Ceres Global
Annual Report 2017

Plain-text annual report

GAINING GROUND C E R E S G LO B A L A G C O R P. | F Y 201 7 A N N U A L R E P O R T GAINING GROUND THE YEAR IN REVIEW We streamlined operations in our agriculture-related business and idled three inefficient facilities within our network. This helped drive more volume through each of our other locations. Along with increasing the number of bushels handled by 44 percent from the previous year, gaining new customers and establishing new trade flows, rationalizing our facilities supported our efforts to reduce our average handling cost per bushel. The highlight in our logistics business during the year was completing construction of our fertilizer facilities at the Northgate Terminal and launching that business on time, on budget and with a perfect safety record. Also at Northgate, we increased natural gas liquids volumes and began transloading a number of industrial products with significant growth potential. Through focused efforts to make the grain supply chain more efficient, we are gaining ground. INCREASED REVENUE BY 37% TO $528.5M GREW NUMBERS OF BUSHELS HANDLED BY 44% 111.1M INCREASED COMMODITY PRODUCT LINES FROM 8 TO 13 LOOKING FORWARD: GOALS FOR 2018 2018 2019 Increase core, new and specialty grain volumes, along with oilseed product volumes throughout our networkIncrease origination volumes directly from farmersDevelop other agriculture-related businesses at Northgate, such as specialty product cleaning, handling, and processingStrengthen relationships with key customersAccelerate the development of our logistics business at NorthgateASSETS & CAPABILITIES ABOUT CERES GLOBAL AG CORP. Ceres has a network of facilities strategically located around the Great Lakes, the Midwest and South Central U.S., and in close proximity to sources of grain origination. Headquartered in Minneapolis, Ceres Global Ag Corp. is focused on two primary businesses: a Grain Storage, Handling and Merchandising unit; and a Commodity Logistics unit. NUMBER OF ELEVATORS 6 BUSHEL CAPACITY 34.4M Ceres’ Grain Storage unit is anchored by its 100% ownership of Riverland Ag Corp. The grain storage unit is comprised of a collection of six operating grain storage and handling assets in Minnesota, Saskatchewan and Ontario, having aggregate storage capacity of approximately 34.4 million bushels as at June 30, 2017. Ceres’ Commodity Logistics unit is focused on the development of a Commodity Logistics Centre in Northgate, SK. The Northgate Commodities Logistics Centre is a state-of-the-art grain, agriculture services and oilfield supplies transloading site. Ceres also has a 25% interest in Stewart Southern Railway Inc., a short-line railway with a range of 130 kilometres that operates in southeastern Saskatchewan and a 17% interest in Canterra Seeds, a Canadian-based seed development company. STRATEGICALLY CONNECTED FROM ORIGINATION TO DEMAND Northgate Duluth Storage MINNEAPOLIS Port Colborne Malt One Shakopee Savage MINNEAPOLIS Louisville Origination Expansion 3rd Party Lease Current NORTHGATE TERMINAL Ceres’ Northgate Terminal is a multi-commodity logistics center strategically located on the Canada/U.S. border in southeastern Saskatchewan. Northgate serves the industrial and agricultural sectors in both Canada and the U.S. Along with agricultural products, we have leveraged our storage and transloader facilities for both fertilizer and natural gas liquids and grown volumes handled for each. Going forward, we will pursue more logistics and non-agricultural opportunities.The Northgate Terminal sits on 1,300 acres and has 2.7M bushel capacity for agricultural products and 26,000t storage capacity for fertilizer. Facilities are also connected to BNSF’s 32,000 mile rail network.CHAIRMAN’S MESSAGE Fiscal 2017 was a challenging year for Ceres Global Ag. Corp. For most of the year, the supply of grain worldwide was much greater than demand. The effects were felt throughout the entire supply chain creating volatility in markets, low margins and aggressive competition. Despite a difficult external environment, Ceres continued on the strategic plan that was put in place more than two years ago. We made significant progress in many areas. • Increased the number of bushels handled from the previous year by 44 percent • Established new customers and trade flows throughout the U.S., Mexico, Europe and Asia • Successfully launched our fertilizer business at Northgate, completing facility construction on time, under budget and with an impeccable safety record • • Increased liquid natural gas volumes and began transloading a number of industrial products with significant growth potential Idled or shut down three inefficient facilities which helped drive more volume through each of our other locations • Most importantly, added talent to the company across all major job families Our strategy focuses on both the turnaround of all assets (that are not Northgate) and the start-up of Northgate. Our non-Northgate facilities were significantly underutilized. For these assets we have increased utilization for Ceres merchandised grain products, increased utilization for third-party product, or idled them because they were inefficient. By doing so, we have significantly lowered our cost per bushel handled and increased our ability to compete against larger companies. By contrast, Northgate (which represents more than half the value of property, plant and equipment on our balance sheet), is a start-up operation and key to the success of Ceres. While we are happy with 2017 volumes of grain, oilseeds and liquid natural gas handled at this facility, margins have been narrow and we have not met our profit objectives. In order to generate acceptable returns at Northgate, we must continue to add more grain and oil seed volume along with more products to lower fixed cost per unit handled and generate revenues commensurate with the investment that we made in the infrastructure. Fertilizer is a great addition and will help us achieve our financial targets. In the meantime, management and the Board of Directors are working hard to add more revenue generating opportunities that will ultimately turn Northgate into the largest inland export port in Saskatchewan. Perhaps our greatest challenge in managing a turnaround and a start-up at the same time has been finding and hiring the talent needed to operate a business of this complexity. Despite the difficulties of competing for talent against much larger global players, we have successfully grown from a small team of traders and merchandisers to a team of nearly twenty people including our grain originators. We have challenged all staff to expand their capabilities as the volume and the complexity of the business grows. While we have experienced some growing pains in this area, we believe that we have a strong team in place to continue to develop and grow the business. As we look ahead to 2018, we are focused on the following: • • Incrementally increase core grain and oilseed product volumes (wheat, durum, oats, and canola) and continue to increase efficiency and margins throughout our network. As a result, we expect to earn a higher average margin per bushel Increase specialty, new grain and oilseed product volumes. Examples would be pulses, rye, soybeans, and barley • Add more farmer origination for grain and other products • Strengthen relationships with key customers • Accelerate the development of our logistics business at Northgate • Develop other agriculture-related businesses at Northgate, such as specialty product cleaning, handling, and processing As we look ahead we continue to be very optimistic. We have assembled a strong team, made great progress on our strategy, and are much better positioned to compete in a low margin environment. We would not be where we are without the hard work and dedication of our employees and I thank each one. I also thank our Board of Directors for their guidance and wisdom. Finally I want to thank our shareholders for your patience and support as we continue to work towards the achievement of our financial goals. Douglas E. Speers Chairman of the Board TABLE OF CONTENTS Financial and Operating Results Quarterly Financial Data Liquidity & Cash Flow Capital Resources Accounting Policies and Critical Accounting Estimates Outlook Other Non-IFRS Financial Measures and Reconciliations Key Assumptions & Advisories 6 12 13 14 15 16 17 18 19 MANAGEMENT’S DISCUSSION AND ANALYSIS Table of Contents Financial and Operating Summary………………………………………………………………… Quarterly Financial Data……………………………………………...…………………………… Liquidity & Cash Flow…………………………………………………………...………………... Capital Resources…………………………………………………………...……………………... Accounting Policies and Critical Accounting Estimates………………………………...………… Outlook……………………………………………………………………..................................... Other……………………………………………………………………......................................... Non-IFRS Financial Measures and Reconciliations……………………………………………….. MANAGEMENT’S DISCUSSION AND ANALYSIS Key Assumptions & Advisories……………………………..…………………………………….. 2 8 9 10 11 12 13 14 15 This Management’s Discussion and Analysis (“MD&A”) dated September 22, 2017 should be read in conjunction with the audited Consolidated Financial Statements for the twelve-month period ended June 30, 2017 of Ceres Global Ag Corp. (“Ceres”, the “Corporation”, “we”, “our”, and “us”), and the Corporation’s audited consolidated financial statements for the fifteen-month period ended June 30, 2016 (the “Annual Consolidated Financial Statements”). Additional information about Ceres filed with Canadian securities regulatory authorities, including the quarterly financial statements and MD&A, and annual report and the annual information form, is available online at www.sedar.com. Basis of Presentation Unless otherwise noted, all financial information has been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Unless otherwise indicated, dollar amounts are expressed in United States dollars (“$” and “USD”) and references to “CAD” are to Canadian dollars. Non-IFRS Financial Measures This MD&A contains references to certain financial measures, including some that do not have any standardized meaning prescribed by IFRS. These measures include “EBITDA” (Earnings before interest, income tax, depreciation and amortization) and “Return on shareholders’ equity”, neither of which have a standardized meaning under IFRS. See “Non-IFRS Financial Measures and Reconciliations.” Change in Fiscal Year-End and Presentation Currency On February 10, 2016, the Board of Directors approved a change in the fiscal year end from March 31 to June 30. As a result of the change, the Corporation has a fifteen-month fiscal period that is reported in this Annual 1 FY2017 ANNUAL REPORT 5 Report for the fiscal-period ending June 30, 2016. In conjunction with the change in fiscal year, Ceres changed its reporting and presentation currency to USD commencing as of July 1, 2016 and for reporting periods, thereafter. Ceres believes that these changes will give investors a view of the Corporation’s financial performance that better aligns the fiscal year with that of the agricultural crop year and functional currency. Risks and Forward Looking Information The Corporation’s financial and operational performance is potentially affected by a number of factors, including, but not limited to, the factors described in “Key Assumptions & Advisories”. This MD&A contains forward-looking information based on the Corporation’s current expectations, estimates, projections and assumptions. This information is subject to a number of risks and uncertainties, including those discussed in this MD&A and the Corporation’s other disclosure documents, many of which are beyond the Corporation’s control. Users of this information are cautioned that actual results may differ materially. See “Key Assumptions and Advisories” for information on material risk factors and assumptions underlying the Corporation’s forward-looking information. 1. FINANCIAL AND OPERATING SUMMARY (in millions except per share) Revenues Gross profit (loss) Income (loss) from operations Net income (loss) Weighted average common shares outstanding Income (loss) per share - Basic Income (loss) per share - Diluted As at: Total assets Total bank indebtedness, current (1) Term debt (2) Shareholders' equity Return on shareholders' equity (3) Twelve-month period ended June 30, 2017 Fifteen-month period ended June 30, 2016 Twelve-month period ended March 31, 2015 $ $ $ $ 528.5 7.8 (1.7) (13.7) 27.5 (0.50) (0.50) $ $ $ $ 385.8 (0.5) (10.6) (12.1) 27.0 (0.45) (0.45) $ $ $ $ 279.8 20.2 3.8 0.7 18.4 0.04 0.04 $ $ $ $ $ $ $ $ $ $ 256.3 56.4 14.5 148.8 -9.2% $ $ $ $ 254.8 55.6 22.9 157.6 -7.7% $ $ $ $ 244.4 14.8 24.0 173.1 0.4% (1) Includes Bank indebtedness and outstanding cheques in excess of cash on hand (2) Includes current portion of long-term debt. (3) Non-IFRS measure. See Non-IFRS Financial Measures and Reconciliations section. HIGHLIGHTS FOR THE TWELVE MONTHS ENDED JUNE 30, 2017  In an environment of low commodity prices with suppressed margin opportunities, the Corporation increased gross profit compared to the fifteen-months ended June 30, 2016.  Number of agricultural commodity product lines increased to 13 in 2017 from 8 in the previous year.  Generated cash flow from operations of $14.6 million, an increase of $9.0 million year over year through efficient management of working capital.  Handled and traded approximately 111.1 million bushels of grain and oilseed during the year, compared to 77.4 bushels for the fifteen-months ended June 30, 2016.  Completed construction of the fertilizer storage warehouse at Northgate, as defined below, and commenced operations on April 30, 2017 in conjunction with our agreement with Koch Fertilizer Canada, ULC (“Koch”) to handle and store fertilizer on their behalf. 2 6 CERES GLOBAL AG CORP. Who We Are While having one reportable segment, the Corporation operates in two business units: (1) grain storage, handling and merchandising unit, and; (2) commodity logistics. Ceres’ grain storage, handling, and merchandising unit is anchored by a collection of six (6) grain storage and handling assets in Minnesota, Saskatchewan and Ontario having aggregate storage capacity of approximately 34.4 million bushels. The Corporation’s Commodity Logistics unit is focused on the development of a commodity logistics centre in Northgate, Saskatchewan. The Northgate Commodities Logistics Centre (“Northgate” or the “NCLC”) is a state-of-the-art grain, agriculture services, and oilfield supplies transloading site, which is being developed in conjunction with several potential energy and agricultural input company partners and is connected to Burlington Northern Santa Fe Railway (the “BNSF”). Ceres also has a 25% interest in Stewart Southern Railway Inc., a short-line railway with a range of 130 kilometres that operates in Southeastern Saskatchewan, and a 17% interest in Canterra Seed Holdings Ltd, a Canadian-based seed development company. Grain Division The Corporation’s grain division is engaged in grain storage, procurement, and merchandising of specialty grains and oilseeds such as oats, barley, rye, hard red spring wheat, durum wheat, canola and pulses through six grain storage and handling facilities in Minnesota, Saskatchewan and Ontario. Two of the grain storage facilities are located at deep-water ports in the Great Lakes, and one is located on the Minnesota River, which is tributary to the Mississippi River, allowing access for vessels and barges and enabling the efficient import and export of grains globally. Approximately 29 million bushels of the Corporation’s facilities are “regular” for delivery for both spring wheat against the Minneapolis Grain Exchange futures contract and oats against the Chicago Board of Trade futures contract. In addition, spring wheat and oats sourced by the Corporation out of Canada are eligible for delivery against the respective futures contract. The majority of the grain division’s current storage space is utilized to benefit from grain trading, arbitrage and merchandising opportunities. Management determines which of the Corporation’s facilities is to be employed for the storage or throughput of a particular grain shipment based on the source of the grain shipment, the elevator location relative to the end customers, the cost of logistics to transport the grain, and the availability of space in the intended elevator. In addition, the Corporation stores and handles grain for third-party customers. Northgate Commodities Logistics Centre Ceres owns approximately 1,300 acres of land at Northgate, Saskatchewan, where it has constructed a commodities logistics centre designed to utilize two rail loops, each capable of handling unit trains of up to 120 railcars. The NCLC is an approximately CAD $100 million grain, oil, natural gas liquids and fertilizer terminal and is connected to the BNSF with plans to further build out infrastructure to support handling of other industrial products and equipment. The Corporation commenced its initial grain operations at Northgate in October 2014, operating the facility with a grain transloader for six months during the year-ended March 31, 2015. Phase one of the elevator was operational in November 2015 and the elevator was fully operational in May 2016. As part of its grain operations, the Corporation contracts grain and oilseed purchases from western Canadian producers that are delivered by truck and unloaded at the NCLC grain terminal. Ceres has the option of storing the grain on-site or loading it into outbound railcars to customer end-users, or to the Corporation’s other facilities, taking advantage of the value and strategic location of its current asset base. Concurrent with its grain operations at NCLC, in April 2015, the Corporation entered into an agreement with Elbow River Marketing (“ERM”), a wholly owned subsidiary of Parkland Fuel Corporation, to transload propane at Northgate. This provides a direct link and an added access point for propane to enter the US market. 3 (“Koch”) to handle and store fertilizer on their behalf. Who We Are While having one reportable segment, the Corporation operates in two business units: (1) grain storage, handling and merchandising unit, and; (2) commodity logistics. Ceres’ grain storage, handling, and merchandising unit is anchored by a collection of six (6) grain storage and handling assets in Minnesota, Saskatchewan and Ontario having aggregate storage capacity of approximately 34.4 million bushels. The Corporation’s Commodity Logistics unit is focused on the development of a commodity logistics centre in Northgate, Saskatchewan. The Northgate Commodities Logistics Centre (“Northgate” or the “NCLC”) is a state-of-the-art grain, agriculture services, and oilfield supplies transloading site, which is being developed in conjunction with several potential energy and agricultural input company partners and is connected to Burlington Northern Santa Fe Railway (the “BNSF”). Ceres also has a 25% interest in Stewart Southern Railway Inc., a short-line railway with a range of 130 kilometres that operates in Southeastern Saskatchewan, and a 17% interest in Canterra Seed Holdings Ltd, a Canadian-based seed development company. Grain Division The Corporation’s grain division is engaged in grain storage, procurement, and merchandising of specialty grains and oilseeds such as oats, barley, rye, hard red spring wheat, durum wheat, canola and pulses through six grain storage and handling facilities in Minnesota, Saskatchewan and Ontario. Two of the grain storage facilities are located at deep-water ports in the Great Lakes, and one is located on the Minnesota River, which is tributary to the Mississippi River, allowing access for vessels and barges and enabling the efficient import and export of grains globally. Approximately 29 million bushels of the Corporation’s facilities are “regular” for delivery for both spring wheat against the Minneapolis Grain Exchange futures contract and oats against the Chicago Board of Trade futures contract. In addition, spring wheat and oats sourced by the Corporation out of Canada are eligible for delivery against the respective futures contract. The majority of the grain division’s current storage space is utilized to benefit from grain trading, arbitrage and merchandising opportunities. Management determines which of the Corporation’s facilities is to be employed for the storage or throughput of a particular grain shipment based on the source of the grain shipment, the elevator location relative to the end customers, the cost of logistics to transport the grain, and the availability of space in the intended elevator. In addition, the Corporation stores and handles grain for third-party customers. Northgate Commodities Logistics Centre Ceres owns approximately 1,300 acres of land at Northgate, Saskatchewan, where it has constructed a commodities logistics centre designed to utilize two rail loops, each capable of handling unit trains of up to 120 railcars. The NCLC is an approximately CAD $100 million grain, oil, natural gas liquids and fertilizer terminal and is connected to the BNSF with plans to further build out infrastructure to support handling of other industrial products and equipment. The Corporation commenced its initial grain operations at Northgate in October 2014, operating the facility with a grain transloader for six months during the year-ended March 31, 2015. Phase one of the elevator was operational in November 2015 and the elevator was fully operational in May 2016. As part of its grain operations, the Corporation contracts grain and oilseed purchases from western Canadian producers that are delivered by truck and unloaded at the NCLC grain terminal. Ceres has the option of storing the grain on-site or loading it into outbound railcars to customer end-users, or to the Corporation’s other facilities, taking advantage of the value and strategic location of its current asset base. Concurrent with its grain operations at NCLC, in April 2015, the Corporation entered into an agreement with Elbow River Marketing (“ERM”), a wholly owned subsidiary of Parkland Fuel Corporation, to transload propane at Northgate. This provides a direct link and an added access point for propane to enter the US market. 3 FY2017 ANNUAL REPORT 7 In November 2015, Ceres entered into an agreement with Koch for the storage and handling of dry fertilizer products which brings phosphate-based fertilizer to Northgate. At Northgate, Ceres unloads and warehouses fertilizer in a new, state of the art, 26,000-ton fertilizer storage terminal. The fertilizer is loaded out by Ceres into trucks and distributed to Canadian farmers. The fertilizer operation commenced on April 30, 2017. Overall Performance The Corporation’s net loss was $13.7 million for the twelve-month period ended June 30, 2017, compared to a net loss of $12.1 million in the fifteen-month period ended June 30, 2016. The net loss was in part due to non- cash items which include a $7.7 million loss on the impairment of the Buffalo and Duluth Lakeport assets and an increase in depreciation from the full deployment of Northgate assets. Gross profit was $7.8 million for the twelve-month period ending June 30, 2017 compared to a gross loss of $0.5 million in the fifteen-month period ended June 30, 2016. Furthermore, loss from operations was $1.7 million for the twelve-month period ended June 30, 2017 compared to a $10.6 million loss from operations in the fifteen-months ended June 30, 2016. Revenues and Gross Profit The Corporation’s revenue is currently generated by its grain and logistics division. The revenues are predominantly composed of the sale of grain, storage and rental income, and transloading income. Since a significant portion of revenue is generated through the sale of grain, as a commercial commodities merchandizing business, revenues can vary from year-to-year due to fluctuations of agricultural commodity prices. The Corporation has the flexibility to be opportunistic in its decisions to buy, sell or hold inventory based on market conditions such as grain supply, demand, and grain values. Total revenue increased by $142.7 million in the twelve-months ended June 30, 2017 compared to the fifteen- months ended June 30, 2016. The Corporation handled and traded 111.1 million bushels of grain and oilseed sales in fiscal year 2017 compared to 77.4 million bushels for the fiscal year 2016. The Corporation’s grain division is principally involved in an agricultural commodity-based business, in which changes in selling prices generally move in relation to changes in purchase prices. Therefore, increases or decreases in prices of the agricultural commodities that the business deals in will have a relatively equal impact on sales and cost of sales. Accordingly, management believes it is more important to focus on changes in gross profit and bushels handled than on changes in revenue dollars. The table below represents a summary of the components of gross profit for the twelve-months ended June 30, 2017 and the fifteen-months ended June 30, 2016: (in millions) Net trading margin Storage and rental income Logistics and transloading Management service revenue Operating expenses included in Cost of sales Depreciation expense included in Cost of sales Twelve-month period ended June 30, 2017 Fifteen-month period ended June 30, 2016 $ 18.4 6.4 1.3 - (13.8) (4.5) $ 11.7 5.6 0.8 1.5 (16.3) (3.8) Gross profit (loss) $ 7.8 $ (0.5) 4 8 CERES GLOBAL AG CORP. Gross profit increased by $8.3 million in the twelve-months ended June 30, 2017 compared to the fifteen- months ended June 30, 2016. The year over year increase in gross profit was driven by an increase in net trading margins and the exclusion of the prior years’ durum loss of $8.2 million. Net trading margin Net trading margin increased by $6.7 million in the twelve-months ended June 30, 2017 compared to the fifteen- months ended June 30, 2016. The prior year results were impacted by a durum loss of $8.2 million. Storage and rental income Storage and rental income increased $0.8 million in the twelve-months ended June 30, 2017 compared to the fifteen-months ended June 30, 2016. The Corporation’s storage and rental income increase was a result of a 55% increase in third-party bushels handled. Logistics and transloading Logistics and transloading revenue increased $0.5 million in the twelve-months ended June 30, 2017 compared to the fifteen-months ended June 30, 2016. The Corporation earns a service fee for handling liquefied petroleum gas (“LPG” or “propane”), industrial products and fertilizer, whose shipments began April 30, 2017, at Northgate. Management service revenue Management service revenue decreased $1.5 million in the twelve-months ended June 30, 2017 compared to the fifteen-months ended June 30, 2016 as a result of a one-time contingency payment as a part of the sale and three-year management of a grain elevator and barley seed plant in March 2013. Operating expenses and depreciation For the twelve-months ended June 30, 2017, operating and depreciation expense included in cost of sales totaled $18.3 million compared to $20.1 million for the fifteen-months ended June 30, 2016. On an annualized basis, the increase was due to a full year’s depreciation of Northgate’s assets compared to the prior year. Also, due to significant volume increases, the costs at other operating facilities have increased for the twelve-months ended June 30, 2017 compared to the fifteen-months ended June 30, 2016. General and Administrative Expenses General and administrative expense is composed of three components: corporate level administrative expenses, administrative expenses associated with operating the grain division (exclusive of those expenses incurred at grain facilities, which are captured in cost of sales and are a reduction to gross profit as described above), and the revaluation of the provision for future payments to Front Street Capital. In addition, the corporate administrative expenses are inclusive of non-grain business growth initiatives. 