Offering Memorandum Strictly Confidential

Offering memorandum Strictly confidential

(ABN 88 000 014 675) US$300,000,000 3.15% Notes due 2016 Issue price: 99.917% US$550,000,000 4.55% Notes due 2021 Issue price: 99.738% Interest payable April 12 and October 12 Woolworths Limited (ABN 88 000 014 675) (“Woolworths”) is offering US$300,000,000 aggregate principal amount of 3.15% Notes due 2016 (the “2016 Notes”) and US$550,000,000 aggregate principal amount of 4.55% Notes due 2021 (the “2021 Notes” and, together with the 2016 Notes, the “Notes”). The 2016 Notes will mature on April 12, 2016 and the 2021 Notes will mature on April 12, 2021. Woolworths will pay interest on each series of the Notes on April 12 and October 12 of each year, beginning on October 12, 2011. Woolworths may redeem some or all of the Notes at any time, subject to the payment of a make-whole premium described under the caption “Description of Notes—Optional redemption.” In addition, Woolworths may redeem the Notes in whole, but not in part, at any time if certain events occur involving Australian taxation as described under the caption “Description of Notes—Redemption of Notes under certain circumstances.” The Notes will be unsecured obligations of Woolworths and will rank equally with all of their other unsecured senior indebtedness. See “Risk factors” beginning on page 21 for a discussion of certain risks that you should consider in connection with an investment in the Notes. The Notes have not been registered under the Securities Act of 1933 (the “Securities Act”) or the securities laws of any other place. Woolworths is offering the Notes only to qualified institutional buyers under Rule 144A under the Securities Act (“Rule 144A”) and non-U.S. persons outside the United States under Regulation S under the Securities Act (“Regulation S”). Prospective investors that are qualified institutional buyers are hereby notified that the sellers of the Notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. For a description of certain restrictions on the transfer of the Notes, see “Notice to investors”. The Notes will not be listed on any securities exchange. Currently, there is no public market for the Notes. Woolworths expects that delivery of the Notes will be made to investors in book-entry form through the book-entry facilities of The Depository Trust Company, Clearstream or the Euroclear System on or about April 12, 2011. Joint Book-Running Managers BofA Merrill Lynch Citi J.P. Morgan

April 5, 2011 You should rely only on the information contained in this offering memorandum. Woolworths has not authorized anyone to provide you with different information. Woolworths is not, and Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated (together, the “Initial Purchasers”) are not, making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information contained in this offering memorandum is accurate as of any date other than the date on the front of this offering memorandum. As used in this offering memorandum, unless the context indicates otherwise, “Woolworths” and the “company” refer to Woolworths Limited and its consolidated subsidiaries.

Woolworths has at no time had any historical, legal, commercial or other relationship with former United States retailer F.W. Woolworth Company or other companies with similar names in the United States, the United Kingdom, South Africa, Germany or Mexico.

Table of contents Page Page Notice to New Hampshire residents .... iv Business ...... 72 Enforcement of civil liabilities ...... v Management ...... 109 Available information ...... vi Principal shareholders ...... 118 Forward-looking statements ...... vii Related party transactions ...... 119 Currency of presentation and exchange rates ...... ix Description of Notes ...... 120 Financial information presentation .... x Taxation ...... 143 Summary ...... 1 Plan of distribution ...... 151 Risk factors ...... 21 Notice to investors ...... 155 Use of proceeds ...... 32 Validity of the Notes ...... 159 Capitalization ...... 33 Management’s discussion and analysis Independent accountants ...... 160 of financial condition and results of Index to consolidated financial operations ...... 34 statements ...... F-1

i This offering memorandum has been prepared by Woolworths solely for use in connection with the proposed offering of the Notes. This offering memorandum is personal to each offeree and does not constitute an offer to any other person or to the public generally to subscribe for or otherwise acquire securities. Distribution of this offering memorandum to any other person other than the prospective investor and any person retained to advise such prospective investor with respect to its purchase is unauthorized, and any disclosure of any of its contents, without Woolworths’ prior written consent, is prohibited. Each prospective investor, by accepting delivery of this offering memorandum, agrees to the foregoing and to make no photocopies of this offering memorandum or any documents referred to in this offering memorandum.

Notwithstanding anything in this offering memorandum to the contrary, each prospective investor (and each employee, representative or other agent of the prospective investor) may disclose to any and all persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of any offering and all materials of any kind (including opinions or other tax analyses) that are provided to the prospective investor relating to such U.S. tax treatment and U.S. tax structure, other than any information for which non-disclosure is reasonably necessary in order to comply with applicable securities laws.

The Initial Purchasers make no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this offering memorandum. Nothing contained in this offering memorandum is, or shall be relied upon as, a promise or representation by the Initial Purchasers as to the past or future. Woolworths has furnished the information contained in this offering memorandum. The Initial Purchasers assume no responsibility for the accuracy or completeness of such information.

Neither the U.S. Securities and Exchange Commission, any state securities commission nor any other regulatory authority, has approved or disapproved the securities nor have any of the foregoing authorities passed upon or endorsed the merits of this offering or the accuracy or adequacy of this offering memorandum. Any representation to the contrary is a criminal offense.

The Notes are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and the applicable state securities laws pursuant to registration or exemption therefrom. As a prospective purchaser, you should be aware that you may be required to bear the financial risks of this investment for an indefinite period of time. Please refer to the sections in this offering memorandum entitled “Plan of distribution” and “Notice to investors.”

The distribution of this offering memorandum and the offering and sale of the Notes in certain jurisdictions may be restricted by law. Woolworths and the Initial Purchasers require persons into whose possession this offering memorandum comes to inform themselves about and to observe any such restrictions. This offering memorandum does not constitute an offer of, or an invitation to purchase, any of the Notes in any jurisdiction in which such offer or invitation would be unlawful. For a description of the restrictions on offers, sales and resales of the Notes and distribution of this offering memorandum, see “Notice to investors”. Neither Woolworths nor the Initial Purchasers are making any representation to any offeree or purchaser under any applicable law.

In making an investment decision, prospective investors must rely on their own examination of the company and the terms of the offering, including the merits and risks involved. Prospective investors should not construe anything in this offering memorandum as legal, business or tax

ii advice nor a recommendation or a statement of opinion, or a report of either of those things, that a prospective investor make a decision in relation to the Notes nor as otherwise constituting “financial product advice” within the meaning of Section 766B of the Corporations Act 2001 of Australia (“Corporations Act”). Each prospective investor should consult its own advisors as needed to make its investment decision and to determine whether it is legally permitted to purchase the securities under applicable legal investment or similar laws or regulations.

Woolworths reserves the right to withdraw this offering at any time. Woolworths and the Initial Purchasers also reserve the right to reject any offer to purchase the Notes in whole or in part for any reason or no reason and to allot to any prospective purchaser less than the full amount of the Notes sought by it. The Initial Purchasers and certain of their respective related entities may acquire, for their own accounts, a portion of the Notes.

In this offering memorandum, Woolworths relies on and refers to information and statistics regarding its industry that Woolworths has obtained from independent industry publications or other publicly available information. In addition, Woolworths relies on and refers to information and statistics regarding its industry that Woolworths has obtained from the Australian Bureau of Statistics (the “ABS”) Retail Trade analysis. Although Woolworths believes that these sources are reliable, Woolworths has not independently verified and does not guarantee the accuracy and completeness of this information.

This offering memorandum contains summaries believed to be accurate with respect to certain documents, but reference is made to the actual documents for complete information. All such summaries are qualified in their entirety by such reference. Copies of documents referred to herein will be made available to prospective investors upon request to Woolworths or the initial purchasers.

iii Notice to New Hampshire residents NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER RSA 421-B WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE DIRECTOR OF THE SECRETARY OF STATE OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

Investors subject to the U.S. Employee Retirement Income Security Act of 1974 or Section 4975 of the U.S. Internal Revenue Code of 1986 should consult with their advisors as to the appropriateness of their investment in the Notes.

iv Enforcement of civil liabilities

Woolworths is an Australian corporation having limited liability, with substantially all of its assets located outside of, and all of its directors and executive officers and the experts named in this offering memorandum are not residents of, the United States. As a result, it may be difficult for U.S. investors to effect service within the United States upon such directors, executive officers or experts, or to enforce against them judgments obtained in U.S. courts predicated upon the civil liability of such persons under U.S. federal securities laws. Woolworths has been advised by its Australian counsel, Mallesons Stephen Jaques, that there is doubt as to the enforceability in Australia in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated upon the civil liability provisions of the federal securities laws of the United States. Also, judgments of United States courts (whether or not such judgment relates to U.S. federal securities laws) will not be enforceable in Australia in certain other circumstances, including where such judgments contravene local public policy, breach the rules of natural justice or general principles of fairness, are not for a fixed or readily ascertainable sum, are subject to appeal, dismissal, stay of execution or otherwise not final and conclusive, or involve consequential, multiple or punitive damages or where the proceedings in such courts were of a penal nature.

The Notes and the indenture pursuant to which the Notes will be issued will be governed by and construed in accordance with the laws of the State of New York. Woolworths has submitted to the non-exclusive jurisdiction of any New York State or U.S. federal court sitting in The City of New York, New York over any legal action, suit, or proceeding against it or its properties, assets or revenues with respect to their obligations, liabilities or any other matter arising out of or in connection with the indenture, and the Notes. See “Description of Notes—Governing law.”

Deloitte Touche Tohmatsu refers to the Australian partnership of Deloitte Touche Tohmatsu and its subsidiaries. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. “Deloitte” is the brand under which independent firms throughout the world collaborate to provide audit, consulting, financial advisory, risk management, and tax services to selected clients. These firms are members of Deloitte Touche Tohmatsu Limited (DTTL), a UK private company limited by guarantee. Each member firm provides services in a particular geographic area and is subject to the laws and professional regulations of the particular country or countries in which it operates. DTTL does not itself provide services to clients. DTTL and each DTTL member firm are separate and distinct legal entities, which cannot obligate each other. DTTL and each DTTL member firm are liable only for their own acts or omissions and not those of each other. Each DTTL member firm is structured differently in accordance with national laws, regulations, customary practice, and other factors, and may secure the provision of professional services in its territory through subsidiaries, affiliates, and/or other entities.

The liability of Deloitte Touche Tohmatsu with respect to claims arising out of its audit report is subject to the limitations set forth in the Professional Standards Act of 1994 of New South Wales, Australia (the “Professional Standards Act”) and the Institute of Chartered Accountants in Australia (NSW) Scheme adopted by The Institute of Chartered Accountants in Australia and approved by the New South Wales Professional Standards Council pursuant to the Professional Standards Act (the “NSW Accountants Scheme”) (or, in relation to matters occurring on or prior to October 7, 2007, the predecessor scheme). The Professional Standards Act and the NSW

v Accountants Scheme may limit the liability of Deloitte Touche Tohmatsu for damages with respect to certain civil claims arising in, or governed by the laws of, New South Wales directly or vicariously from anything done or omitted in the performance of its professional services to Woolworths, including, without limitation, its audits of Woolworths’ financial statements, to the lesser of (in the case of audit services) ten times the reasonable charge for the service provided and a maximum liability for audit work of A$75 million (or, in relation to matters occurring on or prior to October 7, 2007, A$20 million). Other limits apply to other categories of professional services. The limits do not apply to claims for breach of trust, fraud or dishonesty.

In addition, there are equivalent professional standards legislation in place in other states and territories in Australia and amendments have been made to a number of Australian federal statutes to limit liability under those statutes to the same extent as liability is limited under state and territory laws by professional standards legislation.

These limitations of liability may limit enforcement in Australian courts of any judgment under United States or other foreign laws rendered against Deloitte Touche Tohmatsu based on or related to its audit of the financial statements of Woolworths. Substantially all of Deloitte Touche Tohmatsu’s assets are located in Australia. However, the Professional Standards Act and the NSW Accountants Scheme have not been subject to judicial consideration and, therefore, how the limitations will be applied by courts and the effect of the limitations on the enforcement of foreign judgments is untested.

Available information In order to preserve the exemptions for resales and transfers pursuant to Rule 144A, Woolworths will furnish, upon the request of any holder of a Note or of a beneficial interest in a Global Note, such information as is specified in paragraph (d)(4) of Rule 144A to the holder or beneficial owner or to a prospective purchaser of such Note or interest in a Global Note who is a “qualified institutional buyer” within the meaning of Rule 144A unless, at the time of such request, Woolworths is subject to the reporting requirements of Section 13 or 15(d) of the U.S. Securities Exchange Act of 1934 or is exempt from reporting thereunder pursuant to Rule 12g3-2(b) under the Exchange Act.

Woolworths will make available to the holders of the Notes, at the corporate trust office of the trustee under the indenture governing the Notes, copies of the indenture as well as its annual report, including a review of operations, and annual audited consolidated financial statements prepared in conformity with Australian equivalents to International Financial Reporting Standards (“AIFRS”) as published by the Australian Accounting Standards Board.

Woolworths will also make available at the office of the trustee its annual and semi-annual consolidated financial statements, prepared in accordance with AIFRS.

Woolworths’ annual and semi-annual consolidated financial statements, prepared in accordance with AIFRS, are available from the website of the Australian Securities Exchange (the “ASX”) operated by ASX Limited, which can be accessed at www.asx.com.au. This link is provided for convenience only and none of the information on this website is incorporated by reference into this offering memorandum.

vi Forward-looking statements This offering memorandum contains forward-looking statements relating to Woolworths’ financial condition, results of operations and business and to Woolworths’ plans and objectives.

Some statements in this offering memorandum under the captions “Summary,” “Management’s discussion and analysis of financial condition and results of operations,” “Business,” and elsewhere constitute forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause Woolworths’ actual results, performance or achievements, to differ materially from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, investors can identify forward-looking statements by terminology such as “aim”, “anticipate”, “assume”, “believe”, “continue”, “could”, “estimate”, “expect”, “forecast”, “intend”, “may”, “plan”, “potential”, “predict”, “project”, “risk”, “should”, “target”, “will” or “would” or the negative of such terms or other comparable terminology and other similar expressions that are predictions of or otherwise indicate future events or trends. These risks, uncertainties and other important factors include, among others:

• increasing competition from existing and new competitors in Woolworths’ markets, including Coles, Aldi, and Costco;

• general economic and business conditions in the countries or regions in which Woolworths operates its businesses, including the level of food price inflation, particularly in Australia and New Zealand, as well as any further disruption in global markets;

• general industry trends in Australia and New Zealand, including changes in consumer preferences and tastes;

• the continued strength of Woolworths’ exclusive brands and the absence of events or circumstances that could cause Woolworths to be unable to execute its exclusive brand strategy, such as an inappropriate offer, sourcing difficulties, product recalls or lack of customer acceptance;

• the ability of Woolworths to successfully identify new store locations that are zoned for retail use in or near population catchment areas and to identify and enter into leases on commercially reasonable terms for properties that are suitable for its needs;

• the ability of Woolworths to continue to successfully extract cost savings from its businesses;

• the ability of Woolworths to attract and retain key management operating personnel;

• unforeseen failure or obsolescence of the information technology systems necessary for the operation of Woolworths’ businesses;

• non-compliance with, or additional obligations relating to, legal and regulatory obligations and expectations, including industry specific regulations; and

• other factors referred to in this offering memorandum, particularly those set forth under “Risk Factors”.

Forward-looking statements are based upon management’s good faith assumptions relating to the financial, market, regulatory and other relevant environments that will exist and affect Woolworths’ business and operations in the future. Woolworths cannot give you any assurance

vii that the assumptions upon which management based its forward-looking statements will prove to be correct or that Woolworths business and operations will not be affected in any substantial manner by other factors not currently foreseeable by management or beyond its control. All forward-looking statements involve risks and uncertainties, including those described in this offering memorandum, and such statements shall be deemed in the future to be modified in their entirety by Woolworths’ public pronouncements, including those contained in all future reports and other documents it furnishes to the ASX. Any forward-looking statements contained in this offering memorandum speak only as of the date of this offering memorandum. Woolworths disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained in this offering memorandum or to reflect any change in management’s expectations with regard thereto after the date hereof of any change in events, conditions or circumstances on which any such statement is based.

A discussion of some of the key risks that Woolworths faces is set forth under “Risk factors” in this offering memorandum.

viii Currency of presentation and exchange rates Woolworths publishes its consolidated financial statements in Australian dollars. In this offering memorandum, unless otherwise specified or the context otherwise requires, references to “US$” or “U.S. dollars” are to United States dollars, references to “A$” or “$” are to Australian dollars, references to “NZ$” or “New Zealand dollars” are to New Zealand dollars and references to “INR” are to Indian rupees. For the convenience of the reader, this offering memorandum contains translations of certain Australian dollar amounts into U.S. dollars at the rate or rates indicated. Woolworths has translated Australian dollars into U.S. dollars at the noon buying rate in New York City for cable transfers in Australian dollars as certified for customs purposes by the Federal Reserve Bank of New York (the “noon buying rate”). The noon buying rate on December 30, 2010 was A$1.00 = US$1.0122. These translations should not be construed as representations that the Australian dollar amounts actually represent such U.S. dollar amounts or could be converted in U.S. dollars at the rate indicated. The following table sets forth exchange rate information expressed in terms of US$ at the noon buying rate for A$1.00. At period Average end rate(1) High Low Year ended: June 25, 2006 ...... 0.7315 0.7489 0.7781 0.7056 June 24, 2007 ...... 0.8482 0.7836 0.8482 0.7284 June 29, 2008 ...... 0.9610 0.8953 0.9644 0.7860 June 28, 2009 ...... 0.8053 0.7548 0.9797 0.6073 June 27, 2010 ...... 0.8682 0.8801 0.9369 0.7751

At month Average end rate High Low Month: October 2010 ...... 0.9798 0.9817 0.9943 0.9666 November 2010 ...... 0.9607 0.9889 1.0143 0.9594 December 2010 ...... 1.0122 0.9929 1.0153 0.9675 January 2011 ...... 0.9976 0.9962 1.0200 0.9868 February 2011 ...... 1.0174 1.0084 1.0176 0.9984 March 2011(2) ...... 1.0282 1.0072 1.0282 0.9823 (1) The average of the noon buying rates on the last day of each month during the period. (2) Through March 25, 2011. The A$ equity market capitalization of Woolworths as at March 25, 2011 has been translated at the noon buying rate of A$1.00 = US$1.0282 as at such date. The Australian dollar is convertible into US dollars at freely floating rates, subject to sanctions arrangements discussed below. However, the Banking (Foreign Exchange) Regulations promulgated under the Banking Act 1959 of Australia and the Charter of the United Nations Act 1945 of Australia and other laws and regulations in Australia restrict or prohibit payments, transactions and dealings with assets having a prescribed connection with certain countries or named individuals or entities subject to international sanctions or associated with terrorism or money laundering. The Australian Department of Foreign Affairs and Trade maintains a list of all persons and entities having a prescribed connection with terrorism which is available to the public at the Department’s website at http://www.dfat.gov.au/icat/UNSC_financial_sanctions.html and the Reserve Bank of Australia maintains a list of persons and organizations subject to economic sanctions at http://www.rba.gov.au/mkt-operations/fin-sanctions/.

ix Financial information presentation Historical financial information

The audited consolidated financial statements of Woolworths for each fiscal year and the unaudited but reviewed consolidated financial statements of Woolworths for the 27 weeks ended January 2, 2011 included in this offering memorandum have been prepared in accordance with AIFRS. Compliance with AIFRS ensures that the financial statements comply with International Financial Reporting Standards. AIFRS differs from generally accepted accounting principles in the United States (“U.S. GAAP”) which may be material to the financial information contained herein. In making an investment decision, investors must rely on their own examination of Woolworths and consult with their own professional advisors for an understanding of the differences between AIFRS and U.S. GAAP and how those differences might affect the financial information herein.

Woolworths’ fiscal years consist of 52 or 53 weeks and end on the last Sunday in June of each year, with the next fiscal year beginning the following Monday. For example, the most recent financial period of Woolworths ended on June 27, 2010, and comprised 52 weeks. The prior financial periods ended on June 28, 2009 and June 29, 2008, and comprised 52 and 53 weeks, respectively. Accordingly, in this offering memorandum, references to “2010 Fiscal Year” are to the 52 weeks ended June 27, 2010, references to “2009 Fiscal Year” are to the 52 weeks ended June 28, 2009 and references to “2008 Fiscal Year” are to the 53 weeks ended June 29, 2008, unless otherwise stated. Earlier and later periods are referred to in a similar manner. References to the “2011 Half Year” are to the 27 weeks ended January 2, 2011 and references to the “2010 Half Year” are to the 27 weeks ended January 3, 2010.

Non-GAAP measures

In addition to the financial information presented in accordance with AIFRS contained in this offering memorandum, certain “non-GAAP financial measures” (as defined in Regulation G under the Securities Act) have been included in this offering memorandum. Woolworths believes that these “non-GAAP financial measures” provide a useful means through which to examine the underlying performance of the business. These measures, however, should not be considered to be an indication of, or alternative to, corresponding measures of net profit or other figures determined in accordance with AIFRS. In addition, such measures may not be comparable to similar measures presented by other companies. See “Summary selected historical consolidated financial information” in this memorandum for calculations of these measures. The measures include:

• Cost of Doing Business, or CODB, which is defined as selling, general and administrative expenses plus rent plus depreciation;

• EBITDAR, which is defined as operating profit from continuing operations before interest1, tax, depreciation, amortization and all rent expenses;

• EBITDA, which is defined as operating profit from continuing operations before interest1, tax, depreciation and amortization;

• EBIT, which is defined as operating profit from continuing operations before interest1 and tax;

1 Interest means net financing cost as shown in the consolidated financial statements.

x • Funds Employed, which is defined as net assets excluding net tax balances (being current tax liabilities, deferred tax assets and deferred tax liabilities), net repayable debt (being current and non-current interest bearing liabilities less cash on hand, cash at bank and cash on short term deposit and assets and liabilities as a result of hedging per AASB 139 Financial Instruments: Recognition and Measurement) and provision for dividends;

• Return on Funds Employed, which is defined as EBIT divided by the average Funds Employed, measured at the beginning of the period and at the end of the period, expressed as a percentage;

• EBITDA interest cover ratio, which is defined as EBITDA divided by net interest expense. Net interest expense excludes foreign exchange gains/losses, dividend income and capitalized interest;

• Fixed charge cover ratio, which is defined as EBITDAR divided by fixed charges, which includes interest on all indebtedness, including interest on deposits and all rent expense, and is stated before non-controlling interests. Interest expense excludes foreign exchange gains/losses, dividend income and capitalized interest; and

• Free cash flow, which is defined as net cash provided by operating activities after deducting payments for property, plant and equipment and taking into account net proceeds on the disposal of property, plant and equipment and net other investing activities.

Woolworths believes that these measures provide useful supplemental measures of Woolworths’ operating performance as they permit investors to examine the underlying performance and financial condition of Woolworths’ business with a greater degree of comparability and management considers these metrics in measuring Woolworths’ operating performance and financial condition. These measures, however, should not be considered to be an indication of, or alternative to, corresponding measures of gross profit, net profit or cash flows determined in accordance with AIFRS. In addition, other companies may use different methodologies to calculate any of Cost of Doing Business, EBITDAR, EBITDA, EBIT, Funds Employed, Return on Funds Employed, EBITDA interest cover ratio, fixed charge cover ratio, free cash flow or similar non-GAAP financial measures. Information has been included in this offering memorandum to illustrate the manner in which the measures have been determined.

xi Summary This summary highlights information contained elsewhere in this offering memorandum but may not contain all of the information that investors should consider before investing in the Notes. This summary does not purport to be complete and is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information appearing elsewhere in this offering memorandum. You should read this entire offering memorandum, including the sections entitled “Risk factors”, “Management’s discussion and analysis of financial condition and results of operations” and “Business”, and the consolidated financial statements of Woolworths and related notes, before making an investment decision.

Overview

Woolworths is one of Australia’s largest retailers measured by sales revenue and number of stores. Woolworths’ total sales revenue in the 2010 Fiscal Year was A$51.7 billion and A$28.3 billion in the 2011 Half Year, with over 3,200 total retail locations in Australia and New Zealand as at January 2, 2011. Sales revenue in Australia in the 2010 Fiscal Year totaled A$47.3 billion and A$26.0 billion in the 2011 Half Year, and in New Zealand in the 2010 Fiscal Year totaled A$4.4 billion and A$2.3 billion in the 2011 Half Year. Additionally, according to the ABS Retail Trade analysis, Woolworths had the leading market share in Australia of over 30% of food retailing (including supermarket and grocery stores, liquor retailing and other specialized food retailing) for the 2010 Fiscal Year and the 2011 Half Year. Woolworths is also Australia’s largest food and grocery retailer and the second largest food and grocery retailer in New Zealand by sales and number of stores, with 832 supermarkets in Australia and 159 supermarkets in New Zealand, is a major liquor retailer, operating 1,249 retail liquor outlets and 284 hotels, and a large discount department store, consumer electronics and petrol retailer with 164 stores, 409 stores and 590 outlets, respectively. Woolworths also provides wholesale services to 562 home improvement stores, 51 supermarkets in New Zealand and 61 electronic stores in India. Except as noted, all of the foregoing figures are as at January 2, 2011. Woolworths has demonstrated consistently strong financial performance. Sales and EBIT have exhibited strong growth over each of the past five fiscal years with a compound average growth rate (“CAGR”) for sales of 10.5% over the past five full fiscal years and an EBIT CAGR of 18.8% over the past five full fiscal years. In the 2010 Fiscal Year, Woolworths had total EBIT of A$3.1 billion representing growth over the prior year of 9.5%. In the 2011 Half Year EBIT grew by 6.2% compared to the 2010 Half Year. As at March 25, 2011, Woolworths had a market capitalization of A$31.8 billion (US$32.7 billion) and was one of the 15 largest companies listed on the ASX.

1 Woolworths’ activities are primarily conducted through the following operating groups:

Contribution to Contribution to sales revenue for sales revenue for the 2010 Fiscal Year the 2011 Half Year

Operating group(1) • Supermarkets: Woolworths’ Australian and New Zealand supermarkets, Australian retail liquor outlets, and petrol retailing ...... 85.7% 84.4% • BIG W: Discount department store operations ...... 8.1% 8.5% • Consumer Electronics: Consumer electronics retailing ..... 3.5% 3.7% • Hotels: Pub operations including bars, restaurants, gaming, functions and accommodation (but excluding any retail liquor outlets)...... 2.1% 2.2%

(1) Woolworths’ Home Improvement business, including the Danks Holdings Limited business that was acquired in November 2009, was accounted for in its unallocated business segment in the 2011 Half Year and the 2010 Fiscal Year. For the 2011 Half Year, the Home Improvement business accounted for 1.2% of Woolworths’ revenue.

Supermarkets represented the largest portion of Woolworths’ sales (84.4%) and EBIT (88.2%) for the 2011 Half Year. Supermarkets had combined sales and EBIT of A$44.3 billion and A$2.8 billion for the 2010 Fiscal Year, respectively, and A$23.9 billion and A$1.6 billion in the 2011 Half Year, respectively. This represents a growth rate of 4.2% and 13.6%, respectively, for the 2010 Fiscal Year compared to the 2009 Fiscal Year and 3.5% and 8.9%, respectively for the 2011 Half Year compared to the 2010 Half Year.

Australian Supermarkets, primarily trading as Woolworths, operated 832 stores at January 2, 2011 and is Australia’s largest food and grocery retailer by sales and number of stores. The stores are generally large supermarkets offering a wide range of products including frozen food, dairy, delicatessen, fresh fruit and vegetables, meat, groceries, bakery, health and beauty and some general merchandise. These core supermarkets range from 2,000 to 4,000 square meters in trading area size and are generally located in shopping centers or in stand alone locations. Woolworths also offers supermarket shopping and delivery services over the internet through its Woolworths Online website.

Retail Liquor operated 1,249 retail liquor outlets under three distinct brands as at January 2, 2011, each servicing a different segment of the liquor market. Dan Murphy’s outlets are large format liquor outlets that have a supermarket-like layout and are based on providing a large range of liquor at low prices, supported by personalized fine wine advice and expertise and the Dan Murphy’s business recently launched an online retail site that allows consumers to purchase a wide-range of Dan Murphy’s stock over the internet. The Woolworths Liquor stores are attached to Woolworths supermarkets and stock a broad range of beers, wines and spirits. The Beer Wine and Spirits, or “BWS”, branded stores operate as convenience outlets with a similar range to Woolworths Liquor stores. Retail Liquor’s sales for the 2010 Fiscal Year were A$5.6 billion and A$3.2 billion for the 2011 Half Year.

2 New Zealand Supermarkets, trading as Countdown, Foodtown and Woolworths, operated 159 stores at January 2, 2011 and is the second largest food and grocery retailer in New Zealand, with sales of NZ$5.2 billion for the 2010 Fiscal Year and NZ$2.8 billion for the 2011 Half Year. The stores are generally large supermarkets offering a wide range of products including frozen food, dairy, delicatessen, fresh fruit and vegetables, meat, groceries, bakery, health and beauty and some general merchandise. These supermarkets are generally located in shopping centers or in stand alone locations. Woolworths serviced 51 supermarkets at January 2, 2011 though the wholesale and franchise division of New Zealand Supermarkets, and also offers supermarket shopping and delivery services in New Zealand over the internet through its Countdown Online website.

Petrol operated 570 petrol outlets in Australia as of January 2, 2011, of which 132 are operated under an alliance with Caltex Australia Limited, an Australian petroleum company. Petrol is an adjunct to Woolworths’ supermarkets business, creating customer loyalty through a petrol discount program that currently offers a discount of 4 cents per liter of petrol for customers that purchase A$30 or more from a Woolworths supermarket. Petrol sales for the 2010 Fiscal Year were A$5.5 billion and A$2.9 billion for the 2011 Half Year.

BIG W, Woolworths’ discount department store business, is the largest discount department store chain by sales in Australia, operating 164 stores across Australia as at January 2, 2011. BIG W offers a variety of clothing, health and beauty, small appliance and other home and family items in store and through their website. BIG W had sales of A$4.2 billion for the 2010 Fiscal Year and A$2.4 billion for the 2011 Half Year.

Consumer Electronics consisted of 409 consumer electronics stores in Australia and New Zealand as at January 2, 2011. Woolworths operates this business under the Dick Smith brand name. Dick Smith focuses on communications, including mobile phones, computers and in-home entertainment such as TVs and computer games which are offered in store and through its website. Dick Smith stores range in size and provide a broad range of well-known brands at competitive prices. For the 2010 Fiscal Year, Consumer Electronics’ sales (in Australia and New Zealand) were A$1.5 billion and were A$868 million for the 2011 Half Year. Woolworths has a business venture with the TATA Group in India to operate retail electronics stores in India under the Croma brand. As part of this venture, Woolworths provides buying, wholesale, supply chain and general consulting services to TATA. The wholesale operations associated with this business venture recorded A$252 million in sales in the 2010 Fiscal Year and A$177 million in the 2011 Half Year.

Hotels, which is an adjunct to the Australian Retail Liquor business by providing licenses and sites to sell retail liquor, is principally operated through Woolworths’ 75% owned subsidiary, ALH Group Pty Ltd (“ALH”). ALH and its wholly-owned subsidiaries operated 284 hotel interests and 492 associated retail liquor interests across all states of Australia, except the Northern Territory and the Australian Capital Territory, as at January 2, 2011. The term “hotels” refers to smaller pubs or bars, including pubs and bars located in non-Central Business District locations, that also provide restaurants, wagering and gaming facilities, function facilities and in some cases accommodations. For the 2010 Fiscal Year and the 2011 Half Year, Hotels’ sales were A$1.1 billion and A$612 million, respectively.

3 In 2009, Woolworths announced a joint venture with U.S. home improvement retailer Lowe’s Companies, Inc., by establishing a business that is two-thirds owned by Woolworths and one third owned by Lowe’s, to expand into the Australian retail home improvement market. In November 2009, the joint venture acquired Danks Holdings Limited, Australia’s second largest hardware distributor, which it plans to use to facilitate entry and expansion into home improvement distribution and retail in Australia. Woolworths plans to open its first large format home improvement store in the second half of calendar year 2011 and plans to secure 150 home improvement store sites over the next 5 years. The existing Danks wholesale and retail businesses had sales of A$354 million in the 2011 Half Year.

Performance objectives

Woolworths’ vision is to continue to drive each of its retail businesses with a focus on continually improving the customer offer, rewarding customers with lower prices, better value, quality, range, freshness, service and convenience.

Woolworths targets the following key areas of performance measurement for its businesses in the long term, namely:

• Sales (excluding Petrol) to grow in the upper single digits assisted by bolt-on acquisitions;

• EBIT growth outperforming sales growth assisted by cost savings;

• Earnings per share growth outperforming EBIT growth assisted by capital management over the long term;

• Cost of Doing Business margin reduction of at least 0.20 percentage points per annum (excluding the Petrol and Hotels businesses); and

• Maintenance of its targeted credit ratings from Standard & Poor’s Rating Group (“S&P”) and Moody’s Investors Service (“Moody’s”). Woolworths currently has issuer credit ratings of A- from S&P and A3 from Moody’s.

Competitive strengths

Woolworths believes it has the following competitive strengths:

4 Woolworths had the leading market share in Australia of over 30% of food retailing (including supermarket and grocery stores, liquor retailing and other specialized food retailing), with A$34.7 billion and A$18.8 billion of sales revenue in this sector for the 2010 Fiscal Year and the 2011 Half Year, respectively. Woolworths’ competitors include Coles, which reported sales revenue for its Australian food and liquor business of A$23.6 billion and A$13.0 billion in the 2010 Fiscal Year and the 27 weeks ended January 2, 2011, respectively, the banner groups associated with Metcash, Aldi, Costco, other banner groups, independent supermarkets and specialty retailers. • Non-cyclical business: Supermarkets, comprising food and groceries, petrol and liquor, accounted for more than 84.4% of Woolworths’ sales and 88.2% of EBIT in the 2011 Half Year. As providers of food and other basic necessities, these businesses generally have a high level of recession resistance. According to the Australian Bureau of Statistics, Australian nominal food sales have not experienced negative growth in the last 20 years and have posted industry-wide annual growth of 2 to 12% per year since 1984. Woolworths’ discount department stores (BIG W) are somewhat counter-recessionary as consumers have, in the past, switched from specialty retail outlets and department stores to discount stores in times of recession. The non-cyclical nature of Woolworths’ business is illustrated by growth in sales revenue of 7.5% in the 2009 Fiscal Year (excluding the impact of the 53rd week in the 2008 Fiscal Year), 4.2% in the 2010 Fiscal Year, and 4.0% in the 2011 Half Year (compared to the 2010 Half Year), notwithstanding difficult global economic conditions and low levels of food price inflation in the 2010 Fiscal Year and the 2011 Half Year. • Well-recognized brand names: The Woolworths brand name has been a symbol of quality and excellence for 85 years in Australia. The brand is presented with “The Fresh Food People” tagline to promote Woolworths’ quality food and groceries. The Countdown brand name has been in existence in New Zealand since 1981. Since Woolworths acquired Foodland N.Z. Finance Limited in 2005, Woolworths has been undertaking efforts to further build on the strength of the brand through its roll out of new generation Countdown stores. The BIG W brand has been in existence since 1976 and is known for quality merchandise at everyday low prices. Dick Smith commenced operations as an electronics retailer in 1968 and was acquired by Woolworths in 1983. Woolworths acquired the Dan Murphy’s brand in 1998. • Successful retailing strategy and execution history: Woolworths has an established history of successful food and grocery retailing and successfully introducing new categories and business lines. Woolworths’ retail strategy centers on providing a diverse range of high quality products and good service at consistently low prices. Woolworths has been able to lower its prices by reducing its cost of doing business and passing some of these cost savings on to the consumer. This allows Woolworths to drive volumes while maintaining margins. Woolworths has a strong track record of leveraging its supermarket retailing business to launch and acquire new businesses sharing high volume, low margin characteristics, such as general merchandise and consumer electronics. Woolworths has accumulated vast experience in business integration and overlaying its retailing models on new business lines. • State of the art supply chain systems: Woolworths believes its purchasing and distribution system has contributed to its ability to pursue its strategy of selling quality products at competitive prices. This has driven strong customer service levels and improved inventory management, which in turn has contributed to strong sales revenue and EBIT performance. The

5 intellectual property that Woolworths has developed in its supply chain teams, IT systems and distribution centers for its Australian Supermarkets business is now being applied to Woolworths’ other businesses, including New Zealand Supermarkets, BWS, Dan Murphy’s, BIG W and Consumer Electronics. As Woolworths continues to invest in systems that further enhance supply chain capability, Woolworths believes it will continue to create a competitive advantage in this area. Work has commenced on the development of the “Next Generation Replenishment” solution which will continue to improve inventory management as well as result in cost savings in stores, distribution centers and transport.

• Long-term and efficient lease arrangements: Retailers in Australia generally lease properties from third parties, such as listed property trusts, rather than owning property outright. Additionally, commercial property is governed by strict zoning laws, creating difficulty in obtaining “greenfield” sites in densely populated and competitive locations. As such, many of Australia’s supermarkets and other retail stores are located in major shopping centers and malls. Woolworths has approximately two thirds of its stores located in shopping malls with the balance located in shopping strips or stand alone stores. Woolworths’ scale and reputation in the Australian market makes Woolworths an attractive anchor tenant in shopping centers. Lease terms are generally for 20 years with options (exercisable by Woolworths) to renew for further periods of 20 to 40 years, reducing renewal risk. The smaller format retail stores such as liquor and electronics are in large retail centers with lease terms around 5 to 10 years with options to renew for a further 5 to 10 years. Dan Murphy’s liquor stores generally have 15 year lease terms with options to renew for a further 30 years. ALH hotel leases are generally for a term of 25 years with options to renew for a further 40 years. More recently, since the onset of the global financial crisis, Woolworths has increased its own property development activity where it selectively acquires properties for future development with the intention of ultimately selling and leasing back those properties when market conditions permit.

• Business diversity: Woolworths operates throughout all states and territories in Australia, in New Zealand in supermarkets and consumer electronics, and in India as the wholesaler servicing Croma electronics stores. In addition, Woolworths has diversified its revenue base through the growth of existing categories other than supermarkets and through the introduction of new categories, including business lines such as general merchandise, liquor, hotels, petrol and home improvement. The planned entry in the second half of calendar year 2011 into the large format retail home improvement business through Woolworths’ joint venture with Lowe’s is expected to provide an additional source of revenue diversity. Woolworths has a significant Australian presence in liquor (1,249 stores and 284 pubs and clubs), petrol (570 outlets), discount department stores (164 stores) and consumer electronics operations (409 stores) across Australia and New Zealand as of January 2, 2011.

• Strong financial profile: Food, liquor, grocery and petrol retailing represented 84.4% of Woolworths’ sales revenue for the 2011 Half Year. Woolworths believes its prominent positions in this fundamental business in Australia and New Zealand lead to a relatively high degree of stability in earnings and cash flow. Throughout the past five years Woolworths has consistently maintained what it believes to be a conservative financial profile. Furthermore, Woolworths has maintained a rating of A- from S&P since May 2001 and a rating of A3 from Moody’s since October 2005. For these reasons, Woolworths believes that it has historically maintained favorable access to domestic and international capital markets.

6 • Strong depth of management: Woolworths has an experienced executive leadership team. Woolworths’ Group Managing Director and Chief Executive Officer, Michael Luscombe, joined Woolworths over three decades ago as a management trainee and has over 30 years of experience in retail. Woolworths’ Deputy Chief Executive Officer and CEO designate, Grant O’Brien, has worked across a number of Woolworths’ businesses after joining the company in 1987. Cross divisional experience is highly valued and is a characteristic shared by the majority of Woolworths’ executive leadership team. A quarter of Woolworths’ executive leadership team have over 20 years of service at Woolworths. As part of Woolworths’ drive to develop potential future managers, significant attention is given to the recognition of management potential, succession planning and career development. This is designed to ensure that Woolworths has the appropriate strength and depth in its human resources to continue to deliver strong performance in the future. Growth strategies Woolworths’ core strengths include its retailing expertise, world class supply chain capability, low cost culture and its depth of talent. Woolworths believes that there are opportunities to leverage its strengths and augment its existing business plans to drive growth both organically and through the continual evaluation of new business development and acquisition opportunities. These include the following: • Growth opportunities: There is continuing opportunity for Woolworths to grow market share in its current businesses. Woolworths’ market share of over 30% of food retailing (including supermarket and grocery stores, liquor retailing and other specialized food retailing) for the 2011 Half Year allows for further growth. It has plans to continue to develop its food, liquor and grocery business by leveraging the strong brand position it already possesses in this segment, particularly in its fresh food business. Woolworths is also expanding its presence in the increasingly important online distributions channel through its Woolworths Online grocery website and the new BIG W, Dick Smith and Dan Murphy’s online stores. In addition, Woolworths plans to deliver new long term growth initiatives through entry into new businesses and categories. Woolworths has accumulated considerable experience in introducing new businesses and categories, through the successful introduction of the liquor, petrol, consumer electronics, and hotels businesses, and by significantly expanding existing categories. Woolworths considers that there are further opportunities to branch into new categories, such as optical in BIG W and health and wellness products through Australian Supermarkets’ new Macro Wholefood Market range. Woolworths continues to assess both domestic and international opportunities as they arise and has what it believes to be a disciplined and targeted approach to these growth options. • Continued reinvestment in all businesses: Woolworths has a strong track record of reinvestment in its businesses—through improving stores, lowering pricing, improving quality, enhancing the shopping experience, developing its range and implementing new merchandise initiatives driven by customer feedback and changing consumer demand—which it intends to continue. Woolworths intends to continue to focus on improving in-store execution, ranging, stock availability and customer service. Woolworths continues to focus on improving customer experience and service through new store formats as part of Woolworths’ ongoing store refurbishment program, and the implementation of such service improvements as unit pricing

7 (allowing customers to more easily compare prices on items of different size) and self check-out lanes, which have been installed at many Woolworths supermarkets.

• Defined plans to continue space roll-out: Woolworths opened 157 new stores and refurbished 272 stores in the 2010 Fiscal Year and opened a further 115 new stores and refurbished an additional 139 stores in the 2011 Half Year. It is anticipated that Woolworths will continue to add 15 to 25 supermarkets each year which, together with the continued expansion of existing stores, is expected to increase its Australian supermarkets trading area by at least 3% per year. Plans have been made to increase the current trading area of New Zealand supermarkets through refurbishments and target opening of between 3 and 5 new stores per year. BIG W stores are expected to be expanded from 164 as at January 2, 2011, with the potential to open 20 new stores in the next three years. Woolworths is currently targeting to have over 150 Dan Murphy’s stores in Australia, with 18 new locations opened during the 2010 Fiscal Year and a further 12 in the 2011 Half Year. Hotels are expected to be acquired selectively. Woolworths plans to open its first large format home improvement store in the second half of calendar year 2011 and plans to secure 150 home improvement store sites over the next 5 years. Approximately 15-20 stores are planned to open in the 18 months following the first store opening.

Woolworths’ ability to secure retail sites is enhanced by its high sales per square meter, making it an attractive anchor tenant. The company’s store expansion program is supported by detailed plans which identify specific sites.

Store roll-out and refurbishment plans are delivering solid returns and continue to receive positive feedback from customers as it allows Woolworths to tailor stores to meet changing customer needs.

• Reductions in costs and improved efficiencies through Project Quantum: Woolworths commenced its Quantum initiative in the 2010 Fiscal Year, which is designed to improve efficiencies across the Woolworths business. The recurring theme across all initiatives has been to leverage Woolworths’ scale to create synergies and translating “best in breed” practices across all of Woolworths’ businesses and support functions. Key elements of the project are improving Woolworths’ end to end supply chain management, lowering non-inventory procurement costs, improving efficiency and lowering costs in operational work practices, investment in global direct sourcing to enhance procurement capability and lower costs for the consumer, and improving efficiency in support structures. Several key initiatives of Project Quantum have already commenced. The initiative follows in the tradition of Woolworths’ continuous development of all its businesses such as the Project Refresh initiative that included the development of its end to end supply chain management and contributed to a decade of what Woolworths believes to be disciplined cost management. Benefits of the Quantum initiative are expected to emerge in both gross margin and cost of doing business that will be shared between customers and shareholders.

• Leveraging Woolworths’ supply chain capabilities: Woolworths believes that there are opportunities to leverage the intellectual property that it has developed in its supply chain and retailing systems to other businesses. Woolworths continues to invest in its supply chain, including the development of its “Next Generation Replenishment” solution, which is expected to optimize order flow through greater visibility of timing and forecast volumes, which leads

8 to improved labor planning and better inventory management, while continuing to reduce inventory days, and save costs in stores, distribution centers and on transport. Woolworths has also opened liquor distribution centers in Brisbane, Melbourne and Sydney reducing direct to store deliveries, improving inventory management and creating cost savings and efficiencies in supply chain and at stores. The re-engineering of the National Distribution Centre in Melbourne is substantially complete and has significantly improved pick rate efficiency and immediately reduced costs. Woolworths is currently developing a new BIG W Distribution Centre in Sydney that is expected to be completed in the 2012 Fiscal Year and will enable BIG W to improve service and reduce costs. The financial benefits of this advanced supply chain are expected to continue over future years, while the intellectual property is being leveraged across other divisions. Woolworths also recently conducted a major review of its international logistics network, resulting in a reduction in the number of consolidation partners to two. Woolworths has also increased the number of consolidation facilities employed to support an improved flow of merchandise and introduced a single, comprehensive order tracking system. Further development is expected to continue. • Expansion of global sourcing activities: Woolworths operates sourcing offices in Hong Kong and Shanghai to cover the China and South-East Asia region, and also sources goods in India through an exclusive agent. Woolworths’ global sourcing operations continue to grow and are providing significant benefits. Woolworths has made good progress on developing its international logistics capability to support its growth plans. • Continued emphasis on exclusive brand goods: Woolworths’ product range features the major industry brands, its “Fresh Food” offer and a very strong exclusive brands business. Woolworths generally achieves higher margins on its exclusive brands and believes that exclusive brands penetration in Australia is well-below international levels. While Woolworths retains a strong commitment to branded merchandise, its exclusive brand, “Homebrand”, continues to be one of Australia’s largest grocery brands by revenue. Woolworths intends to continue expanding its exclusive brands range together with the Homebrand, Select, and Macro Wholefood Markets range, gaining strong customer acceptance. In addition, Woolworths has expanded its exclusive brands liquor offering. Woolworths launched its exclusive brand low-carb beer called “Platinum Blonde” in July 2008 and, following the acquisition of a 25% interest in the Gage Roads Brewery in June 2009, launched its exclusive brand full-strength beer called “Dry Dock” in October 2009 followed by “Sail & Anchor Clipper light beer” and “Castaway cider” during the 2011 Half Year. These three exclusive brand beers and cider complement Woolworths’ existing range of exclusive brand wine and spirits. Woolworths also offers a wide-range of exclusive brand products in its BIG W and Dick Smith stores. • Entry into the Australian retail home improvement market: Good progress has been made in establishing Woolworths’ home improvement joint venture with Lowe’s, which is a significant part of Woolworths’ category expansion strategy. Of the 150 sites the joint venture plans to secure over the next five years, a significant number have been secured, with many more being added to the pipeline. The sites are generally prime retail sites which Woolworths believes are well located in good trading zones and the joint venture is on track to open its first store in the second half of calendar year 2011. The corporate support office is well established and staffed

9 with a team that has extensive home improvement experience in both domestic and international businesses. With the assistance of Lowe’s, store design, layout and ranging of product are well developed. Through combining the local expertise provided by members of Danks’ management team with Woolworths’ supply chain experience, the joint venture is effectively executing the rapid development of the business, highlighted by the establishment of the supply chain strategy, a key milestone that the joint venture expects to enable a successful national rollout plan. Additionally, the joint venture continues to advance the development of its IT systems, supply arrangements and the Danks wholesale business. The recruitment and training of the first group of store managers has occurred and the first distribution center in Hoppers Crossing, Victoria has commenced operation. Construction has commenced on the first group of stores and approximately 15-20 stores are planned to open in the 18 months following the first store opening. • Developing customer engagement strategy: Woolworths has made progress in developing its customer engagement strategy. The Everyday Rewards program is proving to be successful with 5.6 million cards registered as at February 13, 2011. In addition to earning fuel saving vouchers by shopping in Woolworths supermarkets, cardholders are also able to earn Qantas Frequent Flyer points through shopping in Woolworths supermarkets, BIG W, BWS and Dick Smith. The strategic alliance linking Woolworths’ Everyday Rewards Card with the Qantas Frequent Flyer program is intended to significantly enhance the value of the program to Woolworths’ customers and transform the relationship with them. Over 3.2 million Everyday Rewards members have registered to earn Qantas Frequent Flyer points as at February 13, 2011. The information provided by this strategy allows Woolworths to develop expertise in targeting its customers with compelling offers, making ranging and merchandising decisions and communicating more effectively with its customers. • Financial services capabilities: In addition to its “Everyday Money” credit card, launched in September 2008, and its “Woolworths Everyday Rewards—Qantas credit card” launched in November 2010 with its partner HSBC, Woolworths currently offers stored-value cards that can be used at a variety of Woolworths’ stores through its “WISH gift cards” business and recently launched its “Everyday Money Prepaid Mastercard”, in conjunction with ANZ Bank. Woolworths also sells gift cards for non-competing retailers in its stores through its “Gift Card Mall” and has installed hundreds of co-branded Woolworths Financial Services / ANZ Bank ATMs in its stores. Woolworths intends to continue to invest in its financial services capabilities by potentially offering additional financial services through its retail network. Woolworths has also developed its own financial switch which is used for processing financial transactions (at a lower cost) with very high reliability. Recent developments CEO succession On April 4, 2011, Woolworths announced the intended retirement of its Chief Executive Officer and Managing Director, Michael Luscombe, effective September 30, 2011, and the nomination of Grant O’Brien, Chief Operating Officer, Australian Food and Petrol, as his successor. Effective April 4, 2011, Mr. O’Brien was appointed Deputy Chief Executive Officer and CEO designate. Mr. O’Brien also joined the Woolworths’ Board of Directors as an Executive Director. Mr. O’Brien has worked for 24 years across a number of Woolworths’ businesses after joining the company in 1987 as an Accountant.

10 New Zealand earthquakes

On September 4, 2010, the south island of New Zealand was affected by a 7.1 magnitude earthquake with an epicenter west of the city of Christchurch, New Zealand’s second largest city. The earthquake was followed by a significant number of aftershocks over the following months. The September earthquake damaged all three of Woolworths’ south island distribution centers, rendering them inoperable, and also damaged a number of stores. Woolworths was able to secure supplementary distribution center space while new racking was procured and installed and also supplied its south island stores using its two distribution centers on the north island.

On February 22, 2011, a 6.3 magnitude earthquake occurred south east of Christchurch, causing extensive damage to buildings and infrastructure in the region. Most of Woolworths stores experienced damage to stock, fittings and fixtures, and some stores have experienced structural damage. As of March 25, 2011, four Countdown supermarkets remained closed. There was minimal impact on the south island distribution centers from the February earthquake.

Woolworths does not expect the earthquakes to have a material effect on its overall business and is currently working with its property insurer to recover certain of its losses through its existing insurance policies.

Wet weather in Queensland and Victoria and the impact of Cyclone Yasi

In December 2010 and January 2011, the Australian states of Queensland and Victoria were affected by significant flooding due to prolonged above average rainfall over the preceding months. In early February 2011, Cyclone Yasi made landfall in northern Queensland. Both the flooding and Cyclone Yasi caused substantial damage to homes, businesses and infrastructure in Queensland and Victoria. While Woolworths’ operations in these areas were affected, Woolworths believes that the impact of these events will be limited to a relatively small number of areas and stores and will not have a material impact on Woolworths’ business. Woolworths is currently working with its property insurer to recover certain of its losses through its existing insurance policies.

Cellarmasters acquisition

On February 25, 2011, Woolworths announced that it would acquire The Cellarmasters Group (“Cellarmasters”) for A$340 million. Cellarmasters is one of the largest direct-to-home wine retailers and providers of contract bottling and wine services with operations in Australia and New Zealand. The business is expected to compliment Woolworths’ existing liquor portfolio, which includes brands such as Dan Murphy’s, BWS, Woolworths Liquor and Langton’s. Completion of the acquisition is expected to occur by May 2011, subject to closing conditions, including no regulatory intervention.

The registered office of Woolworths Limited is 1 Woolworths Way, Bella Vista, NSW, 2153, Australia; its telephone number is (61-2) 8885-0000.

11 The offering Notes being offered .... 3.15% Notes due 2016 (the “2016 Notes”) and the 4.55% Notes due 2021 (the “2021 Notes” and, together with the 2016 Notes, the “Notes”). Issuer ...... Woolworths Limited. Principal amount ...... 2016 Notes: US$300,000,000 aggregate principal amount. 2021 Notes: US$550,000,000 aggregate principal amount. The offering ...... TheNotes are being offered in the United States only to qualified institutional buyers in reliance on Rule 144A and outside the United States in accordance with Regulation S. Issue price ...... 2016 Notes: 99.917% of the principal amount thereof plus accrued interest, if any, from April 12, 2011. 2021 Notes: 99.738% of the principal amount thereof plus accrued interest, if any, from April 12, 2011. Maturity date ...... 2016 Notes: April 12, 2016 2021 Notes: April 12, 2021 Interest rate ...... The2016 Notes will bear interest at the rate of 3.15% per year from April 12, 2011, based upon a 360-day year consisting of twelve 30-day months. The 2021 Notes will bear interest at the rate of 4.55% per year from April 12, 2011, based upon a 360-day year consisting of twelve 30-day months. Interest payment dates ...... Interest on each series of the Notes will be payable semi-annually on April 12 and October 12 of each year, commencing October 12, 2011. Ranking ...... Each series of the Notes will be unsecured obligations of Woolworths and will rank equally in right of payment with all other unsecured and unsubordinated indebtedness of Woolworths Limited except for indebtedness mandatorily preferred by applicable law. Use of proceeds ...... Thenetproceeds to Woolworths (after taking into account the deduction of the initial purchasers’ commission and Woolworths’ estimated expenses) will be approximately US$844.5 million. The net proceeds will be used to refinance existing debt facilities and for general corporate purposes. Additional amounts .... Intheevent that certain Australian taxes are payable in respect of payments on the Notes, Woolworths will, subject to certain exceptions, pay such additional amounts as will result, after deduction or withholding of such taxes, in the payment of the amounts which would have been payable in respect of the Notes had no such withholding or deduction been required. See “Description of Notes—Payment of additional amounts.”

12 Optional redemption at make-whole premium ...... Each series of the Notes may be redeemed at Woolworths’ option at any time, in whole or in part, on not less than 30 nor more than 60 days’ notice, at a redemption price equal to the principal amount thereof plus accrued and unpaid interest and a make-whole premium, if any. See “Description of Notes—Optional redemption.”

Optional redemption for tax reasons ...... Each series of the Notes may be redeemed at the option of Woolworths in whole but not in part, at the principal amount thereof plus accrued and unpaid interest in certain circumstances in which Woolworths would become obligated to pay additional amounts under the Notes.

Change of Control ..... Upon a change of control that is accompanied by a ratings downgrade, each holder of the Notes may require Woolworths to repurchase such holder’s Notes, in whole or in part, at a purchase price equal to 101% of the principal amount thereof plus accrued but unpaid interest to the purchase date, as described under “Description of the Notes—Offer to redeem upon change of control triggering event.”

Further issues ...... Woolworths may from time to time without the consent of the holders of the Notes create and issue additional securities having the same terms and conditions as the Notes so that such issue shall be consolidated and form a single series with the outstanding Notes.

Holders of the Notes should be aware that additional notes that are treated for non-tax purposes as a single series with a series of the original Notes offered hereby may be treated as a separate issue for United States federal income tax purposes. In such case, depending upon their issue price, the additional notes may not be a “qualified reopening” for United States federal income tax purposes and, therefore, issued with “original issue discount”, which may affect the market value of a series of the original Notes offered hereby since such additional notes may not be distinguishable from such original Notes. Woolworths does not intend to increase the principal amounts of any series of Notes offered hereby unless the issuance is a qualified reopening for United States federal income tax purposes.

Form, denomination and registration of Notes ...... Itisexpected that delivery of the Notes will be made on or about April 12, 2011 as described below. All Notes sold in the offering will be delivered to the initial purchasers against payment in immediately available funds. Except as described below, the Notes will be issued only in registered form without coupons and in minimum

13 denominations of US$2,000 principal amount and integral multiples of US$1,000 in excess thereof. Notes initially sold in reliance on Rule 144A will be represented by one or more Restricted Global Notes deposited with The Bank of New York Mellon, as trustee, and as custodian for and registered in the name of a nominee of The Depository Trust Company, or DTC, of New York, New York. Notes sold in offshore transactions in reliance on Regulation S will initially be represented by a single, permanent Regulation S Global Note deposited with the trustee as custodian for and registered in the name of a nominee of DTC for the accounts of Euroclear Bank S.A./ N.V. and Clearstream Banking, société anonyme. See “Description of Notes—Registration of transfer and exchange” and “Plan of distribution.”

Transfer restrictions .... TheNotes have not been registered under the Securities Act. The Notes are subject to restrictions on transfer. See “Notice to investors.”

Listing ...... TheNotes will not be listed on any securities exchange.

Restrictive covenants . . . Woolworths has agreed in the indenture that governs the Notes to observe certain covenants, including, among other things, a covenant limiting the incurrence of liens. See “Description of Notes—Certain covenants of Woolworths.”

Trustee ...... TheBank of New York Mellon will be the trustee under the indenture dated as of November 23, 2005, as supplemented by the supplemental indenture, dated as of September 22, 2010.

Governing law ...... NewYork.

Ratings ...... Moody’s Investors Service has indicated that it expects each series of Notes to be rated A3 and Standard & Poor’s Ratings Group has indicated that it expects each series of Notes to be rated A-. A security rating is not a recommendation to buy, sell or hold securities in so far as such ratings do not comment as to market price or suitability for a particular investor. There is no assurance that any rating will remain in effect for a given period of time or that any rating will not be revised or withdrawn entirely by a rating agency in the future if in its judgment circumstances warrant. Woolworths is under no obligation to update information regarding such ratings should they change over time.

See “Notice to investors” for information regarding restrictions on the distribution of credit ratings.

14 Risk factors Prospective purchasers of the Notes should consider carefully all of the information set forth in this offering memorandum and, in particular, the information set forth under “Risk factors” before making an investment in the Notes.

Summary selected historical consolidated financial information The summary selected historical consolidated balance sheet data as of June 27, 2010 and June 28, 2009 and income statement data for the fiscal years ended June 28, 2009 and June 27, 2010 set forth below have been derived from, and should be read in conjunction with and are qualified in their entirety by reference to, Woolworths’ audited annual consolidated financial statements included in this offering memorandum, including the notes thereto, and “Management’s discussion and analysis of financial condition and results of operations.” The summary consolidated balance sheet as at January 2, 2011 and as at January 3, 2010 and the summary consolidated income statement data has been derived from our interim unaudited condensed consolidated financial statements for the 2011 Half Year, which are included elsewhere in this offering memorandum. The summary selected historical balance sheet data as of June 25, 2006, June 24, 2007 and June 29, 2008 and income statement data for the fiscal years ended June 25, 2006, June 24, 2007 and June 29, 2008 set forth below have been derived from the audited annual consolidated financial statements and annual report of Woolworths for the fiscal years ended June 25, 2006, June 24, 2007 and June 29, 2008, which are not included in this offering memorandum but are available upon request.

Woolworths’ consolidated financial statements are prepared in accordance with AIFRS, which vary in certain respects from U.S. GAAP. See “Financial information presentation—Historical financial information” for further details.

15 27 weeks ended the first Sunday of January, 52 weeks ended the last Sunday of June, 2011(1) 2011 2010 2010 2009 2008(2) 2007 2006 (in millions) (US$) (A$) (A$) (A$) Income statement data:(3) Sales Australian Food and Liquor(4) ...... 19,001.0 18,771.9 18,143.4 34,675.4 32,977.2 30,662.6 27,892.9 25,602.8 New Zealand Supermarkets ...... 2,210.0 2,183.4 2,161.7 4,130.6 4,034.3 4,170.2 3,939.9 2,604.9 Petrol ...... 2,980.4 2,944.5 2,781.2 5,481.0 5,482.1 5,642.1 4,836.8 4,390.4

Total Supermarkets Division ...... 24,191.4 23,899.8 23,086.3 44,287.0 42,493.6 40,474.9 36,669.6 32,598.1 BIGW ...... 2,421.2 2,392.0 2,461.6 4,193.1 4,267.3 3,915.9 3,465.2 3,119.1 Consumer Electronics ...... 1,057.4 1,044.7 983.7 1,782.4 1,723.6 1,530.6 1,310.2 1,167.1 Total General Merchandise Division ...... 3,478.6 3,436.7 3,445.3 5,975.5 5,990.9 5,446.5 4,775.4 4,286.2 Hotels ...... 619.4 611.9 591.2 1,102.0 1,110.3 1,113.4 1,032.1 849.9 Home Improvement ...... 358.6 354.3 79.7 329.8 ———— Total Group Sales from Continuing Operations ...... 28,648.0 28,302.7 27,202.5 51,694.3 49,594.8 47,034.8 42,477.1 37,734.2 Cost of goods sold(5) ...... (21,188.0) (20,932.6) (20,162.8) (38,300.7) (36,871.4) (35,134.5) (31,723.1) (28,289.6) Gross profit ...... 7,460.0 7,370.1 7,039.7 13,393.6 12,723.4 11,900.3 10,754.0 9,444.6 Selling, general and administrative expenses ...... (4,400.3) (4,347.3) (4,187.7) (8,035.9) (7,768.8) (7,405.5) (6,847.1) (6,130.1) Rent (including fitout rent) ...... (805.2) (795.5) (762.8) (1,477.9) (1,409.7) (1,315.9) (1,206.3) (1,070.1) Depreciation and amortization ...... (445.7) (440.3) (406.0) (797.7) (729.4) (650.1) (589.3) (522.2)

Cost of doing business(6) ...... (5,651.2) (5,583.1) (5,356.5) (10,311.5) (9,907.9) (9,371.5) (8,642.7) (7,722.4) Earnings before interest and tax ...... 1,808.8 1,787.0 1,683.2 3,082.1 2,815.5 2,528.8 2,111.3 1,722.2 Net financing costs ..... (133.6) (132.0) (110.0) (211.5) (189.2) (191.3) (233.6) (249.7) Operating income tax expense ...... (485.2) (479.4) (464.0) (832.6) (766.3) (686.0) (566.4) (445.8)

Net profit after tax .... 1,190.0 1,175.6 1,109.2 2,038.0 1,860.0 1,651.5 1,311.3 1,026.7 Non-controlling interests ...... (14.1) (13.9) (13.6) (17.2) (24.3) (24.7) (17.3) (12.1)

Net profit attributable to members ...... 1,175.9 1,161.7 1,095.6 2,020.8 1,835.7 1,626.8 1,294.0 1,014.6

(1) Translated at the noon buying rate on December 30, 2010 of A$1.00=US$1.0122. (2) Reflects 53 weeks of financial results.

16 (3) The financial information presented in this table is sourced from Woolworths’ audited financial statements and other unaudited financial information contained in Woolworths’ annual reports. The presentation above is not consistent with the presentation of income statement financial information in the audited consolidated financial statements. (4) Includes Wholesale business previously reported separately. (5) Cost of goods sold as presented in the table above represents cost of goods sold in the financial statements net of other operating revenue. (6) Cost of doing business is a non-GAAP financial measure that is calculated based on amounts derived from audited financial information and is defined as selling, general and administrative expenses plus rent plus depreciation and amortization.

