CONCEPTION AND CREDIT

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2 TABLE OF CONTENT Business profile... 1 Board of directors...2 A word from the president... 3 Report of executive director... 5 Highlights Current research projects Knowledge and discoveries to innovate...14 Impacts and benefits...16 Novalait s 20 th anniversary...19 CONCEPTION AND CREDIT Redaction: Novalait Design: Isabelle Jobin, graphiste Photos: Normand Huberdeau / NH Photographes, Revue Le producteur de lait québécois, Les Producteurs laitiers du Canada, Université Laval, Université McGill, Valacta, Yolaine Villeneuve / CILQ

3 BUSINESS PROFILE NOVALAIT 20 YEARS! MISSION SHAREHOLDING AND ORGANIZATIONAL STRUCTURE ENSURING, THROUGH ITS LEADERSHIP AND ITS ACTIONS, THE DEVELOPMENT AND THE VALORIZATION OF KNOWLEDGE AND INNOVATION IN ORDER TO PROMOTE SUSTAINABLE GROWTH OF QUEBEC'S DAIRY INDUSTRY. 50% PRODUCTION 50% PROCESSSING FIELDS OF ACTION 1 GUIDING: Establish priorities and choose the research projects ANNUAL GENERAL MEETING 2 IMPLEMENTING: Raise funds, develop partnerships and manage investments BOARD OF DIRECTORS RESEARCH COMMITTEE 3 4 COMMUNICATING: Expanding access to research results TRAINING: Professionals and researchers STEERING COMMITTEE EXECUTIVE DIRECTION SELECTION COMMITTEE Novalait involves its shareholders in all its activities. Novalait s committees are mainly composed of shareholders named by the board. START-UP COMMITTEE 1

4 ANNUAL REPORT BOARD OF DIRECTORS PRESIDENT Mr Simon Robert, Agropur coopérative THE BOARD VICE-PRESIDENT Mr Réal Gauthier, Les Producteurs de lait du Québec From left to right on the first line: Ms Catherine Lessard, Ms Carole Thibault and Ms Élise Gosselin, And on the second line: Mr Charles Langlois, Mr Michel Couture, Mr Réal Gauthier and Mr Simon Robert NOVALAIT HIGHLIGHT THE UNIQUE CONTRIBUTION OF MR GILBERT RIOUX WHO SERVED 18 YEARS ON THE BOARD. PEERLESS AMBASSADOR AND LIVING MEMORY OF NOVALAIT, MR RIOUX CHAIRED THE ORGANIZATION THREE TIMES. FOLLOWING HIS DEPARTURE DURING THE YEAR, THE BOARD WANTED TO THANK MR RIOUX FOR HIS INVOLVEMENT IN THE GROWTH AND INFLUENCE OF NOVALAIT. SECRETARY- TREASURER Mr Charles Langlois, Conseil des industriels laitiers du Québec ADMINISTRATORS Mr Michel Couture, Agropur coopérative Ms Catherine Lessard, Les Producteurs de lait du Québec Ms Carole Thibault, Conseil des industriels laitiers du Québec 2

5 A WORD FROM THE PRESIDENT NOVALAIT 20 YEARS! 20 YEARS OF INNOVATION Quebec s dairy farmers and dairy processors were visionaries and forward thinking by creating an innovative research investment model. This year, Novalait took stock of its twenty years, rich in achievements. Since 1995, $41.2 million have been invested in more than a hundred research projects selected by Novalait s shareholders. These projects have generated discoveries, several answers to practical questions, processes and numerous decision support tools. The potential return on Novalait s investments, through the use of research results on farm and in the industry, is estimated at 15 to 1. A CHANGING BUSINESS MODEL Novalait hired KPMG for a study on the evolution of its business model. The organization is effective since 87% of its share capital has been invested in research. Receiving 50% of contributions from comparable organizations, Novalait distinguished itself by its ability to generate a high leverage of funds in research. Over 20 years, for every dollar Novalait invested in research, $3.00 was invested by its partners. Over the past five years, the administrative costs of Novalait remained stable, despite an increase in the value of its research portfolio. IN A RAPIDLY CHANGING ENVIRONMENT, THERE IS NO SUSTAINABLE FUTURE WITHOUT INNOVATION AND NO INNOVATION WITHOUT RESEARCH. The impact of Novalait is also in the proximity of a network of researchers to meet scientific challenges associated with milk production and processing. For the last 20 years, Novalait has mobilized over 300 scientists on its research projects. Seven new research positions were created to meet strategic needs identified by Novalait's shareholders, including cheese ripening and typicity, milk processing eco-efficiency and milk components modulation. In a recent consultation, Novalait's shareholders pointed out that our research helped train a large number of world-class professionals, innovating in industries and dairy organizations. 3

