Maple Leaf Foods Annual Report 2016

FY2016 Annual Report · Maple Leaf Foods

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Maple Leaf Foods Inc.

2016 Annual Report

Important societal shifts are
taking place in how people think
about and consume food. Food
is the great connector, and is a
topic for which people have great
passion. Maple Leaf is uniquely
positioned at the intersection of
the mega trends shaping food
today, including the emerging
importance of “sustainable meat”,
which we believe provides us with
a unique competitive advantage.

Table of Contents
2016 Financial Highlights i Message to Shareholders ii Message from the Chairman vi
Corporate Governance and Board of Directors vii Senior Management and Officers viii
2016 Financial Review ix Management’s Discussion & Analysis 1 Independent Auditors’ Report 33
Audited Consolidated Financial Statements and Notes 34 Corporate Information Inside Back Cover

MAPLE LEAF FOODS INC. | 2016 ANNUAL REPORT

2016 Financial Highlights

Sales
Sales
Sales
Sales
(in millions of
(in millions of
(in millions of
(in millions of
Canadian dollars)
Canadian dollars)
Canadian dollars)
Canadian dollars)

Net Earnings
Net Earnings
Net Earnings
Net Earnings
(in millions of
(in millions of
(in millions of
(in millions of
Canadian dollars)
Canadian dollars)
Canadian dollars)
Canadian dollars)

Adjusted
Adjusted
Adjusted
Adjusted
EBITDA Margin*
EBITDA Margin*
EBITDA Margin*
EBITDA Margin*
(percent) (unaudited)
(percent) (unaudited)
(percent) (unaudited)
(percent) (unaudited)

Free Cash Flow*
Free Cash Flow*
Free Cash Flow*
Free Cash Flow*
(in millions of Canadian
(in millions of Canadian
(in millions of Canadian
(in millions of Canadian
dollars) (unaudited)
dollars) (unaudited)
dollars) (unaudited)
dollars) (unaudited)

3,293
3,293

3,332
3,332

181.7
181.7

10.3
10.3

244
244

6.7
6.7

41.6
41.6

12
12

2015
2015

2016
2016

2015
2015

2016
2016

2015
2015

2016
2016

2015
2015

2016
2016

e
c
n
a
m
r
o
f
r
e
P

Increase of

3.0%

excluding contribution
of 53rd week in 2015

Net earnings of

$181.7M

Adjusted EBITDA
margin of

10.3%

Free cash fl ow of

$244M

Net earnings increased
substantially year-over-
year, primarily due to
improved margins in the
Meat Products Group.

In 2016, Maple Leaf
Foods attained the
strategic margin target
of 10%, refl ecting the
strategic foundation
that has been built.

Maple Leaf Foods
generated $244 million
in free cash fl ow
in 2016, refl ecting
continued progression
of the fi nancial
performance of
the business.

t Sales increases were
x
e
t
n
o
C
n

led by fresh pork due to
our focus on increasing
our value-added pork
business, supported by
favourable exchange
rates and pork markets.
Fresh poultry sales also
increased due to volume
and mix. Prepared meat
sales declined slightly
in the fi rst quarter
but improved as the
year progressed.

s
t
l

u
s
e
R
6
1
0
2

* Please refer to the Non-IFRS Measures outlined in the Management’s Discussion & Analysis on page 27.

Message to Shareholders

Michael H. McCain
President and
Chief Executive Officer

Dear fellow shareholders:

Last year was a major milestone
for our Company, as we
achieved a step-change in
structural profitability and
surpassed our strategic margin
target of 10% Adjusted EBITDA
(Earnings Before Income Taxes,
Depreciation and Amortization).
To place this performance in
context, between 2005 and 2012
our average Adjusted EBITDA
margin was approximately 3.5%.

This financial achievement
represents the culmination
of years of investment and
hard work to transform our
manufacturing and distribution
network. It took tremendous
discipline and, for our people,
a high degree of patience
and perseverance.

Shareholders are being
rewarded for their commitment
to Maple Leaf. We exceeded
our strategic margin target in
each quarter of 2016, as the
fundamentals of our business
remained strong throughout
the year. Solid commercial
performance and continued
efficiency gains in our supply
chain led to strong financial
results. Our stock price
responded to the strengthened
results, appreciating by 18.3%
in 2016.

Adjusted Operating Earnings
last year more than doubled,
growing to $239 million (or $1.23
per share) from $110 million
in 2015. As we improved our
financial performance, our
balance sheet also strengthened.

We have very little debt on our
balance sheet, and $404 million
in cash at year end after taking
into account our $72 million in
share repurchases as part of
our 2016 Normal Course Issuer
Bids. Cumulatively, to date, we
have purchased approximately
$255 million shares as part
of our 2015 and 2016 share
repurchase programs.

Changing the financial
trajectory of the Company is
the best scorecard by which
our shareholders should hold
us to account for the execution
of our vision. However, it is not
the only measure. I believe the
building blocks to future growth
that have been established are
equally important.

Consider that we have

• Transformed our prepared
meats manufacturing and
distribution network to be
cost competitive with North
American peers;

• Become a focused protein

company, disposing of
businesses that did not support
our ambition of becoming one
of the world’s great protein
companies;

• Developed a powerhouse

portfolio of market leading
brands;

• Established a leadership
position as the largest
producer of “raised without
antibiotics” (“RWA”) poultry
in Canada and of RWA pork in
North America;

MAPLE LEAF FOODS INC. | 2016 ANNUAL REPORTStrategic Adjusted EBITDA Margin Target: 10%
Last year was a major milestone for our Company, as we
achieved a step-change in structural profitability and surpassed
our strategic Adjusted EBITDA margin target of 10%.

• Defined the platforms to

profitable growth that offer
the potential to achieve, over
the coming years, the next
step-change in our structural
profitability; and

• Commenced developing a

digital road map to address
the disruptive role – and
significant opportunities – that
technology innovation will
bring in the months and years
ahead. Technology is leading
to new ways of working, of
operating more effectively and
of engaging with suppliers and
customers. We plan to be at
the forefront of those changes.

With these building blocks
in place, we are pursuing
new opportunities beyond
our current geographies
and categories, balancing
this with growth within our
current portfolio.

New product launches last
year created energy and
excitement in key categories.
Maple Leaf Canadian Craft™
appeals to consumers who want
affordable access to artisanal
prepared sliced meats, featuring
regional flavours from Canadian
ingredients. Devour™ is a new
line of jerky, made with natural
ingredients, that targets the

fast growing snacking category.
Greenfield™, our lead brand in
“sustainable meat”, was the top-
selling new brand launched in
Canadian grocery stores in the
last year.

Investing in our brands and our
people is critical to our future.
I am also very proud of our
investment in community.

During the past year, following
significant research, planning
and stakeholder engagement,
we launched the Maple Leaf
Centre for Action on Food
Security, a not-for-profit
organization with a bold vision.
A staggering one in eight
Canadian households and one in
six children face food insecurity,
with devastating consequences
on them and on society. This
is a daunting social issue but
one where we are committed
to investing our expertise and
financial support to make an
impact. Our goal, by working
collaboratively with others
on innovation, advocacy and
advancing knowledge, is to
reduce food insecurity in Canada
by 50% by 2030.

This initiative is part of our
overall sustainability strategy,
launched in 2015, which has four
pillars: advancing nutrition and

health, valuing our people and
communities, treating animals
well, and eliminating waste. We
are making significant strides in
each area.

Maple Leaf Foods has a clear
vision of becoming the most
sustainable protein company in
the world, demonstrating our
mark on the food industry and,
specifically, the protein industry.
We expect to be different, and
we expect to be better. We
believe the world needs this
today, and we are uniquely
positioned to deliver on it.

Our leadership in sustainable
protein is predicated on creating
shared value – delivering
business value through
addressing social and economic
issues. It reflects our values as a
company and the environmental
and social issues related to meat
production, and it presents a
compelling market opportunity
that balances sustainability
with affordability.

The world around us is changing.
Food production impacts
on the environment are real.
Consumers increasingly care
about how their food is made,
how processed it is and if the
animals used to produce it are
raised humanely. People want

iii

MAPLE LEAF FOODS INC. | 2016 ANNUAL REPORTDuring the past year, following significant research, planning and
stakeholder engagement, we launched the Maple Leaf Centre for
Action on Food Security, a not-for-profit organization with a bold
vision. A staggering one in eight Canadian households and one in
six children face food insecurity, with devastating consequences
on them and on society.

access to healthy, appetizing and
culturally relevant food that is
also affordable. Food decisions
increasingly reflect values as well
as lifestyle and nutritional needs.
Meeting these needs will fuel
our growth.

Looking to the future
After working diligently to
transform our prepared meats
and pork manufacturing
footprint, we plan to invest in our
poultry supply chain to establish
a highly competitive cost
platform. While a much smaller
part of our business, there are
clear opportunities to materially
increase profitability through
technology and scale. As the
Canadian leader in branded
fresh chicken, we consider this
an important segment of our
business and plan to support it
through a strong manufacturing
base.

The same focus on execution,
discipline and rigour that led to
the success of our supply chain
transformation is guiding the
next stages of our Company’s
development. We have
established a “waste reduction”
culture as part of our DNA.

The most intriguing and
advanced of our growth
platforms is in “sustainable
meat”. This includes our
portfolio of products that
combine our advancements in
food safety, animal care and
environmental sustainability,
as well as animals raised
entirely without antibiotics.
Consumer research consistently
reveals that what people care
about most is what is not in
their food, seeking simpler,
natural ingredients, with less
processing, and the elimination
of antibiotic and hormone use in
animal production.

In the context of the North
American meat industry, we
believe we are in a unique
position. We are large enough
to bring scale efficiencies to
this market segment, which
enables greater product choice
and benefits, while we have
the vertical integration and
nimbleness to align our culture
and business behind high-impact
changes in our production and
product portfolio.

We have established Maple Leaf
as the Canadian leader in
producing high-quality poultry

MAPLE LEAF FOODS INC. | 2016 ANNUAL REPORTThe success we have
experienced in focusing and
repositioning the business, and
the work ahead to build the next
stage of profitable growth, is
entirely dependent upon the
11,000 men and women who
work at Maple Leaf.

They are deeply passionate
about working in a values-
based culture, and creating
great food that meets the
needs and challenges of our
changing society and world.
We are indebted to all of
them. We also benefit greatly
from having a very strong and
engaged Board, who provide
the insights, wisdom and
experience to help shape our
future. We are energized by
what we have achieved and by
the opportunities ahead.

Sincerely,

Michael H. McCain
President and CEO
February 2017

products from chickens that
are raised entirely without
antibiotics, and as the North
American leader in pork
raised without antibiotics.
We have achieved this over
several years – in our own
hog production operations
and by working closely with
independent poultry and hog
farmers – by implementing
best practices in feed, animal
husbandry and environmental
management. We have also
transitioned 20,500 sows away
from restrictive gestation crates
and are accelerating this work
to deliver on our commitment to
completely eliminate confined
sow housing in our operations.

We are reformulating our
branded products to remove
artificial colours and flavours,
and meet new Health Canada
sodium guidelines. We began
this several years ago with the
development of our Naturals
line, which is now one of our
leading brands.

We have also completed the
most exhaustive consumer
research in our history, which
is leading to new insights,
brand strategies and product
formulations that appeal to
taste and nutrition trends.
While we pursue new markets,
it is essential to strengthen our
core portfolio, and we plan to
revitalize these categories in
market this year.

Snacking is a more advanced
market segment, representing
about half of daily food
and beverage consumption
occasions. Our entry in the jerky
category with the launch of
Devour™ is one such example
of how we are leveraging our
consumer insights, brands
and product development
capabilities. The demand for
high-quality, nutritious and great
tasting meat-based snacking
options continues to outpace
more traditional categories, and
we believe there is opportunity
to leverage our assets, market
reach and brands to support
further expansion.

While alternative proteins is the
least developed of our three
growth platforms, we recently
achieved a major milestone
with our agreement to acquire
Lightlife Foods. Lightlife is the
leader in the U.S. refrigerated
plant protein market, with
38% market share. While
this US$110 million market is
relatively small, it is growing at
a double-digit pace, much faster
than the broader consumer
packaged goods sector.
Acquiring Lightlife gives us a
market leading U.S. platform and
a strong distribution network,
and diversifies our portfolio,
providing consumers with
nutritious meat and non–meat
based protein options.

MAPLE LEAF FOODS INC. | 2016 ANNUAL REPORTMessage from the Chairman

With the attainment of our strategic
10% EBITDA margin target in 2016,
Maple Leaf Foods has fundamentally
changed the financial trajectory of the
business and positioned the Company
for future profitable growth.

The transformation of the
prepared meats manufacturing
and distribution network was
a vision requiring a refocusing
of the business, over a billion
dollars in transformative capital
expenditures, disciplined
planning and tremendous
perseverance to execute.

Your Board has been actively
engaged with Management
throughout this journey,
providing guidance, stewardship
and support along the way.

The Company and shareholders
have benefited substantially.
The market value of Maple Leaf
shares has nearly tripled over
the past five years. Strong
financial performance, a healthy
cash position and confidence
in the future led to the Board
authorizing a 22% increase in
the dividend to $0.11 per share in
February 2017. We also entered
into a new Normal Course Issuer
Bid in May 2016 to purchase up
to 8.7 million common shares.

While Maple Leaf has
transitioned to having one of
the most efficient supply chains
in the business, economic
conditions, consumer tastes,
technology, competition and
geopolitical circumstances will
require continued Board and
managerial vigilance.

While there is always more we
can and will do to optimize
production efficiencies through
scale and technology, the
Company’s focus has shifted to
driving profitable growth, and
to leveraging our significant
competitive capabilities to
expand the existing business and
pursue new markets.

The Board has been actively
engaged with Management in
the strategic planning process
to chart the way forward. With
a portfolio of market leading
brands, an efficient supply chain
and distribution network, and
increasing alignment on our
sustainability focus to meet
social and consumer needs,
we are well positioned to take
the Company to new levels
of success.

Prudent stewardship of capital
will, however, continue to be an
important priority for the Board.

I would like to acknowledge
directors Greg Boland, John
Bragg and Claude Lamoureux,
who stepped down from the
Board in the last year. They all
made significant contributions to
the success of Maple Leaf Foods,
and we are indebted to them
for their insights and diligent
service. We also welcome
directors John Lederer and Carol
Stephenson, who more

recently joined the Board and
bring tremendous experience
and valuable perspectives.

Ongoing Board renewal is
part of our continued focus on
good governance. One of the
highlights of the renewal process
in 2016 included the evolution
of the former Environment,
Health and Safety Committee
to a broadened mandate as
the Safety and Sustainability
Committee, reflecting the
Company’s deep commitment
to food and workplace safety,
social responsibility and
sustainability.

Thank you for your investment
in and support of Maple Leaf
Foods. The Company is
a stronger, more capable
organization than at any time
in its history and, as fellow
shareholders, your Board has
great confidence in our future.

Sincerely,

David L. Emerson
Chairman
February 2017

MAPLE LEAF FOODS INC. | 2016 ANNUAL REPORTCorporate Governance and
Board of Directors

Corporate Governance
The Board of Directors and Management of the Company are committed to
maintaining a high standard of corporate governance. The Board has responsibility
for the overall stewardship of the Company and discharges such responsibility
by reviewing, discussing and approving the Company’s strategic planning and
organizational structure and supervising Management with a view to preserving
and enhancing the underlying value of the Company. Management of the business
within this process and structure is the responsibility of the Chief Executive Officer
and Senior Management. The Board has adopted guidelines to assist it in meeting
its corporate governance responsibilities. The roles of the Board, the Chief Executive
Officer, the Chairman and the individual committees are clearly delineated. Together
with the Chairman and the Corporate Governance Committee, the Board assesses its
processes and practices regularly to ensure its governance objectives are met.

Composition of the Board of Directors
The Company’s directors are very experienced, high-calibre business leaders with
diverse relevant skills and competencies. The Board of Directors has assessed each
of the Company’s eight non-management directors to be independent. A more
comprehensive analysis of the Company’s approach to corporate governance matters
will be included in the Management Proxy Circular for the April 27, 2017 annual
meeting of shareholders.

Board of Directors

William E. Aziz, CPA, CA
President and Chief Executive Officer,
BlueTree Advisors II Inc.
(Private management advisory firm)

W. Geoffrey Beattie
Chief Executive Officer,
Generation Capital
(Investment management firm)

Ronald G. Close
Corporate Director

The Honourable David L. Emerson
Corporate Director

Jean M. Fraser
Retired Partner, Osler, Hoskin & Harcourt

John A. Lederer
Corporate Director

Michael H. McCain
President and Chief Executive Officer,
Maple Leaf Foods Inc.

James P. Olson
Corporate Director

Carol M. Stephenson
Corporate Director

vii

MAPLE LEAF FOODS INC. | 2016 ANNUAL REPORTSenior Management and Officers

Committees of the Board of Directors

Standing
Committees

AUDIT COMMITTEE
W.E. Aziz, Chairman
R.G. Close
J.P. Olson
C.M. Stephenson

CORPORATE GOVERNANCE
COMMITTEE
W.G. Beattie, Chairman
R.G. Close
D.L. Emerson
J.M. Fraser

SAFETY AND SUSTAINABILITY
COMMITTEE
J.P. Olson, Chairman
W.G. Beattie
D.L. Emerson
J.A. Lederer

HUMAN RESOURCES AND
COMPENSATION COMMITTEE
J.M. Fraser, Chair
W.E. Aziz
J.A. Lederer
C.M. Stephenson

Senior Leadership
Team
Michael H. McCain
President and Chief Executive Officer

Other Corporate
Officers
J. Nicholas Boland
Vice-President, Investor Relations

Stephen Elmer
Vice-President and Corporate Controller

Glen Gratton
Vice-President, Maple Leaf Agri-Farms

René McLean
Vice-President, Business Finance

Michael Rawle
Vice-President, Finance and Treasurer

Dianne Singer
Assistant Corporate Secretary

Ben Brooks
Senior Vice-President and General
Manager, Poultry

Rocco Cappuccitti
Senior Vice-President and
Corporate Secretary

Chris Compton
Senior Vice-President, Foodservice
Sales and Marketing

Curtis Frank
Senior Vice-President, Retail Sales

Adam Grogan
Senior Vice-President, Marketing
and Innovation

Ian Henry
Senior Vice-President, People

Randall Huffman
Senior Vice-President, Operations and
Chief Food Safety Officer

Lynda Kuhn
Senior Vice-President, Sustainability and
Public Affairs

Andreas Liris
Chief Information Officer

Gary Maksymetz
Chief Operating Officer

Rory McAlpine
Senior Vice-President, Government and
Industry Relations

Debbie Simpson
Chief Financial Officer

Iain Stewart
Senior Vice-President and General
Manager, Fresh Pork

Richard Young
Senior Vice-President, Supply Chain
and Purchasing

viii

MAPLE LEAF FOODS INC. | 2016 ANNUAL REPORTMAPLE LEAF FOODS INC. | 2016 ANNUAL REPORT

2016 Financial Review

For years ended December 31

(In millions of Canadian dollars, except share information)

2016

2015(i)

2014(i) (ii)

2013(i) (ii)

2012(i) (ii) (iii)

Consolidated results
Sales
Adjusted Operating Earnings (Loss)(iv)
Adjusted EBITDA(iv)
Adjusted EBITDA %(v)
Net earnings from continuing operations
Net earnings(vi)
Return on Net Assets(iv) (vii)

Financial position
Net Assets(vii) (viii)
Shareholders’ equity(vii)
Net Cash (Debt)(iv)

Per share
Adjusted Earnings (Loss) per Share(iv) (vi)
Net earnings (loss) from continuing operations
Net earnings(vi)
Dividends
Book value(vii)

Number of shares (millions)
Weighted average
Outstanding at December 31

3,332
239
343
10.3%
182
182
9.8%

1,717
2,088
394

1.23
1.35
1.35
0.36
15.81

134.2
132.1

3,293
110
220
6.7%
42
42
4.8%

1,705
2,041
282

0.58
0.30
0.30
0.32
15.11

140.2
135.1

3,157
(75)
15
0.5%
(214)
710
(3.7)%

1,729
2,233
486

(0.56)
(1.51)
5.03
0.16
15.62

141.2
142.9

2,955
(136)
(49)
(1.6)%
(141)
496
(0.2)%

2,124
1,569
(452)

(1.08)
(1.01)
3.55
0.16
11.19

139.9
140.3

3,075
57
133
4.3%
(31)
89
9.4%

2,101
879
(1,171)

(0.05)
(0.23)
0.64
0.16
6.28

139.4
140.0

(i)

2012–2015 figures have been restated for the impact of adopting a 2016 IFRIC clarification of International Accounting Standard 12 Income Taxes (“IAS 12”). Refer to
Note 3(v) of the Company’s 2016 audited consolidated financial statements for further information.

(ii) Figures exclude the results of the Bakery Products Group, which are reported as discontinued operations. Refer to Note 22 of the Company’s 2015 audited consolidated

financial statements for further information.

(iii) 2012 figures have been restated for the impact of adopting the revised International Accounting Standard 19 Employee Benefits (“IAS 19”). Refer to Note 32 of the

Company’s 2013 audited consolidated financial statements for further information.

(iv) Refer to the Non-IFRS Measures on page 27 of the Company’s 2016 Management’s Discussion & Analysis.
(v) Adjusted EBITDA % is calculated as Adjusted EBITDA divided by sales.
(vi) Attributable to common shareholders.
(vii) 2012–2013 figures have not been restated for the classification of the Rothsay business and the Bakery Products Group as discontinued operations.
(viii) Net Assets defined as total assets (excluding cash and deferred tax assets) less non-interest bearing liabilities (excluding deferred tax liabilities).

Segmented Operating Results

(In millions of Canadian dollars)

Meat Products Group
Sales
Adjusted Operating Earnings
Total assets

Agribusiness Group
Sales
Adjusted Operating Earnings (Loss)
Total assets

Total Company
Sales(i)
Adjusted Operating Earnings(i)
Total assets(ii) (iii)

Business Segments

2016

2015

% Change

3,316
264
1,867

15
(24)
208

3,332
239
2,633

3,277
108
1,853

16
1
189

3,293
110
2,619

1.2%
143.1%
0.8%

(3.9)%
N/M
10.0%

1.2%
117.9%
0.5%

The Meat Products Group includes value-added prepared meats, lunch kits and snacks, and value-added fresh pork and poultry products sold under flagship Canadian brands
such as Maple Leaf®, Maple Leaf Prime®, Maple Leaf Natural Selections®, Schneiders®, Schneiders® Country Naturals®, Mina®, and many leading regional brands.

The Agribusiness Group includes Canadian hog production operations that primarily supply the Meat Products Group with livestock as well as toll feed sales.
(i) Numbers may not add due to rounding.
(ii) 2015 figure has been restated for the impact of adopting a 2016 IFRIC clarification of International Accounting Standard 12 Income taxes (“IAS 12”). Refer to Note 3(v) of

the Company’s 2016 audited consolidated financial statements for further information.
Includes non-allocated assets.

(iii)

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

Management’s Discussion and Analysis
All dollar amounts are presented in Canadian dollars unless otherwise noted.

February 21, 2017

THE BUSINESS

Maple Leaf Foods Inc. ("Maple Leaf Foods" or the "Company") is a leading consumer protein company, making high quality,
innovative products under national brands including Maple Leaf®, Maple Leaf Prime®, Maple Leaf Natural Selections®,
Schneiders®, Schneiders® Country Naturals® and Mina®. The Company employs approximately 11,000 people across
Canada and exports to global markets, including the U.S. and Asia. The Company is headquartered in Mississauga, Ontario
and its shares trade on the Toronto Stock Exchange (MFI).

OPERATING SEGMENTS

The Company’s results are organized into two segments: Meat Products Group and Agribusiness Group.

The Meat Products Group includes value-added prepared meats, lunch kits and snacks, and value-added fresh pork and
poultry products sold under flagship Canadian brands such as Maple Leaf®, Maple Leaf Prime®, Maple Leaf Natural
Selections®, Schneiders®, Schneiders® Country Naturals®, Mina® and many leading regional brands.

The Agribusiness Group includes Canadian hog production operations that primarily supply the Meat Products Group with
livestock as well as toll feed sales.

FINANCIAL OVERVIEW

In 2016, sales increased 1.2% to $3,331.8 million from $3,292.9 million in the prior year, or decreased 0.3% after adjusting for
the impact of foreign exchange, due to higher sales in the Meat Products Group. Year over year comparisons are affected by
an additional week included in 2015 fourth quarter results. Excluding only the contribution of the 53rd week in 2015, sales in
2016 increased approximately 3.0% from prior year.

Net earnings for the year increased to $181.7 million ($1.35 per basic share) from $41.6 million ($0.30 per basic share) in the
prior year. The increase was primarily due to improved margins in the Meat Products Group.
Adjusted Operating Earnings(i) for the year increased to $239.3 million compared to $109.8 million in the prior year. Adjusted
Earnings per Share(ii) increased to $1.23 from $0.58 in the prior year. The increase was primarily due to improved margins in
the Meat Products Group.

Several items are excluded from the discussions of underlying earnings performance as they are not representative of ongoing
operational activities. Refer to the section entitled Non-IFRS Financial Measures of this Management Discussion and Analysis
on page 27 for a description and reconciliation of all non-IFRS financial measures.

Notes:
(i) Adjusted Operating Earnings, a non-IFRS measure, is used by Management to evaluate financial operating results. It is
defined as earnings adjusted for items that are not considered representative of ongoing operational activities of the
business, and items where the economic impact of the transactions will be reflected in earnings in future periods when the
underlying asset is sold or transferred. Please refer to the section entitled Non-IFRS Financial Measures starting on page
27 of this document.

(ii) Adjusted Earnings per Share, a non-IFRS measure, is used by Management to evaluate financial operating results. It is
defined as basic earnings per share and is adjusted on the same basis as Adjusted Operating Earnings. Please refer to
the section entitled Non-IFRS Financial Measures starting on page 27 of this document.

SELECTED FINANCIAL INFORMATION

The following table summarizes selected financial information for the three years ended December 31:

($ millions except earnings per share)

2016

2015

2014(i)

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

Sales

Adjusted Operating Earnings
Adjusted EBITDA(ii)
Adjusted EBITDA %(iii)
Net earnings (loss)

Adjusted Earnings per Share

Basic earnings per share

Diluted earnings per share
Total assets(iv)
Net Cash(v)
Total long-term liabilities
Return on Net Assets ("RONA")(v)
Cash provided (used) by operating activities

Cash dividends per share

$ 3,331.8

$ 3,292.9

$ 3,157.2

239.3

343.4

10.3%

181.7

1.23

1.35

1.32

109.8

219.8

6.7%

41.6

0.58

0.30

0.29

(75.5)

14.8

0.5%

(213.8)

(0.56)

(1.51)

$ 2,632.6

$ 2,619.0

$ 2,864.7

393.7

169.4

9.8%

357.2

0.36

281.6

248.6

4.8%

159.4

0.32

485.8

244.8

(3.7%)

(362.2)

0.16

(i) 2014 figures exclude the results of the Bakery Products Group, which are reported as discontinued operations. Refer to the

Company's 2015 audited consolidated financial statements.

