Filed pursuant to Rule 433
Registration Statement Nos. 333-162193 and 333-162193-01
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Enhanced Participation Notes(TM)
Investor Products
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RBS Enhanced Participation Notes Risk/Reward Profiles
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Enhanced Participation Notes(TM) ("EPNs") are market-linked investments that
seek to enhance your exposure to market returns up to a stated cap. EPNs are
unsecured and unsubordinated obligations of the issuer, The Royal Bank of
Scotland N.V. ("RBS NV"), that are linked to broad market measures, such as the
SandP 500 Index, or to specific assets, such as stocks, currencies, commodities,
or exchange traded fund shares. If held to maturity, and if the linked market
measure appreciates, EPNs will pay a specified multiple (greater than 100% and
up to 300%) of the return of the linked market measure, up to the stated cap.
Like all debt securities, payments on EPNs are subject to the credit risk of the
issuing company--in this case, RBS NV. However, unlike conventional bonds, EPNs
involve risk to your principal invested if the linked market measure declines in
value. EPNs are generally available in $1,000 increments with typical maturities
of between one and three years.
There are three broad categories of EPNs with different levels of risk to
principal at maturity. The last page of this fact sheet contains a brief summary
of these categories. The following are examples of hypothetical EPN terms to
show the return profiles of three EPN categories. EPNs are registered with the
Securities and Exchange Commission ("SEC") and offered by means of a prospectus
specific to the relevant EPN offering. Before buying any EPNs, you should read
the relevant prospectus for a detailed explanation of the terms, risks, tax
treatment and other relevant information. We also urge you to consult your
accounting, legal and tax advisors before investing. Hypothetical information
below does not reflect the terms of any actual EPN.
Category and Return Profile
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EPNs WITH FULL EXPOSURE
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Level of Principal at Risk at Maturity
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[] Full exposure to any decline in the linked market measure.
[] At maturity, you will be exposed to any decrease in the linked market
measure on a one-to-one basis.
[] You may lose some or all of your investment.
Hypothetical Terms
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Term: 24 months
Upside
Participation Rate: 300%
Maximum Return: 25%
Downside Exposure: Full exposure (100% of
principal invested at risk)
EPNs WITH FIXED BUFFER
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Level of Principal at Risk at Maturity
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[] Full exposure to any decline in the linked market measure beyond the fixed
buffer.
[] At maturity, you will be exposed to any decrease in the linked market
measure below the fixed buffer on a one-to-one basis.
[] You may lose some or a substan- tial portion of your investment.
Hypothetical Terms
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Term: 24 months
Upside
Participation Rate: 200%
Maximum Return: 20%
Fixed Buffer: 10%
Downside Exposure: Full exposure beyond the
fixed buffer (i.e., 90% of
principal invested at risk)
RBS Investor Products | 1-866-747-4332 | investor.products@rbs.com
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Category and Return Profile
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EPNs WITH CONTINGENT BUFFER
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Level of Principal at Risk at Maturity
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[] Full exposure to any decline in the linked market measure if the market
measure falls to or below the contin- gent buffer level at any time during
the term of the EPNs.
[] The contingent buffer offers protec- tion at maturity against a decrease in
the linked market measure only if a Knock-Out Event does not occur. If a
Knock-Out Event occurs, you will be exposed to any decrease in the linked
market measure on a one- to-one basis.
[] You may lose some or all of your investment.
Hypothetical Terms
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Term: 24 months
Upside
Participation Rate: 200%
Maximum Return: 23%
Contingent Buffer: 30%
Knock-Out Event: Linked market measure falls to or below the
contingent buffer level at any time during the term of the
EPNs.
Downside Exposure: Full Exposure if a Knock-Out Event occurs. No
exposure if a Knock-Out Event does not occur; in this case,
the EPN will offer protection of your invested principal at
maturity against a decline in the value of the linked market
measure.
