PRODUCT
SUPPLEMENT |
Product
Supplement No. 3-II to
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(TO
PROSPECTUS DATED FEBRUARY 8, 2010 |
Registration
Statement Nos. 333-162193 and 333-162193-01
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AND
PROSPECTUS SUPPLEMENT |
Dated
February 8, 2010
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DATED
FEBRUARY 8, 2010) |
Rule
424(b)(2)
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The
Royal Bank of Scotland N.V.
RBS
NotesSM
Senior
Fixed Rate Notes
fully
and unconditionally guaranteed by
ABN
AMRO Holding N.V.
Principal
Protected Notes and Partially Principal Protected Notes linked to a Commodity, a
Common Stock, an Index, an Exchange-Traded Fund, a Currency Pair or a Basket of
Commodities, Common Stocks, Indices, Exchange-Traded Funds and/or Currency
Pairs
The Principal
Protected Notes and Partially Principal Protected Notes, which we will each
refer to as the “Notes,” will entitle the holder to receive at maturity an
amount linked to the performance of (i) a commodity, which we refer to as an
“Underlying Commodity”; (ii) the common stock of a company, which we refer to as
an “Underlying Stock”; (iii) an index of equity securities or commodities or
commodity futures contracts, which we refer to as an “Underlying Index”; (iv) an
exchange-traded fund that tracks the performance of an underlying commodity,
index, basket of securities or commodities or commodity futures contracts,
primarily by holding securities, commodities or commodity futures contracts or
other instruments related to such underlying commodity, index or basket, which
we refer to as an “Underlying Fund”; (v) a reference currency, which we refer to
as a “Reference Currency” relative to another currency, which we refer to as a
“Base Currency” and which, together with its Reference Currency, we refer to as
an “Underlying Currency Pair”; or (vi) a basket comprised of Underlying
Commodities, Underlying Stocks, Underlying Indices, Underlying Funds and/or
Underlying Currency Pairs, which we refer to as an “Underlying
Basket.” In this Product Supplement, we refer to any Underlying
Commodity, Underlying Stock, Underlying Index, Underlying Fund or Underlying
Currency Pair included in an Underlying Basket as a “Basket Component,” and we
refer to the Underlying Commodity, Underlying Stock, Underlying Index,
Underlying Fund, Underlying Currency Pair or Underlying Basket to which the
Notes are linked as the “Underlying.” As used in this Product
Supplement, the term “common stock” includes non-U.S. equity securities issued
through depositary arrangements such as American depositary shares, or
ADSs. We refer to the common stock represented by ADSs as the “ADS
Underlying Stock.” If the Underlying Stock is an ADS, the term
“issuer” refers to the issuer of the shares underlying the ADSs. We
refer to the issuer of an Underlying Stock as the “Underlying
Company.” We refer to an Underlying Index comprised of stocks as an
“Underlying Equity Index” and to an Underlying Index comprised of commodities or
commodity futures contracts as an “Underlying Commodity Index.” We
refer to an Underlying Fund that tracks an equity index or basket of stocks as
an “Underlying Equity Fund” and to an Underlying Fund that tracks a commodity,
commodity index or basket of commodities or commodity futures contracts as an
“Underlying Commodity Fund.” We refer to the index that an Underlying
Fund tracks as a “Target Index.”
The
Notes do not pay interest. Any payment on the Notes is subject to the
creditworthiness (i.e.,
the ability to pay) of The Royal Bank of Scotland N.V. and ABN AMRO Holding
N.V., as guarantor.
This Product
Supplement describes terms that will apply generally to the Notes and
supplements the terms described in the accompanying Prospectus Supplement and
Prospectus. A separate Underlying Supplement, term sheet or pricing supplement,
as the case may be, will describe the Underlying to which the Notes are linked,
and a separate term sheet or pricing supplement, as the case may be, will
specify the Underlying to which the Notes are linked and will describe terms
that apply to any specific issue of Notes, including any changes to the terms
specified below. We refer to such term sheets and pricing supplements generally
as Pricing Supplements. If the terms described in the relevant Pricing
Supplement are inconsistent with those described herein or in the accompanying
Underlying Supplement, if any, Prospectus Supplement or Prospectus, the terms
described in the relevant Pricing Supplement shall control.
The Notes are our
unsecured and unsubordinated obligations and are fully and unconditionally
guaranteed by ABN AMRO Holding N.V.
The
Notes are not bank deposits and are not insured or guaranteed by the Federal
Deposit Insurance Corporation, the Deposit Insurance Fund or any other
governmental agency.
The
Notes involve risks not associated with an investment in conventional debt
securities. See “Risk Factors” beginning on PS-8.
The Securities and
Exchange Commission and state securities regulators have not approved or
disapproved these Notes, or determined if this Product Supplement, the
accompanying Underlying Supplement, if any, Prospectus Supplement or Prospectus
or any relevant Pricing Supplement are truthful or complete. Any representation
to the contrary is a criminal offense.
The agents are not
obligated to purchase the Notes but have agreed to use reasonable efforts to
solicit offers to purchase the Notes. To the extent the full aggregate
principal amount of the Notes being offered by the relevant Pricing Supplement
is not purchased by investors in the offering, one or more of our affiliates may
agree to purchase a part of the unsold portion, which may constitute up to 15%
of the total aggregate principal amount of the Notes, and to hold such Notes for
investment purposes. See “Holding of the Notes by Our Affiliates and Future
Sales” under the heading “Risk Factors” and “Plan of Distribution.” The
relevant Pricing Supplement, this Product Supplement, any applicable Underlying
Supplement and the accompanying Prospectus Supplement and Prospectus may be used
by our affiliates in connection with offers and sales of the Notes in
market-making transactions.
RBS
Securities Inc.
In
this Product Supplement, the “Bank,” “we,” “us” and “our” refer to The Royal
Bank of Scotland N.V. and “Holding” refers to ABN AMRO Holding N.V., our parent
company. We refer to the Notes offered by the relevant Pricing
Supplement and the related guarantees as the “Notes” and to each individual
security offered thereby as a “Note.”
RBS NotesSM is a
service mark of The Royal Bank of Scotland N.V.
Any
Notes issued, sold or distributed pursuant to the relevant Pricing Supplement
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.
SUMMARY
The
following summary answers some questions that you might have regarding the Notes
in general terms only. It does not contain all the information that may be
important to you. You should read the summary together with the more detailed
information that is contained in the rest of this Product Supplement and in the
accompanying Pricing Supplement, Prospectus and Prospectus Supplement. You
should carefully consider, among other things, the matters set forth in “Risk
Factors.” In addition, we urge you to consult with your investment, legal,
accounting, tax and other advisors with respect to any investment in the
Notes.
What
are the Notes?
The Notes are
senior notes issued by us, The Royal Bank of Scotland N.V., and are fully and
unconditionally guaranteed by our parent company, ABN AMRO Holding N.V. The
Notes have a maturity that will be specified in the relevant Pricing
Supplement. The payment at maturity on the Notes is determined based
on the performance of
(1) a commodity,
which we refer to as an “Underlying Commodity”;
(2) the common
stock of a company, which we refer to as an “Underlying Stock”;
(3) an index of
equity securities or commodities or commodity futures contracts, which we refer
to as an “Underlying Index”;
(4) an
exchange-traded fund that tracks the performance of an underlying commodity,
index, basket of securities or commodities or commodity futures contracts,
primarily by holding securities, commodities or commodity futures contracts or
other instruments related to such underlying commodity, index or basket, which
we refer to as an “Underlying Fund”;
(5) a reference
currency, which we refer to as a “Reference Currency” relative to another
currency, which we refer to as a “Base Currency” and which, together with its
Reference Currency, we refer to as an “Underlying Currency Pair”;
or
(6) a basket
comprised of Underlying Commodities, Underlying Stocks, Underlying Indices,
Underlying Funds and/or Underlying Currency Pairs, which we refer to as an
“Underlying Basket.”
In
this Product Supplement, we refer to any Underlying Commodity, Underlying Stock,
Underlying Index, Underlying Fund or Underlying Currency Pair included in an
Underlying Basket as a “Basket Component,” and we refer to the Underlying
Commodity, Underlying Stock, Underlying Index, Underlying Fund, Underlying
Currency Pair or Underlying Basket to which the Notes are linked as the
“Underlying.” As used in this Product Supplement, the term “common
stock” includes non-U.S. equity securities issued through depositary
arrangements such as American depositary shares, or ADSs. We refer to
the common stock represented by ADSs as the “ADS Underlying Stock. If
the Underlying Stock is an ADS, the term “issuer” refers to the issuer of the
shares underlying the ADSs. We refer to the issuer of an Underlying
Stock as the “Underlying Company.” We refer to an Underlying Index
comprised of stocks as an “Underlying Equity Index” and to an Underlying Index
comprised of commodities or commodity futures contracts as an “Underlying
Commodity Index.” We refer to an Underlying Fund that tracks an
equity index or basket of stocks as an “Underlying Equity Fund” and to an
Underlying Fund that tracks a commodity, commodity index or basket of
commodities or commodity futures contracts as an “Underlying Commodity
Fund.” We refer to the index that an Underlying Fund tracks as a
“Target Index.” For more information on the payment at maturity,
please see “What will I receive at maturity of the Notes and how is this amount
calculated?”
In
addition, unlike ordinary debt securities, the Notes do not pay
interest. For Principal Protected Notes, if the Underlying Return is
0% or negative, 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. For Partially Principal Protected
Notes, a decline in the value of the Underlying will always reduce your cash
payment at maturity below the principal amount of your Notes and you could lose
some of your initial principal investment. Any payment on the Notes
is subject to the creditworthiness (i.e., the ability to pay) of The Royal Bank
of Scotland N.V. and ABN AMRO Holding N.V., as guarantor.
What
will I receive at maturity of the Notes and how is this amount
calculated?
The payment at
maturity of the Notes will depend on the performance of the
Underlying. For Principal Protected Notes, at maturity, you will
receive, for each $1,000 principal amount Note, a cash amount calculated as
follows:
(1) if the
underlying return is positive, $1,000 plus the supplemental redemption amount;
and
(2) if the
underlying return is 0% or negative, $1,000.
Consequently,
for Principal Protected Notes, if the Underlying Return is 0% or negative, 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.
For Partially
Principal Protected Notes, at maturity, you will receive, for each $1,000
principal amount Note, a cash amount calculated as follows:
(1) if the
underlying return is positive, $1,000 plus the supplemental redemption amount;
and
(2) if the
underlying return is 0% or negative, the greater of (i) $1,000 plus (underlying
return × $1,000) and (ii) $1,000 × principal protection level.
For Partially
Principal Protected Notes, the principal protection level is a percentage as
specified in the relevant Pricing Supplement, which will be less than
100%.
Consequently,
for Partially Principal Protected Notes, a decline in the value of the
Underlying will always reduce your cash payment at maturity below the principal
amount of your Notes and you could lose some of your initial principal
investment.
Any payment on the
Notes is subject to the creditworthiness of The Royal Bank of Scotland N.V. and
ABN AMRO Holding N.V., as guarantor.
What
is the supplemental redemption amount and how is it calculated?
The supplemental
redemption amount is a cash amount determined only when the underlying return is
positive. The supplemental redemption amount for each $1,000
principal amount Note is equal to $1,000 × the participation rate × the
underlying return. However, if the relevant Pricing Supplement
specifies a maximum amount, the supplemental redemption amount will never be
more than the maximum amount.
The participation
rate is a fixed amount or percentage as specified in the relevant Pricing
Supplement. If the participation rate is less than 100%, you will
never receive the full underlying return calculated as described herein; you
will only benefit from a portion of the underlying return equal to the
participation rate times the underlying return.
The maximum amount
is a fixed cash amount specified in the Pricing Supplement for each $1,000
principal amount of Notes. If a maximum amount is applicable, you
will never receive a payment at maturity of more than $1,000 plus the maximum
amount for each $1,000 principal amount of Notes, regardless of how much the
Underlying appreciates.
What
is the underlying return and how is it calculated?
The underlying
return will be the percentage change in the value of the Underlying, calculated
as:
final price, value or
exchange rate – initial price, value or exchange rate
initial price,
value or exchange rate
The initial price
of an Underlying Commodity is the official settlement price or fixing level of
such Underlying Commodity on the pricing date, as (a) made public by the primary
exchange or market of trading for such Underlying Commodity or any related
futures or options contract (which may be published under a specific Bloomberg
ticker) or (b) displayed on a specific page of Bloomberg, L.P. (“Bloomberg”) or
Reuters Group PLC (“Reuters”). The final price of an Underlying
Commodity is the settlement price or fixing level on the determination date, as
(a) made public by the primary exchange or market of trading for such Underlying
Commodity or any related futures or options contract (which may be published
under a specific Bloomberg ticker) or (b) displayed on a specific page of
Bloomberg or Reuters. The relevant Pricing Supplement will specify
the method of determining the initial price and final price of an Underlying
Commodity (including the applicable Bloomberg ticker or Bloomberg or Reuters
page).
The initial price
of an Underlying Stock is the closing price of such Underlying Stock on the
pricing date, divided by the exchange factor, subject to adjustment for certain
corporate events, such as a stock split or merger, affecting such Underlying
Stock, which we describe in “Description of Notes — Adjustment
Events.” The final price of an Underlying Stock is the closing price
of such Underlying Stock on the determination date. We will usually
determine the closing price for any listed Underlying Stock by reference to the
last reported sale price, during regular trading hours (or if listed on The
NASDAQ Stock Market LLC (“NASDAQ”), the official closing price), on the primary
U.S. securities exchange on which the Underlying Stock is traded.
The initial value
of an Underlying Index is the closing value of such Underlying Index on the
pricing date. The final value of an Underlying Index is the closing
value of such Underlying Index on the determination date, subject to the terms
and provisions which we describe in “Description of Notes — Discontinuance of an
Underlying Index; Alteration of Method of Calculation.”
The initial price
of an Underlying Fund is the closing price of such Underlying Fund on the
pricing date, divided by the exchange factor, subject to adjustment
for certain corporate events, such as a stock split or merger, affecting such
Underlying Fund, which we describe in “Description of Notes — Adjustment
Events.” The final price of an Underlying Fund is the closing price
of such Underlying Fund on the determination date, subject to the terms and
provisions which we describe in “Description of Notes — Discontinuance of an
Underlying Fund; Alteration of Method of Calculation.” We will
usually determine the closing price for any listed Underlying Fund by reference
to the last reported sale price, during regular trading hours (or if listed on
NASDAQ, the official closing price), on the primary U.S. securities exchange on
which shares of the Underlying Fund are traded.
The initial
exchange rate of an Underlying Currency Pair is the spot rate for such
Underlying Currency Pair on the pricing date. The final exchange rate
of an Underlying Currency Pair is the spot rate for such Underlying Currency
Pair on the determination date.
The initial value
of an Underlying Basket is 1.00, unless otherwise specified in the relevant
Pricing Supplement. The final value of an Underlying Basket will be
the sum of the weighted returns of the Basket Components, calculated
as:
Sum of (component
return of each Basket Component × component weight of such Basket
Component)
With respect to each Basket Component, the
component return will be calculated as:
final price, value or
exchange rate
initial price,
value or exchange rate
With respect to
each Basket Component, the component weight is a fixed percentage or fraction
determined in the manner specified in the relevant Pricing Supplement, provided that the sum of the
component weights for all Basket Components will equal 100% or 1, as
applicable. The relevant Pricing Supplement will specify either (i)
the weight of each Basket Component in the Basket, which will be fixed for the
term of the Notes, or (ii) the manner in which the weight of each Basket
Component will be determined. For example, if the relevant Pricing
Supplement specifies that a Basket Component is weighted to comprise 18% of the
value of the Basket, the component weight for that Basket Component is
18%. Alternatively, the relevant Pricing Supplement may specify that,
for a Basket consisting of two Basket Components, the Basket Component with the
greater component return will make up 70% of the value of the Basket, and the
Basket Component with the lesser component return will make up 30% of the value
of the Basket.
Will
I receive interest payments on the Notes?
No. You will not
receive any interest on the Notes.
Can
you give me an example of the payment at maturity?
Please refer to the
relevant Pricing Supplement for an example of the payment at
maturity.
Do
I get all my principal back at maturity?
For Principal
Protected Notes, subject to the creditworthiness of The Royal Bank of Scotland
N.V. as the issuer of the Notes and ABN AMRO Holding N.V. as the guarantor of
the issuer’s obligations under the Notes, you will receive at maturity at least
$1,000 per $1,000 principal amount of Principal Protected Notes, regardless of
the value of the Underlying on the determination date.
For Partially
Principal Protected Notes, you are not guaranteed to get all of your principal
back at maturity. Subject to the creditworthiness of The Royal Bank
of Scotland N.V. as the issuer of the Notes and ABN AMRO Holding N.V. as the
guarantor of the issuer’s obligations under the Notes, you will receive at
maturity at least $1,000 × principal protection level per $1,000 principal
amount of Partially Principal Protected Notes, regardless of the value of the
Underlying on the determination date.
However, if you sell the Notes prior
to maturity, you will receive the market price for the Notes, which may or may
not include any return of principal. There may be little or no
secondary market for the Notes. Accordingly, you should be willing to hold your
Notes until maturity.
Do
I benefit from any appreciation in the Underlying over the term of the
Notes?
Yes, but you may
only benefit from a portion of any appreciation equal to the participation rate
times the underlying return, if the participation rate is less than 100%,
subject to any maximum amount. If the underlying return is positive,
you will receive in cash the supplemental redemption amount in addition to the
principal amount of the Notes payable at maturity. The supplemental redemption
amount is equal to $1,000 × the participation rate × the underlying
return. However, if the relevant Pricing Supplement specifies a
maximum amount, the supplemental redemption amount will never be more than the
maximum amount. If the participation rate is less than 100% you will
receive less than 100% of the underlying return, subject to any maximum
amount.
Is
there a limit on how much I can earn over the term of the Notes?
It
depends on whether a maximum amount is applicable to the Notes. If a
maximum amount is applicable and the Notes are held to maturity, the total
amount payable at maturity per Note will not exceed $1,000 plus the maximum
amount, regardless of how much the Underlying may appreciate over the term of
the Notes. If a maximum amount is not applicable and the Notes are
held to maturity, the total amount payable at maturity is not limited and is
based on the underlying return.
What
is the minimum required purchase?
Unless otherwise
specified in the relevant Pricing Supplement, you can purchase Notes in $1,000
denominations or in integral multiples thereof.
Is
there a secondary market for the Notes?
Unless otherwise
specified in the relevant Pricing Supplement, the Notes will not be listed on
any securities exchange. Accordingly, there may be little or no secondary market
for the Notes and, as such, information regarding independent market pricing for
the Notes may be extremely limited or non-existent. You should be
willing to hold your Notes until the maturity date.
Although it is not
required to do so, we have been informed by our affiliate that when this
offering is complete, it intends to make purchases and sales of the Notes from
time to time in off-exchange transactions. If our affiliate does make
such a market in the Notes, it may stop doing so at any time.
In
connection with any secondary market activity in the Notes, our affiliate may
post indicative prices for the Notes on a designated website or via Bloomberg.
However, our affiliate is not required to post such indicative prices and may
stop doing so at any time. Investors are advised that any prices
shown on any website or Bloomberg page are indicative prices only and, as such,
there can be no assurance that any trade could be executed at such
prices. Investors should contact their brokerage firm for
further information.
In
addition, the issue price of the Notes includes the selling agents’ commissions
paid with respect to the Notes and the cost of hedging our obligations under the
Notes. The cost of hedging includes the profit component that our
affiliate has charged in consideration for assuming the risks inherent in
managing the hedging of the transactions. The fact that the issue
price of the Notes includes these commissions and hedging costs is expected to
adversely affect the secondary market prices of the Notes. See “Risk Factors —
The Inclusion of Commissions and Cost of Hedging in the Issue Price is Likely to
Adversely Affect Secondary Market Prices” and “Use of Proceeds.”
What
is the tax treatment of the Notes?
Generally, we
intend to treat Notes with a term of one year or less as “short-term debt
obligations” for U.S. federal income tax purposes. No statutory, judicial or
administrative authority directly addresses the treatment of such Notes or
similar instruments for U.S. federal income tax purposes, and no ruling is being
requested from the Internal Revenue Service (the “IRS”). As a result, certain
aspects of the tax treatment of an investment in these Notes are
unclear.
Generally, we
intend to treat Notes with a term of more than one year as “contingent payment
debt instruments” for U.S. federal income tax purposes. Under this treatment,
regardless of your method of accounting, you will be required to accrue interest
income on the Notes in each year on a constant yield to maturity basis at the
“comparable yield,” as determined by us, although we will not make any payment
on the Notes until maturity. In addition, any income recognized upon a sale,
exchange or retirement of the Notes generally will be treated as interest income
for U.S. federal income tax purposes.
See “U.S. Federal
Income Tax Consequences” for additional discussion regarding the U.S. federal
income tax treatment of the Notes.
Tell
me more about The Royal Bank of Scotland N.V. and ABN AMRO Holding
N.V.
The Royal Bank of
Scotland N.V. is the new name of ABN AMRO Bank N.V. See “The Royal
Bank of Scotland N.V. and ABN AMRO Holding N.V.” in the accompanying prospectus
dated February 8, 2010.
What
is the relationship between The Royal Bank of Scotland N.V., ABN Amro Holding
N.V. and RBS Securities Inc.?
RBS Securities
Inc., which we refer to as RBSSI, is an affiliate of The Royal Bank of Scotland
N.V. and ABN AMRO Holding N.V. RBSSI will act as calculation agent for the
Notes, and is acting as agent for this offering. RBSSI will conduct this
offering in compliance with the requirements of NASD Rule 2720 of the Financial
Industry Regulatory Authority, which is commonly referred to as FINRA, regarding
a FINRA member firm’s distribution of the securities of an affiliate. See “Risk
Factors — Potential Conflicts of Interest between Holders of Notes and the
Calculation Agent” and “Plan of Distribution (Conflicts of Interest)” in this
Product Supplement.
Who
will determine the final price, value or exchange rate, the underlying return
and the payment at maturity?
We
have appointed our affiliate, RBS Securities Inc., which we refer to as RBSSI,
to act as calculation agent for the Notes. As calculation agent, RBSSI will
determine the final price, value or exchange rate of the Underlying, the initial
price, value or exchange rate of the Underlying, the underlying return and the
payment at maturity. The calculation agent may be required, due to
events beyond our control, to adjust any of these calculations, which we
describe “Description of Notes — Adjustment Events,” “Description of Notes —
Discontinuance of the Underlying Index; Alteration of Method of Calculation” and
“Description of Notes — Discontinuance of the Underlying Fund; Alteration of
Method of Calculation.”
Who
invests in the Notes?
The Notes are not
suitable for all investors. The Notes might be considered by
investors who:
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are willing
to risk receiving no return on their initial principal investment and, for
Partially Principal Protected Notes, are willing to risk losing some of
their initial principal investment, in return for the opportunity to
participate in the appreciation, if any, (or, if the participation rate is
less than 100%, a portion of the appreciation, if any,) in the value of
the Underlying over the term of the
Notes;
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do not
require an interest income stream;
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are willing
to be exposed to fluctuations in equity, commodity or currency prices in
general, as applicable, and the price or value of any Underlying
Commodity, Underlying Stock, Underlying Index, Underlying Fund or
Underlying Currency Pair in particular;
and
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are willing
to hold the Notes until maturity.
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You should
carefully consider whether the Notes are suited to your particular circumstances
before you decide to purchase them. In addition, we urge you to
consult with your investment, legal, accounting, tax and other advisors with
respect to any investment in the Notes.
What
are some of the risks in owning the Notes?
Investing in the
Notes involves a number of risks. We have described the most
significant risks relating to the Notes under the heading “Risk Factors” in this
Product Supplement, which you should read before making an investment in the
Notes.
Some selected risk
considerations include:
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Market
Risk. The Notes do not pay any interest. The
rate of return, if any, will depend on the performance of the
Underlying. For Principal Protected Notes, if the underlying
return is zero or negative, you will be entitled to receive only the
principal amount of $1,000 per Note 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. For Partially
Principal Protected Notes, a decline in the value of the Underlying will
always reduce your cash payment at maturity below the principal amount of
your Notes and you could lose some of your initial principal
investment. If the underlying return is positive, your return
will be limited to the maximum amount, if any, regardless of how much the
underlying may appreciate over the term of the Notes, if a maximum amount
is applicable.
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Credit
Risk. Because you are purchasing a security from us, you
are assuming our credit risk. In addition, because the Notes
are fully and unconditionally guaranteed by Holding, you are also assuming
the credit risk of Holding in the event that we fail to make any payment
required by the terms of the Notes.
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Liquidity
Risk. Unless otherwise specified in the relevant Pricing
Supplement, the Notes will not be listed on any securities
exchange. Accordingly, there may be little or no secondary
market for the Notes and information regarding independent market pricing
for the Notes may be very limited or non-existent. If you sell your Notes
in the secondary market, if any, prior to maturity, you will receive the
market price of the Notes, which could be zero. The value of
the Notes in the secondary market, if any, will be subject to many
unpredictable factors, including then prevailing market
conditions.
