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PRODUCT
SUPPLEMENT
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Product
Supplement No. 2-I to
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(TO
PROSPECTUS DATED SEPTEMBER 29, 2009
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Registration
Statement Nos. 333-162193 and 333-162193-01
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AND
PROSPECTUS SUPPLEMENT
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Dated
September 29, 2009
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DATED
SEPTEMBER 29, 2009)
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Rule
424(b)(2)
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ABN
AMRO Bank N.V.
ABN
NotesSM
Senior
Fixed Rate Notes
fully
and unconditionally guaranteed by
ABN
AMRO Holding N.V.
Buffer
Securities and Out-performance Notes linked to a Common Stock, an Index, an
Exchange-Traded Fund, a Currency Pair or a Basket of Common Stocks, Indices,
Exchange-Traded Funds and/or Currency Pairs
The
Buffer Securities and Out-performance Notes, which we will each refer to as the
“Securities,” will entitle the holder to receive at maturity an amount linked to
the performance of (i) the common stock of a company, which we refer to as an
“Underlying Stock”; (ii) an index of equity securities or commodity futures
contracts, which we refer to as an “Underlying Index”; (iii) an exchange-traded
fund that tracks the performance of an underlying index or basket of securities,
primarily by holding securities or other instruments related to such underlying
index or basket, which we refer to as an “Underlying Fund”; (iv) a reference
currency, which we refer to as a “Reference Currency” relative to another
currency, which we refer to as a “Base Currency” and which, together with its
Reference Currency, we refer to as an “Underlying Currency Pair”; or (v) a
basket comprised of Underlying Stocks, Underlying Indices, Underlying Funds
and/or Underlying Currency Pairs, which we refer to as an “Underlying
Basket.” In this Product Supplement, we refer to any Underlying
Stock, Underlying Index, Underlying Fund or Underlying Currency Pair included in
an Underlying Basket as a “Basket Component,” and we refer to the Underlying
Stock, Underlying Index, Underlying Fund, Underlying Currency Pair or Underlying
Basket to which the Securities are linked as the “Underlying.” As
used in this Product Supplement, the term “common stock” includes non-U.S.
equity securities issued through depositary arrangements such as American
depositary shares, or ADSs. We refer to the common stock represented
by ADSs as the “ADS Underlying Stock. If the Underlying Stock is an
ADS, the term “issuer” refers to the issuer of the shares underlying the
ADSs. We refer to the issuer of an Underlying Stock as the
“Underlying Company.” We refer to an Underlying Index comprised of
stocks as an “Underlying Equity Index” and to an Underlying Commodity Index as
an “Underlying Commodity Index.” We refer to the index that an
Underlying Fund tracks as a “Target Index.”
The
Securities do not pay interest. Any payment on the Securities is
subject to the creditworthiness (i.e., the ability to pay) of
ABN AMRO Bank. N.V. and ABN AMRO Holding N.V., as guarantor.
This
Product Supplement describes terms that will apply generally to the Securities
and supplements the terms described in the accompanying Prospectus Supplement
and Prospectus. A separate Underlying Supplement, term sheet or pricing
supplement, as the case may be, will describe the Underlying to which the
Securities are linked, and a separate term sheet or pricing supplement, as the
case may be, will specify the Underlying to which the Securities are linked and
will describe terms that apply to any specific issue of Securities, including
any changes to the terms specified below. We refer to such term sheets and
pricing supplements generally as Pricing Supplements. If the terms described in
the relevant Pricing Supplement are inconsistent with those described herein or
in the accompanying Underlying Supplement, if any, Prospectus Supplement or
Prospectus, the terms described in the relevant Pricing Supplement shall
control.
The
Securities are our unsecured and unsubordinated obligations and are fully and
unconditionally guaranteed by ABN AMRO Holding N.V.
The
Securities are not bank deposits and are not insured or guaranteed by the
Federal Deposit Insurance Corporation, the Deposit Insurance Fund or any other
governmental agency.
The
Securities involve risks not associated with an investment in conventional debt
securities. See “Risk Factors” beginning on PS-9.
The
Securities and Exchange Commission and state securities regulators have not
approved or disapproved these Securities, or determined if this Product
Supplement, the accompanying Underlying Supplement, if any, Prospectus
Supplement or Prospectus or any relevant Pricing Supplement are truthful or
complete. Any representation to the contrary is a criminal offense.
The
agents are not obligated to purchase the Securities but have agreed to use
reasonable efforts to solicit offers to purchase the Securities. To the extent the full aggregate
principal amount of the Securities being offered by the relevant Pricing
Supplement is not purchased by investors in the offering, one or more of our
affiliates may agree to purchase a part of the unsold portion, which may
constitute up to 15% of the total aggregate principal amount of the Securities,
and to hold such Securities for investment purposes. See “Holding of the
Securities by Our Affiliates and Future Sales” under the heading “Risk Factors”
and “Plan of Distribution.” The relevant Pricing Supplement, this Product
Supplement and the accompanying Prospectus Supplement and Prospectus may be used
by our affiliates in connection with offers and sales of the Securities in
market-making transactions.
RBS
Securities Inc.
In this
Product Supplement, the “Bank,” “we,” “us” and “our” refer to ABN AMRO Bank N.V.
and “Holding” refers to ABN AMRO Holding N.V., our parent company. We
refer to the Securities offered by the relevant Pricing Supplement and the
related guarantees as the “Securities” and to each individual security offered
thereby as a “Security.”
ABN
NotesSM is a
service mark of ABN AMRO Bank N.V.
Any
Securities issued, sold or distributed pursuant to the relevant Pricing
Supplement 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.
PS-1
SUMMARY
The
following summary answers some questions that you might have regarding the
Securities in general terms only. It does not contain all the information that
may be important to you. You should read the summary together with the more
detailed information that is contained in the rest of this Product Supplement
and in the accompanying Pricing Supplement, Prospectus and Prospectus
Supplement. You should carefully consider, among other things, the matters set
forth in “Risk Factors.” 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 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. and have
a maturity that will be specified in the relevant Pricing
Supplement. The payment at maturity on the Securities is determined
based on the performance of
(1) the
common stock of a company, which we refer to as an “Underlying
Stock”;
(2) an
index of equity securities or commodity futures contracts, which we refer to as
an “Underlying Index”;
(3) an
exchange-traded fund that tracks the performance of an underlying index or
basket of securities, primarily by holding securities or other instruments
related to such underlying index or basket, which we refer to as an “Underlying
Fund”;
(4) a
reference currency, which we refer to as a “Reference Currency” relative to
another currency, which we refer to as a “Base Currency” and which, together
with its Reference Currency, we refer to as an “Underlying Currency Pair”;
or
(5) a
basket comprised of Underlying Stocks, Underlying Indices, Underlying Funds
and/or Underlying Currency Pairs, which we refer to as an “Underlying
Basket.”
In this
Product Supplement, we refer to any Underlying Stock, Underlying Index,
Underlying Fund or Underlying Currency Pair included in an Underlying Basket as
a “Basket Component,” and we refer to the Underlying Stock, Underlying Index,
Underlying Fund, Underlying Currency Pair or Underlying Basket to which the
Securities are linked as the “Underlying.” As used in this Product
Supplement, the term “common stock” includes non-U.S. equity securities issued
through depositary arrangements such as American depositary shares, or
ADSs. We refer to the common stock represented by ADSs as the “ADS
Underlying Stock. If the Underlying Stock is an ADS, the term
“issuer” refers to the issuer of the shares underlying the ADSs. We
refer to the issuer of an Underlying Stock as the “Underlying
Company.” We refer to an Underlying Index comprised of stocks as an
“Underlying Equity Index” and to an Underlying Commodity Index as an “Underlying
Commodity Index.” We refer to the index that an Underlying Fund
tracks as a “Target Index.” For more information on the payment at
maturity, please see “What will I receive at maturity of the Securities and how
is this amount calculated?”
In
addition, unlike ordinary debt securities, the Securities are not principal
protected and do not pay interest, and, if a maximum amount is applicable, you
will never receive a payment at maturity greater than $1,000 plus the maximum
amount per $1,000 principal amount of Securities. For Buffer
Securities, if the underlying return is less than the negative buffer level, you
could lose some or all of your initial principal investment. For Out-Performance
Notes, if the underlying return is less than 0%, you could lose some or all of
your initial principal investment. Any payment on the Securities is
subject to the creditworthiness (i.e., the ability to pay) of ABN AMRO Bank N.V.
and ABN AMRO Holding N.V., as guarantor.
What
will I receive at maturity of the Securities and how is this amount
calculated?
The
payment at maturity of the Securities will depend on the performance of the
Underlying. For Buffer Securities, at maturity, you will receive, for
each $1,000 principal amount of Securities, a cash amount calculated as
follows:
(1) if
the underlying return is 0% or positive, $1,000 plus the additional
payment;
(2) if
the underlying return is less than 0% down to and including the negative buffer
level, $1,000; and
PS-2
(3) if
the underlying return is less than the negative buffer level, $1,000 plus
[(underlying return + buffer level) × downside leverage factor (if applicable)]
× $1,000.
The
buffer level is a fixed percentage as specified in the relevant Pricing
Supplement.
The
negative buffer level is equal to (-1) × buffer level.
If the
relevant Pricing Supplement specifies a downside leverage factor, the downside
leverage factor is a fixed amount as specified in the relevant Pricing
Supplement.
Accordingly,
the Buffer Securities are not principal protected. If the underlying
return is less than the negative buffer level, you could lose some or all of
your initial principal investment. In addition, if a maximum amount is
applicable, you will never receive a payment at maturity greater than $1,000
plus the maximum amount per $1,000 principal amount of Securities.
For
Out-Performance Notes, at maturity, you will receive for each $1,000 principal
amount of Securities a cash amount calculated as follows:
(1)
if the underlying return is 0% or positive, $1,000 plus the additional payment;
and
(2) if
the underlying return is less than 0% , $1,000 plus (underlying return ×
$1,000).
Accordingly,
the Out-Performance Notes are not principal protected. If the
underlying return is negative (i.e. less than 0%), you could
lose some or all of your initial principal investment. In addition, if a maximum
amount is applicable, you will never receive a payment at maturity greater than
$1,000 plus the maximum amount per $1,000 principal amount of
Securities.
The
additional payment, maximum amount and underlying return are explained
below.
Any
payment on the Securities is subject to the creditworthiness of ABN AMRO Bank
N.V. and ABN AMRO Holding N.V., as guarantor.
What
are the additional payment, the participation rate and the maximum amount and
how are they calculated?
The
Pricing Supplement will state whether the additional payment is a digital return
or an out-performance amount:
(1) If
the additional payment is a digital return, it will be a fixed cash amount for
each $1,000 principal amount of Securities that is specified in the Pricing
Supplement. If the underlying return is 0% or positive so that the
additional payment is payable, the amount of the digital return will not vary
regardless of how much or how little the Underlying appreciates. We refer to
this as a digital return because the digital return is either payable in full or
it is not payable at all, like a digital switch that is either fully on or fully
off.
(2) If
the additional payment is an out-performance amount, it will be an amount in
cash for each $1,000 principal amount of Securities equal to the participation
rate × the underlying return. However, if the relevant Pricing
Supplement specifies a maximum amount, the out-performance amount you receive
will never be more than the maximum amount.
The
participation rate is a fixed amount or percentage as specified in the relevant
Pricing Supplement.
The
maximum amount is a fixed cash amount specified in the Pricing Supplement for
each $1,000 principal amount of Securities. If a maximum amount is
applicable, you will never receive a payment at maturity of more than $1,000
plus the maximum amount for each $1,000 principal amount of Securities
regardless of how much the Underlying appreciates.
PS-3
What
is the underlying return and how is it calculated?
For
Securities linked to a single Underlying Stock, Underlying Index, Underlying
Fund or Underlying Currency Pair, the underlying return will be the percentage
change in the value of the Underlying, calculated as:
final price, value or
exchange rate – initial price, value or exchange rate
initial
price, value or exchange rate
For
Securities linked to an Underlying Basket, the underlying return will be the sum
of the weighted returns of the Basket Components, calculated as:
Sum of
(component return of each Basket Component × component weight of such Basket
Component)
With
respect to each Basket Component, the component return will be the percentage
change in the value of such Basket Component, calculated as:
final price, value or
exchange rate – initial price, value or exchange rate
initial
price, value or exchange rate
The
initial price of an Underlying Stock is the closing price of such Underlying
Stock on the pricing date, divided by the exchange factor, subject to adjustment
for certain corporate events, such as a stock split or merger, affecting such
Underlying Stock, which we describe in “Description of Securities — Adjustment
Events.” The final price of an Underlying Stock is the closing price
of such Underlying Stock on the determination date. We will usually
determine the closing price for any listed Underlying Stock by reference to the
last reported sale price, during regular trading hours (or if listed on The
NASDAQ Stock Market LLC (“NASDAQ”), the official closing price), on the primary
U.S. securities exchange on which the Underlying Stock is traded.
The
initial value of an Underlying Index is the closing value of such Underlying
Index on the pricing date. The final value of an Underlying Index is
the closing value of such Underlying Index on the determination date, subject to
the terms and provisions which we describe in “Description of Securities —
Discontinuance of an Underlying Index; Alteration of Method of
Calculation.”
The
initial price of an Underlying Fund is the closing price of such Underlying Fund
on the pricing date, divided by the exchange factor, subject to
adjustment for certain corporate events, such as a stock split or merger,
affecting such Underlying Fund, which we describe in “Description of Securities
— Adjustment Events.” The final price of an Underlying Fund is the
closing price of such Underlying Fund on the determination date, subject to the
terms and provisions which we describe in “Description of Securities —
Discontinuance of an Underlying Fund; Alteration of Method of
Calculation.” We will usually determine the closing price for any
listed Underlying Fund by reference to the last reported sale price, during
regular trading hours (or if listed on NASDAQ, the official closing price), on
the primary U.S. securities exchange on which shares of the Underlying Fund are
traded.
The
initial exchange rate of an Underlying Currency Pair is the spot rate for such
Underlying Currency Pair on the pricing date. The final exchange rate
of an Underlying Currency Pair is the spot rate for such Underlying Currency
Pair on the Determination Date.
With
respect to each Basket Component, the component weight is a fixed percentage or
fraction determined in the manner specified in the relevant Pricing Supplement,
provided that the sum
of the component weights for all Basket Components will equal 100% or 1, as
applicable. The relevant Pricing Supplement will specify either (i)
the weight of each Basket Component in the Basket, which will be fixed for the
term of the Securities, or (ii) the manner in which the weight of each Basket
Component will be determined. For example, if the relevant Pricing
Supplement specifies that a Basket Component is weighted to comprise 18% of the
value of the Basket, the component weight for that Basket Component is
18%. Alternatively, the relevant Pricing Supplement may specify that,
for a Basket consisting of two Basket Components, the Basket Component with the
greater component return will make up 70% of the value of the Basket, and the
Basket Component with the lesser component return will make up 30% of the value
of the Basket.
PS-4
Will
I receive interest payments on the Securities?
No. You
will not receive any interest on the Securities.
Can
you give me an example of the payment at maturity?
Please
refer to the relevant Pricing Supplement for an example of the payment at
maturity.
Do
I get all my principal back at maturity?
The
Securities are not fully principal protected. Further, any payment at
maturity is subject to the creditworthiness of ABN AMRO Bank, N.V. as the issuer
of the Securities and ABN AMRO Holding N.V. as the guarantor of the issuer’s
obligations under the Securities. For Buffered Securities without any
downside leverage factor, you will receive at maturity at least $1,000 × buffer
level. For Buffer
Securities with a downside leverage factor, if the underlying return is less
than the negative buffer level, you could lose some or all of your initial
principal investment. For Out-Performance Notes, if the underlying
return is less than 0%, you could lose some or all of your initial principal
investment.
However, if you sell the Securities
prior to maturity, you will receive the market price for the Securities, which
may or may not include any return of principal. There may be
little or no secondary market for the Securities. Accordingly, you should be
willing to hold your Securities until maturity.
Is
there a limit on how much I can earn over the term of the
Securities?
It
depends on whether a maximum amount is applicable to the
Securities. If a maximum amount is applicable and the Securities are
held to maturity, the total amount payable at maturity per Security will not
exceed $1,000 plus the maximum amount, regardless of how much the Underlying may
appreciate over the term of the Securities. If a maximum amount is
not applicable and the Securities are held to maturity, the total amount payable
at maturity is not limited and is based on the underlying return.
What
is the minimum required purchase?
Unless
otherwise specified in the relevant Pricing Supplement, you can purchase
Securities in $1,000 denominations or in integral multiples
thereof.
Is
there a secondary market for the Securities?
Unless
otherwise specified in the relevant Pricing Supplement, the Securities will not
be listed on any securities exchange. Accordingly, there may be little or no
secondary market for the Securities and, as such, information regarding
independent market pricing for the Securities may be extremely limited or
non-existent. You should be willing to hold your Securities until the
maturity date.
Although
it is not required to do so, we have been informed by our affiliate that when
this offering is complete, it intends to make purchases and sales of the
Securities from time to time in off-exchange transactions. If our
affiliate does make such a market in the Securities, it may stop doing so at any
time.
In
connection with any secondary market activity in the Securities, our affiliate
may post indicative prices for the Securities on a designated website or via
Bloomberg. However, our affiliate is not required to post such indicative prices
and may stop doing so at any time. Investors are advised that any prices
shown on any website or Bloomberg page are indicative prices only and, as such,
there can be no assurance that any trade could be executed at such
prices. Investors should contact their brokerage firm for
further information.
In
addition, the issue price of the Securities includes the selling agents’
commissions paid with respect to the Securities and the cost of hedging our
obligations under the Securities. The cost of hedging includes the
profit component that our affiliate has charged in consideration for assuming
the risks inherent in managing the hedging of the transactions. The
fact that the issue price of the Securities includes these commissions and
hedging costs is expected to adversely affect the secondary market prices of the
Securities. See “Risk Factors — The Inclusion of Commissions and Cost of Hedging
in the Issue Price is Likely to Adversely Affect Secondary Market Prices” and
“Use of Proceeds.”
PS-5
Tell
me more about ABN AMRO Bank N.V. and ABN AMRO Holding N.V.
ABN AMRO
Bank N.V. is an international banking group offering a wide range of banking
products and financial services worldwide through our network of offices and
branches. ABN AMRO Holding N.V., which we refer to as Holding, is the
parent company of ABN AMRO Bank N.V. Holding’s main purpose is to own
the Bank and its subsidiaries. All of the Securities issued by the
Bank hereunder are fully and unconditionally guaranteed by Holding.
On
October 17, 2007, RFS Holdings B.V., which at the time was owned by a consortium
consisting of the Royal Bank of Scotland Group plc (“RBS”), Fortis N.V., Fortis
SA/NV (“Fortis”) and Banco Santander S.A. (“Santander”), completed the
acquisition of Holding. We refer to all businesses owned by Holding
as the ABN AMRO Group. RFS Holdings B.V., which is now jointly owned
by RBS, the State of the Netherlands (the “Dutch State”) and Santander (the
“Consortium Members”), is in the process of implementing an orderly separation
of the business units of the ABN AMRO Group. Substantially all assets
and liabilities with shared ownership by the consortium have either been sold or
economically allocated to a Consortium Member.
On
November 28, 2008, UK Financial Investments Limited (“UKFI”), which is wholly
owned by the UK government, acquired approximately 57.9% of the enlarged issued
ordinary share capital of RBS and £5 billion of RBS preference
shares. On January 19, 2009, RBS announced that it had reached
agreement with the UK Treasury and UKFI to replace the £5 billion of RBS
preference shares with new RBS ordinary shares. Effective April 14,
2009, the £5 billion of RBS preference shares were replaced with new RBS
ordinary shares, resulting in UKFI holding approximately 70.3% of the enlarged
issued ordinary share capital of RBS.
