Alfesca hf. - Notice to convene extr.general meeting

- Annual General Meeting - 1:00 pm on Tuesday 18 November 2008

Annual General Meeting

1:00 pm on Tuesday 18 November 2008
Grand Hotel, Reykjavík, Iceland

The board of directors of Alfesca hf. submits the following proposals for
consideration at the annual general meeting of Alfesca hf to be held on 18
November 2008:
1. That dividend for the financial year ended 30 June 2008 is not declared nor
   paid on the shares of the Company. 

2. That the remuneration of members of the board of directors for a period of
   one year from the date of the annual general meeting in 2008 to the date of
   the next annual general meeting be as follow: 

   - each director to receive €45,000;
   - the chairman of the board of the directors to receive €135,000;
   - each director appointed to serve on a sub-committee of the board of
     directors to receive €25,000 for such appointment. 

3. That the Remuneration Policy of the Company be readopted and approved by the
   meeting 

“Remuneration Policy 

Remuneration Committee

The Board of Directors shall elect three (3) persons from its ranks that shall
form a Remuneration Committee.  The principal responsibilities of the committee
are setting, reviewing and recommending to the Board for approval the Company´s
overall remuneration policy and strategy for individual remuneration packages
for executive directors and other senior executives of the Company.  The
committee has also the role of approving incentive schemes and option schemes
as well as the approving of bonus payments to directors and certain senior
executives.  The Committee shall also ensure that the terms of employment of
key employees remain within the framework of the Remuneration Policy, and it
shall submit a report on this to the Board of Directors once a year in
connection with the Company's Annual General Meeting. 

This arrangement is in accordance with the guidelines from the Iceland Chamber
of Commerce on Corporate Governance issued in 2005. 

Broad Policy

The remuneration policy is set forth in accordance with article 79a of the Act
on Public Limited Companies no. 2/1995 and general principles on good corporate
governance. 

The objective of the Company is to continue to set remuneration levels so as to
attract and retain high caliber executives and other senior managers and to
encourage and to reward superior business performance. Remuneration for
executive directors and other senior managers is intended to reward against
criteria that are relevant and realistic but also challenging, so that superior
performance is encouraged. Therefore, the remuneration policy shall be reviewed
annually and focus on performance-related incentives, rather than annual
salary, to encourage the alignment of operating objectives as well as
delivering shareholder value. Annual salaries shall continue to be rigorously
tested and reviewed and set at competitive levels having regard to the market
environment.  In relation to bonuses and long-term incentive plans, the policy
will continue to be to provide an opportunity for executives and other senior
managers to earn total remuneration packages in the upper quartile range, if
stretching and demanding performance conditions are met.  The Committee shall
review all aspects of the remuneration policy, including pay benchmarking for
the most senior roles and consideration of the performance measures used. 

The remuneration policy in place for executive directors and senior managers
shall place emphasis on key performance objectives and strengthening executive
shareholding. 

Remuneration for executive directors and other senior managers

The remuneration package of an executive director and senior managers should be
aligned closely with the interests of shareholders and, therefore a significant
proportion of the remuneration package should be performance related.  In
arriving at the balance between fixed and variable remuneration the fixed
portion will relate only to base salary, whilst the variable portion shall
include cash bonuses, long term option arrangements, performance related and/or
conditional rights to receive shares in the Company or long-term incentive
arrangements. 

The balance between fixed and variable remuneration for the executive directors
and other senior executive management shall be as follows: 

Base salaries
Basic salary shall take into account the responsibilities and performance of
the individual concerned.  This shall normally be reviewed annually unless
responsibilities change. Salary levels shall be set at appropriate levels
having regard to market conditions and companies of a comparable size,
complexity and market sector. 

Cash bonuses
Executive directors and senior managers are eligible to receive cash bonuses
subject to achievement of performance targets, which are both group wide and
individual targets. 

Performance Share Plans
In accordance with the Company's objectives of aligning the interests of
shareholders and the Company with the interests of executives and senior
employees and to give the executives and senior employees an incentive to
perform at the highest level over an extended period it is permissible to grant
executives and senior employees share related awards. 

Share related awards can be granted by way of performance related and/or
conditional rights to shares. Share related awards can also be in a form of put
and/or call options and may be supported by loans to employees. The Company may
also create warrants to subscribe in equity shares of the Company, enabling the
employees to subscribe in cash at the exercise price for the warrant shares.
Such equity incentives shall in general be valid for a period of 2 - 4 years
and may be subject to a vesting schedule, if deemed appropriate, during the
relevant period and linked to targets in the business being reached. 

Once a year the Remuneration Committee shall present the Board of Directors
with its proposal concerning share awards for senior employees. 

Remuneration of the Board of Directors

Non-executive directors shall receive a fixed monthly payment in accordance
with the decision of the Annual General Meeting, as stipulated in article 79 of
the Act on Public Limited Liability Companies.  In general, the deputy chairman
shall receive a fixed monthly payment that shall be double amount received by
the non-executive directors.  The non-executive chairman shall receive a higher
amount.  Board Members who are members of the Remuneration Committee, the audit
committee and other sub-committees shall receive a fixed amount for such
activities determined by the Annual General Meeting.
Non-executive directors do not participate in any incentive or pension plans.
Remuneration of the CEO

The Remuneration Committee shall make a proposal in relation to the salary of
the CEO. The CEO´s remuneration shall be comprised of the same elements and on
the same principles as set forth for executive directors and senior managers
referred to above. Other terms of employment shall be comparable to those in
comparable companies, such as pension contributions, vacation benefits, use of
motor vehicles and employment termination period.  The length of the severance
period may take into account the length of the CEO's service to the Company. 
The CEO is supported by an executive committee.  The remuneration of employees
in the executive committee shall be determined by the CEO in consultation with
the Company´s Remuneration Committee. 