6 ANNUAL REPORT A WORD FROM THE PRESIDENT... However, the leverage of Novalait s funds is dependent on government policies. Following the withdrawal of the ministry of agriculture in Quebec, Novalait developed new partnerships, the most recent one being signed with the Consortium de recherche et innovations en bioprocédés industriels au Québec. The investment capacity of Novalait has eroded over time due to a fixed levied amount of 1 /hl between 1995 and The recent increase to 1.27 /hl helped slow down this erosion. However, uncertainty surrounds the R & D tax credits that represent nearly 25% of Novalait s revenues. Having met all the eligibility criteria in the last 20 years, Novalait has initiated legal proceedings to challenge a new interpretation of Canada Revenue Agency adversely affecting us. Several scenarios based on Novalait s strengths are under evaluation to present Novalait's shareholders with an updated business model, both realistic and sustainable. INVESTING IN RESEARCH AND INNOVATE FOR THE LONG TERM Since 1995, Novalait's shareholders have proven the concept: invest in research feeds innovation at the farm and in the processing plant. In a rapidly changing environment, there is no sustainable future without innovation and no innovation without research. In closing, I wish to congratulate Ms. Élise Gosselin following her appointment as Executive Director of Novalait. Ms. Gosselin was able to conduct an orderly transition in a difficult environment, all this while juggling many complex situations. A special thanks to all Board members for their support and commitment to Novalait. Simon Robert, President 4

7 REPORT OF EXECUTIVE DIRECTOR NOVALAIT 20 YEARS! TRANSITION ON A SOLID BASIS The beginning of the year was marked by the leaving of Ms. Danielle Rivard. Under her leadership since 1997, Novalait has built a leading reputation in dairy research. The solid governance and the rigorous practices of Novalait facilitated the transition at the direction. THE STRENGTH OF NOVALAIT RELIES ON ITS NETWORK INVOLVING ITS SHAREHOLDERS, FINANCIAL PARTNERS, RESEARCHERS AND COLLABORATORS FOR EXTENSION. THEIR EXPERTISES AND ADVICES ARE ESSENTIAL TO FULFILL THE MANDATE OF NOVALAIT: MAKING THE BEST RESEARCH INVESTMENTS TO BENEFIT DAIRY FARMERS AND PROCESSORS. FOCUS ON COMMUNICATIONS Novalait is assessing new approaches to better communicate research results to its shareholders. To implement this new communication strategy, we welcome the arrival of Ms. Valérie Bélanger who quickly inject new dynamism to the position of transfer coordinator. This new edition of the annual report reflects the bilingual and digital shift undertaken by Novalait who also migrated to a cloud computing management. NOVALAIT INNOVATES IN ITS PARTNERSHIPS The investments in research by Novalait generate sustained interest from funding agencies such as the Fonds de recherche du Québec Nature et Technologie (FRQNT), Novalait s partner for over 15 years. Novalait is also known from other organizations such as the Consortium de recherche et innovations en bioprocédés industriels au Québec (CRIBIQ). The new partnership agreement in January 2015 with the CRIBIQ and the FRQNT demonstrates the ability of Novalait to innovate and to find new leverage of its funds. For the first time in a new funding program, the researchers must obtain, with the support of Novalait, a grant from a federal funding program equivalent to Novalait s contribution to the project. LISTENING THE SHAREHOLDERS AND THE SCIENTISTS Dairy Farmers of Canada have joined Novalait to complete the development of an awaited research chair in sustainable life of dairy cattle. The NSERC's decision on the funding of this chair is expected to start the project. Novalait remains open to initiatives from the scientific community. Op+LAIT, who is mobilizing researchers on the subject of a high quality milk, obtained funding for strategic clusters from FRQNT, with the support of Novalait. 5

8 ANNUAL REPORT REPORT OF EXECUTIVE DIRECTOR... NOVALAIT CELEBRATED ITS 20 YEARS Since 20 years the dairy farmers and processors have shared the risks, the costs and the results of 100 applied research projects meeting their innovations s priorities. Novalait honored its founders for their forward-thinking vision. Several pages of this report has been devoted to the Novalait s 20 years of achievements. OUTLOOK You have not finished to hear about Novalait in the next year with a new communication strategy and a broad consultation of the shareholders on research priorities. Novalait will also pursue the diversification of its research programs and the development of new partnerships. Novalait always obtained R & D tax credits on its investment in research, a major component of the effectiveness of its business model. Recently, the Canada Revenue Agency issued a decision against to Novalait which is continuing the steps for appeals to recover the tax credits that Novalait is entitled to claim. THE STRENGTH OF A NETWORK In closing, I wish to thank all the committees members that constitute the strength of the Novalait s expertise. They are more than fifty experts from our shareholders groups and adding to that the researchers and the collaborators for extension. Their opinions are essential to fulfill the mandate of Novalait: making the best research investments to benefit dairy farmers and processors. Élise Gosselin, Executive Director 6

