EquitiesCurrent Situation and ProspectsEarnings EstimatesFirst Quarter and 2006

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Equities Current Situation and Prospects – Earnings estimates for Q1 and for 2006

2006:3 6 April 2006

2005:

ummary

hare Prices Reflect Companies’ Value ndsbanki Research’s assessment of the largest companies listed on the Iceland Stock change (ICEX) indicates that these equities can be expected to give a 14% return in the ming 12 months. In our estimation, 11.5% is a fair discount rate for the domestic equity arket, taking into consideration the risk involved in such investment and the currency mposition of the companies’ income and expenses. The outcome of our analysis is thus that arket prices currently correspond well to their value. Key price ratios, including P/E, price--cash flow, price-to-book and EV/EBITDA, support this conclusion.

K ranks third, following GBP and EUR Landsbanki Research Report authoris: Anna M. Ágústsdóttir +354 410-7385 anna.agustsdottir@landsbanki.isÁstrós B. Viðarsdóttir +354 410-7387 astros.vidarsdottir@landsbanki.is Edda Rós Karlsdóttir +354 410-7381 eddaros@landsbanki.is Guðmunda Ó. Kristjánsd+354 410-7384 gudmundak@landsbanki.is Hermann M. Þórisson +354 410-7388 hermann.m.thorisson@landsbanki.is Ingi S. Þórisson +354 410-7389 ingi.s.thorisson@landsbanki.isKarl K. Másson +354 410-7394 karl.k.masson@landsbanki.is Kristján P. Bragason +354 410-7393 kristjan.p.bragason@landsbanki.is Head of Research: Edda Rós Karlsdóttir +354 410-7381 eddaros@landsbanki.is English text: Keneva Kunz keneva.kunz@landsbanki.is Páll Hermannsson pall.hermannsson@landsbanki.is Icelandic letters: ð/Ð (pronounced like th in English this) þ/Þ (pronounced like th in English think)

rge companies listed on ICEX have a very international scope. Our examination of the rrency breakdown of these 17 leading companies’ income and expenses reveals that the P is their most important currency (comprising 33% of income and expenses), followed by

e EUR (24% of income and 23% of expenses). The ISK ranks third (23% of income and 21% expenses) and the USD fourth (11% of income and 16% of expenses).

K weakening boosts the value of 98% of equities e have divided these companies into three categories according to the impact the recent K depreciation has on their ISK value.

• The first category includes companies which rise substantially in value as the ISK depreciates (at least 50% of the depreciation is reflected immediately in the increased value of their cash flow in ISK terms). 53% of the market falls into this category.

• The second category includes companies which rise somewhat in value as the ISK depreciates (10-49% of the depreciation is reflected immediately in the increased value of their cash flow in ISK terms). Around 45% of the market falls into this category.

• The third category includes companies which decrease in value as the ISK depreciates. 2% of the market falls into this category. On the other hand, these last companies’ budgets are in fact based on the assumption that the majority of their income and expenses even this year will originate abroad.

e strong correlation which has been evident between the ISK exchange rate and equity ice developments recently therefore does not reflect economic reality but rather a strong versal of market sentiment in a very short space of time, with the previous widespread timism giving way to general pessimism.

onclusion the short term, we expect the equity market to continue to be very sensitive to media scussion of Iceland’s creditworthiness and that of Icelandic banks. This can be expected to ntinue until the current stir concerning the banks’ funding on international markets bsides.

mailto:anna.agustsdottir@landsbanki.ismailto:eddaros@landsbanki.ismailto:eddaros@landsbanki.is

p. 2

Factors which could contribute to a market rise:

• Company valuations indicate that equity prices are a good reflection of the companies’ value.

• Further ISK weakening has a positive impact on the value of 98% of the market.

Factors which could depress the market:

• Market sentiment is rather sober, and there appears to be a strong tendency to see the negative side of all news.

• Credit is more expensive. • Since domestic interest rates are very high, risk-free deposit accounts serve as stiff

competition for equities.

Taking the circumstances into consideration, a further slide in the equity market cannot be excluded. If this does occur, however, we expect this to be a temporary occurrence. The long-term outlook for the equity market in general is therefore positive.

p. 3

Market developments in Q1 of 2006

The course of the ICEX-15 in Q1 resembles nothing so much as a rollercoaster. To begin with it climbed sharply, rising from the beginning of the year by around 25.1% by mid-February. When the quarter concluded, the ICEX-15 was up 6.5% from the beginning of the year, a good deal below its Q1 peak and historical record high on 16 February of 6,995.

The ICEX-15 index in Q1 was practically a rollercoaster

ICEX-15 last two quarters

4,000

4,500

5,000

5,500

6,000

6,500

7,000

Oct 2005 Nov 2005 Dec 2005 Jan 2006 Feb 2006 Mar 2006 Apr 2006

The rapid rise of Q4 2005, when the ICEX-15 rose by 19.5%, has subsided somewhat. Compared to the average increases in recent years, the Q1 increase is slightly below average, but quarterly increases have, in the past few years, been very sizeable. If the increase is, however, compared to quarterly increases over the past 10 years, it turns out to be above the average increase of 5.6%.

The Q1 increase, compared to quarterly increases over the past

10 years, turns out to be above the average increase of 5.6%

Quarterly increases 2002-2006

13.1%

-0.1%

-0.5%

3.8% 5.0%5.7%

21.1%

16.4%

20.7%

15.8%

28.7%

-11.6%

16.6%

5.5%

12.0%

19.5%

6.6%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2002 2003 2004 2005 2006

p. 4

Share prices of ten of the 15 companies in the ICEX-15 index rose during the quarter while the other five dropped or remained unchanged.

Share price changes for individual companies in Q1 2006

-33%-10%

-6%-5%-5%

-3%0%0%1%1%2%

4%7%

9%9%

13%13%14%

20%22%22%

43%57%

-40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60%

Flaga GroupIcelandic Group

Atorka GroupMosaic Fashions

VinnslustöðinLandsbankinn

AlfescaNýherji

Bakkavör GroupÖssur

HampiðjanGlitnir Bank

Avion GroupStraumur-Burðarás

Kaupthing BankFL GROUP

DagsbrúnMarel

Actavis GroupKögun

HB GrandiP/F Atlantic Petroleum

TM Insurance

Of the 17 companies for which we published earnings estimates at the beginning of this year, seven published results in line with or above our expectations, while in eight instances the results fell short of our expectations. As Mosaic’s accounting year differs from the calendar year, the company has not yet published its 2005 results and we do not issue an investment recommendation for Landsbanki.

Of the 17 companies for which we published earnings estimates at the

beginning of this year, seven published results in line with or

above our expectations, while in eight instances the results fell short

of our expectations

Publication of

results

Share price since Q1 results

Outcome compared to forecast

Alfesca 15.2.06 -4.20% Above Kaupthing Bank 13.2.06 -17.70% Above Actavis 7.3.06 5.30% Above HB Grandi 9.3.03 2.70% On target

FL Group 10.3.06 -15.30% On target

Bakkavör 28.2.06 -4.80% On target

Atorka 20.2.06 -2.40% On target

Dagsbrún 6.2.06 19.30% Below

Straumur-Burðarás 26.1.06 -8.50% Below

TM Insurance 9.2.06 32.80% Below

Icelandic Group 17.3.06 7.50% Below

Marel 7.2.06 8.50% Below

Kögun 22.2.06 15.20% Below

Össur 7.2.06 10.00% Below

Glitnir Bank 31.1.06 -9.50% Below

Mosaic 24.4.06

Landsbanki 27.1.06 -13.40%

At the beginning of this year we expressed the opinion that the Icelandic equity market was rather high priced, and lacked preconditions for major share price increases. During the early weeks of Q1 the market appeared to think otherwise, with last year's increases continuing at a brisk pace. Share prices began to slide after mid-February in the wake of negative media

p. 5

reports on the Icelandic economy and Icelandic banks' possibilities of financing further growth. These discussions resulted in a major ISK depreciation. In the estimation of Landsbanki Research, the decline is also the result of overly high share prices for many companies near the beginning of this year. Due to the ISK weakening, and share price decreases in recent weeks, the market price level more accurately reflects real value than previously. More on this later.

International comparison

Foreign markets rise steeply in Q1 A comparison of global equity indices reveals major increases on foreign markets in Q1, in most cases exceeding those of Q4 2005.

A comparison of global equity indices reveals major increases on

foreign markets in Q1 The Norwegian OBX and Finnish OMX H25 indices rose the most in Q1, by 18% each, while the ICEX-15 rose by 6.5%. On the average, European indices outpaced those in the US. The Danish OMX C20 index rose the least of those included in our comparison, inching upwards by only 0.4% during the quarter.

Share price changes on equity markets in Q1 of 2006

0.4%

3.7%

3.7%

5.9%

6.0%

6.1%

6.2%

6.5%

10.4%

10.4%

17.8%

18.1%

0% 5% 10% 15% 20%

Denmark - OMX C20

Dow Jones

USA - S&P 500

Japan - Nikkei

MSCI World

Nasdaq Comp

UK - FTSE 100

Iceland - ICEX15

Germany - DAX

Sweden - OMXS30

Finland - OMX H25

Norway - OBX

Impact of ISK depreciation on the Icelandic equity market

During Q1 of this year, the ISK has weakened by around 13%. The impact of the depreciation on ICEX-15 company operations and share prices varies. It is important to differentiate between the impact on accounts and on the companies’ cash flow and thereby on their market value.

Landsbanki Research has compiled estimates of the currency breakdown of income and expenses for 2006 for companies included in the ICEX-15 with the exclusion of Medcare Flaga and the addition of HB Grandi and Icelandic Group. Attention is drawn to the fact that only around 23% of the companies’ estimated income and some 21% of their expenses are in ISK. As a result, the value of these companies in ISK terms increases with an ISK depreciation.