(ii) Adjusted EBITDA is calculated as earnings from continuing operations before interest and income taxes plus depreciation

and intangible asset amortization, adjusted for items that are not considered representative of ongoing operational
activities of the business, and items where the economic impact of the transactions will be reflected in earnings in future
periods when the underlying asset is sold or transferred. Please refer to the section entitled Non-IFRS Financial Measures
starting on page 27 of this document.

(iii) Adjusted EBITDA % is calculated as Adjusted EBITDA divided by sales.
(iv) 2014 and 2015 figures have been re-stated for the impact of adopting a 2016 IFRIC clarification of International Accounting
Standard 12 Income taxes (“IAS 12”). Refer to Note 3(v) of the Company’s 2016 audited consolidated financial statements
for further information.

(v) Refer to the section entitled Non-IFRS Financial Measures starting on page 27 of this document.

DISCUSSION OF FACTORS IMPACTING THE COMPANY'S OPERATIONS AND RESULTS

Completion of Value Creation Plan

In 2010, the Company embarked upon a multi year Value Creation Plan (the "Plan") to modernize and consolidate the
prepared meats supply chain. The goal of this transformation was to make Maple Leaf Foods a significantly leaner and more
profitable company. The Company has executed against the Plan over the last six years by reducing product complexity,
closing less efficient manufacturing and distribution operations and consolidating production and distribution into a smaller
number of efficient scale facilities. The Plan has included the construction of a new 400,000 square foot prepared meats
processing facility, the consolidation of 17 distribution centres into two, the closure of eight legacy manufacturing plants, and
expansion of three others.

In conjunction with the Plan, a financial target was set to increase our Adjusted EBITDA margin to 10% through executing one
of the largest transformations in the North American food industry. In 2016, the Company delivered the financial target by
recording an Adjusted EBITDA margin of 10.3%.

Transformation accomplishments:

• Over $600 million was invested in capital to dramatically lower the cost structure and improve network efficiencies;
• Consolidation of 11 prepared meats plants into four scale facilities including a new 400,000 square foot prepared

meats processing facility;

Approximately $90 million was invested to convert multiple legacy systems into one integrated SAP platform;

• Consolidation of 17 distribution centres into two;
•
• Over 1,800 products were eliminated or reformulated to run on longer, faster lines with new technologies;
• Non-core businesses were sold which strengthened the balance sheet; and
• Organizational changes were made to streamline the business and improve cost structures.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

The Company took a long-term approach, building one of the most modern and efficient prepared meats networks in the food
industry, fundamentally shifting costs and migrating to a value-added portfolio. This has resulted in a structural Adjusted
EBITDA margin shift from approximately 3.5% between the years 2005 - 2012 to overachieving the 10.0% target.

Sustainability

The Company has in place a comprehensive sustainability strategy focused on advancement in four areas: advancing nutrition
and health, valuing our people and communities, treating animals well, and eliminating waste. The Company views this
strategy as a competitive advantage. The Company's goal is to deeply embed sustainability into how it operates and to create
business value through addressing social and environmental issues. As people increasingly focus on what is in their food and
how it is produced, there is significant opportunity in building leadership in sustainable protein by producing more natural,
nutritious foods; lending our voice and resources to address the critical issue of food insecurity; continually enhancing a strong
animal care program; and eliminating waste. In 2016, the Company made considerable progress in executing its sustainability
priorities identified for each of its four pillars. The Company reports on its progress against its sustainability goals using the
Global Reporting Initiative (GRI) Standards for Sustainability Reporting and produces an annual sustainability report on its
sustainability website (www.mapleleafsustainability.ca). This website is also regularly updated with other related information
and developments.

Maple Leaf Food’s Sustainability Priorities

The Company has defined four sustainability priorities and areas of focus:

Advancing Nutrition and Health

There is significant commercial and social benefit to advancing the nutrition and health benefits of the Company’s products.
Maple Leaf Foods continues to advance the use of simpler, natural ingredients, reducing or eliminating antibiotic use in animal
production, and other key initiatives including reducing sodium levels to meet Health Canada guidelines. An analysis of
product ingredients and formulations across the Company's portfolio has been undertaken and a comprehensive plan is being
implemented to advance nutrition across our categories.

Valuing our People and Communities

The Company values a strong culture that keeps people safe, rewards excellence and empowers employees to learn and
contribute their best. This includes a robust workplace safety program, which has driven continuous material reductions in
workplace accidents. The Company is committed to being a destination for top talent, supported by leadership and career
development, training and developing a formalized diversity and inclusion strategy. The Company is also increasing its
engagement in responding to the critical national and global issue of food security through a comprehensive community
involvement program. In 2016, the Company launched the not-for-profit Maple Leaf Centre for Action on Food Security, with a
mission to working collaboratively with stakeholders to reduce food insecurity in Canada and globally by 50% by 2030. The
Centre's website can be accessed at www.feedopportunity.com.

Treating Animals Well

This sustainability pillar is embodied in the Company's Animal Care Commitment, launched in 2015, that articulates the
principles, goals and actions it is taking to become a leader in animal care. This includes advancing a culture of animal care
through communications, education and training; robust policies and procedures; regular reporting of performance and
conducting frequent, rigorous internal and independent audits; advancing practices and technologies based on sound science;
and providing clear, fact-based communication of goals, performance and progress. In 2016, the Company made considerable
progress in implementing programs to meet the Company's Animal Care Commitment and animal care strategy, which will be
described in the 2016 sustainability report.

Eliminating Waste

The Company is committed to reducing its environmental footprint by 50% by 2025, encompassing the three areas where
Maple Leaf Foods has the largest environmental impact: climate change (energy and emissions), water usage and waste. The
Company has completed energy, water and waste audits to benchmark its current footprint and has developed action plans to
deliver on its environmental goals. In 2016, the Company has made significant progress towards the implementation of these
plans.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

Market Influences for Pork Value Chain

The following table outlines the change in key commodity prices that affected the Company’s business and financial results:

(Unaudited)
Pork cutout (US$ per cwt)(i)(ii)
Hog market price per cwt (US$ per cwt)(i)(ii)
Hog market price per cwt (CAD per cwt)(i)(ii)
Corn (US$ per bushel)(iii)

As at
December
31, 2016

$ 81.62

$ 58.06

$ 78.04

3.52

Annual Averages

2016

2015

Change

2014

$ 78.66

$ 65.09

$ 86.23

3.58

$ 79.13

$ 70.59

$ 90.28

3.81

(0.6%)

(7.8%)

(4.5%)

(6.0%)

$ 110.20

$ 105.14

$ 116.14

4.18

(i) As at December 31, 2016, rate based on spot prices for the week ended December 31, 2016 based on CME (Source:

USDA).

(ii) Annual averages based on five-day average on CME (Source: USDA).
(iii) Daily close prices (Sources: Bloomberg and CME).

In aggregate, the market influences for the entire pork value chain were consistent with the long term averages for the first
three quarters of 2016 and were favourable in the fourth quarter of 2016. Pork industry processor margins were significantly
positive compared to the five-year average; however, these, were partially offset by lower pork by-product values and hog
production market influences which were below the five-year average in 2016.

The Company uses derivatives and other non-derivative financial instruments to manage its exposures to fluctuations in
commodity prices.

Impact of Currency

The following table outlines the changes in currency rates that have affected the Company’s business and financial results:

U.S. dollar / Canadian dollar(i)
Canadian dollar / Japanese yen(i)

(i) Source: Bloomberg

As at
December
31, 2016
$ 1.34

¥ 87.01

2016

$ 1.32

¥ 82.10

Annual Averages

2015

Change

$ 1.28

¥ 94.66

3.1 %

(13.3)%

2014

$ 1.10

¥ 95.63

The Canadian dollar weakened relative to the U.S. dollar by 3.1% in 2016. In the short-term, a weaker Canadian dollar
expands export margins in the Company’s primary pork processing and hog production operations. Conversely, a weaker
Canadian dollar increases the cost of raw materials and ingredients in the domestic prepared meats business. The prepared
meats business is able to react to changes in input costs through pricing, cost reduction or investment in value-added
products. Over the longer-term, a weaker Canadian dollar increases the relative competitiveness of the domestic Canadian
packaged goods operation, as imports of competing products from the U.S. become less competitive. Similarly, the Company
also has a greater ability to export and expand into the U.S. market.

During 2016, the Japanese yen increased in value relative to the Canadian dollar by 13.3%. In general, an increase in the
Japanese yen strengthens export margins to Japan in the Company’s fresh pork business. The Company ultimately seeks to
manage pricing to offset the impact of currency fluctuations.

The Company uses derivatives and other non-derivative financial instruments to manage its exposures to fluctuations in
foreign exchange rates.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

OPERATING REVIEW

The following table summarizes sales by business segment for the two years ended December 31:

($ millions)

Meat Products Group
Agribusiness Group

Total Sales

2016(i)
$ 3,316.5

15.3
$ 3,331.8

2015(i)
$ 3,277.0

15.9
$ 3,292.9

Change

1.2%

(3.9%)

1.2%

The following table summarizes Adjusted Operating Earnings by business segment for the two years ended December 31:

($ millions)

Meat Products Group
Agribusiness Group

Adjusted Operating Earnings

(i) May not add due to rounding.

Meat Products Group

2016(i)
$ 263.6

(24.3)

2015(i)
$ 108.4

1.4

Change

$ 155.2

(25.7)

$ 239.3

$ 109.8

$ 129.5

Includes value-added prepared meats, lunch kits and snacks, and value-added fresh pork and poultry products sold under
flagship Canadian brands such as Maple Leaf®, Maple Leaf Prime®, Maple Leaf Natural Selections®, Schneiders®,
Schneiders® Country Naturals®, Mina® and many leading regional brands.

Sales in the Meat Products Group for 2016 increased 1.2% to $3,316.5 million, or decreased 0.3% after adjusting for the
weaker Canadian dollar. Excluding only the contribution of the 53rd week in 2015, sales increased by approximately 3.0%.
Prepared meats sales declined slightly in response to a price increase in the first quarter but strengthened as the year
progressed. Sales in fresh pork increased as the Company's focus on increasing its value-added pork business resulted in
higher selling prices. Performance was also supported by favourable exchange rates and pork markets. Fresh poultry sales
also increased due to stronger volume and an improved sales mix.

Adjusted Operating Earnings for 2016 increased to $263.6 million compared to $108.4 million in the prior year. Higher earnings
in prepared meats resulted from lower operating costs across the network and pricing implemented in the first quarter. Higher
fresh pork earnings resulted from increased contributions from value-added retail and value-added export sales, higher
industry margins, and operating efficiency gains. Poultry results were consistent with the prior year as gains from higher retail
branded sales and improved operating efficiencies were offset by lower industry margins.

In the fourth quarter of 2016, the Company announced that it had entered into a new turkey processing agreement with a third
party that will move the Company’s fresh turkey processing from its plant in Thamesford, Ontario to a third party facility in
Mitchell, Ontario in early 2018. This processing agreement provides Maple Leaf Foods with a cost effective supply of high
quality fresh turkey for further processing. As a result of this agreement, the Company expects to close its turkey processing
facility in Thamesford, Ontario in 2018. The costs associated with closing the facility are being recorded through restructuring.

Agribusiness Group

Includes Canadian hog production operations that primarily supply the Meat Products Group with livestock.

Agribusiness Group sales in 2016 declined slightly to $15.3 million compared to $15.9 million in the prior year, due to 2015
sales benefiting from a 53rd week.
Adjusted Operating Earnings in 2016 decreased to a loss of $24.3 million from earnings of $1.4 million in the prior year,
reflecting the impact of lower hog prices and higher feed costs.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

GROSS MARGIN

Gross margin in 2016 was $590.9 million (17.7% of sales) compared to $381.1 million (11.6% of sales) in the prior year. The
increase in gross margin as a percentage of sales is largely attributable to margin improvement in the Meat Products Group,
as outlined above. Included in gross margin was a $19.0 million increase in the fair value of biological assets and a $24.5
million increase in the fair value of unrealized mark-to-market commodity contracts.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

During the year, selling, general and administrative expenses increased by 12.8% to $324.8 million (9.7% of sales), compared
to $288.1 million (8.7% of sales) in the prior year. The increase relates to investment in advertising and promotional expenses
and differences in variable compensation programs linked to Company performance. At Maple Leaf Foods, variable
compensation programs are linked to financial results. In 2015, targets were not achieved and accordingly the variable
compensation was reduced, while the targets were exceeded in 2016, resulting in an increase in variable compensation. This
was partially offset by a decrease in core selling, general and administrative expenses as a result of the Company's ongoing
commitment to driving cost efficiencies.

OTHER INCOME (EXPENSE)

Other expense for 2016 was $3.6 million compared to $1.9 million in the prior year. The increase is primarily due to a higher
loss on disposal of property and equipment and a lower gain on sale of investment properties, partially offset by a lower
depreciation charge on assets servicing divested businesses as these assets are now fully depreciated.

Certain items in other income (expense) are excluded from the calculation of Adjusted EBITDA and Adjusted Earnings per
Share as they are not considered representative of ongoing operational activities of the business. Other income (expense)
used in the calculation of Adjusted EBITDA and Adjusted Earnings per Share for 2016 is an expense of $6.1 million (2015:
expense of $1.2 million).

Non-allocated Costs

Non-allocated amounts that are excluded from Adjusted Operating Earnings in 2016 comprise of a $6.3 million gain due to
changes in the fair value of biological assets (2015: loss of $12.8 million) and a $20.6 million unrealized gain on futures
contracts (2015: loss of $3.9 million).

All non-allocated amounts have been excluded from the computation of Adjusted Operating Earnings, as the economic impact
of these transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred.

RESTRUCTURING AND OTHER RELATED COSTS

Restructuring and other related costs for 2016 were $6.6 million compared to $33.8 million for 2015.

The Meat Products Group incurred $4.8 million (2015: $15.3 million) in restructuring and other related costs. Of this amount,
$3.2 million (2015: $2.4 million) related to severance and other employee costs, $1.4 million (2015: $8.7 million) related to
asset impairment and accelerated depreciation and $0.1 million (2015: $4.2 million) related to site closing costs. The 2016
costs were related primarily to the announced closure of the Thamesford turkey facility, while 2015 costs were related primarily
to the Plan.

The balance of restructuring costs for 2016 and 2015 related primarily to severance and other employee costs that were
incurred in connection with other ongoing management and organizational structure restructuring initiatives.

INTEREST EXPENSE AND OTHER FINANCING COSTS

Interest expense and other financing costs for 2016 were $6.4 million compared to $4.7 million in the prior year. The increase
was mainly due to nonrecurring financing costs of $1.4 million related to the renewal of the Company's accounts receivable
securitization facility in the third quarter of 2016.

INCOME TAXES

The Company’s income tax expense for 2016 resulted in an effective tax rate of 27.2% (2015: 21.0%). The lower effective tax
rate in 2015 primarily resulted from the favourable resolution of an income tax audit. The effective tax rate excluding this item
was 26.6%. For 2016, the effective tax recovery rate on restructuring charges used in the computation of Adjusted Earnings
per Share is 26.1% (2015: 26.0%). The effective tax recovery rate on items not considered representative of continuing
operations in 2016 was 27.2% (2015: 26.5%).

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

ACQUISITIONS AND DIVESTITURES

There were no acquisitions or divestitures during the years ended December 31, 2016 and 2015.

SUBSEQUENT EVENTS

On February 21, 2017, the Company signed a definitive agreement to acquire 100% of the outstanding shares of Lightlife
Foods Holdings, Inc. (“Lightlife”) a privately held U.S. based corporation engaged in the production and distribution of
refrigerated plant-based protein products. Lightlife has a leading market share in this segment, and will provide the Company
with a strong position in this fast growing category. The anticipated purchase price is US$140.0 million prior to transaction
fees, debt settlement, and working capital adjustments. The transaction is subject to customary US regulatory review, and will
be accounted for as a business combination. The Company intends to settle the transaction in cash, with an expected closing
date in March 2017.

On February 21, 2017, the Company entered into an amended and restated governance agreement with McCain Capital Inc.
and Michael H. McCain. Pursuant to that agreement, the Company has agreed that it will not submit the rights plan for
reconfirmation at the Company’s annual meeting in 2017, thereby allowing the rights plan to expire in accordance with its
terms at the termination of that meeting. The determination to not submit the rights plan for reconfirmation at the annual
shareholders’ meeting in 2017 arose, in part, as a result of the new provisions of the amended and restated governance
agreement and the fact that recent changes in securities law make certain provisions of the rights plan redundant.

CAPITAL RESOURCES

The consumer packaged meats industry in which the Company operates is generally characterized by high sales volume and
high turnover of inventories and accounts receivable. In general, accounts receivable and inventories are readily convertible
into cash. Investment in working capital is affected by fluctuations in the price of raw materials, seasonal and other market-
related fluctuations. The Company has consistently generated a strong base level of operating cash flow, even in periods of
higher commodity prices and restructuring of its operations. These operating cash flows provide a base of underlying liquidity
that the Company supplements with credit facilities, securitization facilities and cash on hand to provide longer-term funding
and to finance fluctuations in working capital levels.

On June 24, 2016, the Company entered into a new three-year $400.0 million committed revolving credit facility with a
syndicate of Canadian, U.S., and international institutions. The new credit facility replaced the Company's $200.0 million
revolving credit facility that was due to mature on June 30, 2016. This unsecured facility can be drawn in Canadian or U.S.
dollars and bears interest payable monthly, based on Banker's Acceptance and Prime rates for Canadian dollar loans and
LIBOR for U.S. dollar loans. The facility is intended to meet the Company’s funding requirements for general purposes, and to
provide appropriate levels of liquidity. As at December 31, 2016, the Company had drawn only letters of credit of $6.2 million
on this facility (2015: $60.3 million on previous facility).

The Company has an additional uncommitted credit facility for issuing up to a maximum of $120.0 million letters of credit. As
at December 31, 2016, $63.4 million (2015: $79.4 million) of letters of credit had been issued thereon. These letters of credit
have been collateralized with cash, as further described in Note 4 of the Company’s 2016 audited consolidated financial
statements.

The Company's cash balance as at December 31, 2016 is $403.6 million (2015: $292.3 million). The Company has invested in
short-term deposits in Canadian financial institutions with long-term debt ratings of A or higher.

On August 26, 2016, the Company entered into a new three-year accounts receivable securitization facility. The maximum
cash advance available to the Company under this program is $110.0 million. The new facility replaced the Company's existing
facility that was due to mature on September 30, 2016. The new facility provides similar cash funding with a lower proportion
of the Company's receivables being sold, and provides the Company with competitively priced financing and further diversifies
its funding sources. Under the facility, the Company has sold certain accounts receivable, with very limited recourse, to a third
party trust that is financed by an international financial institution with a long-term AA- debt rating. The receivables are sold at
a discount to face value based on prevailing money market rates.

At the end of 2016, the Company had $116.2 million (2015: $192.6 million) of trade accounts receivable serviced under its
facilities. In return for the sale of these receivables, the Company will receive cash of $83.7 million (2015: $88.9 million) and
notes receivable in the amount of $32.5 million (2015: $103.7 million). Due to the timing of receipts and disbursements, the
Company may, from time to time, record a receivable or payable related to the securitization facility. As at December 31, 2016,
the Company recorded a net payable amount of $0.9 million (2015: $2.9 million net payable). Both the previous and current
facilities were accounted for as an off-balance sheet transaction in accordance with International Financial Reporting
Standards (“IFRS”). The current facility will expire in August 2019.

The Company's credit and securitization facilities are subject to certain restrictions, including the maintenance of covenants.
The Company was in compliance with all of the requirements of these facilities during 2016. If the securitization facility was to

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

be terminated, the Company would recognize the related amounts on the consolidated balance sheet and consider alternative
financing if required.

CAPITAL EXPENDITURES

Capital expenditures for 2016 were $113.2 million compared to $145.8 million in 2015. The reduction in spending from 2015 is
related to the completion of the Plan.

The Company currently estimates its capital expenditures for the full year of 2017 will be roughly $150.0 million. This estimate
includes the Company's expectation that it will spend the amount equal to its depreciation rate on improving and maintaining
its plant network. Included in the 2017 estimate is approximately $40.0 million in large projects, primarily consisting of
investments to optimize fresh pork packaging capabilities and further investments in poultry operations to deliver upon our
animal welfare strategy.

NORMAL COURSE ISSUER BID

On May 16, 2016, the Toronto Stock Exchange ("TSX") accepted the Company's notice of intention to commence a Normal
Course Issuer Bid ("NCIB"), which allows the Company to repurchase, at its discretion, up to 8.70 million common shares in
the open market or as otherwise permitted by the TSX, subject to the normal terms and limitations of such bids. Common
shares purchased by the Company are cancelled. The program commenced on May 19, 2016 and will terminate on May 18,
2017, or on such earlier date as the Company completes its purchases pursuant to the notice of intention. Under this bid
during the year ended December 31, 2016, 2.11 million shares were purchased for cancellation for $60.5 million at a volume
weighted average price paid of $28.74 per common share.

On March 23, 2015, the TSX accepted the Company's notice of intention to commence a NCIB which allowed the Company to
repurchase, at its discretion, up to approximately 8.65 million common shares in the open market or as otherwise permitted by
the TSX, subject to the normal terms and limitations of such bids. The program commenced on March 25, 2015 and was
terminated on January 22, 2016, as the Company completed its purchase and cancellation of 8.65 million common shares for
$194.5 million at a weighted average price paid of $22.48 per common share. Under this bid during the year ended December
31, 2016, 0.51 million (2015: 8.14 million) shares were purchased for cancellation for $11.9 million (2015: $182.5 million) at a
volume weighted average price paid of $23.23 (2015: $22.44) per common share.

CASH FLOW AND FINANCING

Cash was $403.6 million at the end of 2016, compared to $292.3 million in 2015. The increase in cash for the year ended
December 31, 2016 is largely due to increased cash flow from operations, reduced share repurchases in 2016 under the NCIB
programs, and lower investments in property and equipment. This was partially offset by increased dividend payments and
higher treasury stock purchases related to long term incentive plans.

Cash Flow from Operating Activities

Cash provided by operations for 2016 was $357.2 million compared to $159.4 million in 2015. The improvement in cash flow
from operations was primarily due to higher earnings from operations, reduced investment in working capital, lower income tax
payments and lower cash settlement of restricted share units.

Cash Flow from Financing Activities

Cash used in financing activities was $139.3 million for 2016 compared to $229.8 million in 2015. The decrease was mainly
due to fewer share repurchases under the NCIB programs partially offset by higher treasury stock purchases related to long
term incentive plans and increased dividend payments.

Cash Flow from Investing Activities

Cash used in investing activities was $106.5 million for 2016 compared to $133.7 million in 2015. The decrease was mainly
due to lower capital expenditures offset by lower proceeds from the disposal of long-term assets.

CONTRACTUAL OBLIGATIONS

The following table provides information about certain of the Company's significant contractual obligations as at December 31,
2016. This table presents the undiscounted principal cash flows payable in respect of financial liabilities.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

Payments due by fiscal year:

($ thousands)

Financial liabilities

Accounts payable and accruals
Long-term debt(i)
Foreign exchange contracts

Commodity futures contracts
Interest rate swaps(i)
Other liabilities

Due within
1 year

Due between
1 and 2 years

Due between
2 and 3 years

Due after
3 years

Total

$ 256,163

—

$ 256,163

1,083

1,689

848

5,893

89,622

$ 355,298

1,083

7,931

—

1,134

2,217

—

867

1,950

—

1,425

9,356

11,180

1,689

848

5,893

93,048

$ 368,821

Commitments

Contractual obligations including operating
leases
Total

51,195

36,414

30,809

113,045

231,463

$ 406,493

$ 38,631

$ 32,759

$ 122,401

$ 600,284

(i) Does not include contractual interest payments

Management is of the opinion that its cash flow, cash on hand, and sources of financing provide the Company with sufficient
resources to finance ongoing business requirements and its planned capital expenditure program for at least the next 12
months. Additional details concerning financing are set out in Note 13 and Note 17 of the Company's 2016 audited
consolidated financial statements.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT ACTIVITIES

Through the normal course of business the Company is exposed to financial and market risks that have the potential to affect
its operating results. In order to manage these risks, the Company operates under risk management policies and guidelines
which govern the hedging of price and market risk in the foreign exchange, interest rate, and commodity markets, as well as
funding and investing activities.

The Company engages in hedging to manage price and market risk associated with core operating exposures and does not
engage in significant trading activity of a speculative nature.

The Company’s Risk Management Committee meets frequently to discuss current market conditions, review current hedging
programs and trading activity, and approve any new hedging or trading strategies.

Financial Instruments

The Company’s financial assets and liabilities are classified into the following categories:

Cash and cash equivalents

Accounts receivable

Notes receivable

Bank indebtedness

Accounts payable and accrued liabilities

Long-term debt
Derivative instruments(i)

Held for trading

Loans and receivables

Other financial liabilities

Held for trading

(i) These derivative instruments may be designated as cash flow hedges or as fair value hedges as appropriate.

The Company applies hedge accounting as appropriate and uses derivatives and other non-derivative financial instruments to
manage its exposures to fluctuations in foreign exchange rates and commodity prices.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

The fair values and notional amounts of derivative financial instruments as at December 31 are shown below:

($ thousands)

Cash flow hedges

Foreign exchange contracts(ii)
Commodity contracts(ii)

Fair value hedges
Commodity contracts(ii)
Derivatives not designated in a

formal hedging relationship

Interest rate swaps
Foreign exchange contracts(ii)
Commodity contracts(ii)

Total fair value
Current(iii)
Non-current

Total fair value

2016

2015

Notional
(i)
amount

Fair value

Asset

Liability

Notional
amount(i)

Fair value

Asset

Liability

$ 182,696

348

$ 1,019

$ 101,768

258

$ 3,740

—

16,292

—

457

44,738

— $

848

40,128

$ 1,746

—

$ 520,000

$ 2,128

$ 5,893

$ 520,000

$ 5,078

$ 12,798

450,259

537,621

11,248

13,113

670

—

161,456

197,205

2,587

3,119

921

2,226

$ 26,837

$ 8,430

$ 26,837

$ 8,430

—

$ 26,837

$ 8,430

$ 12,788

$ 20,142

$ 10,265

$ 13,662

2,523

6,480

$ 12,788

$ 20,142

(i) Unless otherwise stated, notional amounts are stated at the contractual Canadian dollar equivalent.
(ii) Derivatives are short-term and will impact profit or loss at various dates within the next 12 months.
(iii) As at December 31, 2016, the above fair value of current assets has been reduced on the consolidated balance sheet by

an amount of $3.4 million (2015: reduced by $1.6 million), which represents the excess of the fair market value of
exchange traded commodities contracts over the initial margin requirements. The excess or deficit in maintenance margin
requirements with the futures exchange is net settled in cash each day and is therefore presented as cash and cash
equivalents.

The fair value of financial assets and liabilities classified as loans and receivables and other financial liabilities (excluding long-
term debt) approximate their carrying value due to their short-term nature.

The carrying value of long-term debt as at December 31, 2016 and 2015 approximates its fair value. The fair value of the
Company’s long-term debt has been classified as Level 2 in the fair value hierarchy and was estimated based on discounted
future cash flows using current rates for similar financial instruments subject to similar risks and maturities.

