Hudson’s Bay Company 2004 Annual Report 2 Stores and Merchandise for Canadians from Coast to Coast 3 Letter to Shareholders 4 Stores and Specialty 8 Merchandising and Marketing 12 Back-of-House 13 Value 14 People 15 Corporate Social Responsibility Overview 16 Financial Highlights Board of Directors IBC Senior Officers Corporate Information

Stores and Merchandise for Canadians from Coast to Coast pillows coffee makers watches couches ties televisions vases picture frames bed sheets blenders sweaters food processors toys Persian rugs stoves blouses alarm clocks dvds office furniture cd players pillows steak knives truffles pasta makers blankets make-up gloves video games dining room sets vacuum cleaners shaving cream sun glasses perfume soda stockings stamps cutlery hand bags earrings patio furniture mirrors baking sheets bath towels baby strollers sectional couches lamps dishwashers digital cameras suits prescription medication Hbc point blankets belts bicycles cds dvd players dress shirts watches bath robes bread tissues tooth brushes refrigerators mattresses picture frames pillows coffee makers watches couches ties televisions vases picture frames bed sheets blenders sweaters food processors toys Persian rugs stoves blouses alarm clocks dvds office furniture cd players pillows steak knives truffles pasta makers blankets make-up gloves video games dining room sets vacuum cleaners shaving cream sun glasses perfume soda stockings stamps cutlery hand bags earrings patio furniture mirrors baking sheets bath towels baby strollers sectional couches lamps dishwashers digital cameras suits prescription medication Hbc point blankets belts bicycles cds dvd players dress shirts watches bath robes bread tissues tooth brushes refrigerators mattresses picture frames pillows coffee makers watches couches ties televisions vases picture frames bed sheets blenders sweaters food processors toys Persian rugs stoves blouses alarm clocks 2 dvds office furniture cd players pillows steak knives truffles pasta makers blankets make-up gloves video games dining room sets vacuum cleaners shaving cream sun glasses perfume soda stockings stamps cutlery hand bags earrings patio furniture mirrors baking sheets bath towels baby strollers sectional couches lamps dishwashers digital cameras suits prescription medication Hbc point blankets belts bicycles cds dvd players dress shirts watches bath robes bread tissues tooth brushes refrigerators mattresses picture frames pillows coffee makers watches couches ties televisions vases picture frames bed sheets blenders sweaters food processors toys Persian rugs stoves blouses alarm clocks dvds office furniture cd players pillows steak knives truffles pasta makers blankets make-up gloves video games dining room sets vacuum cleaners shaving cream sun glasses perfume soda stockings stamps cutlery hand bags earrings patio furniture mirrors baking sheets bath towels baby strollers sectional couches lamps dishwashers digital cameras suits prescription medication Hbc point blankets belts bicycles cds dvd players dress shirts watches bath robes bread tissues tooth brushes refrigerators mattresses picture frames pillows coffee makers watches couches ties televisions vases picture frames bed sheets blenders sweaters food processors toys Persian rugs stoves blouses alarm clocks dvds office furniture cd players pillows steak knives truffles pasta makers blankets make-up gloves video games dining room sets vacuum cleaners shaving cream sun glasses perfume soda stockings stamps cutlery hand bags earrings patio furniture mirrors baking sheets bath towels baby strollers sectional couches lamps dishwashers digital cameras suits prescription medication Hbc point blankets belts bicycles cds dvd players dress shirts watches bath robes bread tissues tooth brushes refrigerators mattresses picture frames pillows coffee makers watches couches