EKF 11% Enhanced Yield Securities Linked TO The Claymore Yieldstream 20

 

EKSPORTFINANS ASA

 

Reverse Exchangeable Securities with Contingent Downside Protection

 

$[  l  ] [  l  ]% Enhanced Yield Securities linked to the common stock

of Amazon.com, Inc. due November 4, 2008

 

$[  l  ] [  l  ]% Enhanced Yield Securities linked to the common stock

of Peabody Energy Corporation due November 4, 2008

 

$[  l  ] [  l  ]% Enhanced Yield Securities linked to the common stock

of Schlumberger Limited due November 4, 2008

 

$[  l  ] [  l  ]% Enhanced Yield Securities linked to the American Depositary Shares

of Tata Motors Limited due November 4, 2008

 

 

Offering Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional terms specific to the securities

 

Eksportfinans ASA has filed a registration statement (including a prospectus) with the Securities and Exchange Commission, or SEC, for the offerings to which this terms supplement relates. Before you invest, you should read the prospectus in that registration statement and the other documents relating to these offerings that Eksportfinans ASA has filed with the SEC for more complete information about Eksportfinans ASA and these offerings. You may get these documents without cost by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, Eksportfinans ASA, any agent or any dealer participating in these offerings will arrange to send you the prospectus, each prospectus supplement, product supplement no. 2 and this terms supplement if you so request by calling toll-free 1-888-215-4145 or 1-212-214-6282.

 

You should read this terms supplement together with the prospectus dated February 5, 2007, as supplemented by the prospectus supplement dated February 5, 2007 relating to our medium-term notes of which these securities are a part, and the more detailed information contained in product supplement no. 2 dated September 7, 2007. This terms supplement, together with these documents, contains the terms of the securities and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, brochures or other educational materials of ours. You should carefully consider, among other things, the matters set forth in “Risk factors” in the accompanying product supplement no. 2 and the accompanying prospectus supplement, as the securities involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the securities.

 

You may access these documents on the SEC Web site at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC Web site):

 

http://www.sec.gov/Archives/edgar/data/700978/000095012307012382/u53557e424b2.htm

 

Our Central Index Key, or CIK, on the SEC Web site is 700978. As used in this terms supplement, the “Company,” “we,” “us,” or “our” refers to Eksportfinans ASA.

 

Selected risk considerations

 

An investment in the securities involves significant risks. Investing in the securities is not equivalent to investing directly in the Underlying Stocks. These risks are explained in more detail in the “Risk factors” sections of the accompanying product supplement no. 2 dated September 7, 2007 and the accompanying prospectus supplement.

 

No guaranteed return of principal.   With an investment in the securities, you bear the risk of losing some or all of the value of your principal if a knock-in event occurs during the term of the securities and the final stock price is less than the initial stock price. Under these circumstances, at maturity, for each security you hold, the maturity payment amount that you will receive will be shares of the applicable Underlying Stock, which represents the number of shares of the applicable Underlying Stock equal to the share amount multiplied by the share multiplier. In these circumstances, you will lose some or all of the value of the principal amount of your securities and receive shares of the applicable Underlying Stock instead of a cash payment.

 

Yield may be lower.   The yield that you will receive on your securities, which could be negative, may be less than the return you could earn on other investments. Even if your yield is positive, your yield may be less than the yield you would earn if you bought a standard senior non-callable debt security with the same maturity date.

 

Relationship to the Underlying Stocks.   You will have no rights against any of the Underlying Stock Issuers even though the market value of the securities and the amount you will receive at maturity depend on the performance of the applicable Underlying Stock. The Underlying Stock Issuers are not involved in the offering of the securities and have no obligations relating to the securities. In addition, you will not receive any dividend payments or other distributions on any of the Underlying Stocks, and as a holder of the securities, you will not have voting rights or any other rights that holders of the Underlying Stocks may have.

No active trading market.   The securities will not be listed or displayed on any securities exchange, the Nasdaq National Market or any electronic communications network. There can be no assurance that a liquid trading market will develop for the securities. The development of a trading market for the securities will depend on our financial performance and other factors such as the market price of any of the Underlying Stocks. Even if a secondary market for the securities develops, it may not provide significant liquidity and transaction costs in any secondary market could be high.

 

Potential conflicts of interest.   Wachovia Capital Markets, LLC or its affiliates may presently or from time to time engage in business that may adversely affect the price of the securities, including hedging activities. In addition, the inclusion of commissions and projected profits from hedging in the original issue price is likely to adversely affect secondary market prices. In the course of business, Wachovia Capital Markets, LLC or its affiliates may acquire non-public information relating to any of the Underlying Stock Issuers and, in addition, one or more affiliates of Wachovia Capital Markets, LLC may publish research reports about any of the Underlying Stock Issuers. Neither we nor Wachovia Capital Markets, LLC makes any representation to any purchasers of the securities regarding any matters whatsoever relating to any of the Underlying Stock Issuers.

 

Risk considerations for an investment in the securities linked to the American Depositary Shares of Tata Motors Limited

 

Potential risks of investing in a security linked to shares in an emerging foreign market.   Tata Motors Limited is organized under the laws of, and is based in, India. India is considered to be an emerging market country and investments in emerging markets may be subject to greater risks as a result of a number of considerations. These considerations may include greater risk of market shut down, greater governmental involvement in the economy and, in some cases, greater volatility, unpredictability and economic and political instability and higher risk of civil or international conflict or war.

 

Hypothetical returns

 

The following table illustrates the hypothetical maturity payment amount and corresponding hypothetical return at maturity per security (in each case, including interest payments), for a range of hypothetical final stock prices and the corresponding hypothetical price return of each of the Underlying Stocks and whether or not a knock-in event has occurred.

 

The tables below assume no market disruption event, antidilution adjustments or settlement disruption event occurs. Also, the hypothetical rates of return shown below do not take into account the effects of applicable taxes. Because of the U.S. tax treatment applicable to the securities, tax liabilities could affect the after-tax rate of return on the securities to a comparatively greater extent than the after-tax return on each of the Underlying Stocks.

