Annual Report 2009 providing great value every day on every dollar DOLLARAMA Profi le

Dollarama is Canada’s largest operator of dollar stores with more than 600 locations across the coun- try. The Company was founded when CEO Larry Rossy, a third generation retailer, transitioned a 44 store general merchandise retail chain launched by his grandfather in 1910 to a single price point “dollar store” concept. Today, our shelves are stocked with more than 4,000 quality everyday products, ranging from hammers to gift bags to candy, all for $2 or less. Our mission is simple: to provide value for the customer and to exceed their expectations of the quality and variety of products they can purchase for $1 to $2.

1 Financial and Operating Highlights 2 DOLLARAMA at a Glance 4 Store Listings 5 Report to Shareholders 8 Management’s Discussion & Analysis 39 Auditor’s Report 40 Consolidated Financial Statements 44 Notes to Consolidated Financial Statements 66 Shareholder Information Financial Highlights

Solid Performance in Fiscal Year 2010: Despite the challenging economy, we posted another year of record operating and fi nancial performance in fi scal 2010. Sales rose 15.1% to $1.3 billion, generating net income of $72.9 million or $1.37 per diluted common share.

Fiscal Year Ended (Millions of Dollars) January 31, 2010 February 1, 2009 Sales $ 1,253.7 $ 1,089.0 Gross margin (%) 35.3 33.5 Normalized EBITDA(1) 191.9 153.3 Net earnings 72.9 (15.5) Earnings per share ($ per diluted share) 1.37 (0.36) Net debt(1)(2) 424.3 738.8 Net debt to Normalized EBITDA(1)(3) 2.2 4.8

Operating Highlights

1 3 5 7.9% same store sales 2.3% increase in number of Successfully launched new prod- growth transactions uct price points above $1.00 DOLLARAMA INC.

2 4 6 39 net new stores opened in 5.4% increase in average 24% of sales from new

ANNUAL REPORT 2009 ANNUAL REPORT key markets across Canada transaction size merchandise above $1.00

(1) Please refer to the note on non-GAAP measures included in Management’s Discussion & Analysis. (2) Total debt (as defi ned in Management’s Discussion & Analysis) minus cash and cash equivalents. (3) Net debt at end of fi scal year divided by fi scal year Normalized EBITDA.

1 DOLLARAMA at a Glance

Broad Mix of Everyday Products $1,253.7 million fi scal 2010 revenue

51% General merchandise

Proven Growth Strategy 14% • Expanding store base Seasonal products • Growing same store sales • Enhancing profi tability • Leveraging scale of fi xed 35% Consumable products infrastructure

Largest Operator of Dollar Stores in Canada 603 stores, present in all provinces ANNUAL REPORT 2009

DOLLARAMA INC. British Alberta Saskatchewan Manitoba Ontario Quebec Atlantic Total Columbia Provinces 2 19 40 14 22 237 209 62 603 Revenues ($M) Normalized EBITDA(1) ($M) 16% average annual growth 19% average annual growth 1,254 192

1,089 153 972 146 146 888 123 743 104 634 585 508 82 69 373 47

2002 2003 2004 2005 2006 2007 2008 2009 2010 2002 2003 2004 2005 2006 2007 2008 2009 2010

Thousands of People per Thousands of People per Dollar Store DOLLARAMA Store by Region Canada offers signifi cant growth opportunities Opportunity to increase store density in all regions

32 DOLLARAMA INC. 15

ANNUAL REPORT 2009 ANNUAL REPORT

Western Ontario Atlantic Quebec provinces provinces Canada U.S. 107 55 38 37 3 (1) Please refer to the note on non-GAAP measures included in Management’s Discussion & Analysis. 603 DOLLARAMA Locations

19 40 14 22 237 209 62 (Atlantic)

British Columbia Saskatchewan Ontario Québec New Brunswick Aldergrove Estevan Ajax Meaford Acton Vale Paspébiac Atholville Burnaby Moose Jaw Amherstburg Midland Alma (2) Pincourt Bathurst (2) Campbell River North Battleford Aurora (2) Milton Amos Plessisville Bouctouche Cranbrook Prince Albert Barrie (4) Mississauga (13) Amqui Port-Cartier Campbellton Delta Regina (4) Belleville (2) New Tecumseth Baie-Comeau Québec (14) Caraquet Kamloops Saskatoon (4) Bolton Newmarket (2) Baie-St-Paul Rawdon Edmundston Maple Ridge Swift Current Bracebridge Niagara Falls (3) Beloeil Repentigny (2) Fredericton (4) Nanaimo Weyburn Bradford West Gwil- North Bay (3) Berthierville Rigaud Grand Falls New Westminster limbury North Grenville Blainville Rimouski (2) Miramichi (2) Powell River Brampton (5) Oakville (2) Boisbriand (2) Rivière-du-Loup Moncton (2) Prince George (2) Manitoba Brantford (2) Orangeville Boucherville (2) Roberval Oromocto Quesnel Brandon Brockville Orillia (2) Brossard (2) Rouyn-Noranda Quispamsis Surrey (3) Portage la Prairie Burlington (5) Oshawa (5) Cabano Saguenay (6) Riverview Vancouver Selkirk Cambridge (2) Ottawa (12) Candiac Salaberry-de- Shediac Vernon Steinbach Carleton Place Owen Sound (2) Chandler Valleyfi eld St. John (3) Williams Lake Winkler Chatham-Kent (4) Parry Sound Châteauguay Sept-Iles St. Stephen Winnipeg (17) Clarington Pembroke (2) Côte-St-Luc (2) Shawinigan (2) Sussex Alberta Cobourg Peterborough (2) Cowansville Sherbrooke (4) Tracadie-Sheila Airdrie Collingwood Pickering (2) Delson Sorel-Tracy Woodstock Calgary (6) Cornwall (2) Port Colborne Dolbeau-Mistassini St-Basile-le-Grand Camrose Elliot Lake Quinte West Dollard-des- St-Bruno- Prince Edward Embrun Renfrew Ormeaux (3) de-Montarville Drayton Valley Island Drumheller Espanola Richmond Hill (2) Donnacona St-Constant Fort Erie Sarnia (3) Drummondville Ste-Adèle Charlottetown (2) Edmonton (13) Summerside Edson Georgina Saugeen Shores Farnham Ste-Agathe-des- Hinton Goderich Sault Ste. Marie (4) Gaspé Monts Innisfail Gravenhurst Simcoe Gatineau (5) Ste-Anne-de-Beaupré Nova Scotia Lacombe Greater Napanee Smiths Falls Granby (2) Ste-Anne-des-Monts Amherst Leduc Greater Sudbury (5) St. Catharines (3) Joliette (2) Ste-Anne-des-Plaines Antigonish Lethbridge (3) Grimsby St. Thomas Kirkland Ste-Julie Bridgewater Medicine Hat Guelph (2) Stratford La Malbaie Ste-Marie Digby Olds Haldimand County Strathroy-Caradoc La Pocatière Ste-Marthe-sur-le-Lac Glace Bay Red Deer Halton Hills Temiskaming Shores La Sarre St-Eustache (2) Greenwood Sherwood Park Hamilton (9) Thunder Bay (2) La Tuque St-Félicien Halifax (9) Spruce Grove Hanover Tillsonburg Lachute St-Georges (2) New Glasgow St. Albert Hawkesbury (2) Timmins (2) Lac-Mégantic St-Hyacinthe New Minas Stettler Huntsville Toronto (34) Laval (12) St-Jean-sur- North Sydney Strathmore Ingersoll Uxbridge Lévis (4) Richelieu (3) Port Hawkesbury Wetaskiwin Kawartha Lakes Vaughan (7) Longueuil (6) St-Jérôme (3) Sydney (2) Kingston (4) Wasaga Beach Louiseville St-Raymond Truro Kirkland Lake Waterloo Magog Terrebonne (4) Windsor

ANNUAL REPORT 2009 Kitchener (4) Welland (2) Maniwaki Thetford Mines Yarmouth Lakeshore Whitby (2) Mascouche (2) Thurso Leamington Whitchurch-Stouffville Matane Trois-Pistoles Newfoundland London (9) Windsor (9) Mont-Joli Trois-Rivières (6) and Labrador Markham (3) Woodstock Mont-Laurier Val-d’Or (2) Bay Roberts Montmagny Varennes Clarenville Montréal (41) Vaudreuil-Dorion (2) Conception Bay Mont-Tremblant Victoriaville (2) South DOLLARAMA INC. New Richmond Waterloo Corner Brook Gander 4 Grand Falls-Windsor St. John’s (2) Report to Shareholders

We are pleased to present our fi rst Annual Report as a publicly-traded company. While we may be new to the capital markets, Dollarama is a well respected and highly successful name in the Canadian retail business with an eighteen-year track record of signifi cant growth and increasing profi tability. Today, Dollarama is Canada’s largest operator of dollar stores with over 600 locations across the country, and the only truly national chain catering to the needs of consumers in all ten provinces. With more than four times the number of locations than our nearest competitor, our industry-leading presence in key urban, suburban and rural markets has resulted in strong brand awareness and an enviable reputation for value, selection and convenience.

Solid Performance 19% over this same period. With our strong operating cash fl ow and Despite the challenging economy, we generated another year proceeds from our initial public offering, we signifi cantly reduced our of record operating and fi nancial performance in fi scal 2010. Sales debt balance in fi scal 2010 and we ended the year with a net debt to rose 15.1% to $1.3 billion, and Normalized EBIT(1) (prior to non- Normalized EBITDA(1) ratio of 2.2 times. recurring and IPO-related charges) increased 27.0% to $167 million from $131.4 million in the prior year. Same store sales were up Compelling Competitive Strengths an impressive 7.9%, while we added 39 net new locations to our Our success over the last two decades is primarily the result of growing store count during the year. Profi t margins increased due to a carefully developed and highly differentiated business model that the active management of our merchandise offering and our team’s we believe sets us apart from our competitors. continued success in reducing operating costs. First and foremost, we focus relentlessly on our customers, pro-

A key driver of our growth was the introduction of new products viding great value at low prices and a compelling merchandise offer- DOLLARAMA INC. during the year at price points over one dollar. In February 2009, we ing. A study performed by independent consultants(2) showed that, expanded our assortment to include items offered at select price for every dollar spent at our stores, our customers believe they save points between $1.00 and $2.00 so we could continue to provide equal or greater value. This strong customer value perception is the the quality, freshness and novelty that our customers have come to main reason consumers visit Dollarama time and time again, and it’s

expect from Dollarama. After a highly successful launch, sales of at the heart of everything we do. 2009 ANNUAL REPORT merchandise priced above $1.00 accounted for approximately 30% Our attractive merchandise offering is another key advantage. of our total revenue in the fourth quarter of fi scal 2010, as customers Our stores carry a broad assortment of more than 3,500 active responded very favourably to the exciting new values that now aug- year-round Stock Keeping Units (SKUs), as well as over 600 sea- ment our traditional assortment priced at $1.00. sonal SKUs at any one time for holidays such as Halloween and Throughout its history, Dollarama has consistently demonstrated Christmas. We supplement our direct-sourced private label mer- strong growth in revenues and Normalized EBITDA(1), and our solid chandise with select national brands and focus on offering the performance in fi scal 2010 was no exception. Since fi scal 2002, best value and selection to meet our customers’ everyday needs. sales have increased 16% on a compound annual basis, while Nor- We actively manage our assortment and believe that our mer- 5 malized EBITDA(1) has grown at an even higher average annual rate of chandising strategy contributes to increased store traffi c, repeat Report to Shareholders, continued

Our mission is simple. Value for the customer. Our goal is to exceed their expectations of the quality and variety of products they can purchase for one to two dollars

visits and greater customer loyalty as compared to our dollar ping experience that is complementary to those of our larger retail store competitors. neighbours. 85% of our customers make purchases on their visits Our well-established and low-cost sourcing platform is a third key to our stores(2), and many make Dollarama a stand-alone shopping strength. By purchasing our products directly from the lowest-cost destination. suppliers, we reduce markups and overhead costs typically associ- ated with competing importers, which in turn allows us to offer our Investments for the Future customers the great value proposition they have come to expect Over the last few years we have made signifi cant investments in from Dollarama. In addition, by dealing directly with our suppliers, our infrastructure, systems and people to manage both our current we are able to offer differentiated and often unique products that are level of business, as well as the signifi cant growth we expect to more compelling than those available elsewhere while maintaining deliver in the coming years. our industry-leading profi t margins. Today, we purchase directly The installation of new, state-of-the-art enterprise-wide software from over 900 sources, with no single supplier accounting for more solutions, supported by a new Information Technology management than 6% of our total purchases and the top-ten representing less team, will help us enhance productivity and reduce costs in the than 25% of the total. years ahead. Our new warehouse, completed in 2008, increased Our well-designed, convenient and consistent store format pro- our capacity by 25% and considerably enhanced our distribution vides another important competitive strength. Our stores are gen- capabilities. We currently anticipate meeting our near-term growth erally larger than those of our competitors, and over the years we requirements without further signifi cant capital outlays for distribu- have evolved a highly effective store layout that offers our custom- tion and warehousing infrastructure. In addition, we recently rede-

ANNUAL REPORT 2009 ers a “one store” experience with a consistent look and feel across signed our fi eld management structure in order to provide better

all of our locations. The fact that all of our stores are corporate- visibility on our in-store operations and deploy more effective store owned enables us to share best practices and management expe- management tools. As a result, we have realized signifi cant gains in rience across our entire network and contributes to our success. productivity in-store and in our supply chain. Nearly all of our stores are situated in high-traffi c areas such as Looking ahead, we intend to capitalize on these past invest-

DOLLARAMA INC. strip malls, power and shopping centres in a variety of locations ments to reduce costs and enhance effi ciency as we expand our including metropolitan areas, mid-sized cities and small towns. We store network. We are confi dent we have the systems and the 6 position many of our stores close to leading mass merchants as our people in place to effectively manage our growth going forward. convenient format and attractive product offering provide a shop- Report to Shareholders, continued

A Proven Growth Strategy same store sales growth. The launch of our multiple price point Since its transition to a dollar store concept in 1992, Dollarama strategy in early 2009 has opened up a new world of opportunity has generated almost twenty years of stable and sustainable growth for us in this area. With the introduction of additional price points and increasing profi tability. To maintain this strong track record of over one dollar and our expanded assortment, our customers now performance, we will continue to execute the same proven growth shop Dollarama for new values previously not available under our strategies that have contributed to our success in the past. old single price point model. We expect our new pricing strategy The most important element of our strategy is to further expand will continue to drive same store sales growth well into the future. our store network. Since our founding, we have grown our store And of course, we will continue to execute our private label strategy base at a robust compound annual growth rate of 16%. Over the and provide compelling offerings through our in-house development last four years we have opened a total of 205 new stores and have teams to drive sales productivity. funded these openings exclusively with internally generated cash fl ows. Our expansion model requires low initial capital investment In closing, we are extremely excited about our future. With strong and modest maintenance capital expenditures. Our new stores brand recognition, industry-leading profi tability, our team of dedi- achieve an average capital payback period of less than two years, cated people and a proven track record of organic growth, we are and we believe, deliver higher cash fl ows and attractive returns well-positioned to deliver increased value for our shareholders for relative to those of our major competitors. Nearly two-thirds of our years to come. current store base has been opened, expanded, renovated or re- located within the last six years. The demographics supporting our new store openings are com- pelling. In the United States, there are approximately 15,000 people per dollar store. In Canada, however, the market penetration is only half of that number, with 32,000 people per dollar store. Based solely on our current per capita penetration rate in Quebec, we be- lieve there is presently the potential to expand our store count in Larry Rossy Canada to over 900 stores, and our goal is to exploit this oppor- Chief Executive Offi cer tunity with between thirty and forty new openings per year for the foreseeable future. (1) Please refer to the note on non-GAAP measures included in Management’s Discussion & Analysis. Our second strategy is to build on our track record of annual (2) Study dated November 2007 based on a survey of over 3,000 customers. DOLLARAMA INC.

ANNUAL REPORT 2009 ANNUAL REPORT

7 April 8, 2010 Management’s Discussion & Analysis

The following management’s discussion and analysis (“MD&A”) dated April 8, 2010 is intended to assist readers in understanding Dollarama Inc. (the “Corporation”), its business environment, strategies, per- formance and risk factors. It should be read in conjunction with the consolidated fi nancial statements for the fi scal year ended January 31, 2010 and related notes.

Our functional and reporting currency is the Canadian dollar. Finan- future benefi ts, income taxes, goodwill and intangibles are material cial data has been prepared in conformity with Canadian GAAP. Cer- factors made in preparing forward-looking information and manage- tain measures used in this MD&A do not have any standardized mean- ment’s expectations. Many factors could cause our actual results, level ing under Canadian GAAP. When used, these measures are defi ned of activity, performance or achievements or future events or devel- in such terms as to allow the reconciliation to the closest Canadian opments to differ materially from those expressed or implied by the GAAP measure. It is unlikely that these measures could be compared forward-looking statements, including, without limitation, the following to similar measures presented by other companies. factors set forth in our risk factors section herein: future increases in All references to “Fiscal 2008” are to the Corporation’s fi scal year operating and merchandise costs, inability to refresh our merchandise ended February 3, 2008, to “Fiscal 2009” are to the Corporation’s fi scal as often as in the past, increase in the cost or a disruption in the fl ow year ended February 1, 2009 and to “Fiscal 2010” are to the Corpora- of imported goods, disruption of distribution infrastructure, current tion’s fi scal year ended on January 31, 2010. adverse economic conditions, high level of indebtedness, inability to generate suffi cient cash to service all the Corporation’s indebtedness, Formation of the Corporation ability of the Corporation to incur additional indebtedness, signifi cant The Corporation became a reporting issuer in October 2009. The operating restrictions imposed by our senior secured credit facility (the Corporation indirectly owns, through its subsidiaries, all of the equity “Credit Facility”) and our senior fl oating rate deferred interest notes (the interests in Dollarama L.P. and Dollarama Corporation, which together “Deferred Interest Notes”) Indenture, interest rate risk associated with operate the Dollarama business. Dollarama Inc., together with its con- variable rate indebtedness, no guarantee that our strategy to introduce solidated subsidiaries, are referred to as the “Corporation”, “we”, “us” products between $1.00 and $2.00 will be successfully sustained, or “our”. market acceptance of our private brands, inability to increase our ware- house and distribution center capacity in a timely manner, weather Forward-Looking Statements conditions or seasonal fl uctuations, competition in the retail industry, Except for historical information contained herein, the statements dependence on ability to obtain competitive pricing and other terms in this document are forward-looking. Forward-looking statements in- from our suppliers, inability to renew store, warehouse and distribution

ANNUAL REPORT 2009 volve known and unknown risks and uncertainties, including those that center leases or fi nd other locations on favourable terms, disruption in

are described elsewhere in this report. Forward-looking statements information technology systems, unsuccessful execution of our growth are based on estimates and assumptions made by us in light of our strategy, inability to achieve the anticipated growth in sales and op- experience and perception of historical trends, current conditions and erating income, inventory shrinkage, compliance with environmental expected future developments, as well as other factors that we believe regulations, failure to attract and retain qualifi ed employees, departure

DOLLARAMA INC. are appropriate and reasonable in the circumstances, but there can be of senior executives, fl uctuation in the value of the Canadian dollar in no assurance that such estimates and assumptions will prove to be relation to the U.S. dollar, litigation, product liability claims and product 8 correct. Certain assumptions in respect of claim liabilities, employee recalls, unexpected costs associated with our current insurance pro- DOLLARAMA INC. ANNUAL REPORT 2009 9 Management’s Discussion and Analysis April 8, 2010 8, April Analysis and Discussion Management’s On December 15, 2009 Dollarama Group Holdings L.P. made a Holdings L.P. On December 15, 2009 Dollarama Group the closing of itsOn January 28, 2010 the Corporation completed On October 16, 2009, Stephen Gunn was appointed to the board On January 5, 2010, John J. Swidler was appointed as an indepen- On February 17, 2010, Donald Gray Reid was appointed as an We believe that the presentation of the non-GAAP measures de- the non-GAAP measures of believe that the presentation We cash payment of interest on the Deferred Interest Notes in the amount Interest on the Deferred cash payment of interest of $8.4 million. and the concur- announced bought deal secondary offering previously option pursuant to which its share- closing of the over-allotment rent Stéphane Gonthier S.à r.l., holders Bain Dollarama (Luxembourg) One Inc. and 9086-6666 and 4411145 Canada Inc., 3339408 Canada Rossy and Leon- Alan by Larry Rossy, Quebec Inc., entities controlled of sold an aggregate the “Selling Shareholders”) (collectively, Assaly ard sold pursuant (of which 1,500,000 were 13,150,000 Common Shares option) at a price of $21.50 of the over-allotment to the partial exercise of $282,725,000 to the Sell- proceeds gross for aggregate per share from any of the proceeds Dollarama did not receive ing Shareholders. this offering. and chair of the Corporation as an independent director of directors Zemmouri on the Younes Gunn replaced of the audit committee. Mr. of the Corporation. of directors board and chair of the audit committee of the Corporation. Mr. dent director Barbavara de Gravellona on the Felipe Merry del Val Swidler replaced audit David on the of the Corporation and Gregory of directors board on the audit committee. committee. Stephen Gunn remained and a member of the audit committee of the independent director his po- from Cook who resigned Todd Reid replaces Corporation. Mr. the audit committee and of directors, sition as member of the board accordingly may reduce the cash available to us. We refer the reader the reader refer available to us. We the cash may reduce accordingly nition and Financial Information” for the defi to “Selected Consolidated by the Cor- used and presented measures of non GAAP reconciliation comparable GAAP measures. directly poration to the most these Non-GAAP measures However, scribed above is appropriate. con- as analytical tools, and you should not have important limitations results or as substitutes for analysis of our sider them in isolation, Because of these limitations, we GAAP. under Canadian as reported with Canadian accordance in as reported on our results primarily rely only as a supplement. In ad- GAAP and use the non-GAAP measures non-GAAP measures dition, because other companies may calculate to similarly-titled than we do, they may not be comparable differently by other companies. reported measures Payment of Interest on the Deferred Interest Notes Interest on the Deferred Payment of Interest and Con- of Its Common Shares Closing of Secondary Offering Option Closing of the Over-Allotment current Audit Committee and Compensation Com- of Directors, Board mittee Recent Events Unless otherwise indicated and as hereinafter provided, all fi nan- all fi provided, Unless otherwise indicated and as hereinafter cial statement data in this report has been prepared using Canadian has been prepared cial statement data in this report (“GAAP”). Dollarama Inc.’s generally accepted accounting principles in accordance have been prepared nancial statements consolidated fi to certain non- makes reference This report with Canadian GAAP. not recognized are These non-GAAP measures GAAP measures. meaning do not have a standardized under Canadian GAAP, measures unlikely to be com- therefore by Canadian GAAP and are prescribed Rather, by other companies. presented parable to similar measures as additional information to complement provided are these measures further understanding by providing those Canadian GAAP measures per- management’s from of operations results of the Corporation’s in isolation nor they should not be considered spective. Accordingly, under nancial information reported as a substitute for analysis of our fi to including EBITDA use non-GAAP measures We Canadian GAAP. of our operating per- investors with a supplemental measure provide business that may in our core formance and thus highlight trends solely on Canadian GAAP when relying not otherwise be apparent also believe that securities analysts, investors We nancial measures. fi in the use non-GAAP measures parties frequently and other interested evaluation of issuers. Our management also uses non-GAAP mea- to facilitate operating performance comparisons from in order sures annual operating budgets and assess our period to period, prepare and work- debt service, capital expenditure ability to meet our future not presentations are Non-GAAP measures ing capital requirements. or all For example, certain with Canadian GAAP. made in accordance ect: (a) our cash expenditures, do not refl of the non-GAAP measures or contractual commit- for capital expenditures requirements or future our working capital for, ments; (b) changes in, or cash requirements expense, or the cash requirements cant interest needs; (c) the signifi or principal payments on our debt, and; necessary to service interest in cash available a reduction (d) income tax payments that represent to us. Although we consider the items excluded in the calculation of to evaluate and less relevant to be non-recurring non-GAAP measures our performance, some of these items may continue to take place and GAAP and Non-GAAP Measures gram, protection of trademarks and other proprietary rights, natural and other proprietary of trademarks gram, protection of customers’ credit with the protection disasters, risks associated uence by exist- infl company structure, data, holding and debit card of the the common shares volatile market price for ing shareholders, plans to pay cash divi- no current Shares”), Corporation (the “Common by existing shareholders. Shares sales of Common dends and future a complete list of the fac- to represent not intended These factors are these factors should be considered us; however, tors that could affect statements describe our expectations These forward-looking carefully. we have no intention and undertake no obliga- as of April 8, 2010 and whether as statements, any forward-looking tion to update or revise except as re- events or otherwise, of new information, future a result in this report statements contained The forward-looking by law. quired ed by this cautionary statement. qualifi expressly are 10 DOLLARAMA INC. ANNUAL REPORT 2009 Management’s DiscussionandAnalysisApril8,2010 TheCorporation becameareporting issuerasaresult ofits$300.0 • Key ItemsinFiscalYear 31,2010 EndedJanuary Overview Offi Announcement oftheAppointmentNewChiefFinancial pointed tothecompensationcommitteeofCorporation. independent director andmemberoftheauditcommittee,wasap- the compensationcommitteeofCorporation.Mr. Gunn,acurrent which haveallowedustofurtherbroaden ourproduct offering. 2009, weintroduced additionalpricepointsof$1.25,$1.50and$2.00 the exceptionofselectcandyoffered atlowerprices.OnFebruary2, 2009, allourmerchandise wassoldatasingle$1.00pricepoint,with (for selectcandy),$1.00,$1.25,$1.50and$2.00.PriortoFebruary are soldprimarilyinindividualormultipleunitsatfi xed pricesof$0.69 maintain andimprove theeffi ciency ofouroperations.Ourproducts merchandise toabroad baseofcustomers.We continuallystriveto to offer acompellingvalueproposition onawidevarietyofeveryday upon ourpositionastheleadingCanadianoperatorofdollarstores and mid-sized cities,andsmalltowns. shopping centersinvariouslocations,includingmetropolitan areas, and nearlyallare located inhigh-traffi c areas suchasstripmallsand are corporate-owned, providing aconsistentshoppingexperience, with theexceptionofselectcandyoffered at$0.69.Allofourstores multiple unitsatselectfi xed pricepointsbetween$1.00and$2.00, seasonal products. Our qualitymerchandise issoldinindividualor products and general merchandise foreverydayuse,inadditionto ally brandedproducts. We offer abroad rangeofqualityconsumer merchandise atcompelling values,includingprivatelabelandnation- average approximately 9,806square feetandoffer atargeted mixof and are continuing toexpandinallCanadianprovinces. Ourstores Canada. We are theonlyoperatorwithasignifi cantnationalpresence times thenumberofstores asournextlargestdollarstore competitorin Dollarama stores inoperation asofJanuary31,2010,more thanfour board ofdirectors. April 12,2010.Mr. Nomicoswillremain amemberoftheCorporation’s Chief FinancialOfficer andSecretary oftheCorporation,effective asof cos whowillresign from President, hispositionasSenior Vice Interim effective asofApril12,2010.MichaelRosswillreplace NicholasNomi- of MichaelRoss,CA,asitsnewChiefFinancialOffi cer andSecretary, cer 2009. due in2012(the “8.875%Subordinated Notes”)onNovember17, million principalamountofthe8.875% seniorsubordinated notes to theCredit Facilityandtoredeem theoutstandingU.S.$200.0 the IPOwere usedtorepay thetermloanAoutstandingpursuant million initialpublicoffering (“IPO”)inOctober2009.Proceeds from Our strategyistogrow andcashfl sales,netearnings ow bybuilding We are theleadingoperatorofdollarstores inCanada,with603 On March 18,2010,theCorporationannouncedappointment comparable store sales.Theprimarydriversofcomparablestore sales our costofsales byshiftingmore ofoursourcing tolow-costforeign react tocostincreases on atimelybasis.We have historicallyreduced uct offering effective February2,2009,wenowhavegreater fl exibility to negatively impactourbusiness, with ournewmultiplepricepointprod- the impactofincreasing unitcosts.Althoughcostincreases couldstill Redesigning direct sourced products wastheonlymeanstomitigate because wewere notabletopassoncostincreases toourcustomers. and merchandise costscouldnegativelyimpactouroperatingresults the past,asasinglefixed-price pointdollarstore, increases inoperating tory purchases atcost,whichhastheeffect ofreducing costofsales.In rebates, Therebates whenearned. are recorded asareduction ofinven- ing costs.We record vendorrebates consistingofvolumepurchase store occupancycosts,andwarehouse anddistributioncenteroperat- portation costs(whichare variableandproportional tooursalesvolume), Sales Factors Affecting OurResultsofOperations increased Netearnings $88.4millioninFiscal2010ascompared to • Salesincreased 15.1%inFiscal2010overthepriorfiscal yeardriv- • Cost ofSales Canada where wesellourmerchandise. economic developmentsthataffect thelevelofconsumerspendingin season. cal 2010salesduringthefourthquarterduetoChristmasselling sales andexpectthistrend tocontinue.We generated29.0%ofFis- in welldesigned,consistentandconvenientstore formats. fering awideselectionofhigh-qualitymerchandise atattractivevalues transaction size.To increase comparablestore sales,wefocusonof- performance are changes innumberoftransactionsandaverage the sameperiodinprioryear. sales ofstores open foratleast13completefi scal monthsrelative to store salesisameasure ofthepercentage increase ordecrease ofthe consist ofcomparablestore salesandnewstore sales.Comparable and takespossessionofthemerchandise. Allsalesare fi nal. Oursales provements indistributionandlogisticscosts. margins duetoimproved product marginsandproductivity im- 2009. EBITDAgrowth wasdrivenbyincreased salesandgross 25.2% inFiscal2010to$191.9millionfrom $153.3millioninFiscal Fiscal 2009andNormalizedEBITDA(asdefi ned below)increased in theaveragetransactionsize. 2.3% increase inthenumberoftransactionsanda5.4%increase current fi scal year. Comparablestore salesgrowth consistedofa of twostores) anda7.9%increase incomparable store salesinthe en bytheopeningof41newstores (offset bythetemporaryclosure Our salesare adverselyaffected byinfl ation andotheradverse We havehistorically experiencedlimitedseasonalfl uctuations in We includesales from expandedstores andrelocated stores in We recognize salesatthetimecustomertenderspaymentfor Our costofsalesconsistmainlymerchandise inventoryandtrans-

