IcelandSeafoodInterna.onal2016AnnualReport

Table of Contents

Contents Page

YearinReview 3

•  2016Highlights 4

•  Chairman’sAddress 7

•  CEOStatement 8

•  BoardofDirectors 10

TheGroup 12

•  WeareIcelandSeafood 13

•  OurProductsandBrands 17

•  StrategicFocus 22

•  ExecuHveManagement 24

•  Employees 26

FinancialPerformance 28

•  KeyFigures 29

•  KeyHighlights 31

•  ConsolidatedFinancialStatements2016(separatePDFfile)

Investors 34

•  CorporateGovernance 35

•  ShareholderInformaHon 38

•  RiskManagement 40

CorporateSocialResponsibility 42

Disclaimer 45

YearinReview

2016AnnualReport4

2016 HighlightsBringingqualityseafoodfromselectedproducerstodemandingoperatorsandconsumersworldwide

YearinReview

Revenues of

€246m down 4.6% from 2015

Profit before tax

€3.3m up €2.2m from 2015

Value Added Division’s sales

39% of total sales

Value Added Division’s profit before tax

68% of divisional profitability

Net debt of

€34.7m

€11.8m reducLon from 2015

Equity at

20% up from 10% at year-end 2015

Exports to over

45 countries

With over

280 dedicated and knowledgeable employees

2016AnnualReport5

YearinReview

IcelandSeafoodInternaHonallistedonNasdaqFirstNorthonMay25,2016.ThisbroadenedtheinvestorbaseandprovidedaddiHonalequitytotheGroup.Thisisanimportantstepforfurtherexpansion,withafocusontheValueAddedacHviHes.

InvestmentsintheValueAddeddivisionhaveprovidedapla^ormforgrowth,whereitdelivered68%ofthe

Group’sdivisionalprofitabilityin2016.

Havelok,thefoodservicebusinessintheUK,hasgrownrapidlysinceitsbeginningsandhasreachedcriHcalmasstomoveintoprofitability.

IcelandSeafoodFrance,whichsuppliesfreshandfrozenproductstofoodservice,retailandprocessorsinFrance,generatedrecordprofits.

Overall,IcelandSeafoodInternaHonalhadasolidperformancedespitechallengingcircumstancesinsupplyandtheimpactoftheBrexitvote.Thiswasachieved

throughouremployees’andsuppliers’determinaHonandin-depthknowledgeofthemarketstoserviceourcustomers,wheretheytransformedthosechallenges

intoopportuniHes.

2016AnnualReport6

Chairman’s AddressFrom1932 IcelandSeafood InternaHonal and itsfounders have been leading the way in export,distribuHonandmarkeHngofseafood.TheGroupis known and highly respected for its service,quality and innovaHons, both domesHcally andinternaHonally, as a leading supplier of seafoodtoover45countriesaroundtheworld.

Theconsolidatedrevenuein2016amountedtoEUR246millionresulHnginnormalisedprofitbeforetaxofEUR3.3millionandanetprofitofEUR2.6million.TheoperaHonin2016alsoresultedinthestrengtheningofthebalancesheetwithnetdebtreducHonandastrongerequityraHoof20%,upfrom10%ayearago. CashflowfromoperaHngacHviHesamountedtoEUR6.5million.

Withsolidinfrastructure,healthyoperaHons,asoundbalancesheet,goodcashflowandstrongposiHoninIcelandandallkeymarkets,theGroupisreadyandable to invest innewopportuniHes related to soluHons in themarkeHngofseafood.

The Group will conHnue its commitment to growing, modernizing andimprovingitsexisHngnetworkswiththeaimtodelivervaluetocustomers,suppliersandshareholdersgoingforward. AstrongfocuswillbekeptonqualityofserviceandnewsoluHonsinthemarkeHngofseafoodandatthesame Hme, the Groupwill conHnue to support environmental iniHaHvesincludingsustainablefisheries.

Our strategy is and will be focused on efficiency and profitable growth.There is every reason for opHmism where we expect excellent growthopportuniHesinseafoodmarkeHnginthefuture.

YearinReview

2016AnnualReport7

In May 2016 Iceland Seafood InternaHonal was listed on Nasdaq FirstNorth and I would like to take this opportunity of welcoming newshareholders. AtthesameHmeIwouldliketothankthecurrentmajorityshareholderofthebusinessforhisconHnuedsupportoftheGroup.

2016 was a year of significant accomplishments for Iceland SeafoodInternaHonal.Inconclusion,IwouldliketocongratulatethemanagementandourdedicatedstaffthroughouttheorganizaHonfortheirachievement.

BenediktSveinssonChairman

YearinReview

2016AnnualReport8

CEO Statement2016 was an excellent year for Iceland SeafoodInternaHonal, having achieved normalised profitbeforetaxofEUR3.3million,treblethepreviousyear. Through our focus on our strategicprioriHes, combined with an improvement inworking capital and margins, net marginincreasedby17%(EUR2.8million)in2016,net

debtreducedby25%(EUR11.8million),whiletheequityraHoatyear-end2016wasinexcessof20%.