9 HIGHLIGHTS NOVALAIT 20 YEARS! $1 MILLION Amount paid by Novalait and its partners for research $4 MILLIONS Total value of financing deals THE YEAR IN NUMBERS INVESTMENTS IN RESEARCH $ PARTNERS $ NOVALAIT $ $ PARTNERS $ NOVALAIT $ RAISING FUNDS FOR RESEARCH A significant leverage effect is created from investments in research for farmers and processors through funding partnerships developed by Novalait. RESEARCH EFFICIENCY Project funding is negotiated beforehand, researchers can focus on research and training of professionals. SHARE OF RESEARCH INVESTMENTS NOVALAIT AND PARTNERS $ Total value of the four master s scholarships granted by Novalait CDC program 22 Number of evaluated research proposals and scholarship applications 65 Number of researchers involved in our current projects PRIVATE PARTNERS $ PROVINCIAL GOVERNMENT $ $ NOVALAIT $ PROVINCIAL GOVERNMENT $ Novalait celebrates its 20 years in Number of trained professionals in our current projects 7

10 ANNUAL REPORT HIGHLIGHTS INFLUENCING THE DAIRY RESEARCH Novalait finances applied research projects.the organization seeks the scientific community to address the research priorities identified by its shareholders, dairy farmers and processors. Research proposals are first evaluated by a committee formed of Novalait s shareholders.the evaluation examines the extent of the issues addressed and the potential benefits on farms and in dairy processing plants. The scientific quality of the selected research projects is then evaluated by committees of scholars outside Quebec to bring together relevant expertise in evaluating projects. Sixteen projects of which two industrial research chairs were underway in The following table presents the distribution of researches from Novalait based on priorities established by its shareholders. CURRENT RESEARCH PROJECTS - DISTRIBUTION BY RESEARCH PRIORITY PRODUCTION Projects number PROCESSSING Projects number 1 Strategies to optimize the quality of dairy cattle feed and feed efficiency 4 4 Controlling and enhancing the physicochemical properties of milk and dairy matrix 4 2 Eco-efficiency in dairy production 0 5 Developping the organoleptic qualilties of milk products 3 3 Health and longevity of dairy herd 2 6 Eco-efficiency of milk processing 3 Production sub-total 6 Processsing sub-total 10 8

11 NOVALAIT 20 YEARS! MOBILIZING RESEARCHERS AND TRAINING HIGHLY QUALIFIED PROFESSSIONALS The interdisciplinary collaborations were presents in the research teams. The current projects have mobilized more than sixty researchers to meet the scientific challenges of production and processing of milk. The disciplines of nutrition, health and animal welfare, herd management, agricultural economics, agri-environment, plant biology, process engineering, food science and technology, microbiology and genomics were especially engaged in the Novalait s researches. The training of young professionals to take over is always a priority for Novalait. A significant proportion of funds invested in projects are dedicated to it. In addition, Novalait manages in Quebec the scholarship program of the Canadian Dairy Commission (CDC). For the last competition, four new master's scholarships were awarded representing a $ commitment. A total of 29 master's students and 21 Ph.D. students are in training with funding from Novalait and scholarships. SCHOLARSHIPS PROGRAM FROM CANADIAN DAIRY COMMISSION IN COLLABORATION WITH NOVALAIT 29 MASTER'S STUDENTS AND 21 PH.D. STUDENTS ARE IN TRAINING WITH FUNDING FROM NOVALAIT AND SCHOLARSHIPS. MASTER S SCHOLARSHIPS IN DAIRY PRODUCTION Ms Léonie Morin-Dubé, Université Laval Project: Epigenetic analyses of bovine embryos from peri-pubertal donor Ms Rachel Tremblay, Université Laval Project: Metabolic stress impact on epigenetic programming of bovine embryos MASTER S SCHOLARSHIPS IN MILK PROCESSING Ms Myriam Laberge, Université Laval Project: Selection of cultures to produce fermented milk with high antioxidant potential Ms Alexia Lacelle-Côté, Université Laval Project: Systems biology applied to Cheddar 9

12 ANNUAL REPORT TH ANNIVERSARY A celebration marking the 20 th anniversary of Novalait held on last April 29. The event brought together more than one hundred shareholders, researchers and partners. All the details are presented in the pages of this special edition of the annual report devoted to the 20 th anniversary of Novalait. HIGHLIGHTS PRIORITY TO COMMUNICATION Novalait initiated an update of its communication strategy to its shareholders. In her new position since May 2015, Ms. Valérie Bélanger has already implemented new communication channels, including LinkedIn Novalait Group. This initiative aims to facilitate access of shareholders to Novalait network of researchers and professionals in training in the research projects. The Novalait Group showcases the expertise of researchers and the skills and professional interests of students. The first Novalait Clips video were produced. The Novalait clips present the projects results and achievements of Novalait. Valérie Bélanger, transfer coordinator. 10

