okt.22
Municipality Credit Iceland
Translation of condensed Interim Financial Statements for the period 1 January through 30 June 2018
This condensed interim financial statements are translated from the original which is in Icelandic. Should there be discrepancies between the two versions, the Icelandic version will take priority over the translated version. Index Page
Report of the Board of Directors and the Managing Director ...... 2 Report on Review of Condensed Interim Financial Information ...... 3 Condensed Income Statement and Condensed Statement of Comprehensive Income ...... 4 Statement of Condensed Financial Position ...... 5 Statement of Condensed Changes in Equity ...... 6 Statement of Condensed Cash Flows ...... 7 Notes to the Condensed Financial Statements ...... 8-26
Municipality Credit Iceland Plc. Identity number 580407-1100 Borgartun 30, P.O. Box 8100 128 Reykjavik Report of the Board of Directors and the Managing Director
Municipality Credit Iceland Plc. (MCI) is a statutory limited liability company owned by the Icelandic municipalities. MCI is a financial institution, and operates pursuant to Act no. 1450/2006 on the incorporation of Municipality Credit Iceland as a statutory limited liability company; Act No. 161/2002 on Financial undertakings; cf. The Companies Act No. 2/1995 and is supervised by the Icelandic Financial Supervisor. MCI´s main function is to secure favorable funding to the municipalities and related organisations and enterprises. MCI is by law only allowed to fund municipal projects that are of general economic interest. MCI had three employees at period end, the same as in the year before.
Operating results and financial position The profit for the period amounted to ISK 310 million, as compared to ISK 432 million the same period previous year.
Total assets at the end of the period amounted to ISK 96.906 million, as compared to ISK 85.707 million the previous year. Total outstanding loans amounted to ISK 91.190 (at the end of the period as) compared to 73.566 the previous year. Shareholder equity amounted to ISK 17.364 million as compared to ISK 17.458 million at year end 2017 which is a decrease of 0,5% during the period. Dividend of ISK 388 million was paid out to shareholders in the period. The CAD ratio, based on Basel II, was 81% at period end and increased from 97% at year end 2017.
MCI is owned by the 73 municipalities in Iceland, after a merger of Sandgerdi and Gardur. Reykjavik city holds 17.5% share and is the only shareholder with a total share above 10%. The ten largest shareholders hold in total 56% of the company´s shares. A detailed shareholder list can be found in note 26.
MCI´s Governance
MCI´s board of directors aim to maintain good corporate governance and to follow "Management governance directions for public companies" published in 2015 by Iceland Chamber of Commerce, Nasdaq Iceland and SA-Confederation of Icelandic employers. In March 2013 The Center of Corporate Governance provided MCI with a certification as Exemplary company in corporate governance. This certification was last updated in March 2016. Further information can be found in the Annual Report.
Statement The condensed interim financial statements for the period ending 30 June 2018 have been, to the best knowledge of the board of directors, prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and additional Icelandic disclosure requirements in Act No. 3/2006. According to our best knowledge it is our opinion that the condensed interim financial statements give a true and fair view of the financial performance of MCI for the period of 1 January through 30 June 2018, its assets, liabilities and financial position at end of the period. The Board of Directors of Municipality Credit Iceland and the Managing Director hereby confirm the condensed interim financial statements on 30 June 2018 with their signatures.
Reykjavik, 21. August 2018
Magnús B. Jónsson Chairman
Arna Lára Jónsdóttir Kristinn Jónasson
Elliði Vignisson Helga Benediktsdóttir
Óttar Guðjónsson Managing Director
2 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 Report on Review of Condensed Interim Financial Information
To the Board of Directors and Shareholders of Municipality Credit Iceland LLC.
Introduction
We have reviewed the accompanying condensed balance sheet of Municipality Credit Iceland PLC. as of 30 June 2018 and the related condensed statements of income and condensed statements of comprehensive income, changes in equity and cash flows for the six-month period then ended, report of the board of directors and the Managing Director, and a summary of significant accounting policies and other explanatory notes. Management is responsible for the preparation and presentation of this condensed interim financial information in accordance with International Accounting Standard 34, "Interim Financial Reporting". Our responsibility is to express a conclusion on this condensed interim financial information based on our review.
Scope of Review
We conducted our review in accordance with International Standards on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of the condensed interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed interim financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34 "Interim Financial Reporting".
Reykjavik, 21. August 2018
PricewaterhouseCoopers ehf
Arna G. Tryggvadóttir State authorized public accountant
3 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 Condensed Income Statement and Condensed Statement of Comprehensive Income 1 January through 30 June 2018
2018 2017 Notes 1.1.-30.06. 1.1.-30.06. Net interest income Interest income and CPI linked revenue ...... 2.660.110.731 2.222.615.253 Interest expenses and CPI linked expenses ...... (2.233.401.915) (1.705.491.545) Total net interest income 5 426.708.816 517.123.708
Other operating income Net gain on fin. assets designated at FV through P&L ...... 6 3.539.221 14.363.120 Net foreign exchange (loss) gain ...... 7 (17.324.316) (11.136.370) Net impairment losses on financial assets ...... 14 (3.987.127) 0 Total other operating income (17.772.222) 3.226.750
Net operating income 408.936.594 520.350.458
Operating expenses Salaries and related expenses ...... 8 39.016.662 38.448.564 Cost of bond issuance ...... 9 23.835.092 22.199.993 FSA's annual fee and monitoring fee ...... 6.066.000 5.750.000 Other operating expenses ...... 10 29.386.725 23.923.786 Depreciation ...... 16 597.814 597.811 Total operating expenses 98.902.293 90.920.154
Income from bankrupt financial institutions ...... 15 0 2.871.460
Profit for the period and comprehensive income 310.034.301 432.301.764
Earnings per share Basic and diluted earnings per share ...... 11 0,06 0,09
4 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 Condensed Statement of financial position 30 June 2018
Notes 30.6.2018 31.12.2017 Assets Reserved deposits with Central bank ...... 12 125.688.285 0 Cash and term deposits with Central bank ...... 12 5.295.819.147 11.805.975.970 Cash deposits with credit institutions ...... 13 252.256.945 291.007.716 Loans and receivables ...... 14 91.190.240.250 73.566.191.839 Property, plant and equipment ...... 16 42.444.773 43.042.587 Other assets ...... 28.409 1.051.995 Total assets 96.906.477.809 85.707.270.107
Liabilities Debt securities in issue ...... 18 76.384.203.794 65.153.667.529 Other borrowed funds ...... 19 2.352.052.840 2.573.720.421 Short term borrowings ...... 20 444.119.469 435.837.610 Pension obligations ...... 21 74.402.979 76.064.578 Other liabilities ...... 22 287.331.210 9.462.191 Total liabilities 79.542.110.292 68.248.752.329
Equity Share capital ...... 5.000.000.000 5.000.000.000 Statutory reserve ...... 1.250.000.000 1.250.000.000 Other equity ...... 11.114.367.517 11.208.517.778 Total equity 23 17.364.367.517 17.458.517.778
Total liabilities and equity 96.906.477.809 85.707.270.107
5 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 Condensed Statement of Changes in Equity 1 January through 30 June 2018
Retained Share capital Reserves* earnings Total equity
Changes in equity 2018 Equity as at 1 January ...... 5.000.000.000 1.250.000.000 11.208.517.778 17.458.517.778 Expected credit loss ...... (16.184.562) (16.184.562) Dividend paid out to shareholders ...... (388.000.000) (388.000.000) Profit of the period ...... 310.034.301 310.034.301 Equity as at 30 june ...... 5.000.000.000 1.250.000.000 11.114.367.517 17.364.367.517
Changes in equity 2017 Equity as at 1 January ...... 5.000.000.000 1.274.171.094 10.898.155.768 17.172.326.862 Dividend paid out to shareholders ...... (491.000.000) (491.000.000) Profit January to June ...... 432.301.764 432.301.764 Restricted unrealized change in fair value ...... (10.573.328) 10.573.328 0 Equity as at 30 June ...... 5.000.000.000 1.263.597.766 10.850.030.860 17.113.628.626 Profit July to December ...... 344.889.152 344.889.152 Restricted unrealized change in fair value ...... (13.597.766) 13.597.766 0 Equity as at 31 december ...... 5.000.000.000 1.250.000.000 11.208.517.778 17.458.517.778
*Reserves consist of statutory reserve and restricted unrealized change in fair value. In June 2016 Icelandic Act regarding annual statements were changed regarding requirements of restricted equity due to unrealized changes in fair value that restrict the possibility of dividend. MCI has no financial assets, carried at fair value in the balance sheet on June 30, 2018. Therefore, there is no restricted unrealized change. See also note 2 and 25.
