Maple Leaf Foods Annual Report 2017

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FY2017 Annual Report · Maple Leaf Foods

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2017 ANNUAL REPORT

TO BE
THE MOST
SUSTAINABLE
PROTEIN
COMPANY
ON EARTH

2017 Financial Highlights

3,293

3,332
3,293

3,522

3,332

3,293

3,522

Sales
(In millions of
Canadian dollars)
Sales
(In millions of
Canadian dollars)

Sales
(In millions of
Canadian dollars)

Adjusted
EBITDA Margin(i)
(Percent)
Adjusted
EBITDA Margin(i)
(Percent)

Adjusted
EBITDA Margin(i)
(Percent)

Cash on Hand
(In millions of
Canadian dollars)
Cash on Hand
(In millions of
Canadian dollars)

Cash on Hand
(In millions of
Canadian dollars)

Share Price(ii)
(In Canadian dollars)

2015

2016
2015
2017
2016

2015
2017

2016

2017
2015

2016

2015
2017

2016
2015
2017
2016

2015
2017

2016

2017
2015

2016

2017
2015

2016
2015
2017
2016

2015
2017

2016

2017
2015

2016

2015
2017

2016
2015
2017
2016

3,332

3,293

3,522

3,332

3,522

10.3

10.8

10.3

10.8

10.3

10.8

10.3

10.8

404

199

404

6.7

292

180

203

Cash on hand NCIB Acquisitions

203

180

292

199

Cash on hand NCIB Acquisitions

404

203

180

292

199

Cash on hand NCIB Acquisitions

404

203

180

23.76

199

Cash on hand NCIB Acquisitions

28.12

23.76

35.82

28.12

Continued progress in 2017 with a 5.7%
increase in sales.

The improvement in Adjusted EBITDA
margin(i) to 10.8% was our eighth
consecutive quarter above 10%.

The Company continues to have a
strong cash position, after factoring
in share buybacks and completed
acquisitions in the year.

Share price has increased 51% from the
end of 2015 to the end of 2017.

Share Price(ii)
(i) Please refer to the Non-IFRS Measures outlined in the Management’s Discussion & Analysis on page 25.
(In Canadian dollars)
(ii) Share price is as of December 29, 2017, December 30, 2016 and December 31, 2015.
28.12

35.82

23.76

2015
2017

2016

Share Price(ii)
(In Canadian dollars)

2017
2015

2016

23.76

35.82

28.12

2017

About Maple Leaf Foods Inc.
35.82
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®, Mina®
and Lightlife™. Maple Leaf employs approximately 11,500 people
and does business in Canada, the U.S. and Asia. The Company
is headquartered in Mississauga, Ontario, and its shares trade
on the Toronto Stock Exchange (MFI).

For more information, please visit

mapleleaffoods.com

The world faces pressing challenges,
including the need for a sustainable food
system to nourish future generations. We are
united behind an aspirational purpose –
to Raise the Good in Food – and a vision
to be the most sustainable protein company
on earth.

MAPLE LEAF FOODS INC. | 2017 ANNUAL REPORTs
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M

MAPLE LEAF FOODS HAD A PIVOTAL YEAR
IN 2017. WE MAINTAINED OUR EARNINGS
MOMENTUM, ANNOUNCED TWO
TRANSFORMATIVE ACQUISITIONS AND
COMPLETED A COMPREHENSIVE PROCESS
TO DEFINE OUR FUTURE.

Figuring out how the planet can
sustainably feed a rapidly growing
population is one of the great challenges
of our time. Resource-intensive livestock
production, particularly of beef, puts
tremendous pressure on the air, water
and land we all share. In fact, it accounts
for 75% of all agricultural land use,
contributes to global deforestation
and generates an estimated 15% of all
greenhouse gas emissions.

The world’s food system will need to
close a 70% food gap between calories
that are currently available and expected
caloric demand by 2050, when the world’s
population is expected to exceed nine
billion people. Closing that gap responsibly
is one of society’s most urgent needs.

Simply put, the food system needs to
serve our world better in feeding and
nourishing generations to come.

Companies that rise to the challenge –
those companies that can demonstrate
deep commitments to sustainability
and translate those commitments into
transformative change – will increasingly
earn higher consumer trust and,
ultimately, loyalty.

At Maple Leaf, we embrace this
challenge as a company that is prepared
to lead and change, and we are well

We united behind an aspirational
purpose – to Raise the Good in Food –
and we continue to shape Maple Leaf
in pursuit of our vision to be the most
sustainable protein company on earth.

Never have I been as excited about
Maple Leaf’s future or the opportunities
in front of us – opportunities for our
business and for the future of food.

Our people are inspired by our collective
ambition, energized by our focus and
executing our strategies with passion. We
are doing more than something that’s good
for Maple Leaf and our shareholders. We
are doing something that’s good for society.

That’s because the world needs us – needs
all of us – to change, and change fast!

The global food system is overtaxed and
becoming increasingly unsustainable.

MAPLE LEAF FOODS INC. | 2017 ANNUAL REPORT

Share price
appreciation

27%

year-over-year
increase

Adjusted EBITDA
margin

10.8%

well ahead of 2016

positioned to succeed. We are small
enough to be rebellious in that pursuit,
yet large enough to scale up our bold
ideas to commercial viability.

Advancing a bold aspiration to be the
most sustainable protein company
on earth is an exciting path to growth
through creating shared value – where
our capabilities and strengths as an
organization intersect with what the
world needs. This intersection creates
high growth profitable markets in which
we can differentiate Maple Leaf, and
supports a more sustainable food system.

Building a growth-oriented, profitable
and sustainable company positions us
well for success. In 2017, the financial
expression of this momentum was
Adjusted Operating Earnings of
$263.8 million ($1.54 Adjusted EPS), and
an Adjusted EBITDA margin of 10.8% –
both well ahead of 2016.

We completed the year with $203 million
in cash, inclusive of $180 million in share
repurchases to buy back 5.7 million
shares as part of our Normal Course

Issuer Bid, and investments close to
$200 million for acquisitions including
the purchase of Lightlife Foods.

Shareholders were rewarded with
$57 million in dividend payments, up
17% over the prior year, and a 27% year-
over-year increase in our share price
(compared to 6% growth by the S&P/TSX
Composite Index).

We are implementing a roadmap
to deliver accelerated growth and
profitability for the long term. Our
five-year aspirational goal to deliver an
Adjusted EBITDA margin of between
14% and 16% is backed by a plan that
combines further cost reduction
opportunities with tangible growth,
along with our commitment to creating
shared value.

Six core strategies underpin this plan:
• Lead in sustainability
• Invest in people
• Make great food
• Broaden our reach
• Build a digital future
• Eliminate waste

iii

MAPLE LEAF FOODS INC. | 2017 ANNUAL REPORTSustainability
is authentic to
who we are, as
a culture and as
individuals. It is
deeply embedded
in our organization
and supported by
investments we
have been making
for many years.”

To lead in sustainability is the defining
strategy of our vision and a key
differentiator. We take a broad view, not
just an environmental lens. It informs all
aspects of our business, in our pursuit
of a sustainable enterprise. It enables
us to pursue a new social contract of
shared value. Leading in sustainability
is a significant market differentiator for
Maple Leaf, as we focus our brands, our
products and our customer relationships
on the unique propositions we offer in a
market where “responsible consumption”
is the most significant consumer
growth opportunity.

This work is not new for us. Sustainability
is an area that is deeply embedded
in our organization and supported by
investments we have been making for
many years.

It is authentic to who we are, as a culture
and as individuals. We have framed our
multi-year sustainability journey under
the pillars of Better Food, Better Care,
Better Communities and Better Planet.

We pursue Better Food, in part,
through product reformulations that
remove artificial ingredients, colours
and flavours, while also reducing
sodium. We also pursue Better Food
through building our sustainable meat
portfolio – guided by our Sustainable
Meat Principles. And we are about to
embark on a comprehensive new brand
and product marketing strategy – the
most expansive in our history – that will
position our brands for leadership in
well-defined demand spaces driven by
extensive consumer insights.

Better Care for animals is central to our
responsibility as a sustainable enterprise,
and we are implementing a comprehensive,
goal-driven plan to become a leader.
This has led to better training, better
husbandry, increased transparency and
accountability, and significant investments
in remote video auditing, transportation,
humane processing and enhanced open
sow housing. All of this has required
material capital investments to support
our commitments.

We pursue Better Communities as part
of our social contract and have invested

years in developing a strategic, high
impact approach that will increasingly
define our Company and contribute
to the shared value we create. The
greatest expression of this is our launch
of the Maple Leaf Centre for Action
on Food Security, a registered charity
that is focused on the pressing issue of
advancing food security. It is a national
shame that in Canada, a country of
considerable wealth and abundant
farmland, one in eight households and
one in eight children are affected by food
insecurity. Through advocacy, investing
in innovation and knowledge sharing,
the Centre reflects our long-term
commitment to working collaboratively
to address this urgent social issue, and to
leveraging our resources and expertise
as a leading Canadian food company.

And we pursue a Better Planet by
dramatically reducing our environmental
footprint, recognizing that this is an area
of high impact across our supply chain
and core to our vision. We have publicly
committed to cutting our emissions
and energy use, our water usage and
our waste by at least 50% by 2025 –
and we are tracking well ahead of that
goal. We know we must accelerate our
progress, and we are considering other
bold goals and actions that reflect our
leadership position.

Leading in sustainability, and executing
our comprehensive strategic plan,
requires us to invest in people, the
second of our six core strategies. We
have an ambitious agenda, one that
requires us to be a destination for top
talent. Supporting this, we are making
targeted investments in leadership
development, including a material
expansion of our Leadership Academy.
This strategy is about doubling down
on our efforts to drive engagement
and on our investments in people. It
means continuing to lead our industry in
workplace safety practices, highlighted
by our Safety Promise. This strategy
is also about creating exceptional
engagement opportunities and fostering
a workplace where talented people can
fully contribute, and where differences
are valued in a culture of openness and
inclusion. This includes a clear goal of

MAPLE LEAF FOODS INC. | 2017 ANNUAL REPORTWe are now
launching the
most ambitious
brand and product
strategy in
our history.”

having 50% gender representation at the
manager level and above by 2022.

With great people, our job is to make
great food. That’s what we do, but
consumers and society are asking for
more from their food. In addition to
wanting no artificial colours, flavours and
ingredients, consumers want minimal or
no antibiotics in the production of their
meat, and we are North American leaders
in meeting their needs. They want real,
simple and natural food where possible.
And they want full transparency, as they
should have! But they will never cede a
great taste experience; that, too, is our
commitment in making great food.

I am proud of our unparalleled brand
portfolio, with leading market shares
in key categories. I also recognize that
prepared meats is a category where there
is significant opportunity to innovate
to drive growth. We need to provide
people with more of what they want
(simpler, tasty and healthier foods), and
tap into different needs (which change
depending on the day and occasion) –
what marketers call “demand spaces”.

Following a year of intense preparation
and effort, we are now launching the
most ambitious brand and product
strategy in our history. We have set out
to differentiate our flagship brands and
clearly position them within these defined
demand spaces that drive the vast
majority of prepared meats consumption.

The Maple Leaf® brand will lead a “Real
Food” revolution! As our family-friendly
brand, it will be known for only natural,
simple ingredients and nothing artificial.
Consistent with its roots, Schneiders®
will be positioned as the go-to brand
for Canadians seeking an authentic and
indulgent food experience that brings
together craftsmanship, artisanal methods
and irresistible taste. Our SWIFT® brand
is all about convenience and value.
Collectively, these brands target about
85% of total demand in prepared meats,
and I am confident our brand strategy
renovations this year will contribute
significantly to our growth for decades.

At the same time, we have been
pioneering the space of “sustainable
meat” throughout North America. We

MAPLE LEAF FOODS INC. | 2017 ANNUAL REPORTBecoming the
most sustainable
protein company
on earth is a bold
ambition – one
that requires a
great shift in how
we think about and
run our Company.
But we believe
it is the path to
higher levels
of growth and
profitability.”

began by defining what sustainable
meat means to us through a clear set of
aspirational principles. We then launched
the Greenfield Natural Meat Co. brand,
which is our leading sustainability brand.

Greenfield products come from animals
raised without any hormones or
antibiotics, with high husbandry standards
including humane transportation
and processing, and in a culture of
transparency, accountability and constant
improvement. Our offering is a great
demonstration of how consumers are
rewarding responsible companies:
Greenfield has become the fastest
growing new brand in Canadian retailing.

Broadening our reach to wider
geographies and markets is a core
element of our growth plan. There are two
areas of focus: expanding our presence
in the U.S. market and establishing
leadership in plant-based proteins.

In the U.S., we have built a platform
focused on sustainable meat categories
where we are differentiated in the
market. We are consistently building
our capabilities and expanding our
emerging presence, delivering double-
digit growth rates. While the U.S. is a
particularly competitive market, we
are achieving success. We have the
“disruptor” advantage!

Our journey in plant-based proteins
began many years ago when we invested
in developing category knowledge,
product development, consumer
behaviour research and everything
necessary to underpin our eventual
aggressive moves in this space.