WeareproudtohavelistedIcelandSeafoodInternaHonalontheNasdaqFirstNorthstockexchangeinMay2016,bringingin170newshareholdersintotheGroup.

GlobaldemandforseafoodandfoodsoluHonsisexpectedtogrow.ThisisnotonlybeingdrivenbypopulaHongrowthforecastof8.5billionby2030,butalsothemiddleclasssegment,whichisexpectedtodoubleduringthisperiod. Consumers’ lifestyles are healthier and fish is a first choice forprotein.Aswell,peoplearelookingforquickand“easytoprepare”mealsthatarehealthy,tastyandinnovaHve.IcelandSeafoodInternaHonaliswellplacedtocapitaliseonthesetrends,whereseafoodistherightproteintobein.

Whilst we have been in business for 85 years, we see new growthopportuniHes for healthy protein.Wehave reformulated our strategy tofurtherinvestinourValueAddeddivisioninlinewithglobaltrends.Thisisbeing done in close partnershipwith our customers,wherewe focus onconsumer needs. For Iceland Seafood InternaHonal, it is a conHnuousprocessoflearninganddevelopment.

YearinReview

2016AnnualReport9

Over the last few years, we have strengthened the balance sheet. Thissupports Iceland Seafood InternaHonal on its sustainable investmentstrategy: focussing on organic growth of the business aswell as seekingpotenHalacquisiHonopportuniHes.

As one of the leading global suppliers of seafood, corporate socialresponsibility is at the heart of the business. We work together withharvesters to ensure long-term supply of seafood from renewable andwell-managed resources. We work closely with Iceland ResponsibleFisheries, MSC and various fisheries on fishery improvements and bestpracHces.

Iceland Seafood InternaHonal is commijed to delivering high qualityproducts. This is only made possible with our partners throughout thesupplychainandourdedicatedworkforcewhocollaborateacrossEurope,North America and Asia tomeet our customer requirements in over 45countries.ThroughtheirdeterminaHonandin-depthknowledge,theyhavetransformedchallenges intoopportuniHesandIwanttopersonallythankall our employees, customers and our suppliers for the success weachievedin2016.

HelgiAntonEiríkssonChiefExecu.veOfficer

YearinReview

2016AnnualReport10

Boardof DirectorsBenediktSveinssonChairman

Benedikt Sveinsson has over 40 years of industry experience, in-depthknowledgeoftheGroup’soperaHonsandhasacloserelaHonshipwithkeycustomer and suppliers. Benedikt has worked for Iceland Seafood inIceland, the UK and the US in various roles, which include ManagingDirectoroftheUKoperaHons(1981-1986),DeputyMDandthenManagingDirectorof theSeafoodDivisionofSambandof Iceland (1987-1991),andPresidentandCEOofIcelandSeafoodInternaHonalPlc(1992-1998).

In 1999 Benedikt moved to the US and became President of IcelandSeafoodCorporaHonintheUS.In2006hebecameCEOofIcelandSeafoodInternaHonal in Iceland. Today he is the Chairman of Iceland SeafoodInternaHonal;healsochairstheBoardofSaltkaupandservesasaDirectorontheBoardofÍsfell.

MarkHolyoakeBoardMember

MarkHolyoakeisthecurrent100%ownerofOakvest,aprivateinvestmentfund specialising inprivateequity and real estate investments.Mark, viaOakvest’s subsidiary company InternaHonal Seafood Holdings, is asignificantshareholderinIcelandSeafoodInternaHonal.

Amer graduaHng with a Business Degree in 1995 from the University ofReading,Markhasfocusedondevelopingabroadpor^olioofbusinessesextending across the internaHonal commercial and residenHal propertymarkets,andtheUKandEuropeanfoodsectors.Hehasextensive

YearinReview

2016AnnualReport11

experienceintheglobalseafoodindustryhavingownedanddirectednumerousseafoodcompaniesincludingbutnotlimitedto:FiveStarFishLimited,SeagullFoodsLimited,BriHshSeafoodGroupHoldingsandPacificSeatekLimited.

Mark’sinvestmentfund,Oakvest,conHnuestofocusonprivateequityinvestmentsinthefoodandcommoditysectors,realestateacquisiHonsanddevelopmentsaswellasmanagingalistedequityandfundpor^olio.MarkhasbeenaBoardMembersince2010.

IngiJ.GuðmundssonBoardMember

IngiJ.GuðmundssonisCEOatGjögurfisheryandhasover20years’experienceintheseafoodsectorinIceland.IngihasaCand.oceonbusinessdegreefromtheUniversityofIceland.HeworkedinsalesandproducHonforIcelandSeafoodfrom1995to2000andtodaysitsonseveralboardsinIceland,includingSíldarvinnslanhf,GullbergehfandSjóváInsurance.