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What
if I have more questions?
You should read
“Description of Notes” in this Product Supplement for a detailed description of
the general terms of the Notes. The relevant Pricing Supplement will
describe the terms that apply specifically to the Notes, and the relevant
Underlying Supplement (if any) or the relevant Pricing Supplement will describe
the Underlying. The Notes are senior notes issued as part of our RBS
NotesSM program
and guaranteed by Holding. The Notes offered by the Bank will
constitute the Bank’s unsecured and unsubordinated obligations and rank pari
passu without any preference among them and with all our other present and
future unsecured and unsubordinated obligations. The guarantee of Holding will
constitute Holding’s unsecured and unsubordinated obligation and rank pari passu
without any preference among them and with all Holding’s other present and
future unsecured and unsubordinated obligations. You can find a
general description of our RBS NotesSM program
in the accompanying Prospectus Supplement. We also describe the basic
features of this type of note in the sections of the accompanying Prospectus
Supplement called “Description of Notes” and “Notes Linked to Commodity Prices,
Single Securities, Economic or Financial Measures and Baskets or Indices
Thereof.”
You may contact our
principal executive offices at Gustav Mahleraan 10, 1082 PP Amsterdam, The
Netherlands. Our telephone number is (31-20) 628-9393.
RISK
FACTORS
This section
describes the most significant risks relating to the Notes. For a discussion of
certain general risks associated with your investment in the Notes, please refer
to the section entitled “Risk Factors” beginning on page S-3 of the accompanying
Prospectus Supplement. You should carefully consider whether
the Notes are suited to your particular circumstances before you decide to
purchase them. In addition, we urge you to consult with your
investment, legal, accounting, tax and other advisors with respect to any
investment in the Notes.
Risks
Related to the Notes Generally
The
Notes Are Not Ordinary Senior Notes
The terms of the
Notes differ from those of ordinary debt securities in that we will not pay you
interest on the Notes and, for Partially Principal Protected Notes, you could
lose some of your initial principal investment at maturity. For Principal Protected Notes, if the
percentage change in the value of the Underlying from the pricing date to the
determination date is zero or negative, you will be entitled to receive only the
principal amount of $1,000 per Note at maturity. In such a case, you
will receive no return on your initial principal investment in the Notes 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. For Partially Principal
Protected Notes, a decline in the value of the Underlying from the pricing date
to the determination date will always reduce your cash payment at maturity below
the principal amount of your Notes and you could lose some of your initial
principal investment.
Furthermore, even
if the underlying return is positive, the return you receive on the Notes may be
less than the return you would have received had you invested your entire
principal amount in a conventional debt security with the same maturity issued
by us or a comparable issuer or an instrument which tracks the performance of
the Underlying. If a maximum amount is applicable, the return you
will receive on the Notes, if any, will never exceed the maximum
amount. The return you will receive on the Notes, if any, may be
minimal and may not compensate you for any losses incurred due to inflation or
the value of money over time. You cannot predict the future
performance of the Underlying based on historical performance.
For
Partially Principal Protected Notes, You May Not Receive a Full Return of
Principal at Maturity
If
the underlying return is negative, the amount of cash paid to you at maturity
will be less than the principal amount you invested in the Notes. You
could lose some of your initial principal investment.
The
Appreciation Potential of the Notes Is Limited to the Maximum Amount, If
Applicable
If
the Notes are subject to a maximum amount, the appreciation potential of the
Notes will be limited to the maximum amount. Any applicable maximum
amount will be a fixed cash amount which we will determine on the pricing date
and which will be set forth in the relevant Pricing
Supplement. Accordingly, if the relevant Pricing Supplement specifies
a maximum amount for the Securities, the appreciation potential of the Notes
will be limited to that maximum amount, regardless of how much the Underlying
may appreciate over the term of the Notes.
You
May Not Participate in the Full Underlying Return in the Underlying
If
the underlying return is positive, the payment at maturity will be calculated as
$1,000 plus the supplemental redemption amount. The supplemental redemption
amount will be equal to $1,000 × the participation rate × the underlying return,
subject to any maximum amount. If the participation rate is less than 100%, you
will only participate in that portion of the underlying return rather than in
the full underlying return. Therefore, if the underlying return is positive, the
return on the Notes will be less than the return you would have earned if you
had invested directly in the Underlying.
Credit
Risk of The Royal Bank of Scotland N.V. and ABN AMRO Holding N.V., and their
Credit Ratings and Credit Spreads May Adversely Affect the Market Value of the
Notes
You are dependent
on The Royal Bank of Scotland N.V.’s ability to pay all amounts due on the
Notes, and therefore you are subject to the credit risk of The Royal Bank of
Scotland N.V. and to changes in the market’s view of The Royal Bank of Scotland
N.V.’s creditworthiness. In addition, because the Notes are unconditionally
guaranteed by The Royal Bank of Scotland N.V.’s parent company, ABN AMRO Holding
N.V., you are also dependent on the credit risk of ABN AMRO Holding N.V. in the
event that The Royal Bank of Scotland N.V. fails to make any payment or delivery
required by the terms of the Notes. Any actual or anticipated decline
in The Royal Bank of Scotland N.V. or ABN AMRO Holding N.V.’s credit ratings or
increase in their credit spreads charged by the market for taking credit risk is
likely to adversely affect the value of the Notes.
Our credit ratings
are an assessment, by each rating agency, of our ability to pay our obligations,
including those under the Notes. Credit ratings are subject to
revision, suspension or withdrawal at any time by the assigning rating
organization in their sole discretion. However, because the return on
the Notes is dependent upon factors in addition to our ability to pay our
obligations under the Notes, an improvement in our credit ratings will not
necessarily increase the market value of the Notes and will not reduce market
risk and other investment risks related to the Notes. Credit ratings
do not address the price, if any, at which the Notes may be resold prior to
maturity (which may be substantially less than the issue price of the Notes) and
are not recommendations to buy, sell or hold the Notes. See “Risk Factors —
Market Price of the Notes Influenced by Many Unpredictable
Factors.”
Although
We Are a Bank, the Notes Are Not Bank Deposits and Are Not Insured or Guaranteed
by the Federal Deposit Insurance Corporation, The Deposit Insurance Fund or Any
Other Government Agency
The Notes are our
obligations but are not bank deposits. In the event of our insolvency
the Notes will rank equally with our other unsecured, unsubordinated obligations
and will not have the benefit of any insurance or guarantee of the Federal
Deposit Insurance Corporation, The Deposit Insurance Fund or any other
governmental agency.
Unless
Otherwise Specified in the Relevant Pricing Supplement, the Notes Will Not be
Listed on Any Notes Exchange; Secondary Trading May Be Limited
You should be
willing to hold your Notes until the maturity date. Unless otherwise specified
in the relevant Pricing Supplement, the Notes will not be listed on any
securities exchange; accordingly, there may be little or no secondary market for
the Notes and information regarding independent market pricing for the Notes may
be very limited or non-existent. Even if there is a secondary market, it may not
provide enough liquidity to allow you to trade or sell the Notes easily. Our
affiliate has informed us that, upon completion of the offering, it intends to
purchase and sell the Notes from time to time in off-exchange transactions, but
it is not required to do so. If our affiliate does make such a market
in the Notes, it may stop doing so at any time. In addition, the total principal
amount of the Notes being offered by the relevant Pricing Supplement may not be
purchased by investors in the offering, and one or more of our affiliates may
agree to purchase a part of the unsold portion, which may constitute up to 15%
of the total aggregate principal amount of the Notes. Such affiliate
or affiliates intend to hold the Notes for investment purposes, which may affect
the supply of Notes available for secondary trading and therefore adversely
affect the price of the Notes in any secondary trading. If a
substantial portion of any Notes held by our affiliates were to be offered for
sale following this offering, the market price of such Notes could fall,
especially if secondary trading in such Notes is limited or
illiquid.
Market
Price of the Notes Are Influenced by Many Unpredictable Factors
The value of the
Notes may move up and down between the date you purchase them and the
determination date when the calculation agent determines the amount to be paid
to you on the maturity date.
Several factors,
many of which are beyond our control, will influence the market value of the
Notes, including:
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the market
price, value or exchange rate of the Underlying, which can fluctuate
significantly;
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the
volatility (frequency and magnitude of changes) in the price, value or
exchange rate of the Underlying;
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the dividend
rate on the Underlying Stock or on stocks that comprise an Underlying
Equity Index or Underlying Fund, if applicable. While dividend
payments, if any, on an Underlying Stock or the stocks that comprise an
Underlying Equity Index or Underlying Fund, as applicable, are not paid to
you, such payments may have an influence on the market price of the
Underlying Stock or such stocks, as applicable, and therefore on the
Notes;
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the market
prices of an Underlying Commodity, the exchange-traded commodity futures
contracts comprising an Underlying Commodity Index or Underlying Commodity
Fund;
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interest and
yield rates in the market;
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geopolitical
conditions and economic, financial, political, regulatory, geographical,
agricultural, or judicial events that affect an Underlying Commodity,
Underlying Stock or the stocks comprising an Underlying Equity Index or
Underlying Fund, the commodities or commodity futures contracts comprising
an Underlying Commodity Index or Underlying Fund or an Underlying Currency
Pair, as applicable, or markets generally, and which may affect the value
of the Underlying;
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if the Notes
are linked in whole or in part to an Underlying Stock that is an ADS, a
foreign Underlying Index, a foreign Underlying Fund or an Underlying
Currency Pair, the exchange rate and volatility of the exchange rate
between the U.S. dollar and the currency of the country in which the ADS
Underlying Stock, the stocks comprising the foreign Underlying Index or
Underlying Fund or the foreign commodity futures contracts comprising the
foreign Underlying Index, as applicable, are traded, or between the
Reference Currency and the Base
Currency;
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the time
remaining to the maturity of the
Notes;
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the
occurrence of certain events affecting an Underlying Stock or Underlying
Fund which may require an adjustment to the exchange factor (and
therefore, the initial price); and
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the
creditworthiness of the Bank as issuer of the Notes and Holding as the
guarantor of the Bank’s obligations under the Notes. Any person
who purchases the Notes is relying upon the creditworthiness of the Bank
and Holding and has no rights against any other person. The
Notes constitute the general, unsecured and unsubordinated contractual
obligations of the Bank and
Holding.
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These factors
interrelate in complex ways, and the effect of one factor on the market value of
your Notes may offset or enhance the effect of another factor.
Some or all of
these factors will influence the price that you will receive if you sell your
Notes prior to maturity in the secondary market, if any. If you sell
your Notes prior to maturity, the price at which you are able to sell your Notes
may be at a discount, which could be substantial, from the principal
amount. For example, there may be a discount on the Notes if at the
time of sale the closing price, closing value or spot rate of the Underlying is
at or below its initial price, value or exchange rate or if market interest
rates rise. Even if there is an appreciation in the value of the
Underlying from its initial price, value or exchange rate, there may be a
discount on the Notes based on the time remaining to the maturity of the
Notes. Thus, if you
sell your Note before maturity, you may not receive back your entire principal
amount.
Some or all of
these factors will influence the return, if any, that you receive upon maturity
of the Notes. We cannot predict the future performance of the Notes,
the Underlying or, if applicable, the stocks or futures contracts that comprise
an Underlying Index or Underlying Fund based on the historical performance of
the Underlying or, if applicable, the underlying stocks or futures
contracts. Neither
we nor Holding nor any of our affiliates can guarantee that the value of the
Underlying will increase so that you will receive at maturity an amount in
excess of the principal amount of the Notes. For Partially Principal
Protected Notes, you assume the risk that the value of the Underlying may
decrease so that you receive at maturity an amount that is less than the
principal amount of the Notes.
As
an investor in the Notes you assume the risk that as a result of the performance
of the Underlying you may not receive any return on your initial principal
investment in the Notes or that you may lose some of your initial principal
investment in the Notes.
The
Inclusion of Commissions and Cost of Hedging in the Issue Price Is Likely to
Adversely Affect Secondary Market Prices
Assuming no change
in market conditions or any other relevant factors, the price, if any, at which
the selling agents are willing to purchase Notes 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 paid
with respect to the Notes, as well as the profit component included in the cost
of hedging our obligations under the Notes. In addition, any such
prices may differ from values determined by pricing models used by the selling
agents, as a result of dealer discounts, mark-ups or other transaction
costs.
The
Payment, If Any, You Receive at Maturity Depends on the Final Price, Value or
Exchange Rate on the Determination Date Only
We
determine the payment at maturity based on the difference between the initial
price, value or exchange rate and the final price, value or exchange rate on the
determination date. As a result the payment, if any, at maturity
depends on the price, value or exchange rate on one day, the determination date,
regardless of whether the price, value or exchange rate of the Underlying at the
maturity date or at other times during the term of the Notes, including dates
near the determination date, was higher than the final price, value or exchange
rate. This difference could be particularly large if there is a
significant increase in the price, value or exchange rate of the Underlying
after the determination date, if there is a significant decrease in the price,
value or exchange rate of the Underlying around the time of the determination
date or if there is significant volatility in the price, value or exchange rate
of the Underlying during the term of the Notes (especially on dates near the
determination date). For example, when the determination date is near
the end of the term of the Notes, then if the price, value or exchange rate of
the Underlying increases or remains relatively constant during the initial term
of the Notes and then decreases below the initial price, value or exchange rate,
the final price, value or exchange rate may be significantly less than if it
were calculated on an earlier date. Under these circumstances, you
may receive a lower payment at maturity than you would have received if you had
invested directly in an Underlying Commodity, Underlying Stock, an Underlying
Fund, an Underlying Currency Pair or in the securities comprising an Underlying
Index or Underlying Funds, as applicable.
An
Increase in the Price, Value or Exchange Rate of the Underlying May Not Increase
the Market Value of your Notes
Owning the Notes is
not the same as owning the Underlying or a product which tracks the return on
the Underlying. Accordingly, the market value of your Notes may not
have a direct relationship with the price, value or exchange rate of the
Underlying, and changes in the price, value or exchange rate of the Underlying
may not result in a comparable change in the market value of your Notes. If the
value of the Underlying increases above its initial price, value or exchange
rate on the pricing date, the market value of the Notes may not increase. It is
also possible for the price, value or exchange rate of the Underlying to
increase while the market price of the Notes declines. If a maximum amount is specified in
the relevant Pricing Supplement, regardless of how much the Underlying may
appreciate over the term of the Notes, you will never receive more than $1,000
plus the maximum amount per $1,000 principal amount of
Notes.
Market
Disruptions May Adversely Affect Your Return
The calculation
agent may, in its sole discretion, determine that the relevant markets have been
affected in a manner that prevents it from properly valuing the price, level or
spot rate of the Underlying on the determination date and calculating the amount
that we are required to pay you at maturity. These events may include
disruptions or suspensions of trading in the markets as a whole. If the
calculation agent, in its sole discretion, determines that any of these events
prevents us or any of our affiliates from properly hedging our obligations under
the Notes, it is possible that the determination date and, for Notes linked to
an Underlying Commodity Index, the maturity date will be postponed. In the
event of such a postponement, the closing price, closing value or spot rate, as
applicable, for the determination date will be determined by the calculation
agent in the manner described under “Description of Notes — Determination Date,”
which may adversely affect the return, if any, on your investment in the
Notes.
Information
Regarding Underlying Companies or Underlying Funds
Neither we nor
Holding nor any of our affiliates assume any responsibility for the accuracy or
adequacy of the information contained in the relevant Pricing Supplement about
any Underlying Company or Underlying Fund or in any of their respective publicly
available filings. As an investor in the Notes, you
should make your own investigation into any Underlying Company or Underlying
Fund. Unless otherwise disclosed in the relevant Pricing Supplement, neither we
nor Holding nor any of our affiliates have any affiliation with any Underlying
Company or Underlying Fund and are not responsible for their respective public
disclosure of information, whether contained in SEC filings or
otherwise.
Information
Regarding Underlying Indices
Neither we nor Holding nor any of our
affiliates assume any responsibility for the accuracy or adequacy of the
information contained in the relevant Pricing Supplement about any Underlying
Index or in any publicly available information about the Underlying Index.
Unless otherwise disclosed in the relevant Pricing Supplement, neither we
nor Holding nor any of our affiliates have any affiliation with the sponsor of
any Underlying Index and are not responsible for their public disclosure of
information about the Underlying Index.
Hedging
and Trading Activities by Us or Our Affiliates Could Affect Market Prices of the
Notes
We
and our affiliates may carry out activities that minimize our risks related to
the Notes. In particular, on or prior to the date of the relevant
Pricing Supplement, we, through our affiliates, may have hedged our anticipated
exposure in connection with the Notes by taking positions in Underlying
Commodities, Underlying Stocks, Underlying Funds, Underlying Currency Pair,
stocks or commodities (or options or futures contracts on the stocks or
commodities) that comprise Underlying Indices or Underlying Funds,
exchange-traded funds that track Underlying Indices, options or futures on
Underlying Commodities, Underlying Stocks, Underlying Indices, Underlying Funds
or Underlying Currency Pairs or in other instruments that we deemed appropriate
in connection with such hedging. Our trading activities, however,
could potentially alter the price or value of Underlying Commodities, Underlying
Stocks, Underlying Indices, Underlying Funds or Underlying Currency Pairs and,
therefore, the market price of the Notes.
We
or our affiliates are likely to modify our hedge position throughout the term of
the Notes by purchasing and selling Underlying Commodities, Underlying Stocks,
Underlying Funds, Underlying Currency Pairs, stocks or commodities (or options
or futures contracts on the stocks or commodities) that comprise Underlying
Indices or Underlying Funds, exchange-traded funds that track Underlying Indices
or Underlying Funds, options or futures on Underlying Commodities, Underlying
Stocks, Underlying Indices, Underlying Funds or Underlying Currency Pairs or
other instruments that we deem appropriate. We cannot give any
assurance that our hedging or trading activities will not affect the value of
Underlying Commodities, Underlying Stocks, Underlying Indices, Underlying Funds
or Underlying Currency Pairs. It is also possible that we or one of
more of our affiliates could receive substantial returns from these hedging
activities while the market price of the Notes may decline.
We
or one or more of our affiliates may also engage in trading Underlying
Commodities, Underlying Stocks, Underlying Funds, Underlying Currency Pairs,
stocks or commodities (or options or futures contracts on the stocks or
commodities) that comprise Underlying Indices or Underlying Funds,
exchange-traded funds that track Underlying Indices or options or futures on
Underlying Commodities, Underlying Stocks, Underlying Indices, Underlying Funds
or Underlying Currency Pairs on a regular basis as part of our or their general
broker-dealer activities and other businesses, for proprietary accounts, for
other accounts under management or to facilitate transactions for customers,
including through block transactions. Any of these activities could
adversely affect the value of Underlying Commodities, Underlying Stocks,
Underlying Indices, Underlying Funds or Underlying Currency Pairs and,
therefore, the market price of the Notes.
We
or one or more of our affiliates may also issue or underwrite other securities
or financial or derivative instruments with returns linked or related to changes
in the price or value of Underlying Commodities, Underlying Stocks, Underlying
Indices, Underlying Funds or Underlying Currency Pairs, stocks or commodities
that comprise Underlying Indices or stocks that comprise Underlying
Funds. By introducing competing products into the marketplace in this
manner, we or one or more of our affiliates could adversely affect the market
price of the Notes.
Potential
Conflicts of Interest between Note Holders and the Calculation
Agent
Our affiliate,
RBSSI, will serve as the calculation agent. RBSSI will, among other
things, decide the amount of the return paid out to you on the Notes at
maturity. For a fuller description of the calculation agent’s role,
see “Description of Notes — Calculation Agent.” For example, the
calculation agent may have to determine whether a market disruption event
affecting the Underlying has occurred or is continuing on a day when the
calculation agent will determine its price, level or exchange
rate. This determination may, in turn, depend on the calculation
agent’s judgment whether the event has materially interfered with our ability to
unwind our hedge positions. In addition, the calculation agent may
have to make additional calculations if the Underlying Index or Underlying Fund
is liquidated, discontinued, suspended, modified, delisted or otherwise
terminated. The calculation agent will exercise its judgment when
performing its functions. Since these determinations by the
calculation agent may affect the market value of the Notes, the calculation
agent may have a conflict of interest if it needs to make any such
decision.
Moreover, the issue
price of the Notes includes the agents’ commissions and certain costs of hedging
our obligations under the Notes. Our affiliates through which we
hedge our obligations under the Notes expect to make a profit. Since
hedging our obligations entails risk and may be influenced by market forces
beyond our affiliates’ control, such hedging may result in a profit that is more
or less than initially projected.
No
Security Interest or Rights in any Underlying Commodity, Underlying Stock, in
Any Stocks or Commodity or Commodity Futures Contract that Comprise an
Underlying Index, Underlying Fund or Target Index, or in the Shares of any
Underlying Fund
Neither we nor
Holding nor any of our affiliates will pledge or otherwise hold any amount of an
Underlying Commodity, shares of an Underlying Stock, shares of the stocks or
commodities or commodity futures contracts that comprise an Underlying Index,
Underlying Fund or Target Index, shares of exchange-traded funds that track an
Underlying Index, shares of an Underlying Fund or any option or futures contract
or any other asset for the benefit of holders of the Notes under any
circumstances. Consequently, in the event of a bankruptcy, insolvency
or liquidation involving us or Holding, as the case may be, any of such assets
will be subject to the claims of our creditors or Holding’s creditors generally
and will not be available specifically for the benefit of the holders of the
Notes. In addition, as an investor in the Notes, you will not have
voting rights or rights to receive dividends or other distributions or any other
rights with respect to an Underlying Stock or the stocks that comprise an
Underlying Index, Underlying Fund or Target Index or shares of an Underlying
Fund. As an investor in the Notes, you will not have any rights with
respect to the commodities or commodity futures contracts that comprise an
Underlying Index or Underlying Fund. If the Notes are linked to ADSs
representing non-U.S. equity securities issued through depositary arrangements,
you will not have the rights of owners of such ADSs or the ADS Underlying
Stock.
Moreover, the
indenture governing the Notes does not contain any restriction on our ability or
the ability of any of our affiliates to buy, sell, pledge or otherwise convey
all or any portion of an Underlying Commodity, an Underlying Stock, the stocks
or commodities (or options or futures contracts on the stocks or commodities)
that comprise an Underlying Index, Underlying Fund or Target Index,
exchange-traded funds that track an Underlying Index, shares of an Underlying
Fund or options or futures on an Underlying Commodity, Underlying Stock,
Underlying Index, Underlying Fund or Target Index or other instruments that we
deemed appropriate.
Limited
Antidilution Protection For Notes Linked to an Underlying Stock or Underlying
Fund
As
calculation agent, RBSSI, which is our affiliate, will adjust the initial price
for certain events affecting the shares of an Underlying Stock or Underlying
Fund, such as stock splits and other corporate actions. The calculation agent is
not required to make an adjustment for every corporate action which affects the
shares of an Underlying Stock or Underlying Fund. For example, the calculation
agent is not required to make any adjustments if the Underlying Company or
anyone else makes a partial tender or partial exchange offer for shares of the
Underlying Stock. If an event occurs that does not require the calculation agent
to adjust the amount of shares of an Underlying Stock or Underlying Fund payable
at maturity, the market price of the Notes may be materially and adversely
affected.
No
Affiliation with the Underlying Company, the Underlying Fund or Any Issuers of
the Stocks Comprising the Underlying Fund, as Applicable
Because neither we
nor Holding nor any of our affiliates are affiliated with any Underlying
Company, any Underlying Fund or the issuers of the stocks comprising any
Underlying Index or Underlying Fund, we have no ability to control or predict
the actions of any Underlying Company, any Underlying Fund or the issuers of the
stocks comprising any Underlying Index or Underlying Fund, including any actions
of the type that would require the calculation agent to adjust the initial
price, and have no ability to control the public disclosure of these actions or
any other events or circumstances affecting any Underlying Company, any
Underlying Fund or the issuers of the stocks comprising any Underlying Index or
Underlying Fund. No Underlying Company, Underlying Fund or issuers of stocks
comprising any Underlying Index or Underlying Fund are involved in the offer of
the Notes in any way, and no Underlying Company, Underlying Fund or issuers of
stocks comprising any Underlying Index or Underlying Fund has any obligation to
consider your interest as an owner of the Notes in taking any actions that might
affect the value of your Notes. None of the money you pay for the Notes will go
to any Underlying Company, any Underlying Fund or the issuers of stocks
comprising any Underlying Index or Underlying Fund, as applicable.