We acquired U.S.-based Lightlife Foods
in March of last year, which gave us a
leadership position and platform in the
emerging, high growth plant protein
category. Then we rapidly built a
relationship with the most unique and
complementary player in this category,
the Field Roast Grain Meat Co., and
closed this purchase in early 2018.

Combined with our resources, these two
acquisitions give us a unique platform
to drive consistent North American
growth in a highly attractive category.
We have built a stand-alone, highly skilled

organization focused on riding the wave
of plant protein growth well into the future.

In addition, we have made a small,
minority venture investment in Entomo
Farms, a leading insect protein company,
as we also see a long-term role in the
expansion of this highly sustainable form
of protein, either for animal or human
consumption, which exists in many parts
of the world.

Broadening Maple Leaf’s reach has
meant taking our sustainability story
directly to the marketplace in many
different forms. This gives us a core
growth engine well into the future.

With great people and great products
to offer our customers and consumers,
we are embracing technology to build
a digital future. A sustainable future is
a digital future. Technology will serve
as both a great disruptor and an enabler
in this fourth industrial revolution. We
have commenced developing a digital
roadmap to introduce new ways of
working, innovating and collaborating.
And we are embracing technology’s
rapidly evolving role in our business,
which includes how we streamline
operations, improve safety, reduce
animal waste and advance animal care.
Our digital roadmap is coming to life in
many ways. It is changing how and where
we operate with increased mobility.
Technology is introducing precision
agriculture, artificial intelligence, robotics
and sensor technology. It is also changing
how we engage with our customers in
new forms of e-commerce platforms.
Technology in food production and
distribution is evolving at lightning speed.
We will not only keep pace, but build
competitive advantage, as a result.

Our final strategy is to eliminate waste.
This is our fuel for investing in growth.
Deeply embedded in our culture, it spans
everything from a willingness to invest in
world-class, low cost assets, through to
our rigorous business processes that seek
continuous improvement in eliminating
waste in any resources we consume –
food, energy, time, water, packaging, or
any other. We’re tracking well ahead of
our goals, and now we are considering
how we can dig even deeper!

MAPLE LEAF FOODS INC. | 2017 ANNUAL REPORTBecoming the most sustainable protein
company on earth is a bold ambition.
These six strategies will deliver the
shared value we believe is possible on
that journey. Sustainability at Maple Leaf
has evolved from a business strategy,
to a company strategy, to our defining
vision and purpose: to Raise the Good
in Food. Our vision and purpose have
required a great shift in how we think
about and run our Company, but we
believe it is the path to higher levels of
growth and profitability.

This is a foot race! We are in a race against
time, so urgency is important. First, our
planet requires fast action to mitigate the
looming effects of climate change and
mounting environmental degradation
while simultaneously feeding a burgeoning
population. Second, we have chosen to
be the leader in this movement toward a
new form of sustainable enterprise within
the protein industry. Others are focused
on it as well, which is good for all of us,
as the global food system must serve the
world better. But we intend to be driven
by bolder goals and actions, and to set
the standard.

In our pursuit to be the most sustainable
protein company on earth, we will execute
strategies that will increasingly differentiate
us in the market. We will create new
opportunities and avenues for growth.
We will be thought leaders who champion
a more sustainable food industry.

The Maple Leaf culture is unique. We
challenge the status quo, relentlessly
pushing ourselves to higher and bigger
goals in the pursuit of our vision. I
am deeply humbled to lead such a
passionate, dedicated group of people
who come to work every day to Raise
the Good in Food. I am also grateful
to our Board for their guidance and
engaged stewardship. I have great
confidence in the future and in our ability
to drive long-term shared value that will
continue to reward shareholders well.

The world’s food
system will need
to close a 70%
food gap between
calories that are
currently available
and expected
caloric demand
by 2050. We have
chosen to be the
leader in finding
the solution.”

Michael H. McCain
President and CEO
February 2018

vii

MAPLE LEAF FOODS INC. | 2017 ANNUAL REPORTn
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M

THE BENEFITS
OF MAPLE LEAF’S
TRANSFORMATIVE STRATEGY
HAVE BEEN PROFOUND.

For nearly a decade, Maple Leaf
Foods has focused on remaking
the Company’s prepared meats
manufacturing and distribution
network and singularly refocusing
the organization on protein.

The benefits of this strategy have
been profound. The Company’s
market leading prepared
meats brands now leverage a
cost-competitive manufacturing
network which, coupled with
growth initiatives across the
business, has accelerated
profitability. In 2017, the Company
delivered an Adjusted EBITDA
margin above 10%.

Strengthened financial
performance contributed to
improved free cash flow, an
excellent balance sheet and an
increase in the quarterly dividend
for the fourth consecutive year.
Shareholders have been rewarded
by this improved performance,
with share appreciation of 27%
last year.

Prudent stewardship of capital
will remain an important priority
for the Board. The Board and
Management are focused on
the pursuit of profitable growth
strategies that, in the Board’s
view, have great potential to
contribute to the next step-
change in structural profitability
over time, leveraging previous and
planned investments to create
a world-class, cost-competitive
manufacturing and distribution
network that includes a growing,
but selective, footprint in the
United States.

In 2018, the Company will
undertake the most ambitious
brand and product reformulation
in its history. These changes are
designed to invigorate brand
and category growth, following a
year of concentrated testing and
research begun in 2017.

Governance at Maple Leaf Foods,
while constructive, professional
and cordial, always includes
robust debate and discussion at
the Board level. Good governance
requires good people. The
Company benefits enormously
from the expertise of our highly
experienced directors, who
engage with Management under
the inspired leadership of
Michael McCain.

One of the Company’s strategic
pillars commits to leadership in
sustainability. Over several years,
Maple Leaf has distinguished
itself, and realized competitive
advantage, in a market
that increasingly demands
sustainability. We have embraced
a purpose-based strategy that has
led to Maple Leaf taking a North
American leadership position in
animals raised without antibiotics,
high standards of animal care and
reduced environmental impact.
Our people are committed, our
customers are committed and
it is driving growth in both the
Canadian and U.S. market.

This strategy is also driving
our diversification into plant
proteins. With the acquisition of
Lightlife Foods and Field Roast
Grain Meat Co., both U.S.-based

viii

companies, Maple Leaf is now
a leader in the North American
plant proteins segment. This
small but rapidly growing
category represents an exciting
growth platform for Maple Leaf,
and positions the Company for
balanced growth in a changing
market environment.

The Board will continue to play
an active role in shaping and
stewarding the strategic direction
of the organization, including its
commitment to sustainability.
Maintaining momentum requires
both Management depth and
continuous Board renewal. We
are in the process of recruiting
two new directors who will
continue to expand and renew
the expertise and skills of our
current Board.

I would like to acknowledge
my fellow directors for the
commitment, expertise and
insights they collectively bring to
our deliberations and work, and
to also extend my appreciation to
our shareholders for their support
of the Company. Our managers
and employees are terrific
and a constant reminder that
Maple Leaf Foods is a dynamic,
thriving and capable organization
forging an exciting future!

Sincerely,

David L. Emerson
Chairman
February 2018

MAPLE LEAF FOODS INC. | 2017 ANNUAL REPORT

Corporate 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

Board of Directors

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
is included in the Management
Proxy Circular for the May 2, 2018
annual meeting of shareholders.

William E. Aziz, CPA, CA

The Honourable David L. Emerson

James P. Olson

President and Chief Executive Officer,

Corporate Director

BlueTree Advisors II Inc.

(Private management advisory firm)

W. Geoffrey Beattie

Chief Executive Officer,

Generation Capital

Jean M. Fraser

Carol M. Stephenson

Retired Partner, Osler, Hoskin & Harcourt

Corporate Director

John A. Lederer

Corporate Director

(Investment management firm)

Michael H. McCain

Ronald G. Close

Corporate Director

President and Chief Executive Officer,

Maple Leaf Foods Inc.

MAPLE LEAF FOODS INC. | 2017 ANNUAL REPORTSenior Management and Officers

Standing Committees of
the Board of Directors

Senior Leadership Team

Other Corporate Officers

Michael H. McCain

Scott Bonikowsky

President and Chief Executive Officer

Vice-President, Communications and

Audit Committee

W.E. Aziz, Chair

R.G. Close

J.P. Olson

C.M. Stephenson

Corporate Governance
Committee

W.G. Beattie, Chair

R.G. Close

D.L. Emerson

J.M. Fraser

Safety and Sustainability
Committee

J.P. Olson, Chair

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

Ben Brooks

Public Affairs

Senior Vice-President and General

Stephen Elmer

Manager, Poultry

Vice-President and Corporate Controller

Rocco Cappuccitti

Glen Gratton

Senior Vice-President and Corporate

Vice-President, Maple Leaf Agri-Farms

René McLean

Vice-President, Business Finance

Michael Rawle

Vice-President, Finance and Treasurer

Dianne Singer

Assistant Corporate Secretary

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

Chief Food Safety and Sustainability

Officer

Lynda Kuhn

Senior Vice-President, Public Affairs

and Purpose Champion

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, Pork Complex

Richard Young

Senior Vice-President, Supply Chain

and Purchasing

MAPLE LEAF FOODS INC. | 2017 ANNUAL REPORTMAPLE LEAF FOODS INC. | 2017 ANNUAL REPORT

2017 Financial Review

For years ended December 31

(In millions of Canadian dollars, except share information)

2017

2016

2015(i)

2014(i) (ii)

2013(i) (ii)

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

Financial position
Net Assets(vi) (vii)
Shareholders’ equity(vi)
Net Cash (Debt)(iii)

Per share
Adjusted Earnings (Loss) per Share(iii) (v)
Net earnings (loss) from continuing operations
Net earnings(v)
Dividends
Book value(vi) (viii)
Stock price (MFI)(ix)

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

3,522
264
381
10.8%
164
164
10.5%

1,938
2,052
194

1.54
1.28
1.28
0.44
16.11
35.82

128.6
127.3

3,332
239
343
10.3%
182
182
9.8%

1,717
2,088
394

1.23
1.35
1.35
0.36
15.73
28.12

134.2
132.7

3,293
110
220
6.7%
42
42
4.8%

1,705
2,041
282

0.58
0.30
0.30
0.32
15.10
23.76

140.2
135.2

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

1,729
2,233
486

(0.56)
(1.51)
5.03
0.16
15.56
19.47

141.2
143.5

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

2,124
1,569
(452)

(1.08)
(1.01)
3.55
0.16
11.20
16.79

139.9
140.1

(i)

2013–2015 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) Refer to the Non-IFRS Measures on page 25 of the Company’s 2017 Management’s Discussion & Analysis.
(iv) Adjusted EBITDA % is calculated as Adjusted EBITDA divided by sales.
(v) Attributable to common shareholders.
(vi) 2013 has not been restated for the classification of the Rothsay business and the Bakery Products Group as discontinued operations.
(vii) Net Assets defined as total assets (excluding cash and deferred tax assets) less non-interest bearing liabilities (excluding deferred tax liabilities).
(viii) Outstanding number of shares has been restated for inclusion of the purchase of treasury stock for all years.
(ix) Closing share price as of the date closest to the Company’s fiscal year end; source: Bloomberg.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

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

February 20, 2018

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®, Mina® and LightlifeTM. The Company's portfolio includes prepared meats,
ready-to-cook and ready-to-serve meals, valued-added fresh pork and poultry and plant protein products. The Company
employs approximately 11,500 people and does business in Canada, the U.S. and Asia. The Company is headquartered in
Mississauga, Ontario and its shares trade on the Toronto Stock Exchange (MFI).

OPERATING SEGMENTS

Following the sale of the bakery and rendering businesses, the Company undertook significant reorganization of the internal
leadership and reporting structure, as previously disclosed. The reorganization is now complete and the Company is arranged
as a single, focused protein company. As such, the Company has transitioned to a single reporting segment.

FINANCIAL OVERVIEW

In 2017, sales increased 5.7% to $3,522.2 million from $3,331.8 million in the prior year, or 4.8% after adjusting for the impact
of foreign exchange and acquisitions. Higher sales across the portfolio benefited from improved volumes and pricing, as well
as the addition of Lightlife Food Holdings, Inc. (“Lightlife”).

Net earnings for the year were $164.1 million ($1.28 per basic share) compared to $181.7 million ($1.35 per basic share) in
the prior year. Positive revenue and margin growth and a tax benefit associated with U.S. tax reform was more than offset by
factors excluded in calculating Adjusted Operating Earnings(i).These factors consist of unrealized losses on derivative
contracts, the change in fair value of biological assets and restructuring costs.

Adjusted Operating Earnings(i) for the year increased to $263.8 million compared to $239.3 million in the prior year. Adjusted
Earnings per Share(ii) increased to $1.54 from $1.23 in the prior year. The increase was primarily due to sales growth across
the business with earnings performance in the value-added fresh portfolio being partially offset by margin compression in
prepared meats related to the volatility in raw material costs.
Adjusted EBITDA margin(iii) for the year increased to 10.8% from 10.3% in the prior year, consistent with factors noted above.

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 25 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 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. Please refer to the section entitled Non-IFRS Financial Measures
starting on page 25 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 25 of this document.

