Exhibit 99.3

---





MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The preparation and presentation of the Company's consolidated financial statements and the overall accuracy and integrity of the
Company's financial reporting are the responsibility of management. The accompanying consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board (IASB), and include certain amounts that are based on management's best estimates and judgments. Financial information contained elsewhere in
this Annual Report is consistent with the information set out in the consolidated financial statements.

In
fulfilling its responsibilities, management has developed and maintains an extensive system of disclosure controls and procedures and internal control over financial reporting
processes that are designed to provide reasonable assurance that assets are safeguarded, transactions are properly recorded and reported within the required time periods, and financial records are
reliable for the preparation of the financial statements. The Company's internal auditors also review and evaluate internal controls on behalf of management.

The
Board of Directors monitors management's fulfillment of its responsibilities for financial reporting and internal controls principally through the Audit Committee. The Audit
Committee,
which is comprised solely of independent directors, meets regularly with management, the internal audit department and the Company's external auditors to review and discuss audit activity and results,
internal accounting controls and financial reporting matters. The external auditors and the internal audit department have unrestricted access to the Audit Committee, management and the Company's
records. The Audit Committee is also responsible for recommending to the Board of Directors the proposed nomination of the external auditors for appointment by the shareholders. Based upon the review
and recommendation of the Audit Committee, the consolidated financial statements and Management's Discussion and Analysis have been approved by the Board of Directors.

The
Company's external auditors, Deloitte LLP, have audited the consolidated financial statements in accordance with International Financial Reporting Standards as issued by
the IASB.

GRAPHIC

GRAPHICBrandon G. Stranzl
Executive Chairman

Billy Wong
Chief Financial Officer


Toronto,
Ontario
April 26, 2017

56

---



MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards.
The control framework used by the Company's management to assess the effectiveness of the Company's internal control over financial reporting is theInternal Control-Integrated
Framework2013 (COSO framework) published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Internal
control systems, regardless of superiority in design, have inherent limitations. Therefore, even those systems that have been determined to have been designed effectively can
only provide reasonable assurance with respect to financial reporting and financial statement preparation.

Management
of the Company, including its Executive Chairman and Chief Financial Officer, has evaluated the Company's internal control over financial reporting and has concluded that it
was effective as at January 28, 2017.

Deloitte LLP,
the independent registered public accounting firm that audited the Company's consolidated financial statements for the fiscal year ended January 28, 2017, has
issued its opinion on the Company's internal control over financial reporting as stated in their report included herein.

GRAPHIC

GRAPHICBrandon G. Stranzl
Executive Chairman

Billy Wong
Chief Financial Officer


Toronto,
Ontario
April 26, 2017

57

---





Report of Independent Registered Public Accounting Firm

To
the Board of Directors and Shareholders of
Sears Canada Inc.

We
have audited the accompanying consolidated financial statements of Sears Canada Inc. and subsidiaries (the "Company"), which comprise the consolidated statements of
financial position as at January 28, 2017 and January 30, 2016, and the consolidated statements of net loss and comprehensive loss, consolidated statements of changes in shareholders'
equity, and consolidated statements of cash flows for the 52-week periods ended January 28, 2017 and January 30, 2016, and a summary of significant accounting policies and other
explanatory information.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in
accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An
audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the
auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the
circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.

We
believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Sears
Canada Inc. and subsidiaries as at January 28, 2017 and January 30, 2016, and their financial performance and their cash flows for the 52-week periods ended January 28,
2017 and January 30, 2016 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Other Matter

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
Company's internal control over financial reporting as of

58

---



January 28,
2017, based on the criteria established inInternal Control-Integrated Framework (2013)issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated April 26, 2017 expressed an unqualified opinion on the Company's internal control over financial reporting.

GRAPHIC

Chartered
Professional Accountants
Licensed Public Accountants
April 26, 2017
Toronto, Canada

59

---



Report of Independent Registered Public Accounting Firm

To
the Board of Directors and Shareholders of
Sears Canada Inc.

We
have audited the internal control over financial reporting of Sears Canada Inc. and subsidiaries (the "Company") as of January 28, 2017, based on the criteria
established inInternal Control-Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission. The
Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting
based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or
persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. A company's
internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company's assets that could have a material effect on the financial statements.

Because
of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to
future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 28, 2017, based on the criteria established in Internal Control-Integrated Framework
(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We
have also audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), the
consolidated

60

---



financial
statements as of and for the 52 week-period ended January 28, 2017 of the Company and our report dated April 26, 2017 expressed an unmodified/unqualified opinion on
those financial statements.

GRAPHIC

Chartered
Professional Accountants
Licensed Public Accountants
April 26, 2017
Toronto, Canada

61

---





TABLE OF CONTENTS

Consolidated Financial StatementsConsolidated Statements of Financial Position


63Consolidated Statements of Net Loss and Comprehensive Loss


64Consolidated Statements of Changes in Shareholders' Equity


65Consolidated Statements of Cash Flows


66Notes to the Consolidated Financial StatementsNote 1:

General information


67Note 2:

Significant accounting policies


67Note 3:

Issued standards not yet adopted


78Note 4:

Critical accounting judgments and key sources of estimation uncertainty


79Note 5:

Cash and interest income


82Note 6:

Accounts receivable, net


83Note 7:

Inventories


83Note 8:

Prepaid expenses


83Note 9:

Property, plant and equipment and investment properties


84Note 10:

Intangible assets


86Note 11:

Other long-term assets


87Note 12:

Deferred revenue


87Note 13:

Financial instruments


88Note 14:

Accounts payable and accrued liabilities


90Note 15:

Provisions


91Note 16:

Long-term obligations and finance costs


92Note 17:

Other long-term liabilities


93Note 18:

Leasing arrangements


93Note 19:

Retirement benefit plans


94Note 20:

Contingent liabilities


101Note 21:

Income taxes


102Note 22:

Capital stock and share-based compensation


104Note 23:

Capital disclosures


104Note 24:

Revenue


105Note 25:

Employee benefits expense


105Note 26:

Gain on lease termination and sale and leaseback transactions


106Note 27:

Gain on termination of credit card arrangement


106Note 28:

Assets classified as held for sale


107Note 29:

Related party transactions


107Note 30:

Key management personnel compensation


109Note 31:

Net loss per share


109Note 32:

Changes in non-cash working capital balances


109Note 33:

Changes in non-cash long-term assets and liabilities


110Note 34:

Events after the reporting period


110Note 35:

Approval of the consolidated financial statements


110


62

---





CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in CAD millions)

