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Glitnir Banki Hf OFFERING CIRCULAR CONFIDENTIAL GLITNIR BANKI HF. (incorporated in Iceland as a public limited company) U.S.$250,000,000 7.451% Non-Cumulative Undated Capital Notes Issue Price: 100% We are offering U.S.$250,000,000 aggregate principal amount of our 7.451% Non-Cumulative Undated Capital Notes. We will pay a fixed interest amount on the notes semi-annually in arrear on March 14 and September 14 of each year (each, a “Fixed Interest Payment Date”) beginning on March 14, 2007, up to and including September 14, 2016 (the “First Call Date”). We will pay interest on each Fixed Interest Payment Date at a rate of 7.451% per annum. Thereafter, we will pay interest on the notes quarterly in arrear on March 14, June 14, September 14 and December 14 of each year, subject to adjustment as described herein (each a “Floating Interest Payment Date”) beginning on December 14, 2016 at a floating rate equal to three-month LIBOR plus a spread of 3.117%. We may, subject to the prior approval of the Financial Supervisory Authority of Iceland (the “FSA”), redeem all (but not some) of the notes on the First Call Date or any Floating Interest Payment Date thereafter at their principal amount together with accrued interest. We also may redeem all (but not some), of the notes at any time prior to the First Call Date upon the occurrence of certain tax and regulatory events. The notes will be offered and sold in minimum principal amounts of U.S.$100,000 and in integral multiples of U.S.$1,000 in excess thereof. In making an investment decision, potential investors should carefully consider the merits and risks of an investment in the notes. Investors should be aware of the following special risks: • the notes are unsecured and deeply subordinated; • the notes are perpetual securities with no fixed final redemption date; • the principal amount of the notes may be converted into conditional capital contributions under certain conditions; • conditional capital contributions may be reconverted and reinstated only under certain conditions; • we cannot pay accrued interest in certain circumstances; • unpaid accrued interest will be cancelled in certain circumstances; • we can redeem the notes at our option, in whole, but not in part, as described in the offering circular; and • there is no public market for the notes. Investing in the notes involves risks. See “Risk Factors” beginning on page 12 of this offering circular. There is currently no public market for the notes, the notes are not listed on any stock exchange and we do not intend to apply for any listing of the notes on any securities exchange. The notes are being offered in the United States to qualified institutional buyers in reliance on Rule 144A under the United States Securities Act of 1933, as amended (the “Securities Act”) who are qualified purchasers within the meaning of Section 2(a)(51)(A) of the United States Investment Company Act of 1940, as amended (the “Investment Company Act”) and the rules and regulations thereunder. In addition, the managers are offering the notes outside the United States to non-U.S. persons in reliance on Regulation S under the Securities Act. The notes have not been registered under the Securities Act. We have not registered and do not intend to register as an investment company under the Investment Company Act, in reliance on an exclusion from the definition of “investment company” pursuant to Section 3(c)(7) of the Investment Company Act. The notes may not be offered or sold within the United States or to U.S. persons, except to qualified institutional buyers in reliance on the exemption from registration provided by Rule 144A who are qualified purchasers within the meaning of Section 2(a)(51)(A) of the Investment Company Act and the rules and regulations thereunder, and in offshore transactions in reliance on Regulation S. You are hereby notified that sellers of the notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. See “Notice to Investors” on page 79. It is expected that the notes will be delivered in registered book-entry form only through the facilities of The Depository Trust Company (“DTC”) and to direct and indirect participants of DTC, including Euroclear (as defined herein) and Clearstream (as defined herein) on or about September 14, 2006. Joint Bookrunning Managers Credit Suisse UBS Investment Bank Barclays Capital Deutsche Bank Securities Wachovia Securities The date of this offering circular is September 11, 2006 TABLE OF CONTENTS Page Circular 230 Notice ....................................................................................................................................... 2 Notice to New Hampshire Residents............................................................................................................. 2 Available Information.................................................................................................................................... 2 Documents Incorporated by Reference.......................................................................................................... 3 Forward-Looking Statements ........................................................................................................................ 3 Enforcement of Civil Liabilities .................................................................................................................... 4 Offering Circular Summary........................................................................................................................... 5 The Offering .................................................................................................................................................. 9 Risk Factors................................................................................................................................................. 12 Use of Proceeds ........................................................................................................................................... 20 Capitalization............................................................................................................................................... 20 Ratio of Earnings to Fixed Charges............................................................................................................. 21 Exchange Rates ........................................................................................................................................... 21 Selected Consolidated Financial Data ......................................................................................................... 22 Selected Consolidated Financial Data Under Icelandic GAAP ................................................................... 24 Management’s Discussion and Analysis of Results of Operations.............................................................. 26 The Bank ..................................................................................................................................................... 32 Terms and Conditions.................................................................................................................................. 42 The Republic of Iceland .............................................................................................................................. 60 Financial Markets in Iceland ....................................................................................................................... 62 Icelandic Taxation ....................................................................................................................................... 63 United States Federal Income Taxation....................................................................................................... 64 ERISA Matters ............................................................................................................................................ 69 Book-Entry Ownership................................................................................................................................ 72 Transfer Restrictions.................................................................................................................................... 75 Subscription and Sale .................................................................................................................................. 77 Notice to Investors....................................................................................................................................... 79 Validity of Notes ......................................................................................................................................... 83 Independent Public Accounting Firm.......................................................................................................... 83 -i- We accept responsibility for the information contained in this offering circular. To the best of our knowledge (having taken all reasonable care to ensure that such is the case) the information contained in this offering circular is in accordance with the facts and does not omit anything likely to affect the import of such information. Certain information in the sections entitled “Republic of Iceland” and “Financial Markets in Iceland” has been extracted from publications by the National Economic Institute, the Ministry of Finance and the Central Bank of Iceland. We confirm that such information has been accurately
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