Financial assets and liabilities classified as held-for-trading are recorded at fair value. The fair values of the Company’s
interest rate and foreign exchange derivative financial instruments were estimated using current market measures for interest
rates and foreign exchange rates. Commodity futures and commodity options contracts are exchange-traded and over-the-
counter. Fair value is determined based on exchange prices and other observable market data.

Derivatives not designated in a formal hedging relationship are classified as held-for-trading. Net gains and losses on financial
instruments held-for-trading consist of realized and unrealized gains and losses on derivatives that were de-designated or
were otherwise not in a formal hedging relationship.

For the year ended December 31, 2016, the Company recorded a gain of $43.7 million (2015: gain of $32.4 million) on
financial instruments held for trading. The gain was mainly attributed to a gain in commodity exchange traded contracts which
hedge and offset price risk volatility inherent in the hog operational business.

For the year ended December 31, 2016, the pre-tax amount of hedge ineffectiveness recognized in other income (expense)
was a loss of $0.0 million (2015: gain of $0.1 million).

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

The table below sets out fair value measurements of financial instruments using the fair value hierarchy as at December 31,
2016:

($ thousands)

Assets:

Foreign exchange contracts

Commodity contracts

Interest rate swaps

Liabilities:

Foreign exchange contracts

Commodity contracts

Interest rate swaps

Level 1

Level 2

Level 3

Total

—

$ 11,596

12,341

—

772

2,128

$ 12,341

$ 14,496

—

848

—

$ 1,689

—

5,893

848

$ 7,582

—

$ 11,596

13,113

2,128

$ 26,837

$ 1,689

848

5,893

$ 8,430

There were no transfers between levels for the year ended December 31, 2016. Determination of fair value and the resulting
hierarchy requires the use of observable market data whenever available. The classification of a financial instrument in the
hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. For financial instruments
that are recognized at fair value on a recurring basis, the Company determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorization at the end of each reporting period.

Capital

The Company’s objective is to maintain a cost effective capital structure that supports its long-term growth strategy and
maximizes operating flexibility. In allocating capital to investments to support its earnings goals, the Company establishes
internal hurdle return rates for capital initiatives. Capital projects are generally financed with internal cash flows and senior
debt where required.

The Company typically uses leverage in its capital structure to reduce the cost of capital. The Company’s goal is to maintain its
primary credit ratios and leverage at levels that are designed to provide continued access to investment-grade credit pricing
and terms. The Company measures its credit profile using a number of metrics, some of which are non-IFRS measures,
primarily Net Cash (Debt) to EBITDA, and interest coverage. Refer to the section entitled Non-IFRS Financial Measures
starting on page 27 of this document for more information on the non-IFRS measures.

In addition to senior debt, credit facilities, and equity, the Company uses leases and very limited recourse accounts receivable
securitization programs as additional sources of financing.

The Company has maintained a stable dividend distribution that is based on a long-term sustainable net earnings base. From
time to time, the Company has purchased shares for cancellation pursuant to normal course issuer bids and to satisfy awards
under its Share Incentive Plan.

Credit Risk

Credit risk refers to the risk of losses due to failure of the Company’s customers and counterparties to meet their payment
obligations.

In the normal course of business, the Company is exposed to credit risk from its customers, substantially all of which are in the
retail, food service, industrial, and convenience channels. The Company performs ongoing credit evaluations of new and
existing customers’ financial condition, and reviews the collectibility of its trade accounts receivable and other receivables in
order to mitigate any possible credit losses. The Company has accounts receivable outstanding greater than 60 days past due
and maintains an allowance for doubtful accounts relating to specific losses estimated on individual exposures as described in
Note 5 of the Company's 2016 audited consolidated financial statements. Average accounts receivable days sales outstanding
for the year is consistent with historic trends.

Management believes concentrations of credit risk with respect to accounts receivable is limited due to the generally high
credit quality of the Company’s major customers, the large number and geographic dispersion of smaller customers, and the
operation of the accounts receivable securitization facility as mentioned previously. The Company does, however, conduct a
significant amount of business with a small number of large grocery retailers.

During the year ended December 31, 2016, the Company reported sales to one customer representing 13.2% (2015: 14.0%)
of total sales. No other sales were made to any one customer that represented in excess of 10% of total sales.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

The Company is exposed to credit risk on its notes receivable from an unconsolidated structured entity in respect of the
accounts receivable securitization program as described in Note 23 of the Company's 2016 audited consolidated financial
statements. Management believes that this credit risk is limited by the long-term AA- debt rating held by the financial institution
financing the third party trust. The Company is exposed to credit risk on its cash and cash equivalents (comprising primarily of
deposits with Canadian chartered banks) and non-exchange-traded derivative contracts. The Company mitigates this credit
risk by transacting primarily with counterparties that are major international financial institutions with long-term debt ratings of A
or higher. The Company’s maximum exposure to credit risk at the balance sheet date consisted primarily of the carrying value
of non-derivative financial assets and non-exchange-traded derivatives with positive fair values.

Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.

The Company manages liquidity risk by monitoring forecasted and actual cash flows, minimizing reliance on any single source
of credit, maintaining sufficient undrawn committed credit facilities and managing the maturity profiles of financial assets and
financial liabilities to minimize re-financing risk.

As at December 31, 2016, the Company had available undrawn committed credit of $393.8 million (2015: $139.7 million)
under the terms of its principal banking arrangements (refer to Note 13 of the Company's 2016 audited consolidated financial
statements). These banking arrangements are subject to certain covenants and other restrictions.

Market Risk

Interest Rate Risk

Interest rate risk refers to the risk that the value of a financial instrument or cash flows associated with the instrument will
fluctuate due to changes in market interest rates.

The Company’s interest rate risk arises from long-term borrowings issued at fixed rates that create fair value interest rate risk
and variable rate borrowings that create cash flow interest rate risk. In addition, the Company’s cash balances are typically
invested in short-term interest bearing assets.

At December 31, 2016 and 2015, the Company had no variable rate debt, however, the Company is exposed to floating
interest rates on its accounts receivable securitization program. As at December 31, 2016, the amount serviced pursuant to
this program was $84.5 million at a weighted average interest rate of 1.0% (2015: $91.5 million at a weighted average interest
rate of 1.6%). The maximum amount available to the Company under these programs is $110.0 million (2015: $110.0 million).

As at December 31, 2016, 10.5% (2015: 10.4%) of the Company’s outstanding debt and revolving accounts receivable
securitization program were not exposed to interest rate movements.

As at December 31, 2016, the Company had fixed-rate debt of $9.9 million (2015: $10.7 million) with a weighted average
notional interest rate of 4.3% (2015: 4.4%). Changes in market interest rates cause the fair value of long-term debt with fixed
interest rates to fluctuate but do not affect net earnings, as the Company’s debt is carried at amortized cost and the carrying
value does not change as interest rates change.

Foreign Exchange Risk

Foreign exchange risk refers to the risk that the value of financial instruments or cash flows will fluctuate due to changes in
foreign exchange rates.

The Company’s foreign exchange risk arises primarily from transactions in currencies other than Canadian dollars, US dollar-
denominated borrowings, and investments in foreign operations.

Commodity Price Risk

The Company is exposed to price risk related to commodities such as live hogs, fuel costs, and purchases of certain other
agricultural commodities used as raw materials, including feed grains. The Company may use fixed price contracts with
suppliers as well as exchange-traded and over-the-counter futures and options to manage its exposure to price fluctuations on
operating results.

Derivatives designated as a hedge of an anticipated or forecasted transaction are accounted for either as cash flow or fair
value hedges and are managed within the Company’s hedge accounting portfolio.

The Company applies the “own use exception” classification to certain contracts that are entered into for the purpose of
procuring commodities to be used in production and are not recognized on the balance sheet until delivery.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

For a comprehensive discussion on the Company’s risk management practices and derivative exposures, please refer to Note
17 of the Company's 2016 audited consolidated financial statements.

SHARE CAPITAL

As at December 31, 2016 there were 132,625,089 voting common shares issued and outstanding (2015: 135,058,974). As at
February 15, 2017, there were130,968,189 common shares issued and outstanding.

In each of the quarters of 2016, the Company declared and paid cash dividends of $0.09 per voting common share,
representing a total annual dividend of $0.36 per voting common share and aggregate dividend payments of $48.3 million. In
each of the quarters of 2015, the Company declared and paid cash dividends of $0.08 per voting common share, representing
a total annual dividend of $0.32 per voting common share and aggregate dividend payments of $44.7 million.

OTHER MATTERS

On February 21, 2017, the Board of Directors approved an increase in the quarterly cash dividend to $0.11 per share, $0.44
per share on an annual basis, from $0.09 per share, payable March 31, 2017, to shareholders of record at the close of
business on March 10, 2017. Unless indicated otherwise by the Company in writing at or before the time the dividend is paid,
the dividend will be considered an Eligible Dividend for the purposes of the “Enhanced Dividend Tax Credit System”.

EMPLOYEE BENEFIT PLANS

The cost of pensions and other post-retirement benefits earned by employees is actuarially determined using the projected
unit credit method calculated on service and Management’s best estimate of salary escalation, retirement ages of employees
and expected health care costs. Management employs external experts to advise it when deciding upon the appropriate
estimates to use to value employee benefit plan obligations and expenses. These estimates are determined at the beginning
of each year and re-evaluated if changes in estimates and market conditions indicate that there may be a significant effect on
the Company’s consolidated financial statements.

During 2016, the Company recorded a pre-tax gain of $63.2 million through other comprehensive income (loss) related to the
re-measurement of plan assets and liabilities. This included $55.7 million of pre-tax returns on plan assets in excess of the
discount rate and a pre-tax gain of $12.5 million related to differences between plan experience compared to actuarial
assumptions.

During 2015, the Company recorded a pre-tax gain of $0.5 million through other comprehensive income (loss) related to the
re-measurement of plan assets and liabilities. This includes $1.4 million of pre-tax returns on plan assets in excess of the
discount rate, which was offset by a pre-tax loss of $0.8 million related to differences between plan experience compared to
actuarial assumptions.

The Company operates both defined contribution and defined benefit plans. The assets of the defined benefit plans are
invested primarily in foreign and domestic fixed income and equity securities that are subject to fluctuations in market prices.
Discount rates used to measure plan liabilities are based on long-term market interest rates. Fluctuations in these market
prices and rates can impact pension expense and funding requirements. In 2016, the investment return before expenses on
the Company's defined benefit pension plan assets was 9.4% in 2016 compared to 3.9% in 2015.

The Company's contributions are funded through cash flows generated from operations. Management anticipates that future
cash flows from operations will be sufficient to fund expected future cash contributions. Contributions to defined benefit plans
during 2016 were $5.2 million (2015: $5.2 million).

The Company expects to contribute $31.1 million to the pension plans in 2017, inclusive of defined contribution and multi-
employer plans.

TRANSACTIONS WITH RELATED PARTIES

Transactions between the Company and its consolidated entities have been eliminated in the Company's 2016 audited
consolidated financial statements.

The Company sponsors a number of defined benefit and defined contribution plans. During the year ended December 31,
2016, the Company's contributions to these plans were $9.3 million (2015: $9.6 million).

Key management personnel are those persons having authority and responsibility for planning, directing, and controlling the
activities of the Company and/or its subsidiary, directly or indirectly, including any external director of the Company and/or its
subsidiary.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

Remuneration of key management personnel of the Company is comprised of the following expenses:

($ thousands)

Short-term employee benefits

Salaries, bonuses, and fees

Company car allowances

Other benefits

Total short-term employee benefits

Severance benefits

Post-employment benefits

Share-based compensation

Total remuneration

2016

2015

$ 13,084

$ 7,052

288

147

274

256

$ 13,519

$ 7,582

—

840

12,596

476

782

8,811

$ 26,955

$ 17,651

During the year ended December 31, 2016, key management personnel of the Company exercised 0.1 million (2015: 0.1
million) share options granted under the Maple Leaf Foods Share Incentive Plan for an amount of $1.3 million (2015: $1.7
million).

The Company’s largest shareholder is McCain Capital Inc. (“MCI”) which is beneficially owned and controlled by Mr. Michael
H. McCain, Chief Executive Officer and President of the Company. For the year ended December 31, 2016, the Company
received services from MCI in the amount of $0.6 million (2015: $0.4 million), which represented the market value of the
transactions with MCI. As at December 31, 2016, $0.2 million (2015: $0.0 million) was owing to MCI relating to these
transactions.

McCain Financial Advisory Services ("MFAS"), is an entity jointly controlled by individuals including Mr. Michael H. McCain. For
the year ended December 31, 2016, the Company provided services to MFAS for a nominal amount which represented the
market value of the transactions.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

SUMMARY OF QUARTERLY RESULTS

The following is a summary of unaudited quarterly financial information for each quarter in the last three fiscal years:

($ millions except earnings per share)

(i)

Sales

Net earnings (loss) from continuing

operations

(i)

Net earnings (loss)

Earnings (loss) per share from continuing

(i)

operations
Basic(ii)

Diluted(ii)

Adjusted EPS(ii)(iii)

Earnings (loss) per share

(ii)

Basic(ii)

Diluted(ii)

First
Quarter

$ 796.9

780.2

711.3

Second
Quarter

$ 854.6

820.8

831.8

Third
Quarter

$ 852.1

818.8

820.1

Fourth
Quarter

(iv)

Total

$ 828.2

$ 3,331.8

873.1

794.0

3,292.9

3,157.2

$ 42.3

$ 31.4

$ 31.8

$ 76.2

$ 181.7

(2.9)

(124.6)

$ 42.3

(2.9)

(132.0)

(7.5)

(39.5)

18.7

(26.7)

33.3

(23.0)

41.6

(213.8)

$ 31.4

$ 31.8

$ 76.2

$ 181.7

(7.5)

898.9

18.7

(26.8)

33.3

(28.2)

41.6

711.9

$ 0.31

$ 0.23

$ 0.24

$ 0.57

(0.02)

(0.89)

(0.05)

(0.28)

0.13

(0.19)

0.24

(0.16)

$ 0.31

$ 0.23

$ 0.56

(0.02)

(0.89)

(0.05)

(0.28)

0.13

(0.19)

0.24

(0.16)

$ 0.28

$ 0.32

$ 0.31

0.05

(0.24)

0.13

(0.12)

0.16

(0.12)

0.25

(0.08)

$ 0.31

$ 0.23

$ 0.24

$ 0.57

(0.02)

(0.95)

(0.05)

6.38

0.13

(0.19)

0.24

(0.20)

$ 0.31

$ 0.23

$ 0.56

(0.02)

(0.95)

(0.05)

6.38

0.13

(0.19)

0.24

(0.20)

1.35

0.30

(1.51)

1.32

0.29

(1.51)

1.23

0.58

(0.56)

1.35

0.30

5.03

1.32

0.29

5.03

2016

2015

2014

2016

2015

2014

2016

2015

2014

2016

2015

2014

2016

2015

2014

2016

2015

2014

2016

2015

2014

2016

2015

2014

(i) Figures exclude discontinued operations.
(ii) Basic and diluted earnings (loss) per share, earnings (loss) per share from continuing operations and Adjusted Earnings

(loss) per Share from continuing operations are based on amounts attributable to common shareholders.

(iii) Refer to Non-IFRS Financial Measures starting on page 27 of this document.
(iv) May not add due to rounding.

Fluctuations in quarterly sales can be attributed to changes in pricing, volume, sales mix and foreign exchange rates.

Fluctuations in quarterly net earnings can be attributed to similar factors as noted above, pork and poultry industry processing
margins, restructuring and other related costs, operating efficiencies, changes in the fair value of derivative and non-derivative
financial instruments and biological assets, and transitional costs incurred prior to 2016.

For an explanation and analysis of quarterly results, please refer to the Company’s Management’s Discussion and Analysis for
each of the respective quarterly periods which are filed on SEDAR and also available on the Company’s website at
www.mapleleaffoods.com.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

SUMMARY OF 2016 FOURTH QUARTER RESULTS

The following is a summary of sales by business segment:

($ millions)
(Unaudited)

Meat Products Group
Agribusiness Group

Total Sales

The following is a summary of Adjusted Operating Earnings by business segment:

($ millions)
(Unaudited)

Meat Products Group
Agribusiness Group

Adjusted Operating Earnings

(i) May not add due to rounding.

(i)

2016

Fourth Quarter
2015(i)

$ 824.4

$ 868.5

3.7

4.6

$ 828.2

$ 873.1

Change

(5.1)%

(18.2)%

(5.1)%

Fourth Quarter

(i)

2016

$ 73.5

2015(i)
$ 54.6

Change(i)
$ 18.9

(9.8)

(6.9)

(2.9)

$ 63.7

$ 47.8

$ 16.0

Sales of $828.2 million for the fourth quarter of 2016 decreased 5.1% from prior year, or 5.8% after adjusting for the impacts of
foreign exchange. Excluding only the contribution of the 53rd week in 2015, sales increased by approximately 2.0%.

Adjusted EBITDA margin was 10.4% in the fourth quarter of 2016 compared to 8.7% in 2015; and 11.6% in the current quarter
before $9.9 million of additional variable compensation expenses. This related to the over-achievement of performance targets
for incentive programs. Approximately 1,400 employees participate in these multi-year programs.

Adjusted Operating Earnings for the fourth quarter of 2016 were $63.7 million compared to $47.8 million in the prior year.
Margins in prepared meats improved due to lower operating costs across the network. Fresh pork earnings were higher than
the prior year due to stronger margins in the value-added retail and export channels, higher industry margins, and operating
efficiency gains. Earnings in fresh poultry declined slightly as industry processor margins receded from record levels in the
fourth quarter of 2015.

Earnings in the Agribusiness Group declined slightly due to lower hog prices, which was not fully offset by the Company's risk
management program.

Selling, general and administrative expenses for the fourth quarter increased to $89.4 million (10.8% of sales), from $63.6
million (7.3% of sales) in the prior year. This increase largely reflects differences in variable compensation programs linked to
Company performance. At Maple Leaf Foods, variable compensation programs are linked to financial results. In 2015, targets
were not achieved and accordingly the variable compensation was reduced, while the targets were exceeded in 2016,
resulting in an increase in variable compensation.

Adjusted Earnings per Share in the fourth quarter of 2016 was $0.31 compared to $0.25 in the prior year. Net earnings for the
fourth quarter was $76.2 million ($0.57 per share) compared to $33.3 million ($0.24 per share) in the prior year.

SEASONALITY

The Company is sufficiently large and diversified that seasonal factors within each operation and business tend to offset each
other; therefore, in isolation, they do not have a material impact on the Company’s consolidated earnings. For example, in
general, pork processing margins tend to be higher in the last half of the year when hog prices historically decline and, as a
result, earnings from hog production operations tend to be lower. Strong demand for grilled meat products positively affects the
fresh and prepared meats operations in the summer, while back-to-school promotions support increased sales of sliced meats
and lunch items in the fall. Higher demand for turkey and ham products occurs in the spring and fourth quarter holiday
seasons.

ENVIRONMENT

Maple Leaf Foods is committed to maintaining high standards of environmental responsibility and positive relationships in the
communities where it operates. It operates within the framework of an environmental policy entitled “Our Environmental
Commitment” that is approved by the Board of Directors’ Safety and Sustainability Committee ("Committee").

The Company’s environmental program is monitored on a regular basis by the Committee, including compliance with
regulatory requirements and the use of internal environmental specialists and independent, external environmental experts.
The Company continues to invest in environmental infrastructure related to water, waste, and air emissions to ensure that

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

environmental standards continue to be met or exceeded, while implementing procedures to reduce the impact of operations
on the environment. In the fourth quarter of 2016, the Company announced the closure of its Thamesford, Ontario turkey
facility. All environmental assessments required to ensure that potential environmental matters are appropriately addressed
during decommissioning activities will be completed.

Expenditures related to current environmental requirements are not expected to have a material effect on the financial position
or earnings of the Company. However, there can be no assurance that certain events will not occur that will cause
expenditures related to the environment to be significant and have a material adverse effect on the Company’s financial
condition or results of operations. Such events could include, but not be limited to, additional environmental regulation or the
occurrence of an adverse event at one of the Company’s locations. The Company currently has a provision of $8.2 million
related to expected environmental remediation costs, please refer to Note 12 of the Company's 2016 audited consolidated
financial statements for additional information.

As a large food company there are health, environmental, and social issues that go beyond short-term profitability that
Management believes must shape its business if the Company is to realize a sustainable future. Increasingly, moving beyond
compliance to materially reducing the Company's environmental footprint is critical to addressing mounting environmental
issues and realizing increased operating efficiencies and cost reductions. In 2015, the Company announced a goal to reduce
its environmental footprint by 50% by 2025 in three key areas: climate change, water usage and waste reduction. Performance
against the goal is communicated in the Company’s annual Sustainability Report. The Company has completed energy, water
and waste audits to benchmark its current footprint and has developed plans to deliver on its environmental goals.

RISK FACTORS

The Company operates in the food processing and agricultural businesses, and is therefore subject to risks and uncertainties
related to this business that may have adverse effects on the Company’s results of operations and financial condition. The
following risk factors should be considered carefully. These risk factors, along with other risks and uncertainties not currently
known to the Company, or that the Company currently considers immaterial, could materially and adversely affect the
Company’s future operating results and could cause actual events to differ materially from those described in forward-looking
information, including any financial outlooks, relating to the Company.

Risks Related to the Business of Maple Leaf Foods

Focus on Protein Business

In 2013 and 2014, the Company sold its non-protein operations including potato products, rendering services and bakery
operations. The Company is now primarily a protein business and as a result it is possible that earnings volatility may increase
and synergies and economies of scale will be lost. Each of these factors may have a material adverse effect on the Company’s
financial condition and results of operations.

Risk of Returning or not Returning Capital to Shareholders

The Company has retained funds realized on the sales of its potato products, rendering services and bakery operations after
the repayment of debt. In 2015 and 2016, the Company initiated normal course issuer bids for 8.65 million and 8.70 million of
its common shares, respectively. At the end of 2016 a total of 10.8 million shares have been repurchased at an aggregate cost
of $255.0 million. There can be no assurance that the Company will continue share repurchases under the bid or return any
further funds to shareholders. In addition, if funds are returned to shareholders, there can be no assurance as to the exact
mechanism by which such funds will be returned to shareholders. Furthermore, a return of funds or a failure to return funds to
shareholders may have a material adverse effect on the Company’s share price.

Value Creation Plan

The Plan announced in October 2010 was complex, lengthy, and transformational. Under the Plan, the Company constructed
one large-scale manufacturing facility, closed eight plants and expanded three others. The Company also reconfigured its
distribution systems into two large distribution centers. The Plan is substantially complete and although the Company has
reached its projected level of profitability on an overall basis in 2016 work still remains to fully optimize the operations.

There can be no assurance that the Company will be successful in sustaining the full benefits of the Plan or achieving any
further benefits.

As a result of these initiatives, the Company’s operations are more concentrated in fewer facilities resulting in the risk that any
unforeseen disruption in such facilities could have a greater effect on the operations of the Company as a whole.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

Leverage and Availability of Capital

The ability of the Company to secure short-term and long-term financing on terms acceptable to the Company is critical to fund
business growth and manage its liquidity. The ability to secure such additional capital on commercially favourable and
acceptable terms will, in part be determined by sustaining the full financial objectives of the Plan. The failure or inability of the
Company to secure short-term and long-term financing in the future on terms that are commercially reasonable and
acceptable to the Company could have a significant impact on the Company’s opportunity for growth. Even if the Company
does successfully raise additional capital when needed, if it issues equity securities, investors will be diluted, and if it raises
additional debt, it will be further leveraged and could be subject to restrictive covenants, such as restrictions on paying
dividends or being required to pledge assets.

Systems Conversion, Standardization and Common Systems

The Company regularly implements process improvement initiatives to simplify and harmonize its systems and processes to
optimize performance and reduce the risk of errors in financial reporting. There cannot be any guarantee that any such
changes will improve current processes or operating results or reduce the risk of errors in financial reporting. Any of these
failures could have a material adverse impact on the Company’s financial condition and results of operations.

Cyber Security

The Company relies on information technology systems in all areas of operations. These systems are subject to an increasing
number of sophisticated cyber threats. The methods used to obtain unauthorized access, disable or degrade service or
sabotage systems are constantly evolving. Should a cyber-attack be successful and a breach of sensitive information occur or
its systems and services be disrupted, Maple Leaf Food’s financial position, brand, and/or ability to achieve its strategic
objectives may be negatively affected.

The Company maintains policies, processes, and procedures to address capabilities, performance, security, and availability
including resiliency and disaster recovery for systems, infrastructure, and data. Security protocols, along with information
technology security policies, address compliance with information technology security standards, including those relating to
information belonging to the Company’s customers, employees and suppliers. The Company actively monitors, manages, and
continues to enhance its ability to mitigate cyber risk through its enterprise wide programs. There is no assurance that any of
these measures will be successful however.

Food Safety and Consumer Health

The Company is subject to risks that affect the food industry in general, including risks posed by food spoilage, accidental
contamination, product tampering, consumer product liability, and the potential costs and disruptions of a product recall. The
Company’s products are susceptible to contamination by disease-producing organisms, or pathogens, such as E. coli,
salmonella and listeria. There is a risk that these pathogens could be present in the Company’s products. The Company
actively manages these risks by maintaining strict and rigorous controls and processes in its manufacturing facilities and
distribution systems and by maintaining prudent levels of insurance. However, the Company cannot assure that such systems,
even when working effectively, will eliminate the risks related to food safety. The Company could be required to recall certain of
its products in the event of contamination or adverse test results or as precautionary measures, similar to other recalls initiated
in the past. There is also a risk that not all of the product subject to the recall will be properly identified, or that the recall will
not be successful or not be enacted in a timely manner. Any product contamination could subject the Company to product
liability claims, adverse publicity and government scrutiny, investigation or intervention, resulting in increased costs and
decreased sales. Many of these costs and losses are not covered by insurance. Any of these events could have a material
adverse impact on the Company’s financial condition and results of operations.

Business Acquisitions, Divestitures, and Capital Expansion Projects

While the Company’s focus has been integration of existing operations and supply chain optimization, the Company continues
to review opportunities for strategic growth through acquisitions. Any acquisitions may involve large transactions or
realignment of existing investments, and present financial, managerial and operational challenges, which, if not successfully
overcome, may reduce the Company’s profitability. These risks include: the diversion of Management’s attention from existing
core businesses; difficulties integrating or separating personnel, financial, and other systems; adverse effects on existing
business relationships with suppliers and customers; inaccurate estimates of the rate of return on acquisitions or investments;
inaccurate estimates of fair value made in the accounting for acquisitions and amortization of acquired intangible assets, which
could reduce future reported earnings; potential loss of customers or key employees of acquired businesses; and indemnities
and potential disputes with the buyers or sellers. Any of these items could materially adversely affect the Company’s financial
condition and results of operations.

The Company may, from time to time, determine that certain aspects of its operations are not required to be owned to support
its core business operations and may seek to sell an operation if it believes it can realize sufficient value from its sale. Such a
sale may divert Management’s attention from existing core businesses during the sale process, create difficulties in separating
personnel, financial, and other systems, and cause adverse effects on existing business relationships with suppliers and

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

customers. Any of these items could materially adversely affect the Company’s financial condition and result in a reduction of
earnings beyond the earnings of any operation to be sold.

