1

Prospectus Summary

4 December 2019

This summary is prepared in accordance with Annex XXII of Commission Regulation (EC) No 809/2 004

with subsequent amendments. This EC regulation was transposed into Icelandic law through Regulation

No. 243/2006 on the transposition of Commission Regulation No. 809/2004, with respect to the

presentation and contents of prospectuses, base prospectuses, summaries and final terms wi th respect to

disclosure obligations, and subsequent regulations, including regulations no. 901/2013 which transposed

into Icelandic law Commission Regulation No 486/2012 which amended the aforementioned Commission

Regulation No 809/2004.

The summary contains all the information items which should and may be included in a summary pursuant

to the aforementioned regulation on summaries prepared in accordance with Annexes I, II and III of the

regulation. The numerical order of the items may not be continuous in cases where there is no authorization

and requirement to publish a specific item in a prospectus summary prepared in accordance with the

aforementioned annexes. Although the summary is supposed to contain specific items of information, there

is the possibility that the item is not applicable in the case of the issuer and the securities to which the

prospectus applies. In this case the words “not applicable” are inserted next to the item of information.

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A. Introduction and warnings

Item Disclosure

requirement Information

A.1 Reservation This summary should be read as an introduction to a share prospectus,

dated 4 December 2019, issued by TM hf. (“the issuer” or “the parent

company”) in respect of a rights issue and a public share offer as well

as an application for new shares to be admitted for trading on the Main

Market of the Nasdaq Iceland. Both will be conducted in accordance

with provisions of Icelandic laws and regulations on securities

transactions, cf. the Securities Transactions Act No. 108/2007. Any

decision to invest in shares of the issuer shall not be taken solely on

the basis of this summary, but on the basis of the prospectus in its

entirety. It should be noted that if a claim is brought to court

concerning information contained in this prospectus, the investor who

is the plaintiff, may be required to pay for the prospectus to be

translated before legal proceedings begin. It should be noted that civil

liability only applies to individuals who presented the summary,

including its translation, only if it is misleading, inaccurate or

inconsistent with other parts of the prospectus, or if it does not provide,

in the context of other parts of the prospectus, key information for

investors when they are considering whether to invest in such

securities.

A.2 Consent by the issuer

or person responsible

for drawing up the

prospectus to the use

of the prospectus for

subsequent resale or

final placement of

securities by financial

intermediaries

Not applicable.

B. Issuer

Item Disclosure

requirement Information

B.1 Legal and commercial

name of the issuer

The legal name of the issuer is TM hf. The business name is TM.

B.2 Domicile and legal

form of the issuer and

the legislation under

which it operates

The issuer is a limited company, registered and operated in accordance

with the Limited Liability Companies Act No. 2/1995 and registered

in Iceland under the ID number 660269-2079, with its domicile at

Síðumúli 24, 108 Reykjavík, Iceland. The company operates in

accordance with the Insurance Activities Act No. 100/2016 which

applies to the activities of the issuer and its subsidiaries (jointly

referred to as “TM” or the “company”. Various other laws and

regulations apply to activities, including those concerning insurance

groups, insurance agreements, the official supervision of financial

activities and the payment of related costs, the distribution of

insurance, measures against money laundering and terrorist financing,

data protection and the handling of personal data, accounting, annual

financial statements and taxes (income tax and value-added tax),

competition and securities transactions.

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B.3 Activities The object of the issuer according to the articles of association is the

holding of shares in companies in the fields of finance, credit and

investment activities, insurance activities and other related business,

and the ownership and management of real estate, own investment

activities and service to subsidiaries. TM is an Icelandic insurance

company which offers comprehensive insurance services in Iceland

and offers limited insurance services in the fields of fund and asset

insurance on international markets and the company has an operating

license in the European Economic Area and the Faroe Islands. The

company’s main activity is insurance for individuals, companies and

institutions and the company issues insurance agreements which

transfer the insurance risk from customers to the company. The

company has approximately 50,000 customers. The company has a

market share of approximately 24% of the Icelandic insurance market

based on the total premiums paid in 2018. The company places great

importance on the right pricing according to risk and the maintenance

of long-term business relationships. The company’s insurance business

is divided into non-life and life insurance, and financial operations is

an additional line of business. Investment activities are a significant

component of insurance activities as premiums need to be invested in

order to be able to meet financial commitments to policy holders.

