Delivering on our promise The Inc. 2011 Summary Annual Report Committed to More Growth in Store Two years ago, embarked on a long-term strategy to generate More Growth in Store, a focus built on the simple goal of becoming a retailer who consistently delivers higher-standards for the benefit of all of our stakeholders, beginning with our customers. Today, we’re delivering on that promise by diligently working to improve processes and capabilities across our enterprise.

Vision & Mission 1 Store network 2 Banners 3 Investment strength 4 2011 financial highlights 5 President & CEO message 6 25th Anniversary 9 Product optimization 11 In-stock performance 12 Store stability 14 Supply chain 18 Our community promise 20 Chairman’s message 22 Board members 23 Executive information 24 True to our purpose The North West Company is a leading retailer of food and other essential everyday products and services to remote communities and urban neighbourhoods across , , the South Pacific and the . Our commitment to remaining foremost in these markets is reflected in our vision and mission.

vision mission To create the ability and desire for customers to To be a trusted community store of choice. shop locally with us for the widest possible range of products and services that meet their needs.

The North West Company Inc. 2011 Summary Annual Report 1 Reaching “hard-to-reach” customers We serve some of the most geographically-diverse communities in the world, from the Arctic to the South Pacific.

Northern 123 Stores NorthMart 7 Stores Quickstop 15 Stores 36 Stores AC Value Center 30 Stores

Cost-U-Less 12 Stores South Pacific Other Formats1 Ocean 6 Stores

$49 Other

$178 AC Value Center Our urban, rural and remote markets span the , and Alaska, across Canada’s western $595 and central provinces, down to , , , American Northern $257 Samoa and 8,500 miles east into the Caribbean Islands. Cost-U-Less

2011 Sales by Banner ($ in millions)

$304 $112 Giant Tiger NorthMart 1 Includes Valu Lots, Solo Market, Fur Marketing, NorthMart Pharmacy and Island Fresh

2 The North West Company Inc. 2011 Summary Annual Report Our Banners In addition to fresh food, quality Many of our stores provide far more than day-to-day essentials. Customers also rely on us for necessities like groceries and everyday merchandise, banking, petroleum, postal outlets, tax returns, even many communities depend on mobile phones and airtime. We are truly one-stop-shops The North West Company for vital services. in many corners of the world.

northern northmart quickstop giant tiger stores, offering a combination of stores targeted at larger northern convenience stores offering ready- junior discount stores, offering food, financial services and general markets with an emphasis on an to-eat foods, petroleum products family fashion, household merchandise to remote northern expanded selection of fresh foods, and related services. products and food to urban Canadian communities. fashion and health products in neighbourhoods and larger rural . centres in western Canada.

“I like the fact that NorthMart has ATMs in the store which I rely upon from time to time, as well as financial services. I also like the fact that NorthMart has an in-house pharmacy that I trust.” ac value center cost-u-less Brenda Beacham, Cross Lake stores similar to Northern and mid-sized warehouse stores, NorthMart customer NorthMart, offering a combination offering discount food and general of food and general merchandise merchandise products to island to communities across remote and communities in the South Pacific rural regions of Alaska. and the Caribbean. island fresh neighbourhood store offering convenience with an emphasis on fresh and prepared foods.

$1.495 229 6,901 Billion in sales Locations Employees

The North West Company Inc. 2011 Summary Annual Report 3 A solid investment

85%+ 90%+ 87% community stores customer frequency earnings stability

Community stores with big-box Over 90% of households served by 87% of our sales are food and urban retailers two hours or more our remote banners* shop with us everyday products and services, away from 85% of our remote banner* every month, giving credibility to our which lessens our susceptibility stores, we are the true definition of unique community store role. to economic volatility and fluctuations close and convenient. in discretionary spending. 6.0% 21% 1.5x EBITDA CAGR value creation population growth

With strong cash flows and prudent Total returns to shareholders have Our remote markets are young debt, we continue to invest for growth been 21% on a compound annual basis with income growth from resource while returning about 50% of cash over the past 10 years, reflecting the development and stability from flow to investors every year. Trading Company’s focus on growth and yield. government funding. Population profit (EBITDA) increased from $70.5 $10,000 invested at January 31, 2002 growth is 1.5 times that of Canadian million to $125.9 million over 10 years was worth $67,119 at January 31, 2012. and U.S. averages. ending January 31, 2012—a compound annual growth rate of 6.0%.