Pension Plan Assets and Liabilities

In the normal course of business, the Company provides post-retirement pension benefits to its employees under both defined
contribution and defined benefit pension plan arrangements. The funded status of the plans significantly affects the net
periodic benefit costs of the Company’s pension plans and the ongoing funding requirements of those plans. Among other
factors, changes in interest rates, mortality rates, early retirement rates, and the market value of plan assets can affect the
level of plan funding required, increase the Company’s future funding requirements, and cause volatility in the net periodic
pension cost as well as the Company’s financial results. Any increase in pension expense or funding requirements could have
a material adverse impact on the Company’s financial condition and results of operations.

Hog and Pork Market Cyclicality and Supply

The Company’s results of operations and financial condition are partially dependent upon the cost and supply of hogs as well
as the selling prices for fresh meat products, both of which are influenced by constantly changing market forces of supply and
demand over which the Company has little or no control. These prices, for the most part, are denominated in or related to U.S.
dollars, which adds further variability due to fluctuations in exchange rates. The North American primary pork processing
markets are highly competitive, with major and regional companies competing in each market. The market prices for pork
products regularly experience periods of supply and demand imbalance and are sensitive to changes in industry processing
capacity. Other factors that can influence the supply and market price of live hogs include: fluctuations in the size of herds
maintained by North American hog suppliers; environmental and conservation regulations; economic conditions; the relative
cost of feed for hogs; weather; livestock diseases; and changes to foreign jurisdiction restrictions on drugs, vitamin and feed
additives used in hogs raised in Canada. There can be no assurance that all or part of any such increased costs experienced
by the Company from time to time can be passed along to consumers of the Company’s products directly or in a timely
manner or that meat restricted from certain foreign markets can be sold at acceptable prices. The factors described above
may also impact the supply of hogs available for processing at the Company’s pork processing plants by negatively impacting
the financial strength of the various independent farming operations upon which the Company relies to meet its requirements
for hogs. Any of these could have a material adverse effect on the Company's financial condition and results of operations.

Livestock

The Company’s operations and the demand for the Company’s products can be significantly affected by outbreaks of disease
among livestock, or attributed to livestock whether it occurs within the Company’s production operations or in the operations of
third parties.

The Company monitors herd health status and has strict bio-security procedures and employee training programs throughout
its hog production system and ensures the animals receive veterinary medications as required. However, there is no
guarantee these processes will not fail. In addition, not all livestock procured by the Company may be subject to these
processes, as the majority of hog and poultry livestock processed by the Company is purchased from independent third
parties. In addition to risks associated with maintaining the health of the Company’s livestock, any outbreak of disease
elsewhere in the world could reduce consumer confidence in the meat products affected by the particular disease and
generate adverse publicity. Accordingly, there can be no assurance that an outbreak of animal disease in Canada or elsewhere
will not have a material adverse effect on the Company’s financial condition and results of operations.

The Company is increasing its sales of raised without antibiotic meat products and in turn expanding the portion of its hog
supply raised without antibiotics. Animals raised without antibiotics have a higher cost of production and command higher
prices. If the Company fails to find markets or buyers willing to pay the premium price for all the raised without antibiotic meat
produced, a portion of the higher cost meat will be sold through lower price conventional channels.

The Company has developed a comprehensive internal contingency plan for dealing with animal disease occurrences and/or a
more broad-based pandemic. It has taken steps to support the Canadian government in enhancing both the country’s
prevention measures and preparedness plans. There can be no assurance, however, that these prevention measures or plans
will be successful in minimizing or containing the impact of an outbreak of animal disease and that such outbreak will not have
a material adverse effect on the Company’s financial condition and results of operations. Furthermore, the Company’s supply
of raised without antibiotic meats may be at a greater risk supply disruption in the event of an animal disease outbreak.

Foreign Currencies

A portion of the Company’s revenues and costs are either denominated in or directly linked to other currencies (primarily U.S.
dollars and Japanese yen). In periods when the Canadian dollar has appreciated both rapidly and materially against these
foreign currencies, revenues linked to U.S. dollars or Japanese yen are immediately reduced, while the Company’s ability to
change prices or realize natural hedges may lag the immediate currency change. The effect of such sudden changes in
exchange rates can have a significant immediate impact on the Company’s earnings. Due to the diversity of the Company’s
operations, normal fluctuations in other currencies do not generally have a material impact on the Company’s profitability in the

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

short term due to either natural hedges and offsetting currency exposures (for example, when revenues and costs are both
linked to other currencies) or the ability in the near term to change prices of its products to offset adverse currency
movements. However, as the Company competes in international markets, and faces competition in its domestic markets from
U.S. competitors, significant changes in the Canadian to U.S. dollar exchange rate can have, and have had, significant effects
on the Company’s relative competitiveness in its domestic and international markets, which can have, and have had,
significant effects on the Company’s financial condition and results of operations.

Commodities

The Company is a purchaser of, and its business is dependent on, certain commodities in the course of normal operations,
such as feed grains, livestock, and energy, such as oil-based fuel, natural gas, and electricity. Commodity prices are subject to
fluctuation and such fluctuations are sometimes severe. The Company may use commodity futures and options for hedging
purposes to reduce the effect of changing prices in the short term, but such hedges may not be successful in mitigating this
commodity price risk and may, in some circumstances, subject the Company to loss. On a longer-term basis, the Company
attempts to manage the risk of increases in commodities and other input costs by increasing the prices it charges to its
customers; however, no assurance can be given that customers will continue to purchase the Company’s products if prices
rise. Any fluctuations in commodity prices that the Company is unable to properly hedge or mitigate could have a material
adverse effect on the Company’s financial condition and results of operations.

Supply Management

Under Canada’s system of supply management, the Company’s poultry operations are required to source substantially all live
poultry for processing from Canadian farms which are collectively subject to restrictions on production under a quota system.
Furthermore, the price at which the live poultry is available is also controlled. The supply management system may limit the
availability of live poultry for processing impeding the Company’s growth in the market or could create a circumstance where
excesses impact the price of poultry meat without a corresponding adjustment to the controlled live poultry price. Furthermore,
any dismantling of the supply management system could have negative effect on individual producers and disrupt the
availability of live poultry in Canada. In that event, the Company may not be able to find alternative source of live supply which
could have a material adverse effect on the Company’s financial condition and results of operations.

Reliance on Other Manufacturers

The company relies on contract manufacturers for production of some of it products for reasons such as, seasonal peak
demand, unavailability of specialized equipment, or efficiency in the case of low volume product lines. Acceptable contract
manufacturers may not always be available which could result in higher production costs, additional capital requirements or
lost sales. While the Company maintains a strict quality and food safety protocol and monitoring regime, any deficiencies could
result in product liability, recalls or other consequence that could negatively impact the Company’s reputation and could have a
material adverse effect on the Company’s financial condition and results of operations.

International Trade

The Company exports significant amounts of its products to customers outside of Canada and certain of its inputs are affected
by global commodity prices. The Company’s international operations are subject to inherent risks, including: change in the free
flow of food products between countries; fluctuations in currency values; discriminatory fiscal policies; unexpected changes in
local regulations and laws; and the uncertainty of enforcement of remedies in foreign jurisdictions. In addition, foreign
jurisdictions could impose tariffs, quotas, trade barriers, and other similar restrictions on the Company’s international sales, as
well as subsidize competing agricultural products. All of these risks could result in increased costs or decreased revenues,
either of which could have a material adverse effect on the Company’s financial condition and results of operations.

Regulation

The Company’s operations are subject to extensive regulation by government agencies in the countries in which it operates,
including: the Canadian Food Inspection Agency; the Ministry of Agriculture in Canada; provincial Ministries of the Environment
in Canada; and the United States Department of Agriculture. These agencies regulate the processing, packaging, storage,
distribution, advertising, and labeling of the Company’s products, including food safety standards. The Company’s
manufacturing facilities and products are subject to inspection by federal, provincial, and local authorities. The Company
strives to maintain compliance with all laws and regulations and maintains all permits and licenses relating to its operations.
Nevertheless, there can be no assurance that the Company is in compliance with such laws and regulations, has all necessary
permits and licenses, and will be able to comply with such laws and regulations, permits and licenses in the future. Failure by
the Company to comply with applicable laws and regulations and permits and licenses could subject the Company to civil
remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, which could have a material
adverse effect on the Company’s financial condition and results of operations. Various governments throughout the world are
considering regulatory proposals relating to genetically modified organisms, drug residues in food ingredients, food safety, and
market and environmental regulation that, if adopted, may increase the Company’s costs. There can be no assurance that
additional regulation will not be enacted. In fact, new regulations and standards were enacted to address the risks associated
with certain pathogens in response to the Company’s August 2008 recall of ready-to-eat meat products. If any of these or other

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

proposals or regulations are enacted, the Company could experience a disruption in the supply or distribution of its products,
increased operating costs, and significant additional cost for capital improvements. The Company may be unable to pass on
the cost increases associated with such increased regulatory burden to its customers without incurring volume loss as a result
of higher prices. Any of these events could have a material adverse effect on the Company’s financial condition and results of
operations.

Legal Matters

In the normal course of its operations, the Company becomes involved in various legal actions, either as plaintiff or defendant,
relating to its commercial relationships, employment matters, product liabilities, in addition to other things. The Company
generally believes that the resolution of these claims will not have a material effect on the Company based, in part, on the
availability of insurance. However, the final outcome with respect to actions outstanding, pending or with respect to future
claims cannot be predicted with certainty. Furthermore, even if any action is settled within insurance limits, this can result in
increases to the Company’s insurance premiums. Therefore there can be no assurance that their resolution will not have a
material adverse effect on the Company’s financial condition or results of operations.

Consumer Trends

Success of the Company depends in part on the Company’s ability to respond to market trends and produce innovative
products that anticipate and respond to the changing tastes and dietary habits of consumers. From time to time certain
products are deemed more or less healthy and this can impact consumer buying patterns. The Company’s failure to anticipate,
identify, or react to these changes or to innovate could result in declining demand and prices for the Company’s products,
which in turn could have a material adverse effect on the Company’s financial condition and results of operations.

Environmental Regulation

The Company’s operations are subject to extensive environmental laws and regulations pertaining to the discharge of
materials into the environment and the handling and disposition of wastes (including solid and hazardous wastes) or otherwise
relating to protection of the environment. Failure to comply could have serious consequences, such as criminal as well as civil
penalties, liability for damages, and negative publicity for the Company. No assurances can be given that additional
environmental issues relating to presently known matters or identified sites or to other matters or sites will not require
additional expenditures, or that requirements applicable to the Company will not be altered in ways that will require the
Company to incur significant additional costs. In addition, certain facilities of the Company have been in operation for many
years and, over time, the Company and other prior operators of such facilities may have generated and disposed of waste
which is or may be considered to be hazardous. Future discovery of previously unknown contamination of property underlying
or in the vicinity of the Company’s present or former properties or manufacturing facilities and/or waste disposal sites could
require the Company to incur material unforeseen expenses. Occurrences of any such events could have a material adverse
effect on the Company’s financial condition and results of operations.

Consolidating Customer Environment

As the retail grocery and foodservice trades continue to consolidate and customers grow larger and more sophisticated, the
Company is required to adjust to changes in purchasing practices and changing customer requirements. Failure to do so could
result in losing sales volumes and market share. The Company’s net sales and profitability could also be affected by
deterioration in the financial condition of, or other adverse developments in, the relationship with one or more of its major
customers. Any of these events could have a material adverse effect on the Company’s financial condition and results of
operations.

Competitive Industry Environment

The food industry is intensely competitive. In many product categories in which the Company operates there are low barriers
to entry. Competition is based on product availability, product quality, price, effective promotions, and the ability to target
changing consumer preferences. The Company experiences price pressure from time to time as a result of competitors’
promotional efforts and in product categories and markets characterized by low capacity utilization. Increased competition
could result in reduced sales, margins, profits, and market share, all of which could have a material adverse effect on the
Company’s financial condition and results of operations.

Employment Matters

The Company and its subsidiaries have approximately 11,000 full-time and part-time employees, which include salaried and
union employees, many of whom are covered by collective agreements. These employees are located in various jurisdictions,
each such jurisdiction having differing employment laws. While the Company maintains systems and procedures to comply
with the applicable requirements, there is a risk that failures or lapses by individual managers could result in a violation or
cause of action that could have a material adverse effect on the Company’s financial condition and results of operations.
Furthermore, if a collective agreement covering a significant number of employees or involving certain key employees were to
expire or otherwise cease to have effect leading to a work stoppage, there can be no assurance that such work stoppage
would not have a material adverse effect on the Company’s financial condition and results of operations. The Company’s

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

success is also dependent on its ability to recruit and retain qualified personnel. The loss of one or more key personnel could
have a material adverse effect on the Company’s financial condition and results of operations.

Product Pricing

The Company’s profitability is dependent, in large part, on the Company’s ability to make pricing decisions regarding its
products that, on one hand encourage consumers to buy, yet on the other hand recoup development and other costs
associated with those products. Products that are priced too high will not sell and products priced too low will not generate an
adequate return. Accordingly, any failure by the Company to properly price its products could have a material adverse effect on
the Company’s financial condition and results of operations.

Supply Chain Management

Successful management of the Company’s supply chain is critical to the Company’s success. Insufficient supply of products
threatens the Company’s ability to meet customer demands while over capacity threatens the Company’s ability to generate
competitive profit margins. Accordingly, any failure by the Company to properly manage the Company’s supply chain could
have a material adverse effect on the Company’s financial condition and results of operations.

Strategic Risk Management

Successful identification and management of the strategic risks facing the Company from time to time is critical to the
Company’s success. Among other things, these risks include changes in technology, the food industry, customers, consumers,
and competitors. Failure to properly adapt to changes in strategic risks could have a material adverse effect on the Company’s
financial condition and results of operations.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of consolidated financial statements in accordance with IFRS requires Management to make judgements,
estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,
income, and expenses. Actual amounts may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in
the period in which the estimates are revised and in any future periods affected.

Judgements included in the consolidated financial statements are decisions made by Management, based on analysis of
relevant information available at the time the decision is made. Judgements relate to the application of accounting policies and
decisions related to the measurement, recognition, and disclosure of financial amounts.

Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies, that have
the most significant effects on the amounts recognized in the consolidated financial statements, are included both below and in
the financial statement notes relating to items subject to significant estimate uncertainty and critical judgements.

Long-Lived Assets Valuation

The Company performs impairment testing annually for goodwill and indefinite life intangible assets and, when circumstances
indicate that there may be impairment, for other long-lived assets. Management judgement is involved in determining if there
are circumstances indicating that testing for impairment is required, and in identifying Cash Generating Units (“CGUs”) for the
purpose of impairment testing.

The Company assesses impairment by comparing the recoverable amount of a long-lived asset, CGU, or CGU group to its
carrying value. The recoverable amount is defined as the higher of: (i) value in use; or (ii) fair value less cost to sell.

The determination of the recoverable amount involves significant estimates and assumptions, including those with respect to
future cash inflows and outflows, discount rates, and asset lives. These estimates and assumptions could affect the
Company’s future results if the current estimates of future performance and fair values change. These determinations will
affect the amount of amortization expense on definite life intangible assets recognized in future periods.

Measurement of Fair Values

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and
non-financial assets and liabilities. When the measurement of fair values cannot be determined based on quoted prices in
active markets, fair value is measured using valuation techniques and models. The inputs to these models are taken from
observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair
values. Changes in assumptions about the inputs to these models could affect the reported fair value of the Company’s
financial and non-financial assets and liabilities.

When measuring fair value of an asset or liability, the Company uses market observable data to the extent that it is possible.
To the extent that these estimates differ from those realized, the measured asset or liability, net earnings, and/or
comprehensive income will be affected in future periods.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are
disclosed in Notes 7, 9, 10, 11, and 17 of the Company's 2016 audited consolidated financial statements.

Nature of Interests in Other Entities

Management applies significant judgement in assessing the nature of its interest in unconsolidated structured entities relating
to its accounts receivable securitization facilities. The Company does not hold any equity interest in the structured entities and
based on the terms of the agreements under which the entities are established, the Company does not receive the returns
related to their operations and is exposed to limited recourse with respect to losses (refer to Note 23 of the Company's 2016
audited consolidated financial statements).

Valuation of Inventory

Management makes estimates of the future customer demand for products when establishing appropriate provisions for
inventory. In making these estimates, Management considers the product life of inventory and the profitability of recent sales of
inventory. In many cases, product produced by the Company turns quickly and inventory on-hand values are low, thus
reducing the risk of inventory obsolescence. However, code or “best before” dates are very important in the determination of
net realizable value of inventory. Management ensures that systems are in place to highlight and properly value inventory that
may be approaching code dates. To the extent that actual losses on inventory differ from those estimated, inventory, net
earnings, and comprehensive income will be affected in future periods.

Biological Assets

Biological assets are measured at each reporting date, at fair value less costs to sell, except when fair value cannot be reliably
measured. If fair value cannot be reliably measured, biological assets are measured at cost less depreciation and impairment
losses. Although a reliable measure of fair value may not be available at the point of initial recognition, it may subsequently
become available. In such circumstances, biological assets are measured at fair value less costs to sell from the point at which
the reliable measure of fair value becomes available. Gains and losses that arise on measuring biological assets at fair value
less costs to sell are recognized in the statement of net earnings in the period in which they arise. Costs to sell include all
costs that would be necessary to sell the biological assets, including costs necessary to get the biological assets to market.
Management uses estimates for some of the inputs into the determination of fair value. To the extent that actual values differ
from estimates, biological assets, net earnings and comprehensive income will be affected in future periods.

Trade Merchandise Allowances and Other Trade Discounts

The Company provides for estimated payments to customers based on various trade programs and contracts that often
include payments that are contingent upon attainment of specified sales volumes. Significant estimates used to determine
these liabilities include: (i) the projected level of sales volume for the relevant period and (ii) customer contracted rates for
allowances, discounts, and rebates. These arrangements are complex and there are a significant number of customers and
products affected. Management has systems and processes in place to estimate and value these obligations. To the extent
that payments on trade discounts differ from estimates of the related liability, accounts payable and accruals, net earnings, and
comprehensive income will be affected in future periods.

Employee Benefit Plans

The cost of pensions and other post-retirement benefits earned by employees is actuarially determined using the projected
unit credit method prorated on service, and Management’s best estimate of salary escalation and mortality rates. Discount
rates used in actuarial calculations are based on long-term interest rates and can have a material effect on the amount of plan
liabilities and expenses. Management employs external experts to advise the Company when deciding upon the appropriate
estimates to use to value employee benefit plan obligations and expenses. To the extent that these estimates differ from those
realized, employee benefit plan assets and liabilities and comprehensive income will be affected in future periods.

Significant actuarial assumptions adopted in measuring the Company’s accrued benefit obligations are as follows:

Weighted average discount rate
Rate of salary increase
Medical cost trend rates

2016
3.70%
3.00%
5.00%

2015
3.75%
3.50%
5.00%

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

Information about the sensitivity of the plan obligations to changes in assumptions is presented below:

($ thousands)

Actuarial Assumption

Period end discount rate

Rate of salary increase
Mortality

Increase (decrease) in defined benefit obligation

Sensitivity

3.70% 0.25% decrease

Other post-

Total

retirement

pensions

$ 32,514

benefits

1,357

0.25% increase

$ (31,551)

$ (1,324)

3.00% 0.50% increase
Increase of 1 year
in expected
lifetime of plan
participants

110% of 2014 Private
Sector Canadian
Pensioners' Mortality
Table, projected
generationally using
Scale CPM-B

3,051
$
$ 30,282

N/A
1,836

Total

$ 33,871

$ (32,875)

3,051
$
$ 32,118

Income Taxes

Provisions for income taxes are based on domestic and international statutory income tax rates and the amount of income
earned in the jurisdictions in which the Company operates. Significant judgement is required in determining income tax
provisions and the recoverability of deferred tax assets. The calculation of current and deferred income tax balances requires
Management to make estimates regarding the carrying values of assets and liabilities that include estimates of future cash
flows and earnings related to such assets and liabilities, the interpretation of income tax legislation in the jurisdictions in which
the Company operates, and the timing of reversal of temporary differences. The Company establishes additional provisions for
income taxes when, despite Management’s opinion that the Company’s tax positions are fully supportable, there is sufficient
complexity or uncertainty in the application of legislation that certain tax positions may be reassessed by tax authorities. The
Company adjusts these additional accruals in light of changing facts and circumstances. To the extent that these adjustments
differ from original estimates, deferred tax assets and liabilities, net earnings, and comprehensive income will be affected in
future periods.

Provisions

The Company evaluates all provisions at each reporting date. These provisions can be significant and are prepared using
estimates of the costs of future activities. In certain instances, Management may determine that these provisions are no longer
required or that certain provisions are insufficient as new events occur or as additional information is obtained. Provisions are
separately identified and disclosed in the Company’s consolidated financial statements. Changes to these estimates may
affect the value of provisions, net earnings, and comprehensive income in future periods.

Share-Based Compensation

The Company uses estimates including, but not limited to, estimates of forfeitures, share price volatility, dividends, expected
life of the award, risk-free interest rates, and Company performance in the calculation of the liability and expenses for certain
share-based incentive plans. These estimates are based on previous experience and may change throughout the life of an
incentive plan. Such changes could impact the carrying value of contributed surplus, liabilities, net earnings, and
comprehensive income in future periods.

Some of the Company’s share-based payment plans may be settled in either cash or equity instruments at the option of the
Company. Management uses judgement in determining the appropriate accounting treatment for these plans, based on
expectations and historical settlement decisions. Changes to accounting treatment based on Management’s judgement may
impact contributed surplus, liabilities, net earnings, and comprehensive income in future periods.

Depreciation and Amortization

The Company’s property and equipment and definite life intangible assets are depreciated and amortized on a straight-line
basis, taking into account the estimated useful lives of the assets and residual values. Changes to these estimates may affect
the carrying value of these assets, inventories, net earnings, and comprehensive income in future periods.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

SIGNIFICANT ACCOUNTING POLICIES

Accounting Standards Adopted During the Period

During the year ended December 31, 2016, the Company adopted certain standards and amendments. As required by IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors, the nature and the effect of these changes are disclosed
below:

Annual Improvements to IFRS (2012-2014) Cycle

Beginning on January 1, 2016, the Company adopted various amendments to a total of four standards including the consistent
classification of assets which are reclassified from held for sale to held for distribution in IFRS 5 Non-current Assets Held for
Sale and Discontinued Operations, and clarification of interim financial statement disclosure requirements regarding offsetting
financial assets and liabilities, and clarification of whether a servicing contract constitutes continuing involvement for the
purposes of disclosures of transferred financial assets that are derecognized under IFRS 7 Financial Instruments: Disclosures.
The amendments that were adopted also included clarification that the currency of the bonds used to estimate the discount
rate for pension obligations must be the same as the currency in which the benefits will be paid under IAS 19 Employee
Benefits, and additional requirements under IAS 34 Interim Financial Reporting that cross-referenced information from the
interim financial statements must be available at the same time and on the same terms as the interim financial statements.
The adoption of these amendments did not have a material impact on the consolidated financial statements.

Joint Arrangements

Beginning on January 1, 2016, the Company adopted the amendments to IFRS 11 Joint Arrangements which require an
acquisition of a joint operation that constitutes a business be accounted for using the principles of business combinations in
IFRS 3 Business Combinations. This amendment applies to both initial and additional interest acquired in the joint operation.
The adoption of the amendments to IFRS 11 did not have a material impact on the consolidated financial statements.

Income Taxes

On November 8, 2016, the IFRS Interpretations Committee provided clarification on the tax rate an entity should apply to its
deferred tax assets and liabilities related to intangible assets with indefinite lives. The tax rate applied should be consistent
with how an entity is expected to recover the carrying amount in the form of future economic benefits. As a result of this
clarification, the Company has changed the effective tax rate applied on deferred tax liabilities on indefinite life intangible
assets. This change has been retrospectively applied reducing deferred tax assets and retained earnings as at January 1,
2015 by $11.8 million. There was no impact to net income or comprehensive income (loss) for the years ended December 31,
2016 and 2015 as there were no movements in the temporary differences or changes in relevant statutory income tax rates
during these periods. There was no material effect on the consolidated balance sheet as at January 1, 2015.

Accounting Pronouncements Issued But Not Yet Effective

Statement of Cash Flows

As part of their disclosure initiative, the IASB has issued amendments to IAS 7 Statement of Cash Flows requiring a
reconciliation of liabilities arising from financing activities to enable users of the financial statements to evaluate both cash flow
and non-cash changes in the net debt of a Company. The Company intends to adopt the amendments to IAS 7 prospectively
in its consolidated financial statements for the annual period beginning January 1, 2017. The extent of the impact of adoption
of the amendments is not expected to have a material impact on the consolidated financial statements.

Income Taxes

In January 2016, the IASB has issued amendments to IAS 12 Income Taxes to provide clarification on the requirements
relating to the recognition of deferred tax assets for unrealized losses on debt instruments measured at fair value. The
Company intends to adopt the amendments to IAS 12 in its consolidated financial statements for the annual period beginning
January 1, 2017. The adoption of the amendments to IAS 12 is not expected to have a material impact on the consolidated
financial statements.

Revenue Recognition

In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers. IFRS 15 replaces the detailed guidance on
revenue recognition requirements that currently exists under IFRS. IFRS 15 specifies the accounting treatment for all revenue
arising from contracts with customers, unless the contracts are within the scope of other IFRSs. The standard also provides a
model for the measurement and recognition of gains and losses on the sale of certain non-financial assets that are not an
output of the Company's ordinary activities. Additional disclosure is required under the standard including disaggregation of
total revenue, information about performance obligations, changes in contract asset and liability account balances between
periods, and key judgments and estimates. In July 2015, the effective date for IFRS 15 was deferred to apply to annual
periods beginning on or after January 1, 2018; early application is permitted either following a full retrospective approach or a
modified retrospective approach. The modified retrospective approach allows the standard to be applied to existing contracts
beginning the initial period of adoption and restatements to the comparative periods are not required. The Company is

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

required to disclose the impact by financial line item as a result of the adoption of the new standard. The Company intends to
adopt IFRS 15 in its consolidated financial statements for the annual period beginning January 1, 2018. The extent of the
impact of adoption of IFRS 15 has not yet been determined.

Financial Instruments - Recognition and Measurement

In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments with a mandatory effective date of January 1,
2018. The new standard brings together the classification and measurement, impairment, and hedge accounting phases of the
IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement. In addition to the new requirements for
classification and measurement of financial assets, a new general hedge accounting model and other amendments issued in
previous versions of IFRS 9, the standard also introduces new impairment requirements that are based on a forward-looking
expected credit loss model. The Company intends to adopt IFRS 9 in its consolidated financial statements for the annual
period beginning January 1, 2018. The extent of the impact of the adoption of IFRS 9 has not yet been determined.

The disclosure requirements in IFRS 7 Financial Instruments - Disclosure have also been amended to include the additional
disclosure required under IFRS 9. The Company intends to adopt these amendments to IFRS 7 at the same time as adoption
of IFRS 9. The extent of the impact of the adoption of the amendments to IFRS 7 has not yet been determined.

