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Pricing
Date:
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January 12, 2009 subject to
certain adjustments as described in the related pricing
supplement
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Settlement
Date:
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January 15,
2009
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Determination
Date:
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July 21, 2009 subject to certain
adjustments as described in the related pricing
supplement
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Maturity
Date:
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July 24, 2009 (Six
Month)
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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.
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.
SUMMARY
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 Stock to which it is
linked. Therefore your principal is at risk but you have no opportunity to
participate in any appreciation of the Underlying Stock.
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 Stock to which such Security is linked fell below the knock-in
level on any trading day from but not including the pricing date to and
including the determination date (such period, the “Knock-in Period"), and if
so, (ii) the closing price of the applicable Underlying Stock 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 Stock 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 Stock 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 stock redemption amount, in exchange for each Security, in the
event that the closing price of the applicable Underlying Stock 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 Stock 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 applicable Underlying Stock are not available for
delivery at maturity we may pay you, in lieu of the applicable Stock Redemption
Amount, the cash value of the applicable Stock Redemption Amount, determined by
multiplying the applicable Stock Redemption Amount by the Closing Price of the
applicable Underlying Stock on the Determination Date.
Why
is the interest rate on the Securities higher than the interest rate payable on
your conventional debt securities with the same maturity?
The Securities offer
a higher interest rate than the yield that would be payable on a conventional
debt security with the same maturity issued by us or an issuer with a comparable
credit rating. This is because you, the investor in the Securities, indirectly
sell a put option to us on the shares of the applicable Underlying Stock. 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 Stock with a market value less than the principal amount
of your Securities at maturity, which would mean that you would lose some or all
of your initial principal investment.
What
are the consequences of the indirect put option that I have sold
you?
The put option you
indirectly sell to us creates the feature of exchangeability. This feature could
result in the delivery of Underlying Stock to you, at maturity, with a market
value which is less than the principal amount of $1,000 per Security. If the
closing price of the applicable Underlying Stock on the relevant exchange falls
below the applicable Knock-In Level on any trading day during the Knock-In
Period, and on the Determination Date the closing price of the applicable
Underlying Stock is less than the applicable Initial Price, you will receive the
applicable Stock Redemption Amount. The market value of the shares of
such Underlying Stock 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 Stock rises above the initial price you will not participate in any
appreciation in the price of the Underlying Stock.
How
is the Stock Redemption Amount determined?
The
Stock Redemption Amount for each $1,000 principal amount of any Security is
equal to $1,000 divided by the Initial Price of the Underlying Stock linked to
such Security. The value of any fractional
shares of such
Underlying Stock that you are entitled to receive, after aggregating your total
holdings of the Securities linked to such Underlying Stock, will be paid in cash
based on the closing price of such Underlying Stock 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 a share of underlying stock was $45.00 and the knock-in
level for such offering was 80%, then the stock redemption amount would be
22.222 shares of underlying stock, or $1,000 divided by $45.00, and the knock-in
level would be $36.00, or 80% of the initial price.
If the closing price
of that hypothetical underlying stock fell below the knock-in level of $36.00 on
any trading day during the Knock-in Period, then the payment at maturity would
depend on the closing price of the underlying stock on the determination date.
In this case, if the closing price of the underlying stock on the determination
date is $30.00 per share at maturity, which is below the initial price level,
you would receive 22.222 shares of underlying stock for each $1,000 principal
amount of the securities. (In actuality, because we cannot deliver fractions of
a share, you would receive on the maturity date for each $1,000 principal amount
of the securities 22 shares of underlying stock plus $6.66 cash in lieu of
0.222
fractional shares, determined by multiplying 0.222 by $30.00, the
closing price per shares of underlying stock on the determination date.) 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 22 shares of underlying stock (including the cash paid in
lieu of fractional shares) that we would deliver to you at maturity for each
$1,000 principal amount of security would be $666.66, 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 stock on the determination date is $50.00 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 stock never falls below $36.00, which is the
knock-in level, on any trading day during the Knock-in Period, at maturity you
will receive $1,000 in cash for each security you hold regardless of the closing
price of the underlying stock on the determination date. In addition, over the
life of the securities you would have received interest payments at a rate 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 Stocks 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 Stock
Redemption Amount on the Pricing Date.
Do
I benefit from any appreciation in the Underlying Stock 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.
RISK
FACTORS
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 applicable Underlying Stock falls below the applicable
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 applicable Underlying Stock below the
closing price of such Underlying Stock on the date the Securities were
priced. Accordingly,
investors may lose some or all of their initial investment in
the Securities.
Limited Return
The amount payable under the Securities
will never exceed the original principal amount of the Securities plus the
applicable 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
applicable Underlying Stock, nor will they receive dividends paid on the
applicable Underlying Stock, 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 applicable Underlying Stock
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 Stock to which the Security is linked during the term of the
Security.
Liquidity Risk
The Securities will not be listed on any
securities exchange. Accordingly, there may be little or no secondary
market for the Securities
and information regarding independent market pricing of the Securities may be
very limited or non-existent. The value of the Securities in the secondary
market, if any, will be subject to many unpredictable factors, including then
prevailing market
conditions.
It is important to
note that many factors will contribute to the secondary market value of the
Securities, and investors may not receive their full principal back if the
Securities are sold prior to maturity. Such factors include, but are not limited to, time to
maturity, the price of the applicable Underlying Stock, 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 applicable Underlying
Stock), the investor will not recognize any
gain or loss in respect of the Put Option, but the investor’s tax basis in the applicable Underlying
Stock 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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