Notes

As at
January 28, 2017

As at
January 30, 2016ASSETSCurrent assetsCash

5

$
235.8

$
313.9Accounts receivable, net

6,13,15


67.1


59.4Income taxes recoverable

21


12.3


35.9Inventories

7


598.5


664.8Prepaid expenses

8


34.5


31.0Derivative financial assets

13


0.1


6.6Assets classified as held for sale

28


57.0


22.1Total current assets




1,005.3


1,133.7Non-current assetsProperty, plant and equipment

9,18


227.1


444.1Investment properties

9


2.0


17.0Intangible assets

10


2.0


22.5Deferred tax assets

21


0.7


0.6Other long-term assets

11,13,15,16


7.3


15.3Total assets



$
1,244.4

$
1,633.2LIABILITIESCurrent liabilitiesAccounts payable and accrued liabilities

13,14

$
319.8

$
332.7Deferred revenue

12


136.1


158.3Provisions

15


61.6


75.8Income taxes payable




0.6


2.6Other taxes payable




22.3


17.3Derivative financial liabilities

13


0.6


Current portion of long-term obligations

13,16,18,23


3.7


4.0Total current liabilities




544.7


590.7Non-current liabilitiesLong-term obligations

13,16,18,23


16.6


20.2Deferred revenue

12


69.4


74.2Retirement benefit liability

13,19


308.6


326.9Other long-term liabilities

15,17


82.9


67.0Total liabilities




1,022.2


1,079.0SHAREHOLDERS' EQUITYCapital stock

22


14.9


14.9Share-based compensation reserve

22


3.1


Retained earnings




418.0


739.0Accumulated other comprehensive loss




(213.8
)

(199.7
)Total shareholders' equity

23


222.2


554.2Total liabilities and shareholders' equity



$
1,244.4

$
1,633.2


The accompanying notes are an integral part of these consolidated financial statements.

On Behalf of the Board of Directors,

GRAPHIC

GRAPHICB.G.Stranzl

G.SavageExecutive Chairman and Director

Director


63

---





CONSOLIDATED STATEMENTS OF NET LOSS AND COMPREHENSIVE LOSS        For the 52-week periods ended January 28, 2017 and January 30, 2016

(in CAD millions, except per share amounts)

Notes

2016

2015Revenue

24

$
2,613.6

$
3,145.7Cost of goods and services sold

7,13,25


1,900.5


2,145.9Selling, administrative and other expenses

9,10,13,18,19,25


1,135.5


1,298.1Operating loss




(422.4
)

(298.3
)Gain on lease termination and sale and leaseback transactions

26


105.9


67.2Gain on termination of credit card arrangement

27





170.7Gain on settlement of retirement benefits

19, 25





5.1Finance costs

16,18,21


8.9


9.7Interest income

5


7.2


2.3Loss before income taxes




(318.2
)

(62.7
)Income tax (expense) recoveryCurrent

21


(0.3
)

(8.1
)Deferred

21


(2.5
)

2.9(2.8
)

(5.2
)Net loss



$
(321.0
)
$
(67.9
)Basic and diluted net loss per share

31

$
(3.15
)
$
(0.67
)Net loss



$
(321.0
)
$
(67.9
)Other comprehensive (loss) income, net of taxes:Items that may subsequently be reclassified to net loss:(Loss) gain on foreign exchange derivatives




(12.6
)

19.2Reclassification to net loss of loss (gain) on foreign exchange derivatives




5.0


(18.7
)Items that will not subsequently be reclassified to net loss:Remeasurement (loss) gain on net defined retirement benefit liability

19,21


(6.5
)

50.8Total other comprehensive (loss) income, net of taxes




(14.1
)

51.3Total comprehensive loss



$
(335.1
)
$
(16.6
)




The accompanying notes are an integral part of these consolidated financial statements.

64

---





CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY        For the 52-week periods ended January 28, 2017 and January 30, 2016

Accumulated other comprehensive loss(in CAD millions)

Notes

Capital
stock

Share-based
compensation
reserve

Retained
earnings

Foreign
exchange
derivatives
designated
as cash
flow
hedges

Remeasurement
(loss) gain

Total
accumulated
other
comprehensive
loss

Shareholders'
equityBalance as at January 30, 2016



$
14.9

$


$
739.0

$
7.2

$
(206.9
)
$
(199.7
)
$
554.2Net loss










(321.0
)










(321.0
)Other comprehensive (loss) incomeLoss on foreign exchange derivatives, net of income tax recovery of $2.6

13











(12.6
)




(12.6
)

(12.6
)Reclassification of net loss on foreign exchange derivatives, net of income tax recovery of nil

13











5.0





5.0


5.0Remeasurement loss on net defined retirement benefit liability

19,21














(6.5
)

(6.5
)

(6.5
)Total other comprehensive loss













(7.6
)

(6.5
)

(14.1
)

(14.1
)Total comprehensive loss










(321.0
)

(7.6
)

(6.5
)

(14.1
)

(335.1
)Share-based compensation

22





3.1














3.1Balance as at January 28, 2017



$
14.9

$
3.1

$
418.0

$
(0.4
)
$
(213.4
)
$
(213.8
)
$
222.2Balance as at January 31, 2015



$
14.9

$


$
806.9

$
6.7

$
(257.7
)
$
(251.0
)
$
570.8Net loss










(67.9
)










(67.9
)Other comprehensive income (loss)Gain on foreign exchange derivatives, net of income tax expense of $7.1

13











19.2





19.2


19.2Reclassification of gain on foreign exchange derivatives, net of income tax expense of $6.9

13











(18.7
)




(18.7
)

(18.7
)Remeasurement gain on net defined retirement benefit liability

19,21














50.8


50.8


50.8Total other comprehensive income













0.5


50.8


51.3


51.3Total comprehensive (loss) income










(67.9
)

0.5


50.8


51.3


(16.6
)Balance as at January 30, 2016



$
14.9

$


$
739.0

$
7.2

$
(206.9
)
$
(199.7
)
$
554.2




The accompanying notes are an integral part of these consolidated financial
statements.

65

---





CONSOLIDATED STATEMENTS OF CASH FLOWS        For the 52-week periods ended January 28, 2017 and January 30, 2016

(in CAD millions)

Notes

2016

2015Cash flow used for operating activitiesNet loss



$
(321.0
)
$
(67.9
)Adjustments for:Depreciation and amortization expense

9,10


31.4


48.4Share-based compensation

22


3.1


(0.4
)(Gain) loss on disposal of property, plant and equipment




(4.4
)

0.3Net impairment losses

9,10,28


52.3


63.3Gain on lease termination and sale and leaseback transactions

26


(105.9
)

(67.2
)Gain on termination of credit card arrangement

27





(170.7
)Finance costs

16,18,21


8.9


9.7Interest income

5


(7.2
)

(2.3
)Retirement benefit plans expense

19


14.1


18.9Gain on settlement of retirement benefits

19





(5.1
)Short-term disability expense

19


4.6


4.9Income tax expense

21


2.8


5.2Interest received

5


7.4


1.1Interest paid

16


(3.4
)

