| PRODUCT SUPPLEMENT |
Product
Supplement No. 1-IV to
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| (TO PROSPECTUS DATED APRIL 2, 2010 |
Registration
Statement Nos. 333-162193 and 333-162193-01
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| AND PROSPECTUS SUPPLEMENT |
Dated April
2, 2010
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DATED
APRIL 2, 2010)
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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
RBS
Holdings N.V.
Reverse
ExchangeableSM
Securities and Knock-in Reverse ExchangeableSM
Securities
linked
to the Common Stock of an Underlying Company or an Exchange-Traded
Fund
The Reverse Exchangeable Securities
and Knock-in Reverse Exchangeable Securities, which we will each refer to as the
“Securities,” pay periodic cash payments, which we refer to as the coupon or
coupon payments, at a fixed rate, which we refer to as the coupon rate, but do
not guarantee any return of principal at maturity. Instead, the payout at
maturity will be based on the performance of (i) the common stock of an
Underlying Company, which we refer to as the Underlying Shares, or (ii) an
exchange-traded fund that tracks the performance of an underlying index or
basket of securities, primarily by holding securities or other instruments
related to such underlying index or basket, which we refer to as an Underlying
Fund. In certain circumstances described below, we will exchange each
Security at maturity for a predetermined number of the Underlying Shares or
shares of the Underlying Fund, as applicable, rather than the face amount of the
Securities. 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. If the Underlying Shares are
ADSs, the term “issuer” refers to the issuer of the shares underlying the ADSs,
and we refer to the index that an Underlying Fund tracks as the “Target
Index.” We refer to the Underlying Shares or the Underlying Fund, as
applicable, as the Underlying. If
we deliver shares of the Underlying, the market value of such shares on the
determination date will be less than the face amount of each Security and could
be zero. Accordingly, you could lose some or all of your initial
principal investment in the Securities. You will not participate in any
appreciation of the Underlying. Any payment on the Securities is subject to the
creditworthiness (i.e.,
the ability to pay) of The Royal Bank of Scotland N.V. and RBS
Holdings N.V., as guarantor.
This Product
Supplement describes terms that will apply generally to the Securities and
supplements the terms described in the accompanying Prospectus Supplement and
Prospectus. A separate term sheet or pricing supplement, as the case may be,
will specify the Underlying to which the Securities are linked and will describe
terms that apply to any specific issue of Securities, including any changes to
the terms specified below. We refer to such term sheets and pricing supplements
generally as Pricing Supplements. If the Securities are linked to an Underlying
Fund, a separate Underlying Supplement or the relevant Pricing Supplement will
describe the Target Index. 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 Securities are
our unsecured and unsubordinated obligations and are fully and unconditionally
guaranteed by RBS Holdings N.V.
The
Securities 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
Securities 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 Securities, 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 Securities but have agreed to use
reasonable efforts to solicit offers to purchase the Securities. To
the extent the full aggregate face amount of the Securities 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 all or part of the
unsold portion, which may constitute up to 15% of the total aggregate face
amount of the 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” and “Plan of Distribution.” The relevant Pricing
Supplement, this Product Supplement and the accompanying Prospectus Supplement
and Prospectus may be used by our affiliates in connection with offers and sales
of the Securities 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 RBS Holdings N.V., our parent
company. We refer to the Securities offered by the relevant Pricing
Supplement and the related guarantees as the “Securities” and to each individual
security offered thereby as a “Security.”
Reverse
ExchangeableSM and
RBS NotesSM
are service marks of The Royal Bank of Scotland N.V.
Any
Securities 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.
PS-1
SUMMARY
The
following summary answers some questions that you might have regarding the
Securities 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 Securities.
What
are the Securities?
The Securities are
non-principal protected securities issued by us, The Royal Bank of
Scotland N.V., and are fully and unconditionally guaranteed by our parent
company, RBS Holdings N.V. The Securities will pay periodic cash payments
at a fixed rate. We refer to the payments as the coupon or coupon
payments and the fixed rate as the coupon rate. The Securities are senior notes
of The Royal Bank of Scotland N.V. and have a maturity that will be
specified in the relevant Pricing Supplement. These Securities combine certain
features of debt and equity by offering a fixed coupon rate on the face amount
while the payment at maturity is determined based on the performance during the
term of the Securities of (i) the common stock of an Underlying Company, which
we refer to as the Underlying Shares, or (ii) an exchange-traded fund that
tracks the performance of an underlying index or basket of securities, primarily
by holding securities or other instruments related to such underlying index or
basket, which we refer to as an Underlying Fund. Therefore your principal is at
risk but you have no opportunity to participate in any appreciation of the
Underlying. Any payment on the Securities is subject to the creditworthiness
(i.e., the ability to pay) of The Royal Bank of Scotland N.V. and RBS
Holdings N.V., as guarantor.
We
refer to the issuer of the Underlying Shares as the Underlying Company. 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. If the Underlying Shares are ADSs, the term
“issuer” refers to the issuer of the shares underlying the ADSs. We
refer to the common stock represented by ADSs as the “ADS Underlying
Stock.” We refer to the index that an Underlying Fund tracks as the
“Target Index.” We refer to the Underlying Shares or the Underlying
Fund, as applicable, as the Underlying.
The Securities have
certain features that make them what we refer to as “Reverse Exchangeable
Securities” or “Knock-in Reverse Exchangeable Securities”:
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For Reverse
Exchangeable Securities, this means that if the closing price of the
Underlying on the determination date is equal to or greater than the
closing price on the pricing date (subject to adjustment), which we refer
to as the initial price, we will pay you in cash the face amount of each
Security you hold; however, if the closing price of the Underlying on the
determination date is less than the initial price, we will deliver to you,
in exchange for each $1,000 face amount of Securities, a number of shares
of the Underlying equal to the redemption
amount.
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For Knock-in Reverse
Exchangeable Securities, this means that if the closing price of the
Underlying never falls below a certain price, which we call the knock-in
level, on any trading day from but not including the pricing date to and
including the determination date (such period, the “knock-in period”),
then we will pay you in cash the face amount of each Security at maturity.
On the other hand, if the closing price of the Underlying falls below the
knock-in level on any trading day during the knock-in period, then the
payment at maturity will depend on the closing price of the Underlying on
the determination date. In this latter case, if the closing price of the
Underlying on the determination date is equal to or greater than the
initial price, we will pay you in cash the face amount of each Security
you hold; however, if the closing price of the Underlying on the
determination date is less than the initial price, we will deliver to you,
in exchange for each $1,000 face amount of Securities, a number of shares
of the Underlying equal to the redemption amount. If
we deliver shares of the Underlying, the market value of such shares on
the determination date will be less than the face amount of each Security
and could be zero. Accordingly, you could lose some or all of
your initial principal investment in the
Securities.
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PS-2
Except in certain
circumstances described under “Description of Securities — Closing
Price” in this Product Supplement, we will usually determine the closing price
for any listed Underlying by reference to the last reported sale price, during
regular trading hours (or if listed on The NASDAQ Stock Market LLC, the official
closing price), on the primary U.S. securities exchange on which shares of the
Underlying are traded.
Why
is the coupon rate on the Securities higher than the interest rate payable on
your conventional debt securities with the same maturity?
The Securities
offer a higher coupon rate than the yield that would be payable on a
conventional debt security with the same maturity issued by us or an issuer with
a comparable credit rating because you, the investor in the Securities,
indirectly sell a put option to us on the Underlying. The premium due to you for
this put option is combined with a market interest rate on our senior debt to
produce the higher coupon rate on the Securities. As explained below under “What
are the consequences of the indirect put option that I have sold you?” you are
being paid the premium for taking the risk that you may receive shares of the
Underlying with a market value less than the face amount of your Securities at
maturity, which would mean that you would lose some or all of your initial
principal investment.
What
are the consequences of the indirect put option that I have sold
you?
The put option you
indirectly sell to us creates the feature of exchangeability. This feature could
result in the delivery of shares of the Underlying to you, at maturity, with a
market value which is less than the face amount of $1,000 per Security. For (a)
Reverse Exchangeable Securities, if on the determination date the closing price
per share of the Underlying is less than the initial price or (b) Knock-in
Reverse Exchangeable Securities, if the closing price of the Underlying falls
below the knock-in level on any trading day during the knock-in period, and on
the determination date the closing price per share of the Underlying is less
than the initial price, you will receive a fixed number of shares of the
Underlying for each Security you hold, which we call the redemption amount. The
market value of the redemption amount on the determination date will always be
less than the face amount of $1,000 per Security. On the other hand, (a) for
Reverse Exchangeable Securities, if on the determination date the closing price
per share of the Underlying is equal to or greater than the initial price or (b)
for Knock-in Reverse Exchangeable Securities, if the closing price of the
Underlying falls below the knock-in level, and on the determination date the
closing price per share of the Underlying is equal to or greater than the
initial price, you will receive $1,000 for each Security you hold. If the price
of the Underlying rises above the initial price you will not participate in any
appreciation in the price of the Underlying. Because of the exchangeability of
the Securities and because we will determine whether you will receive cash or
shares of the Underlying by reference to the closing price of the Underlying on
the determination date, such securities are generally referred to as “reverse
exchangeable securities.” However, for Knock-in Reverse Exchangeable Securities,
because this feature of exchangeability is created only if the closing price of
the Underlying falls below the knock-in level on any trading day during the
knock-in period, we call them “Knock-in Reverse Exchangeable
Securities.”
What
will I receive at maturity of the Securities?
The payment at
maturity of the Reverse Exchangeable Securities will depend on the closing price
of the Underlying on the determination date. Unless otherwise specified in the
relevant product supplement, the payment at maturity will be determined as
follows:
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if the
closing price of the Underlying is at or above the initial price on the
determination date, we will pay you the face amount of each Security in
cash; or
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if the
closing price of the Underlying is below the initial price on the
determination date, we will deliver to you the redemption amount, in
exchange for each Security (the market value of the redemption amount on
the determination date will always be less than the face amount of $1,000
per Security). In such a case, you will lose some or all of your initial
principal investment in the
Securities.
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PS-3
The payment at
maturity of the Knock-in Reverse Exchangeable Securities will depend on (i)
whether or not the closing price of the Underlying fell below the knock-in level
on any trading day during the knock-in period, and if so, (ii) the closing price
of the Underlying on the determination date. Unless otherwise specified in the
relevant product supplement, the payment at maturity will be determined as
follows:
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if the
closing price per share of the Underlying has not fallen below the
knock-in level on any trading day during the knock-in period, we will pay
you the face amount of each Security in cash;
or
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if the
closing price per share of the Underlying has fallen below the knock-in
level on any trading day during the knock-in period, we will
either:
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deliver to
you the redemption amount, in exchange for each Security, in the event
that the closing price of the Underlying is below the initial price on the
determination date (the market value of the redemption amount on the
determination date will always be less than the face amount of $1,000 per
Security). In such a case, you will lose some or all of your
initial principal investment in the Securities;
or
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pay you the
face amount of each Security in cash, in the event that the closing price
of the Underlying is at or above the initial price on the determination
date.
