1. 9 March 2006 Securitization

2. Fjármögnun fasteignaviðskipta  Fyrir ágúst 2004 — Íbúðalánasjóður 70% — Lífeyrissjóðir 25% — Fjármálafyrirtæki 5%  Lausleg áætlun — Íbúðalánasjóður 40% — Lífeyrissjóðir 10% — Fjármálafyrirtæki 50%

3. Kaupthing – Structured Covered Bonds  CDO / MBS = Collateralized Dept Obligation / Mortgages Backed Securities  CDO / MBS eru verðbréf sem fá greiðsluflæði sitt frá potti af undirliggjandi skuldabréfum  Best útskýrt með einföldu dæmi

4. Uppbygging Forgangsbréf Skuldabréf Eignir Undirliggjandi skuldabréf Millibréf Skuldabréf Hlutafé (skírteini)

5. Til hvers ?  Tilgangurinn er misjafn  Virðisauki — Minni gjaldþrotsáhætta — Aukinn seljanleiki  Aukin gírun — Selja CDO bréf með lágan vaxtamun, en halda bréfum með hærri vaxtamun  Skráning — Pakka saman óskráð bréf og fá í staðin skráð bréf Forgangsbréf Skuldabréf Eignir Undirliggjand i skuldabréf Millibréf Skuldabréf Hlutafé (skírteini)

6. Dæmi  Eitt undirliggjandi bréf — Vaxtagreiðslubréf til 5 ára — 100 milljón kr. höfuðstóll — Greiðir 8% vexti einu sinni á ári  Eitt CDO skuldabréf — Vaxtagreiðslubréf til 5 ára — 95 milljón kr. höfuðstóll — Greiðir 7% vexti einu sinni á ári Skuldabréf 95 millj. 7% Eignir 100millj. 8% vextir 12mán. 5 ár. Hlutafé (5 millj.)

7. Dæmi  Vaxtamunur: 1%  Gírun á hlutabréfin: — 8% af 5 milljónum — 1% af 95 milljónum — Samtals: 8% + 1%*95/5 = 27%!!  Gjaldþrotsvörn — Ef 100x1 milljón kr. bréf í eignum, þá mega 5 fara í gjaldþrot áður en CDO 1 byrjar að skerðast. Skuldabréf 95 millj. 7% Eignir 100millj. 8% vextir 12mán. 5 ár. Hlutafé (5 millj.)

8. Kaupthing – Structured Covered Bonds  Primary funding for KB Mortgage Portfolio  Denominated in ISK  Index-linked with the Icelandic CPI  Annuity payment structure (prepayable at the discretion of the Issuer)  Maturity in 2033 and 2048 (28y and 43y)  3 year program – potential size ISK 200 billion (≈ EUR 2.5 Billion)

9. Kaupthing – Structured Covered Bonds Investor Covered Bonds Kaupthing bank Issuer Fund Representative Asset MonitorCash Manager Servicer Custody AgentDealer

10. Kaupthing – Structured Covered Bonds  In order to carry out the project a new entity "KB mortgages" will be created  The Fund (SPV) will be an institutional investor funds (Fagfjárfestasjóður) which sole objective is to buy mortgages  The funds equity will be fully owned by Kaupthing Bank and its subsidiaries (if needed it will be possible to expand the programme outside of Iceland in the future)  The fund finances its buy of mortgages through an inter-company loan and through equity contributions from Kaupthing.

11. Kaupthing – Structured Covered Bonds Loan Agreemen t Dividend payments Mortgages SPV Covered Bonds Services Tax payments SubordinatedGeneral claimSubordinated General claim Issuer Event of Default 1.000m 1.050m 50m (plus interest – expenses)

12. Kaupthing – Structured Covered Bonds  The funds assets will be consolidated into Kaupthings balance sheet  In spite of this the fund will at the same time be bankruptcy remote from the bank and its assets will act as a guarantee for the structured covered bonds issued by the bank  This means that in case of bankruptcy of Kaupthing Bank the fund will take over the obligations of the issued covered bonds against netting out the inter-company loan