1 van 54 - 1 -- 1 -

Exit advice ABN AMRO

May 2015

2 van 54

Content

Foreword 4

Summary and conclusions 6

1. NLFI Research 101.1 Preconditions 101.2 Parliamentary debate on the Exit Advice of 23 August 2013 10

2. Exit readiness of ABN AMRO 132.1 Results achieved and strategy of ABN AMRO 132.2 Internal readiness 162.3 Price expectations 172.4 Timing 19

3. Exit options and are the financial markets sufficiently stable? 223.1 Exit options 223.2 Stabilityoffinancialmarkets 23

4. Details of an IPO of ABN AMRO 254.1 Absorptivecapacityofthemarket 284.2 IPO costs 29

5. Governance after initiating exit by means of an IPO 365.1 Introduction 365.2 Public interest 365.3 Further details on governance 375.4 Stable shareholder base 44

6. Conclusion 51

Attachment: IPO process outline 53

4 van 54

Foreword

InthislettertheTrustOfficeFoundationfortheManagementofFinancialInstitutions(Stichtingadministratiekantoorbeheerfinanciëleinstellingen),actingunderthenameNLFI,advisestheMinisterofFinanceonreturningtheABNAMROsharesheldbyNLFI to the private sector. This advisory report is a follow-up to the report dated 23August2013,inwhichNLFIexaminedthevariousexitoptionsforABNAMROGroup NV and a.s.r. Nederland NV. The report contains an independent assessment byNLFIofthedegreeofABNAMRO’sreadiness,theIPOastherecommendedexitoption and the recommended protection measure.

This advisory report is partly based on an intensive and constructive collaboration between NLFI and ABN AMRO.

NLFI is grateful to the Ministry of Finance for providing its opinion on draft versions of this report.

Inaddition,discussionswereheldwithanumberofinvestmentbanks,financialandlegaladvisors,umbrellaorganisationsforinstitutionalandotherinvestors,aswellasother experts who shared their views with us. NLFI is very grateful to all those who helped with the production of this document.

NLFI has noted with interest the report entitled IPOs and Bookbuilding in Future HM Government Primary Share Disposals recently published by the team led by Lord MynersinresponsetotheprivatisationofRoyalMail.NLFIwillexplicitlytaketherecommendations of the report into consideration in the process going forward.

NLFI

May 2015

6 van 54

Summary and conclusions

On23August2013,theTrustOfficeFoundationfortheManagementofFinancialInstitutions(Stichtingadministratiekantoorbeheerfinanciëleinstellingen),actingunderthenameNLFI(hereinafter:NLFI),submittedanExitAdviceforABNAMROGroupNV(hereinafter:(ABNAMRO)anda.s.r.NederlandNV.TheexitofABNAMROwas discussed extensively in the parliamentary debate on this Exit Advice and the letter‘FutureplansforfinancialinstitutionsABNAMRO,ASRandSNSREAAL’fromtheMinisterofFinancedated23August2013.Inresponse,theMinisteraskedABNAMROtoprepareinternallyforanIPOwithouttakingirreversiblesteps,concurrentlywith a request to NLFI to subsequently issue a new Exit Advice.

This letter contains NLFI’s advice to the Minister on the exit strategy for returning theABNAMROsharesheldbyNLFItotheprivatesector.ThetaskcomplieswithNLFI’slegalpurposeaslaiddownintheTrustOfficeFoundationfortheManagementofFinancialInstitutionsAct(Wetstichtingadministratiekantoorbeheerfinanciëleinstellingen,theNLFIAct).1OnauthorisationbytheStateoftheNetherlands,NLFIshall implement this strategy in the name of the State.

Inpreparingthisadvice,NLFIactedinaccordancewithitspurposeasdescribedinits articles of association. In lawfully performing its duties and exercising the rights associatedwiththeshares,NLFIhasprimarilyfocusedonthefinancialandeconomicinterestsoftheState,2whiletakingintoconsiderationtheinterestsofthecompany,itssubsidiariesandaffiliatesandtheemployees.Amongotherthings,thismeansthatNLFIhastakentheinterestsofthevariousstakeholdersofABNAMROintoconsideration when drawing up this report.

SeparateinformationwillbeprovidedontheexitoptionsforSNSBankNV(SNSBank),asubsidiaryofSNSREAALNV.The(timingofthe)exitofSNSBankNVwillhavenoinfluenceontheexitpossibilitiesforABNAMRO.ThisisduetothefactthatSNSBankisasmallerandentirelydifferentbanktoABNAMRO,additionallythereisexpectedtobeenoughabsorptivecapacityinthemarket.

As discussed in the House of Representatives in 2011 and reiterated in the letter fromtheMinisterdated23August2013,ABNAMROmayreturntothemarketwhenthefinancialsectorissufficientlystable,providingthereissufficientinterestinthemarketandthecompanyisready.Theobjectiveistorecoverasmuchaspossibleofthe total capital expenditure of the State.

1 Article3,secondparagraph,sectionb,at1°oftheNLFIAct.2 ThefinancialandeconomicinterestsoftheStatearelinkedtotheexchangeablecertificatesforshares

issuedbyNLFI(commercialname)ratherthanashareholdinginthecompanies.

7 van 54

Theseconditionsarenowmet,acircumstancethatwillbefurtherexplainedinthisadvisory report. If the Minister of Finance and the House of Representatives agree to theexitstrategyproposedbyNLFI,theexitwillstartfromthefourthquarterof2015.

Inhisletterof23August2013,theMinisterstatedthatthepresent(follow-up)report will re-examine whether the then intended form of sale is still preferred. In thelastfewmonths,NLFIhascarefullyexploredandassessedtheexpectedvaluetobeobtainedfromthepreviouslyrecommended‘dualtrack’approach,wherebyaninitialpublicoffering(IPO)constitutesthebaselinescenario,whiletheoptionofaprivatesaleiskeptopenaslongaspossible.Seriousinterestofstrategicpartnersand the potential of these parties to pay a reasonable price for an acquisition and at the same time add strategic value to ABN AMRO has not been found so far. In the opinionofNLFI,anIPOisstilltheoptimalexitoptionforABNAMRO.NLFIrecommends that the external preparations for ABN AMRO’s exit by means of an IPO arestarted,sothatanIPOmayoccurfromthefourthquarterof2015.

Any exit by ABN AMRO initiated by an IPO will mean that there will be new shareholders. The interest and control of NLFI and the State in ABN AMRO will therefore decrease in favour of the new shareholders. To adequately protect the remaininginterestoftheStateinthisnewsituation,NLFIrecommendstheintroductionofastatutoryrequiredqualifiedmajorityforimportantresolutionsatshareholder meetings relating to the character and identity of ABN AMRO.

ToprotectthecontinuityofthebankpriortoanIPOofABNAMRO,NLFIrecommendsestablishingatrustofficeintheformofafoundationtowhichthesharesthattheStateintendstosellonthestockexchangearetransferred.WiththecooperationofABNAMRO,thefoundation(hereinafter:ABNAMROContinuityFoundation)willprovideinvestorswithcertificatesforthesharesofwhichtheyarethenthebeneficialowners.3Thepositionofcertificateholdersisnotmateriallydifferentfromshareholders.Thevotingrightsonshareswillautomaticallyaccruetothecertificateholdersbymeansoftheproxyright.Certificateholderscanopttovotethemselves,indicatethatABNAMROContinuityFoundationcanvoteontheirbehalforabstainfrom voting. There is one exception: in certain cases of unwanted shareholder activismanda(potential)takeoveronwhichnoagreementisreachedwithABNAMRO,theFoundationcantemporarilyassumethevotingrightofallcertifiedsharesbylimiting,excludingorrevokinggrantedvotingproxiesandthusprovidingtemporary protection for the continuity of ABN AMRO. As long as the interest of the Stateisgreaterthanone-third,theABNAMROContinuityFoundationcanonlyundertakesuchaninterventionwiththeapprovalofNLFIandtheState.

3 IfandinsofarasthecertificationofsharesisultimatelychosenasthemannerofprotectingthecontinuityofABNAMRO,thelistedABNAMROsharesmentionedinthisExitAdviceareinfactlistedABNAMROcertificates.

8van 54

Asa(systemicallyimportant)bank,ABNAMROmustgivesomeconsiderationtosociety as a whole. NLFI endorses the desire of ABN AMRO to anchor this social role in the articles of association at the start of the sale.

Thiscombinationofmeasuresandexistinglegislationwill,intheopinionofNLFI,adequatelyprotectthepublicinterest,theremainingfinancialinterestoftheStateandtheinterestofABNAMRO,itsaffiliatedcompaniesandtheemployees.

Finally,inthisreport,NLFIwilldiscusstheoptionofintroducingloyaltysharesduringtheexitofABNAMRO.Duetouncertaintyregardingthebenefitsandapplicationofloyaltyshares,aswellastheaccompanyingsignificantdisadvantagesandrisksincludingfromaninvestorperspective,NLFIrecommendsthatthesearenotintroduced.

10 van 54

1 NLFI Research

1.1 Preconditions

AsdiscussedintheHouseofRepresentativesin2011,ABNAMROmayreturntothemarketifthefinancialsectorissufficientlystable,thereissufficientinterestinthemarketandthecompanyisready.TheobjectiveistorecoverasmuchaspossibleofthetotalcapitalexpenditureoftheState.Thesepreconditionswerealsospecifiedinthe coalition agreement in October.4 In the state aid procedure of the European Commission,theStatealsodeniedanyintentionofwillinglyinvestinginABNAMROover the long term.5YoualsoexpressedthisobjectiveinyourlettertotheHouseofRepresentatives dated 23 August 2013.6NLFIhastakenintoaccountthementionedpreconditions in this recommendation.

1.2 Parliamentary debate on the Exit Advice of 23 August 2013

The exit options of ABN AMRO were extensively discussed in the NLFI Exit Advice dated 23 August 2013. The Minister also gave his vision on the exit possibilities in his letter of the same date. The exit of ABN AMRO was extensively discussed in a parliamentarydiscussionregardingthisletter(writtenconsultation(2013D45598),responsetotheMinisterdated25November2013,thegeneralmeetingon27November2013andtheVAOPlansforthefutureoffinancialinstitutionsABNAMRO,ASRandSNSREAALon12December2013).TopicsthatwerediscussedincludealternativestoanIPO,thetimingofanexit,thecostsassociatedwithanexit,variousprotectionmeasuresandthepossibilityofaloyaltyshareandavolksaandeel(retailoffering).Allofthesetopicsareaddressedinthisreport.

IntheVAOPlansforthefutureoffinancialinstitutionsABNAMRO,ASRandSNSREAAL(AOdated27November2013),thereareseveralmotionsrelatingtoABNAMRO.ThisconcernsthemotionsMerkies(no.43,32013),VanHijum(no.4432013)

4 ‘…ABNAMROmayonlyreturntothemarketwhenthefinancialsectorisstable.Theremustbeadequateinterestinthemarket,thebusinessmustbereadyforthistransitionandasmuchaspossibleoftheState’stotalinvestmentmustberecovered.Againstthisbackground,weareinvestigatingtheotheroptionsthatexistalongsideafullstockmarketflotation…’.CoalitionagreementbetweenVVD–PvdA,‘Bruggenslaan’(Buildingbridges),29October2012.

5 CommissionDecisionof5April2011onmeasuresC11/09(exNN53b/08,NN2/10andN19/10)implemented by the Dutch State for ABN AMRO Group NV (created following the merger between Fortis BankNederlandandABNAMRONV),point87-88,OJL333/1,15December2011(http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:333:0001:0046:EN:PDF).

6 Parliamentarypaper:TweedeKamerderStatenGeneraal,vergaderjaar2012-2013,32013,nr.36(HouseofRepresentatives,session2013-2014,32013,no.36).

11 van 54

andNijboer(no.46,32013).Votingonthemtookplaceon17December2013.Motions43and44wererejectedandmotion46(anchoringpublicinterestinthearticlesofassociation)wasadopted.Motion46hasbeenincorporatedinthisreport(chapter5).

Aftertheparliamentarydebate,youaskedABNAMROtoprepareinternallyforanexit,withanIPOasthemostlikelyoption.Theoptionofastrategicsalewouldbekeptopen.

13 van 54

2 Exit readiness of ABN AMRO

2.1 Results achieved and strategy of ABN AMRO

Initscurrentform,ABNAMROistheresultofamergeroftheDutchdivisionsofABNAMROandFortisBankNederlandpurchasedbytheStateoftheNetherlands(State)in2008.Workstartedonintegrationimmediatelyafterthemerger.Thenecessaryprogress has since then been achieved. The integration was accomplished well within time(in3years)andunderbudget(€1.6billionbeforetax),whilecustomershardlyexperiencedanyinconvenience.Theexpectedannualsynergisticbenefitsamountingto€1.1billionbeforetaxhavebeenachieved.Thecapitalpositionhasstrengthened,and the review of various programmes has led to cost savings on several fronts. It is expectedthatthecost/incomeratioofthebankwillbecomemorestableinthefuture and will subsequently continue to improve.