DOLLARAMA INC. ANNUAL REPORT 2009 11 Management’s Discussion and Analysis April 8, 2010 8, April Analysis and Discussion Management’s As part of our ongoing effort to offer more value and higher quality more to offer effort As part of our ongoing which is highly competitive industry, in the value retail operate We goods to our customers, on February 2, 2009, we began offering in on February 2, 2009, we began offering goods to our customers, priced between assortment of products an additional all our stores continue to be priced the majority of products $1.00 and $2.00. While up to $2.00 has ex- xed price points fi at products at $1.00, offering most cat- with new items across selection panded our merchandise egories. assortment quality, location, merchandise to price, store with respect service. We and customer in-stock consistency, and presentation, and mass variety and discount stores compete with other dollar stores, oper- companies operating in Canada. These other retail merchants we operate and many of them where in many of the areas ate stores we Additionally, efforts. engage in extensive advertising and marketing site locations, as retail compete with a number of companies for prime along with quality employees. We, well as in attracting and retaining a from resulting companies, expect continuing pressure other retail costs, to: merchandise number of factors including, but not limited consumer debt lev- and instability in the global economy, recession rates,els and buying patterns, adverse economic conditions, interest unemployment, labour costs, customer preferences, market volatility, patterns,uctuations, fuel prices, weather exchange fl ation, currency infl and insurance costs. Due events, competitive pressures catastrophic economic conditions, consumer spending could decline to current Reduc- including unemployment. because of economic pressures, spending could have an adversedence and tions in consumer confi our sales. on effect Merchandising Strategy Merchandising the Corporation Factors Affecting Economic or Industry-Wide While we enter into foreign exchange forward contracts to hedge a contracts exchange forward While we enter into foreign cant component also a signifi Shipping and transportation costs are be- We expense. driven by our base rent Our occupancy costs are Our general, administrative and store operating expenses (“SG&A”) Our general, administrative and store consist of store labour (which is primarily variable and proportional to labour (which is primarily variable and proportional consist of store maintenance costs, salaries and related sales volume) and store store eld management team members, adminis- ts of corporate and fi benefi expenses, fees, and other related ce expenses, professional trative offi xed. Although our average hourly wage rate primarily fi all of which are in the mandated mini- is higher than the minimum wage, an increase costs unless we our payroll cantly increase mum wage could signifi expect We gains and cost reductions. productivity offsetting realize to as we build our infrastructure our administrative costs to increase of the Corporation. meet the needs generated by the growth effectively operating Since November 2, 2009, general, administrative and store expenses no longer include annual management fees of $3.0 million payable to funds advised by Bain Capital Partners, LLC (such funds man- as “Bain Capital”) pursuant to its to in this report being referred was terminated in This management agreement agement agreement. IPO during the connection with the consummation of the Corporation’s quarter of Fiscal 2010. A one-time fee of $5.0 million was paid to third Bain Capital in connection with such termination. General, Administrative and Store Operating Expenses General, Administrative and Store suppliers. For Fiscal 2010, direct overseas sourcing was 53.4% of our overseas sourcing direct suppliers. For Fiscal 2010, the same period in the prior year. to 50.4% for compared purchases China, from of our overseas products a majority While we still source other overseas from our purchases increasing we have been steadily directly years, including goods sourced scal fi suppliers in the last two our cost and Vietnam. As a result, Turkey India, Indonesia, Thailand, from the against currencies uctuation of foreign the fl of sales is impacted by a majority of our imported we purchase In particular, Canadian dollar. our using U.S. dollars. Therefore, suppliers in China from merchandise renminbi uctuation of the Chinese by the fl cost of sales is impacted uctuation of the U.S. dollar against the against the U.S. dollar and the fl Canadian dollar. signifi cant portion of our exposure to fl uctuations in the value of the U.S. to fl cant portion of our exposure signifi uc- to fl we do not hedge our exposure dollar against the Canadian dollar, against the U.S. dollar. tuations in the value of the Chinese renminbi shipping and transpor- of our cost of sales. When fuel costs increase, because the carriers generally pass on such cost tation costs increase to the users. Because of the high volatility of fuel costs, it is increases our contract we may incur from the fuel surcharges cult to forecast diffi to past quarters. carriers as compared generally able to negotiate leases at attractive market lieve that we are usually c which our stores consumer traffi rates due to the increased typically enter into We generate in strip malls and shopping centers. for one or to renew leases with base terms of ten years and options ve years each. of fi periods more 12 DOLLARAMA INC. ANNUAL REPORT 2009 rpryadeupet 3,1 1988 111,936 129,878 43,362 42,482 138,214 26,289 1,322,237 42,576 1,363,038 $ 1,200,539 66,218 42,576 $ 93,057 53,049 $ 51,511 13,935 $50,045 234,684 (15,504) 249,644 12,250 $ 198,500 72,863 63,980 Normalized EBIT $ 29,415 $1.17 $1.18 (3,254) (34,411) 72,053 (0.36) (0.36) $ $ 1.37 44,793 102,278 1.41 61,192 23,027 $ $ Total debt (31,108) Total 62,343 25,709 Property andequipment assets 24,919 Merchandise 153,379 289,703 Cash andcashequivalents 21,818 128,440 Balance SheetData inventories 236,414 19,866 18,389 124,649 period(inthousands) 204,124 Weighted average numberofdilutedcommonshares outstandingduringthe period(inthousands) Weighted average numberofbasiccommonshares outstandingduringthe (loss)percommonshareDiluted netearnings (loss)percommonshareBasic netearnings (loss) Net earnings Provision forincome taxes (loss)beforeEarnings incometaxes fi nancial instrumentsandlong-termdebt Foreign exchange loss(gain)onderivative Interest expense onamountsduetoshareholders Interest expense onlong-termdebt Operating Total income Amortization expenses Cost ofsales Sales Data Earnings (dollars inthousands,exceptpershare amountsandnumberofshare) Selected ConsolidatedFinancialInformation Management’s DiscussionandAnalysisApril8,2010 Normalized EBITmargin Normalized EBITDA 443,082 364,854 328,773 General, administrativeandstore operatingexpenses Expenses: Gross profi t aia xedtrs 3,7 $ 4,0 $ 45,994 $ 40,502 $ 33,772 9.5% $ 12.0% 15.1% Average store size(gross square feet) Number ofstores Capital expenditures Normalized SG&Aasa%ofsales Comparable store salesgrowth Year-over-year salesgrowth Other Data 3, 2008hasbeenderivedfrom ourauditedconsolidatedfi nancial statementsandrelated notes. below asofJanuary31,2010andFebruary1,2009,foreachthethree yearsendedJanuary31,2010,February1,2009and Gross margin The followingtablessetoutselectedfi nancial informationfortheperiodsindicated.Theselected consolidatedfi nancial info (4) 517,399 804,988 787,571

(2) (6) 810,624 724,157 643,579 35.3% 33.5% 33.8%

(1) (3) 1694 3,4 $ 127,649 $ 131,440 $ 166,964 $ 603 564 521 (1) 1183 5,5 $ 146,038 $ 153,258 $ 191,883 $ (3)

(1)(7) 13.3% 12.1% 13.1% (5) 7.9% 3.4% (1.5%) (1)(7) 20.0% 19.4% 18.8% (3) 9,806 9,760 9,600 (2) 264,784 214,596 185,735

$ 1,253,706 $ 1,089,011 $ 972,352 2010 2009 2008 aur 1 Fbur , February3, February1, January 31, Fiscal Year Ended rmation set out rmation setout February February DOLLARAMA INC. ANNUAL REPORT 2009 13 P Fiscal Year Ended Fiscal Year Ended Fiscal Year Fiscal Year Ended Fiscal Year Management’s Discussion and Analysis April 8, 2010 8, April Analysis and Discussion Management’s January 31, February 1, February 3, January 31, February 1, February 3, January 31, 1, February February 3, 2010 2009 2008 2009 2010 2008 2009 2010 2008 2009 2010

5,000 - - (b) (13,585) (3,000) (3,000) (3,000) (13,585) (a)(b)(c)(d) 4,852 - - - 4,852 (c) 3,000 3,000 2,250 (a)(b)

1,483 - - - 1,483 (d) (dollars in thousands) (dollars in thousands) (dollars in thousands) A reconciliation of Normalized EBIT to Normalized EBITDA is included below: A reconciliation SG&A SG&A 185,735 $ $ 214,596 $ 264,784 A reconciliation of SG&A to Normalized SG&A is included below: A reconciliation Normalized EBIT Normalized 127,649 $ $ 131,440 $ 166,964 Operating income Operating 124,649 $ $ 128,440 153,379 $ A reconciliation of operating income to Normalized EBIT is included below: income to Normalized EBIT is included of operating A reconciliation

Normalized EBIT Normalized Normalized EBIT margin $ 166,964 $ 131,440 $ 127,649 13.3% 12.1% 13.1% charges and IPO-related Non-recurring 13,585 3,000 3,000 Severance stock compensation expense IPO related charges and IPO-related Deduct: non-recurring

Normalized EBITDA Normalized $ 191,883 $ 153,258 $ 146,038 Amortization Add: 24,919 21,818 18,389

fees charges: and IPO-related Add: non-recurring Management

and adjusted for non-recurring with Canadian GAAP, in accordance operating income, “Normalized EBIT” represents measures”. SG&A, SG&A” represents EBIT plus amortization. “Normalized Normalized charges. “Normalized EBITDA” represents IPO related charges. and IPO-related adjusted for non-recurring with Canadian GAAP, in accordance (1) In this report, we refer to Normalized EBIT, Normalized EBITDA and Normalized SG&A collectively referred to as the “Non GAA to as and Normalized SG&A collectively referred Normalized EBITDA EBIT, to Normalized we refer (1) In this report, in connection with the termination of the management agreement Fee paid SG&A Normalized Normalized SG&A as a % of sales $ 20.0% 251,199 $ 211,596 $ 182,735 19.4% 18.8% 14 DOLLARAMA INC. ANNUAL REPORT 2009 and Cashforeign exchangegain(loss)onderivativefi nancial instruments long-term debt Management fees ot n aiaie neet (416 (460 (65,713) (34,630) (44,156) 146,038 $ 153,258 191,883$ $ Interest expenseonamountsduetoshareholders (netofcapitalizedinterest) costsandcapitalizedinterest) Interest expenseonlong-termdebt(netofamortizationissue Normalized EBITDA Areconciliation ofNormalizedEBITDAtocashfl ows from operatingactivitiesisincludedbelow: Management’s DiscussionandAnalysisApril8,2010 eerdlaeidcmns ,3 226 2,312 (354) (1,083) 2,276 (1,129) (3,114) 3,356 (8,288) 2,139 (23,936) 2,068 (863) 3,437 (1,098) (1,370) Stock-basedcompensation(netofIPOrelated stockcompensation) Amortizationofdeferred tenantallowancesandleasingcosts Deferred tenantallowancesandleasingcosts Deferred leaseinducements Deemedinterest repaid Current incometaxes (dollarsinthousands) Ohr () 3 223 70,880 - 38 127,835 84,332 (1) - 50,233 Normalized SG&A(seenote1)dividedbysales. (1,483) (20,647) $ Normalized EBITmarginrepresents(7) NormalizedEBIT(seenote1)dividedbysales.SG&A as a%ofsalesrepresents 115,656 Gross(6) marginrepresents gross profi relocated stores andexpandedstores. t asa%ofsales. $ (12,179) 122,486 Comparable store(5) meansastore openforatleast13completemonthsrelative tothesameperiodinprioryear, includin fi nancial instrumentsrelated tolong-termdebt. $ Total(4) debtiscomprisedofcurrent portionoflong-termdebt, long-termdebtbefore debtissuecostsanddiscounts,der 38,154 At theendofperiod. (3) comparable fi gures andhistoricalresults havebeenrecalculated accordingly. - Certain expenses havebeenreclassifi(2) ed betweencostofsalesandgeneral,administrativestore operatingexpenses.All fi Represents thecashgain(loss)portionofforeign exchangelossonlong-termdebtandchangeinfairvalueofderivat (e) nancial (d)Represents theeliminationofseverance. instruments. Refl (c) ects thestockcompensationexpenserelated toperformancevestingclausesthatwere triggered byourIPO. - (b)Themanagementagreement wasterminatedconcurrent withtheIPO. Refl (a) ects themanagementfeesincurred andpaidorpayabletoBainCapital,excludingoutofpocketexpenses. Netcashprovided byoperatingactivities (5,000) Changesinnon-cashworkingcapitalcomponents Other Severance Feepaidinconnectionwiththeterminationofmanagementagreement

(a)(b) (2,250) (3,000) (3,000) (e) (25,976) 14,282 (9,618) (c) 748 741 1,312

2010 2009 2008 aur 1 Fbur , February3, February1, January 31, 145 187 (1,730) (1,857) (1,415) Fiscal Year Ended g vtv ivative v ive

DOLLARAMA INC. ANNUAL REPORT 2009 15 Management’s Discussion and Analysis April 8, 2010 8, April Analysis and Discussion Management’s Foreign exchange gain on derivative fi long- nancial instruments and exchange gain on derivative fi Foreign $12.3 mil- $17.2 million, from for income tax increased Provision a $15.5 million loss for $88.4 million, from Net earnings increased Interest expense on amounts due to shareholders decreased $5.8 decreased expense on amounts due to shareholders Interest term debt increased $75.9 million, from a $44.8 million loss for Fiscal a $44.8 million $75.9 million, from term debt increased due mainly to the impact2009, to a $31.1 million gain for Fiscal 2010 U.S. dollar on to the of the Canadian dollar relative of the strengthening not hedged until November Notes, which were Interest our Deferred nancial exchange loss on derivative fi 2009. The $44.8 million foreign 2009 was due primarily toinstruments and long-term debt in Fiscal to the U.S. dollar relative the impact of the weakening of the Canadian not hedged during Notes which were Interest dollar on our Deferred Fiscal 2009. lion for Fiscal 2009 to $29.4 million for Fiscal 2010 due to increased rate was and federal tax statutory provincial The combined tability. profi in Fiscal 2010 and Fiscal 2009. Our 31.8% and 32.2%, respectively value by non-deductible accretion tax rate is mainly affected effective of the Corporation as well on amounts due to certain shareholders only 50% taxable exchange which are as gains and losses on foreign (deductible). in net earn- Fiscal 2009 to $72.9 million for Fiscal 2010. The increase margin dollars, higher gross ings was driven mainly by sales growth, Interest exchange gain on our outstanding Deferred and a foreign not hedged during these periods until November Notes, which were 2009. of debt, partially offset by lower interest costs resulting from the lower from costs resulting interest by lower of debt, partially offset rates on our variable-rate and lower interest outstanding debt balance during Fiscal 2010 incurred charges interest debt. The non-recurring of debt issue costs associated with the write-off include a $3.8 million Notes, and the 8.875% Subordinated Facility term loan A of the Credit and expenses associ- premium repayment and $10.0 million in debt Notes which of the 8.875% Subordinated ated with the redemption 2009 (the “Redemption Date”). on November 17, occurred $25.7 million for Fiscal 2009, to $19.9 million for Fiscal million, from and the debt into shares 2010 due primarily to the conversion of this to sharehold- balance of the amounts due of the remaining repayment ers on October 16, 2009. Foreign Exchange Loss (Gain) on Derivative Financial Instruments Debt and Long-Term Provision for Income Taxes Net Earnings Interest Due to Shareholders Expense on Amounts Interest expense increased $1.2 million, from $61.2 million for Fiscal $61.2 million $1.2 million, from expense increased Interest Amortization expense increased $3.1 million, from $21.8 million $3.1 million, from Amortization expense increased SG&A increased $50.2 million, or 23.4%, from $214.6 million for $214.6 $50.2 million, or 23.4%, from SG&A increased Our cost of sales increased $86.5 million, or 11.9%, from $724.2 $86.5 million, or 11.9%, from Our cost of sales increased For Fiscal 2010, we recorded sales of $1,253.7 million, a 15.1% recorded For Fiscal 2010, we our new selection of items at we introduced On February 2, 2009, 2009, to $62.3 million for Fiscal 2010 due primarily to $13.8 million of expense associated with the early redemption interest non-recurring for Fiscal 2009, to $24.9 million for Fiscal 2010 due to new store for Fiscal 2009, to $24.9 million for Fiscal 2010 due to new store openings. Fiscal 2009, to $264.8 million for Fiscal 2010 due to the opening of 39Fiscal 2009, to $264.8 million for Fiscal 2010 wage in store since the end of Fiscal 2009, increases net new stores costs added during rates, the full-year impact of central infrastructure in Fiscal 2010 of approximately scal year and the incurrence the prior fi expenses. These non- and IPO-related $13.6 million of non-recurring charges include a $5.0 million fee paid in connection with the recurring with Bain Capital, $2.2 mil- termination of our management agreement lion management fees paid to Bain Capital pursuant to such manage- and prior to such termination, stock compensation ment agreement by the Corporation’s $4.9 million triggered expense of approximately charges IPO, and severance charges of $1.5 million. Non-recurring during Fiscal 2009 consisted of $3.0 million management incurred fees paid to Bain Capital described above. million for Fiscal 2009, to $810.6 million for Fiscal 2010. Our gross for Fiscal 2010. Our gross million for Fiscal 2009, to $810.6 million of sales to 33.5% to 35.3% of sales as compared margin increased margins associ- product improved driven by scal year, for the prior fi of our multiple price-point strategy and net ated with the introduction costs. in distribution and logistics improvements productivity increase over the prior fi scal year. Comparable store sales rose 7.9%, sales rose store Comparable scal year. over the prior fi increase number of transactions and a 5.4% in- in driven by a 2.3% increase size. in average transaction crease was made introduction price points of $1.25, $1.50 and $2.00. This of our products rst quarter and the vast majority in the fi progressively new price points of believe the introduction is still sold at $1.00. We in both an improved has positively impacted our sales and resulted transaction size. Our totalnumber of transactions and higher average 5.5 million at February 1, 7.3% from footage increased square store 2009 to 5.9 million at January 31, 2010. Interest Expense on Long-Term Debt Interest Expense on Long-Term Amortization General, Administrative and Store Operating Expenses Cost of Sales Sales Fiscal Year Ended January 31, 2010 Compared to Fiscal Year to Fiscal Year January 31, 2010 Compared Ended Fiscal Year 2009 Ended February 1, Results of Operations 16 DOLLARAMA INC. ANNUAL REPORT 2009 Amortization OperatingExpenses General, AdministrativeandStore Cost ofSales Sales Ended February3,2008 Fiscal Year EndedFebruary1,2009Compared toFiscalYear Management’s DiscussionandAnalysisApril8,2010 sociated withourenterprise-widesoftware system. store openingsandtheamortizationofcapitalizedsoftware costsas- to theamortizationofproperty andequipmentresulting from thenew Fiscal 2008,to$21.8millionfor2009.Thisincrease wasdue for Fiscal2009. of sales,ourSG&Aincreased from 19.1%forFiscal2008to19.7% support ourstore network expansionalsoincreased. Asapercentage number ofstores inoperation andminimumwageincreases. SG&Ato marily drivenbyanincrease instore labourcostsduetotheincreased Fiscal 2008,to$214.6millionfor2009.Thisincrease waspri- primarily tohighertransportationcosts. decreased to 33.5% forFiscal2009from 33.8%forFiscal2008due for Fiscal2008,to$724.2million2009.Ourgross margin million atFebruary3,2008to5.51,2009. Fiscal 2009.Ourtotalstore square footageincreased 10.0%from 5.0 ing of47newstores (offset bythetemporaryclosure offour stores) in temporary closure of three stores) duringFiscal2008andthe open- incremental fullperiodimpactofthe61stores opened(offset bythe tion ofthesalesgrowth, or$106.2million,wasdrivenprimarilybythe by a0.5%decrease inthenumberoftransactions.Theremaining por- was drivenbya3.9%increase intheaveragetransactionsize,offset of approximately $10.5million.TheComparablestore salesincrease sales increased 3.4%duringFiscal2009,representing anincrease for Fiscal2008,to$1,089.0million2009.Comparablestore Amortization expenseincreased $3.4million,from $18.4millionfor SG&A increased $29.1million,or15.7%,from $185.5millionfor Cost ofsalesincreased $80.6million,or12.5%,from $643.6million Our salesincreased $116.7million,or12.0%,from $972.4million and Long-Term Debt ExchangeLoss(Gain)onDerivativeFinancialInstruments Foreign ExpenseonAmountsduetoShareholders Interest Debt ExpenseonLong-term Interest Net Earnings (Loss) Net Earnings Provision forIncomeTaxes Class BandCpreferred shares. on ourpreviously outstandingjuniorsubordinated notesandClassA, cal 2008,to$25.7millionforFiscal2009,whichrefl ects theaccretion were 1.0850forFiscal2009and1.06032008. dollar. Average ratesfortranslatingU.S.dollarsintoCanadian tially offset bytheimpactofstronger U.S.dollarrelative totheCanadian debt outstandingandlowerinterest ratesonvariable-ratedebt,par- cal 2008,to$61.2millionforFiscal2009,whichrefl ects thereduced were unhedgedduringtheseperiods. relative totheCanadiandollaronDeferred Interest Noteswhich to Fiscal2009duetheimpactofstrengthening oftheU.S.dollar on derivativefinancial instrumentsandlong-termdebtfrom Fiscal2008 offset byanunfavourable$79.2millionswinginforeign exchangeloss growth inFiscal2009ascompared toFiscal2008wasmore than 2008, toalossof$15.5millionforFiscal2009asoperatingincome fistatements. nancial come taxrateisincludedinnote17(b)ofourauditedconsolidated cumulative foreign exchange loss.Areconciliation ofoureffective in- which are only50% taxable andvaluationallowancestakenonany on preferred shares aswellgainsandlossesonforeign exchange periods. on theDeferred Interest Noteswhichwere unhedgedduringthese of thestrengthening oftheU.S.dollarrelative totheCanadiandollar 2008, toa$44.8millionlossforFiscal2009,duemainlytheimpact term debtincreased $79.2millionfrom a$34.4milliongainforFiscal Interest expenseincreased $2.7millionfrom $23.0millionforFis- Interest expensedecreased $10.9millionfrom $72.1millionforFis- Net earnings decreasedNet earnings $65.5millionfrom $50.0millionforFiscal Our effective taxrate isaffected bynon-deductibleaccretion value Foreign exchange lossonderivativefinancial instrumentsandlong- DOLLARAMA INC. ANNUAL REPORT 2009 17 comparable Management’s Discussion and Analysis April 8, 2010 8, April Analysis and Discussion Management’s Fiscal 2010 Fiscal 2009

161,498 172,434 181,285 208,940 182,227 202,556 204,189 221,652 74,902 73,714 59,400 56,768 60,471 55,061 51,387 47,677 (1) (1) (Loss) Data: (1) Certain expenses have been reclassifi ed between cost of sales and general, administrative and store operating expenses. All ed between cost of sales and general, administrative and store (1) reclassifi Certain expenses have been Net earnings (loss) earnings $ 7,455 (22,207) $ (7,280) Net 11,130 $ 6,528 $ 26,583 $ 34,010 $ 1,140 $ $ Total expenses Total income 213,948 229,386 Operating 241,846 expenses: 275,391 245,036 268,250 283,911 Other 303,130 expense on Interest debt 60,970 28,886 long-term 35,150 28,373 40,155 30,533 34,885 expense on Interest 22,867 amounts due to shareholders 7,277 26,170 13,472 15,424 15,090 exchange loss Foreign 16,079 14,665 instruments 15,358 nancial debt (gain) on derivative fi long-term and 5,511 (21,329) Earning (loss) before (7,785) (7,505) taxes 5,007 30,230 - income 1,102 5,826 of) for (recovery Provision 8,454 7,131 taxes 6,909 income 6,769 6,469 48,182 6,331 4,675 35,876 13,545 6,140 12,787 13,289 (22,245) (7,085) 14,172 3,535 9,293 2,415 accordingly. have been recalculated and historical results gures fi 6,761 (38) 5,332 195 Amortization 6,576 6,008 6,294 6,041 5,980 5,500 5,565 4,773 General, administrative General, administrative operating and store expenses Statements of Earnings Sales 236,815 264,271 $ Cost of sales 272,379 $ 315,546 $ 273,409 $ 303,400 $ 312,797 $ 364,100 $ $ thousands) (in dollars Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Summary of Consolidated Quarterly Results Summary of Consolidated 18 DOLLARAMA INC. ANNUAL REPORT 2009 and Long-Term Debt ExchangeLoss(Gain) onDerivativeFinancialInstruments Foreign ExpenseonAmountsDuetoShareholders Interest Debt ExpenseonLong-term Interest Amortization OperatingExpenses General, AdministrativeandStore Cost ofSales Sales Analysis ofFourthQuarter2010Results Management’s DiscussionandAnalysisApril8,2010 exchange contracts usedtoredeem aportionofour8.875% Sub- quarter ofFiscal 2010dueprimarilytotheloss realized onforeign fi nancial instruments andlongtermdebtof$5.5millioninthefourth due toshareholders onOctober16,2009. shares andtherepayment oftheremaining balanceoftheamounts the fourthquarterofFiscal2010duetoconversionthisdebt into million, from $6.8millionforthefourthquarterofFiscal2009,tonil lower interest ratesonourvariable-ratedebt. Fiscal 2010dueprimarilytotheloweroutstandingdebtbalance and fourth quarterofFiscal2009,to$7.3millionforthe of of Fiscal2010dueprimarilytonewstore openings. the fourthquarterofFiscal2009,to$6.6millionfor infrastructure costs. Fiscal 2009,increases instore wageratesandincreases incentral due primarilytotheopeningof39netnewstores sincetheendof Fiscal 2010from $60.5million forthefourthquarterofFiscal2009, improved effi ciencies indistributionandtransportationcosts. primarily toimproved product margins,reduced shrinkprovision and compared to33.8% ofsalesforthesameperiodFiscal2009,due quarter ofFiscal2010.Gross marginincreased to39.1%ofsalesas lion forthefourthquarterofFiscal2009,to$221.7million transactions anda5.8%increase intheaveragetransactionsize. store salesgrowth consisted ofa3.3%increase inthenumberof rable store salesoverthefourthquarterofFiscal2009.Comparable new stores duringFiscal2010aswella9.3%increase incompa- riod inFiscal2009. 15.4% to$364.1millionfrom $315.5millioninthecorresponding pe- The Corporationrecorded aforeign exchangelossonderivative Interest expenseonamountsduetoshareholders decreased $6.8 Interest expensedecreased $7.8million,from $15.1millionforthe Amortization expenseincreased $0.6million,from $6.0millionfor SG&A increased 23.9% to$74.9millionforthefourthquarterof Our costofsalesincreased $12.7million,or6.1%,from $208.9mil- Fourth quartersalesgrowth wasdrivenbytheopeningof39net Sales forthe13weekperiodendedJanuary31,2010increased fewer newstore openingsandlowercapitalrequire tion, cashusedtosettlederivative (offset bythetemporaryclosure offourstores) inFiscal2009.Inaddi- the Corporationincurred a decreased to$6.4millionfrom Net Earnings Provision forIncomeTaxes November 17,2009, ascompared to a$9.4millionlossincurred in U.S.$200.0 million principalamount8.875%Subordinated Notes on Cash FlowsfromInvestingActivities Cash FlowsfromOperatingActivities Cash Flows Liquidity andCapitalResources due toshareholders. expense onlong-termdebtandtheeliminationofinterest onamounts in salesandgross marginasapercentage ofsales,reduced interest 2010. Theincreasewasdrivenmainlybyincreases innetearnings quarter ofFiscal2009to$34.0millionforthefourth of Fiscal2010duetoincreased profi tability. the fourthquarterofFiscal2009to$14.2millionfor with theoutstandingdebtfollowing theredemption oftheoutstanding swap agreement tomitigatebettertheforeign currency riskassociated a derivativefi nancial instrumentassociatedwiththemodifi cation ofa and equipmentwere lowerby$6.7millioninFiscal2010 $40.1 millionfrom $49.7millioninFiscal2009.Purchases ofproperty and anincrease intaxespayablegeneratedFiscal2010. advance ofthelaunchourmultiplepricepointmerchandise offering cal 2010ofmerchandise inventoryaccumulatedintheprioryear The changeinworkingcapitaltrend wasdrivenbyareduction inFis- pared toanincrease of$12.2millioninworkingcapitalFiscal2009. by a$38.2millionreduction inworkingcapitalFiscal2010ascom- to $122.5millionascompared to$115.7millioninFiscal2009driven not hedgedduringthatperiod. on ourU.S.dollar-denominated Deferred Interest Noteswhichwere of thestrengthening oftheU.S.dollarrelative totheCanadiandollar recorded duringthefourthquarterofFiscal 2009drivenbytheimpact on derivativefi nancial instrumentsandlong-termdebtof$5.0million million foreign exchangelosscompares toaforeign exchangeloss on ourU.S.dollar-denominated Deferred Interest Notes.This$5.5 ordinated Notesandthoseusedtomakeacashinterest payment closure oftwostores) inFiscal2010 mation systems.There were 41stores opened(offset bythetemporary Net earnings increasedNet earnings $27.5million,from $6.5millionforthefourth Provision forincometaxincreased $7.4million,from $6.8millionfor During Fiscal2010,cashusedforinvestingactivitiesdecreased to Cash flows provided byoperatingactivitiesinFiscal2010increased $6.4 million loss on the early settlement of $6.4 millionlossontheearlysettlement of $9.4 million in Fiscal 2009. In Fiscal 2010 $9.4 millioninFiscal2009.In 2010 fi nancial instrumentsinFiscal 2010 compared to47stores opened ments forourinfor- due mainly to due mainlyto DOLLARAMA INC. ANNUAL REPORT 2009 19 the Credit the Credit Management’s Discussion and Analysis April 8, 2010 8, April Analysis and Discussion Management’s As of January 31, 2010, the Credit Facility consisted of a (i) Facility consisted of a (i) As of January 31, 2010, the Credit Our ability to make scheduled payments of principal, or to pay Our ability to make scheduled payments time to time seek may from cant shareholders and our signifi We On August 12, 2005, we issued U.S.$200.0 million 8.875% Sub- On August 12, 2005, million Deferred On December 20, 2006, we issued U.S.$200.0 had approximate- As of January 31, 2010, we and our subsidiaries the interest on, or to refi nance our indebtedness, or to fund planned on, or to refi the interest performance, which to will depend on our future capital expenditures nancial, competitive, a certain extent, is subject to general economic, fi beyond our control. or other factors that are legislative, regulatory, level of our operations, we believe that cash Based upon the current the available under together with borrowings operations, ows from fl liquidity needs. Our will be adequate to meet our future Facility, Credit liquidity needs may not be correct to future assumptions with respect described above may not the sources and funds available to us from cient to enable us to service our indebtedness, or cover any be suffi shortfall in funding for any unanticipated expenses. issued our outstanding debt (including publicly purchase or to retire and/or exchanges, in open market pur- cash purchases debt) through or otherwise. chases, privately negotiated transactions, by tender offer mar- will depend on prevailing or exchanges, if any, Such repurchases and other contractual restrictions ket conditions, liquidity requirements, factors. The amounts involved may be material. the Credit Facility, pursuant to which we incurred $120.0 million of to which we incurred pursuant Facility, the Credit of loan A facility and U.S.$201.3 million under the term borrowings B facility ($240.0 million based on the under a term loan borrowings senior closing date of the acquisition), and the exchange rate on the an pursuant to which we borrowed bridge loan facility, subordinated of $240.0 million. aggregate 8.875% per annum payable semi at Notes bearing interest ordinated used the proceeds in November 2012. We annually and maturing Notes, together with Subordinated the sale of these 8.875% from Facility of under the term loan B of the Credit additional borrowings pursuant to an amendment to the U.S.$45.0 million that we incurred under the senior the outstanding borrowings to (i) repay Facility Credit a note owing to certain of (ii) repay bridge loan facility, subordinated At that time, fees and expenses. and (iii) pay related our shareholders bridge loan under the senior subordinated the outstanding borrowings at bearing interest $240.5 million were including the accrued interest Acceptance rate plus 8.25% per annum and would Canadian Banker’s in May 2006. have otherwise matured (increas- at 6-month LIBOR plus 5.75% Notes bearing interest Interest years) per annum, three ing to 6.25% after two years and 6.75% after used the 2012. We payable semi annually and maturing in November distribution to the sale of these notes to make a cash from proceeds expenses. fees and and to pay related certain of our shareholders debt outstanding under ly: $250.6 million of senior secured Credit Facility Facility; and U.S.$212.2 million ($226.9 million based on the exchangeFacility; and U.S.$212.2 million ($226.9 million Notes. Interest rate on January 31, 2010) of Deferred million less the issuance principal amount on the term loan