Only 23% of the companies’ estimated income is in ISK and around 21% of their expenses

p. 6

Estimated 2006 income breakdown by currency Estimated 2006 expense breakdown by currency

ISK21%

EUR23%

USD16%

GBP33%

Other7%

ISK23%

EUR24%

USD11%

GBP33%

Other9%

Since the share capital of all of these companies is in ISK, the depreciation causes a temporary drop in equity. Due to the increased profit due to the increase in their foreign earnings and margin, on the other hand, their equity soon rises once more. In Landsbanki Research’s models, the temporary drop in equity means an increased risk for shareholders, resulting in a higher discount rate. This reduces slightly the positive impact of the ISK weakening on the companies' value. The overall impact of the depreciation, however, is clearly very positive.

Companies which keep ISK accounts and have financed themselves through foreign borrowing will have to expense sizeable currency losses following the ISK depreciation. An ISK depreciation increases the loan principal in ISK terms and creates a currency loss on the liability. This is either recognised in profit and loss or in equity. In those instances where it is recognised in profit and loss, we can expect lower profits. The impact on cash flow, however, is quiet different. The currency loss on foreign-denominated loans is not all paid during the period in which it is recognised, but is spread over the duration of the loan.

Companies which keep ISK accounts and have financed themselves

through foreign borrowing will expense sizeable currency losses

following the ISK depreciation

The opposite applies to companies using another reporting currency who have financed their operations in ISK. In such instances, the ISK weakening creates a currency gain.

The banks are in a special position with regard to the impact of the ISK depreciation. All the banks have a major portion of their assets (59%-88%) and liabilities (51%-87%) in foreign currencies. An ISK weakening would increase the banks’ profits, as the increase in interest income would exceed the increase in interest expense, assuming that the interest differential is positive. Furthermore, part of the banks’ equity portfolio is in foreign equities, and an ISK depreciation would boost trading gains on foreign equities. Our conclusion is that all the banks would return a higher profit if the ISK depreciates.

The banks are in a special position with regard to the impact of the ISK

depreciation

Since the banks’ equity consists of primarily ISK assets, an ISK depreciation would cause their capital ratios to drop. The impact would be considerably less, however, than in 2001, when the ISK practically plummeted. The reason is that all the banks (with the exception of Straumur-Burðarás) have subordinated debt in foreign currencies. The value of this subordinated debt thus mirrors ISK currency rate developments, thereby reducing fluctuations in the banks’ capital ratios.

Since the banks’ equity consists of primarily ISK assets, an ISK

depreciation causes their capital ratios to drop

In the longer term, increased profit adds to the value of the banks. Immediately following an ISK weakening, however, the banks can be expected to devote part of their profit to strengthening their equity and increasing their capital ratios.

p. 7

ISK weakening boosts the value of 98% of equities

We have divided the companies into three categories according to the impact the recent ISK depreciation has on their ISK value.

ISK depreciation only effects one company negatively but the company has announced changes in operations

making it more sensitive to the ISK • The first category includes companies which rise substantially in value as the ISK

depreciates (at least 50% of the depreciation is reflected immediately in the increased value of their cash flow in ISK terms). Ten companies fall into this category, representing 53% of the market cap of the ICEX Main List.

• The second category includes companies which rise somewhat in value as the ISK depreciates (0-49% of the depreciation is reflected immediately in the increased value of their cash flow in ISK terms). Six companies fall into this category, representing 45% of the ICEX Main List market cap.

• The third category includes companies which are negatively affected by the ISK depreciation. This category includes Dagsbrún, which accounts for 2% of the ICEX Main List market cap. The company has already announced changes in its operations, as explained in our earnings estimate for the company. When the changes have gone through we expect the company to move to the second category.

Impact of a 10% ISK depreciation on the market cap of ICEX-listed companies included in the forecast

Large impact Medium impact Negative impact

more than 50% 0-49% less than 0%

Actavis Atorka (Dagsbrún)

Alfesca Glitnir banki

Bakkavör Landsbanki

Flaga FL Group

HB Grandi Kögun

Icelandic Group Straumur-Burðarás

Kaupþing Banki

Marel

Mosaic

Össur

This examination clearly demonstrates that the strong correlation which has been evident between the ISK exchange rate and equity price developments recently does not reflect economic reality but rather a strong reversal of market sentiment in a very short space of time, with the previous widespread optimism giving way to general pessimism.

Weighting Recommendation

In this instance, we have given weighting recommendations for eight companies, based on their share prices as of market closing on 4 April 2006. The companies are selected for weighting recommendation on the basis of their liquidity and the distribution of ownership. Our general criterion is that the 10 largest shareholders may not hold more than 80% of the company’s total share capital. In addition, we consider the number of transactions in the shares, turnover velocity and their spreads on the market during the past 12 months. These eight companies represent over 68% of the total market capitalisation of the ICEX Main List. Landsbanki is not included, since it would hardly be fitting for Landsbanki Research to publish a valuation and opinion of the company. Were Landsbanki to be included, the weighting recommendation would cover 81% of the market cap of ICEX Main List companies.

Our weighting recommendation is based on companies’ share prices as

of market closing on 4 April this year

All of the companies for which recommendations are given fulfil these criteria except Alfesca and Össur, where the 10 largest shareholders hold just over 80% of the share capital. An exception is made in Össur’s case, since it exceeds the ownership restriction only marginally. Dagsbrún fulfils our requirements, but since the company has undergone extensive changes in recent weeks and our valuation of the company has not been updated, it is not included in our recommendations this time.

p. 8

Changes from latest report The weighting recommendation was last updated 6 January 2006. In the interim new valuations have been published for Glitnir, Marel and Össur. Since the last report, the ICEX-15 index has fallen by 6.3%, or the equivalent of a 24% annualised decrease. Financials have been in the forefront of the slide, after rising substantially since mid-February.

The weighting recommendation was last updated 6 January 2006. In the

interim new valuations have been published for Glitnir, Marel and Össur

Company Expected

return % of market

Weighting in Research’s collection Market cap

Weighting Recommendatio

n Kaupthing Bank 14.8% 26.8% 39.7% 512,990,100 Marketweight Glitnir Bank 15.9% 12.1% 17.9% 231,436,800 Overweight

Actavis Group 4.6% 9.8% 14.5% 187,671,526 Underweight

Straumur-Burðarás 8.8% 13.0% 168,116,400 Marketweight

FL Group 25.5% 6.1% 9.1% 117,081,600 Overweight

Össur 12.3% 2.2% 3.3% 42,596,866 Marketweight

Marel 11.1% 0.9% 1.4% 17,539,613 Marketweight

Atorka 2.0% 0.8% 1.2% 15,484,248 Underweight

Pricing of the market

The expected return of the companies examined for the next 12 months is currently 13.8%. In our estimation, based on the risk involved in investment in domestic equities, an average rate of 11.8% is a fair discount rate for this market. The relatively low discount rate used, as compared with risk-free interest rates in Iceland (the yield on the Treasury note series RIKB13 was 8.9% at closing on 5 April), can be explained, as previously discussed, by the fact that the majority of the companies’ cash flow originates abroad.

The expected return of the companies examined for the next 12

months is currently 13.8%

Based on the current weighting of these companies in our weighting recommendation, during the upcoming 12 months the group will return 2% above the discount rate applied (11.8%). The outcome of our weighting recommendations is that the market appears to be fairly priced.

The outcome of our weighting recommendations is that the market

is fairly priced

Impact of ISK depreciation on the weighting recommendation

For the sake of curiosity, we have examined what effect a further 10% ISK depreciation (from the trade-weighted index value of 119.51) would have on the companies included in our weighting recommendation. It turns out that the change would be positive for all the companies except Dagsbrún, based on that company’s activities in the first half of 2006. The impact varies depending upon how largely domestic activities figure in each company’s operations. The further depreciation boosts the companies’ expected returns from 13.8% to 20.2%.

An additional 10% depreciation of the ISK would boosts the

companies’ expected returns from 13.8% to 20.2%

Company Expected

return % of market

Weighting in Research’s collection Market cap

Weighting Recommendation

Kaupthing Bank 21.6% 26.8% 39.7% 512,990,100 Overweight Glitnir Bank 21.4% 12.1% 17.9% 231,436,800 Overweight

Actavis Group 15.3% 9.8% 14.5% 187,671,526 Marketweight

Straumur-Burðarás 13X---- 8.8% 13.0% 168,116,400 Underweight

FL Group 30.2% 6.1% 9.1% 117,081,600 Overweight

Össur 23.9% 2.2% 3.3% 42,596,866 Overweight

Marel 19.3% 0.9% 1.4% 17,539,613 Marketweight

Atorka 5.9% 0.8% 1.2% 15,484,248 Underweight

p. 9

Key equity market ratios

Based on their 2005 performance and share prices at year-end 2005, the P/E ratio for our collection of companies was 11.2. The expected P/E ratio, based on our earnings estimates for 2006 and share prices as of 31 March 2006, is 11.1. Our expected P/E ratio for 2006 (as of 4 January) was 15.4, but since that time the ICEX-15 index has dropped and our expectations for 2006 earnings have risen. The ISK depreciation is part of the reason for this.

Weighted P/E ratio for our collection of companies

34.5

42.5

22.7

13.0 13.9 13.714.9 15.1

19.1

24.7

21.0

16.614.9

11.2 11.1

0

5

10

15

20

25

30

35

40

45

Dec 00 Jul 01 Dec 01 Jul 02 Dec 02 Jul 03 Dec 03 Jun 04 Oct 04 Dec 04 Mar 05 Jun 05 Sep 05 Dec 05 2006e

The expected P/E ratio for the Icelandic market as a whole for 2006 is relatively low in an international context. In making such a comparison, however, it must be borne in mind that financial undertakings are a major component in this market, comprising around 75% of market cap, which is considerably more than is the case for foreign markets. In the Swedish OMX S30 index, for instance, financials weigh around 26%. P/E ratio for individual companies

0

10

20

30

40

50

60

GRN

D

OSS

R DB

MAR

L

ACT A

KOG

N

BAKK

AVIO

N

MO

SAIC IG

GLB TM

KAU

P

ATO

R FL

STRB

Expected 2006 2005

94 117

The ratio for the Icelandic market excluding financials (and FL Group as well) is 19.4. Excluding the Icelandic banks from our calculations, however, does not give a fair picture since foreign banks are included in the foreign indices.

p. 10

Forecast for Q1 and for 2006 as a whole

We have compiled earnings estimates for 17 companies on the ICEX Main List. Together they represent 86% of the total market cap. If Landsbanki were included, the estimates would cover 99% of total ICEX market cap.

