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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



(Mark One)



x    ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the
fiscal year ended December 31, 2004



Or



 ̈TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from
                     to



Commission File Number: 333-90436



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AMERICAN SEAFOODS GROUP LLC

(Exact name of registrant as specified in its
charter)



|                                                                          |  |                                        
|------------------------------------------------------------------------- |  | ---------------------------------------
|Delaware                                                                  |  | 22-3702647                             
|(State or other jurisdiction of incorporation or organization)            |  | (I.R.S. Employer Identification Number)
|                                                                          | 
|Market Place Tower 2025 First Avenue Suite 1200 Seattle, Washington 98121 |  | 98121                                  
|(Address of principal executive offices)                                  |  | (Zip Code)                             



Registrants
telephone number, including the area code

(206) 374-1515



Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



Yes  x    No ̈



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the registrants knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ̈



Indicate by check mark whether the Registrant is an accelerated filer as defined in Rule 12b-2 of the Act.



Yes ̈No  x



The registrant does not have a class of equity securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 and there is no public market for the voting stock of the registrant.



DOCUMENTS INCORPORATED BY REFERENCE: None



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TABLE OF CONTENTS



|           |  |                                                                                                              |  |    
|---------- |  | ------------------------------------------------------------------------------------------------------------ |  | ---
|PART I     |  |                                                                                                              |  |    
|Item 1.    |  | Business                                                                                                     |  | 2  
|Item 2.    |  | Properties                                                                                                   |  | 33 
|Item 3.    |  | Legal Proceedings                                                                                            |  | 34 
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                          |  | 35 
|           |  |                                                                                                             
|PART II    |  |                                                                                                              |  |    
|Item 5.    |  | Market For Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 35 
|Item 6.    |  | Selected Financial Data                                                                                      |  | 36 
|Item 7.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 37 
|Item 7A.   |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 52 
|Item 8.    |  | Financial Statements and Supplementary Data                                                                  |  | 56 
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 91 
|Item 9A.   |  | Controls and Procedures                                                                                      |  | 91 
|Item 9B.   |  | Other Information                                                                                            |  | 91 
|           |  |                                                                                                             
|PART III   |  |                                                                                                              |  |    
|Item 10.   |  | Directors and Executive Officers of the Registrant                                                           |  | 92 
|Item 11.   |  | Executive Compensation                                                                                       |  | 95 
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 97 
|Item 13.   |  | Certain Relationships and Related Transactions                                                               |  | 99 
|Item 14.   |  | Principal Accountant Fees and Services                                                                       |  | 102
|           |  |                                                                                                             
|PART IV    |  |                                                                                                              |  |    
|Item 15.   |  | Exhibits and Financial Statement Schedules                                                                   |  | 103
|SIGNATURES |  | 107                                                                                                         



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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS



This annual report includes forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934. All statements other than statements of historical fact are forward-looking
statements. Some of the statements under Item 1 Business, Item 7Managements Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this annual report may include
forward-looking statements that reflect our current views with respect to future events and financial performance. Statements that include the words may, estimate, continue, expect, intend,
plan, believe, project, anticipate and similar statements of forward-looking nature identify forward-looking statements.



Although we believe that the expectations reflected in our forward-looking statements are reasonable, all forward-looking
statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in these statements. We believe that these factors include
the following:



| |  |  | our high degree of leverage and significant debt service obligations;
| | - |  | ---------------------------------------------------------------------



| |  |  | any future changes in government regulation;
| | - |  | --------------------------------------------



| |  |  | the highly competitive nature of the seafood industry;
| | - |  | ------------------------------------------------------



| |  |  | the risk of a significant decline in the market price of our products;
| | - |  | ----------------------------------------------------------------------



| |  |  | the risk of a significant decline in the population and biomass of pollock, other groundfish and catfish stocks in the fisheries in which we operate;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the risk that prices at which we purchase catfish remain at high levels or increase;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | environmental conditions and regulations;
| | - |  | -----------------------------------------



| |  |  | the risk of increased litigation against us;
| | - |  | --------------------------------------------



| |  |  | the risk of a natural calamity affecting the U.S. Bering Sea or any of our vessels;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | the risk of Japanese currency fluctuations; and
| | - |  | -----------------------------------------------



| |  |  | other risks that impair our access to and ability to harvest pollock and other whitefish.
| | - |  | -----------------------------------------------------------------------------------------



We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new
information, future developments or otherwise.



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PART I



|Item 1. | Business
|------- | --------



Unless the context otherwise requires, references to we, us, ASG and our refer to American Seafoods
Group LLC and its consolidated subsidiaries.



Overview



We are one of the largest integrated seafood companies in the U.S. in
terms of revenues. We harvest and process a variety of fish species aboard our sophisticated catcher-processor vessels, our freezer-longliner vessels and at our land-based processing facilities, and market our products to a diverse group of
customers in North America, Asia and Europe. In the U.S., we are the largest harvester and at-sea processor of pollock and hake and the largest processor of catfish. Pollock is the worlds highest-volume whitefish harvested for human
consumption and accounts for a majority of our revenues. In the U.S., catfish is the basis for a large, commercial aquaculture industry serving major U.S. markets, and according to the Food and Agriculture Organization of the United Nations, or FAO,
catfish accounted for approximately 50% of the value of all aquaculture in the U.S. in 2002. In addition, we harvest and/or process additional seafood, including cod, scallops and yellowfin sole. We maintain an international marketing network
through our U.S., Japan and European offices and have developed long-term relationships with our U.S. and international customer base.



We operate in two principal operating segments, at-sea processing and land-based processing. The at-sea processing segment includes the harvesting and
processing of pollock, cod, hake and yellowfin sole on our vessels while at sea. The land-based processing segment includes the processing of pollock, cod, catfish and scallops at our facilities in Alabama and Massachusetts.



We own and operate a premier modern fleet of seven catcher-processor vessels,
which average over 300 feet in length and carry crews of 90 to 125 persons. Our catcher-processors are capable of producing between 110 and 150 metric tons of frozen finished product daily. We produce a variety of products at sea, such as pollock
roe (fish eggs), surimi (a fish protein paste used in products such as imitation lobster and crabmeat), fillet blocks, headed and gutted fish and fishmeal.



We own and operate three freezer-longliners, ranging in length from approximately 125 to 140 feet. We acquired the longliners in late 2001 and have since
made extensive capital improvements upon all three vessels to increase their operational efficiency. These vessels carry an average of 20 crew members and operate in the U.S. Bering Sea/Aleutian Islands Pacific cod fishery, producing headed and
gutted cod sold primarily in the European, Asian and North American markets.



We harvest pollock primarily in the U.S. Bering Sea pollock fishery. According to the Marine Conservation Alliance, this fishery is among the largest and most conservatively managed in the world. In 2004, the Marine
Stewardship Council, or MSC, completed a comprehensive four year review of the U.S. Bering Sea pollock fishery and concluded that this fishery met the rigorous MSC criteria as a responsible and sustainably managed fishery. We benefit from the
favorable regulatory system that governs pollock fishing in these waters. Under U.S. federal law, the fishery is subject to total allowable catch limitations, quota allocations among the different sectors of participants in the fishery, and rules
that give exclusive harvesting rights to specifically identified vessels, with the result that any potential new competitors face significant barriers to entry. We own and operate seven of the 19 catcher-processor vessels permitted to participate in
the catcher-processor sector of the fishery. Under the American Fisheries Act, this sector is allocated 40% of the annual directed pollock catch (with 3.4% being allocated to catcher-vessels that deliver to the catch-processors) and, by the terms of
the Pollock Conservation Cooperative agreement, a contractual arrangement among the seven companies that own the catcher-processors named in the statute, this percentage is further divided and allocated among the Cooperative members. Within the
catcher-processor sector, our allocation for pollock under the Cooperative agreement is nearly 2.5 times larger than that of the second largest Cooperative member.



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The U.S. Pacific cod fishery is subject to total allowable catch limitations and quota allocation among
the three primary sectors of participants in the fishery: community development quota groups, the fixed gear and the trawl sectors. We participate in the trawl sector with our catcher-processors and participate in the fixed gear sector with our
freezer-longliners. Of the total quota, 51% is allocated to the fixed gear sector and of that portion, 80% is allocated to the freezer-longliners. A license limitation program is being enacted and it is expected that there will be 40 to 44 licenses
issued to freezer-longliners once the program is finalized. Further efforts to rationalize the cod fishery, such as implementing individual quotas, are currently in process.



We own and operate two catfish processing facilities in Alabama. We purchase catfish from local farmers and do not own any
of the catfish farms. We are not controlled by or affiliated with catfish farmers or their co-operatives. We distribute fresh and frozen catfish products to both retailers and foodservice customers throughout several regions in the U.S. In addition,
we conduct land-based processing operations at our facility in Massachusetts, where we manufacture products such as breaded seafood portions, fillets and scallops. We distribute these fresh and frozen seafood products to retailers and foodservice
customers throughout the U.S.



Corporate History



On January 28, 2000, American Seafoods, L.P. (ASLP) purchased, through its
subsidiaries, from Norway Seafoods six catcher-processors, one catcher-vessel, all of the outstanding stock of American Seafoods Company (now referred to as ASC, Inc.) and certain assets of Frionor USA (now called American Seafoods
International LLC). ASC, Inc. was the operator of the six acquired vessels and the owner-operator of one additional catcher-processor vessel. ASG was formed in connection with the acquisition. The acquisition was accounted for as a purchase,
and all of the debt, assets and goodwill and other intangible assets relating to the acquisition have been pushed down to the balance sheet of ASG. The purchase accounting resulted in all assets and liabilities being recorded at their
estimated fair values on the date of acquisition. The aggregate purchase price for the acquisition was $477.9 million, including acquisition costs.



In August 2001, we, along with two other partners, formed Pacific Longline Company (PLC) in order to acquire three freezer-longliner vessels. Our initial
ownership through this transaction was 60% of PLC. Effective January 1, 2004 we purchased the third party minority interest in PLC and increased our ownership to 100%. PLC harvests and processes primarily Pacific cod in the U.S. Bering Sea.



Effective December 16, 2002, we purchased substantially all of
the assets of Southern Pride Catfish Company (now known as Southern Pride Catfish Company LLC). Southern Pride Catfish Company LLC and its subsidiary, Southern Pride Catfish Trucking, Inc., are engaged in the business of catfish harvesting,
processing and distribution. The acquired assets included, among other things, certain real property, fixtures, equipment, accounts receivable, trade name, customer and other contracts, and cash on hand. The purchase price was approximately $41.8
million in cash. In addition, we assumed substantially all of the liabilities of Southern Pride, other than certain specifically excluded liabilities, and paid bank debt of Southern Pride in the amount of approximately $2.4 million.



Business Strategy



Over the past decade, we have become one of the largest integrated seafood companies in the U.S. Today, we are committed to
building on our existing harvesting, processing and marketing platforms.



The primary components of our business strategy include the following:



Maximize Pollock Revenues



Our pollock harvesting and at-sea processing operations provide a majority of our revenues. Our strategy to maximize pollock revenues includes:



| |  |  | Maximize access to pollock resources. Over the last three years, we have increased our share of the total allowable catch in the U.S. Bering Sea pollock
fishery by approximately 12%, largely through
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | increasing our purchases of community development quota from Alaska Community Development Groups. Between 1999 and 2004 our purchase of community development
quota increased from 5.0% to 54.0% of the total community development quota. We will continue working to maximize our share of the total allowable catch within the applicable regulatory framework.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Optimize product mix to maximize profitability. We will continue our efforts to maximize revenues by optimizing product mix based on global demand and pricing. Each of our
vessels is staffed with production managers who coordinate continuously with our marketing department to schedule production between blocks and surimi to optimize product mix and maximize our profitability.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Continue to Diversify Sources of Revenues



We generate most of our revenues from at-sea processing, primarily comprised
of pollock-based products. In addition, we participate in a number of other fisheries, such as the hake, cod and yellowfin sole fisheries. We plan to continue expanding our operations in these and other fisheries. With our Southern Pride and Pacific
Longline Company acquisitions, we became both the largest catfish processor in the U.S. and a participant in the cod freezer-longliner sector and therefore have significant market positions in pollock, catfish and cod, the top three whitefish
species in terms of U.S. human consumption. In addition, we have state of the art processing facilities to produce scallops, a market we entered into in 2001.



Leverage International Marketing Network



We are currently expanding our presence in worldwide seafood markets, with a particular focus on the Asian and European markets, to increase and diversify
our customer base and global seafood market share. We have expanded our Japanese office in an effort to increase direct distribution to end-users and to gain an entryway into growing markets such as South Korea and China. We expect that over time,
increasing local market presence in Asia will help maintain price stability through long-term contracts, improve production planning, strengthen customer relationships and provide us with marketing and sales advantages. Additionally, we believe that
a strong local market presence will provide us with an opportunity to introduce new species and product forms into the Asian market and enhance relationships with distributors in Japan. In 2001, we established a sales office in Denmark to serve the
growing European market for pollock block, which in the past has been supplied primarily with Russian pollock. With Russian pollock stocks expected to remain at below average levels in the near term, we believe that our access to pollock resources
in the U.S. Bering Sea pollock fishery will provide us with a competitive advantage in implementing our strategy to increase our presence in Europe. Seafood sales to customers in Europe increased from 2.1% of total revenues in 1999 to 16.0%
of total revenues in 2004.



Pursue Strategic
Acquisitions



We intend to evaluate and selectively pursue
accretive opportunities that we believe are strategically important based on their potential to diversify our product and customer base, broaden our distribution network and increase our cash flow.



Industry and Regulatory Overview



According to the FAO, the worldwide production of seafood, excluding aquatic
plants, has increased steadily at a compounded annual growth rate of approximately 4% from approximately 19 million metric tons in 1950 to approximately 133 million metric tons in 2002 and is projected to increase slightly from 2003 to 2010,
resulting in large part from increasing world population and continued economic growth in developing countries. In 2002, the supply provided by marine and inland fisheries, or capture fisheries, accounted for approximately 93.2 million metric tons,
or approximately 70% of that amount. Worldwide seafood production of capture fish has remained stable in recent years. The growth in worldwide seafood production is primarily related to increased fish farming, or aquaculture. From 1990 to 2002, the
amount of seafood produced in aquaculture



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worldwide grew at a compounded annual growth rate of approximately 10% from approximately 13.1 million metric tons to approximately 39.8 million metric tons.



Due to its higher cost per ton of fish produced, aquaculture
is used primarily to produce higher value fish species such as catfish and salmon. Aquaculture is not a cost effective alternative for lower value fish species such as pollock or hake.



Capture Fisheries



The following chart provides a brief overview of the different types of fish categories caught in the wild for human consumption and use in 2002,
including the different species of groundfish which we harvest. The table indicates the percentage each species represents of the volume of each category harvested from capture fisheries.



LOGO

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|1 | Represents species each accounting for less than 5% of the volume of finished products produced from capture fisheries.
|- | -----------------------------------------------------------------------------------------------------------------------

Source: FAO Fishstat Plus Database, 2004.



In 2002, approximately 15.5 million metric tons of whitefish was produced worldwide. The whitefish category includes groundfish (such as pollock, hake and
cod), flatfish (such as sole), and the redfish, bass and conger species groups. From 1990 to 2002, the worldwide production of groundfish has fluctuated between 8.4 million and 11.6 million metric tons. We are the largest harvester and at-sea
processor of groundfish in the U.S. Pollock, the species representing a substantial majority of our harvest, is the most abundant whitefish and groundfish species in the world.



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Aquaculture



The following chart provides a brief overview of the different types of fish categories produced by aquaculture in the U.S.
in 2002. In 2002, approximately 30% of the seafood produced worldwide was produced in aquaculture. In 2002, according to the FAO, catfish accounted for approximately 58% of the volume of all aquaculture in the U.S., the primary market in which we
sell catfish. We are the largest catfish processor in the U.S.



The following table outlines the percentage each segment represents of total U.S. aquaculture production.



LOGO



Groundfish



Pollock Fisheries



Pollock accounted for 32% of groundfish produced worldwide in 2002,
representing 2.7 million metric tons, which is more than any other groundfish species. The two primary global pollock sources are the U.S. Bering Sea pollock fishery, the primary fishery in which we operate, and the Russian fishery in the Sea of
Okhotsk. The pollock biomasses in these U.S. and Russian pollock fisheries are independent of one another, with virtually no co-mingling between these stocks. Pollock stocks in the U.S. Bering Sea pollock fishery have remained relatively stable
since 1999, while pollock stocks in Russia have experienced a steep decline in recent years. According to TINRO, Wespestad & Ianelli, the Russian fisheries pollock stocks are expected to remain at their current low levels over the next
several years, which we believe is attributable to overfishing. As a result, approximately 56% of the pollock produced worldwide in 2002 came from the U.S. Bering Sea pollock fishery, up from 30% in 1999.



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Between 2001 and 2004, U.S. pollock quotas have remained relatively stable while Russian pollock quotas
have declined. However, the total Russian pollock quota in 2005 increased by 16% from the 2004 level, up to 1,052,250 metric tons. The quota in the Sea of Okhotsk, the primary Russian fishing area, is up compared to 2004 level, by 21%, to 508,000
metric tons.



The map below represents the U.S. Bering
Sea pollock fishery and the Russian pollock fishery in the Sea of Okhotsk, our primary competing fishery.



LOGO



U.S. Pollock
Fishery.    According to the Marine Conservation Alliance, the U.S. Bering Sea pollock fishery is one of the healthiest and most responsibly managed fisheries in the world. In contrast to the general world trend of declining
groundfish stocks, the U.S. Bering Sea pollock fishery is generally characterized by abundant fish stocks and conservative management. In 2004, the Marine Stewardship Council, or MSC, completed a comprehensive four year review of the U.S. Bering Sea
pollock fishery and concluded that the fishery met the MSC criteria for a responsible and sustainably managed fishery. We believe the MSC fishery certification guidelines are among the most rigorous guidelines for fishery management assessment in
the world. Since the inception of the MSC review program only eleven fisheries worldwide have received this certification.



The U.S. Bering Sea pollock fishery is highly regulated and only 19 specifically identified catcher-processor vessels, of which we own seven, can
participate in the catcher-processor sector of the fishery. Pollock matures relatively quickly, with fish aged three to seven years contributing most significantly to the commercial fisheries. Rapid growth allows a relatively high portion of the
pollock biomass to be harvested each year without impacting overall population. According to the National Marine Fisheries Service, the body that conducts pollock stock assessments and recommends sustainable harvest limits in this fishery,
approximately 24% of this fisherys 2005 pollock biomass could have been harvested without causing overfishing to occur. The federal government typically sets harvest limits in the 10% to 20% range, below the levels the National Marine
Fisheries Service views as sustainable.



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The National Marine Fisheries Service considers the current U.S. Bering Sea pollock population healthy
and stable. The National Marine Fisheries Services population models for pollock in the U.S. Bering Sea pollock fishery show that between 1993 and 2005, the estimated biomass has averaged approximately 10.7 million metric tons. The following
graphic indicates the historical pollock total allowable catch and biomass in the U.S. Bering Sea pollock fishery:



U.S. Bering Sea Pollock Fishery Total Allowable Catch/Biomass



LOGO

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|1 | Source for 1993 to 1998: National Marine Fisheries Service; source for 1999 to 2005: North Pacific Fishery Management Council; Amounts for 1999 and thereafter refer to the total
allowable catch for the Eastern Bering Sea only.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2 | Source for 1993 to 2005: Eastern Bering Sea Walleye Pollock Stock Assessment from Alaska Fisheries Science Center and National Marine Fisheries Service, November 2004.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



The pollock fishery in the U.S. Bering Sea is
seasonal. The winter or A season takes place from January to April and the summer/fall or B season runs from June through October. Since 1998, the year the American Fisheries Act was passed, the National Marine Fisheries
Services has permitted participants in the U.S. Bering Sea pollock fishery to harvest 40% of the annual quota during the A season and the remaining 60% during the B season. During the A season, spawning pollock
produce large quantities of high-value roe, making this season the more profitable one.



Other Groundfish Fisheries



In addition to harvesting and processing pollock, we participate in the catcher-processor and mothership sectors of the U.S. hake fishery and in the catcher-processor and freezer-longlinger sector for the U.S. Bering Sea Pacific cod
fishery. In 2002, the U.S. hake and cod fisheries represented approximately 11% and 18% of the worldwide production of hake and cod, respectively. According to the FAO, from 1990 to 2002, the worldwide production of hake has varied from a low of
approximately 1.1 million metric tons in 1992 to a high of approximately 1.7 million metric tons in 1996. Worldwide production of cod has dropped considerably over the last two decades (mostly attributable to a decline in Atlantic cod) from
approximately 2.6 million metric tons in 1981 to approximately 1.3 million metric tons in 2002. We believe this decrease in cod led to the spike in cod pricing in the early 1990s and the conversion of most fillet customers to lower-priced,
relatively more abundant pollock as a primary source of groundfish. Over the past four years, the U.S. Bering Sea Pacific cod quota has increased nearly 10% from 188,000 metric tons in 2001 to 206,000 metric tons in 2005.



Harvesting by catcher-processors in the U.S. hake fishery is conducted on a
cooperative basis similar to the system in place for pollock fishing; the mothership sector for hake is conducted on an Olympic-style or open



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access basis, meaning that any vessel licensed to operate in the fishery may harvest as much fish as possible until the fisherys seasonal quota
allocation has been reached. Harvesting in the U.S. Pacific cod fishery is Olympic-style but with limited licenses allowed to participate in the fishery.



Groundfish Consumption



Pollock and cod are the first and third, respectively, largest whitefish species in terms of human consumption. There are three primary markets for
groundfish products produced for human consumption: Asia, Europe and North America, representing 30%, 39% and 17%, respectively, of the market in 2001. The Japanese use groundfish primarily to produce surimi (a fish protein paste used in
products such as imitation lobster and crabmeat), roe and a variety of fresh-fish products. Consumers in Western Europe and the United States generally purchase groundfish in the form of fresh and frozen fillets, products produced from blocks of
fillets and headed and gutted fish.



According to the National
Fisheries Institute, through 2003 per capita consumption of pollock has experienced stable growth since 1987 at a compounded annual growth rate of approximately 4.2% per annum.



Groundfish Pricing



Each of the products produced from pollock has different pricing characteristics. The price of pollock roe is heavily influenced by the size and condition
of roe skeins, color and freshness of the roe and the maturity of the fish caught. Catcher-processors are more likely to produce higher quality roe because they process the fish within hours of being caught, rather than several days later as is the
case with inshore processors. In addition, roe prices are influenced by anticipated Russian and U.S. production and Japanese inventory carry-over, because roe is consumed almost exclusively in Japan. The U.S. Bering Sea pollock fishery commonly
produces the highest quality roe.



The prices of surimi and
fillets are influenced primarily by expected production in the U.S. and Russian pollock fisheries, and other factors such as carry-over inventories and changes in demand. Because surimi and fillet blocks often are composed of the same raw material,
the demand for one product can influence the price of the other. Surimi and fillet blocks are also produced utilizing species of fish other than pollock, such as hake or itoyori species. However, due to differences in flesh attributes between
pollock and other species, the surimi and block produced from other species are generally not used as substitutes for pollock products and thus have minimal influence on pollock pricing. Fillet blocks are often supplied by both the U.S. Bering Sea
pollock fishery and the Russian fisheries.



Pollock
Allocation



We operate within a favorable statutory and
regulatory environment. The stable nature of the U.S. Bering Sea pollock fishery is partly a function of the regulatory and cooperative structure that governs its activities. The American Fisheries Act specifically identifies the catcher-processor
vessels that are eligible to participate in the fishery, prohibits the entry of additional vessels and prohibits any single entity from harvesting more than 17.5% of the annual directed pollock catch.



The Act allocates the total allowable catch of pollock in the U.S. Bering Sea
pollock fishery among the following sectors:



| |  |  | 10% of the total allowable catch is allocated to six Alaska Community Development Groups (mostly native Alaskan villages and their residents) that sell or lease their community
development quota to other participants, including us;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | approximately 3.5% of the total allowable catch is set aside for pollock by-catch in other fisheries;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | the remaining 86.5% of the total allowable catch (the directed pollock catch) is allocated as follows:
| | - |  | --------------------------------------------------------------------------------------------------------



| |  | 50% of the directed pollock catch is allocated to catcher-vessels delivering to inshore factories;
| | - | --------------------------------------------------------------------------------------------------



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| |  | 40% of the directed pollock catch is allocated to catcher-processors, and catcher-vessels that deliver to catcher-processors; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------



| |  | 10% of the directed pollock catch is allocated to the catcher-vessels that deliver to at-sea processor vessels called motherships, which do not harvest.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



Catcher-processors, such as the vessels we own, harvest and process fish into
products, such as roe, fillets and surimi, within hours of catching them, and operate offshore. Catcher-vessels harvest and deliver fish to catcher-processors, motherships and inshore processors for processing. Motherships are at-sea processors
which rely on catcher-vessels to harvest and deliver fish to them. Inshore processors operate onshore at fixed-location processing facilities, relying on catcher-vessels to harvest and deliver fish to them.



We own and operate seven of the 19 catcher-processor vessels permitted to
participate in the catcher-processor sector of the U.S. Bering Sea pollock fishery. Under the American Fisheries Act, this sector is allocated 40% of the annual directed pollock catch and, by the terms of the Pollock Conservation Cooperative
agreement, a contractual arrangement among the seven companies that own the catcher-processors named in the statute, this percentage is further divided and allocated among the Cooperative members (with 3.4% being allocated to catcher-vessels).
Within the catcher-processor sector, our allocation for pollock under the Cooperative agreement is nearly 2.5 times larger than that of the second largest Cooperative member.



In 2002, 2003 and 2004, we harvested an aggregate of 17.9%, 18.7% and 20.1%, respectively, of the total allowable catch in
the U.S. Bering Sea pollock fishery. We are allocated 16.8% of the directed pollock catch under our Cooperative agreements, and we lease the right to harvest another 0.7% of the directed pollock catch from other vessels in our fishery, bringing us
to 17.5% of the directed pollock catch (which is the maximum permitted harvesting allocation of the directed pollock catch by any single entity). Our share of the directed pollock catch represented 15.1% of the total allowable catch. We supplemented
our share of the directed pollock catch in 2002, 2003 and 2004 by purchasing approximately 28.0%, 36.0% and 54.0%, respectively, of the community development quota (or 2.8%, 3.6% and 5.4%, respectively, of the total allowable catch) from Alaska
Community Development Groups, two of which are equity investors in our company.



Catfish



Catfish production has grown steadily
since the earliest commercial production began. According to the FAO, worldwide production of catfish was approximately 843,000 tons in 2002, up from 472,000 tons in 1990, representing an increase of approximately 79% over the last 12 years. Of this
amount, approximately 61% came from aquaculture and approximately 39% came from capture fisheries.



A large amount of catfish produced in the U.S. comes from independently owned and operated local family farms. The catfish raised in these farms are
typically sold to processors, such as ourselves. We purchase catfish from local farmers and do not own any catfish farms. We are not controlled by or affiliated with catfish farmers or their co-operatives. The catfish is processed into various ready
to consume products such as fillets, nuggets and marinated and breaded products.



Prior to 1999, the total amount of catfish imports in the U.S. was insignificant, representing less than 5% of the volume of catfish sold. Beginning in 1999, there was an increase in catfish-like imports from Vietnam.
In November 2002, the Department of Commerce, or DOC, made a preliminary ruling that the Vietnamese were selling catfish-like products into the U.S. at unfairly low market prices. The DOC issued its final ruling in July 2003, imposing import duties
on Vietnamese catfish and other aquaculture exports.



Worldwide
catfish consumption is concentrated in the U.S., Asia, Africa and, to a lesser degree, in Central Europe. There is very little catfish consumption in Western Europe or Japan. According to the National Fisheries Institute, in the U.S., per capita
catfish consumption has surpassed cod and is now the second largest selling whitefish behind pollock. According to the National Fisheries Institute, through 2003 U.S. per capita catfish



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consumption, like pollock consumption, has experienced stable growth since 1990 at a compounded annual growth rate of approximately 3.8% per annum since
1990. The majority of this growth has occurred in aquaculture, the sector in which we operate.



In the U.S., the catfish market has evolved over the last decade from being a regional commodity, locally produced and consumed predominantly in the southern U.S., to a large, commercial aquaculture industry serving
major U.S. markets. In 2002, according to the FAO, catfish accounted for approximately 50% of the value and 58% of the volume of all aquaculture in the U.S.The U.S. catfish industry is concentrated in Alabama, the region in which we operate,
as well as Mississippi, Arkansas and Louisiana. We are the largest catfish processor in the U.S., processing approximately 100 million pounds of catfish per year.



Catfish harvests are seasonal, following the warm weather-growing cycle of the fish. Farmers prefer to harvest their ponds
at the end of the summer, after the period in which the fish experience their maximum weight gain and before the fish enter a period of slower growth during the winter. The harvest slows modestly during November and December due to reduced demand
during the holiday season and picks up again in the beginning of the year. This leads to a seasonal abundance of fish between late summer and early winter, the time of year when catfish prices are usually at their lowest.



Products



There are three steps in preparing pollock for retail sale: harvesting, primary processing and secondary processing. At-sea
catcher-processor vessels harvest fish and conduct primary processing to produce products such as fillets, surimi and roe. These products are further refined and packaged for retail sale by secondary processing companies in the United States, Asia
(mainly Japan) and Europe, which produce products such as breaded seafood portions, imitation crabmeat and fish sticks.



The sale of pollock roe is our highest margin business. The fish we catch (after extraction of roe, if applicable) is either processed into surimi or
fillet blocks. Each fish is first filleted and incremental flesh is removed from the carcass and sent to the surimi line. The fillets are then either inspected and frozen in block form, or minced and used to produce surimi. The manufacturing
processes for surimi and fillet blocks generate different quantities of salable product from each fish.



We process fish into the following products:



At-sea processing segment:



| |  |  | Roe.    Roe is extracted from spawning fish, which are harvested primarily during the winter and spring. Egg sacs are sorted by size and quality and
frozen on the vessels. The egg sacs are then salted and dyed by processors in Asia for sale to consumers. We produce roe primarily from pollock and to a lesser extent from cod. We sell roe primarily to large Japanese importers.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Block.    We produce different types of block products such as skinless, boneless, pin bone out, pin bone in, deepskin and minced blocks. The frozen
blocks are cut into different sizes, shapes and weights by our secondary processing operations for conversion into products such as breaded and battered fish sticks and fillets. We sell block produced from pollock, hake and cod. We sell most of our
block products to foodservice customers, restaurant chains, retailers or large scale secondary processors in Asia, Europe and North America, including to our land-based processing affiliates.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Surimi.    Surimi is a tasteless fish paste used as the primary protein in numerous Asian dishes and, to a lesser extent in Europe and the U.S. We produce
surimi from pollock and hake. We sell surimi as a commodity to importers and large-scale distributors, who then sell it to processors as a raw ingredient. Outside of Japan, the most recognized surimi products are imitation crab, shrimp, scallops and
other similar products. Over 1,000 different products are made from surimi.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Fishmeal.    Fishmeal is produced from fish by-products, primarily frames, guts and heads of pollock, hake and yellowfin sole. We sell fishmeal primarily
in China, Taiwan and Japan, where it is used as the main ingredient in aquaculture feeds.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other.    We produce headed and gutted fish from cod and yellowfin sole and sell those products primarily to secondary processors in China for conversion
into individual skinless, boneless fillets.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Land-based processing segment:



| |  |  | Fresh.    We sell fresh catfish and scallops. Catfish is sold to foodservice customers and retailers in the U.S. Fresh scallops are sold in bagged form to
wholesalers and high-end restaurants in the U.S.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Individually Quick Frozen.    Individually quick frozen products are skinless fillets or scallops frozen into individual portions rather than blocks. The
individually quick frozen portions are of various sizes and are processed for conversion into center of the plate and breaded and battered products. Most of our individually quick frozen products are produced from catfish and scallops.
We sell most of our individually quick frozen products to foodservice customers and retailers in the U.S.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our product sales value in dollars and as a percentage of total sales including intersegment sales, broken out by product type and geographic region for
2004, in our at-sea processing segment are as follows:



|         |  |                                      |       |                       |       |  
|-------- |  | ------------------------------------ | ----- | --------------------- | ----- | -
|         |  | 2004                                 |      
|         |  | Amount ofSales                       |       | Percent ofTotal Sales |      
|         |  | (in millions other than percentages) |      
|Roe      |  | $                                    | 86.9  |                       | 30.1  | %
|Block    |  |                                      | 112.2 |                       | 38.8  |  
|Surimi   |  |                                      | 74.3  |                       | 25.7  |  
|Fishmeal |  |                                      | 12.2  |                       | 4.2   |  
|Other    |  |                                      | 3.5   |                       | 1.2   |  
|         |  |                                      |       |                       |       |  
|Total    |  | $                                    | 289.1 |                       | 100.0 | %
|         |  |                                      |       |                       |       |  



|                        |  |                                      |       |                       |       |  
|----------------------- |  | ------------------------------------ | ----- | --------------------- | ----- | -
|                        |  | 2004                                 |      
|                        |  | Amount ofSales                       |       | Percent ofTotal Sales |      
|                        |  | (in millions other than percentages) |      
|North America           |  | $                                    | 50.3  |                       | 17.4  | %
|Japan                   |  |                                      | 124.1 |                       | 42.9  |  
|Europe                  |  |                                      | 68.8  |                       | 23.8  |  
|Asia (other than Japan) |  |                                      | 45.9  |                       | 15.9  |  
|                        |  |                                      |       |                       |       |  
|Total                   |  | $                                    | 289.1 |                       | 100.0 | %
|                        |  |                                      |       |                       |       |  



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Our product sales value in dollars and as a percentage of total sales including intersegment sales,
broken out by product type and geographic region for 2004, in our land-based processing segment are as follows:



|                          |  |                                      |       |                       |       |  
|------------------------- |  | ------------------------------------ | ----- | --------------------- | ----- | -
|                          |  | 2004                                 |      
|                          |  | Amount ofSales                       |       | Percent ofTotal Sales |      
|                          |  | (in millions other than percentages) |      
|Individually fresh frozen |  | $                                    | 133.6 |                       | 68.1  | %
|Fresh                     |  |                                      | 62.5  |                       | 31.9  |  
|                          |  |                                      |       |                       |       |  
|Total                     |  | $                                    | 196.1 |                       | 100.0 | %
|                          |  |                                      |       |                       |       |  



|                        |  |                                      |       |                       |       |  
|----------------------- |  | ------------------------------------ | ----- | --------------------- | ----- | -
|                        |  | 2004                                 |      
|                        |  | Amount ofSales                       |       | Percent ofTotal Sales |      
|                        |  | (in millions other than percentages) |      
|North America           |  | $                                    | 188.6 |                       | 96.2  | %
|Europe                  |  |                                      | 3.8   |                       | 1.9   |  
|Asia (other than Japan) |  |                                      | 3.7   |                       | 1.9   |  
|                        |  |                                      |       |                       |       |  
|Total                   |  | $                                    | 196.1 |                       | 100.0 | %
|                        |  |                                      |       |                       |       |  



We are continually
designing and employing new factory technologies. We employ a full time technical engineer who investigates and designs processing factory improvements. We seek to increase the value of the products produced aboard our vessels and to reduce labor
and associated costs wherever possible. One example of these efforts is a patented machine that successfully takes the fish head (which previously went entirely to fishmeal) and removes a relatively large section of meat used for higher-value surimi
or minced products. We are also investigating new technology that will grade fillets automatically with the use of computers and scanners and that could potentially reduce our labor costs.



Sales, Marketing and Distribution



Overview



We have an international marketing network with offices in the United
States, Japan and Denmark. We market, sell and distribute products for two distinct types of customers: the industrial market and the foodservice/retail market. The products we produce through primary processing on board our catcher-processor
vessels are sold as a raw material into the industrial market and used by our customers to produce ready to consume end products. The products we produce through secondary processing at our facility in Massachusetts and at our catfish facilities in
Alabama are sold in a ready to consume format to the foodservice/retail markets.



In 2004, industrial customers and foodservice/retail customers comprised approximately 58% and 42% of our revenues, respectively. Our industrial sales force consists of sales representatives and brokers targeting an
international group of customers primarily in Asia, Europe and North America regions. Our foodservice and retail sales and marketing operations include a network of approximately 40 brokers throughout the U.S. This network sells and distributes on
average in excess of one million pounds of processed, ready to consume catfish, scallops and breaded pollock or cod per week.



The opening of our Copenhagen, Denmark office in 2001 reflects our strategy to build a long-term presence in the European markets that will enable us to
capitalize on seafood consumption growth trends in previously underserved markets such as France, Spain, Italy and Germany. In addition, we have expanded our Japanese office in an effort to increase direct distribution to end-users and to gain an
entryway into growing markets such as South Korea and China.



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In 2004, the MSC completed a comprehensive four year review of the U.S. Bering Sea pollock fishery and
concluded that it met the rigorous MSC criteria for a responsible and sustainably managed fishery. The MSC certification allows us to use the MSC ecolabel on our products. Products displaying the MSC ecolabel assure buyers and consumers that the
seafood they purchase come from a responsible and sustainably managed fishery.



Industrial Market



Our
primary processing operations focus on products used as raw materials by secondary processors serving end markets throughout the world. We harvest, manufacture and market frozen at-sea products from the Bering Sea and North Pacific. The products
produced onboard our catcher-processors and freezer-longliners are specifically made for industrial processors that convert the frozen fillet blocks, headed and gutted fish and surimi products into breaded portions, individual fillets and
surimi-based products like imitation crab meat. Roe is salted and dyed by processors in Asia for sale to consumers. Roe is sold to consumers as fresh or frozen whole skeins, or as bags of eggs removed from the skeins. The whole skeins are considered
a high-end gourmet food product and are used for gift giving in Japan. We develop annual marketing and sales plans for our products based on anticipated demand and market pricing. We review these plans continuously and, if necessary, adjust them
during the season. Because most of our vessels can easily switch between producing surimi and fillet blocks, during each season we constantly monitor and adjust the product mix to meet market demand.



Depending on the product and customer, we negotiate either seasonal or
long-term contracts. We have traditionally entered into revolving arrangements in which several larger customers commit to purchase all surimi produced on a specific vessel. Prior to each fishing season, we typically enter into sales commitments for
70% to 90% of our expected production. Final pricing usually occurs during the season or shortly thereafter, based on general pricing in the market. Over the years, we have built good relationships with our core customer base.



We generally sell our pollock roe through a combination of direct sales and
silent auctions to Japanese industrial customers. Prior to the commencement of the pollock A season, we frequently enter into agreements to sell a specified percentage of the roe production from certain vessels to particular customers.
In 2004, that percentage was 50% for each of our vessels. Under these agreements, the final sales price for the roe sold to the customers is generally identical to the price at which the remainder of the vessels production is sold at
auction. Depending on the quantity of production, the roe of the pollock B season is sold through a similar procedure, entirely by auction or through direct negotiated sales with major customers.



Through our brand names Pride of the Sea, American
Pride and Southern Pride Catfish, we are a well recognized supplier of industrial and secondarily processed products, and we maintain a strong market position in Japan, the United States, parts of Europe and parts of Asia.



Foodservice and Retail Markets



We focus on selling, marketing and distributing seafood products produced in
our three secondary processing facilities to the foodservice and retail channels utilizing our own scalable distribution system and a national broker network. We market products such as breaded portions, fresh and frozen fillets, fresh and frozen
sea scallops, and single serve portions under our national brands American Pride, Frionor, and Southern Pride Catfish, as well as under private label brands. The majority of our sales are in the foodservice
channel and about one third of our products are sold retail through either seafood specialty shops, grocery or club stores. We have increased the retail presence of our products through a recent licensing arrangement with The Walt Disney Company
pursuant to which we are offering co-branded frozen seafood products direct to consumers. We market sea scallops in the retail grocery channel under the Bayside Bistro and private label brands. Additionally, we intend to capitalize on an
industry trend toward fresh and chilled seafood by developing strategic alliances with seafood distributors to supply fresh and chilled seafood, primarily to the seafood counters of retail grocery and club stores. Product mix is about 2/3frozen and 1/3fresh. Approximately 45% of our foodservice and retail products are delivered through our own fleet of trucks.



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We are increasingly emphasizing direct selling, particularly to national restaurant chains in the growth
segments of the foodservice industry. We focus our marketing efforts on a consultative selling approach featuring culinary and resource support that assists customers to develop their seafood businesses. We complement our marketing efforts by
developing innovative high quality products that also solve specific customers challenges, such as scarce labor and food safety.



Customers



We have established long-term relationships with a number of key customers worldwide. Our customer base includes industrial importers, foodservice
distributors, food retailers, restaurants and reprocessing companies.



For surimi and roe products, our customers have primarily been Japanese and South Korean importers and large scale distributors. Over the past few years, we have focused on broadening our customer base and have been building closer
relationships directly with key Japanese food manufacturers. We have recently penetrated the growing European surimi market, particularly in France and Spain. The headed and gutted cod product produced aboard our freezer-longliners are primarily
sold in the European, Asian and North American markets.



The
United States is our primary market for pollock deepskin blocks and catfish products. For pollock deepskin product, we have established long-term customer relationships, including multi-year or multi-season supply contracts with three of the largest
U.S. pollock deepskin customers. Our catfish products are sold to a diversified customer base made up of retail, foodservice and specialty seafood distributors.



With the lower than average levels of Russian pollock supply, we have increased production of pin bone out, pin bone in and minced pollock blocks to
capture additional European market share. In addition to the United States, Europe is a primary market for these products. The growth in European block demand led to the establishment of our European office in Copenhagen, Denmark, which leverages
our existing relationships with broker alliances.



