PROSPECTUS
SUPPLEMENT
(TO
PROSPECTUS DATED FEBRUARY 8, 2010)
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Filed
pursuant to Rule 424(b)(2)
Registration
Nos. 333-162193
333-162193-01
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The
Royal Bank of Scotland N.V.
RBS NotesSM
fully and
unconditionally guaranteed by ABN AMRO Holding N.V.
We, The Royal Bank
of Scotland N.V., may offer from time to time senior notes. The specific terms
of any notes that we offer will be included in a pricing supplement. The notes
will have the following general terms:
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The notes
will bear interest at either a fixed rate or a floating rate that varies
during the lifetime of the relevant notes, which, in either case, may be
zero. Floating rates will be based on rates or indices specified in the
applicable pricing supplement.
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The notes
will be fully and unconditionally guaranteed by ABN AMRO Holding
N.V.
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The notes
will be held in global form by The Depository Trust Company, unless the
pricing supplement provides otherwise.
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The notes
will pay interest, if any, on the dates stated in the applicable pricing
supplement.
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The pricing
supplement may also specify that the notes will have additional terms, including
the following:
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The notes may
be optionally or mandatorily exchangeable for securities of an entity that
is not affiliated with us, for a basket or index of those securities, or
for the cash value of those securities.
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Payments on
the notes may be linked to currency prices, commodity prices, securities
of entities not affiliated with us, baskets of those securities or
indices, or any combination of the above.
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The notes may
be either callable by us or puttable by
you.
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Investing
in the notes involves risks. See “Risk Factors” beginning on page S-2.
These
securities are not bank deposits and are not insured or guaranteed by the
Federal Deposit Insurance Corporation, the Deposit Insurance Fund or any other
federal agency.
The
Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
RBS Securities Inc.
has agreed to use reasonable efforts to solicit offers to purchase these
securities as our selling agent to the extent it is named in the applicable
pricing supplement. Certain other selling agents to be named in the
applicable pricing supplement may also be used to solicit such offers on a
reasonable efforts basis. We refer to each selling agent individually as the
“agent” and together as the “agents”. The agents may also purchase these
securities as principal at prices to be agreed upon at the time of sale. The
agents may resell any securities they purchase as principal at prevailing market
prices, or at other prices, as they determine.
RBS Securities Inc.
may use this prospectus supplement and the accompanying prospectus in connection
with offers and sales of the securities and related guarantees in market-making
transactions.
RBS
Securities Inc.
February
8, 2010
TABLE
OF CONTENTS
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Page
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Page
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Prospectus
Supplement |
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Prospectus
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About This
Prospectus Supplement
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S-1
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About This
Prospectus
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1
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Risk
Factors
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S-2
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Where You Can
Find Additional Information
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2
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Description
of Notes
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S-4
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Cautionary
Statement on Forward-Looking
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Taxation in
The Netherlands
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S-25
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Statements
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3
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United
States Federal
Income Taxation
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S-28
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Consolidated
Ratios of Earnings to Fixed Charges
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4
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Plan of
Distribution (Conflicts of Interest)
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S-36
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The Royal Bank of Scotland
N.V. and ABN
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Legal
Matters
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S-38
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AMRO Holding
N.V.
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5
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Use of
Proceeds
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6
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Description
of Debt Securities
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7
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Forms of
Securities
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17
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The
Depositary
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18
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Plan of
Distribution (Conflicts of Interest)
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20
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Legal
Matters
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23
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Experts
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24
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Benefit Plan
Investor Considerations
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25
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Enforcement
of Civil Liabilities
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26
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ABOUT
THIS PROSPECTUS SUPPLEMENT
We
may offer from time to time the notes described in this prospectus supplement.
We refer to the notes and related guarantees offered under this prospectus
supplement as our RBS NotesSM.
We refer to the offering of the RBS NotesSM
as our “RBS NotesSM
program”.
As
used in this prospectus supplement, the “Bank”, “we,” “us” and “our” refer to
The Royal Bank of Scotland
N.V., “Holding” refers to ABN AMRO Holding N.V, and “RBSSI” refers to RBS
Securities Inc., an affiliate of ours.
This prospectus supplement sets
forth certain terms of the notes that we may offer and supplements the
prospectus that is attached to the back of this prospectus supplement. Each time
we offer notes, we will attach a pricing supplement, product supplement and/or
underlying supplement to this prospectus supplement, all of which we refer to as
a “pricing supplement.” The
pricing supplement will contain the specific description of the notes we are
offering and the terms of the offering and it may modify or replace information
contained in this prospectus supplement or the accompanying
prospectus.
It
is important for you to read and consider all information contained in this
prospectus supplement and the accompanying prospectus and pricing supplement in
making your investment decision. You should also read and consider the
information contained in the documents identified in “Where You Can Find
Additional Information” in the accompanying prospectus.
You
should rely only on the information contained or incorporated by reference in
this prospectus supplement, the prospectus and any pricing supplement. 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.
The
notes may not be offered or sold in any jurisdiction in which such offer or sale
would be unlawful. The notes may only be offered within the European
Economic Area in compliance with the European Prospectus Directive 2003/71/EC
and the implementing measures in any member state. See “Plan of
Distribution – Selling Restrictions” in the accompanying
prospectus.
The information set
forth in this prospectus supplement is directed to prospective purchasers who
are United States residents. We disclaim any responsibility to advise
prospective purchasers who are residents of countries other than the United
States of any matters arising under foreign law that may affect the purchase of
or holding of, or receipt of payments on, the notes. These persons should
consult their own legal and financial advisors concerning these
matters.
RISK
FACTORS
Your
investment in the notes will involve a number of risks. Additional
risks, including specific tax risks, relating to specific types of notes will be
described in the applicable pricing supplement. You should consider carefully
the following risks and the risks, if any, set forth in the applicable pricing
supplement, before you decide that an investment in the notes is suitable for
you. You should consult your own financial and legal advisors regarding the
risks and suitability of an investment in the notes.
If
your notes are redeemable, we may choose to redeem them when prevailing interest
rates are relatively low.
If
your notes are redeemable, we may choose to redeem your notes when prevailing
interest rates are low and you may not be able to reinvest the redemption
proceeds in a comparable security at an effective interest rate as high as the
interest rate on the notes being redeemed.
We
cannot assure you that a trading market for your notes will ever develop or be
maintained or that a trade can be executed at any indicative price shown on any
website or Bloomberg.
We
cannot assure you that a trading market for your notes will ever develop or be
maintained. Many factors independent of our creditworthiness affect the trading
market and market value of your notes. These factors include, among
others:
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whether we
list the notes on a securities
exchange;
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whether we or
any other dealer makes a market in the
notes;
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the method of
calculating the principal and interest for the
notes;
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the time
remaining to the maturity of the
notes;
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the
outstanding amount of the notes;
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the
redemption features of the notes;
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the level,
direction and volatility of interest rates,
generally.
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There may be a
limited number of buyers when you decide to sell your notes, which may affect
the price you receive for your notes or your ability to sell your notes at
all.
In
connection with any secondary market activity in our notes, our affiliates may
post indicative prices for the notes on a designated website or via Bloomberg.
However, our affiliates are 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.
If
the notes you purchase are floating rate notes, you may receive a lesser amount
of interest in the future.
Because the
interest rate on floating rate notes will be indexed to an external interest
rate or index that may vary from time to time, there will be significant risks
not associated with a conventional fixed rate debt security. These risks include
fluctuation of the applicable interest rate and the possibility that, in the
future, the interest rate on your note will decrease and may be zero, subject to
any minimum interest rate specified in the applicable pricing
supplement. We have no control over a number of matters that may
affect interest rates, including economic, financial and political events that
are important in determining the existence, magnitude and longevity of these
risks and their results.
If
the floating rate notes you purchase are subject to a maximum interest rate,
your return will be limited.
If
the applicable pricing supplement specifies that your floating rate notes are
subject to a maximum interest rate, the rate of interest that will accrue on the
floating rate notes during any interest reset period will never exceed the
specified maximum interest rate.
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 agents are willing to purchase notes in secondary market transactions will
likely be lower than the issue price, since the issue price included, and
secondary market prices are likely to exclude, commissions paid with respect to
the notes, as well as the profit component included in the cost of hedging our
obligations under the notes. In addition, any such prices may differ
from values determined by pricing models used by the agents, as a result of
dealer discounts, mark-ups or other transaction costs.
There
are potential conflicts of interest between you and the calculation
agent.
RBSSI, an affiliate
of ours, will serve as the calculation agent with respect to the notes. In its
role as calculation agent, RBSSI will exercise its judgment when performing its
functions. Absent manifest error, all of its determinations in its role as
calculation agent will be final and binding on you and us, without any liability
on its or our part. You will not be entitled to any compensation from us or
RBSSI for any loss suffered as a result of any of its determinations in its role
as calculation agent. Since these determinations by RBSSI as calculation agent
may affect the return on and/or market value of your notes, you and RBSSI
may have a conflict of interest.
The
U.S. federal income tax treatment of certain instruments is
uncertain.
The U.S. federal
income tax treatment of certain instruments we may issue is
uncertain. Please read carefully the section entitled “United States
Federal Income Taxation” in this Prospectus Supplement and any discussion
regarding U.S. federal income taxation contained in the applicable pricing
supplement. You should consult your own tax adviser about an
investment in any of our notes in light of your particular tax
situation.
DESCRIPTION
OF NOTES
Investors should carefully read the
general terms and provisions of our debt securities in “Description of Debt
Securities” in the accompanying prospectus. This section supplements that
description. The
pricing supplement will add specific terms for each issuance of notes and may
modify or replace any of the information in this section and in “Description of
Debt Securities” in the accompanying
prospectus.
General
Terms of Notes
We
may issue notes under an indenture dated September 15, 2006, among us,
Wilmington Trust Company, as trustee, Citibank, N.A., as securities
administrator and Holding, as guarantor, which we refer to as the
“Indenture.” The notes issued under the Indenture will constitute a
single series under the Indenture, together with any notes that we issue in the
future under the Indenture that we designate as being part of that
series.
Our
Outstanding Indebtedness. The Indenture does not limit the amount of
additional indebtedness that we may incur.
Ranking.
Notes issued under the Indenture 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 save for those preferred by
mandatory provision of law.
Terms
Specified in Pricing Supplements. A pricing supplement will specify the
following terms of any issuance of our notes to the extent
applicable:
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the specific
designation of the notes;
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the issue
price (price to public);
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the aggregate
principal amount;
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the
denominations or minimum
denominations;
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the stated
maturity date and any terms related to any extension of the maturity
date;
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whether the
notes are fixed rate notes, floating rate notes or notes with original
issue discount;
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for fixed
rate notes, the rate per year at which the notes will bear interest, if
any, or the method of calculating that rate and the dates on which
interest will be payable;
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for floating
rate notes, the base rate, the index maturity, the spread, the spread
multiplier, the initial interest rate, the interest reset periods, the
interest payment dates, the maximum interest rate, the minimum interest
rate and any other terms relating to the particular method of calculating
the interest rate for the note;
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whether
interest, if any, will be payable in cash or payable in
kind;
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whether the
notes may be redeemed, in whole or in part, at our option or repaid at
your option, prior to the stated maturity date, and the terms of any
redemption or repayment;
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whether the
notes are currency-linked notes and/or notes linked to commodity prices,
securities of entities not affiliated with us, any other
financial, economic or other measures or instruments, including the
occurrence or non-occurrence of any event or circumstance, and/or baskets
or indices of any of these items, or any combination of the
above;
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the terms on
which holders of the notes may convert or exchange them into or for stock
or other securities of entities not affiliated with us, or for the cash
value of any of these securities or for any other property, any specific
terms relating to the adjustment of the conversion or exchange feature and
the period during which the holders may effect the conversion or
exchange;
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whether the
notes are renewable notes;
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if any note
is not denominated and payable in U.S. dollars, the currency or currencies
in which the principal, premium, if any, and interest, if any, will be
paid, which we refer to as the “specified currency,” along with any other
terms relating to the non-U.S. dollar denomination, including exchange
rates as against the U.S. dollar at selected times during the last five
years and any exchange controls affecting that specified
currency;
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whether and
under what circumstances we will pay additional amounts on the notes for
any tax, assessment or governmental charge withheld or deducted and, if
so, whether we will have the option to redeem those debt securities rather
than pay the additional amounts;
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whether the
notes will be listed on any stock
exchange;
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whether the
notes will be issued in book-entry or certificated
form;
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if the notes
are in book-entry form, whether the notes will be offered on a global
basis to investors through Euroclear Bank S.A./ N.V., as operator of the
Euroclear System and Clearstream Banking, société
anonyme as well as through the Depositary (each as defined below);
and
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any other
terms on which we will issue the
notes.
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Some
Definitions. We have defined some of the terms that we use frequently in
this prospectus supplement below:
A
“business day” means any day, other than a Saturday or Sunday, (a) that is
neither a legal holiday nor a day on which banking institutions are authorized
or required by law or regulation to close (x) for all notes, in The City of New
York, (y) for notes denominated in a specified currency other than U.S. dollars,
euro or Australian dollars, in the principal financial center of the country of
the specified currency or (z) for notes denominated in Australian dollars, in
Sydney; and (b) for notes denominated in euro, that is also a TARGET Settlement
Day.