5 FY2017 ANNUAL REPORT 9 The following table sets out the components of the Corporation’s consolidated general and administrative expenses for the twelve-months ended June 30, 2017 and the fifteen-months ended June 30, 2016: (in millions) Twelve-month period ended June 30, 2017 Fifteen-month period ended June 30, 2016 Corporate administration Non-corporate administration Revaluation of provision of Front Street Capital $ 3.4 6.3 (0.1) $ 4.5 5.8 (0.2) Total general and administrative expense $ 9.6 $ 10.1 For the twelve-months ended June 30, 2017, general and administrative expenses totaled $9.6 million compared to $10.1 million in the fifteen-months ended June 30, 2016. The increase in non-corporate administration expense was primarily due to additional headcount year over year as the Corporation built its grain merchandising team and related administrative support. Finance Income (Loss) For the twelve-month period ended June 30, 2017, finance loss totalled $0.3 million compared to finance income of $1.2 million during the fifteen-month period end June 30, 2016. Finance income (loss) is composed of realized and unrealized losses on foreign exchange transactions and currency hedging transactions along with revaluation gains of portfolio investments. For the twelve-month period ended June 30, 2017, the decrease compared to the fifteen-month period ended June 30, 2016 is attributable to the prior year revaluation of the Corporation’s investment in Canterra Seeds Holdings, Ltd. (“Canterra”). Until September 2015, the Corporation held a 25% equity interest in Canterra that had a carrying value of $1.8 million. This investment, accounted for using the equity method, was classified on the Consolidated Balance Sheet as “Investments in associates”. During the quarter ended September 30, 2015, Canterra issued additional common equity shares, resulting in the dilution of the Corporation’s equity interest to 17%. As such, the Corporation no longer had significant influence over the financial and operating policies of Canterra. Therefore, Ceres reclassified its investment to portfolio investments for the period ended September 30, 2015 and recorded it at fair value, recognizing a gain of $1.0 million. The investment in Canterra totals $2.0 million as at June 30, 2017, and is classified on the Consolidated Balance Sheet within “Portfolio investments, at fair value”. Revaluation of Derivative Warrant Liability In connection with the completion of the Corporation’s rights offering (the “Rights Offering”), on December 4, 2014, Ceres issued an aggregate of 2.1 million warrants (the “Warrants”) to the stand-by purchasers. The Warrants issued were conditional upon approval at the Corporation’s annual general meeting (“AGM”), which was obtained at the AGM on August 7, 2015. Furthermore, the Warrants were issued at a fixed exercise price of CAD $5.84 and are each exercisable into one common share of the Corporation (a “Common Share”). The Warrants have an expiry date of December 4, 2016, being 24 months after issuance. In the event that the Warrants are being exercised prior to the completion of a change of control of the Corporation, but after a transaction that will result in such a change of control has been publicly announced, in lieu of exercising the Warrants, the holders of Warrants can elect a cashless exercise to receive Common Shares equal to: the difference between the ten-day Volume-Weighted Average Price (“VWAP”) of the Corporation’s stock price and CAD $5.84; multiplied by the number of Common Shares 6 10 CERES GLOBAL AG CORP. in respect of which the election is made; divided by the ten-day VWAP of the Corporation’s stock price. If a Warrant holder exercises this option, there will be variability in the number of shares issued per Warrant. In accordance with IFRS, a contract to issue a variable number of shares fails to meet the definition of equity and must instead be classified as a derivative liability and measured at fair value with changes in the fair value recognized in the statement of operations and comprehensive loss at each period end. On November 30, 2016, 1.25 million Warrants were exercised into 1.25 million Common Shares at an exercise price of CAD $5.84 for total consideration of $5.4 million (CAD $7.3 million). On December 4, 2016, the remaining 0.8 million Warrants expired and were canceled, resulting in no warrant liability as at June 30, 2017. As at June 30, 2016, warrant liability was $0.1 million. Gain (Loss) on Property, Plant and Equipment As at June 30, 2017, the Corporation had three idle facilities: Duluth Lakeport, Buffalo and Calumet. As the operations of Duluth Lakeport and Buffalo ceased, the cash flows associated with those specific assets could no longer support their carrying value. During the twelve-months ended June 30, 2017, Ceres recorded a loss of $7.7 million on the impairment of Duluth Lakeport and Buffalo compared to a gain of $0.2 million for the sale of Ceres’ Electric Steel facility during the fifteen-months ended June 30, 2016. Subsequent to June 30, 2017, the Corporation closed the sale of its Buffalo facility on August 15, 2017. The gross proceeds of which were $0.1 million. On September 19, 2017, the Corporation closed the sale of its Duluth Lakeport facility for a loss of $0.2 million. Interest Expense (in millions) Interest on revolving credit facility Interest on repurchase obligations Long-term debt Amortization of financing costs paid Interest income and other interest expense Twelve-month period ended June 30, 2017 Fifteen-month period ended June 30, 2016 $ (2.1) (0.3) (0.9) (0.6) - $ (1.9) (0.2) (1.8) (0.7) 0.1 Total interest expense $ (3.9) $ (4.5) For the twelve-months ended June 30, 2017, interest expense totaled $3.9 million compared to $4.5 million for the fifteen-months ended June 30, 2016. The higher interest expense on the revolving credit facility was primarily driven by maintaining higher average inventory levels and a mid-year revolving credit facility interest rate increase of 1.0% per annum. Share of Net Income (Loss) in Investments in Associates For the twelve-months ended June 30, 2017, the Corporation incurred a loss in its net share in investments in associates of $0.2 million compared to an income of $0.3 million for the fifteen-months ended June 30, 2016. 7 FY2017 ANNUAL REPORT 11 2. QUARTERLY FINANCIAL DATA Reporting dates 6/30/2017 3/31/2017 12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015 (in millions except per share) Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q5 2016 Q4 2016 Q3 2016 Q2 2016 3 months 3 months 3 months 3 months 3 months 3 months 3 months 3 months Revenues Gross profit (loss) $ 112.2 $ 128.5 $ 131.8 $ 155.9 $ 115.8 $ 87.3 $ 61.4 $ 73.0 $ 0.1 $ 3.0 $ 2.9 $ 1.9 $ 1.9 $ 2.8 $ (7.8) $ 1.1 Income (loss) from operations $ (2.5) $ 0.6 $ 0.8 $ (0.6) $ (0.3) $ 0.9 $ (9.8) $ (0.8) Net income (loss) $ (4.0) $ (8.1) $ (0.2) $ (1.4) $ (1.5) $ 0.8 $ (10.1) $ 0.1 Return on shareholders' equity¹ Weighted-average number of common shares for the quarter Basic and fully diluted earnings (loss) per share EBITDA¹ EBITDA per share Shareholders' equity, as at reporting date Shareholders' equity per common -2.7% -5.4% -0.1% -0.9% -0.9% 0.5% -6.5% 0.0% 27.9 28.0 27.3 26.9 26.9 27.0 27.1 27.1 $ (0.14) $ (0.29) $ (0.01) $ (0.05) $ (0.05) $ 0.03 $ (0.37) $ 0.00 $ (1.7) $ 1.6 $ 2.0 $ 0.7 $ 0.5 $ 1.9 $ (8.9) $ 0.9 $ (0.06) $ 0.06 $ 0.07 $ 0.03 $ 0.02 $ 0.07 $ (0.33) $ 0.03 $ 148.8 $ 151.0 $ 158.4 $ 155.1 $ 157.6 $ 160.1 $ 155.1 $ 167.4 share, as at reporting date $ 5.33 $ 5.40 $ 5.64 $ 5.77 $ 5.86 $ 5.92 $ 5.73 $ 6.19 Volumes Elevator bushels handled Direct ship bushels 26.1 3.6 16.1 5.8 20.0 4.6 25.0 9.9 18.7 9.4 9.4 3.2 10.8 4.2 10.1 4.3 ¹Non-IFRS measurement. See Note 8 below for further information Fourth Quarter Gross profit for the quarter ended June 30, 2017 decreased $1.8 million to $0.1 million compared to the same period of the previous year. The decline in gross profit was primarily driven by $1.9 million reduction in net trading margin, due to lower carries quarter over quarter, offset by $0.2 million increase in storage and rental income due to the increase in stored bushels and storage and handling rates and $0.3 million in logistics and transloading revenue due to the addition of fertilizer shipments in 2017. Operating and depreciation expense in cost of sales increased $0.4 million due to addition Northgate assets being placed in service. General and administrative expenses increased $0.4 for the quarter ended June 30, 2017 compared to the same period in prior year was due to additional headcount quarter over quarter growth of the grain merchandising and related support teams. Net loss for the quarter ended June 30, 2017 increased $2.5 million to $4.0 million compared to the same period of the previous year as a result of the reduction in net trading margin. 8 12 CERES GLOBAL AG CORP. 3. LIQUIDITY & CASH FLOW (in millions) Net Cash Provided by (Used in) Operating activities Investing activities Net Cash Provided (Used) Before Financing Activities Financing Activities Foreign Exchange Cash Flow Adjustment on Accounts Denominated in a Foreign Currency Twelve-month period ended June 30, 2017 Fifteen-month period ended June 30, 2016 $ 14.6 (11.0) 3.6 (3.0) $ 5.6 (30.2) (24.6) 22.7 - (2.3) Increase (Decrease) in Cash and Cash Equivalents $ 0.6 $ (4.2) Cash and Cash Equivalents (Outstanding cheques) $ - $ (0.8) Operating Activities Cash provided by operating activities was $14.6 million for the twelve-months ended June 30, 2017. The $9.0 million increase in cash provided by operating activities was primarily a result of the effective management of working capital. Investing Activities During the twelve-months ended June 30, 2017, cash used in investing activities were $11.0 million, which comprised of additions of property, plant and equipment. The $19.2 million decrease in cash used in investing activities was primarily due to the completion of asset purchases for the initial buildout of Northgate. Financing Activities During the twelve-months ended June 30, 2017, the Corporation had $3.0 million in cash used in financing activities. The $25.7 million decrease in cash provided by financing activities was primarily due to this year’s repayment of prior year’s net borrowings to fund the purchase of Northgate assets. Available Sources of Liquidity The Corporation’s sources of liquidity as at June 30, 2017 include available funds under its revolving credit facility (the “Credit Facility”). Management believes that cash flow from operations will be adequate to fund operating expenditures, maintenance capital, interest, and any income tax obligations. Growth capital expenditures in the next twelve months are expected to be funded by cash on hand and borrowing against the Credit Facility. Any additional debt incurred is expected to be serviced by the anticipated increases in cash flow and will only be borrowed within the Corporation’s debt covenant limits. In addition, the Corporation’s Credit Facility at June 30, 2017 contains certain covenants, including a covenant that the Corporation maintain minimum working capital of not less than $30.0 million. As at June 30, 2017 the Corporation’s working capital – defined as current assets less current liabilities – totaled $39.9 million. In addition to working capital, the covenants include the maintenance of “consolidated debt” to “consolidated tangible net worth” (as defined in the agreement) of not more than 4.0 to 1.0 and consolidated tangible net worth of not less than $120.0 million. As at June 30, 2017 and June 30, 2016, the Corporation was in compliance with all of the above mentioned financial covenants. 9 FY2017 ANNUAL REPORT 13 Liquidity risk As at June 30, 2017 and June 30, 2016, the following are the contractual maturities of financial liabilities, excluding interest payments: June 30, 2017 Bank indebtedness Accounts payable and accrued liabilities Repurchase obligations Derivatives Provision for future payments to Front Street Capital Warrants Long-term debt June 30, 2016 Carrying amount Contractual cash flows 1 year 2 years 3 to 5 years More than 5 years $ 56.4 $ 56.6 $ 56.6 $ - $ - $ - 22.5 - 14.1 - - 14.5 22.5 - 14.1 - - 15.0 22.5 - 14.1 - - 3.0 - - - - - - - - - - 5.0 7.0 - - - - - - Carrying amount Contractual cash flows 1 year 2 years 3 to 5 years More than 5 years Bank indebtedness Accounts payable and accrued liabilities Repurchase obligations Derivatives Provision for future payments to Front Street Capital Warrants Long-term debt 55.6 16.0 - 2.6 0.1 0.1 22.9 55.8 16.0 - 2.6 0.1 0.1 23.6 55.8 16.0 - 2.6 0.1 0.1 1.6 - - - - - - - - - - - - 5.0 17.0 - - - - - - - Future expected operational cash flows and sufficient assets are available to fund the settlement of these obligations in the normal course of business. In addition, the following factors allow for the substantial mitigation of liquidity risk: the prompt settlement of amounts due from brokers, the active management of trade accounts receivable and the lack of concentration risk related thereto. The Corporation’s cash flow management activities and the continued likelihood of its operations further minimize liquidity risk. 4. CAPITAL RESOURCES The Corporation utilizes the Credit Facility to finance its grain trading operations, which primarily consist of purchases of grain inventories, financing of accounts receivable, and hedging activities, less accounts payable. Levels of short-term debt fluctuate based on changes in underlying commodity prices and the timing of grain purchases. Credit Facility As disclosed in the Consolidated Financial Statements for the twelve-month period ended June 30, 2017 and fifteen-month period end June 30, 2016, on December 30, 2016 the Corporation renewed and amended its uncommitted credit facility to a new maximum revolving facility amount of $67.5 million (previously $120.0 million). The new agreement is set to expire on December 29, 2017. Borrowings bear an interest rate of overnight LIBOR plus 3.875% per annum, calculated and paid on a monthly basis. The Credit Facility is subject to borrowing base limitations. Amounts under the Credit Facility that remain undrawn are not subject to a commitment fee. The Credit Facility has certain covenants pertaining to the accounts of the Corporation, and as at June 30, 2017, the Corporation was in compliance with all covenants. 14 CERES GLOBAL AG CORP. 10 Term Debt In addition, as noted in the Annual Consolidated Financial Statements, on June 27, 2014, Ceres entered into a senior secured term loan facility agreement for $20.0 million with Macquarie Bank to finance further development and early stage construction of Northgate. Subsequent to that, and in conjunction with amending and extending the syndicated uncommitted credit agreement on December 30, 2014, the Corporation entered into a senior secured term loan facility agreement (the “Loan”) for $25.0 million with Macquarie Bank. The Loan was for a term of 5 years with an interest rate of one month LIBOR plus 5.25%. This loan was extinguished and replaced the previous loan originated on June 27, 2014, which had an initial term maturing on December 29, 2014. On November 17, 2015, immediately following the closure of the sale of Electric Steel, the Corporation used the net sales proceeds to repay a portion of its outstanding term debt in accordance with the terms of the Loan. The total amount repaid on the term debt was $1.4 million. In accordance with the Loan, the second principal payment was paid on December 29, 2016 for the amount of $1.6 million. An additional principal payment of $7.0 million was also made on December 29, 2016 and the term loan payment schedule was amended. The next principal payment is payable on December 29, 2017 for the amount of $3.0 million, with a principal payment of $5.0 million due on December 28, 2018 and the final principal payment due on December 27, 2019 in the amount of $7.0 million. The term loan has an effective interest rate of 6.30% plus one month LIBOR. Normal Course Issuer Bid During the twelve-month period ended June 30, 2017, the Corporation purchased Shares under normal course issuer bids, the purpose of which was to provide Ceres with a mechanism to decrease the potential spread between the net asset value per Share and the market price of the common shares. On June 9, 2016, Ceres announced a normal course issuer bid (“the 2016-2017 NCIB”) which commenced on June 12, 2016. Using the facilities of the Toronto Stock Exchange (“TSX”) and in accordance with its rules and policies, Ceres can purchase up to a maximum of 1,595,765 of its Common Shares, representing approximately 10% of its unrestricted public float as of June 2, 2016, subject to a maximum aggregate purchase price of CAD $5.0 million pursuant to restrictions under the Corporation’s Credit Facility. The 2016-2017 NCIB concluded on June 11, 2017. Ceres may purchase up to a daily maximum of 2,119 Common Shares under the 2016-2017 NCIB, except for purchases made in accordance with the “block purchase” exception under applicable TSX rules and policies. During the twelve months ended June 30, 2017, the Corporation purchased and canceled a total of 257,582 common shares under the normal course issuer bid for aggregate cash consideration of $1.1 million. The stated capital value of these repurchased Shares was $1.9 million. The excess of the stated capital value of the repurchased common shares over the cost thereof, being $0.8 million, was allocated to Retained Earnings in the twelve-month period ended June 30, 2017. During the fifteen months ended June 30, 2016, the Corporation purchased and cancelled a total of 168,600 common shares under the normal course issuer bid for aggregate cash consideration of $0.7 million. The stated capital value of these repurchased Shares was $1.0 million. The excess of the stated capital value of the repurchased common shares over the cost thereof, being $0.3 million, was allocated to retained earnings in the fifteen-month period ended June 30, 2016. 5. ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES Changes in Accounting Policies and Standards Issued But Not Yet Effective Refer to Note 3 to the Annual Consolidated Financial Statements for information pertaining to accounting changes effective for the current fiscal year ending June 30, 2017, and information on standards issued but not yet effective. 11 FY2017 ANNUAL REPORT 15 Critical Accounting Estimates The discussion and analysis of Ceres’ financial condition and results of operations are based upon the Corporation’s Consolidated Financial Statements, which have been prepared in accordance with IFRS. Ceres’ significant accounting policies and accounting estimates are contained in the Annual Consolidated Financial Statements (see Notes 3 and 4, respectively, for the description of policies or references to notes where such policies are contained). The critical accounting estimates are valuation of investments; valuation of inventories and commodity derivatives; because they require Ceres to make assumptions about matters that are potentially uncertain at the time the accounting estimate is made and due to the likelihood that materially different amounts could be reported under different conditions or using different assumptions. 6. OUTLOOK Grain Division The 2017 cereal grain growing season faced severe droughts in the western half of the U.S. and Southwestern Canadian growing areas. These droughts created a significant amount of volatility for markets. Initially prices increased due to supply concerns, then more recently prices set back as yields have been better than expected due to sufficient soil moisture prior to drought conditions. High prices in the spring and early summer, plus a relatively strong USD during that time, led to high priced U.S. wheat and durum, and lower than expected exports and margins out of Duluth/Superior. Meanwhile, high prices led to minimal carries and overall limited ways to generate revenue until new crop’s arrival. Early indications of the 2017 crop suggest mixed yields: lower than average where drought conditions were worst and average or better than average in the east and north where moisture was more abundant. Also, protein levels appear to be higher for wheat grown in the U.S. than in Canada. Due to the varied protein levels from this year’s harvest (vs. relatively high uniform protein over the past two years), we expect to see greater volatility around protein basis levels throughout 2017/18. Meanwhile, the durum crop in the U.S. was more negatively affected than spring wheat and we expect U.S. imports of Canadian durum to increase in 2017/18 vs. 2016/17. The fiscal year ending June 30, 2017 marked the first year of operating a fully commissioned grain elevator at Northgate. While margins were challenging in this environment, and some growing pains were realized, we achieved our volume objectives and are confident margins and overall performance will improve in 2017/18 vs. 2016/17. Meanwhile, the Corporation continues to focus on the following: 1. Increasing origination volume direct from farmers in the U.S. and Canada; 2. Maximizing volumes and value through and around its network, capitalizing on its asset utility and effectively lowering fixed cost per bushel handled; 3. Investing in its infrastructure to broaden its product portfolio and focus more on pulses and specialty crops, both at Northgate and other locations; 4. Extending its reach to chosen customers both in the U.S. and internationally; 5. Hiring talented people who can execute on all of the above. Logistics Division Q4 2017 marked the start-up of a 26,000-ton fertilizer warehouse to provide storage and handling of urea and phosphate-based fertilizer for Koch Fertilizer Canada. At Northgate, Ceres began unloading by rail, warehousing and loading trucks for distribution to Canadian farmers. The project officially began operating at the end of April and finished with no accidents, on time and under budget. 12 16 CERES GLOBAL AG CORP. While the partnership with Koch provides the international fertilizer producer access to the western Canadian market, Ceres is working with Koch to provide freight to its fertilizer customers while at the same time provide the grain suppliers at Northgate the ability to backhaul grain, as local grain suppliers would reload their trucks with fertilizer after having unloaded grain and return to their origination. This is off to a very good start and management anticipates that this will greatly improve transportation economics and further highlight Northgate as an advantageous pricing gateway. In addition, the Corporation continues to unload LPG from inbound trucks and load into railcars for shipment into the US market via the BNSF from Northgate, Saskatchewan. The transloading of LPG has increased over the past quarter as movement into the U.S. via BNSF continues to be competitive vs. other outlets. We expect volumes will remain consistent throughout the rest of 2017/18. Overall management anticipates that transloading propane will continue to be a steady business for the Corporation. The Corporation is also exploring opportunities to build out and further develop the NCLC energy transloading business with additional tenant customers and the potential to handle other types of energy and industrial products such as oil field supplies, construction materials, and industrial parts and equipment. Specifically, the Corporation has conducted several tests and expects to see volumes increase as a result of that effort. Movement into Canada has been relatively unimpeded, however, issues have surfaced with respect to some products moving into the U.S. due to infrastructure needed for customs to perform proper inspections. The Corporation is working with both U.S. customs and BNSF to find a solution. Lastly, there are several other opportunities the Corporation is looking at to add revenue opportunities and fully utilize the rail and road infrastructure at Northgate. Management anticipates one or more of these to come to fruition during the 2017/18 fiscal year. 7. OTHER CONTROLS ENVIRONMENT Disclosure Controls and Procedures Ceres maintains appropriate information systems, procedures, and controls to ensure that new information disclosed externally is complete, reliable, and timely. National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”) requires the Chief Executive Officer and the Chief Financial Officer to certify that they are responsible for establishing and maintaining disclosure controls and procedures (“DC&P”) and that they have, as at June 30, 2017, designed and evaluated the effectiveness of the DC&P (or have caused such DC&P to be designed under their supervision) to provide reasonable assurance that material information relating to Ceres is made known to them by others, particularly during the period in which Ceres’ annual filings are being prepared, and that information required to be disclosed by Ceres in its annual filings, interim filings or other reports filed or submitted by Ceres under applicable securities legislation is recorded, processed, summarized, and reported within the time periods specified in applicable securities legislation. Internal Controls over Financial Reporting NI 52-109 also requires the Chief Executive Officer and the Chief Financial Officer to certify that they are responsible for establishing and maintaining internal control over financial reporting (“ICFR”) and that they have, as at June 30, 2017, designed and evaluated the effectiveness of ICFR to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards (IFRS). The control framework used by the Chief Executive Officer and the Chief Financial Officer to design Ceres’ ICFR is the Risk Management and Governance: Guidance on Control (COCO Framework) published by CPA Canada. There have been no 13 FY2017 ANNUAL REPORT 17 material changes in the Corporation’s internal control over financial reporting during the twelve-months ended June 30, 2017 that materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting. FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS The Corporation’s financial instruments and other instruments, including a discussion of risks and relevant risk sensitivities, can be found in Note 14 of the Annual Consolidated Financial Statements. OFF-BALANCE SHEET ARRANGEMENTS The Corporation has not engaged in any off-balance sheet arrangements. RELATED-PARTY TRANSACTIONS The remuneration of key management personnel of the Corporation, which includes both members of the Board of Directors and leadership team including the President and CEO, CFO and vice presidents, is set out below in aggregate: (in millions) Twelve-month period ended June 30, 2017 Fifteen-month period ended June 30, 2016 Employee/director salaries and benefits Share-based compensation $ 1.1 0.4 $ 1.5 0.4 $ 1.5 $ 1.9 SHARES OUTSTANDING As at September 22, 2017, the issued and outstanding equity securities of the Corporation consisted of 27,911,014 common shares. CONTINGENCIES See Note 21 of the Annual Consolidated Financial Statements for disclosure of the Corporation’s contingencies as at June 30, 2017. 