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Index-linked bond Infrastructure

Basic and Extra

Economic growth requires good infrastructure. At the moment, many countries are launching fiscal resuscitation schemes targeted at infrastructure to ensure competiveness in the future.

Shares in the infrastructure sector may benefit from many different trends in the near future. For instance, globalisation places its demands for the minimum infrastructure level, which may accelerate investments made in emerging economies in particular. High population growth increases the need for mobility, making investments in transportation topical.

Nordea’s index-linked bonds Infrastructure Basic and Extra offer a cost-effective way to benefit from the global infrastructure projects, while ensuring capital protection. In addition, they allow you to make a globally diversified investment in shares.

Two alternatives: Basic and Extra

The index-linked bond Infrastructure has two alternatives: Basic and Extra. The alternative Basic is suitable for a cautious investor. Its yield at maturity is 0–40% of the increase of the reference asset, which means that the maximum yield is 40% (see the yield calculation table). The Extra alternative suits an investor who tolerates limited risk and seeks a higher return. The yield at maturity is 0–120% of the reference asset rise, making the maximum yield 120%. If the reference asset value falls or remains unchanged, no yield is paid and the investor loses the premium paid (in the Extra index-linked bond about 10%).

The maturity of both alternatives is approximately five years, and the nominal capital is repaid at maturity irrespective of the performance of the reference asset. You can also sell the investment before maturity, in which case the repurchase price may be above or below the nominal value depending on market performance. In the secondary market the index-linked bond can be purchased or sold on every banking day.

The investment includes a risk of Nordea’s repayment capacity. Nordea’s credit rating is Aa1 (Moody´s) or AA- (Standard & Poor’s).

Reference asset: S&P Global Infrastructre index

The yield from the investment is determined by the performance of the reference asset, Standard & Poor’s Global Infrastructure index. The index comprises 75 infrastructure companies. The companies are divided into three subsectors: energy (weighting about 20%), transportation (weighting about 40%) and networks (weighting about 40%). For further information on the index, see www.spglobal.com

Product summary

Maturity	Short	Medium		Long
Capital guarantee	Full*	Partial**		None
Asset class	Interest rate	Credit	FX	Commodity	Equity

* Basic
** The Extra version has a limited capital risk (price paid above par ca. 10%)

Performance of the reference asset Jan 2004–Jan 2009
(Starting level indexed at 100)

The presented figures apply to previous yield or value performance and no reliable assumptions on future yield or value performance can be formed based on them.

Terms of issue in brief

Issuer	Nordea Bank Finland Plc, credit rating Aa1 (Moody´s), AA- (S&P).
Issue date	23 Feb 2009
Maturity	6 April 2014
Subscription period	23 Feb–2 April 2009
Places of subscription	Nordea Bank Finland and its branches in the Baltics.
Subscription price	Basic 4236A: variable, about 100% Extra 4236B: variable, about 110%
Minimum subscription	EUR 1,000
Yield at maturity	Basic 4236A: 100% of the increase in the reference asset value in the range 0–40% in accordance with the terms of issue. Extra 4236B: 100% of the increase in the reference asset value in the range 0–120% in accordance with the terms of issue.
Reference asset	S&P Global Infrastructure index (BB: SPGTINFE Index)
Starting value	The average of the quarterly closing values of the reference asset from 7 April 2009 until 7 June 2009.
Final value	The average of the quarterly closing values of the reference asset from 23 March 2012 until 23 March 2014.
Repayment of principal	The issuer Nordea Bank Finland Plc will repay the nominal capital of the index-linked bonds in full at maturity irrespective of the performance of the reference asset. The index-linked bonds involve a risk of the issuer’s repayment ability.
Early redemption	Early redemption is possible only if a hedging instrument has to be dissolved due to amendments to law or legal praxis.
Security	The index-linked bonds are unsecured.
Structuring cost	The subscription price includes a structuring cost, which is about 0.6% pa (see the issue terms). No separate subscription or management fee is charged on the index-linked bonds.
Secondary market	The issuer Nordea Bank Finland Plc quotes a repurchase price for the index-linked bonds, which may be lower or higher than the nominal value.
Taxation	No tax is deducted at source for non-residents in Finland.
Custody	Free of charge with Nordea Bank Finland Plc.
Cancellation of 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 which the issuer considers might endanger the issue.

An application will be made for the index-linked bonds to be listed on the Helsinki Stock Exchange. No listing will be applied if the number of subscriptions remains low.

Yield table: Index-linked bonds Infrastructure Basic and Extra

Change in the reference asset according to the terms of the issue	Infrastructure Basic		Infrastructure Extra
	Issue price ca.	100 %	Issue price ca.	110 %
	Yield: Rise in the ref.asset up to	40 %	Yield: Rise in the ref.asset up to	120 %
	Value at maturity	Return p.a.	Value at maturity	Return p.a.
-50 %	100.00 %	0.00 %	100.00 %	-1.90 %
-25 %	100.00 %	0.00 %	100.00 %	-1.90 %
0 %	100.00 %	0.00 %	100.00 %	-1.90 %
25 %	125.00 %	4.60 %	125.00 %	2.60 %
50 %	140.00 %	7.00 %	150.00 %	6.40 %
75 %	140.00 %	7.00 %	175.00 %	9.70 %
100 %	140.00 %	7.00 %	200.00 %	12.70 %
200 %	140.00 %	7.00 %	220.00 %	14.90 %

Index-linked bonds 4236A and 4236B under the Medium-Term Note Programme (an index-linked bond programme reported to the Finnish Financial Supervision Authority from Sweden in accordance with the Prospectus Directive) of Nordea Bank AB (publ) and Nordea Bank Finland Plc dated 4 June 2008. The loan-specific terms are available at the places of subscription.

Market review

In the wake of the global recession several countries have announced sizable resuscitation packages. These extensive schemes will benefit especially the infrastructure sector. According to forecasts, the scope of the resuscitation activities set for 2009 and 2010 in the United States will correspond to about 5.8% of GDP. Also China, India, Japan, the EU countries and Russia plan extensive resuscitation schemes.

Emerging economies will face a growing need to invest in infrastructure due to population growth, income growth and urbanisation. High population will mean an increasing need for transportation, which in turn will require the construction of roads and railways and an increase of air traffic. At present, 70% of the population in India and 55% in China live in rural areas. However, migration from the countryside to cities is anticipated to intensify in the near future. Migration will increase the number of inhabitants in need of electricity, water, telephone and transportation services by a couple of million every month. Globalisation will also set its demands to infrastructure. As the competition tightens we need a well-functioning infrastructure to enable economic growth in the long run.

Source: Goldman Sachs and Nordea Economic Research