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Term
Sheet
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Term Sheet No.
040 to
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(To Product
Supplement No. 1-I Dated September 29, 2009,
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Registration
Statement Nos. 333-162193 and 333-162193-01
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Prospectus
Supplement Dated September 29, 2009
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Dated December
17, 2009
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and Prospectus
Dated September 29, 2009)
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Rule
433
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ABN
AMRO BANK
N.V. Reverse Exchangeable Securities
fully and unconditionally
guaranteed by ABN AMRO Holding
N.V.
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Issuer:
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ABN AMRO Bank
N.V.
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Proposed
Pricing Date:
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December 23,
2009
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Lead
Agent:
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RBS
Securities Inc.
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Proposed
Settlement Date:
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December 31,
2009
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Offering
Period:
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December 17,
2009 – December 23, 2009
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Determination
Date:
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March 26,
20101
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Issue
Price:
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100%
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Maturity
Date:
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March 31,
2010
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1Subject
to certain adjustments as described in the accompanying Product
Supplement
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Underlying
Shares
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Ticker
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Principal
Amount
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Annualized
Coupon Rate2
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Annualized
Interest Rate
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Annualized
Put Premium
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Knock-In
Level
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CUSIP
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The Hartford
Financial Services Group, Inc.
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HIG
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24.25%
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0.15%
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24.10%
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80%
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00083JNJ3
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2The
Securities have a term of three months, so you will receive a pro rated
amount of this per annum rate based on such three-month
period.
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Offerings:
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24.25% (Per
Annum), Three Month Knock-in Reverse Exchangeable Securities due March 31,
2010 linked to the Underlying Shares set forth in the table
above.
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Coupon
Payment Dates:
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Coupons on
the Securities are payable monthly in arrears on the last day of each
month starting on January 31, 2010 and ending on the maturity
date.
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Initial
Price:
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100% of the
closing price of the applicable Underlying Shares on the Pricing Date,
subject to adjustment as described in the accompanying Product
Supplement.
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Knock-In
Level:
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A percentage
of the applicable initial price, as set forth in the table
above.
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Redemption
Amount:
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For each
$1,000 face amount of Security, a number of the applicable Underlying
Shares linked to such Security equal to $1,000 divided by the applicable
initial price.
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Underlying
Shares
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Initial
Price
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Knock-In
Price
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Redemption
Amount
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Aggregate Agent’s
Commission3
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Aggregate
Proceeds to Issuer
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The Hartford
Financial Services Group, Inc.
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3For
all offerings, the agent will receive a commission of 2.00%. For
additional information see “Plan of Distribution (Conflicts of Interest)”
in this Term Sheet.
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Payment
at Maturity:
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The payment
at maturity for each Security is based on the performance of the
applicable Underlying Shares linked to such Security:
(i) If
the closing price of the applicable Underlying Shares has not fallen below
the applicable knock-in level on any trading day from but not including
the Pricing Date to and including the determination date, we will pay you
the face amount of each Security in cash.
(ii) If
the closing price of the applicable Underlying Shares has fallen below the
applicable knock-in level on any trading day from but not including the
Pricing Date to and including the determination date:
(a)
we will deliver to you a number of the applicable Underlying Shares equal
to the applicable redemption amount, in the event that the closing price
of the applicable Underlying Shares on the determination date is below the
applicable initial price; or
(b)
we will pay you the face amount of each Security in cash, in the event
that the closing price of the applicable Underlying Shares on the
determination date is at or above the applicable initial
price.
You will
receive cash in lieu of fractional shares. If due to events beyond our
reasonable control, as determined by us in our sole discretion, the
applicable Underlying Shares are not available for delivery at maturity we
may pay you, in lieu of the applicable redemption amount, the cash value
of the applicable redemption amount, determined by multiplying the
applicable redemption amount by the closing price of the applicable
Underlying Shares on the determination date.
Any payment
at maturity is subject to the creditworthiness of ABN AMRO Bank N.V. and
ABN AMRO Holding N.V., as guarantor.
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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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Denomination:
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$1,000
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Settlement:
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DTC, Book
Entry, Transferable
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Status:
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Unsecured,
unsubordinated obligations of the Issuer and fully and unconditionally
guaranteed by the Issuer’s parent company, ABN AMRO Holding
N.V.
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Selling
Restriction:
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Sales in the
European Union must comply with the Prospectus
Directive
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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, nor are they obligations of, or guaranteed, by a bank.