activities were driven primarily by $18.0 million of activities were A of the Credit Facility due to annual consolidated ex- A of the Credit We are and have historically been signifi cantly leveraged. Our prin- historically been signifi and have are We Capital expenditures for Fiscal 2010 were $33.8 million, offset by $33.8 million, offset for Fiscal 2010 were Capital expenditures The Corporation has historically generated suffi operating cashcient suffi The Corporation has historically generated Cash used by fi nancing activities in Fiscal 2010 was $55.6 million asnancing activities Cash used by fi cipal sources of liquidity have been cash fl ows generated from op- ows generated from of liquidity have been cash fl cipal sources Our principal cash Facility. under the Credit erations and borrowings and have been for working capital, capital expenditures requirements debt service. In connection with the acquisition of the Dollarama busi- into ness in 2004 by an entity formed by Bain Capital, we entered tenant allowances of $3.6 million as compared to $40.5 million offset to $40.5 million offset tenant allowances of $3.6 million as compared by tenant allowances of $2.6 million for Fiscal 2009. The decreased openings spending in Fiscal 2010 was primarily due to fewer store for information systems as compared and lower capital requirements to Fiscal 2009. fl strategy and debt service requirements. ow to fund its planned growth fl to be the case given thatManagement anticipates this will continue achieved an aver- scal years, our new stores fi three over the previous years on the total cashage capital payback period of less than two to launch and inventory) required outlay (including capital expenditures as at January 31, 2010, the Corporation had Further, a new store. $93.1 million of cash and cash equivalents on hand and an undrawn exibility fl further facility of $73.7 million which provides credit revolving to meet any unanticipated cash requirements. Debt and Commitments Capital Expenditures Liquidity A of the Credit Facility, and $2.7 million quarterly scheduled principal and $2.7 million quarterly scheduled Facility, A of the Credit During Fiscal 2009, Facility. of the term loan B of the Credit repayments nancing cash used by fi compared to $25.8 million in Fiscal 2009. In Fiscal 2010, the Corpora- to $25.8 million in compared of $272.4 million due to proceeds tion generated net IPO Cash Flows from Financing Activities Cash Flows from Financing Fiscal 2009 driven by the settlement of a foreign currency swap agree- currency the settlement of a foreign Fiscal 2009 driven by exchange risk associated with our the foreign ment used to mitigate Notes. Subordinated outstanding 8.875% previously cess cash fl ow generation, and by $2.8 million of scheduled quarterlyow generation, and by $2.8 million cess cash fl by offset Facility, on the term loan B of the Credit principal repayments on debt repayment. $1.1 million of deemed interest issuance costs of $27.6 million. The net proceeds of the IPO together million. The net proceeds issuance costs of $27.6 U.S.$200.0 the outstanding used to repay with working capital were Notes Subordinated million principal amount of the 8.875% Senior of the certain shareholders due in 2012, $70.1 million notes owing to Corporation, $53.2 million of the scheduled quarterly principal repayments on the term loan A of the Credit on the term loan A of the Credit scheduled quarterly principal repayments under the terms of a $6.2 million mandatory payment required Facility, the term loan of Common Shares for an aggregate amount of $300.0 aggregate for an of Common Shares 20 DOLLARAMA INC. ANNUAL REPORT 2009 pay acommitment fee(calculatedinarrears) toeach revolving credit prime rateloans. Onthelastdayofeachcalendar quarter, wealso bear interest ataninterest rateequaltotheinterest rateforCanadian BOR rateloansand0.75%for U.S. baserateloans.Swinglineloans and theapplicablemarginpercentage was 1.75% foradjustedLI- for Canadianprimerateloansand 1.75%forbankers’acceptances As ofJanuary31,2010,theapplicable marginpercentage for0.75% ment basedupontheleveloftotallease-adjustedleverage ratio. nated loansandU.S.dollardenominatedare subjecttoadjust- Rate) page(plus0.10%forcertainlenders). the applicableReutersScreen CDOR(Certifi cate ofDepositOffered bankers’ acceptancesfortheappropriate interest periodaslistedon determined asbeingthearithmeticaverageofratesquoted for for certainlenders)plus1.0%perannumor(b)therate Screen CDOR(Certifi cate ofDepositOffered Rate)page(plus0.10% for aninterest periodofonemonthaslistedontheapplicableReuters the arithmeticaverageofratesquotedforbankers’acceptances loans madeinCanadaand(ii)therateperannumdeterminedasbeing in Toronto from timetoasthereference ratefor Canadiandollar to theratewhichRoyalBankofCanadaestablishesatitsmainoffi ce prime rateequaltothegreater of(i)therateinterest perannumequal (2) inthecaseofCanadiandollardenominatedloans,(a)a available byallapplicablelenders,nineortwelvemonthperiods)and the applicableborrower ofone,two,three, orsixmonths(or, ifmade ment RatefordepositsinU.S.dollarsaninterest periodchosenby that displaysanaverageBritishBankersAssociationInterest Settle- the offered ratethatappearsonthepageofTelerate screen 3750 annum equaltotheratedeterminedbyRoyalBankofCanadabe period, asthecasemaybe)plus1.0%perannumor(b)rate funds effective rate(convertedtoabasedon365or366day rate ofinterest forU.S. dollarloansmadeinCanadaand(ii)thefederal tablishes atitsmainoffice inToronto from timetoasthereference interest perannumequal totheratewhichRoyalBankofCanadaes- nated loans,(a)aU.S.baserateequaltothegreater of(i)therate percentage plus,atouroption,(1) inthecaseofU.S.dollardenomi- Credit Facility, otherthanswinglineloans,equalanapplicablemargin $150.0 million(ortheU.S.dollarequivalentthereof). to therevolving loancommitmentsbyanaggregate amountofupto eligible institutions,request additionaltermloantranchesorincreases to receipt ofadditionalcommitmentsfrom existinglendersorother facility. Inaddition,wemay, undercertaincircumstances andsubject $1.3 millionofletterscredit outstandingundertherevolving credit gregate $251.9millionoutstandingundertheCredit Facility, including swingline loansubfacility. AsofJanuary31,2010,there wasanag- includes a$25.0millionletterofcredit subfacilityanda$10.0million denominated inCanadiandollarsandmaturingJune2012,which denominated inU.S.dollars;and(ii)$75.0millionrevolving credit facility January 31,2010)termloanBfacilitymaturinginNovember2011, U.S.$234.3 million($250.6basedontheexchangerate Management’s DiscussionandAnalysisApril8,2010 The applicablemarginpercentages forCanadiandollardenomi- The interest rates perannumapplicabletotheloansunder leverage ratiotest.AsofJanuary31,2010,theterms The interest coverage ratioandthelease-adjustedl covenants are notsubject tofurtheradjust security asourexistingsecured revolving credit facility. otherwise hasthesameterms, pricing,covenants,guaranteesand million secured revolving credit facility, whichmatures inJuly2012and Credit Facility. TheAmendmentNo.6provides uswithanew$75.0 of 2.50:1andalease-adjustedleveragerationo Facility required thatwemaintainaminimuminterest coverage ratio a minimuminterest coverage ratiotestandamaximum comply, onaquarterlybasis,withcertainfi nancial covenants,including prepay, redeem, orrepurchase certainindebtedness. affi liates, enterintoagreements limitingsubsidiarydistributions,and alter thenature ofthebusiness,engageincertaintransactions,with dends, makepaymentson,orredeem orrepurchase equityinterests, acquisitions, assetsalesorsale-leasebacktransactions,declare divi- additional indebtedness,guarantees,orliens,engageinmergers, loans, makecapitalexpenditures, incur, assume,orpermittoexist stricted subsidiaries,to,amongotherthings:makeinvestmentsand ject tosignifi cant exceptions,limitourabilityandtheofre- fee was0.375%. lease-adjusted leverageratio.AsofJanuary31,2010,thecommitment credit facility, subjecttoadjustmentbasedupontheleveloftotal lender inrespect ofanyunusedcommitmentsundertherevolving 8.875% Subordinated Notes have alatermaturitydateandmaydifferent interest rate. ity onthesameterms,exceptthatnewrevolving credit facilitymay credit facilitywhichreplaced ourexistingsecured revolving credit facil- Credit Facilitywhichallowedustoenterintoanewsecured revolving and locallawrequirements. sidiaries, subjecttocertainexceptionsagreed uponwiththelenders of Group L.P.’s capitalstockand thecapitalstockofeachitssub- Inc, Group L.P. andGroup L.P.’s restricted subsidiaries,andapledge the existingandfuture assetsofHoldingsL.P., DollaramaGroup GP subsidiaries, andissecured byasecurityinterest insubstantiallyallof Group GPInc. andallofGroup L.P.’s existingandfuture restricted is guaranteedbyDollaramaHoldingsL.P. (“HoldingsL.P.”), Dollarama if wehaveannualconsolidatedexcesscashfl ows. TheCredit Facility asset dispositions,issuancesofequitysecuritiesordebtsecurities, event ofdefault)theloansincertainassetsalesorother payments oforoffer to prepay (withthefailure todosoconstituting an with allofitsfi nancial covenants. Facility. AsofJanuary31,2010,theCorporationwasincompliance 2.50:1 and4.50:1,respectively, fortheremaining termoftheCredit The Credit Facilitycontainsvariousrestrictive covenantsthat,sub- The Credit Facility requires DollaramaGroup L.P. (“Group L.P.”) to Group L.P. andDollaramaCorporation issued U.S.$200.0million On October21,2009,weentered intoAmendmentNo.6tothe On September22,2009,weentered intoAmendmentNo.5tothe Subject toexceptions,theCredit Facilityrequires mandatorypre- ments andwillbefi xed at everage ratiofi nancial more than4.50:1. lease-adjusted lease-adjusted of theCredit DOLLARAMA INC. ANNUAL REPORT 2009 21 Management’s Discussion and Analysis April 8, 2010 8, April Analysis and Discussion Management’s In addition, Holdings and Dollarama Group Holdings Corporation and Dollarama Group In addition, Holdings contains certain restrictions Notes Indenture Interest The Deferred obligations Notes constitute senior unsecured Interest The Deferred on us, including restrictions on Holdings’, Dollarama Group Holdings on Holdings’, Dollarama Group on us, including restrictions subsidiaries’ ability to make invest- and their restricted Corporation’s stock, de- issue preferred ments and loans, incur indebtedness and equity or repurchase make payments on, or redeem dividends, clare liates, grant liens, sell engage in certain transactions with affi interests, limiting subsidiary distributions, and assets, enter into agreements Notes Inden- Interest engage in certain other activities. The Deferred default,rmative covenants and events of customary affi contains ture of of principal, premium including, but not limited to, non-payment acceleration default and cross of covenants, cross breach interest, events, materialto certain indebtedness, insolvency and bankruptcy of the guarantees. Somejudgments and actual or asserted invalidity and grace periods and are of these events of default allow for notice subject to materiality thresholds. Holdings Corporation. They rank of Holdings and Dollarama Group and Dollarama Group equally in right of payment to all of Holdings’ senior indebtedness, senior unsecured future Holdings Corporation’s Holdings Dollarama Group in right of payment to any of Holdings’ and indebtedness and subordi- senior subordinated future Corporation’s right of pay- in subordinated effectively nated indebtedness and are Holdings Corporation’s ment to any of Holdings’ and Dollarama Group structurally debt, to the extent of such security and are secured future debt and in right of payment to all existing and future subordinated trade payables and lease Facility, other liabilities, including the Credit Notes are Interest obligations, of Holdings’ subsidiaries. The Deferred not guaranteed by any of Holdings’ subsidiaries (other than Dollarama Interest Holdings Corporation, as the co-issuer of the Deferred Group Notes). may redeem all of the Deferred Interest Notes at a price equal to 100% Notes Interest all of the Deferred may redeem plus accrued and unpaid interest, plus deferred of the principal amount Holdings Corporation Dollarama Group if Holdings and if any, interest, amounts. Following a pay certain tax gross-up become obligated to governing the Deferred indenture ned in the as defi change of control Holdings and Notes Indenture”), Interest Notes (the “Deferred Interest to pur- to offer will be required Holdings Corporation Dollarama Group price of 101% of at a purchase Notes Interest chase all of the Deferred plus accrued and unpaid interest, plus deferred their principal amount date of purchase. to the if any, interest), (other than deferred interest Dollarama Group Holdings L.P. (“Holdings”) and Dollarama Group (“Holdings”) and Dollarama Group Holdings L.P. Dollarama Group part, in whole or in Notes may be redeemed, Interest The Deferred Holdings Corporation issued U.S.$200.0 million of Deferred Interest Interest million of Deferred Holdings Corporation issued U.S.$200.0 was 31, 2010, there Notes on December 20, 2006. As of January interest principal amount and deferred U.S.$212.2 million in aggregate on August 15, Notes will mature Interest outstanding. The Deferred Notes accrues and is payable Interest on the Deferred 2012. Interest at on June 15 and December 15 of each year, semi-annually in arrears plus 6.75% as of Decembera rate per annum equal to 6-month LIBOR payment date, Holdings and Dollarama 15, 2009. On each interest in cash or de- Holdings Corporation may elect to pay interest Group will become in which case such interest fer the payment of interest, interest shall accrue on such deferred and interest interest deferred due on periods. For the payment of interest for subsequent interest Holdings Corporation June 15, 2009, Holdings and Dollarama Group Notes, which Interest on the Deferred the payment of interest deferred was also an amount of U.S.$8.7 million. Interest payment represented on June 15, 2008 and December 15, 2008. An aggregate deferred outstanding remains interest amount of U.S.$27.4 million of deferred at the latest upon redemp- as of January 31, 2010 and will be payable elected to Notes. Holdings Interest tion or maturity of the Deferred due on December 15, 2009 in the make a cash payment of interest amount of $8.4 million. of prin- as percentages prices (expressed at the following redemption plus accrued and unpaid interest, interest), cipal amount plus deferred during periods set forth date, if redeemed to the redemption if any, below: Year Year December 15, 2009 to December 14, 2010 December 15, 2010 and thereafter 101.00 100.00 Price Redemption Deferred Interest Notes of 8.875% Subordinated Notes due in 2012 on August 12, 2005. On Notes of 8.875% Subordinated Dollarama Corporation consum- and L.P. Group the Redemption Date, outstanding U.S.$200.0 million principle of the mated the redemption with their Notes in accordance Subordinated amount of the 8.875% was 104.438% of the principal amount price terms. The redemption Notes, plus accrued and unpaid interest of the 8.875% Subordinated cash on hand and from and was paid from to the Redemption Date of the IPO. the net proceeds 22 DOLLARAMA INC. ANNUAL REPORT 2009 rdtFclt 2054 195 2861 ------$ - - Notes,weassumedthecurrent applicablerates.We donothaveanyobligation topayinterest incashuntilmaturity. required. Where swapagreements are inplace,themandatoryinterest paymentsrefl ect swappayments.FortheDeferred Interest $ - - Based ontheassumedinterest ratesontheamountsdueunderCredit Facility,(2) applyingthecurrent foreign exchangerat - paidtolandlords, alltogetherrepresenting lessthan1/3ofourtotalleaseexpenses. $ - Represent thebasicannualrent, exclusiveofthecontingentrentals, commonarea maintenance,real(1) estatetaxesandother $ - - 226,872 - and commitments Total contractualobligations 248,611 $ 1,312 1,925 $ 1,312 $ - Total 250,564 commitments Letters ofcredit andsurety bonds Commitments 226,872 Mandatory interest payments Deferred Interest Notes Credit Facility Long-term borrowings Operating leaseobligations Lease fi Contractual obligations sheet arrangementsandourcommitments: The followingtablessummarizeourmaterialcontractualobligations(inthousandsofdollars)asJanuary31,2010,including Contractual ObligationsandCommercial Commitments Management’s DiscussionandAnalysisApril8,2010 Total contractualobligations we paidBainCapitalanaggregate one-timefeeof$5.0million. nection withtheclosingofourIPO.Inconnectionsuchtermination, the otherhand,wasterminatedeffective asofOctober16,2009incon- the Corporationanditssubsidiariesononehand,BainCapital on Real PropertyLeases Agreement Advisory Termination ofManagementAgreement Transactions withRelatedParties lease agreements. Rentalexpenses associatedwiththese related- center from entitiescontrolled byLarryRossy, pursuant to long-term at theclosingofIPO. ment paidBainCapitalaone-time feeof$1.0millionwhichwaspaid investigations andnegotiations,inaccordance withsuchagree- turing adviceandanalysis,aswellassistancewithduediligence into anadvisoryagreement withBainCapitalforfi nancial andstruc- We currently lease18stores, four warehouses and ourdistribution In connectionwiththeCorporation’s IPO, theCorporationentered The managementagreement datedNovember18,2004between nancing

132 132 $ - $ - - $ - $ - $ - $ - $ 1,312 $ 1,312 $ ,0,6 1076$ 4,7 3884$ 102$ 627$ 238,584 56,227$ 61,072 $ 308,854$ 342,379$ $ 100,746$ 1,107,862 $

(1) 5759 7,1 $ 057 565 6,7 $ 627 238,584 $ 56,227 $ 61,072 $ 65,635 $ 70,567 $ 75,514 $ 567,599 $ (2) ,0,5 9,3 3239$ 0,5 6,7 5,2 238,584 56,227$ 61,072 $ $ 1,106,550 $ 308,854$ 342,379$ 99,434 $ 155 2,6 321 1,4 - - - 16,347 23,201 21,968 61,515 oa Ya Ya Ya Ya Ya Thereafter Year 5 Year 4 Year 3 Year 2 Year 1 Thereafter Year 5 Total Year 4 Year 3 Year 2 Year 1 Total retail inventory methodvaluedatthe lowerofcost(weighted-average) Valuation ofMerchandise Inventories Critical AccountingPoliciesandEstimates Off-Balance Sheet Obligations Actual results maydiffer from theseestimates. sumptions thatwebelievetobe reasonable underthe circumstances. an ongoingbasis,basedonhistorical experienceandvariousotheras- enues andexpensesduringtheperiod.We evaluateourestimateson at thedateoffi nancial statements,andreported amountsofrev- assets andliabilities,thedisclosure ofcontingentassetsandliabilities make estimatesandassumptionsthataffect thereported amountsof ance sheetobligations. gregate amountofapproximately $9.8millionforFiscal2010. party leasesare established atmarkettermsandrepresented anag- The valuationof store merchandise inventories isdeterminedby In preparing ourfi nancial statements, managementisrequired to Other thanouroperatingleasecommitments,wehavenooff-bal- hr e where hre charges off-balance