No
Affiliation with the Sponsor of the Underlying Index
Because neither we
nor Holding nor any of our affiliates are affiliated with any sponsor of any
Underlying Index, we have no ability to control or predict the actions of any
sponsor of an Underlying Index, including any actions of the type that would
require the calculation agent to calculate the final index value, and have no
ability to control the public disclosure of these actions or any other events or
circumstances affecting any Underlying Index. No sponsor of an Underlying Index
is involved in the offer of the Notes in any way, and no sponsor of any
Underlying Index has any obligation to consider your interest as an owner of the
Notes in taking any actions that might affect the value of your Notes. None of
the money you pay for the Notes will go to any sponsor of any Underlying
Index.
We
May Engage in Business with or Involving an Underlying Company, an Underlying
Fund or One or More of the Issuers of the Stocks that Comprise an Underlying
Index or Underlying Fund without Regard to Your Interests
We
and/or our affiliates may presently or from time to time engage in business with
an Underlying Company, an Underlying Fund or one or more of the issuers of the
stocks comprising an Underlying Index or Underlying Fund, without regard to your
interests, including extending loans to, or making equity investments in, or
providing advisory services to such companies or their affiliates or
subsidiaries, including merger and acquisition advisory services. These
activities could lead to actions on the part of an Underlying Company, an
Underlying Fund or the issuers of the stocks comprising an Underlying Index or
Underlying Fund, which might adversely affect the market value of the
Notes. In the course of such business, we and/or our affiliates may
acquire non-public information with respect to such companies. None
of us, Holding or any of our affiliates undertakes to disclose any such
information to you. The statements in the two preceding sentences are
not intended to affect the rights of holders of the Notes under the securities
laws. In addition, one or more of our affiliates may publish research
reports with respect to such companies. These research reports may or may not
recommend that investors buy or hold the stock of an Underlying Company or the
stocks comprising an Underlying Index or Underlying Fund. As a
prospective purchaser of a Note, you should undertake such independent
investigation of the Underlying as in your judgment is appropriate to make an
informed decision with respect to an investment in the Notes.
Holdings
of the Notes by Our Affiliates and Future Sales
Certain of our
affiliates may purchase for investment a portion of the Notes that has not been
purchased by investors in a particular offering of Notes, which initially they
intend to hold for investment purposes. As a result, upon completion of such an
offering, our affiliates may own up to 15% of the aggregate principal amount of
the Notes. Circumstances may occur in which our interests or those of
our affiliates could be in conflict with your interests. For example,
our affiliates may attempt to sell the Notes that they had been holding for
investment purposes at the same time that you attempt to sell your Notes, which
could depress the price, if any, at which you can sell your
Notes. Moreover, the liquidity of the market for the Notes, if any,
could be substantially reduced as a result of our affiliates holding the
Notes. See “— The Notes Will Not be Listed on any Notes Exchange;
Secondary Trading May Be Limited.” In addition, our affiliates could
have substantial influence over any matter subject to consent of the security
holders.
Risks Related to an Underlying
Commodity, an Underlying Commodity Index or an Underlying Commodity Fund Generally
The
Commodities or Commodity Futures Contracts Relating to an Underlying Commodity
or Comprising an Underlying Commodity Index or an Underlying Commodity Fund Are
Subject to Legal and Regulatory Regimes that May Change in Ways that Could
Adversely Affect the Value of the Underlying Commodity, Underlying Commodity
Index or Underlying Commodity Fund and the Notes
The markets for
commodities, commodity futures contracts and options on commodity futures
contracts, including those relating to an Underlying Commodity or on which the
Underlying Commodity Index or Underlying Commodity Fund is based, are subject to
extensive statutes, regulations, and margin requirements. The
Commodity Futures Trading Commission, or the CFTC, and the exchanges on which
such futures contracts trade, are authorized to take extraordinary actions in
the event of a market emergency, including, for example, the retroactive
implementation of speculative position limits or higher margin requirements, the
establishment of daily limits and the suspension of
trading. Furthermore, certain exchanges have regulations that limit
the amount of fluctuations in futures contract prices which may occur during a
single five-minute trading period. These limits could adversely
affect the market prices of relevant futures contracts and forward
contracts. The regulation of commodity transactions in the U.S. is
subject to ongoing modification by government and judicial action. In
addition, various national governments have expressed concern regarding the
disruptive effects of speculative trading in the commodity markets and the need
to regulate the derivative markets in general. The effects of any
future regulatory change on the market value of the Notes is impossible to
predict, but could be substantial and adverse to the interests of Note
holders.
Any legal or
regulatory change affecting the commodity markets could adversely affect the
value of an Underlying Commodity, an Underlying Commodity Index or an Underlying
Commodity Fund and the Notes. It could also interfere with our or our
affiliates’ ability to hedge our obligations under the Notes, which could lead
to a postponement of the determination date and the maturity date and could
adversely affect the market value of the Notes.
For example, the
CFTC has recently announced that it is considering imposing position limits on
certain commodities (such as energy commodities) and the manner in which current
exemptions for bona fide hedging transactions or positions are implemented in
order to protect against excessive speculation, which could result in regulatory
changes that may affect the value of an Underlying Commodity, an Underlying
Commodity Index or an Underlying Commodity Fund and the Notes and our ability to
hedge our obligations under the Notes.
Suspension
or Disruptions of Market Trading in the Commodity and Related Futures Markets
May Adversely Affect the Value of Your Notes
The commodity
markets are subject to temporary distortions or other disruptions due to various
factors, including the lack of liquidity in the markets, the participation of
speculators and government regulation and intervention. In addition,
U.S. futures exchanges and some foreign exchanges have regulations that limit
the amount of fluctuation in futures contract prices which may occur during a
single business day. These limits are generally referred to as “daily
price fluctuation limits” and the maximum or minimum price of a contract on any
given day as a result of these limits is referred to as a “limit
price.” Once the limit price has been reached in a particular
contract, no trades may be made at a different price. Limit prices
have the effect of precluding trading in a particular contract or forcing the
liquidation of contracts at disadvantageous times or prices. These
circumstances could adversely affect the price of an Underlying Commodity or
level of an Underlying Commodity Index, as applicable, and, therefore, the value
of your Notes.
Lack
of Regulation by the CFTC
The Notes are debt
securities that are our direct obligations. The net proceeds to be
received by us from the sale of the Notes that are linked to an Underlying
Commodity, Underlying Commodity Index or Underlying Commodity Fund will not be
used to purchase or sell futures contracts that comprise the Underlying
Commodity Index for the benefit of holders of the Notes. An
investment in the Notes does not constitute either an investment in futures
contracts or in a collective investment vehicle that trades in futures
contracts. The Notes do not constitute a direct or indirect
investment by you in the trading of the underlying futures contracts that
constitute the Underlying Commodity Index. Unlike an investment in
the Notes, an investment in a collective investment vehicle that invests in
futures contracts on behalf of its participants may be regulated as a commodity
pool and its operator may be required to be registered with and regulated as a
“commodity pool operator” (a “CPO”) by the CFTC, an independent federal
regulatory agency. Because the Notes are not interests in a commodity
pool, the Notes will not be regulated by the CFTC as a commodity pool, we will
not be registered with the CFTC as a CPO and you will not benefit from the
CFTC’s or any non-United States regulatory authority’s regulatory protections
afforded to persons who trade on futures exchanges, which generally may only be
transacted through a person registered with the CFTC as a “futures commission
merchant” (an “FCM”). We are not registered with the CFTC as an FCM
and you will not benefit from the CFTC’s or any other non-United States
regulatory authority’s regulatory protections afforded to persons who trade in
futures contracts on regulated futures exchanges through registered a
FCM.
Risks Related to an Underlying
Commodity
Prices for the Physical Commodities May Change Unpredictably and Affect the Mark
et Value of the Notes in Unanticipated Ways
A
decline in the price of the Underlying Commodity may have a material adverse
effect on the market value of the Notes and your return on an investment in the
Notes. The prices of commodities are affected by numerous factors,
including: changes in supply and demand relationships, governmental programs and
policies, national and international political and economic events, changes in
interest and exchange rates, speculation and trading activities in commodities
and related contracts, general weather conditions, and trade, fiscal, monetary
and exchange control policies. Many commodities are also highly
cyclical. These factors, some of which are specific to the market for
each such commodity, as discussed below, may cause the value of the different
commodities to move in inconsistent directions at inconsistent rates. This, in
turn, may affect the market value of the Notes. It is not possible to predict
the aggregate effect of all or any combination of these factors.
For Notes Linked
to an Underlying Commodity Traded on the London Metal Exchange, an Investment in
the Notes May Be Subject to Risks Associated with the London Metal
Exchange
The Notes may be
linked to a commodity (e.g., aluminum, copper, lead, nickel and zinc) that is
traded on the London Metal Exchange (the “LME”). Investments in
securities linked to the value of commodities that are traded on non-U.S.
exchanges involve risks associated with the markets in those countries,
including risks of volatility in those markets and governmental intervention in
those markets.
In
addition, the LME is a principals’ market which operates in a manner more
closely analogous to the over-the-counter physical commodity markets than
regulated futures markets. For example, there are no daily price
limits on the LME, which would otherwise restrict the extent of daily
fluctuations in the prices of LME contracts. In a declining market,
therefore, it is possible that prices would continue to decline without
limitation within a trading day or over a period of trading days. In
addition, a contract may be entered into on the LME calling for delivery on any
day from one day to three months following the date of such contract and for
monthly delivery up to 63, 27 and 15 months forward (depending on the commodity)
following such third month, in contrast to trading on futures exchanges, which
call for delivery in stated delivery months. As a result, there may
be a greater risk of a concentration of positions in LME contracts on particular
delivery dates, which in turn could cause temporary aberrations in the prices of
LME contracts for certain delivery dates. If such aberrations occur
on any determination date, the official U.S. dollar cash buyer settlement prices
per metric ton of the Underlying Commodity and, consequently, the underlying
return, could be adversely affected.
For Notes Linked to an Underlying
Commodity Traded on the London Bullion Market Association, an Investment in the Notes May Be Subject to Risks A
ssociated with the London Bullion Market
Association
The Notes may be
linked a commodity (e.g., gold and silver) that is traded on the London Bullion
Market Association (the “LBMA”). Investments in securities indexed to
the value of commodities that are traded on non-U.S. exchanges involve risks
associated with the markets in those countries, including risks of volatility in
those markets and governmental intervention in those markets.
The final prices of
gold and silver will be determined by reference to fixing prices reported by the
LBMA. The LBMA is a self-regulatory association of bullion market
participants. Although all market-making members of the LBMA are
supervised by the Bank of England and are required to satisfy a capital adequacy
test, the LBMA itself is not a regulated entity. If the LBMA should
cease operations, or if bullion trading should become subject to a value added
tax or other tax or any other form of regulation currently not in place, the
role of LBMA price fixings as a global benchmark for the value of gold and
silver may be adversely affected. The LBMA is a principals’ market
which operates in a manner more closely analogous to an over-the-counter
physical commodity market than regulated futures markets, and certain features
of U.S. futures contracts are not present in the context of LBMA
trading. For example, there are no daily price limits on the LBMA
which would otherwise restrict fluctuations in the prices of LBMA
contracts. In a declining market, it is possible that prices would
continue to decline without limitation within a trading day or over a period of
trading days.
For Notes Linked
to an Underlying Commodity Traded on ICE Futures, an Investment in the Notes May
Be Subject to Risks Associated with ICE Futures
The Notes may be
linked to a commodity (e.g., brent crude and coffee) that is traded on ICE
Futures. Investments in securities linked to the value of commodities
that are traded on non-U.S. exchanges involve risks associated with the markets
in those countries, including risks of volatility in those markets and
governmental intervention in those markets.
For Notes Linked to an Underlying
Commodity Traded on the London Platinum and Palladium Market Association, an Investment in the Notes May Be Subject to Risks Associated with the London Platinum
and Palladium Market
Association
The Notes may be
linked to a commodity (e.g., platinum) that is traded on the London Platinum and
Palladium Market Association (the “LPPM”). Investments in securities indexed to
the value of commodities that are traded on non-U.S. exchanges involve risks
associated with the markets in those countries, including risks of volatility in
those markets and governmental intervention in those markets.
The final price of
platinum will be determined by reference to fixing prices reported by the
LPPM. The LPPM is a self-regulatory association of platinum and
palladium market participants that is not a regulated entity. If the
LPPM should cease operations, or if bullion trading should become subject to a
value added tax or other tax or any other form of regulation currently not in
place, the role of LPPM price fixings as a global benchmark for the value of
platinum may be adversely affected. The LPPM is a principals’ market
which operates in a manner more closely analogous to an over-the-counter
physical commodity market than regulated futures markets, and certain features
of U.S. futures contracts are not present in the context of LPPM
trading. For example, there are no daily price limits on the LPPM
which would otherwise restrict fluctuations in the prices of LPPM
contracts. In a declining market, it is possible that prices would
continue to decline without limitation within a trading day or over a period of
trading days.
The Prices of Underlying Commodities Are Volatile and Are Affected by Numerous Factors, Certain of Which Are Specific to the Market for Each Underlying
Commodity
A
decrease in the price of the Underlying Commodity may have a material adverse
effect on the market value of the Notes and your return on your investment in
the Notes. The Underlying Commodity is subject to the effect of
numerous factors, certain of which are specific to the market for each commodity
to which your Notes may be linked. The following describes some of
the factors affecting certain commodities.
Aluminum
The price of
aluminum is primarily affected by the global demand for and supply of aluminum,
but is also influenced significantly from time to time by speculative actions
and by currency exchange rates. Demand for aluminum is significantly
influenced by the level of global industrial economic
activity. Industrial sectors which are particularly important to
demand for aluminum include the automobile, packaging and construction
sectors. An additional, but highly volatile, component of demand is
adjustments to inventory in response to changes in economic activity and/or
pricing levels. There are substitutes for aluminum in various
applications. Their availability and price will also affect demand
for aluminum. The supply of aluminum is widely spread around the
world, and the principal factor dictating the smelting of such aluminum is the
ready availability of inexpensive power. The supply of aluminum is
also affected by current and previous price levels, which will influence
investment decisions in new smelters. Other factors influencing
supply include transportation problems, labor strikes and shortages of power and
raw materials. It is not possible to predict the aggregate effect of
all or any combination of these factors.
Brent Crude
The price of IPE
brent blend crude oil futures is primarily affected by the global demand for and
supply of crude oil, but is also influenced significantly from time to time by
speculative actions and by currency exchange rates. Crude oil prices are
generally more volatile and subject to dislocation than prices of other
commodities. Demand for refined petroleum products by consumers, as
well as the agricultural, manufacturing and transportation industries, affects
the price of crude oil. Crude oil’s end-use as a refined product is often as
transport fuel, industrial fuel and in-home heating fuel. Potential for
substitution in most areas exists, although considerations including relative
cost often limit substitution levels. Because the precursors of demand for
petroleum products are linked to economic activity, demand will tend to reflect
economic conditions. Demand is also influenced by government regulations, such
as environmental or consumption policies. In addition to general economic
activity and demand, prices for crude oil are affected by political events,
labor activity and, in particular, direct government intervention (such as
embargos) or supply disruptions in major oil producing regions of the world.
Such events tend to affect oil prices worldwide, regardless of the location of
the event. Supply for crude oil may increase or decrease depending on
many factors. These include production decisions by the Organization of the
Petroleum Exporting Countries (“OPEC”) and other crude oil producers.
Crude oil prices are determined with significant influence by OPEC. OPEC has the
potential to influence oil prices worldwide because its members possess a
significant portion of the world’s oil supply. In the event of sudden
disruptions in the supplies of oil, such as those caused by war, natural events,
accidents or acts of terrorism, prices of oil futures contracts could become
extremely volatile and unpredictable. Also, sudden and dramatic changes in the
futures market may occur, for example, upon the commencement or a cessation of
hostilities that may exist in countries producing oil, the introduction of new
or previously withheld supplies into the market or the introduction of
substitute products or commodities. Crude oil prices may also be
affected by short-term changes in supply and demand because of trading
activities in the oil market and seasonality (e.g., weather conditions such as
hurricanes). It is not possible to predict the aggregate effect of
all or any combination of these factors.
Coffee
The price of coffee
is primarily affected by the global demand for and supply of coffee, but is also
influenced significantly from time to time by speculative actions and by
currency exchange rates. Demand for coffee is significantly
influenced by human consumption, retail prices, social trends, lifestyle changes
and market power all of which are subject to fluctuation. The supply of coffee
is dependent on many factors including weather patterns such as floods, drought
and freezing conditions, government regulation, planting decisions, the price of
fuel, seeds and fertilizers and the current and previous price of
coffee. Additionally, since most coffee is grown in Latin America,
Southeast Asia and Africa, coffee crops may be subject to supply disruption as a
result of political instability, natural disasters, pestilence, wars or civil
upheavals in such regions. Changes in supply and demand may have an
adverse effect on the price of coffee. In addition, technological advances and
scientific developments could lead to increases in worldwide production of
coffee and corresponding decreases in the price of coffee.
Copper
The price of copper
is primarily affected by the global demand for and supply of copper, but is also
influenced significantly from time to time by speculative actions and by
currency exchange rates. Demand for copper is significantly
influenced by the level of global industrial economic
activity. Industrial sectors which are particularly important to
demand for copper include the electrical and construction sectors. In
recent years, demand has been supported by strong consumption from newly
industrializing countries due to their copper-intensive economic growth and
industrial development. An additional, but highly volatile, component
of demand is adjustments to inventory in response to changes in economic
activity and/or pricing levels. There are substitutes for copper in
various applications. Their availability and price will also affect
demand for copper. Apart from the United States, Canada and
Australia, the majority of copper concentrate supply (the raw material) comes
from outside the Organization for Economic Cooperation and Development
countries. The supply of copper is also affected by current and
previous price levels, which will influence investment decisions in new
smelters. In previous years, copper supply has been affected by
strikes, financial problems and terrorist activity. It is not
possible to predict the aggregate effect of all or any combination of these
factors.
Corn
The price of corn
is primarily affected by the global demand for, and supply of,
corn. The demand for corn is in part linked to the development of
industrial and energy uses for corn. This includes the use of corn in the
production ethanol. The demand for corn is also affected by the
production and profitability of the pork and poultry sectors, which use corn for
feed. Negative developments in those industries may lessen the demand
for corn. For example, if avian flu were to have a negative effect on
world poultry markets, the demand for corn might decrease. The supply
of corn is dependent on many factors including weather patterns, government
regulation, the price of fuel and fertilizers and the current and previous price
of corn. The United States is the world’s largest supplier of corn,
followed by China and Brazil. The supply of corn is particularly
sensitive to weather patterns in the United States and China. In
addition, technological advances could lead to increases in worldwide production
of corn and corresponding decreases in the price of corn.
Crude Oil
The price of WTI light sweet crude oil
futures is primarily affected by the global demand for and supply of crude oil, but is also
influenced significantly from time to time by speculative actions and by
currency exchange rates. Crude oil prices are generally more volatile
and subject to dislocation than prices of other commodities. Demand
for refined petroleum products by
consumers, as well as the agricultural, manufacturing and transportation
industries, affects the price of crude oil. Crude oil’s end-use as a refined product is often
as transport fuel, industrial fuel and in-home heating fuel. Potential for
substitution in most areas exists, although considerations including relative
cost often limit substitution levels. Because the precursors of demand for petroleum
products are linked to economic activity, demand will tend to reflect
economic
conditions. Demand is also influenced by government regulations, such
as environmental or consumption policies. In addition to general
economic activity and demand, prices for crude oil are affected by political
events, labor activity and, in particular, direct government intervention
(such as embargos) or supply disruptions in major oil-producing regions of the
world. Such events tend to affect oil prices worldwide, regardless of
the location of the event. Supply for crude oil may increase or
decrease depending on many
factors. These include production decisions by OPEC and other crude
oil producers. Crude oil prices are determined with significant
influence by OPEC. OPEC has the potential to influence oil prices
worldwide because its members possess a significant portion of the
world’s oil supply. In the event of
sudden disruptions in the supplies of oil, such as those caused by war, natural
events, accidents or acts of terrorism, prices of oil futures contracts could
become extremely volatile and unpredictable. Also,
sudden and dramatic changes in the futures market may occur, for example, upon
the commencement or
a cessation of hostilities
that may exist in countries producing oil, the introduction of new or previously
withheld supplies into the
market or the introduction of substitute products or
commodities. Crude oil prices may also be affected by short-term
changes in supply and demand because of trading activities in the oil market and
seasonality (e.g., weather conditions such as
hurricanes). It
is not possible to predict the aggregate effect of all or any combination of
these factors.
Gold
The price of gold is primarily affected
by the global demand for and supply of gold. The market for gold
bullion is global, and gold prices are subject to volatile price movements over
short periods of time and are affected by numerous factors, including
macroeconomic factors such as the structure of and confidence in the global
monetary system, expectations regarding the future rate of inflation, the relative strength of, and
confidence in, the U.S. dollar (the currency in which the price of gold is
usually quoted), interest rates, gold borrowing and lending rates, and global or
regional economic, financial, political, regulatory, judicial or other events. Gold prices may be
affected by industry factors such as industrial and jewelry demand as well as
lending, sales and purchases of gold by the official sector, including central
banks and other governmental agencies and multilateral institutions which hold gold. Additionally,
gold prices may be affected by levels of gold production, production costs and
short-term changes in supply and demand due to trading activities in the gold
market. It is not possible to predict the aggregate effect of all
or any combination of these
factors.
Heating Oil
The level of global industrial activity
influences the demand for heating oil. In addition, the seasonal
temperatures in countries throughout the world can heavily influence the demand
for heating oil. Heating oil is generally used to fuel heat
furnaces for buildings. Heat oil is derived from crude oil and as
such, any factors that influence the supply of crude oil may also influence the
supply of heating oil.
Lead
The price of lead is primarily affected
by the global demand for
and supply of lead, but is also influenced significantly from time to time by
speculative actions and by currency exchange rates. Demand for lead
is significantly influenced by the level of global industrial economic
activity. The storage battery industrial sector is
particularly important to demand for lead given that the use of lead in the
manufacture of batteries accounts for a significant percentage of world-wide
lead demand. Growth in the production of batteries will drive
lead demand. The power
generation industrial sector is also important to demand for lead given that the
use of lead in the manufacture of power generation units accounts for a
significant percentage of world-wide lead demand. Additional
applications of lead include gasoline additives, pigments,
chemicals and crystal glass. Use in the manufacture of these products
will also influence demand for lead. An additional, but highly
volatile, component of demand is adjustments to inventory in response to changes
in economic activity and/or pricing
levels. The supply of lead is widely spread around the
world. The supply of lead is also affected by current and previous
price levels, which will influence investment decisions in new mines and
smelters. A critical factor influencing supply is the
environmental and regulatory regimes of the countries in which lead is mined and
processed. It is not possible to predict the aggregate effect of all
or any combination of these factors.
Natural Gas
Natural gas is used primarily for residential and commercial
heating and in the production of electricity. The level of global
industrial activity influences the demand for natural gas. Natural
gas has also become an increasingly popular source of energy in the United
States, both for consumers and industry, in part
because it burns more cleanly and has minimal impact on the
environment. Many utilities, for example, have shifted away from coal
or oil to natural gas to produce electricity. The demand for natural
gas has also traditionally been cyclical, with higher
demand during the months of winter and lower demand during the warmer summer
months. In addition, the seasonal temperatures in countries
throughout the world can also heavily influence the demand for natural
gas. The world's supply of natural gas is
concentrated in the Middle East, Europe, the former Soviet Union and Africa. In
general, the supply of natural gas is based on competitive market forces:
inadequate supply at any one time leads to price increases, which signal to production companies the need to
increase the supply of natural gas to the market. Supplying natural
gas in order to meet this demand, however, is dependent on a number of
factors. These factors may be broken down into two segments: those
factors that affect the short term supply and
general barriers to increasing supply. In turn, factors that affect the short
term supply are as follows: the availability of skilled workers and equipment,
permitting and well development and weather and delivery disruptions (e.g., hurricanes, labor strikes and
wars). Similarly, the other more general barriers to the increase in
supply of natural gas are: access to land, the expansion of pipelines and the
financial environment. These factors, which are not
exhaustive, are
interrelated and can have complex and unpredictable effects on the supply for,
and the price of, natural gas.
Nickel
The price of nickel is primarily
affected by the global demand for and supply of nickel, but is also influenced
from time to time by
speculative actions and by currency exchange rates. Demand for nickel
is significantly influenced by the level of global industrial economic
activity. The stainless steel industrial sector is particularly
important to demand for nickel given that the use of nickel in the manufacture of
stainless steel accounts for a significant percentage of world-wide nickel
demand. Growth in the production of stainless steel will therefore
drive nickel demand. An additional, but highly volatile, component of
demand is adjustments to inventory in response
to changes in economic activity and/or pricing levels. There are
substitutes for nickel in various applications. Their availability
and price will also affect demand for nickel. Nickel supply is
dominated by Canada and the Commonwealth of Independent
States (the “CIS”). Exports from the CIS have
increased in recent years. The supply of nickel is also affected by
current and previous price levels, which will influence investment decisions in
new mines and smelters. It is not possible to
predict the aggregate effect of all or any combination of these
factors.