GjögurfisheryisakeysuppliertoIcelandSeafoodInternaHonal’sIcelandicoperaHngdivision,wherehealsoservesasanon-execuHveMemberoftheBoard.Thetradingbetweenthetwocompaniesisconductedonanarm’slengthbasisonsimilartermsandpricingtoothersupplierstotheGroup.FurtherinformaHonisprovidedinnote24tothe2016ConsolidatedFinancialStatements.

NoneoftheGroup’sBoardmembershaveanyexecuHvepowers.

YearinReview

TheGroup

2016AnnualReport

Iceland Seafood InternaHonal is a worldwide sales, processing andmarkeHng group for a variety of frozen, fresh, salted and dried seafoodandseafoodproducts.

Ourhistoryandheritagedatesbackto1932fromthreeassociaHons:TheUnion of Icelandic Fish Producers (SIF), founded in 1932; the HerringBoard,foundedin1935;andtheSeafoodDivisionofSambandofIceland,founded in1957.Our strong roots in the Icelandic SeafoodSector formsthebasisofourexperHseandlonglasHngrelaHonshipsbuiltontrustandreliability.

Today, Iceland Seafood InternaHonal is a respected industry leadingsupplierofNorthAtlanHcfishandseafood,andaleadingserviceproviderinourmarkets.Weareoneofthelargestexportersoffishproductsfrom

We are Iceland Seafood

13

TheGroup

2016AnnualReport14

IcelandandakeyprocessorofhighqualityseafoodintheSpanishandUKmarkets.

Weserveallmajorseafoodmarketsworldwide,wherewehavedepthofexperHseandunderstandingtomeetourcustomerneedscombinedwithinnovaHveflexiblesoluHonsandstrategicglobaldistribuHon.

OurheadquartersareinIcelandandweoperatetwodivisionswithsevensubsidiariesinEuropeandNorthAmerica.

ValueAddedDivision

IcelandSeafoodInternaHonalconHnuestoinvestinvalueaddedacHviHesinlinewithglobaltrends.WearefocusedonsupplyinggreatqualityseafoodandcreaHngsoluHonsforourcustomers.

TheGroup

RegionswhereIcelandSeafoodInterna.onaloperates

2016AnnualReport15

The Value Added division incorporates three manufacturing sites inBarcelona,GrimsbyandBradford,whichservicetheretailandfoodservicemarketsintheUnitedKingdomandSouthernEurope.

•  IcelandSeafoodSpain,locatedclosetoBarcelona,hasprocessing,coldstoreanddistribuHonfaciliHes.Thecompanyisastrongplayerinsaltedand frozen seafood operaHng in the Spanishmarketwith sales acrosstheMediterranean region. IcelandSeafoodSpain is themain importerof Icelandwetsaltedcod,brandedBacalaode Islandia. Its threeotherbrandsare:LasTapas,highqualityproductsintradiHonaltapasrecipesthatcombinetheculturaltradiHonofMediterraneancuisine,Armengol,a professional rangeof frozen Icelandic salted cod cuts of the highestqualityandBanordforselectedproductssourcedfromotherregions.

•  HavelokLimited,locatedinGrimsby(UK),supplieshighqualityseafoodfromprocurementtopackedproduct,whichissecondtonone,offeringoneofthefinestrangesofbreaded,bajeredandplainfishintheUK.

Specialising inawiderangeofaddedvalueandbespokefishproducts,focusedprimarilyonthecateringand foodservicemarket, theproductrange offers something for everyone, from IQF white fish fillets todeliciousgoldenbajeredandbreadedfishproductstoawiderangeofchildren’sandluxuryproducts.

•  Iceland Seafood Barracloughs, located in Bradford (UK), specialises insupplying our retail customerswith private label high quality fish andshellfish globally sourced. The combinaHon of Iceland SeafoodInternaHonal’shistoricalsourcingskillsandBarracloughsprocessingandpacking skills enables the business to offer its customers an effecHveglobal sourcing chain and flexible UKmanufacturing and packing. Thecompanyspecialisesinsmoking,cuvngtocustomerspecs,andpackinginavarietyofpackformatsformanyofthelargestretailersintheUK.

TheGroup

2016AnnualReport16

Sales&Distribu.onDivision

OurSales&DistribuHondivisioniscommijedtoprovidingqualityseafoodproductstoourmanycustomersacross6conHnents.Thisisachievedbyworkingcloselywithourproducerpartnersandunderstandingmarketsandcustomers’needs.

TheSales&DistribuHondivisionincorporatessubsidiariesinIceland,France,GermanyandtheUSA.Thedivisionsellstoover45countries.

•  IcelandSeafoodIceland,locatedinReykjavik,isoneofthelargestcompaniesintheexportofseafoodfromIcelandtoallmainmarketsaroundtheworld.Thecompanyoperatesincloseco-operaHonwithIcelandicseafoodproducers.ItsmainfuncHonsaresalesofabroadrangeofIcelandicseafoodproducts,sourcingforIcelandSeafoodInternaHonal’ssubsidiariesandtechnicalservicesforproducersandcustomers.

