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MAPLE LEAF FOODS INC. 2005 ANNUAL REPORT

Passionate People Passionate about Food

On the Cover: A historical landmark in Toronto, the

St. Lawrence Market and its many fine purveyors of

fresh meats, cheeses, produce and other food products

has served as the inspiration for food lovers for more

than 100 years. Such markets provide an ideal venue for

our passionate people who are constantly seeking new

ideas for innovative food products for our customers

and consumers.

Pictured left to right are: Jeannie Schmitz (Canada Bread

Fresh Bakery), Glen Gratton (Agribusiness Group),

Andy Persaud (Maple Leaf Consumer Foods) and

Valerie Walton (Maple Leaf Global Foods).

M A P L E L E A F F O O D S I N C .

30 St. Clair Avenue West, Suite 1500

Toronto, Ontario, Canada M4V 3A2

www.mapleleaf.com


Printed in Canada

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C O R P O R A T E P R O F I L E

aple Leaf Foods is a Canadian success story with

growing global reach. Our roots in the flour

business date back to a small-town mill in 1836, our

meat processing business back to the 1860s, and our

bakery business to the amalgamation of five separate companies in 1911.

Rich in history, Maple Leaf Foods entered our current growth phase in

1995 when McCain Capital Corporation pooled our expertise in

the food business with the financial resources of Ontario Teachers’

Pension Plan Board. Today, Maple Leaf Foods employs approximately

24,000 people, exports to nearly 80 countries, and operates in Canada,

the United States, the United Kingdom, Europe, Southeast

Asia and Mexico.

Our Meat Products and Agribusiness operations are strategically

linked to produce high quality meat products, minimize underlying

commodity market exposure, and maximize earnings. They include

animal nutrition, hog production, fresh value-added pork and poultry

products, processed meats and home meal solutions, global sales and

trading, and rendering operations.

Our Bakery operations are concentrated in North America and the

United Kingdom. We are the Canadian market leader in

premium nutrition fresh bakery products, such as whole grain and

organic breads. We are also a major North American supplier of

frozen ready-to-bake, par-baked and pre-baked breads, rolls and

specialty bakery items, in addition to fresh pasta and sauces. In the

U.K., we operate three plants, including one of the largest bagel plants

in the world, servicing the fast growing U.K. and European markets.

Our value creation strategy is supported by our flagship brands

which are growing well above industry averages – Maple Leaf® and

Schneiders® in the meat category and Dempster’s® in the bakery

category. They each deliver a promise to consumers: leadership in food

safety, quality and taste, and nutrition. Behind our products and our

many brands are our passionate people, and their passion for food.

M

Table of Contents1 Financial Highlights

2 Operations Overview

3 Segmented Operating Results

5 Letter from the Chairman

6 Letter to Fellow Shareholders

14 Financials

CAPITAL STOCK

The Company’s authorized capital consists of anunlimited number of voting and an unlimited numberof non-voting common shares. At December 31, 2005,105,704,812 voting shares and 22,000,000 non-votingshares were issued and outstanding, for a total of127,704,812 outstanding shares. There were 1,208shareholders of record of which 1,163 were registeredin Canada, holding 99.4% of the issued voting shares.All of the issued non-voting shares are held by OntarioTeachers’ Pension Plan Board. These non-voting sharesmay be converted into voting shares at any time.

OWNERSHIP

The Company’s major shareholders are McCainCapital Corporation holding 41,518,153 sharesrepresenting 32.5% of the total issued and outstanding shares issued and Ontario Teachers’Pension Plan Board holding 20,728,371 voting sharesand 22,000,000 non-voting shares representing 33.4%of the total issued and outstanding shares. The remainder of the issued and outstanding shares arepublicly held.

CORPORATE OFFICE

Maple Leaf Foods Inc.30 St. Clair Avenue WestSuite 1500Toronto, Ontario, Canada M4V 3A2Tel: (416) 926-2000Fax: (416) 926-2018Website: www.mapleleaf.com

ANNUAL AND GENERAL MEETING

The annual and general meeting of shareholders ofMaple Leaf Foods Inc. will be held on Wednesday, April26, 2006 at 11:00 a.m. at the Glenn Gould Studio,Canadian Broadcasting Centre, 250 Front Street West,Toronto, Canada.

DIVIDENDS

The declaration and payment of quarterly dividends aremade at the discretion of the Board of Directors.Anticipated payment dates in 2006: March 31, June 30,September 29 and December 29.

SHAREHOLDER INQUIRIES

Inquiries regarding dividends, change of address,transfer requirements or lost certificates should bedirected to the Company’s transfer agent:Computershare Investor Services Inc.Stock and Bond Transfer Department100 University Avenue, 9th FloorToronto, Ontario M5J 2Y1Tel: (514) 982-7555or 1-800-564-6253 (toll-free North America)or [email protected]

COMPANY INFORMATION

For public and investment analysis inquiries, pleasecontact our Vice-President, Public & Investor Relationsat (416) 926-2000.

For copies of annual and quarterly reports, annualinformation form and other disclosure documents,please contact our Senior Vice-President, Transactionsand Administration and Corporate Secretary at(416) 926-2000.

TRANSFER AGENT AND REGISTRAR

Computershare Investor Services Inc.100 University Avenue, 9th FloorToronto, Ontario, Canada M5J 2Y1Tel: (514) 982-7555or 1-800-564-6253 (toll-free North America)or [email protected]

AUDITORS

KPMG LLP

Toronto, Ontario

STOCK EXCHANGE LISTINGS AND STOCK

SYMBOL

The Company’s voting common shares are listedon The Toronto Stock Exchange and trade under thesymbol “MFI”.

RAPPORT ANNUEL

Si vous désirez recevoir un exemplaire de la versionfrançaise de ce rapport, veuillez écrire à l’adressesuivante : Secrétaire de la société, Les Aliments MapleLeaf Inc., 30 St. Clair Avenue West, Toronto, OntarioM4V 3A2.

C O R P O R A T E I N F O R M A T I O N

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P A S S I O N A T E P E O P L E • P A S S I O N A T E A B O U T F O O D

1

F I N A N C I A L H I G H L I G H T S

• 66.6% Meat Products

• 20.8% Bakery Products

• 12.6% Agribusiness

• 72.9% Domestic

• 13.9% U.S.

• 13.2% Other International

TOTAL ASSETS BYGROUP




• 9.6% Non-allocated




For years ended December 31(In millions of Canadian dollars, except share information)

2005 2004 2003 2002 2001

Consolidated results

Sales $ 6,463 $ 6,365 $ 5,042 $ 5,076 $ 4,775

Earnings from operations (i) 263 256 152 204 158

Net earnings 94 102 30 80 53

Return on assets employed (ii) 8.2% 8.9% 6.4% 9.2% 7.6%

Financial position

Net assets employed (iii) $ 2,256 $ 2,105 $ 1,561 $ 1,430 $ 1,387

Shareholders’ equity 999 906 654 644 573

Net borrowings 1,063 1,046 785 667 685

Per share

Net earnings $ 0.74 $ 0.90 $ 0.27 $ 0.71 $ 0.55

Dividends 0.16 0.16 0.16 0.16 0.16

Book value 7.82 7.24 5.78 5.70 5.12

Number of shares (millions)

Weighted average 126.8 113.6 113.1 112.5 95.9

Outstanding at December 31 127.7 125.2 113.2 112.9 112.0

(i) Before restructuring costs (2003 and 2005).(ii) After tax, but before interest, calculated on average month-end net assets employed. Before restructuring costs (2003 and 2005).(iii) Total assets, less cash, future tax assets and non-interest bearing liabilities.

DOMESTIC VS.INTERNATIONAL SALES

SALES BY GROUP OPERATING EARNINGS BEFORE

RESTRUCTURING COSTS


2

• M A P L E L E A F C O N S U M E R F O O D S

Supported by our flagship brands – Maple Leaf® andSchneiders® – and a family of strong regional brands,Maple Leaf Consumer Foods is Canada’s leading producer of premium quality processed meat and home meal solutions. Products include refrigeratedfully cooked roasts, frozen meat products, bacon, ham,wieners, deli and canned meats, single serve entrées and“hand-held” meat and pastry products.Plants: 24, Distribution Centres: 7

• M A P L E L E A F F R E S H F O O D S

Maple Leaf Fresh Foods is Canada’s leading multi-species fresh meat company, producing premium quality, fresh and frozen value-added pork, chicken,and turkey products. Brands include Maple Leaf ® Prime™

Naturally*, Maple Leaf ® Fresh Grill!, Maple Leaf ®

Fresh Roast!, Maple Leaf ® Prime™ Turkey, Mitchell’sGourmet Foods and Maple Leaf ® Medallion™ Naturally.Plants: 12, Hatcheries: 3

• M A P L E L E A F G L O B A L F O O D S

Canada’s largest exporter of agri-food products, supported by global offices in key markets, includingSoutheast Asia, Europe and Mexico. Operationsinclude the marketing, distribution and trading ofvalue-added protein, bakery and agri-food products,including pork products, seafood, grain and soy products, pre-cooked meat and poultry products,french fries, bakery products and pet food.Plants: 2, Trading Offices: 8

B A K E R Y P R O D U C T S

F R E S H B A K E R Y

The leading Canadian producer and distributor of freshbaked products including breads, rolls, bagels andartisan breads with brands such as Dempster’s®,POM®, Ben’s®, McGavin’s and Healthy Way.Dempster’s® is the national brand leader in highernutrition, whole grain products. The Company alsomanufactures a variety of fresh and filled fresh pastaand sauces under the Olivieri® brand, distributing tocustomers across North America.Plants: 24, Distribution Centres: 12

* Canada’s leading brand of chicken

• E L I T E S W I N E

The Company’s hog management operations are animportant component of Maple Leaf’s quality controland Vertical Co-ordination strategy, supplyingapproximately 20% of Maple Leaf Fresh Foods’pork requirements. With 130,000 sows undermanagement, Elite Swine is the largest hog producerin Canada and the seventh largest production system inNorth America.

• M A P L E L E A F A N I M A L N U T R I T I O N

Canada’s leading animal nutrition organization, supported by leading trusted brands – Shur-Gain inEastern Canada and Landmark Feeds in WesternCanada – and excellence in research and development.The business provides animal nutrition products and services, including swine, dairy and beef cattle, poultry,aquaculture, equine and pet food.Feed Mills: 18, Retail Sales Centres: 13, Hatcheries: 3,

Research Facilities: 3

• R O T H S A Y

Canada’s largest recycler of animal by-products intovalue-added products, including animal feed, aminoacid supplements, biodiesel and other industrial uses.Rothsay provides an essential service for its customers and other Maple Leaf operations by responsibly managing and recapturing the value ofinedible by-products. Plants: 6

F R O Z E N B A K E R Y

A leading North American producer and distributor offrozen unbaked, par-baked and fully baked breads,rolls and bagels and artisan breads for retail and foodservice customers, and a U.K.-based producer ofbagels and specialty breads for the U.K. and Europeanmarkets. Brands include Grace Baking, CaliforniaGoldminer and the Wholesome Harvest line of premiumnutrition products, in addition to the New York Bagelbrand in the U.K. Plants: 12

P R O T E I N V A L U E C H A I N

• Maple LeafAnimal

Nutrition

Feed

• Elite Swine

HogProduction

• Maple Leaf Consumer Foods• Maple Leaf Fresh Foods• Maple Leaf Global Foods

Processing, Marketing & Distribution

• Rothsay

By-Products

O P E R A T I O N S O V E R V I E W

M E A T P R O D U C T S A G R I B U S I N E S S

For detailed information on these operations, visit www.mapleleaf.com.

P R O T E I N V A L U E C H A I N

(In millions of Canadian dollars)

2005 2004 % change

Meat Products Group

Sales $ 4,300 $ 4,127 4 %

Earnings from operations before restructuring costs 60 68 (13)%

Total assets 1,550 1,463 6 %

Agribusiness Group

Sales $ 817 $ 925 (12)%

Earnings from operations before restructuring costs 102 99 3 %

Total assets 640 603 6 %

TOTAL PROTEIN VALUE CHAIN

(In millions of Canadian dollars)

2005 2004 % change

Sales $ 5,117 $ 5,052 1 %

Earnings from operations before restructuring costs 162 167 (3)%

Total assets 2,190 2,066 6 %

The Meat Products Group includes Consumer Foods, Fresh Foods and Global Foods operations.

The Agribusiness Group comprises Animal Nutrition, hog production and rendering operations.

B A K E R Y P R O D U C T S G R O U P

TOTAL BAKERY PRODUCTS GROUP (In millions of Canadian dollars)

2005 2004 % change

Sales $ 1,346 $ 1,313 3 %

Earnings from operations before restructuring costs 101 89 14 %

Total assets 695 702 (1)%

The Bakery Products Group is comprised of Maple Leaf Foods’ 87.5% ownership in Canada Bread Company, Limited,

a leading producer and distributor of fresh and frozen bakery products and fresh pasta and sauces, with operations across

Canada, the United States and the United Kingdom.

S E G M E N T E D O P E R A T I N G R E S U L T S

Our independent directors have had highly successful

careers as leaders in business, academia and public

service. Because of this, they add significant

perspective and oversight into how management

shapes strategy and manages the business.”

From left to right:

Purdy Crawford

Michael McCain

Chaviva Hosek

Jim Hankinson

Scott McCain

Diane McGarry

Bob Stewart

Jeffrey Gandz

Ted Newall

Bob Hiller

Gord Ritchie

Don Loadman

“


5

L E T T E R F R O M T H E C H A I R M A N

Delivering long-term shareholder value is seldom a

straight line of profit gains. Implementing the right

strategy to achieve high financial returns in a

diversified global food company means growth

often happens in expansive bursts. It may come in

the form of large acquisitions that expand our

global presence, or exciting new product

innovations that transform the marketplace. Great

companies are premised on such intensity.

The alignment of growth ambitions with

shareholder value involves serious equity

commitments by directors and managers. Our two

largest shareholders – McCain Capital Corporation

and Ontario Teachers’ Pension Plan Board – own

approximately 70 percent of the Company. The 10

independent directors on our 13-member board

have also pledged a substantial amount as an

investment in our future.

An important distinction is that all shareholders

don’t necessarily share the same interests, because

investment horizons are different. Our Board and

management team are managing this Company for

long-term value creation. Shareholders, current and

prospective, should keep this top of mind as you

make investment decisions and measure our success.

We operate in a complex environment with

multiple stakeholders – government, communities,

unions and industry groups to name a few. On this

basis, shareholders need a Board well experienced

in value creation, but also who bring a diversity

of experience to the Company’s management. Our

independent directors have had highly successful

careers as leaders in business, academia and public

service. Because of this, they add significant

perspective and oversight into how management

shapes strategy and manages the business.

We are always looking for ways to better engage

directors in the business and with our people. Last

year, we introduced an innovative new program

called “Board Connect”, where directors spend a

day shadowing a senior operations manager. This

allows them to garner first hand insights into our

business and engage directly with our people. One

director enjoyed a day in the life of a sales executive,

another organizing fresh pork shipments across

the border, while a third participated with the

Consumer Foods’ management team in their annual

budget process. This program will continue in 2006.

Building corporate greatness means dramatic

changes in the next few years as we step with increased

boldness onto the world stage. Your Board will

assess these and all our major business decisions

with a shareholder lens; ensuring long-term value

creation is supported each step of the way.

Sincerely,

G. Wallace F. McCain,Chairman

G. Wallace F. McCainChairman


6

L E T T E R T O F E L L O W S H A R E H O L D E R S

We accomplished a great deal in 2005 as we

implemented structural changes throughout the

organization and increased operating earnings by

17% in the first nine months compared with the prior

year. Unfortunately that momentum slowed in the

fourth quarter due to a sharp rise in energy costs,

an unexpected drop in the yen, and higher timing

related advertising and promotion costs. The net result

for 2005 compared with the prior year was as follows:

• Sales increased by 2% to $6.5 billion

• Earnings from operations also increased by 3% to $2631 million

• Earnings per share declined to $0.811 from $0.90

• Cash flow from operating activities increased by

10% to $260 million

• Capital expenditures decreased to $152 million

from $157 million

• Return on net assets declined to 8.2%1 from 8.9%

• Share price closed the year at $15.20, up 1.5%,

outperforming the S&P Food Products Index by 7%

Operating earnings in our Meat Products Group

declined by 13% to $60 million for the year.

The main cause was an industry-wide contraction

in commodity processor margins – approximately

30% in pork and 41% in poultry versus the prior

year. We offset these negative underlying influences

in three ways. First, our Vertical Co-ordination

strategy to minimize commodity influences on our

earnings is working. We effectively own 20% of

our hog supply and this natural hedge against

high hog prices offsets a substantial portion of

the commodity processor margin decline. Second,

we added value to our commodity products

through gains in processing, innovation, and better

sales and marketing execution. Finally, our brand

focused, consumer-oriented, fresh bread and

consumer packaged meats and meals businesses

both performed brilliantly as a result of brand

marketing and sales effectiveness, operational

improvements, and lower raw material costs.

Higher hog prices were the main reason why our

Agribusiness Group’s operating profits increased

by 3% to $102 million. This improvement more

than offset the costs of commissioning a new

high-efficiency feed mill in Atlantic Canada. We

also completed construction of the first commercial

Michael H. McCainPresident and Chief Executive Officer

1 Before restructuring costs (please refer to Management’s Discussion and Analysis)


7

biodiesel plant in Canada, employing a proprietary

process developed at Maple Leaf Foods to convert

tallow into a valuable renewable fuel source. The

Agribusiness Group plays a vital role in our value

chain strategy by delivering stable earnings,

providing virtually all animal feed requirements to

our poultry producers and hog production business,

and converting inedible animal by-products into

earnings streams through our rendering operations.

Our Bakery Products Group, which reflects our

87.5% ownership of

Canada Bread, recorded

another very strong

year, capitalizing on

acquisitions and mergers

completed several years

ago. Operating earnings grew by 14% to

$101 million, driven largely by our fresh bakery

operations. The Group faced the challenges of

higher energy and distribution costs and the

start-up costs of a large bagel plant in the U.K. The

portfolio benefit of being in the bakery business

cannot be overstressed as there are excellent

synergies between the protein and bakery businesses.

We like this business very much and will continue

to acquire Canada Bread shares at the right price,

although we have no overt strategy to buy out the

remaining shares.

Maple Leaf continues to be a strong cash generator,

with $260 million in operating cash flow in 2005.

