Kuntarahoitus Oyj - Interim Management statement

Municipality Finance gained its market share

Due to the financial crisis, the first half of the year presented extraordinary
operating conditions for Municipality Finance Plc. Funding acquisition reached
record-breaking levels. The operating result of the Municipality Finance Group
was clearly better than in the previous year and the loan portfolio grew from
last year's end. During the spring, the company carried out a very successful
share issue. 

Rapid growth in lending 
The long-term loan portfolio of Municipality Finance Plc increased by 15.9%
from last year's end and 40.4% from the end of June 2008. The long-term loan
portfolio at the end of June amounted to EUR 8,768 million, the corresponding
figure having been EUR 6,245 million the previous year. The most significant
growth was seen in loans for financing government-subsidised housing. 

The operating result of the Municipality Finance Group showed clear improvement
during the first half of the year at EUR 11.4 million, compared to EUR 5.9
million the year before. The Group's balance sheet totalled EUR 13.9 billion at
the end of June, the corresponding figure a year earlier being EUR 9,6 billion. 

Record-breaking funding acquisition 
Municipality Finance Plc acquired a total of EUR 3,937 million in long-term
funding in several markets over the first half of the year (1 January - 30 June
2008: EUR 2,171 million). The parent company's total funding at the end of June
amounted to EUR 12,510 million (30 June 2008: EUR 8,149 million). 
Despite a couple of slower months at the start of the year, funding acquisition
grew at a record pace after market conditions improved in March. Funding
acquisition in the first half of 2009 equalled that of the whole of the
previous year. The cost of funding acquisition has, however, increased from the
previous year as demand has picked up. 

Successful share issue
During the first half of the year, Municipality Finance Plc successfully
carried out a share issue that brought in nearly EUR 41 million in new equity,
corresponding to approximately 12.7 million shares. The company has 39 new
shareholders as a result of the share issue, including the state, Finnish
municipalities and municipal corporations. The company counts 272
municipalities among its shareholders. 

The primary credit institution for the Finnish municipal sector 
“The financial crisis has brought about a radical change in our competitive
environment. While competition was fierce last year, our rivals have now moved
away from municipal sector financing. As a result, Municipality Finance has
seen its market share shoot up to 94.3%; in practice this means that
Municipality Finance has almost sole responsibility for financing the Finnish
municipal sector. The situation does, however, prove that the system created to
secure municipal borrowing is able to meet its objectives even in crisis
conditions,” stated CEO Pekka Averio. 

Municipality Finance Plc 

Further information: 
Pekka Averio, CEO, +358 (0)500 406 856
Esa Kallio, Executive Vice President, Deputy to CEO, +358 (0)50 3377 953

Attachments:

interim report bulletin 28082009.pdf