Twenty-five year sales history International Operations April 4, 1987 – January 31, 2012 ($ in millions) Canadian Operations

1500

1000

500

0 1987 1992 1997 2002 2007 2011

* includes Northern, NorthMart, AC Value Center and Cost-U-Less which collectively represent 76% of total sales

4 The North West Company Inc. 2011 Summary Annual Report 2011 Financial highlights CGAAP 1 All currency figures in this report are in Canadian dollars, unless otherwise noted Year Ended Year Ended1 Year Ended ($ in thousands, except per share information) January 31, 2012 January 31, 2011 January 31, 2010

Results For The Year Sales $ 1,495,136 $ 1,448,104 $ 1,444,366 Same store sales % increase 2 3.3% 2.7% 0.1% Trading profit 3 (EBITDA) $ 125,881 $ 125,764 $ 130,274 Earnings from operations 3 (EBIT) 89,309 90,272 95,124 Net earnings 57,961 69,656 81,813 Cash flow from operating activities 114,658 114,564 107,973

Financial POSITION Total assets $ 626,917 $ 616,588 $ 623,800 Total debt 175,892 192,596 209,170 Total equity 283,709 286,475 289,926

Financial Ratios Debt-to-equity .62:1 .67:1 .72:1 Return on net assets 3 18.5% 17.9% 18.7% Return on average equity 3 20.1% 24.1% 29.3% Sales blend: Food 76.4% 76.4% 77.2% General Merchandise 20.2% 20.3% 19.8% Other 3.4% 3.3% 3.0%

Per share ($) ¬ DILUTED 4 Trading profit 3 (EBITDA) $ 2.59 $ 2.59 $ 2.69 Net earnings 1.19 1.44 1.69 Cash flow from operating activities 2.36 2.36 2.23 Market price: January 31 19.40 21.09 17.94 high 22.50 23.00 19.60 low 17.85 17.02 14.88 Sales1 Trading Profit1 Cash Dividends/Distribution ($ in millions) ($ in millions) Per Share/Unit ¬ Diluted ($) 1,444 1,448 1,495 1.42 1,500 150 1.50 1,393 1.40 1.39 130 122 126 126 1,250 125 1.25 1.13 1,064 107 1.05 1,000 100 1.00

750 75 0.75

500 50 0.50

250 25 0.25

0 0 0.00 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011

1 The January 31, 2011 comparative figures previously reported in accordance with Canadian generally accepted accounting principles (CGAAP) have been restated to conform with International Financial Reporting Standards (IFRS). An explanation of the transition from CGAAP to IFRS is provided in Note 24 to the January 31, 2012 consolidated financial statements. The financial information for the fiscal years 2007 to 2009 was prepared in accordance with Canadian GAAP and has not been restated. 2 Same store sales, excluding the foreign exchange impact. 3 See Non-GAAP financial measures section on page 26 of the Annual Financial Report. 4 Effective January 1, 2011, North West Company Fund converted to a share corporation called the North West Company Inc. The comparative information refers to the units of the Fund. See conversion to a share corporation on page 7 of The Annual Financial Report. The North West Company Inc. 2011 Summary Annual Report 5 President & CEO message

We continue to engage with our customers, on a daily basis, to strengthen our position as their trusted community store of choice

“Delivering on our Promise” sums up our 2011 focus on major gains becoming a tighter, leaner and higher-standards retailer, This outcome is directly due to our disciplined focus on ultimately leading to More Growth in Store for tomorrow becoming a more consistent food merchant. We have and beyond. This is our third year on this promising path delivered on foundation work like the major gains we’ve made and I’m pleased to report that we are producing results that in our food in-stock rates, which improved 580 basis points demonstrate we’re doing what is right for our customers across our northern banners throughout the year. Likewise, first and our business overall. our fresh food profitability and market share increased, led by a 20% rise since 2009, in produce gross profit dollars in As would be expected after a second year of flat bottom and Alaska. line performance, I am asked why I remain so positive about our achievements. The answer starts with the core In addition, we exceeded targets in two other important business of selling food, which accounts for 76% of our building-block areas: outbound logistics costs and store current revenue base and continues to grow. In 2011, stability. Outbound logistics encompasses the time, skill North West’s same-store food sales rose 3.5% and same- and cost to move products and services to our customers store food gross profit dollars increased 6%. Like last wherever they live, which in our case means some of year, these results place us ahead of most food retailers the world’s most remote areas. This requires complex, in North America. high-expense work which at the same time pose vast opportunities for improvement.

6 The North West Company Inc. 2011 Summary Annual Report moving ahead By consolidating our air freight and renegotiating rates with our key Canadian air carriers, we were able to lower food prices in 2011, and these efforts were complemented by a key change in the federal government’s nutritious food subsidy program. Behind the scenes, we completed a full assessment of our outbound network and mapped our vision for a technology-enabled transformation of how we will plan, move and track products in real time. This work culminated in selecting a Transportation Management System and laying the foundation for integration and roll out in 2013.