13 CURRENT RESEARCH PROJECTS NOVALAIT 20 YEARS! 2 14 CHAIRS RESEARCH PROJECTS SUPPORTED BY NOVALAIT WERE ONGOING WORK IN Two chairs and 14 research projects supported by Novalait were ongoing work in These projects were jointly funded through partnerships developed by Novalait with sectoral ministries, funding and private organizations in Quebec and Canada. All projects supported by Novalait must provide answers to the research priorities established by its shareholders. Some programs fund projects in teams for a period of two to three years. Industrial research chairs are designed to create new jobs of researchers and to intensify research in strategic areas for the Novalait s shareholders. COLLABORATION AGREEMENT FOR INNOVATION IN DAIRY PRODUCTION AND DAIRY PROCESSING NOVALAIT AAC FQRNT MAPAQ ( ) Profitability, longevity and culling rates in dairy cows Roger Cue, McGill University 2014 Asheber Sewalem, AAC-CRAG Vitamins B: nutrionnal management effects on intake Rachel Gervais, Unviersité Laval 2014 Chirstiane Girard, AAC-CRDBLP Bioavoilability of phenolics compounds and calcium Laurent Bazinet, Université Laval 2015 in milk products and physiological responses Michel Britten, AAC-CRDA 11

14 ANNUAL REPORT CURRENT RESEARCH PROJECTS PARTNERSHIP FOR INNOVATION IN DAIRY PRODUCTION AND DAIRY PROCESSING NOVALAIT FRQNT MAPAQ ( ) Influence of the mineral profile of the ration Edith Charbonneau, Université Laval 2015 on the milk fat production Adjusted milking in transition period to better Simon Dufour, Université de Montréal 2017 control the negative energy balance and its consequences Improvement of forage grasses in a context Édith Charbonneau, Université Laval 2017 of climate change Characteristics of regional milks and native Steve Labrie, Université Laval 2015 fungal microflora influencing the quality of fine cheeses Impact of mechanical treatment on the composition of Yves Pouliot, Université Laval 2015 the soluble phase and coagulation properties of milk Green biotechnology to value cheese residues: Michèle Heitz, Université de Sherbrooke 2016 The Biobac process 12

15 2013- Impacts of milk native flora from cows feeded Denis Roy, Université Laval 2017 with sillage on organoleptic qualities of processing milk products Impact of dynamics of the process and composition Sylvie Turgeon, Université Laval 2016 of the fermented milk products on their stability and rheological properties NOVALAIT 20 YEARS! Impact of manufacturing processes of Gisèle Lapointe, Université Laval 2017 Greek type yogurts rich in protein on the quality, the microbiological safety and the by-product eco-efficiency Systems biology applied to Cheddar Sylvain Moineau, Université Laval 2017 WHAT IS AN INDUSTRIAL RESEARCH CHAIR? Research chairs set up by Novalait stem from a desire to create research positions in strategic research areas for farmers and processors. As part of a special program, the Natural Sciences and Engineering Research Council (NSERC) pay a contribution equal to Novalait and other private partners contributions over five years to fund the salary of a new researcher and conduct major researches. Chairs also provide an exceptional framework to train highly qualified professionals Improving the eco-efficiency of milk processing Yves Pouliot, Université Laval 2017 through the optimal use of milk components: the case of Greek yogurt STRUCTURING INITIATIVES IN RESEARCH Industrial research chair NSERC-Novalait-DFC-PLQ- Yvan Chouinard, Université Laval 2015 MAPAQ-Valacta on nutritional control of the production of milk components in cows Industrial research chair NSERC-Novalait in efficiency Yves Pouliot, Université Laval 2018 of milk processing 13

