UNDERLYING
SUPPLEMENT
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Underlying
Supplement No. 2 to
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(TO
PROSPECTUS DATED SEPTEMBER 29, 2009
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Registration
Statement Nos. 333-162193 and 333-162193-01
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AND
PROSPECTUS SUPPLEMENT
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Dated
October 9, 2009
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DATED
SEPTEMBER 29, 2009)
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Rule
424(b)(2)
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ABN
AMRO Bank N.V.
ABN NotesSM
fully
and unconditionally guaranteed by
ABN
AMRO Holding N.V.
Securities
linked to an Index, an Exchange-Traded Fund or a Basket of Indices,
Exchange-Traded Funds and/or Other Underlying Assets
ABN AMRO
Bank N.V. may, from time to time, offer and sell debt securities, which we
collectively refer to as the “Securities,” linked to (i) an index of equity
securities or commodity futures contracts, which we refer to as an “Underlying
Index”; (ii) an exchange-traded fund that tracks the performance of an
underlying index or basket of securities, commodities or currencies, primarily
by holding securities or other instruments related to such underlying index or
basket, which we refer to as an “Underlying Fund”; or (iii) a basket composed of
Underlying Indices, Underlying Funds and/or other underlying
assets. We refer to the index that an Underlying Fund tracks as a
“Target Index.” This Underlying Supplement No. 2 describes potential
Underlying Indices and Target Indices underlying Underlying Funds to which the
Securities may be linked, as well as related matters concerning the
relationship, if any, between ABN AMRO Bank and the sponsor or publisher of the
Underlying Indices or Target Indices.
Additional
terms that will generally apply to the Securities may be described in a Product
Supplement, if any, accompanying this Underlying Supplement No.
2. This Underlying Supplement No. 2 supplements the terms described
in the accompanying Product Supplement, Prospectus Supplement and
Prospectus. A separate term sheet or pricing supplement, as the case
may be, will describe terms that apply to any specific issue of Securities,
including any changes to the description of the relevant Underlying Index or
Target Index included in this Underlying Supplement. We refer to such
term sheets and pricing supplements generally as Pricing
Supplements. If the terms described in the relevant Pricing
Supplement are inconsistent with those described herein or in any other related
Underlying Supplement, or in the accompanying Product Supplement, Prospectus
Supplement or Prospectus, the terms described in the relevant Pricing Supplement
shall control. You should read this Underlying Supplement No. 2, the
accompanying Product Supplement, Prospectus Supplement and Prospectus, and the
relevant Pricing Supplement before you invest in the Securities.
This
Underlying Supplement No. 2 describes only select Underlying Indices and Target
Indices underlying Underlying Funds to which the Securities may be
linked. We do not guarantee that we will offer Securities linked to
any of the Underlying Indices or Underlying Funds that track any of the Target
Indices described herein. In addition, we may offer Securities linked to one or
more Underlying Indices or Underlying Funds tracking Target Indices that are not
described herein. In such case, we will describe any such additional Underlying
Indices or Target Indices in another Underlying Supplement, the applicable
Pricing Supplement or the applicable Product Supplement.
The
Securities are our unsecured and unsubordinated obligations and are fully and
unconditionally guaranteed by ABN AMRO Holding N.V.
The
Securities are not bank deposits and are not insured or guaranteed by the
Federal Deposit Insurance Corporation, the Bank Insurance Fund or any other
governmental agency.
The
Securities involve risks not associated with an investment in conventional debt
securities. See “Risk Factors” in the accompanying Product Supplement and “Risk
Factors” beginning on page US-1 of this Underlying Supplement No.
2.
The
Securities and Exchange Commission and state securities regulators have not
approved or disapproved these Securities, or determined if this Underlying
Supplement, any other related Underlying Supplement, the accompanying Product
Supplement, Prospectus Supplement or Prospectus or any relevant Pricing
Supplement are truthful or complete. Any representation to the contrary is a
criminal offense.
RBS
Securities Inc.
In this
Underlying Supplement, the “Bank,” “we,” “us” and “our” refer to ABN AMRO Bank
N.V. and “Holding” refers to ABN AMRO Holding N.V., our parent
company. We refer to the Securities offered by the relevant Pricing
Supplement and the related guarantees as the “Securities” and to each individual
security offered thereby as a “Security.”
ABN
NotesSM are
service marks of ABN AMRO Bank N.V.
Any
Securities issued, sold or distributed pursuant to the relevant Pricing
Supplement may not be offered or sold (i) to any person/entity listed on
sanctions lists of the European Union, United States or any other applicable
local competent authority; (ii) within the territory of Cuba, Sudan, Iran and
Myanmar; (iii) to residents in Cuba, Sudan, Iran or Myanmar; or (iv) to Cuban
Nationals, wherever located.
TABLE
OF CONTENTS
Page
Risk
Factors
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US-1
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The Rogers International Commodity
Index® ─ Excess Return™
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US-9
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The Dow Jones EURO STOXX
50® Index
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US-17
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The Dow Jones Industrial
AverageSM
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US-21
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The Dow Jones U.S. Real Estate
Index
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US-23
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The Dow Jones U.S. Financials Sector
Index
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US-25
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The MSCI
Indices
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US-30
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The NASDAQ-100 Index®
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US-41
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The Nikkei 225
Index
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US-46
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The Financial Select Sector
Index
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US-48
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RISK
FACTORS
This
section describes the additional risks relating to the Underlying Indices and
Target Indices described in this Underlying Supplement. You should consider carefully the
risks discussed under “Risk Factors” in the accompanying product supplement and
in any other related Underlying Supplement, together with the following
discussion of additional risks, before you decide that an investment in the
Securities is suitable for you. For a discussion of certain
general risks associated with your investment in the Securities, please refer to
the section entitled “Risk Factors” beginning on page S-3 of the accompanying
Prospectus Supplement. You should carefully consider whether
the Securities are suited to your particular circumstances before you decide to
purchase them. In addition, we urge you to consult with your
investment, legal, accounting, tax and other advisors with respect to any
investment in the Securities.
Risks
Relating to the Rogers International Commodity Index®
─ Excess ReturnTM
Our
Membership on the Index Committee May Conflict With Your Interest As a Holder of
the Securities
The Index Committee is responsible for
the calculation methodology of the Rogers International
Commodity Index. We are a member of the
Index Committee. As a member of the Index Committee, we will be
involved in the composition and management of the Rogers International Commodity
Index®
─ Excess ReturnTM
including additions, deletions and the weightings of the commodities or
exchange-traded futures contracts on the commodities, all of which could affect
the value of the Rogers International Commodity Index®
─ Excess ReturnTM
and, therefore, could affect the amount payable, if any, on the Securities at
maturity and the market value of the Securities prior to
maturity. While we do not believe that we have the power to control
the decision-making of the Index Committee, we may influence the determinations
of the Index Committee, which may adversely affect the value of your
Securities. Due to our potential influence on determinations of the
Index Committee, which may affect the market value of the Securities, we, as
issuer of the Securities, may have a conflict of interest if we participate in
or influence such determinations.
Since we
cannot control or predict the actions of the Index Committee, we are not
ultimately responsible for any errors in or discontinuation of disclosure
regarding the methods or policies relating to the calculation of the Rogers
International Commodity Index®
─ Excess ReturnTM.
The
Securities Are Linked to the Rogers International Commodity Index® ─ Excess
ReturnTM not the
Rogers International Commodity Index® ─ Total
ReturnTM
The Securities are linked to the Rogers
International Commodity Index® ─ Excess
ReturnTM and not
the Rogers International Commodity Index® ─ Total
ReturnTM. As
such, the Rogers International Commodity Index®
─ Excess ReturnTM
reflects the returns that are potentially available through an unleveraged
investment in the RICI Index Commodities. The Rogers International
Commodity Index® ─ Total
Return is a “total return” index which, in addition to reflecting such returns,
also reflects interest that could be earned on cash collateral invested in
3-month U.S. Treasury bills. The Rogers International Commodity
Index® ─ Excess
ReturnTM does
not include this total return feature. In addition, the term “Excess
Return” in the title of the Rogers International Commodity Index®
─ Excess ReturnTM
is not intended to suggest that the performance of the Rogers International
Commodity Index®
─ Excess ReturnTM
at any time or the return on your Securities will be positive or that the Rogers
International Commodity Index®
─ Excess ReturnTM
is designed to exceed a particular benchmark.
If
the Securities Are Linked to the Rogers International Commodity Index®
─ Excess ReturnTM,
the Securities Will Be Subject to Currency Exchange Risk.
Because
the prices of some of the commodities futures contracts comprising the Rogers
International Commodity Index®
─ Excess ReturnTM
are converted into U.S. dollars for the purposes of calculating the level of the
Rogers International Commodity Index®
─ Excess ReturnTM,
the holders of the Securities will be exposed to currency exchange rate risk
with respect to each of the currencies in which the commodities futures
contracts composing the Rogers International Commodity Index®
─ Excess ReturnTM
trade. An investor’s net exposure will depend on
the extent to which such currencies strengthen or weaken against the U.S. dollar
and the relative weight of the commodities futures contracts composing the
Rogers International Commodity Index®
─ Excess ReturnTM
denominated in each such currency. If, taking into account such
weighting, the U.S. dollar strengthens against such currencies, the value of the
Rogers International Commodity Index®
─ Excess ReturnTM
will be adversely affected and the payment at maturity of the Securities may be
reduced.
Of
particular importance to potential currency exchange risk are:
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existing
and expected rates of inflation;
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existing
and expected interest rate levels;
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the
balance of payments;
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the
extent of governmental surpluses or deficits in the component countries
and the United States;
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government
intervention in the currency markets;
and
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government
action fixing exchange rates or allowing exchange rates to
float.
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All of
these factors are in turn sensitive to the monetary, fiscal and trade policies
pursued by the governments of various component countries and the United States
and other countries important to international trade and finance.
If
the Securities are Linked to the Rogers International Commodity Index®
─ Excess ReturnTM,
Changes in the Volatility of Exchange Rates, and the Correlation Between Those
Rates and the Levels of the Rogers International Commodity Index®
─ Excess ReturnTM
are Likely to Affect the Market Value of the Securities.
The
exchange rate between the U.S. dollar and each of the currencies in which the
commodities futures contracts comprising the Rogers International Commodity
Index®
─ Excess ReturnTM
are denominated refers to a foreign exchange spot rate that measures the
relative values of two currencies — the particular currency in which a
commodities futures contract composing the Rogers International Commodity
Index®
─ Excess ReturnTM
is denominated and the U.S. dollar. This exchange rate reflects the
amount of the particular currency in which a commodities futures contract
composing the Rogers International Commodity Index®
─ Excess ReturnTM
is denominated that can be purchased for one U.S. dollar and thus increases when
the U.S. dollar appreciates relative to the particular currency in which that
commodities futures contract is denominated. The volatility of the
exchange rate between the U.S. dollar and each of the currencies in which the
commodities futures contracts composing the Rogers International Commodity
Index®
─ Excess ReturnTM
are denominated refers to the size and frequency of changes in that exchange
rate.
Because
the Rogers International Commodity Index®
─ Excess ReturnTM
is calculated, in part, by converting the closing prices of the commodities
futures contracts composing the Rogers International Commodity Index®
─ Excess ReturnTM
into U.S. dollars, the volatility of the exchange rate between the U.S. dollar
and each of the currencies in which those securities are denominated could
affect the market value of the Securities.
The
correlation of the exchange rate between the U.S. dollar and each of the
currencies in which the commodities futures contracts composing the Rogers
International Commodity Index®
─ Excess ReturnTM
are denominated and the level of the Rogers International Commodity Index®
─ Excess ReturnTM
refers to the relationship between the percentage changes in that exchange rate
and the percentage changes in the level of the Rogers International Commodity
Index®
─ Excess ReturnTM. The
direction of the correlation (whether positive or negative) and the extent of
the correlation between the percentage changes in the exchange rate between the
U.S. dollar and each of the currencies in which the commodities futures
contracts comprising the Rogers International Commodity Index®
─ Excess ReturnTM
are denominated and the percentage changes in the level of the Rogers
International Commodity Index®
─ Excess ReturnTM
could affect the value of the Securities.
The
Rogers International Commodity Index Includes Futures Contracts on Foreign
Exchanges That Are Less Regulated Than U.S. Markets and Are Subject to Risks
That Do Not Always Apply to U.S. Markets
The
Rogers International Commodity Index includes futures contracts on physical
commodities on exchanges located outside the United
States. Historically the percentage of the commodities comprising the
Rogers International Commodity Index traded on foreign exchanges has not
exceeded 20%, however, the Index Committee has not
established any limits on the volume of Index Commodities that can be traded on
non-U.S. exchanges. The regulations of the Commodity Futures Trading
Commission do not apply to trading on foreign exchanges, and trading on foreign
exchanges may involve different and greater risks than trading on United States
exchanges. Certain foreign markets may be more susceptible to
disruption than United States exchanges due to the lack of a
government-regulated clearinghouse system. Trading on foreign
exchanges also involves certain other risks that are not applicable to trading
on United States exchanges. Those risks include varying exchange
rates, foreign exchange controls, governmental expropriation, burdensome or
confiscatory taxation systems, government imposed moratoriums, and political or
diplomatic events.
The Rogers International Commodity
Index® ─ Excess ReturnTM , and Its Sub-Indexes Are Concentrated
in a Single or A Limited Number of Commodity Sectors.
The Securities are linked to the
Rogers International
Commodity Index® ─ Excess ReturnTM. The commodities which comprise the
Rogers
International Commodity
Index® ─ Excess ReturnTM are concentrated in a limited number of
sectors, particularly energy and agriculture. As a result, the
Rogers International
Commodity Index® ─ Excess ReturnTM will be less diversified than other
indices or investment portfolios investing in a broader range
of products or commodities and, therefore, could experience greater
volatility. An investment in the Securities may therefore carry risks
similar to a concentrated securities investment in a limited industry or
sector.
The
commodities which comprise the Rogers International Commodity
Index® ─ Agriculture Excess ReturnTM
or any Sub-Index of the Rogers
International Commodity Index® ─ Excess ReturnTM
are concentrated in a single commodity sector. An investment in
Securities linked to such a Sub-Index is therefore not a diversified investment
and would carry risks similar to an equity investment in a single sector or
industry.
If
the Securities are Linked to the Rogers International Commodity Index®
─ Excess ReturnTM,
A Prolonged Decline in Value in Energy-Oriented Raw Materials Would Have a
Negative Impact on the Level of the Rogers International Commodity Index®
─ Excess ReturnTM
and the Value of Your Securities
As of September 1, 2009, approximately
44% of the component commodities on the Rogers International Commodity
Index® ─ Excess ReturnTM
are energy oriented, including 21% in crude oil. Accordingly, a
decline in the prices of such raw materials would adversely affect the level of
the Rogers International Commodity
Index® ─ Excess ReturnTM
and the value of your Securities. Technological advances or the
discovery of new oil reserves could lead to increases in world wide production
of oil and corresponding decreases in the price of crude oil. In
addition, further development and commercial exploitation of alternative energy
sources, including solar, wind or geothermal energy, could lessen the demand for
crude oil products and result in lower prices. Absent amendment of
the Rogers International Commodity
Index® ─ Excess ReturnTM
to lessen or eliminate the concentration of existing energy contracts in the
Rogers International Commodity
Index® ─ Excess ReturnTM
or to broaden the Rogers
International Commodity Index® ─ Excess ReturnTM
to account for such developments, the level of the Rogers International Commodity
Index® ─ Excess ReturnTM
and the value of your Securities could decline.
If the Securities are Linked to a
Sub-Index of the Rogers International Commodity Index® ─ Excess ReturnTM, A Prolonged Decline in Value in
Raw Materials Related to the Relevant Sector
Would Have a Negative Impact on the Level of Such Sub-Index and the Value of
Your
Securities
Each Sub-Index of the Rogers International Commodity
Index® ─ Excess ReturnTM is concentrated in a particular
commodity sector. A decline in the prices of commodities in such sector whether caused by decreased demand
or increased supply would adversely affect
the level of the relevant
Sub-Index and the value of your
Securities.
If the Securities are Linked to a
Sub-Index of the Rogers International Commodity Index® ─ Excess ReturnTM, the Prices of the Commodities Included in
the Rogers International
Commodity Index® ─ Excess ReturnTM May Correlate With Each
Other.
The commodities included in each Sub-Index of the Rogers International Commodity
Index® ─ Excess ReturnTM are from one particular commodity
sector. It is often, but
not always, the case that prices of commodities in the same sector may move up or down
in a similar pattern due to macroeconomic factors affecting that sector. This
phenomenon is referred to as “correlation.” Choosing commodities in the same sector is likely to result in
correlation among the commodities, and it is possible that correlation
will be detrimental to you because the prices of all of the commodities may move lower at the same
time. This is impossible to predict.
On the other hand, price movements in the commodities within the relevant commodity
sector may not correlate
with each other. At a time when the price of one or more of the commodities increases, the price of one or more of the other commodities may not increase as much or
may decrease. Therefore, in calculating, on the determination date, the payment,
if any, due at maturity, increases in the prices of one or more of the commodities may be moderated, or be
wholly offset, by declines in the prices of one or more of the other commodities.
The
Rogers International Commodity Index Includes Futures Contracts on Foreign
Exchanges That Are Less Regulated Than U.S. Markets and Are Subject to Risks
That Do Not Always Apply to U.S. Markets
The
Rogers International Commodity Index includes futures contracts on physical
commodities on exchanges located outside the United
States. Historically the percentage of the commodities comprising the
Rogers International Commodity Index traded on foreign exchanges has not
exceeded 20%, however, the Index Committee has not established any limits on the
volume of Index Commodities that can be traded on non-U.S.
exchanges. The regulations of the Commodity Futures Trading
Commission do not apply to trading on foreign exchanges, and trading on foreign
exchanges may involve different and greater risks than trading on United States
exchanges. Certain foreign markets may be more susceptible to
disruption than United States exchanges due to the lack of a
government-regulated clearinghouse system. Trading on foreign
exchanges also involves certain other risks that are not applicable to trading
on United States exchanges. Those risks include varying exchange
rates, foreign exchange controls, governmental expropriation, burdensome or
confiscatory taxation systems, government imposed moratoriums, and political or
diplomatic events.
The
Rogers International Commodity Index is a Rolling Index and Future Prices of the
Index Commodities that are Different Relative to Their Current Prices May
Decrease the Amount Payable at Maturity
The
Rogers International Commodity Index is composed of futures contracts on
commodities. Unlike equities, which typically entitle the holder to a continuing
stake in a corporation, commodity futures contracts normally specify a certain
date for delivery of the underlying physical commodity. As the exchange-traded
futures contracts that comprise the Rogers International Commodity Index
approach expiration, they are replaced by contracts that have a later
expiration. Thus, for example, a contract purchased and held in August may
specify an October expiration. As time passes, the contract expiring in October
is replaced by a contract for delivery in November. This process is referred to
as “rolling”. If the market for these contracts is (putting aside other
considerations) in “backwardation”, where the prices are lower in the distant
delivery months than in the nearer delivery months, the sale of the October
contract would take place at a price that is higher than the price of the
November contract, thereby creating a “roll yield” which might create a profit
for the purchase of the contracts. While certain commodities’
contracts included in the Rogers International Commodity Index have historically
exhibited consistent periods of backwardation, backwardation will likely not
exist at all times with respect to any commodity. Certain of the commodities
included in the Rogers International Commodity Index have historically traded in
“contango” markets. Contango markets are those in which the prices of contracts
are higher in the distant delivery months than in the nearer delivery months.
The absence of backwardation in the commodity markets could result in negative
“roll yields,” which might create a loss for the purchase of the contracts and
could adversely affect the value of the Rogers International Commodity Index.
There can be no assurance, however, that backwardation or roll yields will exist
in any particular Index Commodity at any time during the term of the
Securities.