17 As at the first Sunday of January, As at the last Sunday of June, 2011(1) 2011 2010 2010 2009 2008 2007 2006 (in millions) (US$) (A$) (A$) (A$) Balance sheet data:(2) Current assets Cash ...... 1,153.4 1,139.5 1,069.0 713.4 762.6 754.6 798.8 525.9 Trade and other receivables ..... 1,108.3 1,094.9 928.0 916.8 664.2 637.8 484.7 1,160.4 Inventories ...... 4,038.3 3,989.6 3,718.9 3,438.8 3,292.6 3,010.0 2,739.2 2,316.1 Assets held for sale ...... 17.6 17.4 44.1 37.3 36.9 34.7 96.9 115.6 Other financial asset ...... 136.4 134.8 86.0 92.7 102.9 65.1 41.4 2.8 Total current asset ...... 6,454.0 6,376.2 5,846.0 5,199.0 4,859.2 4,502.2 4,161.0 4,120.8 Non-current assets Trade and other receivables ..... 12.0 11.9 36.1 13.3 2.7 3.6 5.4 14.0 Other financial assets ...... 152.5 150.7 172.0 132.3 155.4 262.0 256.0 59.5 Property, plant & equipment .... 8,262.6 8,162.9 7,115.0 7,639.1 6,653.9 5,638.8 4,623.0 4,055.8 Intangible assets ...... 5,035.7 4,975.0 5,029.6 5,071.0 4,933.1 4,835.2 5,003.5 4,759.4 Deferred tax assets ...... 481.7 475.9 464.2 432.6 480.6 430.7 367.2 336.9 Total non-current assets ...... 13,944.5 13,776.4 12,816.9 13,288.3 12,225.7 11,170.3 10,255.1 9,225.6 Total assets ...... 20,398.5 20,152.6 18,662.9 18,487.3 17,084.9 15,672.5 14,416.1 13,346.4 Current liabilities Trade and other payables .... 6,123.1 6,049.3 6,012.3 5,278.9 5,110.0 4,804.9 4,184.7 3,573.4 Borrowings ...... 880.2 869.6 136.0 871.7 188.6 550.2 379.8 612.3 Current tax liabilities ...... 240.2 237.3 281.8 199.0 279.5 330.2 212.9 84.6 Other financial liabilities ...... 38.6 38.1 44.4 24.7 99.3 61.9 74.9 — Provisions ...... 813.2 803.4 759.9 779.1 737.2 677.2 650.5 604.0 Total current liabilities ...... 8,095.3 7,997.7 7,234.4 7,153.4 6,414.6 6,424.4 5,502.8 4,874.3 Non-current liabilities Borrowings ...... 3,238.5 3,199.5 2,806.4 2,670.4 2,986.3 2,224.0 2,690.9 3,704.0 Other financial liabilities ...... 839.0 828.9 290.0 236.7 78.4 274.7 227.2 70.7 Provisions ...... 444.0 438.6 396.3 416.3 362.3 380.0 382.3 340.7 Other ...... 196.4 194.0 195.1 192.8 186.0 134.1 98.2 99.1 Total non-current liabilities .... 4,717.9 4,661.0 3,687.8 3,516.2 3,613.0 3,012.8 3,398.6 4,214.5 Total liabilities ...... 12,813.2 12,658.7 10,922.2 10,669.6 10,027.6 9,437.2 8,901.4 9,088.8 Net Assets ...... 7,585.3 7,493.9 7,740.7 7,817.7 7,057.3 6,235.3 5,514.7 4,257.6 Shareholders’ equity Contributed equity ...... 3,946.7 3,899.1 4,025.4 3,784.4 3,858.6 3,627.1 3,422.7 2,947.8 Shares held in trust ...... (37.8) (37.3) (48.9) (41.2) (51.2) (60.0) (71.6) (87.1) Reserves ...... (258.5) (255.4) (73.1) (28.0) (173.5) (133.9) (38.3) (288.6) Retained profits ...... 3,675.0 3,630.7 3,584.5 3,855.2 3,178.6 2,559.7 1,962.5 1,455.7 Equity attributable to the members of Woolworths Limited ...... 7,325.4 7,237.1 7,487.9 7,570.4 6,812.5 5,992.9 5,275.3 4,027.8 Non-controlling interest ...... 259.9 256.8 252.8 247.3 244.8 242.4 239.4 229.8 Total equity ...... 7,585.3 7,493.9 7,740.7 7,817.7 7,057.3 6,235.3 5,514.7 4,257.6

(1) Translated at the noon buying rate on December 30, 2010 of A$1.00=US$1.0122. (2) The financial information presented in this table is sourced from Woolworths’ audited financial statements.

18 As at and for the 27 weeks ended the first Sunday of As at and for the 52 weeks ended the last January, Sunday of June, 2011(2) 2011 2010 2010 2009 2008(3) 2007 2006 (in millions, except ratios)(1) (US$) (A$) (A$) (A$) Other financial data: Net debt Total borrowings ...... 4,118.7 4,069.1 2,942.4 3,542.1 3,174.9 2,774.2 3,070.7 4,316.3 Cash ...... (1,153.4) (1,139.5) (1,069.0) (713.4) (762.6) (754.6) (798.8) (525.9) Hedge liabilities ...... 723.9 715.2 292.9 184.1 177.7 336.6 302.1 70.7 Hedge assets ...... (170.9) (168.9) (112.8) (98.5) (126.9) (175.2) (131.2) (61.6) Net debt(10) ...... 3,518.3 3,475.9 2,053.5 2,914.3 2,463.1 2,181.0 2,442.8 3,799.5 EBIT ...... 1,808.8 1,787.0 1,683.2 3,082.1 2,815.5 2,528.8 2,111.3 1,722.2 EBITDA(7) ...... 2,254.5 2,227.3 2,089.2 3,879.8 3,544.9 3,178.9 2,700.6 2,244.4 EBITDAR(8) ...... 3,059.7 3,022.8 2,852.0 5,357.7 4,954.6 4,494.8 3,906.9 3,314.5 EBIT to Sales Revenue (%) ...... 6.31 6.31 6.19 5.96 5.68 5.38 4.97 4.56 Funds Employed(5) ...... 11,015.7 10,882.9 9,653.3 10,575.7 9,319.3 8,315.9 7,803.2 7,804.8 Return on Funds Employed (ROFE)(6) ...... 16.66 16.66 17.74 30.98 31.93 31.38 27.05 28.62 EBITDA interest cover ratio (times)(9) ...... 13.83 13.83 16.02 15.07 14.80 14.85 11.72 9.11 Net debt/net debt and equity (%)(10) ...... 31.69 31.69 20.97 27.16 25.87 25.91 30.70 47.16 Net debt/EBIT (times)(10) . . . 1.95 1.95 1.22 0.95 0.87 0.86 1.16 2.21 Fixed charges cover (times)(4) ...... 3.16 3.16 3.19 3.09 3.00 2.94 2.72 2.50

(1) No items have been adjusted for operating lease expenses. (2) Translated at the noon buying rate on December 30, 2010 of A$1.00=US$1.0122. (3) Reflects 53 weeks of financial results. (4) Fixed charges cover ratio is defined as EBITDAR divided by fixed charges, which includes interest on all indebtedness, including interest on deposits, and all rent expense, and is stated before non-controlling interests. Interest excludes foreign exchange gains/ losses, dividend income and interest capitalized. Fixed charges cover ratio for the 2011 Half Year and 2010 Half Year is shown for the respective 27 week period only and is not annualized. (5) Funds Employed, which is defined as net assets excluding net tax balances (being current tax liabilities, deferred tax assets and deferred tax liabilities), net repayable debt (being current and non-current interest bearing liabilities less cash on hand, cash at bank and cash on short term deposit), provision for dividends and assets and liabilities as a result of hedging per AASB 139 Financial Instruments: Recognition and Measurement. (6) Return on Funds Employed is EBIT divided by the average of Funds Employed at the beginning of the period and Funds Employed at the end of the period, expressed as a percentage. Return on Funds Employed for the 2011 Half Year and 2010 Half Year is shown for the respective 27 week period only and is not annualized. (7) Operating profit from continuing operations before net interest expense, depreciation and amortization and income tax expense. EBITDA is not a measure of operating income, operating performance or liquidity under AIFRS or U.S. GAAP. (8) Operating profit from continuing operations before net interest expense, depreciation and amortization, income tax and rent expense. EBITDAR is not a measure of operating income, operating performance or liquidity under AIFRS or U.S. GAAP. (9) EBITDA interest cover ratio has been determined by dividing EBITDA by net interest expense. Interest expense excludes foreign exchange gains/ losses, dividend income and interest capitalized. EBITDA interest cover ratio for the 2011 Half Year and 2010 Half Year is shown for the respective 27 week period only and is not annualized. (10) Net debt is defined as current and non-current interest bearing liabilities, including Woolworths Notes, less cash on hand, cash at bank and cash on short term deposit and provision for dividends, and includes hedge liabilities less hedge assets. Net debt/EBIT for the 2011 Half Year and 2010 Half Year is shown for the respective 27 week period only and is not annualized.

19 27 weeks ended the first Sunday of January, 52 weeks ended the last Sunday of June, 2011(1) 2011 2010 2010 2009 2008(2) 2007 2006 (in millions) (US$) (A$) (A$) (A$)

Statement of cash flows: Net cash flows from operating activities .... 1,888.6 1,865.8 1,843.3 2,759.9 2,604.2 2,654.0 2,294.2 1,704.8 Net cash flows (used in) investing activities ..... (1,093.1) (1,079.9) (984.6) (1,960.1) (1,806.2) (1,753.4) (725.1) (2,725.9) Net cash flows from/(used in) financing activities ...... (357.2) (352.9) (542.7) (832.9) (808.9) (936.8) (1,298.8) 1,119.9

Net increase/(decrease) in cash and cash equivalents 438.3 433.0 316.0 (33.1) (10.9) (36.2) 270.3 98.8

(1) Translated at the noon buying rate on December 30, 2010 of A$1.00=US$1.0122. (2) Reflects 53 weeks of financial results.

20 Risk factors

Investors should carefully consider each of the following risk factors and all of the other information set forth in this offering memorandum before making any investment decision. The risks described below are not the only risks that Woolworths faces. Additional risks and uncertainties not presently known to management or that management currently believes to be immaterial may also adversely affect Woolworths’ businesses. Any of these risks may have a material adverse effect on the business, financial condition, results from operations and cash flows of Woolworths, and may materially impact Woolworths’ ability to make payments of interest on, and principal of, the Notes. In such a case, investors may lose all or part of their investment in the Notes offered hereby.

Risks relating to Woolworths

Woolworths faces increasing competition from existing and new competitors in Woolworths’ markets which may adversely affect the results from its retail operations.

There is strong competition in the Australian and New Zealand markets in which Woolworths’ businesses operate. As Woolworths operates in a broad range of retail sectors (food and liquor, petrol, general merchandise, consumer electronics and hotels) it is exposed to competition in many retail sectors of the Australian market. In particular, the supermarkets business faces significant competition from Coles, the expansion of Aldi’s Australian store network, the banner groups associated with Metcash (which announced in July 2010 the acquisition of the Franklins chain of 85 supermarkets), the entry of Costco into Australia, other banner groups, independent supermarkets and specialty retailers.

Woolworths also faces strong competition in its petrol, general merchandise and consumer electronics businesses. Further, once commenced, Woolworths expects that its retail home improvement business will face significant competition from a number of competitors in the home improvement market, particularly Bunnings (the market share leader), other hardware retail brands (such as Mitre 10 owned by Metcash), as well as a number of independents and category specialists. Coles, Woolworths largest competitor in its supermarkets business, is owned by Wesfarmers Limited, which also owns Woolworths’ largest competitors in large-format retail home improvement (Bunnings) and the discount department stores format (Target and Kmart) and is a conglomerate that owns significant non-retail businesses that may contribute to its ability to fund improvements in its retail businesses.

There is also the risk of new entrants into the Australian or New Zealand retail markets, either by acquisition of an existing retailing company or potentially through greenfields development. Furthermore, there is an international trend in breaking down national barriers in retailing (known as retail globalization) which may result in a further increase in future competition from multi-national retailing groups that may have substantial buying power, particularly in general merchandise. Additionally, the 2009 undertakings to not enforce restrictive covenants in supermarket leases given to the Australian Competition and Consumer Commission (the “ACCC”) by the major supermarket chains (discussed under “—Regulation by the ACCC may impair Woolworths’ ability to operate and may expose it to investigations or prosecutions for violations of Australian competition laws” below) may improve competitors’ access to greenfield sites. These competitive conditions may adversely impact Woolworths’ market shares and trading results.

21 A general decline in economic activity in key markets such as Australia and New Zealand and a further disruption in global credit markets may have an adverse impact on the earnings and profitability of Woolworths.

Woolworths’ operations are conducted almost entirely in Australia and New Zealand and, as such, are affected by general economic conditions in these markets as well as global markets, including the following:

• changes in the rate of inflation, interest rates and foreign currency exchange rates;

• changes in fiscal or monetary policy by the Australian or New Zealand central banks;

• changes in relation to movements in the general level of share prices on local and international equity markets;

• changes in aggregate investment and economic output;

• changes in consumers’ saving levels; and

• changes in employment levels and labor costs.

The retail trading environment in Australia and New Zealand is subject to general economic conditions in the Australian, New Zealand and global markets. Any adverse changes in such economic conditions can be expected to affect the retail trading environment in Australia and New Zealand in general. Any adverse developments in economic conditions during the first half of the fiscal year of Woolworths, particularly the Christmas trading period when its sales and profitability are typically strongest, may have a negative impact on Woolworths’ trading results. Woolworths’ results in the 2009 Fiscal Year, especially in BIG W and consumer electronics, were positively impacted by the Australian government’s economic stimulus which underpinned above average sales revenue growth and impacted the timing of certain consumer discretionary spending by bringing forward into the 2009 Fiscal Year some spending that otherwise would have occurred in the 2010 Fiscal Year. This was not repeated in the 2010 Fiscal Year or the 2011 Half Year and the 2010 Fiscal Year reflects the cycling of the 2009 Fiscal Year government stimulus. Recently, a decline in consumer confidence has led to lower levels of consumer spending and a higher rate of household savings. This, combined with lower levels of food price inflation and significant price deflation in general merchandise products has adversely affected Woolworths CODB margin by reducing its ability to fractionalize its fixed costs.

There is a risk that Woolworths does not achieve expected reductions in its cost of doing business which may adversely affect future profitability.

One of Woolworths’ key strategies for improving its future profitability is the reduction in cost of doing business through various initiatives, including Project Quantum. If Woolworths is unable to decrease its cost of doing business on a sustainable basis it may be unable to compete effectively in its markets and its trading results may be adversely affected. Furthermore, the implementation of supply chain and other cost reduction initiatives it has implemented have required, and will continue to require, significant capital investment. There is no assurance that Woolworths will be able to derive reductions in operating costs to match the overall capital investment. In addition, any disruptions in supply could disrupt Woolworths’ operations and result in increased operating costs and improperly implemented initiatives may harm customer engagement through reduced levels of service, which could adversely impact Woolworths’ businesses.

22 Damage or dilution to Woolworths’ retail brands may adversely affect performance.

Woolworths’ retail businesses depend substantially on their respective brand reputations. Poor quality products, breaches of consumer protection laws, negative publicity at the brand level or other factors may damage the reputation and efficacy of Woolworths’ retail brands. Further, Woolworths’ retail brands may be subject to dilution because of brand infringement by third parties or because of inconsistent product quality. Any of these factors could materially adversely affect the value of Woolworths’ brands. If any of Woolworths’ brands are damaged or diluted, Woolworths may face significant expense repairing the damage or dilution or rebuilding its brands.

There is a risk that Woolworths may not achieve the expected growth in its exclusive brand lines in its Supermarkets business, which may adversely affect future sales growth.

Woolworths believes that its exclusive brand lines, particularly its Homebrand and Woolworths Select brand, represent a growth opportunity, both in terms of a differentiated product offering and increased profit margins. There is a risk that Woolworths is unable to execute its house brand strategy due to an inappropriate offer, sourcing difficulties with suppliers or lack of customer acceptance of house brand products, which may adversely affect future trading results and profitability. Additionally, low levels of food price inflation such as that experienced in the 2010 Fiscal Year and the 2011 Half Year may reduce the shelf price of branded products and, therefore, reduce the price difference between branded and exclusive brand products, which may reduce levels of consumer attraction to Woolworths’ exclusive brand goods.

If Woolworths is unable to locate appropriate store sites for purchase or lease or unable to effectively refurbish existing stores as planned, it may not be able to deliver future store growth.

If Woolworths fails to identify and acquire appropriate sites for new store locations in or near population catchment areas or enter into leases on suitable sites on a timely basis and on satisfactory terms for any reason, including due to governmental zoning or permit restrictions, the inability of property owners to develop suitable property at the pace required by Woolworths’ business or competition from other companies seeking similar sites, Woolworths may be unable to open new stores as anticipated thereby adversely affecting its growth. In particular, availability of additional sites for large format stores such as supermarkets, Dan Murphy’s liquor stores and BIG W stores in densely populated areas is constrained. This is also applicable to Woolworths’ home improvement joint venture, which will generally require larger plots of land to accommodate its planned store format. For example, as a result of tight funding conditions in the property development market, Woolworths has been required to selectively purchase and develop new store sites on its balance sheet in order to maintain its new store roll-out strategy.

Additionally, Woolworths’ future growth and operating performance depend in part on its ability to refurbish and improve existing stores over time. If such refurbishments are not completed on time, within budget or fail to realize their anticipated benefits, Woolworths’ growth and performance may be adversely affected.

Further, if Woolworths fails to regularly monitor underperforming stores and to take appropriate remedial action, such stores may adversely affect the overall profitability of Woolworths.

23 Woolworths’ earnings could be adversely affected by acquisition and divestment activities and Woolworths may face unforeseen liabilities arising from any future acquisitions and dispositions of businesses. Woolworths from time to time examines new acquisition opportunities both domestically and internationally, which may relate to existing businesses or to new areas of operation for Woolworths. Woolworths also pursues disposition strategies from time to time. Acquisitions and dispositions of businesses may lead to a change in the source and nature of Woolworths’ earnings and result in variability in earnings over time. Furthermore, any new businesses that Woolworths acquires must be integrated into the Woolworths group, which may be costly and may occupy a large amount of Woolworths’ management’s time. Woolworths may not be successful in implementing its strategy for any acquired businesses without substantial costs, delays or other problems, which could negatively impact Woolworths’ results of operations, profitability or reputation. In addition, there could be liabilities that arise in connection with the businesses that Woolworths may sell or the businesses that Woolworths may acquire in the future, which could adversely affect Woolworths’ earnings. The success of any potential international expansion by Woolworths could be adversely affected if Woolworths is unable to adapt to the local operating environment.

Woolworths’ retail businesses are dependent upon their ability to source merchandise. Woolworths relies on major suppliers, manufacturers and other service providers to provide materials for and to produce products for Woolworths’ retail businesses and to transport products to customers, and it may not be able to obtain or deliver quality products on a timely basis or in sufficient quantity at acceptable cost. Woolworths’ retail businesses are dependent upon their access to products that meet their specifications. Reliance on independent third party suppliers carries with it substantial risks, including: Risk associated with non-Australian suppliers—Woolworths’ ability to find qualified vendors and to access products in a timely and efficient manner is critical to its business. Certain of Woolworths’ suppliers are located in developing countries, particularly in Asia, in which political or financial instability, trade restrictions, tariffs, transport capacity and other factors relating to foreign trade are beyond Woolworths’ control. These factors could disrupt the Woolworths’ supply chain, requiring it to expend considerable time and expense to locate new suppliers, which could impact Woolworths’ retail businesses’ ability to meet its customer needs on a timely and competitive basis. Risks associated with third party suppliers—Woolworths relies on independent third party suppliers to provide materials and to manufacture products that are consistent with Woolworths’ standards. There can be no assurance that Woolworths’ retail suppliers will continue to provide materials and to manufacture products that are consistent with Woolworths’ standards. Woolworths’ retail businesses have occasionally received, and in the future may continue to receive, shipments of product that fail to conform to Woolworths’ quality standards. As a result, Woolworths may unknowingly sell products that fail to meet its standards, which could adversely affect Woolworths’ reputation in the marketplace. Any disruption to the Woolworths supply chain as a result of an issue with a supplier, an unexpected system or computer network interruption or otherwise, or any damage to its integrity, could cause Woolworths significant time and expense in remediation of any deficiencies and could impact its reputation, which could adversely impact its market share and profitability.

24 There is a risk that Woolworths’ future performance may be adversely affected by unforeseen system and computer network interruptions or if future system or computer network upgrades are required.

The ongoing performance of Woolworths’ operations is dependent, in large part, on the reliability and availability of its systems and computer networks. Because Woolworths’ strategy is focused on high volume, low margin businesses, any disruptions in supply or increases in costs as a result of network, unexpected system or computer network interruptions could reduce overall profitability. Woolworths carries business interruption insurance, which may partly offset the financial effect of such an event, although no assurance can be given that any such event may not adversely affect Woolworths’ future profitability.

Furthermore, a significant portion of the communications between Woolworths’ personnel and suppliers depends on information technology. Like all companies, its information technology systems may be vulnerable to a variety of interruptions due to events that may be beyond its control including, but not limited to, natural disasters, terrorist attacks, telecommunication failures, computer viruses, hackers, and other security issues. Woolworths has technology and information security processes and disaster recovery plans in place to mitigate its risk to these vulnerabilities, but these measures may not be adequate or implemented properly to ensure that its operations are not disrupted.

There is a risk that Woolworths’ retail businesses may be adversely affected if its current or future retail offers do not cater to customer demands.

The ability of Woolworths to successfully gauge and satisfy consumer preferences is critical to Woolworths maintaining its competitive position. Specifically, Woolworths will be required to adapt its retail product offerings to overall changes in Australian demographics and the general ageing of the Australian population, as well as adapt or expand its product offerings in response to changes in customer preferences, such as trends towards consumption of healthier foods, and take advantage of opportunities to cater to customer demands in new areas such as home improvement and financial services and via new channels such as the internet. Failure to gauge and satisfy customer preferences or adapt or expand its product offering to the changing demands of its customer base may adversely affect Woolworths’ business and results of operations.

Inability to effectively manage inventory in Woolworths’ retail businesses may impair Woolworths’ competitive position.

Efficiently managing inventory stocks and ensuring stock availability are of paramount importance to all of Woolworths’ retail businesses. If Woolworths is unable to manage inventory effectively, or if Woolworths faces shortages of stock availability, this could affect the businesses’ competitive position and have an adverse impact on Woolworths’ results of operations and financial condition. For example, Woolworths experienced higher than average inventory levels in the 2011 Half Year as December sales in General Merchandise fell short of expectations. This led to an increase in funds employed for the period.

25 Interruptions at Woolworths’ workplaces arising from industrial disputes, work stoppages and accidents may adversely affect the financial position and performance of Woolworths.

Many of Woolworths’ employees are unionized and covered by collective bargaining agreements. From time to time Woolworths has major enterprise bargaining agreement renegotiations in its businesses, and these can result in increases in costs, and in some circumstances, temporary interruption to operations. In addition, industrial unrest or interruption could lead to work stoppages, production losses and delays that may significantly affect Woolworths’ business operations.

As a result of selling food and liquor products, Woolworths faces the risk of exposure to product liability claims, public liability claims and adverse publicity.

The packaging, marketing, distribution and sale of food and liquor products entail an inherent risk of product liability, public liability, product recall and resultant adverse publicity. If any products sold by Woolworths, including Woolworths’ exclusive brand products, are defective, contaminated or adulterated, this may lead to a risk of exposure to product liability claims and adverse publicity. Such claims may have an adverse impact on Woolworths’ future results of operations if current or potential customers choose alternative stores as a result of any adverse publicity. Further, as a distributor of products, Woolworths faces risks associated with faulty, defective products or mislabeled products. Breaches of Woolworths’ obligations can give rise to prosecution or claims for damages and can adversely affect its profitability or market reputation.

There is a risk of non-compliance with, or additional obligations relating to, legal and regulatory obligations and expectations which may have a negative impact on Woolworths’ performance.

Woolworths is subject to a range of legal and other regulatory controls imposed by Australian and New Zealand state, territory and federal government bodies, including industry specific regulation (such as gaming and liquor licensing). The relevant regulatory regimes are complex and are subject to change over time depending on the policies of the government in place. Compliance with, or changes in, these laws or regulations may reduce the sales and profitability of Woolworths’ retail operations and may otherwise adversely affect Woolworths’ business, financial condition or results of operations. Non-compliance may result in financial penalties being levied against Woolworths and may result in the loss of certain licenses, which would have a negative impact on Woolworths’ performance.

Regulation by the ACCC may impair Woolworths’ ability to operate and may expose it to investigations or prosecutions for violations of Australian competition laws.

Woolworths, like other large Australian businesses, is subject to scrutiny by the ACCC and other state regulatory bodies. For example, in 2009 Woolworths entered into an undertaking with the ACCC to not enforce restrictive covenants in certain of their leases that restricted the ability of competitors to open stores in the same shopping centers. In addition, such regulatory bodies may limit Woolworths’ ability to acquire further businesses to expand or improve its current offerings. Any adverse outcomes arising from any investigations or prosecutions commenced by the ACCC or state regulatory bodies against Woolworths, including for breaches of the ACCC undertaking or any other regulatory restrictions on its business activities, may adversely affect Woolworths’ future financial performance and position.

26 There is a risk that Woolworths’ expansion into new lines of business, such as home improvement and financial services, may ultimately be unsuccessful, which may have an adverse impact on Woolworths’ results of operations.

Part of Woolworths’ growth strategy is to leverage its experience in supermarkets, general merchandise and consumer electronics through expansion into new retail categories, such as home improvement and financial services. Expansion into new retail categories requires a substantial investment of financial, operational and management resources and often faces strong competition from more established retailers in the target sector. For example, Woolworths’ entry into the Australian home improvement sector through its joint venture with Lowe’s will compete with established retail home improvement chains such as Bunnings, the market share leader. Should the home improvement joint venture or any other expansion fail to produce expected results, this could have an adverse impact on Woolworths’ business and results of operations.

An inability to attract or retain key management could have a material impact on Woolworths’ financial performance.

The responsibility of overseeing day-to-day operations and the strategic management of Woolworths is concentrated among a number of key employees. There can be no assurance that there will be no detrimental impact on Woolworths if one or more of these key employees were to cease employment with Woolworths, potentially as a result of poaching by existing or new competitors.

Woolworths’ success and growth strategy will also depend on its ability to attract and retain key management and other operating personnel. An inability to attract and retain the requisite personnel by Woolworths could have an adverse effect on Woolworths’ business, operating results and financial condition. While Woolworths has an established succession planning strategy, there can be no assurance that it will prevent disruptions in the business resulting from the departure of key personnel.

Woolworths’ operations, in particular its petrol business, expose it to potential environmental liability for contamination, which could have an adverse effect of Woolworths’ results of operations.

Environmental legislation in certain jurisdictions imposes strict and retrospective liability for cleaning up contaminated land, watercourses or groundwater on the person causing or knowingly permitting the contamination in circumstances where such contamination is causing, or where there is significant possibility of it causing, significant harm to people or the environment. The owner or occupier of contaminated land could become liable if it became aware of pollution capable of causing significant harm to people or the environment, had the necessary degree of control over operations on the land to prevent such harm and failed to take certain actions to prevent it. There is also the possibility that Woolworths will be forced to bear the cost of environmental remediation in instances where it is not the responsible party but currently owns or occupies the previously contaminated land.

As part of Woolworths’ petrol business, it operates underground storage tanks for the storage of fuel. The presence of these tanks increases the risk of soil and groundwater contamination. Therefore, there is a risk that environmental contamination on sites where Woolworths’ operates its petrol stations may lead to substantial financial liability and adversely affect Woolworths’ results of operations.

27 Breaches of security or privacy measures, unauthorized access to or disclosure of data relating to Woolworths’ customers and fraudulent activity could adversely affect Woolworths’ reputation or harm Woolworths’ business.

As part of Woolworths’ retail operations, including through its Everyday Rewards program and the Woolworths’ Everyday Money Card, Woolworths possesses “personally identifiable” information, including customer addresses, credit card numbers and purchase history. It is possible that hackers, customers, employees (intentionally or inadvertently) or other individuals could improperly access Woolworths’ systems and data and obtain or disclose information about Woolworths’ customers. Further, because customer data may also be collected, stored, or processed by third-party vendors, it is possible that these vendors could intentionally or negligently disclose data about Woolworths’ clients or customers.

A breach of Woolworths’ information systems could lead to fraudulent activity, such as identity theft, credit card fraud, additional security costs, negative publicity and damage to Woolworths’ reputation and brand. Claims for compensatory or other damages may be brought against Woolworths as a result of a breach of its systems or fraudulent activity. Additionally, Woolworths may be subject to regulatory action and fines for certain breaches of Australian or New Zealand privacy laws. Such incidents could adversely affect Woolworths’ reputation, its businesses and its results of operations.

Woolworths is subject to risks from natural disasters and adverse weather conditions that could adversely affect Woolworths’ results of operations

Certain areas of Australia and New Zealand are particularly susceptible to natural disasters and adverse weather conditions, such as earthquakes, cyclones, flooding and drought. These events can damage Woolworths’ stores, distribution centers, the infrastructure upon which Woolworths and its suppliers rely to run their businesses and may also affect the availability of certain agricultural goods. The recent wet weather and cyclone in Queensland and the earthquakes in New Zealand are examples of such events. While Woolworths has insurance and certain procedures in place to deal with these events, should they occur, there can be no certainty that Woolworths’ insurance coverage or procedures are adequate to ensure that events of this type do not adversely impact Woolworths’ results of operations.

Operation of certain of Woolworths’ businesses through joint ventures and strategic alliances creates additional risks and uncertainties in its business.

Woolworths operates certain of its businesses through partnerships and strategic alliances, such as its retail home improvement joint venture with Lowe’s, its strategic alliance in its petrol business with Caltex, it’s joint ownership of the Hotels business with the Bruce Mathieson Group and its consumer electronics business venture in India with the TATA Group. Through the use of joint ventures and strategic alliances, Woolworths is subject to additional risks and uncertainties in that it may be dependent upon, and subject to liability, losses or reputational damage relating to, systems, controls and personnel that are not under its control. In addition, conflicts or disagreements between Woolworths and its joint venture and strategic alliance partners may negatively impact Woolworths’ businesses.

28 Failure to hedge effectively against adverse fluctuations in interest rates and exchange rates or the default of a hedge counterparty could negatively impact Woolworths’ results of operations.

Woolworths is subject to the risk of rising interest rates associated with borrowing on a floating rate basis. As at January 2, 2011, Woolworths had approximately A$0.22 billion of floating rate indebtedness. Woolworths seeks to manage its exposure to adverse fluctuations in floating interest rates by using interest rate hedging arrangements. Woolworths manages its interest expense by borrowing at fixed rates of interest or by using approved financial instruments (or by a combination of the two), so that a change in interest rates (measured as an assumed parallel shift in the yield curve of 1%) will not cause a reduction in earnings (profit after tax) greater than A$5 million in the current financial year, A$10 million in the next financial year and A$10 million in the third financial year.

In addition, Woolworths acquires goods and services and issues debt in non-Australian currencies and outside Australia. The impact of such exchange rate risk cannot be predicted reliably. Woolworths manages its exchange rate risks to minimize any adverse effect on its financial position and performance.

Woolworths’ results of operations may be adversely affected if its hedges are not effective to mitigate interest rate and exchange rate risks, if Woolworths is under hedged or if a hedge provider defaults on its obligations under Woolworths’ hedging agreements. There can be no assurance that Woolworths’ interest rate and exchange rate hedging arrangements or hedging policy will be sufficient or effective.

Occupational health and safety regulations could impose significant costs on Woolworths.

Legislation in the markets in which Woolworths operates imposes various obligations on Woolworths in relation to the occupational health and safety of its employees. If Woolworths fails to comply with these legislative requirements, fines, penalties and compensation fees may be imposed upon Woolworths. In addition to monetary concerns, any breach of the legislative requirements may result in reputational damage to Woolworths which could adversely affect the results of operations.

Litigation or legal proceedings could expose Woolworths to significant liabilities and negatively affect its financial results.

From time to time, Woolworths is a party to litigation claims and legal proceedings, including personal injury and other claims and proceedings arising in the ordinary course of its business. In addition, there is an increasing number of cases being filed against companies generally, some of which contain class-action allegations. Woolworths evaluates the litigation claims and legal proceedings to which it is a party to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, if any, Woolworths establishes reserves and/or discloses the relevant litigation claims or legal proceedings as appropriate. These assessments and estimates are based on the information available to management at the time and involve significant management judgment. Adverse outcomes in such legal proceedings, or changes in management’s evaluations or predictions about the proceedings, could have a material adverse effect on Woolworths financial results and financial condition.

29 Risks relating to the Notes

The Notes will be structurally subordinated to the indebtedness of Woolworths’ subsidiaries.

The Notes will be issued by Woolworths and will be structurally subordinated to the existing and future claims of the creditors of Woolworths’ subsidiaries. Any existing and future claims of the creditors of Woolworths’ subsidiaries that do not guarantee the Notes to the assets of such subsidiaries will have priority over the holders of the Notes, except to the extent that Woolworths may be recognized as a creditor of any such subsidiary. It is not contemplated that any of Woolworths’ subsidiaries will guarantee the Notes at any time. Consequently, the Notes may be structurally subordinated to all liabilities, including trade payables, lease obligations and liquidation preference on any preferred stock, whether or not secured, of any of Woolworths’ subsidiaries and any subsidiaries that Woolworths may in the future acquire or establish to the extent they do not guarantee the Notes. Woolworths’ subsidiaries’ creditors may also include general creditors and taxing authorities. As of January 2, 2011, Woolworths’ subsidiaries had total external indebtedness of A$213.5 million and as of June 27, 2010 had other total external liabilities of A$1,772.7 million.

In the event that Woolworths becomes insolvent, insolvency proceedings will be governed by Australian law.

Australian insolvency laws are different from the insolvency laws of the United States. In particular, the procedures for re-organization (i.e., administration under the Corporations Act) are different from Chapter 11 under the U.S. Bankruptcy Code. If Woolworths becomes insolvent, the treatment and ranking of holders of the Notes, other creditors of Woolworths and shareholders of Woolworths under Australian law may be different to the treatment and ranking of holders of the Notes, other creditors and shareholders if Woolworths was subject to the bankruptcy laws of the United States.

Service of process, enforcement of judgments and bringing of original actions in the United States may be difficult.

Woolworths is a corporation incorporated under the laws of Australia with limited liability for an unlimited duration. All of the directors, executive officers and managers of Woolworths and certain of the other parties named in this offering memorandum reside outside the United States. All or substantially all of Woolworths’ assets and the assets of these other persons are located outside the United States. As a result, it may be difficult or impossible for you to effect service of process for a lawsuit within the United States upon such persons, including with respect to matters arising under the Securities Act, or to enforce against any of them judgments in non-U.S. courts obtained in courts of the United States predicated upon, among other things, the civil liability provisions of the federal securities laws of the United States or state securities laws. There is doubt as to the enforceability, in original actions in Australian courts, of liabilities predicated solely on the U.S. federal securities laws and as to the enforceability, in Australian courts or in actions for enforcement, of judgments of U.S. courts obtained in actions predicated upon the civil liability provisions of the United States federal or state securities laws. See also “Enforcement of civil liabilities.”

30 There is no established trading market for the Notes and one may not develop.

The Notes will be new securities for which there currently is no established trading market. There can be no assurance regarding the future development of a market for the Notes or the ability of holders of the Notes to sell their Notes or the price at which such holders may be able to sell their Notes. If such a market were to develop, the Notes could trade at prices that may be lower than the initial offering price depending on many factors, including prevailing interest rates, Woolworths operating results and the market for similar securities. Therefore, there can be no assurance as to the liquidity of any trading market for the Notes or that an active market for the Notes will develop.

31 Use of proceeds The net proceeds to Woolworths (after taking into account the deduction of the initial purchasers’ commission and Woolworths’ estimated expenses) will be approximately US$844.5 million. The net proceeds will be used to refinance existing debt facilities and for general corporate purposes.

32 Capitalization The following table sets forth the cash, short-term debt, long-term debt and total capitalization of Woolworths as of January 2, 2011 and on an as adjusted pro forma basis giving effect to (i) the issuance of the Notes, (ii) the issuance of A$500 million of the 6.75% notes due 2016 on March 22, 2011 (the “A$ Notes”) and (iii) on an as adjusted pro forma basis converted to U.S. dollars. You should read the following table in conjunction with the sections of this offering memorandum titled “Financial information presentation”, “Summary selected historical consolidated financial information” and “Management’s discussion and analysis of financial condition and results of operations” and the audited consolidated financial statements and related notes of Woolworths included elsewhere in this offering memorandum.

The following table is based on Woolworths’ financial statements that have been prepared in accordance with AIFRS, which varies in certain respects from U.S. GAAP. See “Financial information presentation—Historical financial information” for further details.

As of January 2, 2011 Adjustment for issuance of Notes As adjusted As adjusted Actual and A$ Notes pro forma pro forma(1) (in millions) (A$) (A$) (A$) (US$) Cash ...... 1,139.5 1,333.0 2,472.5 2,502.7 Short-term debt ...... 869.6 — 869.6 880.2 Long-term debt Bank loans ...... 456.1 — 456.1 461.7 Other long term securities ...... 1.5 — 1.5 1.5 U.S. borrowings ...... 2,138.7 — 2,138.7 2,164.8 Woolworths Notes ...... 599.3 — 599.3 606.6 3.15% Notes due 2016(2) ...... — 295.0 295.0 298.6 4.55% Notes due 2021(2) ...... — 539.3 539.3 545.9 A$ Notes(3) ...... — 498.7 498.7 504.8 Finance leases ...... 3.9 — 3.9 3.9 Total long-term debt ...... 3,199.5 1,333.0 4,532.5 4,587.8 Total debt ...... 4,069.1 1,333.0 5,402.1 5,468.0 Shareholders’ equity Contributed equity ...... 3,899.1 — 3,899.1 3,946.7 Shares held in trust ...... (37.3) — (37.3) (37.8) Reserves ...... (255.4) — (255.4) (258.5) Retained profits ...... 3,630.7 — 3,630.7 3,675.0 Non-controlling equity interests in controlled entities ...... 256.8 — 256.8 259.9 Total shareholders’ equity ...... 7,493.9 — 7,493.9 7,585.3 Total capitalization(4) ...... 10,693.4 1,333.0 12,026.4 12,173.1

(1) Translated at the noon buying rate on December 30, 2010 of A$1.00=US$1.0122. (2) These notes are US$ denominated and have been translated at the noon buying rate on December 30, 2010 of A$1.00=US$1.0122. The Notes reflect the net proceeds of the offering, taking into account US$5.5 million of offering discount, initial purchasers’ commission and Woolworths’ estimated expenses. The US$5.5 million will be amortized over the life of the Notes in accordance with AIFRS. (3) The A$ Notes reflect the net proceeds of the offering, taking into account A$1.3 million of initial purchasers’ commission and Woolworths’ estimated expenses. The A$1.3 million will be amortized over the life of the A$ Notes in accordance with AIFRS. (4) Total capitalization represents long-term debt plus total equity.

33 Management’s discussion and analysis of financial condition and results of operations Overview

Woolworths is one of Australia’s largest retailers measured by sales revenue and number of stores. Woolworths’ total sales revenue in the 2010 Fiscal Year was A$51.7 billion and A$28.3 billion in the 2011 Half Year, with over 3,200 total retail locations in Australia and New Zealand as at January 2, 1011. Sales revenue in Australia in the 2010 Fiscal Year totaled A$47.3 billion and A$26.0 billion in the 2011 Half Year, and in New Zealand in the 2010 Fiscal Year totaled A$4.4 billion and A$2.3 billion in the 2011 Half Year. Additionally, according to the ABS Retail Trade analysis, Woolworths had the leading market share in Australia of over 30% of food retailing (including supermarket and grocery stores, liquor retailing and other specialized food retailing) for the 2010 Fiscal Year and the 2011 Half Year. Woolworths is also Australia’s largest food and grocery retailer and the second largest food and grocery retailer in New Zealand by sales and number of stores, with 832 supermarkets in Australia and 159 supermarkets in New Zealand, is a major liquor retailer, operating 1,249 retail liquor outlets and 284 hotels, and a large discount department store, consumer electronics and petrol retailer with 164 stores, 409 stores and 590 outlets, respectively. Woolworths also provides wholesale services to 562 home improvement stores, 51 supermarkets in New Zealand and 61 electronic stores in India. Except as noted, all of the foregoing figures are as at January 2, 2011. Woolworths has demonstrated consistently strong financial performance. Sales and EBIT have exhibited strong growth over each of the past five years with a compound average growth rate (“CAGR”) for sales of 10.5% over the past five full fiscal years and an EBIT CAGR of 18.8% over the past five full fiscal years. In the 2010 Fiscal Year, Woolworths had total EBIT of A$3.1 billion representing growth over the prior year of 9.5%. In the 2011 Half Year EBIT grew by 6.2% compared to the 2010 Half Year. As at March 25, 2011, Woolworths had a market capitalization of A$31.8 billion (US$32.7 billion) and was one of the 15 largest companies listed on the ASX.

Woolworths’ activities are primarily conducted through the following operating groups:

• Australian Food and Liquor: Woolworths’ Australian supermarkets and retail liquor outlets and Australian supermarkets wholesale;

• New Zealand Supermarkets: Woolworths’ New Zealand Supermarkets and supermarkets wholesale;

• Petrol: Petroleum products retail outlets;

• BIG W: Discount department store operations;

• Consumer Electronics: Consumer electronics retail business in Australia and New Zealand and its wholesale business in India pursuant to its business venture with the TATA Group; and

• Hotels: Pub operations including bars, restaurants, gaming and accommodations (but excluding any retail liquor outlets).

These operating groups are also Woolworths reportable segments under AIFRS. In addition, Woolworths’ unallocated segment records unallocated items and eliminations and the results of operations of its head office, property division and Home Improvement division.

34 Key drivers of consolidated results

The key drivers of Woolworths’ results in recent periods have been:

• a solid track record of growing its business, primarily its core food and liquor business, through a focus on customer service and an improved product offering, and through reducing operating costs and reinvesting these costs into lower prices to consumers to increase sales volumes;

• consistent roll out of new stores;

• focus on expanding existing categories, such as liquor, petrol, consumer electronics, hotels and, more recently, expanding into the new home improvement business category;

• growth through bolt-on acquisitions;

• the entrenched market shares in Australia maintained through a portfolio of well-respected retail formats at prime locations; and

• stable operating cash flows, supported by the strength of its food and liquor business and the Australian government’s stimulus package during the 2009 Fiscal Year, which is not expected to contribute to its business going forward.

Australian Food and Liquor

Australian Food and Liquor accounted for 78.6% of Woolworths EBIT for the 2011 Half Year and as a result, factors affecting Australian Food and Liquor have a significant impact on Woolworths’ consolidated results. As a provider of food, groceries, and packaged liquor, Australian Food and Liquor margins are not as susceptible to phases of the economic cycle as are some other industries where sales are dependent on discretionary consumer expenditure. However, there is strong competition in the food retailing industry in Australia and the impact of this competition tends to impact the results for the group. In addition to these broader factors and the key factors described above that have affected Woolworths’ consolidated results, the key drivers of Australia Food and Liquor results in the 2008, 2009 and 2010 Fiscal Years and the 2011 Half Year have been:

• achieving cost efficiencies while encouraging customer loyalty through substantially investing in price;

• organic growth through the rollout of additional stores and refurbishment of existing stores;

• expansion of Woolworths’ exclusive brands;

• expansion of liquor sales through organic growth and acquisitions;

• low food price inflation in the 2011 Half Year of 2.2% (0.5% after removing the effects of the increased tobacco excise tax) and 1.1% in the 2010 Fiscal Year (0.7% after removing the effects of the increased tobacco excise tax), after food price inflation of 4.1% in the 2009 Fiscal Year and 2.9% in the 2008 Fiscal Year;

• improvements in buying, including the benefits gained by increased activity through overseas buying offices; and

35 • increased customer engagement in the 2010 Fiscal Year through the expansion of the Everyday Rewards program through its partnership with the Qantas Frequent Flyer program.

New Zealand Supermarkets

The key drivers of New Zealand Supermarkets results in the 2008, 2009 and 2010 Fiscal Years and the 2011 Half Year have been:

• completed integration process;

• transitioning to a single brand with 80% of stores trading as Countdown at January 2, 2011;

• encouraging customer loyalty through lowering prices;

• organic growth through the rollout of additional stores and refurbishment of existing stores;

• expanding Woolworths’ exclusive brands into New Zealand Supermarkets;

• low food price inflation in the 2011 Half Year of 0.6% and 0.9% in the 2010 Fiscal Year, after food price inflation of 5.8% in the 2009 Fiscal Year and 3.1% in the 2008 Fiscal Year; and

• improvements in buying, including the benefits gained by increased activity through overseas buying offices.

Petrol

Petrol is an adjunct to Woolworths’ supermarkets business, creating incremental store sales through a petrol discount program that currently offers a discount of 4 cents per liter of petrol for customers that purchase A$30 or more from a Woolworths supermarket.

BIG W

Products sold by BIG W are more likely to be discretionary spend items and, as such, BIG W could be considered more sensitive than Supermarkets to the state of the overall economy and the impact of factors that would reduce the amount of discretionary income, such as higher interest rates and increases in petrol prices. However, as a discount department store, Woolworths believes BIG W is less sensitive to economic conditions than other non-food retail offerings. In addition, as with Supermarkets, the impact of competition tends to impact BIG W’s results. In addition to these broader factors and the key factors described above that have affected Woolworths’ consolidated results, the key factors affecting BIG W’s results in the 2008, 2009 and 2010 Fiscal Years and the 2011 Half Year have been:

• BIG W’s everyday low price proposition, in which it aims to offer a range of national brands at competitive prices (the “BIG W price”), underwritten by ongoing cost reductions;

• organic growth through the rollout of additional stores and refurbishment of existing stores;

• increased spending by consumers on discretionary goods as a result of the Australian government’s economic stimulus package during the 2009 Fiscal Year and the cycling of the stimulus in the 2010 Fiscal Year;

• lower consumer spending levels and subdued sales in the 2011 Half Year due to colder and wetter weather experienced over the peak Christmas trading period and significant price

36 deflation in home entertainment and apparel due to the strong Australian dollar with cost price reductions being passed onto the customer and increases in customer numbers and units sold more than offset by deflation for the 2011 Half Year;

• new product categories and improved product offerings through range optimization in line with BIG W’s strategy of becoming a destination for me, my home and family; and

• increased customer engagement in the 2010 Fiscal Year through the expansion of the Everyday Rewards program through its partnership with the Qantas Frequent Flyer program.

Consumer Electronics

The key drivers of Consumer Electronics’ results in the 2008, 2009 and 2010 Fiscal Years and the 2011 Half Year have been:

• transitioning and repositioning of the Dick Smith network of stores towards a multi-channel offering as Woolworths continues the turnaround of the Dick Smith business;

• increased spending by consumers on discretionary goods as a result of the Australian government’s stimulus package during the 2009 Fiscal Year and the cycling of the stimulus in the 2010 Fiscal Year;

• tightened consumer spending in Australia with increased consumer savings levels in the 2011 Half Year;

• significant price deflation in key products due to technological change which was exacerbated by the strong Australian dollar in the 2011 Half Year;

• the evolution of Dick Smith stores to become a “full service” destination for customers, offering after-sale services such as installation and repair services;

• significant overhaul of the website, www.dicksmith.com.au, which was relaunched in August 2009. The refreshed site has created an improved online shopping experience and has received positive feedback from customers regarding its ease of use. As a result, online channel sales in the 2010 Fiscal Year more than doubled the online sales achieved in the 2009 Fiscal Year and continued to gain momentum in the 2011 Half Year; and

• increased customer engagement in the 2010 Fiscal Year through the expansion of the Everyday Rewards program through its partnership with the Qantas Frequent Flyer program in Australia.

Hotels

Woolworths’ Hotels business is an adjunct to the liquor business and has underpinned growth in that business. The Hotels business comprises pubs with bars, restaurants, gaming and accommodation, of which the majority of the profits tend to come from gaming revenue. In addition, because most pubs in Australia generally have attached liquor stores, the expansion of the hotels business allows for expansion of Woolworths’ retail liquor offering. The hotels business was positively impacted by the Australian government’s economic stimulus package during the 2009 Fiscal Year and the cycling of the stimulus in the 2010 Fiscal Year. Gaming revenues are the largest contributor to revenue and EBIT of Hotels. The largest risk to the gaming sector is regulatory risk, such as limitations on trading hours and smoking bans, which impacts

37 profitability. Queensland has recently limited trading hours for hotels and smoking bans have been introduced across all states of Australia, and although these bans tend to have an initial detrimental impact on gaming revenues, gaming revenues have tended to return to historical growth rates. In addition, the gaming industry in Australia is subject to strict regulatory requirements. For example, Victoria recently implemented regulations that place limits on both maximum bets and daily withdrawal limits from ATMs located in gaming facilities.

Critical accounting policies

Woolworths significant accounting policies are described in Note 1 in Woolworths annual consolidated financial statements included in this offering memorandum. The preparation of these financial statements requires Woolworths to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, Woolworths evaluates its estimates, including those related to bad debts, inventories, vendor funds, intangible assets, income taxes, recoverability of non-current assets, self-insurance, contingencies and litigation. Woolworths bases its estimates on historical experience and on various other assumptions and factors that are considered to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Woolworths, based on its ongoing review, will make adjustments to its judgments and estimates where facts and circumstances dictate. Historically, actual results have not differed significantly from those determined using the estimates described above.

The following disclosure is intended to provide an understanding of those significant accounting policies that require management to make subjective judgments or estimates that could be deemed to be critical, and their impact on Woolworths consolidated financial statements.

The following are considered to be critical accounting policies of Woolworths:

Properties

Freehold warehouse, retail, development and other properties are held at the lower of cost less accumulated depreciation and recoverable value.

Borrowing, holding and development costs on property under development are capitalized until completion of the development.

At balance date, the carrying amount of tangible assets is reviewed to determine whether there is an indication that the assets may be impaired. If such an indication exists the recoverable amount of the asset, which is the higher of its fair value less costs to sell and its value in use, is estimated in order to determine the extent of any impairment loss.

Inventories

Short life retail stocks are valued at the lower of average cost and net realizable value. Long life retail stocks are valued using the retail inventory method to arrive at cost. The retail inventory method determines cost by reducing the value of the inventory by the appropriate gross margin percentage which takes into account markdown prices. Warehouse stocks are valued at the lower of average cost and net realizable value.

38 These methods of valuation are considered to achieve a valuation reasonably approximating the lower of cost and net realizable value. Cost includes all purchase-related rebates, settlement discounts and other costs incurred to bring inventory to its condition and location for sale.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Recoverable amounts of non-current assets

The carrying amounts of all non-current assets are reviewed annually and, where appropriate, relevant assets are written down to their recoverable amount.

Determination of recoverable amount requires Woolworths to make assumptions and use estimates. Historical experience has shown that management’s judgment on these issues has been reasonably accurate. Woolworths considers the assumptions used in these calculations to be reasonable and supportable in the existing economic environment.

Goodwill

Goodwill represents the difference between the cost of an acquisition and the fair value of the net identifiable assets acquired. Goodwill is not amortized, but tested for impairment annually and whenever an indication of impairment exists. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units. Any impairment is recognized directly in the income statement and is not subsequently reversed.

In respect of business combinations prior to June 27, 2004, goodwill is included on the basis of its deemed cost, which represents the amount recorded under previous Australian GAAP. As part of its transition to AIFRS, the consolidated entity elected to restate only those business combinations that occurred on or after June 27, 2004.

In respect of business combinations since June 27, 2004, all business combinations are accounted for by applying the purchase method. Entities and businesses acquired are accounted for using the cost method of accounting, whereby fair values are assigned to all the identifiable underlying assets acquired and liabilities assumed, including contingent liabilities, at the date of acquisition.

Liquor and gaming licenses

Liquor and gaming licenses are valued at cost. The cost of acquired liquor and gaming licenses are determined by reference to a combination of independent valuations and internal assessments by liquor specialists performed on the acquisition of businesses. Liquor and gaming licenses are considered to have an indefinite useful life and as a result, no amortization has been charged. They are tested for impairment annually and whenever an indication of impairment exists. Any impairment is recognized immediately in profit or loss.

Other intangibles

Brand names and other intangible assets (stated at cost) recognized by the company are generally considered to have an indefinite useful life and are not amortized. Each period, the useful life of such assets is reviewed to determine whether events and circumstances continue to support an indefinite useful life assessment for the asset. Such assets are tested for impairment in accordance with the Woolworths’ policy.

39 For intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated annually and whenever there is an impairment indicator.

An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit (‘CGU’) exceeds its recoverable amount. Impairment losses are recognized in the income statement.

Expenditure on internally generated goodwill and brand names is recognized in profit or loss as an expense as incurred.

Self-insurance

Woolworths is primarily self-insured for workers’ compensation and public liability claims. Woolworths records provisions for its self-insurance liability based on independent actuarial assessments, which consider numbers, amounts and duration of claims, and allow for future inflation and investment returns. Allowance is included for injuries which occurred before the balance sheet date, but where the claim is expected to be notified after the reporting date. Provisions are discounted using the Commonwealth Government bond rate with a maturity date approximating the term of Woolworths’ obligation. Any actuarial projection of ultimate losses is subject to a high degree of variability. Sources of this variability are numerous and include, but are not limited to, discount rates, future development of previous claims, future economic conditions, court decisions and legislative actions.

Legal contingencies

Woolworths records provisions for legal contingencies when the information available to Woolworths indicates that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Predicting the outcomes of claims and litigation and estimating related costs and exposures involve substantial uncertainties that could cause actual costs to vary materially from estimates. In addition, Woolworths regularly monitors its exposure to the loss contingencies associated with these matters and may from time to time change its predictions with respect to outcomes and its estimates with respect to related costs and exposures. It is possible that differences in actual outcomes, costs and exposures relative to current predictions and estimates, or material changes in such predictions or estimates, could have a material adverse effect on Woolworths’ financial condition, results of operations or cash flows.

40 Results of operations

Consolidated results

The following table sets forth Woolworths’ consolidated results for the periods presented.

27 weeks ended the first Sunday of 52 weeks ended the last January, Sunday of June, (in A$ millions) 2011 2010 2010 2009 2008(1) Sales revenues (sales of goods) ...... 28,302.7 27,202.5 51,694.3 49,594.8 47,034.8 Cost of goods sold(2) ...... (20,932.6) (20,162.8) (38,300.7) (36,871.4) (35,134.5) Gross profit 7,370.1 7,039.7 13,393.6 12,723.4 11,900.3 Selling, general and administrative expenses ...... (4,347.3) (4,187.7) (8,035.9) (7,768.8) (7,405.5) Rent (including fitout rent) ...... (795.5) (762.8) (1,477.9) (1,409.7) (1,315.9) Depreciation and amortization ...... (440.3) (406.0) (797.7) (729.4) (650.1) Cost of doing business ...... (5,583.1) (5,356.5) (10,311.5) (9,907.9) (9,371.5) Earnings before interest and tax (EBIT) .. 1,787.0 1,683.2 3,082.1 2,815.5 2,528.8 Net financing cost ...... (132.0) (110.0) (211.5) (189.2) (191.3) Net profit before tax 1,655.0 1,573.2 2,870.6 2,626.3 2,337.5 Income tax expense ...... (479.4) (464.0) (832.6) (766.3) (686.0) Net profit after Tax 1,175.6 1,109.2 2,038.0 1,860.0 1,651.5 Non-controlling interest ...... (13.9) (13.6) (17.2) (24.3) (24.7) Net profit attributable to members of Woolworths Limited ...... 1,161.7 1,095.6 2,020.8 1,835.7 1,626.8 Other financial data (in A$ millions, except for percentages) CODB to sales revenue (%) ...... 19.73 19.69 19.95 19.98 19.92 Funds employed(3) ...... 10,882.9 9,653.3 10,575.7 9,319.3 8,315.9 Return on Funds Employed (%) ...... 16.66 17.74 30.98 31.93 31.38 EBIT to sales revenue (%) ...... 6.31 6.19 5.96 5.68 5.38

(1) Reflects 53 weeks of financial results. (2) Cost of goods sold as presented in the table above represents cost of goods sold in the financial statements net of other operating revenue. (3) Funds employed is equal to net assets, excluding net tax balances (being current tax liabilities, deferred tax assets and deferred tax liability), net repayable debt (being current and non-current interest bearing liabilities less cash on hand, cash at bank and cash on short term deposit and assets and liabilities as a result of hedging per AASB 139 Financial Instruments: Recognition and Measurement) and provision for dividends.

Sales revenue

Woolworths’ consolidated sales revenue for the 2011 Half Year increased A$1.1 billion, or 4.0% over consolidated sales revenue for the 2010 Half Year of A$27.2 billion. Woolworths’ consolidated sales revenue for the 2010 Fiscal Year increased A$2.1 billion, or 4.2% over consolidated sales revenue for the 2009 Fiscal Year of A$49.6 billion. For the 2009 Fiscal Year, Woolworths’ consolidated sales revenue increased 7.5% (on a 52 week basis)2 over consolidated sales revenue for the 2008 Fiscal Year of A$47.0 billion.

2 Adjusted to reflect the removal of the 53rd week in 2008. Including the 53rd week in the 2008 Fiscal Year, 2009 Fiscal Year sales growth was 5.4%.

41 The increase in consolidated sales revenue for the 2011 Half Year was primarily due to:

• an increase in Australian Food and Liquor sales of 3.5%, achieved through increased market share particularly in fresh food and liquor, increases in customer numbers, basket size and items sold, tempered by price deflation;

• an increase in New Zealand Supermarkets of 4.1 % (in New Zealand dollar terms) reflecting the improved customer offer in New Zealand through the roll out of new format stores, the conversion of stores to the value positioned Countdown brand, market share growth and improvements in ranging and private label offers, tempered by low levels of food price inflation;

• an increase in petrol revenue by 5.9%, reflecting increases in average fuel sell prices and increased volume of liters sold by 2.3%; and

• the opening of 115 new stores, including 12 supermarkets in Australia, 41 liquor outlets in Australia and 31 consumer electronics stores in Australia and New Zealand, and the refurbishment of 139 stores in the 2011 Half Year.

The increase in consolidated sales revenue for the 2010 Fiscal Year was primarily due to:

• an increase in Australian Food and Liquor sales of 5.1%, achieved through volume and market share growth and increased customer numbers, items sold and basket size driven by lower shelf prices combined with the Everyday Rewards program in Australia;

• an increase in New Zealand Supermarkets of 4.6% (in New Zealand dollar terms) reflecting benefits of the completed business foundation transformation in New Zealand, conversion to the value positioned Countdown brand, improvements in ranging and private label offers and improved in-stock position, tempered by mild levels of food inflation;

• the opening of 157 new stores during the 2010 Fiscal Year, including 26 supermarkets in Australia, eight Thomas Dux stores in Australia, four supermarkets in New Zealand, six BIG W stores, 24 Dick Smith stores, 55 liquor stores, 20 Woolworths Petrol outlets, six hotels and eight Danks home improvement retail stores; and

• continued strong customer response to Woolworths’ ongoing store refurbishment program, with 62 Australian supermarket stores, 33 New Zealand supermarket stores, 11 BIG W stores and 55 consumer electronics stores refurbished in the 2010 Fiscal Year.

The increase in consolidated sales revenue for the 2009 Fiscal Year was primarily due to:

• an increase in Australian Food and Liquor sales of 9.6% (on a 52 week basis)3 achieved through volume and market share growth, reflecting strong customer acceptance of key strategic initiatives such as price reinvestment, new store formats and the Everyday Rewards program in Australia;

• an increase in New Zealand Supermarkets of 3.9% (on a 52 week basis)4 (in New Zealand dollar terms) and the benefits of business improvements in supply chain, service levels, refurbishments and amenity initiatives;

3 Adjusted to reflect the removal of the 53rd week in 2008. Including the 53rd week in the 2008 Fiscal Year, 2009 Fiscal Year sales growth was 7.6%. 4 Adjusted to reflect the removal of the 53rd week in 2008. Including the 53rd week in the 2008 Fiscal Year, 2009 Fiscal Year sales growth was 2.0% (in New Zealand dollar terms).

42 • an increase in BIG W sales of 10.5% (on a 52 week basis)5, assisted by increased spending on discretionary goods as a result of the Australian government’s economic stimulus package;

• an increase in Consumer Electronic sales of 14.6% (on a 52 week basis)6, assisted by increased spending on discretionary goods as a result of the Australian government’s economic stimulus package;

• the opening of 195 new stores during the 2009 Fiscal Year, including 28 supermarkets in Australia, two Thomas Dux supermarkets, three supermarkets in New Zealand, five BIG W stores, 51 Dick Smith stores, 73 liquor stores, 21 Woolworths Petrol outlets and 12 hotels; and

• strong customer response to Woolworths’ ongoing store refurbishment program, with 138 Australian supermarket stores, 24 New Zealand supermarket stores, 130 retail liquor stores, 12 BIG W stores and 28 Consumer Electronics stores refurbished in the 2009 Fiscal Year.

Cost of goods sold and gross profit

Woolworths’ costs of goods sold for the 2011 Half Year increased A$770 million, or 3.8% over cost of goods sold for the 2010 Half Year of A$20.2 billion. Gross profit increased 0.16 percentage points for the 2011 Half Year from 25.88% in the 2010 Half Year to 26.04% in the 2011 Half Year. The primary drivers of this increase in gross profit were:

• benefits from supply chain initiatives, including reductions in direct-to-store deliveries as a result of the use of distribution centers;

• improved rates of shrinkage;

• improvements in buying, including the benefits gained by increased activity through overseas buying offices;

• improvements in freight costs, as a direct result of freight saving initiatives;

• expansion and improvement of Woolworths’ higher margin exclusive brands; and

• change in sales mix from the rollout of new store formats.

Woolworths’ costs of goods sold for the 2010 Fiscal Year increased A$1.4 billion, or 3.9% over cost of goods sold for the 2009 Fiscal Year of A$36.9 billion. Gross profit increased 0.25 percentage points for the 2010 Fiscal Year from 25.66% in the 2009 Fiscal Year to 25.91% in the 2010 Fiscal Year. The primary drivers of this increase in gross profit were:

• benefits from supply chain initiatives, including reductions in direct-to-store deliveries as a result of the use of distribution centers;

• improved rates of shrinkage;

• improvements in buying, including the benefits gained by increased activity through overseas buying offices;

5 Adjusted to reflect the removal of the 53rd week in 2008. Including the 53rd week in the 2008 Fiscal Year, 2009 Fiscal Year sales growth was 9.0%. 6 Adjusted to reflect the removal of the 53rd week in 2008. Including the 53rd week in the 2008 Fiscal Year, 2009 Fiscal Year sales growth was 12.6%.

43 • improvements in freight costs, as a direct result of freight saving initiatives;

• expansion and improvement of Woolworths’ higher margin exclusive brands; and

• change in sales mix from the rollout of new store formats.

For the 2009 Fiscal Year, Woolworths’ costs of goods sold increased A$1.7 billion, or 4.9% over costs of goods sold for the 2008 Fiscal Year of A$35.1 billion. Gross profit increased 0.36 percentage points for the 2009 Fiscal Year from 25.30% in the 2008 Fiscal Year to 25.66% in the 2009 Fiscal Year. The primary drivers of this increase in gross profit were:

• benefits from supply chain initiatives, including reductions in direct-to-store deliveries as a result of the use of distribution centers;

• improved rates of shrinkage;

• improvements in buying, including the benefits gained by increased activity through overseas buying offices;

• improvements in freight costs, as a direct result of freight saving initiatives;

• expansion and improvement of Woolworths’ higher margin exclusive brands; and

• change in sales mix from the rollout of new store formats.

Cost of doing business

Cost of doing business (“CODB”) is equal to selling, general and administrative expenses plus rent, depreciation and amortization. Selling, general and administrative expenses is equal to other non-operating revenue from ordinary activities, share of net profits of equity accounted associates and branch and administration expenses, less depreciation and rent. Because one of Woolworths’ main strategies is the lowering of prices to drive sales volumes, underpinned by strong cost control and increased efficiencies as a result of various initiatives, Woolworths focuses on reducing its cost of doing business as a percentage of sales revenue, or CODB margin. As a result, Woolworths believes it is more meaningful to investors in understanding its operating results to discuss movements in CODB margin as opposed to movements in CODB on an absolute basis. Woolworths began its Project Quantum initiative in the 2010 Fiscal Year which in future periods is expected to reduce Woolworths’ CODB through improving efficiencies in support structures, expansion of its end-to-end supply chain, and lowering procurement costs.

44 The following table shows Woolworths’ CODB and CODB margin for the periods presented.

27 weeks ended the first Sunday of 52 weeks ended the last January, Sunday of June, (in A$ millions) 2011 2010 2010 2009 2008(1) Branch expenses(2) ...... 4,400.7 4,163.7 8,165.4 7,800.4 7,330.5 Administration expenses(3) ...... 1,296.2 1,278.5 2,325.4 2,255.9 2,205.0 Less depreciation and amortization (included below) ...... (440.3) (406.0) (797.7) (729.4) (650.1) Less rent (included below) ...... (795.5) (762.8) (1,477.9) (1,409.7) (1,315.9) Other non-operating revenue from ordinary activities ...... (113.9) (85.2) (179.3) (148.4) (129.6) Other income ...... — — — — (34.4) Share of profits/(losses) of associated and jointly controlled entities accounted for using the equity method ...... 0.1 (0.5) — — —

Selling, general and administrative expenses ...... 4,347.3 4,187.7 8,035.9 7,768.8 7,405.5 Operating lease rental expenses: Minimum lease payments ...... 752.0 714.3 1,390.8 1,313.5 1,223.3 Contingent rentals ...... 43.5 48.5 87.1 96.2 92.6

Total rent expenses ...... 795.5 762.8 1,477.9 1,409.7 1,315.9 Depreciation and amortization ...... 440.3 406.0 797.7 729.4 650.1

Cost of doing business ...... 5,583.1 5,356.5 10,311.5 9,907.9 9,371.5 CODB to sales revenue (%) ...... 19.73 19.69 19.95 19.98 19.92

(1) Reflects 53 weeks of financial results. (2) Branch expenses includes all expenses associated with Woolworths’ store network, including employee expenses, rent, depreciation and amortization. (3) Administration expenses includes all expenses associated with Woolworths’ operations other than the store network, including employee expenses, rent, depreciation and amortization.