(2.7
)Retirement benefit plans contributions

19


(43.5
)

(48.6
)Income tax refunds, net

21


25.0


87.6Changes in non-cash working capital balances

32


0.1


(64.3
)Changes in non-cash long-term assets and liabilities

33


(5.7
)

(11.7
)(341.4
)

(201.5
)Cash flow generated from investing activitiesPurchases of property, plant and equipment and intangible assets

9,10


(27.4
)

(45.4
)Proceeds from sale of property, plant and equipment




3.1


0.3Proceeds from termination of credit card arrangement

27





174.0Net proceeds from lease termination and sale and leaseback
transactions

26


295.0


130.0270.7


258.9Cash flow used for financing activitiesInterest paid on finance lease obligations

16,18


(1.7
)

(1.9
)Repayment of long-term obligations




(3.9
)

(3.9
)(5.6
)

(5.8
)Effect of exchange rate on cash at end of period




(1.8
)

3.3(Decrease) increase in cash




(78.1
)

54.9Cash at beginning of period



$
313.9

$
259.0Cash at end of period

5

$
235.8

$
313.9




The accompanying notes are an integral part of these consolidated financial statements.

66

---





NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.     GENERAL INFORMATION



2.     SIGNIFICANT ACCOUNTING POLICIES









67

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.     SIGNIFICANT ACCOUNTING POLICIES (Continued)







68

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.     SIGNIFICANT ACCOUNTING POLICIES (Continued)







69

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.     SIGNIFICANT ACCOUNTING POLICIES (Continued)







70

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.     SIGNIFICANT ACCOUNTING POLICIES (Continued)









71

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.     SIGNIFICANT ACCOUNTING POLICIES (Continued)











72

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.     SIGNIFICANT ACCOUNTING POLICIES (Continued)







73

---





NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.     SIGNIFICANT ACCOUNTING POLICIES (Continued)



74

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.     SIGNIFICANT ACCOUNTING POLICIES (Continued)















75

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.     SIGNIFICANT ACCOUNTING POLICIES (Continued)













76

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.     SIGNIFICANT ACCOUNTING POLICIES (Continued)











77

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.     SIGNIFICANT ACCOUNTING POLICIES (Continued)







3.     ISSUED STANDARDS NOT YET ADOPTED



78

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.     ISSUED STANDARDS NOT YET ADOPTED (Continued)



4.     CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY



79

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.     CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued)







80

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.     CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued)











81

---





NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.     CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued)





5.     CASH AND INTEREST INCOME



The components of cash were as follows:

(in CAD millions)

As at
January 28, 2017

As at
January 30, 2016Cash

$
134.7

$
306.9Restricted cash


101.1


7.0Total cash

$
235.8

$
313.9




82

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6.     ACCOUNTS RECEIVABLE, NET



(in CAD millions)

As at
January 28, 2017

As at
January 30, 2016Deferred receivables

$
0.2

$
0.2Other receivables


66.9


59.2Total accounts receivable, net

$
67.1

$
59.4




(in CAD millions)

As at
January 28, 2017

As at
January 30, 2016Greater than 30 days

$
9.9

$
5.1Greater than 60 days


3.4


2.4Greater than 90 days


11.6


8.3Total

$
24.9

$
15.8




(in CAD millions)

As at
January 28, 2017

As at
January 30, 2016Allowances, beginning of year

$
6.0

$
8.3Net additions (write-off)


0.1


(2.3
)Allowances, end of year

$
6.1

$
6.0


7.     INVENTORIES



8.     PREPAID EXPENSES



(in CAD millions)

As at
January 28, 2017

As at
January 30, 2016Rent

$
9.5

$
10.7Contracts


13.7


11.5Supplies


3.0


2.8Insurance


1.0


0.8Other


7.3


5.2Total prepaid expenses

$
34.5

$
31.0


83

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9.     PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT PROPERTIES



(in CAD millions)

Land

Buildings and
Leasehold
Improvements

Finance
Lease
Buildings

Finance
Lease
Equipment

Equipment
and
Fixtures

TotalCost or deemed costBalance at January 31, 2015

$
228.4

$
1,086.4

$
41.5

$
1.0

$
1,136.0

$
2,493.3Additions





14.0





0.1


9.6


23.7Disposals


(52.1
)

(16.3
)

(3.5
)




(13.7
)

(85.6
)Net movement to assets held for sale(2)


(2.5
)

(16.3
)







(7.0
)

(25.8
)Balance at January 30, 2016

$
173.8

$
1,067.8

$
38.0

$
1.1

$
1,124.9

$
2,405.6Additions





13.6








11.5


25.1Disposals


(57.2
)

(84.2
)

(5.0
)




(40.7
)

(187.1
)Net movement to assets held for sale(2)


(45.0
)

(130.0
)







(36.0
)

(211.0
)Balance at January 28, 2017

$
71.6

$
867.2

$
33.0

$
1.1

$
1,059.7

$
2,032.6Accumulated depreciation and impairmentBalance at January 31, 2015

$


$
847.9

$
34.1

$
0.5

$
1,043.2

$
1,925.7Depreciation expense(1)





19.7


2.0


0.3


22.9


44.9Disposals





(15.6
)

(3.5
)




(13.7
)

(32.8
)Net impairment losses(1)





10.5


5.4





23.3


39.2Net movement to assets held for sale(2)





(8.5
)







(7.0
)

(15.5
)Balance at January 30, 2016

$


$
854.0

$
38.0

$
0.8

$
1,068.7

$
1,961.5Depreciation expense(1)





11.7





0.3


15.6


27.6Disposals





(38.1
)

(5.0
)




(38.1
)

(81.2
)Impairment losses(1)





8.9








15.2


24.1Net movement to assets held for sale(2)





(91.9
)







(34.6
)

(126.5
)Balance at January 28, 2017

$


$
744.6

$
33.0

$
1.1

$
1,026.8

$
1,805.5Net balance at January 28, 2017

$
71.6

$
122.6

$


$


$
32.9

$
227.1Net balance at January 30, 2016

$
173.8

$
213.8

$


$
0.3

$
56.2

$
444.1
  (1)Depreciation
expense and impairment losses are included in "Selling, administrative and other expenses" in the Consolidated Statements of Net Loss and
Comprehensive Loss.(2)Represents
the balances related to certain retail stores and logistics centres. Refer to Note 28 "Assets classified as held for sale" for additional
information.