All of the companies for which a forecast is given have undergone major changes during the past 12-15 months. With the exception of TM Insurance, all of them have been involved in mergers or takeovers. This was specifically discussed in our earnings estimates for 2005 and 2006, published at the beginning of this year. This must be borne in mind in making comparisons with previous years.

We expect six of the 17 companies to report losses in Q1: Alfesca, Dagsbrún, HB Grandi, Icelandic Group, Össur and Avion Group. The reasons vary. Avion Group's loss is seasonal, as is common amongst companies in the travel industry. Össur is expected to expense considerable restructuring costs following acquisitions. HB Grandi, Icelandic Group and Dagsbrún will expense large amounts representing currency losses on foreign debt in the wake of the ISK depreciation.

According to our forecast, six companies of seventeen are

expected to report losses in Q1

Our earnings estimates for the year as a whole assume that profits of all the companies’, with the exception of TM Insurance and HB Grandi, will increase from their previous year’s profits. A major portion of this increase can be attributed to external growth. In absolute terms, the greatest increase is expected at FL Group (ISK 3.5bn, or the equivalent of 20%), Bakkavör (ISK 2.4bn, or 66%) and Actavis (ISK 2bn, or 31%). Furthermore, we expect an improvement of around ISK 3bn in the performance of Icelandic Group, which reported a loss of ISK 1.2bn last year. In relative terms, Alfesca is expected to show the greatest improvement in performance, around 540%. The profit of Mosaic Fashions is expected to increase by 126%.

Total profit will increase from that of the previous year by up to 540%

We expect TM’s profit to decrease by around 57% YoY and amount to ISK 3.1bn in 2006. The reason for the drop lies in the especially favourable equity market conditions last year, which we assume will be less favourable this year. The company’s insurance operations have been only just breaking even for some time and its profit almost completely the result of its financial income.

HB Grandi is expected to report an operating loss for 2006 as a whole, as a result of currency losses on foreign-denominated debt, while its cash flow will be substantially stronger YoY. The company’s EBITDA margin, for instance, is forecast to increase from 14% of its annual income in 2005 to almost 23% of its income in 2006.

p. 11

Actavis A year of integration and acquisitions

Actavis’s performance in Q4 2005 was very good, and surpassed our expectations. The results were characterised by strong organic growth and a high margin; the US generics firm Amide, in particular, has shown very high profitability. Just how advantageous that acquisition was, is becoming ever more apparent. Despite this, we have a tendency to give a rather cautious forecast for Q1 this year.

Closing market price 58.7 Market cap ISK 196.9 bn Valuation data Date of latest valuation 02.12.2005 Valuation ISK 148.5 bn Valuation share price 44.8 Valuation updated on 31.03.2006 Updated valuation* 51.8 Weighting recommend. Underweight *Particulars as provided for in most recent valuation with updated discount rate, exchange rates and securities holdings. Market data, past 12 mos. Highest price 60.5 Lowest price 39.3 Avg. spread 0.58% Avg. daily turnover ISK 454.4 million Avg. no. of trades daily 32.1 Turnover velocity 75.3% Holding of 10 largest shareh. 68.6% Analyst: Guðmunda Ó. Kristjánsd. +354 410-7384 gudmundak@landsbanki.is

• 2006 will be a year of integration for Actavis, following its major acquisitions of the past year or two. The company has set itself fairly conservative targets for the year and the Q1 results will set the tone for the coming quarters. Despite the fact that Actavis is currently one of the five largest global generics producers, the company has not ceased scouting for further acquisitions.

• In Q1 2006, the US generics operations of Alpharma will be fully included in the group's accounts for the first time. This will have a significant impact on its results, since Alpharma's estimated income is close to half of that of the group as a whole. Alpharma had 180-day exclusive rights to sell the cardiac pharmaceutical Gabapentin, which expired in Q2 2005. As a result, a considerable YoY drop in Alpharma’s income can be expected.

• Acquisition of the Bulgarian pharmaceutical distributor Higia was concluded in November last year and this company will now also be fully included in the group’s accounts for the first time. Its estimated income, however, is only around 7.5% of the group total.

• Actavis recently acquired the Romanian generics company Sindan, which specialises in oncology pharmaceuticals. Included in Actavis’s accounts as of 1 April, Sindan will be yet another good addition to the company. It is expected to grow by 21% annually for the next two years. The acquisition was motivated by the fact that patents for a good number of oncology products will expire in the near term and up until now Actavis has not manufactured this type or product.

• Around mid-March, Actavis announced that the company had made an informal offer for Croatian generics producer Pliva. Pliva’s management soon rejected this offer as too low. In response, Actavis’s leaders have stated that they are prepared to list the company on the Zagreb Stock Exchange if the purchase is concluded. The move is clearly intended to win the support of the Croatian state and pension funds, which own close to 20% in the company. In acquiring companies in Central and Eastern Europe, Actavis has, for instance, agreed to provisos concerning specific local investments or promising no employee layoffs. Similar tactics are not unlikely to be followed in this instance as well.

Q1 05 Q1 06 2005 2006 Actual Change Forecast Change Actual Change Forecast Change 04/05 05/06 04/05 05/06 EUR thousands Income 101,790 -19.1% 332,150 226.3% 579,264 28.2% 1,400,000 141.7% Expenses 77,228 -14.3% 270,702 250.5% 432,100 28.2% 1,120,000 159.2% EBITDA 24,562 -31.3% 61,448 150.2% 147,164 28.3% 280,000 90.3% Profit 11,094 -45.0% 20,406 83.9% 81,003 99.8% 96,600 19.3% As a ratio of income EBITDA 24.1% 18.5% 25.4% 20.0% Profit 10.9% 6.1% 14.0% 6.9% Key ratios 12M Price/Earnings ratio (P/E) 26.1 28.6 26.2 24.2 12M EV/EBITDA 15.0 17.3 21.0 11.4 Earnings per share € 0.004 € 0.006 € 0.026 € 0.029 Return on equity (ROE) 15.1% 8.0% 19.2% 9.1% Equity 41.2% 42.5% 42.5% 42.5%

p. 12

Alfesca hf. High purchasing costs for salmon continue

Alfesca’s results in Q2 of its accounting year (October-December 2005) exceeded our expectations slightly, as a result of successful cost control and lower financing expenses. The company’s operations are highly seasonal, relying to a considerable extent on good sales during holiday periods. Around half of the year’s profit comes from December sales, for instance. The quarter just concluded (Q3) is generally a rather unexciting one, especially when it does not include Easter.

Closing market price 3.9 Market value ISK 22.9 bn Valuation data Date of latest valuation 25.08.2005 Valuation ISK 29.8 bn Valuation share price 5.1 Valuation updated on Under review Updated valuation* Under review Weighting Recommend. Marketweight *Particulars as provided for in most recent valuation with updated discount rate, exchange rates and securities holdings. Market data, past 12 mos. Highest price 5.2 Lowest price 3.6 Avg. spread 1.02% Avg. daily turnover ISK 38.0million Avg. no. of trades daily 6.7 Turnover velocity 37.6% Holding of 10 largest shareh. 82.4% Analyst: Kristján Bragason +354 410-7393 kristjan.p.bragason@landsbanki.is

• Purchasing prices for salmon have risen during the past quarter (January-March) due to high demand. Prices have not been higher since 2000 and are predicted to remain at this level or even climb still further. Since salmon sales account for around 1/3 of Alfesca’s turnover, the high price has cut into its margin considerably.

• The cost of goods sold in Q3 has comprised too large a portion of Alfesca's sales income with the result that even a minor setback could send the company into the red. Management has stated that measures have been taken to reduce cost and increase prices to retailers. In our estimation, price increases cannot be completely passed on to customers, and Alfesca’s performance will to a considerable extent continue to be determined by the development of raw material prices.

• According to management, the past quarter’s sales have been good, as following high holiday season sales the shelves of most retailers were close to empty as the year began. It is a cause for some concern, however, that statistics from France, a very important market, show that economic growth during the quarter was only around 0.6%. Easter also falls in Q4 of Alfesca’s accounting year in this instance, boosting that quarter’s performance thanks to sales of high-margin products during the holiday season.

• News and media reports on avian flu are a factor of uncertainty for Alfesca’s operations. The discussion has fortunately taken place for the most part outside of peak sales periods. What impact bird flu concerns will have on Easter sales remains to be seen.

• Fluctuations in the ISK exchange rate have a negligible impact on Alfesca’s operations, since practically all its income and expenses are in EUR and GBP. The ISK value of Alfesca, however, naturally increases with the depreciation.

Q3 04/05 Q3 05/06 04/05 05/06 Actual Change Forecast Change Actual Change Forecast Change 03/04 04/05 04/05 05/06 EUR thousands Income 113,866 -13.7% 122,662 7.7% 394,816 - 597,865 51.4% Expenses 105,427 -17.8% 117,364 11.3% 397,576 - 551,172 38.6% EBITDA 8,439 165.0% 5,298 -37.2% -2,760 - 46,693 - Profit 2,758 131.0% -348 - 2,572 - 14,939 480.8% As a ratio of income EBITDA 7.4% 4.3% -0.7% 7.8% Profit 2.4% -0.3% 0.7% 2.5% Key ratios 12M Price/Earnings ratio (P/E) 19.0 25.4 117.2 18.4 12M EV/EBITDA 9.8 14.2 - 10.9 Earnings per share 0.00 € -0.00 € 0.00 € 0.00 € Return on equity (ROE) 4.3% -0.5% 3.8% 21.9% Equity 40.5% 39.2% 37.6% 39.2%

p. 13

Atorka High trading gains

Atorka’s Q4 results were in line with our expectations, with profit amounting to ISK 850m, up from ISK 420m in the same period of the previous year. This performance was largely driven by financial income of ISK 1,336m in Q4, compared with ISK 119m in the same period of 2004.