Investing
in the Securities involves a number of risks. See “Risk Factors”
beginning on page PS-9 of the accompanying Product Supplement No. 1-I and “Risk
Factors” beginning on page 8 of this Term Sheet.
The Securities and
Exchange Commission and state securities regulators have not approved or
disapproved these Securities, or determined if this Term Sheet or the
accompanying Product Supplement, Prospectus Supplement or Prospectus 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 this Term Sheet is not
purchased by investors in the offering, one or more of our affiliates may agree
to purchase a part of the unsold portion, which may constitute up to 15% of the
total aggregate face amount of the Securities, and to hold such Securities for
investment purposes. See “Holdings of the Securities by Our
Affiliates and Future Sales” under the heading “Risk Factors” and “Plan of
Distribution (Conflicts of Interest)” in this Term Sheet. This Term
Sheet and the accompanying Product Supplement, Prospectus Supplement and
Prospectus may be used by our affiliates in connection with offers and sales of
the Securities in market-making transactions.
PRICE:
$1,000 PER SECURITY
We expect that delivery of the Securities will be made against
payment therefor on or about the closing date specified on the cover page of
this Term Sheet, which will be the fifth Business Day following the Pricing Date
of the Securities (this settlement cycle being referred to as “T+5”). Under Rule 15c6-1 of the SEC under
the Securities Exchange Act of 1934, trades in the secondary market generally
are required to settle in three Business Days, unless the parties to that trade
expressly agree otherwise. Accordingly, purchasers who wish to trade the Securities on the
Pricing Date or the next succeeding Business Day will be required, by virtue of
the fact that the Securities initially will settle in T+5, to specify an
alternate settlement cycle at the time of any such trade to prevent a failed settlement and should
consult their own advisor.
Where
You Can Find More Information
ABN AMRO BANK N.V.,
or ABN AMRO, has filed a registration statement (including a Prospectus and
Prospectus Supplement) with the Securities and Exchange Commission, or SEC, for
the offering to which this Term Sheet relates. Before you invest, you should
read the Prospectus and Prospectus Supplement in that registration statement and
other documents, including the applicable Product Supplement, related to this
offering that ABN AMRO has filed with the SEC for more complete information
about ABN AMRO and the offering of the Securities.
You may get these
documents without cost by visiting EDGAR on the SEC website at www.sec.gov.
Alternatively, ABN AMRO, any underwriter or any dealer participating in the
offering will arrange to send you the Prospectus, Prospectus Supplement and
Product Supplement No. 1-I if you request by calling toll free (866)
747-4332.
You should read
this Term Sheet together with the Prospectus dated September 29, 2009, as
supplemented by the Prospectus Supplement dated September 29, 2009 relating to
our ABN NotesSM of
which these Securities are a part, and the more detailed information contained
in Product Supplement No. 1-I dated September 29, 2009. This Term Sheet, together with the
documents listed below, contains the terms of the Securities and supersedes all
other prior or contemporaneous oral statements as well as any other written
materials including preliminary or indicative pricing terms, correspondence,
trade ideas, structures for implementation, sample structures, fact sheets,
brochures or other educational materials of ours. You should
carefully consider, among other things, the matters set forth in “Risk Factors”
in the accompanying Product Supplement No. 1-I, as the Securities involve risks
not associated with conventional debt securities. We urge you to
consult your investment, legal, tax, accounting and other advisors before you
invest in the Securities.
You may access
these documents on the SEC website at www.sec.gov as follows (or if such address
has changed, by reviewing our filings for the relevant date on the SEC
website):
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Product
Supplement No. 1-I dated September 29, 2009:
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Prospectus
Supplement dated September 29,
2009:
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Prospectus
dated September 29, 2009:
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Our Central Index
Key, or CIK, on the SEC website is 897878. As used in this Term Sheet, the
“Company,” “we,” “us” or “our” refers to ABN AMRO Bank N.V.
These
Securities may not be offered or sold (i) to any person/entity listed on
sanctions lists of the European Union, United States or any other applicable
local competent authority; (ii) within the territory of Cuba, Sudan, Iran and
Myanmar; (iii) to residents of Cuba, Sudan, Iran or Myanmar; or (iv) to Cuban
Nationals, wherever located.
We reserve the
right to withdraw, cancel or modify any offering of the Securities and to reject
orders in whole or in part prior to their issuance.