(in CAD millions)

2016

2015Sears full-line department stores

$
11.6

$
43.1Direct channel


10.5


6.5Other


2.0


4.7Distribution centre





(15.1
)Total net impairment losses

$
24.1

$
39.2


84

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9.     PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT PROPERTIES (Continued)



85

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10.   INTANGIBLE ASSETS



(in CAD millions)

Application
Software

Information
System Software and
Other

TotalCost or deemed costBalance at January 31, 2015

$
66.0

$
136.2

$
202.2Additions


27.1


3.0


30.1Disposals





(0.1
)

(0.1
)Balance at January 30, 2016

$
93.1

$
139.1

$
232.2Additions


3.2


0.1


3.3Disposals





(0.1
)

(0.1
)Balance at January 28, 2017

$
96.3

$
139.1

$
235.4Accumulated amortizationBalance at January 31, 2015

$
57.2

$
128.8

$
186.0Amortization expense(1)


3.4


0.1


3.5Disposals





(0.1
)

(0.1
)Impairment losses(1)


20.3





20.3Balance at January 30, 2016

$
80.9

$
128.8

$
209.7Amortization expense(1)


3.7


0.1


3.8Disposals








Impairment losses(1)


11.1


8.8


19.9Balance at January 28, 2017

$
95.7

$
137.7

$
233.4Net balance at January 28, 2017

$
0.6

$
1.4

$
2.0Net balance at January 30, 2016

$
12.2

$
10.3

$
22.5
  (1)Amortization
expense and impairment losses are included in "Selling, administrative and other expenses" in the Consolidated Statements of Net Loss and
Comprehensive Loss.




86

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.   OTHER LONG-TERM ASSETS



(in CAD millions)

As at
January 28, 2017

As at
January 30, 2016Income taxes recoverable

$


$
3.8Prepaid rent


4.8


5.2Receivables


0.1


1.8Investments





1.3Unamortized debt transaction costs


2.4


3.2Other long-term assets

$
7.3

$
15.3


12.   DEFERRED REVENUE



(in CAD millions)

As at
January 28, 2017

As at
January 30, 2016Arising from extended warranty service contracts(i)

$
122.7

$
131.2Arising from unshipped sales(ii)


40.4


50.8Arising from customer loyalty program(iii)


29.5


34.1Arising from gift card issuances(iv)


8.1


10.7Other(v)


4.8


5.7Total deferred revenue

$
205.5

$
232.5Current

$
136.1

$
158.3Non-current


69.4


74.2Total deferred revenue

$
205.5

$
232.5
  The
following explanations describe the Company's deferred revenue: (i)Deferred
revenue arising from the sale of extended warranty service contracts, which provide coverage for product repair services over the term of
the contracts.(ii)Deferred
revenue arising from the sale of merchandise which has not yet been delivered to or picked up by the customer. The revenue is recognized once the
merchandise is delivered to the customer.(iii)Deferred
revenue arising from the Sears Club loyalty program.(iv)Deferred
revenue arising from the purchase of gift cards by customers that have not yet been redeemed for merchandise. The revenue is recognized primarily
upon redemption of the gift card.(v)Other
includes deferred revenue for services that have not yet been fully rendered. The revenue is recognized when the goods have been delivered or by
reference to the stage of completion of the service.


87

---





NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13.   FINANCIAL INSTRUMENTS







Contractual Cash Flow Maturities(in CAD millions)

Carrying
Amount

Total

Within
1 year

1 year to
3 years

3 years to
5 years

Beyond
5 yearsAccounts payable and accrued liabilities

$
319.8

$
319.8

$
319.8

$


$


$
Finance lease obligations including payments due within one year(1)


20.3


24.6


5.0


9.9


6.9


2.8Operating lease obligations(2)





380.2


82.9


135.5


85.8


76.0Royalties(2)





11.6


3.1


5.9


2.6


Purchase agreements(2)(3)





22.4


15.2


6.7


0.5


Retirement benefit plans obligations(4)


308.6


207.4


47.9


88.4


71.1


$
648.7

$
966.0

$
473.9

$
246.4

$
166.9

$
78.8


(1)Cash
flow maturities related to finance lease obligations, including payments due within one year, include annual interest on finance lease obligations at a
weighted average rate of 7.7%.(2)Operating
lease obligations, royalties and certain purchase agreements are not reported in the Consolidated Statements of Financial
Position.(3)Certain
vendors require minimum purchase commitment levels over the term of the contract. A portion of these obligations are included in "Other long-term
liabilities" in the Consolidated Statements of Financial Position.


88

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13.   FINANCIAL INSTRUMENTS (Continued)

(4)Payments
are based on a funding valuation as at December 31, 2015 which was completed on September 27, 2016. Any obligation beyond 2021 would
be based on a funding valuation to be completed as at December 31, 2018 or earlier at the Company's discretion.








89

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13.   FINANCIAL INSTRUMENTS (Continued)



(in CAD millions)
Classification

Balance Sheet Category

Fair Value
Hierarchy

As at
January 28, 2017

As at
January 30, 2016Fair value through profit or lossU.S. $ derivative contracts

Derivative financial (liabilities) assets

Level 2

$
(0.6
)
$
6.6Fuel and natural gas derivative contracts

Derivative financial assets

Level 2


0.1


Long-term investments

Other long-term assets

Level 3





1.3




14.   ACCOUNTS PAYABLE AND ACCRUED LIABILITIES



(in CAD millions)

As at
January 28, 2017

As at
January 30, 2016Total accounts payable

$
167.9

$
162.5Accrued liabilitiesPayroll and employee benefits


22.9


29.0Merchandise accruals


56.0


65.6Short-term leasehold inducements


8.0


8.3Advertising accruals


6.9


11.9Other accrued liabilities


58.1


55.4Total accrued liabilities

$
151.9

$
170.2Total accounts payable and accrued liabilities

$
319.8

$
332.7


90

---





NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15.   PROVISIONS



(in CAD millions)

As at
January 30, 2016

Additional
Provisions

Release of
Provisions

Reversed
Provisions

As at
January 28, 2017Insurance(i)

$
12.1

$
5.4

$
(5.2
)
$


$
12.3Returns and allowances(ii)


11.1


9.3


(8.3
)




12.1Warranties(iii)


5.2





(1.0
)




4.2Sales tax(iv)


26.7


2.8


(2.4
)

(24.6
)

2.5Severance(v)


16.4


36.1


(25.7
)

(3.5
)

23.3Environmental(vi)


6.4


1.6


(1.9
)

(0.3
)

5.8Other provisions(vii)


2.9


13.5


(5.5
)




10.9Total provisions

$
80.8

$
68.7

$
(50.0
)
$
(28.4
)
$
71.1Current

$
75.8

$
64.2

$
(50.0
)
$
(28.4
)
$
61.6Non-current(iii),(vi)


5.0


4.5








9.5Total provisions

$
80.8

$
68.7

$
(50.0
)
$
(28.4
)
$
71.1




(in CAD millions)

As at
January 31, 2015

Additional
Provisions

Release of
Provisions

Reversed
Provisions

As at
January 30, 2016Insurance(i)

$
13.7

$
3.2

$
(4.8
)
$


$
12.1Returns and allowances(ii)


12.0


6.5


(7.4
)




11.1Warranties(iii)


