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Dual Currency Deposit
ABN AMRO Bank N.V. has voluntarily signed on to the moratorium on distributing particularly complex structured products
to retail investors that has been proposed by the FSMA. This does not constitute a judgement as to the risks inherent in the
product. This structured product qualifies as particularly complex for retail investors under the terms of the moratorium by
the FSMA on the distribution of particularly complex structured products. This document is addressed solely to clients who
hold moveable assets with ABN AMRO BANK N.V. that exceed EUR 500,000 and that allow an investment in structured
products with the portion of the moveable assets held with ABN AMRO BANK N.V. that exceeds EUR 500,000
More information on the moratorium is available on the website www.fsma.be.
A Dual Currency Deposit or DCD is
a short-term investment that offers
investors the possibility of receiving a
substantially higher yield for moderate
movements in exchange rates. It is
highly suited to investors with assets in
more than one currency, with investment
plans in a foreign currency, or with a
clear currency vision. A DCD will be of
interest to you if you do not mind if the
capital and interest are converted into an
alternative currency. The more risk you
are prepared to accept, the higher the
potential yield. The yield depends on a
number of variables including: currency
pair, term (tailored), market interest rates
and volatility of currencies.
Product description
There is a DCD variant for either currency vision: up or
down.
With an up-variant, the capital is repaid in the base
currency if the spot rate at expiration date is equal to or
below the conversion rate. If the spot rate at expiration
date is above the conversion rate, the capital plus interest
is repaid in the alternative currency.
The reverse applies for a down-variant. The capital is
repaid in the base currency if the spot rate at expiration
date is greater than or equal to the conversion rate. If
the spot rate at expiration date is below the conversion
rate, the capital plus interest is repaid in the alternative
currency.
A DCD is a structured tailored product combining a
traditional deposit with the sale of a currency option.
The investor agrees to a conversion rate fixed by mutual
agreement for an agreed alternative currency. By selling an
option, at the exchange rate agreed in advance, investors
can substantially increase their return. The deposit is
placed with ABN AMRO Bank N.V.
Basic parameters
•
Minimum capital deposit: EUR 100,000 or the equivalent
in another agreed currency (“the base currency”);
•
Accepted currencies: all major currencies including but
not restricted to EUR, USD, GBP, CHF, NOK, AUD, CAD,
Target group
•
extensive experience in the currency markets.
•
The interest rate, conversion rate and variant (up or
down) are determined at the outset; interest is taxed
at source;
•
The minimum term is 1 week;
•
The maximum term is 1 year;
•
Conversion into the alternative currency determined at
•
•
•
•
This product is highly suitable if you have assets in
more than one currency or if you have investment
ZAR, NZD, JPY, SEK, SGD, HKD;
•
This product is only suitable for you if you have
plans in a foreign currency.
•
Consult your Private Banker or Investment Advisor
concerning your investor profile.
Risks
the outset if the actual spot rate of the currency pair
Credit risk: all positions are held in the books of
is higher (in the case of an up-variant) or lower (in the
ABN AMRO Bank N.V. The ratings for ABN AMRO Bank
case of a down-variant) than the conversion rate on the
N.V. as at 1 January 2013 are: A for S&P; A2 for Moody´s;
expiration date (two business days before maturity);
and A+ for Fitch.
Interest is paid in the same currency as the capital.
Consequently, in the case of the conversion of the
Market risk: a DCD is not a capital guaranteed product.
capital, the interest is also converted into the alternative
The investor runs the risk that the expected market
currency and paid together with the deposit at maturity
developments concerning exchange rates fail to materialise,
date;
making the conversion rate less favourable than the spot
DCD’s cannot be transferred to another account,
rate. This means that the yield on the invested assets can
whether or not at another bank;
be nil or even negative. ABN AMRO Bank reserves the
DCD’s cannot be terminated by the client during the
right to terminate DCD’s during the term in the event of
term or traded;
circumstances distorting the market.
