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Index-linked Bond BRIC + Africa

Basic ir Extra

Why invest in Index-linked Bond BRIC + Africa?

Index-linked Bond BRIC + Africa is an investment in the economic growth of the BRICs (Brazil, Russia, India and China) and Africa. These markets have a robust growth outlook. According to Nordea's forecast, the growth rate in China and India will be about 9% in 2011 and 2012. Growth in Russia is expected to be over 5% and in Brazil some 4.5%. This illustrates that global growth is now generated increasingly by the emerging economies. Furthermore, growth is expected to be twofold in the future. Twofold means that the emerging economies are now back on the rapid pre-crisis growth track, while the developed Western economies are still lagging far behind the pre-crisis levels.

Africa is also rising strongly from the shadow of the BRIC countries' success story. Growth has been robust in several African countries mainly thanks to exports of commodities and foreign direct investments. The growing demand for commodities is, indeed, one of the biggest challenges today, and Africa's natural resources, including oil and metals, are satisfying the needs of China, for example. Many African and Western companies also benefit from Africa's natural resources. On the other hand, the increasing affluence of African consumers and urbanisation provide good business potential to African companies.

Index-linked Bond BRIC + Africa offers attractive exposure to the leading companies in the BRICs and to companies that benefit from Africa's abundant natural resources and swelling demand. Historically, strong economic growth has coincided with a bull market. Yet, you should bear in mind that the flip side of the healthy return potential is the higher-than-average risk relating to the emerging markets. Consequently, an index-linked bond is a wise choice because the nominal capital of the investment is repaid at maturity irrespective of the share price performance.

Index-linked Bond BRIC + Africa

Index-linked Bond BRIC and Africa is a bond issued by Nordea Bank Finland Plc. Its maturity is about five years, and its yield is based on the performance of an index basket formed of the S&P BRIC 40 EURO and SGI Pan Africa indices. The bond comes with two alternatives: Basic and Extra. The alternative Basic is suitable for a cautious investor. Its yield at maturity is 70% of the increase in the value of the index basket in accordance with the terms of issue. The alternative Extra suits risk-tolerant investors who seek a higher return. Its yield at maturity is 130% of the rise in the value of the index basket in accordance with the terms of issue. Regardless of the index basket performance, Nordea repays the nominal capital of the bond at maturity.

The increase in the index basket value if the weighted average of the performances of the S&P BRIC 40 EURO and SGI Pan Africa indices. The weight of S&P BRIC 40 EURO is 75% and of SGI Pan Africa 25%. The rise in the value of a reference asset is calculated as the difference between its initial price and final price. The initial price is the closing price of the reference asset on 16 March 2011. The final price is the average of the semi-annual closing values of the reference asset from 26 August 2011 to 26 February 2016. If the value of the index basket falls or remains unchanged, no yield is paid.

Risks of the investment

The index-linked bond involves a risk of the issuer Nordea Bank Finland Plc’s repayment ability. The risk relating to the issuer's repayment ability means the risk that the issuer becomes insolvent and cannot fulfil its commitments. The investor can lose the invested capital and the possible yield partially or in full in the event of the issuer's insolvency. Nordea has been given a credit rating Aa2 by Moody's and AA- by Standard & Poor's. The bond is unsecured.

The investor can lose the capital invested exceeding the nominal value either partially or in full. In the Extra bond this premium risk is about 10%, as its subscription price is about 110%. The investor can also sell the bond on the secondary market before maturity. The repurchase price may be above or below the bond’s nominal value. In normal market conditions Nordea quotes a secondary market price for the bond on all banking days when banks are generally open in Finland.

Reference assets

The reference assets are two equity indices, which together form an index basket.

BRIC (weight in the index basket 75%)
S&P BRIC 40 EURO Index
The S&P BRIC 40 equity index includes the 40 largest and most traded companies in Brazil, Russia, India and China which are publicly traded in a Western stock exchange (Hong Kong, London, Nasdaq or NYSE). The maximum weight of one company is limited to 10%. Further information available at www.sandp.com.