We invested $152 million in capital for the year,

which supported the construction of a high-

efficiency feed mill in Eastern Canada, a biodiesel

plant in Quebec and environmental upgrades in

our rendering business.

We ended the year with

a strong balance sheet,

reflected in a Net

Debt/EBITDA ratio of

2.6x and a commitment

to maintaining investment grade credit quality.

Our long-term compound annual growth rate in

earnings per share since 1995 is 10.4% versus our

goal of 15%, and our return on net assets was

8.2% in 2005, versus our target of 11.5%.

S I M P L I F Y I N G O U R S T R U C T U R E

Much of 2005 was devoted to building a stronger

organization that will support lasting long-term

“ M U C H O F 2 0 0 5 WA S D E V O T E D

T O B U I L D I N G A S T R O N G E R

O R G A N I Z AT I O N T H AT W I L L

C R E AT E L A S T I N G L O N G - T E R M

S H A R E H O L D E R VA L U E . ”

Ear

ning

s Pe

r Sh

are

(1)

RONA

Long-Term Financial Targets:EPS CAGR > 15%RONA 11.5%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

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0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

(1) Before restructuring costs

EPS

RONAEPS CAGR: 10.4%



8


shareholder value. We began 2005 with 14

independent operating companies, plus several

ancillary business units. We finished the year with

10 streamlined operating companies. All consumer

foods businesses, including Schneider Foods,

Maple Leaf Consumer Foods and Larsen Packers,

were merged as Maple Leaf Consumer Foods. Our

fresh pork and poultry operations were consolidated

as Maple Leaf Fresh Foods. In the Agribusiness

Group, Shur-Gain and Landmark Feeds were

combined as Maple Leaf Animal Nutrition. Our

international trading business was reorganized as

Maple Leaf Global Foods, and is expanding beyond

its core strength in trading to increase geographic

and value-added product diversification.

These types of mergers always put strain on an

organization. Supported by the discipline and

methodology of Six Sigma, they were accomplished

with professionalism and stability, ensuring we

always kept our customers’ needs first. The task of

aligning our core processes and completing very

complex organizational change will continue in

2006. This simpler organizational structure will

deliver operational efficiencies and enable us

to more effectively leverage the competitive

advantages of our national scope, strong brands

and product diversity.

O U R F O U N D A T I O N S

The enduring feature of our Company is our deep

conviction in the long-term benefit of investing in

people and disciplines, specifically our Leadership

Edge and Six Sigma programs. In 2005, we

expanded that commitment by investing over 8,400

person days in leadership values and skills

development through the Maple Leaf Leadership

Academy and Six Sigma training programs. Our team

of 130 Six Sigma Black Belt professionals manage a

portfolio of what is now more than 570 projects.

We know from long experience that safe plants

are well run plants. We are pleased to report that

we recorded our fifth consecutive year of double-

digit improvement in health and safety measures.

In 2005, our lost time accident frequency rate

improved by a remarkable 38%.

F O U R T H Q U A R T E R C H A L L E N G E S

Our fourth quarter results dampened a year of

strong operating performance due to three factors.

First, we faced unprecedented rapid increases in

energy costs, with more than 40% of oil and gas

cost increases occurring in Q4. This is a large cost

From left to right: Wayne Johnson, Brock Furlong, Lynda Kuhn, Doug Dodds


9


line that affects each of our business units either

directly in the case of manufacturing and

distribution or indirectly in higher ingredient,

packaging and overhead costs. We are confident

that we will be able to pass these cost increases on

in our pricing, although there is a lag effect,

category by category, as we plug into natural

re-pricing rhythms with our customers.

Second, the yen declined 16% against the

Canadian dollar in the quarter compared to the first

six months of 2005,

causing margin pressure

on our Japanese pork

exports, which are priced

in yen. While this should

normalize over the

medium term, it accounted for a significant portion of

the fourth quarter earnings decline. Japan is

important to our fresh pork strategy and is a great,

though inconsistent market from quarter to quarter.

In Q4 we experienced the downside of this curve,

although our results in Japan for the full year were

satisfactory. Compounding the currency impact, the

Japanese market finished the year with unusually

high frozen pork inventories, as domestic

consumption returned to more normal levels after

two robust years. We believe that both of these

factors are short term. Meanwhile, we have made

headway in diversifying our international markets

for premium quality pork, although there is still

lots of opportunity to better balance our important

Japanese business with other markets.

Third, advertising and promotional costs to

support product launches and brand building were

higher due to timing related costs that are

expected to yield returns

in market share and

brand leadership.

Despite these short-

term challenges, the

foundations of the

business continue to get stronger with each passing

year. We have aggressive growth targets and, as

significant shareholders, take a longer-term view to

wealth creation. The Maple Leaf story will never

be a straight line of rising profits. While we seek

steady earnings growth, we do not manage the

business quarter to quarter. Our commitment to

long-term shareholder value creation is resolute.

“ D E S P I T E T H E S E S H O R T- T E R M

C H A L L E N G E S , T H E F O U N D AT I O N S

O F T H E B U S I N E S S C O N T I N U E

T O G E T S T R O N G E R W I T H

E A C H P A S S I N G Y E A R . ”

From left to right: Rick Young, Rocco Cappuccitti, Kevin Golding, Jerry Vergeer, Bruce Miyashita


10


V A L U E C R E A T I O N S T R A T E G I E S

A N D O P P O R T U N I T I E S

The food business provides enormous opportunities

for companies that understand and achieve the

necessary balance between rigorously controlling

costs and growing the top line profitably through

innovation and adding value.

At Maple Leaf Foods, seven strategic elements

form the blueprint for wealth creation and govern all

key business decisions. Each is underpinned with

specific medium-term initiatives:

• Add value for our customers

• Add value to our products

• Invest in leading market shares

• Build our brands

• Innovate

• Drive costs out

• Diversify globally

We are continuously seeking to move our customer

relationships from transactional to strong “enterprise”

partnerships by developing deep insights into their

needs and tailoring our relationship to plug into each

of their unique strategies. Our value-added product

focus spans the Company, from innovation in feed

formulation to new bakery product technology such

as FroBake® in our bakery business. Market share

leadership is critical in this industry to

establish stable market conduct and achieve high

plant efficiencies. We will not compete in a market

that we cannot lead and we have leading market

shares in all our businesses. We are brand equity

builders, and we use innovation as a key brand

building platform. Driving costs out of our business

model is essential to success, supported by Six Sigma

methodology and insights, appropriate capital

investments, consolidation of supply chains into

larger scale facilities, and application of standardized

processes throughout our business structure. We

expect longer-term value creation will be driven by

global diversification, which offers excellent

opportunities in both protein and bakery.

Applying these strategic principles, there are four

major value creation opportunities in the mid-term, in

addition to our many other initiatives. The first is to

complete the merger between Schneider Foods and

Maple Leaf and realize the synergies that result from

having leading brands and market shares in Canadian

packaged consumer meats and meals. The second is

to grow margins in our fresh meat businesses by

adding value to commodity products through service

and value-added processing. The third is harvesting

our investment in the frozen and U.K. bakery

From left to right: Barry McLean, Randy Powell, Michael Detlefsen, Annalisa King


11


businesses, where we feel we have significant

opportunity to drive sales volume and earnings

growth. The fourth is to reduce costs in our hog

production operations and restore competitiveness

with the U.S. industry.

M E G A - B R A N D S ; M E G A F U T U R E

The equity in a brand accrues benefits to brand

owners for decades. Very few companies have a

single “mega-brand”. In Canada, we are proud to

have three leading food brands – Schneiders®, Maple

Leaf® and Dempster’s®.

They are among the top

25 brands in the country

and growing well in

excess of the average for

this peer group – a major

accomplishment of our sales and marketing teams. What

keeps these brands fresh, hot and generating better

returns? A time-tested recipe of brand strategy, brand

support and lots of brand innovation.

The Schneiders® brand has penetrated the position

of “Taste The Difference Quality Makes®” deep into

the Canadian awareness. Supported by European

craftsmanship, heritage and top quality ingredients,

the “taste” proposition continues to resonate

with consumers. The Maple Leaf® brand position

of “We Take Care™” gives consumers added

confidence through our commitment to food safety

leadership. In the bakery category, Dempster’s® leads

the premium nutrition whole grain bakery market,

supported by the newly launched brand position

“Nourish Yourself™”. As one of Canada’s leading

national TV advertisers, we support these brands with

continuous and creative breakthrough advertising.

Brands drive market share leadership, and

innovation drives brands. Consumers are always

seeking something “new”

from the brands they

trust. O u r innovation

platform keeps getting

stronger and stronger.

Recent examples include

Maple Leaf® Fully Cooked Roasts, Maple Leaf®

Fresh Grill! and Maple Leaf® Fresh Roast!, all

targeted to meet the needs of time-starved

consumers. In the bakery category, early in 2006

we launched Dempster’s® Smart™, a white bread

made with all the benefits of whole grains and the

first product of its kind in Canada.

T H E N E X T C H A P T E R

The last decade has been transformational. In

many ways, that’s just the end of the first chapter.

“ S C H N E I D E R S ® , M A P L E L E A F ® A N D

D E M P S T E R ’ S ® . . . A R E A M O N G T H E

T O P 2 5 B R A N D S I N T H E C O U N T RY A N D

G R O W I N G W E L L I N E X C E S S O F T H E

AV E R A G E F O R T H I S P E E R G R O U P. ”

From left to right: Rory McAlpine, Peter Smith, Maryanne Chantler, Pat Ressa Absent: Peter Maycock


12


Long-term we won’t achieve our ambitious

shareholder return targets solely as a $6.5 billion

Canadian protein and bakery company. We must

take on bigger challenges and more well managed

risks to achieve exceptional returns. We have

defined the agenda for the next decade as follows.

First, we always have and always will begin with

our foundations – Leadership Edge and Six Sigma.

This is our past, our present and our future, but we

are looking at both of these foundations through

new prisms. We need to

take them deeper into the

organization – right to

the front line to engage

100% of our people.

Second, we will take

steps to strengthen “fortress Canada” to ensure it

can profitably grow and sustain any competitive

challenges. This will mean substantial increases in

our capital spending to consolidate operations into

“mega-plants” with world leading technology.

There are opportunities to make such investments in

each segment of our business.

Third, we are stepping up our commitment to

innovation, underpinning the “mega-brands” in our

portfolio. We will do so by enhancing the role of

a “culinary” strategy in our Company, by improving

our new product development processes, by

expanding our leadership in delivering convenience

and nutrition, and by developing greater external

relationships with innovation partners. We are

building a culture that is passionate about food!

Finally, significant investments outside Canada are

imperative to expand our geographic reach in our core

categories and realize our growth and financial

goals. In 2005, our Board reviewed and accepted

broad parameters for such

investments. However,

there must be a visible,

compelling value creation

strategy behind our

investments. We will look

for a convincing path to market/category leadership

that fits well with our existing organization. We also

must be in a state of readiness. We are not there yet,

but we are getting ready. Our balance sheet is in

excellent shape and we expect that by early 2007, the

organizational mergers previously described will be

largely complete. We are taking steps to enhance the

global depth and readiness of our talent and we are

assessing in detail the various market opportunities

available to us.

“ M A P L E L E A F P E O P L E A R E

P A S S I O N AT E , C O M M I T T E D P E O P L E

W H O G E T T H I N G S D O N E , A R E

O U T R A G E O U S LY T E N A C I O U S , A N D W H O

A LWAY S K E E P T H E I R E Y E O N T H E P R I Z E . ”

From left to right: Richard Lan, Scott McCain, Tom Muir, Michael Vels, Michael McCain


13


Over the longer-term, we are also proactively

minimizing risk from disease by preparing ourselves

for the potential outbreak of a global influenza

pandemic. We pay close attention to the risk of

avian influenza due to our industry affiliations.

While we are primarily a processor and our business

model is to not own poultry growing operations, we

are taking steps with our employees and producer

partners to reduce risk. The larger concern we all

share is the threat of a pandemic in the human

population. We cannot control this outcome,

although we can take a leadership position in

preparedness, which is exactly what we are doing

– both in our industry and inside our Company.

P A S S I O N A T E P E O P L E ;

P A S S I O N A T E A B O U T F O O D

We continue to nurture and develop the greatest

asset of this organization – our people and their

leadership capabilities, which defines our culture.

Maple Leaf people are passionate, committed

people who get things done, are outrageously

tenacious, and who always keep their eye on the

prize. It’s an amazing place!

Adding to this team are the newest members of

our Executive Council, Annalisa King who leads our

Vertical Co-ordination group, and Maryanne

Chantler who heads up our Purchasing and Supply

Chain group. Both Annalisa and Maryanne have a

strong history in operating and finance roles at

Maple Leaf and they continue to make outstanding

contributions in their new responsibilities. Rory

McAlpine, who has a diverse background in

government and international trade, also recently

joined Maple Leaf’s senior leadership team, to

lead and build our Government and Industry

Relations program.

We are entering 2006 with a great deal of

confidence. Our underlying operating and financial

fundamentals are strong and the talent we have

across the organization, thousands of Maple Leaf

Foods employees, is what will drive value

creation. They are an amazing team, and on that

basis you have invested well.

Michael H. McCain President and

Chief Executive Officer

Richard A. LanPresident and Chief Operating Officer,

Bakery Products Group

J. Scott McCainPresident and Chief Operating Officer,

Agribusiness Group

Tom P. Muir Executive Vice-President andChief Development Officer

Michael H. VelsExecutive Vice-President and

Chief Financial Officer

F I N A N C I A L S

Financial Contents

15 Results of Operations

16 Operating Segments

17 Operating Review

17 Meat Products Group

18 Agribusiness Group

19 Bakery Products Group

20 Acquisitions

21 Capital Resources and Liquidity

23 Derivatives

24 Environment

24 Risk Factors

28 Critical Accounting Estimates

29 Changes in Accounting Policies

30 Recent Accounting Pronouncements

32 Summary of Quarterly Results

32 Forward-Looking Statements

34 Management’s Statement of Responsibility

34 Auditors’ Report to the Shareholders

35 Consolidated Financial Statements

38 Notes to the Consolidated Financial Statements

58 Corporate Governance and Board of Directors

60 Senior Management and Officers

61 Corporate Information


15

THE BUSINESS

Maple Leaf Foods Inc. is a leading Canadian food

processing company committed to delivering quality

food products to consumers around the world. Head-

quartered in Toronto, Canada, the Company employs

approximately 24,000 people at its operations across

Canada and in the United States, Europe and Asia.

EFFECT OF RESTRUCTURING AND OTHER ITEMS

Except where noted, operating earnings, net earnings,

earnings per share (“EPS”) and return on net assets

(“RONA”) comparisons for 2005 exclude

$13.2 million before tax ($8.3 million after-tax and

minority interest) in restructuring costs incurred in the

first quarter of 2005. Management believes that this is

the most appropriate basis on which to evaluate

operating results, as restructuring costs are not

representative of continuing operations. Year-over-year

and quarterly comparisons are also affected by the

inclusion of an additional week of operations in the

fourth quarter of 2004, which affect sales and earnings

comparisons in the fourth quarter and full year.

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S

SELECTED FINANCIAL HIGHLIGHTS

The following is a summary of audited financial information for the three years ended December 31, 2005.

(In thousands of dollars except per share information) 2005 2004 2003

Sales $ 6,462,581 $ 6,364,983 $ 5,041,896

Operating earnings before restructuring costs 263,034 256,364 152,428

Net earnings(i) 94,242 102,283 30,217

Net earnings before restructuring costs(i) 102,588 102,283 40,609

Total assets 3,189,780 3,038,133 2,148,721

Net debt 1,062,755 1,046,335 696,678

RONA(ii) 8.2% 8.9% 6.4%

Per share

EPS $ 0.74 $ 0.90 $ 0.27

EPS before restructuring costs $ 0.81 $ 0.90 $ 0.36

Cash dividends $ 0.16 $ 0.16 $ 0.16

(i) 2003 and 2004 restated in accordance with Note 2 to the Consolidated Financial Statements. (ii) This is not a recognized measure under Canadian Generally Accepted Accounting Principles. The calculation of RONA comprises tax-

affected earnings before interest divided by average monthly net assets. Net assets are defined as total assets, less cash, future tax assetsand non-interest bearing liabilities. These calculations and definitions may not be comparable to measures used by other companies.

RESULTS OF OPERATIONS

Operating results for 2005 reflected strong performance

from most businesses and the full year contribution of

Schneider Foods, purchased in April 2004. Earnings for

the full year were affected by weaker results in the

fourth quarter, due to a combination of factors,

including higher energy costs, lower earnings from

exports to Japan and higher advertising and

promotional costs. Management is of the opinion that

these are largely short-term factors which can be

mitigated through price increases. The value-added

businesses, particularly consumer products and fresh

bakery, contributed strongly to earnings through a

combination of new product innovation, operating

improvements and lower raw material costs in the meat

business earlier in the year. The Company also benefited

from portfolio balance across the Protein Value Chain

operations as weaker commodity processing margins

and lower rendering earnings were partly offset by

higher hog profits. Overall, changes in prices of


16

As noted above, in response to higher costs, particularly

energy, price increases will be implemented in 2006.

Sales for the year increased 2% to $6.5 billion,

primarily due to the acquisition of Schneider Foods in

April 2004. This increase in sales was partially offset by

the inclusion of an additional week of operating results

in the fourth quarter of 2004 and by lower commodity

prices that affected sales in the Company’s pork,

poultry, feed and rendering businesses.

Earnings from operations before restructuring costs

increased 3% to $263.0 million for the year. Net

earnings for the year before restructuring costs of

$102.6 million ($0.81 per share), compared to

$102.3 million ($0.90 per share) last year. Including

restructuring costs, net earnings were $94.2 million

($0.74 per share). RONA declined to 8.2% from 8.9%

in 2004, primarily due to the increase in assets resulting

from the purchase of Schneider Foods.

