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## letter to shareholders 

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On December 19, 2011 your Company acquired the Icelandic Group’s U.S. and Asian operations. This transaction has helped us achieve our vision of being the leading value-added seafood supplier in North America. 

I t was an exceptional conclusion to another year of strong sales and earnings. 

Sales volume increased for the third consecutive year, exceeding 200 million pounds from 177 million in 2010. Revenue was up 14.3% to $668 million and earnings before interest, taxes, depreciation and amortization (EBITDA) increased 15.9% to $54.7. Excluding stock option expense, net income excluding business acquisition, integration and other costs increased by 11.2% to $28.2 million, and diluted EPS increased 17.9% to $1.84. We achieved this growth with a very strong performance in the U.S. despite strong upward raw material cost pressure from the beginning of the year. Canadian results improved as the year progressed. 

It is important that we keep in mind that our performance has been achieved during a time of great economic uncertainty. Unemployment remains stubbornly high and consumers remain cautious. It has become more fashionable to save money. Cautious consumers are putting pressure on our retail and food service customers as they fight to maintain 

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profitability. In turn, they are putting pressure on us to control our prices and provide them with the exciting new products that will help them grow market share. 

Nevertheless, this is a time of considerable opportunity for High Liner Foods. Our business is selling seafood to North Americans. Food is a staple and, as such, demand for our products remains relatively stable during good times and bad. We manage our business well with the proof in our financial and operating performance. 

## The Icelandic USA Acquisition 

During 2010, we set the aggressive goal of increasing our EBITDA to $100 million by 2015. We now own the assets to achieve this goal, potentially a year or two earlier than our original objective. For the 12 months ending December 2011, the Icelandic USA Acquisition operations achieved sales of US$265 million excluding trading sales, and pro forma  adjusted EBITDA of approximately US$30 million. We expect the acquisition to be immediately accretive to earnings per share before one-time costs related to the acquisition. Total annual synergies are expected to be US$16 million to US$18 million by 2014. 

We acquired the assets for a purchase price of US$232.7 million paid in cash, excluding seasonal working capital of US$14 million, and financed with new long-term debt of US$250 million and an increase in High Liner Foods’ existing loan facility from US$120 million to US$180 million. This pushes our debt to EBITDA ratio to 4.4X before synergies, which is above our traditional leverage target of 3X, but it also brings High Liner Foods very close to $1 billion in revenue and $94 million in EBITDA on a pro forma  basis including 

