Western Investment of Canada : Annual – December 31, 2023

Management's Discussion and Analysis

For the year ended December 31, 2023

Dated: April 29, 2024

The Western Investment Company of Canada Ltd.

Management's Discussion and Analysis

Introduction

The Western Investment Company of Canada Limited ("we", "Western," or the "Corporation") is a publicly-traded private equity company based in Western Canada. Our common shares trade on the TSX-V under the trading symbol WI. Our purpose is to create long-term wealth for shareholders by building and maintaining a diversified portfolio of strong, stable, and profitable western-based companies while helping them to grow and prosper. Our strategy is to use our expertise and capital to cultivate already great western Canadian businesses, ultimately contributing to their success and legacy over the long run.

Western's targeted industry verticals align with the industry expertise of the Board of Directors and include: (i) financial services and insurance; (ii) retail and distribution; (iii) human services;

1. agriculture and related services; and (v) special situations. Western's ideal acquisition enterprise value is between $10 million and $100 million, with ownership interest between 25% and 100%. Western will prospect acquisitions from: (i) director and executive networks; (ii) mid- market accounting and merger and acquisition advisors; and (iii) private equity and corporate divestitures.

This Management Discussion and Analysis ("MD&A") provides an update on the Corporation's business activities, financial condition, financial performance, and cash flows since December 31, 2022. The Corporation reports its financial position, financial performance, and cash flows in accordance with International Financial Reporting Standards ("IFRS") in Canadian dollars. The MD&A should be read in conjunction with the audited financial statements of the Corporation, for the year ended December 31, 2023. The MD&A was prepared by management of Western and was approved by the Board of Directors on April 29, 2024. Additional information relating to the Corporation, including its Annual Information Form, is available on SEDAR+ at www.sedarplus.ca.

The following table outlines our current equity investments as of April 29, 2024;

Investments	Acquisition	Ownership (%)
	Date
GlassMasters ARG Autoglass Two Inc.	December 16, 2016	55.3%
Golden Health Care	September 1, 2017	25.0 - 30.0%
Foothills Creamery Ltd.	February 28, 2018	49.5%
Fortress Insurance Company	May 6, 2019	28.5%

Page 2 of 22

Year Ended December 31, 2023

The Western Investment Company of Canada Ltd.

Management's Discussion and Analysis

2023 Key Highlights

For the year ended December 31, 2023, Western generated $1.2 million in equity income and $1.8 million in total revenue, our best result in the last four years. $201,967 in net income was achieved for the year, which, compared to the losses earned in the past three years, is a good indication of recovery and growth at our associates. Western credits the results seen in 2023, to operational improvements implemented at our associates, many of whom have shown large jumps in gross margins and sales.

After having a record year in 2022, GlassMasters ARG Autoglass Two Inc. ("GlassMasters") continues this growth. 2023 sales exceeded the prior year by $6 million or 21%, and EBITDA is up 17%. Sales, gross profit, and normalized net income have exceeded every comparative year since the company was acquired in 2016. Growth is occurring at current retail and warehouse locations, and three new locations have come online in 2023. With this success, GlassMasters serves as Western's primary cash flow source, with regular interest payments occurring on the restructured shareholder notes.

Business at Fortress Insurance Company ("Fortress") continues its rapid growth, with a 26% increase in gross written premiums from 2022. A $5.2 million equity offering, completed in late 2022, provided cash and value-added business partners to contribute to Fortress's continuing growth and development. With the recovery of the investment market, Fortress is realizing gains on its investment portfolio, boosting its profitable underwriting business. Fortress is focused on diversification, expanding its product offerings into liability insurance and the Ontario market.

Foothills Creamery Ltd. ("Foothills") has worked hard to return the business to profitability. 2023 results are a testament to this, as gross margins improved from 13% in 2022 to 21% in 2023. This translates into a $3.3 million increase in gross profit. An improved pricing strategy should continue this trend and address any ongoing inflation and rebate fluctuations. Demand for frozen products was high this summer. The company is currently well stocked with inventory leaving it well positioned to meet demand in 2024.

Golden Health Care ("Golden") has seen a small bump in revenue levels, with a 4% increase this past year thanks to improved occupancy. Inflation has impacted the cost of care, and attracting staff has been challenging. Management is focused on continuing to improve occupancy and is working to access government funding for senior care which would allow more seniors in need to access their beds.

The $417,343 improvement in net income for the year ended December 31, 2023, is an indication of the hard work that has gone on to improve earnings from each of our associates. We believe we have solid management and strategic plans in place and are working closely with each company to further improve profitability. Looking into 2024, we expect revenue growth and improved margins to lead Western into a record-breaking year.