Closing market price 5.8 Market cap ISK 19.6bn Valuation data Date of latest valuation 28.12.2004 Valuation Under review Weighting recommend. Underweight *Particulars as provided for in the most recent valuation with an updated discount rate, exchange rates and securities holdings. Market data, past 12 mos. Highest price 6.6 Lowest price 5.2 Avg. spread 1.00% Avg. daily turnover ISK 46.9m Avg. no. of trades daily 10.4 Turnover velocity 67.6% Holding of 10 largest shareh. 53.0% Analyst: Karl K. Másson +354 410-7394 karl.k.masson@landsbanki.is English text: Páll Hermannsson +354 410-6996 pall.hermannsson@landsbanki.is

• During Q1 2006, Atorka stepped up its investments in the UK by raising its share in Romag Holding to 10.0%. The company also acquired an 18.5% stake in Interbulk Investments – the world’s third-largest tank container operator – for ISK 500m. This acquisition was financed solely with equity.

• Atorka completed its takeover of the Iceland Drilling Company (Jarðboranir), which has now been delisted from the Iceland Stock Exchange. Part of the acquisition price was paid with shares in Atorka, whose board exercised an authorisation to increase the company’s share capital by a nominal value of ISK 600m at the share price of 6, or ISK 3.6bn.

• The company’s shareholder base was strengthened in the quarter when Reykjavik Energy acquired a 5.91% stake in Atorka in exchange for its shares in the Iceland Drilling Company. The Pension Fund of Commerce also joined the shareholder base with a 2.37% stake.

• During Q1 2006, Atorka sold its entire holding in Dagsbrún, a 1.25% stake at year-end 2005. The estimated selling price was about ISK 330m, and the realised gain approximately ISK 77m.

• Atorka has been working on improving its information disclosure to the market, e.g. by hiring an investor relations officer and publishing more detailed information than previously.

• The company has grown substantially in the past few years; its estimated balance sheet is now nearly tenfold its size at year-end 2002. This growth has been financed partly through borrowing, with all loans ISK-denominated at year-end 2005. Negative coverage of the Icelandic economy and its companies’ indebtedness may cause credit access and terms to deteriorate in the short term. This may lead to slower growth for Atorka than previously expected, although the company has a very good equity ratio.

• We expect very good Q1 results, mostly due to high financial income, which we estimate at approximately ISK 1.4bn. Most of the income is being produced by Atorka’s foreign assets portfolio, due to a considerable rise in its UK holding’s market cap in their local currency but, primarily, the ISK depreciation.

Q1 2005 Q1 2006 2005 2006 Actual Change Forecast Change Actual Change Forecast Change 04/05 05/06 04/05 05/06 mISK Net financial income 656 -62.3% 1,691 157.9% 2,118 -41.0% 3,828 80.8% Operating expenses 145 - 93 -36.1% 612 190.3% 370 -39.6% Profit/Loss 659 -53.6% 1,311 98.9% 1,491 -48.4% 2,836 90.2% Key ratios 12M Price/Earnings ratio (P/E) 5.7 9.0 11.8 6.8 Price-to-book ratio (P/B) 1.9 1.2 1.8 1.2 Earnings per share (EPS) ISK 0.24 ISK 0.41 ISK 0.54 ISK 0.88 Return on equity (ROE) 33.0% 13.1% 15.3% 17.3% Equity ratio 51.4% 61.6% 48.7% 61.6%

p. 14

Avion Group Avion Group Improved performance this year Improved performance this year

Closing market price 40.0 Market value ISK 71.7bn Valuation data Date of latest valuation No valuation Valuation Valuation share price Valuation updated on Updated valuation* Weighting Recommendation *Particulars as provided for in most recent valuation with updated discount rate, exchange rates and securities holdings. Market data, past 12 mos. Highest price 45.4 Lowest price 39.2 Avg. spread 0.64% Avg. daily turnover ISK 52.3m Avg. no. of trades daily 11.4 Turnover velocity 17.2% Holding of 10 largest shareh. 77.5% Analyst: Anna M. Ágústsdóttir +354 410-7385 anna.agustsdottir@landsbanki.is ki.is

Avion Group in its present form has only existed since July 2005. Its operating year was modi-fied in 2005, and no longer coincides with the calendar year but begins instead on 1 Novem-ber and concludes on 31 October. The year 2005 was therefore only 10 months, from 1 January 2005 to 31 October 2005. The current forecast is for Q2 of the company’s operating year, i.e.1 February to 30 April 2006. This must be borne in mind in any quarterly comparisons.

Avion Group in its present form has only existed since July 2005. Its operating year was modi-fied in 2005, and no longer coincides with the calendar year but begins instead on 1 Novem-ber and concludes on 31 October. The year 2005 was therefore only 10 months, from 1 January 2005 to 31 October 2005. The current forecast is for Q2 of the company’s operating year, i.e.1 February to 30 April 2006. This must be borne in mind in any quarterly comparisons.

• has three profit divisions: Aviation Services handles maintenance and related services, as well as aircraft leasing. Charter & Leisure operations involve charter flights, seat provision and general travel services. The Shipping and Logistics division includes Eimskip and related companies.

• Avion Group has three profit divisions: Aviation Services handles maintenance and related services, as well as aircraft leasing. Charter & Leisure operations involve charter flights, seat provision and general travel services. The Shipping and Logistics division includes Eimskip and related companies.

Avion Group

• Avion’s operations are subject to seasonal fluctuation, with the company generally reporting losses for the first two quarters of each year and then profits in the latter two. All of the company’s profit is therefore derived from the second half of the year. This is due to the fact that by far the greatest share of income from Charter & Leisure’s activities is earned during the latter half of the year.

• Avion’s operations are subject to seasonal fluctuation, with the company generally reporting losses for the first two quarters of each year and then profits in the latter two. All of the company’s profit is therefore derived from the second half of the year. This is due to the fact that by far the greatest share of income from Charter & Leisure’s activities is earned during the latter half of the year.

• Eimskip recently signed an MoI to purchase a 50% holding in Innovate Holdings, a leading UK provider of climate-controlled transport and logistics services. The acquisition is expected to be formally concluded by the end of April. Our forecast for 2006 turnover assumes that the acquisition will be realised and takes this into consideration.

• Eimskip recently signed an MoI to purchase a 50% holding in Innovate Holdings, a leading UK provider of climate-controlled transport and logistics services. The acquisition is expected to be formally concluded by the end of April. Our forecast for 2006 turnover assumes that the acquisition will be realised and takes this into consideration.

• We assume that the Group will report a loss in Q2, primarily due to substantial expected losses on the Charter & Leisure division, in line with seasonal fluctuations in operations.

• We assume that the Group will report a loss in Q2, primarily due to substantial expected losses on the Charter & Leisure division, in line with seasonal fluctuations in operations.

• Avion Group’s management has said that the acquisition and disposal of assets are part of its regular activities and is included in its EBITDA, which has also been taken into consideration in our forecast.

• Avion Group’s management has said that the acquisition and disposal of assets are part of its regular activities and is included in its EBITDA, which has also been taken into consideration in our forecast.

• For the year as a whole, we have forecast a considerable improvement the performance of all three Avion divisions, as predicted by its management.

• For the year as a whole, we have forecast a considerable improvement the performance of all three Avion divisions, as predicted by its management.

• Avion Group’s keeps its accounts in USD, as the greatest share of its income, expenses and financial expenses are in USD and GBP. As a result, ISK fluctuations have no significant impact on the company’s foreign currency cash flow. The company’s ISK value appreciates as the ISK depreciates.

• Avion Group’s keeps its accounts in USD, as the greatest share of its income, expenses and financial expenses are in USD and GBP. As a result, ISK fluctuations have no significant impact on the company’s foreign currency cash flow. The company’s ISK value appreciates as the ISK depreciates.

Q2 05 Q2 06 2005 2006

Actual Forecast Change Actual Forecast Change 05/06 (10M) 05/06

m.USD

Income 387.4 392.2 1.2% 1,401.5 2,034.4 45.2%

Expenses - 380.4 - 1,286.3 1,873.6 45.7%

EBITDA - 11.8 - 115.2 160.7 39.5%

EBIT -2.6 -5.2 99.1% 61.4 97.7 59.3%

Profit 0.6 -9.1 - 42.7 59.7 39.9%

As a proportion of income

EBITDA - 3.0% 8.2% 7.9%

EBIT -0.7% -1.3% 4.4% 4.8%

Profit 0.2% -2.3% 3.0% 2.9%

Key ratios

12M Price/Earnings ratio - 20.4 - 17.4

12M EV/EBITDA - 12.7 - 10.5

Earnings per share - -0.01 0.04 0.06

Return on equity - -6.1% 17.0% 10.1%

Equity - 40.2% 30.2% 40.2%

p. 15

Bakkavör Group hf. Focus on exploiting synergies

Closing market price 49.4 Market value ISK 79.9 bn Valuation data Date of latest valuation 14.06.2005 Valuation ISK 83.4bn Valuation share price 39.9 Valuation updated on Under review Updated valuation* Under review Weighting Recommend. Under review *Particulars as provided for in most recent valuation with updated discount rate, exchange rates and securities holdings. Market data, past 12 mos. Highest price 56.0 Lowest price 30.5 Avg. spread 0.68% Avg. daily turnover ISK 181.4m Avg. no. of trades daily 20.6 Turnover velocity 65.1% Holding of 10 largest shareh. 67.6% Analyst: Anna M. Ágústsdóttir +354 410-7385 anna.agustsdottir@landsbanki.is

Bakkavör’s Q4 results were good and in line with our expectations. Because the company benefited from a tax break in Q4, its profit exceeded our forecast. The sizeable increase in both its operations and balance sheet in 2005 is primarily the result of its takeover of Geest and Hitchen Foods.