The table
below lists alphabetically our 15 largest customers by revenues in our at-sea processing segment in 2004:



|                                         |  |                               |  |                                       |  |               
|---------------------------------------- |  | ----------------------------- |  | ------------------------------------- |  | --------------
|Customer                                 |  | At-sea Processing Product     |  | Market Segment                        |  | Country       
|Frozen Fish International                |  | Pollock block, deepskin/mince |  | Retail manufacturer/foodservice       |  | Germany       
|Gortons of Gloucester                    |  | Pollock block, deepskin/mince |  | Retail manufacturer/foodservice       |  | USA           
|Hohsui Corporation                       |  | Roe                           |  | Importer                              |  | Japan         
|Jeka Fish Int                            |  | Cod block                     |  | Importer/manufacturer                 |  | Denmark       
|Kamerycah Inc.                           |  | Roe                           |  | Importer                              |  | Japan         
|Kibun Foods USA Inc.                     |  | Surimi                        |  | Importer/retail manufacturer          |  | Japan         
|Matsuoka Co. Ltd.                        |  | Surimi/roe                    |  | Importer                              |  | Japan         
|Nichimo Company Ltd.                     |  | Surimi/roe                    |  | Importer/retail manufacturer          |  | Japan         
|Ocean Resource Macao Commercial Offshore |  | Fishmeal                      |  | Importer/manufacturer                 |  | China         
|Osaka Uoichiba Co Ltd.                   |  | Surimi/roe                    |  | Importer                              |  | Japan         
|Peter Pan Seafoods Inc.                  |  | Pollock & Hake surimi         |  | Importer/retail manufacturer          |  | Japan, USA    
|Pickenpack Hussmann & Hahn               |  | Pollock block, deepskin/mince |  | Retail manufacturer/foodservice       |  | Germany       
|Samho America Inc.                       |  | Roe                           |  | Foodservice-quick service restaurants |  | Korea         
|Tokai Denpun                             |  | Surimi/roe, fishmeal          |  | Importer                              |  | Japan         
|Youngs Bluecrest SFD                     |  | Pollock block, deepskin/mince |  | Retail manufacturer                   |  | United Kingdom



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##### Table of Contents

The table below lists alphabetically our 15 largest customers by revenues in our land-based processing
segment in 2004:



|                                  |  |                                  |  |                         |  |        
|--------------------------------- |  | -------------------------------- |  | ----------------------- |  | -------
|Customer                          |  | Land-based Processing Product    |  | Market Segment          |  | Country
|Atlantic Cape Fisheries           |  | Fresh & Frozen Scallops          |  | Processor               |  | USA    
|Ben E Keith                       |  | Frozen Catfish, Scallops         |  | Foodservice Distributor |  | USA    
|Costco Wholesale                  |  | Frozen Scallops                  |  | Club Store              |  | USA    
|Dot Foods                         |  | Frozen Catfish                   |  | Distributor             |  | USA    
|Long John Silver                  |  | Processed fish                   |  | Restaurant              |  | USA    
|Midway Distributors               |  | Fresh & Frozen Catfish           |  | Foodservice Distributor |  | USA    
|National 1                        |  | Frozen Scallops                  |  | Processor/distributor   |  | France 
|North America ImEx                |  | Fresh Scallops                   |  | Exporter                |  | USA    
|Schnucks Market                   |  | Fresh & Frozen Catfish           |  | Retailer                |  | USA    
|Seacliff Seafoods                 |  | Fresh & Frozen Catfish           |  | Retail Distributor      |  | USA    
|Star Fisheries                    |  | Fresh & Frozen Catfish           |  | Retail Distributor      |  | USA    
|Sysco Corporation (all divisions) |  | Fresh & Frozen Catfish, Scallops |  | Foodservice Distributor |  | USA    
|Tampa Bay Fisheries               |  | Fresh Catfish                    |  | Processor               |  | USA    
|US Foodservice                    |  | Frozen Catfish, Scallops         |  | Foodservice Distributor |  | USA    
|Winn Dixie                        |  | Fresh Catfish, Frozen Scallops   |  | Retailer                |  | USA    



In 2004, our largest
customer accounted for approximately 6% of our total revenues.



In the first quarter of 2005, Winn Dixie filed for bankruptcy protection in the U.S. As a result, we expect to record a charge to earnings of up to $1.0 million primarily related to sales in the first quarter of 2005. During 2004, sales to
Winn Dixie represented less than 1% of our total revenues.



Operations



At-sea processing



Harvesting operations.    Our catcher-processor
vessel captain and fishmaster utilize highly sophisticated fish finding technology to identify the size of the fish and the location and density of the school, allowing the vessels to optimize the catch and resource value. Once the fishmaster
identifies a fishing area, a mid-water trawl net, which includes cone-shaped nets, is towed behind the vessel. The fishing captain monitors the catch sensors attached along the portion of the net that holds the fish. When the optimal catch level is
reached and the net is wound in, the fish are immediately dropped into tanks to await processing.



Aboard our freezer-longliners, we harvest cod using several long lines with baited hooks, which are released from the vessel and weighted on one end to
allow the baited hooks to float in mid water. This method of fishing allows us to realize an optimal finish fish product that translates into higher market prices for the longline cod products.



Processing operations.    Within hours, harvested
fish are converted into primary processed products utilizing highly automated, continuous production processes. In the first phase of processing, fish are released from the holding tanks onto a conveyer, sorted according to size and diverted into
hoppers at the head of one of the several processing lines. Headed and gutted pollock are run through an additional line which extracts roe skeins intact. These skeins are weighed, graded, packaged in groups according to grade and frozen. Fish that
have been headed and gutted are either frozen as-is or filleted for conversion into either surimi or frozen fillets.



Shipping and cold storage logistics.    We have established relationships with shipping agents throughout Europe and Asia to
take advantage of favorable distribution and cold storage rates and service, and we have secured cold storage space in the U.S., Canada, Europe and South Korea to ensure timely delivery of quality products at the most cost efficient rate. Also,
through our integrated structure, our harvesting operations utilize the cold storage facility of our secondary processing operations for East Coast shipments, further reducing storage costs.



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##### Table of Contents

Land-based processing products



Catfish.    The catfish we buy are raised in ponds by independent catfish farmers with whom we
have contractual relationships. Prior to harvesting catfish, sample fish are tested. They are loaded into baskets and then placed in our aerated tank trucks for live shipment to our processing plants. Unlike a large number of our competitors that
depend on farmers to deliver catfish to their plants, we operate our own in-house harvest and live-haul departments, the largest in the nation. Prior to the trucks being unloaded into our plant, sample fish are again tested. At the plant, live
catfish are transferred from aerated trucks to the processing lines. The catfish are cleaned, processed, and placed on ice or frozen using an individually quick-frozen method that preserves the taste and quality of the catfish. The frozen catfish
can also be breaded and battered. The processing lines and the production processes are highly automated and generally similar to those onboard our catcher-processor vessels, with the exception of some secondary processing operations.



Breaded and battered
operations.    Pollock is the primary whitefish used in low cost, breaded and battered fish products for the foodservice and frozen product markets. We convert raw fish blocks, primarily pollock blocks produced by our
harvesting operations, into market ready, frozen, cut or formed, breaded and battered portions. Our products include raw breaded, pre-cooked, batter fried, glazed and dusted products.



Scallop processing operations.    We operate a state-of-the-art wet-fish processing facility
focused primarily on grading and processing scallops. We purchase scallops from scallop harvesters. Scallops are graded by size and quality and processed into either premium or standard products. We utilize industry leading processing equipment and
food technology in the production of our scallops which significantly reduce production time and manual labor.



Government Regulation



Fisheries Regulation



All U.S. fisheries in
which we operate are regulated and subject to total allowable catch limits. Participants in U.S. federal fisheries are required to obtain a federal government permit.



We operate in the groundfish fisheries within the U.S. Exclusive Economic Zone, 3 to 200 nautical miles off the coasts of
Alaska, Washington and Oregon. According to the National Marine Fisheries Service, no species in the U.S. Bering Sea is deemed to be overfished. Credit for these healthy stocks and profitable fisheries can be attributed in large part to two pieces
of federal legislation.



Magnuson-Stevens Fishery
Conservation and Management Act.    The Magnuson-Stevens Fishery Conservation and Management Act of 1976 provides the broad framework for conserving and managing marine fisheries within the U.S. Exclusive Economic Zone. The
councils that oversee the fisheries in which we participate are the North Pacific Fishery Management Council in Alaska and the Pacific Fishery Management Council in Washington and Oregon. The councils two primary areas of responsibility are
(1) the establishment of annual maximum catch levels and (2) the development of fishery management plans that regulate who can fish, when and how they can fish and how much they can catch. The fishery management plans are then implemented and given
legal force through regulations promulgated by the National Marine Fisheries Service, a division of the Department of Commerce. These regulations are then strictly enforced by both the U.S. Coast Guard and the National Marine Fisheries Service.



Each of the fisheries in which we participate is managed on a
maximum sustainable yield basis. At the end of each year, the councils Scientific and Statistical Committees, which are composed of scientists from federal, state and academic positions, make recommendations on acceptable biological catch by
species or species group. The total allowable catch is then typically set by the council at a level equal to or less than the acceptable biological catch depending upon a variety of factors. The councils also set prohibited species catch limits to
limit by-catch of non-target species. These limits are set mainly to protect and preserve crab, halibut, salmon and other non-target species for other fisheries. After being reviewed by the National Marine Fisheries Service, the councils
recommendations are implemented.



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American Fisheries Act.    In 1998, Congress passed a second piece of
legislation, the American Fisheries Act, which introduced several major changes in the management of the U.S. Bering Sea pollock fishery. In 2001, the North Pacific Fishery Management Council provided a report to Congress on the implementation and
effects of the American Fisheries Act. In light of the extremely positive report, which described the positive impacts of the American Fisheries Act on almost all aspects of the U.S. Bering Sea pollock fishery, Congress passed legislation in 2001
permanently removing the original sunset provision of the American Fisheries Act. The American Fisheries Act and its implementing regulations include the following key provisions:



| |  |  | Limitation on participants in the U.S. Bering Sea pollock fishery:
| | - |  | ------------------------------------------------------------------



| |  |  | Only a defined group of 20 named catcher-processors, of which 19 catcher-processors are currently eligible to operate in the fishery, and the catcher-vessels that historically
delivered to them, are eligible to harvest pollock for processing by catcher-processors. As part of the implementation agreement, eight of our vessels were scrapped and one was permanently removed from the fishery, reducing the overall fleet from 29
to 20;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Only a defined group of catcher-vessels may harvest pollock for delivery to motherships, and only three named motherships may process pollock; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Only inshore processors that processed more than 2,000 metric tons of pollock during each of 1996 and 1997 may receive an unlimited amount of pollock for processing; those that
processed less during those years may only receive and process under 2,000 metric tons annually. Subsequently, the council imposed a processing cap limiting the amount of pollock that can be processed by any single entity to 30% of the directed
pollock catch in any given year.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Prohibition on any entity harvesting more than 17.5% of the directed pollock catch in any given year. Allocations purchased from community development quota partners do not count
against this percentage.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Prohibition on the entry of additional large fishing industry vessels into any U.S. fishery.
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | Reallocation of the pollock total allowable catch in the U.S. Bering Sea pollock fishery between the various sectors, increasing the community development quota and inshore
allocations, while reducing the catcher-processor and the mothership sector allocations:
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10% of the total allowable catch is allocated to six Alaska Community Development Groups (mostly native Alaskan villages and their residents) that sell or lease their community
development quota to other participants, including us;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | approximately 3.5% of the total allowable catch is set aside for pollock by-catch in other fisheries;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | the remaining 86.5% of the total allowable catch (the directed pollock catch) is allocated as follows:
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | 50% of the directed pollock catch is allocated to catcher-vessels delivering to inshore factories;
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | 40% of the directed pollock catch is allocated to catcher-processors, and catcher-vessels that deliver to catcher-processors; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10% of the directed pollock catch is allocated to the catcher-vessels that deliver to at-sea processor vessels called motherships, which do not harvest.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



The American Fisheries Act requires that vessels engaged in U.S. fisheries be
owned by entities that are at least 75% U.S. citizen owned and controlled. This requirement applies at each tier of ownership and must also be examined in the aggregate. The Maritime Administration made a favorable determination with respect to the
U.S. citizenship of the entities owning our vessels in January 2002. In 2002, we applied for and obtained confirmation that after completion of the proposed changes in our ownership structure in connection with the recapitalization of Holdings and
its affiliates in April 2002, the Maritime Administration would issue a renewed U.S. citizenship determination. On December 17, 2002, we filed annual affidavits of U.S. citizenship and on February 21, 2003, the Maritime Administration made a
favorable determination of continuing eligibility with respect to the



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citizenship requirements of the American Fisheries Act. On August 6, 2004, the Maritime Administration made another favorable determination of continuing
eligibility with respect to citizenship requirements of the American Fisheries Act.



For purposes of the American Fisheries Act, a U.S. citizen is:



(i) Any individual who is a citizen of the United States by birth, naturalization or as otherwise authorized by law; or



(ii) Any entity (A) that is organized under the laws of the
United States or of a State, (B) of which not less than 75% of the interest in such entity, at each tier of ownership of such entity and in the aggregate, is owned and controlled (including beneficial ownership and control) by U.S. citizens, and (C)
with respect to which no voting or other agreements confer control to non-U.S. citizens.



Special rules applicable to corporations, limited liability companies, partnerships, trusts and other entities limit the number of non-U.S. citizen directors to a minority of a quorum of the board of directors, and
require that certain principal officers and managers (including the chief executive officer, the chairman of the board of directors, trustees and general partners, and persons authorized to act in the absence or disability of such persons) be U.S.
citizens.



The American Fisheries Act is relatively new
legislation. As a result, no reported judicial cases clearly interpret its meaning. For this reason, the full future impact of the American Fisheries Act on our ownership and debt capital structure remains uncertain.



The Pollock Conservation Cooperative.    By
limiting participation in the U.S. Bering Sea pollock fishery, the American Fisheries Act facilitated the formation of a cooperative agreement. In December 1998, the companies owning the 20 catcher-processors named in the American Fisheries Act
formed the Pollock Conservation Cooperative. The Pollock Conservation Cooperative controls 36.6% of the directed pollock catch, with the remaining 3.4% of the sectors 40.0% controlled by seven catcher-vessels that historically delivered to the
catcher-processors. The original division of share among the companies was based primarily on historical performance and was reached by the mutual agreement of the participants. In December 1999, Alaska Trawl Fisheries, one of the original Pollock
Conservation Cooperative members, agreed to sell its interest to the remaining Pollock Conservation Cooperative members and its vessel, Endurance, has been permanently removed from U.S. fisheries, leaving 19 eligible catcher-processors.



Under the terms of the Pollock Conservation Cooperative membership
agreement, each participating company is allocated a percentage of the directed pollock catch by private contractual arrangement. Pollock and other groundfish allocation rights under the Pollock Conservation Cooperative are freely transferable to
other participants pursuant to the membership agreement, without the prior consent or approval of the other participants. Participants can then harvest and process their quota shares at their own pace with vessels named in the American Fisheries
Act, within certain seasonal restrictions. The stable nature of the U.S. Bering Sea pollock fishery is partly a function of the regulatory and cooperative structure that governs its activities. In addition, the change in fishery management
introduced by the American Fisheries Act allowed the catcher-processor sector to: slow the harvesting pace in order to optimize the value per ton of harvested round fish; reduce operating costs; and minimize by-catch and discards.



In 2002, 2003 and 2004 we harvested an aggregate of 17.9%,
18.7% and 20.1% respectively, of the total allowable catch. We are allocated 16.8% of the directed pollock catch under our Cooperative agreements, and we lease the right to harvest another 0.7% of the directed pollock catch from other vessels
in our fishery, bringing us to 17.5% of the directed pollock catch (which is the maximum permitted harvesting allocation of the directed pollock catch by any single entity). Our share of the directed pollock catch represented 15.1% of the total
allowable catch. We supplemented our share of the directed pollock catch in 2002, 2003 and 2004 by purchasing 28.0%, 36.0% and 54.0%, respectively, of the community development quota (or 2.8%, and 3.6% and 5.4%,



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respectively, of the total allowable catch) from Alaska Community Development Groups, two of which are equity investors in our company. The Alaska Community
Development Groups are mostly comprised of native Alaskan villages.



The overall allocation of the total allowable catch, as well as our allocation and quota we have purchased, is illustrated in the following chart of the 2005 total allowable catch.



LOGO

---

|(1) | This chart reflects the pollock TAC for the Eastern Bering Sea. In addition, there is a TAC of 19,000 MT of pollock in the Aleutian Islands. This TAC is initially awarded to the
Aleut Corporation but under certain conditions up to 15,300 MT may be transferred later in 2005 to the directed pollock fishery in the Bering Sea.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Pollock Conservation Cooperative membership agreement will continue through the remainder of the named vessels lives, unless certain events
occur, none of which we expect is likely to occur in the foreseeable future.



The following is a summary of the Pollock Conservation Cooperative current members and their allocations for 2004:



|                   |  |         |  |                            |  
|------------------ |  | ------- |  | -------------------------- | -
|Company            |  | Vessels |  | % of DirectedPollock Catch |  
|American Seafoods  |  | 7       |  | 16.572                     | %
|Trident Seafoods   |  | 5       |  | 6.824                      |  
|Arctic Storm/Fjord |  | 2       |  | 3.633                      |  
|Glacier Fish Ltd.  |  | 2       |  | 3.218                      |  
|Alaska Ocean       |  | 1       |  | 3.004                      |  
|Highland Light     |  | 1       |  | 1.764                      |  
|Starbound Ltd.     |  | 1       |  | 1.585                      |  
|                   |  |         |  |                            |  
|Total              |  | 19      |  | 36.600                     | %
|                   |  |         |  |                            |  



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In December 1998, the owners of the seven catcher-vessels listed in the American Fisheries Act as
eligible to deliver or sell pollock to the Pollock Conservation Cooperative members formed the High Seas Catchers Cooperative. As with the Pollock Conservation Cooperative, the 3.4% of the directed pollock catch allocated to the seven
catcher-vessels was divided by private contractual arrangement based primarily on historical catch performance. The members of the High Seas Catchers Cooperative and their respective allocations are listed below:



|                  |  |         |  |                            |  
|----------------- |  | ------- |  | -------------------------- | -
|Company           |  | Vessels |  | % of DirectedPollock Catch |  
|Sea Storm         |  | 1       |  | 0.8226                     | %
|Neahkanie         |  | 1       |  | 0.6679                     |  
|Tracy Anne        |  | 1       |  | 0.4642                     |  
|Muir Milach       |  | 1       |  | 0.4538                     |  
|Ocean Harvester   |  | 1       |  | 0.4325                     |  
|American Seafoods |  | 1       |  | 0.3149                     |  
|Forum Star        |  | 1       |  | 0.2441                     |  
|                  |  |         |  |                            |  
|Total             |  | 7       |  | 3.4000                     | %
|                  |  |         |  |                            |  



The Pollock
Conservation Cooperative and the High Seas Catchers Cooperative have entered into an agreement that allows the High Seas Catchers Cooperative members to lease their allocations directly to the Pollock Conservation Cooperative members. As
a result, 100% of the High Seas Catchers Cooperative allocation is now harvested directly by Pollock Conservation Cooperative members.



Food Safety



The manufacture, processing, packaging, storage, distribution and labeling of food products are subject to extensive foreign, federal, state and local
regulation. We are regulated by the U.S. Food and Drug Administration, the U.S. Department of Agriculture, the U.S. Department of Commerce, European Union regulators and various U.S. state and local health and agricultural agencies. In addition,
some of our facilities are subject to regular on-site inspections and our production and distribution facilities are subject to various federal, state and local environmental and workplace and food safety regulations. Failure to comply with all
applicable laws and regulations could subject us to civil remedies, including fines, injunctions, recalls or seizures, and criminal sanctions, any of which or all of which could have a material adverse effect on our business, financial condition and
results of operations. None of our products has been subject to such a recall. Additionally, we expect that the food safety regulatory environment in the U.S., Europe and Asia will become more stringent. We believe that we are in substantial
compliance with all such laws and regulations. Compliance with current or future laws or regulations could require us to make material expenditures or otherwise adversely affect our business, prospects, results of operations and financial condition.



Environmental Matters



Our vessels and facilities are subject to numerous foreign, federal, state
and local laws and regulations relating to the treatment, storage, handling, disposal, emission and discharge of materials into the environment, including the federal Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery Act,
the Emergency Planning and Community Right-To-Know Act, the Comprehensive Environmental Response, Compensation and Liability Act, and their state and local counterparts. Under some of these laws, the owner or operator of facilities may be held
liable for the costs of removing or remediating of hazardous substances on or under property, regardless of whether the owner or operator knew of or was responsible for the presence of such hazardous substance and regardless of whether the release
or disposal of such substances was legal at the time it occurred. We believe that we are in substantial compliance with all such laws and regulations. We also believe that none of the environmental laws and regulations that regulate our business is
expected to have a material impact on our business.



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Under certain environmental laws and regulations, we will be required to expend capital in the future in
order to remain in compliance. We do not believe that such capital expenditures required by environmental laws currently in effect will be material.

The National Marine Fisheries Service imposes various operational requirements that limit our ability to discard unwanted species, or by-catch, in the North Pacific. Regulation regarding by-catch is from time to time debated in various
forums, including the United Nations, and is the subject of public campaigns by environmental groups. Any significant change in the by-catch rules resulting from these debates or campaigns could materially increase the costs or decrease the
flexibility of our fishing operations.



Competition



At-sea Processing



Our main competitors in the at-sea processing segment are the other members
of the Pollock Conservation Cooperative, including Trident Seafoods and Glacier Fish. We also compete with inshore processors, including Maruha and Nissui, and motherships, which rely on catcher-vessels to harvest and deliver fish. In addition, we
compete with other pollock fisheries, particularly the Russian pollock fishery in the Sea of Okhotsk.



We compete in selling roe primarily on the basis of quality. The price of pollock roe is heavily influenced by the size and condition of roe skeins, color
and freshness and the maturity of the fish caught. In addition, pollock roe prices are influenced by anticipated Russian and U.S. production and Japanese inventory carry-over, as pollock roe is consumed almost exclusively in Japan. Roe is primarily
sold at auction, where we compete to sell into the Japanese market with other participants in our fishery, as well as with Russian producers. The prices of surimi and fillets are influenced primarily by expected production in the U.S. and Russian
pollock fisheries, and other factors such as carry-over inventories and changes in demand. Because surimi and fillet blocks often are composed of the same raw material, the demand for one product can influence the price of the other. Surimi and
fillet blocks are also produced utilizing species of fish other than pollock, such as hake or itoyori species. However, due to differences in flesh attributes between pollock and other species, the surimi and block produced from other species are
generally not used as substitutes for pollock products, except for potentially lower grade applications in surimi, and thus have minimal influence on pollock pricing.



Land-based Processing



As of December 2004, there were approximately 23 U.S. catfish processing companies, including Confish, Heartland, Americas Catch and Delta Pride,
our primary catfish competitors. We are the largest, processing over 16% of the U.S. farmed catfish market. In 2003, the top five and top ten U.S. catfish companies processed, in the aggregate, approximately 60% and 83% of the U.S.
farmed catfish harvest, respectively.



In secondary
processing, we compete both for raw materials and customers with numerous other processors. Competition for sales is based largely on price. Our competitors range from large volume, well established secondary processors to small independent
importers and brokers. Our major competitors are Fishery Products International, Coldwater Seafoods, Iceland Seafood Corp. and Trident Seafoods.



Insurance



We carry customary insurance coverage, including policies on each of our vessels which provide for the payment of an assessed amount corresponding to
fair market value (generally approximately one-half of current replacement cost) in the event of a loss of a vessel. Additionally, all of our catcher-processor vessels have a further layer of umbrella insurance which provides coverage
for 80% of the difference between such fair market value and the total replacement cost for one vessel during each one-year policy term. We also carry insurance covering product liability claims. We believe that we carry adequate insurance coverage
for our



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business activities. However, such coverage may prove to be inadequate or may not continue to be available to us. If such coverage proves to be inadequate,
the sinking or destruction of, or substantial damage to, any of our vessels could have a material adverse effect on our business, financial condition or results of operations.



Employees



As of March 1, 2005, we employed approximately 1,100 full-time personnel, including approximately 200 corporate staff employees and approximately 900
employees at our catfish and secondary processing facilities. In addition to the full-time personnel, we also employ a seasonal vessel crew, either full-time or part-time, of approximately 900. We have an annual retention rate of over 70% and we
consider relations with our employees to be good.



In addition
to their regular compensation, all corporate staff participate in an incentive plan to reward achievement of performance targets.



All vessel employees are compensated based upon a pre-season estimated value per product applied to actual production and actual roe value achieved by
their vessel.



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RISK FACTORS



In addition to the other information contained in this annual report, you should carefully read and consider the
following risk factors. If any of these risks actually occur, our business, financial condition, or operating results could be adversely affected and the trading price of our outstanding bonds could decline.



Risks Relating to Our Industry and Its Regulation



The repeal of, or adverse amendments to, the American Fisheries Act and other industry
regulations would likely impair our profitability.



The American Fisheries Act restricts the number of vessels operating in the catcher-processor sector of the U.S. Bering Sea pollock fishery to 19 named catcher-processor vessels, of which we own and operate seven, and by allocating 40% of
the directed pollock catch to this sector (with 36.6% being allocated to these 19 catcher- processor vessels and 3.4% being allocated to catcher-vessels). In the event that the American Fisheries Act and other related industry regulations were
repealed or modified to permit additional large vessels to operate in the catcher-processor sector of the U.S. Bering Sea pollock fishery, we could be subject to new competition that could adversely affect our profitability. In addition, our pollock
harvesting rights and profitability would be adversely affected if the American Fisheries Act and other industry regulations were repealed or modified in a manner that decreases the percentage of the total pollock harvest allocated to the 19
catcher-processor vessels named in the Act. A repeal or modification of the American Fisheries Act or other industry regulations could result from changes in the political environment, a significant increase or decrease in the pollock biomass or
other factors, all of which are difficult to predict and are beyond our control.



The relatively stable and predictable nature of our harvesting operations and our efficiencies would deteriorate if the Pollock Conservation Cooperative agreement were terminated or adversely changed.



The members of the Pollock Conservation Cooperative,
which is comprised of all participants in the catcher-processor sector of the U.S. Bering Sea pollock fishery, have agreed that each member will catch only an agreed-upon share of the total allowable catch allocated to the catcher-processor sector
in that fishery. By establishing allocations among all catcher-processors, the Pollock Conservation Cooperative, which we refer to as the Cooperative, ensures that members will have the opportunity to harvest a fixed percentage of the total pollock
harvest and removes the incentives to harvest and process pollock as fast as possible, thereby giving each member a greater opportunity to optimize operational efficiencies. The Cooperative could be terminated as a result of an adverse change in the
American Fisheries Act allocations, the bankruptcy of a Cooperative member or the decision of two or more Cooperative members. The termination of the Cooperative or any adverse change to the allocation system currently in place under the agreement
could increase the volatility of our operations, cause us to lose operational efficiencies and have an adverse effect on our existing harvesting rights.



Growth in our core pollock harvesting operations and our profitability are limited by the American Fisheries Act.



The American Fisheries Act imposes a statutory limit on the maximum amount
of pollock that we may independently harvest equal to 17.5% of the directed pollock catch. We are allocated 16.8% of the directed pollock catch under our Cooperative agreements, and we lease the right to harvest another 0.7% of the directed pollock
catch from other vessels in our fishery, bringing us to the 17.5% harvesting limit.



Our business could be materially affected if the community development quota we purchase is significantly reduced or eliminated or offered to us at prices we consider unreasonable.



We supplement our pollock harvest through the purchase of community
development quota, which plays an important part in our strategy of maximizing access to pollock. The primary agreements governing our current arrangements for purchasing community development quota expire at the end of 2005. The Alaska Community
Development Groups from which we purchase community development quota could decline to continue to sell



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their quota to us or could offer their quota at prices we consider unreasonable, which could materially adversely affect our business.



In addition, every three years the state of Alaska may re-allocate the
community development quota allocation among the six Alaska Community Development Groups. The next reallocation is for the period beginning 2006. The Alaska Community Development Groups from which we purchase community development quota could have
their quota allocation reduced below current levels. If any significant reduction were to occur, we could experience a significant decline in our revenues, earnings and profitability.



Our at-sea processing operations are subject to regulatory control and political
pressure from interest groups that may seek to materially limit our ability to harvest fish.



Under the American Fisheries Act, the Magnuson-Stevens Fishery Conservation and Management Act and other relevant statutes and regulations, various
regulatory agencies, including the National Marine Fisheries Service and the North Pacific Fishery Management Council, are endowed with the power to control our harvest of pollock and other groundfish in the fisheries of the North Pacific. These
regulators may decrease or eliminate our allocation of the fish supply as a result of political pressure from a broad spectrum of lobbying interests including:



| |  |  | native Alaskan groups seeking a greater allocation of the pollock harvest to be devoted to community development quotas;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | other sectors of the pollock fishery, such as inshore processors who periodically seek an increased allocation of the pollock harvest devoted to the on-shore sector; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | environmental protection groups.
| | - |  | --------------------------------



The laws and rules that govern the highly-regulated fishing industry could change in a manner that would have a negative impact on our operations. In
addition, protests and other similar acts of politically-motivated third party groups could cause substantial disruptions to the ability of our vessels to engage in harvesting activities. These factors may affect a substantial portion of our
harvesting and processing operations in any year, which could have a material adverse effect on our business, results of operations or financial condition.



Regulations related to our by-catch could impose substantial costs on our operations and reduce our operational flexibility.



The National Marine Fisheries Service imposes various operational
requirements aimed at limiting our ability to discard unwanted species, or by-catch, in the North Pacific. Regulation regarding by-catch is from time to time debated in various forums, including the United Nations, and is the subject of public
campaigns by environmental groups. Any significant change in the by-catch rules resulting from these debates or campaigns could materially increase our costs or decrease the flexibility of our fishing operations.



Efforts to protect endangered species, such as Steller sea lions, may significantly
restrict our ability to access our primary fisheries and revenues.



There is a risk that access to certain areas of the primary fisheries in which we operate could be restricted due to constraints imposed by governmental authorities in response to the listing of endangered species,
such as Steller sea lions, for purposes of the Endangered Species Act. Since 1990, the National Marine Fisheries Service has issued various biological opinions as to the impact on Steller sea lions of the pollock and other groundfish fisheries of
the U.S. Bering Sea. These opinions have analyzed the effects of the various groundfish fisheries in the waters off Alaska and have recommended actions to avoid jeopardy for the western population of Steller sea lions and the adverse modification of
its habitat. Based upon these opinions, the National Marine Fisheries Service has adopted several regulations relating to the protection of Steller sea lions which have caused us to harvest our allocation of pollock and other groundfish from less
than the full territory of the fisheries in which we have historically operated.



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The regulations to protect endangered species, such as Steller sea lions, may significantly restrict our
fishing operations and revenues. Further, whatever measures that are adopted may be found to be inadequate or not in compliance with the Endangered Species Act. Therefore, as has occurred in the past, a court may in the future force us to modify our
fishing operations by restricting our access to certain areas of the primary fisheries in which we operate in order to ensure the protection of the Steller sea lions or other endangered or threatened species in compliance with the Endangered Species
Act. These restrictions could have an impact on our fishing operations, profitability and revenues which may be material to our business.



In addition, the U.S. Fish and Wildlife Service has prepared a biological opinion on the effects of the Bering Sea/Aleutian Islands/Gulf of Alaska
groundfish fisheries on bird species listed under the Endangered Species Act, in particular the short-tailed albatross. The National Marine Fisheries Service is also conducting an assessment of the potential interactions between short-tailed
albatross and equipment used by trawl vessels in these fisheries. The measures that could be imposed as a result of these investigations could have an impact on our fishing operations, profitability and revenues which may be material to our
business.



The National Marine Fisheries Service
has determined that under certain circumstances, the short-tailed albatross has the potential to interact with longliners gear. Recently implemented regulations require the use of seabird avoidance devices in the U.S. Bering Sea Pacific cod
longline fishery.



If we and members of our crew fail to comply with
applicable regulations, our vessels may become subject to liens, foreclosure risks and various penalties and our fishing rights could be revoked.



Our industry is subject to highly complex statutes, rules and regulations. For example, we are subject to statutory and contractual limitations on the
type and amount of fish we may harvest, as well as restrictions as to where we may fish within our fisheries. If we or members of our crew violate maritime law or otherwise become subject to civil and criminal fines, penalties and sanctions, our
vessels could be subject to forfeiture and our fishing rights could be revoked. The violations that could give rise to these consequences include operating a vessel with expired or invalid vessel documentation or in violation of trading
restrictions, violating international fishing treaties or fisheries laws or regulations, submitting false reports to a governmental agency, interfering with a fisheries observer or improperly handling or discarding pollock roe. Because our
vessels harvesting and processing activities take place at sea, outside the day-to-day supervision of senior management, members of the crews of our vessels may have been guilty of infractions or violations that could subject them or us to
significant penalties, which could have a material and adverse effect on our results of operations and financial condition.



In 2001, we became aware of allegations that certain crew members may have tampered or attempted to tamper with equipment on board one or more of our
vessels which measures the quantity of fish harvested, principally related to the 2001 fishing season. In 2002, we received additional tampering allegations relating to one of our vessels. The National Marine Fisheries Service conducted an
investigation regarding these allegations, and in consultation with the National Marine Fisheries Service, we also conducted an internal investigation regarding these allegations. In 2004, we received additional tampering allegations relating to one
of our vessels. We understand that the National Marine Fisheries Service is currently conducting an investigation regarding these allegations. It is possible that violations may have occurred or may occur in the future. To date no fines or
penalties have been assessed against us in connection with any of these allegations. However, the ultimate outcome of these matters is uncertain.



In addition, our vessels may become subject to liens imposed by operation of maritime law in the ordinary course of business. These include liens for
unpaid crew wages, liens for damages arising from maritime torts, liens for various services provided to the vessel and liens arising out of the operation, maintenance and repair of the vessel. The holders of these liens may have the right to
foreclose on the vessel if the circumstances giving rise to the liens are not adequately addressed.



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If we do not comply with rules regulating non-U.S. citizen ownership and control of fishing vessels, we could lose
our eligibility to participate in U.S. fisheries.



The
American Fisheries Act requires that vessels engaged in U.S. fisheries be owned by entities that are at least 75% U.S. citizen owned and controlled. This requirement applies at each tier of ownership and must also be examined in the aggregate.



If we do not comply with these rules and regulations, we could
lose our eligibility to harvest pollock and other species, which would have a material adverse effect on our business, financial condition or results of operations. See Our CompanyGovernment Regulation.



In addition, the Maritime Administration has the right to review the terms of
our loan covenants and financing arrangements to determine if they constitute an impermissible shifting of control to a non-U.S. citizen lender. Based on discussions with counsel and with pertinent government officials, we believe the intention of
the Maritime Administration is to prevent provisions couched as loan covenants from serving as a device to shift control to non-U.S. citizens, and not to impede conventional market based loans and credit facilities.



The American Fisheries Act is relatively new legislation. As a result, no
reported judicial cases clearly interpret its meaning. For this reason, the full future impact of the American Fisheries Act on our ownership and debt capital structure remains uncertain.



Risks Relating to Our Business



Our products are subject to pricing volatility, and the prices of our pollock roe and pollock surimi products, which declined significantly in 2003, may remain at
their current low levels or decline even further, which would significantly reduce our profitability.



The sale of pollock roe is our highest margin business. Pollock roe prices have experienced significant volatility in recent years and may continue to do
so in the future. The average price of pollock roe that we sell is heavily influenced by the size and condition of roe skeins, its color and freshness, the maturity of the fish caught, the grade mix of the pollock roe and market perceptions of
supply. In addition, pollock roe prices are influenced by anticipated fluctuations in supply, including Russian and U.S. production and Japanese inventory carry-over, as pollock roe is consumed almost exclusively in Japan. In addition, a decline in
the quality of the pollock roe that we harvest could cause a decline in the price at which we sell our pollock roe. For example, our average A season roe prices per kilogram were 1,906 Japanese yen, 1,778 Japanese yen and 1,685 Japanese yen for the
years ended 2002, 2003 and 2004, respectively. A further decline in the market price of pollock roe would reduce our margins and, without an offsetting increase in volume, would reduce our revenues.



In addition, during the second half of 2003 and in 2004, our financial
results were adversely affected by lower pollock surimi prices. From 1999 to 2004, our average pollock surimi prices have fluctuated within a range of approximately 200 to 300 Japanese yen per kilogram. Our overall average surimi price for the year
ended December 31, 2004 was at the low end of our historical average surimi price range and reflects a decline of approximately 11.7% as compared to the same period in 2003, which reflects both the overall decline in surimi market prices as well as
our sales of a greater percentage of lower quality surimi. Prices and sales volume may remain at these low levels or decline even further, which would materially and adversely affect our results of operations and could impair our ability to
refinance our indebtedness and to make timely interest payments.



Partly as a result of these pricing factors, together with high inventory levels at the end of 2003, our overall performance in 2003 was at a level that would have caused us to be in violation of certain of our
financial bank covenants. To prevent this potential violation, during the third quarter of 2003, we cancelled 2003 management bonuses and reversed accruals of those bonuses through June 30, 2003, in accordance with the terms of some of our
employment agreements and our general bonus policy, which does not permit the payment of bonuses based on financial performance for any year in which there is a violation of a covenant under our credit agreement. Despite the cancellation and
reversal of these bonuses, we would have been in violation of those financial



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covenants under our credit agreement at the end of 2003 if we had not obtained a covenant modification from our bank lenders. In addition, in October 2004,
ASG entered into an amendment to its credit facility that, among other things, (1) amended the required leverage ratio beginning September 30, 2004 and made other covenant modifications to provide necessary covenant relief to us primarily due to
recent adverse surimi prices and a decline in the performance of our catfish operations, (2) excluded certain expenses we have incurred from the definition of EBITDA for our covenant calculations, including the write-off of offering costs of up to
$19.0 million related to our cancelled initial public offering of IDSs and (3) permitted the sale of certain distribution-related assets associated with our catfish operations. See Item 7Managements Discussion and Analysis of
Financial Condition and Results of OperationsResults of OperationsYear Ended December 31, 2004 Compared to Year Ended December 31, 2003 and Debt Covenants.



If prices at which we purchase catfish remain at high levels or increase, in either
case without a proportionate increase in the prices at which we sell our catfish products, our ability to maintain profitability in our catfish processing operations will be adversely affected.



In the second half of 2003, many of the farmers from whom we purchase
catfish increased their prices to levels that jeopardized our ability to maintain satisfactory profit margins in the catfish processing operations. The high fish cost trend has continued and fish costs have been approximately 23% higher for the year
ended December 31, 2004 as compared to the same prior year period. Partially as a result of these farm price increases, in September 2003, we temporarily closed our catfish processing plant in Demopolis, Alabama. Our Demopolis plant resumed full
operations in October 2003. However, the prices charged by catfish farmers have remained at relatively high levels, which have adversely affected our catfish processing results in 2004. Prices at which farmers are willing or able to sell their
catfish to us could remain at levels that do not enable us to maintain satisfactory margins and do not allow us to continue these operations without further shutdowns or interruptions.



Southern Prides recent operating results have not met our expectations primarily as a result of increased fish costs
combined with lower processing yields. Such increased costs and lower yields are generally consistent with recent industry wide trends. Until September 2004, our management believed these conditions were temporary. In September 2004, our management
concluded that Southern Prides operating results for the quarter ending September 30, 2004 would decline further as compared to recent quarters and that the conditions affecting this decline may continue to affect Southern Pride to a certain
degree for the foreseeable future. Based on these conclusions, we recorded an impairment charge of approximately $7.2 million in the third quarter of 2004 related to the goodwill associated with Southern Pride.



A material decline in the population and biomass of pollock, other groundfish and
catfish stocks in the fisheries in which we operate could materially and adversely affect our business.



The population and biomass of pollock and other groundfish stocks are subject to natural fluctuations which are beyond our control. Biomass is estimated
annually through a sampling and computer-modeling process, and a recent National Marine Fisheries Service report indicated a decline in the biomass of pollock. Biomass fluctuations may also be exacerbated by disease, reproductive problems or other
biological issues. Pollock stocks are also largely dependent on proper resource management and enforcement. The overall health of a fish stock is difficult to measure and fisheries management is still a relatively inexact science. Since we are
unable to predict the timing and extent of fluctuations in the population and biomass of the pollock stocks, we are unable to engage in any measures that might alleviate the adverse effects of these fluctuations. Any such fluctuation that results in
a material decline in the population and biomass of the pollock stocks in the fisheries in which we operate could materially and adversely affect our business. Conversely, a significant increase in Russian pollock stocks could dramatically reduce
the market price of our products.



Our catfish
operations are also subject to the risk of variations in supply. For example, disease in catfish ponds could reduce catfish stocks and adversely affect our business. In recent years, the flesh recovery rates of



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our catfish operations have decreased primarily due to the processing of leaner fish that resulted from reduced feeding patterns by our suppliers. If we are
unable to improve our current supply levels, or if we continue to have low flesh recovery rates, our business will be adversely affected.



Our business is subject to Japanese currency fluctuations that could materially adversely affect our financial condition and liquidity.



Our profitability depends in part on revenues received in Japanese yen as a
result of sales in Japan. During 2004, our Japanese sales represented 27.0% of our total revenues. A decline in the value of the Japanese yen against the U.S. dollar would adversely affect our earnings from sales in Japan. Fluctuations in currency
are beyond our control and are unpredictable. During the year ended December 31, 2004, the value of the dollar decreased by 3.9% against the Japanese yen, from 106.9 Japanese yen per $1.00 as of December 31, 2003 to 102.7 Japanese yen per $1.00
as of December 31, 2004. To hedge some of our exposure to Japanese yen currency fluctuations, we purchase derivative instruments primarily in the form of foreign exchange contracts.



In addition to our revenues being exposed to Japanese yen currency
fluctuations, our liquidity can also be impacted by unrealized losses sustained to our portfolio of foreign exchange contracts. A number of these contracts have been entered into with a financial institution that requires collateralization of
unrealized losses sustained by the portfolio above a certain threshold. From time to time, to mitigate our short-term liquidity risk with respect to these collateralization requirements, we execute contracts to forward purchase Japanese yen and have
placed additional standing orders to forward purchase Japanese yen should the Japanese yen strengthen to certain spot rates.



These executed contracts and non-executed orders are significant and of a shorter duration than our portfolio of foreign exchange contracts and, as a
result, could have a significant impact on our short-term liquidity should the Japanese yen weaken against the U.S. dollar. See Item 7Managements Discussion and Analysis of Financial Condition and Results of
OperationsLiquidity and Capital ResourcesOther Factors Impacting LiquidityForeign Exchange Contracts.



In addition, in August 2004, we entered into variable to fixed-rate cross currency interest swap contracts with an aggregate notional amount of $75.0
million in anticipation of our entering into a new credit facility in connection with the anticipated completion of our offering of IDSs. Under the terms of these contracts, we pay a fixed rate of interest in Japanese yen and receive payments on a
variable rate of interest in U.S. dollars based on the U.S. dollar three-month LIBOR rate. The objective of these instruments was to reduce our exposure to interest rate risk related to the new credit facility that would have been in place upon
completion of the IDS offering and to provide additional risk management against Japanese currency fluctuations related to our Japanese yen sales. As these contracts have not been designated as hedges and are thus considered to be speculative in
nature, any gains or losses will be recognized in our statement of operations as applicable. On September 27, 2004, we terminated one of the cross currency swaps with a notional amount of $15.0 million for a nominal fee. As of
December 31, 2004, we were party to cross currency swap contracts with an aggregate notional amount of $60.0 million outstanding. The fair value of these outstanding contracts at December 31, 2004 was an unrealized loss of
approximately $6.3 million.