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If
due to events beyond our reasonable control, as determined by us in our sole
discretion, shares of the Underlying are not available for delivery at maturity
we may pay you, in lieu of the redemption amount, the cash value of the
redemption amount, determined by multiplying the redemption amount by the
closing price of the Underlying on the determination date.
The “redemption
amount” is a number of shares of the Underlying equal to $1,000 divided by the
initial price of the Underlying. The initial price and consequently the
redemption amount may be adjusted for certain events, such as a stock split or,
with respect to an Underlying Company, a merger, affecting the Underlying
Company or Underlying Fund, as applicable, which we describe in “Description of
Securities — Adjustment Events.” The “determination date” will be
specified in the relevant Pricing Supplement.
Any payment at
maturity is subject to the creditworthiness of The Royal Bank of Scotland N.V.,
as issuer, and RBS Holdings N.V., as guarantor.
How
are the redemption amount and knock-in level, if applicable,
determined?
The redemption
amount for each $1,000 face amount of the Securities is equal to $1,000 divided
by the initial price. The value of any fractional Underlying Shares you are
entitled to receive, after aggregating your total holdings of the Securities,
will be paid in cash based on the closing price of the Underlying on the
determination date. Any shares of an Underlying Fund which are delivered to
you at maturity will include any fractional shares you are entitled to receive,
after aggregating your total holdings of the Securities based on the closing
price of the Underlying Fund on the determination date.
If
applicable, the knock-in level will be a percentage of the initial price
specified in the relevant Pricing Supplement.
The initial price
and consequently the redemption amount and knock-in level are subject to
adjustment for certain corporate events affecting the Underlying, such as a
stock split or merger, which we describe in “Description of Securities —
Adjustment Events.”
PS-4
What
coupon payments can I expect on the Securities?
The Securities pay
coupons at a per annum rate that will be specified in the relevant Pricing
Supplement. The coupon rate is fixed at issue and is payable periodically as
specified in the relevant Pricing Supplement in arrears. This means that
irrespective of whether the Securities are exchanged at maturity for cash or the
redemption amount, you will be entitled to periodic coupon payments on the full
face amount of the Securities you hold, payable in cash. Coupons on
the Securities will be computed and accrue on the basis of a 360-day year of
twelve 30-day months, or in the case of an incomplete month, the actual number
of days elapsed from and including the most recent coupon payment date, or if no
coupons have been paid, from the issue or other coupon accrual date, to but
excluding the earlier of the next coupon payment date or the maturity
date.
Any coupon payment
is subject to the creditworthiness of The Royal Bank of Scotland N.V.
and RBS Holdings N.V., as guarantor.
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?
You are not guaranteed to receive
any return of principal at maturity. In the case of Reverse Exchangeable
Securities, if the closing price of the Underlying is below the initial price on
the determination date we will deliver to you shares of the Underlying. In the
case of Knock-in Reverse Exchangeable Securities, if the closing price of
Underlying falls below the knock-in level on any trading day during the knock-in
period, and the closing price of the Underlying is below the initial price on
the determination date, we will deliver to you shares of the Underlying. In both
cases, the market value of shares of the Underlying on the determination date
will be less than the face amount of the Securities and could be
zero. In
such a case you will lose some or all of your initial principal investment in
the Securities.
Is
there a limit to how much I can earn over the term of the
Securities?
Yes. The amount
payable under the terms of the Securities will never exceed the face amount of
the Securities payable at maturity plus coupon payments you earn over the term
of the Securities.
Do
I benefit from any appreciation in the Underlying over the term of the
Securities?
No. The amount paid at maturity for
each $1,000 face amount of the Securities will not exceed $1,000. As a result,
if shares of the Underlying have appreciated above their price on the pricing
date, the payment you receive at maturity will not reflect that appreciation.
Under
no circumstances will you receive a payment at maturity greater than the face
amount of the Securities that you hold at that time.
What
is the minimum required purchase?
Unless otherwise
specified in the relevant Pricing Supplement, you can purchase Securities in
$1,000 denominations (which we refer to as the face amount) or in integral
multiples thereof.
Is
there a secondary market for the Securities?
Unless otherwise
specified in the relevant Pricing Supplement, the Securities will not be listed
on any securities exchange. Accordingly, there may be little or no secondary
market for the Securities and, as such, information regarding independent market
pricing for the Securities may be extremely limited or non-existent. You should
be willing to hold your Securities 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 Securities
from time to time in off-exchange transactions. If our affiliate does make such
a market in the Securities, it may stop doing so at any time.
PS-5
In
connection with any secondary market activity in the Securities, our affiliate
may post indicative prices for the Securities 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 Securities includes the selling agents’
commissions paid with respect to the Securities and the cost of hedging our
obligations under the Securities. 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 Securities includes these commissions and
hedging costs is expected to adversely affect the secondary market prices of the
Securities. 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.”
Tell
me more about The Royal Bank of Scotland N.V. and RBS Holdings
N.V.
The Royal Bank of
Scotland N.V. is the new name of ABN AMRO Bank N.V. and RBS Holdings N.V. is the
new name of ABN AMRO Holding N.V. See “The Royal Bank of Scotland N.V.
and RBS Holdings N.V.” in the accompanying prospectus dated April 2,
2010.
What
is the relationship between The Royal Bank of Scotland N.V., RBS Holdings 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 RBS Holdings N.V. RBSSI will act as calculation agent for the
Securities, 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
Securities and the Calculation Agent” and “Plan of Distribution (Conflicts of
Interest)” in this Product Supplement.
Where
can I find out more about the Underlying Company or the Underlying
Fund?
Because shares of
the Underlying are registered under the Securities Exchange Act of 1934, as
amended, the Underlying Company or Underlying Fund, as applicable, is required
to file periodically certain financial and other information specified by the
Securities and Exchange Commission which is available to the public. You should
read “Public Information
Regarding the Underlying” in this Product Supplement to learn how to obtain
public information regarding the Underlying and other important information. The
historical highest intra-day price, lowest intra-day price and last day closing
price of the Underlying will be set forth in the relevant Pricing
Supplement.
Who
will determine whether the closing price of the Underlying has fallen below the
knock-in level (if applicable), the closing price of the Underlying on the
determination date, the redemption amount and the initial price?
We
have appointed our affiliate, RBSSI, to act as calculation agent for the
Securities. As calculation agent, RBSSI will determine whether the closing price
of the Underlying has fallen below the knock-in level on any trading day during
the knock-in period (if applicable), the closing price of the Underlying on the
determination date, the redemption amount and the initial price. The calculation
agent may adjust the initial price of the Underlying and consequently the
redemption amount and knock-in level as a result of certain events affecting the
Underlying Company or the Underlying Fund, as applicable, which we describe in
the section called “Description of Securities — Adjustment Events.”
PS-6
Who
invests in the Securities?
The
Securities are not suitable for all investors. The Securities might be
considered by investors who:
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seek a higher
interest rate than the current dividend yield on the Underlying or the
yield on a conventional debt security with the same maturity issued by us
or an issuer with a comparable credit
rating;
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are willing
to accept the risk of owning equity in general and shares of the
Underlying in particular and the risk that they could lose their entire
investment;
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do not expect
to participate in any appreciation in the price of the Underlying;
and
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are willing
to hold the Securities until
maturity.
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You should
carefully consider whether the Securities 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 Securities.
What
are some of the risks in owning the Securities?
Investing in the
Securities involves a number of risks. We have described the most significant
risks relating to the Securities under the heading “Risk Factors” in this
Product Supplement which you should read before making an investment in the
Securities.
Some selected risk
considerations include:
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Credit
Risk. Because you are purchasing a security from us, you are
assuming our credit risk. In addition, because the Securities
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
or delivery required by the terms of the
Securities.
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Principal
Risk. The Securities are not principal protected, which means there
is no guaranteed return of principal. If (a) for Reverse Exchangeable
Securities, the closing price on the determination date is less than the
initial price, or (b) for Knock-in Reverse Exchangeable Securities, the
closing price of the Underlying falls below the knock-in level on any
trading day during the term of the Securities and the closing price on the
determination date is less than the initial price, we will deliver to you
a fixed number of shares of the Underlying with a market value less than
the face amount of the Securities, which value may be zero. Accordingly,
you assume the risk that you may lose some or all of your initial
principal investment in the
Securities.
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Liquidity
and Market Risk. Unless otherwise specified in the
relevant Pricing Supplement, the Securities will not be listed on any
securities exchange. Accordingly, there may be little or no
secondary market for the Securities and information regarding independent
market pricing for the Securities may be very limited or non-existent. The
value of the Securities in the secondary market, if any, will be subject
to many unpredictable factors, including then prevailing market
conditions.
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What
if I have more questions?
You should read
“Description of Securities” in this Product Supplement for a detailed
description of the general terms of the Securities. The relevant
Pricing Supplement will describe the terms that apply specifically to the
Securities. The Securities are senior notes issued as part of our RBS NotesSM
program and guaranteed by Holding. The Securities offered by us will
constitute our 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.
PS-7
RISK
FACTORS
This section describes the most
significant risks relating to the Securities. For a discussion of certain
general risks associated with your investment in the Securities, please refer to
the section entitled “Risk Factors” beginning on page S-3 of the accompanying
Prospectus Supplement. You
should carefully consider whether the Securities 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 Securities.
The
Securities Are Not Ordinary Senior Notes; There Is No Guaranteed Return of
Principal
The Securities combine limited
features of debt and equity. The terms of the Securities differ from those of
ordinary equity securities in that (i) you will not participate in any
appreciation of the Underlying even if the price of the Underlying rises above
the initial price and (ii) we will not pay you a fixed face amount in cash at
maturity if (a) for Reverse Exchangeable Securities, the closing price on the
determination date is less than the initial price, or (b) for Knock-in Reverse
Exchangeable Securities, the closing price of the Underlying has fallen below
the knock-in level on any trading day during the knock-in period and, in
addition, the closing price of the Underlying is below the initial price on the
determination date. In such event, we will exchange each Security you hold for a
number of shares of the Underlying equal to the redemption
amount. Such shares will have a market value of less than the face
amount of the Securities, and such value may be zero. You cannot predict the
future performance of the Underlying based on its historical performance. Accordingly,
you assume the risk that you could lose some or all of the amount you invest in
the Securities.
Credit
Risk of The Royal Bank of Scotland N.V. and RBS Holdings N.V., and their Credit
Ratings and Credit Spreads May Adversely Affect the Market Value of the
Securities
You are dependent
on The Royal Bank of Scotland N.V.’s ability to pay all amounts due on the
Securities, 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 Securities are
unconditionally guaranteed by The Royal Bank of Scotland N.V.’s parent company,
RBS Holdings N.V., you are also dependent on the credit risk of RBS Holdings
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 Securities. Any actual or
anticipated decline in The Royal Bank of Scotland N.V. or RBS Holdings 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
Securities.