•  IcelandSeafoodFrance,basedinBoulogne-sur-mer,provideshighqualityseafoodfromIcelandandfromavarietyofglobalsources.Thecompanysuppliesfreshandfrozenproductstofoodservice,retailandprocessorsinFrance.

•  IcelandSeafoodGermany,locatedinHamburg(Germany),isasupplierofhighqualityfreshseafoodfromIceland.FreshfishismainlyflowninfromIcelandfordelicatessenstores,foodserviceandretail.

•  ISISeafood,Inc.,theUSAdivision,marketsafullrangeofcod,haddock,andpollock/saitheproductsforthedistributor,foodserviceandrestaurantindustryintheUSA.ProductsareimporteddirectlyfromIceland,RussiaandChina.ISISeafood,Inc.employsanetworkoffoodbrokers,whoareseafoodexperts,toworkdirectlywithdistributorsandrestaurantchefs.

TheGroup

2016AnnualReport

We work hand in hand with an extensive network of highly qualifiedprofessionalsandselectedprovidersaroundtheglobe.

WeprovideabroadrangeoffishandseafoodbyofferingourcustomerscombinedproductsoluHonsfromourfactoriesanddistribuHonsystems.

Our Products

17

TheGroup

2016AnnualReport18

ReadyMealsVarietyofreadymadesoluHonsforfoodservice

andretail

FreshCod,haddock,wolffish,halibut,plaice,oceanperch,ArcHcCharr,sea

urchins

CoatedProductsBajeredfish,breadedfish,specialHes,porHonsandfishcakes,main

meals

ShellfishShrimp,prawns,

langousHnes,Norwaylobster,mussels,sea

urchins

SmokedFishSalmon,ArcHcCharr,cod,

haddock,herring

LandfrozenCod,haddock,wolffish,monkfish,lumpfish,ling,salmon,halibut,plaice,

redfish,roes

LightSaltedCod,ling,tusk,saithe,loins,fillets,porHons

WetSaltedCod,ling,tusk,saithe,loins,fillets,porHons

FrozenatSeaCod,haddock,saithe

fillets,skinon/less,PBI,interleaved

PelagicfishMackerel,AtlanHc

herring,capelin,bluewhiHng

DriedProductsHaddock,cod,skate

heads,steaks,backbonesandoff-cuts

CephalopodsCujlefish,octopus,squid

TheGroup

2016AnnualReport

Weofferarangeofbrandswithourhighqualityguarantee.

Our Brands

19

TheGroup

2016AnnualReport20

TheGroup

BaaerMeUpPremiumTaste-NoDefrosHng

NoFlouring-NoWaste-ZeroDripLoss

IcelandGoldQualityFresh&FrozenSeafoodfromIceland

HavelokAleadingproviderofcoatedandvalueadded

productsfortheUKfoodservicemarket

SmartFishSmarterfoodserviceandretailsoluHons

fortheUKmarket

IslandiaTheIslandiabrandisyourguaranteeforhighquality,wet

saltedandlightsaltedfrozenproductsfromIceland

IslandiaArmengolOurfinestqualityvalueaddedsaltedfish

productsfromIceland

LasTapasSpanish"Tapas&Pinchos"andSpanishcodbased

readymeals

BanordOurselectedproductssourcedfromother

regionsthanIceland

2016AnnualReport

Ourvision is tobringqualityseafoodfromselected,dedicatedproducerstodemandingoperatorsandconsumersworldwide.

Our strategy is focusedondeliveringhighermargingrowthandearningsoverHme. Wehavedevelopeda strategy that reflectsourpurposeandenablesustocapturethevalueofourinternaHonalnetworkandindepthknowledgeofourmarkets.Ourlong-term,two-partstrategyisto:

•  Invest invalueaddedproduct lines:withour strong roots in sourcingseafoodcoupledwithourindepthknowledgeoflocalmarkets,weareinvesHnginandleveragingournetworktodelivervalueaddedproducts

•  Con.nued focus on core sales & distribu.on: our core business isglobalsourcinganddistribuHonofhighquality,fresh,frozen,saltedand

Strategic Focus

21

TheGroup

2016AnnualReport22

driedseafood,developingsourcingandlogisHcssoluHonstomatchourcustomershighrequirements.

TheGroup

GlobalsourcingwiththecorefromIceland,deliveringtoourcustomers’needs

Fresh Frozen Salted Dried

Leveragingournetworktodelivervalueaddedproducts

2016AnnualReport23

OurstrategyposiHonsustocapitaliseonseverallong-termtrends:

•  Drive towards healthy living, where governments are encouragingpeopletoeatmoreseafood,consumersarebecomingmoreselecHveintheirfoodchoicesandmillennials’lifestylesarehealthier

•  Agrowingmiddle class expected to increase fromone-third to two-thirdsoftheworld’spopulaHonby2030

•  Ageingpopula.onandaparallelincreaseinseafoodconsumpHon

•  Ahigherneedforfoodsolu.onsthatareeasyandquicktoprepare,tasty and innovaHve, right for the consumer, the environment andconsumer’ssocialstandards

TheGroup

Needforfoodsolu.ons Fishasafirstchoice

Growingmiddleclass Olderwesternpopula.on

20.80%14.50%

7.30% 6.20% 5.80%

Fish Chicken Pork Lamb BeefSource:Seafish.org

59%41%

2015:7,4bnpopulaHon

36%64%

2030:8,5bnpopulaHon

RestofWorldMiddleClassSource:Brookings.edu Source:Eurostat

61% 59% 56% 54%

39% 41% 44% 46%

2015 2020 2030 2050

0-50years 50+years

2016AnnualReport

The ExecuHve Management of Iceland Seafood InternaHonal consists ofthe Chief ExecuHve Officer, the Chief OperaHng Officer and the ChiefFinancial Officer, who oversee Iceland Seafood InternaHonal globaloperaHons.

