1. Iceland’s Economy and the Stock Market
Thordur Fridjonsson, President OMX Nordic Exchange in Iceland
DenNorskeAktuarforening
15 March 2007

2. Topics The Economy Remarkable performance
Transformation of the economy, local to global
Strengths and weaknesses
What is ahead for the economy?
Iceland Stock Exchange
Track record – hard to beat
The Nordic Exchange
Exceptional growth and impressive transformation
Acquisitions abroad
OMX –The Nordic Exchange
One Nordic marketT
Towards the future – great opportunities
The message

3. The economy – fast and lean

4. Economic Growth – average annual GDP growth
Source: OECD

5. and Financial Development
The Phases of Economic
and Financial Development
Final
phase of
privatization
of state
owned banks
From
budget
deficit to
surplus
The final
phase of
liberalizing
capital flows
Wave of acquisitions abroad
Setting
the
Funda-mentals
Inflation
targeting-
Independent
Central Bank
Incorporation
of state-
owned banks
and
privatization
EEA
established
Containing
inflation

6. Strengths and Weaknesses
Fast growing
Efficient infrastructure
Rich energy resources
Solid fiscal position
Strong pension funds
Motivated people
Weaknesses
Cyclicality
Challenging inflation management over the business cycle
Relatively high foreign debt

7. Iceland is doing well in International Comparisons
Ranking
Standard of living 2
Competitiveness 4
Creativity 7
Low corruption 1
Economic freedom 5
Sources: United Nations Human Development Index, Human Development Report 2005
The IMD World Competitiveness Yearbook 2005, IMD Switzerland 2005
The Flight of the Creative Class: The Global Creativity Index, Professor Richard Florida 2005
Transparency International: The International Corruption Perception Index 2005
The Heritage Foundation / Wall Street Journal: Index of Economic Freedom

8. What is Ahead for the Economy?
“The medium term outlook for the Icelandic economy remains enviable” IMF May
Typical business cycle with a slow-down in growth over the next two years.
Beyond, Iceland will be poised for a new cycle of expansion.
Average growth in Iceland over the next decade should not be any slower than during the past decade. Those are acceptable prospects.

9. Track record - hard to beat Towards the future with OMX

10. Changing face of the Icelandic market - Developments 2001-2006
Market cap increased 6 times
from 55% of GDP to 230% of GDP
Turnover increased 15 times
Stock market prices are up 4.5 times
Number of listed companies declined from 75 to 25, but the average market value has multiplied 18 times
Most of the listed companies are strong international companies

11. Exceptional Growth
Source: OMX Nordic Exchange in Iceland

12. Top Performer Price performance has been extraordinary
This, of course, raises the q is the market overvalued
Iceland Stock Exchange does not make an evaluation, but when we suspect that a bubble is forming the first check is the p/e ratio

13. New Capital - % of end-of-year market cap
Source: OMX Nordic Exchange in Iceland and FESE

14. Acquisitions abroad by listed companies on OMX Nordic Exchange in Iceland
Source: Ministry of Finance (estimate) and OMX Nordic Exchange in Iceland

15. Icelandic Expansion by Countries in 2006

16. Foreign Direct Investment - Stocks % of GDP
Source: UN World Investment Report 2006

17. Revenues Generated Abroad (ICEX-15)
Source: OMX Nordic Exchange in Iceland

18. From local to global

19. The Nordic Exchange Oslo Helsinki Iceland Copenhagen Stockholm Tallinn
London
Copenhagen
Riga
New York
Vilnius
Market value 920 EUR billion
Turnover/business day 4,2 EUR billion
Trades/business day
712 listed companies (excl. 12 multiple listings)
160 trading members (excl. 137 cross membership)

20. One Nordic market COPENHAGEN Main STOCKHOLM Market HELSINKI First
Exchange list
First North
Main
Market
STOCKHOLM
A list
O list
Nya Marknaden
HELSINKI
Main list
I list
NM list
First
North
Iceland
Main List
isec

21. …the leadership in important sectors
No 1 in Europe in IT
No 1 in the world in Paper Products
No 2 in the world in Fashion
No 3 in the world in Machinery
No 2 largest Technology exchange in Europe
No 1 in Europe in technology hardware
Most liquid IT and Telecom exchange in Europe

22. Towards the Future with OMX
Continued rapid growth based on
Fast growing economy
Further global integration
Greater potential with OMX
Benefits from the combination with OMX
Increased visibility
Easier access for investors
More rapid development of new products and services
The guiding light for the future
How can we best serve the market?

23. The Message The economy is fast growing and fundamentally sound
A period of temporary adjustments is ahead in wake of exceptional growth
A transformation from a relatively local economy to a globally integrated economy
The market is well functioning with promising prospects