Our credit ratings
are an assessment, by each rating agency, of our ability to pay our obligations,
including those under the Securities. 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 Securities is dependent upon factors in addition to our ability to pay our
obligations under the Securities, an improvement in our credit ratings will not
necessarily increase the market value of the Securities and will not reduce
market risk and other investment risks related to the
Securities. Credit ratings (i) do not reflect market risk, which is
the risk that the price of the Underlying Shares or Underlying Fund may fall
below the knock-in level, resulting in a loss of some or all of your principal,
(ii) do not address the price, if any, at which the Securities may be resold
prior to maturity (which may be substantially less than the issue price of the
Securities) and (iii) are not recommendations to buy, sell or hold the
Securities. See “Risk Factors — Market Price of the Securities Influenced by
Many Unpredictable Factors.”
Although
We Are a Bank, the Securities 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 Securities are
our obligations but are not bank deposits. In the event of our
insolvency the Securities 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.
PS-8
The
Securities Will Not Pay More Than the Stated Face Amount at
Maturity
The amount paid at maturity of the
Securities in cash or shares of the Underlying will not exceed the face amount
of the Securities. If the closing price of the Underlying on the determination
date is equal to or exceeds the initial price (regardless of whether the
knock-in level, if applicable, has been previously breached), you will receive
the face amount of the Securities irrespective of any appreciation in the share
price. You will not receive shares of the Underlying or any other asset equal to
the value of shares of the Underlying. As a result, if the Underlying has
appreciated above its closing price on the pricing date, the payment you receive
at maturity will not reflect that appreciation.
Under no circumstances will you receive a payment at maturity greater than the
face amount of the Securities that you hold at that
time.
For
Knock-in Reverse Exchangeable Securities, the Protection Provided by the
Knock-In Level May Terminate on Any Day During the Term of the
Securities
For Knock-in
Reverse Exchangeable Securities, if, on any trading day during the knock-in
period, the closing price of the Underlying falls below the knock-in level, you
will be fully exposed to any depreciation in the Underlying. We refer
to this feature as a contingent buffer. The buffer (the difference
between the initial price and the knock-in level) is contingent on the closing
price of the Underlying on each trading day during the knock-in period and on
the determination date. If the closing price has fallen below the
knock-in level on any trading day during the knock-in period and on the
determination date is below the initial price, you will receive at maturity, for
each $1,000 face amount Security, the redemption
amount. Consequently, you will lose 1% of the face amount of your
investment for every 1% decline in the closing price compared to the initial
price. You will be subject to this potential loss of principal even
if, after falling below the knock-in level, the closing price of the Underlying
rises above the knock-in level on any day or above the initial price on any day
other than the determination date. This is because, if the closing
price of the Underlying has fallen below the knock-in level on any trading day
during the knock-in period, we determine the payment you will receive at
maturity based on the closing price on the determination date.
The
Volatility of the Market Price of the Underlying Will Impact the Risk that You
Will Receive Less Than the Full Face Amount of Your Securities at
Maturity
The likelihood of
the Underlying closing or trading below the knock-in level on any trading day
during the knock-in period or the determination date is unpredictable and will
depend in large part on the volatility of the market price of the Underlying —
the frequency and magnitude of changes in the market price of the
Underlying. Recently, the equity markets have experienced significant
volatility. As a result of such increased volatility in the markets,
there is a greater risk that you will receive less than the full face amount of
your Securities at maturity.
Unless
Otherwise Specified in the Relevant Pricing Supplement, the Securities Will Not
be Listed on Any Securities Exchange; Secondary Trading May Be
Limited
You should be
willing to hold your Securities until the maturity date. Unless otherwise
specified in the relevant Pricing Supplement, the Securities will not be listed
on any securities exchange; accordingly, there may be little or no secondary
market for the Securities and information regarding independent market pricing
for the Securities 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 Securities easily. Our affiliate has informed us that, upon completion
of the offering, it intends to purchase and sell the Securities 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 Securities, it
may stop doing so at any time. In addition, the total face amount of the
Securities 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 face amount of the Securities. Such affiliate or
affiliates intend to hold the Securities for investment purposes, which may
affect the supply of Securities available for secondary trading and therefore
adversely affect the price of the Securities in any secondary
trading. If a substantial portion of any Securities held by our
affiliates were to be offered for sale following this offering, the market price
of such Securities could fall, especially if secondary trading in such
Securities is limited or illiquid.
PS-9
Market
Price of the Securities Are Influenced by Many Unpredictable
Factors
The value of the
Securities 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
Securities, including:
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the market
price of the Underlying, including, for Knock-in Reverse Exchangeable
Securities, whether the closing price of the Underlying has fallen below
the knock-in level on any trading
day;
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the
volatility (frequency and magnitude of changes) in the price of the
Underlying;
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the dividend
rate on the Underlying. While dividend payments on the Underlying, if any,
are not paid to holders of the Securities, such payments may have an
influence on the market price of the Underlying and therefore on the
Securities;
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interest and
yield rates in the market;
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economic,
financial, political and regulatory or judicial events that affect the
stock markets generally and which may affect the closing price of the
Underlying and/or the Securities;
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if the
Securities are linked to Underlying Shares that are ADSs or to a foreign
Underlying Fund, 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 or the stocks comprising the foreign Underlying Fund are
traded, as applicable;
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the time
remaining to the maturity of the
Securities;
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the
occurrence of certain events affecting the Underlying which may require an
adjustment to the Exchange Factor (and therefore, the initial price,
redemption amount and knock-in level);
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the
creditworthiness of the Bank as issuer of the Securities and Holding as
the guarantor of the Bank’s obligations under the Securities. Any person
who purchases the Securities is relying upon the creditworthiness of the
Bank and Holding and has no rights against any other
person. The Securities 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 Securities 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
Securities in the secondary market, if any, prior to maturity. For example, you
may have to sell your Securities at a substantial discount from the face amount
if at the time of sale the market price of the Underlying is at, below, or not
sufficiently above the knock-in level. See also “Risk Factors — The
Inclusion of Commissions and Cost of Hedging in the Issue Price is Likely to
Adversely Affect Secondary Market Prices.”
As
an investor in the Securities you assume the risk that as a result of the
performance of the Underlying you may lose some or all of your initial principal
investment in the Securities.
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 Securities in secondary
market transactions will likely be lower than the issue price, since the issue
price included, and secondary market prices are likely to exclude, commissions
paid with respect to the Securities, as well as the profit component included in
the cost of hedging our obligations under the
Securities. 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.
PS-10
An
Increase in the Market Price of the Underlying Will Not Increase the Return on
Your Investment
Owning the
Securities is not the same as owning shares of the Underlying. Accordingly, the
market value of your Securities may not have a direct relationship with the
market price of the Underlying, and changes in the market price of the
Underlying may not result in a comparable change in the market value of your
Securities. If the price per share of the Underlying increases above the initial
price, the market value of the Securities may not increase. It is also possible
for the price of the Underlying to increase while the market price of the
Securities declines.
We
May Not be Able to Deliver Shares of the Underlying at Maturity
If
due to events beyond our reasonable control, as determined by us in our sole
discretion, shares of the Underlying are not available for delivery at maturity
we may pay you cash in lieu of delivering shares of the
Underlying. In such a case, the amount of cash we will deliver will
be an amount calculated by multiplying the redemption amount by the closing
price of the Underlying on the determination date. Accordingly, if you have sold
or otherwise agreed to deliver shares of the Underlying with the expectation of
receiving the redemption amount at maturity, your trade may fail in the event we
do not deliver shares of the Underlying to you.
Potential
Conflicts of Interest; No Security Interest in the Shares of the Underlying Held
by Us
We
and our affiliates may carry out hedging activities that minimize our risks
related to the Securities, including trading in shares of the Underlying. 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 Securities by taking positions in shares of the Underlying, stocks (or
options or futures contracts on the stocks) that comprise the Underlying Fund,
if applicable, options contracts on shares of the Underlying listed on major
securities markets, and/or other instruments that we deemed appropriate in
connection with such hedging. Our purchase activity, however, could potentially
have increased the initial price of the Underlying, and therefore increased the
knock-in level, below which we would be required to deliver to you at maturity
shares of the Underlying, which, in turn, would have a value less than the face
amount of your Securities.
Through our
affiliates, we are likely to modify our hedge position throughout the term of
the Securities by purchasing and selling shares of the Underlying, stocks (or
options or futures contracts on the stocks) that comprise the Underlying Fund,
if applicable, options contracts on shares of the Underlying listed on major
securities markets or positions in other securities or instruments that we may
wish to use in connection with such hedging. We cannot give you any assurance
that we have not or will not affect such price as a result of our hedging or
trading activities. Such hedging or trading activities during the
term of the Securities could adversely affect whether the price of the
Underlying decreases below the knock-in level and therefore, whether or not you
will receive the stated face amount of the Securities or shares of the
Underlying at maturity. It is possible that we or one of more of our
affiliates could receive substantial returns from these hedging activities while
the value of the Securities may decline. We or one or more of our affiliates may
also engage in trading the shares of the Underlying and other investments
relating to the Underlying Company or stocks that comprise the Underlying Fund,
as applicable, on a regular basis as part of our or its general broker-dealer
and other businesses, for proprietary accounts, for other accounts under
management or to facilitate transactions for customers, including block
transactions. We or one or more of our affiliates may also publish
research reports or otherwise express views about the Underlying Company, if
applicable. Any of these activities could adversely affect the price
of the Underlying and, therefore, the value of the Securities. 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 of the Underlying. By introducing competing products into the
marketplace in this manner, we or one or more of our affiliates could adversely
effect the value of the Securities.
The indenture governing the
Securities does not contain any restrictions on our ability or the ability of
any of our affiliates to sell, pledge or otherwise convey all or any portion of
the shares of the Underlying acquired by us or our
affiliates. Neither we nor Holding nor any of our affiliates will
pledge or otherwise hold shares of the Underlying for the benefit of holders of
the Securities in order to enable the holders to exchange their Securities for
shares of the
Underlying under any circumstances. Consequently, in the event of a bankruptcy,
insolvency or liquidation involving us or Holding, as the case may be, any
shares of the Underlying that we or Holding own 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
Securities.
PS-11
Holdings
of the Securities by Our Affiliates and Future Sales
Certain of our
affiliates may purchase for investment a portion of the Securities that has
not been purchased by investors in a particular offering of Securities, 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 face amount of the Securities. 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
Securities that they had been holding for investment purposes at the same time
that you attempt to sell your Securities, which could depress the price, if any,
at which you can sell your Securities. Moreover, the liquidity of the
market for the Securities, if any, could be substantially reduced as a result of
our affiliates holding the Securities. See “— The Securities Will Not be Listed
on any Securities Exchange; Secondary Trading May Be Limited.” In addition, our
affiliates could have substantial influence over any matter subject to consent
of the security holders.
Information
Regarding the Underlying Company or Underlying Fund, as Applicable
Neither we nor
Holding nor any of our affiliates assume any responsibility for the accuracy or
adequacy of the information about the Underlying Company or Underlying Fund, as
applicable, contained in the relevant Pricing Supplement or in any of the
Underlying Company’s or Underlying Fund’s publicly available filings, as
applicable. As an investor in the Securities, you should make your own
investigation into the Underlying Company or Underlying Fund, as applicable.
Unless otherwise disclosed in the relevant Pricing Supplement, neither we nor
Holding nor any of our affiliates have any affiliation with the Underlying
Company or Underlying Fund, as applicable, and are not responsible for the
Underlying Company’s or Underlying Fund’s public disclosure of information, as
applicable, whether contained in SEC filings or otherwise.