OPERATING SEGMENTS

The combination of the Company’s Meat Products

Group and the Agribusiness Group comprises the

Protein Value Chain operations, which are involved in


Annual Averages 2005 2004 Change

Pork Industry Processor Margins (USD per cwt) $ 1.55 $ 2.03 (23.7)%

Poultry Industry Processor Margins (CAD per kg) $ 0.57 $ 0.97 (41.2)%

Natural Gas (CAD / Gj) $ 8.25 $ 6.17 33.8 %

producing animal protein products. The Meat Products

and Agribusiness operations are highly interrelated and

are strategically linked through the Company’s Vertical

Co-ordination business model. While each operation

maintains a strong external customer focus, they are

tightly coordinated to deliver superior performance

where their operations intersect. Accordingly, it is more

meaningful to review the combined results of the

Protein Value Chain rather than each segment

independently. The Meat Products Group comprises

branded value-added prepared meat products; fresh,

frozen and branded value-added pork products; fresh,

frozen and branded value-added chicken and turkey

products; and global food marketing, distribution and

trading. The Agribusiness Group operations include

research, development and supply of quality livestock

nutrition products and services; pet food; swine

production; and animal by-products recycling.

The Bakery Products Group is comprised of Maple

Leaf’s 87.5% ownership in Canada Bread Company,

Limited, a producer of fresh, frozen and branded value-

added bakery products, including frozen par-baked

bakery products and specialty pasta and sauces.

Maple Leaf Ownership of Canada Bread

60.0%

70.0%

80.0%

90.0%

2000 2001 2002 2003 2004 2005

commodities had a marginally negative impact on

earnings for the full year.

The following table outlines the change in some of

the key indicators that affected the business and

financial results.


17

Protein Value Chain Operations Protein Value

Chain earnings for the year declined 3% due to

industry-wide decreases in both pork and poultry

processor margins, higher energy costs, higher costs in

the Company’s hog production operations and lower

profits from rendering operations. These factors more

than offset positive contributions from consumer

products and lower feed costs.

Meat Products Group Sales for the year were up

4% to $4.3 billion compared to $4.1 billion last year,

due to the acquisition of Schneider Foods in April 2004.

Offsetting this was the effect of lower commodity prices

that reduced sales values. Earnings from operations for

the year were $59.9 million, down from $68.5 million

last year.

The consumer products business, which is the

combination of the Schneider Foods and the former


Maple Leaf Consumer Foods operations, achieved

excellent operating results driven by the full-year

contribution of Schneider Foods, lower raw material

costs and the contribution of higher margin products

such as Maple Leaf Fully Cooked Roasts and

Schneiders lunch kits. These strong results were partly

offset in the fourth quarter by higher energy costs and

timing of advertising and promotional spending to

support brand positioning and new product launches.

This business will implement price increases in 2006 to

offset inflationary costs.

The Schneider Foods merger has met expectations to

date. In 2005, the two organizations were combined

with the majority of systems integration to follow in

2006. This will yield future gains in procurement,

supply chain, working capital and customer service. An

integrated manufacturing strategy will be implemented

OPERATING REVIEW

The following table, which forms the basis of discussion in this document of the Company’s results of operations,

reflects operating earnings by business group before restructuring costs.

Earnings from Operations

($ millions) 2005 2004 Change 2003

Meat Products Group $ 59.9 $ 68.4 (13)% $ 24.3

Agribusiness Group 101.8 98.7 3 % 69.9

Protein Value Chain 161.7 167.2 (3)% 94.2

Bakery Products Group 101.3 89.2 14 % 58.2

$ 263.0 $ 256.4 3 % $ 152.4

Segmented Operating Earnings

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Meat Products Group

Agribusiness Group


0

(50)

50

100

150

200

250

300

Ear

ning

s fr

om O

pera

tion

($

mill

ions

)


18

beginning in 2007, although some benefits from

optimizing the manufacturing network will be realized

in 2006. The acquisition of Schneider Foods has given

the Company an effective balance between fresh

primary processing and further processed products,

resulting in a desirable mix of commodity-influenced

and more stable value-added branded businesses. Over

time, in most market conditions, management expects

that this should result in higher margins and less

volatile earnings, particularly when these results are

combined with the counter-cyclical earnings of the

Agribusiness Group.

Earnings from fresh poultry operations declined

sharply in 2005 due to lower industry-wide processor

margins. These margins were at unusually high

levels in 2004 due to a supply shortage related to

avian influenza.

The contribution from primary pork processing

operations was down marginally compared to the prior

year. In 2005, the North American pork processor

spread was lower than 2004 and well below the five-

year average. However, pork processing performance

benefited from an improved value-added sales mix,

increased manufacturing efficiencies and higher

earnings from the Japanese pork market in the first

three quarters of 2005. However, the fourth quarter

was impacted by a 16% depreciation of the Japanese

yen against the Canadian dollar compared to the first

half of 2005, which resulted in a decline in the sales

value and profitability of pork exports to Japan.

In 2005, the Company announced that it will invest

up to $110 million to construct a fresh pork processing

plant in Saskatoon, Saskatchewan. The new plant will

replace a 65-year-old plant in Saskatoon acquired as

part of the purchase of Schneider Foods. The current

facility provides over two-thirds of its production to

other Maple Leaf value-added processing facilities in

Saskatchewan. The new plant will increase production

capacity from the current 17,500 to 20,000 hogs per

week on a single shift, with the capability to process up

to 40,000 on a double shift. Subject to Company and

government approvals, the Province and the City have

committed to infrastructure support that will affect the

ultimate expenditure by the Company. Construction is

expected to commence by mid-to-late 2006 with the

plant commissioned 18 to 24 months later.

Agribusiness Group Sales for the year declined

12% to $816.8 million from $924.9 million last year

due to lower market prices for feed and rendered

products, reflecting lower underlying commodity

prices. Earnings from operations for the year increased

3% to $101.8 million from $98.7 million in 2004.

Contributing to the earnings increase was an

improvement in hog production margins driven

primarily by lower prices for feed grains; however, this

was partially offset by a 4% decline in hog prices

compared to last year. The Company had effective

ownership of 20% of the hogs it processed in the year.

Although hog profits were higher, the Company’s hog

production operations underperformed in the face of a

stronger Canadian dollar and higher operating costs.

The Company has a number of initiatives underway to

improve performance and reduce costs in this business.

Earnings from the rendering operations for the year

declined due to a reduction in export volumes and

lower prices for finished products, compounded by

rapidly rising energy costs. These factors overshadowed

increased operating efficiencies due to a capital

investment in environmental upgrades over the last

number of years. In the fourth quarter, the Company

commissioned a new commercial scale biodiesel plant

in Quebec, which will provide an alternate higher value

market for tallow.



19

The animal nutrition operations continued to post

steady results for the year.

Bakery Products Group Sales increased by 3% to

$1.3 billion, reflecting higher prices and continued

growth in higher value whole grain and specialty

products. Sales comparisons would have been stronger

if not for the inclusion of an additional week of

operating results in the fourth quarter of 2004.

Earnings from operations for the year increased 14%

to $101.3 million from $89.2 million in 2004 as price

increases and a sales mix that is weighted towards health

and well-being categories contributed to earnings in the

first three quarters. Earnings, particularly in the fourth

quarter, were negatively impacted by higher fuel, energy

and other inflationary costs.

Strong sales of branded whole grain, whole wheat

and specialty fresh bakery products, higher prices, and

Six Sigma driven operating improvements all

contributed to strong earnings growth for the year. This

offset the impact of rising fuel, energy and flour costs

and increased advertising and promotional spending in

the back half of the year.

The Olivieri pasta and sauce business experienced

year over year sales and volume growth reflecting a

decline in the effect of low carbohydrate diets.

The North American frozen business experienced

significant increases in fuel, energy and related costs

which offset the operational improvements in the year

in freight and distribution.

The U.K. bakery operations benefited from sales

growth largely due to overall market growth of

18%. Full year margin growth in 2005 was more than

offset by increased advertising expenditures to support

the New York Bagel brand in the U.K., higher energy

and flour costs and additional costs associated with

commissioning a new bagel plant in Rotherham, England.

Other Income Other income increased to

$7.0 million, up from $2.7 million in 2004. The

increase was due to substantially higher earnings from

equity investments acquired as part of the Schneider

Foods acquisition, insurance proceeds, and gains on

fixed asset disposals that were partially offset by a loss

on conversion of the convertible debenture in the first

quarter of 2005.

Restructuring Costs During the first quarter of

2005, the Company recorded $13.2 million in

restructuring costs ($8.8 million after-tax) in respect of

certain plant closures and operational restructuring for

several of its businesses associated with the integration

of Schneider Foods, the closure of the Company’s

bakery in Peterborough, England, and certain other

operational restructuring items. Of the $13.2 million,

$5.0 million represents the writedown of certain capital

assets that were disposed of or that have become

impaired as a result of restructuring and $8.2 million

relates to provisions for employee terminations, facility

exit costs, and other restructuring costs. Of the

$8.2 million in provisions, $2.9 million was paid

in 2005.

The Company expects to complete the remaining

major components of these restructuring plans in 2006.

Furthermore, management continues to seek out

efficiencies and further optimization opportunities. Any

such rationalization initiatives undertaken in 2006 may

result in charges to earnings and will be recorded in the

quarter in which they occur and disclosed as

restructuring costs.

Interest Expense Interest expense for the year

increased to $98.3 million compared to $89.8 million

last year. In the fourth quarter of 2004, the Company

refinanced a significant portion of its debt, replacing

short-term, lower rate debt with longer-term, fixed rate



20

notes that have higher interest rates than short-term

floating debt and therefore contributed to higher

average interest rates of 6.2% paid compared to last

year (2004: 6.0%). A full year impact of the acquisition

of Schneider Foods, partly offset by an equity issue in

December 2004, also contributed to higher interest

expense in the current year. At December 2005, 86% of

indebtedness was not exposed to interest rate

fluctuations.

Income Taxes Income tax expense decreased to

$51.3 million from $57.0 million in 2004. The

Company’s effective tax rate was 32.4% in 2005

compared to 33.7% in 2004. Components of the

changes are provided in Note 18 to the Consolidated

Financial Statements.

ACQUISITIONS

On April 5, 2004, the Company acquired Schneider

Foods for cash consideration of $376.7 million,

including transaction costs of $8.1 million and the

assumption of Schneider Foods’ debt, for a total

purchase price of approximately $500 million.

Schneider Foods is one of Canada’s largest producers

of premium-branded quality food products, specializing

in packaged processed meats, poultry and grocery

products. The Company employs approximately 5,000

people at 20 facilities across Canada.

As at June 30, 2005, the purchase price allocation

(including fair values assigned to intangible assets,

certain fixed assets, legal claims, long-term debt,

pensions, post-retirement benefits and taxes) had been

completed. Other costs of integration that cannot be

allocated to the purchase price were charged to earnings

as incurred. Goodwill resulting from the transaction is

included in the total assets of the Meat Products Group.

The acquisition of Schneider Foods transforms the

Meat Products Group since it significantly increased the

mix of value-added products and management

anticipates this will result in higher margins and more

stable cash flow and earnings. Schneider Foods

and Maple Leaf Consumer Foods have highly

complementary businesses and brands that provide for

significant growth and cost reduction opportunities for

the combined operations.

In May 2005, the Company purchased the

remaining 32% interest in a subsidiary of Schneider

Foods, Cappola Food Inc., for net proceeds of

approximately $3.6 million resulting in additional

goodwill of approximately $1.5 million.

TRANSACTIONS WITH RELATED PARTIES

During 2004 and 2005, the Company completed a

series of market and private agreement purchases of

Canada Bread shares. As a result of these transactions,

the ownership interest in Canada Bread increased from

84.7% at the beginning of 2004 to 87.5% as 225,300

(2004: 490,400) shares were purchased in 2005.

The aggregate value of cash paid and shares issued

to finance these transactions in 2004 and 2005 was

$29.4 million and the allocation of these amounts to


160

80

120

)snoillim $( xepa

C

Capital Expenditures

1996

83.2

1995

71.8

1997

114.9

1998

90.8

1999

121.8

2000

108.6

2001

86.8

2002

92.2

2003

132.6

2004

156.8

2005

152.1

Meat Products Group

Agribusiness Group


Depreciation

0

40

140

60

180

100

20


21

the underlying assets and liabilities of Canada Bread

resulted in an increase in goodwill of $10.8 million.

On December 20, 2004, the Company issued

11.3 million common shares pursuant to a public

offering at $14.55 per share. McCain Capital

Corporation acquired 5,154,639 shares pursuant to

this equity issue, increasing its share ownership in the

Company to 33.2%.

CAPITAL RESOURCES AND LIQUIDITY

The food industry segments in which the Company

operates are generally characterized by high sales

volume and rapid turnover of inventories and accounts

receivable. In general, accounts receivable and

inventories are readily convertible into cash. An

exception to this is the Agribusiness Group where credit

granted to agricultural customers can have longer

collection terms that are matched to crop and livestock

cycles. Investment in working capital is also affected by

fluctuations in the prices of raw materials, seasonal and

other market-related fluctuations. For example,

although an increase or decrease in pork or grain

commodity prices may not affect margins, they can

have a material effect on investment in working capital,

primarily inventory and accounts receivable.

Due to its diversity of operations, the Company has

in the past 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 good base of

underlying liquidity that the Company supplements

with credit facilities to provide longer-term funding and

to finance fluctuations in working capital levels.

Cash Flow from Operations Operating cash flow

for the year of $259.7 million compared to

$235.5 million last year. The increase in cash flow was

largely due to a reduction in long-term receivables and

an improvement in operating working capital, offset by

an increase in future tax assets.

Capital Expenditures Capital spending for the year

decreased to $152.1 million from $156.8 million last

year. The most significant investments in capital in

2005 included the construction of a new feed mill in

Atlantic Canada, a biodiesel plant in Quebec, and

environmental upgrades in the rendering operations in

the early part of the year. During 2005, the Company

completed the construction of a bakery in Rotherham,

England, which was commissioned in the second

quarter of 2005.

Debt Facilities The Company’s strategy related to

liquidity is to reduce reliance on any single source of

credit, maintain sufficient undrawn credit facilities and

to spread debt maturities over time to reduce refinancing

risk. In order to ensure continued access to

competitively priced credit, the Company’s policy is to

maintain its primary credit ratios and leverage at levels

that provide access to investment grade credit. In

circumstances where the Company determines it is

appropriate to reduce leverage, it will use equity or other

forms of liquidity as an additional source of capital.

Immediately following the acquisition of Schneider

Foods in April 2004, the Company commenced a

financial plan to strengthen its balance sheet and

liquidity position. Through a combination of strong

operating cash flows and an equity issue in December

2004, the Company significantly reduced its leverage

ratio, net debt to EBITDA (net debt to earnings

before income taxes, depreciation and amortization),

from a post acquisition high of 3.5x to 2.6x as at

December 31, 2005.

In December 2004, the Company refinanced its

short-term acquisition debt with longer-term debt

sourced in the U.S. and Canadian private placement



22

market. The Company’s core revolving bank facility

was increased in size and the term extended for three

years, maturing in December 2007. In January 2005,

the Company redeemed $80 million of its 6%

convertible debentures for cash and the remaining

$11 million were tendered for conversion to common

equity. After completing these transactions, the

Company had extended the average term of its debt

facilities and secured significant un-utilized committed

liquidity. These transactions are explained more fully in

Note 8 to the Consolidated Financial Statements.

At December 31, 2005, the Company had aggregate

credit facilities, including subsidiary debt, of $1.9 billion,

of which $1.2 billion was utilized (including

$77.6 million in respect of letters of credit). Subsidiary

debt facilities available amounted to $159.9 million, of

which $136.3 was utilized (including $8.1 million in

respect of letters of credit) at year end.

To access competitively priced financing, and to

further diversify its funding sources, the Company

operates several accounts receivable financing facilities.

At year end, the Company had $230.1 million (2004:

$209.7 million) outstanding under these facilities.

Where cost effective to do so, the Company may

finance automobiles, heavy equipment, computers and

office equipment with operating lease facilities.

Variable Interest Entities (“VIEs”) In 1999, the

Company entered into agreements, including a

conditional sales agreement, to finance $130.0 million

of the construction cost of a new hog processing facility

in Brandon, Manitoba. This financing provided the

Company with access to well priced funding. The

Company is required to make payments during the term

of the agreement and, at maturity in August 2006, it is

management’s intention to purchase the facility for

$78.0 million. At December 31, 2005, the Company

had outstanding commitments of $87.8 million (2004:

$100.8 million) related to the facility. Recent changes

in Canadian accounting standards required the

re-characterization of this arrangement (see Note 2(m)

to the Consolidated Financial Statements). Therefore,

commencing January 1, 2005, the Company included

the value of the Brandon asset and a related debt

amount of $87.8 million on its balance sheet.


Contractual Obligations The following table provides information about certain of the Company’s significant

contractual obligations as at December 31, 2005.

Payments due by fiscal year

($ millions) Total 2006 2007 2008 2009 2010 After 2010

Long-term debt $ 1,143.3 $ 110.4 $ 81.7 $ 12.9 $ 175.9 $ 217.2 $ 545.2

Cross-currency swaps related

to long-term debt 98.5 — 23.3 — 5.8 23.3 46.1

Lease obligations 203.2 40.4 31.9 25.9 18.7 16.1 70.2

Total contractual obligations $ 1,445.0 $ 150.8 $ 136.9 $ 38.8 $ 200.4 $ 256.6 $ 661.5

Management is of the opinion that its cash flow and

sources of financing provide the Company with

sufficient resources to finance ongoing business

requirements and its planned capital expenditure

program. Additional details concerning financing are

set out in the Notes to the Consolidated Financial

Statements. As at December 31, 2005, the Company

was in compliance with all debt covenants.


23

DERIVATIVES

Inherent in the food business is the exposure to market

risks from changes in interest rates, foreign exchange

rates and commodity prices (including wheat, feed

grains and livestock). When considered appropriate,

these exposures may be managed by the use of

derivative financial instruments, including interest rate

swaps, currency contracts, commodity futures and

options. Information on the Company’s material year

end derivative hedge positions is set out in Note 10 to

the Consolidated Financial Statements. If the Company

had not entered into these contracts, operating earnings

for 2005 would have been lower by $9.0 million (2004:

higher by $16.3 million) and interest expense would

have been lower by $19.2 million (2004: lower by

$17.7 million).

Management hedges commodities when it

determines that conditions are appropriate to mitigate

risks and reduce the risk of loss from adverse changes

in commodity prices. The Company attempts to closely

match commodity contract terms with the underlying

hedged exposure and continually measures the

effectiveness of the hedge in place.

The Company either enters into interest rate swaps

or has negotiated fixed interest rates on credit facilities

such that the interest payment on a relatively high

percentage of its outstanding debt is not exposed to

fluctuations in interest rates. Details of the Company’s

outstanding derivative transactions are set out in

Note 10 to the Consolidated Financial Statements. At

December 31, 2005, 86% (2004: 96%) of the

Company’s exposure to interest rate fluctuations was

hedged or fixed.