the the DOLLARAMA INC. ANNUAL REPORT 2009 23 Management’s Discussion and Analysis April 8, 2010 8, April Analysis and Discussion Management’s CICA 3064 replaces CICA 3062 and establishes standards for the CICA 3062 and establishes standards CICA 3064 replaces In June 2009, CICA amended Section 1506, “Accounting Chang- In June 2009, the CICA amended section 3862, “Financial Instru- We recognize rental expense and inducements received from land- from received expense and inducements rental recognize We recognition, measurement and disclosure of goodwill and intangible and disclosure measurement recognition, nition and initial recognition to the defi relating assets. The provisions of provisions equivalent to the corresponding of intangible assets are to clarify criteria forIAS 38, Intangible Assets. CICA 1000 is amended in CICA by guidance of an asset. CICA 3450 is replaced recognition entities that have adopted 3064. EIC 27 is no longer applicable for costs to deferred CICA 3064. AcG 11 is amended to delete references guidance on development costs as intangible assets and to provide interim and annual for is effective under CICA 3064. This new standard or after October 1, 2008.nancial statements for years beginning on fi 2, 2009 with no impact onThis Section was adopted as of February nancial statements. the consolidated fi the scope of this section changes in accounting es”, to exclude from primary basis of an entity’s policies upon the complete replacement for years beginning after of accounting. This amendment is effective July 1, 2009. The adoption of this amendment to Section 1506 had nancial statements. no impact on the consolidated fi requirements to include additional disclosure ments — Disclosures”, nancial instruments and liquidity for fi about fair value measurement hierarchy a three-level These amendments require risk disclosures. cance of the inputs used in making the fair value ects the signifi that refl Fair value of assets and liabilities included in Level 1 measurements. for to quoted prices in active markets determined by reference are identical assets and liabilities. Assets and liabilities in Level 2 include valuations using inputs other than the quoted prices for which all sig- or based on observable market data, either directly cant inputs are nifi undiscounted cash fl ows from its use together with its residual value. together with its residual its use ows from undiscounted cash fl the impairment to be to be impaired, considered If such assets are by which the carrying amount by the amount is measured recognized their their fair value. The estimates regarding of the assets exceeds to our conditions relating about future fair value include assumptions those from ows differ If actual cash fl industry. business, as well as the may be required. write-offs by management, additional projected a straight-line basis over the term of the leases. Any difference on lords amounts actually paid is between the calculated expense and the sheet. lease inducements on our balance ected as deferred refl Accounting Changes Financial Instruments - Disclosures Operating Leases Recent Accounting Pronouncements Accounting Changes Implemented Goodwill and Intangible Assets chan- the distribution center affected by many factors, affected n our estimates of markdowns down is determined. We estimate our markdown re- We down is determined. Long-lived assets are reviewed for impairment whenever events or reviewed Long-lived assets are Goodwill and trade name are not subject to amortization and are not subject to amortization and are Goodwill and trade name are Property and equipment are carried at cost. Property and equip- carried at cost. Property and equipment are Property dise on hand, historical markdown statistics and future merchandising merchandising and future dise on hand, historical markdown statistics plans. The accuracy of our estimates can be compared with actual results. compared changes in circumstances indicate that the carrying amount of an as- changes in circumstances Factors which we consider could trigger set may not be recoverable. cant negative not limited to, signifi include, but are an impairment review losses historical or projected and current, industry or economic trends that demonstrate continuing losses. Impairment is assessed by com- net paring the carrying amount of an asset with the expected future tested for impairment annually or more frequently if events or circum- frequently tested for impairment annually or more Impairment is stances indicate that the assets might be impaired. unit to which it ed by comparing the fair value of the reporting identifi carrying unit’s the extent the reporting to its carrying value. To relates the amount of impairment in amount exceeds its fair value, we measure price allocation, and any excess a manner similar to that of a purchase of carrying amount over the implied fair value of goodwill is charged to earnings is determined. Future in the period in which the impairment events could cause us to conclude that impairment indicators exist and Any resulting that goodwill associated with our business is impaired. impairment would be charged to net earnings. ment are amortized over the estimated useful lives of the respective amortized over the estimated useful lives of the respective ment are method, computer equip- assets as follows: (i) on the declining balance straight-line method, store ment and vehicles at 30%; and (ii) on the equipment at eight to ten years, computer software and warehouse of the leases. at the terms ve years and leasehold improvements at fi for impairment whenever events reviewed and equipment are Property indicate that the carrying value of an as- or changes in circumstances set might not be recoverable. Impairment of Long-Lived Assets Goodwill and Trade Name Goodwill and Trade Property and Equipment or net realizable value. Under the retail inventory method, merchandise inventory method, merchandise the retail value. Under or net realizable cost basis by applying an average cost to converted to a inventories are at that are inventories selling ratio. Merchandise or warehouses and inventories that are in-transit from suppliers, are suppliers, are in-transit from that are and inventories or warehouses value, determined on a cost and net realizable stated at the lower of inventories include items basis. Merchandise weighted-average cost estimate of their best down to management’s that have been marked in cost of sales in the period in included value and are net realizable which the mark serve based on the consideration of a variety of factors, including but of a variety of factors, including serve based on the consideration seasonal mer not limited to quantities of slow-moving or carryover some of which are outside of our control, including changes in eco- including outside of our control, some of which are we have Historically, nomic conditions and consumer buying trends. i cant differences not experienced signifi 24 DOLLARAMA INC. ANNUAL REPORT 2009 consultants asrequired. Regular progress reporting to the auditcom- requirements employees supplementedwith willbemet with internal ship team.Resource requirements havebeenidentifi ed andallIFRS lead theconversionproject alongwithsponsorship from the leader- staffcurrent hasbeenappointedto CanadianGAAPtoIFRS.Internal International FinancialReportingStandards(“IFRS”) International currently evaluatingtheimpactofadoptionthisamendment. does notintendtoadoptthisamendmentearly. TheCorporation is lic companieswillhaveadoptedIFRS.Atthispoint,theCorporation amendment iseffective January1,2011,atwhichtimeCanadianpub- separated from itshost debtinstrumentforaccountingpurposes.This amendment alsoclarifi es whenanembeddedprepayment optionis interest ratemethod afteradebtinstrumenthasbeenimpaired. The Recognition andMeasurement”, toclarifyapplicationoftheeffective Financial Instruments–RecognitionandMeasurement non-controlling interests Business Combinations,consolidatedfi Future AccountingChanges September 30,2009. ply forannualfi nancial statementsrelating tofi scal yearsendingafter on observablemarketdata.TheamendmentstoSection3862ap- indirectly. Level3valuationsare basedoninputsthatare not based Management’s DiscussionandAnalysisApril8,2010 balance sheetasatFebruary1, 2010. purposes, ofamountsreported forFiscal2011includingtheopening poration’s Fiscal2012andwillrequire restatement, forcomparative modifi cation, forfi nancial periodsbeginning onJanuary1,2011. accounting enterpriseswillberequired toapplyIFRS,infullandwithout a third andfinal IFRSOmnibusExposure Draftconfi rming thatpublicly of thesenewstandards. with earlyadoptionpermitted.TheCorporationisassessingtheimpact fi nancial statementsrelating toyearsbeginningonJanuary20,2011 Sections 1601and1602applytointerimannualconsolidated quarter beginningonJanuary31,2011withearlyadoptionpermitted. combinations forwhichtheacquisitiondateisonorafterfi rst Statements (January2008)”.Section1582iseffective forbusiness (January 2008)”,andIAS27,“ConsolidatedSeparateFinancial FinancialReportingStandard International 3,“BusinessCombinations in asubsidiary. Thesesectionsprovide theCanadianequivalentto establish anewsectionforaccountingnon-controlling interest nations”, andSection1600,“ConsolidatedFinancialStatements”, “Non-controlling Interests”, replace Section1581,“BusinessCombi- tion 1601,“ConsolidatedFinancialStatements”;andSection1602, The Corporationhascommenced theprocess totransition from The adoptiondateofJanuary31,2011isthefi rst day oftheCor- In October2009,theAccountingStandards Board (“AcSB”)issued In June2009,CICAamendedSection3855,“FinancialInstruments– CICA HandbookSection1582,“BusinessCombinations”;Sec- nancial statementsand all accountingpolicychoicesasproposed bymanagement. committee ona quarterlybasis. the IFRSchangeover project are provided to the Corporation’s audit changeover planearlyinFY11. Updatesregarding theprogress of quantify theimpactofadopting IFRSonthefi nancial statements. and impactsonthefi nancial statements,andassuch isunableto agement hasnotyetfi nalized itsanalysisofaccountingpolicieschoice progressed inthedesignphaseofitschangeoverplan.However, man- phase. DuringthefourthquarterofFY10,Corporationsignifi cantly and hasprepared draftanalysisfortheimpactandevaluation Current StatusofOurIFRSChangeoverPlan: who are impactedbytheconversion. business processes, modification ofagreements andtrainingofallstaff pact analysisphaseandwillincludechangestoinformationsystems, Phase 3: require theauditcommitteeofCorporationtoreview and detailed IFRStrainingtokeyfi nance andotherpersonnel. agreements andother contractualarrangements,andthedeliveryof controls,on internal thereview of compensationarrangements,debt ment oftheimpactaccountingandotherbusinessprocess changes reporting duringFY11 andchangeovertoIFRSinFY12,theassess- and thedevelopmentofastrategyfordualCanadianGAAPIFRS policy recommendations, completionofanITsystemsimpactanalysis tion’s accountingpoliciesandIFRStoprovide abasisforaccounting the completionofanalysesdifferences betweentheCorpora- according tothepriority levelsassignedtothem. Phase 2: ing toIFRS. amount oftimerequired toassesstheimpactofchangesintransition- of thisanalysisare priorityrankedaccording tocomplexityandthe tify areas thatmaybeaffected bythetransitiontoIFRS.Theresults Phase 1: applied tospecifi c areas from start tofi nish: phases, whichincertaincaseswillbeprocess concurrently asIFRSis impacts. training keypersonnel,byproviding generalawareness trainingonIFRS Fiscal 2010.Atthistime,theCorporationhasbegunprocess of been implementedalongwithscheduledtrainingsessionsthroughout mittee oftheCorporationonstatusIFRSconversionhas We expecttocompletethefi nal stagesofthedesignphaseour The Corporationhascompletedthescopinganddiagnosticphase In thelastphase,wewillimplementallchangesapproved intheim- The conclusion of the impact analysis and evaluation phase will Theconclusionoftheimpactanalysisandevaluationphasewill Thisphaseinvolvesthedevelopmentofadetailedproject plan, During thisphase,itemsidentifi ed inthediagnosticare addressed This phaseinvolvesperformingahighlevelimpactanalysistoiden- The implementationproject oftheCorporationconsiststhree key Implementationphaseandreview phase: Impactanalysisandevaluationphase: Scopinganddiagnosticphase: approve DOLLARAMA INC. ANNUAL REPORT 2009 25 Management’s Discussion and Analysis April 8, 2010 8, April Analysis and Discussion Management’s Under Canadian GAAP, when a long-lived asset does not have when a long-lived asset does Under Canadian GAAP, should be done when an asset does Under IFRS, asset grouping should be based on a rationale for goodwill, the grouping Moreover, the above to regard Management has completed its analysis with ows fl cash whenever the estimated future Under Canadian GAAP, testing and determining an impairment may result in The difference impairment losses of any previous the reversal IAS 36 also requires Under IFRS there are no bright-line fi nance lease criteria as com- nance fi no bright-line are Under IFRS there The Corporation has developed internal methodology (decision expected differences and concluded that no material adjustment is expected differences required. identifi able cash fl ows that are largely independent of those from other largely independent of those from ows that are able cash fl identifi assets for im- with other related assets, that asset must be grouped to as the asset group. pairment. This is referred ows, that to net cash fl ows, as opposed able cash infl not have identifi other assets. of those from independent are manage- which the entity’s basis and allocated to the lowest level at This may be an ment monitors the performance of its acquisition. of CGUs but cannot be larger than a segment. individual CGU or group in may not result units under Canadian GAAP the reporting However, used in IAS 36. assessment at as low a level as the CGU is less than the carrying on an undiscounted basis of a property and recorded an impairment loss is measured amount of the property, based on fair values. Under IFRS, IAS 36 Impairment of Assets (“IAS if the recover- an impairment charge to be recognized requires 36’’) able amount, determined as the higher of the estimated fair value less costs to sell or value in use, is less than carrying amount. The impair- ment charge under IFRS is equal to the amount by which the carrying amount. amount exceeds the recoverable assets carrying values of impairment charges, where frequent in more may have been supported under Canadian GAAP on an undiscounted ow ow basis, but cannot be supported on a discounted cash fl cash fl basis. the impairment charge have changed requiring circumstances where be signifi cant, management is still in the process of assessing the ap- of assessing cant, management is still in the process be signifi rst time adoption option. plication of this fi cause certain leases to tenants which may to Canadian GAAP, pared leases, as isnance leases rather than operating ed as fi to be classifi under Canadian GAAP. treatment current generally the Corporation’s cation under IFRS. IFRS indicators to assist in lease classifi using tree) nalizing its assessment review of fi Management is still in the process cant no signifi however, of the impact of this new accounting policy, expected. adjustments are Grouping of Assets for Impairment Purposes Impairment of Long-lived Assets Major differences with current accounting policies with current Major differences Leases IFRS 1 allows the Corporation an exemption to not apply retrospec- We will continue to apply the cost model for PP&E and will not restate will continue to apply the cost model for PP&E and will not restate We IFRS 1 allows an entity to initially measure an item of PP&E and IFRS 1 allows an entity to initially measure IFRS 1 generally provides for the business combinations standard for the business combinations standard IFRS 1 generally provides apply IFRS 3 to business com- not elect to retrospectively will We IFRS 1, “First-Time International Adoption of Financial Reporting policy choices Management is analyzing the various accounting The Corporation has identifi ed the areas noted below as those ex- noted below ed the areas identifi The Corporation has tively IFRS 2, “Share-Based Payments” requirements to equity instru- to equity Payments” requirements tively IFRS 2, “Share-Based November 2, 2002 or which vested before ments granted on or before transition date to IFRS. Although not expected to the Corporation’s investment property upon transition to IFRS at fair value as deemed investment property GAAP revalua- using a previous cost (or under certain circumstances application of the cost model under tion) as opposed to full retroactive IFRS. Under this option, fair value as deemed cost will become the new cost amount for qualifying assets at transition. to be applied either retrospectively or prospectively from the date of the from or prospectively to be applied either retrospectively all business combinations after a select- transition to IFRS (or to restate all an entity to restate application would require ed date). Retrospective nition of a business under IFRS. prior transactions that meet the defi prior to the transition date, and such business binations that occurred Any goodwill arising on such busi- combinations will not be restated. the transition date will not be adjusted from ness combinations before determined under Canadian GAAP the carrying amount previously under of applying these exemptions except as required as a result IFRS 1. Standards” (“IFRS 1”), provides entities adopting IFRS for the fi rst time the fi entities adopting IFRS for (“IFRS 1”), provides Standards” mandatory exceptions inwith a number of optional exemptions and applica- for full retrospective to the general requirement certain areas tion of IFRS. to be the most appropri- available and will implement those determined summarized as follows: are ate for the Corporation which at this time pected to have the most signifi cant impact on our fi nancial statements. cant impact on our fi signifi pected to have the most list of expected changes. As a complete do not represent These areas phase, and as changes to further into the implementation we progress may occur prior to our change- IFRS standards Canadian GAAP and described below may be sub- and impacts over date, the differences to disclose additional impacts on our will continue ject to change. We systems including expected quantitative impacts, reporting, nancial fi as reports our business in future of and other areas and processes determined. they are Share-Based Payments Property, Plant and Equipment (“PP&E”) Property, Business Combinations First time adoption PP&E to fair value under IFRS. We will use the historical bases under PP&E to fair value under IFRS. We Canadian GAAP as deemed cost under IFRS at the transition date. 26 DOLLARAMA INC. ANNUAL REPORT 2009 39 requirements cannotbemadeatthistime,pendingfurtherreview. applied atthetransitiondate.ThefullextentofimpactapplyingIAS methodology hasbeensetupforretrospective testingandhasbeen ness forderivativefi nancial instruments.Consequentlyanewtesting critical termsmatchingmethodforretrospectively assessingeffective- with IFRS.IFRSdoesnotallowtheuseofshortcutmethodor ods toevaluateretrospective hedgeeffectiveness are notconsistent IFRS issubstantiallythesame,existingCanadianstandards andmeth- Income Taxes onintangibleassets differences –temporary Hedges andDerivatives impacts are expectedinthisarea. ment lossesinanycircumstance. and reversed. CanadianGAAPdoesnotpermitthereversal ofimpair- Management’s DiscussionandAnalysisApril8,2010 percent ofthecarrying amount. represents thebalanceincumulativeeligiblecapitalpoolplus25 and specifi es thatfortheseassets,atanypointintime,thetaxbasis incurred; Section3465 –Incometaxesaddresses thisspecifi c situation are deductiblefortax purposestotheextentof75percent ofthecost the current IncomeTax Act(Canada),“eligiblecapitalexpenditures” asset orliabilityanditscarryingamountinthebalancesheet.Under temporary differences thatare differences betweenthetaxbasisofan compliance withIAS39requirements, at thetransitiondate. lationships andhedgeeffectiveness havebeenreviewed toensure than underCanadianGAAP. Assuch,documentationofhedgere- presentation Financial statements Area Based ontheanalysiscompletedbymanagement,nosignifi cant The definition oftemporarydifferences underIFRSisgenerallycon- Under CanadianGAAP, future incometaxes are calculatedfrom Moreover, althoughhedgeaccountingunderCanadianGAAPand Under IFRS,hedgeeffectiveness requirements are more onerous over toIFRS Quantify theeffects ofchange- format Prepare fi nancial statements choices Evaluate andselectIFRS1 policies Evaluate andselectongoing IFRS andCanadianGAAP Identify keydifferences between Key Activity Property, PlantandEquipment Share-based Payments Share-based is expectedinthisarea. depreciated overtheir usefullives. in additionalindividuallineitemsthefi xed assets subledgerbeing be depreciated separatelyoveritsestimatedusefullife.Thismayresult with acostthatissignificant inrelation tothetotalcostofitemmust communications aboutIFRSconversion. Canadian PerformanceReportingBoard withregard tothePre 2011 based ontherecommendations publishedinOctober2008bythe accounting policieswillbereviewed consequently. instead ofaccountingforastheyoccur. is theIFRSrequirement toestimateforfeitures atthetimeofgrant, ment principles.FortheCorporation,oneofapplicabledifferences pact related tothisissue. Management iscurrently fi nalizing thecalculationofpotentialim- sheet todeterminethetemporarydifference relating totheseassets. GAAP, shouldbecompared withthecarryingamountinbalance percent adjustmentofthecarryingamountasallowedunderCanadian tax basisoftheseassets,withouttakingintoconsiderationthe25 capital expenditures suchastheonedescribedabove.Assuch, guidance inrelation tothedeterminationoftaxbasiseligible sistent withCanadianGAAP. However, IFRSdoesnotprovide specifi c quarterly basis be analyzedandreviewed on a Subsequent changestoIFRSwill end ofFiscal2010 all itemstobecompletedbythe Senior managementsign-off for Milestones Given thenature ofthe Corporation’s assets,nosignifi cant impact IFRS requires acomponentapproach: eachpartofanitemPP&E The following table summarizes the status of our changeover plan The followingtablesummarizesthestatusofourchangeoverplan The difference hasnosignifi cant impactatthetransitiondate,but There are multipledifferences betweenbothGAAPinthemeasure- in progress Quantifi cation ofimpactsare statements isundercompletion Preparation ofdraftfi nancial completed is accounting policyalternatives Evaluation andselectionof IFRS differences Completed theidentifi cation of Status DOLLARAMA INC. ANNUAL REPORT 2009 27 Status differences cation of IFRS Identifi under with system impacts is progress Selection of parallel processing solution is completed solution is Implementation of the under progress Assessment of IFRS impacts on existing internal process- control under es and procedures progress and Revision of actual controls cant process design of signifi changes will start during Fiscal 2011 training on General awareness provided. IFRS impacts already Detailed training on relevant during topics will be provided Fiscal 2011 Ongoing communication to external stakeholders through disclosures are Periodic status project to senior management presented and audit committee management continues to Project identify critical path tasks and matters resourcing of identifying issues will Process rst quarter of start during the fi Fiscal 2011 Management’s Discussion and Analysis April 8, 2010 8, April Analysis and Discussion Management’s Milestones nancial systems fi Required parallel changes and set up of to be completed by processing the end of Fiscal 2010 changes Assessment of required to be completed by the end of Q2 Fiscal 2011 Revision to actual internal cations planned modifi controls quarter of Fiscal for the third 2011 Timely to align training provided with work under transition – train- ing to be substantially completed by the end of Fiscal 2011 of the Communicate effect transition during Fiscal 2011 and assign project Procure resources being Changes to agreement completed by the end of third quarter Fiscal 2011 design and Identify and assign necessary with the requisite resources expertise for technical analysis and implementation Assess impacts of IFRS accounting on business activities standards Identify impact on contractual nancial including fi agreement covenants, employee and management compensation plans Provide training to accounting Provide senior executives and board staff, (including audit of directors committee) on Communication of progress conversion plan to internal and external stakeholders Key Activity IFRS Identify and address changes that require differences nancial systems to fi to Evaluate and select methods for parallel need address of 2010 general processing and ledgers and for planning monitoring purposes to exist- changes Assess required and ing internal processes control procedures Design and implement internal to one-time with respect controls changeover adjustments and ongoing changes For changes to accounting ed, policies and practices identifi controls assess the disclosure and procedures effectiveness implications effectiveness nancial reporting IFRS impacts on business and functions groups Training and communication Training Internal over control fi IT systems Area 28 DOLLARAMA INC. ANNUAL REPORT 2009 Foreign ExchangeRisk Foreign Market Risk Quantitative AndQualitativeDisclosures About currency andinterest rateswapagreements withitslenders toreplace qualify forhedgeaccountingas ofthatdate. October 16,2009,theforeign currency swapagreements nolonger tion exercised itscalloptiononthe8.875% Subordinated Noteson agreements qualified forhedgeaccounting.However, astheCorpora- 8.875% Subordinated Notes.Originally, theseforeign currency swap minimize ourexposure toexchangeratefl uctuations inrespect ofour based U.S.dollar-denominated termloans. exchange rateandinterest ratefl uctuations inrespect ofourLIBOR- matching thoseoftheunderlyingdebttominimizeourexposure to foreign currency andinterest rateswapagreements withmaturities life tomaturity. undiscounted Canadiandollarinterest obligationsovertheremaining in additionalCanadiandollardebt,aswell$0.54million Canadian dollarrelative totheU.S.dollarwouldresult in$4.46million our U.S.dollar-denominated debt,eachweakeningbyonecentof dollar-denominated debt.Inabsenceofforeign exchangehedgingof sus theU.S.dollarwouldreduce ourfundsavailabletoserviceU.S. downward fluctuation intheexchangerateofCanadiandollarver- modifying foreign exchange riskassociatedwiththehedgeditem. to ensure that theseinstrumentsare highlyeffective atreducing or instruments weusetohedgeexposure toforeign currency fl uctuation impact ofthisvariation.We periodicallyexaminethederivativefi nancial before taxes.Theseasonality ofourpurchases willaffect thequarterly approximately $2.0million annualdecrease inouroperatingearnings in theCanadiandollarrelative toU.S.dollarexchangerateresults in of ourcurrency riskmanagement program, every$0.01depreciation ticipated purchases of merchandise. We estimatethatintheabsence management purposesandare designatedashedgesofspecifi c an- majority offoreign exchange forward contractsare usedonly forrisk from fl uctuations intheU.S.dollar relative totheCanadiandollar. The Management’s DiscussionandAnalysisApril8,2010 the Canadiandollar. against theU.S.dollarandfl uctuation oftheU.S.dollaragainst cost ofsalesisimpactedbythefl uctuation oftheChineserenminbi chandise from suppliersinChinausingU.S.dollars.Therefore, our dian dollar. Inparticular, wepurchase amajorityofourimportedmer- impacted bythefl uctuation offoreign currencies againsttheCana- of 50%ourpurchases. Accordingly, ourresults ofoperationsare this direct sourcing from foreign suppliersaccountedforinexcess wan, ThailandandTurkey. ForFiscal2009and2010todate, suppliers, includingsuppliersinChina,Brazil,India,Indonesia,Tai- ly increasing ourpurchases ofmerchandise from low-costoverseas On December18, 2008,theCorporationentered intonewforeign Similarly, wehadentered intoforeign currency swapagreements to As required bythetermsofCredit Facility, wehaveentered into In addition,amajorityofourdebtisinU.S.dollars.Therefore, a We useforeign exchangeforward contractstomitigate therisk While allofoursalesare inCanadiandollars,wehavebeensteadi- conversion rateof1.19. at LIBORplus1.75%(inU.S.dollars)withafi xedU.S./Canadiandollar acceptance rateplus2.3%(inCanadiandollars)andtoreceive interest on thestatednotionalamountatavariablerateofCanadianbankers’ at 1.19.Theagreements provide fortheCorporationtopayinterest bankers’ acceptancerateandfi x theexchange rateonthesepayments convert theinterest rate onthedebtfrom U.S.dollarLIBORtoCanadian qualify forhedgeaccounting. of January29,2010.Thenewcurrency andinterest rateswapsdonot existing foreign currency andinterest rateswapswithamaturity date rency and interest rateswapagreements withitslenderstoreplace the dollar conversionrateof1.15. to receive interest atLIBOR(inU.S.dollars)withafi xed U.S./Canadian Canadian bankers’acceptancerateplus0.3%(indollars)and tion topayinterest onthestatednotionalamountatavariablerateof swap arrangement.Theamendedagreement provides fortheCorpora- from afixed-for-fi xed rateswaparrangementtoafl oating-for-fl oating rate eign currency andinterest rateswapagreement withoneofits lenders Interest RateRisk Interest result ina$0.6millionchangeinterest expenseonthe notes. est atvariablerates.Eachquarter pointchangeininterest rateswould Notes basedontheexchangerate onJanuary31,2010,bearinginter- revolving loanfacility. would result ina$0.2millionchangeinterest expenseonour existing entire revolver isdrawn,eachquarterpointchangeininterest rates to $75.0millionwhichbearsinterest atvariablerates.Assumingthe an existingrevolving loanfacilitywhichprovides forborrowings ofup million changeininterest expenseonsuchtermloans. We alsohave rates. Eachquarterpointchangeininterest rateswouldresult ina$0.6 on theexchangerateJanuary31,2010,bearinginterest atvariable $250.6 millionintermloansoutstandingundertheCredit Facilitybased est paymentsduetochangesininterest rates.We haveapproximately capital expenditures. Theseobligationsexposeustovariabilityininter- U.S./Canadian dollarconversionrateof1.20. and toreceive interest atLIBOR plus1.75%(inU.S.dollars)withafi xed of Canadianbankers’acceptancerateplus2.5%(indollars) poration topayinterest onthestatednotionalamountatavariablerate rate onthesepaymentsat1.20.Theagreement provides fortheCor- LIBOR toCanadianbankers’acceptancerateandfi x theexchange Corporation toconverttheinterest rateonthedebtfrom U.S.dollar swap doesnotqualifyforhedgeaccounting. maturity dateofJanuary30,2009.Thenewcurrency andinterest rate the existingforeign currency andinterest rateswapagreements witha The January26,2010swapagreements enabletheCorporationto On January26,2010,theCorporationentered intonewforeign cur- On November17,2009,theCorporationamendedanexistingfor- We alsohaveapproximately $226.9millionofDeferred Interest We usevariable-ratedebttofi nance aportionofouroperations and In addition,theDecember18,2008swapagreement enablesthe DOLLARAMA INC. ANNUAL REPORT 2009 29 by fi nding by fi Management’s Discussion and Analysis April 8, 2010 and Analysis Discussion Management’s There were no changes in our internal control over fi nancial report- over fi no changes in our internal control were There of a nature time involved in legal proceedings time to from are We at low price points is subject quality merchandise Our ability to provide For a complete description of the fi nancial instruments of the Cor- nancial instruments of the fi For a complete description our we evaluated, with the participation of As of January 31, 2010, We believe that our additional fi xed price points of $1.25, $1.50 and believe that our additional fi We have a material im- uctuations, in particular, exchange rate fl Foreign ing that occurred during Fiscal 2010 that have materially affected, during Fiscal 2010 that have materially affected, ing that occurred over our internal control likely to materially affect reasonably or are nancial reporting. fi of money and yield curves. nancial state- 10 to our consolidated fi to note poration, please refer 31, 2010. ments as of January Legal Proceedings Risk Factors As a dollar store, we are to future particularly vulnerable increases in operating and merchandise costs. Controls and Procedures Controls cost savings or operating effi ciencies in another. ciencies cost savings or operating effi by adjusting cost increases exibility to address $2.00 will give us some fl no guarantee that is, however, our selling price on certain items. There prices at increased products our customers will be willing to purchase costs in a meaningful way or that we will be successful in offsetting has there Furthermore, given the limited range of prices which we offer. could be passed any cost increases historically been a time lag before can be no assurance that we will be able on to our customers. There to our customers. to pass on any cost increases to a number of factors that are beyond our control, including merchandise beyond our control, to a number of factors that are and occu- in rent increases uctuations, exchange rate fl costs, foreign in in labour (including any increases ation and increases pancy costs, infl t- our profi the minimum wage) and fuel costs, all of which may reduce ows. In the past as a ability and have an adverse impact on our cash fl to our unable to pass cost increases we were xed price retailer, single fi As such, we have the price of our merchandise. customers by increasing of our operations in one area cost increases attempted to offset Chief Executive Offi cer and our Interim Chief Financial Offi cer, the effec- cer, Financial Offi cer and our Interim Chief Chief Executive Offi and our internal and procedures controls tiveness of both our disclosure our Chief Based on these evaluations, nancial reporting. over fi control cer concluded that and our Interim Chief Financial Offi cer Executive Offi over and our internal control and procedures controls our disclosure as of January 31, 2010. In making the effective were nancial reporting fi we used the nancial reporting, over fi evaluation of our internal control Organizations of thecriteria set forth by the Committee of Sponsoring Framework. – Integrated Commission in Internal Control Treadway considered normal to our business. We believe that none of the litigation believe that none normal to our business. We considered is ma- involved, individually or in the aggregate, currently in which we are of operations. or results nancial condition terial to our consolidated fi In the event a derivative fi nancial instrument designated as a cashnancial In the event a derivative fi not designated as hedges nancial instruments which are Derivative fi Our interest rate risk is primarily in relation to our fl oating rate bor- to our fl rate risk is primarily in relation Our interest We have signifi cant cash fl ows and long-term debt denominated cant cash fl signifi have We We use derivative fi nancial instruments in the management of ournancial instruments derivative fi use We We estimate the fair market value of our fi nancial instruments based value of our fi estimate the fair market We fl ow hedge is terminated or ceases to be effective prior to maturity, prior to maturity, ow hedge is terminated or ceases to be effective fl under deferred gains or losses are and unrealized realized related in income (loss) and recognized accumulated other comprehensive earnings original hedged trans- in the period in which the underlying In the event a designated hedged item is sold, action is recognized. derivative prior to the termination of the related extinguished or matures gain or loss on such or unrealized nancial instrument, any realized fi in earnings. nancial instrument is recognized derivative fi at their recorded prior to maturity are or have ceased to be effective assets or liabilities with changes in estimated fair values under current in earnings. Estimated fair value is their estimated fair values recorded market prices determined using pricing models incorporating current and the contractual prices of the underlying instruments, the time value rowings. We have entered into some swap agreements to exchange into some swap agreements entered have We rowings. to Canadian dollar denomi- oating rate debt U.S. dollar denominated fl oating rate debt. nated fl in U.S. dollars. We use foreign exchange forward contracts and for- exchange forward use foreign in U.S. dollars. We inuctuations fl to mitigate risks from swap agreements eign currency swap agree- currency contracts and foreign exchange rates. Forward designated as used for risk management purposes and are ments are c anticipated purchases. hedges of specifi foreign currency and interest rate exposures. When hedge accounting rate exposures. and interest currency foreign between hedging instruments and is used, we document relationships objective and strategyhedged items, as well as our risk management includes link- This process for undertaking various hedge transactions. liabilities on the balance sheetc assets and ing derivatives to specifi also transactions. We rm commitments or forecasted c fi or to specifi used in hedging transactions assess whether the derivatives that are ows of hedged items. changes in cash fl in offsetting effective are Others Interest Risks Foreign Exchange Risks Hedging Fair Market Value Financial Instruments on current interest rates, foreign currency exchange rate, credit risk, rate, credit exchange currency rates, foreign interest on current similar nancial instruments with of fi pricing market value and current the carrying value of these disclosed herein, terms. Unless otherwise such as maturities especially those with current nancial instruments, fi deposits, accounts accounts receivable, cash and cash equivalents, their fair market value. expenses, approximates payable and accrued 30 DOLLARAMA INC. ANNUAL REPORT 2009 have donesointhepast. We ourmerchandiseasoftenwe maynotbeabletorefresh results ofoperations andcashfl ows willbeadverselyaffected. events thatmayincrease ouroperatingandmerchandise costs,our we are unabletopredict andrespond promptly totheseorothersimilar have anegativeimpactonourmargins,profi tability andcashfl ows. If of Asia,where webuy alargeportionofourimportedmerchandise, can where webothbuyand sellmerchandise, andinChinaotherparts In addition,infl ation andadverseeconomic developmentsinCanada, increase ourtransportation costsandtherefore impactourprofi tability. a competitivelabourcost.Fuelcostincreases orsurcharges couldalso such circumstances. Labourshortagesmayreduce ourabilitytohave a hedgingprogram may outweighthebenefi ts ofthearrangementsin conditions prove tobe incorrect. Inaddition,thecostsassociatedwith tion ifmanagement’s future expectationsconcerning eventsormarket have theeffect oflimiting orreducing thetotalreturns totheCorpora- er thanifthehedginghadnotbeenused.Hedgingarrangementsmay the Canadiandollar, theriskofusinghedgescouldresult inlossesgreat- risk ofilliquidityand,totheextentthatU.S.dollardepreciates against risk associatedwithcurrency fl uctuations. Currency hedgingentailsa exacerbated. We enter intoU.S.dollarcurrency hedgingtoreduce the Canadian dollaratthesametime,negativeimpactwouldbefurther gins, profitability andcashfl ows. IftheU.S.dollarappreciates againstthe China wouldincrease, whichwouldhaveanegativeimpactonourmar- appreciate againsttheU.S.dollar, ourcostofmerchandise purchased in China usingU.S.dollars.Forexample,iftheChineserenminbi were to we purchase amajorityofourimportedmerchandise from suppliersin and thefl uctuation oftheU.S.dollaragainstCanadianbecause sensitive tothefl uctuation oftheChineserenminbi againsttheU.S.dollar than 53%ofourpurchases. Ourresults ofoperationsare particularly Fiscal 2010,direct sourcing from overseassuppliersaccountedformore merchandise from low-costoverseassuppliers, principallyinChina.In sales are inCanadiandollars,wehavebeenincreasing ourpurchases of pact onouroperatingandmerchandise costs.Thisisbecausewhileour be adverselyaffected. outdated orunprofi table, ourresults ofoperationsand cashfl ows will amount ofcompetitivelypricedmerchandise to replace goods thatare dise atattractiveprices.Ifwecannot fi nd orpurchase thenecessary in maintainingacontinuingand increasing supplyof qualitymerchan- standing relationships withoursuppliers,we maynotbesuccessful mass merchants. Althoughwebelievethathave strong andlong- with othermulti-pricedollarstores, varietyanddiscountstores and both ourexistingsuppliersandnewsources, forwhichwecompete merchandise andmustcontinuallyseekoutbuyingopportunitiesfrom not enterintolong-termcontractsforthepurchase ordevelopmentof tive pricesinorder toreplace underperforminggoods.We typicallydo to continuallyfind, selectandpurchase qualitymerchandise atattrac- warranted. Oursuccess,therefore, dependsinlargepartonourability analysisasslow-sellingitemsareinternal discontinuedandreplaced as Management’s DiscussionandAnalysisApril8,2010 We adjustourmerchandise mixperiodicallybasedontheresults of goods maysignifi inthecostoradisruptionfl An increase adverse impactonourcashfl and ouraccess toproducts could adverselyaffect ourbusinessand negatively affect sales.Theseandother factorsaffecting oursuppliers may negativelyaffect ourabilitytoreceive merchandise andthusmay involving ourvendorsorthetransportation andhandlingindustriesalso due tolabourstoppages,strikes orslowdowns,otherdisruptions factors relating toforeign tradeare beyondourcontrol. Disruptions of goodscontainingcertainmaterials from othercountries andother countries, thelimitationonimportationofcertaintypesgoods or impositions onimportedgoods,tradesanctionsimposed certain In addition,theUnitedStates’foreign tradepolicies,tariffs andother are beyondourcontrol andcouldhavenegativeimplicationsforus. and thecountriesinwhichtheyare locatedorfrom whichtheyimport availability andcost,inflation, andotherfactors relating toour suppliers chandise qualityorsafetyissues,currency exchangerates,transport strikes), theavailabilityandcostofrawmaterialstosuppliers, mer- of oursuppliersorlabourproblems theymayexperience(suchas failure tomeetoursupplierstandards, issueswithlabourpractices suppliers are located,thefi nancial instabilityofsuppliers,suppliers’ have anadverseimpactonourcashfl ows. or otherfactorswouldsignifi cantlydecrease oursalesandprofi tsand merchandise oranincrease inthecostofthosegoodsduetothese than thosewecurrently import.Adisruptioninthefl ow ofourimported sourcesalternative mayalsobeoflesserqualityandmore expensive sourcesto alternative intimetomeetourdemands.Products from comes more expensive orunavailable,wemaynotbeabletotransition affect ouroperations inamaterialway. Ifimportedmerchandise be- with. Thedevelopmentofoneormore ofthesefactorscouldadversely and (f)increases inshipping ratesimposedbyforeign countrieswedeal deal with,(e)importduties,quotas,andothertradesanctions, of Canadatomaintainnormaltraderelations withforeign countrieswe of purchasing orshipping foreign merchandise resulting from afailure as China’s claimstosovereignty overTaiwan, (d)increases inthecost disputes,such tainer shortages,(c)economiccrisesandinternational countries, (b)problems withoceanicshipping,includingshippingcon- going outofbusiness,infl ation, strikes,andpoliticalunrest inforeign or anincrease inprices, workstoppages,factoryclosures, suppliers fl ow ofimportedgoodsduetofactorssuchasrawmaterialshortages or unavailableforanumberofreasons, including(a)disruptionsinthe purchases. Ourimportedmerchandise could becomemore expensive to continueaccountforapproximately 45%to60%ofourtotal of ourtotalpurchases duringFiscal2010.We expectdirect imports overseas manufacturers andagentsaccountedformore than53% to ourfavorableprofi t margins.Merchandise importeddirectly from ally lessexpensivethandomesticgoodsandcontributesignifi cantly imported goods,principallyfrom China.Importedgoodsare gener- directly from thelowestcostsupplier. Asaresult, werely heavilyon Political andeconomicinstabilityinthecountrieswhichforeign One ofourkeybusinessstrategiesistosource qualitymerchandise cantly affectoursalesandprofi ows. owofourimported ts andhavean DOLLARAMA INC. ANNUAL REPORT 2009 31 cient cash to service all of Management’s Discussion and Analysis April 8, 2010 8, April Analysis and Discussion Management’s Our ability to make scheduled payments on or to refi nance our Our ability to make scheduled payments on or to refi We are highly leveraged. As of January 31, 2010, we had long-term highly leveraged. As of January 31, 2010, we had are We on our indebtedness cated to the payment of principal and interest not be available for other nancial obligations and will and other fi and capital expendi- purposes, including funding our operations or distribution center, such as a new warehouse projects for tures business opportunities openings, and future new store cult for us to make payments on diffi expense could make it more our debt; general corporate or other purposes may be limited; at variable rates of are Facility, under our Credit borrowings rates; interest exposing us to the risk of increased interest, changes in our business and in our industry in general, placing us to our competitors that at a competitive disadvantage compared have less debt; and economic conditions and adverse industry conditions. debt obligations and to make distributions to enable us to service our nancial and operating performance, debt obligations depends on our fi debt excluding fi nancing costs of $477.4 million. On November 17, nancing costs of $477.4 million. On November debt excluding fi of the 8.875% Subordinated 2009, we consummated the redemption with their terms. For a complete description of the Notes in accordance to note 6 refer Notes, please of the 8.875% Subordinated redemption nancial statements as of January 31, 2010. Our in our consolidated fi of leverage could have important consequences, includ- high degree ing the following: • operations will be dedi- ows from a substantial portion of our cash fl • of our other indebtedness and lease the debt service requirements • nancing for working capital and our ability to obtain additional fi • Notes and Interest including the Deferred certain of our borrowings, • to, or reacting exibility in planning for, our debt level may limit our fl • us vulnerable to a downturn our leverage may make in general (including through the loss of one or more fi nancial institutions that fi of one or more the loss (including through the cost of credit, increasing facility), credit a part of our revolving are the risk of rate risk, increasing manage interest limiting our ability to - or counterparties to or other fi landlords bankruptcy of our suppliers, facilities and our derivative and in our credit nancial institutions involved cost of goods to us, and other impacts the other contracts, increasing anticipate. One of our key strategies is to unable to fully which we are Thus cost supplier. the lowest from directly quality merchandise source due to in costs of merchandise or increases supplier plant closures nancial our business and fi may adversely affect economic conditions results. We may not be able to generate suffi We our indebtedness and may be forced to take other actions to sat- isfy our obligations under such indebtedness. Our level of indebtedness could adversely affect our ability to Our level of indebtedness could adversely limit our ability to raise additional capital to fund our operations, react to changes in the economy or our industry and prevent us from meeting our debt obligations. nancial results. Current economic conditions or a further deterioration in the Ca- Current global economic conditions and uncertainties, In addition, current We must constantly replenish depleted inventory through deliveries depleted inventory through constantly replenish must We All of our vendors and their products must comply with applicable their products All of our vendors and nadian economy may adversely affect the spending of our customers, nadian economy may adversely affect in lower sales than expected on a quarterly or which would likely result disposable con- economic conditions affecting annual basis. Future sumer