TM’s total assets amounted to ISK 39.5 billion on 30.9.2019, of which

the value of investment assets was ISK 31.4 billion. Total revenue was

ISK 14.1 billion in the period 1 January – 30 September 2019, of which

earned premiums amounted to ISK 12.0 billion. Vehicle insurance,

which is classed under non-life insurance, is the largest individual

category and represented 50.3% of earned premiums in 2018. The

group has approximately 130 employees.

B.4a A description of the

most significant

recent trends

affecting the issuer

and the industries in

which it operates

On 10 October 2019 an agreement was signed by TM and Klakki ehf.

regarding the acquisition by the former of 100% of share capital in

Lykill fjármögnun hf. (also referred to as “Lykill”). Lykill has an

operating license as a credit institution, cf. Financial Undertakings Act

No. 161/2002, and the company chiefly operates in the fields of

financing commercial equipment, commercial property and vehicles

for companies and individuals. The transaction was subject to approval

by the Icelandic Competition Authority, the approval by the Icelandic

Financial Supervisory Authority for TM as a qualified owner and the

approval of an extraordinary shareholders’ meeting of TM. The

approvals of the Icelandic Competition Authority and the

extraordinary shareholders’ meeting have already been obtained. For

the purposes of satisfying the condition regarding approval by the

Icelandic Financial Supervisory Authority TM has delivered an

application for permission to hold a qualifying holding in Lykill. At

the time of this Prospectus the application is still under consideration

by the Icelandic Financial Supervisory Authority.

Following the acquisition, the management of TM assume that

activities will be divided into three units: insurance, financing and

investments. It is assumed that the insurance operation of TM hf. will

be transferred to the current subsidiary of TM, Trygging hf., and that

Lykill will be operated as a subsidiary of TM hf.

The transfer of the TM insurance portfolio to the subsidiary is

dependent on the approval of the FME. The FME furthermore is

required to provide Trygging hf. with additional operating license as

an insurance company. All reinsurance agreements are up for renewal

on 1 January 2020 and both TM hf. and Trygging hf. have now been

given status as insured, but the aim is for the latter party to take over

the insurance portfolio. It cannot be ruled out that the FME will decline

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to issue an additional operating license so that the change cannot be

enacted, but this is unlikely in the opinion of TM. In addition the FME

may define the new group as a financial conglomerate as defined in

Act No. 61 on additional supervision of financial conglomerates, but

it is not thought that such definition would have a major impact on the

activities of the two companies as they are already both regulated

entities and already provide all the required information. It cannot be

ruled out, however, that this could have some impact which has yet to

materialize.

Should the purchase not materialize it is clear that the group will not

stand to benefit from the opportunities which the transaction is

expected to generate. Should the transaction not materialize Lykill will

not become a subsidiary within the TM group as is anticipated by the

foregoing but other planned changes to the group are expected to move

ahead regardless of whether or not the purchase of Lykill comes into

effect.

B.5 Description of

issuer’s group

TM consists of TM hf., which is the parent company of the group, and

its four subsidiaries. The parent company TM hf. is responsible for

non-life and accident insurance and the subsidiary

Líftryggingamiðstöðin hf. is responsible for life insurance and health

insurance. There are no actual activities in Íslensk endurtrygging hf.

and Trygging hf. and the former company administers old reinsurance

agreements. Investment activities are carried out both at the parent

company, Líftryggingamiðstöðin hf. and also in the subsidiary TM fé

ehf.

TM fé is wholly owned by the parent company. Líftryggingamiðstöðin

hf. and Trygging hf. are 99.50 % owned by the parent company and

Íslensk endurtrygging is 99.96% owned by the parent company. The

financial statements published in the prospectus are the consolidated

financial statements.