6 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 Condensed Statement of Cash Flows 1 January through 30 June 2018
Notes 1.1.-30.6.2018 1.1.-30.6.2017 Cash flows from operating activities Profit for the period and comprehensive income ...... 310.034.301 432.301.764 Items not affecting cash: Net interest income deducted ...... (426.708.816) (517.123.708) CPI linked and currency movements and accrued interests ...... 89.255.950 128.352.059 Bond discount and cost of borrowing ...... 14,18 166.859.417 41.330.104 Impairment loss on financial assets ...... 14 3.987.127 0 Pension obligations, (increase) ...... 21 (1.661.599) (1.151.990) Depreciation ...... 16 597.814 597.811 (167.670.107) (347.995.724) Changes in operating assets Loans provided to customers ...... (20.650.138.088) (1.907.867.564) Loans collected from customers ...... 3.931.109.927 3.917.661.120 Fin.assets design.at FV through P&L, decrease/(increase) ...... 0 641.346.041 Short term loans prov. to customers, decrease ...... 0 610.000.000 Short term loans borrowings, increase / (decrease) ...... 8.370.876 164.954.010 Other assets, (increase) / decrease ...... 1.023.586 (1.229.146) Other liabilities,(decrease) / increase ...... 277.869.019 (112.470.616) Interest received ...... 1.550.751.498 1.404.096.542 Interest paid ...... (1.382.273.803) (1.157.305.196) (16.263.286.985) 3.559.185.191
Net cash from operating activity (16.120.922.791) 3.643.491.231
Cash flows from financing activities Borrowings ...... 13.309.617.982 2.014.420.084 Borrowings repaid ...... (3.227.151.828) (3.561.690.255) Dividend to shareholders ...... (388.000.000) (491.000.000) 9.694.466.154 (2.038.270.171)
Net increase (decrease) in cash (6.426.456.637) 1.605.221.060
Currency effects on cash and cash equivalents ...... 3.237.328 57.717 Cash and cash equivalents at the beginning of year ...... 12.096.983.686 5.876.008.368 Cash and cash equivalents at end of period ...... 5.673.764.377 7.481.287.145
Cash and cash equivalents Reserved deposits with Central bank ...... 125.688.285 0 Cash and term deposits with Central bank ...... 5.295.819.147 7.220.208.335 Cash deposits at credit institutions ...... 252.256.945 261.078.810 5.673.764.377 7.481.287.145
7 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 Condensed Notes
1. General information
Municipality Credit Iceland Plc. (MCI) is a statutory limited liability company owned by the Icelandic municipalities. MCI is a financial institution, and operates pursuant to Act No. 161/2002 on Financial undertakings, the Companies Act No. 2/1995 and is supervised by the Icelandic Financial Supervisor. MCI´s main function is to secure favorable funding or guarantees to the municipalities and related organisations and enterprises. MCI is by law only allowed to fund municipal projects that are of general economic interest.
MCI is incorporated and domiciled in Iceland. The address of its registered office is: Borgartún 30, Reykjavík. MCI has issued bonds which are listed at the OMX Nordic Exchange and MCI has market maker agreements in place for a part of them. The Condensed Interim finanical statements were approved for issue by the Board of Directors of Municipality Credit Iceland on 21. August 2018.
2. Basis of preperation
The condensed interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). The condensed interim financial statements are prepared on the historical cost basis, except for short-term securities which are measured at fair value.
3. Summary of significant accounting policies
The principal accounting policies applied in the preparation of this condensed interim financial statements have been consistently applied to all years, with the exepction of IFRS 9 replacement of IAS 39.
IFRS 9 became effective on January 1st 2018 and replaced IAS 39. IFRS 9 includes new model for classifying and measuring financial assets, new method of measuring and recognizing expected credit losses and new criteria for hedging. Implementation of IFRS 9 also requires additional disclosures about the implementation process and information and transformations from IAS 39. Below is a summary of the key items in MCI implementation process of IFRS 9.
Financial impact of implementation of IFRS 9 on January 1st 2018 is included in opening balance of retained earnings. Change in expected credit loss over the period will go throught profit and loss. See futher note 14 and 23.
Financial assets can be accounted based on three categories: 1) at amortized cost 2) at fair value through other comprehensive income and 3) at fair value recognized through profit and loss. Measurements of financial assets after initial recognition is based on the classification in these three categories. Reclassification of financial assets after initial recognition from one classification and measurement category to another are required if an entity changes its business model for managing financial assets or if there are significant changes in MCI operation.
Financial assets are measured at amortized cost if it is the entity´s objective to hold the financial assets to collect contractual cash flow that represent solely payments of principal and interest.
Financial assets are measured at fair value through other comprehensive income if it is the entity´s objective to hold the financial assets to collect contractual cash flow that represent payments of principal and interest. All other financial assets are measured at fair value through profit and loss. Reclassification and measurements after initial recognition are not allowed in this category. Implementation process of IFRS 9 will not affect MCI´s current classification and measurement of financial assets. Loans to municipality and companies owned by them are all classified as financial assets at amortized cost, hence the MCI´s objective is to hold the financial assets until maturity and collect contractual cash flow payments.
Expected credit loss IFRS 9 established a new model for expected credit losses which is forward looking and based on possible default into the future. IFRS 9 model calculates the loss allowance based on 12 month expected credit loss or lifetime expected credit loss where the general approach is whether the credit risk has increased significantly since initial recognition. IAS 39 model was based on current loss events at reporting date.