SUMMARY
This
Term Sheet relates to one offering of Securities. The purchaser of any offering
will acquire a Security linked to the Underlying Shares.
The
following summary does not contain all the information that may be important to
you. You should read this summary together with the more detailed information
that is contained in Product Supplement No. 1-I and in the accompanying
Prospectus and Prospectus Supplement. You should carefully consider, among other
things, the matters set forth in “Risk Factors” in the Product Supplement No.
1-I, which are summarized on page 8 of this Term Sheet. 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, ABN AMRO Bank N.V., and are
fully and unconditionally guaranteed by our parent company, ABN AMRO Holding
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 ABN AMRO Bank N.V. 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 of the common stock, which we refer to as the Underlying Shares of
an Underlying Company. Therefore your principal is at risk but you have no
opportunity to participate in any appreciation of the Underlying
Shares.
Any payment on the
Securities is subject to the creditworthiness of ABN AMRO Bank N.V. and ABN AMRO
Holding N.V. as guarantor.
What
will I receive at maturity of the Securities?
The payment at
maturity of the Securities will depend on (i) whether or not the closing price
of the Underlying Shares 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 Shares
on the determination date. Except in certain circumstances described
under “Description of Securities — Closing Price” in the accompanying Product
Supplement, we will usually determine the closing price for any listed
Underlying Shares 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 the Underlying Shares
are traded.
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If the
closing price per Underlying Share 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.
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If the
closing price per Underlying Share 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 Shares on the determination date
is below the closing price on the pricing date (subject to adjustment),
which we refer to as the initial price (the market value of the redemption
amount on the determination date will always be less than the face amount
of $1,000 per Security); 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 Shares 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,
Underlying Shares 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 Shares on the determination date.
The “redemption
amount” is equal to $1,000 divided by the initial price of the Underlying
Shares. The initial price and consequently the redemption amount may be adjusted
for certain corporate events, such as a stock split, affecting the Underlying
Company.
The payment at
maturity is further subject to adjustment in certain circumstances, such as a
stock split or merger, which we describe in “Description of Securities —
Adjustment Events” in the accompanying Product Supplement No. 1-I.
Any payment at
maturity is subject to the creditworthiness of ABN AMRO Bank N.V. and ABN AMRO
Holding N.V., as guarantor.
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 Shares. The premium due to
you for this put option is combined with a market interest rate on our senior
debt to produce the higher 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
Underlying Shares 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 Underlying Shares to you, at maturity, with a market
value which is less than the face amount of $1,000 per Security. If the closing
price of the Underlying Shares falls below the knock-in level on any trading day
during the knock-in period, and on the determination date the closing price of
the Underlying Shares is less than the initial price, you will receive the
redemption amount. The market value of the Underlying Shares on the
determination date will be less than the face amount of the Securities and could
be zero. Therefore you are not guaranteed to receive any return of principal at
maturity. If the price of the Underlying Shares rises above the
initial price you will not participate in any appreciation in the price of the
Underlying Shares.
How
is the redemption amount determined?
The redemption
amount for each $1,000 face amount of any Security is equal to $1,000 divided by
the initial price of the Underlying Shares linked to such Security. The value of
any fractional shares of the Underlying Shares that you are entitled to receive,
after aggregating your total holdings of the Securities linked to the Underlying
Shares, will be paid in cash based on the closing price of the Underlying Shares
on the determination date.
Do
I get all my principal back at maturity?
You are not
guaranteed to receive any return of principal at maturity. If the closing price
of Underlying Shares falls below the knock-in level on any trading day during
the knock-in period, and the closing price of the Underlying Shares is below the
initial price on the determination date, we will deliver to you Underlying
Shares. The market value of the Underlying Shares on the determination date will
be less than the face amount of the Securities and could be zero. Accordingly, you may lose some or all
of your initial principal investment in the Securities.
What
coupon payments can I expect on the Securities?
The coupon rate is
fixed at issue and is payable in cash on each coupon payment date, irrespective
of whether the Securities are redeemed at maturity for cash or
shares.
Any coupon payment
is subject to the creditworthiness of ABN AMRO Bank N.V. and ABN AMRO Holding
N.V. as guarantor.
Can
you give me an example of the payment at maturity?
If, for example, in
a hypothetical offering, the coupon rate was 10% per annum, the initial price of
the Underlying Shares was $45.00 per share and the knock-in level for such
offering was 80%, then the redemption amount would be 22.222 Underlying Shares,
or $1,000 divided by $45.00, and the knock-in level would be $36.00, or 80% of
the initial price.