“Depositary” means
The Depository Trust Company, New York, New York.
“Euro LIBOR notes”
means LIBOR notes for which the index currency is euros.
An
“interest payment date” for any note means a date on which, under the terms of
that note, regularly scheduled interest is payable.
“London banking
day” means any day on which dealings in deposits in the relevant index currency
are transacted in the London interbank market.
The “record date”
for any interest payment date is the date 15 calendar days prior to that
interest payment date, whether or not that date is a business day, unless
another date is specified in the applicable pricing supplement.
“TARGET Settlement
Day” means any day on which the Trans-European Automated Real-time Gross
Settlement Express Transfer System (“TARGET2”) is open.
References in this
prospectus supplement to “U.S. dollar,” or “U.S.$” or “$” are to the currency of
the United States of America.
Guarantee
Holding will fully
and unconditionally guarantee payment in full to the holders of the notes issued
by the Bank under the Indenture after the date hereof. The guarantee is set
forth in, and forms a part of, the Indenture under which the notes will be
issued. If, for any reason, we do not make any required payment in respect of
the notes when due, Holding as the guarantor thereof will cause the payment to
be made to or to the order of the trustee. The holder of the guaranteed note may
sue the guarantor to enforce its rights under the guarantee without first suing
us or any other person or entity. The guarantees will constitute Holding’s
unsecured and unsubordinated obligations and rank pari
passu without any preference among them and with all Holding’s other
present and future unsecured and unsubordinated obligations.
Forms
of Notes
We
will offer the notes on a continuing basis and will issue notes only in fully
registered form either as registered global notes or as certificated notes.
References to “holders” mean those who own notes registered in their own names,
on the books that we or the trustee maintain for this purpose, and not those who
own beneficial interests in notes registered in street name or in notes issued
in book-entry form through one or more depositaries.
Registered
Global Notes. For registered global notes, we will issue one or more
global certificates representing the entire issue of notes. Except as set forth
in the accompanying prospectus under “Forms of Securities — Global Securities,”
you may not exchange registered global notes or interests in registered global
notes for certificated notes.
Each global note
certificate representing registered global notes will be deposited with, or on
behalf of, the Depositary and registered in the name of a nominee of the
Depositary. These certificates name the Depositary or its nominee as the owner
of the notes. The Depositary maintains a computerized system that will reflect
the interests held by its participants in the global notes. An investor’s
beneficial interest will be reflected in the records of the Depositary’s direct
or indirect participants through an account maintained by the investor with its
broker/dealer, bank, trust company or other representative. A further
description of the Depositary’s procedures for global notes representing
book-entry notes is set forth under “Forms of Securities — The Depositary” in
the accompanying prospectus. The Depositary has confirmed to us, RBSSI and the
trustee that it intends to follow these procedures.
Certificated
Notes. If we issue notes in certificated form, the certificate will name
the investor or the investor’s nominee as the owner of the note. The person
named in the note register will be considered the owner of the note for all
purposes under the Indenture. For example, if we need to ask the holders of the
notes to vote on a proposed amendment to the notes, the person named in the note
register will be asked to cast any vote regarding that note. If you have chosen
to have some other entity hold the certificates for you, that entity will be
considered the owner of your note in our records and will be entitled to cast
the vote regarding your note. You may not exchange certificated notes for
registered global notes or interests in registered global
notes.
Denominations.
Unless otherwise specified in the pricing supplement, we will issue the
notes:
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for U.S.
dollar-denominated notes, in denominations of $1,000 or any amount greater
than $1,000 that is an integral multiple of $1,000;
or
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for notes
denominated in a specified currency other than U.S. dollars, in
denominations of the equivalent of $1,000, rounded to an integral multiple
of 1,000 units of the specified currency, or any larger integral multiple
of 1,000 units of the specified currency, as determined by reference to
the market exchange rate, as defined under “— Interest and Principal
Payments — Unavailability of Foreign Currency” below, on the business day
immediately preceding the date of
issuance.
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Interest
and Principal Payments
Payments,
Exchanges and Transfers. Holders may present notes for payment of
principal, premium, if any, and interest, if any, register the transfer of the
notes, and exchange the notes at Citibank, N.A, the securities administrator
under the Indenture, at 111 Wall Street, 15th
Floor, New York, New York 10043, Attention: Agency and Trust Group, as
our current agent for the payment, transfer and exchange of the notes. We refer
to Citibank, N.A. acting in this capacity, as the paying agent. However, holders
of global notes may transfer and exchange global notes only in the manner and to
the extent set forth under “Forms of Securities — Global Securities” in the
accompanying prospectus.
We
will not be required to:
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register the
transfer or exchange of any note if the holder has exercised the holder’s
right, if any, to require us to repurchase the note, in whole or in part,
except the portion of the note not required to be
repurchased;
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register the
transfer or exchange of notes to be redeemed for a period of fifteen
calendar days preceding the mailing of the relevant notice of redemption;
or
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register the
transfer or exchange of any note selected for redemption in whole or in
part, except the unredeemed or unpaid portion of that note being redeemed
in part.
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No
service charge will be made for any registration or transfer or exchange of
notes, but we may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with the registration of transfer or
exchange of notes.
Although we
anticipate making payments of principal, premium, if any, and interest, if any,
on most notes in U.S. dollars, some notes may be payable in foreign currencies
as specified in the applicable pricing supplement. Currently, few facilities
exist in the United States to convert U.S. dollars into foreign currencies and
vice versa. In addition, most U.S. banks do not offer non-U.S. dollar
denominated checking or savings account facilities. Accordingly, unless
alternative arrangements are made, we will pay principal, premium, if any, and
interest, if any, on notes that are payable in a foreign currency to an account
at a bank outside the United States, which, in the case of a note payable in
euro, will be made by credit or transfer to a euro account specified by the
payee in a country for which the euro is the lawful currency.
Recipients
of Payments. The paying agent will pay interest to the person in whose
name the note is registered at the close of business on the applicable record
date. However, upon maturity, redemption or repayment, the paying agent will pay
any interest due to the person to whom it pays the principal of the note. The
paying agent will make the payment of interest on the date of maturity,
redemption or repayment, whether or not that date is an interest payment date.
The paying agent will make the initial interest payment on a note on the first
interest payment date falling after the date of issuance, unless the date of
issuance is less than 15 calendar days before an interest payment date. In that
case, the paying agent will pay interest on the next succeeding interest payment
date to the holder of record on the record date corresponding to the succeeding
interest payment date.
Book-Entry
Notes. The paying agent will make payments of principal, premium, if any,
and interest, if any, to the account of the Depositary, as holder of book-entry
notes, by wire transfer of immediately available funds. We expect that the
Depositary, upon receipt of any payment, will immediately credit its
participants’ accounts in amounts proportionate to their respective beneficial
interests in the book-entry notes as shown on the records of the Depositary. We
also expect that payments by the Depositary’s participants to owners of
beneficial interests in the book-entry notes will be governed by standing
customer instructions and customary practices and will be the responsibility of
those participants.
Certificated
Notes. Except as indicated below, for payments of interest at maturity,
redemption or repayment, the paying agent will make U.S. dollar payments of
interest either:
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by check
mailed to the address of the person entitled to payment as shown on the
note register; or
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by wire
transfer of immediately available funds, if the holder has provided wire
transfer instructions to the paying agent not later than 15 calendar days
prior to the applicable interest payment
date.
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U.S. dollar
payments of principal, premium, if any, and interest, if any, upon maturity,
redemption or repayment on a note will be made in immediately available funds
against presentation and surrender of the note.
Payment
Procedures for Book-Entry Notes Denominated in a Foreign Currency.
Book-entry notes payable in a specified currency other than U.S. dollars will
provide that a beneficial owner of interests in those notes may elect to receive
all or a portion of the payments of principal, premium, if any, or interest, if
any, in U.S. dollars. In those cases, the Depositary will elect to receive all
payments with respect to the beneficial owner’s interest in the notes in U.S.
Dollars, unless the beneficial owner takes the following
steps:
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The
beneficial owner must give complete instructions to the direct or indirect
participant through which it holds the book-entry notes of its election to
receive those payments in the specified currency other than U.S. dollars
by wire transfer to an account specified by the beneficial owner with a
bank located outside the United States. In the case of a note payable in
euro, the account must be a euro account in a country for which the euro
is the lawful currency.
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The
participant must notify the Depositary of the beneficial owner’s election
on or prior to the third business day after the applicable record date,
for payments of interest, and on or prior to the twelfth business day
prior to the maturity date or any redemption or repayment date, for
payment of principal or premium.
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The
Depositary must have notified the paying agent of the beneficial owner’s
election on or prior to the fifth business day after the applicable record
date, for payments of interest, and on or prior to the tenth business day
prior to the maturity date or any redemption or repayment date, for
payment of principal or premium.
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Beneficial owners
should consult their participants in order to ascertain the deadline for giving
instructions to participants in order to ensure that timely notice will be
delivered to the Depositary.
Payment
Procedures for Certificated Notes Denominated in a Foreign Currency. For
certificated notes payable in a specified currency other than U.S. dollars, the
notes may provide that the holder may elect to receive all or a portion of the
payments on those notes in U.S. dollars. To do so, the holder must send a
written request to the paying agent:
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for payments
of interest, on or prior to the fifth business day after the applicable
record date; or
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for payments
of principal, at least ten business days prior to the maturity date or any
redemption or repayment date.
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To
revoke this election for all or a portion of the payments on the certificated
notes, the holder must send written notice to the paying agent:
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at least five
business days prior to the applicable record date, for payment of
interest; or
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at least ten
business days prior to the maturity date or any redemption or repayment
date, for payments of principal.
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If
the holder elects to be paid in a currency other than U.S. dollars, the paying
agent will pay the principal, premium, if any, or interest, if any, on the
certificated notes:
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by wire
transfer of immediately available funds in the specified currency to the
holder’s account at a bank located outside the United States, and in the
case of a note payable in euro, in a country for which the euro is the
lawful currency, if the paying agent has received the holder’s written
wire transfer instructions not less than 15 calendar days prior to the
applicable payment date; or
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by check
payable in the specified currency mailed to the address of the person
entitled to payment that is specified in the note register, if the holder
has not provided wire instructions.
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However, the paying
agent will pay only the principal of the certificated notes, any premium and
interest, if any, due at maturity, or on any redemption or repayment date, upon
surrender of the certificated notes at the office or agency of the paying
agent.
Determination
of Exchange Rate for Payments in U.S. Dollars for Notes Denominated in a Foreign
Currency. The exchange rate agent identified in the relevant pricing
supplement will convert the specified currency into U.S. dollars for holders who
elect to receive payments in U.S. dollars and for beneficial owners of
book-entry notes that do not follow the procedures we have described immediately
above. The conversion will be based on the highest bid quotation in The City of
New York received by the exchange rate agent at approximately 11:00 a.m., New
York City time, on the second business day preceding the applicable payment date
from three recognized foreign exchange dealers for the purchase by the quoting
dealer:
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of the
specified currency for U.S. dollars for settlement on the payment
date;
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in the
aggregate amount of the specified currency payable to those holders or
beneficial owners of notes; and
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at which the
applicable dealer commits to execute a
contract.
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One of the dealers
providing quotations may be the exchange rate agent unless the exchange rate
agent is an affiliate of ours. If those bid quotations are not available,
payments will be made in the specified currency. The holders or beneficial
owners of notes will pay all currency exchange costs by deductions from the
amounts payable on the notes.
Unavailability
of Foreign Currency. The relevant specified currency may not be available
to us or Holding, as the case may be, for making payments of principal of,
premium on, if any, or interest, if any, on any note. This could occur due to
the imposition of exchange controls or other circumstances beyond our control or
if the specified currency is no longer used by the government of the country
issuing that currency or by public institutions within the international banking
community for the settlement of transactions. If the specified currency is
unavailable, we may satisfy our obligations to holders of the notes by making
those payments on the date of payment in U.S. dollars on the basis of the noon
dollar buying rate in The City of New York for cable transfers of the currency
or currencies in which a payment on any note was to be made, published by the
Federal Reserve Bank of New York, which we refer to as the “market exchange
rate.” If that rate of exchange is not then available or is not published for a
particular payment currency, the market exchange rate will be based on the
highest bid quotation in The City of New York received by the exchange rate
agent at approximately 11:00 a.m., New York City time, on the second business
day preceding the applicable payment date from three recognized foreign exchange
dealers for the purchase by the quoting dealer:
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of the
specified currency for U.S. dollars for settlement on the payment
date;
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in the
aggregate amount of the specified currency payable to those holders or
beneficial owners of notes; and
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at which the
applicable dealer commits to execute a
contract.
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One of the dealers
providing quotations may be the exchange rate agent unless the exchange rate
agent is our affiliate. If those bid quotations are not available, the exchange
rate agent will determine the market exchange rate at its sole
discretion.