8 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 3. Summary of significant accounting policies, cont.
Calculations are based on probability on default, probability on loss given default and an exposure at default - measure of the outstanding balance when default occurs.
Impairment model for expected credit loss is divided into 3 stages. Calculations of credit loss is based on assessment of increase in credit risk at reporting date. The impairment is based on 12 month expected credit loss or lifetime expected credit loss.
Stage 1 - Allowance for expected credit loss is measured based on possible defaults only for next 12 months unless a significantly increase in credit risk has occurred from initial recognition. Interest revenue is calculated of weighted book value. All municipalities are initially in stage 1 unless any of the conditions in stage 2 and stage 3 are present.
Stage 2 - Allowance for expected credit loss is measured based on possible defaults for the entire remaining life of the asset due to a significant increase in credit risk. Interest revenue is calculated on weighted book value as in stage 1. Stage 2 includes municipalities that are under inspection of Municipalities Financial Monitoring Committee, are undergoing negotiation with creditors or are undergoing financial restructuring.
Stage 3 - Objective evidence of impairment has been provided at reporting date. The asset has defaulted. For these assets, lifetime ECLs are recognized and interest revenue is calculated at net carrying amount. Stage 3 includes municipalities that are under control of a financial board appointed by Ministry of Transport and Local Government and/or have defaulted on their repayments. All loans to municipality and companies owned by them are all classified at stage 1 and calculations on expected credit loss is based on next 12 months. There has not been any increase in credit risk since initial recognition.
IFRS 15 - Revenue from Contracts with Customers IFRS 15 became effective 1 of January 2018. IFRS 15 has no significant influence of MCI´s revenue recognizes. Most of MCI´s revenue is Interest revenue from Financial assets that do not fall under principle of IFRS 15.
4. Financial risk management
Through MCI's activities it is exposed to a variety of financial risks and those activities involve the analysis, evaluation, acceptance and management to some degree of risk or combination of risks. Effective risk management includes analysis of main risk factors, risk measurement, processes to limit risk and continous supervision. MCI´s aim is therefore to identify MCI´s main risk factors, implement processes to monitor them, assess them regularly, maintain supervision and rules in order to make sure that the company will surpass any potential macroeconomic scenarios. The Board of Directors determines MCI's risk management policy and is responsible towards the owners. The Managing Director is responsible to the Board of Directors and proposes new policies and if appropriate, risk limits and is responsible for the monitoring of the major risk factors. MCI has been granted an exemption from operating an internal auditing department in accordance with guidelines from the Financial Services Authority No. 2/2011. The guidelines spell out how an internal audit shall be conducted and that the main role of an internal audit is to oversee the operations to ensure that rules are being followed in accordance with the boards decisions. MCI´s board contracts the annual internal audit of MCI in accordance with the Financial Services Authority´s rules. The internal audit has been conducted by Ernst&Young hf.
MCI is an intermediary for the Icelandic municipalities and their organisations and enterprises to the domestic and foreign financial markets. The main objective is to secure funding on favourable terms. Credit risk is the greatest single risk faced by the company. Liquidity risk, counterparty risk and operational risk are also important to MCI. Market risk is kept at minimum even though it is present in terms of interests and currency risk.
9 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 4.1 Credit risk
Exposure to credit risk arises from MCI´s loans to Icelandic municipalities and the State Treasury. MCI solely grants loans to municipalities, their organisations and enterprises. The condition for the provision of credit to municipality-owned enterprises and organisations is that such enterprises and organisations must be wholly owned by municipalities or jointly owned by municipalities and the State Treasury, with both acting as guarantors to the Company for respective loans.
There are now 73 municipalities in Iceland, after a merger of Sandgerdi and Gardur and MCI had loans outstanding to 62 of them. The Local Government Act gives a solid legal framework for the municipalities to operate under. The Icelandic municipalities can technically not become bankrupt but it is stated in the Local Government Act that the State will interefere if financial difficulties will arise within a municipality according to chapter VII in the previous mentiond act. The municipalities have been reliable borrowers historically as MCI has not written off any loans since MCI commenced operations in 1967.
According to the Local Government Act No. 138/2011, municipalities may pledge their revenues as security for loans granted by MCI and for guarantees it provides, but for no other loans or guarantees. When granting loans it is the policy of MCI that such security should be provided for by the municipality in question. At end of the period 100% of MCI´s loans to municipalities and companies owned by them had such a pledge.
The total credist risk that MCI takes on when lending money is added to the total book value of loans outstanding in MCI´s balance sheet. When loan applications are reviewed, the borrower has to fulfill all of the legal requirements for receiving a loan as well as the project being of general economic interest. A thorough valuation of the financial position and development of the borrowers and their guarantors is performed. All loan applications are introduced to the board of directors, either for their approval or as an introduction.
At end of the period MCI has two borrowers which was defined as large exposures. Large exposures are defined as risk- weighted exposures that exceed 10% of MCI´s equity according to rule nr. 625/2013 by the FSA. Ten of the largest borrowers are liable for 56% of the total loans. According to law on financial institutions nr.161/2002, no single exposure may exceed 25% of MCI´s equity.
4.1.1 Contractual risk
MCI is owned by the Icelandic municipalities and only lends to municipalities and companies owned by municipalities or municipalities and the State. According to the Local Government Act No. 138/2011, municipalities may pledge their revenues as security for loans and guarantess borrowed from MCI and MCI has the policy to take such a pledge for granted loans. Therefore MCI´s contractual commitments are guaranteed by municipalities and the risk is therefore limited to bankruptcy of a municpality or if they will seek moratorium or composition. Counterparty risk excluding the credit risk is limited to the State Treasury and entities with guarantees from the State Treasury as well as domestic financial institutions which have a license from the Financial Services Authority. Risk related to a foreign financial institution shall be approved by the board of directors.
4.1.2 Counterparty risk
The managing director is responsible for MCI´s counterparty risk monitoring. Exposure to counterparty risk is regularly reviewed and managed through analysis and evaluation of loans and defaults. MCI did not apply its pledge in the period but it has been done once, in 2010.
The following table shows MCI´s maximum Counterparty Risk. 30.6.2018 31.12.2017 Counterparty risk position due to balance sheet assets in ISK million: Cash and balances with Central bank ...... 5.422 11.806 Amounts due from credit institutions ...... 252 291 Loans to municipalities and their companies ...... 91.190 73.566 Other assets ...... 0 1 Total counterparty risk 96.864 85.664
10 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 4.2 Liquidity and Funding Risk
Liquidity risk is the risk that MCI will encounter difficulty in meeting contractual payment obligations associated with its financial liabilities. MCI formulates liquidity management policies regarding its liquidity position and funding, to maintain the flexibility needed. The principal rule is to finish the funding process of a loan before granting a loan commitment. Part of the equity resources is managed short term to ensure a constant access to liquid capital and to maintain flexibility. MCI monitors maturities on the financial instruments in order to secure that it can pay all liabilities on due dates. MCI always has to have enough liquidity to be able to meet predictable and unpredictable obligations. The following tables present the future cash flow in line with contractual repayments.