Changes
that Affect the Composition and Calculation of the Rogers International
Commodity Index will Affect the Market Value of the Securities and the Amount
You Will Receive at Maturity
The
Rogers International Commodity Index is overseen and managed by the Index
Committee. Beeland Interests, Inc., which is 100% owned by James B. Rogers, is
the sole owner of the Rogers International Commodity Index. Rogers
chairs the Index Committee and controls its decisions. The other members of the
Index Committee are Diapason Commodities Management S.A. (“Diapason”), Beeland
Management Company, Daiwa Asset Management,
CQG, Inc., UBS AG, ABN AMRO Bank N.V. and Merrill Lynch. As of
the date of this Underlying Supplement, Rogers has a controlling interest in
Beeland Management Company.
Rogers,
through the Index Committee, has a significant degree of discretion regarding
the composition and management of the Rogers International Commodity Index,
including additions, deletions and the weightings of the Index Commodities or
exchange-traded futures contracts on the Index Commodities, all of which could
affect the value of the Rogers International Commodity Index and, therefore,
could affect the amount payable on the Securities at maturity and the market
value of the Securities prior to maturity. Rogers and the Index
Committee do not have any obligation to take the needs of any parties to
transactions involving the Rogers International Commodity Index, including the
holders of the Securities, into consideration when reweighting or making any
other changes to the Rogers International Commodity Index.
Additionally,
Rogers, individually or through an entity controlled by Rogers, actively trades
commodities and/or futures contracts on physical commodities, including
underlying commodities and/or futures contracts on physical commodities included
in the Rogers International Commodity Index, and over-the-counter contracts
having values which derive from or are related to such commodities. Rogers,
individually or through an entity controlled by Rogers, also may actively trade
and hedge the Rogers International Commodity Index. With respect to any such
activities, neither Rogers nor any of the entities controlled by Rogers has any
obligation to take the needs of any buyers, sellers or holders of the Securities
into consideration at any time. It is possible that such trading and hedging
activities, by any of these parties, will affect the value of the Rogers
International Commodity Index and therefore the market value of the
Securities.
Furthermore,
the annual composition of the Rogers International Commodity Index will be
determined in reliance upon historic price, liquidity and production data that
are subject to potential errors in data sources or errors that may affect the
weighting of components of the Rogers International Commodity Index. Any
discrepancies that require revision are not applied retroactively but will be
reflected in prospective weighting calculations of the Rogers International
Commodity Index for the following year. However, not every discrepancy may be
discovered.
The
amount payable on the Securities and their market value could also be affected
if the Index Committee, in its sole discretion, discontinues or suspends
compilation and maintenance of the Rogers International Commodity Index, in
which case it may become difficult to determine the market value of the
Securities. If events such as these occur, or if the Rogers International
Commodity Index Initial Value or the Rogers International Commodity Index Final
Value are not available because of a market disruption event or for any other
reason, the calculation agent will make a good faith estimate in its sole
discretion of the Rogers International Commodity Index Final Value that would
have prevailed in the absence of the market disruption event. If the
calculation agent determines that the compilation and maintenance of the Rogers
International Commodity Index is discontinued and that there is no successor
index on the date when the Rogers International Commodity Index Final Value is
required to be determined, the calculation agent will instead make a good faith
estimate in its sole discretion of the Rogers International Commodity Index
Final Value by reference to a group of physical commodities, exchange-traded
futures contracts on physical commodities or indexes and a computation
methodology that the calculation agent determines will as closely as reasonably
possible replicate the Rogers International Commodity Index.
Discontinuance
of the Rogers International Commodity Index
Neither
we, the Index Committee, the Index Sponsor nor Rogers are under any obligation
to continue to compile and maintain the Rogers International Commodity Index or
are required to compile and maintain any successor index. If the Index Committee
discontinues or suspends the compilation and maintenance of the Rogers
International Commodity Index, it may become difficult to determine the market
value of the Securities or the amount payable at maturity. The
calculation agent may designate a successor index selected in its sole
discretion. If the calculation agent determines in its sole
discretion that no successor index comparable to the Rogers International
Commodity Index exists, the amount you receive at maturity will be determined by
the calculation agent in its sole discretion.
Policies
of the Index Committee, Composition of the Rogers International Commodity Index
and Changes to the Rogers International Commodity Index
The
policies of the Index Committee concerning the calculation of the level of the
Rogers International Commodity Index, additions, deletions or substitutions of
Index Commodities and the manner in which changes affecting the Index
Commodities are reflected in the Rogers International Commodity Index could
affect the value of the Rogers International Commodity Index and, therefore, the
amount payable on your Securities at maturity and the market value of your
Securities prior to maturity. The amount payable on your Securities at maturity
and their market value prior to maturity could also be affected if the Index
Committee changes the policies of the Rogers International Commodity Index. If
events such as these occur, or if the value of the Rogers International
Commodity Index is not available or cannot be calculated because of a Market
Disruption Event or for any other reason, the calculation agent may be required
to make an alternative determination of the value of the Rogers International
Commodity Index. The composition of the Rogers International Commodity Index may
change over time, as additional commodities satisfy the eligibility criteria or
commodities currently included in the Rogers International Commodity Index fail
to satisfy such criteria. The annual composition of the Rogers International
Commodity Index
will
be determined by the Index Committee based on the Index Committee’s assessment
of the worldwide consumption of those commodities, including in reliance on data
of private and governmental providers regarding commodities demand and supply.
These data sources are subject to potential errors in data sources or errors
that may affect the weights of components of the Rogers International Commodity
Index. Any discrepancies that require revision may impact determinations of
weights made by the Index Committee. If, for any reason, one of the futures
contracts in the Rogers International Commodity Index ceases to exist or any
other similar event with similar consequences, as determined in the discretion
of the Index Committee occurs, the Index Committee will call an exceptional
meeting to assess whether the composition and/or the weights of, the Rogers
International Commodity Index should be modified. The modification of the
composition and/or the weights of the Rogers International Commodity Index may
have an adverse impact on the value of the Rogers International Commodity Index,
the amount payable on the Securities at maturity and their market value prior to
maturity.
Historical
Levels of the Rogers International Commodity Index Should Not Be Taken as an
Indication of Future Performance of the Rogers International Commodity Index
During the Term of the Securities
The actual performance of the Rogers
International Commodity Index over the term of the Securities, as well as the
amount payable at maturity, may bear little relation to the historical levels of
the Rogers International Commodity Index. Due in part to Rogers’
controlling interest of the Index Committee and his ability to make changes to
the Rogers International Commodity Index at any time, the historical performance
and composition of the Rogers International Commodity Index should not be taken
as an indication of the future performance of the Rogers International Commodity
Index during the term of the Securities. The trading prices of
exchange traded futures contracts on the Index commodities will determine the
level of the Rogers International Commodity Index. As a result, it is
impossible to predict whether the level of the Rogers International Commodity
Index will rise or fall.
Risks
Relating to the Dow Jones U.S. Real Estate Index
For
Securities Linked to the Dow Jones U.S. Real Estate Index or to an Underlying
Fund which tracks the Dow Jones U.S. Real Estate Index , Risks Associated with
The Real Estate Industry Will Affect the Value of The Securities.
The real
estate industry is cyclical and has from time to time experienced significant
difficulties. The prices of the stocks included in the Dow Jones U.S.
Real Estate Index or held by an Underlying Fund which tracks the Dow Jones U.S.
Real Estate Index and, in turn, the level of the Dow Jones U.S. Real Estate
Index and the price of an Underlying Fund which tracks the Dow Jones U.S. Real
Estate Index, as applicable, will be affected by a number of factors that may
either offset or magnify each other, including:
• employment
levels and job growth;
• the
availability of financing for real estate;
• interest
rates;
• consumer
confidence;
• the
availability of suitable undeveloped land;
• federal,
state and local laws and regulations concerning the development of land,
construction, home and commercial real estate sales, financing and environmental
protection; and
• competition
among companies which engage in the real estate business.
The
difficulties described above could cause a downturn in the real estate industry
generally or regionally and could cause the value of the stocks included in the
Dow Jones U.S. Real Estate Index or held by an Underlying Fund which tracks the
Dow Jones U.S. Real Estate Index and the level of the Dow Jones U.S. Real Estate
Index or the price of an Underlying Fund which tracks the Dow Jones U.S. Real
Estate Index, as applicable, to decline or remain flat during the term of the
Securities.
For
Securities Linked to the Dow Jones U.S. Real Estate Index or an Underlying Fund
which Tracks the Dow Jones U.S. Real Estate Index, Risks Associated with Real
Estate Investment Trusts Will Affect the Value of The Securities.
The Dow
Jones U.S. Real Estate Index or an Underlying Fund which tracks the Dow Jones
U.S. Real Estate Index is composed of a variety of real estate related stocks
including real estate investment trusts (“REITs”). REITs invest
primarily in income producing real estate or real estate related loans or
interests. Investments in REITs, though not direct investments in
real estate, are still subject to the risks associated with investing in real
estate. The following are some of the conditions that might impact
the structure of and cash flow generated by REITs and, consequently, the value
of REITs and, in turn, the Dow Jones U.S. Real Estate Index or an Underlying
Fund which tracks the Dow Jones U.S. Real Estate Index:
• a
decline in the value of real estate properties;
• extended
vacancies of properties;
• increases
in property and operating taxes;
• increased
competition or overbuilding;
• a
lack of available mortgage funds or other limits on accessing
capital;
• tenant
bankruptcies and other credit problems;
• limitation
on rents, including decreases in market rates for rents;
• changes
in zoning laws and governmental regulations;
• costs
resulting from the clean up of, and legal liability to third parties for damages
resulting from environmental problems;
• investments
in developments that are not completed or that are subject to delays in
completion;
• risks
associated with borrowing;
• changes
in interest rates;
• casualty
and condemnation losses; and
• uninsured
damages from floods, earthquakes or other natural disasters.
The
factors above may either offset or magnify each other. To the extent
that any of these conditions occur, they may negatively impact a REIT’s cash
flow and cause a decline in the share price of a REIT, and, consequently, the
Dow Jones U.S. Real Estate Index or any Underlying Fund which tracks the Dow
Jones U.S. Real Estate Index. In addition, some REITs have relatively
small market capitalizations, which can increase the volatility of the market
price of
securities issued by those REITs. Furthermore, REITs are dependent
upon specialized management skills, have limited diversification and are, as a
result, subject to risks inherent in operating and financing a limited number of
projects. To the extent that such risks increase the volatility of
the market price of securities issued by REITs, they may also, consequently,
increase the volatility of the Dow Jones U.S. Real Estate Index or any
Underlying Fund which tracks the Dow Jones U.S. Real Estate
Index.
Risks
Relating to the Dow Jones U.S. Financials Sector Index
For
Securities Linked to The Dow Jones U.S. Financials Sector Index or an Underlying
Fund which Tracks The Dow Jones U.S. Financials Sector Index, Risks Associated
with the Financial Services Industry Will Affect the Value of the
Securities.
All or
substantially all of the equity securities included in the Dow Jones U.S.
Financials Sector Index or held by an Underlying Fund which tracks the Dow Jones
U.S. Financials Sector Index are issued by companies whose primary line of
business is directly associated with the financial services sector, including
the following sub-sectors: banking, mortgage finance, consumer finance,
specialized finance, investment banking and brokerage, asset management and
custody, corporate lending, insurance and financial investment, and real estate,
including real estate investment trusts. Financial services companies
are subject to extensive government regulation which may limit both the amounts
and types of loans and other financial commitments they can make, and the
interest rates and fees they can charge. Profitability is largely
dependent on the availability and cost of capital funds, and can fluctuate
significantly when interest rates change. Credit losses resulting
from financial difficulties of borrowers can negatively impact the
sector. Insurance companies may be subject to severe price
competition. Adverse economic, business or political developments
affecting real estate could have a major effect on the value of real estate
securities (which include real estate investment trusts). If the
Securities are linked or the Dow Jones U.S. Financials Sector Index or a fund
which , the value of the Securities may be subject to greater volatility and be
more adversely affected by a single economic, political or regulatory occurrence
affecting these industries than a different investment linked to securities of a
more broadly diversified group of issuers.
Risks
Relating to the Financial Select Sector Index
For
Securities Linked to The Financial Select Sector Index or an Underlying Fund
which Tracks The Financial Select Sector Index, Risks Associated with the
Financial Services Industry Will Affect the Value of the
Securities.
All or
substantially all of the equity securities included in the Financial Select
Sector Index or held by an Underlying Fund which tracks the Financial Select
Sector Index are issued by companies whose primary line of business is directly
associated with the financial services sector, including the following
sub-sectors: banking, mortgage finance, consumer finance, specialized finance,
investment banking and brokerage, asset management and custody, corporate
lending, insurance and financial investment, and real estate, including real
estate investment trusts. Financial services companies are subject to
extensive government regulation which may limit both the amounts and types of
loans and other financial commitments they can make, and the interest rates and
fees they can charge. Profitability is largely dependent on the
availability and cost of capital funds, and can fluctuate significantly when
interest rates change. Credit losses resulting from financial
difficulties of borrowers can negatively impact the sector. Insurance
companies may be subject to severe price competition. Adverse
economic, business or political developments affecting real estate could have a
major effect on the value of real estate securities (which include real estate
investment trusts). If the Securities are linked or the Financial
Select Sector Index or a fund which , the value of the Securities may be subject
to greater volatility and be more adversely affected by a single economic,
political or regulatory occurrence affecting these industries than a different
investment linked to securities of a more broadly diversified group of
issuers.
THE
ROGERS INTERNATIONAL COMMODITY INDEX®
─ EXCESS RETURN™
The
following is a description of the Rogers International Commodity Index® ─ Excess
ReturnTM
(the “RICI Index”) including, without limitation, its make-up, method of
calculation and changes in its components. The Securities may be
linked to the RICI Index or to any of its sub-indexes (the “RICI Sub-Indexes”).
The information in this description has been taken from publicly available
sources, including the Rogers International Commodity Index
Handbook. Such information reflects the policies of, and is subject
to change at any time by the Rogers International Commodity Index (“Rogers”) and
the Index Committee. We have not independently verified this
information and therefore cannot be responsible for it. You, as an
investor in the Securities, should make your own investigation into the RICI
Index and Rogers. Except as provided in the next sentence, none of
Beeland Interests, the Index Committee, members of the Index Committee
individually (except as described in the next sentence) and/or Rogers is
involved in the offer of the Securities in any way and has any obligation to
consider your interests as a holder of the Securities. However, ABN
AMRO Bank N.V., the issuer of the Securities, is also a member of the Index
Committee and our affiliates are involved in the public offering and sale of the
Securities and may be engaged in secondary market making transactions in the
Securities. Beeland Interests has no obligation to continue to
maintain or compile the RICI Index, and may discontinue maintenance or
compilation of the RICI Index at any time in its sole discretion. The
level of the RICI Index is calculated by CQG, Inc., the official global
calculation agent, using the methodology provided by the Index
Committee.
Overview
The
return on the Securities is linked to the performance of the RICI
Index. The RICI Index is a composite U.S. dollar based index that is
designed to serve as a diversified benchmark for the price movements of
commodities consumed in the global economy, and is a sub-index of the Rogers
International Commodity Index® designed
by James B. Rogers, Jr. on July 31, 1998. The RICI Index is currently
composed of 36 futures contracts on physical commodities traded on eleven
exchanges and quoted in four different currencies. The exchanges
include the Chicago Mercantile Exchange, Chicago Board of Trade, ICE Futures US,
New York Mercantile Exchange, ICE Futures Canada, ICE Futures Europe, London
Metal Exchange, Sydney Futures Exchange, COMEX, The Tokyo Commodity Exchange,
and the Tokyo Grain Exchange. The commodities futures contracts are
quoted in U.S. dollars (“USD”), Canadian dollars (“CAD”), Japanese yen (“JPY”)
and Australian dollars (“AUS”).
The RICI
Index aims to be an effective measure of the price movements of raw materials
not just in the United States but also around the world. The RICI
Index’s weightings attempt to balance consumption patterns worldwide (in
developed and developing countries) and specific contract
liquidity.
Below is
a current list of the futures contracts comprising the RICI Index, together with
their respective symbols, exchanges, and currencies as of September 1,
2009:
|
|
|
|
|
|
|
|
|
Crude
Oil
|
|
CL
|
|
NYMEX
|
|
USD
|
|
21.00%
|
Brent
|
|
BRN
|
|
ICE
EU
|
|
USD
|
|
14.00%
|
Wheat
|
|
W
|
|
CBOT
|
|
USD
|
|
7.00%
|
Corn
|
|
C
|
|
CBOT
|
|
USD
|
|
4.75%
|
Cotton
|
|
CT
|
|
ICE
US
|
|
USD
|
|
4.20%
|
Aluminum
|
|
AH
|
|
LME
|
|
USD
|
|
4.00%
|
Copper
|
|
CA
|
|
LME
|
|
USD
|
|
4.00%
|
Soybeans
|
|
S
|
|
CBOT
|
|
USD
|
|
3.35%
|
Gold
|
|
GC
|
|
COMEX
|
|
USD
|
|
3.00%
|
Natural
Gas
|
|
NG
|
|
NYMEX
|
|
USD
|
|
3.00%
|
RBOB
Gasoline
|
|
RB
|
|
NYMEX
|
|
USD
|
|
3.00%
|
Soybean
Oil
|
|
BO
|
|
CBOT
|
|
USD
|
|
2.17%
|
Coffee
|
|
KC
|
|
ICE
US
|
|
USD
|
|
2.00%
|
Lead
|
|
PB
|
|
LME
|
|
USD
|
|
2.00%
|
Live
Cattle
|
|
LC
|
|
CME
|
|
USD
|
|
2.00%
|
Silver
|
|
SI
|
|
COMEX
|
|
USD
|
|
2.00%
|
|
|
|
|
|
|
|
|
|
Sugar
|
|
SB
|
|
ICE
US
|
|
USD
|
|
2.00%
|
Zinc
|
|
ZS
|
|
LME
|
|
USD
|
|
2.00%
|
Heating
Oil
|
|
HO
|
|
NYMEX
|
|
USD
|
|
1.80%
|
Platinum
|
|
PL
|
|
NYMEX
|
|
USD
|
|
1.80%
|
Gas
Oil
|
|
GAS
|
|
ICE
EU
|
|
USD
|
|
1.20%
|
Cocoa
|
|
CC
|
|
ICE
US
|
|
USD
|
|
1.00%
|
Lean
Hogs
|
|
LH
|
|
CME
|
|
USD
|
|
1.00%
|
Lumber
|
|
LB
|
|
CME
|
|
USD
|
|
1.00%
|
Nickel
|
|
NI
|
|
LME
|
|
USD
|
|
1.00%
|
Rubber
|
|
81
|
|
TOCOM
|
|
JPY
|
|
1.00%
|
Tin
|
|
SN
|
|
LME
|
|
USD
|
|
1.00%
|
Canola
|
|
RS
|
|
ICE
CA
|
|
CAD
|
|
0.77%
|
Soybean
Meal
|
|
SM
|
|
CBOT
|
|
USD
|
|
0.75%
|
Orange
Juice
|
|
OJ
|
|
ICE
US
|
|
USD
|
|
0.66%
|
Oats
|
|
O
|
|
CBOT
|
|
USD
|
|
0.50%
|
Rice
|
|
RR
|
|
CBOT
|
|
USD
|
|
0.50%
|
Palladium
|
|
PA
|
|
NYMEX
|
|
USD
|
|
0.30%
|
Azuki
Beans
|
|
101
|
|
TGE
|
|
JPY
|
|
0.15%
|
Greasy
Wool
|
|
GW
|
|
SFE
|
|
AUS
|
|
0.10%
|
TOTAL
|
|
|
|
|
|
USD
|
|
100%
|
* The
weights shown above are the weights of each RICI®
Index Component as of September 1, 2009.