The
Consortium Members continue to work on a joint plan for legally separating the
businesses that are owned by the Dutch State from the residual RBS business into
two separate banks. We expect that following the separation of the
businesses that are owned by the Dutch State, we, the existing ABN AMRO Bank
N.V., will be renamed “The Royal Bank of Scotland N.V.” (“RBS
NV”). The future RBS N.V. will be part of RBS and will principally
contain the international lending and international transaction services of
RBS. The businesses that are owned by the Dutch State will be
transferred into a new legal entity, to be named “ABN AMRO Bank N.V.,” which is
a different legal entity from the existing ABN AMRO Bank N.V. and will operate
under a separate Dutch banking license. Accordingly, once this
business separation is complete, we will be known as The Royal Bank of Scotland
N.V. Neither the new entity named ABN AMRO Bank N.V. nor the Dutch
State will insure or guarantee the debt securities offered by any Pricing
Supplement.
Similarly,
Holding expects to change its name to “RBS Holding N.V.” after the completion of
the business separation described above. Holding is no longer listed
on Euronext or the New York Stock Exchange but files periodic reports with the
SEC. “See “Risk Factors — The Securities are Subject to the Credit
Risk of ABN AMRO Bank N.V. and ABN AMRO Holding N.V., and their Credit Ratings
and Credit Spreads May Adversely Affect the Market Value of the
Securities.”
What
is the relationship between ABN Amro Bank N.V., ABN Amro Holding N.V. and RBS
Securities Inc.?
RBS
Securities Inc., which we refer to as RBSSI, is an affiliate of ABN AMRO Bank
N.V. and ABN AMRO Holding N.V. RBSSI will act as calculation agent for the
Securities, and is acting as agent for this offering. RBSSI will conduct this
offering in compliance with the requirements of NASD Rule 2720 of the Financial
Industry Regulatory Authority, which is commonly referred to as FINRA, regarding
a FINRA member firm’s distribution of the securities of an affiliate. See “Risk
Factors — Potential Conflicts of Interest between Holders of Securities and the
Calculation Agent” and “Plan of Distribution (Conflicts of Interest)” in this
Product Supplement.
Who
will determine the final price, value or exchange rate, the underlying return
and the payment at maturity?
We have
appointed our affiliate, RBS Securities Inc., which we refer to as RBSSI, to act
as calculation agent for the Securities. As calculation agent, RBSSI will
determine the final price, value or exchange rate of the Underlying, the initial
price, value or exchange rate of the Underlying, the underlying return and the
payment at maturity. The calculation agent may be required, due to
events beyond our control, to adjust any of these calculations, which we
describe “Description of Securities — Adjustment Events,” “Description of
Securities — Discontinuance of the Underlying Index; Alteration of Method of
Calculation” and “Description of Securities — Discontinuance of the Underlying
Fund; Alteration of Method of Calculation.”
PS-6
Who
invests in the Securities?
The
Securities are not suitable for all investors. The Securities might
be considered by investors who:
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are
willing to risk losing some or all of their initial principal investment
in exchange for the opportunity to benefit from the appreciation (which
may be capped), if any, in the value of the Underlying over the term of
the Securities;
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do
not require an interest income
stream;
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are
willing to be exposed to fluctuations in equity, commodity or currency
prices in general, as applicable, and the price or value of any Underlying
Stock, Underlying Index, Underlying Fund or Underlying Currency Pair in
particular; and
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are
willing to hold the Securities until
maturity.
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You
should carefully consider whether the Securities are suited to your particular
circumstances before you decide to purchase them. 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 some of the risks in owning the Securities?
Investing
in the Securities involves a number of risks. We have described the
most significant risks relating to the Securities under the heading “Risk
Factors” in this Product Supplement which you should read before making an
investment in the Securities.
Some
selected risk considerations include:
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Market
Risk. For Buffer Securities, if the underlying return is
less than 0% down to the negative buffer level, and for Out-Performance
Notes, if the underlying return is 0%, you will be entitled to receive
only the principal amount of $1,000 per Security at
maturity. In such a case, you will receive no return on your
investment and you will not be compensated for any loss in value due to
inflation and other factors relating to the value of money over
time. For Buffer Securities, if the underlying return is
less than the negative buffer level, and for Out-Performance Notes, if the
underlying return is negative, you could lose some or all of your initial
principal investment. If the underlying return is zero (0%) or
positive, your return will be limited to the maximum amount, regardless of
how much the underlying return may appreciate above its initial level, if
a maximum amount is applicable.
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Credit
Risk. Because you are purchasing a security from us, you
are assuming our credit risk. In addition, because the
Securities are fully and unconditionally guaranteed by Holding, you are
also assuming the credit risk of Holding in the event that we fail to make
any payment required by the terms of the
Securities.
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Principal
Risk. The Securities are not principal protected, which
means there is no guaranteed return of principal. For Buffer
Securities, if the underlying return is less than the negative buffer
level, the amount of cash paid to you at maturity will be less than the
principal amount of the Securities. For Out-Performance Notes,
if the underlying return is less than 0%, the amount of cash paid to you
at maturity will be less than the principal amount of the
Securities. Any payment on the Securities is subject to the
creditworthiness of ABN AMRO Bank. N.V. and ABN AMRO Holding N.V., as
guarantor.
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Liquidity
Risk. Unless otherwise specified in the relevant Pricing
Supplement, 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 for the Securities may be very limited or non-existent. If you
sell your Securities in the secondary market, if any, prior to maturity,
you will receive the market price of the Securities, which could be
zero. The value of the Securities in the secondary market, if
any, will be subject to many unpredictable factors, including then
prevailing market conditions.
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PS-7
What
if I have more questions?
You
should read “Description of Securities” in this Product Supplement for a
detailed description of the general terms of the Securities. The
relevant Pricing Supplement will describe the terms that apply specifically to
the Securities, and the relevant Underlying Supplement (if any) or the relevant
Pricing Supplement will describe the Underlying. The Securities are
senior notes issued as part of our ABN NotesSM program
and guaranteed by Holding. The Securities offered by the Bank will
constitute the Bank’s unsecured and unsubordinated obligations and rank pari
passu without any preference among them and with all our other present and
future unsecured and unsubordinated obligations. The guarantee of Holding will
constitute Holding’s unsecured and unsubordinated obligations and rank pari
passu without any preference among them and with all Holding’s other present and
future unsecured and unsubordinated obligations. You can find a
general description of our ABN NotesSM program
in the accompanying Prospectus Supplement. We also describe the basic
features of this type of note in the sections of the accompanying Prospectus
Supplement called “Description of Notes” and “Notes Linked to Commodity Prices,
Single Securities, Economic or Financial Measures and Baskets or Indices
Thereof.”
You may
contact our principal executive offices at Gustav Mahleraan 10, 1082 PP
Amsterdam, The Netherlands. Our telephone number is (31-20)
628-9393.
PS-8
RISK
FACTORS
This
section describes the most significant risks relating to the Securities. For a
discussion of certain general risks associated with your investment in the
Securities, please refer to the section entitled “Risk Factors” beginning on
page S-3 of the accompanying Prospectus Supplement. You should carefully consider whether
the Securities are suited to your particular circumstances before you decide to
purchase them. In addition, we urge you to consult with your
investment, legal, accounting, tax and other advisors with respect to any
investment in the Securities.
Risks
Related to the Securities Generally
The
Securities Are Not Ordinary Senior Notes; The Securities Do Not Pay Interest and
There Is No Guaranteed Return of Principal
The terms
of the Securities differ from those of ordinary debt securities in that (i) we
will not pay you interest on the Securities and (ii) you could lose some or all
of your initial principal investment at maturity. For Buffer Securities, if the
underlying return is less than the negative buffer level, you could lose some or
all of your initial principal investment. For Out-Performance Notes,
if the underlying return is less than 0%, you could lose some or all of your
initial principal investment. In either case, the amount of cash paid
to you at maturity will be less than the principal amount of your Securities and
you assume the risk that you could lose some or all of your initial principal
investment.
Furthermore,
even if the underlying return is 0% or positive, the return you receive on the
Securities may be less than the return you would have received had you invested
your entire principal amount in a conventional debt security with the same
maturity issued by us or a comparable issuer or an instrument which tracks the
performance of the Underlying. If a maximum amount is applicable, the
return you will receive on the Securities, if any, will never exceed the maximum
amount and may not compensate you for any losses incurred due to inflation or
the value of money over time. You cannot predict the future
performance of the Underlying based on historical performance.
The
Appreciation Potential of the Securities is Limited to the Maximum Amount, If
Applicable.
If the
Securities are subject to a maximum amount, the appreciation potential of the
Securities will be limited to the maximum amount. Any applicable
maximum amount will be a percentage which we will determine on the pricing date
and which will be set forth in the relevant Pricing
Supplement. Accordingly, if the relevant Pricing Supplement specifies
a maximum amount for the Securities, the appreciation potential of the
Securities will be limited to that maximum amount even if the underlying return
(either alone or multiplied by, if applicable, the participation rate) is
greater than that maximum amount.
Credit
Risk of ABN AMRO Bank N.V. and ABN AMRO Holding N.V., and their Credit Ratings
and Credit Spreads May Adversely Affect the Market Value of the
Securities
You are
dependent on ABN AMRO Bank N.V.’s ability to pay all amounts due on the
Securities, and therefore you are subject to the credit risk of ABN AMRO Bank
N.V.and to changes in the market’s view of ABN AMRO Bank N.V.’s
creditworthiness. In addition, because the Securities are unconditionally
guaranteed by ABN AMRO Bank N.V.’s parent company, ABN AMRO Holding N.V., you
are also dependent on the credit risk of ABN AMRO Holding N.V. in the event that
ABN AMRO Bank N.V. fails to make any payment or delivery required by the terms
of the Securities. Any actual or anticipated decline in ABN AMRO Bank
N.V. or ABN AMRO Holding N.V.’s credit ratings or increase in their credit
spreads charged by the market for taking credit risk is likely to adversely
affect the value of the Securities.
Our
credit ratings are an assessment, by each rating agency, of our ability to pay
our obligations, including those under the Securities. Credit ratings
are subject to revision, suspension or withdrawal at any time by the assigning
rating organization in their sole discretion. However, because the
return on the Securities is dependent upon factors in addition to our ability to
pay our obligations under the Securities, an improvement in our credit ratings
will not necessarily increase the market value of the Securities and will not
reduce market risk and other investment risks related to the
Securities. Credit ratings do not address the price, if any, at which
the Securities may be resold prior to maturity (which may be substantially less
than the issue price of the Securities) and are not recommendations to buy, sell
or hold the Securities. See “Risk Factors — Market Price of the Securities
Influenced by Many Unpredictable Factors.”
PS-9
Although
We Are a Bank, the Securities Are Not Bank Deposits and Are Not Insured or
Guaranteed by the Federal Deposit Insurance Corporation, The Deposit Insurance
Fund or Any Other Government Agency
The
Securities are our obligations but are not bank deposits. In the
event of our insolvency the Securities will rank equally with our other
unsecured, unsubordinated obligations and will not have the benefit of any
insurance or guarantee of the Federal Deposit Insurance Corporation, The Deposit
Insurance Fund or any other governmental agency.
Unless
Otherwise Specified in the Relevant Pricing Supplement, the Securities Will Not
be Listed on Any Securities Exchange; Secondary Trading May Be
Limited
You
should be willing to hold your Securities until the maturity date. Unless
otherwise specified in the relevant Pricing Supplement, 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 for the Securities may be very limited or non-existent. Even if there is
a secondary market, it may not provide enough liquidity to allow you to trade or
sell the Securities easily. Our affiliate has informed us that, upon completion
of the offering, it intends to purchase and sell the Securities from time to
time in off-exchange transactions, but it is not required to do
so. If our affiliate does make such a market in the Securities, it
may stop doing so at any time. In addition, the total principal amount of the
Securities being offered by the relevant Pricing Supplement may not be purchased
by investors in the offering, and one or more of our affiliates may agree to
purchase a part of the unsold portion, which may constitute up to 15% of the
total aggregate principal amount of the Securities. Such affiliate or
affiliates intend to hold the Securities for investment purposes, which may
affect the supply of Securities available for secondary trading and therefore
adversely affect the price of the Securities in any secondary
trading. If a substantial portion of any Securities held by our
affiliates were to be offered for sale following this offering, the market price
of such Securities could fall, especially if secondary trading in such
Securities is limited or illiquid.
Market
Price of the Securities Are Influenced by Many Unpredictable
Factors
The value
of the Securities may move up and down between the date you purchase them and
the determination date when the calculation agent determines the amount to be
paid to you on the maturity date.
Several
factors, many of which are beyond our control, will influence the market value
of the Securities, including:
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the
market value of the Underlying, which can fluctuate
significantly;
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the
volatility (frequency and magnitude of changes) in the value of
the Underlying;
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the
dividend rate on the Underlying Stock or on stocks that comprise an
Underlying Index or Underlying Fund, if applicable. While
dividend payments, if any, on an Underlying Stock or the stocks that
comprise an Underlying Index or Underlying Fund, as applicable, are not
paid to you, such payments may have an influence on the market price of
the Underlying Stock or such stocks, as applicable, and therefore on the
Securities;
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the
market prices of the commodities comprising an Underlying Index or the
exchange-traded futures contracts on the commodities comprising an
Underlying Index, if applicable;
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interest
and yield rates in the market;
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geopolitical
conditions and economic, financial, political, regulatory, geographical,
agricultural, or judicial events that affect an Underlying Stock or the
stocks comprising an Underlying Index or Underlying Fund, the commodity
futures contracts comprising an Underlying Index or an Underlying Currency
Pair, as applicable, or markets generally, and which may affect the value
of the Underlying;
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if
the Securities are linked in whole or in part to an Underlying Stock that
is an ADS, a foreign Underlying Index, a foreign Underlying Fund or an
Underlying Currency Pair, the exchange rate and volatility of the exchange
rate between the U.S. dollar and the currency of the country in which the
ADS Underlying Stock, the stocks comprising the foreign Underlying Index
or Underlying Fund or the foreign commodity futures contracts comprising
the foreign Underlying Index, as applicable, are traded, or between the
Reference Currency and the Base
Currency;
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the
time remaining to the maturity of the
Securities;
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PS-10
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the
occurrence of certain events affecting an Underlying Stock or Underlying
Fund which may require an adjustment to the exchange factor (and
therefore, the initial price); and
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the
creditworthiness of the Bank as issuer of the Securities and Holding as
the guarantor of the Bank’s obligations under the
Securities. Any person who purchases the Securities is relying
upon the creditworthiness of the Bank and Holding and has no rights
against any other person. The Securities constitute the
general, unsecured and unsubordinated contractual obligations of the Bank
and Holding.
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These
factors interrelate in complex ways, and the effect of one factor on the market
value of your Securities may offset or enhance the effect of another
factor.
Some or
all of these factors will influence the price that you will receive if you sell
your Securities prior to maturity in the secondary market, if any. If
you sell your Securities prior to maturity, the price at which you are able to
sell your Securities may be at a discount, which could be substantial, from the
principal amount. For example, there may be a discount on the
Securities if at the time of sale the closing price, closing value or spot rate
of the Underlying is at or below its initial price, value or exchange rate or if
market interest rates rise. Even if there is an appreciation in the
value of the Underlying from its initial price, value or exchange rate, there
may be a discount on the Securities based on the time remaining to the maturity
of the Securities. Thus, if you sell your Security
before maturity, you may not receive back your entire principal
amount.
Some or
all of these factors will influence the return, if any, that you receive upon
maturity of the Securities. We cannot predict the future performance
of the Securities, the Underlying or, if applicable, the stocks that comprise an
Underlying Index or Underlying Fund based on the historical performance of the
Underlying or, if applicable, the underlying stocks. Neither we nor Holding nor any of our
affiliates can guarantee that the value of the Underlying will increase so that
you will receive at maturity an amount in excess of the principal amount of the
Securities.
As an
investor in the Securities you assume the risk that as a result of the
performance of the Underlying you may not receive any return on your initial
principal investment in the Securities or that you may lose some or all of your
initial principal investment in the Securities.
The
Inclusion of Commissions and Cost of Hedging in the Issue Price Is Likely to
Adversely Affect Secondary Market Prices.
Assuming
no change in market conditions or any other relevant factors, the price, if any,
at which the selling agents 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
paid with respect to the Securities, as well as the profit component included in
the cost of hedging our obligations under the Securities. In
addition, any such prices may differ from values determined by pricing models
used by the selling agents, as a result of dealer discounts, mark-ups or other
transaction costs.
The
Payment, If Any, You Receive at Maturity Depends on the Final Price, Value or
Exchange Rate on the Determination Date Only
We
determine the payment at maturity based on the difference between the initial
price, value or exchange rate and the final price, value or exchange rate on the
determination date. As a result the payment, if any, at maturity
depends on the price, value or exchange rate on one day, the determination date,
regardless of whether the price, value or exchange rate of the Underlying at the
maturity date or at other times during the term of the Securities, including
dates near the determination date, was higher than the final price, value or
exchange rate. This difference could be particularly large if there
is a significant increase in the price, value or exchange rate of the Underlying
after the determination date, if there is a significant decrease in the price,
value or exchange rate of the Underlying around the time of the determination
date or if there is significant volatility in the price, value or exchange rate
of the Underlying during the term of the Securities (especially on dates near
the determination date). For example, when the determination date is
near the end of the term of the Securities, then if the price, value or exchange
rate of the Underlying increases or remains relatively constant during the
initial term of the Securities and then decreases below the initial price, value
or exchange rate, the final price, value or exchange rate may be significantly
less than if it were calculated on an earlier date. Under these
circumstances, you may receive a lower payment at maturity than you would have
received if you had invested directly in an Underlying Stock, an Underlying
Fund, an Underlying Currency Pair or in the securities comprising an Underlying
Index or Underlying Funds, as applicable.
PS-11
An
Increase in the Price, Value or Exchange Rate of the Underlying May Not Increase
the Market Value of your Securities
Owning
the Securities is not the same as owning the Underlying or a product which
tracks the return on the Underlying. Accordingly, the market value of
your Securities may not have a direct relationship with the price, value or
exchange rate of the Underlying, and changes in the price, value or exchange
rate of the Underlying may not result in a comparable change in the market value
of your Securities. If the value of the Underlying increases above its initial
price, value or exchange rate on the pricing date, the market value of the
Securities may not increase. It is also possible for the price, value or
exchange rate of the Underlying to increase while the market price of the
Securities declines. If a
maximum amount is specified in the relevant Pricing Supplement, regardless of
how much the value of the Underlying may increase above the initial price, value
or exchange rate, you will never receive more than $1,000 plus the maximum
amount per $1,000 principal amount of Securities.
Information
Regarding Underlying Companies or Underlying Funds
Neither
we nor Holding nor any of our affiliates assume any responsibility for the
accuracy or adequacy of the information contained in the relevant Pricing
Supplement about any Underlying Company or Underlying Fund or in any of their
respective publicly available filings. As an investor in the Securities, you
should make your own investigation into any Underlying Company or Underlying
Fund. Unless otherwise disclosed in the relevant Pricing Supplement, neither we
nor Holding nor any of our affiliates have any affiliation with any Underlying
Company or Underlying Fund and are not responsible for their respective public
disclosure of information, whether contained in SEC filings or
otherwise.
Hedging
and Trading Activities by Us or Our Affiliates Could Affect Prices of
Securities
We and
our affiliates may carry out activities that minimize our risks related to the
Securities. In particular, on or prior to the date of the relevant
Pricing Supplement, we, through our affiliates, may have hedged our anticipated
exposure in connection with the Securities by taking positions in Underlying
Stocks, Underlying Funds, Underlying Currency Pair, stocks or commodities (or
options or futures contracts on the stocks or commodities) that comprise
Underlying Indices, stocks (or options or futures contracts on the stocks) that
comprise Underlying Funds, exchange-traded funds that track Underlying Indices,
options or futures on Underlying Stocks, Underlying Indices, Underlying Funds or
Underlying Currency Pairs or in other instruments that we deemed appropriate in
connection with such hedging. Our trading activities, however, could
potentially alter the value of Underlying Stocks, Underlying Indices, Underlying
Funds or Underlying Currency Pairs and, therefore, the value of the
Securities.
We or our
affiliates are likely to modify our hedge position throughout the term of the
Securities by purchasing and selling Underlying Stocks, Underlying Funds,
Underlying Currency Pairs, stocks or commodities (or options or futures
contracts on the stocks or commodities) that comprise Underlying Indices, stocks
(or options or futures contracts on the stocks) that comprise Underlying Funds,
exchange-traded funds that track Underlying Indices or Underlying Funds, options
or futures on Underlying Stocks, Underlying Indices, Underlying Funds or
Underlying Currency Pairs or other instruments that we deem
appropriate. We cannot give any assurance that our hedging or trading
activities will not affect the value of Underlying Stocks, Underlying Indices,
Underlying Funds or Underlying Currency Pairs. It is also possible
that we or one of more of our affiliates could receive substantial returns from
these hedging activities while the value of the Securities may
decline.