ties televisions vases picture frames bed sheets blenders sweaters food processors toys Persian rugs stoves blouses alarm clocks dvds office furniture cd players pillows steak knives truffles pasta makers blankets make-up gloves video games dining room sets vacuum cleaners shaving cream sun glasses perfume soda stockings stamps cutlery hand bags earrings patio furniture mirrors baking sheets bath towels baby strollers sectional couches lamps dishwashers digital cameras suits prescription medication Hbc point blankets belts bicycles cds dvd players dress shirts watches bath robes bread tissues tooth brushes refrigerators mattresses picture frames Hbc point blankets belts bicycles cds dvd players dress shirts watches bath robes bread tissues tooth brushes refrigerators mattresses picture frames pillows coffee makers watches couches ties televisions vases picture frames bed sheets blenders sweaters food processors toys Persian rugs stoves blouses alarm clocks dvds office furniture cd players pillows steak knives truffles pasta makers blankets make-up gloves video games dining room sets vacuum cleaners shaving cream sun glasses perfume soda stockings stamps cutlery hand bags earrings patio furniture mirrors baking sheets bath towels baby strollers sectional couches lamps dishwashers digital cameras suits prescription medication Hbc point blankets belts bicycles cds dvd players dress shirts watches bath robes bread tissues tooth brushes refrigerators mattresses picture frames pillows coffee makers watches couches ties televisions vases picture frames bed sheets blenders sweaters food processors toys Persian rugs stoves blouses alarm clocks dvds office furniture cd players pillows steak knives truffles pasta makers blankets make-up gloves video games dining room sets vacuum cleaners shaving cream sun glasses perfume soda stockings stamps cutlery hand bags earrings patio furniture mirrors baking sheets bath towels baby strollers sectional couches lamps dishwashers digital cameras suits prescription medication Hbc point blankets belts bicycles cds dvd players dress shirts watches bath robes bread tissues tooth brushes refrigerators mattresses picture frames Hbc point blankets belts bicycles cds dvd players dress shirts watches bath robes bread tissues tooth brushes refrigerators mattresses picture frames pillows coffee makers watches couches ties televisions vases picture frames bed sheets blenders sweaters food processors toys Persian rugs stoves blouses alarm clocks dvds office furniture cd players pillows steak knives truffles pasta makers blankets make-up gloves video games dining room sets vacuum cleaners shaving cream sun glasses perfume soda stockings stamps cutlery hand bags earrings patio furniture mirrors baking sheets bath towels baby strollers sectional couches lamps dishwashers digital cameras suits prescription medication Hbc point blankets belts bicycles cds dvd players dress shirts watches bath robes bread tissues tooth brushes refrigerators mattresses picture frames pillows coffee makers watches couches ties televisions vases picture frames bed sheets blenders sweaters food processors toys Persian rugs stoves blouses alarm clocks dvds office furniture cd players pillows steak knives truffles pasta makers blankets make-up gloves video games dining room sets vacuum cleaners shaving cream sun glasses perfume soda stockings stamps cutlery hand bags earrings patio furniture mirrors baking sheets bath towels baby strollers sectional couches lamps dishwashers digital cameras suits prescription medication Hbc point blankets belts bicycles cds dvd players dress shirts watches bath robes bread tissues tooth brushes refrigerators mattresses picture frames couches lamps dishwashers digital cameras suits prescription medication Hbc point blankets belts bicycles cds dvd players dress shirts watches bath robes bread tissues tooth brushes

