Investor Presentation New Inflation-Linked Treasury Bonds

1. Investor Presentation New Inflation-Linked Treasury Bonds Government Debt Management ∙ Kalkofnsvegur 1 ∙ 150 Reykjavík ∙ Tel +354 569 9600 ∙ Fax +354 569 9604 ∙ www.lanamal.is

2. Prospects – Emphases in 2010 • The Treasury’s financing needs in 2010 will amount to ISK 230 billion. • ISK 170 billion will be issued in domestic marketable bonds • Net ISK 20 billion will be issued in Treasury bills • The remainder will come from the Treasury’s deposits with the Central Bank

3. Prospects – Emphases in 2010 • A new 11-year inflation-linked Treasury Bond will be issued on 9 April 2010. The target is to sell ISK 50 billion in year 2010. • In the first half of the year, a new 2-year Nominal Treasury Bond will be issued. • In the second half of the year, a new 5- to 6-year Nominal Treasury Bond will be issued. • No foreign loans are scheduled to mature in 2010.

4. Prospects – Emphases in 2010 • Following the collapse of the banks, the total debt of the Treasury increased from ISK 303 billion in 2007 to ISK 1,176 billion at the end of 2009. Total Treasury debt therefore amounted to 78% of GDP at year-end 2009. • According to the medium-term fiscal programme presented to the Icelandic Parliament last autumn, total Treasury finances are projected to be in balance by 2012 and in surplus in 2013. According to the programme, debt will begin declining next year.

5. Prospects – Emphases in 2010 • Debt arising from the reconstruction of the banking system amounts to ISK 186 billion. This amount is offset by the corresponding ownership of capital and credits to the banks. • The Government issued a bond amounting to ISK 159 billion to recapitalise the Central Bank of Iceland after the collapse of the banks. • The cash position of the Treasury is strong, and Treasury deposits with the Central Bank amounted to ISK 120 billion at end of March 2010. The cash position will cover the redemption of domestic bonds this year and 2011 amounting to ISK 97 billion.

6. Prospects – Emphases in 2010 • Foreign debt amounted to ISK 356 billion at year-end 2009. In September and December 2011, two currency reserve loans for a total amount of EUR 1.3 billion will mature. The Government of Iceland can cover these redemptions with FX reserves of EUR 1.4 billion. • In October 2008, the IMF approved a USD 2.1 billion Stand-By Arrangement for Iceland to support the country’s programme to restore confidence and stabilise the economy. The arrangement with the IMF was supported with bilateral loans for USD 2.7 billion from the Nordic countries and Poland. • The second review of the disbursement of loan facilities from the IMF and the bilateral partners has been delayed because of delays in bilateral negotiations between the Icelandic government and UK and Dutch government regarding Icesave. When the Icelandic Government gains access to the remainder of the loans from the IMF and the Nordic countries, it will be possible to strengthen the reserves by another EUR 2.5 billion. The reserves would then amount to EUR 3.9 billion, almost half of GDP and nearly 21 months’ worth of imports, before the loan payments.

7. Prospects – Emphases in 2010 Marketable Treasury securities amounted to ISK 625 billion at year-end 2009. Inflation-linked Treasury bonds constituted 3% of marketable Treasury securities. Nominal Treasury bonds were 55% of the debt portfolio.

8. New Inflation-Linked Treasury Bonds

9. New Inflation-Linked Treasury Bonds The Treasury has not sold inflation-linked bonds in conventional auctions for a number of years. The objectives of issuing inflation-linked bonds are as follows: • Cost-saving – Declining inflation makes issuing an inflation-linked bond more attractive for the Government • Diversification of market risk – Inflation-linked bonds play a significant role in the diversification of Icelandic Government market risk • Broadening the investor base – One of the objectives of issuing inflation-linked Treasury bonds is to appeal to a broader base of investors • Diversification vehicle for investors – The inflation-linked bonds are designed for all categories of investors who aim to protect the purchasing power of their investments. At first, the bonds are aimed at institutional investors – pension funds and other funds – whether resident or non-resident • Investor demand - Pension funds’ demand on the domestic bond market has historically been concentrated in inflation-linked bonds, such as corporate bonds and Housing Financing Fund (HFF) bonds. Because these issues have contracted sharply following the collapse of the banks and the housing market, the Treasury intends to meet this demand by offering inflation-linked bonds • Monetary policy credibility – This issuance by the Treasury will enhance monetary policy credibility and the promotion of price stability

10. New Inflation-Linked Treasury Bonds

11. Information

12. Sovereign credit ratings

13. Information • The two main gateways to information about the Icelandic fixed-income market are http://www.bonds.is and http://www.ndma.is • Bloomberg has information on Treasury Securities, auctions, yields and bids. • Government Debt Management, a department within the Central Bank, publishes monthly market information on auctions, issuance, yield curves, etc. • For further information on auction terms, the description of the Inflation-Linked Treasury Bond RIKS 21 0414, and other matters, please contact one of the following authorized primary dealers: • Arion Bank • Islandsbanki • NBI (Landsbanki) • MP Bank • Saga Capital Investment Bank