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 (800)
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 one offering of Securities. The purchaser of any offering
will acquire a Security linked to a single Underlying Stock.
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 Underlying Stock are not available for delivery at maturity we may
pay you, in lieu of the Stock Redemption Amount, the cash value of the Stock
Redemption Amount, determined by multiplying the Stock Redemption Amount by the
Closing Price of the 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 Underlying Shares. 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 at
the time you receive those shares 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.
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 the
“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 (800) 747-4332.
You
should carefully consider the risks of the Securities to which this
communication relates and whether these Securities are suited to your 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 you to consult with you 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 in the Securities 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,
you may lose
some or all of your 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 you will not benefit from any
price appreciation in the applicable Underlying Stock, nor will you receive
dividends paid on the applicable Underlying Stock, if any. Accordingly, you 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
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 you may not receive your 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 in
the Securities 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 you 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), you 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), you will not recognize any gain or loss in respect of the Put
Option, but your 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.
You
should seek your own advice based on your 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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