8. NON-IFRS FINANCIAL MEASURES AND RECONCILIATIONS Certain financial measures in this MD&A and discussed below are not prescribed by and do not have a standardized meaning under IFRS. As such, they are unlikely to be comparable to similar measures presented by other issuers. These non-IFRS financial measures are included because management uses the information to analyze leverage, liquidity, and operating performance. 18 CERES GLOBAL AG CORP. 14 Earnings Before Interest, Income Taxes, Depreciation and Amortization The Corporation believes the presentation of EBITDA can provide useful information to investors and shareholders as it provides increased transparency. EBITDA is one metric that is used by management to determine the Corporation’s ability to service its debt and finance capital. EBITDA excludes gains and losses on property, plant and equipment and assets held for sale, as these items are considered to be non-reoccurring in nature. The following table is a reconciliation of EBITDA for Ceres on a consolidated basis for the twelve-months ended June 30, 2017, and the fifteen-months ended June 30, 2016: (in millions) Net income (loss) for the period Add/(Deduct): Interest Expense Revaluation of derivative warrant liability Loss (Gain) on sale or property, plant and equipment Income taxes (recovered) Share of net (income) loss in investments in associates Depreciation on property, plant and equipment Twelve-month period ended June 30, 2017 Fifteen-month period ended June 30, 2016 $ (13.7) $ (12.1) 3.9 (0.1) 7.7 - 0.2 4.6 4.5 (1.1) (0.2) (0.2) (0.3) 3.9 $ 2.6 $ (5.5) Return on Shareholders’ Equity Ceres believes that the return on shareholders’ equity can be an effective measure used to evaluate the performance of the business over time. Management uses this metric to analyze performance and set targets. Return on shareholders’ equity is the quotient of the net income (loss) for the period and the total shareholders’ equity as at the reporting date. The following table is a calculation of return on shareholders’ equity for the twelve-months ended June 30, 2017, and the fifteen-months ended June 30, 2016: Twelve-month period ended June 30, 2017 Fifteen-month period ended June 30, 2016 $ $ (13.7) 148.8 -9.2% $ $ (12.1) 157.6 -7.7% (in millions) Net income (loss) for the period Total shareholders' equity as at reporting date 9. KEY ASSUMPTIONS & ADVISORIES FORWARD LOOKING INFORMATION This annual MD&A contains information that is “forward-looking information”, “forward-looking statements” and “future oriented financial information” (collectively herein referred to as “forward-looking statements”) within the meaning of applicable securities laws. Forward-looking statements in this document may include, 15 FY2017 ANNUAL REPORT 19 among others, statements regarding future operations and results, anticipated business prospects and financial performance of Ceres and its subsidiaries, expectations or projections about the future, strategies and goals for growth, the action against Ceres initiated by the Scoular Company, expected and future cash flows, costs, planned capital expenditures, additional anticipated capital projects, construction and completion dates, including plans to further develop the NCLC, operating and financial results, critical accounting estimates and the expected financial and operational consequences of future commitments. Generally, forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “outlook”, “likely”, “probably”, “going forward”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, “believes”, “may have implications” or similar words and phrases or statements that certain actions, events or results “may”, “could”, “should”, “would”, “might”, or “will be taken”, “occur”, or “be achieved”. Forward-looking statements in this document are intended to provide Ceres’ shareholders and potential investors with information regarding Ceres and its subsidiaries, including Management’s assessment of future financial and operational plans and outlook for Ceres and its subsidiaries. Forward-looking statements are based on the opinions and estimates of management at the date the information is made, and are based on a number of assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Actual results or events may differ from those predicted in these forward-looking statements. All of the Corporation’s forward-looking statements are qualified by the assumptions that are stated or inherent therein, including the assumptions listed below. Although Ceres believes these assumptions are reasonable, this list is not exhaustive of factors that may affect any of the forward-looking statements. KEY ASSUMPTIONS Key assumptions have been made in connection with the forward-looking statements in this annual MD&A. These assumptions include, but are not limited to, the following: - No material change in the regulatory environment in Canada and the United States; - Supply and demand factors as well as the pricing environment for grains and other agricultural commodities; - Fluctuation of currency and interest rates; - General financial conditions for Western Canadian and American agricultural producers; - Market share that will be achieved by the Corporation; - Adequate and timely service from the railroad companies, and in particular from the Burlington Northern Santa Fe railroad at the NCLC; - The ability of Ceres to successfully operate Northgate; - The Corporation’s ability to successfully defend itself against, or settle, the dispute with The Scoular Company; - Realization of economic benefits resulting from the synergies with NCLC; and - The Corporation’s ability to maintain existing customer contracts and relationships coupled with its ability to increase its customer portfolio. The preceding list is not an exhaustive list of all possible factors. All factors should be considered carefully when making decisions with respect to Ceres. Many such factors and events are not within the control of Ceres. 16 20 CERES GLOBAL AG CORP. Factors that could cause actual results or events to differ materially from current expectations include, among others, risks related to weather, politics and governments, changes in environmental and other laws and regulations, competitive factors in the agricultural, food processing and feed sectors, construction and completion of capital projects, labour, equipment and material costs, access to capital markets, interest and currency exchange rates, technological developments, global and local economic conditions, the ability of Ceres to successfully implement strategic initiatives and whether such strategic initiatives will yield the expected benefits, the operating performance of the Corporation’s assets, the availability and price of commodities, and the regulatory environment, processes and decisions. Ceres has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements. However, there may be other factors that might cause actions, events or results that are not anticipated, estimated or intended. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements or information. By its nature, forward-looking information is subject to various risks and uncertainties, including those risks discussed in other sections of this annual MD&A and in other filings and communications, any of which could cause Ceres’ actual results and experience to differ materially from the anticipated results or published expectations. Additional information on these and other factors is available in the reports filed by Ceres with Canadian securities regulators. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date of this annual MD&A or otherwise, and not to use future-oriented information or financial outlooks for anything other than their intended purpose. Ceres undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, change in management’s estimates or opinions, future events or otherwise, except as required by law. 17 FY2017 ANNUAL REPORT 21 Consolidated Financial Statements of For the twelve-month period ended June 30, 2017 and the fifteen-month period ended June 30, 2016 TABLE OF CONTENTS Management’s Responsibility for Finanicial Reporting Indepenent Auditor’s Report Consolidated Balance Sheets Consolidated Statements of Comprehensive Income (Loss) Consolidated Statements of Cash Flows Consolidated Statements of Changes in Shareholders’ Equity Notes to the Consolidated Financial Statements 23 24 25 26 27 28 29 Management’s Responsibility for Financial Reporting These consolidated financial statements of the Corporation are the responsibility of management. The consolidated financial statements were prepared by management in accordance with International Financial Reporting Standards (“IFRS”) using information available to September 22, 2017 and management’s best estimates and judgments, where appropriate. Management has established a system of internal accounting and administrative controls to provide reasonable assurance that assets are safeguarded from loss or unauthorized use, transactions are properly authorized and recorded, and financial records are properly maintained for the preparation of reliable financial statements. The Board of Directors discharges its responsibility for the consolidated financial statements primarily through its Audit Committee, which comprises members of the Board of Directors. The Audit Committee meets with management and with the external auditors to discuss the results of the audit examination and review the consolidated financial statements of the Corporation. The Audit Committee also considers, for review by the Board and approval by the shareholders, the engagement or re-appointment of the external auditors. The financial statements have been approved by the Board of Directors and have been audited by Wolrige Mahon LLP, Chartered Professional Accountants, in accordance with Canadian generally accepted auditing standards. Their Independent Auditor’s Report outlines their responsibilities, the scope of their audit, and their opinion on the accompanying consolidated financial statements. Wolrige Mahon LLP has full and unrestricted access to the Audit Committee. Robert Day President and CEO Mark Kucala Chief Financial Officer 22 CERES GLOBAL AG CORP. 2 Management’s Responsibility for Financial Reporting These consolidated financial statements of the Corporation are the responsibility of management. The consolidated financial statements were prepared by management in accordance with International Financial Reporting Standards (“IFRS”) using information available to September 22, 2017 and management’s best estimates and judgments, where appropriate. Management has established a system of internal accounting and administrative controls to provide reasonable assurance that assets are safeguarded from loss or unauthorized use, transactions are properly authorized and recorded, and financial records are properly maintained for the preparation of reliable financial statements. The Board of Directors discharges its responsibility for the consolidated financial statements primarily through its Audit Committee, which comprises members of the Board of Directors. The Audit Committee meets with management and with the external auditors to discuss the results of the audit examination and review the consolidated financial statements of the Corporation. The Audit Committee also considers, for review by the Board and approval by the shareholders, the engagement or re-appointment of the external auditors. The financial statements have been approved by the Board of Directors and have been audited by Wolrige Mahon LLP, Chartered Professional Accountants, in accordance with Canadian generally accepted auditing standards. Their Independent Auditor’s Report outlines their responsibilities, the scope of their audit, and their opinion on the accompanying consolidated financial statements. Wolrige Mahon LLP has full and unrestricted access to the Audit Committee. Robert Day President and CEO Mark Kucala Chief Financial Officer 2 FY2017 ANNUAL REPORT 23 INDEPENDENT AUDITOR’S REPORT To the Shareholders of Ceres Global AG Corp. We have audited the accompanying consolidated financial statements of Ceres Global AG Corp. and its subsidiaries, which comprise the consolidated balance sheet as at June 30, 2017, and the consolidated statement of comprehensive loss, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Ceres Global AG Corp. and its subsidiaries as at June 30, 2017, and their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards. Other Matter The consolidated financial statements of Ceres Global AG Corp. and its subsidiaries for the fifteen month period ended June 30, 2016 were audited by another auditor who expressed an unmodified opinion on those statements on September 22, 2016. TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 256,281,768 $ 254,837,124 $ 244,380,839 CHARTERED PROFESSIONAL ACCOUNTANTS September 22, 2017 Vancouver, B.C. 24 CERES GLOBAL AG CORP. Property, plant and equipment (net of depreciation) CERES GLOBAL AG CORP. Consolidated Balance Sheets ASSETS Current Cash Due from brokers Unrealized gains on open cash contracts Accounts receivable, trade Inventories, grains Sales taxes recoverable Prepaid expenses and sundry assets Assets held for sale Portfolio investments Current assets Investments in associates Intangible assets Non-current assets TOTAL ASSETS LIABILITIES Current Bank indebtedness Current portion of long-term debt Accounts payable and accrued liabilities Repurchase obligations Unrealized losses on open cash contracts Current liabilities Long-term debt Deferred income taxes Non-current liabilities TOTAL LIABILITIES SHAREHOLDERS' EQUITY Common shares Deferred share units Contributed surplus Deficit Accumulated other comprehensive income TOTAL SHAREHOLDERS' EQUITY CONTINGENT LIABILITIES Note June 30, 2017 June 30, 2016 April 1, 2015 Restated (see Note 2) $ 585,497 $ 723,321 $ 4,062,674 1,828,307 10,501,364 22,694,942 95,233,421 41,174 1,923,319 5,458,819 5,106,168 13,457,510 102,616,595 131,015 1,895,386 6,835,418 7,493,264 6,257,573 117,022,684 899,692 1,115,883 - 670,909 3,193,407 3,384,669 136,001,431 132,773,483 144,358,097 2,705,935 300,000 2,946,601 300,000 4,445,034 300,000 117,274,402 118,817,040 95,277,708 120,280,337 122,063,641 100,022,742 $ 256,281,768 $ 254,837,124 $ 244,380,839 $ 56,442,820 $ 55,584,100 $ 14,820,756 3,000,000 22,549,403 1,642,379 16,007,014 14,066,236 2,568,309 10,814 96,069,273 11,453,638 73,325 104,971 75,980,098 21,259,266 11,453,638 21,259,266 - 13,754,313 14,740,904 2,062,395 272,109 1,359,753 47,010,230 24,032,044 234,908 24,266,952 107,522,911 97,239,364 71,277,182 - - - - - - - 15(e) 16 203,263,434 199,605,980 200,640,476 770,876 9,631,605 (21,385,146) (43,521,912) 616,962 9,431,547 (21,360,954) (30,695,775) 277,108 9,279,338 (18,105,009) (18,988,256) 148,758,857 157,597,760 173,103,657 6 5 8 7 8 9 10 13 17 10 18 21 Provision for future payments to Front Street Capital Derivative warrant liabilty 15(c) The accompanying notes are an integral part of these financial statements. ON BEHALF OF THE BOARD Signed "Gary Mize" Director Signed "Doug Speers" Director 5 CERES GLOBAL AG CORP. Consolidated Balance Sheets ASSETS Current Cash Due from brokers Unrealized gains on open cash contracts Accounts receivable, trade Inventories, grains Sales taxes recoverable Prepaid expenses and sundry assets Assets held for sale Portfolio investments Current assets Investments in associates Intangible assets Property, plant and equipment (net of depreciation) Non-current assets TOTAL ASSETS LIABILITIES Current Bank indebtedness Current portion of long-term debt Accounts payable and accrued liabilities Repurchase obligations Unrealized losses on open cash contracts Provision for future payments to Front Street Capital Derivative warrant liabilty Current liabilities Long-term debt Deferred income taxes Non-current liabilities TOTAL LIABILITIES SHAREHOLDERS' EQUITY Common shares Deferred share units Contributed surplus Accumulated other comprehensive income Deficit TOTAL SHAREHOLDERS' EQUITY CONTINGENT LIABILITIES Note June 30, 2017 June 30, 2016 April 1, 2015 Restated (see Note 2) $ 585,497 1,828,307 10,501,364 22,694,942 95,233,421 41,174 1,923,319 - 3,193,407 $ 723,321 5,458,819 5,106,168 13,457,510 102,616,595 131,015 1,895,386 - 3,384,669 $ 4,062,674 6,835,418 7,493,264 6,257,573 117,022,684 899,692 1,115,883 - 670,909 136,001,431 132,773,483 144,358,097 2,705,935 300,000 2,946,601 300,000 4,445,034 300,000 117,274,402 118,817,040 95,277,708 120,280,337 122,063,641 100,022,742 $ 256,281,768 $ 254,837,124 $ 244,380,839 $ 56,442,820 3,000,000 22,549,403 - 14,066,236 10,814 - 96,069,273 11,453,638 - 11,453,638 $ 55,584,100 1,642,379 16,007,014 - 2,568,309 73,325 104,971 75,980,098 21,259,266 - 21,259,266 $ 14,820,756 - 13,754,313 14,740,904 2,062,395 272,109 1,359,753 47,010,230 24,032,044 234,908 24,266,952 107,522,911 97,239,364 71,277,182 203,263,434 770,876 9,631,605 (21,385,146) (43,521,912) 199,605,980 616,962 9,431,547 (21,360,954) (30,695,775) 200,640,476 277,108 9,279,338 (18,105,009) (18,988,256) 148,758,857 157,597,760 173,103,657 6 5 8 7 8 9 10 13 17 15(c) 10 18 15(e) 16 21 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 256,281,768 $ 254,837,124 $ 244,380,839 The accompanying notes are an integral part of these financial statements. ON BEHALF OF THE BOARD Signed "Gary Mize" Director Signed "Doug Speers" Director 5 FY2017 ANNUAL REPORT 25 CERES GLOBAL AG CORP. Consolidated Statements of Comprehensive Income (Loss) For the twelve-month period ended June 30, 2017 and fifteen-month period ended June 30, 2016 CERES GLOBAL AG CORP. Consolidated Statements of Cash Flows For the twelve-month period ended June 30, 2017 and fifteen-month period ended June 30, 2016 Note Twelve-month period ended June 30, 2017 Fifteen-month period ended June 30, 2016 REVENUES Cost of sales GROSS PROFIT (LOSS) General and administrative expenses LOSS FROM OPERATIONS Finance income (loss) Interest expense Revaluation of derivative warrant liability Gain (loss) on property, plant and equipment LOSS BEFORE INCOME TAXES AND UNDERNOTED ITEM Income taxes (recovered) LOSS BEFORE UNDERNOTED ITEM Share of net income (loss) in investments in associates LOSS FOR THE PERIOD Other comprehensive income (loss) for the period Net investment hedge - net income (Loss) gain on translation of foreign currency accounts of foreign operations TOTAL COMPREHENSIVE LOSS FOR THE PERIOD 1 11 12 15 (c) 8 18 7 14 (b) $ 528,478,099 $ 385,762,081 (520,636,681) (386,226,972) 7,841,418 (464,891) (9,558,700) (10,132,889) (1,717,282) (10,597,780) (268,460) 1,167,497 (3,879,127) (4,469,194) 1,112,607 104,145 (7,650,521) 204,952 (13,411,245) (12,581,918) 4,282 (233,206) (13,415,527) (12,348,712) (237,015) 292,457 (13,652,542) (12,056,255) - 1,017,384 (24,192) (4,273,329) (15,312,200) $ (13,676,734) $ WEIGHTED-AVERAGE NUMBER OF SHARES FOR THE PERIOD 27,538,615 27,031,968 LOSS PER SHARE Basic Diluted Supplemental disclosure of selected information: Depreciation included in Cost of sales Depreciation included in General and administrative expenses Amortization of financing costs included in Interest expense Personnel costs included in Cost of sales Personnel costs included in General and administrative expenses The accompanying notes are an integral part of these financial statements. $ (0.50) $ (0.45) (0.45) (0.50) 8 8 $ 4,494,849 $ 3,776,829 $ 86,179 $ 83,400 $ 596,254 $ 551,909 $ 1,222,451 $ 1,851,158 $ 814,292 $ 1,018,884 26 CERES GLOBAL AG CORP. 6 7 CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the period Adjustments for: Depreciation of property, plant and equipment Revaluation of derivative warrant liability Share incentive compensation Revaluation of portfolio investments Loss (Gain) on property, plant and equipment Interest expense Income tax expense (recovery) Deferred share units issued to Directors and fair value adjustment Director share based compensation Share of net loss (income) in investments in associates Revaluation for future payments to Front Street Capital Deferred income tax Changes in non-cash working capital accounts Interest paid Income taxes recovered (paid) Cash flow provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposition of assets held for sale Acquisition of property, plant and equipment Cash flow used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from (repayment of) bank indebtedness Net proceeds from (repayment of) term loan Net proceeds from (repayment of) repurchase obligations Financing costs paid Share issuance costs Warrants exercised Repurchase of common shares under normal course issuer bid Cash flow (used in) provided by financing activities Foreign exchange cash flow adjustment on accounts denominated in a foreign currency Change in cash for the period Cash, beginning of period Note 8 15(c) 11 12 19 16 7 20 8 11 10 13 15(e) 15(b) Twelve-month Fifteen-month period end June 30, 2017 period end June 30, 2016 $ (13,652,542) $ (12,056,255) 3,860,229 (1,112,607) 152,209 (1,031,658) (204,952) 4,469,194 (233,206) 373,012 - (292,457) (173,747) (234,908) 16,165,812 (4,074,001) (3,196) 5,603,469 1,450,000 (31,595,137) (30,145,137) 40,000,000 (1,357,621) (14,740,904) (498,765) (56,824) - (662,094) 22,683,792 (2,315,059) (4,172,935) 4,062,674 4,581,028 (104,145) 200,058 188,612 7,650,521 3,879,127 4,282 223,799 43,593 237,015 (60,620) 14,753,036 (3,294,758) (24,640) 14,624,366 (10,946,758) (10,946,758) 1,595,320 (8,642,379) (305,000) 5,425,492 (1,055,111) (2,981,678) (172) 695,758 (110,261) - - - - - Cash and cash equivalents, end of period $ 585,497 $ (110,261) Cash Cheques issued in excess of cash on hand Cash and cash equivalents, end of period $ 585,497 $ 723,321 9 (833,582) $ 585,497 $ (110,261) The accompanying notes are an integral part of these financial statements CERES GLOBAL AG CORP. Consolidated Statements of Cash Flows For the twelve-month period ended June 30, 2017 and fifteen-month period ended June 30, 2016 CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the period Adjustments for: Depreciation of property, plant and equipment Revaluation of derivative warrant liability Share incentive compensation Revaluation of portfolio investments Loss (Gain) on property, plant and equipment Interest expense Income tax expense (recovery) Deferred share units issued to Directors and fair value adjustment Director share based compensation Share of net loss (income) in investments in associates Revaluation for future payments to Front Street Capital Deferred income tax Changes in non-cash working capital accounts Interest paid Income taxes recovered (paid) Cash flow provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposition of assets held for sale Acquisition of property, plant and equipment Cash flow used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from (repayment of) bank indebtedness Net proceeds from (repayment of) term loan Net proceeds from (repayment of) repurchase obligations Financing costs paid Share issuance costs Warrants exercised Repurchase of common shares under normal course issuer bid Cash flow (used in) provided by financing activities Foreign exchange cash flow adjustment on accounts denominated in a foreign currency Change in cash for the period Cash, beginning of period Note 8 15(c) 11 12 19 16 7 20 8 11 10 13 15(e) 15(b) Twelve-month period end June 30, 2017 Fifteen-month period end June 30, 2016 $ (13,652,542) $ (12,056,255) 4,581,028 (104,145) 200,058 188,612 7,650,521 3,879,127 4,282 223,799 43,593 237,015 (60,620) - 14,753,036 (3,294,758) (24,640) 14,624,366 - (10,946,758) (10,946,758) 1,595,320 (8,642,379) - (305,000) - 5,425,492 (1,055,111) (2,981,678) (172) 695,758 (110,261) 3,860,229 (1,112,607) 152,209 (1,031,658) (204,952) 4,469,194 (233,206) 373,012 - (292,457) (173,747) (234,908) 16,165,812 (4,074,001) (3,196) 5,603,469 1,450,000 (31,595,137) (30,145,137) 40,000,000 (1,357,621) (14,740,904) (498,765) (56,824) - (662,094) 22,683,792 (2,315,059) (4,172,935) 4,062,674 Cash and cash equivalents, end of period $ 585,497 $ (110,261) Cash Cheques issued in excess of cash on hand Cash and cash equivalents, end of period $ 585,497 $ 723,321 9 - (833,582) $ 585,497 $ (110,261) The accompanying notes are an integral part of these financial statements 7 FY2017 ANNUAL REPORT 27 7 5 6 , 3 0 1 , 3 7 1 $ ) 6 5 2 , 8 8 9 , 8 1 ( $ ) 9 0 0 , 5 0 1 , 8 1 ( $ 8 3 3 , 9 7 2 , 9 $ 8 0 1 , 7 7 2 $ 6 7 4 , 0 4 6 , 0 0 2 $ l a t o T t i c i f e D e m o c n i s u l p r u s r e h t o d e t a l u m u c c A e v i s n e h e r p m o c d e t u b i r t n o C d e r r e f e D s t i n u e r a h s n o m m o C s e r a h s e t o N - 6 2 2 , 1 4 4 ) 4 1 2 , 8 6 ( ) 4 2 8 , 6 5 ( 9 0 2 , 2 5 1 ) 4 9 0 , 2 6 6 ( ) 9 2 3 , 3 7 2 , 4 ( 4 8 3 , 7 1 0 , 1 ) 5 5 2 , 6 5 0 , 2 1 ( 0 6 7 , 7 9 5 , 7 5 1 - 9 8 7 , 0 3 2 ) 0 9 9 , 6 ( ) 1 1 1 , 5 5 0 , 1 ( 3 9 5 , 3 4 8 5 0 , 0 0 2 2 9 4 , 5 2 4 , 5 ) 2 9 1 , 4 2 ( - - - - - - - 6 3 7 , 8 4 3 ) 5 5 2 , 6 5 0 , 2 1 ( ) 5 7 7 , 5 9 6 , 0 3 ( - - - 5 0 4 , 6 2 8 - - - - - - - - - - - ) 9 2 3 , 3 7 2 , 4 ( 4 8 3 , 7 1 0 , 1 - - - 9 0 2 , 2 5 1 - - - - - ) 8 5 1 , 3 3 ( ) 4 1 2 , 8 6 ( 6 2 2 , 1 4 4 - - - - - - - 8 5 1 , 3 3 - - ) 4 2 8 , 6 5 ( ) 0 3 8 , 0 1 0 , 1 ( - - - ) 4 5 9 , 0 6 3 , 1 2 ( 7 4 5 , 1 3 4 , 9 2 6 9 , 6 1 6 0 8 9 , 5 0 6 , 9 9 1 - - - - - - - ) 2 9 1 , 4 2 ( - - - - 8 5 0 , 0 0 2 - - - - ) 0 9 9 , 6 ( ) 5 8 8 , 9 6 ( 9 8 7 , 0 3 2 - - - - - - - - 5 8 8 , 9 6 ) 6 1 5 , 1 8 8 , 1 ( - 3 9 5 , 3 4 2 9 4 , 5 2 4 , 5 - - 6 1 6 1 ) b ( 5 1 ) d ( 5 1 ) e ( 5 1 ) c ( 5 1 ) 2 4 5 , 2 5 6 , 3 1 ( ) 2 4 5 , 2 5 6 , 3 1 ( - 7 5 8 , 8 5 7 , 8 4 1 $ ) 2 1 9 , 1 2 5 , 3 4 ( $ ) 6 4 1 , 5 8 3 , 1 2 ( $ 5 0 6 , 1 3 6 , 9 $ 6 7 8 , 0 7 7 $ 4 3 4 , 3 6 2 , 3 0 2 $ s e r a h s n o m m o c r o f s t i n U e r a h S d e r r e f e D f o n o i t p m e d e R s t i n U e r a h S d e r r e f e D f o t n e m t s u j d a e u l a v r i a F d i b r e u s s i e s r u o c l a m r o n r e d n u s e s a h c r u p e R s e r a h s n o m m o c f o s t s o c e c n a u s s I n o i t a s n e p m o c e v i t n e c n i e r a h S s t i n U e r a h S d e r r e f e D f o e c n a u s s I s r e d l o h e r a h S h t i w s n o i t c a s n a r T 5 1 0 2 , 1 l i r p A , s e c n a l a B e m o c n i t e n - e g d e h t n e m t s e v n i t e N s s o l e v i s n e h e r p m o c r e h t O ) s s o L ( e m o c n I e v i s n e h e r p m o C s r e d l o h e r a h S h t i w s n o i t c a s n a r T d o i r e p e h t r o f s s o l t e N 6 1 0 2 , 0 3 e n u J , s e c n a l a B s t i n U e r a h S d e r r e f e D f o e c n a u s s I s e r a h s n o m m o c r o f s t i n U e r a h S d e r r e f e D f o n o i t p m e d e R s t i n U e r a h S d e r r e f e D f o t n e m t s u j d a e u l a v r i a F d i b r e u s s i e s r u o c l a m r o n r e d n u s e s a h c r u p e R n o i t a s n e p m o c e v i t n e c n i e r a h S n o i t a r e n u m e r ' s r o t c e r i D s t n a r r a w f o e s i c r e x E s s o l e v i s n e h e r p m o c r e h t O d o i r e p e h t r o f s s o l t e N ) s s o L ( e m o c n I e v i s n e h e r p m o C 7 1 0 2 , 0 3 e n u J , s e c n a l a B s t n e m e t a t s l a i c n a n i f e s e h t f o t r a p l a r g e t n i n a e r a s e t o n g n i y n a p m o c c a e h T 8 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 1. CORPORATE STATUS, REPORTING ENTITY AND NATURE OF OPERATIONS Ceres Global Ag Corp. (hereinafter referred to as “Ceres” or the “Corporation”) was incorporated on November 1, 2007, as amended on December 6, 2007, under the provisions of the Business Corporations Act (Ontario). On April 1, 2013, Ceres Global Ag Corp. amalgamated with Corus Land Holding Corp. In addition, on April 1, 2014, Ceres Global Ag Corp. amalgamated with Riverland Agriculture Ltd. and Ceres Canada Holding Corp. Thereafter, the amalgamated corporations continued operating as Ceres Global Ag Corp. Ceres is a corporation domiciled in Canada, with its head office located at 1660 South Highway 100, Suite 350, St. Louis Park, Minnesota, United States, 55416. These consolidated financial statements of Ceres as at June 30, 2017, June 30, 2016 and April 1, 2015 and for the twelve-month and fifteen-month periods ended June 30, 2017 and June 30, 2016, respectively, include the accounts of Ceres and its wholly owned subsidiaries Ceres U.S. Holding Corp. and Riverland Ag Corp. (“Riverland Ag”). All intercompany transactions and balances have been eliminated. In combination with Riverland Ag, the Corporation is an agricultural cereal grain storage, customer-specific procurement and supply ingredient company that owns nine grain storage, handling and merchandising facilities in the states of Minnesota and New York, and the provinces of Ontario and Saskatchewan, with a combined licensed capacity of 43 million bushels. The Corporation has one reportable segment while having two operating segments: (1) grain trading, handling and storage, and; (2) logistics, which includes transloading non-grain commodities on behalf of third-party customers. With the exception of $1,405,049 of revenue recognized for the twelve-month period ended June 30, 2017 (fifteen-month period ended June 30, 2016: $1,188,714), all of the Corporation’s revenues are comprised of grain trading, handling and storage. 