Attention is drawn to the proposed changes to the TM group described

in article B.4a.

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B.6 In so far as is known

to the issuer, the name

of any person who,

directly or indirectly,

has an interest in the

issuer’s capital or

voting rights which is

notifiable under the

issuer’s national law,

together with the

amount of each such

person’s interest.

List shareholder of TM as of 3 December 2019:

Other shareholders have less than 5% direct holding in the issuer which

is the lowest limit for notification requirement. Minority interests are

protected in accordance with the provisions of the issuer’s articles of

association and the Public Limited Companies Act No. 2/1995 and the

provisions of chapter X of the Securities Transactions Act No.

108/2007. All issued shares are of the same class and have the same

rights. One vote is attached to each share of a value of ISK 1 in the

issuer.

B.7 Summarized financial

information

No significant changes to the financial and trading position of the

company have occurred neither during the period described by the

historical financial information nor during the per iod from the end of

the latest financial reporting period on 30 September 2019, other than

those which result from the Lykill transaction. Investors are advised to

read article B.4a in this summary on proposed changes to the TM

group, i.e. the company’s acquisition of Lykill and the transfer of the

insurance portfolio to Trygging hf., the subsidiary of TM. If the

acquisition by TM of 100% of share capital in Lykill fjármögnun hf.

does not go ahead, the group will not benefit from the opportunities

which the acquisition is expected to create.

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Income statement:

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Balance sheet:

Cash flow:

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Key figures:

B.8 Pro forma financial

information

Pro forma financial information refers to the hypothetical position and

does not reflect the real financial position of the company.

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B.9 Profit forecast or

estimate

Each quarter TM prepares a running profit forecast for the next four

quarters and its basis is the company’s 5-year business plan. The profit

forecast follows the beyond budgeting method and is designed to give

the best picture of the development of the business over the next few

quarters. A new profit forecast is published when the quarterly

financial results are published.

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C. Securities

Item Disclosure

requirement Information

C.1 Type and the class of

the securities being

offered and/or

admitted to trading

The prospectus relates to a rights issue and a public offering of new

shares of TM and the application for admission of trading thereof on

the Main Market of Nasdaq Iceland HF. The new shares will be

electronically issued on the systems of the Nasdaq CSD Iceland hf.,

national Icelandic corporate registry no. 500797-3209. The identifier

of the shares at Nasdaq CSD Iceland hf. is TM and the ISIN number of

the shares is IS0000000586

C.2 Currency of the

securities issued

The shares will be issued in Icelandic króna (ISK).

B.10 A description of the

nature of any

qualifications in the

audit report on the

historical financial

information.

No qualifications are contained in the audit report on historical

financial information set out in the prospectus.

B.11 If the issuer’s working

capital is not

sufficient for the

issuer’s present

requirements an

explanation should be

included.

Not applicable.

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C.3 Number of issued

shares

The total registered share capital of TM hf. is ISK 678.142.669 with

the nominal value of each share being (ISK) 1. All issued shares are

fully paid up. At a meeting of the board of directors of TM, held at 3

December 2019 to utilize the authority given to it at an extraordinary

shareholders’ meeting of TM on 13. November and instigate a rights

offering and a public offering of 93.750.000 new shares of TM which

will date place during 9-12 December 2019. TM holds none of its own

shares. The Issuer holds 18.5% in S121 ehf which owns 64.62% of

Stoðir hf. which, in turn, is a 9.97% shareholder in TM hf. In that the

company indirectly holds its own shares.

C.4 Rights All issued shares of TM hf. belong to a single class of shares, all of

which enjoy a pari passu ranking. At a shareholders’ meeting a single

vote is attached to a single share.

Shareholders are entitled to invoke their right to vote at the company’s

shareholders meetings, receive dividends form the issuer, enjoy

proportional preemption rights in connection with a share capital

increase (unless they have forfeited such rights) and enjoy the right to

receive their proportional share of the issuer’s assets when the issuer

is either wound up or becomes bankrupt, unless laws or the articles of

association of the issuer stipulate otherwise.

