Arion Bank hf. - Other information disclosed according to the rules of the Exchange

Announcement of results of share placing

NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR INTO
THE UNITED STATES, THE UNITED KINGDOM, CANADA, AUSTRALIA, SOUTH AFRICA OR JAPAN
OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DISTRIBUTE THIS ANNOUNCEMENT.

Arion Banki hf. (“Arion Bank”) and Kaupthing ehf. (“Kaupthing”) announce today
the results of a private placement of shares in Arion Bank owned via
Kaupthing’s wholly-owned subsidiary, Kaupskil ehf., (the “Private Placement”)
in which Kaupskil ehf. has agreed to sell 582,922,113 shares of Arion Bank for
an amount in aggregate of greater than ISK 48.8 billion. As a result of the
Private Placement, Kaupthing’s interest in Arion Bank has reduced to 57.9% of
the issued share capital of Arion Bank. 

In addition, the Private Placement agreements grant the investors options in
respect of 437,191,585 shares of Arion Bank (representing 21.9% of the issued
share capital), which are exercisable at a premium to the price paid in the
Private Placement and expire prior to any potential offering of Arion’s shares
to the public. 

The proceeds from the transaction will be used to prepay the ISK 84 billion
secured note held by the Icelandic Treasury, as part of Kaupthing’s stability
contribution agreed upon its composition. 

The table below presents the shareholders of Arion Bank following the Private
Placement. 

Shareholder:

Kaupskil ehf.                                                                  
                                                    57.9% 

Icelandic State Financial Investments                                          
                                   13% 

Attestor Capital LLP through Trinity Investment Designated Activity Company    
      9.99% 

Taconic Capital Advisors UK LLP through TCA New Sidecar III s.a.r.l.           
           9.99% 

Sculptor Investments s.a.r.l., an affiliated entity of Och-Ziff Capital
Management Group                                                               
                                                                  6.6% 

Goldman Sachs International through ELQ Investors II Ltd.                      
                   2.6% 



Paul Copley, CEO of Kaupthing:

“We are delighted that this milestone of the sale of nearly 30% of Arion Bank
has been achieved, which reduces Kaupthing’s interest in the bank to 57.9%,
thereby significantly advancing our continuing efforts to realise our remaining
asset portfolio and return capital to stakeholders.” 

“In completing this deal, which is the largest equity portfolio investment by
foreign parties in Icelandic history and immediately after the lifting of
capital controls, we have secured international investors with a medium to long
term view of their investment in Arion. All of them are existing investors in
Kaupthing and have chosen to re-invest in Iceland rather than move their money
offshore, which is the strongest possible signal of their confidence in both
Iceland generally and Arion specifically.” 

“Taconic Capital and Och-Ziff are Kaupthing’s two largest investors and have
been deeply committed to Iceland for a number of years across a range of
investments. Likewise, Attestor Capital is a substantial shareholder of ours,
and has in the past invested in a number of other European financial
institutions, including a controlling stake in an Austrian credit institution.
The involvement of an iconic firm such as Goldman Sachs speaks for itself.” 

“I look forward to working with all four institutions as we continue
preparations to realise the remainder of our stake in Arion, likely via an IPO,
where we hope to offer domestic individuals and institutions the opportunity to
invest in the bank.” 

Höskuldur H. Ólafsson, CEO of Arion Bank:

“We have long been of the opinion that it would be a positive move for the Bank
to bring on board international shareholders. We have met numerous
international investors over the last few years and have detected a keen
interest in Iceland and the Bank. We can sense this interest in other fields in
Iceland too, for example in tourism and retail, where renowned international
brands are giving the country unprecedented attention. We are not particularly
surprised that these investors, who have been involved with the Bank indirectly
for several years, have now elected to invest directly by becoming
shareholders. They know the Bank well, have monitored our progress and the
positive developments which have taken place in the Icelandic economy and they
are now underlining their belief that the future is bright for Arion Bank.” 

“Attracting new shareholders, international investors, marks the beginning of a
new era. We will continue to examine the possibility of listing the Bank on the
stock market, which will further diversify the shareholder base.” 



About the investors

Taconic Capital

Taconic Capital is a global institutional investment firm founded in 1999 with
$6bn of assets under management. Its headquarters are in New York and offices
in London and Hong Kong. Taconic Capital is the investment manager of certain
investment vehicles with liquidity structures that align with the potential
underlying investment in Arion bank. Taconic’s investors are predominantly
institutional investors, pension and endowment funds, high net worth
individuals and family offices. 

Attestor Capital

Attestor Capital is a UK-based Investment Manager, which is authorized and
regulated by the Financial Conduct Authority. Attestor Capital is the
investment manager for Trinity Investments Designated Activity Company.
Investors are predominantly endowment funds and family offices. Attestor
Capital is a long-term oriented investment manager that invests in companies
and assets across sectors and geographies. Notable prior transactions include
acquiring significant ownership positions in European regulated financial
institutions, including for example a controlling stake in an Austrian credit
institution (after undergoing full ownership control procedure by the European
Central Bank), and an investment in an Irish mortgage lender.” 

Och-Ziff

Och-Ziff Capital Management Group is one of the largest institutional
alternative assets managers in the world with approximately $34bn of assets
under management. The headquarters of the company are in New York, and it also
has offices in London, Hong Kong, Mumbai, Beijing, Shanghai and Houston.
Investors include pension funds, fund-of-funds, foundations and endowments,
corporations and other institutions, private banks and family offices. 

Goldman Sachs International

Goldman Sachs provides a wide range of financial services to clients located
worldwide. Founded in 1869 the company has 34 thousand employees in more than
80 locations around the world. Goldman Sachs is making an investment into Arion
Bank through a wholly owned subsidiary ELQ Investors II Ltd. 

The before mentioned investors have confirmed to Kaupthing that the beneficial
owners of the funds investing into Arion Bank are all non-domestic parties as
defined in the act on foreign exchange no. 87/1992, with amendments. 



Advisers

Kaupthing was advised by Morgan Stanley, White & Case and LOGOS. The investors
were advised by Linklaters LLP and Fjeldsted & Blöndal. 



For further information:

Haraldur Guðni Eiðsson, head of corporate communications, Arion Bank, s: 444
7108, haraldur.eidsson@arionbanki.is. 

Davíð Stefánsson, Kaupþings ehf., head of treasury, Kaupthing, s: 856 7112,
david.stefansson@kaupthing.com. 



This announcement is not being made in and copies of it may not be distributed
or sent, directly or indirectly, into the United States, the United Kingdom,
Canada, Australia, South Africa, Japan or any other state or jurisdiction in
which release, publication or distribution would be unlawful. 

This announcement is not an offer of securities for sale in the United States.
The securities referred to herein may not be sold in the United States absent
registration or an exemption from registration under the U.S. Securities Act of
1933, as amended. Arion Bank does not intend to register any of the securities
in the United States or to conduct a public offering of the securities in the
United States. 

This communication does not constitute an offer of the securities to the public
in the United Kingdom. No prospectus has been or will be approved in the United
Kingdom in respect of the securities. This communication is being distributed
to and is directed only at (i) persons who are outside the United Kingdom or
(ii) persons who are investment professionals within the meaning of Article
19(5) of the Financial Services and Markets Act 2000 (Financial Promotion)
Order 2005 (the “Order”) and (iii) high net worth entities, and other persons
to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d)
of the Order (all such persons together being referred to as “Relevant
Persons”). Any investment activity to which this communication relates will
only be available to and will only be engaged with, Relevant Persons. Any
person who is not a Relevant Person should not act or rely on this document or
any of its contents.