We or one
or more of our affiliates may also engage in trading Underlying Stocks,
Underlying Funds, Underlying Currency Pairs, stocks or commodities (or options
or futures contracts on the stocks or commodities) that comprise Underlying
Indices, stocks (or options or futures contracts on the stocks) that comprise
Underlying Funds, exchange-traded funds that track Underlying Indices or options
or futures on Underlying Stocks, Underlying Indices, Underlying Funds or
Underlying Currency Pairs on a regular basis as part of our or their general
broker-dealer activities and other businesses, for proprietary accounts, for
other accounts under management or to facilitate transactions for customers,
including through block transactions. Any of these activities could
adversely affect the value of Underlying Stocks, Underlying Indices, Underlying
Funds or Underlying Currency Pairs and, therefore, the value of the
Securities.
We or one
or more of our affiliates may also issue or underwrite other securities or
financial or derivative instruments with returns linked or related to changes in
the price or value of Underlying Stocks, Underlying Indices, Underlying Funds or
Underlying Currency Pairs, stocks or commodities that comprise Underlying
Indices or stocks that comprise Underlying Funds. By
introducing competing products into the marketplace in this manner, we or one or
more of our affiliates could adversely affect the value of the
Securities.
PS-12
Potential
Conflicts of Interest between Security Holders and the Calculation
Agent
Our
affiliate, RBSSI, will serve as the calculation agent. RBSSI will,
among other things, decide the amount of the return paid out to you on the
Securities at maturity. For a fuller description of the calculation
agent’s role, see “Description of Securities — Calculation
Agent.” For example, the calculation agent may have to determine
whether a market disruption event affecting the Underlying has occurred or is
continuing on a day when the calculation agent will determine its price, level
or exchange rate. This determination may, in turn, depend on the
calculation agent’s judgment whether the event has materially interfered with
our ability to unwind our hedge positions. In addition, the
calculation agent may have to make additional calculations if the Underlying
Index or Underlying Fund is liquidated, discontinued, suspended, modified,
delisted or otherwise terminated. The calculation agent will exercise
its judgment when performing its functions. Since these
determinations by the calculation agent may affect the market value of the
Securities, the calculation agent may have a conflict of interest if it needs to
make any such decision.
Moreover,
the issue price of the Securities includes the agents’ commissions and certain
costs of hedging our obligations under the Securities. Our affiliates
through which we hedge our obligations under the Securities expect to make a
profit. Since hedging our obligations entails risk and may be
influenced by market forces beyond our affiliates’ control, such hedging may
result in a profit that is more or less than initially projected.
No
Security Interest or Rights in any Underlying Stock, in Any Stocks that Comprise
an Underlying Index, Underlying Fund or Target Index, in the shares of any
Underlying Fund or in Any Commodity Futures Contracts that Comprise an
Underlying Index
Neither
we nor Holding nor any of our affiliates will pledge or otherwise hold any
shares of an Underlying Stock, shares of the stocks that comprise an Underlying
Index, Underlying Fund or Target Index, commodity futures contracts that
comprise an Underlying Index, shares of exchange-traded funds that track an
Underlying Index, shares of an Underlying Fund or any option or futures contract
or any other asset for the benefit of holders of the Securities under any
circumstances. Consequently, in the event of a bankruptcy, insolvency
or liquidation involving us or Holding, as the case may be, any of such assets
will be subject to the claims of our creditors or Holding’s creditors generally
and will not be available specifically for the benefit of the holders of the
Securities. In addition, as an investor in the Securities, you will
not have voting rights or rights to receive dividends or other distributions or
any other rights with respect to an Underlying Stock or the stocks that comprise
an Underlying Index, Underlying Fund or Target Index or shares of an Underlying
Fund. As an investor in the Securities, you will not have any rights
with respect to the commodity futures contracts that comprise an Underlying
Index. If the Securities are linked to ADSs representing non-U.S.
equity securities issued through depositary arrangements, you will not have the
rights of owners of such ADSs or the ADS Underlying Stock.
Moreover,
the indenture governing the Securities does not contain any restriction on our
ability or the ability of any of our affiliates to buy, sell, pledge or
otherwise convey all or any portion of an Underlying Stock, the stocks (or
options or futures contracts on the stocks) that comprise an Underlying Index,
Underlying Fund or Target Index, commodities (or options or futures contracts on
commodities) that comprise an Underlying Index, exchange-traded funds that track
an Underlying Index, shares of an Underlying Fund or options or futures on an
Underlying Stock, Underlying Index, Underlying Fund or Target Index or other
instruments that we deemed appropriate.
Limited
Antidilution Protection For Securities Linked to an Underlying Stock or
Underlying Fund
As
calculation agent, RBSSI, which is our affiliate, will adjust the initial price
for certain events affecting the shares of an Underlying Stock or Underlying
Fund, such as stock splits and other corporate actions. The calculation agent is
not required to make an adjustment for every corporate action which affects the
shares of an Underlying Stock or Underlying Fund. For example, the calculation
agent is not required to make any adjustments if the Underlying Company or
anyone else makes a partial tender or partial exchange offer for shares of the
Underlying Stock. If an event occurs that does not require the calculation agent
to adjust the amount of shares of an Underlying Stock or Underlying Fund payable
at maturity, the market price of the Securities may be materially and adversely
affected.
PS-13
No
Affiliation with the Underlying Company, the Underlying Fund or Any Issuers of
the Stocks Comprising the Underlying Fund, as Applicable
Because
neither we nor Holding nor any of our affiliates are affiliated with any
Underlying Company, any Underlying Fund or the issuers of the stocks comprising
any Underlying Index or Underlying Fund, we have no ability to control or
predict the actions of any Underlying Company, any Underlying Fund or the
issuers of the stocks comprising any Underlying Index or Underlying Fund,
including any actions of the type that would require the calculation agent to
adjust the initial price, and have no ability to control the public disclosure
of these actions or any other events or circumstances affecting the any
Underlying Company, any Underlying Fund or the issuers of the stocks comprising
any Underlying Index or Underlying Fund. No Underlying Company, Underlying Fund
or issuers of stocks comprising any Underlying Index or Underlying Fund are
involved in the offer of the Securities in any way, and no Underlying Company,
Underlying Fund or issuers of stocks comprising any Underlying Index or
Underlying Fund has any obligation to consider your interest as an owner of the
Securities in taking any actions that might affect the value of your Securities.
None of the money you pay for the Securities will go to any Underlying Company,
any Underlying Fund or the issuers of stocks comprising any Underlying Index or
Underlying Fund, as applicable.
We
May Engage in Business with or Involving an Underlying Company, an Underlying
Fund or One or More of the Issuers of the Stocks that Comprise an Underlying
Index or Underlying Fund without Regard to Your Interests
We and/or
our affiliates may presently or from time to time engage in business with an
Underlying Company, an Underlying Fund or the issuers of the stocks comprising
an Underlying Index or Underlying Fund, including extending loans to, or making
equity investments in, or providing advisory services to such companies,
including merger and acquisition advisory services. These activities could lead
to actions on the part of an Underlying Company, an Underlying Fund or the
issuers of the stocks comprising an Underlying Index or Underlying Fund, which
might adversely affect the value of the Securities. In the course of
such business, we and/or our affiliates may acquire non-public information with
respect to such companies and, in addition, one or more of our affiliates may
publish research reports with respect to such companies. The statement in the
preceding sentence is not intended to affect the rights of holders of the
Securities under the securities laws. As a prospective purchaser of a Security,
you should undertake such independent investigation of the Underlying as in your
judgment is appropriate to make an informed decision with respect to an
investment in the Securities.
Holdings
of the Securities by Our Affiliates and Future Sales
Certain
of our affiliates may purchase for investment a portion of the Securities that
has not been purchased by investors in a particular offering of Securities,
which initially they intend to hold for investment purposes. As a result, upon
completion of such an offering, our affiliates may own up to 15% of the
aggregate principal amount of the Securities. Circumstances may occur
in which our interests or those of our affiliates could be in conflict with your
interests. For example, our affiliates may attempt to sell the
Securities that they had been holding for investment purposes at the same time
that you attempt to sell your Securities, which could depress the price, if any,
at which you can sell your Securities. Moreover, the liquidity of the
market for the Securities, if any, could be substantially reduced as a result of
our affiliates holding the Securities. See “— The Securities Will Not
be Listed on any Securities Exchange; Secondary Trading May Be
Limited.” In addition, our affiliates could have substantial
influence over any matter subject to consent of the security
holders.
The
U.S. Federal Income Tax Consequences of an Investment in the Securities are
Unclear.
There is
no direct legal authority regarding the proper U.S. federal income tax treatment
of the Securities, and we do not plan to request a ruling from the Internal
Revenue Service (the “IRS”). Consequently,
significant aspects of the tax treatment of the Securities are uncertain, and
the IRS or a court might not agree with the treatment of the Securities (as
prepaid financial contracts) described in the section of this Product Supplement
entitled “U.S. Federal Income Tax Consequences.” If the IRS were successful in
asserting an alternative treatment, the tax consequences of ownership and
disposition of the Securities might be affected materially and adversely.
Additionally, as described in “U.S. Federal Income Tax Consequences,” in
December 2007, Treasury and the IRS released a notice requesting comments on
various issues regarding the U.S. federal income tax treatment of “prepaid
forward contracts” and similar instruments. Any Treasury regulations or other
guidance promulgated after consideration of these issues could materially and
adversely affect the tax consequences of an investment in the Securities,
possibly with retroactive effect.
PS-14
Both
U.S. and non-U.S. holders should consult their tax advisers regarding the U.S.
federal income tax consequences of an investment in the Securities (including
possible alternative treatments and the issues presented by the
December 2007 notice), as well as any tax consequences arising under the laws of
any state, local or non-U.S. taxing jurisdiction.
Risks
Related to an Underlying Stock
For
Securities linked to the Performance of ADSs, Fluctuations in Exchange Rates
Will Affect Your Investment
There are
significant risks related to an investment in a Security that is linked to ADSs,
which is quoted and traded in U.S. dollars, representing an ADS Underlying Stock
that is quoted and traded in a foreign currency. The ADSs, which are
quoted and traded in U.S. dollars, may trade differently from the ADS Underlying
Stock. In recent years, the rates of exchange between the U.S. dollar
and some other currencies have been highly volatile and this volatility may
continue in the future. These risks generally depend on economic and political
events over which we have no control. Fluctuations in any particular
exchange rate that have occurred in the past are not necessarily indicative,
however, of fluctuations that may occur during the term of the Securities.
Changes in the exchange rate between the U.S. dollar and a foreign currency may
affect the U.S. dollar equivalent of the price of the ADS Underlying Stock on
non-U.S. securities markets and, as a result, may affect the market price of the
ADSs, which may consequently affect the value of the Securities.
For
Securities linked to the Performance of ADSs, We Have No Control over Exchange
Rates
Foreign
exchange rates can either float or be fixed by sovereign
governments. Exchange rates of the currencies used by most
economically developed nations are permitted to fluctuate in value relative to
the U.S. dollar and to each other. However, from time to time
governments and, in the case of countries using the euro, the European Central
Bank, may use a variety of techniques, such as intervention by a central bank,
the imposition of regulatory controls or taxes or changes in interest rates to
influence the exchange rates of their currencies. Governments may
also issue a new currency to replace an existing currency or alter the exchange
rate or relative exchange characteristics by a devaluation or revaluation of a
currency. These governmental actions could change or interfere with
currency valuations and currency fluctuations that would otherwise occur in
response to economic forces, as well as in response to the movement of
currencies across borders. As a consequence, these government actions
could adversely affect an investment in a Security that is linked to ADSs, which
is quoted and traded in U.S. dollars, representing an ADS Underlying Stock that
is quoted and traded in a foreign currency.
We will
not make any adjustment or change in the terms of the Securities in the event
that exchange rates should become fixed, or in the event of any devaluation or
revaluation or imposition of exchange or other regulatory controls or taxes, or
in the event of other developments affecting the U.S. dollar or any relevant
foreign currency. You will bear those risks.
For
Securities linked to the Performance of ADSs, an Investment in the Securities Is
Subject to Risks Associated with Non-U.S. Securities Markets
An
investment in the Securities linked to the value of ADSs representing interests
in non-U.S. equity securities involves risks associated with the securities
markets in those countries where the relevant non-U.S. equity securities are
traded, including risks of market volatility, governmental intervention in those
markets and cross shareholdings in companies in certain
countries. Also, non-U.S. companies are generally 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 such markets, including changes in a country’s
government, economic and fiscal policies, currency exchange laws or other laws
or restrictions. Moreover, the economies of such countries may differ
favorably or unfavorably from the economy of the United States in such respects
as growth of gross national product, rate of inflation, capital reinvestment,
resources and self sufficiency. Such countries may be subjected to
different and, in some cases, more adverse economic environments.
Some or
all of these factors may influence the price of the ADSs. The impact
of any of these factors set forth above may enhance or offset some or all of any
change resulting from another factor or factors. You cannot predict
the future performance of the ADSs based on their historical
performance. The value of the ADSs may decrease such that you may not
receive any return of your investment. You will bear the risk that
the price of the ADSs may decrease so that at maturity, you will lose some or
all of your investment.
PS-15
There
Are Important Differences Between the Rights of Holders of ADSs and the Rights
of Holders of the Common Stock of the Foreign Company Underlying the
ADSs
If your
Security is linked to the performance of an ADS, you should be aware that your
Security is linked to the price of the ADSs and not the ADS Underlying Stock,
and there exist important differences between the rights of holders of ADSs and
the ADS Underlying Stock. Each ADS is a security evidenced by
American Depositary Receipts that represent a specified number of shares of
common stock of a foreign issuer. Generally, the ADSs are issued
under a deposit agreement, which sets forth the rights and responsibilities of
the depositary, the foreign issuer and holders of the ADSs, which may be
different from the rights of holders of common stock of the foreign
issuer. For example, the foreign issuer may make distributions in
respect of its common stock that are not passed on to the holders of its
ADSs. Any such differences between the rights of holders of the ADSs
and holders of the ADS Underlying Stock may be significant and may materially
and adversely affect the value of the Securities.
In
Some Circumstances, the Payment You Receive on the Securities May Be Based on
the Common Stock (or ADSs, as applicable) of Another Company and not the
Underlying Stock
Following
certain corporate events, such as a merger or acquistion, relating to the
Underlying Stock where its issuer is not the surviving entity, the amount you
receive at maturity may be based on the common stock of a successor to the
Underlying Company or any cash or any other assets distributed to holders of the
Underlying Stock in such corporate event. The occurrence of these
corporate events and the consequent adjustments may materially and adversely
affect the value of the Securities. We describe the specific
corporate events that can lead to these adjustments and the procedures for
selecting Exchange Property (as described below) in the section of this Product
Supplement called “Description of Notes — Adjustment Events.”
Risks
Related to an Underlying Index or Underlying Fund Generally
Investment
in the Securities is Not the Same as a Direct Investment in an Underlying Index,
in the Stocks that Comprise an Underlying Index or Underlying Fund or in
Commodity Futures Contracts that Comprise an Underlying Index
An
investment in the Securities is not the same as a direct investment in an
Underlying Index, in the stocks that comprise an Underlying Index or Underlying
Fund or the commodity futures contracts that comprise an Underlying
Index. Investing in the Securities is not equivalent to investing
directly in an Underlying Index because an Underlying Index is a theoretical
calculation, not an actual portfolio, so it is not possible to make a direct
investment in an Underlying Index. In addition, the return on your
Securities could be less than if you had invested directly in the stocks (or any
other securities) comprising an Underlying Index or Underlying Fund or the
commodity futures contracts comprising an Underlying Index because you will only
participate in the change in the price or value of the Underlying Index or
Underlying Fund over the term of the Securities, because, for Underlying Indices
or Underlying Funds comprised of stocks, the return on the Securities does not
account for the return associated with the reinvestment of dividends that you
would have received if you had invested directly in the stocks (or any other
securities) comprising the Underlying Index or Underlying Fund and because there
are management fees charged by the Underlying Fund. You will not
receive any payment of dividends on any of the stocks (or any other securities)
comprising the Underlying Index or Underlying Fund.
You
Will Not Receive Interest Payments on the Securities or Have Rights in the
Stocks that Comprise an Underlying Index or Underlying Fund or the Commodity
Futures Contracts that Comprise an Underlying Index
You will
not receive any interest payments on the Securities. As an owner of the
Securities, you will not have rights that holders of the stocks that comprise an
Underlying Index or Underlying Fund or the commodity futures contracts that
comprise an Underlying Index.
We
May Engage in Business with or Involving One or More of the Issuers of the
Stocks that Comprise an Underlying Index or Underlying Fund without Regard to
your Interests
We or our
affiliates may presently or from time to time engage in business with one or
more of the issuers of the stocks comprising an Underlying Index or Underlying
Fund without regard to your interests, including extending loans to, or making
equity investments in, providing investment advisory services to, one or more of
such issuers or their affiliates or subsidiaries. In the course of
our business, we or our affiliates may acquire non-public information about one
or more of the issuers of the stocks comprising an Underlying Index or
Underlying Fund. None of us, Holding or any of our affiliates undertakes
to disclose any such information to you. In addition, we or our
affiliates from time to time have published, and in the future may publish,
research reports with respect to the stocks comprising an Underlying Index or
Underlying Fund. These research reports may or may not recommend that
investors buy or hold the stocks comprising an Underlying Index or Underlying
Fund.
PS-16
The
Sponsor of an Underlying Index May Adjust such Underlying Index in a Way That
Affects Its Level, and Such Sponsor Has No Obligation to Consider Your
Interests
The
sponsor of an Underlying Index is responsible for calculating and maintaining
the Underlying Index. The sponsor of an Underlying Equity Index can
add, delete or substitute the equity securities underlying an Underlying Equity
Index. You should realize that the changing of equity securities
included in an Underlying Equity Index may affect the Underlying Equity Index,
as a newly added equity security may perform significantly better or worse than
the equity security or securities it replaces. The sponsor of an
Underlying Index may make other methodological changes that could change the
level of an Underlying Index. Additionally, a sponsor may alter,
discontinue or suspend calculation or dissemination of an Underlying
Index. Any of these actions could adversely affect the value of the
Securities. The sponsor of an Underlying Index has no obligation to
consider your interests in calculating or revising such Underlying
Index.
The
Policies of the Investment Advisor for an Underlying Fund, and the Sponsor of an
Underlying Index or Target Index, Could Affect the Value of the
Securities
The
policies of the investment advisor concerning the calculation of an Underlying
Fund’s net asset value, additions, deletions or substitutions of stocks held by
the Underlying Fund and manner in which changes affecting the stocks held by the
Underlying Fund are reflected in the Underlying Fund could affect the market
price of the shares of the Underlying Fund and, therefore, affect the value of
the Securities. The value of the Securities could also be affected if
the investment advisor changes these policies, for example, by changing the
manner in which it calculates the Underlying Fund’s net asset value, or if the
investment advisor discontinues or suspends calculation or publication of the
Underlying Fund’s net asset value, in which case it may become difficult to
determine the value of the Securities.
In
addition, the sponsor of an Underlying Index or Target Index is responsible for
the design and maintenance of such index. Periodically, the sponsor
of an Underlying Index or Target Index may (i) determine that total shares
outstanding have changed in one or more component securities of the Underlying
Index or Target Index due to secondary offerings, repurchases, conversions or
other corporate actions; (ii) determine that the available float shares of one
or more of the component securities of the Underlying Index Target Index may
have changed due to corporate actions, purchases or sales of securities by
holders or other events, or (iii) replace one or more component securities of
the Underlying Index or Target Index due to mergers, acquisitions, bankruptcies,
or other market conditions, or if the issuers of such component securities of
the Underlying Index or Target Index fail to meet the criteria for inclusion in
the Underlying Index or Target Index. With respect to a Target Index,
the Underlying Fund generally aggregates certain of these adjustments and
changes the composition of the Underlying Fund. Any of these actions
could adversely affect the prices of the component securities of the Target
Index and/or the Underlying Fund and, consequently, the value of the
Securities.