Executive Management

24

TheGroup

2016AnnualReport25

TheGroup

HelgiAntonEiríkssonChiefExecu.veOfficer

HelgiAntonEiríkssonhasbeen involvedwith theglobal seafood industry,including sales, procurement, operaHons and financing for over 20 years.AmergraduaHngwithaCand.oceondegreefromtheUniversityofIcelandin1992,Helgi joinedIcelandicGroup, iniHally inIcelandandthenworkedfornine years in theUKas SalesDirector and later ProcurementDirector forthe four factory operaHons of Icelandic’s UK business. Helgi joinedÍslandsbankiin2004andledtheseafoodbankingteamunHl2007whenhejoined the bank’s execuHve management team. Helgi worked as a foodindustry advisor in London and Reykjavik in 2009 before joining IcelandSeafoodInternaHonalasCEOatthestartof2010.

LeeCamfieldChiefOpera.ngOfficer

Lee Camfield has 30 years of financial and operaHonal experiencewithintheUKandEuropeanfoodindustries, including10yearswithCoca-ColaintheUK,Heinz,RankHovis,andfrom2004unHllate2009asChiefFinancialOfficerofTheRealGoodFoodCompanyPLC,anAIM listed foodgroup intheUK.Leequalifiedasanaccountantin1991andhasservedasacompanydirector,financedirectorandCFOonabroadrangeofcompanies,includingservingasapensiontrusteeintheUK.HelivesintheUKandaswellashisGroup COO role, Lee also serves as Chairman of Iceland SeafoodInternaHonal’stwoUKcompanies.LeejoinedtheGroupin2010.

ReynirJónssonChiefFinancialOfficer

ReynirJónssonhasbeentheGroup’sCFOsincelate2013.BeforejoiningtheGroup,heworkedasaDirectorandPartneratDeloijeFinancial advisoryservicesforfiveyears,whereamajorityofhisprojectswererelatedtotheseafoodsectorinIceland.Priortothat,ReynirwastheheadofaccounHngat HB Grandi. Reynir holds an MSc degree in Finance and StrategicManagementfromCopenhagenBusinessSchool,andaCand.oceonDegreeinaccounHngfromUniversityofIceland.

2016AnnualReport

Iceland Seafood InternaHonal has over 280 employees across our seveninternaHonal locaHons. We place considerable emphasis on theimportance of employees with skills and desire to perform, saHsfycustomerdemandandachievetheGroup’sstrategicgoals.

Our internaHonal business is made up of a highly experienced group ofpeople, from a range of cultures. Our objecHve is to ensure that ouremployeesfeelempoweredtodelivertothehigheststandardsbybeing:

•  Connectedtoourproducersandcustomers

•  Dependabletodeliverseafoodconsistentlyyear-round

•  OpentodifferentideasandinnovaHonforevolvingdemands

Employees

26

TheGroup

2016AnnualReport27

How we do business is as important as the high quality products wedeliver.Wewanttobeabusinessthatpeopleareproudtoworkfor,withthetrustofourproducersandcustomersweserve.

TheGroup

FinancialPerformance

2016AnnualReport29

Key Figures (all amounts are in thousands of euro)

FinancialPerformance

ConsolidatedIncomeStatement2016 2015

Normalisedresult

Significantitems IFRS Normalised

resultSignificantitems IFRS

Opera.ngrevenue 246.273 246.273 258.414 258.414

Grossmargin 33.805 33.805 34.338 34.338

DistribuHoncosts (14.830) (14.830) (17.718) (17.718)

Netmargin 18.975 18.975 16.542 16.542

EBITDA 5.538 (203) 5.335 4.255 (697) 3.558

Profit(loss)beforeincometax 3.294 (203) 3.090 1.057 (697) 360

Incometax (529) 30 (499) (420) 139 (281)

Profit(loss)fortheyearfromcon.nuingopera.on 2.765 (174) 2.591 637 (558) 79

LossfortheyearfromdisconHnuedoperaHons,posttax (34) (34) (261) (261)

Profit(loss)fortheyear 2.765 (208) 2.557 637 (819 (182)

Profit(loss)fortheyeara0ributableto:

OwnersoftheCompany 2.776 (208) 2.568 645 (819) (174)

Non-controllinginterest (11) (11) (8) (8)

