2014 ANNUAL REPORT Maple Leaf Foods Inc. Foods Maple Leaf OVER THE LAST 2014 ANNUAL REPORT ANNUAL 2014 SEVEN YEARS, WE’VE BEEN REBUILDING OUR COMPANY. NOW WE’RE POISED FOR PROFITABLE GROWTH. CMYK Maple Leaf Foods Inc. is a leading Canadian consumer protein company, making high-quality, innovative products under national brands including Maple Leaf®, Maple Leaf Prime®, Maple Leaf Natural Selections®, Schneiders®, Schneiders Country Naturals® and Mina™. The Company employs approximately 12,000 people across Canada and exports to global markets, including the U.S. and Asia. The Company is headquartered in Mississauga, Ontario and its shares trade on the Toronto Stock Exchange (MFI). Table of Contents Message to Shareholders ii | Message from the Chairman vi | Corporate Governance and Board of Directors vii | Senior Management and Officers viii | Management’s Discussion and Analysis 1 | Independent Auditors’ Report 33 | Audited Consolidated Financial Statements 34 | Corporate Information 83 Financial Highlights For years ended December 31 (In millions of Canadian dollars, except share information) 2014 2013(i) 2012(i) (ii) 2011(i) (ii) 2010(i) Consolidated results Sales 3,157 2,955 3,075 3,082 3,216 Adjusted Operating Earnings (Loss)(iii) (75) (136) 57 36 49 Net earnings (loss) from continuing operations (214) (141) (31) (47) (75) Net earnings(iv) 710 496 89 59 29 Return on Net Assets(iii) (v) (3.7)% (0.2)% 9.4% 9.7% 8.6% Financial position Net assets employed(v) (vi) 1,729 2,124 2,101 1,907 1,966 Shareholders’ equity(v) 2,244 1,581 891 865 924 Net Cash (Debt)(iii) (v) 486 (452) (1,171) (984) (902) Per share Adjusted Earnings per Share(iii) (iv) (0.58) (1.08) (0.05) (0.14) (0.12) Net earnings (loss) from continuing operations (1.51) (1.01) (0.23) (0.34) (0.55) Net earnings(iv) 5.03 3.55 0.64 0.43 0.22 Dividends 0.16 0.16 0.16 0.16 0.16 Book value(v) 15.70 11.27 6.36 6.18 6.60 Number of shares (millions) Weighted average 141.2 139.9 139.4 138.7 135.6 Outstanding at December 31 143.0 140.3 140.0 140.0 140.0 (i) Unless otherwise noted, all figures have been restated for the classification of the Rothsay business and the Bakery Products Group as discontinued operations. Refer to Note 25 of the Company’s 2014 audited consolidated financial statements for further information. (ii) 2012 and 2011 figures have been restated for the impact of adopting the revised International Accounting Standard 19 Employee Benefits (“IAS 19”). Refer to Note 32 of the Company’s 2013 audited consolidated financial statements for further information. (iii) Refer to the Non-IFRS Measures on page 28 of the Company’s 2014 Management’s Discussion & Analysis. (iv) Attributable to common shareholders. (v) 2010–2013 have not been restated for the classification of the Rothsay business and the Bakery Products Group as discontinued operations. (vi) Defined as total assets, less cash, deferred tax assets and non-interest bearing liabilities. Segmented Operating Results Protein Group (In millions of Canadian dollars) 2014 2013(i) % Change Meat Products Group Sales 3,135 2,926 7.1% Adjusted Operating Earnings (Loss) (80) (86) 7.0% Total assets 1,965 1,824 7.7% Agribusiness Group Sales 22 29 (24.1)% Adjusted Operating Earnings (Loss) 9 (38) 123.7% Total assets 212 196 8.2% Protein Group Sales(ii) 3,157 2,955 6.8% (ii) Adjusted Operating Earnings (Loss) (71) (124) 42.7% Total assets(ii) 2,177 2,019 7.8% Business Segments The Meat Products Group includes value-added prepared meats, lunch kits and snacks, and fresh pork and poultry products sold under leading Canadian brands such as Maple Leaf® and Schneiders®, and many leading regional brands. The Agribusiness Group includes Canadian hog production operations that primarily supply the Meat Products Group with livestock as well as toll feed sales. (i) Unless otherwise noted, all figures have been restated for the classification of the Rothsay business and the Bakery Products Group as discontinued operations. Refer to Note 25 of the Company’s 2014 audited consolidated financial statements for further information. (ii) Numbers may not add due to rounding. Maple Leaf Foods Inc. 2014 ANNUAL REPORT i Message to Shareholders Michael H. McCain President and Chief Executive Officer Dear fellow shareholders, Shaping the Business Seven years ago, we began work on a strategic 2014 was a pivotal year for Maple Leaf Foods. We blueprint for delivering significant and sustainable value sold our interest in Canada Bread and restructured to our shareholders. It involved investing to establish the Company and leadership to reflect our exclusive the scale and technology required to step-change focus on the protein market, advanced our network our productivity and reduce our cost structure. We transformation to the point where the finish line is in full set forth with an aggressive agenda that