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Index-linked bond Finland

Basic and Extra

Global equity markets have been hit hard in the wake of the money market crisis and recession fears which originated in the US. Uncertainties around economic development, the strengthening euro and increased financial costs caused by risen interest rates have burdened share prices significantly also in Finland. During the past 12 months the value of the 25 most traded shares in the Helsinki Stock Exchange has decreased by as much as 19% (15 June 2007-16 June 2008). As companies are still making positive results and stable return on equity, the valuation level of the Helsinki Stock Exchange is cheap based on several measurements. By investing in Nordea Bank Finland Plc’s index-linked bond Finland you can spread your investments in the Finnish equity market in a nominal capital protected way. The minimum investment is EUR 1,000.

Two alternatives in index-linked bond Finland – Basic and Extra

The Basic loan suits a cautious investor. The yield at maturity is 100% of the rise of the reference index according to the issue terms. Then again, the Extra loan suits an investor who tolerates limited risk and who has higher profit targets. At maturity the return of the investment is 155 % of the rise of the reference index for nominal capital according to the issue terms. If the reference index decreases or remains flat, no return is paid and the investor loses the sum paid above par value (some 10 % in Extra).

The loan period of both index-linked bonds is about five years. The nominal capital is returned in total at maturity regardless of the reference index performance. The investment can also be sold before maturity, in which case the repurchase price may be above or below the nominal value depending on market performance. The index-linked bonds include the risk of the issuer´s repayment ability. Nordea´s credit rating is Aa1 (Moody´s) and AA-(Standard & Poor´s). For more information on Nordea, please check the Internet in www.nordea.fi.

Reference index – OMX Helsinki 25

OMX Helsinki 25 (OMXH25) is the benchmark for Finnish equity market performance. It includes the 25 most traded equities in the Helsinki Stock Exchange. The OMXH25 index is a price index where the maximum weight of one company is 10%. Equity weights are checked two times a year. For more information on the index, please check the Internet at www.omxnordicexchange.com.

Companies with the biggest weight in the benchmark 6/2008

(Source: Bloomberg)

The development of OMX Helsinki 25 index June 2001 – June 2008
(The starting level indexed at 100%, source: Bloomberg)

The presented figures describe past performance or value performance. No reliable assumptions on future performance 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	15 August 2008
Maturity	15 August 2013
Subscription period	23 June – 14 August 2008
Places of subscription	Nordea Bank Finland Plc’s branches, Nordea Private Banking. Nordea Customer Service with access codes tel. 0200 70000 (local network charge/mobile phone charge) from Monday to Friday from 10.00 to 16.30 and Netbank at www.nordea.fi when a customer has access to the Netbank´s portfolio service
Subscription price	Basic 4150A: variable some 100 % Extra 4150B: variable some 110 %
Minimum subscription	EUR 1,000
Yield at maturity	Basic 4150A: 100% of the reference index rise in accordance with the issue terms. Extra 4150B: 155% of the reference index rise in accordance with the issue terms.
Reference index	OMX Helsinki 25 price index (Bloomberg: OMXH25).
Starting value	The official closing value of the reference index on 19 August 2008.
Closing value	The arithmetic average of the quarterly closing value of the reference index starting on 1 August 2011 and ending on 1 August 2013.
Repayment of principal	Nordea Bank Finland Plc as the issuer repays the nominal capital of the index-linked bonds in full at maturity regardless of the performance of the reference index. The index-linked bonds involve a risk of the issuer’s repayment capacity.
Early redemption	Early redemption is possibly only if due to an amendment to law or legal practice a hedging instrument has to be dissolved.
Security	The index-linked bonds are unsecured.
Structuring cost	The subscription price includes a structuring cost, which is some 0.9% p.a. (more information in the issue terms). There is no separate subscription or management fee.
Secondary market	Nordea Bank Finland Plc will quote a repurchase price for the index-linked bonds which may be above or below the nominal value.
Taxation	Possible index bonus is subject to tax at source on interest income for natural persons and Finnish death estates.
Custody	Free of charge with Nordea Bank Finland Plc.
Cancellation of issue	The issuer is entitled to cancel the issue based on unforeseen changes in the economic conditions, when subscription activity remains low, or if something happens that could compromise the success of the arrangement at the issuer’s discretion.