Profit(loss)fortheyear 2.765 (208) 2.557 637 (819) (182)

ConsolidatedBalanceSheet 31December2016 31December2015

Assets 75.049 81.232Non-currentassets 18.868 19.019Currentassets 56.083 60.204Assetsclassifiedasheldforsale 98 2.009Equity 15.363 8.076Liabili.es 59.686 73.156Non-currentliabiliHes 2.006 2.462CurrentliabiliHes 57.637 69.731LiabiliHesassociatedwithassetsclassifiedasheldforsale 43 963

2016AnnualReport30

FinancialPerformance

1.3 1.7

2.9

1.1

3.3

2012 2013 2014 2015 2016

NormalisedPBTinmillionsofeuro

53.4 61.952.7 46.5

34.7

2012 2013 2014 2015 2016

Netdebtinmillionsofeuro

101.5 105.387.0 81.2 75.0

2012 2013 2014 2015 2016

Totalassetsinmillionsofeuro

ConsolidatedIncomeStatement 2016 2015

Netcashfromcon.nuingopera.ons 5.559 4.260Netcashfromdiscon.nuedopera.ons 958 2.330NetcashfromoperaHngacHviHes 6.517 6.590NetcashusedininvesHngacHviHes (1.154) (461)NetcashusedinfinancingacHviHes (6.138) (5.964)Changesincashandcashequivalents (774) 165EffectsofexchangeratefluctuaHonsoncashheld (76) 28Cashandcashequivalentsatyear-end 1.797 2.647

2016AnnualReport31

Key Highlights

Iceland Seafood InternaHonal had excellent results for 2016 withnormalizedprofitbefore taxofEUR3.3million,EUR2.2millionaheadoftheprioryear.

GroupFinancials

The Group conHnued to invest in its customer-focused value addedacHviHes in 2016. At the sameHme its conHnuedmargin improvementfocus and working capital management program led to a reducHon inlowermargintradingacHvityduringtheyear. ThisresultedintotalGroupsales of EUR 246.3 million, a 4.6% decrease from prior year, whilstnormalisedprofitbeforetaxofEUR3.3million,EUR2.2millionhigherthan2015. Net profit for the year, amer significant items and disconHnuedoperaHons,wasEUR2.6million,EUR2.7millionaheadofprioryear.

TheGroup’sbalancesheetshowsasignificantimprovementfromtheprioryear. Total assetsat year-end2016wereEUR75.0million compared toEUR81.2millionatendof2015. At the sameHme,equity increasedbyEUR7.3millionduring2016,reflecHngacombinaHonofincreasedretainedearnings and equity injecHonwhen the Group listed inMay 2016. NetdebtofEUR34.7millionreducedbyEUR11.8millionfromtheprioryearasaresultoflowerworkingcapitalandtheequityinjecHon.

FinancialPerformance

Euromillion 2016 2015

Turnover 246.3 258.4

Normalised*PBT 3.3 1.1

Netearnings 2.6 (0.2)

NetcashfromoperaHngacHviHes 6.5 6.6

Totalassets(31December2016) 75.0 81.2

EquityraHo(31December2016) 20.5% 9.9%

2016AnnualReport32

FinancialPerformance

ValueAddedDivision

The Value Added division saw strong profit growth in 2016, withnormalisedprofitbefore taxof EUR3.3million, up22% fromprior year.The growth was driven by the UK foodservice business with a solidperformanceofbothUKretailandtheSpanishbusinesses.TheweakeningoftheBriHshpound,followingBrexitinJune2016,impactedbothturnoverandprofitsofthedivision. Onaconstantcurrencybasis,turnoverwouldhaveincreasedby3.1%andprofitswouldhavegrownby29%.

Net debt of the Value Added division reduced by EUR 3.9million in theyear, benefivng fromworking capital management focus and a weakerBriHshpound.

Sales&Distribu.onDivision

The Sales & DistribuHon division had a solid performance with profitssignificantly upon theprior year. Revenues are slightly downversus theprior year drivenby three factors: the focus on reducinghigher risk andlower margin sales; lower capelin quotas in Iceland; and lower sales ofdriedfish toNigeria due to import restricHons.At the sameHmeprofitsbefore tax improved by EUR 1.9 million from the prior year, driven bystrongermarginsfrompelagicsales,lowerfinancecostbenefivngfrom

Euromillion 2016 2015

Turnover 110.3 112.7

Normalised*PBT 3.3 2.7

Netdebt(31December2016) 17.7 21.6

Euromillion 2016 2015

Turnover 170.5 180.9

Normalised*PBT 1.5 (0.4)

Netdebt(31December2016) 1.7 6.5

2016AnnualReport33

focussed working capital management and good growth in frozen salesandmargins in France,with a good spread of product offerings sourcedglobally.

The Sales & DistribuHon division saw a significant decrease in net debt,driven by the focus on reducing higher risk, lower margin sales andimprovedworkingcapitalmanagement.