Balance 30.06.2018 in ISK million 0-1 1 to 3 3 to 12 1 to 5 Over 5 months months months years years Total Financial assets Cash and deposits ...... 5.548 - - - - 5.548 Loans ...... 194 2.948 7.535 41.469 62.404 114.550 Total financial assets 5.742 2.948 7.535 41.469 62.404 120.098
Financial liabilities Bonds and debt instruments ...... 445 2.301 6.314 34.850 57.161 101.071 Total financial liabilities 445 2.301 6.314 34.850 57.161 101.071
Net, assets - liabilities 5.297 647 1.221 6.619 5.243 19.027
Balance 31.12.2017 in ISK million 0-1 1 to 3 3 to 12 1 to 5 Over 5 months months months years years Total Financial assets Cash and deposits ...... 12.097 - - - - 12.097 Loans ...... 134 2.917 6.515 36.236 45.006 90.808 Total financial assets 12.231 2.917 6.515 36.236 45.006 102.905
Financial liabilities Bonds and debt instruments ...... 520 2.826 5.136 31.727 45.653 85.862 Total financial liabilities 520 2.826 5.136 31.727 45.653 85.862
Net, assets - liabilities 11.711 91 1.379 4.509 (647) 17.043
11 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 4.3 Interest rate and CPI risk
MCI´s aim with regards to interest rate risk to balance the repayment profile of both assets and liabilities as well as to balance the fixed and variable interest rates. In general, loans are provided on the same terms as their financing with regards to life time of the loan, repayment profile, interest rates, interest periods as well as amending interest premiums. Part of the loans are funded with MCI´s equity with variable interest rates which the company can amend unilaterally.
Financial assets and liabilities, classified by interest repricing time, in ISK million as at 30.06.2018
0-1 years 1-5 years 5-10 years Over 10 Y Total Financial assets ISK - CPI linked ...... 7.905 28.958 20.050 27.619 84.532 ISK - non indexed ...... 9.411 - - - 9.411 EUR ...... 2.660 - - - 2.660 USD ...... 41 - - - 41 GBP ...... 9 - - - 9 JPY ...... 38 - - - 38 CHF ...... 67 - - - 67 Total financial assets 20.131 28.958 20.050 27.619 96.758
Financial liabilities ISK - CPI linked ...... 6.501 25.035 17.301 27.547 76.384 ISK - non indexed ...... 444 - - - 444 EUR ...... 2.352 - - - 2.352 Total financial liabilities 9.297 25.035 17.301 27.547 79.180
Net assets - liabilities 10.834 3.923 2.749 72 17.578
Financial assets and liabilities, classified by interest repricing time, in ISK million as at 31.12.2017
0-1 years 1-5 years 5-10 years Over 10 Y Total Financial assets ISK - CPI linked ...... 7.309 25.730 17.608 18.038 68.686 ISK - non indexed ...... 13.925 - - - 13.925 EUR ...... 2.885 - - - 2.885 USD ...... 43 - - - 43 JPY ...... 9 - - - 9 CHF ...... 46 - - - 46 GBP ...... 70 - - - 70 Total financial assets 24.287 25.730 17.608 18.038 85.664
Financial liabilities ISK - CPI linked ...... 6.066 22.863 15.710 20.514 65.153 ISK - non indexed ...... 436 - - - 436 EUR ...... 2.574 - - - 2.574 Total financial liabilities 9.076 22.863 15.710 20.514 68.163
Net assets - liabilities 15.211 2.867 1.898 (2.476) 17.501
12 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 4.3 Interest rate and CPI risk, cont.
Interest sensitivity Interest sensitivity analysis with the assumption of average lifetime shows that 1 percentage interest increase would increase net interest revenue by ISK 17 million or 0,1% of MCI´s equity as compared to ISK 529 million and 3% of MCI´s equity as of year end 2017. The table below shows the effects of interest rate increase split down to asset and liability groups according to repricing time in ISK million.
Parallel upwards shift on interest curve 30.6.2018 31.12.2017 (bps) Profit (loss) ISK - CPI linked ...... 100 21 531 ISK - non indexed ...... 100 (3) (1) Foreign currencies ...... 100 (1) (1) Total 17 529
Inflation (CPI) risk At period end, MCI´s CPI linked assets exceeded CPI linked liabilities by ISK 8.148 millions as compared to ISK 3.532 million in year end 2017. It has the effect that if the consumer price index increases by 1% then MCI's profit would increase by ISK 81 million and 1% decrease would reduce the profit by ISK 81 million.
CPI link effects 30.6.2018 31.12.2017
CPI linked assets ...... 84.532 68.685 CPI linked liabilities ...... 76.384 65.153 Net CPI linked position 8.148 3.532
4.4 Currency risk
MCI´s policy is to be in compliance with Central Banks rules and to eliminate currency risk by minimizing the mismatch between financial assets and financial liabilities denominated in foreign currencies.
Currency sensitiviy analysis A sensitivity analsysis on MCI´s currency position reveals that 10% weakening of the Icelandic krona will increase MCI's profit and equity by ISK 47 million which represents 0,3% of equity. The table below illustrates the sensitivy analysis whereby MCI´s currency position is split down to each currency and shows the effect on profit and equity if the Icelandic krona would weaken by 10% with respect to foreign currencies.
Currency sensitivity analysis in ISK million Currencies strengthening/ weakening 30.6.2018 31.12.2017 towards the ISK Profit (loss) EUR ...... (10%) 31 31 USD ...... (10%) 4 4 JPY ...... (10%) 4 5 CHF ...... (10%) 7 7 GBP ...... (10%) 1 1 Total 47 48
The following table lists the exchange rates employed in calculations applicable to this annual statement. 30.6.2018 31.12.2017 Change % EUR/ISK ...... 124,15 125,40 (1,0%) USD/ISK ...... 106,65 104,67 1,9% JPY/ISK ...... 0,9651 0,9305 3,7% CHF/ISK ...... 107,40 107,37 0,0% GBP/ISK ...... 140,12 141,32 (0,8%)
13 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 4.4 Currency risk, cont.
Financial assets and liabilities in ISK million as at 30.06.2018 Other EUR USD JPY currencies Total Financial assets Cash and deposits ...... 246 1 - - 247 Loans ...... 2.414 40 38 76 2.568 Total financial assets 2.660 41 38 76 2.815
Financial liabilities Borrowed funds ...... 2.352 - - - 2.352 Total financial liabilities 2.352 0 0 0 2.352
Net, assets-liabilities 308 41 38 76 463
Financial assets and liabilities in ISK million as at 31.12.2017 Other EUR USD JPY currencies Total Financial assets Cash and deposits ...... 249 - - - 250 Loans ...... 2.637 42 46 79 2.804 Total financial assets 2.885 43 46 79 3.055
Financial liabilities Borrowed funds ...... 2.574 - - - 2.574 Total financial liabilities 2.574 0 0 0 2.574
Net, assets-liabilities 311 43 46 79 479
4.5 Operational risk
Regarding operational risk, MCI aims to have written and clear policies for all major business processes and standardise its loan agreements. It has also been a policy to outsource administrative services in order to minimise risk by distributing operations. As the operation of MCI can be characterised as relatively simple with the clients both being homogeneous and limited, the operational risk is limited.