Shareholders’ rights are subject to applicable laws and the articles of

association of the issuer which elaborate on the provisions of the Act

on Limited Liability Companies no. 2/1995. No special rights are

attached to the shares of the issuer and shareholders are not responsible

for the issuer’s liabilities in excess of the amount of the share capital

held by them. Shareholders’ shares are not subject to any squeeze -out

obligations except where prescribed by law.

C.5 Restrictions to the

transferability of

shares

No restrictions are placed on transactions with shares issued by the

Issuer in excess of what is prescribed by law, in particular act no.

100/2016 on insurance activities as regards investors’ ability to possess

qualifying holdings and, as a consequence, the shares may be freely

transferred and pledged unless where legislation dictates otherwise

(including laws which pertain to transfer to non-domestic parties). A

shareholder cannot invoke its rights associated with his shareholding

unless his name has been entered into the issuer’s shareholder registry.

All notifications directed at shareholders, as do any payment of

dividend, shall be made to the party who is, from time to time,

registered as a shareholder of the issuer on the systems of Nasdaq CSD

Iceland hf. Any transfer of shares and the performance thereof is

subject to the provisions of Act no. 31/1997 on the electronic

registration of ownership rights associated with financial instruments

and regulation based thereon.

C.6 Information on

whether an

application has been

submitted or is

intended to be

submitted for

admission to trading

on a regulated market

and information on

all regulated markets

All issued shares of TM hf. have been admitted to trading on the Main

Marked of Nasdaq Iceland hf. Following the ratification of this

prospectus by the Icelandic Financial Supervisory Authority the board

of directors of the issuer will request that the new shares of TM hf. are

admitted to trading the Main Market of Nasdaq Iceland hf., which is a

regulated securities exchange.

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that the securities are

admitted to trading

C.7 Dividend policy The objective is for the aggregate amount of annual dividends and

share buy-backs to be no less than 50% of TM’s net earnings post tax.

Any payment of dividend and share buy-backs are subject to the

following conditions: i) the company shall always meet solvency

requirements; ii) the company shall always have sufficient liquidity for

its operations and iii) the company shall be financially stable.

Additionally payments of dividend shall be subject to applicable laws

and regulations as these are from time to time, including the provision

of the Act on limited liability companies no. 2/1995, the Act on

insurance activities no. 100/2016. Within the applicable legal

framework, as this is from time to time, TM is permitted to engage in

share buy-backs and/or make payment of dividends, all subject to

approval by a shareholders’ meeting of the company.

D. Risks

Item Disclosure

requirement Information

D.1 Key information on

the key risks that are

specific to the issuer

or its industry

The risk factors of which TM is aware and which it believes apply to

the issuer and its subsidiaries and its industry and which could have an

impact on the price of securities issued by the issuer:

Risk related to insurance business

Insurance risk: Insurance risk is specific to insurance operations and

arises because premiums are determined in advance and the service is

provided later and the individual risk factors are often not fully known

at the outset, which could have an impact on the group’s results,

financial position and future prospects.

Insurance risk is divided into premium risk and reserve risk.

Premium risk is the risk that the total amount of claims in the future,

plus related costs, will be higher than expected when the premiums for

the applicable insurance agreements were decided. Reserve risk is the

risk that claims which have occurred but not yet settled will develop

more negatively than expected.

Market risk: Market risk is the risk that changes to the market price

of the financial instruments will have an impact on the value of the

company’s investments, including the group’s results, financial

position and future prospects. TM balances its insurance reserve with

a portfolio of securities and other assets in an investment portfolio

which bear market risk. Changes to the following factors could have

an impact on the value of TM’s investment portfolio: interest rates,

changes in price levels, the market value of listed shares, the total

effect of derivatives, the fair value of private equity, price trends on

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the real estate market, exchange rates and the risk premium on bond

issuers.

TM faces concentration risk in respect of the company’s investment

portfolio, i.e. if too many investments are made in individual asset

classes or individual counterparties so that the asset portfolio is

insufficiently diversified.