16 ANNUAL REPORT KNOWLEDGE AND DISCOVERIES TO INNOVATE DURING THE YEAR, A RESEARCH PROJECT WAS COMPLETED AND SEVERAL ADVANCEMENTS HAVE BEEN MADE IN BOTH INDUSTRIAL RESEARCH CHAIRS IN ACTIVITY. THIS SECTION SUMMARIZES THE FINDINGS AND THE NEW KNOWLEDGE GENERATED FROM THESE PROJECTS AND THE POTENTIAL BENEFITS FOR DAIRY FARMS AND DAIRY PLANTS INDUSTRIAL RESEARCH CHAIR NSERC-NOVALAIT- DFC- PLQ-MAPAQ-VALACTA ON NUTRITIONAL CONTROL OF THE PRODUCTION OF MILK COMPONENTS IN COWS Researcher: Mr Yvan Chouinard, Université Laval This chair aims to improve the nutritional management of dairy herd to better control the production of milk components. During the year, the researches from the chair have brought many results and some of which are presented here. Revealing results A research revealed that for the majority (89%) of lactating cows in Quebec, dietary cation-anion difference (DCAD) was less than the recommended value. This finding is the result of an analysis of data collected by Valacta from 2500 dairy farms. This analysis also revealed an improvement in the rate of milk fat with an increase of the DCAD. These results find a use in the preparation of milk fat rate prediction equations from the diet components. This work confirms that additional attention should therefore be given to DCAD when formulating rations, not only near calving, but also for lactating cows. Also looking for rapid diagnostic tools to prevent acidosis in cows, the research team demonstrated that the profile of milk odd and branched chain fatty acids was a good indicator of rumen health. The work carried out has shown that these fatty acids were present in the body reserves of the cow and they were mobilized in varying ways during lactation. Another experiment found that some dietary lipid supplements for the cow could also contain odd and branched chain fatty acids. All these elements must be considered when developing models to predict rumen fermentation patterns from milk fatty acids. Promising benefits Ultimately, the work of the chair in milk components will have a direct impact on the feed management of dairy herds by helping to develop new tools to better predict the nutritional value of rations and their effects on the milk components. Integrated into ration formulation software, the DCAD will specify the contribution of the mineral profile of the ration to the milk fat content. Moreover, to facilitate the development of diagnostic tools on ruminal health usable in commercial farms, the research team is currently involved with Valacta in the development of a rapid and inexpensive method for establishing the milk fatty acids profile. The contribution of knowledge on nutritional factors affecting milk composition continues through the creation, within the framework of this chair, of two new researcher positions. Ms Rachel Gervais and Ms Édith Charbonneau are conducting researches for the benefits of dairy farmers in the Department of Animal Sciences at Laval University. O H H H H H H H H H H H H H H H H H O C C C C C C C C C C C C C C C C C H H H H H H H H H H H H H H H H H 14

17 Image of the software prototype PROFITABILITY, LONGEVITY AND CULLING RATES IN DAIRY COWS Researchers: Mr Roger Cue, McGill University and Mr Asheber Sewalem, Agriculture and AgriFood Canada The lifetime profitability of cows is an important indicator for the management of dairy herds. The calculation of this indicator will gain in accuracy with the new tool resulting from this research project. It is the first project to combine data on production and on health of 1,000 Quebec dairy herds over twelve years. The analysis of the data allowed to make comparisons between the herds and to establish reference values. A prototype software was designed to visualize the profitability of each cow and its evolution in the herd. It lets you view and compare the factors affecting the lifetime profitability. The software also provides the ability to compare his own herd with others with similar characteristics or cows in the herd. Promising results demonstrate that the benefit of individual cows and Dr Roger Cue, researcher and Mr Hector Delgado, Ph.D. Candidate at McGill University. the herd is influenced by milk production, feed costs, the number of breedings per conception, the culling rate and the number of animal health events (acidosis, mastitis). By evaluating more precisely the impact of health and reproductive events on the profitability of cows, this calculator is intended to support dairy farmers in decision making regarding health and reform in particular. The approach combining the analysis of milk controlling data and health data is unprecedented and may shed new light for herd management. In a next stage of development, the software should be tested on farms with dairy farmers. NOVALAIT 20 YEARS! INDUSTRIAL RESEARCH CHAIR NSERC-NOVALAIT IN EFFICIENCY OF MILK PROCESSING Researcher: Mr Yves Pouliot, Université Laval This chair aims to identify technological approaches to optimize the use of natural milk components, while minimizing the environmental impact of milk processing. Based on the expertise of Dr Pouliot, the chair primarily addresses the membrane separations and aims to improve the efficiency and process performances of them. Here are some achievements made so far in the chair. Equipped with a filtration model system for the study of membrane fouling, the research team preliminarily showed that the pasteurization, the filtration temperature and the composition of dairy fluids may change the fouling pattern of the ultrafiltration membranes and the formation of biofilms. A complementary project demonstrates that the rate of bacteria sticking to the membranes did not appear to vary with the filtration temperature and therefore, equivalent filtration yields may be obtained at low temperatures without the need for pasteurization. Cold filtration of whey may therefore be a promising avenue for slowing the formation of long-term biofilms. Research is continuing in particular with the high-speed DNA sequencing to profile bacteria that stick to the membranes. A pilot test bench was used to simulate the actual conditions in the processing plants. The comparison of spiral and tubular microfiltration membranes with porosity gradient to separate the casein milk show interesting preliminary results. Lower total pressures than those used in the literature have still resulted in a satisfactory performance of the porosity gradient membranes. Energy efficiency is an important asset in the environmental impact of the dairy plants and the project develops models and tools to predict the eco-efficiency of certain milk processing methods. The various tested processes aim to increase energy efficiency in the dairy plants and reduce costs, including through less frequent replacement of membranes and reducing discards. The results of the chair will be presented continuously in the events of the dairy sector and via the website of Novalait. For more information on the chair and the objectives, you may watch the short video clip on the Novalait YouTube channel. Mr Julien Chamberland, Ph.D. Candidate at Université Laval. 15