income, such as employment levels, consumer debt levels, business conditions, fuel and energy costs, lack of available credit, our business rates, and tax rates, could also adversely affect interest cus- consumer spending or causing by reducing nancial results and fi may be sensitive We tomers to shift their spending to other products. in consumer spending because we generally have limited to reductions our prices to maintain or attract additional sales in exibility to reduce fl an economic downturn. the potential for addi- recession, the potential impact of the current nancial institutions, and the related of fi or realignments tional failures us and our suppliers and other may affect impact on available credit and customers in an adverse manner business partners, landlords, access to liquid funds or credit including, but not limited to, reducing of merchandise to our four warehouses, our distribution center and our our distribution to our four warehouses, of merchandise and distribution center to our stores our warehouses and from stores, shipments by sea, trainby various means of transportation, including and highways of Canada. Long-term disrup- and truck on the roads and distribution center and to the national tions to our warehouses that lead to delays or and international transportation infrastructure our business. Similarly, interruptions of service would adversely affect of inventory the planned receipt weather conditions can affect extreme and may have an adverse effect and the distribution of merchandise nancial results. on our business and fi General economic conditions and volatility in the worldwide General economic conditions and volatility economy has adversely affected consumer spending, which may negatively affect our business and fi We are of our distribu- dependent upon the smooth functioning We tion network. fi nancial results. As we increase our imports of merchandise from for- from our imports of merchandise As we increase nancial results. fi imports will increase. associated with foreign eign vendors, the risks do not have adequate insurance or con- safety laws. If we product to liability claims relating product cation available, tractual indemnifi harmful could have defective or otherwise recalled, that are products nancial and fi on our business, reputation a material adverse effect suppliers may foreign cation from indemnifi Our ability to obtain results. lack of understanding of Canadian by the manufacturers’ be hindered likely that we which may make it more liability or other laws, product if customers as to claims or complaints from to respond be required This could adversely af- of the products. the manufacturer we were each of and our litigation expenses could increase, fect our reputation and on our business, reputation which could have an adverse effect nancial results. fi 32 DOLLARAMA INC. ANNUAL REPORT 2009 ing certainactionsthatmaybeinourinterest. usfrompursuingcertainbusinessopportunities andtak- prevent imposesignifi Indenture Notes Interest FacilityandtheDeferred oftheCredit The terms described above. debt,whichcouldfurtherexacerbatetherisks substantially more indebtednesslevels,wemaystillbeabletoincur Despite current service obligationsthendue. from themandthese proceeds maynotbeadequatetomeetanydebt those dispositionsortoobtaintheproceeds whichcouldberealized proceeds from assetdispositions.We maynotbeabletoconsummate restricted subsidiariestodisposeofassetsandrestrict theuseof Interest Notes Indenture restricts theability ofHoldingsL.P. andits ability ofGroup L.P. anditsrestricted subsidiaries,andtheDeferred debt serviceandotherobligations.TheCredit Facilityrestricts the be required todisposeofmaterialassetsoroperationsmeetour circumstances, wecouldfacesubstantialliquidityproblems andmight not permitustomeetourscheduleddebtserviceobligations.Insuch measures edness. Thesealternative maynotbesuccessfuland assets, seekadditionalcapital,orrestructure orrefi nance ourindebt- tions, wemaybeforced toreduce ordelaycapitalexpenditures, sell and capitalresources are insuffi cient tofundourdebtserviceobliga- increased operatingcosts,andtrends inourindustry. Ifourcashfl ows trol, includingfl uctuationsininterest rates,marketliquidityconditions, and tocertainfi nancial, business,andotherfactorsbeyondourcon- which issubjecttoprevailing economicandcompetitiveconditions create orpermit restrictions on theabilityofourrestricted • use theproceeds from salesof assetsandsubsidiarystock; • create orpermitcertainliens; • makecapitalexpenditures; • • make investments; paydividendson,redeem orrepurchase ourcapitalstock; • preferred incur, assume,orguaranteeadditionaldebtand issueorsell stock; • ability to,amongotherthings: to engageinspecifi ed types oftransactions.Thesecovenantslimitour are increased, therelated risksthatwenowfacecouldintensify. million (ortheU.S.dollarequivalentthereof). Ifourcurrent debtlevels revolving loancommitments byanaggregate amountofupto$150 institutions, request additional termloantranchesorincreases tothe ceipt ofadditionalcommitmentsfrom existinglendersorothereligible our subsidiariesmay, undercertaincircumstances andsubjecttore- in compliancewithsuchrestrictions couldbesubstantial.Inaddition, exceptions, andundercertaincircumstances, indebtednessincurred ness, suchrestrictions are subjecttoanumberofqualifi cations and Indenture contain restrictions ontheincurrence ofadditionalindebted- future. Althoughthe Credit FacilityandtheDeferred Interest Notes Management’s DiscussionandAnalysisApril8,2010 Our Credit Facilitycontainsvariouscovenantsthatlimitourability We maybeabletoincur substantialadditionalindebtednessinthe whichmay cant operatingrestrictions, tion thanBainCapital, inwhichcasetheyare nolongerconsidered shareholders holdmore voting stockofHoldingsL.P. orthe Corpora- and certainoriginalmanagement shareholders, unless management assets (otherthantocertain“permitted holders”beingBainCapital any. Changeofcontrol eventsincludeasaleofsubstantially allofour 101% oftheirprincipalamount plusaccruedandunpaidinterest, if outstanding notesundertheapplicable indenture at apriceequalto of control eventsoccur, wewillberequired tooffer torepurchase all not beconsidered achangeofcontrol. the HoldingsL.P.’s board ofdirectors, inwhichcasesucheventshall to bedirectors thatwere recommended fornominationelectionby stock, and,(ii)amajorityofHoldingsL.P.’s board ofdirectors continues held bysuchpermittedholders)ofDollaramaHoldingsL.P.’s voting more than35%,directly orindirectly, (or, ifhigher, thepercentage then sons (otherthan“permittedholders”)becomesthebenefi cial ownerof stock; unless,followingsuchevent,(i)nootherpersonorgroup ofper- cease toholdamajority, directly orindirectly, ofHoldingsL.P.’s voting which casetheyare notincludedaspermittedholdersforthispurpose) Holdings L.P. ormore votingstockinHoldingsL.P. thanBainCapital,in agement shareholders holdmore than30%ofthevotingstock Capital andcertainoriginalmanagementshareholders, unlessman- include ifcertain“permittedholders”(beingfundsadvisedbyBain control eventswillcause aneventofdefault.Changecontrol events prepay, redeem orrepurchase certainindebtedness. • and consolidateormergesellallsubstantiallyofourassets; • conductcertainbusinessactivities; • enterintotransactionswithaffi liates; • subsidiariestopaydividendsormakeotherdistributionsus; create orpermitrestrictions ontheabilityofourrestricted • usetheproceeds from salesofassetsandsubsidiarystock; • create orpermitcertainliens; • • make investments; paydividendson,redeem orrepurchase ourcapitalstock; • preferred incur, assume,orguaranteeadditionaldebtandissuesell stock; • These covenantslimitourabilityto,amongotherthings: enants thatlimitourabilitytoengageinspecifi ed typesoftransactions. ratio test. lease-adjusted leverageratiotestandaminimuminterest coverage a quarterlybasiswithcertainfi nancial covenants,includingamaximum prepay, redeem orrepurchase certainindebtedness. • and consolidateormergesellallsubstantiallyofourassets; • conductcertainbusinessactivities; • enterintotransactionswithaffi liates; • subsidiariestopaydividendsormakeotherdistributionsus; Under theDeferred Interest NotesIndenture, ifspecifi ed change Under theCredit Facility, theoccurrence ofspecifi ed changeof The Deferred Interest Notes Indenture alsocontainsvariouscov- In addition,theCredit Facilityalsorequires Group L.P. tocomplyon DOLLARAMA INC. ANNUAL REPORT 2009 33 tability. Management’s Discussion and Analysis April 8, 2010 and Analysis Discussion Management’s Weather conditions can affect the timing of consumer spending the timing of consumer conditions can affect Weather in the value operate business is highly competitive. We The retail We may need additional warehouse and distribution center capac- may need additional warehouse We uctuations. and have an impact on our retail sales. Moreover, the different holidays the different sales. Moreover, and have an impact on our retail Halloween have a positive Day and Valentine’s like Christmas, Easter, have sales results our highest sales. Historically, impact on our retail holiday selling which includes the during the fourth quarter, occurred 29.0% of our sales were season. During Fiscal 2010, approximately weather conditions or Accordingly, generated in the fourth quarter. to anticipate the impact that holidays may have on our op- a failure nancial on our business and fi erations could have an adverse effect results. location, to price, store which is competitive with respect industry, retail in stock consis- assortment and presentation, quality, merchandise subjects us environment and customer service. This competitive tency, nancial performance because of to the risk of adverse impact to our fi to maintain our the lower prices, and thus the lower margins, required competitive position. Also, companies operating in our industry (due to customer demographics and other factors) may have limited ability but not costs (including, to increased prices in response to increase This limitation may adversely affect limited to, vendor price increases). compete for customers, We nancial performance. our margins and fi and services and in other important sites, products employees, store and national aspects of our business with many other local, regional and dis- variety compete with multi-price dollar stores, We retailers. These other competitors com- and mass merchants. count stores activities, promotional pete in a variety of ways, including aggressive to customers, services offered selection and availability, merchandise amenities and price. If we fail to respond hours, in-store location, store markets, and changes in the retail to competitive pressures effectively Some of nancial results. our business and fi it could adversely affect much larger and have sub- industry are our competitors in the retail vulnerable to than we do, and we remain resources stantially greater sales for our private brands. As a result, our business and fi nancial our business and fi brands. As a result, sales for our private could be adversely affected. results under openings. However, store following future ity in the coming years we believe our existing distribution network expansion plan, our current than 150 service more cost-effectively has the capacity to currently to locate sites for new warehouses unable If we are additional stores. or distribution warehouses and distribution centers or unable to launch to successfully executecenters on a timely basis, we may not be able strategy. our growth Competition in the retail industry limit our growth opportu- could nities and reduce our profi We may be unable to obtain additional capacity for our ware- may be unable to obtain We centers. house and distribution conditions or seasonal Our sales may be affected by weather fl cantly. We carry a substantial number of private brand items. We believe carry a substantial number of private brand items. We We On February 2, 2009, we introduced additional price points of additional price points of On February 2, 2009, we introduced A portion of our indebtedness, including our Deferred Interest Notes Interest Deferred A portion of our indebtedness, including our These restrictions may prevent us from taking actions that we be- us from may prevent These restrictions that our success in maintaining broad market acceptance of our pri- that our success in maintaining broad vate brands depends on many factors, including pricing, quality and may not achieve or maintain our expected We customer perception. $1.25, $1.50 and $2.00. We believe that these multiple price points will $1.25, $1.50 and $2.00. We value and higher quality goods to our customers. more allow us to offer no guarantee that our customers will continue to is, however, There priced above the $1.00 price point or that we our products purchase the same quality and variety of products will be able to continue to offer our business at the same price-points, which would negatively affect nancial results. and fi and the borrowings under the Credit Facility, is at variable rates of Facility, under the Credit and the borrowings rates increase, rate risk. If interest and exposes us to interest interest rate indebtedness wouldour debt service obligations on the variable the same, and remained even though the amount borrowed increase ows would decrease. our net income and cash fl Our private brands may not achieve or maintain broad market ac- ceptance. There is no guarantee that our strategy to introduce products be- tween the $1.00 and $2.00 dollar price range will continue to be successful. Our variable rate indebtedness subjects us to interest rate risk, us to interestOur variable rate indebtedness subjects rate risk, which could cause our debt service obligations to increase signifi permitted holders), the acquisition by a person or group of persons of persons acquisition by a person or group permitted holders), the of or indirectly, holders) of at least 50% , directly (other than permitted or a majority of the Corporation or Holdings L.P. the voting power of the for nominated that were ceasing to be directors directors Corporation’s by approved, for election was previously election, or whose nomination these to repurchase Our failure of directors. board the Corporation’s would cause an event of default under of control notes upon a change Notes upon a change Interest governing the Deferred the indenture to nancial resources cient fi not have suffi because we may of control upon a change of control. tendered are all of the notes that purchase the terms of our Credit under we will be contractually restricted Further, by holders upon all of the notes tendered repurchasing Facility from we may not be able to satisfy such Accordingly, a change of control. nance or refi able to the notes unless we are obligations to purchase these to repurchase Our failure Facility. obtain waivers under the Credit would cause an event of default under notes upon a change of control may also Notes. This Interest governing the Deferred the indenture Facility. under the Credit cause a cross-default of our business, and may make it dif- lieve would be in the best interest effectively cult for us to successfully execute our business strategy or fi not similarly restricted. compete with companies that are 34 DOLLARAMA INC. ANNUAL REPORT 2009 to performour obligationsundertheapplicable leaseincluding, itable, andwedecide tocloseit,wemaynonetheless becommitted cannot canceltheseleases.If an existingorfuture store is notprof- cost ofinsurance,taxes,maintenance andutilities.We generally the lease.Mostleasesrequire ustopayavarietyofcosts suchas es provide thatthelandlord mayincrease therent overthetermof fl owsmaybemateriallyadverselyaffected. Furthermore, manyleas- tive store locationsthatmeetourneeds,profi tability andcash signifi cant numberofourexpiringleasesortopromptly fi nd alterna- our needsonfavorabletermsoratall.Ifweare unabletorenew a to renew theseleasesorfi storend alternative locations thatmeet lease terms.Asthetermsofourleasesexpire, wemaynotbeable have made,willrevert totheproperty ownersuponexpirationofthe tended, theproperties, togetherwithanyimprovements thatwe expire infi scal year2024.Unlesstheterms ofourleasesare ex- in fi scal year2024,respectively, andourdistributioncentre leasewill entities controlled byLarryRossy. Ourwarehouse leaseswillexpire we leasedallofourwarehouses andourdistributioncentre from 2012, andfi scal year 2013,respectively. AsofJanuary31,2010, with third party lessorswillexpire inFiscalyear2011,fi scal year by LarryRossy. Approximately 11%,9%andofourstore leases third parties,except 18ofourstores leasedfrom entitiescontrolled AsofJanuary31,2010,weleasedallourstores from unaffi liated center leasesorfi We anddistribution warehouse ourstore, maybeunable torenew of inventory. fromoursuppliersandthetimelyreceipt pricing andotherterms Our businessisdependentonourabilitytoobtaincompetitive economic barrierstoothercompaniesopeningdollarstores. them. Competitionmayalsoincrease becausethere are nosignifi cant other dollarstores, willincreasingly bringusintodirect competitionwith we expectthatourexpansionplans,aswelltheplansof could venture intoourmarketsegmentinasignificant way. Inaddition, mass merchants, andtotheriskthatthesemassmerchants orothers the marketingpowerandhighlevelofconsumerrecognition ofmajor adversely affected. are beyondour control, ourbusinessandfi nancial results maybe basis becauseofinterruptionsinproduction orotherreasons that we are unabletoreceive merchandise from oursuppliersonatimely and ourresults ofoperations maybeadverselyaffected. Inaddition,if attractive pricing,inwhichcaseourprofi t marginsmaybereduced in thepricesofcertainrawmaterials,wemaynotbeabletoobtain costs are increased asaresult ofprolonged orrepeated increases maintain goodrelations withoursuppliers,orifsuppliers’product of continuedproduct supplyorguaranteedproduct cost.Ifwefailto and haveveryfewlong-termpurchase contractsorotherassurances from suppliers.However, webuyproducts onanorder-by-order basis we are generallyable toobtaincompetitivepricingandotherterms Management’s DiscussionandAnalysisApril8,2010 We believethatwehavegoodrelations with oursuppliersandthat nd otherlocationsorleasesonfavourableterms. information systemscouldbesignifi cant. and cashfl ows. Costsassociatedwithpotentialinterruptionstoour tion andhaveamaterialadverseeffect onourresults ofoperations such eventsmaydisruptorreduce theeffi ciency ofourentire opera- able tofi x oursystemsinaneffi cient andtimelymanner. Accordingly, disruptions withourinformationtechnologysystem,wemaynotbe business andfi nancial results. Intheeventweexperience signifi cant service ourcustomers,whichwouldhaveanadverseeffect onour requirements, manageoursupplychain,andotherwiseadequately our abilitytotimelyshipandtrackproduct orders, project inventory ware andsoftware platformcoulddisruptouroperations,including ments andgeographiclocations.However, diffi culties withthehard- and gather, analyze,andassessinformationacross allbusinessseg- management tobetterandmore effi ciently conductouroperations tions systems.Ourenterprise-widesoftware solutionenables age, purchasing andinventorymanagement,store communica- cient We dependonourinformationtechnologysystemsfortheeffi - versely affected. nology systems,ourbusinessandfi If weexperiencesignifi lease term. among otherthings,payingthebaserent forthebalanceof particularly outside of our core marketsofOntarioandQuébec. particularly outsideofourcore We maynotbe abletosuccessfullyexecuteourgrowthstrategy, ability tocontinue togrow. build,expandandupgradewarehouses anddistribution centers • successfullycompete againstlocalcompetitors;and • expandwithinourtraditionalcore marketsofOntario andQuébec, • expand into newgeographicmarkets,where wehavelimitedorno • locate,lease,buildout,andopenstores insuitablelocationsona • hire, train,andretain anincreasing numberofqualifi ed employees • supplyanincreasing numberofstores withtheproper mixand • ing whetherwecan: willdependonanumber offactors,includ- and Québec,which,inturn, stores, particularly outsideofourtraditionalcore marketsofOntario depend largelyonourabilitytosuccessfullyopenandoperatenew near future. Ourability tosuccessfullyexecuteourgrowth strategywill cal year2002,andweplantocontinueopennewstores inthe years, openinganaverageof43netnewstores peryearsincefi s- Any failure byustoachievethesegoals couldadverselyaffect our nomical manner. storeand internal supportsystemsin aneffi cient, timelyandeco- where newstores maydrawsalesawayfrom ourexistingstores; presence; timely basisandonfavorableeconomicterms; at affordable ratesofcompensation; volume ofmerchandise; We haveexperienced substantialgrowth duringthepastseveral functioning ofourbusiness,includingaccounting,datastor- tech- cant disruptionsinourinformation maybead- nancial results DOLLARAMA INC. ANNUAL REPORT 2009 35 nancial periods. nancial results and may ed employees while controlling ed employees nancial results. Management’s Discussion and Analysis April 8, 2010 and Analysis Discussion Management’s Exchange rate fl uctuations could have an adverse effect on our on our uctuations could have an adverse effect Exchange rate fl Many of our senior executives have extensive experience in our Many of our senior executives have extensive Our future growth and performance depends on our ability to at- and performance growth Our future a network of geographically managed through are Also, our stores results of operations and ability to service our U.S. dollar-denominated of operations and ability to service our U.S. dollar-denominated results industry and with our business, products, and customers. Since we industry and with our business, products, cers, the loss of senior executive offi managed by a small group are of the technical knowledge, management expertise and knowledge management members of our core of our operations of one or more the grandson of our founder, our CEO and team, including Larry Rossy, and the son of Merchandising our Senior Vice President, Neil Rossy, Import Divi- our Senior Vice President, Robillard, Geoffrey Larry Rossy, in a diversion of result our COO, could sion, and Stéphane Gonthier, of management members as the remaining management resources, would need to cover the duties of any senior executive who leaves for managing our us and would need to spend time usually reserved and train new members of management. hire for, business to search The loss of some or all of our senior executives could negatively affect which could our ability to develop and pursue our business strategy, nancial results. our business and fi adversely affect tract, retain and motivate qualifi ed employees, many of whom are in many of whom are ed employees, and motivate qualifi tract, retain to meet our Our ability high rates of turnover. positions with historically our labour costs, is subject to many controlling labour needs, while external of quali- the competition for and availability factors, including those in a given market, unemployment levels within ed personnel fi minimum wage laws, health and other wage rates, markets, prevailing and labour legislation insurance costs and changes in employment for our employees to join a union) or (including changes in the process (including changes in entitlement programs other workplace regulation While we believe such as health insurance and paid leave programs). cant portion of a signifi we pay our employees fair wages, to the extent to unionize, our businessour employee base unionizes, or attempts successful, attempts are could be disrupted and, to the extent such Our ability to pass along labour costs our labour costs could increase. is constrained. and ef- to effectively dispersed management personnel. Our inability result- losses including the ability to control ciently operate our stores, fi our sales inventory and cash shrinkage, may negatively affect ing from and/or operating margins. Fluctuations in the value of the Canadian dollar in relation to the U.S. dollar may impact our operating and fi affect the comparability of our results between fi If we lose the services of our senior executives who possess spe- skills, it could reducecialized market knowledge and technical or to effectively, our ability to compete, to manage our operations develop new products and services. Failure retain to attract and qualifi af- as other labour issues, could adversely labour costs, as well fi fect our business and monitor- tability may be negatively affected by inventory shrinkage. Certain of the facilities that we occupy have been in operation forCertain of the facilities that we occupy have course of our business, we sometimes use, store, In the ordinary Under various federal, provincial, and local environmental laws and and local environmental Under various federal, provincial, We are subject to the risk of inventory loss, administrative or opera- subject to the risk of inventory loss, administrative are We If our planned expansion occurs as anticipated, our store base will occurs as anticipated, our store If our planned expansion many years and, over such time, we and the prior owners or occupantsmany years and, over such time, we and the may have generated and disposed of materials of such properties it is possible Accordingly, hazardous. or may be considered which are as a result liabilities may arise in the future that additional environmental materials. Although of any generation and disposal of such hazardous envi- of, any current not aware are ed of, and we have not been notifi claim, or non-compliance, we could incur costs in liability, ronmental to comply with, or address in order to our properties related the future laws and regulations. environmental any violations under, and cleaning supplies that handle or dispose of household products laws various environmental materials under ed as hazardous classifi are laws or regula- the environmental cannot predict We and regulations. laws or how existing or future tions that may be enacted in the future with Compliance or interpreted. will be administered and regulations enforce- vigorous as well as more stringent laws or regulations, more of agencies or stricter interpretations ment policies of the regulatory by additional expenditures may require existing laws and regulations, anticipated. those currently us which could vary substantially from tor errors, including mislabeling, theft and fraud. We have experienced have including mislabeling, theft and fraud. We tor errors, you that inci- assure inventory shrinkage in the past, and we cannot or that the in the future dences of inventory loss and theft will decrease will effectively taking or the initiatives we implemented we are measures some level of of inventory shrinkage. Although the problem address cost of doing busi- inventory shrinkage is a necessary and unavoidable to experience higher rates of inventory shrinkage or ness, if we were security costs to combat inventory theft, our business incur increased adversely. could be affected nancial results and fi include a relatively high proportion of stores with relatively short operat- with relatively of stores high proportion include a relatively when sales may be negatively affected Store ing histories. Comparable If our new stores existing stores. opened or expanded near are stores comparable to our existing stores, results on average fail to achieve in our overall sales a decrease could produce our planned expansion margins. operating foot and store-level per square regulations, current or previous owners or occupants of property may owners or occupants of property or previous current regulations, and removing become liable for the costs of investigating, We are subject to environmental regulations, and compliance We with such regulations could require us to make expenditures. Our profi We may not be able to achieve the anticipated growth in sales achieve the anticipated growth in sales may not be able to We when we open new stores.and operating income ing any hazardous substances found on the property. These laws and substances found on the property. ing any hazardous to fault. often impose liability without regard regulations 36 DOLLARAMA INC. ANNUAL REPORT 2009 recalls. We subjecttotheriskofproductliabilityclaimsand are Litigation mayadverselyaffectourbusinessandfi not becomparablefrom periodtoperiod. ally asaresult offoreign exchangetranslationgainsorlossesandmay principles. Consequently, ourreported couldfl earnings uctuate materi- into Canadiandollarsundergenerallyacceptedaccounting of U.S.dollardenominateddebtandourrelated hedgeinstruments period wouldresult inaforeign currency lossorgainonthetranslation nadian dollaragainsttheU.S.duringagivenfi nancial reporting the purposesoffi nancialreporting, anychangeinthevalueofCa- struments and,inaddition,ourgross marginswouldbeimpacted.For to serviceourU.S.dollar-denominated debtandtherelated hedgein- Canadian dollarversustheU.S.wouldaffect thecashneeded in Canadiandollars.Therefore, afl uctuation intheexchangerateof U.S. dollarswhilethemajorityofoursalesandoperatingexpensesare debt. Themajorityofourdebtandover50%purchases are in our qualitystandards, wemay berequired toremove merchandise our suppliersare unableorunwilling torecall products failingtomeet not identifythedefi ciency before merchandise shipstoourstores. If safety requirements orourqualitycontrol standards, andwemight actions. Oneormore ofoursuppliersmight notadhere to product caused bysuchproducts, anymayrequire theCorporationtotake uct liabilityclaimsrelating topersonalinjury, deathor property damage turers. Someoftheseproducts mayexposetheCorporationtoprod- adversely affect ourbusinessandfi nancial results. valid orwhetherweare ultimatelyfoundliable.Asaresult, litigationmay perception ofourbusiness,regardless ofwhethertheallegationsare publicity associatedwithlitigationthatcouldnegativelyaffect customer defend future litigationmaybesignifi cant. There alsomaybeadverse in taxationauthoritieschallenginganyofourtaxfi lings. Thecostto authorities. There isno assurancethatanysuchreviews willnotresult business activities,theCorporationissubjecttoreviews bytaxation operations are required. Also,inconnection withtheCorporation’s may negativelyaffect ouroperatingresults ifchangestoourbusiness may result inliability material toourfi nancial statementsasawholeor these lawsuitsorclaims,ifdecidedadverselytoussettledbyus, remain unknownfor substantial periodsoftime.Inaddition,certain magnitude ofthepotentiallossrelating totheselawsuitsorclaimsmay may seekrecovery of verylargeorindeterminateamounts,andthe to assessorquantify. Claimantsinthesetypesoflawsuitsorclaims lawsuits, regulatory actions andintellectualproperty claims,isdiffi cult taxation authorities.Theoutcomeoflitigation,particularlyclassaction in thecaseofadministrativeproceedings, asaresult ofreviews by istrative proceedings, regulatory actionsorotherlitigation,including, ment agencies,orothersthrough privateactions,classadmin- tomers, consumers,suppliers,competitors,shareholders, govern- Management’s DiscussionandAnalysisApril8,2010 The Corporationsellsproducts produced bythird partymanufac- Our businessissubjecttotheriskoflitigationbyemployees,cus- nancial results. nancial etary rights. etary We maynotbeabletoprotectourtrademarks andotherpropri- costs andnegativelyaffectourfi insuranceprogrammayexposeustounexpected Our current taken byusmay beinadequatetoprevent imitationofourproducts we protect ourtrademarksand proprietary rights. However, theactions important tooursuccessand competitiveposition.Accordingly, be adverselyaffected. number oftheselossesthanweanticipate,ourfi nancial results could losses uptotheamountofourdeductibles.Ifweexperienceagreater for catastrophic events,weare effectively self-insured forproperty financial results. Althoughwecontinuetomaintainproperty insurance under theseprograms, whichcouldhaveanadverseeffect onour could result inmateriallydifferent amountsofexpensethanexpected losses, includingexpectedincreases inmedicalandindemnitycosts, management estimatesunderlyingourrecorded liabilitiesforthese Unanticipated changesinanyapplicableactuarialassumptions and bile liability, generalliabilityandgroup healthinsuranceprograms. tion ofexpectedlossesunderourworkers’compensation,automo- these marketchanges.Inaddition,weselfinsure asignifi cant por- higher deductiblesorreduce theamountofcoverageinresponse to negative insurancemarkettrends, wemayelecttoselfinsure, accept insurance coverageorresult inexcessivepremium increases. To offset insurance industryandadverselyimpacttheavailabilityofadequate could suffer. Certainmaterialeventsmayresult insizablelossesforthe disasters. Ifweincurtheselossesandtheyare material,ourbusiness due toactsofwar, employeeandcertainothercrimesomenatural we believeare noteconomically reasonable toinsure, suchaslosses losses wemayincurbutagainstwhichcannotbeinsured orwhich based onthedispersionofouroperations.However, there are typesof tions, limitsofliabilityandsimilarprovisions thatwebelieveare prudent the Corporation’s businessandfi nancial results. product recalls, withdrawalsorreplacements couldadverselyaffect economically reasonable termsoratall.Product liabilityclaimsand actually incurred orthatinsurancewillcontinuetobeavailableon tion cannotbecertainthatitscoveragewilladequateforliabilities maintains liabilityinsurancetomitigatepotentialclaims,theCorpora- replacements oftheCorporation’s products. AlthoughtheCorporation is insulatedfrom theissuesthatpreceded therecalls, withdrawals,or that theirproducts are produced inamannerorgeographicarea that attempt todifferentiate themselvesfrom theCorporationbyclaiming of competitionthattheCorporationfaces.Somecompetitorsmay calls, withdrawals,orreplacements mayalsoincrease theamount may adverselyaffect ourbusinessandfi nancial results. Product re- tion’s reputation andacceptanceofitsproducts bycustomers,which Product recalls, withdrawalsorreplacements mayharmtheCorpora- from ourshelvesorrecall thoseproducts atasubstantialcosttous. We believethatourtrademarksandotherproprietary rights are Our insurancecoveragerefl ects deductibles,self-insured reten- nancial results. nancial DOLLARAMA INC. ANNUAL REPORT 2009 37 Management’s Discussion and Analysis April 8, 2010 and Analysis Discussion Management’s The market price for Common Shares may be volatile and subject to The market price for Common Shares Based on share ownership as of January 31, 2010, Bain Capital Based on share results of operations; results analysts; securities research companies that investors deem comparable to the Corporation; other key personnel; Shares; or capital commitments by or involving the nerships, joint ventures Corporation or its competitors; and issues in the Corpora- changes and other related ments, regulatory uence by Existing Shareholders. The ability of these entities to pay dividends and other distributions to pay dividends and other distributions The ability of these entities by such and will be maintained results will depend on their operating contained in the instruments restrictions companies and contractual or reor- liquidation governing In the event of a bankruptcy, their debt. trade subsidiaries, holders of indebtedness and ganization of any of its the to payment of their claims from will generally be entitled creditors made available for any assets are before assets of those subsidiaries Inc. distribution to Dollarama 31,740,059 Com- or indirectly, directly cially owns or controls, benefi 43.7% approximately represents which in the aggregate mon Shares, Larry Rossy and The of our issued and outstanding Common Shares, cially own or control, benefi Larry and Cookie Rossy Family Foundation Shares, 6,347,640 Common or indirectly, directly in the aggregate, As a 8.7% of our Common Shares. approximately which represent they have if some of these persons or entities act together, result, for ap- all matters submitted to our shareholders the ability to control of direc- including without limitation the election and removal proval, and by-laws and tors, amendments to our articles of incorporation of any business combination. This may delay or prevent the approval the market price of our an acquisition of the Corporation or cause all cases of Bain Capital may not in decline. The interests to shares Bain Capital In addition, of our shareholders. be aligned with interests and other in pursuing acquisitions, divestitures may have an interest could enhancetransactions that, in the judgment of its management, transactions might involve its equity investment, even though such price of the market and may ultimately affect risks to our shareholders the Common Shares. Volatile market price for Common Shares. Volatile • quarterly uctuations in the Corporation’s actual or anticipated fl • of operations by us or results changes in estimates of our future • changes in the economic performance or market valuations of other • cers and executive offi of the Corporation’s addition or departure • on outstanding Common or other transfer restrictions release • sales of additional Common Shares; sales or perceived • cant acquisitions or business combinations, strategic part- signifi • concerns or competitive develop- to trends, relating news reports Infl wide fl uctuations in response to numerous factors, many of which are factors, many of which are to numerous uctuations in response wide fl including the following: control, beyond the Corporation’s nancial results. Dollarama Inc. is a holding company and a substantial portion of We transmit confi dential credit card information in connection with information card dential credit transmit confi We The occurrence of one or more natural disasters, such as hur- natural disasters, of one or more The occurrence its assets are the capital stock of its subsidiaries. As a result, investors the capital stock of its subsidiaries. As a result, its assets are subject to the risks attributable to Dollarama in the Corporation are Dollarama Inc. conducts subsidiaries. As a holding company, Inc.’s its subsidiaries, which gener- substantially all of its business through Dol- Consequently, revenues. ate substantially all of Dollarama Inc.’s or desirable ows and ability to complete current cash fl larama Inc.’s dependent on the earnings of enhancement opportunities are future its subsidiaries and the distribution of those earnings to Dollarama Inc. our credit card pilot project. Third parties may have the technology or Third pilot project. card our credit the security of this customer information, and know-how to breach and those of our technology vendors may not our security measures access to this in- obtaining improper others from prevent effectively could expose us to risks of data loss, formation. Any security breach litigation and liability and could seriously disrupt our operations and any cantly harm our reputation. negative publicity could signifi resulting ricanes and earthquakes, unusually adverse weather, pandemic pandemic weather, ricanes and earthquakes, unusually adverse in boycotts and geo-political events, such as civil unrest outbreaks, or located and acts of terrorism, countries in which our suppliers are nancial our operations and fi similar disruptions could adversely affect of to one or more in physical damage These events could result results. the temporary in fuel or other energy prices, increases our properties, or or warehouses of our stores of one or more or permanent closure the temporary lack stores, distribution centers, delays in opening new in a market, the temporary or long-term of an adequate workforce and overseas some local from disruption in the supply of products transport of goods from suppliers, the temporary disruption in the distribution warehouses, overseas, delay in the delivery of goods to our of prod- in the availability the temporary reduction centers or stores, and disruption to our information systems. These ucts in our stores our operations affect factors could otherwise disrupt and adversely nancial results. and fi Dollarama Inc. is a holding company. We face risks related to protection of customers’ credit card data. We Natural disasters, unusual weather, pandemic outbreaks, boy- Natural disasters, unusual weather, terrorism could adverse- cotts and geo-political events or acts of ly affect our operations and fi and concepts by others or to prevent others from claiming violations of others from or to prevent and concepts by others rights by us. In addition, our intellec- proprietary their trademarks and have the value that we believe they have. rights may not tual property rights, or our intellectual property unsuccessful in protecting If we are to our intellectual against us relating in litigation if another party prevails could adequacy of our brand recognition rights, the value and property our customer confusion and adversely affecting be diminished causing costs and may becant and we may incur signifi tability sales and profi of our operations. to change certain aspects required 38 DOLLARAMA INC. ANNUAL REPORT 2009 a price greater thanthatwhichyoupaidforthem. a pricegreater for oninvestmentunlessyousellyourCommonShares any return youmaynotreceive future, fortheforeseeable Common Shares planstopaycashdividendsonour Because wehavenocurrent a pricegreater thanthatwhichtheypaidforthem. ment inourCommonShares unlesstheysellourCommonShares for Notes. Asaresult, investorsmaynotreceive anyreturn onaninvest- our Credit Facilityandtheindenture theDeferred governing Interest future outstandingindebtednessweoroursubsidiariesincur, including ability topaydividendsmaybelimitedbycovenantsofanyexisting and factors thatourboard ofdirectors maydeemrelevant. Inaddition, our financial results, cashrequirements, contractualrestrictions andother of ourboard ofdirectors andwilldependon,amongotherthings,our declare andpaydividends inthefuture willbemadeatthediscretion to payanycashdividendsfortheforeseeable future. Anydecisionto eration, expansionanddebtrepayment andhavenocurrent plans price oftheCommonShares maybeadverselyaffected. Corporation’s operationscouldbeadverselyimpactedandthetrading If suchincreased levelsofvolatilityandmarketturmoilcontinue,the surance thatcontinuingfluctuations inpriceandvolumewillnotoccur. affect thetradingprice oftheCommonShares. There canbe noas- in theCommonShares bythoseinstitutions,whichcouldadversely and failure tomeetsuch criteriamayresult inalimitedornoinvestment against suchinstitutions’respective investmentguidelinesandcriteria, andsocialpracticesperformance environmental, governance base theirinvestmentdecisionsonconsiderationoftheCorporation’s result inimpairmentlosses.Aswell,certaininstitutionalinvestorsmay asset valuesthatare deemedtobeotherthantemporary, whichmay these factors,aswellotherrelated factors,maycausedecreases in underlying assetvaluesorprospects havenotchanged.Additionally, mon Shares maydeclineeveniftheCorporation’s operatingresults, pects ofsuchcompanies.Accordingly, themarketpriceofCom- related totheoperatingperformance,underlyingassetvaluesorpros- equity securitiesofcompaniesandthathave,inmanycases,beenun- volume fluctuations thathaveparticularlyaffected themarketpricesof Management’s DiscussionandAnalysisApril8,2010 We currently intendtoretain future ifany, earnings, forfuture op- Financial marketshaverecently experiencedsignifi cant priceand tion’s industryortargetmarkets. Future Sales of Common Shares byourExistingShareholders. SalesofCommonShares Future Common Share Trading Information Additional Information party isgrantedcertainregistration rights. in connectionwiththeclosingofIPOonOctober16,2009,each entities controlled byLarryRossy, AlanRossyandLeonard Assaly Corporation, BainDollarama(Luxembourg)OneS.àr.l. andcertain the CommonShares. sales couldoccur, couldadverselyaffect prevailing marketpricesfor principal shareholders andtheiraffi liates, ortheperception thatsuch of asubstantialnumberCommonShares byouroffi cers,directors, Common Shares prevailing from timetotime.However, thefuture sale future salesofCommonShares willhave onthemarketpriceof in thefuture. Noprediction canbemade astotheeffect, ifany, such holders andtheiraffiliates maysellsome oralloftheirCommonShares with applicablesecuritieslaws,ouroffi cers,directors, principalshare- 52.4% ofouroutstandingCommonShares. Subjecttocompliance Common Shares, whichintheaggregate represent approximately aggregate, beneficially ownorcontrol, directly orindirectly, 38,087,699 Larry RossyandTheCookieFamilyFoundation,inthe basis asatJanuary31,2010. 75,970,561 CommonShares issuedandoutstandingonafullydiluted ing exercise ofalloutstanding stockoptions,there wouldhavebeen Shares reserved forissuancetheexercise ofstockoptions.Assum- issued andoutstanding.Inaddition,there were 7,269,193Common January 31,2010,theCorporationhad72,691,935CommonShares the symbol“DOL”andbegantradingonOctober16,2009.Asat SE DAR atwww.sedar.com. Pursuant toashareholders agreement entered intobetween the Based onshare ownershipasofJanuary31,2010,BainCapital, The CommonShares tradeontheToronto StockExchangeunder Additional informationrelating toDollaramaInc.isavailableon DOLLARAMA INC. ANNUAL REPORT 2009 39 ted and April 8, 2010 April 8, n. hese fi nancial hese fi al statements and February the accounting cludes examining, Corporation as of , as the context requires, the , as the context requires, We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan require Those standards auditing standards. with Canadian generally accepted accordance conducted our audits in We “PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l., an Ontario limited liability partnership, or LLP/s.r.l./s.e.n.c.r.l., to PricewaterhouseCoopers “PricewaterhouseCoopers” refers We have audited the consolidated balance sheets of Dollarama Inc. as of January 31, 2010 and February 1, 2009 and the consolida as of January 31, 2010 and February 1, balance sheets of Dollarama Inc. have audited the consolidated We In our opinion, these consolidated fi nancial statements present fairly, in all material respects, the fi nancial position of the the fi all material respects, in fairly, nancial statements present consolidated fi In our opinion, these Montréal, Quebec April 8, 2010 statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these fi nanci fi an opinion on these is to express Our responsibility management. the Corporation’s of the responsibility statements are based on our audits. statements of earnings (loss), shareholders’ equity and cash fl 31, 2010 and February 1, 2009. T ows for the years ended January equity and cash fl statements of earnings (loss), shareholders’ PricewaterhouseCoopers global network or other member fi rms of the network, each of which is a separate legal entity. rms of the network, each of which is a separate member fi PricewaterhouseCoopers global network or other To the Shareholders of Dollarama Inc. the Shareholders To Auditor’s report Auditor’s perform an audit to obtain reasonable assurance whether the fi audit in of material misstatement. An free statements are nancial assurance whether the fi reasonable perform an audit to obtain An audit also includes assessing nancial statements. fi in the supporting the amounts and disclosures on a test basis, evidence nancial statement presentatio fi as well as evaluating the overall cant estimates made by management, principles used and signifi January 31, 2010 and February 1, 2009 and the results of its operations and its cash fl ows for the years ended January 31, 2010 of its operations and its cash fl the results January 31, 2010 and February 1, 2009 and 1, 2009 in accordance with Canadian generally accepted accounting principles. 1, 2009 in accordance 40 DOLLARAMA INC. ANNUAL REPORT 2009 Commitments Long-Term Debt Current portion oflong-termdebt Goodwill Property and Equipment Other IntangibleAssets Due To Shareholders Accumulated OtherComprehensive Income(Loss) Retained Earnings Contributed Surplus Future Income Taxes Other Liabilities Nicholas Nomicos, Approved bytheBoard ofDirectors: Capital Stock 4,710 Shareholders’ Equity 66,218 4,924 93,057 Accrued expensesandother Accounts payable Current Liabilities Liabilities Derivative fi nancial instruments Merchandise inventories Deposits andprepaid expenses Accounts receivable Cash andcashequivalents Current Assets Assets Derivative fi nancial instruments Income taxespayable Derivative fi (expressed inthousandsofCanadiandollars) Consolidated BalanceSheets The accompanying notesare anintegralpartoftheconsolidated fi nancial statements. Consolidated FinancialStatements