If the closing
price of the hypothetical Underlying Shares fell below the knock-in level of
$36.00 on any trading day during the knock-in period, then the payment at
maturity would depend on the closing price of the Underlying Shares on the
determination date. In this case, if the closing price of the Underlying Shares
on the determination date is $30.00 per share, which is below the initial price,
you would receive 22.222 Underlying Shares for each $1,000 face amount of the
Securities. (In actuality, because we cannot deliver fractions of a share, you
would receive on the maturity date for each $1,000 face amount of the
Securities, 22 Underlying Shares plus $6.66 cash in lieu of 0.222 fractional
shares, determined by multiplying 0.222 by $30.00, the closing price of the
Underlying Shares on the determination date.) In addition, over the term of the
Securities you would have received coupon payments at a rate of 10% per annum.
In this hypothetical example,
the market value of those 22 Underlying Shares (including the cash paid in lieu
of fractional shares) that we would deliver to you at maturity for each $1,000
face amount of Security would be $666.66, which is less than the face amount of
$1,000, and you would have lost a portion of your initial
investment. If, on the other hand, the closing price of the
Underlying Shares on the determination date is $50.00 per share, which is above
the initial price, you will receive $1,000 in cash for each $1,000 face amount
of the Securities regardless of the knock-in level having been breached. In
addition, over the term of the Securities you would have received coupon
payments at a rate of 10% per annum.
Alternatively, if
the closing price of the Underlying Shares never falls below $36.00, which is
the knock-in level, on any trading day during the knock-in period, at maturity
you will receive $1,000 in cash for each Security you hold regardless of the
closing price of the Underlying Shares on the determination date. In addition,
over the term of the Securities you would have received coupon payments at a
rate of 10% per annum.
This example is for illustrative
purposes only and is based on a hypothetical offering. It is not
possible to predict the closing price of the Underlying Shares on the
determination date or at any time during the term of the
Securities. For each offering, we will set the initial price,
knock-in level and redemption amount on the Pricing Date.
In this Term Sheet,
we have also provided under the heading “Hypothetical Sensitivity Analysis of
Total Return of the Securities at Maturity” the total return of owning the
Securities through maturity for various closing prices of the Underlying Shares
on the determination date.
Do
I benefit from any appreciation in the Underlying Shares over the term of the
Securities?
No. The amount paid
at maturity for each $1,000 face amount of the Securities will never exceed
$1,000.
What
is the minimum required purchase?
You may purchase
Securities in minimum denominations of $1,000 or in integral multiples
thereof.
Is
there a secondary market for Securities?
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. 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.
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” in the accompanying Product
Supplement No. 1-I.
What
is the relationship between ABN AMRO Bank N.V., ABN AMRO Holding N.V. and RBS
Securities Inc.?
RBS
Securities Inc., which we refer to as RBSSI, is an affiliate of ABN AMRO Bank
N.V. and ABN AMRO Holding 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 the
accompanying Product Supplement No. 1-I.
Where
can I find out more about the Underlying Company?
Because
the Underlying Shares are registered under the Securities Exchange Act of 1934,
as amended, the Underlying Company is required to file periodically certain
financial and other information specified by the Commission which is available
to the public. You should read “Public Information Regarding the Underlying
Shares” in this Term Sheet to learn how to obtain public information regarding
the Underlying Shares and other important information. The historical highest
intra-day price, lowest intra-day price and last day closing price of the
Underlying Shares are set forth under the heading “Public Information Regarding
the Underlying Shares” in this Term Sheet.
What
if I have more questions?
You should read
“Description of Securities” in the accompanying Product Supplement No. 1-I for a
detailed description of the terms of the Securities. ABN AMRO has
filed a registration statement (including a Prospectus and Prospectus
Supplement) with the SEC for the offering to which this communication
relates. Before you invest, you should read the Prospectus and
Prospectus Supplement in that registration statement and other documents ABN
AMRO has filed with the SEC for more complete information about ABN AMRO and the
offering of the Securities. You may get these documents for free by
visiting EDGAR on the SEC web site at www.sec.gov. Alternatively, ABN
AMRO, any underwriter or any dealer participating in the offering will arrange
to send you the Prospectus and Prospectus Supplement if you request it by
calling toll free (866) 747-4332.