The Company periodically enters into foreign

exchange hedges to fix certain of its foreign currency

exposure. This involves the use of cross-currency swaps

and foreign currency-denominated debt to hedge the

Company’s balance sheet exposure and the use of spot,

forward and option contracts to manage the

Company’s exposure to foreign currency cash flows.

All hedging and derivative activity is in accordance

with risk management policies that specify both the

type of allowed derivatives, maximum trading

exposures and the definition of allowable hedge

activity. Counterparty risk is monitored and controlled

carefully, and no derivative instruments may be entered

into with a counterparty whose public credit rating is

less than A credit quality.

During 2005, there were no material derivative

gains or losses related to the ineffectiveness of hedges

and no material hedges were discontinued in 2005 as a

result of it becoming probable that a forecasted

transaction would not occur.

SEASONALITY

The Company is sufficiently large and diversified that

seasonal factors within each operation and business tend

to offset each other and in isolation do not have a

material impact on the Company’s consolidated

earnings. For example, pork processing margins tend to

be higher in the back half of the year when hog prices

historically decline, and as a result, earnings from hog

production tend to be lower. Strong demand for grilled

meat products positively affects the fresh and processed

meats operations, while back to school promotions

support increased sales of bakery, sliced meats and lunch

items. Higher demand for turkey and ham products

occurs in the fourth quarter and spring holiday seasons.

SHARE CAPITAL AND DIVIDENDS

During 2005, the Company repurchased 127,000

common shares for cancellation pursuant to a normal

course issuer bid at an average exercise price of $15.66

per share. The excess of the purchase cost over the book

value of the shares was charged to retained earnings.



24

In each of the quarters of 2005, the Company

declared and paid cash dividends of $0.04 per common

share. This represents a total dividend of $0.16 per

common share and aggregate dividend payments of

$20 million and $18 million in the prior year.

As at January 31, 2006, there were 127,761,512

common shares of the Company issued and

outstanding.

ENVIRONMENT

Maple Leaf Foods is conscious of its environmental

responsibilities. Each of its businesses operates within

the framework of an environmental policy entitled

“Our Environmental Commitment” that is approved

by the Board of Directors’ Environment, Health and

Safety Committee. The Company’s environmental

program is monitored on a regular basis by the

Committee, including compliance with regulatory

requirements, the use of internal environmental

specialists and independent, external environmental

analyses. 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 minimize the impact of

operations on the environment. Expenditures related to

current environmental requirements are not expected to

have a material effect on the financial position or

earnings of the Company.

RISK FACTORS

The Company operates in the food processing sector,

and is therefore subject to risks and uncertainties

related to these businesses that may have adverse effects

on the Company’s results of operations and financial

position. Some of these risks and uncertainties are

outlined below. Prospective investors should carefully

review and evaluate the following risk factors together

with all of the other information contained in this

report. The risk factors described below are not the

only risk factors facing the Company. The Company

may be subject to risks and uncertainties not described

below that the Company is not presently aware of or

that the Company may currently deem insignificant.

Food Safety and Consumer Health The Company

is subject to risks that affect the food industry in

general, including risks posed by food spoilage or

contamination, consumer product liability, and the

potential costs and disruptions of a product recall. The

Company actively manages these risks by maintaining

strict and rigorous controls and processes in its

manufacturing facilities and distribution systems. The

Company’s facilities are subject to audit by federal

health agencies in Canada and similar institutions

outside of Canada, and performs its own audits to

ensure compliance with its internal standards, which

are generally at, or higher than, regulatory agency

standards. However, the Company cannot guarantee

that compliance with procedures and regulations will

necessarily mitigate the risks related to food safety.

Livestock The Company is susceptible to risks

related to health status of livestock both within and

outside its Protein Value Chain. Livestock health

problems could adversely affect production, supply of

raw material to manufacturing facilities and consumer

confidence. The Company monitors herd health status

and has strict bio-security procedures and employee

training programs throughout its hog production

system. However, not all livestock procured by the

Company may be subject to these processes, as hog and

poultry livestock is also purchased from independent

third parties, and the Company cannot guarantee that

an outbreak of animal disease in Canada will not have a

material adverse effect on the Company’s financial



25

statements. Maple Leaf Foods has developed a

comprehensive internal contingency plan for dealing

with animal disease occurrences or a more broad-based

pandemic and has taken steps to encourage the

Canadian government to enhance both the country’s

prevention measures and preparedness plans.

Credit Risk of Customers The Company sells

products, primarily feed and services, to the agricultural

industry and provides credit to customers in this sector.

Terms of sale vary from relatively short credit terms to

extended terms designed to match livestock marketing

cycles. As the Company’s customers are exposed to

market and other risk, credit provided in this segment

has a higher degree of risk and subject to greater levels

of default. The Company carefully monitors the level of

credit made available to individual customers, and

registers security where possible, but the Company

cannot completely eliminate the risk of extended credit

to agricultural customers. Default by customers on

credit extended by the Company may have a material

adverse effect on the Company’s financial condition and

results of operation.

Foreign Currencies A significant amount 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 on

natural hedges may lag the immediate currency change.

The effect of such sudden change in exchange rates can

have a significant 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

due to either “natural hedges” and offsetting currency

exposures (for example, when revenues and costs are

both linked to other currencies) or ability in the near

term to change prices of its products to offset adverse

currency movements. As a result, currency fluctuations

would not normally be considered a material risk to the

Company. Over time, the Company reduces this risk by

realizing natural hedges, increasing prices, or where

possible or necessary, reducing costs.

Commodity The Company is a purchaser of certain

commodities, such as wheat, feed grains, livestock and

natural gas, in the course of normal operations. The

Company may use commodity futures and options for

hedging purposes to reduce the effect of changing prices

in the short term. On a longer-term basis, the Company

manages the risk of increases in commodities and other

input costs by increasing the price it charges to

its customers.

International Trade The Company exports

significant amounts of its products to customers outside

Canada and certain of its inputs are affected by global

commodity prices. As a result, the Company can be

affected, both positively and adversely, by international

events that affect the price of food commodities or the

free flow of food products between countries. Examples

of such events are animal disease in other countries,

trade actions and tariffs on food products, and

government subsidies of competing agricultural

products. This was the case, for example, when the

United States initiated a countervail and anti-dumping

case against live swine from Canada, which disrupted

and slowed the flow of market hogs from Canada to the

United States. The Company mitigated this risk by

mounting a legal defense in conjunction with industry

stakeholders to successfully win the case. Also, in 2005,

Canada launched a case against the United States on



26

corn countervail and anti-dumping. The Company is

once again striving to mitigate this risk by mounting a

legal defense in conjunction with other major users of

corn and industry stakeholders, sourcing alternative

inputs, and obtaining duty deferral permits.

Hog and Pork Market Cyclicality The Company’s

results of operations and financial condition are

partially dependent upon the cost and supply of hogs

and the selling prices for its products, both of which are

influenced by constantly changing market forces of

supply and demand over which the Company has little

or no control. The North American 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. Factors contributing to this

cyclicality include the substantial capital investment and

high fixed costs required to manufacture pork products

efficiently and the significant costs associated with plant

closures. In addition, the supply and market price of live

hogs is dependent upon a variety of factors over which

the Company has little or no control, including

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 other factors. Although the Company’s pork value

chain Vertical Co-ordination strategy is designed to

reduce certain of these risks, severe price swings in raw

materials, and the resultant impact on the prices the

Company charges for its products, have at times had,

and may in the future have, material adverse effects on

the Company’s financial condition and results of

operations. There can be no assurance that all or part of

any 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. As a

result, there is no assurance that the occurrence of these

events will not have a material adverse effect on the

Company’s financial condition and results of operation.

Governmental Regulation and Changes in

Legislation 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 and the Ministry of

Agriculture in Canada. These agencies regulate the

processing, packaging, storage, distribution, advertising

and labelling 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

believes that it is currently in material compliance with

all laws and regulations and maintains all material

permits and licences relating to its operations.

Nevertheless, there can be no assurance that the

Company is in compliance with such laws and

regulations or that it will be able to comply with such

laws and regulations in the future. Failure by the

Company to comply with applicable laws and

regulations 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.

Various governments throughout the world are

considering regulatory proposals relating to genetically

modified organisms, drug residues or food ingredients,

food safety and market and environmental regulation

that, if adopted, may increase the Company’s costs. If

any of these or other proposals are enacted, the

Company could experience a disruption in supply and

may be unable to pass on the cost increases to its



27

customers without incurring volume loss as a result of

higher prices.

Environmental Regulation The Company’s

operations are subject to extensive environmental laws

and regulations pertaining to the discharge of materials

into the environment and the handling and disposition

of wastes (including solid and hazardous wastes) or

otherwise relating to protection of the environment.

Failure to comply can have serious consequences, such

as criminal as well as civil penalties, liability for

damages, and negative publicity to the Company. The

Company has incurred and will continue to incur

capital and operating expenditures to comply with such

laws and regulations. No assurances can be given that

additional environmental issues relating to presently

known matters or identified sites or to other matters or

sites will not require additional expenditures, or that

requirements applicable to the Company will not be

altered in ways that will require the Company to incur

significant additional costs. In addition, certain of the

Company’s facilities have been in operation for many

years and, over such time, the Company and other prior

operators of such facilities have generated and disposed

of wastes which are or may be considered hazardous.

Future discovery of previously unknown contamination

of property underlying or in the vicinity of the

Company’s present or former properties or

manufacturing facilities and/or waste disposal sites

could require the Company to incur material

unforeseen expenses. Occurrences of any such events

may have a material affect on the Company’s financial

results and financial condition.

Consolidating Customer Environment As the

retail grocery and foodservice trades continue to

consolidate and customers grow larger, the Company is

required to adjust to changes in purchasing practices

and customer sophistication, as 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.

Leverage The terms of the Company’s credit

facilities and the terms of the notes, if issued, include

covenants which could limit the Company’s operating

and financial flexibility. The Company’s ability to make

scheduled payments of principal or interest on, or

refinance, its indebtedness depends on its future

business performance, which is subject to economic,

financial, competitive and other factors beyond its

control. Any failure by the Company to satisfy its

obligations with respect to its indebtedness at maturity

or prior thereto would constitute a default under such

indebtedness and could cause a default under the

agreements governing other indebtedness, if any, of

the Company.

Animal Disease and Pandemic The Company is

subject to risks that affect agriculture and animal

health, including disease affecting its employees, such as

a pandemic. These risks can result in disruptions of

trade, consumer confidence issues, and impact its ability

to manufacture, ship products and perform core

business processes. The Company actively manages

these risks by maintaining a general emergency

response process. These processes involve prevention,

preparedness including emergency simulations,

response and recovery plans. In 2005, the Company

initiated a project to update its emergency response

plans to more thoroughly address pandemic

implications. An annual update to these plans will



28

occur each year to maintain relevance and priority, and

annual simulations of various emergencies form the

basis for continuous improvement. The Company

monitors the World Health Organization (“WHO”)

and other alert systems worldwide, to enable prompt

reaction to any specific issues. However, not all services

procured by the Company may be subject to these

processes, as it depends on independent third parties for

many aspects of the business, such as transportation.

The Company cannot guarantee that an outbreak of

pandemic in Canada will not have a material adverse

effect on the Company’s financial statements.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the Company’s consolidated

financial statements requires management to make

certain estimates and assumptions. The estimates and

assumptions are based on the Company’s experience

combined with management’s understanding of current

facts and circumstances. These estimates may differ

from actual results, and certain estimates are considered

critical as they are both important to reflect the

Company’s financial position and results of operations

and require a significant or complex judgement on the

part of management.

The following is a summary of certain accounting

estimates or policies considered critical by the

management of the Company.

Goodwill Goodwill is tested for impairment

annually and as part of this test the Company assesses

the value of goodwill of its various reporting units. The

Company’s goodwill was tested in the second quarter

of 2005 and no impairment in the value of goodwill

had occurred.

Reserve for Bad Debts The Company provides for

individual non-collectible or doubtful accounts.

Estimation of recoverable amounts is based on

management’s best estimate of a customer’s ability to

settle its obligations, and actual amounts received may

be affected by various factors, including industry

conditions and changes in individual customer

financial condition.

Trade Merchandise Allowances and Other Trade

Discounts The Company provides for estimated

payments to customers based on various trade

programs and contracts, which includes payments upon

attainment of certain sales volumes. Significant

estimates used to determine these liabilities include the

level of customer performance and the historical

promotional expenditure rate versus contracted rates.

Employee Benefit Plans The cost of pensions and

other retirement benefits earned by employees is

actuarially determined using the projected benefit

method prorated on service and management’s best

estimate of expected plan investment performance

(7.5%), salary escalation (4%), retirement ages of

employees and expected health care costs. 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.

The effect on the Company’s 2005 earnings of a 1%

increase and decrease in the health care cost trend,

assuming no change in benefit levels, is as follows.

1% 1%($ millions) increase decrease

Effect on end-of-year obligation $ 2.8 $ (3.4)

Aggregate of 2005 current

service cost and

interest cost 0.2 (0.2)

Taxes The provision for income taxes is based on

domestic and international statutory income tax rates

and tax planning opportunities available to the



29

Company in the jurisdictions in which it operates.

Significant judgement is required in determining

income tax provisions and in evaluating tax positions.

The Company establishes additional provisions for

income taxes when, despite the belief that existing tax

positions are fully supportable, there remain certain tax

positions that may be reviewed by tax authorities. The

Company adjusts these additional accruals in light of

changing facts and circumstances. The tax provision

includes the impact of changes to accruals that are

considered appropriate.

Restructuring Reserves The Company evaluates

accruals related to restructuring at each reporting date

to ensure these accruals are still appropriate. In certain

instances, management may determine that these

accruals are no longer required because of efficiencies in

carrying out restructuring activities. In certain

circumstances, management may determine that certain

accruals are insufficient as new events occur or as

additional information is obtained.

CHANGES IN ACCOUNTING POLICIES

Convertible Debt Effective January 1, 2005, the

Company adopted an amendment to Canadian

accounting principles, section 3860, “Financial

Instruments – Disclosure and Presentation”, on a

retroactive basis with restatement of prior periods. The

revised standard, which is effective for January 1, 2005,

requires obligations of a fixed amount that may be

settled, at the issuer’s option, by a variable number of

the issuer’s own equity instruments to be presented as

liabilities. As a result of adopting the revised standard,

the Company reclassified the principal component of its

convertible debenture (see Note 12 to the Consolidated

Financial Statements) as a debt instrument and

reclassified the interest, accretion charges and related

tax effects in the statement of earnings in the

comparative periods. Retroactive application of this

standard resulted in a reclassification of $89.7 million

from shareholders’ equity to debt as at December 31,

2004. The impact of the revised standard was a

reduction in net earnings of $4.5 million (net of tax) for

the year ended December 31, 2004 and $4.5 million for

the year ended December 31, 2005. There was no

impact to basic or diluted earnings per share for prior

periods as a result of adopting this change.

Variable Interest Entities (“VIEs”) The Company

adopted the guidance in Accounting Guideline 15,

“Consolidation of Variable Interest Entities”,

retroactively without restatement of prior periods,

effective January 1, 2005. As a result of the adoption,

there are several previously unconsolidated entities that

are now consolidated with the results of the Company.

The most significant was the consolidation of the

Company’s hog processing facility in Brandon,

Manitoba. This resulted in an increase in assets and

long-term debt of approximately $87.8 million as of

December 31, 2005. In addition, several of the

Company’s investments in various previously equity-

accounted hog facilities are now consolidated. The

results of the consolidation of these hog production

facilities is an increase in debt of approximately

$19.7 million and an increase in total assets of

approximately $29.0 million. There was no impact on

the net earnings of the Company arising from the

consolidation of these entities.

Sales Classification New guidance provided by EIC

Abstract 156 “Accounting by a Vendor for

Consideration Given to a Customer (including a reseller

of the vendor’s products)” requires vendors to classify

certain consideration provided to customers as a



30

First Second Third Fourth

($ millions) Quarter Quarter Quarter Quarter Total

2005

Reported sales $ 1,582.3 $ 1,666.2 $ 1,615.8 $ 1,598.2 $ 6,462.6

Trade merchandising allowances

and other discounts 81.6 85.8 86.2 79.7 333.3

Adjusted sales $ 1,500.7 $ 1,580.4 $ 1,529.6 $ 1,518.5 $ 6,129.3

2004

Reported sales $ 1,194.7 $ 1,689.5 $ 1,698.5 $ 1,782.3 $ 6,365.0

Trade merchandising allowances

and other discounts 50.0 83.2 85.3 90.4 308.9

Adjusted sales $ 1,144.7 $ 1,606.3 $ 1,613.2 $ 1,691.9 $ 6,056.1

RECENT ACCOUNTING PRONOUNCEMENTS

In 2005, the Canadian Accounting Standards Board

issued three new standards that introduce new

requirements for the recognition and measurement of

financial instruments that are based on and similar to

standards issued by the Financial Accounting Standards

Board in the U.S. and the International Accounting

Standards Board.

Comprehensive Income Section 1530 requires that

entities present comprehensive income and its

components, as well as net income in its financial

statements. Comprehensive income is the change in

equity of an enterprise during a period from

transactions and other events from non-owner sources.

It includes all changes in equity during a period except

those resulting from investments by and distributions

to owners.


Financial Instruments Section 3855 requires that

all financial assets be classified as held for trading, held

to maturity, loans and receivables or available for sale.

All derivative instruments, including those that are

embedded in, but not closely related to, another

contract must be classified as held for trading. Financial

assets and liabilities classified as held for trading must

be measured at fair value with gains and losses

recognized in the periods in which they arise. Financial

assets classified as held to maturity, loans and

receivables, and financial liabilities not classified as held

for trading, must be measured at their amortized cost.

Financial assets classified as available for sale are

measured at fair value with gains and losses recognized

in other comprehensive income until the underlying

financial asset is derecognized or becomes impaired.

reduction of revenue rather than as cost of sales unless

the vendor receives, or will receive, an identifiable

benefit in exchange for the consideration. This EIC is

effective for fiscal and interim periods beginning on or

after January 1, 2006. The Company will adopt this

standard retroactively as of January 1, 2006 as required.