These provisions do
not apply if a specified currency is unavailable because it has been replaced by
the euro. If the euro has been substituted for a specified currency, we may at
our option, or will, if required by applicable law, without the consent of the
holders of the affected notes, pay the principal of, premium on, if any, or
interest, if any, on any note denominated in the specified currency in euro
instead of the specified currency, in conformity with legally applicable
measures taken pursuant to, or by virtue of, the treaty establishing the
European Community, as amended by the treaty on European Union. Any payment made
in U.S. dollars or in euro as described above where the required payment is in
an unavailable specified currency will not constitute an event of
default.
Discount
Notes. Some notes may be issued at a price which represents a discount to
their principal amount. We refer to these notes as “discount notes.” Such
discount may be required to be included in income for U.S. federal income tax
purposes, as described under “United States Federal Income Taxation — Tax
Consequences to U.S. Holders — Original Issue Discount.” In the event of a
redemption or repayment of any discount note or if any discount note is declared
to be due and payable immediately as described under “Description of Debt
Securities — Events of Default” in the accompanying prospectus, the amount of
principal due and payable on that note will be limited
to:
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the aggregate
principal amount of the note multiplied
by the sum of
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its issue price, expressed as
a percentage of the aggregate principal amount, plus
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the original
issue discount accrued from the date of issue to the date of redemption,
repayment or declaration, expressed as a percentage of the aggregate
principal amount.
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Solely for purposes
of determining the amount of original issue discount that has accrued under the
above formula as of any date on which a redemption, repayment or acceleration of
maturity occurs for a discount note, original issue discount will be accrued
using a constant yield method. The constant yield will be calculated using a
30-day month, 360-day year convention, a compounding period that, except for the
initial period (as defined below), corresponds to the shortest period between
interest payment dates for the applicable discount note (with ratable accruals
within a compounding period), and an assumption that the maturity of a discount
note will not be accelerated. If the period from the date of issue to the first
interest payment date for a discount note, which we refer to as the “initial
period”, is shorter than the compounding period for the discount note, a
proportionate amount of the yield for an entire compounding period will be
accrued. If the initial period is longer than the compounding period, then the
period will be divided into a regular compounding period and a short period with
the short period being treated as provided in the preceding
sentence.
The accrual of the
applicable original issue discount described above is solely for purposes of
determining the amounts payable upon redemption, repayment or acceleration of
maturity. That amount of accrued original issue discount may differ from the
accrual of original issue discount for purposes of the Internal Revenue Code of
1986, as amended (the “Code”). Certain discount notes may not be treated as
having original issue discount within the meaning of the Code, and notes other
than discount notes may be treated as issued with original issue discount for
federal income tax purposes. See “United States Federal Income Taxation — Tax
Consequences to U.S. Holders — Original Issue Discount” below. See also the
applicable pricing supplement for any special considerations applicable to these
notes.
Fixed
Rate Notes
Each fixed rate
note will bear interest from the date of issuance at the annual rate stated on
its face until the principal is paid or made available for payment.
How
Interest Is Calculated. Interest on fixed rate notes will be computed on
the basis of a 360-day year of twelve 30-day months.
How
Interest Accrues. Interest on fixed rate notes will accrue from and
including the most recent interest payment date to which interest has been paid
or duly provided for, or, if no interest has been paid or duly provided for,
from and including the issue date or any other date specified in a pricing
supplement on which interest begins to accrue. Interest will accrue to but
excluding the next interest payment date, or, if earlier, the date on which the
principal has been paid or duly made available for payment, except as described
below under “If a Payment Date Is not a Business
Day.”
When
Interest Is Paid. Payments of interest on fixed rate notes will be made
on the interest payment dates specified in the applicable pricing supplement.
However, if the first interest payment date is less than 15 days after the date
of issuance, interest will not be paid on the first interest payment date, but
will be paid on the second interest payment date.
Amount
of Interest Payable. Interest payments for fixed rate notes will include
accrued interest from and including the date of issue or from and including the
last date in respect of which interest has been paid, as the case may be, to but
excluding the relevant interest payment date or date of maturity or earlier
redemption or repayment, as the case may be.
If
a Payment Date Is not a Business Day. If any scheduled interest payment
date is not a business day, we will pay interest on the next business day, but
interest on that payment will not accrue during the period from and after the
scheduled interest payment date. If the scheduled maturity date or date of
redemption or repayment is not a business day, we may pay interest and principal
and premium, if any, on the next succeeding business day, but interest on that
payment will not accrue during the period from and after the scheduled maturity
date or date of redemption or repayment.
Floating
Rate Notes
Unless otherwise
specified in the applicable pricing supplement, each floating rate note will
bear interest at a floating rate determined by reference to an interest rate or
interest rate formula, which we refer to as the “base rate.” The base rate may
be one or more of the following:
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the
commercial paper rate,
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any other
rate or interest rate formula specified in the applicable pricing
supplement.
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Formula
for Interest Rates. The interest rate on each floating rate note will be
calculated by reference to:
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the specified
base rate based on the index
maturity,
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plus or minus
the spread, if any, and/or
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multiplied by
the spread multiplier, if any.
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For any floating
rate note, “index maturity” means the period of maturity of the instrument or
obligation from which the base rate is calculated and will be specified in the
applicable pricing supplement. The “spread” is the number of basis points (one
one-hundredth of a percentage point) specified in the applicable pricing
supplement to be added to or subtracted from the base rate for a floating rate
note. The “spread multiplier” is the percentage specified in the applicable
pricing supplement to be applied to the base rate for a floating rate
note.
Limitations
on Interest Rate. A floating rate note may also have either or both of
the following limitations on the interest rate:
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a maximum
limitation, or ceiling, on the rate of interest which may accrue during
any interest period, which we refer to as the “maximum interest
rate”;
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a minimum
limitation, or floor, on the rate of interest that may accrue during any
interest period, which we refer to as the “minimum interest
rate.”
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Any applicable
maximum interest rate or minimum interest rate will be set forth in the
applicable pricing supplement.
In
addition, the interest rate on a floating rate note may not be higher than the
maximum rate permitted by New York law, as that rate may be modified by United
States law of general application. Under current New York law, the maximum rate
of interest, subject to some exceptions, for any loan in an amount less than
$250,000 is 16% and for any loan in the amount of $250,000 or more but less than
$2,500,000 is 25% per annum on a simple interest basis. These limits do not
apply to loans of $2,500,000 or more.
How
Floating Interest Rates Are Reset. The interest rate in effect from the
date of issue to the first interest reset date for a floating rate note will be
the initial interest rate specified in the applicable pricing supplement. We
refer to this rate as the “initial interest rate.” The interest rate on each
floating rate note may be reset daily, weekly, monthly, quarterly, semiannually
or annually. This period is the “interest reset period” and the first day of
each interest reset period is the “interest reset date.” The “interest
determination date” for any interest reset date is the day the calculation agent
identified in the applicable pricing supplement will refer to when determining
the new interest rate at which a floating rate will reset, and is applicable as
follows (unless otherwise specified in the applicable pricing
supplement):
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for CD rate
notes, commercial paper rate notes, federal funds rate notes, prime rate
notes and CMT rate notes, the interest determination date will be the
second business day prior to the interest reset
date;
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for EURIBOR
notes or Euro LIBOR notes, the interest determination date will be the
second TARGET Settlement Day, as defined above under “— General Terms of
Notes — Some Definitions,” prior to the interest reset
date;
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for LIBOR
notes (other than Euro LIBOR notes), the interest determination date will
be the second London banking day prior to the interest reset date, except
that the interest determination date pertaining to an interest reset date
for a LIBOR note for which the index currency is pounds sterling will be
the interest reset date; and
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for Treasury
rate notes, the interest determination date will be the day of the week in
which the interest reset date falls on which Treasury bills would normally
be auctioned.
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Treasury bills are
normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
but the auction may be held on the preceding Friday. If, as the result of a
legal holiday, the auction is held on the preceding Friday, that Friday will be
the interest determination date pertaining to the interest reset date occurring
in the next succeeding week. If an auction falls on a day that is an interest
reset date, that interest reset date will be the next following business
day.
The interest reset
dates will be specified in the applicable pricing supplement. If an interest
reset date for any floating rate note falls on a day that is not a business day,
it will be postponed to the following business day, except that, in the case of
a EURIBOR note or a LIBOR note, if that business day is in the next calendar
month, the interest reset date will be the immediately preceding business
day.
The interest rate
in effect for the ten calendar days immediately prior to maturity, redemption or
repayment will be the one in effect on the tenth calendar day preceding the
maturity, redemption or repayment date.
In
the detailed descriptions of the various base rates which follow, the
“calculation date” pertaining to an interest determination date means the
earlier of (1) the tenth calendar day after that interest determination date,
or, if that day is not a business day, the next succeeding business day, and (2)
the business day preceding the applicable interest payment date or maturity date
or, for any principal amount to be redeemed or repaid, any redemption or
repayment date.
How
Interest Is Calculated. Interest on floating rate notes will accrue from
and including the most recent interest payment date to which interest has been
paid or duly provided for, or, if no interest has been paid or duly provided
for, from and including the issue date or any other date specified in a pricing
supplement on which interest begins to accrue. Interest will accrue to but
excluding the next interest payment date or, if earlier, the date on which the
principal has been paid or duly made available for payment, except as described
below under “If a Payment Date is Not a Business
Day.”
The applicable
pricing supplement will specify a calculation agent for any issue of floating
rate notes. Upon the request of the holder of any floating rate note, the
calculation agent will provide the interest rate then in effect and, if
determined, the interest rate that will become effective on the next interest
reset date for that floating rate note.
Unless otherwise
specified in the applicable pricing supplement, for a floating rate note,
accrued interest will be calculated by multiplying the principal amount of the
floating rate note by an accrued interest factor. This accrued interest factor
will be computed by adding the interest factors calculated for each day in the
period for which interest is being paid. The interest factor for each day is
computed by dividing
the interest rate applicable to that day:
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by 360, in
the case of CD rate notes, commercial paper rate notes, EURIBOR notes,
federal funds rate notes, LIBOR notes (except for LIBOR notes denominated
in pounds sterling) and prime rate
notes;
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by 365, in
the case of LIBOR notes denominated in pounds sterling;
or
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by the actual
number of days in the year, in the case of Treasury rate notes and CMT
rate notes.
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For these
calculations, the interest rate in effect on any interest reset date will be the
applicable rate as reset on that date. The interest rate applicable to any other
day is the interest rate from the immediately preceding interest reset date or,
if none, the initial interest rate.
All percentages
used in or resulting from any calculation of the rate of interest on a floating
rate note will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point (with 0.000005% rounded up to 0.00001%), and all U.S.
dollar amounts used in or resulting from these calculations on floating rate
notes will be rounded to the nearest cent (with one-half cent rounded upward).
All Japanese Yen amounts used in or resulting from these calculations will be
rounded downwards to the next lower whole Japanese Yen amount. All amounts
denominated in any other currency used in or resulting from these calculations
will be rounded to the nearest two decimal places in that currency with 0.005
being rounded upward.
When
Interest Is Paid. We will pay interest on floating rate notes on the
interest payment dates specified in the applicable pricing supplement. However,
if the first interest payment date is less than 15 days after the date of
issuance, interest will not be paid on the first interest payment date, but will
be paid on the second interest payment date.
If
a Payment Date Is Not a Business Day. If any scheduled interest payment
date, other than the maturity date or any earlier redemption or repayment date,
for any floating rate note falls on a day that is not a business day, it will be
postponed to the following business day, except that, in the case of a EURIBOR
note or a LIBOR note, if that business day would fall in the next calendar
month, the interest payment date will be the immediately preceding business day.
If the scheduled maturity date or any earlier redemption or repayment date of a
floating rate note falls on a day that is not a business day, the payment of
principal, premium, if any, and interest, if any, will be made on the next
succeeding business day, but interest on that payment will not accrue during the
period from and after the maturity, redemption or repayment
date.
Base
Rate Notes
CD
Rate Notes
CD
rate notes will bear interest at the interest rates specified in the applicable
pricing supplement. Those interest rates will be based on the CD rate and any
spread and/or spread multiplier and will be subject to the minimum interest rate
and the maximum interest rate, if any.
Unless otherwise
specified in the applicable pricing supplement, the “CD rate” means, for any
interest determination date, the rate on that date for negotiable certificates
of deposit having the index maturity specified in the applicable pricing
supplement as published by the Board of Governors of the Federal Reserve System
in “Statistical Release H.15(519), Selected Interest Rates,” or any successor
publication of the Board of Governors of the Federal Reserve System
(“H.15(519)”) under the heading “CDs (Secondary Market).”
The following
procedures will be followed if the CD rate cannot be determined as described
above:
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If the above
rate is not published in H.15(519) by 9:00 a.m., New York City time, on
the calculation date, the CD rate will be the rate on that interest
determination date set forth in the daily update of H.15(519), available
through the world wide website of the Board of Governors of the Federal
Reserve System at http://www.federalreserve.gov/releases/h15/update, or
any successor site or publication, which is commonly referred to as the
“H.15 Daily Update,” for the interest determination date for certificates
of deposit having the index maturity specified in the applicable pricing
supplement, under the caption “CDs (Secondary
Market).”