Assuming the same maturity date and linked market measure, EPNs without a buffer
(i.e., full exposure to any decline in the linked market measure) tend to have
greater upside potential (i.e., higher upside participation rates and/or stated
caps) than those with a buffer. Similarly, EPNs with a contingent buffer tend to
have higher upside participation rates and/or stated cap than EPNs with a fixed
buffer, assuming all other terms are the same. Any payment on the EPNs remains
subject to the credit risk of the issuer, RBS NV.
What advantages do Enhanced
Participation Notes provide?
Enhanced return, up to a cap. When EPNs mature, you will be entitled to receive
any increase in the value of the linked market measure multiplied by the
participation rate, up to a stated cap. For example, if the EPN that you buy
promises to pay you 200% of any increase in the value of the linked market
measure up to a stated cap of 25%, then, if the value of the linked market
measure increases, you will receive at maturity twice the return of the linked
market measure subject to a maximum return on the note of 25%. The enhanced
participation feature can help investors to potentially outperform a direct
investment in the linked market measure in a moderately bullish market
environment, subject to a pre-determined cap.
Reduce market downside exposure (only for EPNs with a buffer).
[] For EPNs with a fixed buffer, regardless of how the linked market measure
performs, you will be entitled to receive at least a portion of the
principal of the note back at maturity, subject to the credit risk of the
issuer. The []xed buffer provides a modest protection of your investment
against a decline in the value of the linked market measure. For an EPN
with a 10% buffer, the linked market measure would have to decline 11% for
you to experience a 1% loss, and 90% of your principal is at risk if the
linked market measure falls to zero.
[] EPNs with a contingent buffer provide a tactical cushion against a modest
decline in the value of the linked market measure only if the linked market
measure does not fall to or below the level of the contingent buffer at any
time during the term of the EPN. If the value of the linked market measure
falls to or below the level of the contingent buffer at any time during the
term of the EPNs, you will be exposed to the full decrease in the value of
the linked market measure with no cushion against any market measure
decline. In such an instance, you will experience a 1% loss for every 1%
decline in the value of the linked market measure, and you may lose some or
all of your investment.
RBS Investor Products | 1-866-747-4332 | investor.products@rbs.com
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Asset diversification. EPNs can provide exposure to a variety of market
measures, including some not readily available through mutual funds or exchange
traded funds. However, all EPNs of the same issuer will carry the same credit
risk and, as such, will not offer portfolio diversification from a credit
perspective.
Strategic investment solution for an overall portfolio. EPNs offer investors a
single packaged solution, which are more readily accessible to most investors
than executing complicated investment strategies. They can play a strategic role
as a portion of an investment portfolio by offering the potential for enhanced
growth, up to a specified limit, while providing a modest protection against
market declines in the case of EPNs with a buffer. EPNs are not meant to serve
as the primary portion of any investment portfolio. As with all investments, you
should carefully consider the risk of asset and credit concentration of EPNs in
your portfolio.
What are some of the risks of an investment in Enhanced Participation Notes?
Poor market performance. If the linked market measure performs poorly, you could
experience lower returns than anticipated and may lose some or all of your
invested principal.
Lower returns. Because returns are limited by a stated cap, if the linked market
measure performs well, your returns could be lower than they would have been if
you were invested directly in that market measure. In addition you will not
receive any dividends, interest payments or other distributions from the linked
market measure. Depending on the performance of the linked market measure, your
EPNs may provide lower returns than other bonds.
Limited liquidity. There may be little or no secondary market for the EPNs, so
you may not be able to sell them prior to maturity. If you are able to sell your
EPNs, you may receive less than you paid. You should be willing and able to hold
your EPNs until the maturity date.
Credit risk. EPNs are unsecured and unsubordinated obligations of RBS NV. If RBS
NV goes bankrupt or is unable to pay its debts, you could lose your full
investment, even if the linked market measure is performing well. The notes are
unsecured and not backed by FDIC insurance or any other governmental support.
Further, all EPNs of the same issuing company carry the same credit risk.
Tax consequences. Significant aspects of the U.S. federal income tax treatment
of the EPNs are uncertain. You should consult your tax advisor before
investing.
See "Risk Factors" in the applicable prospectus for more information.