Market
Disruptions May Adversely Affect Your Return
The calculation
agent may, in its sole discretion, determine that the markets have been affected
in a manner that prevents it from properly determining the closing price and
calculating the payment at maturity, if any, that we are required to pay
you. 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 Securities, it is
possible that the determination date will be postponed and your return will be
adversely affected. See “Description of Securities — Market
Disruption Event.”
No
Shareholder Rights in the Shares of the Underlying
As
a holder of the Securities, you will not have voting rights or rights to receive
dividends or other distributions or other rights that holders of the Underlying
Shares, the shares of the Underlying Fund or stocks comprising the Underlying
Fund or Target Index would have, as applicable. If the Securities 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.
Limited
Antidilution Protection
As calculation agent, RBSSI, which
is our affiliate, will adjust the initial price and consequently the redemption
amount and knock-in level for certain events affecting the shares of the
Underlying, 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 the Underlying. 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 the Underlying Shares. If
an event occurs that does not require the calculation agent to adjust the amount
of shares of the Underlying payable at maturity, the market price of the
Securities may be materially and adversely affected.
PS-12
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 the Underlying Company, the Underlying
Fund or the issuers of the stocks comprising the Underlying Fund, as applicable,
we have no ability to control or predict the actions of the Underlying Company,
the Underlying Fund or the issuers of the stocks comprising the Underlying Fund,
as applicable, including any actions of the type that would require the
calculation agent to adjust the initial price and consequently the knock-in
level, if applicable, and redemption amount, and have no ability to control the
public disclosure of these actions or any other events or circumstances
affecting the Underlying Company, the Underlying Fund or the issuers of the
stocks comprising the Underlying Fund, as applicable. The
Underlying Company, the Underlying Fund and the issuers of the stocks comprising
the Underlying Fund, as applicable, are not involved in the offer of the
Securities in any way and have no obligation to consider your interest as an
owner of the Securities in taking any actions that might affect the value of
your Securities. None of the money you pay for the Securities will go to the
Underlying Company, the Underlying Fund or the issuers of stocks comprising the
Underlying Fund, as applicable.
We
May Engage in Business with or Involving the Underlying Company, the Underlying
Fund or One or More of the Issuers of the Stocks that Comprise the Underlying
Fund, as Applicable, without Regard to Your Interests
We
and/or our affiliates may presently or from time to time engage in business with
the Underlying Company, the Underlying Fund or the issuers of the stocks
comprising the 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. These activities could lead
to actions on the part of the Underlying Company or Underlying Fund, as
applicable, which might adversely affect the price of the
Underlying. 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. The statement in the preceding sentence is not
intended to affect the rights of holders of the Securities under the securities
laws. As a prospective purchaser of a Security, you should undertake such
independent investigation of the Underlying Company or Underlying Fund, as
applicable, as in your judgment is appropriate to make an informed decision with
respect to an investment in the Underlying.
Potential
Conflicts of Interest between Holders of Securities and the Calculation
Agent
As calculation agent, RBSSI, which
is our affiliate, will calculate the payout to you at maturity of the
Securities. RBSSI and other affiliates may carry out hedging activities related
to the Securities, including trading in the shares of the Underlying, as well as
in other instruments related to the Underlying. RBSSI and some of our other
affiliates also trade the shares of the Underlying on a regular basis as part of
their general broker dealer businesses. Any of these activities could influence
RBSSI’s determinations as calculation agent and any such trading activity could
potentially affect the price of the Underlying and, accordingly could affect the
payout on the Securities. RBSSI
is an affiliate of The Royal Bank of Scotland N.V.
In
addition, if certain reorganization events occur as defined under “Description
of Securities — Adjustment Events” the calculation agent may adjust the initial
price and consequently the knock-in level and redemption amount to reflect the
new securities issued in such reorganization event. The calculation
agent may make such adjustment based on its assessment of the market value and
volatility of those new securities, which may adversely affect the value of the
Securities. The calculation agent’s adjustment to the Securities may
be influenced by, among other things, our or our affiliates’ hedging
transactions with respect to the Securities and our or their ability to hedge
our obligations under the Securities following those reorganization events. You
will bear the risk that a reorganization event may occur or that the calculation
agent’s adjustments upon a reorganization event may adversely affect the value
of the Securities.
Moreover, the issue
price of the Securities includes the agents’ commissions and certain costs of
hedging our obligations under the Securities. Our affiliates through
which we hedge our obligations under the Securities 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.
PS-13
The
Tax Consequences of an Investment in the Securities Are Unclear
There is no direct
legal authority regarding the proper U.S. federal income tax treatment of the
Securities, and we do not plan to request a ruling from the Internal Revenue
Service (the “IRS”). Consequently,
significant aspects of the tax treatment of the Securities are unclear, and the
IRS or a court might not agree with the treatment of the Securities described in
the section of this Product Supplement entitled “U.S. Federal Income Tax
Consequences.” If the IRS were successful in asserting an alternative
treatment, the tax consequences of ownership and disposition of the Securities
might be affected materially and adversely. Additionally, as described in “U.S.
Federal Income Tax Consequences,” in December 2007, Treasury and the IRS
released a notice requesting comments on various issues regarding the U.S.
federal income tax treatment of “prepaid forward contracts” and similar
instruments. While it is not clear whether the Securities would be viewed as
similar to the typical prepaid forward contract described in the notice, it is
possible that any Treasury regulations or other guidance promulgated after
consideration of these issues could materially and adversely affect the tax
consequences of an investment in the Securities, possibly with retroactive
effect.
Both
U.S. and non-U.S. holders should consult their tax advisers regarding the U.S.
federal income tax consequences of an investment in the Securities (including
possible alternative treatments and the issues presented by the 2007 notice), as
well as tax consequences arising under the laws of any state, local or non-U.S.
taxing jurisdiction.
Risks
Related to Underlying Shares
For
Securities linked to the Performance of ADSs, Fluctuations in Exchange Rates
Will Affect Your Investment
For
Securities 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 Security 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 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.
PS-14
For
Securities linked to the Performance of ADSs, an Investment in the Securities Is
Subject to Risks Associated with Non-U.S. Securities Markets
An
investment in the Securities 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 lose some or
all 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 Security is linked to the performance of an ADS, you should be aware that
your Security 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 value of the Securities.
In
Some Circumstances, the Payment You Receive on the Securities May Be Based on
the Common Stock (or ADSs, as applicable) of Another Company and not the
Underlying Shares
Following certain
corporate events, such as a merger or acquisition, relating to the Underlying
Shares 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
Shares in such corporate event. The occurrence of these corporate
events and the consequent adjustments may materially and adversely affect the
value of the Securities. 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 the Underlying Fund
Investment
in the Securities is Not the Same as a Direct Investment in the Underlying Fund
or in the Stocks that Comprise the Underlying Fund
An investment in the Securities is
not the same as a direct investment in the Underlying Fund or in the stocks that
comprise the Underlying Fund. The return on your Securities could be
less than if you had invested directly in the stocks (or any other securities)
comprising the Underlying Fund because you will only participate in the change
in the price of the Underlying Fund over the term of the Securities, because,
for Underlying Funds comprised of stocks, the return
on the Securities does not account for the return associated with the
reinvestment of dividends that you would have received if you had invested
directly in the stocks (or any other securities) comprising the Underlying Fund
and because 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
Fund.
PS-15
Your
Return May Be Affected by Factors Affecting International
Securities
The price of the
Underlying Fund may be computed by reference to the value of the equity
securities of companies listed on various global exchanges. Under
these circumstances, the return on the Securities will be affected by factors
affecting the prices of securities in the relevant markets. The
relevant foreign securities markets may be more volatile than United States or
other securities 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 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 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
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 Held By a Foreign Underlying Fund Are Not
Converted Into U.S. Dollars For Purposes of Calculating the Net Asset Value of
the Foreign Underlying Fund, the Amount Payable On the Securities at Maturity
Will Not Be Adjusted For Changes In Exchange Rates That Might affect the Foreign
Underlying Fund
Because the prices
of the equity securities held by a foreign Underlying Fund are not converted
into U.S. dollars for purposes of calculating the net asset value of that
foreign Underlying Fund and although the equity securities held by that foreign
Underlying Fund are traded in currencies other than U.S. dollars, and the
Securities, which are linked in whole or in part to that foreign Underlying
Fund, are denominated in U.S. dollars, the amount payable on the Securities 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 held
by that foreign Underlying Fund 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 Securities. The amount we pay in respect
of the Securities on the maturity date, if any, will be determined solely in
accordance with the procedures described in “Description of Securities — Payment
at Maturity.”
If
the Prices of the Equity Securities Held By a Foreign Underlying Fund Are
Converted Into U.S. Dollars For Purposes of Calculating the Net Asset Value of
That Foreign Underlying Fund, the Securities Will Be Subject To Currency
Exchange Risk
Because the prices
of the equity securities held by a foreign Underlying Fund are converted into
U.S. dollars for the purposes of calculating the net asset value of that foreign
Underlying Fund, the holders of the Securities will be exposed to currency
exchange rate risk with respect to each of the currencies in which the equity
securities held by that foreign Underlying Fund 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
held by that foreign Underlying Fund denominated in each such
currency. If, taking into account such weighting, the U.S. dollar
strengthens against such currencies, the net asset value of that foreign
Underlying Fund will be adversely affected and the payment at maturity of the
Securities 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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PS-16
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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 Held By a Foreign Underlying Fund Are
Converted Into U.S. Dollars For Purposes of Calculating the Net Asset
Value of That Foreign Underlying Fund, Changes In the Volatility of Exchange
Rates, and the Correlation Between Those Rates and the Net Asset
Value of That Foreign Underlying Fund are Likely To affect the Market Value of
the Securities
The exchange rate
between the U.S. dollar and each of the currencies in which the equity
securities held by a foreign Underlying Fund 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 held by that foreign Underlying
Fund and the U.S. dollar. This exchange rate reflects the amount of
the particular currency in which an equity security held by that foreign
Underlying Fund 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 is denominated. The volatility
of the exchange rate between the U.S. dollar and each of the currencies in which
the equity securities held by that foreign Underlying Fund trade are denominated
refers to the size and frequency of changes in that exchange rate.
Because the net
asset value of a foreign Underlying Fund is calculated, in part, by converting
the closing prices of the equity securities held by that foreign Underlying Fund
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 are denominated
could affect the market value of the Securities.
The correlation of
the exchange rate between the U.S. dollar and each of the currencies in which
the equity securities held by a foreign Underlying Fund trade are denominated
and the net asset value of that foreign Underlying Fund trade refers
to the relationship between the percentage changes in that exchange rate and the
percentage changes in the net asset value of that foreign Underlying
Fund. 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 held by that foreign Underlying Fund trade are denominated and the
percentage changes in the net asset value of that foreign Underlying Fund trade
could affect the value of the Securities.
There
Are Risks Associated With the Underlying Fund
The Underlying Fund
may have limited operating history. Even if the 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.
The 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. See the relevant index description in the accompanying
Underlying Supplement or the relevant Pricing Supplement for additional
information.
