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9Valuation AssumptionsWe assume an increase in Marel’smarket share of 1.1 percentagepoints in the coming yearsSurpassing market growth in the coming yearsThe valuation assumes that Marel’s income growth to 2012 will exceed market growth by 2-8%. This will increase the company’s market share during this period from 4.3% in 2005 to5.4% in 2010. From 2013 until the end of the forecast period, however, we expect growthclose to that of the forecast growth of this market.Income growth and marketshare25,0%20,0%15,0%10,0%5,0%0,0%-5,0%2002 2004 2006 2008 2010 2012 2014Growth exceeding market growth Market growth Market share7,0%6,5%6,0%5,5%5,0%4,5%4,0%3,5%Marel has set itself ambitiousgrowth objectives, which it plans toachieve through both organic andexternal growth. The forecast modelis an attempt to reflect this vision ofMarel’s management, withouttaking the external growthenvisaged into considerationSource: Global Industy Analysts (GIA)As previously mentioned, management have set clear future objectives, predicting thatMarel’s turnover will be EUR 400-500m in 3-5 years’ time. To achieve this objective by 2009,Marel will have to grow by an average of 36% annually. This rate of expansion is not to beachieved merely by organic growth, however, as management expect 2-4 companies will beacquired. Strong organic growth expected to continue in 2009-2015, and the company’sturnover to reach EUR 1,000m by year-end 2015. This would mean organic growth averaging14.2% annually.The forecast model is an attempt to reflect this vision of Marel’s management, without takingthe external growth envisaged into consideration. We anticipate that Marel’s organic growthwill average around 11% annually to 2009, and lower from 2009 to 2015, or around 7.4%.This would mean an average growth during the forecast period of 8.6%. This is an increase inthe forecast growth since our most recent valuation of Marel was issued, which assumed anaverage annual growth of 7% for the forecast period.In consideration of the fact that this would give Marel a global market share at the end ofthe forecast period which, in our estimation, is a bit high, we have lowered the long-termgrowth forecast following the forecast period to 4.0% from the 4.5% used in the previousvaluation.We expect a margin improvement inthe coming years resulting fromcontinuing cost-efficiencymeasures, standardisation andoutsourcing of production, as wellas economies of scale followingexternal growthMargin assumptionsMarel’s margins were squeezed considerably last year as has been pointed out above. Lastyear’s EBIT, for instance, was only 7.5% as a ratio of turnover. We expect little marginimprovement this year, and forecast an EBIT margin of 7.8%, due to an improved margin atCarnitech. The margin is expected to increase in the coming years, when the restructuringcurrently underway brings results. In addition, we expect cost efficiency to continue toimprove due to standardisation of production and outsourcing. As a result, we forecast thatthe EBIT margin will peak at 12.1% in 2010 an remain at this level in the long term. Weforecast a long-term EBITDA of 16.1% as a ratio of turnover.

10These margins are substantially higher than the EBIT of 10.2% and EBITDA of 12.6% forecastin our last valuation of Marel. The increase is partly due to IFRS changes which have, aspreviously mentioned, boosted margins. Although this is not merely the result of accountingchanges, their impact is clearly visible if we compare the EBITDA margin which would resultfrom expensing all development costs as compared with the margin resulting when around45% of this cost is capitalised. The result would give an EBITDA margin of 13.1%. Theintroduction of IFRS therefore raises the EBITDA margin by 3.0 percentage points in the longterm, making it 0.5 percentage points higher than in the last valuation.EUR thousands 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015EBIT 11.420 15.847 18.918 23.003 25.572 28.430 30.613 32.626 34.063 35.430EBIT % 7,8% 9,9% 10,7% 11,9% 12,0% 12,1% 12,1% 12,1% 12,1% 12,1%EBITDA 17.286 22.270 26.120 30.764 33.981 37.520 40.613 43.126 45.363 47.230EBITDA % 11,9% 13,9% 14,8% 15,9% 15,9% 16,0% 16,0% 16,1% 16,1% 16,1%The grounds for the higher margin can be attributed to the acceptable margin produced byMarel companies even in the face of unfavourable external conditions. The EBIT margin ofthese operations, for instance, was around 13% in the first 9M of 2005, and 