Delivering on our promise The North West Company Inc. 2011 Summary Annual Report Committed to More Growth in Store Two years ago, The North West Company 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 Canada, Alaska, the South Pacific and the Caribbean. 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 Giant Tiger 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 Northwest Territories, Nunavut and Alaska, across Canada’s western $595 and central provinces, down to Hawaii, Fiji, Guam, 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 western Canada. 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 Northern Canada 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.