Your
Return May Be Affected by Factors Affecting International Securities or
Commodities Markets
The price
or value of an Underlying Equity Index or Underlying Fund may be computed by
reference to the value of the equity securities of companies listed on various
global exchanges. The value of an Underlying Commodity Index may be
computed by reference to the value of commodity futures contracts traded on
various global exchanges. Under these circumstances, the return on
the Securities will be affected by factors affecting the prices of securities or
commodities in the relevant markets. The relevant foreign securities
or commodities markets may be more volatile than United States or other
securities or commodities markets and may be affected by market developments in
different ways than United States or other securities markets. Direct
or indirect government intervention to stabilize a particular securities or
commodities market and cross-shareholdings in companies in the relevant foreign
securities markets may affect prices and the volume of trading in those
markets. Also, there is generally less publicly available information
about foreign companies than about United States companies that are subject to
the reporting requirements of the Securities and Exchange Commission.
Additionally, accounting, auditing and financial reporting standards and
requirements in foreign countries differ from those applicable to United States
reporting companies.
The
prices and performance of securities of companies or commodity futures contracts
in foreign countries may be affected by political, economic, financial and
social factors in those regions. In addition, recent or future
changes in government, economic and fiscal policies in the relevant
jurisdictions, the possible imposition of, or changes in, currency exchange
laws or other laws or restrictions, and possible fluctuations in the rate of
exchange between currencies, are factors that could negatively affect the
relevant securities or commodities markets. Moreover, the relevant
foreign economies may differ favorably or unfavorably from the United States
economy in economic factors such as growth of gross national product, rate of
inflation, capital reinvestment, resources and
self-sufficiency.
PS-17
If
the Prices of the Equity Securities Comprising a Foreign Underlying Index or
Held By a Foreign Underlying Fund or the Commodity Futures Contracts Comprising
a Foreign Underlying Index Are Not Converted Into U.S. Dollars For Purposes of
Calculating the Value of the Foreign Underlying Index or the Net Asset Value of
the Foreign Underlying Fund, the Amount Payable On the Securities at Maturity
Will Not Be Adjusted For Changes In Exchange Rates That Might affect the Foreign
Underlying Index or Foreign Underlying Fund.
Because
the prices of the equity securities a foreign Underlying Index or held by a
foreign Underlying Fund or the commodity futures contracts comprising a foreign
Underlying Index are not converted into U.S. dollars for purposes of calculating
the value of that foreign Underlying Index or the net asset value of that
foreign Underlying Fund and although the equity securities that foreign
Underlying Index or held by that foreign Underlying Fund or the commodity
futures contracts comprising that foreign Underlying Index are traded in
currencies other than U.S. dollars, and the Securities, which are linked in
whole or in part to that foreign Underlying Index or foreign Underlying Fund,
are denominated in U.S. dollars, the amount payable on the Securities at
maturity, if any, will not be adjusted for changes in the exchange rate between
the U.S. dollar and each of the currencies in which the equity securities that
foreign Underlying Index or held by that foreign Underlying Fund or the
commodity futures contracts comprising that foreign Underlying Index are
denominated. Changes in exchange rates, however, may reflect changes
in various non-U.S. economies that in turn may affect the return on the
Securities. The amount we pay in respect of the Securities on the
maturity date, if any, will be determined solely in accordance with the
procedures described in “Description of Securities — Payment at
Maturity.”
If
the Prices of the Equity Securities Comprising a Foreign Underlying Index or
Held By a Foreign Underlying Fund or the Commodity Futures Contracts Comprising
a Foreign Underlying Index Are Converted Into U.S. Dollars For Purposes of
Calculating the Value of That Foreign Underlying Index or the Net Asset Value of
That Foreign Underlying Fund, the Securities Will Be Subject To Currency
Exchange Risk.
Because
the prices of the equity securities a foreign Underlying Index or held by a
foreign Underlying Fund or the commodity futures contracts comprising a foreign
Underlying Index are converted into U.S. dollars for the purposes of calculating
the value of that foreign Underlying Index or the net asset value of that
foreign Underlying Fund, the holders of the Securities will be exposed to
currency exchange rate risk with respect to each of the currencies in which the
equity securities that foreign Underlying Index or held by that foreign
Underlying Fund or the commodity futures contracts comprising that foreign
Underlying Index trade. An investor’s net exposure will depend on the
extent to which such currencies strengthen or weaken against the U.S. dollar and
the relative weight of the equity securities that foreign Underlying Index or
held by that foreign Underlying Fund or the commodity futures contracts
comprising that foreign Underlying Index denominated in each such
currency. If, taking into account such weighting, the U.S. dollar
strengthens against such currencies, the value of that foreign Underlying Index
or the net asset value of that foreign Underlying Fund will be adversely
affected and the payment at maturity of the Securities may be
reduced.
Of
particular importance to potential currency exchange risk are:
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existing
and expected rates of inflation;
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existing
and expected interest rate levels;
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the
balance of payments;
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the
extent of governmental surpluses or deficits in the component countries
and the United States;
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government
intervention in the currency markets;
and
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government
action fixing exchange rates or allowing exchange rates to
float.
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All of
these factors are in turn sensitive to the monetary, fiscal and trade policies
pursued by the governments of various component countries and the United States
and other countries important to international trade and finance.
PS-18
If
the Prices of the Equity Securities Comprising a Foreign Underlying Index or
Held By a Foreign Underlying Fund or the Commodity Futures Contracts Comprising
a Foreign Underlying Index Are Converted Into U.S. Dollars For Purposes of
Calculating the Value of That Foreign Underlying Index or the Net Asset Value of
That Foreign Underlying Fund, Changes In the Volatility of Exchange Rates, and
the Correlation Between Those Rates and the Value of That Foreign Underlying
Index or the Net Asset Value of That Foreign Underlying Fund are Likely To
affect the Market Value of the Securities.
The
exchange rate between the U.S. dollar and each of the currencies in which the
equity securities a foreign Underlying Index or held by a foreign Underlying
Fund or the commodity futures contracts comprising a foreign Underlying Index
are denominated refers to a foreign exchange spot rate that measures the
relative values of two currencies—the particular currency in which an equity
security that foreign Underlying Index or held by that foreign Underlying Fund
or a commodity futures contract included in that foreign Underlying Index are
denominated and the U.S. dollar. This exchange rate reflects the
amount of the particular currency in which an equity security that foreign
Underlying Index or held by that foreign Underlying Fund or a commodity futures
contract included in that foreign Underlying Index trade is denominated that can
be purchased for one U.S. dollar and thus increases when the U.S. dollar
appreciates relative to the particular currency in which that equity security or
commodity futures contract is denominated. The volatility of the
exchange rate between the U.S. dollar and each of the currencies in which the
equity securities that foreign Underlying Index or held by that foreign
Underlying Fund or the commodity futures contracts comprising that foreign
Underlying Index trade are denominated refers to the size and frequency of
changes in that exchange rate.
Because
the value of a foreign Underlying Index or the net asset value of a foreign
Underlying Fund is calculated, in part, by converting the closing prices of the
equity securities that foreign Underlying Index or held by that foreign
Underlying Fund or the final settlement prices of the commodity futures
contracts comprising that foreign Underlying Index into U.S. dollars,
the volatility of the exchange rate between the U.S. dollar and each of the
currencies in which those equity securities or commodity futures contracts are
denominated could affect the market value of the Securities.
The
correlation of the exchange rate between the U.S. dollar and each of the
currencies in which the equity securities a foreign Underlying Index or held by
a foreign Underlying Fund or the commodity futures contracts comprising a
foreign Underlying Index are denominated and the value of that foreign
Underlying Index or the net asset value of that foreign Underlying Fund trade
refers to the relationship between the percentage changes in that exchange rate
and the percentage changes in the value of that foreign Underlying Index or the
net asset value of that foreign Underlying Fund, as applicable. The
direction of the correlation (whether positive or negative) and the extent of
the correlation between the percentage changes in the exchange rate between the
U.S. dollar and each of the currencies in which the equity securities that
foreign Underlying Index or held by that foreign Underlying Fund or the
commodity futures contracts comprising that foreign Underlying Index trade are
denominated and the percentage changes in the value of that foreign Underlying
Index or the net asset value of that foreign Underlying Fund trade could affect
the value of the Securities.
There
Are Risks Associated With the Underlying Fund
An
Underlying Fund may have limited operating history. Even if an
Underlying Fund is listed for trading and a number of similar products have been
traded for varying periods of time on various securities exchanges, you cannot
be certain that an active trading market will continue for the shares of the
Underlying Fund or that there will be liquidity in the trading
market.
An
Underlying Fund is also subject to management risk, which is the risk that the
investment strategy of the Underlying Fund’s investment advisor, the
implementation of which is subject to a number of constraints, may not produce
the intended results. See the relevant index description in the
accompanying Underlying Supplement or the relevant Pricing Supplement for
additional information.
Underlying
Funds are Not Actively Managed
Unless
otherwise specified in the relevant Pricing Supplement or Underlying Supplement,
Underlying Funds are not actively managed by traditional methods, and therefore
the adverse financial condition of one or more issuers of stocks which comprise
an associated Target Index will not result in the elimination of such stock or
stocks from an Underlying Fund unless such stock or stocks are removed from the
Target Index. For Securities linked to an Underlying Fund or to an
Underlying Basket that includes an Underlying Fund, this may adversely affect
the value of the Securities and the return, if any, on the
Securities.
PS-19
An
Underlying Fund May Not Always be Able Exactly to Replicate the Performance of
the Target Index
It is
possible that, for a short period, an Underlying Fund may not fully replicate
the performance of the Target Index due to the temporary unavailability of
certain index securities in the secondary market or due to other extraordinary
circumstances. In addition, an Underlying Fund is not able to replicate exactly
the performance of the Target Index because the Target Index is a theoretical
calculation while the Underlying Fund is an actual portfolio of
stocks. Accordingly, the total return generated by an Underlying Fund
is reduced by its expenses and transaction costs incurred in adjusting the
actual balance of the Underlying Fund. For Securities linked to an
Underlying Fund or to an Underlying Basket that includes an Underlying Fund,
this may adversely affect the value of the Securities and the return, if any, on
the Securities.
Risks
Related to an Underlying Commodity Index
An
Underlying Commodity Index or a Target Index May Be an Excess Return Index and
Not a Total Return Index
An
Underlying Commodity Index or a Target Index may be an excess return index and
not a total return index. An excess return index reflects the returns
that are potentially available through an unleveraged investment in the equity
securities or commodity futures contracts that comprise the index. By
contrast, a total return index, in addition to reflecting such returns, also
reflects interest that could be earned on cash collateral. An excess
return index does not include this total return feature. In addition,
the term “excess return” is not intended to suggest that the performance of an
excess return index at any time or the return on your Securities will be
positive or that such excess return index is designed to exceed a particular
benchmark.
The
Final Value You Receive on the Securities May Be Delayed Upon the Occurrence of
a Market Disruption Event
If the
calculation agent determines that, on the Determination Date, a market
disruption event has occurred or is continuing, the determination by the
calculation agent of the value of the Underlying Commodity Index may be
deferred. As a result, the Determination Date for your Securities may
also be delayed. If this occurs, you may not receive the cash payment
we are obligated to deliver on the Maturity Date of the Securities until several
days after the originally scheduled due date.
Suspension
or Disruptions of Market Trading in the Commodity and Related Futures Markets
May Adversely Affect the Value of Your Securities
The
commodity markets are subject to temporary distortions or other disruptions due
to various factors, including the lack of liquidity in the markets, the
participation of speculators and government regulation and
intervention. In addition, U.S. futures exchanges and some foreign
exchanges have regulations that limit the amount of fluctuation in futures
contract prices which may occur during a single business day. These
limits are generally referred to as “daily price fluctuation limits” and the
maximum or minimum price of a contract on any given day as a result of these
limits is referred to as a “limit price.” Once the limit price has
been reached in a particular contract, no trades may be made at a different
price. Limit prices have the effect of precluding trading in a
particular contract or forcing the liquidation of contracts at disadvantageous
times or prices. These circumstances could adversely affect the price
or level of the Underlying Commodity Index and, therefore, the value of your
Securities.
An
Underlying Commodity Index may be a Rolling Index and Future Prices of the
Commodities that are Different Relative to Their Current Prices May Decrease the
Amount Payable at Maturity
An
Underlying Commodity Index is comprised of commodity futures
contracts. Unlike equities, which typically entitle the holder to a
continuing stake in a corporation, commodity futures contracts normally specify
a certain date for delivery of the underlying physical commodity. As
the exchange-traded futures contracts that comprise the Underlying Commodity
Index approach expiration, they are replaced by contracts that have a later
expiration. Thus, for example, a contract purchased and held in August may
specify an October expiration. As time passes, the contract expiring in October
is replaced by a contract for delivery in November. This process is referred to
as “rolling.” If the market for these contracts is (putting aside other
considerations) in “backwardation,” where the prices are lower in the distant
delivery months than in the nearer delivery months, the sale of the October
contract would take place at a price that is higher than the price of the
November contract, thereby creating a “roll yield” which might create a profit
for the purchase of the contracts. While certain commodities’
contracts included in an Underlying Commodity Index may have historically
exhibited consistent periods of backwardation, backwardation will likely not
exist at all times with respect to any commodity. Certain of the commodities
included in an Underlying Commodity Index may have historically traded in
“contango” markets. Contango markets are those in which the prices of
contracts are higher in the distant delivery months than in the nearer delivery
months. The absence of backwardation in the commodity markets could result in
negative “roll yields,” which might create a loss for the purchase of the
contracts and could adversely affect the value of the Underlying Commodity
Index. There can be no assurance, however, that backwardation or roll yields
will exist in any particular commodity at any time during the term of the
Securities.
PS-20
The
Securities Are Not Directly Linked to the Contracts in an Underlying Commodity
Index or Any Other Exchange-Traded Futures Contracts
The
Securities may be linked in whole or in part to an Underlying Commodity Index,
but they are not directly linked to the contracts in an Underlying Commodity
Index or any other exchange-traded futures contracts. An Underlying Commodity
Index reflects the returns that are potentially available through an unleveraged
investment in the contracts in the associated Target Index. Accordingly, the
return on your Securities will reflect the returns associated with the contracts
in the Target Index, including any positive or negative “roll yield,” and
therefore will not reflect the return you would realize if the Securities were
linked directly to the contracts in the Target Index or if you actually owned
such contracts or other exchange-traded futures contracts for a similar
period.
An
Underlying Commodity Index May Be Comprised of Commodities Produced Worldwide
Whose Prices May Change Unpredictably
An
Underlying Commodity Index may be comprised of specified commodities produced
worldwide. Global commodity prices are primarily affected by the
global demand for and supply of those commodities, but are also significantly
influenced by speculative actions and by currency exchange rates. In
addition, prices for commodities are affected by governmental programs and
policies, such as trade, fiscal and monetary issues. Extrinsic
factors such as weather, disease and natural disasters also affect commodity
prices. Demand for agricultural commodities, such as wheat, corn and
soy, both for human consumption and as cattle feed, has generally increased with
increases in worldwide growth and prosperity. These factors and
others may affect the level of an Underlying Commodity Index and the value of
your Securities in varying ways, and different factors may cause the value of
different commodities comprising an Underlying Commodity Index and the
volatilities of their prices, to move in inconsistent directions and at
inconsistent rates.
An
Underlying Commodity Index May Include Futures Contracts on Foreign Exchanges
That Are Less Regulated Than U.S. Markets and Are Subject to Risks That Do Not
Always Apply to U.S. Markets
An
Underlying Commodity Index may include futures contracts on physical commodities
on exchanges located outside the United States. The regulations of
the Commodity Futures Trading Commission do not apply to trading on foreign
exchanges, and trading on foreign exchanges may involve different and greater
risks than trading on United States exchanges. Certain foreign
markets may be more susceptible to disruption than United States exchanges due
to the lack of a government-regulated clearinghouse system. Trading
on foreign exchanges also involves certain other risks that are not applicable
to trading on United States exchanges. Those risks include varying
exchange rates, foreign exchange controls, governmental expropriation,
burdensome or confiscatory taxation systems, government imposed moratoriums, and
political or diplomatic events.
It may
also be more costly and difficult to enforce the laws or regulations of a
foreign country or exchange, and it is possible that the foreign country or
exchange may not have laws or regulations which adequately protect the rights
and interests of investors in an Underlying Commodity Index.
Lack
of Regulation by the CFTC
The
Securities are debt securities that are our direct obligations. The
net proceeds to be received by us from the sale of the Securities that include
an Underlying Commodity Index will not be used to purchase or sell futures
contracts that comprise the Underlying Commodity Index for the benefit of
holders of the Securities. An investment in the Securities does not
constitute either an investment in futures contracts or in a collective
investment vehicle that trades in futures contracts. The Securities
do not constitute a direct or indirect investment by you in the trading of the
underlying futures contracts that constitute the Underlying Commodity
Index. Unlike an investment in the Securities, an investment in a
collective investment vehicle that invests in futures contracts on behalf of its
participants may be regulated as a commodity pool and its operator may be
required to be registered with and regulated as a “commodity pool operator” (a
“CPO”) by the Commodity Futures Trading Commission (the “CFTC”), an independent
federal regulatory agency. Because the Securities are not interests
in a commodity pool, the Securities will not be regulated by the CFTC as a
commodity pool, we will not be registered with the CFTC as a CPO and you
will not benefit from the CFTC’s or any non-United States regulatory
authority’s regulatory protections
afforded to persons who trade on futures exchanges, which generally may only be
transacted through a person registered with the CFTC as a “futures commission
merchant” (an “FCM”). We are not registered with the CFTC as an FCM
and you will not benefit from the CFTC’s or any other non-United States
regulatory authority’s regulatory protections afforded to persons who trade in
futures contracts on regulated futures exchanges through registered a
FCM.
PS-21
Commodity
Prices May Change Unpredictably, Affecting the Underlying Return and the Value
of Your Securities In Unforeseeable Ways
Trading
in futures contracts associated with commodities is speculative and can be
extremely volatile. A decrease in the price of any of the commodities
upon which the futures contracts that compose an Underlying Commodity Index are
based may have a material adverse effect on the value of the Securities and your
return on an investment in the Securities. Market prices of the
commodities that comprise and Underlying Commodity Index may fluctuate rapidly
based on numerous factors, including: changes in supply and demand
relationships; governmental programs and policies, national and international
political and economic events, changes in interest and exchange rates,
speculation and trading activities in commodities and related contracts, general
weather conditions, and trade, fiscal, monetary and exchange control policies;
agriculture; trade; disease; and technological developments. Many
commodities are also highly cyclical. These factors, some of which
are specific to the market for each such commodity may cause the value of the
different commodities upon which the futures contracts that compose an
Underlying Commodity Index are based, as well as the futures contracts
themselves, to move in inconsistent directions at inconsistent
rates. This, in turn, will affect the value of the
Securities. It is not possible to predict the aggregate effect of all
or any combination of these factors.
Some
of the Commodities that comprise an Underlying Commodity Index may be Subject to
Pronounced Risks of Pricing Volatility
As a
general matter, the risk of low liquidity or volatile pricing around the
maturity date of a commodity futures contract is greater than in the case of
other futures contracts because (among other factors) a number of market
participants take physical delivery of the underlying
commodities. Many commodities, like those in the energy and
industrial metals sectors, have liquid futures contracts that expire every
month. Therefore, in the calculation of the some Underlying Commodity
Indices these contracts are rolled forward every month. Contracts
based on certain other commodities, most notably agricultural and livestock
products, tend to have only a few contract months each year that trade with
substantial liquidity. Thus, these commodities, with related futures
contracts that expire infrequently, may roll forward less frequently than every
month in the calculation of an Underlying Commodity Index and can have further
pronounced pricing volatility during extended periods of low
liquidity.
Risks
Related to an Underlying Currency Pair
The
Securities Are Subject to Currency Exchange Risk
Fluctuations
in the exchange rate of an Underlying Currency Pair will affect the value of the
Securities. The exchange rate of an Underlying Currency Pair is the
result of the supply of, and the demand for, those currencies. Changes in the
exchange rate result over time from the interaction of many factors directly or
indirectly affecting economic and political conditions in the countries of the
Underlying Currency Pair, including economic and political developments in other
countries. 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 and the extent of governmental surpluses or
deficits in the countries of the Underlying Currency Pair. All of these factors
are in turn sensitive to the monetary, fiscal and trade policies pursued by the
governments of various countries, including the countries of the Underlying
Currency Pair and other countries important to international trade and
finance.