9.3% for theyear as a whole. The margin did slide steadily last year, however, not least due to the strongISK, and the negative impact of Carnitech’s poor performance on the group.We assume that management’s stated objectives of an 8% EBIT margin for Carnitech will beachieved. This would mean that the Marel companies need to achieve a 15% EBIT margin inorder for our forecast of a 12.1% group margin to be realised. This we consider a realisticpossibility, in view of the company’s 2004 performance. We expect Marel to achieveconsiderable savings with further standardisation and outsourcing, plus increased economiesof scale resulting from its substantial planned growth in coming years.Production capacity in both Icelandand Slovakia will be increased incoming yearsIncreased investment in Iceland and SlovakiaMarel has provided figures on its projected investments in the near term. In 2006, its plant inGarðabær will be expanded, doubling the current manufacturing floor space The facilities canbe easily expanded, at a relatively low cost of around EUR 4m. Work is expected to becompleted in August this year. In addition, the company is building a production plant inSlovakia, with a capacity around twice that of the Garðabær plant. Construction cost isestimated at EUR 4m, and the facility is scheduled for completion in the first half of 2007.This will give Marel more than double its current capacity.Since 2002, when the company moved to its current location in Garðabær, investment infixed assets has been relatively low. These two projects will result in increased investment inthe next two years, resulting in increased interest expense, which is provided for in thevaluation.We expect investment to decrease once more in 2008 and after that to keep pace withincreasing turnover.The valuation does not take possible acquisitions into consideration. Since Marel’s equity ratiois currently 35%, we expect that such acquisitions will require both an issue of new sharecapital and borrowing. In recent years, Icelandic companies expanding abroad have managedto finance their acquisitions abroad on considerably more favourable terms and with a highergearing than generally practiced in Iceland. If Marel manages to do the same, this wouldincrease the group’s value.Capital tied up in operationsincreased considerably in 2005Substantial capital tied up in operationsMarel’s operations have meant that considerable capital has been tied up in inventory andreceivables. On the other hand, the balance between payables and receivables has been fairlyequal. In 2005, net capital tied up in operating assets was over 25% of income. This is to alarge extent the result of rising inventory following increased standardisation of products.Receivables have also been on the rise, as was evident from the company’s 9M results last

11year. Management have explained that this interest is due to insufficient follow-up on thegroup’s internal collection procedures. They claim that the increase in receivables is onlytemporary and the problem has been resolved. As a result, we expect that capital tied up inoperations will decrease considerably in the near future.We assume that Marel will improveits inventory and receivablessituation, lowering capital tied up inoperations for the forecast periodMarel’s management expect to lower the operating capital tied up to below 20%. To achievethis, efforts have been directed at improving inventory management and acceleratinginventory turnover. This objective could also partly be achieved by extending suppliers’payment deadlines and we anticipate some increase in payables in the coming years.Our valuation assumes that capital tied up in operations will be considerably less than wasthe case last year or an estimated 20% in the long term, which accords with managementobjectives. It should be pointed our specifically that this assumption has a major impact onthe valuation.Little change in discount rateThe discount rate on Marel’s equityused is 11.58%, a slight increasefrom the last valuationThe discount rate for Marel was determined using the capital asset pricing model (CAPM),with two important modifications, however. Two additional items are added to the equation,a company premium (FRT) and a small cap premium (SC). The reason for this addition is ouruse of a beta reflecting the US average for this industrial sector, and not based on Marel’sown actual figures.The equation for calculating the discount rate is thus as follows:E(R) = Rf + β* (E[Rm] – Rf) + FRT + SCAssessment of the risk-free interest rate is based on our estimated breakdown of income andexpenditure by currency and the yields on 10Y non-indexed government bonds in thecurrencies concerned. The risk premium (beta) is the average for Marel’s industrial sector. Itwas calculated by combining 1/5 of the risk co-efficient for the sector “Machinerymanufacturers” with 4/5 that for “Software manufacturers”. Marel’s weighted beta is 0.9.The market premium [E[Rm] – Rf) is calculated based on the historical return of US sharesover and above US T-bond returns. A special company premium (FRT) is then added, which isintended to represent the risk in excess of that expected in this sector on the average in theUS. In Marel’s case, the premium is 0.5%, all of which is currency risk. Adding this currencyrisk is equivalent to increasing the beta by 0.1, making it just over 1. The small cap premium(SC) added is intended to equalise the different returns from companies with different marketvalues but the same beta. US experience has shown that companies with low market valuehave given better returns than have companies with a higher value. Marel’s small cappremium is 1%.The above methodology gives a discount rate of 11.51% for Marel, which is slightly higherthan the 11.46% discount rate used in our last valuation of 1 December 2004.We estimate Marel’s value at EUR208.1m, or the equivalent of avaluation share price of 65.1The principal changes are higheranticipated growth and improvedmarginsConclusionGiven the assumptions discussed above, the market value of Marel is estimated to be EUR210.2m. Conversion using the EUR exchange rate on 16 February 2006 (EUR/ISK 75.77), givesa value of ISK 15.9 bn for the company, or the equivalent of a share price of 65.6 This is basedon a discount rate of 11.51% and anticipated long-term growth of 4.0%. Our most recentvaluation of Marel, dated 1 December 2004, estimated the company’s value at ISK 12 bn,giving a valuation share price of 49.3. Marel’s closing share price on 16 February 2006 was62.0. Allowing for a 0.5% margin of uncertainty on the discount rate, we recommend thatinvestors hold their shares in the company and overweight them in a well-diversifiedportfolio.Our assumption of considerably higher growth is one major change compared to the lastvaluation, as Marel has laid out a clear future vision aiming at substantial near-term growth.Furthermore, Marel’s margin has also been boosted considerably from the previous valuation,even if a substantial part of this is the result of changed IFRS accounting practices. The ISK

12exchange rate has decreased considerably since our last valuation was published. Thecompany’s anticipated growth rate following the forecast period has been lowered from 4.5%to 4.0%.Three factors should be mentioned especially which make a decisive difference to Marel’svalue: the discount rate, the ISK exchange rate and Marel’s temporary possibilities to increaseits gearing in connection with acquisitions abroad.• In assessing the basic interest rate used to calculate our discount rate, we use theweighted risk-free interest rates in the currencies which form Marel's net cash flow.This method gives a risk-free rate of 5.7%. Investors eyeing Marel as a foreigninvestment could be expected to use risk-free Eurozone interest rates of 3.5% as areference. This would result in a discount rate of 9.34% and increase the valuationto EUR 301.9m, and the valuation share price to 94.2. In this connection it should bepointed out that the yield on the longest class of Icelandic Treasury notes (RIKB13,with a duration of 5.6 years) is currently 7.96%.• Any ISK weakening would have a positive impact on Marel’s price; we havepredicted a weakening of the currency by around 10% this year, assuming that nofurther power-related industry projects are announced. If our forecast provescorrect, this would increase the valuation by around 13%. The outcome would be atarget price (in 12 months time) of 82.8 and an expected 12M increase of around26%.• If Marel manages to finance external growth through lending, without acorresponding increase in its equity (lowering its equity ratio) and without thisaffecting the terms of its financing, this would boost the group’s value above thepresent estimate. There are examples of listed Icelandic companies expandingabroad who have followed this route.Assumptions concerning income growth and margins are the main factors contributing todownside uncertainty in the valuation.