8.2


0.6


(3.6
)




5.2Sales tax(iv)


6.0


22.1


(1.4
)




26.7Severance(v)


11.9


28.7


(18.3
)

(5.9
)

16.4Environmental(vi)


6.1


2.7


(2.1
)

(0.3
)

6.4Other provisions(vii)


5.5





(2.4
)

(0.2
)

2.9Total provisions

$
63.4

$
63.8

$
(40.0
)
$
(6.4
)
$
80.8Current

$
58.6

$
63.6

$
(40.0
)
$
(6.4
)
$
75.8Non-current(iii)(vi)


4.8


0.2








5.0Total provisions

$
63.4

$
63.8

$
(40.0
)
$
(6.4
)
$
80.8


The
following explanations describe the Company's provisions:

(i)The
provision for insurance, or general liability claims, represents the Company's best estimate of the future outflow of economic resources due to
automobile, product and other general liability claims. Insurance claims relating to this provision are expected to be paid over the next several years; however, as the Company has no unconditional
right to defer the settlement past at least 12 months, this provision is considered to be current. In estimating the obligation associated with incurred losses, the Company utilizes actuarial
methodologies validated by an independent third party. These actuarial methodologies utilize historical data to project future incurred losses. Loss estimates are adjusted based on reported claims and
actual settlements.(ii)The
provision for returns and allowances represents the Company's best estimate of the future outflow of economic resources due to merchandise returns and
allowances. Returns and allowances relating to this provision are expected to be realized over the next 12 months. Uncertainty exists relating to the amount and timing of returns and
allowances, therefore, historical data has been used to arrive at this estimate.(iii)The
provision for warranty claims represents the Company's best estimate of the future outflow of economic resources that will be required due to the
Company's warranty obligations. Uncertainty exists relating to the number of incidents requiring merchandise repair and the related costs. This provision is estimated based on historical warranty
trends and costs. The provision for warranty claims is primarily expected to be realized within 72 months, with the balance included in "Provisions" and "Other long-term liabilities" in the
Consolidated Statements of Financial Position.


91

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15.   PROVISIONS (Continued)

(iv)The
Company maintains provisions for sales tax assessments under active discussion, audit, dispute or appeal with tax authorities. These provisions
represent the Company's best estimate of the amount expected to be paid based on qualitative and quantitative assessments. Though uncertainty exists around the timing of settlement of the disputes or
appeals with tax authorities, the Company expects that sales tax provisions will be settled within four years. However, as the Company has no unconditional right to defer the settlement of these
provisions past at least 12 months, these provisions are classified as current.(v)The
provision for severance represents the Company's best estimate of the future outflow of payments to terminated employees. Uncertainty exists in certain
cases relating to the amount of severance that will be awarded in court proceedings. As the Company has no unconditional right to defer these payments past at least 12 months, this provision is
classified as current.(vi)The
environmental provision primarily represents the costs to remediate environmental contamination associated with decommissioning auto centres to meet
regulatory requirements. The provision is based on assessments conducted by third parties as well as historical data. The timing of payments for remediation is uncertain and as the Company has no
unconditional right to defer most of these payments past at least 12 months, the balance is included primarily in "Provisions", with the remainder of the balance included in "Other long-term
liabilities" in the Consolidated Statements of Financial Position.(vii)Other
provisions primarily relate to onerous contracts. The provision for onerous contracts represents the Company's best estimate of the future outflow
of payments when the unavoidable costs of meeting the obligations under a contract exceed the economic benefits expected. Uncertainty exists in certain cases relating to the expected economic benefits
under an onerous contract, however the Company expects the onerous contract provisions to be settled within five years. The liability that is expected to be settled within 12 months is included
in "Provisions", with the remainder of the balance included in "Other long-term liabilities" in the Consolidated Statements of Financial Position.


16.   LONG-TERM OBLIGATIONS AND FINANCE COSTS



92

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16.   LONG-TERM OBLIGATIONS AND FINANCE COSTS (Continued)



17.   OTHER LONG-TERM LIABILITIES

The components of other long-term liabilities were as follows:

(in CAD millions)

As at
January 28, 2017

As at
January 30, 2016Leasehold inducements

$
35.3

$
43.3Straight-line rent liability


33.4


11.7Miscellaneous


14.2


12.0Total other long-term liabilities

$
82.9

$
67.0




18.   LEASING ARRANGEMENTS





93

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18.   LEASING ARRANGEMENTS (Continued)



As at January 28, 2017

As at January 30, 2016(in CAD millions)

Finance
lease
payments

Future
finance
costs

Present value of
minimum lease
payments

Finance
lease
payments

Future
finance
costs

Present value of
minimum lease
paymentsWithin 1 year

$
5.0

$
1.3

$
3.7

$
5.6

$
1.6

$
4.02 years


5.0


1.1


3.9


5.0


1.5


3.53 years


4.9


0.8


4.1


5.0


1.1


3.94 years


3.8


0.5


3.3


4.9


0.8


4.15 years


3.1


0.3


2.8


3.8


0.5


3.3Thereafter


2.8


0.3


2.5


5.9


0.5


5.4Total minimum payments

$
24.6

$
4.3

$
20.3

$
30.2

$
6.0

$
24.2




(in CAD millions)

As at
January 28, 2017

As at
January 30, 2016Within 1 year

$
82.9

$
81.22 years


72.1


71.43 years


63.4


58.84 years


53.1


46.45 years


32.7


35.1Thereafter


76.0


83.4Total operating lease obligations(1)

$
380.2

$
376.3
  (1)Operating
lease obligations are not reported in the Consolidated Statements of Financial Position.




19.   RETIREMENT BENEFIT PLANS



94

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19.   RETIREMENT BENEFIT PLANS (Continued)



95

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19.   RETIREMENT BENEFIT PLANS (Continued)



2016

2015(in CAD millions)

Registered
Retirement
Plans

Non-
Registered
Pension
Plan

Other
Benefits
Plan

Total

Registered
Retirement
Plans

Non-
Registered
Pension
Plan

Other
Benefits
Plan

TotalDefined benefit plan assetsFair value, beginning balance

$
1,106.5

$
48.1

$
1.5

$
1,156.1

$
1,217.8

$
50.8

$
1.9

$
1,270.5Interest income


33.2


1.4





34.6


39.1


1.6





40.7Remeasurement gain (loss) on return on plan assets


32.0


0.1


0.6


32.7


(36.5
)

(1.5
)

(0.1
)

(38.1
)Employer contributions


18.6


2.6


17.1


38.3


20.3


0.8


21.1


42.2Administrative expenses


(0.5
)







(0.5
)

(0.5
)







(0.5
)Benefits paid(1)


(139.1
)

(4.2
)

(17.6
)

(160.9
)

(133.7
)

(3.6
)

(21.4
)