2. BASIS OF PREPARATION Statement of compliance These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The accounting, estimation and valuation policies, as described below, have been consistently applied to all periods presented herein. These consolidated financial statements were authorized for issue by the Audit Committee of the Board of Directors on September 22, 2017. Functional and presentation currency These consolidated financial statements are presented in United States Dollars (“USD”), which is different from the Corporation’s functional currency of Canadian Dollars (“CAD”). This represents a change in accounting policy and is the first year the Corporation has used USD as a presentation currency. Effective July 1, 2016 the Corporation changed its presentation currency from the CAD to the USD. The change in presentation currency is to better reflect the Corporation’s business activities. There has been no change to Ceres’ functional currency (CAD) or its subsidiaries’ functional currencies (USD). In making this change to the USD presentation currency, the Corporation followed the guidance in IAS 21 The Effects of Changes in Foreign Exchange Rates (IAS 21) and has applied the change retrospectively as if the new presentation currency had always been the Corporation’s presentation currency. In 9 6 1 0 2 , 0 3 e n u J d e d n e d o i r e p h t n o m - n e e t f i f d n a 7 1 0 2 , 0 3 e n u J d e d n e d o i r e p h t n o m - e v l e w t e h t r o F y t i u q E ' s r e d l o h e r a h S n i s e g n a h C f o s t n e m e t a t S d e t a d i l o s n o C . P R O C G A L A B O L G S E R E C 28 CERES GLOBAL AG CORP. CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 1. CORPORATE STATUS, REPORTING ENTITY AND NATURE OF OPERATIONS Ceres Global Ag Corp. (hereinafter referred to as “Ceres” or the “Corporation”) was incorporated on November 1, 2007, as amended on December 6, 2007, under the provisions of the Business Corporations Act (Ontario). On April 1, 2013, Ceres Global Ag Corp. amalgamated with Corus Land Holding Corp. In addition, on April 1, 2014, Ceres Global Ag Corp. amalgamated with Riverland Agriculture Ltd. and Ceres Canada Holding Corp. Thereafter, the amalgamated corporations continued operating as Ceres Global Ag Corp. Ceres is a corporation domiciled in Canada, with its head office located at 1660 South Highway 100, Suite 350, St. Louis Park, Minnesota, United States, 55416. These consolidated financial statements of Ceres as at June 30, 2017, June 30, 2016 and April 1, 2015 and for the twelve-month and fifteen-month periods ended June 30, 2017 and June 30, 2016, respectively, include the accounts of Ceres and its wholly owned subsidiaries Ceres U.S. Holding Corp. and Riverland Ag Corp. (“Riverland Ag”). All intercompany transactions and balances have been eliminated. In combination with Riverland Ag, the Corporation is an agricultural cereal grain storage, customer-specific procurement and supply ingredient company that owns nine grain storage, handling and merchandising facilities in the states of Minnesota and New York, and the provinces of Ontario and Saskatchewan, with a combined licensed capacity of 43 million bushels. The Corporation has one reportable segment while having two operating segments: (1) grain trading, handling and storage, and; (2) logistics, which includes transloading non-grain commodities on behalf of third-party customers. With the exception of $1,405,049 of revenue recognized for the twelve-month period ended June 30, 2017 (fifteen-month period ended June 30, 2016: $1,188,714), all of the Corporation’s revenues are comprised of grain trading, handling and storage. 2. BASIS OF PREPARATION Statement of compliance These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The accounting, estimation and valuation policies, as described below, have been consistently applied to all periods presented herein. These consolidated financial statements were authorized for issue by the Audit Committee of the Board of Directors on September 22, 2017. Functional and presentation currency These consolidated financial statements are presented in United States Dollars (“USD”), which is different from the Corporation’s functional currency of Canadian Dollars (“CAD”). This represents a change in accounting policy and is the first year the Corporation has used USD as a presentation currency. Effective July 1, 2016 the Corporation changed its presentation currency from the CAD to the USD. The change in presentation currency is to better reflect the Corporation’s business activities. There has been no change to Ceres’ functional currency (CAD) or its subsidiaries’ functional currencies (USD). In making this change to the USD presentation currency, the Corporation followed the guidance in IAS 21 The Effects of Changes in Foreign Exchange Rates (IAS 21) and has applied the change retrospectively as if the new presentation currency had always been the Corporation’s presentation currency. In 9 FY2017 ANNUAL REPORT 29 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 accordance with IAS 21, the financial statements for all years and periods presented have been translated to the new USD presentation currency as follows: the difference between the fair value and the cost of portfolio investments is recognized as a revaluation of portfolio investments in Finance income (loss) on the Statement of Comprehensive Income (Loss).  All assets and liabilities have been translated from their functional currency into the new USD presentation currency using the closing current exchange rate at the date of each balance sheet; Investments in associates  Income and expenses for each statement of profit or loss presented have been retranslated at average exchange rates prevailing during each reporting period;  Equity balances have been retrospectively translated at historical rates prevailing during the period incurred; and  All resulting exchange differences have been recognized in other comprehensive income and accumulated as a separate component of equity (cumulative translation adjustment listed as Accumulated Other Comprehensive Income on the Balance Sheet). In addition to the comparative financial statements, the Corporation has presented a third statement of financial position as at April 1, 2015 as required by IFRS upon application of a voluntary change in accounting policy. Basis of measurement These consolidated financial statements have been prepared on the historical cost basis, except for the following material items in the Balance Sheet:  Derivative financial instruments are measured at fair value;  Assets held for sale are measured at fair value less costs to sell;  Financial instruments at fair value through profit or loss are measured at fair value; and  Inventories of agricultural commodities are measured at fair value less costs to sell. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Transaction costs The accounting policies described below have been applied consistently to all periods presented in these consolidated financial statements. Revenue recognition, net sales and cost of sales The Corporation follows a policy of recognizing sales revenue at the time of delivery of the product and when all of the following have occurred: a sales agreement is in place, title and risk of loss have passed, pricing is fixed or determinable, and collection is reasonably assured. Grain storage, rental and other operating income are recorded as earned on an accrual basis. Freight costs and handling charges related to sales are presented gross in Revenues and Cost of sales. Other direct and indirect costs associated with inventory and storage, including payroll and benefits of elevator employees, depreciation of buildings, silos and elevators, utilities and other similar costs are classified within Cost of sales. Income and expenses are recorded on an accrual basis. Investment transactions are recognized on the trade date. Dividend revenues are recognized on the ex-dividend date. Interest is recognized as earned using the effective interest method. Realized gains and losses from the sale of investments are calculated using the average cost method. The change over a reporting period of Associates are entities in which Ceres has significant influence, but has no control, over the financial and operating policies. Significant influence is presumed to exist when the Corporation holds between 20% and 50% of the voting power of another entity. Investments in associates are accounted for using the equity method and are recognized initially at cost. The Corporation’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Corporation’s share of the after-tax net income (or net loss) and of the changes in equity during a reporting period, after adjustments (if any) to align the associate’s accounting policies with those of the Corporation, from the date that significant influence commences until the date that significant influence ceases. If the Corporation’s accumulated share of net losses in an associate were to exceed the carrying amount of its interest in that associate, the carrying amount of that interest, would be reduced to nil and the recognition of further losses would be discontinued except to the extent the Corporation were to have an obligation or were to have made payments on behalf of the associate. The Corporation reviews its investments in associates for impairment whenever events or changes in business circumstances indicate that the carrying amount of the investments may not be recoverable. Evidence of impairment in value might include the absence of an ability to recover the carrying amount of the investments, the inability of the associates to sustain earnings capacity that would justify the carrying amount of the investments or, where applicable, estimated sales proceeds that are insufficient to recover the carrying amount of the investments. If the recoverable amount of the investments is determined to be less than the carrying amount, an impairment write-down is recorded based on the excess of the carrying amount over management’s estimate of the recoverable amount. Portfolio transaction costs include brokerage commissions incurred in the purchase and sale of portfolio securities in which Ceres invests. Corporate transaction costs include costs directly attributable to the acquisition of subsidiaries and the investments in associates. All such costs are expensed in the period incurred and classified as General and administrative expenses in the Statement of Comprehensive Income (Loss). Transaction costs related to the issuance of equity instruments of the Corporation or its subsidiaries are accounted for as a reduction of the stated capital of the equity securities issued. Transaction costs related to the issuance of debt instruments of the Corporation or its subsidiaries are considered in the determination of amortized cost. Transaction costs related to bank indebtedness are amortized using the straight-line method over the term of the financing arrangement, while transaction costs for long-term debt are amortized using the effective interest method. 30 CERES GLOBAL AG CORP. 10 11 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 the difference between the fair value and the cost of portfolio investments is recognized as a revaluation of portfolio investments in Finance income (loss) on the Statement of Comprehensive Income (Loss). Investments in associates Associates are entities in which Ceres has significant influence, but has no control, over the financial and operating policies. Significant influence is presumed to exist when the Corporation holds between 20% and 50% of the voting power of another entity. Investments in associates are accounted for using the equity method and are recognized initially at cost. The Corporation’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Corporation’s share of the after-tax net income (or net loss) and of the changes in equity during a reporting period, after adjustments (if any) to align the associate’s accounting policies with those of the Corporation, from the date that significant influence commences until the date that significant influence ceases. If the Corporation’s accumulated share of net losses in an associate were to exceed the carrying amount of its interest in that associate, the carrying amount of that interest, would be reduced to nil and the recognition of further losses would be discontinued except to the extent the Corporation were to have an obligation or were to have made payments on behalf of the associate. The Corporation reviews its investments in associates for impairment whenever events or changes in business circumstances indicate that the carrying amount of the investments may not be recoverable. Evidence of impairment in value might include the absence of an ability to recover the carrying amount of the investments, the inability of the associates to sustain earnings capacity that would justify the carrying amount of the investments or, where applicable, estimated sales proceeds that are insufficient to recover the carrying amount of the investments. If the recoverable amount of the investments is determined to be less than the carrying amount, an impairment write-down is recorded based on the excess of the carrying amount over management’s estimate of the recoverable amount. Transaction costs Portfolio transaction costs include brokerage commissions incurred in the purchase and sale of portfolio securities in which Ceres invests. Corporate transaction costs include costs directly attributable to the acquisition of subsidiaries and the investments in associates. All such costs are expensed in the period incurred and classified as General and administrative expenses in the Statement of Comprehensive Income (Loss). Transaction costs related to the issuance of equity instruments of the Corporation or its subsidiaries are accounted for as a reduction of the stated capital of the equity securities issued. Transaction costs related to the issuance of debt instruments of the Corporation or its subsidiaries are considered in the determination of amortized cost. Transaction costs related to bank indebtedness are amortized using the straight-line method over the term of the financing arrangement, while transaction costs for long-term debt are amortized using the effective interest method. 11 FY2017 ANNUAL REPORT 31 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 Classification of financial instruments Valuation of investments Financial assets A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated as such upon initial recognition. Financial assets are designated at fair value through profit or loss if the Corporation manages such investments and makes purchase and sale decisions in accordance with the Corporation’s documented risk management and investment strategies. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in net income or loss. Portfolio investments represent non-derivative financial assets classified as held for trading. The Corporation’s unrealized gains on open cash contracts are derivative financial assets classified as held for trading. Financial assets having fixed or determinable payments, and which are not quoted in an active market are defined as loans and receivables. Such assets are initially recognized at fair value plus directly attributable transaction costs, if any. Thereafter, loans and receivables are measured at amortized cost using the effective interest method less impairment losses, if any. Loans and receivables include cash, due from Brokers, and accounts receivable, trade. Financial liabilities Unrealized losses on open cash contracts are classified as held for trading and valued at fair value through profit or loss. The provision for future payment to Front Street Capital is also valued at fair value through profit and loss. Non-derivative financial liabilities of the Corporation include bank indebtedness, accounts payable and accrued liabilities, repurchase obligations and long term debt. These financial liabilities are initially recognized at fair value plus any directly attributable transaction costs. Thereafter, these financial liabilities are measured at amortized cost using the effective interest method. Equity Common shares and unconditional warrants Common shares and certain warrants are classified as equity. Incremental costs directly attributable to the issue of common shares and warrants are recognized as a deduction from equity, net of the effects of income taxes, if any. Contributed surplus The value of warrants issued that have expired is recognized as contributed surplus, net of the effects of income taxes, if any. Repurchase of common shares When common shares recognized as equity are repurchased, the amount of the consideration paid (which may include directly attributable transaction costs) is recognized as a deduction from equity, net of the effects of income taxes, if any. The portion of the consideration paid that represents the value of the stated capital of the shares repurchased is deducted from the carrying amount of common shares. Any difference between the total consideration paid and the stated capital amount of the shares repurchased is added to (or deducted from) retained earnings (deficit), as applicable. Portfolio investments are held for trading, and are measured and reported at fair value. Securities and ownership interests over which the Corporation exercises significant influence or control are accounted for using the equity-accounting model or through consolidation, as appropriate. As at a reporting date, the fair value of financial instruments traded in active markets (primarily equity securities of public companies and related derivative instruments, if any) is based on the bid price for investments held by the Corporation, and on the asking price for investments sold short, if any. The fair value of financial instruments not traded in an active market (including but not limited to: securities in private companies, warrants and restricted securities) is determined using valuation techniques. Depending on various circumstances, the Corporation may use several methods and makes assumptions based on market conditions existing at each reporting date. Valuation techniques may include, without limitation, the use of comparable recent arm’s length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants. Recognition of investments Purchases and sales of investments are recognized on the trade date, being the date on which the Corporation commits to purchase or sell an investment. Investments cease to be recognized when the rights to receive cash flows from the investments have expired or the Corporation has transferred substantially all risks and rewards of ownership. Derivative contracts Ceres may purchase forward foreign exchange contracts to act as an economic hedge against assets and liabilities denominated in foreign currencies. As at a reporting date, forward foreign exchange contracts are valued based on the difference between the forward contract rate and the forward bid rate (for currency held). Unrealized gains and losses, if any, on these forward contracts used to hedge foreign currency assets and liabilities are presented separately on the Balance Sheet and included in Derivative assets or Derivative liabilities, as applicable, and are recognized in the Statement of Comprehensive Income (Loss) as a component of Finance income (loss) and included with the revaluation of portfolio investments. Upon the closing out of these contracts, any gains or losses on foreign exchange are reported in Finance income (loss) in the Statement of Comprehensive Income (Loss) as realized gain (loss) on currency hedging transactions. To reduce price risk caused by market fluctuations, the Corporation generally follows a policy of using exchange-traded futures and options contracts to minimize its net position of merchandisable agricultural commodity inventories and forward cash purchase and sales contracts. The Corporation will also use exchange-traded futures and options contracts as components of merchandising strategies designed to enhance margins. The results of these strategies may be significantly influenced by factors such as the volatility of the relationship between the value of exchange-traded commodities futures contracts and the cash prices of the underlying commodities, and volatility of freight markets. Derivative contracts have not been designated, and are not accounted for, as fair value hedges. Management determines fair value based on exchange-quoted prices, and in the case of its forward purchase and sale contracts, estimated fair value is adjusted for differences in local markets. Realized and unrealized gains and losses in the value of inventories of merchandisable agricultural commodities, forward cash purchase and sales contracts, and 32 CERES GLOBAL AG CORP. 12 13 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 Valuation of investments Portfolio investments are held for trading, and are measured and reported at fair value. Securities and ownership interests over which the Corporation exercises significant influence or control are accounted for using the equity-accounting model or through consolidation, as appropriate. As at a reporting date, the fair value of financial instruments traded in active markets (primarily equity securities of public companies and related derivative instruments, if any) is based on the bid price for investments held by the Corporation, and on the asking price for investments sold short, if any. The fair value of financial instruments not traded in an active market (including but not limited to: securities in private companies, warrants and restricted securities) is determined using valuation techniques. Depending on various circumstances, the Corporation may use several methods and makes assumptions based on market conditions existing at each reporting date. Valuation techniques may include, without limitation, the use of comparable recent arm’s length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants. Recognition of investments Purchases and sales of investments are recognized on the trade date, being the date on which the Corporation commits to purchase or sell an investment. Investments cease to be recognized when the rights to receive cash flows from the investments have expired or the Corporation has transferred substantially all risks and rewards of ownership. Derivative contracts Ceres may purchase forward foreign exchange contracts to act as an economic hedge against assets and liabilities denominated in foreign currencies. As at a reporting date, forward foreign exchange contracts are valued based on the difference between the forward contract rate and the forward bid rate (for currency held). Unrealized gains and losses, if any, on these forward contracts used to hedge foreign currency assets and liabilities are presented separately on the Balance Sheet and included in Derivative assets or Derivative liabilities, as applicable, and are recognized in the Statement of Comprehensive Income (Loss) as a component of Finance income (loss) and included with the revaluation of portfolio investments. Upon the closing out of these contracts, any gains or losses on foreign exchange are reported in Finance income (loss) in the Statement of Comprehensive Income (Loss) as realized gain (loss) on currency hedging transactions. To reduce price risk caused by market fluctuations, the Corporation generally follows a policy of using exchange-traded futures and options contracts to minimize its net position of merchandisable agricultural commodity inventories and forward cash purchase and sales contracts. The Corporation will also use exchange-traded futures and options contracts as components of merchandising strategies designed to enhance margins. The results of these strategies may be significantly influenced by factors such as the volatility of the relationship between the value of exchange-traded commodities futures contracts and the cash prices of the underlying commodities, and volatility of freight markets. Derivative contracts have not been designated, and are not accounted for, as fair value hedges. Management determines fair value based on exchange-quoted prices, and in the case of its forward purchase and sale contracts, estimated fair value is adjusted for differences in local markets. Realized and unrealized gains and losses in the value of inventories of merchandisable agricultural commodities, forward cash purchase and sales contracts, and 13 FY2017 ANNUAL REPORT 33 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 exchange-traded futures contracts are recognized in profit or loss as a component of Cost of sales. Unrealized gains and losses on these derivative contracts are recognized in earnings and classified on the Balance Sheet as Due from Broker, Derivative assets or Derivative liabilities, as applicable. Fair value measurements The Corporation uses a valuation hierarchy as a framework for disclosing fair values, based on the inputs to measure the fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 – inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities including exchange-traded derivative contracts that can be assessed at measurement date; Level 2 – inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from prices); and Level 3 – inputs are unobservable inputs based on the Corporation’s own assumptions used to measure assets and liabilities at fair value. Foreign currency translation, transactions of Canadian dollar functional currency entities Foreign currency transactions are translated into CAD using the exchange rates prevailing at the dates of the transactions. As at a reporting date, assets and liabilities denominated in a foreign currency are translated into CAD, as follows:  Foreign currency monetary items are translated using the spot exchange rate in effect at the reporting date, and;  Non-monetary items measured at fair value in a foreign currency are translated using the exchange rate(s) in effect as at the date(s) on which fair value was determined. Foreign exchange gains or losses resulting from the settlement of such transactions and from the translation as at a reporting date of assets and liabilities denominated in foreign currencies are reflected in the Statement of Comprehensive Income (Loss). Translation gains or losses on securities included in the investment portfolio of the Corporation are recognized as Finance income (loss) in the Statement of Comprehensive Income (Loss) and classified with the revaluation of portfolio investments. Foreign currency translation, non-USD functional currency entities For the preparation of these consolidated financial statements, all assets and liabilities are translated into the presentation currency of U.S. dollars (“USD”) using the foreign exchange rate in effect as at the reporting date with income statement accounts translated using the average exchange rate for the reporting or applicable period. Translation adjustments arising from changes in exchange rates are reported as a component of other comprehensive income and form part of the cumulative translation account in shareholders’ equity. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation account related to that foreign operation is reclassified to profit or loss as part of the profit or loss on disposal. Finance income (loss) Corporation, and includes: Finance income (loss) pertains to revenues, gains and losses related to the investing activities of the  Dividend revenues, if any, from portfolio investments;  Realized gains (losses) on portfolio investments;  Realized gains (losses) on currency-hedging transactions;  Realized and unrealized gains (losses) on foreign exchange; and  Unrealized increase (decrease) in fair value of investments. Depending on the movements of equity and other markets, finance income and losses will vary for each Finance expenses represent the aggregate of interest expense on borrowings and the amortization of reporting period. Interest expenses financing transaction costs. Inventories Inventories represent agricultural grain and oilseed commodities and are stated at fair value less costs to sell. Fair value is primarily determined from market prices quoted on public commodity exchanges, adjusted for expected freight costs to normal delivery points and a price premium or discount to cover local supply and demand factors as estimated by management. Changes in the fair value less costs to sell of inventories of agricultural grain commodities are recognized in profit or loss as and when they occur, and such changes are included as a component of cost of sales. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation. Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate. Costs are capitalized only when it is probable that future economic benefits associated with the item will flow to the Corporation and the cost can be measured reliably. When parts of an item of property and equipment have different useful lives, they are accounted for as separate components of property and equipment and depreciated accordingly. The carrying amount of a replaced component is derecognized. Repairs and maintenance costs are expensed as incurred. Property, plant and equipment are reviewed for impairment at the end of each reporting period to assess whether there is any indication of impairment. If any indication of impairment exists, an estimate of the asset’s recoverable amount is calculated as the higher of fair value less costs of disposal and value in use. 34 CERES GLOBAL AG CORP. 14 15 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 Finance income (loss) Finance income (loss) pertains to revenues, gains and losses related to the investing activities of the Corporation, and includes:  Dividend revenues, if any, from portfolio investments;  Realized gains (losses) on portfolio investments;  Realized gains (losses) on currency-hedging transactions;  Realized and unrealized gains (losses) on foreign exchange; and  Unrealized increase (decrease) in fair value of investments. Depending on the movements of equity and other markets, finance income and losses will vary for each reporting period. Interest expenses Finance expenses represent the aggregate of interest expense on borrowings and the amortization of financing transaction costs. Inventories Inventories represent agricultural grain and oilseed commodities and are stated at fair value less costs to sell. Fair value is primarily determined from market prices quoted on public commodity exchanges, adjusted for expected freight costs to normal delivery points and a price premium or discount to cover local supply and demand factors as estimated by management. Changes in the fair value less costs to sell of inventories of agricultural grain commodities are recognized in profit or loss as and when they occur, and such changes are included as a component of cost of sales. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation. Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate. Costs are capitalized only when it is probable that future economic benefits associated with the item will flow to the Corporation and the cost can be measured reliably. When parts of an item of property and equipment have different useful lives, they are accounted for as separate components of property and equipment and depreciated accordingly. The carrying amount of a replaced component is derecognized. Repairs and maintenance costs are expensed as incurred. Property, plant and equipment are reviewed for impairment at the end of each reporting period to assess whether there is any indication of impairment. If any indication of impairment exists, an estimate of the asset’s recoverable amount is calculated as the higher of fair value less costs of disposal and value in use. 15 FY2017 ANNUAL REPORT 35 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 Land is not depreciated. Depreciation on the other assets is provided for on a straight-line basis over the estimated useful lives of assets as follows: Earnings (loss) per Share Buildings, silos/elevators, and improvements Machinery and equipment Furniture, fixtures, office equipment, and computers 15 – 31 years 7 – 15 years 3 – 7 years For the purpose of measuring recoverable amounts, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Gains and losses on disposals of property, plant and equipment are determined by comparing the disposal proceeds with the carrying amount of the asset and are included in profit or loss as gain (loss) on property, plant and equipment. Repurchase obligations The Corporation periodically enters into sale/repurchase agreements whereby the Corporation receives cash in exchange for selling inventory to a commodity trading financial institution and the Corporation agrees to repurchase the inventory from the financial institution at a fixed rate on a future date. The Corporation accounts for these as product financing arrangements and, accordingly, these transactions are treated as borrowings and commodity inventory in the Corporation’s consolidated financial statements and no sales and purchases are reported in the consolidated financial statements. Income taxes Income tax expense comprises current and deferred taxes. Current tax and deferred tax are recognized in profit or loss, except to the extent that they relate to a business combination, or to items recognized directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, measured using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted as at the reporting date. Deferred tax assets and liabilities are offset to the extent that they relate to income taxes levied on the same taxable entity by the same taxation authority. A deferred tax asset is recognized for unused tax losses and tax credits and deductible temporary differences, to the extent that it is probable that future taxable income will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized; such reductions are reversed when the probability of future taxable profits improves. Earnings (loss) per Share (“EPS”) is reported for basic and diluted net income (loss). Basic EPS is calculated by dividing net income (loss) for the reporting period by the weighted-average number of common shares outstanding during the reporting period. Diluted EPS is calculated by adjusting net income (loss) and the weighted-average number of common shares outstanding for the effects, if any, of all potentially dilutive common shares, resulting from the exercise of options or Warrants or the redemption of Deferred Share Units outstanding as at the end of a reporting period. The effect of the potential issuance of common shares related to the redemption of Deferred Share Units or exercise of options on diluted EPS has not been presented, as it is anti-dilutive in a period of loss. Share-based payments Deferred Share Unit The Corporation has established a Directors’ Deferred Share Unit Plan (the “DSU Plan”), which became effective on March 10, 2014 and is an equity-settled share-based payment plan. Under the DSU Plan, a director who is not an employee of the Corporation or any affiliate (including any non-executive Chair of the Board) is an Eligible Director. Any Eligible Director may elect to receive some or all of the Annual Cash Remuneration amount (as defined in the DSU Plan) for that Director in the form of Deferred Share Units (“DSUs”). DSUs are settled by the issuance of common shares on the Entitlement Date (as defined under the DSU Plan), which is a date after the end of a director’s term of service with the Board. As at the dates on which DSUs are issued under the Plan, the Corporation recognizes as an expense the portion of the Directors’ fees issued in the form of DSUs issued to the Director, which are issued at fair value, and the Corporation increases shareholders’ equity by an equal amount. The Corporation revalues DSUs as at each reporting period-end, based on the volume-weighted average trading price per common share of the Corporation on the Toronto Stock Exchange during the immediately preceding five (5) trading days. Revaluation adjustments are recognized as an increase or decrease in the expense for Directors’ fees during the reporting period, with a corresponding increase or decrease in shareholders’ equity. Stock Options Stock options are equity-settled share-based payment transactions. The Corporation follows the fair value method to measure stock option awards it grants to certain officers, key employees and consultants of the Corporation and its subsidiaries. The fair value of stock options on the date the options are granted is determined by the Black Scholes option pricing model with assumptions for risk-free interest rate, dividend yield, volatility of the expected market price of the Corporation’s common shares and an expected life of the options. The number of stock option awards expected to vest are estimated using a forfeiture rate based on historical experience and future expectations, as applicable. Expected annual volatility is estimated using historical volatility. Compensation is amortized to earnings over the vesting period of the related option. The Corporation uses graded or accelerated amortization, which specifies that each vesting tranche must be accounted for as a separate arrangement with a unique fair value measurement. Each vesting tranche is subsequently amortized separately and in parallel from the grant date. Stock Appreciation Rights Stock Appreciation Rights (“SARs”) may be granted to officers, certain employees and consultants of the Corporation on such terms and conditions determined by the Board of Directors (the “Board”). Stand Alone SARs are cash-settled share-based payment transactions and are measured at the fair value of the 36 CERES GLOBAL AG CORP. 16 17 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 Earnings (loss) per Share Earnings (loss) per Share (“EPS”) is reported for basic and diluted net income (loss). Basic EPS is calculated by dividing net income (loss) for the reporting period by the weighted-average number of common shares outstanding during the reporting period. Diluted EPS is calculated by adjusting net income (loss) and the weighted-average number of common shares outstanding for the effects, if any, of all potentially dilutive common shares, resulting from the exercise of options or Warrants or the redemption of Deferred Share Units outstanding as at the end of a reporting period. The effect of the potential issuance of common shares related to the redemption of Deferred Share Units or exercise of options on diluted EPS has not been presented, as it is anti-dilutive in a period of loss. Share-based payments Deferred Share Unit The Corporation has established a Directors’ Deferred Share Unit Plan (the “DSU Plan”), which became effective on March 10, 2014 and is an equity-settled share-based payment plan. Under the DSU Plan, a director who is not an employee of the Corporation or any affiliate (including any non-executive Chair of the Board) is an Eligible Director. Any Eligible Director may elect to receive some or all of the Annual Cash Remuneration amount (as defined in the DSU Plan) for that Director in the form of Deferred Share Units (“DSUs”). DSUs are settled by the issuance of common shares on the Entitlement Date (as defined under the DSU Plan), which is a date after the end of a director’s term of service with the Board. As at the dates on which DSUs are issued under the Plan, the Corporation recognizes as an expense the portion of the Directors’ fees issued in the form of DSUs issued to the Director, which are issued at fair value, and the Corporation increases shareholders’ equity by an equal amount. The Corporation revalues DSUs as at each reporting period-end, based on the volume-weighted average trading price per common share of the Corporation on the Toronto Stock Exchange during the immediately preceding five (5) trading days. Revaluation adjustments are recognized as an increase or decrease in the expense for Directors’ fees during the reporting period, with a corresponding increase or decrease in shareholders’ equity. Stock Options Stock options are equity-settled share-based payment transactions. The Corporation follows the fair value method to measure stock option awards it grants to certain officers, key employees and consultants of the Corporation and its subsidiaries. The fair value of stock options on the date the options are granted is determined by the Black Scholes option pricing model with assumptions for risk-free interest rate, dividend yield, volatility of the expected market price of the Corporation’s common shares and an expected life of the options. The number of stock option awards expected to vest are estimated using a forfeiture rate based on historical experience and future expectations, as applicable. Expected annual volatility is estimated using historical volatility. Compensation is amortized to earnings over the vesting period of the related option. The Corporation uses graded or accelerated amortization, which specifies that each vesting tranche must be accounted for as a separate arrangement with a unique fair value measurement. Each vesting tranche is subsequently amortized separately and in parallel from the grant date. Stock Appreciation Rights Stock Appreciation Rights (“SARs”) may be granted to officers, certain employees and consultants of the Corporation on such terms and conditions determined by the Board of Directors (the “Board”). Stand Alone SARs are cash-settled share-based payment transactions and are measured at the fair value of the 17 FY2017 ANNUAL REPORT 37 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 liability as at the date the Stand-Alone SARs are granted. At the end of each reporting period, the Corporation re-measures the fair value of the liability for such Stand-Alone SARs, and any changes in fair value of that liability is recognized in profit or loss for the period. Tandem SARs are granted with stock options. Tandem SARs may settled by the payment or the delivery of cash or common shares, as may be determined by the Board. Any portion of Tandem SARs to be settled for cash is measured using the measurement standards described for Stand-Alone SARs. The portion, if any, of the Tandem SARs to be settled by the issuance of common shares is measured using the measurement standards that apply to stock options awards, as described in the preceding paragraph. Option-pricing models require the use of highly subjective estimates and assumptions; including the expected share price volatility. Changes in the underlying assumptions can materially affect fair value estimates. Therefore, existing models do not necessarily provide reliable measurement of the fair value of the Corporation’s share-based payments. Future changes in accounting standards The standards and interpretations that are issued but not yet effective up to the date of issuance of the Corporation’s consolidated financial statements are listed below. This listing of standards and interpretations issued includes those that the Corporation reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date. IFRS 9 – Financial Instruments On July 24, 2014, the IASB issued the final version of IFRS 9, which replaces IAS 39 – Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The new standard introduces requirements for the classification and measurement of financial assets and financial liabilities, impairment, hedge accounting and the fair value of an entity’s own debt. IFRS 9 will be effective for annual periods beginning on or after January 1, 2018, with earlier adoption permitted. Ceres has not yet determined the impact of this standard on the Corporation’s consolidated financial statements. IFRS 15 – Revenue from Contracts with Customers On May 28, 2014, the IASB issued IFRS 15, which provides a single, principles-based five-step model to be applied to all contracts with customers. IFRS 15 specifies how and when to recognize revenue as well as requiring entities to provide users of financial statements with more relevant disclosures. IFRS 15 supersedes IAS 18 – Revenue, IAS 11 – Construction Contracts and a number of revenue-related interpretations and applies to annual reporting periods beginning on or after January 1, 2018, although early adoption is permitted. Ceres has not yet determined the impact of this standard on the Corporation’s consolidated financial statements. IFRS 16 – Leases On January 13, 2016, the IASB issued IFRS 16 Leases. This standard introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. The new standard is effective for annual periods beginning on or after January 1, 2019. Ceres has not yet determined the impact of this standard on the Corporation’s consolidated financial statements. 4. SUMMARY OF SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES, AND ASSUMPTIONS The timely preparation of financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively. The following summarizes the accounting judgments, estimates and assumptions management considers significant: Inventories and Commodity Derivatives To reduce price risk caused by market fluctuations, the Corporation generally follows a policy of using exchange traded futures and options contracts to minimize its net position of merchandisable agricultural commodity inventories and forward cash purchase and sales contracts. The Corporation will also use exchange traded futures and options contracts as components of merchandising strategies designed to enhance margins. The results of these strategies can be significantly impacted by factors such as the volatility of the relationship between the value of exchange traded commodities futures contracts and the cash prices of the underlying commodities, and volatility of freight markets. Derivative instruments, including futures contracts, forward commitments, options and other similar types of contracts and commitments based on commodity derivatives, are carried at their fair value. The estimated fair value of the commodity derivative contracts that require the receipt or posting of cash collateral is recorded on a net basis (offset against cash collateral posted or received, also known as margin deposits) within commodity derivative assets or liabilities. Management determines fair value based on exchange quoted prices and in the case of its forward purchase and sale contracts, estimated fair value is adjusted for differences in local markets. While the Corporation considers its commodity contracts to be effective economic hedges, the Corporation does not designate or account for its commodity contracts as hedges. Realized and unrealized gains and losses in the value of commodity contracts and grain inventories are recognized in earnings immediately in cost of sales in consolidated profit or loss. Unrealized gains and losses on these derivative contracts are included in due from broker, and derivative assets and liabilities on the consolidated Balance Sheet. Estimates and assumptions are required in determination of fair values of commodity inventories, particularly for those commodities where exchange-traded prices are not available. For these inventories, management assesses the available quoted market prices and applies judgment in determining the effect local market conditions. Valuation of investments Portfolio investments are held for trading, are measured and reported at fair value, and may include securities not traded in an active market. The fair value of such securities is determined using valuation techniques. Depending on various circumstances, the Corporation may use several methods and makes assumptions based on market conditions existing at each reporting date. Valuation techniques may include, without limitation, the use of comparable recent arm’s length transactions, discounted cash flow analysis, option-pricing models and other valuation techniques commonly used by market participants. 38 CERES GLOBAL AG CORP. 18 19 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 4. SUMMARY OF SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES, AND ASSUMPTIONS The timely preparation of financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively. The following summarizes the accounting judgments, estimates and assumptions management considers significant: Inventories and Commodity Derivatives To reduce price risk caused by market fluctuations, the Corporation generally follows a policy of using exchange traded futures and options contracts to minimize its net position of merchandisable agricultural commodity inventories and forward cash purchase and sales contracts. The Corporation will also use exchange traded futures and options contracts as components of merchandising strategies designed to enhance margins. The results of these strategies can be significantly impacted by factors such as the volatility of the relationship between the value of exchange traded commodities futures contracts and the cash prices of the underlying commodities, and volatility of freight markets. Derivative instruments, including futures contracts, forward commitments, options and other similar types of contracts and commitments based on commodity derivatives, are carried at their fair value. The estimated fair value of the commodity derivative contracts that require the receipt or posting of cash collateral is recorded on a net basis (offset against cash collateral posted or received, also known as margin deposits) within commodity derivative assets or liabilities. Management determines fair value based on exchange quoted prices and in the case of its forward purchase and sale contracts, estimated fair value is adjusted for differences in local markets. While the Corporation considers its commodity contracts to be effective economic hedges, the Corporation does not designate or account for its commodity contracts as hedges. Realized and unrealized gains and losses in the value of commodity contracts and grain inventories are recognized in earnings immediately in cost of sales in consolidated profit or loss. Unrealized gains and losses on these derivative contracts are included in due from broker, and derivative assets and liabilities on the consolidated Balance Sheet. Estimates and assumptions are required in determination of fair values of commodity inventories, particularly for those commodities where exchange-traded prices are not available. For these inventories, management assesses the available quoted market prices and applies judgment in determining the effect local market conditions. Valuation of investments Portfolio investments are held for trading, are measured and reported at fair value, and may include securities not traded in an active market. The fair value of such securities is determined using valuation techniques. Depending on various circumstances, the Corporation may use several methods and makes assumptions based on market conditions existing at each reporting date. Valuation techniques may include, without limitation, the use of comparable recent arm’s length transactions, discounted cash flow analysis, option-pricing models and other valuation techniques commonly used by market participants. 19 FY2017 ANNUAL REPORT 39 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 5. INVENTORIES As at June 30, 2017, June 30, 2016 and April 1, 2015, the Corporation held $95,233,421, $102,616,595 and $117,022,684 of inventories at fair value less costs to sell, respectively. For the twelve-month period ended June 30, 2017, inventories recognized as an expense through cost of sales totaled $445,474,086. For the fifteen-month period ended June 30, 2016, inventories recognized as an expense through cost of sales totaled $294,599,905. Furthermore, as at April 1, 2015, the carrying amount of inventories pledged as security against the Corporation’s repurchase obligations totaled $14,786,250. 