These instruments may not
be sufficient to provide adequate protection against losses related to currency fluctuations and, accordingly, any such fluctuations could adversely affect our revenues. There also exists the risk, should our forecasted yen denominated sales
decline, that we could become overhedged through these instruments and thereby exposed to further foreign currency fluctuations.



The segments of the seafood industry in which we operate are competitive, and our inability to compete successfully could adversely affect our business, results of
operations and financial condition.



We compete with
major integrated seafood companies such as Trident Seafoods, Nippon Suisan and Maruha, as well as with inshore processors that operate inshore on fixed location processing facilities, relying on catcher-vessels to harvest and deliver fish for
processing. We also compete with motherships that are solely at-



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sea processors, relying on catcher-vessels to harvest and deliver fish for processing. Additionally, we compete with other pollock fisheries, particularly
the Russian pollock fishery in the Sea of Okhotsk. Some of our competitors have the benefit of marketing their products under brand names that have better market recognition than ours, or have stronger marketing and distribution channels than we do.
In addition, other competitors may produce better quality products or have more advantageous pricing margins than we do. We may not be able to compete successfully with any of these companies. In addition, production and distribution of substitute
products for pollock and catfish could have a significant adverse impact on our profitability. Increased competition as to any of our products could result in price reduction, reduced margins and loss of market share, which could negatively affect
our profitability. An increase in imported products in the U.S. at low prices could also negatively affect our profitability.



All of our business activities are subject to a variety of natural risks, which could have a material adverse effect on our business, financial condition or results
of operations.



The U.S. Bering Sea pollock fishery,
the primary fishery in which we operate, is characterized by extreme sea conditions. Additionally, we purchase catfish raised in ponds primarily located in Alabama and Mississippi, and scallops from fishermen who harvest them off the eastern coast
of the U.S. Unusual weather conditions could materially and adversely affect the quality and quantity of the fish products we produce and distribute.



Our vessels are expensive assets that are subject to substantial risks of serious damage or destruction. The sinking or destruction of, or substantial
damage to, any of our vessels would entail significant costs to us, including the loss of production while the vessel was being replaced or repaired. Our insurance coverage may prove to be inadequate or may not continue to be available to us. In the
event that such coverage proves to be inadequate, the sinking or destruction of, or substantial damage to, any of our vessels could have a material adverse effect on our business, financial condition or results of operations.



Should any of our vessels be destroyed or otherwise become inoperable, the
American Fisheries Act would limit our ability to replace that vessel. The statute permits the replacement of lost vessels only if the loss is due to an Act of God, an act of war, the result of a collision, or otherwise not an intentional act of the
vessels owner. These rules would restrict our ability to replace our vessels on account of obsolescence and, accordingly, could cause us to incur increased costs of maintaining our vessels, including the substantial loss of capacity during
times of such maintenance and rebuilding.



Seasonality and variability of
our businesses may cause volatility in the market value of your investment and may hinder our ability to make timely distributions on the notes.



Our business is seasonal in nature, and our net sales and operating results vary significantly from quarter to quarter. For example, our revenue, revenue
per pound of fish harvested and gross profit tend to be higher in the January-to-April season, and hence in the first half of our fiscal year, due to the harvesting of roe which has the highest revenue per pound of product sold.



Our fishing seasons, including the important January-to-April season,
straddle more than one quarter. As a result, the timing of the recognition of sometimes significant amounts of revenue from one quarter to another can be a function of unpredictable factors, such as the timing of roe auctions, weather, the timing of
shipments to pollock roe customers, fishing pace and product delivery schedules, all of which are likely to vary from year to year. Consequently, results of operations for any particular quarter may not be indicative of results of operations for
future quarterly periods, which makes it difficult to forecast our results for an entire year. This variability may cause volatility in the market price of the notes. In addition, the seasonality and variability of our business means that at certain
times of the year our cash receipts are significantly higher than at other times. Consequently, given that we are required to make regular interest payments to debt holders, there is a risk that we will experience cash shortages. See Item
7Managements Discussion and Analysis of Financial Condition and Results of OperationsSeasonality.



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We may be required to pay significant damages in connection with litigation that is pending against us.



A complaint was filed against us by a former vessel
crew member on behalf of himself and a class of seamen, alleging that we breached our contract with the plaintiffs by underestimating the value of the catch in computing the plaintiffs wages. The plaintiff also alleged that we fraudulently
concealed the underestimation of product values, thereby preventing the discovery of their cause of action. In September 2003, the court entered an order granting our motion for summary judgment and dismissing the entirety of the plaintiffs
claims with prejudice and with costs. The plaintiff filed a motion for reconsideration of this order which was denied by the court. The plaintiff then appealed the decision to the Ninth Circuit Court of Appeals. The appeal is currently pending.
We have not recorded a liability related to this matter as the outcome is uncertain and the amount of loss, if any, is not estimable. The plaintiff may prevail and we may be required to pay significant damages to resolve this litigation,
which could have a material adverse effect on our business, results of operations or financial condition. See Item 3Legal Proceedings.



We may be adversely affected by an IRS audit.



The IRS has opened an audit of ASG with respect to tax year 2001. We do not know what issues will be raised in the course of this audit and such audit
could result in adjustments that could have a material adverse effect on our financial condition.



We may incur material costs associated with compliance with environmental regulations.



We are subject to foreign, federal, state, and local environmental regulations, including those governing discharges to water, the management, treatment,
storage and disposal of hazardous substances, and the remediation of contamination. If we do not fully comply with environmental regulations, or if a release of hazardous substances occurs at or from one of our facilities or vessels, we may be
subject to penalties and could be held liable for the cost of remediation. For example, an accident involving one of our vessels could result in significant environmental liability, including fines and penalties and remediation costs. If we are
subject to these penalties or costs, we may not be covered by insurance, or any insurance coverage that we do have may not cover the entire cost. Compliance with environmental regulations could require us to make material capital expenditures and
could have a material adverse effect on our results of operations and financial condition.



We produce and distribute food products that are susceptible to contamination and, as a result, we face the risk of exposure to product liability claims and damage to our reputation.



As part of the fish processing, small pieces of metal or other similar
foreign objects may enter into some of our products. Additionally, our fish products are vulnerable to contamination by disease-producing organisms or pathogens. Shipments of products that contained foreign objects or were so contaminated could lead
to an increased risk of exposure to product liability claims, product recalls, adverse public relations and increased scrutiny by federal and state regulatory agencies. If a product liability claim were successful, our insurance might not be
adequate to cover all the liabilities we would incur, and we might not be able to continue to maintain such insurance, or obtain comparable insurance at a reasonable cost, if at all. If we did not have adequate insurance or contractual
indemnification available, product liability claims relating to defective products could significantly increase our operating costs. In addition, even if a product liability claim was not successful or was not fully pursued, the negative publicity
surrounding any such assertion could harm our reputation with our customers.



Our operations are labor intensive, and our failure to attract and retain qualified employees may adversely affect us.



The segments of the harvesting and processing industry in which we compete are labor intensive and require an adequate supply of qualified production
workers willing to work in rough weather and potentially dangerous operating conditions at sea. Some of our operations have from time to time experienced a high rate of employee turnover and could continue to experience high turnover in the future.
Labor shortages, the inability to hire or retain qualified employees or increased labor costs could have a material adverse effect on our ability to control



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expenses and efficiently conduct our operations. We may not be able to continue to hire and retain the sufficiently skilled labor force necessary to operate
efficiently and to support our operating strategies, or we may not continue to experience favorable labor relations. In addition, our labor expenses could increase as a result of a continuing shortage in the supply of personnel. Changes in
applicable state and federal laws and regulations could increase labor costs, which could have a material adverse effect on our business, results of operations and financial condition.



Because we distribute a significant amount of our products and receive supplies and other provisions using maritime carriers, certain
adverse conditions affecting these carriers and terminals at which they transfer cargo could have a material adverse effect on our business, financial condition or results of operations.



Our distribution and purchase channels depend on the services of maritime
carriers that load and unload our products, supplies and other provisions at the Port of Dutch Harbor, Alaska, and then unload our products at terminals in Korea, New Brunswick, Canada, and the Netherlands. A strike, work slow down, unfavorable
weather conditions, changes in shipping routes or other factors adversely affecting such carriers or terminals could delay the delivery of our products and supplies. If this were to occur, it would negatively affect our revenues and profitability.



Our substantial indebtedness could adversely affect our cash flow and
prevent us from fulfilling our financial obligations, including making payment on our outstanding notes.



We have a significant amount of debt. The degree to which we are leveraged could have important consequences. For example it could:



| |  |  | make it more difficult for us to satisfy our debt obligations;
| | - |  | --------------------------------------------------------------



| |  |  | require us to dedicate a significant portion of our cash flow from operations to the payment of the principal and interest on our indebtedness, thereby reducing funds available for
future operations, capital expenditures, acquisitions and other general corporate expenses;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limit our ability to obtain additional future financing, if we need it, due to applicable financial and restrictive covenants in our existing debt;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limit our flexibility to plan for and react to changes in our business or strategy;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | increase our vulnerability to adverse economic and industry conditions; and
| | - |  | ---------------------------------------------------------------------------



| |  |  | place us at a competitive disadvantage to less leveraged competitors.
| | - |  | ---------------------------------------------------------------------



Available Information



We file annual, quarterly and special reports and other information with the Securities and Exchange Commission (SEC). You can read and copy
any materials we file with the SEC at the SECs Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers, such as us, that file electronically with the SEC. The address of the SECs Internet site is http://www.sec.gov. We make
available free of charge on or through our Internet site, www.americanseafoods.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Information on our website is not part of our annual report. We will voluntarily provide electronic or
paper copies of our filings free of charge upon request.



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|Item 2. | Properties
|------- | ----------



At-Sea Processing Segment



We own and operate the largest fleet, consisting of seven vessels, within the catcher-processor sector of the U.S. Bering Sea pollock fishery. Our
catcher-processor vessels range in length from approximately 260 to 340 feet, generate between 6,500 and 10,000 horsepower in their main engines (allowing the vessels to operate under extreme sea conditions) and each carry between 90 to 125 crew
members. Each of our catcher-processors meets the rigorous seaworthiness requirements of Det Norske Veritas, the highest vessel classification standard in the world. The catcher-processors targeting pollock have the capability to produce between 110
metric tons and 150 metric tons of frozen product daily and can harvest approximately 100 metric tons of fish per haul. An appraisal conducted in 2002 estimated that our fleet has a value of $290.0 million and replacement cost of approximately
$545.0 million.



We own and operate three freezer-longliners in
the fixed gear sector of the U.S. Bearing Sea Pacific cod fishery, ranging in length from approximately 125 to 140 feet. Our freezer-longliners are coast guard inspected each year and are maintained under similar rigorous maintenance standards as
our catcher-processors. These vessels carry an average of 20 crew members and operate in the U.S. Bering Sea/Aleutian Islands Pacific cod fishery, producing headed and gutted cod that is sold primarily in the European, Asian and North American
markets.



Between 1996 and 1998, we made significant
investments on our catcher-processor vessels immediately following their acquisition. Because of this previous capital investment, our annual capital expenditures are primarily made only to maintain our vessels at their current state-of-the-art
condition. Our entire fleet is currently equipped with highly sophisticated instruments and we do not believe that any significant further capital expenditure is required to maintain the level of performance of our vessels. Within the pollock
fishery, we believe that ours is the only catcher-processor fleet with significant incremental capacity. Each vessel is equipped with highly sophisticated instruments and equipment such as fish finding technology to locate schools of the targeted
species, cod ends (nets) with volume sensors and an integrated computer system enabling constant, real-time communication between each vessel and the corporate office. Our port engineers oversee the maintenance of each vessel to help ensure
deployment of fit vessels for every fishing trip. Our fleet consists of the following vessels:



|                       |  |                   |  |       |  |             
|---------------------- |  | ----------------- |  | ----- |  | ------------
|Vessel                 |  | Vessel type       |  | Built |  | Length(feet)
|American Dynasty       |  | Catcher-Processor |  | 1989  |  | 272         
|American Triumph       |  | Catcher-Processor |  | 1991  |  | 285         
|Deep Pacific           |  | Freezer-Longliner |  | 1991  |  | 125         
|Katie Ann              |  | Catcher-Processor |  | 1986  |  | 295         
|Lilli Ann              |  | Freezer-Longliner |  | 1991  |  | 141         
|North Cape             |  | Freezer-Longliner |  | 1989  |  | 123         
|Northern Eagle         |  | Catcher-Processor |  | 1988  |  | 341         
|Northern Hawk          |  | Catcher-Processor |  | 1991  |  | 341         
|Northern Jaeger        |  | Catcher-Processor |  | 1991  |  | 336         
|Ocean Rover            |  | Catcher-Processor |  | 1990  |  | 256         
|American Challenger(1) |  | Catcher-Vessel    |  | 1992  |  | 106         

---

|(1) | Represents a vessel that is listed as a catcher-vessel in the American Fisheries Act and therefore may not process pollock in the U.S. Bering Sea pollock fishery. We do not operate
this vessel.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



All of our vessels targeting
pollock are equipped with both surimi and fillet lines and fishmeal plants. Within hours, these flexible factory platforms can shift production plans between surimi and block products, allowing us to control daily output to meet changing market
demands.



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Land-Based Processing Segment



We own and operate two catfish processing facilities located in Greensboro and Demopolis, Alabama. Combined, these
processing facilities operate a total of fifteen processing lines and are capable of processing approximately 425,000 pounds of live catfish per day. In 2003, we installed a new, state of the art trim line. The additional trim line utilizes advanced
technology to increase both throughput and yield, producing an estimated additional 6 million pounds of catfish per year. We own live hauling equipment, including 15 aerated tank trucks used to harvest and transport the live catfish to our
processing facilities. We own and operate a fleet of approximately 30 trucks used for distribution of our products.



We also own and operate a facility in New Bedford, Massachusetts comprised of a secondary processing facility for frozen and block products, a cold
storage space for over 9,100 pallets and a corporate office. This facility also includes a state-of-the-art wet-fish processing facility focused primarily on grading and processing scallops.



We lease our corporate headquarters, located in Seattle, Washington. We
benefit from a preferential docking agreement with the Port of Seattle which provides for the docking of all of our vessels during the off-season. We also lease office space in Copenhagen, Denmark and Tokyo, Japan. Additionally, in Dutch Harbor,
Alaska we lease office space and warehouse facilities and use several docking facilities during the fishing season.



We believe that our existing vessels and facilities are adequate for our current operations.



|Item 3. | Legal Proceedings
|------- | -----------------



Litigation



General. We are from time to time party to litigation, administrative proceedings and union grievances that arise in the ordinary course of our
business. Except as described below, we do not have pending any litigation that, separately or in the aggregate, would in the opinion of management have a material adverse effect on our results of operations or financial condition. However, given
the inherent unpredictability of litigation, it is possible that an adverse outcome could, from time to time, have a material adverse effect on our operating results or cash flows in any particular quarterly or annual period.



Crew Member Lawsuit. On October 19, 2001, a complaint was filed in the
United States District Court for the Western District of Washington and the Superior Court of Washington for King County. An amended complaint was filed in both courts on January 15, 2002. The amended complaint was filed against us by a former
vessel crew member on behalf of himself and a class of over 500 seamen, although neither the United States District Court nor the Superior Court certified this action as a class action. On June 13, 2002, the plaintiff voluntarily dismissed the
complaint filed in the Superior Court. The complaint filed alleged that we breached our contract with the plaintiffs by underestimating the value of the catch in computing the plaintiffs wages. The plaintiff demanded an accounting of their
crew shares pursuant to federal statutory law. In addition, the plaintiff requested relief under a Washington statute that would render us liable for twice the amount of wages withheld, as well as judgment against us for compensatory and exemplary
damages, plus interest, attorneys fees and costs, among other things. The plaintiff also alleged that we fraudulently concealed the underestimation of product values, thereby preventing the discovery of their cause of action. The conduct
allegedly took place prior to January 28, 2000, the date our business was acquired by Centre Partners and others through ASLP. On September 25, 2003, the court entered an order granting our motion for summary judgment and dismissing the entirety of
the plaintiffs claims with prejudice and with costs. The plaintiff filed a motion for reconsideration of this order which was denied by the court. The plaintiff then appealed the District Court decision to the Ninth Circuit Court of Appeals.
This appeal is currently pending. At December 31, 2004, we have not recorded a liability related to this matter as the outcome is uncertain and the amount of loss, if any, is not estimable. We cannot assure you that the plaintiff will not prevail or
that we will not be required to pay significant damages to



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resolve this litigation, which could have a material adverse effect on our business, results of operations, or financial condition.



National Marine Fisheries Service Investigation. In 2001 and 2002, we
became aware of allegations that certain crew members may have tampered or attempted to tamper with measurement equipment on board one or more of our vessels. The National Marine Fisheries Service conducted an investigation regarding these
allegations, and in consultation with the National Marine Fisheries Service, we also conducted an internal investigation regarding these allegations. In 2004, we received additional tampering allegations relating to one of our vessels. We understand
that the National Marine Fisheries Service is currently conducting an investigation regarding these allegations. To date, no fines or penalties have been assessed against us in connection with any of these allegations. However, the ultimate outcome
of these matters is uncertain.



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------



None.



PART II



|Item 5. | Market For Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|------- | ------------------------------------------------------------------------------------------------------------



There is no established public trading market for our common equity.



We are part of a group of subsidiaries that are wholly owned
by ASLP. As of January 18, 2005, ASLP directly owns approximately 99.4% of the common equity interests in, and is the managing member of, American Seafood Holdings LLC, (Holdings). Bernt O. Bodal and Webjorn Eikrem own directly
approximately 0.4% and 0.2%, respectively, of Holdings interests. Holdings directly owns 100% of American Seafoods Consolidated LLC, which, in turn, directly owns 90% and indirectly, through ASC, Inc., owns the remaining 10% of ASG Consolidated LLC.
ASC, Inc. owns approximately 10% of the ASG Consolidated LLC and has an interest with preferred allocation and distribution rights. ASG Consolidated LLC directly owns 100% of American Seafoods Group.



As of January 18, 2005 the beneficial ownership through ASLP, held by Centre
Partners, Coastal Villages Region Fund, Bernt O. Bodal, our Chairman and Chief Executive Officer, and our directors and officers as a group was 22.5%, 35.4%, 23.4% and 32.8%, respectively.



There are restrictions imposed on distributions to partners by covenants
contained in the Amended and Restated Credit Agreement, dated as of April 18, 2002, among Holdings, ASG Consolidated LLC, American Seafoods Consolidated LLC, the Company, the banks and other financial institutions, Harris Trust and Savings Bank, as
Documentation Agent, the Bank of Nova Scotia, as Syndication Agent, and Bank of America, N.A., as Administrative Agent, Issuing Lender and Swingline Lender. Distributions are limited to an amount that will enable the partners to pay Theoretical Tax,
as defined, on the amount of taxable income of the Company and its subsidiaries allocated to such partners. See Item 8Financial Statements and Supplementary Data, Notes 8 and 10.





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|Item 6. | Selected Financial Data
|------- | -----------------------



The following selected historical consolidated financial data as of and for the years ended December 31, 2002, 2003 and 2004 has been derived from
the audited consolidated financial statements included elsewhere in this annual report. The following selected historical consolidated financial data as of December 31, 2000 and 2001 and for the period January 28 through December 31,
2000 and for the predecessor business for the period January 1 through January 27, 2000, has been derived from the consolidated financial statements of ASG and the predecessor business, as applicable, which are not included in this annual
report.



The following selected historical financial data
should be read in conjunction with Item 7Managements Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and related notes included elsewhere in this annual
report.



|                                                        |  |                             |        |         |                               |   |         |                               |  |   |         |         |   |      |         |          |      |   |         |          |   |   |         |  
|------------------------------------------------------- |  | --------------------------- | ------ | ------- | ----------------------------- | - | ------- | ----------------------------- |  | - | ------- | ------- | - | ---- | ------- | -------- | ---- | - | ------- | -------- | - | - | ------- | -
|                                                        |  | PredecessorBusiness (1)     |        |         |                               |  
|                                                        |  | January 1ThroughJanuary 27, |        |         | January 28ThroughDecember 31, |   |         | Year Ended December 31,(2)(3) | 
|                                                        |  | 2000                        |        |         | 2000                          |   |         | 2001                          |  |   | 2002    |         |   | 2003 |         |          | 2004 |  
|                                                        |  | (dollars inthousands)       |        |         | (dollars in thousands)        |  
|Statement of Operations Data:                           |  |                             |        |         |                               |   |         |                               |  |   |         |         |   |      |         |          |      |   |         |          |   |   |         |  
|Total sales and revenues                                |  | $                           | 9,719  |         |                               | $ | 252,346 |                               |  | $ | 336,839 |         |   | $    | 332,872 |          |      | $ | 411,363 |          |   | $ | 461,667 |  
|Gross profit(4)                                         |  |                             | (2,490 | )       |                               |   | 58,691  |                               |  |   | 75,115  |         |   |      | 97,969  |          |      |   | 102,117 |          |   |   | 88,916  |  
|Gross margin                                            |  |                             | (25.6  | %)      |                               |   | 23.3    | %                             |  |   | 22.3    | %       |   |      | 29.4    | %        |      |   | 24.8    | %        |   |   | 19.3    | %
|Operating income (loss)                                 |  |                             | (4,334 | )       |                               |   | 29,858  |                               |  |   | 33,507  |         |   |      | 43,753  |          |      |   | 58,994  |          |   |   | 42,424  |  
|Income (loss) before income taxes and minority interest |  |                             | 1,828  |         |                               |   | 10,737  |                               |  |   | 16,105  |         |   |      | 8,176   |          |      |   | 14,859  |          |   |   | (28,857 | )
|Net income (loss)                                       |  |                             | 1,190  |         |                               |   | 10,593  |                               |  |   | 16,289  |         |   |      | 8,496   |          |      |   | 14,639  |          |   |   | (28,888 | )
|                                                        |  |                            
|                                                        |  |                             |        |         | December 31,                  |  
|                                                        |  |                             |        |         | 2000                          |   |         | 2001                          |  |   | 2002    |         |   | 2003 |         |          | 2004 |  
|                                                        |  |                             |        |         | (dollars in thousands)        |  
|Balance Sheet Data:                                     |  |                             |        |         |                               |   |         |                               |  |   |         |         |   |      |         |          |      |   |         |          |   |   |         |  
|Property, vessels and equipment, net                    |  |                             | $      | 267,868 |                               |   | $       | 254,337                       |  |   | $       | 253,082 |   |      | $       | 225,965  |      |   | $       | 198,335  |  
|Total assets                                            |  |                             |        | 524,252 |                               |   |         | 516,847                       |  |   |         | 520,903 |   |      |         | 519,448  |      |   |         | 458,078  |  
|Total debt                                              |  |                             |        | 369,072 |                               |   |         | 326,499                       |  |   |         | 551,413 |   |      |         | 527,282  |      |   |         | 481,122  |  
|Members equity (deficit)                               |  |                             |        | 132,392 |                               |   |         | 154,887                       |  |   |         | (78,581 | ) |      |         | (112,141 | )    |   |         | (118,553 | )

---

|(1) | Our business was acquired by Centre Partners and others through ASLP in a transaction accounted for as a purchase on January 28, 2000. The purchase accounting resulted in all assets
and liabilities being recorded at their estimated fair values. Also, the method of accounting for major scheduled vessel maintenance and derivative instruments was changed effective with the purchase. Accordingly, the predecessor business amounts
are not comparable to amounts for periods subsequent to the acquisition.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Effective January 1, 2002, we changed our method of accounting for goodwill and other intangible assets.
|--- | --------------------------------------------------------------------------------------------------------

|(3) | In October 2001, we reassessed the estimated useful lives of cooperative fishing rights and increased the amortization period.
|--- | ------------------------------------------------------------------------------------------------------------------------------

|(4) | Due to a change in our policy, shipping and handling charges are now classified in cost of sales for all periods presented. These charges were previously classified as selling,
general and administrative expenses.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------



The following discussion should be read in conjunction with our
consolidated financial statements and the notes to those statements and other financial information appearing elsewhere in this annual report. This annual report contains forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those indicated in forward-looking statements. See Cautionary Statement Regarding Forward-Looking Statements.



Business Overview



We are one of the largest integrated seafood companies in the U.S. in terms of revenues. We harvest and process a variety of fish species aboard our
sophisticated catcher-processor vessels, aboard our freezer-longliner vessels and at our land-based processing facilities, and we market our products to a diverse group of customers in North America, Asia and Europe. We are the largest harvester and
at-sea processor of pollock and hake and the largest processor of catfish in the U.S. In addition, we harvest or process additional seafood, including cod, scallops and yellowfin sole. We maintain an international marketing network through our U.S.,
Japan and Europe offices and have developed long-term relationships with our U.S. and international customer base.



We operate in two principal operating segments, at-sea processing and land-based processing. The at-sea processing segment includes the harvesting and
processing of pollock, cod, hake and yellowfin sole on our vessels while at sea. The land-based processing segment includes the primary processing of catfish and scallops at our facilities in Alabama and Massachusetts and secondary processing of
pollock products in Massachusetts.



The most significant
portion of our revenues and profitability is derived from our at-sea processing segment. The performance of our at-sea processing segment largely depends on the amount of pollock, cod and hake resources that we harvest each year and the prevailing
market prices for the related products we sell. During 2004, we harvested approximately 368,000 metric tons of whitefish.



Pollock represents the most significant portion of our harvest and the most significant portion of our net sales both in terms of volume and revenues. In
2004, our pollock products represented approximately 72.7% of the products sold in our at-sea processing segment. Some of our products exhibit commodity-like pricing characteristics. These prices fluctuate from season to season and from year to year
as a result of factors such as market conditions, inventory levels and production volumes.



We operate in three primary U.S. fisheries, the U.S. Bering Sea pollock fishery, the U.S. Bering Sea Pacific cod fishery and the U.S. hake fishery. For each U.S. fishery, the fishery management council determines the
annual total allowable catch, which is the total weight of fish that can be harvested. In addition to the amount of the directed pollock catch that we harvest, we supplement our pollock and longline cod harvest by purchasing community development
quota allocated to Alaska Community Development Groups.



The
remaining portion of our revenues and profitability is derived from our land-based processing segment. The performance of our land-based processing segment largely depends on the amount of catfish, pollock, cod and scallops that we process each
year, the cost of fish we purchase and the prevailing market prices for the related products we sell. For the year ended December 31, 2004, we processed approximately 131.2 million pounds in our land-based processing segment.



Overview of Recent Financial Results for 2002 to 2004



Our seafood sales increased primarily due to the growth in our production
volumes as a result of increases in the total allowable catch attributed to the U.S. Bering Sea pollock fishery and the community development quota (CDQ) we purchase and our acquisition of Southern Pride in late 2002. Our gross margin declined
primarily due to our acquisition of the lower margin Southern Pride business, the purchase of additional CDQ, and the downward trend in pollock surimi prices that began in the second half of 2003 (although prices increased slightly in the second
half of 2004). Operating expenses increased primarily due to an increase in variable expense



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resulting from a growth in sales volume, the write-off of the Southern Pride goodwill in 2004, which was partially offset by a decrease in equity-based
compensation. Net other expenses increased primarily due to unrealized derivative losses caused by the continued weakness in the U.S. dollar as compared to the Japanese yen, the write-off of deferred transaction costs due to the withdrawal of
our public offering during 2004, and additional interest cost from notes issued in October 2004.



Corporate History



On
January 28, 2000, American Seafoods, L.P. (ASLP) purchased, through its subsidiaries, from Norway Seafoods six catcher-processors, one catcher-vessel, all of the outstanding stock of American Seafoods Company (now referred to as ASC,
Inc.) and certain assets of Frionor USA (now called American Seafoods International LLC). ASC, Inc. was the operator of the six acquired vessels and the owner-operator of one additional catcher-processor vessel. ASG was formed in
connection with the acquisition. The acquisition was accounted for as a purchase, and all of the debt, assets and goodwill and other intangible assets relating to the acquisition have been pushed down to the balance sheet of ASG. The
purchase accounting resulted in all assets and liabilities being recorded at their estimated fair values on the date of acquisition. The aggregate purchase price for the acquisition was $477.9 million, including acquisition costs.



In August 2001, we, along with two other partners, formed Pacific Longline
Company (PLC) in order to acquire three freezer-longliner vessels. Our initial ownership through this transaction was 60% of PLC. Effective January 1, 2004 we purchased the third party minority interest in PLC and increased our ownership to 100%.
PLC harvests and processes primarily Pacific cod in the U.S. Bering Sea.



Effective December 16, 2002, we purchased substantially all of the assets of Southern Pride. Southern Pride is engaged in the business of catfish harvesting, processing and distribution. The acquired assets included,
among other things, certain real property, fixtures, equipment, accounts receivable, trade name, customer and other contracts, and cash on hand. The purchase price was approximately $41.8 million in cash. In addition, we assumed substantially all of
the liabilities of Southern Pride, other than certain specifically excluded liabilities, and paid bank debt of Southern Pride in the amount of approximately $2.4 million.



Revenues and Expenses



At-Sea Processing Segment



At-Sea Processing Revenues.    Revenues in our at-sea processing segment are primarily driven by the following factors:



| |  |  | the volume of pollock and other whitefish harvested annually by our catcher-processors and freezer-longliners;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | the quantity of finished product we are able to produce (determined by the flesh and roe recovery rates);
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | the prevailing market prices for the products we sell, such as roe, surimi (a fish protein paste used in products such as imitation lobster and crabmeat) and fillet block;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the timing of our sales of fish products; and
| | - |  | ---------------------------------------------



| |  |  | the Japanese yen to U.S. dollar exchange rate.
| | - |  | ----------------------------------------------



Harvest volumes.    In addition to the portion of the directed pollock catch allocated to us under the Pollock Conservation
Cooperative agreement, we historically have purchased additional pollock quota from other industry participants up to the 17.5% harvesting limit of the directed pollock catch. In addition, we supplemented our share of the directed pollock catch in
2002, 2003 and 2004 by purchasing 28.0%, 36.4% and 54.0%, respectively, of the total community development quota allocated to Alaska Community Development Groups, which does not count against the 17.5% harvesting limitation. The increase from 2003
to 2004 was due to the purchase of a portion of Bristol Bays community development quota for 2004. See Item 1BusinessIndustry and Regulatory OverviewGroundfishPollock Allocation.



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In October 2003, we entered into an agreement with Bristol Bay, one of the six Alaska Community
Development Groups that is allocated community development quota. Under this agreement, Bristol Bay has sold us the right to harvest all of the pollock resource allocated to it under the CDQ program for the 2004 and 2005 pollock seasons. This
agreement increased our total CDQ resources to 54.0% of the total available pollock CDQ for the U.S. Bering Sea fishery. We have similar agreements with Coastal Villages and the Central Bering Sea Fishermen Association (CBSFA). All quota agreements
expire at the end of 2005 pursuant to the State of Alaska Community Development Quota program guidelines. We have recently renewed our agreements with Bristol Bay and CBSFA for 2006-2008 and are currently negotiating a new agreement with Coastal
Villages. Coastal Villages is our largest supplier of quota and holds a significant investment in ASLP.



Recovery rates.    Increases in flesh and roe recovery rates, which represent the percentage of finished product produced from
a whole fish, result in higher finished product volumes. Flesh recovery rate means the weight of processed products, other than fishmeal and roe, relative to the weight of fish harvested, expressed as a percentage. Roe recovery rate means the weight
of processed roe, relative to the weight of fish harvested, expressed as a percentage.



Market prices.    Market prices for our at-sea processed products are primarily influenced by the aggregate supply of products produced in any given year, the anticipated inventory carry
over for that year and changes in demand.



During fiscal years
1999 to 2004, our average pollock surimi prices have typically fluctuated within a range of approximately 200 to 300 Japanese yen per kilogram. In the second half of 2003 and the first half of 2004, our average pollock surimi price was at the low
end of this range, though surimi prices began to rise during the second half of 2004. Pollock surimi prices are sensitive to grade mix composition, anticipated seasonal production, overall inventory levels and buyers speculation of anticipated
price levels.



Prices for roe products also fluctuate from year
to year. While overall average pollock roe prices have declined in recent years, on a grade-by-grade basis, roe prices have remained relatively stable.



Below is a chart illustrating our average prices achieved for the years 2000 through 2004 for pollock surimi, pollock roe, deepskin and pollock block pin
bone out products. The surimi and roe prices are noted in Japanese yen per kilogram, which is the unit price we receive from our Japanese customers. The pollock deepskin and block pin bone out are noted in U.S. dollars per pound, which is the unit
price we receive from our customers.



|                                |  |      |       |      |   |       |  |      |       |      |   |       |  |   |      
|------------------------------- |  | ---- | ----- | ---- | - | ----- |  | ---- | ----- | ---- | - | ----- |  | - | -----
|                                |  | 2000 |       | 2001 |   | 2002  |  | 2003 |       | 2004
|Pollock surimi ¥/kg             |  | ¥    | 218   |      | ¥ | 212   |  | ¥    | 278   |      | ¥ | 222   |  | ¥ | 197  
|Pollock roe ¥/kg(1)             |  | ¥    | 2,856 |      | ¥ | 2,247 |  | ¥    | 1,906 |      | ¥ | 1,778 |  | ¥ | 1,685
|Pollock deepskin $/lb           |  | $    | 1.32  |      | $ | 1.25  |  | $    | 1.24  |      | $ | 1.25  |  | $ | 1.24 
|Pollock block pin bone out $/lb |  | $    | 0.80  |      | $ | 0.88  |  | $    | 1.06  |      | $ | 1.04  |  | $ | 1.01 

---

|(1) | Average roe prices are for the A season only as this represents more than 95% of the total roe value for each year.
|--- | -------------------------------------------------------------------------------------------------------------------



Exchange rate effects.    Because we sell large
quantities of roe and surimi to Japanese customers, a significant portion of our revenue is denominated in Japanese yen. Consequently, we could be at risk that any increase or decrease in the value of the Japanese yen relative to the dollar would
increase or decrease the amount of dollar revenues we record on the sales of our products in Japan. To mitigate the potentially adverse effect of fluctuations in the Japanese yen to U.S. dollar spot exchange rate, we enter into forward currency
contracts. It is our risk management policy to hedge at least 80% of our forecasted Japanese yen sales over the next 12 months, 65% over months 13 to 24, 50% over months 25 to 36, and 35% over months 37 to 48.



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At-Sea Processing Expenses.    The operating cost structure of the at-sea
processing operations include four main cost categories:



| |  |  | variable costs driven by revenue or product volume, such as crew compensation, product freight and storage, packaging and additives;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | vessel-related depreciation and amortization of cooperative and fishing rights;
| | - |  | -------------------------------------------------------------------------------



| |  |  | fixed costs that are incurred whether or not the vessel is deployed, such as quota purchases, insurance, repair and maintenance, moorage and general supplies; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | operating costs driven by vessel operations, such as fuel, nets and gear supplies, galley supplies, equipment rental, crew travel, observers and technicians.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



Land-Based Processing Segment



Land-Based Processing
Revenues.    Revenues from our land-based processing segment are primarily a function of our throughput volume of pollock, cod, catfish and scallops that we process and the prevailing market prices for those products.



Land-Based Processing
Expenses.    Operating costs related to our land-based processing operations are principally comprised of the cost of raw material purchases, labor and operating costs. Operating costs include depreciation expense related to
equipment and facilities used for processing and transportation.



Overall Expense Summary



Costs of sales
include operating costs such as crew and factory personnel compensation, quota purchase costs, seafood purchases, vessel fuel, packaging, insurance, product freight, other operating related expenses, amortization of cooperative and fishing rights
and depreciation applicable to property, vessels and equipment used in production. Selling, general and administrative expenses include employee compensation and benefits, rent expense, professional fees, promotional costs and other expenses, such
as office equipment and supplies.



After depreciation expense,
crew compensation represents the largest operating cost for the vessel operations and is primarily a variable cost, structured to reward each crew member based upon an estimated value of the product. Quota purchase costs are calculated as an amount
per ton harvested and are incurred when we purchase quota amounts from our Alaska Community Development Group partners, catcher vessel owners and other third party fishery participants. Product freight is incurred when we transport the product to
either our customer or a cold storage facility. Storage costs are incurred for product entering a cold storage facility.



Results of Operations



Year Ended December 31, 2004 Compared to the Year Ended December 31, 2003.



Revenues.    Revenues for 2004 increased $50.3 million, or 12.2%, to $461.7 million from
$411.4 million for 2003. At-sea processing sales for the year increased to $265.5 million from $229.8 million for the prior year, an increase of $35.7 million or 15.5%. This increase was a result of the sale of carryover
flesh-based pollock inventory from the 2003 B season and a higher volume of roe sales from A season production in 2004, partially offset by lower sales prices during 2004. Land-based processing sales for the year increased $14.6 million, or
8.0%, to $196.1 million from $181.5 million for the prior year. The increase in land-based processing sales was primarily due to increased catfish sales prices and higher scallop sales volumes during the 2004 period.



Cost of Sales.    Cost of sales for 2004
increased $63.6 million, or 20.6%, to $372.8 million from $309.2 million for 2003. At-sea processing cost of sales for 2004 increased $39.3 million, or 26.1%, to $190.1 million from $150.8 million for the prior year,
primarily due to the increase in variable costs such as crew compensation and product freight, driven by higher sales volumes, and the purchase of additional CDQ. Land-based processing cost of sales for 2004 increased $24.3 million, or 15.3%,
to $182.7 million from $158.4 million



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for the prior year, primarily as a result of higher catfish production costs per pound due to increased farm prices, higher labor and lower yields. The lower
yields were largely due to processing smaller, less meaty fish, which resulted from less frequent feeding patterns by catfish farmers.



Gross Profit.    Gross profit for 2004 decreased $13.2 million, or 12.9%, to $88.9 million from $102.1 million
for 2003, and gross margin decreased to 19.3% from 24.8% in the prior year. At-sea processing gross profit decreased to $75.4 million in 2004 from $79.0 million during the prior year and gross margin decreased for 2004 to 28.4% from 34.4%
in the prior year. The decline in gross margin resulted from the sale of the lower grade carryover 2003 B season pollock surimi inventory that we sold at a lower margin and additional purchase of CDQ. Land-based processing gross profit for 2004
decreased to $13.5 million as compared to $23.1 million in the prior year and land-based processing gross margin for 2004 declined to 6.9% as compared to 12.7% in 2003 due primarily to the increased catfish costs per pound sold and lower
yields.



Selling, General and Administrative
Expenses.    For 2004, selling, general and administrative expenses, including equity-based compensation, decreased $3.7 million, or 9.3%, to $36.2 million from $39.9 million for 2003. This decrease was
primarily due to a decrease in equity-based compensation charges of $1.8 million.



Amortization and Depreciation.    Amortization and depreciation of other assets for 2004 was $3.1 million, remaining consistent with the amount recorded in the prior year of
$3.2 million.



Goodwill
Impairment.    During 2004 we incurred a write-off of $7.2 million of goodwill related to our investment in our catfish operations. We did not incur any goodwill impairment in 2003.



Interest Expense, Net (including related party
interest).    Interest expense, net, for 2004, decreased $1.2 million, or 3.0%, to $39.0 million from $40.2 million for 2003. This decrease was due primarily to the decrease in our revolving credit facility during
2004.



Write off of recapitalization transaction
costs.    We incurred a write off of recapitalization transactions cost during 2004 of $19.3 million related to the cancelled income deposit securities (IDS) offering and senior subordinated notes. We did not incur such a
write off in 2003.



Foreign Exchange Losses and Other
Derivative Losses, Net.    Foreign exchange losses and other derivative losses, net, for 2004, were $12.9 million compared to $4.0 million in 2003. This $8.9 million increase was primarily attributable to unrealized losses on
foreign exchange contracts, partially offset by unrealized gains recognized during the period related to the time value portion of our financial derivatives designated as hedges. The net realized losses were primarily the result of the continued
weakness of the U.S. dollar versus the Japanese yen. The unrealized gains were related to the time value portion of the foreign exchange contracts that result from the interest rate differential between the U.S. and Japan.



Year Ended December 31, 2003 Compared to Year Ended December 31, 2002.



Revenues.     Revenues for
2003 increased $78.5 million, or 23.6%, to $411.4 million from $332.9 million for 2002. This increase was almost entirely due to the inclusion of catfish sales for the entire year in 2003. At-sea processing revenues for 2003 decreased
$23.1 million to $229.8 million from $252.9 million for the prior year primarily due to lower surimi prices and sales volume. Land-based processing revenues for 2003 increased $101.5 million to $181.5 million from
$80.0 million for 2002, almost entirely due to the inclusion of catfish sales for 2003 as a result of the December 2002 acquisition of Southern Pride.



Cost of Sales.    Cost of sales for 2003 increased $74.3 million, or 31.6%, to $309.2 million from
$234.9 million in 2002. At-sea processing cost of sales for 2003 decreased $12.2 million to $150.8 million from $163.0 million for the prior year, primarily due to the lower sales volumes of pollock surimi in 2003. Land-based
processing cost of sales for 2003 increased $86.5 million to $158.4 million from $71.9 million for the prior year, almost entirely due to the inclusion of catfish operations in 2003.



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Gross Profit.    Gross profit for 2003 increased $4.1 million, or 4.2%,
to $102.1 million from $98.0 million for 2002, and gross margin over the same period decreased to 24.8% from 29.4%, primarily due to a higher proportion of lower margin land-based processing sales in 2003 as compared to 2002. At-sea
processing gross margin decreased in 2003 to 34.4% from 35.5% in 2002 primarily due to lower margins on surimi sales. Land-based processing gross margin for 2003 increased in 2003 to 12.7% from to 10.1% for 2002 primarily due to the inclusion of
Southern Pride Catfish.



Selling, General and Administrative
Expenses.    For 2003, selling, general and administrative expenses including equity-based compensation decreased $12.0 million, or 23.1%, to $39.9 million from $51.9 million for 2002. This decrease was
primarily due to a decrease in equity-based compensation charges of $16.2 million, partially offset by additional expenses incurred as a result of the acquisition of Southern Pride, and the absence of management bonuses in 2003, as compared to $2.3
million of management bonuses in 2002. Equity-based compensation charges were higher in 2002 primarily as the result of the vesting of certain options related to the April 2002 recapitalization and the partial sale of units held by one of our
partners.