The‘new’bankstrategyhasbeendefinedandimplementedoverthepastfewyears.TheresultisabankthatisoneofthethreelargestbanksintheNetherlandsandprovidesproductsandservicestobothprivateandbusinesscustomers,basedona‘full service bank’ model.7Examplesincludemortgages,savings,paymentservices,loans,tradefinancing,financialadvice,etc.ThemajorityofrevenueisgeneratedinNetherlands.Thebankisactiveinternationallyinanumberofareasthatarecountedamongthecorecompetenciesofthebank:privatebanking(servicesforwealthyclients),internationallendinginEnergy,CommoditiesandTransportation(‘ECT’),clearingoffinancialtransactionsonexchangesworldwide(‘Clearing’)andAssetBasedFinancing(suchasleasingandcommercialfinance).Thebankfocusesonthefollowingstrategictopics:puttingitscustomers’interestsfirst,investinginthefuture,maintainingamoderateriskprofile,selectiveinternationalgrowthandimprovementofprofitability.NLFItruststhatABNAMRO,whenimplementingthestrategy,willensurethatachievingthefinancialobjectiveswillcoincidewithafocuson customer’s interests.

ABNAMROhasformulatedanumberoffinancialobjectivesfor2017:• ReturnonEquity(‘RoE’–theprofitabilityofthebank)of9-12%;• Cost/incomeratio(‘C/I’–theefficiencymeasureofthebank)of56-60%;• CommonEquityTier1(‘CET1’–thesolvencyofthebank)of11.5-12.5%.

7 A‘fullservicebankmodel’meansthatabankoffersavariedproductandservicepackagetobothbusinessandprivatecustomers.ABNAMROdoesthisthroughitsretailbanking,privatebankingandcorporatebankingdivisions.

14 van 54

RoEhasdisplayedanupwardtrendsince2014,andtheaverageRoEoverthepastfourquartershasbeenwithinthestatedtargetasofQ42014,asshowninthegraphbelow:

-1,4

%

10,9

%

9,2%

12,7

%

10,9

%

8,2%

5,5%

10,9

%

0%

5%

10%

15%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013 2014

2012 2013 2014

ROE van kwartaal ROE van jaar 4Q moving average

The results of Q4 2014 show that the control of costs has improved compared to Q4 2013.Thecost/incomeratiooverthewholeof2014ispositionedatthetopofthetargetrangefor2017,whichis56-60%.ItshouldbenotedthatsavingsinoperatingcostsarepartiallyoffsetbysharplyincreasedcostsforsuchitemsasthebanktaxandtheAssetQualityReview(AQR).TheabovepercentageshavebeenadjustedfortheSNSresolutioncharge.Intheyearsahead,ABNAMROexpectsrisingcostsassociated with new contributions to the deposit guarantee scheme and the European Resolution Fund. The last quarter of 2014 also shows a positive turn in provisions as well as a continuation of the improving net interest margin.

65%

58%

61%

57%

61%

58%

62%

59%

6%

4%

2%

1%

1%

5 0%

57%

64%

71%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013 2014

2012 2013 2014

C /I   ex   bank   tax

Bank   tax

4Q  m ov ing  averag e

TheCET1ratioofthebankissolidandabovethetargetof11.5%-12.5%.Theoutcome of the AQR and stress test shows that the balance sheet and capital position are robust. The impact of the outcome of the AQR on core capital as at 31 December 2013wasminimalatonly12basispoints(0.12%).Withthecurrentcapitalposition,ABN AMRO can also adequately accommodate the impact of the outcome of the stress-tests.

The progress has been achieved despite core capital being negatively impacted in thesecondquarterof2014bythetransitiontoadefinedcontributionpensionplan.Thenegativeimpactoncorecapitalamountedtoapproximately€1.7billion(Basel

15 van 54

III phased-in Common Equity Tier 1 capital).ABNAMROundertookthistransitioninorder to mitigate the volatility in the results due to changed accounting policies.

14,5%

12,8%

13,0%

14,1%

14,1%

1 0%

12%

14%

16%

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Fu llyL oaded

Basel   I I B as el   I I I

IntheExitAdvicedated23August2013,NLFIformulatedanumberofstrategicchallengesforthebankwithaviewtothepossibleexitbytheState,includingthenecessaryprofitabilityinsomedivisions.Overthepastyear,ABNAMROhasmadethenecessaryprogressinthisregard.Theprofitabilityinprivatebankinghasimproved,and the results of the business divisions were already showing improvement in 2014 andareexpectedtofurtherimproveinthecomingyears,recuperatingtheircostsintermsofequitycapital.Equityderivativetransactionsarenolongertakingplaceinthecommercialdivision,Dutchtreasurydeskshavebeencentralisedand market activitiesinAsiaareclosed.Thishasreducedriskweightedassetssothat,iftheriskinvolvedinexistingactivitiesremainsconstant,lesscapitalinvestmentwillberequired in the years ahead.

Thebankhaspreparedastrategicplanfor2014-2017thatprovidesagoodbasisforthe‘equitystory’ofthebank(asummaryofthestrategicplanincludingthereasonswhyinvestorsshouldbuythesharesofABNAMRO).Inthestrategicplan,thebankoutlinesavisionofauniversalbankwithatop3positionintheNetherlandsineachofitsthreecoreactivities:retail,privateandcorporatebanking.OutsidetheNetherlands,selectivegrowthisanticipatedbasedonthecorecompetenciesofthebankinprivatebanking,ECT,ClearingandAssetBasedFinancing.ThepositionofABNAMROisunderpinnedbyacontinuedfocusonefficiencyandcostcontrol,amoderateriskprofileandastrongcapitalposition.

ABN AMRO shares could be presented to investors as ‘dividend shares’.8 Investors expect an attractive annual dividend from such a share. The strategic plan of ABN AMROindicatesthatthebankwillbeabletopayastableorincreasingdividend,while maintaining a strong capital position and at the same time increasing its incomeandprofitability.

8 A ‘dividend share’ is different to a ‘growth-share’. Shares in companies that expect strong growth in revenuesand/orprofitabilityforfutureyearsandarethereforeabletopaylittleornodividends,arecalled‘growth-shares’.Thefuturevalueofsuchacompanymayincreasesignificantlybutisalsoassociatedwithgreaterrisk.

16 van 54

Intermsofsustainability,thebankhasdevelopedanumberofinitiativesoverthepast years on account of which it is also ready for an exit in this area. These initiatives can be divided into three categories:1. focusingoncustomerinterests,buildinglastingrelationshipsandcommittingfinancialexpertisetosociety;

2. providingsustainableandresponsiblefinancingandadvice;3. implementing sustainable business operations.

2.2 Internal readiness

The management and supervisory boards of ABN AMRO have provided NLFI with confirmationofthebank’sinternalreadinessforexit.NLFIhassufficientconfidenceinthisconclusion,inpartbasedontheinformationobtainedfromtheongoingdialoguethatNLFIhasheldwiththebank’smanagementandsupervisoryboardsinthe course of its regular engagement with management activities over a period runningbackmorethanayear.

Should you and the House of Representatives agree to an IPO for ABN AMRO to occur fromthefourthquarterof2015,thefuturesyndicateofinvestmentbanksthatwillbeassistingtheIPOwillsubsequentlyhavetoexternallyvalidatethefinalexitreadinessbasedontheinformationatthattime.Theleadingsyndicatebanksareoftenreferredtoasthe‘(joint)globalco-ordinators’(‘glocos’).Theseglocoswillalsohave to perform due diligence for the other parties involved in the syndicate (see Annex1)withrespecttothecompany’skeyfinancial,tax-related,legalandcommercial factors relating to its activities in the Netherlands and abroad. Thesyndicatebankswillbeassistedinthistaskbytheirconsultants,includinglegalandfinancialadvisors.Thisprocesswillfurthermoreoccurincollaborationwiththecompany’saccountant.Theindicatedadvisorswillalsobeaskedbythebanksyndicatetoconfirmtheresultsoftheirinvestigations.Thisduediligenceprocessshould help to ensure that the prospectus contains information about everything thatisreasonablyimportantforaninvestortoknowbeforemakinganinvestmentdecision.Theprospectusismeanttofocusextensiveattentiononthepotentialrisksassociated with an investment in ABN AMRO. This process is also intended to avoid possible prospectus liability of the company and syndicate members. The prospectus will ultimately have to be submitted for AFM approval. The company is primarily responsible for the creation of an accurate prospectus that deals fully with all essentialpoints.NLFI,initsroleasasellingshareholder,willengageitsownadvisorstooverseetheprocessofpreparingtheprospectusundertakenbythecompanyanditsadvisorsalongwiththesyndicateofcommercialbanksandtheiradvisors. Besides the external investigation of the internal readiness of ABN AMRO foranIPObythesyndicateofinvestmentbanks,theEuropeanCentralBankandtheDutchCentralBank(hereinafter‘theSupervisor’9)willalsomakeajudgementabout

9 Startingon4November2014,theECBisresponsibleforthesupervisionofABNAMROundertheSingleSupervisoryMechanism(SSM).ItwillcarryoutthisactivityinclosecooperationwithDNB(JointSupervisoryTeam).

17 van 54

the exit readiness of ABN AMRO shortly prior to its IPO. This will occur in the context oftheapplicationforadeclarationofnoobjection(DNO).Theprocesswillincludeanassessmentoftheriskmanagementsystemsandtheeffectivenessofinternalcontrol systems.InviewofthisDNOprocedure,ABNAMROandNLFIhaveheldregularconsultations with the Supervisor on the readiness of ABN AMRO in preparation for theexit.DNB/ECBhavesetanumberofconditionsforanIPO.ABNAMROhasalready made the necessary progress towards meeting these conditions. Some sub-processesarestillongoing,butABNAMROisexpectedtocompletemostoftheminthefirsthalfof2015.InassessingtheapplicationfortheDNO,theSupervisorwilldetermineifABNAMROmeetsthespecificconditions.TheSupervisorisalreadyindiscussions with ABN AMRO about the DNO process to be followed at that time.

2.3 Price expectations

Thevaluationoffinancialinstitutionsdisplayedacleardownwardtrendduringthefinancialcrisis.Since2012,thedownwardspiralhasbeenreversedintoapositivetrend,asshowninthegraphbelowoftheprice-to-bookmultiplesofEuropeanbanks(basedonIFRScapital).Thesemultiplesreflecthowbanksarevalued.

* The peers in this graph are: Lloyds, Nordea, Intesa Sanpaolo, Credit Agricole, Handelsbanken, Swedbank, DNB ASA, Danske Bank, KBC Group, Commerzbank, Société Generale, RBS, BNP Paribas, UniCredit and ING Group. The European Banks Index is the STOXX Europe 600 Banks index.

ThefinancialresultsachievedbyABNAMROinthepastyearalsoprovideevidenceofimprovement.Thesolidpositioning,thestrategicplanandtheprojectedresultsand

18van 54

capital development in the coming years give rise to the expectation that a valuation atleastequaltoABNAMRO’sbookvalueappearstobefeasible,basedoncurrentmarketconditions.ThistiesinwiththepriceambitionformulatedbyNLFIintheExitAdviceof2013.For2014,thiswouldmeananamountofapproximately€15billion,whileitamountedtoapproximately€13.6billionin2013.ABNAMROhasmadeprogress towards achieving its plans for the coming years.

IntheeventofanIPO,aso-called‘IPOdiscount’shouldbetakenintoaccount.Thisisadiscountonthepriceofthefirstpartofthesharesthataresold(firsttranche)and is due to the fact that the share has no historical share price and the company hasnotrackrecordasalistedcompany.ThisuncertaintyforinvestorsisreflectedintheIPOprice.Historicaldatasuggestsanaveragediscountof10%-15%.The extent of the IPO discount for ABN AMRO is impossible to determine in advance. Itlargelydependsonmarketconditions,demandfor(banking)shares,stockmarketvolatility,resultsofdiscussionswithpotentialinvestors,trustofpotentialinvestorsinABNAMRO’sstrategicplanandfinancialobjectivesandclarityaboutthepoliticalintentionsregardingthefutureofthebank(forexample,inwhattimeframedoestheStateintendtohavefullyphasedoutitsinterestsinABNAMRO).Acommonmethodfor calculating the IPO discount retrospectively is to compare the IPO price to the pricedevelopmentonthefirstdayorweekoftradingintheshares.

ThetotalproceedsfromtheexitofABNAMROwillonlybeknownoncethefullinterest of the State has been sold.10

The proceeds of an exit of ABN AMRO are offset by the amount invested by the State in ABN AMRO. This amount is included in the table below. The cost of capital of the State are not included therein. The dividend payments or other sums received and (bank)taxeshavealsonotbeentakenintoaccount.

D e s c r ip tion D a te AB N  AMRO

Na tiona lis a tion  Fo rtis  Ne de rla nd O ct-­‐0 8 € 1 2 ,8 0 0  mlnRe ca p ita lis a tion  ABN  AMRO De c-­‐0 8 € 4 ,3 2 0  mlnMa nda to ry  C onve rtib le  No te   (MC N)   I Ju l-­‐0 9 € 8 0 0  mlnMC N   I I  a nd  conve rs ion  o f   lo a n s   in  E V De c-­‐0 9 € 3 ,1 5 0  mlnC oupon  p a yme n ts  MC N  no t   re ce ive d Ap r-­‐1 0 € 1 0 3  mlnRe s idua l   re ca p ita lis a tion  ABN  AMRO Jun -­‐1 0 € 4 9 0  mln

T ota l  e x pe nd itu r e s € 2 1 ,6 6 3  m ln

10 TheprivatisationofTNT(formerlyPTT)lastedatotalof17years,forexample,andKPNlasted12years.

19 van 54

TheParliamentaryInquiryCommitteeofontheFinancialSystem(Parlementaire Enquêtecommissie Financieel Stelsel)concluded11in2012that,whiletheinvestmentcertainlyhadeconomicvalue,itwasunlikelythatthetotalinvestmentwouldberecovered.ItisobviouslytheobjectiveandlegalroleofNLFItorecouptheinvestedcapital to the maximum extent possible.