(158.7
)Fair value of plan assets, ending balance

$
1,050.7

$
48.0

$
1.6

$
1,100.3

$
1,106.5

$
48.1

$
1.5

$
1,156.1Defined benefit plan obligationsAccrued obligations, beginning balance

$
1,226.6

$
52.9

$
203.5

$
1,483.0

$
1,391.7

$
55.1

$
231.1

$
1,677.9Interest cost


35.8


1.5


5.7


43.0


44.5


1.7


6.9


53.1Benefits paid


(139.1
)

(4.2
)

(13.0
)

(156.3
)

(133.6
)

(3.6
)

(16.5
)

(153.7
)Settlement gain




















(5.4
)

(5.4
)Actuarial losses (gain)


37.7


0.1


1.4


39.2


(76.0
)

(0.3
)

(12.6
)

(88.9
)Accrued plan obligations, ending balance

$
1,161.0

$
50.3

$
197.6

$
1,408.9

$
1,226.6

$
52.9

$
203.5

$
1,483.0Funded status of plan  (deficit)


(110.3
)

(2.3
)

(196.0
)

(308.6
)

(120.1
)

(4.8
)

(202.0
)

(326.9
)Retirement benefit liability at end of fiscal year, net

$
(110.3
)
$
(2.3
)
$
(196.0
)
$
(308.6
)
$
(120.1
)
$
(4.8
)
$
(202.0
)
$
(326.9
)
  (1)Benefits
paid from the funded assets include retiree benefits and short-term disability of active employees. Other benefits consist of retiree health and
dental claims.


96

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19.   RETIREMENT BENEFIT PLANS (Continued)



As at January 28, 2017

As at January 30, 2016(in CAD millions)

Registered
Retirement
Plans

Non-
Registered
Pension
Plan

Other
Benefits
Plan

Total

Registered
Retirement
Plans

Non-
Registered
Pension
Plan

Other
Benefits
Plan

TotalCash and cash equivalentsLevel 2

$
12.4

$
23.0

$
1.6

$
37.0

$
166.1

$
23.0

$


$
189.1Corporate bonds and notesLevel 2


305.2








305.2


369.4








369.4Level 3


136.7








136.7


141.5





1.5


143.0Subtotal


441.9








441.9


510.9





1.5


512.4Common stock, preferred stock and REITSLevel 1


294.3








294.3


193.9








193.9Common or collective trustsLevel 2


160.5


24.4





184.9


150.8


24.9





175.7Short-term collective investment fundsLevel 2


136.4


0.6





137.0


101.6


0.2





101.8Level 3


1.5








1.5











Subtotal


137.9


0.6





138.5


101.6


0.2





101.8Hedge fundsLevel 3


0.6








0.6


1.1








1.1Receivables (liabilities)Level 1


4.2








4.2


5.8








5.8Level 2


4.2








4.2


(21.3
)







(21.3
)Subtotal


8.4








8.4


(15.5
)







(15.5
)Miscellaneous other liabilitiesLevel 1


(5.3
)







(5.3
)

(2.4
)







(2.4
)Total fair value of plan assets

$
1,050.7

$
48.0

$
1.6

$
1,100.3

$
1,106.5

$
48.1

$
1.5

$
1,156.1






97

---





NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19.   RETIREMENT BENEFIT PLANS (Continued)



As at January 28, 2017

As at January 30, 2016Registered
Retirement
Plans

Non-
Registered
Pension
Plan

Other
Benefits
Plan

Registered
Retirement
Plans

Non-
Registered
Pension
Plan

Other
Benefits
PlanFixed income securities


58.3%


75.5%


100.0%


69.6%


69.5%


100.0%Alternative investments


0.1%


%


%


0.1%


%


%Equity securities


41.6%


24.5%


%


30.3%


30.5%


%Total


100.0%


100.0%


100.0%


100.0%


100.0%


100.0%




As at
January 28, 2017

As at
January 30, 2016Registered
Retirement
Plans

Non-
Registered
Pension
Plan

Other
Benefits
Plan

Registered
Retirement
Plans

Non-
Registered
Pension
Plan

Other
Benefits
PlanDiscount rate used in calculation of Accrued benefit plan obligations


3.70
%

3.60
%

3.60
%

3.80
%

3.70
%

3.70
%Benefit plans expense


3.00
%

2.90
%

2.90
%

3.00
%

3.00
%

2.90
%Rate of compensation increase used in calculation of Accrued benefit plan obligations


3.30
%

3.30
%

3.30
%

3.50
%

3.50
%

3.50
%Benefit plans expense


3.30
%

3.30
%

3.30
%

3.50
%

3.50
%

3.50
%Expected long-term rate of return on plan assets used in calculation of benefit plans expense


3.00
%

2.90
%

2.90
%

3.00
%

3.00
%

2.90
%Health care cost trend ratesUsed in calculation of accrued benefit plan obligations








4.47
%







4.62
%Used in calculation of benefit plans expense








4.62
%







4.77
%Cost trend rate declines to








2.45
%







2.45
%Year that the rate reaches assumed constant








2030








2030


98

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19.   RETIREMENT BENEFIT PLANS (Continued)



2016

2015(in CAD millions)

Registered
Retirement
Plans

Non-
Registered
Pension
Plan

Other
Benefits
Plan

Registered
Retirement
Plans

Non-
Registered
Pension
Plan

Other
Benefits
PlanDiscount rate sensitivityAccrued benefit plan obligations100 basis point increase in discount rate

$
(122.0
)
$
(4.8
)
$
(18.3
)
$
(130.7
)
$
(5.1
)
$
(21.2
)100 basis point decrease in discount rate


148.6


5.8


21.7


160.3


6.1


25.2Benefit plans expense100 basis point increase in discount rate


(3.6
)

(0.1
)

0.9


(5.7
)

(0.2
)

1.0100 basis point decrease in discount rate


1.8


0.1


(1.1
)

3.2


0.1


(1.3
)Rate of compensation increase sensitivityAccrued benefit plan obligations50 basis point increase in rate of compensation increase


6.6


0.2


n/a


8.1


0.3


n/a50 basis point decrease in rate of compensation increase


(6.1
)

(0.2
)

n/a


(7.2
)

(0.2
)

n/aBenefit plans expense50 basis point increase in rate of compensation increase


0.2





n/a


0.4





n/a50 basis point decrease in rate of compensation increase


(0.2
)




n/a


(0.3
)




n/aHealth care cost trend rate sensitivityAccrued benefit plan obligations100 basis point increase in health care trend rate


n/a


n/a


16.0


n/a


n/a


18.6100 basis point decrease in health care trend rate


n/a


n/a


(13.8
)

n/a


n/a


(16.0
)Benefit plans expense100 basis point increase in health care trend rate


n/a


n/a


0.5


n/a


n/a


0.6100 basis point decrease in health care trend rate


n/a


n/a


(0.4
)

n/a


n/a


(0.5
)