CODB margin increased by 0.04 percentage points from 19.69 % in the 2010 Half Year to 19.73 % in the 2011 Half Year, reflecting the effects of low to negative sell price inflation while serving a significantly increased number of customers.

CODB margin decreased by 0.03 percentage points from 19.98% in the 2009 Fiscal Year to 19.95% in the 2010 Fiscal Year. Excluding the distorting impacts of Hotels and Petrol and the provision release in the 2009 Fiscal Year, CODB reduced by more than 0.20 percentage points in the 2010 Fiscal Year. This was underpinned by strong cost reductions in Australia Food and Liquor and New Zealand Supermarkets. CODB on an absolute dollar basis increased in the periods presented, in line with increased sales revenue.

CODB margins increased by 0.06 percentage points to 19.98% in the 2009 Fiscal Year from 19.92% in the 2008 Fiscal Year. Excluding the distorting impacts of Hotels and Petrol and profits from the sale of development properties that were not repeated in subsequent years, CODB reduced by more than 0.20 percentage points in the 2009 Fiscal Year. This was underpinned by strong cost reductions in Australia Food and Liquor and BIG W assisted by continued fractionalization of fixed costs being achieved through solid sales growth.

45 Rent expenses

Rent expenses includes base rent, rent that is contingent on revenues, fitout rents and rental expense for leased equipment. Rent expenses for the 2011 Half Year was A$795.5 million, an increase of A$32.7 million, or 4.3% over rent expenses for the 2010 Half Year of A$762.8 million. Rent expenses for the 2010 Fiscal Year was A$1,477.9 million, an increase of A$68.2 million, or 4.8% over rent expenses for the 2009 Fiscal Year of A$1,409.7 million.

Rent expenses for the 2009 Fiscal Year increased A$93.8 million, or 7.1% over rent expense for the 2008 Fiscal Year of A$1,315.9 million.

These increases were primarily due to rent expenses rising in line with increased sales revenue and the opening of new retail stores, with 115 new stores opened in the 2011 Half Year, 157 new stores opened during the 2010 Fiscal Year and 195 new stores opened during the 2009 Fiscal Year.

Depreciation and amortization expense

Depreciation and amortization expenses for the 2011 Half Year was A$440.3 million, an increase of A$34.3 million, or 8.4% over the 2010 Half Year of A$406.0 million. Depreciation and amortization expenses for the 2010 Fiscal Year was A$797.7 million, an increase of A$68.3 million, or 9.4% over the 2009 Fiscal Year of A$729.4 million. Depreciation and amortization expense for the 2009 Fiscal Year increased by A$79.3 million, or 12.2% over depreciation expense for the 2008 Fiscal Year of A$650.1 million.

The increases in depreciation and amortization in the 2011 Half Year and the 2010 and 2009 Fiscal Years were primarily due to the opening of 115, 157 and 195 new stores respectively, improvements in Woolworths’ store networks through 139 refurbishments in the 2011 Half Year, 272 refurbishments in the 2010 Fiscal Year and 360 refurbishments in the 2009 Fiscal Year across Supermarkets, BIG W and Consumer Electronics to ensure store formats continue to evolve to meet changing customer needs and continued investment in supply chain initiatives to achieve further cost savings and efficiencies.

EBIT and EBIT margin

The following table shows Woolworths’ EBIT for the periods presented.

(1) Reflects 53 weeks of financial results. (2) Cost of goods sold as presented in the table above represents cost of goods sold in the financial statements net of other operating revenue.

46 EBIT for the 2011 Half Year increased to A$1.8 billion, or 6.2% over EBIT of A$1.7 billion for the 2010 Half Year, again growing faster than sales. EBIT for the 2010 Fiscal Year increased to A$3.1 billion, or 9.5% over EBIT of A$2.8 billion for the 2009 Fiscal Year. EBIT for the 2009 Fiscal Year increased A$286.7 million, or 11.3% over EBIT for the 2008 Fiscal Year of A$2.5 billion.

These increases in EBIT in the 2011 Half Year and the 2010 and 2009 Fiscal Years were primarily due to sales growth in the Australian and New Zealand supermarkets divisions, combined with improvements in gross margin as a result of:

• benefits from supply chain initiatives, including reductions in direct-to-store deliveries as a result of the use of distribution centers;

• improved rates of shrinkage;

• improvements in buying, including the benefits gained by increased activity through overseas buying offices;

• improvements in freight costs, as a direct result of freight saving initiatives;

• expansion and improvement of Woolworths’ higher margin exclusive brands; and

• change in sales mix from the rollout of new store formats.

The increase in EBIT in the 2009 Fiscal Year was also due to an increased contribution to EBIT from BIG W partly as a result of increased spending related to the Australian government’s economic stimulus package.

EBIT margin increased by 0.12 percentage points from 6.19% in the 2010 Half Year to 6.31% in the 2011 Half Year. EBIT Margin increased by 0.28 percentage points from 5.68% in the 2009 Fiscal Year to 5.96% in the 2010 Fiscal Year. EBIT margin increased by 0.30 percentage points from 5.38% in the 2008 Fiscal Year to 5.68% in the 2009 Fiscal Year. The increases in the EBIT margins in the 2011 Half Year and the 2010 and 2009 Fiscal Years were primarily due to the improvements in gross margin in the Australia and New Zealand supermarkets divisions discussed above.

Net interest expense

Net interest expense for the 2011 Half Year was A$138.5 million, an increase of A$20.7 million over net interest expense for the 2010 Half Year of A$117.8 million, resulting from interest expense of A$161.0 million less capitalized interest of A$22.5 million. This increase was primarily due to increased levels of debt related to the funding of capital expenditure of development properties and the two share buy-backs completed over the 12 months ended January 2, 2011.

Net interest expense for the 2010 Fiscal Year was A$227.3 million, an increase of A$5.1 million over net interest expense for the 2009 Fiscal Year of A$222.2 million, resulting from interest expense of A$257.4 million less capitalized interest of A$30.1 million. This increase was primarily due to increased levels of debt related to the funding of capital expenditure increases and to a lesser extent, a slight increase in interest rates in floating rate debt.

Net interest expense for the 2009 Fiscal Year increased A$12.6 million, or 6.0% over net interest expense for the 2008 Fiscal Year of A$209.6 million, resulting from interest expense of A$239.6 million less capitalized interest of A$17.4 million. This increase was primarily due to

47 increased levels of debt related to the funding of capital expenditure increases, slightly offset by a change in accounting standards that increased capitalized interest and a reduction in interest rates on floating rate debt.

Income tax expense

The Australian corporate tax rate in the 2011 Half Year and the 2010, 2009 and 2008 Fiscal Years was 30%. Woolworths effective income tax rate throughout the period has been approximately equal to the Australian corporate tax rate.

Net profit

The following table shows Woolworths’ net profit before and after tax for the periods presented.

27 weeks ended the first 52 weeks ended the last Sunday of January, Sunday of June, (in A$ millions) 2011 2010 2010 2009 2008(1) Earnings before interest and tax ...... 1,787.0 1,683.2 3,082.1 2,815.5 2,528.8 Interest expense less interest income .... (161.0) (130.4) (257.4) (239.6) (214.0) Less interest capitalized ...... 22.5 12.6 30.1 17.4 4.4 Net interest expense ...... (138.5) (117.8) (227.3) (222.2) (209.6) Dividend income ...... 5.3 6.4 12.5 7.8 14.7 Foreign exchange gain/ loss ...... 1.2 1.4 3.3 25.2 3.6 Net financing costs ...... (132.0) (110.0) (211.5) (189.2) (191.3) Net profit before tax ...... 1,655.0 1,573.2 2,870.6 2,626.3 2,337.5 Income tax expense ...... (479.4) (464.0) (832.6) (766.3) (686.0) Net profit after tax ...... 1,175.6 1,109.2 2,038.0 1,860.0 1,651.5 Non-controlling interest ...... (13.9) (13.6) (17.2) (24.3) (24.7) Net profit attributable to members of Woolworths Limited ...... 1,161.7 1,095.6 2,020.8 1,835.7 1,626.8

(1) Reflects 53 weeks of financial results.

Woolworths’ net profit after tax increased by 12.6% from A$1,651.5 million in the 2008 Fiscal Year to A$1,860.0 million in the 2009 Fiscal Year, by 9.6% in the 2010 Fiscal Year to A$2,038 million and by 6.0% in the 2011 Half Year over the 2010 Half Year to A$1,175.6 million. Woolworths’ net profit after tax in each of the Fiscal Years was driven by the factors discussed above, principally increases in sales revenue and improvements in gross margin in the Australia and New Zealand supermarkets divisions combined with relatively steady COBD margins in these businesses.

Funds employed

Funds employed is equal to net assets, excluding net tax balances (being current tax liabilities, deferred tax assets and deferred tax liability), net repayable debt (being current and non-current interest bearing liabilities less cash on hand, cash at bank and cash on short term deposit and assets and liabilities as a result of hedging per AASB 139: Financial Instruments: Recognition and Measurement) and provision for dividends. Woolworths calculates Return on Funds Employed (“ROFE”) by dividing EBIT by the average of the opening and closing balance of funds employed for the year. The following table sets forth Woolworths’ funds employed and ROFE for the periods presented.

48 27 weeks ended the first 52 weeks ended the last Sunday of January, Sunday of June, (in A$ millions, except for percentages) 2011 2010 2010 2009 2008(1) Inventory ...... 3,989.6 3,718.9 3,438.8 3,292.6 3,010.0 Accounts payable ...... (4,917.8) (4,836.1) (4,211.2) (4,055.1) (3,878.1) Net investment in inventory ...... (928.2) (1,117.2) (772.4) (762.5) (868.1) Fixed assets and investments ...... 8,296.8 7,304.3 7,802.9 6,822.2 5,825.5 Intangibles ...... 4,975.0 5,029.6 5,071.0 4,933.1 4,835.2 Receivables and other assets ...... 1,106.8 964.1 930.1 666.9 641.4 Other creditors and provisions ...... (2,567.5) (2,527.5) (2,455.9) (2,340.4) (2,118.1) Funds employed(2) ...... 10,882.9 9,653.3 10,575.7 9,319.3 8,315.9 Average funds employed(3) ...... 10,729.3 9,486.3 9,947.5 8,817.6 8,059.6 EBIT ...... 1,787.0 1,683.2 3,082.1 2,815.5 2,528.8 Return on funds employed (%)(4) ...... 16.66 17.74 30.98 31.93 31.38

(1) Reflects 53 weeks of financial results. (2) Funds employed is equal to net assets, excluding net tax balances (being current tax liabilities, deferred tax assets and deferred tax liability), net repayable debt (being current and non-current interest bearing liabilities less cash on hand, cash at bank and cash on short term deposit and assets and liabilities as a result of hedging per AASB 139 Financial Instruments: Recognition and Measurement) and provision for dividends. (3) Average funds employed is equal to the average of the opening and closing balance of funds employed for the year. (4) Return on Funds Employed is EBIT divided by the average of Funds Employed at the beginning of the period and Funds Employed at the end of the period, expressed as a percentage. Return on Funds Employed for the 2011 Half Year and 2010 Half Year is shown for the respective 27 week period only and is not annualized.

Funds employed for the 2011 Half Year increased to A$10.9 billion, an increase of A$1.2 billion or 12.7% over funds employed of A$9.7 billion for the 2010 Half Year, primarily due to investment in Woolworths’ store network offset in part by depreciation and higher inventory levels reflecting the lower than expected December 2010 trading.

Funds employed for the 2010 Fiscal Year increased to A$10.6 billion, an increase of A$1.3 billion or 13.5% over funds employed of A$9.3 billion for the 2009 Fiscal Year, primarily due to investment in the Woolworths’ store network offset by depreciation.

Funds employed for the 2009 Fiscal Year increased by A$1.0 billion, or 12.1% over funds employed for the 2008 Fiscal Year of A$8.3 billion.

ROFE decreased to 16.66% in the 2011 Half Year from 17.74% in the 2010 Half Year. This was primarily due to increased inventory levels reflecting the lower than expected December 2010 trading and increased property development activity. ROFE decreased to 30.98% in the 2010 Fiscal Year from 31.93% in the 2009 Fiscal Year. This was primarily due to increased funds being invested into the business, specifically for the opening of new stores and the improvement of the Woolworths’ store network through undertaking refurbishments, as well as continued investment in supply chain initiatives to achieve further cost savings and efficiencies and a decrease in the rate of EBIT growth in the 2010 Fiscal Year as compared to the 2009 Fiscal Year. ROFE increased by 0.55 percentage points from 31.38% in the 2008 Fiscal Year to 31.93% in the 2009 Fiscal Year. This increase was primarily due to benefits of increased spend on continued roll out of new stores, refurbishment activity and further investment in supply chain initiatives to continue to achieve a competitive advantage in this area.

49 Segment results The following table sets forth the operating revenue and EBIT from continuing operations by division over the past three years. 27 weeks ended the first Sunday of January, 52 weeks ended the last Sunday of June 2011 2010 2010 2009 2008(1) (A$ millions) (% of Total) (A$ millions) (% of Total) (A$ millions) (% of Total) (A$ millions) (% of Total) (A$ millions) (% of Total) Operating revenue from Continuing Operations: Australian Food and Liquor(2) . . . 18,771.9 66.3 18,143.4 66.7 34,675.4 67.1 32,977.2 66.5 30,662.6 65.1 New Zealand Supermarkets . . 2,183.4 7.7 2,161.7 7.9 4,130.6 8.0 4,034.3 8.1 4,170.2 8.9 Petrol ...... 2,944.5 10.4 2,781.2 10.2 5,481.0 10.6 5,482.1 11.1 5,642.1 12.0

Total Supermarkets Division ...... 23,899.8 84.4 23,086.3 84.8 44,287.0 85.7 42,493.6 85.7 40,474.9 86.0 BIG W ...... 2,392.0 8.5 2,461.6 9.1 4,193.1 8.1 4,267.3 8.6 3,915.9 8.3 Consumer Electronics ..... 1,044.7 3.7 983.7 3.6 1,782.4 3.5 1,723.6 3.5 1,530.6 3.3

General Merchandise ... 3,436.7 12.2 3,445.3 12.7 5,975.5 11.6 5,990.9 12.1 5,446.5 11.6 Hotels ...... 611.9 2.2 591.2 2.2 1,102.0 2.1 1,110.3 2.2 1,113.4 2.4 Home Improvement ... 354.3 1.2 79.7 0.3 329.8 0.6 — — — —

Woolworths Sales ...... 28,302.7 100.0 27,202.5 100.0 51,694.3 100.0 49,594.8 100.0 47,034.8 100.0 EBIT Australian Food and Liquor(2) . . . 1,404.8 78.6 1,299.4 77.2 2,492.5 80.9 2,206.9 78.4 1,918.0 75.9 New Zealand Supermarkets . . 108.6 6.1 96.9 5.8 190.4 6.2 153.9 5.5 169.2 6.7 Petrol ...... 63.4 3.5 51.2 3.0 99.5 3.2 87.5 3.1 81.9 3.2

Supermarkets division ...... 1,576.8 88.2 1,447.5 86.0 2,782.4 90.3 2,448.3 87.0 2,169.1 85.8 BIG W ...... 125.0 7.0 150.8 9.0 200.0 6.5 200.2 7.1 161.2 6.4 Consumer Electronics ..... 22.3 1.2 34.8 2.0 31.5 1.0 50.8 1.8 63.1 2.5

General Merchandise ... 147.3 8.2 185.6 11.0 231.5 7.5 251.0 8.9 224.3 8.9 Hotels ...... 111.9 6.3 114.6 6.8 176.7 5.7 218.0 7.7 215.1 8.5

Total trading result ...... 1,836.0 102.7 1,747.7 103.8 3,190.6 103.5 2,917.3 103.6 2,608.5 103.2 Property income ...... 6.7 0.4 0.7 — 2.5 0.1 (7.2) (0.3) 33.1 1.3 Central overheads ...... (55.7) (3.1) (65.2) (3.8) (111.0) (3.6) (94.6) (3.3) (112.8) (4.5)

Total unallocated(3) ... (49.0) (2.7) (64.5) (3.8) (108.5) (3.5) (101.8) (3.6) (79.7) (3.2)

Woolworths EBIT ...... 1,787.0 100.0 1,683.2 100.0 3,082.1 100.0 2,815.5 100.0 2,528.8 100.0

(1) Reflects 53 weeks of financial results. (2) Includes Wholesale business previously reported separately. (3) Unallocated consists of Woolworths’ other operating segments that are not separately reportable (including Home Improvement) as well as various other support functions including property and head office costs.

50 Supermarkets

Supermarkets consists of Woolworths’ supermarkets, retail liquor outlets and petrol stations. The following table provides information relating to sales, gross margin, cost of doing business and EBIT for Supermarkets for the periods presented.

27 weeks ended the first 52 weeks ended the last Sunday of January, Sunday of June, (in A$ millions, except for percentages) 2011 2010 2010 2009 2008(1)

Sales revenue: Australia(2) Food and Liquor ...... 18,771.9 18,143.4 34,675.4 32,977.2 30,662.6 Petrol ...... 2,944.5 2,781.2 5,481.0 5,482.1 5,642.1 New Zealand Supermarkets ...... 2,183.4 2,161.7 4,130.6 4,034.3 4,170.2

Total ...... 23,899.8 23,086.3 44,287.0 42,493.6 40,474.9 Australia Gross margin ...... 5,385.7 5,108.2 9,842.3 9,249.5 8,502.6 Cost of doing business(3) ...... 3,917.5 3,757.6 7,252.3 6,955.1 6,502.7 New Zealand(4) Gross margin ...... 489.3 477.7 919.9 883.5 912.0 Cost of doing business(3) ...... 380.7 380.8 729.5 729.6 742.8 EBIT Australia(2) Food and Liquor ...... 1,404.8 1,299.4 2,492.5 2,206.9 1,918.0 Petrol ...... 63.4 51.2 99.5 87.5 81.9 New Zealand Supermarkets ...... 108.6 96.9 190.4 153.9 169.2

Total ...... 1,576.8 1,447.5 2,782.4 2,448.3 2,169.1 Other financial information Australia(2) Gross margin (%) ...... 24.80 24.41 24.51 24.05 23.42 Cost of doing business to sales (%) ...... 18.04 17.96 18.06 18.08 17.92 EBIT to sales (%) ...... 6.76 6.45 6.45 5.97 5.51 New Zealand(4) Gross margin (%) ...... 22.41 22.10 22.27 21.90 21.87 Cost of doing business to sales (%) ...... 17.44 17.62 17.66 18.09 17.81 EBIT to sales (%) ...... 4.97 4.48 4.61 3.81 4.06

(1) Reflects 53 weeks of financial results. (2) Includes Wholesale business previously reported separately. (3) Operating group CODB is calculated on an as incurred basis, with no allocation of corporate overhead costs to any of the operating groups. (4) On an Australian dollar basis.

51 Sales revenue

Australian Food and Liquor

Australian Food and Liquor sales increased 3.5% from the 2010 Half Year to the 2011 Half Year, 5.1% from the 2009 Fiscal Year to the 2010 Fiscal Year and 9.6% (on a 52 week basis)7 from the 2008 Fiscal Year to the 2009 Fiscal Year. Comparable store sales increased by 2.2% from the 2010 Half Year to the 2011 Half Year, 3.3% for the 2010 Fiscal Year, and 7.4% (on a 52 week basis) for the 2009 Fiscal Year. Woolworths’ retail liquor operations, including supermarkets attached liquor stores, Dan Murphy’s, BWS and ALH bar sales recorded sales for the 2011 Half Year of A$3.2 billion compared to A$3.1 billion for the 2010 Half Year, reflecting a 3.3% increase over the 2010 Half Year and recorded sales for the 2010 Fiscal Year of A$5.6 billion compared to A$5.2 billion in 2009, representing a 7.7% increase over the 2009 Fiscal Year. Total liquor sales for the 2009 Fiscal Year increased by 13.0% (on a 52 week basis)8 over the 2008 Fiscal Year.

The increase in each period was primarily due to increases in market share, customer numbers, volumes sold and basket size as a result of customer initiatives such as reduced shelf prices combined with the Everyday Rewards program, expansion of the Woolworths’ exclusive brands range, refurbishment activity and, to a lesser extent, food price inflation in the 2009 Fiscal Year. Increases in sales revenue in the 2011 Half Year and the 2010 Fiscal Year were tempered by low levels of food price inflation in those periods.

Sales results were positively impacted in each period by the opening of new supermarkets and retail liquor stores. Woolworths opened 12 new supermarkets and 41 new retail liquor outlets in the 2011 Half Year, and opened 26 new supermarkets during the 2010 Fiscal Year and opened 55 new retail liquor outlets, which increased total trading area for Australian supermarkets by 2.2% in the 2011 Half Year and 4.4% in the 2010 Fiscal Year. Australian supermarkets refurbished 41 stores in the 2011 Half Year and 62 stores in the 2010 Fiscal Year. During the 2009 Fiscal Year, Woolworths opened 28 new supermarkets and opened 73 new retail liquor outlets, which increased total trading area for Australian supermarkets by 4.7% over the 2008 Fiscal Year. Australian supermarkets refurbished 138 stores in the 2009 Fiscal Year.

Petrol

Petrol’s sales revenue for the 2011 Half Year was A$2.9 billion, an increase of 5.9% over the 2010 Half Year, reflecting higher average fuel prices and increased volume. Petrol’s sales revenue for the 2010 Fiscal Year was A$5.5 billion, in line with the 2009 Fiscal Year and decreased by 0.5% (on a 52 week basis)9 in the 2009 Fiscal Year from A$5.6 billion in the 2008 Fiscal Year. These results were primarily due to increased sales volumes, partially as a result of opening additional petrol canopies during the year, which were offset by lower average sales price.

New Zealand Supermarkets

New Zealand Supermarkets’ sales in Australian dollar terms increased 1.0% from the 2010 Half Year to the 2011 Half Year. New Zealand Supermarkets’ sales in Australian dollar terms increased

7 Adjusted to reflect the removal of the 53rd week in 2008. Including the 53rd week in the 2008 Fiscal Year, 2009 Fiscal Year sales growth was 7.6%. 8 Adjusted to reflect the removal of the 53rd week in 2008. Including the 53rd week in the 2008 Fiscal Year, 2009 Fiscal Year sales growth was 11.0%. 9 Adjusted to reflect the removal of the 53rd week in 2008. Including the 53rd week in the 2008 Fiscal Year, 2009 Fiscal Year sales declined 2.8%.

52 2.4% from the 2009 Fiscal Year to the 2010 Fiscal Year and decreased 1.5% (on a 52 week basis)10 from the 2008 Fiscal Year to the 2009 Fiscal Year. In New Zealand dollar terms, comparable store sales increased by 3.5% from the 2010 Half Year to the 2011 Half Year, 4.0% for the 2010 Fiscal Year, and 3.6% (on a 52 week basis) for the 2009 Fiscal Year. The 4.1%, 4.6% and 3.9% increase in sales in New Zealand dollar terms in the 2011 Half Year, 2010 Fiscal Year and 2009 Fiscal Year (on a 52 week basis), respectively, were primarily due to increased volume of sales as a result of the rollout of new format stores, the transition to a single value positioned Countdown brand in New Zealand, improved product ranging and growth in the Woolworths exclusive brands sales. The benefits of business improvements in supply chain and service levels and improvements in in- stock position also contributed to increased sales in the 2010 Fiscal Year and the 2009 Fiscal Year. The decrease in sales in Australian dollar terms in the 2009 Fiscal Year was primarily due to movements in the Australian dollar / New Zealand dollar exchange rate.

Gross margin

Australian Food and Liquor gross margin (including petrol) increased by 0.39 percentage points from 24.41% in the 2010 Half Year to 24.80% in the 2011 Half Year, by 0.46 percentage points from 24.05% in the 2009 Fiscal Year to 24.51% in the 2010 Fiscal Year and by 0.63 percentage points from 23.42% in the 2008 Fiscal Year to 24.05% in the 2009 Fiscal Year. The increase in gross margin for each of the 2011 Half Year, the 2010 Fiscal Year and the 2009 Fiscal Year were primarily due to further reductions in direct store deliveries (particularly in Liquor), buying improvements, improvement in freight costs, savings in shrinkage, expansion and improvement of the exclusive brand ranges and the rollout of new format stores.

New Zealand Supermarkets’ gross margin increased by 0.31 percentage points from 22.10% in New Zealand dollar terms in the 2010 Half Year to 22.41% in New Zealand dollar terms in the 2011 Half Year, by 0.37 percentage points from 21.90% in New Zealand dollar terms in the 2009 Fiscal Year to 22.27% in New Zealand dollar terms in the 2010 Fiscal Year and by 0.03 percentage points in New Zealand dollar terms from 21.87% in the 2008 Fiscal Year to 21.90% in the 2009 Fiscal Year. These changes were primarily due to improvements in shelf stock availability and reduced shrinkage, as a result of the completed implementation of core support merchandising, point of sale and replenishment systems (Stock Smart and AutostockR) and increased sales of the Woolworths’ exclusive brands.

CODB margin

Australian Supermarkets’ CODB margin (including petrol) increased by 0.08 percentage points from 17.96% in the 2010 Half Year to 18.04% in the 2011 Half Year, resulting from a deflationary sales environment with a slight increase in costs . Australian Supermarkets’ CODB margin (including petrol) decreased by 0.02 percentage points from 18.08% in the 2009 Fiscal Year to 18.06% in the 2010 Fiscal Year, achieved through good cost control in an environment where low food price inflation resulted in fixed cost fractionalization being lower than it has been. Australian Supermarkets’ CODB margin (including petrol) increased by 0.16 percentage points from 17.92% in the 2008 Fiscal Year to 18.08% in the 2009 Fiscal Year. This change was primarily

10 Adjusted to reflect the removal of the 53rd week in 2008. Including the 53rd week in the 2008 Fiscal Year, 2009 Fiscal Year sales declined 3.3% (in Australian dollars).

53 due to the impact of cost reductions and fractionalization from sales growth, offset by increased CODB margin in petrol due to lower fuel prices. Excluding Petrol, Australian Food and Liquor achieved solid CODB margin reductions in the 2009 and 2010 Fiscal Years.

New Zealand Supermarkets’ CODB margin decreased by 0.09 percentage points from 17.53% in New Zealand dollar terms in the 2010 Half Year to 17.44% in New Zealand dollar terms in the 2011 Half Year . New Zealand Supermarkets’ CODB margin decreased by 0.14 percentage points from 17.70% in New Zealand dollar terms in the 2009 Fiscal Year to 17.56% in New Zealand dollar terms in the 2010 Fiscal Year and CODB margin remained relatively stable with a small increase of 0.02 percentage points in New Zealand dollar terms from 17.68% in the 2008 Fiscal Year to 17.70% the 2009 Fiscal Year. These changes were primarily due to reductions in costs as a result of improvements in the group’s core support systems for replenishment (Stock Smart and AutostockR) and point of sale services, partially offset by increased depreciation expense as a result of investment in new stores and refurbishment.

EBIT and EBIT margin

Australian Food and Liquor’s EBIT grew faster than sales at 8.1% from the 2010 Half Year to the 2011 Half Year, 12.9% for the 2010 Fiscal Year and by 15.1% for the 2009 Fiscal Year.

Australian Food, Liquor and Petrol EBIT margin increased by 0.31 percentage points from 6.45% in the 2010 Half Year to 6.76% in the 2011 Half Year, by 0.48 percentage points from 5.97% in the 2009 Fiscal Year to 6.45% in the 2010 Fiscal Year. EBIT margin increased by 0.46 percentage points from 5.51% in the 2008 Fiscal Year to 5.97% in the 2009 Fiscal Year. These changes were primarily due to the factors described above as affecting sales, gross margin and CODB margin.

Petrol EBIT increased by 23.8% to A$63.4 million in the 2011 Half Year compared to the 2010 Half Year. Petrol EBIT margins also improved to 2.15% in the 2011 Half Year from 1.84% in the 2010 Half Year. Petrol EBIT increased by 13.7% to A$99.5 million in the 2010 Fiscal Year. Petrol EBIT margins also improved to 1.82% in the 2010 Fiscal Year from 1.60% in the 2009 Fiscal Year. The increase in petrol EBIT and EBIT margin in the 2011 Half Year was as a result of buying benefits achieved together with our supply partner Caltex, a focus on CODB management and significantly improved merchandise trading performance. The increase in petrol EBIT and EBIT margin in the 2010 Fiscal Year was primarily due to increased sales volumes, partially as a result of opening additional petrol canopies during the year.

Petrol EBIT increased by 6.8% to A$87.5 million in the 2009 Fiscal Year. Petrol EBIT margins also improved to 1.6% in the 2009 Fiscal Year from 1.5% in the 2008 Fiscal Year. The increase in Petrol EBIT and EBIT margin in the 2009 Fiscal Year was primarily due to increased sales volumes, partially as a result of opening additional petrol canopies during the year.

New Zealand Supermarkets’ EBIT increased by 15.2% in New Zealand dollar terms in the 2011 Half Year compared to the 2010 Half Year, by 19.1% in New Zealand dollar terms for the 2010 Fiscal Year and increased by 2.8% in New Zealand dollar terms for the 2009 Fiscal Year. In Australian dollar terms, New Zealand Supermarkets’ EBIT increased by 12.1% in the 2011 Half Year compared to the 2010 Half Year, by 23.7% for the 2010 Fiscal Year and decreased by 9.0% for the 2009 Fiscal Year. EBIT margin increased by 0.40 percentage points in New Zealand dollar terms from 4.57% in the 2010 Half Year to 4.97% in the 2011 Half Year, by 0.51 percentage points in New Zealand dollar terms from 4.20% in the 2009 Fiscal Year to 4.71% in New Zealand dollar terms in the 2010 Fiscal Year. EBIT margin increased by 0.01 percentage points in

54 New Zealand dollar terms from 4.19% in the 2008 Fiscal Year to 4.20% in the 2009 Fiscal Year. These changes were primarily due to increased sales and improvements in gross margin combined with a decreasing or relatively consistent CODB margin.

BIG W BIG W comprises Woolworths’ discount department store operations. The following table provides information relating to sales, gross margin, cost of doing business and EBIT for BIG W for the periods presented.

27 weeks ended the first Sunday 52 weeks ended the last of January, Sunday of June, (in A$ millions, except for percentages) 2011 2010 2010 2009 2008(1) Sales revenue ...... 2,392.0 2,461.6 4,193.1 4,267.3 3,915.9 Gross margin ...... 706.1 715.6 1,266.2 1,262.7 1,174.4 Cost of doing business(2) ...... 581.1 564.8 1,066.2 1,062.5 1,013.2 EBIT ...... 125.0 150.8 200.0 200.2 161.2 Other financial information Gross margin (%) ...... 29.52 29.07 30.20 29.59 29.99 Cost of doing business to sales (%) ...... 24.29 22.94 25.43 24.90 25.87 EBIT to sales (%) ...... 5.23 6.13 4.77 4.69 4.12

(1) Reflects 53 weeks of financial results. (2) Operating group CODB is calculated on an as incurred basis, with no allocation of corporate overhead costs to any of the operating groups.

Sales revenue BIG W’s sales decreased A$69.6 million, or 2.8%, to A$2.39 billion in the 2011 Half Year from A$2.46 billion in the 2010 Half Year. This decrease was due to lower consumer spending levels and subdued sales due to the impact of colder and wetter weather experienced over the peak Christmas trading period, particularly affecting sales in key categories such as summer apparel, outdoor and everyday needs, as well as the continued effects of significant price deflation in categories such as home entertainment and apparel. The primary cause of price deflation has been the recent increase in the relative strength of the Australian dollar, reducing the costs of goods procured from overseas, with these cost reductions passed along to customers. BIG W’s sales decreased A$74.2 million, or 1.7%, to A$4.2 billion in the 2010 Fiscal Year from A$4.3 billion in the 2009 Fiscal Year. This decrease was due to the cycling of the prior fiscal year’s relatively high levels of consumer spending as a result of the Australian government’s economic stimulus package and price deflation in key categories such as home entertainment, toys and sporting goods. During the 2009 Fiscal Year, BIG W achieved sales of A$4.3 billion, growth of 10.5% (on a 52 week basis)11 over the 2008 Fiscal Year. This result was also underpinned by comparable store sales, which showed growth of 7.1% (on a 52 week basis) for the full year and the opening of five additional BIG W stores during the 2009 Fiscal Year. Sales in the 2009 Fiscal Year were positively impacted by increased spending on discretionary goods as a result of the Australian government’s economic stimulus packages and a shift of consumer focus to value for money during the global financial crisis.

11 Adjusted to reflect the removal of the 53rd week in 2008. Including the 53rd week in the 2008 Fiscal Year, 2009 Fiscal Year sales growth was 9.0%.

55 CODB margin

BIG W’s CODB margin increased by 1.35 percentage points from 22.94% in the 2010 Half Year to 24.29% in the 2011 Half Year, increased by 0.53 percentage points from 24.90% in the 2009 Fiscal Year to 25.43% in the 2010 Fiscal Year and decreased by 0.97 percentage points in the 2009 Fiscal Year from 25.87% in the 2008 Fiscal Year. The increase in CODB margin in the 2011 Half Year was primarily due to lower sales levels. The increase in CODB margin in the 2010 Fiscal Year was primarily due to relatively flat CODB dollars compared with the 2009 Fiscal Year, increasing as a percentage of sales revenue due to lower sales, reducing BIG W’s ability to fractionalize costs. The decline in CODB margin in the 2009 Fiscal Year was primarily due to continued focus on cost control and the benefits of sales growth outpacing cost growth, achieved through strong sales.

EBIT and EBIT margin

BIG W’s EBIT for the 2011 Half Year was A$125.0 million, a decrease over EBIT in the 2010 Half Year of A$150.8 million. EBIT margins fell by 0.90 percentage points to 5.23% in the 2011 Half Year compared to the 2010 Half Year, as a result of lower sales due to lower consumer spending levels and subdued sales due to the impact of colder and wetter weather experienced over the peak Christmas trading period as well as the continued effects of significant price deflation in key categories, increases in CODB margin offsetting improvements in gross margins resulting from strong inventory management, reduced levels of markdown activity required to clear seasonal stock and improved buying.

BIG W’s EBIT for the 2010 Fiscal Year was A$200.0 million, a small decrease over EBIT in the 2009 Fiscal Year of A$200.2 million. EBIT margins rose by 0.08 percentage points to 4.77% in the 2010 Fiscal Year. This result was achieved despite a decrease in sales, reflecting the cycling of the Australian Government economic stimulus package in 2009, price deflation in key categories such as home entertainment, toys and sporting goods and as a result of increases in CODB margin more than offset by improvements in gross margins resulting from strong inventory management, reduced levels of markdown activity required to clear seasonal stock and improved buying.

BIG W’s EBIT for the 2009 Fiscal Year increased 24.2% or A$39.0 million, over EBIT of A$161.2 million in the 2008 Fiscal Year. As a result of the reduction in CODB margin described above, BIG W’s EBIT rose faster than sales in the 2009 Fiscal Year and EBIT margin increased from 4.12% in the 2008 Fiscal Year to 4.69% in the 2009 Fiscal Year. This was primarily a result of increased sales revenue assisted by the Australian Government economic stimulus package and a shift of consumer focus to value for money during the global financial crisis with a continued focus on cost control and the benefit of cost fractionalization achieved through strong sales.

Consumer Electronics

Consumer Electronics consists of Woolworths’ consumer electronics retailing business in Australia and New Zealand and wholesale business in India. The following table provides information relating to sales, gross margin, cost of doing business and EBIT for Consumer Electronics for the periods presented.

56 Consumer Electronics (Australia, New Zealand and India) 27 weeks ended the first 52 weeks ended the last Sunday of January, Sunday of June, (in A$ millions, except for percentages) 2011 2010 2010 2009 2008(1) Sales revenue ...... 1,044.7 983.7 1,782.4 1,723.6 1,530.6 Gross margin ...... 232.7 239.2 411.3 409.2 394.2 Cost of doing business(2) ...... 210.4 204.4 379.8 358.4 331.1 EBIT ...... 22.3 34.8 31.5 50.8 63.1 Other financial information Gross margin (%) ...... 22.27 24.32 23.08 23.74 25.75 Cost of doing business to sales (%) ...... 20.13 20.78 21.31 20.79 21.63 EBIT to sales (%) ...... 2.13 3.54 1.77 2.95 4.12

(1) Reflects 53 weeks of financial results. (2) Operating group CODB is calculated on an as incurred basis, with no allocation of corporate overhead costs to any of the operating groups.

Consumer Electronics (Australia) 27 weeks ended the first 52 weeks ended the last Sunday of January, Sunday of June, (in A$ millions, except for percentages) 2011 2010 2010 2009 2008(1) Sales revenue ...... 726.3 710.1 1,260.2 1,242.1 1,133.2 Gross margin ...... 191.4 195.3 334.8 332.3 311.1 Cost of doing business(2) ...... 173.8 167.8 313.1 294.2 269.7 EBIT ...... 17.6 27.5 21.7 38.1 41.4 Other financial information Gross margin (%) ...... 26.35 27.50 26.57 26.75 27.45 Cost of doing business to sales (%) ...... 23.93 23.63 24.85 23.68 23.80 EBIT to sales (%) ...... 2.42 3.87 1.72 3.07 3.65

(1) Reflects 53 weeks of financial results. (2) Operating group CODB is calculated on an as incurred basis, with no allocation of corporate overhead costs to any of the operating groups.

Consumer Electronics (New Zealand) 27 weeks ended the first 52 weeks ended the last Sunday of January, Sunday of June, (in A$ millions, except for percentages) 2011 2010 2010 2009 2008(1) Sales revenue ...... 141.1 149.6 270.3 294.4 293.4 Gross margin ...... 34.4 39.5 66.5 72.0 81.2 Cost of doing business(2) ...... 32.0 32.4 58.0 55.0 54.5 EBIT ...... 2.4 7.1 8.5 17.0 26.7 Other financial information Gross margin (%) ...... 24.41 26.42 24.60 24.48 27.62 Cost of doing business to sales (%) ...... 22.68 21.61 21.46 18.68 18.54 EBIT to sales (%) ...... 1.73 4.81 3.14 5.80 9.08

(1) Reflects 53 weeks of financial results. (2) Operating group CODB is calculated on an as incurred basis, with no allocation of corporate overhead costs to any of the operating groups.

57 Sales revenue

During the 2011 Half Year Consumer Electronics in Australia, New Zealand and India experienced sales growth of A$61.0 million, or 6.2%, to A$1,044.7 million compared to the 2010 Half Year. Comparable store sales growth in Australia rose by 4.1% on the 2010 Half Year and fell by 5.0% in New Zealand in the 2011 Half Year compared to the 2010 Half Year. During the 2010 Fiscal Year, Consumer Electronics in Australia, New Zealand and India experienced sales growth of A$58.8 million, or 3.4%, to A$1.8 billion. Comparable store sales growth in Australia and New Zealand declined by 0.9%12 on 2009 Fiscal Year. During the 2009 Fiscal Year, Consumer Electronics in Australia, New Zealand and India experienced sales growth of 14.6% (on a 52 week basis)13. Comparable store sales increased in Australia and New Zealand on the 2008 Fiscal Year by 6.3% (on a 52 week basis)14.

Woolworths believes that the rollout of new Dick Smith store formats, the improved product range and merchandise offered and Dick Smith “Talk to the Techxperts” rebranding have been key factors in driving sales growth in each of the periods. As at January 2, 2011, 55% of all Dick Smith stores in Australia had been repositioned to the new customer offer, with sales revenue in those repositioned stores up 16% in the 2011 Half Year. Additionally, the overhaul of the www.dicksmith.com.au website that was completed in August 2009 improved online channel sales in the 2011 Half Year and the 2010 Fiscal Year.

The sales growth in the 2011 Half Year was primarily a result of strong customer acceptance of the new, refreshed Dick Smith offer in Australia and significant investment in price reductions, resulting in market share growth in key categories such as computers, GPS navigation systems and LCD televisions. This growth was partially offset by significant price deflation for key products as a result of the recent relative strength of the Australian dollar. The relatively low level of sales growth in 2010 Fiscal Year was a result of the cycling of the prior year’s high levels of consumer spending as a result of the Australian government’s stimulus package, lower consumer confidence and spending by consumers and intense competition in the consumer electronics sector. Sales growth in the 2009 Fiscal Year resulted from increased spending on discretionary goods as a result of the Australian government’s economic stimulus packages and the expansion of Dick Smith in Australia and New Zealand through the rollout of new store formats. The wholesale operations of Woolworths’ business venture in India with TATA Group recorded sales of A$177 million in the 2011 Half Year, compared to sales of A$124 million in the 2010 Half Year, and sales of A$252 million in the 2010 Fiscal Year, compared with sales of A$187 million in the 2009 Fiscal Year and A$104 million in the 2008 Fiscal Year.

Gross margin

Gross margin decreased by 2.05 percentage points from 24.32% in the 2010 Half Year to 22.27% in the 2011 Half Year due to increased price competition as a result of lowering prices combined with significant price deflation in consumer products generally. The impact of these factors was exacerbated by the transitioning of the network of stores as the repositioning of the Dick Smith business continues. Gross margin decreased by 0.66 percentage points from 23.74% in the 2009 Fiscal Year to 23.08% in the 2010 Fiscal Year due to increased price competition as a result of

12 Adjusted for movements in exchange rates. 13 Adjusted to reflect the removal of the 53rd week in 2008. Including the 53rd week in the 2008 Fiscal Year, 2009 Fiscal Year sales growth was 12.6%. 14 Adjusted for movements in exchange rates.

58 lower consumer spend levels and intense competition in the Consumer Electronics sector due to lower consumer spending levels. This result is also affected by a change in the nature of rebates in Consumer Electronics, as they are now all accounted for in gross margin whereas they were previously split across gross margin and CODB. When the impact of this is adjusted for in the 2009 Fiscal Year, gross margin for Australian and New Zealand Consumer Electronics would have declined 1.49 percentage points. Gross margin fell by 2.01 percentage points from 25.75% in the 2008 Fiscal Year to 23.74% in the 2009 Fiscal Year, primarily as a result of increased price competition, slightly offset by a reduction in promotional expenses and improvements in trading terms.

CODB margin

Consumer Electronics’ CODB margin decreased by 0.65 percentage points from 20.78% in the 2010 Half Year to 20.13% in the 2011 Half Year, primarily as a result of increased sales volume attributable to the wholesale business in India. Consumer Electronics’ CODB margin increased by 0.52 percentage points from 20.79% in the 2009 Fiscal Year to 21.31% in the 2010 Fiscal Year and decreased by 0.84 percentage points to 20.79% in the 2009 Fiscal Year from 21.63% in the 2008 Fiscal Year. The increase in the 2010 Fiscal Year was primarily as a result of start-up costs in the refurbished, new format Dick Smith stores, with 55 stores refurbished in the 2010 Fiscal Year and the addition of 24 new stores, as well as investment in the repositioning of the business and improvements in recruitment, retention, training and support initiatives for Dick Smith staff. This result is also affected by a change in the nature of rebates in Consumer Electronics, as they are now all accounted for in gross margin whereas they were previously split across gross margin and CODB. When the impact of this is adjusted for in the 2009 Fiscal Year, CODB margin for Australian and New Zealand Consumer Electronics would have increased 0.13 percentage points.

EBIT and EBIT margin

EBIT decreased by 35.9% from the 2010 Half Year to the 2011 Half Year, with EBIT margin decreasing 1.41 percentage points from 3.54% in the 2010 Half Year to 2.13% in the 2011 Half Year, despite an increase in sales resulting from an improved customer acceptance of the new refreshed offer. This EBIT decline was primarily due to a decline in gross margin resulting from lowering prices, combined with significant price deflation in consumer electronic products generally. The impact of these factors was exacerbated by the transition of the network of stores as part of the continued repositioning of the Dick Smith business. EBIT decreased by 38.0% for the 2010 Fiscal Year, with EBIT margin decreasing 1.18 percentage points from 2.95% in the 2009 Fiscal Year to 1.77% in the 2010 Fiscal Year, primarily due to a decline in gross margin resulting from lower consumer confidence and spending and intense competition in the Consumer Electronics sector as participants chased lower consumer spending levels, as well lower sales growth reflecting the cycling of the Australian Government economic stimulus package in 2009. Despite a rise in sales in the 2009 Fiscal Year, EBIT fell by 19.5% in the same year and EBIT margin fell 1.17 percentage points to 2.95% in the 2009 Fiscal Year from 4.12% in the 2008 Fiscal Year, primarily as a result of as a result of increased price competition, slightly offset by reductions in promotional expenses and improved trading terms. The wholesale operations of Woolworths’ business venture in India with TATA Group recorded EBIT of A$2.3 million in the 2011 Half Year, compared with EBIT of A$0.2 million in the 2010 Half Year and A$1.3 million in the 2010 Fiscal Year, compared with EBIT of negative A$4.3 million in the 2009 Fiscal Year and negative A$5.0 million in the 2008 Fiscal Year.

59 Hotels

Hotels includes Woolworths’ on-premise liquor, food and accommodation and gaming businesses. The following table provides information relating to sales, gross margin, cost of doing business and EBIT for Hotels for the periods presented.

27 weeks ended the first 52 weeks ended the last Sunday of January, Sunday of June, (in A$ millions, except for percentages) 2011 2010 2010 2009 2008(1) Sales revenue ...... 611.9 591.2 1,102.0 1,110.3 1,113.4 Gross margin ...... 499.3 487.1 908.3 922.0 916.1 Cost of doing business(2) ...... 387.4 372.5 731.6 704.0 701.0 EBIT ...... 111.9 114.6 176.7 218.0 215.1 Other financial information Gross margin (%) ...... 81.60 82.39 82.42 83.04 82.28 Cost of doing business to sales (%) ...... 63.32 63.00 66.39 63.41 62.96 EBIT to sales (%) ...... 18.28 19.39 16.03 19.63 19.32

(1) Reflects 53 weeks of financial results. (2) Operating group CODB is calculated on an as incurred basis, with no allocation of corporate overhead costs to any of the operating groups.

Sales revenue

During the 2011 Half Year Hotels sales increased A$20.7 million, or 3.6%, to A$611.9 million compared to the 2010 Half Year. During the 2010 Fiscal Year Hotels sales declined A$8.3 million, or 0.7%, to A$1,102.0 million. During the 2009 Fiscal Year Hotels experienced increasing sales of 1.6% (on a 52 week basis)15 from sales in the 2008 Fiscal Year of A$1,113.4 million. The increase in sales revenue in the 2011 Half Year was primarily due to improvements in the food and entertainment offers. The decrease in sales revenue in the 2010 Fiscal Year is primarily due to cycling of the prior year’s relatively high levels of consumer spending as a result of the Australian government stimulus package, tightened consumer spending, reduced trading hours in Queensland and changes to gaming regulations in Victoria resulting in lower revenue from gaming. The slight increase in sales revenue in the 2009 Fiscal Year is primarily due to increased revenue from gaming.

Gross margins

Hotels gross margin decreased by 0.79 percentage points from 82.39 % in the 2010 Half Year to 81.60 % in the 2011 Half Year reflecting a change in sales mix, with an increase in sales in the lower margin food and bar businesses and continued focus on customer value through price reductions. Hotels gross margin decreased by 0.62 percentage points from 83.04% in the 2009 Fiscal Year to 82.42% in the 2010 Fiscal Year reflecting a change in sales mix with an increase in sales in the lower margin food business and a decrease in higher margin gaming revenue partly due to the reduced trading hours in Queensland and gaming related legislation in Victoria. Gross margin increased by 0.76 percentage points from 82.28% in the 2008 Fiscal Year to 83.04% in the 2009 Fiscal Year, primarily as a result of a change in sales mix to higher margin items, such as gaming.

15 Adjusted to reflect the removal of the 53rd week in 2008. Including the 53rd week in the 2008 Fiscal Year, 2009 Fiscal Year sales declined 0.3%.

60 CODB margin Hotels CODB margin increased by 0.32 percentage points from 63.00% in the 2010 Half Year to 63.32% in the 2011 Half Year, increased by 2.98 percentage points from 63.41% in the 2009 Fiscal Year to 66.39% in the 2010 Fiscal Year and by 0.45 percentage points in the 2009 Fiscal Year from 62.96% in the 2008 Fiscal Year. The increase in the 2011 Half Year was primarily due to changes in sales mix towards the higher cost food business. The increase in the 2010 Fiscal Year was primarily due to changes in sales mix away from gaming towards the higher cost food business and a change in accounting standards requiring venue acquisition costs to be expensed at the time of acquisition. The increase in the 2009 Fiscal Year was primarily due to cycling a small development profit from the 2008 Fiscal Year and, excluding the impact of this development profit, CODB margin in the 2009 Fiscal Year was largely in line with the 2008 Fiscal Year.

EBIT EBIT for Hotels decreased in the 2011 Half Year to A$111.9 million from A$114.6 million in the 2010 Half Year. This was due primarily to a change in the mix of business, with lower gross margin and higher CODB resulting from a change in sales mix towards food and a continued focus on competitive pricing levels. EBIT for Hotels fell in the 2010 Fiscal Year to A$176.7 million from A$218.0 million in the 2009 Fiscal Year. This was due primarily to a change in the mix of business, with a shift to the lower margin food business and a decrease in gaming revenue. EBIT rose slightly in the 2009 Fiscal Year to A$218.0 million from A$215.1 million in the 2008 Fiscal Year, primarily as a result of an increase in gaming sales.

Central overheads and net property income Central overheads represent costs associated with various development activities including costs relating to the hardware business. There were no significant items in the 2011 Half Year or the 2010 Fiscal Year. Central overheads decreased in the 2011 Half Year by A$9.5 million to A$55.7 million compared to the 2010 Half Year. This was primarily due to the inclusion of profit from the Danks business for a full half year and reduced central costs. Net property income in the 2011 Half Year of A$6.7 million was A$6.0 million above the A$0.7 million net property income in the 2010 Half Year. This was primarily due to the sale of completed development property. Central overheads increased in the 2010 Fiscal Year by A$16.4 million to A$111.0 million. This was primarily due to the releasing of a A$17.0 million provision no longer required in the 2009 Fiscal Year. Central overheads remained relatively stable excluding the impact of the provision release. Net Property Income of A$2.5 million was generally in line with the 2009 Fiscal Year. Central overheads decreased by A$18.2 million in the 2009 Fiscal Year to A$94.6 million due to the release of a A$17.0 million provision no longer required. Net Property Expense in the 2009 Fiscal Year was A$7.2 million, which was A$40.3 million less than the A$33.1 million of Net Property Income in the 2008 Fiscal Year. This was primarily due to the sale of completed development property in the 2008 Fiscal Year.

Liquidity and capital resources Historically, Woolworths’ primary source of liquidity has been cash generated from operating activities. Woolworths’ principal liquidity requirements are payments to suppliers and employees.

61 Other significant uses of cash include capital spending, including Woolworths’ investments in new store development and existing store refurbishment, supply chain and acquisitions. The table below sets out a summary of Woolworths’ cash flow for the periods presented. The table presents operating cash flow both before and after movements in working capital. Because of the nature of Woolworths’ business, Woolworths believes this presentation provides investors with a better understanding of trends in cash flows in its business. This presentation is different from the presentation as required by AIFRS. For further details on Woolworths cash flow statements for the 2008, 2009 and 2010 Fiscal Years, refer to Woolworths’ audited consolidated financial statements included elsewhere in this offering memorandum. For further details on Woolworths’ cash flow statements for the 2011 Half Year, refer to Woolworths’ interim unaudited condensed consolidated financial statements for the 2011 Half Year, which are included elsewhere in this offering memorandum. 27 weeks ended the 52 weeks ended the last first Sunday of January, Sunday of June, (in A$ millions) 2011 2010 2010 2009 2008(1) EBITDA ...... 2,227.3 2,089.2 3,879.8 3,544.9 3,178.9 Net interest paid (including cost of Woolworths Notes) ...... (151.5) (125.9) (249.8) (244.4) (215.5) Tax paid ...... (423.1) (462.6) (896.9) (802.1) (573.9) Operating cash flow before working capital ...... 1,652.7 1,500.7 2,733.1 2,498.4 2,389.5 (Decrease)/ increase in creditors ...... 741.7 712.2 82.9 169.9 644.8 (Increase)/decrease in inventory ...... (553.0) (388.0) (94.2) (273.1) (303.4) Other working capital movements ...... 24.4 18.4 38.1 209.0 (76.9)

Operating cash flow after working capital ...... 1,865.8 1,843.3 2,759.9 2,604.2 2,654.0 Payments for capital expenditure ...... (1,020.0) (873.1) (1,817.7) (1,678.2) (1,748.1) Proceeds on disposal of property, plant and equipment ...... 68.4 30.8 55.4 18.7 228.4 Other investing activities ...... (128.3) (142.3) (197.8) (146.7) (233.7) Free cash flow ...... 785.9 858.7 799.8 798.0 900.6 Movement in gross debt ...... 880.4 (55.6) 486.1 160.8 (132.2) Issue of subsidiary shares to non controlling interests ...... 74.6 42.7 79.5 — — Dividends paid ...... (667.1) (605.0) (1,181.4) (1,041.6) (876.8) Buy-back of shares ...... (737.9) — (294.6) — — New shares issued ...... 97.1 75.2 77.5 71.9 72.2 Effects of exchange rate changes on balance of cash held in foreign currencies ...... (6.9) (1.2) (0.2) 3.0 (8.0) Net cash flow ...... 426.1 314.8 (33.3) (7.9) (44.2)

(1) Reflects 53 weeks of financial results.

Net operating cash flows Woolworths believes it has relatively strong and predictable cash flow underpinned by its food, liquor and grocery businesses. Operating cash flows before working capital increased in the 2011

62 Half Year by A$152.0 million compared to the 2010 Half Year, after increasing in the 2010 Fiscal year by A$234.7 million, following a slight drop in the 2009 Fiscal Year. In the three fiscal years prior to the 2010 Fiscal Year, operating cash flows before working capital grew at a compound annual growth rate of 18.1%, following the significant expansion of the Hotels and New Zealand supermarket businesses in 2005. In general terms, operating cash flows after working capital are affected by fluctuations in working capital, arising in the ordinary course of business, at the end of the relevant financial period. Woolworths believes that it has sufficient working capital for its purposes. Payments for property, plant and equipment increased in the 2011 Half Year compared to the 2010 Half Year, 2010 Fiscal Year and 2009 Fiscal Year, primarily due to the increase in capital expenditure, partially due to increased acquisition of property as part of Woolworths’ continued store roll-out plan. In the 2011 Half Year compared to the 2010 Half Year, net cash flow used in other investing activities decreased by A$14.0 million and the movement in gross debt increased by A$936.0 million, primarily as a result of expenditure on property development and the share buyback. A share buy-back of A$704 million was undertaken in the 2011 Half Year. In the 2010 Fiscal Year, net cash flow used in other investing activities increased by A$51.1 million and the movement in gross debt increased by A$325.3 million, primarily as a result of the increased acquisitions of businesses, including Danks and Gunns, and share buybacks. A share buy-back of A$325 million was undertaken in the 2010 Fiscal Year.

Debt financing Woolworths’ objective is to achieve its business goals while at the same time achieving balance sheet strength, financial flexibility and prudent financial ratios. This would normally equate to a reduction in debt, however, subject to credit rating stability, Woolworths is not averse to a temporary increase in its net debt and resulting reduction in its interest coverage ratio if the right investment opportunity arises and it believes that the debt can be managed back to prudent levels within a time frame acceptable to the ratings agencies. Woolworths’ gearing and interest coverage ratios for the periods presented have been as follows: 27 weeks ended the first 52 weeks ended the last Sunday of January, Sunday of June, 2011 2010 2010 2009 2008(1) Net debt/net debt and equity(2)(5) (%)...... 31.69 20.97 27.16 25.87 25.91 EBITDA interest cover ratio(2)(3) (times) ...... 13.83 16.02 15.07 14.80 14.85 Fixed charges cover ratio(2)(4) (times) ...... 3.16 3.19 3.09 3.00 2.94 Net debt/EBIT(2)(5) (times) ...... 1.95 1.22 0.95 0.87 0.86

(1) Reflects 53 weeks of financial results. (2) Does not adjust for operating leases. (3) EBITDA interest cover ratio has been determined by dividing EBITDA by net interest expense. Interest expense excludes foreign exchange gains/ losses, dividend income and interest capitalized. EBITDA interest cover ratio for the 2011 Half Year and 2010 Half Year is shown for the respective 27 week period only and is not annualized. (4) Fixed charges cover ratio is defined as EBITDAR divided by fixed charges, which includes interest on all indebtedness, including interest on deposits, and all rent expense, and is stated before non-controlling interests. Interest excludes foreign exchange gains/ losses, dividend income and interest capitalized. Fixed charges cover ratio for the 2011 Half Year and 2010 Half Year is shown for the respective 27 week period only and is not annualized. (5) Net debt is defined as current and non-current interest bearing liabilities, including Woolworths Notes, less cash on hand, cash at bank and cash on short term deposit and provision for dividends, and includes hedge liabilities less hedge assets. . Net debt/EBIT for the 2011 Half Year and 2010 Half Year is shown for the respective 27 week period only and is not annualized.

63 Woolworths’ long-term debt and short-term debt for the periods presented have been as follows:

As at the first Sunday of As at the last Sunday of January, June, (in A$ millions) 2011 2010 2010 2009 2008 Long-term debt(1) ...... 3,199.5 2,806.4 2,670.4 2,986.3 2,224.0 Short-term debt ...... 869.6 136.0 871.7 188.6 550.2 Total debt ...... 4,069.1 2,942.4 3,542.1 3,174.9 2,774.2

(1) Includes Woolworths Notes with a face value of A$600 million.

Woolworths’ debt financing consists of short-term securities, various bilateral bank facilities and medium-term and long-term securities. As of January 2, 2011, Woolworths debt totaled A$4,069.1 million. The increase of A$527.0 million in total debt at January 2, 2011 compared to the end of the 2010 Fiscal Year was primarily due to expenditure on property development and the share buy-backs. Committed bank facilities available to Woolworths at that date totaled A$3,818.3 million (excluding bank overdraft facilities of A$43.4 million) of which A$683.4 million was drawn and A$3,134.9 million was available to be drawn. Woolworths did not have any secured debt as of January 2, 2011.

Debt maturity profile

The following chart illustrates Woolworths’ debt maturity profile as at January 2, 2011 in millions of Australian dollars including undrawn, committed bank facilities but excluding revolving bank facilities which typically roll on an annual basis. Borrowings denominated in foreign currencies are translated at the hedged rate where applicable. The Woolworths Notes hybrid borrowing is a perpetual instrument and is included in the chart at the first call period in September 2011.

A$m 2,800

2,400 800

2,000

1,600 868

1,200

800 410 530

400 794 600 581 350 381 127 127 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Beyond

Woolworths Fiscal Year

MTN Domestic USPP WOW Notes US 144A Asian Syndicated US 144A Syndicated Facility Term+RCF

64 Short-term securities

Woolworths maintains an A$800 million Australian domestic commercial paper program to meet its short-term funding requirements. The commercial paper program is supported by additional standby facilities with a total value of A$400 million. S&P has assigned the notes issued under the program a short term rating of A2. At January 2, 2011, there were no amounts of commercial paper outstanding under this program, compared with A$205.0 million at June 27, 2010. Short- term money market loans represent monies borrowed from financial institutions participating in the money market on an 11am call basis. At January 2, 2011, there was A$45.5 million of money market borrowings outstanding and A$25.5 million outstanding loans at June 27, 2010.

Bank loans

Unsecured bank loans consist of:

• one to five-year revolving credit facilities totaling A$1,345 million, comprising of a series of bilateral loan agreements, maturing from the 2011 to the 2015 Fiscal Years. Draw downs are less than six months and may be rolled over on maturity. Interest is payable at a rate calculated as the Australian bank bill swap yield plus a margin. The facilities are subject to a negative pledge agreement. At January 2, 2011, there were no amounts outstanding under these facilities.

• one year revolving credit facilities totaling NZ$500 million, comprising of a series of bilateral loan agreements, maturing in the 2012 Fiscal Year. Draw downs are less than six months and may be rolled over on maturity. Interest is payable on roll-over, at a rate calculated as the New Zealand bank bill reference rate plus a margin. The facilities are subject to a negative pledge agreement. At January 2, 2011, there was NZ$215 million outstanding under these facilities.

• one year revolving credit facilities totaling INR2 billion, comprising of two bilateral loan agreements, maturing in the 2012 Fiscal Year. Interest is payable on drawdown at a variable rate. The facilities are subject to a negative pledge agreement. At January 2, 2011, there was INR575 million outstanding under these facilities.

• a commercial paper standby facility totaling A$400 million, comprising of a series of bilateral loan agreements, maturing in the 2012 Fiscal Year. Interest is payable at a rate calculated as the Australian bank bill swap yield plus a margin. The facilities are subject to a negative pledge agreement. At January 2, 2011, there were no amounts outstanding under this facility.

• a syndicated revolving credit facility totaling A$800 million, maturing in the 2012 Fiscal Year. Interest is payable at a rate calculated as the Australian bank bill swap yield plus a margin. The facility is subject to a negative pledge agreement. At January 2, 2011, there were no amounts outstanding under this facility.

• a syndicated revolving and term multi-currency credit facility totaling US$700 million, maturing in the 2012 Fiscal Year. Interest is payable at a rate calculated as the Australian bank bill swap yield or LIBOR (depending on the currency of borrowing) plus a margin. The facility is subject to a negative pledge agreement. At January 2, 2011, there was A$456.1 million outstanding under this facility. Woolworths has entered into cross currency swaps in respect of these borrowings which are intended to eliminate all foreign currency exposures.

65 Non-bank debt

As of January 2, 2011, Woolworths’ non-bank debt comprised:

• Medium-term notes of A$350 million (issued in March 2006) into the Australian domestic market with a maturity date of March 14, 2011, consisting of A$200 million of 6.1% notes and A$150 million of floating rate notes, paying interest quarterly at the Australian bank bill rate plus 0.30%. Prior to the date of this offering memorandum, these notes matured and have been fully repaid.

• US$500 million of senior, unsecured notes privately placed in the United States issued in 2005, of which US$100 million matures on April 26, 2015, US$300 million matures on April 26, 2017 and US$100 million matures on April 26, 2020. Interest is payable semi-annually in U.S. dollars, at a fixed rate. Woolworths has entered into cross currency swaps in respect of these borrowings which are intended to eliminate all foreign currency exposures.

• US$725 million of senior, unsecured notes sold in the United States Rule 144A bond market in 2005, of which US$300 million matures on November 15, 2011 and US$425 million matures on November 15, 2015. Interest is payable semi-annually in U.S. dollars, at a fixed rate. Woolworths has entered into cross currency swaps in respect of these borrowings which are intended to eliminate all foreign currency exposures.

• US$1.25 billion of senior, unsecured notes sold in the United States Rule 144A bond market in 2010, of which US$500 million matures on September 22, 2015 and US$750 million matures on September 22, 2020. Interest is payable semi-annually in U.S. dollars, at a fixed rate. Woolworths has entered into cross currency swaps in respect of these borrowings which are intended to eliminate all foreign currency exposures.

• On June 5, 2006, Woolworths issued A$600 million in Woolworths Notes, which were issued to replace the 6,000,000 Woolworths Income Notes (“WINs”) issued on December 15, 1999. The Woolworths Notes are perpetual income notes and, in general terms, holders of Woolworths Notes are entitled to a distribution calculated and paid quarterly in arrears, at a margin of 1.10% over the 90-day Australian bank bill swap yield at the relevant quarter.

Since January 2, 2011, Woolworths issued on March 22, 2011 A$500 million of 6.75% notes due 2016. These replaced its A$350 million medium-term notes which matured on March 14, 2011, which consisted of A$200 million of 6.1% notes and A$150 million of floating rate notes paying interest quarterly at the Australian bank bill rate plus 0.30%.

Hedging

Woolworths limits transactions within its treasury operations to those required to hedge and manage Woolworths underlying economic exposures to currency exchange rates and interest rates. As a result, any gains or losses on hedging transactions are offset by corresponding losses or gains, as the case may be, on the underlying economic exposures being hedged. Woolworths does not enter into any hedging arrangements for speculative purposes. For a detailed explanation of Woolworths position with respect to derivative instruments as of June 27, 2010, including average rates and maturity profile and the quantitative impact of movements in interest rates and exchange rates see notes 26 and 27 to Woolworths’ annual consolidated financial statements included in this offering memorandum.

