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 4 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
senior notes 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
linked to the performance of the S&P 500 Index, which we refer to as the
Underlying Index. The Securities have a maturity of three years. The
payment at maturity of the Securities is determined based on the performance of
the Underlying Index, as described below. Unlike
ordinary debt securities, the Securities do not pay interest. If the level of
the Underlying Index at any time during the regular business hours of the New
York Stock Exchange, which we refer to as the relevant exchange, on any trading
day during the period from but excluding the pricing date to and including the
determination date, which we refer to as the relevant period, is above the Upper
Barrier or below the Lower Barrier 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.
What
will I receive at maturity of the Securities?
The payment at
maturity for each $1,000 principal amount of the Securities is based on the
performance of the Underlying Index as follows:
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•
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If the level
of the Underlying Index never rises above the Upper Barrier or falls below
the Lower Barrier at any time during the regular business hours of the
relevant exchange on any trading day during the Relevant Period, you will
receive $1,000 plus the Supplemental Redemption Amount;
or
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•
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If the level
of the Underlying Index either rises above the Upper Barrier or falls
below the Lower Barrier at any time on any trading day during the regular
business hours of the relevant exchange during the Relevant Period you
will receive $1000 only.
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If
the Final Index Level is equal to the Initial Index Level the Supplemental
Redemption Amount will be zero and you will not receive any return on your
initial principal investment even if the level of the Underlying Index never
rises above the Upper Barrier or falls below the Lower Barrier at any time
during the regular business hours of the relevant exchange on any trading day
during the Relevant Period.
What
is the supplemental redemption amount and how is it calculated?
The supplemental
redemption amount is a cash amount calculated only if the level of the
Underlying Index remains at or below the Upper Barrier and at or above Lower
Barrier at all times during the regular business hours of the relevant exchange
on each trading day during the Relevant Period. The supplemental
redemption amount is equal to the product of the (i) absolute return times (ii) the participation
rate times (iii)
$1,000.
If the level of the
Underlying Index on the determination date is equal to the Initial Index Level,
then the absolute return will be zero and the supplemental redemption amount
will be zero even though the level of the Underlying Index never rose above the
Upper Barrier or fell below the Lower Barrier at any time during the life of the
Securities.
How
is the absolute return calculated?
The absolute return
is the absolute value* of:
Final Index Value - Initial
Index Value
Initial Index
Value
*The absolute value
is always expressed as a positive number, even if it is negative.
If
the difference between the Initial Index Value and the Final Index Value is
zero, the absolute return, and thus the supplemental redemption amount, will be
zero.
Will
I receive interest payments on the Securities?
No. You
will not receive any interest payments on the Securities.
Will
I get my principal back at maturity?
Subject to the
credit 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,
you will receive at maturity at least $1,000 per $1,000 principal amount of
Securities. However, if you sell the Securities prior to maturity,
you will receive the market price for the Securities, which may or may not
include the return of $1,000 for each $1,000 principal amount of
Securities. There may be little or no secondary market for the
Securities. Accordingly, you should be willing to hold your
Securities until maturity.
Can
you give me examples of the payment I will receive at maturity depending on the
performance of the Underlying Index?
Example 1: If, for example, in
a hypothetical offering, the Initial Index Value is 900, the participation rate
is 1.00 (or 100%), the upper barrier is equal to the Initial Index Value x 134%
and the lower barrier is equal to the Initial Index Value x 66% then the Upper
barrier is 1206 (900 x 134%) and the Lower barrier is 594 (900 x
66%). If the Final Index Value is 800 and the level of the Underlying
Index never rose above the Upper Barrier or fell below the Lower Barrier at any
time during the regular business hours of the relevant exchange on any trading
day during the relevant period, at maturity you will receive back your principal
amount of $1,000 plus the supplemental redemption amount, which is based on the
absolute return (if any) of the Underlying Index. In such a
hypothetical case, the supplemental redemption amount would be calculated as
follows:
Participation Rate
x Absolute Return x $1,000,
Where,
The
absolute return is the absolute value of:
Final Index Value - Initial
Index Value
Initial Index
Value
or, in this
hypothetical example,
Since the absolute
value is always expressed as a positive number, even if it is negative, -.1111
becomes .1111 and the Absolute Return equals .1111 (or 11.11%).
The supplemental
redemption amount, is calculated as:
Participation Rate
x Absolute Return x $1,000,
or, in this hypothetical
example,
1 x 0.1111 x $1,000
= $111.10
Accordingly, at
maturity you would receive the sum of $1,000 plus $111.10 for a total payment of
$1,111.10 per Security. In this hypothetical example, you would have
received an 11.11% return on your Securities even though the Underlying Index
declined by 11.11% over the life of the Securities.