 

Securities linked to Amazon.com, Inc.

 

The examples are based on the following hypothetical terms:

 

 

The figures below are for purposes of illustration only. The actual maturity payment amount and the resulting return (inclusive of coupons) will depend on the actual final stock price and whether or not a knock-in event occurs, each determined by the calculation agent as described in this terms supplement.

 

 

 

The following graph sets forth the return at maturity for a range of final stock prices both if a knock-in event has occurred and if a knock-in event has not occurred.

 

Return Profile of [     l     ]% Enhanced Yield Securities vs. Amazon.com, Inc.*

 

 

 

 

Securities linked to Peabody Energy Corporation

 

The examples are based on the following hypothetical terms:

 

 

The figures below are for purposes of illustration only. The actual maturity payment amount and the resulting return (inclusive of coupons) will depend on the actual final stock price and whether or not a knock-in event occurs, each determined by the calculation agent as described in this terms supplement.

 

 

 

The following graph sets forth the return at maturity for a range of final stock prices both if a knock-in event has occurred and if a knock-in event has not occurred.

 

Return Profile of     l     % Enhanced Yield Securities vs. Peabody Energy Corporation*

 

 

 

 

Securities linked to Schlumberger Limited

 

The examples are based on the following hypothetical terms:

 

 

The figures below are for purposes of illustration only. The actual maturity payment amount and the resulting return (inclusive of coupons) will depend on the actual final stock price and whether or not a knock-in event occurs, each determined by the calculation agent as described in this terms supplement.

 

 

 

The following graph sets forth the return at maturity for a range of final stock prices both if a knock-in event has occurred and if a knock-in event has not occurred.

 

Return Profile of [     l     ]% Enhanced Yield Securities vs. Schlumberger Limited*

 

 

 

 

Securities linked to Tata Motors Limited

 

The examples are based on the following hypothetical terms:

 

 

The figures below are for purposes of illustration only. The actual maturity payment amount and the resulting return (inclusive of coupons) will depend on the actual final stock price and whether or not a knock-in event occurs, each determined by the calculation agent as described in this terms supplement.

 

 

 

The following graph sets forth the return at maturity for a range of final stock prices both if a knock-in event has occurred and if a knock-in event has not occurred.

 

Return Profile of [     l     ]% Enhanced Yield Securities vs. Tata Motors Limited*

 

 

 

 

The Underlying Stocks

 

The Underlying Stock Issuers

 

Provided below is a brief description of the Underlying Stock Issuers obtained from publicly available information published by the Underlying Stock Issuers. Neither we nor Wachovia Capital Markets, LLC makes any representation to any purchasers of the securities regarding any matters whatsoever relating to the Underlying Stock Issuers. Any prospective purchaser of the securities should undertake an independent investigation of the Underlying Stock Issuers as in its judgment is appropriate to make an informed decision regarding an investment in the securities.

 

Each of the Underlying Stocks is registered under the Exchange Act. Companies with securities registered under the Exchange Act are required to file periodically financial and other information specified by the SEC. Information filed with the SEC can be inspected and copied at the Public Reference Section of the SEC, Room 1580, 100 F Street, N.E., Washington, D.C. 20549. Copies of this material can also be obtained from the Public Reference Section, at prescribed rates. In addition, information filed by each of the Underlying Stock Issuers with the SEC electronically can be reviewed through a website maintained by the SEC. The address of the SEC’s website is http://www.sec.gov.

 

Amazon.com, Inc. operates retail websites and offers programs that enable third parties to sell products on its websites. Amazon.com, Inc. also provides services for third-party retailers, marketing and promotional services, and web services for developers. In addition, Amazon.com, Inc. operates other websites that enable search and navigation and a comprehensive movie database. Information filed with the SEC by Amazon.com, Inc. under the Exchange Act can be located by reference to SEC file number 000-22513.

 

Peabody Energy Corporation is a private-sector coal company. Peabody Energy Corporation owns majority interests in coal operations located throughout all major U.S. coal producing regions and in Australia. In addition to its mining operations, it markets, brokers and trades coal. Peabody Energy Corporation’s other energy related commercial activities include the development of mine-mouth coal-fueled generating plants, the management of its coal reserve and real estate holdings, coalbed methane production, and Btu Conversion technologies, which are designed to convert coal to natural gas and transportation fuels. Information filed with the SEC by Peabody Energy Corporation under the Exchange Act can be located by reference to SEC file number 001-16463.

 

Schlumberger Limited is an oilfield services company, supplying technology, project management and information solutions intended to optimize performance in the oil and gas industry. Schlumberger Limited consists of two business segments: Schlumberger Oilfield Services, a provider of technology, project management and information solutions to the international oil and gas exploration and production industry, and WesternGeco, a seismic company providing comprehensive reservoir imaging, monitoring, and development services. Information filed with the SEC by Schlumberger Limited under the Exchange Act can be located by reference to SEC file number 001-04601.

 

Tata Motors Limited is one of the largest automobile manufacturers in India. It has a broad portfolio of automotive products, ranging from sub-1 ton to 40 ton Gross Vehicle Weight trucks and from small, medium, ad large buses and coaches to passenger cars and utility vehicles. Tata Motors Limited has also expanded international operations through mergers and acquisitions involving non-Indian companies. In 2004, it acquired the Daewoo Commercial Vehicles Company, in May 2006, it entered into a joint venture agreement with Brazil-based Marcopolo S.A., or Marcopolo, a global leader in body-building for buses and coaches, to manufacture and assemble fully-built buses and coaches in India, wherein we have a 51% ownership, with the balance held by Marcopolo. In December 2006, it entered into a joint venture agreement with Thonburi Automotive Assembly Plant Co., Thailand, or Thonburi, to manufacture pick-ups in Thailand. Tata Motors Limited own 70% of the joint venture, while Thonburi owns the remaining 30%. More recently in March 2007, Tata Motors Limited has agreed to acquire Jaguar and Land Rover brands from Ford Motor Company. Information filed with the SEC by Tata Motors Limited, under the Exchange Act can be located by reference to SEC file number 001-32294.