Investment
in the Securities is Not the Same as a Direct Investment in Any
Currency
An
investment in the Securities is not the same as a direct investment any
currency. This is due both to the method of calculating your payment
at maturity and to the fact that the spot rate reflected in the Underlying
Currency Pair is based on a single point in time and therefore does not
necessarily reflect rates at which an actual transaction has occurred.
Consequently, the return on the Securities could be less than a direct
investment in the Reference Currency relative to the Base Currency.
Even
Though the Currencies Comprising an Underlying Currency Pair are Traded
Around-the-Clock, the Securities Will Not Be So Traded
The
interbank market in foreign currencies is a global, around-the-clock market.
Therefore, the hours of trading for the Securities, if any trading market
develops, will not conform to the hours during which the currencies comprising
an Underlying Currency Pair are traded. To the extent that U.S. markets are
closed while markets for other currencies remain open, significant price and
rate movements may take place in the foreign exchange markets that will not be
reflected immediately in the price of the Securities. The possibility of these
movements should be taken into account in relating the value of the Securities
to those in the U.S. foreign exchange markets.
PS-22
There is
no systematic reporting of last-sale information for foreign currencies.
Reasonably current bid and offer information is available in certain brokers’
offices, in bank foreign currency trading offices and to others who wish to
subscribe for this information, but this information will not necessarily be
reflected in the value of the Underlying Currency Pair used to calculate the
amount paid to you at maturity. There is no regulatory requirement that those
quotations be firm or revised on a timely basis. The absence of last-sale
information and the limited availability of quotations to individual investors
may make it difficult for many investors to obtain timely, accurate data about
the state of the foreign exchange markets.
Suspension
or Disruptions of Market Trading in an Currencies Comprising the Underlying
Currency Pair May Adversely Affect the Value of the Securities
The
currencies markets are subject to temporary distortions or other disruptions due
to various factors, including government regulation and intervention, the lack
of liquidity in the markets, and the participation of speculators. These
circumstances could adversely affect the Underlying Currency Pair and,
therefore, the value of the Securities.
Risks
Related to an Underlying Basket
The
Basket Components May Not be Equally Weighted
The
Basket Components may have a different weight in determining the return of the
Underlying Basket, depending on the component weight specified in the relevant
Pricing Supplement. For example, the relevant Pricing Supplement may
specify that the component weight for Component A, Component B and Component C
are 50%, 30% and 20%, respectively. One consequence of such an
unequal weighting of the Basket Components is that the same percentage change in
the component return of two of the Basket Components may have different effects
on the underlying return. For example, if the component weight for
the Component A is greater than the component weight for Component B, a 5%
decrease in Component A will have a greater effect on the underlying return than
a 5% decrease in Component B.
Changes
in the Price, Value or Exchange Rate of the Basket Components May Offset Each
Other
Price
movements in the Basket Components may not correlate with each
other. At a time when the price, value or exchange rate of one or
more of the Basket Components increases, the price, value or exchange rate of
the other Basket Components may not increase as much or may even
decline. Therefore, in calculating the underlying return, increases
in the price, value or exchange rate of one or more of the Basket Components may
be moderated, or more than offset, by lesser increases or declines in the price,
value or exchange rate of the other Basket Component or Components, particularly
if the Basket Component or Components that appreciate are of relatively low
weight in the Basket. You assume the risk that the underlying return
may not be positive and the risk that you may lose some or all of your
investment in the Securities if the underlying return is negative.
You may
not be able to rely on the Basket as a means of diversification in the equity,
commodity or currency markets. For example, if one Basket Component
is more heavily weighted than other Basket Components or if Basket Components
representing one industry are more heavily weighted than other Basket
Components, the Basket may be particularly sensitive to the performance of such
Basket Component or such industry. In this situation, you may lose
some or all of your investment based on a decline in one or more Basket
Components.
If
the Basket Components Are from the Same Industry or Sector, Prices May Correlate
with Each Other
If all of
the Basket Components are from the same industry or sector, it is often, but not
always, the case that prices of stocks in the same industry or sector may move
up or down in a similar pattern due to macroeconomic factors affecting that
industry
or sector. This phenomenon is referred to as “correlation.” For example, a
Basket of ten Underlying Stocks in the same industry or sector is likely to
result in correlation between the ten Underlying Stocks, and it is possible that
correlation will be detrimental to you since the prices of all ten Underlying
Stocks may decline at the same time. This is impossible to predict.
The
Weight of Each Basket Component May Be Determined on a Date Other Than the
Pricing Date.
If so
specified in the relevant Pricing Supplement, the weight of each Basket
Component in the Basket may be determined on a date or dates other than the
pricing date. For example, the relevant Pricing Supplement may
specify that the weights of the Basket Components in the Basket will be
determined based on the relative magnitude of the Component Return of each
Basket Component on the determination date. As a result, if the
relevant Pricing Supplement so specifies, you will not know the weight assigned
to each Basket Component until a date later than the pricing date, and you may
not know the weight assigned to each Basket Component in the Basket prior to the
determination date.
PS-23
PUBLIC
INFORMATION REGARDING THE UNDERLYING STOCK OR THE UNDERLYING FUND
In the
relevant Pricing Supplement, we will provide summary information regarding the
Underlying Company or the Underlying Fund, as applicable, based on its publicly
available documents. We take no responsibility for the accuracy or completeness
of such information.
The
shares of the Underlying are registered under the Securities Exchange Act of
1934, as amended, which we refer to as the “Exchange Act.” Companies
with securities registered under the Exchange Act are required periodically to
file certain financial and other information specified by the Securities and
Exchange Commission, which we refer as the “Commission.” In addition,
registered investment companies that manage exchange-traded funds are required
to provide or file periodically certain financial and other information
specified by the Commission pursuant to the Exchange Act and the Investment
Company Act of 1940, as amended. Information provided to or filed
with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at 100 F Street, N.E., Washington, D.C.
20549. Copies of this material can also be obtained from the Public
Reference Room of the Commission at 100 F Street, N.E., Washington, D.C. 20549
at prescribed rates. Please call the Commission at 1-800-SEC-0330 for further
information about the Public Reference Room. In addition, information provided
to or filed with the Commission electronically can be accessed through a website
maintained by the Commission. The address of the Commission’s website is
http://www.sec.gov. Information provided to or filed with the Commission by the
Underlying Company or the Underlying Fund, as applicable, pursuant to the
Exchange Act can be located by reference to the relevant Commission file number
for such Underlying Company or Underlying Fund, as applicable.
In
addition, information regarding the Underlying Company or Underlying Fund may be
obtained from other sources including, but not limited to, press releases,
newspaper articles and other publicly disseminated documents. We make no
representation or warranty as to the accuracy or completeness of such
reports.
This
Product Supplement and the relevant Pricing Supplement relate only to the
Securities offered by us and does not relate to the Underlying Stock or other
securities of the Underlying Company or the Underlying Fund. We will
derive all disclosures contained in the relevant Pricing Supplement regarding
the Underlying Company or Underlying Fund from the publicly available documents
described above. Neither we nor Holding nor the agents have participated in the
preparation of such documents or made any due diligence inquiry with respect to
the Underlying Company or Underlying Fund in connection with the offering of the
Securities. Neither we nor Holding nor the agents make any representation that
such publicly available documents or any other publicly available information
regarding the Underlying Company or Underlying Fund are accurate or complete.
Furthermore, neither we nor Holding can give any assurance that all events
occurring prior to the date of the relevant Pricing Supplement (including events
that would affect the accuracy or completeness of the publicly available
documents described above) that would affect the trading price of the Underlying
Stock or Underlying Fund (and therefore the initial price) have been publicly
disclosed. Subsequent disclosure of any such events or the disclosure of or
failure to disclose material future events concerning the Underlying Company or
Underlying Fund could affect the payment, if any, you will receive on the
maturity date with respect to the Securities and therefore the trading prices of
the Securities. Neither we nor Holding nor any of our affiliates have
any obligation to disclose any information about the Underlying Company or
Underlying Fund after the date of the relevant Pricing Supplement.
Neither
we nor Holding nor any of our affiliates makes any representation to you as to
the performance of the Underlying Stock or Underlying Fund.
We and/or
our affiliates may presently or from time to time engage in business with the
Underlying Company, the Underlying Fund or the issuers of the stocks comprising
the Underlying Fund, as applicable, including extending loans to, or making
equity investments in, or providing advisory services to such companies,
including merger and acquisition advisory services. In the course of such
business, we and/or our affiliates may acquire non-public information with
respect to such companies and, in addition, one or more of our affiliates may
publish research reports with respect to such companies. The statement in the
preceding sentence is not intended to affect the rights of holders of the
Securities under the securities laws. As a prospective purchaser of a
Security, you should undertake such independent investigation of the Underlying
Company or Underlying
Fund as in your judgment is appropriate to make an informed decision with
respect to an investment in the Securities.
PS-24
DESCRIPTION
OF SECURITIES
Capitalized
terms not defined herein have the meanings given to such terms in the
accompanying Prospectus Supplement. The term “Security” refers to each Buffer
Security linked to an Underlying and to each Out-Performance Note linked to an
Underlying, which are fully and unconditionally guaranteed by
Holding.
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Underlying
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As
specified in the relevant Pricing Supplement. The Underlying
will be (i) the common stock of a company, which we refer to as an
“Underlying Stock”; (ii) an index of equity securities or commodity
futures contracts, which we refer to as an “Underlying Index”; (iii) an
exchange-traded fund that tracks the performance of an underlying index or
basket of securities, primarily by holding securities or other instruments
related to such underlying index or basket, which we refer to as an
“Underlying Fund”; (iv) a reference currency, which we refer to as a
“Reference Currency” relative to another currency, which we refer to as a
“Base Currency” and which, together with its Reference Currency, we refer
to as an “Underlying Currency Pair”; or (v) a basket comprised of
Underlying Stocks, Underlying Indices, Underlying Funds and/or Underlying
Currency Pairs, which we refer to as an “Underlying Basket.” In
this Product Supplement, we refer to any Underlying Stock, Underlying
Index, Underlying Fund or Underlying Currency Pair included in an
Underlying Basket as a “Basket Component,” and we refer to the Underlying
Stock, Underlying Index, Underlying Fund, Underlying Currency Pair or
Underlying Basket to which the Securities are linked as the
“Underlying.” As used in this Product Supplement, the term
“common stock” includes non-U.S. equity securities issued through
depositary arrangements such as American depositary shares, or
ADSs. We refer to the common stock represented by ADSs as the
“ADS Underlying Stock. If the Underlying Stock is an ADS, the
term “issuer” refers to the issuer of the shares underlying the
ADSs. We refer to the issuer of an Underlying Stock as the
“Underlying Company.” We refer to an Underlying Index comprised
of stocks as an “Underlying Equity Index” and to an Underlying Commodity
Index as an “Underlying Commodity Index.” We refer to the index
that an Underlying Fund tracks as a “Target Index.”
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Pricing
Date
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As
specified in the relevant Pricing Supplement.
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Issue
Price
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Unless
otherwise specified in the relevant Pricing Supplement,
100%.
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Maturity
Date
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As
specified in the relevant Pricing Supplement, subject to postponement as
described below and as described under “Description of Notes — Fixed Rate
Notes — If a Payment Date Is not a Business Day” in the accompanying
Prospectus Supplement.
With
respect to Securities linked to an Underlying Commodity Index or a Basket
that includes an Underlying Commodity Index, if the Determination Date is
postponed as described below under “— Determination Dates” the Maturity
Date shall be postponed to the third business day immediately following
the Determination Date, as postponed or, for Securities linked to a
Basket, the last Determination Date, as postponed for any Basket
Component. No interest shall accrue as a result of any such
postponement.
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Specified
Currency
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U.S.
Dollars
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Denominations
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Unless
otherwise specified in the relevant Pricing Supplement, the Securities may
be purchased in minimum denominations of $1,000 and integral multiples
thereof.
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Form
of Securities
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The
Securities will be represented by a single registered global security,
deposited with the Depository Trust Company.
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Guarantee
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The
payment and delivery obligations of ABN AMRO Bank N.V. under the
Securities, when and as they shall become due and payable, whether at
maturity or upon acceleration, are fully and unconditionally guaranteed by
ABN AMRO Holding N.V.
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PS-25
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Interest
Rate
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None.
The Securities do not pay interest.
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Payment
at Maturity
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Unless
otherwise specified in the relevant Pricing Supplement, for Buffer
Securities, at maturity, you will receive, for each $1,000 principal
amount of Securities, a cash amount calculated as follows:
(1) if
the Underlying Return is 0% or positive, $1,000 plus the Additional
Payment;
(2) if
the Underlying Return is less than 0% down to and including the Negative
Buffer Level, $1,000; and
(3) if
the Underlying Return is less than the Negative Buffer Level, $1,000 plus
[(Underlying Return + Buffer Level) × Downside Leverage Factor (if
applicable)] × $1,000.
If
the Underlying Return is less than the Negative Buffer Level, you could
lose some or all of your initial principal investment. In addition, if a
Maximum Amount is applicable, you will never receive a payment at maturity
greater than $1,000 plus the Maximum Amount per $1,000 principal amount of
Securities.
Unless
otherwise specified in the relevant Pricing Supplement, for
Out-Performance Notes, at maturity, you will receive for each $1,000
principal amount of Securities a cash amount calculated as
follows:
(1) if
the Underlying Return is 0% or positive, $1,000 plus the Additional
Payment; and
(2) if
the Underlying Return is less than 0% , $1,000 plus (Underlying Return ×
$1,000).
If
the Underlying Return is less than 0%, you could lose some or all of your
initial principal investment. In addition, if a Maximum Amount is
applicable, you will never receive a payment at maturity greater than
$1,000 plus the Maximum Amount per $1,000 principal amount of
Securities.
Any
payment on the Securities is subject to the creditworthiness of ABN AMRO
Bank N.V. and ABN AMRO Holding N.V., as guarantor.
The
Calculation Agent, which is our affiliate, will calculate the cash payment
due at maturity, if any, on the Determination Date. The
Calculation Agent will provide written notice to the Securities
Administrator at its New York Office, on which notice the Securities
Administrator may conclusively rely, of such payment amount, on or prior
to 11:00 a.m. on the Business Day preceding the Maturity
Date.
The
Calculation Agent will round all percentages resulting from any
calculation with respect to the Securities to the nearest one
hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)). All
dollar amounts resulting from such calculation will be rounded to the
nearest cent with one-half cent being rounded upwards.
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Additional
Payment
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A
Digital Return or an Out-Performance Amount, as specified in the relevant
Pricing Supplement.
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Digital
Return
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If
applicable, a fixed cash amount for each $1,000 principal amount of
Securities, as specified in the relevant Pricing
Supplement.
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Out-Performance
Amount
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If
applicable, a cash amount for each $1,000 principal amount of Securities
equal to the Participation Rate × the Underlying Return; provided, however, that
the Out-Performance Amount will not exceed the Maximum Amount, if the
relevant Pricing Supplement specifies a Maximum
Amount.
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PS-26
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Maximum
Amount
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As
specified in the relevant Pricing Supplement.
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Buffer
Level
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A
fixed percentage as specified in the relevant Pricing
Supplement.
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Negative
Buffer Level
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(-1)
× Buffer Level
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Participation
Rate
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A
fixed amount or percentage as specified in the relevant Pricing
Supplement.
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Downside
Leverage Factor
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If
applicable, a fixed amount as specified in the relevant Pricing
Supplement.
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Underlying
Return
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For
Securities linked to a single Underlying Stock, Underlying Index,
Underlying Fund or Underlying Currency Pair, the Underlying Return will be
the percentage change in the price, value or exchange rate of the
Underlying, calculated as:
final price, value or
exchange rate – initial price, value or exchange rate
initial
price, value or exchange rate
For Securities linked to an Underlying Basket, the Underlying Return will be the sum of the weighted returns of the Basket Components, calculated as: Sum
of (Component Return of each Basket Component × Component Weight of such
Basket Component)
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Component
Return
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With
regard to each Basket Component, the Component Return will be the
percentage change in the price, value or exchange rate of such Basket
Component, calculated as:
final price, value or
exchange rate – initial price, value or exchange rate
initial
price, value or exchange rate
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Component
Weight
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With
respect to each Basket Component, the Component Weight is a fixed
percentage or fraction determined in the manner specified in the relevant
Pricing Supplement, provided that the sum
of the Component Weights for all Basket Components will equal 100% or 1,
as applicable. The relevant Pricing Supplement will specify
either (i) the weight of each Basket Component in the Basket, which will
be fixed for the term of the Securities, or (ii) the manner in which the
weight of each Basket Component will be determined. For
example, if the relevant Pricing Supplement specifies that a Basket
Component is weighted to comprise 18% of the value of the Basket, the
Component Weight for that Basket Component is
18%. Alternatively, the relevant Pricing Supplement may specify
that, for a Basket consisting of two Basket Components, the Basket
Component with the greater component return will make up 70% of the value
of the Basket, and the Basket Component with the lesser component return
will make up 30% of the value of the Basket.
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Initial
Price, Value or Exchange Rate
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The
Initial Price of an Underlying Stock is the Closing Price of such
Underlying Stock on the Pricing Date, divided by the Exchange Factor,
subject to adjustment for certain corporate events affecting such
Underlying Stock, which we describe in “Description of Securities —
Adjustment Events.”
The
Initial Value of an Underlying Index is the Closing Value of such
Underlying Index on the Pricing Date.
The
Initial Price of an Underlying Fund is the Closing Price of a share of
such Underlying Fund on the Pricing Date, divided by the Exchange Factor,
subject to adjustment for certain corporate events affecting such
Underlying Fund, which we describe in “Description of Securities —
Adjustment Events.”
The
Initial Exchange Rate of an Underlying Currency Pair is the Spot Rate for
such Underlying Currency Pair on the Pricing Date.
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PS-27
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Final
Price, Value or Exchange Rate
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The
Final Price of an Underlying Stock is the Closing Price of such Underlying
Stock on the Determination
Date.
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The
Final Value of an Underlying Index is the Closing Value of such Underlying
Index on the Determination Date, subject to the terms and provisions which
we describe in “Description of Securities — Discontinuance of an
Underlying Index; Alteration of Method of Calculation.”
The
Final Price of an Underlying Fund is the Closing Price of a share of such
Underlying Fund on the Determination Date, subject to the terms and
provisions which we describe in “Description of Securities —
Discontinuance of an Underlying Fund; Alteration of Method of
Calculation.”
The
Final Exchange Rate of an Underlying Currency Pair is the Spot Rate for
such Underlying Currency Pair on the Determination
Date.
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Closing
Price, Closing Value or Spot Rate
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With
respect to an Underlying Stock (or any other security for which a Closing
Price must be determined) or Underlying Fund, if the Underlying Stock (or
any other security for which a Closing Price must be determined) or
Underlying Fund is listed on a U.S. securities exchange registered under
the Securities Exchange Act of 1934, as amended (which we refer to as the
Exchange Act), or is included in the OTC Bulletin Board Service, which we
refer to as the OTC Bulletin Board (operated by the Financial Industry
Regulatory Authority), the Closing Price for one share of the Underlying
Stock (or one unit of any such other security) or one share of the
Underlying Fund on any Trading Day means (i) the last reported sale price,
regular way (or if listed on NASDAQ, the official closing price), in the
principal trading session on such day on the principal securities exchange
on which the Underlying Stock (or any such other security) or shares of
the Underlying Fund are listed or admitted to trading and (ii) if not
listed or admitted to trading on any such securities exchange or if such
last reported sale price is not obtainable (even if the Underlying Stock,
other such other security or shares of the Underlying Fund are listed or
admitted to trading on such securities exchange), the last reported sale
price in the principal trading session on the over-the-counter market as
reported on the Relevant Exchange or OTC Bulletin Board on such day. If
the last reported sale price is not available pursuant to clause (i) or
(ii) of the preceding sentence, the Closing Price for any Trading Day
shall be the mean, as determined by the Calculation Agent, of the bid
prices for the Underlying Stock (or any such other security) or shares of
the Underlying Fund obtained from as many dealers in such security, but
not exceeding three, as will make such bid prices available to the
Calculation Agent. Bids of RBSSI or any of our other affiliates
may be included in the calculation of the mean, but only if any such bid
is not the lowest of the bids obtained. The term “OTC Bulletin
Board Service” shall include any successor service thereto.
