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 (866)
747-4332.
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.
This
prospectus relates to two separate offerings of Securities. Each Security
offered is linked to one, and only one, of the Underlying Stocks described on
the cover page. The purchaser of any offering will acquire a Security linked to
a single Underlying Stock, not to a basket or index of both of the Underlying
Stocks. You may participate in either of the two offerings or, at your election,
in both offerings.
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.
|
•
|
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.
|
|
•
|
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:
|
|
•
|
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
|
|
•
|
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.
|
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 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
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.
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.
5