The impact of the adoption of this standard will

reduce sales by approximately $333.3 million (2004:

$308.9 million), with no impact on net earnings or

EPS as follows.


31


Hedges Section 3865 establishes standards for when

and how hedge accounting may be applied. The

standard requires that hedges be designated as either

fair value hedges, cash flow hedges or hedges of a net

investment in a self-sustaining operation. For a fair

value hedge, the gain or loss on the hedging item is

recognized in earnings in the period of change together

with the offsetting change attributable to the hedged

risk. For a cash flow hedge, as well as a hedge of a net

investment in a self-sustaining foreign operation, the

effective portion of the gain or loss on the hedging item

is initially reported in other comprehensive income and

subsequently recognized in earnings when the hedged

item affects earnings.

These three new accounting standards are effective for

fiscal years beginning on or after October 1, 2006 and

would therefore be applicable to the Company’s 2007

fiscal year. The Company has not yet determined the

impact of these new standards on its operations and

financial condition.

Variable Interest Entities In October 2005,

EIC-157 “Implicit Variable Interests under AcG-15”

was issued which clarifies that a reporting enterprise

should consider whether it holds an implicit variable

interest in a VIE or potential VIE. The Committee also

reached a consensus that the determination of whether

an implicit variable interest exists should be based on

whether the reporting enterprise may absorb variability

of the VIE or potential VIE. The Company adopted the

guidance in AcG-15 retroactively without restatement

of prior periods, effective January 1, 2005. The

adoption of this guideline did not have a material

impact on the Company.

Conditional Asset Retirement Obligations In

December 2005, the EIC released abstract EIC-159,

“Conditional Asset Retirement Obligations”. A

conditional asset retirement obligation is an obligation

associated with the retirement of a long-lived asset

where the timing and/or method of settlement are

conditional on a future event. To address the issue of

when to recognize such an obligation, the Committee

reached a consensus that a liability be recognized at fair

value when the fair value of the obligation can be

reasonably estimated. Should the fair value of the

obligation not be reasonably estimable, this fact and its

reason(s) are to be disclosed. The Company does not

anticipate this EIC to have any impact on its results or

financial position.

RESPONSIBILITIES OF MANAGEMENT AND

BOARD OF DIRECTORS

Management is responsible for the reliability and

timeliness of content disclosed in the Management’s

Discussion & Analysis (“MD&A”), which is current as

of February 22, 2006. Management also acknowledges

responsibility for the existence and effectiveness of

systems, controls and procedures to ensure that

information used internally by management and

disclosed externally is reliable and timely.

It is the responsibility of the Audit Committee to

provide oversight in reviewing the MD&A and the

Board of Directors to approve the MD&A. The Board

of Directors and the Audit Committee review all

material matters relating to the necessary systems,

controls and procedures in place to ensure the

appropriateness and timeliness of MD&A disclosures.


32

SUMMARY OF QUARTERLY RESULTS

The following is a summary of unaudited quarterly financial information for the eight interim periods ended December

31, 2005 (in thousands of dollars except per share information).

First Second Third Fourth

Quarter Quarter Quarter Quarter Total

Sales 2005 $ 1,582,278 $ 1,666,243 $ 1,615,812 $ 1,598,248 $ 6,462,581

2004 1,194,731 1,689,490 1,698,508 1,782,254 6,364,983

Net earnings 2005 12,748 33,237 30,061 18,196 94,242

2004(i) 18,115 25,035 26,710 32,423 102,283

Net earnings before

restructuring costs 2005 21,094 33,237 30,061 18,196 102,588

2004(i) 18,115 25,035 26,710 32,423 102,283

Earnings per share:

Basic 2005 $ 0.10 $ 0.26 $ 0.24 $ 0.14 $ 0.74

2004 0.16 0.22 0.24 0.28 0.90

Basic before

restructuring costs 2005 0.17 0.26 0.24 0.14 0.81

2004 0.16 0.22 0.24 0.28 0.90

Diluted 2005 0.10 0.25 0.23 0.14 0.72

2004 0.16 0.22 0.23 0.28 0.89 (i) Restated in accordance with Note 2 to the Consolidated Financial Statements.

For an explanation and analysis of quarterly results, refer to the MD&A in the 2005 Interim Reports to Shareholders

filed on SEDAR and also available on the Company’s website at www.mapleleaf.com.

FORWARD-LOOKING STATEMENTS

This document contains, and the Company’s oral and

written public communications often contain, forward-

looking statements that are based on current

expectations, estimates, forecasts and projections about

the industries in which the Company operates and

beliefs and assumptions made by the management of

the Company. Such statements include, but are not

limited to, statements with respect to our objectives and

goals, as well as statements with respect to our beliefs,

plans, objectives, expectations, anticipations, estimates

and intentions. Words such as “expect,” “anticipate,”

“intend,” “attempt,” “may,” “plan,” “believe,”

“seek,” “estimate,” and variations of such words and


similar expressions are intended to identify such

forward-looking statements. These statements are not

guarantees of future performance and involve

assumptions and risks and uncertainties that are

difficult to predict. Therefore, actual outcomes and

results may differ materially from what is expressed,

implied or forecasted in such forward-looking

statements. The Company does not intend, and the

Company disclaims any obligation to update any

forward-looking statements, whether written or oral, or

whether as a result of new information, future events

or otherwise.

These forward-looking statements are based on a

variety of factors and assumptions including, but not


33

limited to: the condition of the Canadian and U.S.

economies, the rate of appreciation of the Canadian

dollar versus the U.S. dollar and Japanese yen, the

availability and prices of livestock, raw materials,

energy and supplies, product pricing, the competitive

environment and related market conditions, operating

efficiencies, access to capital, the cost of compliance

with environmental and health standards, adverse

results from ongoing litigation and actions of domestic

and foreign governments. These assumptions have been

derived from information currently available to the

Company including information obtained by the

Company from third-party industry analysts. Actual

results may differ materially from those predicted by

such forward-looking statements. While the Company

does not know what impact any of these differences

may have, its business, results of operations, financial

condition and the market price of its securities may be

materially adversely affected. Factors that could cause

actual results or outcomes to differ materially from the

results expressed or implied by forward-looking

statements include, among other things: the risks posed

by food contamination, consumer liability and product

recalls; the risks related to the health status of livestock;

the risks related to the creditworthiness of customers to

whom the Company extends credit; the Company’s

exposure to currency exchange risks; the impact of

international events on commodity prices and the free

flow of goods; the cyclical nature of the cost and supply

of hogs and the pork market generally; the risks posed

by compliance with extensive government regulation;

the impact of the rate of duty imposed by the United

States government on the shipment of live swine to the

United States; the risk due to the consolidating

customer environment; leverage risk and the risk posed

by pandemic.



34

Management recognizes its responsibility for conducting

the Company’s affairs in the best interests of all its

shareholders. The Consolidated Financial Statements

and related information in the annual report are the

responsibility of management. The Consolidated

Financial Statements have been prepared in accordance

with Canadian generally accepted accounting principles,

which involve the use of judgement and estimates in

applying the accounting principles selected. Other

financial information in the annual report is consistent

with that in the Consolidated Financial Statements.

The Company maintains systems of internal controls,

which are designed to provide reasonable assurance that

accounting records are reliable and to safeguard the

Company’s assets. The Company’s independent auditors,

KPMG LLP, Chartered Accountants, have audited and

reported on the Company’s Consolidated Financial

Statements. Their opinion is based upon audits

conducted by them in accordance with Canadian

generally accepted auditing standards to obtain

reasonable assurance that the Consolidated Financial

Statements are free of material misstatement.

The Audit Committee of the Board of Directors, all

of whom are independent of the Company or any of its

affiliates, meets periodically with the independent

external auditors, the internal auditors and

management representatives to review the internal

accounting controls, the consolidated quarterly and

annual financial statements and other financial

reporting matters. Both the internal and independent

external auditors have unrestricted access to the Audit

Committee. The Audit Committee reports its findings

and makes recommendations to the Board of Directors.

M A N A G E M E N T ’ S S T A T E M E N T O F R E S P O N S I B I L I T Y

We have audited the consolidated balance sheets of

Maple Leaf Foods Inc. as at December 31, 2005 and

2004 and the consolidated statements of earnings,

retained earnings and cash flows for the years then

ended. These financial statements are the responsibility

of the Company’s management. Our responsibility is to

express an opinion on these financial statements based

on our audits.

We conducted our audits in accordance with

Canadian generally accepted auditing standards. Those

standards require that we plan and perform an audit to

obtain reasonable assurance whether the financial

statements are free of material misstatement. An audit

includes examining, on a test basis, evidence supporting

the amounts and disclosures in the financial statements.

An audit also includes assessing the accounting

principles used and significant estimates made by

management, as well as evaluating the overall financial

statement presentation.

In our opinion, these consolidated financial

statements present fairly, in all material respects, the

financial position of the Company as at December 31,

2005 and 2004 and the results of its operations and its

cash flows for the years then ended in accordance with

Canadian generally accepted accounting principles.

Chartered Accountants

Toronto, Canada

February 21, 2006

A U D I T O R S ’ R E P O R T T O T H E S H A R E H O L D E R S

February 21, 2006

M. H. VelsM. H. McCain Executive Vice-President andPresident and Chief Executive Officer Chief Financial Officer


35

C O N S O L I D A T E D B A L A N C E S H E E T S

As at December 31(In thousands of Canadian dollars)

2005 2004

ASSETS

Current assetsCash and cash equivalents $ 80,502 $ 111,770

Accounts receivable (Note 3) 247,014 292,462

Inventories (Note 4) 400,848 385,128

Future tax asset – current (Note 18) 15,329 6,708

Prepaid expenses and other assets 12,104 13,218

755,797 809,286

Investments in associated companies 61,939 82,302

Property and equipment (Note 5) 1,137,317 973,718

Other long-term assets (Note 6) 261,907 246,603

Future tax asset – non-current (Note 18) 38,499 26,976

Goodwill 847,853 816,408

Other intangibles (Note 7) 86,468 82,840

$ 3,189,780 $ 3,038,133

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilitiesAccounts payable and accrued charges $ 669,941 $ 637,966

Income and other taxes payable 31,727 27,651

Current portion of long-term debt (Note 8) 110,428 105,910

812,096 771,527

Long-term debt (Note 8) 1,032,829 1,052,195

Future tax liability (Note 18) 56,183 29,207

Other long-term liabilities (Note 9) 202,576 205,542

Minority interest 87,425 74,109

Shareholders’ equity (Note 13) 998,671 905,553

$ 3,189,780 $ 3,038,133

Contingencies and commitments (Note 22)

See accompanying Notes to the Consolidated Financial Statements

On behalf of the Board:

Michael H. McCain Robert W. Hiller

Director Director


36

C O N S O L I D A T E D S T A T E M E N T S O F E A R N I N G S

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

2005 2004As Restated (Note 2(m))

Sales $ 6,462,581 $ 6,364,983

Earnings from operations before restructuring costs $ 263,034 $ 256,364

Restructuring costs (Note 11) (13,157) —

Earnings from operations 249,877 256,364

Other income (Note 16) 6,977 2,650

Earnings before interest and income taxes 256,854 259,014

Interest expense, net (Note 17) 98,317 89,798

Earnings before income taxes 158,537 169,216

Income taxes (Note 18) 51,308 57,018

Earnings before minority interest 107,229 112,198

Minority interest, net of tax 12,987 9,915

Net earnings $ 94,242 $ 102,283

Basic earnings per share (Note 15) $ 0.74 $ 0.90

Diluted earnings per share (Note 15) $ 0.72 $ 0.89

Weighted average number of shares (millions) 126.8 113.6


C O N S O L I D A T E D S T A T E M E N T S O F R E T A I N E D E A R N I N G S

Years ended December 31(In thousands of Canadian dollars)


Retained earnings, beginning of year $ 159,129 $ 74,982

Net earnings 94,242 102,283

Dividends declared ($0.16 per share; 2004: $0.16 per share) (20,327) (18,136)

Premium on repurchase of share capital (Note 13) (1,237) —

Retained earnings, end of year $ 231,807 $ 159,129



37

C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S

Years ended December 31(In thousands of Canadian dollars)


CASH PROVIDED BY (USED IN)

Operating activitiesNet earnings $ 94,242 $ 102,283

Add (deduct) items not affecting cash

Depreciation and amortization 132,489 125,494

Stock-based compensation (Note 14) 8,425 4,095


Future income taxes (8,921) 7,985

Undistributed earnings of associated companies (7,620) (6,289)

Loss on repayment of convertible debenture 1,108 —

Gain on sale of property and equipment (5,814) (892)

Loss (gain) on sale of investments 363 (417)

Other (3,026) (21,053)

Change in other long-term receivables 6,840 (6,018)

Increase in net pension asset (39,226) (38,247)

Change in non-cash operating working capital 67,836 58,614

259,683 235,470Financing activitiesDividends paid (20,327) (18,136)

Dividends paid to minority interest (1,031) (956)

Increase in long-term debt 592 1,023,007

Decrease in long-term debt (122,948) (772,101)

Increase in share capital (Note 13) 19,421 166,243

Shares repurchased for cancellation (Note 13) (1,989) —

Other (13,454) (17,529)

(139,736) 380,528Investing activitiesAdditions to property and equipment (152,130) (156,777)

Proceeds from sale of property and equipment 14,778 12,649

Purchase of Canada Bread shares (Note 20) (7,004) (18,909)

Purchase of net assets of businesses, net of cash acquired (Note 21) (3,621) (382,666)

Change in investments, net — 1,111

Other (3,238) 1,456

(151,215) (543,136)

Increase (decrease) in cash and cash equivalents (31,268) 72,862

Cash and cash equivalents, beginning of year 111,770 38,908

Cash and cash equivalents, end of year $ 80,502 $ 111,770

Supplemental cash flow information:

Net interest paid $ 103,342 $ 77,585

Net income taxes paid 54,053 44,910



38

1. THE COMPANY

Maple Leaf Foods Inc. (“Maple Leaf Foods” or the “Company”) is a leading Canadian-based food processing

company, serving wholesale, retail, foodservice, industrial and agricultural customers across North America and

internationally. The Company’s results are organized into three segments: Meat Products Group, Agribusiness Group

and Bakery Products Group.

2. SIGNIFICANT ACCOUNTING POLICIES

The following are the significant accounting policies of the Company. The preparation of periodic financial statements

necessarily involves the use of estimates and approximations. Should the underlying assumptions change, the actual

amounts could differ from those estimates.

(a) Principles of consolidationThe consolidated financial statements include the accounts of the Company and its subsidiaries and the Company’s

proportionate share of the assets, liabilities, revenue and expenses of joint ventures over which the Company

exercises joint control. Investments in associated companies, over which the Company exercises significant

influence, are accounted for by the equity method. Variable Interest Entities (“VIEs”), as defined by Accounting

Guideline 15 – “Consolidation of Variable Interest Entities” are consolidated by the Company when it is

determined that the Company will, as the primary beneficiary, absorb the majority of the VIEs expected losses

and/or expected residual returns.

(b) Translation of foreign currenciesThe accounts of the Company are presented in Canadian dollars. The financial statements of foreign subsidiaries,

associated companies and joint ventures whose unit of measure is not the Canadian dollar are translated into

Canadian dollars using the exchange rate in effect at the year-end for assets and liabilities and the average exchange

rates for the period for revenue and expenses. Exchange gains or losses on translation of foreign subsidiaries are

deferred and included as a separate component in shareholders’ equity until realized.

(c) Hedging arrangementsThe Company enters into hedging arrangements to manage its exposure to currency, commodity price and interest

rate fluctuations. The Company uses hedge accounting to record for these derivative transactions.

The Company formally documents all relationships between hedging instruments and hedged items, as well as

its risk management objective and strategy for undertaking various hedged transactions. This process includes

assigning all derivatives to specific assets and liabilities on the balance sheet or to specific firm commitments or

anticipated transactions. The Company formally assesses, using regression analysis, both at the inception of the

hedge and on a quarterly basis, whether the derivatives that are used in hedging transactions are effective in

offsetting the changes in the fair values or the cash flows of hedged items.

The Company uses currency forward contracts and options to hedge its exposures to transactions denominated

in foreign currencies. The Company also uses futures and options to hedge its exposures to commodity based

transactions (wheat, live hogs, grains). When the criteria for hedge effectiveness is met, the gains and losses on the

currency and/or commodity hedging instruments are recognized in the consolidated financial statements in the same

period as the underlying transaction is recorded in net earnings. Any accrued amounts receivable and payable under

the terms of such contracts are included in accounts receivable and accounts payable, respectively. When hedge

effectiveness is not met, the Company records the fair value of the hedging items as other liabilities or assets on the

balance sheet. Any resulting gains or losses are recorded in operating earnings. Where the Company enters into

forward exchange contracts to hedge the principal and/or interest on related debt payable in foreign currencies,

unrealized losses or gains on such contracts are matched with exchange gains or losses on the debt and/or interest

payable.

The Company enters into interest rate and foreign exchange swaps to reduce the impact of fluctuating interest

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

Years ended December 31, 2005 and 2004 (Tabular amounts in thousands of Canadian dollars, unless otherwise indicated)


39

rates and exchange rates on short-term and long-term debt. The Company designates its interest rate hedge

agreements and foreign exchange swaps relating to debt as hedges of the underlying debt. The interest rate swap

agreements involve the periodic exchange of payments without the exchange of the notional principal amount upon

which the payments are based. Interest expense on the debt is adjusted to include the payments made or received

on the interest rate swaps. The related amount payable to or receivable from counterparties is included as an

adjustment to accrued interest. Any exchange gain or loss arising on the designated borrowings is offset against the

unrealized exchange gain or loss arising on translation of the foreign exchange component of the swaps. The

liability for the foreign exchange component of the swap is included in other liabilities.

The Company designates certain of its U.S. dollar borrowings as a hedge of its net investment in its U.S.

operations. At December 31, 2005, the amount of debt designated as a hedge of the Company’s net investment in

its U.S. operations was US$160.0 million (2004: US$160.0 million). Any exchange gain or loss on such designated

borrowings is offset against the unrealized exchange gain or loss arising on translation of the U.S. dollar financial

statements of these businesses and is included in the unrealized foreign currency adjustment account in

shareholders’ equity.

Realized and unrealized gains or losses associated with derivative instruments that have been terminated or

cease to be effective prior to maturity are recorded as deferred liabilities or assets on the balance sheet and

recognized in income in the period in which the underlying hedged transaction is recognized. In the event the

designated hedged item is sold, extinguished or matures prior to the termination of the related derivative

instrument, any unrealized gain or loss on such derivative instrument is recognized immediately in income.