With
respect to an Underlying Index on any Trading Day, the Closing Value means
the closing value of such Underlying Index on such Trading
Day.
With
respect to an Underlying Currency Pair on any Trading Day, the Spot Rate
means (a) the spot exchange rate, expressed as the number of units of Base
Currency of such Underlying Currency Pair per one unit of the Reference
Currency of such Underlying Currency Pair or (b) the spot exchange rate,
expressed as the number of units of Reference Currency of such Underlying
Currency Pair per one unit of the Base Currency of such Underlying
Currency Pair, in each case as reported by Reuters Group PLC (“Reuters”)
on the relevant page or by Bloomberg, L.P. (“Bloomberg”) on the relevant
page or any substitute Reuters or Bloomberg page at 10:00 a.m. New York
City time (or such other time as specified in the relevant pricing
supplement). The relevant Pricing Supplement will specify the
means in which the Spot Rate will be expressed whether the Reuters or
Bloomberg page will be used and the specific Reuters or Bloomberg page to
be used to determine the Spot Rate.
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PS-28
|
Determination
Date
|
As
specified in the relevant Pricing Supplement, subject to adjustment as
described below.
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With
respect to an Underlying Commodity Index, if the scheduled Determination
Date is not a Trading Day, or if a Market Disruption Event has occurred on
such Trading Day, the Determination Date will be postponed to the last
date on which the settlement price of a Disrupted Contract (as defined
below) is determined, as described below, and the Calculation Agent will
calculate the Closing Value for that Determination Date utilizing, for
those futures contracts included in the Underlying Commodity Index that do
not suffer a Market Disruption Event or a non-Trading Day on the
originally scheduled Determination Date, the final settlement prices, and
for those futures contracts included in the Underlying Commodity Index
that experience a Market Disruption Event or a non-Trading Day on the
originally scheduled Determination Date (the “Disrupted Contracts”), the
settlement prices on the first Trading Day on which a Market Disruption
Event is not existing with respect to such futures
contracts. If, however, a Market Disruption Event with respect
to one or more Disrupted Contracts included in the Underlying Index is
continuing on the third Trading Day following the originally scheduled
Determination Date, the Calculation Agent will determine, on such third
Trading Day, in its discretion, an estimated fair value price for the
Disrupted Contracts after considering any available electronic or after
hours trading prices, related over-the-counter or other non-exchanged
based prices, implied prices that may be derived from other exchange
traded instruments, and estimated fair values based on fundamental market
information.
With
respect to an Underlying Stock, an Underlying Equity Index, an Underlying
Fund or an Underlying Currency Pair, if the scheduled Determination Date
is not a Trading Day, or if a Market Disruption Event has occurred on such
Trading Day, the Determination Date for such Underlying Stock, Underlying
Index, Underlying Fund or Underlying Currency Pair shall be the
immediately succeeding Trading Day; provided that the
Determination Date with respect to any Underlying Stock, Underlying Index
or Underlying Fund comprised of stocks or Underlying Currency Pair shall
be no later than the second scheduled Trading Day preceding the Maturity
Date, notwithstanding the occurrence of a Market Disruption Event on such
second scheduled Trading Day or such second scheduled Trading Day is not a
Trading Day. For information about what constitutes a Market
Disruption Event, see below under “— Market Disruption
Events.”
If,
with respect to an Underlying Index comprising of stock or an Underlying
Fund, a Market Disruption Event occurs on such second scheduled Trading
Day prior to the Maturity Date or such scheduled Trading Day is not a
Trading Day, the Calculation Agent will determine the Closing Price or
Closing Value in accordance with the formula for calculating the price of
the Underlying Fund or the value of the Underlying Index, as applicable,
last in effect prior to the commencement of the Market Disruption Event,
using the closing price (or, if trading in the relevant securities has
been materially suspended or materially limited, its good faith estimate
of the closing price that would have prevailed but for such suspension or
limitation) on such Trading Day of each security most recently comprising
such Underlying Index or Underlying Fund, as applicable.
If,
with respect to an Underlying Currency Pair, a Market Disruption Event
occurs on such second scheduled Trading Day prior to the Maturity Date or
such scheduled Trading Day is not a Trading Day, the Calculation Agent
will determine the Spot Rate at approximately 10:00 a.m. New York City
time (or such other time as specified in the relevant pricing supplement)
on the relevant date in accordance with the following substitute
procedures:
(a)
The Final Exchange Rate will be either (i) the Base Currency/Reference
Currency exchange rate, expressed as the number of units of Base Currency
of such Underlying Currency Pair per one unit of the Reference Currency of
such Underlying Currency Pair or (ii) the Reference Currency/Base Currency
exchange rate, expressed as the number of units of Reference Currency of
such Underlying Currency Pair per one unit of the Base Currency of such
Underlying Currency Pair (depending on how the Spot Rate is to be
expressed, as
|
PS-29
| specified
in the relevant pricing supplement) for settlement in two business days
reported by the Federal Reserve Bank of New York, in each case as reported
by Reuters on the relevant page or by Bloomberg on the relevant page or
any substitute Reuters or Bloomberg page at 10:00 a.m. New York City time
(or such other time as specified in the relevant pricing
supplement). The relevant Pricing Supplement will specify
whether the Reuters or Bloomberg page will be used and the specific
Reuters or Bloomberg page to be used to determine the Spot Rate.
(b)
If the exchange rate referenced to in (a) above is not so quoted on
Reuters or Bloomberg, as applicable, or any substitute page thereto, then
the Final Exchange Rate will be calculated on the basis of the arithmetic
mean of the applicable spot quotations received by the Calculation Agent
on the relevant date for the purchase or sale of deposits in Base
Currency/Reference Currency or Reference Currency/Base Currency by the New
York offices of three leading banks engaged in the interbank market
(selected in the sole discretion of the Calculation Agent), such banks
also referred to as reference banks. If only two reference banks provide
such spot quotations, then the Final Exchange Rate will be the arithmetic
mean of such two spot quotations received by the Calculation
Agent. If only one reference bank spot quotation is available
or if no reference bank provides such a spot quotation, then the
Calculation Agent shall determine the Final Exchange Rate using its fair
and reasonable discretion.
For
Securities linked to a Basket, if one or more of the Basket Components are
subject to a Market Disruption Event or non-Trading Day, the Determination
Date for each affected Basket Component will be adjusted as described
above.
All
determinations and adjustments to be made by the Calculation Agent with
respect to the value of the Final Exchange Rate and the amount payable at
maturity may be made by the Calculation Agent in its sole
discretion. See “Risk Factors” for a discussion of certain
conflicts of interest which may arise with respect to the Calculation
Agent.
|
||
|
Relevant
Exchange
|
With
respect to an Underlying Stock (or other security), the Relevant Exchange
means the primary U.S. securities exchange or organized market of trading
for the shares of the Underlying Stock (or other security). If
a Reorganization Event has occurred or if the shares of the Underlying
Stock are ADSs and such ADSs are delisted or the ADS facility is
terminated, the Relevant Exchange will be the stock exchange or securities
market on which the Exchange Property (as defined below under “—
Adjustment Events”) that is a listed equity security is principally traded
or the primary securities exchange or organized market for trading in the
ADS Underlying Stock, as applicable, in each case as determined by the
Calculation Agent.
With
respect to a commodity futures contract included in an Underlying
Commodity Index, the Relevant Exchange means the primary market or
exchange on which such contract trades.
With
respect to an Underlying Equity Index, the Relevant Exchange means the
Relevant Exchanges for any security (or any combination thereof) then
included in such Underlying Index.
With
respect to an Underlying Fund, the Relevant Exchange means the primary
U.S. securities exchange or organized market of trading for shares of such
Underlying Fund.
With
respect to a Target Index, the Relevant Exchange means the primary
exchange or market of trading for any security (or any combination
thereof) then included in the Target Index.
|
|
PS-30
|
Trading
Day
|
With
respect to an Underlying Stock, a Trading Day means a day, as determined
by the Calculation Agent, on which trading is generally conducted on the
Relevant Exchange.
With
respect to an Underlying Equity Index, a Trading Day means a day, as
determined by the Calculation Agent, on which such Underlying Index is
calculated and published and on which securities comprising more than 80%
of the value of such Underlying Index on such day
are capable of being traded on their Relevant Exchanges during the
one-half hour before the determination of the Closing Value of such
Underlying Index.
|
|
With
respect to an Underlying Commodity Index, a Trading Day means a day, as
determined by the Calculation Agent, on which the Relevant Exchanges for
all commodity futures contracts included in such Underlying Index are open
for business, including half-day opening.
With
respect to an Underlying Fund, a Trading Day means a day, as determined by
the Calculation Agent, on which trading in shares of such Underlying Fund
is generally conducted on the Relevant Exchange and on which securities
comprising more than 80% of the value of the Target Index on such day are
capable of being traded on their Relevant Exchanges during the one-half
hour before the determination of the Closing Price of such Underlying
Fund.
With
respect to an Underlying Currency Pair, a Trading Day means a day, other
than a Saturday or a Sunday, that is neither a legal holiday nor a day on
which commercial banks are authorized or required by law, regulation or
executive order to close (including for dealings in foreign exchange in
accordance with the practice of the foreign exchange market) in New York
City and the principal financial centers for the Reference Currency and
the Base Currency for such Underlying Currency Pair, as specified in the
relevant Pricing Supplement.
|
||
|
Trustee
|
Wilmington
Trust Company
|
|
|
Securities
Administrator
|
Citibank,
N.A.
|
|
|
Market
Disruption Event
|
With
respect to an Underlying Stock or any other securities (other than shares
of an Underlying Fund) for which a Closing Price must be determined,
Market Disruption Event means:
(i)
either:
(a)
the occurrence or existence of a suspension, absence or material
limitation of trading of the Underlying Stock (or such other securities)
on the Relevant Exchange for the Underlying Stock (or such other
securities) for more than two hours of trading during, or during the
one-half hour period preceding the close of, the principal trading session
on such Relevant Exchange;
(b)
a breakdown or failure in the price and trade reporting systems of the
Relevant Exchange for the Underlying Stock (or such other securities) as a
result of which the reported trading prices for the Underlying Stock (or
such other securities) during the last one-half hour preceding the close
of the principal trading session on such Relevant Exchange are materially
inaccurate; or
(c)
the suspension, absence or material limitation of trading on the primary
market for trading in futures or options contracts related to the
Underlying Stock (or such other securities), if available, during the
one-half hour period preceding the close of the principal trading session
in such market,
in
each case as determined by the Calculation Agent in its sole discretion;
and
(ii)
a determination by the Calculation Agent in its sole discretion that the
applicable event described in clause (i) above materially interfered with
our ability or the ability of any of our affiliates to unwind or adjust
all or a material portion of the hedge with respect to the
Securities.
|
PS-31
|
For
purposes of determining whether a Market Disruption Event with respect to
the Underlying Stock (or such other security) has occurred: (1) a
limitation on the hours or number of days of trading will not constitute a
Market Disruption Event if it results from an announced change in the
regular business hours of the Relevant Exchange or the primary market for
trading in the relevant futures or options contracts; (2) a decision to
permanently discontinue trading in the relevant futures or options
contract will not constitute a Market Disruption Event; (3) limitations
pursuant NYSE Rule 80B (or any applicable rule or regulation enacted or
promulgated by the New York Stock Exchange Inc., any other self-regulatory
organization or the Commission of similar scope as determined by the
Calculation Agent) on trading during significant market fluctuations shall
constitute a suspension, absence or material limitation of trading; (4) a
suspension of trading in the relevant futures or options contract by the
primary market for trading in such futures or options, if available, by
reason of (x) a price change exceeding limits set by such market, (y) an
imbalance of orders relating to such contracts or (z) a disparity in bid
and ask quotes relating to such contracts will constitute a suspension,
absence or material limitation of trading in such futures or options
contracts; and (5) a suspension, absence or material limitation of trading
on the primary market on which the relevant futures or options are traded
will not include any time when such market is itself closed for trading
under ordinary circumstances.
|
||
|
With
respect to an Underlying Equity Index, Market Disruption Event
means:
|
| (i) | either: | ||
| (a) | any suspension or absence or limitation imposed on trading in stocks then constituting 20% or more of the level of the Underlying Equity Index by the primary exchange therefor or otherwise and whether by reason of movements in price exceeding limits permitted by such exchange or otherwise or by any exchange or quotation system on which trading in futures or options contracts relating to stocks then constituting 20% or more of the level of the Underlying Equity Index is executed, or | ||
| (b) | any event (other than an event described in clause (c) below) that disrupts or impairs (as determined by the Calculation Agent) the ability of market participants in general (1) to effect transactions in or obtain market values for stocks then constituting 20% or more of the level of the Underlying Equity Index on the primary exchange therefor or (2) to effect transactions in or obtain market values for futures or options contracts relating to stocks then constituting 20% or more of the level of the Underlying Equity Index on any other exchange, or | ||
| (c) | the closure on any Trading Day of the primary exchange for stocks then constituting 20% or more of the level of the Underlying Equity Index, or any exchange or quotation system on which trading in future or options relating the such stocks is executed, prior to its scheduled closing time unless such earlier closing time is announced by such exchange at least one hour prior to the earlier of (1) the actual closing time for the regular trading session on such exchange on such Trading Day and (2) the submission deadline for orders to be entered into such exchange for execution on such Trading Day; and | ||
| (ii) a determination by the Calculation Agent in its sole discretion that the applicable event described in clause (i) above materially interfered with our ability or the ability of any of our affiliates to unwind or adjust all or a material portion of the hedge with respect to the Securities. | |||
| For purposes of determining whether a Market Disruption Event exists with respect to an Underlying Equity Index at any time, if trading in a security included in the Underlying Equity Index is materially suspended or materially limited at that time, or there occurs an event that disrupts or impairs the ability of market participants in general to effect transactions in or obtain market values for such security, then the relevant percentage contribution of that security to the level of the Underlying Equity Index shall be based on a comparison of (i) the portion of the level of the Underlying Equity Index attributable to that | |||
PS-32
| security
relative to (ii) the overall level of the Underlying Equity Index, in each
case immediately before the occurrence of that suspension, limitation or
other market disruption, as the case may be.
For
purposes of determining whether a Market Disruption Event with respect to
an Underlying Equity Index has occurred: (1) a
limitation on the hours or number of days of trading will not constitute a
Market Disruption Event if it results from an announced change in the
regular business hours of the Relevant Exchange or market, (2) a decision
permanently to discontinue trading in the relevant futures or options
contract will not constitute a Market Disruption Event, (3) limitations
pursuant to NYSE Rule 80B (or the rules of any Relevant Exchange similar
to any applicable rule or regulation enacted or promulgated by any other
self-regulatory organization or any government agency of similar scope as
determined by the Calculation Agent) on trading during significant market
fluctuations will constitute a suspension or absence or limitation of
trading, (4) a suspension of trading in a futures or options contract on
the Underlying Index by the primary securities market related to such
contract by reason of (x) a price change exceeding limits set by such
exchange or market, (y) an imbalance of orders relating to such contracts
or (z) a disparity in bid and ask quotes relating to such contracts will
constitute a suspension or absence or limitation of trading in futures or
options contracts related to the Underlying Equity Index and
(5) a suspension or absence or limitation of trading on any Relevant
Exchange or on the primary market on which futures or options contracts
related to the Underlying Index are traded will not include any time when
such market is itself closed for trading under ordinary
circumstances.
|
| With respect to an Underlying Commodity Index, Market Disruption Event means: | |||
| (i) | either: | ||
| (a) | the termination or suspension of, or material limitation or disruption in, the trading of any exchange-traded futures contract, then included in the Underlying Index, or | ||
| (b) | the price at any time of any exchange-traded commodity futures contract then included in the Underlying Commodity Index has increased or decreased by an amount equal to or greater than the maximum permitted price change set by the Relevant Exchange; | ||
| (c) | the failure of the sponsor or calculation agent, as the case may be, for the Underlying Commodity Index to calculate and publish the U.S. dollar level for the Underlying Commodity Index; | ||
| (d) | the settlement price is not published for any exchange-traded futures contract then included in the Underlying Commodity Index; | ||
| (e) | the occurrence of a material change in the formula for or the method of calculating the relevant settlement price of the exchange-traded futures contracts then included in the Underlying Commodity Index; | ||
| (f) | the occurrence of a material change in the content, composition or constitution of the exchange-traded futures contracts then included in the Underlying Commodity Index; | ||
| in each case as determined by the Calculation Agent; and | |||
| (ii) a determination by the Calculation Agent in its sole discretion that the applicable event described in clause (i) above materially interfered with our ability or the ability of any of our affiliates to unwind or adjust all or a material portion of the hedge with respect to the Securities. | |||
| For purposes of determining whether a Market Disruption Even with respect to an Underlying Commodity Index has occurred, a limitation on the hours or number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the regular business hours of the Relevant Exchange. | |||
PS-33
|
With
respect to an Underlying Fund, Market Disruption Event
means:
|
| (i) either: |
| (a) | the occurrence or existence of a suspension, absence or material limitation of trading of the Underlying Fund on the Relevant Exchange for the Underlying Fund for more than two hours of trading during, or during the one-half hour period preceding the close of, the principal trading session on such Relevant Exchange; | |
| (b) | a breakdown or failure in the price and trade reporting systems of the Relevant Exchange for the Underlying Fund as a result of which the reported trading prices for the Underlying Fund during the last one-half hour preceding the close of the principal trading session on such Relevant Exchange are materially inaccurate; | |
| (c) | the suspension, absence or material limitation of trading on the primary market for trading in futures or options contracts related to the Underlying Fund, if available, during the one-half hour period preceding the close of the principal trading session in such market, | |
| (d) | the occurrence or existence of a suspension, absence or material limitation of trading of stocks then constituting 20% or more of the value of the Target Index on the Relevant Exchange(s) for such securities for more than two hours of trading during, or during the one-half hour period preceding the close of, the principal trading session on such Relevant Exchange(s), in each case as determined by the Calculation Agent in its sole discretion; or | |
| (e) | the suspension, material limitation or absence of trading on the primary market for trading in futures or options contracts related to the Target Index during the one-half hour period preceding the close of the principal trading session in such market, | |
| (f) | in each case as determined by the Calculation Agent in its sole discretion; and |
| (ii) a determination by the Calculation Agent in its sole discretion that the applicable event described in clause (i) above materially interfered with our ability or the ability of any of our affiliates to unwind or adjust all or a material portion of the hedge with respect to the Securities. |
|
For
the purpose of determining whether a Market Disruption Event exists with
respect to an Underlying Fund at any time, if trading in a security
included in the Target Fund is materially suspended or materially limited
at that time, or there occurs an event that disrupts or impairs the
ability of market participants in general to effect transactions in or
obtain market values for such security, then the relevant percentage
contribution of that security to the level of the Target Fund shall be
based on a comparison of (i) the portion of the level of the Target Fund
attributable to that security relative to (ii) the overall level of the
Target Fund, in each case immediately before the occurrence of that
suspension, limitation or other market disruption, as the case may
be.