(iii) 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. Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by sales.
Please refer to the section entitled Non-IFRS Financial Measures starting on page 25 of this document.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

SELECTED FINANCIAL INFORMATION

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

($ millions except earnings per share)

2017

2016

2015(ii)

Sales

Adjusted Operating Earnings
Adjusted EBITDA(i)
Adjusted EBITDA margin

Net earnings

Adjusted Earnings per Share

Basic earnings per share

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

Cash dividends per share

$ 3,522.2

$ 3,331.8

$ 3,292.9

263.8

381.1

10.8%

164.1

1.54

1.28

1.24

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

$ 2,632.6

$ 2,619.0

194.2

230.7

10.5%

386.7

0.44

393.7

169.4

9.8%

357.2

0.36

281.6

248.6

4.8%

159.4

0.32

(i) Please refer to the section entitled Non-IFRS Financial Measures starting on page 25 of this document.
(ii) 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(x) of the Company’s 2017 audited consolidated financial statements
for further information.

COMPANY VISION AND STRATEGIC PLAN

For the past several years, Maple Leaf Foods has been engaged in the execution of a multi-year transformative strategy to
reduce complexity and transform the Company’s manufacturing and distribution network.

Successful execution of this strategy resulted in a step-change in structural profitability, surpassing our strategic margin target
in 2016 of 10% Adjusted EBITDA compared to historical average Adjusted EBITDA margin of approximately 3.5% between
2005 and 2012. In 2017, Adjusted EBITDA margin increased to 10.8%.

In 2017, following a comprehensive process, Maple Leaf Foods defined its vision to become the most sustainable protein
company on earth, and its purpose to Raise the Good in Food. This vision and purpose is consistent with investments the
Company has been making for several years, and a core conviction that its emerging North American leadership in
sustainability can strategically differentiate the organization and create significant commercial and social value.

Maple Leaf Foods believes it can further increase structural profitability over the next five years with an aspirational goal of
14-16% Adjusted EBITDA margin, and has developed a comprehensive strategic plan with six priorities to achieve its vision
and growth agenda.

Maple Leaf Foods’ Strategic Priorities

Lead in sustainability

Maple Leaf Foods takes a broad perspective to advancing its leadership in sustainability. The Company is pursuing a
comprehensive strategy and actions across four sustainability pillars that encompass all facets of its business: Better Food,
Better Care, Better Communities and Better Planet. Building leadership in sustainability is a competitive advantage for the
Company, as the market increasingly seeks suppliers who produce protein with the highest standards of nutrition, animal care,
social engagement and environmental sustainability.

As consumers increasingly focus on what is in their food and how it is produced, there is significant opportunity in building
leadership in sustainability by producing more natural, nutritious foods; lending our voice and resources to address the critical
issue of food security; continually enhancing a strong animal care program; and eliminating waste. In 2017, the Company
made considerable progress in executing its sustainability priorities identified for each of its four pillars.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

Invest in our people

Maple Leaf Foods is committed to being a destination for top talent, supported by career and leadership development, training,
and developing a formalized diversity and inclusion strategy. The Company values a strong workplace and 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 also implementing a
multi-year diversity and inclusion strategy, including a goal to have 50% gender equality at the manager level and above within
the next five years.

Make great food

Maple Leaf Foods has a leading portfolio of brands with the number one or number two market share in their respective
categories. The Company is deeply connecting with consumers by offering great food choices and options. In 2017, the
Company commenced an initiative to renovate its prepared meats portfolio across multiple dimensions, including taste,
nutrition, affordability and sustainability to accelerate growth in this core segment of the Company’s product portfolio. The
results of this comprehensive initiative will materialize in 2018 through well-defined positioning for the Maple Leaf®,
Schneiders® and SWIFT® brands, supporting clearly aligned brand attributes. More than 900 unique products have been
reformulated as part of this commercial strategy to align core flagship brands with demand spaces.

Broaden our reach

Maple Leaf Foods is expanding its presence in the United States with sustainable protein as a core growth platform. This
includes a portfolio of products that combine the Company’s advancements in raised without antibiotics, animal care, and
environmental sustainability. To diversify its portfolio into other high growth markets, Maple Leaf Foods has been building
leadership in plant proteins with the acquisition of Lightlife in 2017 and with the acquisition of The Field Roast Grain Meat
Company, SPC (“Field Roast Grain Meat Co.”) in early 2018. The Company continues to identify both organic and acquisition
opportunities that expand the Company’s business outside of Canada.

Build a digital future

Technology is leading to new ways of working, of operating more effectively and of engaging with suppliers and customers in
most industries, including the food sector. Maple Leaf Foods has commenced developing a digital roadmap to introduce new
ways of working, innovating and collaborating. The digital roadmap’s focus includes exploring new technologies to streamline
operations, improve safety in all areas, reduce waste and improve animal care. The Company is leveraging insights, data
visualization and analytics to enhance its capabilities to engage with suppliers and customers.

Eliminate waste

Maple Leaf Foods has embedded a rigorous and disciplined cost culture throughout the organization and continues to seek
out opportunities to eliminate waste from its supply chain. This is supported by zero-based budgeting, strategic sourcing, ‘cost-
gates’ that define thresholds across key functions, and improved operating efficiencies through waste reduction and energy
and water conservation initiatives.

OPERATING REVIEW

The following table summarizes sales, Adjusted Operating Earnings and Adjusted EBITDA margin for the two years ended
December 31:

($ millions)

Sales

Adjusted Operating Earnings

Adjusted EBITDA Margin

2017

$ 3,522.2

$ 263.8

2016

$ 3,331.8

$ 239.3

Change

5.7%

10.3%

10.8%

10.3%

+50bps

Sales for 2017 increased 5.7% to $3,522.2 million, or 4.8% after adjusting for the impact of foreign exchange and acquisitions
compared to the prior year. Higher sales across the portfolio benefited from improved volumes and pricing, as well as the
addition of Lightlife. Prepared meats sales benefited from innovation and the Company's development in the U.S. market.
Sales in the value-added fresh portfolio increased due to stronger volumes and improved sales mix.

Adjusted Operating Earnings for 2017 increased to $263.8 million compared to $239.3 million in the prior year. Increased sales
across the business contributed to earnings growth. Earnings performance in the value-added fresh portfolio was partially
offset by margin compression in prepared meats related to the volatility in raw material costs for the majority of the year.
During the fourth quarter the trend reversed, with a softening in the pork complex partially offset by improved commercial
performance in prepared meats.
Adjusted EBITDA margin for the year increased to 10.8% from 10.3% in the prior year, consistent with factors noted above.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

GROSS MARGIN

Gross margin in 2017 was $587.5 million (16.7% of sales) compared to $590.9 million (17.7% of sales) in the prior year. The
decrease in gross margin as a percentage of sales is largely attributable to the change in fair value of unrealized derivative
contracts of $46.8 million and the change in fair value of biological assets of $5.0 million.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

During the year, selling, general and administrative expenses were $348.6 million (9.9% of sales), compared to $324.8 million
(9.7% of sales) in the prior year. The increase is primarily related to the selling, general and administrative expenses of
companies acquired during the year and an investment in growth initiatives, offset by a partial reduction versus last year in
variable compensation costs linked to Company performance.

OTHER INCOME (EXPENSE)

Other income was $3.6 million compared to an expense of $3.6 million in the prior year and is primarily due to the gain on sale
of investment properties, recovery from insurance proceeds and changes in environmental provisions related to investment
properties no longer held by the Company offset by provisions on plants announced for closure. This is offset by transaction
costs related to acquisitions and a fixed asset impairment loss. Refer to Note 27 and Note 28 of the Company's 2017 audited
consolidated financial statements for information on the acquisitions.

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 2017 is income of $0.0 million (2016: expense
of $6.1 million).

RESTRUCTURING AND OTHER RELATED COSTS

For the year ended December 31, 2017, the Company recorded restructuring and other related costs of $23.0 million. Of this
amount, $18.9 million related to accelerated depreciation and severance and other employee costs as a result of the
announced plant closures of the Thamesford turkey facility and the St. Anselme pastry facility. In addition, $1.9 million related
to adjustments to share-based compensation for terminated employees pertaining to changes to the Company's Management
structure associated with previously divested businesses, and $1.0 million related to an onerous lease for vacated space in the
Company's office facilities. The remaining $1.2 million related to other previously announced Management and organizational
restructuring initiatives.

For the year ended December 31, 2016, the Company recorded restructuring and other related costs of $6.6 million. These
costs were related primarily to the announced closure of the Thamesford turkey facility.

INTEREST EXPENSE AND OTHER FINANCING COSTS

Interest expense and other financing costs for 2017 were $5.2 million compared to $6.4 million in the prior year. The decrease
was mainly due to non-recurring financing costs of $1.4 million related to the renewal of the Company's accounts receivable
securitization facility, which occurred during the third quarter of 2016.

INCOME TAXES

The Company’s income tax expense for 2017 resulted in an effective tax rate of 23.4% (2016: 27.2%). In 2017 the Company
recorded a deferred income tax recovery in the amount of $6.8 million in respect of the re-measurement of its U.S. deferred
tax liabilities at the lower U.S. corporate tax rate that was enacted in December 2017.The effective tax rate excluding this item
was 26.6%.

The effective tax rate in 2017 in determining Adjusted Earnings per Share is 23.4% (2016: 27.2%). The lower effective rate in
2017 is due to the deferred income tax recovery of $6.8 million recorded in respect of the re-measurement of the Company's
U.S. deferred tax liability described above. The effective tax rate excluding this item was 26.0%. For 2017, the effective tax
recovery rate on restructuring charges used in the computation of Adjusted Earnings per Share is 26.1% (2016: 26.1%). The
effective tax recovery rate on items not considered representative of continuing operations in 2017 was 20.1% (2016: 27.2%).
The lower effective rate of recovery in 2017 primarily resulted from non-deductible acquisition-related transaction costs.

ACQUISITIONS AND DIVESTITURES

On May 1, 2017, the Company acquired specific assets, liabilities and assembled workforce from a privately-held hog
production operation for total consideration of $10.3 million. The acquisition has been accounted for as a business
combination and no goodwill was recognized.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

On March 10, 2017, the Company acquired 100% of the outstanding shares of Lightlife, a privately held U.S. based
corporation engaged in the production and distribution of plant protein products.

Recognized goodwill is attributable to the skills, talent and artisanal expertise of Lightlife’s work force and the Company’s
leadership position in the fast-growing plant protein market. The amount of goodwill expected to be deductible for tax purposes
is $6.1 million. Lightlife has a leading market share, and will provide the Company with a strong foothold in this expanding
category.

During the year ended December 31, 2017, the Company recorded transaction costs of $7.6 million (2016: $0.0 million)
related to acquisition activities, that have been excluded from the consideration paid and have been recognized as an expense
in other income (expense).

The Company has finalized the amounts recorded in the Lightlife business combination during 2017. Refer to Note 27 of the
Company's 2017 audited consolidated financial statements for further details.

There were no acquisitions or divestitures during the year ended December 31, 2016.

SUBSEQUENT EVENTS

On November 30, 2017, the Company signed a definitive agreement to acquire 100% of the outstanding shares of Field Roast
Grain Meat Co., a privately held U.S. based corporation engaged in the production and distribution of premium grain-based
protein and vegan cheese products. The transaction was subject to customary U.S. regulatory review, and was completed on
January 29, 2018. The purchase price was US$120.0 million plus transaction costs settled through a combination of cash-on-
hand and borrowings under the existing revolving credit facility as described in Note 13 of the Company's 2017 audited
consolidated financial statements. The transaction will be accounted for as a business combination.

CAPITAL RESOURCES

The consumer packaged protein 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 October 19, 2017, the Company amended its existing $400.0 million unsecured committed revolving credit facility by
extending the maturity of the facility to October 19, 2021 under similar terms and conditions using the same syndicate of
Canadian, U.S., and international institutions. 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, corporate development
activities, and to provide appropriate levels of liquidity. As at December 31, 2017, the only drawings on the facility were letters
of credit of $6.4 million (2016: $6.2 million).

The revolving term facility requires the maintenance of certain covenants. As at December 31, 2017, 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, 2017, $67.8 million of letters of credit had been issued thereon (2016: $63.4 million). These letters of credit
have not been collateralized with cash, as further described in Note 4 of the Company’s 2017 audited consolidated financial
statements.

The Company's cash balance as at December 31, 2017 is $203.4 million (2016: $403.6 million). The Company has invested in
short-term deposits in Canadian financial institutions with long-term debt ratings of A or higher.

The Company operates an accounts receivable securitization facility. The maximum cash advance available to the Company
under this program is $110.0 million. The facility provides cash funding with a 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 an unconsolidated third-party trust
that is funded 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.

As at December 31, 2017, the Company had $124.9 million (2016: $116.2 million) of trade accounts receivable serviced under
its facilities. In return for the sale of its trade receivables, the Company will receive cash of $96.0 million (2016: $83.7 million)
and notes receivable in the amount of $28.9 million (2016: $32.5 million). 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,
2017, the Company recorded a net payable amount of $14.0 million (2016: $0.9 million net payable). The facility is accounted

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

for as an off-balance sheet transaction in accordance with International Financial Reporting Standards (“IFRS”) and will expire
in August 2019.