2.4 Timing

The general meeting of 27 November 2013 included extensive discussions on the timingofanexit:‘Whatistherighttime’,‘whynotwaitalittlelonger’werequestionsthatwereasked.Thissectiondiscussesthequestionofwhenisanopportunetimetolaunch the exit.

Immediatelyaftertherescuein2008,itwasclearthatABNAMROshouldreturntothemarketassoonasreasonablypossible.YouandyourpredecessorsinofficehavebeenindicatingsincetherescueoperationinOctober2008thattheinterimnatureoftheinvestments,whichweremadeintheinterestsofsecuringthestabilityofthefinancialsector,hasalwaysbeenamainpriority;areturntotheprivatesectorwasand is the cabinet’s intention.12 The parliamentary debate on several letters from your predecessors concerning the future of ABN AMRO suggests that there has been political agreement since 2009 on the re-privatisation of ABN AMRO in the foreseeable future.13ThisisinlinewiththerecommendationmadebytheCommissionontheStructureofDutchBanks(Commissie Structuur Nederlandse Banken)advocatingnormalisationofrelationsinordertostimulatecompetitionintheDutchbankingsectorbyprivatisingstate-ownedbanksassoonascircumstancesallow.TheStatehas also indicated on many occasions during the state aid procedure at the European CommissionthatithasnointentionofinvestinginABNAMROoverthelongterm.14

Section2.1(exitreadiness)indicatesthattheinternalpreparationofABNAMROhasnowbeencompleted.Asindicated,thereadinessofABNAMROwillhavetobevalidatedexternallybytheassistinginvestmentbanks.Inaddition,theSupervisormustissueaDNOshortlybeforetheIPO.Inpractice,theseprocessestakeafewmonths.Iftheseprocessesarecompletedinapositivewayandthemarketisstillstableatthattime(section3.2),andtheabsorptivecapacityofthemarketisofasufficientlevel(section4.3),NLFIisoftheopinionthatanIPOcanoccurfromthefourth quarter of 2015. Not only does NLFI consider an IPO to be feasible but also

11 FindingsoftheParliamentaryInquiryCommitteeontheFinancialSystem,11April2012.12 Parliamentarypaper:TweedeKamerderStatenGeneraal,vergaderjaar2010-2011,hoofddossier28165,

nr.117(HouseofRepresentative,session2011-2012,maindossier31789,no.41).13 Generalmeetingof2July2009ontheletterfromtheMinisterofFinanceconcerningFortisBank

NederlandandABNAMROdated26June2009(31.789,no.12)andgeneralmeetingof8December2009ontheletterfromtheMinisterofFinancedated19November2009(31789,no.23).

14 CommissionDecisionof5April2011onmeasuresC11/09(exNN53b/08,NN2/10andN19/10)implemented by the Dutch State for ABN AMRO Group NV (created following the merger between Fortis BankNederlandandABNAMRONV),point87-88,OJL333/1,15December2011(http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:333:0001:0046:EN:PDF)

20 van 54

importantbecausewhennewshareholdersjoin,theywilladdanewperspectivetothe future results of ABN AMRO.

NLFI recommends that you now approve the start of external preparation for a possible IPO of ABN AMRO from the fourth quarter of 2015. Following approval by youandtheHouseofRepresentatives,NLFIandABNAMROwillcommencethispreparationincludingformingasyndicateofinvestmentbankssothatanIPOcanactuallytakeplacefromthefourthquarterof2015.Inthisphase,irreversiblestepswillbetaken.15 There will be ongoing monitoring of compliance with the aforementioned conditions. Should any pertinent changes occur in the coming period,theexitprocesscanthenbeput‘onhold’.Inaddition,theSupervisorwillassess the IPO of ABN AMRO before issuing a DNO.

15 JustasapplyingforadeclarationofnoobjectionfromtheSupervisorandhiringinvestmentbankstoassistintheIPO,writingaprospectusforwhichtheapprovaloftheAFMisrequired,etc.

22 van 54

3 Exit options and are the financial markets sufficiently stable?

3.1 Exit options

IntheNLFIreportof23August2013andthesubsequentparliamentarydebate,considerable attention was paid to the various exit options that NLFI envisaged for ABNAMRO.Eachoptionwasdiscussedextensively,andaconclusionwasdrawnonthesuitabilityofeachoptionforABNAMRO.IntheopinionofNLFI,anIPOwasthemostlikelyexitrouteforABNAMRO.Asaletocustomersandaconversiontoacooperativestructureappearedtobecomplex,reducedthebank’scapacitiestostrengthen its capital in emergency situations and yielded proceeds for the State thatwereexpectedtobelow.GiventhesizeofABNAMRO,asaletoastrategicpartner or a private investor was not considered a viable option. In accordance with therecommendationofNLFIandafterdiscussionwiththeHouseofRepresentatives,you requested ABN AMRO and NLFI to start the internal preparations for an exit of ABNAMROviaanIPO,withoutexcludingtheoptionofaprivatesaletoastrategicpartyorprivateinvestor.AsindicatedinthepreviousExitAdvice,NLFIwould,inthisso-called‘dualtrack’approach,keeptheoptionofaprivatesaleopenaslongaspossible without approaching parties pro-actively. Any interest from strategic parties orprivateinvestorswouldbeexaminedandassessed,shoulditoccur.Inrecentmonths,NLFIhascarefullyinvestigatedandassessedthetwo‘tracks’intermsofexpectedvaluerealisation.Strategicpartnershaveyettoshowanyinterest,todemonstrateanypotentialtopayareasonablepriceforanacquisitionand,fromastrategicperspectivewithregardtoABNAMRO,toaddanyvalue.IntheopinionofNLFI,anIPOisstilltheoptimalexitoptionforABNAMRO.Giventhesizeofthecompany,bothintermsoftotalassetsandrevenuesaswellexpectedvaluation,ABNAMROisacompanythatfitswellintoastockexchangelistedenvironment.AlistingallowsABNAMROaccesstothestockmarkettoraiseadditionalcorecapital(equity),shouldthisbenecessaryincertaincircumstances.Thebankwouldthereforebenot(entirely)dependentontheState.Theabilitytoraiseadditionalcapitalwhenneededhasaddedvalue,especiallyforasystemicallyimportantfinancialinstitution.ABNAMROhasbeenactiveintheinternationalbondmarketforyearstoattractsubordinatedcapitalandfundingforthebank.Thecostsincurredbythebankforthispurposeareinlinewiththoseofcomparablebanks.

IftheexitofABNAMROislaunchedviaanIPO,suchaprocessdoesnotruleoutthepossibility that the remaining interest of the State is then sold entirely or partly in oneormoretranchesandtooneormoreparties(includingstrategicparty/iesand/

23 van 54

orprivateinvestor(s))afterthelistingoftheABNAMROsharesonaregulatedmarket(seechapter4).

3.2 Stability of financial markets

According to DNB16calmhasreturnedtothefinancialmarketsatalevelcomparabletobeforethecrisis.Stronginterventionbygovernmentsandcentralbankshascontributedsignificantlytothis.However,therecoveryremainsfragileand,according toDNB,anegativelychangingmarketsentimentshouldnotberuledout.Therefore,itisclearlyimportantthatthefinancialsectorissufficientlypreparedforfutureheadwinds.Tothisend,crucialstepshavebeentakeninthereformprocessatnational and European level over the last year in order to strengthen the stability of thefinancialsector.

TheresultsoftheECBAQRandstresstestwerepublishedon26October2014.17

TheseanalyseswereneededbeforetheECBcouldassumebanksupervision.TheECBAQRandstresstestrevealedthatthesevensurveyedDutchbanks;INGBank,Rabobank,ABNAMRO,SNSBank,BNGBank,NWBBankandtheRoyalBankofScotlandN.V.,areallwellcapitalized.Italsofoundthatthesebankscontinuetohaveaccesstosufficientcapitalincaseofadverseeconomicdevelopments.BankshavefailedthetestelsewhereintheEurozone.Theseare25bankswithatotalcapitalshortfallof€25billion.Twelveofthesebankshavealreadyreplenished€15billionofthisshortfall.SeveralbanksstrengthenedtheircapitalpositioninanticipationoftheECBAQRbytaperingrisksorattractingadditionalcapital.FinancialmarketsreactedpositivelytotheresultsoftheECBAQRandstresstest.NLFIhasthereforeconcludedthatthefinancialmarketsaresufficientlystableforanIPOofABNAMRO.

16 DNB,OverviewofFinancialStability,fallof2014,no.20.17 See in particular the letter from the Minister of Finance to the House of Representatives dated

26October2014,referenceFM/2014/1645N.

25 van 54

4 Details of an IPO of ABN AMRO

InthecaseofABNAMRO,NLFIwillsellthesharesonbehalfoftheState,andreceivetheproceedsforthebenefitoftheState(a‘secondaryoffering’).Adescriptionoftheprocessofasalethroughthestockexchangeisincludedasanappendixtothisreport.

NLFI recommends that the shares of ABN AMRO should be listed on the regulated marketofEuronextAmsterdam.Thisfitsinwiththestrongbondthatthebankhaswith the Netherlands. All large Dutch listed companies are listed on Euronext Amsterdam.WithalistingonEuronext,sharesareaccessibletoallinvestors.

100%ofthesharesarenotimmediatelysoldinanIPO.Usually,inacompanythesizeofABNAMRO,thefirstpart(theso-calledfirst‘tranche’)consistsof15%to30%oftheshares.TheexactvolumewillbedeterminedimmediatelypriortotheIPO.Thiswilldependonthedemandfrominvestorsfortheshares,theexpectedpriceandtheminimumvolumeneededtogeneratesufficienttradingaftertheIPOsothatthesharesaresufficientlyliquid.Sufficientliquidityisimportantforthemarketabilityoftheshares.AnadditionalfactoristhatitisadvantageoustobelistedintheAEXindexandotherleadingindicessoonaftertheIPO,sothatinvestorswhofollow the indices automatically include the share in their portfolio.18 Given the absorptivecapacityofthemarketinrelationtothesizeofABNAMROandthefactthattheStatewantstomaintainsufficientsharestobenefitfromtheexpectedfuturegains,thefirsttrancheofABNAMROshouldberelativelysmall.NLFIadvisesnottosellmorethan20%inthefirsttranche.19Thiswillresultinsufficientliquidityand,atthesametime,therewillbeasufficientholdingleftoverforNLFItobenefitfromafuture sale of additional shares at a potentially increased rate. The cost of an IPO andthesizeoftheIPOdiscountprovidefurtherreasonstokeepthefirsttrancherelativelysmall.Theremainingshareswillbesoldinstages(latertranches)insubsequent years.

The exact price per share at IPO will be established in a phased process. A price rangeisdeterminedbasedonsyndicatebankvaluationsandthepriceambitionofNLFIandtheState.IntheensuingperiodbutpriortotheIPO,investorswillprovidefeedbackonthepricerangeandindicateatwhatpricetheywouldliketopurchaseaspecificquantityofshares.Theinvestorsdonotyetcommittoanything;thesellercannotderiveanyrightsfromthefeedback.AstheIPOapproaches,itiscommonfor

18 One of the recommendations in the report IPOs and Bookbuilding in Future HM Government Primary Share Disposals dated 16 December 2014 which came into being under the leadership of Lord Myners followingtheprivatisationofRoyalMail,istofocusonindexinvestorsasthemostreliablelong-terminvestors.

19 This shall include any possible greenshoe.

26 van 54

thepricerangetonarrow,basedonthefeedbackreceived.Thisisadelicateprocess; thesharesshouldnotbeofferedattoolowprices,orthesellerwillnotmaximiseproceeds.Ifthesharesarepricedtoohigh,itwillbedifficulttofindenoughinvestorsand the share price may decline after the IPO. This outcome would give rise to disappointment among investors and may negatively impact sales of the remaining shares owned by the State.

The introductory price of the shares will be determined at the end of the roadshows andthebookbuildingprocess,20 but prior to the IPO. NLFI considers this to be a fundamentalandweightydecision,forwhichapprovalisrequiredfromtheMinisterofFinance.Tothisend,inconsultationwithitsadvisorsandafterconsultationwithABNAMRO,NLFIwillmakearecommendationtotheMinister.

AfterestablishingtheIPOofferprice,theallocationofthesharesamongthebidderswill also be determined. Basically all interested investors will be given the opportunity tosubscribeforsharesintheIPOofABNAMRO.TheactualIPOandfirsttradewilltakeplaceaftertheallocation.

A ‘greenshoe’ is a tool used to stabilise the share price immediately after the IPO and toreduceshort-termvolatilityofastockafteranIPO.Agreenshoeisnowacommontool and is used in most of the recent IPOs in Europe. Institutional investors will expect to have this option in an IPO of ABN AMRO. An IPO candidate without the option of a greenshoe is exposed to a higher price sensitivity among investors because there is moreuncertaintyaboutthepatternoftradefollowingtheIPO.Withagreenshoe,underwriters21havetheoptionofpurchasingaspecificnumberofsharesfromsellingshareholder(s)ontopofthenumberofsharessoldintheIPO,ortobuysharesbackfromthemarket.Asarule,thisislimitedtoamaximumof15%ofthesharessoldinthefirsttranche.Withthisinstrument,thesyndicatehastheability,ifnecessaryandwithsufficientdemand,tostabilisethepriceupto30daysaftertheIPO.Thatgivesthesharessufficienttimetoachieveanormalisedpatternoftrade.