18 ANNUAL REPORT IMPACTS AND BENEFITS THE RETURN ON NOVALAIT S INVESTMENTS IN RESEARCH TAKES THREE FORMS: 1 DISCOVERIES AND NEW KNOWLEDGE FOR INNOVATION AT THE FARM AND THE PLANT DISCOVERIES AND NEW KNOWLEDGE FOR INNOVATION AT THE FARM AND THE PLANT; HIGHLY QUALIFIED PROFESSIONALS TO MEET THE CHALLENGES OF PRODUCING AND PROCESSING MILK; A NETWORK OF RESEARCHERS TO MEET THE SCIENTIFIC CHALLENGES OF THE DAIRY SECTOR. The following testimonies clearly illustrate these benefits. It is when integrated in farm practices or plant processes that knowledge from Novalait s researches make sense. L ÉTABLE, SOURCE DE CONFORT! A FORMATION THAT INTEGRATES THE RESULTS FROM NOVALAIT S RESEARCH In 2015, Valacta established a formation entitled L étable source de confort! This training is based on the knowledge developed from the project named : Improved cow comfort in tie stall. More than 1500 farmers and nearly a hundred of stakeholders attended the training. They all emerged convinced; small adjustments to the length of the chains and at the height of the tie bars can make a big difference on cow comfort and these adaptations are profitable. A practical guide produced by Valacta and given to participants is available here complete the information. GENOME CANADA SUPPORTS THE APPLICATION OF KNOWLEDGE IN CHEESE GENOMIC There are several programs in support of processors who want to innovate from the results of pre-commercial researches of Novalait. Recently, Genome Canada has supported a major project developed by Agropur cooperative in collaboration with the researcher Steve Labrie at Laval University. This project on genomics in cheese making values the knowledge from the chair on technology and cheese technology and typicity supported by Novalait. Named Metagenomics of washed rind cheeses, this project aims to increase the consistency and quality of production, and identify pathogens that are found in cheese and that reduce their lifespan. A short video was produced to further explain the project. The position of Dr Steve Labrie was created as part of a chair supported by Novalait to meet the need for expertise in the yeasts and molds in cheese production. The fact that we have access to recent studies with our Quebec herds greatly facilitates the adhesion of new practices by the dairy farmers. The presentation of tie-stall studies, previously rare, were a highlight of the training and brang credibility to the proposed improvements. Steve Adam, agr., Expert in comfort, behavior and well-being, Valacta The work of the industrial chair led to good progress in genomics and in understanding the cheese microbiota. The collaborative project supported by Genome Canada is a good example of using this knowledge by the shareholders of Novalait. Steve Labrie, professeur titulaire, Université Laval 16

19 2 HIGHLY QUALIFIED PROFESSIONALS TO MEET THE CHALLENGES OF PRODUCING AND PROCESSING MILK Innovation is facilitated and stimulated by hiring new skills. Through Novalait s investments in research, dairy farmers and dairy processors have access to world-class professionals. NOVALAIT 20 YEARS! My post-doc at Valacta allows me to open my horizons to new research topics. I put into practice the concepts that until now had been presented as theoretically in my studies. It's a great way to consolidate and enrich my knowledge. Mélissa Duplessis, agr., Ph.D., post-doc, Valacta During my master in the laboratory of Dr Moineau, I not only developed my autonomy and my critical mind, but I also had the chance to collaborate with multiple people and participate in the advancement of scientific knowledge of food sector whose repercussions continue today. Josiane Garneau, Microbiologist, M.Sc., MBA, MAPAQ CONTINUING THE RESEARCH IN INDUSTRY: A GREAT OPPORTUNITY TO PUT INTO PRACTICE THE ACHIEVEMENTS FROM THE PH.D. Ms Mélissa Duplessis earned her Ph.D. in 2014 in the context of a research supported by Novalait. Having solved the riddle of the role of folic acid and vitamin B 12 in the energy balance of the dairy cow, she had the bite for research. Today, she puts into practice at Valacta her knowledge and skills through a NSERC industrial postdoctoral fellowship. Ms Duplessis continues at Valacta the animal phases of research on vitamin B 12. She also taught a milk production course at McGill University. Thus, communicating her passion for research and teaching, several new projects and innovations will emerge, an asset for the dairy production in Quebec. MICROBIOLOGY STUDIES NOW IN THE MAPAQ Scholarship holder from the Canadian Dairy Commission Program in collaboration with Novalait, Ms Josiane Garneau participated, as part of her Master, to the discoveries of anti-crispr phage system in the lactic bacteria Streptococcus thermophilus, one of the most used in cheese production. The findings of this important research team led to several major publications, including an article in the renowned journal Nature in Ms Garneau is now advisor in food safety and risk analysis for the dairy sector in the direction of the food inspection in MAPAQ. She supports the inspector staff in risk analyzes and contributes to relevant guidelines and projects to the dairy sector. 17