98 stores 298 stores 47 stores 103 stores 1 store Full-line department store Mass merchandise division, Hbc’s kitchen, bed and Value-priced general Off-price banner of Hbc, chain concentrating on offering customers value, bath specialty superstore merchandise stores that offering designer and fashion merchandise in service and price competi- chain with unbeatable offer everyday essential better branded ladies, apparel, accessories and tiveness on national and selection and service. household needs, basic men’s, juniors, accessories soft home categories. private brand merchandise. Canada’s fastest growing family apparel and and home merchandise specialty store chain. footwear, and seasonal at 50 to 70 percent below merchandise. market prices. To Our Shareholders

Consumers continue the trend The “right” store for them today is the We began by connecting all our cus- toward “eclectic shopping”, one that is most relevant to them, not the tomer touch points to Hbc. We built the “right” name over the door. Customers most recognized and used credit cards, defying the strictures imposed have given themselves license to mix and loyalty program, gift cards and services by rigid retail formats that were match – styles, price points, convenience, in Canadian retail. We invested heavily in brands, and non-brands. They are totally building one common, highly effective designed for a time when at ease wearing $20 footwear and $80 and efficient retail infrastructure that customers categorized them- shirts. Equally, their bed sheets may be powers all parts of Hbc. That infrastruc- selves, and their spending 300 thread count percale, but the lamp in ture includes logistics, systems, supply the bedroom is a great find at $10. chain, operations, and importantly, parameters across their various Increasingly, retailers must assort provides us with the visibility and decision needs were consistent. This is themselves to the customer, not only to support capability to better understand the “channel” they occupy, which has customer and market needs. no longer true: Not today or been, by definition, narrower than the The third phase began after exten- tomorrow. The same customer customer they serve. sive piloting; we announced a structural who shops around to save ten Yet at the same time, it is important change effective February 2005 whereby that the core values of the format be some key senior management roles were 3 cents on soap powder will buy protected. It is the customer relevancy changed to fully operate Hbc as a unified a cup of specialty coffee worth proposition that must improve, better entity that is more responsive to customer more than the detergent. reflecting today’s reality that customers and market demand and opportunity. don’t define themselves by the store they Marc Chouinard, formerly President shop at; they have long since given and Chief Operating Officer, The Bay, themselves permission to shop at the became President, Hbc Merchandising stores most relevant to them. Group, and Thomas Haig, formerly It is that customer and market centric President and Chief Operating Officer, approach that is at the core of the vision Zellers, became President, Hbc Stores and strategy that defines the Hbc of the and Specialty. 21st century. We are completing our transition to an integrated retail company that will position great product and assortment in each Hbc channel and store based on the customer and the opportunity. Each banner will play a distinct yet integrated role as part of Hbc’s promise to deliver what the customer wants, wherever they are. We have built a retail company that now has the same “license” as the cus- tomer, providing more of what today’s customer wants, where they want to shop.

“George J. Heller”

George J. Heller Hbc President and Chief Executive Officer 4 5

Thomas Haig, President Hbc Stores and Specialty Stores and Specialty

“Convenient, rewarding, responsive – Hbc stores represent many others, to more Hbc stores and have 6 things to Canadians from coast to coast. Within the Stores and added businesses such as exercise equipment, snow blowers, expanded Specialty division, we work to ensure that every visit to Hbc over- hardware and home office needs, all to delivers on the customer’s expectations. From our merchandise better serve the customers and take assortment tailored to the local market, to our friendly and helpful advantage of market opportunities. Now that we have successfully sales associates, and the ongoing renovation of the Hbc network deleveraged our balance sheet and of stores – we will deliver on the wants and needs of Canadian already funded vital infrastructure consumers through our department and mass formats, as well as requirements such as I.T. systems, logistics, etc., our priority in capital the development of our growing specialty store division. Through allocation is shifting to stores. all our banners, and every customer visit, Hbc will meet the In 2004, we invested millions more needs of Canadians.” capital than in the past several years into Hbc stores, and will continue to do so. Our goal is to have the right mix, the Thomas Haig, President Canadian consumers are not homoge- right number, the right-sized, modern and Hbc Stores and Specialty neous. Ours is a vast country with varying effective network of stores by market. climates, lifestyles and disposable Our financial ability to accelerate this incomes. Hbc is unique in its ability to process is fuelling, and will continue to position itself through several banners to fuel, our growth and competitiveness in best serve and fill the unique shopping the marketplace. needs of Canadians by market. Our goal As population growth and shopping is to achieve the proper mix of Hbc habits have changed, so has Hbc. stores by market, serving all Canadians Our Specialty Store division is based through a continuum of product and on extending our reach and leveraging services geared to specific needs by our strengths into power centres and trading area. We have engineered and accelerating growth in those businesses piloted several merchandise initiatives that and commodities holding the most future are key to our future growth; assorting promise. Our national chain of Home our stores based on known customer Outfitters/Deco Découverte is the largest need versus the narrower confines of specialty retailer of bed, bath and kitchen what “traditionally” was made available in Canada. Now with 47 stores and grow- in a given retail channel, be it department ing quickly, we will retain this pre-eminent store, mass or specialty. This customer position in the category. We opened our and market centric, versus channel first , a true off-price approach, has seen the expansion of branded assortment of recognized grocery in Zellers through Neighborhood designers in fashion and home décor, Markets, a successful 10,000 square foot at incredible prices, with unique product. model that we are fast tracking. This We will open up to six in 2005, with concept, with the addition of several ambitious plans for the future. All Hbc other “everyday needs” such as phar- banners are linked by common macy, was introduced into our flagship customer touch points: Hbc Credit, Queen Street Bay store and will be Hbc Rewards, Hbc gift cards and the rolled out to other Bay locations. Equally, trust Canadians have in this country’s we have expanded toys, music, appli- oldest retailer. ances and consumer electronics, among 7 8