The Company's securitization and other credit 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 2017. If the securitization
facility were to 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 2017 were $142.2 million compared to $113.2 million in 2016. The increase in spending from 2016 is
related to profit enhancement projects, the purchase of sow farms and sustainability projects which support the Company’s
animal welfare and environmental strategies.

The Company currently estimates its capital expenditures for the full year of 2018 will be approximately $150.0 million.
Included in the 2018 estimate are investments that support the Company's animal welfare and environmental priorities.

NORMAL COURSE ISSUER BID

On May 17, 2017, 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 8.20 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 23, 2017 and will terminate on May 22,
2018, or on such earlier date as the Company completes its purchases pursuant to the notice of intention. During the year
ended December 31, 2017, 2.33 million shares were purchased for cancellation under this NCIB for $77.4 million at a volume
weighted average price paid of $33.25 per common share.

On May 16, 2016, the TSX accepted the Company's notice of intention to commence a NCIB, which allowed 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. The program commenced on May 19, 2016 and was terminated on
May 18, 2017 as the Company completed its purchase and cancellation of 5.52 million common shares for $163.1 million at a
volume weighted average price of $29.57 per common share. During the year ended December 31, 2017, 3.41 million shares
(2016: 2.11 million) were purchased for cancellation under this NCIB for $102.6 million (2016: $60.5 million) at a volume
weighted average price paid of $30.09 (2016: $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. During the year ended December 31, 2016, 0.51
million shares were purchased for cancellation under this NCIB for $11.9 million at a volume weighted average price paid of
$23.23 per common share.

CASH FLOW AND FINANCING

Cash was $203.4 million at the end of 2017, compared to $403.6 million in 2016. The decrease in cash for the year ended
December 31, 2017 is largely due to acquisitions of businesses, share repurchases under NCIB programs, investment in
property and equipment, increased quarterly dividend payments and the purchase of treasury shares, offset by earnings and
proceeds from sale of long-term assets.

Cash Flow from Operating Activities

Cash provided by operations for 2017 was $386.7 million compared to $357.2 million in 2016. The improvement in cash flow
from operations was primarily due to higher cash earnings from operations and reduced investment in working capital, partially
offset by higher pension contributions, lower margin received by the Company against its derivatives for its commodity hedging
program and higher income tax payments.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

Cash Flow from Financing Activities

Cash used in financing activities was $261.2 million for 2017 compared to $139.3 million in 2016. The increased use of cash
was mainly due to higher share repurchases under the NCIB programs, more treasury share purchases and an increased
dividend payment rate.

Cash Flow from Investing Activities

Cash used in investing activities was $325.7 million for 2017 compared to $106.5 million in 2016. The increase was due to
acquisitions of businesses and higher capital expenditures partially offset by higher 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,
2017. This table presents the undiscounted cash flows payable in respect of financial liabilities.

Payments due by fiscal year:

($ thousands)

Financial liabilities

Due within
1 year

Due between
1 and 2 years

Due between
2 and 3 years

Due after
3 years

Total

Accounts payable and accruals

$ 300,659

—

$ 300,659

Long-term debt

Foreign exchange contracts

Commodity futures contracts

Other liabilities

Commitments

Contractual obligations including operating
leases
Total

1,083

2,802

3,237

26,237

$ 334,018

1,083

6,944

—

1,511

2,594

—

960

2,043

—

1,949

8,893

10,193

2,802

3,237

30,657

$ 347,548

47,523

37,382

29,896

90,906

205,707

$ 381,541

$ 39,976

$ 31,939

$ 99,799

$ 553,255

Management believes 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 2017 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.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

Financial Instruments

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

Cash and cash equivalents

Accounts receivable

Notes receivable

Accounts payable and accruals

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, fair value hedges or net investments in foreign

operations hedge 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, interest rates, and commodity prices.

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

2017

2016

Notional
amount(i)

Fair value

Asset

Liability

Notional
amount(i)

Fair value

Asset

Liability

$ 340,505

$ 4,225

$ 1,788

$ 182,696

348

$ 1,019

—

44,822

— $ 1,589

44,738

— $

848

— $

— $ 520,000

$ 2,128

$ 5,893

136,546

371,157

710

—

1,014

1,648

450,259

537,621

11,248

13,113

670

—

$ 4,935

$ 6,039

$ 4,935

$ 6,039

—

$ 4,935

$ 6,039

$ 26,837

$ 8,430

$ 26,837

$ 8,430

—

$ 26,837

$ 8,430

(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, 2017, the above fair value of current assets has been increased on the consolidated balance sheet
by an amount of $9.8 million (2016: reduced by $3.4 million), which represents the excess or deficit 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, 2017 and 2016 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 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.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

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, 2017, the Company recorded a gain of $18.6 million (2016: gain of $43.7 million) on
financial instruments held for trading. The gain was mainly attributed to a gain in commodity exchange traded contracts which
economically hedge and offset price risk volatility inherent in the hog operational business.

For the year ended December 31, 2017, the pre-tax amount of hedge ineffectiveness recognized in other income (expense)
was a gain of $0.1 million (2016: loss of $0.0 million).

The table below sets out fair value measurements of certain financial instruments using the fair value hierarchy as at
December 31, 2017:

($ thousands)

Assets:

Foreign exchange contracts

Liabilities:

Foreign exchange contracts

Commodity contracts

Level 1

Level 2

Level 3

Total

—

3,237

$ 4,935

$ 2,802

—

$ 3,237

$ 2,802

—

$ 4,935

$ 2,802

3,237

$ 6,039

There were no transfers between levels for the year ended December 31, 2017. 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. Refer to the section entitled Non-IFRS Financial Measures starting on page 25 of this
document for more information on the non-IFRS measures.

In addition to 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 2017 audited consolidated financial statements. Average accounts receivable days sales outstanding
for the year is consistent with historic trends.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

operation of the accounts receivable securitization facility as described in Note 23. The Company does, however, conduct a
significant amount of business with a small number of large grocery retailers.

For the year ended December 31, 2017, the Company reported sales to two customers representing 12.0% and 10.3% (2016:
one customer representing 13.2%) of total sales. No other sales were made to any one customer that represented in excess of
10% of total sales.

The Company is also 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 2017 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, 2017, the Company had available undrawn committed credit of $393.6 million (2016: $393.8 million)
under the terms of its principal banking arrangements (refer to Note 13 of the Company's 2017 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.

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, 2017 and 2016, 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, 2017, the amount serviced pursuant to
this program was $110.0 million at a weighted average interest rate of 1.4% (2016: $84.5 million at a weighted average
interest rate of 1.0%). The maximum amount available to the Company under these programs is $110.0 million (2016: $110.0
million).

As at December 31, 2017, 7.8% (2016: 10.5%) of the Company’s outstanding debt and revolving accounts receivable
securitization program were not exposed to interest rate movements.

As at December 31, 2017, the Company had fixed-rate debt of $9.2 million (2016: $9.9 million) with a weighted average
effective interest rate of 4.4% (2016: 4.3%). 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, U.S. dollar-
denominated borrowings, and investments in foreign operations.

Commodity Price Risk

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

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.

For a comprehensive discussion on the Company’s risk management practices and derivative exposures, please refer to Note
17 of the Company's 2017 audited consolidated financial statements.

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 2017, the Company recorded a pre-tax loss of $4.2 million through other comprehensive income (loss) related to the
re-measurement of plan assets and liabilities. This included a pre-tax loss of $61.3 million related to differences between plan
experience compared to actuarial assumptions, offset by $56.1 million of pre-tax returns on plan assets in excess of the
discount rate.

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 includes $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.

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 2017, the investment return before expenses on
the Company's defined benefit pension plan assets was 9.0% in 2017 compared to 9.4% in 2016.

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 2017 were $10.3 million (2016: $5.2 million).

The Company expects to contribute $33.1 million to the pension plans in 2018, 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 2017 audited
consolidated financial statements.

The Company sponsors a number of defined benefit and defined contribution plans. During the year ended December 31,
2017, the Company's contributions to these plans were $26.4 million (2016: $9.3 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 | 2017 | 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

Post-employment benefits

Share-based compensation

Total remuneration

2017

2016

$ 13,448

$ 13,084

316

139

288

147

$ 13,903

$ 13,519

902

12,753

840

12,596

$ 27,558

$ 26,955

During the year ended December 31, 2017, key Management personnel of the Company exercised 0.4 million (2016: 0.1
million) share options granted under the Maple Leaf Foods Share Option Plan for an amount of $5.9 million (2016: $1.3
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, 2017, the Company
received services from MCI in the amount of $0.5 million (2016: $0.6 million), which represented the market value of the
transactions with MCI. As at December 31, 2017, $0.1 million (2016: $0.2 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, 2017, the Company provided services to MFAS for a nominal amount which represented the
market value of the transactions.

SHARE CAPITAL

As at December 31, 2017, there were 127,321,089 voting common shares issued and outstanding (2016: 132,625,089). As at
February 13, 2018, there were 127,147,389 common shares issued and outstanding.

In each of the quarters of 2017, the Company declared and paid cash dividends of $0.11 per voting common share,
representing a total annual dividend of $0.44 per voting common share and aggregate dividend payments of $56.6 million. 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.

OTHER MATTERS

On February 20, 2018, the Board of Directors approved a dividend of $0.13 per share, $0.52 per share on an annual basis,
from $0.11 per share, payable March 29, 2018 to shareholders of record at the close of business March 9, 2018. Unless
indicated otherwise by the Company 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”.

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 and
2017 annual meetings in order to remain in effect. 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 did 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.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | 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)

Sales

Net earnings (loss)

Earnings (loss) per share

Basic(i)

Diluted(i)

Adjusted EPS(i)(ii)

First
Quarter

$ 811.2

$ 796.9

$ 780.2

$ 30.1

$ 42.3

Second
Quarter

$ 925.9

$ 854.6

$ 820.8

$ 37.3

$ 31.4

(2.9)

(7.5)

$ 0.23

$ 0.31

$ 0.29

$ 0.23

$ (0.02)

$ (0.05)

$ 0.22

$ 0.31

$ 0.28

$ 0.23

$ (0.02)

$ (0.05)

$ 0.33

$ 0.28

$ 0.05

$ 0.41

$ 0.32

$ 0.13

Third
Quarter

$ 908.4

$ 852.1

$ 818.8

$ 37.6

$ 31.8

$ 18.7

$ 0.29

$ 0.24

$ 0.13

$ 0.29

$ 0.23

$ 0.13

$ 0.39

$ 0.32

$ 0.16

Fourth
Quarter

$ 876.8

$ 828.2

$ 873.1

$ 59.1

$ 76.2

$ 33.3

$ 0.47

$ 0.57

$ 0.24

$ 0.45

$ 0.56

$ 0.24

$ 0.41

$ 0.31

$ 0.25

Total(iii)
$ 3,522.2

$ 3,331.8

$ 3,292.9

$ 164.1

$ 181.7

41.6

1.28

1.35

0.30

1.24

1.32

0.29

1.54

1.23

0.58

2017

2016

2015

2017

2016

2015

2017

2016

2015

2017

2016

2015

2017

2016

2015

(i) Basic and diluted earnings (loss) per share, earnings (loss) per share and Adjusted Earnings (loss) per Share are based

on amounts attributable to common shareholders.

(ii) Refer to Non-IFRS Financial Measures starting on page 25 of this document.
(iii) May not add due to rounding.

Fluctuations in quarterly sales can be attributed to changes in pricing, volume, sales mix, acquisitions 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, acquisitions, transitional costs incurred, provision estimate adjustments and gains/
losses on disposal of assets.

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.

SUMMARY OF 2017 FOURTH QUARTER RESULTS

The following table summarizes sales, Adjusted Operating Earnings and Adjusted EBITDA margin for the fourth quarter:

($ millions)

Sales
Adjusted Operating Earnings(i)
Adjusted EBITDA Margin(i)

Fourth Quarter

2017

$ 876.8

$ 64.7

2016

Change

$ 828.2

$ 63.7

5.9%

1.5%

10.7%

10.4%

+30bps

(i) Please refer to the section entitled Non-IFRS Financial Measures starting on page 25 of this document.

Sales for the fourth quarter increased 5.9% to $876.8 million or 5.4% after adjusting for the impact of foreign exchange and
acquisitions, driven primarily by pricing and volume growth, with prepared meats sales benefiting from innovation and the
Company's development in the U.S. market. Sales in the value-added fresh portfolio benefited from continued increased
demand for fresh value-added poultry. The addition of Lightlife also contributed to the increase.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

Adjusted Operating Earnings for the fourth quarter of 2017 were $64.7 million compared to $63.7 million in the fourth quarter of
2016. Adjusted EBITDA margin increased to 10.7% in the fourth quarter of 2017 from 10.4% in the prior year. Increased sales
and volume growth, lower operating costs, as well as a partial reduction in year over year variable compensation costs,
contributed to higher earnings in the quarter. Commercial performance in prepared meats partially offset a softening in the
pork complex, reversing the trend from earlier in the year. Fourth quarter earnings also benefited from continued high demand
for fresh value-added poultry.