• Q1 of 2006 is compared to Q1 2005, which covers Bakkavör’s operations prior to the takeover of Geest, a fact which must be borne in mind in making any comparisons.

• It should also be pointed out, that this year Easter is included in Q2, but occurred in Q1 in 2005. Since there is a considerable increase in sales at Easter, this does make a difference.

• Based on our calculations of pro forma, like-to-like sales figures, i.e. for the combined turnover of Bakkavör, Geest and Hitchen, we anticipate a YoY sales increase of 7% for Q1. For the year as a whole, we expect Bakkavör’s growth to be on par with that forecast for its market, 8-10%.

• A slow down in personal consumption growth in the UK could negatively affect Bakkavör’s sales, but its management claim there are few signs of a drop in consumption in the company’s leading product classes.

• Bakkavör’s management aim at achieving an EBITDA margin of 12-14% in the coming years. We expect the Q1 margin to be lower than this long-term target, reflecting seasonal fluctuations in Bakkavör’s operations, and the fact that Q1 is generally the most sluggish quarter of the year.

• The main focus will be on exploiting the synergies offered by takeovers in 2005, with the company's margin reflecting how well it accomplishes this.

• Further consolidation of the market is anticipated and Bakkavör’s management say they intend to be an active participant here.

• The impact of avian flu on the group’s operations will be primarily on the make up of its product classes, which could change if poultry meat is replaced by other foods. According to Bakkavör’s management, bird flu will not affect Bakkavör’s overall performance.

• The ISK weakened by over 13% during Q1 and Bakkavör’s share price appears to have fluctuated in tandem with the ISK.

Q1 05 Q1 06 2005 2006

Actual Change Forecast Change Actual Br. Forecast Change 04/05 05/06 04/05 05/06

m.GBP

Income 38.8 13.8% 269.9 595.4% 722.1 382.7% 1,173.6 62.5%

Expenses 30.7 6.2% 238.6 677.4% 636.0 409.6% 1,031.7 62.2%

EBITDA 8.1 56.2% 31.3 285.6% 86.1 247.4% 141.9 64.8%

EBIT 7.1 68.4% 23.4 227.8% 66.7 217.7% 110.2 65.3%

Profit 4.2 92.6% 8.3 95.3% 32.3 146.7% 49.7 53.8%

As a proportion of income

EBITDA 20.9% 11.6% 11.9% 12.1%

EBIT 18.4% 8.7% 9.2% 9.4%

Profit 10.9% 3.1% 4.5% 4.2%

Key ratios

12M Price/Earnings ratio 39.2 25.9 28.8 17.6

12M EV/EBITDA 24.2 13.6 18.5 10.3

Earnings per share 0.39 0.47 1.83 2.81

Return on equity 18.8% 21.8% 30.0% 33.1%

Equity 38.3% 16.9% 12.4% 16.7%

p. 16

Dagsbrún Dagsbrún Unexciting Q1 results expected Unexciting Q1 results expected

Closing market price 6.6 Market cap ISK 33.0 bn Valuation data Date of latest valuation 14.02 2005 Valuation ISK 16.4 bn Valuation share price 4.01 Valuation updated on Updated valuation* Under review Weighting Recommend. Under review *Particulars as provided for in most recent valuation with updated discount rate, exchange rates and securities holdings. Market data, past 12 mos. Highest price 7.0 Lowest price 3.9 Avg. spread 0.74% Avg. daily turnover ISK 94.9 million Avg. no. of trades daily 9.3 Turnover velocity 105% Holding of 10 largest shareh. 84.7% Analyst: Guðmunda Ó.Kristjánsd. +354 410-7384 gudmundak@landsbanki.is

Dagsbrún’s Q4 results did not live up to Research’s expectations due to higher operating costs and higher amortisation of intangibles than we anticipated. Dagsbrún’s operations are subject to considerable seasonal fluctuations. Q4 is generally the group’s best quarter, Q1 its poorest.

Dagsbrún’s Q4 results did not live up to Research’s expectations due to higher operating costs and higher amortisation of intangibles than we anticipated. Dagsbrún’s operations are subject to considerable seasonal fluctuations. Q4 is generally the group’s best quarter, Q1 its poorest.

• Dagsbrún has been diligently acquiring companies recently. At the beginning of this year it acquired Securitas in Iceland and the entertainment company Sena, both of which will be partially included in its Q1 results. In addition, the company has made a takeover bid for Kögun and the UK printing company Wyndeham Press Group. If these acquisitions do in fact go through, Dagsbrún has achieved the target it set at the beginning of this year: to double the scope of the group's operations in the next 12-18 months. The company is now preparing to publish a new daily newspaper in Denmark and has acquired respected Danish media figures to steer the project.

• Dagsbrún has been diligently acquiring companies recently. At the beginning of this year it acquired Securitas in Iceland and the entertainment company Sena, both of which will be partially included in its Q1 results. In addition, the company has made a takeover bid for Kögun and the UK printing company Wyndeham Press Group. If these acquisitions do in fact go through, Dagsbrún has achieved the target it set at the beginning of this year: to double the scope of the group's operations in the next 12-18 months. The company is now preparing to publish a new daily newspaper in Denmark and has acquired respected Danish media figures to steer the project.

• Dagsbrún’s Q1 results will be coloured by high currency losses on foreign loans, as a result of which we expect a negative outcome. In addition, we expect expenses in connection with the group’s takeovers of Kögun and the UK press and communications company Wyndeham will amount to around ISK 80 m. These costs will cut into the company’s Q1 margin.

• Dagsbrún’s Q1 results will be coloured by high currency losses on foreign loans, as a result of which we expect a negative outcome. In addition, we expect expenses in connection with the group’s takeovers of Kögun and the UK press and communications company Wyndeham will amount to around ISK 80 m. These costs will cut into the company’s Q1 margin.

• Q1 2005 was unusually good for Dagsbrún’s broadcasting and print division, 365 Media, in particular due to the fact that last year it included Easter. Easter has a positive impact on 365 Media, due to increased advertising and subscription income. Since Easter is in Q2 this year, this division can be expected to perform less well.

• Q1 2005 was unusually good for Dagsbrún’s broadcasting and print division, 365 Media, in particular due to the fact that last year it included Easter. Easter has a positive impact on 365 Media, due to increased advertising and subscription income. Since Easter is in Q2 this year, this division can be expected to perform less well.

• During the past year, its external environment has been highly favourable for Dagsbrún. The group, and 365 Media especially, performs well when purchasing power is increasing. The outlook this year, however, is for a slowdown in purchasing power growth which could affect the company’s domestic expansion. The ISK weakening also negatively affects Dagsbrún’s value, setting it apart from all the other ICEX-15 companies with the exception of Flaga. Currently, all of the company’s income and 75% of its expenses are in ISK. An ISK weakening thus has a negative impact on the company’s margin but, since it has an active currency overlay, the impact will not be fully visible this year. The addition of Wyndeham Press to the group will also reduce the ISK impact on its operations, since Wyndeham's market is in the UK.

• During the past year, its external environment has been highly favourable for Dagsbrún. The group, and 365 Media especially, performs well when purchasing power is increasing. The outlook this year, however, is for a slowdown in purchasing power growth which could affect the company’s domestic expansion. The ISK weakening also negatively affects Dagsbrún’s value, setting it apart from all the other ICEX-15 companies with the exception of Flaga. Currently, all of the company’s income and 75% of its expenses are in ISK. An ISK weakening thus has a negative impact on the company’s margin but, since it has an active currency overlay, the impact will not be fully visible this year. The addition of Wyndeham Press to the group will also reduce the ISK impact on its operations, since Wyndeham's market is in the UK.

• No consideration is had in this instance for the impact of Kögun on Dagsbrún in our earnings estimate for 2006. Instead a separate forecast is made for Kögun. Wyndeham is included in the earnings estimate in the latter half of this year.

• No consideration is had in this instance for the impact of Kögun on Dagsbrún in our earnings estimate for 2006. Instead a separate forecast is made for Kögun. Wyndeham is included in the earnings estimate in the latter half of this year.

Q1 05 Q1 06 2005 2006 Actual Change Forecast Change Actual Change Forecast Change 04/05 05/06 04/05 05/06 mISK Income 3,435 115.6% 4,915 43.1% 15,325 121.2% 30,840 101.2% Expenses 2,709 127.4% 4,140 52.8% 12,243 145.0% 25,780 110.6% EBITDA 727 80.8% 775 6.7% 3,082 59.7% 5,060 64.2% Profit 199 285.5% -175 - 718 41.1% 1,071 49.2% As a ratio of income EBITDA 21.2% 15.8% 20.1% 16.4% Profit 5.8% -3.6% 4.7% 3.5% Key ratios 12M Price/Earnings ratio (P/E) 29.7 180.3 36.1 35.2 12M EV/EBITDA 11.5 20.0 11.2 11.4 Earnings per share ISK 0.048.

ISK -0.042. ISK 0.172. ISK 0.159.

Return on equity (ROE) 10.4% -8.1% 35.2% 12.2% Equity 36.5% 38.4% 38.4% 40.0%

* Wyndeham is included in the earnings estimate in the latter half of 2006.

p. 17

FL GROUP Investment company on the advance

Closing market price 19.8 Market value ISK 121.6 bn Valuation data Date of latest valuation 13.09.2005 Valuation ISK 36.9 bn Valuation share price 14.6 Valuation updated on 05.04.2006 Updated valuation* 21.5 Weighting Recommend. Overweight *Particulars as provided for in most recent valuation with updated discount rate, exchange

rates and securities holdings. Market data, past 12 mos. Highest price 26.6 Lowest price 13.2 Avg. spread 0.82% Avg. daily turnover ISK 433.6 m Avg. no. of trades daily 34.8 Turnover velocity 155.3% Holding of 10 largest shareh. 81.3% Analyst: Anna M. Ágústsdottir +354 410-7385 anna.agustsdottir@landsbanki.is

FL Group reported a record profit in Q4 2005 and for the year as a whole, primarily due to high trading gains on its investment activities.