(d) Revenue recognitionThe Company recognizes revenues from product sales upon transfer of title to customers. Revenue is recorded at

the invoice price for each product net of estimated returns. An estimate of sales incentives provided to customers

is also recognized at the time of sale and is classified as cost of sales. Sales incentives include various rebate and

promotional programs with the Company’s customers, primarily rebates based on achievement of specified volume

or growth in volume levels.

(e) InventoriesInventories are valued at the lower of cost and net realizable value, with cost being determined substantially on a

first-in, first-out basis. Included in the cost of inventory are direct product costs, direct labour and an allocation of

variable and fixed manufacturing overhead including depreciation.

(f) Property and equipmentProperty and equipment are recorded at cost including, where applicable, interest capitalized during the

construction or development period. Depreciation is calculated using the straight-line basis at the following rates,

which are based on the expected useful lives of the assets.

Buildings 21/2% to 6%

Machinery and equipment 10% to 33%

(g) Deferred financing costsCosts incurred to obtain long-term debt financing are amortized over the term of such debt and are included in

interest expense for the year.

(h) Goodwill and other intangiblesGoodwill is the residual amount that results when the purchase price of an acquired business exceeds the sum of

the amounts allocated to identifiable assets acquired, less liabilities assumed, based on their fair values. Goodwill

is allocated as of the date of the business combination to the Company’s reporting units that are expected to benefit



40

from the synergies of the business combination. The Company assigns value to certain acquired identifiable

intangible assets, primarily brands, poultry quota and delivery routes. Definite life intangibles are amortized over

their estimated useful lives. Goodwill is tested for impairment annually in the second quarter and otherwise as

required if events occur that indicate that it is more likely than not that the fair value of a reporting unit has been

impaired. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying

amount to its fair value.

(i) Income taxesThe Company uses the asset and liability method of accounting for income taxes. Accordingly, future tax assets and

liabilities are recognized for the future tax consequences attributable to differences between the financial statement

carrying amounts of assets and liabilities and their respective tax bases. Future tax assets and liabilities are

measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which

those temporary differences are expected to be recovered or settled. In addition, the effect on future tax assets and

liabilities of a change in tax rates is recognized in income in the year that includes the enactment or substantive

enactment date.

(j) Employee benefit plansThe Company accrues obligations and costs in respect of employee benefit plans. The cost of pensions and other

retirement benefits earned by employees is actuarially determined using the projected benefit method prorated on

service and management’s best estimate of expected plan investment performance, salary escalation, retirement ages

of employees and expected health care costs. Changes in these assumptions could affect future pension expense. For

the purpose of calculating the expected return on plan assets, those assets are valued at fair value. Past service costs

arising from plan amendments are amortized on a straight-line basis over the average remaining service period of

employees active at the date of amendment.

Actuarial gains and losses in excess of 10% of the greater of the actuarial liabilities and the market value of

assets at the beginning of the year and all gains and losses due to changes in plan provisions are amortized on a

straight-line basis over the expected average remaining service period of the active plan members. When a

restructuring of a benefit plan gives rise to both a curtailment and settlement of obligations, the curtailment is

accounted for prior to the settlement.

(k) Stock-based compensationThe Company applies the fair value method of accounting for its stock-based compensation. The fair value at grant

date of stock options (“options”) is estimated using the Black-Scholes option-pricing model with an assumed

forfeiture rate. The fair value of restricted stock units (“RSUs”) are measured based on the intrinsic value of the

award on grant date with an assumed forfeiture rate. Compensation cost is recognized on a straight-line basis over

the expected vesting period of the stock-based compensation.

For awards issued prior to January 1, 2003, the Company has not recognized any stock-based compensation

cost. The Company has disclosed the pro forma impact under the fair value method of awards granted in 2002 (see

Note 14).

(l) Statement of cash flowsCash and cash equivalents are defined as cash and short-term securities with maturities less than 90 days at the date

of acquisition, less bank indebtedness.

(m) Accounting Changes(i) Convertible DebenturesEffective January 1, 2005, the Company adopted an amendment to Canadian accounting principles, section

3860, “Financial Instruments – Disclosure and Presentation”, on a retroactive basis with restatement of prior



41


periods. The revised standard, which is effective for January 1, 2005, requires obligations of a fixed amount

that may be settled, at the issuer’s option, by a variable number of the issuer’s own equity instruments to be

presented as liabilities. As a result of adopting the revised standard, the Company reclassified the principal

component of its convertible debenture (Note 12) as a debt instrument and reclassified the interest, accretion

charges and related tax effects in the statement of earnings in the comparative periods. The impact of the

revised standard was a reduction in net earnings of $4.5 million (net of tax) for the year ended December 31,

2004. There was no impact to basic or diluted earnings per share for prior periods as a result of adopting

this change.

(ii) Variable Interest EntitiesThe Company adopted the guidance in Accounting Guideline 15, “Consolidation of Variable Interest

Entities”, retroactively without restatement of prior periods, effective January 1, 2005. As a result of the

adoption, there are several previously unconsolidated entities that are now consolidated with the results of the

Company. The most significant was the consolidation of the Company’s hog processing facility in Brandon,

Manitoba. This resulted in an increase in assets and long-term debt of approximately $87.8 million as of

December 31, 2005. In addition, several of the Company’s investments in various previously equity accounted

hog facilities are now consolidated. The results of the consolidation of these hog production facilities is an

increase in debt of approximately $19.7 million and an increase in total assets of approximately $29.0 million.

There was no impact on the net earnings of the Company arising from the consolidation of these entities.

(n) Comparative figuresCertain 2004 comparative figures have been reclassified to conform with the financial statement presentation

adopted in 2005.

3. ACCOUNTS RECEIVABLE

Under revolving securitization programs the Company has sold certain of its trade accounts receivable to financial

institutions. The Company retains servicing responsibilities and retains a limited recourse obligation for delinquent

receivables. At December 31, 2005, trade accounts receivable being serviced under this program amounted to

$230.1 million (2004: $209.7 million).

4. INVENTORIES

2005 2004

Material held for production $ 216,588 $ 185,724

Finished products 184,260 199,404

$ 400,848 $ 385,128

5. PROPERTY AND EQUIPMENT

2005 2004

Land $ 72,233 $ 68,025

Buildings 594,651 465,881

Machinery and equipment 1,447,956 1,271,259

Construction in progress 90,456 83,267

Land held for development or sale 1,993 710

2,207,289 1,889,142

Less: Accumulated depreciation 1,069,972 915,424

$ 1,137,317 $ 973,718


42


6. OTHER LONG-TERM ASSETS

2005 2004

Pension assets (Note 19) $ 220,540 $ 199,304

Deferred financing costs 22,985 22,750

Notes and mortgages receivable 9,003 12,044

Other 9,379 12,505

$ 261,907 $ 246,603

7. OTHER INTANGIBLES

2005 2004

Brands $ 59,232 $ 59,501

Poultry quota 24,442 20,114

Other 2,794 3,225

$ 86,468 $ 82,840

8. LONG-TERM DEBT

2005 2004

Notes payable:

– due 2009 (US$140 million)(a) $ 163,226 $ 168,504

– due 2007 (US$60 million)(a) 69,954 72,216

– due 2010 (US$75 million and CAD$115 million)(b) 202,443 205,270

– due 2011 (US$207.0 million)(c) 241,341 249,145

– due 2014 (US$98 million and CAD$105 million)(c) 219,258 222,953

– due 2016 (US$7 million and CAD$20 million)(c) 28,161 28,425

– due 2010 (CAD$10 million)(d) 11,726 13,991

– due 2016 (CAD$54.3 million)(d) 62,577 66,896

Bank debt – due 2006(e) 87,750 —

Convertible debenture(f) — 90,034

Other(g) 56,821 40,671

$ 1,143,257 $ 1,158,105

Less: Current portion 110,428 105,910

$ 1,032,829 $ 1,052,195

(a) In December 2002, the Company issued US$200.0 million of notes payable. The notes payable include a

US$140.0 million tranche, bearing interest at 6.3% per annum and due in 2009, and a US$60.0 million tranche,

bearing interest at 5.6% per annum and due in 2007. Through the use of cross-currency swaps (Note 10), the

Company effectively converted US$75.0 million into Canadian dollar-denominated debt of $116.5 million bearing

interest at floating interest rates being the three-month bankers’ acceptance rate plus 2.5% per annum. The financial

impact of currency rate changes on the swap is reported as other liabilities. At December 31, 2005, the swap liability

was $29.1 million (2004: $26.2 million) based on year-end exchange rates.

(b) In April 2000, the Company issued notes payable due April 28, 2010. The notes payable include a Canadian dollar-

denominated tranche for CAD$115.0 million, bearing interest at 7.7% per annum, and a U.S. dollar-denominated


43

tranche for US$75.0 million, bearing interest at 8.5% per annum. Through the use of cross-currency swaps (Note 10),

the Company effectively converted the U.S. dollar tranche into Canadian dollar-denominated debt, resulting in a

Canadian dollar-denominated amount of $110.8 million at an effective fixed interest rate of 7.7% per annum. The

financial impact of currency rate changes on the swap is reported as other liabilities. At December 31, 2005, the swap

liability was $23.3 million (2004: $20.5 million) based on year-end exchange rates.

(c) In December 2004, the Company issued $500.0 million of notes payable. The notes were issued in tranches of U.S.

and Canadian dollar-denominations, with maturity dates from seven to 12 years and bearing interest at fixed annual

coupon rates. Details of the five tranches are:

Principal Maturity Date Annual Coupon

US$207 million 2011 5.2%

US$98 million 2014 5.6%

US$7 million 2016 5.8%

CAD$105 million 2014 6.1%

CAD$20 million 2016 6.2%

Interest is payable semi-annually. Through the use of cross-currency swaps (Note 10), the Company effectively

converted: US$177.0 million of debt maturing in 2011 into Canadian dollar-denominated debt of $231.0 million

bearing interest at an annual fixed rate of 5.4%, US$98 million of debt maturing in 2014 into Canadian dollar-

denominated debt of $135.3 million bearing interest at an annual fixed rate of 6.0%, and US$2 million of debt

maturing in 2016 into Canadian dollar-denominated debt of $2.7 million bearing interest at an annual fixed rate of

6.1%. The financial impact of currency rate changes on the swaps is reported as other liabilities. At December 31,

2005, the swap liabilities were $46.1 million based on year-end exchange rates (2004: $31.9 million).

(d) Concurrent with the acquisition of Schneider Corporation in April 2004 (Note 21), the Company assumed the

liabilities outstanding under previously issued debentures by Schneider Corporation. On the closing date, the

debentures provided for principal payments totalling $13.1 million and $60.0 million, respectively, and bear interest

at fixed annual rates of 10.0% and 7.5%, respectively. The debentures require annual principal repayments over the

term of the bonds that have final maturity dates of September 2010 and October 2016, respectively. These debentures

were recorded at their fair value on the acquisition closing date. The difference between the acquisition date fair value

and the face value of the bonds is amortized over the remaining life of the debentures on an effective yield basis. On

December 31, 2005, the remaining book values were $11.7 million for the 2010 debentures (2004: $14.0 million) and

$62.6 million for the 2016 debentures (2004: $66.9 million) and the remaining principal payments outstanding are

$10.0 million and $54.3 million, respectively (2004: $11.6 million and $57.3 million).

(e) In 1999, the Company entered into agreements, including a conditional sales agreement, to finance $130.0 million

of the construction cost of a new hog processing facility in Brandon, Manitoba. In August 2006, the Company has the

option to purchase the facility for $78.0 million or to put back the facility to the seller. Effective, January 1, 2005,

pursuant to accounting guideline AcG-15, the Brandon facility is recorded as an asset of the Company with its related

obligations. At December 31, 2005, long-term debt related to this facility totals $87.8 million bearing interest at

floating interest rates based on bankers’ acceptance rates.

(f) At December 31, 2004, the Company had convertible debentures with a principal amount of $91.3 million

outstanding. These convertible debentures had a maturity date of December 2005 and were recorded as equity. On

December 8, 2004, the Company issued a cash redemption notice with payment due on January 7, 2005. Accordingly,

as of that date, the Company reclassified the liability component of the convertible debentures to current debt. On

January 7, 2005, certain of the debenture holders tendered $79.8 million for cash redemption and the remaining

debenture holders tendered $11.5 million of the debentures for conversion to common equity (see Notes 12 and 13).



44


(g) Subsidiaries of the Company have various lending facilities, including capital leases, with interest rates ranging

from non-interest bearing to 10.0% per annum. These facilities are repayable over various terms from 2006 to 2011.

As at December 31, 2005, $56.8 million (2004: $40.7 million) was outstanding.

(h) The Company has a primary bank debt facility of $700.0 million with a maturity date of December 6, 2007. This

facility can be drawn in either Canadian or U.S. dollars and bears interest based on bankers’ acceptance rates for

Canadian dollar loans and LIBOR for U.S. dollar loans. As at December 31, 2005, $69.5 million (2004: $66.0 million)

of the revolving facility was utilized in respect of letters of credit and trade finance.

The Company’s various facilities with Canadian chartered banks and other lenders, all of which are unsecured, are

subject to certain financial covenants.

The Company’s blended average effective cost of borrowing for 2005 was 6.2% (2004: 6.0%) after taking into

account the impact of interest rate hedges.

Required repayments of long-term debt are as follows.

2006 $ 110,428

2007 81,680

2008 12,887

2009 175,898

2010 217,199

Thereafter 545,165

Total long-term debt $ 1,143,257

9. OTHER LONG-TERM LIABILITIES

2005 2004

Foreign currency hedge liability (Note 10) $ 98,474 $ 78,703

Pension liabilities (Note 19) 36,535 63,827

Post retirement benefits (Note 19) 61,135 58,669

Other 6,432 4,343

$ 202,576 $ 205,542

10. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

In the ordinary course of business, the Company enters into derivative financial instruments to reduce underlying fair

value and cash flow risks associated with foreign currency, interest rates and commodity prices.

Foreign currency risk managementThe Company uses foreign currency forward contracts and options to manage a portion of its currency exposures.

These currency exposures relate primarily to U.S. dollar and Japanese yen denominated export sales and, to a lesser

extent, expenditures denominated in other foreign currencies.


45


The following table summarizes the Company’s net commitments to sell (purchase) foreign currency under forward

contracts at December 31, 2005.

Notional Average

2005 Currency amount exchange rate Maturity

U.S. dollar sales contracts US$ 42,256 1.1682 2006

Japanese yen sales contracts Yen ¥ 2,293,783 0.009948 2006

Notional Average

2004 Currency amount exchange rate Maturity

U.S. dollar sales contracts US$ 142,992 1.226 2005

U.S. dollar purchase contracts US$ (92,000) 1.249 2011

Japanese yen sales contracts Yen ¥ 4,037,660 0.011686 2005

Based on the market exchange rates at December 31, 2005, the Company would have realized a net gain of

$0.3 million (2004: net loss of $4.5 million) to settle all its commitments under its outstanding foreign exchange

forward contracts.

At December 31, 2005, the Company had entered into a series of option contracts to hedge a portion of its

anticipated Japanese sales for 2006. The total notional amount of these contracts is Yen ¥ 1,937,000 for various

maturity dates in 2006. The Company would realize a $0.03 million gain to terminate these outstanding option

contracts at market prices as at December 31, 2005.

Interest rate risk managementThe Company uses a variety of interest rate derivative instruments to manage a portion of its exposure to interest rate

fluctuations.

At the end of 2005, the Company has the following outstanding swap contracts used to hedge Company debt

(Note 8).

Canadian dollar fixed interest rate swaps

Notional Effective

Maturity amount interest rate

2008 $ 200,000 6.29%

2009 $ 60,000 6.10%

Cross-currency swaps

Notional Notional Effective

Maturity amount amount interest rate

US$ CAD$

2007 (Note 8 (a)) 60,000 93,240 BA(1) + 2.5%

2009 (Note 8 (a)) 15,000 23,273 BA(1) + 2.6%

2010 (Note 8 (b)) 75,000 110,775 7.7%

2011 (Note 8 (c)) 177,000 231,025 5.4%

2014 (Note 8 (c)) 100,000 138,000 6.0%

(1) Three-month Canadian Bankers’ acceptance rate

The cost to terminate all of the Company’s interest rate derivative contracts at market value on December 31, 2005

would have been $146.6 million (2004: loss of $122.2 million). Of this cost, $98.5 million (2004: $78.7 million) is

the currency revaluation which has been recorded in other liabilities (Note 9). Fair value calculations are based on

information received from the Company’s counterparties to these contracts.


46


In the second quarter of 2005, the Company terminated its outstanding US$92 million seven-year currency forward

contract and replaced it with a cross currency swap generating a loss of $1.4 million. The forward contract was

designated as a hedge of the note payable due in 2011. Consequently, the loss has been recorded as a deferred financing

cost in other long-term assets (Note 6) and will be amortized in interest expense over the remaining life of the

hedged debt.

In the second quarter of 2004, the Company entered into a series of swaps to hedge the interest rate on its

anticipated December 2004 debt issue (Note 8 (c)). Concurrent with the debt issue in December 2004, the Company

terminated these swaps at a cost of $16.1 million which has been deferred as a component of deferred financing costs

in other long-term assets (Note 6) and is being amortized as interest expense over the life of the hedged debt (six to

12 years). At December 31, 2005, the remaining deferred financing cost balance is $14.2 million.

Commodity price risk managementThe Company uses a variety of derivative instruments to manage its exposure to commodity price fluctuations. Based

on market values at December 31, 2005, the Company would have incurred a gain of $1.5 million (2004: loss of

$7.8 million) to terminate these outstanding contracts.

Fair value of financial assets and liabilitiesFair value of current assets and liabilities, including the current portion of long-term debt approximates their carrying

value due to their short-term nature. The book and fair values of the Company’s long-term indebtedness are

$1,032.8 million and $1,062.4 million, respectively (2004: $1,052.2 million and $1,099.7 million respectively).