A top priority for Western in the fourth quarter was addressing the $4 million in convertible debentures (the "2024 Debentures") coming due in early 2024. In December, Western successfully closed a private placement, raising $5 million of new 9.6% Debentures ("2025 Debentures), that have a maturity date of December 31, 2025. After this placement, which included the exchange of $2.875 million of the original 2024 Debentures, $1.125 million remained outstanding of the 7.5% 2024 Debenture's, which matured and were repaid on March 31, 2024.

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Year Ended December 31, 2023

The Western Investment Company of Canada Ltd.

Management's Discussion and Analysis

Review of Western's Operations and Financial Results

The financial highlights of the Corporation are:

	Three months ended	Year ended
	December 31,		December 31,
Financial results ($	2023	2022	2023	2022
Income	(549,914)	620,702	1,807,910	1,222,904
Professional fees	72,700	53,608	307,818	263,761
Regulatory fees	3,530	2,874	55,839	44,244
Management salaries	109,776	94,557	447,592	378,154
Share based compensation	-	-	56,513	51,964
Interest	219,229	178,844	792,516	667,113
Other expenses	9,057	9,600	41,803	33,044
Total expenses	414,292	339,483	1,702,081	1,438,280
Deferred tax recovery	96,138	-	96,138	-
Net income (loss)	(868,068)	281,219	201,967	(215,376)
Net income (loss) per share	(0.028)	0.009	0.007	(0.007)
		December 31, 2023	December 31, 2022
Financial position ($)
Working capital		(824,968)	261,774
Total assets		19,864,478	18,615,425
Operating loan			-	1,200,316
Loans and convertible debentures		6,725,981	4,883,173
Shareholders' equity		12,780,056	12,377,424
		December 31, 2023	December 31, 2022
Western Share Count Information
Common shares issued and outstanding	30,207,756	30,287,756

Equity income for the year ended December 31, 2023, was $1.2 million, a significant improvement from our $613,687 equity loss in the comparative year 2022. Our top performing associates include both GlassMasters and Foothills. Income was also boosted in 2023 with the restructuring undertaken at GlassMasters, which now provides Western with regular interest income and cash flow. Combining equity income and interest, GlassMasters alone contributed, $1.2 million to our income this year.

For the fourth quarter, equity income was a negative $544,562, which is slightly below the prior year. This quarter is the slowest of a year, for both GlassMasters and Foothills, who typically experience a loss. 2022 income was boosted by a gain on dilution, the most significant being related to the capital raise at Fortress in the fourth quarter. 2023 income was hindered by a $205,594 loss incurred on the exchange of the 2024 Debentures, recognized in the fourth quarter.

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Year Ended December 31, 2023

The Western Investment Company of Canada Ltd.

Management's Discussion and Analysis

Expenses have increased 18% this year. Western has seen a significant jump in professional fees primarily related to financial reporting. Management salaries are also higher with increased time spent on financial reporting. The increase in interest expense can be attributed to rising interest rates and higher drawings on the line of credit through most of the year.

With the proceeds from the 2025 debentures issued in December, Western had cash on hand as at December 31, 2023. The 2024 Debentures, that mature on March 31, 2024, are recorded as a current liability, and Western used the operating loan to meet this liability.

Looking into the future, we expect to see continued improvements in equity income as our associates grow. 2024 should bring growth in the insurance business and ongoing expansion at GlassMasters. We will continue to focus on maintaining and improving profitability at Foothills.

Net Asset Value

To provide shareholders with an idea of the actual value of their investment, we completed a market value assessment of each associate company as at December 31, 2023. For accounting purposes, each investment is recorded based on the equity method of accounting, whereby the investment is initially recognized at cost and adjusted thereafter for our share of the investee's profit or loss. The methods used to determine the market value estimate of each associate are outlined below. We believe providing this estimate gives our investors better insight into the true underlying value of their investment in Western.

The market value assessment shows the value of our equity investments is significantly above the current carrying value. If we adjust our net book value as at December 31, 2023, to account for the inherent market value of our investments, the value per share is $0.69 (2022 - $0.67).

This is well above the current market price of our shares, demonstrating the true value our shareholders hold. We expect that net asset value will remain a dynamic number with improving results and increased stability.