6. DUE FROM (TO) BROKERS Due from Brokers is composed of commodity futures and options contracts and margin deposits in the form of cash and open trade equity maintained by a broker in connection with such contracts. Amounts due from Brokers are offset by amounts due to the same Brokers, under the terms and conditions of enforceable master netting arrangements in effect with all brokers through which the Corporation executes its transactions and for which it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. As at June 30, 2017, June 30, 2016 and April 1, 2015, the amounts due from Brokers represent the following: Due from Brokers Margin deposits Unrealized gains on future contracts and options, at fair value Due to Brokers Unrealized losses on future contracts and options, at fair value 7. INVESTMENT IN ASSOCIATES June 30, 2017 June 30, 2016 April 1, 2015 $ 2,815,351 $ 5,453,861 $ 5,161,958 33,215 2,848,566 128,518 5,582,379 2,114,710 7,276,668 (1,020,259) 1,828,307 $ (123,560) 5,458,819 $ (441,250) 6,835,418 $ June 30, 2017 June 30, 2016 April 1, 2015 Canterra Seeds Holdings, Ltd., common shares Stewart Southern Railway Inc., common shares $ - $ - 2,705,935 2,946,601 $ 1,466,704 2,978,330 $ 2,705,935 $ 2,946,601 $ 4,445,034 (a) Investment in Canterra Seeds Holdings, Ltd. (“Canterra”) As at April 1, 2015, Ceres held a 25% equity interest in Canterra, a Canadian company. Canterra purchases, produces, and distributes seed varieties and related technologies to its customers throughout Western Canada and the Great Northern Plains and Pacific North West of the United States. Major operating decisions of Canterra are made by its Board of Directors and Ceres, as at April 1, 2015, had a 25% voting right on Canterra’s Board of Directors. Due to these factors, Ceres did not control Canterra, 20 40 CERES GLOBAL AG CORP. CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 and accounted for its investment in Canterra, which had a carrying value of $1,466,704 and was classified on the Consolidated Balance Sheet as “Investments in associates” using the equity method. During the quarter ended June 30, 2015, the Corporation recorded its portion of Canterra’s net income of $254,731. During the fifteen-month period ended June 30, 2016, Canterra issued additional common equity shares, resulting in the dilution of the Corporation’s equity interest to 17%. As a result, the Corporation no longer has a significant influence over the financial and operating policies of Canterra. Therefore, Ceres reclassified its investment to portfolio investments and recorded it at fair value, recognizing a gain of $1,031,658 as “Finance income” within profit or loss. (b) Investment in Stewart Southern Railway Inc. (“SSR”) Ceres holds a 25% equity interest in SSR, a Canadian private company. Ceres also holds rights to a 25% voting position on SSR’s Board of Directors. SSR operates a 132-kilometre (82-mile) short-line railway in southeastern Saskatchewan. Major operating decisions of SSR are made by its Board of Directors and Ceres does not have a majority of the board seats. Due to these factors, Ceres does not control SSR, and accounts for its investment in SSR using the equity method. Revenues Income from continuing operations Net and comprehensive income (loss) Current assets Non-current assets Current liabilities Non-current liabilities Twelve-month period ended June 30, 2017 Fifteen-month period ended June 30, 2016 $ 1,245,414 $ 3,856,482 (1,137,305) (948,060) 271,924 150,904 $ 2,217,210 $ 3,201,700 8,382,043 144,652 88,074 8,396,737 207,917 60,536 For the period ended June 30, 2017, the Corporation’s consolidated profit or loss included the Corporation’s share in the net loss of SSR’s equity of $237,015 (2016: net income of $37,726). During the period ended June 30, 2017, the Corporation did not receive a dividend from SSR (2016: nil). Included below is a reconciliation of the Corporation’s 25% portion in SSR’s equity to the carrying value reported on the Consolidated Balance Sheets as at June 30, 2017, June 30, 2016 and April 1, 2015: June 30, 2017 June 30, 2016 April 1, 2015 Investee's equity as at reporting date $ 10,366,990 $ 11,329,984 $ 11,445,564 Corporation's 25% portion of SSR equity Goodwill Carrying value 2,591,747 114,188 2,832,495 114,106 2,861,390 116,940 $ 2,705,935 $ 2,946,601 $ 2,978,330 21 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 and accounted for its investment in Canterra, which had a carrying value of $1,466,704 and was classified on the Consolidated Balance Sheet as “Investments in associates” using the equity method. During the quarter ended June 30, 2015, the Corporation recorded its portion of Canterra’s net income of $254,731. During the fifteen-month period ended June 30, 2016, Canterra issued additional common equity shares, resulting in the dilution of the Corporation’s equity interest to 17%. As a result, the Corporation no longer has a significant influence over the financial and operating policies of Canterra. Therefore, Ceres reclassified its investment to portfolio investments and recorded it at fair value, recognizing a gain of $1,031,658 as “Finance income” within profit or loss. (b) Investment in Stewart Southern Railway Inc. (“SSR”) Ceres holds a 25% equity interest in SSR, a Canadian private company. Ceres also holds rights to a 25% voting position on SSR’s Board of Directors. SSR operates a 132-kilometre (82-mile) short-line railway in southeastern Saskatchewan. Major operating decisions of SSR are made by its Board of Directors and Ceres does not have a majority of the board seats. Due to these factors, Ceres does not control SSR, and accounts for its investment in SSR using the equity method. Revenues Income from continuing operations Net and comprehensive income (loss) Current assets Non-current assets Current liabilities Non-current liabilities Twelve-month period ended June 30, 2017 Fifteen-month period ended June 30, 2016 $ 1,245,414 (1,137,305) (948,060) $ 3,856,482 271,924 150,904 $ 2,217,210 8,382,043 144,652 88,074 $ 3,201,700 8,396,737 207,917 60,536 For the period ended June 30, 2017, the Corporation’s consolidated profit or loss included the Corporation’s share in the net loss of SSR’s equity of $237,015 (2016: net income of $37,726). During the period ended June 30, 2017, the Corporation did not receive a dividend from SSR (2016: nil). Included below is a reconciliation of the Corporation’s 25% portion in SSR’s equity to the carrying value reported on the Consolidated Balance Sheets as at June 30, 2017, June 30, 2016 and April 1, 2015: June 30, 2017 June 30, 2016 April 1, 2015 Investee's equity as at reporting date $ 10,366,990 $ 11,329,984 $ 11,445,564 Corporation's 25% portion of SSR equity Goodwill Carrying value 2,591,747 114,188 2,705,935 $ 2,832,495 114,106 2,946,601 $ 2,861,390 116,940 2,978,330 $ 21 FY2017 ANNUAL REPORT 41 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 8. PROPERTY, PLANT AND EQUIPMENT June 30, 2017 Cost Balances, June 30, 2016 Asset additions Assets placed in service Reclassification of assets held for sale Foreign currency translation adjustments Balances, June 30, 2017 Accumulated depreciation Balances, June 30, 2016 Depreciation charged to operations Reclassification of assets held for sale Foreign currency translation adjustments Balances, June 30, 2017 Land Buildings and silos/elevators Machinery & equipment Office equipment & other assets Construction in Progress Totals 22,708,494 - 4,225 (789,787) 13,035 21,935,967 79,579,445 - 10,937,080 (8,412,466) 202,729 82,306,788 - - - - - (10,601,220) (2,790,854) 2,405,948 (23,296) (11,009,422) 23,449,513 - 2,245,606 (1,322,323) 50,897 24,423,693 (1,647,996) (1,645,936) 596,242 (30,915) (2,728,605) 3,479,467 - 74,900 (50,761) 1,500 3,505,106 (1,417,036) (144,238) 48,689 (4,621) (1,517,206) 3,266,374 10,477,697 (13,261,811) (126,063) 1,884 358,081 132,483,293 10,477,697 - (10,701,400) 270,045 132,529,635 - - - - - (13,666,252) (4,581,028) 3,050,879 (58,832) (15,255,233) Carrying amount, June 30, 2017 $ 21,935,967 $ 71,297,366 $ 21,695,088 $ 1,987,900 $ 358,081 $ 117,274,402 June 30, 2016 Cost Balances, April 1, 2015 Asset additions Assets placed in service Disposals Foreign currency translation adjustments Balances, June 30, 2016 Accumulated depreciation Balances, April 1, 2015 Depreciation charged to operations Disposals Foreign currency translation adjustments Balances, June 30, 2016 23,311,179 - 177,903 (349,043) (431,545) 22,708,494 56,290,655 - 24,340,035 (892,512) (158,733) 79,579,445 - - - - - (7,981,567) (2,690,102) 109,817 (39,369) (10,601,221) 5,110,713 - 18,630,570 (190,634) (101,136) 23,449,513 (952,276) (740,258) 49,641 (5,103) (1,647,996) 1,489,313 - 2,004,738 - (14,584) 3,479,467 (984,955) (429,869) - (2,212) (1,417,036) 18,994,646 29,426,425 (45,153,246) - (1,451) 3,266,374 105,196,506 29,426,425 - (1,432,189) (707,449) 132,483,293 - - - - - (9,918,798) (3,860,229) 159,458 (46,684) (13,666,253) Carrying amount, June 30, 2016 $ 22,708,494 $ 68,978,224 $ 21,801,517 $ 2,062,431 $ 3,266,374 $ 118,817,040 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 During the twelve-month period ended June 30, 2017, Ceres continued with its plan to idle three grain storage elevators located in Buffalo, New York (Buffalo); Minneapolis, Minnesota (Calumet); and Duluth, Minnesota (Duluth Lakeport). As the operations at Duluth Lakeport and Buffalo have ceased, the cash flows associated with these specific assets could no longer support their carrying values. During the twelve-month period ended June 30, 2017, Ceres recorded a loss of $7,650,521 on the impairment of Duluth Lakeport and Buffalo, which is classified within profit or loss as “(Loss) gain on property, plant and equipment”. Additionally, Ceres committed to, and activated a plan for the sale of Buffalo and Duluth Lakeport. As noted in footnote twenty-two, subsequent to the reporting date of June 30, 2017 but prior to the date of issuance of these financial statements, Ceres closed on the sale of the Buffalo and Duluth Lakeport storage facilities. As at June 30, 2017, Buffalo and Duluth Lakeport are assets held for sale with a net book value of zero. As at June 30, 2016 and April 1, 2015, Ceres did not have any assets held for sale. Asset additions during the twelve months ended June 30, 2017 accrued and not yet paid for as at the reporting date totaled $3,904,304 (2016: $4,373,365). 9. BANK INDEBTEDNESS On December 30, 2016, the Corporation amended its uncommitted credit facility (the “Credit Facility”), which now expires on December 29, 2017. The maximum borrowings under the revolving facility are $67,500,000. Borrowings bear an interest rate of overnight LIBOR plus 3.875% per annum, and interest is calculated and paid on a monthly basis. The Credit Facility is subject to borrowing base limitations. Amounts under the Credit Facility that remain undrawn are not subject to a commitment fee. The Credit Facility has certain covenants pertaining to the accounts of the Corporation and as at June 30, 2017, the Corporation was in compliance with all covenants. On December 18, 2015, the Corporation amended its uncommitted $120,000,000 Credit Facility. Borrowings bore an interest rate dependent on the facility utilization level: at any time the utilization level was less than 50%, overnight LIBOR plus 2.875% per annum, and at any time that the utilization level was greater than or equal to 50%, overnight LIBOR plus 2.750% per annum. Prior to the December 18, 2015 amendment, borrowings under the Credit Facility were subject to interest of overnight LIBOR plus 2.875% per annum, with interest calculated and paid monthly. As at June 30, 2017, June 30, 2016 and April 1, 2015, the Corporation had $10,705,000, $37,493,000 and $83,154,000 in availability, respectively, on its revolving line of credit. As at June 30, 2017, June 30, 2016 and April 1, 2015, the carrying amount of bank indebtedness is summarized as follows: June 30, 2017 June 30, 2016 April 1, 2015 Revolving line of credit Unamortized financing costs Cheques issued in excess of cash on hand $ 56,595,320 $ 55,000,000 $ 15,000,000 (152,500) - (249,383) 833,483 (179,244) - $ 56,442,820 $ 55,584,100 $ 14,820,756 42 CERES GLOBAL AG CORP. 22 23 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 During the twelve-month period ended June 30, 2017, Ceres continued with its plan to idle three grain storage elevators located in Buffalo, New York (Buffalo); Minneapolis, Minnesota (Calumet); and Duluth, Minnesota (Duluth Lakeport). As the operations at Duluth Lakeport and Buffalo have ceased, the cash flows associated with these specific assets could no longer support their carrying values. During the twelve-month period ended June 30, 2017, Ceres recorded a loss of $7,650,521 on the impairment of Duluth Lakeport and Buffalo, which is classified within profit or loss as “(Loss) gain on property, plant and equipment”. Additionally, Ceres committed to, and activated a plan for the sale of Buffalo and Duluth Lakeport. As noted in footnote twenty-two, subsequent to the reporting date of June 30, 2017 but prior to the date of issuance of these financial statements, Ceres closed on the sale of the Buffalo and Duluth Lakeport storage facilities. As at June 30, 2017, Buffalo and Duluth Lakeport are assets held for sale with a net book value of zero. As at June 30, 2016 and April 1, 2015, Ceres did not have any assets held for sale. Asset additions during the twelve months ended June 30, 2017 accrued and not yet paid for as at the reporting date totaled $3,904,304 (2016: $4,373,365). 9. BANK INDEBTEDNESS On December 30, 2016, the Corporation amended its uncommitted credit facility (the “Credit Facility”), which now expires on December 29, 2017. The maximum borrowings under the revolving facility are $67,500,000. Borrowings bear an interest rate of overnight LIBOR plus 3.875% per annum, and interest is calculated and paid on a monthly basis. The Credit Facility is subject to borrowing base limitations. Amounts under the Credit Facility that remain undrawn are not subject to a commitment fee. The Credit Facility has certain covenants pertaining to the accounts of the Corporation and as at June 30, 2017, the Corporation was in compliance with all covenants. On December 18, 2015, the Corporation amended its uncommitted $120,000,000 Credit Facility. Borrowings bore an interest rate dependent on the facility utilization level: at any time the utilization level was less than 50%, overnight LIBOR plus 2.875% per annum, and at any time that the utilization level was greater than or equal to 50%, overnight LIBOR plus 2.750% per annum. Prior to the December 18, 2015 amendment, borrowings under the Credit Facility were subject to interest of overnight LIBOR plus 2.875% per annum, with interest calculated and paid monthly. As at June 30, 2017, June 30, 2016 and April 1, 2015, the Corporation had $10,705,000, $37,493,000 and $83,154,000 in availability, respectively, on its revolving line of credit. As at June 30, 2017, June 30, 2016 and April 1, 2015, the carrying amount of bank indebtedness is summarized as follows: June 30, 2017 June 30, 2016 April 1, 2015 Revolving line of credit Unamortized financing costs Cheques issued in excess of cash on hand $ 56,595,320 (152,500) - $ 56,442,820 $ $ 55,000,000 (249,383) 833,483 55,584,100 $ 15,000,000 (179,244) - $ 14,820,756 23 FY2017 ANNUAL REPORT 43 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 The revolving Credit Facility, is secured by the following: (i) a security interest in substantially all of the personal property of Ceres; (ii) a charge and mortgage over substantially all of the real property and elevator assets held by Riverland Ag,; and (iii) a pledge of substantially all of the equity interests and investment property held by the Corporation. 11. FINANCE INCOME (LOSS) 10. TERM LOAN On December 29, 2016, the Corporation paid down the principal on its term loan facility agreement by the amount of $1,642,379 in accordance with the principal payment schedule included in the agreement. Additionally, the Corporation made an additional principal payment of $7,000,000, reducing the principal to $15,000,000 and amended the existing term loan facility agreement. The agreement was revised to reflect a term of 3 years. The interest rate of one month LIBOR plus 5.25% is consistent with the previous term loan agreement. In accordance with the amended agreement, the next principal payment on the term loan is payable on December 29, 2017 in the amount of $3,000,000 with a principal payment of $5,000,000 payable on December 28, 2018 and $7,000,000 payable on December 27, 2019. The loan has an effective interest rate of 6.30% plus one month LIBOR. On December 30, 2014, the Corporation entered into a senior secured term loan facility agreement for $25,000,000. This term loan was for a term of 5 years with an interest rate of one month LIBOR plus 5.25%. The first principal payment was payable on December 29, 2016 in the amount of $1,642,379. On November 17, 2015, immediately following the closure of the sale of the Electric Steel facility, the Corporation used the net sales proceeds to repay a portion of its outstanding term debt. The total amount repaid on the term debt was $1,357,621. The loan had an effective interest rate of 6.21% plus one month LIBOR. In connection with the origination of the term loan, the Corporation paid transaction costs relating to the loan closure in the amount of $1,011,629, which included legal fees and other related borrowing costs. Transaction costs directly attributable to the issuance of the term loan are recognized as a reduction in the balance of the loan, and are amortized over the term of the loan using the effective interest rate method. June 30, 2017 June 30, 2016 April 1, 2015 Total term debt Less current portion of long-term debt Unamortized financing costs $ 15,000,000 (3,000,000) 12,000,000 (546,362) $ 23,642,379 (1,642,379) 22,000,000 (740,734) $ 25,000,000 - $ 25,000,000 (967,956) Total long-term debt $ 11,453,638 $ 21,259,266 $ 24,032,044 The term loan, is secured by the following: (i) a security interest in substantially all of the personal property of Ceres; (ii) a charge and mortgage over substantially all of the real property and elevator assets held by Riverland Ag; and (iii) a pledge of substantially all of the equity interests and investment property held by the Corporation. The following table presents realized and unrealized gains (losses) on foreign exchange, currency-hedging transactions and the revaluation of portfolio investments for the twelve-month period ended June 30, 2017 and fifteen-month period ended June 30, 2016: Realized and unrealized losses on foreign exchange $ (73,051) $ (42,925) Realized and unrealized gains (losses) on currency-hedging transactions Revaluation of portfolio investments Twelve-month Fifteen-month period ended June 30, 2017 period ended June 30, 2016 (6,797) (188,612) 178,764 1,031,658 $ (268,460) $ 1,167,497 As at April 1, 2015, the Corporation held a 25% equity interest in Canterra Seeds Holdings, Ltd. (“Canterra”) that had a carrying value of $1,466,704. This investment, accounted for using the equity method, was classified on the Consolidated Balance Sheet as “Investments in associates”. During the quarter ended September 30, 2015, Canterra issued additional common equity shares, resulting in the dilution of the Corporation’s equity interest to 17%, and it no longer having a significant influence over the financial and operating policies of Canterra. Therefore, during the fifteen-month period ended June 30, 2016, Ceres reclassified this investment to portfolio investments and recorded it at fair value, recognizing a gain of $1,031,658 classified within profit or loss as “Finance income”. The investment in Canterra totals $2,110,189 as at June 30, 2017, and is classified on the Consolidated Balance Sheet within “Portfolio investments, at fair value”. 12. INTEREST EXPENSE The following table presents interest income (expense) for the twelve-month period June 30, 2017 and fifteen-month period ended June 30, 2016: Interest on revolving line of credit Interest on repurchase obligation Interest on long-term debt Amortization of financing costs paid Interest income and other interest expense Twelve-month Fifteen-month period ended June 30, 2017 period ended June 30, 2016 $ (1,822,299) $ (1,877,446) (297,260) (1,163,314) (596,254) - (172,010) (1,851,791) (655,867) 87,920 $ (3,879,127) $ (4,469,194) 44 CERES GLOBAL AG CORP. 24 25 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 11. FINANCE INCOME (LOSS) The following table presents realized and unrealized gains (losses) on foreign exchange, currency-hedging transactions and the revaluation of portfolio investments for the twelve-month period ended June 30, 2017 and fifteen-month period ended June 30, 2016: Realized and unrealized losses on foreign exchange Realized and unrealized gains (losses) on currency-hedging transactions Revaluation of portfolio investments Twelve-month period ended June 30, 2017 $ (73,051) Fifteen-month period ended June 30, 2016 $ (42,925) (6,797) (188,612) (268,460) $ 178,764 1,031,658 1,167,497 $ As at April 1, 2015, the Corporation held a 25% equity interest in Canterra Seeds Holdings, Ltd. (“Canterra”) that had a carrying value of $1,466,704. This investment, accounted for using the equity method, was classified on the Consolidated Balance Sheet as “Investments in associates”. During the quarter ended September 30, 2015, Canterra issued additional common equity shares, resulting in the dilution of the Corporation’s equity interest to 17%, and it no longer having a significant influence over the financial and operating policies of Canterra. Therefore, during the fifteen-month period ended June 30, 2016, Ceres reclassified this investment to portfolio investments and recorded it at fair value, recognizing a gain of $1,031,658 classified within profit or loss as “Finance income”. The investment in Canterra totals $2,110,189 as at June 30, 2017, and is classified on the Consolidated Balance Sheet within “Portfolio investments, at fair value”. 12. INTEREST EXPENSE The following table presents interest income (expense) for the twelve-month period June 30, 2017 and fifteen-month period ended June 30, 2016: Twelve-month period ended June 30, 2017 Fifteen-month period ended June 30, 2016 Interest on revolving line of credit Interest on repurchase obligation Interest on long-term debt Amortization of financing costs paid Interest income and other interest expense $ $ (1,822,299) (297,260) (1,163,314) (596,254) - (3,879,127) (1,877,446) (172,010) (1,851,791) (655,867) 87,920 (4,469,194) $ $ 25 FY2017 ANNUAL REPORT 45 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 13. REPURCHASE OBLIGATIONS As at April 1, 2015, the Corporation had two open repurchase commitments under its product financing arrangement to repurchase 2,500,000 bushels of certain grains. Under the product financing arrangement, the Corporation sold grain under contract and simultaneously entered into contracts to repurchase the grain during the first quarter of the fifteen-month period ending June 30, 2016. Since the Corporation was obligated to repurchase these commodities, it did not recognize these transactions as sales. As at April 1, 2015, the Corporation recognized the inventory owned by the Corporation in this regard on its consolidated balance sheet and recorded a liability of $14,740,904 plus accrued interest payable. As at April 1, 2015, the fixed interest rate on the open repurchase commitment was 3.06%. 14. FINANCIAL INSTRUMENTS (a) Fair value of financial instruments The Corporation’s financial assets and liabilities that are measured at fair value in the consolidated balance sheets are categorized by level according to the significance of the inputs used in making the measurements. The Corporation recognizes transfers between fair value measurements hierarchy levels as of the date of the event or change in circumstances that caused the transfer. The following table presents information about the financial assets and liabilities measured at fair value on a recurring basis, and indicates the fair value hierarchy of the valuation techniques used to determine such fair values. Portfolio investments Due from broker, unrealized gains on futures and options (Note 6) Unrealized gains on open cash contracts (derivatives) Due to broker, unrealized losses on futures and options (Note 6) Unrealized losses on open cash contracts (derivatives) Provision for future payments to Front Street Capital June 30, 2017 Le ve l 1 $ - Le ve l 2 $ - Le ve l 3 Total $ 3,193,407 $ 3,193,407 33,215 - - 10,501,364 (1,020,259) - - (14,066,236) - (987,044) $ (10,814) (3,575,686) $ - - - - - $ 3,193,407 33,215 10,501,364 (1,020,259) (14,066,236) (10,814) (1,369,323) $ CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 Portfolio investments $ - $ 2,729,868 $ 654,801 $ 3,384,669 Le ve l 1 Le ve l 2 Le ve l 3 Total June 30, 2016 $ 4,958 $ 5,089,431 $ 654,801 $ 5,749,190 Portfolio investments $ - $ - $ 670,909 $ 670,909 Le ve l 1 Le ve l 2 Le ve l 3 Total April 1, 2015 128,518 (123,560) 2,114,710 (441,251) - - - - - - - - - - - - 5,106,168 (2,568,309) (104,971) (73,325) 7,493,264 (2,062,395) (1,359,753) (272,109) - - - - - - - - - - - - 128,518 5,106,168 (123,560) (2,568,309) (104,971) (73,325) 2,114,710 7,493,264 (441,251) (2,062,395) (1,359,753) (272,109) $ 1,673,459 $ 3,799,007 $ 670,909 $ 6,143,375 Due from broker, unrealized gains on futures and options (Note 6) Unrealized gains on open cash contracts (Derivatives) Due to Broker, unrealized losses on futures and options (Note 6) Unrealized losses on open cash contracts (Derivatives) Derivative warrant liability Provision for future payments to Front Street Capital Due from broker, unrealized gains on futures and options (Note 6) Unrealized gains on open cash contracts (Derivatives) Due to Broker, unrealized losses on futures and options (Note 6) Unrealized losses on open cash contracts (Derivatives) Derivative warrant liability Provision for future payments to Front Street Capital Reconciliation of Level 3 fair values Balance at April 1, 2015 Currency translation differences Balance at June 30, 2016 Recategorizations Revaluation of portfolio investments Currency translation differences Balance at June 30, 2017 Level 3 $ 670,909 (16,108) 654,801 2,731,990 (188,612) (4,772) $ 3,193,407 46 CERES GLOBAL AG CORP. 26 27 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 Portfolio investments Due from broker, unrealized gains on futures and options (Note 6) Unrealized gains on open cash contracts (Derivatives) Due to Broker, unrealized losses on futures and options (Note 6) Unrealized losses on open cash contracts (Derivatives) Derivative warrant liability Provision for future payments to Front Street Capital Portfolio investments Due from broker, unrealized gains on futures and options (Note 6) Unrealized gains on open cash contracts (Derivatives) Due to Broker, unrealized losses on futures and options (Note 6) Unrealized losses on open cash contracts (Derivatives) Derivative warrant liability Provision for future payments to Front Street Capital Reconciliation of Level 3 fair values Balance at April 1, 2015 Currency translation differences Balance at June 30, 2016 Recategorizations Revaluation of portfolio investments Currency translation differences Balance at June 30, 2017 Le ve l 1 $ - Le ve l 2 Le ve l 3 Total $ 2,729,868 $ 654,801 $ 3,384,669 June 30, 2016 128,518 - - 5,106,168 (123,560) - - - (2,568,309) (104,971) - - - - - 128,518 5,106,168 (123,560) (2,568,309) (104,971) - 4,958 $ (73,325) 5,089,431 $ - 654,801 $ (73,325) 5,749,190 $ Le ve l 1 $ - Le ve l 2 $ - Le ve l 3 Total $ 670,909 $ 670,909 April 1, 2015 2,114,710 - - 7,493,264 (441,251) - (2,062,395) (1,359,753) - - - $ 1,673,459 - - - - - 2,114,710 7,493,264 (441,251) (2,062,395) (1,359,753) (272,109) 3,799,007 $ - 670,909 $ (272,109) 6,143,375 $ Level 3 $ 670,909 (16,108) 654,801 2,731,990 (188,612) (4,772) 3,193,407 $ 27 FY2017 ANNUAL REPORT 47 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 For the fiscal year ended June 30, 2017, the Corporation was not able to obtain observable inputs to fair value its portfolio investments that were classified as a Level 2 investment as at June 30, 2016. Accordingly, the $2,731,990 of portfolio investments transferred out of Level 2 and into Level 3. Commodity risk (b) Management of financial instruments risks In the normal course of business, the Corporation is exposed to various financial instruments risks, including market risk (consisting of price risk, commodity risk, interest rate risk and currency risk), credit risk, custodian and prime brokerage risks, and liquidity risk. The Corporation’s overall risk management program seeks to minimize potentially adverse effects of those risks on the Corporation’s financial performance. The Corporation may use derivative financial instruments to mitigate certain risk exposures. The Corporation may invest in non-public and public issuers and assets. Price risk As at June 30, 2017, the Corporation’s market risk pertaining to portfolio investments was potentially affected by changes in actual market prices. As at June 30, 2017, the Corporation’s portfolio investments are solely in private companies. Therefore, market factors affecting the value of the portfolio investments are primarily changes in fair value of the investments and the Corporation’s ability to liquidate the investments. The following is a summary of the effect on the results of operations of the Corporation for the twelve- month period ended June 30, 2017, if the fair value of each of the portfolio investments as at June 30, 2017 had increased or decreased by 10% with all other variables remaining constant: Change in fair value of investments June 30, 2017 Increase (decrease) in net income Increase (decrease) in earnings per share 10% increase in fair value 10% decrease in fair value $ $ 319,341 (319,341) $ $ 0.01 (0.01) The following is a summary of the effect on the results of operations of the Corporation for the twelve- month period ended June 30, 2017, if the fair value of each of the open cash contracts as at June 30, 2017 had increased or decreased by 5%, with all other variables remaining constant: June 30, 2017 Increase Increase (decrease) (decrease) in in earnings net income per share Change in bid/ask prices of commodities 5% increase in bid-ask prices 5% decrease in bid-ask prices $ (848,050) $ (0.03) $ 848,050 $ 0.03 During the fifteen-month period ended June 30, 2016, the Corporation hedged a portion of its investment in a US subsidiary through US dollars futures contracts, which mitigated the foreign currency risk arising from the subsidiary’s net assets. During the quarter ended December 31, 2015, the Corporation settled the US dollar futures hedge and realized a gain of $1,017,384, which has been recognized in other comprehensive income. Interest rate risk securities. As at June 30, 2017, Ceres had no long or short portfolio positions in any interest-bearing investment As at June 30, 2017, except for cash on deposit, the amounts of which vary from time-to-time and on which the Corporation earns interest at nominal variable interest rates, the Corporation had no other variable rate interest-bearing financial assets. As at those dates, a notional increase or decrease in interest rates applicable to cash on deposit would not have materially affected interest revenue and the results of operations. Therefore, as at June 30, 2017, the Corporation’s assets are not directly exposed to any significant degree to cash flow interest rate risk due to changes in prevailing market interest rates. As disclosed in Note 9 (Bank Indebtedness), as at June 30, 2017, the Corporation’s Credit Facility (as defined herein) bears interest at an annual rate of 3.875% plus overnight LIBOR. As at June 30, 2017, management has determined the effect on the future results of operations of the Corporation, if the variable interest rate component applicable on that date was to increase by 25 basis points (“25 bps”), using the balance of the revolving credit facility payable as at that date, and the number of shares then issued and outstanding, and with all other variables remaining constant. Furthermore, as at June 30, 2017, the Corporation’s term loan (Note 10) bears interest at an annual rate of 5.25% plus one month LIBOR. As at June 30, 2017, management has determined the effect on the future results of operations of the Corporation, if the variable interest rate component applicable on that date on the term loan was to increase by 25 bps, using the balance of the term loan payable as at that date, and the number of shares then issued and outstanding, and with all other variables remaining constant. 48 CERES GLOBAL AG CORP. 28 29 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 Commodity risk The following is a summary of the effect on the results of operations of the Corporation for the twelve- month period ended June 30, 2017, if the fair value of each of the open cash contracts as at June 30, 2017 had increased or decreased by 5%, with all other variables remaining constant: Change in bid/ask prices of commodities June 30, 2017 Increase (decrease) in net income Increase (decrease) in earnings per share 5% increase in bid-ask prices 5% decrease in bid-ask prices $ $ (848,050) 848,050 $ $ (0.03) 0.03 During the fifteen-month period ended June 30, 2016, the Corporation hedged a portion of its investment in a US subsidiary through US dollars futures contracts, which mitigated the foreign currency risk arising from the subsidiary’s net assets. During the quarter ended December 31, 2015, the Corporation settled the US dollar futures hedge and realized a gain of $1,017,384, which has been recognized in other comprehensive income. Interest rate risk As at June 30, 2017, Ceres had no long or short portfolio positions in any interest-bearing investment securities. As at June 30, 2017, except for cash on deposit, the amounts of which vary from time-to-time and on which the Corporation earns interest at nominal variable interest rates, the Corporation had no other variable rate interest-bearing financial assets. As at those dates, a notional increase or decrease in interest rates applicable to cash on deposit would not have materially affected interest revenue and the results of operations. Therefore, as at June 30, 2017, the Corporation’s assets are not directly exposed to any significant degree to cash flow interest rate risk due to changes in prevailing market interest rates. As disclosed in Note 9 (Bank Indebtedness), as at June 30, 2017, the Corporation’s Credit Facility (as defined herein) bears interest at an annual rate of 3.875% plus overnight LIBOR. As at June 30, 2017, management has determined the effect on the future results of operations of the Corporation, if the variable interest rate component applicable on that date was to increase by 25 basis points (“25 bps”), using the balance of the revolving credit facility payable as at that date, and the number of shares then issued and outstanding, and with all other variables remaining constant. Furthermore, as at June 30, 2017, the Corporation’s term loan (Note 10) bears interest at an annual rate of 5.25% plus one month LIBOR. As at June 30, 2017, management has determined the effect on the future results of operations of the Corporation, if the variable interest rate component applicable on that date on the term loan was to increase by 25 bps, using the balance of the term loan payable as at that date, and the number of shares then issued and outstanding, and with all other variables remaining constant. 29 FY2017 ANNUAL REPORT 49 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 On that basis, the potential effects on the result of operations for the twelve-month period ending June 30, 2017 would be as follows: Liquidity risk Change in interest rate on revolving facility June 30, 2017 Increase in net loss Increase in loss per share 25 bps increase in annual interest rate $ (143,060) $ (0.01) Change in interest rate on term loan 25 bps increase in annual interest rate $ (37,917) $ (0.00) Credit risk Credit risk is the risk a counterparty would be unable to pay for amounts due to the Corporation in accordance with the terms and conditions of the debt instruments. As at June 30, 2017, the Corporation is subject to credit risk concerning cash, amounts due from brokers, trade accounts receivable, and to the extent, open cash contracts for grain commodities have given rise to unrealized gains. The maximum exposure to credit risk on those assets is limited to the carrying value of those assets. The Corporation uses various grain contracts as part of its overall grain merchandising strategies. Performance on these contracts is dependent on delivery of the grain or a customer buy-out. There is counter-party risk associated with non-performance, which may have the potential of creating losses. Management has assessed the counter-party risk and believes that insignificant losses, if any, would result from non- performance. The Corporation regularly evaluates its credit risk concerning its trade accounts receivable to the extent that such receivables may be concentrated in certain industries or with significant customers. The Corporation minimizes this risk by having a diverse customer base and established credit policies. The aging of the Corporation’s trade accounts receivable is substantially current. Based on its review and assessment of its trade accounts receivable, management has determined that as at June 30, 2017, no allowance for doubtful accounts is warranted. The Corporation had two customers that each individually represented more than 10% of total revenue for the twelve-month period ended June 30, 2017, comprising 12% and 11% of total revenue. For the fifteen- month period ended June 30, 2016, the Corporation had one customer that individually represented more than 10% of total revenue, comprising 16% of total revenue. Custody and prime brokerage risk There are risks involved with dealing with a custodian or broker who settle trades. In certain circumstances, the securities or other assets deposited with the custodian or broker may be exposed to credit risk with respect to those parties. In addition, there may be practical or timing problems associated with enforcing the Corporation’s rights to its assets in the case of the insolvency of any such party. Notwithstanding the foregoing, management has evaluated the risk of loss related to the custodian or brokers and has determined this risk to be insignificant. As at June 30, 2017 and June 30, 2016, the following are the contractual maturities of financial liabilities, excluding interest payments: June 30, 2017 Bank indebtedness Accounts payable and accrued liabilities Derivatives Provision for future payments to Front Street Capital Long-term debt (Note 10) 14,453,638 15,000,000 5,000,000 7,000,000 Carrying amount Contractual cash flows 1 year 2 years 3 to 5 years More than 5 years $ 56,442,820 $ 56,595,320 $ 56,595,320 $ - $ - $ - 22,549,403 14,066,235 10,814 22,549,403 14,066,235 10,814 22,549,403 14,066,235 10,814 3,000,000 Carrying amount Contractual cash flows 1 year 2 years 5 years 5 years 3 to More than - - - - - - - - - - - - - - - - - - - - - - - Bank indebtedness $ 55,584,100 $ 55,833,483 $ 55,833,483 $ - $ - $ - Accounts payable and accrued liabilities 16,007,014 16,007,014 16,007,014 Provision for future payments to Front Street Capital 2,568,309 2,568,309 2,568,309 73,325 104,971 73,325 104,971 73,325 104,971 22,901,645 23,642,379 1,642,379 5,000,000 17,000,000 Future expected operational cash flows and sufficient assets are available to fund the settlement of these obligations in the normal course of business. In addition, the following factors allow for the substantial mitigation of liquidity risk: the prompt settlement of amounts due from brokers, the active management of trade accounts receivable and the lack of concentration risk related thereto. The Corporation’s cash flow management activities and the continued likelihood of its operations further minimize liquidity risk. June 30, 2016 Derivatives Warrants Long-term debt Currency risk In the normal course of business, Ceres may hold assets or have liabilities denominated in currencies other than USD. Therefore, Ceres is exposed to currency risk, as the value of any assets or liabilities denominated in currencies other than USD will vary due to changes in foreign exchange rates. 50 CERES GLOBAL AG CORP. 30 31 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 Liquidity risk As at June 30, 2017 and June 30, 2016, the following are the contractual maturities of financial liabilities, excluding interest payments: June 30, 2017 Carrying amount Contractual cash flows 1 year 2 years 3 to 5 years More than 5 years Bank indebtedness Accounts payable and accrued liabilities Derivatives Provision for future payments to Front Street Capital Long-term debt (Note 10) $ 56,442,820 $ 56,595,320 $ 56,595,320 $ - $ - $ - 22,549,403 14,066,235 10,814 22,549,403 14,066,235 10,814 14,453,638 15,000,000 22,549,403 14,066,235 10,814 3,000,000 - - - - - - 5,000,000 7,000,000 - - - - June 30, 2016 Carrying amount Contractual cash flows 1 year 2 years 5 years 5 years 3 to More than Bank indebtedness $ 55,584,100 $ 55,833,483 $ 55,833,483 $ - $ - $ - Accounts payable and accrued liabilities 16,007,014 16,007,014 16,007,014 Derivatives Provision for future payments to Front Street Capital Warrants Long-term debt 2,568,309 2,568,309 2,568,309 73,325 104,971 73,325 104,971 73,325 104,971 - - - - - - - - - - - - - 22,901,645 23,642,379 1,642,379 5,000,000 17,000,000 Future expected operational cash flows and sufficient assets are available to fund the settlement of these obligations in the normal course of business. In addition, the following factors allow for the substantial mitigation of liquidity risk: the prompt settlement of amounts due from brokers, the active management of trade accounts receivable and the lack of concentration risk related thereto. The Corporation’s cash flow management activities and the continued likelihood of its operations further minimize liquidity risk. Currency risk In the normal course of business, Ceres may hold assets or have liabilities denominated in currencies other than USD. Therefore, Ceres is exposed to currency risk, as the value of any assets or liabilities denominated in currencies other than USD will vary due to changes in foreign exchange rates. 31 FY2017 ANNUAL REPORT 51 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 As at June 30, 2017, the following is a summary, at fair value, of Ceres’ exposure to currency risks: Currency Canadian dollars June 30, 2017 Net asset (liability) exposure $ 607,095 As at June 30, 2017, June 30, 2016 and April 1, 2015, the Corporation had no commitment to any futures foreign exchange contracts. The following is a summary of the effect on Ceres’ profit or loss for the twelve-month period ended June 30, 2017 if the USD had become 5% stronger or weaker against the CAD as at June 30, 2017, with all other variables remaining constant, related to monetary assets and liabilities denominated in foreign currencies: Change in foreign exchange rate C$ 5% stronger C$ 5% weaker June 30, 2017 Increase (decrease) in net income Increase (decrease) in earnings per share $ $ (24,680) 22,330 $ $ (0.00) 0.00 Currency risk for Ceres relates to grain transactions denominated in a currency other than USD and the translation of its accounts from the functional currency CAD to the presentation currency USD for the purposes of the consolidated financial reporting of Ceres. Adjustments related to the translation of accounts from the functional currency to the presentation currency are included as other comprehensive income (loss) and have no effect on the determination of net income for the reporting period. Other financial instruments The carrying values of cash and cash equivalents, due from (to) brokers, accounts receivable, bank indebtedness, and account payable and accrued liabilities approximate their fair values as at June 30, 2017 due to the short-term nature of these instruments. The carrying value of long-term debt approximates fair value as at June 30, 2017. 15. SHARE CAPITAL AND WARRANTS (a) Authorized Unlimited number of voting, participating Common shares, without par value. CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 (b) Normal Course Issuer Bids During the twelve-month period ended June 30, 2017 and the fifteen-month period ended June 30, 2016, the Corporation purchased Shares under normal course issuer bids, the purpose of which was to provide Ceres with a mechanism to decrease the potential spread between the net asset value per Share and the market price of the common shares. On June 10, 2015, Ceres announced a normal course issuer bid (“the 2015-2016 NCIB”) which commenced on June 12, 2015 and concluded on June 11, 2016. The Corporation renewed the normal course issuer bid (“the 2016-2017 NCIB”) commencing on June 12, 2016. Using the facilities of the Toronto Stock Exchange (“TSX”) and in accordance with its rules and policies, Ceres intended to purchase up to a maximum of 1,595,765 of its Common Shares, representing approximately 10% of its unrestricted public float as of June 2, 2016, subject to a maximum aggregate purchase price of CAD $5,000,000 pursuant to restrictions under the Corporation’s Credit Facility. Ceres purchased up to a daily maximum of 2,119 Common Shares under the 2016-2017 NCIB, except for purchases made in accordance with the “block purchase” exception under applicable TSX rules and policies. The 2016-2017 NCIB concluded on June 11, 2017. During the twelve months ended June 30, 2017, the Corporation purchased a total of 257,582 common shares under the normal course issuer bid for aggregate cash consideration of $1,055,111. The stated capital value of these repurchased Shares was $1,881,516. The excess of the stated capital value of the repurchased common shares over the cost thereof, being $826,405, was allocated to Deficit in the twelve- month period ended June 30, 2017. During the fifteen months ended June 30, 2016, the Corporation purchased a total of 168,600 common shares under the normal course issuer bid for aggregate cash consideration of $662,094. The stated capital value of these repurchased Shares was $1,010,830. The excess of the stated capital value of the repurchased common shares over the cost thereof, being $348,736, was allocated to Deficit in the fifteen- month period ended June 30, 2016. (c) Common Share Purchase Warrants In connection with the completion of the Corporation’s rights offering (the “Rights Offering”), on December 4, 2014, Ceres issued an aggregate of 2,083,334 warrants (the “Warrants”) to the stand-by purchasers. The Warrants issued were conditional upon approval at the Corporation’s annual general meeting (“AGM”), which was obtained at the AGM on August 7, 2015. Furthermore, the Warrants were issued at a fixed exercise price of CAD $5.84 and were each exercisable into one common share of the Corporation (a “Common Share”). The Warrants had an expiry date of December 4, 2016, being 24 months after issuance. In the event that the Warrants were exercised prior to the completion of a change of control of the Corporation, but after a transaction that will result in such a change of control has been publicly announced, in lieu of exercising the Warrants, the holders of Warrants could elect a cashless exercise to receive Common Shares equal to: the difference between the ten-day Volume-Weighted Average Price (“VWAP”) of the Corporation’s stock price and CAD $5.84; multiplied by the number of Common Shares in respect of which the election was made; divided by the ten-day VWAP of the Corporation’s stock price. If a Warrant holder exercised this option, there would be variability in the number of shares issued per Warrant. 52 CERES GLOBAL AG CORP. 32 33 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 (b) Normal Course Issuer Bids During the twelve-month period ended June 30, 2017 and the fifteen-month period ended June 30, 2016, the Corporation purchased Shares under normal course issuer bids, the purpose of which was to provide Ceres with a mechanism to decrease the potential spread between the net asset value per Share and the market price of the common shares. On June 10, 2015, Ceres announced a normal course issuer bid (“the 2015-2016 NCIB”) which commenced on June 12, 2015 and concluded on June 11, 2016. The Corporation renewed the normal course issuer bid (“the 2016-2017 NCIB”) commencing on June 12, 2016. Using the facilities of the Toronto Stock Exchange (“TSX”) and in accordance with its rules and policies, Ceres intended to purchase up to a maximum of 1,595,765 of its Common Shares, representing approximately 10% of its unrestricted public float as of June 2, 2016, subject to a maximum aggregate purchase price of CAD $5,000,000 pursuant to restrictions under the Corporation’s Credit Facility. Ceres purchased up to a daily maximum of 2,119 Common Shares under the 2016-2017 NCIB, except for purchases made in accordance with the “block purchase” exception under applicable TSX rules and policies. The 2016-2017 NCIB concluded on June 11, 2017. During the twelve months ended June 30, 2017, the Corporation purchased a total of 257,582 common shares under the normal course issuer bid for aggregate cash consideration of $1,055,111. The stated capital value of these repurchased Shares was $1,881,516. The excess of the stated capital value of the repurchased common shares over the cost thereof, being $826,405, was allocated to Deficit in the twelve- month period ended June 30, 2017. During the fifteen months ended June 30, 2016, the Corporation purchased a total of 168,600 common shares under the normal course issuer bid for aggregate cash consideration of $662,094. The stated capital value of these repurchased Shares was $1,010,830. The excess of the stated capital value of the repurchased common shares over the cost thereof, being $348,736, was allocated to Deficit in the fifteen- month period ended June 30, 2016. (c) Common Share Purchase Warrants In connection with the completion of the Corporation’s rights offering (the “Rights Offering”), on December 4, 2014, Ceres issued an aggregate of 2,083,334 warrants (the “Warrants”) to the stand-by purchasers. The Warrants issued were conditional upon approval at the Corporation’s annual general meeting (“AGM”), which was obtained at the AGM on August 7, 2015. Furthermore, the Warrants were issued at a fixed exercise price of CAD $5.84 and were each exercisable into one common share of the Corporation (a “Common Share”). The Warrants had an expiry date of December 4, 2016, being 24 months after issuance. In the event that the Warrants were exercised prior to the completion of a change of control of the Corporation, but after a transaction that will result in such a change of control has been publicly announced, in lieu of exercising the Warrants, the holders of Warrants could elect a cashless exercise to receive Common Shares equal to: the difference between the ten-day Volume-Weighted Average Price (“VWAP”) of the Corporation’s stock price and CAD $5.84; multiplied by the number of Common Shares in respect of which the election was made; divided by the ten-day VWAP of the Corporation’s stock price. If a Warrant holder exercised this option, there would be variability in the number of shares issued per Warrant. 33 FY2017 ANNUAL REPORT 53 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 In accordance with IFRS, a contract to issue a variable number of shares fails to meet the definition of equity and must instead be classified as a derivative liability and measured at fair value with changes in the fair value recognized in the statement of operations and comprehensive loss at each period end. On November 30, 2016, 1,250,000 Warrants were exercised into 1,250,000 Common Shares at an exercise price of CAD $5.84 for total consideration of $5,425,492 (CAD $7,300,000). On December 4, 2016, the remaining 833,334 Warrants expired, resulting in no warrant liability as at June 30, 2017. As at June 30, 2016 and April 1, 2015, the warrant liability was $104,971 and $1,359,753 respectively. (d) Stock Option and Appreciation Rights On March 10, 2014, the Board approved the Ceres Global Ag Corp. Stock Option Plan (the “Options Plan”). The Options Plan is available to certain officers, key employees and consultants of the Corporation and its subsidiaries. The purpose of the Options Plan is to attract, retain and motivate these parties by providing them with the opportunity, through options, to acquire a proprietary interest in the Corporation and to benefit from its growth. The Options Plan is administered by the Board, which determines (among other things) those officers, key employees and consultants who may be granted awards as Participants and the terms and conditions of any award to any such Participant. The Exercise Price of the options is fixed by the Board and maybe no less than 100% of the Market Price on the effective date of the award of the options, which may be granted for a term not exceeding ten (10) years. The maximum number of common shares reserved for issuance upon the exercise of options cannot exceed 10% of the total number of common shares issued and outstanding less the number of common shares reserved for issuance under the Corporation’s Directors Deferred Share Unit Plan (Note 16). Restrictions exist as to the number of options that may be granted to Insiders within any one-year period, and as to the number of, and the aggregate fair market value of, the common shares underlying the options that may be granted to any one Participant. The Options Plan also provides for the Board to grant Stock Appreciation Rights (“SARs”) to certain officers, key employees and consultants of the Corporation. Stand-Alone SARs granted under the Plan become vested at such times, in such installments and subject to the terms and conditions of the Options Plan (including satisfaction of Performance Criteria and/or continued employment) as may be determined by the Board. The Base Price for each common share subject to a Stand-Alone SAR may not be less than 100% of the Market Price of a common share on the Effective Date of the award of such Stand-Alone SAR. Tandem SARs may be granted at or after the Effective Date of the related award of options, and each Tandem SAR is subject to the same terms and conditions and denominated in the same currency as the option to which it relates and the additional terms and conditions under the Options Plan. Tandem SARs may be exercised only if and to the extent the options related thereto are then vested and exercisable. On exercise of a Tandem SAR, the related option will be cancelled and the Participant will be entitled to an amount in settlement of such Tandem SAR calculated and in such form as provided by the Options Plan. As at June 30, 2017, June 30, 2016 and April 1, 2015, no SARs had been awarded. During the twelve months ended June 30, 2017, Ceres granted stock options (“Options”) under the Corporation’s Option Plan to certain officers and employees of the Corporation. The exercise price was fixed by the Board of Directors at the time of grant. As at June 30, 2017, the outstanding Options are as follows: Outstanding as at April 1, 2015 $ - Granted Exercised Expired/forfeited Granted Exercised Expired/forfeited Outstanding as at June 30, 2016 $ 6.71 Outstanding as at June 30, 2017 1,091,879 $ 6.00 Exercisable as at June 30, 2017 354,123 $ 6.13 Weighted- average Weighted- average Remaining Number of Options exercise price Contractual (CAD) Term (Years) - - - 322,500 (44,169) 278,331 892,826 (79,278) 6.72 6.75 5.84 - - 6.75 - 5.00 4.53 4.11 3.91 3.39 At the grant date, the fair value of the Options was estimated using the Black-Scholes pricing model with the following weighted-average assumptions: an average risk free interest rate of 0.75%; expected volatility of 24.6%; dividend yield of nil; an average expected option life of 4.6 years; and average exercise price of CAD $5.84. The weighted average grant date fair value of the Options granted during the twelve- month period ended June 30, 2017, is CAD $0.72 (fifteen-month ended June 30, 2016: CAD $1.45 and twelve-month ended March 31, 2015: nil). As at June 30, 2017 and June 30, 2016, outstanding Options had exercise prices ranging from CAD $5.84 to CAD $6.75. The total Option compensation cost included in general and administrative expenses for the twelve months ended June 30, 2017, amounted to $200,058 (fifteen months ended June 30, 2016: $152,209) with the non-cash expense being accrued and classified within contributed surplus in the Consolidated Balance Sheet. 