20 ANNUAL REPORT IMPACTS AND BENEFITS... 3 A NETWORK OF RESEARCHERS TO MEET THE SCIENTIFIC CHALLENGES OF THE DAIRY SECTOR The proximity of world-class researchers, knowing the dairy companies and organizations and familiar with the local issues of milk production and processing, is an important factor for answering the scientific and technological challenges of milk production and processing. By getting involved in industrial research chairs, Novalait aims to create research positions in strategic areas for its shareholders. A NEW RESEARCHER IN MILK PRODUCTION AND AN EXPERTISE IN NUTRITIONAL MANAGEMENT The position of Ms Rachel Gervais at Laval University was established under the Industrial research chair on the nutritional control of the production of milk components in cows. Her research interests are various; effects of nutrition on milk components, vitamin B intake, methane emissions from cattle and fatty acid synthesis mechanisms in dairy cows. Her objective is to continue the development and the application of new concepts in feed management of dairy herd My participation in the activities of the chair allowed me to acquire new knowledge in the field of the analysis and the modulation of the milk fat composition. As a professor, I have the duty and the privilege to deepen this knowledge and to transfer it to the dairy sector in particular through the training of students at all levels who will work within this dynamic sector. Rachel Gervais, associate professor, Université Laval 18

21 NOVALAIT CELEBRATES ITS 20 TH ANNIVERSARY NOVALAIT 20 YEARS! RESEARCH FOR INNOVATION Novalait is a key partner of the dairy research. All our projects meet the needs identified by our shareholders and are selected according to the potential benefits on the farm and in the plants. Our applied research provides the information needed to improve production practices and milk processing methods. For example, Novalait did not discover the short dry period but provided answers on the impact on commercial farms that a 35 days dry period management can bring on the next lactation, the udder health, the reproduction and the economic benefits in a supply management environment. In another pilot farm project, a new selective dry cow treatment protocol has reduced by 25% the use of antibiotics without increasing the incidence of mastitis. The evaluation of new models continues with a project on the adjustment of the milking during the transition period to better control the negative energy balance. Moreover, recent Valacta formations on the management of forage and cow comfort provided access to several other results of our researches. On the side of the dairy processing, the success of the first project supported by Novalait on the factors responsible for the quality of the Mozzarella cheese paved the way for many other projects generating a better knowledge of dairy matrices and quality control tools. The discoveries and the highly trained professionals in large extent projects like the industrial research chairs on whey proteins, on cheese typicity and on eco-efficiency benefit the large as the small enterprises of milk processing. These examples of partnership projects, grounded to the reality of dairy farms and dairy plants, are the signature of Novalait. A SMALL ORGANIZATION WITH A LARGE IMPACT In 20 years, Novalait invested in 100 research projects for a total worth of $41.2 million. For every dollar invested in research, Novalait has matched three dollars of private and government funding through partnerships. The Novalait research portfolio is diversified and account both targeted projects on pilot farms and provincial and national level initiatives. One of the biggest success of Novalait is, without any doubt, the pilot farms network who enables the realization of nine projects on commercial dairy farms directly. $12.2M SHARE CAPITAL $41.2M TOTAL RESEARCH VALUE $600M POTENTIAL BENEFITS In 1995, dairy farmers and dairy processors have begun to invest in research up to 1 /hl. In 2012, this contribution was indexed and is now 1.27 /hl. The annual contributions of farmers and processors have been converted into share capital of Novalait which amounts to $12.2 million today. Thanks to developed funding partnerships, the Novalait s shareholders have a research portfolio value of $41.2 million, or almost four times the value of their investment. The potential benefits from the implementation of research results on farms and in plants are estimated at $600 million, or 15 times the total value of research. MR GILBERT RIOUX, DAIRY FARMER AND ADMINISTRATOR OF NOVALAIT FROM 1997 TO