Marc Chouinard, President Hbc Merchandising Group 9 10 Merchandising and Marketing

“We are creating differentiated and compelling assortments The pooling of our buying function talent, for Canadians with merchandise they want, where they want combined with the expertise of our by 11 banner selectors and the local market it, at the prices they want. Whether it’s opportunity buys, expertise of our store managers, gives us appliances, grocery, exclusive brands in fashion and cosmetics, the enhanced ability to deliver better, we provide it. We’re building product solutions for Canadians more complete and relevant assortments to our Hbc stores. based on market size and need, then delivering merchandise This maximization of our buying through our Bay, Zellers, and Designer Depot talent with banner-specific selectors locations. It’s a continuous process of communication and allows us to introduce and expand busi- nesses and commodities within Hbc dialogue with our customers that leads us to refine the Hbc stores. In 2004, we piloted DVDs, enhanced offering to meet their needs.” toy departments and a pharmacy plus concept, amongst other initiatives at the Bay, while Zellers benefited from Marc Chouinard, President Our customers are telling us what they enhanced jewellery, lingerie, and major Hbc Merchandising Group want by market and lifestyle and we’re appliances initiatives. In all cases, the listening. Through half a million online decisions were customer and market customer comments, daily category sales driven, adding product customers wanted reports, market intelligence gathering and but previously were not carried as they direct customer interviews, we are build- fell outside of the “norms” for the formats. ing our merchandise assortments based We begin 2005 with a view to the on the customer need and market size. total opportunity by merchandise category By not limiting ourselves to the traditional based on customer need and market definition of what merchandise can be potential. Only then do we decide how sold through a Bay, Zellers or Home to optimize that opportunity through the Outfitters store, our approach to mer- various price points, brands and life- chandising allows us to meet customer styles in our banners, by market. We demand by filling the need by each will grow our business by closing the market and customer segment. With product gaps and finding the seams in superior customer understanding, we can the market we left behind when our be the most relevant retailer in Canada. start point was by banner and not by We have worked hard to create market opportunity. the systems and processes that give us Our marketing and advertising will a single view of the market size and not only communicate to customers the potential by commodity, and we then unique offers by banner, but will also translate that need to targeted assort- coordinate the total Hbc sales initiatives ments by market. We will approach the to align all Hbc stores, when timely, to marketplace in a unified way where we dominate at the merchandise category gain the distribution advantage of our level, such as season openings and large network of stores, such as outer- weather related commodities. This wear, seasonal footwear and more. We integrated approach will allow Hbc to will build a full Hbc assortment in com- approach our customers with timely, modity areas such as outerwear that wide assortments that span the price, encompasses all price, brand and utility brand and lifestyle spectrum through requirements. We will then select from distinct banners, but common timing, that Hbc assortment by banner, by which will allow us to take advantage market, by store; we believe we can gain of our superior network of stores. market share through having both the broadest distribution, and more relevant assortments than our competitors. Back-of-House

