Kuntarahoitus Oyj - Interim report (Q1 and Q3)

INTERIM REPORT BULLETIN 1 January - 30 June 2011

Municipality Finance increasingly attractive as an investment

Municipality Finance Plc (MuniFin) has retained its strong market position in
the first half of 2011 as the leading financier for its clients, Finnish
municipalities and government-subsidised housing production. During this
period, the company acquired EUR 5.1 billion in funds from international
investors (compared with EUR 3.2 billion for the period 1 January - 30 June
2010), which represents around three quarters of the funding needed by MuniFin
for the whole year. 

This success in acquiring funds is partly due to the fact that Finland has
become significantly more attractive as investments amid increasing economic
insecurity in Europe. Finland is regarded as a safe haven for investments,
which is evidenced in the good availability of both shorter- and longer-term
funding. In practice, the funding being offered to MuniFin currently exceeds
requirements. 

The first inaugural USD benchmark issue from MuniFin

In May, MuniFin successfully launched its inaugural USD 1.5 billion benchmark
issue. Over 50% of the transaction was sold to central banks from various
countries, with over a third of the total being sold to Asia. Over 40 investors
from around the world participated in the issue. 

This transaction significantly diversified company's funding base further,
while also enabling the company to join the ranks of leading global bond
issuers. MuniFin, which enjoys the highest credit ratings, is a particularly
sought-after partner among the largest financial players. 

Lending remains at previous year's level

New lending by MuniFin increased by 4.7% to EUR 1.476 billion (1 Jan - 30 Jun
2010: EUR 1.410 billion) during the first six months of the year. This increase
was moderate, and there were no great changes in municipalities' funding
requirements. The total loan portfolio at the end of June was EUR 12.6 billion
(31 Dec 2010: EUR 11.7 billion). 

The Municipality Finance Group's net operating profit for the period was EUR
35.0 million (1 Jan - 30 Jun 2010: EUR 30.5 million) and net interest income
was EUR 41.0 million (1 Jan - 30 Jun 2010: EUR 38.1 million). The Group's risk
bearing capacity remained strong: its capital adequacy ratio stood at 22.83% at
the end of June (31 Dec 2010: 19.28%) and its capital adequacy for Tier 1
capital was 16.90% (31 Dec 2010: 13.92%). 

President and CEO Pekka Averio said:

“The proper functioning of the financing system for municipalities and social
housing production must be secured competitively in all conditions. 

It is worth noting that the new Finnish government programme specifically
mentions MuniFin's role in providing funding for local government and state
subsidised housing production. This reflects genuine concern over the need to
ensure local government and social housing production under all circumstances
and the importance of competitive local government funding.” 

Municipality Finance Plc

For further information, contact:

Pekka Averio, President and CEO, tel. +358 (0)500 406 856

Esa Kallio, Executive Vice President, Deputy to CEO, tel. +358 (0)50 337 7953

The Interim Report of Municipality Finance can be found on the internet at
www.munifin.fi.

Attachments:

Kuntarahoitus_OVK_30062011_ENG.pdf