For
purposes of determining whether a Market Disruption Event with respect to
an Underlying Fund has occurred: (1) a limitation on the hours
or number of days of trading will not constitute a Market Disruption Event
if it results from an announced change in the regular business hours of
the Relevant Exchange or the primary market for trading in the relevant
futures or options contracts; (2) a decision to permanently discontinue
trading in the relevant futures or options contract will not constitute a
Market Disruption Event; (3) limitations pursuant NYSE Rule 80B (or any
applicable rule or regulation enacted or promulgated by the New York Stock
Exchange Inc., any other self-regulatory organization or the Commission of
similar scope as determined by the Calculation Agent) on trading during
significant market fluctuations shall constitute a suspension, absence or
material limitation of trading; (4) a suspension of trading in the
relevant futures or options contract by the primary market for
|
PS-34
| trading in such futures or options, if available, by reason of (x) a price change exceeding limits set by such market, (y) an imbalance of orders relating to such contracts or (z) a disparity in bid and ask quotes relating to such contracts will constitute a suspension, absence or material limitation of trading in such futures or options contracts; and (5) a suspension, absence or material limitation of trading on the primary market on which the relevant futures or options are traded will not include any time when such market is itself closed for trading under ordinary circumstances. | ||
|
With
respect to an Underlying Currency Pair, Market Disruption Event
means:
either:
(i)
a determination by calculation agent in good faith that the Spot Rate for
such Underlying Currency Pair is unavailable; or
(ii)
an event that generally makes it impossible to obtain the Spot Rate for
such Underlying Currency Pair from the relevant Bloomberg or Reuters page,
as applicable.
|
||
|
The
Calculation Agent shall as soon as reasonably practicable under the
circumstances notify us, the Trustee, the Securities Administrator, the
Depository Trust Company and the Agents of the existence or occurrence of
a Market Disruption Event with respect to any Underlying Stock, Underlying
Index, Underlying Fund or Underlying Currency Pair, as applicable, on any
day that but for the occurrence or existence of a Market Disruption Event
would have been the Determination Date for such Underlying Stock,
Underlying Index, Underlying Fund or Underlying Currency Pair, as
applicable.
|
||
|
Exchange
Factor
|
With
respect to an Underlying Stock or Underlying Fund, the Exchange Factor
will be set initially at 1.0, but will be subject to adjustment upon the
occurrence of certain corporate events affecting such Underlying Stock or
Underlying Fund. See “Adjustment Events”
below.
|
|
|
Adjustment
Events
|
The
Exchange Factor with respect to an Underlying Stock will be adjusted as
follows:
|
| 1. | If the Underlying Stock is subject to a stock split or reverse stock split, then once such split has become effective, the Exchange Factor with respect to the Underlying Stock will be proportionately adjusted. | ||
| 2. | If the Underlying Stock is subject (i) to a stock dividend (i.e., the issuance of additional Underlying Stock) that is given ratably to all holders of the Underlying Stock or (ii) to a distribution of the Underlying Stock as a result of the triggering of any provision of the corporate charter of the Underlying Company, in each case other than a stock split described in paragraph 1, then once the dividend has become effective and such Underlying Stock is trading ex-dividend, the Exchange Factor with respect to the Underlying Stock will be proportionally adjusted. | ||
| 3. | There shall be no adjustments to any Exchange Factor to reflect cash dividends or other distributions paid with respect to the Underlying Stock unless such cash dividends or other distributions constitute Extraordinary Dividends as described below (except that distributions described in paragraph 2 above shall not be subject to this paragraph). A cash dividend or other distribution with respect to the Underlying Stock shall be deemed to be an “Extraordinary Dividend” if such dividend or other distribution exceeds the immediately preceding non-Extraordinary Dividend for the Underlying Stock by an amount equal to at least 10% of the Closing Price of the Underlying Stock (as adjusted for any subsequent corporate event requiring an adjustment hereunder, such as a stock split or reverse stock split) on the Trading Day preceding the ex-dividend date for the payment of such Extraordinary Dividend (the “ex-dividend date”). If an Extraordinary Dividend occurs with respect to the Underlying Stock, the Exchange Factor with respect to the Underlying Stock will be adjusted on the relevant ex-dividend date so that the new Exchange Factor with respect to the Underlying Stock will equal the product of (i) the |
PS-35
| then-current Exchange Factor and (ii) a fraction, the numerator of which is the Closing Price of the Underlying Stock on the Trading Day preceding the ex-dividend date, and the denominator of which is the amount by which the Closing Price on the Trading Day preceding the ex-dividend date exceeds the Extraordinary Dividend Amount. The “Extraordinary Dividend Amount” with respect to an Extraordinary Dividend for the Underlying Stock shall equal (x) in the case of cash dividends or other distributions that constitute regular dividends, the amount per share of such Extraordinary Dividend minus the amount per share of the immediately preceding non-Extraordinary Dividend for the Underlying Stock or (y) in the case of cash dividends or other distributions that do not constitute regular dividends, the amount per share of such Extraordinary Dividend. To the extent an Extraordinary Dividend is not paid in cash, the value of the non-cash component will be determined by the Calculation Agent, whose determination shall be conclusive. A distribution on the Underlying Stock described in clause (A), clause (D) or clause (E) in the definitions of “Reorganization Event” of paragraph 5 below that also constitutes an Extraordinary Dividend shall not cause an adjustment to such Exchange Factor pursuant to this paragraph 3. | |||
| 4. | If the Underlying Company issues rights or warrants to all holders of its Underlying Stock to subscribe for or purchase the Underlying Stock at an exercise price per share less than the closing price of the Underlying Stock on both (i) the date the exercise price of such rights or warrants is determined and (ii) the expiration date of such rights or warrants, and if the expiration date of such rights or warrants precedes the maturity of the Securities, then the Exchange Factor with respect to the Underlying Stock shall be adjusted to equal the product of the prior Exchange Factor with respect to the Underlying Stock and a fraction, the numerator of which shall be the number of shares of the Underlying Stock outstanding immediately prior to the issuance of such rights or warrants plus the number of additional shares of the Underlying Stock offered for subscription or purchase pursuant to such rights or warrants and the denominator of which shall be the number of shares of the Underlying Stock outstanding immediately prior to the issuance of such rights or warrants plus the number of additional shares of Underlying Stock which the aggregate offering price of the total number of shares of the Underlying Stock so offered for subscription or purchase pursuant to such rights or warrants would purchase at the closing price on the expiration date of such rights or warrants, which shall be determined by multiplying such total number of shares offered by the exercise price of such rights or warrants and dividing the product so obtained by such Closing Price. | ||
| 5. | If a Reorganization Event (as defined below) occurs, in each case as a result of which the holders of the Underlying Stock are entitled to receive Exchange Property (as defined below) with respect to or in exchange for the Underlying Stock, then, following the effective date of such Reorganization Event, in lieu of using the Closing Price for the Underlying Stock to calculate the Underlying Return of the Underlying Stock on the Determination Date, the Calculation Agent will use the Transaction Value received with respect to a share of the Underlying Stock, as set forth below. | ||
| “Reorganization Event” means with respect to the Underlying Stock (A) there has occurred any reclassification or change with respect to such Underlying Stock, including, without limitation, as a result of the issuance of any tracking stock by the Underlying Company; (B) the Underlying Company or any surviving entity or subsequent surviving entity of the Underlying Company (an “Underlying Company Successor”) has been subject to a merger, combination or consolidation and is not the surviving entity; (C) any statutory exchange of securities of the Underlying Company or any Underlying Company Successor with another corporation occurs (other than pursuant to clause (B) above); (D) the Underlying Company is liquidated; (E) the Underlying Company issues to all of its shareholders equity securities of an issuer other than such Underlying Company (other than in a transaction described in clauses (B), (C) or (D) above) (a “Spin-off Event”); or (F) a tender or exchange offer or going-private transaction is consummated for all the outstanding shares of the Underlying Company. |
PS-36
| “Exchange Property” means securities, cash or any other assets distributed to holders of the Underlying Stock in any Reorganization Event, including, (A) in the case of the issuance of tracking stock or in the case of a Spin-off Event, the Underlying Stock with respect to which the tracking stock or spun-off security was issued and (B) in the case of any other Reorganization Event where the Underlying Stock continues to be held by the holders receiving such distribution, the Underlying Stock. | |||
| “Transaction Value” means (A) for any cash received as Exchange Property in any such Reorganization Event, the amount of cash received per share of Underlying Stock valued as of the date of the Reorganization Event; (B) for any property other than cash or securities received in any such Reorganization Event, the market value, as determined by the Calculation Agent, as of the date of receipt by the party owning the original shares, of such Exchange Property received per share of Underlying Stock; and (C) for any security received in any such Reorganization Event (including in the case of the issuance of tracking stock, such reclassified Underlying Stock and, in the case of a Spin-off Event, the Underlying Stock with respect to which the spun-off security was issued), an amount equal to the Closing Price, as of the Determination Date, per share of such security multiplied by the quantity of such security received for each such Underlying Stock. | |||
| 6. | If an ADS serving as the Underlying Stock is no longer listed or admitted to trading on a U.S. securities exchange registered under the Exchange Act, or included in the OTC Bulletin Board, or if the ADS facility between the Underlying Company and the ADS depositary is terminated for any reason, then, on and after the date the ADSs are no longer so listed or admitted to trading or the date of such termination, as applicable (the “Change Date”), the ADS Underlying Stock will be deemed to be the Underlying Stock. The Exchange Factor will thereafter equal the last value of the Exchange Factor for the ADSs multiplied by the number of shares of ADS Underlying Stock represented by a single ADS. The Closing Price of the Underlying Stock on the Determination Date shall be expressed in U.S. dollars, converting the closing price of the ADS Underlying Stock on the Determination Date into U.S. dollars using the applicable exchange rate on the Change Date as described below. | ||
| On the Determination Date, the applicable exchange rate will be the spot rate of the local currency of the ADS Underlying Stock relative to the U.S. dollar as reported by Reuters Group PLC (“Reuters”) on the relevant page for such rate at approximately the closing time of the Relevant Exchange for the ADS Underlying Stock on such day. However, if such rate is not displayed on the relevant Reuters page on the Determination Date, the applicable exchange rate on such day will equal an average (mean) of the bid quotations in The City of New York received by the Calculation Agent at approximately 11:00 a.m., New York City time, on the business day immediately following the Determination Date, from three recognized foreign exchange dealers (provided that each such dealer commits to execute a contract at its applicable bid quotation) or, (2) if the Calculation Agent is unable to obtain three such bid quotations, the average of such bid quotations obtained from two recognized foreign exchange dealers or, (3) if the Calculation Agent is able to obtain such bid quotation from only one recognized foreign exchange dealer, such bid quotation, in each case for the purchase of the applicable foreign currency for U.S. dollars in the aggregate principal amount of the Securities for settlement on the third business day following the Determination Date. If the Calculation Agent is unable to obtain at least one such bid quotation, the Calculation Agent will determine the applicable exchange rate in its sole discretion. | |||
| With respect to paragraphs 1 to 5 above, if ADSs are serving as an Underlying Stock, all adjustments to the Exchange Factor for such Underlying Stock will be made as if the ADS Underlying Stock is serving as the Underlying Stock. Therefore, for example, if the ADS Underlying Stock is subject to a two-for-one stock split and assuming the Exchange Factor is equal to one, the Exchange Factor for the Underlying Stock would be adjusted to equal to | |||
PS-37
|
two. If
the Securities are linked to ADSs, the term “dividend” will mean, unless
otherwise specified in the relevant Pricing Supplement, the dividend paid
by the issuer of the ADS Underlying Stock, net of any applicable foreign
withholding or similar taxes that would be due on dividends paid to a U.S.
person that claims and is entitled to a reduction in such taxes under an
applicable income tax treaty, if available.
If
ADSs are serving as an Underlying Stock, no adjustment to the ADS price or
the Exchange Factor, including those described below, will be made if (1)
holders of ADSs are not eligible to participate in any of the transactions
described above or (2) (and to the extent that) the Calculation Agent
determines in its sole discretion that the issuer or the depositary for
the ADSs has adjusted the number of shares of the ADS Underlying Stock
represented by each ADS so that the ADS price would not be affected by the
corporate event in question. However, to the extent that the
number of shares of ADS Underlying Stock represented by each ADS is
changed for any other reason, appropriate adjustments to the Exchange
Factor will be made to reflect such change.
With
respect to paragraphs 1 through 5 above, no adjustments to the Exchange
Factor for the Underlying Stock will be required unless such adjustment
would require a change of at least 0.1% in the Exchange Factor then in
effect. The Exchange Factor resulting from any of the
adjustments specified above will be rounded to the nearest one
hundred-thousandth with five one-millionths being rounded
upward. Adjustments to the Exchange Factor of the Underlying
Stock will be made up to and including the Determination
Date.
No
adjustments to the Exchange Factor or method of calculating the Exchange
Factor shall be required other than those specified above. However, the
Bank may, at its sole discretion, cause the Calculation Agent to make
additional changes to the Exchange Factor upon the occurrence of corporate
or other similar events that affect or could potentially affect market
prices of, or shareholders’ rights in, the Underlying Stock (or other
Exchange Property) but only to reflect such changes, and not with the aim
of changing relative investment risk. The adjustments specified above do
not cover all events that could affect the market price or the Closing
Price of the Underlying Stock, including, without limitation, a partial
tender or partial exchange offer for the Underlying
Stock.
|
||
|
The
Exchange Factor with respect to an Underlying Fund will be adjusted as
follows:
If
the shares of the Underlying Fund are subject to a stock split or reverse
stock split, then once such split has become effective, the Exchange
Factor will be adjusted to equal the product of the prior Exchange Factor
and the number of shares issued in such stock split or reverse stock split
with respect to one share of the underlying Fund.
No
adjustments to the Exchange Factor shall be required unless such
adjustment would require a change of at least 0.1% in the Exchange Factor
then in effect. The Exchange Factor resulting from any of the adjustments
specified above shall be rounded to the nearest one hundred-thousandth
with five one-millionths being rounded upward.
No
adjustments to the Exchange Factor or method of calculating the Exchange
Factor shall be required other than those specified above. However, the
Bank may, at its sole discretion, cause the Calculation Agent to make
additional changes to the Exchange Factor upon the occurrence of other
similar events that affect or could potentially affect market prices of,
or shareholders’ rights in, the Underlying Fund but only to reflect such
changes, and not with the aim of changing relative investment risk. The
adjustments specified above do not cover all events
that could affect the market price or the Closing Price of the Underlying
Fund.
|
|
The
Calculation Agent will provide information as to any adjustments to the
Exchange Factor or method of calculating the Exchange Factor upon written
request by any holder of the
Securities.
|
PS-38
|
Discontinuance
of an Underlying Index; Alteration of Method of Calculation
|
If
the sponsor of an Underlying Index (an “Index Sponsor”) discontinues
publication of the Underlying Index and such Index Sponsor or another
entity publishes a successor or substitute index that the Calculation
Agent determines, in its sole discretion, to be comparable to the
discontinued Underlying Index (such index being referred to herein as a
“Successor Index”), then the Final Value with respect to the Underlying
Index will be determined by reference to the value of such Successor Index
at the close of trading on the Relevant Exchange or market for such
Successor Index on the applicable Determination Date.
Upon
any selection by the Calculation Agent of a Successor Index, the
Calculation Agent will cause written notice thereof to be furnished to us,
the Trustee, the Securities Administrator and the Depository Trust Company
as the holder of the Securities within three Trading Days of such
selection.
If
the Index Sponsor discontinues publication of the Underlying Index prior
to, and such discontinuance is continuing on, the Determination Date, and
the Calculation Agent determines that no Successor Index is available with
respect to the Underlying Index at such time, then the Calculation Agent
will determine the Final Value with respect to the Underlying
Index. Such Final Value will be computed by the Calculation
Agent in accordance with the formula for and method of calculating the
Underlying Index last in effect prior to such discontinuance, using the
closing price (or, if trading in the relevant securities has been
materially suspended or materially limited, its good faith estimate of the
closing price that would have prevailed but for such suspension or
limitation) on the Determination Date for the Underlying Index of each
security most recently comprising the Underlying
Index. Notwithstanding these alternative arrangements,
discontinuance of the publication of the Underlying Index may adversely
affect the value of the Securities.
If
at any time the method of calculating the Underlying Index or a Successor
Index, or the value thereof, is changed in a material respect, or if the
Underlying Index or a Successor Index is in any other way modified so that
such index does not, in the opinion of the Calculation Agent, fairly
represent the value of the Underlying Index or such Successor Index had
such changes or modifications not been made, then the Calculation Agent
will, at the close of business in New York City on the Determination Date
with respect to the Underlying Index make such calculations and
adjustments to the terms of the Securities as, in the good faith judgment
of the Calculation Agent, may be necessary in order to arrive at a value
of a stock index comparable to the Underlying Index or Successor Index, as
the case may be, as if such changes or modifications had not been made,
and on the applicable Determination Date make each relevant calculation
with reference to the Underlying Index or Successor Index, as
adjusted. Accordingly, if the method of calculating the
Underlying Index or a Successor Index is modified so that the value of
such index is a fraction of what it would have been if it had not been
modified (e.g., due to a split in the index), then the Calculation Agent
will adjust such index in order to arrive at a value of the Underlying
Index or Successor Index as if it had not been modified (e.g., as if such
split had not occurred).
|
|
|
Discontinuance
of an Underlying Fund; Alteration of Method of Calculation
|
If
an Underlying Fund is liquidated, delisted or otherwise terminated and the
sponsor of the Underlying Fund (a “Fund Sponsor”) or another entity
establishes and maintains a successor or substitute exchange-traded fund
that the Calculation Agent determines, in its sole discretion, to be
comparable to the liquidated, delisted or otherwise terminated Underlying
Fund (such fund being referred to herein as a “Successor Fund”), then the
Final Price with respect to the Underlying Fund will be determined by
reference to the price per share of such Successor Fund at the close of
trading on the Relevant Exchange or market for such Successor
Fund on the applicable Determination Date.
|
|
|
Upon
any selection by the Calculation Agent of a Successor Fund, the
Calculation Agent will cause written notice thereof to be furnished to us,
the Trustee, the Securities Administrator and the Depository Trust Company
as the holder of the Securities within three Trading Days of such
selection.
|
||
|
If
the Fund Sponsor liquidates, delists or otherwise terminates the
Underlying Fund prior to, and such liquidation, delisting or termination
is continuing on, the Determination Date, and the Calculation Agent
determines that no Successor Fund is available with respect to the
Underlying Fund at such time, then the Calculation Agent will determine
the Final Price with respect to the
|
PS-39
|
Underlying
Fund. Such Final Price will be computed by the Calculation
Agent in accordance with the formula for and method of calculating the
Underlying Fund last in effect prior to such liquidation, delisting or
termination, using the closing price (or, if trading in the relevant
securities has been materially suspended or materially limited, its good
faith estimate of the closing price that would have prevailed but for such
suspension or limitation) on the Determination Date for the Underlying
Fund of each security most recently comprising the Underlying
Fund. Notwithstanding these alternative arrangements,
liquidation, delisting or termination of the Underlying Fund may adversely
affect the value of the Securities.
If
at any time the method of calculating the price of a share of the
Underlying Fund or a Successor Fund is changed in a material respect, or
if the Underlying Fund or a Successor Fund is in any other way modified so
that such fund does not, in the opinion of the Calculation Agent, fairly
represent the price of the Underlying Fund or such Successor Fund had such
changes or modifications not been made, then the Calculation Agent will,
at the close of business in New York City on the Determination Date with
respect to the Underlying Fund make such calculations and adjustments to
the terms of the Securities as, in the good faith judgment of the
Calculation Agent, may be necessary in order to arrive at a price of a
fund comparable to the Underlying Fund or Successor Fund, as the case may
be, as if such changes or modifications had not been made, and on the
applicable Determination Date make each relevant calculation with
reference to the Underlying Fund or Successor Fund, as
adjusted. Accordingly, if the method of calculating the price
of a share of the Underlying Fund or a Successor Fund is modified so that
the price of such fund is a fraction of what it would have been if it had
not been modified, then the Calculation Agent will adjust such method in
order to arrive at a price of the Underlying Fund or Successor Fund as if
it had not been modified.
|
||
|
Alternate
Calculation in case of an Event of Default
|
In
case an Event of Default with respect to the Securities shall have
occurred and be continuing, the amount declared due and payable for each
Security upon any acceleration of the Securities shall be determined by
RBSSI, as Calculation Agent, as though the Final Price, Final Value or
Final Exchange Rate for the Underlying as of the applicable Determination
Date were the Final Price, Final Value or Final Exchange Rate on the date
of acceleration. See “Description of Debt Securities — Events
of Default” in the Prospectus.