Platinum
The price of platinum is primarily
affected by the global demand for and supply of platinum. However, since the
platinum supply is very limited, any disruptions in platinum supply tend to
have an exaggerated effect on the price of platinum. Key factors that may
influence prices are the policies in or political stability of the most
important producing countries, in particular, Russia and South Africa
(which together account for over 90% of
production), the size and availability of the Russian platinum stockpiles, as
well as the economic situation of the main consuming countries. Platinum is used
in a variety of industries and the automotive industry. Demand for platinum from the automotive
industry which uses platinum as a catalytic converter, accounts for
approximately 80% of the industrial use of platinum. Platinum is also used in
the chemical industry, the electronics industry and the dental
industry. The primary non-industrial use of
platinum is jewelry, which accounts for approximately 40% of the overall demand
for platinum.
RBOB Gasoline
The level of global industrial activity
influences the demand for non-oxygenated gasoline. In addition, the
demand has seasonal
variations, which occur during "driving seasons" usually considered the summer
months in North America and Europe. Non-oxygenated gasoline is derived from
crude oil and as such, any factors that influence the supply of crude oil may
also influence the supply of non-oxygenated
gasoline.
Silver
The price of silver is primarily
affected by global demand for and supply of silver. Silver prices can
fluctuate widely and may be affected by numerous factors. These
include general economic trends, technical developments, substitution
issues and regulation, as well as specific factors including industrial and
jewelry demand, expectations with respect to the rate of inflation, the relative
strength of the U.S. dollar (the currency in which the price of silver is generally quoted) and other
currencies, interest rates, central bank sales, forward sales by producers,
global or regional political or economic events, and production costs and
disruptions in major silver producing countries such as the United Mexican States and the Republic of
Peru. The demand for and supply of silver affect silver prices, but
not necessarily in the same manner as supply and demand affect the prices of
other commodities. The supply of silver consists of a combination of
new mine production and existing stocks of
bullion and fabricated silver held by governments, public and private financial
institutions, industrial organizations and private individuals. In
addition, the price of silver has on occasion been subject to very
rapid short-term changes due to speculative
activities. From time-to-time, above-ground inventories of silver may
also influence the market. The major end uses for silver include
industrial applications, photography and jewelry and silverware. It
is not possible to predict the aggregate effect
of all or any combination of these factors.
Soybeans
The price of soybeans is primarily
affected by the global demand for and supply of soybeans, but is also influenced
significantly from time to time by speculative actions and by currency exchange
rates. Demand for soybeans is in part linked to the development of
agricultural, industrial and energy uses for soybeans. This includes
the use of soybeans for the production of animal feed, vegetable oil, edible
soybean oil and biodiesel, all of which may have a major impact on
worldwide demand for soybeans. In addition, prices for soybeans are affected by
governmental programs and policies regarding agriculture, including soybeans,
specifically, and trade, fiscal and monetary issues, more
generally. Extrinsic factors also affect soybean prices such as crop
yields, natural disasters, pestilence, wars and political and civil upheavals.
In addition, substitution of other commodities for soybeans could also impact
the price of soybeans. The supply of soybeans is
particularly sensitive to weather patterns such as floods, drought and freezing
conditions, planting decisions, the price of fuel, seeds and fertilizers and the
current and previous price
of soybeans. In
addition, technological
advances and scientific developments could lead to increases in worldwide
production of soybeans and corresponding decreases in the price of
soybeans. The United States, Argentina and Brazil are the three
largest suppliers of soybean crops.
Wheat
The price of wheat is primarily affected
by the global demand for and supply of wheat, but is also influenced
significantly from time to time by speculative actions and by currency exchange
rates. Demand for wheat is in part linked to the development
of agricultural, industrial
and energy uses for wheat including the use of wheat for the production of
animal feed and bioethanol which may have a major impact on worldwide demand for
wheat. In addition, prices for wheat are affected by governmental and
intergovernmental programs and policies
regarding trade, agriculture, and energy and fiscal and monetary issues, more
generally. Human consumption and alternative uses for wheat and other
grains in manufacturing and other industries. Wheat prices may
also be influenced by or dependant on
subsidies, tariffs, retail prices, social trends, lifestyle changes and market
power. Wheat
prices are also affected by extrinsic factors such as natural
disasters, pestilence, wars and political and civil
upheavals. Substitution of other commodities for wheat
could also impact the price of wheat. The supply of wheat is
particularly sensitive to weather patterns such as floods, drought and freezing
conditions, planting decisions, the price of fuel, seeds and
fertilizers and the current and previous price of
wheat. In addition, technological advances and scientific
developments could lead to increases in worldwide production of wheat and corresponding decreases in the
price of wheat. China, India and the United
States are the three
largest suppliers of wheat crops.
Zinc
The price of zinc is primarily affected
by the global demand for and supply of zinc, but is also influenced
significantly from time to time by speculative actions and by currency exchange
rates. Demand for zinc is significantly influenced by
the level of global industrial economic activity. The galvanized
steel industrial sector is particularly important to demand for zinc given that
the use of zinc in the manufacture of galvanized steel accounts for a
significant percentage of world-wide zinc
demand. The galvanized steel sector is in turn heavily dependent on
the automobile and construction sectors. Growth in the production of
galvanized steel will drive zinc demand. An additional, but highly
volatile, component of demand is adjustments to
inventory in response to changes in economic activity and/or pricing
levels. The supply of zinc concentrate (the raw material) is
dominated by Australia, North America and Latin America. The supply
of zinc is also affected by current and previous price
levels, which will influence investment decisions in new mines and
smelters. Low prices for zinc in the early 1990s tended to discourage
such investments. It is not possible to predict the aggregate effect
of all or any combination of these
factors.
The Relevant Exchange Has No Obligation to
Consider Your Interests
The relevant exchange for an Underlying Commodity is responsible for calculating the
official settlement price or fixing level, as applicable, for the Underlying Commodity. The relevant
exchange may alter, discontinue or suspend calculation or dissemination of the
official settlement price or fixing level, as applicable, for the Underlying Commodity. Any of these
actions could adversely affect the market value of the Notes. The relevant exchange
has no obligation to consider your interests in calculating or revising the
official settlement price or fixing level, as applicable, for the Underlying Commodity.
Risks
Related to an Underlying Stock
For
Notes linked to the Performance of ADSs, Fluctuations in Exchange Rates Will
Affect Your Investment
There are
significant risks related to an investment in a Note that is linked to ADSs,
which is quoted and traded in U.S. dollars, representing an ADS Underlying Stock
that is quoted and traded in a foreign currency. The ADSs, which are
quoted and traded in U.S. dollars, may trade differently from the ADS Underlying
Stock. In recent years, the rates of exchange between the U.S. dollar
and some other currencies have been highly volatile and this volatility may
continue in the future. These risks generally depend on economic and political
events over which we have no control. Fluctuations in any particular
exchange rate that have occurred in the past are not necessarily indicative,
however, of fluctuations that may occur during the term of the Notes. Changes in
the exchange rate between the U.S. dollar and a foreign currency may affect the
U.S. dollar equivalent of the price of the ADS Underlying Stock on non-U.S.
securities markets and, as a result, may affect the market price of the ADSs,
which may consequently affect the market value of the Notes.
For
Notes linked to the Performance of ADSs, We Have No Control over Exchange
Rates
Foreign exchange
rates can either float or be fixed by sovereign governments. Exchange
rates of the currencies used by most economically developed nations are
permitted to fluctuate in value relative to the U.S. dollar and to each
other. However, from time to time governments and, in the case of
countries using the euro, the European Central Bank, may use a variety of
techniques, such as intervention by a central bank, the imposition of regulatory
controls or taxes or changes in interest rates to influence the exchange rates
of their currencies. Governments may also issue a new currency to
replace an existing currency or alter the exchange rate or relative exchange
characteristics by a devaluation or revaluation of a currency. These
governmental actions could change or interfere with currency valuations and
currency fluctuations that would otherwise occur in response to economic forces,
as well as in response to the movement of currencies across
borders. As a consequence, these government actions could adversely
affect an investment in a Note that is linked to ADSs, which is quoted and
traded in U.S. dollars, representing an ADS Underlying Stock that is quoted and
traded in a foreign currency.
We
will not make any adjustment or change in the terms of the Notes in the event
that floating exchange rates should become fixed, or in the event of any
devaluation or revaluation or imposition of exchange or other regulatory
controls or taxes, or in the event of other developments affecting the U.S.
dollar or any relevant foreign currency. You will bear those
risks.
For
Notes linked to the Performance of ADSs, an Investment in the Notes Is Subject
to Risks Associated with Non-U.S. Securities Markets
An
investment in the Notes linked to the value of ADSs representing interests in
non-U.S. equity securities involves risks associated with the securities markets
in those countries where the relevant non-U.S. equity securities are traded,
including risks of market volatility, governmental intervention in those markets
and cross shareholdings in companies in certain countries. Also,
non-U.S. companies are generally subject to accounting, auditing and financial
reporting standards and requirements, and securities trading rules different
from those applicable to U.S. reporting companies.
The prices of
securities in non-U.S. markets may be affected by political, economic, financial
and social factors in such markets, including changes in a country’s government,
economic and fiscal policies, currency exchange laws or other laws or
restrictions. Moreover, the economies of such countries may differ
favorably or unfavorably from the economy of the United States in such respects
as growth of gross national product, rate of inflation, capital reinvestment,
resources and self sufficiency. Such countries may be subjected to
different and, in some cases, more adverse economic environments.
Some or all of
these factors may influence the price of the ADSs. The impact of any
of these factors set forth above may enhance or offset some or all of any change
resulting from another factor or factors. You cannot predict the
future performance of the ADSs based on their historical
performance. The value of the ADSs may decrease such that you may not
receive any return of your investment. You will bear the risk that
the price of the ADSs may decrease so that at maturity, you will receive no
return on your investment and, for Partially Principal Protected Notes, you may
lose some of your investment.
There
Are Important Differences Between the Rights of Holders of ADSs and the Rights
of Holders of the Common Stock of the Foreign Company Underlying the
ADSs
If
your Note is linked to the performance of an ADS, you should be aware that your
Note is linked to the price of the ADSs and not the ADS Underlying Stock, and
there exist important differences between the rights of holders of ADSs and the
ADS Underlying Stock. Each ADS is a security evidenced by American
Depositary Receipts that represent a specified number of shares of common stock
of a foreign issuer. Generally, the ADSs are issued under a deposit
agreement, which sets forth the rights and responsibilities of the depositary,
the foreign issuer and holders of the ADSs, which may be different from the
rights of holders of common stock of the foreign issuer. For example,
the foreign issuer may make distributions in respect of its common stock that
are not passed on to the holders of its ADSs. Any such differences
between the rights of holders of the ADSs and holders of the ADS Underlying
Stock may be significant and may materially and adversely affect the market
value of the Notes.
In
Some Circumstances, the Payment You Receive on the Notes May Be Based on the
Common Stock (or ADSs, as applicable) of Another Company and not the Underlying
Stock
Following certain
corporate events, such as a merger or acquistion, relating to the Underlying
Stock where its issuer is not the surviving entity, the amount you receive at
maturity may be based on the common stock of a successor to the Underlying
Company or any cash or any other assets distributed to holders of the Underlying
Stock in such corporate event. The occurrence of these corporate
events and the consequent adjustments may materially and adversely affect the
market value of the Notes. We describe the specific corporate events
that can lead to these adjustments and the procedures for selecting Exchange
Property (as described below) in the section of this Product Supplement called
“Description of Notes — Adjustment Events.”
Risks
Related to an Underlying Index or Underlying Fund Generally
Investment
in the Notes is Not the Same as a Direct Investment in an Underlying Index or
Underlying Fund, in the Stocks or Commodities or Commodity Futures Contracts
that Comprise an Underlying Index or Underlying Fund
An
investment in the Notes is not the same as a direct investment in an Underlying
Index or Underlying Fund, in the stocks or commodities or commodity futures
contracts that comprise an Underlying Index or Underlying
Fund. Investing in the Notes is not equivalent to investing directly
in an Underlying Index because an Underlying Index is a theoretical calculation,
not an actual portfolio, so it is not possible to make a direct investment in an
Underlying Index. In addition, the return on your Notes could be less
than if you had invested directly in the stocks (or any other securities) or
commodities or commodity futures contracts comprising an Underlying Index or
Underlying Fund because (1) you will only participate in the change in the price
or value of the Underlying Index or Underlying Fund over the term of the Notes,
(2) for Underlying Indices or Underlying Funds comprised of stocks, the return
on the Notes 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 Underlying Index or Underlying
Fund and (3) there are management fees charged by the Underlying
Fund. You will not receive any payment of dividends on any of the
stocks (or any other securities) comprising the Underlying Index or Underlying
Fund.
You
Will Not Receive Interest Payments on the Notes or Have Rights in the Stocks or
Commodities or Commodity Futures Contracts that Comprise an Underlying Index or
Underlying Fund
You will not
receive any interest payments on the Notes. As an owner of the Notes, you will
not have rights that holders of the stocks or commodities or commodity futures
contracts that comprise an Underlying Index or Underlying Fund
have.
The
Sponsor of an Underlying Index May Adjust such Underlying Index in a Way That
Affects Its Level, and Such Sponsor Has No Obligation to Consider Your
Interests
The sponsor of an
Underlying Index is responsible for calculating and maintaining the Underlying
Index. The sponsor of an Underlying Index can add, delete or
substitute the equity securities or commodities or commodity futures contracts
underlying an Underlying Index. You should realize that the changing
of equity securities or commodities or commodity futures contracts included in
an Underlying Index may affect the Underlying Index, as a newly added equity
security or commodities or commodity futures contract may perform significantly
better or worse than the equity security or securities or commodity or
commodities or commodity futures contract or contracts it
replaces. The sponsor of an Underlying Index may make other
methodological changes that could change the level of an Underlying
Index. Additionally, a sponsor may alter, discontinue or suspend
calculation or dissemination of an Underlying Index. Any of these
actions could adversely affect the market value of the Notes. The
sponsor of an Underlying Index has no obligation to consider your interests in
calculating or revising such Underlying Index.
The
Policies of the Investment Advisor for an Underlying Fund, and the Sponsor of an
Underlying Index or Target Index, Could Affect the Market value of the
Notes
The policies of the
investment advisor concerning the calculation of an Underlying Fund’s net asset
value, additions, deletions or substitutions of stocks or commodities or
commodity futures contracts held by the Underlying Fund and the manner in which
changes affecting the stocks or commodities or commodity futures contracts held
by the Underlying Fund are reflected in the net asset value of the Underlying
Fund could affect the market price of the shares of the Underlying Fund and,
therefore, affect the market value of the Notes. The market value of
the Notes could also be affected if the investment advisor changes these
policies, for example, by changing the manner in which it calculates the
Underlying Fund’s net asset value, or if the investment advisor discontinues or
suspends calculation or publication of the Underlying Fund’s net asset value, in
which case it may become difficult to determine the market value of the
Notes.
In
addition, the sponsor of an Underlying Index or Target Index is responsible for
the design and maintenance of such index. Periodically, the sponsor
of an Underlying Index or Target Index may (i) determine that total shares
outstanding have changed in one or more component securities of the Underlying
Equity Index or equity Target Index due to secondary offerings, repurchases,
conversions or other corporate actions, (ii) determine that the available float
shares of one or more of the component securities of the Underlying Equity Index
or equity Target Index may have changed due to corporate actions, purchases or
sales of securities by holders or other events, (iii) replace one or more
component securities or commodities or commodity futures contracts of the
Underlying Index or Target Index due to mergers, acquisitions, bankruptcies, or
other market conditions, or if the issuers of such component securities or if
the commodities or commodity futures contracts of the Underlying Index or Target
Index fail to meet the criteria for inclusion in the Underlying Index or Target
Index or (iv) change the method of rolling the commodity futures contracts
underlying an Underlying Commodity Index or a commodity Target
Index. With respect to a Target Index, the Underlying Fund generally
aggregates certain of these adjustments and changes the composition of the
Underlying Fund. Any of these actions could adversely affect the
prices of the component securities of the Target Index and/or the Underlying
Fund and, consequently, the market value of the Notes.
Your
Return May Be Affected by Factors Affecting International Securities or
Commodities Markets
The price or value
of an Underlying Equity Index or Underlying Fund may be computed by reference to
the value of the equity securities of companies listed on various global
exchanges. The value of an Underlying Commodity Index may be computed
by reference to the value of commodity futures contracts traded on various
global exchanges. Under these circumstances, the return on the Notes
will be affected by factors affecting the prices of securities or commodities in
the relevant markets. The relevant foreign securities or commodities
markets may be more volatile than United States or other securities or
commodities markets and may be affected by market developments in different ways
than United States or other securities markets. Direct or indirect
government intervention to stabilize a particular securities or commodities
market and cross-shareholdings in companies in the relevant foreign securities
markets may affect prices and the volume of trading in those
markets. Also, there is generally less publicly available information
about foreign companies than about United States companies that are subject to
the reporting requirements of the Securities and Exchange Commission.
Additionally, accounting, auditing and financial reporting standards and
requirements in foreign countries differ from those applicable to United States
reporting companies.
The prices and
performance of securities of companies or commodity futures contracts in foreign
countries may be affected by political, economic, financial and social factors
in those regions. In addition, recent or future changes in
government, economic and fiscal policies in the relevant jurisdictions, the
possible imposition of, or changes in, currency exchange laws or other laws or
restrictions, and possible fluctuations in the rate of exchange between
currencies, are factors that could negatively affect the relevant securities or
commodities markets. Moreover, the relevant foreign economies may
differ favorably or unfavorably from the United States economy in economic
factors such as growth of gross national product, rate of inflation, capital
reinvestment, resources and self-sufficiency.
If
the Prices of the Equity Securities Comprising a Foreign Underlying Index or
Held By a Foreign Underlying Fund or the Commodity Futures Contracts Comprising
a Foreign Underlying Index Are Not Converted Into U.S. Dollars For Purposes of
Calculating the Value of the Foreign Underlying Index or the Net Asset Value of
the Foreign Underlying Fund, the Amount Payable On the Notes at Maturity Will
Not Be Adjusted For Changes In Exchange Rates That Might affect the Foreign
Underlying Index or Foreign Underlying Fund
If
the prices of the equity securities a foreign Underlying Index or held by a
foreign Underlying Fund or the commodity futures contracts comprising a foreign
Underlying Index are not converted into U.S. dollars for purposes of calculating
the value of that foreign Underlying Index or the net asset value of that
foreign Underlying Fund and although the equity securities of that foreign
Underlying Index or held by that foreign Underlying Fund or the commodity
futures contracts comprising that foreign Underlying Index are traded in
currencies other than U.S. dollars, and the Notes, which are linked in whole or
in part to that foreign Underlying Index or foreign Underlying Fund, are
denominated in U.S. dollars, the amount payable on the Notes at maturity, if
any, will not be adjusted for changes in the exchange rate between the U.S.
dollar and each of the currencies in which the equity securities that foreign
Underlying Index or held by that foreign Underlying Fund or the commodity
futures contracts comprising that foreign Underlying Index are
denominated. Changes in exchange rates, however, may reflect changes
in various non-U.S. economies that in turn may affect the return on the
Notes. The amount we pay in respect of the Notes on the maturity
date, if any, will be determined solely in accordance with the procedures
described in “Description of Notes — Payment at Maturity.”
If
the Prices of the Equity Securities Comprising a Foreign Underlying Index or
Held By a Foreign Underlying Fund or the Commodity Futures Contracts Comprising
a Foreign Underlying Index Are Converted Into U.S. Dollars For Purposes of
Calculating the Value of that Foreign Underlying Index or the Net Asset Value of
that Foreign Underlying Fund, the Notes Will Be Subject To Currency Exchange
Risk
If
the prices of the equity securities a foreign Underlying Index or held by a
foreign Underlying Fund or the commodity futures contracts comprising a foreign
Underlying Index are converted into U.S. dollars for the purposes of calculating
the value of that foreign Underlying Index or the net asset value of that
foreign Underlying Fund, the holders of the Notes will be exposed to currency
exchange rate risk with respect to each of the currencies in which the equity
securities that foreign Underlying Index or held by that foreign Underlying Fund
or the commodity futures contracts comprising that foreign Underlying Index
trade. An investor’s net exposure will depend on the extent to which
such currencies strengthen or weaken against the U.S. dollar and the relative
weight of the equity securities that foreign Underlying Index or held by that
foreign Underlying Fund or the commodity futures contracts comprising that
foreign Underlying Index denominated in each such currency. If,
taking into account such weighting, the U.S. dollar strengthens against such
currencies, the value of that foreign Underlying Index or the net asset value of
that foreign Underlying Fund will be adversely affected and the payment at
maturity of the Notes may be reduced.
Of
particular importance to potential currency exchange risk are:
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existing and
expected rates of inflation;
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existing and
expected interest rate levels;
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the balance
of payments;
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the extent of
governmental surpluses or deficits in the component countries and the
United States;
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government
intervention in the currency markets;
and
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government
action fixing exchange rates or allowing exchange rates to
float.
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All of these
factors are in turn sensitive to the monetary, fiscal and trade policies pursued
by the governments of various component countries and the United States and
other countries important to international trade and finance.
If
the Prices of the Equity Securities Comprising a Foreign Underlying Index or
Held By a Foreign Underlying Fund or the Commodity Futures Contracts Comprising
a Foreign Underlying Index Are Converted Into U.S. Dollars For Purposes of
Calculating the Value of that Foreign Underlying Index or the Net Asset Value of
that Foreign Underlying Fund, Changes In the Volatility of Exchange Rates, and
the Correlation Between those Rates and the Value of that Foreign Underlying
Index or the Net Asset Value of that Foreign Underlying Fund are Likely to
Affect the Market Value of the Notes
The exchange rate
between the U.S. dollar and each of the currencies in which the equity
securities comprising a foreign Underlying Index or held by a foreign Underlying
Fund or the commodity futures contracts comprising a foreign Underlying Index
are denominated refers to a foreign exchange spot rate that measures the
relative values of two currencies—the particular currency in which an equity
security included in that foreign Underlying Index or held by that foreign
Underlying Fund or a commodity futures contract included in that foreign
Underlying Index are denominated and the U.S. dollar. This exchange
rate reflects the amount of the particular currency in which an equity security
included in that foreign Underlying Index or held by that foreign Underlying
Fund or a commodity futures contract included in that foreign Underlying Index
trade is denominated that can be purchased for one U.S. dollar and thus
increases when the U.S. dollar appreciates relative to the particular currency
in which that equity security or commodity futures contract is
denominated. The volatility of the exchange rate between the U.S.
dollar and each of the currencies in which the equity securities that foreign
Underlying Index or held by that foreign Underlying Fund or the commodity
futures contracts comprising that foreign Underlying Index trade are denominated
refers to the size and frequency of changes in that exchange rate.
Because the value
of a foreign Underlying Index or the net asset value of a foreign Underlying
Fund is calculated, in part, by converting the closing prices of the equity
securities comprising that foreign Underlying Index or held by that foreign
Underlying Fund or the final settlement prices of the commodity futures
contracts comprising that foreign Underlying Index into U.S. dollars,
the volatility of the exchange rate between the U.S. dollar and each of the
currencies in which those equity securities or commodity futures contracts are
denominated could affect the market value of the Notes.
The correlation of
the exchange rate between the U.S. dollar and each of the currencies in which
the equity securities comprising a foreign Underlying Index or held by a foreign
Underlying Fund or the commodity futures contracts comprising a foreign
Underlying Index are denominated and the value of that foreign Underlying Index
or the net asset value of that foreign Underlying Fund refers to the
relationship between the percentage changes in that exchange rate and the
percentage changes in the value of that foreign Underlying Index or the net
asset value of that foreign Underlying Fund, as applicable. The
direction of the correlation (whether positive or negative) and the extent of
the correlation between the percentage changes in the exchange rate between the
U.S. dollar and each of the currencies in which the equity securities comprising
that foreign Underlying Index or held by that foreign Underlying Fund or the
commodity futures contracts comprising that foreign Underlying Index trade are
denominated and the percentage changes in the value of that foreign Underlying
Index or the net asset value of that foreign Underlying Fund trade could affect
the value of the Notes.
There
Are Risks Associated With the Underlying Fund
An
Underlying Fund may have limited operating history. Even if an
Underlying Fund is listed for trading and a number of similar products have been
traded for varying periods of time on various securities exchanges, you cannot
be certain that an active trading market will continue for the shares of the
Underlying Fund or that there will be liquidity in the trading
market.
An
Underlying Fund is also subject to management risk, which is the risk that the
investment strategy of the Underlying Fund’s investment advisor, the
implementation of which is subject to a number of constraints, may not produce
the intended results.