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If the above
rate is not yet published in either H.15(519) or the H.15 Daily Update by
3:00 p.m., New York City time, on the calculation date, the calculation
agent will determine the CD rate to be the arithmetic mean of the
secondary market offered rates as of 10:00 a.m., New York City time, on
that interest determination date of three leading nonbank dealers in
negotiable U.S. dollar certificates of deposit in The City of New York
selected by the calculation agent, after consultation with us, for
negotiable certificates of deposit of major United States money center
banks of the highest credit standing in the market for negotiable
certificates of deposit with a remaining maturity closest to the index
maturity specified in the applicable pricing supplement in an amount that
is representative for a single transaction in that market at that
time.
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If the
dealers selected by the calculation agent are not quoting as set forth
above, the CD rate for that interest determination date will remain the CD
rate for the immediately preceding interest reset period, or, if there was
no interest reset period, the rate of interest payable will be the initial
interest rate.
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Commercial
Paper Rate Notes
Commercial paper
rate notes will bear interest at the interest rates specified in the applicable
pricing supplement. Those interest rates will be based on the commercial paper
rate and any spread and/or spread multiplier and will be subject to the minimum
interest rate and the maximum interest rate, if any.
Unless otherwise
specified in the applicable pricing supplement, the “commercial paper rate”
means, for any interest determination date, the money market yield, calculated
as described below, of the rate on that date for commercial paper having the
index maturity specified in the applicable pricing supplement, as that rate is
published in H.15(519), under the heading “Commercial Paper —
Nonfinancial.”
The following
procedures will be followed if the commercial paper rate cannot be determined as
described above:
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If the above
rate is not published by 9:00 a.m., New York City time, on the calculation
date, then the commercial paper rate will be the money market yield of the
rate on that interest determination date for commercial paper of the index
maturity specified in the applicable pricing supplement as published in
the H.15 Daily Update under the heading “Commercial Paper —
Nonfinancial.”
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If by 3:00
p.m., New York City time, on that calculation date the rate is not yet
published in either H.15(519) or the H.15 Daily Update, then the
calculation agent will determine the commercial paper rate to be the money
market yield of the arithmetic mean of the offered rates as of 11:00 a.m.,
New York City time, on that interest determination date of three leading
dealers of commercial paper in The City of New York selected by the
calculation agent, after consultation with us, for commercial paper of the
index maturity specified in the applicable pricing supplement, placed for
an industrial issuer whose bond rating is “AA,” or the equivalent, from a
nationally recognized statistical rating
agency.
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If the
dealers selected by the calculation agent are not quoting as set forth
above, the commercial paper rate for that interest determination date will
remain the commercial paper rate for the immediately preceding interest
reset period, or, if there was no interest reset period, the rate of
interest payable will be the initial interest
rate.
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The “money market
yield” will be a yield calculated in accordance with the following
formula:
money market
yield =
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D ×
360
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× 100
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360 – (D ×
M)
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where “D” refers to
the applicable per year rate for commercial paper quoted on a bank discount
basis and expressed as a decimal and “M” refers to the actual number of days in
the interest period for which interest is being calculated.
EURIBOR
Notes
EURIBOR notes will
bear interest at the interest rates specified in the applicable pricing
supplement. That interest rate will be based on EURIBOR and any spread and/or
spread multiplier and will be subject to the minimum interest rate and the
maximum interest rate, if any.
Unless otherwise
specified in the applicable pricing supplement, “EURIBOR” means, for any
interest determination date, the rate for deposits in euros as sponsored,
calculated and published jointly by the European Banking Federation and ACI —
The Financial Market Association, or any company established by the joint
sponsors for purposes of compiling and publishing those rates, for the index
maturity specified in the applicable pricing supplement as that rate appears on
the display on Reuters, or any successor service, on page EURIBOR01 or any other
page as may replace page EURIBOR01 on that service, which is commonly referred
to as “Reuters Page EURIBOR01,” as of 11:00 a.m. (Brussels time).
The following
procedures will be followed if the rate cannot be determined as described
above:
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If the above
rate does not appear, the calculation agent will request the principal
Euro-zone office of each of four major banks in the Euro-zone interbank
market, as selected by the calculation agent, after consultation with us,
to provide the calculation agent with its offered rate for deposits in
euros, at approximately 11:00 a.m. (Brussels time) on the interest
determination date, to prime banks in the Euro-zone interbank market for
the index maturity specified in the applicable pricing supplement
commencing on the applicable interest reset date, and in a principal
amount not less than the equivalent of U.S.$1 million in euro that is
representative of a single transaction in euro, in that market at that
time. If at least two quotations are provided, EURIBOR will be the
arithmetic mean of those
quotations.
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If fewer than
two quotations are provided, EURIBOR will be the arithmetic mean of the
rates quoted by four major banks in the Euro-zone, as selected by the
calculation agent, after consultation with us, at approximately 11:00 a.m.
(Brussels time), on the applicable interest reset date for loans in euro
to leading European banks for a period of time equivalent to the index
maturity specified in the applicable pricing supplement commencing on that
interest reset date in a principal amount not less than the equivalent of
U.S.$1 million in euro.
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If the banks
so selected by the calculation agent are not quoting as set forth above,
EURIBOR for that interest determination date will remain EURIBOR for the
immediately preceding interest reset period, or, if there was no interest
reset period, the rate of interest will be the initial interest
rate.
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“Euro-zone” means
the region comprised of member states of the European Union that adopt the
single currency in accordance with the treaty establishing the European
Community, as amended by the treaty on European Union.
Federal
Funds Rate Notes
Federal funds rate
notes will bear interest at the interest rates specified in the applicable
pricing supplement. Those interest rates will be based on the federal funds rate
and any spread and/or spread multiplier and will be subject to the minimum
interest rate and the maximum interest rate, if any.
Unless otherwise
specified in the applicable pricing supplement, “federal funds rate” means, for
any interest determination date, the rate on that date for federal funds as
published in the Federal Reserve Statistical Release H.15(519) under the heading
“Federal Funds (Effective)” as displayed on Reuters or any successor service, on
page FEDFUNDS1 or any other page as may replace the applicable page on that
service, which is commonly referred to as “Reuters Page
FEDFUNDS1.” For the avoidance of doubt, the federal funds rate for
any interest determination date is the rate published for the immediately
preceding business day.
The following
procedures will be followed if the federal funds rate cannot be determined as
described above:
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If the above
rate is not published by 9:00 a.m., New York City time, on the calculation
date, the federal funds rate will be the rate on that interest
determination date as published in the H.15 Daily Update under the heading
“Federal Funds/Effective Rate.”
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If the above
rate is not yet published in either H.15(519) or the H.15 Daily Update by
3:00 p.m., New York City time, on the calculation date, the calculation
agent will determine the federal funds rate to be the arithmetic mean of
the rates for the last transaction in overnight federal funds by each of
three leading brokers of federal funds transactions in The City of New
York selected by the calculation agent, after consultation with us, prior
to 9:00 a.m., New York City time, on that interest determination
date.
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If the
brokers selected by the calculation agent are not quoting as set forth
above, the federal funds rate for that interest determination date will be
the federal funds rate last in effect on the interest determination
date.
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LIBOR
Notes
LIBOR notes will
bear interest at the interest rates specified in the applicable pricing
supplement. That interest rate will be based on London interbank offered rate,
which is commonly referred to as “LIBOR,” and any spread and/or spread
multiplier and will be subject to the minimum interest rate and the maximum
interest rate, if any.
Unless otherwise
specified in the applicable pricing supplement, the calculation agent will
determine “LIBOR” for each interest determination date as follows:
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As of the
interest determination date, LIBOR will be
either:
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if “LIBOR
Reuters” is specified in the applicable pricing supplement, the arithmetic
mean of the offered rates for deposits in the index currency having the
index maturity designated in the applicable pricing supplement, as of that
interest determination date, that appear on the Designated LIBOR Page, as
defined below, as of 11:00 a.m., London time, on that interest
determination date, if at least two offered rates appear on the Designated
LIBOR Page; except that if the specified Designated LIBOR Page, by its
terms provides only for a single rate, that single rate will be used;
or
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if “LIBOR
Bloomberg” is specified in the applicable pricing supplement, the rate for
deposits in the index currency having the index maturity designated in the
applicable pricing supplement, as of that interest determination date or,
if pounds sterling is the index currency, commencing on that interest
determination date, that appears on the Designated LIBOR Page at
approximately 11:00 a.m., London time, on that interest determination
date.
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If (1) fewer
than two offered rates appear and “LIBOR Reuters” is specified in the
applicable pricing supplement, or (2) no rate appears and the applicable
pricing supplement specifies either (x) “LIBOR Bloomberg” or (y) “LIBOR
Reuters” and the Designated LIBOR Page by its terms provides only for a
single rate, then the calculation agent will request the principal London
offices of each of four major reference banks in the London interbank
market, as selected by the calculation agent after consultation with us,
to provide the calculation agent with its offered quotation for deposits
in the index currency for the period of the index maturity specified in
the applicable pricing supplement as of that interest determination date
or, if pounds sterling is the index currency, commencing on that interest
determination date, to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on that interest determination date
and in a principal amount that is representative of a single transaction
in that index currency in that market at that
time.
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If at least
two quotations are provided, LIBOR determined on that interest
determination date will be the arithmetic mean of those quotations. If
fewer than two quotations are provided, LIBOR will be determined for the
applicable interest reset date as the arithmetic mean of the rates quoted
at approximately 11:00 a.m., London time, or some other time specified in
the applicable pricing supplement, in the applicable principal financial
center for the country of the index currency on that interest reset date,
by three major banks in that principal financial center selected by the
calculation agent, after consultation with us, for loans in the index
currency to leading European banks, having the index maturity specified in
the applicable pricing supplement and in a principal amount that is
representative of a single transaction in that index currency in that
market at that time.
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If the banks
so selected by the calculation agent are not quoting as set forth above,
LIBOR for that interest determination date will remain LIBOR for the
immediately preceding interest reset period, or, if there was no interest
reset period, the rate of interest payable will be the initial interest
rate.
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The “index
currency” means the currency specified in the applicable pricing supplement as
the currency for which LIBOR will be calculated, or, if the euro is substituted
for that currency, the index currency will be the euro. If that currency is not
specified in the applicable pricing supplement, the index currency will be U.S.
dollars.
“Designated LIBOR
Page” means either (a) if “LIBOR Reuters” is designated in the applicable
pricing supplement, the display on Reuters for the purpose of displaying the
London interbank rates of major banks for the applicable index currency or its
designated successor, or (b) if “LIBOR Bloomberg” is designated in the
applicable pricing supplement, the display on Bloomberg or any successor
service, page BBAM1 <GO> on the page specified in the applicable pricing
supplement, or any other page as may replace that page on that service, for the
purpose of displaying the London interbank rates of major banks for the
applicable index currency.
If
neither LIBOR Reuters nor LIBOR Bloomberg is specified in the applicable pricing
supplement, LIBOR for the applicable index currency will be determined as if
LIBOR Reuters were specified, and, if the U.S. dollar is the index currency, as
if Page LIBOR01, had been specified.
Prime
Rate Notes
Prime rate notes
will bear interest at the interest rates specified in the applicable pricing
supplement. That interest rate will be based on the prime rate and any spread
and/or spread multiplier, and will be subject to the minimum interest rate and
the maximum interest rate, if any.
Unless otherwise
specified in the applicable pricing supplement, “prime rate” means, for any
interest determination date, the rate on that date as published in Federal
Reserve Statistical Release H.15(519) under the heading “Bank Prime
Loan.” For the avoidance of doubt, the Prime Rate for any interest
determination date is the rate published for the immediately preceding business
day.
The following
procedures will be followed if the prime rate cannot be determined as described
above:
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If the above
rate is not published prior to 9:00 a.m., New York City time, on the
calculation date, then the prime rate will be the rate on that interest
determination date as published in Federal Reserve Statistical Release
H.15 Daily Update under the heading “Bank Prime
Loan.”
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If the rate is not published
in either H.15(519) or the H.15 Daily Update by 3:00 p.m., New York City
time, on the calculation date, then the calculation agent will determine
the prime rate to be the arithmetic mean of the rates of interest publicly
announced by each bank that appears on the Reuters Screen USPRIME 1 Page,
as
defined below, as that bank’s prime rate or base lending rate as in effect
for that interest determination
date.
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If fewer than
four rates appear on the Reuters Screen USPRIME 1 Page for that interest
determination date, the calculation agent will determine the prime rate to
be the arithmetic mean of the prime rates quoted on the basis of the
actual number of days in the year divided by 360 as of the close of
business on that interest determination date by at least three major banks
in The City of New York selected by the calculation agent, after
consultation with us.
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If the banks
selected by the calculation agent are not quoting as set forth above, the
prime rate for that interest determination date will remain the prime rate
for the immediately preceding interest reset period, or, if there was no
interest reset period, the rate of interest payable will be the initial
interest rate.
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“Reuters Screen
USPRIME 1 Page” means the display designated as page “USPRIME 1” on Reuters, or
any successor service, or any other page as may replace the USPRIME 1 Page on
that service for the purpose of displaying prime rates or base lending rates of
major United States banks.