“Every day, Hbc orders, processes, sorts, picks, packs, ships we have set our sights on providing even 12 and delivers millions of items through a logistics and technology better service to Canadian families by ensuring our stores are always in stock platform that rivals the best in the industry. Hbc’s back-of-house on items that Mom needs. To support operations are growing more nimble and responsive, allowing this effort, we have launched “Vision us to provide a better shopping experience for our customers.” 25/24”, a program to ensure the top 2,500 most frequently shopped items are never out of stock. This program greatly Peter Kenyon, Executive Vice President Hbc continues to increase efficiency enhances our ability to reduce vendor lead Hbc Managed Services through ongoing improvements to our time, protect and expand market share, back-of-house systems. Our logistics and improve customer service. team operates coast to coast via sea, Hbc’s credit and loyalty divisions rail and road transport, ensuring that continue to create value for the Company merchandise is delivered to our distribu- and enhance the shopping experience tion centres and then shipped to over for Hbc customers. Our credit card is 500 Hbc store locations efficiently. the seventh largest in the country and The introduction of integrated can be used at a growing number of distribution centres has created an envi- partners. Hbc’s Rewards program, one ronment in which goods flow seamlessly of the top loyalty programs in Canada between Hbc’s banners. Improved with approximately nine million names, processes and merchandise planning, allows us to form valuable partnerships in line with industry best practices, have that extend further benefits to Hbc cus- helped Hbc’s logistics team to ensure tomers, while providing the Company the right facilities are servicing the right with a better understanding of their stores at the required service levels, shopping behaviour. We are able to all while maintaining the lowest costs. leverage this information through direct In 2004, enhanced sales forecasting marketing initiatives, such as Living enabled a more proactive approach to Spree and a quarterly statement mailed distribution centre scheduling. Produc- to select Hbc Rewards customers. As tivity levels of Hbc distribution centres a result of these and other programs, increased 11 percent. These gains were in 2004, Hbc continued to see growth achieved while supporting the launch of in sales linked to our Rewards program. Designer Depot and Style Outlet locations. Building on the progress already achieved with our award winning system, Listed Inventory Database System, in 2005, Value

“Retail is a complex and capital-intensive business that necessi- capital expenditure levels in 2004 to tates a prudent approach to balancing both the capital and cost enable the acceleration of our real estate 13 strategy through store renovations, structure. At Hbc, we’ve managed to get our financial house in closings and openings. In 2004, Hbc order while supporting our growth initiatives. We’re focused on closed 15 non-strategic Zellers stores, executing our strategy as the means to deliver a greater return and the 24 stores renovated to include Neighborhood Markets are experiencing to our shareholders.” average sales increases in excess of other locations. Based on the success of these initiatives, we will spend a slightly Michael Rousseau, Executive Vice President A cornerstone of Hbc’s future growth higher amount renovating stores and Hbc Chief Financial Officer lies in the re-engineering of its balance other growth areas in 2005. By the end of sheet and capital structure. Improved 2005, one-third of the entire Zellers store debt levels, cash flow management and portfolio will have been subject to either a more efficient cost structure are creating a renovation, a closure or a new store greater stability within the organization opening in the past three years. and allowing us to invest in future growth In addition to consistently upgrading opportunities through increased capital retail locations, Hbc also believes that expenditures, most notably store investing in technology is critical to our renovation projects and information future success. Our strategic technology technology investments. alliance – a consortium of the world’s In 2004, Hbc made strides in leading IT companies – has worked improving liquidity through debt reduction together, and on individual projects, of $64 million. Hbc’s debt to equity ratio to improve the strategic and tactical has improved over the past several years effectiveness of the technology infra- to its current position of 0.20:1, one of structure of the Company. the most respectable in the retail industry. We have achieved international Current debt levels allow the Company recognition through numerous awards. to re-invest its free cash flow in growth- An example of a value-added system oriented projects like Designer Depot or is Hbc’s Listed Inventory Database Neighbourhood Markets at Zellers. System. This integrated self-replenish- While inventory turns year-over- ment and stockroom management year were generally flat, they have system uses real time sales and inventory improved over the past several years, information to help ensure the right primarily at Zellers. We believe that products are in the right place at the future improvements in inventory turns, right time. improved accounts receivable levels We have taken an extremely pro- and more focused vendor management active position in regards to compliance programs will provide positive cash flow. with the rules adopted by the Canadian Our free cash flow was positive $90 million Securities Administrators to reflect certain in 2004 after investing $213 million in provisions of the Sarbanes-Oxley (SOX) store and other capital projects. Act. We started early last year, developed Hbc has, and intends to continue a comprehensive plan and dedicated a improving its cost structure through on- cross functional team to ensure we are going efforts, most notably, rationalizing industry leaders in this area. Over the past unproductive areas of the Company and year, the Company has commenced a continuing to execute initiatives such as comprehensive evaluation of its key strategic sourcing with non-merchandise processes supporting disclosure and suppliers. Over the past several years, the financial reporting. In carrying out this Company initiated several cost reduction evaluation, Hbc applied detailed require- programs consistent with the practice of ments as set out in SOX, as a proxy integrating back-of-house and support for best practice. This work has and will structures. Significant cost savings in continue to support the Company in areas such as finance, technology and identifying opportunities to further logistics have funded growth initiatives strengthen its key internal controls and and inflationary wage increases. Overall, governance processes. Hbc’s cost structure has remained rela- Hbc’s strategic direction and intent tively stable over the past few years, are clear. Every part of this organization reflecting this practice. is focused on success through its ability Hbc continued its focus on improving and accountability to drive or influence return on assets measures by increasing profitable growth. People