11. RESTRUCTURING COSTS

During the first quarter of 2005, the Company recorded $13.2 million in restructuring costs ($8.8 million after-tax) in

respect of certain plant closures and operational restructuring for several of its businesses associated with the

integration of Schneider Corporation (“Schneider Foods”), the closure of the Company’s bakery in Peterborough,

England, and certain other operational restructuring items. Of the $13.2 million, $5.0 million represents the write-

down of certain capital assets that were disposed of or that have become impaired as a result of restructuring and

$8.2 million relates to provisions for employee terminations, facility exit costs, and other restructuring costs. Of the

$8.2 million in provisions, $2.7 million was paid in the year, leaving an outstanding provision balance of $5.5 million

as at December 31, 2005.

During 2003, the Company recorded $17.7 million in restructuring costs ($11.7 million, after-tax). Included in the

$17.7 million were provisions of $13.7 million relating to employee terminations, facility exit costs, and other

restructuring costs. Of the $13.7 million in provisions, $2.9 million was paid during 2005 (2004 and prior:

$9.9 million) and $0.2 million was returned to earnings leaving an outstanding provision balance of $0.7 million as

at December 31, 2005.

12. CONVERTIBLE DEBENTURES

In 1998, the Company issued $91.3 million in convertible unsecured subordinated debentures for net proceeds, after

costs, of $90.0 million with an interest rate of 6% and a maturity date of December 31, 2005. The debentures could

be converted by the debenture holders into common shares of the Company at a conversion price of $15.00 per share

at any time prior to maturity or the day immediately preceding the date fixed for redemption.

On and after December 8, 2004, the debentures were redeemable at the Company’s option at any time at par plus

any accrued and unpaid interest. The Company had the unrestricted option to satisfy payment on the redemption or

maturity of the debentures, and its interest obligations, by issuing common shares of the Company. Accordingly, at

issuance, the convertible debentures were classified as equity, including $7.3 million of the proceeds allocated to the

value of the debenture holders’ conversion option. Carrying charges, including coupon interest, on an after-tax basis,

were classified as a distribution of equity and as a deduction in calculating earnings per common share.


47


On December 8, 2004, the Company issued a redemption notice for the aggregate principal amount on the

debentures of $91.3 million for cash at par plus accrued interest with a redemption date of January 7, 2005. As a

result, the Company no longer had the option to satisfy repayment on redemption with common shares. Accordingly,

as of that date the Company reclassified $90.0 million of the convertible debentures to current debt, leaving

$7.3 million related to the debenture holders’ conversion option within shareholders’ equity. For the period from the

date of the reclassification to December 31, 2004, the carrying charges, including coupon interest, were classified as

interest expense.

On January 7, 2005, certain of the debenture holders exercised their conversion rights and the Company issued

763,933 common shares for a reduction in the total cash to be paid by the Company upon redemption of

approximately $11.5 million. Accordingly, the Company paid $79.8 million to redeem the remaining debentures out-

standing, resulting in a net loss on redemption of $1.1 million.

13. SHAREHOLDERS’ EQUITY

Shareholders’ equity consists of the following.

2005 2004

Share capital $ 765,666 $ 731,291

Retained earnings 231,807 159,129

Convertible debentures (Note 12) — 7,304

Contributed surplus 19,756 4,944

Unrealized foreign currency adjustment (18,558) 2,885

$ 998,671 $ 905,553

The authorized share capital of Maple Leaf Foods consists of an unlimited number of common shares and an unlimited

number of non-voting common shares. As at December 31, 2005, there were 105,704,812 voting common shares

issued and outstanding (2004: 103,174,627) and 22,000,000 non-voting common shares issued and outstanding

(2004: 22,000,000). The non-voting common shares carry rights identical to those of the common shares, except that

they have no voting rights other than as specified in the Canada Business Corporations Act. Each non-voting common

share is convertible at any time into one common share at the option of the holder. Holders of non-voting common

shares have a separate class vote on any amendment to the articles of the Company, if the non-voting common shares

would be affected by such amendment in a manner that is different from the holders of common shares.

Details of share transactions relating to both voting and non-voting shares during the year are as follows.

Number of Share

shares capital

Balance, December 31, 2003 113,174,213 $ 565,048

Issued for cash on exercise of options (Note 14) 660,414 6,197

Issued for cash from treasury (b) 11,340,000 160,046

Balance, December 31, 2004 125,174,627 731,291

Issued for cash on exercise of options (Note 14) 1,678,802 19,421

Issued on conversion of convertible debentures (Note 12) 763,933 12,218

Issued to purchase additional shares in Canada Bread Company, Limited (Note 20) 214,450 3,495

Repurchased for cancellation (a) (127,000) (759)

Balance, December 31, 2005 127,704,812 $ 765,666

(a) During 2005, the Company repurchased for cancellation 127,000 common shares pursuant to a normal course

issuer bid at an average exercise price of $15.66 per share. The excess of the purchase cost over the book value of the

shares was charged to retained earnings.


48


(b) On December 20, 2004, the Company issued 11.3 million common shares pursuant to a public offering at

$14.55 per share for net proceeds to the Company of $160.0 million (after costs of $5.0 million). McCain Capital

Corporation acquired 5,154,639 shares pursuant to this equity offering, increasing its share ownership as of

December 31, 2004 to 33.2%.

14. STOCK-BASED COMPENSATION

Under the Maple Leaf Foods Share Incentive Plan as at December 31, 2005, the Company may grant options to its

employees and employees of its subsidiaries to purchase up to 11,841,583 shares of common stock and may grant

RSUs entitling employees to receive up to 2,200,000 in common shares. Options and RSUs are granted from time to

time by the Board of Directors on the recommendation of the Human Resources and Compensation Committee. The

vesting conditions are specified by the Board of Directors and may include continued service of the employee with the

Company and/or other criteria based on a measure of the Company’s performance.

Stock optionsA summary of the status of the Company’s stock option plans as at December 31, 2005 and 2004, and changes during

these years is presented below.

2005 2004

Options Weighted average Options Weighted averageoutstanding exercise price outstanding exercise price

Outstanding, beginning of year 12,393,454 $ 12.02 12,338,995 $ 11.83

Exercised (1,678,802) 11.57 (660,414) 9.38

Granted 1,355,000 16.34 1,416,600 13.09

Expired and terminated (621,036) 16.27 (701,727) 13.34

Outstanding, end of year 11,448,616 12.37 12,393,454 12.02

Options currently exercisable 7,872,396 $ 11.66 6,939,243 $ 11.84

All outstanding share options vest and become exercisable over a period not exceeding six years (time vesting) from

the date of grant and/or upon the achievement of specified performance targets (based on return on net assets, earnings,

share price or total stock return relative to an index). The options have a term of between seven and 10 years.

The number of options outstanding at December 31, 2005, together with details regarding time and performance

vesting conditions of the options, is as follows.Options currently Options subject to Options subject to

Options outstanding exercisable time vesting only performance vesting

WeightedWeighted average Weighted Weighted Weighted

average remaining average average averageRange of Number exercise term Number exercise Number exercise Number exerciseexercise prices outstanding price (in years) exercisable price outstanding price outstanding price

$ 8.36 to $10.73 3,646,900 $ 9.89 3.6 2,861,100 $ 9.77 — $ — 785,800 $10.33

$10.77 to $13.21 4,216,360 12.05 3.2 3,307,690 11.78 125,070 12.27 783,600 13.15

$13.47 to $15.01 2,229,856 14.59 3.1 1,670,606 14.54 — — 559,250 14.72

$15.60 to $18.47 1,355,500 16.39 6.6 33,000 17.17 49,000 16.37 1,273,500 16.37

$ 8.36 to $18.47 11,448,616 $12.37 3.7 7,872,396 $11.66 174,070 $13.42 3,402,150 $13.96


49


During 2005, the Company granted 1,355,000 stock options (2004: 1,416,600) at a weighted average exercise price

per share of $16.34 (2004: $13.09). The fair value of the total options issued is determined using the Black-Scholes

option pricing model with the following weighted average assumptions.

2005 2004

Expected option life (in years) 4.2 4.2

Risk-free interest rate 4.3% 3.9%

Expected annual volatility 29.5% 33.4%

Dividend yield 1.0% 1.2%

The estimated fair value of options granted during the year was $4.4 million (2004: $4.5 million). This value is

amortized to income over the vesting period of the related options. The amortization of the fair value of options in

2005 is $5.2 million (2004: $3.4 million) and is recorded in contributed surplus.

Restricted stock unitsIn 2005, the Company granted 811,750 RSUs (2004: 789,000) to its employees under the Company’s Share Incentive

Plan. Each RSU entitles the holder to receive one common share in the capital of the Company at specified future dates.

The issuance of these shares is dependent upon the achievement of specified stock performance targets relative to a

North American index of food stocks, and continued employment with the Company.

All outstanding RSUs vest over a period of not less than three years and not exceeding five years (time vesting) from

the date of grant and upon the achievement of specified stock price performance targets relative to a North American

index of food stocks.

A summary of the status of the Company’s RSU plan as at December 31, 2005 and 2004 and changes during these

years is presented below.

2005 2004

RSUs Weighted average RSUs Weighted averageoutstanding price at grant outstanding price at grant

Outstanding, beginning of year 783,125 $ 12.73 — $ —Exercised — — — —Granted 811,750 16.33 789,000 12.73

Expired and terminated (16,250) 13.50 (5,875) 12.71

Outstanding, end of year 1,578,625 $ 14.82 783,125 $ 12.73

The fair value of the RSUs on the date of grant was $9.1 million, which is amortized to income on a pro rata basis

over the vesting periods of the related RSUs. The amortization of the fair value of the RSUs in 2005 is $3.2 million

(2004: $0.7 million).

The fair value of the total RSUs granted in the year is determined using a present value calculation with an assumed

forfeiture rate, based on the following weighted average assumptions.

2005 2004

Expected RSU life (in years) 3.3 3.3

Forfeiture rate 30% 23.1%

Discount rate 4.0% 4.0%

Dividend yield 1.1% 1.3%

Weighted average remaining term (in years) 4.2 4.7


50


Pro forma impact on earningsIn 2003, the Company elected to early adopt the new “Stock-based Compensation and Other Stock-based Payments”

accounting rules on a prospective basis for awards granted or modified after January 1, 2003. During 2002, the

Company granted 2,503,500 stock options at a weighted average price per share of $14.36. The effect of these stock

option awards, had they been charged to earnings during the year on a fair value basis, would have been an expense

of $0.1 million (2004: $3.4 million) with a related reduction to basic and diluted earnings per common share of $nil

(2004: $0.03). As at December 31, 2005, there was no remaining unrecorded expense on options granted prior to

January 31, 2003.

15. EARNINGS PER SHARE

The following table sets forth the calculation of basic and diluted earnings per share.

2005 2004

Numerator:

Earnings available to common shareholders – basic $ 94,242 $ 102,283

Effect on earnings of dilutive securities:

Convertible debt (ii) — 4,882

Earnings available to common shareholders – diluted $ 94,242 $ 107,165

Denominator:

Weighted average common shares outstanding (in millions) 126.813 113.623

Effect of dilutive securities (in millions):

Employee stock options (i) 3.244 1.095

Convertible debt — 6.087

Weighted average shares – diluted (in millions) 130.057 120.805

(i) Excludes the effect of 10.3 million options and restricted stock units (2004: 12.1 million) to purchase common shares that are anti-dilutive.

(ii) As explained in Note 12, the convertible debentures were all converted or repaid on January 7, 2005.

2005 2004

Earnings per share:

Basic $ 0.74 $ 0.90

Diluted 0.72 0.89

16. OTHER INCOME (EXPENSE)

2005 2004

Earnings from associated companies $ 3,131 $ 985

Gain on sale of property and equipment 3,498 892

Dividends received 510 144

Gain on sale of investments, net 363 417

Rental income 300 458

Earnings (loss) from real estate operations 283 (246)

Loss on conversion of debenture (1,108) —

$ 6,977 $ 2,650


51


17. INTEREST EXPENSE

2005 2004

Interest expense on long-term debt $ 90,154 $ 81,226

Other net interest expense 8,163 8,572

$ 98,317 $ 89,798

18. INCOME TAXES

Income tax expense varies from the amount that would be computed by applying the combined federal and provincial

statutory income taxes rate as a result of the following.

2005 2004

Income tax expense according to combined statutory

rate of 34.5% (2004: 35.1%) $ 54,770 $ 59,735

Increase (decrease) in income taxes resulting from:

Adjustment to net future tax liabilities for changes in tax laws and rates (167) (136)

Rate differences in foreign subsidiaries (3,853) (4,320)

Manufacturing and processing credit (1,961) (2,177)

Non-taxable gains (398) (1,118)

Share option expense 2,928 1,423

Equity in earnings of associated companies (1,562) (1,751)

Dividends not taxable (181) (58)

Large corporations tax 1,947 1,599

Other (215) 3,821

$ 51,308 $ 57,018


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The tax effects of temporary differences that give rise to significant portions of the future tax assets and future tax

liabilities at December 31 are presented below.

2005 2004

Future tax assets:

Non-capital loss carry forwards $ 113,199 $ 114,479

Accrued liabilities 22,476 24,686

Tax on intra-subsidiary asset transfer 18,620 19,089

Other 12,111 2,491

$ 166,406 $ 160,745

Future tax liabilities:

Property and equipment $ 80,419 $ 81,557

Cash basis farming 8,440 13,472

Investments in associated companies 1,135 1,135

Net pension asset 49,551 42,140

Goodwill and other intangibles 16,273 17,688

Other 13,350 3,736

$ 169,168 $ 159,728

Classified in the consolidated financial statements as:

Future tax asset – current $ 15,329 $ 6,708

Future tax asset – non-current 38,499 26,976

Future tax liability – current (407) (3,461)

Future tax liability – non-current (56,183) (29,207)

Net future tax liability $ (2,762) $ 1,016


53


19. PENSIONS AND OTHER POST-RETIREMENT BENEFITS

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

Post-retirement Schneider Other 2005 2004

benefit pension pension Total Total

Accrued benefit obligation:

Balance, beginning of year $ 58,666 $ 418,720 $ 535,014 $ 1,013,200 $ 508,668

Addition of Schneider Foods’

plans (Note 21) — — — — 464,441

Current service cost 779 42 19,162 19,983 16,340

Interest cost 3,382 23,464 30,930 57,776 49,230

Benefits paid (2,804) (22,856) (38,961) (64,621) (58,551)

Actuarial losses 6,214 39,853 57,191 103,258 28,175

Employee contributions — 116 5,426 5,542 4,897

Balance, end of year $ 66,237 $ 459,339 $ 609,762 $ 1,135,138 $ 1,013,200

Plan assets:

Fair value, beginning of year $ — $ 353,238 $ 838,517 $ 1,191,755 $ 792,618

Addition of Schneider Foods’

plans (Note 21) — — — — 338,817

Actual return on plan assets — 39,791 135,648 175,439 106,139

Employer contributions 2,804 21,093 2,780 26,677 18,446

Employee contributions — 116 5,426 5,542 4,897

Benefits paid (2,804) (22,856) (38,961) (64,621) (58,551)

Asset transfer to Company defined

contribution plan — — (13,488) (13,488) (10,611)

Fair value, end of year $ — $ 391,382 $ 929,922 $ 1,321,304 $ 1,191,755

Funded status – plan surplus

(deficit) $ (66,237) $ (67,957) $ 320,360 $ 186,166 $ 178,555

Unamortized transition amount — — (171,754) (171,754) (190,334)

Unamortized actuarial losses 5,102 28,145 49,482 82,729 69,400

Unamortized prior service cost — — 1,028 1,028 1,124

Other — — (194) (194) —

Accrued benefit asset (liability) $ (61,135) $ (39,812) $ 198,922 $ 97,975 $ 58,745

Amounts recognized in the consolidated balance sheet consist of:

2005 2004

Other long-term assets $ 220,540 $ 199,304

Accounts payable and accrued charges 24,895 18,063

Other long-term liabilities 97,670 122,496


54


Pension benefit expense (income).

2005 2004

Current service cost – defined benefit $ 19,204 $ 15,566

Current service cost – defined contribution 18,049 18,100

Interest cost 54,394 47,110

Actual return on plan assets (175,439) (106,415)

Difference between actual and expected return 87,801 31,348

Actuarial losses recognized 97,044 30,064

Difference between actual and recognized actuarial losses in the year (96,028) (31,325)

Amortization of transitional obligation (18,580) (18,580)

Amortization of prior service cost 96 96

Net benefit plan income $ (13,459) $ (14,036)

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

2005 2004

Discount rate used to calculate net benefit plan expense 5.75% 6.00%

Discount rate used to calculate year-end benefit obligation 5.00% 5.75%

Expected long-term rate of return on plan assets 7.50% 7.50%

Rate of compensation increase 4.00% 4.00%

Other post-retirement benefit expense.

2005 2004

Current service cost $ 779 $ 774

Interest cost 3,382 2,120

Actuarial gain recognized 6,214 —

Difference between actual and expected actuarial gain (6,214) —

$ 4,161 $ 2,894

Impact of 1% change in health care cost trend.

1% Increase 1% Decrease

Effect of end-of-year obligation $ 2,802 $ (3,405)

Aggregate of 2005 current service cost and interest cost 202 (227)

Measurement dates:

2005 expense December 31, 2004

Balance sheet December 31, 2005

The pension assets are invested in the following asset categories at December 31, 2005 and December 31, 2004.

2005 2004

Asset category:

Equity securities 72% 70%

Debt securities 28% 30%

100% 100%


55


20. INVESTMENT IN CANADA BREAD COMPANY, LIMITED (“CANADA BREAD”)

During 2005, the Company acquired 225,300 shares (2004: 490,400) in Canada Bread for $10.5 million (2004:

$18.9 million) comprised of cash of $7.0 million and shares of $3.5 million, increasing its ownership to 87.5%.

The allocation of the acquisition of shares is as follows.

2005 2004

Property and equipment $ 138 $ 2,848

Goodwill 6,081 4,752

Other intangibles 195 4,019

Future income taxes (75) (1,547)


Total purchase cost $ 10,500 $ 18,909

21. ACQUISITIONS AND DIVESTITURES

On April 5, 2004, the Company acquired Schneider Corporation (“Schneider Foods”) for cash consideration of

$376.7 million including transaction costs of $8.1 million and the assumption of Schneider Foods’ debt. As at June

30, 2005 the purchase price allocation (including fair value assigned to intangible assets, certain fixed assets, legal

claims, indebtedness, pensions, post-retirement benefits and taxes) was finalized. Goodwill resulting from the above

transaction is included in the total assets of the Meat Products Group.

