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Index-linked bond MinMax X

The index-linked bond MinMax X is an investment with a maturity of approximately five years, in terms of annual yield the yield is always at least 1.7% and at most 4%. Investors receive a yield payment four times a year. The index-linked bond MinMax X is intended as a “buy and hold” type of investment.

Index-linked bond MinMax X in brief

Why should I invest in the index-linked bond MinMax X?

The investor receives a yield payment four times a year. The amount of the yield is at least 1.7% p.a. In addition, the investors benefit from the rise of the 3-month Euribor interest rate up to 4%. If the 3-month Euribor interest rate performs in accordance with Nordea's forecast, the investor will receive a yield higher than the market interest rate for at least the first year of the investment. The nominal capital is returned to the investor at maturity. The amount paid over the nominal amount when subscribing, if any, is not returned.

Yield and risks of investment

The amount of yield paid on the index-linked bond MinMax X depends on the performance of the 3-month Euribor interest rate. However, in terms of annual yield the yield is always at least 1.7% and at most 4%. So even though the 3-month Euribor exceeds 4%, the maximum payout is 4%. The amount of yield is calculated quarterly according to the bond terms for each 3 month period i.e. the amount of yield fluctuates in each period.

Investors receive a yield payment four times a year and the nominal capital is returned at maturity on 15 December 2015. The amount paid over the nominal amount when subscribing, if any, is not returned.

Examples of yield calculation

The issuer Nordea Bank Finland Plc quotes a repurchase price for the bond each day the banks are generally open in Finland. In the secondary market the repurchase price is determined according to the market situation and the price may be less than or greater than the bond's nominal value. The issuer's financing costs will affect the bond's secondary market price.

The index-linked bond MinMax X is unsecured, it involves the risk of the issuer’s, Nordea Bank Finland Plc, repayment ability. The risk related to the issuer’s repayment ability refers to a risk that the issuer becomes insolvent and is unable to meet its obligations. Due to this risk an investor may lose their invested capital and any potential payout in part or in full. Nordea's credit ratings are Aa2 (Moody's) and AA– (Standard & Poor's). A more detailed description of MinMax X and the related risks are given in the bond terms and the base prospectus. Prospective investors are advised to read them before making an investment decision.

• If the 3-month Euribor at the beginning of a yield period is at least 1.7% and at most 4%, the yield paid for the yield period is annual yield according to the 3-month Euribor.
• If the 3-month Euribor at the beginning of a yield period is below 1.7%, for example 1.5%, the yield paid for the yield period is 1.7% p.a.
• If the 3-month Euribor at the beginning of a yield period is over 4%, for example 5.2%, the yield paid for the yield period is 4% p.a.

Performance of the 3-month Euribor during the past ten years and the current market expectation*

The presented figures describe previous yield or value performance, and no reliable assumptions on future yield or value can be made based on them. The red lines illustrate the minimum and the maximum amounts of the yield payments for the investor.

* The projected future 3-month Euribor rates derived from current

Market review

3-month Euribor already above ECB's policy rate

The Euribor rates have gone up in the past few months. The reason for the rise is the marked change in the financial position of euro-area banks, as the amount of loans from the ECB the banks have renewed is considerably smaller than the amount of matured loans. The money supply in the banking system has decreased, which has lifted short market rates. Furthermore, the rise was underpinned by the ECB's intention to continue scaling down its exceptional monetary policy measures, even though the other large central banks are still proposing new fiscal stimulus or further easing of monetary policy. It is likely that in December we will receive further news about the ECB's measures to reduce liquidity in the banking system. Yet, the upward potential in short rates has narrowed, as the ECB's rate hikes are not yet topical.

Furthermore, the financial data has been better than expected in the past few weeks. Although the economic recovery will inevitably slow down from the figures of 2010 so far, the deceleration might be very limited and the recovery may gain momentum next year. Consequently, the ECB can probably also wait with its monetary policy tightening measures well into 2011 given that price pressure is still moderate.

Our view is that the ECB will start rate hikes in H2 2011, which would prepare the way for a further rise in the Euribor rates. Then again, earlier hikes are also fully possible. After that, the ECB is likely to continue hiking the rates gradually. In such a case, the 3-month Euribor, for example, would rise to over 2% in less than two years. On average, the 3-month Euribor has been clearly above 3% in the euro era, and in 2008 it was even higher than 5%. Against that backdrop, the rates are likely to continue to rise markedly after next year, too.

Yet a more rapid rise cannot be ruled out. It is a general notion that one reason for the current financial crisis is that after the previous recession interest rates were kept at a low level for too long. Without doubt, the central banks are not inclined to make the same mistake again. Of course, it is also possible that rate hikes will be delayed if economic growth fails to gain momentum.

Source: Nordea Strategy Research (12 November 2010)

Bond terms in brief

Issuer	Nordea Bank Finland Plc
Loan number	4439
ISIN	FI4000019203
Issue date	15 November 2010
Maturity date	15 December 2015
Subscription period	15 November–9 December 2010
Places of subscription	Nordea Bank Finland Plc branches, Nordea Private Banking and with access codes Customer Service, 0200 70 000 (local network charge/mobile call charge), Mon – Fri 10.00 – 16.30 and Netbank at www.nordea.fi.
Subscription price	Variable, approx. 100%.
Minimum subscription	EUR 1,000
Yield	Yield is paid quarterly based on the performance of the 3-month Euribor interest rate. However, the yield is always at least 1.7% p.a. and at most 4% p.a. The yield is paid to the account linked to the custody account four times a year. The first yield payment date is 15 March 2011. After that the yield is paid quarterly always on the 15 June, 15 September 15 December and 15 March each year. If the yield payment date is not a banking day it will be moved according to the banking day convention to the following banking day.
Return of principal	The nominal capital of the bond is returned at maturity. The amount paid in excess of the nominal value, if any, is not returned at maturity. The bond involves the risk of the issuer’s repayment ability.
Early repayment	The issuer is entitled to repay the bond early for taxation reasons in accordance with the bond terms.
Security	The bond is unsecured.
Secondary market	Under normal market conditions Nordea Bank Finland Plc quotes a repurchase price for the bond.
Structuring cost	The price may be above or below the nominal value of the bond. The subscription price includes a structuring cost of approximately 0.45% p.a. (see bond terms for more details). No separate subscription or management fee is charged on the bond.
Taxation	The 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	An application will be made for the bond to be listed on NASDAQ OMX Helsinki if the subscribed amount is at least EUR 200,000.

Bond 4439 (the index-linked bond MinMax X) under the Medium-Term Note Programme (a bond 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 on 25 May 2010. 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 loan terms is binding. The version in English is only a translation of the Swedish. The Swedish loan terms are 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.

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