4.5.1 Employee risk
MCI has three employees, Managing director, Credit manager and Treasury manager. In addition to that the company has outsourced various administrative services to The Association of Local Authorities in Iceland which has worked well and will be continued.
14 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 4.5.2 Legal risk
MCI operates pursuant to Act no. 150/2006 on the incorporation of Municipality Credit Iceland as a statutory limited liability company, Act no.161/2002 on financial undertakings and the companies Act no. 2/1995. Changes in law, court rulings or government decisions is outside of MCI´s control. However, changes to Act no. 150/2006 is considered a part of MCI´s legal risk as it would have adverse effects if MCI´s right to take pledge in the municipalities revenue would be revoked. It is however impossible to quantify this risk.
There are no litigations outstanding for MCI.
4.6 Equity management
The aim with equity management is that MCI has always enough equity to counterbalance against MCI´s underlying risk factors.
MCI´s equity consists of share capital, statutory reserve and retained earnings (Tier 1). The minimum capital requirement according to paragraph 84 in Act no. 161/2002 is 8% of risk weighted assets. The requirements are based on the European legal framework for capital requirements (CRD) implementing the Basel framework. The regulatory minimum capital requirement under Pillar I of the Basel framework is 8% of risk-weighted assets (RWA) for credit risk, market risk and operational risk. MCI applies the standardised approach when it comes to calculating credit risk and market risk, but basic indicator approach when it comes to operational risk.
FSA conducted a SREP assessment on MCI´s ICAAP report in 2017. The outcome of the assessment was introduced to MCI and the analysis confirms that MCI´s equity is well above the standard set by MCI as well as the standards set by FSA.
In July 2015 changes were made on act no. 161/2002 implementing items regarding Basel III capital requirements. This changes will add to the minimum capital requirement for MCI, in 2017. From 1. November 2017 MCI is obligated to additional bind 2,5% of equity due to capital conservation buffer and 1,25% due to countercyclical capital buffer. Total minimum capital requirements is 11,75%
15 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 5. Net interest income 1.1.-30.6.2018 1.1.-30.6.2017
Interest income and CPI linked revenue Loans ...... 2.505.543.839 2.052.039.497 Cash and short term funds ...... 154.566.892 170.575.756 2.660.110.731 2.222.615.253
Interest expense and CPI linked expenses Debt securities in issue and other borrowed funds ...... 2.233.401.915 1.705.491.545 Net interest income 426.708.816 517.123.708
6. Net gain on financial assets designated at fair value through profit or loss 1.1.-30.6.2018 1.1.-30.6.2017
Covered bonds and CP ...... 0 0 Money market funds ...... 3.539.221 14.363.120 3.539.221 14.363.120
7. Net foreign exchange gains 1.1.-30.6.2018 1.1.-30.6.2017
Loans ...... (40.708.038) (45.562.599) Borrowings ...... 26.621.050 34.483.946 Amounts due from credit institutions ...... (3.237.328) (57.717) (17.324.316) (11.136.370)
8. Salaries and salary related expenses
At the end of year, there were three employees working for MCI. MCI has entered into a service agreement with the Icelandic Association of Local Authorities regarding the purchase of administrative services and such expense is recorded under the other operational expenses item. All board members receive 8% pension fund remuneration and the Managing director 12%. Salary structure of MCI is the same as in the Icelandic Association of Local Authorities. Salary structure of MCI is the same as of the Icelandic Association of Local Authorities.
1.1.-30.6.2018 1.1.-30.6.2017
Salaries ...... 32.169.235 31.935.629 Paid pension contribution ...... 3.711.399 3.408.649 Related expenses ...... 3.136.028 3.104.286 39.016.662 38.448.564
Óttar Guðjónsson, Managing Director ...... 12.456.732 12.454.732
Board of directors: Magnús B. Jónsson, chairman of the board ...... 1.004.643 984.942 Kristinn Jónasson, vice chairman of the board ...... 669.765 656.634 Helga Benediktsdóttir, chairman of accounting committee ...... 870.699 853.626 Elliði Vignisson ...... 669.765 656.634 Arna Lára Jónsdóttir ...... 669.765 437.756 Kristín María Birgisdóttir, alternative ...... 111.628 218.878 Ólafur Þ. Ólafsson, alternative ...... 111.627 109.439 4.107.892 3.917.909
16 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 9. Bond issuance costs 1.1.-30.6.2018 1.1.-30.6.2017
Market makers ...... 17.750.000 17.750.000 Bond issuance fees ...... 1.791.000 545.130 Annual fees related to bond issuance ...... 4.294.092 3.904.863 23.835.092 22.199.993
10. Other operating expenses 1.1.-30.6.2018 1.1.-30.6.2017
Contract with the Icelandic Association of Local Authorities ...... 10.475.766 9.826.464 Professional fees (legal and other) ...... 2.230.816 1.347.300 Housing expenses ...... 3.031.101 2.658.859 Computer and software ...... 6.900.556 3.089.981 Auditor´s fees ...... 3.256.316 3.003.536 Travelling expenses ...... 796.659 1.707.873 Office equipment ...... 651.121 372.685 Other operating expenses ...... 2.044.390 1.917.088 29.386.725 23.923.786
11. Earnings per share 1.1.-30.6.2018 1.1.-30.6.2017
Profit for the period ...... 310.034.301 432.301.764 Weighted average number of ordinary shares in issue ...... 5.000.000.000 5.000.000.000 Earnings per share ...... 0,06 0,09
12. Cash and balances with the Central bank 30.06.2018 31.12.2017
Deposits with the Central bank, non mandatory ...... 334.423.329 1.790.182.775 Term deposits with the Central bank ...... 4.961.395.818 10.015.793.195 5.295.819.147 11.805.975.970
Cash and balances with the Central bank as well as amounts due from credit institutions constitute cash and cash equivalents at period end as stated in the statement of Cash Flows, amounted to ISK 5.673 million as compared to ISK 12.097 at year end 2017. Changes in credit instituions´ minimum reserve requirements at the Central bank. The reserve requirement will be divided into two parts. Credit instituions are obligated to hold the fixed 1% reserve requirement in a separete reserve account with the Central Bank at all times, bearing no interest.
13. Amounts due from credit institutions 30.06.2018 31.12.2017
Bank accounts ...... 252.256.945 291.007.716
14. Loans and receivables 30.06.2018 31.12.2017
CPI linked loans ...... 84.531.807.148 68.685.173.583 Foreign currency loans ...... 2.568.672.895 2.804.181.227 Non - CPI linked loans ...... 4.109.931.896 2.076.837.029 91.210.411.939 73.566.191.839 Expected credit loss accourding to IFRS 9 ...... (20.171.689) 0 91.190.240.250 73.566.191.839
Remaining balance of discounts and loan fees at period end is ISK 543,8 million. In 2017-year end, remaining balance were ISK 429,1 million. IFRS 9 became effective on January 1. Expected credit loss on loans to municipalities amount to ISK 16.184.562 at beginning of the year. The loss allowance is calculated based on 12 month expected credit loss in stage 1. Changes in the period based on outstanding loans on 30 June 2018 amounts to ISK 3.987.127. Total expected credit loss accourding to IFRS 9, at end of the period is ISK 20.171.689.