Recent
Developments
As
described under the heading “Tell me more about ABN AMRO Bank N.V. and ABN AMRO
Holding N.V.” in the accompanying Product Supplement No. 1-I, on October 17,
2007, RFS Holdings B.V., which at the time was owned by a consortium consisting
of the Royal Bank of Scotland Group plc (“RBS”), Fortis N.V., Fortis SA/NV and
Banco Santander S.A., completed the acquisition of Holding, the parent of ABN
AMRO Bank N.V. Subsequent to the events described therein the
following has occurred:
On
November 3, 2009 RBS announced that UK Financial Investments Limited (“UKFI”),
which is wholly owned by the UK government, agreed to subscribe for additional B
Shares of RBS raising UKFI’s economic interest in RBS to 84.4% while UKFI’s
ordinary shareholdings of RBS remain at 70.3%. While B Shares are
convertible into ordinary shares, UKFI has maintained
its agreement not to convert its B Shares into ordinary shares to the
extent its holding of ordinary shares would represent 75% or more of RBS's
issued ordinary share capital. Issuance of the B Shares was approved by the
European Commission on December 14, 2009 and by the shareholders of RBS on
December 15, 2009.
For
further information about RBS see “Tell me more about ABN AMRO Bank N.V. and ABN
AMRO Holding N.V.” in the accompanying Product Supplement No. 1-I.
RISK
FACTORS
You
should carefully consider the risks of the Securities to which this Term Sheet
relates and whether these Securities are suited to your particular circumstances
before deciding to purchase them. It is important that prior to
investing in these Securities you read the Product Supplement No. 1-I related to
such Securities and the accompanying Prospectus and Prospectus Supplement to
understand the actual terms of and the risks associated with the Securities. In
addition, we urge you to consult with your investment, legal, accounting, tax
and other advisors with respect to any investment in the
Securities.
Credit
Risk
The Securities are
issued by ABN AMRO and guaranteed by ABN AMRO Holding N.V., ABN AMRO’s parent
company. As a result, investors in the Securities assume the credit risk of ABN
AMRO and that of ABN AMRO Holding N.V. in the event that ABN AMRO defaults on
its obligations under the Securities. Any obligations or Securities
sold, offered, or recommended are not deposits of ABN AMRO and are not endorsed
or guaranteed by any bank or thrift, nor are they insured by the FDIC or any
governmental agency.
Principal
Risk
The Securities are
not ordinary debt securities: they are not principal protected. In addition, if
the closing price of the Underlying Shares falls below the knock-in level on any
trading day during the knock-in period, investors in the Securities will be
exposed to any decline in the price of the Underlying Shares below the closing
price of the Underlying Shares on the date the Securities were priced. Accordingly, you may lose some or all
of your initial principal investment in the Securities.
Limited
Return
The amount payable
under the Securities will never exceed the original face amount of the
Securities plus the applicable aggregate fixed coupon payment investors earn
during the term of the Securities. This means that you will not
benefit from any price appreciation in the Underlying Shares, nor will you
receive dividends paid on the Underlying Shares, if any. Accordingly,
you will never receive at maturity an amount greater than a predetermined amount
per Security, regardless of how much the price of the Underlying Shares may
increase during the term of the Securities or on the determination
date. The return on a Security may be significantly less than the
return on a direct investment in the Underlying Shares to which the Security is
linked during the term of the Security.
Liquidity
Risk
The Securities will
not be listed on any securities exchange. Accordingly, there may be
little or no secondary market for the Securities and information regarding
independent market pricing of the Securities may be very limited or
non-existent. The value of the Securities in the secondary market, if any, will
be subject to many unpredictable factors, including then prevailing market
conditions.
It is important to note that many
factors will contribute to the secondary market value of the Securities, and you
may not receive your full principal back if the Securities are sold prior to
maturity. Such factors include, but are not limited to, time
to maturity, the price of the Underlying Shares, volatility and interest
rates.
In addition, the
price, if any, at which our affiliate or another party are willing to purchase
Securities in secondary market transactions will likely be lower than the issue
price, since the issue price included, and secondary market prices are likely to
exclude, commissions, discounts or mark-ups paid with respect to the Securities,
as well as the cost of hedging our obligations under the
Securities.
Holdings
of the Securities by Our Affiliates and Future Sales
Certain of our
affiliates may agree to purchase for investment the 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. In addition, our affiliates could have
substantial influence over any matter subject to consent of the security
holders.