An application for a listing will be made in the Helsinki Stock Exchange.

Yield profile – Index-linked bond Finland Basic and Extra

Change in the reference index according to the terms of the issue	Finland Basic		Change in the reference index according to the terms of the issue	Finland Extra
	Issue price ca.	100 %		Issue price ca.	110 %
	Participation rate	100 %		Participation rate	155 %
	Value at maturity	Return p.a.		Value at maturity	Return p.a.
-50 %	100 %	0,0 %	-50 %	100 %	-1,9 %
-25 %	100 %	0,0 %	-25 %	100 %	-1,9 %
0 %	100 %	0,0 %	0 %	100 %	-1,9 %
25 %	125 %	4,6 %	25 %	139 %	4,8 %
50 %	150 %	8,4 %	50 %	178 %	10 %
75 %	175 %	11,8 %	75 %	216 %	14,5 %
100 %	200 %	14,9 %	100 %	255 %	18,3 %

Index-linked bonds 4150A and 4150B of the Medium-Term Note Programme of Nordea Bank AB (publ) and Nordea Bank Finland Plc (an index-linked bond programme reported to the Finnish Financial Supervision Authority from Sweden in accordance with the Prospectus Directive), dated on 4 June 2008. Bond-specific terms are available at places of subscription.

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 notice 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 a prior consent in writing of Nordea Markets.

Market review

During the first half of the year, the estimates depicting the 2008 earnings growth in the Helsinki Stock Exchange have decreased quite a bit. At the turn of the year, growth was still expected to exceed 10%, but at the moment the growth is expected to remain weaker than last year. The clear weakening of growth could be detected when the earnings reports for the first quarter in 2008 were published. The aggregate earnings remained weaker than the market expected. Majority of the companies kept their whole year estimates unchanged, but the words for future outlook were slightly more cautious than before. Despite the significant drop in earnings estimates the valuation of the Helsinki Stock Exchange has remained moderate. This can be explained with a heavy drop in share prices during the first half of the year.

The OMXH25 index depicting the value performance of the 25 most traded equities in the Helsinki Stock Exchange, has dropped by some 19% in the last 12 months and 11% from the beginning of the year.

Currently, the average valuation level of the Helsinki Stock Exchange is cheap based on several measurements when market is pricing modest or slightly negative earnings growth for domestic listed companies. For example, the market value of many listed companies has approached or even fallen below their book value on equity despite the fact that companies are still producing positive earnings and stable return on equity. According to our view, also the current P/E valuation can be considered fairly cheap, when the P/E for 2008 calculated according to the current earnings estimate is about 13 (2009 over 11). The P/E valuation is not the most important factor driving the market at the moment, because it includes a risk that the current earnings estimates are not yet sufficiently reflecting companies´ deteriorating earnings. Considering these factors the second quarter earnings season, which starts in the middle of July, and companies´ growth estimates for the rest of the year are going to play a key role for the future prospects in the Helsinki Stock Exchange.

According to The Research Institute of the Finnish Economy (ETLA), the estimate for Finnish economy in 2008 can be seen as cautious. Total production is estimated to increase by 2.7% in 2008, while it is expected to increase by 3% in 2009. The temporary slowdown of growth in industrial countries which originated in the US markets, weakens export demand also in Finland. The performance gets, however, a lift both from the oil-wealthy Russia and rapidly growing emerging economies. In 2009, export is expected to grow by some 5%. Export quantities are also expected to grow in most sectors. According to ETLA´s estimates, investments increase faster than expected in Finland. Public sector surpluses have also remained significant in Finland. The surplus has been mainly justified by a favourable economic trend and improving employment, which improves the government´s potential to boost the economy via tax cuts.

Sources: Nordea Equities Finland and ETLA (The Research Institute of the Finnish Economy)