NLFIrecommendstheoptionofusingagreenshoeofupto15%asastabilisationinstrumentfortheIPOofABNAMRO,22thusadheringtomarketpractice.23

20 Bookbuildingisthemostcommonmethodofdeterminingtheinitialpricepershare.Duringbookbuilding,investorsareinvitedtosubscribebyspecifyingthenumberofsharesandtheprice.The‘book’isthebuiltuponthisbasis.Banksthatkeepbooksarecalled‘bookrunners’.

21 Investmentbanksinthesyndicatewhoassumetheriskoftheactualplacementofandpaymentfortheshares.

22 Inaninitialtrancheof20%andagreenshoeof15%ofthetranche,thefirsttrancheshouldnotexceed23%.Inaninitialtrancheof25%andagreenshoeof15%ofthetranche,thefirsttrancheshouldnotexceed29%.

23 ThiswillbedoneinconformancewiththeRegulation(EC)no.2273/2003of22December2003implementingDirective2003/6/ECoftheEuropeanParliamentandoftheCouncil,insofarasitappliestoexemptionforbuy-backprogrammesandstabilisationoffinancialinstruments.

27 van 54

TheIPOofRoyalMailtookplaceon10October2013.RoyalMailwasagovernmentholdingintheUnitedKingdom.IntheweeksfollowingtheIPO,thesharepricerosesignificantly,thusraisingquestionsaboutthecorrectnessofthesharepriceduringtheIPO.NLFIhasstudiedthisIPOandtakenthelessonslearnedtoheart.Themostimportantlessonsrelatetovaluation,pricing,allocationofsharestoinvestorsandthesizeofthefirsttranche.

ForthevaluationofABNAMRO,agoodcomparisoncanbemadewithotherlistedbanks.WithRoyalMail,nocomparisonwaspossible,whichmeantthatthevaluationwasdifficulttomakeandthepriceformationwasdifficulttoassessagainstthevaluemeasurement.Additionally,ABNAMROhasagoodfinancialtrackrecordandaproperlysupportedstrategicplan.IntheIPO,theoptiontoadjustthepricerangeupwardswillbekeptopenaslongaspossible.Inallocatingtheshares,wewillalsoconsidertheinvestmentstyleofinvestors.An optimal mix between the various investment styles will be sought. This was notdonewithRoyalMail.InthecaseofRoyalMail,thefirsttranchehadamagnitudeof60%.Itwasthereforenotpossibletobenefitfullyfromanysubsequentrises.NLFIadvisesagainstthesaleofmorethan20%-30%ofthesharesinthefirsttrancheofanIPOofABNAMRO(includinganypossiblegreenshoe).ThereportIPOs and Bookbuilding in Future HM Government Primary Share Disposals by Lord Myners dated 16 December 2014 also recommendsthatthefirsttrancheshouldnotbetoolargeinsize.

Itiscommonforasellingshareholdertoagreetoalock-upperiodaftertheIPO,during which time it may not sell additional shares. This gives investors certainty aboutthenumberofsharesthatcanbetradedinitially,andtheyareinsuredagainstan oversupply of shares. This can prevent a potential downward pressure on the shareprice.EuropeanIPOshavealock-upperiodof180daysonaverage,butthereareexamplesofIPOswithalongerlock-upperiod.NLFIrecommendsusingalock-upperiodof180daysfortheremaininginterestinABNAMROheldbyNLFIandthustoconformtomarketpractice.

CornerstoneinvestorshaveoftenbeenusedinrecentIPOs.Theseareinvestorswhoare approached early in the process of preparing an IPO to determine if they wish to invest in a company. A cornerstone investor can be considered as a form of pre-IPO investor.Theseareusuallypubliccommitments(publishedintheprospectus)tobuyaspecificnumberofsharesintheIPOwiththeguaranteefromthesellerthattheshares are actually allocated to the relevant investor. Another form of pre-IPO investor is represented by investors who invest a certain amount in a company shortlybeforetheIPO,thisinexchangeforshares.CornerstoneinvestorsarenotcriticaltothesuccessorfailureofanIPO,buttheymayserveasasignalofapprovaloftheinvestmentcasetothemarket.Theuseofcornerstoneinvestorsmayleadtoabroadening of potential investors. Adverse effects may be that the liquidity of the share decreases and that cornerstone investors may want a certain degree of additional control.Cornerstoneinvestorshavebeenusedquiterecentlyandsuccessfullyin

28van 54

severallargeEuropeanIPOs,includingAAPlc.(2014),Euronext(2014)andNationaleNederlanden(2014).

NLFI recommends to further explore the possibilities for the IPO of ABN AMRO to makeuseofoneormore‘leading’potentialinvestorsaspre-IPOinvestors.Theywouldonlyhavetobeusediftheirinclusionhasabeneficialeffectonthesaleofthefirsttranche.NLFIisnotinfavourofgrantingadiscountonthesharepricetoanycornerstoneinvestors,asthiswouldhaveadetrimentaleffectonproceedstotheState,norisNLFIinfavourofgrantingadditionalcontroltocornerstoneinvestors.

4.1 Absorptive capacity of the market

ForsufficientinvestorstobuyABNAMROsharesatagoodprice,sufficientabsorptivecapacityofthemarketisneeded.Theactual,concreteinterestfrominvestorswillonlybecomeclearduringthemarketingprocessoftheIPOandduringand after the management roadshow presentations to potential investors. They will takeplaceintheweekspriortoIPOpricing.Therearesomeindicatorsthroughwhichan estimate can be made in advance of whether there is interest in the shares or whetherinvestorsareinterestedspecificallyinalternativeinvestmentopportunities(suchasbonds).Thesewillbeexplainedinmoredetailbelow.

ThefollowinggraphshowshowmanyIPOsworthmorethan€100millionhavetakenplacesince2007(‘priced’)andhowmanyhavebeencancelled(‘pulled’)ordelayed.One can clearly see that more IPOs were cancelled in the crisis years. Since late 2013,thenumberofcompletedIPOshasincreasedandhasreturnedtothelevelbefore the crisis.

*V2Xisameasureofthestockmarketvolatility

29 van 54

Examiningthecapitalmarketasameansofattractingequitycapital(sharesandhybridcapitalthatislossabsorbing),thefollowingcanbenoted:1. Totalcollectedequitycapitalisfluctuatinganddemandhasbeenincreasingsincemid2013;

2. Thecompositionoftheinstrumentsissued(IPOs,follow-uptranchesandconvertiblecapitalinstruments)isdifferent;inthecrisisyears,relativelynumeroussubsequenttransactionswereissuedby,forexample,companiesthatneededextracapital.ThenumberofIPOshasbeenincreasingforseveralyears,duringwhichQ2andQ4ofeachhavebeentraditionallybusierthanQ1andQ3;

3. Intimesoflowvolatility,capitalmarketinstrumentscanbeissuedrelativelyeasily.Whenvolatilityishigh,investorsarelesswillingtoinvestincapitalmarketinstruments.Volatilityhasbeendecliningsince2013,acircumstancethatisfavourable to IPOs.

Thisisreflectedinthegraphbelow.

Itcanbeconcludedthat,since2013,investorshavebecomemoreinterestedininvestinginshares,includingthesharesoffinancialinstitutions.InvestorinterestinIPOs of Nationale Nederlanden and Voya (both sold by ING Group as part of the agreementswiththeEuropeanCommission)aregoodexamplesofthistrend.Severalinvestmentbankshavealsoindicatedthatinvestorswouldliketoinvestinabanksuch as ABN AMRO.

4.2 IPO costs

This chapter explains which advisors of a selling party are involved in an IPO and whatcostsareinvolved.Wethenlookatwaystoreducecostsasmuchaspossible.

Itisthedesireofyou,theHouseofRepresentativesandNLFItokeepthecostsassociated with an IPO as low as possible. NLFI considers it important to note that this emphasis on cost reduction does not affect the quality of advisors and the syndicatebanks.Qualityisthefirstrequirement;costsplayamajor,butsecondary

30 van 54

role.IfanIPOoccurs,therearevariousadvisorswhoarehiredbyvariousparties.NLFIconsidersitanimportanttasktokeepthecostsoftheadvisorshiredbyNLFItoa minimum.

PartofthecostsareincludedintheNLFIbudget.CostsincurredbyNLFIwhilemanaging ABN AMRO are included in the budget and the annual accounts of NLFI. The Minister of Finance shall reimburse these costs to NLFI and pass them on to ABN AMRO.24

The cost of the parties that assists NLFI in a possible IPO of ABN AMRO are not included in NLFI’s budget. The basic principle is that such costs of sale will be deducted from the sale proceeds of shares. These costs are then withheld from the saleproceeds,andnetincomeisaccountedforinthebudgetandfinancialstatementsofthecentralgovernment(budgetIXB).

4.2.1 Advisors to the selling shareholderWithregardtocosts,itisimportanttodistinguishbetweencostsbornebythesellingshareholder(NLFI/State)andcostsbornebythecompany(ABNAMRO).Beforediscussingthepossibilitiesofreducingcostsasmuchaspossible,wewillfirstlookatthedifferentadvisorsusedbythesellingshareholderinanIPO.Otherstakeholders,suchasthemanagementboard,thesupervisoryboardandtheworkscouncilofABNAMRO may hire advisors for their own account.

Financial advisor to NLFI:Afteracompetitiveprocurementprocess,NLFIhiredRothschild to advise and assist in relation to the exit of ABN AMRO and its preparation. Rothschild will provide advice on all relevant aspects related to the exit andwillalsoassistinappointingtheinvestmentbankswhowillprovidesupportfortheIPO.Furthermore,RothschildwillprovideadditionalcapacitytoNLFIintimesofpressure. This does not mean that NLFI will no longer be able to form its own opinion.Asarule,afinancialadvisorreceivesamonthly(retainer)feeandafeeoncompletionofthetransaction(afixedamountorapercentageoftheproceeds).ArelativelylowmonthlyfeehasbeenagreedwithRothschild,onethatisrelatedtotheworkperformed,alongwithafeeoncompletionoftheexitthatisindependentofthesize of the transaction and is partly based on the opinion of NLFI on the quality of the services provided by Rothschild.

Legal advisor for NLFI:followingacompetitiveprocurementprocess,NLFIhiredAllen& Overy to advise NLFI on relevant legal issues relating to the exit of ABN AMRO. Legaladvisorsusuallyreceivecompensationforhoursworked.Inexceptionalcases,amaximumamountmaybeagreed(withincertainparameters).Suchanagreementwas arranged in this case.

24 InaccordancewithArticle7oftheTrustOfficeFoundationManagementFinancialInstitutionsAct(NLFIAct)AlsoseetheDecreeof29August2011,containingrulesoncostallocationoftheTrustOfficeFoundationfortheManagementofFinancialInstitutions(NLFI).

31 van 54

Syndicateinvestmentbanks: these are contracted in connection with the IPO. The tasksofthesebanksincludethefollowingmatters:a. ManagingtheIPOprocess;b. Liaisingwithpotentialinvestorsandassistingmanagementintalkswithpotentialinvestors;

c. Advisinginthepreparationoftheso-called‘equitystory’(summaryofstrategy,demonstratingwhyinvestorsshouldbuythesharesofABNAMRO);

d. Conductingduediligence(financialinvestigation)forthesyndicate;e. Assistinginthepreparationoftheprospectus;f. Assistinginthepreparationofanalystpresentationsandroadshows;g. Collectingandanalysingfeedbackfrompotentialinvestorsandtheorderstheyplace;

h. Advising on the distribution of shares to potential investors and advising about the exact price at which the shares should be offered.

ThefeefortheinvestmentbanksisoftenapercentageoftheproceedsofanIPO.Sometimesafixedamountis(partly)agreed.Theadvantageofafeeexpressedasapercentageoftheproceedsisthatbanksthenhaveanadditionalincentivetoachieveashighapriceaspossible.Oneriskisthatthereismorepressurefromthesyndicate ofinvestmentbankstoplacealargerfirsttranche,whichcanincreasetheproceedsandthusthecompensation.InthecaseofanIPOofABNAMRO,thisriskislimitedifthefirsttrancheremainsrelativelysmallbydetermininginadvancethatitwillnotexceed30%(seesection4.2).

NLFIhasanalysedthefeesthatinvestmentbankshavebeenpaidinEuropeanprivatisations(bymeansofanIPO)since2006wherethesizeoftheofferingexceeds€100million.Theaveragefeeforthefirsttranchewas1.7%andthemedian1.3%ofsaleproceeds.Inrecentprivatisations,theaveragefeewasapproximately1%.NLFIwilltrytoensurethatthefeeforthefirsttranchewillbelessthan1%.Thisincludesasmallpercentagethatinvestmentbanksoftentakeintoaccountascompensation for the so-called ‘underwriting commitment’. This is a commitment withwhichinvestmentbanksactuallyguaranteethatinvestorswhoareallocatedshares will also pay for the shares.

Thetranchesthatarefloatedinsubsequentyearswillbeassociatedwithlowercostsbecause there is no need for the laborious IPO process. Investors are already familiar withthestock.Thereisusuallynoneedtodrawupaprospectus(dependingontheprecisetransactionstructure)andthereislessneedforassistancewithroadshows.Moreover,noIPOdiscountisapplied.

NLFI has held a tender procedure for the construction of a generic NLFI-wide panel ofinvestmentbanks.NLFIcanasktherespectivebanksforadviceonarangeoftopicsrelatedtoequitycapitalmarkets.NLFI’sneedforadvicemay,inprinciple,coverallNLFIholdings.Allinterestedmarketpartieswereinformedandtreatedequallyduringtheprocurement(non-discrimination).Adescriptionoftheprocurement and evaluation process was included in the tender documents in order to promote transparency.Objectivecriteriawereusedfortheassessmentofthesuitabilityofthe

32 van 54

partiesandthesubstantiveassessmentoftenders(topromoteobjectivityintheselectionprocess).Inprinciple,anypartymayparticipate,subjecttocompliancewith the criteria set by NLFI.