Approval and Reporting 
The Remuneration Policy shall be approved at the Company's annual general
meeting.  The policy is binding on the Board of Directors as regards share
awards and equity related payments.  In other respects the policy is a
guideline for the Company and the Board of Directors.  At every annual general
meeting the Board of Directors shall give an account of the employment terms of
the CEO, executive directors and other senior employees and board members and
the estimated cost of share awards in addition to explaining the implementation
of the remuneration policy.  Deviations from the policy shall be especially
accounted for and explained.
At the annual general meeting the Board of Directors shall report on the CEO's
terms of employment and the combined total salaries of executive directors,
senior employees and board members.  It shall further provide information
concerning the total amount of salaries paid during the year, amount of cash
bonuses and share awards and other types of payment linked to shares in the
Company, severance payments, if any, and the total amount of other kinds of
payments.  The Board of Directors shall further report on the estimated
expenses of any share related awards and payments. 

Adoption date: 18 November 2008”

4. That the following individuals, who have submitted their candidacy for
   membership of the board of directors of the Company for a period of one year,
   be elected: 

a. Mr. Arni Tomasson, 
b. Mr. Bill Ronald
c. Mr. Gudmundur Asgeirsson
d. Mr. Olafur Olafsson
e. Mr. Kristinn Albertsson

5. That Deloitte hf. is re-appointed as the Company´s auditors for a period of
   one year and the board be authorised to fix their remuneration. 

6. That the Company is authorised to own and accept as security shares up to
   10% of its issued share capital.  This authorization is to be effective for a
   period 18 months, with the restriction that the total shares so acquired or
   accepted as collateral shall not exceed 10% of the total issued share capital
   of the Company at each time. The purchase price for the shares may deviate up
   to maximum of 10% from the average selling price of shares in the Company
   quoted by the OMX Nordic Exchange in Iceland hf. in the two weeks preceding
   the acquisition. With the approval of this proposal, the earlier
   authorisation to purchase the Company's own shares, which was approved at
   the last Annual General Meeting, shall expire. 

7. That the Articles of Association of the Company are amended.

After amendments, paragraph 2 of Article 2.1. of the Articles of Association of
the Company will read: 

“The nominal value of each share is one krona or a multiple thereof. It is
permissible to issue one share for all the share capital of each shareholder in
the Company and the same is valid for the increase in the share capital, as
stipulated in article 2.02.” 

After amendments, Article 4.1. of the Articles of Association of the Company
will read: 

“General Shareholders' meetings
Within the limits laid down by these Articles of Association and by law, the
duly held meetings of shareholders shall have the supreme power in the affairs
of the Company. 

Representation
A shareholder may have his representative attend a shareholders' meeting on his
behalf. A representative shall submit a dated Power of Attorney in writing. 

Such Power of Attorney shall not be validly revoked vis-à-vis the Company once
the Power of Attorney has been presented at the time of the meeting's agenda
being provided or at the beginning of the meeting, whichever is the earliest. 

Electronical attendance at shareholders' meetings:
The Board of Directors may determine to hold a Shareholders' Meeting with the
assistance, either partly or fully, of electronic media. 

In the event that the Board of Directors determines to hold an electronic
Shareholders' Board Meeting, provided that the appropriate equipment available
is adequately secure, this shall be mentioned specifically in the call to the
meeting. Information on technical outfit and details of how shareholders can
give notice of their electronic participation, how voting is performed and
where shareholders can obtain information about the implementation of
electronic participation at the meeting, password as well as other pertaining
information, shall be included in the call to the meeting. A password used in
the appropriate electronic equipment shall be equivalent of the signature of
the shareholder in question and is a confirmation of his participation in the
Shareholders' Meeting. 

Shareholders who intend to attend a meeting by electronic means, shall notify
the Company's office with a minimum of [five] days notice and shall, at the
same time submit written questions, regarding the agenda or submitted
documents, that they wish to have answered at the meeting. 

In the event that the Board of Directors does not consider it feasible to grant
the Shareholders the option to take part in a Shareholders' meeting by
electronic means, the shareholders shall be given the opportunity to cast votes
on propositions or participate in elections, in writing. Instructions on how
such voting will be implemented shall be included in the call to the meeting.
Shareholders can request to have their ballots sent to them provided that they
have sent a written request thereof to the Company's office five days before
the announced Shareholders' Meeting. Shareholders may also claim their ballots
at the Company's office within the aforementioned time limit or cast their vote
at the same office. 

Otherwise Article 80a of Act no. 2/1995 respecting Public Limited Companies as
amended from time to time shall apply. 

Legitimacy of shareholders' meetings
A shareholders' meeting is legitimate if correctly called upon.”

8. That the Company adopts a dividend policy.

“Dividend Policy
The dividend policy of Alfesca hf. is to optimise the return on assets
entrusted to the Company and ensure that its shareholders benefit from the
successful growth and anticipated strong cash flow of the business whilst
providing sufficient funds for investment in future growth.  Alfesca's policy
is to maintain a dividend “pay-out” ratio in the range of 30 - 40% of its net
income. 

As part of its dividend policy, Alfesca hf will provide a dividend reinvestment
plan (DRIP).  Under the plan, Alfesca hf will offer shareholders the
opportunity to reinvest their net dividends to receive shares rather than their
cash entitlement.  The objective of the DRIP is to provide a convenient means
for shareholders to increase their holding in Alfesca hf at competitive rates
for the benefit of both the company and its shareholders.”