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Index-linked bond USA

Economic growth in the United States is expected to slow down during the next few months. However, the economy is forecast to take a turn upwards at the end of next year at the latest. In the equity markets the turn for the better will probably be seen earlier than that. By investing in the index-linked bond USA you obtain exposure in the world's largest equity market without the risk of losing your capital.

Basic and Extra

According to forecasts, the financial market crisis that started from the US housing market bubble will ease up towards the end of next year and the economy will start to recover. However, in the equity markets the turn for the better is expected earlier, as they have a tendency to anticipate movements in the economy. The US economy is considered the most dynamic in the world and the economy is rapidly adjusted to the prevailing market situation. The hopes that the worst is behind is supported by the bailout package of the federal government. All problem credits which have bust banks are gathered in this package and in this way the uncertainty in the financial market suffering from lack of trust is decreased. Also the unprecedented interest rate cut decision taken jointly by the major central banks on October 8th inspires trust that policy makers are keen to act promptly to limit the damages of the credit crunch.

Index-linked bond USA offers you capital protection and diversification of time with regard to sales and purchases.*

The US equity markets have fallen about 40% in a year as a result to the ongoing financial crisis. Sharp and dramatic declines can imply good investment potential for investors. By investing in the index-linked bond USA issued by Nordea Bank Finland Plc you can gain from the possible rise of the US equity markets. The yield of the index-linked bond USA is determined according to the performance of the S&P 500 equity index. If the equity markets recover, the value of the investment rises. If the fall continues, the nominal capital will be repaid at maturity.

Index-linked bond USA has two alternatives: Basic and Extra. The Basic version is suitable for cautious investors. At maturity, its yield is 71% of the rise of the underlying asset in accordance with the issue terms. Extra suits investors who tolerate limited risk and seek a higher return. The yield on the investment at maturity is 125% of the rise of the underlying asset in accordance with the issue terms. If the underlying asset falls or remains unchanged, no yield is paid and the investor loses the amount paid above par value (in the Extra bond about 10%).

The investment period of both index-linked bonds is approximately four years, and the nominal capital is repaid at maturity irrespective of the performance of the reference index. The investment can also be realised before maturity, in which case the value may be above or below the nominal value depending on market performance. Index-linked bonds involve a risk of the issuer’s repayment ability. Nordea’s credit rating is Aa1 (Moody´s) or AA- (Standard & Poor’s).

Product summary

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

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

Reference asset: Standard and Poor’s 500 (S&P 500)

The S&P 500 equity index measures the price development of 500 biggest US companies in terms of market value. The index reflects the performance of the US equity markets widely as it includes shares from all of the most important industries. The index is calculated and published by Standard & Poor´s. Further details on the index are available on the Internet at www.spglobal.com.

*The starting value of the investment is calculated as an average of the monthly values of the reference asset the S&P 500 for the first six months (November 2008 – May 2009). The diversification of time is tailored according to the view that share prices can still decrease in the short term. If the value of the reference asset falls during the first six months, the averaged starting value makes a more favourable starting value possible. The closing value is calculated on the monthly observations of the reference asset (November 2011 – November 2012) and it can be interpreted as diversification of the sales date.

Performance of the reference asset October 2003 – October 2008
(Starting level indexed at 100)

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.

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.

Terms of issue in brief

Issuer	Nordea Bank Finland Plc
Issue date	13 October 2008
Due date	21 November 2012
Subscription period	13 October - 20 November 2008
Places of subscription	Nordea Bank Finland Plc and its branches in the Baltics
Subscription price	4183A USA Basic: variable, about 100% 4183B USA Extra: variable, about 110%
Minimum subscription	EUR 1,000
Yield at maturity	4183A USA Basic: 71% of the rise of the reference asset in accordance with the issue terms 4183B USA Extra: 125% of the rise of the reference asset in accordance with the issue terms
Reference asset	Standard and Poor´s 500 (BB: SPX Index)
Starting value	An average of the monthly closing values of the reference asset 25 November 2008 – 25 May 2009
Closing value	The average of the monthly closing values of the reference asset November 2011 - 7 November 2012.
Repayment of the principal	The issuer Nordea Bank Finland Plc will repay the nominal principal of the index-linked bonds in full at maturity irrespective of the performance of the reference asset. The index-linked bonds involves 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 loans are unsecured.
Structuring cost	The subscription price includes a structuring cost, which is about 0.8% p.a. (see the terms of issue). No separate subscription or management fee is charged on the index-linked bond.
Secondary market	The issuer Nordea Bank Finland Plc will quote 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 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 occurs which the issuer considers might endanger the issue.

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

Yield table on index-linked bond USA

Change in the reference asset according to the terms of the issue	USA Basic		USA Extra
	Issue price ca.	100 %	Issue price ca.	110 %
	Participation rate	71 %	Participation rate	125 %
	Value at maturity	Return p.a	Value at maturity	Return p.a
-50 %	100 %	0.0 %	100 %	-2.4 %
-25 %	100 %	0.0 %	100 %	-2.4 %
0 %	100 %	0.0 %	100 %	-2.4 %
25 %	118 %	4.2 %	131 %	4.5 %
50 %	136 %	7.9 %	163 %	10.2 %
75 %	153 %	11.3 %	194 %	15.2 %
100 %	171 %	14.4 %	225 %	19.6 %

Index-linked bonds 4183A and 4183B 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 on 7 June 2007. Bond-specific terms are available at places of subscription.

US equities a safe haven

The US economy and the global economy along with it have faced hard times during the past year. The equity markets have also been exceptionally volatile following the turns of the US credit crisis. The impact of the 700 billion dollar bank bailout package of the US federal government remains to be seen, but based on previous experience the introduction of a bailout package has foreboded that the crisis will be overcome and the situation normalised. Contrary to the savings banks crisis in at the end of the 1980s, the US government and the Fed have attempted to act in preventively in managing the present money market crisis.

Paying extra tax refunds earlier than normally prevented the US economy from contracting in the first months of this year. However, according to our view, economic growth will go down to recession when the effects of the resuscitation fade out in the latter part of this year. Exports, which have so far been supported by the weak dollar, have given fair support to the economy, but the drive given by exports will decrease as the economy is anticipated to slow down while the dollar appreciates. The correction in the US mortgage market is likely to continue and residential investment is expected to pick up in the latter part of 2009. After the presidential election in November the country will get a new cabinet, which will take action if there are no signs of recovery. We believe that the US economy will take off in 2009.

The US economy still includes risks, but usually the bad news of a recession has been priced in share valuations. Although the culprit for the present problems in the global economy can be found in the United States, the US equity markets have performed better than other markets this year.

The downhill of the global economy began in the US last year and many investors hope that the recovery will also start from there. The outperformance of the US market compared to other markets has been affected by the government’s and the central bank’s active measures to improve the economic situation. The Fed, the US central bank has cut the key rate from 5.25% to 1.5% and also otherwise made its best to resuscitate the economic situation. During recession periods the US markets have traditionally managed better than other markets. When the uncertainty is at its highest level, investors want to invest in familiar markets. The United States has attracted the investors’ assets also this year supported by its position as a safe haven.

Source: Nordea Economic Research