Selling, general and administrative expenses for the fourth quarter of 2017 were $92.1 million (10.5% of sales), compared to
$89.4 million (10.8% of sales) in the fourth quarter of 2016. The increase is primarily related to the selling, general and
administrative expenses of companies acquired during the year and investment in growth initiatives, offset by a partial
reduction versus last year in variable compensation costs linked to Company performance.

Net earnings for the quarter were $59.1 million compared to $76.2 million in the same period last year. The progress in the
business reflected in positive revenue and margin growth, and a tax benefit associated with U.S. tax reform, was more than
offset by factors excluded in calculating Adjusted Operating Earnings. These factors consist of unrealized losses on derivative
contracts, the change in fair value of biological assets and restructuring costs.

Basic Earnings per Share was $0.47 for the fourth quarter of 2017 compared to $0.57 in the fourth quarter of 2016 due to the
factors described above. Adjusted Earnings per Share in the fourth quarter of 2017 was $0.41 compared to $0.31 in the fourth
quarter of 2016.

DISCUSSION OF FACTORS IMPACTING THE COMPANY'S OPERATIONS AND RESULTS

Impact of Currency

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

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

(i) Source: Bloomberg

As at
December 31,
2017
1.26

¥ 89.66

2017

1.30

¥ 86.48

Annual Averages

2016

Change

1.32

¥ 82.10

(1.5)%

5.3 %

2015

1.28

¥ 94.66

The Canadian dollar, on average, strengthened relative to the U.S. dollar by 1.5% in 2017. In the short-term, a stronger
Canadian dollar compresses the Company's export margins. Conversely, a stronger Canadian dollar decreases the cost of raw
materials and ingredients in the domestic business. The business is able to react to changes in input costs over time through
pricing, cost reduction, or investment in value-added products.

During 2017, the Japanese yen, on average declined in value relative to the Canadian dollar by 5.3%. In general, a decline in
the Japanese yen compresses export margins to Japan. 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.

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,
2017

$ 77.40

$ 58.06

$ 72.99

3.51

2017

$ 84.13

$ 71.42

$ 92.72

3.59

Annual Averages

2016

Change

2015

$ 78.66

$ 65.09

$ 86.23

3.58

7.0%

9.7%

7.5%

0.3%

$ 79.13

$ 70.59

$ 90.28

3.81

(i) As at December 31, 2017, rate based on spot prices for the week ended December 31, 2017 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).

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

In aggregate for 2017, the market influences for the entire pork value chain were higher than the five-year average. 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 2017.

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

Seasonality

The Company is sufficiently large and diversified, with a balanced portfolio, that seasonal factors within various parts of its
operations 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, margins on fresh pork products tend to be higher in the last half of the year when hog
prices historically decline which in turn depresses earnings from raising hogs, maintaining balance within the Company's pork
complex. Strong demand for grilled meat products positively affects categories such as wieners and fresh sausages 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
Sustainability 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
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 2017, the Company announced the closure of its St. Anselme, Quebec pastry
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 $4.8 million
related to expected environmental remediation costs. Please refer to Note 12 of the Company's 2017 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.

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 usage and emissions), water usage and
waste. The Company has developed environmental sustainability action plans at every operation to deliver on its
environmental goals. In 2017, the Company has made significant progress towards the implementation of these plans and
reducing the Company’s environmental footprint. Details on this environmental performance can be found in the annual
sustainability report available on the Company's sustainability website (www.mapleleafsustainability.ca).

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

Maple Leaf Foods is primarily a meat protein company with early investments in plant protein. As a result, the Company
may be susceptible to earnings volatility. This factor may have a material adverse effect on the Company’s financial
condition and results of operations.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

Risk of Returning or not Returning Capital to Shareholders

In 2015, 2016 and 2017 the Company initiated normal course issuer bids for 8.65 million, 8.70 million and 8.20 million of its
common shares, respectively. In 2017 a total of 5.7 million shares had been repurchased under those bids at an aggregate
cost of $180.1 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.

Supply Chain Consolidation

From 2010 to 2015 the Company consolidated and upgraded its prepared meats manufacturing network. The Company also
reconfigured its distribution systems for prepared meats into two large distribution centers. 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.

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 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 Foods' 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 system
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 organisms that can cause illness, or pathogens, such as certain
strains of Escherichia coli, Salmonella and Listeria. There is a risk that these pathogens could be present in certain products
produced by the Company. 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 a
precautionary measure, 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

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

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

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
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 hogs and poultry (collectively "livestock"), or attributed to livestock whether it occurs within the Company’s production
operations or in the operations of third parties. In the longer term, the availability of livestock in the relative proximity of the
Company's processing facilities may be impacted by climate change if the availability of feed grains in the relative proximity of
its processing facilities is altered.

The Company monitors herd and flock 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 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.

Over the long term, a reduction in the availability of livestock at the Company’s processing plant may result in higher
transportation costs if livestock is sourced from more distant growing areas or result in higher capital costs if the Company is
required to relocate processing facilities. There can be no assurance that those extra operating costs or capital costs can be
passed on to customers which may have a material adverse effect on the Company’s financial condition and results of
operations.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

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
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. Furthermore, changes in climate and other long term trends may have
a material effect on the availability and prices of the commodities the Company uses.

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 or switching to alternatives; however, no assurance
can be given that customers will continue to purchase the Company’s products if prices rise or that alternatives may be
available or less costly. 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

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

local regulations and laws; and the uncertainty of enforcement of remedies in foreign jurisdictions. In addition, trade
agreements between Canada and foreign jurisdictions could change and 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
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 including class actions, either
as plaintiff or defendant, relating to its commercial activities and relationships, employment matters, product liabilities, in
addition to other things. This includes a class action that was launched in respect of pricing practices at packaged bread
manufacturers and retailers that are the subject of an ongoing investigation by the Competition Bureau. Maple Leaf Foods is
not the subject of the investigation but it believes that it was added as a defendant to the class action as a result of the share
ownership position it previously held in Canada Bread. 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 and Risks

The Company’s operations are subject to extensive environmental laws and regulations pertaining to the discharge of
materials into the environment (including greenhouse gases) 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 or levies or taxes assessed against 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.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

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 11,500 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
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 information.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

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.

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, 17, and 22 of the Company's 2017 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 2017
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

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

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.

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

2017
3.40%
3.00%
5.00%

2016
3.70%
3.00%
5.00%

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

3.40% 0.25% decrease

Other post-

Total

retirement

pensions

$ 35,109

benefits

1,352

0.25% increase

$ (34,029)

$ (1,319)

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

$
2,398
$ 34,447

N/A
1,839

Total

$ 36,461

$ (35,348)

$
2,398
$ 36,286

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.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

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, considering 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.

SIGNIFICANT ACCOUNTING POLICIES

Accounting Standards Adopted During the Period

During the year ended December 31, 2017, 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:

Statement of Cash Flows

Beginning on January 1, 2017, the Company adopted the amendments to IAS 7 Statement of Cash Flows which require 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 adoption of the amendments to IAS 7 did not have a material impact
on the consolidated financial statements.

Income Taxes

Beginning on January 1, 2017, the Company adopted the amendments to IAS 12 Income Taxes which provide clarification on
the requirements relating to the recognition of deferred tax assets for unrealized losses on debt instruments measured at fair
value. The adoption of the amendments to IAS 12 did not have a material impact on the consolidated financial statements.

Disclosure of Interests in Other Entities

Beginning on January 1, 2017, the Company adopted the amendments to IFRS 12 Disclosure of Interests in Other Entities
which provide clarification that the required disclosures under IFRS 12 also apply 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 adoption of the amendments to IFRS 12 did not have a material impact on the consolidated
financial statements.

Accounting Pronouncements Issued But Not Yet Effective

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 a 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; 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 required to
disclose the impact by financial line item because of the adoption of the new standard and intends to adopt IFRS 15 in its
consolidated financial statements for the annual period beginning January 1, 2018 and intends to adopt IFRS 15 using the
modified retrospective approach. The Company has reviewed significant agreements and contracts with customers. Based on
this review, the adoption of IFRS 15 is expected to result in changes in classification between sales and cost of goods sold and
selling, general and administrative expenses, as well as an increase to inventories and other current liabilities on the

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

consolidated financial statements. For the period beginning January 1, 2018, the implementation of IFRS 15 is expected to
decrease opening retained earnings by approximately $2.0 million, increase inventory by approximately $8.0 million and
increase unearned revenue by approximately $10.0 million.

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 adoption of IFRS 9 is not expected to have a material impact on the consolidated
financial statements.

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 adoption of the amendments to IFRS 7 is not expected to have a material impact on the consolidated financial
statements.

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 adoption of the amendments to IFRS 2 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 Company intends to adopt IFRIC 22
prospectively in its consolidated financial statements for the annual period beginning January 1, 2018. The adoption of IFRIC
22 is not expected to have a material impact on the consolidated financial statements.

Uncertainty over Income Tax Treatments

In June 2017, the IASB issued IFRIC 23 Uncertainty over Income Tax Treatments with a mandatory effective date of January
1, 2019. The interpretations provide guidance on how to value uncertain income tax positions based on the probability of
whether the relevant tax authorities will accept the company's tax treatments. A company is to assume that a taxation authority
with the right to examine any amounts reported to it will examine those amounts and will have full knowledge of all relevant
information when doing so. IFRIC 23 is to be applied by recognizing the cumulative effect of initially applying these guidelines
in opening retained earnings without adjusting comparative information. The extent of the impact of the adoption of IFRIC 23
has not yet been determined.

Long-term Interests in Associates and Joint Ventures

In October 2017, the IASB issued Long-term interests in Associates and Joint Ventures (Amendments to IAS 28) with a
mandatory effective date of January 1, 2019. The amendments clarify that a company applies IFRS 9 to long-term interests in
an associate or joint venture that form part of the net investment in the associate or joint venture. The Company intends to
adopt the amendments to IAS 28 retrospectively in its consolidated financial statements for the annual period beginning
January 1, 2019. The adoption of the amendments to IAS 28 is not expected to have a material impact on the consolidated
financial statements.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

Annual Improvements to IFRS (2015-2017) Cycle

In December 2017, the IASB issued narrow-scope amendments to a total of four standards as part of its annual improvement
process. Amendments were made to clarify that a company must remeasure its previously held interest in a joint operation
when it obtains control of the business in accordance with IFRS 3 Business Combinations but does not remeasure when it
obtains joint control of the business under IFRS 11 Joint Arrangements. The amendments also include clarification that, all
income tax consequences of dividend payments should be recognised consistently with the transactions that generated the
distributable profits, under IAS 12 Income Taxes and that under IAS 23 Borrowing Costs, any specific borrowing that remains
outstanding after the related asset is ready for its intended use or sale becomes part of general borrowings. The Company
intends to adopt these amendments prospectively in its consolidated financial statements for the annual period beginning
January 1, 2019. The extent of the impact of the adoption of these standards has not yet been determined.

Restatement of Comparative Periods for Previously Adopted Accounting Standards

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 December 31,
2015. There was no impact to net income or comprehensive income (loss) for the year ended December 31, 2016 as there
were no movements in the temporary differences or changes in relevant statutory income tax rates during these periods.

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
effectiveness of the Company’s internal control over financial reporting and disclosure controls and procedures as at
December 31, 2017, 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, 2017, and ended on December 31, 2017, 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.

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

The table below provides a reconciliation of net earnings as reported under IFRS in the audited consolidated statement 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 from operations
Increase in fair value of biological assets(i)
Unrealized loss (gain) on derivative contracts(ii)
Adjusted Operating Earnings

December 31,

2017

164,089

50,192

214,281

5,168

(3,609)

23,024

238,864

(1,267)

26,243

263,840

2016

181,702

67,891

249,593

6,367

3,596

6,570

266,126

(6,263)

(20,581)

239,282

(i) Refer to Note 7 of the Company’s 2017 audited consolidated financial statements for further details regarding biological

assets.

(ii) Unrealized losses (gains) on derivative contracts are reported within cost of goods sold in the Company’s 2017 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)

Increase in fair value of biological assets(iii)
Unrealized loss (gain) on derivative contracts(iii)
Adjusted Earnings per Share(iv)

December 31,

2017

1.28

0.13

(0.01)

0.15

1.54

2016

1.35

0.04

(0.02)

(0.03)

(0.11)

1.23

(i)

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

(ii) Primarily includes (gains) and losses on disposal of investment properties, changes in estimates of provisions, acquisition

related costs, interest income, assets held for sale, net of tax.

(iii)

Includes per share impact of the change in unrealized loss (gain) on derivative 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 | 2017 | MAPLE LEAF FOODS INC.

Adjusted Earnings Before Interest, Income Taxes, 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

Increase in fair value of biological assets and unrealized loss (gain) on derivative

contracts

Depreciation and amortization

Adjusted EBITDA

December 31,

2017

164,089

50,192

214,281

5,168

(3,582)

23,024

24,976

117,190

381,057

2016

181,702

67,891

249,593

6,367

(2,518)

6,570

(26,844)

110,276

343,444

(i) Primarily includes (gains) and losses on disposal of investment properties, changes in estimates of provisions, acquisition

related costs, interest income, assets held for sale, net of tax.