Amortization and
Depreciation.    Amortization and depreciation, excluding amounts classified as cost of sales for 2003 increased $0.9 million, or 39.1%, to $3.2 million from $2.3 million for 2002. This increase was primarily
due to the amortization of other intangibles, which were purchased in connection with the acquisition of Southern Pride in December 2002.



Interest Expense, Net (including related party interest).    Interest expense, net, for 2003, increased $1.4 million to
$40.2 million from $38.8 million for 2002. The increase in interest expense, net, was mainly attributable to an increase in amounts borrowed under our credit facility in connection with the acquisition of Southern Pride, partially offset by a
decline in interest rates.



Foreign Exchange Losses (Gains)
and Other Derivative Losses (Gains), Net.    Foreign exchange losses and other derivative losses, net, for 2003, were $4.0 million compared to $19.0 million in foreign exchange gains and other derivative gains, net
for the comparable period in 2002. This decrease of $23.0 million was primarily attributable to net unrealized losses, recognized during the period related to the ineffective portion of our financial derivatives designated as hedges. The
unrealized losses were primarily the result of a decrease in the U.S. dollar versus the Japanese yen and a decrease in the forward points that result from the interest rate differential.



Seasonality



The U.S. Bering Sea pollock fishery is split into two distinct fishing seasons, known as the A and B
seasons. The A season opens in January and typically ends in April. During the A season pollock are spawning and therefore typically carry more high-value roe, making this season the more profitable one. During the A season, we also produce other
products such as surimi and fillet blocks, although yields on these products are slightly lower in A season compared to B season due to the prioritization of roe production in the A season. Although the A season typically accounts for approximately
40% of our years total pollock harvest measured by weight, it represents a majority of our revenues for the year due to the higher value of roe that is recovered during the A season.



The pollock B season occurs in the latter half of the year, typically
beginning in July and extending through the end of October. The primary products produced in the B season are surimi and fillet blocks. The B season typically accounts for approximately 60% of our years total pollock harvest.



The freezer-longliner Pacific cod fishery is divided into two seasons. Of the
annual quota, approximately 60% is allocated to the A season and the remaining 40% is allocated to the B season. The A season begins January 1st and runs until the season quota is caught, and the B season begins in mid-August and runs until the
season quota is caught.



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To illustrate the seasonal impact of our distinct fishing seasons for all of our operations, the table
below shows our quarterly dispersion of our revenues and gross profit, expressed in terms of percentage, for the years ended December 31, 2002, 2003, and 2004:



|              |  |          |   |  |          |   |  |    |   |  |    |  
|------------- |  | -------- | - |  | -------- | - |  | -- | - |  | -- | -
|              |  | A Season |   |  | B Season |  
|              |  | Q1       |   |  | Q2       |   |  | Q3 |   |  | Q4 |  
|Revenues:     |  |          |   |  |          |   |  |    |   |  |    |  
|2002          |  | 25       | % |  | 30       | % |  | 22 | % |  | 23 | %
|2003          |  | 27       |   |  | 30       |   |  | 20 |   |  | 23 |  
|2004          |  | 29       |   |  | 28       |   |  | 20 |   |  | 23 |  
|Gross profit: |  |          |   |  |          |   |  |    |   |  |    |  
|2002          |  | 36       | % |  | 30       | % |  | 23 | % |  | 11 | %
|2003          |  | 40       |   |  | 32       |   |  | 18 |   |  | 10 |  
|2004          |  | 47       |   |  | 28       |   |  | 21 |   |  | 4  |  



Our fishing seasons,
including the important January-to-April pollock season, straddle more than one quarter. Additionally, the timing of our sales fluctuates from quarter to quarter. As a result, the timing of the recognition of significant amounts of revenues can vary
from one quarter to another.



Historically the gross profit
generated as a percentage of revenues in the fourth quarter has been less than the prior three quarters of each year. This is due primarily to less high-margin roe sales and the timing of the sales of B season production in our at-sea processing
segment. Additionally, in the fourth quarter of 2004 gross profits declined below historical levels primarily as a result of higher catfish farm prices and lower catfish processing yields in our land-based processing segment.



Financing Activities



Senior Discount Notes



On October 19, 2004, ASG Consolidated LLC, our direct parent (ASG Consolidated), completed an offering of 111/2% Senior Discount Notes in the aggregate principal amount of $196.0 million at maturity in November 2011. The Senior Discount Notes were issued at a
substantial discount from their aggregate principal amount at maturity to generate gross proceeds of $124.9 million. As of December 31, 2004, the carrying amount of this debt was approximately $127.7 million, which is not recorded on our
consolidated balance sheet. The accreted value of each note increases from the date of issuance until November 1, 2008 such that the accreted value at that date will equal the principal amount at maturity. The carrying balance on the notes will
accrete using the effective interest method from origination through the period ending November 1, 2008. No interest will be paid during this period. Thereafter, interest will accrue and be payable semi-annually on May 1 and November 1 of each year
at a fixed annual rate of 111/2%. The first interest-only payment is due on May 1, 2009.



The proceeds of the Senior Discount Notes were
distributed, directly or indirectly, to American Seafoods Consolidated LLC (American Seafoods Consolidated). American Seafoods Consolidated distributed such amount to its parent, American Seafoods Holdings LLC (Holdings), which used approximately
$32.7 million to repurchase its outstanding redeemable preferred equity units and approximately $5.5 million to repay its indebtedness. ASG Consolidated also incurred related fees and expenses totaling $4.3 million. The balance of approximately
$81.9 million was distributed to ASLP, which in turn distributed the funds to its partners.



ASG Consolidated is wholly dependent on distributions from us to meet its debt service obligations. Our ability to make distributions to ASG Consolidated will depend upon our operating results. We are subject to
restrictions under our Credit Agreement and the indenture governing our Senior Subordinated Notes. We and our subsidiaries have not guaranteed the repayment of the Senior Discount Notes.



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Non-Cash Capital Contribution



During the fourth quarter of 2004, ASLP made a non-cash capital contribution to ASG of a $20.0 million receivable from ASG
related to equity-based compensation.



Tax Distributions



We make distributions to our ultimate equity holders for
the tax liabilities they incur on their allocated portion of our taxable income. More specifically, we will make distributions to these holders in amounts equal to the theoretical tax on our taxable income (determined without regard to deductions
for interest on the notes or other deductions incurred by entities above us), which we will in turn distribute to our owners (whether or not such amounts are required by such owners actually to pay taxes on the income that we allocate to them).
These payments are recorded as distributions to members on the statements of members equity (deficit).



During 2004, ASC, Inc. received a tax refund in the amount of $2.2 million of prior years taxes. ASC, Inc. remitted the amount of its tax refund to
us, which was recorded as a tax refund contribution on the statement of members equity (deficit) in 2004.



April 2002 ASG Recapitalization



Senior Subordinated Notes.    On April 18, 2002, we issued and sold $175.0 million principal amount of 101/8% senior subordinated notes (Senior Subordinated Notes) due 2010 as part of a recapitalization. Concurrently with
the offering of these notes, we entered into our credit facility. As part of the April 2002 recapitalization, we used the proceeds of the notes offering, together with borrowings of $325.9 million under the credit facility, to:



| |  |  | repay all outstanding debt under our old credit facilities;
| | - |  | -----------------------------------------------------------



| |  |  | repay all amounts outstanding (including accrued interest), under two senior subordinated promissory notes issued by our affiliates, ASC, Inc. and Holdings, to Norway Seafoods, the
former owner of our business;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | pay related fees and expenses; and
| | - |  | ----------------------------------



| |  |  | distribute the remainder of the borrowed amounts to our members.
| | - |  | ----------------------------------------------------------------



In addition, we distributed to our then members cash on hand as of April 18, 2002. As a result, the aggregate amount of cash distributed to the ASLP
partners was approximately $203.8 million, including $5.7 million of fees paid out of the distribution.



Credit Agreement.    In connection with our April 2002 recapitalization, we entered into a senior credit agreement (Credit
Agreement) with a syndicate of banks, the administrative agent of which is Bank of America, N.A. Our Credit Agreement consists of a $75.0 million revolving credit facility and $370.0 million in term loans ($90.0 million Term A and $280.0 million
Term B). Our obligations under the credit facility are secured by substantially all our assets. The agreement subjects us to various restrictive covenants, including limitations on our ability to prepay indebtedness (including our Senior
Subordinated Notes), incur additional indebtedness, and requirements that we maintain specified financial ratios, such as maximum total leverage, minimum interest coverage and minimum fixed charge coverage.



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In December 2002, we entered into an amendment to the Credit Agreement that provided, among other things,
for an increase in the principal amount of the Term B loans by $50 million and consent to the acquisition of Southern Pride. We used the additional borrowing capacity to fund our acquisition of Southern Pride, to make certain payments related to the
acquisition, pay related fees and expenses and for general corporate purposes. The assets we acquired are included in the security for the credit facility.



During January 2004, we obtained an amendment to our debt covenants at a cost of $0.4 million, which, among other things, adjusted the required leverage
ratios as of December 31, 2003 and March 31, 2004 primarily due to adverse surimi prices. During the third quarter of 2003, an adjustment was made to reverse the management bonus accrued through June 30, 2003 of approximately $1.2 million in
accordance with certain employment agreements and our general bonus policy, which require that performance bonuses are not payable for any year in which there is or would be a covenant violation. This amendment and the reversal of the bonuses
allowed us to maintain compliance with the leverage ratio covenant under the credit agreement.



In October 2004, we entered into another amendment to our Credit Agreement that, among other things: (1) permitted the offering of the Senior Discount Notes by our direct parent, ASG Consolidated; (2) provided for
guarantees by ASG Consolidated and its wholly-owned subsidiary, ASG Finance, Inc., of our obligations under the credit facility and a pledge of ASG Consolidated ownership interests in us to secure the guarantee; (3) permitted the sale of certain
distribution related assets of Southern Pride Catfish Trucking, Inc. up to an aggregate fair market value of $7.5 million; (4) amended the required leverage ratio beginning September 30, 2004 and made other covenant modifications to provide
necessary covenant relief to us primarily due to recent adverse surimi prices and a decline in the performance of our catfish operations; and (5) excluded certain expenses we incurred from the definition of EBITDA (earnings before interest, tax,
depreciation and amortization) for our covenant calculations, including the write-off of offering costs of up to $19.0 million related to our cancelled public IDS offering. As of December 31, 2004, there was $306.1 million of outstanding
indebtedness under the credit facility, $27.5 million of an open letter of credit and approximately $31.0 million of unused borrowing capacity under the revolving credit facility.



Officer Loan



On July 2, 2002, we loaned $6.0 million to Bernt O. Bodal, our Chairman and Chief Executive Officer, to finance his purchase of equity interests in ASLP.
The interest rate on this loan reset each January 1, April 1, July 1 and October 1 to the prime rate plus 1/2 percent. In October 2004, Mr. Bodal repaid the loan in full in the amount of approximately $6.3 million comprised of principal and
interest.



Liquidity and Capital Resources



Overview



Our short-term and long-term liquidity needs arise primarily from: interest
payments due on debt which are expected, based on our current capital structure, to be between $36.0 million and $39.0 million for 2005; scheduled principal repayments on debt of approximately $26.5 million in 2005, $19.5 million in 2006, $34.1
million in 2007, $30.3 million in 2008, $195.7 million in 2009 and $175.0 million thereafter; potential acquisitions; and working capital requirements arising as a result of the seasonality of our business and as may be needed to support business
growth. We expect to fund our liquidity needs primarily with cash generated from operations and, to the extent necessary, through additional borrowings under our revolving line of credit, which matures in 2007.



We conduct all of our operations through our subsidiaries. As a result, we
are wholly dependent on distributions from our subsidiaries to meet our debt service obligations. Therefore, our ability to make distributions to our equity holders will depend upon the operating results of our subsidiaries, and is subject to
restrictions under the Credit Agreement and the indenture governing our Senior Subordinated Notes, as well as any future indebtedness incurred by our subsidiaries.



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The Credit Agreement does not permit us to pay principal amounts on our Senior Subordinated Notes. Our
Senior Subordinated Notes mature and are payable in full on April 15, 2010. Accordingly, we will need to refinance our credit facility at or prior to its maturity on terms that permit payments sufficient to pay principal on the Senior
Subordinated Notes at maturity, or else we will have to refinance the Senior Subordinated Notes. We might not be able to refinance the credit facility at such time on such terms, and our ability to do so will depend both on our own operating
performance and on the state of credit markets at the time. Our Credit Agreement also requires us to make excess cash flow payments, as defined in the agreement, which reduce the principal balance on the bank term loans and future quarterly
principal payments. In the years ended December 31, 2003 and 2004, we made such additional principal payments of $33.4 million and $8.3 million, respectively. In 2002, we did not make any additional principal payments.



Historical Cash Flow



Cash flow from operating activities was $68.4 million, $46.5 million, and
$94.1 million for 2004, 2003 and 2002, respectively. The increase in 2004 over 2003 was primarily the result of a reduction in non-cash working capital during 2004 primarily due to an increase in collection of accounts receivable as compared to the
prior year period, and the sale of larger volumes of inventory held over from the prior year B season as compared to 2003. The decrease in cash flow from operating activities from 2002 to 2003 was due to a net increase in non-cash working capital,
excluding the current portion of long-term debt, primarily related to accounts receivable and carry-over at-sea processing inventories.



Cash flow used in investing activities was $10.8 million, $13.6 million and $58.8 million for 2004, 2003 and 2002, respectively. The decrease in 2004
from 2003 was primarily due to the collection of a $6.0 million related party loan from our chief executive officer. This amount was partially offset by our January 2004 purchase of the remaining minority ownership interest in PLC for $1.8
million, a $0.6 million increase in property, vessels and equipment purchases in 2004, and a $1.4 million increase in capital projects in progress. The decrease in cash used by investing activities from 2002 to 2003 was related principally to
the acquisition of Southern Pride during 2002.



Cash used in
financing activities was $62.1 million, $32.8 million and $32.4 million for 2004, 2003, and 2002, respectively. The increase in cash used in financing activities in 2004 over 2003 primarily reflects the cash used to make principal payments on the
long-term debt, including the revolving credit facility, and incurring the costs related to the recapitalization transaction. During 2002, our cash flows from financing activities were primarily comprised of net borrowings and net payments of
long-term debt, including the revolving credit facility. On April 18, 2002, we repaid all of our existing senior debt and seller notes in the amount of $305.6 million in connection with the our April 2002 recapitalization. Concurrently, we entered
into the credit facility in the amount of $445.0 million, which includes two term loans for $370.0 million and a revolving credit line of $75.0 million, and subordinated notes of $175.0 million. The total amount borrowed on the term loans and Senior
Subordinated Notes was $545.0 million, of which $9.5 million had been paid down at December 31, 2002. As a policy, we repay our debt as required by our loan agreements and we pay down our revolving debt to reduce our interest cost and improve our
leverage ratio as cash is available from our operating activities.



At December 31, 2004, we had $0.7 million of cash and cash equivalents and $31.0 million available under our revolving credit facility. We believe that the cash we expect to generate from operations and borrowing capabilities under our
revolving credit facility will be sufficient to meet our liquidity requirements in the foreseeable future.



Other Factors Impacting Liquidity



Credit Facilities.    A significant portion of our credit facilities will mature during the years 2009 to 2010. We may be
unable to renew or refinance the credit facilities at that time, or may complete such renewal or



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refinancing at less favorable terms. If we were unable to renew or refinance our credit facilities, our failure to repay all amounts due on the maturity date
would cause a default.



Foreign Exchange and Other
Derivatives Contracts.    Our liquidity is impacted by unrealized losses sustained by our portfolio of foreign exchange and other derivatives contracts. A majority of these contracts have been entered into with a financial
institution that requires collateralization of unrealized losses sustained by the portfolio of contracts with this financial institution above $17.5 million. At December 31, 2004, collateral against the unrealized losses on contracts in excess of
the $17.5 million threshold was $21.4 million, which was satisfied by a standby letter of credit in the amount of $27.5 million.



To mitigate our short-term liquidity risks with respect to these collateralization requirements, from time to time we placed standing orders to forward
purchase Japanese yen should the yen strengthen to certain spot rates. During the first six months of 2004, we had three of these standing orders, each with notional amounts of $125 million and maturity dates of July 30, 2004. All of these
aforementioned contracts were settled on July 30, 2004 for a net loss of approximately ($1.9) million. During 2004, we entered into a number of foreign exchange contracts to purchase Japanese yen for U.S. dollars with an aggregate notional amount of
$512.5 million, exchange rates ranging from 108.75 Japanese yen per U.S. dollar to 104.80 Japanese yen per U.S. dollar and maturity dates between July 30, 2004 and March 30, 2006. These foreign exchange instruments were not designated as hedges so
all realized and unrealized gains and losses were recognized in earnings. We sold all of our positions on these contracts or the contracts matured during the year at a net realized gain of $0.1 million.



Cross Currency Interest Rate Swaps.    In August
2004, primarily in order to mitigate liquidity risk related to the impact of strengthening Japanese yen on our foreign exchange portfolio and related collateral agreement, we entered into variable to fixed-rate cross currency interest swap contracts
with an aggregate notional amount of $75.0 million in anticipation of the completion of the IDS offering and subordinated notes. Under the terms of these contracts, we pay a fixed rate of interest in Japanese yen and receive payments on a variable
rate of interest in U.S. dollars based on the three-month LIBOR rate. The objective of these instruments was to reduce our exposure to interest rate risk related to our new credit facility that was to have been in place upon consummation of the IDS
offering and subordinated notes, and to provide additional risk management against Japanese currency fluctuations related to our sales to Japan. As these instruments have not been designated as hedges, any unrealized gains and losses resulting from
the change in fair value are recognized in our earnings as a component of gain or loss on other derivatives. On September 27, 2004, we terminated one of the cross currency swaps with a notional amount of $15.0 million for a nominal fee. As of
December 31, 2004, we were party to cross currency interest swap contracts with an aggregate notional amount of $60 million outstanding. The fair value of these outstanding contracts at December 31, 2004 was an unrealized loss of approximately
$6.3 million.



Tax
Matters.    We and our significant subsidiaries are flow-through entities for income tax purposes. We have been and will continue to be obligated, therefore, to make distributions to our members for the tax liabilities they
incur on their allocated portion of our taxable income. More specifically, we will make distributions to ASG Consolidated in amounts equal to the theoretical tax on ASGs taxable income (determined without regard to deductions for interest on
the notes or other deductions incurred by entities above us), which ASG Consolidated will in turn distribute to our owners (whether or not such amounts are required by such owners actually to pay taxes on the income that we allocate to them).



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Capital Expenditures.    Capital expenditures reflected below are additions to
property, vessels and equipment that have been placed in service. Capital projects in process will be classified as property, vessels and equipment when completed and placed in service. Such expenditures were funded from cash flows from operations
and borrowings under our senior credit facility.



|                                                           |  |                       |     |      |   |      |  |   |     
|---------------------------------------------------------- |  | --------------------- | --- | ---- | - | ---- |  | - | ----
|                                                           |  | 2002                  |     | 2003 |   | 2004
|                                                           |  | (dollars in millions)
|Fishing gear                                               |  | $                     | 0.8 |      | $ | 1.1  |  | $ | 2.6 
|Machinery and equipment                                    |  |                       | 5.2 |      |   | 9.3  |  |   | 7.1 
|Major scheduled vessel maintenance                         |  |                       | 2.7 |      |   | 0.3  |  |   | 1.6 
|Other                                                      |  |                       | 0.7 |      |   | 1.6  |  |   | 1.6 
|                                                           |  |                       |     |      |   |      |  |   |     
|Total capital expenditures                                 |  |                       | 9.4 |      |   | 12.3 |  |   | 12.9
|Capital projects in process                                |  |                       |    |      |   | 0.4  |  |   | 1.8 
|                                                           |  |                       |     |      |   |      |  |   |     
|Total capital expenditures and capital projects in process |  | $                     | 9.4 |      | $ | 12.7 |  | $ | 14.7
|                                                           |  |                       |     |      |   |      |  |   |     



The $0.6 million
increase in capital expenditures from 2003 to 2004 was primarily attributable to the timing of major scheduled shipyard maintenance and the purchase of fishing gear. The $1.4 million increase in capital projects in process from 2003 to 2004 was due
to the timing of the completion of projects related to our fishing vessels. In addition to capital expenditures, we spent $8.2 million, $8.4 million and $8.0 million on vessel maintenance, which was expensed during the years ended December 31, 2002,
2003 and 2004, respectively.



In 2005 and 2006, we estimate
that annual capital expenditures will be $12.0 million to $15.0 million.



Debt Covenants



The Credit Agreement requires
us to meet certain financial tests, including a maximum leverage ratio, a minimum interest coverage ratio and a minimum fixed charge coverage ratio. In addition, the Credit Agreement contains certain covenants which, among other things, limit the
incurrence of additional indebtedness, liens and encumbrances, changes in the nature of our business, investments, dividends and other restricted payments, prepayments of certain indebtedness, certain transactions with affiliates, asset sales,
acquisitions, capital expenditures, mergers and consolidations, sales of receivables and other matters customarily restricted in such agreements. Such restrictions could limit our ability to respond to certain market conditions, meet our capital
spending program, provide for unanticipated capital investments or take advantage of business opportunities. The indentures governing our Senior Subordinated Notes and ASG Consolidateds Senior Discount Notes impose similar restrictions on the
operation of our business. But for us entering into an amendment to our Credit Agreement in October 2004, our leverage ratio as of December 31, 2004 would have exceeded the level required to remain in compliance with the leverage ratio covenant
under the Credit Agreement. The leverage ratio is calculated for purposes of the Credit Agreement based on the ratio of Adjusted EBITDA to outstanding debt (both as defined in the Credit Agreement). See Financing Activities.



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Contractual Obligations and Commercial Commitments



The following table provides aggregated information about our contractual obligations as of December 31, 2004 (in
thousands):



|                                                             |  |                                       |         |                  |   |          |  |          |        |              |   |         |  |   |        
|------------------------------------------------------------ |  | ------------------------------------- | ------- | ---------------- | - | -------- |  | -------- | ------ | ------------ | - | ------- |  | - | -------
|                                                             |  | Payments Due by Period (in thousands)
|Contractual Obligations                                      |  | Total                                 |         | Less than 1 year |   | 1-3years |  | 3-5years |        | After 5years
|Long-term debt, principal payments only                      |  | $                                     | 481,122 |                  | $ | 26,547   |  | $        | 53,623 |              | $ | 225,952 |  | $ | 175,000
|Operating leases (1)                                         |  |                                       | 15,063  |                  |   | 3,764    |  |          | 7,302  |              |   | 3,997   |  |   |       
|Unconditional purchase obligations:                          |  |                                       |         |                  |   |          |  |          |        |              |   |         |  |   |        
|Community development quota and catcher boat commitments (2) |  |                                       | 30,330  |                  |   | 30,330   |  |          |       |              |   |        |  |   |       
|Catfish purchases (3)                                        |  |                                       | 24,000  |                  |   | 3,000    |  |          | 6,000  |              |   | 6,000   |  |   | 9,000  
|Letters of credit (4)                                        |  |                                       | 21,387  |                  |   | 2,850    |  |          | 18,537 |              |   |        |  |   |       
|Purchase orders                                              |  |                                       | 6,752   |                  |   | 6,752    |  |          |       |              |   |        |  |   |       
|Employment and consulting contracts                          |  |                                       | 2,341   |                  |   | 1,566    |  |          | 775    |              |   |        |  |   |       
|                                                             |  |                                       |         |                  |   |          |  |          |        |              |   |         |  |   |        
|Total contractual cash obligations                           |  | $                                     | 580,995 |                  | $ | 74,809   |  | $        | 86,237 |              | $ | 235,949 |  | $ | 184,000
|                                                             |  |                                       |         |                  |   |          |  |          |        |              |   |         |  |   |        

---

|(1) |  | Includes payments to ASLP for aircraft leases.
|--- |  | ----------------------------------------------

|(2) |  | An estimated amount based on 2005 the total allowable catch and allocated quotas.
|--- |  | ---------------------------------------------------------------------------------

|(3) |  | Consists of catfish purchases of 5.0 million pounds per year under an agreement with the prior owner of Southern Pride based on a market indexed rate, which was approximately $0.67
per pound at December 31, 2004.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Letters of credit associated with derivative instruments are allocated between years based on the term of the underlying contract. At December 31, 2004, collateral against
unrealized losses on contracts in excess of the $17.5 million threshold was $21.4 million, which was satisfied by a standby letter of credit in the amount of $27.5 million.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The table above excludes derivative contracts under which we are obligated to net settle the contracts as described in
Note 5Derivative Financial Instruments in our consolidated financial statements included elsewhere in this annual report, because the settlements under these contracts are variable based on the notional amounts and changes in the
underlying indices.



Critical Accounting Policies and Estimates



Managements discussion and analysis of our
financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements
requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our critical accounting
policies and estimates and base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.



We believe the following critical accounting policies reflect the most significant judgments and estimates used in the
preparation of our consolidated financial statements:



Foreign exchange contracts.    We record gains and losses on foreign currency transactions following SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. Foreign exchange contracts
are used to hedge the variability of future cash flows associated with Japanese yen-denominated sales due to changes in foreign currency exchange rates. The effectiveness of the hedged transactions is measured by changes in spot



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rates and the gain or loss resulting from the change in time value is recognized currently in earnings. The unrealized gains and losses resulting from the
change in spot rates, or the effective portion, are recorded in other comprehensive income. These gains and losses are recognized in revenues when the forecasted sales occur. Gains and losses resulting from all derivative instruments not designated
or documented as hedges, and the ineffective portion of hedges, representing the time value component of the contract, are recognized currently in earnings. See Item 1BusinessRisk FactorsOur business is subject to Japanese
currency fluctuations that could materially adversely affect our financial condition and liquidity.



Our profitability depends in part on revenues received in Japanese yen as a result of sales in Japan. Japanese sales represented 39.6%, 24.9% and 27.0% of
our total revenues in 2002, 2003 and 2004, respectively. A decline in the value of Japanese yen against the U.S. dollar would adversely affect our earnings from sales in Japan. Fluctuations in currency are beyond our control and are
unpredictable.From January 1 through December 31, 2002, the value of the dollar decreased by 9.6% against the Japanese yen, from 131.3 Japanese yen per U.S. dollar to 118.6 Japanese yen per U.S. dollar, respectively. In 2003, the
value of the dollar decreased by 9.9% against the Japanese yen, from 118.6 Japanese yen per U.S. dollar to 106.9 Japanese yen per U.S. dollar. During 2004, the value of the dollar decreased by 3.9% against the Japanese yen, from 106.9 Japanese yen
per U.S. dollar to 102.7 Japanese yen per U.S. dollar. While we conduct hedging activities to mitigate the risk of currency fluctuations, these hedging activities may not be sufficient to provide complete protection against loss and accordingly, any
such fluctuations could adversely affect our revenues.



Long-Lived Assets.    Long-lived assets and amortizable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. We have no indefinite life intangible assets. Asset groups to be held and used are evaluated for impairment by comparing the carrying amount to the future net cash flows expected to be generated by the asset group. If the carrying
amount of the assets exceeds the expected future net cash flows, undiscounted and without interest, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the asset groups.
Asset groups to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.



Goodwill.    We assess goodwill for impairment by applying a fair value based test at least annually or on an interim basis if
circumstances change or events occur that indicate that goodwill may be impaired. We have no other intangibles with an indefinite life. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, goodwill is evaluated for
impairment by using a two-step process. Step 1 involves determining the fair value of the reporting unit, which is compared to the carrying amount of the reporting unit, including goodwill. If the carrying amount exceeds the fair value, then the
goodwill may be impaired and Step 2 is then required. In Step 2, the implied value of the goodwill is determined as the difference between the fair value of the reporting unit and the fair value of its net assets. If the carrying amount of
the goodwill exceeds the implied value, an impairment loss is recognized to the extent of the difference. In accordance with SFAS No. 142, we assign goodwill to the reporting units that we expect to benefit from the expected synergies of the
business combinations that we have entered into.



Vessel
maintenance.    A significant portion of our operations take place on our vessels. On January 28, 2000, the purchase of our vessels was part of the total acquisition of our core business. Our vessels were recorded at their
estimated fair market values, with approximately 60% categorized as vessel equipment and machinery with an estimated useful life of seven years and approximately 40% as vessel hull with an estimated useful life of twenty-five years. We depreciate
these assets on a straight-line basis over their estimated useful lives.



We incur expenses to repair and maintain our vessels. Repairs and ordinary maintenance are expensed as incurred while significant additions and improvements are capitalized. To maintain our Det Norske Veritas class
certification, the highest vessel certification in the industry, our vessels must undergo scheduled major shipyard maintenance every three to five years. As a part of this scheduled maintenance, we may also have major vessel components overhauled.
The costs for this major shipyard maintenance are capitalized and charged to operations on a pro-rata basis during the period through the next scheduled major shipyard maintenance.



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Valuation Accounts.    We have three valuation accounts recorded on our
balance sheet. The allowance for trade accounts receivable reflects managements estimate of potential losses inherent in the accounts receivable balance. Management determines the allowance based on known troubled accounts, historical
experience, and other currently available evidence. It is our policy to write off accounts as collectibility becomes remote. The allowance for trade accounts receivable balance was approximately $0.7 million and $1.5 million at December 31, 2003 and
2004, respectively. Total bad debt write-offs were $0.1 million, $0.1 million and $0.6 million for the years ended December 31, 2002, 2003 and 2004, respectively. We also had an allowance of $2.0 million and $2.6 million recorded at December
31, 2003 and 2004, respectively, for a receivable due from one of our insurance providers, that filed for bankruptcy in March 2001.



Equity-Based Compensation.    Certain of our employees have equity-based compensation arrangements under which they received
options to acquire partnership units of ASLP. We follow the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25,Accounting for Stock Issued to Employees,and related interpretations
including FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation,an Interpretation of APB Opinion No. 25 to account for equity-based compensation. The related compensation cost has been pushed
down to our financial statements, and the deferred compensation has been recorded as a contribution from our parent. We determined the amount of equity-based compensation recorded under APB No. 25 based on the excess of the fair value of ASLPs
partnership units above the exercise price of the option on the applicable measurement date, which is generally the date that the number of units subject to the option and the option exercise price are known. All of our equity- based compensation
plans are variable, meaning we update our estimate of fair value of the ASLP units and adjust compensation expense each period. Since ASLPs partnership units are not publicly traded, we estimate their fair value based on current operating
results and the historical relationship of these results to the sales price of ASLPs previous equity offerings, comparable industry information, and our expectations with respect to the sales price of our securities in proposed or contemplated
future transactions.



These options were granted with various
vesting requirements. Series A options vest over time, and compensation expense is recognized ratably over the vesting period. Series C, D and F options vest based on the achievement of performance targets relating to a specified internal rate of
return in connection with (i) an exit or 50% sell-down of its investment by a partner of ASLP, (ii) a deemed exit event that occurs on January 28, 2006, or (iii) a sale of more than 25% of the outstanding partnership interest by such partners, and
compensation expense is recognized for these options when achievement of the performance targets is probable. Series E options vest based on the achievement of performance targets relating to specified EBITDA targets, and compensation expense for
these options is recognized ratably over the vesting period based on the number of options expected to vest.



In connection with the distribution of the proceeds from the Senior Discount Notes in October 2004, we provided optionholders two alternatives with
respect to the treatment of their options. Under the first alternative, all outstanding Series A awards and a portion of the Series C, D and E awards vested immediately prior to the distribution. No Series F awards vested. In addition, in order to
compensate for the reduction in value caused by the distribution, we reduced the exercise price of our remaining outstanding unvested Series E and F options to an amount equal to the greater of (i) the current exercise price reduced by the
distribution amount on the underlying units or (ii) the fair market value of the units after the distribution, and to make a cash payment by ASLP to holders of the remaining outstanding unvested Series C and D options in an amount equal to the per
unit distribution amount for each unit underlying their remaining unvested options.



We offered our optionholders an alternative to the accelerated vesting of their options described above. Those optionholders who elected this alternative received pro-rata vesting of their Series A options based on
their service period through the date of the transactions, received vesting on all other options to the extent that they would have received vesting under the acceleration event, and received a reduction in the exercise price on all options that
have an exercise price in excess of the fair market value of the units after the distribution to an amount equal to the greater of (i) the current exercise price reduced by the distribution amount on the underlying



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units or (ii) the fair market value of the underlying units after the distribution. As all of these amendments became effective after the completion of the
Senior Discount Notes offering by ASG Consolidated; optionholders that chose this alternative did not participate in any of the distribution of proceeds from the offering.



The modification and acceleration set forth above, together with compensation expensed recognized as equity-based
compensation awards vested, resulted in the recognition by us of compensation expense of $2.9 million.



Recently issued accounting pronouncements



Prospective Accounting Pronouncements. The Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based
Payment (123R), in December 2004. SFAS No. 123R is a revision of SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. SFAS
No. 123R requires the fair value of employee awards issued, modified, repurchased or cancelled after implementation under share-based payment arrangements to be measured as of the date the award is issued, modified, repurchased or cancelled. The
resulting cost will then be recognized in the statement of earnings over the service period. Accordingly, if we were to adopt SFAS No. 123R, we anticipate that there would be no effect on the financial statements for options outstanding prior to
adoption. As we have no equity securities traded in a public market, we are required to implement SFAS No. 123R using the prospective transition method not later than fiscal 2006.



The FASB issued SFAS No. 151, Inventory CostsAn Amendment of ARB No. 43, Chapter 4 in November 2004. Statement
151 amends the guidance in Accounting Research Bulletin (ARB) No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Among other
provisions, the new rule requires that items such as idle facility expense, excessive spoilage, double freight, and rehandling costs be recognized as current-period charges regardless of whether they meet the criterion of so abnormal as
stated in ARB No. 43. Additionally, SFAS 151 requires that allocation of fixed production overheads to the costs of conversions be based on normal capacity of the production facilities. SFAS 151 is effective for fiscal years beginning after June 15,
2005, and is required to be adopted by the first quarter of fiscal 2006. We are currently evaluating the effect that the adoption of SFAS 151 will have on our financial position and results of operations but do not expect it to be material.



The FASB issued SFAS No. 153, Exchanges of Nonmonetary
AssetsAn Amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions in December 2004. SFAS 153 eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of
Accounting Principles Board (APB) Opinion No. 29, Accounting for Nonmonetary Transactions, and replaces it with an exception for exchanges that do not have commercial substance. SFAS 153 specifies that a nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS 153 is effective for fiscal periods beginning after June 15, 2005, and is required to be adopted by us in the third quarter of
fiscal 2005. We are currently evaluating the effect that the adoption of SFAS 153 will have on our financial position and results of operations but do not expect it to be material.



In November 2004, the FASBs Emerging Issues Task Force (EITF) reached a consensus on Issue No. 03-13, Applying the
Conditions in Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations. The guidance should be applied to a component of an enterprise that is either disposed of or classified as held for sale in fiscal
periods that began after December 15, 2004. We do not believe that the adoption of EITF 03-13 will have a significant effect on our consolidated financial statements.



|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk
|-------- | ----------------------------------------------------------



Pollock Market Conditions.Each of the products produced from pollock has different pricing
characteristics. The price of pollock roe is heavily influenced by the size and condition of roe skeins, color and



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freshness of the roe and the maturity of the fish caught. Catcher-processors are more likely to produce higher quality roe because they process the fish
within hours of being caught, rather than several days later as is the case with inshore processors. In addition, roe prices are influenced by anticipated Russian and U.S. production and Japanese inventory carry-over, because roe is consumed almost
exclusively in Japan. The U.S. Bering Sea pollock fishery commonly produces the highest quality roe.



The prices of surimi and fillets are influenced primarily by expected production in the U.S. and Russian pollock fisheries, and other factors such as
carry-over inventories and changes in demand. Because surimi and fillet blocks often are composed of the same raw material, the demand for one product can influence the price of the other. Surimi and fillet blocks are also produced utilizing species
of fish other than pollock, such as hake or itoyori species. However, due to differences in flesh attributes between pollock and other species, the surimi and block produced from other species are generally not used as substitutes for pollock
products and thus have only a modest influence on pollock pricing. Fillet blocks are often supplied by both the U.S. Bering Sea pollock fishery and the Russian fisheries.



In 2002, 2003 and 2004, we harvested an aggregate of approximately 17.9%, 18.7% and 20.1% respectively, of the total
allowable catch in the U.S. Bering Sea pollock fishery. We are allocated 16.8% of the directed pollock catch under our Cooperative agreements, and we purchase the right for a period of time to harvest another 0.7% of the directed pollock catch from
other vessels in our fishery, bringing us to 17.5% of the directed pollock catch (which is the maximum permitted harvesting allocation of the directed pollock catch by any single entity). Our share of the directed pollock catch represented
approximately 15.1% of the total allowable catch. We supplemented our share of the directed pollock catch in 2002, 2003 and 2004 by purchasing approximately 28.0%, 36.0% and 54.0%, respectively, of the community development quota (or 2.8%, 3.6% and
5.4%, respectively, of the total allowable catch) from Alaska Community Development Groups, two of which are equity investors in our company.



Catfish Market Conditions.    During the second half of 2003, many of the farmers from whom we purchase catfish increased their
prices to levels that jeopardized our ability to maintain satisfactory profit margins in the catfish processing operations. As a result, in September 2003, we closed our catfish processing plant in Demopolis, Alabama for approximately three weeks,
after which period the plant resumed full operations. The plant closure involved a layoff of approximately 270 employees, nearly all of whom were rehired on the plants reopening. The high fish cost trend has continued and fish costs have been
approximately 21.8% higher on a per pound basis during the year ended December 31, 2004 as compared to 2003, which is generally consistent with the industry wide increase of prices paid to catfish farmers. While market prices for our catfish
products have improved somewhat in 2004 over the same prior year period, such improvement has not offset the increase in fish costs. See Item 1BusinessRisk FactorsRisks Relating to Our BusinessIf prices at which we
purchase catfish remain at high levels or increase, in either case without a proportionate increase in the prices at which we sell our catfish products, our ability to maintain profitability in our catfish processing operations will be adversely
affected.



Foreign Currency, Interest Rate and
Commodity Hedging.    We are exposed to cash flow and earnings risk from certain changes in the yen foreign currency exchange rate, interest rates and diesel fuel prices. To mitigate the risk related to these factors, we
utilize forward currency contracts, cross-currency swaps, interest rate caps and other derivative commodity instruments, principally futures contracts. As of December 31, 2004, we had open foreign exchange contracts maturing through December 30,
2008 with total notional amounts of $627.6 million, including $150.0 million subject to extension agreements.



We have extension agreements to enter into foreign exchange contracts. Two of the extension agreements expire between March 2006 and December 2007 and
between September 2006 and March 2008 and would become binding and effective only if the spot rate falls below a pre-specified level (the trigger) on or before December 2005 or March 2006, respectively. If the spot rate does not reach the trigger by
December 2005 or March 2006, then neither we nor the counterparty shall have any right or obligation with respect to any of these



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extension agreements. The trigger for each of these two extension agreements is 99.0 Japanese yen per U.S. dollar and the notional amounts of these extension
agreements are $150.0 million. We also had another extension agreement that had similar terms, which was triggered in October 2003 at 110.0 Japanese yen per U.S. dollar for notional amounts of $39.0 million, which were designated and documented as
hedges at that time.



At December 31, 2004, we prepared an
analysis to determine the sensitivity of our forward foreign exchange contracts to sell Japanese yen, which have total notional amounts of $477.6 million and are staggered over a rolling 48-month timeframe, to changes in exchange rates. A
hypothetical adverse Japanese yen exchange rate movement of 1% against our forward foreign exchange contracts would have resulted in a potential loss in fair value of these contracts of approximately $4.3 million. All such losses on these forward
foreign exchange contracts would be substantially offset by gains on the underlying Japanese yen sales that we have hedged. We have certain collateralization requirements with a bank representing the majority of these contracts. We are required to
post collateral if the market value of our forward foreign exchange contracts drops below a certain level. As of December 31, 2003 and 2004, we had posted a $16.0 million and $27.5 million letter of credit, respectively. In addition, an
unconsolidated affiliate deposited $1.5 million as collateral as of December 31, 2003. During 2004, primarily in order to mitigate liquidity risk related to the impact of the strengthening Japanese yen on our foreign exchange portfolio and related
collateral agreement, we entered into a number of foreign exchange contracts to purchase Japanese yen for U.S. dollars with an aggregate notional amount of $512.5 million, exchange rates ranging from 108.75 Japanese yen per U.S. dollar to 104.80
Japanese yen per U.S. dollar and maturity dates between July 30, 2004 and March 30, 2006. These foreign exchange instruments were not designated as hedges so all realized and unrealized gains and losses were recognized in earnings. We sold all our
positions on these contracts or the contracts matured during the year at a net realized gain of $0.1 million.



Prior to the acquisition of our business by Centre Partners in January 28, 2000, Aker RGI ASA, or Aker, the parent of Norway Seafoods, had entered into a
currency forward transaction with Sparebanken NOR and a forward transaction with Den norske Bank ASA. On January 28, 2000, in connection with the acquisition of our business, Aker entered into an agreement with us whereby Aker is obligated to pay us
all amounts less a nominal fee that Aker receives from Sparebanken NOR or Den norske Bank ASA, and we are obligated to pay Aker all amounts that Aker must pay to Sparebanken NOR or Den norske Bank ASA. Aker also had, as of December 31, 2004,
exercisable foreign currency options with Sparebanken NOR with total notional amounts of $20.6 million maturing through July 2005. These options will become forward foreign currency exchange contracts at our election.



We enter into fuel hedges whereby we pay a fixed price per gallon and receive
a floating price per gallon with the payments being calculated on a notional gallon amount. Our policy is to hedge at least 50% of the forecasted fuel usage for any given season. As of December 31, 2004, we had open contracts with terms through
October 31, 2006. The objective of the swap agreements is to hedge the variability of future fuel prices. In accordance with our hedging policy in relation to these contracts, we perform periodic assessments of effectiveness on at least a quarterly
basis. Based on the results of these analyses, we considered these instruments to be highly effective as of the year ended December 31, 2003 and we recorded an unrealized gain of approximately $1.1 million as a component of accumulated other
comprehensive income for this period. We performed this analysis when we entered into fuel contracts in November 2004 and determined that the instruments entered in 2004 were not effective. Accordingly, we recorded an unrealized loss of
approximately $0.7 million representing the fair value of these instruments as of December 31, 2004 in the statement of operations as a component of gain or loss on other derivatives.