InordertofinallyarriveatasyndicateofinvestmentbanksthatcansupervisetheIPOofABNAMRO,aso-called‘mini-competition’or‘auction’willprincipallybeorganised based on quantitative and qualitative criteria within the generic NLFI panel ofinvestmentbanks.

TheadvantageofagenericNLFI-widepanelisthatthepreparatoryworkforanIPOofABNAMROcanbestartedquicklyafterapprovalbytheHouseofRepresentatives.

InordernottoweakenthenegotiatingpositionofNLFIwithrespecttoinvestmentbanks,thisopiniondoesnotcontainadetailednegotiatingstrategyandposition.NLFIwillinformyouofthisconfidentially.

Legaladvisortotheinvestmentbanks(Underwriters’Counsel): the group of investmentbankshirelegalcounselinordertoensurecompliancewithalllawsandregulations and to conduct due diligence. This is also important for NLFI and ABN AMRO.Normally,legaladvisorsarereimbursedbasedonhoursworked.Inexceptionalcases,afixedamountcapmaybeagreed(withincertainparameters).

We may also incur costs for a communications advisor. This advisor shall ensure that allcommunicationsregardingthetimingoftheIPO,forinstance,andallcommunicationsinothercountriesareguidedalongtherightchannels.Afixedamount is usually agreed on for this.

4.2.2 Cost minimisation NLFIconsidersitimportanttokeepthecostsoftheadvisorsappointedbyNLFI,toaminimum. Examples include various fee structures and the establishment of a competitive process for the auctioning of the various roles. With the advisors hired to date(anindependentfinancialadvisorandalegaladvisor),NLFIobtainedgoodnegotiatedresultsandfixedcompensationormaximumpaymentswithinanagreedset range. This is also the ambition when recruiting other advisors: good quality at the lowest possible price. NLFI assessed whether a non-traditional IPO process can beusedfromsomeelementsinordertosavecosts.WelookedatoptionsthatarepossibleandacceptableforanIPOofacompanysuchasABNAMRO,alargesystemicallyimportantfinancialinstitution.ThenatureandsizeofABNAMROprovideadditional responsibilities with regard to the exit process. The process must be controllable,andtheprobabilityofanunsuccessfulexitshouldbeminimised.WhenreplyingtoParliamentaryquestionsonthistopic,youindicated25thatthealternativesthatwouldbepresentedduringtheroundtableof30October2013,wouldresultinsignificantlylowerproceedsfortheStateandlimitedaccesstocapital

25 Dated25November2013,referenceFIN/2013/U1101.

33 van 54

marketsforABNAMRO.Thiswouldbeundesirable.Forthisreason,thealternativesin question are not discussed in this report.

NLFI investigated the following alternatives:1. Agreementonafixedfeeforinvestmentbanksratherthanapercentageoftheproceeds;

2. LimitationofthesupervisionbyinvestmentbanksbyhavingcertainactivitiescarriedoutbytheAgencyorABNAMROindependently;

3. Anauctionoftheshares,alsocalleda‘DutchAuction’,asinthecaseofGoogle.4. Introductionofavolksaandeel(people’sshare);providingaportionofthesharestoindividualsatafixedpricebasedonregistration. Thefeasibility,advantagesanddisadvantagesofthesealternativesarediscussedbelow.

1. Agreement on a fixed fee for investment banks in the syndicate rather than a percentage of the proceeds. Theadvantageofafixedfeeisthatitgivesclarityinadvanceabouttheamount ofcosts.Thismeansthat,ifthereisasmallerinitialtranchethaninitiallyplanned,thefixedfeemaybehighifrecalculatedasapercentage. The advantage of a percentage is that the amount changes along with the size andpriceofeachtranche;ifthetrancheisrelativelysmallandthepriceislow,the cost will be relatively low.26 Another advantage is that compensation in the formofapercentageservesasadditionalmotivationforthebankstoachieveagoodprice;afterall,abetterpriceresultsinhighercompensation. Innegotiationswiththeinvestmentbanks,NLFIwillassesswhichformofcompensation,oracombinationofbothforms,willultimatelyleadtothelowest cost.

2. Limitation of the supervision by investment banks by having certain activities carried out by the Agency or ABN AMRO independently. The Ministry of Finance has examined the extent to which the Agency may play a role in an IPO. ABNAMROhasbeenconductingmanypreparationsindependently,sinceitisthe‘objectofsale’.ThisisalsothecasewithotherIPOs;acompanythatgoespublicrequiresalotofpreparatorywork.WithregardtotheexecutionbyABNAMROofactivitiesthatareusuallyconductedbyinvestmentbanksinthesyndicate,abalancemustbefoundbetweenthevariousinterests.ShouldABNAMRObeaskedtoperformworkatareducedrate,itisthennotacting‘at

26 Calculationexample:ifafirsttrancheconsistsof50millionsharesyielding€10eachandtheinvestmentbankschargeafeeof1%,thenthecostwillbe€5million.Ifthesharesonlyyield€8each,thenthecostwillonlybe€4million.

34 van 54

arm’s length’.27Moreover,itmaybeattheexpenseoftimethatthebankcanspend on customers who generate income. NLFI therefore advises that ABN AMRObegiventheopportunitytoplayaroleintheIPOundernormalmarketconditionsaswellastheopportunity,justastheother(Dutch)investmentbanks,tocompeteforaroleinthesyndicate.

3. An auction of the shares, also called a ‘Dutch Auction’, such as in the case of Google. ADutchAuctioncanworkwellwithabrandthatisaswell-knownanduniqueasGoogle(therearefewlistedcompaniesthathavesimilaractivities,marketshareandbrandawarenessinwhichinvestorscaninvest).Investmentbanksspendlesstimetryingtoattractinvestors,sincetheshareisalreadyveryfamiliar.AtthetimeoftheGoogleIPO,Googlewasknownasabrand,butatleastequallyimportantwasthefactthatitwasalsoknownasacompanywith(exceptional)growthpotential.Consequently,thesharespracticallysoldthemselves and investors lined up to invest in them. In Europe there are over 250listedbanks,andinvestorschoosetoinvestinonlyafewofthem.NLFIbelievesthataDutchAuctionisnotsuitableforacompanylikeABNAMRO. ADutchAuctionofanunknownbrandispossible,butitdoesrequireextensivemarketing.Thisrequireshiringinvestmentbanks,forwhichcostsareincurred.Therefore,thereisnocostadvantagecomparedtoanIPO.

4. Introduction of a volksaandeel (retail offering) Avolksaandeel(activelyofferingsharesspecificallytoprivateinvestorsduringtheIPO,alsoknownasa‘retailoffering’)doesnotnecessarilyleadtolowercosts.Infact,atraditionalretailofferingisusuallyaccompaniedbyawide-rangingmarketingcampaignspecificallyaimedatthetargetgroupofprivateinvestors.Forexample,aseparatewebsitewhereindividualscanfindrelevantinformation is often also developed. It is also customary to set up a call centre to answer questions from individuals and to print additional copies of the prospectus. Section 5.4 contains further explanation of the considerations for providing private investors with the opportunity to buy shares during the IPO of ABN AMRO. Moregenerally,itcanbestatedthatallsellingshareholderswouldbenefitfromachieving an IPO on the best possible terms and lowest possible cost. ProfessionalshareholdersregularlysellparticipatinginterestsandmakeuseofanIPO.Todate,noalternativeshavebeendevelopedthatsubstantiallyreducethe cost of an IPO.

27 Atarm’slengthmeansthatatransactionmustbeconductedaccordingtocommercial(market)conditions.

36 van 54

5 Governance after initiating exit by means of an IPO

5.1 Introduction

Inthegeneralmeetingof27November2013,considerableattentionwaspaidtothefuture of ABN AMRO in view of the exit of the State. This was mainly due to the large publicinterestthatcomeswithasystemicallyimportantbanksuchasABNAMROandthe concern of the House of Representatives that history (the nationalisation of ABN AMROandSNSREAAL)willrepeatitself.

ThequestionofwhetherABNAMRO’scontinuityissufficientlysecuredafterthecommencementofanexitwasdiscussedatlengthagainstthisbackground.Alsodiscussed was whether the measures recommended by NLFI in the Exit Advice of August2013withregardtogovernanceweresufficientlyeffectiveandadequate.Both topics are discussed in this chapter. This also applies to the other topics which you have promised the House of Representatives to investigate further. This includes the commitment to ‘re-explore whether offering loyalty dividends will generate sufficientinteresttoachievegoodreturnsandwhetherthiscouldpossiblyharminvestor interest’.

5.2 Public interest

Following the discussion at the general meeting of 27 November 2013 to assess if the publicinterestisABNAMROissufficientlysafeguarded,theHouseofRepresentativesadoptedtheNijboermotion.Itrequestsyou‘tosubstantiatehowthepublicinterestsassociatedwiththestabilityandcontinuityoftheservicesprovidedbyABNAMRO,can be embedded in the articles of association of ABN AMRO or can be associated withtheinvocationoftherightofpreferencesharesbytheABNAMROContinuityFoundation’.28

IntheHouseofRepresentativesdebateonABNAMRO,youstressedthatthepublicinterestsassociatedwithfinancialinstitutionsaresecuredinlawsandregulations.Thisalsoappliesto(systemicallyimportant)banks.Inyourletterof23August2013,youstatedthattheCabinetconsidersitimportanttomaintainABNAMROintheDutchbankinglandscapeforthesakeofdiversityandcompetitioninthemarket.The

28 Motion32013,no.46.

37 van 54

bankmustnotbeallowedtoloseitsfunctionfortheNetherlandsasaresultofanacquisition and subsequent dismantling.29Thisappliesforall(systemicallyimportant)banks.Sincethispublicinteresthasalreadybeenadequatelysecured-asevidencedbythelegislationonfinancialsupervisionandtheensuingsupervisionthathasresulted-itwasyouropinionthattherewasnoreasontotakeadditionalmeasuresspecificallyforABNAMRO.

Inadditiontotheembeddingofpublicinterestinthefinancialregulatorylegislation,theDutchcompanylawalsoprovidesacertaindegreeofassurance.Caselawandjurisprudencesuggeststhatashareholderofalistedcompanythathasoperationsinasectoridentifiedbythegovernmentas‘vital30 to the preservation of social life’ (suchasinthecaseofasystembanklikeABNAMRO31)isalwaysobligedtoweighpublicinterestagainstotherinterests.Forsuchcompaniesofpublicinterest,corporate interest is partly determined by public interest.32

Thismeansthat,ifaprivatesaleofABNAMROtoapartyisconsideredorifapublicofferismadeforthesharesofABNAMRO,NLFIisalsoobliged,asashareholder,totakeaccountofpublicinterestinitsrecommendationstotheMinisteronthepossibledecisiontoproceedornottoproceedwiththesale.UndertheNLFIAct,NLFIshouldalsotakeintoaccountthesustainabilityofthefuturesituation,thecontinuityofthecompany,thestabilityofthefinancialsystemandfaircompetitioninthefinancialmarkets.AnyprotectionfoundationabletoacquirevotingrightsinABNAMROincertain situations will also have to include public interest in its deliberations when makingdecisions.

5.3 Further details on governance

IfthesaleofABNAMROisinitiatedviaIPO,thecompanywillhavenewshareholdersfrom that moment on. This means that the interest of the State and the control of NLFI in ABN AMRO will decrease in favour of the new shareholders. In the Exit Advice of23August2013,NLFIrecommendedthatseveralmeasuresshouldbetakeninordertoprotecttheremainingfinancialinterestoftheStateandofthecompanyagainsthostiletakeoversortheundesirableinfluenceofactivistshareholders.These measures include:1. theintroductionofastatutoryqualifiedmajorityforimportantdecisionsintheshareholdersmeetings;and

2. the establishment of a protection foundation to which a call-option is granted for the acquisition of protective preference shares.

29 ThishasnoeffectonanacquisitionwherethefunctionofthebankismaintainedfortheDutchmarket.30 Thesevitalsectorsarementioned,amongothers,inthereport‘Tussennaïviteitenparanoia:Nationale

veiligheidsbelangenbijbuitenlandseinvesteringeninvitalesectoren’((Betweennaivetéandparanoia:Nationalsecurityinterestsinforeigninvestmentinvitalsectors)bytheWorkingGrouponEconomicSecurity(AttachedtoKamerstukken(ParliamentaryPapers)II2013/14,30821,no.22).

31 EnterpriseSectionoftheAmsterdamCourt,5April2012,JOR2013/14.32 Publicinterestfromtheperspectiveoftheshareholder,R.Abma,WPNR,No.7048,31January2015.

