Real estate index-linked notes are ‘hybrid’ securities because they have characteristics of both fixed income (i.e., corporate bonds) and equity securities. They sometimes feature: › the principal protection of a bond as well as the potential returns, or inverse returns, of a market index › an index multiplier to magnify index performance (or inverse index performance). › Performance caps or participation rates The repayment of principal (and interest, to the extent applicable) are backed by the full faith and credit of the issuing firm. Index-linked notes and certificates typically are issued by broker-dealers via a A-rated (or higher) entity and usually mature 2 to 5 years following original issuance. For a real estate index-linked note, in an appreciating market, a “bull note” investor can achieve returns that reflect those of an ownership position in a diverse portfolio of properties; in a depreciating market, a “bear note” investor can hedge pre-existing real estate risk to the extent the index is a reasonable proxy for the exposure. Upon maturity, the investor receives the bond principal, interest if it is included in the product design, plus the absolute percentage value increase (bull note) or decline (bear note) in the chosen index.

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