Historical Data

 

Each of the Underlying Stocks is listed on the Relevant Exchange under its respective symbol described above. The following table sets forth the high intra-day, low intra-day and quarter-end closing prices for each of the Underlying Stocks for the four calendar quarters in each of 2004, 2005, 2006, and 2007 and the period beginning January 1, 2008 to March 31, 2008 and from April 1, 2008 to and including April 14, 2008. For each of the Underlying Stocks, the historical prices listed below were obtained from Bloomberg Financial Markets without independent verification. These historical prices should not be taken as an indication of future performance, and no assurance can be given that the price of either of the Underlying Stocks will not decrease such that you would receive less than the principal amount of your securities at maturity.

 

Any historical upward or downward trend in the price of any of the Underlying Stocks during any period shown below is not an indication that the price of that Underlying Stock is more or less likely to increase or decrease at any time during the term of the securities. You should not take the historical performance levels as an indication of future performance of any of the Underlying Stocks. We cannot assure you that the future performance of any of the Underlying Stocks will result in your receiving the principal amount of your securities on the maturity date. The actual performance of each of the Underlying Stocks over the life of the securities may bear little relation to the historical levels shown below.

Amazon.com, Inc.

 

 

Peabody Energy Corporation

 

Schlumberger Limited

 

 

Tata Motors Limited

 

 

Supplemental information regarding taxation in the United States

 

The amount of the stated interest rate on the note that constitutes interest on the Deposit (as defined in the accompanying product supplement no. 2), and the amount that constitutes Put Premium (as defined in the accompanying product supplement no. 2) are set forth in the table below.

 

 

In addition to potential alternative treatments under current tax law, it is also possible that the tax law may be changed by legislative or regulatory action, possibly with retroactive effect. However, it is not possible to predict whether or when such action will occur and the effect of such potential changes is uncertain.

 

Please refer to “Taxation in the United States” beginning on page PS-29 of the accompanying product supplement no. 2.

 

Supplemental plan of distribution

 

The securities are being purchased by Wachovia Capital Markets, LLC (the agent) as principal, pursuant to terms agreements dated as of     l     between the agent and us. The agent has agreed to pay our out-of-pocket expenses in connection with the issuance of the securities.

 

See “Supplemental plan of distribution” beginning on page PS-32 of the accompanying product supplement no. 2.

 

 

 

Enhanced Yield Securities

Reverse Exchangeable Securities with

Contingent Downside Protection

 

 

 

 

We may offer from time to time a class of Enhanced Yield Securities that are Reverse Exchangeable Securities with Contingent Downside Protection, which we refer to as the “securities”, that pay at maturity either their principal amount in U.S. dollars or, under certain circumstances, shares of common stock or American depositary shares, which we refer to, collectively, as the “Underlying Stock”, of an Underlying Stock Issuer not affiliated with us. This product supplement describes some of the general terms that may apply to the securities and the general manner in which they may be offered, and supplements the terms described in the accompanying prospectus supplement and prospectus. A separate term sheet or pricing supplement, as the case may be, will describe terms that apply specifically to the notes, including any changes to the terms specified below. We refer to such term sheets and pricing supplements generally as terms supplements. If the terms described in the applicable terms supplement are inconsistent with those described herein or in the accompanying prospectus supplement and prospectus, the terms described in the applicable terms supplement will control. The securities will have the following general terms:

 

 

For a detailed description of the terms of the securities, see the applicable terms supplement as well as “Summary Information” beginning on page PS-1 and “Description of the Securities” beginning on page PS-17.

 

Investing in the securities involves risks. See “Risk Factors” beginning on page PS-6.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this product supplement, the accompanying prospectus supplement and prospectus, or any related terms supplement. Any representation to the contrary is a criminal offense.

 

 

 

Wachovia Securities

 

 

 

 

TABLE OF CONTENTS

 

 

In making your investment decision, you should rely only on the information contained or incorporated by reference in the terms supplement relevant to your investment, this product supplement and the accompanying prospectus supplement and prospectus with respect to the notes offered by the applicable terms supplement and this product supplement and with respect to Eksportfinans. We have not authorized anyone to give you any additional or different information. The information in the applicable terms supplement, this product supplement and the accompanying prospectus supplement and prospectus may only be accurate as of the dates of each of these documents, respectively.

 

The securities described in the applicable terms supplement and this product supplement are not appropriate for all investors, and involve important legal and tax consequences and investment risks, which should be discussed with your professional advisers. You should be aware that the regulations of the National Association of Securities Dealers, Inc. and the laws of certain jurisdictions (including regulations and laws that require brokers to ensure that investments are suitable for their customers) may limit the availability of the notes. The applicable terms supplement, this product supplement and the accompanying prospectus supplement and prospectus do not constitute an offer to sell or a solicitation of an offer to buy the notes in any circumstances in which such offer or solicitation is unlawful.

 

In this product supplement and the accompanying prospectus supplement and prospectus, “Eksportfinans”, the “Company”, “we”,“us” and “our” refer to Eksportfinans ASA and “agent(s)” refer to any agent(s) for sales of notes identified in the applicable terms supplement.

 

We are offering to sell, and are seeking offers to buy, the notes only in jurisdictions where offers and sales are permitted. Neither this product supplement nor the accompanying prospectus supplement, prospectus or terms supplement constitutes an offer to sell, or a solicitation of an offer to buy, any notes by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation. Neither the delivery of this product supplement nor the accompanying prospectus supplement, prospectus or terms supplement nor any sale made hereunder implies that there has been no change in our affairs or that the information in this product supplement and accompanying prospectus supplement, prospectus and terms supplement is correct as of any date after the date hereof.