We advanced our store stability progress in three important ways. First, we recruited a record number of new store and department manager candidates, setting the stage for an influx of recently-trained, highly-capable leaders assigned to stabilize 25 below-potential stores in 2012. Second, we created clear, relevant success profiles so that we now have practical, tailored criteria for recruiting, retaining and developing qualified managers. Third, we addressed an area of high priority for manager retention by investing $7 million in staff housing upgrades to be followed by an additional $5.0 million in 2012.

growth strides Our complementary businesses also hit new strides in 2011. Most notably:

• the recovery of our Alaskan wholesale business • growth in our pharmacy division, including hospital contract services and a partnership agreement for future health services with Keewatinowi Okimakanak, a regional northern Manitoba tribal council • the debut of our first three locations in , Nunavut • the addition of a second direct-to-customer food distribution outlet located in Edmonton • a record-setting year for volumes and revenues in our eastern Arctic shipping venture

Amidst this important activity, we confronted external hurdles, including fires destroying three of our Northern stores in the past 12 months and a persistently sluggish economy. Each challenge is being effectively managed

The North West Company Inc. 2011 Summary Annual Report 7 for risk mitigation and better results. While it took most of the first two quarters of 2011 to size up below-target performance at Cost-U-Less and Giant Tiger, by mid-year we had a realistic picture and adjusted plans in place, namely lower price points and more merchandise newness at Cost-U-Less and expense containment at Giant Tiger.

going forward 2012 will be another important year building on essential business improvements, which we believe is part of the progression from top line growth to a prudent balance between getting sales and ensuring on time, on budget performance with minimal waste, shrinkage, and markdowns.

We anticipate that the majority of our markets will be in a stable or modest growth mode next year, led by Western Canada and our banners in the North. The northern economy should continue to benefit from relatively robust metals prices, while the Caribbean and Pacific will vary considerably, from recessionary conditions in the U.S. Virgin Islands to more signs of a steady recovery in the Pacific region.

Overall, we remain confident that North West will continue to grow and leverage our capital and key work investments in 2012 to capture every opportunity and deliver on our performance promise.

Edward S. Kennedy President & CEO April 9, 2012

8 The North West Company Inc. 2011 Summary Annual Report The next 25 years of success

To mark The North West Company’s 25th Anniversary the career commitment that has built North West, as an independent enterprise, we kicked off 2012 with our 171 staff were also honoured for 25-52 years of tenure. annual Wintering Partners’ Conference in February, but for this special occasion we brought all of our store managers “This celebration was a tribute to the past 25 years of together for the first time ever. 220 managers from the success as an independent company and the over 340 Caribbean, South Pacific, Alaska and Northern and preceding years of continuous service to the people of Western Canada converged in for a week of the North and today many other parts of the world. I learning and sharing better practices, later described as assure you that the spirit and pride of the people here, the “best ever” for getting dialed into our 2012 sales plans together with our nearly 7,000 fellow Nor’Westers at work and improvement agenda. everyday in our stores making customer service their first priority, bodes well for our future” said Edward Kennedy, To cap off the week, conference attendees joined another President & CEO. 900 employees, retirees and friends of the Company for an anniversary dinner and gala in Winnipeg, where recording artist Susan Aglukark performed along with First Nations’ dancers and a steel-drum band. Demonstrating

The North West Company Inc. 2011 Summary Annual Report 9 “Our customers love our fresh fruit and vegetables. We always have a good selection in store and offer a lot of variety on a regular basis.” Thoma Irkootee Produce Manager, Northern, Rankin Inlet, NU

10 The North West Company Inc. 2011 Summary Annual Report Raising our fresh performance Prudent assessing and addressing gaps fresh meat sections with display-case ready packaging that standardizes quality and eliminates processing costs at between good and great practices, then store level. setting higher standards, proved the right ingredients for an outstanding year in our produce category. We achieved double- digit growth in unit sales and margin dollars, demonstrating that a more focused operation delivers a better, fresher offer for our customers and positive results for North West. Edward Kennedy, President & CEO.

At North West, fresh is essential to what we offer, from consistent quality, variety, new products and updated favourites to trends, unique sourcing and exclusive lines and services, including our private label brands. Fresh choices set the table for unique and compelling customer experiences, creating new potential to ensure More Growth in Store for all our stakeholders. Raising the bar on our fresh performance, like our in-stock #1 work, has been achieved by diligent focus on the details of Whether our customers shop with what makes a perishable food department successful in us along the 71st parallel in Alaska remote and challenging environments. or the 11th parallel in Suva, our #1 selling item is bananas. knowledge first and foremost Selling perishable foods is a high-stakes business, with several risks versus rewards to balance in order to be a new revenue streams leader in meeting customer expectations. The starting We opened five new in-store bakeries at Cost-U-Less point was investing in technology and reporting to give locations in the South Pacific and Caribbean, bringing the us full visibility into what we were ordering, selling and regional total to seven, generating incremental sales and discarding, ever conscious that freight expenses embedded tempting reasons for customers to make Cost-U-Less a in a product’s price are often higher than a discarded frequent food destination. Adding fresh confectionery items, item’s original cost. gourmet cheeses, more organic and vegan choices and exotic fruit varieties also bolstered southern and Alaskan Valuable insight gleaned last year was the springboard for revenues, where new flavours contributed to sales growth. 2011 as we shifted attention, strategies and execution to making our perishables performance an enterprise-wide Going forward, we will continue to utilize category benchmark for thinking and working at North West. assessment tools and designated managers to help us keep on top of customer preferences and emerging trends. A year after launching pre-packaged fruits and vegetables Whenever possible we will also source local suppliers to to reduce spoilage while improving both profitability and enhance freshness, speed delivery and reduce transport costs. consumer satisfaction, in 2011 we expanded this success to our small and medium-sized stores in Canada and Alaska. We also began applying this strategy across our

The North West Company Inc. 2011 Summary Annual Report 11 Ready and in-stock Our 2011 target was to have core merchandise in stock, on the shelf and at the ready for our customers 92% of the time in our Northern Canada and Alaskan stores. We achieved that goal and delivered $5.0 million in annualized sales.

