Nordea Credit Notes by Grapina Graphics Oy

Credit notes

4.9.2012

Regular yield in your investment portfolio

The credit note is an investment that offers a

Why consider credit notes?

company to which each credit note is linked. The investment is not capital guaranteed. We offer five different credit notes, from which you can choose the option that best suits your portfolio. You will usually achieve the best results by diversifying your invest-

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Saving and investing has traditionally consisted of bank deposits and investments in equities and funds. Historically, equity investments have generated good returns, but the risks are high and if the equity markets decline, investors stand to lose money. For example, since 1989, the Helsinki Stock Exchange has experienced three periods during which shares listed on it have lost more than two-thirds of their value. Investors who are unwilling to expose their money to such risks keep their funds in very lowyield fixed-income investments, such as bank accounts. Accounts and deposits are a safe option, but in times of low interest rates, the yield they generate is lower than inflation, i.e. their real yield is negative. For investors looking for a better yield than deposit interest rates but who are unwilling to take the risk of equity investments, credit notes offer a new and attractive investment option.

regular yield paid four times a year. The yield

Credit notes offered Credit notes are bonds issued by Nordea Bank Finland Plc. Currently Nordea offers notes linked to the credit risk of five different companies. You can read more about the companies and their future outlook in a separate attachement.

Reference company

Interest p.a.

Credit note

Credit rating (S&P/Moody’s**)

Maturity date

Credit event period ends

Carlsberg Breweries A/S

3-month Euribor + 1.00%

Carlsberg 1/2018

- /Baa2

15 Jan. 2018

20 Dec. 2017

Metso Corporation

3-month Euribor + 1.40%

Metso 1/2018

BBB/Baa2

15 Jan. 2018

20 Dec. 2017

UPM-Kymmene Corporation

3-month Euribor + 3.30%

UPM 1/2018

BB/Ba1

15 Jan. 2018

20 Dec. 2017

Metsä Board Corporation

3-month Euribor + 5.20%

Metsä Board 1/2018

B-/B3

15 Jan. 2018

20 Dec. 2017

Nokia Plc

3-month Euribor + 8.10%

Nokia 1/2018

BB-/Ba3

15 Jan. 2018

20 Dec. 2017

* 3-month Euribor on 23 Aug. 2012: 0.30%

** S&P = Long Term Issuer Credit. Moody´s = Long Term Rating.

Yield and repayment of nominal capital

The yield on the credit note is paid four times a year. The yield is the 3-month Euribor plus a fixed additional yield, which differs from one credit note to the next. The additional yield is usually lower in the case of reference companies with a good credit rating and, conversely, higher in the case of reference companies with a weaker credit rating. The credit notes’ maturity date is approximately five years from their date of issue. If a reference company’s operations continue normally throughout the investment period, the nominal value of the investment will be repaid to the investors at the maturity date. If, however, the reference company runs into financial difficulties during the investment period and is unable to meet its financial obligations, the credit note will mature prematurely and investors can suffer a loss. Investing in a credit note

Credit notes can be bought from Nordea branches. The minimum investment is 5,000 euros and the denomination is 1,000 euros. Credit notes are available for at least six months after the date of issue, and they can be traded 2

on the secondary market. Nordea quotes a daily repurchase price for credit notes in normal market conditions. The price of credit notes varies according to the reference company’s credit risk and the interest rate level, and therefore an investment with a nominal value of 10,000 euros may cost more or less than 10,000 euros. If the rate is, for example, 100.1%, an investment with a nominal value of 10,000 euros will cost 10,010 euros. The interest on the investment, however, is always paid on the nominal value, in this case 10,000 euros. The purchase price, in other words, will have an impact on the actual yield paid to the investor. Accrued interest

If an investor buys a credit note in the middle of the fixed-income period, he or she will pay any accrued interest, or secondary market compensation, in addition to the note’s principal. Correspondingly, when an investor sells a credit note, he or she will receive any interest accrued. The amount of accrued interest depends on the time from the previous interest payment date and on the interest rate.

Interest and capital In addition to the purchase price and the trend in the Euribor interest rate, the yield on credit notes depends on whether the reference company experiences a credit event during the investment period. If the reference company’s business operations continue normally and the company does not experience a credit event, interest will be paid quarterly on the credit note and the nominal capital will be repaid on the maturity date. If the reference company, however, experiences a credit event, the credit note will mature before the maturity date and, instead of the nominal value, the investor will receive a “recovery rate” plus any interest accrued until the date of confirmation of the credit event. The recovery rate, indicated as a figure between 0% and 100%, is determined based on the value of the company’s debt securities after the credit event. If the recovery rate is 0%, the investor will lose the entire capital he or she has invested. No credit events Payment of interest and repayment of capital during the investment period Year 1

Year 2

Year 3

Year 4

Year 5

Quarterly payment of interest

Rapayment of capital

Credit event during the investment period Payment of interest and repayment of capital in the event that the reference company experiences a credit event in the third quarter of the fourth year. Year 1

Year 2

Year 3

Year 4

Year 5

Quarterly payment of interest

Recovery rate

Rapayment of capital

Examples of possible outcomes Example 1 (Positiv scenario) The investor invests 100 000 euro in Credit Note Metso. The business of the reference company continues normally for the entire investment period, ie. no credit event occurs. The invetor is paid a quartely interest of 3 month Euribor +1.40% p.a. The nominal capital is repaid in full by the issuer at maturity.