Underlying
Funds are Not Actively Managed
Unless otherwise
specified in the relevant Pricing Supplement or Underlying Supplement,
Underlying Funds are not actively managed by traditional methods, and therefore
the adverse financial condition of one or more issuers of stocks which comprise
an associated Target Index or adverse conditions affecting a commodity sector
will not result in the elimination of such stock or stocks or the relevant
commodity or commodities or commodity futures contract or contracts from an
Underlying Fund unless such stock or stocks or commodity or commodities or
commodity futures contract or contracts are removed from the Target
Index. For Notes linked to an Underlying Fund or to an Underlying
Basket that includes an Underlying Fund, this may adversely affect the value of
the Notes and the return, if any, on the Notes.
An
Underlying Fund May Not Always be Able Exactly to Replicate the Performance of
the Target Index
It
is possible that, for a short period, an Underlying Fund may not fully replicate
the performance of the Target Index due to the temporary unavailability of
certain index securities or commodities or commodity futures contracts in the
secondary market or due to other extraordinary circumstances. In addition, an
Underlying Fund is not able to replicate exactly the performance of the Target
Index because the Target Index is a theoretical calculation while the Underlying
Fund is an actual portfolio of stocks or commodities or commodity futures
contracts. Accordingly, the total return generated by an Underlying
Fund is reduced by its expenses and transaction costs incurred in adjusting the
actual balance of shares or commodities or contracts held by the Underlying
Fund. For Notes linked to an Underlying Fund or to an Underlying
Basket that includes an Underlying Fund, this may adversely affect the value of
the Notes and the return, if any, on the Notes.
Risks
Related to an Underlying Commodity Index or Underlying Commodity
Fund
An
Underlying Commodity Index or a Target Index Comprised of Commodity Futures
Contracts May Be an Excess Return Index and Not a Total Return
Index
An
Underlying Commodity Index or a commodity Target Index may be an excess return
index and not a total return index. An excess return index reflects
the returns that are potentially available through an unleveraged investment in
the commodity futures contracts that comprise the index. By contrast,
a total return index, in addition to reflecting such returns, also reflects
interest that could be earned on cash collateral. An excess return
index does not include this total return feature. In addition, the
term “excess return” is not intended to suggest that the performance of an
excess return index at any time or the return on your Notes will be positive or
that such excess return index is designed to exceed a particular
benchmark.
The
Cash Payment You Receive on the Notes May Be Delayed Upon the Occurrence of a
Market Disruption Event
If
the calculation agent, which is our affiliate, determines that, on the
determination date, a market disruption event has occurred or is continuing, the
determination by the calculation agent of the value of the Underlying Commodity
Index or Underlying Commodity Fund may be deferred. As a result, the
determination date for your Notes may also be delayed. If this
occurs, you may not receive the cash payment we are obligated to deliver on the
maturity date of the Notes until several days after the originally scheduled due
date.
An
Underlying Commodity Index may be a Rolling Index and Future Prices of the
Commodities that are Different Relative to Their Current Prices May Decrease the
Amount Payable at Maturity
An
Underlying Commodity Index is comprised of commodity futures
contracts. Unlike equities, which typically entitle the holder to a
continuing stake in a corporation, commodity futures contracts normally specify
a certain date for delivery of the underlying physical commodity. As
the exchange-traded futures contracts that comprise the Underlying Commodity
Index approach expiration, they are replaced by contracts that have a later
expiration. Thus, for example, a contract purchased and held in August may
specify an October expiration. As time passes, the contract expiring in October
is replaced by a contract for delivery in a later month (e.g., November). This process
is referred to as “rolling.” If the market for these contracts is (putting aside
other considerations) in “backwardation,” where the prices are lower in the
distant delivery months than in the nearer delivery months, the sale of the
October contract would take place at a price that is higher than the price of
the November contract, thereby creating a “roll yield” which might create a
profit for the purchase of the contracts. While certain commodities’
contracts included in an Underlying Commodity Index may have historically
exhibited consistent periods of backwardation, backwardation will likely not
exist at all times with respect to any commodity. Certain of the commodities
included in an Underlying Commodity Index may have historically traded in
“contango” markets. Contango markets are those in which the prices of contracts
are higher in the distant delivery months than in the nearer delivery months.
The absence of backwardation in the commodity markets could result in negative
“roll yields,” which might create a loss for the purchase of the contracts and
could adversely affect the value of the Underlying Commodity Index. There can be
no assurance, however, that backwardation or roll yields will exist in any
particular commodity at any time during the term of the Notes.
The
Notes Are Not Directly Linked to the Contracts in an Underlying Commodity Index
or Underlying Commodity Fund or Any Other Exchange-Traded Futures
Contracts
The Notes may be
linked in whole or in part to an Underlying Commodity Index or Underlying
Commodity Fund, but they are not directly linked to the contracts in an
Underlying Commodity Index or Underlying Commodity Fund or any other
exchange-traded futures contracts. An Underlying Commodity Index that is an
excess return index reflects the returns that are potentially available through
an unleveraged investment in the contracts in the Underlying Commodity Index.
Accordingly, the return on your Notes will reflect the returns associated with
the contracts in the Underlying Commodity Index, including any positive or
negative “roll yield,” and therefore will not reflect the return you would
realize if the Notes were linked directly to the contracts in the Underlying
Commodity Index or if you actually owned such contracts or other exchange-traded
futures contracts for a similar period.
An
Underlying Commodity Index or Underlying Commodity Fund May Be Comprised of
Commodities Produced Worldwide Whose Prices May Change
Unpredictably
An
Underlying Commodity Index or Underlying Commodity Fund may be comprised of
specified commodities produced worldwide. Global commodity prices are
primarily affected by the global demand for and supply of those commodities, but
are also significantly influenced by speculative actions and by currency
exchange rates. In addition, prices for commodities are affected by
governmental programs and policies, such as trade, fiscal and monetary
issues. Extrinsic factors such as weather, disease and natural
disasters also affect commodity prices. Demand for agricultural
commodities, such as wheat, corn and soy, both for human consumption and as
cattle feed, has generally increased with increases in worldwide growth and
prosperity. These factors and others may affect the level of an
Underlying Commodity Index or Underlying Commodity Fund and the value of your
Notes in varying ways, and different factors may cause the value of different
commodities comprising an Underlying Commodity Index and the volatilities of
their prices, to move in inconsistent directions and at inconsistent
rates.
An
Underlying Commodity Index or Underlying Commodity Fund May Include Futures
Contracts on Foreign Exchanges That Are Less Regulated Than U.S. Markets and Are
Subject to Risks That Do Not Always Apply to U.S. Markets
An
Underlying Commodity Index may include futures contracts on physical commodities
on exchanges located outside the United States. The regulations of
the Commodity Futures Trading Commission do not apply to trading on foreign
exchanges, and trading on foreign exchanges may involve different and greater
risks than trading on United States exchanges. Certain foreign
markets may be more susceptible to disruption than United States exchanges due
to the lack of a government-regulated clearinghouse system. Trading
on foreign exchanges also involves certain other risks that are not applicable
to trading on United States exchanges. Those risks include varying
exchange rates, foreign exchange controls, governmental expropriation,
burdensome or confiscatory taxation systems, government imposed moratoriums, and
political or diplomatic events.
It
may also be more costly and difficult to enforce the laws or regulations of a
foreign country or exchange, and it is possible that the foreign country or
exchange may not have laws or regulations which adequately protect the rights
and interests of investors in an Underlying Commodity Index or Underlying
Commodity Fund.
Commodity
Prices May Change Unpredictably, Affecting the Underlying Return and the Value
of Your Notes In Unforeseeable Ways
Trading in futures
contracts associated with commodities is speculative and can be extremely
volatile. A decrease in the price of any of the commodities upon
which the futures contracts that comprise an Underlying Commodity Index or
Underlying Commodity Fund are based may have a material adverse effect on the
value of the Notes and your return on an investment in the
Notes. Market prices of the commodities that comprise an Underlying
Commodity Index or Underlying Commodity Fund may fluctuate rapidly based on
numerous factors, including: changes in supply and demand relationships;
governmental programs and policies, national and international political and
economic events, changes in interest and exchange rates, speculation and trading
activities in commodities and related contracts, general weather conditions, and
trade, fiscal, monetary and exchange control policies; agriculture; trade;
disease; and technological developments. Many commodities are also
highly cyclical. These factors, some of which are specific to the
market for each such commodity may cause the value of the different commodities
upon which the futures contracts that compose an Underlying Commodity Index or
Underlying Commodity Fund are based, as well as the futures contracts
themselves, to move in inconsistent directions at inconsistent
rates. This, in turn, will affect the value of the
Notes. It is not possible to predict the aggregate effect of all or
any combination of these factors.
Some
of the Commodities that Comprise an Underlying Commodity Index may be Subject to
Pronounced Risks of Pricing Volatility
As
a general matter, the risk of low liquidity or volatile pricing around the
maturity date of a commodity futures contract is greater than in the case of
other futures contracts because (among other factors) a number of market
participants take physical delivery of the underlying
commodities. Many commodities, like those in the energy and
industrial metals sectors, have liquid futures contracts that expire every
month. Therefore, in the calculation of the some Underlying Commodity
Indices these contracts are rolled forward every month. Contracts
based on certain other commodities, most notably agricultural and livestock
products, tend to have only a few contract months each year that trade with
substantial liquidity. Thus, these commodities, with related futures
contracts that expire infrequently, may roll forward less frequently than every
month in the calculation of an Underlying Commodity Index and can have further
pronounced pricing volatility during extended periods of low
liquidity.
Risks
Related to an Underlying Currency Pair
The
Notes Are Subject to Currency Exchange Risk
Fluctuations in the
exchange rate of an Underlying Currency Pair will affect the value of the
Notes. The exchange rate of an Underlying Currency Pair is the result
of the supply of, and the demand for, those currencies. Changes in the exchange
rate result over time from the interaction of many factors directly or
indirectly affecting economic and political conditions in the countries of the
Underlying Currency Pair, including economic and political developments in other
countries. Of particular importance to potential currency exchange risk are
existing and expected rates of inflation, existing and expected interest rate
levels, the balance of payments and the extent of governmental surpluses or
deficits in the countries of the Underlying Currency Pair. All of these factors
are in turn sensitive to the monetary, fiscal and trade policies pursued by the
governments of various countries, including the countries of the Underlying
Currency Pair and other countries important to international trade and
finance.
Investment
in the Notes is Not the Same as a Direct Investment in Any Currency
An
investment in the Notes is not the same as a direct investment any
currency. This is due both to the method of calculating your payment
at maturity and to the fact that the spot rate reflected in the Underlying
Currency Pair is based on a single point in time and therefore does not
necessarily reflect rates at which an actual transaction has occurred.
Consequently, the return on the Notes could be less than a direct investment in
the Reference Currency relative to the Base Currency.
The
Liquidity, Trading Value and Amounts Payable under the Notes Could Be Affected
by the Actions of the Governments of the Originating Nations of the Currencies
in the Underlying Currency Pairs
Foreign exchange
rates can either be fixed by sovereign governments or
floating. Exchange rates of most economically developed nations are
permitted to fluctuate in value relative to the value of other
currencies. However, governments do not always allow their currencies
to float freely in response to economic forces. Governments use a
variety of techniques, such as intervention by their central bank or imposition
of regulatory controls or taxes, to affect the trading value of their respective
currencies. They may also issue a new currency to replace an existing
currency or alter the exchange rate or relative exchange characteristics by
devaluation or revaluation of a currency. Thus, a special risk in
purchasing the Notes is that their liquidity, trading value and amounts payable
could be affected by the actions of sovereign governments which could change or
interfere with theretofore freely determined currency valuation, fluctuations in
response to other market forces and the movement of currencies across
borders. Unless such an event constitutes a market disruption event,
there will be no adjustment or change in the terms of the Notes in the event
that floating exchange rates should become fixed, in the event of any
devaluation or revaluation or imposition of exchange or other regulatory
controls or taxes, in the event of the issuance of a replacement currency, or in
the event of other developments affecting the Currencies in the Underlying
Currency Pairs.
The
Current Global Financial Crisis Can Be Expected to Heighten Currency Exchange
Risks
In
periods of financial turmoil, capital can move quickly out of regions that are
perceived to be more vulnerable to the effects of the crisis than others with
sudden and severely adverse consequences to the currencies of those
regions. In addition, governments around the world, including the
United States government and governments the currencies of which are major world
currencies, have recently made, and may be expected to continue to make,
significant interventions in their economies, and sometimes directly in their
currencies. Such interventions affect currency exchange rates
globally and, in particular, the exchange rates of the Underlying Currency
Pairs. Further interventions, other government actions or suspensions
of actions, as well as other changes in government economic policy or other
financial or economic events affecting the currency markets, may cause currency
exchange rates to fluctuate sharply in the future, which could have a material
adverse effect on the value of the Notes and the return on your investment in
the Notes at maturity.
Even
Though the Currencies Comprising an Underlying Currency Pair are Traded
Around-the-Clock, the Notes Will Not Be So Traded
The interbank
market in foreign currencies is a global, around-the-clock market. Therefore,
the hours of trading for the Notes, if any trading market develops, will not
conform to the hours during which the currencies comprising an Underlying
Currency Pair are traded. To the extent that U.S. markets are closed while
markets for other currencies remain open, significant price and rate movements
may take place in the foreign exchange markets that will not be reflected
immediately in the price of the Notes. The possibility of these movements should
be taken into account in relating the value of the Notes to those in the U.S.
foreign exchange markets.
There is no
systematic reporting of last-sale information for foreign currencies. Reasonably
current bid and offer information is available in certain brokers’ offices, in
bank foreign currency trading offices and to others who wish to subscribe for
this information, but this information will not necessarily be reflected in the
value of the Underlying Currency Pair used to calculate the amount paid to you
at maturity. There is no regulatory requirement that those quotations be firm or
revised on a timely basis. The absence of last-sale information and the limited
availability of quotations to individual investors may make it difficult for
many investors to obtain timely, accurate data about the state of the foreign
exchange markets.
The
Absence of Last-Sale and Other Information about the Currencies in the
Underlying Currency Pairs May Affect the Market Value of the Notes
There is no
systematic reporting of last-sale information for foreign
currencies. Reasonably current bid and offer information is available
in certain brokers’ offices, in bank foreign currency trading offices and to
others who wish to subscribe for this information, but this information will not
necessarily be reflected in the value of the exchange rates used to calculate
the underlying return and therefore the supplement redemption amount, if any.
There is no regulatory requirement that those quotations be firm or revised on a
timely basis. The absence of last-sale information and the limited availability
of quotations to individual investors may make it difficult for many investors
to obtain timely, accurate data about the state of the underlying foreign
exchange markets.
In
addition, certain relevant information relating to the originating countries of
the Currencies in the Underlying Currency Pairs may not be as well known or as
rapidly or thoroughly reported in the United States as comparable United States
developments. Prospective purchasers of the Notes should be aware of
the possible lack of availability of important information that can affect the
value of the Currencies in the Underlying Currency Pairs and must be prepared to
make special efforts to obtain that information on a timely basis.
Changes
in Interest Rates May Affect the Market Value of the Notes
Changes in interest
rates may affect the market value of the Notes. In general, where the
exchange rate for each Underlying Currency Pair used to determine the underlying
return is expressed as the number of units of the applicable Base Currency per
one unit of the applicable Reference Currency, and the Notes are bullish on the
Reference Currency relative to the Base Currency (i.e., you expect the
Reference Currency to appreciate in value relative to the Base Currency), then,
if interest rates of the country issuing the applicable Base Currency increase,
the market value of the Notes may decrease. This is because the
higher interest rates may result in capital inflows to the country issuing such
Base Currency, which strengthens the Base Currency. A stronger Base
Currency buys more units of the Reference Currency which means that the value of
the reference currency declines relative to the Base Currency. Since
the Notes are bullish on the Reference Currency relative to the Base Currency, a
decline in the value of the Reference Currency would likely cause the value of
the Notes to decline. Conversely, if the interest rates of the
country issuing the applicable Base Currency decrease, the market value of the
Notes may increase.
Similarly, where
the exchange rate for each Underlying Currency Pair used to determine the
underlying return is expressed as the number of units of the applicable
Reference Currency per one unit of the applicable Base Currency, and the Notes
are bearish on the Reference Currency relative to the Base Currency (i.e., you expect the
Reference Currency to depreciate in value relative to the Base Currency), if
interest rates of the country issuing the applicable Reference Currency
increase, the market value of the Notes may decrease and, conversely, if the
interest rates of the country issuing the applicable Reference Currency
decrease, the market value of the Notes may increase.
Of
course, there can be no guarantee that events will follow the above
scenarios.
Interest rates may
affect the economies of the countries issuing the Currencies in the Underlying
Currency Pairs, and, in turn, the exchange rates for the Underlying Currency
Pairs. Prior to maturity, the impact of interest rates of the
countries issuing the Currencies in the Underlying Currency Pairs may either
offset or magnify each other. For example, one country may raise
interest rates while the other lowers interest rates or both countries may
simultaneously raise or lower interest rates.
Suspension
or Disruptions of Market Trading in Currencies Comprising the Underlying
Currency Pair May Adversely Affect the Value of the Notes
The currencies
markets are subject to temporary distortions or other disruptions due to various
factors, including government regulation and intervention, the lack of liquidity
in the markets, and the participation of speculators. These circumstances could
adversely affect the Underlying Currency Pair and, therefore, the value of the
Notes.
Risks
Related to an Underlying Basket
The
Basket Components May Not be Equally Weighted
The Basket
Components may have a different weight in determining the return of the
Underlying Basket, depending on the component weight specified in the relevant
Pricing Supplement. For example, the relevant Pricing Supplement may
specify that the component weight for Component A, Component B and Component C
are 50%, 30% and 20%, respectively. One consequence of such an
unequal weighting of the Basket Components is that the same percentage change in
the component return of two of the Basket Components may have different effects
on the underlying return. For example, if the component weight for
the Component A is greater than the component weight for Component B, a 5%
decrease in Component A will have a greater effect on the underlying return than
a 5% decrease in Component B.
Changes
in the Price, Value or Exchange Rate of the Basket Components May Offset Each
Other
Price movements in
the Basket Components may not correlate with each other. At a time
when the price, value or exchange rate of one or more of the Basket Components
increases, the price, value or exchange rate of the other Basket Components may
not increase as much or may even decline. Therefore, in calculating
the underlying return, increases in the price, value or exchange rate of one or
more of the Basket Components may be moderated, or more than offset, by lesser
increases or declines in the price, value or exchange rate of the other Basket
Component or Components, particularly if the Basket Component or Components that
appreciate are of relatively low weight in the Basket. You assume the
risk that the underlying return may not be positive, which means that, for
Principal Protected Notes, you would not receive any return on the Notes and,
for Partially Principal Protected Notes, you may lose some of your investment in
the Notes if the underlying return is negative.
You may not be able
to rely on the Basket as a means of diversification in the equity, commodity or
currency markets. For example, if one Basket Component is more
heavily weighted than other Basket Components or if Basket Components
representing one industry are more heavily weighted than other Basket
Components, the Basket may be particularly sensitive to the performance of such
Basket Component or such industry. In this situation, your return may
be adversely affected by a decline in one or more Basket Components and, for
Partially Principal Protected Notes, you may lose some of your investment in the
Notes.
If
the Basket Components Are from the Same Industry or Sector, Prices May Correlate
with Each Other
If
all of the Basket Components are from the same industry or sector, it is often,
but not always, the case that prices of stocks in the same industry or sector
may move up or down in a similar pattern due to macroeconomic factors affecting
that industry or sector. This phenomenon is referred to as “correlation.” For
example, a Basket of ten Underlying Stocks in the same industry or sector is
likely to result in correlation between the ten Underlying Stocks, and it is
possible that correlation will be detrimental to you since the prices of all ten
Underlying Stocks may decline at the same time. This is impossible to
predict.
The
Weight of Each Basket Component May Be Determined on a Date Other Than the
Pricing Date
If
so specified in the relevant Pricing Supplement, the weight of each Basket
Component in the Basket may be determined on a date or dates other than the
pricing date. For example, the relevant Pricing Supplement may
specify that the weights of the Basket Components in the Basket will be
determined based on the relative magnitude of the Component Return of each
Basket Component on the determination date. As a result, if the
relevant Pricing Supplement so specifies, you will not know the weight assigned
to each Basket Component until a date later than the pricing date, and you may
not know the weight assigned to each Basket Component in the Basket prior to the
determination date.
PUBLIC
INFORMATION REGARDING AN UNDERLYING STOCK OR UNDERLYING FUND
In
the relevant Pricing Supplement, we will provide summary information regarding
an Underlying Company or Underlying Fund, as applicable, based on its publicly
available documents. We take no responsibility for the accuracy or completeness
of such information.
The shares of an
Underlying Company or Underlying Fund are registered under the Securities
Exchange Act of 1934, as amended, which we refer to as the “Exchange
Act.” Companies with securities registered under the Exchange Act are
required periodically to file certain financial and other information specified
by the Securities and Exchange Commission, which we refer as the
“Commission.” In addition, registered investment companies that
manage exchange-traded funds are required to provide or file periodically
certain financial and other information specified by the Commission pursuant to
the Exchange Act and the Investment Company Act of 1940, as
amended. Information provided to or filed with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at 100 F Street, N.E., Washington, D.C. 20549. Copies of
this material can also be obtained from the Public Reference Room of the
Commission at 100 F Street, N.E., Washington, D.C. 20549 at prescribed rates.
Please call the Commission at 1-800-SEC-0330 for further information about the
Public Reference Room. In addition, information provided to or filed with the
Commission electronically can be accessed through a website maintained by the
Commission. The address of the Commission’s website is http://www.sec.gov.
Information provided to or filed with the Commission by an Underlying Company or
Underlying Fund, as applicable, pursuant to the Exchange Act can be located by
reference to the relevant Commission file number for such Underlying Company or
Underlying Fund, as applicable.
In
addition, information regarding an Underlying Company or Underlying Fund may be
obtained from other sources including, but not limited to, press releases,
newspaper articles and other publicly disseminated documents. We make no
representation or warranty as to the accuracy or completeness of such
reports.
This
Product Supplement and the relevant Pricing Supplement relate only to the Notes
offered by us and does not relate to the Underlying Stock or other securities of
an Underlying Company or Underlying Fund. We will derive all
disclosures contained in the relevant Pricing Supplement regarding an Underlying
Company or Underlying Fund from the publicly available documents described
above. Neither we nor Holding nor the agents have participated in the
preparation of such documents or made any due diligence inquiry with respect to
an Underlying Company or Underlying Fund in connection with the offering of the
Notes. Neither we nor Holding nor the agents make any representation that such
publicly available documents or any other publicly available information
regarding an Underlying Company or Underlying Fund are accurate or complete.
Furthermore, neither we nor Holding can give any assurance that all events
occurring prior to the date of the relevant Pricing Supplement (including events
that would affect the accuracy or completeness of the publicly available
documents described above) that would affect the trading price of an Underlying
Stock or Underlying Fund (and therefore the initial price) have been publicly
disclosed. Subsequent disclosure of any such events or the disclosure of or
failure to disclose material future events concerning an Underlying Company or
Underlying Fund could affect the payment, if any, you will receive on the
maturity date with respect to the Notes and therefore the trading prices of the
Notes. Neither we nor Holding nor any of our affiliates have any
obligation to disclose any information about an Underlying Company or Underlying
Fund after the date of the relevant Pricing Supplement.
Neither
we nor Holding nor any of our affiliates makes any representation to you as to
the performance of any Underlying Stock or Underlying Fund.
We
and/or our affiliates may presently or from time to time engage in business with
an Underlying Company, an Underlying Fund or the issuers of the stocks
comprising an Underlying Fund, as applicable, including extending loans to, or
making equity investments in, or providing advisory services to such companies,
including merger and acquisition advisory services. In the course of such
business, we and/or our affiliates may acquire non-public information with
respect to such companies and, in addition, one or more of our affiliates may
publish research reports with respect to such companies. Neither we nor any of
our affiliates undertakes to disclose any non-public information with respect to
such companies to you. The statements in the two preceding sentences
are not intended to affect the rights of holders of the Notes under the
securities laws. As
a prospective purchaser of a Note, you should undertake such independent
investigation of an Underlying Company or Underlying Fund as in your
judgment is appropriate to make an informed decision with respect to an
investment in the Notes.
DESCRIPTION
OF NOTES
Capitalized terms
not defined herein have the meanings given to such terms in the accompanying
Prospectus Supplement. The term “Note” refers to each Principal Protected Note
linked to an Underlying and to each Partially Principal Protected Note linked to
an Underlying, which are fully and unconditionally guaranteed by
Holding.