Net Cash

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. 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:

($ thousands)

Current portion of long-term debt

Long-term debt

Total debt

Cash and cash equivalents

Net Cash

December 31,

2017

(805)

(8,443)

(9,248)

203,425

194,177

2016

(794)

(9,119)

(9,913)

403,621

393,708

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

Free Cash Flow

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,

2017

386,695

(142,245)

244,450

2016

357,157

(113,194)

243,963

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
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: expectations
regarding the use of derivatives, futures and options; 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 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;

MANAGEMENT'S DISCUSSION AND ANALYSIS | 2017 | MAPLE LEAF FOODS INC.

•

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;

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.

About Maple Leaf Foods Inc.

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®,
Mina® and LightlifeTM. Maple Leaf employs approximately 11,500 people and does business in Canada, the U.S. and Asia.
The Company is headquartered in Mississauga, Ontario and its shares trade on the Toronto Stock Exchange (MFI).

TABLE OF CONTENTS | 2017 | 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. Geographic and Customer Profile

Note 27. Business Combinations

Note 28. Subsequent Events

INDEPENDENT AUDITORS' REPORT | 2017 | 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, 2017 and December 31, 2016, the consolidated statements of net earnings,
other comprehensive income (loss), changes in total equity and cash flows for the years then ended, 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, 2017 and December 31, 2016, and its consolidated financial performance and its
consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards.

Chartered Professional Accountants, Licensed Public Accountants
February 20, 2018

Toronto, Canada

Consolidated Balance Sheets

(In thousands of Canadian dollars)

Notes

As at December 31,
2017

As at December 31,
2016

CONSOLIDATED BALANCE SHEETS | 2017 | MAPLE LEAF FOODS INC.

203,425
123,968
28,918
273,365
111,735
24,393
—
765,804
1,116,309
1,892
9,856
6,125
517,387
215,197
$ 2,632,570

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

300,659
9,335
805
7,855
31,597
350,251
8,443
117,808
11,273
12,689
80,498
580,962

835,154
1,253,035
(9,620)
(26,961)
$ 2,051,608
$ 2,632,570

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

4
5
23
6
7

10
11

12
13
20
14

13
9
12
15
20

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
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 (loss) income
Treasury stock
Total shareholders’ equity
Total liabilities and equity

Commitments and contingencies (Note 24)

Subsequent events (Note 28)

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 | 2017 | MAPLE LEAF FOODS INC.

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

Notes

2017

2016

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 tax 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.

$ 3,522,226

$ 3,331,812

2,934,747

2,740,866

587,479

590,946

348,615

324,820

238,864

266,126

(23,024)

3,609

(6,570)

(3,596)

219,449

255,960

5,168

6,367

214,281

249,593

50,192

67,891

164,089

181,702

1.28

1.24

128.6

132.4

1.35

1.32

134.2

137.6

CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS) | 2017 | MAPLE LEAF FOODS INC.

Consolidated Statements of Other Comprehensive
Income (Loss)

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

Net earnings

Other comprehensive (loss) income

2017

2016

$ 164,089

$ 181,702

Actuarial gains and losses that will not be reclassified to profit or loss (Net of tax of $1.0

million; 2016: $17.0 million)

$ (3,117)

$ 46,243

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; 2016: $0.0 million)

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

2016: $0.8 million)

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

Total other comprehensive (loss) income

Comprehensive income

See accompanying Notes to the Consolidated Financial Statements.

$ (13,536)

(390)

2,297

$ (11,239)

$ (14,356)

$ 149,733

2,423

2,033

$ 48,276

$ 229,978

Consolidated Statements of Changes in Total Equity

CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY | 2017 | MAPLE LEAF FOODS INC.

(In thousands of Canadian dollars)

Notes

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, 2016

$ 853,633 $ 1,247,737 $

— $

2,116 $

(497) $

(14,966) $ 2,088,023

Net earnings
Other comprehensive income (loss)(ii)

Dividends declared ($0.44 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

—

164,089

(3,117)

(56,640)

—

21,087

4,750

(24,409)

(66,074)

(25,837)

5,930

—

(32,960)

—

(13,536)

2,297

—

164,089

(14,356)

(56,640)

21,087

4,750

(116,320)

5,930

16,005

(16,955)

(28,000)

Balance at December 31, 2017

$ 835,154 $ 1,253,035 $

— $

(11,420) $

1,800 $

(26,961) $ 2,051,608

Accumulated other
comprehensive income
(loss)(i)

Foreign
currency
translation
adjustment

Unrealized
gains and
losses on
cash flow
hedges

Treasury
stock

Total
equity

Notes

Share
capital

Retained
earnings

Contributed
surplus

$ 882,770 $ 1,161,047 $

— $

2,506 $

(2,920) $

(2,086) $ 2,041,317

—

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)

(In thousands of Canadian dollars)
Balance as at December 31, 2015(iii)

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

Balance at December 31, 2016

$ 853,633 $ 1,247,737 $

— $

2,116 $

(497) $

(14,966) $ 2,088,023

(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.

(iii) Restated, see Note 3(x).

See accompanying Notes to the Consolidated Financial Statements.

Consolidated Statements of Cash Flows

CONSOLIDATED STATEMENTS OF CASH FLOWS | 2017 | 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

Gain on sale of long-term assets

Change in fair value of non-designated derivatives

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

Change in derivatives margin

Other

Change in non-cash operating working capital

Cash provided by operating activities

Financing activities

Dividends paid

Net 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

Acquisition of business

Proceeds from sale of long-term assets

Cash used in investing activities

(Decrease) increase 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.

2017

2016

164,089

181,702

(1,267)

117,227

21,087

40,920

9,272

5,168

(5,781)

21,877

3,776

5,379

(10,604)

(2,299)

9,037

(13,210)

(6,316)

28,340

(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)

1,772

520

(11,016)

386,695

357,157

(56,640)

(48,348)

(1,083)

5,930

(180,110)

(1,302)

(28,000)

(1,051)

2,826

(72,412)

(2,412)

(17,912)

$ (261,205)

$ (139,309)

$ (142,245)

$ (113,194)

(199,440)

15,999

—

6,698

$ (325,686)

$ (106,496)

$ (200,196)

111,352

403,621

292,269

203,425

403,621

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

Notes to the Consolidated Financial Statements
(Tabular amounts in thousands of Canadian dollars unless otherwise indicated)
Years ended December 31, 2017 and 2016

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®, Mina®,
and LightlifeTM. The Company's portfolio includes prepared meats, ready-to-cook and ready-to-serve meals, valued-added
fresh pork and poultry and plant protein products. 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, 2017, include the accounts of the Company and its subsidiaries. The composition of the Company is further
described in Note 23.

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 20, 2018.

(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 | 2017 | 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, 17, and 22.

Nature of Interests in Other Entities

Valuation of Inventory

Biological Assets

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

Income Taxes

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | 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.

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 bargain
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.

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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

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.

(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
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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

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 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 permitted, the hedging relationship may be designated as a cash flow hedge, a fair value hedge, or
a hedge of foreign currency exposure of a net investment in a 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, demand deposits and investments with an original maturity at the
date of purchase of three months or less.

(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
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 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 considering 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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

(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, except for
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, recipes, customer relationships and poultry production quota.
Definite life intangible assets are measured at cost less accumulated amortization and any net accumulated impairment
losses. Amortization is recognized in the consolidated statements of earnings on a straight-line basis over the estimated useful
lives of the following assets:

____________________________________________________________________________________________________

Computer software
Customer relationships
Recipes
____________________________________________________________________________________________________

3-10 years
20-25 years
5-20 years

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | 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”). 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 | 2017 | 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 because
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 products 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 | 2017 | 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

Statement of Cash Flows

Income Taxes

Disclosure of Interests in Other Entities

(w) Accounting Pronouncements Issued But Not Yet Effective

Revenue Recognition

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

Financial Instruments – Recognition and Measurement

Leases

Share-Based Payments

Foreign Currency Transactions and Advance Considerations

Uncertainty over Income Tax Treatments

Long-term Interests in Associates and Joint Ventures

Annual Improvements to IFRS (2015-2017) Cycle

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

when it obtains control of the business in accordance with IFRS 3 Business Combinations but does not remeasure when it
obtains joint control of the business under IFRS 11 Joint Arrangements. The amendments also include clarification that, all
income tax consequences of dividend payments should be recognised consistently with the transactions that generated the
distributable profits, under IAS 12 Income Taxes and that under IAS 23 Borrowing Costs, any specific borrowing that remains
outstanding after the related asset is ready for its intended use or sale becomes part of general borrowings. The Company
intends to adopt these amendments prospectively in its consolidated financial statements for the annual period beginning
January 1, 2019. The extent of the impact of the adoption of these standards has not yet been determined.

(x) Restatement of Comparative Periods for Previously Adopted Accounting Standards

Income taxes

4. CASH AND CASH EQUIVALENTS

As at December 31, 2017, the Company did not post any cash to collateralize its letters of credit (2016: $68.1 million).

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,

2017

2016

$ 90,862

$ 90,463

(5)

$ 90,857

$ 90,458

8,723

—

13,341

11,047

11,004

422

17,347

8,518

$123,968

$127,749

As at December 31,

2017

2016

$ 70,054

$ 64,176

16,683

1,694

2,431

19,057

2,702

4,528

$ 90,862

$ 90,463

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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

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, 2017 and 2016.

6. INVENTORIES

Raw materials

Work in process

Finished goods

Packaging

Spare parts

As at December 31,

2017

2016

$ 23,369

23,229

18,517

180,843

13,193

37,443

16,309

175,452

13,997

32,732

$ 273,365

$ 261,719

For the year ended December 31, 2017, inventory in the amount of $2,723.1 million (2016: $2,538.5 million) was expensed
through cost of goods sold.

7. BIOLOGICAL ASSETS

Hog stock

Poultry stock

Commercial

Parent

Commercial

Balance at December 31, 2016

$ 83,052

$ 22,855

3,693

Additions and purchases

Depreciation

Change in fair value realized

Change in fair value unrealized

Further processing and sales

292,080

—

(4,595)

5,862

(291,812)

2,582

(4,068)

—

57,312

—

(56,605)

Parent

1,845

2,338

(2,804)

—

Total

111,445

354,312

(6,872)

(4,595)

5,862

(348,417)

Balance at December 31, 2017

$ 84,587

$ 21,369

4,400

1,379

111,735

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 is comprised of approximately 0.8 million animals as at December 31, 2017 (2016: 0.9 million). During the years
ended December 31, 2017 and 2016, substantially all hog stock was directly transferred to the Company's primary processing
operations.

Poultry stock is comprised of approximately 8.8 million eggs and 0.2 million birds as at December 31, 2017 (2016: 7.5 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 $1.3 million for the year ended
December 31, 2017 (2016: gain of $6.3 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, 2017.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

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 6.3% to 7.3%. 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.

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, 2017

Cost

Accumulated depreciation

Net balance, December 31, 2016

Land

Buildings

Machinery
and
equipment

Under
construction

Total

41,238

$ 848,697

$ 1,176,443

—

(288,140)

(737,341)

41,238

$ 560,557

$ 439,102

75,412

$ 2,141,790

—

(1,025,481)

75,412

$ 1,116,309

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

The changes in net carrying amounts of property, plant and equipment during 2017 and 2016 were as follows:

Land

Buildings

Machinery
and
equipment

Under
construction

Total

Net balance, December 31, 2016

33,891

$ 536,934

$ 457,658

56,792

$ 1,085,275

Business combinations

Additions

Transfers from under construction

Impairment

Restructuring related write-downs

Depreciation

Foreign currency translation
Other(i)
Net balance, December 31, 2017

1,552

—

6,114

—

(30)

(289)

14,171

—

47,333

(3,776)

(7,040)

(26,241)

(369)

(455)

4,064

—

132,696

60,633

(114,080)

—

(4,233)

(74,477)

(252)

(4,291)

—

(14)

—

19,805

132,696

—

(3,776)

(11,273)

(100,718)

(665)

(5,035)

41,238

$ 560,557

$ 439,102

75,412

$ 1,116,309

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

(i)

Includes disposals, reclassifications and other adjustments.

