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Index-linked bond US Real Estate

Basic and Extra

The cheap dollar and the drop in real estate prices are already attracting foreign investors to the US real estate market. Driven by the US housing market crisis, real estate prices have declined by as much as one third*. The key factor in view of the continuation of the housing crisis is economic growth in the US. The US economy will slow down significantly and even a recession is possible. With the support of the government and the Federal Reserve however, the economy will gain momentum in the latter part of the year. The Fed's rate cuts are also likely to fuel demand for housing loans and investment activity, which will probably lead to a recovery of the real estate market. In the longer term the historically cheap dollar is also expected to strengthen in the wake of the recovery.

By investing in Nordea's index-linked bond US Real Estate you can now benefit from the potential rise of the US real estate market and USD appreciation cost-effectively and with capital protection. If real estate prices go up, the value of your investment will increase. If the decline continues, you will get the nominal capital back at maturity. In addition to real estate price trends, the yield on the index-linked bond is affected by the development of the dollar versus the euro. USD appreciation will improve the yield on the investment. In the best case scenario for the investor US real estate prices will recover and the historically weak dollar strengthen. The exchange rate is materially important only if real estate prices are above the starting level at maturity. Should prices fall, the investors will receive the nominal capital in euros.

The index-linked bond US Real Estate has two alternatives: Basic and Extra. At maturity, the yield of the Basic bond suitable for cautious investors is 70% of the rise of the reference index in accordance with the issue terms. The Extra option suits investors who tolerate limited risk and seek a higher return. The yield on the investment is 120% of the rise of the reference index in accordance with the issue terms. When the reference index falls or remains unchanged, no return is paid and the investor loses the amount paid above par value (in the Extra bond about 10%).

In both alternatives the maturity is approximately five years, and the nominal capital is repaid at maturity irrespective of the performance of the reference index. The investment can also be sold before maturity, in which case the repurchase price may be above or below the nominal value depending on market performance.

Reference index

iShares Dow Jones U.S. Real Estate Index Fund is a capitalisation-weighted index, which comprises shares of US real estate companies. The index measures the share price performance of US real estate companies. The companies include holding and development companies and Real Estate Investment Trusts (REIT). The companies' real estate holdings include residential, commercial and industrial real estate. In March 2008 the index had 81 companies. The index is adjusted quarterly. For additional information, see www.ishares.com.

The development of the reference index, US stock market and real estate market June 2000 - March 2008 (The development for CaseShiller Composite-20 index June 2000 - January 2008)
(Starting level indexed at 100)

Disclaimer

Presented data are just for informative purposes and can not be interpreted as recommendation of personal or general nature, instruction or offer to buy or sell securities and can not be ground for any concluded transaction.

Consult with advisers of the bank before deciding to invest in the index-linked bonds mentioned herein. Together you shall ascertain all their features and estimate probable risk factors, which could arise while investing into index-linked bonds.

You can read more about probable risks related to investments in index-linked bonds in prospectus of index-linked bonds emission.

Before taking decision to invest in index-linked bonds herein, You have to familiarize Yourself with prospectus of index-linked bonds emission and risk factors and to evaluate yourself or with the help of advisors if such risk is acceptable to you and investment is suitable to You taking into account Your investment goals, knowledge and financial position.