Leases

In January 2016, the IASB issued IFRS 16 Leases with a mandatory effective date of January 1, 2019. The new standard will
replace IAS 17 Leases and will carry forward the accounting requirements for lessors. IFRS 16 provides a new framework for
lessee accounting that requires substantially all assets obtained through operating leases to be capitalized and a related
liability to be recorded. The new standard seeks to provide a more accurate picture of a Company's leased assets and related
liabilities and create greater comparability between companies who lease assets and those who purchase assets. The
Company intends to adopt IFRS 16 in its consolidated financial statements for the annual period beginning January 1, 2019.
The extent of the impact of the adoption of IFRS 16 has not yet been determined.

Share-Based Payments

In June 2016, the IASB issued amendments to IFRS 2 Share-Based Payment with a mandatory effective date of January 1,
2018. The amendments provide clarification on how to account for certain types of share-based payment transactions. The
Company intends to adopt the amendments to IFRS 2 in its consolidated financial statements for the annual period beginning
January 1, 2018. The extent of the impact of the adoption of the amendments has not yet been determined.

Disclosure of Interests in Other Entities

In December 2016, the IASB issued amendments to IFRS 12 Disclosure of interests in other entities to provide clarification
that the required disclosures under IFRS 12 also applies to subsidiaries, joint ventures and associates that are classified as
held for sale or discontinued operations under IFRS 5 with the exception that the disclosures for summarized financial
information do not apply to subsidiaries, joint ventures and associates classified as held for sale or discontinued operations.
The amendments are effective retrospectively for the annual period beginning January 1, 2017. The adoption of the
amendments to IFRS 12 is not expected to have a material impact on the consolidated financial statements.

Foreign Currency Transactions and Advance Considerations

In December 2016, the IASB issued IFRIC 22 Foreign Currency Transactions and Advance Consideration with a mandatory
effective date of January 1, 2018. When a foreign currency transaction where consideration is received or paid in advance of
the recognition of the related asset, expense, or income, the exchange rate used should be based on the exchange rate as at
the date when the pre-payment asset or deferred liability is recognized. IFRIC 22 can be applied on a full retrospective basis,
retrospective from the comparative year or prospectively from January 1, 2018. The extent of the impact of the adoption of the
standard has not yet been determined.

DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

Management, under the direction and supervision of the Company’s Chief Executive Officer and Chief Financial Officer, is
responsible for establishing and maintaining disclosure controls and procedures. These controls and procedures are designed
to provide reasonable assurance that material information relating to the Company, including its consolidated subsidiaries, is
accumulated and communicated to Management in a timely manner so that information required to be disclosed by the
Company under securities legislation is recorded, processed, summarized and reported within the time periods specified in
applicable securities legislation. Management, under the direction and supervision of the Company’s Chief Executive Officer
and Chief Financial Officer, is also responsible for establishing and maintaining internal control over financial reporting to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with IFRS.

As required by National Instrument 52-109 - Certification of Disclosure in Issuers’ Annual and Interim Filings, the Company’s
Chief Executive Officer and Chief Financial Officer have evaluated, or caused to be evaluated under their supervision, the

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

effectiveness of the Company’s internal control over financial reporting and disclosure controls and procedures as at
December 31, 2016, and have concluded that such controls and procedures are effective.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and
presentation.

There have been no changes in the Company’s internal control over financial reporting that occurred during the period
beginning on January 1, 2016, and ended on December 31, 2016, that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial reporting.

NON-IFRS FINANCIAL MEASURES

The Company uses the following non-IFRS measures: Adjusted Operating Earnings, Adjusted Earnings per Share, Adjusted
EBITDA, Net Cash, Free Cash Flow and Return on Net Assets. Management believes that these non-IFRS measures provide
useful information to investors in measuring the financial performance of the Company for the reasons outlined below. These
measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly
titled measures presented by other publicly traded companies and should not be construed as an alternative to other financial
measures determined in accordance with IFRS.

Adjusted Operating Earnings

Adjusted Operating Earnings, a non-IFRS measure, is used by Management to evaluate financial operating results. It is
defined as earnings before income taxes adjusted for items that are not considered representative of ongoing operational
activities of the business and items where the economic impact of the transactions will be reflected in earnings in future
periods when the underlying asset is sold or transferred. The table below provides a reconciliation of net earnings as reported
under IFRS in the audited consolidated statements of earnings to Adjusted Operating Earnings for the years ended, as
indicated below. Management believes that this basis is the most appropriate on which to evaluate operating results, as they
are representative of the ongoing operations of the Company.

($ thousands)

Net earnings

Income taxes
Earnings before income taxes

Interest expense and other financing costs

Other (income) expense

Restructuring and other related costs
Earnings (loss) from operations
Decrease (increase) in fair value of biological assets(i)
Unrealized (gain) loss on futures contracts(ii)
Adjusted Operating Earnings

December 31, 2016

Meat
Products
Group

Agribusiness
Group

Non-allocated
costs

Consolidated

7,008

4,761

(894)

—

(2,518)

1,809

$ 181,702

67,891

$ 249,593

6,367

3,596

6,570

$ 263,605

$ (24,323)

$ 26,844

$ 266,126

—

(6,263)

(20,581)

(6,263)

(20,581)

$ 263,605

$ (24,323)

—

$ 239,282

(i) Refer to Note 7 of the Company’s 2016 audited consolidated financial statements for further details regarding biological

assets.

(ii) Unrealized gains/losses on futures contracts are reported within cost of goods sold in the Company’s 2016 audited

consolidated financial statements.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

December 31, 2015

Meat
Products
Group

Agribusiness
Group

Non-allocated
costs

Consolidated

(884)

15,321

(275)

—

3,058

18,504

$ 41,580

11,071

$ 52,651

4,711

1,899

33,825

$ 108,440

$ 1,360

$ (16,714)

$ 93,086

—

12,778

3,936

12,778

3,936

$ 108,440

$ 1,360

—

$ 109,800

($ thousands)
Net earnings

Income taxes
Earnings before income taxes

Interest expense and other financing costs

Other (income) expense

(i) Refer to Note 7 of the Company’s 2016 audited consolidated financial statements for further details regarding biological

assets.

(ii) Unrealized gains/losses on futures contracts are reported within cost of goods sold in the Company’s 2016 audited

consolidated financial statements.

Adjusted Earnings per Share

Adjusted Earnings per Share, a non-IFRS measure, is used by Management to evaluate financial operating results. It is
defined as basic earnings per share and is adjusted on the same basis as Adjusted Operating Earnings. The table below
provides a reconciliation of basic earnings per share as reported under IFRS in the audited consolidated statements of
earnings to Adjusted Earnings per Share for the years ended, as indicated below. Management believes this basis is the most
appropriate on which to evaluate financial results as they are representative of the ongoing operations of the Company.

($ per share)

Basic earnings per share
Restructuring and other related costs(i)
Items included in other income not considered representative of ongoing operations(ii)
Change in the fair value of unrealized (gain) loss on futures contracts(iii)
Change in the fair value of biological assets(iii)
Adjusted Earnings per Share

(iv)

(i)

Includes per share impact of restructuring and other related costs, net of tax.

December 31,

2016

$ 1.35

2015

$ 0.30

0.04

(0.02)

(0.11)

(0.03)

0.18

0.02

0.07

$ 1.23

$ 0.58

(ii) Primarily includes a depreciation charge on assets servicing divested businesses, interest income and gains/losses

associated with investment properties and assets held for sale, net of tax.

(iii)

Includes per share impact of the change in unrealized (gain) loss on futures contracts and the change in fair value of
biological assets, net of tax.
(iv) May not add due to rounding.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

Adjusted Earnings Before Interest, Tax, Depreciation, and Amortization

Adjusted EBITDA is calculated as earnings before interest and income taxes plus depreciation and intangible asset
amortization, adjusted for items that are not considered representative of ongoing operational activities of the business, and
items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is
sold or transferred. The following table provides a reconciliation of net earnings as reported under IFRS in the audited
consolidated statements of earnings to Adjusted EBITDA for the years ended, as indicated below. Management believes
Adjusted EBITDA is useful in assessing the performance of the Company’s ongoing operations and its ability to generate cash
flows to fund its cash requirements, including the Company’s capital investment program.

($ thousands)

Net earnings

Income taxes
Earnings before income taxes
Interest expense and other financing costs
Items included in other income not considered representative of on-going operations(i)
Restructuring and other related costs

Change in the fair value of biological assets and unrealized (gain) loss on futures contracts

Depreciation and amortization

Adjusted EBITDA

December 31,

2016

2015

$ 181,702

$ 41,580

67,891

11,071

$ 249,593

$ 52,651

6,367

(2,518)

6,570

(26,844)

110,276

4,711

3,058

33,825

16,714

108,890

$ 343,444

$ 219,849

(i) Primarily includes a depreciation charge on assets servicing divested businesses, interest income and gains/losses

associated with investment properties and assets held for sale.

Net Cash

The following table reconciles Net Cash to amounts reported under IFRS in the Company's audited consolidated balance
sheets for the years ended, as indicated below. The Company calculates Net Cash as cash and cash equivalents, less long-
term debt and bank indebtedness. Management believes this measure is useful in assessing the amount of financial leverage
employed.

($ thousands)

Current portion of long-term debt

Long-term debt

Total debt

Cash and cash equivalents

Net Cash

Free Cash Flow

December 31,

2016

(794)

(9,119)

2015

(813)

(9,843)

(9,913)

$ (10,656)

403,621

292,269

$ 393,708

$ 281,613

Free Cash Flow, a non-IFRS measure, is used by Management to evaluate cash flow after investing in the maintenance or
expansion of the Company's asset base. It is defined as cash provided by operations, less additions to long-term assets. The
following table calculates Free Cash Flow for the periods indicated below.

($ thousands)
(Unaudited)

Cash provided by operating activities
Additions to long-term assets

Free Cash Flow

Return on Net Assets

December 31,

2016

2015

$ 357,157

$ 159,407

(113,194)

(147,699)

$ 243,963

$ 11,708

RONA is calculated by dividing tax effected earnings from operations (adjusted for items which are not considered
representative of the underlying operations of the business) by average monthly net assets. Net assets are defined as total

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

assets (excluding cash and deferred tax assets) less non-interest bearing liabilities (excluding deferred tax liabilities).
Management believes that RONA is an appropriate basis upon which to evaluate long-term financial performance.

FORWARD-LOOKING STATEMENTS

This document contains, and the Company’s oral and written public communications often contain, “forward-looking
information” within the meaning of applicable securities law. These statements are based on current expectations, estimates,
forecasts, and projections about the industries in which the Company operates, as well as beliefs and assumptions made by
Management of the Company. Such statements include, but are not limited to, statements with respect to objectives and goals,
in addition to statements with respect to beliefs, plans, objectives, expectations, anticipations, estimates, and intentions.
Specific forward-looking information in this document includes, but is not limited to, statements with respect to: the increases in
operating efficiencies and cost reductions; expectations regarding the use of derivatives, futures and options; expectations
regarding improving efficiencies; the expected use of cash balances; source of funds for ongoing business requirements;
capital investments and expectations regarding capital expenditures; expectations regarding the implementation of
environmental sustainability initiatives; expectations regarding the adoption of new accounting standards and the impact of
such adoption on financial position; expectations regarding pension plan performance and future pension plan liabilities and
contributions; expectations regarding levels of credit risk; and expectations regarding outcomes of legal actions. Words such
as “expect”, “anticipate”, “intend”, “may”, “will”, “plan”, “believe”, “seek”, “estimate”, and variations of such words and similar
expressions are intended to identify such forward-looking information. These statements are not guarantees of future
performance and involve assumptions, risks, and uncertainties that are difficult to predict.

In addition, these statements and expectations concerning the performance of the Company’s business in general are based
on a number of factors and assumptions including, but not limited to: the condition of the Canadian, U.S., and Japanese
economies; the rate of exchange of the Canadian dollar to the U.S. dollar, and the Japanese yen; the availability and prices of
raw materials, energy and supplies; product pricing; the availability of insurance; the competitive environment and related
market conditions; improvement of operating efficiencies; continued access to capital; the cost of compliance with
environmental and health standards; no adverse results from ongoing litigation; no unexpected actions of domestic and foreign
governments; and the general assumption that none of the risks identified below or elsewhere in this document will
materialize. All of these assumptions have been derived from information currently available to the Company, including
information obtained by the Company from third-party sources. These assumptions may prove to be incorrect in whole or in
part. In addition, actual results may differ materially from those expressed, implied, or forecasted in such forward-looking
information, which reflect the Company’s expectations only as of the date hereof.

Factors that could cause actual results or outcomes to differ materially from the results expressed, implied, or forecasted by
forward-looking information include, among other things:

•

risks associated with the Company focusing solely on the protein business;

risks related to the Company's decisions regarding any potential return of capital to shareholders;

risks associated with the Plan and concentration of production in fewer facilities;

risks associated with the availability of capital;

risks associated with changes in the Company’s information systems and processes;

risks associated with cyber threats;

risks posed by food contamination, consumer liability, and product recalls;

risks associated with acquisitions, divestitures, and capital expansion projects;

impact on pension expense and funding requirements of fluctuations in the market prices of fixed income and equity
securities and changes in interest rates;

cyclical nature of the cost and supply of hogs and the competitive nature of the pork market generally;

risks related to the health status of livestock;

impact of a pandemic on the Company’s operations;

the Company’s exposure to currency exchange risks;

ability of the Company to hedge against the effect of commodity price changes through the use of commodity futures and
options;

impact of changes in the market value of the biological assets and hedging instruments;

risks associated with the supply management system for poultry in Canada;

risks associated with the use of contract manufacturers;

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2016 | MAPLE LEAF FOODS INC.

•

impact of international events on commodity prices and the free flow of goods;

risks posed by compliance with extensive government regulation;

risks posed by litigation;

impact of changes in consumer tastes and buying patterns;

impact of extensive environmental regulation and potential environmental liabilities;

risks associated with a consolidating retail environment;

risks posed by competition;

risks associated with complying with differing employment laws and practices, the potential for work stoppages due to
non-renewal of collective agreements, and recruiting and retaining qualified personnel;

risks associated with pricing the Company’s products;

risks associated with managing the Company’s supply chain; and

risks associated with failing to identify and manage the strategic risks facing the Company.

The Company cautions the reader that the foregoing list of factors is not exhaustive. These factors are discussed in more
detail under the heading “Risk Factors” presented previously in this document. The reader should review such section in detail.
Some of the forward-looking information may be considered to be financial outlooks for purposes of applicable securities
legislation including, but not limited to, statements concerning future capital expenditures. These financial outlooks are
presented to evaluate anticipated future uses of cash flows, and may not be appropriate for other purposes and readers
should not assume they will be achieved. The Company does not intend to, and the Company disclaims any obligation to,
update any forward-looking information, whether written or oral, or whether as a result of new information, future events or
otherwise, except as required by law. Additional information concerning the Company, including the Company’s Annual
Information Form, is available on SEDAR at www.sedar.com.

TABLE OF CONTENTS | 2016 | MAPLE LEAF FOODS INC.

Consolidated Financial Statements

Independent Auditors' Report

Consolidated Balance Sheets

Consolidated Statements of Net Earnings

Consolidated Statements of Other Comprehensive Income (Loss)

Consolidated Statements of Changes in Total Equity

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

Note 1. The Company

Note 2. Basis of Preparation

Note 3. Significant Accounting Policies

Note 4. Cash and Cash Equivalents

Note 5. Accounts Receivable

Note 6. Inventories

Note 7. Biological Assets

Note 8. Property and Equipment

Note 9. Employee Benefits

Note 10. Goodwill

Note 11. Intangible Assets

Note 12. Provisions

Note 13. Long-Term Debt

Note 14. Other Current Liabilities

Note 15. Other Long-Term Liabilities

Note 16. Share Capital

Note 17. Financial Instruments and Risk Management Activities

Note 18. Other Income (Expense)

Note 19. Interest Expense and Other Financing Costs

Note 20. Income Taxes

Note 21. Earnings Per Share

Note 22. Share-Based Payment

Note 23. Composition of the Company

Note 24. Commitments and Contingencies

Note 25. Related Party Transactions

Note 26. Segmented Financial Information

Note 27. Subsequent Events

INDEPENDENT AUDITORS' REPORT | 2016 | MAPLE LEAF FOODS INC.

Independent Auditors' Report
To the Shareholders of Maple Leaf Foods Inc.

We have audited the accompanying consolidated financial statements of Maple Leaf Foods Inc., which comprise the
consolidated balance sheets as at December 31, 2016 and December 31, 2015, the consolidated statements of net earnings,
other comprehensive income (loss), changes in total equity and cash flows for the years ended December 31, 2016 and
December 31, 2015, and notes, comprising 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.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our
audits 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 our 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, we
consider 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 in our audits 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 consolidated financial position
of Maple Leaf Foods Inc. as at December 31, 2016 and December 31, 2015, and its consolidated financial performance and its
consolidated cash flows for the years ended December 31, 2016 and December 31, 2015 in accordance with International
Financial Reporting Standards.

Chartered Professional Accountants, Licensed Public Accountants
February 21, 2017

Toronto, Canada

CONSOLIDATED BALANCE SHEETS | 2016 | MAPLE LEAF FOODS INC.

Notes

As at December 31,
2016

As at December 31,
2015
(Restated)
(Note 3(v))

4
5
23
6
7

20
10
11

12
13
20
14

13
9
12
15
20

403,621
127,749
32,485
261,719
111,445
30,372
4,837
972,228
1,085,275
1,929
10,311
6,557
—
428,236
128,085
$ 2,632,621

292,269
57,958
103,706
257,671
103,877
14,946
130
830,557
1,082,360
7,336
66,519
10,791
55,094
428,236
138,155
$ 2,619,048

256,163
11,889
794
9,544
96,857
375,247
9,119
108,730
16,555
12,654
22,293
544,598

853,633
1,247,737
1,619
(14,966)
$ 2,088,023
$ 2,632,621

256,473
32,531
813
9,670
29,637
329,124
9,843
203,241
14,622
20,901
—
577,731

882,770
1,161,047
(414)
(2,086)
$ 2,041,317
$ 2,619,048

Consolidated Balance Sheets

(In thousands of Canadian dollars)

ASSETS
Current assets

Cash and cash equivalents
Accounts receivable
Notes receivable
Inventories
Biological assets
Prepaid expenses and other assets
Assets held for sale

Property and equipment
Investment property
Employee benefits
Other long-term assets
Deferred tax asset
Goodwill
Intangible assets
Total assets

LIABILITIES AND EQUITY
Current liabilities

Accounts payable and accruals
Provisions
Current portion of long-term debt
Income taxes payable
Other current liabilities

Long-term debt
Employee benefits
Provisions
Other long-term liabilities
Deferred tax liability
Total liabilities

Shareholders’ equity
Share capital
Retained earnings
Accumulated other comprehensive income (loss)
Treasury stock
Total shareholders’ equity
Total liabilities and equity

Commitments and contingencies (Note 24)

Subsequent events (Note 27)

See accompanying Notes to the Consolidated Financial Statements.

On behalf of the Board:

MICHAEL H. MCCAIN
Director

WILLIAM E. AZIZ
Director

Consolidated Statements of Net Earnings

CONSOLIDATED STATEMENTS OF NET EARNINGS | 2016 | MAPLE LEAF FOODS INC.

Years ended December 31,
(In thousands of Canadian dollars, except share amounts)

Notes

2016

2015

Sales

Cost of goods sold

Gross margin

Selling, general and administrative expenses

Earnings before the following:

Restructuring and other related costs

Other income (expense)

Earnings before interest and income taxes

Interest expense and other financing costs

Earnings before income taxes

Income taxes expense

Net earnings

Earnings per share attributable to common shareholders:

Basic earnings per share

Diluted earnings per share

Weighted average number of shares (millions)

Basic

Diluted

See accompanying Notes to the Consolidated Financial Statements.

$ 3,331,812

$ 3,292,932

2,740,866

2,911,791

590,946

381,141

324,820

288,055

266,126

93,086

(6,570)

(3,596)

255,960

6,367

249,593

67,891

181,702

1.35

1.32

134.2

137.6

(33,825)

(1,899)

57,362

4,711

52,651

11,071

41,580

0.30

0.29

140.2

141.7

CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS) | 2016 | MAPLE LEAF FOODS INC.

Consolidated Statements of Other Comprehensive
Income (Loss)

Years ended December 31,
(In thousands of Canadian dollars)

Net earnings

Other comprehensive income (loss)

2016

2015

$ 181,702

$ 41,580

Actuarial gains and losses that will not be reclassified to profit or loss (Net of tax of $17.0

million; 2015: $0.2 million)

$ 46,243

389

Items that are or may be reclassified subsequently to profit or loss:

Change in accumulated foreign currency translation adjustment (Net of tax of $0.0

million; 2015: $0.0 million)

Change in unrealized gains and losses on cash flow hedges (Net of tax of $0.8 million;

2015: $0.7 million)

Total items that are or may be reclassified subsequently to profit or loss

Total other comprehensive income (loss)

Comprehensive income

See accompanying Notes to the Consolidated Financial Statements.

(390)

1,769

2,423

2,033

$ 48,276

$ 229,978

(1,957)

(188)

201

$ 41,781

Consolidated Statements of Changes in Total Equity

CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY | 2016 | MAPLE LEAF FOODS INC.

(In thousands of Canadian dollars)

Balance at December 31, 2015

Note

Share
capital

Retained
earnings

Contributed
surplus

Accumulated other
comprehensive income
(loss)(i)

Foreign
currency
translation
adjustment

Unrealized
gains and
losses on
cash flow
hedges

Treasury
stock

Total
equity

(Restated) (Note 3(v))

$ 882,770 $ 1,161,047 $

— $

2,506 $

(2,920) $ (2,086) $ 2,041,317

Net earnings
Other comprehensive income (loss)(ii)

Dividends declared ($0.36 per share)

Share-based compensation expense

Deferred taxes on share-based compensation

Repurchase of shares

Exercise of stock options

Settlement of share-based compensation

Shares purchased by RSU trust

—

181,702

46,243

(48,348)

—

29,224

3,550

(31,963)

(83,778)

(32,418)

2,826

—

(9,129)

—

(356)

—

(390)

2,423

—

5,032

181,702

48,276

(48,348)

29,224

3,550

(148,159)

2,826

(4,453)

—

— (17,912)

(17,912)

—

Balance at December 31, 2016

$ 853,633 $ 1,247,737 $

— $

2,116 $

(497) $ (14,966) $ 2,088,023

(In thousands of Canadian dollars)

Note

Share
capital

Retained
earnings

Contributed
surplus

Accumulated other
comprehensive income
(loss)(i)

Foreign
currency
translation
adjustment

Unrealized
gains and
losses on
cash flow
hedges

Treasury
stock

Total
equity

Balance at December 31, 2014

(Restated) (Note 3(v))

Net earnings

Other comprehensive income (loss)(ii)

Dividends declared ($0.32 per share)

Share-based compensation expense

Repurchase of shares

Issuance of treasury stock

Exercise of stock options

Settlement of share-based compensation

Shares purchased by RSU trust

$ 936,479 $ 1,216,998 $

79,652 $

737 $

(963) $

(224) $ 2,232,679

—

41,580

389

(44,668)

—

12,870

(56,744)

(48,163)

(90,216)

—

(3,860)

(2,306)

3,035

—

(1,229)

—

1,769

(1,957)

—

3,326

—

(5,188)

41,580

201

(44,668)

12,870

(195,123)

(2,840)

3,035

(1,229)

(5,188)

Balance at December 31, 2015 (Restated) (Note 3(v))

$ 882,770 $ 1,161,047 $

— $

2,506 $

(2,920) $ (2,086) $ 2,041,317

(i)
(ii)

Items that are or may be subsequently reclassified to profit or loss.

Included in other comprehensive income (loss) is the change in actuarial gains and losses that will not be reclassified to profit or loss and has been
reclassified to retained earnings.

See accompanying Notes to the Consolidated Financial Statements.

Consolidated Statements of Cash Flows

CONSOLIDATED STATEMENTS OF CASH FLOWS | 2016 | MAPLE LEAF FOODS INC.

Years ended December 31,
(In thousands of Canadian dollars)

CASH PROVIDED BY (USED IN) :

Operating activities

Net earnings

Add (deduct) items not affecting cash:

Change in fair value of biological assets

Depreciation and amortization

Share-based compensation

Deferred income taxes

Income tax current

Interest expense and other financing costs

Loss (gain) on sale of long-term assets

Change in fair value of non-designated derivative financial instruments

Impairment of assets (net of reversals)

Change in net pension liability

Net income taxes paid

Interest paid

Change in provision for restructuring and other related costs

Cash settlement of restricted share units

Derivatives margin

Other

Change in non-cash operating working capital

Cash provided by operating activities

Financing activities

Dividends paid

Net increase (decrease) in long-term debt

Exercise of stock options

Repurchase of shares

Payment of deferred financing fees

Purchase of treasury stock

Cash used in financing activities

Investing activities

Additions to long-term assets

Transaction costs

Proceeds from sale of long-term assets

Cash used in investing activities

Increase (decrease) in cash and cash equivalents

Net cash and cash equivalents, beginning of period

Net cash and cash equivalents, end of period

See accompanying Notes to the Consolidated Financial Statements.

2016

2015

181,702

41,580

(6,263)

111,651

29,224

63,124

4,767

6,367

(1,235)

(25,086)

2,831

24,903

(4,944)

(3,904)

(17,256)

(216)

1,772

736

12,778

123,480

12,870

9,178

1,893

4,711

(10,344)

(1,429)

1,907

26,761

(12,735)

(3,674)

(14,963)

(11,236)

1,587

932

(11,016)

(23,889)

357,157

159,407

(48,348)

(44,668)

(1,051)

2,826

(72,412)

(2,412)

(17,912)

(125)

3,035

(182,549)

(277)

(5,188)

$ (139,309)

$ (229,772)

$ (113,194)

$ (147,699)

—

6,698

(64)

14,069

$ (106,496)

$ (133,694)

111,352

$ (204,059)

292,269

496,328

403,621

292,269

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

Notes to the Consolidated Financial Statements
(Tabular amounts in thousands of Canadian dollars unless otherwise indicated)
Years ended December 31, 2016 and 2015

1. THE COMPANY

Maple Leaf Foods Inc. (“Maple Leaf Foods” or the “Company”) is a producer of food products under leading brands including
Maple Leaf®, Maple Leaf Prime®, Maple Leaf Natural Selections®, Schneiders®, Schneiders® Country Naturals® and Mina®.
The Company's portfolio includes prepared meats, ready-to-cook and ready-to-serve meals and valued-added fresh pork and
poultry. The address of the Company’s registered office is 6985 Financial Dr. Mississauga, Ontario, L5N 0A1, Canada. The
consolidated financial statements of the Company as at and for the year ended December 31, 2016, include the accounts of
the Company and its subsidiaries. The composition of the Company is further described in Note 23. The Company’s results
are organized into two segments: Meat Products Group and Agribusiness Group.

2. BASIS OF PREPARATION

(a) Statement of Compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board (“IASB”) and using the accounting policies described
herein.