Borrowing Costs

For the years ended December 31, 2017 and 2016, 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 considering 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 pension plans. The merger was completed
during the quarter ended December 31, 2016.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | 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-

2017

retirement

benefits

Pension

Total

benefits

Pension

2016

Total

Accrued benefit obligation:

Balance, beginning of year

54,504

$ 1,082,533

$ 1,137,037

58,539

$ 1,146,332

$ 1,204,871

Current service cost

Interest cost

1,949

12,049

39,205

12,132

41,154

105

2,122

12,800

42,320

12,905

44,442

Benefits paid from plan assets

—

(73,572)

—

(78,284)

Benefits paid directly from the

Company

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

assumptions

Employee contributions
Settlements(iii)
Balance, end of year

Unfunded
Funded(i)
Total obligation

Plan Assets

Fair value, beginning of year

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 liability,

(3,418)

(411)

(1,531)

16,795

(4,949)

16,384

(3,457)

(3,072)

(1,449)

(9,424)

(4,906)

(12,496)

1,579

—

43,367

3,528

—

44,946

3,528

—

267

—

3,502

3,532

3,769

3,532

(36,796)

54,286

$ 1,122,374

$ 1,176,660

54,286

33,680

87,966

— 1,088,694

1,088,694

54,286

$ 1,122,374

$ 1,176,660

54,504

$ 1,082,533

$ 1,137,037

54,504

28,686

83,190

— 1,053,847

1,053,847

54,504

$ 1,082,533

$ 1,137,037

— $ 1,040,616

$ 1,040,616

— $ 1,069,260

$ 1,069,260

—

37,315

56,073

8,809

3,528

37,315

56,073

8,809

3,528

(73,572)

—

(2,289)

—

38,635

55,711

3,734

3,532

38,635

55,711

3,734

3,532

(78,284)

(13,478)

(2,121)

(36,373)

(13,478)

(2,121)

(36,373)

— $ 1,070,480

$ 1,070,480

— $ 1,040,616

$ 1,040,616

— $

(1,772) $

— $

(1,998) $

(1,998)

end of year

(54,286) $

(53,666) $ (107,952) $

(54,504) $

(43,915) $

(98,419)

(i) Includes wholly and partially funded plans.
(ii) Return on plan assets greater (less) than discount rate.
(iii) 2016 includes the transfer of assets and liabilities to third parties related to previously divested businesses.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

Amounts recognized in the consolidated balance sheet consist of:

Employee benefit assets

Employee benefit liabilities

Accrued net benefit 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

Administrative costs
Settlement (gain) loss(i)
Net pension benefit expense

As at December 31,

2017

9,856

117,808

2016

10,311

108,730

$ (107,952)

$ (98,419)

2017

2016

12,049

12,800

15,116

1,890

2,289

—

14,931

3,685

2,121

(423)

31,344

33,114

(i)

For the year ended December 31, 2016 included in other income.

For the year ended December 31, 2017, the Company expensed salaries of $669.2 million (2016: $656.7 million), excluding
pension and other post-retirement benefits.

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

Actuarial (losses) gains

2017

2016

(4,154)

63,206

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

2017

3.40%

3.00%

5.00%

2016

3.70%

3.00%

5.00%

As at December 31,

2017

50%

48%

100%

2016

60%

36%

100%

As at December 31, 2017, all investments in the plan assets are at Level 2 on the fair value hierarchy.

Other post-

Total

retirement

pensions

$ 35,109

benefits

1,352

0.25% increase

$ (34,029)

$ (1,319)

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

2,398
$
$ 34,447

N/A
1,839

Total

$ 36,461

$ (35,348)

2,398
$
$ 36,286

Measurement dates:

2017 expense

Balance sheet

December 31, 2016

December 31, 2017

The average expected maturity of the pension obligations is 13.1 years (2016: 13.0 years).

The Company expects to contribute $33.1 million to pension plans in 2018, 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 (2016: $0.7 million) related to payments into this plan. The Company
expects to contribute $0.7 million into this plan in 2018.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

10. GOODWILL

The net carrying value for goodwill was $517.4 million as at December 31, 2017 (2016: $428.2 million). There were no
impairment losses recorded for the years ended December 31, 2017 and 2016.

For the purposes of annual impairment testing, goodwill is allocated to the Meat Products and Alternative Protein CGU groups,
being the groups expected to benefit from the synergies of each business combination in which the goodwill arose:

CGU Group

Meat Products

Alternative Protein

As at December 31,

2017

2016

$ 428,236

89,151

—

$ 517,387

$ 428,236

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 groups. The measurement of the recoverable amount of the CGU groups 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 groups. 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 growth rates ranging from 1.5% to 7.5% (2016 - 2.2%).

•

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 applied in determining the recoverable amount of the CGU groups were ranging from 7.9% to 11.6%

(2016 - 8.0%). The discount rates were estimated based on past experience and the weighted average cost of capital
of each CGU group and other competitors in the industry.

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

The change in the carrying amount of goodwill during 2017 and 2016 was as follows:

Net balance, beginning of year

Business combinations

Foreign currency translation

Net balance, end of year

2017

2016

$ 428,236

95,639

(6,488)

—

$ 517,387

$ 428,236

11. INTANGIBLE ASSETS

Definite life

Indefinite life

Total intangible assets

Cost

Accumulated amortization

Net balance, December 31, 2017

Cost

Accumulated amortization

Net balance, December 31, 2016

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

As at December 31,

2017

2016

$ 123,261

$ 61,232

91,936

66,853

$ 215,197

$ 128,085

Software in
use

Software in
process

$ 111,644

(63,968)

$ 47,676

9,998

—

9,998

Software in
use

$ 105,979

(50,478)

$ 55,501

Software in
process

5,731

—

5,731

Definite life

Recipes

8,779

(992)

7,787

Customer
relationships

59,823

(2,023)

57,800

Recipes

Customer
relationships

—

Total

$ 190,244

(66,983)

$ 123,261

Total

$ 111,710

(50,478)

$ 61,232

The changes in net carrying amounts of definite life intangibles during 2017 and 2016 were as follows:

Net balance, December 31, 2016

$ 55,501

5,731

—

$ 61,232

Software in
use

Software in
process

Recipes

Customer
relationships

Total

Business combinations

Additions

Transfers

Amortization

Foreign currency translation
Other(i)

320

—

5,282

(13,386)

(21)

(20)

—

9,549

(5,282)

—

9,428

64,247

—

(1,015)

(626)

—

(2,070)

(4,377)

—

73,995

9,549

—

(16,471)

(5,024)

(20)

Net balance, December 31, 2017

$ 47,676

9,998

7,787

57,800

$ 123,261

Software in
use

Software in
process

Recipes

Customer
relationships

Net balance, December 31, 2015

$ 66,974

4,328

Additions

Transfers

Amortization

—

4,668

(16,141)

6,071

(4,668)

—

Net balance, December 31, 2016

$ 55,501

5,731

(i)

Includes disposals, reclassifications and other adjustments.

Amortization

—

Total

$ 71,302

6,071

—

(16,141)

$ 61,232

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

Borrowing Costs

For the years ended December 31, 2017 and 2016, there were no borrowing costs capitalized.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

Indefinite Life Intangibles

Indefinite life intangible assets are comprised of trademarks and poultry production quota. The Company expects to renew the
registration of the trademarks and poultry production quota at each expiry date indefinitely, and expects these assets to
generate economic benefit in perpetuity. As such, the Company assessed these intangibles to have indefinite useful lives.

The changes in net carrying amounts of indefinite life intangibles during 2017 and 2016 were as follows:

Net balance, December 31, 2016

Business Combinations

Foreign Currency Translation

Net balance, December 31, 2017

Net balance, December 31, 2016 and 2015

Indefinite life

Trademarks

Quota

Total

$ 46,700

$ 20,153

$ 66,853

26,938

(1,855)

—

26,938

(1,855)

$ 71,783

$ 20,153

$ 91,936

Trademarks

Quota

Total

$ 46,700

$ 20,153

$ 66,853

The indefinite life intangible assets are allocated between the Meat Products and Alternative Protein CGU Groups as follows:

CGU Group

Meat Products

Alternative Protein

As at December 31,

2017

2016

$ 66,853

25,083

—

$ 91,936

$ 66,853

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

2017

2016

1.5 - 3.0%

1.5 - 2.0%

1.5 - 3.0%

10.0 - 13.0%

2.2%

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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

12. PROVISIONS

Balance at December 31, 2016

Charges

Reversals

Cash payments

Non-cash items

Legal

$ 2,250

377

(1,123)

(1,215)

—

Environ-
mental

$ 8,233

2,510

(5,385)

(525)

—

Restructuring and related
provisions

Severance
and other
employee
related costs

Site
closing
and other
cash costs

Lease
make-
good

Total

$ 2,228

8,656

$ 7,077

$ 28,444

—

9,904

(1,275)

(6,906)

—

1,104

(242)

(5,191)

131

Balance at December 31, 2017

$ 289

$ 4,833

$ 2,228

$ 10,379

$ 2,879

Current

Non-current

Total at December 31, 2017

Balance at December 31, 2015

Charges

Reversals

Cash payments

Non-cash items

Legal

$ 2,250

—

Environ-
mental

$ 8,300

—

(102)

—

Restructuring and related
provisions

Lease
make-
good

Severance
and other
employee
related costs

Site closing
and other
cash costs

—

(101)

(8)

—

9,613

(3,623)

(22,439)

(8)

537

(1,398)

(1,387)

172

$ 2,337

$ 25,113

$ 9,153

$ 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

Restructuring and Other Related Costs

13,895

(8,025)

(13,837)

131

$ 20,608

$ 9,335

11,273

$ 20,608

Total

10,185

(5,122)

(23,936)

164

$ 28,444

$ 11,889

16,555

$ 28,444

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

13. LONG-TERM DEBT

Current portion of long-term debt

Long-term debt

As at December 31,

2017

2016

805

794

8,443

9,119

$ 9,248

$ 9,913

The Company has various government loans on specific projects, with interest rates ranging from non-interest bearing to 2.9%
per annum (2016: 2.9%). These facilities are repayable over various terms from 2022 to 2024. As at December 31, 2017, $9.2
million (2016: $9.9 million) was outstanding. All of these facilities are committed.

The revolving term facility requires the maintenance of certain covenants. As at December 31, 2017, the Company was in
compliance with all of these covenants.

The Company’s estimated average effective cost of borrowing for 2017 was approximately 4.6%, which excludes any impact of
interest rate hedges (2016: 4.6%). Required repayments of long-term debt are as follows:

2018

2019

2020

2021

2022

Thereafter

Total long-term debt

14. OTHER CURRENT LIABILITIES

Derivative instruments

Obligation for repurchase of shares

Other

15. OTHER LONG-TERM LIABILITIES

Step rent and lease inducements

Other

$ 1,083

1,083

4,935

926

$ 10,193

As at December 31,

Notes

2017

2016

6,039

8,430

24,531

1,027

88,322

105

$ 31,597

$ 96,857

As at December 31,

2017

2016

8,559

9,001

4,130

3,653

$ 12,689

$ 12,654

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

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

Treasury Stock

2017

2016

132,085

134,987

551

436

182

163

(5,740)

(2,618)

(843)

(629)

126,489

132,085

2017

540

(551)

—

843

832

2016

(182)

—

629

540

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.

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, 2017,
an obligation for the repurchase of shares of $24.5 million (2016: $88.3 million) was recognized under the ASPP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | 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”).

The Company’s revolving term facility is subject to certain financial covenants. As at December 31, 2017, the Company was in
compliance with all of these covenants.

In addition to 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,
2017.

Financial Instruments

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

Cash and cash equivalents

Accounts receivable

Notes receivable

Accounts payable and accruals

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, fair value hedges or net investments in foreign

operations hedge as appropriate.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | 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)

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

2017

2016

Notional
amount(i)

Fair value

Asset

Liability

Notional
amount(i)

Fair value

Asset

Liability

$ 340,505

$ 4,225

$ 1,788

$ 182,696

44,822

— $ 1,589

44,738

348

$ 1,019

— $

848

— $

— $ 520,000

$ 2,128

$ 5,893

$ 136,546

$ 371,157

710

—

1,014

1,648

$ 450,259

$ 537,621

11,248

13,113

670

—

$ 4,935

$ 6,039

$ 4,935

$ 6,039

—

$ 4,935

$ 6,039

$ 26,837

$ 8,430

$ 26,837

$ 8,430

—

$ 26,837

$ 8,430

For the year ended December 31, 2017, the pre-tax amount of hedge ineffectiveness recognized in other income (expense)
was a gain of $0.1 million (2016: loss of $0.0 million).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

The table below sets out fair value measurements of financial instruments as at December 31, 2017 using the fair value
hierarchy:

Assets:

Foreign exchange contracts

Liabilities:

Foreign exchange contracts

Commodity contracts

Level 1

Level 2

Level 3

Total

—

3,237

4,935

2,802

—

2,802

—

4,935

2,802

3,237

6,039

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.

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 described in Note 23. The Company does, however, conduct a
significant amount of business with a small number of large grocery retailers. The Company's two largest customers as at
December 31, 2017 comprise approximately 22.3% (2016: one customer representing 13.2%) of total sales.

The Company is also 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 | 2017 | MAPLE LEAF FOODS INC.

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

December 31, 2017

Due within 1
year

Due between
1 and 2 years

Due between
2 and 3 years

Due after 3
years

Total

Financial liabilities

Accounts payable and accruals

$ 300,659

—

$ 300,659

Long-term debt

Foreign exchange contracts

Commodity futures contracts

Other liabilities

Total

1,083

2,802

3,237

26,237

1,083

—

1,511

1,083

—

960

6,944

—

1,949

10,193

2,802

3,237

30,657

$ 334,018

2,594

2,043

8,893

$ 347,548

As at December 31, 2017, the Company had available undrawn committed credit of $393.6 million (2016: $393.8 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.