After a full year since enhancements to our handheld electronic (PDT) technology, processes and skills for sales floor ordering, reporting and inventory tracking, the result is dramatically better in-stock performance and in turn, higher sales. Today all of our 229 stores have greater visibility of product sales history and trends, resulting in far less instances of empty shelves and more of the popular items, in the right amount at the right time. 580 Our in-stock performance improved Early in 2011, we began PDT-tracking for fresh fruit and 580 basis points in 2011, helping drive same-store food sales growth in produce, with a target to expand to 95% of our food order our northern banners to some of the volume by year end. Not only did we meet that goal, we highest levels in North America. exceeded it by achieving 98%.

tracking performance Our in-stock initiatives continue to generate “spin-off” benefits that underpin our intense focus on details that enable simpler, leaner operations. The cost and labour- saving benefits of PDT technology emerged across our business, including:

• Streamlined, standardized ordering and scheduling • Real-time reporting and data sharing • Reduced lead times and warehouse space due to order frequency The positive results from these recent initiatives will manifest • Accurate forecasting from visible past performance throughout 2012, as will the benefits of new technology, • Insight into high-turnover products vs. “slow- processes and people skills we are developing through moving” inventory ongoing refinement of our learning and success. Next year we • Reliable daily monitoring of shelf assortment will roll out a new Inventory Management Training Program to and replenishment standardize store procedures and certify staff to North West best practices and processes. the next level: optimizing potential Pilot testing began last fall in northern Canada and Alaska to further utilize PDT technology and work processes to calculate item and inventory rates of return, and translate findings through a web-based platform for visibility and analysis enterprise wide.

At the same time, our Caribbean and South Pacific operations launched a robust new monitoring system to achieve similar in-stock improvements.

12 The North West Company Inc. 2011 Summary Annual Report “In our business, you’re either in stock or you’re out a customer sale The main focus in our store is to be consistently in stock on everyday items customers want at all times You cannot grow your business otherwise. On a consistent basis, customers will make your store the first place to shop and when you gain customer trust that you have what they need, everybody wins.” Mike McNally Branch Manager, AC Value Center, Nome, AK

The North West Company Inc. 2011 Summary Annual Report 13 Staffing for stability

Store Stability’s goal is to drive store execution capability through stable and proficient store teams supported by lean retail processes. We are building the foundations to ensure we recruit managers with the right skills and attitudes needed to excel in remote locations. We are providing an attractive value offer aimed at motivating and rewarding employees to remain and grow with us. The North West Company is committed to building the most capable, stable store teams in the markets we serve and to be a trusted community store of choice. Richard Fortier, Vice-President, Human Resources

In 2011, we pursued several initiatives to achieve long-term key performance indicators specific to our business. stability, including reviewing our recruitment criteria, This will assist in recruiting highly-capable leaders and increasing management bench strength and working provide a solid platform for honing existing skills. diligently at strategic employee placements to retain team cohesion and ensure time for staff to gain thorough insight We also reviewed employee housing standards, which into local markets and customer needs, while forging strong is a key, controllable retention factor, and developed a community bonds for sustained success. comprehensive plan with dedicated resources to ensure sustainable, quality housing across the North. Building on our 2010 progress, we continued to re-structure stores and add both Administration and Grocery Fresh With these initiatives the past 12 months, we are well Managers to create breadth across our teams and free up on our way to store stability across our operations. While Store Manager time to grow the business and strengthen regional business models differ, many of our strategies can customer and community relations. be effectively applied throughout our banners for lasting stability and superior execution capabilities. store manager success Simultaneously, we developed a Manager Success Profile to pinpoint competencies and character traits, based on

14 The North West Company Inc. 2011 Summary Annual Report “Customer service is where the job begins, it’s what drives the business. I like having the ability to provide a service to the community, while building friendships with our customers.” Salu Bodine Department Manager, AC Value Center, Nome, AK

The North West Company Inc. 2011 Summary Annual Report 15 Creating tomorrow’s leaders Today more than ever this program is proof that our core principles are embedded in every corporate facet of our business, each employee action and all customer touchpoints.

leadership@north west By January 31, 2012, over 50 North West senior managers have completed training and attended working trips to various stores to gain in-depth insight into local markets, cultural differences, customer needs and what it means to live and work in that community.

Bi-annual forums are also part of the program, enabling leaders to gather to discuss common platforms and new practices.