Treasury
Rate Notes
Treasury rate notes
will bear interest at the interest rates specified in the applicable pricing
supplement. That interest rate will be based on the Treasury rate and any spread
and/or spread multiplier and will be subject to the minimum interest rate and
the maximum interest rate, if any.
Unless otherwise
specified in the applicable pricing supplement, “Treasury rate”
means:
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the rate from
the auction held on the applicable interest determination date, which we
refer to as the “auction,” of direct obligations of the United States,
which are commonly referred to as “Treasury Bills,” having the index
maturity specified in the applicable pricing supplement as that rate
appears under the caption “INVESTMENT RATE” on the display on Reuters or
any successor service, on page USAUCTION 10 or any other page as may
replace page USAUCTION 10 on that service, which we refer to as “Reuters
Page USAUCTION 10,” or page USAUCTION 11 or any other page as may replace
page USAUCTION 11 on that service, which we refer to as “Reuters Page
USAUCTION 11”;
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if the rate
described in the first bullet point is not published by 3:00 p.m., New
York City time, on the calculation date, the bond equivalent yield of the
rate for the applicable Treasury Bills as published in the Federal Reserve
Statistical Release H.15 Daily Update, or other recognized electronic
source used for the purpose of displaying the applicable rate, under the
caption “U.S. Government Securities/Treasury Bills/Auction
High”;
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if the rate
described in the second bullet point is not published by 3:00 p.m., New
York City time, on the related calculation date, the bond equivalent yield
of the auction rate of the applicable Treasury Bills, announced by the
United States Department of the
Treasury;
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if the rate
referred to in the third bullet point is not announced by the United
States Department of the Treasury, or if the auction is not held, the bond
equivalent yield of the rate on the applicable interest determination date
of Treasury Bills having the index maturity specified in the applicable
pricing supplement published in H.15(519) under the caption “U.S.
Government Securities/Treasury Bills/ Secondary
Market”;
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if the rate
referred to in the fourth bullet point is not so published by 3:00 p.m.,
New York City time, on the related calculation date, the rate on the
applicable interest determination date of the applicable Treasury Bills as
published in H.15 Daily Update, or other recognized electronic source used
for the purpose of displaying the applicable rate, under the caption “U.S.
Government Securities/Treasury Bills/Secondary
Market”;
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if the rate
referred to in the fifth bullet point is not so published by 3:00 p.m.,
New York City time, on the related calculation date, the rate on the
applicable interest determination date calculated by the calculation agent
as the bond equivalent yield of the arithmetic mean of the secondary
market bid rates, as of approximately 3:30 p.m., New York City time, on
the applicable interest determination date, of three primary United States
government securities dealers, which may include an agent or one or more
of our affiliates, selected by the calculation agent, for the issue of
Treasury Bills with a remaining maturity closest to the index maturity
specified in the applicable pricing supplement;
or
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if the
dealers selected by the calculation agent are not quoting as set forth
above, the Treasury rate for that interest determination date will remain
the Treasury rate for the immediately preceding interest reset period, or,
if there was no interest reset period, the rate of interest payable will
be the initial interest rate.
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The “bond
equivalent yield” means a yield calculated in accordance with the following
formula and expressed as a percentage:
bond
equivalent yield =
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D ×
N
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× 100
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360 – (D ×
M)
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In
this formula, “D” refers to the applicable per annum rate for Treasury Bills
quoted on a bank discount basis, “N” refers to 365 or 366, as the case may be,
and “M” refers to the actual number of days in the interest period for which
interest is being calculated.
CPI
Rate Notes
CPI rate notes will
bear interest at the interest rates specified in the applicable pricing
supplement. That interest rate will be based on a formula linked to changes in
the CPI (as defined below) and which includes a spread and/or spread multiplier,
and will be subject to the minimum interest rate and the maximum interest rate,
if any.
Unless otherwise
specified in the applicable pricing supplement, the “CPI” means, for any
interest determination date, the non-seasonally adjusted U.S. City Average All
Items Consumer Price Index for All Urban Consumers reported monthly by the
Bureau of Labor Statistics of the U.S. Department of Labor and reported on
Bloomberg or any successor service.
If, while the CPI
Rate Notes are outstanding, the CPI is not published because it has been
discontinued or has been substantially altered, an applicable substitute index
will be chosen to replace the CPI for purposes of determining interest on the
CPI Rate Notes. The applicable index will be that chosen by the
Secretary of the Treasury for the Department of The Treasury’s Inflation-Linked
Treasuries as described at 62 Federal Register 846-874 (January 6, 1997) or, if
no such securities are outstanding, the substitute index will be determined by
the calculation agent in good faith and in accordance with general market
practice at the time.
Renewable
Notes
We
may also issue floating rate renewable notes which will bear interest at a
specified rate that will be reset periodically based on a base rate and any
spread and/or spread multiplier, subject to the minimum interest rate and the
maximum interest rate, if any. Any renewable notes we issue will be registered
global floating rate notes. The general terms of the renewable notes are
described below.
Automatic
Extension of Maturity. The renewable notes will mature on the date
specified in the applicable pricing supplement, which we refer to as the
“initial maturity date.” On the interest payment dates in each year
specified in the applicable pricing supplement, each of which is treated as an
election date under the terms of the renewable notes, the maturity of the
renewable notes will automatically be extended to the interest payment date
occurring twelve months after the election date, unless the holder elects to
terminate the automatic extension of maturity for all or any portion of the
principal amount of that holder’s note. However, the maturity of the renewable
notes may not be extended beyond the final maturity date, which will be
specified in the applicable pricing supplement.
Holder’s
Option to Terminate Automatic Extension. On an election date, the holder
may elect to terminate the automatic extension of the maturity of the renewable
notes or of any portion of the renewable note having a principal amount of
$1,000 or any integral multiple of $1,000. To terminate the extension, the
holder must deliver a notice to the paying agent within the time frame specified
in the applicable pricing supplement. This option may be exercised for less than
the entire principal amount of the renewable notes, as long as the principal
amount of the remainder is at least $1,000 or any integral multiple of
$1,000.
If
the holder elects to terminate the automatic extension of the maturity of any
portion of the principal amount of the renewable notes and this election is not
revoked as described below, that portion will become due and payable on the
interest payment date falling six months after the applicable election
date.
Revocation
of Election by Holder. The holder may revoke an election to terminate the
automatic extension of maturity as to any portion of the renewable notes having
a principal amount of $1,000 or any integral multiple of $1,000. To do so, the
holder must deliver a notice to the paying agent on any day after the election
to terminate the automatic extension of maturity is effective and prior to the
fifteenth day before the date on which that portion would otherwise mature. The
holder may revoke the election for less than the entire principal amount of the
renewable notes as long as the principal amount of both the portion whose
maturity is to be terminated and the remainder whose maturity is to be extended
is at least $1,000 or any integral multiple of $1,000. However, a revocation may
not be made during the period from and including a record date to but excluding
the immediately succeeding interest payment date.
An
election to terminate the automatic extension of the maturity of the renewable
notes, if not revoked as described above by the holder making the election or
any subsequent holder, will be binding upon that subsequent holder.
Redemption
of Notes at Company’s Option. We have the option to redeem renewable
notes in whole or in part on the interest payment dates in each year specified
in the applicable pricing supplement, commencing with the interest payment date
specified in the applicable pricing supplement. The redemption price will be
equal to 100% of the principal amount of the renewable notes to be redeemed,
together with accrued and unpaid interest to the date of redemption.
Notwithstanding anything to the contrary in this prospectus supplement, we will
mail a notice of redemption to each holder by first-class mail, postage prepaid,
at least 180 days and not more than 210 days prior to the date fixed for
redemption.
Remarketing
of Notes. We may issue renewable notes with the spread or spread
multiplier to be reset by a remarketing agent in remarketing procedures. A
description of the remarketing procedures, the terms of the remarketing
agreement between us and the remarketing agent and the terms of any additional
agreements with other parties that may be involved in the remarketing procedures
will be set forth in the applicable pricing supplement and in the relevant
renewable notes.
Exchangeable
Notes
We
may issue notes, which we refer to as “exchangeable notes,” that are optionally
or mandatorily exchangeable into:
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the
securities of an entity not affiliated with
us;
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a basket of
those securities;
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an index or
indices of those securities; or
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any
combination of, or the cash value of, any of the
above.
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As
specified in the applicable pricing supplement, the exchangeable notes may or
may not bear interest or be issued with original issue discount or at a premium.
The general terms of the exchangeable notes are described below.
Optionally
Exchangeable Notes. The holder of an optionally exchangeable note may,
during a period, or at specific times, exchange the note for the underlying
property at a specified rate of exchange. If specified in the applicable pricing
supplement, we will have the option to redeem the optionally exchangeable note
prior to maturity. If the holder of an optionally exchangeable note does not
elect to exchange the note prior to maturity or any applicable redemption date,
the holder will receive the principal amount of the note plus any accrued
interest at maturity or upon redemption.
Mandatorily
Exchangeable Notes. At maturity, the holder of a mandatorily exchangeable
note must exchange the note for the underlying property at a specified rate of
exchange, and, therefore, depending upon the value of the underlying property at
maturity, the holder of a mandatorily exchangeable note may receive less than
the principal amount of the note at maturity. If so indicated in the applicable
pricing supplement, the specified rate at which a mandatorily exchangeable note
may be exchanged may vary depending on the value of the underlying property so
that, upon exchange, the holder participates in a percentage, which may be less
than, equal to, or greater than 100% of the change in value of the underlying
property. Mandatorily exchangeable notes may include notes where we have the
right, but not the obligation, to require holders of notes to exchange their
notes for the underlying property.
Mandatorily
exchangeable notes that we issue may include the following:
Reverse
Exchangeable Securities (“REXs”).
Unless otherwise
provided in the applicable pricing supplement, investors in REXs will
receive periodic cash payments at a fixed rate. At
maturity, investors in REXs will receive either a cash payment equal to the
original principal amount of the notes or a number of shares of underlying stock
equal to the stock redemption amount. The type of payment at maturity
will be determined by comparing the closing price of the underlying stock on a
specified determination date to the closing price of the underlying stock on the
date the notes were priced. If the closing price of the underlying
stock on the determination date is at or above the closing price of the
underlying stock on the date the notes were priced, the payment at maturity will
be a cash payment equal to the principal amount. If the closing price
of the underlying stock on the determination date is below the closing price of
the underlying stock on the date the notes were priced, the investors will
receive the stock redemption amount. The stock redemption amount is a
number of shares of the underlying stock equal to the principal amount per
security divided by the closing price of the underlying stock on the date the
securities were priced.
Knock-in
Reverse Exchangeable Securities (“Knock-in REXs”).
Unless otherwise
provided in the applicable pricing supplement, investors in Knock-in REXs will
receive periodic cash payments at a fixed rate. Like REXs, at
maturity, investors in Knock-in REXs will receive either a cash payment equal to
the original principal amount of the securities or a number of shares of
underlying stock equal to the stock redemption amount. However, the
type of payment at maturity will be calculated by first determining if the
closing price of the underlying stock was at or below the predetermined
“knock-in level” on any trading day from the date the notes were priced to, and
including, a specified determination date. If the closing price of
the underlying stock was never at or below the “knock-in level” on any trading
day during the period from the date the securities were priced to, and
including, the determination date, the payment at maturity will always be a cash
payment equal to the principal amount, irrespective of the closing price of the
underlying stock on the determination date. If, however, the closing
price of the underlying stock was at or below the “knock-in level” on any
trading day during the period from the date the securities were priced to, and
including, the determination date, the payment at maturity will be determined by
comparing the closing price of the underlying stock on the determination date to
the closing price of the underlying stock on the date the notes were priced. If
such closing price is equal to or greater than the closing price of the
underlying stock on the date the securities were priced, the payment at maturity
will be a cash payment equal to the principal amount. If, on the
other hand, such closing price is below the closing price of the underlying
stock on the date the securities were priced, investors will receive the stock
redemption amount described above.
Payments
upon Exchange. The applicable pricing supplement will specify if upon
exchange, at maturity or otherwise, the holder of an exchangeable note may
receive, at the specified exchange rate, either the underlying property or the
cash value of the underlying property. The underlying property may be the
securities of either U.S. or foreign entities or both. The exchangeable notes
may or may not provide for protection against fluctuations in the
exchange rate between the currency
in which that note is denominated and the currency or currencies in which the
market prices of the underlying security or securities are quoted. Exchangeable
notes may have other terms, which will be specified in the applicable pricing
supplement.
Special
Requirements for Exchange of Global Securities. If an optionally
exchangeable note is represented by a global note, the Depositary’s nominee will
be the holder of that note and therefore will be the only entity that can
exercise a right to exchange. In order to ensure that the Depositary’s nominee
will timely exercise a right to exchange a particular note or any portion of a
particular note, the beneficial owner of the note must instruct the broker or
other direct or indirect participant through which it holds an interest in that
note to notify the Depositary of its desire to exercise a right to exchange.
Different firms have different deadlines for accepting instructions from their
customers. Each beneficial owner should consult the broker or other participant
through which it holds an interest in a note in order to ascertain the deadline
for ensuring that timely notice will be delivered to the
Depositary.