Detailed information is also to be found in the Dual
Currency Deposit Agreement.
Liquidity risk: a DCD is not negotiable or transferable and
cannot be terminated by you during the term. Note: the
Cost
No separate charges apply for buying and selling. The
cost of structuring the DCD by the Bank depends on
the amount, complexity, currency pair and term of the
transaction and is included in the interest. The interest is
subject to withholding taxes.
principal is withdrawn from your account as soon as the
contract for the DCD is signed and is not included in the
calculation of your spending limit.
Notes on operation of the DCD up-variant:
•
Example: investment in EUR and the alternative currency is USD.
•
Suppose the current EUR/USD spot rate is 1.387 and you do not expect this to rise substantially. Then you choose a
conversion rate above the current EUR/USD spot rate, for example 1.395.
•
If the EUR/USD spot rate at 10 a.m. New York time on the expiration date is above the predetermined conversion
rate, the capital and interest are converted into the alternative currency (in this case USD) at the previously agreed
conversion rate.
•
If the EUR/USD spot rate on the expiration date is lower than or equal to the conversion rate, the capital and interest
are paid in the currency of the investment (in this case EUR).
Up-variant
Repayment in
DCD
Interest rate
Interest Rate
Return
alternative currency
Repayment in
base currency
Market
Interest rate
0
Spot rate <
Conversion rate
< Spot rate
Spot rate on
expiration
Up-variant scenarios
DCD term:
1 year
DCD capital:
EUR 100,000
Alternative currency:
USD
Expiration date (Fixing Date):
2 business days before the maturity of the deposit, at 10 a.m. New York time.
DCD interest % p.a.:
5%
Conversion rate:1.395
Spot rate on start date:
1.387
Scenario 1
EUR/USD spot rate is above the
conversion rate on the expiration
date
Scenario 2
EUR/USD spot rate is equal
to the conversion rate on the
expiration date
Scenario 3
EUR/USD spot rate is below the
conversion rate on the expiration
date
EUR/USD spot rate on
expiration date
1.48
1.395
1.31
Capital + interest*
146,475 USD
105,000 EUR
105,000 EUR
Annual yield versus
spot rate on expiration
date
- 1,030.40 EUR
- 1.03 %
5,000 EUR
+5%
5,000 EUR
+5%
Calculation
((105,000 * 1.395)/1.48) - 100,000
(100,000 + 5,000)
(100,000 + 5,000)
* Gross yield subject to tax at source (25%) 1
1
Subject to changes in the tax regime. For more information, please don’t hesitate to contact your Private Banker.
Notes on operation of the DCD down-variant:
•
Example: investment in USD and the alternative currency is EUR.
•
Suppose the current EUR/USD spot rate is 1.387 and you do not expect this to fall substantially. Then you choose a
conversion rate below the current EUR/USD spot rate, for example 1.37.
•
If the EUR/USD spot rate at 10 a.m. New York time on the expiration date is below the predetermined conversion
rate, the capital and interest are converted into the alternative currency (in this case USD) at the previously agreed
conversion rate.
•
If the EUR/USD spot rate on the expiration date is equal to or above the conversion rate, the capital and interest are
paid in the currency of the investment (in this case USD).
Down-variant
DCD
Interest rate
Interest Rate
Return
Repayment in
Repayment in
alternative currency
base currency
Market
Interest rate
0
Spot rate <
Conversion rate
< Spot rate
Spot rate at
expiration
Down-variant scenarios
DCD term:
1 year
DCD capital:
USD 100,000
Alternative currency:
EUR
Expiration date (Fixing Date):
2 business days before the maturity of the deposit, at 10 a.m. New York time
DCD interest % p.a.:
5%
Conversion rate:1.37
Spot rate on start date:
EUR/USD spot rate on
expiration date
1.387
Scenario 1
EUR/USD spot rate is above
the conversion rate on the
expiration date
Scenario 2
EUR/USD spot rate is equal
to the conversion rate on the
expiration date
Scenario 3
EUR/USD spot rate is below
the conversion rate on the
expiration date
1.45
1.37
1.29
Capital + interest*
105,000 USD
105,000 USD
76,642.34 EUR
Annual yield versus
spot rate on expiration
date
5,000 USD
+5%
5,000 USD
+5%
- 1,131.39 USD
- 1.13 %
Calculation
(100,000 + 5,000)
(100,000 + 5,000)
((105,000/ 1.37)*1.29) - 100,000
* Gross yield subject to tax at source (25%) 1
1
Subject to changes in the tax regime. For more information, please don’t hesitate to contact your Private Banker.