If
the maturity of the Securities is accelerated because of an Event of
Default as described above, we shall, or shall cause the Calculation Agent
to, provide written notice to the Trustee at its New York office, and to
the Securities Administrator at its Delaware office, on which notice the
Trustee and the Securities Administrator may conclusively rely, and to DTC
of the aggregate cash amount due with respect to the Securities, if any,
as promptly as possible and in no event later than two Business Days after
the date of acceleration.
|
|
|
Calculation
Agent
|
RBSSI,
which is our affiliate. All determinations made by the
Calculation Agent will be at the sole discretion of the Calculation Agent
and will, in the absence of manifest error, be conclusive for all purposes
and binding on you and on us.
|
|
|
Additional
Amounts
|
Subject
to certain exceptions and limitations described in “Description of Debt
Securities — Payment of Additional Amounts” in the accompanying
Prospectus, we will pay such additional amounts to holders of the
Securities as may be necessary in order that the net payment of any amount
payable on the Securities, after withholding for or on account of any
present or future tax, assessment or governmental charge imposed upon or
as a result of such
payment
by The Netherlands (or any political subdivision or taxing authority
thereof or therein) or the jurisdiction of residence or incorporation of
any successor corporation (other than the United States), will not be less
than the amount provided for in the Securities to be then due and
payable.
|
|
Book
Entry Note or Certificated Note
|
Book
Entry
|
|
|
Record
Date
|
The
“record date” for any interest payment date is the calendar day prior to
that interest payment date, whether or not that date is a business
day.
|
PS-40
USE
OF PROCEEDS
Unless
otherwise specified in the relevant Pricing Supplement, the net proceeds we
receive from the sale of the Securities will be used for general corporate
purposes and, in part, by us or one or more of our affiliates in connection with
hedging our obligations under the Securities. The issue price of the Securities
includes the selling agents’ commissions (as shown on the cover page of the
relevant Pricing Supplement) paid with respect to the Securities and the cost of
hedging our obligations under the Securities. The cost of hedging includes the
projected profit that our affiliates expect to realize in consideration for
assuming the risks inherent in managing the hedging transactions. Since hedging
our obligations entails risk and may be influenced by market forces beyond our
or our affiliates’ control, such hedging may result in a profit that is more or
less than initially projected, or could result in a loss. See also “Risk Factors
— The Inclusion of Commissions and Cost of Hedging in the Issue Price is Likely
to Adversely Affect Secondary Market Prices” and “Potential Conflicts of
Interest between Security Holders and the Calculation Agent” and “Plan of
Distribution (Conflicts of Interest)” in this Product Supplement and “Use of
Proceeds” in the accompanying Prospectus.
PS-41
U.S.
FEDERAL INCOME TAX CONSEQUENCES
The
following is a summary of the material U.S. federal income tax consequences of
ownership and disposition of the Securities. It applies only to an investor who
holds the Securities as capital assets within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended to the date hereof (the “Code”). This discussion is
based on the Code, administrative pronouncements, judicial decisions and
currently effective and proposed Treasury regulations, changes to any of which
subsequent to the date of this Product Supplement may affect the tax
consequences described below, possibly with retroactive effect. It does not
address all aspects of U.S. federal income taxation that may be relevant to an
investor in light of the investor’s particular circumstances or to certain types
of investors subject to special treatment under the U.S. federal income tax
laws, such as certain former citizens or residents of the United States, certain
financial institutions, real estate investment trusts, regulated investment
companies, tax-exempt entities, dealers and certain traders in securities,
partnerships or other entities classified as partnerships for U.S. federal
income tax purposes, persons who hold the Securities as a part of a hedging
transaction, straddle, conversion or integrated transaction, U.S. holders (as
defined below) who have a “functional currency” other than the U.S. dollar, or
individual non-U.S. investors who are present in the United States for 183 days
or more in the taxable year in which their Securities are sold or
retired.
In
addition, we will not attempt to ascertain whether any entity included in or
constituting any Underlying or Basket Component would be treated as a “passive
foreign investment company” (a “PFIC”) within the meaning of
Section 1297 of the Code or as a “United States real property holding
corporation” (a “USRPHC”) within the meaning of
Section 897 of the Code. If any such entity were so treated, certain adverse
U.S. federal income tax consequences might apply, to a U.S. holder in the case
of a PFIC and to a non-U.S. holder in the case of a USRPHC, upon the sale,
exchange or retirement of a Security. You should refer to information filed with
the Securities and Exchange Commission or the equivalent governmental authority
by such entities and consult your tax adviser regarding the possible
consequences to you if any such entity is or becomes a PFIC or a
USRPHC.
Tax
Treatment of the Securities
Unless
otherwise specified in the applicable Pricing Supplement, we believe it is
reasonable to treat the Securities as prepaid financial contracts for U.S.
federal income tax purposes, with the consequences described below. Due to the
absence of authorities that directly address instruments that are similar to the
Securities, significant aspects of the U.S. federal income tax consequences of
an investment in the Securities are uncertain. We do not plan to request a
ruling from the IRS, and the IRS or a court might not agree with the treatment
described herein. Accordingly, you should consult your tax adviser regarding the
U.S. federal income tax consequences of an investment in the Securities
(including possible alternative treatments, some of which are discussed below)
and with respect to any tax consequences arising under the laws of any state,
local or non-U.S. taxing jurisdiction. Unless otherwise stated, the following
discussion assumes that the treatment of the Securities as prepaid financial
contracts will be respected.
Tax
Consequences to U.S. Holders
You are a
“U.S. holder” if, for U.S. federal income tax purposes, you are a beneficial
owner of the Securities who is: (i) a citizen or resident of the United States;
(ii) a corporation created or organized under the laws of the United States or
any political subdivision thereof; or (iii) an estate or trust the income of
which is subject to U.S. federal income taxation regardless of its
source.
Tax Treatment Prior to
Maturity. You should not recognize taxable income or loss over the term
of the Securities prior to maturity, other than pursuant to a sale or exchange,
as described below.
Sale, Exchange or Retirement of the
Securities. Upon a sale, exchange or retirement of the Securities, you
will recognize taxable gain or loss equal to the difference between the amount
realized on such sale, exchange or retirement and your tax basis in the
Securities. Your tax basis in the Securities should equal the amount you paid to
acquire them. This gain or loss generally should be capital gain or loss and
should be long-term capital gain or loss if you have held the Securities for
more than one year, subject to the potential application of the “constructive
ownership” regime or certain rules and regulations relating to foreign currency
instruments, each of which is discussed below. The deductibility of capital
losses is subject to certain limitations.
PS-42
Possible Alternative Tax Treatments
of an Investment in the Securities. Due to the absence of authorities
that directly address the proper tax treatment of the Securities, the IRS or a
court might not uphold the treatment described above. Alternative U.S. federal
income tax treatments of the Securities are possible that, if applied, could
materially and adversely affect the timing and/or character of income or
loss with respect to the Securities. It is possible, for example, that the
Securities could be treated as debt instruments issued by us. Under this
treatment, the Securities having a term exceeding one year from issuance to
maturity (including the last possible date that the Securities could be
outstanding) would be governed by Treasury regulations relating to the taxation
of contingent payment debt instruments. In that event, even if you are a
cash-method taxpayer, in each year that you held the Securities you would be
required to accrue into income “original issue discount” based on our comparable
yield for similar non-contingent debt, determined as of the time of issuance of
the Securities, even though we will not be required to make any payments with
respect to the Securities prior to maturity. In addition, any income on the
sale, exchange or retirement of the Securities would be treated as ordinary in
character. Moreover, if you were to recognize a loss above certain thresholds,
you could be required to file a disclosure statement with the IRS.
Alternatively,
if a “pass-thru entity” (such as a Fund) is an Underlying or a Basket Component,
the Securities could be treated as “constructive ownership transactions” within
the meaning of Section 1260 of the Code, in which case the tax consequences of
sale, exchange or retirement of the Security could be affected materially and
adversely. If a Security were treated in whole or in part as a constructive
ownership transaction, all or a portion of any long-term capital gain you would
otherwise recognize on a sale, exchange or retirement of the Security would be
recharacterized as ordinary income to the extent such gain exceeded the “net
underlying long-term capital gain.” Under Section 1260, the net underlying
long-term capital gain is generally the net long-term capital gain a taxpayer
would have recognized by investing in the underlying pass-thru entity at the
inception of the constructive ownership transaction and selling that investment
on the date the constructive ownership transaction is closed (i.e., at maturity
or earlier disposition). Assuming Section 1260 were to apply to a Security, it
is unclear how the net underlying long-term capital gain would be computed. It
is possible, for instance, where a Fund is the sole Underlying, that the net
underlying long-term capital gain could equal the amount of long-term capital
gain you would have recognized if on the issue date you had invested the face
amount of the Security sold, exchanged or retired in shares of the Fund and sold
those shares for their fair market value on the date your Security is sold,
exchanged, or retired. Unless otherwise established by clear and convincing
evidence, the net underlying long-term capital gain is treated as zero. Any
long-term capital gain recharacterized as ordinary income under Section 1260
would be treated as accruing at a constant rate over the period you held the
Security, and you would be subject to an interest charge in respect of the
deemed tax liability on the income treated as accruing in prior tax
years.
If
payment at maturity is determined in whole or in part by reference to one or
more Underlying Currency Pairs, it is also possible that Section 988 of the
Code could apply to the Securities. If Section 988 were to apply,
all or a portion of the gain or loss on your Securities that would
otherwise be treated as capital gain or loss could be treated as ordinary income
or loss, unless on or before the date on which you acquired your Securities you
made a valid election pursuant to the applicable Treasury regulations to treat
such gain or loss as capital gain or loss. We believe that it is reasonable to
treat the election as available to the extent that Section 988 would otherwise
apply and that there should be no adverse consequences as a result of having
made a protective election under Section 988. To make the election, you must, in
accordance with detailed procedures set forth in the regulations under Section
988, either (a) clearly identify the transaction on your books and records on or
before the date you acquire your Securities as being subject to such an election
and file the relevant statement verifying such election with your federal income
tax return or (b) otherwise obtain independent verification. You should consult
your tax adviser regarding the availability of the election, the advisability of
making it and the conditions and procedures for doing so.
Other
U.S. federal income tax characterizations of the Securities might also require
you to include amounts in income during the term of the Securities and/or might
treat all or a portion of the gain or loss on the sale or settlement of the
Securities as ordinary income or loss or as short-term capital gain or loss,
without regard to how long you held the Securities. For instance, in the case of
any index that is included in, or constitutes, an Underlying, it is possible
that any reconstitution, rebalancing or recomposition of the index, change in
methodology of calculating the index or substitution of a successor index could
be treated as a “deemed” taxable exchange that could cause you to recognize gain
or loss (subject, in the case of loss, to possible application of the “wash
sale” rules) as if you had sold or exchanged the Securities.
PS-43
In
December 2007, Treasury and the IRS released a notice requesting comments on
various issues regarding the U.S. federal income tax treatment of “prepaid
forward contracts” and similar instruments, such as the Securities. The notice
focuses in particular on whether to require holders of these instruments to
accrue income over the term of their investment. It also asks for comments on a
number of related topics, including the character of income or loss with respect
to these instruments; the relevance of factors such as the nature of the
underlying property to which the instruments are linked; and whether these
instruments are or should be subject to the “constructive ownership” regime
discussed above. While the notice requests comments on appropriate transition
rules and effective dates, any Treasury regulations or other guidance
promulgated after consideration of these issues could materially and
adversely affect the tax consequences of an investment in the Securities,
possibly with retroactive effect.
You
should consult your tax adviser regarding the U.S. federal income tax
consequences of an investment in the Securities, including possible alternative
treatments and the issues presented by this notice, as well as any tax
consequences arising under the laws of any state, local or non-U.S. taxing
jurisdiction.
Tax
Consequences to Non-U.S. Holders
You are a
“non- U.S. holder” if, for U.S. federal income tax purposes, you are a
beneficial owner of the Securities who is: (i) a nonresident alien individual,
(ii) a foreign corporation or (iii) a foreign estate or trust.
Sale, Exchange or Retirement of the
Securities. Any gain from the sale, exchange or retirement of the
Securities should not be subject to U.S. federal income tax, including
withholding tax, unless such gain is effectively connected with your conduct of
a trade or business in the United States, as described below.
Tax Consequences under Possible
Alternative Treatments. If the Securities were treated as indebtedness,
any income from the Securities would not be subject to U.S. federal income tax,
including withholding tax, provided generally that (i) you certified on IRS Form
W-8BEN, under penalties of perjury, that you are not a United States person and
otherwise satisfied applicable requirements, and (ii) any income from the
Securities was not effectively connected with your conduct of a trade or
business in the United States.
As
described above under “—Tax Consequences to U.S. Holders—Possible Alternative
Tax Treatments of an Investment in the Securities,” in December 2007, Treasury
and the IRS released a notice requesting comments on various issues regarding
the U.S. federal income tax treatment of “prepaid forward contracts” and similar
instruments, such as the Securities. The notice focuses, among other things, on
the degree, if any, to which income realized with respect to such instruments by
non-U.S. persons should be subject to withholding tax. It is possible that any
Treasury regulations or other guidance promulgated after consideration of these
issues might require non-U.S. holders to accrue income, subject to withholding
tax, over the term of the Securities, possibly on a retroactive basis. You
should consult your tax adviser regarding the U.S. federal income tax
consequences of an investment in the Securities, including possible alternative
treatments and the issues presented by this notice.
Income Effectively Connected with a
Trade or Business in the United States. If you are engaged in a trade or
business in the United States, and income from the Securities is effectively
connected with your conduct of that trade or business, you generally will be
taxed in the same manner as a U.S. holder. In this case, you will be required to
provide a properly executed IRS Form W-8ECI in order to claim an exemption from
withholding. If this paragraph applies to you, you should consult your tax
adviser with respect to other U.S. tax consequences of the ownership and
disposition of the Securities, including the possible imposition of a 30% branch
profits tax if you are a corporation.
Backup
Withholding and Information Reporting
The
proceeds received from a sale, exchange or retirement of the Securities will be
subject to information reporting unless you are an exempt recipient (such as a
domestic corporation) and may also be subject to backup withholding at the rate
specified in the Code if you fail to provide certain identifying information
(such as an accurate taxpayer identification number, if you are a U.S. holder)
or meet certain other conditions. If you are a non-U.S. holder and you provide a
properly executed IRS Form W-8BEN or W-8ECI, as applicable, you will generally
establish an exemption from backup withholding.
Amounts
withheld under the backup withholding rules are not additional taxes and may be
refunded or credited against your U.S. federal income tax liability, provided
the required information is furnished to the IRS.
PS-44
PLAN
OF DISTRIBUTION (CONFLICTS OF INTEREST)
Unless
otherwise specified in the relevant Pricing Supplement, we have appointed RBS
Securities Inc. (“RBSSI”) as agent for any offering of the
Securities. RBSSI has agreed to use reasonable efforts to solicit
offers to purchase the Securities. We will pay RBSSI, in connection
with sales of the Securities resulting from a solicitation such agent made or an
offer to purchase such agent received, a commission in an amount as specified in
the relevant Pricing Supplement. RBSSI has informed us that, as part of its
distribution of the Securities, it intends to reoffer the Securities to other
dealers who will sell the Securities. Each such dealer engaged by
RBSSI, or further engaged by a dealer to whom RBSSI reoffers the Securities,
will purchase the Securities at an agreed discount to the initial offering price
of the Securities. RBSSI has informed us that such discounts may vary
from dealer to dealer and that not all dealers will purchase or repurchase the
Securities at the same discount. RBSSI has also informed us that it
may pay any dealer additional fees payable upon maturity of the Securities based
on the performance of the Securities sold and/or additional fees payable
annually based on the amount of Securities sold by such dealer in a particular
calendar year; provided
that the aggregate amount of such discounts and additional fees paid to all
dealers for an offering shall not exceed the commission that RBSSI will receive
from us. You can find a general description of the commission rates
payable to the agents under “Plan of Distribution” in the accompanying
Prospectus Supplement.
RBSSI is
an affiliate of ours and Holding. RBSSI will conduct each offering of Securities
in compliance with the requirements of NASD Rule 2720 of the Financial Industry
Regulatory Authority, which is commonly referred to as FINRA, regarding a FINRA
member firm’s distribution of securities of an affiliate. Following the initial
distribution of any of these Securities, RBSSI may offer and sell those
Securities in the course of its business as broker-dealer. RBSSI may
act as principal or agent in these transactions and will make any sales at
varying prices related to prevailing market prices at the time of sale or
otherwise. RBSSI may use this Product Supplement, the relevant Pricing
Supplement and the accompanying Prospectus Supplement and Prospectus in
connection with any of these transactions. RBSSI is not obligated to make a
market in any of these Securities and may discontinue any market-making
activities at any time without notice.
RBSSI or
an affiliate of RBSSI may enter into one or more hedging transactions with us in
connection with this offering of Securities. See “Use of Proceeds”
above.
To the
extent that the total aggregate principal amount of the Securities being offered
by the relevant Pricing Supplement is not purchased by investors in that
offering, one or more of our affiliates may agree to purchase a portion of the
unsold Securities, and to hold such Securities for investment purposes. See
“Holding of the Securities by our Affiliates and Future Sales” under the heading
“Risk Factors.”
PS-45
|
You
should rely only on the information contained or incorporated by reference
in this Product Supplement, the relevant Pricing Supplement, any related
Underlying Supplement, the Prospectus Supplement and the Prospectus. We
have not authorized anyone else to provide you with different or
additional information. We are offering to sell these Securities and
seeking offers to buy these Securities only in jurisdictions where offers
and sales are permitted. Neither the delivery of this Product Supplement
nor the relevant Pricing Supplement, any related Underlying Supplement,
accompanying Prospectus Supplement or Prospectus, nor any sale made
hereunder and thereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of ABN AMRO Bank
N.V. or ABN AMRO Holding N.V. since the date of the relevant Pricing
Supplement or that the information contained or incorporated by reference
in the accompanying Prospectus is correct as of any time subsequent to the
date of such information.
|
ABN
AMRO BANK N.V.
Senior
Fixed Rate Notes
fully
and unconditionally guaranteed by
ABN
AMRO Holding N.V.
|
||
|
TABLE
OF CONTENTS
|
|||
|
PRODUCT
SUPPLEMENT
|
Page
|
Buffer
Securities and Out-performance Notes
linked
to a Common Stock, an Index, an
Exchange-Traded
Fund, a Currency Pair or a
Basket of Common
Stocks, Indices, Exchange-
Traded Funds and/or
Currency Pairs
|
|
|
Summary
|
PS-2
|
||
|
Risk
Factors
|
PS-9
|
||
|
Public
Information Regarding the Underlying Stock or the Underlying
Fund
|
PS-24
|
||
|
Description
of Securities
|
PS-25
|
||
|
Use
of Proceeds
|
PS-41
|
||
|
U.S.
Federal Income Tax Consequences
|
PS-42
|
||
|
Plan
of Distribution (Conflicts of Interest)
|
PS-45
|
||
|
PROSPECTUS
SUPPLEMENT
|
Page
|
||
|
About
This Prospectus Supplement
|
S-1
|
||
|
Risk
Factors
|
S-2
|
PRODUCT
SUPPLEMENT
(TO
PROSPECTUS DATED
SEPTEMBER
29, 2009 AND
PROSPECTUS
SUPPLEMENT
DATED
SEPTEMBER 29, 2009)
|
|
|
Description
of Notes
|
S-4
|
||
|
Taxation
in the Netherlands
|
S-24
|
||
|
United
States Federal Income Taxation
|
S-27
|
||
|
Plan
of Distribution (Conflicts of Interest)
|
S-34
|
||
|
Legal
Matters
|
S-36
|
||
|
PROSPECTUS
|
Page
|
||
|
About
This Prospectus
|
1
|
||
|
Where
You Can Find Additional Information
|
2
|
||
|
Cautionary
Statement on Forward-Looking
|
RBS
Securities Inc.
|
||
|
Statements
|
3
|
||
|
Consolidated
Ratios of Earnings to Fixed Charges
|
4
|
||
|
ABN
AMRO Bank N.V. and ABN AMRO
|
|||
|
Holding
N.V.
|
5
|
||
|
Use
of Proceeds
|
5
|
||
|
Description
of Debt Securities
|
6
|
||
|
Forms
of Securities
|
16
|
||
|
The
Depositary
|
17
|
||
|
Plan
of Distribution (Conflicts of Interest)
|
19
|
||
|
Legal
Matters
|
22
|
||
|
Experts
|
23
|
||
|
Benefit
Plan Investor Considerations
|
24
|
||
|
Enforcement
of Civil Liabilities
|
25
|