nancialinstruments

(note 11) (note 9)

(note 8) (note 6)

Director

(note 7) (note 17)

(note 4)

(note 3)

49,879 71,759

(note 5) 113,302 115,210 138,214 129,878 (note 10) (note 10)

(note 6) 46,825 37,760 (note 10) 55,194 - 3,479 33,175 1,925 15,302 5,342 33,423 (10,091) 40,557 aur 1 00$ February1,2009$ January 31,2010$ 1,322,237 1,363,038 1,322,237 1,363,038 727,782 707,541 1,260,801 159,083 98,483 337,597 356,745 468,591 806,384 614,696 102,237 518,430 35,304 234,684 249,644 John J.Swidler, 29,988 28,098 88,885 16,022 17,472 10,354 31,694 39,729 23,445 5,692 1,453 2,998 so Asof As of - 256,077

Director DOLLARAMA INC. ANNUAL REPORT 2009 41 uary equity $ Shareholders’ equity Accumulated income (loss) $ comprehensive Consolidated Financial Statements Financial Consolidated

other Capital Contributed Retained stock $ surplus $ earnings $ 278,680 - - 278,680 - (note 1) 614,696 518,430 17,472 88,885 (10,091) 102,237 40,557 16,022 10,354 35,304 71,908 31,526 (4,993) 10,071 35,304 - 7,118 - - 7,118 - 283 - - 283 (note 12) (note 12) 204,446 - - 204,446 - (note 11) The accompanying notes are an integral part of the consolidated fi nancial statements. an integral part of the consolidated fi The accompanying notes are (expressed in thousands of Canadian dollars) (expressed

Balance – January 31, 2010 The sum of retained earnings and accumulated other comprehensive income (loss) amounted to $78,794 as of January 31, 2010 (Febr earnings income (loss) amounted to $78,794 as of January 31, 2010 The sum of retained and accumulated other comprehensive 1, 2009 – $56,579). Other comprehensive income income 22,215 comprehensive Balance – February 1, 2009 income Net earnings for the year Other comprehensive nancial instruments, net of loss on derivative fi Unrealized cation adjustments and income taxes of $22,465 reclassifi Total Stock-based compensation - into Conversion of amounts due to shareholders shares common - - - (50,648) (50,648) - 72,863 - 72,863 Other comprehensive income 30,046 income comprehensive 3, 2008 Balance – February income Net loss for the year Other comprehensive instruments, net of nancial fi gain on derivative Unrealized of $21,435 cation adjustments and income taxes reclassifi Total Stock-based compensation - - - 45,550 - 45,550 - (15,504) - (15,504)

Consolidated Statements of Shareholders’ Equity Equity of Shareholders’ Statements Consolidated

net of issuance expenses of Issuance of common shares, income taxes of $6,455 $27,775 and related

42 DOLLARAMA INC. ANNUAL REPORT 2009 The accompanyingnotesare anintegralpartoftheconsolidatedfi nancial statements. (expressed inthousandsofCanadiandollars) (Loss) Consolidated StatementsofEarnings Consolidated FinancialStatements

Cost ofSalesandExpenses e anns(os o h er 283 (15,504) (0.36) (0.36) 72,863 1.37 1.41 Weighted average numberofdilutedcommonshares outstandingduringtheyear Weighted average numberofcommonshares outstandingduringtheyear (loss)percommonshareDiluted netearnings (loss)percommonshareBasic netearnings (loss)fortheyear Net earnings anns(os eoeicm ae 1228 (3,254) 61,192 102,278 25,709 62,343 19,866 214,596 44,793 264,784 (31,108) Provision forincome taxes (loss)beforeEarnings incometaxes Foreign exchange loss(gain)onderivativefi nancial instruments andlongtermdebt Interest expense onamountsduetoshareholders Interest expense onlong-termdebt Operating income Amortization General, administrativeandstore operatingexpenses Cost ofsales Sales

(note 17)

29,415 12,250 (note11) 51,511 42,576 (note 11) 5,4 42,576 53,049 o h eredd Fortheyearended For theyearended aur 1 00$ February1,2009$ January 31,2010$ 1,253,706 1,089,011 1,100,327 960,571 153,379 128,440 810,624 724,157 24,919 21,818

DOLLARAMA INC. ANNUAL REPORT 2009 43

Consolidated Financial Statements Financial Consolidated - (208) (1) 38 (157) (575) 5,479 9,136 84,332 127,835 (40,091) (49,728) (55,556) (25,999) 122,486 115,656 January 31, 2010 $ February 1, 2009 $ For the year ended For the year ended 66,218 26,289 66,218 38,154 (12,179) 38,154 93,057 66,218 93,057 (6,429) (9,415) (6,429) 26,839 39,929 26,839 (note 15) (note 10)

The accompanying notes are an integral part of the consolidated fi nancial statements. an integral part of the consolidated fi The accompanying notes are (expressed in thousands of Canadian dollars) (expressed

Purchase of property and equipment of property Purchase and equipment on disposal of property Proceeds nancial instruments Net settlement of derivative fi 110 (33,772) 189 (40,502)

Cash and Cash Equivalents – End of Year Increase in Cash and Cash Equivalents in Cash and Increase Cash and Cash Equivalents – Beginning of Year Repayment of amounts due to shareholders Repayment of amounts due to shareholders in common shares Increase Debt issue costs (70,082) 272,224 - - Financing Activities Investing Activities Repayment of long-term debt (257,698) (25,791) Operating Activities Net earnings for the year (loss) Adjustments for and equipment of property Amortization of intangible assets Amortization in fair value of derivatives Change costs Amortization of debt issue on debt repayments Deemed interest exchange loss (gain) on long-term debt Foreign lease rights Amortization of unfavourable lease inducements Deferred leasing costs Deferred leasing costs Amortization of deferred tenant allowances Deferred compensation tenant allowances Amortization of deferred Stock-based on long-term debt Capitalized interest expense on amounts due to shareholders Capitalized interest income taxes Future Other Changes in non-cash working capital components 25,327 72,863 (103,371) 1,737 46,287 (8,288) 8,439 (2,145) 22,310 18,451 (15,504) 143,512 (1,698) (84,437) 328 2,267 2,139 (1,129) (2,759) 5,802 23,852 5,600 9,748 3,594 (1,343) 2,276 245 20,760 741 2,643

Consolidated Statements of Cash Flows of Cash Statements Consolidated

44 DOLLARAMA INC. ANNUAL REPORT 2009 Notes toConsolidatedFinancialStatements Initial PublicOffering ofBusiness andNature Basis ofPresentation Public Offering andReorganization Basis ofPresentation, Nature ofBusiness, [ 1] to theunderwriters anover-allotment option,whichwasfullyexercised offering. Inaddition,certainshareholders oftheCorporation granted deducting theunderwriters’fees andotherexpensesrelated tothe per commonshare, resulting innetproceeds of$272,223,983after offering byissuing17,142,857commonshares atapriceof$17.50 tivities. stores andperformrelated logisticalandadministrativesupportac- described innote6(b). dinated deferred interest notes,asfurtherdescribedin are asfollows: basis ofonereportable segment. Montréal area, Canada. TheCorporationmanagesitsbusinessonthe headquarters, distributioncentre andwarehouses are located inthe ried onineveryCanadianprovince. Theretail operations’corporate for $2orless.AsofJanuary31,2010,itsretail operationsare car- are whollyowned. tions andcashfl ows oftheCorporationanditssubsidiaries,allwhich principles (“GAAP”)andrefl ect thefi nancial position,results ofopera- prepared inaccordance withCanadiangenerallyacceptedaccounting (the “Corporation”).Theconsolidatedfi nancial statementshavebeen Dollarama CapitalCorporationchangeditsnametoInc. under theCanadaBusinessCorporationsAct.OnSeptember8,2009, Notes toConsolidatedFinancialStatements DOLLARAMA GROUPHOLDINGSL.P. On October 16, 2009, the Corporation completed its initial public On October16,2009,theCorporation completeditsinitialpublic Dollarama L.P. andDollaramaCorporationoperatethechainof Dollarama Group L.P. hasaseniorsecured credit facilityasfurther note 6(c). Dollarama Group HoldingsL.P. is aco-issueroftheseniorsubor- The signifi cant entitieswithinthelegalstructure oftheCorporation The Corporationoperatesdollarstores inCanadathatsellallitems Dollarama CapitalCorporationwasformedonOctober20,2004 DOLLARAMA GROUPL.P. DOLLARAMA INC. DOLLARAMA L.P. DOLLARAMA CORPORATION Initial Reorganization Merchandise Inventories Cash andEquivalents Use ofEstimates Summary ofSignifi [ 2] offering. were repaid onOctober16,2009,concurrently withtheinitial public referred toabove.Thepromissory notesamountingto$70,082,000 of DollaramaInc.,andtheCorporationassumedpromissory notes tion and4513631CanadaInc.were convertedintocommonshares sued andoutstandingcommonpreferred shares oftheCorpora- the Corporation. Class Acommonshares andtheClassCpreferred shares issuedby than thejuniorsubordinated notes,theClassApreferred shares, the the initialpublicoffering anddidnot ownanysignifi cant assetsother ties otherthanpromissory noteswhichwere paidontheclosingof and preferred shares. ated corporationconsistsofanunlimitednumbercommonshares controlling shareholder. Theauthorizedshare capitaloftheamalgam- to above,theCorporationamalgamatedwith4513631CanadaInc.,its well ascostsdirectly associatedwith warehousing anddistribution. amounts paidto suppliers,dutiesandfreight intothewarehouses as inventories usingtheretail inventorymethod.Costs ofinventoryinclude determined onaweightedaverage costbasisandisassignedtostore stores are stated atthelowerofcostandnetrealizable value.Costis original maturitiesfrom dateofpurchase ofthree monthsorless. able information.Actualresults coulddiffer from thoseestimates. taxes andfairvalueoffi nancial instruments, based oncurrently avail- and equipment,impairmentoflong-livedassetsgoodwill,income net realizable valueofmerchandise inventories,usefullivesofproperty sis, managementreviews itsestimates,includingthoserelated tothe revenue andexpenseitemsforthereporting period.Onanongoingba- and liabilitiesatthebalancesheetdatereported amountsof amounts ofassetsandliabilitiesdisclosure ofcontingentassets nadian GAAPrequires theuseofestimatesthataffect thereported paid therelated underwriters’feeswhichamountedto$2,700,000. mon shares bythesellingshareholders; however, theCorporationhas Corporation didnotreceive anyproceeds from thesaleofthesecom- to purchase from suchshareholders 2,571,428commonshares. The Upon amalgamation,thejuniorsubordinated notesandalltheis- On amalgamation4513631CanadaInc.hadnosignifi cant liabili- Immediately before theclosingofinitialpublicoffering referred Merchandise inventoriesatthedistributioncentre, warehouses and Cash andcashequivalentsincludehighlyliquidinvestmentswith The preparation offi nancial statementsinaccordance withCa-

cant AccountingPolicies DOLLARAMA INC. ANNUAL REPORT 2009 45 Notes to Consolidated Financial Statements Financial to Consolidated Notes The Corporation includes store and head offi ce salaries and ben- and head offi The Corporation includes store Long-lived assets are reviewed for impairment whenever events for impairment whenever reviewed Long-lived assets are at the time the customer ten- revenue The Corporation recognizes inventories, pro- The Corporation includes the cost of merchandise Deferred leasing costs and deferred tenant allowances are record- tenant allowances are deferred leasing costs and Deferred value of the re- the carrying deducted from Debt issue costs are and induce- expense incurred rental The Corporation recognizes efi ts, repairs and maintenance, professional fees, store supplies and fees, store and maintenance, professional ts, repairs efi operating expenses in general, administrative and store other related expenses. or changes in circumstances indicate that the carrying amount of an or changes in circumstances Impairment is assessed by comparing asset may not be recoverable. net undis- expected future the carrying amount of an asset with the value. If such its use together with its residual ows from counted cash fl to be recognized the impairment to be impaired, asset is considered by the amount by which the carrying amount of the asset is measured exceeds its fair value. All sales ders payment for and takes possession of the merchandise. nal. fi are and distribution costs, and certain occupancy warehousing curement, costs in its cost of sales. ed on the balance sheet and amortized using the straight line methoded on the balance sheet lease. over the term of the respective accounted for at amortized cost using the effective lated debt and are method. interest on a straight-line basis over the term landlords from ments received and the between the calculated expense of the lease. Any difference lease inducements in ected as deferred amounts actually paid is refl expense is recog- balance sheet. Contingent rental the Corporation’s is considered ed sales targets nized when the achievement of specifi probable. General, Administrative and Store Operating Expenses General, Administrative and Store Impairment of Long-Lived Assets Revenue Recognition Cost of Sales Covenants Not to Compete basis compete is amortized on a straight-line The covenants not to agreement. over the terms of the Leasing Instruments Deferred Debt Issue Costs Operating Leases Favourable and unfavourable lease rights represent the fair value Favourable and unfavourable lease rights represent Trade name is recorded at cost and is not subject to amortization. It name is recorded Trade Goodwill is tested for impairment annually or when events or or when events or Goodwill is tested for impairment annually Under the straight-line method Under the straight-line Under the declining balance method Under the declining of lease rights as established on the date of their acquisition or as- amortized on a straight-line basis over the terms of sumption and are leases. the related is tested for impairment annually or more frequently if events or circum- frequently is tested for impairment annually or more The impairment test consists stances indicate that it may be impaired. of a comparison of the fair value, based on discounted estimated cash to the trade name, with its carrying amount. If the fair ows related fl than the carrying amount, no impairment is necessary. value is greater If the carrying amount exceeds the fair value, an impairment loss shall in an amount equal to that excess. The Corporation be recognized conducts its annual impairment test as of the balance sheet date. changes in circumstances indicate that it may be impaired. A Step I indicate that it may be impaired. changes in circumstances unit is ac- reporting impairment test of the goodwill of the Corporation’s the fair value of the report- complished mainly by determining whether of the assessment date. Ifing unit exceeds its net carrying amount as than the net carrying amount, no impairment is the fair value is greater In the event that the net carrying amount of the reporting necessary. ows, a Step cash fl unit exceeds the sum of the discounted estimated the fair value of the re- II impairment test must be performed whereby goodwill must be estimated to determine if it is less than porting unit’s in the Step II impairmentits net carrying amount. Fair value of goodwill was determined at thetest is estimated in the same way as goodwill that is, the excessdate of the acquisition in a business combination, able unit over the fair value of the identifi of the fair value of the reporting unit. The Corporation conducts its annual net assets of the reporting impairment test as of the balance sheet date. Favourable and Unfavourable Lease Rights Trade Name Trade software Computer equipment and warehouse Store Leasehold improvements Goodwill 8-10 years years 5 of lease Term Computer equipment Computer Vehicles 30% 30% Property and equipment are carried at cost and amortized over the carried are and equipment Property of the assets as follows: estimated useful lives Property and Equipment Property 46 DOLLARAMA INC. ANNUAL REPORT 2009 Derivative FinancialInstruments Foreign Currency Transactions Income Taxes Employee Future Benefi Advertising Costs Vendor Rebates Pre-Opening Costs [ 2]continued commitments or forecasted transactions. TheCorporation also as- to specific assetsand liabilities onthebalancesheetortospecifi c fi rm various hedgetransactions.This process includes linking derivatives as wellitsriskmanagement objective andstrategyforundertaking lationships betweenthehedging instrumentsandthehedgeditems, agement ofitsforeign currency andinterest rateexposures. statement ofearnings. resulting exchangegainsorlossesare recorded intheconsolidated are translatedatprevailing marketratesintherecognition period.The and liabilitiesare translatedathistoricalrates.Revenuesandexpenses are translatedatyear-end exchangerates,whilenon-monetaryassets than notthattheassetswillberealized. settled. Future income taxassetsare recognized whenitismore likely in whichthesetemporarydifferences are expectedtoberecovered or are measured usingsubstantivelyenactedtaxratesineffect intheyear bases ofassetsandliabilities.Future incometaxassetsandliabilities are determinedusing thedifference betweentheaccountingandtax ing forincometaxes.According tothismethod,future incometaxes 2009 –$1,153,000). year endedJanuary31,2010amountedto$1,132,000(February1, of upto3%theemployee’s salary. Thepensionexpenseforthe to eligibleemployeeswhereby itmatchesanemployee’s contributions (February 1,2009–$1,953,000). ing costsfortheyearendedJanuary31,2010amountedto$630,000 cost ofsales. reduction ofinventorypurchases andare refl ected asareduction of the amountisreasonably estimable.Therebates are recorded asa purchase rebates, whenitis probable thattheywillbereceived and as incurred. Notes toConsolidatedFinancialStatements When hedgeaccountingisused, theCorporationdocumentsre- The Corporationusesderivativefi nancial instruments intheman- Monetary assetsandliabilitiesdenominatedinforeign currencies The Corporationusestheassetandliabilitymethodinaccount- The Corporationoffers agroup defi ned contributionpensionplan The Corporationexpensesadvertisingcostsasincurred. Advertis- The Corporationrecords vendorrebates, consistingofvolume Costs associatedwiththeopeningofnewstores are expensed ts accelerated expense attribution method over the vesting period. accelerated expenseattributionmethodoverthevestingperiod. (graded vesting),andaccordingly, theexpenseisrecognized usingthe fair valueoftheoptionsatgrantdate.Thevestintranches ingly, theCorporationrecognizes acompensationexpensebasedonthe Agreements Foreign ExchangeForwardContractsAndCurrencySwap Stock-Based Compensation Others Interest RateSwapAgreements or liabilitiesontheconsolidatedbalancesheet. whentherelatedearnings hedgeditemisrecorded inearnings. prehensive income” and reclassifi ed totheconsolidatedstatementof exchange forward contracts are recorded in“Accumulatedothercom- tions. Underthecashfl ow hedgemodel,thefairvalues oftheforeign are designatedascashfl ow hedgesofspecifi c anticipatedtransac- are usedforriskmanagementpurposes.Someforward contracts tions inexchangerates.Allforward contractsandswapagreements and foreign currency swapagreements tomitigaterisksfrom fl uctua- denominated inUSdollars.Itusesforeign exchangeforward contracts in theperiodof forfeiture. conditions are notmet,anyexpense previously recorded isreversed to vest.Whenawards are forfeitedbecauseserviceorperformance ditions andconsequentlythenumber ofoptionsthatare expected based onmanagement’s bestestimateoftheoutcomecon- of performanceconditions,the Corporationrecognizes theexpense estimated fairvaluesrecorded inearnings. estimated fairvaluesunderassetsorliabilities,withchanges in their or haveceasedtobeeffective priortomaturityare recorded attheir loss onsuchderivativefi nancial instrumentisrecognized inearnings. related derivativefinancial instrument,anyrealized orunrealized gainor item issold,extinguishedormatures priortotheterminationof hedged transactionisrecognized. Intheeventadesignatedhedged and recognized intheperiodwhichunderlyingoriginal inearnings and unrealized gains orlossesare deferred underassetsor liabilities is terminatedorceasestobeeffective priortomaturity, related realized ments tomitigatethisrisk. ing rateborrowings. TheCorporationhasentered intoswapagree- are effective inoffsetting changesincashfl ows ofhedgeditems. sesses whetherthederivativesthatare usedinhedgingtransactions Foreign exchange forward contractsare classified ascurrent assets The Corporationhassignifi cant cashfl ows andlongtermdebt When thevestingofanaward iscontingent upon theattainment The commonshares optionsare considered equityawards. Accord- The Corporationhasoutstandingcommonshares options. Derivative financial instrumentswhichare notdesignatedashedges In theeventaderivativefi nancial instrumentdesignatedasahedge The Corporation’s interest rateriskisprimarilyinrelation toitsfloat- DOLLARAMA INC. ANNUAL REPORT 2009 47 Notes to Consolidated Financial Statements Financial to Consolidated Notes CICA Handbook Section 1582, “Business Combinations”; Sec- CICA Handbook Section 1582, “Business In June 2009, the CICA amended Section 1506, “Accounting amended Section 1506, “Accounting In June 2009, the CICA amended Section 3862, “Financial Instru- In June 2009, the CICA tion 1601, “Consolidated Financial Statements”; and Section 1602, tion 1601, “Consolidated Financial Statements”; Section 1581, “Business Combi- replace Interests”; “Non-controlling nations”, and Section 1600, “Consolidated Financial Statements”, and interest establish a new section for accounting for a non-controlling the Canadian equivalent to These sections provide in a subsidiary. International 3, “Business Combinations Financial Reporting Standard (January 2008)”, and IAS 27, “Consolidated and Separate Financial for business Statements (January 2008)”. Section 1582 is effective rst combinations for which the acquisition date is on or after the fi quarter beginning on January 31, 2011 with early adoption permitted. Sections 1601 and 1602 apply to interim and annual consolidated to years beginning on January 31, 2011 nancial statements relating fi with early adoption permitted. The Corporation is assessing the impact of these new standards. Changes”, to exclude from the scope of this Section changes in ac- from Changes”, to exclude primary of an entity’s the complete replacement counting policies upon for years beginning This amendment is effective basis of accounting. amendment was early adopted as of Januaryafter July 1, 2009. This nancial statements. on the consolidated fi 31, 2010 with no impact requirements to include additional disclosure ments – Disclosures”, nancial instruments and liquidity for fi about fair value measurement hierarchy a three-level These amendments require risk disclosures. the inputs used in making the fair valuecance of ects the signifi that refl Fair values of assets and liabilities included in Level measurements. to quoted prices in active markets for by reference determined 1 are liabilities in Level 2 includeidentical assets and liabilities. Assets and prices for which all sig- valuations using inputs other than the quoted or based on observable market data, either directly cant inputs are nifi based not based on inputs that are Level 3 valuations are indirectly. of amended Section 3862on observable market data. The adoption nancial the consolidated fi as of January 31, 2010 had no impact on statements. Future Accounting Standards Not Yet Applied Not Yet Accounting Standards Future Financial Statements and Business Combinations, Consolidated Non-Controlling Interests Accounting Changes – DisclosuresFinancial Instruments Canadian Institute of Chartered Accountants (“CICA”) Handbook Canadian Institute of Chartered To conform with the basis of presentation adapted in the current adapted in the current conform with the basis of presentation To Earnings per common share are determined using the weighted are Earnings share per common Prior to the reorganization described in note 1, the Corporation had Prior to the reorganization Section 3064, “Goodwill and Intangible Assets”, replaces Section Assets”, replaces Section 3064, “Goodwill and Intangible and establishes stan- 3062, “Goodwill and Other Intangible Assets”, goodwill of and disclosure measurement for the recognition, dards nition and initial to the defi relating and intangible assets. The provisions equivalent to the corresponding of intangible assets are recognition (“IAS”) 38, “Intangible of International Accounting Standard provisions Assets”. Section 1000, “Financial Statement Concepts”, has been of an asset. Section 3450, amended to clarify criteria for recognition by guid- and Development Costs”, has been replaced “Research ance in Section 3064. CICA Emerging Issues Committee Abstract Period”, During the Pre-operating 27, “Revenues and Expenditures is no longer applicable for entities that have adopted Section 3064. Accounting Guideline 11, “Enterprises in the Development Stage”, has provide costs and to to deferred been amended to delete references guidance on development costs as intangible assets under Section 3064. This Section was adopted as of February 2, 2009 with no impact nancial statements. on the consolidated fi year, certain fi gures previously reported have been reclassifi ed. have been reclassifi reported previously gures certain fi year, average number of common shares outstanding during the year. Di- outstanding during the year. shares average number of common the treasury determined using are luted earnings share per common of stock options, convert- stock method to evaluate the dilutive effect Under this method,ible instruments and equivalents, when applicable. basically when the average market instruments with a dilutive effect, consid- are price, for the period exceeds the exercise price of a share at the beginning of the period (or at the exercised to have been ered considered are received time of issuance, if later) and the proceeds market at the average common shares to have been used to redeem price during the period. Class A, B and C preferred shares which were classifi ed as liabilities classifi were which shares Class A, B and C preferred and which were line “Due to shareholders” within the balance sheet value. at their redemption recorded Goodwill and Intangible Assets Changes in Accounting Policies During The Year Changes in Accounting Policies During Comparative Figures Earnings Share per Common Preferred Shares Preferred 48 DOLLARAMA INC. ANNUAL REPORT 2009 05 32 352 478 862 1,344 1,681 2015 2014 2013 2012 2011 eerdlaigcss . 9.8 9.4 7.0 Net 16,645115,210 amortization Cost 18,710113,302131,855 132,012 -108,200 Net amortization Cost -108,200 Amortization ofotherintangibleassetsforthenextfi ve yearsisapproximately asfollows: 108,200 Deferred leasingcosts Covenants nottocompete 5631,830 Favourable leaserights 8911,6592,393 2,550 5,020 3,34120,86215,842 The weightedaverageamortizationperiods(expressed innumberofyears)are asfollows: 20,86217,521 Net 60,685129,878 85,789138,214190,563 amortization Cost 224,003 Deferred 2,6811,3411,3402,4931,0101,483 Covenants 400298102240160 Favourable Net leasing Trade amortization Cost lease not name costs rights to 3,1421,3651,777 14,7128,4556,257 13,698 5,4268,272 Other IntangibleAssets 958 compete [ 4] 2,001 1,043 79,99328,06151,93266,52720,87545,652 Vehicles Computer Computer Leasehold equipment 123,47546,56776,908 Store 105,844 32,33173,513 software improvements and warehouse Property andEquipment equipment [ 3] (tabular amountsexpressed inthousandsofCanadiandollars,unlessotherwisenoted) Notes toConsolidatedFinancialStatements $