Africa (weight in the index basket 25%)
SGI Pan Africa Index
SGI Pan Africa includes the shares of 30 companies listed or operating in Africa. The operations of the index companies are geographically diversified into three regions: South Africa, Northern Africa and the sub-Saharan countries. The maximum weight of one company is limited to 10%. Further information on the index is available on the Internet at www.sgindex.com.

Performance of S&P BRIC 40 and SGI Pan Africa 1/2006 - 1/2011
Starting level indexed at 100%. The premium, if any, the averaging of the final price in accordance with the issue terms and the participation rates are not taken into account in calculating the index performance. The yields in accordance with the issue terms can deviate significantly from the index performance. Source: Bloomberg.

The presented figures describe previous yield or value performance, and no reliable assumptions on future yield or value can be made based on them.

Yield table: Index-linked Bond BRIC + Africa Basic and Extra

Change in the index basket according of the terms of the issue	BRIC + Afrika Basic Issue price ca.	100%	BRIC + Afrika Extra Issue price ca.	110%
	Participation rate	70%	Participation rate	130%
	Value at maturity	Return p.a.	Value at maturity	Return p.a.*
-50%	100%	0.0%	100%	-1.9%
-25%	100%	0.0%	100%	-1.9%
0%	100%	0.0%	100%	-1.9%
25%	118%	3.3%	133%	3.8%
50%	135%	6.2%	165%	8.4%
75%	153%	8.8%	198%	12.4%
100%	170%	11.2%	230%	15.9%

* A 10% premium has been taken into account in yield calculation

Issue terms in brief

Issuer	Nordea Bank Finland Plc; credit ratings Aa2 (Moody’s) and AA- (Standard & Poor’s).
ISIN	Index-linked bond BRIC + Africa Basic 4470A FI40000020516 Index-linked bond BRIC + Africa Extra 4470B FI40000020524
Issue date	31 January 2011
Maturity date	11 March 2016
Subscription period	31 January - 11 March 2011
Places of subscription	Nordea Bank Finland Plc branches, Nordea Private Banking and Nordea Customer Service with access codes, tel 0200 70 000, Mon–Fri 10.00–16.30 (local network charge/mobile call charge), and Netbank at nordea.fi.
Subscription price	Basic 4470A: variable, about 100% Extra 4470B: variable, about 110%
Minimum subscription	1,000 euros
Yield at maturity	Basic 4470A: 70% of the rise of the index basket in accordance with the issue terms Extra 4470B: 130% of the rise of the index basket in accordance with the issue terms
Reference asset	The following equity indices form the reference assets (together the index basket): 75% S&P BRIC 40 EURO Index (Bloomberg: SBE Index) 25% SGI Pan Africa Index (Bloomberg: SGIXPAPE Index)
Initial price	The closing prices of the reference assets on 16 March 2011
Final price	Average of the reference assets' semi-annual closing prices from 28 August 2011 to 26 February 2016
Repayment of capital	The issuer Nordea Bank Finland Plc repays the nominal capital of the bonds in full at maturity irrespective of the performance of the commodity basket. The bonds involve a risk of the issuer’s repayment ability and of losing the premium (in Extra bond about 10%).
Security	The bonds are unsecured.
Structuring cost	The subscription price includes a structuring cost of about 0.8% p.a. (see the terms of issue for more details). No separate subscription or management fee is charged on the bonds.
Secondary market	In normal market conditions the issuer Nordea Bank Finland Plc quotes a repurchase price for the bonds, which may be lower or higher than the nominal value.
Taxation	Possible index-linked yield is subject to tax at source on interest income for natural persons and Finnish death estates.
Safe custody	Free of charge with Nordea Bank Finland Plc.
Cancellation of the issue	The issuer has the right to cancel the issue based on changes in the economic circumstances or if the total amount of subscriptions is low, or if something should occur that the issuer considers might endanger the issue.
Listing	If the total amount of subscriptions is sufficient, an application will be made for the bonds to be listed on NASDAQ OMX Helsinki.