Below is
a current list of the Sub-Indexes of the RICI Index and the futures contracts
comprising each Sub-Index, as of September 1, 2009:
Rogers International Commodity
Index®
Agriculture
|
Rogers
International Commodity Index®
Energy
|
Rogers
International Commodity Index®
Metals
|
|
|
|
Azuki
Beans
|
Brent
|
Rogers
International Commodity
|
Canola
|
Crude
Oil
|
Index®
Industrial Metals
|
Cocoa
|
Gas
Oil
|
|
Coffee
|
Heating
Oil
|
Aluminium
|
Corn
|
Natural
Gas
|
Copper
|
Cotton
|
RBOB
Gasoline
|
Lead
|
Greasy
Wool
|
|
Nickel
|
Lean
Hogs
|
|
Tin
|
Live
Cattle
|
|
Zinc
|
Lumber
|
|
|
Oats
|
|
Rogers
International Commodity
|
Orange
Juice
|
|
Index®
Precious Metals
|
Rice
|
|
|
Rubber
|
|
Gold
|
Soybean
Meal
|
|
Palladium
|
Soybean
Oil
|
|
Platinum
|
Soybeans
|
|
Silver
|
Sugar
|
|
|
Wheat
|
|
|
The
Index Committee
The Index
Committee formulates and enacts all business assessments and decisions regarding
the composition of the RICI Index. Rogers, as the founder of the RICI Index,
chairs the Index Committee and is the final arbiter of its decisions. Beside
Rogers, representatives of the following parties are members of the Index
Committee: Diapason, Beeland Management Company, CQG, Daiwa Asset Management
America, UBS AG, ABN AMRO Bank N.V. and Merrill Lynch & Co. Only Rogers, as
chairman of the Index Committee, is authorized to designate new members of the
Index Committee, if necessary.
The Index
Committee meets each December to consider changes in the components and
weightings of the RICI Index for the following calendar year; however, such
changes can be made at any time.
Index
Composition
The
Process
The
contracts chosen for the basket of commodities that constitute the RICI Index,
which include the commodities that constitute the RICI Index, are required to
fulfill various conditions described below. Generally, the selection and
weighting of the items in the RICI Index are reviewed annually by the Index
Committee, and weights for the next year are assigned every
December. The RICI Index’s composition is modified only on rare
occasions, in order to maintain liquidity and stability, and the composition of
the RICI Index generally will not be changed unless severe circumstances in fact
occur. Such “severe circumstances” may include (but are not
restricted to):
|
·
|
continuous
adverse trading conditions for a single contract (e.g., trading volume
collapses), or
|
|
·
|
critical
changes in the global consumption pattern (e.g., scientific breakthroughs
that fundamentally alter consumption of a
commodity).
|
Exchanges
and Non-Traded Items
All
commodities included in the RICI Index must be publicly traded on recognized
exchanges in order to ensure ease of tracking and
verification. Additionally, the RICI Index does not and will not
included non-traded items such as hides or tallow, which are included in other
popular commodity indices. The 11 international exchanges recognized
by the Index Committee are:
1. Chicago
Mercantile Exchange (USA)
2. Chicago
Board of Trade (USA)
3. ICE
Futures US (USA)
4. New
York Mercantile Exchange (USA)
5. ICE
Futures Canada (Canada)
6. ICE
Futures Europe (UK)
7. London
Metal Exchange (UK)
8. Sydney
Futures Exchange (Australia)
9. COMEX
(USA)
10. The
Tokyo Commodity Exchange (Japan)
11. Tokyo
Grain Exchange (Japan)
General
Contract Eligibility
A
commodity may be considered suitable for inclusion in the RICI Index if it plays
a significant role in worldwide (developed and developing economies)
consumption. “Worldwide consumption” is measured by tracking international
import and export patterns, and domestic consumption environments of the world’s
prime commodity consumers. Only raw materials that reflect the current state of
international trade and commerce are eligible to become index commodities.
Commodities that are merely linked to national consumption patterns will not be
considered. The RICI Index is not related to any commodities production
data.
Commodity
Screening Process
Data of
private and governmental providers concerning the world’s top consumed
commodities is actively monitored and analyzed by the members of the Index
Committee throughout the year. In order to obtain the most accurate picture of
international commodities consumption, a wide range of sources on commodities
demand and supply is consulted. The findings of this research are then condensed
into the different commodities contracts weightings of the RICI Index. Sources
on global commodity consumption data include:
|
·
|
Industrial
Commodity Statistics Yearbook, United Nations (New
York)
|
|
·
|
Commodity
Trade Statistics Database, United Nations Statistic Division (New
York)
|
|
·
|
Copper
Bulletin Yearbook, International Copper Study Group
(Lisbon)
|
|
·
|
Foreign
Agricultural Service’s Production, Supply and Distribution Database, U.S.
Department of Agriculture (Washington,
D.C.)
|
|
·
|
Manufactured
Fiber Review, Fiber Economics Bureau, Inc. (Arlington,
VA)
|
|
·
|
Monthly
Bulletin, International Lead and Zinc Study Group
(London)
|
|
·
|
Quarterly
Bulletin of Cocoa Statistics, International Cocoa Organization
(London)
|
|
·
|
Rubber
Statistical Bulletin, International Rubber Study Group
(London)
|
|
·
|
Statistical
Bulletin Volumes, Arab Gulf Cooperation Council
(GCC)
|
|
·
|
Sugar
Yearbook, International Sugar Organization (ISO),
(London)
|
|
·
|
World
Agriculture Assessments of Intergovernmental Groups, Food &
Agriculture Organization of the United Nations
(Rome)
|
|
·
|
World
Commodity Forecasts, Economist Intelligence Unit
(London)
|
|
·
|
World
Cotton Statistics, International Cotton Advisory Committee (Washington,
D.C.)
|
|
·
|
World
Metals Statistics, World Bureau of Metal Statistics
(London)
|
Contract
Characteristics
In order
to decide whether a specific commodity contract is liquid enough to be included
in the RICI Index, the Index Committee screens the volume and liquidity data of
international exchanges, published on a regular basis by the Futures Industry
Association (Washington DC, United States). Additionally, individual exchange
data on contracts may also be included in the process.
If a
commodity contract trades on more than one exchange, the most liquid contract
globally, in terms of volume and open interest combined, is then selected for
inclusion in the RICI Index, taking legal considerations into account. Beyond
liquidity, the Index Committee seeks to include the contract representing the
highest quality grade of a specific commodity.
Index
Weightings
Initial
Weightings
As of
September 1, 2009, the RICI Index components have the initial weightings listed
in the chart above. The initial weightings of the RICI Index (the
“Initial Weightings”) may be amended from time to time, as described
below.
Changes
in Weights and/or Index Composition
As noted,
the Index Committee reviews the selection and weighting of the futures contracts
in the RICI Index annually. Thus, weights are potentially reassigned during each
December for the following year, if the Index Committee so determines in its
sole discretion.
Monthly
Rolling of Contracts
The
Rogers Indices usually roll over three days, from the day prior to the last RICI
®
business day of the month to the first RICI ® business
day of the following month, following certain rules defined by the Index
Committee. For the contracts traded on the London Metal Exchange, the 3-month
forward contracts are used. A RICI ® business
day is a day on which all U.S.-based exchanges that list futures contracts
included in the Rogers Indices are open for business, including half-day
openings. Generally, if the next calendar month of a futures contract includes a
first notice day, a delivery day or historical evidence that liquidity migrates
to a next contract month during this period, then the next contract month is
intended to be applied to calculate the Rogers Indices, taking legal constraints
into account. For example, during the November roll period, the January Crude
Oil contract is replaced by the February Crude Oil contract.
Rebalancing
of the Rogers Index Components
The
Rogers Indices are rebalanced monthly during each roll period toward the Initial
Weights.
Exceptional
Committee Meetings
If, for
any reason, one of the components included in the RICI Indices ceases to exist
or its liquidity collapses to abnormal levels, or any other similar event with
similar consequences, as determined at the discretion of the Index Committee,
occurs, the Index Committee will call an exceptional meeting to assess the
situation and decide on a replacement for this component or a change in the
weight. For example, following the fall of the Malaysian ringgit in 1998, the
liquidity of the palm oil futures contract on the Kuala Lumpur Commodity
Exchange collapsed to a point where it became impossible to trade it. In that
case, the Index Committee, calling an exceptional meeting, decided to replace
the palm oil futures contract with the soybean oil contract that trades on the
Chicago Board of Trade.
Excess
Return vs .Total Return
As noted
above, the Rogers International Commodity Index® is
calculated as both an excess return and a total return index. The Rogers
International Commodity Index® — Excess
ReturnTM
reflects the uncollateralized returns on the futures contracts on physical
commodities included in the Rogers International Commodity Index®. The
Rogers International Commodity Index® — Total
ReturnTM, in
turn reflects those same uncollateralized returns as well as any interest that
could be earned on cash collateral invested in 3-month U.S. treasury bills. Note
that the term “Excess Return” in the title of the Rogers International Commodity
Index® — Excess
ReturnTM is not
intended to suggest that its performance at any time or the return on your
Notes, if linked to the Rogers International Commodity Index® — Excess
ReturnTM, will
be positive or that the Rogers International Commodity Index® — Excess
ReturnTM is
designed to exceed a particular benchmark.
RICI®
Market Disruption
Events
A
“RICI®
Market Disruption Event” will be deemed to have occurred on any day upon which
the trading of a contract involved in the index calculation is disrupted or the
fair determination of its price is interfered with subject to the
following:
a. The
contract trades at the price set by the exchange to be the limit of its
permissible trading range at any point in the last fifteen minutes of
trading.
b. No
settlement price for that contract is determined by midnight on the day of
trading in the time zone in which the exchange is located.
c. The
exchange upon which the contract trades closes trading in that contract at a
time prior to the published closing time, unless the altered closing time was
brought to public attention by the closing time on the trading day prior to the
day in question.
d. The
settlement closing price published by the exchange is not deemed, in the opinion
of the RICI®
Committee, to properly reflect the fair price of that contract as determined by
its free and fair trading on that exchange.
If a
RICI®
Market Disruption Event occurs during the roll or rebalancing period for one or
more commodities, the specific contracts involved are neither rolled nor
rebalanced on that day. For those contracts, the Roll Weights and the Monthly
Contract Weights (“MCWs”) remain identical to the values they had on the
RICI®
Business Day immediately preceding the RICI®
Market Disruption Event. The roll period and the rebalancing period will be
extended for this or these particular commodities only until the next available
business day upon which no RICI®
Market Disruption Event occurs for that or those commodities. Outside of the
roll and rebalancing period, the Index is calculated using the last trading
price available on the exchange. In particular the calculation of the MCWs will,
in the normal course of events, take place using the last price available
regardless of whether a RICI®
Market Disruption Event has occurred. However, under extreme conditions the
RICI®
Committee reserves the right to adjust any prices used in the Index calculation.
This may occur if the settlement price is deemed to materially differ from the
fair price for that commodity determined by trading on that day and that use of
the official settlement price would not be in the interest of Index investors.
In this case an alternative settlement price or prices may be determined and
used for the Index calculation until fair trading is resumed and the exchange
quoted settlement price can again be relied upon. In this case the prices used
in the calculation of the Index and the calculation of MCWs will be published
along with the mechanism for their determination. Should any exchange amend the
settlement price for a contract involved in the Index calculation and do so in a
timely manner the RICI ®
Committee may, if deemed appropriate, reflect this change by adjusting the
published level of the Index.
A
RICI® Business
Day is a day on which all United States based exchanges that list futures
contracts included in the Index are open for business (including half-day
opening).
Data
Source
The RICI
Index value is based on the official commodity exchanges’ prices of the futures
contracts included in the RICI Index.
Reference
Rates
The
foreign exchange rates used to translate the value of the futures contracts
denominated in a foreign currency into U.S dollars are obtained from Bloomberg
using the “close” value for each currency at 5:00 pm New York time.
Calculation
of the Level of the RICI Index
The Index Committee is responsible for
the calculation methodology of the RICI Index. CQG, Inc. the official
global calculation agent, calculates the level of the RICI Index with respect to
the Securities using the methodology provided by the Index
Committee.
License
Agreement
Beeland
Interests, Inc. (“Beeland Interests”) and we have entered into a non-exclusive
license agreement providing for the license to ABN AMRO Bank N.V., and certain
of its affiliated or subsidiary companies, in exchange for a fee, of the right
to use the RICI Index and the Underlying Index. Neither Beeland Interests nor
any of its affiliates makes any representation or warranty, express or implied,
to the owners of or counterparts to the Securities or any member of the public
regarding the advisability of investing in securities or commodities generally
or in the Securities particularly. The only relationship of Beeland Interests or
any of its subsidiaries or affiliates to us is the licensing of certain
trademarks, trade names and service marks and of the Rogers International
Commodity Index® ─ Excess
ReturnTM, which
is determined and compiled by the Index Committee without regard to us or the
Securities.
Neither
Beeland Interests, nor the Index Committee has any obligation to take our needs
or the needs of the owners of the Securities into consideration in determining
or compiling the Rogers International Commodity Index® ─ Excess
ReturnTM. None
of Beeland Interests or any of its subsidiaries or affiliates is responsible for
or has participated in the determination of the timing of, prices at, or
quantities of the Securities to be issued or in the determination or calculation
of the equation by which the Securities are to be converted into cash. None of
Beeland Interests or any of its subsidiaries or affiliates shall have any
obligation or liability, including without limitation to
Securities
customers, in connection with the administration, marketing or trading of the
Securities. Notwithstanding the foregoing, Beeland Interests and its
subsidiaries or affiliates may independently issue and/or sponsor financial
products unrelated to the Securities currently being issued by us, but which may
be similar to and competitive with the Securities. In addition, Beeland
Interests and its subsidiaries or affiliates may actively trade commodities,
commodity indexes and commodity futures (including the Rogers International
Commodity Index® ─ Excess
ReturnTM), as
well as swaps, options and derivatives which are linked to the performance of
such commodities, commodity indexes and commodity futures. It is possible that
this trading activity will affect the value of the Rogers International
Commodity Index® ─ Excess
ReturnTM and the
Securities.
This
Underlying Supplement relates only to the Securities and does not relate to the
exchange-traded physical commodities underlying any of the Rogers International
Commodity Index® ─ Excess
ReturnTM
components. Purchasers of the Securities should not conclude that the inclusion
of a futures contract in the Rogers International Commodity Index® ─ Excess
ReturnTM is any
form of investment recommendation of the futures contract or the underlying
exchange-traded physical commodity by Beeland Interests or any of its
subsidiaries or affiliates. The information in the Pricing Supplement regarding
the exchange-traded futures contracts on physical commodities which comprise the
Rogers International Commodity Index® ─ Excess
ReturnTM
components has been derived solely from publicly available
documents.
None of
Beeland Interests or any of its subsidiaries or affiliates has made any due
diligence inquiries with respect to the exchange-traded futures contracts which
comprise the Rogers International Commodity Index® ─ Excess
ReturnTM in
connection with the Securities. None of Beeland Interests or any of its
subsidiaries or affiliates makes any representation that the publicly available
documents or any other publicly available information regarding these
exchange-traded futures contracts which comprise the Rogers International
Commodity Index® ─ Excess
ReturnTM,
including without limitation a description of factors that affect the prices of
such exchange-traded futures contracts, are accurate or complete.
The
Securities are not sponsored, endorsed, sold or promoted by Beeland Interests or
James Beeland Rogers, Jr. Neither Beeland Interests nor James Beeland Rogers,
Jr. makes any representation or warranty, express or implied, nor accepts any
responsibility, regarding the accuracy or completeness of this Underlying
Supplement, or the advisability of investing in securities or commodities
generally, or in the Securities or in futures particularly.
NEITHER
BEELAND INTERESTS NOR ANY OF ITS AFFILIATES, GUARANTEES THE ACCURACY AND/OR THE
COMPLETENESS OF THE ROGERS INTERNATIONAL COMMODITY INDEX (“RICI®”), THE
UNDERLYING INDEX OR ANY DATA INCLUDED THEREIN. SUCH PERSON SHALL NOT
HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN AND MAKES
NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY OWNERS OF THE
SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE RICI®, THE
UNDERLYING INDEX, ANY DATA INCLUDED THEREIN OR THE
SECURITIES. NEITHER BEELAND INTERESTS NOR ANY OF ITS AFFILIATES,
MAKES ANY EXPRESS OR IMPLIED WARRANTIES, AND EACH EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE RICI®, THE
UNDERLYING INDEX AND ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY
OF THE FOREGOING, IN NO EVENT SHALL BEELAND INTERESTS OR ANY OF ITS AFFILIATES
HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR
CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF NOTIFIED OF THE POSSIBILITY
THEREOF.
The
Commodity Futures Markets
Contracts
on physical commodities are traded on regulated futures exchanges, in the
over-the-counter market and on various types of physical and electronic trading
facilities and markets. At present, all of the contracts included in the
Underlying Index are exchange-traded futures contracts. An exchange-traded
futures contract is a bilateral agreement providing for the purchase and sale of
a specified type and quantity of a commodity or financial instrument during a
stated delivery month for a fixed price. A futures contract on an index of
commodities typically provides for the payment and receipt of a cash settlement
based on the value of such commodities. A futures contract provides for a
specified settlement month in which the commodity or financial instrument is to
be delivered by the
seller (whose position is described as “short”) and acquired by the purchaser
(whose position is described as “long”) or in which the cash settlement amount
is to be made.
There is
no purchase price paid or received on the purchase or sale of a futures
contract. Instead, an amount of cash or cash equivalents must be deposited with
the broker as “initial margin”. This amount varies based on the requirements
imposed by the exchange clearing houses, but may be as low as 5% or less of the
value of the contract. This margin deposit provides collateral for the
obligations of the parties to the futures contract.
By
depositing margin in the most advantageous form (which may vary depending on the
exchange, clearing house or broker involved), a market participant may be able
to earn interest on its margin funds, thereby increasing the potential total
return that may be realized from an investment in futures contracts. The market
participant normally makes to, and receives from, the broker subsequent payments
on a daily basis as the price of the futures contract fluctuates. These payments
are called “variation margin” and make the existing positions in the futures
contract more or less valuable, a process known as “marking to
market”.
Futures
contracts are traded on organized exchanges, known as “contract markets” in the
United States, through the facilities of a centralized clearing house and a
brokerage firm which is a member of the clearing house. The clearing house
guarantees the performance of each clearing member which is a party to the
futures contract by, in effect, taking the opposite side of the transaction. At
any time prior to the expiration of a futures contract, subject to the
availability of a liquid secondary market, a trader may elect to close out its
position by taking an opposite position on the exchange on which the trade
obtained the position. This operates to terminate the position and fix the
trader’s profit or loss.
U.S.
contract markets, as well as brokers and market participants, are subject to
regulation by the Commodity Futures Trading Commission. Futures markets outside
the United States are generally subject to regulation by comparable regulatory
authorities. However, the structure and nature of trading on non-U.S. exchanges
may differ from the foregoing description. From its inception to the present,
the RICI Index and the Underlying Index have been comprised exclusively of
futures contracts traded on regulated exchanges.
THE
DOW JONES EURO STOXX 50®
INDEX
We have
derived all information contained in this Underlying Supplement regarding the
Dow Jones EURO STOXX 50® Index,
including, without limitation, its make-up, method of calculation and changes in
its components, from publicly available information. Such information
reflects the policies of, and is subject to change by, STOXX
Limited. We make no representation or warranty as to the accuracy or
completeness of such information. The Dow Jones EURO STOXX 50® Index is
calculated, maintained and published by STOXX Limited. STOXX Limited
has no obligation to continue to publish, and may discontinue publication of,
the Dow Jones EURO STOXX 50®
Index.