17 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 14. Loans and receivables, cont.
Next year's payments 30.06.2018 Under 12 months Over 12 months Total CPI linked loans ...... 7.912.312.856 76.619.494.292 84.531.807.148 Foreign currency loans ...... 211.011.021 2.357.661.874 2.568.672.895 Non - CPI linked loans ...... 366.094.460 3.743.837.436 4.109.931.896 8.489.418.337 82.720.993.602 91.210.411.939
31.12.2017 Under 12 months Over 12 months Total CPI linked loans ...... 7.308.554.730 61.376.618.853 68.685.173.583 Foreign currency loans ...... 305.699.669 2.498.481.558 2.804.181.227 Non - CPI linked loans ...... 167.267.955 1.909.569.074 2.076.837.029 7.781.522.354 65.784.669.485 73.566.191.839
15. Financial assets designated at fair value MCI has two claims outstanding against bankrupt financial institutions as described below
MCI´s gross claim on Glitnir bank amounted to ISK 6.723 million. The calculation of the claim was in dispute between MCI and Glitnir Bank. The Supreme court ruled that the claim against Glitnir bank was ISK 889 million. MCI received ISK 7,8 million in 2017. MCI has not recieved any payments from Glintir bank in the period.
16. Property, plant and equipment 30.06.2018 31.12.2017
Net book amount at the beginning of the year ...... 43.042.587 44.238.212 Depreciation during the period ...... (597.814) (1.195.625) Net book amount at period end ...... 42.444.773 43.042.587
Net book amount is specified as: Historical cost ...... 59.781.372 59.781.372 Accumulated depreciation ...... (17.336.599) (16.738.785) Net book amount ...... 42.444.773 43.042.587
Real estate evaluation at year end amounted to ISK 95,9 million. Insured value for real estate was ISK 90,9 million for the year.
18 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 17. Classification and measurement of financial assets and liabilities
According to IAS39 "Financial Instruments: Recognition and Measurement", financial assets and financial liabilities must be classified into specific categories which then determines the subsequent measurement of the instrument.
Each category´s basis of subsequent measurement is specified below: - Loans and receivables, at amortized cost; - Financial assets designated as at fair value through profit or loss, measured at fair value; - Other liabilities, at amortized cost.
The following table shows the classification of financial assets and financial liabilities :
30 June 2018 Loans and Designated as Liabilities at Total carrying Assets receivables at fair value amortized cost amount Fair value Cash and balances with Central Bank ...... 5.295.819.147 - - 5.295.819.147 5.295.819.147 Loans to credit institutions ...... 252.256.945 - - 252.256.945 252.256.945 Loans and receivables ...... 91.190.240.250 - - 91.190.240.250 94.667.996.302 Total assets 96.738.316.342 0 0 96.738.316.342 100.216.072.394
Liabilities Bonds and debt instruments ...... - - 79.180.376.103 79.180.376.103 82.831.457.054 Total liabilities 0 0 79.180.376.103 79.180.376.103 82.831.457.054
31 December 2017 Loans and Designated as Liabilities at Total carrying Assets receivables at fair value amortized cost amount Fair value Cash and balances with Central Bank ...... 11.805.975.970 - - 11.805.975.970 11.805.975.970 Loans to credit institutions ...... 291.007.716 - - 291.007.716 291.007.716 Loans and receivables ...... 73.566.191.839 - - 73.566.191.839 72.165.856.152 Total assets 85.663.175.525 0 0 85.663.175.525 84.262.839.838
Liabilities Bonds and debt instruments ...... - - 68.163.225.560 68.163.225.560 72.499.334.940 Total liabilities 0 0 68.163.225.560 68.163.225.560 72.499.334.940
The fair value of MCI´s bonds is based on their trading price at period end.
The loan portfolios fair value is measured by calculating the present value using the funds bonds in addition to a 15bp spread. The spread is a combination of 10bp to cover direct bond issuance and market making costs as well as 5bp towards MCI operational costs.
19 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 17. Classification and measurement of financial assets and liabilities, cont.
Municipality Credit Iceland uses a valuation hierarchy for disclosure of inputs to valuation used to measure fair value. Fair value measurements of financial instruments are made on the basis of the following hierarchy:
Level 1: Quoted prices are used for assets and liabilities traded in active markets.
Level 2: Valuation technique based on observable inputs. The most recent transaction prices in combination with generally accepted valuation methods are used to measure fair value of shares. However, the yield of actively traded bonds with the same duration is used as a benchmark for the valuation of bonds.
Level 3: Valuation technique based on significant non-observable inputs. It covers all instruments for which the valuation technique includes inputs based on unobservable data and the unobservable inputs have significant effect on the instrument’s valuation.
MCI has no financial assets and liabilities, carried at fair value in the balance sheet on June 30, 2018.
The following table shows the Level in the heirarchy into which the fair value of financial assets and liabilities, not carried at fair value in the balance sheet:
30 June 2018 Level 1 Level 2 Level 3 Total Assets Cash and term deposits with Central Bank ...... - 5.295.819.147 - 5.295.819.147 Loans to credit institutions ...... - 252.256.945 - 252.256.945 Loans and receivables ...... - 91.190.240.250 - 91.190.240.250 Total 0 96.738.316.342 0 96.738.316.342
Liabilities Money market securities ...... 79.180.376.103 - - 79.180.376.103 Total 79.180.376.103 0 0 79.180.376.103
31 December 2017 Level 1 Level 2 Level 3 Total Assets Cash and term deposits with Central Bank ...... - 11.805.975.970 - 11.805.975.970 Loans to credit institutions ...... - 291.007.716 - 291.007.716 Loans and receivables ...... - 73.566.191.839 - 73.566.191.839 Total 0 85.663.175.525 0 85.663.175.525
Liabilities Money market securities ...... 68.163.225.560 - - 68.163.225.560 Total 68.163.225.560 0 0 68.163.225.560
20 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 18. Debt securities in issue Weighted average interest rate* 30.6.2018 31.12.2017 30.6.2018 31.12.2017
LSS '03, notes due 2018 ...... 5,17% 5,17% 0 66.009.991 LSS '04, notes due 2019 ...... 4,08% 4,08% 456.036.270 441.095.353 LSS '05-2, notes due 2022 ...... 4,30% 4,30% 2.632.963.640 3.306.646.524 LSS '08 1, notes due 2034 ...... 5,29% 5,29% 2.202.062.682 2.241.994.077 LSS 150224, notes due 2024 ...... 4,64% 4,64% 20.887.877.414 22.101.383.710 LSS 150434, notes due 2034 ...... 3,09% 3,27% 36.160.098.106 29.151.973.875 LSS 151155, notes due 2055 ...... 2,69% 2,80% 14.045.165.682 7.844.563.999 Debt securities in issue total 76.384.203.794 65.153.667.529
* Weighted average interest rate is calculated in accordance with the effective interest rate method. Remaining balance of discounts and cost of borrowing at period end is ISK 990,8 million. In 2017 year end remaining balance were ISK 251 millions.