 

You must (i) comply with all applicable laws and regulations in force in any jurisdiction in connection with the possession or distribution of this product supplement and the accompanying prospectus supplement, prospectus and terms supplement and the purchase, offer or sale of the notes and (ii) obtain any consent, approval or permission required to be obtained by you for the purchase, offer or sale by you of the notes under the laws and regulations applicable to you in force in any jurisdiction to which you are subject or in which you make such purchases, offers or sales; neither we nor the agents shall have any responsibility therefor.

	(a)	a knock-in event has occurred; and
	(b)	the final stock price is less than the initial stock price.

 

RISK FACTORS

 

An investment in the securities is subject to the risks described below, as well as the risks described under “Risk Factors — Risks related to index linked notes or notes linked to certain assets” in the accompanying prospectus supplement and any additional risk factors identified in the applicable terms supplement. The securities are not secured debt and are riskier than ordinary debt securities. Because the return to investors is linked to the performance of the common stock or the American depositary shares of the Underlying Stock Issuer specified in the applicable terms supplement, there is no guaranteed return of principal at maturity. Also, an investment in the securities is not equivalent to investing directly in the Underlying Stock to which the securities are linked. This section describes the most significant risks relating to the securities. You should carefully consider whether the securities are suited to your particular circumstances before you decide to purchase them.

 

Your investment may result in a loss of some or all of your principal

 

Unlike standard senior non-callable debt securities, the securities do not guarantee the return of the principal amount at maturity. With an investment in the securities, you bear the risk of losing some or all of the value of your principal if a knock-in event occurs during the term of the securities and the final stock price is less than the initial stock price. Under these circumstances, at maturity, for each security you hold, the maturity payment amount that you will receive will be in shares of the Underlying Stock equal to the share amount multiplied by the share multiplier. Accordingly, if a knock-in event has occurred during the term of the securities (i.e., the market price of the Underlying Stock has declined to or below the knock-in price during the term of the securities) and the final stock price is less than the initial stock price you will lose some or all of the value of the principal amount of your securities, and you will receive shares of the Underlying Stock, which may be worth $0.00, instead of a cash payment.

 

Your yield may be lower than the yield on a standard debt security of comparable maturity

 

The yield that you will receive on your securities, which could be negative if a knock-in event occurs during the term of the securities and the final stock price is less than the initial stock price, may be less than the return you could earn on other investments. Your maturity payment amount in cash will not be greater than the aggregate principal amount of your securities. Even if your yield is positive, your yield may be less than the yield you would earn if you bought a standard senior non-callable debt security of Eksportfinans with the same maturity date. Your investment may not reflect the full opportunity cost to you when you take into account factors that affect the time value of money.

 

Owning the securities is not the same as owning the Underlying Stock

 

Your return will not reflect the return you would realize if you actually owned and held the Underlying Stock for a similar period because the maturity payment amount per security will never exceed the principal amount of your securities and will be determined without taking into consideration the value of any dividends that may be paid on the Underlying Stock. The securities represent senior unsecured obligations of ours and do not represent or convey any rights of ownership in the Underlying Stock, other than the right to receive a payment at maturity in shares of the Underlying Stock if a knock-in event has occurred and the final stock price is less than the initial stock price. In addition, you will not receive any dividend payments or other distributions on the Underlying Stock and, as a holder of the securities, you will not have voting rights or any other rights that holders of the Underlying Stock may have. If the return on the Underlying Stock over the term of the securities exceeds the principal amount of the securities and the interest payments you receive, your return on the securities at maturity will be less than the return on a direct investment in the Underlying Stock without taking into account taxes and other costs related to such a direct investment. If the market price of the Underlying Stock increases above the initial stock price during the term of the securities, the market value of the securities will not increase by the same amount. It is also possible for the market price of the Underlying Stock to increase while the market value of the securities declines.

 

There may not be an active trading market for the securities

 

Unless otherwise specified in the applicable terms supplement, the securities will not be listed or displayed on any securities exchange or any electronic communications network. Even if the securities are listed on an securities exchange or an electronic communications network, there can be no assurance that a liquid trading market will develop for the securities. The development of a trading market for the securities will depend on our financial performance and other factors such as the increase, if any, in the market price of the Underlying Stock. Even if a secondary market for the securities develops, it may not provide significant liquidity and transaction costs in any secondary market could be high. As a result, the difference between bid and asked prices for the securities in any secondary market could be substantial. If you sell your securities before maturity, you may have to do so at a discount from the public offering price, and, as a result, you may suffer substantial losses.

 

Wachovia Capital Markets, LLC and its broker-dealer affiliates currently intend to make a market for the securities, although they are not required to do so and may stop any such market-making activities at any time. As market makers, trading of the securities may cause Wachovia Capital Markets, LLC or its broker-dealer affiliates to have long or short positions in the securities. The supply and demand for the securities, including inventory positions of market makers, may affect the secondary market for the securities.

 

Many factors affect the market value of the securities

 

The market value of the securities will be affected by factors that interrelate in complex ways. It is important for you to understand that the effect of one factor may offset the increase in the market value of the securities caused by another factor and that the effect of one factor may compound the decrease in the market value of the securities caused by another factor. We expect that the market value of the securities will depend substantially on the market price of the Underlying Stock at any time during the term of the securities relative to the initial stock price.

