After his father is killed, Prince Valemon ascends the throne, only to be turned into a polar bear by a bitter witch who wants to be his queen.

Set at the start of the twentieth century, the movie deals with the orphaned boy Álfgrímur, his adoptive grandparents, and the small, tolerant community of misfits and eccentrics they gather around them at Brekkukot, their cottage in Reykjavík. As Álfgrímur begins to encounter the minor politicians, businessmen and social-climbers of the growing town of Reykjavík he starts to question his future as a fisherman's grandson, and is increasingly fascinated by Garðar Hólm, the celebrated Icelandic "world singer" whose sporadic returns to Iceland encourage Álfgrímur to pursue his own personal goals of self-expression. He discovers the true value of his boyhood experiences only as he sets out on a path that will take him away from them forever.

Jónas, working in peace and quiet in an isolated summerhouse, hires a young girl, Sandra, to cook for and look after him, and complete an ideal situation for an Icelandic writer on the brink of an international breakthrough. The plan, however, does not turn out the way Jónas intended.

The Knüppels are in trouble with their underage daughter, who has discovered love too early. She has a child with Frank Dreier. But the young people have long since come to an agreement.