Iceland Stock Exchange

Icelandic Investment Abroad

Thordur Fridjonsson, President and CEO of ICEXSixth Consular Conference - 8 May 2006

Topics• The Economy

– Performance and prospects – Structural improvements– Strong fundamentals

• Iceland Stock Exchange– ICEX – NOREX Alliance– Size of the Icelandic securities market– Equity market capitalisation in relation to GDP– Exceptional growth - Remarkable price performance– Valuation on the equity market– Acquisitions abroad - International companies– Revenues generated abroad (ICEX 15)– New capital raised in the market– Reasons behind the success

Economic Growth – average annual GDP growth-

4,4%

3,3%

2,0%

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

4,0%

4,5%

Iceland USA Euro area

1996-2005

Source: OECD

1990 1995 2005

Containinginflation

Setting the Funda-mentals

EEA established

The finalphase ofliberalisingcapital flows

Incorporationof stateowned banksandprivatisation

Frombudgetdeficit tosurplus

Inflationtargeting-IndependantCentral Bank

Finalphase ofprivatisation of stateowned banks

The Phases of Economic and Financial Development

Wave of acquisitions abroad

Iceland is doing well in International Comparisons

RankingStandard of living 2Competitiveness 4Creativity 7Low corruption 1Economic freedom 5

Quotes: United Nations Human Development Index, Human Development Report 2005The IMD World Competitiveness Yearbook 2005, IMD Switzerland 2005The Flight of the Creative Class: The Global Creativity Index, Professor Richard Florida 2005Transparency International: The International Corruption Perception Index 2005The Heritage Foundation / Wall Street Journal: Index of Economic Freedom

Pension Fund Assets 1984-2005

0

5

10

15

20

25

30

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

0

20

40

60

80

100

120

140

Per

cen

t o

f G

DP

Yearly real increase % Per-cent of GDP

Population over 65 per cent of working population

  US Japan Europe Iceland

1950 12 8 12 8

1975 16 12 21 10

2005 18 30 25 13

2025 30 50 37 21

2050 33 70 50 27

External PositionPer cent of GDP

-100

-50

0

50

100

150

200

250

300

350

400

2001 2002 2003 2004 2005*

Total Assets Total Liabilities International Investment Position

Source: Central Bank of Iceland

* Preliminary figures

Examples of Foreign Debt in a Few Countries

Per cent of GDP

0%

200%

400%

600%

800%

1000%

1200%

1400%

Irela

ndSwitz

erla

nd UK

Icel

and

Luxe

mbo

urg

Denmar

kNew Z

eala

nd

Source: Jón Steinsson

Mbl. 24.3.2006

NOREX Alliance

Tallinn

Helsinki

Stockholm

Copenhagen

Vilnius

Riga

ICEX / VMF

Size of the Icelandic Securities Market

24,3

14,513,3

0

5

10

15

20

25

30

GDP Bonds Stocks

EU

R b

illio

ns

Source: Central Bank of Iceland and ICEX

Stocks: Market capitalisation - December 2005

Bonds: Market capitalisation - December 2005

GDP: Nominal 2005

Equity Market CapitalisationPer cent of GDP 2005

139% 136%125% 121%

69%72%

186%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

Iceland UK USA Finland Sw eden Denmark Norw ay

Exceptional Growth on ICEXTurnover EUR Billion

2,9 3,1

10,913,7

20,017,7

2,5

4,3

7,4

9,716,1

0,7

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

12/00 12/01 12/02 12/03 12/04 12/05

Fixed income Equity

Market cap EUR Billion

5,4 6,7 8,010,7

13,4 14,75,45,4

6,7

9,4

14,7

24,1

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

12/00 12/01 12/02 12/03 12/04 12/05

Fixed Income Equity

Top Performer

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

30.1

2.99

30.0

3.00

30.0

6.00

30.0

9.00

30.1

2.00

30.0

3.01

30.0

6.01

30.0

9.01

30.1

2.01

30.0

3.02

30.0

6.02

30.0

9.02

30.1

2.02

30.0

3.03

30.0

6.03

30.0

9.03

30.1

2.03

30.0

3.04

30.0

6.04

30.0

9.04

30.1

2.04

30.0

3.05

30.0

6.05

30.0

9.05

30.1

2.05

30.0

3.06

ICEX-15

S&P 500 INDEX

NASDAQ COMPOSITE

FTSE 100

OMXC20

DAX

Valuation on the Icelandic Equity Market

P/E ratios

0

10

20

30

40

50

60

70 S&P 500

FTSE

ICEX-15

• Source: Landsbanki Islands, Bloomberg

Number of Listed Companies & Average Market Value

– Delistings mostly due to M&A activities– Companies more liquid and larger than 2-3 years ago

