3.3 CORE COMPETENCIES bRAnD EquITy CuSTOMER RELATIOnSHIPS DIFFEREnTIATED InnOVATIVE PRODuCTS PROCuREMEnT ExPERTISE LOW bREAk-EVEn POInT, SCALAbLE OPERATIOnS 28 HIGH LINER FOODS INCORPORATED 3 The Best New Product Awards is an annual awards program focusing on everyday consumer packaged goods products in the food, personal care and household care  categories Winners are selected based on voting by over 25,000 Canadian consumers from coast-to-coast who participate in the annual independent market research survey  conducted by BrandSpark International  based on changing consumer tastes. We can be flexible, and  now we more quickly respond to trends and tastes as they  emerge. Our joint venture in China and the addition of a  primary processing plant in China strengthen our control  over seafood supplies. Our core operational competencies are:  High Liner  is the leading Canadian seafood brand, with a  leading retail market share. The retail market share that  we are using to measure ourselves against includes mass  merchandisers, general merchandisers, club stores and  distributors, in addition to the grocery channel. We are the  preferred seafood brand, and the value of our leadership  position is not recorded in our financial statements. The  strength of our brand reputation can be leveraged into growth  with new species, in new channels, and to new customers.  The brand also has a positive impact on our food service  business where we are well known for our innovative, quality  products and superior service. We have been supplying food products to major grocery  retailers and food service distributors for decades. We have  developed strong relationships with our customers through  excellent customer service and brand recognition. We reach  our consumers through these exceptionally strong customer  relationships. We sell to most of the retail chains and to the  major club stores in North America and most food service  distributors in Canada and the U.S. We have ensured that our  infrastructure is capable of meeting the exacting demands of these customers, for both excellent products and delivery service.  High Liner  is currently building brand awareness in the U.S.  Well known in U.S. club stores for the launch of premium  products under the  High Liner  brand and the umbrella  branding of  Fisher Boy  and  Sea Cuisine  brands further  strengthen our market position in traditional grocery outlets.  Fisher Boy  already has strong brand recognition in certain  regions of the U.S. and  Sea Cuisine  is expanding its ACV. Innovation is one of our core values and we exhibit this  especially in our product line. We strive to develop and  launch new products that are differentiated from others in  the market. For example, in late 2010 we launched a new  innovative product line in the U.S. food service channel  called  FireRoasters . Due to the success of  FireRoasters  we  are expanding its distribution to U.S. retail, and Canadian  retail and food service channels. It is a line of value-added,  flame-seared seafood product that is unlike anything in the  market today. During 2011, we created more than 125 stock  keeping units for new products. High Liner’s  Market Cuts ,  which were launched in 2011 in Canadian retail, won the  “Best New Product Award 3 ” in the frozen fish category in  January 2012. Our premium products in the U.S. and Canada  have been an excellent example of our innovation in seafood  products. Increasing the depth of our product line by adding  new species from aquaculture has allowed us to develop even  more innovative products.  In the U.S. food service market, the  FPI  brand is also well  known for its product innovation and quality products. It is  one of the most recognizable brands in the U.S. food service  market. The  Viking  brand increases our share of the market  for broad line value-added seafood products in the U.S. food  service industry, making us one of the largest suppliers of  value-added seafood products to that market. In addition, the  Icelandic USA Acquisition makes us the largest supplier of  value-added seafood to the U.S. food service market. We are seafood experts, and procure seafood on world  markets from a position of strength. We have no harvesting  or farming operations, we procure many species from around  the world, accessing product from various fisheries in  different parts of the globe. This provides us with a continuity  of supply, without the investment in capital necessary for  fishing or farming operations, and allows us to focus on  what the customer wants rather than trying to sell what is  caught. Our procurement group’s proprietary Internet-based  procurement and inventory management system enables  the purchase of approximately 30 species of seafood from  geographically diverse suppliers in approximately 30 different nations. The results are lower raw material costs,  better predictability of raw material supply and pricing, high  quality, reduced risk and better inventory management. Our  expertise has also allowed us to competitively outsource low  value-added, labour-intensive products to other processors,  freeing capacity in our own plants for more specialized,  and higher value-added products. Lastly, our procurement  knowledge has provided the freedom to develop products  Our business model has a low break-even point. We are  no longer in the capital-intensive fishing operations, but  instead rely on our procurement expertise. Our business  has relatively low fixed costs and proportionately more  variable costs, which means that the break-even point for the  Company is low. Our sales more than doubled since 2007, and  they are expected 1  to increase significantly in 2012 as a result  of the Icelandic USA Acquisition; however, our selling, general  and administrative costs that are primarily fixed costs increased  at a much slower pace. Specifically, our selling, general and  administrative costs, excluding stock options, as a percentage  of sales in 2007 were 14.3%, but this has now dropped to  10.7% in 2011 and is expected 1  to decrease even further in  2012. We are 1  well positioned to continue to increase sales  and profitability without significant increases in fixed cost.