Next year's payments 30.6.2018 Under 12 months Over 12 months Total Debt securities in issue ...... 6.500.978.632 69.883.225.162 76.384.203.794
31.12.2017 Under 12 months Over 12 months Total Debt securities in issue ...... 6.065.663.883 59.088.003.646 65.153.667.529
19. Other long term borrowings Interest rate 30.6.2018 31.12.2017 30.6.2018 31.12.2017
EUR loans (EURIBOR + margin) ...... 0,26% 0,26% 2.352.052.840 2.573.720.421 Other long term borrowings total 2.352.052.840 2.573.720.421
Next year's payments 30.6.2018 Under 12 months Over 12 months Total EUR loans (EURIBOR + margin) ...... 196.109.125 2.155.943.715 2.352.052.840
31.12.2017 Under 12 months Over 12 months Total EUR loans (EURIBOR + margin) ...... 297.080.025 2.276.640.396 2.573.720.421
Interest rate 20. Short term borrowings 30.6.2018 31.12.2017 30.6.2018 31.12.2017
ISK loans, non-CPI linked ...... 3,75% 3,75% 444.119.469 435.837.610
21. Post-employment obligations
MCI and other jointly administrated institutions are subject to pension obligations related to their employees, that have and do participate in the B-department of the State Employees' Pension Fund. The calculations of an actuary has been calculated for the pension obligations and recorded as liability in the balance sheet based on a 2,0% interest rate. New life expectancy rate according to 2010-2014 values. Post-employment obligation is not regarding present employees.
21 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 21. Post-employment obligations, cont. Post-employment obligations are specified as: 30.6.2018 31.12.2017
Pension liability at beginning of year ...... 76.064.578 74.589.521 Paid during the period ...... (1.661.599) (2.092.726) Increase during the period ...... 0 3.567.783 Pension obligation total 74.402.979 76.064.578
22. Other liabilities 30.6.2018 31.12.2017
Creditors ...... 206.350.657 6.142.394 Unpaid salary related expenses ...... 3.380.553 3.319.767 Unpaid capital income tax ...... 77.600.000 0 Other liabilities total 287.331.210 9.462.161
23. Equity
The minimum capital requirement according to paragraph 84 in Act no. 161/2002 is 8% of risk weighted assets. The requirements are based on the European legal framework for capital requirements (CRD) implementing the Basel framework. The regulatory minimum capital requirement under Pillar I of the Basel framework is 8% of risk-weighted assets (RWA) for credit risk, market risk and operational risk. MCI applies the standardised approach when it comes to calculating credit risk and market risk, but basic indicator approach when it comes to operational risk. Requirements based on Basel III were added in to act no. 161/2002, in July 2015. At year end MCI is obligated to additional bind 2,5% of equity due to capital conservation buffer and 1,25% due to countercyclical capital buffer. Total minimum capital requirements is 11,75%
At the end of the period the total share capital was ISK 5.000 million. One vote is entitled to each nominal ISK.
The capital adequacy ratio is determined as follows:
30.6.2018 31.12.2017 Equity Share Capital ...... 5.000.000.000 5.000.000.000 Statutory reserve ...... 1.250.000.000 1.250.000.000 Other equity ...... 11.114.367.517 11.208.517.778 Equity total 17.364.367.517 17.458.517.778
Risk base Credit risk ...... 19.179.622.363 15.730.519.504 Market risk ...... 463.080.786 479.376.516 Operational risk ...... 1.797.857.143 1.797.857.143 Risk base total 21.440.560.291 18.007.753.163
Capital adequacy ratio Capital adequacy ratio ...... 81% 97%
MCI´s CAD ratio is 87% at year end and was 97% previous year. In conformity with Pillar II of the Basel framework, MCI annually assesses its own capital needs through the Internal Capital Adequacy Assessment Process (ICAAP). The ICAAP results are subsequently reviewed by the Financial Supervisory Authority (FSA) in the Supervisory Review and Evaluation Process (SREP). The company´s equity assessment, with the ICAAP analysis, is a key element in MCI's equity and risk management.
FSA conducted a SREP assessment on MCI´s ICAAP report in 2017. The outcome of the assessment was introduced to MCI and the analysis confirms that MCI´s equity is well above the standard set by MCI as well as the standards set by FSA.
IFRS 9 became effective on January 1st 2018 and replaced IAS 39. IFRS 9 includes new model for classifying and measuring financial assets and new method of measuring and recognizing expected credit losses. Financial impact of implementation of IFRS 9 on January 1st 2018 is included in opening balance of retained earnings, amount of ISK 16.184.562.
22 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 24. Related party
Related parties are defined as municipalities and companies, owned by them, which are related to members and alternate members of MCI´s Board of Directors, CEO, key employees and close member of their family. Alternates become a related party from the moment that they are called into a boardmeeting.
Municipalities that own more than 10% af shares in MCI is considered a related party. Information regarding related parties are as follows:
30.6.2018 31.12.2017
Balance at the beginning of year...... 10.429.227.171 43.276.090.203 New loans to related parties...... 2.223.445.332 237.000.000 Loan repayments from related parties...... (731.448.445) (848.821.856) Other changes...... 1.627.366.652 (32.235.041.176) Balance at period end...... 13.548.590.710 10.429.227.171
Interest income...... 210.026.931 457.459.425 Interest expense...... 8.370.875 20.184.583
Information about directors´salary, see note 8. Expenses paid to the Icelandic Association of Local Authorities, see note 10. Debt to related parties at year end, see note 25. Transactions with related parties are all in the normal course of MCI´s activities.
23 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 25. Outstanding loans
The table below shows the outstanding loans by borrower type. MCI has lent ISK 77.415 million to municipalities. On next page is an overview of outstanding loans to companies owned by municipalities.