22 ANNUAL REPORT NOVALAIT CELEBRATES ITS 20 TH ANNIVERSARY... The pre-commercial research is the research that industry cannot afford. MR MICHEL DORÉ, DIRECTOR OF TECHNICAL SERVICES AT PARMALAT THE DNA OF NOVALAIT: GATHER THE DAIRY FARMERS AND THE DAIRY PROCESSORS In 1995, it took a good dose of boldness and a strong vision from the founders of Novalait (photo 1) to bring together all dairy farmers and dairy processors of Quebec within an organization devoted to research. Novalait was created in a context of declining market share. There was an urgent need to stimulate innovation in the farm management, in the milk processing and in the development of new products. In a rapidly changing environment that challenges farms and industries, the Novalait s researches are more than ever a competitive advantage. Novalait includes among its three groups of shareholders; Les Producteurs de lait du Québec, Agropur cooperative, and Le Conseil des industriels laitiers du Québec (CILQ). The business model of Novalait, bringing together farmers and processors in equal parts, is the key to our success today. Research and development activities are becoming more and more expensive and companies are turning to open innovation to generate new ideas, solve problems and improve practices. Within Novalait, the risks, the costs and the results of research are shared. Mr Michel Doré, director of technical services at Parmalat, summarized the positioning of Novalait: The pre-commercial research is the research that industry cannot afford. The founders of Novalait - From left to right : Mr Gaston Lajoie and Mr Dimitri Fraeys de Veubeke, representing the Groupe Lactel since who is no longer in activity. Follow; Mr Claude Lambert and Mr Donat Roy for the CILQ; Mr Alain Bourbeau and Mr Jean Nobert for the Fédération des producteurs de lait du Québec, now Les Producteurs de lait du Québec. Finally, Mr Jacques Cartier and Mr Robert Poirier, representing Agropur coopérative. A FESTIVE MEETING TO CELEBRATE 20 YEARS OF INNOVATION To formally celebrate its 20 th anniversary, Novalait brought together, on April 29 th 2015, more than one hundred shareholders, researchers and partners for project funding and transfer. In an original roundtable formula, three representatives of Novalait s shareholders talked about the realizations and successes through the 20 years of the organization Creation of Novalait Research network on lactic bacteria Creation of the position of transfer coordinator Pilot farms network NOVALAIT IN 20 YEARS! First project: Quality of mozzarella 1.0 cent /hl for R&D Industrial research chair on whey proteins First Research partnership Novalait AAFC - FRQNT- MAPAQ 20

23 From left to right: Mr Charles Langlois (CILQ), Mr Michel Pouliot (Agropur coopérative), Mr Gilbert Rioux (PLQ) and Ms Élise Gosselin (Novalait). We receive an answer from world-class researchers within few hours after a call. MR MICHEL POULIOT, VICE-PRESIDENT R&D, AGROPUR COOPÉRATIVE According to Mr Alain Bourbeau, founding member and director at Les Producteurs de lait du Québec the success of the partnership between farmers and processors from the creation of Novalait took root in the many working committees of the dairy sector. The ability to consult the different groups that make up the shareholding of Novalait, notably to establish research priorities, is a force that was also highlighted. These research priorities are well grounded to meet the real needs. In an environment where knowledge is an issue of competitiveness, Mr Claude Lambert, founding member and former director of CILQ, mentioned that the benefits of sharing costs and risks were key elements that have rallied the industries to jointly invest in research. Among the impacts of Novalait, the participants pointed out the proximity of world-class researchers with whom trusted connections were built. We receive an answer from world-class researchers within few hours after a call, explains Mr Michel Pouliot, R&D Vice President, Agropur cooperative. This close relationship is another guarantee of the success of Novalait. The Industrial research chairs initiated by Novalait have also helped to create seven new researcher positions in strategic areas. All our projects trained professionals, they are more than 350 to have met the scientific challenges of the dairy sector. Several speakers pointed out the value of this highly qualified staff for their organization. Mr Ould Abdel Ali Baba, CEO of the Centre d expertise fromagère du Québec, mentioned in his testimony for the 20th anniversary: Novalait is for us, the small cheesemaker, a key stepping stone of the scientific knowledge in Quebec and it is up to us to seize the opportunities and to integrate the scientific culture and innovation in our cheese. As for Mr Gilbert Rioux, dairy farmer and Novalait administrator from 1997 to 2015, one of the greatest achievements of Novalait is undoubtedly the pilot farms network that enabled the realization of nine research projects on commercial dairy farms. INNOVATE FOR THE LONG TERM Building on its achievements, Novalait moves confidently into the challenges and opportunities of the next 20 years. In the short term, Novalait is preparing a new strategy for communication with its shareholders and revise its transfer model. Novalait also continue the development of partnerships to fund research in a broader horizon, to the best benefit of its shareholders. Knowledge and innovation are an engine of the economy and is a competitive advantage for industry. The strength of the links developed between its shareholders and the impacts of 20 years of action from Novalait will be valuable to a sustainable future. NOVALAIT 20 YEARS! Already 52 research projects Scholarship program with Canadian Dairy Commission Premium Milk Innovation Industrial research chair in efficiency of milk processing 20 years later... more than 100 projects: Canadian bovine mastitis and Milk quality research network; Industrial research chair in cheese technology and typicity Industrial research chair on milk components Agropur cooperative is celebrating its 75 years! CILQ is celebrating its 50 years! 1.27 cent/hl for R&D The FPLQ becomes Les Producteurs de lait du Québec 4 industrial research chairs 2 strategic networks 9 pilot farms projects 13 Forums technologique 350 trained professionnals. On the way for the next 20 years! 21

24 INVESTING IN RESEARCH AND INNOVATE FOR THE LONG TERM 2750, rue Einstein, bureau 220, Québec (Québec) G1P 4R1