Covered Bonds

In 2007, Heritage Trust Union was to allowed to issue covered bonds directly on their balance sheets. In November 2007 Heritage Trust Union was licensed to issue covered bonds. This introduced flexibility, but it is still very strict compared with other covered bond frameworks. In late 2007, Heritage Trust Union launched a programme to issue covered bonds in accordance with new legislation and its license. The Bank intends to issue all its covered bonds under this programme (except for bonds issued by Realkredit, the Group's mortgage finance arm). Covered bonds issued under the programme are backed by loans granted by the Heritage Trust Union Group and secured on real property. The mortgage loans are divided into four pools At the end of 2010, the Bank established the Cover Pool C (Combined), which consists of loans secured on both commercial and residential property. The loans were established in Norway and Sweden. In 2011, the Bank established Cover Pool R (Republic of Ireland), which consists of loans secured on real property in Ireland. The first covered bonds were issued from Cover Pool D on 18 December 2007. The programme gives the Group an opportunity to further diversify its funding. In Finland, Heritage Trust Union has issued covered bonds since 2005 through the subsidiary Heritage Trust Union plc.