The Dow
Jones EURO STOXX 50® Index is
reported by Bloomberg L.P. under the ticker symbol “SX5E.”
The Dow
Jones EURO STOXX 50® Index
was created by STOXX Limited, a joint venture between Deutsche Börse AG, Dow
Jones & Company and SWX Swiss Exchange. Publication of the Dow
Jones EURO STOXX 50® Index
began on February 26, 1998, based on an initial Dow Jones EURO STOXX 50® Index
value of 1,000 at December 31, 1991. The Dow Jones EURO STOXX 50® Index is
published in The Wall Street Journal and disseminated on the STOXX Limited
website: www.stoxx.com, which sets forth, among other things, the country and
industrial sector weightings of the securities included in the Dow Jones EURO
STOXX 50®
Index and updates these weightings at the end of each
quarter. Information contained in the STOXX Limited website is not
incorporated by reference in, and should not be considered a part of, this
Underlying Supplement or any terms supplement.
Dow
Jones EURO STOXX 50® Index
Composition and Maintenance
The Dow
Jones EURO STOXX 50® Index is
composed of 50 component stocks of market sector leaders from within the 18 Dow
Jones EURO STOXX®
Supersector indices, which represent the Eurozone portion of the Dow Jones STOXX
600®
Supersector indices. The Dow Jones STOXX 600®
Supersector indices contain the 600 largest stocks traded on the major exchanges
of 18 European countries. The component stocks have a high degree of
liquidity and represent the largest companies across all market
sectors.
The
composition of the Dow Jones EURO STOXX 50® Index is
reviewed annually, based on the closing stock data on the last trading day in
August. The component stocks are announced the first trading day in
September. Changes to the component stocks are implemented on the
third Friday in September and are effective the following trading
day. Changes in the composition of the Dow Jones EURO STOXX 50® Index
are made to ensure that the Dow Jones EURO STOXX 50® Index
includes the 50 market sector leaders from within the Dow Jones EURO STOXX®
Index. A current list of the issuers that comprise the Dow
Jones EURO STOXX 50® Index is
available on the STOXX Limited website: www.stoxx.com. Information
contained in the STOXX Limited website is not incorporated by reference in, and
should not be considered a part of, this Underlying Supplement or any terms
supplement.
The free
float factors for each component stock used to calculate the Dow Jones EURO
STOXX 50®
Index, as described below, are reviewed, calculated and implemented on a
quarterly basis and are fixed until the next quarterly review.
The Dow
Jones EURO STOXX 50® Index is
also reviewed on an ongoing basis. Corporate actions (including
initial public offerings, mergers and takeovers, spin-offs, delistings and
bankruptcy) that affect the Dow Jones EURO STOXX 50® Index
composition are immediately reviewed. Any changes are announced,
implemented and effective in line with the type of corporate action and the
magnitude of the effect.
Dow
Jones EURO STOXX 50® Index
Calculation
The Dow
Jones EURO STOXX 50® Index is
calculated with the “Laspeyres formula,” which measures the aggregate price
changes in the component stocks against a fixed base quantity
weight. The formula for calculating the Dow Jones EURO STOXX 50® Index
value can be expressed as follows:
Index
|
=
|
free
float market capitalization of the Dow Jones EURO STOXX 50®
Index
|
x
|
1,000
|
adjusted
base date market capitalization of the Dow Jones EURO STOXX 50®
Index
|
The “free
float market capitalization of the Dow Jones EURO STOXX 50® Index”
is equal to the sum of the products of the closing price, market capitalization
and free float factor for each component stock as of the time the Dow Jones EURO
STOXX 50®
Index is being calculated.
The Dow
Jones EURO STOXX 50® Index is
also subject to a divisor, which is adjusted to maintain the continuity of Dow
Jones EURO STOXX 50® Index
values despite changes due to corporate actions. The following is a
summary of the adjustments to any component stock made for corporate actions and
the effect of such adjustment on the divisor, where shareholders of the
component stock will receive “B” number of shares for every “A” share held
(where applicable).
(1) Split
and reverse split:
Adjusted
price = closing price * A/B
New
number of shares = old number of shares * B/A
Divisor: no
change
|
(2) Rights
offering:
Adjusted
price = (closing price * A + subscription price * B) / (A +
B)
New
number of shares = old number of shares * (A + B) / A
Divisor: increases
|
(3) Stock
dividend:
Adjusted
price = closing price * A / (A + B)
New
number of shares = old number of shares * (A + B) / A
Divisor: no
change
|
(4) Stock
dividend of another company:
Adjusted
price = (closing price * A - price of other company * B) / A
Divisor: decreases
|
(5) Return
of capital and share consideration:
Adjusted
price = (closing price - dividend announced by company * (1-withholding
tax)) * A / B
New
number of shares = old number of shares * B / A
Divisor: decreases
|
(6) Repurchase
shares / self tender:
Adjusted
price = ((price before tender * old number of shares ) - (tender price *
number of tendered shares)) / (old number of shares - number of tendered
shares)
New
number of shares = old number of shares - number of tendered
shares
Divisor: decreases
|
(7) Spin-off:
Adjusted
price = (closing price * A - price of spun-off shares *B) / A
Divisor: decreases
|
(8) Combination
stock distribution (dividend or split) and rights offering:
|
For
this corporate action, the following additional assumptions
apply:
Shareholders
receive B new shares from the distribution and C new shares from the
rights offering for every A share held
If
A is not equal to one share, all the following “new number of shares”
formulae need to be divided by A:
|
-
If rights are applicable after stock distribution (one action applicable
to other):
Adjusted
price = (closing price * A + subscription price * C *
(1
+ B / A)) / ((A + B) * ( 1 + C / A))
New
number of shares = old number of shares * ((A + B) * (1 + C / A)) /
A
Divisor: increases
|
-
If stock distribution is applicable after rights (one action applicable to
other):
Adjusted
price = (closing price * A + subscription price * C) / ((A + C) * (1 + B /
A))
New
number of shares = old number of shares * ((A + C) * (1 + B /
A))
Divisor: increases
|
-
Stock distribution and rights (neither action is applicable to the
other):
Adjusted
price = (closing price * A + subscription price * C) / (A + B +
C)
New
number of shares = old number of shares * (A + B + C) / A
Divisor: increases
|
License
Agreement with STOXX Limited
We have
entered into an agreement with STOXX Limited providing us and certain of our
affiliates or subsidiaries identified in that agreement with a non-exclusive
license and, for a fee, with the right to use the Dow Jones EURO STOXX 50® Index,
which is owned and published by STOXX Limited, in connection with certain
securities, including the Securities.
The
Securities are not sponsored, endorsed, sold or promoted by Dow Jones or any of
its licensors. Neither Dow Jones nor any of its licensors makes any
representation or warranty, express or implied, to the owners of the Securities
or any member of the public regarding the advisability of investing in
securities generally or in the Securities particularly. The only relationship of
Dow Jones and its licensors to the Licensee is the licensing of certain
trademarks, trade names and service marks and of the Dow Jones EURO STOXX
50®
Index, which is determined, composed and calculated without regard to ABN
AMRO Bank N.V. or the Securities. Neither Dow Jones nor any of its licensors has
any obligation to take the needs of ABN AMRO Bank N.V. or the owners of the
Securities into consideration in determining, composing or calculating Dow Jones
EURO STOXX 50® Index.
Neither Dow Jones nor any of its licensors is responsible for or has
participated in the determination of the timing of, prices at, or quantities of
the Securities to be issued or in the determination or calculation of the
equation by which the Securities are to be converted into cash. None of Dow
Jones or any of its licensors has any obligation or liability in connection with
the administration, marketing or trading of the Securities.
DOW
JONES AND ITS LICENSORS DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF
THE DOW JONES EURO STOXX 50® INDEX OR
ANY DATA RELATED THERETO AND NONE OF DOW JONES NOR ANY OF ITS LICENSORS SHALL
HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW
JONES AND ITS LICENSORS MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO
BE OBTAINED BY ABN AMRO BANK N.V., OWNERS OF THE SECURITIES, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE DOW JONES EURO STOXX 50® INDEX OR
ANY DATA RELATED THERETO. NONE OF DOW
JONES OR ITS LICENSORS MAKES ANY EXPRESS OR IMPLIED WARRANTIES, AND EACH
EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DOW JONES EURO STOXX 50®
INDEX OR ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO
EVENT SHALL DOW JONES OR ANY OF ITS LICENSORS HAVE ANY LIABILITY FOR ANY LOST
PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN
IF NOTIFIED OF THE POSSIBILITY THEREOF. EXCEPT FOR THE LICENSORS, THERE ARE NO
THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN DOW JONES
AND ABN AMRO BANK N.V.
THE
DOW JONES INDUSTRIAL AVERAGESM
We have
derived all information contained in this Underlying Supplement regarding the
Dow Jones Industrial AverageSM,
including, without limitation, its make-up, are derived from publicly available
information prepared by Dow Jones & Company, Inc. (“Dow
Jones”). Such information reflects the policies of, and is subject to
change by Dow Jones. We make no representation or warranty as to the
accuracy or completeness of such information. The Dow Jones
Industrial AverageSM is an
index calculated, published and disseminated by Dow Jones. Dow Jones
has no obligation to continue to publish, and may discontinue publication of,
the Dow Jones Industrial AverageSM.
The Dow
Jones Industrial AverageSM is
reported by Bloomberg L.P. under the ticker symbol “INDU.”
The Dow
Jones Industrial AverageSM was
introduced to the investing public by Charles Dow on May 26, 1896 and originally
was comprised of only 12 stocks. It has since become one of the most
well known and widely followed indicators of the U.S. stock market and is the
oldest continuing stock market index in the world. The Dow Jones
Industrial AverageSM is
comprised of 30 common stocks chosen by the editors of The Wall Street Journal as
representative of the broad market of U.S. industry. Many of the
companies represented in the Dow Jones Industrial AverageSM are
household names and leaders in their respective industries, and their stocks are
widely held by both individual and institutional investors. Because
the Dow Jones Industrial AverageSM is so
well known and its performance is generally perceived to reflect that of the
overall domestic equity market, it is often used as a benchmark for investments
in equities, mutual funds, and other asset classes. The Dow Jones
Industrial AverageSM
accounts for approximately 23.8% of the total U.S. market, as measured by the
Dow Jones Wilshire 5000 Index, as of December 13, 2005.
The Dow
Jones Industrial AverageSM is a
price-weighted index rather than market capitalization-weighted index. In
essence, the Dow Jones Industrial AverageSM
consists of one share of each of the 30 stocks included in the Dow Jones
Industrial AverageSM. Thus,
the weightings of the components of the Dow Jones Industrial AverageSM are
affected only by changes in their prices, while the weightings of stocks in
other indices are affected by price changes and changes in shares outstanding.
This distinction stems from the fact that, when initially created, the Dow Jones
Industrial AverageSM was a
simple average (hence the name), and was computed merely by adding up the prices
of the stocks in the Dow Jones Industrial AverageSM and
dividing that sum by the total number of stocks in the Dow Jones Industrial
AverageSM. However,
it eventually became clear that a method was needed to smooth out the effects of
stock splits and composition changes to prevent these events from distorting the
level of the Dow Jones Industrial AverageSM. Therefore,
a divisor was created that has been periodically adjusted over
time. This divisor, when divided into the sum of the prices of the
stocks in the Dow Jones Industrial AverageSM,
generates the number that is reported every day in newspapers, on television and
radio, and over the internet. With the incorporation of the divisor,
the Dow Jones Industrial AverageSM can no
longer be considered an average.
The
editors of The Wall Street
Journal, which is published by Dow Jones, select the components of the
Dow Jones Industrial AverageSM.
Periodically, the editors review and make changes to the composition of the Dow
Jones Industrial AverageSM. While
there are no rules for component selection, a stock typically is added only if
it has an excellent reputation, demonstrates sustained growth, is of interest to
a large number of investors and accurately represents the sector(s) covered by
the average. The
inclusion of any particular company in the Dow Jones Industrial
AverageSM does not constitute a prediction as
to the company’s future results of operations or stock market
performance. For the sake of continuity, composition changes
are rare, and generally have occurred only after corporate acquisitions or other
dramatic shifts in a company’s core business. When such an event
necessitates that one component be replaced, the entire index is
reviewed. As a result, multiple component changes are often
implemented simultaneously.
License
Agreement between Dow Jones and ABN AMRO Bank N.V.
Dow Jones
and ABN AMRO Bank N.V. have entered into a non-exclusive license agreement
providing for the sub-license to us and certain of our affiliated or subsidiary
companies, in exchange for a fee, of the right to use the Dow Jones Industrial
AverageSM, which
is owned and published by Dow Jones, in connection with certain
securities.
The
Securities are not sponsored, endorsed, sold or promoted by Dow Jones or any of
its licensors. Neither Dow Jones nor any of its licensors makes any
representation or warranty, express or implied, to the owners of the
Securities or any member of the public regarding the advisability of
investing in securities generally or in the Securities particularly. The only
relationship of Dow Jones and its licensors to the Licensee is the licensing of
certain trademarks, trade names and service marks and of the Dow Jones
Industrial AverageSM, which
is determined, composed and calculated without regard to ABN AMRO Bank N.V. or
the Securities. Neither Dow Jones nor any of its licensors has any obligation to
take the needs of ABN AMRO Bank N.V. or the owners of the Securities into
consideration in determining, composing or calculating Dow Jones Industrial
AverageSM.
Neither Dow Jones nor any of its licensors is responsible for or has
participated in the determination of the timing of, prices at, or quantities of
the Securities to be issued or in the determination or calculation of the
equation by which the Securities are to be converted into cash. None of Dow
Jones or any of its licensors has any obligation or liability in connection with
the administration, marketing or trading of the Securities.
DOW
JONES AND ITS LICENSORS DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF
THE DOW JONES INDUSTRIAL AVERAGESM OR ANY
DATA RELATED THERETO AND NONE OF DOW JONES NOR ANY OF ITS LICENSORS SHALL HAVE
ANY LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW JONES AND
ITS LICENSORS MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED
BY ABN AMRO BANK N.V., OWNERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY
FROM THE USE OF THE DOW JONES INDUSTRIAL AVERAGESM OR ANY
DATA RELATED THERETO. NONE OF DOW JONES OR ITS LICENSORS MAKES ANY EXPRESS OR
IMPLIED WARRANTIES, AND EACH EXPRESSLY DISCLAIMS ALL WARRANTIES, OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
DOW JONES INDUSTRIAL AVERAGESM OR ANY
DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL
DOW JONES OR ANY OF ITS LICENSORS HAVE ANY LIABILITY FOR ANY LOST PROFITS OR
INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF NOTIFIED
OF THE POSSIBILITY THEREOF. EXCEPT FOR THE LICENSORS, THERE ARE NO THIRD PARTY
BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN DOW JONES AND ABN AMRO
BANK N.V.
THE
DOW JONES U.S. REAL ESTATE INDEX
We have
derived all information contained in this Underlying Supplement regarding the
Dow Jones U.S. Real Estate Index, including, without limitation, its
make-up, method of calculation and changes in its components, from publicly
available information. Such information reflects the policies of, and
is subject to change by, Dow Jones & Company, Inc. (“Dow
Jones”). The Dow Jones U.S. Real Estate Index is calculated,
maintained and published by Dow Jones. We make no representation or
warranty as to the accuracy or completeness of such information.
Dow
Jones U.S. Real Estate Index Composition and Maintenance
The Dow
Jones U.S. Real Estate Index measures the performance of the real estate
sector of the United States equity market. Component companies
include those that invest directly or indirectly through development, management
or ownership of shopping malls, apartment buildings and housing developments;
and REITs that invest in apartments, office and retail
properties. REITs are passive investment vehicles that invest
primarily in income-producing real estate or real estate related loans and
interests.
The Dow
Jones U.S. Real Estate Index is one of the 19 supersector indices that make
up the Dow Jones U.S. Index (formerly known as the Dow Jones U.S. Total Market
Index). The Dow Jones U.S. Real Estate Index is a subset of the
Dow Jones U.S. Financials Index, which in turn is a subset of the Dow Jones
U.S. Index. The Dow Jones U.S. Index is part of the Dow
Jones World Index, which is a benchmark family that follows some 6,000 stocks
from 45 countries. It is a market capitalization-weighted index in
which only the shares of each company that are readily available to investors
— the “float” — are counted.
Index
component candidates must be common shares or other securities that have the
characteristics of common equities. All classes of common shares,
both fully and partially paid, are eligible. Fixed-dividend shares
and securities such as convertible notes, warrants, rights, mutual funds, unit
investment trusts, closed-end fund shares, and shares in limited partnerships
are not eligible. Temporary issues arising from corporate actions,
such as “when-issued” shares, are considered on a case-by-case basis when
necessary to maintain continuity in a company’s index
membership. REITs also are eligible. Multiple classes of
shares are included if each issue, on its own merit, meets the other eligibility
criteria. Securities that have had more than ten nontrading days
during the past quarter are excluded. Stocks in the top 95% of the
index universe by free-float market capitalization are selected as components of
the Dow Jones U.S. Index, skipping stocks that fall within the
bottom 1% of the universe by free-float market capitalization and within the
bottom .01% of the universe by turnover. To be included in the Dow
Jones U.S. Real Estate Index, the issuer of the component securities must
be classified in the Real Estate Sector of industry classifications as
maintained by the Industry Classification Benchmark (“ICB”).
The Dow
Jones U.S. Real Estate Index is reviewed by Dow Jones on a quarterly
basis. Shares outstanding totals for component stocks are updated
during the quarterly review. However, if the number of outstanding
shares for an index component changes by more than 10% due to a corporate
action, the shares total will be adjusted immediately after the close of trading
on the date of the event. Whenever possible, Dow Jones will announce
the change at least two business days prior to its
implementation. Changes in shares outstanding due to stock dividends,
splits and other corporate actions also are adjusted immediately after the close
of trading on the day they become effective. Quarterly reviews are
implemented during March, June, September and December. Both
component changes and share changes become effective at the opening on the first
Monday after the third Friday of the review month. Changes to the Dow
Jones U.S. Real Estate Index are implemented after the official closing
values have been established. All adjustments are made before the
start of the next trading day. Constituent changes that result from
the periodic review will be announced at least two business days prior to the
implementation date.
In
addition to the scheduled quarterly review, the Dow Jones U.S. Real Estate
Index is reviewed on an ongoing basis. Changes in index composition
and related weight adjustments are necessary whenever there are extraordinary
events such as delistings, bankruptcies, mergers or takeovers involving index
components. In these cases, each event will be taken into account as
soon as it is effective. Whenever possible, the changes in the index
components will be announced at least two business days prior to their
implementation date. In the event that a component no longer meets
the eligibility requirements, it will be removed from the Dow Jones
U.S. Real Estate Index. You can find a list of the companies
whose common stocks are currently included in the Dow Jones U.S. Real
Estate Index on the
Dow Jones website at http://www.djindexes.com. Information included
in such website is not a part of this Underlying Supplement.
Background
on the ICB
ICB, a
joint classification system launched by FTSE Group and Dow Jones Indexes offers
broad, global coverage of companies and securities and classifies them based on
revenue, not earnings. ICB classifies the component stocks into
groups of 10 industries, 19 supersectors, 41 sectors and 114
subsectors. The Real Estate Sector is composed of two
Subsectors. The Real Estate Holding & Development Subsector
consists of companies that invest directly or indirectly in real estate through
development, management or ownership, including property
agencies. This Subsector excludes REITs and similar
entities. The Real Estate Investment Trusts Subsector consists of
real estate investment trusts or corporations and listed property
trusts.
License
Agreement with Dow Jones & Company
We have
entered into a non-exclusive license agreement with Dow Jones providing us and
certain of our affiliated or subsidiary companies identified in that agreement
with a license and, in exchange for a fee, with the right to use the Dow Jones
U.S. Real Estate Index, which is published by Dow Jones, in connection with
certain securities, including the Securities.