• Trading gains will continue to be a major factor in the Group’s performance, both in Q1 and for 2006 as a whole. The company has disposed of its domestic equity holdings which were not classified as strategic investments, and we anticipate considerable gains on the sales of these assets in Q1. FL Group’s major domestic holdings at present are in Glitnir and Kaupthing Bank.

• FL Group’s foreign holdings now comprise about half its total portfolio, and this has changed substantially from that of year-end 2005. Investments in three new companies, Bang & Olufsen, Royal Unibrew and Aktiv Kapital have been announced, in addition to which the company increased its stakes in Finnair and easyJet.

• The addition of Sterling to the group as of 1 January 2006 boosts the company's YoY and quarterly turnover considerably. Our forecast turnover for 2006 assumes that Sterling will achieve its turnover and EBITDA targets.

• The ISK depreciation of recent weeks has both positive and negative effects on FL Group’s operations. While a weaker ISK should improve the competitiveness of the domestic travel industry, and could reduce travel abroad by Icelanders. EUR/ISK exchange rate development has not been to the company's advantage, nor have rising fuel prices. We assume, however, that the company’s fuel hedges will protect it to some extent from Q1 fuel price increases.

• FL Group intends to improve the margin in its airline operations this year through necessary cost-cutting measures, despite the difficult external circumstances it has faced in the past year or two. We assume they will manage to do so.

• Icelandair Group was to be floated on ICEX in the spring of 2006, but difficult market conditions could possibly change this. Our 2006 forecast does not take into consideration possible profit from the sale of Icelandair. In Q1, FL Group sold off Icelandair-Hertz Car Rentals and Iceland Travel, and has placed Reykjavík Excursions up for sale. Profit on the sale of the two companies amounts to around ISK 1,600 m.

• At the beginning of Q2, FL Group announced it had sold its 16.9% stake in easyJet. The estimated selling price is around ISK 29bn. This means a realised profit of ISK 13 bn on its original investment in easyJet. FL Group’s current cash and cash equivalents amount to ISK 50 bn. after the sale and in regard of a bond issue in March for ISK 15,0 bn.

Q1 05 Q1 06 2005 2006

Actual Change Forecast Change Actual Change Forecast Change 04/05 04/05 04/05 04/05

m.ISK

Income 7,816 7.4% 19,131 144.8% 47,644 11.9% 104,726 119.8%

Expenses 8,956 11.2% 20,024 123.6% 44,283 16.9% 96,270 117.4%

EBITDA -1,140 47.7% -893 -21.7% 3,361 -27.0% 8,456 151.6%

EBIT -1,566 30.2% -1,872 19.5% 953 -56.0% 4,538 376.2%

Profit 25 -102.9% 6,231 - 17,251 378.5% 20,707 20.0% As a proportion of income

EBITDA -14.6% -4.7% 7.1% 8.1%

EBIT -20.0% -9.8% 2.0% 4.3%

Profit 0.3% 32.6% 36.2% 19.8%

Key ratios

12M Price/Earnings ratio 8.4 5.6 6.5 6.4

12M EV/EBITDA 13.4 45.9 19.6 11.7

Earnings per share 0.01 1.02 2.95 3.40

Return on equity 1.0% 33.5% 38.7% 27.8%

Equity 20.0% 65.1% 56.1% 63.7%

.

p. 18

Glitnir (formerly Íslandsbanki) Fine performance expected

Glitnir’s Q4 2005 results fell far short of Research’s expectations. While the bank’s operations were relatively in line with our forecast, the reported losses on the bank’s securities portfolio were a major surprise. We expect the bank to turn in a good performance in Q1, backed by a sizeable increase in commission and interest income, as well as higher trading gains abroad.

Closing market price 17.0 Market value ISK 242.5 bn Valuation data Date of latest valuation 20.01.2006 Valuation ISK 235.8 bn Valuation share price 17.1 Valuation updated on 31.04.2006 Updated valuation* 17.0 Weighting Recommend. Overweight *Particulars as provided for in most recent valuation with updated discount rate, exchange rates and securities holdings. Market data, past 12 mos. Highest price 22.2 Lowest price 12.2 Avg. spread 0.5% Avg. daily turnover ISK 1,318.4m Avg. no. of trades daily 68.7 Turnover velocity 153.3% Holding of 10 largest shareh. 57.5% Analyst: Ingi Sturla Þórisson +354 410-7389 ingi.s.thorisson@landsbanki.is

• At the beginning of this year Straumur-Burðarás Investment Bank sold most of its 26% holding in Glitnir to FL Group, Milestone and Glitnir directors. This gives the bank’s management a stronger hand to direct its future course. Soon after this, changes in the bank’s emphasis were announced and its name changed to Glitnir. We expect considerable expense in connection with the name change to occur in Q1.

• At the end of January, the bank announced the establishment of the investment company Máttur, signalling a new direction with increasing emphasis on investment activities. There has been no news of the company since then, possibly as a result of the difficult market circumstances for such activities which have prevailed in recent weeks.

• In Q1, Glitnir acquired a 50.1% stake in the Norwegian corporate finance company Union Group. The acquisition is intended to reinforce the bank’s Norwegian corporate advisory and financing operations. As a result of its increasing activities in Norway, the bank's commission income should increase substantially this year, and its interest income is also expected to grow. Increased earnings can also be expected from the bank's own corporate financing division, for instance, from FL Group, now a major shareholder.

• Icelandic banks' international funding has been the source of considerable attention recently, as the stream of available funding has clearly slowed. We expect this situation to continue for some time yet, and slow the bank’s near-term growth. Glitnir recently became the first Icelandic bank to be awarded a credit rating by Standard&Poor’s. S&P awarded the bank an A- rating, which is considerably better than the rating proposed by foreign market analysts. The credit rating should assist the bank’s funding efforts, although on 20 March this year, Glitnir stated that it had already financed all of its required funding for 2006, which totalled EUR 600m. Due to the unrest of recent weeks on the banks’ funding markets, we have lowered our estimates for Glitnir’s balance sheet growth this year, while keeping our prediction for the entire forecast period unchanged.

• We anticipate considerable trading gains on Glitnir’s foreign equities in Q1, reflecting the major increases on Nordic equity markets. The 13% ISK depreciation in Q1 also has a positive impact on Glitnir's market value.

Q1 05 Q1 06 2005 2006 Actual Change Forecast Change Actual Change Forecast Change 04/05 05/06 04/05 05/06

m ISK

Net interest income 4,465 63.4% 7,790 74.5% 23,390 83.1% 28,510 21.9%

Other operating income 3,813 -11.0% 6,290 65.0% 17,608 -6.4% 18,780 6.7%

Net income from operations 8,278 18.0% 14,080 70.1% 40,998 29.8% 47,290 15.3%

Other operating expenses 4,219 29.1% 5,750 36.3% 15,731 9.6% 19,150 21.7%

Provision for credit losses 501 -48.9% 1,150 129.5% 1,900 -39.4% 4,720 148.4%

Profit 3,038 -37.8% 6,030 98.5% 19,099 59.7% 19,630 2.8%

Int. rate margin/avg. balance sheet position 2.5% 2.1% 2.2% 1.8% Impairment of loans/avg. balance sheet position 0.3% 0.3% 0.2% 0.3%

Cost-income ratio 51.0% 40.8% 38.4% 40.5%

Key ratios

12M Price/Earnings ratio (P/E) 15.9 11.6 11.7 13.1

Price-to-book ratio (P/B) 2.7 3.0 3.1 2.6

Return on equity (ROE) 26.4% 31.6% 26.5% 19.8%

Capital adequacy (CAD) 15.5% - 12.6% -

Earnings per share ISK 0.3 ISK 0.4 ISK 1.5 ISK 1.4

p. 19

HB Grandi Exchange rate improvement and high product prices

HB Grandi’s 2005 results were, on the whole, acceptable considering the adverse factors it faced, such as high fuel prices, an unfavourable ISK exchange rate and poor catches of important fish species. Its operations returned a profit in spite of these difficulties.

Closing market price 11.3 Market value ISK 19.2bn Valuation data Date of latest valuation 23.10.2003 Valuation ISK 17.3bn Valuation share price 10.4 Valuation updated on Not updated Updated valuation* Under review Weighting recommend. Under review *Particulars as provided for in most recent valuation with updated discount rate. exchange rates and securities holdings. Market data, past 12 mos. Highest price 11.3 Lowest price 7.8 Avg. spread 0.96% Avg. daily turnover ISK13.0m Avg. no. of trades daily 1.6 Turnover velocity 21.7% Holding of 10 largest shareh. 92.8% Analyst: Kristján Bragason +354 410-7393 kristjan.p.bragason@landsbanki.is

• During the year to date, HB Grandi’s operating environment has improved: the ISK has weakened by 13.2%, for instance, with a positive impact on this year’s operations. Since practically all HB Grandi’s income, but only a small fraction of its expenses, is in foreign currencies, this will improve its EBITDA margin.

• Our previous forecast assumed that external conditions would continue to be difficult until after mid-2006, but the sharp ISK depreciation of recent weeks has altered the operating environment for fisheries companies. Their income will therefore increase and margins improve sooner. On the other hand, we can expect substantial exchange rate losses on loans in Q1, as HB Grandi is fairly heavily indebted and the major portion of its debt is foreign-denominated. As a result of these exchange rate losses, we predict that the company will report a loss in Q1. It is important to bear in mind that these losses have a relatively small impact on cash flow for the period, since they are spread over the entire maturity of the liabilities. The increase in income and margin, on the other hand, is fully manifest in cash flow.

• Demand for fish has been high following positive media reports of the health effects of fish consumption. Concerns due to avian flu have also boosted fish consumption. Product prices rose somewhat last year and have remained stable since last autumn, rather than subsiding again as is customary at the beginning of the year.

• Poor capelin catches during the winter season will affect company’s income, but the advent of the pelagic freezing vessel Engey RE should enable HB Grandi to increase the value of its catch, offsetting the lower catches to some extent.