66 Interest rate hedging

Under interest rate swap agreements, Woolworths receives interest at variable rates and pays interest at fixed rates. The contracts are used to protect against rising interest rates on the variable interest component of the underlying debt. The contracts are settled on a net basis, and the net amount receivable or payable on the contract is accrued against interest expense.

Interest rate hedging policy

Woolworths manages its interest expense by borrowing at fixed rates of interest or by using approved financial instruments (or by a combination of the two), so that a change in interest rates (measured as an assumed parallel shift in the yield curve of 1%) will not cause a reduction in earnings (profit after tax) greater than A$5 million in the current financial year, A$10 million in the next financial year and A$10 million in the third financial year. The current year interest rate sensitivity limit is reduced by one twelfth as each month passes.

Wherever possible, Woolworths’ Group Treasury ensures that hedging transactions relating to interest rate risk will meet the requirements of AASB 139 Financial Instruments: Recognition and Measurement for accounting treatment of the hedges as effective hedges. If a contemplated hedging transaction does not meet the requirements of AASB 139 for accounting treatment as a hedge, a written evaluation of the expected effect of the hedging transaction is prepared and submitted for approval by the Financial Director prior to execution.

Woolworths’ Group Treasury is not permitted to enter into hedging contracts relating to interest rate risk that exceed (in terms of either amount or duration) the expected borrowings outstanding.

All swap contracts are settled on a quarterly basis to match the dates on which the interest is payable on the syndicated revolving credit facilities, Woolworths Notes, U.S. Senior Notes (which were swapped back to floating Australian dollars) and floating rate Domestic Medium Term Notes. Swap agreements in place at January 2, 2011 covered 100% of the aggregate principal outstanding on these debt instruments. Swap agreements in place at June 27, 2010 covered 100% of the aggregate principal amount of these instruments. As of January 2, 2011, 100% of the relevant interest rate exposure was fixed at a weighted average rate of 5.62% paid quarterly.

For a summary of Woolworths’ exposure to fixed and floating interest rates as of June 27, 2010, see note 26 in Woolworths annual consolidated financial statements for the 2010 Fiscal Year, included in this offering memorandum.

Currency hedging

Woolworths is exposed to movements in foreign currency exchange rates through purchases of goods for resale where the purchase price is denominated in a foreign currency, purchases of items or services for its own use where the price is denominated in a foreign currency, borrowings in a foreign currency and having a branch or subsidiary operations in a foreign country.

With respect to purchases of inventory for resale, Woolworths’ policy is to enter into forward exchange contracts for the full cost of the purchase where it is not possible or practicable to change the selling price without materially affecting sales volumes. Subject to certain limitations,

67 where it is possible to change the selling price without seriously adversely affecting the volume that can be sold, the relevant business unit can decide whether to hedge the purchases or not. Forecast purchases may also be hedged, within defined guidelines.

All purchases of items or services for Woolworths’ own use that give rise to foreign exchange risk are fully hedged when it is certain that the purchases will take place (or as soon as is practicable thereafter).

All borrowings in foreign currencies are fully hedged into Australian dollars no later than the time the commitment to borrow is made.

Foreign exchange risk arising from the investment in, or intercompany balances with, a branch or subsidiary operation in a foreign country may be hedged. Consideration is given to the impact of hedging on net after-tax interest expense to the Woolworths group (taking into account the relative interest rates in Australian dollars versus the currency being hedged). The balances may be hedged by either borrowing in the relevant currency or the use of derivatives. The decision to hedge such balances is made by the Board of Woolworths on a case-by-case basis.

Woolworths entered into cross currency swap agreements to fully hedge its U.S. dollar- denominated senior notes issued in April 2005 (US$500 million), November 2005 (US$725 million) and September 2010 (US$1.25 billion) and also its syndicated revolving and term multi-currency credit facility. The effect of the cross currency swaps is to offset all of the U.S. dollar exposure on both interest and principal payments associated with the notes. Consequently, the maturity and settlement dates under the swaps match the maturity and coupon payments for the term of these notes. As a result of the cross currency swap agreements, Woolworths’ exposure is in Australian dollars. Woolworths expects to enter into similar arrangements with respect to the Notes. Swap agreements in place at June 27, 2010 covered 100% of the aggregate principal amount of these instruments.

For a summary of Woolworths’ exposure to foreign currency exchange rates as of June 27, 2010, see note 27 in Woolworths annual consolidated financial statements as at and for the year ended June 27, 2010, included in this offering memorandum.

68 Summary of contractual obligations and commercial commitments

The following table shows Woolworths’ contractual commitments for the periods presented.

As at the first As at the last Sunday of January, Sunday of June, 2011 2010 2010 2009 (A$ millions)

Commitments for expenditure Capital expenditure commitments Estimated capital expenditure under firm contracts, not provided for in Woolworths’ financial statements, payable: No later than one year(1) ...... 932.5 573.0 631.0 483.2 Between one and two years ...... 45.7 — 11.3 1.5 Between two and five years ...... 83.1 — 124.7 — Later than five years ...... — — 41.6 —

Total capital expenditure commitments ...... 1,061.3 573.0 808.6 484.7

Operating lease commitments Future minimum rentals under non-cancelable operating leases not provided for in Woolworths’ financial statements, payable: Not later than one year ...... 1,455.0 1,347.9 1,445.9 1,322.4 Between one and two years ...... 1,392.6 1,302.6 1,372.8 1,269.1 Between two and five years ...... 3,690.5 3,780.7 3,623.9 3,698.9 Later than five years ...... 8,747.7 8,439.7 8,726.6 8,520.7

Total future minimum lease payments not provided for ... 15,285.8 14,870.9 15,169.2 14,811.1

(1) Capital expenditure commitments at January 2, 2011 mainly comprise commitments that relate to the development and construction of property, Victorian gaming licenses, store refurbishment and store fitouts.

The commitments set out above do not include contingent turnover rentals, which are charged on many of the retail premises leased by Woolworths. These rentals are calculated as a percentage of the turnover of the store occupying the premises, with the percentage and turnover threshold at which the additional rentals commence varying with each lease agreement.

Woolworths leases retail premises and warehousing facilities for periods of up to 40 years. Generally the lease agreements are for initial terms of 20 years and most include multiple renewal options for additional 5 year terms. Under most leases, Woolworths is responsible for property taxes, insurance, maintenance and expenses related to the leased properties. However, many of the more recent lease agreements have been negotiated on a gross or semi-gross basis, which eliminates or significantly reduced the lessee’s exposure to operational charges associated with the properties.

69 Capital management

Woolworths currently sets its capital structure with the objective of enhancing shareholder value through optimizing its weighted average cost of capital while retaining flexibility to pursue growth and undertake capital management initiatives. Consistent with this objective, Woolworths has targeted, achieved and maintained its strong credit ratings of A- from Standard and Poor’s and A3 from Moody’s Investor Services, which underpin its debt profile.

Since July 2001, over A$9.5 billion has been returned to shareholders through dividends, on-market and off-market buy-backs (including the interim dividend for the 2011 Half Year). Woolworths completed a A$704 million off-market buy-back in October 2010 as part of Woolworths’ ongoing capital management program. Capital management initiatives will continue to be assessed in light of investment and growth opportunities available to Woolworths, its focus on maintaining a strong credit rating, the capital markets environment from time to time and the overarching objective of enhancing long term shareholder value. Woolworths conducted an on-market share buy-back initiative during the 2010 Fiscal Year under which A$325 million of shares were bought back by Woolworths.

Off-balance sheet arrangements

The details and estimated maximum amounts of contingent liabilities which may become payable are shown below. Other than as set forth below, no provision has been made in the financial statements in respect of these contingencies. These items are in addition to the operating lease commitments disclosed in “—Summary of contractual obligations and commercial commitments” above.

Bank guarantees: As of January 2, 2011, Woolworths had contingent liabilities relating to bank guarantees of A$49.2 million. These guarantees primarily relate to conditions set out in development applications and contracts for sale in the normal course of business.

Workers’ compensation self-insurance guarantees: As of January 2, 2011, Woolworths had contingent liabilities relating to workers’ compensation self-insurance arrangements of A$522.4 million. State WorkCover authorities require guarantees against workers’ compensation self- insurance liabilities. The guarantee is based on independent actuarial advice of the outstanding liability. There is a provision of A$440.7 million for self-insured risks, which includes liabilities relating to workers’ compensation claims, that has been recognized in the balance sheet at January 2, 2011 (A$409.0 million as of June 27, 2010).

Litigation: As of January 2, 2011, Woolworths had no contingent liabilities relating to various litigation matters in progress or threatened against Woolworths or its subsidiaries.

Letter of credit: As of January 2, 2011, Woolworths had contingent liabilities relating to outstanding letters of credit issued to suppliers of A$19.0 million.

Other than as set out above, Woolworths has no other off-balance sheet arrangements.

70 Capital expenditures

The following table shows Woolworths’ capital expenditures for the periods presented:

27 weeks ended the first Sunday 52 weeks ended the last of January, Sunday of June, (A$ millions) 2011 2010 2010 2009 2008(1) Supermarkets ...... 496.3 475.5 892.6 1,117.2 1,150.0 BIGW ...... 66.0 58.2 129.0 131.0 152.9 Consumer Electronics ...... 32.1 19.1 45.1 54.0 36.2 Hotels ...... 97.2 96.1 176.9 234.6 333.4 Unallocated(2) ...... 425.1 354.7 711.6 315.1 269.2

Total capital expenditures 1,116.7 1,003.6 1,955.2 1,851.9 1,941.7 New stores ...... 164 118 225 254 262 Refurbishments ...... 309 327 622 652 643

Growth capital expenditures 473 445 847 906 905 Stay in business ...... 106 111 229 326 427 Supply chain and data center ...... 74 41 119 145 101 Home improvement ...... 13 — 5 — —

Normal and ongoing expenditures(3) 666 597 1,200 1,377 1,433

(1) Reflects 53 weeks of financial results. (2) Unallocated comprise corporate head office, property division and home improvement division. Expenditure in the 2011 Half Year and 2010 Half Year and 2010 Fiscal Year includes land acquisition costs incurred by the home improvement division. (3) Excludes property development and acquisitions.

Normal and ongoing expenditures for the 2011 Fiscal Year are projected to be approximately A$1.4 billion compared with A$1.2 billion for the 2010 Fiscal Year. It is expected that approximately A$849 million of this projected capital expenditure will be for growth and A$520 million of this projected capital expenditure will be for maintenance of existing capital. Capital expenditure projects in the 2011 Fiscal Year include continued roll out of new stores and investment in the Woolworths store network through refurbishment activity, further investments in supply chain such as the construction of the BIG W facility and the re-engineering of the Melbourne National Distribution Center and the establishment of the new Home Improvement business, including store fit-outs, IT and logistics.

Historically, Woolworths has funded its capital expenditures from operating cash flow, bank facilities and long-term debt and expects to continue this practice in the future.

71 Business Overview

Woolworths is one of Australia’s largest retailers measured by sales revenue and number of stores. Woolworths’ total sales revenue in the 2010 Fiscal Year was A$51.7 billion and A$28.3 billion in the 2011 Half Year, with over 3,200 total retail locations in Australia and New Zealand as at January 2, 2011. Sales revenue in Australia in the 2010 Fiscal Year totaled A$47.3 billion and A$26.0 billion in the 2011 Half Year and in New Zealand in the 2010 Fiscal Year totaled A$4.4 billion and A$2.3 billion in the 2011 Half Year. Additionally, according to the ABS Retail Trade analysis, Woolworths had the leading market share in Australia of over 30% of food retailing (including supermarket and grocery stores, liquor retailing and other specialized food retailing) for the 2010 Fiscal Year and the 2011 Half Year. Woolworths is also Australia’s largest food and grocery retailer and the second largest food and grocery retailer in New Zealand by sales and number of stores, with 832 supermarkets in Australia and 159 supermarkets in New Zealand, is a major liquor retailer, operating 1,249 retail liquor outlets and 284 hotels, and a large discount department store, consumer electronics and petrol retailer with 164 stores, 409 stores and 590 outlets, respectively. Woolworths also provides wholesale services to 562 home improvement stores, 51 supermarkets in New Zealand and 61 electronic stores in India. Except as noted, all of the foregoing figures are as at January 2, 2011. Woolworths has demonstrated consistently strong financial performance. Sales and EBIT have exhibited strong growth over each of the past five fiscal years with a compound average growth rate (“CAGR”) for sales of 10.5% over the past five full fiscal years and an EBIT CAGR of 18.8% over the past 5 years. In the 2010 Fiscal Year, Woolworths had total EBIT of A$3.1 billion representing growth over the prior year of 9.5%. In the 2011 Half Year EBIT grew by 6.2% compared to the 2010 Half Year.

Woolworths has no historical or other relationship with former United States retailer F.W. Woolworth Company or other companies with similar names in the United States, the United Kingdom, South Africa, Germany or Mexico.

Woolworths’ ordinary shares were listed on the ASX in 1993 under the symbol “WOW”. As of March 25, 2011, Woolworths had a total equity market capitalization of approximately A$31.8 billion and was one of the 15 largest companies listed on the ASX. Woolworths has been rated A- by S&P since 2001 and has been rated A3 by Moody’s since 2005. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by an assigning rating agency and any rating should be evaluated independently of any other information.

Woolworths’ activities are primarily conducted through the following operating groups:

• Australian Food and Liquor: Woolworths’ Australian supermarkets and retail liquor outlets and Australian food and liquor wholesale;

• New Zealand Supermarkets: Woolworths’ New Zealand Supermarkets and supermarkets wholesale;

• Petrol: Australian petroleum products retail outlets;

• BIG W: Discount department store operations;

• Consumer Electronics: Consumer electronics retailing; and

72 • Hotels: Pub operations including bars, restaurants, gaming, functions and accommodation (but excluding any retail liquor outlets).

The following table provides the number of Woolworths’ retail outlets for the 2006 Fiscal Year through the 2011 Half Year.

As at January 2, As at the last Sunday of June, 2011 2010 2010 2009 2008 2007 2006 Supermarkets—Australia (including attached liquor) ...... 832 813 823 802 780 766 756 Supermarkets—New Zealand ...... 159 150 152 149 149 149 152 Thomas Dux ...... 11 10 11 3 1 — — Liquor outlets Freestanding...... 299 271 281 256 233 212 204 ALH retail liquor outlets ...... 492 476 480 463 434 424 432

Total liquor outlets (excluding attached liquor) ...... 791 747 761 719 667 636 636 Petrol outlets Woolworths ...... 438 419 429 409 389 371 360 Woolworth petrol convenience—New Zealand ...... 20 22 22 22 22 22 22 Caltex Alliance ...... 132 132 132 133 133 134 131

Total petrol outlets ...... 590 573 583 564 544 527 513 BIG W ...... 164 159 161 156 151 142 129 Consumer electronics outlets Tandy ...... 7 79 22 87 106 123 123 Dick Smith ...... 402 354 394 349 310 277 243

Total consumer electronics outlets ...... 409 433 416 436 416 400 366 Hotels ...... 284 286 284 280 271 263 250

Danks (Home Improvement Retail) ...... 191 8————

Total ...... 3,259 3,172 3,199 3,109 2,979 2,883 2,802

73 Area of operations

The map below demonstrates Woolworths’ geographic diversity across Australia and New Zealand as at January 2, 2011.

Supermarkets 191 GROUP TOTAL BWS 311 Supermarkets (incl attached Liquor of 458) 832 Dan Murphy 33 Thomas Dux 11 Petrol 120 NZ Supermarkets 159 BIG W 42 BWS 658 Consumer Electronics 77 Dan Murphy 133 ALH Hotels 108 Petrol 590 Supermarkets 83 Total 882 BIG W 164 BWS 54 Consumer Electronics 409 Dan Murphy 8 ALH Hotels 284 Petrol 57 Danks 19 BIG W 14 Total 3,259 Consumer Electronics 36 ALH Hotels 16 Total 268 Northern Territory

Queensland Supermarkets 251 Thomas Dux 6 Western BWS 118 Dan Murphy 38 Australia South Petrol 186 Australia BIG W 62 Consumer Electronics 114 New South ALH Hotels 26 Wales Australian Danks 6 Capital Total 807 Territo ry Victoria

Supermarkets 75 BWS 60 Supermarkets 29 BWS 21 Dan Murphy 9 Tasmania Petrol 49 Petrol 16 BIG W 3 BIG W 15 Supermarkets 203 New Zealand Consumer Electronics 32 Consumer Electronics 6 ALH Hotels 5 Thomas Dux 5 ALH Hotels 32 BWS 94 Total 272 Danks 11 Total 91 Dan Murphy 45 Supermarkets 159 Petrol 142 Petrol 20 BIG W 28 Consumer Electronics 72 Consumer Electronics 72 Total 251 ALH Hotels 97 Danks 2 Total 688

Corporate history

The origin of Woolworths dates back to 1924 when Woolworths Stupendous Bargain Basement was opened in Sydney and the company was listed on the Sydney Stock Exchange. Woolworths expanded into supermarkets and discount department stores throughout the 1950s to 1970s and in 1983 it completed the acquisition of the Dick Smith business, after acquiring 60% of the business in 1981. In 1985 Woolworths acquired the Australian operations of the U.S. Safeway chain. Following a brief period during which it was owned by a private equity firm, Woolworths was re-floated on the ASX in 1993.

In the 2001 Fiscal Year, Woolworths expanded its consumer electronics retailing capability when it acquired the Tandy consumer electronics chain of 224 stores from Canada-based Intertan Inc. In addition, Woolworths acquired 71 Franklins supermarkets from the Hong Kong-based Dairy Farm International (of which four stores were subsequently divested) and expanded its petrol retail operations by leasing 69 Liberty Oil petrol stations. In the same year, Woolworths sold its interest in Crazy Prices discount stores.

74 In the 2002 Fiscal Year, Woolworths established Bruandwo Pty Ltd (now ALH Group Pty Ltd) with The Bruce Mathieson Group to acquire pubs and to operate its Queensland liquor business. On October 31, 2004, Woolworths’ subsidiary Bruandwo, acquired control of the Australian Leisure and Hospitality Group Limited for a total cash consideration of approximately A$1.3 billion.

In November 2005 Woolworths acquired Foodland N.Z. Finance Limited, the owner of Countdown, Foodtown and Woolworths branded supermarkets in New Zealand, and twenty “Action” branded supermarkets and associated liquor outlets and two supermarket development sites, from Foodland Associates Limited for approximately A$2.3 billion. In 2005, Bruandwo acquired the assets in Victoria of the Bruce Mathieson Group, including 26 hotels and 8 clubs and in 2006 it acquired Taverner, an operator of 33 hotels in large-scale metropolitan areas in South Australia, Victoria and New South Wales, for A$377 million.

In 2006, Woolworths launched a business venture with the TATA Group in India to operate retail electronics stores in India under the Croma brand. As part of this venture, Woolworths provides buying, wholesale, supply chain and general consulting services to TATA.

In 2009, Woolworths announced a joint venture with U.S. home improvement retailer Lowe’s Companies, Inc. to expand into the Australian retail home improvement market. The joint venture has acquired Danks Holdings Limited, Australia’s second largest hardware distributor, which is planned to be used to facilitate entry and expansion into the home improvement distribution and retailing in Australia.

On February 25, 2011, Woolworths announced it will acquire The Cellarmasters Group (“Cellarmasters”) for A$340 million, subject to closing conditions including no regulatory intervention. Cellarmasters is one of Australia’s largest direct marketing wine retailers and providers of contract bottling and wine services.

Strategy Performance objectives

Woolworths targets the following key areas of performance measurement for its businesses in the long term, namely:

• Sales (excluding Petrol) to grow in the upper single digits assisted by bolt-on acquisitions;

• EBIT growth outperforming sales growth assisted by cost savings;

• Earnings per share growth outperforming EBIT growth assisted by capital management over the long term;

• Cost of Doing Business margin reduction of at least 0.20 percentage points per annum (excluding the Petrol and Hotels businesses); and

• Maintenance of its targeted credit ratings from S&P and Moody’s. Woolworths currently has issuer credit ratings of A- from S&P and A3 from Moody’s.

75 Competitive strengths

Woolworths believes it has the following competitive strengths:

• Leading market positions: Woolworths is one of Australia’s largest retailers measured by sales revenue and number of stores. Woolworths’ sales revenue in the 2010 Fiscal Year was A$51.7 billion and A$28.3 billion in the 2011 Half Year with over 3,200 total retail locations in Australia and New Zealand as at January 2, 2011. Woolworths is also Australia’s largest food and grocery retailer and the second largest food and grocery retailer in New Zealand by sales and number of stores, with 832 supermarkets in Australia, a major liquor retailer, operating 1,249 retail liquor outlets and 284 hotels, a large discount department store retailer with 164 stores and a large consumer electronics retailer with 409 stores. In New Zealand, Woolworths operated 159 supermarkets as at January 2, 2011. According to the ABS Retail Trade analysis, Woolworths had the leading market share in Australia of over 30% of food retailing (including supermarket and grocery stores, liquor retailing and other specialized food retailing), with A$34.7 billion and A$18.8 billion of sales revenue in this sector for the 2010 Fiscal Year and the 2011 Half Year, respectively. Woolworths’ competitors include Coles, which reported sales revenue for its Australian food and liquor business of A$23.6 billion and A$13.0 billion in the 2010 Fiscal Year and the 27 weeks ended January 2, 2011, respectively, the banner groups associated with Metcash, Aldi, Costco, other banner groups, independent supermarkets and specialty retailers.

• Non-cyclical business: Supermarkets, comprising food and groceries, petrol and liquor, accounted for more than 84.4% of Woolworths’ sales and 88.2% of EBIT in the 2011 Half Year. As providers of food and other basic necessities, these businesses generally have a high level of recession resistance. According to the Australian Bureau of Statistics, Australian nominal food sales have not experienced negative growth in the last 20 years and have posted industry-wide annual growth of 2 to 12% per year since 1984. Woolworths’ discount department stores (BIG W) are somewhat counter-recessionary as consumers have, in the past, switched from specialty retail outlets and department stores to discount stores in times of recession. The non-cyclical nature of Woolworths’ business is illustrated by growth in sales revenue of 7.5% in the 2009 Fiscal Year (excluding the impact of the 53rd week in the 2008 Fiscal Year), 4.2% in the 2010 Fiscal Year, and 4.0% in the 2011 Half Year compared to the 2010 Half Year, notwithstanding difficult global economic conditions and low levels of food price inflation in the 2010 Fiscal Year and the 2011 Half Year.

• Well-recognized brand names: The Woolworths brand name has been a symbol of quality and excellence for 85 years in Australia. The brand is presented with “The Fresh Food People” tagline to promote Woolworths’ quality food and groceries. The Countdown brand name has been in existence in New Zealand since 1981. Since Woolworths acquired Foodland N.Z. Finance Limited in 2005, Woolworths has been undertaking efforts to further build on the strength of the brand through its roll out of new generation Countdown stores. The BIG W brand has been in existence since 1976 and is known for quality merchandise at everyday low prices. Dick Smith commenced operations as an electronics retailer in 1968 and was acquired by Woolworths in 1983. Woolworths acquired the Dan Murphy’s brand in 1998.

• Successful retailing strategy and execution history: Woolworths has an established history of successful food and grocery retailing and successfully introducing new categories and business lines. Woolworths’ retail strategy centers on providing a diverse range of high quality products and good service at consistently low prices. Woolworths has been able to lower its prices by

76 reducing its cost of doing business and passing some of these cost savings on to the consumer. This allows Woolworths to drive volumes while maintaining margins. Woolworths has a strong track record of leveraging its supermarket retailing business to launch and acquire new businesses sharing high volume, low margin characteristics, such as general merchandise and consumer electronics. Woolworths has accumulated vast experience in business integration and overlaying its retailing models on new business lines.

• State of the art supply chain systems: Woolworths believes its purchasing and distribution system has contributed to its ability to pursue its strategy of selling quality products at competitive prices. This has driven strong customer service levels and improved inventory management, which in turn has contributed to strong sales revenue and EBIT performance. The intellectual property that Woolworths has developed in its supply chain teams, IT systems and distribution centers for its Australian Supermarkets business is now being applied to Woolworths’ other businesses, including New Zealand Supermarkets, BWS, Dan Murphy’s, BIG W and Consumer Electronics. As Woolworths continues to invest in systems that further enhance supply chain capability, Woolworths believes it will continue to create a competitive advantage in this area. Work has commenced on the development of the “Next Generation Replenishment” solution which will continue to improve inventory management as well as result in cost savings in stores, distribution centers and transport.

77 • Strong financial profile: Food, liquor, grocery and petrol retailing represented 84.4% of Woolworths’ sales revenue for the 2011 Half Year. Woolworths believes its prominent positions in this fundamental business in Australia and New Zealand lead to a relatively high degree of stability in earnings and cash flow. Throughout the past five years Woolworths has consistently maintained what it believes to be a conservative financial profile. Furthermore, Woolworths has maintained a rating of A- from S&P since May 2001 and a rating of A3 from Moody’s since October 2005. For these reasons, Woolworths believes that it has historically maintained favorable access to domestic and international capital markets. • Strong depth of management: Woolworths has an experienced executive leadership team. Woolworths’ Group Managing Director and Chief Executive Officer, Michael Luscombe, joined Woolworths over three decades ago as a management trainee and has over 30 years of experience in retail. Woolworths’ Deputy Chief Executive Officer and CEO designate, Grant O’Brien, has worked across a number of Woolworths’ businesses after joining the company in 1987. Cross divisional experience is highly valued and is a characteristic shared by the majority of Woolworths’ executive leadership team. A quarter of Woolworths’ executive leadership team have over 20 years of service at Woolworths. As part of Woolworths’ drive to develop potential future managers, significant attention is given to the recognition of management potential, succession planning and career development. This is designed to ensure that Woolworths has the appropriate strength and depth in its human resources to continue to deliver strong performance in the future.

Growth strategies Woolworths’ core strengths include its retailing expertise, world class supply chain capability, low cost culture and its depth of talent. Woolworths believes that there are opportunities to leverage its strengths and augment its existing business plans to drive growth both organically and through the continual evaluation of new business development and acquisition opportunities. These include the following: • Growth opportunities: There is continuing opportunity for Woolworths to grow market share in its current businesses. Woolworths’ market share of over 30% of food retailing (including supermarket and grocery stores, liquor retailing and other specialized food retailing) for the 2011 Half Year allows for further growth. It has plans to continue to develop its food, liquor and grocery business by leveraging the strong brand position it already possesses in this segment, particularly in its fresh food business. Woolworths is also expanding its presence in the increasingly important online distributions channel through its Woolworths Online grocery website and the new BIG W, Dick Smith and Dan Murphy’s online stores. In addition, Woolworths plans to deliver new long term growth initiatives through entry into new businesses and categories. Woolworths has accumulated considerable experience in introducing new businesses and categories, through the successful introduction of the liquor, petrol, consumer electronics, and hotels businesses, and by significantly expanding existing categories. Woolworths considers that there are further opportunities to branch into new categories, such as optical in BIG W and health and wellness products through Australian Supermarkets’ new Macro Wholefood Market range. Woolworths continues to assess both domestic and international opportunities as they arise and has what it believes to be a disciplined and targeted approach to these growth options. • Continued reinvestment in all businesses: Woolworths has a strong track record of reinvestment in its businesses—through improving stores, lowering pricing, improving quality,

78 enhancing the shopping experience, developing its range and implementing new merchandise initiatives driven by customer feedback and changing consumer demand—which it intends to continue.

Woolworths intends to continue to focus on improving in-store execution, ranging, stock availability and customer service. Woolworths continues to focus on improving customer experience and service through new store formats as part of Woolworths’ ongoing store refurbishment program, and the implementation of such service improvements as unit pricing (allowing customers to more easily compare prices on items of different size) and self check-out lanes, which have been installed at many Woolworths supermarkets.

Store roll-out and refurbishment plans are delivering solid returns and continue to receive positive feedback from customers as it allows Woolworths to tailor stores to meet changing customer needs.

79 • Leveraging Woolworths’ supply chain capabilities: Woolworths believes that there are opportunities to leverage the intellectual property that it has developed in its supply chain and retailing systems to other businesses. Woolworths continues to invest in its supply chain, including the development of its “Next Generation Replenishment” solution, which is expected to optimize order flow through greater visibility of timing and forecast volumes, which leads to improved labor planning and better inventory management, continuing to reduce inventory days, and save costs in stores, distribution centers and on transport. Woolworths has also opened liquor distribution centers in Brisbane, Melbourne and Sydney reducing direct to store deliveries, improving inventory management and creating cost savings and efficiencies in supply chain and at stores. The re-engineering of the National Distribution Centre in Melbourne is substantially complete and has significantly improve pick rate efficiency and immediately reduced costs. Woolworths is currently developing a new BIG W Distribution Centre in Sydney that is expected to be completed in the 2012 Fiscal Year and will enable BIG W to improve service and reduce costs. The financial benefits of this advanced supply chain are expected to continue over future years, while the intellectual property is being leveraged across other divisions.

Woolworths also recently conducted a major review of its international logistics network, resulting in a reduction in the number of consolidation partners to two. Woolworths has also increased the number of consolidation facilities employed to support an improved flow of merchandise and introduced a single, comprehensive order tracking system. Further development is expected to continue.

• Expansion of global sourcing activities: Woolworths operates sourcing offices in Hong Kong and Shanghai to cover the China and South-East Asia region, and also sources goods in India through an exclusive agent. Woolworths’ global sourcing operations continue to grow and are providing significant benefits. Woolworths has made good progress on developing its international logistics capability to support its growth plans.

• Continued emphasis on exclusive brand goods: Woolworths’ product range features the major industry brands, its “Fresh Food” offer and a very strong exclusive brands business. Woolworths generally achieves higher margins on its exclusive brands and believes that exclusive brands penetration in Australia is well-below international levels. While Woolworths retains a strong commitment to branded merchandise, its exclusive brand, “Homebrand”, continues to be one of Australia’s largest grocery brands by revenue. Woolworths intends to continue expanding its exclusive brands range together with the Homebrand, Select, and Macro Wholefood Markets range, gaining strong customer acceptance. In addition, Woolworths has expanded its exclusive brands liquor offering. Woolworths launched its exclusive brand low-carb beer called “Platinum Blonde” in July 2008 and, following the acquisition of a 25% interest in the Gage Roads Brewery in June 2009, launched its exclusive brand full-strength beer called “Dry Dock” in October 2009 followed by “Sail & Anchor Clipper light beer” and “Castaway cider” during the 2011 Half Year. These three exclusive brand beers complement Woolworths’ existing range of exclusive brand wine. Woolworths also offers a wide-range of exclusive brand products in its BIG W and Dick Smith stores.

• Entry into the Australian retail home improvement market: Good progress has been made in establishing Woolworths’ home improvement joint venture with Lowe’s, which is a significant part of Woolworths’ category expansion strategy. Of the 150 sites the joint venture plans to secure over the next five years, a significant number have been secured, with many more being

80 added to the pipeline. The sites are generally prime retail sites which Woolworths believes are well located in good trading zones and the joint venture is on track to open its first store in the second half of calendar year 2011. The corporate support office is well established and staffed with a team that has extensive home improvement experience in both domestic and international businesses. With the assistance of Lowe’s, store design, layout and ranging of product are well developed. Through combining the local expertise provided by members of Danks’ management team with Woolworths’ supply chain experience, the joint venture is effectively executing the rapid development of the business, highlighted by the establishment of the supply chain strategy, a key milestone that the joint venture expects to enable a successful national rollout plan. Additionally, the joint venture continues to advance the development of its IT systems, supply arrangements and the Danks wholesale business. The recruitment and training of the first group of store managers has occurred and the first distribution center in Hoppers Crossing, Victoria has commenced operation. Construction has commenced on the first group of stores and approximately 15-20 stores are planned to open in the 18 months following the first store opening.

• Developing customer engagement strategy: Woolworths has made progress in developing its customer engagement strategy. The Everyday Rewards program is proving to be successful with 5.6 million cards registered as at February 13, 2011. In addition to earning fuel saving vouchers by shopping in Woolworths supermarkets, cardholders are also able to earn Qantas Frequent Flyer points through shopping in Woolworths supermarkets, BIG W, BWS and Dick Smith. The strategic alliance linking Woolworths’ Everyday Rewards Card with the Qantas Frequent Flyer program is intended to significantly enhance the value of the program to Woolworths’ customers and transform the relationship with them. Over 3.2 million Everyday Rewards members have registered to earn Qantas Frequent Flyer points as at February 13, 2011. The information provided by this strategy allows Woolworths to develop expertise in targeting its customers with compelling offers, making ranging and merchandising decisions and communicating more effectively with its customers.

• Financial services capabilities: In addition to its “Everyday Money” credit card, launched in September 2008 and “Woolworths Everyday Rewards – Qantas credit card” launched in November 2010 with its partner HSBC, Woolworths currently offers stored-value cards that can be used at a variety of Woolworths’ stores through its “WISH gift cards” business and recently launched its “Everyday Money Prepaid Mastercard”, in conjunction with ANZ Bank. Woolworths also sells gift cards for non-competing retailers in its stores through its “Gift Card Mall” and has installed hundreds of co-branded Woolworths Financial Services / ANZ Bank ATMs in its stores. Woolworths intends to continue to invest in its financial services capabilities by potentially offering additional financial services through its retail network. Woolworths has also developed its own financial switch which is used for processing financial transactions (at a lower cost) with very high reliability.

Supermarkets

Supermarkets accounted for approximately 84.4% of Woolworths’ sales revenue in the 2011 Half Year. Supermarkets has three business groups: Australian Food and Liquor, New Zealand Supermarkets and Petrol.

81 Set out below are details of the geographic distribution of stores in Supermarkets as of January 2, 2011.

Freestanding Supermarkets liquor Petrol(1) New South Wales & Australian Capital Territory ...... 251 156 186 Queensland ...... 191 344 120 Victoria ...... 203 139 142 South Australia & Northern Territory ...... 75 69 49 Western Australia ...... 83 62 57 Tasmania ...... 29 21 16 New Zealand ...... 159 — 20

Total ...... 991 791 590

(1) Includes 132 petrol stations operated under the Caltex alliance described under “—Petrol”.

Supermarkets

New Zealand Supermarkets, trading as Countdown, Foodtown and Woolworths, operated 159 stores at January 2, 2011 and is the second largest food and grocery retailer in New Zealand, with sales of NZ$5.2 billion for the 2010 Fiscal Year and NZ$2.8 billion for the 2011 Half Year. The stores are generally large supermarkets offering a wide range of products including frozen food, dairy, delicatessen, fresh fruit and vegetables, meat, groceries, bakery, health and beauty and some general merchandise. These supermarkets are generally located in shopping centers or in stand alone locations. Woolworths also offers supermarket shopping and delivery services in New Zealand over the internet through its Countdown Online website.

As “The Fresh Food People”, Woolworths offers a wide range of fresh product, dry groceries and other merchandise, with freshness and quality underpinned by Woolworths’ quality assurance commitment, and provided to customers at consistently low prices. Woolworths strives to have an unbeatable fresh offer for its customers through focusing on improving the quality of its buying, working with suppliers to enhance quality of their products, examining all aspects of its fresh supply chain to improve quality on the shelf and reduce costs, reducing shrinkage, enhancing its fresh food testing through its food labs, and looking for ways to improve overall quality and shelf life and enhance store presentation. Woolworths is a major buyer in Australia and seeks to consistently focus on and deliver high quality fresh produce.

Woolworths’ internet food retailing business in Australia is operated under the Woolworths Online brand and focuses on providing the traditional supermarket range of goods from Woolworths’ supermarkets to the online consumer.

82 According to the ABS Retail Trade analysis, Woolworths had the leading market share in Australia of over 30% of food retailing (including supermarket and grocery stores, liquor retailing and other specialized food retailing) for the 2011 Half Year.

Industry trends Woolworths has identified the following trends in the supermarket retail industry in Australia and New Zealand that it believes have affected and will continue to affect the strategy and performance of the Supermarkets businesses: • Significant competition: Over the past 10 years, new entrants to the Australian supermarket retail industry and a reinvigorated Coles after a change in ownership in 2007 have led to a change in market dynamics. The German discount supermarket chain Aldi opened its first location in Australia in 2001 and currently has over 200 Australian stores. Additionally, the United States-based consumer staples retailer Costco opened an outlet in the greater Melbourne area in August 2009 and is planning to open a store in greater Sydney in 2011. The change in market dynamics that has resulted from these entrants and Coles’ reinvigoration is expected to continue, and will challenge Woolworths to retain its leading market share. This competition may lead to changes in the product mix that Woolworths offers its customers. • Regeneration of urban areas: In a related trend to the rise of single-person households, according to the ABS, there is a growing trend of regeneration of urban and inner-suburban areas, as families choose to be closer to cities for work or other reasons. Woolworths believes that this trend will result in demand for additional smaller-scale grocery stores in inner- suburban areas. • Healthy and organic foods: Woolworths believes that as health and obesity-related issues grow, there will be a growing demand for organic and healthy foods, such as fresh fruits and vegetables. • International sourcing: As part of an effort to reduce cost of goods sold, Woolworths has seen an increase in international sourcing activities by supermarkets in Australia and New Zealand and has expanded its own efforts in this area through increased, direct importation of goods from overseas. • Online retailing: Recently, Woolworths has seen an increase in the number of customers shopping for groceries over the internet and arranging to have the groceries delivered to their home or office in a specified delivery window. Woolworths participates in this market through its “Woolworths online” service available at www.homeshop.com.au, and expects this growth trend to continue. • Environmental initiatives: As part of a response to growing societal concern about the environment, there has been an increased focus on environmentally-friendly or “green” initiatives in the corporate sector. Woolworths has responded by reducing water usage, installing more energy efficient refrigerators and freezers in its supermarkets and installing solar panels on some of its petrol canopies, which has lessened Woolworths’ impact on the environment and also enabled it to reduce costs.

Marketing and merchandising strategy The marketing and merchandising strategy of Supermarkets is to provide its customers with quality products at competitive prices in attractive stores which offer convenient, friendly and

83 efficient service. Woolworths endeavors to maintain consistently low prices, thereby reducing reliance on temporary markdowns. Woolworths’ product range features the major industry brands and a strong exclusive brands business.

Exclusive Brands. Woolworths continues to focus on the development of two of its exclusive label-branded product ranges: the “Homebrand” range, targeting cost-conscious consumers, and the Woolworths’ “Select” range, a premium range of Woolworths branded product. Woolworths sells a wide range of goods under the Homebrand label, including a wide range of canned goods, packaged food products and paper goods. Woolworths believes that Homebrand is Australia’s largest selling grocery brand, and Woolworths intends to continue to expand the Homebrand range. The Homebrand line helps Woolworths compete with Aldi, which offers a wide-range of generic products to cost-conscious consumers.

In addition, Woolworths has introduced Woolworths “Select”, a premium range of Woolworths branded product. Woolworths “Select” products aim to be at the top of the range in the relevant category, while having a price advantage relative to products of comparable quality. Woolworths intends to expand this offering where it believes it can establish a definable point of difference. Woolworths has also recently introduced its own exclusive label liquor products, including Platinum Blonde and Dry Dock beers, Sail & Anchor light beer and Castaway cider.

Woolworths also aims to continue to develop and grow its sales of major industry brands. Where possible, Woolworths stores offer Australian sourced products. Woolworths employs food scientists, packaging engineers and a marketing department to assist in the development and expansion of its exclusive label brands.

Organic and health foods. In response to a growing awareness of health and obesity-related issues, in recent years, Supermarkets has expanded its offering of organic products and fresh produce, including through its Macro Wholefoods Market range. Woolworths believes that its advertising theme, The Fresh Food People, has complemented its focus on such products.

New Zealand brand consolidation: Woolworths is currently consolidating all New Zealand supermarkets under the Countdown brand, which will provide streamlined marketing and capitalize on the strongest of Woolworths’ New Zealand supermarkets brands.

Commitment to quality

Woolworths believes that its commitment to providing quality products at competitive prices is an important factor in maintaining and expanding its customer base. In particular, Woolworths believes its fresh produce is an important customer attraction and, as a result, it focuses its buying on quality produce. Woolworths devotes a significant proportion of the floor space of its stores to fresh fruit and vegetables, as well as other perishables such as delicatessen items, baked goods, prepared foods, and prime cut meats. Woolworths has also enhanced the attractiveness of the display of these products. Improvements in the warehousing and distribution systems have enabled fresh items to be delivered to its stores more quickly and more frequently, improving quality on the shelf while reducing costs and shrinkage. These improvements have been supported by The Fresh Food People advertising theme used by the business.

Pricing policy

Woolworths has a long-standing policy, whereby it seeks to offer better value to its customers through lower prices than its major competitors for comparable products and package size. This

84 pricing philosophy is supported by various programs aimed at reducing operating costs. In particular, Woolworths has a significant focus on continuing to drive operating costs out of its supermarkets business with the goal of passing along a portion of any cost savings to customers in the form of lower prices. Recently, Woolworths has reduced the prices on over 5,000 of its Australian supermarkets products as part of its “low prices you can count on, every day” strategy, in addition to 2,000 weekly specials. Woolworths continues to evolve its price marketing strategies as competition changes. Woolworths began its Project Quantum initiative in the 2010 Fiscal Year that seeks to reduce Woolworths’ cost of doing business through improving efficiencies in support structures, expansion of its end-to-end supply chain, and lowering procurement costs. Woolworths expects to pass part of the savings from the Quantum initiative on to customers through reduced shelf prices.

Product range and efficient store utilization

Woolworths continues to seek to increase the selling capacity of its supermarkets through more efficient utilization of store and shelf space. At the same time, Woolworths has expanded the assortment of items available in its supermarkets.

In recent years, Woolworths has also targeted urban and inner-suburban areas such as several residential neighborhoods near the Sydney central business district. These stores tend to be smaller in size than a typical Woolworths supermarket store, while still offering a wide range of products. In addition, these stores have limited or no parking facilities and fewer grocery carts than a typical store. Our Thomas Dux branded supermarkets are of similar size but offer a more up-scale range of products, including expanded cheese, meat, and organic produce offers, as well as specialty goods from around the globe.

Extended trading hours

Permitted trading hours vary from state to state in Australia, and in certain areas, Woolworths’ stores are still subject to trading restrictions, particularly on Sundays and, to a lesser extent, Saturdays and weekday evenings.

Over the past several years, these restrictions have been relaxed in most states, and there are no trading hours restrictions in Victoria and the Northern Territory. Longer trading hours, combined with Woolworths’ ability to offer a wide range of grocery items and fresh foods, enhances the ability of Woolworths’ supermarkets to compete against a range of other food retailers. In those areas where Woolworths supermarkets are able to trade on Sundays, sales revenue on Sundays tends to be greater than all other days but Saturdays, though increased wages paid tend to result in slightly lower profits. The ability to trade later in the evening on other days has resulted in additional growth in sales revenue and profits.

Emphasis on customer service

Woolworths believes that it provides good service to its customers and that in-store customer service is an important point of differentiation in the Australian food retail sector. Courtesy and friendliness are emphasized in the training of store personnel.

Woolworths has installed self checkout systems in many of its supermarkets in order to give greater convenience and improved customer experience at the checkout counter.

85 Each Woolworths supermarket has electronic funds transfer at point of sale (EFTPOS) capability available at every checkout lane.

Store roll-out and refurbishment

The primary objectives of refurbishment are to provide an ongoing attractive, bright and clean shopping environment and to increase store selling capacity through improved utilization of available space. Woolworths’ new and refurbished stores generally reflect the latest merchandise offer across all departments. In order to minimize the disruptive effect on sales, most stores are kept open during the refurbishing period.

In New Zealand, Woolworths has also initiated a major refurbishment and new store rollout initiative to improve its offer to customers and increase its footprint, as well as expanding the trading area of existing stores. Following an extensive review, Woolworths is now putting in place a program to roll out a new supply chain infrastructure to support the New Zealand business.

Woolworths expects to continue its major refurbishment cycle with most stores being refurbished every seven to ten years, although this schedule can be accelerated when refurbishing a store is expected to provide an especially attractive return or is needed to protect market position. Between major refurbishments, cosmetic upgrades are used to maintain a store’s appearance.

Woolworths believes that store refurbishments have a significant impact on the sales and profitability of its supermarkets. In recent years, supermarkets that have undergone major refurbishment have largely experienced sales increases, as well as improved profits. In the 2011 Half Year, Australian Supermarkets opened 12 new stores and refurbished 41 existing stores and New Zealand Supermarkets opened eight new stores and refurbished 13 existing stores.

Woolworths intends to continue to open 15 to 25 supermarkets each year in Australia (with a reasonable degree of certainty for the next three years), which, together with the continued expansion of existing stores, is expected to increase its trading area by more than 3% per year based on square meters. Recently, due to funding difficulties for property developers as a result of the global financial crisis, Woolworths has undertaken to purchase and develop land directly and to hold these assets on its balance sheet in order to maintain the pace of its store roll-out plans. Consistent with its overall property strategy, Woolworths intends to sell and lease back these premises when market conditions allow for this to occur on acceptable terms. See “—Property, plant and equipment” for a discussion of Woolworths’ property management and site pipeline.

Advertising and promotion

Woolworths’ advertising strategy for its supermarkets is directed primarily at enhancing its image as a service-oriented supermarket chain while continuing its reputation of being price competitive. Woolworths continues to emphasize its commitment to quality products and produce through its The Fresh Food People advertising theme. In addition, Woolworths maintains a petrol discount program that provides a discount on petrol purchases with purchases of A$30 or more from a Woolworths supermarket, which Woolworths believes has been very attractive to its customers. See “—Petrol—Pricing policies”. The Everyday Rewards alliance with Qantas enables Everyday Rewards card holders to earn Qantas Frequent Flyer points, which can be

86 redeemed for Qantas flights and merchandise in the Qantas Frequent Flyer Store online. Woolworths believes that the Everyday Rewards card program increases customer loyalty and allows Woolworths to develop expertise in targeting its customers with compelling offers, making ranging and merchandising decisions and communicating more effectively with its customers.

Supply and distribution

Supermarkets currently operates seven regional distribution centers (“RDCs”), two national distribution centers (“NDCs”) and three liquor distributions centers in Australia, which supply dry grocery, general merchandise, fruit and vegetables and meat products and three distribution centers operating in New Zealand, which supply dry grocery and general merchandise. Woolworths’ supply chain management systems currently being used in Australian Supermarkets are now being rolled out in Liquor and New Zealand Supermarkets. Woolworths’ supply chain management system developed in the Australian Supermarkets is designed to improve business efficiency processes and business restructuring programs, with the overall goal of significant cost reductions.

The principal systems that have driven the transformation of Woolworths’ supply chain are: StockSmart (DC forecast based replenishment), AutoStockR (store forecast based replenishment), Warehouse Management Systems and Transport Management Systems. These systems have improved productivity enabling higher levels of “in stock” performance.

Supermarkets’ distribution centers reflect the consolidation of 31 distribution centers in Australia as part of Woolworths’ move to end-to-end supply chain management. The NDCs are designed to house items with longer shelf lives, such as ambient goods. The RDCs are designed to house items with shorter shelf lives, such as chilled goods and produce, and to coordinate distributions of goods from the NDCs to individual stores. Both the RDCs and NDCs have been designed in a “modular” format to account initially for Woolworths expected volumes in the near term, with the ability to expand as needed. The supermarket DCs were developed by Woolworths and then subsequently sold and leased back from the purchaser, consistent with Woolworths’ standard practice regarding development of real property.

Woolworths believes its purchasing and distribution system has contributed to its ability to pursue its strategy of selling quality products at competitive prices. Its warehouses and distribution facilities enable Woolworths’ supermarkets to offer fresh dairy products, meat, produce and bakery items. These goods are moved mainly by independent trucking contractors, though Woolworths operates a trucking fleet primarily for its Victorian operations. In recent years, Woolworths has been working with participants in the trucking industry to design multi- level and multi-temperature trailers in an effort to reduce Woolworths distribution costs.

Work has commenced on the development of the “Next Generation Replenishment” solution, which is expected to optimize order flow through greater visibility of timing and forecast volumes, which leads to improved labor planning and better inventory management, while continuing to reduce inventory days, and save costs in stores, distribution centers and on transport. The re-engineering of the NDC located in Victoria is substantially complete and has significantly improved pick rate efficiency and immediately reduced costs. This involved significant software and hardware upgrades and increases capacity on the site with an extension of existing automation. These changes are expected to significantly improve pick rate efficiency

87 and reduce costs. This work is substantially complete and Woolworths has already experienced improved pick rate efficiency and reduced costs. The refurbishment of Woolworths’ two automated DCs at Hume, Victoria and Minchinbury, New South Wales was completed in the first half of the 2011 Fiscal Year. This work is expected to significantly extend the life of these DCs. Development of a meat processing and distribution operation in Western Australia has commenced with the goal of improving the efficiency in Western Australia and is planned to be completed in the second half of the 2012 Fiscal Year. Construction of a Tasmanian DC commenced in the 2011 Half Year, with completion planned for the 2012 Fiscal Year.

Woolworths has completed its outbound Metro Transport Model, which involves Woolworths’ ownership of specifically designed trailers and the deployment of capacity planning, optimization and freight tracking systems. Operations in Perth and Adelaide were commissioned in the 2010 Fiscal Year and Brisbane was commissioned in the first half of the 2011 Fiscal Year. Woolworths has also developed a new rail strategy, the first phase of which was implemented in the last quarter of the 2010 Fiscal Year on the Adelaide to Northern Territory corridor. Woolworths has been working closely with rail providers to deliver a more cost effective end to end solution, with work on the east-west corridor now complete and operational.

Relations with suppliers

Supermarkets deals with more than 3,800 suppliers, and is not dependent on any one supplier or group of suppliers. Woolworths believes its high volume of purchases in Australia and its ability to source products from a number of different suppliers provide a mutually beneficial position when negotiating supply contracts.

Liquor

Woolworths is a major liquor retailer in Australia, operating 757 liquor outlets across its liquor brands in its own right and 492 outlets operated by the ALH Group (75% owned by Woolworths). Total liquor sales for the 2011 Half Year totaled A$3.2 billion.

The business operates under three distinct brands, each servicing a different segment of the liquor market:

• Dan Murphy’s: Free standing “big box” liquor outlets that have a supermarket-like layout at 133 locations as at January 2, 2011. Dan Murphy’s philosophy is based on providing a large range of liquor at low prices, supported by personalized fine wine advice and expertise and the Dan Murphy’s business recently launched an online retail site that allows consumers to purchase a wide-range of Dan Murphy’s stock over the internet. Woolworths believes that its Dan Murphy’s branded liquor operations has had wide customer acceptance, providing customers with what Woolworths believes to be good value for money in line with its advertising theme “Lowest Liquor Prices Guaranteed” and extensive product ranging, together with personalized fine wine advice and expertise. During the 2011 Half Year, Woolworths opened 12 new Dan Murphy’s stores and has an overall target of 150 stores.

• BWS (Beer, Wine and Spirits): Free standing outlets that stock a range of beers, wines and spirits providing a competitive convenience offer at 658 locations throughout Australia as at January 2, 2011.

88 • Woolworths Liquor: Liquor outlets that are, in most cases, attached to supermarkets, stocking a range of beers, wines and spirits. There were 458 locations throughout Australia as at January 2, 2011.

On February 25, 2011, Woolworths announced that it would acquire The Cellarmasters Group (“Cellarmasters”) for A$340 million. Cellarmasters is one of the largest direct-to-home wine retailers and providers of contract bottling and wine services with operations in Australia and New Zealand. The business is expected to compliment Woolworths’ existing liquor portfolio. Completion of the acquisition is expected to occur by May 2011, subject to closing conditions, including no regulatory intervention.

Marketing and merchandising strategy

Because of the Liquor business’ close relationship with the supermarkets business, many of the marketing and merchandise strategies described above in “—Supermarkets” apply equally to the Liquor business. For example, as with Supermarkets, the marketing and merchandising strategy of the Liquor business is to provide its customers with quality products at competitive prices in attractive stores which offer convenient, friendly and efficient service. Woolworths’ product range features the major industry brands. In addition, the Liquor business focuses on maintaining low prices supported by continuing cost reductions. Woolworths offers exclusive brand beer, wine and liquor across all three of its retail liquor formats. Liquor distribution is done through DCs in Brisbane, Melbourne and Sydney.

Regulation

Liquor retailing is regulated in Australia, with each State and Territory controlling liquor sale via liquor licensing. State Government liquor authorities execute the licensing regulations in their regions with each region’s regulations reflecting their own unique regional issues. Consequently the degree of regulation differs from state to state. Woolworths is not aware of any action or proposed action that would invalidate any of its liquor licenses. See “—Regulation—Australian regulation—Retail liquor regulation” for further information.

As a result of the impact of liquor licensing regulation, expansion within the liquor retailing business can be costly and time consuming. As a result, growth in the business is expected to be undertaken through acquisition of existing stores with liquor licenses, obtaining new liquor licenses from State liquor boards and by changing the format of Woolworths’ current stores to the most profitable format for the location.

Petrol

Woolworths’ first petrol station site opened in central New South Wales in 1996. The Woolworths petrol business is an adjunct to its supermarkets business, creating incremental store sales as a result of the petrol discount program described below under “—Pricing policies”. Woolworths believes that petrol retailing fits within Woolworths’ core competency of high volume, low margin businesses and, with petrol stations located adjacent or close to supermarkets, assists in allowing Woolworths to meet more of its customers’ needs at a single location. Total petrol sales for the 2011 Half Year were approximately A$2.9 billion.

In August 2003, Woolworths announced a petrol retailing and convenience store alliance with Caltex Australia Limited (“Caltex”). The co-branded alliance outlets are in every Australian state

89 and territory and are generally located near Woolworths’ stores. Woolworths sets retail petrol prices in accordance with its petrol pricing policy and Woolworths also sets the redemption discounts.

During the 2011 Half Year, Woolworths added nine petrol stations. As a result, as at January 2, 2011, Woolworths’ petrol network included 570 petrol outlets in Australia (including 438 petrol outlets operated by Woolworths and 132 petrol outlets operated as a result of the Caltex alliance) and is targeting an additional 11 outlets to be opened by June 2011.

Pricing policies

The price of petrol in Australia is generally affected by the price of petrol from Singapore refineries in U.S. dollars, the value of the Australian dollar relative to the U.S. dollar, Australian federal taxes and state government subsidies, and the cost of seafreight for refined product from Asia to Australia, including wharfage, and margins within Australia for storage and distribution, wholesaling and retailing.

Of these, the only factor that Woolworths determines is the retail margin. Woolworths offers a petrol discount program that allows customers to receive a discount on the price per liter (currently four cents per liter) off the local price on production of a receipt or Everyday Rewards Card showing purchases totaling A$30 or more from a Woolworths supermarket, and also offers other, targeted petrol discount offers as a part of periodic marketing. Woolworths believes that the Everyday Rewards program creates a unique cross-marketing opportunity and has been very attractive to its customers. Woolworths also has a policy of matching the lowest price within a competitive distance of each of Woolworths’ petrol sites.

Relationship with supplier

Woolworths purchases its petrol from Caltex, one of four Australian refiners, pursuant to a supply agreement which is in place through December 31, 2011. A new three year supply agreement has been entered into, extending this relationship through December 31, 2014.

BIG W

BIG W comprises Woolworths’ discount store operations. BIG W’s sales for the 2011 Half Year were approximately A$2.4 billion, and accounted for approximately 8.5% of Woolworths’ consolidated sales revenue in the 2011 Half Year.

BIG W consisted of 164 discount department stores as at January 2, 2011, with an average selling space of approximately 5,000 to 6,000 square meters. BIG W offers a variety of merchandise including men’s, women’s and children’s apparel; footwear; fabrics; confectionery; health and beauty products; optical products; office supplies; small appliances; home entertainment (particularly televisions and gaming consoles); garden equipment and pet supplies. Additionally, in 2007, BIG W began offering optometry services in select BIG W stores under the BIG W Vision brand. There were 33 BIG W Vision locations as at January 2, 2011.

90 The table below shows the geographic distribution of BIG W stores as of January 2, 2011.

BIG W New South Wales & Australian Capital Territory ...... 62 Queensland ...... 42 Victoria ...... 28 Northern Territory and South Australia ...... 15 Western Australia ...... 14 Tasmania ...... 3

Total ...... 164

Marketing and merchandising strategy

BIG W’s trading policy is to offer customers top quality national brands at every day low prices under the marketing themes “Everyday Low Prices” and “Live Big for Less”. BIG W endeavors to maintain consistently low prices, thereby reducing reliance on temporary markdowns. BIG W’s merchandising strategy requires the identification of items wanted by customers on an every day basis, which are then purchased in large volumes by BIG W. Customers benefit from the resultant cost advantages through reduced prices, while at the same time BIG W is able to earn satisfactory margins through high sales volumes. Sales are primarily on a self-service, cash-and-carry basis aimed at maximizing sales volume and inventory turnover while minimizing overhead expenses.

In addition to its “everyday low price” positioning, BIG W seeks to be a destination for key items for me, my home and family through its wide range of over 80,000 product offerings. Additionally, BIG W has become a destination for new mothers through its offer of key baby- related products at low prices and also offers a range of home entertainment products such as televisions and gaming consoles. BIG W has also recently launched an online shopping website, http://www.bigw.com.au , that offers over 9,000 items from BIG W’s range for purchase over the internet.

Supply and distribution

BIG W maintains two distribution centers, situated in Warwick, Queensland, and Monarto, South Australia. Warwick distributes to all stores in Queensland and most stores in New South Wales. Monarto distributes to Victoria, South Australia, Northern Territory, Western Australia, Tasmania and the rest of the stores in New South Wales. BIG W has a third distribution center under development in Sydney that is expected to be completed in the 2012 Fiscal Year. During the 2010 Fiscal Year, in excess of 70.6% of purchases were transported from these facilities, including cross docking and flowthrough. The balance was shipped directly to BIG W stores from suppliers.

In 2007, BIG W commenced its Quicksilver program to focus on transforming the flow of merchandise to stores to support BIG W in delivering the right product, to the right stores, at the right time. The program has made progress on a number of key initiatives. The most significant of these initiatives is the development and implementation of a more advanced store forecast based replenishment system that builds on the capabilities of AutoStockR. The accelerated rollout of AutoStockR was completed in the 2010 Fiscal Year and is expected to lead to a more efficient use of working capital through improved inventory management.

91 Buying function BIG W’s support office is responsible for sourcing, ranging, some central distribution and planning facilities. Significant discretion is exercised by stores in merchandising and re-ordering basic stocks. Seasonal and promotional merchandise are centrally managed by the support office. BIG W believes its buying function is very effective, and has contributed significantly to BIG W’s success in recent years, as it has allowed BIG W to negotiate directly with suppliers, particularly suppliers in China, to supply goods to BIG W’s specifications at low prices. Where the product offering overlaps, BIG W seeks to negotiate with suppliers in conjunction with other Woolworths divisions to achieve greater sourcing efficiencies when appropriate.

Advertising and promotion BIG W uses television, internet, brochures, magazines, newspapers and radio in its advertising. BIG W customers can use their Everyday Rewards cards to earn Qantas Frequent Flyer points. Woolworths uses data gathered from its Everyday Rewards program to make targeted offers to consumers based on their shopping patterns.

Store roll-out and refurbishment Based on its current forecasts as to demand and growth, Woolworths intends to increase the number of BIG W stores by 4 or 5 each year, from its current 164 stores to a target of over 200 stores in the medium term. BIG W is also in the process of refurbishing its existing stores on a rolling basis.

Consumer electronics As of January 2, 2011, Woolworths had 409 consumer electronics stores, with 337 in Australia and 72 in New Zealand. Within Consumer Electronics, Woolworths’ aim is to provide a range of the latest technology in consumer electronic products with superior in-store and after-sales service, such as installation and repair services, with the aim of being recognized by its customers as a “full service” technology solution provider. Woolworths operates the consumer electronics business under the Dick Smith brand name. Woolworths previously operated a line of “Tandy” branded stores and is currently transitioning out of the Tandy brand and consolidating the stores under the Dick Smith brand. This transition is expected to be substantially completed in the next six months. Consumer Electronics’ total sales in Australia and New Zealand for the 2011 Half Year were approximately A$868 million. The table below shows the geographic distribution of stores in Consumer Electronics as of January 2, 2011(1). Dick Smith New South Wales & Australian Capital Territory ...... 111 Queensland ...... 75 Victoria ...... 72 Northern Territory and South Australia ...... 31 Western Australia ...... 35 Tasmania ...... 6 New Zealand ...... 72 Total ...... 402

(1) There were also 7 Tandy brand stores in Australia as of January 2, 2011.

92 Consumer electronics retail brands

Dick Smith

At January 2, 2011, Woolworths operated 402 Dick Smith outlets, of which 330 were located in Australia and 72 were located in New Zealand. In the 2010 Fiscal Year, Woolworths completed the transition of all “Dick Smith PowerHouse” branded stores to the standard Dick Smith brand. With the average store approximately 300 to 600 square meters, Dick Smith stores typically carry a range of products in four separate groups:

• communications (including mobile phones);

• electronics, including a range of wires and accessories for hobbyists;

• home entertainment products, such as computers and DVD players; and

• computers and computer accessories.

Dick Smith stores are designed to provide consumers with a technology solution, with product selection advice provided by experts and installation and other services available post-sale. This is part of the “Talk to the Techxperts” branding that has been recently introduced in Dick Smith stores together with the value and service offer which Woolworths believes helps to differentiate Dick Smith from some of its more self-service oriented competitors. Combined with Dick Smith’s service, installation and after-sale support capability through its Mobile Techxperts service, Dick Smith believes its product and service offering permits increased customer connectivity. Additionally, the business recently overhauled the www.dicksmith.com.au website in August 2009. This refurbished and expanded website helps to advantageously situate the Dick Smith business in the growing online sales market in Australia and provides Dick Smith with a multichannel retail strategy that allows customers to check whether a product is in stock at a particular store via the internet.

Tandy

At January 2, 2011, Woolworths operated seven Tandy stores all of which are located in Australia. Woolworths acquired the Tandy stores and the right to use the Tandy brand name from RadioShack Corporation (formerly Tandy Corporation) in 2001 and the unlimited right to use the Tandy brand name in Australia in the 2005 Fiscal Year. Woolworths is currently transitioning out of the Tandy brand and consolidating the stores under the Dick Smith brand and will have exited the Tandy store brand during the 2012 Fiscal Year. Dick Smith stores intend to continue to offer a limited range of Tandy-branded products.

Croma

In 2006 Woolworths launched a business venture with the TATA Group in India to operate retail electronics stores in India under the Croma brand. As part of this partnership, Woolworths provides buying, wholesale, supply chain and general consulting services to TATA, who currently operates over 60 stores under the Croma brand. The wholesale operations associated with the Croma venture recorded A$177 million in sales in the 2011 Half Year.

93 Merchandising strategy

Consumer Electronics is focusing on providing customers with excellent value and service, primarily on well-known electronic brands. In addition to recognized industry brands, Consumer Electronics markets a range of products, primarily under the Dick Smith and the Tandy brands, including basic phone and computer cables and accessories and personal stereos. Dick Smith offers a range of exclusive brand products as part of its retailing strategy.

Due to the increasing importance of multi-channel retail in the consumer electronics industry, Woolworths overhauled the www.dicksmith.com.au website in August 2009 with the goal of advantageously situating the Dick Smith business in the online sales market in Australia.

Consumer Electronics provides financing of larger goods, including low or no interest finance from time to time. This consumer credit is provided by HSBC and as a result, Woolworths does not receive any interest income and is not exposed to a risk of payment default by the customer.

Supply and distribution

Consumer Electronics obtains its merchandise both directly from manufacturers and from distributors and operates one distribution center that services its stores throughout Australia. Woolworths believes that it has good relationships with key suppliers.

Consumer Electronics’ support office is responsible for sourcing, ranging, central distribution and planning facilities. Significant discretion is exercised by stores in merchandising and re-ordering basic stocks.

Advertising and promotion

Consumer Electronics uses television, internet, catalogs, magazines, newspapers and radio in their advertising. The choice of medium depends on the type of promotion scheduled. Additionally, Woolworths Everyday Rewards cardholders can earn one Qantas Frequent Flyer point for every dollar in excess of A$50 spent in Dick Smith stores.

Store roll-out and refurbishment

Woolworths’ general strategy is to continue to add new Dick Smith stores when suitable opportunities arise, but does not have any specific numerical targets for future stores. Woolworths is currently in the process of rolling out its new format Dick Smith stores to reflect its new contemporary logo and “Talk to the Techxperts” branding. As at January 2, 2011, 55% of Dick Smith stores in Australia had been converted to the new format, with these stores demonstrating improved sales and EBIT through strong customer acceptance. This transition to the new concept format is expected to be completed within the next two years. In the 2011 Half Year, 31 new Consumer Electronics stores were opened and 17 existing stores were refurbished.