Interest Rates.    The Credit Agreement requires us to hedge the variable interest rate on a
portion of the outstanding senior debt to convert such debt to fixed-rate debt. We are required to enter into hedging transactions such that no less than 50% of the aggregate principal amount of the term loans and our Senior Subordinated Notes is
effectively fixed rate debt until June 25, 2005.



We have
interest rate caps with aggregate notional amounts of $93.5 million. The cap rate is 5.0% and the variable rate is the U.S. dollar three month LIBOR. As we do not consider these instruments to be effective until



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the interest rate of the underlying instrument exceeds the cap rate, we record any unrealized gains or losses in the earnings as a component of gain or loss
on other derivatives. The fair value of these instruments was, in the aggregate, not material at December 31, 2003 and 2004. The objective of the agreements is to hedge the variability of future cash flows associated with changes in variable
interest rates.



In addition to the interest hedges applicable
to our senior debt, interest on our Senior Subordinated Notes have a fixed rate. Approximately 51% and 56% of our total debt effectively has a fixed interest rate or is hedged by interest rate caps as of December 31, 2003 and 2004, respectively.
Interest rate changes generally do not affect the market value of floating rate debt but do impact the amount of our interest payments and, therefore, our future earnings and cash flows, assuming other factors are held constant.



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|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------



Report of Independent Registered Public Accounting Firm



The Members

American Seafoods Group LLC:

We have audited the accompanying consolidated balance sheets of American Seafoods Group LLC and
subsidiaries (the Company) as of December 31, 2003 and 2004 and the related consolidated statements of operations, members equity (deficit) and comprehensive income (loss) and cash flows for each of the years in the three-year period ended
December 31, 2004. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.



We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provides a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of American
Seafoods Group LLC and subsidiaries as of December 31, 2003 and 2004 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004, in conformity with U.S. generally accepted
accounting principles.



As discussed in Note 1 to the financial
statements, the Company changed its accounting policy for classification of shipping and handling costs in 2004.

/s/    KPMG LLP

Seattle, Washington

March 28, 2005



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AMERICAN SEAFOODS GROUP LLC AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS

(in thousands)



|                                                                                       |  |              |          |   |      |   |          |  
|-------------------------------------------------------------------------------------- |  | ------------ | -------- | - | ---- | - | -------- | -
|                                                                                       |  | December 31, |         
|                                                                                       |  | 2003         |          |   | 2004 |  
|ASSETS                                                                                 |  |              |          |   |      |   |          |  
|Current assets:                                                                        |  |              |          |   |      |   |          |  
|Cash and cash equivalents                                                              |  | $            | 5,268    |   |      | $ | 740      |  
|Trade accounts receivable, net of allowance of $691 and $1,460                         |  |              | 38,155   |   |      |   | 38,042   |  
|Receivables from related parties                                                       |  |              | 111      |   |      |   | 98       |  
|Inventories                                                                            |  |              | 53,549   |   |      |   | 50,647   |  
|Prepaid expenses                                                                       |  |              | 4,549    |   |      |   | 8,062    |  
|Unrealized gains on derivatives                                                        |  |              | 3,275    |   |      |   |         |  
|Other                                                                                  |  |              | 6,213    |   |      |   | 5,114    |  
|                                                                                       |  |              |          |   |      |   |          |  
|Total current assets                                                                   |  |              | 111,120  |   |      |   | 102,703  |  
|                                                                                       |  |              |          |   |      |   |          |  
|Property, vessels and equipment, net                                                   |  |              | 225,965  |   |      |   | 198,335  |  
|Capital projects in process                                                            |  |              | 436      |   |      |   | 1,835    |  
|                                                                                       |  |             
|Other assets:                                                                          |  |              |          |   |      |   |          |  
|Cooperative and fishing rights, net of accumulated amortization of $61,255 and $65,302 |  |              | 86,321   |   |      |   | 83,093   |  
|Goodwill                                                                               |  |              | 40,847   |   |      |   | 33,676   |  
|Deferred financing costs, net of accumulated amortization of $8,347 and $13,622        |  |              | 27,951   |   |      |   | 23,603   |  
|Other intangibles, net of accumulated amortization of $521 and $1,078                  |  |              | 4,433    |   |      |   | 3,944    |  
|Unrealized gains on derivatives                                                        |  |              | 1,543    |   |      |   | 2,063    |  
|Restricted cash                                                                        |  |              | 419      |   |      |   | 405      |  
|Receivable from related party                                                          |  |              | 6,000    |   |      |   |         |  
|Other                                                                                  |  |              | 14,413   |   |      |   | 8,421    |  
|                                                                                       |  |              |          |   |      |   |          |  
|Total other assets                                                                     |  |              | 181,927  |   |      |   | 155,205  |  
|                                                                                       |  |              |          |   |      |   |          |  
|Total assets                                                                           |  | $            | 519,448  |   |      | $ | 458,078  |  
|                                                                                       |  |              |          |   |      |   |          |  
|LIABILITIES AND MEMBERS EQUITY (DEFICIT)                                              |  |              |          |   |      |   |          |  
|Current liabilities:                                                                   |  |              |          |   |      |   |          |  
|Accounts payable and accrued expenses                                                  |  | $            | 40,743   |   |      | $ | 32,514   |  
|Current portion of long-term debt                                                      |  |              | 15,929   |   |      |   | 26,547   |  
|Unrealized losses on derivatives                                                       |  |              | 6,919    |   |      |   | 10,983   |  
|Payables to related parties                                                            |  |              | 1,609    |   |      |   | 1,900    |  
|                                                                                       |  |              |          |   |      |   |          |  
|Total current liabilities                                                              |  |              | 65,200   |   |      |   | 71,944   |  
|                                                                                       |  |              |          |   |      |   |          |  
|Long-term liabilities:                                                                 |  |              |          |   |      |   |          |  
|Long-term debt, net of current portion                                                 |  |              | 511,353  |   |      |   | 454,575  |  
|Unrealized losses on derivatives                                                       |  |              | 37,017   |   |      |   | 50,112   |  
|Payable to related party                                                               |  |              | 17,037   |   |      |   |         |  
|                                                                                       |  |              |          |   |      |   |          |  
|Total long-term liabilities                                                            |  |              | 565,407  |   |      |   | 504,687  |  
|                                                                                       |  |              |          |   |      |   |          |  
|Total liabilities                                                                      |  |              | 630,607  |   |      |   | 576,631  |  
|                                                                                       |  |              |          |   |      |   |          |  
|Commitments and contingencies                                                          |  |              |          |   |      |   |          |  
|                                                                                       |  |             
|Minority interest in consolidated subsidiary                                           |  |              | 982      |   |      |   |         |  
|                                                                                       |  |             
|Members equity (deficit):                                                             |  |              |          |   |      |   |          |  
|Members deficit                                                                       |  |              | (62,498  | ) |      |   | (72,511  | )
|Accumulated other comprehensive loss                                                   |  |              | (49,643  | ) |      |   | (46,042  | )
|                                                                                       |  |              |          |   |      |   |          |  
|Total members equity (deficit)                                                        |  |              | (112,141 | ) |      |   | (118,553 | )
|                                                                                       |  |              |          |   |      |   |          |  
|Total liabilities and members equity (deficit)                                        |  | $            | 519,448  |   |      | $ | 458,078  |  
|                                                                                       |  |              |          |   |      |   |          |  



The accompanying notes
are an integral part of these consolidated financial statements.



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AMERICAN SEAFOODS GROUP LLC AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)



|                                                                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|----------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                      |  | Year ended December 31. |        
|                                                                                                      |  | 2002                    |         |   | 2003 |   |         | 2004 | 
|Net sales and revenues:                                                                               |  |                         |         |   |      |   |         |      |  |   |         |  
|Seafood sales                                                                                         |  | $                       | 331,978 |   |      | $ | 409,001 |      |  | $ | 460,579 |  
|Revenuesrelated parties                                                                              |  |                         | 709     |   |      |   |        |      |  |   |        |  
|Other                                                                                                 |  |                         | 185     |   |      |   | 2,362   |      |  |   | 1,088   |  
|                                                                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|Total sales and revenues                                                                              |  |                         | 332,872 |   |      |   | 411,363 |      |  |   | 461,667 |  
|Cost of sales:                                                                                        |  |                         |         |   |      |   |         |      |  |   |         |  
|Cost of sales, including depreciation and amortization of $38,013, $38,993 and $42,960                |  |                         | 188,174 |   |      |   | 266,225 |      |  |   | 319,248 |  
|Cost of salesrelated parties                                                                         |  |                         | 22,736  |   |      |   | 17,324  |      |  |   | 21,257  |  
|Shipping and handling costs                                                                           |  |                         | 23,993  |   |      |   | 25,697  |      |  |   | 32,246  |  
|                                                                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|Gross profit                                                                                          |  |                         | 97,969  |   |      |   | 102,117 |      |  |   | 88,916  |  
|                                                                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|Operating expenses:                                                                                   |  |                         |         |   |      |   |         |      |  |   |         |  
|Selling, general and administrative expenses, excluding equity-based compensation and related parties |  |                         | 30,041  |   |      |   | 33,536  |      |  |   | 31,479  |  
|Selling, general and administrative expensesrelated parties                                          |  |                         | 948     |   |      |   | 1,657   |      |  |   | 1,804   |  
|Equity-based compensation                                                                             |  |                         | 20,929  |   |      |   | 4,703   |      |  |   | 2,931   |  
|Amortization and depreciation                                                                         |  |                         | 2,298   |   |      |   | 3,227   |      |  |   | 3,107   |  
|Goodwill impairment                                                                                   |  |                         |        |   |      |   |        |      |  |   | 7,171   |  
|                                                                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|Operating income                                                                                      |  |                         | 43,753  |   |      |   | 58,994  |      |  |   | 42,424  |  
|                                                                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|Other income (expense):                                                                               |  |                         |         |   |      |   |         |      |  |   |         |  
|Interest expense                                                                                      |  |                         | (34,076 | ) |      |   | (40,573 | )    |  |   | (39,302 | )
|Write off of recapitalization transaction costs                                                       |  |                         |        |   |      |   |        |      |  |   | (19,264 | )
|Foreign exchange gains (losses), net                                                                  |  |                         | 18,982  |   |      |   | (4,030  | )    |  |   | (5,814  | )
|Other derivatives gains (losses), net                                                                 |  |                         |        |   |      |   |        |      |  |   | (7,098  | )
|Related party interest income (expense), net                                                          |  |                         | (4,744  | ) |      |   | 288     |      |  |   | 228     |  
|Interest income                                                                                       |  |                         | 55      |   |      |   | 67      |      |  |   | 75      |  
|Minority interest                                                                                     |  |                         | 401     |   |      |   | (179    | )    |  |   |        |  
|Loss from debt repayment and related write-offs                                                       |  |                         | (15,711 | ) |      |   |        |      |  |   |        |  
|Other                                                                                                 |  |                         | (83     | ) |      |   | 113     |      |  |   | (106    | )
|                                                                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|Total other income (expense)                                                                          |  |                         | (35,176 | ) |      |   | (44,314 | )    |  |   | (71,281 | )
|                                                                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|Income (loss) before income taxes                                                                     |  |                         | 8,577   |   |      |   | 14,680  |      |  |   | (28,857 | )
|Income tax provision                                                                                  |  |                         | 81      |   |      |   | 41      |      |  |   | 31      |  
|                                                                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|Net income (loss)                                                                                     |  | $                       | 8,496   |   |      | $ | 14,639  |      |  | $ | (28,888 | )
|                                                                                                      |  |                         |         |   |      |   |         |      |  |   |         |  





The accompanying notes are an integral part of these consolidated financial statements.



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AMERICAN SEAFOODS GROUP LLC AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF MEMBERS EQUITY (DEFICIT) AND COMPREHENSIVE INCOME (LOSS)

(in
thousands)



|                                                                      |  |                         |          |   |                                            |   |         |                              |  |   |                            |   |  |   |         |  
|--------------------------------------------------------------------- |  | ----------------------- | -------- | - | ------------------------------------------ | - | ------- | ---------------------------- |  | - | -------------------------- | - |  | - | ------- | -
|                                                                      |  | MembersEquity(Deficit) |          |   | AccumulatedOtherComprehensiveIncome (Loss) |   |         | TotalMembersEquity(Deficit) |  |   | ComprehensiveIncome (Loss) |  
|Balance, December 31, 2001                                            |  | $                       | 123,818  |   |                                            | $ | 31,069  |                              |  | $ | 154,887                    |   |  |   |         |  
|Distributions to members                                              |  |                         | (206,015 | ) |                                            |   |        |                              |  |   | (206,015                   | ) |  |   |         |  
|Contribution of interest in subsidiary                                |  |                         | 1,444    |   |                                            |   |        |                              |  |   | 1,444                      |   |  |   |         |  
|Net income                                                            |  |                         | 8,496    |   |                                            |   |        |                              |  |   | 8,496                      |   |  | $ | 8,496   |  
|Other comprehensive loss:                                             |  |                         |          |   |                                            |   |         |                              |  |   |                            |   |  |   |         |  
|Unrealized losses on derivative instruments designated as hedges, net |  |                         |         |   |                                            |   | (37,401 | )                            |  |   | (37,401                    | ) |  |   | (37,401 | )
|Translation adjustment                                                |  |                         |         |   |                                            |   | 8       |                              |  |   | 8                          |   |  |   | 8       |  
|                                                                      |  |                         |          |   |                                            |   |         |                              |  |   |                            |   |  |   |         |  
|Comprehensive loss                                                    |  |                         |          |   |                                            |   |         |                              |  |   |                            |   |  | $ | (28,897 | )
|                                                                      |  |                         |          |   |                                            |   |         |                              |  |   |                            |   |  |   |         |  
|Balance, December 31, 2002                                            |  | $                       | (72,257  | ) |                                            | $ | (6,324  | )                            |  | $ | (78,581                    | ) |  |   |         |  
|                                                                      |  |                         |          |   |                                            |   |         |                              |  |   |                            |   |  |   |         |  
|Distributions to members                                              |  |                         | (4,880   | ) |                                            |   |        |                              |  |   | (4,880                     | ) |  |   |         |  
|Net income                                                            |  |                         | 14,639   |   |                                            |   |        |                              |  |   | 14,639                     |   |  | $ | 14,639  |  
|Other comprehensive loss:                                             |  |                         |          |   |                                            |   |         |                              |  |   |                            |   |  |   |         |  
|Unrealized losses on derivative instruments designated as hedges, net |  |                         |         |   |                                            |   | (43,319 | )                            |  |   | (43,319                    | ) |  |   | (43,319 | )
|                                                                      |  |                         |          |   |                                            |   |         |                              |  |   |                            |   |  |   |         |  
|Comprehensive loss                                                    |  |                         |          |   |                                            |   |         |                              |  |   |                            |   |  | $ | (28,680 | )
|                                                                      |  |                         |          |   |                                            |   |         |                              |  |   |                            |   |  |   |         |  
|Balance, December 31, 2003                                            |  | $                       | (62,498  | ) |                                            | $ | (49,643 | )                            |  | $ | (112,141                   | ) |  |   |         |  
|                                                                      |  |                         |          |   |                                            |   |         |                              |  |   |                            |   |  |   |         |  
|Distributions to members                                              |  |                         | (3,296   | ) |                                            |   |        |                              |  |   | (3,296                     | ) |  |   |         |  
|Contributions from members                                            |  |                         | 22,171   |   |                                            |   |         |                              |  |   | 22,171                     |   |  |   |         |  
|Net loss                                                              |  |                         | (28,888  | ) |                                            |   |        |                              |  |   | (28,888                    | ) |  | $ | (28,888 | )
|Other comprehensive loss:                                             |  |                         |          |   |                                            |   |         |                              |  |   |                            |   |  |   |         |  
|Unrealized gains on derivative instruments designated as hedges, net  |  |                         |         |   |                                            |   | 3,600   |                              |  |   | 3,600                      |   |  |   | 3,600   |  
|Translation adjustment                                                |  |                         |         |   |                                            |   | 1       |                              |  |   | 1                          |   |  |   | 1       |  
|                                                                      |  |                         |          |   |                                            |   |         |                              |  |   |                            |   |  |   |         |  
|Comprehensive loss                                                    |  |                         |          |   |                                            |   |         |                              |  |   |                            |   |  | $ | (25,287 | )
|                                                                      |  |                         |          |   |                                            |   |         |                              |  |   |                            |   |  |   |         |  
|Balance, December 31, 2004                                            |  | $                       | (72,511  | ) |                                            | $ | (46,042 | )                            |  | $ | (118,553                   | ) |  |   |         |  
|                                                                      |  |                         |          |   |                                            |   |         |                              |  |   |                            |   |  |   |         |  





The accompanying notes are an integral part of these consolidated financial statements.



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CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                         |  |                         |          |   |      |   |         |      |  |   |         |  
|---------------------------------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                         |  | Year ended December 31, |         
|                                                                                         |  | 2002                    |          |   | 2003 |   |         | 2004 | 
|Cash flows from operating activities:                                                    |  |                         |          |   |      |   |         |      |  |   |         |  
|Net income (loss)                                                                        |  | $                       | 8,496    |   |      | $ | 14,639  |      |  | $ | (28,888 | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                         |          |   |      |   |         |      |  |   |         |  
|Depreciation and amortization                                                            |  |                         | 40,311   |   |      |   | 42,220  |      |  |   | 46,067  |  
|Unrealized (gains) losses on derivatives, net                                            |  |                         | (10,763  | ) |      |   | 10,332  |      |  |   | 23,514  |  
|Write off of recapitalization costs                                                      |  |                         |         |   |      |   |        |      |  |   | 19,264  |  
|Goodwill impairment                                                                      |  |                         |         |   |      |   |        |      |  |   | 7,171   |  
|Amortization of deferred financing costs                                                 |  |                         | 3,849    |   |      |   | 5,228   |      |  |   | 5,275   |  
|Amortization of debt discount                                                            |  |                         | 485      |   |      |   |        |      |  |   |        |  
|Equity-based compensation                                                                |  |                         | 20,929   |   |      |   | 4,703   |      |  |   | 2,931   |  
|Loss on sale of property and equipment and other                                         |  |                         |         |   |      |   | 211     |      |  |   | 142     |  
|Loss from debt repayment and related write offs                                          |  |                         | 15,711   |   |      |   |        |      |  |   |        |  
|Minority interest                                                                        |  |                         | (401     | ) |      |   | 179     |      |  |   |        |  
|Change in operating assets and liabilities:                                              |  |                         |          |   |      |   |         |      |  |   |         |  
|Trade accounts receivable, net                                                           |  |                         | 14,911   |   |      |   | (11,228 | )    |  |   | 113     |  
|Net receivables and payables from related parties                                        |  |                         | (8,974   | ) |      |   |        |      |  |   | 304     |  
|Inventories, net of depreciation and amortization component                              |  |                         | 7,138    |   |      |   | (21,673 | )    |  |   | 2,292   |  
|Prepaid expenses and other current assets                                                |  |                         | (156     | ) |      |   | (4,019  | )    |  |   | (2,414  | )
|Other assets, net                                                                        |  |                         | 77       |   |      |   | (1,121  | )    |  |   | (1,653  | )
|Accounts payable and accrued expenses                                                    |  |                         | 2,443    |   |      |   | 6,987   |      |  |   | (5,734  | )
|                                                                                         |  |                         |          |   |      |   |         |      |  |   |         |  
|Net cash flows from operating activities                                                 |  |                         | 94,056   |   |      |   | 46,458  |      |  |   | 68,384  |  
|                                                                                         |  |                         |          |   |      |   |         |      |  |   |         |  
|Cash flows from investing activities:                                                    |  |                         |          |   |      |   |         |      |  |   |         |  
|Purchases of property, vessels and equipment                                             |  |                         | (9,431   | ) |      |   | (12,313 | )    |  |   | (12,948 | )
|Related party (loans) repayment                                                          |  |                         | (6,000   | ) |      |   |        |      |  |   | 6,000   |  
|Purchase of minority interest in Pacific Longline Company LLC                            |  |                         |         |   |      |   |        |      |  |   | (1,800  | )
|Additions to capital projects in process                                                 |  |                         |         |   |      |   | (436    | )    |  |   | (1,835  | )
|Restricted cash withdrawals                                                              |  |                         |         |   |      |   |        |      |  |   | 14      |  
|Purchase of fishing rights                                                               |  |                         |         |   |      |   | (1,016  | )    |  |   |        |  
|Acquisition of Southern Pride Catfish, net of acquired cash                              |  |                         | (43,228  | ) |      |   |        |      |  |   |        |  
|Other                                                                                    |  |                         | (106     | ) |      |   | 207     |      |  |   | (271    | )
|                                                                                         |  |                         |          |   |      |   |         |      |  |   |         |  
|Net cash used in investing activities                                                    |  |                         | (58,765  | ) |      |   | (13,558 | )    |  |   | (10,840 | )
|                                                                                         |  |                         |          |   |      |   |         |      |  |   |         |  
|Cash flows from financing activities:                                                    |  |                         |          |   |      |   |         |      |  |   |         |  
|Borrowings on long-term debt facilities                                                  |  |                         | 545,000  |   |      |   |        |      |  |   |        |  
|Distributions related to debt offerings                                                  |  |                         | (187,279 | ) |      |   |        |      |  |   |        |  
|Principal payments on long-term debt                                                     |  |                         | (323,177 | ) |      |   | (55,520 | )    |  |   | (23,160 | )
|Net borrowings (repayments) on revolving debt facilities                                 |  |                         | (10,000  | ) |      |   | 37,499  |      |  |   | (23,000 | )
|Payment of recapitalization costs                                                        |  |                         |         |   |      |   | (4,760  | )    |  |   | (13,886 | )
|Financing costs                                                                          |  |                         | (36,850  | ) |      |   | (484    | )    |  |   | (927    | )
|Tax and other distributions to members                                                   |  |                         | (18,736  | ) |      |   | (4,880  | )    |  |   | (3,298  | )
|Capital contributions                                                                    |  |                         |         |   |      |   |        |      |  |   | 2,199   |  
|Principal payments on obligations to related party                                       |  |                         | (1,350   | ) |      |   | (4,638  | )    |  |   |        |  
|Other                                                                                    |  |                         |         |   |      |   | (21     | )    |  |   |        |  
|                                                                                         |  |                         |          |   |      |   |         |      |  |   |         |  
|Net cash used in financing activities                                                    |  |                         | (32,392  | ) |      |   | (32,804 | )    |  |   | (62,072 | )
|                                                                                         |  |                         |          |   |      |   |         |      |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                                     |  |                         | 2,899    |   |      |   | 96      |      |  |   | (4,528  | )
|Cash and cash equivalents at beginning of year                                           |  |                         | 2,273    |   |      |   | 5,172   |      |  |   | 5,268   |  
|                                                                                         |  |                         |          |   |      |   |         |      |  |   |         |  
|Cash and cash equivalents at end of year                                                 |  | $                       | 5,172    |   |      | $ | 5,268   |      |  | $ | 740     |  
|                                                                                         |  |                         |          |   |      |   |         |      |  |   |         |  
|Supplemental disclosures of cash flow information:Cash paid during the year for:         |  |                         |          |   |      |   |         |      |  |   |         |  
|Interest                                                                                 |  | $                       | 33,212   |   |      | $ | 34,970  |      |  | $ | 35,171  |  
|Non-cash financing activities:                                                           |  |                         |          |   |      |   |         |      |  |   |         |  
|Capital contribution                                                                     |  |                         |         |   |      |   |        |      |  |   | 19,972  |  



The accompanying notes
are an integral part of these consolidated financial statements.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



December 31, 2003 and 2004



Note
1.    Description of Business and Summary of Significant Accounting Policies



Description of Business and Basis of Presentation



American Seafoods Group LLC (ASG), a Delaware limited liability company, and its subsidiaries (collectively referred herein as the Company)
harvest and process a variety of fish, either on board its sophisticated catcher-processor and freezer-longliner vessels or at its land-based processing facilities, and markets its products to its customers in North America, Asia and Europe. The
Company is an at-sea harvester and processor of pollock, hake and cod in the U.S. In addition, the Company is a land-based processor of catfish and scallops, and secondary processor of pollock.



ASG was formed in January 2000. The sole owner of ASG is ASG Consolidated LLC
(ASG Consolidated), which is held by American Seafoods Consolidated LLC (American Seafoods Consolidated) and ASC, Inc., both of which are held directly or indirectly by American Seafoods Holdings LLC (Holdings), which, in turn, is controlled by
American Seafoods, L.P. (ASLP) and by its general partner, ASC Management, Inc. ASG has one class of member interests, and the liability of its member is limited to its members interests.



The consolidated financial statements include the accounts of ASG and its
subsidiaries for all periods presented. All significant intercompany transactions and balances are eliminated in consolidation.



ASG has no independent assets or operations and has outstanding public debt. Guarantees of ASGs debt by its subsidiaries are full and unconditional
and joint and several, any subsidiaries other than the subsidiary guarantors are minor, and there are no significant restrictions on the ability of ASG or any guarantor subsidiary to obtain funds from its subsidiaries by dividend or loan.



Listed below are ASGs principal operating subsidiaries
with a description of their activities and the segment in which they are included. Each subsidiary is considered a reporting unit because it constitutes a business for which discrete financial information is available and management of each segment
regularly reviews the operation results. At December 31, 2004, the principal operating subsidiaries are as follows:



At-Sea Processing Segment:



| |  |  | American Seafoods Company LLC(ASC) harvests and performs primary processing of mainly pollock, through its seven catcher-processor vessels that operate in the Bering Sea and
coastal waters off Washington and Oregon. ASC also markets, sells and distributes its products into the United States, Asian, and European markets. Each of the seven vessels is owned by a limited liability company that is a subsidiary of ASC.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pacific Longline Company LLC (PLC) harvests and performs primary processing of mainly Pacific cod through its three freezer-longliner cod fishing vessels that operate in the
Bering Sea. Each of the three vessels is owned by a limited liability company that is a subsidiary of PLC.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Land-Based Processing Segment:



| |  |  | American Seafoods International LLC (ASI) operates a secondary processing plant for primarily frozen pollock and cod in New Bedford, Massachusetts, which includes cutting,
breading and battering operations.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | American Seafoods Processing LLC (ASP) operates a scallop processing facility in New Bedford, Massachusetts.
| | - |  | ------------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



| |  |  | Southern Pride Catfish LLC (SPC) operates two catfish processing facilities in Alabama and processes and distributes catfish products primarily in the United States.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Southern Pride Catfish Trucking, Inc. (SPC Trucking) operates seafood distribution for ASI, ASP and SPC products and is a taxable entity.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



Corporate History



The Original Acquisition. On January 28, 2000, ASLP purchased from
Norway Seafoods, through its subsidiaries, six catcher-processors, one catcher-vessel, all of the outstanding stock of American Seafoods Company (now referred to as ASC, Inc.) and certain assets of Frionor USA (now American Seafoods
International LLC) (Original Acquisition). ASC, Inc. was the operator of the six acquired vessels and the owner-operator of one additional catcher-processor vessel. ASG was formed in connection with the Original Acquisition. As part of the Original
Acquisition, ASC, Inc. contributed its assets to ASG in exchange for member interests with preferred distribution rights. The Original Acquisition was accounted for as a purchase, and all of the debt, assets and goodwill and other intangible assets
relating to the Original Acquisition have been pushed down to the balance sheet of ASG. The purchase accounting resulted in all assets and liabilities being recorded at their estimated fair values on the date of Original Acquisition. The
aggregate purchase price was $477.9 million, including acquisition costs. The Original Acquisition was financed through short-term seller financing, long-term debt and seller long-term subordinated promissory notes.



ASG Recapitalization. On April 18, 2002, ASG completed an offering of
Senior Subordinated Notes in the amount of $175.0 million as part of a recapitalization (Recapitalization). Concurrently with the offering of the Senior Subordinated Notes, ASG entered into the Credit Agreement in the amount of $395.0 million
including a $75.0 million revolving credit facility of which $5.9 million was borrowed at closing. The total amount borrowed was $500.9 million. The proceeds of the Recapitalization were used to:



| |  |  | repay all outstanding debt under ASGs existing revolving credit and term loan agreement, which totaled $187.2 million;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | make a distribution of $62.3 million to ASC, Inc. to repay all amounts outstanding on a senior subordinated promissory note due to Norway Seafoods;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | pay related fees and expenses totaling $31.6 million;
| | - |  | -----------------------------------------------------



| |  |  | distribute the remainder of the proceeds to American Seafoods Consolidated LLC, which, in turn, distributed these funds to Holdings. Holdings used these funds to repay all amounts
outstanding on a senior subordinated promissory note due to Norway Seafoods, totaling $56.1 million, and make a distribution of $163.7 million to the members of Holdings.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, ASG distributed to its members cash on hand at the time of the Recapitalization. The aggregate amount
distributed to ASGs members was approximately $203.8 million, including $5.7 million of financing fees paid to a related party out of the distribution and payments for equity-based compensation of $10.8 million. At the time of repayment of the
debt, ASG had unamortized debt discounts and deferred financing costs of $14.7 million. As a result of the repayment, these amounts were charged to loss from debt repayment and related write-offs on the statement of operations.



SPC Acquisition. On December 16, 2002, the Company, through its direct
and indirect wholly-owned subsidiaries, purchased substantially all of the assets of Southern Pride Catfish Company, Inc. (SPCC), an



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



Alabama corporation engaged in the business of catfish harvesting, processing and distribution and contributed these assets to SPC and SPC Trucking (referred
herein collectively as Southern Pride). The purchase price was approximately $41.8 million in cash. In addition, the Company assumed liabilities of $3.8 million, paid off bank debt of SPCC in the amount of $2.4 million and incurred
direct acquisition costs of approximately $1.0 million. The SPC Acquisition was financed with additional indebtedness under the Companys Credit Agreement (see Note 8). Factors considered by management in the purchase price that resulted in
goodwill included the historic and expected future cash flows of the acquired business and managements belief that Southern Pride would complement and augment the Companys existing production and distribution capacity. SPC complements
the Companys operations by adding a whitefish species, catfish, to the product line. With this addition, the Company has significant market positions in pollock, cod and catfish, the top three domestic whitefish species in terms of human
consumption. The operations of Southern Pride are included in the Companys consolidated financial statements since the acquisition date.



The allocation of purchase cost was approximately $11.7 million to current assets, $24.7 million to property and equipment, $4.9 million to other
intangible assets and the residual to goodwill in the amount of $7.2 million, which was determined to be impaired in its entirety in the third quarter of 2004. Acquired intangible assets consist principally of a trade name and customer-based
intangibles, each of which has an estimated life of ten years.



PLC Acquisition. On December 31, 2003, ASG received a contribution of an 80% ownership interest in PLC from Holdings. PLC is included in the Companys consolidated financial statements for all periods presented as required under
the guidance of Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, for transactions involving the transfers of net assets between entities under common control.



Effective January 1, 2004, ASG purchased the remaining 20% interest in PLC
from the third-party minority interest holder for $1.8 million. The purchase price exceeded the carrying amount of the minority interest at that date by approximately $0.8 million. The consideration in excess of the carrying amount of the minority
interest was recorded as fishing rights, in the consolidated balance sheet as other intangible assets, and is being amortized through 2027.



Use of Estimates



The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.



Significant
estimates impacting the financial statements include the estimated fair values of the assets and liabilities acquired in connection with the acquisitions, depreciable lives of property, vessels, and equipment, the amortization lives of cooperative
and fishing rights and other intangibles, the fair values and the effectiveness of hedges against risks of foreign currency, interest and fuel price changes, the fair value of ASLP units used for equity-based compensation, capitalization of costs
incurred and collectibility of receivables.



Concentration
of Risk



A significant portion of the Companys sales
are denominated in Japanese yen. Material changes in the yen to dollar exchange rates have had and could have a significant impact on the Company. In an effort to manage



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



foreign exchange risk, the Company has certain foreign exchange contracts that require collateral of cash or letters of credit, which could have an adverse
impact on the Companys liquidity.



The Companys
operations are concentrated in the highly regulated fishing and seafood industry. Material changes in these industries or the applicable regulations have had and could have a significant impact on the Company.



The quality and quantity of the fish harvested and processed could be
impacted by biological and environmental risks such as disease and pollution.



Cash and Cash Equivalents



The Company considers all highly-liquid investments with a maturity of three months or less when purchased to be cash equivalents.



Accounts Receivable and Revenue Recognition



The Company recognizes revenues and records accounts receivable balances when persuasive evidence of an arrangement exists, delivery has occurred to the
extent required by the sales terms agreed to with the customer, the price is fixed or determinable and collectibility is reasonably assured. It is the Companys policy to evaluate its customers on at least an annual basis and obtain credit
insurance for those customers that provide an exposure to risk when available. The allowance for trade accounts receivable reflects managements estimate of probable losses inherent in the receivable balance. Management determines the allowance
based on known troubled accounts, historical experience, and other currently available evidence. It is the Companys policy to write off accounts if collectibility becomes remote.



Inventories



Inventories, which consist of processed seafood and certain raw materials, are stated at the lower of cost or market. Cost includes materials, labor,
shipping and handling charges, and manufacturing overhead related to harvesting and processing inventories. The average cost method is used to cost land-based processing inventories, which together represented approximately 47% and 53% of
consolidated total inventories at December 31, 2003, and 2004, respectively. The first-in, first-out method is used to cost at-sea processing inventories.



Property, Vessels and Equipment



Property, vessels and equipment are stated at cost. Significant additions and improvements are capitalized while repairs and ordinary maintenance are
expensed as incurred. Depreciation of property, vessels and equipment is provided using the straight-line method over the assets estimated useful lives as follows:



|                                        |  |               
|--------------------------------------- |  | --------------
|Buildings                               |  | 25 to 39 years
|Vessel hulls                            |  | 25 years      
|Machinery and equipment                 |  | 3 to 7 years  
|Fishing gear                            |  | 2 to 4 years  
|Other equipment, furniture and fixtures |  | 2 to 5 years  



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



Office leasehold improvements are amortized over the shorter of the estimated useful lives of the
assets or the respective lease terms, generally 3 to 5 years.



Costs of major scheduled vessel maintenance, which consists of dry-docking the vessel and overhauling or replacing certain components, are capitalized and depreciated over the period through the next major scheduled vessel maintenance,
which is generally performed on a three-year cycle.



Capital
projects in progress and related deposits are comprised of long-lived assets that have not been placed in service and the related vendor deposits. The Company classifies such costs as property, vessels and equipment when the underlying assets are
placed in service.



Impairment or Disposal of Long-Lived
Assets



Long-lived assets and amortizable intangible
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has no indefinite life intangible assets. Asset groups to be held and used are evaluated
for impairment by comparing the carrying amount to the future net cash flows expected to be generated by the asset group. If the carrying amount of the asset group exceeds the expected future net cash flows, undiscounted and without interest, the
impairment to be recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value. Asset groups to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.



Goodwill



The Company assesses goodwill for impairment by applying a fair value based
test at least annually or on an interim basis if circumstances change or events occur that indicate that goodwill may be impaired. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, goodwill is evaluated for impairment by
using a two-step process. Step 1 involves determining the fair value of the reporting unit, which is compared to the carrying amount of the reporting unit, including goodwill. If the carrying amount exceeds the fair value, then the goodwill may be
impaired and Step 2 is then required. In Step 2, the implied value of the goodwill is determined as the difference between the fair value of the reporting unit and the fair value of its net assets. If the carrying amount of the goodwill
exceeds the implied value, an impairment loss is recognized to the extent of the difference. In accordance with SFAS No. 142, the Company assigns goodwill to the reporting units that the Company expects to benefit from the expected synergies of
the business combinations that the Company has entered into.



Derivative Instruments and Hedging



The
Company records certain gains and losses on foreign currency transactions, cross currency interest rate swaps, interest rate caps, and fuel contracts in other income and expense. The Company follows the provisions of SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended. The Company has formally designated certain of its hedging derivative instruments as cash flow hedges, and gains and losses resulting from the effective portion of the hedge, which
relate to changes in spot rates, are deferred and included in income when the forecasted sales occur. Gains and losses resulting from all derivative instruments not designated and documented as hedges, and the ineffective portion of hedges, which
generally relate to the time value component of the contract, are recognized currently in earnings. In accordance with the Companys hedging policy, periodic assessments of effectiveness are performed on at least a quarterly basis.





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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



The Company has a significant amount of Japanese yen denominated sales; therefore, its earnings, cash
flows and financial position are exposed to foreign currency risk from yen-denominated sales transactions. The Company attempts to manage foreign currency risk by using foreign currency forward exchange contracts to hedge the variability of future
cash flows associated with Japanese yen-denominated sales. These contracts are arranged so that the Company sells Japanese yen to the counterparty at a fixed exchange rate and receives U.S. dollars in return. It is the Companys risk management
policy to hedge at least 80% of its forecasted yen sales over the next 12 months, 65% over months 13 to 24, 50% over months 25 to 36 and 35% over months 37 to 48.



Deferred Financing Costs and Debt Discount



It is the Companys policy to capitalize financing costs and expense such costs over the life of the financing
agreement to interest expense. All deferred financing fees are recognized as a component of interest expense using the straight-line method, which approximates the effective interest method over the term of the debt.



Incremental direct costs related to the offering of securities are deferred
to the extent that management expects that completion of the offering is probable and that the offering will not be postponed for an extended period. During 2003, the Company incurred costs of $7.9 million relating to a proposed senior credit
facility and initial public offering of income deposit securities (IDS) and subordinated notes and such costs were included in other non current assets in the accompanying consolidated balance sheet at December 31, 2003. This amount increased
to $19.3 million in 2004. During the third quarter of 2004, the Company determined that it was not probable that it would proceed with a proposed senior credit facility and the initial public offering and, as a result, the Company recorded a
write-off of $19.3 million of deferred costs related to the offering in 2004.



Advertising Costs



The
cost of advertising is expensed as incurred. Advertising expenses incurred during 2002, 2003 and 2004 were approximately $0.1 million, $0.2 million and $0.1 million, respectively.



Shipping and Handling Costs



In accordance with Emerging Issues Task Force No. 00-10, Accounting for Shipping and Handling Fees and Costs, the Company evaluates the
significance of shipping and handling costs for the purpose of determining the classification of shipping and handling costs in the statement of operations. The Company compares the effect on gross profit of including such costs as a component of
cost of sales as compared to selling, general and administrative expenses.



As a result of changes in the business over time and an upward trend in shipping and handling costs, the Company changed its policy in 2004. Carrier shipping and handling charges are classified in cost of sales in the
statement of operations and inventory costs in the balance sheet. In prior years, these charges were classified as selling, general and administrative expenses in the statement of operations and prepaid assets in the balance sheet. The shipping and
handling costs for the prior years have been reclassified to conform to the current year presentation. Management believes this presentation is preferable in the circumstances because shipping and handling costs in cost of sales better reflects the
cost of producing, distributing and selling its products in the statement of operations. Total shipping and handling costs for the year ended December 31, 2002, 2003, and 2004 were $24.0 million, $25.7 million, and $32.2 million, respectively. This
change does not affect the operating income, income (loss) before income taxes or net income (loss).



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



Equity-Based Compensation



Certain employees of the Company have equity-based compensation arrangements, which grant them options to acquire
partnership units of ASLP. The related compensation cost has been pushed down to the Companys financial statements.



The Company applies the intrinsic-value-based method of accounting for equity-based compensation awards to employees and has adopted only the disclosure
requirements of SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment of FASB No. 123. The following table illustrates the
effect on net income (loss) as if the fair-value-based method had been applied to all awards in each period. Equity-based compensation has no significant tax effect on the Company.



|                                                                                                   |  |                               |        |   |      |   |        |      |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ----------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------- | -
|                                                                                                   |  | 2002                          |        |   | 2003 |   |        | 2004 | 
|                                                                                                   |  | (Dollar Amounts in thousands) |       
|Net income (loss), as reported                                                                     |  | $                             | 8,496  |   |      | $ | 14,639 |      |  | $ | (28,888 | )
|Equity-based employee compensation expense included in reported net income (loss)                  |  |                               | 20,929 |   |      |   | 4,703  |      |  |   | 2,931   |  
|Equity-based employee compensation expense determined under fair-value-based method for all awards |  |                               | (5,600 | ) |      |   | (672   | )    |  |   | (1,253  | )
|                                                                                                   |  |                               |        |   |      |   |        |      |  |   |         |  
|Pro forma net income (loss)                                                                        |  | $                             | 23,825 |   |      | $ | 18,670 |      |  | $ | (27,210 | )
|                                                                                                   |  |                               |        |   |      |   |        |      |  |   |         |  



On October 19, 2004,
the Companys direct parent, ASG Consolidated and its subsidiary, ASG Finance, Inc. (ASG Finance), issued and sold 111/2% senior discount notes (Senior Discount Notes). The distribution of the offering proceeds from these notes to the Companys ultimate equity holders accelerated the vesting of certain outstanding options held by Company
employees under the ASLP Year 2000 Unit Option Plan (see Note 15). Since this transaction was also accompanied by a modification of certain option grants, the Company has measured the incremental compensation cost resulting from the
modifications in accordance with the provisions of SFAS No. 123 as of this date. The fair value of each option grant is estimated using the Black-Scholes option-pricing model. Assumptions used in estimating the fair value were as follows:



|                        |  |              |  |             |  |                
|----------------------- |  | ------------ |  | ----------- |  | ---------------
|                        |  | 2002         |  | 2003        |  | 2004           
|Risk free interest rate |  | 2.95%4.65%  |  | 2.52%3.05% |  | 2.58%2.85%    
|Expected life           |  | 2.755 years |  | 5 years     |  | 2.173.17 years



Expected volatility is
zero as ASLP has no public equity securities. Expected dividend yield is zero as distributions are expected only to pay theoretical tax.



Income Taxes



The income tax accounts reflected on these financial statements relate solely to a foreign sales company in Japan and SPC Trucking, both of which are
taxable entities. All other entities are flow through entities for tax purposes.



Segment information



During the fourth quarter of 2004, the Company reorganized its internal reporting structure due to certain changes in the internal organization and management, which changed the composition of its operating segments



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



to at-sea processing and land-based processing. In accordance with SFAS No. 131, Disclosure about Segments of an Enterprise and Related
Information, the prior period segment data has been restated to conform to the current presentation.



Major Customers



The Company did not have any individual customers that represented in excess of 10% of total sales for the years ended December 31, 2002, 2003 or 2004.



Reclassification and Revisions



Certain prior year items have been reclassified to conform to the current
year presentation.