included a view, and managed through the most volatile period of series of new builds and start-ups, consolidation of raw material inflation in our Company’s history. It was an plants and distribution centres across the country, and exhilarating and challenging year and the culmination of converting from multiple operating systems to one a major structural change to our business. integrated platform. Emerging from this unprecedented year of change Our significant investment in the meat business will be a different Maple Leaf. We will have a low cost, opened the door for us to reshape the rest of the technologically advanced supply chain combined with a Company. Over the course of the last 18 months, we passionate workforce, leading brands and market shares sold Rothsay, our rendering business, and Olivieri, our supported by a strong balance sheet. At the same pasta business, before completing a $1.66 billion sale time, the animal protein business has become one of of Canada Bread in 2014. the most exciting and fastest growing segments of the entire global food industry. Selling these businesses allowed us to repay our debt, and at the end of 2014, we had approximately From this enviable position, we are aspiring to become $496 million of cash on our balance sheet. Strategically, the best protein company in the world. it meant an exclusive focus on our market leading We arrived here after making a series of key strategic position in the meat business. We simplified our decisions about the business that date back a number organizational structure and made a number of of years. leadership changes to support our future requirements. ii Maple Leaf Foods Inc. 2014 ANNUAL REPORT It’s more than a new year for Maple Leaf. “ This is the first year in many that we have ‘clear air’ – after years of change to our supply chain and our structure, we see a clear future with unbridled opportunity and a vision to become the best protein company in the world.” The executive team was selected from the Company’s newly constructed facility in southwest Ontario. We deep bench strength as we drew upon talent with also consolidated and optimized our product portfolio extensive leadership skills as well as operational and to be able to efficiently manufacture in this new, industry experience. We also appointed younger high capacity/high technology network and are well leaders to the executive team, and they are bringing positioned to upgrade our product mix. new perspectives and ways of doing things. It is a When we complete the final stage of our transformation – refreshed and invigorated team that is hands-on, expected in 2015 – we will eliminate the cost burden highly action oriented and regularly challenges me. At associated with running a duplicative supply chain and the same time, we bid farewell to three giants in our in turn capture the full potential of our investment in business – Richard Lan, Scott McCain and Michael Vels – technology and scale. It will also mark a major shift who contributed extensively over their long careers from fixing our cost structure to profitably growing to helping make Maple Leaf the market leader it has our business. become. I am deeply grateful for their commitment, their wisdom and their guidance over the years. And while we are navigating the details of completing this monumental task, I want to underscore what we Our restructuring did not distract us from advancing will have accomplished. From 2010 through to 2015, our network transformation – job #1 for the last seven we will have invested more than $1 billion to create the years – or from the confidence that we will hit an leading prepared meats supply chain in the country annualized Adjusted EBITDA margin of 10% in 2015. We and be better able to compete with the biggest players have largely completed the conversion from multiple on the continent. It signals our long-term commitment legacy systems to SAP, providing increased controls and to producing great food in Canada, while delivering capabilities. We have transformed our manufacturing very attractive returns to our shareholders. We believe network with our new 400,000 square foot Heritage that the profitability target we have set for ourselves plant in Hamilton, Ontario, expansions at three existing should be seen as the new floor for what our business facilities, and the closing of seven of a planned eight can achieve. This is truly a transformation to a more legacy plants. We consolidated our distribution network profitable and growth-oriented Maple Leaf Foods. and have gone from 19 centres to two, including a Maple Leaf Foods Inc. 2014 ANNUAL REPORT iii 2014 Recap With our new assets there is further runway to fully Sales in 2014 were $3.2 billion, up 5.8% from 2013, after optimize plants and related supply chain efficiencies, adjusting for foreign exchange.