13Annex 1Scenario with variable exchange ratesThe ISK exchange rate has had a substantial negative impact on Marel’s operations in thepast year or two. Any ISK depreciation would therefore positively affect its operations.Management have, for instance, suggested that an ISK depreciation of 5% would boost itsEBIT margin by 1%. The valuation does not take this into consideration. We do expect Marelto seek other ways of improving its margin if the exchange rate in Iceland continues to beunfavourable. Measures intended to reduce the significance of the ISK in Marel’s operationhave already been announced, reducing the impact which major ISK fluctuations have onoperations. Our valuation assumes that Marel’s margin will reach a maximum of 12.1%without consideration of ISK developments.There are many indications, however, that the ISK will weaken, and we assume a 10%depreciation this year. In our opinion a distinction should be made between returns on equityand currency trading, and we recommend that investors with a strong focus on exchange ratemovements invest in currency markets rather than investing indirectly through equities. Theaccompany scenario shows the impact of an ISK depreciation on the valuation share price.The scenario assumes that the ISK depreciation has an impact on both the margin and theEUR/ISK exchange rate used to convert the company’s value to ISK. For example, an ISKweakening of 10% would raise the valuation share price from 65.6 to 74.3.10,51% 11,01% 11,51% 12,01% 12,51%-20% 60,6 55,7 51,1 47,2 43,8 40,7-15% 64,4 60,6 55,8 51,5 47,9 44,6-10% 68,2 65,7 60,5 56,1 52,2 48,7-5% 72,0 71,0 65,5 60,7 56,6 53,00% 75,8 76,4 70,6 65,6 61,2 57,45% 79,6 81,4 75,3 70,1 65,5 61,410% 83,3 86,2 79,8 74,3 69,4 65,215% 87,1 90,6 83,9 78,1 73,1 68,620% 90,9 94,9 88,0 81,9 76,7 72,0

1517. February 2006Marel hfShare priceStock turnoverMajor ShareholdersLast 12 months Landsbanki Íslands hf. 36,50%72Number of trades 1.012 Eyrir Invest ehf. 29,33%64Turnover - nominal value 100,4 m.kr. Helga Sigurðardóttir 1,98%56Turnover - market value 6.419 m.kr. Ingunn Sigurðardóttir 1,98%Velocity 0,42 Súsanna Sigurðardóttir 1,96%48Tryggingamiðstöðin hf. 1,73%40* nominal turnover/share capital Egill Vilhjálmur Sigurðsson 1,58%32Traustfang ehf. 1,44%24Average price 61,3 Harpa holding ehf. 1,39%jan.04 maí.04 sep.04 jan.05 maí.05 sep.05 jan.06High 72,0 Landssjóður hf. 1,10%Low 52,2 date. 9.Feb.2005 78,99%Financial Statements SummaryBoard of DirectorsEUR thousands2002 2003 2004 2005 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005Income statementCEOOperating income 100.654 106.104 112.301 129.039 26.822 29.121 29.928 33.910 30.416 34.785 Hörður ArnarssonEBITDA 5.712 10.129 16.527 14.814 3.750 3.767 4.180 4.469 3.399 2.764EBIT 2.278 6.568 10.596 9.721 2.833 2.848 3.056 3.254 2.136 1.275 BoardAfter tax profit 50 3.749 6.615 5.715 1.757 1.895 1.801 2.104 1.231 579 Árni Oddur Þórðarson, chairmanCash flowArnar Þór MássonNet cash from operating expenses 1.004 4.724 13.207 2.987 2.788 2.836 1.486 1.226 3.138 -2.863 Friðrik Jóhannsson% of operation income 1,0% 4,5% 11,8% 2,3% 10,4% 9,7% 5,0% 3,6% 10,3% -8,2% Þórólfur Árnason% of turnover: Egill TryggvasonGross profitSales and marketing expensesDevelopment expensesAdministrative expensesEBITDA- 32,6% 36,5% 33,4% 35,0% 36,4% 35,1% 34,2% 32,1% 32,5%- 12,8% 12,4% 12,5% 11,1% 12,6% 12,3% 12,2% 12,7% 12,7% Valuation breakdown- 6,8% 5,8% 6,2% 5,0% 7,2% 5,7% 4,8% 5,5% 8,7%- 8,1% 8,1% 8,1% 8,6% 7,5% 7,4% 8,6% 7,7% 8,5%5,7% 9,5% 14,7% 11,5% 14,0% 12,9% 14,0% 13,2% 11,2% 7,9%EBIT 2,3% 6,2% 9,4% 7,5% 10,6% 9,8% 10,2% 9,6% 7,0% 3,7%After tax profit0,0% 3,5% 5,9% 4,4% 6,6% 6,5% 6,0% 6,2% 4,0% 1,7%Balance sheetEquityInterest-bearing debtTotal assetsKey ratiosCurrent ratioQuick ratioEquity ratioP/E ratioAssumptionsEUR thousandsOperating incomeYoY changeEBITDAYoY changeEBITYoY changeAfter tax profitYoY changeKey ratios% of turnover:22.724 25.167 31.595 41.032 29.104 28.413 33.263 34.539 37.048 37.23138.224 37.063 38.467 45.934 38.671 38.467 40.643 40.590 41.781 44.14382.602 81.334 95.482 114.890 90.732 87.444 95.482 99.477 104.774 107.0281,4 1,7 1,6 1,4 1,7 1,8 1,7 1,5 1,4 1,40,7 0,8 0,7 0,6 0,8 0,7 0,7 0,6 0,7 0,627,5% 30,9% 33,1% 35,7% 32,5% 32,4% 34,7% 35,4% 34,8% 35,7%0,2% 16,5% 30,5% 18,1% 27,6% 26,3% 21,8% 23,5% 20,6% 18,1%Determining a required ROE2006 2007 2008 2009 2010 2011 2012 2013 2014 2015145.543 160.064 176.135 193.829 213.278 234.679 253.378 268.570 282.095 293.37914,9% 12,8% 10,0% 10,0% 10,0% 10,0% 10,0% 8,0% 