PS-17
The
Policies of the Investment Advisor for the Underlying Fund, and the Sponsor of
the Target Index, Could Affect the Value of the Securities
The policies of the
investment advisor concerning the calculation of the Underlying Fund’s net asset
value, additions, deletions or substitutions of stocks held by the Underlying
Fund and manner in which changes affecting the stocks held by the Underlying
Fund are reflected in the Underlying Fund could affect the market price of the
shares of the Underlying Fund and, therefore, affect the value of the
Securities. The value of the Securities 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 value of the Securities.
In
addition, the sponsor of the Target Index is responsible for the design and
maintenance of such index. Periodically, the sponsor of the Target
Index may (i) determine that total shares outstanding have changed in one or
more component securities of the 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 Target
Index may have changed due to corporate actions, purchases or sales of
securities by holders or other events, or (iii) replace one or more component
securities of the Target Index due to mergers, acquisitions, bankruptcies, or
other market conditions, or if the issuers of such component securities of the
Target Index fail to meet the criteria for inclusion in the 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 value of
the Securities.
The
Underlying Fund is Not Actively Managed
Unless otherwise
specified in the relevant Pricing Supplement, the Underlying Fund is not
actively managed by traditional methods, and therefore the adverse financial
condition of one or more issuers of stocks which comprise the Target Index will
not result in the elimination of such stock or stocks from the Underlying Fund
unless such stock or stocks are removed from the Target Index. This
may adversely affect the value of the Securities and the return, if any, on the
Securities.
The
Underlying Fund May Not Always be Able Exactly to Replicate the Performance of
the Target Index
It
is possible that, for a short period, the Underlying Fund may not fully
replicate the performance of the Target Index due to the temporary
unavailability of certain index securities in the secondary market or due to
other extraordinary circumstances. In addition, the 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. Accordingly, the total return generated by the
Underlying Fund is reduced by its expenses and transaction costs incurred in
adjusting the actual balance of the Underlying Fund. This may
adversely affect the value of the Securities and the return, if any, on the
Securities.
PS-18
PUBLIC
INFORMATION REGARDING THE UNDERLYING
In
the relevant Pricing Supplement, we will provide summary information regarding
the Underlying Company or the 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 the
Underlying 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 the
Underlying Company or the 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 the Underlying Company or Underlying Fund, as
applicable, 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
Securities offered by us and does not relate to the Shares of the Underlying or
other securities of the Underlying Company, if applicable. We will
derive all disclosures contained in the relevant Pricing Supplement regarding
the Underlying Company or Underlying Fund, as applicable, 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 the Underlying Company or Underlying Fund, as
applicable, in connection with the offering of the Securities. Neither we nor
Holding nor the agents make any representation that such publicly
available documents or any other publicly available information regarding the
Underlying Company or Underlying Fund, as applicable, 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 the Underlying
(and therefore the initial price and the knock-in level and redemption amount)
have been publicly disclosed. Subsequent disclosure of any such events or the
disclosure of or failure to disclose material future events concerning the
Underlying Company or Underlying Fund, as applicable, could affect the value you
will receive on the maturity date with respect to the Securities and therefore
the trading prices of the Securities. Neither we nor Holding nor any
of our affiliates have any obligation to disclose any information about the
Underlying Company or Underlying Fund, as applicable, 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 the shares of the Underlying.
We and/or our affiliates may
presently or from time to time engage in business with the Underlying Company,
the Underlying Fund or the issuers of the stocks comprising the 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. The statement in the preceding sentence is not intended to affect the
rights of holders of the Securities under the securities laws. As
a prospective purchaser of a Security, you should undertake such independent
investigation of the Underlying Company or Underlying Fund, as applicable, as
in
your judgment is appropriate to make an informed decision with respect to an
investment in the Underlying.
PS-19
DESCRIPTION
OF SECURITIES
Capitalized terms
not defined herein have the meanings given to such terms in the accompanying
Prospectus Supplement. The term “Security” refers to each $1,000 face amount of
our Reverse Exchangeable Securities or Knock-in Reverse Exchangeable Securities,
as the case may be, and fully and unconditionally guaranteed by
Holding.
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The
Underlying
|
(i) The
common stock (including ADSs) of the Underlying Company, which we refer to
as the Underlying Shares, or (ii) an exchange-traded fund that tracks the
performance of an underlying index or basket of securities, primarily by
holding securities or other instruments related to such underlying index
or basket, which we refer to as an Underlying Fund, as specified in the
relevant Pricing Supplement. We refer to the index that an
Underlying Fund tracks as the “Target Index.”
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Underlying
Company
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As specified
in the relevant Pricing Supplement, if applicable.
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Pricing
Date
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As specified
in the relevant Pricing Supplement.
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Issue
Price
|
Unless
otherwise specified in the relevant Pricing Supplement, 100%.
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Initial
Price
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The closing
price of the Underlying on the Pricing Date, divided by the Exchange
Factor. The Initial Price is subject to adjustment for certain corporate
events affecting the shares of the Underlying, which we describe in
“Description of Securities — Adjustment Events.”
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Knock-in
Level
|
For Knock-in
Reverse Exchangeable Securities, a price equal to a fixed percentage of
the Initial Price as specified in the relevant Pricing Supplement. The
Initial Price and consequently the Knock-in Level is subject to adjustment
for certain corporate events affecting the shares of the Underlying, which
we describe below under “— Adjustment Events.”
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Knock-In
Period
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For Knock-in
Reverse Exchangeable Securities, unless otherwise specified in the
relevant Pricing Supplement, each Trading Day from but not including the
Pricing Date to and including the Determination Date.
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Maturity Date
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As specified
in the relevant Pricing Supplement, subject to postponement as described
under “Description of Notes — Fixed Rate Notes — If a Payment Date Is not
a Business Day” in the accompanying Prospectus Supplement.
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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, $1,000, which we
refer to as the face amount, and integral multiples thereof.
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Form of
Securities
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The
Securities 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
Securities, when and as they shall become due and payable, whether at
maturity or upon acceleration, are fully and unconditionally guaranteed by
RBS Holdings N.V.
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Coupon Rate
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A per annum
rate, payable periodically in arrears as specified in the relevant Pricing
Supplement. See “Description of Notes — Interest and Principal
Payments” and “— Fixed Rate Notes” in the accompanying Prospectus
Supplement for additional information.
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PS-20
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Coupon
Payment Dates
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As specified
in the relevant Pricing Supplement, subject to postponement as described
under “Description of Notes — Fixed Rate Notes — If a Payment Date Is not
a Business Day” in the accompanying Prospectus
Supplement.
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Payment at
Maturity
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Unless
otherwise specified in the relevant Pricing Supplement, for Reverse
Exchangeable Securities, if the Closing Price per share of the Underlying
on the Determination Date is at or above the Initial Price, we will pay
you the face amount of each Security in cash. If the Closing Price per
share of the Underlying on the Determination Date is below the Initial
Price, we will deliver to you, in exchange for each Security, a number of
shares of the Underlying equal to the Redemption Amount.
Unless
otherwise specified in the relevant Pricing Supplement, for Knock-in
Reverse Exchangeable Securities, if the Closing Price per share of the
Underlying has not fallen below the Knock-in Level on any Trading Day
during the Knock-in Period, we will pay you the face amount of each
Security in cash. If the Closing Price per share of the Underlying has
fallen below the Knock-in Level on any Trading Day during the Knock-in
Period, then (i) if the Closing Price per share of the Underlying on the
Determination Date is below the Initial Price, we will deliver to you, in
exchange for each Security, a number of shares of the Underlying equal to
the Redemption Amount or (ii) if the Closing Price per share of the
Underlying on the Determination Date is at or above the Initial Price, we
will pay you the face amount of each Security in cash.
We will pay
cash in lieu of delivering fractional Underlying Shares in an amount equal
to the corresponding fractional Closing Price of the Underlying Shares, as
determined by the Calculation Agent on the Determination Date. Any shares
of an Underlying Fund which are delivered to you at maturity will be
delivered in book entry form and will include any fractional shares you
are entitled to receive, after aggregating your total holdings of the
Securities based on the closing price of the Underlying Fund on the
determination date. If due to events beyond our reasonable control, as
determined by us in our sole discretion, shares of the Underlying are not
available for delivery at maturity we may pay you, in lieu of the
Redemption Amount, the cash value of the Redemption Amount, determined by
multiplying the Redemption Amount by the Closing Price of the Underlying
on the Determination Date. Following a Reorganization Event,
the amount payable at maturity is subject to adjustments as described
below under “— Adjustment Events.”
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Redemption
Amount
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The
Calculation Agent, which is our affiliate, will determine the Redemption
Amount on the Determination Date by dividing $1,000 by the Initial Price
of the Underlying. The Initial Price and consequently the Redemption
Amount may be adjusted for certain corporate events affecting the
Underlying Company, which we described below under “— Adjustment Events.”
The coupon payment on the Securities at maturity will be paid in
cash.
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Determination
Date
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As specified
in the relevant Pricing Supplement; provided
that if such day is not a Trading Day, or if a Market Disruption Event has
occurred on such Trading Day, the Determination Date shall be the
immediately succeeding Trading Day; provided,
further, that the Determination Date 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 that 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.”
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PS-21
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Closing Price
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If the
Underlying Shares (or any other security for which a Closing Price must be
determined) or the Underlying Fund, as applicable, 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 Underlying Share (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
The NASDAQ Global Select Market, The NASDAQ Global Market or The NASDAQ
Capital Market, the official closing price), in the principal trading
session on such day on the principal securities exchange on which the
Underlying Shares (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 Shares, 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 Shares (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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Relevant
Exchange
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With respect
to Underlying Shares (or other security), the Relevant Exchange means the
primary U.S. securities exchange or organized market of trading for the
Underlying Shares (or other security). If a Reorganization
Event has occurred or if the Underlying Shares 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 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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With respect
to Underlying Shares, 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 Fund, a Trading Day means a day, as determined by the
Calculation Agent, on which trading in shares of such Underlying Fund is
generally conducted on the Relevant Exchange and on which securities
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.