Recent Accounting Pronouncements



Prospective Accounting Pronouncements. The
Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payment (123R), in December 2004. SFAS No. 123R is a revision of SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123R requires the fair value of employee awards issued, modified, repurchased or cancelled after implementation under share-based payment
arrangements to be measured as of the date the award is issued, modified, repurchased or cancelled. The resulting cost will then be recognized in the statement of earnings over the service period. Accordingly, if the Company was to adopt SFAS No.
123R, management anticipates that there would be no effect on the financial statements for options outstanding prior to adoption. As the Company has no equity securities traded in a public market, it is required to implement SFAS No. 123R using the
prospective transition method not later than fiscal 2006.



The
FASB issued SFAS No. 151, Inventory CostsAn Amendment of ARB No. 43, Chapter 4 in November 2004. Statement 151 amends the guidance in Accounting Research Bulletin (ARB) No. 43, Chapter 4, Inventory Pricing, to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling costs, and waste material (spoilage). Among other provisions, the new rule requires that items such as idle facility expense, excessive spoilage, double freight, and
rehandling costs be recognized as current-period charges regardless of whether they meet the criterion of so abnormal as stated in ARB No. 43. Additionally, SFAS 151 requires that allocation of fixed production overheads to the costs of
conversions be based on normal capacity of the production facilities. SFAS 151 is effective for fiscal years beginning after June 15, 2005, and is required to be adopted by the Company in the first quarter of fiscal 2006. The Company is currently
evaluating the effect that the adoption of SFAS 151 will have on its financial position and results of operations, but does not expect it to be material.



The FASB issued SFAS No. 153, Exchanges of Nonmonetary AssetsAn Amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions
in December 2004. SFAS 153 eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of Accounting Principles Board (APB) Opinion No. 29, Accounting for Nonmonetary
Transactions, and replaces it with an exception for exchanges that do not have commercial substance. SFAS 153 specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. SFAS 153 is effective for fiscal periods beginning after June 15, 2005, and is required to be adopted by the Company in the third quarter of fiscal 2005. The Company is currently evaluating the effect that
the adoption of SFAS 153 will have on its financial position and results of operations, but does not expect it to be material.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



In November 2004, the FASBs Emerging Issues Task Force (EITF) reached a consensus on Issue No.
03-13, Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations. The guidance should be applied to a component of an enterprise that is either disposed of or classified as held
for sale in fiscal periods that began after December 15, 2004. Management does not believe that the adoption of EITF 03-13 will have a significant effect on the Companys consolidated financial statements.



Note 2.    Inventories



Inventories at December 31, 2003 and 2004 consist of the following (in
thousands):



|                                                   |  |      |        |      |   |       
|-------------------------------------------------- |  | ---- | ------ | ---- | - | ------
|                                                   |  | 2003 |        | 2004
|Fish blocks and surimi                             |  | $    | 31,683 |      | $ | 22,889
|Finished seafood products                          |  |      | 15,235 |      |   | 18,219
|Breading, batter, additives and packaging supplies |  |      | 6,631  |      |   | 9,539 
|                                                   |  |      |        |      |   |       
|                                                   |  | $    | 53,549 |      | $ | 50,647
|                                                   |  |      |        |      |   |       



Note
3.    Prepaid Expenses



Prepaid
expenses at December 31, 2003 and 2004 consist of the following (in thousands):



|                                     |  |      |       |      |   |      
|------------------------------------ |  | ---- | ----- | ---- | - | -----
|                                     |  | 2003 |       | 2004
|Prepaid insurance                    |  | $    | 1,962 |      | $ | 2,242
|Vessel supplies                      |  |      | 204   |      |   | 1,696
|Fuel                                 |  |      | 916   |      |   | 1,678
|Fish quota purchases and dues        |  |      |      |      |   | 506  
|Fishing gear supplies                |  |      | 271   |      |   | 502  
|Permits, licenses and property taxes |  |      | 227   |      |   | 377  
|Deposits                             |  |      | 281   |      |   | 223  
|Other                                |  |      | 688   |      |   | 838  
|                                     |  |      |       |      |   |      
|                                     |  | $    | 4,549 |      | $ | 8,062
|                                     |  |      |       |      |   |      



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AMERICAN SEAFOODS GROUP LLC AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



Note 4.    Property, Vessels and Equipment



Property, vessels and equipment at December 31, 2003 and 2004 consist of the
following (in thousands):



|                                               |  |      |          |   |      |   |          |  
|---------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                               |  | 2003 |          |   | 2004 |  
|Vessels and related equipment                  |  | $    | 307,009  |   |      | $ | 314,542  |  
|Buildings                                      |  |      | 12,179   |   |      |   | 12,348   |  
|Machinery and equipment                        |  |      | 27,997   |   |      |   | 30,005   |  
|Fishing gear                                   |  |      | 5,822    |   |      |   | 7,820    |  
|Office equipment, furniture and fixtures       |  |      | 6,224    |   |      |   | 7,015    |  
|Office leasehold improvements                  |  |      | 591      |   |      |   | 678      |  
|                                               |  |      |          |   |      |   |          |  
|                                               |  |      | 359,822  |   |      |   | 372,408  |  
|Less accumulated depreciation and amortization |  |      | (135,327 | ) |      |   | (175,543 | )
|                                               |  |      |          |   |      |   |          |  
|                                               |  |      | 224,495  |   |      |   | 196,865  |  
|                                               |  |     
|Land                                           |  |      | 1,470    |   |      |   | 1,470    |  
|                                               |  |      |          |   |      |   |          |  
|                                               |  | $    | 225,965  |   |      | $ | 198,335  |  
|                                               |  |      |          |   |      |   |          |  



Depreciation of
property, vessels and equipment and amortization of leasehold improvements, net of amounts included in inventory, was $35.8 million, $37.4 million, and $41.5 million for the years ended December 31, 2002, 2003, and 2004, respectively. At December
31, 2003 and 2004, depreciation and amortization recorded in ending inventory was $4.0 million and $3.5 million, respectively.



Note 5.    Derivative Instruments



Foreign Exchange Contracts



As of December 31, 2004, the Company had open foreign exchange contracts, which are formally designated as cash flow hedges, maturing through December 30,
2008 with total notional amounts of $627.6 million, including $150.0 million subject to extension agreements, and options to enter into forward exchange contracts with notional amounts of $20.6 million.



In connection with these foreign currency forward exchange contracts, as of
December 31, 2004, the Company also had agreements to extend certain foreign exchange agreements that expire between March 2006 and December 2007 and between September 2006 and March 2008. These extension agreements would become binding and
effective only if the spot rate falls below a pre-specified level (trigger) on or before December 2005 (with respect to the agreements that expire between March 2006 and December 2007) or March 2006 (with respect to the agreements that expire
between September 2006 and March 2008). If the spot rate does not reach the trigger on or before December 2005 or March 2006, then neither the Company nor the counterparty shall have any right or obligation with respect to any of these extension
agreements. The trigger for each of these extension agreements is 99.00 Japanese yen per U.S. dollar and the total notional amount of these extension agreements is $150.0 million. The Company also has agreements with notional amounts of $39.0
million that were triggered on October 7, 2003 when the spot rate reached the trigger of 110.0 Japanese yen per U.S. dollar, which were designated and documented as hedges at that time.



The unrealized gains and losses resulting from the change in spot rates, or the effective portion, are recognized in
accumulated other comprehensive loss. These gains and losses are recognized in revenue when the forecasted



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



sales occur. The estimated net amount of existing gains (losses) as of December 31, 2002, 2003 and 2004 that were expected to be reclassified into revenue
within the next 12 months were approximately $1.8 million, ($17.7) million and $(16.5) million, respectively. Gains (losses) reclassified into revenue for the years ended December 31, 2002, 2003 and 2004 were approximately $15.7 million, $0.9
million and ($12.6) million, respectively.



The net unrealized
gains and losses recognized in earnings on foreign exchange contracts designated as cash flow hedges represents the change in fair value of these contracts arising from factors other than the change in spot rates, including the change in the time
value component of the contracts. The net unrealized gains (losses) recognized in earnings for the years ended December 31, 2002, 2003 and 2004 were approximately $18.3 million, ($4.2) million and ($4.0) million, respectively. These amounts are
included in the statements of operations as a component of foreign exchange gains (losses), net.



Realized gains (losses) included in the statements of operations as a component of foreign exchange gains (losses), net, for the years ended December 31,
2002 and 2004 were approximately $0.2 million and ($2.1) million, respectively, related to settled contracts. There was no significant realized net gain or loss for the year ended December 31, 2003. Net foreign currency transactions gains included
as a component of foreign exchange gains (losses) were approximately $0.5 million, $0.2 million and $0.3 million for the years ended December 31, 2002, 2003 and 2004, respectively.



The Company has options, which can be exercised at the Companys election and are formally designated as cash flow
hedges, to enter into foreign exchange contracts with a notional amount of $20.6 million and an exchange rate of 104.5 Japanese yen per U.S. dollar. The options, if exercised, provide that the Company receives U.S. dollars in exchange for Japanese
yen. The exercise dates are between January 2005 and July 2005. At December 31, 2004, the fair value of these options was not significant.



The majority of the aforementioned foreign exchange contracts are covered by a cash collateralization agreement that requires the Company to place
restricted cash deposits or standby letters of credit with the counterparty for unrealized losses on the total portfolio in excess of $17.5 million. At December 31, 2004, collateral against the unrealized losses on these contracts in excess of the
$17.5 million threshold was $21.4 million, which was satisfied by a standby letter of credit in the amount of $27.5 million.



During 2004, the Company entered into foreign exchange contracts to purchase Japanese yen for U.S. dollars with an aggregate notional amount of $512.5
million, exchange rates ranging from 108.75 Japanese yen per U.S. dollar to 104.80 Japanese yen per U.S. dollar and maturity dates between July 30, 2004 and March 30, 2006. These foreign exchange instruments were not designated as hedges, so all
realized and unrealized gains and losses were recognized in the statement of operations as a component of foreign exchange gains (losses) net. The Company settled these contracts, or the contracts matured during the year, at a net realized gain of
$0.1 million.



In August 2004 the Company entered into variable
to fixed-rate cross currency interest swap contracts with an aggregate notional amount of $75.0 million. Under the terms of these contracts, the Company pays a fixed rate of interest in Japanese yen and receives payments on a variable rate of
interest in U.S. dollars based on the three-month LIBOR rate. The objective of these instruments was to reduce the Companys exposure to interest rate risk related to its new credit facility that was to have been in place upon consummation of
the IDS offering and subordinated notes, and to provide additional risk management against Japanese currency fluctuations related to the Companys sales to Japan. As these instruments have not been designated as hedges, any unrealized gains and
losses resulting from the change in fair value are recognized in the statements of operations as a component of gain or loss on other derivatives. On September 27, 2004, the Company terminated one of the cross currency



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



swaps with a notional amount of $15.0 million for a nominal fee. As of December 31, 2004, the Company was party to cross currency interest swap contracts
with an aggregate notional amount of $60 million. The fair value of these outstanding contracts at December 31, 2004 was an unrealized loss of approximately $6.3 million.



The impact of a 1% change in exchange rates is approximately $5.5 million and $4.3 million for the notional amount of
contracts outstanding at December 31, 2003 and 2004, respectively. A change in fair value would be recognized in earnings to the extent the gain or loss results from factors other than the change in spot rates on contractual foreign exchange
instruments designated as hedges.



Interest Rate Swap and
Cap Agreements



The Company has interest rate caps with
notional amounts of $21.0 million and $72.5 million maturing in March 2005 and June 2005, respectively. The cap rate is 5.0% for each cap and the variable rate is the three-month LIBOR rate. As these instruments are not considered to be effective
until the interest rate of the underlying exceeds the cap rate, any unrealized gains or losses are recognized in the statements of operations as a component of gain or loss on other derivatives. During 2002, 2003 and 2004, the related gain (loss)
was approximately $0.2 million, $(0.4) million and $(0.1) million, respectively. The fair value of these instruments at December 31, 2004 was not significant.



Fuel Contracts



The Company has fuel contracts whereby the Company pays a fixed price per gallon and receives a floating price per gallon with payments calculated on the
remaining notional amount of 10.0 million gallons over the term of the contracts through October 31, 2006. These contracts were entered into in November 2004. In accordance with the Companys hedging policy in relation to these contracts,
periodic assessments of effectiveness are performed on at least a quarterly basis. Based on the results of these analyses, the Company determined that these new instruments were not highly effective. Accordingly, an unrealized loss of approximately
$0.7 million representing the fair value of these instruments as of December 31, 2004 was recorded in the statement of operations as a component of gain or loss on other derivatives. Prior to these new instruments, the Company had other fuel
contracts with a notional amount of 7.7 million gallons that expired in November 2004. As of December 31, 2003, the fair value of these instruments was an unrealized gain of approximately $1.1 million, which was recorded as a component of
accumulated other comprehensive loss as these instruments were highly effective. During 2004 the hedged fuel purchases were completed, these contracts matured and $3.0 million in gains were reclassified into cost of sales.



Note 6.    Cooperative and Fishing Rights, Goodwill and Other
Intangibles



Cooperative rights were recorded at their
estimated fair value of $138.2 million in connection with the Original Acquisition. The cooperative rights are being amortized on a straight-line basis over 23.2 years, based principally on the average remaining lives of the vessels. There have been
no events or circumstances that warrant a revision to the remaining period of amortization.



On December 16, 2002, the Company completed the SPC Acquisition. The allocation of the purchase price included approximately $4.9 million in intangible assets other than goodwill. These acquired intangible assets
consist principally of a trade name and customer-based intangibles, each of which has an estimated life of ten years.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



In the third quarter of 2004, management determined that it was more likely than not that the
carrying amount of net assets, including goodwill, at SPC exceeded the fair value of the reporting unit. SPCs recent operating results have not met managements expectations primarily as a result of increased fish costs paid to catfish
farmers combined with lower processing yields. The Company engaged a valuation firm to assist management in determining the fair value of SPC as of August 31, 2004 and the amount of goodwill impairment in accordance with SFAS No. 142. Pursuant to
SFAS No. 142, the Company recorded an impairment charge of $7.2 million in the third quarter of 2004, which represented the entire carrying amount of goodwill associated with SPC.



As of December 31, 2004, goodwill is primarily comprised of the $33.7 million incurred in connection with the Original
Acquisition. Management has determined the fair value of goodwill associated with the reporting units within the at-sea processing segment exceeds its carrying amount by a substantial margin and assets and liabilities that make up these reporting
units have not changed significantly since the Original Acquisition. Accordingly, management has concluded that the likelihood that a determination that the fair value would be less than the current carrying amount of the reporting unit is remote.



On January 28, 2000, the Company entered into a fishing rights
agreement with Rebecca Ann Fisheries, Inc. (RAFI), pursuant to which the Company obtained RAFIs right to harvest the entire portion of the total allowable catch allocated to it under the pollock conservation cooperative program. On January 29,
2003, the Company settled its obligation to RAFI at approximately the carrying amount of $5.2 million and completed the purchase of substantially all the rights from RAFI on April 1, 2003 for additional consideration of approximately $1.0 million.



Amortization expense for cooperative and fishing rights and
other intangibles and the estimated useful lives for the years ended December 31, 2002, 2003 and 2004 consist of the following (in thousands):



|                                 |  |      |  |                      |       |      |   |       |  |   |      
|-------------------------------- |  | ---- |  | -------------------- | ----- | ---- | - | ----- |  | - | -----
|                                 |  |      |  | Amortization expense
|                                 |  | Life |  | 2002                 |       | 2003 |   | 2004 
|Cooperative rights               |  | 23.2 |  | $                    | 3,823 |      | $ | 3,823 |  | $ | 3,822
|SPC customer base and trade name |  | 10.0 |  |                      |      |      |   | 520   |  |   | 520  
|RAFI fishing rights              |  | 21.8 |  |                      | 641   |      |   | 374   |  |   | 137  
|PLC fishing rights               |  | 23.2 |  |                      | 55    |      |   | 55    |  |   | 88   
|                                 |  |      |  |                      |       |      |   |       |  |   |      
|                                 |  |      |  | $                    | 4,519 |      | $ | 4,772 |  | $ | 4,567
|                                 |  |      |  |                      |       |      |   |       |  |   |      
|Weighted-average life            |  | 22.7 |  |                      |       |      |   |       |  |   |      
|                                 |  |      |  |                      |       |      |   |       |  |   |      



Amortization of
cooperative and fishing rights is classified in cost of sales in the statement of operations. In prior years, this amortization expense was classified as operating expenses. Amortization of cooperative and fishing rights for the prior years has been
reclassified to conform to the current year presentation. Amortization of the SPC customer base and trade name is classified in selling, general and administrative expenses.



The estimated aggregate amortization expense for cooperative and fishing rights and other intangibles for each of the next
five years is $4.6 million.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



Note 7.    Accounts Payable and Accrued Expenses



Accounts payable and accrued expenses at December 31, 2003 and 2004 consist
of the following (in thousands):



|                                 |  |      |        |      |   |       
|-------------------------------- |  | ---- | ------ | ---- | - | ------
|                                 |  | 2003 |        | 2004
|Accounts payable                 |  | $    | 22,775 |      | $ | 14,870
|Deferred compensation            |  |      | 4,580  |      |   | 5,331 
|Accrued payroll and benefits     |  |      | 2,812  |      |   | 4,281 
|Interest payable                 |  |      | 5,333  |      |   | 3,741 
|Alaska landing tax payable       |  |      |       |      |   | 1,406 
|Accrued protection and indemnity |  |      | 503    |      |   | 334   
|Accrued selling expense          |  |      | 761    |      |   | 142   
|Accrued income taxes             |  |      | 24     |      |   | 33    
|Other accrued liabilities        |  |      | 3,955  |      |   | 2,376 
|                                 |  |      |        |      |   |       
|                                 |  | $    | 40,743 |      | $ | 32,514
|                                 |  |      |        |      |   |       



Note
8.    Long-Term Debt



Long-term debt
and interest rates at December 31, 2003 and 2004 were as follows (in thousands):



|                                                                                    |  |      |         |      |   |        
|----------------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                                                                    |  | 2003 |         | 2004
|Senior Subordinated Notes, interest at 101/8%, maturing in 2010                     |  | $    | 175,000 |      | $ | 175,000
|Term A loan, interest at 4.17% and 5.56%, respectively, maturity in 2007            |  |      | 62,541  |      |   | 45,319 
|Term B loan, interest at 4.42% and 5.81%, respectively, maturity in 2009            |  |      | 250,241 |      |   | 244,303
|Revolving Credit Facility, interest 4.61% and 5.56%, respectively, maturity in 2007 |  |      | 39,500  |      |   | 16,500 
|                                                                                    |  |      |         |      |   |        
|Total long-term debt                                                                |  |      | 527,282 |      |   | 481,122
|Less current portion of long-term debt                                              |  |      | 15,929  |      |   | 26,547 
|                                                                                    |  |      |         |      |   |        
|Long-term debt, net of current portion                                              |  | $    | 511,353 |      | $ | 454,575
|                                                                                    |  |      |         |      |   |        



At December 31, 2004,
the future maturities of long-term debt are as follows (in thousands):



|                     |  |   |        
|-------------------- |  | - | -------
|2005                 |  | $ | 26,547 
|2006                 |  |   | 19,503 
|2007                 |  |   | 34,120 
|2008                 |  |   | 30,295 
|2009                 |  |   | 195,657
|Thereafter           |  |   | 175,000
|                     |  |   |        
|Total long-term debt |  | $ | 481,122
|                     |  |   |        



ASG issued and sold
$175.0 million of Senior Subordinated Notes as part of the Recapitalization on April 18, 2002. These notes mature in 2010, and interest is paid semi-annually in April and October of each year at a fixed annual interest rate of 101/8%. Interest expense for the Senior Subordinated Notes was $12.4 million in 2002, and approximately $18.0 million
per year thereafter.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



The indenture for the Senior Subordinated Notes contain various financial, operating and restrictive
covenants and impose restrictions on capital expenditures. The indentures governing the Senior Subordinated Notes also impose restrictions similar to the Credit Agreement restrictions (described below) on the operation of the business. The Company
was in compliance with the covenants of the indenture of the Senior Subordinated Notes at December 31, 2004.



Credit Agreement



On April 18, 2002, ASG and its subsidiaries entered into a senior credit agreement (Credit Agreement) with a syndicate group of banks. The Credit
Agreement provides for a revolving loan commitment through September 30, 2007 of $75.0 million with a sub-credit facility for letters of credit of up to $30.0 million. The open letters of credit decrease the amount of available borrowings under this
credit facility. The interest on the revolving loan is determined based on a rate, which is calculated using LIBOR (Eurodollar rate) or the higher of the syndicate group of banks prime rate and the federal funds effective rate plus 0.5% per
annum (base rate) basis at the Companys option, plus a margin determined by results of financial covenant ratios. The margins range from 2.25% to 3.00% for Eurodollar rate loans and 1.25% to 2.00% for base rate loans. The average interest
rates on the revolving credit facility were 5.6%, 5.5% and 5.1% in 2002, 2003 and 2004, respectively, and the interest expense incurred was $0.9 million, $1.9 million, and $1.7 million in 2002, 2003, and 2004, respectively. The Credit Agreement also
provides for a commitment fee of 0.5% to 0.375% of the unused portion of the revolving commitment, depending on the results of financial covenant ratios.



As of December 31, 2003 and 2004, available borrowings under the revolving loan credit facility are summarized as follows (in thousands):



|                                |  |      |        |      |   |       
|------------------------------- |  | ---- | ------ | ---- | - | ------
|                                |  | 2003 |        | 2004
|Total revolving credit facility |  | $    | 75,000 |      | $ | 75,000
|Less outstanding commitments:   |  |      |        |      |   |       
|Outstanding balance             |  |      | 39,500 |      |   | 16,500
|Open letters of credit          |  |      | 16,000 |      |   | 27,500
|                                |  |      |        |      |   |       
|Total outstanding commitments   |  |      | 55,500 |      |   | 44,000
|                                |  |      |        |      |   |       
|Available borrowings            |  | $    | 19,500 |      | $ | 31,000
|                                |  |      |        |      |   |       



The Credit Agreement,
as amended, also provides for a long-term facility, the terms of which are summarized as follows:



| |  |  | Term A loan in the amount of $90.0 million, maturing on September 30, 2007;
| | - |  | ---------------------------------------------------------------------------



| |  |  | Term B loan in the amount of $280.0 million, maturing on March 31, 2009;
| | - |  | ------------------------------------------------------------------------



| |  |  | Interest payments on the Term A and B loans are made quarterly and may be determined on a Eurodollar rate or the base rate basis at the Companys option, plus a margin
determined by ASGs financial covenant ratios. The margins range from 2.25% to 3.25% for Eurodollar loans and 1.25% to 2.25% for base rate loans, depending on the results of financial covenant ratios. The Company incurred interest expense under
the Term A and B loans of $14.1 million, $14.8 million, and $14.2 million in 2002, 2003, and 2004, respectively;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Term A and B loans require quarterly principal payments that aggregate $3.8 million beginning in March 2005, increasing periodically to a maximum of $7.9 million in June 2008, with
a final payment of $195.7 million in March 2009; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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December 31, 2003 and 2004



| |  |  | Term A and B loans also require additional excess cash flow payments to be made in accordance with the Credit Agreement, which reduce future quarterly principal payments, and as a
result, the Company made additional principal payments of $33.4 and $8.3 million in 2003 and 2004, respectively, and estimates the payment to be $9.8 million in 2005.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Credit Agreement is secured by substantially all assets of ASG and its subsidiaries, including intangible assets. The
Credit Agreement requires ASG and its subsidiaries to meet certain financial tests, including without limitation, a maximum leverage ratio, a minimum interest coverage ratio and a minimum fixed charge coverage ratio. In addition, the Credit
Agreement contains certain covenants which, among other things, limit the incurrence of additional indebtedness, liens and encumbrances, changes in the nature of the business, investments, dividends and other restricted payments, prepayments of
certain indebtedness (including the Senior Subordinated Notes), certain transactions with affiliates, asset sales, acquisitions, capital expenditures, mergers and consolidations, sales of receivables and other matters customarily restricted in such
agreements.



The Company has obtained amendments to its Credit
Agreement, summarized as follows:



| |  |  | During January 2004, ASG obtained an amendment to its debt covenants at a cost of $0.4 million that, among other things, adjusted the required leverage ratio as of December 31, 2003
and March 31, 2004 primarily due to adverse surimi prices. During the third quarter of 2003, an adjustment was made to reverse the management bonus accrued through June 30, 2003 of approximately $1.2 million in accordance with certain employment
agreements and the Companys general bonus policy, which require that performance bonuses are not payable for any year in which there is or would be a covenant violation. This amendment and the reversal of the bonuses allowed the Company to
maintain compliance with the leverage ratio covenant under the credit agreement; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In October 2004, ASG obtained another amendment to its credit facility, at a cost of $0.5 million that, among other things: (1) permitted the Senior Discount Notes offering by the
Companys direct parent, ASG Consolidated, and its subsidiary, ASG Finance (referred herein collectively as the Issuers) and the intended use of proceeds; (2) permitted the formation of the Issuers and provided for guarantees by the
Issuers of ASGs obligations under the credit facility and a pledge of ASG Consolidateds ownership interests in ASG to secure the guarantee; (3) permitted the sale of certain distribution-related assets of SPC Trucking up to an aggregate
fair market value of $7.5 million; (4) amended the required leverage ratio beginning September 30, 2004 and made other covenant modifications to provide necessary covenant relief to the Company primarily due to recent adverse surimi prices and a
decline in the performance of its catfish operations; and (5) excluded certain expenses the Company has incurred from the definition of EBITDA (earnings before interest, taxes, depreciation and amortization) for its covenant calculations, including
the write-off of offering costs of up to $19.0 million related to the cancelled of the IDS offering.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of December 31, 2004, the Company was in compliance with its covenants under the Credit Agreement.



Deferred Financing Costs



Financing costs were paid in connection with the Credit Agreement and
related amendments and offering of the Senior Subordinated Notes. These deferred financing costs are being amortized into interest expense on a straight-line basis, which approximates the effective interest method over the periods presented.
Amortization of deferred financing costs was approximately $3.8 million, $5.2 million and $5.3 million for the years ended December 31, 2002, 2003 and 2004, respectively.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



Debt Prior to April 18, 2002 Recapitalization



On January 28, 2000, ASG and its subsidiaries entered into a revolving
credit and term loan agreement (Loan Agreement) with a syndicate group of banks. The term loan facility portion had two components; a $175 million term loan and a $75 million term loan. All amounts owing under the Loan Agreement of approximately
$187.2 million were paid off from the proceeds of the Recapitalization on April 18, 2002, plus $5.9 million in early payment charges. Interest expense on the Loan Agreement was $2.8 million for the period January 1 to April 18, 2002. The Loan
Agreement was secured by all significant assets of ASG, including intangible assets, and had covenants requiring additional principal payments on the term loans based on the issuance of equity, sale of assets and an excess cash flow calculation
performed annually. On April 18, 2002, the carrying amount of the related deferred financing fees of $5.9 million was charged to expense in the statement of operations.



On December 26, 2001, PLC entered into an $8.0 million revolving term note with a financial institution which was payable in
equal semi-annual installments of $0.4 million until January 1, 2012. The purpose of the revolving term note was to refinance the loans related to the purchases of the freezer-longliner vessels. Interest was determined, at ASG and its subsidiaries
option, based on a series of rate options, plus a 2.25% margin. The rate options ranged from a base rate, which was an adjustable interest rate set by a banks 30-day prime rate. The interest rate at December 31, 2002 was 3.6%. In December
2003, this note was paid in full.



Note 9.    Related
Parties



Transactions with related parties include the
following as of and for the years ended December 31 (in thousands):



|                                                                                              |  |      |        |      |   |        |  |   |       
|--------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------
|                                                                                              |  | 2002 |        | 2003 |   | 2004  
|Revenue:                                                                                      |  |      |        |      |   |        |  |   |       
|Management, marketing and consulting fees                                                     |  | $    | 709    |      | $ |       |  | $ |      
|                                                                                              |  |      |        |      |   |        |  |   |       
|Cost of sales:                                                                                |  |      |        |      |   |        |  |   |       
|Purchases of fish quota                                                                       |  |      | 15,278 |      |   | 14,917 |  |   | 14,995
|Insurance                                                                                     |  |      | 3,081  |      |   | 2,407  |  |   | 6,262 
|Raw material purchases                                                                        |  |      | 4,377  |      |   |       |  |   |      
|                                                                                              |  |      |        |      |   |        |  |   |       
|Total cost of sales                                                                           |  |      | 22,736 |      |   | 17,324 |  |   | 21,257
|                                                                                              |  |      |        |      |   |        |  |   |       
|Selling, general and administrative expenses:                                                 |  |      |        |      |   |        |  |   |       
|Aircraft lease expense, net of charter revenue of $71 and $146 in 2003 and 2004, respectively |  |      |       |      |   | 702    |  |   | 732   
|Marketing and commissions                                                                     |  |      | 572    |      |   | 533    |  |   | 699   
|Insurance                                                                                     |  |      | 226    |      |   | 272    |  |   | 223   
|Directors fees                                                                               |  |      | 150    |      |   | 150    |  |   | 150   
|                                                                                              |  |      |        |      |   |        |  |   |       
|Total selling, general and administrative expenses                                            |  |      | 948    |      |   | 1,657  |  |   | 1,804 
|                                                                                              |  |      |        |      |   |        |  |   |       
|Other:                                                                                        |  |      |        |      |   |        |  |   |       
|Interest expense                                                                              |  |      | 4,901  |      |   |       |  |   |      
|Interest income                                                                               |  |      | 157    |      |   | 288    |  |   | 228   
|                                                                                              |  |      |       
|Note receivableoutstanding at end of period                                                  |  |      | 6,000  |      |   | 6,000  |  |   |      



There are a limited
number of entities that hold quota rights to fish for pollock in the Bering Sea. Quota rights are expressed in metric tons of harvestable fish. It is common for such entities to sell quota to both fishing



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



companies in which they hold a financial interest and to others. Fishing companies acquire quota to increase the volume of pollock harvested, processed and
sold. The Company purchases quota from a number of such entities including a partner of ASLP. Purchases of fish quota from related parties comprised 79.7%, 62.6% and 57.8% of total purchases of fish quota in 2002, 2003 and 2004, respectively.



In December 2004, ASGs chief executive officer and chief
operating officer entered into contribution agreements with ASLP pursuant to which they agreed to make capital contributions of $20.0 million and $2.8 million, respectively, to ASLP in the event of a failure of ASG to make any principal payment
under the Credit Agreement. ASLP in turn agreed to contribute these amounts to the capital of Holdings and to cause Holdings and its subsidiaries to contribute these amounts to ASG. The contribution obligation will expire on the earlier of the
repayment of all principal and interest due under the Credit Agreement or January 16, 2006.



On July 2, 2002, the Company loaned $6 million to its chief executive officer to purchase ownership interests in ASLP and Holdings from a selling ASLP partner at the same price per unit paid by other purchasing
partners at that time. The loan bore interest at the prime rate plus one-half percent per annum, reset on January 1, April 1, July 1 and October 1 of each year that the loan was outstanding. During 2002, 2003, and 2004, approximately $0.2 million,
$0.3 million, and $0.2 million, respectively of related party interest income had been recorded pursuant to this loan. The loan effective rate was 5.25% and 4.5% at December 31, 2002, and 2003, respectively. Principal and interest on the loan,
totaling $6.3 million, was paid in full in October 2004.



The
Company leases two aircraft on a month-to-month basis from ASLP. During 2003 and 2004, the Company generated $0.2 million and $0.4 million, respectively from the short-term rental of an aircraft, which has been recorded as a reduction of lease
expense included in selling, general and administrative expenses. In March 2005, the Company subleased one of the aircraft to a related party for a monthly fee of $37,500 and an hourly usage fee of $1,533.



The Company purchases certain insurance policies through an insurance
brokerage company in which its president is the brother of the Companys chief executive officer. During 2002, 2003 and 2004, the related insurance premiums were approximately $3.3, $2.7 and $6.5 million, respectively.



In January 2000, ASC, Inc. and Holdings entered into two long-term notes
payable (Seller Notes) with Norway Seafoods. The Seller Notes provided financing for the Original Acquisition. The face amounts of the Seller Notes totaled $95.0 million. The Seller Notes accrued interest at 10% for the first year and required
semi-annual interest payments. Interest expense related to these Seller Notes was $3.5 million for the year ended December 31, 2002 and amortization expense related to this discount was $0.5 million in 2002. These notes were repaid in connection
with the Recapitalization in 2002.



Note 10.    Income
Taxes



The taxable entities in the consolidated group
include a foreign sales company in Japan and, beginning in December 2002, SPC Trucking. The Company and all of its other subsidiaries are flow through entities for income tax purposes. Therefore, the provision for income taxes for these periods
reflects only the provision of the taxable entities. The total current provision for income taxes was $81,000, $41,000 and $31,000 for the years ended December 31, 2002, 2003 and 2004, respectively.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



A reconciliation of the statutory tax rate to the effective tax rate is as follows:



|                                |  |       |    |  |       |    |  |       |   
|------------------------------- |  | ----- | -- |  | ----- | -- |  | ----- | --
|                                |  | 2002  |    |  | 2003  |    |  | 2004  |   
|Statutory rate                  |  | 35.0  | %  |  | 35.0  | %  |  | 35.0  | % 
|Impact of flow-through entities |  | (34.1 | )% |  | (34.7 | )% |  | (35.1 | )%
|                                |  |       |    |  |       |    |  |       |   
|Effective rate                  |  | 0.9   | %  |  | 0.3   | %  |  | (0.1  | )%
|                                |  |       |    |  |       |    |  |       |   



The tax effects of
temporary differences and carry forwards that give rise to deferred tax assets and liabilities at December 31, 2002, 2003, and 2004 are not material. The book basis of the Companys net assets exceeds tax basis by approximately $148.0 million,
and $123.7 million at December 31, 2003 and 2004, respectively.



The Internal Revenue Service is currently auditing ASGs tax return for 2001. No adjustments have been proposed to date by the Internal Revenue Service as a result of this examination.



Note 11.    Retirement Plans



The Company sponsors a defined contribution profit sharing plan that covers
all eligible full-time employees. Profit sharing contributions to the plan are at the discretion of management. The Company also makes matching contributions equal to 25% of the employees contributions to the plan. The total amount of the
Companys contributions was approximately $0.2 million in 2002 and $0.1 million in 2003 and 2004, respectively.



The Company also sponsors a nonqualified deferred compensation plan for certain employees. The Company makes matching contributions equal to 25% of the
employees deferred compensation up to a maximum Company contribution of 15.0% of the employees annual compensation. Employees earnings under this plan are calculated to be equal to the returns of certain public funds as designated
by the employee. To assist in funding the deferred compensation program, the Company has invested in corporate-owned life insurance policies. The cash surrender value of these policies is approximately $3.9 million and $5.2 million at December 31,
2003 and 2004, respectively, and is included in other assets. The liability for the deferred compensation was approximately $4.6 million and $5.3 million at December 31, 2003 and 2004, respectively, and is included in accrued expenses.



Note 12.    Commitments and Contingencies



Leases



The Company leases offices, aircraft, two warehouses, parking space, and land under operating leases. Lease expense was $3.0
million, $3.9 million, and $3.8 million for the years ended December 31, 2002, 2003, and 2004 respectively.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



Minimum future lease payments under non-cancelable operating leases having remaining terms in excess
of one year as of December 31, 2004 are as follows (in thousands):



|           |  |   |       
|---------- |  | - | ------
|2005       |  | $ | 3,764 
|2006       |  |   | 3,709 
|2007       |  |   | 3,593 
|2008       |  |   | 2,089 
|2009       |  |   | 1,908 
|Thereafter |  |   |      
|           |  |   |       
|           |  | $ | 15,603
|           |  |   |       



Legal Matters



On October 19, 2001, a complaint was filed in the United
States District Court for the Western District of Washington and the Superior Court of Washington for King County. An amended complaint was filed in both courts on January 15, 2002. The amended complaint was filed against the Company by a former
vessel crew member on behalf of himself and a class of over 500 seamen, although neither the United States District Court nor the Superior Court certified this action as a class action. On June 13, 2002, the plaintiff voluntarily dismissed the
complaint filed in the Superior Court. The complaint filed alleges that the Company breached its contract with the plaintiffs by underestimating the value of the catch in computing the plaintiffs wages. The plaintiff demanded an accounting of
their crew shares pursuant to federal statutory law. In addition, the plaintiff requested relief under a Washington statute that would render the Company liable for twice the amount of wages withheld, as well as judgment against the Company for
compensatory and exemplary damages, plus interest, attorneys fees and costs, among other things. The plaintiff also alleged that the Company fraudulently concealed the underestimation of product values, thereby preventing the discovery of
their cause of action. The conduct allegedly took place prior to January 28, 2000, the date the Companys business was acquired by ASLP. On September 25, 2003, the court entered an order granting the Companys motion for summary judgment
and dismissing the entirety of plaintiffs claims with prejudice and with costs. The plaintiff filed a motion for reconsideration of this order that was denied by the court. The plaintiff then appealed the District Court decision to the Ninth
Circuit Court of Appeals. The appeal is currently pending. The Company has not recorded a liability related to this matter as of December 31, 2004 as the outcome is uncertain and the amount of loss, if any, is not estimable.



In 2001 and 2002, the Company became aware of allegations that certain crew
members may have tampered or attempted to tamper with measurement equipment on board one or more of the Companys vessels. The National Marine Fisheries Service (NMFS) conducted an investigation regarding these allegations, and in consultation
with the NMFS, the Company also conducted an internal investigation regarding these allegations. The Company has received notice that the investigations related to the 2001 and 2002 allegations have been closed with no significant findings. In 2004,
the Company received additional tampering allegations relating to one of its vessels. The Company understands that the NMFS may be investigating these new allegations; however, it has not received any formal notice from the NMFS and is unaware of
the status of any such investigation. To date, no fines or penalties have been assessed against the Company in connection with any of these allegations. However, the ultimate outcome of these matters is uncertain.



Other lawsuits relate principally to employment matters and are not expected
to be material to the Companys consolidated financial statements taken as a whole.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



Protection and Indemnity Claims



The Company has protection and indemnity policies for each of its fishing vessels. The deductible amounts for the policies
are as follows:



|               |  |                                   |              
|-------------- |  | --------------------------------- | -------------
|For the years: |  | Deductible per claimor occurrence
|2002           |  | $                                 | 20,000-50,000
|2003           |  | $                                 | 20,000-50,000
|2004           |  | $                                 | 20,000-45,000



The Company incurred
expenses of approximately $1.7 million, $2.2 million and $1.8 million related to costs paid under deductibles for the years ended December 31, 2002, 2003 and 2004, respectively.



Fish Purchase Commitments



The Company is party to fixed obligation agreements with Alaskan community development groups that provide the Company with an exclusive license to
harvest and process all or part of the groups portion of the total allowable catch of pollock allocated to them under the Alaska Community Development Quota (CDQ) program. Under these agreements, the Company is obligated to make minimum
purchases over the next year, which will be based on the total allowable catch for the year. Based on the 2005 total allowable catch, minimum purchases would total approximately $27.5 million. The Company purchased $13.9 million, $21.6 million and
$26.0 million of CDQ for the years ended December 31, 2002, 2003, and 2004, respectively.



The Company purchased $5.2 million, $2.2 million, and $5.0 million of fish from other catcher vessels in 2002, 2003, and 2004, respectively. The Company is obligated to purchase $2.8 million of fish from catcher
vessels in 2005.



At the option of the previous owner of SPCC,
the Company is obligated to purchase up to 5 million pounds of catfish per year from catfish farms owned by this previous owner at a price based on a market index. The term of this obligation is ten years ending January 1, 2013. The Company
purchased from the previous owner 2.4 million, and 3.1 million pounds of catfish for $1.3 million, and $2.0 million for the years ended December 31, 2003 and 2004, respectively. Fish purchases from the previous owner of SPCC were not
significant for the period from December 16, 2002 through December 31, 2002.



ASG Consolidated



ASG
Consolidateds principal source of cash flow is from distributions from ASG. ASGs ability to make distributions to ASG Consolidated will depend upon the operating results of ASG and its subsidiaries. ASG is subject to restrictions under
its Credit Agreement and the indenture governing its Senior Subordinated Notes.



On October 19, 2004, ASG Consolidated and its wholly-owned subsidiary, ASG Finance, Inc., issued and sold 111/2% Senior Discount Notes for gross proceeds of $124.9 million. As of December 31, 2004, the carrying amount of this debt was approximately $127.7 million, which is not recorded in the accompanying
consolidated balance sheet. ASG and its subsidiaries have not guaranteed the repayment of the Senior Discount Notes. The Senior Discount Notes will have an accreted value of $196.0 million principal amount at maturity in November 2011. ASG
Consolidateds carrying balance on the notes is being accreted using the effective interest method from origination through the period ending November 1, 2008. No interest will be paid during this period. Thereafter, interest will accrue and be
payable semi-annually by ASG Consolidated on May 1 and November 1 of each year, at a fixed annual rate of 111/2%. The first interest-only payment is due on May 1, 2009.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



Note 13.    Fair Value of Financial Instruments



The Companys financial instruments include cash and cash equivalents,
receivables, foreign exchange contracts, cross currency interest rate swap agreements, interest rate cap agreements, fuel contracts, accounts payable, and short-term and long-term borrowings. The Company believes that the fair value of these
financial instruments approximates their carrying amounts based on current market indicators, such as prevailing interest rates and market pricing models, except that the estimated fair value of the Companys Senior Subordinated Notes was
approximately $200.0 million and $188.1 million at December 31, 2003 and 2004, respectively, which exceeds the $175.0 million carrying amount.



Note 14.    Members Interest



Restrictions on Distributions and Liabilities



As described in Note 1, the Company is part of a group of subsidiaries that are owned by ASLP. The partners of ASLP do not have any direct liability
for the acts of the Company. There are restrictions imposed on distributions to members by covenants contained in the Credit Agreement and Senior Subordinated Note indenture as described in Note 8. Distributions are limited to an amount that will
enable the partners to pay theoretical tax, as defined in the Credit Agreement, on the amount of taxable income of the Company allocated to its members.



Non-Cash Capital Contribution



During the fourth quarter of 2004, ASLP made a non-cash capital contribution to ASG of a $20.0 million receivable from ASG.



Tax Distributions and Contributions



The Company makes distributions to its members for the tax liabilities they
incur on their allocated portion of taxable income. More specifically, the Company makes distributions to its members in amounts equal to the theoretical tax on the Companys taxable income (determined without regard to deductions for interest
on the notes or other deductions incurred by entities above ASG), whether or not such amounts are required by such owners actually to pay taxes on the income that we allocate to them. These payments are recorded as distributions to members on the
statement of members equity (deficit).