2010 2009 2010 2009 $ $ Accumulated Accumulated Accumulated Accumulated DOLLARAMA INC. ANNUAL REPORT 2009 49 Notes to Consolidated Financial Statements Financial to Consolidated Notes 2010 $ 2009 $ Note 2010 $ 2009 $ (tabular amounts expressed in thousands of Canadian dollars, unless otherwise noted) otherwise unless Canadian dollars, of in thousands amounts expressed (tabular Less: Current portion notes (US$212,169,000; 2009 – interest deferred Senior subordinated accrues semi-annually in August 2012, interest US$203,449,000), maturing at a rate per annum equal to 6-month LIBOR plus 5.75%, in arrears Current to 6.25% in December 2008 and 6.75% in December 2009 increasing during the year notes, repaid Senior subordinated year during the bank loan, repaid Term 15,302 1,925 Less: 838,411 Less: Debt issue costs and discount 477,436 823,109 6(c) 226,872 475,511 806,384 249,530 468,591 6(a) - 6(b) 245,300 - 53,195 6,920 16,725 Term bank loan (US$234,325,000; 2009 – US$236,760,000), maturing in bank loan (US$234,325,000; 2009 – US$236,760,000), maturing Term in quarterly capital instalments of US$608,000. November 2011, repayable at rates ranging from bank loan bear interest Advances under the term However, prime rate. above the bank’s 0.75% to 1.0% per annum under the term bank loan by way of LIBOR loans bear interest borrowings LIBOR 1.75% to 2.0% per annum above the bank’s at rates ranging from 6(b) 250,564 290,386 Long-term debt outstanding consists of the following: Long-term debt outstanding consists of [ 6 ] Debt Long-Term Compensation and benefi ts 12,265 benefi 19,597 transit and in tax Compensation 1,974 Interest Inventory 5,321 Rent Sales Other 37,760 1,352 3,754 13,053 46,825 5,366 5,362 4,607 2,152 9,782 [ 5 ] and Other Accrued Expenses 50 DOLLARAMA INC. ANNUAL REPORT 2009 ) Seniorsecured credit facility b) Seniorsubordinated notes(the“Notes”) a) [ 6]continued Notes toConsolidatedFinancialStatements distributions, including limitingdistributions,unless suffi cient funds certain circumstances, restrict DollaramaGroup L.P.’s abilitytopay a minimuminterest coverageratiotest.Thecredit facilitiesmay, in maintenance ofamaximumlease adjustedleverageratiotestand consent ofthelenders.Thecredit facilitiesare alsosubjecttothe tional indebtednessandgranting liensorsellingassetswithoutthe ditions forloansofthisnature, includinglimits onincurringaddi- instruments andlongtermdebt”. in“Foreignof earnings exchangeloss(gain)onderivativefi nancial $55,624,000) hasbeenincludedintheconsolidatedstatements foreign exchangegainof$36,821,000(February1,2009–loss foreign exchangeratesprevailing atthebalancesheetdatesanda US$236,759,000) hasbeenconvertedintoCanadiandollars at (as defi ned inthecredit agreement). fering orprivateplacement,and50%ofannualexcesscashfl ow of certainnewindebtedness,50%netproceeds ofapublicof- on certainsalesofassets,100%netcashproceeds onissuance the termbankloansrequire paymentof100%netcashproceeds exceptions andreductions inthetotallease-adjustedleverageratio, to $1,312,000(February1,2009–$2,170,000).Subjectcertain letters ofcredit issuedforthepurchase ofinventoriesamounting rowings senior secured credit facilityalsoincludestermbankloans.Bor- ary 31,2010,there were noborrowings underthisfacility. The the letterofcredit facility islimitedto$25,000,000.AsofJanu- Borrowings underswing lineloansare limitedto$10,000,000and bankers’ acceptances,swinglineloansandaletterofcredit facility. amounting to$75,000,000andconsistingofrevolving credit loans, $46,500,000). riod ofFebruary2,2009toNovember17,(2009–loss derivative fi nancial instrumentsandlongtermdebt”forthepe- was recorded under “Foreign inearnings exchangeloss(gain)on sheet date.Asaresult, aforeign exchangegainof$35,200,000 dian dollarsattheforeign exchangeratesprevailing atthebalance corded asaredemption premium ininterest expense. using theexchangerateasoftransactiondate)hasbeenre- As aresult, anadditionalexpenseofUS$8,876,000($9,183,000 Notes, plusaccruedandunpaidinterest uptoNovember17,2009. to 104.438%(US$208,876,000)oftheprincipalamountssuch and section3.01(a)oftheIndenture ataredemption priceequal of US$200,000,000inaccordance withsection5(a)oftheNotes issued andoutstandingNotesintheaggregate principalamount as ofJanuary31,2010 The credit facilitiesare subjecttothecustomarytermsandcon- The termbankloanofUS$234,325,000(February1,2009– Dollarama Group L.P. hasaseniorsecured revolving credit facility Prior totheirredemption, theNoteswere convertedintoCana- On November17,2009,theCorporationredeemed allofthe under thetermbankloansamountedto$250,564,000 (February1,2009–$343,581,000)and ) Seniorsubordinated deferred interest notes(the“Deferred Inter- c) est Notes”) with thesecovenants. As ofJanuary31,2010,DollaramaGroup L.P. wasincompliance ceeds from theliquidationofassetsDollaramaGroup L.P. unsecured creditors, would theholdersofunitsreceive anypro- after suchrepayment, andthepaymentofanyothersecured and of suchenforcement proceedings, using allavailableassets.Only and equipment.Thelenderwouldthenberepaid from theproceeds Dollarama Group L.P., includingaccountsreceivable, inventories entitled tobeginenforcement procedures againsttheassetsof credit facilities,anduponsuchacceleration,thelenderswouldbe entitle thelenderstoaccelerateallamountsoutstandingunder of interest expensesandtaxes. are availablefortherepayment ofindebtednessandthepayment 2009 – loss of $43,746,000) has been included in the consolidated 2009 –lossof$43,746,000) hasbeenincluded in theconsolidated dates andaforeign exchangegainof $31,798,000(February1, dollars attheforeign exchangeratesprevailing atthebalance sheet tions, orsellassets. create liens,consolidate,mergeorenterinto businesscombina- additional debt,paydividendsand makeotherrestricted payments, 101.00 Group HoldingsCorporation’s abilityto,amongotherthings, incur enants restricting DollaramaGroup HoldingsL.P.’s andDollarama 100.00 accrued andunpaidinterest, ifany, tothedateofpurchase. of 101%theirprincipalamountplusdeferred interest plusany be required tooffer topurchase allDeferred Interest Notesat aprice Following achangeincontrol, DollaramaGroup HoldingsL.P. will December 15,2010andthereafter December 15,2009 er omnig price% Years commencing the redemption date: plus deferred interest) plusaccruedandunpaidinterest, ifany, to lowing redemption prices(expressed aspercentages ofprincipal may redeem someor alloftheDeferred Interest Notesatthe fol- Group HoldingsL.P. andDollaramaGroup HoldingsCorporation such deferred interest forsubsequentinterest periods.Dollarama cash ordeferthepaymentofinterest, andinterest shallaccrueon Dollarama Group Holdings Corporationmayelecttopayinterest in each interest payment date,DollaramaGroup HoldingsL.P. and other liabilitiesofDollaramaGroup HoldingsL.P.’s subsidiaries.On subordinated inrightofpayment toallexistingandfuture debtand L.P. andDollaramaGroup HoldingsCorporation andare structurally and are senior unsecured obligationsofDollaramaGroup Holdings Failure tocomplywiththetermsofcredit facilitieswould The Deferred Interest NoteshavebeentranslatedintoCanadian The Deferred Interest Notesare subjecttothecustomarycov- The Deferred Interest Noteswere issuedat99%offacevalue Redemption DOLLARAMA INC. ANNUAL REPORT 2009 51 9, cash nada Inc. issued and out- 2010 2009 2010 Notes to Consolidated Financial Statements Financial to Consolidated Notes of shares shares shares Number of $ of $ Number

dividends (defi ned as “Restricted Payments”) to and from Dol- from ned as “Restricted Payments”) to and dividends (defi Virtually all L.P. Group and Dollarama Holdings L.P. larama Group its indirect conducted through are operations of the Corporation the capacity to make consequently, and L.P., Dollarama subsidiary, to the Corporation depends on the capacityRestricted Payments to Holdings L.P. Group and Dollarama L.P. of Dollarama Group as- As of January 31, 2010, the net make Restricted Payments. to $917.7 million, of which amounted L.P. sets of Dollarama Group to limita- payments. Subject from $747.6 million was restricted governing Interest the Deferred tions imposed by the indenture Holdings L.P.’s Group Notes, as of January 31, 2010, Dollarama of which $619.4 million net assets amounted to $691.3 million, payments. from was restricted ing the transfer of funds in the form of loans, advances or ing the transfer of funds g) exist regard- in (b) and (c) above, certain restrictions As described (tabular amounts expressed in thousands of Canadian dollars, unless otherwise noted) otherwise unless Canadian dollars, of in thousands amounts expressed (tabular $ The fair value of long-term debt, including the portion due withinThe fair value of long-term to $474,291,000. one year, is principally based on prices obtained on the quoted based on prices obtained on the quoted is principally one year, party broker. a third markets and from 2011 1,925 2012 248,639 2013 226,872 statements of earnings (loss) in “Foreign exchange loss (gain) on exchange loss (gain) statements of earnings (loss) in “Foreign instruments and long-term debt.”nancial derivative fi As described in note 1, as of the date of the closing of the initial public offering, the junior subordinated notes and all the the junior subordinated As described in note 1, as of the date of the closing of the initial public offering, ed on October 16, 200 repaid notes in the amount of $70,082,000, which were Dollarama Inc., and the Corporation assumed promissory Junior Subordinated Notes Junior Subordinated interest shares Class A preferred shares Class B preferred shares Class C preferred Accrued 5,003 n/a - n/a n/a - - - n/a 20,964,958 - 24,681,726 55,552,551 116,262 32,108 37,802 64,902 - 256,077 Amounts due to shareholders and number of shares outstanding are as follows: outstanding are and number of shares Amounts due to shareholders held by 4513631 Ca notes and shares than the junior subordinated of the Corporation (other shares standing common and preferred [ 7 ] Due to Shareholders f) of the next on long-term debt due in each Principal repayments as follows: approximately years are three e) debt amount- 31, 2010, the fair value of long-term As of January d) the Corporation has pledged As collateral for the long-term debt, substantially all of its assets. of converted into common shares which have been cancelled for no consideration) and 4513631 Canada Inc. were with the closing of the initial public offering. concurrently 52 DOLLARAMA INC. ANNUAL REPORT 2009 627 68,981 1,839 67,142 2009 $ 76,277 73,979 2,298 2010 $ 56,227 61,072 65,635 70,567 75,514 10,764 10,902 Contingent rent Basic rent 6,432 (loss)areincluded intheconsolidatedstatementsofearnings asfollows: 12,903 The rent andcontingent rent expenseofoperatingleasesforstores, warehouses, thedistributioncentre andcorporateheadquar 12,797 Thereafter 238,584 2015 4,288 2014 2013 2012 2011 The basicannualrent, exclusiveofcontingentrentals, forthenextfi ve yearsandthereafter isasfollows: various periodsuptotheyear2024. As ofJanuary31,2010,contractualobligationsforoperatingleasesamountedtoapproximately $567,599,000.Theleasesextend Commitments [ 9] of $4,852,000;2009–$3,154,000) Deferred tenantallowances(includingaccumulatedamortization Deferred leaseinducements of$15,777,000;2009–$13,633,000) Unfavourable leaserights,(includingaccumulatedamortization Other Liabilities [ 8] (tabular amountsexpressed inthousandsofCanadiandollars,unlessotherwisenoted) Notes toConsolidatedFinancialStatements $

2,8 28,098 29,988 00 2009$ 2010 $ ters over DOLLARAMA INC. ANNUAL REPORT 2009 53 anage- ivative fi nancial ivative fi ncy and interest ncy and interest ncial instru- ial instruments e income (loss) lar borrowings. y fl uctuation risk as- y fl highly probable highly probable ial instruments not As of February 1, 2009 As of January 31, 2010 losses from changes losses from As of February 1, 2009 $ Notes to Consolidated Financial Statements Financial to Consolidated Notes

As of January 31, 2010 $

(tabular amounts expressed in thousands of Canadian dollars, unless otherwise noted) otherwise unless Canadian dollars, of in thousands amounts expressed (tabular nominal sheet Asset hedging nominal sheet Asset nominal sheet Asset hedging sheet nominal Asset Contractual Balance Fair value – of Nature

nancial instruments The Corporation formally documents the relationship between the hedging instruments and the hedged items, as well as its risk m The Corporation formally documents the relationship The Corporation is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using der The Corporation is exposed to certain risks relating Derivative fi nancial instruments are classifi ed as held for trading or designated as hedging instruments. The derivative fi nanc ed as held for trading or designated as hedging instruments. The derivative fi classifi instruments are nancial Derivative fi A summary of the aggregate contractual or notional amounts, balance sheet location and estimated fair values of derivative fi na of derivative fi sheet location and estimated fair values contractual or notional amounts, balance A summary of the aggregate and reclassifi ed to earnings when the associated gains (losses) on the related hedged items are recognized. hedged items are ed to earnings when the associated gains (losses) on the related and reclassifi future cash fl ows attributable to a recognized asset or liability or a forecasted transaction (cash fl ow hedges). All gains and transaction (cash fl asset or liability or a forecasted ows attributable to a recognized cash fl future in accumulated other comprehensiv recorded ow hedges are designated as cash fl nancial instruments in fair value of derivative fi designated as hedges are recognized in earnings. The Corporation has designated its derivatives as hedges of the variability in recognized designated as hedges are ment objectives and strategies for undertaking the hedge transactions. nanc fi changes in fair value of derivative gains and losses from at fair value determined using market prices. All recorded are ments as of January 31, 2010 and February 1, 2009 is as follows: ments as of January US$ value location $ relationship Contractual Balance Fair value – of Nature rate swaps are entered into to manage currency fl uctuation risk and interest rate risk associated with the Corporation’s US dol Corporation’s rate risk associated with the risk and interest uctuation fl into to manage currency entered rate swaps are (46,373) 66,598 Derivative fi assets Current Long-term assets liabilities Current 610,700 66,598 3,479 5,342 (55,194) 33,175 33,423 - Non-hedging instruments rate swap agreements and interest currency Foreign 236,700 Long-term assets 7,976 Foreign exchange forward contracts exchange forward Foreign swap agreements currency Foreign 174,000 200,000 assets Current Long-term assets 33,175 25,447 ow hedge Cash fl ow hedge Cash fl 374,000 58,622 Hedging instruments Hedging instruments 702,300 (46,373) Non-hedging instruments rate swaps and interest currency Foreign swap agreements currency Foreign swap agreements currency Foreign 234,300 liabilities Current 70,000 143,000 assets Long-term liabilities Current (32,759) 5,342 (12,546) Foreign exchange forward contracts exchange forward Foreign contracts exchange forward Foreign 125,000 130,000 assets Current liabilities Current 3,479 (9,889) ow hedge ow hedge Cash fl Cash fl 255,000 (6,410) [ 10 ] Instruments Derivative Financial value US$ location (liability) $ relationship

instruments are currency risk and interest rate risk. Foreign exchange forward contracts are entered into to manage the currenc entered contracts are exchange forward rate risk. Foreign risk and interest currency instruments are curre and foreign swap agreements currency Foreign in the stores. sold purchases US-dollar merchandise sociated with forecasted 54 DOLLARAMA INC. ANNUAL REPORT 2009 1807 (0,7) - - - (103,371) - - 448 - - (24,899) 108,017 - - - (36,821) - (31,798) - (24,899) 1,386 - (35,200) - 36,821 - 31,798 uance 10(b) Reclassifi cation underdiscontin- - Foreign currency swapagreements - - forward Impactoflagonforeign exchange contracts, netofreclassifi 35,200 contracts 36,821 Foreign exchangeforward - 31,798 Hedging 6(b) Derivative fi 6(c) 35,200 Other foreign exchange gain 6(a) Short-term investment(classifi deferreded as interest notes Senior subordinated cash Term Bloan Senior subordinated notes Investment andlong-termdebt and cash equivalents) [ 10]continued 2,812 - 2,812 - 4,0) 617 (6,429) - 36,107 (42,007) - - - 46,287 (73,113)31,108 (6,429) (103,371) (4,628) - 4,628 10,180 - (34,902) Total (73,113) 4,628 andinterest rateswap 10(c) Realizedlossonforeign currency contracts–Notunder Foreign exchangeforward agreements Foreign currency swap interest Materializedlosson early Foreign currency andinterest hedge - payments Non-hedging 10(a) - - rate (1,586) - accounting -(40,735)40,735 10(b) - swap settlement currency Realizedgain(loss)onforeign (4,314) swap 10(a)(40,735) - agreements agreement of interest derivative 10(c) - payments 10(c) 6,429 - 177 - (6,429) (tabular amountsexpressed inthousandsofCanadiandollars,unlessotherwisenoted) Notes toConsolidatedFinancialStatements nancial instruments of - hedge - (2,581)2,581 relationship 10(c) cation

10(b) (39,585) - (39,585) - 0c 4,0) 608 3,6)3,6 - - - (6,048) (37,660) 37,660 10(c) (43,708) Note year oninvestment, value duringthe long-term debt balance sheet and derivative Change infair instruments Impact on fi nancial $ instruments net Unrealized gain comprehensive reclassifi Pre-tax impact on derivative adjustment fi on other nancial cation loss of $ long termdebt exchange gain and derivative instruments Impact on earnings fi (loss) on nancial Foreign $ instruments fair valueof Change in derivative fi nancial $ gain (loss)on long-term exchange Foreign debt Impact oncashfl $ instruments settlement derivative fi nancial 2010 ows Net of $ DOLLARAMA INC. ANNUAL REPORT 2009 55 $ of Net ows 2009 nancial fi derivative settlement instruments $ Impact on cash fl debt Foreign exchange long-term gain (loss) on $ Notes to Consolidated Financial Statements Financial to Consolidated Notes nancial fi derivative Change in fair value of instruments $ Foreign nancial (loss) on fi earnings Impact on instruments and derivative exchange gain long term debt $ of loss cation nancial on other fi (tabular amounts expressed in thousands of Canadian dollars, unless otherwise noted) otherwise unless Canadian dollars, of in thousands amounts expressed (tabular adjustment on derivative Pre-tax impact Pre-tax reclassifi comprehensive comprehensive Unrealized gain Unrealized instruments net $ year on nancial fi Impact on the instruments value during Change in fair and derivative balance sheet long-term debt Note 10(a) 10,089 (12,205) - 12,205 - 2,116 10(c) 50,338 10(c) (42,916) 3,838 46,500 - - nancial instruments instruments nancial Foreign exchange forward contracts, exchange forward Foreign swap agreements currency Foreign net of reclassifi cation 10(b) 37,682 37,682 - - - - 37,682 37,682 10(b) cation reclassifi 23,749 - - 23,749 - of 10(b) - contracts net forward exchange Impact lag on foreign Derivative fi Hedging - (146,209) - 143,512 - Long-term debt revaluation - (2,358) Long-term notes - (339) notes Senior subordinated - - B loan Term on interest deferred Senior subordinated exchange loss Other foreign 6(c) (43,746) 6(a) - (43,746) (46,500) - 43,746 6(b) - - (55,624) (46,500) - - (55,624) 46,500 - - 55,624 - [ 10 ] continued Total Total 66,985 (44,793) (84,437) 143,512 (9,415) Non-hedging agreements swap and interest currency Foreign rate 10(a) and currency Settlement of foreign 48,693 swap agreements rate interest - 48,693 (46,969) 66,985 - 44,930 (25,263) - - (9,807) - 56,486 (59,174) - 392 settlement of derivatives 10(c) - - (3,584) (3,584) - - (3,584) (3,584) - - - (498) 10(c) - - 10(c) - - derivatives payments of interest (1,724) settlement - - (1,724) - - - (2,688) agreement - - derivative 10(a) - - payments Settlement of derivatives of on early Other materialized loss currency Realized gain on foreign interest settlement 14,035 swap 1,716 Other materialized loss on early 2,512 Realized loss on foreign (2,512) rate and interest currency - (9,807) 56 DOLLARAMA INC. ANNUAL REPORT 2009 oebr1,21 Oetm 5,9 41,912 116,588 71,943 50,297 139,392 85,771 Onetime Onetime Onetime 6,212 7,446 112,596 116,588 Quarterly 134,565 139,392 Foreign exchangeforward contracts Onetime b) Onetime 5,069 6,074 Total Quarterly April30,2009toOctober31,2011(intheaggregate) November17,2011 January31,2011 January29,2010 AsofFebruary1,2009,thevariousswapagreements calledfortheCorporationtoexchangefollowingamounts: Total April30,2009toOctober31,2011(intheaggregate) November17,2011 January31,2011 AsofJanuary31,2010,thevariousswapagreements calledfortheCorporationtoexchangefollowingamounts: are undertakentoaddress tworiskswithitsUS-dollarLIBOR-basedtermbankloan(note6). TheCorporationentersintoswapagreements consistingofacombinationforeign currency swapandaninterest rateswap Foreign currency andinterest rateswapagreements a) [ 10]continued

(tabular amountsexpressed inthousandsofCanadiandollars,unlessotherwisenoted) Notes toConsolidatedFinancialStatements 1, 2009–gainof$33,175,000),“Accumulatedothercomprehensive income(loss)” includes alossof$7,242,000(February1, recognition oftherelated inventoryinearnings. $17,657,000) onforeign exchangeforward contractssettledbefore January31,2010butwhichwillbereported in (February 1,2009–US$174,000,000forCA$179,977,000),maturing betweenFebruary2010andNovember2010. cember 18,2008resulted inanetcashoutfl ow of$1,724,000. (February 1,2009,againof$60,898,000)wasrecorded toearnings. (gain) onderivativefinancialinstrumentsandlong-termdebt”.Accordingly, fortheyearendedJanuary31,2010,alossof $4 In additiontothefairvalueofforeign exchangeforward contractsrepresenting alossof$6,410,000asJanuary31,201 As ofJanuary31,2010,theCorporationwaspartytoforeign exchangeforward contractstopurchase US$255,000,000forCA$269,3 Furthermore, thesettlement ofUS$47,370,000forCA$56,844,000ontheswapagreements entered intobytheCorporationonDe- Changes infairvalueoftheforeign currency andinterest rate swapagreements are reported under “Foreign inearnings exchang Interval CA$ US$ Interval CA$ oprto from lenders 282,906236,655 Corporation US$ CA$ Interval paid from lenders Corporation 280,031234,255 by received paid by received Amount Amount earnings based on the basedonthe earnings 2009 – gain of 2009 –gainof 0,735,000 0 (February (February 85,000 85,000 e loss e loss that DOLLARAMA INC. ANNUAL REPORT 2009 57

d 08 s a igate other ting in eclas- longer 6). The income currency currency ed to the w of has been corded in corded riod under eriod from eriod from elationship d amounts: conversion of Amount Amount Amount Amount Amount Amount Notes to Consolidated Financial Statements Financial to Consolidated Notes paid by received by paid Interval Corporation lender from paid by received by paid Interval Corporation lender from paid by received by paid Interval Corporation lender from (tabular amounts expressed in thousands of Canadian dollars, unless otherwise noted) otherwise unless Canadian dollars, of in thousands amounts expressed (tabular In addition, the foreign currency swap agreement which expired on August 15, 2008 no longer qualifi ed as a cash fl ow hedge star ed as a cash fl 15, 2008 no longer qualifi on August which expired swap agreement currency In addition, the foreign Furthermore, the settlement of US$70,000,000 for CA$70,679,000 on the swap agreement entered into by the Corporation in July 20 into entered the settlement of US$70,000,000 for CA$70,679,000 on the swap agreement Furthermore, Until October 16, 2009, the fair value of the foreign currency swap agreements (the “Derivatives”) was recorded in accumulated in recorded (the “Derivatives”) was swap agreements currency foreign Until October 16, 2009, the fair value of the On October 16, 2009, the Corporation notifi ed the Notes holders that it would redeem all of the issued and outstanding Notes. A ed the Notes holders that it would redeem On October 16, 2009, the Corporation notifi In August 2005, the Corporation entered into two foreign currency swap agreements with its lenders which were undertaken to mit its lenders which were with swap agreements currency into two foreign entered In August 2005, the Corporation On November 17, 2009, the Corporation modifi ed its swap agreement mentioned above to better mitigate the risk surrounding the mentioned above to better mitigate the risk surrounding ed its swap agreement On November 17, 2009, the Corporation modifi July 2008. On August 15, 2008, the settlement of this instrument resulted in a net cash outfl ow of $9,807,000, which correspond in a net cash outfl of this instrument resulted July 2008. On August 15, 2008, the settlement fair value of this swap at that time. The fair value of the swap was $(14,035,000) as of February 3, 2008.fair value of this swap at that time. The fair resulted in a net cash outfl ow of $3,584,000. in a net cash outfl resulted comprehensive income. A portion of the changes in the fair value of the Derivatives (representing the offsetting impact on the the offsetting income. A portion of the changes in the fair value of the Derivatives (representing comprehensive the Notes from US dollars to Canadian dollars at the balance sheet date) was reclassifi ed from accumulated other comprehensive accumulated other comprehensive ed from US dollars to Canadian dollars at the balance sheet date) was reclassifi the Notes from for the p long term debt”. Accordingly, nancial instruments and exchange loss (gain) on derivative fi to earnings under “Foreign February 1, 2009 – gain of $46,500,000) was r February 2, 2009 to October 16, 2009, a loss of $37,660,000 (52-week period ended sifi ed from accumulated other comprehensive income to earnings. accumulated other comprehensive ed from sifi foreign exchange risk associated with the principal and interest payments on the US$200,000,000 senior subordinated notes (note notes the US$200,000,000 senior subordinated payments on with the principal and interest exchange risk associated foreign swap agreements call for the Corporation to exchange fi xed amounts as follows: xed amounts Corporation to exchange fi call for the swap agreements result, it was no longer probable that the anticipated hedge transaction linked to the Derivatives would occur, and the hedge r that the anticipated hedge transaction linked to the Derivatives would occur, it was no longer probable result, no as the derivatives are October 16, 2009 forward, income to earnings. From accumulated other comprehensive from ed reclassifi in earnings of the pe recorded are accounted for under the hedge accounting model, changes in the fair value of the derivatives of $4,628,000 on the swaps was re nancial instruments and long-term debt”. A gain exchange loss (gain) on derivative fi “Foreign between the Notes and the Derivatives was discontinued on that date. Accordingly, as of October 16, 2009, a gain of $2,581,000 as of October between the Notes and the Derivatives was discontinued on that date. Accordingly, income for the period of October 16, 2009 to January 31, 2010. o in a net cash outfl resulted cation of the swap agreement of the Notes. The modifi outstanding debt following the reimbursement $6,429,000 by the Corporation. As a result, the current swap agreements call for the Corporation to exchange the following fi xe call for the Corporation to exchange the following fi swap agreements the current $6,429,000 by the Corporation. As a result,