99

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19.   RETIREMENT BENEFIT PLANS (Continued)



2016

2015(in CAD millions)

Registered
Retirement
Plans

Non-
Registered
Pension
Plan

Other
Benefits
Plan

Total

Registered
Retirement
Plans

Non-
Registered
Pension
Plan

Other
Benefits
Plan

TotalNet interest

$
2.8

$
0.1

$
5.7

$
8.6

$
5.4

$
0.1

$
6.9

$
12.4Settlement gain




















(5.4
)

(5.4
)Administrative expenses


0.5








0.5


0.5





0.3


0.8Net defined benefit plans expense

$
3.3

$
0.1

$
5.7

$
9.1

$
5.9

$
0.1

$
1.8

$
7.8Net defined contribution plan expense


4.8





0.2


5.0


5.8





0.2


6.0Total retirement benefit plans expense(1)

$
8.1

$
0.1

$
5.9

$
14.1

$
11.7

$
0.1

$
2.0

$
13.8


(1)Not
included in total expense recognized are short-term disability payments of $4.6 million (2015: $4.9 million) that were paid from the
health and welfare trust. Both short-term disability and the retirement benefit plans expense are included in "Selling, administrative and other expenses", unless disclosed elsewhere, in the Company's
Consolidated Statements of Net Loss and Comprehensive Loss.




100

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19.   RETIREMENT BENEFIT PLANS (Continued)



2016

2015(in CAD millions)

Registered
Retirement
Plans

Non-
Registered
Pension
Plan

Other
Benefits
Plan

Total

Registered
Retirement
Plans

Non-
Registered
Pension
Plan

Other
Benefits
Plan

TotalActuarial gain (loss) on difference between expected interest income and actual return on plan assets

$
32.0

$
0.1

$
0.6

$
32.7

$
(36.5
)
$
(1.5
)
$
(0.1
)
$
(38.1
)Actuarial (loss) gain due to change in financial assumptions


(18.2
)

0.7


(3.4
)

(20.9
)

68.0


2.4


9.7


80.1Actuarial (loss) gain due to all other experiences


(19.5
)

(0.8
)

2.0


(18.3
)

8.0


(2.1
)

2.9


8.8Total remeasurement (loss) gain, net of income taxes(1)

$
(5.7
)
$


$
(0.8
)
$
(6.5
)
$
39.5

$
(1.2
)
$
12.5

$
50.8


(1)Total
remeasurement (loss) gain, net of income taxes, is included in "Total other comprehensive income (loss)" in the Company's Consolidated Statements of
Net Loss and Comprehensive Loss.




20.   CONTINGENT LIABILITIES





101

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20.   CONTINGENT LIABILITIES (Continued)



21.   INCOME TAXES



(in CAD millions)

2016

2015Loss before income taxes

$
(318.2
)
$
(62.7
)Income tax recovery at the average statutory tax rate

$
(85.6
)
$
(16.8
)(Decrease) increase in income taxes resulting fromNon-taxable portion of capital gain


(16.1
)

(33.3
)Non-deductible items


1.5


1.0Prior year adjustments


11.3


Non-recognition of deferred taxes assets, net


94.6


56.7Others


(2.6
)

(2.6
)3.1


5.0Effective tax rate before the following adjustments


(1.0
)%

(8.0
)%Changes in tax rates or imposition of new taxes


(0.3
)

0.2Total income tax expense

$
2.8

$
5.2Effective tax rate


(0.9
)%

(8.3
)%




102

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

21.   INCOME TAXES (Continued)



(in CAD millions)

As at
January 30, 2016

Recognized in
earnings

Recognized in
equity

As at
January 28, 2017Deferred revenue

$
0.6

$
0.3

$


$
0.9Other long term liabilities


19.1


(3.0
)




16.1Derivative financial assets


(2.7
)




2.8


0.1Property, plant and equipment


(4.2
)







(4.2
)Investment property


(21.5
)

11.9





(9.6
)Intangible assets


1.1


0.5





1.6Retirement benefit obligations


87.6


(6.2
)

1.7


83.1Provisions


60.8


(8.4
)




52.4Non-capital losses


51.5


88.8





140.3Other


8.2


8.2





16.4Write down of deferred tax assets


(122.0
)







(122.0
)Non-recognition of deferred tax assets


(77.9
)

(94.6
)

(1.9
)

(174.4
)Total deferred tax assets, net

$
0.6

$
(2.5
)
$
2.6

$
0.7




(in CAD millions)

As at
January 31, 2015

Recognized in
earnings

Recognized in
equity

As at
January 30, 2016Deferred revenue

$
0.5

$
0.1

$


$
0.6Other long term liabilities


21.8


(2.7
)




19.1Derivative financial assets


(2.5
)

(0.4
)

0.2


(2.7
)Property, plant and equipment


(7.9
)

3.7





(4.2
)Investment property


(28.0
)

6.5





(21.5
)Intangible assets


1.1








1.1Retirement benefit obligations


108.2


(7.0
)

(13.6
)

87.6Provisions


49.6


11.2





60.8Non-capital losses


10.4


41.1





51.5Other


1.1


7.1





8.2Write down of deferred tax assets, net


(122.0
)







(122.0
)Non-recognition of deferred tax assets


(35.0
)

(56.7
)

13.8


(77.9
)Total deferred tax (liabilities) assets, net

$
(2.7
)
$
2.9

$
0.4

$
0.6




103

---





NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

21.   INCOME TAXES (Continued)



22.   CAPITAL STOCK AND SHARE-BASED COMPENSATION



23.   CAPITAL DISCLOSURES





104

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

23.   CAPITAL DISCLOSURES (Continued)



(in CAD millions)

As at
January 28, 2017

As at
January 30, 2016Total long-term obligations

$
20.3

$
24.2Shareholders' equity


222.2


554.2Total

$
242.5

$
578.4


24.   REVENUE



(in CAD millions)

2016

2015Apparel and Accessories

$
994.4

$
1,108.6Home and Hardlines


1,143.4


1,476.4Other merchandise revenue


205.8


207.0Services and other


237.6


245.6Commission and licensee revenue


32.4


108.1Total revenue

$
2,613.6

$
3,145.7


25.   EMPLOYEE BENEFITS EXPENSE



(in CAD millions)

2016

2015Wages and salaries

$
376.5

$
432.6Paid absences(1)


35.0


40.0BenefitsProvincial healthcare costs


9.4


10.3Flex benefits


10.1


12.4Retirement benefit plans expense(2)


14.0


13.5Statutory deductions(3)


27.0


30.9Severance


36.1


25.3Other employer paid benefits


10.4


5.6Total benefits expense

$
518.5

$
570.6


(1)Paid
absences are expenses related to vacation, statutory holidays and sick days.(2)Included
in Retirement benefit plans expense for Fiscal 2016 was nil related to the settlement of retirement benefits under the non-pension retirement
benefit plan (2015: $5.4 million gain related to the settlement of retirement benefits under the non-pension retirement benefit plan excluding fees of
$0.3 million).(3)Statutory
deductions consist of the employer portion of payment for the Canada Pension Plan and Employment Insurance.