TM also faces reinvestment risk as the company needs to regularly find

new investment opportunities which yield satisfactory returns, both

with respect to internal growth and reinvestment.

Counterparty risk: Counterparty risk is the risk of financial loss if a

customer or counterparty in a financial instrument cannot meet the

agreed obligations and the collateral does not cover the outstanding

claim. The company’s counterparty risk includes bank deposits, loans

and reinsurance.

Liquidity risk: Liquidity risk is the risk that the company cannot meet

its obligations when they become due. The company must have at any

given time sufficient liquidity to be able to meet unforeseen payments,

accounts receivable or changes to the liquidity of assets.

Operational risk

Management and employee risk: Management and employee risk is

the risk represented by the management, organization and knowledge

within the company being insufficient at any given time to tackle any

issues which need to resolved, and the risk that the company is unable

to retain and/or hire capable management and employees. This may

have an impact on the group’s results, financial position and future

prospects.

Rules of procedure: The risk associated with rules of procedure is that

the rules are insufficiently precise, do not cover circumstances which

may arise and/or rules are not adhered to.

IT systems and cyber threats: Risks associated with disruption of

important IT systems or other systems which could have an impact on

the group’s ability to meet its customers’ expectations. This may

include malfunctions, damage or lack of productivity which may be

traced to cyber-attacks, viruses, defects in hardware or software,

human error, access by non-authorized persons, natural disasters or

other disturbances, including delays to important updates or if these

updates do not deliver the expected results. In addition the group faces

the risk of illegal breaches of its IT systems, including cyber fraud and

theft.

Outsourcing risk: Outsourcing risk is the risk associated with loss of

control, loss of business and potential increased costs in connection

with outsourcing to third parties or the risk that the outsourced service

will not be in accordance with the policy and corporate governance of

the group. The group has created a policy on outsourcing. Projects

which form part of core activities are not outsourced except to a very

small degree and formal agreements are made on the projects which

are outsourced.

Fraud: There is always some risk that the group will suffer damage

due to intent or gross negligence. This may involve the company’s

employees and in order to limit this risk, regular courses are held at

the company where employees receive the training on the laws and

regulations which apply to the activities of insurance companies.

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Legal risk: The company operates in accordance with numerous laws,

regulations and rules and is subject the supervision of numerous

authorities. Any violation of these laws may damage the company and

this could have an impact on the group’s results, financial position and

future prospects.

Risk associated with accounting principles The preparation of annual

financial statements and interim financial statements in accordance

with international financial reporting standards (IFRS) requires that

management makes decisions, performs assessments and draws

conclusions which have an effect on the application of accounting

methods, and publishes figures on assets and liabilities, income and

expenses. The actual results may differ from these assessments.

Amendments to IFRS or its interpretation may have an impact on the

results of the company’s annual financial statements or interim

statements.

Court cases: Disputes over liability or the amount of claims are not

uncommon and are considered a normal part of the operations of

insurance companies. At any given time the group is engaged in a

number of court cases concerning such disputes. Generally claims

such as these come under the company’s reinsurance coverage and the

company’s own risk is limited to that. Companies in the group are not and have not been involved in

administrative, judicial or arbitration court proceedings in the last 12

months which differ from the typical courts cases in which the company

is generally involved.

Business risk

Risk associated with the economic environment: The general state of

the economy in Iceland, such as economic growth, rate of employment

and inflation, has an impact on the insurance market, the financial

market and the company’s customers, and thereby those of the group.

Business activity and the state of the economy affect both demand for

insurance, the cost of claims and competition on the insurance market,

and therefore the results, economic position and future prospects of

the company. Economic developments internationally have an impact

on the state of the economy in Iceland and on the activities and

financial position of the group’s customers and thereby of the group

itself. Developments on international capital markets can also have an

impact on the domestic capital market and thereby on the group itself.

It also generally has a direct impact on international securities held

in the investment portfolio of TM. Factors related to the general

economic environment domestically and internationally are outside

the control of the group.