The
Securities are not sponsored, endorsed, sold or promoted by Dow Jones or any of
its licensors. Neither Dow Jones nor any of its licensors makes any
representation or warranty, express or implied, to the owners of the Securities
or any member of the public regarding the advisability of investing in
securities generally or in the Securities particularly. The only relationship of
Dow Jones and its licensors to the Licensee is the licensing of certain
trademarks, trade names and service marks and of the Dow Jones U.S. Real
Estate Index, which is determined, composed and calculated without regard to ABN
AMRO Bank N.V. or the Securities. Neither Dow Jones nor any of its licensors has
any obligation to take the needs of ABN AMRO Bank N.V. or the owners of the
Securities into consideration in determining, composing or calculating Dow Jones
U.S. Real Estate Index. Neither Dow Jones nor any of its licensors is
responsible for or has participated in the determination of the timing of,
prices at, or quantities of the Securities to be issued or in the determination
or calculation of the equation by which the Securities are to be converted into
cash. None of Dow Jones or any of its licensors has any obligation or liability
in connection with the administration, marketing or trading of the
Securities.
DOW
JONES AND ITS LICENSORS DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF
THE DOW JONES U.S. REAL ESTATE INDEX OR ANY DATA RELATED THERETO AND NONE OF DOW
JONES NOR ANY OF ITS LICENSORS SHALL HAVE ANY LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. DOW JONES AND ITS LICENSORS MAKE NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY ABN AMRO BANK
N.V., OWNERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF
THE DOW JONES U.S. REAL ESTATE INDEX OR ANY DATA RELATED THERETO. NONE OF DOW
JONES OR ITS LICENSORS MAKES ANY EXPRESS OR IMPLIED WARRANTIES, AND EACH
EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DOW JONES U.S. REAL ESTATE INDEX
OR ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
SHALL DOW JONES OR ANY OF ITS LICENSORS HAVE ANY LIABILITY FOR ANY LOST PROFITS
OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF
NOTIFIED OF THE POSSIBILITY THEREOF. EXCEPT FOR THE LICENSORS, THERE ARE NO
THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN DOW JONES
AND ABN AMRO BANK N.V.
THE
DOW JONES U.S. FINANCIALS SECTOR INDEX
We have
derived all information contained in this Underlying Supplement regarding the
Dow Jones U.S. Financials Sector Index, including, without limitation, its
make-up, method of calculation and changes in its components, from publicly
available information. Such information reflects the policies of, and is subject
to change by, Dow Jones. The Dow Jones U.S. Financials Sector Index is
calculated, maintained and published by Dow Jones. We make no representation or
warranty as to the accuracy or completeness of such information.
Index
Composition and Maintenance
The Dow
Jones U.S. Financials Sector Index measures the performance of the financial
industry portion of the United States equity market. The Dow Jones U.S.
Financials Sector Index is a market capitalization-weighted index in which only
the shares of each company that are readily available to investors — the “float”
— are counted and components are drawn from the Bank, Insurance and Financial
Services supersectors. The Dow Jones U.S. Financials Sector Index is
a subset of the Dow Jones U.S. Index which in turn is a subset of the Dow Jones
World Index, a benchmark family that follows some 6,000 stocks from 46
countries.
Index
component candidates must be common shares or other securities that have the
characteristics of common equities. All classes of common shares, both fully and
partially paid, are eligible. Fixed-dividend shares and securities such as
convertible notes, warrants, rights, mutual funds, unit investment trusts,
closed-end fund shares, and shares in limited partnerships are not eligible.
Temporary issues arising from corporate actions, such as “when-issued” shares,
are considered on a case-by-case basis when necessary to maintain continuity in
a company’s index membership. REITs, listed property trusts and similar
real-property-owning pass-through structures taxed as REITs by their domiciles
also are eligible. Multiple classes of shares are included if each issue, on its
own merit, meets the other eligibility criteria. Securities that have had more
than ten nontrading days during the past quarter are excluded. Stocks in the top
95% of the index universe by free-float market capitalization are selected as
components of the U.S. Index, skipping stocks that fall within the bottom 1% of
the universe by free-float market capitalization and within the bottom .01% of
the universe by turnover. To be included in the Dow Jones U.S. Financials Sector
Index, the issuer of the component securities must be classified in the
financial industry as maintained by the Industry Classification Benchmark
(“ICB”).
The Dow
Jones U.S. Financials Sector Index is reviewed by Dow Jones on a quarterly
basis. Shares outstanding totals for component stocks are updated during the
quarterly review. However, if the number of outstanding shares for an index
component changes by more than 10% due to a corporate action, the shares total
will be adjusted immediately after the close of trading on the date of the
event. Whenever possible, Dow Jones will announce the change at least two
business days prior to its implementation. Changes in shares outstanding due to
stock dividends, splits and other corporate actions also are adjusted
immediately after the close of trading on the day they become effective.
Quarterly reviews are implemented during March, June, September and December.
Both component changes and share changes become effective at the opening on the
first Monday after the third Friday of the review month. Changes to the Index
are implemented after the official closing values have been established. All
adjustments are made before the start of the next trading day. Constituent
changes that result from the periodic review will be announced at least two
business days prior to the implementation date.
In
addition to the scheduled quarterly review, the Dow Jones U.S. Financials Sector
Index is reviewed on an ongoing basis. Changes in index composition and related
weight adjustments are necessary whenever there are extraordinary events such as
delistings, bankruptcies, mergers or takeovers involving index components. In
these cases, each event will be taken into account as soon as it is effective.
Whenever possible, the changes in the index components will be announced at
least two business days prior to their implementation date. In the event that a
component no longer meets the eligibility requirements, it will be removed from
the Index. You can find a list of the companies whose common stocks are
currently included in the Dow Jones U.S. Financials Sector Index on the Dow
Jones website at http://www.djindexes.com. Information included in such website
is not a part of this Underlying supplement.
ICB, a
joint classification system launched by FTSE Group and Dow Jones Indexes offers
broad, global coverage of companies and securities and classifies them based on
revenue, not earnings. ICB classifies stocks into groups of 10 industries, 18
supersectors, 39 sectors and 104 subsectors. The Financial Industry is composed
of the Bank supersector, the Insurance supersector and the Financial Services
supersector. The Bank supersector includes companies in the Bank sector, the
Insurance supersector includes companies in the nonlife insurance and life
insurance sectors and the Financial Services supersector includes companies in
the real estate, general financial, equity investment instruments and nonequity
investment instrument sectors.
Calculation
and Adjustments
Input
Data Sources.
Real-time
stock prices are provided by Reuters, with the latest trading price used for
index calculation. The number of shares is determined separately for each class
of stock. This information is obtained from regulatory filings and a variety of
data vendors or from the companies themselves. Corporate actions are sourced
from public news services, regulatory filings, data vendors and the companies
themselves. Float data are obtained from a variety of sources including data
vendors, exchanges, regulators and the companies themselves.
Index
Formula.
The Dow
Jones U.S. Financials Sector Index is calculated using a Laspeyres formula. This
formula is used for the calculation of the price return index. The only
difference is that the divisor Dt is different for the two indexes. The Dow
Jones U.S. Financials Sector Index is computed as follows:
The above
mentioned formula can be simplified as
where:
|
Dt |
=
|
![](p30-3.jpg) |
=
divisor at time (t) |
|
n
|
= the
number of stocks in the index
|
|
Pi0
|
= the
closing level of stock i at the base date (December 31,
1991)
|
|
qi0
|
= the
number of shares of company i at the base date (December 31,
1991)
|
|
Pit
|
= the
price of stock i at time (t)
|
|
qit
|
= the
number of shares of company i at time
(t)
|
|
Ct
|
= the
adjustment factor for the base date market
capitalization
|
|
T
|
= the
time the index is computed
|
|
Mt
|
= market
capitalization of the index at time
(t)
|
|
Bt
|
= adjusted
base date market capitalization of the index at time
(t)
|
Dividend
payments are not taken into account in the price index, whereas dividend
payments are reinvested in the index sample of the total return index. Any
dividend larger than 10% of the equity price is considered a special dividend,
which requires a divisor adjustment. The adjustment protects the index from the
effects of changes in index composition and the impact of corporate
actions.
Divisor
Adjustments.
Corporate
actions affect the share capital of component stocks and therefore trigger
increases or decreases in the index. To avoid distortion, the divisor of the Dow
Jones U.S. Financials Sector Index is adjusted accordingly. Changes in the
index’s market capitalization due to changes in the composition (additions,
deletions or replacements), weighting (following quarterly reviews or changes of
more than 10% in a single component’s share number) or corporate actions
(mergers, spinoffs, rights offerings, repurchase of shares, public offerings,
return of capital, or special cash or stock distributions of other stocks)
result in a divisor change to maintain the index’s continuity. By adjusting the
divisor, the index value retains its continuity before and after the
event.
Formulae
for Divisor Adjustment.
The
following formulae will be used for divisor adjustments. (Note: No divisor
adjustments are necessary for stock splits, since market capitalization does not
change and the share number and share price are adjusted prior to the opening of
trading on the split’s ex-date.)
Dt+1
|
= divisor
at time (t+1)
|
|
Pit
|
= stock
price of company i at time (t)
|
|
qit
|
= number
of shares of company i at time (t)
|
DMCt+1
=
|
add
new component’s market capitalization and adjusted market capitalization
(calculated with adjusted closing levels and shares effective at time t+1
and/or minus market capitalization of companies to be deleted (calculated
with closing levels and shares at time t). If the current trading price of
an issue is unavailable, the previous trading session’s closing level is
used. However, if the issue is affected by any corporate action that
requires an adjustment, then the adjusted price is
used.
|
Adjustments
for Corporate Actions.
An index
divisor may decrease (Ñ) or increase
(D) or keep
constant (n) when corporate
actions occur for a component stock. Assuming shareholders receive “B” new
shares for every “A” share held for the following corporate
actions:
|
|
DIVISOR Ñ
|
A)
Cash dividend (applied for return index only)
adjusted
price = closing level – dividend announced by the
company
|
|
|
DIVISOR D
|
B)
Special Cash dividend (applied for price return index only)
adjusted
price = closing level – dividend announced by the
company
|
|
|
DIVISOR n
|
C)
Split and Reverse Split
adjusted
price = closing level * A / B
new
number of shares = old number of shares * B / A
|
|
|
DIVISOR D
|
D)
Rights Offering
adjusted
price = (closing level * A + subscription price * B) / (A +
B)
new
number of shares = old number of shares * (A + B) /
A
|
|
|
|
|
DIVISOR n
|
E)
Stock Dividend
adjusted
price = closing level * A / (A + B)
new
number of shares = old number of shares * (A + B) / A
|
|
|
DIVISOR Ñ
|
F)
Stock Dividend of a Different Company Security
adjusted
price = (closing level * A – price of the different company
security * B) / A
|
|
|
DIVISOR Ñ
|
G)
Return of Capital and Share Consolidation
adjusted
price = (closing level – dividend announced by company) * A /
B
new
number of shares = old number of shares * B / A
|
|
|
DIVISOR Ñ
|
H)
Repurchase Shares-Self-Tender
adjusted
price = (closing level – dividend announced by company) * A /
B
new
number of shares = old number of shares * B / A
adjusted
price = [(price before tender * old number of shares) – (tender price *
number of tendered shares)] / (old number of shares – number of tendered
shares) new number of shares = old number of shares – number of tendered
shares
|
|
|
DIVISOR Ñ
|
I)
Spinoff
adjusted
price = ( closing level * A – price of spun-off shares * B ) /
A
|
|
|
DIVISOR D
|
J)
Combination Stock Distribution (Dividend or Split) and Rights
Offering
Shareholders
receive B new shares from the distribution and C new shares
from
the
rights offering for every A shares held:
w
If rights are applicable after stock distribution (one action applicable
to other)
adjusted
price = [closing level * A + subscription price * C * (1 + B /
A)]
/ [
(A + B) * (1 + C / A) ]
new
number of shares = old number of shares * [(A + B) * (1 + C / A)] /
A
w
If stock distribution is applicable after rights (one action applicable to
other)
adjusted
price = [closing level * A + subscription price * C] / [(A + C) * (1 + B /
A)]
new
number of shares = old number of shares * [ ( A + C ) * ( 1 + B / A)
]
|
|
|
DIVISOR D
|
K)
Stock Distribution and Rights (Neither Action is Applicable to the
Other)
adjusted
price = [closing level * A + subscription price * C] / [A + B +
C]
new
number of shares = old number of shares * [A + B +
C]
|
Computational
Precision.
Index
values are rounded to two decimal places and divisors are rounded to integers.
Any values derived by the index calculation engine from a corporate action used
for the divisor adjustments and index computations are rounded to seven decimal
places.
License
Agreement with Dow Jones & Company
We have
entered into an agreement with Dow Jones providing us and certain of our
affiliates or subsidiaries identified in that agreement with a non-exclusive
license and, for a fee, with the right to use the Dow Jones U.S. Financials
Sector Index, which is owned and published by Dow Jones, in connection with
certain securities, including the Securities.
The
Securities are not sponsored, endorsed, sold or promoted by Dow Jones or any of
its licensors. Neither Dow Jones nor any of its licensors makes any
representation or warranty, express or implied, to the owners of the Securities
or any member of the public regarding the advisability of investing in
securities generally or in the Securities particularly. The only relationship of
Dow Jones and its licensors to the Licensee is the licensing of certain
trademarks, trade names and service marks and of the Dow Jones U.S. Financials
Sector Index, which is determined, composed and calculated without regard to ABN
AMRO Bank N.V. or the Securities. Neither Dow Jones nor any of its licensors has
any obligation to take the needs of ABN AMRO Bank N.V. or the owners of the
Securities into consideration in determining, composing or calculating
Dow Jones U.S. Financials Sector Index. Neither Dow Jones nor any of its
licensors is responsible for or has participated in the determination of the
timing of, prices at, or quantities of the Securities to be issued or in the
determination or calculation of the equation by which the Securities are to be
converted into cash. None of Dow Jones or any of its licensors has any
obligation or liability in connection with the administration, marketing or
trading of the Securities.
DOW
JONES AND ITS LICENSORS DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF
THE DOW JONES U.S. FINANCIALS SECTOR INDEX OR ANY DATA RELATED THERETO AND NONE
OF DOW JONES NOR ANY OF ITS LICENSORS SHALL HAVE ANY LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. DOW JONES AND ITS LICENSORS MAKE NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY ABN AMRO BANK
N.V., OWNERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF
THE DOW JONES U.S. FINANCIALS SECTOR INDEX OR ANY DATA RELATED THERETO. NONE OF
DOW JONES OR ITS LICENSORS MAKES ANY EXPRESS OR IMPLIED WARRANTIES, AND EACH
EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DOW JONES U.S. FINANCIALS SECTOR
INDEX OR ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO
EVENT SHALL DOW JONES OR ANY OF ITS LICENSORS HAVE ANY LIABILITY FOR ANY LOST
PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN
IF NOTIFIED OF THE POSSIBILITY THEREOF. EXCEPT FOR THE LICENSORS, THERE ARE NO
THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN DOW JONES
AND ABN AMRO BANK N.V.
THE
MSCI INDICES
We have
derived all information contained in this Underlying Supplement regarding the
MSCI Brazil Index, the MSCI EAFE® Index,
the MSCI Emerging Markets Index and the MSCI Japan Index (together, “the MSCI
Indices”), including, without limitation, their make-up, method of calculation
and changes in their components, from publicly available
information. Such information reflects the policies of, and is
subject to change by, MSCI. We make no representation or warranty as
to the accuracy or completeness of such information. The MSCI Indices
are calculated, maintained and published by MSCI. MSCI has no
obligation to continue to publish, and may discontinue publication of, any of
the MSCI Indices.
Transition
On March
28, 2007, MSCI announced changes to the methodology used by MSCI to calculate
its Standard and Small Cap Indices. The transition of the Standard and Small Cap
Indices to the MSCI Indices occurred in two phases, the first completed as of
November 30, 2007 and the second completed as of May 30, 2008. The
current index calculation methodology used to formulate the MSCI Indices (and
which is also used to formulate the indices included in the MSCI Global Index
Series) (the “MSCI Global Investable Market Indices Methodology”) was
implemented as of June 1, 2008.
The
MSCI Brazil Index
The MSCI
Brazil Index is a free float-adjusted market capitalization index of securities
listed on the Bolsa de Valores
de Sao Paulo. The MSCI Brazil Index is calculated daily in
U.S. dollars and published in real time every 15 seconds during market trading
hours. The MSCI Brazil Index is reported by Bloomberg L.P. under the
ticker symbol “MXBR.”
The
MSCI EAFE®
Index
The MSCI
EAFE® Index is
a free float-adjusted market capitalization index intended to measure the equity
market performance of certain developed markets. The MSCI EAFE® Index is
calculated daily in U.S. dollars and published in real time every 15 seconds
during market trading hours. As of July 22, 2009, the MSCI EAFE® Index
consisted of the following 21 developed market country indices: Australia,
Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland,
Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain,
Sweden, Switzerland, and the United Kingdom. The MSCI Singapore Index is
reported by Bloomberg L.P. under the ticker symbol “MXEA.”
The
MSCI Emerging Markets Index
The MSCI
Emerging Markets Index is a free float-adjusted market capitalization index that
is designed to measure equity market performance of global emerging
markets. The MSCI Emerging Markets Index is calculated daily in U.S.
dollars and published in real time every 15 seconds during market trading
hours. As of July 22, 2009, the MSCI Emerging Markets Index consisted
of the following 22 emerging market country indices: Brazil, Chile, China,
Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea,
Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa,
Taiwan, Thailand, and Turkey. The MSCI Emerging Markets Index is reported by
Bloomberg L.P. under the ticker symbol “MXEF.”
The
MSCI Japan Index
The MSCI
Japan Index is a free float adjusted market capitalization index of securities
listed on the Nagoya Stock Exchange, Osaka Securities Exchange, Tokyo Stock
Exchange and the JASDAQ. The MSCI Japan Index is divided into large and mid cap
segments and provides exhaustive coverage of these size segments by targeting a
coverage range around 85% of free float-adjusted market capitalization in each
market. The MSCI Japan Index is calculated daily in U.S. dollars and
published in real time every 15 seconds during market trading
hours. The MSCI Japan Index is reported by Bloomberg L.P. under the
ticker symbol “MSJP.”
Constructing
the MSCI Global Investable Market Indices
MSCI
undertakes an index construction process, which involves: (i) defining the
Equity Universe; (ii) determining the Market Investable Equity Universe for each
market; (iii) determining market capitalization size segments for each market;
(iv) applying Index Continuity Rules for the MSCI Standard Index; (v) creating
style segments within each size segment within each market; and (vi) classifying
securities under the Global Industry Classification Standard (the
“GICS”).
The
“relevant market” with respect to a single country index is equivalent to the
single country, except in DM-classified countries in Europe (as described
below), where all such countries are first aggregated into a single market for
index construction purposes. Subsequently, individual DM Europe
country indices within the MSCI Europe Index are derived from the constituents
of the MSCI Europe Index under the MSCI Global Investable Market Indices
Methodology.
The
“relevant market” with respect to a composite index includes each of the single
countries which comprise the composite index.
The
“Equity Universe” is the aggregation of all Market Investable Equity
Universes. The “DM Investable Equity Universe” is the aggregation of
all the Market Investable Equity Universes for Developed Markets.
Defining
the Equity Universe
(i) Identifying
Eligible Equity Securities: The Equity Universe initially looks at securities
listed in any of the countries in the MSCI Global Index Series, which will be
classified as either Developed Markets (“DM”) or Emerging Markets (“EM”). All
listed equity securities, or listed securities that exhibit characteristics of
equity securities, except mutual funds, exchange traded funds, equity
derivatives, limited partnerships, and most investment trusts, are eligible for
inclusion in the Equity Universe. Real Estate Investment Trusts (“REITs”) in
some countries and certain income trusts in Canada are also eligible for
inclusion.