Payments
upon Acceleration of Maturity or upon Tax Redemption. If the principal
amount payable at maturity of any exchangeable note is declared due and payable
prior to maturity, the amount payable on:
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an optionally
exchangeable note will equal the face amount of the note plus accrued
interest, if any, to but excluding the date of payment, except that if a
holder has exchanged an optionally exchangeable note prior to the date of
declaration or tax redemption without having received the amount due upon
exchange, the amount payable will be an amount of cash equal to the amount
due upon exchange and will not include any accrued but unpaid interest;
and
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a mandatorily
exchangeable note will equal an amount determined as if the date of
declaration or tax redemption were the maturity date plus accrued
interest, if any, to but excluding the date of
payment.
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Notes
Linked to Commodity Prices, Single Securities, Economic or Financial Measures
and Baskets or Indices Thereof
We
may issue notes with the principal amount payable on any principal payment date
and/or the amount of interest payable on any interest payment date to be
determined by reference to one or more commodity prices, securities of entities
not affiliated with us, any other financial, economic or other measures or
instruments, including the occurrence or non-occurrence of any event or
circumstance, and/or baskets or indices of any of these items, or any
combination of the above. These notes may include other terms, which will be
specified in the relevant pricing supplement.
Currency-Linked
Notes
We
may issue notes with the principal amount payable on any principal payment date
and/or the amount of interest payable on any interest payment date to be
determined by reference to the value of one or more currencies as compared to
the value of one or more other currencies, which we refer to as “currency-linked
notes.” The pricing supplement will specify the following:
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information
as to the one or more currencies to which the principal amount payable on
any principal payment date or the amount of interest payable on any
interest payment date is linked or indexed;
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the currency
in which the face amount of the currency-linked note is denominated, which
we refer to as the “denominated
currency”;
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the currency
in which principal on the currency-linked note will be paid, which we
refer to as the “payment currency”;
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the interest
rate per annum and the dates on which we will make interest
payments;
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specific
historic exchange rate information and any currency risks relating to the
specific currencies selected; and
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additional
tax considerations, if any.
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The denominated
currency and the payment currency may be the same currency or different
currencies. Interest on currency-linked notes will be paid in the denominated
currency.
Notes
Subject to a Financial Insurance Guaranty Policy
We
may issue notes that are subject to a financial insurance guaranty policy issued
by a financial institution that unconditionally and irrevocably guarantees
certain payments on the notes. The terms of the financial insurance guaranty
policy will be described in the relevant pricing supplement.
TAXATION
IN THE NETHERLANDS
The
following summary of certain Dutch taxation matters is based on the laws and
practice in force as of the date of this Prospectus Supplement and is subject to
any changes in law and the interpretation and application thereof, which changes
could be made with retroactive effect. The following summary does not purport to
be a comprehensive description of all the tax considerations that may be
relevant to a decision to acquire, hold or dispose of a note, and does not
purport to deal with the tax consequences applicable to all categories of
investors, some of which may be subject to special rules.
For
the purpose of this summary it is assumed that no holder of a note has or will
have a substantial interest, or — in the case of a holder of a note being an
entity — a deemed substantial interest, in the Bank and that no connected person
(verbonden persoon) to the holder of a note has or will have a substantial
interest in the Bank.
Generally
speaking, an individual has a substantial interest in the Bank if (a) such
individual, either alone or together with his partner, directly or indirectly
has, or (b) certain relatives of such individual or his partner directly or
indirectly have, (I) the ownership of, a right to acquire the ownership of, or
certain rights over, shares representing 5 per cent or more of either the total
issued and outstanding capital of the Bank or the issued and outstanding capital
of any class of shares of the Bank, or (II) the ownership of, or certain rights
over, profit participating certificates (winstbewijzen) that relate to 5 per
cent or more of either the annual profit or the liquidation proceeds of the
Bank.
Generally
speaking, an entity has a substantial interest in the Bank if such entity,
directly or indirectly has (I) the ownership of, a right to acquire the
ownership of, or certain rights over, shares representing 5 per cent or more of
either the total issued and outstanding capital of the Bank or the issued and
outstanding capital of any class of shares of the Bank, or (II) the ownership
of, or certain rights over, profit participating certificates (winstbewijzen)
that relate to 5 per cent or more of either the annual profit or the liquidation
proceeds of the Bank. An entity holding a note has a deemed substantial interest
in the Bank if such entity has disposed of or is deemed to have disposed of all
or part of a substantial interest on a non-recognition basis.
For
the purpose of this summary, the term “entity” means a corporation as well as
any other person that is taxable as a corporation for Dutch corporate tax
purposes.
Holders
of a note should consult their professional advisers on the tax consequences of
their acquiring, holding and disposing of a note.
Withholding
Tax
All payments made
by the Bank of interest and principal under the notes can be made free of
withholding or deduction of any taxes of whatsoever nature imposed, levied,
withheld or assessed by The Netherlands or any political subdivision or taxing
authority thereof or therein, unless the notes qualify as debt that effectively
functions as equity for purposes of article 10, paragraph 1, sub d of the
Corporate Tax Act (Wet
op de vennootschapsbelasting 1969).
Taxes
on Income and Capital Gains
Residents
Resident
entities
An
entity holding a note which is, or is deemed to be, resident in The Netherlands
for corporate tax purposes and which is not tax exempt, will generally be
subject to corporate tax in respect of income or a capital gain derived from a
note at rates up to 25.5 per cent.
Resident
individuals
An
individual holding a note who is, is deemed to be, or has elected to be treated
as, resident in The Netherlands for income tax purposes will be subject to
income tax in respect of income or a capital gain derived from a note at rates
up to 52 per cent if:
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(i)
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the income or
capital gain is attributable to an enterprise from which the holder
derives profits (other than as a shareholder);
or
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(ii)
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the income or
capital gain qualifies as income from miscellaneous activities (belastbaar
resultaat uit overige werkzaamheden) as defined in the Income Tax
Act (Wet
inkomstenbelasting 2001), including, without limitation, activities
that exceed normal, active asset management (normaal,
actief vermogensbeheer).
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If
neither condition (i) nor (ii) applies, an individual holding a note will be
subject to income tax on the basis of a deemed return, regardless of any actual
income or capital gain derived from a note. The deemed return amounts to 4 per
cent. of the average value of the individual's net assets in the relevant fiscal
year (including the note). Subject to application of certain allowances, the
deemed return will be taxed at a rate of 30 per cent.
Non-residents
A
holder of a note which is not, is not deemed to be, and - in case the holder is
an individual - has not elected to be treated as, resident in The Netherlands
for the relevant tax purposes will not be subject to taxation on income or a
capital gain derived from a note unless:
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(i)
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the income or
capital gain is attributable to an enterprise or part thereof which is
either effectively managed in The Netherlands or carried on through a
permanent establishment (vaste
inrichting) or a permanent representative (vaste
vertegenwoordiger) in The Netherlands and the holder of a note
derives profits from such enterprise (other than by way of securities);
or
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(ii)
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the holder is
an individual and the income or capital gain qualifies as income from
miscellaneous activities (belastbaar
resultaat uit overige werkzaamheden) in The Netherlands as defined
in the Income Tax Act (Wet
inkomstenbelasting 2001), including, without limitation, activities
that exceed normal, active asset management (normaal,
actief vermogensbeheer).
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Gift
and Inheritance Taxes
Dutch gift or
inheritance taxes will not be levied on the occasion of the transfer of a note
by way of gift by, or on the death of, a holder of a note, unless:
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(i)
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the holder of
a note is, or is deemed to be, resident in The Netherlands for the purpose
of the relevant provisions; or
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(ii)
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the transfer
is construed as an inheritance or gift made by, or on behalf of, a person
who, at the time of the gift or death, is or is deemed to be resident in
The Netherlands for the purpose of the relevant provisions;
or
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(iii)
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such note is
attributable to an enterprise or part thereof which is carried on through
a permanent establishment (vaste
inrichting) or a permanent representative (vaste
vertegenwoordiger) in The
Netherlands.
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Value
Added Tax
The issuance or
transfer of a note, and payments of interest and principal under a note, will
not be subject to value added tax in The Netherlands.
Other
Taxes and Duties
The subscription,
issue, placement, allotment, delivery or transfer of a note will not be subject
to registration tax, stamp duty or any other similar tax or duty payable in The
Netherlands.
Residence
A
holder of a note will not be, or deemed to be, resident in The Netherlands for
tax purposes and, subject to the exceptions set out above, will not otherwise be
subject to Dutch taxation, by reason only of acquiring, holding or disposing of
a note or the execution, performance, delivery and/or enforcement of a
note.
EU
Council Directive on Taxation of Savings Income
In
accordance with EC Council Directive 2003/48/EC on the taxation of savings
income, The Netherlands will provide to the tax authorities of another EU member
state (and certain non-EU countries and associated territories specified in said
directive) details of payments of interest or other similar income paid by a
person within The Netherlands to, or collected by such a person for, an
individual resident in such other state.
UNITED
STATES FEDERAL INCOME TAXATION
The following is a
summary of the material U.S. federal income tax consequences of ownership and
disposition of the notes. It applies only to an investor who holds the notes as
capital assets within the meaning of Section 1221 of the Code. This
discussion is based on the Code, administrative pronouncements, judicial
decisions and currently effective and proposed Treasury regulations, changes to
any of which subsequent to the date of this prospectus 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,
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 a note as a part of a hedging transaction,
straddle, conversion or other integrated transaction, or U.S. holders (as
defined below) who have a “functional currency” other than the U.S. dollar.
Holders should consult their tax advisers regarding the application of U.S.
federal tax laws to their particular circumstances, as well as any tax
consequences arising under the laws of any state, local or non-U.S. taxing
jurisdiction.
The following
discussion may be modified or superseded by additional information regarding
U.S. federal income taxation set forth in the applicable pricing supplement,
which investors should consult before making a decision to invest in the
specific instruments issued thereunder. This discussion does not apply to notes
that are not fully principal-protected, certain linked notes, renewable notes,
mandatorily exchangeable notes or reverse exchangeable notes. The tax treatment
of these instruments will be discussed in the applicable pricing
supplement.
Tax
Consequences to U.S. Holders
As
used herein, the term “U.S. holder” means, for U.S. federal income tax purposes,
a beneficial owner of notes that 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.
Payments
of Interest
Interest paid on a
note generally will be taxable to a U.S. holder as ordinary interest income at
the time it accrues or is received in accordance with the holder’s method of
accounting for U.S. federal income tax purposes. Interest income
earned by a U.S. holder with respect to a note will be U.S. source income for
purposes of calculating the U.S. holder’s foreign tax credit
limitation.
Special rules
governing recognition of interest income on notes issued with original issue
discount, short-term notes, contingent notes and foreign currency notes are
described below under “—Original Issue Discount,” “—Short-term Notes,”
“—Contingent Notes” and “—Foreign Currency Notes.”
Original
Issue Discount
A
note that has an “issue price” that is less than its “stated redemption price at
maturity” will be considered to have been issued with original issue discount
(“OID”) for U.S. federal income tax purposes (and will be referred to as an “OID
note”) unless the note satisfies a de
minimis threshold (as described below). Special rules governing the tax
treatment of “short-term notes” (which are not OID notes for purposes of this
discussion) are described below under “—Short-term Notes.” The “issue price” of
a note will be the first price at which a substantial amount of the notes is
sold to the public (not including sales to bond houses, brokers or similar
persons or organizations acting in the capacity of underwriters, placement
agents or wholesalers). The “stated redemption price at maturity” of a note
generally will equal the sum of all payments required under the note other than
payments of “qualified stated interest.” “Qualified stated interest” includes
stated interest unconditionally payable (other than in debt instruments of the
issuer) at least annually at a single fixed rate, and also includes stated
interest on certain floating rate notes.
If
the difference between a note’s stated redemption price at maturity and its
issue price is less than a de
minimis amount, i.e.,
¼ of one percent of the stated redemption price at maturity multiplied by the
number of complete years from issuance to maturity, then the note will not be
subject to the rules described below. Holders of notes with a de
minimis amount of OID generally will include this OID in income, as
capital gain, on a pro
rata basis as principal payments are made on the note.
A
holder of OID notes will be required to include any qualified stated interest
payments in income in accordance with the holder’s method of accounting for U.S.
federal income tax purposes. In addition, the holder will be required to include
OID in income as it accrues, in accordance with a constant-yield method based on
a compounding of interest, regardless of the holder’s method of accounting.
Under this method, a holder of OID notes generally will be required to include
in income increasingly greater amounts of OID in successive accrual periods. A
holder’s basis in an OID note will be increased by the amount of OID included in
the holder’s income.
A
holder may make an election to include in gross income all interest that accrues
on any note (including stated interest, OID, de
minimis OID, market discount and de
minimis market discount, as adjusted by any amortizable bond premium or
acquisition premium) in accordance with the constant-yield method based on the
compounding of interest (a “constant-yield election”).
Short-term
Notes
A
short-term note is one with a term of one year or less (from but excluding the
issue date to and including the last possible date that the note could be
outstanding). Generally, a short-term note is treated as issued at a discount
equal to the sum of all payments required on the note minus its issue price. As
discussed below, certain aspects of the U.S. federal income tax treatment of a
short-term note with contingent payments are unclear.