Hotels

The term “hotels” refers to smaller pubs or bars, including pubs and bars located in non-Central Business District locations, that also provide restaurants, wagering and gambling facilities, function facilities and in some cases accommodations. The Hotels business is principally operated through Woolworths’ 75% owned subsidiary, ALH. The remaining 25% is owned by Bruce

94 Mathieson Group (“BMG”), a privately owned business. Under arrangements between Woolworths and BMG, Woolworths manages the retail liquor operations of ALH Group while BMG manages the hotel operations. As at January 2, 2011, ALH and its wholly-owned subsidiaries operated 284 hotels and 492 associated retail liquor interests across all states of Australia, except the Northern Territory and the Australian Capital Territory, and constituted Australia’s largest hotel operator.

Location data for ALH’s operations as at January 2, 2011 is given in the table below. Woolworths includes ALH’s retail liquor operations in its Supermarkets food and liquor segment.

As of January 2, 2011 NSW QLD VIC SA/NT WA TAS Total Retail Liquor ...... 26 344 75 29 14 4 492 Pubs ...... 26 108 97 32 16 5 284

Pub operations

ALH pub venues are the cornerstone of Woolworths’ pub operations and encompass bar, gaming, food and motel style accommodation. ALH presently offers over 1,300 motel rooms across 66 of the venues in all states in Australia, except the Northern Territory and the Australian Capital Territory. Queensland and Victoria account for the largest portion of pub venues, with 108 and 97 locations, respectively.

In Queensland, licensed pubs are permitted to operate retail liquor outlets on-site, plus an additional three detached bottle shops within a 10 kilometer radius of the licensed pub premises. The sale of liquor is not permitted in Queensland outside of pub and club premises unless through detached bottle shops associated with licensed pubs.

Electronic gaming machines

Woolworths is also Australia’s largest gaming hotel operator of Electronic Gaming Machines (“EGMs”). While Woolworths is also the largest individual gaming operator in Australia, its EGMs accounted for less than 15% of EGM expenditure in Australia in the 2010 Fiscal Year. Woolworths operates its EGMs through ALH under contractual arrangements with entities licensed to provide gaming and wagering activities. The ownership, operating and revenue sharing model for Woolworths’ EGMs is dependent upon a state-based regulatory framework, which varies between jurisdictions.

Additionally, Woolworths operates non-EGM gambling, primarily involving wagering and Keno. Wagering and Keno are ancillary offerings that Woolworths believes broaden the appeal of its pubs and facilitate greater utilization of the venue. These products are offered under licensing arrangements with totalisator, or “tote board”, operators and Keno providers. As a result of these offerings, Woolworths has been successful in attracting large customer numbers in periods when horse racing carnivals and other major events are held.

As part of a recent change in legislation in Victoria, Woolworths was able to acquire the required EGM licenses for its Victorian hotels. These licenses commence in 2012 and have a 10 year duration. Currently, the licenses for the EGMs in Woolworths’ Victorian hotels are held by third- parties.

95 Retail and wholesale home improvement

In 2009, Woolworths announced a joint venture with U.S. home improvement retailer Lowe’s Companies, Inc. to expand into the Australian retail home improvement market. The joint venture, which is two-thirds owned by Woolworths, acquired Danks Holdings Limited (“Danks”) in November 2009, which is planned to be used to facilitate entry and expansion into home improvement distribution and retail in Australia. Danks is Australia’s second largest hardware distributor, supplying 562 Home Timber & Hardware, Thrifty-Link Hardware, and Plants Plus Garden Centre stores plus over 900 independent hardware stores. The joint venture is targeting to secure 150 home improvement store sites over the next five years. The first retail home improvement store is planned to open in Victoria in late 2011. In May 2010, Danks acquired five hardware stores, a timber joinery center and a truss manufacturing plant from Gunns Retail Division in Tasmania and during the 2011 Half Year purchased Becks Timber and Hardware (including three hardware stores and a truss manufacturing plant in Tasmania), Magnet Mart (including five hardware stores in Australian Capital Territory and New South Wales) and Flatman’s Timber and Hardware (including two hardware stores in Melbourne, Victoria).

Good progress has been made in establishing Woolworths’ home improvement business. Of the 150 sites the joint venture plans to secure over the next five years, a significant number have been secured, with many more being added to the pipeline. The sites are generally prime retail sites which Woolworths believes are well located in good trading zones and the joint venture is on track to open its first store in the second half of calendar year 2011. The corporate support office is well established and staffed with a team that has extensive home improvement experience in both domestic and international businesses. With the assistance of Lowe’s, store design, layout and ranging of product are well developed. Through combining the local expertise provided by members of Danks’ management team with Woolworths’ supply chain experience, the joint venture is effectively executing the rapid development of the business, highlighted by the establishment of the supply chain strategy, a key milestone that the joint venture expects to enable a successful national rollout plan. The recruitment of the first group of store managers is complete, with these store managers and other members of the Home Improvement team having undertaken training at Lowe’s facilities. Additionally, the joint venture continues to advance the development of its IT systems, supply arrangements and the Danks wholesale business.

Other operations

Financial services

On September 1, 2008, Woolworths launched its “Everyday Money” credit card in conjunction with HSBC Bank Australia Limited, allowing customers to accumulate reward points that can be used at most Woolworths retail outlets. In November 2010, Woolworths launched the “Woolworths Everyday Rewards—Qantas credit card”, which allows holders to accumulate Qantas frequent flyer points by using the card. Woolworths believes that a significant number of cardholders use the card as one of their primary credit cards, making purchases both within and outside of Woolworths retail outlets. The consumer credit is provided by HSBC and as a result, Woolworths does not receive any interest income and is not exposed to a risk of payment default by the cardholder. In June 2010, Woolworths launched its “Everyday Money Prepaid Mastercard”, in conjunction with ANZ, which allows users to load a fixed amount of money on the card at the time of purchase and then use the card for subsequent purchases in stores and online until the balance is exhausted.

96 Woolworths’ gift cards business offers stored-value cards that can be used at a variety of Woolworths’ stores. These cards can be purchased in Woolworths stores or over the internet. Consumers also have the option of purchasing cards that can be used at most Woolworths stores, single brand gift cards redeemable at all of Woolworths’ retail store brands, as well as cards that can be used to purchase only certain goods at specific stores, such as petrol or groceries.

Seasonal trends

Although Woolworths is supported by a high level of stability in its cash flows from operations, the core food, liquor and petrol divisions do exhibit seasonal patterns with cash flows per quarter reaching their highest level in the second quarter (which includes the Christmas trading period). On a consolidated basis, there is a slightly higher seasonality due to the higher level of cyclicality introduced by BIG W and Consumer Electronics, though primarily BIG W. Supermarket sales also tend to rise during other holiday periods. Gaming revenues are the largest contributor to revenue and EBIT of Hotels. Gaming revenues tend to be less seasonal compared to other sectors, although there is a slight tendency for higher revenues in the colder months.

Property, plant and equipment

At January 2, 2011, Woolworths operated over 3,200 total retail locations stores in Australia and New Zealand, with total selling area in supermarkets, BIG W and consumer electronics of approximately 3.6 million square meters (approximately 38.7 million square feet). Properties include locations in downtown shopping areas, shopping malls, strip retail locations, and freestanding stores.

It is commonplace in Australia and New Zealand for retailers to lease properties from third parties, such as listed property trusts, rather than to own property outright. The majority of Woolworths stores are leased. Additionally, commercial property is governed by strict zoning laws, creating difficulty in obtaining “greenfield” sites in densely populated and competitive locations. As such, many of Australia’s supermarkets are located in major shopping centers and malls. Woolworths has approximately two thirds of its supermarkets stores located in shopping malls with the balance located in shopping strips or stand alone stores.

Woolworths believes that its scale and reputation in the Australian market makes its supermarkets and BIG W stores good anchor tenants in shopping centers. Lease terms for supermarkets and BIG W stores are generally for 20 years with options (exercisable by Woolworths) to renew for further periods of 20 to 40 years, reducing renewal risk.

Under most leases, Woolworths is responsible for property taxes, insurance, maintenance and expenses related to the leased properties. However, many of the more recent lease agreements have been negotiated on a gross or semi-gross basis, which eliminates or significantly reduces the lessee’s exposure to increases in operational charges associated with the properties. Rent increases in some of Woolworths’ supermarkets leases is linked to gross sales at that location.

As part of Woolworths’ store expansion, it uses a combination of its own development and external property developers to roll-out new stores. Recently, due to funding difficulties for property developers as a result of the global financial crisis, Woolworths has undertaken to purchase and develop land directly and to hold these assets on its balance sheet. Consistent with its overall property strategy, Woolworths intends to sell and lease back these premises when market conditions allow for this to occur on acceptable terms.

97 Woolworths has a regular store maintenance and refurbishment program. Refurbishment costs are capitalized and expensed on a straight-line basis over the remaining period of the lease or the estimated useful life, whichever is the shorter.

At January 2, 2011, Woolworths’ property, plant and equipment was recorded at A$8,162.9 million (June 27, 2010: A$7,639.1 million), held either directly, or indirectly through investments in property joint ventures.

Freehold warehouse, retail, development and other properties are held at the lower of cost less accumulated depreciation and recoverable value. Borrowing, holding and development costs on property under development are capitalized until completion of the development. At balance date, the carrying amount of tangible assets is reviewed to determine whether there is an indication that the assets may be impaired. If such an indication exists the recoverable amount of the asset, which is the higher of its fair value less costs to sell and its value in use, is estimated in order to determine the extent of any impairment loss. Based on the most recent assessments, a provision of A$106.0 million (June 27, 2010: A$111.3 million) is held against the value of land and buildings as of January 2, 2011.

Woolworths has historically developed marketplace style retail centers through its property development arm. To enable the continued roll out of its store network during the recent global economic downturn, Woolworths has increased its involvement in the development of sites, which has resulted in the ownership of a larger portfolio of retail centers than it has typically held historically. Woolworths is generally not a long term holder of property assets and is currently in the process of marketing these retail sites on the basis of a sale and long term leaseback transaction. The potential sale of these properties is progressing with several parties expressing an interest in potentially acquiring either a portfolio of sites or individual sites. Woolworths expects that sales of property totaling approximately A$300 – 700 million to be completed by the end of the 2011 calendar year, though there is no certainty that these transactions will be consummated before the end of the 2011 calendar year or at all.

Intangible assets—Liquor and gaming licenses

Woolworths is required by Australian State regulations to maintain liquor and gaming licenses for its retail liquor and hotel operations. Both types of licenses are valued at cost and, because Woolworths considers both types of licenses to have indefinite useful lives, Woolworths does not amortize the value of the licenses. For further details, see Note 1(I) and Note 11 to Woolworths’ consolidated financial statements, included elsewhere in this offering memorandum.

Industry and competition

Industry overview

Woolworths operates in the retail industry, organized into four distinct divisions:

• food, groceries, petrol and liquor;

• discount department stores;

• consumer electronics; and

• hotels.

98 Supermarkets, comprising food and groceries, petrol and liquor, accounted for more than 84.4% of Woolworths’ sales in 2011 Half Year. As a provider of food and other basic necessities, Supermarkets generally has a high level of recession resistance. According to the Australian Bureau of Statistics, Australian nominal food sales have not experienced negative growth in the last 20 years and have posted industry-wide annual growth of 2 to 12% per year since 1984.

According to the Australian Government Department of Agriculture, Fisheries and Forestry, the Australian food industry grew to over A$113.0 billion in the 2008 Fiscal Year (the most recent period for which data is available), representing approximately 52.0% of total retail spending in that year. 61.0% of the Australian food industry is serviced by supermarkets and grocery stores of various sizes with the majority of supermarket sales being generated in Australia’s eastern states of New South Wales, Victoria and Queensland.

Consumer spending on food, liquor and groceries is generally less than perfectly correlated to the stage of the economic cycle, in that spending on these goods tends to increase or decrease less than economic output as a whole. A similar relationship is generally seen between food sales and household gross disposable income, as spending on food is less discretionary than certain other categories of consumption.

As a result of the strong competition in the retail market, margins are generally low and earnings are dependent upon rapid inventory turnover, strict cost controls and high sales volumes. In addition, Woolworths believes that competitive factors include the quality of fresh foods offered, service, convenience, price, location, product variety, store layout and design and minimal out-of-stock conditions. Woolworths endeavors to concentrate its efforts on each of these factors, with special emphasis on maintaining attractive store conditions, quality fresh food products, comprehensive service, specialty departments and competitive pricing. The level of competition, particularly price competition, impacts directly upon earnings.

Because products sold by BIG W are more likely to be discretionary spend items, BIG W could be considered more sensitive than Supermarkets to the state of the overall economy and the impact of factors that would reduce the amount of discretionary income, such as higher interest rates and increases in petrol prices. As a discount department store, however, BIG W is considered less sensitive than other non-food retail offerings. In addition, as with Supermarkets, the impact of competition, particularly price competition, tends to impact BIG W’s results.

Woolworths expects that online retailing will become increasingly important to its business. However, there is not currently a significant online marketplace in Australia.

The hotel business’ competition includes registered clubs and casinos as well as other pub operators. A significant part of the income of hotels comes from gaming machines. Hotels and gaming are regulated on a State by State basis. Hotel income consists of a mixture of sales of food and beverages (for consumption on the premises), the net take or profit share from EGMs, wagering commission, entertainment charges and accommodation revenue.

Competition Overview—Supermarkets and retail liquor

According to the ABS Retail Trade analysis, Woolworths had the leading market share in Australia of over 30% of food retailing (including supermarket and grocery stores, liquor retailing and other specialized food retailing), with A$18.8 billion of sales revenue in this sector for the 2011 Half Year. Woolworths’ competitors include Coles, which reported sales revenue for

99 its Australian food and liquor business of A$13.0 billion for the same period, the banner groups associated with Metcash, Aldi, Costco, other banner groups, independent supermarkets and specialty retailers. Approximately 2,500 independent grocers are supplied by Metcash’s wholesale and distribution operations.

The retail liquor market is governed by specific zoning regulations for new sites and the existence of strict licensing laws in some states. In all states, except Queensland, application to operate licensed premises is available to independent retailers as well as retail chains. In Queensland, the ability to operate retail liquor outlets is only available to owners of pubs in the local area.

Major participants

Supermarkets

Coles

Coles is a significant competitor in Australian supermarkets and is wholly-owned by Wesfarmers Limited, an Australian conglomerate. Coles operates the Coles supermarket and Bi-Lo discount supermarket chains with Wesfarmers reporting there were 694 Coles stores and 48 Bi-Lo stores as at December 31, 2010.

Coles acquired the franchise rights for a large number of Shell petrol stations in 2003. Following the formation of the alliance, Coles established the “Coles Express” brand in July 2003 and operated 624 petrol station and convenience stores as at December 31, 2010.

Coles is also Woolworths’ largest competitor in liquor retailing, with Wesfarmers reporting that it operated over 700 Liquorland, Vintage Cellars and 1st Choice Liquor Superstores at December 31, 2010, with A$13.0 billion of combined sales for its Australian food and liquor business reported for the 27 weeks ended January 2, 2011.

Metcash

Metcash is a wholesaler and distributor of groceries and liquor, operating through four business divisions: Independent Grocers of Australia (“IGA Distribution”), Australian Liquor Marketers, Campbells Wholesale and Mitre 10. IGA Distribution supplies IGA branded and non-branded independent grocery stores in New South Wales, the Australian Capital Territory, Victoria, Queensland, South Australia and Western Australia. Metcash reports that Australian Liquor Marketers operated 18 distribution centers across Australia and New Zealand supplying liquor to over 15,000 licensed premises as at June 30, 2010. Metcash reports that Campbells Wholesale serviced more than 80,000 small business customers through 31 outlets across all states and territories and other specialist confectionary distribution centers as at June 30, 2010. Mitre 10 had a retail network of more than 430 Mitre 10 and True Value Hardware stores as at June 30, 2010.

On July 1, 2010, Metcash announced that they would acquire from Pick’n Pay, a major South African retailer, the Franklins Supermarket Chain, which operates 85 supermarkets across New South Wales. Franklins is a “no frills” discount supermarket chain. The ACCC announced in October 2010 that it opposed the acquisition and the certainty and timing of the acquisition is currently unknown.

100 Aldi

Aldi is a relatively recent entrant to the Australian supermarket industry, though one of the larger international food retailers. It opened its first store in New South Wales in January 2001. Aldi is a discount supermarket chain that offers a simple “no frills” approach to retailing, stocking limited lines of each product which are predominantly Aldi private label products. Aldi product lines are aimed at budget shoppers and stores have limited product offerings and minimal service. Aldi currently operates over 200 stores in New South Wales, Victoria, Queensland and the Australian Capital Territory. Aldi currently sells liquor in certain of its stores in Victoria and has recently applied to sell liquor in all of its 102 stores in New South Wales. Aldi’s liquor offering primarily consists of Aldi brand products.

Independents and other competitors

There are approximately 2,500 major independent grocery stores. Independent stores vary in size and layout, however, most are smaller stores located in suburban areas. Australian consumers buy a large proportion of food products from small independent butcher shops, delicatessens and greengrocers. Many of these independent operators are strong competitors of Woolworths.

Woolworths’ supermarkets, small food stores and liquor outlets are also subject to competition from other independent stores and other retail formats such as discount stores, convenience stores, specialty food stores, fast food chains and liquor shops. The United States-based retailer Costco currently operates one store in Victoria and is currently developing a second site in New South Wales. Due to its limited presence in Australia, Costco is not currently a significant competitor of Woolworths. However, Costco’s offering of discounted bulk food and grocery items, as well as home and family products, position it as a potential competitor for Woolworths supermarkets and BIG W operations if it expands its Australian operations as expected.

Woolworths petrol retailing operations compete against other retailers in the fuel and convenience industry including BP, Caltex (non-alliance canopies), Shell, 7-Eleven and other independent fuel retailers.

Foodstuffs (New Zealand) Limited

Woolworths’ main competitor in the New Zealand supermarket retail industry is Foodstuffs (New Zealand) Limited. Through its New World, Pak’n Save and Four Square branded supermarkets, Foodstuffs is the largest participant in the supermarket retail industry in New Zealand. As of February 2011, Foodstuffs operated 135 New World stores, 47 Pak’n Save stores and 278 Four Square Stores and was New Zealand’s largest supermarkets operator by sales. Foodstuffs operates through several independent co-operatives and primarily acts as a supplier for owner-operated franchises of their three primary supermarket brands.

BIG W

BIG W’s competitive position in the industry depends on such factors as price, quality of goods, product mix and convenience. As a whole, BIG W operates on low margins and high sales volume. Profits are directly affected by the intensity of competition, particularly price competition.

BIG W’s wide range of product offering means that it competes against many retailers and formats wherever their product ranges overlap. BIG W competes across its entire product range

101 with discount department stores such as Kmart and Target. BIG W also competes across certain product categories and price points with department stores such as Myer and David Jones, and with a broad range of specialty and category specific retailers, such as bookstores, toy stores, homeware stores, storage specialists and electronic stores.

Consumer electronics

Woolworths’ consumer electronics business competes with a variety of different competitors, including:

• larger “big box” competitors, such as Harvey Norman, The Good Guys, Bing Lee and J.B. Hi-Fi in Australia, and Harvey Norman and Pacific Retail in New Zealand, which offer consumer electronics in addition to a range of white goods and other general merchandise items;

• department stores, such as BIG W, Target, Kmart, Myer and David Jones, which offer a limited range products such as television and DVD products, stereos, gaming consoles and computers and accessories;

• smaller boutique stores that offer home and car audio and video products, computers, mobile phones and accessories;

• mobile phone shops, which tend to offer a broad array of mobile phones and accessories; and

• manufacturer websites, such as those of Dell and Apple, that enable consumers to order products online and receive them directly from the manufacturer.

Hotels

There are approximately 8,000 hotels in Australia of which about 73% provide gaming facilities. ALH’s competition includes registered clubs and casinos as well as other hotel operators.

The hotels industry is currently fragmented with over 86% of Australia’s gaming hotels operated by groups with less than 20 hotels. Market share is difficult to grow organically given the differing state by state restrictions on new hotel and EGM licenses. Further industry consolidation and rationalization is expected.

Home improvement

Woolworths’ joint venture with Lowe’s into the retail home improvement sector faces strong competition from Bunnings, currently Australia and New Zealand’s top retailer of home improvement and outdoor living products based on sales, and a major supplier of building materials. At June 30, 2010, Bunnings, which is owned and operated by Wesfarmers, had 242 retail stores operating across all states and territories in Australia and throughout New Zealand. Woolworths’ entry into the wholesale home improvement market through the acquisition of Danks faces competition from other home improvement wholesalers in Australia, including Mitre 10 Group, which is 50.1% owned by Metcash Limited, which has an option to acquire the remaining 49.9%.

In Australia and New Zealand, Woolworths’ joint venture with Lowe’s also competes with owner- operator hardware retailers grouped under various brands, including Mitre 10, Home Timber & Hardware and Thrifty-Link Hardware, as well as category specialists in areas such as tools, lighting, plumbing and paint and general merchandise retailers.

102 Regulation Due to its size and the nature of the markets in which it operates, including fuel, grocery, liquor, gaming and merchandising, Woolworths is subject to a range of laws and regulations in Australia and New Zealand.

Australian regulation

As a public company listed on the ASX, Woolworths is subject to many business laws and regulations including, but not limited to:

• the listing rules of the ASX;

• the Corporations Act; and

• Australian accounting and taxation laws and regulations.

Due to the nature of Woolworths’ retail businesses, Woolworths is required to operate in compliance with many Australian Federal, State, Territory and local laws and regulations including, but not limited to, laws which:

• prohibit anti-competitive conduct;

• prohibit misleading, deceptive or unconscionable conduct;

• impose liability on suppliers and manufacturers of defective products;

• impose standards and labeling requirements for a wide range of goods, including standards developed by Food Standards Australia New Zealand and the Federal Therapeutic Goods Administration;

• regulate the sale of alcohol and tobacco and the operation of hotels and electronic gaming machines;

• regulate health and safety standards;

• regulate the provision of financial services and financial products;

• regulate the provision of telecommunication services and telecommunication products;

• protect the environment;

• regulate trading hours; and

• establish regimes for protecting privacy by, for example, placing restrictions on the uses which may be made of personal data (such as customer data obtained through customer loyalty programs or direct marketing activities).

As one of Australia’s largest employers, Woolworths is subject to Federal, State and Territory laws covering, but not limited to:

• employment standards for workers (see “—Employees” below for further information);

• discrimination and equal opportunities in employment; and

• workers’ compensation, workers’ compensation self-insurance and occupational health and safety.

103 The Competition & Consumer Act 2010

The Competition & Consumer Act 2010 of Australia (“CCA”) has a direct and wide ranging impact on Woolworths’ trading activities, including, but not limited to, the following areas.

Product liability

From January 1, 2011, the statutory guarantee regime in the CCA imposes a series of non-excludable statutory guarantees in relation to transactions with consumers, including a guarantee that goods are of acceptable quality and that services are rendered with due care and skill. A major product failure will entitle a consumer to a statute-based remedy, including obtaining a refund. Where the goods or services are not ordinarily acquired for personal, domestic or household use/consumption, suppliers can limit (but not exclude) their liability for breach.

The CCA also imposes liability on manufacturers of defective goods. Manufacturers cannot exclude, restrict or modify their statutory liability. The CCA deems corporations to be manufacturers where the corporation has attached its brand or mark to the good. The CCA also deems importers of goods to be manufacturers of the goods where the actual manufacturer has no place of business in Australia.

The CCA includes a national product safety regime addressing a range of issues, including product bans and recalls, and requires suppliers, retailers and manufacturers of products to report incidents to the responsible Commonwealth Minister that involved death or serious injury or illness caused by products they have supplied.

Anti-competitive conduct

The CCA prohibits a range of anti-competitive conduct, including:

• acquisitions of shares or assets that would have the effect, or be likely to have the effect, of substantially lessening competition in a market in Australia;

• misuse of substantial market power for certain prohibited purposes;

• contracts, arrangements or understandings between competitors that have the purpose, effect, or likely effect of substantially lessening competition in Australia;

• engaging in exclusive dealing conduct which has the purpose, or has or is likely to have the effect of substantially lessening competition;

• collective boycotts, minimum resale price maintenance and certain tying arrangements (referred to as “third-line forcing”), irrespective of the likely effect of the conduct on competition; and

• cartel conduct which includes price fixing, output restriction, market sharing and bid-rigging (or attempts to engage in any such conduct), irrespective of the likely effect of the conduct on competition.

There are certain exemptions in relation to cartel conduct, including notified conduct, authorized conduct, conduct between related bodies corporate and conduct for the purpose of a joint venture.

104 For a body corporate, a contravention of the anti-competitive provisions of the CCA may result in penalties up to the greater of A$10 million for each contravention, or three times the gain from the contravention, or, if the gain cannot be assessed, 10% of the annual turnover of the Australian group. For an individual, each contravention can attract a maximum penalty of A$500,000, as well as banning orders. A range of other civil remedies are available for contraventions of the CCA by bodies corporate and individuals.

Cartel conduct carries parallel civil and criminal sanctions. The criminal sanctions include the imposition of up to 10 years imprisonment for individuals and penalties up to a maximum of A$220,000. Criminal sanctions only apply to conduct which occurred after July 24, 2009.

A corporation cannot indemnify its officers for legal costs and penalties resulting from contraventions of the CCA.

Consumer protection

The CCA prohibits misleading and deceptive conduct (whether in relation to negotiations with suppliers or in advertising material for consumers), unconscionable conduct and various other practices that are potentially harmful to consumers, including pyramid selling. The CCA also provides that “unfair” terms in standard form consumer contracts are void.

In some cases, the CCA imposes criminal liability for a breach of the consumer protection provisions, which may result in fines of up to A$220,000 for individuals and A$1.1 million for corporations for each contravention. In other cases, a contravention of the consumer protection provisions may result in civil pecuniary penalties of up to A$220,000 for individuals and A$1.1 million for corporations, awards of damages or orders for corrective advertising. Consumer regulators have broad powers to issue substantiation notices, infringement notices and fines (up to A$66,000 for publicly listed corporations) for certain consumer protection breaches, in addition to public warning notices to alert the public to harmful conduct. The regulator may seek non-party redress on behalf of consumers, including refunds.

Retail industry deregulation

Progressive deregulation of trading hours has assisted industry consolidation as it has allowed large retailers to provide for the needs of consumers by remaining open 24 hours a day, 7 days a week.

The regulation of trading hours varies between States and Territories. For example, the Australian Capital Territory and the Northern Territory do not have legislation which primarily regulates trading hours, but in New South Wales it is necessary for a retail chain to obtain an exemption before it may trade on Sundays, and in Western Australia retail chains are prohibited from trading on Sundays, subject to limited exceptions for seasonal events, such as the Christmas holiday season.

Retail liquor and gaming regulation

Regulations and liquor license requirements vary between States and Territories. In most States and Territories, supermarkets are presently prohibited from offering direct liquor sales, though liquor can usually be offered in adjacent or nearby stand alone liquor stores.

105 Equally, regulations and gaming licensing requirements vary between States and Territories. Such regulation and licensing is predominantly directed towards ensuring those who are entitled to operate electronic gaming machines comply with gaming licensing requirements and that the operation of electronic gaming machines is conducted in a manner that minimizes the harm that may arise from excessive gambling.

New Zealand regulation

Woolworths’ operations in New Zealand are subject to business laws and regulations broadly similar in nature and scope to those in Australia. In New Zealand Woolworths is subject to, among others, laws and regulations regarding product safety, consumer protection, property planning, workplace safety and other employment-related legislation, restrictive trade practices, trading hours, retail liquor and pharmacy services. The securities of neither Woolworths nor any of its subsidiaries are listed in New Zealand. Accordingly, Woolworths is not subject to the listing or disclosure rules of any securities exchange in New Zealand.

Employees

At January 2, 2011, Woolworths employed close to 200,000 people working in stores, support office and distribution centers globally.

The terms and conditions of employment of Woolworths employees are primarily regulated by the federal Fair Work Act 2009 (the “Fair Work Act”). The Fair Work Act regulates Australia’s industrial relations system and (among other things) imposes minimum standards of employment for all employees, regulates trade unions and industrial disputes. The Fair Work Act also provides for a system of industrial awards administrated by Fair Work Australia (the Federal industrial tribunal) which provide a safety net of entitlements that apply to employees in specific industries or occupations, in addition to the minimum entitlements provided under the Fair Work Act. The Fair Work Act also facilitates collective bargaining that allows employers and groups of employees (typically unions) to collectively bargain enterprise agreements (“EAs”) to supplement the minimum statutory and awards terms.

While approximately 60% of employees in Australia belong to a union, approximately 76% of these employees have their pay and working conditions determined by EAs. Employees receive the same conditions of employment irrespective of whether they are a union member or not. Woolworths has 43 separate EAs in Australia with 8 different unions. The majority of these agreements are negotiated with 2 principal unions in Australia while the others represent smaller business areas. These EAs generally extend for a period of three years. 15% of Woolworths’ workforce are salaried employees covered under employment contracts between Woolworths and the employee directly.

Woolworths entered into a National Supermarkets Agreement with the Shop Distributive and Allied Employees Association (“SDA”) in May 2010, which runs until June 30, 2012. For the first time Woolworths’ Australian Supermarkets business now operates under one EA that applies consistent employment conditions to supermarket employees across Australia and support business efficiencies and flexibility.

Woolworths actively works with its employees and unions to understand and attempt to address any concerns they may have. Woolworths has a constructive relationship with its principal unions, being the SDA, the National Union of Workers (“NUA”) and the National Distribution Union

106 (“NDU”) in New Zealand, and its strong employee relations are demonstrated by the low number of days lost due to industrial disputes. There has been no industrial action within the last three years within any of Woolworths’ stores and there were no days lost due to industrial disputes within the distribution centers within any of the last three years. The last dispute occurred at Woolworths’ distribution centers in New Zealand in August 2006 and resulted in approximately one month of work stoppage for those sites with minimal disruption to the overall business. Union relationships in Australia, however, may be tested under the Fair Work Act 2009 with unions enjoying an increased power base. The Fair Work Act 2009 has brought significant change to the Australian workplace relations landscape and has resulted in Woolworths undertaking a review of its workplace policies, practices and processes.

Woolworths is one of the largest employers of trainees and apprentices in Australia with approximately 43% of all employees under the age of 25. Woolworths encourages its employees to achieve their personal goals and strongly believes in succession planning to grow the talent that already exists in the organization, and has a long history of promoting within. The average length of service of a Supermarket Store Manager is 16 years and Woolworths has approximately 3,300 employees who have been with Woolworths for more than 25 years.

Legal matters

Woolworths is party to certain claims and litigation in the ordinary course of business. Woolworths is not currently involved in any legal proceedings that it believes will result, individually or in the aggregate, in a material adverse effect upon its financial condition or results of operations.

Regulatory and political scrutiny

In recent years, the ACCC and the Australian federal government has closely scrutinized Woolworths’ position in retail markets, including grocery, liquor and fuel markets. This regulatory and political scrutiny has often been led by consumer advocate groups and Australian small business advocates.

This scrutiny included the ACCC’s public inquiry in 2008 into grocery prices, which resulted in the introduction of unit pricing for large retail grocers such as Woolworths. The ACCC has also brought successful Federal Court proceedings against Woolworths for anti-competitive conduct in recent years. Woolworths expects ongoing regulatory and political scrutiny of retail grocery markets.

In response to concerns regarding the competitiveness of retail leasing in the grocery industry in Australia, the ACCC announced in August 2009 that it is undertaking an investigation into restrictive covenants in retail leases involving large supermarket chains and independents, landlords and tenants that would restrict the ability of landlords to lease space in retail centers in which Woolworths stores operate to any competitor business of Woolworths. In September 2009, Woolworths and Coles both entered into a court-enforceable undertaking with the ACCC in which the companies agreed not to enforce the restrictive covenants in any lease for any supermarket that has been trading for five years or more and to not include these restrictive covenants in any leases entered into in the future.

107 Insurance

Woolworths carries insurance for all significant insurable risks, with the exception of workers compensation insurance, where it self-insures in all Australian states and territories except the Australian Capital Territory. Australian legislation requires that insurance is carried against excessive workers compensation losses (above A$1 million on any one claim). In respect of public liability, Woolworths has insurance for events in excess of A$250,000. Woolworths’ liability for workers compensation and public liability risk is accounted for as the present value of future claims payments and expenses based on actuarially determined estimates. Actual claims payments and losses may differ from the provision for loss. Across its insurance policies, Woolworths’ highest deductible is for the property risk policy, where each event has a A$1 million deductible and there is a group wide annual deductible of A$4 million. Other major risks, such as motor vehicles, fidelity, product tamper and contamination, public liability, directors and officers and marine transit, have lower retention levels, ranging from A$7,500 to A$2 million depending on the class of insurance. All insurance risk is placed with unaffiliated Australian insurers, local subsidiaries of foreign insurers or the London market.

Woolworths regularly reviews the ratings of its insurance providers based on Standard & Poor’s and AM Best ratings and requires that all primary insurers have a rating of A- or above.

108 Management Woolworths’ business is overseen by a Board of Directors. In accordance with the corporate constitution of Woolworths, the Board may not be fewer than the number required by the Corporations Act (which is currently three) and not more than 15 (or such number within this range as the Board may determine from time to time). The Directors of Woolworths are: Year appointed Name Age Position as director Michael Gerard Luscombe 57 Managing Director and Chief Executive 2006 Officer Grant O’Brien 49 Director and Deputy Chief Executive 2011 Officer Thomas William Pockett 52 Finance Director 2006 James Alexander Strong AO 66 Chairman of the Board, Member of the 2000 Audit, Risk Management and Compliance Committee, Member of the Nomination Committee and Member of the People Policy Committee John Frederick Astbury 67 Non-executive director, Chairman of the 2004 Audit, Risk Management and Compliance Committee and Member of the Nomination Committee—FAICD Jillian Rosemary Broadbent AO 62 Non-executive director, Member of the 2011 Audit, Risk Management and Compliance Committee and Member of the Nomination Committee—BA, HonDLitt (UWS) Roderick Sheldon Deane 69 Non-executive director, Chairman of the 2000 People Policy Committee and Member of the Nomination Committee—PhD, BCom (Hons), FCA, FCIM, FNZIM, LLD (honorary from Victoria University) Carla (Jayne) Hrdlicka 48 Non-executive director, Member of the 2010 People Policy Committee and the Nomination Committee—BA, MBA Leon Michael L’Huillier 67 Non-executive director, Member of the 1997 Audit, Risk Management and Compliance Committee and Member of the Nomination Committee—BCom (Hons), MBA, MPhil Ian John Macfarlane AC 64 Non-executive director, Member of the 2007 Audit, Risk Management and Compliance Committee and Member of the Nomination Committee—BEc (Hons), MEc Ralph Graham Waters 62 Non-executive director, Member of the 2011 People Policy Committee and Member of the Nomination Committee—CPEng, FIE Aust, M Bus

109 Michael Gerard Luscombe is the Managing Director and Chief Executive Officer of Woolworths. Mr. Luscombe is a graduate of Monash University. Mr. Luscombe is a long term employee of Woolworths. His career extends over 30 years, starting as a Management Trainee in Woolworths Victoria. He was appointed Managing Director and Chief Executive Officer in October 2006. Prior to that he held positions as Chief Operating Officer, Director of Supermarkets, Chief General Manager Supermarkets, Buying and Marketing, General Manager Supply Chain, General Manager Buying Long Life Products for Supermarkets, Safeway Merchandising and Marketing Manager, Senior Category Manager, Safeway Retail Operations Manager, Area Manager, Training and Development Manager, and Store Manager. Mr. Luscombe is also Chair of the Australian National Retailers’ Association and a Director of The Consumer Goods Forum, the peak global body for food/grocery retailers and manufacturers. Mr. Luscombe was appointed a Director of Woolworths Limited in June 2006. On April 4, 2011, Woolworths announced that Mr. Luscombe would retire as Chief Executive Officer and Managing Director on September 30, 2011. Grant O’Brien is Director and Deputy Chief Executive Officer of Woolworths. Mr. O’Brien is a long term employee of Woolworths. His career extends over 24 years, starting as an Accountant in Purity (Supermarkets) in Tasmania, a division of Woolworths Limited. He was appointed Deputy Chief Executive Officer in April 2011. Prior to that he held positions as Chief Operating Officer Australian Food and Petrol, Director New Business Development, General Manager Woolworths Liquor, National Operations Manager Freestanding Liquor, Senior Business Manager Marketing Supermarkets, and Marketing and Merchandise Manager — Purity. Mr. O’Brien was appointed a Director of Woolworths Limited in April 2011. Thomas William Pockett is the Finance Director of Woolworths. Mr. Pockett was educated in Sydney, receiving a Bachelor of Commerce degree from the University of New South Wales. He is a member of the Group of 100 and was the National President from August 2000 to January 2003. He is a Fellow of the Institute of Chartered Accountants in Australia (FCA) and was a member of the Financial Reporting Council from March 2003 to March 2006. Mr. Pockett was appointed chairman of the Business Council of Tax Reform in February 2011. Mr. Pockett joined Woolworths Limited as Chief Financial Officer in August 2002. He previously held the position of Deputy Chief Financial Officer at the Commonwealth Bank of Australia (CBA). Prior to his role with CBA, he was with Lend Lease Corporation Ltd. While at Lend Lease he held several senior finance roles in different companies across the Lend Lease Group, including Property and Financial Services, with his last position before moving being General Manager Finance for Lend Lease Corporation Ltd. Prior to Lend Lease, he was with Chartered Accounting firm Deloitte. Mr. Pockett was appointed a Director of Woolworths Limited in November 2006. James Alexander Strong AO is currently Chairman of Kathmandu Holdings Limited (October 2009 to date) and the Australian Council for the Arts. He is also a director of Qantas Airways Limited (2006 to date), a member of the Australian Grand Prix Corporation and a member of the Nomura Australia Advisory Board. Mr. Strong was Chairman of Insurance Australia Group Limited (IAG) (director 2001 to August 2010) until August 2010, Chief Executive and Managing Director of Qantas Airways Limited (1993 to 2001), Chairman of Rip Curl Group Pty Limited (director from 2001 to 2008), Group Chief Executive of DB Group Limited in New Zealand, National Managing Partner and later Chairman of law firm Corrs Chambers Westgarth, Chief Executive of Trans Australian Airlines (later Australian Airlines) and Executive Director of the Australian Mining Industry Council. Mr. Strong has been admitted as a barrister and/or solicitor in various state jurisdictions in Australia. In 2006 he was made an Officer of the Order of Australia. Mr. Strong was appointed a Director of Woolworths Limited in March 2000 and Chairman in April 2001.

110 John Frederick Astbury was a Director of AMP Limited from September 2004 to October 2007 and of Insurance Australia Group Limited from July 2000 to August 2007. He was also the Finance Director of Lend Lease Corporation Ltd and a Chief General Manager, National Australia Bank Limited. He has had a long career in banking and financial services in both the UK and Australia. Mr. Astbury was appointed a Director of Woolworths Limited in January 2004.

Jillian Broadbent AO is a Member of the Board of the Reserve Bank of Australia and a non-executive director of ASX Limited and Special Broadcasting Service Corporation (SBS) and Chancellor of Wollongong University. She is Chairman of the Sydney Theatre Company Foundation and Vice Chairman of the Art Gallery of NSW Foundation. In the past, she has been a director of Westfields, Woodside Petroleum and Coca-Cola Amatil. Ms. Broadbent has extensive experience in corporate banking and finance in both Australia and internationally, primarily with Bankers Trust Australia. Ms. Broadbent has a Bachelor of Arts degree (economics and maths majors) from the University of Sydney and an Honorary PhD in Literature from the University of Western Sydney. Ms. Broadbent was appointed a Director of Woolworths in January 2011.

Dr. Roderick Sheldon Deane is the Chairman of the New Zealand Seed Fund (2000 to date), the IHC Foundation (2006 to date) and was appointed Chairman and Director of Pacific Road Group Pty Limited in January 2010. He is Patron of New Zealand’s largest charitable organization, the IHC. He was previously Chairman and a director of Fletcher Building Limited (2001 to March 2010), Telecom Corporation of New Zealand Limited (1999-2006, having been CEO 1992-1999), TePapa Tongarewa, The Museum of New Zealand (2000-2006) and ANZ National Bank Limited (1999-2006), a Director of ANZ Banking Group Limited (1994-2006) and TransAlta Corporation (2000-2003), Chief Executive of the Electricity Corporation of NZ Limited (1987-2002), Chairman of the State Services Commission (1986-87), Deputy Governor of the Reserve Bank of NZ (1982- 86), Chairman of the City Gallery Wellington Foundation (1998-2006) and Professor of Economics & Management at Victoria University of Wellington (2000-2003). Dr. Deane has an honorary LLD from Victoria University in Wellington. Dr. Deane was appointed a Director of Woolworths Limited in April 2000.

Carla (Jayne) Hrdlicka holds a Bachelor of Arts degree in Economics and Business Administration from the Colorado College, Colorado Springs, Colorado USA and an MBA from Dartmouth College, Hanover, New Hampshire USA. Ms. Hrdlicka is an experienced executive and advisor. She was a senior partner with management consulting firm Bain & Company where she led the Asia region Customer Strategy practice for 8 years. She is a recognized leader globally on the topic of customer led growth and loyalty. She has held numerous leadership positions within the firm including being a founding member of the Bain’s Global Women’s Leadership Council. Ms. Hrdlicka has worked across many industries and geographies and has extensive experience in Consumer Products, Retail and Alcoholic Beverages. Prior to her consulting career, she was an executive in the publishing and marketing industry. In August 2010, she joined Qantas Airways to run Group Strategy and a growth related transformation program. She is also a member of the Sydney Medical School Deans Advisory Board. Ms. Hrdlicka was appointed a Director of Woolworths Limited in August 2010.

Leon Michael L’Huillier is an experienced Chief Executive and Company Director in the grocery and liquor industries. He commenced his business career with Myer and is a former CEO of Lion Nathan Australia. He has substantial experience as a Non-executive Director of major organizations in transport and logistics, property and financial services. Mr. L’Huillier is currently a Director of the Melbourne Rebels Rugby Union Ltd (appointed December 2009). Mr. L’Huillier

111 was previously a member of the Policy Board of Price Waterhouse, Chairman and Chief Executive of the Transport Accident Commission, a director of MPG Logistics, and former Chairman of the Australian Property Fund, a group with interests in major retail shopping centers. He is a former Director of MLC Limited and Challenge Bank Limited. Mr. L’Huillier was appointed a Director of Woolworths Limited in September 1997.

Ian John Macfarlane AC is a graduate of Monash University in Melbourne. He was Governor of the Reserve Bank of Australia (RBA) from 1996 until 2006. He held several senior positions with the RBA after joining in 1979. Prior to the RBA, he worked in the Economics Department of the OECD in Paris and at the Institute for Economics and Statistics at Oxford University.

Mr. Macfarlane is also a Director of ANZ Banking Group Limited (since 2007), Leighton Holdings Limited (since 2007) and of the Lowy Institute for International Policy (since 2003). He is a member of the International Advisory Board of Goldman Sachs (since 2007), the International Advisory Board of Temasek Holdings (Private) Limited (since 2010) and the International Advisory Board of the China Banking Regulatory Commission (since 2010). Mr. Macfarlane is also a member of the Asian Advisory Board of Champ Private Equity (since 2008). Mr. Macfarlane was appointed a Director of Woolworths Limited in January 2007.

Ralph Graham Waters is a director of Fonterra Co-operative Group and Westpac New Zealand Limited and is Chairman of Fletcher Building Limited. In the past, Mr. Waters has been Chairman and director of Fisher and Paykel Appliances Holdings Limited. He has extensive experience in the Australasian building products industry, including as managing director of Email Limited and as Chief Executive of Fletcher Building Limited, as well as engineering and management experience in London and the Middle East. Mr. Waters has a Master of Business from Curtin University of Technology, is a Chartered Professional Engineer and a Fellow of the Institution of Engineers Australia. Mr. Waters was appointed a Director of Woolworths in January 2011.

Executive officers

Executive Officers of Woolworths who are not Directors at the date of this offering memorandum are as follows:

Name Position Julie Coates Director, Big W Greg Foran Director, Supermarkets, Liquor & Petrol Andrew Hall Director, Corporate and Public Affairs Peter Horton Group General Counsel and Company Secretary Kim Schmidt Director, Human Resources

Julie Coates is the Woolworths Director, BIG W and was appointed to this role in November 2008. Prior to this role she was Woolworths’ Chief Logistics Officer, after serving as Woolworths Director, Human Resources. Before joining Woolworths in 2002, she held senior positions with Coles Myer and David Jones Limited.

Greg Foran is the Woolworths Director, Supermarkets, Liquor & Petrol and was appointed to this role in November 2008. Prior to this role, he was in charge of the General Merchandise and

112 Consumer Electronics trading divisions. Mr. Foran joined Woolworths in 2001 as General Manager, Generic and Private Label.

Andrew Hall is the Woolworths Director, Corporate and Public Affairs and was appointed to this role in June 2007. Prior to this role, he spent five years as the federal director for the National Party of Australia in Canberra and has previous experience in politics, journalism and as a BIG W sales assistant.

Peter Horton is Woolworths’ Company Secretary and General Counsel and was appointed to this role in November 2005. Prior to this role, he was General Manager Legal and Company Secretary for WMC Resources Ltd and WMC Ltd.

Kim Schmidt is the Woolworths Director, Human Resources and was appointed to this role in May 2007. Ms. Schmidt joined Woolworths in 2000 as the General Manager of Human Resources for BIG W.

Board practices

Composition of the Board/Committees

The Board has adopted a policy of ensuring that it is composed of a majority of independent non-executive Directors who, with the executive Director, comprise an appropriate mix of skills to provide the necessary breadth and depth of knowledge and experience to meet the Board’s responsibilities and objectives. With the exception of the Chief Executive Officer and the Finance Director, all of the Directors are non-executive Directors and each are considered to be independent under the Corporations Act and the listing rules of the Australian Securities Exchange Limited (the “ASX Listing Rules”).

A determination of non-executive Directors’ independence is based on the Board’s individual and ongoing assessment that the Director is free of any material business or any other relationship that could be reasonably considered to interfere with the exercise of their un fettered and independent judgment.

In order for a Director to be considered independent the Board must determine that the Director does not have a material relationship with Woolworths, other than solely as a consequence of being a Director.

A “material relationship” includes a direct or indirect interest or relationship that could reasonably be considered to influence in a material way the Directors’ decisions in relation to Woolworths. When considering whether a relationship is “material”, the Board will consider the materiality to each of Woolworths, the Director and the person or organization with which the Director is related (as customer, supplier or advisor). The Board has not set materiality thresholds, and considers all relationships on a case by case basis and where appropriate with the assistance of external advice.

Any Director who considers that he/she has or may have a conflict of interest or a material personal interest in any matter concerning Woolworths is required to give the Board immediate notice of such interest.

113 The Chairman is elected by and from the non-executive Directors each of whom is appointed to the Nomination Committee. The non-executive Directors are also appointed to at least one of the Audit, Risk Management and Compliance Committee, the People Policy Committee or to the Policy Committee of the Woolworths Group Superannuation Plan. The Audit, Risk Management and Compliance Committee and People Policy Committee have each adopted comprehensive Charters defining their roles and responsibilities as summarized below.

There is no specified term of office for non-executive Directors; however each Director is required to retire and offer themselves for re-election at the third annual general meeting following the Director’s appointment or every three years, whichever is longer. The year of appointment of each non-executive Director is set out above.

Audit, Risk Management and Compliance Committee

The Audit, Risk Management and Compliance Committee of Directors is comprised of non-executive Directors who, at the date of this offering memorandum, are John Astbury (Chairman), James Strong, Jillian Broadbent, Ian Macfarlane and Leon L’Huillier. The Committee provides advice and assistance to the Board in fulfilling the Board’s responsibilities relating to Woolworths’ risk management and compliance systems and practice, financial statements, financial and market reporting systems, internal accounting and control systems, internal and external audit and such other matters as the Board may request from time to time.

The Committee also provides advice and assistance to the Board on the compliance framework and its effectiveness including legal and regulatory compliance, health and safety, privacy, environment, trade practices and fair trading, trade weights and measures, and employment obligations. Woolworths has specific policies and processes for addressing these and other compliance areas and the Committee receives and reviews regular management reports.

The Committee processes are designed to establish a proactive framework and dialogue in which the Committee, management and external and internal auditors review and assess the risk framework, the quality of earnings, liquidity and strength of the balance sheet and income statement, and transparency and accuracy of reporting. The Committee recommends any actions it deems appropriate to the Board for its consideration.

Access and reporting

The Audit, Risk Management and Compliance Committee maintains direct, unfettered access to external auditors, internal auditors and management. The Committee meets regularly with external and internal auditors and the Board and Committee meet with the external and internal auditors, at least twice a year, without any management present. The Committee has full access to Woolworths’ records and personnel. The Committee Chairman commits additional time and meets with the Chief Executive Officer, the Finance Director, senior management and external and internal auditors between meetings to discuss and review matters relating to Committee functions as appropriate.

The key issues and reports discussed at each Committee meeting are reported to the Board by the Chairman of the Committee at the immediately following Board meeting. The Committee’s charter includes providing periodical reports to the Board on the most significant risks facing Woolworths and the mitigation strategies and practices adopted by management.

114 Responsibilities

The Committee reviews and approves, annually, the overall audit strategy of Woolworths which uses a risk framework to identify, assess and assign accountability for risk and audit procedures. This ensures that the activities of external and internal audit are focused and coordinated and that there is no duplication of effort.

• External Audit: the Committee oversees the effectiveness of processes in place for the appointment, performance and independence of external audit services.

• Internal Controls: the Committee examines the adequacy of the nature, extent and effectiveness of the internal audit control processes of Woolworths.

• Risk Management: the Committee assists the Board in overseeing and reviewing the risk management framework and the effectiveness of risk management in Woolworths. Management is responsible for identifying, managing and reporting on and effecting measures to address risk.

• Risk Event “Consideration”: the Committee oversees the appropriate investigation and management reporting of significant risk events and incidents.

• Compliance: the Committee assists the Board in fulfilling its compliance responsibilities and oversees and reviews Woolworths’ compliance framework and its effectiveness. The Committee also assists management to foster and support a compliance culture based on appropriate benchmarks.

• Financial Reports: the Committee oversees Woolworths’ financial reporting processes and reports on the results of its activities to the Board. Specifically, the Committee reviews with management and the external auditor Woolworths’ annual and financial statements and reports to shareholders.

• Accounting Standards and Quality: the Committee oversees the adequacy and effectiveness of Woolworths’ accounting and financial policies and controls and risk management systems and seeks assurance of compliance with relevant regulatory and statutory requirements.

Nomination Committee

The Nomination Committee consists of all of the Non-executive Directors and has the following responsibilities:

• reviewing and making recommendations to the Board on the size and composition of the Board, including assessment of necessary and desirable competencies, experience and attributes of Board members, strategies to address Board diversity, and Board succession plans and the succession of the Chair;

• membership of the Board, including recommendations for the appointment and re-election of Directors, and where necessary propose candidates for consideration by the Board (including in respect of Executive Directors); and

• assisting the Board and the Chair of the Board as required in evaluating the performance of the Board, its Committees and individual Directors against appropriate measures.

115 Nomination Committee members are not involved in making recommendations to the Board in respect of themselves. The Nomination Committee also has responsibility for:

• assisting the Board in developing and implementing plans for identifying, assessing and enhancing Director competencies;

• ensuring that an effective induction process is in place and regularly reviewing its effectiveness;

• reviewing the time expected to be devoted by Non-executive Directors in relation to the Company’s affairs;

• making recommendations to the Board on corporate governance issues as requested by the Board from time to time; and

• reviewing the Board Charter on a periodic basis, and recommending for Board consideration any amendments it considers are necessary.

People Policy Committee

The People Policy Committee of Directors must be comprised of at least three independent, Non-executive Directors. Currently, the Committee comprises Non-executive Directors Roderick Deane (Chair), James Strong, Jayne Hrdlicka and Ralph Waters.

The People Policy Committee acts on behalf of the Board and shareholders in respect of human resources to oversee management activities in:

• establishing and implementing a human resources strategy which ensures that appropriately talented and trained people are available to achieve Woolworths’ business strategy;

• protecting the safety and health of its employees, customers, contractors and visitors;

• undertaking the appropriate performance management, succession planning and development activities and programs;

• providing effective remuneration policies having regard to the creation of value for shareholders and the external remuneration market;

• complying with relevant legal and regulatory requirements and principles of good governance; and

• reporting to shareholders in line with required standards.

Directors’ independent advice

The Directors, the Board and the Board Committees are empowered to seek external professional advice, as considered necessary, at Woolworths’ expense, subject to prior consultation with the Chairman. If appropriate, any advice so received will be made available to all Directors.

Directors’ Policy Statements

The Directors have approved and adopted a Corporate Governance Manual comprising Policy Statements setting out their legal and fiduciary duties relating to:

• exercise of due care and diligence;

116 • ensuring continuous disclosure of material matters;

• dealing with conflicts of interest and duties;

• access to Company documents, information, insurance, indemnities and independent advice;

• confidentiality;

• dealing in securities of Woolworths and insider trading;

• fair, open, ethical and honest standards of conduct and dealing; and

• ensuring compliance with the Company’s Code of Conduct.

Policy on trading in company securities

Woolworths has a policy which requires Directors, executives and senior managers who trade, or propose to trade, in the securities of Woolworths, to act in accordance with strict guidelines which prohibit trading in Woolworths’ securities prior to the end of each quarter, half year and full year until the release of the relevant results to the ASX. Notwithstanding this policy, there is no period during which an individual is exempt from the requirements of the Corporations Act in regard to insider trading prohibitions.

Financial report accountability

Woolworths’ Chief Executive Officer and Finance Director are required to state to the Board, in writing, that Woolworths’ Financial Statements and Reports present a true and fair view, in all material respects, of Woolworths’ financial condition and operational results and are in accordance with relevant Australian accounting standards.

As part of the process of approving the Financial Statements, the Chief Executive Officer and Finance Director provide statements in writing to the Board on the effectiveness of Woolworths’ risk management and internal compliance control systems.

Remuneration of Officers and Directors

Information relating to the remuneration, share ownership and employment contracts of Woolworths’ directors and executive officers is included in extracts from Woolworths’ 2010 Directors Report included in Woolworths’ audited financial statements for the year ended June 30, 2010 included in this offering memorandum and from the 2009 Directors Report included in Woolworths’ audited financial statements for the year ended June 30, 2009 included in this offering memorandum.

117 Principal shareholders As of March 30, 2011, no persons were known to Woolworths (through substantial shareholder notices lodged with the ASX) to be the holder of more than 5% of any class of voting securities.

Directors and Executive Officers as a group hold less than 0.5% of Woolworths voting shares.

There are no arrangements known to Woolworths the operation of which may at a subsequent date result in a change in control of Woolworths.

118 Related party transactions For a discussion of related party transactions, see Note 25 in Woolworths’ annual consolidated financial statements for the 2010 Fiscal Year included in this offering memorandum.

119 Description of Notes The following summaries of certain provisions of the indenture and the Notes do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of the indenture and the Notes, including the definitions therein of certain terms. Section references are to sections of the indenture and capitalized terms not defined in this offering memorandum have the meanings set forth in the indenture. References below to the “Company” are to Woolworths Limited.

General

The Notes will be issued under the indenture

The Notes offered in this offering memorandum will be unsecured obligations governed by an indenture, dated as of November 23, 2005, between the Company and The Bank of New York Mellon (as successor to JPMorgan Chase Bank, N.A.), as trustee, as supplemented by a supplemental indenture, dated as of September 22, 2010 between the Company and The Bank of New York Mellon, as trustee. For the purposes of this offering memorandum, the term “indenture” shall refer to the indenture, as supplemented by the supplemental indenture. The trustee has two main roles:

• First, the trustee can enforce a holder’s rights against the Company if it defaults. There are some limitations on the extent to which the trustee acts on the holders’ behalf, which are described below under “—Events of default—Remedies if an event of default occurs.”

• Second, the trustee performs administrative duties for the Company, such as sending interest payments and notices.

A copy of the indenture (which includes the forms of the Notes) is available for inspection during normal business hours at the offices of the trustee and of any other paying agents.

Principal and interest

The 2016 Notes will mature on April 12, 2016 and the 2021 Notes will mature on April 12, 2021. The 2016 Notes will bear interest from April 12, 2011, and will be payable semi-annually in arrears on each April 12 and October 12, commencing October 12, 2011, at the rate of 3.15% per year, to the holders in whose names the Notes are registered at the close of business on the March 28 or September 27 immediately preceding the related interest payment date. The 2021 Notes will bear interest from April 12, 2011, and will be payable semi-annually in arrears on each April 12 and October 12, commencing October 12, 2011, at the rate of 4.55% per year, to the holders in whose names the Notes are registered at the close of business on the March 28 or September 27 immediately preceding the related interest payment date.

The Company will pay interest on the Notes on the interest payment dates stated above, and at maturity. Each payment of interest due on an interest payment date or at maturity will include interest accrued from and including the last date to which interest has been paid or made available for payment, or from the issue date, if none has been paid or made available for payment, to but excluding the relevant payment date on the Notes on the basis of a 360-day year consisting of twelve 30-day months.

120 Further issues

The indenture provides that Securities (as defined in the indenture) may be issued thereunder from time to time in one or more series without limitation as to aggregate principal amount. (Section 301). The Company therefore reserves the right, from time to time without the consent of the holders of the Notes, to issue additional notes on terms and conditions substantially identical to those of the Notes, which additional notes may increase the aggregate principal amount of, and may be consolidated and form a single series with, the Notes. Holders of the Notes should be aware that additional Notes that are treated for non-tax purposes as a single series with a series of the original Notes offered hereby may be treated as a separate issue for United States federal income tax purposes. In such case, depending upon their issue price, the additional Notes may not be a “qualified reopening” for United States federal income tax purposes and, therefore, issued with “original issue discount”, which may affect the market value of a series of the original Notes offered hereby since such additional Notes may not be distinguishable from such original Notes. Woolworths does not intend to increase the principal amount of any series of Notes offered hereby unless the issuance is a qualified reopening for United States federal income tax purposes.

Stated maturity and maturity

The day on which the principal amount of the Notes is scheduled to become due is called the stated maturity of the principal. The principal may become due sooner, by reason of redemption or acceleration after a default. The day on which the principal actually becomes due, whether at the stated maturity or earlier, is called the maturity of the principal. The terms “stated maturity” and “maturity” refer to the dates when interest payments become due. For example, reference to a regular interest payment date when an installment of interest is scheduled to become due is referred to as the “stated maturity” of that installment. When reference is made to the “stated maturity” or the “maturity” of the Notes without specifying a particular payment, it refers to the stated maturity or maturity, as the case may be, of the principal. The Notes are subject to defeasance as described below under “—Defeasance and covenant defeasance.”

How the Notes rank against other debt

The Notes will not be secured by any property or assets of the Company. Thus, by owning these Notes, holders are one of the Company’s unsecured creditors. These Notes will not be subordinated or senior to any of the Company’s other unsecured debt obligations. This means that, in a bankruptcy or liquidation proceeding against the Company, these Notes would rank equally in right of payment with all of the Company’s other unsecured and unsubordinated debt, except debt given preference by law.

Form and denomination of the Notes

The Notes are being offered and sold in the United States to qualified institutional buyers in accordance with Rule 144A and the Notes also may be offered and sold outside the United States in accordance with Regulation S under the Securities Act.

Notes will be issued only in fully registered form, without interest coupons, in minimum denominations of US$2,000 and integral multiples of US$1,000 in excess thereof. Notes will not be issued in bearer form. Notes will be issued at the closing of the offering only against payment in immediately available funds.

121 U.S. offering

All Notes initially sold in the United States or to U.S. persons will be represented by one or more Notes in registered, global form without interest coupons. These Notes are referred to as the Restricted Global Notes. The Restricted Global Notes will be issued in definitive, fully registered form without interest coupons to qualified institutional buyers pursuant to Rule 144A under the Securities Act, in the form of beneficial interests in one or more Restricted Global Notes registered in the name of a nominee of The Depository Trust Company, known as DTC, and will be deposited with the trustee as custodian for DTC.

The international offering

Notes sold to persons other than U.S. persons in offshore transactions in reliance on Regulation S will be represented by a single permanent global Note in definitive, fully registered form without interest coupons. This Note is referred to as the Regulation S Global Note. Together, the Restricted Global Notes and the Regulation S Global Note are known as the “Global Notes.” The Global Notes will be registered in the name of a nominee of DTC, and will be deposited with the trustee as custodian for DTC for credit by DTC to the respective accounts of beneficial owners of the Notes, including in the case of the Regulation S Global Note, at Euroclear System and Clearstream Banking S.A., respectively.

Holders with a beneficial interest in the Regulation S Global Note must hold it through the Euroclear System or Clearstream Banking, S.A. (as indirect participants in DTC) through and including the 40th day following the issuance of the Notes. This period through and including the 40th day after the later of the commencement of the offering and the original issue date of the Notes is known as the “restricted period.” The restriction on transfer of interests in the Regulation S Global Note applies during this restricted period unless the Notes are transferred to a person that takes delivery as a Restricted Global Note in accordance with the requirements described below. Beneficial owners may not exchange beneficial interests in the Restricted Global Notes for beneficial interests in the Regulation S Global Note at any time, except as described below. See “—Registration of transfer and exchange—Transfers between Global Notes.”

The Global Notes will be subject to certain restrictions on transfer and will bear restrictive legends as described under “Notice to Investors.” In addition, transfers of beneficial interests in the Global Notes will be subject to the rules and procedures of DTC and its direct or indirect participants (including, if applicable, those of Euroclear and Clearstream), which may change from time to time. Except as set forth below, the Global Notes may be transferred, in whole or in part, only to DTC, a nominee of DTC or to their successors. Holders may not exchange their beneficial interest in a Global Note for Notes in certificated or non-book entry form except in the limited circumstances described below. See “—Registration of transfer and exchange—Transfers or exchanges from Global Notes to certificated Notes.”

Registration of transfer and exchange

General

Subject to the restrictions on transfer contained in the indenture, and described below and in “Notice to investors,” and the limitations applicable to the Global Notes, Notes may be presented for exchange for other Notes of any authorized denomination and of a like tenor and aggregate principal amount or for registration of transfer by the holder thereof or his attorney duly

122 authorized in writing and, if so required by the Company or the trustee, with the form of transfer thereon duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Company or the security registrar duly executed, at the office of the security registrar or at the office of any transfer agent designated by the Company for such purpose. No service charge will be made for any exchange or registration of transfer of Notes, but the Company may require payment of a sum by the holder of a Note sufficient to cover any tax or other governmental charge payable in connection with any transfer.

A transfer or exchange will be effected once the security registrar or such transfer agent, as the case may be, becomes satisfied with the documents of title and identity of the person making the request. The security registrar may decline to accept any request for an exchange or registration of transfer of any Note during the period of 15 days preceding the due date for any payment of principal of or any other payments on or in respect of the Notes. The indenture requires that the security register be maintained at all times outside Australia. The Company has appointed the trustee as security registrar. The Company may at any time designate additional transfer agents or rescind the designation of any transfer agent or approve a change in the office through which any transfer agent acts; provided, however, that there shall at all times be a transfer agent in the Borough of Manhattan, The City of New York.

Transfers within Global Notes

Subject to the procedures and limitations described below under “—Global Notes,” transfers of beneficial interests within a Global Note may be made without delivery to the Company or the trustee of any written certifications or other documentation by the transferor or transferee.

Transfers between Global Notes

Prior to the expiration of the restricted period, a beneficial interest in a Regulation S Global Note may be transferred to a person who takes delivery in the form of an interest in a Restricted Global Note once the trustee has received a written certification from the transferee or the transferor, as the case may be (in the form provided in the indenture) to the effect that either:

(i) the transfer is being made to a person who the transferor reasonably believes is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act,

• the person is purchasing for its own account or for the account or benefit of one or more qualified institutional buyers as to which account it exercises sole investment discretion, in a transaction that meets the requirements of Rule 144A and is in accordance with all applicable securities laws, and

• the transferee has been advised that the transferor is making such transfer in reliance on Rule 144A; or

(ii) the transferor did not purchase such Notes as part of the initial distribution thereof and the transfer is being effected pursuant to and in accordance with an applicable exemption from the registration requirements of the Securities Act and the transferor has delivered to the trustee such additional evidence that the Company or the trustee may require as to compliance with such available exemption.

On and after the expiration of the restricted period, the certifications referred to in this clause shall no longer be required.