 

If you choose to sell your securities when the market price of the Underlying Stock exceeds or is equal to the initial stock price, you may receive substantially less than the amount that would be payable at maturity based on this market price because of the expectation that the market price of the Underlying Stock will continue to fluctuate until the final stock price is determined and the risk that a knock-in event may occur. In addition, we believe that other factors that may influence the value of the securities include:

 

 

Historical performance of the Underlying Stock should not be taken as an indication of its future performance during the term of the securities

 

You cannot predict the future performance of Underlying Stock based on its historical performance. The Underlying Stock has performed differently in the past and is expected to perform differently in the future. The market price of the Underlying Stock will be influenced by complex and interrelated political, economic, financial

and other factors that can affect the Underlying Stock Issuer. You should refer to the applicable terms supplement for a description of the Underlying Stock Issuer and historical data on the Underlying Stock. The price of the Underlying Stock may decrease to or below the knock-in price and remain below the initial stock price until maturity so that you will receive at maturity shares of Underlying Stock worth less than the principal amount of the securities. We cannot guarantee that the market price of the Underlying Stock will stay above the knock-in price over the life of the securities or that, if the market price of the Underlying Stock has decreased to or below the knock-in price, the market price of the Underlying Stock will recover and be at or above the initial stock price on the valuation date so that you will receive at maturity an amount at least equal to the principal amount of the securities.

 

We and our affiliates expect to have no affiliation with any Underlying Stock Issuer and are not responsible for its public disclosure of information

 

We do not expect any Underlying Stock Issuer to be an affiliate of ours. We do not expect any Underlying Stock Issuer to be involved with any offering of the securities in any way. Consequently, we do not expect to have any ability to control the actions of any Underlying Stock Issuer, including any corporate actions of the type that would require the calculation agent to adjust the payout to you at maturity on the securities. No Underlying Stock Issuer will have an obligation to consider your interest as an investor in the securities in taking any corporate actions that might affect the value of your securities. We do not expect to have any ability to control the public disclosure of these corporate actions or any events or circumstances affecting them.

 

Each security will be an unsecured debt obligation of Eksportfinans only and will not be an obligation of any Underlying Stock Issuer. None of the money you pay for the securities will go to any Underlying Stock Issuer. Since the Underlying Stock Issuer is not involved in the offering of the securities in any way, it has no obligation to consider your interest as an owner of securities in taking any actions that might affect the value of your securities. An Underlying Stock Issuer may take actions that will adversely affect the market value of the securities linked to that issuer’s Underlying Stock.

 

The securities may become exchangeable into the common stock of a company other than the Underlying Stock Issuer

 

Following certain corporate events relating to the Underlying Stock, such as a stock-for-stock merger where the Underlying Stock Issuer is not the surviving entity, you will receive at maturity cash or in shares of the common stock of a successor corporation to the Underlying Stock Issuer based on the closing price of such successor’s common stock. We describe the specific corporate events that can lead to these adjustments in the section of this prospectus called “Description of the Securities — Antidilution Adjustments”. The occurrence of such corporate events and the consequent adjustments may materially and adversely affect the market price of the securities.

 

You have limited antidilution protection

 

Wachovia Capital Markets, LLC, as calculation agent for your securities, will, in its sole discretion, adjust the share multiplier and, thus, the market price used to determine whether or not the knock-in price has been reached and, if applicable, the number of shares of Underlying Stock deliverable at maturity for certain events affecting the Underlying Stock, such as stock splits and stock dividends, and certain other corporate actions involving the Underlying Stock Issuer, such as mergers. However, the calculation agent will not make an adjustment for every corporate event that could affect the Underlying Stock. For example, the calculation agent is not required to make any adjustments to the share multiplier if the Underlying Stock Issuer or anyone else makes a partial tender or partial exchange offer for the Underlying Stock. If an event occurs that does not require the calculation agent to adjust the amount of Underlying Stock payable at maturity, the market price of the securities may be materially and adversely affected. You should refer to “Description of the Securities — Antidilution Adjustments” beginning on page PS-21 for a description of the general circumstances in which the calculation agent will make adjustments to the share multiplier.

 

Hedging transactions may affect the return on the securities

 

We through one or more of our hedging counterparties may hedge our obligations under the securities by purchasing the Underlying Stock, futures or options on the Underlying Stock or other derivative instruments with returns linked or related to changes in the market price of the Underlying Stock, and our hedging counterparties may adjust these hedges by, among other things, purchasing or selling the Underlying Stock, futures, options or other derivative instruments with returns linked to the Underlying Stock at any time. Although they are not expected to, any of these hedging activities may adversely affect the market price of the Underlying Stock and, therefore, the market value of the securities. It is possible that our hedging counterparties could receive substantial returns from these hedging activities while the market value of the securities declines.

 

The inclusion of commissions and projected profits from hedging in the initial public offering price set forth in the applicable terms supplement is likely to adversely affect secondary market prices for the securities

 

Assuming no change in market conditions or any other relevant factors, the price, if any, at which Wachovia Capital Markets, LLC is willing to purchase the securities in secondary market transactions will likely be lower than the initial public offering price set forth in the applicable terms supplement, since the initial public offering price will include, and secondary market prices are likely to exclude, commissions paid with respect to the securities, as well as the projected profit included in the cost of hedging our obligations under the securities. In addition, any such prices may differ from values determined by pricing models used by Wachovia Capital Markets, LLC, as a result of dealer discounts, mark-ups or other transactions.

 

The calculation agent may postpone the valuation date and, therefore, the determination of the final stock price and the maturity date if a market disruption event occurs on the valuation date

 

The valuation date and, therefore, the determination of the final stock price may be postponed if the calculation agent determines that a market disruption event has occurred or is continuing on the valuation date. If a postponement occurs, the calculation agent will use the closing price per share of the Underlying Stock on the next succeeding trading day on which no market disruption event occurs or is continuing. As a result, the maturity date for the securities would also be postponed. You will not be entitled to any compensation from us or the calculation agent for any loss suffered as a result of the occurrence of a market disruption event, any resulting delay in payment or any change in the market price of the Underlying Stock resulting from the postponement of the valuation date. See “Description of the Securities — Market Disruption Event” beginning on page PS-20.