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PS-22
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Book Entry
Note or Certificated Note
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Book
Entry
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|||
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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 the Underlying Shares or any other securities (other than shares of the
Underlying Fund) for which a Closing Price must be determined, Market
Disruption Event means:
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| (i) | either: | |||
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the
occurrence or existence of a suspension, absence or material limitation of
trading of the Underlying Shares (or such other securities) on the
Relevant Exchange for the Underlying Shares (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;
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(b)
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a breakdown
or failure in the price and trade reporting systems of the Relevant
Exchange for the Underlying Shares (or such other securities) as a result
of which the reported trading prices for the Underlying Shares (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
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| (c) |
the
suspension, absence or material limitation of trading on the primary
market for trading in futures or options contracts related to the
Underlying Shares (or such other securities), if available, during the
one-half hour period preceding the close of the principal trading session
in such market,
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| in each case as determined by the Calculation Agent in its sole discretion; and | ||||
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(ii)
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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 Securities. | |||
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For purposes
of determining whether a Market Disruption Event with respect to the
Underlying Shares (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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PS-23
| 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;
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| (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;
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| (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,
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| (d) |
the
occurrence or existence of a suspension, absence or material limitation of
trading of stocks then constituting 20% or more of the value of the Target
Index on the Relevant Exchange(s) for such 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(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,
|
|||
| 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
Securities.
|
||||
|
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
included in the Target Fund 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 relevant percentage
contribution of that security to the level of the Target Fund shall be
based on a comparison of (i) the portion of the level of the Target Fund
attributable to that security relative to (ii) the overall level of the
Target Fund, in each case immediately before the occurrence of that
suspension, limitation or other market disruption, as the case may be.
|
||||
PS-24
|
For purposes
of determining whether a Market Disruption Event with respect to the
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.
|
||
|
The
Calculation Agent shall as soon as reasonably practicable under the
circumstances notify us, the trustee, the Depository Trust Company and
the agents of the existence or occurrence of a Market Disruption
Event on any day that but for the occurrence or existence of a Market
Disruption Event would have been the Determination Date.
|
||
|
Exchange
Factor
|
The Exchange
Factor will be set initially at 1.0, but will be subject to adjustment
upon the occurrence of certain corporate events affecting the shares of
the Underlying. See “Adjustment Events” below.
|
|
|
Adjustment
Events
|
For
Securities linked to Underlying Shares, the Exchange Factor with respect
to the Underlying Shares or the amounts paid at maturity will be adjusted
as follows:
|
| 1. | If the Underlying Shares are subject to a stock split or reverse stock split, then once such split has become effective, the Exchange Factor will be proportionately adjusted. | |||
| 2. | If the Underlying Shares are subject (i) to a stock dividend (i.e., the issuance of additional Underlying Shares) that is given ratably to all holders of Underlying Shares or (ii) to a distribution of the Underlying Shares 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 the Underlying Shares are trading ex-dividend, the Exchange Factor will be proportionally adjusted. | |||
PS-25
| 3. | There shall be no adjustments to the Exchange Factor to reflect cash dividends or other distributions paid with respect to the Underlying Shares 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 Shares shall be deemed to be an “Extraordinary Dividend” if such dividend or other distribution exceeds the immediately preceding non-Extraordinary Dividend for the Underlying Shares by an amount equal to at least 10% of the Closing Price of the Underlying Shares (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 Shares, the Exchange Factor with respect to the Underlying Shares will be adjusted on the ex-dividend date with respect to such Extraordinary Dividend so that the new Exchange Factor will equal the product of (i) the then-current Exchange Factor and (ii) a fraction, the numerator of which is the Closing Price 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 Shares shall equal (i) 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 Shares or (ii) 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 Shares 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 the Exchange Factor pursuant to this paragraph 3. | |||
| 4. | If the Underlying Company issues rights or warrants to all holders of the Underlying Shares to subscribe for or purchase Underlying Shares at an exercise price per share less than the Closing Price of the Underlying Shares 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 Securities, then the Exchange Factor shall be adjusted to equal the product of the prior Exchange Factor and a fraction, the numerator of which shall be the number of Underlying Shares outstanding immediately prior to the issuance of such rights or warrants plus the number of additional Underlying Shares offered for subscription or purchase pursuant to such rights or warrants and the denominator of which shall be the | |||
PS-26
| number of Underlying Shares outstanding immediately prior to the issuance of such rights or warrants plus the number of additional Underlying Shares which the aggregate offering price of the total number of shares of the Underlying Shares 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. | For Reverse Exchangeable Securities, if a Reorganization Event (as defined below) occurs, the payment at maturity will depend on the kind and amount of Exchange Property (as defined below) received by holders of Underlying Shares in the Reorganization Event. |
| (i) | If the Exchange Property consists solely of equity securities listed on a securities exchange that, in the opinion of the Calculation Agent, maintains sufficient liquidity for trading in such Exchange Property, then the payment at maturity for each $1,000 face amount of Securities will depend on whether the Closing Price of such Exchange Property on the Determination Date: |
| (a) | If the Closing Price of such Exchange Property has not fallen below the Initial Price on the Determination Date, then each holder of a Security will receive the face amount of $1,000 in cash; or | ||||
| (b) | If the Closing Price of such Exchange Property has fallen below the Initial Price on the Determination Date, we will deliver to you, in exchange for each Security, Exchange Property with a value equal to the product of the Redemption Amount times the Transaction Value and (y) if the Closing Price of such Exchange Property on the Determination Date is at or above the Initial Price, we will pay you $1,000 in cash. | ||||
| The Calculation Agent will adjust the Initial Price to reflect the new securities delivered in such Reorganization Event and the market value and volatility levels of such securities and any Exchange Factor adjustments to the Initial Price as of the effective date of the Reorganization Event. Following any such adjustment, the Initial Price will be such adjusted Initial Price, divided by the Exchange Factor (which shall have been reset to 1.0 immediately following the Reorganization Event). The Bank will provide notice to the Trustee and the Securities Administrator of the adjusted Initial Price as soon as practicable after the date of such Reorganization Event. | ||||
| (ii) | If the Exchange Property consists solely of property other than such listed equity securities, each holder of a Security will receive, on the Maturity Date, in exchange for each $1,000 face amount of Securities, the lesser of: (i) $1,000 in cash or (ii) Exchange Property in an amount with a value equal to the product of the | |||
PS-27
| Redemption Amount times the Transaction Value as of the Determination Date. We may, in lieu of delivering such Exchange Property, pay you the cash value of such Exchange Property as of the Determination Date, as determined by the Calculation Agent. We will notify the Trustee and the Securities Administrator of the amount and type of Exchange Property to be delivered or cash to be paid. | ||||
| (iii) | If the Exchange Property consists of any combination of such listed equity securities and other property, then we will (a) deliver, on the Maturity Date, the portion of Exchange Property consisting of such other property with a value equal to the product of the Redemption Amount (prior to any adjustment under this clause) times the Transaction Value of such portion of Exchange Property on the Determination Date or, at our election, pay the cash value thereof, as determined by the Calculation Agent, (b) proportionally adjust the Redemption Amount to reflect the portion of the Exchange Property constituting such listed equity securities, (c) adjust the Initial Price to reflect such listed equity securities, the market value and volatility levels of such listed equity securities and any Exchange Factor adjustments to the Initial Price as of the effective date of the Reorganization Event and (d) reduce the face amount of each $1,000 of Securities to an amount equal to such adjusted Redemption Amount multiplied by such adjusted Initial Price. Following such adjustments, the amount paid at maturity for each Security will be determined as set forth under clause (i) above, except references to each $1,000 face amount of Security and $1,000 in cash and the reference to $1,000 in the definition of Redemption Amount shall be references to the adjusted face amount of Securities as described in clause (d) of the preceding sentence. In addition, following any such adjustment, the Initial Price will be such adjusted Initial Price, divided by the Exchange Factor (which shall have been reset to 1.0 immediately following the Reorganization Event). The Bank will provide notice to the Trustee and the Securities Administrator of any adjustments to the Securities as a result of this clause (iii) as soon as practicable after the date of such Reorganization Event. | |||
| 6. | For Knock-in Reverse Exchangeable Securities, if a Reorganization Event (as defined below) occurs, the payment at maturity will depend on (i) whether the Closing Price of the Underlying Shares fell below the Knock-in Level on any Trading Day from but not including the Pricing Date to and including one Trading Day prior to the date of the Reorganization Event (for purposes of this paragraph 5, we refer to such period as the “Relevant Period”), and (ii) the kind and amount of Exchange Property (as defined below) received by holders of Underlying Shares in the Reorganization Event. | |||
| In the case where the Closing Price of the Underlying Shares has fallen below the Knock-in Level on any Trading Day during the Relevant Period, each holder of a Security will receive at | ||||
PS-28
| maturity, in respect of each $1,000 face amount of each Security, the lesser of: (i) $1,000 in cash or (ii) Exchange Property in an amount with a value equal to the product of the Redemption Amount times the Transaction Value (as defined below). | ||||
| In the case where the Closing Price of the Underlying Shares has not fallen below the Knock-in Level on any Trading Day during the Relevant Period, then the payment at maturity will depend upon the type of Exchange Property received by holders of Underlying Shares in accordance with the following: | ||||
| (i) | If the Exchange Property consists solely of equity securities listed on a securities exchange that, in the opinion of the Calculation Agent, maintains sufficient liquidity for trading in such Exchange Property, then the payment at maturity for each $1,000 face amount of Securities will depend on whether the Closing Price of such Exchange Property has fallen below the Knock-in Level on any Trading Day commencing on the date of such Reorganization Event to and including the Determination Date: | |||
| (a) | If the Closing Price of such Exchange Property has not fallen below the Knock-in Level on any Trading Day commencing on the date of such Reorganization Event to and including the Determination Date, then each holder of a Security will receive the face amount of $1,000 in cash; or | ||||
| (b) | If the Closing Price of such Exchange Property has fallen below the Knock-in Level on any Trading Day commencing on the date of such Reorganization Event to and including the Determination Date, then (x) if the Closing Price of such Exchange Property on the Determination Date is below the Initial Price, we will deliver to you, in exchange for each Security, Exchange Property with a value equal to the product of the Redemption Amount times the Transaction Value and (y) if the Closing Price of such Exchange Property on the Determination Date is at or above the Initial Price, we will pay you $1,000 in cash. | ||||
| The Calculation Agent will adjust the Initial Price and consequently the Knock-in Level to reflect the new securities delivered in such Reorganization Event and the market value and volatility levels of such securities and any Exchange Factor adjustments to the Initial Price as of the effective date of the Reorganization Event. Following any such adjustment, the Initial Price will be such adjusted Initial Price, divided by the Exchange Factor (which shall have been reset to 1.0 immediately following the Reorganization Event). The Bank will provide notice to the Trustee and the Securities Administrator of the adjusted Knock-in Level and Initial Price as soon as practicable after the date of such Reorganization Event. | |||||
PS-29
| (ii) | If the Exchange Property consists solely of property other than such listed equity securities, each holder of a Security will receive, on the Maturity Date, in exchange for each $1,000 face amount of Securities, the lesser of: (i) $1,000 in cash or (ii) Exchange Property in an amount with a value equal to the product of the Redemption Amount times the Transaction Value as of the Determination Date. We may, in lieu of delivering such Exchange Property, pay you the cash value of such Exchange Property as of the Determination Date, as determined by the Calculation Agent. We will notify the Trustee and the Securities Administrator of the amount and type of Exchange Property to be delivered or cash to be paid. | |||
| (iii) | If the Exchange Property consists of any combination of such listed equity securities and other property, then we will (a) deliver, on the Maturity Date, the portion of Exchange Property consisting of such other property with a value equal to the product of the Redemption Amount (prior to any adjustment under this clause) times the Transaction Value of such portion of Exchange Property on the Determination Date or, at our election, pay the cash value thereof, as determined by the Calculation Agent, (b) proportionally adjust the Redemption Amount to reflect the portion of the Exchange Property constituting such listed equity securities, (c) adjust the Initial Price and consequently the Knock-in Level to reflect such listed equity securities, the market value and volatility levels of such listed equity securities and any Exchange Factor adjustments to the Initial Price as of the effective date of the Reorganization Event and (d) reduce the face amount of each $1,000 of Securities to an amount equal to such adjusted Redemption Amount multiplied by such adjusted Initial Price. Following such adjustments, the amount paid at maturity for each Security will be determined as set forth under clause (i) above, except references to each $1,000 face amount of Security and $1,000 in cash and the reference to $1,000 in the definition of Redemption Amount shall be references to the adjusted face amount of Securities as described in clause (d) of the preceding sentence. In addition, following any such adjustment, the Initial Price will be such adjusted Initial Price, divided by the Exchange Factor (which shall have been reset to 1.0 immediately following the Reorganization Event). The Bank will provide notice to the Trustee and the Securities Administrator of any adjustments to the Securities as a result of this clause (iii) as soon as practicable after the date of such Reorganization Event. |
|
“Reorganization
Event” means (A) there has occurred any reclassification or change with
respect to the Underlying Shares, 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,
|
||
PS-30
|
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 the 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 Underlying Shares.
