LETTER TO SHAREHOLDERS :: L ETTER TO SHAREHOLDERS Dear Fellow Shareholders Year 2012 posed a tremendous challenge. On one hand, it was marked by the necessity for Ceapro to plan for the graduation from the Leduc-based incubator facility to a new facility. On the other hand, this special project needed to be conducted while keeping the business ‘‘up and running ‘‘. We are very pleased with the outcome from this project. Our team worked hard in conducting thorough feasibility studies to recommend the most suitable solution and place to manufacture our innovative products. Nine locations were considered within and outside Canada. While contract manufacturing scenarios were envisioned during this process, it became very clear that Ceapro needs its own facility given the nature of its specialized and unique proprietary technologies. We were very excited to find the best place right on ‘‘our door step’’ in Edmonton. This new site will house head office, laboratories, and manufacturing areas. It will be customized to our needs and will allow the implementation of improved processes and technologies that our research engineers have been working on for the last two years. Better product margins are expected from improved efficiencies. From a product portfolio investment perspective, and as a continuum to the product stories featured in our 2011 annual report, we continued to focus our activities on the development of new formulations and potential new indications for our value drivers, avenanthramides and beta glucan. No doubt that the successful development of technologies to produce dry formulations of our value drivers is the most important milestone so far achieved in our R&D program. These formulations should enable us to produce larger quantities of higher purity products that should allow the eventual transition to other sectors like nutraceuticals and pharmaceuticals. The next step is to assess the suitability of these formulations for such development as tablets and capsules. These products need to be strategically marketed and we are always looking at ways to market them better with enhanced representation around the globe. In line with our last year’s message, we have invested significantly in the assessment of different marketing strategies. While we will sell directly in some local markets in North America, we will concurrently pursue a global selling strategy mostly through a network of renowned distributors. For the cosmetics market, license and distribution agreements will be based on a key end customer basis and not necessarily on a ‘‘traditional’’ geographical basis. Discussions are ongoing with some major players in this industry and one such agreement has already been executed subsequent to year end. Looking at key accomplishments in 2012, we are very proud of the tremendous efforts deployed by our dedicated people in achieving the following: Completion of first phase of special project for the relocation of Ceapro’s facility (planning & process design) GLYPH<127> Successful scale-up of supercritical fluid drying technology to produce pilot scale batches of beta glucan formulations GLYPH<127> Signing of two agreements for technologies from Agriculture and Agri-Food Canada to improve the yield of Ceapro’s flagship product, avenanthramides GLYPH<127> Successful development of lupin peptide powders GLYPH<127> Completion of  in vitro  performance testing at the National Research Council Institute for Nutrisciences and Health (NRC-INH) with favourable data to support Ceapro’s product claims in cosmetics applications GLYPH<127> 2 CEAPRO Annual Report 2012