Added last year was an inaugural Ideas Summit where our Canadian and International senior leaders met to share process, systems, enterprising ideas, and experiences gleaned from store working trips, and learn about unique challenges and opportunities in each of our markets and banners.

managing@north west In the third year of this practical, blended learning program an additional 200 managers were trained to manage everyday scenarios and challenges, as well as apply new business tools and processes to improve market-specific strategies and results.

Originally designed for support office managers, a Craig Gilpin, Executive Vice-President & Chief Corporate Officer condensed version of Leadership @ North West was Ideas Summit, January 2011 launched as Managing @ North West and rolled out in 2009. In 2011 the program reached over 200 managers in warehouse, operations, technical and store support functions across our operations. In 2012 Managing @ North West graduates will be able to take advantage of further training through peer-to-peer mentoring, Manager Forums and lunch and learns.

In 2012, we plan to cascade a refined Managing @North West program to an additional 225 supervisory and entry-level employees across the organization.

16 The North West Company Inc. 2011 Summary Annual Report “NWC does a great job of training managers and helping us grow. The leadership program covers everything from Managing Change to Motivating Employees to Superior Customer Service. We learn to apply our core principles consistently, whether in Northern Canada or the South Pacific.” Guy Strickland (left) Store Manager, Cost-U-Less, Grand Cayman

The North West Company Inc. 2011 Summary Annual Report 17 Superior connections

Outside experts say that North West operates the most complex supply chain they’ve ever seen, not only due to distance and destinations, but also the multiple modes of transport—road, ice road, rail, air, water—plus local handling that can add up to a half dozen hand-off points for some stores. For us, that says opportunity for improvement. Mike Sorobey, Vice-President Logistics & Supply Chain Services

The logistics of our vast distribution network pose challenges to even the brightest scholars. An online supplement to the Harvard Business Review publishes case studies of North West Supply Chain Management for academic analysis.

Year two of our logistics strategy to contribute to more growth expectations for the resulting efficiencies of these advanced in store required the vision and framework for proprietary and core processes on our $100 million annual expenditures integrated transportation services. The cornerstone is our on outbound logistics and our ability to fully live up to the Transporation Management System (TMS). North West’s reputation of being the best at moving retail products and services to some of the hardest-to-reach This robust platform will help redefine our outbound customers in the world. transportation capabilities in the north, optimizing load efficiencies by location, delivery windows, volumes and new subsidy savings carrier types, while yielding invaluable real-time item Much of our attention at the start of 2011 was to develop visibility across our supply chain. Longer term it will also and implement proccesses to support the Canadian generate freight delivery capabilities that can be leveraged government’s new Nutrition North program which to bring a vast assortment of products to our customers, replaced Food Mail. As of April 1st, 2011, rather than far beyond the current physical and cost limitations of local subsidizing transport costs to ship groceries to hard-to- store selling space. reach northern communities, subsidies are paid directly to retailers like North West who serve the Canadian north, TMS deployment is slated for 2013, with pilot testing enabling us to work with our carriers to determine more beginning in the second half of 2012. We have high efficient routing, better service and lower freight rates.

18 The North West Company Inc. 2011 Summary Annual Report $4m in cost efficiencies achieved through renegotiating carrier contracts and efficient route planning in Canada.

By renegotiating contracts with air and land carriers last spring, we realized cost efficiencies of about $4 million. We also capitalized on other advantages of this program. No longer obligated to go through Canada Post entry sustainable moves points, we can now select the most expedient delivery A test trial replacing wood pallets routes. Former time and effort spent on sorting subsidy- with heavy-gauge plastic versions eligible foods for separate weighing, packaging and labelling began in many Manitoba stores in is eliminated. Today, less staging, loading and offloading, late 2011. Both the environmental combined with streamlined shipping channels, have and “lifespan” benefits of plastic far outweigh the higher initial translated into significantly lower distribution costs, which purchase cost and they are well- we pass on directly to our customers in Canada’s North. suited to our supply chain including the following: more deliveries We’ve also seized opportunities to improve our general - made from recycled materials merchandise deliveries to many northern communities. Now, - more durable, with an average lifespan of 3.5 years along with two food shipments a week, we add big-ticket - 30% lighter than wood for items like furniture, appliances and snowmobiles to each considerable freight savings load for increased in-stock and sales potential. Our intent - each stacks inside one another is to expand this bi-weekly schedule to all stores next year. for space economy - can be recycled again to divert At our Winnipeg distribution centre, an enhanced warehouse from the landfill management system now incorporates a workforce module to measure performance of all personnel handling grocery. Pending trial success, converting to As planned, Edmonton proved to be a more effective hub plastic pallets could generate cost savings of as much as $350,000 from which to ship merchandise to our regional Giant Tiger per year. outlets as well as many northern communities, resulting in reduced costs throughout 2011.

Iqaluit

Anchorage Hay River Churchill North West’s distribution network Thompson traverses highways, seasonal and ice roads, rail lines, air, seaways, lakes Edmonton and oceans via truck, semitrailer, Val -d’or Winnipeg flatbed, boxcar, plane, helicopter, sea Pacific Ocean Tacoma lift, barge, ferry, boat, side-by-side vehicle, ATV and snowmobile.