Policy formulation risk: Business decisions, their execution or lack of

response to changes in the operating environment could result in

negative financial consequences for the company. The company’s

business policy is shaped by its defined role and objectives. There is a

risk of the company failing to fully execute its stated policy, either due

to the company’s own mistakes or external factors which the company

is unable to adequately respond to. If the company’s policy proves to

be wrong or is not effectively implemented there is a risk the business

will suffer.

Political risk: Changes to the law, regulations and administrative

practice, e.g. with regards to tax and supervision, could have a posit ive

or negative on the company. Furthermore, planned changes to

legislation and discussion thereof could possibly have a negative

impact on the company's operating environment. Political ins tability

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could therefore possibly have a negative or positive impact on the

group's results, financial position and future prospects. The impact

may be on domestic insurance services, international insurance

services, investments and reinsurance coverage acquired

internationally.

Risk associated with supervisory environment: TM’s activities are

based on an operating license to pursue insurance activities which the

FME has granted the company and the operating license is necessary

for the company to run its business. The Insurance Activities Act

contains conditions on the financial strength of insurance companies,

solvency requirements. If these solvency requirements are not met, the

FME needs to intervene and this could possibly have a detrimental

effect on the company, the company could require additional capital

(new equity and/or subordinated loans), may need to reduce insurance

and market risk and thus lower the solvency requirements, become

insolvent or lose its operating license. If it is necessary to reduce

insurance and market risk, it may possibly have a negative impact on

the group's results, financial position and future prospects.

Reputational risk: If the group's reputation is damaged in the eyes of

customers, employees, reinsurers, creditors, shareholders, authorities

etc., it can have a negative impact on the group. There is a risk that

the group will suffer financial damage if it does not meet the

expectations of the above groups or if it receives negative coverage of

its business practice. If the reputation or credibility of the group is

damaged as a result of official or public discussion it may limit the

potential for generating revenue and have a negative impact on its

financial results.

Proposed changes to the group:

Investors are advised to read article B.4a in this summary on proposed

changes to the TM group, i.e. the company’s acquisition of Lykill and

the transfer of the insurance portfolio to Trygging hf., the subsidiary

of TM. If the acquisition by TM of 100% of share capital in Lyki ll

fjármögnun hf. does not go ahead, the group will not benefit from the

opportunities which the acquisition is expected to create.

D.3 Key information on

the key risks that are

specific to the

securities.

General equity risk: Investing in shares generally carries a higher

level of risk than investing in bonds. One reason for this higher level

of risk is that shareholders have lower priority than bondholders as

creditors. Furthermore the price of shares tends to fluctuate more than

bond prices and the value of shares can be lost partly or entirely.

Risk associated with shares in TM

Market risk of shares in TM: It cannot be ruled out that volatility in

the price of shares in TM will be significant in the future. Volatility in

the price of shares in TM will be contingent on the supply of, and

demand for, shares in the company.

Liquidity risk of shares in TM: It cannot be guaranteed that

shareholders in TM will be able to sell their holdings in the company

in the volume they want and at the real value on the market. Market

making for shares can to some extent reduce liquidity risk. TM has

entered into market making agreements for shares in TM with Kvika

and Íslandsbanki. The agreement with Íslandsbanki expires on 9

December 2019 and it will be replaced with an agreement with Arion

Bank.

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Ownership: The composition of the shareholders of TM could be a risk

factor for investors and investors should keep in mind that the

ownership of TM can change quickly and without warning.

Dilution: If new shares in TM are issued, the proportional

shareholding of current shareholders will be reduced, if they chose not

to participate in the share capital increase in proportion to their

holdings or if they waive their preemptive rights at a shareholders'

meeting.

The current articles of association of TM provide the board of

directors with authority to increase the company’s share capital. The

articles of association authorize the board of directors of TM to

increase TM’s share capital by up to ISK 125,000,000 at nominal value

by issuing new shares. When exercising this authority, shareholders in

TM have preemptive rights to subscribe for the new shares in the share

capital increase in proportion to their shareholding, and general

investors will be given the option of subscribing for the shares that

holders of preemptive rights do not buy.