The consolidated financial statements were authorized for issue by the Board of Directors on February 21, 2017.

(b) Basis of Measurement

The consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments,
biological assets, defined benefit plan assets, and liabilities associated with certain share-based compensation, which are
stated at fair value. Liabilities associated with employee benefits are stated at actuarially determined present values.

The consolidated financial statements are presented in Canadian dollars, which is the Company’s functional currency.

(d) Use of Estimates and Judgements

Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies, that have
the most significant effects on the amounts recognized in the consolidated financial statements, are included both below and in
the statement notes relating to items subject to significant estimate uncertainty and critical judgements.

Long-Lived Assets Valuation

Measurement of Fair Values

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

values. Changes in assumptions about the inputs to these models could affect the reported fair value of the Company’s
financial and non-financial assets and liabilities.

Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are
disclosed in Notes 7, 9, 10, 11, and 17.

Nature of Interests in Other Entities

Valuation of Inventory

Biological Assets

Trade Merchandise Allowances and Other Trade Discounts

Employee Benefit Plans

Income Taxes

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

Company adjusts these additional accruals in light of changing facts and circumstances. To the extent that these adjustments
differ from original estimates, deferred tax assets and liabilities, net earnings, and comprehensive income will be affected in
future periods.

Provisions

Share-Based Compensation

Depreciation and Amortization

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial
statements.

(a) Principles of Consolidation

These consolidated financial statements include the accounts of the Company and its subsidiaries from the date that control
commences until the date that control ceases. Control exists when the Company is exposed to or has rights to variable returns
from its involvement with the entity and has the ability to affect those returns through its power over the entity. Acquisitions of
non-controlling interests are accounted for as transactions with equity holders in their capacity as equity holders; therefore, no
goodwill is recognized as a result of such transactions.

All intercompany accounts and transactions have been eliminated on consolidation.

(b) Business Combinations and Goodwill

Business combinations are accounted for using the acquisition method at the acquisition date, which is the date that control is
transferred to the Company. In assessing control, the Company takes into consideration potential voting rights that are
currently exercisable.

Goodwill is measured as the excess of the sum of the fair value of the consideration transferred, the amount of any non-
controlling interests in the acquiree, and the fair value of any previously held equity interest in the acquiree over the net of the
acquisition date fair value of the identifiable assets acquired and the liabilities assumed. If the excess is negative, a purchase
gain is recognized immediately in earnings. Transaction costs, other than those associated with the issue of debt or equity, are
recognized in earnings as incurred.

Goodwill is not amortized and is tested for impairment annually in the fourth quarter and as required if events occur that
indicate that its carrying amount may not be recoverable. Goodwill is tested for impairment at the CGU group level by
comparing the carrying amount to its recoverable amount, consistent with the methodology outlined in Note 3(k).

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is
classified as equity, then it is not re-measured and settlement is accounted for in equity. Otherwise, subsequent changes in the
fair value of the contingent consideration are recognized in earnings.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

When the initial accounting for a business combination has not been finalized by the end of the reporting period in which the
combination occurs, the Company reports provisional amounts for the items for which the accounting has not been finalized.
These provisional amounts are adjusted during the measurement period, which does not exceed one year from the acquisition
date, or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that
existed at the acquisition date that, if known, would have affected the amounts recognized at that date.

The Company measures certain financial and non-financial assets and liabilities at fair value at each balance sheet date. In
addition, fair value measurements are disclosed for certain financial and non-financial assets and liabilities.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. In estimating the fair value of an asset or a liability, the Company takes into
account the characteristics of the asset or liability if market participants would take those characteristics into account when
pricing the asset or liability at the measurement date. Fair value for measurement and disclosure purposes is determined on
such a basis, except for share-based payment transactions, and measurements that have some similarities to fair value but
are not fair value, such as net realizable value or value in use.

Assets and liabilities, for which fair value is measured or disclosed in the consolidated financial statements, are classified
using a three-level fair value hierarchy that reflects the significance and transparency of the inputs used in making the fair
value measurements. Each level is based on the following:

Level 1 - inputs are unadjusted quoted prices of identical assets or liabilities in active markets

Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly

or indirectly

Level 3 - one or more significant inputs used in a valuation technique are unobservable in determining fair values of

the asset or liability

Determination of fair value and the resulting hierarchy requires the use of observable market data whenever available. The
classification of an asset or liability in the hierarchy is based upon the lowest level of input that is significant to the
measurement of fair value.

(d) Non-current Assets (or Disposal Groups) Held for Sale

The Company classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered
principally through a sale transaction rather than through continuing use. The criteria for held for sale classification is regarded
as met when a sale is highly probable, the asset or disposal group is available for immediate sale in its present condition, and
management is committed to the sale, which is expected to be completed within one year from the date of classification. Non-
current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value
less costs to sell. Non-current assets are not depreciated once classified as held for sale.

(e) Translation of Foreign Currencies

The accounts of the Company are presented in Canadian dollars. Transactions in foreign currencies are translated at the
actual rates of exchange. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated
to the Canadian dollar at the exchange rate for that date. Foreign exchange differences arising on translation are recognized in
net earnings. Non-monetary assets and liabilities that are measured at historical cost are translated using the exchange rate at
the date of the transaction.

The financial statements of foreign subsidiaries whose unit of measure is not the Canadian dollar are translated into Canadian
dollars using the exchange rate in effect at the period-end for assets and liabilities, and the average exchange rates for the
period for revenue, expenses, and cash flows. Foreign exchange differences arising on translation are recognized in
accumulated other comprehensive income (loss) in total equity.

When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost,
the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the
gain or loss on disposal. If the Company disposes of part of its interest in a subsidiary but retains control, then the relevant
proportion of the cumulative amount is reattributed to the non-controlling interest. When the Company disposes of only part of
an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative
amount is reclassified to net earnings.

Foreign exchange gains and losses arising from a receivable or payable to a foreign operation, the settlement of which is
neither planned nor likely to occur in the foreseeable future and which in substance is considered to form part of the net
investment in the foreign operations, are recognized in other comprehensive income (loss) in the cumulate foreign currency
translation differences.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

(f) Financial Instruments

The Company’s financial assets and financial liabilities, upon initial recognition, are measured at fair value and are classified
as held for trading, loans and receivables, or other financial liabilities. The classification depends on the purpose for which the
financial instruments were acquired and their characteristics. Held for trading is the required classification for all derivative
financial instruments unless they are specifically designated within an effective hedge relationship. Held for trading financial
instruments not designated within an effective hedging relationship are measured at fair value with changes in fair value
recognized in consolidated statements of net earnings in the period in which such changes arise. Loans and receivables and
other financial liabilities are initially recorded at fair value and are subsequently measured at amortized cost.

Financial assets are assessed at each reporting date to determine whether there is any objective evidence of impairment. A
financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect
on the estimated future cash flows of that asset, with impairment losses recognized in the consolidated statements of net
earnings. If, in a subsequent period, the impairment loss decreases, the previously recognized impairment is reversed to the
extent of the impairment.

Transaction costs, other than those related to financial instruments classified as fair value through profit or loss, which are
expensed as incurred, are capitalized to the carrying amount of the instrument and amortized using the effective interest
method.

(g) Hedge Accounting

The Company uses derivatives and other non-derivative financial instruments to manage its exposures to fluctuations in
interest rates, foreign exchange rates, and commodity prices.

At the inception of a hedging relationship, the Company designates and formally documents the relationship between the
hedging instrument and the hedged item, the risk management objective, and its strategy for undertaking the hedge. The
documentation identifies the specific asset, liability, or anticipated cash flows being hedged, the risk that is being hedged, the
type of hedging instrument used, and how effectiveness will be assessed.

The Company also formally assesses both at inception and at least quarterly thereafter, whether or not the derivatives that are
used in hedging transactions are highly effective in offsetting the changes attributable to the hedged risks in the fair values or
cash flows of the hedged items. If a hedge relationship becomes ineffective, it no longer qualifies for hedge accounting and
any subsequent change in the fair value of the hedging instrument is recognized in net earnings.

When hedge accounting is appropriate, the hedging relationship is designated as a cash flow hedge, a fair value hedge, or a
hedge of foreign currency exposure of a net investment in a self-sustaining foreign operation. In a cash flow hedge, the
change in fair value of the hedging instrument is recorded, to the extent it is effective, in other comprehensive income until the
hedged item affects net earnings. In a fair value hedge, the change in fair value of the hedging derivative is offset in the
consolidated statements of net earnings by the change in fair value of the hedged item relating to the hedged risk.

Hedge ineffectiveness is measured and recorded in current period earnings in the consolidated statements of net earnings.
When either a fair value hedge or cash flow hedge is discontinued, any cumulative adjustment to either the hedged item or
other comprehensive income (loss) is recognized in net earnings, as the hedged item affects net earnings, or when the
hedged item is derecognized. If a designated hedge is no longer effective, the associated derivative instrument is
subsequently carried at fair value through net earnings without any offset from the hedged item.

Derivatives that do not qualify for hedge accounting are carried at fair value on the consolidated balance sheets, and
subsequent changes in their fair value are recorded in the consolidated statements of net earnings.

(h) Cash and Cash Equivalents

Cash and cash equivalents are comprised of cash balances and demand deposits.

(i)

Inventories

Inventories are valued at the lower of cost and net realizable value, with cost being determined substantially on a first-in, first-
out basis. The cost of inventory includes direct product costs, direct labour, and an allocation of variable and fixed
manufacturing overhead, including depreciation. When circumstances that previously caused inventories to have a write-down
below cost no longer exist, or when there is clear evidence of an increase in the net realizable value, the amount of a write-
down previously recorded is reversed through cost of goods sold.

(j) Biological Assets

Biological assets consist of live hogs, poultry, and eggs. For the purposes of valuation, these assets are categorized as either
parent stock or commercial stock. Parent stock represents animals held and bred for the purpose of generating commercial
stock and to replace parent stock nearing the end of its productive cycle. Commercial stock is held for the purposes of further
processing or eventual sale, at which point it becomes inventory. The fair value of commercial stock is determined based on
market prices of livestock of similar age, breed, and generic merit, less costs to sell the assets, including estimated costs

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

necessary to transport the assets to market. Where reliable market prices of parent stock are not available, they are valued at
cost less accumulated depreciation and any accumulated impairment losses. No active liquid market exists for parent stock as
they are rarely sold. Hog parent stock is depreciated on a straight-line basis over two to three years after taking into account
residual values, whereas poultry parent stock is depreciated on a straight-line basis over six to eight months.

Biological assets are transferred into inventory at fair value less costs to sell at the point of delivery.

(k) Impairment or Disposal of Long-Lived Assets

The Company reviews long-lived assets or asset groups held and used, including property and equipment and intangible
assets subject to amortization, for recoverability whenever events or changes in circumstances indicate that their carrying
amount may not be recoverable. Asset groups referred to as CGUs include an allocation of corporate assets and are reviewed
at their lowest level for which identifiable cash inflows are largely independent of cash inflows of other assets or groups of
assets. The recoverable amount is the greater of its value in use and its fair value less cost to sell.

Value in use is based on estimates of discounted future cash flows expected to be recovered from a CGU through its use.
Management develops its cash flow projections based on past performance and its expectations of future market and business
developments. Once calculated, the estimated future pre-tax cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Fair value less cost to sell is the amount obtainable from the sale of an asset or CGU in an arm’s-length transaction between
knowledgeable, willing parties, less the costs of disposal. Costs of disposal are incremental costs directly attributable to the
disposal of an asset or CGU, excluding financing costs and income tax expense.

An impairment loss is recognized in the consolidated statements of net earnings when the carrying amount of any asset or its
CGU exceeds its estimated recoverable amount. Impairment losses recognized in respect of CGUs are allocated, first to
reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the net carrying amount of the other
assets in the CGU on a pro rata basis.

Impairment losses related to long-lived assets recognized in prior periods are assessed at each reporting date for any
indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying amount that would have been determined, net of depreciation and amortization,
if no previous impairment loss had been recognized.

(l) Property and Equipment

Property and equipment, with the exception of land, is recorded at cost less accumulated depreciation and any net
accumulated impairment losses. Land is carried at cost and not depreciated. For qualifying assets, cost includes interest
capitalized during the construction or development period. Construction-in-process assets are capitalized during construction
and depreciation commences when the asset is available for use. Depreciation related to assets used in production is
recorded in inventory and cost of goods sold. Depreciation related to non-production assets is recorded through selling,
general, and administrative expense. Depreciation is calculated on a straight-line basis, after taking into account residual
values, over the following expected useful lives of the assets:

___________________________________________________________________________________________________

Buildings, including other components
Machinery and equipment
____________________________________________________________________________________________________

10-40 years
3-20 years

When parts of an item of property and equipment have different useful lives, those components are accounted for as separate
items of property and equipment.

(m) Investment Property

Investment property is comprised of properties owned by the Company that are held to either earn rental income or for capital
appreciation, or both. The Company’s investment properties include land and buildings.

Investment properties are recorded at cost less accumulated depreciation and any accumulated impairment losses, with the
exception of land which is recorded at cost less any accumulated impairment losses. The depreciation policies for investment
properties are consistent with those for buildings.

(n) Intangible Assets

Intangible assets include computer software, trademarks and poultry production quota. Definite life intangible assets are
measured at cost less accumulated amortization and any net accumulated impairment losses. Amortization for computer
software is recognized in the consolidated statements of earnings on a straight-line basis over their estimated useful lives
between 3 to 10 years.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

Indefinite life intangibles including trademarks and poultry production quota are tested for impairment annually in the fourth
quarter and otherwise as required if events occur that indicate that the net carrying value may not be recoverable.

Upon recognition of an intangible asset, the Company determines if the asset has a definite or indefinite life. In making this
determination, the Company considers the expected use, expiry of agreements, the nature of the asset, and whether the value
of the asset decreases over time.

(o) Employee Benefit Plans

The Company provides post-employment benefits through defined benefit and defined contribution plans.

Defined Benefit Plans

The Company accrues obligations and costs in respect of employee defined benefit plans. The cost of pensions and other
retirement benefits earned by employees is actuarially determined using the projected unit credit method prorated on service
and Management's best estimate of salary escalation, retirement ages of employees, mortality rates, inflation and expected
health care costs. Changes in these assumptions could affect future pension expense. The fair value of plan assets and the
present value of the obligation are used to calculate net interest cost or income. The discount rate used to value the defined
benefit obligation is based on high-quality corporate bonds in the same currency in which the benefits are expected to be paid
and with terms to maturity that, on average, match the terms of the defined benefit obligations. The discount rate used to value
the current service cost is based on high-quality corporate bonds in the same currency in which the employer contributions are
expected to be made in and with terms of maturity that, on average, match the expected remaining service period for active
employees.

Actuarial gains and losses due to changes in defined benefit plan assets and obligations are recognized immediately in
accumulated other comprehensive income (loss).

When the calculation results in a net benefit asset, the recognized asset is limited to the total of any unrecognized past service
costs and the present value of economic benefits available in the form of future refunds from the plan or reductions in future
contributions to the plan (the “asset ceiling”). In order to calculate the present value of economic benefits, consideration is
given to minimum funding requirements that apply to the plan. Where it is anticipated that the Company will not be able to
recover the value of the net defined benefit asset, after considering minimum funding requirements for future services, the net
defined benefit asset is reduced to the amount of the asset ceiling. The impact of the asset ceiling is recognized in other
comprehensive income (loss).

When future payment of minimum funding requirements related to past service would result in a net defined benefit asset
“surplus” or an increase in a surplus, the minimum funding requirements are recognized as a liability, to the extent that the
surplus would not be fully available as a refund or a reduction in future contributions. Re-measurement of this liability is
recognized in other comprehensive income (loss) in the period in which the re-measurement occurs.

Defined Contribution Plans

The Company’s obligations for contributions to employee defined contribution pension plans are recognized in the
consolidated statement of net earnings in the periods during which services are rendered by employees.

Multi-Employer Plans

The Company participates in multi-employer pension plans which are accounted for as defined contribution plans. The
Company does not administer these plans as the administration and the investment of these assets are controlled by a board
of trustees consisting of union and employer representatives. The Company’s responsibility to make contributions to these
plans is established pursuant to collective bargaining agreements. The contributions made by the Company to the multi-
employer plans are expensed when due.

(p) Share-Based Compensation

The Company applies the fair value method of accounting for share-based compensation. The fair value at grant date of stock
options is estimated using the Black-Scholes option-pricing model. The fair value of restricted share units (“RSUs”), including
performance share units (“PSUs”), is measured based on the fair value of the underlying shares on the grant date and
expected achievement of performance conditions. Compensation cost is recognized on a straight-line basis over the expected
vesting period of the share-based compensation. The Company estimates the number of units expected to vest at the grant
date and revises the estimate as necessary if subsequent information indicates that the actual number of units vesting differs
significantly from the original estimate. The fair value of deferred share units (“DSUs”) is measured based on the fair value of
the underlying shares at each reporting date.

The Company has share-based compensation plans which are able to be settled in either cash or equity instruments at the
option of the Company. Each grant is accounted for based on the expected settlement method at the time of issue. The
expectation is re-evaluated at the end of each reporting period.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

(q) Provisions

Provisions are liabilities of the Company for which the amount and/or timing of settlement is uncertain. A provision is
recognized in the consolidated financial statements when the Company has a present legal or constructive obligation as a
result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the
effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and, when appropriate, the risks specific to the liability.

(r) Revenue Recognition

The majority of the Company’s revenue is derived from the sale of product to retail and foodservice customers, as well as the
sale of by-products to industrial and agricultural customers. The Company recognizes revenue from product sales at the fair
value of the consideration received or receivable, net of estimated returns, and an estimate of sales incentives provided to
customers. Revenue is recognized when the customer takes ownership of the product, title has transferred, all the risks and
rewards of ownership have transferred to the customer, recovery of the consideration is probable, the Company has satisfied
its performance obligations under the arrangement, and has no ongoing involvement with the sold product. The value of sales
incentives provided to customers are estimated using historical trends and are recognized at the time of sale as a reduction of
revenue. Sales incentives include rebate and promotional programs provided to the Company's customers. These rebates are
based on achievement of specified volume or growth in volume levels and other agreed promotional activities. In subsequent
periods, the Company monitors the performance of customers against agreed upon obligations related to sales incentive
programs and makes any adjustments to both revenue and sales incentive accruals as required.

The Company generally does not accept returns of spoiled products from customers. For product that may not be returned, the
Company, in certain cases, provides customers with allowances to cover any damage or spoilage, and such allowances are
deducted from sales at the time of revenue recognition.

(s) Borrowing Costs

Borrowing costs are primarily comprised of interest on the Company's indebtedness. Borrowing costs are capitalized when
they are attributable to the acquisition, construction, or production of a qualifying asset. The Company defines qualifying
assets as any asset that requires more than six months to prepare for its intended use. Borrowing costs attributable to
qualifying assets are calculated using the Company’s average borrowing cost excluding the costs associated with the de-
recognition of accounts receivables under securitization programs. Borrowing costs that are not attributable to a qualifying
asset are expensed in the period in which they are incurred and reported within interest expense in the consolidated statement
of net earnings.

(t) Government Incentives

Government incentives are not recognized until there is reasonable assurance that they will be received and that the Company
will be in compliance with any conditions associated with the incentives. Incentives that compensate the Company for
expenses or losses are recognized in earnings with the same classification as the related expense or loss in the same periods
in which the expenses or losses are recognized.

Government incentives received with the primary condition that the Company should purchase, construct, or otherwise acquire
non-current assets are recognized as a deduction from the associated asset on the consolidated balance sheet. The incentive
is recognized in earnings over the useful life of the asset as a reduction of the related depreciation expense.

Government incentives that are receivable as compensation for expenses or losses already incurred, or for the purpose of
giving immediate financial support to the Company with no future related costs, are recognized in earnings in the period in
which they become receivable.

The benefit of a government loan at a below-market rate of interest is treated as a government incentive, and is measured as
the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.

(u) Income Taxes

Income tax expense is comprised of current and deferred tax. Income tax is recognized in the consolidated statements of net
earnings, except to the extent that it relates to a business combination, or items recognized directly in equity or in other
comprehensive income (loss).

Current tax expense represents the amount of income taxes payable, in respect of the taxable profit for the period, based on
tax law that is enacted or substantially enacted at the reporting date, and is adjusted for changes in estimates of tax expense
recognized in prior periods. A current tax liability or asset is recognized for income tax payable, or paid but recoverable in
respect of all periods to date.

The Company uses the asset and liability method of accounting for income taxes. Accordingly, deferred tax assets and
liabilities are recognized for the deferred tax consequences attributable to differences between the financial statement carrying
amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted
or substantively enacted tax rates expected to apply to taxable income in the years when those temporary differences are

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

expected to be recovered or settled and in the manner in which those temporary differences are expected to be recovered or
settled through sale or continued use. In addition, the effect on deferred tax assets and liabilities of a change in tax rates is
recognized in both net earnings and comprehensive income in the period in which the enactment or substantive enactment
takes place.

A deferred tax asset is recognized for unused tax losses, tax credits, and deductible temporary differences, to the extent that it
is probable that future taxable income will be available to utilize such amounts. Deferred tax assets are reviewed at each
reporting date and are adjusted to the extent that it is no longer probable that the related tax benefits will be realized.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the
Company intends to settle its current tax assets and liabilities on a net basis.

Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the
reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not
reverse in the foreseeable future.

(v) Accounting Standards Adopted During the Period

Annual Improvements to IFRS (2012-2014) Cycle

Joint Arrangements

Income Taxes

(w) Accounting Pronouncements Issued But Not Yet Effective

Statement of Cash Flows

Income Taxes

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

January 1, 2017. The adoption of the amendments to IAS 12 is not expected to have a material impact on the consolidated
financial statements.

Revenue Recognition

Financial Instruments - Recognition and Measurement

Leases

Share-Based Payments

Disclosure of Interests in Other Entities

Foreign Currency Transactions and Advance Considerations

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

4. CASH AND CASH EQUIVALENTS

As at December 31, 2016, the Company had agreements to cash collateralize certain of its letters of credit up to an amount of
$120.0 million (2015: $120.0 million), of which $68.1 million (2015: $83.9 million) was deposited with a major financial
institution.

5. ACCOUNTS RECEIVABLE

Trade receivables

Less: Allowance for doubtful accounts

Net trade receivables

Other receivables:

Commodity taxes receivable

Interest rate swap receivable

Government receivable

Other

The aging of trade receivables is as follows:

Current

Past due 0-30 days

Past due 31-60 days

Past due > 60 days

As at December 31,

2016

2015

$ 90,463

$ 25,537

(5)

$ 90,458

$ 25,532

11,004

422

17,347

8,518

8,972

435

11,890

11,129

$127,749

$ 57,958

As at December 31,

2016

2015

$ 64,176

$ 16,295

19,057

2,702

4,528

9,070

161

$ 90,463

$ 25,537

The Company maintains an allowance for doubtful accounts that represents its estimate of the uncollectible amounts based on
specific losses estimated on individual exposures.

The Company has sold certain of its trade accounts receivables under securitization programs as described in Note 23. On
August 26, 2016, the Company entered into a new three-year accounts receivable securitization facility. The new facility
replaced the Company's existing facility that was due to mature on September 30, 2016. On termination of the previous facility
the Company re-purchased all receivables and sold only a portion of these into the new facility.

Under both the previous facility and the current facility, the Company's securitization programs require the sale of trade
receivables to be treated as a sale from an accounting perspective and as a result, trade receivables sold under these
programs are derecognized in the consolidated balance sheets as at December 31, 2016 and 2015.

6. INVENTORIES

Raw materials

Work in process

Finished goods

Packaging

Spare parts

As at December 31,

2016

2015

$ 23,229

$ 28,237

16,309

175,452

13,997

32,732

17,367

165,522

15,856

30,689

$ 261,719

$ 257,671

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

For the year ended December 31, 2016, inventory in the amount of $2,538.5 million (2015: $2,567.0 million) was expensed
through cost of goods sold.

7. BIOLOGICAL ASSETS

Hog stock

Poultry stock

Commercial

Parent

Commercial

Balance at December 31, 2015

$ 75,715

$ 22,650

3,739

Additions and purchases

Depreciation

Change in fair value realized

Change in fair value unrealized

Further processing and sales

283,381

—

1,668

4,595

(282,307)

4,719

(4,514)

—

51,833

—

(51,879)

Parent

1,773

2,722

(2,650)

—

Total

$ 103,877

342,655

(7,164)

1,668

4,595

(334,186)

Balance at December 31, 2016

$ 83,052

$ 22,855

3,693

1,845

$ 111,445

Hog stock

Poultry stock

Commercial

Parent

Commercial

Balance at December 31, 2014

$ 81,049

$ 19,777

3,234

Additions and purchases

Depreciation

Change in fair value realized

Change in fair value unrealized

Further processing and sales

238,128

—

(11,110)

(1,668)

(230,684)

6,903

(4,030)

—

50,871

—

(50,366)

Parent

1,683

2,494

(2,404)

—

Total

$ 105,743

298,396

(6,434)

(11,110)

(1,668)

(281,050)

Balance at December 31, 2015

$ 75,715

$ 22,650

3,739

1,773

$ 103,877

Hog stock is comprised of approximately 0.9 million animals as at December 31, 2016 (2015: 0.8 million). During the years
ended December 31, 2015 and 2016, substantially all hog stock was directly transferred to the Company's primary processing
operations.

Poultry stock is comprised of approximately 7.5 million eggs and 0.2 million birds as at December 31, 2016 (2015: 7.6 million
eggs and 0.2 million birds).

The change in fair value of commercial hog and poultry stock for the year was a gain of $6.3 million for the year ended
December 31, 2016 (2015: loss of $12.8 million) recorded in cost of goods sold.

The fair value measures of commercial hog stock have been categorized as a Level 3 fair value based on inputs to the
valuation techniques used. There were no transfers between levels for the year ended December 31, 2016.

The Company uses the market comparison approach to determine the fair value of its commercial hog stock. The valuation
model is based on the market price of hog stock of similar age, weight, breed, and genetic make-up. The model is based on
the U.S. dollar market price per cut weight and adjusted for foreign exchange, conversion from pounds to kilograms, and
specific significant unobservable inputs, including a quality index adjustment and a market conversion factor, as defined below.

The quality index adjustment is a value adjustment based on the relative quality of a processed hog based on the lean yield
(being the ratio between muscle and fat content) and total weight. Quality adjustments range from 6.8% to 7.7%. A higher
(lower) quality adjustment percentage will result in an increase (decrease) to the fair market value of the commercial hog
stock.

The market conversion factor is a market adjustment used to discount the formula from a U.S. market price to a Canadian
pricing model. The market conversion factor experiences minimal fluctuation. A higher (lower) market conversion factor will
result in an increase (decrease) to the fair market value of the commercial hog stock.

Commercial poultry stock are valued at cost as an indicator of fair value in the case where little biological transformation has
taken place since initial cost occurrence or when the impact of the biological transformation on price is not expected to be
material.

Where reliable market prices of parent stock are not available, they are valued at cost less accumulated depreciation and any
accumulated impairment losses. No active liquid market exists for parent stock as they are rarely sold.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

The Company has established environmental policies and procedures which comply with local environmental and other laws.
Management performs regular reviews to identify environmental risks and to ensure that the systems in place are adequate to
manage those risks.