Example 2 (Negative scenario) The investor invests 100 000 euro in Credit Note Metso. The reference company suffers a credit event after two years. The recovery rate is determined as 40%. The Credit Note matures prematurely. The investor is repaid 40% of the nominal capital. Payment of interest ends on the determination date of the credit event.

Example 3 (Worst possible scenario) The investor invests 100 000 euro in Credit Note Metso. The reference company sufers a credit event immedialty after the issue date and the recovery rate is set to 0%. No payments of interest occur, and the investment matures prematurely at a value of 0%. What is the difference between credit notes and corporate bonds? 3

What is the difference between credit notes and corporate bonds? Credit notes are fairly similar to corporate bonds, but they differ in a few aspects. The main differences are: • Credit notes are issued by Nordea and therefore do not constitute raising of funds by the reference company. • In both credit notes and corporate bonds, investors carry the credit risk of the reference company. In credit notes, investors also carry Nordea’s credit risk.

• The minimum investment in credit notes is 5,000 euros. When investing in corporate bonds, the minimum investment is often substantially higher. • In general, corporate bonds generate a fixed yield, whereas credit notes have a variable yield that fluctuates according to the 3-month Euribor.

Determining credit worthiness

Speculative grade

Investment grade

Credit rating

Standard & Poor´s

Definition

Moody´s

AAA

Extremely strong credit rating

Aaa

Very strong credit rating

Strong credit rating

BBB

Adequate credit rating

Baa

Mildly speculative

Speculative

CCC

Very speculative

Caa

CC-C

Close to default

Default

Sources: Standard & Poor´s and Moody´s

The reference company’s creditworthiness can be assessed using its credit rating. The most common issuers of credit ratings are Standard & Poor’s and Moody’s.

Risks related to credit notes Credit notes have no capital protection, which means the investor may lose the invested capital partially or in full. When making an investment decision, investors should consider the total risk relating to the reference company and the issuer in their portfolios. You can read more about the refenrence companies in a separate attachement. An investment will mature prematurely if the reference company defaults on the financial obligations of its debts and experiences a credit event. A credit event refers to a state in which the reference company is in serious financial difficulties and cannot fulfil the payment obligations relating to its debts. Credit events include: • Bankruptcy • Failure to pay, which means that the company has been unable to pay its debts of at least 1 million US dollars, and debt restructuring, which means that the company is renegotiating new terms for its debt that are more unfavourable to its creditors, and the value of the debt is at least 10 million US dollars. • Determination of whether a credit event has occurred and of the recovery rate takes place according to the market situation and is based on the rules of ISDA (International Swap and Derivatives Association). You can read a more detailed definition of a credit event in the Final Terms of the Credit Note.

In a credit event the company’s creditors and debt investors suffer credit losses. The amount of the credit loss is determined by the recovery rate. The recovery rate can vary from 0% to 100%. The long-term average has been around 37%. In 2011, recovery rates were 40% on average. When Credit Events increase, the recovery rates usually drop. Detailed definitions are available in the terms of issue, which the investor should read before making an investment decision. As the notes are unsecured, they involve a risk of the issuer’s, Nordea Bank Finland Plc’s, repayment ability. The risk relating to the issuer’s repayment ability means the risk that the issuer becomes insolvent and cannot fulfil its commitments. The investor can hence lose the invested capital and the possible yield partially or in full in the event of the issuer’s insolvency. Nordea Bank Finland Plc’s credit ratings are Aa3 (Moody’s) and AA- (Standard & Poor’s). The premium, i.e. the proportion of the subscription price exceeding the nominal value of the note, is not returned. The secondary market price can fluctuate heavily, so the note is intended as a ’buy and hold’ investment. In normal market conditions Nordea Bank Finland Plc quotes a repurchase price on the investment on nominal values of 1,000 euros or more.