Municipality Amount Habitants Municipality Amount Habitants Hafnarfjarðarkaupstaður 9.891 28.703 Mýrdalshreppur 344 562 Kópavogsbær 9.499 35.246 Strandabyggð 330 468 Sveitarfélagið Árborg 6.574 8.471 Sveitarfélagið Vogar 330 1.206 Reykjanesbær 5.598 16.350 Þingeyjarsveit 301 915 Mosfellsbær 3.992 9.783 Seyðisfjarðarkaupstaður 299 650 Sveitarfélagið Skagafjörður 3.369 3.932 Djúpavogshreppur 294 452 Fljótsdalshérað 3.186 3.493 Langanesbyggð 271 484 Fjarðabyggð 3.115 4.691 Dalabyggð 262 673 Fjallabyggð 2.985 2.033 Tálknafjarðarhreppur 233 236 Ísafjarðarbær 2.626 3.608 Húnaþing vestra 187 1.174 Hveragerðisbær 1.930 2.483 Skaftárhreppur 182 475 Garðabær 1.915 15.230 Hörgársveit 139 574 Stykkishólmsbær 1.592 1.168 Breiðdalshreppur 124 182 Seltjarnarneskaupstaður 1.510 4.450 Húnavatnshreppur 107 408 Combined Sandgerði and Garður 1.571 3.219 Skeiða- og Gnúpverjahreppur 99 594 Vesturbyggð 1.323 1.030 Flóahreppur 95 648 Sveitarfélagið Ölfus 1.295 2.005 Grýtubakkahreppur 76 352 Akraneskaupstaður 1.283 7.051 Eyjafjarðarsveit 47 1.015 Borgarbyggð 1.169 3.677 Kjósarhreppur 40 220 Bolungarvíkurkaupstaður 1.076 908 Vopnafjarðarhreppur 33 645 Grundarfjarðarbær 972 869 Reykhólahreppur 28 282 Norðurþing 969 2.963 Hvalfjarðarsveit 23 636 Snæfellsbær 961 1.625 Skagabyggð 18 101 Grímsnes- og Grafningshreppur 853 467 Skútustaðahreppur 17 425 Blönduósbær 823 866 Súðavíkurhreppur 16 186 Dalvíkurbyggð 746 1.831 Sveitarfélagið Hornafjörður 12 2.187 Rangárþing ytra 687 1.537 Ásahreppur 9 256 Hrunamannahreppur 595 773 Kaldrananeshreppur 7 106 Bláskógabyggð 507 1.026 Árneshreppur 3 46 Rangárþing eystra 478 1.752 Tjörneshreppur 3 59 Akureyrarkaupstaður 397 18.488
24 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 25. Outstanding loans, cont.
The table below shows the outstanding loans by companies owned by municipalities. MCI has lent ISK 13.796 million to companies owned by municipalities.
Municipal owned company Amount Municipal owned company Amount Félagsbústaðir hf 5.201 Fasteignir Húnavatnshrepps ehf. 60 Strætó bs 1.008 Félagsþjónusta A-Hún bs 58 Reykjaneshöfn 913 Skagafjarðarveitur 38 Orkuveita Reykjavíkur 839 Jeratún ehf 32 Fallorka ehf 617 Bolungarvíkurhöfn 31 Kjósarveitur ehf. 455 Hrunaljós 30 Selfossveitur 447 Þorlákshafnarhöfn 22 Dvalarheimilið Kirkjuhvoll 443 Tónlistarskóli Árnesinga 22 Norðurá bs. 420 Félags- og skólaþjónusta Snæfellinga 20 Brunavarnir Árnessýslu 414 Listasafn Árnesinga 19 Hafnarsjóður Norðurþings 346 Hólmavíkurhöfn 17 Höfði hjúkrunar- og dvalarheimili 289 Brunavarnir Austur-Húnavetninga 15 Héraðsnefnd Árnesinga bs. 288 Byggðasafn Árnesinga 14 Hitaveita Egilsstaða og Fella ehf. 277 Héraðsskjalasafn Árnesinga 11 Sorpstöð Rangárvallasýslu bs 270 Hitav. Húnaþings vestra 10 Norðurorka 239 Brunavarnir Rangárvallasýslu bs. 10 Fasteignafél. Hveragerðisbæjar 233 Orkuveita Húsavíkur 10 Slökkvilið höfuðborgarsvæðisins 230 Hitaveita Laugarvatns 4 Byggðasafnið í Skógum 140 Félags- og skólaþj Rangárv & V Skaft 2 SORPA bs 111 Sorpstöð Héraðs bs 1 Byggðasamlagið Oddi bs 99
MCI has received permission in writing from its borrowers whereby they approve of the publication of their total borrowings from MCI. This is done in order to be able to publish the information in financial statements and investor reports where total loans are split down by municipalities and companies owned by them. This permission was sought in accordance with article 60 of Act no. 161/2002 on financial institutions.
25 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018 26. List of shareholders
MCI is owned by all 73 municipalities in Iceland. Reykjavik is the only shareholder with a share above 10%, holding 17,5% of MCI´s shares. The ten biggest shareholders together own 56% of MCI´s shares. Below is a table presenting all MCI´s shareholders and their respective share.
Shares Shares Municipality in % Municipality in % Akrahreppur 0,08% Kópavogsbær 5,52% Akraneskaupstaður 2,41% Langanesbyggð 0,54% Akureyrarkaupstaður 5,49% Mosfellsbær 1,49% Árneshreppur 0,04% Mýrdalshreppur 0,37% Ásahreppur 0,04% Norðurþing 2,22% Bláskógabyggð 0,63% Rangárþing eystra 1,67% Blönduósbær 1,47% Rangárþing ytra 1,72% Bolungarvíkurkaupstaður 0,83% Reykhólahreppur 0,30% Borgarbyggð 1,78% Reykjanesbær 3,03% Borgarfjarðarhreppur 0,09% Reykjavíkurborg 17,47% Breiðdalshreppur 0,35% Combined Sandgerði and Garður 1,09% Dalabyggð 0,61% Seltjarnarneskaupstaður 1,16% Dalvíkurbyggð 1,35% Seyðisfjarðarkaupstaður 0,98% Djúpavogshreppur 0,33% Skaftárhreppur 0,38% Eyja- og Miklaholtshreppur 0,05% Skagabyggð 0,03% Eyjafjarðarsveit 0,37% Skeiða- og Gnúpverjahreppur 0,37% Fjallabyggð 2,39% Skorradalshreppur 0,02% Fjarðabyggð 3,00% Skútustaðahreppur 0,21% Fljótsdalshérað 1,59% Snæfellsbær 1,77% Fljótsdalshreppur 0,03% Strandabyggð 0,45% Flóahreppur 0,25% Stykkishólmsbær 1,85% Garðabær 3,76% Súðavíkurhreppur 0,30% Grindavíkurbær 1,09% Svalbarðarstandarhreppur 0,18% Grímsnes- og Grafningshreppur 0,22% Svalbarðshreppur 0,08% Grundarfjarðarbær 0,60% Sveitarfélagið Árborg 3,05% Grýtubakkahreppur 0,13% Sveitarfélagið Hornafjörður 1,35% Hafnarfjarðarkaupstaður 4,25% Sveitarfélagið Skagafjörður 2,34% Helgafellssveit 0,02% Sveitarfélagið Skagaströnd 0,29% Hrunamannahreppur 0,24% Sveitarfélagið Vogar 0,42% Húnavatnshreppur 0,15% Sveitarfélagið Ölfus 0,86% Húnaþing vestra 0,89% Tálknafjarðarhreppur 0,20% Hvalfjarðarsveit 0,22% Tjörneshreppur 0,02% Hveragerðisbær 0,96% Vestmannaeyjabær 5,81% Hörgársveit 0,17% Vesturbyggð 1,32% Ísafjarðarbær 4,15% Vopnafjarðarhreppur 0,68% Kaldrananeshreppur 0,06% Þingeyjarsveit 0,34% Kjósárhreppur 0,08%
26 MCI Plc. Condensed Interim Financial Statement 1 January - 30 June 2018