 

Potential conflicts of interest could arise

 

Wachovia Capital Markets, LLC and its affiliates expect to engage in trading activities related to the Underlying Stock, including hedging transactions for their proprietary account, for other accounts under their management or to facilitate transactions on behalf of customers. Any of these activities could adversely affect the value of the Underlying Stock and, therefore, the market value of the securities and payment at maturity. Wachovia Capital Markets, LLC may also issue or underwrite securities or financial or derivative instruments with returns linked to changes in the value of the Underlying Stock. These trading activities may present a conflict between your interest in your securities and the interests that Wachovia Capital Markets, LLC and its affiliates will have in their proprietary accounts, in facilitating transactions, including block trades, for their customers and in accounts under their management. These trading activities, if they influence the market price of the Underlying Stock, could be adverse to your interests as a holder of the securities.

 

Wachovia Capital Markets, LLC or its affiliates may presently or from time to time engage in business with us or the Underlying Stock Issuer. This business may include extending loans to, or making equity investments in, the Underlying Stock Issuer or providing advisory services to the Underlying Stock Issuer, including merger and acquisition advisory services. In the course of business, Wachovia Capital Markets, LLC or its affiliates may acquire non-public information relating to the Underlying Stock Issuer and, in addition, one or more affiliates of Wachovia Capital Markets, LLC may publish research reports about the Underlying Stock Issuer. We do not make any representation to any purchasers of the securities regarding any matters whatsoever relating to the Underlying

Stock Issuer. Any prospective purchaser of the securities should undertake an independent investigation of the Underlying Stock Issuer as in its judgment is appropriate to make an informed decision regarding an investment in the securities.

 

Tax consequences are uncertain

 

You should consider the tax consequences of investing in the securities, significant aspects of which are uncertain. See “Taxation in the United States” beginning on page PS-29.

 

Special Risks When the Underlying Stock is American Depositary Shares

 

Certain additional risks apply to investments in the securities for which the Underlying Stock is comprised of American depositary shares of non-U.S. companies, as described below.

 

There are important differences between the rights of holders of ADSs and the rights of holders of the shares of stock that the ADSs represent

 

If your security is linked to the value of American depositary shares ( ADSs ), and not to the underlying common shares (or the equity equivalent of common shares in the relevant country) of the Underlying Stock Issuer, you should be aware of the differences between ADSs and the underlying shares. ADSs are securities that represent a specified number of underlying shares of a non-U.S. company. The rights and responsibilities of the Underlying Stock Issuer and the ADS holders may be different from the rights of holders of the shares underlying the ADSs, and the Underlying Stock Issuer may have different responsibilities to such shareholders from those it has to the holders of its ADSs. For example, an issuer of ADSs may make distributions in respect of its underlying shares that are not passed on to holders of its ADSs or are passed to holders of its ADSs at a later time. In addition, the calculation agent will not be required to make anti-dilution adjustments for every corporate event that may affect the shares of stock that the ADSs represent.

 

ADSs may trade differently from the shares of stock that the ADSs represent

 

ADSs represent the underlying shares of non-U.S. companies. These underlying shares are not quoted and traded in U.S. dollars. You should be aware that an investment in securities linked to the value of ADSs involves particular risks. For example, fluctuations in the exchange rate between the currency of the Underlying Stock Issuer’s country of organization and the U.S. dollar may affect the U.S. dollar equivalent of the foreign currency price of the underlying shares of the ADS issuer and may, in turn, affect the U.S. dollar market price of the ADSs and may correspondingly affect the market value of your security.

 

The exchange rate between the currency in which the shares underlying the ADSs are issued (usually the Underlying Stock Issuer’s home currency), on the one hand, and the U.S. dollar, on the other hand, may fluctuate over time due to the interaction of many factors directly or indirectly affecting economic and political conditions in the Underlying Stock Issuer’s country of organization and the United States, including economic and political developments in other countries.

 

In addition, the shares underlying an ADS are frequently subject to restrictions on foreign ownership in the local securities market which may, due to an excess in demand in foreign ownership for the underlying shares relative to the supply of underlying shares made available for foreign ownership in the form of ADSs or other instruments, cause the ADSs to trade at a premium ( i.e. , a higher price per underlying share represented by the ADS) to the related underlying shares in the local securities market. This premium, if any, may be reduced or eliminated depending upon changes in supply and demand due to general market forces or in a reduction in or elimination of the restrictions on foreign ownership of the underlying shares in the local securities market.

 

While the ADSs of ADS issuers are listed and traded in the United States, the shares of stock of those companies are quoted and traded on foreign securities markets, which may have less liquidity and greater volatility than U.S. markets and market developments may affect foreign markets differently from U.S. or other securities markets. Also, there may be less publicly available information about foreign companies, including those that file periodic reports with the SEC, than about those U.S. companies that are subject to the reporting requirements of the SEC. Foreign companies are subject to accounting, auditing and financial reporting standards and requirements that differ from those applicable to U.S. reporting companies.

 

OVERVIEW OF REVERSE EXCHANGEABLE SECURITIES

 

We have provided the following information to help you understand the securities more fully. This section discusses the characteristics of “reverse exchangeable securities” we are offering, and provides payout scenarios and other information to help you understand how the securities work and how they differ from more conventional debt securities.

 

The payout structure of the securities is part of a general class of securities referred to as “reverse exchangeable securities”.

 

What are “reverse exchangeable securities”?

 

The term “reverse exchangeable securities” refers generally to a particular type of security that is:

 

 

Reverse exchangeable securities are also sometimes referred to as “reverse convertible securities”.

 

What is the difference between a reverse exchangeable security and a conventional exchangeable bond?

 

For a conventional (not a “reverse”) convertible or exchangeable bond, the principal amount is typically protected at maturity, and the holder has the option to convert or exchange the bond for the underlying stock, such that the investor participates in the appreciation of the underlying stock. In simplified terms, a convertible or exchangeable bond is economically equivalent to a debt security, or bond, plus a long call option on the underlying stock ( i.e. , the investor is the “purchaser” of the call option and has the right to purchase, or “call”, the underlying stock).