(ii) Country
Classification of Eligible Securities: Each company and its securities (i.e.,
share classes) are classified in one and only one country, which allows for a
distinctive sorting of each company by its respective country.
Determining
the Market Investable Equity Universes
A Market
Investable Equity Universe for a market is derived by applying investability
screens to individual companies and securities in the Equity Universe that are
classified in that market. A market is equivalent to a single country, except in
DM Europe, where all DM countries in Europe are aggregated into a single market
for index construction purposes. Subsequently, individual DM Europe country
indices within the MSCI Europe Index are derived from the constituents of the
MSCI Europe Index under the Global Investable Market Indices
methodology.
The
investability screens used to determine the Investable Equity Universe in each
market are as follows:
|
(i)
|
Equity
Universe Minimum Size Requirement: This investability screen is applied at
the company level. In order to be included in a Market Investable Equity
Universe, a company must have the required minimum full market
capitalization. A company will meet this requirement if its
cumulative free float-adjusted market capitalization is within the top 99%
of the sorted Equity Universe.
|
|
(ii)
|
Equity
Universe Minimum Float−Adjusted Market Capitalization Requirement: This
investability screen is applied at the individual security level. To be
eligible for inclusion in a Market Investable Equity Universe, a security
must have a free float−adjusted market capitalization equal to or higher
than 50% of the Equity Universe Minimum Size
Requirement.
|
(iii)
|
DM
and EM Minimum Liquidity Requirement: This investability screen is applied
at the individual security level. To be eligible for inclusion in a Market
Investable Equity Universe, a security must have adequate liquidity as
measured by the Annualized Traded Value Ratio (“ATVR”) and the Frequency
of Trading. The ATVR screens out extreme daily trading volumes,
taking into account the free float-
|
|
adjusted
market capitalization size of securities. The aim of the
12-month and 3-month ATVR together with 3-month Frequency of Trading is to
select securities with a sound long and short-term liquidity. A
minimum liquidity level of 20% of 3-month ATVR and 90% of 3-month
Frequency of Trading over the last 4 consecutive quarters, as well as 20%
of 12-month ATVR are required for the inclusion of a security in a Market
Investable Equity Universe of a Developing Market. A minimum
liquidity level of 15% of 3-month ATVR and 80% of 3-month Frequency of
Trading over the last 4 consecutive quarters, as well as 15% of 12-month
ATVR are required for the inclusion of a security in a Market Investable
Equity Universe of an Emerging Market.
In
instances when a security does not meet the above criteria, the security
will be represented by a relevant liquid eligible Depository Receipt if it
is trading in the same geographical region. Depository Receipts
are deemed liquid if they meet all the above mentioned criteria for
12-month ATVR, 3-month ATVR and 3-month Frequency of
Trading.
|
(iv)
|
Global
Minimum Foreign Inclusion Factor Requirement: This investability screen is
applied at the individual security level. To be eligible for inclusion in
a Market Investable Equity Universe, a security’s Foreign Inclusion Factor
(“FIF”) must reach a certain threshold. The FIF of a security is defined
as the proportion of shares outstanding that is available for purchase in
the public equity markets by international investors. This proportion
accounts for the available free float of and/or the foreign ownership
limits applicable to a specific security (or company). In general, a
security must have an FIF equal to or larger than 0.15 to be eligible for
inclusion in a Market Investable Equity
Universe.
|
|
(v)
|
Minimum
Length of Trading Requirement: This investability screen is applied at the
individual security level. For an initial public offering (“IPO”) to be
eligible for inclusion in a Market Investable Equity Universe, the new
issue must have started trading at least four months before the
implementation of the initial construction of the index or at least three
months before the implementation of a Semi−Annual Index Review. This
requirement is applicable to small new issues in all markets. Large IPOs
are not subject to the Minimum Length of Trading Requirement and may be
included in a Market Investable Equity Universe and the Standard Index
outside of a Quarterly or Semi−Annual Index
Review.
|
Defining Market Capitalization Size Segments
for Each Market
Once a
Market Investable Equity Universe is defined, it is segmented into the following
size−based indices:
|
·
|
Investable
Market Index (Large + Mid + Small)
|
|
·
|
Standard
Index (Large + Mid)
|
Creating
the Size Segment Indices in each market involves the following steps: (i)
defining the Market Coverage Target Range for each size segment; (ii)
determining the Global Minimum Size Range for each size segment; (iii)
determining the Market Size−Segment Cutoffs and associated Segment Number of
Companies; (iv) assigning companies to the size segments; and (v) applying final
size−segment investability requirements and index continuity rules.
Index
Continuity Rules for the Standard Indices
In order
to achieve index continuity, as well as provide some basic level of
diversification within a market index, notwithstanding the effect of other index
construction rules, a minimum number of five constituents will be maintained
for a DM Standard Index and a minimum number of three constituents will be
maintained for an EM Standard Index.
If after
the application of the index construction methodology, a Standard Index contains
fewer than five securities in a Developed Market or three securities in an
Emerging Market, then the largest securities by free float-adjusted market
capitalization are added to the Standard Index in order to reach five
constituents in that Developed Market or three in that Emerging
Market. At subsequent Index Reviews, if the free float-adjusted
market capitalization of a non-index constituent is at least 1.50 times the free
float-adjusted market capitalization of the smallest existing constituent after
rebalancing, the larger free float-adjusted market capitalization security
replaces the smaller one.
Creating
Style Indices within Each Size Segment
All
securities in the investable equity universe are classified into Value or Growth
segments using the MSCI Global Value and Growth methodology.
Classifying
Securities under the Global Industry Classification Standard
All
securities in the Global Investable Equity Universe are assigned to the industry
that best describes their business activities. To this end, MSCI has designed,
in conjunction with Standard & Poor’s, the Global Industry Classification
Standard (“GICS”). The GICS entails four levels of classification:
(1) sector; (2) industry groups; (3) industries; (4)
sub-industries. Under the GICS, each company is assigned uniquely to
one sub−industry according to its principal business activity. Therefore, a
company can belong to only one industry grouping at each of the four levels of
the GICS.
Maintenance
of the MSCI Indices
The MSCI
Global Investable Market Indices are maintained with the objective of reflecting
the evolution of the underlying equity markets and segments on a timely basis,
while seeking to achieve index continuity, continuous investability of
constituents and replicability of the indices, and index stability and low index
turnover.
In
particular, index maintenance involves:
|
(i)
|
Semi−Annual
Index Reviews (“SAIRs”) in May and November of the Size Segment and Global
Value and Growth Indices which
include:
|
|
·
|
Updating
the indices on the basis of a fully refreshed Equity
Universe.
|
|
·
|
Taking
buffer rules into consideration for migration of securities across size
and style segments.
|
|
·
|
Updating
FIFs and Number of Shares (“NOS”).
|
The
objective of the SAIRs is to systematically reassess the various dimensions of
the Equity Universe for all markets on a fixed semi-annual timetable. A SAIR
involves a comprehensive review of the Size Segment and Global Value and Growth
Indices.
|
(ii)
|
Quarterly
Index Reviews (“QIRs”) in February and August of the Size Segment Indices
aimed at:
|
|
·
|
Including
significant new eligible securities (such as IPOs that were not eligible
for earlier inclusion) in the
index.
|
|
·
|
Allowing
for significant moves of companies within the Size Segment Indices, using
wider buffers than in the SAIR.
|
|
·
|
Reflecting
the impact of significant market events on FIFs and updating
NOS.
|
QIRs are
designed to ensure that the indices continue to be an accurate reflection of the
evolving equity marketplace. This is achieved by a timely reflection of
significant market driven changes that were not captured in the index at the
time of their actual occurrence but are significant enough to be reflected
before the next SAIR. QIRs may result in additions or deletions due
to migration to another Size Segment Index, and changes in FIFs and in
NOS. Only additions of significant new investable companies are
considered, and only for the Standard Index. The buffer zones used to
manage the migration of companies from one segment to another are wider than
those used in the SAIR. The style classification is reviewed only for
companies that are reassigned to a different size segment.
(iii)
|
Ongoing
event−related changes. Ongoing event-related changes to the
indices are the result of mergers, acquisitions, spin-offs, bankruptcies,
reorganizations and other similar corporate events. They can
also result from capital reorganizations in the form of rights issues,
bonus issues, public placements and other similar corporate actions that
take place on a continuing basis. These changes generally are
reflected in the indices at the time of the
event. Significantly large IPOs are included in the indices
after the close of the company’s tenth day of
trading.
|
Announcement
Policy
The
results of the SAIRs are announced at least two weeks in advance of their
effective implementation dates as of the close of the last business day of May
and November. The results of the QIRs are announced at least two
weeks in advance of their effective implementation dates as of the close of the
last business day of February and August. All changes resulting from
corporate events are announced prior to their implementation.
The
changes are typically announced at least ten business days prior to the changes
becoming effective in the indices as an “expected” announcement, or as an
“undetermined” announcement, when the effective dates are not known yet or when
aspects of the event are uncertain. MSCI sends “confirmed” announcements at
least two business days prior to events becoming effective in the indices,
provided that all necessary public information concerning the event is
available. The full list of all new and pending changes is delivered to clients
on a daily basis, at 5:30 p.m., US Eastern Time through the Advance Corporate
Events (ACE) File.
In
exceptional cases, events are announced during market hours for same or next day
implementation. Announcements made by MSCI during market hours are usually
linked to late company disclosure of corporate events or unexpected changes to
previously announced corporate events.
In the
case of secondary offerings representing more than 5% of a security’s number of
shares for existing constituents, these changes will be announced prior to the
end of the subscription period when possible and a subsequent announcement
confirming the details of the event (including the date of implementation) will
be made as soon as the results are available.
Both
primary equity offerings and secondary offerings for U.S. securities,
representing at least 5% of the security’s number of shares, will be confirmed
through an announcement during market hours for next day or shortly after
implementation, as the completion of the events cannot be confirmed prior to the
notification of the pricing.
Early
deletions of constituents due to bankruptcy or other significant cases are
announced as soon as practicable prior to their implementation.
Index
Calculation
Price
Index Level
The MSCI
Indices are calculated using the Laspeyres’ concept of a weighted arithmetic
average together with the concept of chain-linking. As a general
principle, today’s index level is obtained by applying the change in the market
performance to the previous period index level.
PriceIndexLevelUSDt = PriceIndexLevelUSDt-1 ×
|
IndexAdjustedMarketCapUSDt
|
IndexInitialMarketCapUSDt
|
PriceIndexLevelLocalt = PriceIndexLevelLocalt-1 ×
|
IndexAdjustedMarketCapForLocalt
|
IndexInitialMarketCapUSDt
|
Where:
|
·
|
PriceIndexLevelUSDt-1 is
the Price Index level in USD at time
t-1
|
|
·
|
IndexAdjustedMarketCapUSDt is the Adjusted
Market Capitalization of the index in USD at time
t
|
|
·
|
IndexInitialMarketCapUSDt is the Initial
Market Capitalization of the index in USD at
time t
|
|
·
|
PriceIndexLevelLocalt-1 is
the Price Index level in local currency at time
t-1
|
|
·
|
IndexAdjustedMarketCapForLocalt is the Adjusted
Market Capitalization of the index in USD converted using FX rate as of
t-1 and used for local currency index at time
t
|
Note:
IndexInitialMarketCapUSD
was previously called IndexUnadjustedMarketCapPreviousUSD
Security
Price Index Level
SecurityPriceIndexLevel1 = SecurityPriceIndexLevelt-1 ×
|
SecurityAdjustedMarketCapForLocalt
|
SecurityInitialMarketCapUSDt
|
SecurityAdjustedMarketCapForLocalt =
|
|
IndexNumberOfSharest
-1 × PricePerSharet × InclusionFactort x PAFt
|
×
|
ICIt
|
FXratet-1
|
ICIt-1
|
SecurityInitialMarketCapUSDt =
|
IndexNumberOfSharest
-1 × PricePerSharet-1 × InclusionFactort
|
FXratet-1
|
Where:
|
·
|
SecurityPriceIndexLevelt-1 is
Security Price Index level at time
t-1
|
|
·
|
SecurityAdjustedMarketCapForLocalt is the Adjusted
Market Capitalization of security s in USD converted using FX rate as of
t-1
|
|
·
|
SecurityInitialMarketCapUSDt is the Initial
Market Capitalization of security s in USD at time
t
|
|
·
|
IndexNumberOfSharest-1 is
the number of shares of security s at time
t-1.
|
|
·
|
PricePerSharet
is the price per share of security s at time
t.
|
|
·
|
PricePerSharet-1 is
the price per share of security s at time
t-1.
|
|
·
|
InclusionFactort
is the inclusion factor of security s at time t. The inclusion factor can
be one or the combination of the following factors: Foreign Inclusion
Factor, Domestic Inclusion Factor Growth Inclusion Factor, Value Inclusion
Factor, Index Inclusion Factor.
|
|
·
|
PAFt
is the Price Adjustment Factor of security s at time
t.
|
|
·
|
FXratet
-1 is
the FX rate of the price currency of security s vs USD at time t-1. It is
the value of 1 USD in foreign
currency.
|
|
·
|
ICIt is the Internal
Currency Index of price currency at time t. The ICI is different than 1
when a country changes the internal value of its currency (e.g. from Turkish Lira
to New Turkish Lira – ICI =
1,000,000).
|
|
·
|
ICIt-1 is
the Internal Currency Index of price currency at time
t-1.
|
|
·
|
Index
Market Capitalization
|
IndexAdjustedMarketCapUSDt =
å
s ε
I,t
|
Index Number of Sharest-1 × Price Per Sharet × Inclusion Factort × PAFt
|
FXratet
|
IndexAdjustedMarketCapForLocalt =
å
s ε
I,t
|
(
|
Index Number of Sharest-1 × Price Per Sharet × Inclusion Factort × PAFt
|
×
|
ICIt
|
FXratet-1
|
ICIt-1
|
IndexInitialMarketCapUSDt =
å
s ε
I,t
|
Index Number of Sharest-1 × Price Per Sharet × Inclusion Factort
|
FXratet-1
|
Where:
|
·
|
IndexNumberOfSharest-1 is
the number of shares of security s at time
t-1.
|
|
·
|
PricePerSharet
is the price per share of security s at time
t.
|
|
·
|
PricePerSharet-1 is
the price per share of security s at time
t-1.
|
|
·
|
InclusionFactort
is the inclusion factor of security s at time t. The inclusion factor can
be one or the combination of the following factors: Foreign Inclusion
Factor, Domestic Inclusion Factor Growth Inclusion Factor, Value Inclusion
Factor, Index Inclusion Factor.
|
|
·
|
PAFt
is the Price Adjustment Factor of security s at time
t.
|
|
·
|
FXratet
is the FX rate of the price currency of security s vs USD at time t. It is
the value of 1 USD in foreign
currency.
|
|
·
|
FXratet
-1 is
the FX rate of the price currency of security s vs USD at time t-1. It is
the value of 1 USD in foreign
currency.
|
|
·
|
ICIt is the Internal
Currency Index of price currency at time t. The ICI is different than 1
when a country changes the internal value of its currency (e.g. from Turkish Lira
to New Turkish Lira – ICI =
1,000,000).
|
|
·
|
ICIt-1 is the Internal
Currency Index of price currency at time
t-1.
|
Corporate
Events
Mergers
and Acquisitions
As a
general principle, MSCI implements M&As as of the close of the last trading
day of the acquired entity or merging entities (last offer day for tender
offers), regardless of the status of the securities (index constituents or
non-index constituents) involved in the event. MSCI uses market prices for
implementation. This principle applies if all necessary information is available
prior to the completion of the event and if the liquidity of the relevant
constituent(s) is not expected to be significantly diminished on the day of
implementation. Otherwise, MSCI will determine the most appropriate
implementation method and announce it prior to the changes becoming effective in
the indices.
Tender
Offers
In tender
offers, the acquired or merging security is generally deleted from the
applicable MSCI Indices at the end of the initial offer period, when the offer
is likely to be successful and / or if the free float of the security is likely
to be substantially reduced (this rule is applicable even if the offer is
extended), or once the results of the offer have been officially communicated
and the offer has been successful and the security’s free float has been
substantially reduced, if all required information is not available in advance
or if the offer’s outcome is uncertain. The main factors considered by MSCI when
assessing the outcome of a tender offer (not in order of importance) are: the
announcement of the offer as friendly or hostile, a comparison of the offer
price to the acquired security’s market price, the recommendation by the
acquired company’s board of directors, the major shareholders’ stated intention
whether to tender their shares, the required level of acceptance, the existence
of pending regulatory approvals, market perception of the transaction, official
preliminary results if any, and other additional conditions for the
offer.
In
certain cases, securities may be deleted earlier than the last offer
day. For example, in the case of tender offers in the United Kingdom,
a security is typically deleted two business days after the offer is declared
unconditional in all respects.
If a
security is deleted from an index, the security will not be reinstated
immediately after its deletion even when the tender offer is subsequently
declared unsuccessful and/or the free float of the security is not substantially
reduced. It may be reconsidered for index inclusion in the context of a
quarterly index review or annual full country index review. MSCI uses market
prices for implementation.
Late
Announcements of Completion of Mergers and Acquisitions
When the
completion of an event is announced too late to be reflected as of the close of
the last trading day of the acquired or merging entities, implementation occurs
as of the close of the following day or as soon as practicable thereafter. In
these cases, MSCI uses a calculated price for the acquired or merging entities.
The calculated price is determined using the terms of the transaction and the
price of the acquiring or merged entity, or, if not appropriate, using the last
trading day’s market price of the acquired or merging entities.
Conversions
of Share Classes
Conversions
of a share class into another share class resulting in the deletion and/or
addition of one or more classes of shares are implemented as of the close of the
last trading day of the share class to be converted.
Spin-Offs
On the
ex-date of a spin-off, a PAF is applied to the price of the security of the
parent company. The PAF is calculated based on the terms of the transaction and
the market price of the spun-off security. If the spun-off entity qualifies for
inclusion, it is included as of the close of its first trading day. If
appropriate, MSCI may link the price history of the spun-off security to a
security of the parent company.
In cases
of spin-offs of partially-owned companies, the post-event free float of the
spun-off entity is calculated using a weighted average of the existing shares
and the spun-off shares, each at their corresponding free float. Any resulting
changes to FIFs and/or DIFs are implemented as of the close of the
ex-date.
When the
spun-off security does not trade on the ex-date, a “detached” security is
created to avoid a drop in the free float-adjusted market capitalization of the
parent entity, regardless of whether the spun-off security is added or not. The
detached security is included until the spun-off security begins trading, and is
deleted thereafter. Generally, the value of the detached security is equal to
the difference between the cum price and the ex price of the parent
security.
Corporate
Actions
Corporate
actions such as splits, bonus issues and rights issues, which affect the price
of a security, require a price adjustment. In general, the PAF is applied on the
ex-date of the event to ensure that security prices are comparable between the
ex-date and the cum date. To do so, MSCI adjusts for the value of the right
and/or the value of the special assets that are distributed. In general,
corporate actions do not impact the free float of the securities because the
distribution of new shares is carried out on a pro rata basis to all existing
shareholders. Therefore, MSCI will generally not implement any pending number of
shares and/or free float updates simultaneously with the event.
If a
security does not trade for any reason on the ex-date of the corporate action,
the event will be generally implemented on the day the security resumes
trading.