6,0% 5,0%17.286 22.270 26.120 30.764 33.981 37.520 40.613 43.126 45.363 47.230-10,2% 28,8% 17,3% 17,8% 10,5% 10,4% 8,2% 6,2% 5,2% 4,1%11.420 15.847 18.918 23.003 25.572 28.430 30.613 32.626 34.063 35.430-19,4% 38,8% 19,4% 21,6% 11,2% 11,2% 7,7% 6,6% 4,4% 4,0%6.648 10.056 12.445 15.548 17.471 19.532 21.137 22.549 23.526 24.508-28,4% 51,2% 23,8% 24,9% 12,4% 11,8% 8,2% 6,7% 4,3% 4,2%Hold/OverweightIn determining a required FOE, LandsbankiResearch bases its calculations on thecapital asset pricing method (CAPM), plusan additional two items, a company premium(FRT) and a small cap premium (SC), asshown in the equation: E(R) = Rf + β *(E[Rm] – Rf) + FRT + SC. Risk-free interestrates (Rf) are based on yields on 10-year,non-indexed government bonds in thecurrencies which form the company*s netcash flow. The market premium (Rm) iscalculated based on the historical return ofEBITDA 11,9% 13,9% 14,8% 15,9% 15,9% 16,0% 16,0% 16,1% 16,1% 16,1% US shares in excess of government bondEBIT 7,8% 9,9% 10,7% 11,9% 12,0% 12,1% 12,1% 12,1% 12,1% 12,1% returns. The company premium (FRT) isEBT 5,9% 8,1% 9,1% 10,3% 10,5% 10,7% 10,7% 10,8% 10,7% 10,7%comprised of currency risk, political risk andAfter tax profit4,6% 6,3% 7,1% 8,0% 8,2% 8,3% 8,3% 8,4% 8,3%special operating risk. A small cap premium8,4%(SC) of 1% is added.58%FCFF 2006-2015FCFF after 201542%Sensitivity of growth Sensitivity of ROE and furure growth Required return on equityRequired rate on equity10510,58% 11,08% 11,58% 12,08% 12,58% Risk-free return (rf) 5,7%852,0% 64,7 60,8 57,2 54,0 51,2 Market premium (rm) 4,8%79,872,476,03,0% 69,8 65,1 60,9 57,2 53,9 Beta (β)650,9065,6 68,959,2 62,356,24,0% 76,4 70,6 65,6 61,2 57,4 Company premium (FRT) 0,5%45 50,5 53,35,0% 85,3 77,9 71,7 66,3 61,7 Small cap premium (SC) 1,0%256,0% 98,3 88,2 80,0 73,1 67,3 Required rate of return 11,5%-3% -2% -2% -1% -1% 0% 1% 1% 2% 2% 3%Future growth 4,0%DisclaimerThe content and format of this document are the work of the staff of Landsbanki Research and are based on public information that was accessible at the time the analysis was performed. Thevaluationbased on this information reflects the opinions of Landsbanki Research’s staff on the date of this analysis, but those opinions are subject to change without notice.Landsbanki Ltd. and its employees will not assume responsibility for business transactions based on the information and opinions presented here. It should be pointed out that Landsbanki Ltd may, atany time, have direct or indirect interests to protect as regards individual companies. This refers to the bank itself, its subsidiaries, and its business on behalf of its customers; i.e., as investor, lender,orservice agent. Analyses are nonetheless prepared independently by Landsbanki Research, and the bank observes rules concerning the separation of operational divisions. These rules can be viewedonthe bank’s Website.Landsbanki Research reminds the reader that investment in securities is, by its nature risky. Landsbanki Research recommends that potential investors seek advice from more than one party beforemaking a decision.Future growthLandsbanki Íslands Hafnarstræti 5 tel.410 7380 www.landsbanki.is

16The contents and form of this document were produced by employees of Landsbanki Researchand are based on information available to the public when the valuation was compiled.Assessment of this information reflects the views of Research’s employees on the valuationdate, which may change without notice.Neither Landsbanki Íslands hf. nor its personnel can be held responsible for transactions basedon the information and opinions expressed here. Attention should be drawn to the fact thatLandsbanki Íslands hf. may, at any time, have direct or indirect interests at stake in individualcompanies, either on its own behalf or through its subsidiaries or customers, for instance asan investor, creditor or service provider. Nonetheless, all valuations are preparedindependently by Landsbanki Research and in accordance with the Bank’s rules on separationof activities accessible on the Landsbanki website.Landsbanki Research reiterates that investment in securities or foreign currency naturallyinvolves risk and potential investors are advised to seek the advice of more than one partybefore making any decisions.Equities Marel 2006:1Tel: +354 410-4000 Landsbanki Research, Hafnarstræti 5, 101 ReykjavíkFax: +354 410-3006 Use of this material is unrestricted, but we requestthat the source be quoted.greining@landsbanki.is www.landsbanki.is