Underlying
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As specified
in the relevant Pricing Supplement. The Underlying will be (i)
a commodity, which we refer to as an “Underlying Commodity”; (ii) the
common stock of a company, which we refer to as an “Underlying Stock”;
(iii) an index of equity securities or commodities or commodity futures
contracts, which we refer to as an “Underlying Index”; (iv) an
exchange-traded fund that tracks the performance of an underlying
commodity, index, basket of securities or commodities or commodity futures
contracts, primarily by holding securities, commodities or commodity
futures contracts or other instruments related to such underlying
commodity, index or basket, which we refer to as an “Underlying Fund”; (v)
a reference currency, which we refer to as a “Reference Currency” relative
to another currency, which we refer to as a “Base Currency” and which,
together with its Reference Currency, we refer to as an “Underlying
Currency Pair”; or (vi) a basket comprised of Underlying Commodities,
Underlying Stocks, Underlying Indices, Underlying Funds and/or Underlying
Currency Pairs, which we refer to as an “Underlying Basket.” In
this Product Supplement, we refer to any Underlying Commodity, Underlying
Stock, Underlying Index, Underlying Fund or Underlying Currency Pair
included in an Underlying Basket as a “Basket Component,” and we refer to
the Underlying Commodity, Underlying Stock, Underlying Index, Underlying
Fund, Underlying Currency Pair or Underlying Basket to which the Notes are
linked as the “Underlying.” As used in this Product Supplement,
the term “common stock” includes non-U.S. equity securities issued through
depositary arrangements such as American depositary shares, or
ADSs. We refer to the common stock represented by ADSs as the
“ADS Underlying Stock. If the Underlying Stock is an ADS, the
term “issuer” refers to the issuer of the shares underlying the
ADSs. We refer to the issuer of an Underlying Stock as the
“Underlying Company.” We refer to an Underlying Index comprised
of stocks as an “Underlying Equity Index” and to an Underlying Index
comprised of commodities or commodity futures contracts as an “Underlying
Commodity Index.” We refer to an Underlying Fund that tracks an
equity index or basket of stocks as an “Underlying Equity Fund” and to an
Underlying Fund that tracks a commodity, a commodity index or basket of
commodities or commodity futures contracts as an “Underlying Commodity
Fund.” We refer to the index that an Underlying Fund tracks as
a “Target Index.”
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Pricing
Date
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As specified
in the relevant Pricing Supplement.
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Issue
Price
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Unless
otherwise specified in the relevant Pricing Supplement,
100%.
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Maturity
Date
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As specified
in the relevant Pricing Supplement, subject to postponement as described
below and as described under “Description of Notes — Fixed Rate Notes — If
a Payment Date Is not a Business Day” in the accompanying Prospectus
Supplement.
With respect
to Notes linked to an Underlying Commodity Index or a Basket that includes
an Underlying Commodity Index, if the Determination Date is postponed as
described below under “— Determination Dates” the Maturity Date shall be
postponed to the third business day immediately following the
Determination Date, as postponed or, for Notes linked to a Basket, the
last Determination Date, as postponed for any Basket Component; provided that, if the
Notes have a maturity of not more than one year, the Determination Date,
as postponed, will not produce a Maturity Date more than one year
(counting for this purpose either the issue date or the Maturity Date, but
not both) after the issue date. No interest shall accrue as a
result of any such postponement.
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Specified
Currency
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U.S.
Dollars
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Denominations
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Unless
otherwise specified in the relevant Pricing Supplement, the Notes may be
purchased in minimum denominations of $1,000 and integral multiples
thereof.
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Form of
Notes
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The Notes
will be represented by a single registered global security, deposited with
the Depository Trust Company.
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Guarantee
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The payment
and delivery obligations of The Royal Bank of Scotland N.V. under the
Notes, when and as they shall become due and payable, whether at maturity
or upon acceleration, are fully and unconditionally guaranteed by ABN AMRO
Holding N.V.
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Interest
Rate
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None. The
Notes do not pay interest.
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Payment at
Maturity
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Unless
otherwise specified in the relevant Pricing Supplement, for Principal
Protected Notes, at maturity, you will receive, for each $1,000 principal
amount Note, a cash amount calculated as follows:
(1) if
the Underlying Return is positive, $1,000 plus the Supplemental Redemption
Amount; and
(2) if
the Underlying Return is 0% or negative, $1,000.
Consequently,
for Principal Protected Notes, if the Underlying Return is 0% or negative,
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. In addition, if a
Maximum Amount is applicable, you will never receive a payment at maturity
greater than $1,000 plus the Maximum Amount per $1,000 principal amount of
Notes.
Unless
otherwise specified in the relevant Pricing Supplement, for Partially
Principal Protected Notes, at maturity, you will receive, for each $1,000
principal amount Note, a cash amount calculated as follows:
(1) if
the Underlying Return is positive, $1,000 plus the Supplemental Redemption
Amount; and
(2) if
the Underlying Return is 0% or negative, the greater of (i) $1,000 plus
(Underlying Return × $1,000) and (ii) $1,000 × Principal Protection
Level.
Consequently,
for Partially Principal Protected Notes, a decline in the value of the
Underlying will always reduce your cash payment at maturity below the
principal amount of your Notes and you could lose some of your initial
principal investment. In addition, if a Maximum Amount is
applicable, you will never receive a payment at maturity greater than
$1,000 plus the Maximum Amount per $1,000 principal amount of
Notes.
Any payment
on the Notes is subject to the creditworthiness of The Royal Bank of
Scotland N.V. and ABN AMRO Holding N.V., as guarantor.
The
Calculation Agent, which is our affiliate, will calculate the cash payment
due at maturity, if any, on the Determination Date. The
Calculation Agent will provide written notice to the Securities
Administrator at its New York Office, on which notice the Securities
Administrator may conclusively rely, of such payment amount, on or prior
to 11:00 a.m. on the business day preceding the Maturity
Date.
The
Calculation Agent will round all percentages resulting from any
calculation with respect to the Notes to the nearest one
hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)). All
dollar amounts resulting from such calculation will be rounded to the
nearest cent with one-half cent being rounded
upwards.
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Principal
Protection Level
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For Partially
Principal Protected Notes, a percentage as specified in the relevant
Pricing Supplement, which will be less than 100%.
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Supplemental
Redemption Amount
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Unless
otherwise specified in the relevant Pricing Supplement, the Supplemental
Redemption Amount is a cash amount for each $1,000 principal amount Note
equal to $1,000 × the Participation Rate × the Underlying
Return. However, if the relevant Pricing Supplement specifies a
Maximum Amount, unless otherwise specified in the relevant Pricing
Supplement, the Supplemental Redemption Amount is a cash amount for each
$1,000 principal amount Note equal to the lesser of (i) $1,000 x the
Participation Rate x the Underlying Return and (ii) the Maximum
Amount.
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Participation
Rate
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A fixed
amount or percentage as specified in the relevant Pricing
Supplement.
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Maximum
Amount
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A fixed cash
amount as specified in the relevant Pricing Supplement.
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Underlying
Return
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The
Underlying Return will be the percentage change in the price, value or
exchange rate of the Underlying, calculated as:
final price, value or
exchange rate – initial price, value or exchange rate
initial
price, value or exchange rate
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Initial
Price, Value or Exchange Rate
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The Initial Price of an Underlying Commodity is the Closing Price of such
Underlying Commodity on the Pricing Date.
The Initial
Price of an Underlying Stock is the Closing Price of such Underlying Stock
on the Pricing Date, divided by the Exchange Factor, subject to adjustment
for certain corporate events affecting such Underlying Stock, which we
describe in “Description of Notes — Adjustment Events.”
The Initial
Value of an Underlying Index is the Closing Value of such Underlying Index
on the Pricing Date.
The Initial
Price of an Underlying Fund is the Closing Price of a share of such
Underlying Fund on the Pricing Date, divided by the Exchange Factor,
subject to adjustment for certain corporate events affecting such
Underlying Fund, which we describe in “Description of Notes — Adjustment
Events.”
The Initial
Exchange Rate of an Underlying Currency Pair is the Spot Rate for such
Underlying Currency Pair on the Pricing Date.
The Initial
Value of an Underlying Basket is 1.00, unless otherwise specified in the
relevant Pricing Supplement.
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Final Price,
Value or Exchange Rate
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The Final Price of an Underlying Commodity is the Closing Price of such
Underlying Commodity on the Determination Date.
The Final
Price of an Underlying Stock is the Closing Price of such Underlying Stock
on the Determination Date.
The Final
Value of an Underlying Index is the Closing Value of such Underlying Index
on the Determination Date, subject to the terms and provisions which we
describe in “Description of Notes — Discontinuance of an Underlying Index;
Alteration of Method of Calculation.”
The Final
Price of an Underlying Fund is the Closing Price of a share of such
Underlying Fund on the Determination Date, subject to the terms and
provisions which we describe in “Description of Notes — Discontinuance of
an Underlying Fund; Alteration of Method of Calculation.”
The Final
Exchange Rate of an Underlying Currency Pair is the Spot Rate for such
Underlying Currency Pair on the Determination
Date.
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The Final
Value of an Underlying Basket will be the sum of the weighted returns of
the Basket Components, calculated as:
Sum of
(Component Return of each Basket Component × Component Weight of such
Basket Component)
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Component
Return
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With regard
to each Basket Component, the Component Return will be calculated
as:
final price, value or
exchange rate
initial price, value or exchange rate
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Component
Weight
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With respect
to each Basket Component, the Component Weight is a fixed percentage or
fraction determined in the manner specified in the relevant Pricing
Supplement, provided that the sum
of the Component Weights for all Basket Components will equal 100% or 1,
as applicable. The relevant Pricing Supplement will specify
either (i) the weight of each Basket Component in the Basket, which will
be fixed for the term of the Notes, or (ii) the manner in which the weight
of each Basket Component will be determined. For example, if
the relevant Pricing Supplement specifies that a Basket Component is
weighted to comprise 18% of the value of the Basket, the Component Weight
for that Basket Component is 18%. Alternatively, the relevant
Pricing Supplement may specify that, for a Basket consisting of two Basket
Components, the Basket Component with the greater component return will
make up 70% of the value of the Basket, and the Basket Component with the
lesser component return will make up 30% of the value of the
Basket.
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Closing
Price, Closing Value or Spot Rate
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With respect
to an Underlying Commodity, the Closing Price of the Underlying Commodity
on any Trading Day will equal the official settlement price or fixing
level of the Underlying Commodity as (a) made public by the Relevant
Exchange (which may be published under a Bloomberg ticker) or (b)
displayed on a specific page of Bloomberg, L.P., which we refer to as
“Bloomberg,” or Reuters Group PLC, which we refer to as “Reuters,” on such
Trading Day. The relevant Pricing Supplement will specify the
method of determining the Closing Price of an Underlying Commodity
(including the applicable Bloomberg ticker or Bloomberg or Reuters
page).
With respect
to an Underlying Stock (or any other security for which a Closing Price
must be determined) or Underlying Fund, if the Underlying Stock (or any
other security for which a Closing Price must be determined) or Underlying
Fund is listed on a U.S. securities exchange registered under the
Securities Exchange Act of 1934, as amended (which we refer to as the
Exchange Act), or is included in the OTC Bulletin Board Service, which we
refer to as the OTC Bulletin Board (operated by the Financial Industry
Regulatory Authority), the Closing Price for one share of the Underlying
Stock (or one unit of any such other security) or one share of the
Underlying Fund on any Trading Day means (i) the last reported sale price,
regular way (or if listed on NASDAQ, the official closing price), in the
principal trading session on such day on the principal securities exchange
on which the Underlying Stock (or any such other security) or shares of
the Underlying Fund are listed or admitted to trading and (ii) if not
listed or admitted to trading on any such securities exchange or if such
last reported sale price is not obtainable (even if the Underlying Stock,
other such other security or shares of the Underlying Fund are listed or
admitted to trading on such securities exchange), the last reported sale
price in the principal trading session on the over-the-counter market as
reported on the Relevant Exchange or OTC Bulletin Board on such day. If
the last reported sale price is not available pursuant to clause (i) or
(ii) of the preceding sentence, the Closing Price for any Trading Day
shall be the mean, as determined by the Calculation Agent, of the bid
prices for the Underlying Stock (or any such other security) or shares of
the Underlying Fund obtained from as many dealers in such security, but
not exceeding three, as will make such bid prices available to the
Calculation Agent. Bids of RBSSI or any of our other affiliates
may be included in the calculation of the mean, but only if any such bid
is not the lowest of the bids obtained. The term “OTC Bulletin
Board Service” shall include any successor service
thereto.
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With respect
to an Underlying Index on any Trading Day, the Closing Value means the
closing value of such Underlying Index on such Trading Day.
With respect
to an Underlying Currency Pair on any Trading Day, the Spot Rate means (a)
the spot exchange rate, expressed as the number of units of Base Currency
of such Underlying Currency Pair per one unit of the Reference Currency of
such Underlying Currency Pair or (b) the spot exchange rate, expressed as
the number of units of Reference Currency of such Underlying Currency Pair
per one unit of the Base Currency of such Underlying Currency Pair, in
each case as reported by Reuters on the relevant page or by Bloomberg on
the relevant page or any substitute Reuters or Bloomberg page at 10:00
a.m. New York City time (or such other time as specified in the relevant
pricing supplement). The relevant Pricing Supplement will
specify the means in which the Spot Rate will be expressed whether the
Reuters or Bloomberg page will be used and the specific Reuters or
Bloomberg page to be used to determine the Spot Rate.
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Determination
Date
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As specified
in the relevant Pricing Supplement, subject to adjustment as described
below.
With respect
to an Underlying Commodity, Underlying Stock, an Underlying Equity Index,
an Underlying Fund or an Underlying Currency Pair, if the scheduled
Determination Date is not a Trading Day, or if a Market Disruption Event
has occurred on such Trading Day, the Determination Date for such
Underlying Commodity, Underlying Stock, Underlying Equity Index,
Underlying Fund or Underlying Currency Pair shall be the immediately
succeeding Trading Day; provided that the
Determination Date with respect to any Underlying Commodity, Underlying
Stock, Underlying Equity Index, Underlying Fund or Underlying Currency
Pair shall be no later than the second scheduled Trading Day preceding the
Maturity Date, notwithstanding the occurrence of a Market Disruption Event
on such second scheduled Trading Day or such second scheduled Trading Day
is not a Trading Day. For information about what constitutes a
Market Disruption Event, see below under “— Market Disruption
Events.”
If, with
respect to an Underlying Commodity, a Market Disruption Event occurs on
such second scheduled Trading Day prior to the Maturity Date or such
scheduled Trading Day is not a Trading Day, the Calculation Agent will
determine the Closing Price by requesting the principal New York office of
each of four leading dealers in the relevant market, selected by the
Calculation Agent, to provide a quotation of the relevant
price. If at least two of such quotations are provided as
requested, the Closing Price shall be the arithmetic mean of such
quotations. If only one such quotation is provided as
requested, the Closing Price shall be such price. If no quotations are
provided as requested, the Closing Price shall be determined by the
Calculation Agent, in its sole and absolute discretion (acting in good
faith), taking into account any information that it deems
relevant.
If, with
respect to an Underlying Equity Index or an Underlying Fund, a Market
Disruption Event occurs on such second scheduled Trading Day prior to the
Maturity Date or such scheduled Trading Day is not a Trading Day, the
Calculation Agent will determine the Closing Price or Closing Value in
accordance with the formula for calculating the price of the Underlying
Fund or the value of the Underlying Equity Index, as applicable, last in
effect prior to the commencement of the Market Disruption Event, using the
closing price or settlement price or fixing level (or, if trading in the
relevant securities or commodities or commodity futures contracts has been
materially suspended or materially limited, its good faith estimate of the
closing price or settlement price or fixing level that would have
prevailed but for such suspension or limitation) on such Trading Day of
each security (or, with respect to an Underlying Commodity Fund, each
commodity or commodity futures contract) most
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recently
comprising such Underlying Equity Index or Underlying Fund, as applicable.
If, with
respect to an Underlying Currency Pair, a Market Disruption Event occurs
on such second scheduled Trading Day prior to the Maturity Date or such
scheduled Trading Day is not a Trading Day, the Calculation Agent will
determine the Spot Rate at approximately 10:00 a.m. New York City time (or
such other time as specified in the relevant pricing supplement) on the
relevant date in accordance with the following substitute
procedures:
(a) The Final Exchange Rate will
be either (i) the Base Currency/Reference Currency exchange rate,
expressed as the number of units of Base Currency of such Underlying
Currency Pair per one unit of the Reference Currency of such Underlying
Currency Pair or (ii) the Reference Currency/Base Currency exchange rate,
expressed as the number of units of Reference Currency of such Underlying
Currency Pair per one unit of the Base Currency of such Underlying
Currency Pair (depending on how the Spot Rate is to be expressed, as
specified in the relevant pricing supplement) for settlement in two
business days reported by the Federal Reserve Bank of New York, in each
case as reported by Reuters on the relevant page or by Bloomberg on the
relevant page or any substitute Reuters or Bloomberg page at 10:00 a.m.
New York City time (or such other time as specified in the relevant
pricing supplement). The relevant Pricing Supplement will
specify whether the Reuters or Bloomberg page will be used and the
specific Reuters or Bloomberg page to be used to determine the Spot
Rate.
(b) If the exchange rate referenced to
in (a) above is not so quoted on Reuters or Bloomberg, as applicable, or
any substitute page thereto, then the Final Exchange Rate will be
calculated on the basis of the arithmetic mean of the applicable spot
quotations received by the Calculation Agent on the relevant date for the
purchase or sale of deposits in Base Currency/Reference Currency or
Reference Currency/Base Currency by the New York offices of three leading
banks engaged in the interbank market (selected in the sole discretion of
the Calculation Agent), such banks also referred to as reference banks. If
only two reference banks provide such spot quotations, then the Final
Exchange Rate will be the arithmetic mean of such two spot quotations
received by the Calculation Agent. If only one reference bank
spot quotation is available or if no reference bank provides such a spot
quotation, then the Calculation Agent shall determine the Final Exchange
Rate using its fair and reasonable discretion.
With respect
to an Underlying Commodity Index, if the scheduled Determination Date is
not a Trading Day, or if a Market Disruption Event has occurred on such
Trading Day, the Determination Date will be postponed to the last date on
which the settlement price or fixing level of a Disrupted Commodity (as
defined below) is determined, as described below; provided that, if the
Notes have a maturity of not more than one year, the Determination Date,
as postponed, will not produce a Maturity Date more than one year
(counting for this purpose either the issue date or the Maturity Date, but
not both) after the issue date (the last date that could serve as the
Determination Date without causing the maturity date to be more than one
year after the issue date, the “Final Disrupted Determination
Date”). If the Determination Date is postponed, the Calculation
Agent will calculate the Closing Value for that Determination Date
utilizing, for each commodity or futures contract included in the
Underlying Commodity Index that does not suffer a Market Disruption Event
or a non-Trading Day on the originally scheduled Determination Date, the
final settlement price or fixing level for such commodity or futures
contract on the originally scheduled Determination Date, and for each
commodity or futures contract included in the Underlying Commodity Index
that experiences a Market Disruption Event or a non-Trading Day on the
originally scheduled Determination Date (a “Disrupted Commodity”), the
settlement price for such Disrupted Commodity on the first Trading Day on
which a Market Disruption Event is not existing with respect to such
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Disrupted
Commodity. If, however, a Market Disruption Event with respect
to one or more Disrupted Commodities is continuing on the third Trading
Day following the originally scheduled Determination Date (or, for Notes
with a maturity of not more than one year, on the earlier of the third
Trading Day following the originally scheduled Determination Date and the
Final Disrupted Determination Date), the Calculation Agent will determine,
on such third Trading Day (or, for Notes with a maturity of not more than
one year, on the earlier of the third Trading Day following the originally
scheduled Determination Date and the Final Disrupted Determination Date),
in its discretion, an estimated fair value price for such Disrupted
Commodities after considering any available electronic or after hours
trading prices, related over-the-counter or other non-exchanged based
prices, implied prices that may be derived from other exchange traded
instruments, and estimated fair values based on fundamental market
information.
For Notes
linked to a Basket, if one or more of the Basket Components are subject to
a Market Disruption Event or non-Trading Day, the Determination Date for
each affected Basket Component will be adjusted as described
above.
All
determinations and adjustments to be made by the Calculation Agent with
respect to the value of the Final Exchange Rate and the amount payable at
maturity may be made by the Calculation Agent in its sole
discretion. See “Risk Factors” for a discussion of certain
conflicts of interest which may arise with respect to the Calculation
Agent.
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Relevant
Exchange
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Unless
otherwise specified in the relevant Pricing Supplement, with respect to an
Underlying Commodity, the Relevant Exchange means the primary exchange or
market of trading for the Underlying Commodity and any primary exchange
where futures or options contracts related to the Underlying Commodity are
traded.
With respect
to an Underlying Stock (or other security), the Relevant Exchange means
the primary U.S. securities exchange or organized market of trading for
the shares of the Underlying Stock (or other security). If a
Reorganization Event has occurred or if the shares of the Underlying Stock
are ADSs and such ADSs are delisted or the ADS facility is terminated, the
Relevant Exchange will be the stock exchange or securities market on which
the Exchange Property (as defined below under “— Adjustment Events”) that
is a listed equity security is principally traded or the primary
securities exchange or organized market for trading in the ADS Underlying
Stock, as applicable, in each case as determined by the Calculation
Agent.
With respect
to a commodity or commodity futures contract included in an Underlying
Commodity Index, the Relevant Exchange means the primary market or
exchange on which such commodity or contract trades.
With respect
to an Underlying Equity Index, the Relevant Exchange means the Relevant
Exchanges for any security (or any combination thereof) then included in
such Underlying Index.
With respect
to an Underlying Fund, the Relevant Exchange means the primary U.S.
securities exchange or organized market of trading for shares of such
Underlying Fund.
With respect
to a Target Index, the Relevant Exchange means the primary exchange or
market of trading for any security (or any combination thereof) then
included in the Target Index.
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Trading
Day
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Unless
otherwise specified in the relevant Pricing Supplement, with respect to an
Underlying Commodity, a Trading Day means (a) if the Underlying Commodity
is not gold, silver or platinum (each a “Bullion Commodity”), a day, as
determined by the Calculation Agent, on the Relevant Exchange with respect
to the applicable Underlying Commodity is open for trading during its
regular trading session, and (b) if the Underlying Commodity is a Bullion
Commodity, a day, as determined by the Calculation Agent, on which the
Relevant Exchange is open to effectuate delivery of the relevant Bullion
Commodity.
With respect
to an Underlying Stock, a Trading Day means a day, as determined by the
Calculation Agent, on which trading is generally conducted on the Relevant
Exchange.
With respect
to an Underlying Equity Index, a Trading Day means a day, as determined by
the Calculation Agent, on which such Underlying Index is calculated and
published and on which securities comprising more than 80% of the value of
such Underlying Index on such day are capable of being traded on their
Relevant Exchanges during the one-half hour before the determination of
the Closing Value of such Underlying Index.
With respect
to an Underlying Commodity Index, a Trading Day means a day, as determined
by the Calculation Agent, on which the Relevant Exchanges for all
commodities or commodity futures contracts included in such Underlying
Commodity Index are open for business, including half-day
opening.
With respect
to an Underlying Fund, a Trading Day means a day, as determined by the
Calculation Agent, on which trading in shares or commodities or commodity
futures contracts of such Underlying Fund is generally conducted on the
Relevant Exchange and on which securities or commodities or commodity
futures contracts comprising more than 80% of the value of the Target
Index on such day are capable of being traded on their Relevant Exchanges
during the one-half hour before the determination of the Closing Price of
such Underlying Fund.
With respect
to an Underlying Currency Pair, a Trading Day means a day, other than a
Saturday or a Sunday, that is neither a legal holiday nor a day on which
commercial banks are authorized or required by law, regulation or
executive order to close (including for dealings in foreign exchange in
accordance with the practice of the foreign exchange market) in New York
City and the principal financial centers for the Reference Currency and
the Base Currency for such Underlying Currency Pair, as specified in the
relevant Pricing Supplement.
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Trustee
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Wilmington
Trust Company
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Securities
Administrator
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Citibank,
N.A.
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Market
Disruption Event
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With respect to an Underlying Commodity, a Market Disruption Event means:
(i)
either:
(a) a
material suspension of, or material limitation imposed on, trading in (i)
the Underlying Commodity on its Relevant Exchange or (ii) futures or
options contracts relating to the Underlying Commodity on the Relevant
Exchange for those contracts;
(b) the
temporary or permanent failure of the Relevant Exchange to announce or
publish the official settlement price or fixing level, as applicable, of
the Underlying Commodity, or, if the Closing Price is determined by
reference to the price displayed on a
Bloomberg
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or Reuters
page, the temporary or permanent failure of Bloomberg or Reuters, as
applicable, to publish the official settlement price or fixing level, as
applicable, of the Underlying Commodity;
(c) the
failure of trading to commence, or the permanent discontinuance of
trading, in the Underlying Commodity or futures or options contracts
related to the Underlying Commodity on the Relevant Exchange;
(d) the
disappearance of, or of trading in, the Underlying Commodity;
or
(e) the
imposition of , change in or removal of an excise, severance, sales, use,
value-added, transfer, stamp, documentary, recording or similar tax on, or
measured by reference to, the Underlying Commodity (other than a tax on,
or measured by reference to overall gross or net income) by any government
or taxation authority after the Pricing Date, if the direct effect of such
imposition, change or removal is to raise or lower the official settlement
price or fixing level, as applicable, of the Underlying Commodity on any
day that would otherwise be a Determination Date from what it would have
been without that imposition, change or removal,
in each case
as determined by the Calculation Agent in its sole discretion;
and
(ii) a
determination by the Calculation Agent in its sole discretion that the
applicable event described in clause (i) above materially interfered with
our ability or the ability of any of our affiliates to adjust or unwind
all or a material portion of any hedge with respect to the
Notes.