Below is a comparison of the carrying value of our associates with the estimated market value as at December 31, 2023:

	Original purchase		Estimated	Unrealized
$	price	Carrying Value	Market Value	Gain
Golden Health Care	4,738,192	4,711,339	5,800,000	1,088,661
Fortress Insurance Company	1,690,000	2,726,191	5,200,000	2,473,809
Foothills Creamery Ltd.	3,251,000	2,842,164	4,680,000	1,837,836
GlassMasters ARG Autoglass
Two Inc.	4,010,000	8,188,455	10,750,000	2,561,545
Total value of investment in
associates	13,689,192	18,468,149	26,430,000	7,961,851

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Year Ended December 31, 2023

The Western Investment Company of Canada Ltd.

Management's Discussion and Analysis

Using the estimated market value of our associates as outlined above, the net asset value of Western as at December 31, 2023, is:

$		Estimated Market
	Value
Current assets		656,124
Due from related parties		740,205
Investment in associates		26,430,000
Current liabilities		(358,441)
Loan from related party		(1,095,000)
Convertible debentures		(5,630,981)
Net asset value		20,741,907
Common shares outstanding		30,207,756
Value per share	$	0.69

The approach we used to value each company depended on their unique characteristics and the available information and market support. Below is a summary of the methods used to develop our market estimate.

The market value of each Golden Health Care company was calculated by taking a multiple of adjusted net operating income ("NOI") per their 2023 budget, reduced by the net long-term debt held by the company. Directors and management fees were removed to determine adjusted NOI. In determining the multiple, we used the rates from the purchase price calculation at acquisition in 2017, which took into account market-based transactions for similar homes. The acquisition in 2017 was an arms-length transaction, and we believe the rate used in the negotiations continues to represent a market rate.

Fortress was valued based on the recent arms-length transaction that Western signed in March 2024. The share purchase agreement, values Fortress at $2.60 per share.

Foothills was valued using the income approach, specifically a discounted cash flow method based on the Company's forecasts. Under the discounted cash flow method, business enterprise value was determined by discounting the Company's forecasted discretionary cash flows with an appropriate discount rate, approximated by the Company's weighted average cost of capital ("WACC"). Discretionary cash flows were based on management's financial projections for the fiscal years ending December 31, 2024, to 2028. Forecasted EBITDA was tax effected based on the expected federal and Alberta corporate tax rate of 23%. The WACC used in the calculation was 17-19%. It was calculated by weighting the required returns on interest-bearing debt and equity capital in proportion to their estimated percentages. To the business enterprise value, we added the estimated fair market value of the net redundant assets (real estate owned), net of taxes and selling costs, and subtracted the Company's net debt.

Like Foothills, Western used the discounted cash flow method based on the Company's forecasts to value GlassMasters. Discretionary cash flows were based on management's financial projections for the fiscal years ending December 31, 2024, to 2028. The WACC used in the calculation was 14-18%. It was calculated by weighting the required returns on interest- bearing debt and equity capital in proportion to their estimated percentages. To the business enterprise value, the Company's net debt was subtracted.

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Year Ended December 31, 2023

The Western Investment Company of Canada Ltd.

Management's Discussion and Analysis

Summary of Equity Investments

Below is a summary of the results of each of Western's associates for the year ended December 31, 2023. The performance of our associates is assessed based on revenues, net income from operations, and EBITDA. EBITDA is a supplemental measure of operating income in which tax, depreciation and amortization, and interest are added back to the associate's net income (refer to the "Description of Non-IFRS Measures" section below for more information).

Fortress Insurance Company

Fortress is a western Canadian licensed insurance company focusing on specialty and surplus lines of business within the western Canadian insurance marketplace. The principal business for Fortress involves property insurance but the company also offers insurance in niche products, including accident & sickness, liability, boiler & machinery, marine, fidelity, legal expense, and surety. Fortress is licensed in five provinces from BC to Ontario and all three territories.

Management has been actively working on developing relationships with its broker network and on negotiating reinsurance contracts to mitigate the risk taken by Fortress. With reinsurance, Fortress essentially shares the risk of each contract with other insurance companies. Expanding the broker network allows Fortress to penetrate deeper into the market and offer greater capacity to brokers.

For the year ended December 31, 2023, Western recognized equity income of $150,505 from Fortress (2022 - $57,771 loss).

Financial highlights for Fortress (at 100%) are presented below:

	Three months ended		Year ended
	December 31,		December 31,
Financial results ($)	2023	2022	2023	20222
Gross written premiums1	7,098,596	6,266,458	22,406,496	17,719,454
Insurance revenue	5,511,545	4,591,502	20,535,772	11,499,180
Investment income (loss)	630,261	106,989	913,309	(704,781)
Net income (loss)	174,691	(108,861)	719,536	(382,702)

1 Non-GAAP measure - total gross insurance premiums written during the year

2 Prior year numbers have been restated to conform with the new standard, IFRS 17, Insurance Contracts, which was adopted by Fortress on January 1, 2023, with retrospective application.