1117

2427

32

51

67

75 7571

64

48

34

26 26

0

10

20

30

40

50

60

70

80

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006*

0

200

400

600

800

1.000

1.200

EU

R M

illi

on

s

* 27.02.2006

Acquisitions Abroad by Listed Companies on ICEX

6,4

3,52,8

13,3

0

2

4

6

8

10

12

14

GDP 2005 2004 2005 2004+2005

EU

R b

illio

ns

Source: Central Bank of Iceland and ICEX

Value of Acquisitions by Countries

Source: ICEX

33%

21%

8%

1%1%

6%7%

22%

0%

5%

10%

15%

20%

25%

30%

35%

40%

UK

Denm

ark

US

A

Norw

ay

France

Sw

eden

Germ

any

Faroe

Islands

Revenues Generated Abroad (ICEX-15)Per cent of total revenue

0%10%

20%30%

40%50%60%

70%80%

90%100%

Bakkav

ör

Mosa

ic F

ashio

ns A

Össur

Flaga

Actavi

s

Mar

el

FL GROUP

KB-ban

ki

Atork

a

Kögun

Landsb

anki Í

slands

Glitnir

Straum

ur-Bur

ðará

s

Dagsbrú

n

Listed Companies Division of Employees Between Iceland and Abroad

19%

81%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Iceland Abroad

Source: ICEX

New CapitalPer cent of Market Value

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

ICEX

Luxembourg

PragueW

iener BörseCyprusLjubljanaBorsa ItalianaO

slo BørsIrish Stock Exchange

AthensLondonSpanish Exchanges

EuronextDeutsche BörseO

MX

Bratislava

2004 2005

International Investment - 1Actavis Group: Balkanpharma, Pharmamed, FAKO, Zdravlje, Amide, Alpharma’s

human generic business, Higia AD, Sindan

Alfesca: Labeyrie Group, Lyons Seafoods

Atorka Group: Promens, Ilanta, NWF Group Plc. (16%), Romag (11%), Interbulk (23%), AMIAD Filtration System (10,9%)

Avion Group: Excel Airways Group, Travel City Holdings Plc., Kosmar Holidays, Star Airlines, Star Europe, Xtra Airways, Aviation Services, Avia

Services, Technical & Logistics Services, Shipping & Logistics, Innovate, Farmaleiðir, Faroe Ship, Heri Thomsen, Daalimpex, CTG, Halship, Euro Container Line, Harbor Grace, Dissaco GSS Airfreight NV, Traxx Intercontinental BV, Kirkenes Agency AS

Bakkavor Group: Wine & Dine, Katsouris, Geest, Hitchen Foods, Creative Foods, New Primebake, Laurens Patisseries

Dagsbrun: P/F Kall, 354 Media Scandinavia A/S, Wyndeham, Press Group Plc.

Flaga Group: Sleep Tech, Medcorp.

International Investment - 2

FL GROUP: Sterling, Aktiv Kapital, Finnair, Royal Unibrew, Bang & Olufsen, Refresco Holding B.V.

Glitnir Bank: Kredittbanken, BN Bank, Norse Securities, Union Group (51%)

Icelandic Group: Seachill Ltd, Barogel S.A., Pickenpack–Hussman & Hahn Seafood, Saltur A/S, Dalian Three Star Ltd.

Kaupthing Bank: FIH, JP Nordiska, Aragon, Sofi, Norvestia, Singer & Friedlander

Kogun: Hands ASA Norway, Specialists in Custom Software Inc.

Landsbanki Islands: Heritable Bank, Theather & Greenwood Holdings, Kepler Equities, Merrion Capital Group Ltd.

Marel: Carnitech, TVM, CP Food Machinery, Geba, AEW Thurne, Delford Sortaweight

Straumur Burdaras Investment Bank: Old Mutual Plc., Finnair Oyj., Cherryforetegen AB, Pricer AB, Polimoon

TM: NEMI Forsikring, Invik & Co AB

Ossur: Royce Medical Holdings, Innovation Sports Inc., Innovation Medical Products Holdings

ICEX-15 – End of April 2006 Market

Cap EUR m. %

of MV

Kaupthing Bank 6,761 26.1%

Glitnir banki hf. 3,246 12.5%

Landsbanki Íslands hf. 3,246 12.5%

Actavis Group hf. 2,717 10.5%

Straumur-Burðarás Fjárfestingabanki hf. 2,344 9.0%

FL GROUP hf. 1,595 6.1%

Bakkavör Group hf. 1,063 4.1%

Mosaic Fashions hf. 699 2.7%

Össur hf. 564 2.2%

Dagsbrún hf. 383 1.5%

Alfesca hf. 307 1.2%

Atorka Group hf. 271 1.0%

Marel hf. 234 0.9%

Kögun hf. 192 0.7%

Flaga Group hf. 36 0.1%

ICEX-15 total 23,658 91.2%

Total MV of listed comp. 25,954  

Reasons Behind the Success

• Economic reforms during the last 10-15 years―Liberalisation―Privatisation―Entrepreneurship and flexibility

• ICEX has played an important role―Providing capital for expansion and restructuring

The Message

• The economy is fundamentally sound• The market is well functioning• From local to global• Adjustments in wake of exceptional growth

Iceland Stock ExchangeLaugavegur 182IS-105 Reykjavik

Icelandwww.icex.is