Potential
Conflicts of Interest
We and our
affiliates play a variety of roles in connection with the issuance of the
Securities, including acting as calculation agent. In performing
these duties, the economic interests of the calculation agent and other
affiliates of ours are potentially adverse to your interests as an investor in
the Securities. We and our affiliates may carry out hedging
activities that minimize our risks related to the Securities, including trading
in the Underlying Shares. In particular, on or prior to the date of this Term
Sheet, we, through our affiliates, may have hedged our anticipated exposure in
connection with the Securities by taking positions in the Underlying Shares,
options contracts on Underlying Shares 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 Shares, and therefore increased the knock-in
level, below which we would be required to deliver to you at maturity Underlying
Shares, which, in turn, would have a value less than the face amount of your
Securities.
No
Affiliation with the Underlying Company
The Underlying
Company is not an affiliate of ours and is not involved with this offering in
any way. The obligations represented by the Securities are our obligations, not
those of the Underlying Company. Investing in the Securities is not
equivalent to investing in the Underlying Shares. Neither we nor Holding nor any of our
affiliates have any affiliation with the Underlying Company, and are not
responsible for the Underlying Company’s public disclosure of information,
whether contained in SEC filings or otherwise.
Uncertain
Tax Treatment
You should review
carefully the section of the accompanying Product Supplement entitled “U.S.
Federal Income Tax Consequences.” Although the tax consequences of an investment
in the Securities are unclear, 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 Shares, secured by a cash deposit equal to the
face amount of the Security (the “Deposit”). Under
this treatment, less than the full amount of each coupon payment will be
attributable to the interest on the Deposit, and the excess of each coupon
payment over the portion of the coupon payment attributable to the interest on
the Deposit will represent a portion of the option premium attributable to your
grant of the Put Option (the “Put Premium,” and collectively
for all coupon payments received, “Put Premiums”). Interest on
the Deposit generally will be treated as ordinary income on indebtedness while
the Put Premium will not be taken into account prior to sale, exchange or
maturity of the Securities. The cover of this Term Sheet reflects our
preliminary determination of the rate of interest paid on the Deposit and the
amount of the 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 Internal Revenue Service (the “IRS”), and the IRS or a court
might not agree with the tax treatment described in this Term Sheet and the
accompanying Product Supplement. If the IRS were successful in asserting an
alternative treatment for the Securities,
the tax
consequences of the ownership and disposition of the Securities could be
affected materially and adversely.
In December 2007,
the 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, 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 all
aspects of the U.S. federal tax consequences of investing in the Securities
(including possible alternative treatments and the issues presented by the
December 2007 notice), as well as any tax consequences arising under the laws of
any state, local or non-U.S. taxing jurisdiction.
Reverse
Exchangeable is a Service Mark of ABN AMRO Bank N.V.
Hypothetical
Sensitivity Analysis of Total Return
of
the Securities at Maturity
The following
tables set out the total return to maturity of a Security, based on the
assumptions outlined below and several variables, which include (a) whether the
closing price of the Underlying Shares has fallen below the knock-in level on
any trading day during the knock-in period and (b) several hypothetical closing
prices for the Underlying Shares on the determination date. The information in
the tables is based on hypothetical market values for the Underlying Shares. We
cannot predict the market price or the closing price of the Underlying Shares on
the determination date or at any time during the term of the Securities. The assumptions
expressed below are for illustrative purposes only and the returns set forth in
the table may or may not be the actual return applicable to a purchaser of the
Securities.
Assumptions
|
Initial
Price:
|
$24.13
(indicative price only, the initial price will be set on the pricing date;
the closing price on December 16, 2009 was $24.13)
|
|
Knock-In
Level:
|
$19.30 (80%
of the initial price)
|
|
Annual
Coupon on the Securities:
|
24.25%
|
|
Term
of the Securities:
|
3
months
|
|
Exchange
Factor:
|
1.0 (we have
assumed that no Market Disruption Event occurs and the Calculation Agent
does not need to adjust the Exchange Factor for any adjustment event
during the term of the Securities).