“High performance people are the future of this organization. In addition to recruiting potential leaders 14 We need associates who are willing to think like a customer, for Hbc, we are investing in training and development for current associates analyze the market for opportunities that others don’t see through programs like OPAL, our online and use the full strength of Hbc to leverage opportunities that learning portal. Since its introduction in will create long-term success.” 2002, we have experienced remarkable growth in the number of courses com- pleted by Hbc associates. We’re confident Robert Kolida, Senior Vice President Growth demands innovation, efficiency that these efforts will create the high Hbc Human Resources and focus; that’s why in 2004, Hbc potential individuals that will lead Hbc realigned its management team and to greater success. divisions to complete its strategy. This As a people-driven organization, single view of the Company was gener- rewarding associates at all levels of the ated from the bottom up, as we esta- Company is a strategic imperative. blished a fully integrated team of Hbc At the executive level, we introduced a merchandisers and operators. Based on redesigned compensation plan that the success of numerous pilot initiatives aligned performance and rewards to the in 2004, we moved to implement our strategic and financial goals of Hbc, and vision for the kind of Hbc required to the interests of shareholders. As a result drive growth. Using leadership develop- of this new plan, approximately 60 per- ment, Company-wide succession cent of compensation is incentive-based. planning, rewards and more effective On a broader scale, Hbc continues communications, we are leveraging an to offer its associates innovative rewards integrated workforce to implement initia- and benefits, including the new Hbc tives and create value for our customers, Associate Buying Club – providing exclu- associates and shareholders. sive deals from over 35 different suppliers. Our efforts to further develop our The Associate Buying Club has received associates and build for future needs an overwhelming response, with nearly include the introduction of online training 200,000 website hits since its introduction programs for all associates, succession in April 2004, and our associates received and performance planning and our Hbc over $1.5 million in savings. Management Trainee Program, now Communication is allowing us to moving into its second year with some better understand associates and, in of the best business graduates in Canada. turn, gain their support. Internal surveys This program allows Hbc to develop show the Company has growing levels of future generations of retail leaders for associate satisfaction and understanding our organization. Over 90 first-year of Hbc’s strategic direction. Together trainees are preparing to graduate from with management, Hbc’s 70,000 associ- the program this Spring and transition ates will continue to drive business into full-time roles in merchandising and results through a focus on integration, operations throughout Hbc. accountability and execution. Corporate Social Responsibility Overview

For detailed information about Hbc’s Corporate Social Responsibility initiatives, 15 please visit www.hbc.ca.