Source: Moody´s

Average recovery rates 1982 – 2011 70% 60% 50% 40% 30% 20% 10% 0% 1982

1986

1990

1994

1998

2002

2006

2010

Issue terms in brief

Issuer Nordea Bank Finland Plc, credit ratings Aa3 (Moody’s) and AA- (S&P). Loan number and ISIN Credit note Carlsberg 1/2018 4715 FI4000040910 Credit note Metso 1/2018 4714 FI4000040902 Credit note UPM 1/2018 4717 FI4000040936 Credit note Metsä Board 1/2018 4716 FI4000040928 Credit note Nokia 1/2018 4718 FI4000040944 Reference companies Credit note Carlsberg 1/2018: Carlsberg Breweries A/S Credit note Metso 1/2018: Metso Oyj Credit note UPM 1/2018: UPM-Kymmene Oyj Credit note Metsä Board 1/2018: Metsä Board Oyj Credit note Nokia 1/2018: Nokia Oyj Issue date 10 September 2012 Maturity date 15 January 2018 Places of sale Nordea Bank Finland Plc branches and Nordea Private. Minimum subscription 5 000 euros, tickets of 1 000 euros. Selling price Variable, about 100% Yield A quarterly yield is paid on the notes nominal capital, amounting to: Credit note Carlsberg 1/2018: 3-month Euribor + 1.0% p.a. Credit note Metso 1/2018: 3-month Euribor + 1.4% p.a. Credit note UPM 1/2018: 3-month Euribor + 3.3% p.a. Credit note Metsä Board 1/2018: 3-month Euribor + 5.2% p.a. Credit note Nokia 1/2018: 3-month Euribor + 8.1% p.a. The first yield period begins on 10 September 2012 and ends on 20 December 2012. After that, the length of each yield period is about three months. The final yield period begins on 20 September 2017 and ends on the maturity date. The yield payment dates are 20 March, 20 June, 20 September and 20 December and the maturity date. Repayment of capital The issuer Nordea Bank Finland Plc will repay the nominal capital of the note in full at maturity if no credit events have occurred in the credit note’s reference company. The note involves a risk of the issuer’s repayment ability. The investor may lose the invested capital partially or in full. Premature maturity The credit note will mature prematurely if the note’s reference company faces a credit event. In such a case the payment of yield ends and the capital is returned to the investor in accordance with the recovery rate. Credit event period The credit event period is the period between 10 September 2012 and 20 December 2017. However, in accordance with international market practice, the situation of the reference company can be reviewed retroactively for a period of 60 banking days prior to the beginning of the actual credit event period in order to establish the occurrence of a credit event. The issuer is also entitled to announce a credit event that has occurred during the credit event period but that has become known to the issuer only after the credit event period; however, within two weeks after the end of the credit event period at the latest. See the loan-specific terms and conditions for details. Credit event A credit event refers to an event in which, according to the issuer’s estimate, the reference company faces a default of payment, debt restructuring or bankruptcy. Determination of whether a credit event has occurred and of the recovery rate takes place according to the market situation and is based on the rules of ISDA (International Swap and Derivatives Association). See the loan-specific terms and conditions for details. Security The notes are unsecured. The notes involve a risk of the issuer’s repayment ability. Structuring cost The selling price includes a structuring cost of 0.5–0.6% p.a. No separate subscription or management fee is charged on the notes. Secondary market Nordea quotes a repurchase price for nominal amounts of 1,000 euros and higher. The repurchase price may be lower or higher than the nominal value. Taxation Yield is subject to tax at source on interest income for natural persons and Finnish death estates in accordance with the tax legislation valid at the time. Safe custody Free of charge with Nordea Bank Finland Plc. Cancellation The issuer is entitled 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 may endanger the issue. Listing An application will be made for the notes to be listed on Nasdaq OMX Helsinki. 6

Nordea Banki Finland Plc HSI113 09.12

Loans 4715 (Credit note Carlsberg 1/2018), 4714 (Credit note Metso 1/2018), 4717 (Credit note UPM 1/2018), 4716 (Credit note Metsä Board 1/2018) and 4718 (Credit note Nokia 1/2018) under the MTN programme (a medium-term note 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 4 May 2012. The note-specific terms and the base prospectus are available at the places of subscription. Please read the issue terms and the base prospectus before subscription. The Swedish version of the terms is binding and thus applicable in possible conflict situations.

DISCLAIMER 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 essential 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 the prior consent in writing of Nordea Markets.

RISK CLASSIFICATION: MEDIUM RISK. Structured investment products in which the repayment of nominal capital depends on market performance, such as the trend in the market capitalisation of the reference company shares or the number of credit events in the reference companies, as well as the issuer’s repayment ability. The potential repayment of the nominal capital does not cover the premium or the fees and costs paid by the investors. The risk relating to the issuer’s repayment ability is described in this marketing brochure. The risk classification does not remove the investor’s obligation to carefully study this marketing brochure, the product-specific terms and conditions and the prospectus, if any, and the risks mentioned in them.