Bond Issue

Bond issuance by the Housing Financing Fund

The Housing Financing Fund issues and sells market securities in order to finance its lending operations as well as to balance and secure its finances and operations. Bond issuance has undergone changes as a result of the changing situation of the Fund and its predecessor, the Housing Authority, and of relevant legal amendments. Market securities were first issued and sold under the Housing Authority in 1989, when the Housing Bond system was first established. Shortly thereafter Housing Authority Bonds were issued with the purpose of re-capitalizing older liabilities by the Housing Authority. The securities were issued in this form until the end of June 2004 when new issuance within these series was terminated and replaced by the issuance and sale of HFF Bonds to finance the Fund´s operations.

When the Housing Bond and Housing Authority Bonds were issued initially, electronic ownership registration of securities had not been introduced in Iceland and therefore the bonds were only issued on paper as bond certificates. Both the Housing Bonds and the Housing Authority Bonds were listed on the public stock market, formerly Verðbréfaþing Íslands hf., currently on OMX  Nordic Exchange. The bonds are still listed on that market. In the year 2001 two Housing Bond series were issued, Series 1, 2001 (IBH26 0316, ISIN code IS0000004927) and Series 2, 2001 (IBH41 0315, ISIN code IS0000004935), in de-materialised (electronic) format, and registered by the Icelandic Securities Depository. In the wake of the issuance of these series it was decided to offer owners of certain previously issued Housing Bond and Housing Authority Bond classes to register them electronically to the Icelandic Securities Depository. The classes in question were Housing Bond Series 2, 1996 (IBH21 0115, ISIN code IS0000001063), Housing Bond Series 1, 1998 (IBH22 1215, ISIN code IS0000001071), Housing Bond Series 2, 1998 (IBH37 1215, ISIN code IS0000001097), Housing Authority Bond Series 1, 1996 (IBN20 0101, ISIN code IS0000001154) and Housing Authority Bond Series 2, 1996 (IBN38 0101, ISIN code IS0000001162). At the end of 2003, these series were then deposited to Clearstream, an international depository and settlement service. As a result, foreign investors were able to purchase the bonds since registration in such international depositories is a prerequisite for foreign investors buying securities in Iceland.

On July 1, 2004, HFF´s securities issuance underwent a transformation. The issuance of two bond classes, i.e. Housing Bonds and Housing Authority Bonds was terminated. From then on the Fund issued one class only, i.e. HFF Bonds. Initially three series of HFF Bonds were issued, HFF150224 (ISIN code XS0195066146), HFF150434 (ISIN code XS0195066575) and HFF150644 (ISIN code XS0195066658). In order to strengthen the market position of these series, owners of de-materialised Housing Bond and Housing Authority Bond classes were allowed to exchange their older bonds for new HFF bonds. Owners responded well and around 80 - 84% of The Housing Authority classes and 85 - 98% of The Housing Bonds classes were replaced by HFF bonds, making the new classes immediately very marketable. November 2004 saw the addition of a new HFF Bond series, HFF150914 (ISIN code XS0205348427). All the HFF Bond series are listed on the public stock market at the Iceland Stock Exchange and deposited at Euroclear, an international depository and settlement service center.

Steps have been taken to make information and the availability of information about HFF Bonds as accessible as possible for international investors. In addition to information on HFF Bonds being accessable at the OMX Nordic Exchange homepage, the Housing Financing Fund has opened a homepage on Bloomberg where information about the bonds are also available. For those with access to Bloomberg, The Housing Financing Funds homepage is HFFI.
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