“Every day, across Canada and around the world, we believe there’s an opportunity to make a difference in the lives of our associates, customers and the communities in which we operate. From small things like supporting the local little league team, to the development of one of the country’s leading ethical sourcing programs, at Hbc we believe we can and must do our part. Considering the social and environmental impact of our decisions is a part of how Hbc operates. We are committed to reporting on the four key areas of energy conservation, the well-being and development of our 70,000 associates, ethical sourcing and community investment.”

George J. Heller Hbc President and Chief Executive Officer

Environment Associates Ethical Sourcing Community Our award-winning energy Hbc is committed to investing Recognized for its leadership Through the Hbc Foundation, conservation program is built in and developing programs in ethical sourcing, Hbc is Hbc is investing in the on the principles of decreasing for the 70,000 associates that focused on developing hundreds of communities Hbc’s energy consumption, ensure wellbeing, a balanced sustainability programs that in which we operate stores. improving our operations to lifestyle and fostering an envi- will ultimately contribute to From the donation of Hbc reduce their impact on the ronment in which they are positive change in the work- Rewards points to the sale environment and engaging our encouraged to learn and ing conditions in the factories of gift boxes and plush toys, associates and customers in grow. Each year, Hbc invests from which it sources mer- Hbc associates and customers energy awareness programs. over $9 million in training and chandise. In 2004, over 485 make a difference. In 2004, Since the start of our program skills development programs, factories were audited to Hbc continued its support in 2000, the cumulative including an online learning ensure they met Hbc’s Code for important organizations amount of emissions reduced program that has almost of Vendor Conduct. This year, like the Canadian Women’s is over 108,000 tonnes, the doubled its participation rate Hbc also helped to lead the Foundation, the Canadian equivalent to the emissions over the last year, and a way for international retailers Cancer Society and Common- from more than 23,500 cars. Management Trainee Program to work together, creating a wealth Games Canada, but These initiatives have been that allows Hbc to develop confidential global repository also introduced important recognized by the Association future retail leaders. of manufacturing facilities, initiatives like the Hbc of Energy Engineers, Natural audited for compliance with Run for Canada and the Resources Canada and international labour and Hbc Rewards Community Canada’s Climate Change human rights standards. Giving Program. Voluntary Challenge & Registery Inc. Financial Highlights

2005 2004 2003 January 31 (millions of dollars (restated) (restated)

Sales and revenue 7,069.7 7,295.1 7,303.9 Net earnings 59.7 60.0 85.4 Cash flow from operating activities 267.5 377.1 160.7 Capital expenditures 190.0 114.8 133.1 Debt:equity ratio 0.20:1 0.23:1 0.37:1

(dollars) Per share Net earnings 0.86 0.87 1.23 Net earnings – diluted 0.86 0.86 1.19 16 Dividends 0.36 0.36 0.36 Sales and Revenue Net Earnings Earnings per Share ($ millions) ($ millions) ($)

7,303.9 7,295.1 85.4 1.23 7,069.7

60.0 59.7 0.87 0.86

2003 2004 2005 2003 2004 2005 2003 2004 2005

Board of Directors

David W. Colcleugh Kerry L. Hawkins Donna Soble Kaufman Corporate Director, President, Cargill Limited Lawyer and Corporate Director, Mississauga, Winnipeg, Manitoba , Ontario Elected 2000 2, 3, 4 Elected 1998 2, 3, 4 Elected 2000 2, 5

L. Yves Fortier George J. Heller Peter T. Kaursland Governor, President & Chief Executive Officer, Corporate Director, Hudson’s Bay Company Hudson’s Bay Company Oxfordshire, England Chairman & Senior Partner, Toronto, Ontario Elected 2002 1, 5 Ogilvy, Renault Elected 1999 3 , Thomas A. Knowlton Elected 1993 2, 3 Barbara R. Hislop Dean, Faculty of Business, President & Chief Executive Officer Ryerson University David A. Galloway Genus Resource Management Toronto, Ontario Corporate Director, Technologies Inc. Elected 2003 1, 4 Toronto, Ontario Vancouver, British Columbia Elected 2003 2, 4 Elected 1993 4, 5 Peter W. Mills Company Director & Paul Gobeil James B. Hume Business Consultant, Vice Chairman of the Board, President & Chief Executive Officer, Toronto, Ontario Metro Inc. & Chairman of the Board, Kanesco Holdings Ltd. Elected 1985 1, 2, 3 Export Development Canada (EDC) Calgary, Alberta Montreal, Quebec Elected 2003 1, 5 1 Audit Committee 2 Elected 2003 1, 4 Corporate Governance Committee 3 Executive Committee 4 Human Resources Committee 5 Pension Committee