|
||
|
“Exchange Property” means
securities, cash or any other assets distributed to holders of the
Underlying Shares 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 Shares 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 Shares continue to be held by the holders receiving
such distribution, the Underlying
Shares.
|
||
|
“Transaction
Value”, at any date, means (A) for any cash received as Exchange Property
in any such Reorganization Event, the amount of cash received per
Underlying Share; (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, of such Exchange
Property received per Underlying Share; and (C) for any security received
in any such Reorganization Event (including in the case of the issuance of
tracking stock, the reclassified Underlying Shares and, in the case of a
Spin-off Event, the Underlying Shares 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 Underlying
Share.
|
|
For purposes
of clause (iii) above, if Exchange Property consists of more than one type
of property that is not listed equity securities described in clause (iii)
above, holders of Securities will receive at maturity a pro rata share of
each such type of Exchange Property in proportion to the quantity of such
Exchange Property received in respect of each Underlying Share. If
Exchange Property includes a cash component, holders will not receive any
coupons accrued on such cash component. In the event Exchange Property
consists of securities, those securities will, in turn, be subject to the
antidilution adjustments set forth in paragraphs 1 through 6.
|
||
|
For purposes
of paragraph 5 and 6:
|
| (i) | in the case of a consummated tender or exchange offer or going-private transaction involving Exchange Property of a particular type, Exchange Property shall be deemed to include the amount of cash or other property paid by the offeror in the tender or exchange offer with respect to such Exchange Property (in an amount determined on the basis of the rate of exchange in such tender or exchange offer or going-private transaction); and | |||
PS-31
| (ii) | in the event of a tender or exchange offer, merger, combination or consolidation or a going-private transaction with respect to Exchange Property in which an offeree may elect to receive cash or other property, Exchange Property shall be deemed to include the kind and amount of cash and other property received by offerees who elect to receive cash. | |||
| 7. | If ADSs serving as the Underlying Shares are no longer listed or admitted to trading on a U.S. securities exchange registered under the Exchange Act, or 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 Shares. 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. On and after the Change Date, solely for the purposes of determining whether the Closing Price has declined below the Knock-in Level, the Initial Price shall be converted into the applicable foreign currency using the applicable exchange rate on the Change Date as described below. The Closing Price of the Underlying Shares 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 as described below. | |||
|
Unless
otherwise specified
in the relevant Price Supplement,
in
these circumstances, to
the extent that the Redemption
Amount is
otherwise due at maturity, the
Bank will
pay
you the cash value of the Redemption Amount in U.S. dollars. On
any date of determination, 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 Group PLC
(“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 such date of determination, 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 date of determination, 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 face
amount of
the Securities for
settlement on the third business day following the date
of determination. 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.
|
||||
PS-32
|
With respect
to paragraphs 1 to 6 above, if ADSs are serving as the Underlying Shares,
all adjustments to the Exchange Factor for such Underlying Shares will be
made as if the ADS Underlying Stock is serving as the Underlying Shares.
Therefore, for example, if the ADS Underlying Stock are subject to a
two-for-one stock split and assuming the Exchange Factor is equal to one,
the Exchange Factor for the Underlying Shares would be adjusted to equal
to two. If the Securities 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 the Underlying Shares, 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.
|
|
With respect
to paragraphs 1 to 6 above, 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 corporate
or other similar events that affect or could potentially affect market
prices of, or shareholders’ rights in, the Underlying Shares (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 Shares, including, without limitation, a partial
tender or partial exchange offer for the Underlying Shares.
|
||
|
The
Calculation Agent shall be solely responsible for the determination and
calculation of any adjustments to the Exchange Factor or method of
calculating the Exchange Factor and of any related determinations and
calculations with respect to any distributions of stock, other securities
or other property or assets (including cash) in connection with any
Reorganization Event described in paragraph 5 above, and its
determinations and calculations with respect thereto shall be
conclusive.
|
||
|
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
Securities.
|
PS-33
|
For
Securities linked to an Underlying Fund, the Exchange Factor with respect
to the 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
Securities.
|
|
Discontinuance
of the Underlying Fund; Alteration
of Method of Calculation
|
If the
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
Closing Price per share of the Underlying Fund on the Determination Date
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 Securities 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 Closing Price per
share of the Underlying Fund. Such Closing 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
|
PS-34
|
liquidation,
delisting or termination, using the closing price (or, if trading in the
relevant securities has been materially suspended or 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 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 Securities.
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
Securities 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.
|
||
|
Alternate
Exchange Calculation in case of an Event of Default
|
In case an
Event of Default with respect to the Securities shall have occurred and be
continuing, the amount declared due and payable upon any acceleration of
any Security shall be determined by RBSSI, as Calculation Agent, as though
the Closing Price per share of the Underlying as of the Determination Date
were the Closing Price per share of the Underlying on the date of
acceleration, and, for Knock-in Reverse Exchangeable Securities, the
Knock-in Period ends on the date of acceleration, including any accrued
coupons to, but not including, the date of acceleration.
|
|
|
Calculation
Agent
|
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.
|
|
|
Additional
Amounts
|
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
Securities as may be necessary in order that the net payment of the
principal of the Securities and any other amounts payable on the
Securities, 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 Securities to be then
due and payable.
|
|
PS-35
|
Book Entry
|
The indenture
for the Securities permits us at anytime and in our sole discretion to
decide not to have any of the Securities represented by one or more
registered global securities. DTC has advised us that, under its current
practices, it would notify its participants of our request,
but will only withdraw beneficial interests from the global security at
the request of each DTC participant.
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|
|
Record Date
|
The “record
date” for any Coupon Payment Date is the calendar day prior to that Coupon
Payment Date, whether or not that date is a business day.
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|
|
Supplemental
Information
|
References in
this product supplement and in the relevant Pricing Supplement to coupons,
coupon payments, coupon rates, coupon payment dates and face amount are
equivalent to references to interest, interest payments, interest rates,
interest payment dates and principal amount, respectively, in the
prospectus and the prospectus supplement.
|
PS-36
USE
OF PROCEEDS
Unless otherwise
specified in the relevant Pricing Supplement, the net proceeds we receive from
the sale of the Securities 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 Securities. The issue price of the Securities includes the
selling agents’ commissions (as shown on the cover page of the relevant Pricing
Supplement) paid with respect to the Securities and the cost of hedging our
obligations under the Securities. 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; No Security Interest in the Shares of the Underlying Held by Us” and
“Plan of Distribution (Conflicts of Interest)” in this Product Supplement and
“Use of Proceeds” in the accompanying Prospectus.
PS-37
U.S.
FEDERAL INCOME TAX CONSEQUENCES
The following is a
summary of the material U.S. federal income tax consequences of ownership and
disposition of the Securities. It applies only to an investor who purchases the
Securities at issuance for their issue price and holds the Securities as capital
assets within the meaning of Section 1221 of the Internal Revenue Code of 1986,
as amended to the date hereof (the “Code”).
The tax consequences of ownership and disposition of the Underlying are not
addressed. 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 with retroactive effect.
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 Securities 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 a taxable year in which their Securities are sold or
retired.
Tax
Treatment of the Securities
Unless otherwise
provided in the applicable Pricing Supplement, we believe that it is reasonable
to treat a Security for U.S. federal income tax purposes as a put option (the
“Put
Option”) written by you to us with respect to the Underlying, secured by
a cash deposit equal to the issue price (the “Deposit”). Under
this treatment, in the case of a Reverse Exchangeable Security, the Put Option
will be deemed to have been exercised by us if the closing price of the
Underlying on the determination date is less than its initial
price. In the case of a Knock-in Reverse Exchangeable Security, the
Put Option will be deemed to have been exercised if (i) the closing price of the
Underlying is less than the knock-in level at any time during the knock-in
period, and (ii) the closing price of the Underlying on the determination date
is less than its initial price. If the Put Option is deemed to have
been exercised by us, the Deposit will be applied automatically in full
satisfaction of your obligation under the Put Option; otherwise, the Put Option
will be deemed to have expired unexercised and the Deposit will be returned to
you. Under this treatment, less than the full amount of each coupon
payment will be attributable to the interest on the Deposit; the excess of each
coupon payment over the portion of the payment attributable to the interest on
the Deposit will represent a portion of the option premium attributable to your
grant of the Put Option (“Put
Premium,” and collectively for all coupon payments received, “Put
Premiums”).
Due to the absence
of authorities that directly address instruments that are similar to the
Securities, significant aspects of the U.S. federal income tax consequences of
an investment in the Securities are uncertain. We do not plan to request a
ruling from the IRS, and the IRS or a court might not agree with the treatment
described herein. Accordingly, you should consult your tax adviser regarding the
U.S. federal income tax consequences of an investment in the Securities
(including possible alternative treatments, some of which are discussed below)
and with respect to any tax consequences arising under the laws of any state,
local or non-U.S. taxing jurisdiction.
Unless otherwise
stated, the following discussion assumes that the treatment of the Securities
described above will be respected.
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 Security 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.
PS-38
Securities
with a Term of One Year or Less
The following
discussion applies to Securities with a term of one year or less (from but
excluding the issue date to and including the last possible date that the
Securities could be outstanding).
Coupon
Payments. Because the term of these Securities is one year or less,
the Deposit will be treated as a short-term debt instrument for U.S. federal
income tax purposes. Under the applicable Treasury regulations, the
Deposit will be treated as being issued at a discount equal to the sum of all
interest payments to be made with respect to the
Deposit. Accrual-method holders, and cash-method holders who so
elect, should include the discount in income as it accrues on a straight-line
basis, unless they elect to accrue the discount on a constant-yield method based
on daily compounding. Cash-method holders who do not elect to accrue
the discount in income currently should include interest paid on the Deposit
upon its receipt. Additionally, cash-method holders who do not elect
to accrue the discount in income currently will be required to defer deductions
for any interest paid on indebtedness incurred to purchase or carry the
Securities, in an amount not exceeding the accrued discount that has not been
included in income. The Put Premiums will be taken into account as
described below.