The Company's biological asset operations can be affected by outbreaks of disease among livestock. To mitigate this risk, the
Company monitors herd health status and has strict bio-security procedures and employee training programs throughout its
livestock production operation.

8. PROPERTY AND EQUIPMENT

Cost

Accumulated depreciation

Net balance, December 31, 2016

Cost

Accumulated depreciation

Net balance, December 31, 2015

Land

Buildings

Machinery
and
equipment

Under
construction

Total

33,891

$ 787,710

$ 1,136,716

—

(250,776)

(679,058)

33,891

$ 536,934

$ 457,658

56,792

$ 2,015,109

—

(929,834)

56,792

$ 1,085,275

Land

Buildings

Machinery
and
equipment

Under
construction

Total

33,891

$ 758,492

$ 997,417

—

(224,967)

(550,570)

33,891

$ 533,525

$ 446,847

68,097

$ 1,857,897

—

(775,537)

68,097

$ 1,082,360

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

The changes in net carrying amounts of property, plant and equipment during 2016 and 2015 were as follows:

Land

Buildings

Machinery
and
equipment

Under
construction

Total

Net balance, December 31, 2015

33,891

$ 533,525

$ 446,847

68,097

$ 1,082,360

Additions

Transfers from under construction

Impairment

Restructuring related write-downs

Transfers to assets held for sale

Depreciation
Other(i)
Net balance, December 31, 2016

—

32,823

—

(735)

—

(25,553)

(3,126)

—

85,605

(2,831)

(372)

(43)

(69,913)

(1,635)

107,123

(118,428)

—

107,123

—

(2,831)

(1,107)

(43)

(95,466)

(4,761)

33,891

$ 536,934

$ 457,658

56,792

$ 1,085,275

Land

Buildings

Machinery
and
equipment

Under
construction

Total

Net balance, December 31, 2014

38,081

$ 524,176

$ 451,895

28,354

$ 1,042,506

Additions

Transfers from under construction

Impairment

Restructuring related write-downs

Depreciation
Other(i)
Net balance, December 31, 2015

—

1,249

—

(5,439)

—

34,102

—

(24,611)

(142)

—

64,932

(1,907)

(448)

(66,126)

(1,499)

140,026

(100,283)

—

140,026

—

(1,907)

(448)

(90,737)

(7,080)

33,891

$ 533,525

$ 446,847

68,097

$ 1,082,360

(i)

Includes disposals, reclassifications and other adjustments.

Borrowing Costs

For the years ended December 31, 2016 and 2015, there were no borrowing costs capitalized.

9. EMPLOYEE BENEFITS

The Company sponsors several defined benefit pension plans for Canadian employees which are either final salary plans,
career salary plans, service based plans, or a combination thereof. The Company also sponsors a final salary defined benefit
pension plan in the U.K. in which membership is closed. These defined benefit plans require contributions to be made to
separately administered funds. Certain retired employees are covered under a post-retirement benefit plan, which reimburses
certain medical costs and provides life insurance coverage.

The Canadian plans are governed by the pension laws of the province in which the respective plan is registered. The U.K. plan
is governed by the employment laws of the U.K.

The Company's pension funding policy is to contribute amounts sufficient, at a minimum, to meet local statutory funding
requirements. For the Company's defined benefit pension plans, local regulatory bodies either define minimum funding
requirements or approve funding plans submitted by the Company. From time to time the Company may make additional
discretionary contributions taking into account actuarial assessments and other factors. The contributions that have been
made to support ongoing plan obligations have been recorded in the respective asset or liability accounts on the consolidated
balance sheet. Actuarial valuations for the Company's defined benefit pension plans are completed based on the regulations in
place in the jurisdictions where the plans operate.

On August 18, 2016, the Company received regulatory approval to merge certain of its pension plans. The merger was
completed during the quarter ended December 31, 2016. This has impacted the balance sheet presentation of the pension
plans.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

Information about the Company's defined benefit plans as at December 31, in aggregate, is as follows:

Other post-

retirement

Other post-

2016

retirement

benefits

Pension

Total

benefits

Pension

2015

Total

Accrued benefit obligation:

Balance, beginning of year

58,539

$ 1,146,332

$ 1,204,871

60,369

$ 1,163,748

$ 1,224,117

Current service cost

Interest cost

Benefits paid from plan assets

Benefits paid directly from the

Company

Actuarial (gains) losses - experience
Actuarial (gains) losses - financial

assumptions

Employee contributions

Special termination benefits

Curtailments
Settlements(iii)
Balance, end of year

Unfunded
Funded(i)
Total obligation
(i) Includes wholly and partially funded plans

105

2,122

12,800

42,320

12,905

44,442

112

2,191

13,688

42,988

13,800

45,179

—

(78,284)

—

(71,376)

(3,457)

(3,072)

(1,449)

(9,424)

(4,906)

(12,496)

(3,530)

(603)

267

—

3,502

3,532

—

3,769

3,532

—

(36,796)

54,504

$ 1,082,533

$ 1,137,037

54,504

28,686

83,190

(1,464)

1,435

—

3,522

1,131

(109)

(7,231)

(4,994)

832

—

3,522

1,131

(109)

(7,231)

—

58,539

$ 1,146,332

$ 1,204,871

58,539

28,766

87,305

— 1,053,847

1,053,847

— 1,117,566

1,117,566

54,504

$ 1,082,533

$ 1,137,037

58,539

$ 1,146,332

$ 1,204,871

Plan Assets

Fair value, beginning of year

— $ 1,069,260

$ 1,069,260

— $ 1,117,224

$ 1,117,224

Interest income
Actuarial gains (losses)(ii)
Employer contributions

Employee contributions

Benefits paid

Asset transfer to Company defined

contribution plan

Administrative costs
Settlements(iii)
Fair value, end of year

Other

Accrued net benefit asset (liability),

—

38,635

55,711

3,734

3,532

38,635

55,711

3,734

3,532

(78,284)

(13,478)

(2,121)

(36,373)

—

40,473

1,397

3,781

3,522

1,397

3,781

3,522

(71,376)

(14,351)

(3,024)

(8,386)

(3,024)

(8,386)

— $ 1,040,616

$ 1,040,616

— $ 1,069,260

$ 1,069,260

— $

(1,998) $

— $

(1,111) $

(1,111)

end of year
(ii) Return on plan assets greater (less) than discount rate.

(54,504) $

(43,915) $

(98,419) $

(58,539) $

(78,183) $ (136,722)

(iii) 2016 includes the transfer of assets and liabilities to third parties related to previously divested businesses; 2015
includes settlement of benefits related to sale and closures of facilities.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

Amounts recognized in the consolidated balance sheet consist of:

Employee benefit assets

Employee benefit liabilities

Accrued net benefit asset (liability), end of year

Pension benefit expense recognized in net earnings:

Current service cost - defined benefit

Current service cost - defined contribution and multi-employer plans

Net interest cost (benefit)

Administrative costs
Curtailment (gain)(i)
Special termination benefits(i)
Settlement (gain)loss(i)
Net pension benefit expense

As at December 31,

2016

2015

10,311

66,519

108,730

203,241

$ (98,419)

$ (136,722)

2016

2015

$ 12,800

13,688

14,931

3,685

2,121

—

(423)

16,038

2,515

3,024

(109)

1,131

1,155

$ 33,114

37,442

(i)

For the year ended December 31, 2016 included in other income. For the year end December 31, 2015 included in
restructuring and other related costs.

For the year ended December 31, 2016, the Company expensed salaries of $656.7 million (2015: $708.5 million), excluding
pension and other post-retirement benefits.

Amounts recognized in other comprehensive income (loss) (before income taxes):

Actuarial gains (losses)

2016

63,206

2015

539

The significant actuarial assumptions adopted in measuring the Company’s accrued benefit obligations are as follows:

Weighted average discount rate

Rate of salary increase

Medical cost trend rates

Plan assets comprise of:

Equity securities

Debt securities

Other investments and cash

2016

3.70%

3.00%

5.00%

2015

3.75%

3.50%

5.00%

As at December 31,

2016

60%

36%

100%

2015

59%

40%

100%

As at December 31, 2016, 29% of the equity securities are a Level 1 on the fair value hierarchy, with the remainder being
Level 2. All of the debt securities are a Level 2 on the fair value hierarchy.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

Other post-

Total

retirement

pensions

$ 32,514

benefits

1,357

0.25% increase

$ (31,551)

$ (1,324)

Rate of salary increase
Mortality

3.00% 0.50% increase
Increase of 1 year
in expected
lifetime of plan
participants

110% of 2014 Private
Sector Canadian
Pensioners' Mortality
Table, projected
generationally using
Scale CPM-B

$
3,051
$ 30,282

N/A
1,836

Total

$ 33,871

$ (32,875)

$
3,051
$ 32,118

Measurement dates:

2016 expense

Balance sheet

December 31, 2015

December 31, 2016

The average expected maturity of the pension obligations is 13.0 years (2015: 12.9 years).

The Company expects to contribute $31.1 million to pension plans in 2017, inclusive of defined contribution plans and multi-
employer plans.

Governance and Risk Management

The Company administers its pension plans through its Board of Directors. The Company’s Board of Directors has established
a governance structure and delegated to the Audit Committee and the Pension Investment Advisory Committee all aspects of
the investment of the funds. The Company’s Board of Directors has delegated to the Pension Policy and Administration
Committee the authority to make amendments to the documents that govern the pension plans of an administrative or
compliance nature, that relate to collective bargaining agreements entered into by the Company or that have a minimal
financial impact on the plans.

In fulfilling their responsibilities, the Audit Committee and the Pension Investment Advisory Committee may delegate functions
or responsibilities to, or otherwise utilize employees of the Company where appropriate. The Audit Committee and the Pension
Investment Advisory Committee may rely on independent experts for certain aspects of the funds’ operations. The Audit
Committee or the Pension Investment Advisory Committee, as appropriate, retain responsibility and utilize suitable personnel
for such activities and monitor the activities undertaken by the selected personnel.

The plan assets are invested primarily in well-diversified pooled funds that meet the constraints set out in legislation of the
jurisdictions in which the plans operate. Further diversification criteria set out in investment funds' governing documents
require the division of investments between equities and fixed income. There are no significant concentrations of risks.

Multi-Employer Plan

The Company contributes to the Canadian Commercial Workers Industry Pension Plan which is a multi-employer defined
benefit plan for employees who are members of the United Food and Commercial Workers Canada union. This is a large-scale
plan for union workers of multiple companies across Canada. Adequate information to account for these contributions as a
defined benefit plan in the Company’s statements is not available due to the size and number of contributing employers in the
plan. Included in pension benefit expense is $0.7 million (2015: $0.8 million) related to payments into this plan. The Company
expects to contribute $0.7 million into this plan for in 2017.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

10. GOODWILL

The net carrying value for goodwill was $428.2 million as at December 31, 2016 (2015: $428.2 million). There were no
impairment losses recorded for the years ended December 31, 2016 and 2015.

For the purposes of annual impairment testing, goodwill is allocated to the Meat Products CGU Group, being the group
expected to benefit from the synergies of the business combinations in which the goodwill arose.

Annual impairment testing involves determining the recoverable amount of the CGU group to which goodwill is allocated, and
comparing this to the carrying value of the CGU group. The measurement of the recoverable amount of the CGU group was
calculated based on fair value less costs to sell. Where there was no market information available, fair value was determined
by discounting the future cash flows generated from the continuing use of the group. The calculation of the fair value based on
discounting the future cash flows was based on the following key assumptions:

• Cash flows were projected based on the Company's long-term business plan. Cash flows for a further perpetual
period were extrapolated using the growth rates listed below. These rates do not exceed the long term average
growth rate for the countries in which the group operates. Material differences in these estimates could have a
significant impact on the determination of the recoverable amount.

•

The business plan contains forecasts based on past experience of actual operating results in conjunction with
anticipated future growth opportunities. While the forecast does assume some base business expansion, largely
related to innovation, the primary engine of growth is strategic in nature and is consistent with the projects and
expectations as articulated in the Company's strategic plan.

• Discount rates as shown in the table below were applied in determining the recoverable amount of the CGU group.

The discount rate was estimated based on past experience and the weighted average cost of capital of the Company
and other competitors in the industry.

CGU Group

Meat Products

Discount Rate

Growth Rate

2016

8.0%

2015

8.6%

2016

2.2%

2015

2.2%

The values assigned to the key assumptions represent Management's assessment of future trends in the industries in which
the CGU group operates and are based on both external and internal sources and historical trend data.

11. INTANGIBLE ASSETS

Definite life

Indefinite life

Total intangible assets

Cost

Accumulated amortization

Net balance, December 31, 2016

Cost

Accumulated amortization

Net balance, December 31, 2015

As at December 31,

2016

2015

$ 61,232

$ 71,302

66,853

$ 128,085

$ 138,155

Definite Life

Software in
use

Software in
process

Total

$ 105,979

(50,478)

$ 55,501

5,731

$ 111,710

—

(50,478)

5,731

$ 61,232

Software in
use

$ 150,878

(83,904)

$ 66,974

Software in
process

Total

4,328

$ 155,206

—

(83,904)

4,328

$ 71,302

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

The changes in net carrying amounts of definite life intangibles during 2016 and 2015 were as follows:

Net balance, December 31, 2015

Additions

Transfers

Amortization

Net balance, December 31, 2016

Net balance, December 31, 2014

Additions

Transfers

Amortization

Net balance, December 31, 2015

Net balance, December 31, 2016 and 2015

Amortization

Software in
use

Software in
process

Total

$ 66,974

4,328

$ 71,302

—

4,668

(16,141)

6,071

(4,668)

—

6,071

—

(16,141)

$ 55,501

5,731

$ 61,232

Software in
use

Software in
process

Total

$ 97,234

979

$ 98,213

—

2,375

(32,635)

5,724

(2,375)

—

5,724

—

(32,635)

$ 66,974

4,328

$ 71,302

Indefinite Life

Trademarks

Quota

Total

$ 46,700

$ 20,153

$ 66,853

Amortization is recorded through cost of goods sold or selling, general, and administrative expenses depending on the nature
of the asset.

Disposals

Disposals during the years ended December 31, 2016 and 2015 were fully amortized. Fully amortized assets previously used
for providing ongoing information systems support to divested businesses were disposed of at the end of the transitional
period in 2016.

Borrowing Costs

For the years ended December 31, 2016 and 2015, there were no borrowing costs capitalized.

Indefinite Life Intangibles

The indefinite life intangible assets are allocated to the Meat Products CGU Group.

The Company performs annual impairment testing on its indefinite life intangible assets. Annual impairment testing, consistent
with the impairment testing for goodwill as described in Note 10, involves determining the recoverable amount of each
indefinite life intangible asset and comparing it to the net carrying value.

Trademarks

The recoverable value of trademarks is calculated using the royalty savings approach, which involves present valuing the
royalties earned by similar trademarks. The key assumptions used in this determination are:

Royalty rate range

Growth rate

Discount rate

Quotas

2016

2015

1.5 - 2.0%

2.20%

10.0%

2.25%

10.0%

The recoverable value of quotas is determined based on recent sales of similar quota, as this is an active market and reliable
information is readily available.

12. PROVISIONS

Balance at December 31, 2015

Charges

Reversals

Cash payments

Non-cash items

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

Restructuring and related
provisions

Severance
and other
employee
related costs

Site
closing
and other
cash costs

Lease
make-
good

Total

$ 2,337

$ 25,113

$ 9,153

$ 47,153

Legal

$ 2,250

Environ-
mental

$ 8,300

—

(102)

—

(101)

(8)

—

9,613

(3,623)

(22,439)

(8)

537

(1,398)

(1,387)

172

10,185

(5,122)

(23,936)

164

$ 28,444

$ 11,889

16,555

$ 28,444

Total

25,162

(4,166)

(50,628)

(1,093)

$ 47,153

$ 32,531

14,622

$ 47,153

Balance at December 31, 2016

$ 2,250

$ 8,233

$ 2,228

8,656

$ 7,077

Current

Non-current

Total at December 31, 2016

Balance at December 31, 2014

Charges

Reversals

Cash payments

Non-cash items

Legal

$ 2,250

—

Environ-
mental

$ 11,030

—

(2,240)

(490)

—

Restructuring and related
provisions

Lease
make-
good

Severance
and other
employee
related costs

Site closing
and other
cash costs

250

—

(1,350)

(1,020)

19,874

(1,844)

(40,324)

(410)

5,038

(82)

(8,464)

337

$ 4,457

$ 47,817

$12,324

$ 77,878

Balance at December 31, 2015

$ 2,250

$ 8,300

$ 2,337

$ 25,113

$ 9,153

Current

Non-current

Total at December 31, 2015

Restructuring and Other Related Costs

For the year ended December 31, 2016, the Company recorded restructuring and other related costs of $6.6 million.

The Meat Products Group incurred $4.8 million in restructuring and other related costs. Of this amount, $3.2 million related to
severance costs net of reversals, $1.4 million related to asset impairment and accelerated depreciation and $0.1 million
related to site closing costs. Within these amounts, $3.7 million of severance costs and $1.0 million of accelerated depreciation
related to the announced closure of the Thamesford turkey processing plant.

For the year ended December 31, 2015, the Company recorded restructuring and other related costs of $33.8 million. The
Meat Products Group incurred $15.3 million in restructuring and other related costs, of this amount, $8.7 million related to
asset impairment and accelerated depreciation, $4.2 million related to site closing costs and $2.4 million related to severance
and other employee costs net of reversals.

For the years ended December 31, 2016 and 2015, the balance of restructuring costs primarily related to severance and other
employee costs that were incurred in connection with ongoing management and organizational structure restructuring
initiatives.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

13. LONG-TERM DEBT

Current portion of long-term debt

Long-term debt

As at December 31,

2016

2015

794

813

9,119

9,843

$ 9,913

$ 10,656

The Company has various government loans on specific projects, with interest rates ranging from non-interest bearing to 2.9%
per annum. These facilities are repayable over various terms from 2022 to 2024. As at December 31, 2016, $9.9 million (2015:
$10.7 million) was outstanding. All of these facilities are committed.

On June 24, 2016, the Company entered into a new three-year $400.0 million committed revolving credit facility with a
syndicate of Canadian, U.S., and international institutions. The new credit facility replaced the Company's $200.0 million
revolving credit facility that was due to mature on June 30, 2016. This unsecured facility can be drawn in Canadian or U.S.
dollars and bears interest payable monthly, based on Banker's Acceptance and Prime rates for Canadian dollar loans and
LIBOR for U.S. dollar loans. The facility is intended to meet the Company's funding requirements for general purposes, and to
provide appropriate levels of liquidity. As at December 31, 2016, the Company had drawn only letters of credit of $6.2 million
on this facility (2015: $60.3 million on the previous facility).

The revolving term facility requires the maintenance of certain covenants. As at December 31, 2016, the Company was in
compliance with all of these covenants.

The Company has an additional uncommitted credit facility for issuing up to a maximum of $120.0 million letters of credit. As at
December 31, 2016, $63.4 million of letters of credit had been issued thereon (2015: $79.4 million). These letters of credit
have been collateralized with cash, as further described in Note 4 of the consolidated financial statements.

The Company’s estimated average effective cost of borrowing for 2016 was approximately 4.6%, which excludes any impact of
interest rate hedges (2015: 4.5%). Required repayments of long-term debt are as follows:

2017

2018

2019

2020

2021

Thereafter

Total long-term debt

14. OTHER CURRENT LIABILITIES

Derivative instruments

Obligation for repurchase of shares

Other

$ 1,083

1,083

5,765

$ 11,180

Notes

As at December 31,

2016

2015

8,430

$ 13,662

88,322

105

12,574

3,401

$ 96,857

$ 29,637

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

15. OTHER LONG-TERM LIABILITIES

Derivative instruments

Step rent and lease inducements

Other

16. SHARE CAPITAL

(thousands of shares)

Balance, beginning of year

Distributions under share-based compensation plans

Exercise of share options

Shares repurchased

Purchase of treasury stock

Balance, end of year

Common Shares

Note

As at December 31,

2016

—

9,001

3,653

2015

6,480

9,545

4,876

$ 12,654

$ 20,901

Common Shares

Treasury Stock

2016

2015

134,987

142,943

182

163

148

262

(2,618)

(8,137)

(629)

(229)

132,085

134,987

2016

2015

(182)

(148)

—

629

540

—

229

The authorized share capital consists of an unlimited number of common shares, an unlimited number of non-voting common
shares, and an unlimited number of preference shares. These shares have no par value.

The holders of common shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per
share at meetings of the Company.

On May 1, 2014, shareholders of the Company reconfirmed the Shareholder Rights Plan (the "Rights Plan"). While the Rights
Plan was entered into on December 5, 2011, it required reconfirmation by shareholders of the Company at the May 2014
annual meeting in order to remain in effect. Under an amended and restated governance agreement with McCain Capital Inc.
and Michael H. McCain signed February 21, 2017, the Rights Plan will be permitted to expire in May 2017. See note 27
Subsequent Events for more details.

Treasury Stock

Treasury stock is comprised of shares purchased by a trust in order to satisfy the requirements of the Company's Restricted
Share Plan, as described in Note 22.

Share Repurchase

The Company entered into an Automatic Share Purchase Plan ("ASPP") with a broker that allows the purchase of common
shares for cancellation under the NCIB at any time during predetermined trading blackout periods. As at December 31, 2016,
an obligation for the repurchase of shares of $88.3 million (2015: $12.6 million) was recognized under the ASPP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

17. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT ACTIVITIES

Capital

The Company typically uses leverage in its capital structure to reduce the cost of capital. The Company’s goal is to maintain its
primary credit ratios and leverage at levels that are designed to provide continued access to investment-grade credit pricing
and terms. The Company measures its credit profile using a number of metrics, some of which are non-IFRS measures,
primarily cash and cash equivalents, less long-term debt and bank indebtedness (“net cash (debt)”) to earnings before interest,
income taxes, depreciation, amortization, restructuring and other related costs (“EBITDA”), and interest coverage.

The Company’s various credit facilities are subject to certain financial covenants. As at December 31, 2016, the Company was
in compliance with all of these covenants.

In addition to senior debt, credit facilities, and equity, the Company uses leases and very limited recourse accounts receivable
securitization programs as additional sources of financing.

There have been no material changes to the Company’s risk management activities during the year ended December 31,
2016.

Financial Instruments

The Company’s financial assets and liabilities are classified into the following categories:

Cash and cash equivalents

Accounts receivable

Notes receivable

Bank indebtedness

Accounts payable and accrued liabilities

Long-term debt
Derivative instruments(i)

Held for trading

Loans and receivables

Other financial liabilities

Held for trading

(i) These derivative instruments may be designated as cash flow hedges or as fair value hedges as appropriate.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

The fair values and notional amounts of derivative financial instruments as at December 31 are shown below:

Cash flow hedges

Foreign exchange contracts(ii)
Commodity contracts(ii)

Fair value hedges
Commodity contracts(ii)
Derivatives not designated in a

formal hedging relationship

Interest rate swaps
Foreign exchange contracts(ii)
Commodity contracts(ii)

Total fair value
Current(iii)
Non-current

Total fair value

2016

2015

Notional
(i)
amount

Fair value

Asset

Liability

Notional
amount(i)

Fair value

Asset

Liability

$ 182,696

348

$ 1,019

$ 101,768

258

$ 3,740

—

16,292

—

457

44,738

— $

848

40,128

$ 1,746

—

$ 520,000

$ 2,128

$ 5,893

$ 520,000

$ 5,078

$ 12,798

450,259

537,621

11,248

13,113

670

—

161,456

197,205

2,587

3,119

921

2,226

$ 26,837

$ 8,430

$ 26,837

$ 8,430

—

$ 26,837

$ 8,430

$ 12,788

$ 20,142

$ 10,265

$ 13,662

2,523

6,480

$ 12,788

$ 20,142

For the year ended December 31, 2016, the pre-tax amount of hedge ineffectiveness recognized in other income (expense)
was a loss of $0.0 million (2015: gain of $0.1 million).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

The table below sets out fair value measurements of financial instruments as at December 31, 2016 using the fair value
hierarchy:

Assets:

Foreign exchange contracts

Commodity contracts

Interest rate swaps

Liabilities:

Foreign exchange contracts

Commodity contracts

Interest rate swaps

Level 1

Level 2

Level 3

Total

—

11,596

12,341

—

12,341

—

848

—

848

772

2,128

14,496

1,689

—

5,893

7,582

—

11,596

13,113

2,128

26,837

1,689

848

5,893

8,430

The risks associated with the Company’s financial instruments and policies for managing these risks are detailed below.

Credit Risk

Credit risk refers to the risk of losses due to failure of the Company’s customers and counterparties to meet their payment
obligations.

In the normal course of business, the Company is exposed to credit risk from its customers, substantially all of which are in the
retail, food service, industrial, and convenience channels. The Company performs ongoing credit evaluations of new and
existing customers’ financial condition, and reviews the collectibility of its trade accounts receivable and other receivables in
order to mitigate any possible credit losses. The Company has accounts receivable outstanding greater than 60 days past
due and maintains an allowance for doubtful accounts relating to specific losses estimated on individual exposures as
described in Note 5. Average accounts receivable days sales outstanding for the year is consistent with historic trends.

The Company is exposed to credit risk on its notes receivable from an unconsolidated structured entity in respect of the
accounts receivable securitization program as described in Note 23. Management believes that this credit risk is limited by the
long-term AA- debt rating held by the financial institution financing the third party trust. The Company is exposed to credit risk
on its cash and cash equivalents (comprising primarily of deposits with Canadian chartered banks) and non-exchange-traded
derivative contracts. The Company mitigates this credit risk by transacting primarily with counterparties that are major
international financial institutions with long-term debt ratings of A or higher. The Company’s maximum exposure to credit risk at
the balance sheet date consisted primarily of the carrying value of non-derivative financial assets and non-exchange-traded
derivatives with positive fair values.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

The contractual undiscounted principal cash flows payable in respect of financial liabilities as at the balance sheet date, were
as follows:

Financial liabilities

Accounts payable and accruals
Long-term debt(i)
Foreign exchange contracts

Commodity futures contracts
Interest rate swaps(i)
Other liabilities

Total

December 31, 2016

Due within 1
year

Due between
1 and 2 years

Due between
2 and 3 years

Due after 3
years

Total

$ 256,163

—

$ 256,163

1,083

1,689

848

5,893

1,083

7,931

—

867

—

1,425

11,180

1,689

848

5,893

93,048

89,622

1,134

$ 355,298

2,217

1,950

9,356

$ 368,821

(i) Does not include contractual interest payments

As at December 31, 2016, the Company had available undrawn committed credit of $393.8 million (2015: $139.7 million)
under the terms of its principal banking arrangements (Note 13). These banking arrangements are subject to certain
covenants and other restrictions.

Market Risk

Interest Rate Risk

Interest rate risk refers to the risk that the value of a financial instrument or cash flows associated with the instrument will
fluctuate due to changes in market interest rates.