105

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

26.   GAIN ON LEASE TERMINATION AND SALE AND LEASEBACK TRANSACTIONS



27.   GAIN ON TERMINATION OF CREDIT CARD ARRANGEMENT



106

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

28.   ASSETS CLASSIFIED AS HELD FOR SALE



(in CAD millions)

Retail Store

Logistics Centre

TotalBalance at January 31, 2015

$


$
13.3

$
13.3Additions





12.6


12.6Disposals








Impairment losses





(3.8
)

(3.8
)Balance at January 30, 2016

$


$
22.1

$
22.1Additions(1)


17.6


69.7


87.3Disposals(2)


(10.2
)

(33.9
)

(44.1
)Impairment losses


(0.4
)

(7.9
)

(8.3
)Balance at January 28, 2017

$
7.0

$
50.0

$
57.0


(1)Included
in additions were the assets of one retail store and one logistics centre which were classified as held for sale and subsequently disposed of in
Fiscal 2016. See Note 26 "Gain on lease termination and sales leaseback transactions" for additional information regarding disposals.(2)See
Note 26 "Gain on lease termination and sales leaseback transactions" for additional information regarding disposals.




29.   RELATED PARTY TRANSACTIONS



107

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

29.   RELATED PARTY TRANSACTIONS (Continued)



2016

2015(in CAD millions)

Purchase
of goods

Services
received

Other

Total

Purchase
of goods

Services
received

Other

TotalSears Holdings Corporation

$


$
2.8

$
0.2

$
3.0

$


$
3.8

$
0.2

$
4.0




Amounts receivable from
a related party(in CAD millions)

As at
January 28, 2017

As at
January 30, 2016Sears Holdings Corporation

$


$
0.2




Amounts payable to a
related party(in CAD millions)

As at
January 28, 2017

As at
January 30, 2016Sears Holdings Corporation

$
0.2

$
0.5




108

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

29.   RELATED PARTY TRANSACTIONS (Continued)



30.   KEY MANAGEMENT PERSONNEL COMPENSATION



(in CAD millions)

2016

2015Salaries and perquisites

$
13.0

$
11.4Annual incentive plans and other bonuses


3.2


3.7Pensions


0.1


0.1Termination benefits


1.6


4.9Total key management personnel compensation

$
17.9

$
20.1


31.   NET LOSS PER SHARE



(Number of shares)

2016

2015Weighted average number of shares per basic net loss per share calculation


101,877,662


101,877,662Effect of dilutive instruments outstanding





Weighted average number of shares per diluted net loss per share calculation


101,877,662


101,877,662




32.   CHANGES IN NON-CASH WORKING CAPITAL BALANCES



(in CAD millions)

2016

2015Accounts receivable, net

$
(7.7
)
$
12.5Inventories


66.3


(23.4
)Prepaid expenses


(3.5
)

(2.3
)Derivative financial assets


(3.1
)

1.3Accounts payable and accrued liabilities


(18.6
)

(35.3
)Deferred revenue


(22.2
)

(12.9
)Provisions


(14.2
)

17.2Income and other taxes payable and recoverable


1.3


(18.1
)Effect of foreign exchange rates


1.8


(3.3
)Cash used for non-cash working capital balances

$
0.1

$
(64.3
)


109

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

33.   CHANGES IN NON-CASH LONG-TERM ASSETS AND LIABILITIES



(in CAD millions)

2016

2015Other long-term assets

$
7.2

$
4.3Other long-term liabilities


(13.5
)

(16.3
)Other


0.6


0.3Cash used for non-cash long-term assets and liabilities

$
(5.7
)
$
(11.7
)


34.   EVENTS AFTER THE REPORTING PERIOD



35.   APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS



110

---





DIRECTORS AND OFFICERS

Board of Directors

OfficersShahir Guindi

Brandon G. StranzlManaging Partner, Montreal Office

Executive ChairmanOsler, Hoskin & Harcourt LLPR. Raja Khanna(1)(2)(4)

Philip MohtadiChief Executive Officer

General Counsel and Corporate SecretaryBlue Ant Media Inc.Deborah E. Rosati(1)(4)

Billy WongCorporate Director and Advisor

Executive Vice-President and Chief Financial OfficerAnand A. Samuel(2)(3)

Becky PenriceAnalyst
ESL Investments Inc.

Executive Vice-President and Chief Operating OfficerGraham Savage(1)(2)(4)Corporate DirectorS. Jeffrey Stollenwerck(3)President, Sears Real Estate BusinessSears Holdings CorporationBrandon G. Stranzl(3)Executive Chairman of the CorporationHeywood Wilansky(2)President and Chief Executive OfficerStrategic Management Resources LLC


Committees

111

---





CORPORATE INFORMATION

Head OfficeSears Canada Inc.
290 Yonge Street
Suite 700
Toronto, Ontario
M5B 2C3Website:sears.ca
E-mail:home@sears.caFor more information about the Company, or for additional copies of the Annual Report, write to the Corporate Communications Department at the Head Office of Sears
Canada Inc., or call 416-941-4422.The Company's regulatory filings can be found on the SEDAR website at sedar.com and on the U.S. Securities Exchange
Commission (SEC) website at sec.gov.Stock Exchange ListingToronto Stock Exchange
Trading symbol: SCC
NASDAQ
Trading symbol: SRSCTransfer Agents and RegistrarsCST Trust Company
P.O. Box 700, Station B
Montreal, Québec
H3B 3K3

Annual Meeting The Annual Meeting of the Shareholders of Sears Canada Inc. will be held on Wednesday,
June 14, 2017 at 8:00 a.m. in the Auditorium, Fourth floor, 290 Yonge Street, Toronto, Ontario Canada.Édition française
du rapport annuelOn peut se procurer l'édition française de ce rapport en écrivant au :Service national des communications
Sears Canada Inc.
290 Yonge Street
Suite 700
Toronto (Ontario)
M5B 2C3Pour de plus amples renseignements au sujet de la Société, veuillez écrire au service national des communications, ou composer le 416-941-4422.Les dépôts réglementaires de la Société se trouvent sur le site Web de SEDAR à l'adresse sedar.com et sur le site Web de la Securities
Exchange Commission («SEC») des États-Unis à l'adresse sec.gov.




Answerline:

416-682-38601-800-387-0825Fax:

1-888-249-6189Website:

canstockta.comE-Mail:

inquiries@canstockta.comAmerican Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219Answerline:

1-800-937-5449Fax:

718-236-2641Website:

amstock.comE-Mail:

info@amstock.com


112

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