Example 2: If, for example, in
a hypothetical offering, the Initial Index Value is 900, the participation rate
is 1.00 (or 100%), the Upper Barrier is equal to the Initial Index Value x 134%
and the Lower Barrier is equal to the Initial Index Value x 64% then the Upper
Barrier is 1206 (900 x 134%) and the Lower Barrier is 594 (900 x
66%). If the Final Index Value is 1100 and the level of the
Underlying Index was 1206.10, which is just above the Upper Barrier, at some
point in time during the regular business hours of the relevant exchange on any
trading day during the relevant period, then at maturity you will be entitled to
receive only the principal amount of $1,000 for each $1,000 principal amount of
your Securities.
Accordingly, at
maturity you would receive the sum of $1,000 per Security and you would not be
compensated for any loss in value due to inflation and other factors relating to
the value of money over time. In this hypothetical example, you would
not have received any return on your Securities even though the Underlying Index
appreciated by 22.22% over the life of the Securities.
This example
illustrates that a holder of the Securities may receive no return on the
Securities even if the Underlying Index experiences significant appreciation (or
depreciation) in its value over the life of the Securities. This is
true even if there is only one instance where the level of the Underlying Index
was outside (above or below) the upper or lower barrier during the relevant
period.
Example 3: If, for example, in
a hypothetical offering, the Initial Index Value is 900, the participation rate
is 1.00 (or 100%), the Upper Barrier is
equal to the Initial Index Value x 134% and the Lower Barrier is equal to the
Initial Index Value x 66% then the Upper Barrier is 1206 (900 x 134%) and the
Lower Barrier is 594 (900 x 66%). If the Final Index Value is 900 and
the level of the Underlying Index never rose above the Upper Barrier or fell
below the Lower Barrier at any time during the regular business hours of the
relevant exchange on any trading day during the relevant period, at maturity you
will receive back your principal amount of $1,000 plus the supplemental
redemption amount, which is based on the absolute return (if any) on the
Underlying Index. In such a hypothetical case, the supplemental
redemption amount would be calculated as follows:
Participation Rate
x Absolute Return x $1,000,
Where,
The absolute return
is the absolute value of:
Final Index Value - Initial
Index Value
Initial Index
Value
or, in this
hypothetical example,
Because the
absolute return equals zero in this hypothetical example, the supplemental
redemption amount will be zero and at maturity you would receive only your
principal amount of $1,000 for each Security and you would not be compensated
for any loss in value due to inflation and other factors relating to the value
of money over time. In this hypothetical example, you would receive
no return on your initial principal investment in the Securities even though the
level of the Underlying Index never rose above the upper barrier or fell below
the lower barrier at any time during the regular business hours of the relevant
exchange on any trading day during the relevant period.
These
examples are for illustrative purposes only and are based on a hypothetical
offering. It is not possible to predict the level of the Underlying
Index at any time during the life of the Securities or the closing level of the
Underlying Index on the determination date. For each offering we will set the
Initial Index Value and the upper and lower barriers (each subject to adjustment
for certain events affecting the Underlying Index) on the date we price the
Securities, which we refer to as the pricing date.
Do
I benefit from any appreciation or depreciation in the Underlying Index over the
life of the Securities?
Yes, but only in
the event that (1) the level of the Underlying Index remains at or below the
Upper Barrier and at or above the Lower Barrier at all times during the regular
business hours of the relevant exchange on each trading day during the relevant
period, and (2) the Final Index Value is different from the Initial Index Value,
resulting in a positive Absolute Return. If both of these conditions
are met, you will receive in cash the supplemental redemption amount in addition
to the principal amount of the Securities payable at maturity. The
supplemental redemption amount will represent a return on the Securities based
on the Absolute Return, which is the percentage change in the value of the
Underlying Index, and the applicable participation
rate. That is, your
return on the Securities will be equal to the Absolute Return.
Is
there a limit on how much I can earn on the Securities?
Yes, since the
Final Index Value cannot be greater than the Upper Barrier or less than the
Lower Barrier if a supplemental redemption amount is to be paid at maturity, the
Absolute Return is capped at the percentage by which the Upper Barrier and the
Lower Barrier are each either above or below the Initial Index
Value.
For example, if in
a hypothetical offering, the upper barrier were 134% above the Initial Index
Value and the lower barrier were 66% below the Initial Index Value, then your
return on the Securities in that hypothetical offering could never exceed 34%.
This is because the difference between the Final Index Value and the Initial
Index Value in this hypothetical example can never be greater than
34%. If the difference between the Final Index Value and the Initial
Index value were greater than 34% then the Underlying Index would have breached
the barrier and no supplemental redemption amount would be paid at maturity.