|
Payment
at maturity if the closing price of the Underlying Shares falls below the
knock-in level on any trading day during the knock-in period:
|
Assumed
Underlying
Shares
closing
price on
determination
date
|
Value
of
Payment
at
Maturity(a)
|
Three
Monthly
Coupon
Payments(b)
|
Total
Return(c)
|
|
$
|
%
|
|
$24.13 or
above
|
$1,000.00
|
$60.63
|
$1,060.63
|
6.06%
|
|
$23.53
|
$ 975.13
|
$60.63
|
$1,035.76
|
3.58%
|
|
$22.44
|
$ 929.96
|
$60.63
|
$ 990.59
|
-0.94%
|
|
$21.96
|
$ 910.07
|
$60.63
|
$ 970.70
|
-2.93%
|
|
$19.76
|
$ 818.89
|
$60.63
|
$ 879.52
|
-12.05%
|
|
$17.39
|
$ 720.68
|
$60.63
|
$ 781.31
|
-21.87%
|
|
$13.91
|
$ 576.46
|
$60.63
|
$ 637.09
|
-36.29%
|
|
$ 9.74
|
$ 403.65
|
$60.63
|
$ 464.28
|
-53.57%
|
|
$ 4.87
|
$ 201.82
|
$60.63
|
$ 262.45
|
-73.76%
|
|
$ 2.44
|
$ 101.12
|
$60.63
|
$ 161.75
|
-83.83%
|
|
$ 0.00
|
$ 0.00
|
$60.63
|
$ 60.63
|
-93.94%
|
Payment
at maturity if the closing price of the Underlying Shares never falls below the
knock-in level on any trading day during the knock-in period:
Assumed
Underlying
Shares
closing
price on
determination
date
|
Value
of
Payment
at
Maturity(d)
|
Three
Monthly
Coupon
Payments(b)
|
|
|
|
|
|
$24.13 or
above
|
$1,000.00
|
$60.63
|
$1,060.63
|
6.06%
|
|
$21.72
|
$1,000.00
|
$60.63
|
$1,060.63
|
6.06%
|
|
$20.63
|
$1,000.00
|
$60.63
|
$1,060.63
|
6.06%
|
|
$19.30
|
$1,000.00
|
$60.63
|
$1,060.63
|
6.06%
|
Please
see footnotes on next page.
|
(a)
|
Based on the
assumptions set forth above, if the closing price of the Underlying Shares
falls below $19.30 on any trading day during the knock-in period and, in
addition, the closing price of the Underlying Shares is less than $24.13
on the determination date, the payment at maturity will be made in
Underlying Shares. For determining the value of the payment at maturity,
we have assumed that the closing price of the Underlying Shares will be
the same on the maturity date as on the determination
date.
|
|
(b)
|
Coupons on
the Securities will be computed on the basis of a 360-day year of twelve
30-day months or, in the case of an incomplete month, the number of actual
days elapsed. Accordingly, depending on the number of days in any monthly
coupon payment period, the coupon payable in such period and,
consequently, the total coupons payable over the term of the Securities,
may be less than the amount reflected in this
column.
|
|
(c)
|
The total
return presented is exclusive of any tax consequences of owning the
Securities. You should consult your tax advisor regarding whether owning
the Securities is appropriate for your tax situation. See the sections
titled “Risk Factors” in this Term Sheet and the accompanying Product
Supplement No. 1-I and “United States Federal Taxation” and “Taxation in
the Netherlands” in the accompanying Prospectus
Supplement.
|
|
(d)
|
Based on the
assumptions set forth above, if the closing price of the Underlying Shares
never falls below $19.30 on any trading day during the knock-in period,
the payment at maturity will be made in
cash.
|
PUBLIC
INFORMATION REGARDING THE UNDERLYING SHARES
According to
publicly available documents, The Hartford Financial Services Group, Inc., which
we refer to as “Hartford Financial” or the Underlying Company, is an insurance
and financial services company providing investment products, individual life,
group life and group disability insurance products as well as property and
casualty insurance products.
The Underlying
Shares are shares of the Common Stock of Hartford Financial, $0.01 par value per
share. The Underlying Shares 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.” 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 Hartford Financial
pursuant to the Exchange Act can be located by reference to the Commission file
number 001-13958.
In addition,
information regarding Hartford Financial 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
Term Sheet relates only to the Securities offered by us and does not relate to
the Underlying Shares or other securities of the Underlying
Company. We will derive all disclosures contained in this Term Sheet
regarding the Underlying Company 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 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 are accurate or complete. Furthermore, neither we nor Holding
can give any assurance that all events occurring prior to the date of this Term
Sheet (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 Shares (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 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 after the date of this Term Sheet.
Neither we nor
Holding nor any of our affiliates makes any representation to you as to the
performance of the Underlying Shares.