August 15, 2012 One time CA$164,150 US$143,000 xe to exchange fi calls for the Corporation swap agreement which had a maturity date of August 15, 2008. The new swap agreement 2008 August 15, 2012 August 15, 2009 to August 15, 2012 February 15, Semi-annual CA$3,191 US$3,106 One time One time US$70,000 CA$70,679 CA$70,679 US$70,000 the existing foreign with its lenders to replace agreement swap currency into a foreign the Corporation entered In July 2008, August 12, 2005 2008 August 15, 2012 August 15, 2006 February 15, 2006 to August 15, 2008 August 15, 2006 to August 15, 2012 August 15, Semi-annual Semi-annual CA$3,340 One time CA$6,534 One time US$3,106 US$200,000 One time One time US$5,769 CA$84,070 CA$240,200 CA$156,130 CA$10,171 US$70,000 US$130,000 US$9,023 following table: amounts, as indicated in the [ 10 ] continued c) agreements swap currency Foreign

Date Date Date 58 DOLLARAMA INC. ANNUAL REPORT 2009 thereorganization onthecapitalstructure oftheCorporation. 00 2009$ $(0.36) - $(0.36) 2010$ (15,504) $1.37 $1.41 1,538 518,430 72,863 - 278,680 - 42,576 - 42,576 - 41,513 - Options–Performance 38,587 Options–Service - - 124,346 shares Common $ - 72,691,935 53,049 - (loss)percommonshare includedinthecomputationofdilutedearnings becausetodosowouldhavebeen anti-dilutive: - - Thefollowingprovides (loss)percommonshare theoptionsthatcouldpotentiallydilutebasicearnings inthefuture butwer ClassB$ 51,511 After 17,142,857 - - ClassA$ - (loss)percommonshare Dilutednet earnings - (loss)percommonshare Basicnetearnings - - 1,290,689 shares - - 2,372,074 Weighted averagenumberofdiluted commonshares Amount outstanding(thousands) Before - Common 2,204,995 - ClassB - 7,105,503 Effect ofdilutiveoptions(thousands) 1,374 - After Weighted averagenumberofcommon shares outstanding(thousands) - ClassA 1,374 reorganization 33,930 - (loss)fortheyear Netearnings 35,304 - 33,930 - reorganization - reorganization Before (1,374) - reorganization Number Balance–January31,2010 netofissuancecostandtaxes (33,930) of units 8,645,886 Issuanceofcommonshares, 42,575,817 33,929,931 8,645,886 (8,645,886) ConversionofClassBpreferred shares (33,929,931) 33,929,931 ConversionofClassApreferred shares Conversionofjuniorsubordinated notes Stocksplit(1:03for1:00) intocommonshares ofDollaramaInc. ConversionofClassAandBcommonshares Balance–February1,2009 Balance–February3,2008 ClassA,BandCpreferred shares. Unlimitednumberofpreferred shares, withoutparvalue,non-votingandnon-participating Unlimitednumberofcommonshares, votingandparticipating,withoutparvalue As aresult ofthereorganization, theCorporationhasfollowingcapitalstructure: Asdescribedinnote1,asofthedateclosinginitialpublicoffering, theCorporationreorganized itscapital Capital Stock [ 11] (tabular amountsexpressed inthousandsofCanadiandollars,unlessotherwisenoted) Notes toConsolidatedFinancialStatements ) Thetablebelowsummarizesthenumberofcommonandpreferred shares issuedbefore andafterthereorganization andtheeffe b) a) Authorized Prior tothereorganization, theauthorizedcapitalstockofCorporationwascomposedClassAandBcommonshares, and aur 1 00$ February1,2009$ January 31,2010$ 2,000 880,422 - 1,760,844 structure. o e not ct of DOLLARAMA INC. ANNUAL REPORT 2009 59 – he he om , 2009 – tions es of the of stock 2010. lic offering. lic offering. nd Febru- 2,269,000; 2009 and 2008 exchange has years. s nil since all the note 1), an amount of by the Corporation, balance sheet. Notes to Consolidated Financial Statements Financial to Consolidated Notes purchase purchase of purchase Weighted Number of Weighted Number (tabular amounts expressed in thousands of Canadian dollars, unless otherwise noted) otherwise unless Canadian dollars, of in thousands amounts expressed (tabular 880,199 1,619,024 3.80 2,512,836 4,622,074 0.93 1,166,319 2,112,321 5.02 - - - 5.02 2,112,321 1,166,319 880,422 1,760,844 3.24 2,513,462 5,026,924 880,422 1,760,844 0.88 3.24 2,513,462 5,026,924 0.88 998,377 1,812,307 - - 998,377 The Corporation has recognized a stock-based compensation expense of $5,600,000 for the year ended January 31, 2010 (February 1 a stock-based compensation expense of $5,600,000 for the year ended January 31, 2010 (February The Corporation has recognized as of January 31, 2010 amounted to $544,000 for op not yet recognized to non-vested awards The total compensation costs related All of the outstanding options previously granted under the Old Plan were exchanged for options issued under the New Plan. The for options issued under the New exchanged granted under the Old Plan were options previously All of the outstanding Up to October 16, 2009, the Corporation had a management stock option plan (the “Old Plan”) whereby managers, directors and directors managers, stock option plan (the “Old Plan”) whereby the Corporation had a management Up to October 16, 2009, initial pub immediately followed by an its capital structure of the Corporation completed a reorganization On October 16, 2009, The weighted average remaining contractual terms of all options outstanding and of exercisable options as of January 31, 2010 a contractual terms of all options outstanding and of exercisable The weighted average remaining Outstanding – January 31, 2010 – January 31, 2010 Exercisable options fully vested as of January 31, 2010 is $45,168,000 (February 1, 2009 – $ The total intrinsic value for the common share Outstanding – October 16, 2009

(stock split) Impact of reorganization Impact of New Plan Granted after October 16, 2009 26,683 Performance Service $ 49,081 options common share price 5.5 years and 6.4 years respectively. ary 1, 2009 were Performance Service 17,934 $ average price options fully vested as of January 31, 2010 i share February 3, 2008 – $1,719,000). The total intrinsic value for the preferred 241,503 options under the New Plan in 2010 (February 1, 2009 exchanged for common share options under the Old Plan were share preferred options share preferred - 444,216 average 18.05 9.66 - (2,512,836) (4,622,074) - 0.93 - - - 3, 2008 Outstanding – February

1, 2009 Outstanding – February October 16, 2009 Granted before October 16, 2009 Forfeited before 35,121 (35,344) (212,062) 70,242 11.20 1.00 (100,900) 100,274 (605,398) 200,548 1.56 - available: types of options are Under the New Plan, the following a) (“Service Conditions”) Options with service requirements The options vest at a rate of 20% annually on t an equivalent number of common shares. granted to purchase options were These of the grant date. anniversary b) (“Performance Conditions”) Options with service and performance requirements The options become eligible to vest annually fr an equivalent number of common shares. granted to purchase options were These met. grant at a rate of 20% when the performance conditions are the date of $1,162,599; February 3, 2008 – $665,461). [ 12 ] Stock-Based Compensation with Service Conditions and $489,000 for options with Performance Conditions. Concurrently, the Corporation established a new management option plan (the “New Plan”) whereby managers, directors and employe and managers, directors plan (the “New Plan”) whereby established a new management option the Corporation Concurrently, options will have a life not exceeding 10 of the Corporation, and the of Directors by the Board determined options granted are completed of the initial public offering to the option holders. As a result value being awarded in any incremental not resulted Corporation may be granted stock options to acquire shares of Dollarama Inc. Under the New Plan, the number and characteristics Under the New Plan, the number and of Dollarama Inc. shares granted stock options to acquire Corporation may be the year ended January 31, during recorded lled, and as such, an expense of $4,938,000 was fulfi the Performance Conditions were employees of the Corporation were eligible to be granted stock options to acquire shares of Dollarama Inc. shares to acquire eligible to be granted stock options were employees of the Corporation $1,518,000 relating to the options on the preferred shares was reclassifi ed from accounts payable to contributed surplus in the ed from was reclassifi shares to the options on the preferred $1,518,000 relating $741,000; February 3, 2008 – $1,312,000) relating to the options with Service and Performance Conditions (no amount recorded in to the options with Service and Performance Conditions (no amount recorded $741,000; February 3, 2008 – $1,312,000) relating ( of the reorganization the occurrence periods for options with Performance Conditions). In addition, on October 16, 2009, with 60 DOLLARAMA INC. ANNUAL REPORT 2009 2010 2009 $ $ Long-term debt,includingcurrent portion Capital Disclosures [ 13] • 1,113,996 1,095,303 maintainaflexible capitalstructure thatoptimizesthecostofcapital • 256,077 - 61,680 provide astrong capitalbaseso astomaintaininvestor, creditor • TheCorporation’s objectiveswhenmanagingcapitalare 624,787 to: * Excludingaccumulatedothercomprehensive income(loss) (25,447) - Total capital Shareholders’ equity* Due toshareholders Foreign currency swapagreements theinterest coverageratio,defi ned asadjustedEBITDAto netin- • theleverageratio,defi ned as debtadjustedforvalueofleaseob- • including butnotlimitedto: TheCorporation monitorsdebtusinganumberoffi nancial metrics, or reduce theamountofexistingdebt. issue newdebttoreplace existingdebt(withdifferent characteristics), its capitalstructure, theCorporationmayissueshares ornewdebt, changes ineconomicconditionsandrisk.Inorder tomaintainoradjust to itinorder to support thebroader corporatestrategyorinresponse to Corporation managesitscapitalstructure andmaymakeadjustments available cashondepositand,where applicable,bankborrowings. The and maintenancecapitalexpenditures are fundedfrom operations, mance throughout the yeartoensure workingcapitalrequirements they qualifyascashfl ow hedges. (loss) andthefairvalueofforeign currency swapagreements when holders’ equityexcludingaccumulatedothercomprehensive income (tabular amountsexpressed inthousandsofCanadiandollars,unlessotherwisenoted) Notes toConsolidatedFinancialStatements tions; and at acceptableriskandpreserves theabilitytomeetfinancial obliga- business; and marketconfi dence andtosustainfuture developmentofthe earned). terest expense(interest expenseincurred netofinterest income DAR”); and (ii) leaseexpense(EBITDAplusisdefined as“consolidatedEBIT- for newstores (defi ned as“consolidatedadjustedEBITDA”),and depreciation andamortization,adjustedforannualizedearnings beforeligations tothesumof(i)adjustedearnings interest,taxes, In managingitscapitalstructure, theCorporationmonitorsperfor- ensure suffi cient liquiditytopursueitsorganicgrowth strategy. Capital isdefi ned aslong-termdebt,duetoshareholders, share- 4056 821,686 470,516 Classifi Financial Instruments [ 14] prehensive income(loss)”. cash fl ow hedgesare initiallyrecorded in“Accumulatedothercom- fair valueofderivativefi nancial instrumentswhichwere designedas transaction (cashfl ow hedges).Allgainsandlossesfrom changesin fl ows attributabletoa recognized asset orliability, oraforecasted that theywere hedgesofthevariabilityinhighlyprobable future cash derivatives are designatedashedges,theCorporationhasdetermined ments notdesignatedashedgesare When recognized inearnings. gains andlossesfrom changesinfairvalueofderivativefinancial instru- ments are recorded atfairvaluedeterminedusingmarketprices.All or designatedashedginginstruments.Thederivativefi nancial instru- at amortizedcostusingtheeffective interest method. are classifi ed asother liabilities.Otherfi nancial liabilitiesare recorded recorded atamortizedcostusingtheeffective interest method. to repay onaspecifi ed date,orondemand.Accountsreceivable are cash orotherassetsbyalendertoborrower inreturn forapromise refer tonon-derivative fi nancial assetsresulting from thedeliveryof in fairvalueare refl ected inearnings. realized ondisposal and unrealized gainsandlossesfrom the change determined usingmarketprices.Interestgainsandlosses earned, the nearterm.Thefinancial instrumentisrecorded atfairmarketvalue assumed forthepurposeofsellingorrepurchasing theinstrumentin refers tofi nancial assetsandfi nancial liabilitiestypicallyacquired or values inallmaterialrespects. detailed below, andtheirrespective carrying amountsequaltheirfair with allsuchcovenants. service ratiospresented above.TheCorporationisincompliance a quarterlybasis.Thesecovenantsincludetheleverageanddebt credit facilityagreements andindentures, whichare measured on measures presented byother entities. ing. Therefore, theyare notlikelytobecomparablesimilar under CanadianGAAPanddonothaveastandardized mean- are notrecognized forfi nancial statementpresentation purposes ments tomonitorperformance.Bothmeasures, aspresented, Derivative fi nancial instrumentsare classifi ed asheldfortrading Accounts payable,accruedexpensesandotherlongtermdebt Accounts receivable are classified asloansandreceivables, which Cash andcashequivalentsare classifi ed asheldfortrading,which The classification offi nancial instrumentsasofJanuary31,2010is The Corporationissubjecttofi nancial covenantspursuanttothe The CorporationusesEBITDAandEBITDARasmeasure- cationofFinancialInstruments DOLLARAMA INC. ANNUAL REPORT 2009 61 Notes to Consolidated Financial Statements Financial to Consolidated Notes When appropriate, the Corporation analyzes its interest the Corporation analyzes its interest When appropriate, also has approximately Holdings L.P. Dollarama Group The Corporation’s interest rate risk arises from long-term arises from rate risk interest The Corporation’s The Corporation entered into other swap agreements into other swap agreements The Corporation entered borrowings. Borrowings issued at variable rates expose the issued at variable rates expose Borrowings borrowings. is- risk. Borrowings rate ow interest Corporation to cash fl to fair value inter- xed rates expose the Corporation sued at fi est rate risk. rate risk exposure. Various scenarios are simulated, taking simulated, scenarios are Various rate risk exposure. of existing positions, nancing, renewal into consideration refi nancing and hedging. Based on these scenarios, alternative fi earningsthe Corporation calculates the impact on of a de- nance a debt to fi rate shift. It uses variable-rate ned interest fi These ob- portion of its operations and capital expenditures. payments due to ligations expose it to variability in interest million $250.6 rates. It has approximately changes in interest cred- senior secured in term bank loans outstanding under its January 31, 2010, it facility based on the exchange rate on at variable rates. Each quarter point change bearing interest in a $0.6 million change in inter- rates would result in interest est expense on such term bank loans. notes interest oating rate deferred $226.9 million of senior fl based on the exchange rate on January 31, 2010, bearing at variable rates. Each quarter point change in inter- interest ex- in a $0.6 million change in interest est rates would result pense on the notes. exchange rate and interest rate fl uctuations in respect of its uctuations in respect rate fl exchange rate and interest term loans. The Cor- LIBOR-based US dollar-denominated risk in the absence of its currency poration estimates that in the Cana- $0.01 appreciation every management program, in an increase US dollar would result to the dian dollar relative taxes of $4.8 million. in earnings income before swaps to minimize its exposure currency consisting of foreign its long-term debt. of uctuations in respect to exchange rate fl do not qualify for hedge accounting, These swap agreements in the consoli- reported uctuations are and their fair value fl dated statement of earnings. The Corporation is exposed to credit risk to the extent of non- The Corporation is exposed to credit payment by counterparties of its fi nancial instruments. The Cor- payment by counterparties of its fi The nancial exposures. policies covering fi poration has credit risk at the balance sheet date is to credit maximum exposure nancial asset, includ- by the carrying value of each fi represented nancial instruments. The Corporation mitigates ing derivative fi - major fi risk by dealing with counterparties which are this credit nancial institutions that the Corporation anticipates will satisfy their contractual obligations. ii) Interest rate risk b) Credit risk b) Credit (tabular amounts expressed in thousands of Canadian dollars, unless otherwise noted) otherwise unless Canadian dollars, of in thousands amounts expressed (tabular The Corporation is exposed to foreign exchange risks aris- The Corporation is exposed to foreign risk management policy is to hedge up The Corporation’s contracts exchange forward The Corporation uses foreign debt is in US In addition, a majority of the Corporation’s ing from (1) US dollar-denominated debt and (2) the purchase debt and (2) the purchase (1) US dollar-denominated ing from using US dollars, which is partially of imported merchandise contracts. exchange forward by foreign covered of for purchases ows required to 100% of anticipated cash fl months. 12 in US dollars over the next rolling merchandise to in the US dollar relative uctuations fl to manage risks from contracts are The majority of forward the Canadian dollar. designated and are used only for risk management purposes of merchandise. c anticipated purchases as hedges of specifi for- exchange or amendment of a foreign Upon redesignation portion of such contracts is rec- contract, the ineffective ward ognized immediately in earnings. Corporation estimates The risk management program, that in the absence of its currency to the in the Canadian dollar relative every $0.01 appreciation in earnings in- in an increase before US dollar would result $2.0 million. The seasonality of come taxes of approximately the quarterly im- would affect purchases the Corporation’s pact of this variation. The Corporation periodically examines nancial instruments it uses to hedge exposure the derivative fi that these instru- uctuations to ensure fl currency to foreign foreign or modifying at reducing highly effective ments are exchange risk associated with the hedged item. in the value of the Canadian a reduction dollars. Therefore, the funds available dollar versus the US dollar would reduce by the debt. As required to service its US dollar-denominated the Corporation has facility, credit terms of its senior secured currency consisting of foreign into swap agreements entered between January rate swap that expire swaps and an interest to 31, 2011 and August 15, 2012, to minimize its exposure The Corporation’s activities expose it to a variety of fi nancial risks: activities expose it to a variety of fi The Corporation’s department undernance carried out by the fi Risk management is i) Currency risk i) Currency market risk (including currency risk, fair value interest rate risk and cash risk, fair value interest currency market risk (including risk. The Corporation’s risk and liquidity rate risk), credit ow interest fl of the focuses on the unpredictability program overall risk management the on seeks to minimize potential adverse effects nancial market and fi uses derivativenancial performance. The Corporation fi Corporation’s to hedge certain risk exposures. nancial instruments fi This department identi- Directors. of by the Board practices approved of nancial risks based on the requirements es, evaluates and hedges fi fi guidance for overall provides of Directors the organization. The Board exchange such as foreign c areas risk management, covering specifi nancial fi risk and the use of derivative rate risk, credit risk, interest instruments. a) Market risk a) Market Financial Risk Factors 62 DOLLARAMA INC. ANNUAL REPORT 2009 (tabular amountsexpressed inthousandsofCanadiandollars,unlessotherwisenoted) prices)orindirectly (derivedfrom prices);and inputsother thanquotedmarketpricesincludedinLevel1thatare observablefortheassetorliability, either Level2– • quotedmarket pricesinactivemarketsforidenticalassetsorliabilities; Level1– • The fairvaluehierarchy hasthefollowinglevels: related totheCorporation’s fi nancial assetsandfi nancial liabilitiesthatare recognized inthebalancesheetatfairvalue. are notrequired intheyearofadoption.Theamendmentsrequire theuseofafairvaluehierarchy inorder toclassifythefai 5,9 5,9 989 535 - 45,305 - - 9,889 55,194 12,546 - 55,194 - - - - From 2to 243,219 270,237 253,890 From 1to 9,889 100,606 12,546 32,759 614,062 Under 5,740 - 555,955 9,889 12,546 - 259,630 Contractual 9,889 243,219 Carrying 46,825 250,564 16,347 32,759 46,825 amount $ cash 16,347 32,759 46,825 Foreign Currencies fl 275,913 Foreign currency swapagreements 226,872 Foreign currency andinterest tradeswap agreements Foreign exchange forward contracts 31,694 Derivative 31,694 Term bankloan–B 31,694 - Senior subordinated deferred interest notes Financial Accrued expensesandother Accounts Non-Derivative Liabilities payable The contractualmaturities,includinginterest, oftheCorporation’s fi nancial liabilitiesasofJanuary31,2010are summarize Financial Liabilities [ 14]continued Notes toConsolidatedFinancialStatements oeg xhnels gi)icue ncs fsls 2,2) 3,723 lowestlevelinput thatissignifi cant tothefair valuemeasurement initsentirety. 48,516 fairvaluehierarchy withinwhichthefairvalue measurement iscategorized initsentirety isdeterminedon thebasisoft (29,820) unobservableinputssuchasforthe assetorliability thatare notbased onobservablemarketdata.Thele Level3– • 44,793 (60,928) The CorporationadoptedtheamendmentstoCICASection3862 fortheseannualconsolidatedfi nancial statements;comparativedis (31,108) Fair Value ofFinancialInstruments Aggregate foreign(loss) exchangeloss(gain)includedinnetearnings Foreign exchangeloss(gain)includedincostofsales Foreign exchangeloss(gain)onderivativefi nancial instrumentsandlong-termdebt The resulting exchange gainsorlossesare recorded intheconsolidatedstatementsofearnings. and liabilitiesare translatedathistoricalrates.Revenuesandexpensesare translatedatprevailing marketratesinthereco Monetary assetsandliabilitiesdenominatedinforeign currencies are translatedatyear-end exchangerates,whilenon-monetary receivable are fullysatisfi ed. this risk,theCorporationretains rent paymentsuntilaccounts ablefrom itslandlords fortenant allowances.Inorder toreduce The Corporationisexposedtocredit riskonaccountsreceiv-

c) Liquidity risk letters ofcredit of$1.3million(February1,2009–$2.2million). ary 1,2009–$72.8million),takingintoconsiderationoutstanding Corporation hadavailablecredit facilitiesof$73.7million(Febru- meet itsobligationsastheyfalldue.AsofJanuary31,2010,the 2010 $ 2009 $ Liquidity riskisthethatCorporationwillnotbeableto os$ 1ya 2yas$ 5years$ 2years$ 1year$ ows $ d inthefollowingtable: r valuedisclosures gnition period. directly (as vel inthe assets clo he sures DOLLARAMA INC. ANNUAL REPORT 2009 63 re cant ecause ,000). 000). In- nd foreign nd foreign ng the asset

yield curves, evel 2 because cant Signifi Signifi

- 4,003 - 2010 $ 2009 $ 1,545 365 1,545 Notes to Consolidated Financial Statements Financial to Consolidated Notes (6,517) 17,527 (6,517) 38,154 (12,179) 38,154 in active markets for observable observable for observable markets Quoted prices

January 31 identical assets inputs inputs (tabular amounts expressed in thousands of Canadian dollars, unless otherwise noted) otherwise unless Canadian dollars, of in thousands amounts expressed (tabular cation and nature $ 2010 (Level 1) $ (Level 2) $ (Level 3) $

Accounts receivable Accounts receivable $41,758,000 (February 1, 2009 – $35,861, paid by the Corporation for the year ended January 31, 2010 was approximately Interest Fair value measurements of accounts receivable, accounts payable, and accrued expenses and other are classifi ed under Level 3 b classifi payable, and accrued expenses and other are accounts of accounts receivable, Fair value measurements Assets Liabilities a ed under Level 1 because such measurements classifi cash and cash equivalents are of the Corporation’s Fair value measurements Derivative fi nancial instruments include foreign currency and interest rate swap agreements, foreign currency swap agreements a swap agreements currency foreign rate swap agreements, and interest currency nancial instruments include foreign Derivative fi Income taxes recoverable inventories expenses Deposits and prepaid Merchandise payable Accounts Accrued expenses and other Income taxes payable $3,956,000 (February 1, 2009 – $3,114 approximately come taxes paid by the Corporation for the year ended January 31, 2010 were (214) 14,960 9,065 (36,131) 19,315 6,809 (5,302) 550

Balance sheet classifi receivable and cash equivalents Cash Accounts nancial instruments – Current Derivative fi current nancial instruments – Non Derivative fi payable Accounts Accrued expenses and other nancial instruments – Current Derivative fi 5,342 3,479 93,057 1,453 - 93,057 - 55,194 5,342 - 3,479 46,825 31,694 ------55,194 1,453 - - - - - 31,694 46,825 determined using quoted prices in active markets for identical assets. determined using quoted prices in active

The changes in non-cash working capital components are as follows: components are The changes in non-cash working capital [ 15 ] Statement of Cash Flows Information as follows: are

31, 2010 balance sheet as of January in the consolidated nancial liabilities measured nancial assets and fi value of fi The fair exchange forward contracts. Fair value measurement of the Corporation’s derivative fi nancial instruments are classifi ed under L classifi nancial instruments are derivative fi the Corporation’s of contracts. Fair value measurement exchange forward rates, market prices or estimates based on observable inputs such as interest determined using published are such measurements exchange rates. and spot and future inputs are generally unobservable and refl ect management’s estimates of assumptions that market participants would use in prici ect management’s generally unobservable and refl inputs are or liability. 64 DOLLARAMA INC. ANNUAL REPORT 2009 (tabular amountsexpressed inthousandsofCanadiandollars,unlessotherwisenoted) related parties. other). 2010(February 1,2009–$9,559,000). rvso o noetxs 945 12,250 29,415 - - 4,316 (1,049) 7,182 239 1,920 (6,469) 3,149 1,759 32,496 1,779 (1,775) (1,920) Provision forincometaxes Non-deductibleexpenserelated totheinitialpublicoffering Other Non-deductible Decrease infuture incometaxesresulting from asubstantively stock-based compensation Non-deductibledividendsonpreferred shares enacted expense Non-deductible(taxable)portionofcapital losses(gains) change in Changeinvaluationallowancerelated tocapitallosses tax rates Adjustmentforincometaxesarising from thefollowing: Canadianandprovincial incometaxrate Provision for(recovery of)incometaxesbasedonthe combinedbasic combinedbasicrateforthefollowing reasons: Theprovision forincometaxesbasedontheeffective incometaxratediffers from theprovision forincometaxesbasedon b) Future Current Theprovision forincometaxesisasfollows: a) Income Taxes [ 17] Related PartyTransactions [ 16] Notes toConsolidatedFinancialStatements consulting feewhichisincludedintheinitialpublicoffering expenses. VIII, LP, (“BainCapital”)aprivate equityfirm thatcontrols theCorporation’s parent. Furthermore, anaffiliate ofBainCapi management agreement) fortheyearendedJanuary31,2010(February1,2009–$3,331,000)chargedbyanaffiliate ofBainCapit These transactionswere measured atthe exchangeamount,whichistheamountofconsiderationestablishedandagreed toby There wasnoamountpayabletoBainCapitalasofJanuary31,2010(February1,2009–$1,500,000includedinaccruedexpenses Expenses chargedbyentitiescontrolled byadirector, whichmainlycompriserent, total$9,815,000fortheyearendedJanuary Included inexpensesare managementfeesof$7,504,000(includinga$5,000,000feepayableinconnectionwiththeterminationo 29,415 12,250 23,936 3,114 (3,081) 13,299 5,479 9,136 00$ 2009$ 2010 $ 2009$ 2010 $ 396 (358) tal charged a $1,000,000 tal chargeda$1,000,000 al Partners al Partners h the f the f the and and 31, the the DOLLARAMA INC. ANNUAL REPORT 2009 65 - (1,920) - 23 210 23 2010 $ 2009 $ Notes to Consolidated Financial Statements Financial to Consolidated Notes 16,432 7,840 16,432 79,599 66,311 (tabular amounts expressed in thousands of Canadian dollars, unless otherwise noted) otherwise unless Canadian dollars, of in thousands amounts expressed (tabular 49,879 71,759 49,879

c) taxes include the following items: income Future assets tax income Future [ 17 ] continued Derivative fi nancial instruments instruments nancial liabilities Other income and capital tax losses from t arising fi benefi Tax nancing expenses Derivative fi from t arising benefi Tax allowance Valuation exchange losses on long-term debt Foreign liabilities tax income equipment Future and Property instruments nancial fi Derivative exchange gain on long-term debt Foreign Other Goodwill and other intangible assets - liabilities tax income 1,373 4,917 Future - 382 10,142 - - 7,084 2,353 - 7,458 1,920 56,851 6,709 20,217 - 52,463 66 DOLLARAMA INC. ANNUAL REPORT 2009 Shareholder Information Technology andLogistics Senior Vice President, Information Leonard Assaly Senior Vice President,ImportDivision Geoffrey Robillard Chief MerchandisingOffi cer Neil Rossy Chief OperatingOffi cer Stéphane Gonthier Chief FinancialOffi cer andSecretary Michael Ross,CA Chief ExecutiveOffi cer Chair oftheBoardDirectorsand Larry Rossy Executive Offi cers (5) ChairoftheAudit Committee (4) Memberofthe Audit Committee (3) MemberoftheCompensationCommittee (2) LeadDirector (1) ChairoftheCompensationCommittee Senior Advisor, RSMRichterChamberlandLLP John J.Swidler, FCA Chief MerchandisingOffi cer Neil Rossy Corporate Director Donald GrayReid Operating Partner, BainCapitalPartners,LLC Nicholas Nomicos Managing Director, BainCapitalPartners,LLC Matthew Levin Chief ExecutiveOffi cer, CanadaInc. SleepCountry Chair oftheBoardDirectorsand Stephen Gunn Chief ExecutiveOffi cer, GRICapitalInc. Gregory David Managing Director, BainCapitalPartners,LLC Joshua Bekenstein Chief ExecutiveOffi cer Chair oftheBoardDirectorsand Larry Rossy Directors (2)(3)(4) (3) (4) (1) (5)

Shareholder Information

Head Offi ce Investor Relations Dollarama Inc. Michael Ross, CA 5805 Royalmount Avenue Chief Financial Offi cer and Secretary Montréal, Québec H4P 0A1 Dollarama Inc. Telephone: 1-514-737-1006 5805 Royalmount Avenue Fax: 1-514-940-6169 Montréal, Québec H4P 0A1 www.dollarama.com Telephone: 1-514-737-1006 x1237 Fax: 1-514-409-2292 Registrar & Transfer Agent Computershare Investor Services Inc. Media 100 University Ave., 9th Floor Paul de la Plante Toronto, Ontario M5J 2Y1 NATIONAL Public Relations Telephone: 1-800-564-6253 2001 McGill College Avenue, Suite 800 www.computershare.com Montréal, Québec H3A 1G1 Telephone: 1-514-843-2332 Auditors Fax: 1-514-843-6976 PricewaterhouseCoopers LLP www.national.ca 1250 René-Lévesque Blvd. West Suite 2800 Stock Exchange Listing Information Montréal, Québec H3B 2G4 Toronto Stock Exchange: (DOL) Telephone: 1-514-205-5000 Fax: 1-514-876-1502 Annual General Meeting www.pwc.com The Annual General Meeting of the Shareholders of Dollarama Inc. will be held on Thursday, June 10, 2010 at 10:00 am at the Windsor, 1170 Peel, Montréal, Québec, Canada. www.dollarama.com