Fortress continues its trajectory of rapid growth, with increases in gross written premiums each year, including a 26% increase from 2022. In 2023 Fortress increased its capacity on all its products and added liability and transportation insurance products to its lineup. The company's underwriting business is now consistently profitable, and net income is nearly $1 million above the comparative year. Fortress expects to see continued growth in written premiums throughout the coming year with a focus on diversification of both product lines, and geography. 2022 business was heavily weighted in B.C. In 2023, Fortress had strong growth in Alberta, and built momentum in Ontario, Manitoba, and Saskatchewan.

While the prior year's performance was hampered by unrealized losses in their investment portfolio, markets recovered in 2023, with major gains earned in the fourth quarter. 2023

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Year Ended December 31, 2023

The Western Investment Company of Canada Ltd.

Management's Discussion and Analysis

investment income exceeds the prior year by $1.6 million. Fortress works closely with its investment advisors to manage this market volatility and to maximize returns.

The $5.2 million equity offering in late 2022 and strategic agreement with a U.S. based specialty insurance company have set the company up for continuing growth and development, providing it with capital, capacity and growth opportunities for years to come. This equity financing included a plan to provide Fortress with the resources and expertise to offer specialty surety products in Canadian commercial insurance markets through a comprehensive underwriting and reinsurance agreement. Fortress is using this additional capacity and capital to diversify its offerings with new products and expansion into the Ontario market.

Gross written premiums include all premiums written during the year, including both earned and unearned, auto insurance premiums, and fronting fees earned. Fortress continues to expand its fronting programs, though slower then anticipated, gross fronting revenue increased nearly $1 million in 2023. Fronting is the process where a registered insurer transfers the risk to an unlicensed third party. The fronting insurer is used to ensure the policy is issued by a locally licensed insurer.

The trailing 12-month loss ratio as at December 31, 2023 (incurred losses over earned premium) is 47% (2022 - 41%), an impressive result and testament to their lean cost structure and focused execution. We believe the ratio is indicative of the quality business Fortress has developed.

As we head into 2024, we see a softening of the insurance market. Capacity is increasing and rates are coming down. While this may impact Fortress's growth and retention, management is actively monitoring the market and working to find niche areas of products to stay relevant with the brokers.

Western currently holds 28% ownership of Fortress and appoints two of eight directors to the Board. This gives Western significant influence over the investment. As such, the Corporation is accounting for this investment under the equity method.

Foothills Creamery Ltd.

Western holds a 50% interest in Foothills, a producer and distributor of high-quality butter and ice cream products with over 50 years of operations in Western Canada. Headquartered in Calgary, Alberta, it serves customers through a large grocery retail and food service network across western Canada, supported by distribution facilities in Edmonton, Alberta, and Kelowna, BC. Foothills butter products are specially churned, using only the freshest cream to produce a smooth textured product with exceptional taste. Target markets for its butter products include grocery retailers and the food service industry, including commercial kitchens and bakeries. Ice cream sales are seasonal, with the busiest quarters occurring in the spring and summer months. Based on this seasonality, readers are cautioned not to weigh quarterly financial data equally for all quarters.

On July 14, 2023, 10,500 shares of Foothills were issued from treasury to a member of management, diluting the Corporation's ownership of Foothills from 49.6% to 49.5%.

In the year ended December 31, 2023, Western recorded equity income of $391,559 from Foothills (2022 - equity loss of $917,770). Western earns annual management fees of $75,000

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Year Ended December 31, 2023

The Western Investment Company of Canada Ltd.

Management's Discussion and Analysis

from Foothills. Management fees from Foothills have been added to the shareholder loan balance. $44,812 in interest was earned on this shareholder loan during the year (2022 - $6,351).

Financial highlights for Foothills (at 100%) are presented below:

	Three months ended	Year ended
	December 31,	December 31,
Financial results ($)	2023	2022	2023	2022
Revenue	8,435,105	7,466,345	38,162,778	35,226,186
Gross profit	1,259,979	462,488	7,908,274	4,596,590
Net (loss) income	(982,021)	(1,055,467)	789,348	(1,829,330)
Interest	307,685	246,038	1,174,214	809,547
Amortization and depreciation	327,865	306,653	1,461,754	1,195,788
Tax	(70,126)	(289,582)	(97,741)	(563,225)
EBITDA	(416,597)	(792,358)	3,327,575	(387,220)

After a challenging year in 2022, Foothills entered 2023 determined to improve gross margins and return the company to profitability. 2023 results to date show a remarkable turnaround. Revenue is 8% ahead of the prior year, but gross margins have jumped from 13% to 21%, providing a 72% increase in gross profit. Foothills achieved this with an improved pricing strategy that accounts for the rise in input costs, savings in logistics, and improvements in the dairy rebates received. The focus on high-margin frozen products is also starting to pay off. The management team at Foothills has worked tirelessly, and there isn't an area of the business that has not seen operational improvements. This improvement in profitability comes despite harsh economic conditions, including a constant increase in input costs and rising interest rates. The summer ice cream was a success despite being cut short in the interior of British Columbia by an extreme fire event.

