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Index-linked bond Star Class

Finland and Sweden

Although most of the financial news are still mainly negative, signs of optimism are emerging, as there are grounds for the revival of the economy. The low interest level and decelerated inflation, the weakened euro and krona, the decreased price of energy and massive governmental resuscitation packages pave the way for un economic upturn. The effect of these factors is, however, delayed.

The stock exchange outlook in the short term is still unstable, but the Helsinki and Stockholm stock exchanges offer inexpensive trading for longer-term investors. Due to the uncertainty, large and well-established listed companies are the safest investment objects at present. An investment in an index-linked bond with protected nominal capital is a safe means of utilising the yield potential in the equity market.

Index-linked bond Star Class provides a safe and cost-efficient means of investing in a diversified manner in Finnish or Swedish shares in which we see yield potential in the longer term.

Two options in index-linked bond Star Class - Finland and Sweden

There are two options in index-linked bond Star Class. The reference asset of Star Class Finland consists of a basket of ten Finnish shares; Star Class Sweden consists of a basket of ten Swedish shares (see below).

The yield from index-linked bond Star Class Finland and Sweden results from the rise of the share baskets up to 30%, which makes the index-linked bond suitable for investors with a moderate positive view of the performance of the equity market.

In both options maturity is about four years and the nominal capital will be repaid at maturity regardless of the performance of the reference asset. The investment can also be sold before maturity, in which case the repurchase price may be higher or lower than the nominal value due to the market situation. On the secondary market the index-linked bond can be purchased or sold on every business day.

The investment involves the risk of Nordea’s repayment ability. Nordea’s credit rating is Aa1 (Moody´s) or AA- (Standard & Poors).

Product features

Maturity	Short	Medium-term		Long
Capital protect.	Capital-protected	Partly capital-protected		No capital protection
Asset type	Interest	Business risk	Currency	Commodity	Share

* ca 1% above-par-value risk

Reference asset - Star Class Finland and Sweden

The reference assets of Star Class Finland and Sweden consist of Finnish and Swedish share baskets in which the selected shares have the following weights:

	Star Class Finland	Star Class Sweden
1	Neste Oil Oyj	AstraZeneca PLC
2	UPM-Kymmene Oyj	Ericsson AB
3	KONE Oyj	Hennes & Mauritz AB
4	Metso Oyj	MTG AB
5	Nokian Renkaat Oyj	SCA AB
6	Sampo Oyj	Svenska Handelsbanken AB
7	Nokia Oyj	SKF AB
8	TietoEnator Oyj	Swedish Match AB
9	TeliaSonera AB	Tele2 AB
10	Fortum Oyj	Getinge AB

Performance of the reference assets (share baskets) during March 2005 - March 2009. Neste Oil’s share is included since April 2005 and Kone’s share since June 2005.
(Starting level indexed at 100)

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

Issue terms in brief

Star Class Sweden

Issuer	Nordea Bank Finland Plc, credit rating Aa1 (Moody´s) and AA- (S&P).
Issue date	14 April 2009
Maturity date	22 May 2013
Subscription period	14 April–21 May 2009/td>
Places of subscription	Nordea Bank Finland Plc and its branches in the Baltics
Subscription price	Star Class 4251 Finland: variable, ca 101% Star Class 4251 Sweden: variable, ca 101%
Minimum subscription	EUR 1,000
Yield at maturity	Star Class 4251 Finland: 100% of the rise of the reference asset within the range 0 - 30%, calculated in accordance with the issue terms. Star Class 4251 Sweden: 100% of the rise of the reference asset within the range 0 - 30%, calculated in accordance with the issue terms.
Reference asset	Star Class Finland
Weight	Company	Bloomberg
1/10	Neste Oil Oyj	NES1V FH
1/10	UPM-Kymmene Oyj	UPM1V FH
1/10	KONE Oyj	KNEBV FH
1/10	Metso Oyj	MEO1V FH
1/10	Nokian Renkaat Oyj	NRE1V FH
1/10	Sampo Oyj	SAMAS FH
1/10	Nokia Oyj	NOK1V FH
1/10	TietoEnator Oyj	TIE1V FH
1/10	TeliaSonera AB	TLSN SS
1/10	Fortum Oyj	FUM1V FH
Weight	Company	Bloomberg
1/10	AstraZeneca PLC	AZN SS
1/10	Ericsson AB	ERICB SS
1/10	Hennes & Mauritz AB	HMB SS
1/10	MTG AB	MTGB SS
1/10	SCA AB	SCAB SS
1/10	Svenska Handelsbanken AB	SHBA SS
1/10	SKF AB	SKFB SS
1/10	Swedish Match AB	SWMA SS
1/10	Tele2 AB	TEL2B SS
1/10	Getinge AB	GETIB SS
Starting value	Average of the reference asset’s monthly closing values starting on 26 May 2009 and ending on 26 November 2009.
Closing value	Average of the reference asset’s monthly closing values starting on 8 May 2012 and ending on 8 May 2013.
Repayment of principal	The issuer Nordea Bank Finland Plc will repay the nominal capital of the index-linked bonds in full at maturity regardless of the reference rate performance. 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	No separate security has been placed for the index-linked bonds.
Structuring cost	The subscription price includes a structuring cost, which is about 0.70% p.a. (see the terms of issue for details). No separate subscription or servicing fees are charged for the index-linked bonds.
Secondary market	Nordea Bank Finland Plc will quote a repurchase price for the index-linked bonds. It may be lower or higher than the nominal value.
Taxation	Possible index bonus 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 is entitled to cancel the issue based on changes in economic conditions, if the total amount of subscriptions is low or something should occur that the issuer considers might endanger the issue.