DISCLAIMER
Prospective investors must understand that the risks associated with this product and should reach an investment
decision in relation to this product after careful consideration, if necessary in consultation with their advisers,
including as to whether this product is in keeping with their own investment policy. The information contained
in this document has been drawn up by ABN AMRO and is intended as general information and is not tailored to
your personal situation. The information is therefore definitely not to be considered as advice or as a proposal or
offer for 1) buying or trading in financial instruments and/or 2) purchasing investment services or as investment
advice.
Any decisions you make on the basis of the information contained in this document are for your own account
and risk. The information and terms and conditions applying to financial instruments offered by ABN AMRO and
investment services provided by ABN AMRO are to be found in the ABN AMRO Securities Services Terms which
form part of ABN AMRO general banking terms and are available from www.abnamro.be. This product is also
subject to the provisions of the Dual Currency Deposit Agreement. Although ABN AMRO endeavours to provide
complete, up-to-date information from reliable sources, ABN AMRO makes no warranties, express or implied, as
to whether this document is correct, complete or up to date. ABN AMRO accepts no responsibility for printing
and typesetting errors. The information contained in this document is subject to change without prior notice.
ABN AMRO is not obliged to update or amend the information contained herein. ABN AMRO and/or its agents or
subcontractors accept no liability whatsoever for any loss (including loss of profits), arising in any way from the
information offered to you in this document or its use. ABN AMRO or the rightholder reserves all rights (including
copyright, trademarks, patents and other intellectual property rights) in relation to all information provided in this
document (including all text, graphics and logos). The information contained in this document may not be copied
or published in any form, distributed or reproduced without the prior written permission of ABN AMRO or the
consent of the rightholder. However you may print out the information contained in this document for your own
personal use.
ABN AMRO is not a registered broker-dealer and investment adviser under the U.S. Securities Exchange Act of
1934 and the U.S. Investment Advisers Act of 1940, as amended from time to time and under other applicable laws
and regulations of the individual states of the United States of America. Unless an exception applies under the
aforementioned laws, the provision of securities services by ABN AMRO including (but not limited to) the products
and services described herein, and the advice in this respect, is not intended for US Persons as defined by the
aforementioned laws and regulations. This document or copies thereof must not be sent or taken to the United
States of America or supplied to US Persons. Nevertheless, it is not the intention to sell or distribute or offer the
services and/or products described in this document to persons in countries in which ABN AMRO is barred on
the basis of any legal provision. Any party in possession of this document or copies thereof must check for itself
whether any legal restrictions apply to the publication and distribution of this document and/or the purchase of
the services and/or products described in this document and bear such restrictions in mind. ABN AMRO is not
liable for loss resulting from services and/or products purchased contrary to the aforementioned restrictions. This
brochure was produced on 1 March 2012.
AAPB - April 2013
ABN AMRO Bank N.V., registered office Gustav Mahlerlaan 10, 1082 PP Amsterdam, the Netherlands, Amsterdam
Chamber of Commerce 34334259. Belgian office, Roderveldlaan 5 bus 4, 2600 Berchem, Belgium, Registry of
Antwerp Commercial Court (Companies Register) 0819.210.332 VAT BE 0819.210.332. (‘ABN AMRO‘) is the issuing
institution.