A
cash-method U.S. holder generally will not be required to recognize income with
respect to a short-term note prior to maturity, other than with respect to
receipt of interest payments, if any, or pursuant to a sale or exchange of the
note. An accrual-method U.S. holder (or a cash-method holder who elects to
accrue income on the note currently) will be subject to rules that generally
require accrual of discount on short-term debt instruments on a straight-line
basis, unless the holder elects a constant-yield method of accrual based on
daily compounding. In the case of a short-term note with contingent payments, it
is not clear how such accruals should be determined. Holders should consult
their tax advisers regarding the amount and timing of any accruals on such
notes.
Upon a sale,
exchange or retirement of a short-term note, a holder will recognize gain or
loss in an amount equal to any difference between the amount received and the
holder’s basis in the note. The holder’s basis in the note should equal the
amount paid to acquire the note increased, for a holder that accrues income on
the notes currently, by any previously accrued but unpaid discount. The amount
of any resulting loss will be treated as a short-term capital loss, the
deductibility of which is subject to limitations. The excess of the amount
received at maturity over the holder’s basis in the note generally should be
treated as ordinary income, although the treatment of gain recognized at
maturity that is attributable to the purchase of a note in the secondary market
for less than its issue price plus accrued but unpaid discount, if any, is
unclear. It is also not clear whether or to what extent gain recognized upon a
sale or exchange prior to maturity of a short-term note providing for contingent
payments should be treated as capital gain or ordinary income. Holders should
consult their tax advisers regarding these issues.
A
cash-method holder who does not make the election to accrue income currently on
a short-term note may be required to defer deductions for interest paid on
indebtedness incurred to purchase or carry the note. Cash-method holders should
consult their tax advisers regarding these rules.
Market
Discount
If
a U.S. holder purchases a note (other than a short-term note) for an amount that
is less than its stated redemption price at maturity or, in the case of an OID
note, its adjusted issue price, the amount of the difference will be treated as
market discount for federal income tax purposes, unless this difference is less
than a specified de
minimis amount. The adjusted issue price of an OID note generally equals
the issue price of the note, increased by previously accrued OID and decreased
by the amounts of any previous payments on the note other than payments of
qualified stated interest.
A
holder will be required to treat any principal payment on (or, in the case of an
OID note, any payment that does not constitute qualified stated interest on), or
any gain on the sale, exchange or retirement of a note, as ordinary income to
the extent of the market discount accrued on the note at that time unless this
market discount has been previously included in income by the holder pursuant to
an election to include market discount in income as it accrues, or pursuant to a
constant-yield election as described under “—Original Issue Discount” above. If
a note is disposed of in one of certain nontaxable transactions, accrued market
discount will be includible as ordinary income as if the holder had sold the
note in a taxable transaction at its then fair market value. Unless a holder
elects to include market discount in income as it accrues, the holder generally
will be required to defer deductions for any interest paid on indebtedness
incurred to purchase or carry the notes in an amount not exceeding the accrued
market discount until the accrued market discount is included in
income.
If
a holder makes an election to include market discount as it accrues (a “market
discount accrual election”), that election will apply to all market discount
bonds acquired by the holder on or after the first day of the first taxable year
to which that election applies. If a holder makes a constant-yield
election (as described under “—Original Issue Discount” above) with respect to a
market discount note, that election will result in a deemed market discount
accrual election for the taxable year in which the note was
acquired.
Acquisition
Premium and Amortizable Bond Premium
A
U.S. holder who purchases an OID note for an amount that is greater than the
note’s “adjusted issue price” but less than or equal to the sum of all amounts
payable on the note after the purchase date, other than payments of qualified
stated interest, will be considered to have purchased the note with acquisition
premium. Under the acquisition premium rules, the amount of OID that the holder
must include in its gross income with respect to the note for any taxable year
will be reduced by the portion of acquisition premium properly allocable to that
year.
If
a holder purchases a note for an amount that is greater than the sum of all
amounts payable on the note after the purchase date, other than payments of
qualified stated interest, the holder generally will be considered to have
purchased the note with amortizable bond premium equal to such excess. If the
note is not optionally redeemable prior to its maturity date, the holder
generally may elect to amortize this premium over the remaining term of the note
using a constant-yield method. If, however, the note may be optionally redeemed
prior to maturity after the holder has acquired it, the amount of amortizable
bond premium is determined by substituting the redemption date for the maturity
date and the redemption price for the amount payable at maturity if and only if
the substitution results in a smaller amount of premium attributable to the
period before the redemption date. A holder may generally use the amortizable
bond premium allocable to an accrual period to offset qualified stated interest
required to be included in such holder’s income with respect to the note in that
accrual period. A holder that elects to amortize bond premium must reduce its
tax basis in the note by the amount of the premium amortized in any year. An
election to amortize bond premium applies to all taxable debt obligations then
owned and thereafter acquired by the holder and may be revoked only with the
consent of the Internal Revenue Service (the “IRS”).
If
a holder makes a constant-yield election (as described under “—Original Issue
Discount” above) for a note with amortizable bond premium, such election will
result in a deemed election to amortize bond premium for all of the holder’s
debt instruments with amortizable bond premium.
Sale,
Exchange or Retirement of a Note
Upon the sale,
exchange or retirement of a note, a U.S. holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and the holder’s tax basis in the note. For these purposes, the
amount realized does not include any amount attributable to accrued interest on
the note, which is treated as a payment of interest.
Gain or loss
realized on the sale, exchange or retirement of a note generally will be capital
gain or loss and will be long-term capital gain or loss if at the time of sale,
exchange or retirement the note has been held for more than one year. Exceptions
to this general rule apply to short-term notes, notes with market discount,
contingent notes and foreign currency notes. See “—Short-term Notes” and
“—Market Discount” above and “—Contingent Notes” and “—Foreign Currency Notes”
below.
Contingent
Notes
Certain floating
rate notes, optionally exchangeable notes and other notes issued pursuant to
this prospectus supplement will be subject to the rules governing contingent
payment debt instruments (“contingent
notes”). In general, contingent notes will be subject to the OID
provisions of the Code and the Treasury regulations issued thereunder, and U.S.
holders will be required to accrue as interest income in each year the OID on
the notes, with certain adjustments to reflect the difference, if any, between
the actual and projected amounts of the contingent payments on the notes, as
described below.
We
are required to determine a "comparable yield" for a contingent note. The
"comparable yield" generally is the yield at which, in similar general market
conditions, we could issue a fixed-rate debt instrument with terms similar to
those of the notes, including the level of subordination, term and timing of
payments, but excluding any adjustments for the riskiness of the contingencies
or the liquidity of the notes. Solely for purposes of determining the amount of
interest income that a holder will be required to accrue, we are also required
to construct a "projected payment schedule" representing a payment or series of
payments the amount and timing of which would produce a yield to maturity on the
contingent note equal to the comparable yield.
Neither
the comparable yield nor the projected payment schedule constitutes a
representation by us or Holding regarding the actual amounts, if any, that we
will pay on a note. Unless otherwise specified in the relevant pricing
supplement, a holder may obtain the comparable yield and projected payment
schedule by submitting a written request to our representative, whose name or
title and address and/or telephone number we will provide in the relevant
pricing supplement.
For U.S. federal
income tax purposes, a holder is required to use the comparable yield and the
projected payment schedule determined by us to calculate the holder’s interest
accruals and any adjustments thereto in respect of the contingent notes, unless
the holder timely discloses and justifies the use of other estimates to the
IRS.
A
holder will be required for U.S. federal income tax purposes to accrue an amount
of OID for each accrual period prior to and including the maturity (or earlier
sale, exchange or retirement) of the contingent notes, that equals the product
of (i) the adjusted issue price of the notes (as defined below) as of the
beginning of the accrual period, (ii) the comparable yield of the notes,
adjusted for the length of the accrual period, and (iii) the number of days
during the accrual period that the holder held the notes divided by the number
of days in the accrual period.
For U.S. federal
income tax purposes, the “adjusted issue price” of a contingent note is its
issue price increased by any interest income previously accrued (without regard
to any positive or negative adjustments, as described below), and decreased by
the projected amounts of all prior scheduled payments with respect to the
contingent note (without regard to the actual amounts paid). Regardless of a
holder’s accounting method, the holder will be required to accrue OID on the
notes as interest income at the comparable yield, with adjustments described
below to reflect the difference, if any, between the actual and projected
amounts of the payments on the notes.
A
holder will be required to recognize additional interest income equal to the
amount of any net positive adjustment, i.e.,
the excess of actual payments over projected payments, in respect of a
contingent note for a taxable year. A net negative adjustment, i.e.,
the excess of projected payments over actual payments, in respect of a
contingent note for a taxable year:
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●
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will first
reduce the amount of interest in respect of the note that a holder would
otherwise be required to include in income in the taxable year;
and
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|
to the extent
of any excess, will give rise to an ordinary loss equal to the excess
of:
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|
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the amount of
all previous interest inclusions under the note
over
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|
the total
amount of the holder’s net negative adjustments treated as ordinary loss
on the note in prior taxable years.
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Any net negative
adjustment in excess of the amounts described above will be carried forward to
offset future interest income in respect of the note or to reduce the amount
realized on a sale, exchange or retirement of the note. A net negative
adjustment is not subject to the limitation imposed on miscellaneous itemized
deductions under Section 67 of the Code.
If
a holder purchases a contingent note for a price other than its adjusted issue
price, the difference between the purchase price and the adjusted issue price
must be reasonably allocated to the daily portions of interest or projected
payments with respect to the note over its remaining term and treated as a
positive or negative adjustment, as the case may be, with respect to each period
to which it is allocated. The rules described above regarding market discount,
acquisition premium and amortizable bond premium do not apply to contingent
notes.
Upon a sale,
exchange or retirement of a contingent note prior to its scheduled maturity, a
holder generally will recognize gain or loss equal to the difference between the
amount the holder receives and the holder’s basis in the note. (At the scheduled
maturity, the holder will be treated as receiving the amount of the
payment set forth
in the projected payment schedule, and any difference between the
amount received and the projected payment will be treated as a positive or
negative adjustment, as described above.) The holder’s basis in a note generally
will equal the cost thereof, increased by the amount of interest income
previously accrued in respect of the note (without regard to any positive or
negative adjustments, as described above), and decreased by the projected amount
of all prior scheduled payments with respect to the note (without regard to the
actual amounts paid). Any gain will be treated as interest income, and any loss
will be treated first as ordinary loss to the extent of previous interest
inclusions less prior net negative adjustments that the holder took into account
as ordinary loss, and then as capital loss. These losses are not subject to the
limitation imposed on miscellaneous itemized deductions under Section 67 of the
Code. The deductibility of capital losses, however, is subject to
other limitations. Additionally, if a holder recognizes a loss above
certain thresholds, the holder may be required to file a disclosure statement
with the IRS. Holders should consult their tax advisers regarding these
limitations and reporting obligations.
Special rules may
apply if the amounts of all of the remaining payments on a contingent note
become fixed. For this purpose, a payment will be treated as fixed if the
remaining contingencies with respect to it are remote or incidental. Under these
rules, a holder would be required to account for the difference between the
originally projected amount of each contingent payment and the fixed amount
thereof in a reasonable manner over the period to which the difference relates.
In addition, the holder would be required to make adjustments to, among other
things, the holder’s accrual periods and the holder’s basis in the notes. The
character of any gain or loss on a sale or exchange of the contingent note also
would be affected. Holders should consult their tax advisers regarding the
application of these rules.
Foreign
Currency Notes
We
refer to notes the interest and principal on which are payable in a single
currency other than the U.S. dollar as “foreign currency notes.” The following
summary does not describe special rules applicable to currency-linked notes,
contingent notes payable in a foreign currency, or notes providing for payments
in more than one currency. Holders should refer to the applicable pricing
supplement for a discussion of these special rules.
As
further described below, the rules applicable to foreign currency notes may
require a holder to treat some or all of the holder’s income, gain or loss with
respect to a foreign currency note as “exchange gain or loss,” which is ordinary
in character. The applicable rules, which are complex, permit certain elections.
U.S. holders should consult their tax advisers regarding these
rules.
A
cash-method holder who has not made an election to accrue interest income on a
foreign currency note currently and who receives a payment of qualified stated
interest (or who receives proceeds from a sale, exchange or other disposition
attributable to qualified stated interest) in a foreign currency with respect to
a foreign currency note will be required to include in income the U.S. dollar
value of the foreign currency payment (determined based on the spot rate on the
date the payment is received) regardless of whether the payment is in fact
converted to U.S. dollars at the time, and this U.S. dollar value will be the
holder’s tax basis in the foreign currency. In this case, the holder will not
have any exchange gain or loss with respect to the qualified stated
interest.