Therefore, for each $1,000 principal amount of Securities, the maximum amount
payable at maturity would be $1,340, which consists of the principal amount of
$1,000 plus the maximum supplemental redemption amount of $340 (or, $1,000 x
100% x 34%). We will set the upper and lower barriers on the pricing
date. You will not receive a return on your Securities, if any, until
maturity.
What
is the Underlying Index?
The S&P 500
Index, which we refer to as the Underlying Index is a 500-stock benchmark that
includes a representative sample of leading U.S. companies across broad industry
groupings. It is a market-value weighted index (stock price times
number of shares outstanding), with each stock’s weight in the index
proportionate to its market value. The calculation of the value of the S&P
500 Index is based on the relative value of the aggregate market value of the
common stocks of 500 companies as of a particular time compared to the aggregate
average market value of the common stocks of 500 similar companies during the
base period of the years 1941 through 1943.
You should read
“Description of the Underlying Index” and “Public Information Regarding the
Underlying Index” in the accompanying Pricing Supplement for additional
information regarding the Underlying Index and to learn how to obtain public
information regarding the Underlying Index and other important
information.
Information
concerning certain historical values of the Underlying Index is set forth under
the heading “Public Information Regarding the Underlying Index” in the
accompanying Pricing Supplement. Past performance of the Underlying
Index, however, is not necessarily indicative of how the Underlying Index will
perform in the future.
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
(866) 747-4332.
RISK
FACTORS
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 you 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 your 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
Bank N.V.’s parent. As a result, you assume the credit risk of ABN
AMRO Bank N.V. and that of ABN AMRO Holding N.V. in the event that ABN AMRO Bank
N.V. defaults on its obligations under the Securities. Any obligations or
Securities sold, offered, or recommended are not deposits of 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.
Market
Risk
The Securities do
not pay any interest. The rate of return, if any, will depend on the performance
of the Underlying Index. If the level of the Underlying Index either falls below
the Lower Barrier or rises above the Upper Barrier at any time during the
regular business hours of the relevant exchange on any trading day during the
relevant period, you will be entitled to receive only the principal amount of
$1,000 per Security at maturity. In addition, even if the level of
the Underlying Index remains equal to or above the Lower Barrier and equal to or
below the Upper Barrier at all times during the regular business hours of the
relevant exchange on each trading day during the relevant period, the
supplemental redemption amount payable at maturity will be zero if the Final
Index Value is equal to the Initial Index Value. In each such 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.
Investment
in the Securities is Not the Same as a Direct Investment in the Stocks that
Comprise the S&P 500 Index or a Product that Tracks the Performance
of the S&P 500 Index
An investment in
the Securities is not the same as a direct
investment in the stocks (or any other securities) that comprise the S&P 500
Index or in a product that tracks the performance of the S&P 500
Index. The return on your Securities could be less than if you had
invested directly in the stocks (or any other securities) that comprise the
S&P 500 Index or in a product that tracks the return of the S&P 500
Index because of the barrier feature and the method by which the supplemental
redemption amount is calculated. In addition, your return may be
limited because the calculation of the supplemental redemption amount and the
return, if any, 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 S&P
500 Index or in a product which tracks the performance of the S&P 500 Index
directly. You will not receive any payment of dividends on any of the
stocks (or any other securities) that comprise the S&P 500
Index.
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 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 level of the Underlying Index at any time, 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 levels 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
The Securities will
be treated as "contingent payment debt instruments" for U.S. federal income tax
purposes. Accordingly, U.S. taxable investors, regardless of their
method of accounting, will be required to accrue as ordinary income amounts
based on the “comparable yield” of the Securities, as determined by us, even
though they will receive no payment on the Securities until
maturity. In addition, any gain recognized upon a sale, exchange or
retirement of the Securities will generally be treated as ordinary interest
income for U.S. federal income tax purposes.
Investors should
review the “Taxation” section in the related Pricing Supplement and the section
entitled “United States Federal Taxation” (in particular the sub-section
entitled “United States Federal Taxation—Contingent Payment Debt Instruments”)
in the accompanying Prospectus Supplement. Additionally, investors
are urged to consult their tax advisor regarding the tax treatment of the
Securities and whether a purchase of the Securities is advisable in light of the
tax treatment and their particular situation
This
tax summary was written in connection with the promotion or marketing of the
Securities, and cannot be used by any investor for the purpose of avoiding
penalties that may be asserted against the investor under the Internal Revenue
Code. Taxpayers should seek advice based on their particular
circumstances from an independent tax advisor.