 

A reverse exchangeable security can be thought of as the inverse of an exchangeable bond. That is, as with an exchangeable bond, a reverse exchangeable security is a debt security that is exchangeable into the common stock of an issuer other than the issuer of the debt security. However, the principal amount of the reverse exchangeable security is not protected at maturity. Instead of the holder participating in the appreciation of the underlying stock, the holder is exposed to the depreciation of the underlying stock. In simplified terms, a reverse exchangeable security is economically equivalent to a debt security, or bond, plus a short put option on the underlying stock ( i.e. , the investor is the “seller” of the put option and can be forced to accept the common stock in lieu of payment on the debt security).

 

Why is the interest rate payable on a reverse exchangeable security higher than on a conventional bond issued by the same issuer?

 

As discussed above, a reverse exchangeable security is economically equivalent to a bond plus a short put option on the underlying stock. Consistent with this, the coupon payable on a reverse exchangeable security is economically equivalent to the interest rate payable on the hypothetical bond plus the premium payable in respect of the hypothetical short put option. Because of the premium portion of the interest rate, the interest rate on a reverse exchangeable security is greater than the interest rate payable on a conventional bond of the issuer. Frequently, the interest rate payable on a reverse exchangeable security can be comparable to, or may even exceed, the interest rates payable on certain high-yield bonds.

 

A higher interest rate reflects the potential risk of loss of principal. In the case of a high-yield bond, the interest rate is derived from the credit risk of the issuer. In the case of a reverse exchangeable security, the interest rate is derived from the risk of a decrease in the trading price of the underlying stock. In general, with respect to the securities we offer under this product supplement, if the Underlying Stock is or is expected to be more volatile, then the securities will either have a higher interest rate and have a knock-in price set at such a level that a knock-in event is more likely or will have a lower interest rate but will have a knock-in price set at such a level that a knock-in event is less likely.

 

What is a “knock-in” reverse exchangeable security?

 

A “knock-in” reverse exchangeable security is a particular type of reverse exchangeable security. Unlike a conventional reverse exchangeable security which provides exposure to the depreciation of the underlying stock at maturity under all circumstances, a knock-in reverse exchangeable security provides exposure to the depreciation of the underlying stock only if certain conditions are met, i.e. , only if a “knock-in” event has occurred and the final stock price is less than the initial stock price. Only in these circumstances is the embedded put option exercised, and at maturity investors receive the underlying stock, which will be worth less than the principal amount of the securities. Because the risk of loss of principal is contingent in a knock-in reverse exchangeable security but is not contingent in a conventional reverse exchangeable security, for the same underlying stock and the same investment term, the interest rate payable on a knock-in reverse exchangeable security is lower than on a conventional reverse exchangeable security.

 

The securities that are covered by this product supplement are knock-in reverse exchangeable securities.

 

What are the payout scenarios for the securities?

 

The following flow chart demonstrates the basic payout scenarios for the securities:

 

 

Examples of Hypothetical Payouts

 

Set forth below are four hypothetical examples of the calculation of the payment at maturity for a hypothetical issuance of the particular type of reverse exchangeable securities this product supplement describes. Interest on the securities will be paid quarterly regardless of whether the maturity payment amount is payable in cash equal to the principal amount or in shares of the Underlying Stock worth less than the principal amount.

 

Note that, for different Underlying Stocks, the interest rate and knock-in price (relative to the initial stock price) will vary, and will depend in large part on the volatility of the Underlying Stock. In general, with respect to the securities we offer under this product supplement, if the Underlying Stock is or is expected to be more volatile, then the securities will either have a higher interest rate and have a knock-in price set at such a level that a knock-in event is more likely or will have a lower interest rate but will have a knock-in price set at such a level that a knock-in event is less likely. The interest rate and knock-in price for a particular offering of securities will be specified in the applicable terms supplement.

 

For purposes of these examples, we have assumed the following:

 

 

Based on the above hypothetical terms, if a knock-in event has occurred and the hypothetical final stock price is less than the hypothetical initial stock price, the maturity payment amount per security will equal 10 shares of Underlying Stock (assuming no change in the share multiplier due to corporate events affecting the Underlying Stock), determined as follows:

 

 

 

Example 1 — The hypothetical final stock price is equal to 60.00% of the hypothetical initial stock price and a knock-in event has occurred:

 

 

Since a knock-in event has occurred and the hypothetical final stock price is less than the hypothetical initial stock price, the maturity payment amount per security would be equal to 10 shares of the Underlying Stock with an aggregate market value on the valuation date equal to $600.00, representing a 40.00% loss of the principal amount per security.

 

Note that, in this example, the hypothetical final stock price is not only less than the hypothetical initial stock price, it is also less than the knock-in price. The knock-in event could have occurred on the valuation date or on any trading day from the first trading day following the trade date to and including the valuation date.

 

Example 2 — The hypothetical final stock price is equal to 85.00% of the hypothetical initial stock price and a knock-in event has occurred ( i.e. , at some time during the term of the securities the market price of the Underlying Stock trade to or below the knock-in price at any time during regular business hours of the relevant exchange on any trading day from the first trading day following the trade date to and including the valuation date):

 

 

Since a knock-in event has occurred and the hypothetical final stock price is less than the hypothetical initial stock price, the maturity payment amount per security would be equal to 10 shares of the Underlying Stock with an aggregate market value on the valuation date equal to $850.00, representing a 15.00% loss of the principal amount per security.

 

Note that, in this example, the hypothetical final stock price is higher than the knock-in price but less than the hypothetical initial stock price. This example illustrates the fact that, if a knock-in event occurs during the term of the securities, the maturity payment amount will be payable in shares of the Underlying Stock worth less than the principal amount per security even if, subsequent to the occurrence of a knock-in event, the Underlying Stock recovers some but not all of its decline in value such that, on the valuation date, the hypothetical final stock price less than the hypothetical initial stock price.

 

Example 3 — The hypothetical final stock price is equal to 85.00% of the hypothetical initial stock price but a knock-in event has not occurred:

 

Since a knock-in event has not occurred, the maturity payment amount per security would be paid in cash in an amount equal to the full principal amount of $1,000.00 in cash even though the hypothetical final stock price is less than the hypothetical initial stock price.