We and/or our
affiliates may presently or from time to time engage in business with the
Underlying Company, including extending loans to, or making equity investments
in, or providing advisory services to the Underlying Company, 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 the Underlying
Company and, in addition, one or more of our affiliates may publish research
reports with respect to the Underlying Company. 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 as in your judgment is appropriate to
make an informed decision with respect to an investment in the Underlying
Shares.
HISTORICAL
INFORMATION
The Underlying
Shares are traded on the NYSE under the symbol “HIG”. The following table sets
forth the published quarterly highest intra-day price, lowest intra-day price
and last day closing price of the Underlying Shares since 2005. The closing
price for each share of common stock of December 16, 2009 was $24.13. We
obtained the prices listed below from Bloomberg Financial Markets without
independent verification. You should not take the historical prices of the
Underlying Shares as an indication of future performance. Neither we nor Holding can give any
assurance that the price of the Underlying Shares will not decrease, such that
we will deliver Underlying Shares at maturity.
|
|
|
|
|
|
2005
|
|
|
|
|
First
Quarter
|
$ 74.07
|
$65.98
|
$68.56
|
|
Second
Quarter
|
$ 77.52
|
$65.35
|
$74.78
|
|
Third
Quarter
|
$ 82.50
|
$71.53
|
$77.17
|
|
Fourth
Quarter
|
$ 89.49
|
$72.57
|
$85.89
|
|
2006
|
|
|
|
|
First
Quarter
|
$ 89.12
|
$79.24
|
$80.55
|
|
Second
Quarter
|
$ 93.95
|
$80.14
|
$84.60
|
|
Third
Quarter
|
$ 88.51
|
$79.55
|
$86.75
|
|
Fourth
Quarter
|
$ 93.75
|
$83.78
|
$93.31
|
|
2007
|
|
|
|
|
First
Quarter
|
$ 97.95
|
$90.30
|
$95.58
|
|
Second
Quarter
|
$106.23
|
$94.89
|
$98.51
|
|
Third
Quarter
|
$100.54
|
$83.00
|
$92.55
|
|
Fourth
Quarter
|
$ 99.14
|
$86.37
|
$87.19
|
|
2008
|
|
|
|
|
First
Quarter
|
$ 87.88
|
$63.98
|
$75.77
|
|
Second
Quarter
|
$ 79.88
|
$64.41
|
$64.57
|
|
Third
Quarter
|
$ 68.35
|
$31.50
|
$40.99
|
|
Fourth
Quarter
|
$ 39.74
|
$ 4.16
|
$16.42
|
|
2009
|
|
|
|
|
First
Quarter
|
$19.91
|
$ 3.33
|
$ 7.85
|
|
Second
Quarter
|
$18.16
|
$ 7.16
|
$11.87
|
|
Third
Quarter
|
$29.00
|
$10.00
|
$26.50
|
|
Fourth
Quarter (through December 16, 2009)
|
$29.59
|
$23.06
|
$24.13
|
Neither we nor ABN
AMRO Holding N.V. make any representation as to the amount of dividends, if any,
that Hartford Financial will pay in the future. In any event, as a holder of a
Security, you will not be entitled to receive dividends, if any, that may be
payable on the Underlying Shares.
PLAN
OF DISTRIBUTION (CONFLICTS OF INTEREST)
We have appointed
RBS Securities Inc. (“RBSSI”) as agent for this offering. 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 of
2.00% of the initial offering price of the Securities. 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. You can find a general description of the
commission rates payable to the agents under “Plan of Distribution” in the
accompanying Product Supplement No. 1-I.
RBSSI is an
affiliate of ours and ABN AMRO Holding N.V. 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 distributing the 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 a broker-dealer. RBSSI may act as
principal or agent in those 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 Term Sheet and the accompanying Prospectus, Prospectus
Supplement and Product Supplement No. 1-I in connection with any of those
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 will enter into one or more hedging transactions with us in
connection with this offering of Securities. See “Use of Proceeds” in the
accompanying Product Supplement No. 1-I.
To the extent that
the total aggregate face amount of the Securities being offered by this Term
Sheet is not purchased by investors in the offering, one or more of our
affiliates has agreed to purchase the unsold portion, and to hold such
Securities for investment purposes. See “Holdings of the Securities by our
Affiliates and Future Sales” under the heading “Risk Factors” in this Term
Sheet.