For this
purpose, with respect to an Underlying Commodity traded on a Relevant
Exchange, a “failure of trading to commence” on the Relevant Exchange will
not include any time when such Relevant Exchange is itself closed for
trading under ordinary circumstances.
With respect
to an Underlying Stock or any other securities (other than shares of an
Underlying Fund) for which a Closing Price must be determined, Market
Disruption Event means:
(i)
either:
(a)
the occurrence or existence of a suspension, absence or material
limitation of trading of the Underlying Stock (or such other securities)
on the Relevant Exchange for the Underlying Stock (or such other
securities) for more than two hours of trading during, or during the
one-half hour period preceding the close of, the principal trading session
on such Relevant Exchange;
(b)
a breakdown or failure in the price and trade reporting systems of the
Relevant Exchange for the Underlying Stock (or such other securities) as a
result of which the reported trading prices for the Underlying Stock (or
such other securities) during the last one-half hour preceding the close
of the principal trading session on such Relevant Exchange are materially
inaccurate; or
(c)
the suspension, absence or material limitation of trading on the primary
market for trading in futures or options contracts related to the
Underlying Stock (or such other securities), if available, during the
one-half hour period preceding the close of the principal trading session
in such market,
in each case
as determined by the Calculation Agent in its sole discretion;
and
(ii) a
determination by the Calculation Agent in its sole discretion that the
applicable event described in clause (i) above materially interfered with
our ability or the ability of any of our affiliates to unwind or adjust
all or a material portion of the hedge with respect to the
Notes.
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For purposes
of determining whether a Market Disruption Event with respect to the
Underlying Stock (or such other security) has occurred: (1) a limitation
on the hours or number of days of trading will not constitute a Market
Disruption Event if it results from an announced change in the regular
business hours of the Relevant Exchange or the primary market for trading
in the relevant futures or options contracts; (2) a decision to
permanently discontinue trading in the relevant futures or options
contract will not constitute a Market Disruption Event; (3) limitations
pursuant NYSE Rule 80B (or any applicable rule or regulation enacted or
promulgated by the New York Stock Exchange Inc., any other self-regulatory
organization or the Commission of similar scope as determined by the
Calculation Agent) on trading during significant market fluctuations shall
constitute a suspension, absence or material limitation of trading; (4) a
suspension of trading in the relevant futures or options contract by the
primary market for trading in such futures or options, if available, by
reason of (x) a price change exceeding limits set by such market, (y) an
imbalance of orders relating to such contracts or (z) a disparity in bid
and ask quotes relating to such contracts will constitute a suspension,
absence or material limitation of trading in such futures or options
contracts; and (5) a suspension, absence or material limitation of trading
on the primary market on which the relevant futures or options are traded
will not include any time when such market is itself closed for trading
under ordinary circumstances.
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With respect
to an Underlying Equity Index, Market Disruption Event means:
(i) either:
(a)
any suspension or absence or limitation imposed on trading in stocks then
constituting 20% or more of the level of the Underlying Equity Index by
the primary exchange therefor or otherwise and whether by reason of
movements in price exceeding limits permitted by such exchange or
otherwise or by any exchange or quotation system on which trading in
futures or options contracts relating to stocks then constituting 20% or
more of the level of the Underlying Equity Index is executed,
(b)
any event (other than an event described in clause (c) below) that
disrupts or impairs (as determined by the Calculation Agent) the ability
of market participants in general (1) to effect transactions in or obtain
market values for stocks then constituting 20% or more of the level of the
Underlying Equity Index on the primary exchange therefor or (2) to effect
transactions in or obtain market values for futures or options contracts
relating to stocks then constituting 20% or more of the level of the
Underlying Equity Index on any other exchange, or
(c)
the closure on any Trading Day of the primary exchange for stocks then
constituting 20% or more of the level of the Underlying Equity Index, or
any exchange or quotation system on which trading in future or options
relating the such stocks is executed, prior to its scheduled closing time
unless such earlier closing time is announced by such exchange at least
one hour prior to the earlier of (1) the actual closing time for the
regular trading session on such exchange on such Trading Day and (2) the
submission deadline for orders to be entered into such exchange for
execution on such Trading Day; and
(ii) a
determination by the Calculation Agent in its sole discretion that the
applicable event described in clause (i) above materially interfered with
our ability or the ability of any of our affiliates to unwind or adjust
all or a material portion of the hedge with respect to the
Notes.
For purposes
of determining whether a Market Disruption Event exists with respect to an
Underlying Equity Index at any time, if trading in a security included in
the Underlying Equity Index is materially suspended or materially limited
at that time, or there occurs an event that disrupts or impairs the
ability of market participants in general to effect transactions in or
obtain market values for such security, then the
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relevant
percentage contribution of that security to the level of the Underlying
Equity Index shall be based on a comparison of (i) the portion of the
level of the Underlying Equity Index attributable to that security
relative to (ii) the overall level of the Underlying Equity Index, in each
case immediately before the occurrence of that suspension, limitation or
other market disruption, as the case may be.
For purposes
of determining whether a Market Disruption Event with respect to an
Underlying Equity Index has occurred: (1) a
limitation on the hours or number of days of trading will not constitute a
Market Disruption Event if it results from an announced change in the
regular business hours of the Relevant Exchange or market, (2) a decision
permanently to discontinue trading in the relevant futures or options
contract will not constitute a Market Disruption Event, (3) limitations
pursuant to NYSE Rule 80B (or the rules of any Relevant Exchange similar
to any applicable rule or regulation enacted or promulgated by any other
self-regulatory organization or any government agency of similar scope as
determined by the Calculation Agent) on trading during significant market
fluctuations will constitute a suspension or absence or limitation of
trading, (4) a suspension of trading in a futures or options contract on
the Underlying Index by the primary securities market related to such
contract by reason of (x) a price change exceeding limits set by such
exchange or market, (y) an imbalance of orders relating to such contracts
or (z) a disparity in bid and ask quotes relating to such contracts will
constitute a suspension or absence or limitation of trading in futures or
options contracts related to the Underlying Equity Index and
(5) a suspension or absence or limitation of trading on any Relevant
Exchange or on the primary market on which futures or options contracts
related to the Underlying Index are traded will not include any time when
such market is itself closed for trading under ordinary
circumstances.
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With respect
to an Underlying Commodity Index, Market Disruption Event
means:
(i)
either:
(a)
the termination or suspension of, or material limitation or disruption in,
the trading of any commodity or exchange-traded futures contract, then
included in the Underlying Index,
(b)
the price at any time of any commodity or exchange-traded commodity
futures contract then included in the Underlying Commodity Index has
increased or decreased by an amount equal to or greater than the maximum
permitted price change set by the Relevant Exchange;
(c)
the failure of the sponsor or calculation agent, as the case may be, for
the Underlying Commodity Index to calculate and publish the U.S. dollar
level for the Underlying Commodity Index;
(d)
the settlement price or fixing level is not published for any commodity or
exchange-traded futures contract then included in the Underlying Commodity
Index;
(e)
the occurrence of a material change in the formula for or the method of
calculating the relevant settlement price or fixing level of the commodity
or exchange-traded futures contracts then included in the Underlying
Commodity Index; or
(f) the
occurrence of a material change in the content, composition or
constitution of the commodities or exchange-traded futures contracts then
included in the Underlying Commodity Index;
in each case
as determined by the Calculation Agent;
and
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(ii) a
determination by the Calculation Agent in its sole discretion that the
applicable event described in clause (i) above materially interfered with
our ability or the ability of any of our affiliates to unwind or adjust
all or a material portion of the hedge with respect to the
Notes.
For purposes
of determining whether a Market Disruption Even with respect to an
Underlying Commodity Index has occurred, a limitation on the hours or
number of days of trading will not constitute a Market Disruption Event if
it results from an announced change in the regular business hours of the
Relevant Exchange.
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With respect
to an Underlying Fund, Market Disruption Event means:
(i) either:
(a)
the occurrence or existence of a suspension, absence or material
limitation of trading of the Underlying Fund on the Relevant Exchange for
the Underlying Fund for more than two hours of trading during, or during
the one-half hour period preceding the close of, the principal trading
session on such Relevant Exchange;
(b)
a breakdown or failure in the price and trade reporting systems of the
Relevant Exchange for the Underlying Fund as a result of which the
reported trading prices for the Underlying Fund during the last one-half
hour preceding the close of the principal trading session on such Relevant
Exchange are materially inaccurate;
(c)
the suspension, absence or material limitation of trading on the primary
market for trading in futures or options contracts related to the
Underlying Fund, if available, during the one-half hour period preceding
the close of the principal trading session in such market,
(d)
the occurrence or existence of a suspension, absence or material
limitation of trading of stocks or commodities or commodity futures
contracts then constituting 20% or more of the value of the Target Index
on the Relevant Exchange(s) for such securities or commodities or
commodity futures contracts for more than two hours of trading during, or
during the one-half hour period preceding the close of, the principal
trading session on such Relevant Exchange(s), in each case as determined
by the Calculation Agent in its sole discretion; or
(e)
the suspension, material limitation or absence of trading on the primary
market for trading in futures or options contracts related to the Target
Index during the one-half hour period preceding the close of the principal
trading session in such market,
(f)
in each case as determined by the Calculation Agent in its sole
discretion; and
(ii) a
determination by the Calculation Agent in its sole discretion that the
applicable event described in clause (i) above materially interfered with
our ability or the ability of any of our affiliates to unwind or adjust
all or a material portion of the hedge with respect to the
Notes.
For the
purpose of determining whether a Market Disruption Event exists with
respect to an Underlying Fund at any time, if trading in a security or
commodity or commodity futures contract included in the Target Index is
materially suspended or materially limited at that time, or there occurs
an event that disrupts or impairs the
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ability of
market participants in general to effect transactions in or obtain market
values for such security or commodity or commodity futures contract, then
the relevant percentage contribution of that security to the level of the
Target Index shall be based on a comparison of (i) the portion of the
level of the Target Index attributable to that security or commodity or
commodity futures contract relative to (ii) the overall level of the
Target Index, in each case immediately before the occurrence of that
suspension, limitation or other market disruption, as the case may be.
For purposes
of determining whether a Market Disruption Event with respect to an
Underlying Fund has occurred: (1) a limitation on the hours or
number of days of trading will not constitute a Market Disruption Event if
it results from an announced change in the regular business hours of the
Relevant Exchange or the primary market for trading in the relevant
futures or options contracts; (2) a decision to permanently discontinue
trading in the relevant futures or options contract will not constitute a
Market Disruption Event; (3) limitations pursuant NYSE Rule 80B (or any
applicable rule or regulation enacted or promulgated by the New York Stock
Exchange Inc., any other self-regulatory organization or the Commission of
similar scope as determined by the Calculation Agent) on trading during
significant market fluctuations shall constitute a suspension, absence or
material limitation of trading; (4) a suspension of trading in the
relevant futures or options contract by the primary market for trading in
such futures or options, if available, by reason of (x) a price change
exceeding limits set by such market, (y) an imbalance of orders relating
to such contracts or (z) a disparity in bid and ask quotes relating to
such contracts will constitute a suspension, absence or material
limitation of trading in such futures or options contracts; and (5) a
suspension, absence or material limitation of trading on the primary
market on which the relevant futures or options are traded will not
include any time when such market is itself closed for trading under
ordinary circumstances.
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With respect
to an Underlying Currency Pair, Market Disruption Event
means:
either:
(i) a
determination by calculation agent in good faith that the Spot Rate for
such Underlying Currency Pair is unavailable; or
(ii) an event
that generally makes it impossible to obtain the Spot Rate for such
Underlying Currency Pair from the relevant Bloomberg or Reuters page, as
applicable.
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The
Calculation Agent shall as soon as reasonably practicable under the
circumstances notify us, the Trustee, the Securities Administrator, the
Depository Trust Company and the Agents of the existence or occurrence of
a Market Disruption Event with respect to any Underlying Stock, Underlying
Index, Underlying Fund or Underlying Currency Pair, as applicable, on any
day that but for the occurrence or existence of a Market Disruption Event
would have been the Determination Date for such Underlying Stock,
Underlying Index, Underlying Fund or Underlying Currency Pair, as
applicable.
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Exchange
Factor
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With respect
to an Underlying Stock or Underlying Fund, the Exchange Factor will be set
initially at 1.0, but will be subject to adjustment upon the occurrence of
certain corporate events affecting such Underlying Stock or Underlying
Fund. See “Adjustment Events” below.
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Adjustment
Events
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The Exchange
Factor with respect to an Underlying Stock will be adjusted as
follows:
1.
If the Underlying Stock is subject to a stock split or reverse stock
split, then once such split has become effective, the Exchange Factor with
respect to the Underlying Stock will be proportionately
adjusted.
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2.
If the Underlying Stock is subject (i) to a stock dividend (i.e., the
issuance of additional Underlying Stock) that is given ratably to all
holders of the Underlying Stock or (ii) to a distribution of the
Underlying Stock as a result of the triggering of any provision of the
corporate charter of the Underlying Company, in each case other than a
stock split described in paragraph 1, then once the dividend has become
effective and such Underlying Stock is trading ex-dividend, the Exchange
Factor with respect to the Underlying Stock will be proportionally
adjusted.
3.
There shall be no adjustments to any Exchange Factor to reflect cash
dividends or other distributions paid with respect to the Underlying Stock
unless such cash dividends or other distributions constitute Extraordinary
Dividends as described below (except that distributions described in
paragraph 2 above shall not be subject to this paragraph). A cash dividend
or other distribution with respect to the Underlying Stock shall be deemed
to be an “Extraordinary Dividend” if such dividend or other distribution
exceeds the immediately preceding non-Extraordinary Dividend for the
Underlying Stock by an amount equal to at least 10% of the Closing Price
of the Underlying Stock (as adjusted for any subsequent corporate event
requiring an adjustment hereunder, such as a stock split or reverse stock
split) on the Trading Day preceding the ex-dividend date for the payment
of such Extraordinary Dividend (the “ex-dividend date”). If an
Extraordinary Dividend occurs with respect to the Underlying Stock, the
Exchange Factor with respect to the Underlying Stock will be adjusted on
the relevant ex-dividend date so that the new Exchange Factor with respect
to the Underlying Stock will equal the product of (i) the then-current
Exchange Factor and (ii) a fraction, the numerator of which is the Closing
Price of the Underlying Stock on the Trading Day preceding the ex-dividend
date, and the denominator of which is the amount by which the Closing
Price on the Trading Day preceding the ex-dividend date exceeds the
Extraordinary Dividend Amount. The “Extraordinary Dividend Amount” with
respect to an Extraordinary Dividend for the Underlying Stock shall equal
(x) in the case of cash dividends or other distributions that constitute
regular dividends, the amount per share of such Extraordinary Dividend
minus the amount per share of the immediately preceding non-Extraordinary
Dividend for the Underlying Stock or (y) in the case of cash dividends or
other distributions that do not constitute regular dividends, the amount
per share of such Extraordinary Dividend. To the extent an Extraordinary
Dividend is not paid in cash, the value of the non-cash component will be
determined by the Calculation Agent, whose determination shall be
conclusive. A distribution on the Underlying Stock described in clause
(A), clause (D) or clause (E) in the definitions of “Reorganization Event”
of paragraph 5 below that also constitutes an Extraordinary Dividend shall
not cause an adjustment to such Exchange Factor pursuant to this paragraph
3.
4.
If the Underlying Company issues rights or warrants to all holders of its
Underlying Stock to subscribe for or purchase the Underlying Stock at an
exercise price per share less than the closing price of the Underlying
Stock on both (i) the date the exercise price of such rights or warrants
is determined and (ii) the expiration date of such rights or warrants, and
if the expiration date of such rights or warrants precedes the maturity of
the Notes, then the Exchange Factor with respect to the Underlying Stock
shall be adjusted to equal the product of the prior Exchange Factor with
respect to the Underlying Stock and a fraction, the numerator of which
shall be the number of shares of the Underlying Stock
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outstanding
immediately prior to the issuance of such rights or warrants plus the
number of additional shares of the Underlying Stock offered for
subscription or purchase pursuant to such rights or warrants and the
denominator of which shall be the number of shares of the Underlying Stock
outstanding immediately prior to the issuance of such rights or warrants
plus the number of additional shares of Underlying Stock which the
aggregate offering price of the total number of shares of the Underlying
Stock so offered for subscription or purchase pursuant to such rights or
warrants would purchase at the closing price on the expiration date of
such rights or warrants, which shall be determined by multiplying such
total number of shares offered by the exercise price of such rights or
warrants and dividing the product so obtained by such Closing Price.
5.
If a Reorganization Event (as defined below) occurs, in each case as a
result of which the holders of the Underlying Stock are entitled to
receive Exchange Property (as defined below) with respect to or in
exchange for the Underlying Stock, then, following the effective date of
such Reorganization Event, in lieu of using the Closing Price for the
Underlying Stock to calculate the Underlying Return of the Underlying
Stock on the Determination Date, the Calculation Agent will use the
Transaction Value received with respect to a share of the Underlying
Stock, as set forth below.
“Reorganization
Event” means with respect to the Underlying Stock (A) there has occurred
any reclassification or change with respect to such Underlying Stock,
including, without limitation, as a result of the issuance of any tracking
stock by the Underlying Company; (B) the Underlying Company or any
surviving entity or subsequent surviving entity of the Underlying Company
(an “Underlying Company Successor”) has been subject to a merger,
combination or consolidation and is not the surviving entity; (C) any
statutory exchange of securities of the Underlying Company or any
Underlying Company Successor with another corporation occurs (other than
pursuant to clause (B) above); (D) the Underlying Company is liquidated;
(E) the Underlying Company issues to all of its shareholders equity
securities of an issuer other than such Underlying Company (other than in
a transaction described in clauses (B), (C) or (D) above) (a “Spin-off
Event”); or (F) a tender or exchange offer or going-private transaction is
consummated for all the outstanding shares of the Underlying
Company.
“Exchange
Property” means securities, cash or any other assets distributed to
holders of the Underlying Stock in any Reorganization Event, including,
(A) in the case of the issuance of tracking stock or in the case of a
Spin-off Event, the Underlying Stock with respect to which the tracking
stock or spun-off security was issued and (B) in the case of any other
Reorganization Event where the Underlying Stock continues to be held by
the holders receiving such distribution, the Underlying
Stock.
“Transaction
Value” means (A) for any cash received as Exchange Property in any such
Reorganization Event, the amount of cash received per share of Underlying
Stock valued as of the date of the Reorganization Event; (B) for any
property other than cash or securities received in any such Reorganization
Event, the market value, as determined by the Calculation Agent, as of the
date of receipt by the party owning the original shares, of such Exchange
Property received per share of Underlying Stock; and (C) for any security
received in any such Reorganization Event (including in the case of the
issuance of tracking stock, such reclassified Underlying Stock and, in the
case of a Spin-off Event, the Underlying Stock with respect to which the
spun-off security was issued), an amount equal to the Closing Price, as of
the Determination Date, per share of such security multiplied by the
quantity of such security received for each such Underlying
Stock.
6.
If an ADS serving as the Underlying Stock is no longer listed or admitted
to trading on a U.S. securities exchange registered under the Exchange
Act, or
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included in
the OTC Bulletin Board, or if the ADS facility between the Underlying
Company and the ADS depositary is terminated for any reason, then, on and
after the date the ADSs are no longer so listed or admitted to trading or
the date of such termination, as applicable (the “Change Date”), the ADS
Underlying Stock will be deemed to be the Underlying Stock. The
Exchange Factor will thereafter equal the last value of the Exchange
Factor for the ADSs multiplied by the number of shares of ADS Underlying
Stock represented by a single ADS. The Closing Price of the Underlying
Stock on the Determination Date shall be expressed in U.S. dollars,
converting the closing price of the ADS Underlying Stock on the
Determination Date into U.S. dollars using the applicable exchange rate on
the Change Date as described below.
On the
Determination Date, the applicable exchange rate will be the spot rate of
the local currency of the ADS Underlying Stock relative to the U.S. dollar
as reported by Reuters on the relevant page for such rate at approximately
the closing time of the Relevant Exchange for the ADS Underlying Stock on
such day. However, if such rate is not displayed on the
relevant Reuters page on the Determination Date, the applicable exchange
rate on such day will equal an average (mean) of the bid quotations in The
City of New York received by the Calculation Agent at approximately 11:00
a.m., New York City time, on the business day immediately following the
Determination Date, from three recognized foreign exchange dealers
(provided that each such dealer commits to execute a contract at its
applicable bid quotation) or, (2) if the Calculation Agent is unable to
obtain three such bid quotations, the average of such bid quotations
obtained from two recognized foreign exchange dealers or, (3) if the
Calculation Agent is able to obtain such bid quotation from only one
recognized foreign exchange dealer, such bid quotation, in each case for
the purchase of the applicable foreign currency for U.S. dollars in the
aggregate principal amount of the Notes for settlement on the third
business day following the Determination Date. If the
Calculation Agent is unable to obtain at least one such bid quotation, the
Calculation Agent will determine the applicable exchange rate in its sole
discretion.
With respect
to paragraphs 1 to 5 above, if ADSs are serving as an Underlying Stock,
all adjustments to the Exchange Factor for such Underlying Stock will be
made as if the ADS Underlying Stock is serving as the Underlying Stock.
Therefore, for example, if the ADS Underlying Stock is subject to a
two-for-one stock split and assuming the Exchange Factor is equal to one,
the Exchange Factor for the Underlying Stock would be adjusted to equal to
two. If the Notes are linked to ADSs, the term “dividend” will
mean, unless otherwise specified in the relevant Pricing Supplement, the
dividend paid by the issuer of the ADS Underlying Stock, net of any
applicable foreign withholding or similar taxes that would be due on
dividends paid to a U.S. person that claims and is entitled to a reduction
in such taxes under an applicable income tax treaty, if
available.
If ADSs are
serving as an Underlying Stock, no adjustment to the ADS price or the
Exchange Factor, including those described below, will be made if (1)
holders of ADSs are not eligible to participate in any of the transactions
described above or (2) (and to the extent that) the Calculation Agent
determines in its sole discretion that the issuer or the depositary for
the ADSs has adjusted the number of shares of the ADS Underlying Stock
represented by each ADS so that the ADS price would not be affected by the
corporate event in question. However, to the extent that the
number of shares of ADS Underlying Stock represented by each ADS is
changed for any other reason, appropriate adjustments to the Exchange
Factor will be made to reflect such
change.
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With respect
to paragraphs 1 through 5 above, no adjustments to the Exchange Factor for
the Underlying Stock will be required unless such adjustment would require
a change of at least 0.1% in the Exchange Factor then in
effect. The Exchange Factor resulting from any of the
adjustments specified above will be rounded to the nearest one
hundred-thousandth with five one-millionths being rounded
upward. Adjustments to the Exchange Factor of the Underlying
Stock will be made up to and including the Determination
Date.
No
adjustments to the Exchange Factor or method of calculating the Exchange
Factor shall be required other than those specified above. However, the
Bank may, at its sole discretion, cause the Calculation Agent to make
additional changes to the Exchange Factor upon the occurrence of corporate
or other similar events that affect or could potentially affect market
prices of, or shareholders’ rights in, the Underlying Stock (or other
Exchange Property) but only to reflect such changes, and not with the aim
of changing relative investment risk. The adjustments specified above do
not cover all events that could affect the market price or the Closing
Price of the Underlying Stock, including, without limitation, a partial
tender or partial exchange offer for the Underlying
Stock.
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The Exchange
Factor with respect to an Underlying Fund will be adjusted as
follows:
If the shares
of the Underlying Fund are subject to a stock split or reverse stock
split, then once such split has become effective, the Exchange Factor will
be adjusted to equal the product of the prior Exchange Factor and the
number of shares issued in such stock split or reverse stock split with
respect to one share of the underlying Fund.
No
adjustments to the Exchange Factor shall be required unless such
adjustment would require a change of at least 0.1% in the Exchange Factor
then in effect. The Exchange Factor resulting from any of the adjustments
specified above shall be rounded to the nearest one hundred-thousandth
with five one-millionths being rounded upward.