Share
Placements and Offerings
Changes
in number of shares and FIF resulting from primary equity offerings representing
more than 5% of the security’s number of shares are generally implemented as of
the close of the first trading day of the new shares, if all necessary
information is available at that time. Otherwise, the event is implemented as
soon as practicable after the relevant information is made available. A primary
equity offering involves the issuance of new shares by a company. Changes in
number of shares and FIF resulting from primary equity offerings representing
less than 5% of the security’s number of shares are deferred to the next
regularly scheduled Quarterly Index Review following the completion of the
event. For public secondary offerings of existing constituents representing more
than 5% of the security’s number of shares, where possible, MSCI will announce
these changes and reflect them shortly after the results of the subscription are
known. Secondary public offerings that, given lack of sufficient notice, were
not reflected immediately will be reflected at the next Quarterly Index Review.
Secondary offerings involve the distribution of existing shares of current
shareholders’ in a listed company and are usually pre-announced by a company or
by a company’s shareholders and open for public subscription during a
pre-determined period.
Debt-to-Equity
Swaps
In
general, large debt-to-equity swaps involve the conversion of debt into equity
originally not convertible at the time of issue. In this case, changes in
numbers of shares and subsequent FIF and/or DIF changes are implemented as of
the close of the first trading day of the newly issued shares, or shortly
thereafter if all necessary information is available at the time of the swap. In
general, shares issued in debt-to-equity swaps are assumed to be issued to
strategic investors. As such, the post event free float is calculated on a pro
forma basis assuming that all these shares are non-free float. Changes in
numbers of shares and subsequent FIF and/or DIF changes due to conversions of
convertible bonds or other convertible instruments, including periodical
conversions of preferred stocks and small debt-to-equity swaps are implemented
as part of the quarterly index review.
Suspensions
and Bankruptcies
MSCI will
remove from the MSCI Indices as soon as practicable companies that file for
bankruptcy, companies that file for protection from their creditors and/or are
suspended and for which a return to normal business activity and trading is
unlikely in the near future. When the primary exchange price is not available,
MSCI will delete securities at an over the counter or equivalent market price
when such a price is available and deemed relevant. If no over the counter or
equivalent price is available, the security will be deleted at the smallest
price (unit or fraction of the currency) at which a security can trade on a
given exchange. For securities that are suspended, MSCI will carry forward the
market price prior to the suspension during the suspension period.
The
MSCI Brazil Index, the MSCI EAFE® Index,
the MSCI Emerging Markets Index and the MSCI World IndexSM Are
Subject to Currency Exchange Risk
Because
the closing prices of the component securities of the MSCI Brazil Index, the
MSCI EAFE® Index,
the MSCI Emerging Markets Index and the MSCI World IndexSM are
converted into U.S. dollars for purposes of calculating the value of the
respective MSCI Indices, investors in the Securities will be exposed to currency
exchange rate risk with respect to each of the currencies in which the component
securities of the applicable MSCI Indices trade. Exposure to currency
changes will depend on the extent to which such currencies strengthen or weaken
against the U.S. dollar and the relative weight of the component securities in
the applicable MSCI Indices denominated in each such currency. The
devaluation of the U.S. dollar against the currencies in which the Component
Securities trade will result in an increase in the value of the applicable MSCI
Indices. Conversely, if the U.S. dollar strengthens against such
currencies, the values of the applicable MSCI Indices will be adversely affected
and may reduce or eliminate the payment at maturity, if any, on the
Securities. Fluctuations in currency exchange rates can have a
continuing impact on the value of the applicable MSCI Indices, and any negative
currency impact on such MSCI Indices may significantly decrease the value of the
Securities. The return on an index composed of the component
securities of the applicable MSCI Indices where the closing price is not
converted into U.S. dollars can be significantly different from the return on
such MSCI Indices which is converted into U.S. dollars.
License
Agreement with MSCI
We have
entered into an agreement with MSCI providing us and certain of our affiliates
or subsidiaries identified in that agreement with a non-exclusive license and,
for a fee, with the right to use the Underlying Index, which is owned and
published by MSCI, in connection with certain securities, including the
Notes.
The
Securities are not sponsored, endorsed, sold or promoted by MSCI. Neither MSCI
nor any other party makes any representation or warranty, express or implied to
the holders of the Securities or any member of the public regarding the
advisability of investing in securities generally or in the Securities
particularly, or the ability of the MSCI Emerging Markets Index to track general
stock market performance. MSCI is the licensor of certain trademarks, service
marks and trade names of MSCI and of the MSCI Emerging Markets Index, which
index is determined, composed and calculated by MSCI without regard to the
issuer of the Notes. MSCI has no obligation to take the needs of the issuer of
the Securities or the holders of the Securities into consideration in
determining, composing or calculating the Underlying Index. MSCI is not
responsible for and has not participated in the determination of the timing of,
prices at, or quantities of the Securities to be issued or in the determination
or calculation of the equation by which the Securities are to be converted into
cash. Neither MSCI nor any other party has any obligation or liability to
holders of the Securities in connection with the administration, marketing or
trading of the Notes.
THE
SECURITIES ARE NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY MSCI, ANY AFFILIATE
OF MSCI OR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY
MSCI INDEX. THE MSCI INDICES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE
MSCI INDEX NAMES ARE SERVICE MARK(S) OF MSCI OR ITS AFFILIATES AND HAVE BEEN
LICENSED FOR USE FOR CERTAIN PURPOSES BY ABN AMRO BANK N.V. (THE “LICENSEE”).
NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED
TO, MAKING OR COMPILING ANY MSCI INDEX MAKES ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, TO THE HOLDERS OF THE SECURITIES OR ANY MEMBER OF THE PUBLIC
REGARDING THE ADVISABILITY OF INVESTING IN FINANCIAL SECURITIES GENERALLY OR IN
THE SECURITIES PARTICULARLY OR THE ABILITY OF ANY MSCI INDEX TO TRACK
CORRESPONDING STOCK MARKET PERFORMANCE. MSCI OR ITS AFFILIATES ARE THE LICENSORS
OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES AND OF THE MSCI INDICES
WHICH ARE DETERMINED, COMPOSED AND CALCULATED BY MSCI WITHOUT REGARD TO THE
SECURITIES OR THE ISSUER OR HOLDER OF THE SECURITIES. NEITHER MSCI, ANY OF ITS
AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING
ANY MSCI INDEX HAS ANY OBLIGATION TO TAKE THE NEEDS OF THE ISSUERS OR OWNERS OF
THE SECURITIES INTO CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING THE
MSCI INDICES. NEITHER MSCI, ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR
RELATED TO, MAKING OR COMPILING ANY MSCI INDEX IS RESPONSIBLE FOR OR HAS
PARTICIPATED IN THE
DETERMINATION
OF THE TIMING OF, PRICES AT, OR QUANTITIES OF THE SECURITIES TO BE ISSUED OR IN
THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE SECURITIES ARE
REDEEMABLE FOR CASH. NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY
INVOLVED IN, OR RELATED TO, THE MAKING OR COMPILING ANY MSCI INDEX HAS ANY
OBLIGATION OR LIABILITY TO THE HOLDERS OF THE SECURITIES IN CONNECTION WITH THE
ADMINISTRATION, MARKETING OR OFFERING OF THE NOTES. ALTHOUGH MSCI
SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE
MSCI INDICES FROM SOURCES WHICH MSCI CONSIDERS RELIABLE,
NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN,
OR RELATED TO MAKING OR COMPILING ANY MSCI INDEX WARRANTS OR GUARANTEES THE
ORIGINALITY, ACCURACY AND/OR THE COMPLETENESS OF ANY MSCI INDEX OR ANY DATA
INCLUDED THEREIN. NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY
INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX MAKES ANY
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE,
LICENSEE’S CUSTOMERS OR COUNTERPARTIES, ISSUERS OF THE NOTES, HOLDERS OF THE
NOTES, OR ANY OTHER PERSON OR ENTITY, FROM THE USE OF ANY MSCI INDEX OR ANY DATA
INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY
OTHER USE. NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN,
OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX SHALL HAVE ANY LIABILITY FOR
ANY ERRORS, OMISSIONS OR INTERRUPTIONS OF OR IN CONNECTION WITH ANY MSCI INDEX
OR ANY DATA INCLUDED THEREIN. FURTHER, NEITHER MSCI, ANY OF ITS AFFILIATES NOR
ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX
MAKES ANY EXPRESS OR IMPLIED WARRANTIES OF ANY KIND, AND MSCI, ANY OF ITS
AFFILIATES AND ANY OTHER PARTY INVOLVED IN, OR RELATED TO MAKING OR COMPILING
ANY MSCI INDEX HEREBY EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO ANY MSCI INDEX AND ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MSCI,
ANY OF ITS AFFILIATES OR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR
COMPILING ANY MSCI INDEX HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL,
PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
No
purchaser, seller or holder of this security, or any other person or entity,
should use or refer to any MSCI trade name, trademark or service mark to
sponsor, endorse, market or promote this product without first contacting MSCI
to determine whether MSCI’s permission is required. Under no circumstances may
any person or entity claim any affiliation with MSCI without the prior written
permission of MSCI.
THE
NASDAQ-100 INDEX®
We have
derived all information contained in this Underlying Supplement regarding the
NASDAQ-100 Index® ,
including, without limitation, its make-up, method of calculation and changes in
its components, from publicly available information. Such information
reflects the policies of, and is subject to change by The Nasdaq Stock Market,
Inc. (“Nasdaq”). We make no representation or warranty as to the
accuracy or completeness of such information. The NASDAQ-100
Index®
was developed by Nasdaq and is calculated, maintained and published by
The NASDAQ OMX GROUP, Inc. (“NASDAQ OMX”). Neither Nasdaq nor NASDAQ
OMX has any obligation to continue to publish, and may discontinue publication
of, the NASDAQ-100 Index®
.
General
The
NASDAQ-100 Index® is a
modified market capitalization-weighted index of 100 of the largest stocks of
non-financial companies listed on The Nasdaq Global Market tier of The NASDAQ
Stock Market. The NASDAQ-100 Index® , which
includes companies across a variety of major industry groups, was launched on
January 31, 1985, with a base index value of 250.00. On
January 1, 1994, the base index value was reset to
125.00. Current information regarding the market value of the
NASDAQ-100 Index® is
available from Nasdaq as well as numerous market information
services. The NASDAQ-100 Index® is
reported by Bloomberg L.P. under the ticker symbol “NDX.”
The
NASDAQ-100 Index® share
weights of the component securities of the NASDAQ-100 Index® at any
time are based upon the total shares outstanding in each of those securities and
are additionally subject, in certain cases, to
rebalancing. Accordingly, each underlying stock’s influence on the
level of the NASDAQ- 100 Index® is
directly proportional to the value of its NASDAQ-100 Index® share
weight.
Calculation
of the NASDAQ-100 Index®
At any
moment in time, the value of the NASDAQ-100 Index® equals
the aggregate value of the then-current NASDAQ-100 Index® share
weights of each of the NASDAQ-100 Index®
component securities, which are based on the total shares outstanding of
each such NASDAQ-100 Index®
component security, multiplied by each such security’s respective last
sale price on The NASDAQ Stock Market (which may be the official closing price
published by The NASDAQ Stock Market), and divided by a scaling factor (the
“divisor”), which becomes the basis for the reported NASDAQ-100 Index®
value. The divisor serves the purpose of scaling such
aggregate value (otherwise in the trillions) to a lower order of magnitude which
is more desirable for NASDAQ-100 Index®
reporting purposes.
Underlying
Stock Eligibility Criteria and Annual Ranking Review
Initial
Eligibility Criteria
To be
eligible for initial inclusion in the NASDAQ-100 Index® , a
security must be listed on The NASDAQ Stock Market and meet the following
criteria:
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the
security’s U.S. listing must be exclusively on the NASDAQ Global Select
Market or the NASDAQ Global Market (unless the security was dually listed
on another U.S. market prior to January 1, 2004 and has continuously
maintained that listing);
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the
security must be of a non-financial
company;
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the
security may not be issued by an issuer currently in bankruptcy
proceedings;
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the
security must have an average daily trading volume of at least 200,000
shares;
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if
the security is of a foreign issuer (a foreign issuer is determined based
on its country of organization), it must have listed options on a
recognized market in the United States or be eligible for listed-options
trading on a recognized options market in the United
States;
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only
one class of security per issuer is
allowed;
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the
issuer of the security may not have entered into a definitive agreement or
other arrangement which would likely result in the security no longer
being NASDAQ-100 Index®
eligible;
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the
issuer of the security may not have annual financial statements with an
audit opinion that is currently
withdrawn;
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the
security must have “seasoned” on the NASDAQ Stock Market or another
recognized market (generally, a company is considered to be seasoned if it
has been listed on a market for at least two years; in the case of
spin-offs, the operating history of the spin-off will be considered);
and
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if
the security would otherwise qualify to be in the top 25% of the
securities included in the NASDAQ-100 Index® by
market capitalization for the six prior consecutive month-ends, then a
one-year “seasoning” criterion would
apply.
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Continued
Eligibility Criteria
In
addition, to be eligible for continued inclusion in the NASDAQ-100 Index® the
following criteria apply:
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the
security’s U.S. listing must be exclusively on the NASDAQ Global Select
Market or the NASDAQ Global Market (unless the security was dually listed
on another U.S. market prior to January 1, 2004 and has continuously
maintained that listing);
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the
security must be of a non-financial
company;
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the
security may not be issued by an issuer currently in bankruptcy
proceedings;
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the
security must have an average daily trading volume of at least 200,000
shares as measured annually during the ranking review process described
below;
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if
the security is of a foreign issuer, it must have listed options on a
recognized market in the United States or be eligible for listed-options
trading on a recognized options market in the United States, as measured
annually during the ranking review
process;
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the
security must have an adjusted market capitalization equal to or exceeding
0.10% of the aggregate adjusted market capitalization of the NASDAQ-100
Index® at
each month-end. In the event a company does not meet this
criterion for two consecutive month-ends, it will be removed from the
NASDAQ-100 Index®
effective after the close of trading on the third Friday of the
following month; and
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the
issuer of the security may not have annual financial statements with an
audit opinion that is currently
withdrawn.
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These
NASDAQ-100 Index®
eligibility criteria may be revised from time to time by Nasdaq without
regard to the Securities.
Annual
Ranking Review
The
NASDAQ-100 Index®
securities are evaluated on an annual basis, except under extraordinary
circumstances which may result in an interim evaluation, as follows (this
evaluation is referred to herein as the “Ranking Review”). Securities
listed on The NASDAQ Stock Market which meet the applicable eligibility criteria
are ranked by market value. NASDAQ-100 Index®
-eligible securities which are already in the NASDAQ-100 Index® and
which are ranked in the
top 100 eligible securities (based on market capitalization) are retained in the
NASDAQ-100 Index®
. A security that is ranked 101 to 125 is also retained, provided that such security
was ranked in the top 100 eligible securities as of the previous Ranking
Review. Securities not meeting such criteria are
replaced. The replacement securities chosen are those NASDAQ-100
Index®
-eligible securities not currently in the NASDAQ-100 Index® that
have the largest market capitalization. The data used in the ranking
includes end of October market data from The NASDAQ Stock Market and is updated
for total shares outstanding submitted in a publicly filed SEC document via
EDGAR through the end of November.
Generally,
the list of annual additions and deletions is publicly announced via a press
release in the early part of December. Replacements are made
effective after the close of trading on the third Friday in
December. Moreover, if at any time during the year, a NASDAQ-100
Index®
security is determined by Nasdaq to become ineligible for continued
inclusion in the NASDAQ-100 Index® , the
security will be replaced with the largest market capitalization security not
currently in the NASDAQ-100 Index® and
meeting the NASDAQ-100 Index®
eligibility criteria listed above.
Index
Maintenance
In
addition to the Ranking Review, the securities in the NASDAQ-100 Index® are
monitored every day by Nasdaq with respect to changes in total shares
outstanding arising from secondary offerings, stock repurchases, conversions or
other corporate actions. Nasdaq has adopted the following quarterly
scheduled weight adjustment procedures with respect to those changes. If the
change in total shares outstanding arising from a corporate action is greater
than or equal to 5.0%, that change will be made to the NASDAQ-100 Index® as soon
as practical, normally within ten days of such corporate
action. Otherwise, if the change in total shares outstanding is less
than 5.0%, then all those changes are accumulated and made effective at one time
on a quarterly basis after the close of trading on the third Friday in each of
March, June, September and December. In either case, the NASDAQ-100
Index®
share weights for those underlying stocks are adjusted by the same
percentage amount by which the total shares outstanding have changed in those
NASDAQ-100 Index®
securities. Ordinarily, whenever there is a change in the
NASDAQ-100 Index® share
weights, a change in a component security included in the NASDAQ-100 Index® , or a
change to the price of a component security due to spin-off, rights issuances or
special cash dividends, Nasdaq adjusts the divisor to ensure that there is no
discontinuity in the level of the NASDAQ-100 Index® which
might otherwise be caused by any of those changes. All changes will
be announced in advance and will be reflected in the NASDAQ-100 Index® prior to
market open on the effective date of such changes.
Index
Rebalancing
The
NASDAQ-100 Index® is
calculated under a “modified capitalization-weighted” methodology, which is a
hybrid between equal weighting and conventional capitalization
weighting. This methodology is expected to: (1) retain in
general the economic attributes of capitalization weighting; (2) promote
portfolio weight diversification (thereby limiting domination of the NASDAQ-100
Index®
by a few large stocks); (3) reduce NASDAQ-100 Index®
performance distortion by preserving the capitalization ranking of
companies; and (4) reduce market impact on the smallest NASDAQ-100
Index®
securities from necessary weight rebalancings.
Under the
methodology employed, on a quarterly basis coinciding with Nasdaq’s quarterly
scheduled weight adjustment procedures, the NASDAQ-100 Index®
securities are categorized as either “Large Stocks” or “Small Stocks”
depending on whether their current percentage weights (after taking into account
scheduled weight adjustments due to stock repurchases, secondary offerings or
other corporate actions) are greater than, or less than or equal to, the average
percentage weight in the NASDAQ-100 Index® (i.e., as a 100-stock index,
the average percentage weight in the NASDAQ-100 Index® is
1.0%).
This
quarterly examination will result in a NASDAQ-100 Index®
rebalancing if either one or both of the following two weight
distribution requirements are not met: (1) the current weight of the single
largest market capitalization component security must be less than or equal to
24.0% and (2) the “collective weight” of those component securities the
individual current weights of which are in excess of 4.5%, when added together,
must be less than or equal to 48.0%. In addition, Nasdaq may conduct
a special rebalancing if it is determined necessary to maintain the integrity of
the NASDAQ-100 Index®
.
If either
one or both of these weight distribution requirements are not met upon quarterly
review, or Nasdaq determines that a special rebalancing is required, a weight
rebalancing will be performed. First, relating to weight distribution
requirement (1) above, if the current weight of the single largest
component security exceeds 24.0%, then the weights of all Large Stocks will be
scaled down proportionately towards 1.0% by enough for the adjusted weight of
the single largest component security to be set to 20.0%. Second,
relating to weight distribution requirement (2) above, for those component
securities the individual current weights or adjusted weights in accordance with
the preceding step of which are in excess of 4.5%, if their “collective weight”
exceeds 48.0%, then the weights of all Large Stocks will be scaled down
proportionately towards 1.0% by just enough for the “collective weight,” so
adjusted, to be set to 40.0%.
The
aggregate weight reduction among the Large Stocks resulting from either or both
of the above rescalings will then be redistributed to the Small Stocks in the
following iterative manner. In the first iteration, the weight of the
largest Small Stock will be scaled upwards by a factor which sets it equal to
the average Index weight of 1.0%. The weights of each of the smaller
remaining Small Stocks will be scaled up by the same factor reduced in relation
to each stock’s relative ranking among the Small Stocks such that the smaller
the component security in the ranking, the less the scale-up of its
weight. This is intended to reduce the market impact of the weight
rebalancing on the smallest component securities in the NASDAQ-100 Index®
.
