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