Overall,theValueAddeddivisionaccountsfor68%ofthedivisionalprofitbeforetax in2016,comparedto26%threeyearsago. AtthesameHmethe proporHon of Value Added sales grew from 29% in 2013 to 39% in2016. The Group strategic focus is to drive profit growth with furtherinvestmentsincustomerfocused,valueaddedacHviHes.

FinancialPerformance

Sales*byopera.ngdivision

PBT*byopera.ngdivision

*NormalisedPBT,beforeHeadOffice,consolida.onadjustments,significantitemsanddiscon.nuedopera.ons

26%

74% 68%

32%

29%

71%

39%

61%

ValueAddedSales&DistribuHon

2013 2016

2013 2016

Investors

2016AnnualReport

IcelandSeafoodInternaHonalisalimitedliabilitycompanyoperaHngunderActNo.2/1995respecHngPublicLimitedCompanies.UnderitsArHclesofAssociaHon, the Company is governed by shareholders’ meeHngs, theBoardofDirectorsandtheChiefExecuHveOfficer.The Company’s ArHcles of AssociaHons and rules of issuers of securiHeslisted at Nasdaq First North make up the framework for the CorporateGovernancepracHces for IcelandSeafood InternaHonal.Reference isalsomadetotheIcelandicGuidelinesonCorporateGovernancearepublishedby the Iceland Chamber of Commerce, SA Business Iceland and NasdaqIceland.

Corporate Governance

35

Investors

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BoardofDirectorsAt the Annual General MeeHng of the Company, three members areelectedtotheBoardofDirectors.

TheBoardofDirectorsholdsthesupremeauthoritybetweenshareholdersmeeHngs and promotes the development and long-termperformance oftheGroup and the supervisionof its operaHons. Togetherwith theCEO,theyformulatethestrategy,policies,andsetgoalsandriskparametersfortheorganisaHon.

TheBoardisresponsiblefortherecruitmentanddismissaloftheCEO.TheRules of Procedure for theBoardofDirectorswere adopted in linewithArHcle 70 of the Public Limited Company Act, also defining the sub-commijeesappointedtooperateon itsbehalf.TheserulesofprocedurearesupplementarytotheArHclesofAssociaHon.

BoardCommiaeesTheAuditCommijeeensures thequalityof thefinancial statementsandinternalcontrols.Ithasoversightoftheexternalauditors.Italsopresentsproposals for the selecHon of external auditors and ensures theirindependence.MembersoftheAuditCommijeeareBenediktSveinsson,MarkHolyoakeandLeeCamfield.TheRemuneraHonCommijee is responsible to establish a remuneraHonpolicy for the Company.Members of the Audit Commijee are BenediktSveinssonandMarkHolyoake.

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ChiefExecu.veOfficerTheCEOcarriesouttheday-to-dayoperaHonsoftheCompanyandmust,inthisrespect,followthepoliciesandinstrucHonslaiddownbytheBoardandabidebylawsandregulaHons.TheCEOmustatallHmesconducthisworkwithintegrityandtakesaccountoftheCompany’sinterests.

Investors

2016AnnualReport

Iceland Seafood InternaHonal shares are listed on Nasdaq First NorthIcelandunderthesymbolICESEA,withtheISINnumberIS0000026961.

At end of 2016, therewere 1.300million shares issued, all in one class.Priorto lisHngontheNasdaqFirstNorthIcelandinMay2016,theGroupissued27.3millionnewshares.Thesesharesandsharespreviouslyheldbythe Group, in total accounHng for 10% of share capital, were sold toinvestorspriortolisHng.

ExecuHvesandsenioremployeesheldopHonsover33millionsharesoftheGroupatyear-end2016.TheseopHonsweregrantedinMay2016andwillvest in the period fromMay 2017 to May 2020. At the Group’s 2016Annual General MeeHng, the Board of Directors was authorized toincrease

Shareholder Information

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Investors

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the Group’s share capital by 39 million shares to fulfil stock opHonagreements.ThisauthorizaHonisvalidunHlMay2021.

The 10 largest shareholders held 89.7% of the total shares at year-end2016:

Investors

Shareholder Numberofshares,million Sharesin%

InternaHonalSeafoodHoldingsS.a.r.l. 829.6 63.8%

Kvikabankihf. 141.7 10.9%

Frjálsilífeyrissjóðurinn 42.7 3.3%

Stefnir-ÍS15 28.0 2.2%

Festa–lífeyrissjóður 27.0 2.1%

9.Sehf. 21.0 1.6%

AktaHS1 20.0 1.5%

Sjóvá-Almennartryggingarhf. 20.0 1.5%

LífeyrissjóðurVestmannaeyja 18.5 1.4%

Moment~árfesHngarehf 18.5 1.4%

Top10total 1.167.0 89.7%

Others 132.6 10.3%

Totalissuedshares 1.299.6 100.0%

2016AnnualReport

Iceland Seafood InternaHonal acHviHes are exposed to variety of riskfactorsrelatedtoitsoperaHonsandfinancials.EffecHveriskmanagementis important tominimize the risk ofmaterialmisstatements and for thebusinesstoperform. DetailedinformaHononriskfactorscanbefoundintheCompanydescripHonwhichwaspublishedinrelaHontothelisHngonNasdaq First North Iceland inMay 2016 and is available on the Group’swebsite.