In the
second iteration, the weight of the second largest Small Stock, already adjusted
in the first iteration, will be scaled upwards by a factor which sets it equal
to the average index weight of 1.0%. The weights of each of the
smaller remaining Small Stocks will be scaled up by this same factor reduced in
relation to each stock’s relative ranking among the Small Stocks such that, once
again, the smaller the component stock in the ranking, the less the scale-up of
its weight.
Additional
iterations will be performed until the accumulated increase in weight among the
Small Stocks exactly equals the aggregate weight reduction among the Large
Stocks from rebalancing in accordance with weight distribution requirement (1)
and/or weight distribution requirement (2).
Then, to
complete the rebalancing procedure, once the final percent weights of each of
the component securities are set, the NASDAQ-100 Index® share
weights will be determined anew based upon the last sale prices and aggregate
capitalization of the NASDAQ-100 Index® at the
close of trading on the Tuesday in the week immediately preceding the week of
the third Friday in March, June, September and December. Changes to
the NASDAQ-100 Index® share
weights will be made effective after the close of trading on the third Friday in
March, June, September and December, and an adjustment to the NASDAQ-100
Index®
divisor will be made to ensure continuity of the NASDAQ-100 Index®
.
Ordinarily,
new rebalanced weights will be determined by applying the above procedures to
the current NASDAQ-100 Index® share
weights. However, Nasdaq may from time to time determine rebalanced
weights, if necessary, by instead applying the above procedure to the actual
current market capitalization of the component securities. In those instances,
Nasdaq would announce the different basis for rebalancing prior to its
implementation.
License
Agreement
Nasdaq
has entered into a non-transferable, non-exclusive license agreement granting us
and certain of our affiliated or subsidiary companies, in exchange for a fee,
the right to use the NASDAQ-100 Index®, in
connection with certain securities, including the Securities.
The
license agreement between Nasdaq and us provides that the following language
must be set forth in this Underlying Supplement:
The
Securities are not sponsored, endorsed, sold or promoted by The NASDAQ OMX
Group, Inc. (or its affiliates) (NASDAQ OMX, with its affiliates, are referred
to as the “Corporations”). The Corporations have not passed on the legality or
suitability of, or the accuracy or adequacy of descriptions and disclosures
relating to, the Securities. The Corporations make no representation or
warranty, express or implied to the owners of the Securities or any member of
the public regarding the advisability of investing in securities generally or in
the Securities particularly, or the ability of the NASDAQ-100 Index® to track
general stock market performance. The Corporations’ only relationship to us is
in the licensing of the NASDAQ®,
NASDAQ-100®, and
NASDAQ-100 Index®
registered trademarks, and certain trade names of the Corporations and the use
of the NASDAQ-100 Index®
which is
determined, composed and calculated by NASDAQ OMX without regard to us or the
Securities. NASDAQ OMX has no obligation to take our needs or the needs of us or
the owners of the Securities into consideration in determining, composing or
calculating the NASDAQ-100 Index®. The
Corporations are not responsible for and have not participated in the
determination of the timing of, prices at, or quantities of the Securities to be
issued or in the determination or calculation of the equation by which the
Securities are to be converted into cash. The Corporations have no liability in
connection with the administration, marketing or trading of the
Securities.
THE CORPORATIONS DO NOT GUARANTEE THE
ACCURACY AND/OR UNINTERRUPTED CALCULATION OF THE NASDAQ-100 INDEX® OR ANY DATA INCLUDED THEREIN. THE
CORPORATIONS MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED
BY US, OWNERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF
THE NASDAQ-100 INDEX® OR ANY DATA INCLUDED THEREIN. THE
CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE NASDAQ-100 INDEX® OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE CORPORATIONS HAVE
ANY LIABILITY FOR ANY LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT,
OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
THE
NIKKEI 225 INDEX
We have
derived all information contained in this Underlying Supplement regarding the
Nikkei 225 Index, including, without limitation, its make-up, method of
calculation and changes in its components, from publicly available
information. Such information reflects the policies of, and is
subject to change by Nikkei Inc. We make no representation or
warranty as to the accuracy or completeness of such information. The
Nikkei 225 Index was developed by Nikkei Inc. and is calculated, maintained and
published by Nikkei Inc. Nikkei Inc. has no obligation to continue to
publish, and may discontinue the publication of, the Nikkei 225
Index.
The
Nikkei 225 Index is reported by Bloomberg L.P. under the ticker symbol
“NKY.”
The
Nikkei 225 Index is a stock index that measures the composite price performance
of selected Japanese stocks. The Nikkei 225 Index, as of the date of
this Underlying Supplement, is based on 225 underlying stocks (the “Nikkei
Underlying Stocks”) trading on the Tokyo Stock Exchange (“TSE”) representing a
broad cross-section of Japanese industries.
All 225
Nikkei Underlying Stocks are stocks listed in the First Section of the
TSE. Stocks listed in the First Section of the TSE are among the most
actively traded stocks on the TSE. Nikkei Inc. rules require that the
75 most liquid issues (one-third of the component count of the Nikkei 225 Index)
be included in the Nikkei 225 Index.
The 225
companies included in the Nikkei 225 Index are divided into six sector
categories: Technology, Financials, Consumer Goods, Materials, Capital
Goods/Others and Transportation and Utilities. These six sector
categories are further divided into 36 industrial classifications as
follows:
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Technology
— Pharmaceuticals, Electrical Machinery, Automobiles, Precision Machinery,
Telecommunications;
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Financials
— Banks, Miscellaneous Finance, Securities,
Insurance;
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Consumer
Goods — Marine Products, Food, Retail,
Services;
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Materials
— Mining, Textiles, Paper and Pulp, Chemicals, Oil, Rubber, Ceramics,
Steel, Nonferrous Metals, Trading
House;
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Capital
Goods/Others — Construction, Machinery, Shipbuilding, Transportation
Equipment, Miscellaneous Manufacturing, Real Estate;
and
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Transportation
and Utilities — Railroads and Buses, Trucking, Shipping, Airlines,
Warehousing, Electric Power, Gas.
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The
Nikkei 225 Index is a modified, price-weighted index (i.e., a Nikkei Underlying
Stock’s weight in the index is based on its price per share rather than the
total market capitalization of the issuer) which is calculated by (i)
multiplying the per share price of each Nikkei Underlying Stock by the
corresponding weighting factor for such Nikkei Underlying Stock (a “Weight
Factor”), (ii) calculating the sum of all these products and (iii) dividing such
sum by a divisor (the “Divisor”). The Divisor was initially set at
225 for the date of May 16, 1949 using historical numbers from May 16, 1949, the
date on which the TSE was reopened. The Divisor was 24.656 as of
April 2, 2009 and is subject to periodic adjustments as set forth
below. Each Weight Factor is computed by dividing ¥50 by the par
value of the relevant Nikkei Underlying Stock, so that the share price of each
Nikkei Underlying Stock when multiplied by its Weight Factor corresponds to a
share price based on a uniform par value of ¥50. The stock prices
used in the calculation of the Nikkei 225 Index are those reported by a primary
market for the Nikkei Underlying Stocks (currently the TSE). The
level of the Nikkei 225 Index is calculated once per minute during TSE trading
hours.
In order
to maintain continuity in the Nikkei 225 Index in the event of certain changes
due to non-market factors affecting the Nikkei Underlying Stocks, such as the
addition or deletion of stocks, substitution of stocks, stock splits or
distributions of assets to stockholders, the Divisor used in calculating the
Nikkei 225 Index is adjusted in a manner designed to prevent any instantaneous
change or discontinuity in the level of the Nikkei 225 Index. Thereafter,
the Divisor remains at the new value until a further adjustment is necessary as
the result of another change. As a result of such change affecting
any Nikkei Underlying Stock, the Divisor is adjusted in such a way that the sum
of all share prices immediately after such change multiplied by the applicable
Weight Factor and divided by the new Divisor (i.e., the level of the Nikkei 225
Index immediately after such change) will equal the level of the Nikkei 225
Index immediately prior to the change.
A Nikkei
Underlying Stock may be deleted or added by Nikkei Inc. Any stock
becoming ineligible for listing in the First Section of the TSE due to any of
the following reasons will be deleted from the Nikkei Underlying Stocks: (i)
bankruptcy of the issuer, (ii) merger of the issuer with, or acquisition of the
issuer by, another company, (iii) delisting of such stock, (iv) transfer of such
stock to the “Seiri-Post” because of excess debt of the issuer or because of any
other reason or (v) transfer of such stock to the Second Section. In
addition, a component stock transferred to the “Kanri-Post” (Posts for stocks
under supervision) is in principle a candidate for deletion. Nikkei Underlying
Stocks with relatively low liquidity, based on trading value and rate of price
fluctuation over the past five years, may be deleted by Nikkei
Inc. Upon deletion of a stock from the Nikkei Underlying Stocks,
Nikkei Inc. will select a replacement for such deleted Nikkei Underlying Stock
in accordance with certain criteria. In an exceptional case, a newly
listed stock in the First Section of the TSE that is recognized by Nikkei Inc.
to be representative of a market may be added to the Nikkei Underlying
Stocks. In such a case, an existing Nikkei Underlying Stock with low
trading volume and deemed not to be representative of a market will be deleted
by Nikkei Inc.
A list of
the issuers of the Nikkei Underlying Stocks constituting the Nikkei 225 Index is
available from the Nikkei Economic Electronic Databank System and from the Stock
Market Indices Data Book published by Nikkei Inc. Nikkei Inc. may
delete, add or substitute any stock underlying the Nikkei 225 Index. Nikkei Inc.
first calculated and published the Nikkei 225 Index in 1970.
License
Agreement
The
Nikkei 225 Stock AverageSM and The Nikkei Index are the intellectual property of
Nikkei. “Nikkei,” “Nikkei Stock Average,” “Nikkei Average” and “Nikkei 225” are
the service marks of Nikkei. Nikkei reserves all the rights, including
copyright, to the Nikkei 225 Stock Average.
Nikkei
has entered into a license agreement providing ABN AMRO Bank N.V. a license, in
exchange for a fee, of certain trade and service marks with respect to indices
owned and published by Nikkei in connection with the issuance of the
Securities. The use of and reference to the Nikkei 225 Stock Average
in connection with the Securities have been consented to by Nikkei, the
publisher of the Nikkei 225 Stock Average.
Nikkei
gives no assurance regarding any modification or change in any methodology used
in calculating the Nikkei 225 Stock Average and is under no obligation to
continue the calculation and dissemination of the Nikkei 225 Stock
Average. The Securities are not sponsored, endorsed, sold or promoted
by Nikkei. No inference should be drawn from the information contained in this
Underlying Supplement that Nikkei makes any representation or warranty, implied
or express, to ABN AMRO Bank N.V., the holders of the Securities or any member
of the public regarding the advisability of investing in securities generally or
in the Securities in particular or the ability of the Nikkei 225 Stock Average
to track general stock market performance. Nikkei has no obligation
to take the needs of ABN AMRO Bank N.V. or the holders of the Securities into
consideration in determining, composing or calculating the Nikkei 225 Stock
Average. Nikkei is not responsible for, and has not participated in the
determination of, the timing of, prices for, or quantities of, the Securities to
be issued or any amount payable with respect to the Securities is
set. Nikkei has no obligation or liability in connection with the
administration, marketing or trading of the Securities .
Nikkei
disclaims all responsibility for any errors or omissions in the calculation and
dissemination of the Nikkei 225 Stock Average or the manner in which such index
is applied in determining the interest rate or any other amount payable in
respect of the Securities.
THE
FINANCIAL SELECT SECTOR INDEX
We have derived all information
contained in this Underlying Supplement regarding the Financial Select
Sector Index and the index from which it is derived, the S&P 500®
Index, including, without
limitation, the make-up, method of calculation and changes in components for
each index, from publicly available information. Such information
reflects the policies of, and is subject to change by, Standard &
Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”), or the NYSE Arca’s Index Services Group, as index
compilation agent (the “Index Compilation Agent”) and as index calculation agent (the
“Index Calculation Agent”). We make no representation
or warranty as to the accuracy or completeness of such
information. For further information about the S&P
500®
Index, please see
“The S&P 500®
Index” above.
The Financial Select Sector Index is a
modified market capitalization-based index, intended to provide an indication of
the pattern of common stock price movements of companies that are components of
the S&P 500® Index and are involved in the
development or production of financial products. Companies in the
Financial Select Sector Index include a wide array of diversified financial
services firms whose business lines range from investment management to
commercial and business banking. The Financial Select Sector Index is
one of the nine Select Sector sub-indices of the S&P 500® Index, each of which we refer to as a
“Select Sector Index.”
The stocks included in the Financial
Select Sector Index are selected by the Index Compilation Agent in consultation
with S&P from the universe of companies represented by the S&P
500® Index. The composition and
weighting of the stocks included in the Financial Select Sector Index will
likely differ from the composition and weighting of stocks included in any
similar S&P 500® sector index that is published and
disseminated by S&P. The NYSE Arca’s Index Services Group acts as the
“Index Calculation Agent” in connection with the calculation and
dissemination of the Financial Select Sector Index. S&P’s only relationship to the Index
Compilation Agent is the licensing of certain trademarks and trade names of
S&P and of the S&P 500® Index which is determined, composed and
calculated by S&P without regard to the Index Compilation
Agent.
As of December 31, 2008, the Financial Select Sector Index had
a 13.34% weighting in the S&P 500® Index based on the capitalization of
the constituent stocks.
Construction and
Maintenance
The Financial Select Sector Index is
developed and maintained in accordance with the following
criteria:
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Each of the component stocks in
the Financial Select Sector Index (the “Component Stocks”) is a constituent company of the
S&P 500®
Index.
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Each stock in the S&P
500® Index is allocated to one and
only one of the Select Sector
Indices.
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The Index Compilation Agent
assigns each constituent stock of the S&P 500® Index to a Select Sector
Index. The Index Compilation Agent, after consultation with
S&P, assigns a particular company’s stock to the Financial Select
Sector Index on the basis of such company’s sales and earnings composition
and the sensitivity of the company‘s stock price and business results
to the common factors that affect other companies in the Financial Select
Sector Index. S&P has sole control over the removal of
stocks from the S&P 500® Index and the selection of
replacement stocks to be added to the S&P 500® Index. However,
S&P plays only a consulting role in the assignment of the S&P
500® Index constituent stocks to the
Financial Select Sector Index, that assignment being the sole
responsibility of the Index Compilation
Agent.
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The Financial Select Sector Index
is calculated by the Index Calculation Agent using a modified “market capitalization” methodology. This
design ensures that each of the Component Stocks within the Financial
Select Sector Index is represented in a proportion consistent with its
percentage with respect to the total market capitalization of the
Financial Select Sector Index. Under certain conditions,
however, the number of shares of a Component Stock within the Financial
Select Sector Index may be adjusted to conform to Internal Revenue Code
requirements.
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The Financial Select Sector Index
is calculated using the same methodology utilized by S&P in
calculating the S&P 500® Index, using a base-weighted
aggregate methodology. See “—The S&P 500® Index” below. The daily
calculation of the Financial Select Sector Index is computed by dividing
the total market value of the companies in the Financial Select Sector
Index by a number called the index
divisor.
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The Financial Select Sector Index
is weighted based on the market capitalization of each of the Component
Stocks, subject to the following asset diversification requirements:
(i) the market capitalization-based weighted value of any single
Component Stock measured on the last day of a calendar quarter may not
exceed 24.99% of the total value of the Financial Select Sector Index; and
(ii) with respect to 50% of the total value of the Financial Select Sector
Index, the market capitalization-based weighted value of the Component
Stocks must be diversified so that no single Component Stock measured on
the last day of a calendar quarter represents more than 4.99% of the total
value of the Financial Select Sector
Index.
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Rebalancing the Financial Select
Sector Index to meet the asset diversification requirements will be the
responsibility of the Index Calculation Agent. If shortly prior
to the last business day of any calendar quarter (a “Quarterly Qualification
Date”), a Component Stock (or two or
more Component Stocks) approaches the maximum allowable value limits set
forth above (the “Asset Diversification
Limits”), the percentage that such
Component Stock (or Component Stocks) represents in the Financial Select
Sector Index will be reduced and the market capitalization based weighted
value of such Component Stock (or Component Stocks) will be redistributed
across the Component Stocks that do not closely approach the Asset
Diversification Limits in accordance with the following methodology:
First, each Component Stock that exceeds 24% of the total value of the
Financial Select Sector Index will be reduced to 23% of the total value of
the Financial Select Sector Index and the aggregate amount by which all
Component Stocks exceed 24% will be redistributed equally across the
remaining Component Stocks that represent less than 23% of the total value
of the Financial Select Sector Index. If as a result of this
redistribution, another Component Stock then exceeds 24%, the
redistribution will be repeated as necessary. Second, with
respect to the 50% of the value of the Financial Select Sector Index
accounted for by the lowest weighted Component Stocks, each Component
Stock that exceeds 4.8% of the total value of the Financial Select Sector
Index will be reduced to 4.6% and the aggregate amount by which all
Component Stocks exceed 4.8% will be distributed equally across all
remaining Component Stocks that represent less than 4.6% of the total
value of the Financial Select Sector Index. If as a result of
this redistribution another Component Stock that did not previously exceed
4.8% of the Financial Select Sector Index value then exceeds 4.8%, the
redistribution will be repeated as necessary until at least 50% of the
value of the Financial Select Sector Index is accounted for by Component
Stocks representing no more than 4.8% of the total value of the Financial
Select Sector Index. If necessary, this reallocation process
may take place more than once prior to a Quarterly Qualification
Date.
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The Index Compilation Agent at any time
may determine that a Component Stock which has been assigned to one Select
Sector Index has undergone such a transformation in the composition of its
business that it should be removed from that Select Sector Index and assigned to
a different Select Sector Index. In the event that the Index
Compilation Agent notifies the Index Calculation Agent that a Component
Stock’s Select Sector Index assignment should
be changed, the Index Calculation Agent will disseminate notice of the change
following its standard procedure for announcing index changes and will implement
the change in the affected Select Sector Indices on a date no less than one week
after the initial dissemination of information on the sector change to the
maximum extent practicable. It is not anticipated that Component
Stocks will change sectors frequently. Component Stocks removed from
and added to the S&P 500® Index will be deleted from and added to
the appropriate Select Sector Index on the same schedule used by S&P for
additions and deletions from the S&P 500® Index insofar as
practicable.
License Agreement with
S&P
We have entered into a non-exclusive
license agreement with Standard & Poor’s, a division of The McGraw-Hill
Companies, Inc.. (“S&P”) for use of the Financial Select Sector
Index in connection with certain securities, including the
Securities.
The license agreement between S&P
and us provides that the following language must be set forth in this Underlying
Supplement:
“Standard & Poor’s®”, “S&P®”, “
Standard & Poor’s 500 Composite Stock Price
Index®”, “S&P 500® Index”, “Standard & Poor’s 500®”, “
Standard & Poor’s Depositary Receipts®” and “SPDRs®” are trademarks of The McGraw-Hill
Companies, Inc. State Street Global Markets, LLC is permitted to use
these trademarks pursuant to a License Agreement with Standard &
Poor’s, a division of The McGraw-Hill
Companies, Inc., and SPDR Trust, Series 1, is permitted to use these trademarks
pursuant to a sublicense from State Street Global Markets, LLC. SPDR Trust,
Series 1 is not, however, sponsored by or affiliated with Standard &
Poor’s or The McGraw-Hill Companies, Inc.
These
trademarks and service marks have been licensed for use for certain purposes by
ABN AMRO Bank N.V. The Securities have
not been passed on by any of the foregoing entities. The Securities are not
sponsored, endorsed, sold or promoted by any of the foregoing entities and none
of the above makes any warranties or bears any liability with respect to the
Securities.