BDC 's index-linked issue: you win if either the Canadian or the U.S. market appreciates - Business Development Bank of Canada

Recently there has been a proliferation of index-linked notes (see page 4). The recent issue by Business Development Bank of Canada (BDC) has a new twist. While most notes are linked to a single stock market index, this issue is tied to two different indexes in such a way that your return is tied more to the index that has a higher return.

This is how it works. You invest in these notes, which mature on August 5, 2005. The amount of interest will be calculated as follows: (1) One-third of the percentage increase in S&P 500 index; (2) One-third of the percentage increase in Toronto 35 index; and (3) One-third of the percentage increase in the higher performing index. If both indices go down instead of up, you will get your principal back. You may choose to receive interest on all or any $1,000 portion of a note at any time prior to maturity.

These notes are suitable for fixed income investors who cannot afford to lose the principal but can afford to forego the interest in search for possibly higher return should the stock markets appreciate considerably in the next few years. These notes constitute direct unconditional obligation of the Government of Canada. The lead underwriter of this security is CIBC Wood Gundy.