ThefollowingdescripHonofriskfactorsisnotcompleteandisnotlistedinanyorderofpriority.

•  Currency risk: The reporHng currency of the Group is the Euro,therefore the Group has a currency risk related to the operaHon ofsubsidiaries in UK and USA, which operate and report in a differentcurrency.AddiHonally,

Risk Management

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individual subsidiaries use forward contracts tomiHgate currency risk,e.g.whenbuyingrawmaterialinaforeigncurrencytothelocalmarket.In certainmarkets, predominantly Iceland, purchases aremade in thecurrencythatthegoodsaresold,providinganaturalcurrencyhedge.

•  Supplierrisk:TheGroupisexposedtorisksregardingsuppliers,inboththe wild and farmed seafood sector, as it sources its products fromspecific origins and producHon methods. This potenHally limits thenumber of suppliers theGroup can purchase from in some instances,althoughtheGrouphasawidesupplybase,withnoindividualsupplierrepresenHngmorethan8%ofthetotalsupply.

•  Credit risk: The credit risk of the Group mainly relates to accountsreceivables,i.e.thosecustomersarenotabletopayforgoodsthattheGrouphassoldtothem.TheGroupcontrolsthisriskcarefully,withthevastmajorityofallreceivablescreditinsured.TheGroupdoesnottakeuninsured posiHons against a customer without going through anappropriateriskassessmentprocedure.

•  Liquidityrisk:TheGroupcontrolsliquidityriskbymaintainingaccesstoappropriate loan faciliHes, taking intoaccount sufficientheadroom forfluctuaHons,whilstcashflowismonitoredonadailybasis. TheGroupdid in 2016 renew its main EUR 65million loan facility with its mainlenderinIceland. Thisisarevolvingloanfacilitysecuredwithapledgeover inventories and receivables. Headroom is, in the opinion of theBoard,sufficienttocoverfluctuaHons,bothwithregardstototalfacilityamountandunderlyingassets.

•  Insurance: The Group has appropriate insurance policies in place,whichprovides insurancecoveragainstproductandpropertydamage,certaindelays,generalliabilityandenvironmentalliabilityinaccordancewithnormalpracHcewithintheindustry.

Investors

CorporateSocialResponsibility

2016AnnualReport

Iceland Seafood InternaHonal bases its global sourcing policy on thefollowingprinciples:

•  Source fromfisheries thatareadministrated inconformancewithFAOCode of Conduct for responsible fisheries and have proper fisherymanagementsystems

•  Support independent and credible standards that are set to audit andapprove fisheries that are well managed and will wherever possiblepromotethesefisheriestoitscustomers

A Global Sourcing Policy Based on Responsible Ocean Stewardship

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CorporateSocialResponsibility

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•  Commijed to working with industry on fishery improvements andbestpracHces

•  Help and support customers to make the right choice to sourcesustainableseafood

•  Commijedtosupplysustainableseafoodtoitscustomers

CorporateSocialResponsibility

FAOCodeofConduct

Iceland Seafood InternaHonalworks according to the FAOCodeofConductforresponsiblefisheries(FAO2005).MostresponsiblefishingnaHonsareworkinginconformancewiththeFAOCodeofConduct and have issued quotas or have other means ofregulaHng fishing within their own fishing zones. For moreinformaHon,visithjp://www.fao.org/3/a-v9878e/index.html

IcelandResponsibleFisheries

The FAO-based Iceland Responsible Fisheries ManagementCerHficaHonProgrammeisathirdpartycerHficaHonmodelusedto verify responsible fisheries management in Icelandic watersandgoodtreatmentofmarineresources.FormoreinformaHon,visit:hjp://www.responsiblefisheries.is/cerHficaHon/

MSC

Iceland Seafood InternaHonal acHvely develops and supportsiniHaHves that posiHvely influence sustainable fishing pracHces.In2012,withotherkeysuppliers, thecompanyfoundedIcelandSustainableFisheries(ISF),whichsupports iniHaHvessuchastheMSC. Iceland Seafood InternaHonal and its subsidiaries supplyMSCproductfromaroundtheworld.

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ForwardLookingStatements

ThispresentaHonisfurnishedandintendedforEuropeanmarketparHcipantsandshouldbeviewedinthatmanner.

Any potenHal forward looking statements contained in this presentaHon are reflecHve ofmanagement’scurrentviewsonfutureeventsandperformance,whilsttheviewsarebasedon posiHons thatmanagement believes are reasonable there is no assurances that theseeventsandviewswillbeachieved.ForwardlookingviewsnaturallyinvolveuncertainHesandriskandconsequentlyactualresultsmaydiffertothestatementsorviewsexpressed.

Conceptanddesign

Maresíasslf

IcelandSeafoodInterna.onalhf.

Köllunarklejsvegi2104ReykjavíkIcelandReg.no611088-1329

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