great tasting seafood for a better life

2016 Annual Report

FULL 2016 ANNUAL REPORT

With the customer at the centre of all that we do,
High Liner Foods is on a mission to drive seafood consumption by providing innovative solutions to a world looking for healthy, easy to prepare, delicious seafood options. This year's report takes a look at some of the strategies guiding our progress.

2016 Financial Highlights
(Unaudited)

(Amounts in United States Dollars ("USD") 000s, except per share amounts, unless otherwise noted) 2016 2015 % Change
Revenues 956,016 1,001,507 (4.5)%
Adjusted EBITDA1 82,413 78,218 5.4 %
Net Income 32,950 29,581 11.4 %
Basic earnings per common share 1.07 0.96 11.5 %
Diluted earnings per common share 1.06 0.95 11.6 %
Adjusted net income1 40,948 35,563 15.1 %
Basic earnings per common share 1.32 1.15 14.8 %
Diluted earnings per common share 1.31 1.14 14.9 %
Total assets 684,141 693,067 (1.3)%
Gross capital expenditures 17,686 18,587 (4.8)%
Shareholders' equity 222,762 200,519 11.1 %
Book value per share 7.21 6.49 11.1 %
Dividends paid per share (CAD) 0.520 0.465 11.8 %
OPERATING HIGHLIGHTS 2016 2015 % Change
Sales volume (000s of pounds) 277,298 284,382 (2.5)%
Number of employees 1,293 1,413 (8.5)%

1
Please refer to the Non-IFRS Financial Measures section of High Liner Foods' Management's Discussion and Analysis for the fifty-two weeks ended December 31, 2016 for further explanation of these non-IFRS financial measures.
customer
focused
we are focused on the
customer in all we do.

KEITH DECKER

PRESIDENT & CHIEF EXECUTIVE OFFICER

Following the completion of our supply chain optimization initiatives during the past year, High Liner Foods is focused on driving organic sales growth with new and innovative seafood products.

Financial Results

High Liner Foods achieved higher profitability and earnings in 2016, as we refined our strategy for sustainable growth amidst a challenging industry environment. Reported sales decreased by $45.5 million, or 4.5 percent, to $956.0 million compared to $1,001.5 million in 2015. Sales in domestic currency1 decreased by $36.5 million, or 3.4 percent, reflecting softer sales in our U.S. business due to lower demand for traditional breaded and battered frozen seafood products and the impact of selling our scallop business in the third quarter of 2016. Gross profit for the year increased $1.2 million to $202.9 million, reflecting an increase in gross profit as a percentage of sales, partially offset by lower sales volumes. As a percentage of sales, gross profit increased 110 basis points to 21.2% compared to 20.1% in 2015, due to lower raw material costs and savings from optimizing our supply chain. The closure and
sale of our New Bedford facility in 2016 consolidated our manufacturing footprint to three plants in
North America and marked the last significant initiative of our multi-year supply chain optimization project. Through this project we achieved more than $20 million in annual cost savings on a run-rate basis. Going forward, we have opportunities for additional improvements as we leverage our 'High Liner Operating System' across our consolidated production network.

Adjusted EBITDA2 for the year increased by $4.2 million, or 5.4 percent, to $82.4 million and by 80
basis points as a percentage of sales to 8.6% from 7.8% in 2015. Adjusted Net Income2 increased by
$5.3 million, or 14.9 percent, to $40.9 million and Adjusted Diluted Earnings per Share2 were $1.31 compared to $1.14 in 2015.

We also continued to strengthen the balance sheet, as cash flow from operating activities and proceeds from the sale of the New Bedford facility were used to improve the net-interest bearing debt-to-Adjusted EBITDA ratio to 3.1x at the end of Fiscal 2016 from 4.0x a year earlier.

Great Tasting Seafood for a Better Life

Given the proven health and nutritional benefits of seafood consumption, we believe the prospects for our business are supported by strong growth potential. For some time, Canada's Food Guide and the U.S. Dietary Guidelines for Americans have recommended at least two servings of seafood each week which, if followed, would significantly increase North American per capita seafood consumption.

Yet we also know that health-conscious consumers have been migrating from the centre aisle of the supermarket to the periphery, from processed food items to fresh. This is a challenge for High Liner Foods as evidenced by softening demand for traditional frozen breaded and battered seafood products, but one that we are energetically addressing.

In 2016, we introduced a new vision - Great Tasting Seafood for a Better Life - and a new mission statement that describes the course we are taking to achieve sustainable organic sales growth: With the customer at the centre of all that we do, we are on a mission to drive seafood consumption by providing innovative solutions to a world looking for healthy, easy to prepare, delicious seafood options.


1
Domestic currency is before the impact of converting our Canadian dollar ("CAD") operations to United States dollars ("USD"). Financial information presented in domestic currency reflects mixed currencies, i.e. CAD for our Canadian operations and USD for our U.S. operations.
2
Please refer to the Non-IFRS Financial Measures section of High Liner Foods' Management's Discussion and Analysis for the fifty-two weeks ended December 31, 2016 for further explanation of these non-IFRS financial measures.
focused on
innovation
we are focused on
innovation to fuel growth.

In 2016, we introduced a new vision - Great Tasting Seafood for a
Better Life
- and a new mission statement that describes the course we are taking to achieve sustainable organic sales growth.