During 2004, ASC,
Inc. received a tax refund in the amount of $2.2 million of prior years taxes and contributed the cash to ASG.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



Note 15.    Partnership Unit Option Plan



ASLP adopted a unit option plan on January 28, 2000, as amended and restated
effective April 18, 2002 and as amended on December 16, 2002 (Unit Option Plan). Options were granted under the Unit Option Plan to officers and certain key employees. The purpose of the Unit Option Plan is to promote the success of ASLP and the
interests of its partners by attracting, motivating, retaining and rewarding eligible participants.



The Unit Option Plan has been administered by the board of directors of ASC Management, Inc., the general partner of ASLP. The board selects eligible
participants for participation in the Unit Option Plan and determines the number of partnership units subject to each option granted thereunder, the exercise price of such options, the time and condition of exercise of such options and all other
terms and conditions of such options, including the form of the option agreement setting forth the terms and conditions of such options. The board may in its discretion establish performance measures or other criteria that must be satisfied or met
as a condition to the grant of an option or the exercisability of all or a portion of an option. The board also determines whether an option is exercisable in cumulative or non-cumulative installments and in part or in full at any time.



In the sole discretion of the board, the terms of an option agreement may
provide that in the event of a reorganization, merger, consolidation, sale or other disposition of all or substantially all of the assets of or equity interests in ASLP, the vesting of some or all of a participants outstanding options shall,
immediately upon the occurrence of such event or at such other time specified in the option agreement, be accelerated, in part or in full. In addition, the board may at any time accelerate the vesting of any option issued under the Unit Option Plan,
in part or in full.



The Unit Option plan provides for the
issuance of Series A options, Series B options, Series C options, Series D options, Series E options and Series F options, and permits ASLP to issue different types of options. Under the plan, the Series A options vest based on certain specified
periods of continued employment following issuance of the options; the Series B and E options vest based on ASLP achieving certain earnings before income, tax, depreciation, and amortization targets; the Series C, D and F options vest based on
certain partners of ASLP achieving specified target internal rates of returns. Series B, C, D, E, and F options are considered performance-based awards. Series A options have been repriced. Therefore, these awards are accounted for as variable
awards and compensation costs relating to the awards are recognized when it becomes probable that the performance targets will be achieved and vesting will occur.



Subject to adjustments provided for in the option agreements and increases by the board of directors, the Unit Option Plan
provides for an aggregate of 182,000 partnership units to be available for option grants. Each option is subject to vesting provisions and transfer restrictions as set forth in the option agreement relating to such option. Unless terminated earlier
by the board, the Unit Option Plan will terminate when partnership units are no longer available for grant.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



Activity and price information for the plan are summarized as follows:



|                               |  |                        |   |  |                               |   |  |          |   |  |          |   |  |          |   |  |          |   |  |   |       
|------------------------------ |  | ---------------------- | - |  | ----------------------------- | - |  | -------- | - |  | -------- | - |  | -------- | - |  | -------- | - |  | - | ------
|                               |  | ASLP Partnership Units |   |  | Weighted AverageExercisePrice
|                               |  | Series A               |   |  | Series B                      |   |  | Series C |   |  | Series D |   |  | Series E |   |  | Series F |   | 
|Outstanding, December 31, 2001 |  | 36,588                 |   |  | 36,579                        |   |  | 36,579   |   |  | 22,500   |   |  |         |   |  |         |   |  | $ | 100.00
|Granted                        |  | 8,407                  |   |  | 99                            |   |  | 99       |   |  |         |   |  | 37,539   |   |  | 8,307    |   |  |   | 171.01
|Exercised                      |  | (13,701                | ) |  | (32,862                       | ) |  | (17,595  | ) |  | (11,228  | ) |  |         |   |  |         |   |  |   | 51.61 
|Forfeited                      |  | (2,103                 | ) |  | (3,816                        | ) |  | (2,343   | ) |  |         |   |  |         |   |  |         |   |  |   | 100.00
|                               |  |                        |   |  |                               |   |  |          |   |  |          |   |  |          |   |  |          |   |  |   |       
|Outstanding, December 31, 2002 |  | 29,191                 |   |  |                              |   |  | 16,740   |   |  | 11,272   |   |  | 37,539   |   |  | 8,307    |   |  |   | 100.00
|Granted                        |  | 466                    |   |  |                              |   |  |         |   |  |         |   |  | 466      |   |  | 466      |   |  |   | 219.71
|Forfeited                      |  | (166                   | ) |  |                              |   |  | (167     | ) |  |         |   |  | (300     | ) |  |         |   |  |   | 91.95 
|                               |  |                        |   |  |                               |   |  |          |   |  |          |   |  |          |   |  |          |   |  |   |       
|Outstanding, December 31, 2003 |  | 29,491                 |   |  |                              |   |  | 16,573   |   |  | 11,272   |   |  | 37,705   |   |  | 8,773    |   |  |   | 101.66
|Granted                        |  |                       |   |  |                              |   |  |         |   |  |         |   |  |         |   |  |         |   |  |   |      
|Exercised                      |  | (23,089                | ) |  |                              |   |  | (8,182   | ) |  | (5,636   | ) |  | (7,663   | ) |  |         |   |  |   | 62.03 
|Forfeited                      |  | (222                   | ) |  |                              |   |  | (1,732   | ) |  | (1,127   | ) |  | (5,047   | ) |  | (83      | ) |  |   | 106.80
|Expired                        |  | (90                    | ) |  |                              |   |  |         |   |  |         |   |  | (50      | ) |  |         |   |  |   | 91.58 
|                               |  |                        |   |  |                               |   |  |          |   |  |          |   |  |          |   |  |          |   |  |   |       
|Outstanding, December 31, 2004 |  | 6,090                  |   |  |                              |   |  | 6,659    |   |  | 4,509    |   |  | 24,945   |   |  | 8,690    |   |  | $ | 95.92 
|                               |  |                        |   |  |                               |   |  |          |   |  |          |   |  |          |   |  |          |   |  |   |       



As of December 31,
2002, 2003 and 2004, 3,670, 7,850 and 3,531 options were exercisable, respectively. The weighted average exercise price of options exercisable at December 31, 2002, 2003, and 2004 was $168.45, $105.38, and $122.88, respectively.



Outstanding options under the Unit Option Plan at December 31, 2004 are
summarized as follows:



|                |  |                    |  |                                                  |        |                    |       |                                                  |   |                                                  |  |     
|--------------- |  | ------------------ |  | ------------------------------------------------ | ------ | ------------------ | ----- | ------------------------------------------------ | - | ------------------------------------------------ |  | ----
|Price Range     |  | OptionsOutstanding |  | Weighted AverageExercise PriceOptionsOutstanding |        | OptionsExercisable |       | Weighted AverageExercise PriceOptionsExercisable |   | Weighted AverageRemainingContractual Life(Years)
|$0.01           |  | 11,168             |  | $                                                | 0.01   |                    |      |                                                  |   |                                                 |  | 4.08
|$122.86-$123.33 |  | 39,725             |  |                                                  | 122.88 |                    | 3,531 |                                                  | $ | 122.88                                           |  | 6.41
|                |  |                    |  |                                                  |        |                    |       |                                                  |   |                                                  |  |     
|                |  | 50,893             |  | $                                                | 95.92  |                    | 3,531 |                                                  | $ | 122.88                                           |  | 5.90
|                |  |                    |  |                                                  |        |                    |       |                                                  |   |                                                  |  |     



Prior to the
Recapitalization, the Series A options vested 50% after the third year and ratably for the fourth, fifth, and sixth years. The Series A options were granted as part of a fixed award with a strike price equal to the fair market value of the
partnership units when issued. Accordingly, no compensation expense was recognized for these options prior to the recapitalization. The Series B options vested ratably over five years provided certain earnings before interest, tax, depreciation, and
amortization targets were met. The Series C and D options vest upon a substantial sale of the ownership interests of certain partners based upon the achievement of certain internal rate of return targets. Prior to the Recapitalization, no
compensation was recorded on the C and D options as vesting in these options was not considered probable.



On April 18, 2002, in connection with the Recapitalization, the Company made changes in the terms of the options held by certain employees of the Company
to acquire partnership units in ASLP. The changes to the terms of the options impacted the Series A, B, C and D options. The Series A options were repriced from $100 to $83.55 per partnership unit through the date of the Recapitalization and to
$50.00 per partnership unit after the



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



Recapitalization. The vesting of the Series A options was changed to 37.5% immediately prior to the Recapitalization, 12.5% upon the third anniversary of the
original option grant and 16.67% per year thereafter. The Series B options were repriced from $100 to $83.55 per partnership unit, 90% of the options vested immediately prior to the Recapitalization and 10% of the options were cancelled. The Series
C and D options were repriced to $0.01 per partnership unit. The Company accounts for repriced awards as variable awards until such awards are exercised. A portion of the Series C and D options vested upon a sale of the ownership interests of
certain partners in August 2002. On November 18, 2002, the Company forgave the $0.01 exercise price for the units that vested upon a sale of ownership interests and converted these options to partnership units in ASLP. In 2002, the board of
directors granted additional Series A options, 50% of which vest on the third anniversary of the grant date with the remainder vesting equally on each of the fourth, fifth and sixth anniversary of the grant date, new Series E performance-based
options that vest only if certain EBITDA targets are met and new Series F performance-based options that vest upon a substantial sale of the ownership interests of certain partners based upon the achievement of specified internal rate of return
targets. These grants included options for certain new key employees hired subsequent to the Recapitalization. At December 31, 2002, certain terms of the Series E options were not resolved, but the Company agreed to vest 10% of the Series E options
at that time excluding Series E options held by SPC employees. The equity-based compensation charge resulting from these changes to the Series A, B, C, D and E options was $15.3 million in the year ended December 31, 2002. In addition, a portion of
the Series C and D options vested upon a sale of the ownership interests of certain partners in August 2002. The equity-based compensation charge resulting from the vesting of the Series C and D options was $5.6 million in the year ended December
31, 2002.



No additional Series C, D, or F options vested in
2003 and vesting of such outstanding awards was not considered probable at December 31, 2003. Therefore no compensation costs were recorded relating to these options in 2003. An equity-based compensation charge of $4.7 million was recorded in 2003
relating to the Series A options that were repriced in 2002 accounted for as variable awards and based on managements analysis as to the probability of vesting of Series E awards.



On October 19, 2004, ASG Consolidated completed its offering of Senior Discount Notes. The distribution of the offering
proceeds from these notes to the Companys ultimate equity holders accelerated the vesting of certain outstanding options held by Company employees under the ASLP Year 2000 Unit Option Plan. Specifically, all outstanding Series A awards, 50% of
the Series C and D awards and approximately 14.6% of the Series E awards vested and were exercised immediately prior to the distribution. No Series F awards vested. The acceleration of the options resulted in the recognition of compensation costs.
In addition, in order to compensate for the reduction in value caused by the distribution, the exercise price of the remaining outstanding Series E and F options were reduced to an amount equal to the greater of (i) the exercise price related to
each option reduced by $96.38 or (ii) the fair market value of the underlying units after the distribution, and a cash payment was made by ASLP to holders of the remaining outstanding unvested Series C and D options in the amount of $96.38 per
remaining outstanding unvested unit. In addition, holders of unvested Series E and F options who are still employees of ASLP or its subsidiaries at the time of exercise will receive a tax gross-up payment to cover their tax liability in connection
with the exercise of their options, which payment will not exceed $50.00 per unit. The modification to the terms of the unvested Series C, D, E and F options resulted in additional compensation cost in 2004 and will result in future compensation
costs in excess of amounts that would have been recorded absent the modification. Compensation cost, if any, for the unvested Series C, D, E and F options is recognized to the extent their respective vesting targets are probable.



Option holders were also offered an alternative to the accelerated vesting of
their options as outlined above. Those option holders that elected this alternative received pro-rata vesting of their Series A options based on



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



their service period through October 20, 2004, received vesting on all other options to the extent that they would have received vesting under an
acceleration event and received a reduction in the exercise price on all options that had an exercise price in excess of the fair market value of the units after the distribution from the offering such that the related exercise price was an amount
equal to the greater of (i) the exercise price related to each option reduced by $96.38 or (ii) the fair market value of the underlying units after the distribution. In addition, holders of unvested Series E and F options who are still employees of
ASLP or its subsidiaries at the time of exercise will receive a payment to cover their tax liability in connection with the exercise of their options, which will not exceed $50.00 per unit. As all of these modifications were considered to be
effective after the completion of the distribution to the Companys ultimate equity holders, the option holders that chose this alternative did not participate in any of the distribution of proceeds from the offering. All option holders were
presented with these two alternatives on October 20, 2004 and chose between these two alternatives by November 26, 2004.



The weighted-average grant-date fair value of the outstanding options was $39.36 and $27.81 per unit for options granted during 2002 and 2003,
respectively. There were no option grants in 2004. The Company recognized compensation expense of approximately $20.9 million, $4.7 million and $2.9 million for the years ended December 31, 2002, 2003 and 2004, respectively. Prior to the fourth
quarter of 2004, equity-based compensation was recorded as a related party payable. In late 2004, ASLP contributed its receivable in the amount of $20.0 million to the Company and agreed that no amounts will be due in the future relating to existing
options. As a result of performance conditions and modifications, all outstanding options are accounted for as variable awards.



Note 16.    Accumulated Other Comprehensive Loss



Comprehensive loss includes net income (loss) as well as a component comprised of gains and losses that under generally accepted accounting principles are
reflected as accumulated other comprehensive loss income in members equity (deficit), but are excluded from the determination of net income (loss). The Company has segregated the total accumulated other comprehensive loss from the other
components of members equity (deficit) in the accompanying condensed balance sheets. The components of accumulated other comprehensive loss at December 31, 2003 and 2004 are as follows (in thousands):



|                                                                 |  |      |         |   |      |   |         |  
|---------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                 |  | 2003 |         |   | 2004 |  
|Unrealized losses on derivative instruments designated as hedges |  | $    | (49,634 | ) |      | $ | (46,034 | )
|Translation adjustment                                           |  |      | (9      | ) |      |   | (8      | )
|                                                                 |  |      |         |   |      |   |         |  
|Total accumulated other comprehensive loss                       |  | $    | (49,643 | ) |      | $ | (46,042 | )
|                                                                 |  |      |         |   |      |   |         |  



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



Note 17.    Quarterly Information (Unaudited)



The following tables set forth selected quarterly consolidated financial
data for the Company for the years ended December 31, 2002, 2003, and 2004 (in thousands).



|                                                |  |      |         |    |      |         |  |   |        |   |  |    |         |    |  |    |         |  |    |         |  |   |         |   |  |   |         |  
|----------------------------------------------- |  | ---- | ------- | -- | ---- | ------- |  | - | ------ | - |  | -- | ------- | -- |  | -- | ------- |  | -- | ------- |  | - | ------- | - |  | - | ------- | -
|                                                |  | 2003 |         |    | 2004 |        
|                                                |  | Q1   |         | Q2 |      | Q3      |  |   | Q4     |   |  | Q1 |         | Q2 |  | Q3 |         |  | Q4 |        
|Revenues                                        |  | $    | 111,099 |    | $    | 121,864 |  | $ | 85,117 |   |  | $  | 93,283  |    |  | $  | 134,893 |  | $  | 127,296 |  | $ | 92,986  |   |  | $ | 106,492 |  
|Gross profit                                    |  |      | 41,068  |    |      | 33,134  |  |   | 18,154 |   |  |    | 9,761   |    |  |    | 42,006  |  |    | 24,336  |  |   | 18,816  |   |  |   | 3,758   |  
|Goodwill impairment                             |  |      |        |    |      |        |  |   |       |   |  |    |        |    |  |    |        |  |    |        |  |   | 7,171   |   |  |   |        |  
|Operating income (loss)                         |  |      | 31,023  |    |      | 20,013  |  |   | 9,665  |   |  |    | (1,707  | )  |  |    | 29,594  |  |    | 16,900  |  |   | 7,550   |   |  |   | (11,620 | )
|Write off of recapitalization transaction costs |  |      |        |    |      |        |  |   |       |   |  |    |        |    |  |    |        |  |    |        |  |   | 18,948  |   |  |   | 316     |  
|Net income (loss)                               |  |      | 23,608  |    |      | 16,364  |  |   | (7,764 | ) |  |    | (17,569 | )  |  |    | 21,396  |  |    | 3,560   |  |   | (16,253 | ) |  |   | (37,591 | )



Note
18.    Segment and Geographical Information



The Company is principally engaged in the harvesting, processing, marketing, selling and distribution of fish products. At December 31, 2004, the Companys reportable segments are:



| |  |  | At-sea processingprimarily comprised of the harvesting and processing of pollock, hake, yellowfin sole and Pacific cod aboard the Companys vessels operating in
the Bering Sea; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Land-based processingprimarily comprised of the processing of catfish and scallops and secondary processing of pollock in the Companys processing plants in
Alabama and Massachusetts.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Segment operating
results and balances are determined on a basis consistent with the accounting policies used in the consolidated financial statements. Corporate costs are allocated to each segment based on total assets.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



Segment information as of and for the year ended December 31, 2004 is as follows (in thousands):



|                                             |  |                  |         |   |                      |   |         |               |  |   |             |   |  |                    |         |   |  |   |         |  
|-------------------------------------------- |  | ---------------- | ------- | - | -------------------- | - | ------- | ------------- |  | - | ----------- | - |  | ------------------ | ------- | - |  | - | ------- | -
|                                             |  | At-SeaProcessing |         |   | Land-BasedProcessing |   |         | SegmentTotals |  |   | Adjustments |   |  | ConsolidatedTotals |        
|Revenues:                                    |  |                  |         |   |                      |   |         |               |  |   |             |   |  |                    |         |   |  |   |         |  
|External customers                           |  | $                | 265,526 |   |                      | $ | 196,141 |               |  | $ | 461,667     |   |  | $                  |        |   |  | $ | 461,667 |  
|Intersegment                                 |  |                  | 23,614  |   |                      |   |        |               |  |   | 23,614      |   |  |                    | (23,614 | ) |  |   |        |  
|                                             |  |                  |         |   |                      |   |         |               |  |   |             |   |  |                    |         |   |  |   |         |  
|Total revenues                               |  |                  | 289,140 |   |                      |   | 196,141 |               |  |   | 485,281     |   |  |                    | (23,614 | ) |  |   | 461,667 |  
|                                             |  |                  |         |   |                      |   |         |               |  |   |             |   |  |                    |         |   |  |   |         |  
|Gross profit:                                |  |                  |         |   |                      |   |         |               |  |   |             |   |  |                    |         |   |  |   |         |  
|External customers                           |  |                  | 75,442  |   |                      |   | 13,474  |               |  |   | 88,916      |   |  |                    |        |   |  |   | 88,916  |  
|Intersegment                                 |  |                  | (569    | ) |                      |   |        |               |  |   | (569        | ) |  |                    | 569     |   |  |   |        |  
|                                             |  |                  |         |   |                      |   |         |               |  |   |             |   |  |                    |         |   |  |   |         |  
|Total gross profit                           |  |                  | 74,873  |   |                      |   | 13,474  |               |  |   | 88,347      |   |  |                    | 569     |   |  |   | 88,916  |  
|                                             |  |                  |         |   |                      |   |         |               |  |   |             |   |  |                    |         |   |  |   |         |  
|Net income (loss)                            |  |                  | (10,282 | ) |                      |   | (19,144 | )             |  |   | (29,426     | ) |  |                    | 538     |   |  |   | (28,888 | )
|                                             |  |                  |         |   |                     
|Depreciation and amortization expense        |  |                  | 39,764  |   |                      |   | 6,303   |               |  |   | 46,067      |   |  |                    |        |   |  |   | 46,067  |  
|Goodwill impairment                          |  |                  |        |   |                      |   | 7,171   |               |  |   | 7,171       |   |  |                    |        |   |  |   | 7,171   |  
|Interest expense                             |  |                  | 35,099  |   |                      |   | 4,203   |               |  |   | 39,302      |   |  |                    |        |   |  |   | 39,302  |  
|Write off recapitalization transaction costs |  |                  | 17,191  |   |                      |   | 2,073   |               |  |   | 19,264      |   |  |                    |        |   |  |   | 19,264  |  
|Purchases of property, vessels and equipment |  |                  | 10,263  |   |                      |   | 2,685   |               |  |   | 12,948      |   |  |                    |        |   |  |   | 12,948  |  
|Capital projects in process                  |  |                  | 1,835   |   |                      |   |        |               |  |   | 1,835       |   |  |                    |        |   |  |   | 1,835   |  
|Goodwill                                     |  |                  | 33,186  |   |                      |   | 490     |               |  |   | 33,676      |   |  |                    |        |   |  |   | 33,676  |  
|Total assets                                 |  |                  | 379,429 |   |                      |   | 78,649  |               |  |   | 458,078     |   |  |                    |        |   |  |   | 458,078 |  



Segment information as
of and for the year ended December 31, 2003 is as follows (in thousands):



|                                             |  |                  |         |   |                      |   |         |               |  |   |             |   |  |                    |         |   |  |   |        
|-------------------------------------------- |  | ---------------- | ------- | - | -------------------- | - | ------- | ------------- |  | - | ----------- | - |  | ------------------ | ------- | - |  | - | -------
|                                             |  | At-SeaProcessing |         |   | Land-BasedProcessing |   |         | SegmentTotals |  |   | Adjustments |   |  | ConsolidatedTotals
|Revenues:                                    |  |                  |         |   |                      |   |         |               |  |   |             |   |  |                    |         |   |  |   |        
|External customers                           |  | $                | 229,823 |   |                      | $ | 181,540 |               |  | $ | 411,363     |   |  | $                  |        |   |  | $ | 411,363
|Intersegment                                 |  |                  | 24,242  |   |                      |   |        |               |  |   | 24,242      |   |  |                    | (24,242 | ) |  |   |       
|                                             |  |                  |         |   |                      |   |         |               |  |   |             |   |  |                    |         |   |  |   |        
|Total revenues                               |  |                  | 254,065 |   |                      |   | 181,540 |               |  |   | 435,605     |   |  |                    | (24,242 | ) |  |   | 411,363
|                                             |  |                  |         |   |                      |   |         |               |  |   |             |   |  |                    |         |   |  |   |        
|Gross profit:                                |  |                  |         |   |                      |   |         |               |  |   |             |   |  |                    |         |   |  |   |        
|External customers                           |  |                  | 79,011  |   |                      |   | 23,106  |               |  |   | 102,117     |   |  |                    |        |   |  |   | 102,117
|Intersegment                                 |  |                  | (944    | ) |                      |   |        |               |  |   | (944        | ) |  |                    | 944     |   |  |   |       
|                                             |  |                  |         |   |                      |   |         |               |  |   |             |   |  |                    |         |   |  |   |        
|Total gross profit                           |  |                  | 78,067  |   |                      |   | 23,106  |               |  |   | 101,173     |   |  |                    | 944     |   |  |   | 102,117
|                                             |  |                  |         |   |                      |   |         |               |  |   |             |   |  |                    |         |   |  |   |        
|Net income (loss)                            |  |                  | 20,138  |   |                      |   | (5,499  | )             |  |   | 13,736      |   |  |                    | 903     |   |  |   | 14,639 
|                                             |  |                  |         |   |                     
|Depreciation and amortization expense        |  |                  | 36,542  |   |                      |   | 5,678   |               |  |   | 42,220      |   |  |                    |        |   |  |   | 42,220 
|Interest expense                             |  |                  | 35,206  |   |                      |   | 5,367   |               |  |   | 40,573      |   |  |                    |        |   |  |   | 40,573 
|Purchases of property, vessels and equipment |  |                  | 6,948   |   |                      |   | 5,365   |               |  |   | 12,313      |   |  |                    |        |   |  |   | 12,313 
|Capital projects in process                  |  |                  | 436     |   |                      |   |        |               |  |   | 436         |   |  |                    |        |   |  |   | 436    
|Goodwill                                     |  |                  | 33,186  |   |                      |   | 7,661   |               |  |   | 40,847      |   |  |                    |        |   |  |   | 40,847 
|Total assets                                 |  |                  | 426,191 |   |                      |   | 93,257  |               |  |   | 519,448     |   |  |                    |        |   |  |   | 519,448



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AMERICAN SEAFOODS GROUP LLC AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



Segment information as of and for the year ended December 31, 2002 is as follows (in thousands):



|                                                |  |                  |         |                      |   |         |              |  |             |         |  |                   |         |   |  |   |        
|----------------------------------------------- |  | ---------------- | ------- | -------------------- | - | ------- | ------------ |  | ----------- | ------- |  | ----------------- | ------- | - |  | - | -------
|                                                |  | At-SeaProcessing |         | Land-BasedProcessing |   |         | SegmentTotal |  | Adjustments |         |  | ConsolidatedTotal
|Revenues:                                       |  |                  |         |                      |   |         |              |  |             |         |  |                   |         |   |  |   |        
|External customers                              |  | $                | 252,910 |                      | $ | 79,962  |              |  | $           | 332,872 |  | $                 |        |   |  | $ | 332,872
|Intersegment                                    |  |                  | 16,829  |                      |   |         |              |  |             | 16,829  |  |                   | (16,829 | ) |  |   |       
|                                                |  |                  |         |                      |   |         |              |  |             |         |  |                   |         |   |  |   |        
|Total revenues                                  |  |                  | 269,739 |                      |   | 79,962  |              |  |             | 349,701 |  |                   | (16,829 | ) |  |   | 332,872
|                                                |  |                  |         |                      |   |         |              |  |             |         |  |                   |         |   |  |   |        
|Gross profit:                                   |  |                  |         |                      |   |         |              |  |             |         |  |                   |         |   |  |   |        
|External customers                              |  |                  | 89,877  |                      |   | 8,092   |              |  |             | 97,969  |  |                   |        |   |  |   | 97,969 
|Intersegment                                    |  |                  | 1,061   |                      |   |         |              |  |             | 1,061   |  |                   | (1,061  | ) |  |   |       
|                                                |  |                  |         |                      |   |         |              |  |             |         |  |                   |         |   |  |   |        
|Total gross profit                              |  |                  | 90,938  |                      |   | 8,092   |              |  |             | 99,030  |  |                   | (1,061  | ) |  |   | 97,969 
|                                                |  |                  |         |                      |   |         |              |  |             |         |  |                   |         |   |  |   |        
|Net income (loss)                               |  |                  | 23,818  |                      |   | (14,180 | )            |  |             | 9,638   |  |                   | (1,142  | ) |  |   | 8,496  
|                                                |  |                  |         |                      |  
|Depreciation and amortization expense           |  |                  | 38,619  |                      |   | 1,692   |              |  |             | 40,311  |  |                   |        |   |  |   | 40,311 
|Interest expense                                |  |                  | 29,049  |                      |   | 5,027   |              |  |             | 34,076  |  |                   |        |   |  |   | 34,076 
|Loss from debt repayment and related write-offs |  |                  | 13,612  |                      |   | 2,099   |              |  |             | 15,711  |  |                   |        |   |  |   | 15,711 
|Purchases of property, vessels and equipment    |  |                  | 8,993   |                      |   | 438     |              |  |             | 9,431   |  |                   |        |   |  |   | 9,431  
|Goodwill                                        |  |                  | 33,031  |                      |   | 7,661   |              |  |             | 40,692  |  |                   |        |   |  |   | 40,692 
|Total assets                                    |  |                  | 458,678 |                      |   | 62,225  |              |  |             | 520,903 |  |                   |        |   |  |   | 520,903



All significant
non-cash charges to income, including unrealized foreign exchange gains and losses, unrealized gains on other derivatives, and interest accrued to related parties, are attributable to the at-sea processing segment for all years presented. Interest
expense and loss from debt repayment and related write-offs are allocated based on the assets of operating entities comprising each segment. Intersegment revenues are based on estimated market prices of products sold.



The land-based processing segments results of operations for 2002 are
comprised primarily of the combined operations of ASI and ASP. As of December 31, 2002, goodwill and total assets for the land-based processing segment consist of the combined assets of ASI, ASP, SPC and SPC Trucking.



The Company attributes its revenues to customers in different geographical
areas on the basis of the location of the customer. Export sales from the United States consist principally of processed pollock roe and surimi to Japan and frozen whitefish to Europe. Substantially all long-lived assets are located in the United
States and substantially all North America sales are to customers in the United States.



Seafood sales by geographic region, excluding sales to related parties, were (in thousands):



|              |  |      |         |      |   |         |  |   |        
|------------- |  | ---- | ------- | ---- | - | ------- |  | - | -------
|              |  | 2002 |         | 2003 |   | 2004   
|North America |  | $    | 110,387 |      | $ | 207,255 |  | $ | 214,313
|Japan         |  |      | 131,518 |      |   | 102,010 |  |   | 124,146
|Europe        |  |      | 57,440  |      |   | 58,533  |  |   | 73,665 
|Other Asia    |  |      | 32,633  |      |   | 41,203  |  |   | 48,455 
|              |  |      |         |      |   |         |  |   |        
|              |  | $    | 331,978 |      | $ | 409,001 |  | $ | 460,579
|              |  |      |         |      |   |         |  |   |        



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AMERICAN SEAFOODS GROUP LLC AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



December 31, 2003 and 2004



Note 19.    Valuation and Qualifying Accounts



Information relating to valuation and qualifying accounts is as follows for
2002, 2003 and 2004 (in thousands):



|                                                 |  |                               |       |                             |   |                             |  |                        |     |  |   |      
|------------------------------------------------ |  | ----------------------------- | ----- | --------------------------- | - | --------------------------- |  | ---------------------- | --- |  | - | -----
|                                                 |  | Balance at Beginningof Period |       | Charged toExpense orRevenue |   | DeductionsandAdjustments(1) |  | Balanceat Endof Period
|Year ended December 31, 2002:                    |  |                               |       |                             |   |                             |  |                        |     |  |   |      
|Allowances for trade accounts receivable         |  | $                             | 521   |                             | $ | 27                          |  | $                      | 96  |  | $ | 452  
|Allowance for receivable from insurance provider |  |                               | 866   |                             |   | 963                         |  |                        |    |  |   | 1,829
|Year ended December 31, 2003:                    |  |                               |       |                             |   |                             |  |                        |     |  |   |      
|Allowances for trade accounts receivable         |  | $                             | 452   |                             | $ | 345                         |  | $                      | 106 |  | $ | 691  
|Allowance for receivable from insurance provider |  |                               | 1,829 |                             |   | 161                         |  |                        |    |  |   | 1,990
|Allowance for other accounts receivables         |  |                               |      |                             |   | 212                         |  |                        |    |  |   | 212  
|Year ended December 31, 2004:                    |  |                               |       |                             |   |                             |  |                        |     |  |   |      
|Allowances for trade accounts receivable         |  | $                             | 691   |                             | $ | 1,371                       |  | $                      | 602 |  | $ | 1,460
|Allowance for receivable from insurance provider |  |                               | 1,990 |                             |   |                            |  |                        | 565 |  |   | 2,555
|Allowance for other accounts receivables         |  |                               | 212   |                             |   |                            |  |                        |    |  |   | 212  

---

|(1) | Deductions for accounts receivable represent accounts written off, net of recoveries. Adjustments for receivable from insurance provider represents a 100% allowance established for
additional gross receivables resulting from reconciliation with the insurance provider liquidator.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company had three valuation accounts recorded on the balance sheet at December 31, 2003 and 2004 as follows:



| |  |  | Allowances for trade accounts receivable reflect managements estimate of potential losses inherent in the accounts receivable balance. Management determines the allowance
based on known troubled accounts, historical experience, and other currently available evidence. The Companys policy is to write-off accounts as collectibility becomes remote.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company has outstanding claim receivables totaling $4.6 million from an Australian insurance carrier and its U.S. subsidiary (collectively referred herein as the
Carrier) that filed bankruptcy in 2001. The Carrier provided employee personal injury coverage for the Company during the years 1996 to 1999. The amount of receivable has increased as claims were presented to the Carrier for
reimbursement under its policies. The amount to be realized is ultimately dependent on a number of factors including the decision of the bankruptcy courts, and the ability of the Company to recover amounts directly or indirectly from the
Carriers reinsurance companies and a trust fund established by the New York Superintendent of Insurance. The Company is actively pursuing each source of recovery. Based on information currently available, management has estimated that the
Company will recover between 25% and 60% of its outstanding receivable. In accordance with SFAS No. 5, Accounting for Contingencies, and related interpretations, the Company has recorded an allowance based on managements estimate of the
amounts that will ultimately be collected. As of December 31, 2003 and 2004, the net receivable of approximately $2.0 million is classified as other non current assets.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In addition, the Company established an allowance account in 2003 related to a miscellaneous receivable from a fuel hedge provider that filed for bankruptcy in 2002, which
represents managements estimate of collectibility of the related balance. The net receivable as of December 31, 2003 and 2004 is not significant.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure



Not applicable.



Item 9A.Controls and Procedures



Evaluation of disclosure controls and procedures.    Our management, with the participation of our Chief Executive Officer and
Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2004. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective in alerting them to material information relating to us that is required to be included in our periodic SEC filings. There were no significant changes in our internal controls during the fourth quarter of 2004 that have
materially affected, or are reasonably likely to materially affect, our internal controls.



Item 9B.Other Information



None.



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PART III



|Item 10. | Directors and Executive Officers of the Registrant
|-------- | --------------------------------------------------



The following table identifies as of March 1, 2005 our executive officers and key employees, as well as the members of the board of directors of ASC
Management, Inc. As a limited liability company, we do not have a board of directors; nor does any of our immediate parent ASG Consolidated LLC, its parent American Seafoods Consolidated LLC, its parent American Seafoods Holdings LLC and our
ultimate parent American Seafoods, L.P. We therefore disclose the identity of the directors of ASC Management, Inc., the managing general partner of American Seafoods, L.P. and our executive officers.



|                       |  |     |  |                                                                              
|---------------------- |  | --- |  | -----------------------------------------------------------------------------
|Name                   |  | Age |  | Position                                                                     
|Bernt O. Bodal         |  | 51  |  | Chairman and Chief Executive Officer, Director of ASC Management, Inc.       
|Brad Bodenman          |  | 41  |  | Chief Financial Officer and Treasurer                                        
|Amy Humphreys          |  | 38  |  | Vice President of Finance and Corporate Development                          
|Matthew D. Latimer     |  | 37  |  | Chief Legal Officer and General Counsel                                      
|Michael Hyde(1)        |  | 48  |  | President, American Seafoods Company LLC                                     
|Inge Andreassen(1)     |  | 41  |  | Vice President of Operations, American Seafoods Company LLC                  
|John Cummings          |  | 49  |  | President, American Seafoods International LLC and Southern Pride Catfish LLC
|Morgen Crow            |  | 41  |  | Director of ASC Management, Inc.                                             
|Jeffrey Davis          |  | 55  |  | Director of ASC Management, Inc.                                             
|John Fluke             |  | 62  |  | Director of ASC Management, Inc.                                             
|Michael Magerman       |  | 42  |  | Director of ASC Management, Inc.                                             
|George L. Majoros, Jr. |  | 43  |  | Director of ASC Management, Inc.                                             
|Scott Perekslis        |  | 36  |  | Director of ASC Management, Inc.                                             
|Lester Pollack         |  | 70  |  | Director of ASC Management, Inc.                                             
|William Tisher         |  | 30  |  | Director of ASC Management, Inc.                                             
|Eric Wilmes            |  | 31  |  | Director of ASC Management, Inc.                                             

---

|(1) | Pursuant to the terms of a separation agreement dated February 15, 2005, Mr. Hyde will resign as President of American Seafoods Company LLC effective March 31, 2005. Mr. Andreassen
will succeed Mr. Hyde as President of American Seafoods Company LLC.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Bernt O. Bodal.    Mr. Bodal has been the Chairman and Chief Executive Officer of ASG since 2000. Since January 2000, he has been the President of ASC Management, Inc., the general partner
of ASLP and a director of ASC Management, Inc. From 1994 to 1998, Mr. Bodal served as President and Chief Executive Officer of American Seafoods Company and RGI Seafoods, a subsidiary of Norway Seafoods. Between 1998 and 2000, Mr. Bodal pursued
personal investment activities.



Brad
Bodenman.    Mr. Bodenman has been the Chief Financial Officer of ASG since May 2002 and Treasurer since March 2002. From April 2000 to December 2001, Mr. Bodenman was the Chief Financial Officer and Treasurer of Essential
Markets, Inc., a developer of proprietary software, and from 1997 to 2000, Mr. Bodenman was the Chief Financial Officer and Treasurer of Muzak, LLC., a business music provider.



Amy Humphreys.    Ms. Humphreys has been the Vice President of Finance and Corporate Development
of ASG since May 2003. She was the Director of Finance and Corporate Development of ASG from 2000 to 2003. Ms. Humphreys was the Business Development Manager of American Seafoods Company from 1996 to 2000.



Matthew D. Latimer.Mr. Latimer has been the
Chief Legal Officer and General Counsel of ASG since August 2004. Mr. Latimer was Of Counsel with the law firm of Davis Wright Termaine LLP from January of



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2003 until August 2004. Prior to January 2003, Mr. Latimer was an associate at the law firm of Cooley Godward LLP from October 1999 to December 2002. From
February 1999 to October 1999, Mr. Latimer was an associate at the law firm of Dorsey and Whitney LLP. From September 1995 to February 1999, Mr. Latimer was an associate at the law firm of Bogle & Gates PLLC.



Michael Hyde.    Mr. Hyde has been the President
of American Seafoods Company LLC since 2000. American Seafoods Company LLC is a subsidiary of ASG through which we conduct our at-sea pollock harvesting and processing operations. Mr. Hyde was also the General Counsel of ASG from 2000 until July
2004. From 1998 to 2000 Mr. Hyde was President of American Seafoods Company.



Inge Andreassen.    Mr. Andreassen will become President of American Seafoods Company LLC effective April 1, 2005. Mr. Andreassen has been the Vice President of Operations of American
Seafoods Company LLC since 2000. From 1996 to 2000, Mr. Andreassen was the Vice President of Operations of American Seafoods Company.



John Cummings.    Mr. Cummings has been the President of American Seafoods International LLC since April 2002 and President of
Southern Pride Catfish LLC since December 2003. From 2000 to 2002, Mr. Cummings was President of Gofish.com, a privately held service firm with online seafood trading, and from 1993 to 2000, Mr. Cummings was President of Fishery Products
International, Inc., a subsidiary of FPI Ltd., a supplier of fresh and frozen seafood products.



Morgen Crow.    Mr. Crow has served as a director of ASC Management, Inc. since 2000. Mr. Crow has been the Executive Director
of Coastal Villages Region Fund since 1999. Mr. Crow is a member of the board of directors of the Marine Conservation Alliance and the Pollock Conservation Cooperative.



Jeffrey Davis.    Mr. Davis has served as a director of ASC Management, Inc. since February 2005.
Mr. Davis was the Chief Operating Officer of ASG and the Chief Executive Officer of American Seafoods International LLC from January 2000 to December 2004. Mr. Davis was the President and Chief Executive Officer of Baader North America Corporation,
a wholly-owned U.S. subsidiary of Baader Beteiligungs GmbH, a manufacturer of fish and poultry processing machines, from 1980 to December 1999.



John Fluke.    Mr. Fluke has been a director of ASC Management, Inc. since 2002. Since 1974, Mr. Fluke has served as the
Chairman of Fluke Capital Management, LP, a venture capital firm he founded. Mr. Fluke has served as a director of PACCAR Inc. since 1984 and on its audit committee since 2002. Mr. Fluke has served as a director of Cell Therapeutics, Inc. since
2002.



Michael Magerman.    Mr.
Magerman has been a director of ASC Management, Inc. since 2003. Mr. Magerman has been a Senior Director of Centre Partners Management LLC since 2001. Mr. Magerman is currently Chairman of Autoland, Inc. and serves on the board of directors of Bravo
Sports.



George L. Majoros,
Jr.    Mr. Majoros has served as a director of ASC Management, Inc. since 2002. Mr. Majoros has been President and Chief Operating Officer of Wasserstein & Co., L.P. since its inception in January 2001. Mr. Majoros was a
Managing Director of Wasserstein Perella & Co., Inc. and the Chief Operating Officer of its Merchant Banking Group from 1997 to 2001. Mr. Majoros also serves on the board of directors of American Lawyer Media Holdings, Inc., American Lawyer
Media, Inc., Bear Creek Corporation, and numerous private companies.



Scott Perekslis.    Mr. Perekslis has been a director of ASC Management, Inc. since 2000. Mr. Perekslis has been a Managing Director of Centre Partners Management LLC since 2001. He has served in various
capacities for Centre Partners and its affiliates since 1991. Mr. Perekslis is the Chairman of Hyco International, Inc. and is a member of the board of directors of Maverick Media LLC, Firearms Training Systems, Inc. and the Board of Trustees of
Connors Brothers Income Fund.



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Lester Pollack.    Mr. Pollack has been a director of ASC Management, Inc.
since 2000. He has been a Managing Director of Centre Partners Management LLC since 1986. Mr. Pollack is also a Limited Managing Director of Lazard Frères & Co. LLC. Mr. Pollack is a member of the board of directors of Bank Leumi USA,
Centre Pacific LLC, Kaz Inc., Parlex Corporation, and Tiffen Manufacturing Inc., and is a director emeritus of U.S. Bancorp.



William Tisher.Mr. Tisher has been a director of ASC Management, Inc. since October 2002. Mr. Tisher is currently
the director of finance at Coastal Villages Region Fund and has been working there since 2001. From 1996 to 2001, Mr. Tisher worked as an auditor for Mikunda, Cottrell and Co.



Eric Wilmes.    Mr. Wilmes has been a director of ASC Management, Inc. since 2000. Mr. Wilmes has
been a Director of Centre Partners Management LLC since 2005. From 2000 to 2004 Mr. Wilmes was a Principal of Centre Partners Management LLC. From 1997 to 2000, Mr. Wilmes was an Associate of Centre Partners Management LLC. He is a member of the
board of directors of International Imaging Materials, Inc. and Uno Restaurant Holdings Corporation.



We have insurance that indemnifies our directors and officers against certain liabilities.



Board of Directors Committees



We are a limited liability company. In our case, the ultimate function of a board of directors is fulfilled by the board of directors of ASC Management,
Inc., which is the managing general partner of ASLP, our ultimate parent.