38van 54

Overthelastfewmonths,NLFIhasbeenworkingwithABNAMROonadditionalpreparations.Onvarious(sub-)topics,NLFIhasenlistedthehelpofinvestmentbankers,lawyersandavarietyoftradeunions.Inpreparingthenewarticlesofassociation,theusualcorporaterelationshipsandbestpracticesforgoodgovernance33 were adopted as the starting point. This section deals with the parts of the recommended future governance of ABN AMRO that constitute an elaboration of the aforementioned measures.

a. Qualified majority (protecting remaining interest of State)Previously,NLFIadvisedyoutoprotecttheremainingfinancialinterestoftheStateinABNAMRO,bystatinginthearticlesofassociationthataqualifiedmajorityisrequired in the shareholder meeting before decisions can be reached on a number of important issues. This is an acceptable measure for investors and avoids the impact that other protective structures34 can have on the valuation of a company. NLFI recommendsadoptingaqualifiedmajorityknowntothemarket35 that also appears in thelawasapermittedmajority.36Thisisatwo-thirdsmajorityofthevotescastrepresentingmorethanhalfoftheissuedcapital.Asaresult,NLFI’scontrolwithregardtostipulatedimportantsubjectsremainseffectiveaslongasNLFImaintainsaholding in ABN AMRO that is greater than one third of the issued capital. As long as NLFIholdsatleastonethirdofthesharesinABNAMRO,therequiredqualifiedmajorityactsasadefactovetoforNLFI.NLFIcouldmakeuseofthisif,forexampleactivist shareholders were successful in a campaign against ABN AMRO to move the headquartersofthebankabroadortobringaboutade-merger.

NLFI recommends that there is as little deviation as possible from the usual corporate relationshipswhendealingwithaqualifiedmajorityintheshareholdermeeting.Forthisreason,NLFIadvisesthatqualifiedmajorityvotingshouldbeonlyintroducedforsubjectsthataremostessentialforthecompanyandthatmayhavethegreatestimpactontheresidualfinancialinterestoftheState;theseincludeimportantchanges inname,registeredoffice,purposeandotherimportantchangesintheidentityornatureasdefinedinArticle2:107aoftheNetherlandsCivilCode,amendmentofthearticles of association and dissolution of the company. In addition to article 2:107a CivilCodeandthelimitspecifiedthereinforapprovalbyshareholdersof(dis)investmentswithavaluegreaterthanone-thirdofthetotalassets,NLFIsuggeststhat,giventherelativelylargesizeofABNAMRO’sassets,useismadeofthesignificantlylowerboundaryofone-thirdoftheequityofthebank.

NLFIbelievesthatthismeasurewillsufficientlyprotecttheremainingfinancialinterest oftheState,whilethenegativeimpactonthevalueoftheremaininginterestoftheState remains as limited as possible. The measure suggested here falls within the boundaries established by Dutch company law and complies with European legal regulations.

33 NetherlandsCorporateGovernanceCode.34 Such as priority shares. These are ordinary shares to which additional control can be assigned.35 Forexample,INGGroupNV...36 Articles2:133,paragraph2and134,paragraph2oftheNetherlandsCivilCode(BurgerlijkWetboek).

39 van 54

b. Embedding the social roleWithregardtoembeddingthesocialroleofABNAMROinthebank’sarticlesofassociation,NLFIhasalreadyindicatedintheExitAdviceofAugust2013thatthiswouldbeadesirableadditiontothegovernanceofthebank.ABNAMROsupportsthisposition.NLFIrecommendsthat,inthenewarticlesofassociationofthebank,the interests of the company are explicitly stipulated to include the interests of customers,saversanddepositors,37 and ABN AMRO is overtly designated a systemically importantbankand,assuch,shouldalsogiveconsiderationtosocietyasawhole.Itisadvisabletoembedthesestatementsinthearticlesofassociation,becausetheyform the foundation of a company.38 They guarantee that the management and supervisory boards of ABN AMRO act in the interests of the company when executing theircorporateduties,whichshallalsoincludeassociatedpartialinterests,suchasthe interests of customers and society as a whole. This further connects to relevant case law39andthegeneraldutyofcareforfinancialinstitutionsasspecifiedintheFinancialSupervisionAct(WetophetFinancieelToezichtWft).

c. Protecting the continuity of the companyAtpresent,thelessstringentformoftherulesfortwo-tierentities(Article2:155aCivilCode)applytoABNAMRO.IfthesaleofABNAMROisinitiatedthroughanIPO,thefullsetofrulesapplyingtotwo-tierentitieswilltakeeffect.Thismeansthattheauthority required for appointing and dismissing members of the management board shiftsfromthegeneralmeetingofshareholderstothesupervisoryboard.Assuch,the rules applying to two-tier entities indirectly offer a de facto form of protection against shareholders with ‘hostile’ intentions because these shareholders are unable to appoint members of the management board. This protection is not complete becausetheshareholdermeetingcanterminatetheconfidenceintheentiresupervisory board.

AnIPOwillintroducenewshareholderstoABNAMRO.Fromthatpointon,thebankcan no longer avoid having to face undesirable shareholder activism that could harm thecontinuityofthebankoratakeoverbidonwhichnoagreementhasbeenreached with the company. As long as NLFI has an interest in ABN AMRO that is greater than one-thirdoftheissuedcapital,NLFIisinaposition,asashareholder,toprotectthecompanyfromactivistshareholderswho,forinstance,startacampaignagainstthebankinordertoimplementcertainundesirablechangesinthestrategyorstructure,ortodefendthebankagainstapartyconsideringanundesirabletakeoverbidforABNAMRO.OnceNLFI’sinterestisreducedtobelowonethird,NLFIwillnolongerbein this position.

37 The relevant provision in the articles of Association are: ‘The interest of the company includes the interestsofitsaffiliatedcompany,includingbutnotlimitedtothelegitimateinterestsofcustomers,saversanddepositors,shareholders,employeesandthecommunityinwhichthecompanycarriesoutits activities.’

38 ThisisinlinewiththerecommendationsoftheCommissionontheStructureofDutchBanks,inthereport‘Naareendienstbaarenstabielbankwezen’(Ontheroadtoasubservientandstablebankingsector)ofJune2013withtherecommendationthatbanksexplicitlyrecordtheirvisionoftheroletheywant to play in society in a social provision in the articles of association.

39 NJ2014/167,withannotationbyP.vanSchilfgaardeandArticle4:24aWft.

40 van 54

ABN AMRO has stated the desire to be adequately protected during an IPO. Various protectivemeasuresarepossibleforthispurpose,includingcertificationofsharesandthepreviouslydiscussedfoundation,whichisthengrantedacalloptiontoacquire protective preference shares.

Inthecaseofcertification,thesharesaretransferredtoatrust,usuallyintheformofafoundation.Thisfoundationsubsequentlyissuessharecertificatestoinvestors.Investorsthenacquirethebeneficialownershipoftheshares(and,forexampletheassociatedrighttoanydividendpaidontheshares),whilelegalownershipremainswiththetrustoffice.Thecertificatesaretradedonthestockexchange.Ingeneral,theresultofcertificationisthatthetrustofficebasicallyretainsthevotingrightsofshares,whilethecertificateholdershavetherighttoaskthetrustofficeforavotingproxy.Ifcertificateholdersrequestavotingproxyinthisway,thetrustofficemayno longer exercise the voting rights on the shares in question. The law40 provides the opportunity,incertaincases(oftenreferredtoassituationsof‘war’),41 to withdraw theproxiessothatthetrustofficecanexercisethevotingrightsonthesharesandthusprovideprotectiontothecompany.Aprerequisiteisthatthetrustofficeisindependent from the company.42

Inthecaseofpreferencesharesforafoundation,thisfoundationacquiresacalloptiontoacquirepreferenceshareswithvotingrights.Byinvokingthecalloption,thefoundationmay,insituationsthatthreatenthecontinuityofacompany,acquirecontrolofthecompanyinorderto(temporarily)fendoffunwantedactivistshareholdersoranundesirabletakeover.

IntheExitAdviceofAugust2013,NLFIrecommended,afterconsultationwithABNAMRO,thatpreferencesharesbeestablishedforafoundation.InthesubsequentdebateintheHouseofRepresentatives,thesufficienteffectivenessandadequacyofthisprotectivemeasurewasdiscussedatlength,partlybecauseoftherequiredpermission(DNO)fromtheSupervisor.Intheeventthatprotectivepreferencesharesareissued,thenecessarypermissioncanonlyberequestedfromtheSupervisor at the time that the foundation actually wishes to exercise the call-option (thusinarealthreatofawarsituation).DuetotheprocessingperiodutilisedbytheSupervisorforaDNOprovision,therewouldbesomeuncertaintyaboutthetimelyavailabilityoftheinstrumentandhenceitseffectiveness.AgainstthisbackgroundandyourcommitmenttotheHouseofRepresentativestofurtherexamineand,ifnecessary,resolvethispoint,NLFIonceagaincollaboratedwithABNAMROduringthe ensuing period to explore and elaborate the various options for effective and adequateprotection.ItisextremelyimportantforABNAMROtohavesufficientclarity about the effectiveness and adequacy of the chosen protection measure and thereforetheanswertothequestionwhetheraDNOwillbeobtained,asquicklyaspossible in the process and preferably prior to the IPO. NLFI understands this

40 Article2:118a,paragraph2,CivilCode.41 The terms ‘war time’ and ‘peace time’ are common terms in published studies on the protective

measures of listed companies.42 Article2:118a,paragraph3,CivilCode.

41 van 54

position and the concern that the House of Representatives has expressed about this point. A protection structure has recently been elaborated in which the advantages ofbothcertificationandprotectivepreferencesharesarecombinedinsuchawaythat,intheopinionofNLFIandABNAMRO,sufficientassurancecanbeobtainedontheeffectivenessandadequacyoftheprotection,earlyenoughintheprocess.NLFIrecommendsformallysubmittingthisprotectionstructure,whichisfurtherelaborated below,forapprovalbytheSupervisorinthenearfuture.

Trust Office Foundation for the Continuity of ABN AMRO – further elaborationNLFIrecommends,priortoABNAMRO’sIPO,settingupatrustofficeintheformofafoundation intended to protect the continuity of ABN AMRO (hereinafter: ABN AMRO ContinuityFoundation)TheABNAMROContinuityFoundationwillnotbegrantedacall-optiontoacquireprotectivepreferenceshares,butthefoundationwillreceive,atthetimeoftheIPO,theshareswhichtheStatethenwishestosellonthemarket.Thisalsoappliestolatersell-downsonthestockexchange.TheABNAMROContinuity Foundationwillnotbegrantedacall-optiontoacquireprotectivepreferenceshares,but the foundation will receive the shares which the State wishes to sell on the market,atthetimeoftheIPO.TheproceedsfromthesaleofthecertificatesintheIPO,aswithasaleofshares,willgototheState.Withcertification,itisnotthesharesbutthecertificatesthataretradedontheexchange.ThelegalownershipofthesharesremainswiththeABNAMROContinuityFoundation.

Ingeneral,certificationisdesignedineffecttoenablethetrustofficetoretainthevotingrightsofsharesandtograntcertificateholderstherighttoaskthetrustofficefor a voting proxy.43Thetrustofficemayconsequentlyexercisethevotingrightsassociatedwiththesharesforwhichcertificateholdershavenotrequestedanyproxies.

FortheABNAMROContinuityFoundation,NLFIrecommendsdeviatingfromthispracticebystipulatingthatthefoundationalwaysautomaticallygrantsthecertificateholdersaproxytovoteforeachshareholdermeetingintimesof‘peace’.Thecertificate holderscanthenchooseto1)usetheproxyvotebyvotingpersonallyintheABNAMROshareholdermeetingor,2)returnthevotingproxywithorwithoutavotinginstructiontotheABNAMROContinuityFoundation,sothatthefoundationcanvoteor3)todonothing,votepersonallyorreturnthevotetotheABNAMROContinuityFoundation(inwhichcasethevoteisthenlost).TheABNAMROContinuityFoundationcouldencouragecertificateholderstoreturntheirproxyvotebyissuingvotingrecommendations.Inthisway,theABNAMROContinuityFoundationcanalsotrytoaddressanyshareholderabsenteeism.Proxiescanbereturnedbycertificateholders for each shareholder meeting. As an important exception to the principle that theABNAMROContinuityFoundationautomaticallygrantsvotingproxiesto

43 unlessthereisawarsituationasdescribedinArticle2:118a,paragraph2oftheCivicCode.

42 van 54

certificateholders,44NLFIrecommendsthattheABNAMROContinuityFoundationshould,insomecasesofundesirableshareholderactivismandatakeoverbidonwhichnoagreementhasbeenreachedwithABNAMRO,beabletotemporarilyrestrict,excludeorrevoketheproxies,and,inthisway,maytemporarilyassumethevotingrightsoncertifiedshares.Withregardtothetemporarinessofsuchameasure,NLFIrecommendsthattheperiodofthemeasurebelimitedtothemaximumperiodinwhichprotectivepreferenceshareshavetobewithdrawn,whichiswithintwoyears.Byrestricting,excludingorrevokingvotingproxiesin‘timesofwar’,theABNAMROContinuityFoundationmayexercisethevotingrightsofalltheshares that the State has already renounced and thus provide temporary protection for the continuity of ABN AMRO. The board of ABN AMRO can use this period of up to two years for further consideration and possible consultation with the relevant activistshareholder(s)orbidder(s)behindthe(unwanted)bid.Aslongastheinterestof the State is greater than one-third of the issued capital and NLFI is able to provide protectionthroughitslegallyrequiredqualifiedmajorityforimportantchangestotheidentityorcharacterofthebank,NLFIrecommendsorganisingthecertificationatABNAMROsothatthefoundationcanonlyrestrict,excludeorrevokevotingproxiesafter prior approval from the Minister and NLFI.

Designingthefoundationinsuchamannerensures,ontheonehand,thatitisableto adequately and proportionately protect ABN AMRO in times of war without unduly disruptingvotingatshareholdermeetingsintimesofpeaceand,ontheotherhand,thataDNOcanberequestedfromtheSupervisorfortheABNAMROContinuityFoundationatanearlystageinthepreparatoryprocessoftheIPO.Afterall,theABNAMROContinuityFoundationwillbeabletoexercisevotingrightsattheshareholdermeetingoncetheIPOoccurs,inpeacetime,thefoundationcanvoteonthesharesforwhichcertificateholdershavereturnedtheirvotingproxywithorwithoutspecificinstructions,andinwartimethefoundationcan(temporarily)exercisethevotingrights of all shares which the State has divested during the IPO. In composing the boardoftheABNAMROContinuityFoundation,therequirementsofindependencecontained in the law will be strictly and carefully applied.