In May 2005, the Company purchased the remaining 32% interest in Cappola Food Inc. for net proceeds of

approximately $3.6 million resulting in additional goodwill of approximately $1.5 million.

Details of net assets acquired and purchase adjustments made in 2005 and 2004 are as follows.

Schneider 2005 2004Foods Other Total Total

Net working capital (deficit) $ (4,443) $ — $ (4,443) $ 79,286

Investments — — — 21,191

Property and equipment (2,976) — (2,976) 152,604

Other assets (1,977) — (1,977) 7,689

Goodwill 28,149 1,504 29,653 293,378

Other intangibles — — — 72,480

Long-term debt — — — (146,691)

Future income taxes 19,886 — 19,886 27,014

Pension benefit liability (250) — (250) (75,993)

Post employment benefit liability (53) — (53) (49,631)

Other long-term liabilities (38,336) — (38,336) (1,255)

Minority interest — 2,074 2,074 (1,737)

Retained earnings — 82 82 —

Total purchase cost — 3,660 3,660 378,335

Consideration:

Cash — 3,621 3,621 382,666

Accounts payable, accrued charges,

and long-term debt — 39 39 (4,331)

$ — $ 3,660 $ 3,660 $ 378,335


56

22. CONTINGENCIES AND COMMITMENTS

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

contingencies arising in the normal course of business. Management is of the opinion that the outcome of these

uncertainties will not have a material adverse effect on the Company’s financial position.

(b) In the normal course of business, the Company and its subsidiaries enter into sales commitments with customers,

and purchase commitments with suppliers. These commitments are for varying terms and can provide for fixed or

variable prices. With respect to certain of its contracts, the Company has the right to acquire at fair value, and the

suppliers have the right to sell back to the Company, certain assets which have an estimated fair value of $14.3 million.

The Company believes that these contracts serve to reduce risk, and it is not anticipated that losses will be incurred on

these contracts.

(c) The Company has operating lease, rent and other commitments, that require minimum annual payments as follows.

2006 $ 40,488

2007 31,880

2008 25,858

2009 18,683

2010 16,075

Thereafter 70,185

$ 203,169

23. SEGMENTED FINANCIAL INFORMATION

The Company’s operations are classified into the following three primary business segments, which have been used for

the operating segment disclosures for all years presented:

(a) Meat Products Group includes the Company’s meat and meat-related businesses, comprising the primary pork and

poultry processing, prepared meats, and global food marketing operations.

(b) Agribusiness Group includes the Company’s feed and pet food businesses, animal by-products recycling, swine

production, poultry growing and hatching operations.

(c) Bakery Products Group comprises the Company’s 87.5% ownership in Canada Bread Company, Limited, a

producer of fresh and frozen par-baked bakery products, and fresh pasta and sauces.



57


(In thousands of Canadian dollars) 2005 2004

Sales to customers

Meat Products Group $ 4,300,290 $ 4,127,255

Agribusiness Group 816,776 924,912

Bakery Products Group 1,345,515 1,312,816

$ 6,462,581 $ 6,364,983

Earnings from operations, before restructuring costs

Meat Products Group $ 59,881 $ 68,440


Bakery Products Group 101,291 89,188

$ 263,034 $ 256,364

Capital expenditures




$ 152,130 $ 156,777

Depreciation and amortization




$ 132,489 $ 125,494

Total assets

Meat Products Group $ 1,550,439 $ 1,463,253



Non-allocated assets 305,200 269,688

$ 3,189,780 $ 3,038,133

The Agribusiness Group operating earnings include the Company’s share of earnings from equity-accounted hog

investments in the year in the amount of $4.5 million (2004: $5.3 million losses).

During the year, total sales to customers outside of Canada were $1,753.9 million (2004: $1,840.3 million) of

which $901.0 million (2004: $962.2 million) were sales to customers in the United States.


58

CORPORATE GOVERNANCE

The Board of Directors and management of theCompany are committed to maintaining a highstandard of corporate governance. The Board hasresponsibility for the overall stewardship of theCompany and discharges such responsibility byreviewing, discussing and approving the Company’sstrategic planning and organizational structure andsupervising management with a view to preserving andenhancing the underlying value of the Company.Management of the business within this process andstructure is the responsibility of the Chief ExecutiveOfficer and senior management.

The Board has adopted guidelines to assist it inmeeting its corporate governance responsibilities. Therole of the Board, the CEO, the Chairman, LeadDirector and the individual committees are clearlydelineated. Together with the Chairman, Lead Directorand the Corporate Governance Committee, the Boardassesses its processes and practices regularly to ensureits governance objectives are met.

Composition of the Board of Directors

The Board is comprised of experienced directors with adiversity of relevant skills and competencies. The Boardof Directors has assessed each of the Company’s 10non-management directors to be independent. These10 directors are also considered independent under therelevant securities regulations.

A more comprehensive analysis of the Company’sapproach to corporate governance matters is includedin the Management Proxy Circular for the April 26,2006 Annual and General Meeting of Shareholders.

BOARD OF DIRECTORS

Purdy Crawford O.C.Counsel, Osler, Hoskin & Harcourt (Law firm)

Mr. Crawford, 74, is a director of a number of U.S.and Canadian companies. Until February 2000, he wasthe non-Executive Chairman of Imasco Limited and CTFinancial Services. Mr. Crawford is an Officer of theOrder of Canada and a member of the CanadianBusiness Hall of Fame.Director since: 1995

Jeffrey GandzProfessor, Managing Director – Program Design, Richard IveySchool of Business, University of Western Ontario

Dr. Gandz, 61, has been a consultant for many Canadian and multinational corporations andgovernment ministries, and is the author of severalbooks, many articles and government reports on avariety of subjects, including leadership andorganizational effectiveness.Director since: 1999

James F. HankinsonPresident and Chief Executive OfficerOntario Power Generation (Electric generation company)

Mr. Hankinson, 62, is a director of a number ofCanadian companies. Mr. Hankinson retired as President and CEO of New Brunswick PowerCorporation in 2002. He was President and ChiefOperating Officer of Canadian Pacific Limited until 1995.Director since: 1995

Robert W. HillerCorporate Director

Mr. Hiller, 69, has served as a director and senior officerof a number of large multinational food companies inthe United States and in Canada. Until 1991, he wasSenior Vice-President and Chief Financial Officer ofthe Campbell Soup Company Limited.

Director since: 1995

Chaviva M. HosekPresident and Chief Executive OfficerThe Canadian Institute for Advanced Research (Research Institute)

Dr. Hosek, 59, received her Ph.D. from HarvardUniversity in 1973. She was Director of Policy andResearch from 1993 to 2000 in the Prime Minister’sOffice. Her career has included a term as Minister ofHousing for the Province of Ontario and a 13-yearperiod as an academic at the University of Toronto.Dr. Hosek serves as a director of Inco Limited.


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59

Donald E. LoadmanCorporate Director and Business Consultant

Mr. Loadman’s career includes service in Canadaand the United States with three multinationalfood and packaged goods companies. Until 1991Mr. Loadman was Chairman of Pillsbury International.Mr. Loadman, 73, is a resident of California.Until 1996, Mr. Loadman was Chairman of AultFoods Limited.


G. Wallace F. McCain O.C.Chairman, Maple Leaf Foods Inc.

Mr. McCain, 75, was appointed Chairman followingthe acquisition of the Company in April 1995.Mr. McCain co-founded McCain Foods Limited in1956 which has grown to become one of the largestfrozen food companies in the world. Mr. McCain wasPresident and Co-CEO of McCain Foods Limited until1994 and is currently its Vice-Chairman and directorof other associated companies within the McCain FoodsGroup. Mr. McCain is an Officer of the Orderof Canada.


J. Scott McCainPresident and Chief Operating Officer, Agribusiness Group,Maple Leaf Foods Inc.

Before joining Maple Leaf Foods Inc. in April 1995,Mr. McCain was Vice-President for Production ofMcCain Foods Limited in Canada, a company he joinedin 1978 and where he held progressively seniorpositions in manufacturing and operations. He is adirector of Canada Bread Company, Limited andMcCain Capital Corporation. Mr. McCain, 49, is adirector of McCain Foods Group.


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

Mr. McCain, 47, joined Maple Leaf Foods Inc. in April1995 after 16 years with McCain Foods Limited inCanada and the United States. Prior to leaving in March1995, Mr. McCain was the President and ChiefExecutive Officer of McCain Foods USA Inc. He is adirector of Canada Bread Company, Limited,McCain Foods Group and is a past director of theAmerican Frozen Food Institute. Mr. McCain is aDirector of Royal Bank of Canada and serves on theBoard of Trustees of The Hospital for Sick Children in Toronto.


Diane E. McGarryCorporate Director

Ms. McGarry, 56, is a director of Omnova SolutionsInc. Her career includes over 30-years’ experience withXerox including five years in Canada as Chairman,President and CEO of Xerox Canada from 1993 to 1998.Prior to retiring in 2005, Ms. McGarry held the positionof Chief Marketing Officer, Xerox Corporation.


J. Edward Newall O.C.Chairman, Newall & Associates (Consulting firm)

Mr. Newall, 70, is also Chairman and Director ofNOVA Chemicals Corporation, Chairman and Director of Canadian Pacific Railway Ltd. andChairman and director of Novelis Inc. In 1998 heretired as Vice-Chairman and CEO of NOVACorporation. He served as a Director of Alcan Inc. tillDecember 2004 and as a director of Royal BankFinancial Group till January 2005. Mr. Newall is anOfficer of the Order of Canada.


Gordon RitchieChairman of Public Affairs, Hill & Knowlton Canada (Government and public relations company)

Mr. Ritchie, 62, is also CEO of Strategico Inc. and adirector of a number of leading Canadian corporations.Mr. Ritchie had 22 years of distinguished public service.As Ambassador for Trade Negotiations, Mr. Ritchiewas one of the principal architects of theCanada/United States Free Trade Agreement.


Robert T. StewartCorporate Director

Mr. Stewart, 73, is a director of a number of largeNorth American companies in various industries.Mr. Stewart had a 40-year career with Scott PaperLimited, retiring in 1995 as Chairman and CEO.


Note: Ages of the Board of Directors provided as at March 2006.

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COMMITTEES OF THE BOARD OF DIRECTORS

Audit Committee

R.W. Hiller, ChairmanJ.F. HankinsonD.E. LoadmanJ.E. NewallG. Ritchie

Corporate Governance Committee

P. Crawford, ChairmanJ. GandzD.E. LoadmanR.T. Stewart

Environment, Health and Safety Committee

R.T. Stewart, ChairmanJ.F. HankinsonR.W. HillerC.M. Hosek

Human Resources and Compensation Committee

J.E. Newall, ChairmanP. CrawfordJ. GandzC.M. HosekG. Ritchie

CORPORATE COUNCIL

G. Wallace F. McCainChairman

Michael H. McCainPresident and Chief Executive Officerand Chief Operating Officer, Meat Products Group

J. Scott McCainPresident and Chief Operating Officer, Agribusiness Group

Richard A. LanPresident and Chief Operating Officer, Bakery Products Group

Michael H. VelsExecutive Vice-President and Chief Financial Officer

Thomas P. MuirExecutive Vice-President and Chief Development Officer

Douglas W. DoddsChief Strategy Officer

Wayne JohnsonSenior Vice-President and Chief Human Resources Officer

Rocco CappuccittiSenior Vice-President, Transactions and Administrationand Corporate Secretary

Lynda J. KuhnVice-President, Public & Investor Relations

EXECUTIVE COUNCIL

(Includes members of the Corporate Council and Senior Operating Management as follows)

Michael E. DetlefsenPresident, Maple Leaf Global Foods

Brock J. FurlongPresident, Canada Bread Frozen Bakery

Kevin P. GoldingPresident, Rothsay and Elite Swine Inc.

Annalisa KingSenior Vice-President, Vertical Co-ordination

Rory A. McAlpineVice-President, Government and Industry Relations

C. Barry McLeanPresident, Canada Bread Fresh Bakery

Peter G. MaycockManaging Director, Maple Leaf Bakery U.K.

Bruce Y. MiyashitaVice-President, Six Sigma

Randy A. PowellPresident, Maple Leaf Fresh Foods

Patrick A. RessaChief Information Officer

Peter C. SmithVice-President, Corporate Engineering

Maryanne ChantlerVice-President, Purchasing and Supply Chain

Jerry VergeerPresident, Maple Leaf Animal Nutrition

Richard YoungPresident, Maple Leaf Consumer Foods

OTHER CORPORATE OFFICERS

J. Nicholas BolandVice-President, Finance

Natalie M. MarcheVice-President and Treasurer

Judith A. RobinsonAssistant Corporate Secretary

S E N I O R M A N A G E M E N T A N D O F F I C E R S

C O R P O R A T E P R O F I L E

aple Leaf Foods is a Canadian success story with

growing global reach. Our roots in the flour

business date back to a small-town mill in 1836, our

meat processing business back to the 1860s, and our

bakery business to the amalgamation of five separate companies in 1911.

Rich in history, Maple Leaf Foods entered our current growth phase in

1995 when McCain Capital Corporation pooled our expertise in

the food business with the financial resources of Ontario Teachers’

Pension Plan Board. Today, Maple Leaf Foods employs approximately

24,000 people, exports to nearly 80 countries, and operates in Canada,

the United States, the United Kingdom, Europe, Southeast

Asia and Mexico.

Our Meat Products and Agribusiness operations are strategically

linked to produce high quality meat products, minimize underlying

commodity market exposure, and maximize earnings. They include

animal nutrition, hog production, fresh value-added pork and poultry

products, processed meats and home meal solutions, global sales and

trading, and rendering operations.

Our Bakery operations are concentrated in North America and the

United Kingdom. We are the Canadian market leader in

premium nutrition fresh bakery products, such as whole grain and

organic breads. We are also a major North American supplier of

frozen ready-to-bake, par-baked and pre-baked breads, rolls and

specialty bakery items, in addition to fresh pasta and sauces. In the

U.K., we operate three plants, including one of the largest bagel plants

in the world, servicing the fast growing U.K. and European markets.

Our value creation strategy is supported by our flagship brands

which are growing well above industry averages – Maple Leaf® and

Schneiders® in the meat category and Dempster’s® in the bakery

category. They each deliver a promise to consumers: leadership in food

safety, quality and taste, and nutrition. Behind our products and our

many brands are our passionate people, and their passion for food.

M

Table of Contents1 Financial Highlights

2 Operations Overview

3 Segmented Operating Results

5 Letter from the Chairman

6 Letter to Fellow Shareholders

14 Financials

CAPITAL STOCK

The Company’s authorized capital consists of anunlimited number of voting and an unlimited numberof non-voting common shares. At December 31, 2005,105,704,812 voting shares and 22,000,000 non-votingshares were issued and outstanding, for a total of127,704,812 outstanding shares. There were 1,208shareholders of record of which 1,163 were registeredin Canada, holding 99.4% of the issued voting shares.All of the issued non-voting shares are held by OntarioTeachers’ Pension Plan Board. These non-voting sharesmay be converted into voting shares at any time.

OWNERSHIP

The Company’s major shareholders are McCainCapital Corporation holding 41,518,153 sharesrepresenting 32.5% of the total issued and outstanding shares issued and Ontario Teachers’Pension Plan Board holding 20,728,371 voting sharesand 22,000,000 non-voting shares representing 33.4%of the total issued and outstanding shares. The remainder of the issued and outstanding shares arepublicly held.

CORPORATE OFFICE

Maple Leaf Foods Inc.30 St. Clair Avenue WestSuite 1500Toronto, Ontario, Canada M4V 3A2Tel: (416) 926-2000Fax: (416) 926-2018Website: www.mapleleaf.com

ANNUAL AND GENERAL MEETING

The annual and general meeting of shareholders ofMaple Leaf Foods Inc. will be held on Wednesday, April26, 2006 at 11:00 a.m. at the Glenn Gould Studio,Canadian Broadcasting Centre, 250 Front Street West,Toronto, Canada.

DIVIDENDS

The declaration and payment of quarterly dividends aremade at the discretion of the Board of Directors.Anticipated payment dates in 2006: March 31, June 30,September 29 and December 29.

SHAREHOLDER INQUIRIES

Inquiries regarding dividends, change of address,transfer requirements or lost certificates should bedirected to the Company’s transfer agent:Computershare Investor Services Inc.Stock and Bond Transfer Department100 University Avenue, 9th FloorToronto, Ontario M5J 2Y1Tel: (514) 982-7555or 1-800-564-6253 (toll-free North America)or [email protected]

COMPANY INFORMATION

For public and investment analysis inquiries, pleasecontact our Vice-President, Public & Investor Relationsat (416) 926-2000.

For copies of annual and quarterly reports, annualinformation form and other disclosure documents,please contact our Senior Vice-President, Transactionsand Administration and Corporate Secretary at(416) 926-2000.

TRANSFER AGENT AND REGISTRAR

Computershare Investor Services Inc.100 University Avenue, 9th FloorToronto, Ontario, Canada M5J 2Y1Tel: (514) 982-7555or 1-800-564-6253 (toll-free North America)or [email protected]

AUDITORS

KPMG LLP

Toronto, Ontario

STOCK EXCHANGE LISTINGS AND STOCK

SYMBOL

The Company’s voting common shares are listedon The Toronto Stock Exchange and trade under thesymbol “MFI”.

RAPPORT ANNUEL

Si vous désirez recevoir un exemplaire de la versionfrançaise de ce rapport, veuillez écrire à l’adressesuivante : Secrétaire de la société, Les Aliments MapleLeaf Inc., 30 St. Clair Avenue West, Toronto, OntarioM4V 3A2.

C O R P O R A T E I N F O R M A T I O N

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MAPLE LEAF FOODS INC. 2005 ANNUAL REPORT


On the Cover: A historical landmark in Toronto, the

St. Lawrence Market and its many fine purveyors of

fresh meats, cheeses, produce and other food products

has served as the inspiration for food lovers for more

than 100 years. Such markets provide an ideal venue for

our passionate people who are constantly seeking new

ideas for innovative food products for our customers

and consumers.

Pictured left to right are: Jeannie Schmitz (Canada Bread

Fresh Bakery), Glen Gratton (Agribusiness Group),

Andy Persaud (Maple Leaf Consumer Foods) and

Valerie Walton (Maple Leaf Global Foods).

M A P L E L E A F F O O D S I N C .

30 St. Clair Avenue West, Suite 1500

Toronto, Ontario, Canada M4V 3A2

www.mapleleaf.com


Printed in Canada

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