Sonora

Atlantic Ocean

Fort Lauderdale South Pacific Ocean

The North West Company Inc. 2011 Summary Annual Report 19 Our community promise This has tremendous positive impact and goes hand in hand with being a trusted local retailer.

While our culture & arts sports & recreation contributions are $705,422 7,000+ varied, financial North West supports cultural We help over 7,000 youth annually events, performing arts and by providing uniforms, team support is celebrations of heritage, language travel, financial aid and sponsoring divided between and artistic expression, including summer camps, community-based The Manitoba Theatre for Young street hockey and more. five general People’s Aboriginal Arts Training categories: and Mentorship Program and the Festival du Voyageur.

youth & education healthy living environment $282,169 $443,408 1,082 mt

Each year we award thousands Our Healthy Living Programs Streamlining our truck fleet of dollars in post-secondary promote nutritional and physical decreased fuel consumption and scholarships and educational wellness for our customers and cut Greenhouse Gas Emissions by assistance to our community employees. North West also 1,082 metric tons in 2011. As well, members, schools, and staff, participates in events for the our Greener Tomorrow program including programs like Excellence Canadian and American Diabetes has helped reduce plastic bag use in Aboriginal Business Leadership Associations, the Canadian Cancer by more than 60% across the and Junior Achievement. Society, the Muscular Dystrophy Northwest Territories, Nunavut Association and others. and Nunavik.

Our everyday participation is counted on more than that of Here’s a sampling of who and how we’ve helped in the past average outside businesses and we do our best to live up twelve months1: to these expectations. In addition to supporting causes and • Drop the Pop annual campaign in Nunavut, Northwest events financially, and recruiting, training and employing Territories & community members where we work, North West donates thousands of volunteer hours annually. • Cost-U-Less St. Croix helps VICARE promote HIV screening and awareness employee giving • Giant Tiger raises $90,000 for sick children across Staff participation goes into every initiative we support. Western Canada From our front-line customer service associates through • Northern Lac Brochet donates $15,000 to bring Keepers to our President & CEO, the example is set by hundreds of the Water youth summit in Northern of Nor’Westers every year in many ways, including our United Way leadership last year and going the extra mile • NorthMart Iqaluit donates $10,000 to aid victims for the Canadian and American Diabetes Association of flash fires (see sidebar). • Cost-U-Less and Island Fresh raise vital donations for Guam Memorial Hospital • Northern Attawapiskat provides gift cards to 300 residents at Christmas

20 The North West Company Inc. 2011 Summary Annual Report united way & days of caring Our people have greatly increased both financial aid and volunteer support to the United Way through the years. We have turned the charity’s annual Day of Caring into a multi-day company affair, taking on projects for lasting impact. In 2010, we spent five days plowing and planting a garden in a low-income Winnipeg community. In 2011, we visited a similar housing complex where 150 North West employees, from executives to store cashiers, hauled lumber, soil, mulch and dug in to create two vegetable gardens for the enjoyment of the whole community.

rome run for diabetes 61 North West employees from all banners and 16 community members converged in Rome, Italy last spring for a marathon benefitting the Canadian and American Diabetes Associations.

Over the past 10 years, staff from coast to coast have united as Team Diabetes, raising well over $2 million. Joining President and CEO, Edward Kennedy and the team was Grand Chief, David Harper of Manitoba Keewatinowi Okimakanak, running on behalf of Aboriginal people who are up to five times more likely to develop Type 2 diabetes. While past proceeds funded research, net proceeds raised by Team Diabetes in 2011 – over $250,000 – Resident children, Casa Manita Orphange will be directed to diabetes education and programs Cost-U-Less Curacao management and staff provide within the communities North West serves. ongoing mentoring and nurturing for deserving children. Our dedicated staff also run and fundraise annually • North West bestows National Aboriginal Achievement in Labrador’s Trapline Marathon and the Long Sun Foundation Bursary in Business and Commerce Run in Northern Saskatchewan. • Cost-U-Less and Red Cross help tsunami victims social connections • Northern Ile a la Crosse raises $5,000 to help build a Our Northern/NorthMart new community swimming pool complex Facebook Community page launched last summer, garnering • North West delivers Christmas gifts to 200 children about 7,800 views per posting and low-income families in Winnipeg and 4,300 weekly users. Through • North West provides We Day with a $10,000 sponsorship conversations, contests, promotions and product profiles, we are gaining insight into lifestyle trends we can leverage to better meet our customers’ local shopping needs. We created Facebook pages for many more of our communities as an excellent localized forum.