What do I pay when I buy an Enhanced Participation Note?
EPNs are generally offered in new issue offerings at $1,000 per note. Part of
the $1,000 you pay for each new issue EPN goes to the broker selling you the
investment. Because the broker is paid a selling commission for its EPN sales,
the broker is incentivized to sell you the EPN. This amount will be disclosed to
you on the cover of the relevant prospectus. The $1,000 that you pay for each
new issue EPN will also include hedging costs, principally reflecting a profit
component built into the price that RBS NV may have paid to hedge its
obligations under the EPN. As a result of these fees and costs, the value that
you might expect to receive if you were able to resell your EPNs on the day that
you purchase them will be less than $1,000.
What is RBS' role in selling Enhanced Participation Notes?
The proceeds from the sale of EPNs will be used for RBS NV's general corporate
purposes and, in part, by RBS NV or its affiliates in connection with hedging
the issuer's obligations under the EPNs. RBS Securities Inc., a U.S.
broker-dealer, will be paid an underwriting discount or selling commission for
EPNs offered through it. RBS Securities Inc. and its affiliated companies also
expect to engage in trading, hedging and investment activities related to the
EPNs or any of the linked market measures.
RBS Investor Products | 1-866-747-4332 | investor.products@rbs.com
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RBS Investor Products
RBS Investor Products are divided into four broad categories depending on the
level of risk to your principal invested at maturity: Protection, Fixed Buffer,
Contingent Buffer and Full Exposure. These broad categories are intended to help
you to first understand the degree of your principal at risk at maturity, before
you consider the upside potential of RBS Investor Products. The following
description is only an overview of the four categories of RBS Investor Products,
and does not represent any particular security nor guarantee performance. Capped
EPNs are available only in the Fixed Buffer, Contingent Buffer or Full Exposure.
Any payment on the EPNs remains subject to the credit risk of RBS NV, as issuer
of the EPNs, and RBS Holdings, as guarantor of the issuer's obligations.
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Protection investments provide for full or partial protection on your invested
principal at maturity against downside market movements, subject to the
creditworthiness of the issuer and the guarantor. These securities are designed
for investors who place a priority on the preservation of principal at maturity,
while potentially offering better returns than traditional fixed income
investments. These securities tend to have a longer term than securities that do
not offer protection, and principal invested is not protected prior to maturity.
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Fixed Buffer investments provide a modest buffer at maturity against downside
market movements. These securities are designed for investors who seek potential
growth or income, and who also seek some cushion against modest market declines
up to a specified buffer. You are exposed to the full market decline in the
underlying asset beyond the specified buffer, and you can lose some or a
substantial portion of your investment.
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Contingent Buffer investments provide some protection against downside market
movements only if the underlying asset does not fall to or below a specified
level during the term of the securities. If the underlying asset falls to or
below this specified level, you are exposed to the full market decline in the
underlying asset at maturity without any cushion against downside market
movements. These investments are for more aggressive investors who can tolerate
full downside risk but find the contingent buffer to be an appealing form of
tactical cushion. You can lose some or all of your investment.
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Full Exposure investments expose investors to full downside risk to any decline
in the underlying asset. These investments are meant for investors who are
willing to take full market risk in return for either enhanced appreciation or
access to a unique underlying asset or strategy. You can lose some or all of
your investment.
IMPORTANT NOTICE: The Royal Bank of Scotland N.V. (RBS NV) has filed a
registration statement (including a prospectus) with the Securities and Exchange
Commission, or SEC, for the offering to which this communication relates. Before
you invest, you should read the prospectus in that registration statement and
other documents, including the applicable EPN product supplement, related to
this offering that RBS NV has filed with the SEC for more complete information
about RBS NV and the offering of the securities. You may get these documents
without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively,
RBS NV, any underwriter or any dealer participating in this offering will
arrange to send you the prospectus and EPN product supplement if you request by
calling toll free (866) 747-4332.
RBS Investor Products | 1-866-747-4332 | investor.products@rbs.com
Dated February 4, 2011
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