Customer-focused innovation

In 2017, we'll continue to advance this mission with a new generation of customer-focused innovations aimed at realizing these objectives. One of the ways we hope to change conventional attitudes toward frozen fish is by making it taste as good as fresh. Our newest proprietary technique starts with the finest quality seafood and marinates it in an all-natural recipe before it is flash frozen to lock in moisture and freshness. We are excited by the potential of applying this process to more products in the years ahead.

The same spirit of innovation can be seen at work with a new line of products that will be introduced to the Canadian retail market mid-2017 featuring a patented foolproof cooking technology. This technology enables anyone to serve perfectly cooked seafood in under 10 minutes, with minimal effort or mess.

We are introducing a fully cooked, meal-ready salmon strip that will make it easy to enjoy seafood as a protein option with pasta, salads, sandwiches, tacos, and many other dishes.

At the same time, we are doing our best to raise public awareness on the virtues of our delicious frozen seafood products. In February, we launched an ambitious marketing program in Canada to support these and other product innovations. It includes our largest ever digital and social media campaign to help debunk myths surrounding frozen seafood while introducing innovative new products to the market. February signaled the beginning of these initiatives with the launch of 'Fish Slap', an amusingly offbeat ad campaign that tackles category misperceptions head on to help consumers see frozen seafood in a positive new light. This will also be our second year as the Official Frozen Seafood of the NHL®, with associated sponsorships, contests and social and digital media campaigns to promote the High Liner brand and drive seafood consumption.

The quickening pace of new product introductions reflects an unprecedented commitment to innovation engineering (IE) as a core function at High Liner Foods. More than 100 employees have already undergone formal training in IE. Our ultimate objective is to align our innovation strategy across all departments so that it becomes an ingrained part of our corporate culture. In the meantime, IE is helping us increase speed to market, reduce risk, and ensure that all new products answer meaningful consumer needs or trends.


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commercial
excellence
we are dedicated
to commercial excellence.

Our sales and marketing teams are equipped with the information and market intelligence they need to make effective pricing and promotional decisions.

Commercial excellence

We have also been working more closely with our customers to find out what they need and exceed their expectations. In an evolving market, our sales and marketing teams are equipped with the information and market intelligence they need to make effective pricing and promotional decisions and provide customers with products that help them win in seafood. Increasingly, this process includes live presentations from one of our highly trained chefs who help demonstrate first-hand the ease of preparation and other benefits of our quality product offerings.

Our efforts to make it easier for customers to do business with us extend well beyond our sales and marketing functions. We are embarking on an upgrade of our enterprise resource planning system to JD Edwards EnterpriseOne. This powerful platform for change will allow us to streamline and simplify the way we do business going forward.

simplifying
business
we are simplifying &
improving our business.

Sustainability

High Liner Foods has played a leading role in the recovery and sustainable management of several of the world's wild fisheries. We continue to support initiatives around the world in furtherance of these objectives, including funding and supporting the Groundfish Enterprise Allocation Council / Association of Seafood Producers 2J3KL Cod Fishery Improvement Project, which seeks to restore Newfoundland's Northern cod, once one of the world's largest and most iconic fisheries, to a sustainable seafood resource that can be enjoyed by future generations.

As a result of major gains in the recovery and management of the world's major fisheries, sustainable production levels have reached a peak but are not suffcient to keep pace with the protein demands of a growing global population. Responsible aquaculture is the answer to bridging this gap.

To help guarantee the highest aquaculture standards for our customers, High Liner Foods employs a strict supplier approval, product inspection and verification process that includes physical, chemical and antibiotic inspections of the aquaculture products we buy from around the world. We are also taking the lead to increase consumer confidence in aquaculture seafood by promoting responsible business practices in the private sector and effective enforcement of existing best aquaculture practice regulations at the government level.

Our commitment to responsible corporate behavior goes well beyond sustainable business practices. This year, we will publish High Liner Foods' first Corporate Social Responsibility Report. It will describe many of the long-standing social and environmental practices of High Liner Foods and its suppliers, as well as plans to expand the scope of our supply chain audits in the near future.

Leadership Team

Paul Jewer

Executive Vice
President & Chief
Financial Officer

Tim Rorabeck

Executive Vice
President,
Corporate Affairs & General
Counsel

Keith Decker

President & Chief Executive
Officer

Peter Brown

President & Chief Operating Officer, U.S. Operations

Jeff O'Neill

President & Chief Operating Officer, Canadian Operations

Paul Snow

Executive Vice President, Global Procurement

sustainable
food
we are an industry leader in
sustainable food practices.

Our most important assets

Ultimately, our growth as a company depends on engaged and motivated employees. Acquiring new talent, developing and retaining existing employees, and giving them the tools and support they need to learn and grow is critical to the success of our business. This will continue to be a strategic priority at High Liner Foods.

The year ahead

Our ability to achieve sustainable organic growth will depend on the pace with which our new product sales offset lower industry-wide demand in the traditional breaded and battered categories. While this may take some time, I am confident we are on the right path. Guided by our mission, we will continue to focus on delivering innovative seafood products that align well with emerging consumer trends and better meet the needs and preferences of our customers.

In closing, I would like to thank all of our employees for helping High Liner Foods achieve continued progress in a challenging industry environment. I also wish to extend my appreciation to the Board of Directors for their guidance and support, and want to acknowledge the invaluable contributions of Derek Buntain, a long serving member of the Board, who will be retiring at this year's annual general meeting. With the continued support of our many valued customers, suppliers, business partners and investors, I look forward to reporting on our progress in the year ahead.

(signed)
Keith Decker
President & Chief Executive Offcer