Sale
or Exchange of a Security. Upon sale or exchange of a Security prior to
maturity, you will be required to recognize an amount of short-term capital gain
or loss equal to the difference between (i) the proceeds received minus the
amount of accrued but unpaid discount on the Deposit and (ii) the purchase price
you paid for the Security minus the total Put Premiums you have received from
us. This amount represents the net of the gain or loss attributable
to the termination of the Put Option and the gain or loss attributable to the
sale of the Deposit. You will recognize ordinary income with respect
to accrued discount on the Deposit that you have not previously included in
income. You should consult your tax adviser regarding the separate
determination of gain or loss with respect to the Put Option and the
Deposit.
Tax
Treatment at Maturity. The coupon payment received at maturity will be
treated as described above under “Coupon Payments.” If, in addition
to the final coupon payment, you receive an amount of cash equal to the face
amount, the Put Option will be deemed to have expired unexercised. In that case,
you will not recognize gain or loss upon the return of the Deposit, but you will
recognize short-term capital gain in an amount equal to the sum of all Put
Premiums received (including the final Put Premium).
If
you receive the redemption amount at maturity, you will be deemed to have
applied the Deposit toward the physical settlement of the Put
Option. In this case, you will not recognize gain or loss with
respect to the Put Premiums or the receipt of the Underlying (other than in
respect of cash received in lieu of any fractional share). Instead,
you will have an aggregate basis in the Underlying (including any fractional
share) received equal to the amount of the Deposit less the total Put Premiums
received, and that basis will be allocated proportionately among those
shares. Your holding period for the Underlying will begin on the day
after receipt. With respect to any cash received in lieu of a
fractional share, you will recognize gain or loss in an amount equal to the
difference between the amount of the cash received in respect of the fractional
share and the tax basis allocable to the fractional share.
If, instead, you
receive the cash value of the redemption amount, you will be deemed to have
applied the Deposit toward the cash settlement of the Put Option. In
that case, you will recognize short-term capital gain or loss in an amount equal
to the difference between (i) the cash value plus the total Put Premiums
received and (ii) the amount of the Deposit.
Securities
with a Term of More Than One Year
The following
discussion applies to Securities with a term of more than one year.
Coupon
Payments. The portion of each coupon payment attributable to
the Deposit will be taxable to you as ordinary income at the time it accrues or
is received in accordance with your method of accounting for U.S. federal income
tax purposes. The Put Premiums will be taken into account as
described below.
PS-39
Sale
or Exchange of the Securities. Upon a sale or exchange of a Security
prior to maturity, you should apportion the amount realized between the Deposit
and the Put Option based on their respective values on the date of the sale or
exchange. You will recognize gain or loss with respect to the Deposit in an
amount equal to the difference between (i) the amount realized that is
apportioned to the Deposit (excluding any amount attributable to accrued but
unpaid interest on the Deposit, which will be treated as a payment of interest);
and (ii) your basis in the Deposit. Such gain or loss will be capital
gain or loss, and will be long-term capital gain or loss if you have held the
Security for more than one year. Any amount realized that is apportioned to the
Put Option (together with the total Put Premiums previously received) will be
treated as short-term capital gain.
If
the value of the Deposit on the date of the sale or exchange exceeds the amount
realized upon the sale or exchange of a Security, you will be treated as having
(i) sold or exchanged the Deposit for an amount equal to its value on that date,
and (ii) made a payment to the purchaser of the Security, equal to the amount of
the excess of the value of the Deposit over the amount received, in exchange for
the purchaser’s assumption of the Put Option. In that case, you will recognize
short-term capital gain or loss in respect of the Put Option in an amount equal
to the difference between the total Put Premiums previously received by you and
the amount deemed to be paid by you in exchange for the purchaser’s assumption
of the Put Option.
Tax
Treatment at Maturity. The coupon payment received at maturity will be
treated as described above under “Coupon Payments.” If, in addition
to the final coupon payment, you receive an amount of cash equal to the face
amount, the Put Option will be deemed to have expired unexercised. In
this case, you will not recognize gain or loss upon the return of the Deposit,
but you will recognize short-term capital gain in an amount equal to the sum of
all the Put Premiums received (including the final Put
Premium).
If
you receive the redemption amount at maturity, you will be deemed to have
applied the Deposit toward the physical settlement of the Put
Option. In that case, you will not recognize gain or loss with
respect to the Put Premiums or the receipt of the Underlying (other than in
respect of cash received in lieu of any fractional share). Instead,
you will have an aggregate basis in the Underlying (including any fractional
share) received equal to the amount of the Deposit less the total Put Premiums
received, and that basis will be allocated proportionately among those
shares. Your holding period for the Underlying will begin on the day
after receipt. With respect to any cash received in lieu of a
fractional share, you will recognize gain or loss in an amount equal to the
difference between the amount of the cash received in respect of the fractional
share and the basis allocable to the fractional share.
If, instead, you
receive the cash value of the redemption amount, you will be deemed to have
applied the Deposit toward the cash settlement of the Put Option. In
that case, you will recognize short-term capital gain or loss in an amount equal
to the difference between (i) the cash value plus the total Put Premiums
received with respect to the Put Option and (ii) the amount of the
Deposit.
Possible
Alternative Tax Treatments of an Investment in the Securities.
Due to the absence
of authorities that directly address the proper tax treatment of the Securities,
the IRS or a court might not uphold the tax treatment described above. If the
IRS were successful in asserting an alternative treatment, the tax consequences
of ownership and disposition of the Securities might be affected materially and
adversely from the description above. It is possible, for example,
that the Securities could be treated as debt instruments issued by us. Under
this treatment, Securities having a term exceeding one year from issuance to
maturity (including the last possible date that the Securities could be
outstanding) would be governed by Treasury regulations relating to the taxation
of contingent payment debt instruments. In that event, regardless of whether you
are an accrual-method or cash-method taxpayer, you would be required to accrue
into income “original issue discount” based on our comparable yield for similar
non-contingent debt, determined as of the time of issuance of the
Securities, in each year that you held the Securities. In addition,
delivery of the redemption amount would be a taxable event, and any income
recognized on the sale, exchange or retirement of the Securities would be
treated as ordinary in character. Moreover, if you were to recognize a loss
above certain thresholds, you could be required to file a disclosure statement
with the IRS.
PS-40
Other alternative
U.S. federal income tax characterizations of the Securities are also
possible. For instance, you could be required to include the full
amount of the coupon payments on the Securities as ordinary income in accordance
with your method of accounting. In addition, in December 2007,
Treasury and the IRS released a notice requesting comments on various issues
regarding the U.S. federal income tax treatment of “prepaid forward contracts”
and similar instruments. While it is not clear whether the Securities would be
viewed as similar to the typical prepaid forward contract described in the
notice, it is possible that any Treasury regulations or other guidance
promulgated after consideration of these issues could materially and adversely
affect the tax consequences of an investment in the Securities, possibly with
retroactive effect.
You should consult
your tax adviser regarding the U.S. federal income tax consequences of an
investment in the Securities, including possible alternative treatments and the
issues presented by this notice, as well as any tax consequences arising under
the laws of any state, local or non-U.S. taxing jurisdiction.
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
the Securities who is: (i) a nonresident alien individual; (ii) a foreign
corporation; or (iii) a foreign estate or trust.
Under current law,
any income or gain from a Security should not be subject to U.S. federal income
tax, including withholding tax, provided generally that (i) you certified on IRS
Form W-8BEN, under penalties of perjury, that you are not a United States person
and otherwise satisfied applicable requirements, and (ii) such income or
gain was not effectively connected with your conduct of a trade or business
in the United States.
As
described above under “—Tax Consequences to U.S. Holders—Possible Alternative
Tax Treatments of an Investment in the Securities,” in December 2007, Treasury
and the IRS released a notice requesting comments on various issues regarding
the U.S. federal income tax treatment of “prepaid forward contracts” and similar
instruments. While it is not clear whether the Securities would be
viewed as similar to the typical prepaid forward contract described in the
notice, it is possible that any Treasury regulations or other guidance
promulgated after consideration of these issues might require non-U.S. holders
to accrue income, subject to withholding tax, over the term of the Securities,
possibly on a retroactive basis. You should consult your tax adviser regarding
the U.S. federal income tax consequences of an investment in the Securities,
including possible alternative treatments and the issues presented by this
notice.
If
you are engaged in a trade or business in the United States, and if the income
or gain from the Securities 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 ownership and disposition of the Securities, including the
possible imposition of a 30% branch profits tax if you are a
corporation.
Backup
Withholding and Information Reporting
Payments on the
Securities and proceeds received from a sale or exchange of the Securities
(including payment of the cash value of the redemption amount) 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.
PS-41
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 Securities 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 the full aggregate face amount of the Securities 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 all
or part of the unsold portion, which may constitute up to 15% of the total
aggregate principal amount of the 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.”
PS-42
|
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 RBS Holdings 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.
|
THE
ROYAL BANK OF SCOTLAND N.V.
Senior
Fixed Rate Notes
fully
and unconditionally guaranteed by
RBS Holdings
N.V.
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|
TABLE
OF CONTENTS
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PRODUCT
SUPPLEMENT
|
Page
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Reverse ExchangeableSM
Securities and
Knock-in Reverse
ExchangeableSM
Securities linked to the Common Stock of an
Underlying Company or
an
Exchange-Traded Fund
|
|
|
Summary
|
PS-2
|
||
|
Risk
Factors
|
PS-8
|
||
|
Public
Information Regarding the Underlying
|
PS-19
|
||
|
Description
of Securities
|
PS-20
|
||
|
Use of
Proceeds
|
PS-37
|
||
|
U.S. Federal
Income Tax Consequences
|
PS-38
|
||
|
Plan of
Distribution (Conflicts of Interest)
|
PS-42
|
||
|
PROSPECTUS
SUPPLEMENT
|
Page
|
||
|
About This
Prospectus Supplement
|
S-1
|
||
|
Risk
Factors
|
S-2
|
PRODUCT
SUPPLEMENT
(TO
PROSPECTUS DATED
APRIL
2, 2010 AND
PROSPECTUS
SUPPLEMENT
DATED APRIL
2, 2010)
|
|
|
Description
of Notes
|
S-4
|
||
|
Taxation in
the Netherlands
|
S-25
|
||
|
United States
Federal Income Taxation
|
S-28
|
||
|
Plan of
Distribution (Conflicts of Interest)
|
S-36
|
||
|
Legal
Matters
|
S-38
|
||
|
PROSPECTUS
|
Page
|
||
|
About This
Prospectus
|
1
|
||
|
Where You Can
Find Additional Information
|
2
|
||
|
Cautionary
Statement on Forward-Looking Statements
|
3
|
RBS
Securities Inc.
|
|
|
Consolidated
Ratios of Earnings to Fixed Charges
|
4
|
||
|
The Royal
Bank of Scotland N.V. and RBS Holdings
N.V.
|
5
|
||
|
Use of
Proceeds
|
6
|
||
|
Description
of Debt Securities
|
7
|
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|
Forms of
Securities
|
17
|
||
|
The
Depositary
|
18
|
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|
Plan of
Distribution (Conflicts of Interest)
|
20
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|
Legal
Matters
|
23
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|
Experts
|
24
|
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|
Benefit Plan
Investor Considerations
|
25
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|
Enforcement
of Civil Liabilities
|
26
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