Legal framework for public offer and admission for trading: TM

shares have been accepted for trading on the Main Market of the

Nasdaq Iceland which is a regulated securities market under the Stock

Exchanges Act No. 110/2007. The provisions of the Securities

Transactions Act and regulations derived from the Act and rules

applicable to issuers of securities which have been admitted for

trading on the stock exchange, as current, and the FME’s Rules No.

1050/2012 on the Treatment of Inside Information and Insider

Transactions and the Stock Exchanges rules of issuers of financial

instruments apply to the company and trading with its shares.

E. The Offer

Item Disclosure

requirement Information

E.1 The total net proceeds

and an estimate of the

total expenses of the

issue/offer, including

estimated expenses

charged to the

investor by the issuer

or the offeror.

The total net proceeds of the offer are estimated to be ISK 3,000

million if all the new shares in the offer are fully subscribed for. The

nominal value of each of the new shares will be one Icelandic króna

and all the new shares will belong to the same share class as the

existing share capital in TM at the beginning of the offer.

The estimated net proceeds of the offer will be approximately ISK

2,950 million, after deducting expenses of the offer of an estimated

ISK 50 million.

E.2a Reasons for the offer,

use of proceeds,

estimated net amount

of the proceeds.

The aim of the offer is to fund the acquisition by TM of all of the share

capital of Lykill fjármögnun hf.

The estimated net proceeds of the offer is approximately ISK 2,950

million.

TM intends to use the net proceeds to either: a) pay the purchase price

for Lykill fjármögnun hf. or b) repay debt financing which TM may

raise for the acquisition. In addition to using the net proceeds of the

offer for the above purposes, TM intends to pay the purchase price for

Lykill fjármögnun hf. by selling assets. TM has obtained debt

financing amounting to up to ISK 3,000 million for this transaction in

order to maintain flexibility in managing the asset portfolio.

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E.3 A description of the

terms and conditions

of the offer.

The offer is i) a rights issue by TM of a total of 93,750,000 new shares

in TM, at a subscription price of ISK 32.0 a share, to parties who are

registered shareholders in TM at 17.00 GMT on 12 December 2019, or

parties who have had preemptive rights to the new shares transferred

to them, and secondly ii) a public share offer, both in accordance with

the terms set out in this prospectus. References to the “offer” in this

summary apply to the rights issue and the public share offer which is

taking place simultaneously.

If holders of preemptive rights do not exercise their rights to the new

shares in full, those shares which are not subscribed for are expected

to be allocated to investors in the public offer. However, if holders of

preemptive rights do exercise their rights to the new shares in full, no

shares will be allocated to the public offer.

Shareholders in TM are permitted to transfer their preemptive rights to

the new shares. Notification of this transfer and the subscription of the

new transferee needs to have been received no later than 17.00 GMT

on 12 December 2019.

The main dates concerning the offer are as follows:

Reference date of preemptive rights

to new shares: 12 December 2019 17.00 (GMT)

Offer period for the rights issue and

public share offer begins: 9 December 2019 10.00 (GMT)

Deadline to notify the manager of the

transfer of preemptive rights: 12 December 2019 17.00 (GMT)

End of offer period: 12 December 2019 17.00 (GMT)

Allocation of new shares to investors

(both in rights issue and public offer): 13 December 2019 (estimated)

Notification of allocation and

payment instructions sent to

investors:

13 December 2019 (estimated)

Due date of payment for

subscriptions: 17 December 2019 (estimated)

Delivery of new shares to investors: 18 December 2019 (estimated)

New shares admitted for trading and

trading commences on stock

exchange:

18 December 2019 (estimated)

The above dates assume that the issuer does not change the subscription

period, the processing of subscriptions does not take shorter or longer than

the seller expected and the issuer’s application for the admission for trading

of the new shares on the Main Market of Nasdaq Iceland is responded to

within the timeframe expected by the issuer.