The Company manages its interest rate risk exposure by using a mix of fixed and variable rate debt and periodically using
interest rate derivatives to achieve the desired proportion of variable to fixed-rate debt.
At December 31, 2016 and 2015, the Company had no variable rate debt, however, the Company is exposed to floating
interest rates on its accounts receivable securitization program. As at December 31, 2016, the amount serviced pursuant to
this program was $84.5 million at a weighted average interest rate of 1.0% (2015: $91.5 million at a weighted average interest
rate of 1.6%). The maximum amount available to the Company under these programs is $110.0 million (2015: $110.0 million).

As at December 31, 2016, 10.5% (2015: 10.4%) of the Company’s outstanding debt and revolving accounts receivable
securitization program were not exposed to interest rate movements.

Foreign Exchange Risk

Foreign exchange risk refers to the risk that the value of financial instruments or cash flows will fluctuate due to changes in
foreign exchange rates.

The Company’s foreign exchange risk arises primarily from transactions in currencies other than Canadian dollars, US dollar-
denominated borrowings, and investments in foreign operations.

The Company uses foreign exchange forward contracts to manage foreign exchange transaction exposures. The primary
currencies to which the Company is exposed to are the U.S. dollar and the Japanese yen. Qualifying foreign currency forward
contracts are accounted for as cash flow hedges. As of December 31, 2016, $182.7 million (2015: $101.8 million) of
anticipated foreign currency denominated sales and purchases have been hedged with underlying foreign exchange forward
contracts settling at various dates beginning January 2017. The aggregate net fair value of these forward contracts was a loss

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

of $0.7 million as at December 31, 2016 (2015: loss of $3.5 million) that was recorded in accumulated other comprehensive
income (loss) with an offsetting amount recorded in other current assets and liabilities. The Company also holds foreign
exchange contracts for $450.3 million (2015: $161.5 million) related to anticipated foreign currency denominated sales and
purchases that are not held in a qualifying hedge relationship.

It is estimated that, all else constant, an adverse hypothetical 10% change in the value of the Canadian dollar against all
relevant currencies would result in a decrease in the fair value of the Company’s foreign exchange forward contracts of $15.9
million, with a corresponding decrease in earnings before taxes of $24.6 million offset by an increase in other comprehensive
income before taxes of $8.7 million.

Commodity Price Risk

The Company uses futures to minimize the price risk assumed under forward priced contracts with suppliers. This includes
futures contracts that are designated and accounted for as fair value hedges as well as non-designated derivative instruments.

The Company also uses futures to minimize the price risk of anticipated or forecasted transactions which are accounted for as
cash flow hedges as well as non-designated derivative instruments.

Changes in the fair value of the cash flow hedging derivatives are recorded in other comprehensive income (loss) to the extent
the hedge is effective in mitigating the exposure to the related anticipated transaction, and subsequently reclassified to
earnings to offset the impact of the hedged items when they affect earnings. The Company did not have any futures contracts
designated as cash flow hedging derivatives as at December 31, 2016. The aggregate fair value of futures contracts
designated as cash flow hedging derivatives for the year ended December 31, 2015 was a gain of $0.5 million that was
recorded in accumulated other comprehensive income (loss) with an offsetting amount recorded in other current liabilities. The
Company also holds commodity contracts designated as fair value hedges for $44.7 million (2015: $40.1 million) and has
$537.6 million (2015: $197.2 million) in contracts that are not held in a qualifying hedge relationship.

It is estimated that, all else constant, an adverse hypothetical 10% change in market prices of the underlying commodities
would result in a decrease in the fair value of underlying outstanding derivative contracts of $17.8 million, with a decrease in
earnings before taxes of $17.8 million and $0.0 million in other comprehensive income (loss). These amounts exclude the
offsetting impact of the commodity price risk inherent in the transactions being hedged.

Accumulated other comprehensive income (loss)

The Company estimates that $0.7 million, net of tax of $0.2 million, of the unrealized gain included in accumulated other
comprehensive income (loss) will be reclassified into net earnings within the next 12 months. The actual amount of this
reclassification will be impacted by future changes in the fair value of financial instruments designated as cash flow hedges.
The actual amount reclassified could differ from this estimated amount.

During the year ended December 31, 2016, a gain of $6.6 million, net of tax of $2.3 million, was released to earnings from
accumulated other comprehensive income (loss) and included in the net change for the year (2015: loss of $11.1 million, net of
tax of $3.9 million).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

18. OTHER INCOME (EXPENSE)

Gain (loss) on disposal of property and equipment

Gain (loss) on sale of investment properties

Recovery from insurance claims

Net investment property expense
Impairment of assets(i)
Depreciation of assets used to support divested businesses(ii)
Interest income

Provision estimate changes

Net expense on non-designated interest rate swaps

Change in fair value of non-designated interest rate swaps

Other

2016

2015

$ (4,195)

(753)

5,430

425

(1,819)

(2,831)

(1,331)

2,790

—

(4,028)

3,955

(1,992)

11,097

2,010

(3,578)

(1,907)

(14,482)

3,393

2,217

(5,034)

4,768

370

$ (3,596)

$ (1,899)

(i)

Relates to the impairment of property and equipment not in use.

(ii) Relates to assets used to provide ongoing information systems support to divested businesses during a transitional

period. As a result of divestitures during 2014, the Company revised the estimated useful life of these assets, resulting in
a depreciation charge in excess of cost recoveries. During the year ended December 31, 2016, the Company further
revised the estimated useful life of these assets, resulting in a reduction in the depreciation charge recorded during the
period.

19. INTEREST EXPENSE AND OTHER FINANCING COSTS

Interest expense on long-term debt

Interest expense on securitized receivables

Deferred finance charges

Other interest charges

Other financing costs

20. INCOME TAXES

The components of income tax expense were as follows:

Current tax expense

Current year

Deferred tax expense

Origination and reversal of temporary differences

Adjustment for prior periods

Change in tax rates

Total income tax expense

2016

403

1,520

688

2,308

1,448

2015

377

1,667

337

2,330

—

6,367

4,711

2016

2015

4,767

1,893

$ 63,124

$ 13,225

—

(3,881)

(166)

$ 63,124

$ 67,891

9,178

$ 11,071

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

Reconciliation of Effective Tax rate

Income tax expense varies from the amount that would be computed by applying the combined federal and provincial statutory
income tax rates as a result of the following:

Income tax expense according to combined statutory rate of 26.8% (2015: 26.6%)

$ 66,891

$ 14,017

2016

2015

Increase (decrease) in income tax resulting from:

Deferred tax expense (recovery) relating to changes in tax rates

Tax rate differences in other jurisdictions

Manufacturing and processing credit

Share-based compensation

Non-deductible expenses

Unrecognized income tax benefit of losses

Adjustment for favorable tax audit resolution

Other

Income Tax Recognized in Other Comprehensive Income (Loss)

Derivative instruments

Pension adjustments

Deferred Tax Assets and Liabilities

Recognized Deferred Tax Asset and Liabilities

—

249

(1,714)

904

596

—

895

(166)

354

(314)

725

289

(2,950)

(951)

$ 67,891

$ 11,071

2016

850

16,963

$ 17,813

2015

(690)

150

(540)

The Company has recognized deferred tax assets in the amount of approximately $56.0 million (2015: $94.0 million), relating
primarily to tax losses carried forward and future deductions for employee benefits and restructuring expenses. These deferred
tax assets are recorded based on the Company's estimate that it will earn sufficient taxable profits to fully utilize its tax losses
in the appropriate carry over periods.

The Company has recognized deferred tax liabilities in the amount of approximately $78.3 million (2015: $38.9 million),
relating primarily to claims for tax depreciation in excess of accumulated book depreciation, cash basis farming adjustments,
and the excess of book value over the tax cost of intangible assets.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

Deferred tax assets:

Tax losses carried forward

Accrued liabilities

Employee benefits

Other

Deferred tax liabilities:

Property and equipment

Cash basis farming

Goodwill and other intangible assets

Classified in the consolidated financial statements as:

Deferred tax asset

Deferred tax liability

Unrecognized Deferred Tax Assets

As at December 31,

2016

2015
(Restated)
(Note 3(v))

$ 13,794

$ 36,746

5,292

35,830

1,095

16,955

35,317

4,985

$ 56,011

$ 94,003

$ 34,759

$ 10,465

26,096

17,449

10,995

17,449

$ 78,304

$ 38,909

—

$ 55,094

22,293

—

The Company has no unrecognized deferred tax assets as at December 31, 2016 and 2015.

Unrecognized Deferred Tax Liabilities

There is no unrecognized temporary difference as at December 31, 2016 and 2015.

21. EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing the net earnings of the Company by the weighted average
number of shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net earnings of the Company by the weighted average
number of shares outstanding during the year, adjusted for the effects of potentially dilutive instruments.

The following table sets forth the calculation of basic and diluted earnings (loss) per share (“EPS”):

Years ended December 31,

Basic
Stock options(i)
Diluted

2016

Weighted
average
number of
(ii)
shares

EPS

Net
earnings

134.2

$ 1.35

$ 41,580

3.4

Net
earnings

$181,702

137.6

$ 1.32

$ 41,580

2015

Weighted
average
number of
shares(ii)
140.2

1.5

141.7

EPS

$ 0.30

$ 0.29

(i) Excludes the effect of approximately 3.2 million (2015: 4.0 million) options and performance shares that are anti-dilutive.
(ii)

In millions.

22. SHARE-BASED PAYMENT

Under the Maple Leaf Foods Share Incentive Plan and the Share Options Plan in effect as at December 31, 2016, the
Company may grant options to its employees and employees of its subsidiaries to purchase shares of common stock. Under
the Maple Leaf Foods Restricted Share Unit Plan (adopted in 2006) ("the 2006 Plan") in effect as at December 31, 2016, the
Company may grant Restricted Share Units (“RSUs”) and Performance Share Units (“PSUs”) to its employees and employees
of its subsidiaries entitling employees to receive common shares or cash at the Company’s option. Options, RSUs, and PSUs
are granted from time to time by the Human Resources and Compensation Committee or by the Board of Directors on the

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

recommendation of the Human Resources and Compensation Committee. The vesting conditions for options, RSUs, and
PSUs are specified by the Board of Directors and may include the continued service of the employee with the Company and/or
other criteria based on measures of the Company’s performance.

Under the Company’s Share Purchase and Deferred Share Unit Plan (“DSU Plan”), eligible Directors may elect to receive their
retainer and fees in the form of Deferred Share Units (“DSUs”) or as common shares of the Company.

Stock Options
Since it was adopted in 2004, options were granted under the Share Incentive Plan. In 2016, the Share Option Plan was
adopted and will be the only plan under which options will be granted after 2016. A summary of the status of the Company’s
outstanding stock options as at December 31, 2016 and 2015, and changes during these years are presented below:

2016

2015

Weighted
average
exercise
price

Options
outstanding

Outstanding, beginning of year

3,608,000

$ 16.61

3,141,200

$ 14.83

Granted

Exercised

Forfeited

Outstanding, end of year

Options currently exercisable

841,300

(162,500)

(26,800)

4,260,000

2,554,900

22.53

17.39

20.28

$ 17.73

$ 14.86

728,400

(261,600)

—

3,608,000

2,105,600

22.52

11.60

—

$ 16.61

$ 13.22

All outstanding stock options vest and become exercisable over a period not exceeding five years (time vesting) from the date
of grant. The outstanding options have a term of seven years.

The number of options outstanding as at December 31, 2016, is as follows:

Options Outstanding

Options currently
exercisable

Options subject to
timing vesting only

Range of
exercise prices

Number
outstanding

Weighted
average
exercise
price

Weighted
average
remaining
term of options
(in years)

Weighted
average
exercise
price

Number
exercisable

Weighted
average
exercise
price

Number
outstanding

$11.36 to $11.85

1,664,900

$11.64

$20.28 to $22.53

2,595,100

21.63

Total Options

4,260,000

$17.73

1.4

5.3

3.8

1,664,900

$11.64

—

$ —

890,000

20.88

1,705,100

22.03

2,554,900

$14.86

1,705,100

$22.03

The number of options outstanding as at December 31, 2015, is as follows:

Options outstanding

Options currently
exercisable

Options subject to
timing vesting only

Range of
exercise prices

Number
outstanding

Weighted
average
exercise
price

Weighted
average
remaining
term of options
(in years)

Weighted
average
exercise
price

Number
exercisable

Weighted
average
exercise
price

Number
outstanding

$11.36 to $11.85

1,718,600

$11.63

$20.28 to $22.52

1,889,400

21.14

Total Options

3,608,000

$16.61

2.39

5.89

4.23

1,718,600

$11.63

—

$ —

387,000

20.28

1,502,400

21.37

2,105,600

$13.22

1,502,400

$21.37

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

At grant date, each option series is measured at fair value based on the Black-Scholes formula. Expected volatility is
estimated by considering historic average share price volatility. The inputs used in this model for the options granted during the
years ended December 31, 2016 and 2015 are shown in the table below.

Share price at grant date

Exercise price
Expected volatility(i)
Option life (in years)(ii)
Expected dividend yield
Risk-free interest rate(iii)

(i) Weighted average based on number of units granted.
(ii) Expected weighted average life.
(iii) Based on Government of Canada bonds.

2016

$23.14

$22.53

2015

$21.86

$22.52

23.71%

24.33%

4.5

1.56%

0.67%

4.5

1.46%

0.95%

There were 841,300 (2015: 728,400) stock options issued during the year ended December 31, 2016. The fair value of options
granted during the year ended December 31, 2016 was $3.4 million (2015: $2.6 million). Amortization charges relating to
current and prior year options were $3.5 million (2015: $2.8 million).

Restricted Share Units and Performance Share Units

The awards granted under the 2006 Plan are satisfied either by shares to be purchased on the open market by a trust
established for that purpose, or cash at the option of the Company on the time of vesting.

Under the 2006 Plan, one common share of the Company may be distributed for each RSU, and these units vest strictly over
time. The PSUs are subject to both time and performance vesting. The PSUs provide the holder with up to two RSUs based on
the achievement of predetermined Company performance targets. All outstanding RSUs and PSUs under the 2006 Plan vest
over a period of approximately one to three years from the date of grant.

A summary of the status of the Company’s RSU plans (including PSUs) as at December 31, 2016 and 2015 and changes
during these periods is presented below:

Outstanding, beginning of year

Granted

Exercised

Forfeited

Outstanding, end of year

2016

2015

Weighted
average
fair value
at grant

RSUs
outstanding

Weighted
average
fair value
at grant

RSUs
outstanding

1,598,462

$ 20.61

1,320,259

$ 15.37

414,630

(343,699)

(98,724)

22.29

22.48

18.55

1,136,045

(751,564)

(106,278)

22.03

14.04

17.40

1,570,669

$ 17.86

1,598,462

$ 20.61

On April 1, 2016, the Company communicated to its employees the intent to issue RSUs in early 2017. These units have a
three year service period.

Of the RSUs exercised, the Company settled 12,538 (2015: 581,813) units in cash rather than equity instruments.
Commencing from the date of modification the Company has accounted for these as cash-settled awards. As a result of the
terms of modification the amount of this liability was fixed as at the date of the sale of Canada Bread. All of the Company’s
remaining outstanding RSUs are accounted for as equity-settled awards.

The fair value of RSUs and PSUs granted in 2016 was $7.6 million (2015: $22.5 million). Expenses for the year ended
December 31, 2016 relating to current and prior year RSUs and PSUs, were $25.0 million (2015: $11.8 million), of which $0.7
million (2015: $2.8 million) related to RSUs and PSUs that were cash settled.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

The key assumptions used in the valuation of fair value of RSUs granted during the year are shown in the table below(i).

Expected RSU life (in years)

Forfeiture rate

Risk-free discount rate

(i) Weighted average based on number of units granted.

Director Share Units

2016

2015

3.22

1.78

17.4% 10.3%

0.4% 0.5%

If an eligible Director elects to receive his or her retainer and fees as common shares of the Corporation, the Company
purchases shares at market rates on behalf of the participating Directors.

Prior to 2013, if an eligible Director elected to receive his or her fees and retainer in the form of DSUs, each DSU had a value
equal to the market value of one common share of the Company at the time the DSU is credited to the Director. DSUs attract
dividends in the form of additional DSUs at the same rate as dividends on common shares of the Company. The value of each
DSU is measured at each reporting date and is equivalent to the market value of a common share of the Company at the
reporting date.

In 2013, the Company adopted a new Share Purchase and Deferred Share Unit Plan (the “2013 DSU Plan”), which replaced
the Company’s existing Share Purchase and Deferred Share Unit Plan (the “2002 DSU Plan”). The 2002 DSU Plan only allows
for DSUs to be satisfied in cash, whereas the 2013 DSU Plan allows the Company, at its discretion, the flexibility to satisfy
DSUs in common shares, either issued from treasury or purchased by the Company on the open market. DSUs outstanding
under the 2002 DSU Plan will be governed by the terms of the 2002 DSU Plan, unless a participant elected in writing that his
or her DSUs outstanding under the 2002 DSU Plan are to be governed by the 2013 DSU Plan.

The fair value of director share units expensed during the year ended December 31, 2016 was $1.4 million (2015: $1.1
million).

A summary of the status of the Company’s outstanding DSUs as at December 31, 2016 and 2015, and changes during these
years is presented below:

Units Outstanding

2013 DSU plan

2002 DSU plan

2013 DSU plan

2002 DSU plan

2016

2015

Outstanding, beginning of year

Additions: granted

Additions: dividends reinvested

Exercised

Outstanding, end of year

Value of liability at December 31

(i)

(i) Value of liability is only applicable to 2002 plan.

23. COMPOSITION OF THE COMPANY

Unconsolidated Structured Entity

293,234

48,148

4,129

(11,067)

334,444

—

19,169

—

249

—

19,418

$ 554

396,926

48,327

5,033

(157,052)

293,234

—

18,893

—

276

—

19,169

$ 462

On August 26, 2016, the Company entered into a new three-year accounts receivable securitization facility. The maximum
cash advance available to the Company under this program is $110.0 million. The new facility replaced the Company's existing
facility that was due to mature on September 30, 2016. Under the new facility, the Company has sold certain of its trade
accounts receivable, with very limited recourse, to an unconsolidated third-party trust financed by an international financial
institution with a long-term AA- debt rating and short-term notes back to the Company. The receivables are sold at a discount
to face value based on prevailing money market rates. The Company retains servicing responsibilities for these receivables.
On termination of the previous facility, the Company re-purchased all receivables and sold only a portion of these into the new
facility.

Under the previous securitization facility, the Company had sold certain of its trade accounts receivable to an unconsolidated
structured entity owned by a financial institution, under a revolving securitization program. The Company retained servicing
responsibilities for these receivables. The structured entity financed the purchase of these receivables by issuing senior debt
instruments to the financial institution, short-term mezzanine notes back to the Company, and an equity interest held by the

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

financial institution. The maximum potential loss that could be borne by subordinated interests in the structured entity was a
$1.5 million equity interest.

As at December 31, 2016, trade accounts receivable being serviced under this facility amounted to $116.2 million (2015:
$192.6 million). In return for the sale of its trade receivables, the Company will receive cash of $83.7 million (2015: $88.9
million) and notes receivable in the amount of $32.5 million (2015: $103.7 million). The notes receivable are non-interest
bearing and are settled on the settlement dates of the securitized accounts receivable. Due to the timing of receipts and
disbursements, the Company may, from time to time, also record a receivable or payable related to the securitization facility.
As at December 31, 2016, the Company recorded a net payable amount of $0.9 million (2015: $2.9 million net payable) in
accounts payable and accruals.

The Company’s maximum exposure to loss due to its involvement with a structured entity is equal to the current carrying value
of the interest in the notes receivable due from the structured entity. The Company has not recognized any income or losses
with its interest in unconsolidated structured entities for the year ended December 31, 2016 and 2015.

24. COMMITMENTS AND CONTINGENCIES

(a) The Company has been named as a defendant in several legal actions and is subject to various risks and contingencies

arising in the normal course of business. Management is of the opinion that the outcome of these uncertainties will not
have a material adverse effect on the Company’s financial position.

(b) In the normal course of business, the Company and its subsidiaries enter into sales commitments with customers, and
purchase commitments with suppliers. These commitments are for varying terms and can provide for fixed or variable
prices. The Company believes that these contracts serve to reduce risk, and does not anticipate that losses will be
incurred on these contracts.

existing facilities. Contract commitments as at December 31, 2016 were $4.9 million (2015: $9.1 million).

(d) The Company has lease, rent, and other commitments that require minimum annual payments as follows:

2017

2018

2019

2020

2021

Thereafter

52,352

37,300

31,547

23,197

19,457

71,263

$ 235,116

For the year ended December 31, 2016, an amount of $33.2 million was recognized as an expense in earnings in respect of
operating leases (2015: $35.7 million).

25. RELATED PARTY TRANSACTIONS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

Remuneration of key management personnel of the Company is comprised of the following expenses:

Short-term employee benefits

Salaries, bonuses, and fees

Company car allowances

Other benefits

Total short-term employee benefits

Severance benefits

Post-employment benefits

Share-based compensation

Total remuneration

2016

2015

$ 13,084

$ 7,052

288

147

274

256

$ 13,519

$ 7,582

—

840

12,596

476

782

8,811

$ 26,955

$ 17,651

26. SEGMENTED FINANCIAL INFORMATION

Reportable Segmented Information

The Company has two reportable segments, as described below, which are groupings of the Company’s CGUs. These
segments offer different products and have separate management structures. The Company’s Management regularly reviews
internal reports for these segments. The following describes the operations of each segment:

(a) The Meat Products Group is comprised of value-added prepared meats, lunch kits and snacks, and value-added fresh

pork and poultry products.

(b) The Agribusiness Group is comprised of the Company’s hog production operations that primarily supply the Meat

Products Group with livestock as well as toll feed sales.

(c) Non-allocated costs are comprised of expenses not separately identifiable to business segment groups and are not part of
the measures used by the Company when assessing the segment’s operating results. These costs include changes in fair
value of biological assets and unrealized gains or losses on commodity contracts.

Non-allocated assets are comprised of corporate assets not separately identifiable to business segment groups. These
include, but are not limited to, corporate property and equipment, software, investment properties, and tax balances.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

Sales

Meat Products Group

Agribusiness Group

Total sales

Earnings (loss) before restructuring and other related costs and other income

Meat Products Group

Agribusiness Group

Non-allocated

2016

2015

$ 3,316,490

$ 3,276,994

15,322

15,938

$ 3,331,812

$ 3,292,932

263,605

108,440

(24,323)

26,844

1,360

(16,714)

Total earnings (loss) before restructuring and other related costs and other income

266,126

93,086

Capital expenditures

Meat Products Group

Agribusiness Group

Depreciation and amortization

Meat Products Group

Agribusiness Group
Non-allocated(i)

(i)

Includes depreciation on assets used to service divested business.

Total assets

Meat Products Group

Agribusiness Group

Non-allocated assets

Goodwill

Meat Products Group

95,293

17,901

123,455

22,295

113,194

145,750

102,820

102,302

7,456

1,375

6,588

14,590

111,651

123,480

As at December 31,

2016

2015
(Restated)
(Note 3(v))

$ 1,867,146

$ 1,853,146

207,730

557,745

188,890

577,012

$ 2,632,621

$ 2,619,048

$ 428,236

Information About Geographic Areas

Property and equipment and investment property located outside of Canada was $0.2 million as at December 31, 2016 (2015:
$0.2 million). No goodwill was attributed to operations outside of Canada.

Revenues earned outside of Canada for the year ended December 31, 2016, were $762.5 million (2015: $672.7 million). Of
the total amount earned outside of Canada, $236.1 million (2015: $211.6 million) was earned in the U.S., and $314.8 million
(2015: $282.7 million) was earned in Japan. Revenue by geographic area is determined based on the shipping location.

Information About Major Customers

For the year ended December 31, 2016, the Company reported sales to one customer representing 13.2% (2015: 14.0%) of
total sales. These revenues were reported in the Meat Products Group. No other sales were made to any one customer that
represented in excess of 10% of total sales.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2016 | MAPLE LEAF FOODS INC.

27. SUBSEQUENT EVENTS

Corporate Information

Capital Stock
The Company’s authorized capital
consists of an unlimited number of
voting common shares, an unlimited
number of non-voting common
shares and an unlimited number of
preferred shares issuable in series.
At December 31, 2016, 132,625,089
voting common shares were issued
and outstanding. There were
704 shareholders of record of which
673 were registered in Canada,
holding approximately 98.8% of the
issued voting shares.

Ownership
As at December 31, 2016, the
Company’s largest shareholder
is McCain Capital Inc., holding
46,788,658 voting shares
representing approximately 35.3%
of the total issued and outstanding
shares. Michael H. McCain
beneficially owns and controls
100% of McCain Capital Inc. and
has beneficial ownership or control
of 46,788,658 common shares
or 35.3% of the common shares.
The remainder of the issued and
outstanding shares are publicly held.

Corporate Office
Maple Leaf Foods Inc.
6985 Financial Drive
Mississauga, Ontario
L5N 0A1
Canada
Tel: (905) 285-5000
Fax: (905) 285-6000
mapleleaffoods.com

Annual Meeting
The annual meeting of shareholders
of Maple Leaf Foods Inc. will be held
on Thursday, April 27, 2017, at
11:00 a.m. at
Maple Leaf Foods
ThinkFOOD!
6897 Financial Drive
Mississauga, Ontario
L5N 0A8
Canada

Dividends
The declaration and payment of
quarterly dividends are made at the
discretion of the Board of Directors.
Anticipated payment dates in 2017:
March 31, June 30, September 29
and December 29.

Shareholder Inquiries
Inquiries regarding dividends,
change of address, transfer
requirements or lost certificates
should be directed to the Company’s
transfer agent:

Computershare Investor Services Inc.
100 University Avenue
8th Floor, North Tower
Toronto, Ontario
M5J 2Y1
Canada
Tel: (514) 982-7555
or 1-800-564-6253
(toll-free North America)
or service@computershare.com

Company Information
For Investor Relations, please call
(905) 285-5898.

For copies of annual and quarterly
reports, the annual information form
and other disclosure documents,
please contact our Senior Vice-
President and Corporate Secretary
at (905) 285-5000.

Transfer Agent and Registrar
Computershare Investor Services Inc.
100 University Avenue
8th Floor, North Tower
Toronto, Ontario
M5J 2Y1
Canada
Tel: (514) 982-7555
or 1-800-564-6253
(toll-free North America)
or service@computershare.com

Auditors
KPMG LLP
Toronto, Ontario, Canada

Stock Exchange Listings
and Stock Symbol
The Company’s voting common
shares are listed on the Toronto
Stock Exchange and trade under the
symbol “MFI”.

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Maple Leaf Foods Inc. is a leading consumer protein
company, making high-quality, innovative products under
national brands including Maple Leaf®, Maple Leaf Prime®,
Maple Leaf Natural Selections®, Schneiders®, Schneiders®
Country Naturals® and Mina®. The Company employs
approximately 11,000 people across Canada and exports
to global markets, including the U.S. and Asia.

To learn more about our sustainability initiatives, please visit
mapleleafsustainability.ca

For more investor information, please visit
mapleleaff oods.com/investors

Maple Leaf Foods Inc.
6985 Financial Drive
Mississauga, Ontario
L5N 0A1 Canada
mapleleaff oods.com