The complete version of Hbc’s 2004 consolidated financial statements and related materials are included in our 2004 Financial Report, available at www.hbc.ca. Senior Officers

L. Yves Fortier, C.C., Q.C. Deborah A. Edwards Stephen F. Knight Governor Senior Vice President, Vice President, Hudson’s Bay Company Total Brand Management Credit & Loyalty Management Hudson’s Bay Company Hudson’s Bay Company George J. Heller President & Chief Executive Officer Robert M. Kolida Arthur N. Mitchell Hudson’s Bay Company Senior Vice President, Vice President & Controller Human Resources Hudson’s Bay Company Michael S. Rousseau Hudson’s Bay Company Executive Vice President & Robert R. Moore Chief Financial Officer Donald C. Rogers Vice President, Hudson’s Bay Company Senior Vice President, Corporate Communications Real Estate & Development Hudson’s Bay Company Marc R. Chouinard Hudson’s Bay Company Executive Vice President & Michael J. Thomas President, Hbc Merchandising Group J. Gregory Armstrong Vice President, Hudson’s Bay Company Vice President, Logistics Audit Services Hudson’s Bay Company Thomas Haig Hudson’s Bay Company Executive Vice President & Kenneth C. Wong President, Hbc Stores & Specialty Gary B. Davenport Treasurer, Hudson’s Bay Company Vice President & Hudson’s Bay Company Chief Information Officer Peter A. Kenyon Hudson’s Bay Company Executive Vice President, Managed Services James A. Ingram Hudson’s Bay Company Vice President, Secretary & General Counsel Hudson’s Bay Company

Corporate Information

Registered Office Stock Exchange Listings Internet 401 Bay Street, Suite 500 Common shares are listed on the Hudson’s Bay Company provides up-to- Toronto, Ontario M5H 2Y4 Toronto Stock Exchange under the date financial information to investors on trading symbol “HBC.” the performance section at www.hbc.ca. Auditors Investors have access to news releases, KPMG LLP Transfer Agents and Registrar financial reports, stock charts, audio Investors are encouraged to contact webcasts and Hbc executive profiles. Principal Bankers our Transfer Agent and Registrar, General Electric Capital Canada Inc. CIBC Mellon Trust Company, for Annual Meeting of Shareholders Bank of America, NA (Canada Branch) information regarding their security The 336th Annual Meeting of CIT Business Credit Canada Inc. holdings. They can be reached at: Shareholders will be held at the HSBC Bank Canada Arcadian Court, 8th Floor, CIBC Mellon Trust Company 401 Bay Street, Toronto, Ontario Investor Relations P.O. Box 7010, Adelaide Street Contact: Postal Station Wednesday, May 25th, 2005 at 3:00 p.m. Michael S. Rousseau Toronto, Ontario M5C 2W9 Executive Vice-President & Chief Financial Officer AnswerLine™: Tel: (416) 861-4935 (416) 643-5500 or 1-800-387-0825 Fax: (416) 861-4720 (Toll-free for North America)

Rob Moore Fax: (416) 643-5501 Vice-President, Website: www.cibcmellon.com Corporate Communications Email: [email protected] Tel: (416) 861-4419 Fax: (416) 216-7887

Design Ove Design & Communications Ltd. Printing Quebecor World MIL Hudson’s Bay Company Hbc.ca 401 Bay Street, Suite 500 Toronto, ON M5H 2Y4 Canada