Loans 4470A (Index-linked Bond BRIC + Africa Basic) and 4470B (Index-linked Bond BRIC + Africa Extra) under the MTN programme (a medium term note programme reported to the Finnish Financial Supervisory Authority from Sweden in accordance with the Prospectus Directive) of Nordea Bank AB (publ) and Nordea Bank Finland Plc, dated 25 May 2010. The bond-specific terms and the base prospectus are available at the places of subscription. Read the issue terms and the base prospectus before subscription. The Swedish version of the terms is binding and thus applied in possible dispute situations.

Nordea Markets is the name of the Markets departments of Nordea Bank Norge ASA, Nordea Bank AB (publ), Nordea Bank Finland Plc and Nordea Bank Danmark A/S.

The information provided herein is intended for background information only and for the sole use of the intended recipient. The views and other information provided herein are the current views of Nordea Markets on the date of this document and are subject to change without notice. This document is not an exhaustive description of the described product or the risks related to it, and it should not be relied on as such, nor is it a substitute for the judgement of the recipient.

The information provided herein is not intended to constitute and does not constitute investment advice nor is the information intended as an offer or solicitation for the purchase or sale of any financial instrument. The information contained herein has no regard to the specific investment objectives, the financial situation or particular needs of any particular recipient. Relevant and specific professional advice should always be obtained before making any investment or credit decision. It is important to note that past performance is not indicative of future results.

Nordea Markets is not and does not purport to be an adviser as to legal, taxation, accounting or regulatory matters in any jurisdiction.

This document may not be copied, distributed or published for any purpose without the prior consent in writing of Nordea Markets.

Robust growth in emerging countries

The recession triggered by the financial crisis primarily hit the developed Western economies. Many emerging economies climbed from the recession back to brisk growth considerably faster than the Western economies. The global economic recovery is expected to continue twofold: while growth is stabilising in the Western economies, the emerging economies will experience faster-than-average growth. Accordingly, the emerging economies are expected to generate an ever bigger proportion of global growth.

Thanks to the robust growth in the emerging countries, Africa is also assuming a bigger role, as it supplies the raw materials required for growth. China's brisk growth consumes a huge amount of raw materials and energy. As compensation for the raw materials, China has granted economic and development aid and made investments in Africa. China's trade with Africa has multiplied in the past few years, and China also supports African infrastructure projects in the regions that it finds financially interesting.

The BRICs show the way

The aggregate population of the leading BRIC countries (Brazil, Russia, India and China) is 2.8 billion, which accounts for about 42% of the global population. They cover about 25% of the world's land area. The financial and political weight of the BRICs has increased tremendously as a result of their huge potential and brisker-than-average economic growth.

Russia is an important commodities producer, and its stock exchange mostly benefits from the rising price of oil. Brazil is also an important raw material producer (and increasingly an oil producer), and it is also home to important, globally thriving industrial companies. China is, of course, primarily a centre of industrial production, but domestic demand is set to become a bigger growth driver thanks the swelling surpluses. In the fourth BRIC country, India, the industrial sector is not as open as in China, which is why India mainly specialises in exports of services. Furthermore, its demography underpins robust economic growth.

African lions' brisk growth driven by commodities

While the rise of the BRICs has received a lot of media attention, the strong growth in Africa has been acclaimed less. According to the analysis of The Economist magazine, there were six African countries among the ten fastest growing economies in the world in 2000–2010. The IMF forecasts that in the next five years the ten fastest growing countries will include seven African countries.

African countries, which are striving for growth from a low standard of living, have a good chance to close the gap to richer countries at an accelerating speed. Growth in Africa in driven by commodities. Consequently, the rise of the continent is largely based on the massive need of commodities and energy globally and especially in the briskly growing emerging countries. African countries have ample reserves of various natural resources, such as oil, gold, diamonds, agricultural goods, uranium and mixed minerals.

Growth has also been boosted by foreign direct investments, mostly from China. Furthermore, urbanisation and modernisation progress at high speed, and the income level of the middle class is on the rise. As a result, demand from the African continent will increase, which will improve the business opportunities of African companies. Challenges to growth in many African countries include political instability, a poorly developed judicial system, corruption, the wretched condition of the infrastructure, health problems and the low level of education. Despite the challenges, the African lions deserve their place beside the Asian tigers.

Sources: Nordea Economic Research, The Economist