An
accrual-method holder (or a cash-method holder who elects to accrue interest
income currently) will be required to include in income the U.S. dollar value of
the amount of interest income that accrues with respect to a foreign currency
note during an accrual period. The U.S. dollar value of the accrued income will
be determined by translating the accrued income (determined in the relevant
foreign currency) at the average exchange rate of the currency for the accrual
period or, with respect to an accrual period that spans two taxable years, at
the average rate for the partial period within the taxable year. An
accrual-method holder will recognize exchange gain or loss (which will be
ordinary in character and will not be treated as interest income or expense)
with respect to accrued interest income on the date the interest payment (or
proceeds from the sale, exchange or other disposition attributable to accrued
interest) is actually received. The exchange gain or loss so recognized will
equal the difference between (i) the U.S. dollar value of the foreign currency
payment received (determined based on a spot rate on the date the payment is
received) in respect of the accrual period (or, where a holder receives U.S.
dollars, the amount of the payment in respect of the accrual period) and (ii)
the U.S. dollar value of interest income that has accrued during the accrual
period (as determined above). Rules similar to these apply in the case of a
cash-method taxpayer required to accrue OID or market discount.
An
accrual-method holder may elect to translate interest income (including OID)
into U.S. dollars at the spot rate on the last day of the interest accrual
period (or, in the case of a partial accrual period, the spot rate on the last
day of the taxable year) or, if the date of receipt is within five business days
of the last day of the interest accrual period, the spot rate on the date of
receipt. A holder that makes this election must apply it consistently to all
debt instruments from year to year and cannot change the election without the
consent of the IRS.
OID, market
discount, acquisition premium and amortizable bond premium on a foreign currency
note are determined in the relevant foreign currency. Where the taxpayer elects
to include market discount in income currently, the amount of market discount
will be determined for any accrual period in the relevant foreign currency and
then translated into U.S. dollars on the basis of the average exchange rate
during the accrual period. Exchange gain or loss realized with respect to
accrued market discount is determined in accordance with the rules relating to
accrued interest described above.
If
an election to amortize bond premium is made, amortizable bond premium taken
into account on a current basis will reduce interest income in units of the
relevant foreign currency. Exchange gain or loss is realized on the amortizable
bond premium with respect to any period by treating the bond premium amortized
in the period as a return of principal that is subject to the rules that apply
on the sale, exchange or retirement of the foreign currency note (as described
below). If the election is not made, any loss realized on the sale, exchange or
retirement of the foreign currency note will be a capital loss to the extent of
the bond premium. Similar rules apply to a foreign currency note acquired with
acquisition premium.
A
holder’s tax basis in a foreign currency note, and the amount of any subsequent
adjustment to the holder’s tax basis, will be the U.S. dollar value of the
foreign currency amount paid for such foreign currency note, or of the foreign
currency amount of the adjustment, determined on the date of the purchase or
adjustment. A holder who purchases a foreign currency note with previously owned
foreign currency will recognize ordinary income or loss in an amount equal to
the difference, if any, between such holder’s tax basis in the foreign currency
and the U.S. dollar fair market value of the foreign currency note on the date
of purchase.
Exchange gain or
loss upon sale, exchange or retirement of a foreign currency note will equal the
difference between (i) the U.S. dollar value of the foreign currency
principal amount of the note, determined on the date the payment is received or
the note is disposed of, and (ii) the U.S. dollar value of the foreign
currency principal amount of the note, determined on the date the holder
acquired the note. Payments attributable to accrued interest will be treated in
accordance with the rules described above. The exchange gain or loss (including
the exchange gain or loss recognized with respect to accrued interest and
amortizable bond premium, as applicable) will be recognized only to the extent
of the total gain or loss realized by the holder on the sale, exchange or
retirement of the foreign currency note. Any gain or loss realized by a holder
in excess of the exchange gain or loss will be capital gain or loss except to
the extent of any accrued market discount or, where applicable, in accordance
with the rules for short-term notes. See “—Short-term Notes” and
“—Market Discount” above. The source of the exchange gain or loss
will be determined by reference to the residence of the holder or the “qualified
business unit” of the holder on whose books the note is properly
reflected. A holder who recognizes a loss upon a sale, exchange or
retirement of a foreign currency note above
certain thresholds may be required to file a disclosure statement with the
IRS. Holders should consult their tax advisers regarding this
reporting obligation.
A
holder will have a tax basis in any foreign currency received on the sale,
exchange or retirement of a foreign currency note equal to the U.S. dollar value
of the foreign currency, determined at the time of sale, exchange or retirement.
A cash-method holder who buys or sells a foreign currency note is required to
translate units of foreign currency paid or received into U.S. dollars at the
spot rate on the settlement date of the purchase or sale. Accordingly, no
exchange gain or loss will result from currency fluctuations between the trade
date and the settlement date of the purchase or sale. An accrual-method holder
may elect the same treatment for all purchases and sales of foreign currency
notes, provided that the notes are traded on an established securities market.
This election may not be changed without the consent of the IRS. Any gain or
loss realized by a holder on a sale or other disposition of foreign currency
(including its exchange for U.S. dollars or its use to purchase foreign currency
notes) will be ordinary income or loss.
Tax
Consequences to Non-U.S. Holders
As
used herein, the term “non-U.S. holder” means, for U.S. federal income tax
purposes, a beneficial owner of notes that is: (i) a nonresident alien
individual, (ii) a foreign corporation or (iii) a foreign estate or
trust. This discussion does not apply to a non-U.S. holder who is an individual
present in the United States for 183 days or more in the taxable year of
disposition. Such a non-U.S. holder should consult his or her tax
adviser regarding the U.S. federal income tax consequences of the ownership and
disposition of a note.
Payments to a
non-U.S. holder on the notes, and any gain realized on the sale or exchange of
the notes, will be exempt from U.S. federal income tax, including withholding
tax, provided,
generally, that the non-U.S. holder (i) certifies on IRS Form W-8BEN,
under penalties of perjury, that it is not a United States person and otherwise
satisfies applicable requirements; and (ii) such amounts are not effectively
connected with the non-U.S. holder’s conduct of a trade or business in the
United States.
If
a non-U.S. holder is engaged in a trade or business in the United States, and if
income or gain from the notes is effectively connected with the conduct of that
trade or business, the non-U.S. holder generally will be taxed in the same
manner as a U.S. holder. In this case, the non-U.S. holder will be required to
provide a properly executed IRS Form W-8ECI in order to claim an exemption from
withholding. Non-U.S. holders that are engaged in a trade or business in the
United States should consult their tax advisers regarding other U.S. tax
consequences of the ownership and disposition of the notes, including the
possible imposition of a 30% branch profits tax if the non-U.S. holder is a
corporation.
Backup
Withholding and Information Reporting
Payments on the
notes, OID accruals on the notes, if any, and the proceeds received
from a sale or other disposition of the notes generally will be subject to
information reporting unless the holder is an “exempt recipient” (such as a
domestic corporation) and may also be subject to U.S. backup withholding at the
rate specified in the Code if the holder fails to provide certain identifying
information (such as an accurate taxpayer identification number, in the case of
a U.S. holder) or meet certain other conditions. A non-U.S. holder that complies
with the certification procedures described in the preceding section generally
will establish an exemption from backup withholding.
Amounts withheld
under the backup withholding rules are not additional taxes and may be refunded
or credited against the holder’s U.S. federal income tax liability, provided the
required information is furnished to the IRS.
The
U.S. federal income tax discussion set forth above is included for general
information only and does not address all aspects of U.S. federal income
taxation that may be relevant to holders in light of their particular
circumstances. Holders should consult their tax advisers regarding the
application of U.S. federal tax laws in their particular circumstances, as well
as any tax consequences arising under the laws of any state, local or non-U.S.
taxing jurisdiction.
PLAN
OF DISTRIBUTION (CONFLICTS OF INTEREST)
We
and Holding are offering the RBS NotesSM
and related guarantees on a continuing basis exclusively through RBS Securities
Inc. to the extent it is named in the applicable pricing supplement. In
addition, we and Holding may offer the notes and related guarantees through
certain other agents to be named in the applicable pricing supplement. The
agents have agreed to use reasonable efforts to solicit offers to purchase these
securities. We will have the sole right to accept offers to purchase these
securities and may reject any offer in whole or in part. Each agent may reject,
in whole or in part, any offer it solicited to purchase securities. Unless
otherwise specified in the applicable pricing supplement, we will pay an agent,
in connection with sales of these securities resulting from a solicitation that
agent made or an offer to purchase the agent received, a commission ranging from
0.05% to 5% of the initial offering price of the securities to be sold,
depending upon the maturity of the securities. We and the agent will negotiate
commissions for securities with a maturity of 30 years or greater at the time of
sale.
We
and Holding may also sell these securities to an agent as principal for its own
account at discounts to be agreed upon at the time of sale. That agent may
resell these securities to investors and other purchasers at a fixed offering
price or at prevailing market prices, or prices related thereto at the time of
resale or otherwise, as that agent determines and as we will specify in the
applicable pricing supplement. An agent may offer the securities it has
purchased as principal to other dealers. That agent may sell the securities to
any dealer at a discount and, unless otherwise specified in the applicable
pricing supplement, the discount allowed to any dealer will not be in excess of
the discount that agent will receive from us. After the initial
public offering of securities that the agent is to resell on a fixed public
offering price basis, the agent may change the public offering price, concession
and discount.
Each of the agents
may be deemed to be an “underwriter” within the meaning of the Securities Act of
1933, as amended. We and Holding have agreed to indemnify the agents against
certain liabilities, including liabilities under the Securities Act of 1933, or
to contribute to payments made in respect of those liabilities.
To
the extent the total aggregate principal amount of securities offered pursuant
to a pricing supplement is not purchased by investors, one or more of our
affiliates may agree to purchase the unsold portion and hold such securities for
its own investment.
We
estimate that we will spend approximately $350,000 for printing, rating agency,
trustee and legal fees and other expenses allocable to the
offering.
Unless otherwise
provided in the applicable pricing supplement, we do not intend to apply for the
listing of these securities on a national securities exchange. We have been
advised by certain agents that they intend to make a market in these securities,
as applicable laws and regulations permit. The agents are not obligated to make
a market in these securities, however, and the agents may discontinue making a
market at any time without notice. No assurance can be given as to the liquidity
of any trading market for these securities.
In
addition, we may, at our sole option, extend the offering period for securities
offered pursuant to a pricing supplement. One or more of our or Holding’s
affiliates may agree to purchase, for its own investment, any securities that
are not sold during the extended offering period. During an extended offering
period, securities will be offered at prevailing market prices which may be
above or below the initial issue price set forth in the applicable pricing
supplement. Our affiliates will not make a market in those securities during
that period, and are not obligated to do so after the distribution is
complete.
RBSSI is an
affiliate of ours and Holding. RBSSI will conduct each offering of these
securities in compliance with the requirements of the 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.
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 prospectus supplement 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.
Underwriting
discounts and commissions on securities sold in the initial distribution will
not exceed 8% of the offering proceeds.
Neither RBSSI nor
any other affiliated agent or dealer of ours utilized in the initial offering of
these securities will confirm sales to accounts over which it exercises
discretionary authority without the prior specific written approval of its
customer.
In
order to facilitate the offering of these securities, the agents may engage in
transactions that stabilize, maintain or otherwise affect the price of these
securities or of any other securities the prices of which may be used to
determine payments on these securities. Specifically, the agents may sell more
securities than they are obligated to purchase in connection with the offering,
creating a short position in these securities for its own accounts. A short sale
is covered if the short position is no greater than the number or amount of
securities available for purchase by the agent under any over-allotment option.
The agents can close out a covered short sale by exercising an over-allotment
option or purchasing these securities in the open market. In determining the
source of securities to close out a covered short sale, the agents will
consider, among other things, the open market price of these securities compared
to the price available under the over-allotment option. The agents may also sell
these securities or any other securities in excess of the over-allotment option,
creating a naked short position. The agents must close out any naked short
position by purchasing securities in the open market. A naked short position is
more likely to be created if the agents are concerned that there may be downward
pressure on the price of these securities in the open market after pricing that
could adversely affect investors who purchase in the offering. As an additional
means of facilitating the offering, the agents may bid for, and purchase, these
securities or any other securities in the open market to stabilize the price of
these securities or of any other securities. Finally, in any offering of the
securities through a syndicate of underwriters, the underwriting syndicate may
also reclaim selling concessions allowed to an underwriter or a dealer for
distributing these securities in the offering if the syndicate repurchases
previously distributed securities to cover syndicate short positions or to
stabilize the price of these securities. Any of these activities may raise or
maintain the market price of these securities above independent market levels or
prevent or retard a decline in the market price of these securities. The agents
are not required to engage in these activities, and may end any of these
activities at any time.
Other selling group
members include broker-dealers and other securities firms that have executed
dealer agreements with RBSSI. In the dealer agreements, the selling group
members have agreed to market and sell notes in accordance with the terms of
those agreements and all applicable laws and regulations.
LEGAL
MATTERS
Davis Polk &
Wardwell LLP will
pass upon the validity of the offered securities with respect to United States
Federal and New York law. Clifford Chance LLP will pass upon the
validity of the offered securities with respect to Dutch law. Each of
Davis Polk & Wardwell LLP and
Clifford Chance LLP has
in the past represented ABN AMRO Holding N.V. and its affiliates, including us,
and continues to represent ABN AMRO Holding N.V. and its affiliates on a regular
basis and in a variety of matters.