• HB Grandi’s management has already responded to poor Q1 catches by putting Svanur RE up for sale and announcing that its oldest purse-seiner Víkingur AK will be docked until the next capelin season a year hence. Through these actions management are attempting to adapt fleet capacity to the company’s harvest rights, reducing fixed costs and improving fishing productivity.

Q1 05 Q1 06 2005 2006 Actual Change Forecast Change Actual Change Forecast Change 04/05 05/06 04/05 05/06 mISK Income 3,343 32.1% 3,243 -3.0% 10,838 16.6% 12,486 15.2% Expenses 2,491 29.7% 2,161 -13.2% 9,315 20.3% 9,647 3.6% EBITDA 852 39.7% 1,082 27.0% 1,523 -1.6% 2,838 86.3% EBIT 588 56.0% 774 31.6% 320 -28.7% 1,606 401.9% Profit 763 1,367.3% -197 -125.8% 547 -44.9% 202 -63.1% As a ratio of income EBITDA 25.5% 33.4% 14.1% 22.7% EBIT 17.6% 23.9% 3.0% 12.9% Profit 22.8% -6.1% 5.0% 1.6% Key ratios 12M Price/Earnings ratio (P/E) 7.9 - 32.1 95.4 12M EV/EBITDA 16.6 24.5 20.9 12.6 Earnings per share 0.45 -0.12 0.32 0.12 Return on equity (ROE) 31.3% -7.6% 5.1% 2.0% Equity 35.9% 35.2% 35.2% 35.2%

p. 20

Icelandic Group hf. Hopes of better performance following major restructuring

Closing market price 8.4 Market value ISK 23.1 bn

Valuation data Date of latest valuation 28.10.2003 Valuation ISK 8 bn Valuation share price 5.53 Valuation updated on Not updated Updated valuation Under review Weighting Recommend. Under review *Particulars as provided for in most recent valuation with updated discount rate, exchange rates and securities holdings.

March of this year. 12 mos. Highest price 11.7 Lowest price 7.4 Avg. spread 1.24% Avg. daily turnover ISK 95.4 million. Avg. no. of trades daily 2.7 Turnover velocity 118.3% Holding of 10 largest shareh. 92.4% Analyst: Kristján Bragason 410-7393 kristjan.p.bragason@landsbanki.is

On the whole, last year's performance fell far short of our expectations, and group operations during the past year or two have been difficult. Following last year’s extensive restructuring, management are hopeful that they have managed to turn the situation around.

• We anticipate that the addition of new units to the group will lead to better performance. Improvement is also forecast on the cost side, as a result of actions taken by the company in the wake of mergers. Some one-off costs have to be expected due to mergers, despite considerable sums expensed to this end last year.

• Q1 sales are expected to be rather slow, since the peak Easter selling period occurs in Q2. Raw material prices have remained high during Q1, and retailers’ strong market position limits producers’ possibilities of raising prices. On the other hand, reports on the benefits of fish consumption – together with concerns of avian flu – have had a positive impact on sales of seafood products.

• The addition of Pickenpack Hussman & Hahn and SALTUR A/S has increased the relative share of production in Icelandic operations somewhat. This should have a positive impact on its performance, since the margin on manufacturing operations is generally higher than on sales and marketing activities. The acquisition of SALTUR comes as a surprise, however, since the company has not previously emphasised salted fish sales.

• In recent months, Icelandic Group has replaced a number of its managers. The major task facing the new management team is to accelerate the restructuring process and improve company performance, not least by achieving increasing returns to scale. This applies in particular to purchasing, sales and marketing work, inventory control and financing.

• ISK exchange rate developments in recent weeks will have some impact on Icelandic’s operations this year. The major portion of the Group’s income and expenditure is in foreign currencies. The proportion is higher, however, on the income side, which should improve EBITDA. Most of the company’s liabilities are also in foreign currencies. Since the ISK is the company’s reporting currency, it will probably recognise substantial currency losses on its loans during Q1.

• Despite poor 2005 results, management say their performance and turnover targets for this year remain unchanged. When presented last year, these targets were very ambitious in view of the company’s difficult operations. The ISK weakening of recent weeks have, however, made the targets considerably more realistic.

Q1 05 Q1 06 2005 2006 Actual Change Forecast Change Actual Change Forecast Change 04/05 05/06 04/05 05/06 mISK Income 21,667 33.0% 28,030 29.4% 93,895 34.1% 122,400 30.4% Expenses 20,926 33.7% 27,468 31.3% 92,631 37.1% 116,632 25.9% EBITDA 741 17.1% 562 -24.2% 1,264 -49.7% 5,768 356.3% Profit 191 -10.3% -388 - -1,176 - 1,796 - As a ratio of income EBITDA 3.4% 2.0% 1.3% 4.7% Profit 0.9% -1.4% -1.3% 1.5% Key ratios 12M Price/Earnings ratio (P/E) 24.4 - - 13.2 12M EV/EBITDA 15.8 22.3 39.2 9.2 Earnings per share ISK 0.12 ISK -0.14 ISK -0.43 ISK 0.65 Return on equity (ROE) 89.7% 25.9% 13.1% 66.3% Equity 20.3% 16.9% 16.9% 16.9%

p. 21

Kaupthing Bank All signs point to a good quarter

Kaupthing Bank’s good results in Q4 of 2005 exceeded our expectations. The bank’s high trading gains of last year are expected to continue this year as well. The major factor here is Kaupthing’s planned sale of its holding in the investment company Exista, which is expected to return a trading profit of ISK 13 billion (bn), as the holding has been recognised on its balance sheet at purchase price. If the sale is concluded, we expect this year’s profit to be around ISK 56bn, or a new record performance by an Icelandic company.

Closing market price 765 Market value ISK 508.4 bn Valuation data Date of latest valuation 17.11.2005 Valuation ISK 414.4 bn Valuation share price 622 Valuation updated on 31.03.2006 Updated valuation* 788 Weighting Recommend. Marketweight *Particulars as provided for in most recent valuation with updated discount rate, exchange rates, securities holdings and other data from annual financial statements. Market data, past 12 mos. Highest price 997.9 Lowest price 519.4 Avg. spread 0.38% Avg. daily turnover 1,419.8 mISK Avg. no. of trades daily 82.4 Turnover velocity 78.7% Holding of 10 largest shareh. 60.8% Analyst: Hermann Már Þórisson +354 410-7388 hermann.m.thorisson@landsbanki.is

• Commission income is expected to grow substantially, both as a result of high turnover on the domestic market and the bank’s expanding securities brokering outside of Iceland. The ISK weakening increases both the bank’s foreign currency and commission income.

• Trading gains comprise a very large share of Q1 income. Kaupthing’s estimated profit on its domestic equity portfolio, however, is considerably less than that of recent quarters. We predict an unrealised profit of ISK 200 million (m) on the convertible bond from Bakkavör, while in 2005 the trading gains on this bond averaged over ISK 1bn per month. We expect sizeable gains on the bank’s foreign equity portfolio since Nordic equity markets have been performing well, in addition to which the ISK has weakened. Kaup-thing sold its holding in Baugur Group during the quarter, realising a profit of ISK 3.3bn.

• Kaupthing had a positive currency balance of ISK 44 bn as 1 Jan. this year, and we ex-pect it to have increased during Q1. We estimate currency gains on this exposure will amount to ISK 10bn. Since the currency balance is defined as a hedge, we expect this profit to be credited directly to equity and not included in the income statement.

• Icelandic banks' international funding has drawn considerable attention recently, as the stream of funding available to them clearly has slowed. We expect this situation to continue for some time yet, and to slow the bank’s near-term growth. In a news announcement on 15 March this year, Kaupthing Bank provided information confirming its strong liquidity position, stating that the bank had already ensured funding to cover 70% of its refinancing needs. It also pointed out that this financing had been obtained on terms no worse than those of last year. Since that time, Kaupthing has issued the equivalent of ISK 43bn (EUR 500m) in structured covered bonds in Germany to finance the bank’s housing loans in Iceland. We expect the tumult concerning the bank’s financing to subside in the latter half of the year.

• FIH is expected to grow substantially this year, both in securities brokering and lending. In Q1 an experienced team of specialists was hired from other securities dealers to head its capital markets operations. FIH is unlikely to realise much income on these operations until the latter half of this year.

Q1 05 Q1 06 2005 2006

Actual Change Forecast Change Actual Change Forecast Change

04/05 05/06 04/05 05/06

MISK

Net interest income 7,046 101.3% 10,766 52.8% 32,710 70.1% 46,153 41.1%

Other operating income 14,779 143.5% 22,863 54.7% 68,693 85.6% 76,290 11.1%

Net income from operations 21,825 128.0% 33,629 54.1% 101,403 80.3% 122,443 20.7%

Other operating expenses 6,605 30.3% 11,008 66.7% 34,729 50.5% 45,030 29.7%

Impairmaent of loans 894 -22.3% 1,199 34.1% 4,389 17.4% 5,540 26.2%

Profit 11,093 318.6% 16,640 50.0% 49,260 116.1% 55,811 13.3% Int. rate margin/avg. balance. sheet position 1.8% 1.6% 1.6% 1.8%

Imp. of loans/avg. b. sheet pos. 20.0% 0.3% 0.2% 0.2%

Cost-income ratio 30.3% 32.7% 34.2% 36.8%

Key ratios

12M Price/Earnings ratio (P/E) 11.7 9.1 11.6 9.1

Price-to-book ratio (P/B) 2.3 2.5 2.8 2.1

Return on equity (ROE) 33.2% 34.2% 34.0% 29.7%

Capital adequacy (CAD) 14.4% - 12.2% -

Earnings per share ISK 17.0 ISK 25.2 ISK 75.2 ISK 84.0

p. 22

Kögun hf Kögun hf Acquired by Dagsbrún Acquired by Dagsbrún

Closing market price 75.0 Market cap ISK 14.5bn Valuation data Date of latest valuation 07.06.2005 Valuation ISK 9.4bn Valuation share price 49.1 Valuation updated on n/a Valuation updated* n/a Weighting recommend. n/a *Particulars as provided for in the most recent valuation with an updated discount rate, exchange rates and securities holdings. Market data, past 12 mos. Highest price 75.0 Lowest price 53.2 Avg. spread 0.78% Avg. daily turnover ISK 82.6m Avg. no. of trades daily 4.6 Turnover velocity 166.6% Holding of 10 largest shareh. 94.5% Analyst: Karl Kári Másson +354 410-7394 karl.k.masson@landsbanki.is English text: Páll Hermannsson +354 410-6995 pall.hermannsson@landsbanki.is

Kögun’s Q4 profit exceeded our expectations, although turnover fell somewhat short of our forecast. Turnover in hardware was far below our prediction, while software turnover surpassed our estimate. The hardware margin improved markedly, having been below Kögun’s targets and expectations, as was turnover, in the other 2005 quarters. The software margin was very good in the year and beat the company’s targets.