Follow us on Facebook, Twitter, LinkedIn and YouTube. 1 For a detailed listing, please view Our Community Promise report at www.northwest.ca and our annual highlights at www.northwest.ca/community

The North West Company Inc. 2011 Summary Annual Report 21 2011 Chairman’s Message

2011 was a year of measurable progress at North West. The Company continued to focus on driving sustainable results through operational excellence or “More Growth in Store “ and our northern businesses led the way, helped by relatively stable economic and competitive environments. The ability to apply new approaches to the business was a testimony to the energy, openness and dedication of our associates. Their strength continues to be a hallmark to our success.

As the Company’s attention to process innovation and execution increased, your Board played an active oversight role in helping ensure that performance targets were appropriate and that compensation was aligned. Over the past year, this produced changes to both short and long-term incentive pay. On the short-term side, several performance drivers were identified by management as key to accomplishing the initiatives highlighted in this summary report. These have been added to the previous single, bottom line business unit measures and will be part of the Board’s ongoing review of our “More Growth in Store” effectiveness.

The delivery of total returns (share price growth and strong dividends) is a key long-term objective of directors. Gary Merasty, Vice-President, Corporate Social the Company just as it has been a key feature of our Responsibility at Cameco Corporation, joined the Board in performance over the past 25 years. Going forward, long- June 2011 and brings a deep understanding of constructive term incentive pay has been adjusted to recognize both Aboriginal community relations in the North built on a consistent achievement against operational and strategic career as a teacher, business leader and federal politician. targets and our total returns compared to other public Annette Verschuren, Executive Chair, NRStor Incorporated Canadian and U.S. retailers. and formerly President, Home Depot Canada and Asia for 15 years, was appointed in December 2011 adding a unique An important development at the Board level was the blend of entrepreneurial and international retail perspectives. transition of our Board make-up. As announced last year, Eric Stefanson was appointed in January 2012 and has great Ian Sutherland, a founding shareholder, former CEO and breadth in senior finance and accounting roles, including his former Chair, retired at the 2011 Annual Meeting. Just most recent position as Central Canada Managing Partner, prior to Ian’s departure, Keith Martell, a leading Aboriginal BDO Canada and earlier experience as CFO of Assante business person, left the Board due to his primary business Canada and Minister of Finance of Manitoba from 1993-99. commitments. At the 2012 Annual Meeting, Jim Oborne and David Broadhurst will be retiring from the Board. In this, our 25th year as an independent company, these Jim and David have made long, valuable contributions to changes leave North West well-positioned with a balanced North West dating back to the Company’s start-up as an set of skills and a Board renewed and ready to fulfill the independent business in 1987 with Jim, in particular, playing tradition of strong governance first established in 1987. a pivotal role as the lead Winnipeg director and in the initial financing of the enterprise.

While we appreciate the important contribution of all of these retiring directors, I am very pleased to report H. Sanford Riley that your Board has moved forward diligently on board Chairman, Board of Directors succession with the recruitment of three strong, new April 9, 2012

22 The North West Company Inc. 2011 Summary Annual Report Corporate Governance Board of Directors

directors the north west company inc. 1 H. Sanford Riley Chairman 2 Edward S. Kennedy 3 David G. Broadhurst 1,2 4 Frank J. Coleman 1,2

1 2 3 5 Wendy F. Evans 1,3 6 Robert J. Kennedy 2,3 7 Gary J. Lukassen 2 8 Gary Merasty 2,3 9 James G. Oborne 1,3 10 Eric L. Stefanson 2,3

FPO 2,3 new 11 Annette M. Verschuren 4 5 6 images from client committees 1 Governance & Nominating 2 Audit 3 Human Resources, Compensation & Pension

7 8 69

10 11

Complete disclosure of The North West Company Inc.’s corporate governance is provided in the Company’s Management Information Circular, which is available on the Canadian Securities Administrators’ website at www.sedar.com or in the investor section of the Company’s website at www.northwest.ca

The North West Company Inc. 2011 Summary Annual Report 23 Corporate Governance Canadian & International Executives

executives executives canadian operations* international operations* 1 2 3 1 Edward S. Kennedy 1 Edward S. Kennedy President & CEO Chairman & CEO

2 Craig T. Gilpin 13 Rex A. Wilhelm Executive Vice-President & President & COO Chief Corporate Officer 3 John D. King 3 John D. King Chief Financial Officer 4 5 6 Chief Financial Officer 14 J. Robert Cain 4 Michael W. McMullen Vice-President, Executive Vice-President, Logistics & Supply Chain Northern Canada Retail Services

5 Dalbir S. Bains 15 Christie A. Frazier-Coleman Vice-President, Vice-President, Food 7 8 9 Corporate Development Procurement & Marketing

6 David M. Chatyrbok 7 Paulina Hiebert Vice-President, Canadian Vice-President, Legal & Procurement & Marketing Corporate Secretary