 

Note that, in this example as in Example 2, the hypothetical final stock price is higher than the knock-in price but less than the hypothetical initial stock price. This example illustrates the fact that the maturity payment amount will be payable in cash equal to the principal amount per security even if the hypothetical final stock price is less than the hypothetical initial stock price, so long as a knock-in event has not occurred during the term of the securities.

 

Example 4 — The hypothetical final stock price is equal to 140.00% of the hypothetical initial stock price (regardless whether a knock-in event has or has not occurred):

 

 

Since the hypothetical final stock price is greater than the hypothetical initial stock price, the maturity payment amount per security would be paid in cash in an amount equal to the $1,000.00 principal amount per security, regardless of whether a knock-in event has or has not occurred.

 

Note that, in this example, even if a knock-in event has occurred during the term of the securities, the maturity payment amount will be payable in cash in an amount equal to the $1,000.00 principal amount per security, so long as, on the valuation date, the hypothetical final stock price is equal to or greater than the hypothetical initial stock price. Also note that the return on the securities at maturity does not reflect any increase in the market price of the Underlying Stock at maturity when the hypothetical final stock price is higher than the initial stock price.

 

Hypothetical Returns on the Securities

 

The following table illustrates the hypothetical maturity payment amount and corresponding hypothetical return at maturity per security (in each case, including interest payments), based on the following:

 

 

The figures below are for purposes of illustration only. The actual maturity payment amount and the resulting return (inclusive of coupons) will depend on the actual final stock price and whether or not a knock-in event occurs, each determined by the calculation agent as described in this product supplement and the applicable terms supplement.

 

 

 

 

The following graph sets forth the return at maturity for a range of final stock prices both if a knock-in event has occurred and if a knock-in event has not occurred.

 

Return Profile of 8.00% Enhanced Yield Securities* vs. Hypothetical Underlying Stock Price

 

 

* Assumes an interest rate of 8.00% per annum and 1-year term

 

DESCRIPTION OF THE SECURITIES

 

Please note that in this section entitled “Description of the Securities”, references to “holders” mean those who own securities registered in their own names, on the books that we or the trustee maintain for this purpose, and not indirect holders who own beneficial interests in securities registered in street name or in securities issued in book- entry form through The Depository Trust Company.

 

Investors should carefully read the general terms and provisions of our debt securities set forth under the headings “Description of Debt Securities” in the accompanying prospectus supplement and “Description of Debt Securities” in the accompanying prospectus. This section supplements that description. A separate terms supplement to the product supplement will specify the particular terms for each issuance of securities, and may supplement, modify or replace any of the information in this section. References in this product supplement to a security shall refer to the stated principal amount specified as the denomination for that issuance of securities in the applicable terms supplement.

 

The securities are part of a series of debt securities, entitled “Medium-Term Notes”, that Eksportfinans may issue from time to time as described in the accompanying prospectus supplement and prospectus. The securities are also “Asset linked notes” as described in the accompanying prospectus supplement.

 

We describe the general terms of the securities in more detail below.

 

Terms Specified in the Applicable Terms Supplement

 

For each issuance of securities, the applicable terms supplement will specify the following terms of the securities, to the extent applicable:

 

 

Payment at Maturity

 

On the maturity date, for each security you hold, you will receive a payment equal to the maturity payment amount, plus accrued but unpaid interest in cash.

 

The maturity payment amount will be a cash payment equal to the principal amount of your securities, unless :

 

 

If the conditions described in (a) and (b) both occur, at maturity, for each security you hold, the maturity payment amount you will receive will be in shares of Underlying Stock in exchange for each security equal to the share amount multiplied by the share multiplier.

 

The share amount is the number of shares of the Underlying Stock equal to the principal amount per security on the trade date. The share amount will be specified in the applicable terms supplement, and will be determined as follows:

principal amount per security

initial stock price

 

If the number of shares to be delivered per security at maturity results in fractional shares, rather than delivering fractional shares at maturity, such fractional shares will be paid in U.S. dollar amounts equal to the fractional number of shares multiplied by the closing price per share of the Underlying Stock on the valuation date.

 

If the payment at maturity is payable in shares of the Underlying Stock and we determine that we are prohibited from delivering shares of the Underlying Stock, or that it would otherwise be unduly burdensome to deliver shares of the Underlying Stock, then on the maturity date, we will pay a cash amount per security equal to the closing price of the Underlying Stock on the valuation date multiplied by the number of shares of the Underlying Stock into which each security is redeemable. Any such determination will be made in our sole discretion.

 

If a knock-in event occurs and the final stock price is less than the initial stock price, you will lose some or all of your principal and receive shares of the Underlying Stock instead of the principal amount in cash at maturity. Under these conditions, the market value on the valuation date of the shares of the Underlying Stock that you will receive on the maturity date will be less than the aggregate principal amount of your securities and could be $0.00 (but you will still receive accrued but unpaid interest in cash).

 

Additional Defined Terms

 

We have defined some of the terms that we use frequently in this product supplement below:

 

The initial stock price will be the closing price per share of the Underlying Stock on the trade date and will be specified in the applicable terms supplement.

 

The final stock price will be determined by the calculation agent and will equal the closing price per share of the Underlying Stock multiplied by the share multiplier as of the valuation date.

 

The share multiplier will be 1.0, subject to adjustment for certain corporate events relating to the Underlying Stock Issuer described in this product supplement under “— Antidilution Adjustments”.

 

A knock-in event will occur if, as determined by the calculation agent, the market price of the Underlying Stock multiplied by the share multiplier has fallen to or below the knock-in price at any time during regular business hours of the relevant exchange on any trading day from the first trading day following the trade date to and including the valuation date.

 

The knock-in price will be a price that is below the initial stock price and will be specified in the applicable terms supplement.