Kögun’s Q4 profit exceeded our expectations, although turnover fell somewhat short of our forecast. Turnover in hardware was far below our prediction, while software turnover surpassed our estimate. The hardware margin improved markedly, having been below Kögun’s targets and expectations, as was turnover, in the other 2005 quarters. The software margin was very good in the year and beat the company’s targets.

• Kögun has continued to strengthen its position as a Microsoft Dynamics partner (previously Microsoft Business Solutions), acquiring the Norwegian software house Hands ASA and the US firm Specialists in Custom Software Inc. (SCS) at the end of last year. The two target companies’ combined 2006 turnover is estimated at over ISK 2.3bn. Their acquisition is part of positioning Kögun as one of the top Microsoft Dynamics partners globally, which offers significant growth potential as Microsoft strongly emphasises gaining market share from its competitors Oracle and SAP.

• Kögun has continued to strengthen its position as a Microsoft Dynamics partner (previously Microsoft Business Solutions), acquiring the Norwegian software house Hands ASA and the US firm Specialists in Custom Software Inc. (SCS) at the end of last year. The two target companies’ combined 2006 turnover is estimated at over ISK 2.3bn. Their acquisition is part of positioning Kögun as one of the top Microsoft Dynamics partners globally, which offers significant growth potential as Microsoft strongly emphasises gaining market share from its competitors Oracle and SAP.

• In February this year, Kögun’s subsidiary Skýrr acquired a 58.7% stake in the Icelandic IT company EJS, which had a turnover of ISK 3.6bn and an EBITDA margin of 7.6% last year. EJS was consolidated with the Group on 1 March.

• In February this year, Kögun’s subsidiary Skýrr acquired a 58.7% stake in the Icelandic IT company EJS, which had a turnover of ISK 3.6bn and an EBITDA margin of 7.6% last year. EJS was consolidated with the Group on 1 March.

• Earlier this year, Síminn (Iceland Telecom) and Exista acquired a stake in Kögun totalling 38%, and attempted to gain a majority on the company’s board at the last annual general meeting. This attempt failed, and afterwards Dagsbrún acquired a majority stake in Kögun in consultation with the target company’s management. Dagsbrún then made a takeover bid to other shareholders at the share price of 75, and Kögun is now set to join the Dagsbrún Group.

• Earlier this year, Síminn (Iceland Telecom) and Exista acquired a stake in Kögun totalling 38%, and attempted to gain a majority on the company’s board at the last annual general meeting. This attempt failed, and afterwards Dagsbrún acquired a majority stake in Kögun in consultation with the target company’s management. Dagsbrún then made a takeover bid to other shareholders at the share price of 75, and Kögun is now set to join the Dagsbrún Group.

• Dagsbrún and Síminn appear to have spotted synergies between their respective telecoms activities and Kögun’s software segment. There have been indications for some time that Kögun’s hardware segment will be divested in part or whole, a process that Dagsbrún’s takeover of Kögun is likely to expedite.

• Dagsbrún and Síminn appear to have spotted synergies between their respective telecoms activities and Kögun’s software segment. There have been indications for some time that Kögun’s hardware segment will be divested in part or whole, a process that Dagsbrún’s takeover of Kögun is likely to expedite.

• The drop in the Icelandic krona (ISK) has had a positive effect on Kögun as about half of its activities are overseas. However, the ISK’s depreciation is likely to put some pressure on margins in Iceland, particularly for the hardware segment. The Group’s largest loan is denominated in SEK and is used to finance operations in Sweden. Therefore, the loan’s currency loss is recognised through equity and not profit and loss.

• The drop in the Icelandic krona (ISK) has had a positive effect on Kögun as about half of its activities are overseas. However, the ISK’s depreciation is likely to put some pressure on margins in Iceland, particularly for the hardware segment. The Group’s largest loan is denominated in SEK and is used to finance operations in Sweden. Therefore, the loan’s currency loss is recognised through equity and not profit and loss.

Q1 05 Q1 06 2005 2006 Actual Change Forecast Change Actual Change Forecast Change 04/05 05/06 04/05 05/06 mISK Income 4,121 414.5% 5,368 30.2% 17,428 252.6% 24,883 42.8% Expenses 3,784 428.7% 4,879 28.9% 16,003 272.4% 22,631 41.4% EBITDA 337 295.8% 488 44.8% 1,425 120.8% 2,252 58.0% Profit 105 25.4% 155 47.2% 636 40.3% 795 25.1% As a ratio of income EBITDA 8.2% 9.1% 8.2% 9.1% Profit 2.6% 2.9% 3.6% 3.2% Key ratios 12M Price/Earnings ratio (P/E) 24.5 20.8 18.3 17.9 12M EV/EBITDA 20.2 14.7 13.5 10.7 Earnings per share (EPS) ISK 0.6 ISK 0.8 ISK 3.4 ISK 4.2 Return on equity (ROE) 8.0% 9.8% 12.2% 12.6% Equity ratio 33.0% 30.6% 30.6% 30.6%

p. 23

Marel ISK depreciation welcome

Marel’s Q4 2005 results were considerably below our expectations. While the company’s income growth was in line with our forecast, its margin fell well short of expectations. The group’s overall margin was 3.7%, thanks completely to the good performance of Carnitech in Denmark (9.9%). The margins of Marel companies themselves (the parent company in Iceland, its eight sales and service offices, and Pols in Ísafjörður) were negative by 2.0%.

Closing market price 71.8 Market value ISK 17.2 bn Valuation data Date of latest valuation 16.02.2006 Valuation ISK 15.9 bn Valuation share price 65.6 Valuation updated on 31.3.2006 Updated valuation 71.0 Weighting Recommend. Marketweight *Particulars as provided for in most recent valuation with updated discount rate, exchange rates and securities holdings. Market data, past 12 mos. Highest price 76.0 Lowest price 55.0 Avg. spread 0.9% Avg. daily turnover ISK 22.4 million Avg. no. of trades daily 4.4 Turnover velocity 35.8% Holding of 10 largest shareh. 79.6% Analyst: Ástrós Viðarsdóttir +354 410-7387 astros.vidarsdottir@landsbanki.is

• Information provided by Marel in connection with the announcement of its annual results indicated that this year had got off to a slow start. As a result, we expect Q1 income growth to be on the low side, in comparison with our forecast for the year as a whole. Income growth is expected to pick up after mid-year and be in the range of 13-14% in Q2-Q4.

• Marel’s operating environment has been very difficult in the past few years, not least due to the strong ISK. The company has implemented major cost-cutting measures, however, and as a result managed to maintain an acceptable margin for quite some time, despite its extremely unfavourable exchange rate situation. The ISK weakening recently will boost Marel’s operations substantially, in addition to which there is still room for improving cost efficiency, which would help its margin and capital utilisation.

• The currency situation in Q1 2006 was considerably more favourable than in Q4 of last year, for instance. Since the ISK component is higher in Marel’s expenses than in its income, the company benefited from the 6.1% weaker ISK on average against the EUR in Q1.

• In view of the ISK depreciation and continuing cost-efficiency measures we expect Marel’s margin to improve both on a quarterly basis and YoY. We expect the ISK to weaken still further during the remainder of this year, and Marel’s margin to rise accordingly during the latter half of the year.

Q1 05 Q1 06 2005 2006 Actual Change Forecast Change Actual Change Forecast Change E R thousands U 04/05 05/06 04/05 05/06 Sales 29,928 0.6% 32,921 10.0% 129,039 14.9% 145,543 12.8% EBITDA 4,180 42.4% 3,633 -13.1% 14,814 -10.2% 19,102 28.9% EBIT 3,056 65.4% 2,166 -29.1% 9,721 -19.4% 13,236 36.2% Profit 1,801 25.0% 1,219 -32.3% 5,715 -28.4% 8,442 47.7% As a ratio of income EBITDA 14.0% 11.0% 11.5% 13.1% EBIT 10.2% 6.6% 7.5% 9.1% Profit 6.0% 3.7% 4.4% 5.8% Key ratios 12M Price/Earnings ratio (P/E) 23.8 41.0 35.6 24.9 12M EV/EBITDA 12.6 18.0 16.7 13.5 Earnings per share 0.6 0.4 2.4 3.0 Return on equity (ROE) 21.7% 11.9% 18.1% 20.6% Equity 34.7% 35.7% 35.7% 35.0%

p. 24

Mosaic Fashions Unseasonable weather a factor in performance

Closing market price 17.5 Market value ISK 50.8 bn Valuation data Date of latest valuation No valuation Valuation Valuation share price Valuation updated on Updated valuation* Weighting Recommendation *Particulars as provided for in most recent valuation with updated discount rate, exchange rates and securities holdings. Market data, past 12 mos. Highest price 19.6 Lowest price 12.9 Avg. daily turnover ISK 96.9 million Avg. no. of trades daily 9.2 Turnover velocity 49.5% Holding of 10 largest sharehþ 80.9% Analyst: Ástrós Björk Viðarsdóttir +354 410-7387 astros.vidarsdottir@landsbanki.is

Since Mosaic will publish its annual results at the end of April, no information is available as yet on its Q4 operating outcome.

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