123 Beneficial interests in a Restricted Global Note may be transferred to a person who takes delivery in the form of an interest in a Regulation S Global Note, whether before, on or after the expiration of the restricted period, only upon receipt by the trustee of a written certification from the transferor (in the forms provided in the indenture) to the effect that:

• such transfer is being made in accordance with Rule 903 or Rule 904 of Regulation S (as applicable) or, in the case of an exchange occurring following the expiration of the restricted period, Rule 144 under the Securities Act; and

• if such transfer occurs prior to the expiration of the restricted period, the interest transferred will be held immediately thereafter through Euroclear or Clearstream.

Any beneficial interest in any Global Note that is transferred to a person who takes delivery in the form of an interest in the other type of Global Note will, upon transfer, cease to be an interest in such Global Note and become an interest in the other type of Global Note and, accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in such other type of Global Note for as long as it remains such an interest. Except in the circumstances described below and under “—Global Notes,” owners of beneficial interests in Global Notes will not be entitled to receive physical delivery of certificated Notes.

If holders exchange a beneficial interest in a Regulation S Global Note for a beneficial interest in a Restricted Global Note or vice versa, instructions will be given by the trustee to DTC through the DTC Deposit Withdraw at Custodian system, or DWAC. Following the receipt of these instructions, adjustments will be made in the records of the security registrar to reflect a decrease in the principal amount of the holders’ interest in the Regulation S Global Note and a corresponding increase in the principal amount of the holders’ interest in the Restricted Global Note, or vice versa, as applicable.

Transfers or exchanges from Global Notes to certificated Notes

If DTC or any successor depositary is at any time unwilling or unable to continue as a depositary for the reasons set forth below under “—Global Notes,” and a successor depositary is not appointed by the Company, the Company will issue certificated Notes in definitive registered form in exchange for the Regulation S Global Note and Restricted Global Notes, as the case may be. In addition, upon at least 60 days’ prior written notice given to the trustee in accordance with DTC’s customary procedures, holders of beneficial interests in a Global Note may request through DTC that the Company exchange such beneficial interest for certificated Notes in a principal amount equal to the principal amount represented by such beneficial interest. Upon receipt of such notice from the trustee, the Company will cause the requested certificated Notes to be prepared for delivery.

Unless determined otherwise by the Company in accordance with applicable law, certificated Notes will be issued upon transfer or exchange of beneficial interests in a Restricted Global Note or Regulation S Global Note only upon compliance with the transfer restrictions and procedures set forth in the indenture and described below under “Notice to investors” and will bear the legend referred therein and contained in the indenture.

In all cases, certificated Notes delivered in exchange for any Global Note or beneficial interests therein will be registered in the names, and issued in any approved denominations, requested by DTC.

124 Global Notes

The following descriptions of the operations and procedures of DTC, Euroclear and Clearstream are provided to holders solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to change from time to time. The Company takes no responsibility for these operations and procedures and urges holders to contact the systems or their participants directly to discuss these matters.

DTC has advised the Company that it is a limited-purpose trust company created to hold securities for its participating organizations, known as participants, and to facilitate the clearance and settlement of transactions in those securities between participants through electronic book-entry changes in the accounts of its participants. The participants include securities brokers and dealers, banks, trust companies, clearing corporations and other organizations. Access to DTC’s system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. These persons are known as indirect participants. Persons who are not participants may beneficially own securities held by or on behalf of DTC only through participants or indirect participants. The ownership interest and transfer of ownership interest of each actual purchaser of each security held by or on behalf of DTC are recorded on the records of participants and indirect participants.

Ownership of beneficial interests in a Global Note will be limited to DTC participants or persons who hold interests through participants. Upon the issuance of a Global Note, DTC or its custodian will credit, on its internal system, the respective principal amount of the individual beneficial interests represented by such Global Note to the accounts of its participants. Such accounts initially will be designated by or on behalf of the initial purchasers. Ownership of beneficial interests in a Global Note will be shown only on, and the transfer of such ownership interests will be effected only through, records maintained by DTC or its nominee, in the case of participants, or by participants and indirect participants, in the case of other owners of beneficial interests in the Global Notes.

Although the Company expects that DTC, Euroclear and Clearstream will follow the foregoing procedures in order to facilitate transfers of beneficial interest in the Global Notes among participants in DTC, Euroclear and Clearstream, they are under no obligation to perform or to continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Company nor the trustee will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants of their obligations under the rules and procedures governing their operations, which may include:

• maintaining, supervising and reviewing the records related to payments made on account of beneficial ownership interests in Global Notes, and

• any other action taken by any such depositary, participant or indirect participant.

Notwithstanding any provision of the indenture or any Note, no Global Note may be exchanged in whole or in part for certificated Notes registered, and no transfer of a Global Note in whole or in part may be registered, in the name of any person other than DTC or its nominee unless:

• DTC notifies the Company that it is unwilling or unable to continue as depositary for a Global Note or has ceased to be qualified to act as such as required by the indenture; or

• there shall have occurred and be continuing an event of default with respect to the Notes.

125 As long as DTC, or its nominee, is the registered holder of a Global Note, DTC or its nominee, as the case may be, will be considered the sole owner and holder of such Global Note (and of the Notes represented thereby) for all purposes under the indenture and the Notes. Except in the circumstances referred to in the preceding paragraph, holders of book-entry interests in a Global Note:

• will not have Notes registered in their name;

• will not receive physical delivery of Notes in certificated form; and

• will not be considered the registered owner or holder of the interest in the Global Note under the indenture or the Notes.

DTC has advised the Company that it will take any action permitted to be taken by a holder of Notes:

• only at the direction of one or more participants to whose account with DTC interests in the Global Notes are credited; and

• only in respect of such portion of the aggregate principal amount of the Notes as to which the participant in question has given such direction.

If there is an event of default under the Notes, however, DTC reserves the right to exchange the Global Notes for legended Notes in certificated form, and to distribute these Notes to its participants.

All payments of interest on, principal of, or additional amounts on, a Global Note will be made to DTC or its nominee, as the case may be, as the holder thereof. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in definitive form. These laws may impair the ability to transfer beneficial interests in a Global Note. Because DTC can only act on behalf of participants, who in turn act on behalf of indirect participants in certain banks, the ability of a person having a beneficial interest in a Global Note to pledge such interest to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interest, may be affected by the lack of a physical certificate evidencing such interest.

Clearstream and Euroclear will hold interests in the Regulation S Global Note on behalf of their participants through customers’ securities accounts in their respective names on the books of their respective depositaries. The depositaries, in turn, will hold such interests in the Regulation S Global Note in customers’ securities accounts in the depositaries’ names on the books of DTC. All interests in a Global Note, including those held through Euroclear or Clearstream, may be subject to the procedures and requirements of DTC. Transfers and exchanges of interests in Global Notes will also be subject to the restrictions described above under “—Transfers between Global Notes” and “—Registration of transfer and exchange—Transfers or exchanges from Global Notes to certificated Notes.” Beneficial owners may hold interests in the Restricted Global Notes directly through DTC, if they are participants in such system, or indirectly through organizations which are participants in such system.

The Company has been advised that DTC or its nominee, upon receipt of any payment of interest on, principal of, or additional amounts on, a Global Note held by it or its nominee, will credit the accounts of the participants with such payments on the date the same are payable to it or its nominee in amounts proportionate to the participants’ respective beneficial interest in the

126 principal amount of such Global Note as shown on the records of DTC or its nominee. The Company expects that payments by participants to owners of beneficial interests in such Global Note held through such participants will be governed by standing instructions and customary practice, as is now the case with securities held for the accounts of customers registered in street name. These payments will be the responsibility of these participants.

Transfers between participants in DTC will be effected in accordance with DTC’s procedures, which currently provide for settlement in same-day funds. Transfers between participants in Euroclear and Clearstream will be effected in the ordinary way in accordance with their respective rules and operating procedures.

Each of Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the Regulation S Global Note in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream participants and Euroclear participants may not deliver instructions directly to the depositaries for Clearstream or Euroclear.

Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a Global Note from a DTC participant will be credited during the securities settlement processing day (which must be a business day for Euroclear and Clearstream) immediately following the DTC settlement date and such credit of any transactions in interests in a Global Note settlement during such processing day will be reported to the relevant Euroclear or Clearstream participant on such day. Cash received in Euroclear or Clearstream as a result of sales of interests in a Global Note by or through a Euroclear or Clearstream participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Euroclear or Clearstream cash account only as of the business day following settlement in DTC.

Same-Day settlement and payment

Settlement for the Notes must be made by the initial purchasers in immediately available funds. All payments of interest on and principal of Global Notes will be made in immediately available funds.

So long as Notes are represented by a Global Note registered in the name of DTC or its nominee, the Notes will trade in DTC’s Same-Day Funds Settlement System and secondary market trading activity in the Notes will be required by DTC to settle in immediately available funds on trading activity in the Notes.

Payment and paying agents Who receives payment

For interest due on the interest payments dates, the Company will pay the interest to the holder in whose name the Note is registered at the close of business on the regular record date relating to the interest payment date. For interest due at maturity but on a day that is not an interest payment date, the Company will pay the interest to the person or entity entitled to receive the principal of the Note. For principal due on the Notes at maturity, the Company will pay the amount to the holders of the Notes against surrender of the Notes at the proper place of payment.

127 Regular record dates for interest; place and method of payment

The regular record dates relating to the interest payment dates for the Notes are March 28 and September 27. For the purpose of determining the holder at the close of business on a regular record date when business is not being conducted, the close of business will mean 5:00 p.m., New York City time, on that day.

The principal of, and any interest on, the Notes will be payable at the office of such paying agent or paying agents as the Company may designate for such purpose from time to time; provided, however, that at the option of the Company payment of any interest may be made by check mailed to the address of the person entitled thereto as such address appears in the security register so long as such address is outside the Commonwealth of Australia; and provided further, that notwithstanding the foregoing, a holder of US$10,000,000 or more in aggregate principal amount of the Notes may elect to receive payments of any interest on the Notes (other than at maturity) by electronic funds transfer of immediately available funds to an account maintained by such holder at a bank located outside of Australia if appropriate wire transfer instructions are received by the paying agent not less than 5 Business Days prior to the date for payment. Unless such designation is revoked, any such designation made by such person with respect to such Notes will remain in effect with respect to any future payments with respect to such Notes payable to such person. The Company will pay any administrative costs imposed by banks in connection with making payments by electronic funds transfer.

Paying agent

The corporate trust office of the trustee in The City of New York will be designated as the Company’s sole paying agent for payments with respect to each series of Notes. The Company may at any time designate additional paying agents or rescind the designation of any paying agent or approve a change in the office through which any paying agent acts, except that the Company will be required to maintain a paying agent in each place of payment for a particular series of Notes. (Section 1002).

All moneys paid by the Company to the trustee or a paying agent for the payment of the principal of or interest on any Note which remains unclaimed at the end of two years after such principal or interest has become due and payable will be repaid to the Company, and the holder of such Note thereafter may look only to the Company, for payment thereof. (Section 1003).

Payment of additional amounts

All payments of, or in respect of, principal of, and interest on, the Notes shall be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of Australia or any political subdivision or taxing authority thereof or therein, unless such taxes, duties, assessments or governmental charges are required to be withheld or deducted by law. In that event, the Company will pay those amounts as will result (after deduction of such taxes, duties, assessments or governmental charges and any additional taxes, duties, assessments or governmental charges payable in respect of such) in the payment to the holder of such Note of the amounts which would have been payable in respect of such Note had no such withholding or

128 deduction been required. These amounts are referred to as additional amounts. The Company will not, however, pay any additional amounts for or on account of:

1. any tax, duty, assessment or other governmental charge which would not have been imposed but for the fact that such holder:

(a) was a resident, domiciliary or national of, or engaged in business or maintained a permanent establishment or was physically present in Australia or any of its territories or any political subdivision thereof or otherwise had some connection with Australia other than the ownership of, or the receipt of payment under, the Note;

(b) presented (if presentation shall be required) the Note for payment in Australia or any of its territories or any political subdivision thereof, unless the Note could not have been presented for payment elsewhere; or

(c) presented (if presentation shall be required) the Note more than thirty (30) days after the date on which the payment in respect of the Note first became due and payable or provided for, whichever is later, except to the extent that the holder would have been entitled to such additional amounts if it had presented the Note for payment on any day within such period of thirty (30) days;

2. any estate, inheritance, gift, sale, transfer, personal property or similar tax, assessment or other governmental charge;

3. any tax, assessment or other governmental charge which is payable otherwise than by withholding or deduction from payments under the Note;

4. any tax, assessment or other governmental charge that is imposed or withheld by reason of the holder or the beneficial owner of a Note being an “associate” of the Company within the meaning of Section 128F(9) of the Income Tax Assessment Act 1936 of Australia;

5. any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure to comply by the holder or the beneficial owner of a Note with a request from the Company addressed to such holder (a) to provide information concerning the nationality, residence or identity of the holder or such beneficial owner (including, without limitation, the supplying of an Australian Business Number, any appropriate tax file number or other appropriate exemption details) or (b) to make any declaration or other similar claim or satisfy any information or reporting requirement, which, in the case of (a) or (b), is required or imposed by a statute, treaty, regulation or administrative practice of the taxing jurisdiction as a precondition to exemption from all or part of such tax, assessment or other governmental charge; or

6. any combination of items (1), (2), (3), (4) and (5); nor shall additional amounts be paid with respect to any payment in respect of the Note to any holder who is a fiduciary or partnership or other than the sole beneficial holder of the Note to the extent such payment would be required by the laws of Australia (or any political subdivision or any taxing authority thereof or therein) to be treated as being derived or received for tax purposes by a beneficiary or settlor with respect to such fiduciary or a member of such partnership or a beneficial owner who would not have been entitled to such additional amounts had it been the holder of the Note.

129 Whenever there is mentioned, in any context, the payment of any payments pursuant to the Note, such mention shall be deemed to include mention of the payment of additional amounts provided for in the indenture to the extent that, in such context, additional amounts are, were or would be payable in respect thereof pursuant to the indenture. (Section 1007). Certain other additional amounts may be payable in respect of the Note as a result of certain consolidations or mergers involving, or conveyances, transfer or leases of properties and assets by the Company. (Section 801). See below under “—Consolidation, merger and sale of assets.”

Optional redemption The Notes may be redeemed by the Company in whole or in part, at its option at any time and from time to time at a redemption price equal to the greater of (i) 100% of the principal amount of the Notes to be redeemed and (ii) the sum of the present values of the Remaining Scheduled Payments discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 15 basis points with respect to the 2016 Notes and the Treasury Rate plus 20 basis points with respect to the 2021 Notes, together with, in each case, accrued interest on the principal amount of the Notes to be redeemed to the date of redemption. In connection with such optional redemption the following defined terms apply: • “Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity (computed as of the third Business Day immediately preceding that redemption date) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for that redemption date. • “Comparable Treasury Issue” means the United States Treasury security selected by the Independent Investment Banker that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes. “Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Company to act as the “Independent Investment Banker.” • “Comparable Treasury Price” means, with respect to any redemption date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding that redemption date, as set forth in the daily statistical release designated H.15 (519) (or any successor release) published by the Federal Reserve Bank of New York and designated “Composite 3:30 p.m. Quotations for U.S. Government Securities” or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (A) the average of the Reference Treasury Dealer Quotations for that redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (B) if the Independent Investment Banker for the Notes obtains fewer than five such Reference Treasury Dealer Quotations, the average of all such Quotations. • “Reference Treasury Dealer” means each of Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated and their respective successors and three other nationally recognized investment banking firms that are Primary Treasury Dealers specified from time to time by the Company, provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City

130 (a “Primary Treasury Dealer”), the Company shall substitute therefor another nationally recognized investment banking firm that is a Primary Treasury Dealer. • “Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by such Reference Treasury Dealer at 3:30 p.m., New York City time, on the third Business Day preceding that redemption date. • “Remaining Scheduled Payments” means, with respect to each Note to be redeemed, the remaining scheduled payments of the principal thereof and interest thereon that would be due after the related redemption date but for such redemption, provided, however, that, if that redemption date is not an interest payment date with respect to such Note, the amount of the next succeeding scheduled interest payment thereon will be reduced by the amount of interest accrued thereon to that redemption date. Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of the Notes to be redeemed. On and after any redemption date, interest will cease to accrue on the Notes or any portion thereof called for redemption. On or before any redemption date, the Company shall deposit with a paying agent (or the trustee) money sufficient to pay the redemption price of and accrued interest on the Notes to be redeemed on such date. If less than all the Notes are to be redeemed, the Notes to be redeemed shall be selected by the trustee by such method as the trustee shall deem fair and appropriate. The redemption price shall be calculated by the Independent Investment Banker and the Company, the trustee and any paying agent for the Notes shall be entitled to rely on such calculation.

Redemption of Notes under certain circumstances If, as a result of any change in or any amendment to the laws, regulations or published tax rulings of Australia, or of any political subdivision or taxing authority thereof or therein affecting taxation, or any change in the official administration, application or interpretation by any Australian court or tribunal, government or government authority of such laws, regulations or published tax rulings either generally or in relation to the Notes, which change or amendment becomes effective on or after the original issue date of the Notes or which change in official administration, application or interpretation shall not have been available to the public prior to such issue date, the Company would be required to pay any additional amounts under the Notes in respect of interest on the next succeeding interest payment date (assuming a payment in respect of such interest was required to be made by the Company under the Notes on such interest payment date) and the obligation to pay additional amounts cannot be avoided by the use of reasonable measures available to the Company, it may at its option, redeem all (but not less than all) of the Notes, upon not less than 30 nor more than 60 days’ written notice as provided in the indenture, at a redemption price equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest due thereon up to, but not including, the date fixed for redemption; provided, however, that (a) no such notice of redemption may be given earlier than 60 days prior to the earliest date on which the Company would be obligated to pay such additional amounts were a payment in respect of the Notes then due, and (b) at the time any such redemption notice is given, such obligation to pay such additional amounts must remain in effect.

131 If (1) the Company shall have on any date consolidated with or merged into, or conveyed or transferred or leased its properties and assets substantially as an entirety to, any person which is organized under the laws of any jurisdiction other than the United States of America, any state thereof or the District of Columbia or the Commonwealth of Australia, and (2) as a result of any change in or any amendment to the laws, regulations or published tax rulings of such jurisdiction of organization, or of any political subdivision or taxing authority thereof or therein, affecting taxation, or any change in the official administration, application or interpretation of such laws, regulations or published tax rulings either generally or in relation to any particular Notes, which change or amendment becomes effective on or after the succession date or which change in official administration, application or interpretation shall not have been available to the public prior to such succession date, the successor person would be required to pay any successor additional amounts pursuant to Section 801(3) of the indenture or the terms of the Notes in respect of interest on any Notes on the next succeeding interest payment date (assuming, in the case of a successor person, that a payment in respect of such interest were required to be made by such successor person under the Notes on such interest payment date) and such successor additional amounts cannot be avoided by the use of reasonable measures available to the Company or such successor person, the Company or such successor person may, at its option, redeem all (but not less than all) of the Notes, upon not less than 30 nor more than 60 days’ written notice as provided in the indenture, at a redemption price equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest and any additional amounts due thereon up to, but not including, the date fixed for redemption; provided, however, that (1) no such notice of redemption may be given earlier than 60 days prior to the earliest date on which a successor person would be obligated to pay such successor additional amounts were a payment in respect of the Notes, as the case may be, then due, and (2) at the time any such redemption notice is given, such obligation to pay such successor additional amounts must remain in effect.

Prior to any such redemption, the Company or the successor person shall provide the trustee with an opinion of counsel to the effect that the conditions precedent to such redemption have occurred and a certificate signed by an authorized officer of the Company, or the successor person, as the case may be, stating that the obligation to pay additional amounts cannot be avoided by taking measures that the Company or the successor person, as the case may be, believes are reasonable. (Section 1108).

Offer to redeem upon Change of Control Triggering Event

Upon the occurrence of a Change of Control Triggering Event, unless the Company has exercised its right to redeem the Notes as described under “—Optional redemption” or “—Redemption of Notes under certain circumstances”, the terms of the Notes provide that each holder of Notes will have the right to require the Company to purchase all or a portion of such holder’s Notes pursuant to the offer described below (the “Change of Control Offer”), at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase, subject to the rights of holders of the Notes on the relevant record date to receive interest due on the relevant interest payment date.

Within 30 days following the date upon which the Change of Control Triggering Event occurred, or at the Company’s option, prior to any Change of Control but after the public announcement of the pending Change of Control, the Company will be required to send, by first class mail, a notice to each holder of Notes, with a copy to the Trustee, which notice will govern the terms of

132 the Change of Control Offer. Such notice will state, among other things, the purchase date, which must be no earlier than 30 days nor later than 60 days from the date such notice is mailed, other than as may be required by law (the “Change of Control Payment Date”). The notice, if mailed prior to the date of consummation of the Change of Control, will state that the Change of Control Offer is conditioned on the Change of Control being consummated on or prior to the Change of Control Payment Date. Holders of the Notes electing to have Notes purchased pursuant to a Change of Control Offer will be required to surrender their Notes, with the form entitled “Option of Holder to Elect Purchase” on the reverse of the Note completed, to the Trustee at the address specified in the notice, or transfer their Notes to the Trustee by book-entry transfer pursuant to the applicable procedures of the Trustee, prior to the close of business on the third Business Day prior to the Change of Control Payment Date.

The Company will not be required to make a Change of Control Offer if a third party makes such an offer in the manner, at the times and otherwise in compliance with the requirements for such an offer made by the Company and such third party purchases all Notes properly tendered and not withdrawn under its offer.

Certain covenants of the Company

Limitation on liens

Pursuant to the indenture, so long as any of the Notes are outstanding, the Company may not, and the Company may not permit any Subsidiary to create or permit to exist any Lien on the whole or any part of any Property and may not, and may not permit any Subsidiary to, create or permit to exist any Lien upon any shares or stock of any Subsidiary, in either case to secure any present or future Indebtedness without making effective provision whereby the Notes shall be secured equally and ratably with (or, at the option of the Company, or such Subsidiary, prior to) such Indebtedness, so long as such Indebtedness shall be so secured; provided, however, that the above shall not apply to:

• any Lien existing at the date of the issuance of the Notes;

• a Lien arising by operation of law securing money owing in respect of goods or services provided in the ordinary course of business which is not yet due and payable;

• a pledge over documents of title to goods created in the ordinary course of business in favor of a supplier to secure the purchase price of those goods or trade finance on usual arm’s length terms from the supplier where the purchase price of those goods or trade finance is paid in the ordinary course of business;

• a right of title retention in favor of a supplier in connection with the acquisition of assets in the ordinary course of business;

• any Lien which exists at the time of acquisition on or over any asset acquired by the Company or any Subsidiary (otherwise than from the Company or any other Subsidiary, as applicable) and is not created in contemplation of or in connection with that acquisition;

• in the case of any company which becomes a Subsidiary of the Company, any Lien which exists on or over its assets when it becomes a Subsidiary and is not created in contemplation of or in connection with it becoming a Subsidiary;

133 • any Lien mandatorily imposed by the law of any jurisdiction outside Australia in which the Company or any Subsidiary conducts business provided that the Lien is confined to the assets located in that jurisdiction;

• any Lien given by the Company or any Subsidiary on its interests in an incorporated or unincorporated joint venture in favor of any manager of or joint venture participant in any such joint venture securing the obligations of the Company or such Subsidiary to such joint venture or any Lien in relation to the Indebtedness of a Project Finance Subsidiary;

• any set-off arrangement in relation to the transaction banking business of the Company or any Subsidiary.

• Liens securing Indebtedness owing by any Subsidiary to the Company or to any other Subsidiary;

• pledges, deposits or other Liens made or arising under worker’s compensation laws or similar laws or legislation;

• Liens for taxes or assessments, landlord’s liens and mechanic’s liens;

• Liens extending, renewing or replacing, in whole or in part, any Lien set forth above.

Notwithstanding anything mentioned above, the Company or any Subsidiary may issue, assume or guarantee Indebtedness secured by a Lien that would otherwise be subject to the foregoing restrictions in an aggregate amount which, together with the aggregate amount which, together with the outstanding principal amount of all other Indebtedness of the Company and its Subsidiaries that would otherwise be subject to the foregoing restrictions, does not at any time exceed 5% of Consolidated Total Tangible Assets.

Consolidation, merger and sale of assets

The indenture provides that for so long as any of the Notes are outstanding, the Company may not consolidate with or merge into any other person or convey, transfer or lease its properties and assets substantially as an entirety to any person, unless:

(a) any person formed by such consolidation or into which the Company, is merged or to whom the Company has conveyed, transferred or leased its properties and assets substantially as an entirety is a corporation, partnership or trust organized and validly existing under the laws of the applicable jurisdiction, and such person expressly assumes, by a supplemental indenture, the Company’s obligations on the Notes and under the indenture (including any obligation to pay any additional amounts);

(b) immediately after giving effect to the transaction and treating any indebtedness which becomes an obligation of the Company as a result of such transaction as having been incurred at the time of such transaction, no event of default, and no event which, after notice or lapse of time or both, would become an event of default, shall have happened and be continuing;

134 (c) any such person not organized and validly existing under the laws of the Commonwealth of Australia or any State of the United States of America, shall expressly agree by a supplemental indenture,

(i) to indemnify the holder of each Note against —any tax, assessment or governmental charge imposed on such holder or required to be withheld or deducted from any payment to such holder as a consequence of such consolidation, merger, conveyance, transfer or lease, and —any costs or expenses of the act of such consolidation, merger, conveyance, transfer or lease, and

(ii) that all payments pursuant to the Notes, shall be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of the jurisdiction of organization of such person or any political subdivision or taxing authority thereof or therein, unless such taxes, duties, assessments or governmental charges are required by such jurisdiction or any such subdivision or authority to be withheld or deducted, in which case such person will pay such additional amounts of, or in respect of, principal and interest, which the Company refers to as successor additional amounts, as will result (after deduction of such taxes, duties, assessments or governmental charges and any additional taxes, duties, assessments or governmental charges payable in respect of such) in the payment to each holder of a Note of the amounts which would have been payable pursuant to the Notes had no such withholding or deduction been required, subject to the same exceptions as would apply with respect to the payment by the Company of additional amounts in respect of the Notes (substituting the jurisdiction or organization of such person for Australia) (see above under “—Payment of additional amounts”); and

(d) certain other conditions are met. (Section 801).

The foregoing provisions would not necessarily afford holders of the Notes protection in the event of highly leveraged or other transactions involving the Company that may adversely affect holders of the Notes.

Certain definitions

For purposes of the above discussion of the covenants under the indenture:

“Business Day” means any day other than a Saturday, a Sunday or a day on which commercial banks in New York City, Sydney, Australia or London are required or authorized to be closed.

“Change of Control” means the occurrence of any one of the following:

1. the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any “person” (as that term is used in Section 13(d)(3) of the Exchange Act) other than to the Company or one of its Subsidiaries;

135 2. the consummation of any transaction (including without limitation, any merger or consolidation) the result of which is that any person (including any “person” as that term is used in Section 13(d)(3) of the Exchange Act) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of more than 50% of the outstanding Voting Stock of the Company, measured by voting power rather than number of shares, where the acquisition of more than 50% of such Voting Stock is not subject to any unsatisfied or unwaived condition, regulatory approval or shareholders resolution; or 3. the Company consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which any of the Voting Stock of the Company outstanding immediately prior to such transaction or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where the shares of the Voting Stock of the Company constitute, or are converted into or exchanged for, a majority of the Voting Stock of the surviving Person immediately after giving effect to such transaction. “Change of Control Triggering Event” means if two Rating Agencies (including, if applicable, a Substitute Rating Agency) cease to rate the Notes Investment Grade on any date during the period (the “Trigger Period”) commencing upon, the earlier of (i) the occurrence of a Change of Control or (ii) 60 days prior to the date of the first public announcement of any Change of Control (or pending Change of Control), and ending 60 days following consummation of such Change of Control (which Trigger Period will be extended following consummation of a Change of Control for so long as any of the Rating Agencies (including, if applicable, a Substitute Rating Agency) has publicly announced that it is considering a possible ratings downgrade). Unless two Rating Agencies are providing a rating for the Notes at the commencement of any Trigger Period, the Notes will be deemed to have ceased to be rated Investment Grade by two Ratings Agencies during that Trigger Period. Notwithstanding the foregoing, no Change of Control Triggering Event will be deemed to have occurred in connection with any particular Change of Control unless and until such Change of Control has actually been consummated. “Consolidated Total Tangible Assets” means the total assets of the Company and its Subsidiaries, determined on a consolidated basis in accordance with Australian GAAP, excluding any intangible assets (including, without limitation, future income tax benefits) other than liquor licenses at cost (which shall be regarded as tangible assets for the purpose of this definition). (Section 1008). “Indebtedness” means any indebtedness for money borrowed now or hereafter existing and any liabilities under any bond, note, bill, loan, stock or other security, in each case issued for cash or in respect of acceptance credit facilities or as consideration for assets or services or the deferred purchase price of property or assets (for more than 12 months), but excluding such liabilities incurred in relation to the acquisition of goods or services in the ordinary course of business of the person incurring such liabilities. (Section 101). “Investment Grade” means (i) a rating of Baa3 or better by Moody’s (or its equivalent under any successor rating category of Moody’s); (ii) a rating of BBB- or better by S&P (or its equivalent under any successor rating category of S&P); or (iii) in the event of the Notes being rated by a Substitute Rating Agency, the equivalent of either (i) or (ii) by such Substitute Rating Agency. “Lien” means any bill of sale (as defined in any statute), mortgage, charge, lien, pledge, hypothecation, title retention arrangement, trust or power, as or in effect as security for the payment of a monetary obligation or the observance of any other obligation. (Section 1008).

136 “Moody’s” means Moody’s Investors Service, Inc, a subsidiary of Moody’s Corporation, and its successors.

“Person” means any individual, corporation, partnership, joint venture, joint-stock company, limited liability company, limited liability partnership, trust, unincorporated organization or government or any agency or political subdivision thereof.

“Project Finance Subsidiary” means a Subsidiary of the Company which is a special purpose project finance body and which funds its assets on the basis that lenders only have recourse to its assets and neither the Company nor any other Subsidiary provides any guarantee or other liability for its Indebtedness other than prior to the satisfaction of a completion test.

“Property” means any asset, revenue or any other property, whether tangible or intangible, real or personal, including, without limitation, any right to receive income. (Section 101).

“Rating Agency” means Moody’s, S&P or a Substitute Rating Agency.

“S&P” means Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc., and its successors.

“Subsidiary” means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership or joint venture can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a “Subsidiary” is a reference to a Subsidiary of the Company. (Section 101).

“Substitute Rating Agency” means a “nationally recognized statistical rating organization” within the meaning of the Securities Exchange Act of 1934 engaged by the Company to provide a rating of the Notes in the event that either S&P or Moody’s, or a Substitute Rating Agency, has ceased to provide a rating of the Notes for any reason other than as a result of any action or inaction by the Company, and a result thereof there are no longer two Rating Agencies providing ratings of the Notes.

“Voting Stock” of any specified Person as of any date means the capital stock of such Person that is at the time entitled to vote generally in the election of the board of directors of such Person.

Events of default

An event of default means any of the following:

• a default in the payment of any principal on any Notes when due, whether at maturity, upon redemption or otherwise;

• a default in the payment of any interest due and payable on any Notes and the continuance of such default for a period of 30 days;

137 • a default in the performance or observance of any other term, covenant or obligation of the indenture (other than a covenant included in the indenture solely for the benefit of a series of the securities to be issued in the future under such indenture) and the continuance of such default for more than 30 days after the earlier of a responsible officer of the Company obtaining actual knowledge of such default or written notice of such default has been given by the trustee or the holders of at least 25% in aggregate principal amount of the Notes outstanding;

• (i) a default in the payment of principal, interest, premium or make-whole amount of any Indebtedness having an aggregate principal amount exceeding A$100 million (or its equivalent in any other currency or currencies), after the expiration of any applicable grace period relating thereto; or (ii) a default (other than as set forth in clause (i) above) under any Indebtedness having an aggregate principal amount exceeding A$100 million (or its equivalent in any other currency or currencies) which default shall have resulted in such Indebtedness becoming or being validly declared due and payable prior to the date on which it would have otherwise become due and payable;

• a final judgment or judgments for the payment of money aggregating in excess of A$100 million (or the equivalent in any other currency or currencies) are rendered against the Company or any Subsidiary that is not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; and

• entry into or the making of any compromise arrangement with creditors and certain events of bankruptcy or insolvency with respect to the Company or a Restricted Subsidiary.

Remedies if an event of default occurs

If such an event of default (other than an event of default specified in subparagraph (vi) above) occurs and is continuing, then and in every such case the trustee or the holders of not less than 25% in aggregate principal amount of the outstanding Notes of the series may declare the principal amount of all the Notes of the series to be due and payable immediately, by a notice in writing to the Company (and to the trustee if given by holders). Upon such a declaration, such principal amount, additional amounts, if any, and any accrued interest shall become immediately due and payable. If a bankruptcy or similar event as specified above occurs, the principal of, additional amounts, if any, and any accrued interest on the Notes then outstanding shall become immediately due and payable.

Each of the situations described above is called a declaration of acceleration of the maturity of the Notes. At any time after a declaration of acceleration with respect to the Notes of the series has been made and before a judgment or decree for payment of money has been obtained by the trustee, the holders of a majority in aggregate principal amount of the Notes of the series at the time outstanding may, under certain circumstances, rescind and annul such acceleration if all events of default, other than the non-payment of the accelerated principal, have been cured or waived as provided in the indenture.

The foregoing provision shall be without prejudice to the rights of each individual holder to initiate an action against the Company for payment of any principal, additional amounts and/or interest past due on any Notes. (Section 508).

138 If any event of default occurs, the trustee will have special duties. In that situation, the trustee will be obligated to use those of its rights and powers under the indenture, and to use the same degree of care and skill in doing so, that a prudent person would use in that situation in conducting his or her own affairs.

Except as described in the prior paragraph, the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request or direction of any of the holders, unless those holders shall have offered the trustee reasonable security against costs, expenses and liability. This is called an indemnity. (Section 603). Subject to such provisions for the indemnification of the trustee, the holders of a majority in aggregate principal amount of the outstanding Notes will have the right to direct the time, method and place of conducting any lawsuit or other formal legal action for any remedy available to the trustee. These majority holders may also direct the trustee in exercising any trust or power conferred on the trustee with respect to the Notes. (Section 512).

A holder may not institute any proceeding, judicial or otherwise, with respect to the indenture, or for the appointment of a receiver or a trustee, or for any other remedy thereunder, unless:

• such holder has previously given to the trustee written notice of a continuing event of default with respect to the Notes;

• the holders of at least 25% in aggregate principal amount of the outstanding Notes have made written request, and such holder or holders have offered reasonable indemnity, to the trustee to institute such proceeding as trustee; and

• the trustee has failed to institute such proceeding, and has not received from the holders of a majority in aggregate principal amount of the outstanding Notes a direction inconsistent with such request, within 60 days after receipt of such notice, request and offer. (Section 507). Such limitations do not apply, however, to a suit instituted by a holder of a Note for the enforcement of payment of the principal of or interest on such Note on or after the applicable due date specified in such Note. (Section 508).

An event of default with respect to the Notes would not necessarily constitute an event of default with respect to the securities of any other series issued in the future under the indenture.

Amendment and modification

Modifications and amendments of the indenture may be made by the Company and the trustee with the consent of the holders of not less than a majority in aggregate principal amount of the outstanding Notes; provided, however, that no such modification or amendment may, without the consent of the holder of each outstanding Note affected thereby, among other things:

• change the stated maturity of the principal of, or any installment of principal of or interest on, any Note or change the obligation of the Company to pay any additional amounts;

• reduce the principal amount of, or rate of interest on any Note;

• reduce the amount of principal of, interest on or premium with respect to a Note payable upon acceleration of its maturity;

• change the place of payment where, or the currency in which, any Note or any premium or interest thereon is payable;

139 • impair the right to institute suit for the enforcement of any payment on or with respect to any Note on or after the stated maturity or redemption date;

• reduce the percentage in principal amount of outstanding Notes, the consent of whose holders is required for modification or amendment of the indenture or for waiver of compliance with certain provisions of the indenture or for waiver of certain defaults; or

• modify such provisions with respect to modification and waiver. (Section 902).

The holders of a majority in aggregate principal amount of the outstanding Notes may, on behalf of all holders of Notes, waive compliance by the Company with certain restrictive provisions of the indenture. (Section 1013). The holders of not less than a majority in aggregate principal amount of the outstanding Notes may, on behalf of all holders of Notes, waive any past default under the indenture with respect to the Notes, except a default in the payment of principal of or interest on, any outstanding Note or in respect of a covenant or provision which, under the indenture, cannot be modified or amended without the consent of the holder of each outstanding Note affected thereby. (Section 513).

Except in certain limited circumstances, the Company will be entitled to set any day as a record date for the purpose of determining the holders of outstanding Notes entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action under the indenture, in the manner and subject to the limitations provided in the indenture. If a record date is set for any action to be taken by holders, such action may be taken only by persons who are holders of outstanding Notes on the record date. To be effective, such action must be taken by holders of the requisite principal amount of such Notes within a specified period following the record date. For any particular record date, this period will be 180 days or such shorter period as may be specified by the Company and may be shortened or lengthened (but not beyond 180 days) from time to time. (Section 104).

Defeasance and covenant defeasance

The indenture provides that the Company at its option:

(i) will be deemed to have been discharged from obligations in respect of the Notes (except for certain obligations, including the obligations to register the transfer of, or exchange of, Notes, to replace stolen, lost, destroyed or mutilated Notes upon satisfaction of certain requirements (including, without limitation, providing such security or indemnity as the trustee or the Company may require), to maintain an office or agency where the Notes may be presented and surrendered for payment, to maintain paying agents, to hold certain moneys in trust outside the Commonwealth of Australia for payment); or

(ii) need not comply with certain restrictive covenants of the indenture (including those described under “—Certain covenants of the Company—Limitation on liens”), in each case if the Company deposits in trust with the trustee money in an amount, or U.S. Government Obligations that through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, prior to the due date of any payment, money in an amount, or a combination thereof, in each case sufficient to pay all the principal of, and any premium and interest on, the Notes, on the dates such payments are due in accordance with the terms of the indenture and the Notes.

140 In the case of discharge pursuant to clause (i) above, the Company is required to deliver to the trustee an opinion of counsel stating that (a) the Company has received from, or there has been published by, the United States Internal Revenue Service, a ruling, or (b) since the date of the indenture, there has been a change in the applicable United States federal income tax law, in either case to the effect that the beneficial owners of the Notes of such series will not recognize gain or loss for United States federal income tax purposes as a result of the exercise of the option under clause (i) above and will be subject to United States federal income tax on the same amount and in the same manner and at the same times as would have been the case if such option had not been exercised.

In the case of discharge pursuant to clause (ii) above, the Company is required to deliver to the trustee an opinion of counsel stating that the beneficial owners of the Notes of such series will not recognize gain or loss for United States federal income tax purposes as a result of the exercise of the option under clause (ii) above and will be subject to United States federal income tax on the same amount and in the same manner and at the same times as would have been the case if such option had not been exercised. (Sections 1302, 1303 and 1304).

Notices and title

Notices to holders of Notes will be given by mail to the addresses of such holders as they may appear in the security register. (Sections 101 and 106).

As long as the Company issues Notes in global form, notices to be given to holders will be given to DTC, in accordance with its applicable policies as in effect from time to time. If the Company issues Notes in certificated form, notices to be given to holders will be sent by mail to the respective addresses of the holders as they appear in the trustee’s records, and will be deemed given when mailed.

Neither the failure to give any notice to a particular holder, nor any defect in a notice given to a particular holder, will affect the sufficiency of any notice given to another holder.

The Company, the trustee and any agent of the Company or the trustee may treat the person in whose name a Note is registered as the absolute owner thereof (whether or not such Note may be overdue) for the purpose of making payment and for all other purposes. (Section 308).

Governing law

The indenture is, and the Notes will be, governed by and construed in accordance with the laws of the State of New York, without regard to the principles of conflicts of laws thereof; provided, however, that all matters governing the authorization and execution of the indenture and the Notes by the Company will be governed by and construed in accordance with the laws of the State of New South Wales, Australia. (Section 111).

Consent to service of process

The indenture provides that the Company has irrevocably designated Corporation Service Company as its authorized agent for service of process in any legal action or proceeding arising out of or relating to the indenture or the Notes brought in any federal or state court in the Borough of Manhattan, The City of New York, New York, and the Company will irrevocably submit to the non-exclusive jurisdiction of such courts. (Section 112).

141 Concerning the trustee

The Bank of New York Mellon is the trustee under the indenture. The indenture provides that the Company will indemnify the trustee, its officers, directors, employees and agents against any loss, liability or expense incurred without negligence, bad faith or willful misconduct of the trustee in connection with the acceptance or administration of the trust created by the indenture. (Section 607). The Bank of New York Mellon may have other business relationships with the Company from time to time.

142 Taxation Certain United States federal income tax considerations

United States Internal Revenue Service Circular 230 Notice: The tax discussion contained in this prospectus supplement was not intended or written to be used, and cannot be used by any person, for the purpose of avoiding U.S. federal tax penalties. This discussion was written to support the promotion or marketing of the transactions or matters addressed in this prospectus supplement. You should seek advice based on your particular circumstances from an independent tax advisor.

This section describes the material United States federal income tax consequences of owning the Notes. It is the opinion of Sullivan & Cromwell LLP, United States counsel to Woolworths. It applies to you only if you acquire Notes in the offering at the issue price and you hold your Notes as capital assets for United States federal income tax purposes. This section does not apply to you if you are a member of a class of holders subject to special rules, such as:

• a dealer in securities;

• a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings;

• a bank;

• a life insurance company;

• a tax-exempt organization;

• a person that owns Notes that are a hedge or that are hedged against interest rate risks;

• a person that owns Notes as part of a straddle or conversion transaction for tax purposes; or

• a United States holder (as defined below) whose functional currency for tax purposes is not the U.S. dollar.

If you purchase Notes at a price other than the issue price, the amortizable bond premium or market discount rules may also apply to you. You should consult your tax advisor regarding this possibility.

This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations under the Internal Revenue Code, published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis.

If a partnership holds the Notes, the United States federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the Notes should consult its tax advisor with regard to the United States federal income tax treatment of an investment in the Notes.

Please consult your own tax advisor concerning the consequences of owning these Notes in your particular circumstances under the Internal Revenue Code and the laws of any other taxing jurisdiction.

143 United States holders This subsection describes the tax consequences to a United States holder. You are a United States holder if you are a beneficial owner of a Note and you are:

• a citizen or resident of the United States;

• a domestic corporation or an entity treated as a domestic corporation for purposes of the Internal Revenue Code;

• an estate whose income is subject to United States federal income tax regardless of its source; or

• a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust.

If you are not a United States holder, this subsection does not apply to you and you should refer to “United States Alien Holders” below.

Woolworths believes that there is only a remote possibility of the occurrence of a change of control that is accompanied by a ratings downgrade (which may result in holders having the option to require Woolworths to redeem the Notes). This remote possibility should not cause the Notes to be contingent payment debt instruments and should therefore not change the treatment described below.

Payments of Interest. You will be taxed on interest on your Note and any additional amounts paid with respect to a withholding tax on your Note, including withholding tax on payments of such additional amounts, as ordinary income at the time you receive the interest or when it accrues, depending on your method of accounting for tax purposes.

Interest and additional amounts paid by Woolworths on the Notes is income from sources outside the United States subject to the rules regarding the foreign tax credit allowable to a United States holder. Under the foreign tax credit rules, interest and additional amounts will, depending on your circumstances, be either “passive” or “general” income for purposes of computing the foreign tax credit. The rules relating to foreign tax credits are extremely complex. United States holders should consult their tax advisors regarding the availability of foreign tax credits in their particular circumstances.

Purchase, Sale and Retirement of the Notes. Your tax basis in your Note generally will be its cost. You will generally recognize capital gain or loss on the sale or retirement of your Note equal to the difference between the amount you realize on the sale or retirement, (except for amounts attributable to accrued but unpaid interest, which will be taxed as such) and your tax basis in your Note. Capital gain of a noncorporate United States holder is generally taxed at preferential rates where the property is held for more than one year. The deductibility of capital losses is subject to limitations. Any gain or loss recognized on a sale or retirement of your Notes generally will be income or loss from sources within the United States for foreign tax credit purposes.

Information with Respect to Foreign Financial Assets. Under recently enacted legislation, individuals that own “specified foreign financial assets” with an aggregate value in excess of US$50,000 in taxable years beginning after March 18, 2010 will generally be required to file an information report with respect to such assets with their tax returns. “Specified foreign financial

144 assets” include any financial accounts maintained by foreign financial institutions, as well as any of the following, but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-United States persons, (ii) financial instruments and contracts held for investment that have non-United States issuers or counterparties and (iii) interests in foreign entities. United States holders that are individuals are urged to consult their tax advisors regarding the application of this legislation to their ownership of the Notes.

Medicare Tax. For taxable years beginning after December 31, 2012, a United States holder that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, will be subject to a 3.8% tax on the lesser of (1) the United States holder’s “net investment income” for the relevant taxable year and (2) the excess of the United States holder’s modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals will be between US$125,000 and US$250,000, depending on the individual’s circumstances). A holder’s net investment income will generally include its interest income and its net gains from the disposition of Notes, unless such interest income or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). If you are a United States holder that is an individual, estate or trust, you are urged to consult your tax advisors regarding the applicability of the Medicare tax to your income and gains in respect of your investment in the Notes.

United States alien holders

This subsection describes the tax consequences to a United States alien holder. You are a United States alien holder if you are a beneficial owner of a Note and you are, for United States federal income tax purposes:

• a nonresident alien individual;

• a foreign corporation; or

• an estate or trust that in either case is not subject to United States federal income tax on a net income basis on income or gain from a Note.

If you are a United States holder, this subsection does not apply to you.

Payment of interest

Under United States federal income and estate tax law, and subject to the discussion of backup withholding below, if you are a United States alien holder of a Note, interest on a Note paid to you is exempt from United States federal income tax, including withholding tax, whether or not you are engaged in a trade or business in the United States, unless:

• you are an insurance company carrying on a United States insurance business to which the interest is attributable, within the meaning of the Internal Revenue Code; or

• you both:

• have an office or other fixed place of business in the United States to which the interest is attributable; and

• derive the interest in the active conduct of a banking, financing or similar business within the United States.

145 Purchase, Sale, Retirement and Other Disposition of the Notes. If you are a United States alien holder of a Note, you generally will not be subject to United States federal income withholding tax on gain realized on the sale, exchange or retirement of a Note unless:

• the gain is effectively connected with your conduct of a trade or business in the United States, and the gain is attributable to your permanent establishment maintained in the United States if that is required by an applicable income tax treaty as a condition for subjecting you to United States taxation on a net income basis; or

• you are an individual, you are present in the United States for 183 or more days during the taxable year in which the gain is realized and certain other conditions exist.

For purposes of the United States federal estate tax, the Notes will be treated as situated outside the United States and will not be includible in the gross estate of a holder who is neither a citizen nor a resident of the United States as specifically defined for United States federal estate tax purposes at the time of death.

Backup withholding and information reporting

If you are a noncorporate United States holder, information reporting requirements, on Internal Revenue Service Form 1099, generally will apply to:

• payments of principal and interest on a Note within the United States, including payments made by wire transfer from outside the United States to an account you maintain in the United States; and

• the payment of the proceeds from the sale of a Note effected at a United States office of a broker.

Additionally, backup withholding will apply to such payments if you are a noncorporate United States holder that:

• fails to provide an accurate taxpayer identification number;

• is notified by the Internal Revenue Service that you have failed to report all interest and dividends required to be shown on your U.S. federal income tax returns; or

• in certain circumstances, fails to comply with applicable certification requirements.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against the holder’s United States federal income tax liability, if any, provided that the required information is furnished to the Internal Revenue Service in a timely manner.

Pursuant to recently enacted legislation, certain payments in respect of Notes made to corporate United States holders after December 31, 2011 may be subject to information reporting and backup withholding.

If you are a United States alien holder, you are generally exempt from backup withholding and information reporting requirements with respect to:

• payments of principal and interest made to you outside the United States by Woolworths or another non-United States payor; and

146 • other payments of principal and interest and the payment of the proceeds from the sale of a Note effected at a United States office of a broker, as long as the income associated with such payments is otherwise exempt from United States federal income tax, and:

• the payor or broker does not have actual knowledge or reason to know that you are a United States person and you have furnished to the payor or broker: • an Internal Revenue Service Form W-8BEN or an acceptable substitute form upon which you certify, under penalties of perjury, that you are a non-United States person; • other documentation upon which it may rely to treat the payments as made to a non-United States person in accordance with U.S. Treasury regulations; or

• you otherwise establish an exemption.

Payment of the proceeds from the sale of a Note effected at a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, a sale of a Note that is effected at a foreign office of a broker will be subject to information reporting and backup withholding if:

• the proceeds are transferred to an account maintained by you in the United States;

• the payment of proceeds or the confirmation of the sale is mailed to you at a United States address; or

• the sale has some other specified connection with the United States as provided in U.S. Treasury regulations, unless the broker does not have actual knowledge or reason to know that you are a United States person and the documentation requirements described above are met or you otherwise establish an exemption.

In addition, a sale of a Note effected at a foreign office of a broker will be subject to information reporting if the broker is:

• a United States person;

• a controlled foreign corporation for United States tax purposes;

• a foreign person 50% or more of whose gross income is effectively connected with the conduct of a United States trade or business for a specified three-year period; or

• a foreign partnership, if at any time during its tax year;

• one or more of its partners are “United States persons”, as defined in U.S. Treasury regulations, who in the aggregate hold more than 50% of the income or capital interest in the partnership; or

• such foreign partnership is engaged in the conduct of a United States trade or business, unless the broker does not have actual knowledge or reason to know that you are a United States person and the documentation requirements described above are met or you otherwise establish an exemption. Backup withholding will apply if the sale is subject to information reporting and the broker has actual knowledge that you are a United States person.

147 Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against the holder’s United States federal income tax liability, if any, provided that the required information is furnished to the Internal Revenue Service in a timely manner.

Australian taxation

The following is a summary of the taxation treatment under the Income Tax Assessment Acts of 1936 and 1997 of Australia (together, the “Australian Tax Act”), at the date of this Offering Memorandum, of payments of interest on the Notes and certain other matters. It is not exhaustive, in particular, does not deal with the position of certain classes of holders of Notes (including, without limitation, dealers in securities, custodians or other third parties who hold Notes on behalf of other persons). Prospective investors should satisfy themselves as to the overall tax consequences of purchasing, holding and/or selling Notes and should consult their professional advisers on the tax implications of an investment in the Notes for their particular circumstances.

Interest withholding tax

An exemption from Australian interest withholding tax imposed under Division 11A of Part III of the Australian Tax Act (“IWT”) is available under section 128F of the Australian Tax Act in respect of interest paid on the Notes if the following conditions are met:

(a) Woolworths remains a resident of Australia and a company when it issues the Notes and when interest (as defined in section 128A(1AB) of the Australian Tax Act) is paid;

(b) the Notes are issued in a manner which satisfies the public offer test in section 128F of the Australian Tax Act. In relation to the Notes, there are five principal methods of satisfying the public offer test, the purpose of which is to ensure that lenders in capital markets are aware that Woolworths is offering the Notes for issue. Woolworths intends to issue the Notes in a manner which will satisfy one or more of the five principal methods of satisfying the public offer test by ensuring the Notes are offered to 10 or more unrelated financiers or securities dealers and via appropriate information sources;

(c) Woolworths does not know, or have reasonable grounds to suspect, at the time of issue, that the Notes or interests in the Notes were being, or would later be, acquired, directly or indirectly, by an Offshore Associate (other than in the capacity of a dealer, manager or underwriter in relation to the placement of the debt securities or a clearing house, custodian, funds manager or responsible entity of a registered managed investment scheme under the Corporations Act); and

(d) at the time of the payment of interest, Woolworths does not know, or have reasonable grounds to suspect, that the payee is an Offshore Associate (other than in the capacity of a clearing house, paying agent, custodian, funds manager or responsible entity of a registered managed investment scheme under the Corporations Act).

“Offshore Associate” means an associate of Woolworths that is either a non-Australian resident that does not acquire the Notes in carrying on a business at or through a permanent establishment in Australia, or an Australian resident that acquires the Notes in carrying on a business at or through a permanent establishment outside Australia. An “associate” of

148 Woolworths for the purposes of section 128F of the Australian Tax Act includes (i) a person or entity which holds a majority of the voting shares of, or otherwise controls, Woolworths, (ii) an entity in which a majority of the voting shares are held by, or which is otherwise controlled by, Woolworths, (iii) a trustee of a trust where Woolworths is capable of benefiting (whether directly or indirectly) under that trust, and (iv) a person or entity who is an “associate” of another person or company which is an “associate” of Woolworths under any of the foregoing.

Exemptions under recent double tax conventions

The Australian government has signed new or amended double tax conventions (“New Treaties”) with the United States and a number of other countries (each a “Specified Country”).

In broad terms, the New Treaties effectively prevent IWT being imposed on interest derived by:

• the government of the relevant Specified Country, and certain governmental authorities and agencies in the Specified Country; or

• a “financial institution” which is a resident of a Specified Country and which is unrelated to and dealing wholly independently with Woolworths. The term “financial institution” refers to either a bank or any other enterprise which substantially derives its profits by carrying on a business of raising and providing finance. However, interest paid under a back-to-back loan or an economically equivalent arrangement will not qualify for this exemption.

The Australian Federal Treasury maintains a listing of Australia’s double tax conventions which provides details of country, status, withholding tax rate limits and Australian domestic implementation. This listing is available to the public on the Federal Treasury’s Department website at http://www.treasury.gov.au/contentitem.asp?pageld=&ContentID=625.

Payment of additional amounts

As set out in more detail under the heading “Description of Notes—Payment of additional amounts”, all payments of, or in respect of, principal of, and interest on, the Notes shall be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of Australia or any political subdivision or taxing authority thereof or therein, unless such taxes, duties, assessments or governmental charges are required to be withheld or deducted by law. In that event, Woolworths will pay those amounts as will result (after deduction of such taxes, duties, assessments or governmental charges and any additional taxes, duties, assessments or governmental charges payable in respect of such) in the payment to the holder of such Note of the amounts which would have been payable in respect of such Note had no such withholding or deduction been required, except as described under that heading.

Other tax matters

Under Australian laws as presently in effect:

(a) death duties—no Notes will be subject to death, estate or succession duties imposed by Australia, or by any political subdivision or authority therein having power to tax, if held at the time of death;

149 (b) stamp duty and other taxes—no ad valorem stamp, issue, registration or similar taxes are payable in Australia on the issue or transfer of any Notes;

(c) other withholding taxes on payments in respect of Notes—Section 12-140 of Schedule 1 to the Taxation Administration Act 1953 of Australia (“Taxation Administration Act”) imposes a type of withholding tax at the rate of (currently) 46.5% on the payment of interest on certain registered securities unless the relevant payee has quoted an Australian tax file number (“TFN”), (in certain circumstances) an Australian Business Number (“ABN”) or proof of some other exception (as appropriate).

Assuming the requirements of Section 128F of the Australian Tax Act are satisfied with respect to the Notes, then the requirements of Section 12-140 do not apply to payments to a holder of Notes in registered form who is not a resident of Australia and not holding the Notes in the course of carrying on business at or through a permanent establishment in Australia. Payments to other classes of holders of Notes in registered form may be subject to a withholding where the holder of the Notes does not quote a TFN, ABN or provide proof of an appropriate exemption (as appropriate);

(d) supply withholding tax—payments in respect of the Notes can be made free and clear of the “supply withholding tax” imposed under section 12-190 of Schedule 1 to the Taxation Administration Act; and

(e) goods and services tax (GST)—neither the issue nor receipt of the Notes will give rise to a liability for GST in Australia on the basis that the supply of Notes will comprise either (in the case of an offshore subscriber) a GST-free supply or (in the case of an onshore subscriber) an input taxed financial supply. Furthermore, neither the payment of principal or interest by Woolworths, nor the disposal of the Notes, would give rise to any GST liability in Australia.

(f) taxation of financial arrangements—The Australian Tax Act contains new rules which represent a new code for the taxation of receipts and payments in relation to “financial arrangements”. The rules contain a number of different methods for bringing to account gains and losses in relation to “financial arrangements” (including fair value, accruals, retranslation, realization, hedging and financial records).

The rules apply from the commencement of the first tax year beginning on or after July 1, 2010 (although taxpayers may have been able to make an election to apply the rules for a tax year commencing on or after July 1, 2009 if they wished to do so).

These rules so not affect the provisions relating to the imposition of IWT. In particular, the new rules do not apply in a manner which overrides the exemption available under section 128F of the Australian Tax Act.

150 Plan of distribution Subject to the terms and conditions stated in the purchase agreement dated the date of this offering memorandum, each initial purchaser named below has agreed severally to purchase, and Woolworths has agreed to sell to that initial purchaser, the principal amount of the Notes set forth opposite the initial purchaser’s name. Principal amount Principal amount Initial purchaser of 2016 Notes of 2021 Notes Citigroup Global Markets Inc...... US$100,000,000 US$183,334,000 J.P. Morgan Securities LLC ...... 100,000,000 183,333,000 Merrill Lynch, Pierce, Fenner & Smith Incorporated ...... 100,000,000 183,333,000 Total ...... US$300,000,000 US$550,000,000

The obligations of the initial purchasers under the purchase agreement, including their agreement to purchase the Notes from Woolworths, are several and not joint. Those obligations are also subject to various conditions in the purchase agreement being satisfied. The initial purchasers have agreed to purchase all of the Notes if any of them are purchased. The initial purchasers have advised Woolworths that they propose to offer the Notes for resale at the offering price that appears on the cover of this offering memorandum. After the initial offering, the initial purchasers may change the offering price and any other selling terms. In the purchase agreement, Woolworths has agreed to indemnify the initial purchasers against certain liabilities, including liabilities under the Securities Act, or contribute to payments that the initial purchasers may be required to make in respect of those liabilities. The Notes will constitute a new class of securities with no established trading market. Woolworths does not intend to list the Notes on any national securities exchange. The initial purchasers have advised us that they currently intend to make a market in the Notes. However, they are not obligated to do so and they may discontinue any market-making activities with respect to the Notes at any time without notice. Accordingly, Woolworths cannot assure you as to the liquidity of or the trading market for the Notes. In connection with this offering, the initial purchasers may purchase and sell Notes in the open market. These transactions may include over-allotment, syndicate covering transactions and stabilizing transactions undertaken outside Australia and not on any market in Australia. Over- allotment involves sales of Notes in excess of the principal amount of Notes to be purchased by the initial purchasers in this offering, which creates a short position for the initial purchasers. Covering transactions involve purchases of the Notes in the open market after the distribution has been completed in order to cover short positions. Stabilizing transactions consist of certain bids or purchases of Notes made for the purpose of preventing or retarding a decline in the market price of the Notes while the offering is in progress. Any of these activities may have the effect of preventing or retarding a decline in the market price of the Notes. They may also cause the price of the Notes to be higher than the price that otherwise would exist in the open market in the absence of these transactions. The initial purchasers may conduct these transactions in the over-the-counter market or otherwise. If the initial purchasers commence any of these transactions, they may discontinue them at any time. The initial purchasers also may impose a penalty bid. This occurs when a particular initial purchaser repays to another initial purchaser a portion of the underwriting discount received by it because the initial purchaser or its affiliates have repurchased Notes sold by or for the account of such initial purchaser in stabilizing or short covering transactions.

151 Offers and sales outside of the United States may be made through non-U.S. affiliates of the initial purchasers acting as selling agents.

The Notes have not been and will not be registered under the Securities Act or qualified for sale under the securities laws of any state or any jurisdiction outside of the United States. Accordingly, the Notes are subject to restrictions on resale and transfer as described under “Notice to investors.” In the purchase agreement, each initial purchaser has acknowledged and agreed that:

The Notes may not be offered or sold within the United States or to U.S. persons, except pursuant to an exemption from the registration requirements of the Securities Act or in transactions not subject to those registration requirements.

During the initial distribution of the Notes, it will offer or sell Notes only to QIBs in compliance with Rule 144A and outside the united States in compliance with Regulation S.

In addition, until 40 days after the commencement of this offering, an offer or sale of Notes within the United States by a dealer that is not participating in this offering may violate the registration requirements of the Securities Act if that offer or sale is made otherwise than in accordance with Rule 144A.

In the purchase agreement, each initial purchaser has also acknowledged and agreed that:

• it: (i) has not made or invited, and will not make or invite, applications for an offer of the Notes for issue, sale or purchase in Australia (including an offer or invitation which is received by a person in Australia); and (ii) has not distributed or published, and will not distribute or publish, this offering memorandum or any other offering material or advertisement relating to the Notes in Australia, unless in either case: (A) the minimum aggregate consideration payable by each offeree is at least A$500,000 (disregarding moneys lent by the offeror or its associates) or the offer otherwise does not require disclosure to investors under Parts 6D.2 or 7.9 of the Corporations Act; (B) the offer is not made to a person in Australia who is a “retail client” for the purposes of Section 761G of the Corporations Act; (C) such action complies with all applicable laws, regulations and directives (including, without limitation, the licensing requirements of Chapter 7 of the Corporations Act) of the Commonwealth of Australia; and (D) such action does not require any document to be lodged with the Australian Securities and Investment Commission.

• in relation to each member state of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), including each Relevant Member State that has implemented the 2010 PD Amending Directive with regard to persons to whom an offer of securities is addressed and the denomination per unit of the offer of securities (each, an “Early Implementing Member State”), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”), it has not made and will not make an offer of securities to the public in that Relevant Member State (other than offers (the “Permitted Public Offers”) where a prospectus will be published in relation to the securities that has been approved by the competent authority in a Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive), except that with effect from and

152 including that Relevant Implementation Date, offers of securities may be made to the public in that Relevant Member State at any time:

(i) to “qualified investors” as defined in the Prospectus Directive, including:

(A) (in the case of Relevant Member States other than Early Implementing Member States), legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities, or any legal entity which has two or more of (x) an average of at least 250 employees during the last financial year; (y) a total balance sheet of more than €43.0 million and (z) an annual turnover of more than €50.0 million as shown in its last annual or consolidated accounts; or;

(B) (in the case of Early Implementing Member States), persons or entities that are described in points (1) to (4) of Section I of Annex II to Directive 2004/39/EC, and those who are treated on request as professional clients in accordance with Annex II to Directive 2004/39/EC, or recognized as eligible counterparties in accordance with Article 24 of Directive 2004/39/EC unless they have requested that they be treated as non-professional clients; or

(ii) to fewer than 100 (or, in the case of Early Implementing Member States, 150) natural or legal persons (other than “qualified investors” as defined in the Prospectus Directive), as permitted in the Prospectus Directive, subject to obtaining the prior consent of the representatives for any such offer; or

(iii) in any other circumstances falling within Article 3(2) of the Prospectus Directive. provided that no such offer of securities shall result in a requirement for the publication of a prospectus pursuant to Article 3 of the Prospectus Directive or of a supplement to a prospectus pursuant to Article 16 of the Prospectus Directive.

Each person in a Relevant Member State (other than a Relevant Member State where there is a Permitted Public Offer) who initially acquires any securities or to whom any offer is made will be deemed to have represented, acknowledged and agreed that (i) it is a “qualified investor”, and (ii) in the case of any securities acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, (A) the securities acquired by it in the offering have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than “qualified investors” as defined in the Prospectus Directive, or in circumstances in which the prior consent of the Subscribers has been given to the offer or resale, or (B) where securities have been acquired by it on behalf of persons in any Relevant Member State other than “qualified investors” as defined in the Prospectus Directive, the offer of those securities to it is not treated under the Prospectus Directive as having been made to such persons.

For the purpose of paragraph (i), the expression “an offer to the public” in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer of any securities to be offered so as to enable an investor to decide to purchase any securities, as the same may be varied in the Relevant Member State by any measure implementing the Prospectus Directive in the Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71 EC (including the 2010 PD Amending Directive, in the case of Early Implementing Member States) and includes any

153 relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU. • it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (as amended) (“FSMA”)) received by it in connection with the issue or sale of the Notes in circumstances in which Section 21(1) of FSMA does not apply to Woolworths. • it has complied with and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom. • the Notes have not been and will not be registered under the Securities and Exchange Law of Japan, and each initial purchaser represents that it has not offered or sold, and agrees not to offer or sell the Notes, directly or indirectly, in Japan or to, or for the benefit of, any Japanese Person or to others for re-offering or resale, directly or indirectly, in Japan or to a Japanese Person, except pursuant to an exemption from the registration requirements of the Securities and Exchange Law of Japan and otherwise in compliance with applicable regulations and provisions of Japanese law. For the purpose of this paragraph “Japanese Person” means any person resident in Japan, including any corporation or other entity organized under the laws of Japan. • it may not offer or sell the Notes by means of any document other than (i) to persons whose ordinary business is to buy or sell debentures, whether as principal or agent, or (ii) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong or (iii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made thereunder or (iv) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong, and no advertisement, invitation or document relating to the Notes may be issued, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made thereunder. • this offering memorandum has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this offering memorandum and any other document or material in connection with the offer or sale, or invitation or subscription or purchase, of the Notes may not be circulated or distributed, nor may the Notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (a) to an institutional investor under Section 274 of the Securities and Futures Act (Cap. 289) (as amended) of Singapore (“SFA”), (b) to a relevant person, or any person pursuant to Section 275 (1A), and in accordance with the conditions specified in Section 275 of the SFA, or (c) otherwise pursuant to, and in accordance with the conditions of any other applicable provision of the SFA. The initial purchasers have performed investment banking and advisory services for us from time to time for which they have received customary fees and expenses. The initial purchasers may, from time to time, engage in transactions with and perform services for us in the ordinary course of their business.