Audit Committee.    The audit committee of the board of directors of ASC Management, Inc. consists of Messrs. Perekslis, Pollack, Fluke and Crow. Mr. Fluke serves as our audit committee
financial expert. The audit committee has the following responsibilities:



| |  |  | recommending the engagement of independent accountants to audit our financial statements;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | discussing the scope and results of the audit with our independent accountants;
| | - |  | -------------------------------------------------------------------------------



| |  |  | reviewing the functions of our management and our independent accountants pertaining to our statements; and
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | performing such other related duties and functions as are deemed appropriate by the audit committee and the board of directors.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



Compensation Committee.    The compensation
committee consists of Messrs. Perekslis, Crow and Majoros. The compensation committee has the following responsibilities:



| |  |  | assisting the Board in fulfilling its responsibilities relating to the design, administration and oversight of employee compensation programs and benefit plans;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | discharging the Boards duties relating to compensation of our directors and executive officers; and
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | reviewing the performance of our Chief Executive Officer.
| | - |  | ---------------------------------------------------------



Code of Ethics



We have adopted a code of business conduct and ethics applicable to our Chief Executive Officer, Chief Financial Officer, controller and other financial
leaders, as well as to our employees generally, which is a code of ethics as defined by applicable rules of the Securities and Exchange Commission. This code is publicly available on our website at www. americanseafoods.com. If we make
any amendments to this code other than technical, administrative or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of this code to our Chief Executive Officer, Chief Financial Officer, or
controller, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies on our website or on Form 8-K filed with the Securities and Exchange Commission.



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|Item 11. | Executive Compensation
|-------- | ----------------------



The following table sets forth information concerning the compensation of the Chief Executive Officer and each of the four most highly compensated
executive officers of the operating subsidiaries of ASG during each of the last three fiscal years.



Summary Compensation Table



|                                                    |  |                        |  |                                                                |                |          |                       |            |  |         |      |  |   |              |     
|--------------------------------------------------- |  | ---------------------- |  | -------------------------------------------------------------- | -------------- | -------- | --------------------- | ---------- |  | ------- | ---- |  | - | ------------ | ----
|                                                    |  | Annual Compensation(1) |  | Long TermCompensationAwardsSecuritiesUnderlyingOptions/SARs(3) |                |          | All OtherCompensation |           
|Name and Principal Position                         |  | FiscalYear             |  | Salary                                                         |                | Bonus(2) |                       |           
|Bernt O. Bodal                                      |  | 2004                   |  | $                                                              | 420,000        |          | $                     | 1,062,031  |  |        |      |  | $ | 18,687       | (4) 
|Chairman and Chief Executive Officer                |  | 2003                   |  |                                                                | 400,000        |          |                       | 680        |  |        |      |  |   | 16,562       |     
|                                                    |  | 2002                   |  |                                                                | 392,708        |          |                       | 342,741    |  | 75,067  | (5)  |  |   | 16,555       |     
|                                                    |  |                        |  |                                                                |               
|Michael J. Hyde(15)                                 |  | 2004                   |  | $                                                              | 357,000        |          | $                     | 268,512    |  |        |      |  | $ | 69,446       | (6) 
|President of American Seafoods Company LLC          |  | 20032002               |  |                                                                | 340,000335,625 |          |                       | 680291,540 |  | 15,666 | (7)  |  |   | 78,47073,572 |     
|                                                    |  |                        |  |                                                                |               
|Jeffrey Davis(14)                                   |  | 2004                   |  | $                                                              | 379,936        |          | $                     | 253,445    |  |        |      |  | $ | 13,780       | (8) 
|Chief Operating Officer                             |  | 2003                   |  |                                                                | 340,000        |          |                       | 680        |  |        |      |  |   | 11,385       |     
|                                                    |  | 2002                   |  |                                                                | 335,624        |          |                       | 291,540    |  | 27,900  | (9)  |  |   | 6,061        |     
|                                                    |  |                        |  |                                                                |               
|Brad Bodenman                                       |  | 2004                   |  | $                                                              | 250,000        |          | $                     | 459,679    |  |        |      |  | $ | 8,323        | (10)
|Chief Financial Officer and Treasurer               |  | 2003                   |  |                                                                | 185,000        |          |                       | 680        |  |        |      |  |   | 4,940        |     
|                                                    |  | 2002                   |  |                                                                | 146,459        |          |                       | 126,148    |  | 5,550   | (11) |  |   | 239          |     
|                                                    |  |                        |  |                                                                |               
|Amy Humphreys                                       |  | 2004                   |  | $                                                              | 175,000        |          | $                     | 209,707    |  |        |      |  | $ | 7,946        | (12)
|Vice President of Finance and Corporate Development |  | 20032002               |  |                                                                | 156,923129,134 |          |                       | 68093,335  |  | 3,434  | (13) |  |   | 6,5445,350   |     

---

|(1) | Includes amounts deferred under the American Seafoods Group Deferred Compensation Plan. The American Seafoods Group Deferred Compensation Plan also provides for a company match of
$0.25 for each dollar deferred (up to a maximum of 15% of compensation) (for amounts, see All Other Compensation column).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Except for a holiday payment of $680, in 2003, no management bonuses were paid in accordance with our employment agreements and our general bonus policy, which does not require the
payment of bonuses based on financial performance for any year in which there is or would be a violation of a covenant under our credit agreement. But for the elimination of these bonuses in 2003, we would have been in violation of our leverage
covenant under our credit agreement. Amounts for 2004 include $840,801 paid to Mr. Bodal, $80,466 paid to Mr. Hyde, $253,445 paid to Mr. Davis and $16, 093 paid to Ms. Humphreys related to the distribution on unvested options made in connection with
the Senior Discount Note offering.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | As of the date of this annual report, ASLP held 99.4% of the beneficial interests in Holdings and had 898,966 units outstanding.
|--- | --------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes a company match under the American Seafoods Group Deferred Compensation Plan of $11,719, $2,125 for life insurance premiums related to the American Seafoods Group Deferred
Compensation Plan and $2,500 for life insurance coverage provided pursuant to the American Seafoods Group Executive Life Insurance Plan.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Includes a grant under the Unit Option Plan of 8,250 Series E options and 66,817 repriced options.
|--- | --------------------------------------------------------------------------------------------------

|(6) | Includes a payment under an agreement which provides that the company shall continue making annual $50,000 payments through 2005, a company match under the American Seafoods Group
Deferred Compensation Plan of $14,731, $1,750 for life insurance premiums related to the American Seafoods Group Deferred Compensation Plan and $2,965 for life insurance coverage provided pursuant to the American Seafoods Group Executive Life
Insurance Plan.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Includes a grant under the Unit Option Plan of 6,000 Series E options and 9,666 repriced options.
|--- | -------------------------------------------------------------------------------------------------

|(8) | Includes a company match under the American Seafoods Group Deferred Compensation Plan of $3,588, $9,125 for life insurance premiums related to the American Seafoods Group Deferred
Compensation Plan and $1,067 for life insurance coverage provided pursuant to the American Seafoods Group Executive Life Insurance Plan.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Includes a grant of 6,000 Series E options under the Unit Option Plan and 21,900 repriced options.
|--- | --------------------------------------------------------------------------------------------------

|(10) | Includes a company match under the American Seafoods Group Deferred Compensation Plan of $5,459, $1,130 for life insurance premiums related to the American Seafoods Group Deferred
Compensation Plan and $1,733 for life insurance coverage provided pursuant to the American Seafoods Group Executive Life Insurance Plan.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) | Includes grants under the Unit Option Plan of 1,850 Series A options; 1,850 Series E options; and 1,850 Series F options.
|---- | -------------------------------------------------------------------------------------------------------------------------



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|(12) | Includes a company match under the American Seafoods Group Deferred Compensation Plan of $6,562, $380 for life insurance premiums related to the American Seafoods Group Deferred
Compensation Plan and $1,004 for life insurance coverage provided pursuant to the American Seafoods Group Executive Life Insurance Plan.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(13) | Includes a grant of 1,500 Series E options under the Unit Option Plan and 1,934 repriced options.
|---- | -------------------------------------------------------------------------------------------------

|(14) | Mr. Davis resigned as the Chief Operating Officer of American Seafoods Group effective December 31, 2004 and joined our Board of Directors in February 2005.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|(15) | Pursuant to the terms of a separation agreement dated February 15, 2005, Mr. Hyde will resign from the Company effective March 31, 2005.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------



Aggregated Option Exercises and Fiscal Year-End Option Value



The following table sets forth certain information
regarding options in ASLP held by the named executive officers at December 31, 2004.



|                |  |                               |  |                   |            |                                                             |   |  |                                                   |     |               |   |  |   |          
|--------------- |  | ----------------------------- |  | ----------------- | ---------- | ----------------------------------------------------------- | - |  | ------------------------------------------------- | --- | ------------- | - |  | - | ---------
|                |  | SharesAcquired on Exercise(#) |  | ValueRealized ($) |            | Number of SecuritiesUnderlying UnexercisedOptions at FY End |   |  | Value of UnexercisedIn-the-MoneyOptions at FY End
|                |  |                               |  | Exercisable       |            | Unexercisable                                               |   |  | Exercisable                                       |     | Unexercisable
|Bernt O. Bodal  |  | 66,434                        |  | $                 | 16,289,938 |                                                             |  |  | 14,948                                            |     |               |  |  | $ | 1,161,293
|Jeffrey Davis   |  | 20,744                        |  |                   | 4,846,377  |                                                             |  |  |                                                  | (1) |               |  |  |   |         
|Michael J. Hyde |  | 7,305                         |  |                   | 1,395,916  |                                                             |  |  | 5,361                                             | (2) |               |  |  |   | 134,651  
|Brad Bodenman   |  | 2,305                         |  |                   | 142,349    |                                                             |  |  | 3,245                                             |     |               |  |  |   | 19,416   
|Amy Humphreys   |  | 1,536                         |  |                   | 284,619    |                                                             |  |  | 1,298                                             |     |               |  |  |   | 6,769    

---

|(1) | In connection with his resignation, all of Mr. Daviss outstanding options were terminated as of December 31, 2004.
|--- | -------------------------------------------------------------------------------------------------------------------

|(2) | Pursuant to the terms of a separation agreement dated February 15, 2005, Mr. Hyde will resign from the Company effective March 31, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------



Option Plan



ASLP adopted a Unit Option Plan on January 28, 2000, which was amended and restated effective December 16, 2002.
Options to acquire units in ASLP were granted under the plan to officers and certain key employees. The purpose of the Unit Option Plan was to promote the success of ASLP and the interests of its partners by attracting, motivating, retaining and
rewarding eligible participants.



The ASLP Unit Option Plan has
been administered by the entire board of directors of ASC Management, Inc. The board has selected eligible participants for participation in the Unit Option Plan and determined the number of partnership units subject to each option granted
thereunder, the exercise price of such option, the time and condition of exercise of such option and all other terms and conditions of such option, including the form of the option agreement setting forth the terms and conditions of such option.



We may in the future adopt a long-term incentive plan to
provide incentive compensation for any new members of management or to supplant the existing options once they have been exercised or have lapsed.



Employment Agreements



Each of Bernt O. Bodal, Michael Hyde and Brad Bodenman has an employment agreement with ASLP and ASG. The employment agreements expire in 2005, and
are subject to automatic extensions for succeeding terms of one year each unless terminated by delivery of notice by either party in accordance with the terms of the contract. Pursuant to these contracts, each executive may receive, in addition to
his base salary, a discretionary and nondiscretionary bonus. Any discretionary bonus will be determined by the board of directors of ASLP in its sole discretion. The nondiscretionary bonus will be awarded if the Adjusted EBITDA of ASLP exceeds
certain targets, but the nondiscretionary bonuses will not be payable if, at the time of payment or at any time during the year of measurement, we are in default under any credit agreement relating to indebtedness for borrowed money.



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If we terminate any of these executives employment with cause or if any of these executives
terminates his employment without good reason, the executive is entitled only to payment of his unpaid base salary for the period prior to termination. If an executives employment terminates because of his death, or we terminate the
executives employment upon his disability, then the executive is entitled to his unpaid salary and a pro-rated share of the nondiscretionary portion of the bonus to which he would otherwise have been entitled in respect of the year during
which termination occurred. If we terminate an executives employment for any other reason or if the executive terminates for good reason, he is entitled to all of the amounts referred to in the preceding sentence, as well as severance
compensation equal to the amount of his actual aggregate base salary for the 12 month period immediately prior to such termination payable over a 24 month period.



Pursuant to the terms of a separation agreement dated February 15, 2005, Mr. Hyde agreed to resign from his employment with
ASG effective March 31, 2005. Under the terms of the agreement, Mr. Hyde will enter into a consulting agreement with ASG pursuant to which he will receive monthly payments of $25,000. The separation agreement further provides for payment to Mr. Hyde
of his 2004 bonus, the continuation of his right to receive an additional $50,000 payment in 2005, vesting of his outstanding Series C options and the continuation of his outstanding Series E options during the term of the consulting agreement.



Board of Directors Compensation



The members of the board of directors of ASC Management, Inc., other than
Mssrs. Fluke and Davis, do not receive any compensation for serving as directors. Mssrs. Fluke and Davis each receive $12,500 per quarter as compensation for serving as directors.



Compensation Committee Interlocks and Insider Participation



On October 29, 2002, the board of directors of ASC Management, Inc. established a compensation committee comprised of three
members: Scott Perekslis, Morgen Crow and George L. Majoros, Jr. The members of the compensation committee do not receive any compensation for their services.



|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|-------- | ----------------------------------------------------------------------------------------------



The following table and accompanying footnotes provide information regarding
the indirect beneficial ownership of equity interests in ASG as of January 18, 2005. The persons listed below include: (i) each person known to us to beneficially own 5% or more of the equity interests in ASLP, ASGs indirect parent; (ii)
each named executive officer of ASG; (iii) each director of ASC Management, Inc., the managing general partner of ASLP; and (iv) all executive officers and directors as a group.



The persons listed on the following table directly and indirectly, through the ownership of limited partnership units of
ASLP, own membership interests in American Seafoods Holdings LLC (Holdings). ASLP, Webjorn Eikrem and Bernt O. Bodal each directly owns 99.4%, 0.4% and 0.2%, respectively, of the interests of Holdings. However, the unit information has
been adjusted to treat Mr. Bodals and Mr. Eikrems direct ownership interests in Holdings as if they were interests in units of ASLP, which is the managing member of Holdings. Holdings directly owns 100% of American Seafoods Consolidated
LLC, which, in turn, owns directly approximately 90% and indirectly owns the remaining interests in ASG Consolidated. ASG Consolidated owns directly 100% of ASG.



The general partner of ASLP is an affiliate of Centre Partners, and Centre Partners has the right to designate a majority of
the members of ASLPs board of directors. Accordingly, Centre Partners has broad authority to conduct our business and control our company. Centre Partners and other holders of ASLP limited partnership units entered into a Securityholders
Agreement, dated January 28, 2000, as amended, which governs several aspects of the relationship among the holders of ASLP limited partnership units. See  Item 13Certain Relationships and Related TransactionsASLP Securityholders
Agreement.



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The information in the table set forth below reflects outstanding options that are exercisable
within 60 days of January 18, 2005.



|                                                            |  |                        |  |                            |  
|----------------------------------------------------------- |  | ---------------------- |  | -------------------------- | -
|Name of Beneficial Holder(1)                                |  | Number ofASLP Units(2) |  | Percentage ofASLP Units(3) |  
|Centre Partners(4)                                          |  | 200,502                |  | 22.5                       | %
|Coastal Villages(5)                                         |  | 315,801                |  | 35.4                       | %
|Bernt O. Bodal(6)                                           |  | 208,230                |  | 23.4                       | %
|Michael J. Hyde                                             |  | 11,525                 |  | 1.3                        | %
|Brad Bodenman                                               |  | 3,722                  |  | *                          |  
|Amy Humphreys                                               |  | 6,088                  |  | *                          |  
|Morgen Crow(7)                                              |  |                       |  |                           |  
|Jeffrey Davis                                               |  | 42,877                 |  | 4.8                        | %
|John Fluke                                                  |  |                       |  |                           |  
|Michael Magerman(8)                                         |  |                       |  |                           |  
|George L. Majoros, Jr.(9)                                   |  |                       |  |                           |  
|Scott Perekslis(8)                                          |  |                       |  |                           |  
|Lester Pollack(8)                                           |  |                       |  |                           |  
|William Tisher(10)                                          |  |                       |  |                           |  
|Eric Wilmes(8)                                              |  |                       |  |                           |  
|All directors and executive officersas a group (17 persons) |  | 293,472                |  | 32.8                       | %

---

|* | Less than 1%
|- | ------------

|(1) | Unless otherwise indicated below, the persons named in the table above have sole voting and investment power with respect to the number of securities set forth opposite their names.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes the following interests subject to options to purchase units, which are currently exercisable or will become exercisable as of January 18, 2005: all directors and executive
officers as a group2,748 units and 835 of Mr. Hydes options that will vest on April 1, 2005.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Applicable percentage ownership is based on 891,692 units outstanding as of January 18, 2005 plus, in the case of each holder, any presently exercisable options held by such holder
and options that will become exercisable within 60 days of January 18, 2005.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Consists of: (a) 153,181 units of ASLP owned of record by Centre Capital Investors III, L.P. (Investors III), (b) 18,534 units of ASLP owned of record by Centre Partners
III Tax Exempt Holdings (CPIII), (c) 19,195 units of ASLP owned of record by ASC Offshore Holding Corporation (Holdings Corp.), (d) 1,120 units of ASLP owned of record by Centre Capital Individual Investors III, L.P.
(Individual III), (e) 8,371 units of ASLP owned of record by Centre Capital Partners Coinvestment III, L.P. (Coinvestment III), and (f) 100 units of ASLP owned of record by ASC Management, Inc. Investors III, Individual III
and Coinvestment III are limited partnerships, of which the general partner of each is Centre Partners III, L.P.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Includes an aggregate of 23,706 units of ASLP beneficially owned by Coastal Villages through its purchase of an interest in CPIII and Holdings Corp. Coastal Villages is shown as the
beneficial owner of its proportionate share of the units held by CPIII and Holdings Corp. because Coastal Villages can vote the units on certain important matters and CPIII and Holdings Corp. are special purpose entities formed solely to hold ASLP
units.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Includes an aggregate of 13,873 units of ASLP beneficially owned by Mr. Bodal through his purchase of an interest in CPIII. Mr. Bodal is shown as the beneficial owner of his
proportionate share of the units held by CPIII because Mr. Bodal can vote units on certain important matters and CPIII is a special purpose entity formed solely to hold units of ASLP. Also includes 1,621 units representing a deemed conversion of Mr.
Bodals direct ownership interest in American Seafoods Holdings LLC, a subsidiary of ASLP.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Mr. Crow is a director of Coastal Villages Region Fund, the parent of Coastal Villages Pollock LLC, and as such may be deemed to beneficially own and share the power to vote or
dispose of the units held by Coastal Villages Pollock LLC. Mr. Crow disclaims beneficial ownership of such units.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(8) | Scott Perekslis and Lester Pollack are Managing Directors and Michael Magerman and Eric Wilmes are Directors of Centre Partners and as such may be deemed to beneficially own and
share the power to vote or dispose of the units held by Investors III, Individual III and Coinvestment III. Messrs. Perekslis, Pollack, Magerman and Wilmes disclaim beneficial ownership of such units.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Mr. Majoros is President and Chief Operating Officer of Wasserstein & Co., L.P. and as such may be deemed to beneficially own and share the power to vote or dispose of the
interests held by the U.S. Equity Partners Funds. Mr. Majoros disclaims beneficial ownership of such interests.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Mr. Tisher is the Director of Finance at Coastal Villages Region Fund, the parent of Coastal Villages Pollock LLC, and as such may be deemed to beneficially own and share the power
to vote or dispose of the units held by Coastal Villages Pollock LLC. Mr. Tisher disclaims beneficial ownership of such units.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The addresses of the beneficial owners shown in the table above who are beneficial owners of five percent or more of our membership interests are as
follows: Centre Partners Management LLC, 30 Rockefeller Plaza, Suite 5050, New York, New York 10020; Coastal Villages Pollock LLC, 711 H Street, Suite 200, Anchorage, Alaska 99501; Bernt O. Bodal, American Seafoods Group LLC, Market Place Tower,
2025 First Avenue, Suite 1200, Seattle, Washington 98121.



Equity Compensation Plan Information



The
following table sets forth information as of December 31, 2004 concerning compensation plans previously approved by securityholders and not previously approved by securityholders. A description of the material features of the unit option plan may be
found in Item 8Financial Statements and Supplementary Data as well as in Item 11Executive Compensation.



|                                                           |  |                                                                                            |  |                                                                            |       |                                                                                                                                          |       
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------- | ----- | ---------------------------------------------------------------------------------------------------------------------------------------- | ------
|Plan Category                                              |  | Number of securitiesto be issued uponexercise ofoutstanding options,warrants and rights(a) |  | Weighted-averageexercise price ofoutstandingoptions, warrantsand rights(b) |       | Number of securitiesremaining availablefor future issuanceunder equitycompensation plans(excluding
securitiesreflected in column (a))(c)
|Equity compensation plans approved by security holders     |  |                                                                                           |  |                                                                            |      |                                                                                                                                          |      
|Equity compensation plans not approved by security holders |  | 50,893                                                                                     |  | $                                                                          | 95.92 |                                                                                                                                          | 11,151
|Total                                                      |  | 50,893                                                                                     |  | $                                                                          | 95.92 |                                                                                                                                          | 11,151



|Item 13. | Certain Relationships and Related Transactions
|-------- | ----------------------------------------------



ASLP Securityholders Agreement



The holders of options and units in ASLP are party to a Securityholders Agreement that was originally entered into on January 28, 2000 and that has been
amended from time to time. As in effect on the date of this annual report, the ASLP Securityholders Agreement imposes restrictions on transfers of securities in ASLP, provides first offer, tag-along and drag along
rights with respect to certain transfers of ASLP securities and deals with certain other governance matters. In addition, the ASLP Securityholders Agreement contains provisions specifying the composition of the board of directors of ASC Management,
Inc., the general partner of ASLP. Under those provisions, Centre Partners currently has the right to elect a majority of that board.



The ASLP Securityholders Agreement further provides that our board of directors will initially consist of nine directors and that for so long as Centre
Partners and entities controlled by Centre Partners hold at least 200,000 ASLP partnership units, Centre Partners will have the right to designate to the board of ASC



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Management, Inc. five members (or such larger number of members as shall constitute a majority of the Board). If certain other thresholds continue to be met,
Coastal Villages and Bernt O. Bodal will continue to have the right to designate a maximum of two and one members, respectively, to the board of ASC Management, Inc.



Agreement Relating to Coastal Villages



We are party to an agreement with Coastal Villages, a substantial equityholder of our company, pursuant to which Coastal Villages has granted us a license
to harvest and process the entire portion of the total allowable catch allocated to it under the Alaska Community Development Quota program through the 2005 pollock season. Pursuant to this agreement, we paid to Coastal Villages $11.6 million in
2004 based on tons harvested. Coastal Villages quota for the 2004 season represented 2.4% of the total allowable catch. Under the agreement, we are also committed to certain job training and community development initiatives for the benefit of
Coastal Villages member communities. Coastal Villages is our largest supplier of community development quota. The agreement with Coastal Villages is scheduled to terminate on December 31, 2005. See Item 1BusinessRisk
FactorsRisks Relating to Our Industry and Its RegulationsOur business could be materially affected if the community development quota we purchase is significantly reduced or eliminated or offered to us at prices we consider
unreasonable.



In 2004, in connection with our cancelled
IDS offering and the initial placement of the Senior Discount Notes by ASG Consolidated, we paid an aggregate of approximately $1.0 million in travel, legal and other expenses to Coastal Villages.



Transactions and Agreements Relating to Our Management



Loans



In July 2002, ASG loaned $6.0 million to Mr. Bodal to finance a purchase of equity interests in ASLP. The loan bore interest
at prime plus 0.5%, reset each January 1, April 1, July 1, and October 1. Payment was required to be made from the proceeds, net of applicable taxes, of any and all dividends and distributions with respect to the obligors ASLP interests
in connection with a public liquidity event or exercise of management options, whether currently owned or subsequently purchased, and 25% of the gross amount of any annual bonus paid, with any remaining balance due in 2012. The underlying loans were
recourse to the assets of the obligor, except that the recourse to assets other than ownership interests was eliminated in certain circumstances if the value of the underlying security becomes greater than four times the loan balance. All of the
obligors interest in ASLP was pledged as collateral on the loan. In connection with the offering of ASG Consolidateds Senior Discount Notes in October 2004, Mr. Bodal paid his loan in full.



Corporate Insurance Policies



We purchase corporate insurance policies from ABD Seattle-Sullivan &
Curtis, or ABD, an insurance brokerage company in which Mr. Trond R. Bodal is the President. Mr. Trond R. Bodal is the brother of Bernt O. Bodal, our Chairman and Chief Executive Officer. We paid ABD approximately $6.5 million in 2004.
No amounts were paid directly to Mr. Trond R. Bodal with respect to these insurance policies. We believe that the terms of the insurance policies we have obtained from ABD are no less favorable to us than those that would have been obtained from
another insurance company.



Aircraft Charters



On December 31, 2002, ASLP leased an aircraft on a long
term basis from a third party lender. In connection with that lease, Mr. Bodal agreed to indemnify and hold harmless ASLP from costs and losses associated with the extent to which that long-term lease is at a notional cost or value in excess of $5.7
million. Also on December 31, 2002, we entered into a month to month lease arrangement with ASLP for use of the



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aircraft. In December 2004, we entered into a month-to-month charter arrangement with ASLP for the use of an additional aircraft. Our monthly lease payment
to ASLP under this arrangement is $159,000. Our lease expense to ASLP under these arrangements was $878,000 in 2004.



In March 2005, Bumblebee Seafoods LLC, a company in which Centre Partners, an investor which controls our board of directors, owns an interest,
agreed to a two-year, non-exclusive charter of the aircraft from us pursuant to which it will pay a monthly fee of $37,500 and an hourly operating fee of $1,533.



Mssrs. Bodal, Perekslis and Bodenman and Centre Partners have entered into time sharing agreements with us pursuant to which
they can lease the new aircraft on an hourly basis at a rate that is slightly above ASGs direct and incremental operating costs.



Guarantees of Corporate Debt



In December 2004, Mssrs. Bodal and Davis agreed to contribute to the capital of ASLP, our ultimate parent, $20.0 million and $2.8 million, respectively,
in the event that we defaulted in the payment of any principal or interest due under our Credit Agreement. ASLP, in turn, agreed to push down such capital contributions to us. The contribution agreement will remain in effect until the
earlier of the repayment of all of the outstanding principal and interest owing under our Credit Agreement or January 16, 2006.



Consulting Agreements



In December 2004, we entered into a consulting agreement with Jeffrey Davis, a member of our Board of Directors since February 2005. Under the terms of
the consulting agreement, we will pay Mr. Davis $175,000 per year for consulting services. The agreement has a term of one year and is renewable for successive one year terms.



In February 2005, we entered into a separation agreement with Michael Hyde, President of American Seafoods Company LLC.
Under the terms of the agreement, Mr. Hyde agreed to resign from his employment effective March 31, 2005 and to enter into consulting agreement with us pursuant to which he will receive monthly payments of $25,000. The consulting agreement has a
term of one year but will automatically renew for successive one year terms unless notice is given prior to 180 days before the end of each term. The separation agreement further provides for payment to Mr. Hyde of his 2004 bonus, the continuation
of his right to receive an additional $50,000 in 2005 pursuant to that Employment Termination Agreement entered into as of March 31, 2000 by and among ASG, American Seafoods Company and Mr. Hyde, vesting of his Series C options and the continuation
of his Series E options during the term of the consulting agreement.



Certain Payments Relating to Financing Activities



In October 2004, the net proceeds of ASG Consolidateds Senior Discount Note offering were distributed to our indirect parent, American Seafoods Holdings LLC, which used approximately $32.7 million and $5.5. million to repurchase its
outstanding redeemable preferred equity units and repay its indebtedness, respectively, held by U.S. Equity Partners. Mr. Majoros, one of our directors, is President and Chief Operating Officer of Wasserstein & Co., L.P., the manager of the U.S.
Equity Partners funds. The balance of the net proceeds of approximately $78.8 million was distributed to our ultimate equity holders.



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Item 14.Principal Accountant Fees and Services



The following table sets forth the aggregate fees by our independent auditors, KPMG LLP, for the years ended December 31, 2003 and 2004 (in thousands).



|                   |  |      |       |      |   |      
|------------------ |  | ---- | ----- | ---- | - | -----
|                   |  | 2003 |       | 2004
|Audit fees         |  | $    | 1,987 |      | $ | 1,571
|Audit related fees |  |      | 17    |      |   |     
|Tax fees           |  |      | 1,317 |      |   | 1,292
|                   |  |      |       |      |   |      
|                   |  | $    | 3,321 |      | $ | 2,863
|                   |  |      |       |      |   |      



In the table above,
pursuant to their definitions under the applicable regulations of the Securities and Exchange Commission, audit fees are fees for professional services rendered for the audit of our annual financial statements and review of our financial
statements included in our quarterly reports on Form 10-Q, for services that are normally provided by the accountant in connection with regulatory filings or engagements including services provided in connection with the filing of registration
statements for the sale of our securities with the Securities and Exchange Commission, for accounting consultations, and for audits in connection with acquisitions; audit related fees are fees for assurance and related services that are
reasonably related to the performance of the audit and review of our financial statements, and primarily include due diligence services provided in connection with acquisitions; tax fees are fees for tax compliance, tax advice and tax
planning. In addition to the fees included in the table above, KPMG LLP provided other services to Holdings and ASLP in the form of tax and accounting consultation services in the aggregate amount of approximately $231,000 in 2003 and $15,000 in
2004.



Pre-Approval Policies and Procedures



The Audit Committee of our Board of Directors pre-approves all audit and
non-audit services performed by KPMG LLP. The Audit Committees policy for pre-approval requires that the committee consider whether the services to be delivered by the auditors are compatible with the maintenance of their independence. The
Audit Committee has concluded that services provided by the auditors to date do not compromise their independence. Pre-approvals of non-audit services are sometimes delegated to a single member of the Audit Committee. However, any pre-approvals made
by a single Audit Committee member must be presented to the full Audit Committee at the next regularly scheduled meeting.



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PART IV



Item 15.Exhibits and Financial Statement Schedules



(a) Financial Statements and Financial Statement Schedules:



(1) Index to Financial Statements



Report of Independent Registered Public Accounting Firm

56Consolidated Balance Sheets as of December 31, 2003 and 2004

57Consolidated Statements of Operations for the years ended December 31, 2002, 2003 and 2004

58Consolidated Statements of Members Equity (Deficit) and Comprehensive Income (Loss) for the years ended December 31, 2002, 2003 and 2004

59Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2003 and 2004

60Notes to Consolidated Financial Statements

61




(2) Index to
Financial Statement Schedules.



Schedules have been
omitted because they are not applicable or are not required or the information required to be set forth in schedules is included in the consolidated financial statements or related notes.



(3) Exhibits.



|       |  |                                                                                                                                                                                                                                                                                                                                                                             
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                                                                                                                                                                                                                                                                                                 
|       | 
|3.1    |  | Certificate of Formation of American Seafoods Group LLC.(1)                                                                                                                                                                                                                                                                                                                 
|       | 
|3.2    |  | Third Amended and Restated Limited Liability Company Agreement of American Seafoods Group LLC.(1)                                                                                                                                                                                                                                                                           
|       | 
|4.1    |  | Indenture, dated as of April 18, 2002, among American Seafoods Group LLC, American Seafoods, Inc., the Guarantors listed on Schedule A thereto and Wells Fargo Bank Minnesota, National
Association, as trustee, relating to the 101/8% Senior Subordinated Notes due 2010.(1)                                                                                              
|       | 
|4.2    |  | Supplemental Indenture, dated as of December 16, 2002, among Southern Pride Catfish LLC, a subsidiary of American Seafoods Group LLC (or its permitted successor) (the Company),
the Company, American Seafoods Finance, Inc., the other Guarantors (as defined in the Indenture referred to therein) and Wells Fargo Bank Minnesota, National Association, as trustee.(4)
|       | 
|4.3    |  | Supplemental Indenture, dated as of December 16, 2002, among Southern Pride Catfish Trucking Inc., American Seafoods Group LLC (the Company), the Company, American Seafoods
Finance, Inc., the other Guarantors (as defined in the Indenture referred to therein) and Wells Fargo Bank Minnesota, National Association, as trustee.(4)                                   
|       | 
|4.4    |  | Third Supplemental Indenture, dated September 26, 2003, among American Seafoods Group LLC, American Seafoods Finance, Inc., the Guarantors listed on Schedule A thereto and Wells Fargo Bank
Minnesota, National Association, as trustee.(6)                                                                                                                                
|       | 
|10.1   |  | Pollock Conservation Cooperative Agreement, dated December 1998, granting American Seafoods Company the right to harvest and process 16.57% of the directed pollock catch.(1)                                                                                                                                                                                               
|       | 
|10.2   |  | High Seas Catchers Cooperative Agreement, dated December 1998, granting American Seafoods Company the right to harvest 0.31% of the directed pollock catch.(1)                                                                                                                                                                                                             
|       | 
|10.3   |  | Employment Agreement, dated January 28, 2000, by and among American Seafoods, L.P., American Seafoods Group LLC and Bernt Bodal.(2)                                                                                                                                                                                                                                         
|       | 
|10.4   |  | Employment Agreement, dated April 1, 2000, by and among American Seafoods, L.P., American Seafoods Group LLC and Michael J. Hyde.(2)                                                                                                                                                                                                                                        



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|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | 
|10.5   |  | Employment Termination Agreement entered into as of March 31, 2000 by and between American Seafoods Group LLC, American Seafoods Company and Michael J. Hyde.(5)                                                                                                                                                                                                                                                                                              
|       | 
|10.6   |  | Employment Agreement, dated January 28, 2000, by and among American Seafoods, L.P., American Seafoods Company LLC and Inge Andreassen.(2)                                                                                                                                                                                                                                                                                                                     
|       | 
|10.7   |  | Employment Agreement, dated March 18, 2002, by and between American Seafoods Group LLC and Brad Bodenman.(3)                                                                                                                                                                                                                                                                                                                                                  
|       | 
|10.8   |  | Employment Agreement, dated August 9, 2004, by and between American Seafoods, L.P., American Seafoods Group LLC and Matthew D. Latimer.(7)                                                                                                                                                                                                                                                                                                                    
|       | 
|10.9   |  | Employment Agreement, dated April 8, 2002, by and between American Seafoods, L.P., American Seafoods International LLC and John Cummings.(3)                                                                                                                                                                                                                                                                                                                  
|       | 
|10.10  |  | Employment Separation Agreement, dated February 15, 2005, by and between American Seafoods, L.P., American Seafoods Group LLC and Michael J. Hyde.*                                                                                                                                                                                                                                                                                                           
|       | 
|10.11  |  | Consulting Agreement, dated January 1, 2005, by and between American Seafoods Group LLC and Southern Group, LLC.*                                                                                                                                                                                                                                                                                                                                             
|       | 
|10.12  |  | Amendment No. 1, dated as of March 29, 2005, to the Employment Agreement, dated as of January 28, 2000, among American Seafoods, L.P., American Seafoods Group LLC and Bernt O.
Bodal.*                                                                                                                                                                                                                                                                       
|       | 
|10.13  |  | Amendment No. 1, dated as of March 29, 2005, to the Employment Agreement, dated as of March 18, 2002, between American Seafoods Group LLC and Brad Bodenman.*                                                                                                                                                                                                                                                                                                 
|       | 
|10.14  |  | Amended and Restated Credit Agreement, dated as of April 18, 2002, by and among American Seafoods Holdings LLC, American Seafoods Consolidated LLC, American Seafoods Group LLC, the banks and
other financial institutions from time to time party thereto, Harris Trust and Savings Bank, as Documentation Agent, the Bank of Nova Scotia, as Syndication Agent, and Bank of America, N.A., as Administrative Agent, Issuing Lender and Swingline
Lender.(1)
|       | 
|10.15  |  | Second Amended and Restated Credit Agreement, dated as of December 16, 2002, by and among American Seafoods Holdings LLC, American Seafoods Consolidated LLC, American Seafoods Group LLC,
Harris Trust and Savings Bank, as Documentation Agent, The Bank of Nova Scotia, as Syndication Agent, and Bank of American Na.A. as Administrative Agent, Issuing Lender and Swingline Lender.(4)                                                                  
|       | 
|10.16  |  | First Amendment to Second Amendment to Second Amended and Restated Credit Agreement, dated as of January 15, 2004, by and among American Seafoods Holdings LLC, American Seafoods Consolidated
LLC, American Seafoods Group LLC, Harris Trust and Savings Bank, as Documentation Agent, The Bank of Nova Scotia, as Syndication Agent, and Bank of American, Na.A. as Administrative Agent, Issuing Lender and Swingline Lender.(8)                           
|       | 
|10.17  |  | Second Amendment to Second Amended and Restated Credit Agreement, dated as of September 29, 2004, by and among American Seafoods Holdings LLC, American Seafoods Consolidated LLC, American
Seafoods Group LLC, Harris Trust and Savings Bank, as Documentation Agent, The Bank of Nova Scotia, as Syndication Agent, and Bank of American, Na.A. as Administrative Agent, Issuing Lender and Swingline Lender.(7)                                            
|       | 
|18.1   |  | Letter from KPMG LLP regarding change in accounting principles.*                                                                                                                                                                                                                                                                                                                                                                                              
|       | 
|21.1   |  | List of subsidiaries of American Seafoods Group LLC.*                                                                                                                                                                                                                                                                                                                                                                                                         
|       | 
|31.1   |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*                                                                                                                                                                                                                                                    



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|       |  |                                                                                                                                                                                                           
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                                                                                                                               
|       | 
|31.2   |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*
|       | 
|32.1   |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                               
|       | 
|32.2   |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                               

---

|* | Filed herewith.
|- | ---------------

|(1) | Included as an exhibit to the Companys Registration Statement on Form S-4 (Registration No. 333-90436) filed with the Securities and Exchange Commission on October 15, 2002
and included herein by reference.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Included as an exhibit to Amendment No. 1 to the Companys Registration Statement on Form S-4 (Registration No. 333-904536) filed with the Securities and Exchange Commission on
July 26, 2002 and included herein by reference.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Included as an exhibit to Amendment No. 2 to the Companys Registration Statement on Form S-4 (Registration No. 333-904536) filed with the Securities and Exchange Commission on
September 12, 2002 and included herein by reference.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Included as an exhibit to the Companys Form 8-K filed with the Securities and Exchange Commission on December 30, 2002 and included herein by reference.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Included as an exhibit to the Companys Form 10-K filed with the Securities and Exchange Commission on March 31, 2003 and included herein by reference.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Included as an exhibit to American Seafoods Corporations Registration Statement on Form S-1 (Registration No. 333-105499) filed with Securities and Exchange Commission on
October 16, 2003 and included herein by reference.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Included as an exhibit to the Companys Form 10-Q filed with the Securities and Exchange Commission on November 15, 2004 and included herein by reference.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Included as an exhibit to ASG Consolidated LLCs Form S-4 (Registration No. 333-123636) filed with the Securities and Exchange Commission on March 29, 2005 and included herein
by reference.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(b) Exhibits



The following exhibits are filed with this annual report:



|      |  |                                                                                                                                                                                                          
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.10 |  | Employment Separation Agreement, dated February 15, 2005, by and between American Seafoods, L.P., American Seafoods Group LLC and Michael J. Hyde.                                                       
|      | 
|10.11 |  | Consulting Agreement, dated January 1, 2005, by and between American Seafoods Group LLC and Southern Group, LLC.                                                                                         
|      | 
|10.12 |  | Amendment No. 1, dated as of March 29, 2005, to the Employment Agreement, dated as of January 28, 2000, among American Seafoods, L.P., American Seafoods Group LLC and Bernt O.
Bodal.                   
|      | 
|10.13 |  | Amendment No. 1, dated as of March 29, 2005, to the Employment Agreement, dated as of March 18, 2002, between American Seafoods Group LLC and Brad Bodenman.                                             
|      | 
|18.1  |  | Letter from KPMG LLP regarding change in accounting principles.                                                                                                                                          
|      | 
|21.1  |  | List of Subsidiaries of American Seafoods Group LLC.                                                                                                                                                     
|      | 
|31.1  |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.



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|     |  |                                                                                                                                                                                                          
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|31.2 |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|     | 
|32.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                               
|     | 
|32.2 |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                               



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SIGNATURES



Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on the 30th day of March 2005.



AMERICAN SEAFOODS GROUP LLCBy:

/s/    BRAD
BODENMANBrad Bodenman Chief Financial Officer




Pursuant to the
requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                                        |  |                                                                                                                                   |  |               
|--------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|Name                                    |  | Title                                                                                                                             |  | Date          
|                                        |  |                                                                                                                                  
|/s/    BERNT O. BODALBernt O. Bodal     |  | Chairman and Chief Executive Officer, American Seafoods Group LLC, Director of ASC Management, Inc. (Principal Executive
Officer) |  | March 30, 2005
|                                        |  |                                                                                                                                  
|/s/    BRAD BODENMANBrad Bodenman       |  | Chief Financial Officer, American Seafoods Group LLC (Principal Financial Officer and Principal Accounting Officer)               |  | March 30, 2005
|                                        |  |                                                                                                                                  
|/s/    MORGEN CROWMorgen Crow           |  | Director of ASC Management, Inc.                                                                                                  |  | March 30, 2005
|                                        |  |                                                                                                                                  
|/s/    JOHN FLUKEJohn Fluke             |  | Director of ASC Management, Inc.                                                                                                  |  | March 30, 2005
|                                        |  |                                                                                                                                  
|/s/    MICHAEL
MAGERMANMichael
Magerman |  | Director of ASC Management, Inc.                                                                                                  |  | March 30, 2005
|                                        |  |                                                                                                                                  
|/s/    GEORGE MAJOROSGeorge Majoros     |  | Director of ASC Management, Inc.                                                                                                  |  | March 30, 2005
|                                        |  |                                                                                                                                  
|/s/    SCOTT PEREKSLISScott Perekslis   |  | Director of ASC Management, Inc.                                                                                                  |  | March 30, 2005
|                                        |  |                                                                                                                                  
|/s/    LESTER POLLACKLester Pollack     |  | Director of ASC Management, Inc.                                                                                                  |  | March 30, 2005
|                                        |  |                                                                                                                                  
|/s/    WILLIAM TISHER                   |  | Director of ASC Management, Inc.                                                                                                  |  | March 30, 2005
|William Tisher                          |  |                                                                                                                                   |  |               
|                                        |  |                                                                                                                                  
|/s/    ERIC WILMESEric Wilmes           |  | Director of ASC Management, Inc.                                                                                                  |  | March 30, 2005
|                                        |  |                                                                                                                                  
|/s/    JEFFREY DAVISJeffrey Davis       |  | Director of ASC Management, Inc.                                                                                                  |  | March 30, 2005



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