54 CERES GLOBAL AG CORP. 34 35 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 As at June 30, 2017, the outstanding Options are as follows: Outstanding as at April 1, 2015 Granted Exercised Expired/forfeited Outstanding as at June 30, 2016 Granted Exercised Expired/forfeited Outstanding as at June 30, 2017 Number of Options - 322,500 - (44,169) 278,331 892,826 - (79,278) 1,091,879 Weighted- average exercise price (CAD) Weighted- average Remaining Contractual Term (Years) $ - 6.72 - 6.75 6.71 5.84 - 6.75 6.00 $ $ - 5.00 4.53 4.11 3.91 3.39 Exercisable as at June 30, 2017 354,123 $ 6.13 At the grant date, the fair value of the Options was estimated using the Black-Scholes pricing model with the following weighted-average assumptions: an average risk free interest rate of 0.75%; expected volatility of 24.6%; dividend yield of nil; an average expected option life of 4.6 years; and average exercise price of CAD $5.84. The weighted average grant date fair value of the Options granted during the twelve- month period ended June 30, 2017, is CAD $0.72 (fifteen-month ended June 30, 2016: CAD $1.45 and twelve-month ended March 31, 2015: nil). As at June 30, 2017 and June 30, 2016, outstanding Options had exercise prices ranging from CAD $5.84 to CAD $6.75. The total Option compensation cost included in general and administrative expenses for the twelve months ended June 30, 2017, amounted to $200,058 (fifteen months ended June 30, 2016: $152,209) with the non-cash expense being accrued and classified within contributed surplus in the Consolidated Balance Sheet. 35 FY2017 ANNUAL REPORT 55 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 (e) Issued and outstanding as at June 30, 2017, June 30, 2016 and April 1, 2015 The following is a summary of the changes in the Common shares for the twelve-month period ended June 30, 2017 and fifteen-month period ended June 30, 2016: Common shares Shares Amount The Corporation intends to settle all DSUs with shares through the issuance of treasury shares. Compensation expense is included as part of Directors’ fees classified with general and administrative expenses, and is recognized in the accounts as and when services are rendered to the Corporation. DSUs outstanding as at a reporting period-end are revalued at the fair market value as at that period and changes in the fair market value are recognized to Directors’ fees in the period in which the changes occur. The following is a summary of the changes in the number of DSUs issued and outstanding for the twelve- month period ended June 30, 2017 and fifteen-month period ended June 30, 2016: $ $ $ 200,640,476 33,158 (56,824) (1,010,830) 199,605,980 69,885 (1,881,516) 5,425,492 43,593 203,263,434 Balances, March 31, 2015 Redemption of deferred share units Share issuance costs Repurchase under normal course issuer bid Balances, June 30, 2016 Redemption of deferred share units Repurchase under normal course issuer bid Exercise of warrants Directors' remuneration Balances, June 30, 2017 27,050,673 6,982 - (168,600) 26,889,055 17,333 (257,582) 1,250,000 10,790 27,909,596 DSUs, beginning of period Units issued Units redeemed Balance, end of period 17. MANAGEMENT FEES 12-month period ended June 30, 2017 15-month period ended June 30, 2016 142,717 58,201 (17,333) 183,585 52,813 96,887 (6,983) 142,717 On August 23, 2013, Ceres announced it had entered into a Management Transition Agreement (the “Transition Agreement”) with Front Street Capital 2004 (“Front Street Capital”), which provided, among other things, for the early termination of the Management Agreement. The Transition Agreement was approved by the shareholders at the annual and special meeting held on September 27, 2013. The Transition Agreement provided for the following:  The Management Agreement was terminated effective November 30, 2013;  Monthly management fee payments to the Front Street Capital ended December 31, 2013;  On October 1, 2013, Ceres paid Front Street Capital CAD $5,000,000 plus HST of CAD $650,000;  Front Street Capital will be paid an additional CAD $1,000,000 if the five-day volume- weighted average price of Ceres’ common shares (the “5-day VWAP”) reaches CAD $10 within the five-year period ending August 23, 2018, and a further CAD $1,000,000 if the 5-day VWAP reaches CAD $11 at any time during that 5-year period; and  The additional payments will become payable immediately if, prior to the fifth anniversary of the date of the Transition Agreement, there occurs either a change in control or a going private transaction for a price in excess of CAD $7.85 per share; Ceres must deposit into an escrow fund 5% of any gross sale proceeds in excess of net book value and direct transaction costs from the sale of any of Ceres’ assets, to a maximum amount of CAD $1,000,000, and such escrow fund amount shall be paid to the Manager if the 5-day VWAP does not reach CAD $10 within five years. As at June 30, 2017, management has determined the fair value of the potential additional payments provided for under the Transition Agreement is $10,814 (June 30, 2016: $73,321 and April 1, 2015: $272,109). As at June 30, 2017, the fair value of each additional payment was determined using the binomial options pricing model, with a remaining term to August 23, 2018, using volatility of 25% and a risk-free interest rate of 1.1% (fifteen-month period ended June 30, 2016: remaining term to August 23, As at June 30, 2017, June 30, 2016 and April 1, 2015, directors and officers of the Corporation, through a controlled entity, beneficially own, directly or indirectly, or exercise control or direction over 43.6%, 40.7% and 40.3%, respectively, of the outstanding Common shares of the Corporation. 16. DEFERRED SHARE UNIT PLAN Effective September 29, 2016, the Board amended the Directors’ Deferred Share Unit Plan to (i) authorize the Board, in its sole discretion, to issue Common Shares to directors in lieu of all or a portion of the annual cash remuneration payable to eligible directors in respect of services provided by such eligible directors to the Corporation, (ii) increase the aggregate number of Common Shares issuable under the plan from 450,000 to 600,000 Common Shares and (iii) rename the plan the Directors’ Share and Deferred Share Unit Plan. Effective March 10, 2014, Ceres has a Directors’ Deferred Share Unit Plan, whereby deferred share units (“DSU”) are issued to Eligible Directors, in lieu of cash, for a portion of Directors’ fees otherwise payable to Directors. The Fair Market Value of the DSUs on the date such units are calculated and issued represents the volume-weighted average trading price of Ceres’ common shares for the five trading days immediately preceding the date of issuance of the DSUs. Each DSU entitles the director to receive payment after the end of the director’s term in the form of common shares of the Corporation. Under the plan, the aggregate number of common shares issuable by Ceres under this Plan was limited to 450,000 and subsequently amended to 600,000 common shares. Certain insider restrictions and annual dollar limits per Eligible Director exist. Dividends, if any, otherwise payable on the common shares represented by the DSUs are converted into additional DSUs based on the Fair Market Value as of the date on which any such dividends would be paid. The Plan also provides for the Board to award additional DSUs (referred to in the Plan agreement as “Matching DSUs”) to an Eligible Director who has elected to receive DSUs pertaining to his/her Annual Cash Remuneration amount (as defined by the Plan). 56 CERES GLOBAL AG CORP. 36 37 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 The Corporation intends to settle all DSUs with shares through the issuance of treasury shares. Compensation expense is included as part of Directors’ fees classified with general and administrative expenses, and is recognized in the accounts as and when services are rendered to the Corporation. DSUs outstanding as at a reporting period-end are revalued at the fair market value as at that period and changes in the fair market value are recognized to Directors’ fees in the period in which the changes occur. The following is a summary of the changes in the number of DSUs issued and outstanding for the twelve- month period ended June 30, 2017 and fifteen-month period ended June 30, 2016: DSUs, beginning of period Units issued Units redeemed Balance, end of period 17. MANAGEMENT FEES 12-month period ended June 30, 2017 15-month period ended June 30, 2016 142,717 58,201 (17,333) 183,585 52,813 96,887 (6,983) 142,717 On August 23, 2013, Ceres announced it had entered into a Management Transition Agreement (the “Transition Agreement”) with Front Street Capital 2004 (“Front Street Capital”), which provided, among other things, for the early termination of the Management Agreement. The Transition Agreement was approved by the shareholders at the annual and special meeting held on September 27, 2013. The Transition Agreement provided for the following:  The Management Agreement was terminated effective November 30, 2013;  Monthly management fee payments to the Front Street Capital ended December 31, 2013;  On October 1, 2013, Ceres paid Front Street Capital CAD $5,000,000 plus HST of CAD $650,000;  Front Street Capital will be paid an additional CAD $1,000,000 if the five-day volume- weighted average price of Ceres’ common shares (the “5-day VWAP”) reaches CAD $10 within the five-year period ending August 23, 2018, and a further CAD $1,000,000 if the 5-day VWAP reaches CAD $11 at any time during that 5-year period; and  The additional payments will become payable immediately if, prior to the fifth anniversary of the date of the Transition Agreement, there occurs either a change in control or a going private transaction for a price in excess of CAD $7.85 per share; Ceres must deposit into an escrow fund 5% of any gross sale proceeds in excess of net book value and direct transaction costs from the sale of any of Ceres’ assets, to a maximum amount of CAD $1,000,000, and such escrow fund amount shall be paid to the Manager if the 5-day VWAP does not reach CAD $10 within five years. As at June 30, 2017, management has determined the fair value of the potential additional payments provided for under the Transition Agreement is $10,814 (June 30, 2016: $73,321 and April 1, 2015: $272,109). As at June 30, 2017, the fair value of each additional payment was determined using the binomial options pricing model, with a remaining term to August 23, 2018, using volatility of 25% and a risk-free interest rate of 1.1% (fifteen-month period ended June 30, 2016: remaining term to August 23, 37 FY2017 ANNUAL REPORT 57 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 2018, volatility of 25% and risk-free interest rate of 0.52% and twelve-month period ended March 31, 2015: remaining term to August 23, 2018, volatility of 25% and risk-free interest rate of 0.62%). Management recalculates the fair value of such potential additional payments as at each quarter-end and adjusts the provision recognized in the accounts. For the twelve-month period ended June 30, 2017, the Corporation recognized a gain of $60,620 related to the revaluation of the provision for future payments to Front Street Capital (fifteen-month period ended June 30, 2016: revaluation gain of $173,747). 18. INCOME TAXES (a) Reconciliation of statutory tax provision to the effective tax provision As the Corporation operates in several tax jurisdictions, its income is subject to taxation at various rates. The provision for income taxes differs from the amount that would have resulted from applying the Canadian statutory income tax rates to income before income taxes for the following reasons: 2017 2016 Income tax expense (recovered) $ 4,282 $ (217,809) Income (loss) before income taxes and share of net income in investments in associates: Canada United States of America Combined statutory Canadian federal and Ontario corporate income tax rate Provision for income taxes recoverable using statutory rate Adjusted for the income tax effect of: Difference in tax rates applicable to subsidiaries U.S. state taxes, net of U.S. federal benefit Non-deductible portion of unrealized losses on investments Changes in unrecognized temporary difference on deferred income tax assets, net of deferred tax liabilities Non-deductible changes in the revaluation of the derivative warrant liability Foreign exchange and other differences $ $ $ (5,342,140) (8,069,105) $ 6,981,987 (19,038,242) (13,411,245) $ (12,056,255) 26.5% 26.5% (3,553,980) $ (3,194,908) (964,335) 4,282 144,766 (2,143,443) 29,959 79,643 6,126,269 5,783,919 - (1,752,720) 3,558,262 (370,595) (417,781) 2,961,702 Income tax expense (recovered) $ 4,282 $ (233,206) The components of the provision for income taxes are as follows: Canada 2017 2016 $ - $ - Current Deferred Current Deferred Current Deferred United States of America - Federal United States of America - State (b) Deferred income tax liability tax liability are as follows: Deferred tax assets: - - - - - 4,282 - 4,282 (226,695) (226,695) (4,054) (15,324) (19,378) 29,959 (1,695) 28,264 2017 2016 974,007 678,988 205,079 783,908 645,675 166,408 42,983,338 38,016,076 (14,339,757) (15,541,595) (423,748) (450,581) (386,982) (317,318) (15,150,487) (16,309,494) (27,832,851) (21,706,582) $ - $ - The tax effects of temporary differences that give rise to significant elements of the net deferred income Non-capital and net operating losses carried-forward $ 41,125,264 $ 36,420,085 Allowable capital losses carried forward Deductible portion of unrealized depreciation of investments Share issuance costs Deferred tax liabilities: Property, plant and equipment Taxable portion of unrealized depreciation of investment in associates Other temporary taxable differences, net of temporary deductible differences Unrecognized deferred tax assets Non-current deferred tax liabilities, net 58 CERES GLOBAL AG CORP. 38 39 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 The components of the provision for income taxes are as follows: Canada Current Deferred United States of America - Federal Current Deferred United States of America - State Current Deferred 2017 $ - - - 2016 $ - (226,695) (226,695) - - - 4,282 - 4,282 (4,054) (15,324) (19,378) 29,959 (1,695) 28,264 Income tax expense (recovered) $ 4,282 $ (217,809) (b) Deferred income tax liability The tax effects of temporary differences that give rise to significant elements of the net deferred income tax liability are as follows: 2017 2016 Deferred tax assets: Non-capital and net operating losses carried-forward Allowable capital losses carried forward Deductible portion of unrealized depreciation of investments Share issuance costs $ 41,125,264 974,007 678,988 205,079 $ 36,420,085 783,908 645,675 166,408 Deferred tax liabilities: Property, plant and equipment Taxable portion of unrealized depreciation of investment in associates Other temporary taxable differences, net of temporary deductible differences Unrecognized deferred tax assets Non-current deferred tax liabilities, net 42,983,338 38,016,076 (14,339,757) (15,541,595) (423,748) (450,581) (386,982) (317,318) (15,150,487) (16,309,494) (27,832,851) (21,706,582) $ - $ - 39 FY2017 ANNUAL REPORT 59 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 (c) Tax losses carried forward (i) Operations in Canada CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 19. RELATED PARTY TRANSACTIONS Key management personnel As at June 30, 2017, the Corporation has accumulated non-capital losses in the amount of CAD $57,042,744 relating to its operations in Canada. The non-capital losses are being carried forward and, unless utilized, will expire in the following taxation years: The Corporation has defined key management personnel as senior executive officers, as well as the members of the Board of Directors, as they collectively have the authority and responsibility for planning, directing and controlling the activities of the Corporation and its subsidiaries. The following table summarizes total compensation expense for key management personnel for the twelve-month period ended June 30, 2017 and fifteen-month period ended June 30, 2016: Year of expiry Amount in CAD 2031 2032 2033 2034 2035 2036 2037 $ $ 400,608 7,335,493 6,548,720 13,586,280 8,197,795 10,776,858 10,196,990 57,042,744 As at June 30, 2017, Ceres has accumulated capital losses totaling CAD $9,517,086, which are available indefinitely to be applied against capital gains in future taxation years. The potential income tax benefit of the non-capital and capital losses has not been recognized in the consolidated financial statements. (ii) Operations in the United States of America As at June 30, 2017, the Corporation has accumulated net operating losses in the amounts noted below in USD, for federal and state income tax purposes. These net operating losses are being carried forward and, unless utilized, will expire in the following taxation years: Year of expiry Federal Minnesota New York North Dakota Wisconsin 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 - $ - - - - 9,596,976 3,686,320 8,570,443 12,772,909 - 26,591,099 5,309,455 3,359,802 $ 5,248,595 1,724,905 6,334,919 9,210,006 - 9,847,204 2,187,786 1,281,966 - - - - - - $ - - - - 5,704,206 3,169,350 9,875,230 13,816,532 - 617,130 5,457 3,531 $ 470,876 200,556 - - - - - - - 124,459 67,731 121,103 58,746 - $ - 1,278,355 1,764,043 - - - - - - 311,229 111,069 - $ 69,887,004 $ 35,835,381 $ 33,191,436 $ 1,043,471 $ 3,464,696 Salaries and short-term employee/director benefits Share-based compensation 20. CHANGES IN NON-CASH WORKING CAPITAL ACCOUNTS Decrease in due from Broker Decrease in net open cash contracts Increase (Decrease) in accounts receivable Decrease in inventories Decrease in Sales taxes recoverable (Increase) in prepaid expenses and sundry assets Increase in accounts payable and accrued liabilities 21. CONTINGENT LIABILITIES Twelve-month Fifteen-month period ended June 30, 2017 period ended June 30, 2016 $ 1,091,071 $ 1,485,918 416,962 409,214 $ 1,508,033 $ 1,895,132 Twelve-month Fifteen-month period ended period ended June June 30, 2017 30, 2016 $ 3,630,512 $ 1,376,599 6,102,263 2,893,010 (9,241,399) (7,170,810) 7,383,174 14,406,089 89,783 772,274 (27,107) (777,517) 6,815,810 4,666,167 $ 14,753,036 $ 16,165,812 The Corporation is involved in various legal claims and legal notices arising in the ordinary course of business. The Corporation believes it has adequately assessed each claim, and the necessity of a provision for such claims. As at June 30, 2017, June 30, 2016 and April 1, 2015, the Corporation has no provision for any contingent liabilities. During the year ended March 31, 2014, Ceres terminated its arrangements and ongoing discussions with The Scoular Company (“Scoular”) as a potential development partner with respect to the development and construction of a grain facility at Northgate Commodities Logistics Centre (NCLC). The termination of discussions with Scoular may have implications for any amounts to be collected from the potential partner and amounts previously paid to Ceres by Scoular in respect to a certain portion of NCLC site preparation costs under a cost-sharing agreement. The recovery and/or reimbursement of such amounts, if any, will be subject to resolution of the claim described below. 60 CERES GLOBAL AG CORP. 40 41 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 19. RELATED PARTY TRANSACTIONS Key management personnel The Corporation has defined key management personnel as senior executive officers, as well as the members of the Board of Directors, as they collectively have the authority and responsibility for planning, directing and controlling the activities of the Corporation and its subsidiaries. The following table summarizes total compensation expense for key management personnel for the twelve-month period ended June 30, 2017 and fifteen-month period ended June 30, 2016: Salaries and short-term employee/director benefits Share-based compensation Twelve-month period ended June 30, 2017 Fifteen-month period ended June 30, 2016 $ 1,091,071 416,962 $ 1,485,918 409,214 $ 1,508,033 $ 1,895,132 20. CHANGES IN NON-CASH WORKING CAPITAL ACCOUNTS Decrease in due from Broker Decrease in net open cash contracts Increase (Decrease) in accounts receivable Decrease in inventories Decrease in Sales taxes recoverable (Increase) in prepaid expenses and sundry assets Increase in accounts payable and accrued liabilities 21. CONTINGENT LIABILITIES Twelve-month period ended June 30, 2017 Fifteen-month period ended June 30, 2016 $ 3,630,512 6,102,263 (9,241,399) 7,383,174 89,783 (27,107) 6,815,810 $ 14,753,036 $ 1,376,599 2,893,010 (7,170,810) 14,406,089 772,274 (777,517) 4,666,167 $ 16,165,812 The Corporation is involved in various legal claims and legal notices arising in the ordinary course of business. The Corporation believes it has adequately assessed each claim, and the necessity of a provision for such claims. As at June 30, 2017, June 30, 2016 and April 1, 2015, the Corporation has no provision for any contingent liabilities. During the year ended March 31, 2014, Ceres terminated its arrangements and ongoing discussions with The Scoular Company (“Scoular”) as a potential development partner with respect to the development and construction of a grain facility at Northgate Commodities Logistics Centre (NCLC). The termination of discussions with Scoular may have implications for any amounts to be collected from the potential partner and amounts previously paid to Ceres by Scoular in respect to a certain portion of NCLC site preparation costs under a cost-sharing agreement. The recovery and/or reimbursement of such amounts, if any, will be subject to resolution of the claim described below. 41 FY2017 ANNUAL REPORT 61 CERES GLOBAL AG CORP. Notes to Consolidated Financial Statements June 30, 2017 and June 30, 2016 During the year ended March 31, 2015, Scoular initiated an action against the Corporation for injunctive relief and unspecified damages relating to the development and construction of a grain facility at NCLC. As of the date hereof, the Corporation, based on the advice of its litigation counsel, does not believe that the claims alleged by Scoular have any legal merit, and therefore, the Corporation intends to vigorously defend the lawsuit. Prior to the termination of its relationship with Scoular, the counterparty paid CAD $3,899,146 in costs related to the project. The Corporation does not believe that the counterparty is entitled to recovery of any of these costs based on the legal relationship that existed at the time and based on the claims alleged in the counterparty’s complaint. On January 20, 2017, the court heard oral argument on the Corporation’s motion for summary judgment, which seeks dismissal of all claims asserted by Scoular. On August 16, 2017, the court denied the Corporation’s motion and scheduled a trial by jury expected to start in Q2 fiscal year 2018. The outcome of this complaint is difficult to assess or quantify. The plaintiff may seek recovery of large or indeterminate amounts, and the magnitude of the potential loss may remain unknown for substantial periods of time. The cost to defend this complaint may be significant. In addition, this complaint, if decided adversely to the Corporation or settled by the Corporation, may result in liability material to the Corporation’s financial statements as a whole or may materially and adversely affect the Corporation’s business, financial position, cash flow and/or results of operations. 22. SUBSEQUENT EVENTS On August 16, 2017, the Corporation closed the sale of its Buffalo grain storage facility. The gross proceeds from the sale were $120,000. During the quarter ended March 31, 2017, the Buffalo facility was idled and its carrying value of $2,610,306 was impaired in full. On September 19, 2017, the Corporation closed the sale of its Duluth Lakeport grain storage facility and realized a loss on the sale of $150,000. During the quarter ended March 31, 2017, the Corporation recognized a loss on the impairment of Duluth Lakeport of $5,040,215. 62 CERES GLOBAL AG CORP. 42 SENIOR MANAGEMENT Robert Day President and Chief Executive Officer Kyle Egbert Vice President and Chief Financial Officer John Carroll Vice President Trading and Risk Management DIRECTORS Douglas Speers Independent Director, Chairman, and Member of the Human Resources, Safety and Environmental Committee Robert Day Director and Officer, Member of Nominating, Government, Risk and Ethics Committee Harvey Joel Independent Director, Chair of the Human Resources Safety and Environmental Committee, Member of the Audit and Finance Committee Gary Mize Independent Director, Chair of Audit and Finance Committee, Chair of the Nominating, Governance, Risk and Ethics Committee James Vanasek Member of Audit and Finance Committee CORPORATE OFFICE 1660 S. Highway 100 Suite 350 St. Louis Park MN 55416 USA REGISTERED OFFICE 155 Wellington West, 40th floor Toronto ON M5V 3J7 TRANSFER AGENT AST Trust Company (Canada) AUDITORS Wolrige Mahon LLP 400 Burrard Street, Ninth Floor Vancouver BC V6C 3B7 INVESTOR CONTACT Heidi Christensen Brown NATIONAL Equicom T: 416 848 1389 E: hchristensenbrown@national.ca AGM Ceres Global Ag Corp. Annual General Meeting November 15 at 11:00 am EST Blake, Cassels & Graydon LLP 199 Bay Street, Suite 4000 Commerce Court West Toronto, ON M5L 1A9 ceresglobalagcorp.com CORPORATE INFORMATION ceresglobalagcorp.com 

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