Looking forward, both inflation and rebates appear to be stabilizing. Cost increases are now more readily passed on to customers with a pricing strategy that will better manage inflation and the volatility of government rebates. The company has manufactured high levels of inventory to ensure it can meet a strong demand for frozen products in 2024. Innovation continues with 12 new products recently added. The sales team is adding new accounts, leading to growth in the frozen mix and specialty butter categories.

Foothills sold its storage facility in Kelowna during the year, providing it with capital to complete upgrades to the processing plant and pay down debt. EBITDA and net income include a $859,084 gain on this sale. With this one-time gain removed, EBITDA to date is still $2.9 million ahead of the prior comparative year, and net income is $1.8 million ahead.

Cash flow continues to be a main priority moving forward, and earlier in 2023 Foothills negotiated a revised financing arrangement with its lender. This refinancing has decreased debt service requirements and allowed the company to make necessary upgrades to the plant.

In October 2022, the Corporation advanced $250,000 to Foothills Creamery in the form of a shareholder loan bearing interest at 13% per annum. Unpaid interest shall be added to the principal sum owing. The loan has a one-year maturity date, with the option to extend for two consecutive six-month periods. At the maturity date, Western has the option to convert the outstanding principal sum, together with all accrued and unpaid interest, into shares of Foothills

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Year Ended December 31, 2023

The Western Investment Company of Canada Ltd.

Management's Discussion and Analysis

at a conversion price of $1.00 per share. If the conversion option is exercised, Western will receive share purchase warrants of Foothills in the amount of one-third of one share purchase warrant for every share issued upon loan conversion. Each warrant shall entitle Western to purchase one share of Foothills. As of December 31, 2023, the loan balance owing to Western was $419,288 (December 31, 2022 - $295,726). On October 27, 2023, Western exercised the option to extend the maturity date for six months, and it is expected Western will exercise its option on April 27, 2024 for the remaining six months.

Foothills earns the majority of its income in the spring and summer months. Based on the seasonality of operations, readers are cautioned not to weigh quarterly financial data equally for all quarters.

Western has 50% ownership of Foothills however, it appoints two of seven directors to the Board and does not have the voting authority to pass decisions without majority board approval. This gives Western significant influence but not control over the company. As such, the Corporation is accounting for this investment under the equity method.

Golden Health Care

Western holds a 30% equity interest in three Saskatchewan senior care homes and a 25% interest in Golden Health Care Management Inc. The three homes are: Hill View Manor Ltd. in Estevan, The Good Shepherd Villas Inc. in Prince Albert, and William Albert House Ltd. in the Regina suburb of Emerald Park (together referred to as "Golden"). Western is pleased to be part of the skilled and experienced management team at Golden Health Care Management Inc., which provides management services to a portfolio of seven retirement communities and approximately 457 retirement suites, all under the Golden Health Care banner.

Golden Health Care is the largest full-service retirement operator in Saskatchewan. They have a unique model of "aging in place" where Golden's care homes adapt to the needs of individual residents from assisted living up to long-term care in each facility, maintaining a family environment rather than an institutional one regardless of the level of care required.

In the year ended December 31, 2023, Western recognized equity income from Golden of $34,571 (2022 - $3,065 income). During this year, Western received $22,500 in directors' fees (2021 - $45,000) and $105,000 in dividends (2022 - $138,000). The dividends were used to pay down the shareholder loan payable to Golden.

Financial highlights for Golden (at 100%) are presented below:

	Three months ended	Year ended
	December 31,	December 31,
Financial results ($)	2023	2022	2023	2022
Revenue	2,329,654	2,175,667	9,005,447	8,692,073
Net income	(22,575)	(219,289)	114,950	(12,779)
Interest	91,235	109,089	364,618	442,167
Amortization and depreciation	135,110	142,769	562,112	588,176
Tax	55,319	77,477	116,837	288,524
EBITDA	259,089	110,046	1,158,517	1,306,088

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Year Ended December 31, 2023