Participation in the offer by investors is subject to conditions, such as the

marketing of the offer and financial competence. Specific rules apply to

employees of Arion Bank hf. intending to participate in the offer.

Subscriptions from investors will be submitted on a special electronic

subscription form which can be accessed online at

www.arionbanki.is/tm-utbod. Conditional subscriptions will not be

accepted. Investors should indicate in their subscription the total

purchase price for the shares which they wish to purchase in the offer

and the investor is then committed to buying for the amount specified

on the subscription website. Subscriptions received outs ide the offer

period are considered invalid.

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Financial institutions which have asset management operations are

given the opportunity to submit subscriptions on behalf of one or more

investors on a special subscription form which can be obtained from

the manager. If financial institutions which have asset management

operations intend to submit a subscription, one or more, on behalf of

investors who own and intend to exercise preemptive rights to the new

shares, this financial institution in question shall submit a subscription

to this end, stating the name and ID number of each holder of

preemptive rights.

Holders of preemptive rights to the share capital of TM, i.e.

shareholders on the reference date which is 12 December 2019, 17.00

GMT, or otherwise parties who have notified their transfer of such

preemptive rights before that time in accordance with the rule of the

offer, have priority in the allocation of shares in the offer and shares

will only be allocated in the public share offer if holders of preemptive

rights do not exercise their preemptive rights in full.

It is planned to announce the results of the offer publicly in the

European Economic Area before 09.00 GMT on 13 December 2019.

An announcement will also be published on TM’s website,

www.tm.is/fjarfestar.

The attention of investors is drawn to the authorization of TM to cancel

unpaid subscriptions and to reallocate the resulting new shares, and the

authorization of TM to collect payment for unpaid subscriptions.

E.4 A description of any

interest that is

material to the

issue/offer including

conflicting interests.

The attention of investors is drawn to the interests that Arion Bank hf.

may have in connection with the offer of new shares in TM hf:

The Corporate Finance department of the Corporate &

Investment Banking division of Arion Bank is managing the

process of getting new shares issued by TM hf. admitted for

trading on the Main Market of Nasdaq Iceland, and this

includes advice to the representatives of the issuer on the

necessary measures in this respect, and advice on the

preparation of a prospectus, and the manager receives a fee

from the issuer for this service.

The Corporate Finance department of the Corporate &

Investment Banking division of Arion Bank is managing the

proposed rights issue and public share offer and the manager

receives a fee from the issuer for this service.

The TM hf. group is a general customer of Arion Bank hf. and

the Bank furthermore performs market making for the

company’s shares.

It should also be noted that the employees and management of TM, and

the employees and management of Lykill fjármögnun hf. who are also

shareholders in TM, may have been involved in the preparation of this

prospectus. The participation of such persons in the rights issue and

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public share offer is not restricted and in other respects the internal

rules of TM and Lykill fjármögnun apply to the participation of

employees in securities transactions.

E.5 Name of the person or

entity offering to sell

the security.

Lock-up agreements:

the parties involved;

and indication of the

period of the lock up.

The manager of the offer is Arion Bank hf., ID-No. 581008-0150,

Borgartún 19, 105 Reykjavík.

There are no sales restrictions in relation to the offer.

E.6 The amount and

percentage of

immediate dilution

resulting from the

offer.

If holders of preemptive rights in TM do not exercise their rights to

buy shares in the offer, they will be subject to up to 13.8% dilution or

the equivalent of ISK 0.4 a share.

E.7 Estimated expenses

charged to the

investor by the issuer

or the offeror.

No special costs will be imposed on the investor in respect of the

transaction by the seller, manager or issuer. Investors need to establish

themselves whether any costs or fees will be charged by other parties

in connection with the transaction. It should be noted that if the

investor does not own a custody account at the depository specified in

the subscription, Arion Bank hf. will open a custody account in the

name of the investor at Arion Bank hf. (and at the Nasdaq CSD) so that

it is possible to receive the investor’s shares in accordance with the

above and the Bank reserves the right to collect a fee from the investor

for storing the shares.