154 Notice to investors Because of the following restrictions, investors are advised to consult legal counsel prior to making any offer, resale, pledge or transfer of Notes.

Offers and sales by the initial purchasers The Notes have not been and will not be registered under the Securities Act or any state securities laws and may not be offered, sold or delivered in the United States or to, or for the account or benefit of, any U.S. person, except pursuant to an effective registration statement or in a transaction not subject to the registration requirements of the Securities Act or in accordance with an applicable exemption from the registration requirements thereof. Accordingly, the Notes are being offered and sold hereunder only: • to qualified institutional buyers in accordance with Rule 144A under the Securities Act; and • outside the United States to non U.S. persons in accordance with Regulation S under the Securities Act.

Investors’ representation and restrictions on resale Each purchaser of the Notes offered hereunder will be deemed, in making its purchase, to have represented and agreed as follows (terms used in this section that are defined in Rule 144A or in Regulation S are used in this section as defined in those rules or regulations): 1. The purchaser either (a)(1) is a qualified institutional buyer, (2) is aware that the sale of the Notes to it is being made in reliance on Rule 144A and (3) is acquiring such Notes for its own account or the account of one or more other qualified institutional buyers or (b)(1) is a foreign purchaser that is outside the United States and not a U.S. person or acting for the account or benefit of a U.S. person (or a foreign purchaser that is a dealer or other fiduciary of the kind referred to above) and (2) is aware that the sale of the Notes to it is being made in reliance on Regulation S; 2. The purchaser understands that the Notes have not been registered under the Securities Act and they may not be offered, sold or delivered in the United States or to, or for the account or benefit of, any U.S. person except as set forth below; 3. The purchaser understands and agrees that such Notes are being offered only in a transaction not involving any public offering within the meaning of the Securities Act, and that any future resale, pledge or transfer of such Notes on which the legend set forth below appears, may be made only (i) to Woolworths, (ii) to a person who the seller reasonably believes is a qualified institutional buyer acquiring for its own account or for the account of one or more other qualified institutional buyers in a transaction meeting the requirements of Rule 144A (if available), (iii) outside the United States in an offshore transaction meeting the requirements of Rule 903 or Rule 904 of Regulation S under the Securities Act, (iv) pursuant to an exemption from registration under the Securities Act provided by Rule 144 under the Securities Act (if available) or (v) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States or other jurisdictions; 4. The purchaser will, and each subsequent holder is required to, notify any purchaser of Notes from it of the resale restrictions referred to in (3) above, if then applicable;

155 5. The purchaser understands and agrees that (A) the Notes initially offered to qualified institutional buyers in reliance on Rule 144A will be represented by Restricted Global Notes, and (B) with respect to any transfer of any interest in Restricted Global Notes, (i) if to transferees that take delivery in the form of interests in Restricted Global Notes, the trustee will not require any written certification from the transferor or the transferee, and (ii) if to transferees that take delivery in the form of interests in the Regulation S Global Note, the trustee will require written certification from the transferor (in the form(s) provided in the indenture), the form of which can be obtained from the trustee, to the effect that the transfer complies with Rule 903 or Rule 904 of Regulation S and that, if such transfer occurs on or prior to 40th day after the later of the commencement of the offering and the closing date, the interest transferred will be held immediately thereafter through Euroclear or Clearstream;

6. The Purchaser understands that the Notes will bear a legend to the following effect unless otherwise agreed by Woolworths:

“NEITHER THIS SECURITY NOR ANY BENEFICIAL INTEREST HEREIN HAS BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF WOOLWORTHS LIMITED (THE “ISSUER”) THAT THIS SECURITY MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO THE ISSUER, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), IN THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A) PURCHASING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF ONE OR MORE OTHER QUALIFIED INSTITUTIONAL BUYERS IN ACCORDANCE WITH RULE 144A, (3) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH SUCH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE ISSUER THAT IT WILL NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO ABOVE. THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF ONE YEAR FROM THE ORIGINAL ISSUANCE OF THE SECURITY EVIDENCED HEREBY.”

7. If the purchaser is a foreign purchaser, it understands that the Notes offered in reliance on Regulation S initially will be represented by the Regulation S Global Note and that interests therein may be held only through Euroclear or Clearstream through and including the 40th day after the later of the commencement of the offering of the Notes and the closing date of the offering of the Notes, as described under “Description of Notes—Form and denomination of the Notes.” The purchaser further understands that the Regulation S Global Note will bear a legend to the following effect, unless Woolworths determines otherwise in accordance with applicable law:

“THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) AND MAY NOT BE OFFERED, SOLD OR DELIVERED IN THE UNITED

156 STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON, UNLESS SUCH NOTES ARE REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE. THE FOREGOING SHALL NOT APPLY FOLLOWING THE EXPIRATION OF FORTY DAYS FROM THE LATER OF (i) THE DATE ON WHICH THESE NOTES WERE FIRST OFFERED AND (ii) THE DATE OF ISSUANCE OF THESE NOTES.”

8. Neither this Offering Memorandum nor any disclosure document (as defined in the Corporations Act) in relation to the Notes has been lodged with the Australian Securities and Investment Commission and the Notes may not be offered for sale, nor may applications for the sale or purchase of any Notes be invited, in Australia (including an offer or invitation which is received by a person in Australia) and no offering memorandum or any other offering material or advertisement relating to the Notes may be distributed or published in Australia, unless: (A) the minimum aggregate consideration payable by each offeree is at least A$500,000 (disregarding moneys lent by the offeror or its associates) or the offer otherwise does not require disclosure to investors under Parts 6D.2 or 7.9 of the Corporations Act; (B) the offer is not made to a person in Australia who is a “retail client” for the purposes of Section 761G of the Corporations Act; (C) such action complies with all applicable laws, regulations and directives (including, without limitation, the licensing requirements of Chapter 7 of the Corporations Act) of the Commonwealth of Australia; and (D) such action does not require any document to be lodged with the Australian Securities and Investment Commission.

9. It is not an Offshore Associate (as defined under the heading “Taxation—Australian taxation”) and will not sell any of the Notes (or any interest in any of the Notes) to any person, if, at the time of such sale, its employees directly involved in the sale knew or had reasonable grounds to suspect that, as a result of the sale, such Notes would be acquired (directly or indirectly) by an Offshore Associate (other than in the capacity of a clearing house, paying agent, custodian, funds manager or responsible entity of a registered managed investment scheme under the Corporations Act).

There are references in this Offering Memorandum to credit ratings. Credit ratings are for distribution only to a person (a) who is not a “retail client” within the meaning of section 761G of the Corporations Act and is also a sophisticated investor, professional investor or other investor in respect of whom disclosure is not required under Parts 6D.2 or 7.9 of the Corporations Act, and (b) who is otherwise permitted to receive credit ratings in accordance with applicable law in any jurisdiction in which the person may be located. Anyone who is not such a person is not entitled to receive this Offering Memorandum and any person who receives this Offering Memorandum is advised that they must not distribute it to any person who is not entitled to receive it.

The purchaser acknowledges that Woolworths, the initial purchasers and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations, warranties and agreements, and agrees that if any of the acknowledgments, representations or warranties deemed to have been made by it by its purchase of Notes are no longer accurate, it shall promptly notify Woolworths and the initial purchasers. If it is acquiring any Notes as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to each such account and it has full power to make the foregoing representations, warranties and agreements on behalf of each such account.

157 Each purchaser of Notes will be deemed to have represented and agreed that it understands that with respect to any transfer of interests in the Regulation S Global Note, on or prior to the 40th day after the later of the commencement of the offering and the closing date, if to a transferee who takes delivery in the form of an interest in the Restricted Global Note, the trustee will require written certification from the transferee or transferor, as the case may be, (in the form(s) provided in the indenture) to the effect that (i) such transferee is purchasing the Notes for its own account or for accounts as to which it exercises sole investment discretion and that it and, if applicable, each such account is a qualified institutional buyer within the meaning of Rule 144A, in each case, in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction or (ii) the transferor did not purchase such Notes as part of the initial distribution thereof and the transfer is being effected pursuant to and in accordance with an applicable exemption from the registration requirements of the Securities Act and the transferor has delivered to the trustee such additional evidence that Woolworths or the trustee may require as to compliance with such available exemption.

For further discussion of the requirements (including the presentation of transfer certificates) under the indenture to effect exchanges or transfers of interests in Global Notes and of Certificated Notes, see “Description of Notes—Form and denomination of the Notes,” “—Registration of transfer and exchange” and “—Global Notes.”

Woolworths recognizes that none of DTC, Euroclear or Clearstream in any way undertakes to, and none of DTC, Euroclear or Clearstream shall have any responsibility to, monitor or ascertain the compliance of any transactions in the Notes with any exemptions from registration under the Securities Act or of any other state or federal securities law.

158 Validity of the Notes The validity of the Notes will be passed upon for Woolworths by Sullivan & Cromwell, Sydney, Australia, as to certain matters of New York law, and for the initial purchasers by Sidley Austin, Sydney, Australia, as to certain matters of New York law. The validity of the Notes will be passed upon for Woolworths by Mallesons Stephen Jaques, Sydney, Australia as to certain matters of Australian law.

159 Independent accountants The audited financial statements of Woolworths and its subsidiaries as of June 29, 2008, June 28, 2009 and June 27, 2010 and for the years then ended, included in this offering memorandum, have been audited by Deloitte Touche Tohmatsu, independent accountants, as stated in their report appearing herein. The interim condensed consolidated financial statements of Woolworths and its subsidiaries as of January 3, 2010 and January 2, 2011 have been reviewed, but not audited, by Deloitte Touche Tohmatsu, independent accountants, as stated in their report appearing herein. With respect to the unaudited interim financial information as of January 3, 2010 and January 2, 2011, included in this offering memorandum, the independent accountants have reported that they applied limited procedures in accordance with professional standards for a review of such information in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity. However, their separate review report included in this offering memorandum, states that they did not audit and they do not express an opinion on that interim financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied.

160 Index to consolidated financial statements Page Woolworths Limited—Interim financial report for the financial half year ended January 2, 2011(1) Auditor’s declaration ...... F-2 Independent Auditor’s review report ...... F-3 Directors’ declaration ...... F-5 Interim consolidated income statements for the half years ended January 2, 2011 and January 3, 2010 ...... F-6 Interim consolidated statement of comprehensive income for the half years ended January 2, 2011 and January 3, 2010 ...... F-7 Interim consolidated balance sheet as of January 2, 2011, June 27, 2010 and January 3, 2010 ...... F-9 Consolidated statement of changes in equity for the half year ended January 2, 2011 .... F-10 Interim consolidated statement of cash flows for the half years ended January 2, 2011 and January 3, 2010 ...... F-11 Notes to the interim consolidated financial statements ...... F-12 Woolworths Limited—Annual consolidated financial statements(2) Directors’ statutory report for the fiscal year ended June 27, 2010 ...... F-19 Auditor’s declaration ...... F-44 Income statements for the fiscal years ended June 27, 2010 and June 28, 2009 ...... F-45 Statements of comprehensive income for the fiscal years ended June 27, 2010 and June 28, 2009 ...... F-46 Balance sheets as of June 27, 2010 and June 28, 2009 ...... F-48 Cash flow statements for the fiscal years ended June 27, 2010 and June 28, 2009 ...... F-49 Statement of changes in equity for the fiscal years ended June 27, 2010 and June 28, 2009 ...... F-52 Notes to the financial statements ...... F-54 Directors’ declaration ...... F-141 Independent auditor’s report ...... F-142 Directors’ statutory report for the fiscal year ended June 28, 2009 ...... F-144 Auditor’s declaration ...... F-167 Income statements for the fiscal years ended June 28, 2009 and June 29, 2008 ...... F-168 Statements of recognized income and expense for the fiscal years ended June 28, 2009 and June 29, 2008 ...... F-169 Balance sheets as of June 28, 2009 and June 29, 2008 ...... F-170 Cash flow statements for the fiscal years ended June 28, 2009 and June 29, 2009 ...... F-171 Notes to the financial statements ...... F-173 Directors’ declaration ...... F-242 Independent auditor’s report ...... F-243

(1) The interim financial report for the half year ended January 2, 2011 has been extracted from Woolworths’ Appendix 4D filing with the ASX and, as a result, includes references to the internal numbering of this filing. For ease of reference, this internal numbering has been retained. (2) As permitted by Australian Corporations Regulations 2001, Woolworths has disclosed information about the remuneration of directors and executives as required by Australian Accounting Standard AASB 124 Related Party Disclosures in the Remuneration Report, which forms part of the Director’s Statutory Report for the fiscal year ended June 27, 2010 and accordingly, has been included in this offering memorandum. The Directors’ Statutory Report and the consolidated financial statements of Woolworths as at and for the fiscal years ended June 27, 2010, June 28, 2009 and June 29, 2008 included in this offering memorandum have been extracted from Woolworths’ annual reports for the fiscal years ended June 27, 2010 and June 28, 2009 and as a result, include references to the internal numbering of those reports. For ease of reference, this internal numbering has been retained.

F-1 Woolworths Limited Appendix 4D Additional Information For the Financial Half Year Ended 2 January 2011

F-2 Woolworths Limited Appendix 4D Additional Information For the Financial Half Year Ended 2 January 2011

F-3 Woolworths Limited Appendix 4D Additional Information For the Financial Half Year Ended 2 January 2011

F-4 Woolworths Limited Appendix 4D Additional Information For the Financial Half Year Ended 2 January 2011

DIRECTORS’ DECLARATION

The directors declare that:

(a) in the director’s opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and

(b) in the director’s opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity.

Signed in accordance with a resolution of the directors made pursuant to s.303(5) of the Corporations Act 2001.

On behalf of the Directors

JAMES STRONG MICHAEL LUSCOMBE Chairman Managing Director and Chief Executive Officer

25 February 2011

F-5 Woolworths Limited

INTERIM CONSOLIDATED INCOME STATEMENT

For the half year ended Consolidated

2-Jan-11 3-Jan-10 $m $m Revenue from the sales of goods 28,302.7 27,202.5 Other operating revenue 68.2 44.1 Total revenue from operations 28,370.9 27,246.6 Cost of sales (21,000.8) (20,206.9) Gross profit 7,370.1 7,039.7 Other revenue 113.9 85.2 Share of profits/ (losses) of associated and jointly (0.1) 0.5 controlled entities accounted for using the equity method Branch expenses (4,400.7) (4,163.7) Administration expenses (1,296.2) (1,278.5) Earnings before interest and taxes 1,787.0 1,683.2 Financial expense (149.7) (123.5) Financial income 17.7 13.5 Net financing costs (132.0) (110.0) Net Profit before income tax expense 1,655.0 1,573.2 Income tax expense (479.4) (464.0) Profit after income tax expense 1,175.6 1,109.2 Net profit attributable to: Equity holders of the parent entity 1,161.7 1,095.6 Non-controlling interest 13.9 13.6 Profit for the period 1,175.6 1,109.2

Earnings Per Share (EPS) Basic EPS (cents per share) 95.2 89.1 Diluted EPS (cents per share) 94.7 88.6 Weighted average number of shares used in the calculation of Basic EPS (million) 1,220.3 1,230.3

The interim consolidated income statement should be read in conjunction with the notes to the interim financial statements set out on pages 44 to 50

F-6 Woolworths Limited

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the half year ended Consolidated 2-Jan-11 3-Jan-10 $m $m Profit for the period 1,175.6 1,109.2

Other comprehensive income Exchange differences taken to equity (177.3) 23.7 Movement in the fair value of financial assets to be taken directly to equity (3.6) 15.6 Movement in the fair value of cash flow hedges (470.5) (130.6) Transfer to income statement cash flow hedges 351.7 183.7 Tax effect of items recognised directly to equity 60.6 (19.4) Other comprehensive income for the period (net of tax) (239.1) 73.0

Total comprehensive income for the period 936.5 1,182.2

Attributable to: Equity holders of the parent 922.6 1,168.6 Non-controlling interest 13.9 13.6 936.5 1,182.2

Income Tax on other comprehensive income Before tax Tax (expense)/ Net of benefit tax For the half year ended 2 Jan 2011 $m $m $m Exchange differences taken to equity (177.3) 24.4 (152.9) Movement in the fair value of financial assets to be taken directly to equity (3.6) - (3.6) Movement in the fair value of cash flow hedges (470.5) 141.1 (329.4) Transfer to income statement cash flow hedges 351.7 (104.9) 246.8 (299.7) 60.6 (239.1)

F-7 Woolworths Limited

Before tax Tax (expense) / Net of benefit tax For the half year ended 3 Jan 2010 $m $m $m Exchange differences taken to equity 23.7 (3.5) 20.2 Movement in the fair value of financial assets to be taken directly to equity 15.6 - 15.6 Movement in the fair value of cash flow hedges (130.6) 39.2 (91.4) Transfer to income statement cash flow hedges 183.7 (55.1) 128.6 92.4 (19.4) 73.0

The interim consolidated statement of comprehensive income should be read in conjunction with the notes to the interim financial statements set out on pages 44 to 50.

F-8 Woolworths Limited

INTERIM CONSOLIDATED BALANCE SHEET Consolidated 2 Jan 2011 27 June 2010 3 Jan 2010 $m $m $m Current assets Cash 1,139.5 713.4 1,069.0 Trade and other receivables 1,094.9 916.8 928.0 Inventories 3,989.6 3,438.8 3,718.9 Assets held for sale 17.4 37.3 44.1 Other financial assets 134.8 92.7 86.0 Total current assets 6,376.2 5,199.0 5,846.0 Non-current assets Trade and other receivables 11.9 13.3 36.1 Other financial assets 150.7 132.3 172.0 Property, plant and equipment 8,162.9 7,639.1 7,115.0 Intangibles 4,975.0 5,071.0 5,029.6 Deferred tax assets 475.9 432.6 464.2 Total non-current assets 13,776.4 13,288.3 12,816.9 Total assets 20,152.6 18,487.3 18,662.9 Current liabilities Trade and other payables 6,049.3 5,278.9 6,012.3 Borrowings 869.6 871.7 136.0 Current tax liabilities 237.3 199.0 281.8 Other financial liabilities 38.1 24.7 44.4 Provisions 803.4 779.1 759.9 Total current liabilities 7,997.7 7,153.4 7,234.4 Non-current liabilities Borrowings 3,199.5 2,670.4 2,806.4 Other financial liabilities 828.9 236.7 290.0 Provisions 438.6 416.3 396.3 Other 194.0 192.8 195.1 Total non-current liabilities 4,661.0 3,516.2 3,687.8 Total liabilities 12,658.7 10,669.6 10,922.2 Net assets 7,493.9 7,817.7 7,740.7 Equity Contributed equity 3,899.1 3,784.4 4,025.4 Shares held in trust (37.3) (41.2) (48.9) Reserves (255.4) (28.0) (73.1) Retained profits 3,630.7 3,855.2 3,584.5 Equity attributable to the members of Woolworths Limited 7,237.1 7,570.4 7,487.9 Non-controlling interest 256.8 247.3 252.8 Total equity 7,493.9 7,817.7 7,740.7

The interim consolidated balance sheet should be read in conjunction with the interim notes to the financial statements set out on pages 44 to 50.

F-9 Woolworths Limited

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the half year ended 2 January 2011 Issue d Shares Hedging Foreign Remuneration Asse t Available-for-sale Retained Equity Non- Total Capital held in trust Reserve Currency Reserve Revaluation Revaluation Earnings attributable controlling Translation Reserve Reserve to member Interest Reserve of Woolworths Consolidated Limited $M $M $M $M $M $M $M $M $M $M $M

Balance at 28 June 2010 3,784.4 (41.2) 107.6 (262.3) 200.6 16.4 (90.3) 3,855.2 7,570.4 247.3 7,817.7 Profit after income tax expense ------1,161.7 1,161.7 13.9 1,175.6 Other comprehensive income for the period (net of tax) - - (82.6) (152.9) - - (3.6) - (239.1) - (239.1)

Total comprehensive income for the period (net of tax) - - (82.6) (152.9) - - (3.6) 1,161.7 922.6 13.9 936.5

Dividend paid ------(766.3) (766.3) (4.7) (771.0) Issue of shares as a result of options exercised under executive share option plans 96.5 ------96.5 - 96.5 Issue of shares as a result of dividend reinvestment plan 103.9 ------103.9 - 103.9 Issue of shares under employee share plan - 3.9 ------3.9 - 3.9 Shares bought back (84.7) (621.6) (706.3) (706.3) Issue of shares to Minority Interest ------74.6 74.6 Issue of shares as consideration for acquired entity ------Compensation on share based payments - - - - 11.7 - - - 11.7 - 11.7 Reclassification of NCI for recognition of financial liability ------(74.3) (74.3) Other (1.0) ------1.7 0.7 - 0.7 Balance at 2 January 2011 3,899.1 (37.3) 25.0 (415.2) 212.3 16.4 (93.9) 3,630.7 7,237.1 256.8 7,493.9

Issue d Shares Hedging Foreign Remuneration Asse t Available-for-sale Retained Equity Non- Total Capital held in trust Reserve Currency Reserve Revaluation Revaluation Earnings attributable controlling Equity Translation Reserve Reserve to member Interest Reserve of Woolworths Consolidated Limited $M $M $M $M $M $M $M $M $M $M $M

Balance at 29 June 2009 3,858.6 (51.2) 44.5 (305.6) 157.5 16.4 (86.3) 3,178.6 6,812.5 244.8 7,057.3 Profit after income tax expense ------1,095.6 1,095.6 13.6 1,109.2 Other comprehensive income for the period (net of tax) - - 37.2 20.2 - - 15.6 - 73.0 - 73.0

Total comprehensive income for the period (net of tax) - - 37.2 20.2 - - 15.6 1,095.6 1,168.6 13.6 1,182.2

Dividend paid ------(692.0) (692.0) (6.8) (698.8) Issue of shares as a result of options exercised under executive share option plans 73.8 ------73.8 - 73.8 Issue of shares as a result of dividend reinvestment plan 93.8 ------93.8 - 93.8 Issue of shares under employee share plan - 2.3 ------2.3 - 2.3 Issue of shares to minority interest ------42.7 42.7 Issue of shares as consideration for acquired entity - --- Compensation on share based payments - - - - 27.4 - - - 27.4 - 27.4 Reclassification of NCI for recognition of financial liability ------(41.5) (41.5) Other (0.8) ------2.3 1.5 - 1.5 Balance at 3 January 2010 4,025.4 (48.9) 81.7 (285.4) 184.9 16.4 (70.7) 3,584.5 7,487.9 252.8 7,740.7

The consolidated statement of changes in equity should be read in conjunction with the interim notes to the financial statements set out on pages 44 to 50.

F-10 WOOLWORTHS LIMITED

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

2-Jan-11 3-Jan-10 $m $m Cash Flows From Operating Activities Receipts from customers 30,423.4 28,976.9 Receipts from vendors and tenants 26.9 21.1 Payments to suppliers and employees (28,009.9) (26,566.2) Interest and costs of finance paid (162.3) (131.1) Interest received 10.8 5.2 Income tax paid (423.1) (462.6) Net cash provided by operating activities 1,865.8 1,843.3

Cash Flows From Investing Activities Proceeds from the sale of property, plant and equipment 68.4 30.8 Advances related to development property (20.2) - Payment for property, plant and equipment (1,018.6) (873.1) (Payments) for purchase or proceeds from sale of investments - 3.0 Payments for the purchase of intangibles (1.4) (1.0) Dividends received 5.3 6.4 Payments for purchase of businesses (113.4) (150.7) Net cash used in investing activities (1,079.9) (984.6)

Cash Flows From Financing Activities Proceeds from issue of equity securities 97.1 75.2 Proceeds from issue of equity securities in subsidiary to non controlling interest 74.6 42.7 Payments for share buy back (737.9) - Proceeds from external borrowings 8,397.1 6,159.9 Repayment of external borrowings (7,516.7) (6,215.5) Dividends paid (662.4) (598.2) Dividends paid to minority interest (4.7) (6.8) Net cash provided by financing activities (352.9) (542.7)

Net Increase In Cash Held 433.0 316.0 Effect of exchange rate changes on foreign currency held (6.9) (1.2) Cash At The Beginning Of The Financial Year 713.4 746.7 Cash At The End Of The Financial Year 1,139.5 1,061.5

The interim consolidated statement of cash flows should be read in conjunction with the interim notes to the financial statements set out on pages 44 to 50

F-11 WOOLWORTHS LIMITED

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1 Significant accounting policies Woolworths Limited (the “Company”) is a company domiciled in Australia. The interim consolidated financial report of the Company for the 27 weeks ended 2 January 2011 comprises the Company and its subsidiaries (together referred to as the “consolidated entity”). Statement of compliance The interim consolidated financial report for the 27 weeks ended 2 January 2011 (“Half Year Financial Report”), is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards AASB 134 Interim Financial Reports and the Corporations Act 2001. The consolidated Half Year Financial Report does not include all of the information required for a full annual financial report, and should be read in conjunction with the consolidated annual financial report of the consolidated entity as at and for the 52 weeks ended 27 June 2010, and any public announcements by Woolworths Limited and its subsidiaries during the half year in accordance with continuous disclosure obligations under the Corporations Act 2001.

Basis of preparation The Half Year Financial Report has been prepared on the basis of historical cost, except for derivative financial instruments and financial instruments classified as fair value through other comprehensive income. The carrying value of recognised assets and liabilities that are hedged with fair value hedges are adjusted to record changes in the fair value attributable to the risks that are being hedged.

The Half Year Financial Report was approved by the Board of Directors on 25 February 2011.

The consolidated entity is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with the Class Order, amounts in the financial report have been rounded off to the nearest tenth of a million dollars, unless otherwise stated.

F-12 WOOLWORTHS LIMITED

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 2 Segment Information

Australian Food & New Zealand Consumer Petrol BIG W Hotels (3) Unallocated (4) Consolidated Liquor (1) Supermarkets Electronics (2) 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 $A million $A million $A million $A million $A million $A million $A million $A million $A million $A million $A million $A million $A million $A million $A million $A million Segment disclosures Business segments

Business segments Sales to customers 18,771.9 18,143.4 2,183.4 2,161.7 2,944.5 2,781.2 2,392.0 2,461.6 1,044.7 983.7 611.9 591.2 354.3 79.7 28,302.7 27,202.5 Other operating revenue 62.0 40.1 6.2 4.0 ------68.2 44.1 Inter-segment revenue ------0.3 - - - 192.5 138.0 192.8 138.0 Segment revenue 18,833.9 18,183.5 2,189.6 2,165.7 2,944.5 2,781.2 2,392.0 2,461.6 1,045.0 983.7 611.9 591.2 546.8 217.7 28,563.7 27,384.6 Eliminations (0.3) (192.5) (138.0) (192.8) (138.0) Unallocated revenue (5) 113.9 85.2 113.9 85.2

Total revenue 18,833.9 18,183.5 2,189.6 2,165.7 2,944.5 2,781.2 2,392.0 2,461.6 1,044.7 983.7 611.9 591.2 468.2 164.9 28,484.8 27,331.8

Segment earnings before interest and tax 1,404.8 1,299.4 108.6 96.9 63.4 51.2 125.0 150.8 22.3 34.8 111.9 114.6 (49.0) (64.5) 1,787.0 1,683.2

Net financing cost (132.0) (110.0)

Profit before tax 1,655.0 1,573.2 Income tax expense (479.4) (464.0) Profit after tax 1,175.6 1,109.2

Segment depreciation and amortisation 255.9 238.2 37.5 33.0 16.3 15.1 39.0 36.6 15.2 13.8 36.3 39.5 40.1 29.8 440.3 406.0

Capital expenditure (6) 329.1 357.3 141.1 93.9 26.1 24.3 66.0 58.2 32.1 19.1 97.2 96.1 425.1 354.7 1,116.7 1,003.6

(1) Australian Food & Liquor comprise supermarket and liquor stores and wholesale food and liquor stores in Australia (2) Consumer Electronics includes Woolworths Wholesale India. (3) Hotels comprise on-premise liquor sales, food, accommodation, gaming and venue hire. (4) Unallocated comprise corporate head office, property division and home improvement division. (5) Unallocated revenue comprises of rent and other revenue from operating activities. (6) Capital expenditure is property, plant and equipment and intangible asset additions

F-13 WOOLWORTHS LIMITED

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The group has seven reportable segments. The reportable segments were identified on the basis of internal reports on the components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and assess its performance.

In addition, these business units offer different products and services and are managed separately because they require different technology and marketing strategies. The Group’s reportable segments are as follows:

– Australian Food and Liquor – procurement of Food and Liquor and products for resale to customers in Australia – New Zealand Supermarkets – procurement of Food and Liquor and products for resale to customers in New Zealand – Petrol – procurement of Petroleum products for resale to customers in Australia. – BIG W – procurement of discount general merchandise products for resale to customers in Australia – Consumer Electronics – procurement for electronic products for resale in Australia, New Zealand and India. – Hotels – provision of leisure and hospitality services including food and alcohol, accommodation, entertainment and gaming – Unallocated – consists of the group’s other operating segments that are not separately reportable (including Home Improvements) as well as various support functions including Property and Head office costs

3 Significant Transactions

There were no significant transactions during the current half year period.

4 Business Acquisitions Over the course of the half year, the consolidated entity acquired various hotel venues, home improvement retail stores and other businesses. Each acquisition was for 100% of the respective enterprise. In some instances Woolworths share was only 67% where the acquisition was made through Hydrox. Total consideration paid was $113.4 million including $3.5 million of acquisition costs recognised in the income statement. Net assets acquired comprised mainly of property, plant and equipment $47.0 million; inventory $20.8 million, liquor and gaming licences $19.8 million and other negative working capital balances of $2.9 million, with goodwill on acquisition of $25.2 million. Goodwill has arisen on acquisition of these businesses primarily because of their capacity to generate recurring revenue streams in the future.

F-14 WOOLWORTHS LIMITED

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

5 Dividends Paid 2-Jan-11 27-Jun-10 3-Jan-10 27 weeks ended $m $m $m Final dividend in respect of 2010 year of 62 cents (2009:56 cents) per fully paid ordinary share 100% franked at 30% tax rate (2009:100%) 766.3 - 692.0 Interim dividend in respect of 2010 year of 53 cents (2009:48 cents) per fully paid ordinary share 100% franked at 30% tax rate (2009:100%) - 657.2 - On 25 February 2011, the board of directors declared a dividend of 57 cents (2010: 53 cents) per share. The amount that will be paid on 29 April 2011 will be approximately $693.3 million (2010: $657.2 million). No provision for the dividend has been made in the Half Year Financial Report in line with the requirements of AASB 137 Provisions, Contingent Liabilities and Contingent Assets.

6 Contingent Liabilities Contingent liabilities at 2 January 2011 comprising:

2-Jan-11 3-Jan-10 $m $m Bank guarantees1 49.2 45.6 Workers compensation self-insurance guarantees 522.4 474.2 Other (outstanding letters of credit issued to suppliers) 19.0 28.0 590.6 547.8 1This item mainly comprises guarantees relating to conditions set out in development applications and for the sale of properties in the normal course of business.

No provision has been made in the Half Year Financial Report in respect of these contingencies, however there is a provision of $440.7 million (3 January 2010: $391.2 million) for self-insured risks, which includes liabilities relating to workers’ compensation claims, that has been recognised in the statement of financial position.

F-15 WOOLWORTHS LIMITED

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

7 Goodwill The intangibles balance in the consolidated balance sheet includes the following movements in Goodwill for the half years: For the half year ended 2 January 2011 2-Jan-11 3-Jan-10 $m $m Carrying amount at start of period 3,078.2 2,991.6 Additions arising from the acquisition of businesses 25.2 43.7 Disposals - - Reclassifications - 0.3 Effect of movements in foreign exchange rates (129.2) 20.0 Carrying amount at end of period 2,974.2 3,055.6

F-16 WOOLWORTHS LIMITED

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

8 Issued Capital For the half year ended 2 January 2011 2-Jan-11 3-Jan-10 $m $m Issued and paid up share capital 1,212,888,209 fully paid ordinary shares (3 January 2010: 1,239,999,913) Fully paid ordinary shares carry one vote per share and the right to dividends Reconciliation of fully paid share capital Balance as at beginning of period 3,784.4 3,858.6 Issue of shares as a result of options exercised under Executive Share Option Plan 96.5 73.8 Issue of shares as a result of Dividend Reinvestment Plan 103.9 93.8 Adjustment to reflect final proceeds for shares issued under Employee Share Plan (1.0) (0.8) Shares bought back (84.7) - Balance at end of period 3,899.1 4,025.4

Reconciliation of fully paid share capital- (net of own shares held in trust) No. of shares No. of shares Balance as at beginning of period 1,227.4 1,223.6 Issue of shares as a result of options exercised under Executive Share Option Plan 5.7 7.7 Issue of shares as a result of Dividend Reinvestment Plan 3.6 3.2 Adjustment to reflect final proceeds for shares issued under Employee Share Plan 0.4 0.3 Shares bought back (27.5) - Balance at end of period 1,209.6 1,234.8 Note: The reconciliation of fully paid share capital- number of shares is presented net of shares held in trust

Shares held in trust $m $m Reconciliation of shares held in trust Balance at beginning of period (41.2) (51.2) Issue of shares under Employee Share Plan 3.9 2.3 Balance at end of period (37.3) (48.9)

Reconciliation of shares held in trust No. of shares No. of shares Balance at beginning of period 3.8 5.4 Issue of shares under Employee Share Plan (0.4) (0.3) Balance at end of period 3.4 5.1

F-17 WOOLWORTHS LIMITED

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

9 Explanation of significant movements in the statement of financial position

Key balance sheet movements relative to the prior half year are explained as follows:

Whilst average inventory was slightly down on last year at 33.8 days, year end inventory balances were 7.3% higher than last year reflecting the impact of lower than expected December trading. Inventory is on target to return to normal levels by the end of the second half. Trade creditor balances have increased by 1.7%. This reflects timing of purchasing, particularly through the latter half of December as purchasing slowed in response to consumer spending tightening. Negative working capital decreased by $291.7 million to $2,388.9 million. This is largely due to the increase in the net investment in inventory as outlined above as well as the timing of property related receivables. Fixed assets and investments increased by $992.5 million to $8,296.8 million, primarily reflecting the increase in capital expenditure offset by depreciation. Capital expenditure for the half was $1,009 million compared to $855 million in the prior half year. The increase was due to additional property development activity, the building of a new Data Centre in Sydney, commencement of construction of the BIG W, Consumer Electronics, Home Improvement and New Zealand DCs as well as Melbourne NDC re-engineering. Capital expenditure forecast for the full year (excluding property development) has reduced by $78 million. Intangibles decreased $54.6 million to $4,975.0 million, reflecting foreign exchange movements in respect of New Zealand intangibles partially offset by goodwill and intangibles related to the acquisition of various Home Improvement retail outlets, stand alone supermarkets particularly in New Zealand, free standing liquor stores and various hotels. Two separate share buy-backs have occurred since HY10, an on-market buy-back in June 2010 for $325 million and an off-market buy-back in October 2010 for $704 million. Net repayable debt (which includes cash, borrowings, financial assets and liabilities) has increased by $1,532.6 million to $3,627.6 million reflecting the increased borrowings to fund capital expenditure and the two share buy-backs.

10 Subsequent Events On 25 February 2011, Woolworths Limited announced it will acquire 100% of The Cellarmasters Group (Cellarmasters) for $340 million, to be funded through existing debt facilities. Cellarmasters is one of Australia’s largest direct marketing wine sellers and providers of contract bottling and wine services

Completion of the acquisition is expected to occur no later than May 2011, subject to closing conditions, including no regulatory intervention.

F-18 DIRECTORS’ STATUTORY REPORT This Report is given by the Directors in respect of Woolworths Limited (the Company) and the consolidated entity consisting of the Company and the entities it controlled (the Group) for the financial period ended 27 June 2010. THE DIRECTORS The persons who have been Directors of the Company at any time during or since the end of the financial period and up to the date of this Report are: Non-executive Directors JA Strong Chairman JF Astbury RS Deane DJ Grady CJ (Jayne) Hrdlicka (appointed 10 August 2010) LM L'Huillier IJ Macfarlane AM Watkins (retired 31 July 2010) Executive Directors MG Luscombe Managing Director and Chief Executive Officer TW Pockett Finance Director Details of the experience, qualifications, special responsibilities and other directorships of listed companies in respect of each of the Directors are set out against their respective names from pages 33 to 36. COMPANY SECRETARY Mr Peter John Horton BA LLB. Mr Horton joined Woolworths in November 2005 as Group General Counsel and Company Secretary. Previously Mr Horton was General Manager Legal and Company Secretary at WMC Resources Limited. PRINCIPAL ACTIVITIES Woolworths Limited operates in Australia and New Zealand with 3,199 stores and more than 188,000 employees. The company operates 975 Supermarkets under the Woolworths and Safeway brands in Australia and under Woolworths, Foodtown and Countdown brands in New Zealand. The liquor retailing division services different customer needs through BWS, Dan Murphy’s, Woolworths/Safeway attached liquor outlets and through supermarket outlets in New Zealand. The petrol retailing division has 561 canopies at year end across Australia which are co-branded Woolworths/Caltex. The general merchandise division services customers everyday needs through 161 BIG W stores and supplies consumers with the latest technology through Dick Smith and Tandy stores operating throughout Australia and New Zealand in 416 outlets. The business venture with TATA in India now provides wholesale services to 50 retail stores operating under the “Croma” brand. The Hotel division includes 284 premium hotels, including bars, dining, gaming, accommodation and venue hire operations. CONSOLIDATED RESULTS AND REVIEW OF THE OPERATIONS The net amount of consolidated profit for the financial period after income tax expense attributable to members of the Company and its controlled entities was $2,020.8 million (2009: $1,835.7 million). A review of the operations of the consolidated entity and its principal businesses during the financial period and the results of those operations are set out in the Chairman’s Report and the Managing Director’s Report from pages 4 to 32 inclusive.

F-19 DIRECTORS’ STATUTORY REPORT continued DIVIDENDS The amounts set out below have been paid by the Company during the financial period or have been declared by the Directors of the Company, by way of dividend, but not paid during the financial period up to the date of this Report. All dividends were fully franked at the tax rate indicated.

Franking Dividend Total paid/ tax rate Cents per payable % share $m Final 2009 Dividend Payable on 9 October 2009 30 56 691.9 Interim 2010 Dividend Paid on 23 April 2010 30 53 657.2 Final 2010 Dividend Payable on 15 October 2010 30 62 766.4

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Other than as referred to in the Managing Director’s Report, the significant changes in the state of affairs of the Group during the financial period are as follows. A net increase in the issued share capital of the Company of 2,098,325 fully paid ordinary shares as a result of: (i) the issue on 9 October 2009 of 3,236,818 fully paid ordinary shares and the issue on 23 April 2010 of 3,214,594 fully paid ordinary shares pursuant to the Dividend Reinvestment Plan. Neither the 2009 final dividend nor the 2010 interim dividend was underwritten and a cap of 20,000 maximum share participation in the Dividend Reinvestment Plan was in operation for both dividends; (ii) the issue on various dates, for cash at the relevant exercise price, of 7,726,614 fully paid ordinary shares as a result of the exercise of options held by a number of executives under the Executive Option Plan (EOP) and the Long Term Incentive Plan (LTIP). (iii) On-market Share Buy-Back. On 26 February 2010, Woolworths Limited announced a proposed $400 million on-market share Buy-Back. At 27 June 2010, 12,079,701 shares with a value of $325 million have been brought back and subsequently cancelled under the Buy-Back from 23 March 2010 to 27 June 2010. GRANT OF OPTIONS On 27 November 2009 an offer was made under the Long Term Incentive Plan (LTIP) with an effective date of 1 July 2009 granting 4,124,850 options and 958,070 performance rights with stringent performance measures relating to EPS and TSR hurdles. A further 80,000 performance rights were offered under the Retention Plan with effective dates of 1 November 2009 and 24 December 2009. Between 27 June 2010 and 27 August 2010, 78,000 shares were allotted as a result of the maturity of retention rights under the LTIP in 2007 and 2008, and the exercise of options granted under the LTIP in July 2005, July 2006 and July 2007.

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL PERIOD There have been no events subsequent to balance date which would have a material effect on the Group’s financial statements at 27 June 2010.

F-20 DIRECTORS’ STATUTORY REPORT continued FINAL DIVIDEND On 20 August 2010, the Directors declared a final dividend of 62 cents per share, fully franked at the 30% tax rate, on each of the issued ordinary shares of the Company. The final dividend is payable on 15 October 2010. TRANSACTIONS WITH THE ALH GROUP AND RELATED COMPANIES Details of certain transactions between the ALH Group and related companies are set out below: ALH Group purchased various building supplies and services totalling $61,428,390 (2009: $75,656,952) from Lifetime Developments Pty Ltd, a company with which Mr Bruce Mathieson is a related party through a family member/s who is/are a Director/Directors of Lifetime Developments Pty Ltd. Amounts were billed based on commercial market rates for such supplies and were due and payable under commercial payment terms. ALH Group purchased various building supplies and services totalling $19,542,987 (2009:$ 20,299,852) from TAG Constructions Pty Ltd, a company with which Mr Bruce Mathieson is a related party through family member/s who is/are a Director/Directors of TAG Constructions Pty Ltd. Amounts were billed based on commercial market rates for such supplies and were due and payable under commercial payment terms. ALH Group purchased various marketing services totalling $287,345 (2009 $300,316) from Capricornia Pty Ltd, a company which Mr Bruce Mathieson is a related party. Amounts relate to a pro-rata of shared marketing costs associated with the promotion of two ALH accommodation properties jointly with one Capricornia accommodation property. These transactions were subject to review and testing on a sample basis by Woolworths’ internal audit. Significant construction activity is also subject to independent review by a quantity surveyor and competitive tender. DIRECTORS’ INTERESTS IN SHARES/OPTIONS Particulars of Directors’ relevant interests in shares and options in the Company as at 27 August 2010 are set out below:

Director Shares Options Performance rights J A Strong 70,479 - - M G Luscombe 523,290 1,580,000 61,175 J F Astbury 12,797 - - R S Deane 40,000 - - D J Grady 36,259 - - C J Hrdlicka Nil - - L M L’Huillier 30,000 - - I J Macfarlane 8,000 - - T W Pockett 133,000 955,000 30,588 A M Watkins 11,859 - -

F-21 DIRECTORS’ STATUTORY REPORT continued MEETINGS OF DIRECTORS The table below sets out the number of meetings of the Company’s Directors (including meetings of Committees of Directors) held during the financial period ended 27 June 2010 and the number of meetings attended by each Director. In addition to attending formal Board and Board Committee meetings, the Directors undertake other duties including attending strategic review sessions, retail market study trips, as well as Board and Board Committee Meeting preparation and research. These additional responsibilities constitute a further significant time commitment by Directors.

Directors Board Ad hoc Board Audit, Risk People Policy Meetings Meetings Management Committee and Compliance Committee J A Strong (1)(2)(3) 10/10 2/2 7/7 4/4 M G Luscombe 10/10 2/2 7/7 4/4 J F Astbury (1)(3)(6) 10/10 2/2 7/7 - R S Deane (2a)(3) 10/10 1/2 - 4/4 D J Grady (1)(3) 9/10 2/2 6/7 - L M L’Huillier (2)(3)(4)(5) 10/10 2/2 - 4/4 I J Macfarlane (1)(3) 10/10 2/2 7/7 - T W Pockett 10/10 2/2 7/7 4/4 A M Watkins (1a)(2)(3) 10/10 2/2 7/7 4/4 Meetings attended/held while in office

1 Member of the Audit, Risk Management and Compliance Committee 1a Chairman of the Audit, Risk Management and Compliance Committee during the period 2 Member of the People Policy Committee 2a Chairman of the People Policy Committee 3 Member of the Nomination Committee which meets at the same time as the Board meetings 4 Chairman of the Woolworths Group Superannuation Plan’s Policy Committee 5 Director of ALH Group Pty Limited and Chairman of its Audit Committee 6 Director of Hydrox Holdings Pty Ltd and Chairman of its Audit, Risk Management and Compliance Committee.

F-22 DIRECTORS’ STATUTORY REPORT continued REMUNERATION REPORT 1. Introduction Our employees play an important role in delivering the Company’s financial performance and our remuneration policies have been developed to provide market competitive remuneration in order to sustain Woolworths’ competitive advantage and protect the interests of shareholders. Woolworths recognises that remuneration is an important factor in attracting, motivating and retaining talented employees, in conjunction with other elements of our approach to people management. The Woolworths Academy provides training and development for employees to learn and develop the skills they need to succeed in their current roles and the development opportunities to enable them to reach their full potential. Effective succession planning includes promotion and appointment of employees to new challenges within the business. Woolworths has an achievement and performance-oriented culture which our remuneration policies drive and support. In recognising the importance of our people to our success, approximately 40,000 Woolworths employees hold shares in the Company through participation in various equity based schemes, sharing in the Company’s success and aligning their experience with that of other shareholders. 2. Remuneration Policy Remuneration policy is aligned with both our financial and strategic business objectives and recognises that people are a major contributor to sustained improvements in performance. Woolworths’ approach to remuneration is in line with principles endorsed by the Australian Institute of Company Directors, Australian Employee Ownership Association and Australian Shareholders Association. Woolworths' remuneration policy for all executives ensures: Remuneration is market competitive and designed to attract, motivate and retain key executives; Demanding performance measures are applied to both short and long-term “at risk” remuneration; Short term performance is linked to both financial and non-financial performance measures; and Long term performance is measured through the creation of value for shareholders. Company protection and employment stability is provided through pre-established employment agreements limiting the amount of termination payments and providing restrictive covenants on future employment by competitors. 3. Role of the People Policy Committee The Committee works closely with management to review processes and programs to ensure the Remuneration Policy is implemented. The Committee also obtains independent external advice on key remuneration issues, as required. The Committee oversees management on behalf of the Board and shareholders to ensure that in relation to its human resources, the Company: Establishes and implements a human resources strategy to ensure that appropriately talented and trained people are available to achieve the Business Strategy; Protects the safety and health of its employees, customers, contractors and visitors; Undertakes the appropriate performance management, succession planning and development activities and programs; Provides effective remuneration policies having regard to the creation of value for shareholders and the external remuneration market; Provides a safe working environment for all employees; Complies with relevant legal and regulatory requirements and principles of good governance; and Reports to shareholders in line with required standards.

F-23 DIRECTORS’ STATUTORY REPORT continued REMUNERATION REPORT continued In terms of remuneration, the People Policy Committee is specifically responsible for annually: Reviewing and approving the structure of short term incentive plans to ensure they are designed to effectively reward the achievement of Company and individual objectives; Reviewing the implementation and outcome of short term incentive plans to ensure individuals are fairly and equitable rewarded within the Company’s cost parameters; Reviewing the design of all long term incentive and equity plans to determine: 1. If Company objectives are met; 2. Compliance with the legislative and regulatory environment 3. Alignment to industry standards; and 4. Overall cost effectiveness Reviewing and approving categories of employees who will be eligible to participate in long term incentive and equity plans; and Recommending to the Board, for approval, the overall structure and level of participation in the plans The Committee also reviews and recommends to the Board, for approval, the remuneration structure for the Non-Executive Directors however the CEO’s remuneration is the responsibility of the Chairman in direct consultation with the full Board. Membership of the Committee consists of four independent Non-executive Directors who for the financial year were, Roderick Deane (Chair), James Strong, Leon L’Huillier and Alison Watkins. The members’ attendance at meetings of the People Policy Committee is set out on page 40. 4. Remuneration Structure Overview Woolworths’ current remuneration structure is comprised of two components: Fixed remuneration which is base salary, superannuation contributions and, where appropriate, the use of a fully maintained motor vehicle; and The variable or “at risk” component which is performance based and comprised of a cash based Short Term Incentive Plan (STIP) and a Long Term Incentive Plan (LTIP). The total remuneration package of all executives is designed to ensure an appropriate mix of fixed remuneration with short and long term incentive opportunities. The relative weighting of fixed and variable components for on target performance varies with the level and complexity of the role so that generally, the “at risk” component increases with accountability. In order to align reward to performance, Woolworths requires a significant proportion of senior executives’ total potential reward to be at risk. To ensure alignment, Woolworths aims to position all senior executives’ remuneration at: The median of the relevant market for fixed remuneration; and The third quartile of the relevant market for total remuneration for outstanding performance. Woolworths targets the mix of fixed and variable remuneration as follows: Percentage of total target remuneration Fixed Target short-term Target long-term incentive remuneration incentive (STIP) (LTIP) % % % Executive Directors 33 33 33 Direct reports to CEO 40 30 30 Other senior executives 60 20 20

F-24 REMUNERATION REPORT continued 5. Base salary The amount of base salary is determined by reference to independent research considering the scope and nature of the role and appropriate market rates as well as the executive's individual performance and experience. External consultants are engaged by and report to the People Policy Committee to work with management to conduct a review of Key management personnel (KMP) salaries. Whilst remuneration reviews are conducted annually, there are no guaranteed remuneration increases. Any increases are determined by individual performance, economic indicators and market data.

6. Short Term Incentive Plan (STIP) The STIP has been structured to ensure that payments are closely aligned to business performance and are designed to: Deliver Company performance improvements over the prior year; Provide rewards subject to the achievement of rigorous performance targets; and Align individual objectives to Company and business-specific objectives. The STIP provides an annual cash incentive that is calculated based on financial year results and is based on a maximum percentage of the executive’s base salary, except for the CEO and Finance Director STIPs which are calculated on fixed remuneration. STIP is payable upon the achievement of a number of measures, with 60% to 70% of the total maximum percentage based on key financial objectives and 40% to 30% based on non financial or individual objectives. There are four main financial key result areas (KRAs) that are standard in plans and are designed to ensure the company achieves long term sustainable profitable growth. These KRAs are cascaded from total group results down to department level. In line with the Company’s strategy of achieving long term sustainable profit growth, it was recognised that non financial measures also impact profitability so non-financial measures such as reducing staff turnover rates and improving performance in areas such as safety, shrinkage, inventory control and food safety compliance ratings have been targeted to provide a balanced approach. In line with achieving our “Destination Zero” objectives, safety measures have been added to or increased in all STIPs to ensure there is sufficient focus on both employee and customer safety. The targets and weightings for each measure are adjusted at the beginning of the financial year to reflect the specific financial objectives of each business within the Woolworths Group for that financial year and are designed to deliver improvements on the prior year’s results. This results in each executive having a STIP that is directly linked to their annual business objectives. There are three levels of targeted performance for each measure: Threshold, which is the minimum improvement to last year’s results required to qualify for any incentive payment; Target, where established performance targets have been achieved; and Stretch, where performance targets have been exceeded. STIPs for each financial year are not paid until the release of Woolworths’ financial results to the ASX.

7. Long Term Incentives 7.1 Overview Woolworths’ long term incentive plans have been in place, in various forms, since 1993 and are designed to: Attract, retain and motivate all executives; Align executive rewards to shareholder value creation; and Provide rewards that are linked to the Company’s strategic, financial and human resources objectives.

F-25 REMUNERATION REPORT continued From 1999 through to 2004 long term incentives were provided through the Executive Option Plan (EOP). At the 2004 Annual General Meeting shareholders approved the introduction of the Woolworths Long Term Incentive Plan (LTIP) which provided the Company with greater flexibility to determine whether to use options or a number of other alternatives such as performance rights, performance shares or cash. Following is a summary of the plans from 1999.

Financial Plan Type Vesting Exercise Options Performance Total Year Period Period Rights (years) (1) (years) (1) 1999 – 2001 EOP 5 10 100% - 100% 2002-2004 EOP 5 5.5 100% - 100% 2005 - 2007 LTIP 5 5.5 100% - 100% 2008-2009(2) LTIP 4 5.5 50% 50% 100% (1) Measured from grant date (2) Based on value to individual Since 2002, eligibility to participate in long term incentives has been linked to executives entering into Service Agreements that offer the Company protection, management stability for shareholders and clarity for executives. Effective from 2003 all Supermarket and BIG W store managers and buyers as well as distribution centre managers became eligible to receive long term incentives and for FY2010 buyers from Home Improvements and Consumer Electronics also became eligible. Where new participants are not executives and therefore not required to enter Service Agreements, it is a condition of the long term incentive plan offer that these participants are required to enter into amended terms and conditions of employment that offer similar protection to the Company and shareholders. In the event of cessation of employment, both the EOP and the LTIP Rules provide the Board with discretion as to the treatment of unvested long term incentives. 7.2 Performance Measures

Both the EOP and LTIP use the same two performance measures, each worth 50% of the total grant, however vesting is subject to different performance hurdles which must be met before vesting occurs. The hurdles are explained in detail in the relevant section. For both plans the two performance hurdles are based on cumulative earnings per share (EPS) growth and relative total shareholder return (TSR) measured over the performance period. EPS and TSR were chosen as performance measures to retain a balance between an external, TSR, and internal, EPS, measure of success and is directly linked to the company’s objectives of long term profitable sustainability; Basic EPS is measured as the net profit of the consolidated entity after non controlling interests, divided by the weighted average number of shares on issue (including ordinary shares and dividend reinvestment allotments, but excluding shares held by Woolworths custodian) over the performance period; Relative TSR measures the growth in the Company’s share price plus dividends notionally reinvested in the Company’s shares comparative to a peer group, measured from the grant date but averaged for three months to eliminate volatility. This reflects the increase in value delivered to shareholders over the performance period; TSR performance is measured against the S&P/ASX100 comparator companies, excluding companies in the ASX classified as financial services and resources and any companies in the comparator group that have merged, had a share reconstruction, been delisted or subject to takeover or takeover offer during the measurement periods; The percentage of the total number of instruments granted that vest is dependent on Woolworths ranking relative to the performance of the comparator companies; and TSR performance measurement for the purpose of calculating the number of instruments to vest is subject to testing by our independent auditors.

F-26 REMUNERATION REPORT continued 7.3 Option Exercise Price For both EOP and LTIP the exercise price of options is set at the volume weighted average market price of Woolworths Limited’s ordinary shares on the five trading days prior to the date approved by the Board, generally 1 July annually, as the effective date for the purpose of determining the exercise period and performance hurdles. 7.4 Executive Option Plan The Executive Option Plan (EOP) was approved by shareholders in November 1999 and was last offered with an effective grant date of 1 July 2004. As at 27 June 2010, there were 153,600 options outstanding under this Plan. Awards have been made under the EOP in five tranches with each tranche subject to performance hurdles established by the People Policy Committee and approved by the Board. The Executive Option Plan has the following features: An exercise period that commences after five years, subject to performance hurdles being met and with a maximum exercise period of five and a half years (10 years for options issued prior to 2002); Upon exercise, each option entitles the option holder to one ordinary fully paid Woolworths Limited share; For offers made from 2002 the 50% EPS component vests in four equal tranches of 12.5%, dependent on attaining average annual growth of either 10% or 11%; The fifth tranche is comprised of the 50% TSR component which vests progressively where TSR equals or exceeds the 60th percentile of the comparator group up to the full 50% vesting where TSR equals the 75th percentile of the comparator group. No further grants have been made under this plan since 2004.

7.5 Woolworths Long Term Incentive Plan (LTIP) At the 2004 Annual General Meeting, shareholders approved the introduction of a new long term incentive, the Woolworths Long Term Incentive Plan. The Plan has four Sub-Plans, which are described below, that allows the Board flexibility to determine which of the Sub-Plan’s awards will be granted to deliver the overall LTIP objectives. From 2005 to 2007 the Option Sub-Plan was used to satisfy Woolworths LTIP requirements. Offers made in 2008 and 2009 used a combination of the Option Sub-Plan and the Performance Rights Sub-Plan. Irrespective of Sub-Plan, stringent performance measures are set annually and relate to EPS and TSR hurdles. The Performance Shares and Cash Award Sub-Plans have not been used.

Summary of Sub-Plans Delivers a right to acquire… Subject to performance hurdles being met and….

Option Sub-Plan A share at a future date Payment of an exercise price Performance Rights Sub-Plan A share at a future date No monetary payment Performance Shares Sub-Plan A share immediately No monetary payment Cash Award Sub-Plan Cash at a future date No other condition

In addition the Performance Rights Sub-Plan has been used as a Retention Plan since 2007 to ensure that key employees are retained to protect and deliver on the Company’s strategic direction. It has been delivered to senior executives who had either no or relatively small option grants scheduled to vest over the ensuing two years. This plan does not have performance measures attached to it due to the objective of retaining key talent and vests subject to the executive remaining employed by the Company for a two year or more period. It is intended that this plan be used only in special circumstances.

F-27 REMUNERATION REPORT continued

Summary of outstanding Instruments Granted under LTIP (As at 27 June 2010) Year 2005 2006 2007 2008 2009 Total Options 5,273,547 6,749,250 8,157,500 5,314,250 4,062,550 29,557,097 Performance Rights - - - 1,013,984 943,920 1,957,904 Retention Performance Rights - - 40,000 65,000 95,000 200,000

The LTIP has the following features: A maximum exercise period of five and a half years; Upon exercise, each option entitles the option holder to one ordinary fully paid Woolworths Limited share; For offers from 2005 through to 2007: o an exercise period that commences after five years, subject to performance hurdles being met; o the 50% EPS component vests in four equal tranches of 12.5%, dependent on attaining average annual growth of either 10% or 11%; o a fifth tranche comprised of the 50% TSR component which vests progressively where TSR equals or exceeds the 60th percentile of the comparator group up to the full 50% vesting where TSR equals the 75th percentile of the comparator group. For offers from 2008 through to 2009: o a four year vesting period that may commence vesting after three years, subject to performance hurdles being met; o if the minimum performance hurdles are not met after three years, nothing vests and the measures will be tested at the end of four years o where any performance measures are met after three years, nothing further vests at the end of four years; o the 50% EPS component vests progressively upon attaining average annual growth of 10%. At 10% growth, 12.5% EPS will vest with the full 50% vesting at an average annual growth of 15%; o the 50% TSR component vests progressively where TSR equals or exceeds the 51st percentile of the comparator group. At the 51st percentile, 12.5% TSR will vests with the full 50% vesting where TSR equals the 75th percentile of the comparator group. Securities Dealing Policy The Woolworths Securities Dealing Policy was reviewed in September 2008. As part of the policy all members of the senior management team have signed a declaration that they have not entered into any arrangements that would contravene the policy. Under the policy, executives may not enter into any derivative (including hedging) transaction that will protect the value of unvested securities issued as part of the Woolworths Long Term Incentive Plan. Compliance with the policy has been introduced as a condition of participation in the Long Term Incentive Plan with effect from 2008. To enter into any such arrangement would breach the conditions of the grant and would result in forfeiture of the relevant securities. Executive compliance with this policy will be monitored through an annual declaration by executives stating that they have not entered into any derivative transaction in relation to their unvested Woolworths securities. Woolworths does not have holding locks in place on any of the long term incentive schemes. The proposed changes in relation to the Productivity Commission into Executive Remuneration, if accepted, will therefore require no change to the policy.

F-28 REMUNERATION REPORT continued 7.6 Conditional entitlement to and share holdings The table below summarises the movements during the year in holdings of option and performance rights interests for the key management personnel in the Company for the period. An option or performance right entitles the holder to one ordinary fully paid Woolworths Limited share. There is no amount unpaid on options exercised.

Opening Options and performance rights Options exercised(2) Options & Options Vested at 27 June 2010 Balance granted as remuneration (1) performance rights holding at 27 Jun 10(3) Total Exercisable Unexercisable Vested during the year No. No. $ No. $ No. No. No. No. No. M Luscombe 1,730,000 311,175 2,164,572 (400,000) 4,805,500 1,641,175 20,000 - 20,000 382,500 T Pockett 980,000 155,588 1,082,296 (150,000) 2,545,500 985,588 20,000 - 20,000 132,500 J Coates 272,500 55,000 370,450 (100,000) 1,875,200 227,500 12,500 - 12,500 72,500 G Foran 292,500 55,000 370,450 (120,000) 2,048,600 227,500 12,500 - 12,500 87,500 A Hall 54,445 42,778 288,132 - - 97,223 - - - - P Horton 124,445 42,778 288,132 - - 167,223 12,500 - 12,500 12,500 G O'Brien 202,000 55,000 370,450 (32,000) 721,240 225,000 5,000 - 5,000 14,000 K Schmidt 112,778 42,778 288,132 (12,000) 203,640 143,556 3,250 - 3,250 12,250 Total 3,768,668 760,097 5,222,614 (814,000) 12,199,680 3,714,765 85,750 - 85,750 713,750

M Hamnett(4) 286,389 42,778 288,132 (150,000) 2,545,500 179,167 10,000 - 10,000 122,500 R Umbers(4) 176,389 42,778 288,132 (30,000) 776,400 189,167 - - - 30,000 Total 462,778 85,556 576,264 (180,000) 3,321,900 368,334 10,000 -10,000 152,500

Grand Total 4,231,446 845,653 5,798,878 (994,000) 15,521,580 4,083,099 95,750 - 95,750 866,250

(1) Options and performance rights granted as remuneration is the total fair value of options and performance rights granted during the year determined by an independent actuary. This will be amortised over the vesting period. (2) The value of options exercised during the year is calculated as the market value of shares on the Australian Securities Exchange as at close of trading on the date the options were exercised after deducting the price paid to exercise the options. No other options were exercised by key management personnel. (3) The number of ordinary shares under option/performance rights as at 27 June 2010 is equivalent to the option/performance rights holding at that date. (4) Included as Key management personnel to comply with the Corporations Act.

In 2010 no options lapsed or were forfeited relating to the key management personnel above during the year as a result of failure to meet performance hurdles.

Options granted as Options exercised (2) Options Lapsed (3) Options & Options Vested at 28 June 2009 remuneration (1) performance rights holding at 28 Jun 09(3) Total Exercisable Unexercisable Vested during the year No. No. $ No. $ No. $ No. No. No. No. No. M Luscombe 1,330,000 500,000 2,477,500 (100,000) (1,501,000) - - 1,730,000 37,500 - 37,500 112,500 T Pockett 880,000 250,000 1,238,750 (150,000) (2,251,500) - - 980,000 37,500 - 37,500 150,000 N Onikul 380,000 27,500 217,713 (60,000) (900,600) - - 347,500 25,000 25,000 70,000 P Smith 325,000 21,389 169,334 (100,000) (1,501,000) - - 246,389 20,000 - 20,000 95,000 J Coates 345,000 27,500 217,713 (100,000) (1,489,000) - - 272,500 20,000 - 20,000 95,000 G Foran 365,000 27,500 217,713 (100,000) (1,359,000) - - 292,500 25,000 - 25,000 100,000 R Umbers 155,000 21,389 169,334 - - - - 176,389 - - - - Total 3,780,000 875,278 4,708,056 (610,000) (9,002,100) - - 4,045,278 165,000 - 165,000 622,500

(1) Options and performance rights granted as remuneration is the total fair value of options and performance rights granted during the year determined by an independent actuary. This will be amortised over the vesting period. (2) The value of options exercised during the year is calculated as the market value of shares on the Australian Securities Exchange as at close of trading on the date the options were exercised after deducting the price paid to exercise the options. No other options were exercised by key management personnel. (3) The number of ordinary shares under option/performance rights as at 28 June 2009 is equivalent to the option/performance rights holding at that date.

In 2009 no options lapsed or were forfeited relating to the key management personnel above during the year as a result of failure to meet performance hurdles.

F-29 REMUNERATION REPORT continued The table below summarises the movements during the year in holdings of shares in Woolworths Limited held by the Non-executive Directors and key management personnel.