7 Paulina Hiebert 16 Thomas M. Kallio Vice-President, Legal & Vice-President & General 10 11 12 Corporate Secretary Manager, Cost-U-Less 8 Daniel G. McConnell Vice-President, Real Estate & 17 Scott A. McKay Store Development Vice-President, General Merchandise Procurement 9 Christine D. Reimer & Marketing Vice-President & General Manager, Giant Tiger, 18 Walter E. Pickett 13 14 15 West Store Division Vice-President & General Manager, 10 Richard J. Fortier Alaska Commercial Company Vice-President, Human Resources 19 James W. Walker Vice-President & General 11 Gerald L. Mauthe Manager, Vice-President, Wholesale Operations 16 17 18 Information Services * As at April 9, 2012 12 Michael E. Sorobey Vice-President, Logistics & Supply Chain Services

19

24 The North West Company Inc. 2011 Summary Annual Report Shareholder information

The North West Company Inc. Fiscal Year Share/Unit Share/Unit Share/Unit Quarter Ended Price High Price Low Price Close Volume EPS/EPU1 Anticipated Dividend Dates*

2011 $ 22.50 $ 17.85 $ 19.40 22,417,768 $ 1.19 Record Date: March 30, 2012 April 30, 2011 22.50 19.65 19.78 5,885,378 0.26 Payment Date: April 16, 2012 July 31, 2011 20.85 18.51 20.23 5,802,416 0.31 Record Date: June 29, 2012 October 31, 2011 20.63 17.85 18.78 4,020,971 0.35 Payment Date: July 16, 2012 January 31, 2012 20.72 18.28 19.40 6,709,003 0.27 Record Date: September 28, 2012 2010 $ 23.00 $ 17.02 $ 21.09 24,813,768 $ 1.44 Payment Date: October 15, 2012 April 30, 2010 19.50 17.60 18.75 4,899,200 0.37 July 31, 2010 20.22 17.02 19.78 4,148,526 0.42 Record Date: December 31, 2012 October 31, 2010 21.99 19.27 20.68 5,118,932 0.46 Payment Date: January 15, 2013 January 31, 20112 23.00 19.93 21.09 10,647,110 0.19 *Dividends are subject to approval by the Board of 2009 $ 19.60 $ 14.88 $ 17.94 20,080,407 $ 1.69 Directors April 30, 2009 17.48 14.98 16.35 4,068,297 0.33 2012 Annual Meeting July 31, 2009 16.75 14.88 15.65 5,289,346 0.43 The Annual Meeting of Shareholders of October 31, 2009 18.70 15.11 16.98 6,004,601 0.51 The North West Company Inc. will be held on January 31, 2010 19.60 16.86 17.94 4,718,163 0.42 Wednesday, June 6, 2012 at 11:30 am at The Hotel, Grand Ballroom, 1 Net earnings per share (unit) are on a diluted basis. 2010 has been restated for IFRS. 222 Broadway, Winnipeg, Manitoba. 2009 is reported under Canadian generally accepted accounting principles (CGAAP)

Transfer Agent and Registrar Canadian Stock Transfer Company Inc. (acts as administrative agent for CIBC Mellon Trust Company) Total Return Performance (% at January 31) Calgary and Toronto This chart illustrates the relative performance of shares/units of The North West Toll-free: 1 800 387 0825 Company Inc. and its predessor, North West Company Fund, over the past five years. www.cibcmellon.ca Effective January 1, 2011, North West Company Fund converted to a share corporation called The North West Company Inc. The index incorporates the reinvestment of Stock Exchange Listing dividends and income distributions. The

Stock Symbol NWC 175 ISIN #: CA6632781093 150 CUSIP #: 663278109 125 Number of shares issued and outstanding 100 at January 31, 2012: 48,378,000 75 50 Auditors PricewaterhouseCoopers LLP 25% 2007 2008 2009 2010 2011 2012 Trademarks are used throughout this annual report in an editorial fashion with no intention of infringement. NWC/NWF.UN/NWF 100 119 113 136 172 166 Printed in Canada on recyclable paper. TSX Composite 100 103 71 93 117 110 ©2012 The North West Company Inc.

Consumer Durables/ 100 101 43 71 87 65 Our thanks to the staff and customers who appear in photographs from Apparel Group Calgary, ; Curacao, Netherland Antilles; Gjoa Haven, Nunavut; Iqaluit, Nunavut; Klawock, Alaska; Rankin Inlet, Nunavut; St. Thomas, Retailing Group 100 87 62 83 93 99 U.S. Virgin Islands; Sand Point, Alaska; Winnipeg, Manitoba.

Food/Staples 100 80 85 89 95 106 Retailing Group Nor’Westers are rooted in the spirit of trading posts that began in 17th century North America, including store locations that have been in continuous operation for over 340 years. Since acquiring our northern retail network in 1987, we’ve grown an enterprising Canadian merchant business into a leading community retailer serving remote, rural and urban neighbourhoods. Now, as we celebrate our 25th Anniversary, we proudly uphold the pioneering legacy that inspires The North West Company today.

For additional information about this report or for general information about the Company, contact the Corporate Secretary:

The North West Company Inc. Gibraltar House, 77 Main Street Winnipeg, Manitoba Canada R3C 2R1 T 204.934.1756 F 204.934.1317 Toll-free 1.800.563.0002 [email protected] www.northwest.ca