As at December 31, 2017, 7.8% (2016: 10.5%) 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, U.S. 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, 2017, $340.5 million (2016: $182.7 million) of
anticipated foreign currency denominated transactions have been hedged with underlying foreign exchange forward contracts
settling at various dates beginning January 2018. The aggregate net fair value of these forward contracts was a gain of $2.4
million as at December 31, 2017 (2016: loss of $0.7 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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

contracts for $136.5 million (2016: $450.3 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 $2.9
million, with a corresponding decrease in earnings before taxes of $3.1 million offset by an increase in other comprehensive
income before taxes of $0.3 million.

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.

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, 2017 and 2016. The Company also holds commodity
contracts designated as fair value hedges for $44.8 million (2016: $44.7 million) and has $371.2 million (2016: $537.6 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 $18.3 million, with a decrease in
earnings before taxes of $13.7 million and $0.0 million in other comprehensive income (loss). The earnings before taxes
include the offsetting impact of the commodity price risk inherent in the transactions being hedged.

Accumulated other comprehensive income (loss)

The Company estimates that $1.8 million, net of tax of $0.6 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, 2017, a gain of $9.4 million, net of tax of $3.3 million, was released to earnings from
accumulated other comprehensive income (loss) and included in the net change for the year (2016: gain of $6.6 million, net of
tax of $2.3 million).

18. OTHER INCOME (EXPENSE)

Loss on disposal of property and equipment

Gain on sale of investment properties

Recovery from insurance claims

Net investment property expense

Impairment of assets

Interest income
Changes in provisions(i)
Net expense on non-designated interest rate swaps

Transaction costs on acquisitions

Change in fair value of non-designated interest rate swaps

Other

2017

2016

$ (4,362)

$ (4,195)

9,780

5,000

(1,097)

(3,776)

1,300

4,410

(3,786)

(7,619)

3,765

(6)

5,430

425

(1,819)

(2,831)

2,790

—

(4,028)

—

3,955

(3,323)

3,609

$ (3,596)

(i) Primarily relates to changes in environmental provisions for investment properties no longer held by the Company and

plants announced for closure.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

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

Change in tax rates

Total income tax expense

Reconciliation of Effective Tax rate

2017

418

1,596

1,197

1,957

—

2016

403

1,520

688

2,308

1,448

5,168

6,367

2017

2016

9,272

4,767

$ 47,713

$ 63,124

(6,793)

$ 40,920

$ 50,192

—

$ 63,124

$ 67,891

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% (2016: 26.8%)

Increase (decrease) in income tax resulting from:

Deferred tax (recovery) expense relating to changes in U.S. 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

2017

2016

$ 57,430

$ 66,891

(6,793)

531

(1,459)

1,015

343

138

(697)

(316)

—

249

(1,714)

904

596

—

895

$ 50,192

$ 67,891

2017

811

2016

850

(1,037)

16,963

(226)

$ 17,813

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

Deferred Tax Assets and Liabilities

Recognized Deferred Tax Asset and Liabilities

The Company has recognized deferred tax assets in the amount of approximately $61.5 million (2016: $56.0 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 $142.0 million (2016: $78.3 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.

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,

2017

2016

$ 18,295

$ 13,794

4,916

36,168

2,122

5,292

35,830

1,095

$ 61,501

$ 56,011

$ 83,344

$ 34,759

26,123

32,532

26,096

17,449

$ 141,999

$ 78,304

—

80,498

22,293

The Company has no unrecognized deferred tax assets as at December 31, 2017 and 2016.

Unrecognized Deferred Tax Liabilities

Deferrred tax is not recognized on the unremitted earnings of subsidiaries and other investments as the Company is in a
position to control the reversal of the temporary difference and it is probable that such differences will not reverse in the
foreseeable future. The unrecognized temporary difference at December 31, 2017 for the Company's subsidiaries was $124.4
million (2016: $0.0 million).

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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

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

Years ended December 31,

Basic
Stock options(i)
Diluted

2017

Weighted
average
number of
shares(ii)
128.6

3.8

Net
earnings

$ 164,089

EPS

Net
earnings

$ 1.28

$ 181,702

2016

Weighted
average
number of
shares(ii)
134.2

3.4

EPS

$ 1.35

$ 164,089

132.4

$ 1.24

$ 181,702

137.6

$ 1.32

(i) Excludes the effect of approximately 3.0 million (2016: 3.2 million) options and performance shares that are anti-dilutive.
(ii)

In millions.

22. SHARE-BASED PAYMENT

Under the Maple Leaf Foods Share Options Plan in effect as at December 31, 2017, 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, 2017, 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 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 Plans (“DSU Plans”), 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 is the only plan under which options are granted after 2016. A summary of the status of the Company’s
outstanding stock options as at December 31, 2017 and 2016, and changes during these years are presented below:

2017

2016

Weighted
average
exercise
price

Options
outstanding

Outstanding, beginning of year

4,260,000

$ 17.73

3,608,000

$ 16.61

Granted

Exercised

Forfeited

Outstanding, end of year

Options currently exercisable

782,200

(435,800)

(50,000)

4,556,400

3,019,200

30.98

13.61

32.75

$ 20.23

$ 17.05

841,300

(162,500)

(26,800)

4,260,000

2,554,900

22.53

17.39

20.28

$ 17.73

$ 14.86

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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

The number of options outstanding as at December 31, 2017, 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

1,308,500

$11.61

$20.28 to $22.53

2,515,700

$30.86 to $30.86

732,200

21.63

30.86

Total Options

4,556,400

$20.23

0.4

4.3

6.2

3.5

1,308,500

$11.61

—

$ —

1,710,700

21.20

—

805,000

732,200

22.53

30.86

3,019,200

$17.05

1,537,200

$26.50

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

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, 2017 and 2016 are shown in the table below(i):

Share price at grant date

Exercise price

Expected volatility
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.

2017

$31.50

$30.98

2016

$23.14

$22.53

23.32%

23.71%

4.5

1.40%

1.16%

4.5

1.56%

0.67%

The fair value of options granted during the year ended December 31, 2017 was $4.5 million (2016: $3.4 million). Amortization
charges relating to current and prior year options were $3.9 million (2016: $3.5 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 at 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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

A summary of the status of the Company’s RSU plans (including PSUs) as at December 31, 2017 and 2016 and changes
during these periods is presented below:

Outstanding, beginning of year

Granted

Exercised

Forfeited

Outstanding, end of year

2017

2016

Weighted
average
fair value
at grant

RSUs
outstanding

Weighted
average
fair value
at grant

RSUs
outstanding

1,570,669

$ 20.79

1,598,462

$ 20.61

720,813

(666,721)

(63,066)

30.65

19.80

24.03

414,630

(343,699)

(98,724)

22.29

22.48

18.55

1,561,695

$ 25.61

1,570,669

$ 20.79

On April 1, 2016, the Company communicated to its employees the intent to issue RSUs at which time the service period
commenced. During the year ended December 31, 2017, the RSUs were formally granted. These units have a further two year
service period.

None of the RSUs exercised were settled in cash (2016: 12,538 units). All of the Company's remaining outstanding RSUs are
accounted for as equity-settled awards.

The fair value of RSUs and PSUs granted in 2017 was $18.9 million (2016: $7.6 million). Expenses for the year ended
December 31, 2017 relating to current and prior year RSUs and PSUs, were $15.8 million (2016: $25.0 million). No RSUs or
PSUs were cash settled in the year (2016: $0.7 million).
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

2017

2016

2.58

3.22

14.4% 17.4%

0.9% 0.4%

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, 2017 was $1.4 million (2016: $1.4
million).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

A summary of the status of the Company’s outstanding DSUs as at December 31, 2017 and 2016, and changes during these
years is presented below:

Units outstanding

2013 DSU plan

2002 DSU plan

2013 DSU plan

2002 DSU plan

2017

2016

Outstanding, beginning of year

Additions: granted

Additions: dividends reinvested

Exercised

Outstanding, end of year
Value of liability at December 31(i)

334,444

40,866

4,352

(127,920)

251,742

—

19,418

—

259

—

19,677

$ 714

293,234

48,148

4,129

(11,067)

334,444

—

19,169

—

249

—

19,418

$ 554

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

23. COMPOSITION OF THE COMPANY

Unconsolidated Structured Entity

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 this 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, for cash 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
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, 2017, trade accounts receivable being serviced under this facility amounted to $124.9 million (2016:
$116.2 million). In return for the sale of its trade receivables, the Company will receive cash of $96.0 million (2016: $83.7
million) and notes receivable in the amount of $28.9 million (2016: $32.5 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, 2017, the Company recorded a net payable amount of $14.0 million (2016: $0.9 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, 2017 and 2016.

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.

The Company was added as a defendant in a class action lawsuit against a group of food retailers and bread
manufacturers that are the subject of an investigation by the Competition Bureau relating to pricing practices. Maple Leaf
Foods is not part of the investigation. The Company was added as a defendant to the class action as a result of the share
ownership position it previously held in Canada Bread, and is of the view that the action does not present a material
financial risk to the Company.

(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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

existing facilities. Contract commitments as at December 31, 2017 were $4.5 million (2016: $4.9 million).

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

2018

2019

2020

2021

2022

Thereafter

47,523

37,382

29,896

23,914

20,281

46,711

205,707

For the year ended December 31, 2017, an amount of $28.9 million was recognized as an expense in earnings in respect of
operating leases (2016: $33.2 million).

25. RELATED PARTY TRANSACTIONS

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

Post-employment benefits

Share-based compensation

Total remuneration

2017

2016

$ 13,448

$ 13,084

316

139

288

147

$ 13,903

$ 13,519

902

12,753

840

12,596

$ 27,558

$ 26,955

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

26. GEOGRAPHIC AND CUSTOMER PROFILE

Information About Geographic Areas

Property and equipment and investment property located outside of Canada was $9.4 million as at December 31, 2017 (2016:
$0.2 million). Of this amount, $0.2 million (2016: $0.2 million) was in Japan and $9.2 million (2016: $0.0 million) was located in
the U.S. Goodwill of $89.2 million (2016: $0.0 million) was attributed to operations outside of Canada.

Revenues earned outside of Canada for the year ended December 31, 2017, were $865.4 million (2016: $762.5 million). Of
the total amount earned outside of Canada, $344.7 million (2016: $314.8 million) was earned in Japan and $294.7 million
(2016: $236.1 million) was earned in the U.S. Revenue by geographic area is determined based on the shipping location.

Information About Major Customers

27. BUSINESS COMBINATIONS

On March 10, 2017, the Company acquired 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 plant protein products.

The fair value of consideration transferred for the acquisition of Lightlife consists of the following:

Agreed-upon purchase price

Working capital adjustments
Total consideration paid in cash

Purchase price

March 10, 2017

188,566

2,117

190,683

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2017 | MAPLE LEAF FOODS INC.

The Company has finalized the amounts recorded in the business combination which resulted in the following adjustments to
the preliminary purchase price allocation:

Current assets

Cash
Accounts receivable(i)
Inventories

Prepaid expenses and other assets

Income taxes receivable

Non-current assets

Property and equipment

Goodwill

Intangible assets

Current liabilities

Preliminary
Amounts

Adjustments

Final
Amounts

766

3,968

4,539

626

14,536

133,854

37,709

—

1,065

—

(4,825)

(38,215)

63,224

766

3,968

5,604

626

9,711

95,639

100,933

Accounts payable and accruals

(3,043)

—

(3,043)

Non-current liabilities

Deferred tax liability

Total net assets acquired

(2,322)

(21,249)

(23,571)

190,683

—

190,683

(i) Contractual cash flows not expected to be collected are not significant.

28. SUBSEQUENT EVENTS

On November 30, 2017, the Company signed a definitive agreement to acquire 100% of the outstanding shares of The Field
Roast Grain Meat Company, SPC, a privately held U.S. based corporation engaged in the production and distribution of
premium grain-based protein and vegan cheese products. The transaction was subject to customary U.S. regulatory review,
and was completed on January 29, 2018. The purchase price was US$120.0 million plus transaction costs settled through a
combination of cash-on-hand and borrowings under the existing revolving credit facility as described in Note 13. The
transaction will be accounted for as a business combination.

Corporate Information

Annual Meeting
The annual meeting of
shareholders of Maple Leaf Foods
Inc. will be held on Wednesday,
May 2, 2018, at 11:00 a.m. at
Maple Leaf Foods
ThinkFOOD!
6897 Financial Drive
Mississauga, Ontario
Canada
L5N 0A8

Dividends
The declaration and payment of
quarterly dividends are made at
the discretion of the Board of
Directors. Anticipated payment
dates in 2018: March 29, June 29,
September 28 and December 28.

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”.

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, 2017, 127,321,089
voting common shares were
issued and outstanding. There
were 786 shareholders of record,
of which 755 were registered in
Canada, holding approximately
98.7% of the issued voting shares.

Ownership
As at December 31, 2017, the
Company’s largest shareholder
is McCain Capital Inc., directly
or indirectly holding 46,983,607
voting shares representing
approximately 36.9% 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 46,983,607 common shares
or 36.9% 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
www.mapleleaffoods.com

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MAPLELEAFFOODS.COM

MAPLE LEAF FOODS INC., 6985 FINANCIAL DRIVE, MISSISSAUGA, ONTARIO L5N 0A1 CANADA