No
adjustments to the Exchange Factor or method of calculating the Exchange
Factor shall be required other than those specified above. However, the
Bank may, at its sole discretion, cause the Calculation Agent to make
additional changes to the Exchange Factor upon the occurrence of other
similar events that affect or could potentially affect market prices of,
or shareholders’ rights in, the Underlying Fund but only to reflect such
changes, and not with the aim of changing relative investment risk. The
adjustments specified above do not cover all events that could affect the
market price or the Closing Price of the Underlying Fund.
The
Calculation Agent will provide information as to any adjustments to the
Exchange Factor or method of calculating the Exchange Factor upon written
request by any holder of the Notes.
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Discontinuance
of an Underlying Index; Alteration of Method of
Calculation
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If the
sponsor of an Underlying Index (an “Index Sponsor”) discontinues
publication of the Underlying Index and such Index Sponsor or another
entity publishes a successor or substitute index that the Calculation
Agent determines, in its sole discretion, to be comparable to the
discontinued Underlying Index (such index being referred to herein as a
“Successor Index”), then the Final Value with respect to the Underlying
Index will be determined by reference to the value of such Successor Index
at the close of trading on the Relevant Exchange or market for such
Successor Index on the applicable Determination Date.
Upon any
selection by the Calculation Agent of a Successor Index, the Calculation
Agent will cause written notice thereof to be furnished to us, the
Trustee, the Securities Administrator and the Depository Trust Company as
the holder of the Notes within three Trading Days of such
selection.
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If the Index
Sponsor discontinues publication of the Underlying Index prior to, and
such discontinuance is continuing on, the Determination Date, and the
Calculation Agent determines that no Successor Index is available with
respect to the Underlying Index at such time, then the Calculation Agent
will determine the Final Value with respect to the Underlying
Index. Such Final Value will be computed by the Calculation
Agent in accordance with the formula for and method of calculating the
Underlying Index last in effect prior to such discontinuance, using the
closing price (or, if trading in the relevant securities or commodities or
commodity futures contracts has been materially suspended or materially
limited, its good faith estimate of the closing price or settlement price
or fixing level that would have prevailed but for such suspension or
limitation) on the Determination Date for the Underlying Index of each
security or commodity or commodity futures contract most recently
comprising the Underlying Index. Notwithstanding these
alternative arrangements, discontinuance of the publication of the
Underlying Index may adversely affect the value of the Notes.
If at any
time the method of calculating the Underlying Index or a Successor Index,
or the value thereof, is changed in a material respect, or if the
Underlying Index or a Successor Index is in any other way modified so that
such index does not, in the opinion of the Calculation Agent, fairly
represent the value of the Underlying Index or such Successor Index had
such changes or modifications not been made, then the Calculation Agent
will, at the close of business in New York City on the Determination Date
with respect to the Underlying Index make such calculations and
adjustments to the terms of the Notes as, in the good faith judgment of
the Calculation Agent, may be necessary in order to arrive at a value of
an index comparable to the Underlying Index or Successor Index, as the
case may be, as if such changes or modifications had not been made, and on
the applicable Determination Date make each relevant calculation with
reference to the Underlying Index or Successor Index, as
adjusted. Accordingly, if the method of calculating the
Underlying Index or a Successor Index is modified so that the value of
such index is a fraction of what it would have been if it had not been
modified (e.g., due to a split in the index), then the Calculation Agent
will adjust such index in order to arrive at a value of the Underlying
Index or Successor Index as if it had not been modified (e.g., as if such
split had not occurred).
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Discontinuance
of an Underlying Fund; Alteration of Method of
Calculation
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If an
Underlying Fund is liquidated, delisted or otherwise terminated and the
sponsor of the Underlying Fund (a “Fund Sponsor”) or another entity
establishes and maintains a successor or substitute exchange-traded fund
that the Calculation Agent determines, in its sole discretion, to be
comparable to the liquidated, delisted or otherwise terminated Underlying
Fund (such fund being referred to herein as a “Successor Fund”), then the
Final Price with respect to the Underlying Fund will be determined by
reference to the price per share of such Successor Fund at the close of
trading on the Relevant Exchange or market for such Successor Fund on the
applicable Determination Date.
Upon any
selection by the Calculation Agent of a Successor Fund, the Calculation
Agent will cause written notice thereof to be furnished to us, the
Trustee, the Securities Administrator and the Depository Trust Company as
the holder of the Notes within three Trading Days of such
selection.
If the Fund
Sponsor liquidates, delists or otherwise terminates the Underlying Fund
prior to, and such liquidation, delisting or termination is continuing on,
the Determination Date, and the Calculation Agent determines that no
Successor Fund is available with respect to the Underlying Fund at such
time, then the Calculation Agent will determine the Final Price with
respect to the Underlying Fund. Such Final Price will be
computed by the Calculation Agent in accordance with the formula for and
method of calculating the Underlying Fund last in effect prior to such
liquidation, delisting or termination, using the closing price (or, if
trading in the relevant securities or commodities or commodity futures
contracts has been materially suspended or
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materially
limited, its good faith estimate of the closing price that would have
prevailed but for such suspension or limitation) on the Determination Date
for the Underlying Fund of each security or commodity or commodity futures
contract most recently comprising the Underlying
Fund. Notwithstanding these alternative arrangements,
liquidation, delisting or termination of the Underlying Fund may adversely
affect the value of the Notes.
If at any
time the method of calculating the price of a share of the Underlying Fund
or a Successor Fund is changed in a material respect, or if the Underlying
Fund or a Successor Fund is in any other way modified so that such fund
does not, in the opinion of the Calculation Agent, fairly represent the
price of the Underlying Fund or such Successor Fund had such changes or
modifications not been made, then the Calculation Agent will, at the close
of business in New York City on the Determination Date with respect to the
Underlying Fund make such calculations and adjustments to the terms of the
Notes as, in the good faith judgment of the Calculation Agent, may be
necessary in order to arrive at a price of a fund comparable to the
Underlying Fund or Successor Fund, as the case may be, as if such changes
or modifications had not been made, and on the applicable Determination
Date make each relevant calculation with reference to the Underlying Fund
or Successor Fund, as adjusted. Accordingly, if the method of
calculating the price of a share of the Underlying Fund or a Successor
Fund is modified so that the price of such fund is a fraction of what it
would have been if it had not been modified, then the Calculation Agent
will adjust such method in order to arrive at a price of the Underlying
Fund or Successor Fund as if it had not been modified.
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Alternate
Calculation in case of an Event of Default
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In case an
Event of Default with respect to the Notes shall have occurred and be
continuing, the amount declared due and payable for each Note upon any
acceleration of the Notes shall be determined by RBSSI, as Calculation
Agent, as though the Final Price, Final Value or Final Exchange Rate for
the Underlying as of the applicable Determination Date were the Final
Price, Final Value or Final Exchange Rate on the date of
acceleration. See “Description of Debt Securities — Events of
Default” in the Prospectus.
If the
maturity of the Notes is accelerated because of an Event of Default as
described above, we shall, or shall cause the Calculation Agent to,
provide written notice to the Trustee at its New York office, and to the
Securities Administrator at its Delaware office, on which notice the
Trustee and the Securities Administrator may conclusively rely, and to DTC
of the aggregate cash amount due with respect to the Notes, if any, as
promptly as possible and in no event later than two business days after
the date of acceleration.
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Calculation
Agent
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RBSSI, which
is our affiliate. All determinations made by the Calculation
Agent will be at the sole discretion of the Calculation Agent and will, in
the absence of manifest error, be conclusive for all purposes and binding
on you and on us.
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Additional
Amounts
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Subject to
certain exceptions and limitations described in “Description of Debt
Securities — Payment of Additional Amounts” in the accompanying
Prospectus, we will pay such additional amounts to holders of the Notes as
may be necessary in order that the net payment of any amount payable on
the Notes, after withholding for or on account of any present or future
tax, assessment or governmental charge imposed upon or as a result of such
payment by The Netherlands (or any political subdivision or taxing
authority thereof or therein) or the jurisdiction of residence or
incorporation of any successor corporation (other than the United States),
will not be less than the amount provided for in the Notes to be then due
and payable.
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Book Entry
Note or Certificated Note
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Book
Entry
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USE
OF PROCEEDS
Unless otherwise
specified in the relevant Pricing Supplement, the net proceeds we receive from
the sale of the Notes will be used for general corporate purposes and, in part,
by us or one or more of our affiliates in connection with hedging our
obligations under the Notes. The issue price of the Notes includes the selling
agents’ commissions (as shown on the cover page of the relevant Pricing
Supplement) paid with respect to the Notes and the cost of hedging our
obligations under the Notes. The cost of hedging includes the projected profit
that our affiliates expect to realize in consideration for assuming the risks
inherent in managing the hedging transactions. Since hedging our obligations
entails risk and may be influenced by market forces beyond our or our
affiliates’ control, such hedging may result in a profit that is more or less
than initially projected, or could result in a loss. See also “Risk Factors —
The Inclusion of Commissions and Cost of Hedging in the Issue Price is Likely to
Adversely Affect Secondary Market Prices” and “Potential Conflicts of Interest
between Note Holders and the Calculation Agent” and “Plan of Distribution
(Conflicts of Interest)” in this Product Supplement and “Use of Proceeds” in the
accompanying Prospectus.
U.S.
FEDERAL INCOME TAX CONSEQUENCES
The following is a
summary of the material U.S. federal income tax consequences of owning and
disposing of the Notes. It applies only to an investor who purchases Notes at
their original issuance for the issue price and holds those Notes as capital
assets within the meaning of Section 1221 of the Internal Revenue Code of
1986, as amended to the date hereof (the “Code”). This discussion is
based on the Code, administrative pronouncements, judicial decisions and
currently effective and proposed Treasury regulations, changes to any of which
subsequent to the date of this Product Supplement may affect the tax
consequences described below, possibly retroactively. It does not address all
aspects of U.S. federal income taxation that may be relevant to an investor in
light of the investor’s particular circumstances or to certain types of
investors subject to special treatment under the U.S. federal income tax laws,
such as certain former citizens or residents of the United States, certain
financial institutions, real estate investment trusts, regulated investment
companies, tax-exempt entities, dealers and certain traders in securities,
partnerships or other entities classified as partnerships for U.S. federal
income tax purposes, persons who hold the Notes as a part of a hedging
transaction, straddle, conversion or integrated transaction, U.S. holders (as
defined below) who have a “functional currency” other than the U.S. dollar, or
individual non-U.S. investors who are present in the United States for 183 days
or more in the taxable year in which their Notes are sold or
retired.
In addition, we
will not attempt to ascertain whether any entity included in or constituting any
Underlying or Basket Component would be treated as a “passive foreign investment
company” (a “PFIC”)
within the meaning of Section 1297 of the Code or as a “United States real
property holding corporation” (a “USRPHC”) within the meaning of
Section 897 of the Code. If any such entity were so treated, certain adverse
U.S. federal income tax consequences might apply, to a U.S. holder in the case
of a PFIC and to a non-U.S. holder in the case of a USRPHC, upon the sale,
exchange or retirement of a Note. You should refer to information filed with the
Securities and Exchange Commission or the equivalent governmental authority by
such entities and consult your tax adviser regarding the possible consequences
to you if any such entity is or becomes a PFIC or a USRPHC.
As the law
applicable to the U.S. federal income taxation of instruments such as the Notes
is technical and complex, the discussion below necessarily represents only a
general summary. Moreover, the effects of any applicable state, local or
non-U.S. tax laws are not discussed. You should consult your tax adviser
regarding the U.S. federal income tax consequences of an investment in the
Notes, as well as tax consequences arising under the laws of any state, local or
non-U.S. taxing jurisdiction.
Tax
Consequences to U.S. Holders
You are a “U.S.
holder” if, for U.S. federal income tax purposes, you are a beneficial owner of
a Note who is: (i) a citizen or resident of the United States; (ii) a
corporation created or organized under the laws of the United States or any
political subdivision thereof; or (iii) an estate or trust the income of
which is subject to U.S. federal income taxation regardless of its
source.
Notes
with a term of one year or less
The following
discussion applies only to Notes with a term of one year or less (from but
excluding the settlement date to and including the last possible date that the
Notes could be outstanding). Unless otherwise indicated
in the applicable Pricing Supplement, we intend to treat these Notes as
short-term debt instruments, and the remainder of this discussion assumes this
treatment.
No statutory,
judicial or administrative authority directly addresses the treatment of such
Notes or similar instruments for U.S. federal income tax purposes, and no ruling
will be requested from the IRS. As a result, certain aspects of the U.S. federal
income tax consequences of an investment in the Notes are unclear.
If you are a
cash-method taxpayer, you generally will not be required to recognize income
with respect to the Notes prior to maturity, other than pursuant to a sale or
exchange. If you are an accrual-method taxpayer (or a cash-method taxpayer who
elects to accrue income on the Notes currently), you will be subject to rules
that generally require accrual of income on short-term debt instruments on a
straight-line basis, unless you elect a constant-yield method of accrual based
on daily compounding. However, because the amount due on the Notes at maturity
is uncertain, it is not clear how such accruals should be determined. If you are
a cash-method taxpayer and you do not make the election to accrue interest
currently, you may be required to defer deductions for certain interest paid on
indebtedness incurred to purchase or carry the Notes. You should consult your
tax adviser regarding the amount and timing of any accruals.
Upon a sale,
exchange or retirement of a Note, you will recognize gain or loss equal to the
difference between the amount received and your basis in the Note. Your basis in
the Note should equal the amount paid to acquire the Note increased, if you
accrue income on the Note currently, by any previously accrued but unpaid
income. The amount of any resulting loss generally will be treated as a
short-term capital loss, the deductibility of which is subject to limitations.
It is possible, however, that if the Underlying or a Basket Component consists
of a currency Index or Currency Pairs, some or all of any loss on your Notes
could be ordinary in character, in which case special rules for reporting
foreign currency losses would also apply if the loss exceeds a specified
threshold. Any excess of an amount received at maturity over your basis in a
Note generally should be treated as ordinary income. It is not clear whether or
to what extent gain recognized upon a sale or exchange prior to maturity should
be treated as capital gain or ordinary income. You should consult your tax
adviser regarding these issues.
Notes
with a term of more than one year
The following
discussion applies only to Notes with a term of more than one year (from but
excluding the settlement date to and including the last possible date that the
Notes could be outstanding). Unless otherwise indicated in the applicable
Pricing Supplement, we intend to treat these Notes as “contingent payment debt
instruments” for U.S. federal income tax purposes, and the remainder of this
discussion assumes this treatment.
In general, the
Notes will be subject to the original issue discount (“OID”) provisions of the Code
and the Treasury regulations issued thereunder, and you will be required to
accrue as interest income in each year the OID on the Notes as described below,
although we will not make any payment with respect to the Notes prior to
maturity. We are required to determine a “comparable yield” for each issuance of
Notes. The “comparable yield” generally is the yield at which, in similar
general market conditions, we could issue a fixed-rate debt instrument with
terms similar to those of the Notes, including the level of subordination, term
and timing of payments, but excluding any adjustments for the riskiness of the
contingencies or the liquidity of the Notes. Solely for purposes of determining
the amount of interest income that you will be required to accrue, we are also
required to construct a “projected payment schedule” representing a payment at
maturity that would produce a yield to maturity on the Notes equal to the
comparable yield.
We will determine
the comparable yield for each issuance of Notes and will provide that comparable
yield, and the related projected payment schedule, in the applicable Pricing
Supplement for the Notes. Neither the comparable yield nor the
projected payment schedule constitutes a representation by us regarding the
actual amount, if any, that we will pay on the Notes.
For U.S. federal
income tax purposes, you are required to use the comparable yield and the
projected payment schedule determined by us to calculate your interest accruals
in respect of the Notes, unless you timely disclose and justify the use of other
estimates to the IRS.
Accordingly, you
will be required for U.S. federal income tax purposes to accrue an amount of OID
for each accrual period prior to and including the maturity (or earlier sale,
exchange or retirement) of the Notes, that equals the product of (i) the
adjusted issue price of the Notes (as defined below) as of the beginning of the
accrual period, (ii) the comparable yield of the Notes, adjusted for the
length of the accrual period, and (iii) the number of days during the accrual
period that you held the Notes divided by the number of days in the accrual
period. For U.S. federal income tax purposes, the “adjusted issue price” of a
Note is its issue price increased by any interest income you have previously
accrued.
Upon a sale or
exchange of a Note prior to its scheduled maturity, you will recognize taxable
gain or loss equal to the difference between the amount you receive and your
basis in the Note. Your basis in a Note will equal its cost increased by the
amount of interest income you have previously accrued. Any gain will be treated
as interest income, and any loss will be treated first as ordinary loss, to the
extent of previous interest inclusions, and then as capital loss.
At maturity, you
will be treated as receiving the amount of the payment set forth in the
projected payment schedule. If the amount you actually receive is more than the
projected amount, the excess will be treated as additional interest income to
you. If the amount you actually receive is less than the projected amount, this
shortfall will first reduce the amount of interest in respect of the Note that
you would otherwise be required to include in income for that taxable year,
thereafter will be treated as an ordinary loss to the extent of previous
interest inclusions, and thereafter will be treated as capital loss. These
losses are not subject to the limitation imposed on miscellaneous itemized
deductions under Section 67 of the Code. The deductibility of capital
losses, however, is subject to other limitations. Additionally, if you recognize
a loss above certain thresholds, you may be required to file a disclosure
statement with the IRS. You should consult your tax adviser regarding these
limitations and reporting obligations.
Special rules may
apply if the amount of the payment at maturity on a Note becomes fixed. For this
purpose, a payment will be treated as fixed if the remaining contingencies with
respect to it are remote or incidental. Under these rules, you would be required
to account for the difference between the originally projected payment at
maturity and the fixed amount thereof in a reasonable manner over the period to
which the difference relates. In addition, you would be required to make
adjustments to, among other things, your accrual periods and your basis in the
Notes. The character of any gain or loss on a sale or exchange of your Notes
also would be affected. You should consult your tax adviser concerning the
application of these rules.
Tax
Consequences to Non-U.S. Holders
You are a “non-U.S.
holder” if, for U.S. federal income tax purposes, you are a beneficial owner of
a Note who is: (i) a nonresident alien individual; (ii) a foreign
corporation; or (iii) a foreign estate or trust.
Unless otherwise
indicated in the applicable Pricing Supplement, payments to you on the Notes,
and any gain realized on a sale or exchange of the Notes, should be exempt from
U.S. federal income tax, including withholding tax, provided generally that (i)
you certify on IRS Form W-8BEN, under penalties of perjury, that you are not a
United States person and otherwise satisfy applicable requirements and (ii) such
amounts are not effectively connected with your conduct of a trade or business
in the United States.
If you are engaged
in a trade or business in the United States, and income from the Notes is
effectively connected with your conduct of that trade or business, you generally
will be taxed in the same manner as a U.S. holder. In this case, you will be
required to provide a properly executed IRS Form W-8ECI in order to claim an
exemption from withholding. If this paragraph applies to you, you should consult
your tax adviser with respect to other U.S. tax consequences of the ownership
and disposition of the Notes, including the possible imposition of a 30% branch
profits tax if you are a corporation.
Backup
Withholding and Information Reporting
Accruals of OID and
proceeds received from a sale, exchange or retirement of the Notes generally
will be subject to information reporting unless you are an “exempt recipient”
(such as a domestic corporation) and may also be subject to backup withholding
at the rate specified in the Code if you fail to provide certain identifying
information (such as an accurate taxpayer identification number, if you are a
U.S. holder) or meet certain other conditions. If you are a non-U.S. holder and
you provide a properly executed IRS Form W-8BEN or W-8ECI, as applicable, you
will generally establish an exemption from backup withholding.
Amounts withheld
under the backup withholding rules are not additional taxes and may be refunded
or credited against your U.S. federal income tax liability, provided the
required information is furnished to the IRS.
PLAN
OF DISTRIBUTION (CONFLICTS OF INTEREST)
Unless otherwise
specified in the relevant Pricing Supplement, we have appointed RBS Securities
Inc. (“RBSSI”) as agent for any offering of the Securities. RBSSI has
agreed to use reasonable efforts to solicit offers to purchase the
Securities. We will pay RBSSI, in connection with sales of the
Securities resulting from a solicitation such agent made or an offer to purchase
such agent received, a commission in an amount as specified in the relevant
Pricing Supplement. RBSSI has informed us that, as part of its distribution of
the Securities, it intends to reoffer the Securities to other dealers who will
sell the Securities. Each such dealer engaged by RBSSI, or further
engaged by a dealer to whom RBSSI reoffers the Securities, will purchase the
Securities at an agreed discount to the initial offering price of the
Securities. RBSSI has informed us that such discounts may vary from
dealer to dealer and that not all dealers will purchase or repurchase the
Securities at the same discount. RBSSI has also informed us that it
may pay any dealer additional fees payable upon maturity of the Securities based
on the performance of the Securities sold and/or additional fees payable
annually based on the amount of Notes sold by such dealer in a particular
calendar year; provided
that the aggregate amount of such discounts and additional fees paid to all
dealers for an offering shall not exceed the commission that RBSSI will receive
from us. You can find a general description of the commission rates
payable to the agents under “Plan of Distribution” in the accompanying
Prospectus Supplement.
RBSSI is an
affiliate of ours and Holding. RBSSI will conduct each offering of Securities in
compliance with the requirements of NASD Rule 2720 of the Financial Industry
Regulatory Authority, which is commonly referred to as FINRA, regarding a FINRA
member firm’s distribution of securities of an affiliate. Following the initial
distribution of any of these Securities, RBSSI may offer and sell those
Securities in the course of its business as broker-dealer. RBSSI may
act as principal or agent in these transactions and will make any sales at
varying prices related to prevailing market prices at the time of sale or
otherwise. RBSSI may use this Product Supplement, the relevant Pricing
Supplement and the accompanying Prospectus Supplement and Prospectus in
connection with any of these transactions. RBSSI is not obligated to make a
market in any of these Securities and may discontinue any market-making
activities at any time without notice.
RBSSI or an
affiliate of RBSSI may enter into one or more hedging transactions with us in
connection with this offering of Securities. See “Use of Proceeds”
above.
To
the extent that the total aggregate principal amount of the Notes being offered
by the relevant Pricing Supplement is not purchased by investors in that
offering, one or more of our affiliates may agree to purchase a portion of the
unsold Securities, and to hold such Securities for investment purposes. See
“Holding of the Securities by our Affiliates and Future Sales” under the heading
“Risk Factors.”
You
should rely only on the information contained or incorporated by reference
in this Product Supplement, the relevant Pricing Supplement, any related
Underlying Supplement, the Prospectus Supplement and the Prospectus. We
have not authorized anyone else to provide you with different or
additional information. We are offering to sell these Securities and
seeking offers to buy these Securities only in jurisdictions where offers
and sales are permitted. Neither the delivery of this Product Supplement
nor the relevant Pricing Supplement, any related Underlying Supplement,
accompanying Prospectus Supplement or Prospectus, nor any sale made
hereunder and thereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of The Royal Bank
of Scotland N.V. or ABN AMRO Holding N.V. since the date of the relevant
Pricing Supplement or that the information contained or incorporated by
reference in the accompanying Prospectus is correct as of any time
subsequent to the date of such information.
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THE
ROYAL BANK OF SCOTLAND N.V.
Senior
Fixed Rate Notes
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fully
and unconditionally guaranteed by
ABN
AMRO Holding N.V.
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TABLE
OF CONTENTS
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PRODUCT
SUPPLEMENT
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Page
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PS-2
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PS-9
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PS-33
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Principal
Protected Notes and Partially Principal Protected Notes linked to a
Commodity, Common Stock, an Index, an Exchange-Traded Fund, a Currency
Pair or a Basket of Commodities, Common Stocks, Indices, Exchange-Traded
Funds and/or Currency Pairs
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PS-34
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PS-53
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PS-54
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PS-57
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PROSPECTUS
SUPPLEMENT
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Page
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About This
Prospectus Supplement
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S-1
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Risk
Factors
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S-2
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Description
of Notes
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S-4
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Taxation in
the Netherlands
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S-25
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United States
Federal Income Taxation
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S-28
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Plan of
Distribution (Conflicts of Interest)
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S-36
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Legal
Matters
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S-38
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PROSPECTUS
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Page
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About This
Prospectus
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1
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Where You Can
Find Additional Information
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2
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Cautionary Statement on
Forward-Looking |
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PRODUCT
SUPPLEMENT
(TO
PROSPECTUS DATED
FEBRUARY
8, 2010 AND
PROSPECTUS
SUPPLEMENT
DATED
FEBRUARY 8, 2010)
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3
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Consolidated
Ratios of Earnings to Fixed Charges
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4
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The Royal
Bank of Scotland N.V. and ABN AMRO
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Holding N.V.
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5
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Use of
Proceeds
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6
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Description
of Debt Securities
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7
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Forms of
Securities
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17
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The
Depositary
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18
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Plan of
Distribution (Conflicts of Interest)
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20
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Legal
Matters
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23
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RBS
Securities Inc.
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Experts
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24
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Benefit Plan
Investor Considerations
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25
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Enforcement
of Civil Liabilities
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26
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