IfandinsofarasthecertificationofsharesisultimatelychosenasthemannerofprotectingthecontinuityofABNAMRO,thelistedABNAMROsharesmentionedinthisExitAdviceareinfactlistedABNAMROcertificates.

44 Article2:118a,paragraph2,CivilCodeprovidesthispossibilitybydeterminingthatthevoter(inthecaseofABNAMRO,theABNAMROContinuityFoundation),canonlyrestrict,excludeorrevokeagivenvoting proxy if: a.atakeoverbidhasbeenannouncedormadeonsharesinthecapitalofthecompanyortheshare certificates,orthereisareasonableexpectationthatsuchwilloccur,withoutthecompanyhaving agreedtosuchatransaction; b.aholderofcertificatesorseveralholdersofcertificatesandshares,accordingtoamutualagreement tocooperateandthiswithorwithouttheinvolvementofsubsidiaries,provideorarrangeforatleast 25%ofthecompany’sissuedcapital,or; c.theexercisingofvotingrightsbyaholderofcertificatesis,intheopinionofthevoter,fundamentally inconflictwiththeinterestsofthecompanyandtherelatedcompany.

43 van 54

Response time and rights of the works council InadditiontotheestablishedABNAMROContinuityFoundation,DutchcorporatelawalsoprovidesotherinstrumentsthatABNAMROcouldusetoexertsomeinfluenceifthebankisfacedwithunwantedshareholderactivism.

When activist shareholders wish to discuss the strategy or management of the companywithABNAMRO,forinstance,theyarefreetoaskthecompanytoplacethesubjectontheagendafordiscussionatashareholdermeeting.45 In that case the management of the company can call upon the period of 60 days prior to the general meetingstipulatedinthearticlesofassociation,46 which must be observed for the submissionofarequestforinclusionofanagendaitem.Ifitisasubjectthatcanleadtoachangeinthestrategyofthecompany,forexample,bywithdrawingconfidenceinthesupervisoryboard,themanagementboardmayalsoinvoketheso-called‘responsetime’oftheDutchCorporateGovernanceCode,whichmustberespectedbyDutchlistedcompanies.BestpracticeprovisionIV.4.4inconjunctionwithII.1.9oftheDutchCorporateGovernanceCodeprovidesthatshareholdersshouldtakeintoaccountaresponsetimeof180dayswhenschedulingsuchstrategicsubjects.Invokingthisperiodgivesthemanagementofthecompanythetimeandopportunity to consider a possible response. The board should use the response time forfurtherdeliberationandconstructiveconsultation,atleastwiththeseshareholders,andshouldexplorethealternatives.47

IfatakeoverbidismadeforABNAMROforwhichnoagreementhasbeenreachedwiththemanagementandsupervisoryboards,itisconsideredahostiletakeoverbid.Thedecisionnottosupportabidisnotadecisionforwhichtheworkscouncilhasadutytoprovideadvice,becauseitisadecisionnottodosomething.ThisisdifferentthanwhenABNAMROwouldexplicitlygranttheworkscouncil(WC)48 such advisory powers.Inthatcase,theworkscouncilcouldpossiblyincreaseitsinvolvementintheacquisition process by exercising its advisory power.

Astrategicchange,suchasamergerordivisioncanalsobebroughttoavotebythemanagement board under pressure from an activist shareholder.49 Such decisions usuallyfallundertheadvisoryremitoftheworkscouncil,onaccountofwhichtheworkscouncilcanincreaseitsinvolvement.

TheworkscouncilhasnoindependentlegalrighttosubmitarequestforinquirytotheEnterpriseChamber.Itmaydoso,butonlyinaccordancewiththearticlesofassociation or by agreement with the company. The inquiry procedure basically focusesonthebehaviourofthemanagementboardorthesupervisoryboard,but

45 Shareholderscannotforcesuchsubjectstoavoteatashareholdermeeting.Onlytheexecutiveboardof a company possesses such a right of initiative.

46 Article2:114aCivilCode.47 TheCryo-SaverulingoftheAmsterdamCourtofAppeal(‘EnterpriseChamber’)inSeptember2013has

ascribedthisprovisionahighstatus,makingitmoreorlessalegalrule.48 TheworkscouncilofABNAMROiscalledtheRaadvanMedewerkers(CouncilofEmployees)(RVM).49 Shareholderscannotforcesuchsubjectstoavoteatashareholdermeeting.Onlytheexecutiveboard

of a company possesses such a right of initiative.

44 van 54

canalsorelatetoashareholdermeeting.Ingeneral,a(hostile)bidderhasalreadybuiltupashareholdinginthecompanybeforemakingapublicoffer.Withsucharightofinvestigation,theworkscouncilcouldpossiblyattempttoinfluencethebehaviourofthebidderandthustheprocessofanunwantedtakeoverbid.

ABNAMROisawareofthesepossibilitiesandNLFItruststhatthebankwilldealwiththem in a sensible way.

IntheopinionofNLFI,theestablishedABNAMROContinuityFoundationcanoffergood(temporary)protectionforthecontinuityofABNAMRO.Additionally,NLFIitselfcanprovidethenecessaryprotectionforABNAMRO,partlythroughtheuseofthequalifiedmajority.NLFIrecommendsthattherebenoadditionalprotectivemeasuresfor ABN AMRO. This could negatively affect the valuation of ABN AMRO and may deter potential investors.

5.4 Stable shareholder base

IntroductionDuringthegeneralmeetingof27November2013,youagreedto‘re-explorethequestionwhetherofferingloyaltydividendswouldleadtosufficientinterestinorderto achieve good yields and whether this could possibly harm investor interest’. This is due to the desire expressed in the House of Representatives to attract long-term shareholderstoobtainastakeinABNAMRO.Ingeneral,itisconsequentlyexpectedthat these long-term shareholders will actively endeavour to promote the creation of long-term value. Long-term shareholders could also serve as a counterweight to shareholders who are focused on short-term interests. Rewarding long-term shareholderswithadditionaldividends(loyaltydividends)couldassistinattractingthem.Bybindingshareholderslongertoacompany,theyshouldbegintofeelmoreresponsible for policy and provide more of a counterweight to shareholders mainly guided by short-term interests. The following is a more detailed analysis.

A loyalty dividend is an extra dividend that shareholders are paid on shares that they retain for a predetermined period. To demonstrate that the shares are actually held fortheagreedperiod,shareholders’sharesinthecompanymustberegistered..‘Ordinary’ shares will be converted into ‘registered’ shares. Registration of the shares removesthemfromthebook-entrysystem.Registeredsharescannolongerbetradedontheexchange.Shouldshareholderswishtoselltheirregisteredshares,thesharesmustfirstbereconverted.Theshareholdersarethennolongereligiblefortheloyalty dividend.

Legal frameworkTheNetherlandshasnolegalbasisforgrantingloyaltydividends.IntheDSMruling,50 theSupremeCourtheldthatshareholdersmaybegivenadditionalrewardsunder

50 HR14December2007(‘DSMruling).

45 van 54

certainconditions,aslongassuchpracticesdonotviolatetheprincipleofequalityamong shareholders.51DuetothelimitedreviewbytheSupremeCourt,jurisprudencehas established no consensus on how a loyalty scheme must be designed in a legally viablemanner.Itisclearthatintroducingaloyaltydividendmakesadistinctionamongshareholders,asloyaltyshareholdersarefavouredoverordinaryshareholders. ItisultimatelyuptotheEuropeanCourtofJusticetoevaluateifthenecessaryobjectivejustificationexistsforthepractice(testingitagainstrequirementsoflegitimacy,effectiveness,subsidiarityandproportionality).DespitethegreenlightfromtheSupremeCourt,DSMdecidedatthetimenottoproceedwiththeintroduction of a loyalty dividend. There are no other Dutch companies with loyalty schemes. Thereare,indeed,twoDutchcompanieswithaloyaltyschemeforvoting rights. Theseschemeswererecentlyestablishedinthecontextofamerger(notanIPO).52 Inbothcases,theschemesensuredthatalong-termexistingmajorshareholderobtained,inanyevent,additionalvotingrights,sothatitremainedincontrol.

Is a loyal shareholder involved? A discussion that has been going on in the Netherlands for some time concerns the question of whether a loyal shareholder is more involved. A shareholder that retains theirinterestinacompanyforalong,ongoingperiod,isnotnecessarilyaninvolvedshareholder. Involved shareholders are regarded as shareholders that exercise their shareholderrights(e.g.votesattheAGM)andinformthemanagementboardabouttheir views on long-term value. Several authors have pointed out that there is no empiricalevidencejustifyingtheexpectationthatlong-termshareholderswillalsoactivelytakepositionstopromotelong-termvalue.53 Organisations such as Eumedion and VEB stress the fact that shareholders that hold their shares for a long time are not,forcertain,moreinvolvedormorelikelytocontributetothecreationoflong-term shareholdervalue.Activeinvolvementmakesdemandsontheshareholders’timeandmoney.Thisdoesnotalwayscoincidewellwiththeobjectiveofmanyinvestorstoachievethehighestpossiblereturnforagivenriskprofile.54

Adebatehasalsobeengoingoninscholarshipandjurisprudenceconcerningthedesirability of focusing on long-term shareholders. These discussions indicate that it isnotcertainiflistedcompaniesaredefinitelyworseoffwithshort-termshareholders. It was also revealed that long-term shareholders are not necessarily more concerned with the long-term interests of a company. Too many long-term shareholders may lead to reduced liquidity. This could have a negative effect on shareholder value creation.55 Investors with a short-term focus may in turn contribute to good pricing.

51 Art.2:92para.2CivilCode.52 CNHIndustrialN.V.(createdfromamergerbetweenFiatIndustrialS.p.a.andCNHGlobalN.V.)andFiat

ChryslerAutomobilesN.V.Bothcompaniesareonlylistedonforeignstockexchanges.53 ForexampleA.Doorman,‘AnnotatieHogeRaad’s-Gravenhage,JOR2008,11,B.Bier‘Betekent

winstrechtookrechtopwinst?’HandboekOndernemingenaandeelhouder2012,p.163-208enM.KoelemeijerenR.W.F.Hendriks‘Loyaliteitsdividend:naarloyaleaandeelhouders?’Tijdschriftvoorvennootschaps-enrechtspersonenrecht,2012,5,p.144-148.

54 Loyaltydividendwithlistedcompanies:justified?,Mr.S.F.deBeurs,CorporateLawandFinance,2011,p.6/7andIntroducingloyaltysharesterribleplan,Eumedion,24May2013andStudyofshort-termbehaviourofDutchinstitutionalinvestors,W.Kuipers,CorporateLaw2013/106.

55 Note,rewardloyalshareholders,attachmentto31083,no.26.

46 van 54

Listedcompaniesplacegreatimportanceontheadequateliquidityandmarketabilityoftheirshares.Forthestockmarket,thisisalsoanimportantcriterionforadmittingacompanytoanindexthatshareholderscanfollow.Inpractice,therefore,listedcompanies strive to maintain a certain balance between long-term and short-term shareholders.

Negative effects of loyalty dividends Loyalty dividends are only for shareholders who are actually involved in the listed company,bothlegallyandeconomically.Thisisnotthecaseifshareholdersdonotholdsharesfortheirownaccountandattheirownrisk,forexamplebecausetheyhavehedgedtheunderlyingeconomicrisk.Forexample,ashareholdercansetupaholdinginbetweenhimselfandthecompanythatdoesissuemarketableshares.Oraspecialisedloyaltyfundissetupthatdoesissuemarketableparticipations.Acheckonsuchformsofabuseisverydifficultandresultsinhighadministrativecostsforthe company.

Additionally,loyaltydividendsmayhaveapotentialimpactonthedisciplinaryfunction of shareholders with regard to the company’s management. Shareholders wouldnormallypreventtheboardmembersfromusingitspower,positionandthemoney contributed by shareholders to allow their own interests to prevail over those oftheshareholders.Therefore,theshareholders’meetingalsohastheresponsibilityofmonitoringtheboardandpossiblydiscipliningit(theagencyfunction).Disgruntledshareholders may exercise their rights to force the board to implement a different policyortoselltheirshares(votingwiththeirfeet).Whenthelatterresultsinlossoftheloyaltydividend,itislikelythatashareholderwillbeslowertoresorttoit.Knowingthis,themanagementboardcanmoreeasilydisregardanycriticism,whichmeansthatitwillbeevenlessattractiveforshareholderstomaketheirviewsknownto the board. The consequence may be that shareholders are passive in exercising their shareholder rights and become less involved in the company (which is precisely thepurposeofaloyaltydividend).Publisheddiscussionsuggeststhatthepreciseeffect remains unclear. Further investigation is therefore required.