An application will be made for the index-linked bond to be listed on the Helsinki Stock Exchange.

Yield table: index-linked bond Star Class Finland and Sweden

Change acc. to issue terms of ref. index	Star Class Finland		Star Class Sweden
	Issue price ca	101%	Issue price ca	101%
	Yield: Rise of reference asset up to 30%		Yield: Rise of reference asset up to 30%
	Value at mat.	Yield pa	Value at mat.	Yield pa
-50 %	100 %	-0.2 %	100 %	-0.2 %
-25 %	100 %	-0.2 %	100 %	-0.2 %
0 %	100 %	-0.2 %	100 %	-0.2 %
10 %	110 %	2.2 %	110 %	2.2 %
20 %	120 %	4.4 %	120 %	4.4 %
30 %	130 %	6.5 %	130 %	6.5 %
40 %	130 %	6.5 %	130 %	6.5 %
50 %	130 %	6.5 %	130 %	6.5 %

Index-linked bonds 4251 under Nordea Bank AB’s (publ) and Nordea Bank Finland Plc’s Medium-Term Note Programme dated on 4 June 2008 (a note programme notified from Sweden to Finland). The prospectus including the terms of issue is available at subscription places.

Market review

Outlook of the Helsinki Stock Exchange

The Finnish equity market has nearly halved during the past year. Strong cyclical fluctuations have marked the present stock exchange year 2009, as in 2008. The rates have mainly remained in a downswing during the first quarter of the year, but in March we also saw some brisk days of upturn when hopes of the reviving effect of the support packages were reflected in the markets.

As a result of the drastic fall of the rates, the valuation of the Finnish equity market has become very moderate even when reviewed with several indicators. Calculated with the present 2009 result forecasts, the P/E ratio of the Helsinki Stock Exchange is around 11, which we think can be considered an inexpensive level in relation to the historical averages. In fact, the results should weaken considerably more than the present forecasts before the valuation became expensive. In our view, the inexpensive valuation can also be seen in the fact that the market value of many companies has decreased close to, or even below, their balance sheet value despite the still positive results and returns on equity.

There is still much uncertainty connected with the economic outlook and companies' result prospects. This is why we think that the preconditions for a more sustainable recovery of the Helsinki Stock Exchange in the near future remain minor. We believe that the cyclical fluctuations will continue strong and the general mood will continue to change rapidly during this stock exchange year. Despite the uncertainty, there is already much inexpensive trading available for long-term investors. In share selections we favour large and well-established companies that have solid result and cash flow prospects, low indebtness and valuation that can stand even a marked fall in the result.

Outlook of the Stockholm Stock Exchange

The implications of the world-wide recession and financial crisis on the Stockholm Stock Exchange have remained somewhat more moderate compared to the other European stock exchanges. During the past 12 months, the Stockholm Stock Exchange has experienced a downfall of around 30%, while in the rest of Europe the indices have decreased by 40 - 50%. The lower downfall figures of the Swedish equity market can be explained by the relatively good performance of the largest companies listed on the Stockholm Stock Exchange despite the market turmoil. The strongly weakened Swedish krona has, for its part, supported the import companies of the country.

The results of the companies listed on the Stockholm Stock Exchange decreased considerably in 2008 from the previous year, and in 2009 the results are expected to still fall from the 2008 level. In fact, the result forecasts of many Swedish companies have been brought downwards substantially. The companies’ market situation, which continues to be uncertain, still places pressures for bringing result forecasts down.

Despite the fallen result forecasts, the valuation of the Stockholm Stock Exchange has remained attractive in regard to its history. Calculated with the 2009 forecasts, the P/E ratio of the Swedish equity market is about 12. The results should fall considerably lower than the present forecasts before the P/E ratio would become expensive.

We believe that the rate fluctuations and changes of the general mood continue strong; it is still too early to tell when the rates would turn to a longer-term rise. Despite the uncertainty, there is already inexpensive trading available on the Stockholm Stock Exchange for longer-term investors. In an uncertain market situation it is worthwhile to favour companies whose business is only slightly dependent of economic cycles and whose result and cash flow prospects are solid and indebtness ratio is low.

Source: Nordea Equities Finland