Asmentionedabove,registeredsharesmaynolongerbefreelytradedontheexchange.Publishedresearchindicatesthat,whenalargenumberofsharesareconvertedintoloyaltyshares,shareliquidityonthestockexchangedecreases.Thenumberofsharesavailableforunrestrictedtrading(‘freefloat’)isreduced.Thiscanlead to a share price that is more susceptible to volatility. Shareholders are therefore exposedtogreaterpricerisk.Thereducedliquiditymaycausethecompany’scostsofattractingcapitaltoincrease,whichcanhaveadetrimentalimpactontheeffectivenessofthecapitalmarket.Asmaller‘freefloat’canleadtoalowerweighting oftheshareonindices.Forfundsandinstitutionalinvestorsthattracktheseindices,thiscouldmeanthattherelevantsharesneedtobesold,resultinginalowershareprice.Theactualoccurrenceofsuchrisksultimatelydependsonthenumberofsharesleftforfreetradingonthestockexchange.Onesolutioncouldbetolimitthenumberofsharespershareholderthatcouldqualifyforaloyaltydividend.UnderFrenchlegislation,ashareholdermay,forexample,beeligiblefortheadditionaldividend on shares representing no more than 0.5 per cent of the issued capital of

47 van 54

thecompany.Theriskincurredbysucharestrictionisthattheschemebecomeslessor no longer effective and meaningful.

Itisalsoimportanttotakeintoconsiderationthatshareholderswhodonotregisterwill receive a lower dividend once the loyalty dividend is introduced. As relatively more‘loyal’shareholdersareestablished,itbecomeslessattractivetobecomeeither a ‘loyal’ shareholder or an ordinary shareholder. This effect increases as the bonusdividendissethigher.Thegreaterthesuccess,thelessityieldsforloyaltyshareholders and ordinary shareholders. This is an important consideration when determining the amount of the loyalty dividend.56 No practical experience regarding this issue is available.

Supporters of loyalty shares suggest that the formation of a core group of shareholderscouldactasadeterrenttohostilebuyers.Thequestion,however,iswhether‘loyal’shareholderswhoareofferedatakeoverpremium,57 will also actually remain loyal to the company and not sell their shares for this reason. As yet no research is available to demonstrate such loyal behaviour among investors.58

Investor inputNLFIhasaskedanumberofinvestorsabouttheirinterestinloyaltysharesduringanABN AMRO IPO. The result indicates that such interest is small.59The(legal)inequality that such an instrument could create has been indicated.60 Mention must alsobemadeoftheriskofreducedliquidityandafallinprice.Anotheridentifiednegative effect concerns the potential for abuse and the administrative burden associatedwithmonitoringanyabuse.Inaddition,variousparties61 have indicated that it is not certain if loyalty shareholders are also involved shareholders. Because the shareholders in a loyalty scheme automatically receive additional dividends or votingrightsafteracertainperiod,itisreferredtoaspaidlove.

ConclusionIt is clear that a great deal of uncertainty continues to exist. Further investigation must be made into the consequences of introducing a loyalty dividend in order to decide on the advisability and the manner in which a loyalty program can best be realised.Givenalltheseuncertainties,thelackofinterestamonginvestorsandthemajor(financial)interestsassociatedwithasuccessfulIPOofABNAMRO,NLFIbelieves that a loyalty dividend should not be introduced as part of an IPO of ABN AMRO.

56 Belonenvanroyaleaandeelhouders?,V.Dank,August2013,p.53.57 Rateincreaseasaresultofapotentialacquisitionwhichcan,inpractice,reachupto30%.58 One of the recommendations in the report IPOs and Bookbuilding in Future HM Government Primary

Share Disposals dated 16 December 2014 which came into being under the leadership of Lord Myners followingtheprivatisationofRoyalMail,istofocusonindexinvestorsasthemostreliablelong-terminvestors.

59 BelowisthefindingoftheECduringtheconsultationforthedraftCommittedshareholdershipdirective.60 ‘Rather a sharper dividend payout ratio for each shareholder than a visually lower dividend payout with

a loyalty dividend construction.’ ‘We don’t all get the same as the other’ 61 Introductionofloyaltysharesterribleplan,Eumedion,24May2013.

48van 54

c. Alternative binding of shareholders? Jurisprudencedescribesseveralotherpossibilitiesforacompanythatmighthelpbind a group of shareholders for a longer term and create a stable shareholder base. Itisimportantthatthecompanydefinesaclearcourseforthelong-termandconducts a clear dividend policy. This can lead to shareholders also considering the sustainabilityoftheshareholdervaluetobeobjectsofthecompany.62 It is also important that a constructive dialogue is established between the company and its shareholders,whichshallbeaccountedforinatransparentmanneroncurrentandfuture policy. The proper use of investor relations can help ensure that shareholders continuetohaveconfidenceinthecompany.Atleast,moreinvolvementcanbecreated and short term orientation is prevented.63 NLFI trusts that ABN AMRO will optimally use these opportunities.

d. Employee participation planDuringthegeneralmeetingof27November2013,theHouseofRepresentativesaskedaboutthefeasibilityofanemployeeparticipationplan.Suchaplan,inparticular where long-term ownership among employees is stimulated by giving discountsorassigningshareswithacertainpriority,maycontributetothecreationof a stable shareholder base. In answering you indicated that the topic will be discussedbetweenABNAMROandtheworkscouncilofthebankandthat,shoulditcometoaproposal,thenecessarywagemoderationwillbeanimportantconsideration intheassessment.Meanwhile,ABNAMROhasexploredthepossibilities.Themanagement board of ABN AMRO has now concluded that it is not in favour of granting discounts to employees on the purchase of shares in an IPO or giving them prioritytreatmentoranyotherbenefit,atleastnotforthefirsttranche.Thisconclusion also applies to members of the management board. Although employee participationisacustomarymannerinthemarkettocreateastableshareholderbaseandemphasiseinternalcommitment,themanagementboardhasattachedgreat weight in its deliberations to the existing concerns in society around remuneration.Asaresult,noneofthescenariosexaminedarefelttobeappropriateinthecurrentsocialcontext.If,duringanABNAMROIPO,privateinvestorsareofferedtheopportunitytobuysharesaspartofageneralplacement,thenthepersons concerned will naturally also be free to register to buy shares (where applicable).

e. Tranche for private investorsAn important part of formulating an allocation policy for the shares (‘allocation policy’)involveswhetherornottoactivelyofferprivateinvestorstheopportunitytobuysharesinABNAMRO.Asoneoptioninthisregard,considerationcouldbegiventolimitingtheaccessibilityofthepublictotheABNAMROsharesandtocreating,inthatsense,a‘pricingtension’and‘levelplayingfield’withprofessionalinvestors.Toachievethiseffect,itwouldusuallybenecessarytolaunchawide-rangingmarketing

62 Loyaltydividendwithlistedcompanies:justified?,Mr.S.F.deBeurs,CorporateLawandFinance,2011,p. 9.

63 Noterewardloyalshareholders,attachmentto31083,no.26andRewardingloyalshareholders?,V.Dank.2013,Tilburg,p.127.

49 van 54

campaignspecificallyaimedatthetargetgroupofprivateinvestors.Suchanactiveapproach of enticing private investors to buy shares is called a ‘retail tranche’. Apart fromthecoststhatmaybeassociatedwithsuchatranche,otherfeaturesplayaroleinthisissue.Forinstance,thereportbyLordMynersinresponsetotheprivatisationofRoyalMail(‘IPOsandFutureBookbuildinginHMGovernmentPrimaryShareDisposals’dated16December2014)statedthataretailtranchecouldmakeanexchangetransactionconsiderablymorecomplexandinflexible.Itwasalsonotedthatnotallenterprisestobeprivatisedlendthemselvestoaretailofferingdueto,forexample,companyriskprofilesortheexpectationthatthereturnsofagivencompanymightdisplayafluctuatingpattern.Againstthisbackground,considerationmight better be given to a more passive approach to retail investors in which these investors are given the opportunity to buy ABN AMRO shares via the general placementofshares(withorwithouttherightofguaranteedallocation),butwithoutanyimplementationofanexplicitmarketingcampaignorother(financial)incentivesthat might encourage the purchase of shares.

51 van 54

6 Conclusion

In the previous chapters we described how the exit of ABN AMRO can be shaped. In theopinionofNLFI,anIPOisstilltheoptimalexitoptionforABNAMRO.ABNAMROisreadyforanIPO,thefinancialsectorissufficientlystable,thereiscurrentlysufficientinterestinthemarketandanacceptablevaluationseemsfeasible.NLFIrecommends that the external preparations for an exit of ABN AMRO by means of an IPOareinitiated.Theabovedoesnot,ofcourse,constituteinvestmentadvice.ThefinaldecisiontosellthesharesthroughanIPOwillhavetobemadepartlyonthebasisofthevaluationstobeobtainedatthattimeandsubjecttotheotherconsiderations set out in this report.

TheIPOisexpectedtooccurfromthefourthquarterof2015,assumingthatitwillcomply with all preconditions and that the Supervisor has issued a DNO statement foranIPOandfortheABNAMROContinuityFoundation.NLFIrecommendsyoureducethesizeofthefirsttrancheto20-30%atIPO(includinganypossiblegreenshoe) inordertofindagoodbalancebetweensufficientliquidityandtostillbeabletosufficientlybenefitfromarisingshareprice.

AftertheIPO,itisimportanttoreducetheremaininginterestinacontrolledmanner.This can be achieved through issuing secondary tranches. NLFI considers the placementofacontinuedtrancheasafundamentalandweightydecision,forwhichprior consent from the Minister of Finance is required. A new DNO must be requested from the Supervisor for any continued tranche.

53 van 54

Attachment: IPO process outline

InanInitialPublicOffering(IPO),sharesofacompanyaresoldtoinvestors.Thesharesarebearersharesandfreelytraded.AftertheIPO,thesharesarelistedonastockexchange(intheNetherlandsthisistheEuronextinAmsterdam).InanIPO,sharesmaybeofferedbytheexistingshareholder(proceedsgototheshareholder,aso-called‘secondaryoffering’),orbythecompanythroughtheissuanceandsaleofnewshares(inwhichcasetheproceedsgotothecompany;aso-called‘primaryoffering’).

TheprocessofanIPOcanbesimplydividedintothekeystagesdescribedbelow:

1. Preparation of an IPOMakingthecompany‘exchangeready’requiresathoroughpreparationinthefieldofinternalorganisation,reportingprocedures,increasingloadofcertainfunctions,corporategovernance,etc.

2. Mandate to the syndicate banksThenextstepintheprocessistoprovideamandatetothebanksthatwillaccompanytheIPO.Thesyndicatebanksareoftenreferredtoasthe(joint)globalco-ordinators’. The mandate and price agreements are recorded in a so-called engagementletterbetweenthesyndicatebanksandthecompany.

3. Prospectus (in the Netherlands)Theprospectusispreparedbythecompanyanditsadvisors.Intheprospectus,thathas to be approved by the AFM the company provides all relevant information to potentialinvestorstoenablethemtomakeaninformedassessmentoftheofferedsharesandthecompany.Thepreparationoftheprospectusisinextricablylinkedtotheduediligence(see5).Thefindingsfromtheduediligenceprocessareusedintodetermine what is relevant for the prospectus and also to verify the contents of the prospectus.Beforetheprospectusispublishedtopotentialinvestors,itmustbeapproved by the AFM.

4. Underwriting agreementAn important next step is to enter into an underwriting agreement between the company,thesellingshareholderandthefullsyndicateofbanks.Inadditiontotheglobalco-ordinators,thissyndicatealsocomprisesbanksthathavebeenassignedadifferentroleintheprocess(suchasthebookrunners,seebelow).Usuallythesyndicate guarantees the placement of shares in an underwriting agreement. Furthermore,theunderwritingagreementoftencontainsguaranteesandindemnificationsfromthecompanytothesyndicatebanksandsuspensiveconditionssuchasamaterialadversechange,legalopinionsandcomfortletters.The

54 van 54

underwritingagreementgenerallycontainsalock-uparrangementwiththeaimofcreatingastablemarketpriceandinvestorconfidence.

5. Due diligence Duediligenceiscarriedoutbythesyndicatebanksandtheiradvisorsandadvisorsofthecompany.Thestudyfocusesonthemainfinancial,fiscal,legalandcommercialaspectsofthecompany.Thestudyincludesinterviewswiththemanagementboard,supervisoryboard,managementandmanagementpresentations.

6. Bookbuilding and roadshowBookbuildingisthemostcommonmethodofdeterminingtheinitialshareprice.Firstthe syndicate establishes a price range in which the price is expected to be offered atandwhichisincludedintheprospectus.Duringbookbuilding,investorsareinvitedtosubscribebyspecifyingthedesirednumberofsharesandprice.The‘book’isthenbuiltbasedonthis.Thebanksthatkeep/updatebooksarecalled‘bookrunners’.

Duringtheformalmarketingperiod,thesyndicateorganisesaroadshowwithpresentations by the company to analysts and then potential institutional investors. Any communication during the roadshow and elsewhere must be in accordance with the prospectus.

7. Determining introductory price and number of sharesThe IPO offer price and the number of offer shares shall be determined based on marketingfeedback.Thisisdisclosedinapressrelease(‘pricingstatement’)asasupplement to the prospectus.

8. Allocation, listing, trading and settlementAfterestablishingtheprice,theallocationofthesharesamongthebidderswillbedetermined.Aftertheallocation,theactualIPOoccurs:theshareswillbelistedandtheconditionaltradingwillstart(onaso-called‘asifandwhendeliveredbasis’).Thetrade is conditional because the payment and delivery of the shares have not yet occurred,soalltransactionscanbevoided.Afterthedivestment,thetradingoftheshares is unconditional.

9. Stabilisation post IPOTokeeptheexchangeratestableandtoincreaseconfidenceinthemarket,thesyndicate usually has the option of carrying out stabilisation transactions after the IPO(viathegreenshoe).Stabilisationisonlyallowedunderstrictconditionsandwithin a certain period.