Shareholding Shares Shares Shares Shares Shareholdin at 28 June issued received issued purchased g at 27 June 2009 under on under or (sold)(3) 2010 DRP(1) exercise NEDSP(2) of options No. No. No. No. No. No. J Strong 70,479 - - - - 70,479 M Luscombe 433,290 - 400,000 - (310,000) 523,290 J Astbury 12,797 - - - - 12,797 R Deane 40,000 - - - - 40,000 D Grady 36,259 - - - - 36,259 L L’Huillier 60,000 - - - (30,000) 30,000 I Macfarlane 4,000 - - - 4,000 8,000 A Watkins 11,859 - - - - 11,859 T Pockett 93,000 - 150,000 - (110,000) 133,000 J Coates 66,250 - 100,000 - (146,250) 20,000 G Foran 50,380 763 120,000 - (100,000) 71,143 A Hall ------P Horton 1,212 52 - - - 1,264 G O’Brien 20,000 - 32,000 - (32,000) 20,000 K Schmidt - - 12,000 - (12,000) -

M Hamnett (4) 5,000 - 150,000 - (150,000) 5,000 R Umbers(4) - - 30,000 - - 30,000

(1) Comprises new shares issued as a result of participation in the Dividend Reinvestment Plan on the same basis as transactions by other shareholders and on-market transactions. (2) Comprises shares issued under the Non-executive Directors’ Share Plan (NEDSP). (3) Figures in brackets indicate that these shares have been sold or otherwise disposed of. (4) Included as key management personnel to comply with the Corporations Act.

F-30 REMUNERATION REPORT continued 7.6 Conditional entitlement to and share holdings continued The table below sets out the grants and outstanding number of options and performance rights for the Key management personnel in Woolworths Limited for the period 29 June 2009 to 27 June 2010. No amounts were paid or payable by the recipient on receipt of the option or performance right.

Grant date Effective No. of Expiry date Exercise Exercise Maximum Fair value per date options and price per date(2) value of option/performance right (4) rights at 27 option/ award to Jun 10(1) right vest(3) EPS TSR Retention

M Luscombe 2/12/2005 1/07/2005 80,000 31/12/2010 $16.46 1/07/2010 177,200 $2.50 $1.93

24/11/2006 1/07/2006 250,000 31/12/2011 $19.47 1/07/2011 863,125 $4.23 $2.68

3/12/2007 1/07/2007 250,000 31/12/2012 $25.91 1/07/2012 2,201,250 $9.42 $8.19

3/12/2007 1/07/2007 250,000 31/12/2012 $25.91 1/07/2010 2,201,250 $9.42 $8.19 (5) 9/12/2008 1/07/2008 500,000 31/12/2013 $24.90 1/07/2012 2,477,500 $5.15 $4.76 (6) 27/11/2009 1/07/2009 250,000 31/12/2014 $25.88 1/07/2013 1,005,000 $4.77 $3.27 (6) 27/11/2009 1/07/2009 61,175 31/12/2014 Nil 1/07/2013 1,159,572 $24.74 $13.17

1,641,175 10,084,897

T Pockett 2/12/2005 1/07/2005 80,000 31/12/2010 $16.46 1/07/2010 177,200 $2.50 $1.93

24/11/2006 1/07/2006 250,000 31/12/2011 $19.47 1/07/2011 898,750 $4.26 $2.93

3/12/2007 1/07/2007 250,000 31/12/2012 $25.91 1/07/2012 2,226,250 $9.48 $8.33 (5) 9/12/2008 1/07/2008 250,000 31/12/2013 $24.90 1/07/2012 1,238,750 $5.15 $4.76 (6) 27/11/2009 1/07/2009 125,000 31/12/2014 $25.88 1/07/2013 502,500 $4.77 $3.27 (6) 27/11/2009 1/07/2009 30,588 31/12/2014 Nil 1/07/2013 579,796 $24.74 $13.17

985,588 5,623,246

J Coates 2/12/2005 1/07/2005 50,000 31/12/2010 $16.46 1/07/2010 110,750 $2.50 $1.93

30/01/2007 1/07/2006 45,000 31/12/2011 $19.47 1/07/2011 215,775 $5.73 $3.86

3/12/2007 1/07/2007 50,000 31/12/2012 $25.91 1/07/2012 445,250 $9.48 $8.33 (5) 9/12/2008 1/07/2008 22,500 31/12/2013 $24.90 1/07/2012 111,488 $5.15 $4.76 (5) 9/12/2008 1/07/2008 5,000 31/12/2013 Nil 1/07/2012 106,225 $23.66 $18.83 (6) 27/11/2009 1/07/2009 45,000 31/12/2014 $25.88 1/07/2013 180,900 $4.77 $3.27 (6) 27/11/2009 1/07/2009 10,000 31/12/2014 Nil 1/07/2013 189,550 $24.74 $13.17

227,500 1,359, 938

G Foran 2/12/2005 1/07/2005 50,000 31/12/2010 $16.46 1/07/2010 110,750 $2.50 $1.93

30/01/2007 1/07/2006 45,000 31/12/2011 $19.47 1/07/2011 215,775 $5.73 $3.86

227,500 1,359, 938

F-31 REMUNERATION REPORT continued

A Hall 3/12/2007 1/07/2007 30,000 31/12/2012 $25.91 1/07/2012 267,150 $9.48 $8.33 (5) 9/12/2008 1/07/2008 20,000 31/12/2013 $24.90 1/07/2012 99,100 $5.15 $4.76

(5) 9/12/2008 1/07/2008 4,445 31/12/2013 Nil 1/07/2012 94,434 $23.66 $18.83

(6) 27/11/2009 1/07/2009 35,000 31/12/2014 $25.88 1/07/2013 140,700 $4.77 $3.27

(6) 27/11/2009 1/07/2009 7,778 31/12/2014 Nil 1/07/2013 147,432 $24.74 $13.17

97,223 748,816

P Horton 2/12/2005 1/07/2005 50,000 31/12/2010 $16.46 1/07/2010 110,750 $2.50 $1.93

30/01/2007 1/07/2006 20,000 31/12/2011 $19.47 1/07/2011 95.900 $5.73 $3.86

3/12/2007 1/07/2007 30,000 31/12/2012 $25.91 1/07/2012 267,150 $9.48 $8.33

(5) 9/12/2008 1/07/2008 20,000 31/12/2013 $24.90 1/07/2012 99,100 $5.15 $4.76

(5) 9/12/2008 1/07/2008 4,445 31/12/2013 Nil 1/07/2012 94,434 $23.66 $18.83

(6) 27/11/2009 1/07/2009 35,000 31/12/2014 $25.88 1/07/2013 140,700 $4.77 $3.27

(6) 27/11/2009 1/07/2009 7,778 31/12/2014 Nil 1/07/2013 147,432 $24.74 $13.17

167,223 955,466

G O’Brien 2/12/2005 1/07/2005 20,000 31/12/2010 $16.46 1/07/2010 44,300 $2.50 $1.93

30/01/2007 1/07/2006 45,000 31/12/2011 $19.47 1/07/2011 215,775 $5.73 $3.86

3/12/2007 1/07/2007 50,000 31/12/2012 $25.91 1/07/2012 445,250 $9.48 $8.33

(5) 9/12/2008 1/07/2008 45,000 31/12/2013 $24.90 1/07/2012 222,975 $5.15 $4.76

(5) 9/12/2008 1/07/2008 10,000 31/12/2013 Nil 1/07/2012 212,450 $23.66 $18.83

(6) 27/11/2009 1/07/2009 45,000 31/12/2014 $25.88 1/07/2013 180,900 $4.77 $3.27

(6) 27/11/2009 1/07/2009 10,000 31/12/2014 Nil 1/07/2013 189,550 $24.74 $13.17

225,000 1,511,200

K Schmidt 2/12/2005 1/07/2005 13,000 31/12/2010 $16.46 1/07/2010 28,795 $2.50 $1.93

30/01/2007 1/07/2006 15,000 31/12/2011 $19.47 1/07/2011 71,925 $5.73 $3.86

3/12/2007 1/07/2007 30,000 31/12/2012 $25.91 1/07/2012 267,150 $9.48 $8.33

(5) 9/12/2008 1/07/2008 35,000 31/12/2013 $24.90 1/07/2012 173,425 $5.15 $4.76

(5) 9/12/2008 1/07/2008 7,778 31/12/2013 Nil 1/07/2012 165,244 $23.66 $18.83

(6) 27/11/2009 1/07/2009 35,000 31/12/2014 $25.88 1/07/2013 140,700 $4.77 $3.27

(6) 27/11/2009 1/07/2009 7,778 31/12/2014 Nil 1/07/2013 147,432 $24.74 $13.17

143,556 994,671

R Umbers(7) 30/01/2007 1/07/2006 45,000 31/12/2011 $19.47 1/07/2011 215,775 $5.73 $3.86

3/12/2007 1/07/2007 50,000 31/12/2012 $25.91 1/07/2012 445,250 $9.48 $8.33

3/08/2007 25/07/2007 30,000 1/07/2009 Nil 1/07/2010 701,100 $23.37

(5) 9/12/2008 1/07/2008 17,500 31/12/2013 $24.90 1/07/2012 86,713 $5.15 $4.76

(5) 9/12/2008 1/07/2008 3,889 31/12/2013 Nil 1/07/2012 82,622 $23.66 $18.83

(6) 27/11/2009 1/07/2009 35,000 31/12/2014 $25.88 1/07/2013 140,700 $4.77 $3.27

(6) 27/11/2009 1/07/2009 7,778 31/12/2014 Nil 1/07/2013 147,432 $24.74 $13.17

189,167 1,819,592

F-32 REMUNERATION REPORT continued

M Hamnett(7) 2/12/2005 1/07/2005 40,000 31/12/2010 $16.46 1/07/2010 88,600 $2.50 $1.93

30/01/2007 1/07/2006 45,000 31/12/2011 $19.47 1/07/2011 215,775 $5.73 $3.86

3/12/2007 1/07/2007 30,000 31/12/2012 $25.91 1/07/2012 267,150 $9.48 $8.33

(5) 9/12/2008 1/07/2008 17,500 31/12/2013 $24.90 1/07/2012 86,713 $5.15 $4.76 (5) 9/12/2008 1/07/2008 3,889 31/12/2013 Nil 1/07/2012 82,622 $23.66 $18.83 (6) 27/11/2009 1/07/2009 35,000 31/12/2014 $25.88 1/07/2013 140,700 $4.77 $3.27

(6) 27/11/2009 1/07/2009 7,778 31/12/2014 Nil 1/07/2013 147,432 $24.74 $13.17

179,167 1,028,992

(1) The number of options at 27 June 2010 comprises both options that have vested and have not been exercised and options yet to vest. (2) Represents the first day the option/right can be exercised. (3) The maximum value of award to vest represents the value of employee benefit expense that will be recorded in future reporting periods in respect of options currently on issue. (4) The fair value per option/performance right was determined by an independent actuary using the Monte Carlo Simulation Binomial method. (5) Vesting may occur on 1 July 2011 if the performance hurdles are met as outlined on page 46. (6) Vesting may occur on 1 July 2012 if the performance hurdles are met as outlined on page 46. (7) Included as key management personnel to comply with the Corporations Act.

F-33 REMUNERATION REPORT continued

The following table summarises movements for the financial year ended 27 June 2010 for outstanding options and performance rights: Offer date Expiry date Exercise No. of Options/rights Options Options/rights No. of No. of price Options 28 granted exercised lapsed during options/rights options June 2009 during year during year at 27 June exercisable year 2010 27 June 2010

Options 01/07/2001 01/07/2011 $10.89 192,500 - (38,900) - 153,600 153,600 01/07/2002 31/12/2007 $12.94 ------01/07/2004 31/12/2009 $11.54 5,926,937 - (5,880,689) (46,248) - - 01/07/2005 31/12/2010 $16.46 5,496,725 - (42,025) (181,153) 5,273,547 - 01/07/2006 31/12/2011 $19.47 7,315,150 - (250,000) (315,900) 6,749,250 - 01/07/2007 31/12/2012 $25.91 8,580,300 - - (422,800) 8,157,500 - 01/07/2008 31/12/2013 $24.90 5,541,625 - - (227,375) 5,314,250 - 01/07/2009 31/12/2014 $25.88 - 4,124,850 - (62,300) 4,062,550

Rights 25/07/2007 01/07/2009 Nil 1,515,000 - (1,515,000) - - - 25/07/2007 01/07/2009 Nil 40,000 - - - 40,000 - 01/07/2008 01/07/2013 Nil 1,064,916 - - (50,932) 1,013,984 - 01/09/2008 01/09/2010 Nil 80,000 - - (15,000) 65,000 - 02/02/2009 02/02/2012 Nil 15,000 - - - 15,000 - 01/07/2009 31/12/2014 Nil - 958,070 - (14,150) 943,920 - 01/11/2009 01/11/2011 Nil - 60,000 - - 60,000 - 24/12/2009 24/12/2010 Nil - 20,000 - - 20,000 - 35,768,153 5,162,920 (7,726,614) (1,335,858) 31,868,601 153,600 8. Relationship of variable remuneration to Woolworths’ financial performance Woolworths’ executive remuneration is directly related to the performance of the following results through linking of short and long term incentive targets to these measures. A decade ago, Woolworths did not have the same structure around short and long term incentives with very few employees participating in either. Since then, short term incentives have been aligned to key business drivers, standardised, and now apply to in excess of 20,000 Woolworths’ employees. Long term incentives eligibility has been broadened and currently applies to in excess of 2,500 employees including store managers, buyers and other key personnel as well as our executives. In addition, our preference for redeployment over redundancy reinforces the culture of performance improvement at the individual level. Woolworths believes there is a direct link to our improved business performance over the last decade through these changes and believes there is a significant financial benefit linked to both short and long term decision making.

F-34 REMUNERATION REPORT continued

The effectiveness of the STIP in driving year-on-year growth and business improvements is highlighted in the following table. Each of these elements is currently linked to Woolworths STIP. In monetary terms, since 2006: Five Year Performance Table 2006 2007 2008 2009 2010

Sales ($m) 37,734 42,477 47,035 49,595 51,694 EBIT ($m) 1,722 2,111 2,529 2,816 3,082 ROFE (%) 28.6(1) 27.1 31.4 31.9 31.0 CODB (%) 20.47 20.35 19.92 19.98 19.95

(1) Impacted by increase in Funds Employed following the acquisition of ALH.

Sales have increased by more than 36% since 2006; EBIT has increased by more than 78%; CODB has decreased by 52 bps over the past five years. Whilst EBIT has increased by more than 78% over the period, STIP paid to executives has remained at less than 10% of EBIT over the same period. A comparison of the improved financial performance and benefits for shareholder wealth derived from Woolworths’ long term incentive arrangements and the number of options granted to all executives are shown in the following table:

Year ended June 2006 2007 2008 2009 2010 EPS (cents per share) 90.9 108.8 134.9 150.7 164.0 Total dividends (cents per share) 59.0 74.0 92.0 104.0 115.0 Market capitalisation ($ million) 22,822 33,322 30,453 31,906 33,733 No. of options granted to executives (million) 6.9 8.3 9.0 5.6 4.1 No. of executives granted options 1,464 1,730 1,961 2,410 2,262

Fair value per option ($) – Total weighted 2.22 4.68 8.90 4.96 4.02 Fair value per option ($) – TSR 1.93 3.76 8.32 4.76 3.27 Fair value per option ($) – EPS 2.50 5.60 9.48 5.15 4.77

No. of performance rights granted to executives (million) - - 1.6 1.2 1.1 Fair value per performance right ($) – Total weighted - - 24.34 21.55 19.42 Fair value per performance right ($) – TSR - - - 18.83 13.17 Fair value per performance right ($) – EPS - - - 23.66 24.74 Fair value per performance right ($) – Retention - - 24.34 24.89 24.49 No. of executives granted performance rights - - 182 2,416 2,267 Share price (closing) ($) 19.36 27.60 25.02 25.96 27.40

F-35 REMUNERATION REPORT continued 9. Directors and Executives The following is a list of the Non-executive Directors and key management personnel of Woolworths Limited and their positions during the year:

Position title

Executive Directors Michael Gerard Luscombe Managing Director and Chief Executive Officer Thomas (Tom) William Pockett Finance Director

Chairman James Alexander Strong Chairman of the Board, member of the Audit, Risk Management and Compliance Committee, member of the People Policy Committee and member of the Nomination Committee

Non-Executive Directors John Frederick Astbury Non-executive Director, Chairman of the Audit, Risk Management and Compliance Committee (since July 2010) and member of the Nomination Committee. Director of Hydrox Holdings Pty Ltd and Chairman of its Audit Risk Management and Compliance Committee

Roderick Sheldon Deane Non-executive Director, Chairman of the People Policy Committee and member of the Nomination Committee

Diane Jennifer Grady Non-executive Director, member of the Audit, Risk Management and Compliance Committee and Nomination Committee

Leon Michael L’Huillier Non-executive Director, Chairman of the Woolworths Group Superannuation Plan’s Policy Committee and member of the People Policy Committee and Nomination Committee. Director of ALH Group Pty Ltd and Chairman of its Audit Committee

Ian John Macfarlane Non-executive Director, member of the Audit, Risk Management and Compliance Committee and member of the Nomination Committee

Alison Mary Watkins Non-executive Director, formerly Chairman of the Audit, Risk Management and Compliance Committee (until July 2010) and member of the People Policy Committee and member of the Nomination Committee

Executives Julie Coates Director of BIG W Greg Foran Director of Food, Liquor and Petrol Andrew Hall Director Corporate and Public Affairs Peter Horton Group General Counsel and Company Secretary Grant O’Brien Chief Operating Officer Australian Food & Petrol Kim Schmidt Director Human Resources

Non-executive Directors do not consider themselves part of management.

Mr R.Umbers and Mr M.Hamnett are also included as key management personnel to satisfy the Corporations Act reporting requirements.

F-36 REMUNERATION REPORT continued Remuneration Tables

Set out in the following table is the remuneration for the Non-executive Directors and Key management personnel of Woolworths Limited and its subsidiary during the financial year ended 27 June 2010.

Share based TotalProportion of Options & Retirement allowance (4) 2010 Short-term employee benefits Post-employment Other long- payments remuneration Performance benefits term benefits performance Rights as a % of Salary and Short-term cash bonus Non-monetary Superannuation Long service related % Total Opening Indexation Retirement fees benefits(1) leave Remuneration Balance required Allowance Balance Paid % of potential % of potential bonus paid bonus forfeited

$$ $ $ $ % $ $

Non-Executive Directors J Astbury*(2) 311,738 - - - 1,253 14,461 - - 327,452 - - - - - R Deane 251,812 - - - 1,253 14,461 - - 267,526 - - 492,501 20,334 512,835 D Grady 230,625 - - - 1,253 14,461 - - 246,339 - - - - - L L’Huillier(3) 356,187 - - - 1,253 14,461 - - 371,901 - - - - - J Strong 615,000 - - - 1,253 14,461 - - 630,714 - - - - - A Watkins* 274,188 - - - 1,253 14,461 - - 289,902 - - - - - I Macfarlane 230,625 - - - 1,253 14,461 - - 246,339 - - - - -

Executive Directors M Luscombe 2,209,817 2,548,205 75% 25% 31,852 510,576 63,815 2,966,152 8,330,417 66.2% 35.6% - - - T Pockett 1,177,925 1,193,815 70% 30% 20,515 138,083 22,269 1,467,059 4,019,666 66.2% 36.5% - - -

Executives J Coates 703,083 152,439 30% 70% 24,294 81,168 14,057 353,307 1,328,348 38.1% 26.6% - - - G Foran 912,945 685,878 79% 21% 23,845 130,174 18,013 353,307 2,124,162 48.9% 16.6% - - - A Hall 351,941 152,439 73% 27% 28,970 25,000 6,201 217,540 782,091 47.3% 27.8% - - - P Horton 546,563 234,002 73% 27% 25,900 53,482 9,928 254,053 1,123,928 43.4% 22.6% - - - G O'Brien 674,319 406,504 73% 27% 26,091 118,000 18,781 416,338 1,660,033 49.6% 25.1% - - - K Schmidt 571,288 312,005 73% 27% 24,024 25,000 11,323 285,512 1,229,152 48.6% 23.2% - - - Total 9,418,056 5,685,287 214,262 1,182,710 164,387 6,313,268 22,977,970 492,501 20,334 512,835

M Hamnett(5) 761,845 479,101 68% 32% 21,871 50,000 28,491 268,572 1,609,880 46.4% 16.7% - - - R Umbers(5) 768,914 286,746 69% 31% 24,532 25,000 14,676 541,850 1,661,717 49.9% 32.6% - - - * These fees include fees sacrificed for the purchase of shares in the Company under the Non-executive Directors’ Share Plan. (1) Non-monetary benefits include the cost to the Company of motor vehicles, fringe benefits tax and other items where applicable, in addition to the deemed premium in respect of the Directors’ and Officers’ Indemnity insurance. (2) Included in the table above, Mr J.Astbury received an additional fee of $62,800 from Oct 2009 to June 2010 as a Director of Hydrox Holdings Pty Ltd and $19,312 from Oct 09 to June 2010 as Chairman of its Audit Committee. (3) Included in the table above, Mr. L’Huillier receives an additional fee of $82,400 per annum as a Director of ALH Group Pty Ltd and $25,750 per annum as Chairman of its Audit Committee. (4) These numbers represent the current year apportionment of the fair value of unvested options and performance rights, on a pro-rata basis over the total vesting period. (5) Mr R.Umbers and Mr M.Hamnett were also included as Key management personnel to satisfy the Corporations Act reporting requirements.

F-37 REMUNERATION REPORT continued

Set out in the following table is the remuneration for the Non-executive Directors and Key management personnel of Woolworths Limited and its subsidiary during the financial year ended 28 June 2009.

Share based TotalProportion of Options & Retirement allowance payments (3) remuneration Performance 2009 Short-term employee benefits Post-employment Other long- performance Rights as a % of benefits term benefits related % Total Salary and Short-term cash bonus Non-monetary Superannuation Long service Remuneration Opening Indexation Re tir e m e nt fees benefits(1) leave Balance required Allow ance Balance Paid % of % of potential potential bonus paid bonus forfeited $$ $ $ $ % $$

Non-Executive Directors J Astbury* 222,917 - - - 1,317 13,745 - - 237,979 0.0% - - - - R Deane 243,093 - - - 1,317 13,745 - - 258,155 0.0% - 470,227 22,274 492,501 D Grady 222,917 - - - 1,317 13,745 - - 237,979 0.0% - - - - L L’Huillier(2) 346,667 - - - 1,317 13,745 - - 361,729 0.0% - - - - J Strong 595,000 - - - 1,317 13,745 - - 610,062 0.0% - - - - A Watkins* 264,583 - - - 1,317 13,745 - - 279,645 0.0% - - - - I Macfarlane 222,917 - - - 1,317 13,745 - - 237,979 0.0% - - - -

Executive Directors M Luscombe 2,044,307 3,037,720 92% 8% 33,114 444,341 150,949 2,617,336 8,327,767 67.9% 31.4% - - - T Pockett 1,021,906 1,424,795 87% 13% 22,080 266,733 31,936 1,203,169 3,970,619 66.2% 30.3% - - -

Executives N Onikul 670,397 466,063 90% 10% 24,082 217,420 62,912 371,869 1,812,743 46.2% 20.5% - - - P Smith 483,654 150,273 31% 69% 75,591 114,000 24,145 266,511 1,114,174 37.4% 23.9% - - - J Coates 688,955 516,738 96% 4% 25,571 50,000 20,140 549,424 1,850,828 57.6% 29.7% - - - R Umbers 734,649 481,284 86% 14% 29,015 50,000 15,261 845,987 2,156,196 61.6% 39.2% - - - G Foran 949,148 723,193 92% 8% 34,807 164,413 35,755 560,674 2,467,990 52.0% 22.7% - - - Total 8,711,110 6,800,066 253,479 1,403,122 341,098 6,414,970 23,923,845 470,227 22,274 492,501

* These fees include fees sacrificed for the purchase of shares in the Company under the Non-executive Directors’ Share Plan. (1) Non-monetary benefits include the cost to the Company of motor vehicles, fringe benefits tax and other items where applicable, in addition to the deemed premium in respect of the Directors’ and Officers’ Indemnity insurance. (2) Included in the table above, Mr. L’Huillier receives an additional fee of $80,000 per annum as a Non-executive Director and $25,000 per annum as Chairman of the Audit Committee of ALH Group Pty Limited. (3) These numbers represent the current year apportionment of the fair value of unvested options and performance rights, on a pro-rata basis over the total vesting period.

F-38 REMUNERATION REPORT continued 10.1 Chief Executive Officer The CEO’s service agreement has effect from 1 October 2006 and is a rolling contract. The service agreement provides for 12 months notice of termination on the part of the company and 6 months notice on the part of the CEO. In addition the Company may invoke a restraint period of up to 12 months following separation, preventing the CEO from engaging in any business activity with major competitors of Woolworths. The CEO will not be entitled to any termination payment other than: Fixed Remuneration for the duration of the notice period (or payment in lieu of working out the notice period); Pro rated Short Term Incentive Plan payment; Any accrued statutory entitlements; and Any Long Term Incentive Plan entitlements in accordance with the Plan rules. The Company retains the right to terminate the CEO employment without notice for a number of reasons such as dishonesty, serious or persistent breach of duty or serious or persistent neglect of duty.

Short Term Incentive Plan The Short Term Incentive Plan (STIP) provides for a maximum annual payment of 130% of Fixed Remuneration. The actual payment will be calculated with regard to achievement of key performance indicators agreed annually with the Board. The performance indicators are based on a combination of detailed measurements of corporate and financial performance and the implementation of strategic operational objectives.

Long Term Incentive Plan The CEO is a participant in the Woolworths LTIP. At the 2006 Annual General Meeting shareholder approval was given for up to a maximum of 1,500,000 options to be granted to the CEO comprising annual grants in 2006, 2007 and 2008. At the 2008 Annual General Meeting shareholder approval was given for up to a maximum of 1,500,000 options or a combination of options and performance rights to an equivalent value to be granted to the CEO over three years commencing with the 2010 financial year. For the 2006 and 2007 grants, the same performance hurdles and conditions that apply under the Woolworths LTIP apply to options allocated to the CEO, except that 50% of the allocation vests and becomes exercisable three years from the effective date of the grant subject to meeting the performance hurdles. The remaining 50% of the allocation vests and becomes exercisable after five years in accordance with the prescribed conditions. For the 2008 and 2009 grants, the same performance hurdles and conditions that apply under the Woolworths LTIP apply to the allocation made to the CEO. 10.2 All Other Executives Since 2002, LTIP participation has been offered subject to executives entering into Service Agreements with the Company. The Service Agreements detail the components of remuneration paid to executives but do not prescribe how remuneration levels are to be modified from year to year. They do not provide for a fixed term although these Service Agreements can be terminated on specified notice. For all of the executives, the Company is required to give a minimum of two months’ notice however, the Company retains the right to terminate any Service Agreement immediately in a number of circumstances including fraud, dishonesty, breach of duty or improper conduct. All executives are required to provide the Company with a minimum of four weeks notice of termination. In addition, for all executives and LTIP participants, the Company may elect to invoke a restraint period not exceeding 12 months.

F-39 REMUNERATION REPORT continued All executives are entitled to receive their statutory leave entitlements and superannuation benefits upon termination. In relation to incentive plans on termination, where an executive has resigned, STIP is paid only if the executive is employed on the last day of the financial year. In relation to LTIP, the treatment of vested and unvested options, in all instances of separation, remains subject to the discretion of the Board in accordance with the Plan rules. 11. NON-EXECUTIVE DIRECTORS’ REMUNERATION 11.1 Non-executive Directors’ remuneration policy and structure Non-executive Directors’ fees are determined by the Board within the aggregate amount approved by shareholders. The current maximum aggregate amount which may be paid in Directors’ fees, as approved at the Annual General Meeting on 16 November 2007 is $3,000,000 per annum. No Directors’ fees are paid to Executive Directors. During the financial year ended 27June 2010, the amount of Directors’ base fees paid to each Non- executive Director was increased to $206,000 per annum effective from 1 September 2009. The Chairman receives a multiple of three times this amount. Following is a summary of base and committee fees for the last two financial years:

2009 2010 Committee Fees Chair Member Chair Member Woolworths Limited 600,000 200,000 618,000 206,000 Audit, Risk Management and 50,000 25,000 51,500 25,750 Compliance Committee People Policy Committee 35,000 17,500 36,050 18,025 Woolworths Group Superannuation 25,000 25,750 Plan ALH Group Pty. Ltd. 80,000 82,400 ALH Audit Committee 25,000 25,750 Hydrox Holdings Pty. Ltd 80,000 82,400 Hydrox Audit Committee 25,000 25,750

In addition to the above fees, an overseas Directors’ Allowance of $10,990 was also provided to any Non- executive Directors’ residing outside Australia, representing the additional time and cost involved in attending to Board and Board Committee responsibilities. External remuneration consultants provided advice on the structure and level of Non-executive Directors’ fees. The advice takes into consideration the fees paid to Non-executive Directors of Australian listed corporations, the size and complexity of the Company’s operations and the responsibilities and workload requirements of Directors. No element of the remuneration of any Non-executive Director is dependent on the satisfaction of a performance condition. The increase of 3% for Non-Executive Directors was less than recommended by the external consultants but was consistent with the overall salary increase awarded to non-EBA employees of the Company. 11.2 Non-executive Director Share Plan The Non-executive Director Share Plan (‘NEDSP’) was established following approval by shareholders at the Company’s Annual General Meeting on 26 November 1999. The NEDSP allows Non-executive Directors to forego some of their future pre-tax Directors’ fees to acquire shares in the Company at prevailing market prices on the Australian Securities Exchange. The rules of the NEDSP are virtually identical to the Woolworths Executive Management Share Plan as described in Note 24. Following September 2008, no further shares have been purchased and the NEDSP has been suspended.

F-40 REMUNERATION REPORT continued 11.3 Non-executive Directors’ retirement benefits cease Directors’ Retirement Deeds, which were approved by shareholders in November 1998 entitled each Non-executive Director (appointed prior to January 2004) to receive an allowance on retirement as a Director (“Allowance”) after a minimum period of service. The Board determined that it should implement changes to Non-executive Director remuneration consistent with developing market practice and guidelines by discontinuing the on-going accrual of benefits under the existing retirement benefits arrangements on 1 August 2006. The benefits accrued to that date are indexed by reference to the bank bill rate or have been rolled into a defined benefit superannuation fund until retirement occurs. With the cessation of the retirement benefits, all Non-executive Directors (other than the Chairman) receive the same base fees. 11.4 Remuneration tables for Non-executive Directors For the financial year ended 27 June 2010 details of the remuneration of the Non-executive Directors are set out at section 9 of this report. 11.5 Shareholdings of Non-executive Directors For the financial year ended 27 June 2010 details of shareholdings by Non-executive Directors is set out at section 7.6 of this report. 11.6 Appointment Letters, Deeds of Access, Insurance and Indemnity, Disclosure Deeds The Company and each of the Non-executive Directors have entered into an Appointment Letter together with a Deed of Access, Insurance and Indemnity and a Disclosure Deed (as required under the ASX Listing Rules). The Appointment Letter covers the key aspects of the duties, role and responsibilities of Non-executive Directors. Non-executive Directors are not appointed for a specific term and their appointment may be terminated by notice from the Director or otherwise pursuant to sections 203B or 203D of the Corporations Act, 2001.

ENVIRONMENTAL REGULATION Except as set out below, the operations of the Group are not subject to any particular and significant environmental regulation under a law of the Commonwealth of Australia or of any of its States or Territories. The Woolworths Petrol operations are subject to regulations and standards governing the construction and operation of the facilities relating to the storage and dispensing of petroleum products. The Group may also from time to time be subject to various State and Local Government food licensing requirements and environmental and town planning regulations incidental to the development of shopping centre sites. As outlined in the Managing Director’s Report the Group has implemented a number of environmental initiatives. The Group has not incurred any significant liabilities under any environmental legislation. DIRECTORS’ AND OFFICERS’ INDEMNITY/INSURANCE (i) The Constitution of the Company provides that the Company may indemnify (to the maximum extent permitted by law) in favour of each Director of the Company, the Company Secretary, directors and secretaries of related bodies corporate of the Company, and previous directors and secretaries of the Company and its related bodies corporate (“Officers”), against any liability to third parties (other than related Woolworths Group companies) incurred by such Officers unless the liability arises out of conduct involving a lack of good faith. The indemnity includes costs or expenses incurred by an Officer in successfully defending proceedings or in connection with an application in which the court grants relief to the specified persons under the Corporations Act, 2001; (ii) Each Director has entered into a Deed of Indemnity and Access which provides for indemnity against liability as a Director, except to the extent of indemnity under an insurance policy or where prohibited by statute. The Deed also entitles the Director to access Company documents and records, subject to undertakings as to confidentiality; and

F-41 DIRECTORS’ AND OFFICERS’ INDEMNITY/INSURANCE continued (iii) During or since the end of the financial period, the Company has paid or agreed to pay a premium in respect of a contract of insurance insuring Officers (and any persons who are Officers in the future and employees of the Company or its subsidiaries) against certain liabilities incurred in that capacity. Disclosure of the total amount of the premiums and the nature of the liabilities in respect of such insurance is prohibited by the contract of insurance.

AUDITOR’S INDEPENDENCE DECLARATION The auditor’s independence declaration is included on page 62 of the annual report. NON-AUDIT SERVICES During the year, Deloitte Touche Tohmatsu, the Company’s auditors, have performed certain other services in addition to their statutory duties. The Board is satisfied that the provision of those non-audit services during the year provided by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 or as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks or rewards. Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in Note 4 to the financial statements.

F-42 ROUNDING OF AMOUNTS The Company is of a kind referred to in Australian Securities and Investments Commission Class Order 98/0100 dated 10 July 1998 pursuant to section 341(1) of the Corporations Act 2001 relating to the ‘rounding off’ of amounts in the Financial Report and Directors’ Report. In accordance with that Class Order, amounts therein have been rounded off to the nearest tenth of a million dollars except where otherwise indicated. This Report is made out in accordance with a Resolution of the Directors of the Company on 7 September 2010.

James Strong Michael Luscombe Chairman Managing Director and Chief Executive Officer

F-43 AUDITOR’S DECLARATION

F-44 INCOME STATEMENTS Consolidated Woolworths Limited 2010 2009 2010 2009 52 weeks 52 weeks 52 weeks 52 weeks Note $m $m $m $m

Revenue from the sale of goods 2a 51,694.3 49,594.8 37,006.9 35,607.0 Other operating revenue 2a 90.5 103.0 81.8 84.4 Revenue from operations 51,784.8 49,697.8 37,088.7 35,691.4 Cost of sales (38,391.2) (36,974.4) (27,460.6) (26,586.1) Gross profit 13,393.6 12,723.4 9,628.1 9,105.3 Other revenue 2b 179.3 148.4 117.1 97.0 Branch expenses (8,165.4) (7,800.4) (5,651.9) (5,381.8) Administration expenses (2,325.4) (2,255.9) (1,861.0) (1,853.8) Earnings before interest and tax 3,082.1 2,815.5 2,232.3 1,966.7 Financial expense 3 (238.5) (235.2) (233.9) (226.9) Financial income 3 27.0 46.0 274.1 314.8 Net financing (cost)/benefit (211.5) (189.2) 40.2 87.9 Net profit before income tax 2,870.6 2,626.3 2,272.5 2,054.6 expense Income tax expense 5a (832.6) (766.3) (655.3) (606.3) Profit after income tax expense 2,038.0 1,860.0 1,617.2 1,448.3

Net profit attributable to: Equity holders of the parent entity 2,020.8 1,835.7 1,617.2 1,448.3 Non-controlling interest 17.2 24.3 - - 2,038.0 1,860.0 1,617.2 1,448.3 Earnings per share (EPS) Basic EPS (cents per share) 20 164.01 150.71 - - Diluted EPS (cents per share) 20 163.17 149.69 - -

Weighted average number of shares 20 1,232.1 1,218.0 - - used in the calculation of basic EPS (million)

The income statements should be read in conjunction with the Notes to the Financial Statements set out on pages 97 to 183.

F-45 STATEMENTS OF COMPREHENSIVE INCOME Consolidated Woolworths Limited 2010 2009 2010 2009 52 weeks 52 weeks 52 weeks 52 weeks Note $m $m $m $m

Profit for the period 2,038.0 1,860.0 1,617.2 1,448.3 Other comprehensive income Movement in translation of foreign operations 50.7 (12.5) - - taken to equity Movement in the fair value of investments in (4.0) (20.5) 1.4 (11.0) equity securities Movement in fair value of cash flow hedges (36.3) 112.9 (36.3) 112.9 Transfer to income statement cash flow hedges 126.3 (223.5) 126.3 (223.5) Actuarial gains/(losses) on defined benefit plans 1.7 (67.4) 1.7 (66.8) Tax effect of items recognised directly to equity (34.9) 60.8 (27.5) 53.0 Other comprehensive income for the period (net 103.5 (150.2) 65.6 (135.4) of tax) Total comprehensive income for the period 2,141.5 1,709.8 1,682.8 1,313.0

Attributable to: Equity holders of the parent 2,124.3 1,685.6 1,682.8 1,313.0 Non-controlling interest 17.2 24.2 - - 2,141.5 1,709.8 1,682.8 1,313.0

Income tax on other comprehensive income Before tax Tax Net of tax Consolidated (expense)/ benefit For the year ended 27 June 2010

Movement in translation of foreign operations taken to 50.7 (7.4) 43.3 equity Movement in the fair value of investments in equity (4.0) - (4.0) securities Gain/(loss) in cash flow hedges taken to equity (36.3) 11.0 (25.3) Gain/(loss) in cash flow hedges taken to income statement 126.3 (37.9) 88.4 Actuarial gains/(losses) on defined benefit plans 1.7 (0.6) 1.1 Total of items recognised directly in equity 138.4 (34.9) 103.5

Before tax Tax Net of tax Consolidated (expense)/ For the year ended 28 June 2009 benefit

Movement in translation of foreign operations taken to equity (12.5) 7.5 (5.0) Movement in the fair value of investments in equity securities (20.5) - (20.5) Gain/(loss) in cash flow hedges taken to equity 112.9 (33.9) 79.0 Gain/(loss) in cash flow hedges taken to income statement (223.5) 66.9 (156.6) Actuarial gains/(losses) on defined benefit plans (67.4) 20.3 (47.1) Total of items recognised directly in equity (211.0) 60.8 (150.2)

The consolidated statement of comprehensive income should be read in conjunction with the Notes to the Financial Statements set out on pages 97 to 183.

F-46 STATEMENTS OF COMPREHENSIVE INCOME continued

Income tax on other comprehensive income Before tax Tax Net of tax Woolworths Limited (expense)/ benefit For the year ended 27 June 2010

Movement in translation of foreign operations taken to - - - equity Movement in the fair value of investments in equity 1.4 - 1.4 securities Gain/(loss) in cash flow hedges taken to equity (36.3) 11.0 (25.3) Gain/(loss) in cash flow hedges taken to income statement 126.3 (37.9) 88.4 Actuarial gains/(losses) on defined benefit plans 1.7 (0.6) 1.1 Total of items recognised directly in equity 93.1 (27.5) 65.6

Before tax Tax Net of tax Woolworths Limited (expense)/ For the year ended 28 June 2009 benefit

Movement in translation of foreign operations taken to equity - - - Movement in the fair value of investments in equity securities (11.0) - (11.0) Gain/(loss) in cash flow hedges taken to equity 112.9 (33.9) 79.0 Gain/(loss) in cash flow hedges taken to income statement (223.5) 66.9 (156.6) Actuarial gains/(losses) on defined benefit plans (66.8) 20.0 (46.8) Total of items recognised directly in equity (188.4) 53.0 (135.4)

The consolidated statement of comprehensive income should be read in conjunction with the Notes to the Financial Statements set out on pages 97 to 183.

F-47 BALANCE SHEETS Consolidated Woolworths Limited 2010 2009 2010 2009 Note $m $m $m $m Current assets Cash 713.4 762.6 459.1 574.4 Trade and other receivables 8 916.8 664.2 1,451.4 1,254.4 Inventories 3,438.8 3,292.6 2,354.9 2,285.9 Assets held for sale 10 37.3 36.9 14.1 14.1 Other financial assets 9 92.7 102.9 92.7 102.9 Total current assets 5,199.0 4,859.2 4,372.2 4,231.7 Non-current assets Trade and other receivables 8 13.3 2.7 5,868.2 5,604.6 Other financial assets 9 132.3 155.4 3,410.7 3,270.8 Property, plant and equipment 10 7,639.1 6,653.9 3,977.1 3,654.0 Intangibles 11 5,071.0 4,933.1 507.0 485.9 Deferred tax assets 5d 432.6 480.6 317.3 353.0 Total non-current assets 13,288.3 12,225.7 14,080.3 13,368.3 Total assets 18,487.3 17,084.9 18,452.5 17,600.0 Current liabilities Trade and other payables 12 5,278.9 5,110.0 7,656.8 7,468.1 Borrowings 14 871.7 188.6 793.8 142.4 Current tax liabilities 5c 199.0 279.5 160.1 232.5 Other financial liabilities 13 24.7 99.3 24.7 99.3 Provisions 16 779.1 737.2 612.0 588.9 Total current liabilities 7,153.4 6,414.6 9,247.4 8,531.2 Non-current liabilities Borrowings 14 2,670.4 2,986.3 2,668.0 2,984.8 Other financial liabilities 13 236.7 78.4 159.4 78.4 Provisions 16 416.3 362.3 376.5 326.6 Other 192.8 186.0 158.6 152.8 Total non-current liabilities 3,516.2 3,613.0 3,362.5 3,542.6 Total liabilities 10,669.6 10,027.6 12,609.9 12,073.8 Net assets 7,817.7 7,057.3 5,842.6 5,526.2 Equity Issued capital 17 3,784.4 3,858.6 3,784.4 3,858.6 Shares held in trust 17 (41.2) (51.2) (41.2) (51.2) Reserves 18 (28.0) (173.5) 291.4 183.8 Retained earnings 19 3,855.2 3,178.6 1,808.0 1,535.0 Equity attributable to the members of Woolworths Limited 7,570.4 6,812.5 5,842.6 5,526.2 Non-controlling interest 247.3 244.8 - - Total equity 7,817.7 7,057.3 5,842.6 5,526.2

The balance sheets should be read in conjunction with the Notes to the Financial Statements set out on pages 97 to 183.

F-48 CASH FLOW STATEMENTS Consolidated Woolworths Limited 2010 2009 2010 2009 52 weeks 52 weeks 52 weeks 52 weeks $m $m $m $m Cash flows from operating activities Receipts from customers 55,664.6 53,184.3 38,657.4 37,364.2 Receipts from vendors and tenants 45.5 41.6 4.8 4.8 Payments to suppliers and employees (51,803.5) (49,575.2) (35,786.2) (34,631.8) Interest and costs of finance paid (260.5) (257.4) (254.5) (248.3) Interest received 10.7 13.0 218.0 238.0 Income tax paid (896.9) (802.1) (815.4) (722.1) Net cash provided by operating activities 2,759.9 2,604.2 2,024.1 2,004.8 Cash flows from investing activities Proceeds from the sale of property, plant and equipment 55.4 18.7 0.6 6.3 Proceeds from the sale of investments 4.2 - 4.2 - Payments for capital expenditure (1,817.7) (1,678.2) (874.8) (1,031.4) Payment for purchase of investments (1.9) - (160.8) (52.3) (Repayments)/advances (to)/from related entities - - (210.4) (411.9) Dividend received 12.5 7.8 55.1 90.1 Payments for purchase of businesses (212.6) (154.5) (25.6) (28.5) Net cash (used in)/provided by investing activities (1,960.1) (1,806.2) (1,211.7) (1,427.7) Cash flows from financing activities Proceeds from issue of equity securities 73.8 66.7 73.8 66.7 Proceeds from issue of equity securities in subsidiary to non controlling interests 79.5 - - - Payments for share buyback (294.6) - (294.6) - Proceeds from external borrowings 12,833.8 13,619.3 10,118.8 12,364.6 Repayment of external borrowings (12,347.7) (13,458.5) (9,664.8) (11,977.3) Dividends paid (1,164.6) (1,012.4) (1,164.6) (1,012.4) Dividends paid to non-controlling interest (16.8) (29.2) - - Repayment of employee share plan loans 3.7 5.2 3.7 5.2 Net cash (used in) financing activities (832.9) (808.9) (927.7) (553.2) Net (decrease)/increase in cash held (33.1) (10.9) (115.3) 23.9 Effects of exchange rate changes on balance of cash held in foreign currencies (0.2) 3.0 - - Cash at the beginning of the financial period 746.7 754.6 574.4 550.5 Cash at the end of the financial period 713.4 746.7 459.1 574.4 Non-cash financing and investing activities In accordance with the Company’s Dividend Reinvestment Plan (DRP) 14% (2009: 14%) of the dividend paid was reinvested in the shares of the company Dividend (Note 6) 1,349.2 1,174.3 1,349.2 1,174.3 Issuance of shares under the DRP (184.6) (161.9) (184.6) (161.9) Net cash outflow 1,164.6 1,012.4 1,164.6 1,012.4 The cash flow statements should be read in conjunction with the Notes to the Financial Statements set out on pages 97 to 183.

F-49 CASH FLOW STATEMENTS continued

Consolidated Woolworths Limited Reconciliation of net cash provided by operating 2010 2009 2010 2009 activities to profit from ordinary activities after income 52 weeks 52 weeks 52 weeks 52 weeks tax expense $m $m $m $m

Profit from ordinary activities after income tax expense 2,038.0 1,860.0 1,617.2 1,448.3 Depreciation/amortisation charged to income statement 797.7 729.4 573.4 532.3 Difference between defined benefit expense and cash contributions (3.6) (4.1) (3.6) (3.7) (Profit)/Loss on sale of property, plant and equipment 11.4 14.2 7.4 5.5 (Increase)/decrease in deferred tax asset 19.2 3.6 8.7 (2.2) Increase/(decrease) in current tax liability (83.1) (50.8) (72.4) (35.0) (Increase)/decrease in trade and other receivables (85.9) (15.4) (41.7) (5.0) (Increase)/decrease in inventories (94.2) (273.1) (68.4) (152.2) Increase/(decrease) in trade creditors 82.9 169.9 (17.8) 162.3 Increase/(decrease) in sundry creditors and provisions 66.1 160.0 56.6 103.1 Other non-cash movements 11.4 10.5 (35.3) (48.6) Net cash provided by operating activities 2,759.9 2,604.2 2,024.1 2,004.8 Acquisition of businesses Details of the aggregate cash outflow relating to the acquisition of businesses and the aggregate assets and liabilities of those businesses as at the date of the acquisition were as follows: - property, plant and equipment 77.6 75.6 2.5 0.9 - inventories 47.0 5.7 0.7 3.7 - liquor and gaming licences and other intangibles 23.4 52.5 3.1 12.8 - brand names 8.4 - - - - cash acquired 2.4 0.5 - - - other asset - 4.8 - 2.2 - deferred tax asset 5.8 - 0.5 - - receivables 97.1 - - - - interest bearing liabilities (15.2) - - - - accounts payable (66.9) - - - - provisions (13.8) (0.3) (0.4) - - other liabilities (10.1) (1.2) (0.8) - Net assets acquired 155.7 137.6 5.6 19.6 Goodwill on acquisition 47.7 28.2 18.0 8.9 Fair value of net assets acquired 203.4 165.8 23.6 28.5 Analysed as follows: Consideration - equity issued - 6.4 - - - contingent consideration (1.7) 4.4 - - - cash paid 205.1 155.0 23.6 28.5 Total consideration 203.4 165.8 23.6 28.5 Cash paid 205.1 155.0 23.6 28.5 Add: costs of acquisition and deferred consideration 9.9 - 2.0 - Less: cash balances acquired (2.4) (0.5) - - Cash consideration paid this year 212.6 154.5 25.6 28.5 Details of acquisitions are shown at Note 30

F-50 CASH FLOW STATEMENTS continued

Reconciliation of cash For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows: 2010 2009 Cash 713.4 762.6 Bank overdraft - (15.9) 713.4 746.7

F-51 STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED Issue d Shares Hedging Foreign Remuneration Asse t Equity Instrument Retained Equity Non- Total Capital held in trust Reserve Currency Reserve Revaluation Reserve Earnings attributable controlling Translation Reserve to member Interest Reserve of Woolworths Consolidated Limited $M $M $M $M $M $M $M $M $M $M $M

Balance at 29 June 2009 3,858.6 (51.2) 44.5 (305.6) 157.5 16.4 (86.3) 3,178.6 6,812.5 244.8 7,057.3 Profit after income tax expense ------2,020.8 2,020.8 17.2 2,038.0 Other comprehensive income for the period (net of tax) - - 63.1 43.3 - - (4.0) 1.1 103.5 - 103.5

Total comprehensive income for the period (net of tax) - - 63.1 43.3 - - (4.0) 2,021.9 2,124.3 17.2 2,141.5

Dividend paid ------(1,349.2) (1,349.2) (16.8) (1,366.0) Issue of shares as a result of options exercised under executive share option plans 73.8 ------73.8 - 73.8 Issue of shares as a result of dividend reinvestment plan 184.6 ------184.6 - 184.6 Issue of shares under employee share plan - 10.0 ------10.0 - 10.0 Shares bought back (326.3) ------(326.3) - (326.3) Issue of shares to non controlling interest (NCI) ------79.5 79.5 Issue of shares as consideration for acquired entity ------Compensation on share based payments - - - - 43.1 - - - 43.1 - 43.1 Reclassification of NCI for recognition of financial liability ------(77.4) (77.4) Other (6.3) ------3.9 (2.4) - (2.4) Balance at 27 June 2010 3,784.4 (41.2) 107.6 (262.3) 200.6 16.4 (90.3) 3,855.2 7,570.4 247.3 7,817.7

For the year ended 28 June 2009 Issue d Shares Hedging Foreign Remuneration Asse t Equity Instrument Retained Equity Non- Total Capital held in trust Reserve Currency Reserve Revaluation Reserve Earnings attributable controlling Equity Translation Reserve to member Interest Reserve of Woolworths Consolidated Limited $M $M $M $M $M $M $M $M $M $M $M

Balance at 30 June 2008 3,627.1 (60.0) 122.1 (300.6) 94.0 16.4 (65.8) 2,559.7 5,992.9 242.4 6,235.3 Profit after income tax expense ------1,835.7 1,835.7 24.3 1,860.0 Other comprehensive income for the period (net of tax) - - (77.6) (5.0) - - (20.5) (47.0) (150.1) (0.1) (150.2)

Total comprehensive income for the period (net of tax) - - (77.6) (5.0) - - (20.5) 1,788.7 1,685.6 24.2 1,709.8

Dividend paid ------(1,174.3) (1,174.3) (21.8) (1,196.1) Issue of shares as a result of options exercised under executive share option plans 66.7 ------66.7 - 66.7 Issue of shares as a result of dividend reinvestment plan 161.9 ------161.9 - 161.9 Issue of shares under employee share plan - 8.8 ------8.8 - 8.8 Issue of shares as consideration for acquired entity 6.4 ------6.4 - 6.4 Compensation on share based payments - - - - 63.5 - - - 63.5 - 63.5 Other (3.5) ------4.5 1.0 - 1.0 Balance at 28 June 2009 3,858.6 (51.2) 44.5 (305.6) 157.5 16.4 (86.3) 3,178.6 6,812.5 244.8 7,057.3

F-52 STATEMENT OF CHANGES IN EQUITY

WOOLWORTHS LIMITED Issue d Shares Hedging Foreign Remuneration Asse t Equity Instrument Retained Non- Total Capital held in trust Reserve Currency Reserve Revaluation Reserve Earnings controlling Translation Reserve Interest Woolworths Limited Reserve $M $M $M $M $M $M $M $M $M $M

Balance at 29 June 2009 3,858.6 (51.2) 44.5 - 157.5 - (18.2) 1,535.0 - 5,526.2 Profit after income tax expense ------1,617.2 - 1,617.2 Other comprehensive income for the period (net of tax) - - 63.1 - - - 1.4 1.1 - 65.6

Total comprehensive income for the period (net of tax) 63.1 - - - 1.4 1,618.3 - 1,682.8 Dividend paid ------(1,349.2) - (1,349.2) Issue of shares as a result of options exercised under executive share option plans 73.8 ------73.8 Issue of shares as a result of dividend reinvestment plan 184.6 ------184.6 Issue of shares under employee share plan - 10.0 ------10.0 Share bought back (326.3) ------(326.3) Compensation on share based payments - - - - 43.1 - - - - 43.1 Other (6.3) ------3.9 - (2.4) Balance at 27 June 2010 3,784.4 (41.2) 107.6 - 200.6 - (16.8) 1,808.0 - 5,842.6

Issue d Shares Hedging Foreign Remuneration Asse t Equity Instrument Retained Non- Total Capital held in trust Reserve Currency Reserve Revaluation Reserve Earnings controlling Equity Translation Reserve Interest Woolworths Limited Reserve $M $M $M $M $M $M $M $M $M $M

Balance at 30 June 2008 3,627.1 (60.0) 122.1 - 94.0 - (7.2) 1,303.3 - 5,079.3 Profit after income tax expense ------1,448.3 - 1,448.3 Other comprehensive income for the period (net of tax) - - (77.6) - - - (11.0) (46.8) - (135.4) Total comprehensive income for the period (net of tax) (77.6) - - - (11.0) 1,401.5 - 1,312.9 Dividend paid ------(1,174.3) - (1,174.3) Issue of shares as a result of options exercised under executive share option plans 66.7 ------66.7 Issue of shares as a result of dividend reinvestment plan 161.9 ------161.9 Issue of shares under employee share plan - 8.8 ------8.8 Issue of shares as consideration for acquired entity 6.4 ------6.4 Compensation on share based payments - - - - 63.5 - - - - 63.5 Other (3.5) ------4.5 - 1.0 Balance at 28 June 2009 3,858.6 (51.2) 44.5 - 157.5 - (18.2) 1,535.0 - 5,526.2

F-53 NOTES TO THE FINANCIAL STATEMENTS

1 SIGNIFICANT ACCOUNTING POLICIES

Woolworths Limited (the “Company”) is a company domiciled in Australia. The Financial Report of the Company for the 52 weeks ended 27 June 2010 comprises the Company and its subsidiaries (together referred to as the “consolidated entity”).

The Financial Report was authorised for issue by the Directors on 7 September 2010.

(A) Statement of compliance

The Financial Report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the law.

The Financial Report includes the separate financial statements of the Company and the consolidated financial statements of the consolidated entity. Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘A-IFRS’). Compliance with A-IFRS ensures that the financial statements and notes of the company and consolidated entity comply with International Financial Reporting Standards (‘IFRS’).

The Corporations Amendment (Corporate Reporting Reform) Act 2010 (CRRA) was given Royal Assent on 28 June 2010 and became effective from 1 July 2010. As a result of the decision being made after the Group’s year end, this amendment will not apply. CRRA amended the Corporations Act 2001 (the Act) so that those entities reporting under Chapter 2M that present consolidated financial statements are no longer required to present parent entity financial statements.

(B) Basis of preparation

The Financial Report is presented in Australian dollars.

The Financial Report has been prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments, financial instruments held for trading and financial assets valued through other comprehensive income and other financial liabilities.

The Company is of a kind referred to in ASIC Class Order 98/0100 dated 10 July 1998 and in accordance with the Class Order, amounts in the Financial Report and Directors Report have been rounded off to the nearest million dollars, unless otherwise stated.

In the current year, the consolidated entity has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the ‘AASB’) that are relevant to its operations and effective for annual reporting periods beginning on or after 30 June 2009. The adoption of these new and revised accounting standards other than AASB 3 Business Combinations, has not resulted in any significant impact on the financial results as the standards and amendments are primarily concerned with disclosures. The Group has adopted AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards during the period. These amendments relate primarily with the presentation of the financial statements and have resulted in the inclusion of two new financial statements being the Statement of Comprehensive Income and the Statement of Changes in Equity. AASB 3 Business Combinations was applied for the first time in the current period. It applies prospectively to business combinations for which the acquisition date is on or after 29 June 2009 and alters the manner in which business combinations and changes in ownership interest in subsidiaries are accounted for. Accordingly, while its adoption has no impact on previous acquisitions made by the Group, the application of the Standard has affected the accounting for the acquisition of Danks Holdings Limited and all other acquisitions in the current period with all acquisition expenses now recorded in the Consolidated Income Statement. The Group has adopted AASB 8 Operating Segments and AASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 8 with effect from 29 June 2009. AASB 8 requires operating segments to be identified the basis of internal reports about components of the Group that are regularly reviewed by the chief

F-54 NOTES TO THE FINANCIAL STATEMENTS continued

1 SIGNIFICANT ACCOUNTING POLICIES continued operating decision maker in order to allocate resources to the segments and to assess its performance. In contrast, the predecessor Standard (AASB 114 Segment reporting) required an entity to identify two sets of segments (business and geographical) using a risks and rewards approach, with the entity’s system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments. As a result of applying AASB 8 the number of individually reported segments has expanded to include Australian Food and Liquor, New Zealand Supermarkets and Petrol (previously reported under Supermarkets) and the measure of segment profit has been defined as earnings before interest and tax (EBIT). The comparative period has been restated to reflect these changes. The group has early adopted AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 during the current period. AASB 9 provides an option to designate and measure an investment in equity instruments at fair value with changes recognised in other comprehensive income with only dividends being recognised in profit or loss. The group has elected to apply this option. The application of this standard affects the accounting for the investments in The Warehouse Group Limited and Australian Leisure and Entertainment Property Management Limited (“ALE Property Group”), both of which have been designated as fair value through other comprehensive income. These changes have been adopted retrospectively with no impact on retained earnings in the current or previous financial years.

The group has adopted AASB 2009-2 Amendments to Australian Accounting standards – Improving Disclosures about Financial Instruments. Amendments to AASB 7 Financial Instruments require enhanced disclosures about fair value measurements and liquidity risk. This includes additional disclosure of any change in the method of determining fair value and reason for change and establishing a disclosure three-level hierarchy for fair value measurement.

Issued standards and interpretations not early adopted

The following standards and Amendment to Standards were available for early adoption and were applicable to the consolidated entity but have not been applied to the consolidated entity in these financial statements. Adoption of these standards is not expected to have a significant impact on the financial results of the Company or the consolidated entity:

- AASB 2009-5 Further Amendments to Australia Accounting Standards Arising from the annual improvement process. A number of the amendments are largely technical, clarifying particular terms, or eliminating unintended consequences. The amendments made to the guidance to AASB 118 Revenue regarding determining whether an entity is acting as agent or principal have no explicit application date and is applicable immediately. This standard applies to annual reporting periods beginning on or after 1 January 2010. - AASB 2009-8 Amendments to Australian Accounting Standards – Group Cash-Settled Share-base Payment Transactions. This requirement is effective for annual reporting periods beginning on or after 1 January 2010. - AASB 2009-10 Amendments to Australian Accounting Standards Classification of Rights Issues. Applies to annual reporting periods beginning on or after 1 February 2010. - AASB 2009-14 Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement. This standard makes limited-application to Interpretation 14 AASB 119. This standard applies to annual reporting periods beginning on or after 1 January 2011. - AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project. This standard provides clarification on the measurement of non-controlling interests in a business combination and transition requirements. This standard applies to annual reporting periods beginning on or after 1 July 2010. - AASB 2010-4 Further to Amendments to Australian Accounting Standard arising from the Annual Improvements Project. Key amendments in this standard includes clarification on financial statement disclosures (AASB7) and significant events and transactions in interim reports (AASB 134), as well as clarification to Interpretation 13 – fair value of award credits. This standard applies to annual reporting periods beginning on or after 1 January 2011.

F-55 NOTES TO THE FINANCIAL STATEMENTS continued

1 SIGNIFICANT ACCOUNTING POLICIES continued The accounting policies set out below have been applied consistently to all periods presented in these financial statements. The preparation of a Financial Report in conformity with Australian Accounting Standards requires management to make judgments, estimates and assumptions that effect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

(C) Basis for consolidation (i) Subsidiaries In these financial statements, Woolworths Limited is referred to as “the Company” and the “Consolidated” financial statements are those of the consolidated entity, comprising Woolworths Limited and its subsidiaries.

Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the Financial Report from the date that control commences until the date that control ceases.

Interests in subsidiaries are accounted for at cost in Woolworths Limited’s financial statements. Non-controlling interests in the equity and results of subsidiaries are shown as a separate item in the consolidated Financial Report.

(ii) Transactions eliminated on consolidation Intragroup balances, and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated Financial Report.

(D) Foreign currency Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Australian dollars at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

Exchange differences are recognised in the profit or loss in the period in which they arise except that: - exchange differences on transactions entered into in order to hedge certain foreign currency risks are reported initially in the hedging reserve to the extent the hedge is effective (refer Note 1(F)); and - exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur, and which form part of the net investment in a foreign operation, are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of the net investment.

Financial statements of foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to Australian dollars at foreign exchange rates ruling at the balance sheet date. Revenue and expense items are translated at the average exchange rates for the period. Exchange differences arising on translation of foreign operations, if any, are recognised in the foreign currency translation reserve and recognised in consolidated profit and loss on disposal of the foreign operation.

F-56 NOTES TO THE FINANCIAL STATEMENTS continued

1 SIGNIFICANT ACCOUNTING POLICIES continued

(E) Derivative financial instruments The consolidated entity uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. In accordance with its treasury policy, the consolidated entity does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

Derivative financial instruments are recognised initially at fair value on the date a derivative contract is entered into. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss unless the derivatives qualify for hedge accounting whereby the timing of the recognition of any resultant gain or loss depends on the nature of the hedge relationship (refer Note 1(F)).

The fair value of interest rate swaps is the estimated amount that the consolidated entity would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the time to maturity. The fair value of forward exchange contracts is their quoted market price at the balance sheet date, being the present value of the quoted forward price.

(F) Hedging (i) Cash flow hedge A cash flow hedge is a hedge of an exposure to uncertain future cash flows. A cash flow hedge results in the uncertain future cash flows being hedged back into fixed amounts. Woolworths’ cash flow hedges include: Interest rate swap contracts that convert floating interest rate payments on borrowings into fixed amounts. Cross currency interest rate swaps (‘CCIRS’) that convert foreign currency denominated principal and interest rate payments on offshore loans into fixed Australian dollar amounts. Forward foreign exchange contracts that convert foreign currency denominated payments to offshore suppliers and income of offshore subsidiaries into Australian dollar amounts.

Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecasted transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity.

When the forecasted transaction subsequently results in the recognition of a non-financial asset or non-financial liability, the associated cumulative gain or loss is removed from equity and included in the initial cost or other carrying amount of the non-financial asset or liability. If a hedge of a forecasted transaction subsequently results in the recognition of a financial asset or a financial liability, then the associated gains and losses that were recognised directly in equity are reclassified into profit or loss in the same period or periods during which the asset acquired or liability assumed affects profit or loss (i.e. when interest income or expense is recognised).

The ineffective part of any derivative designated as a hedge is recognised immediately in the income statement.

When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction still is expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, then the cumulative unrealised gain or loss recognised in equity is recognised immediately in the income statement.

Gains or losses removed from equity during the period in relation to interest rate hedge instruments are recognised within “net finance costs” in the income statement.

100

F-57 NOTES TO THE FINANCIAL STATEMENTS continued

1 SIGNIFICANT ACCOUNTING POLICIES continued

(ii) Fair value hedge A fair value hedge is a hedge of a fair value (i.e. “mark-to-market”) exposure arising on a recognised balance sheet asset or liability. A fair value hedge results in the fair value exposure being offset. Woolworths’ fair value hedges include:

- Cross currency interest rate swaps (CCIRS) that convert fixed interest rate foreign currency borrowings into floating rate Australian dollar borrowings. The CCIRS offsets the foreign currency and fixed interest rate fair value exposures arising on those borrowings.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that is attributable to the hedged risk.

Hedge accounting is discontinued when the hedge instrument expires or is sold, terminated, exercised, or no longer qualifies for hedge accounting. The adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised to profit or loss from that date.

(iii) Hedge of monetary assets and liabilities When a derivative financial instrument is used to hedge economically the foreign exchange exposure of a recognised monetary asset or liability, hedge accounting is not applied and any gain or loss on the hedging instrument is recognised in the income statement.

(G) Property, plant and equipment Freehold warehouse, retail, development and other properties are held at the lower of cost less accumulated depreciation and recoverable value (refer Note 1(M)).

Borrowing, holding and development costs on property under development are capitalised until completion of the development.

Land and buildings held for sale are classified as current assets and are valued at the lower of cost and fair value less costs to sell and are not depreciated.

Items of plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses (refer Note 1(M)).

The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of overheads. The cost of self-constructed assets and acquired assets includes estimates of the costs of dismantling and removing the items and restoring the site on which they are located where it is probable that such costs will be incurred and changes in the measurement of existing liabilities recognised for these costs resulting from changes in the timing or outflow of resources required to settle the obligation or from changes in the discount rate.

Property that is being constructed or developed for future use is classified as development properties and stated at the lower of cost less accumulated depreciation and recoverable value (refer Note 1 (M)) until construction or development is complete.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

(i) Leased assets Leases whereby the consolidated entity assumes substantially all of the risks and rewards of ownership are classified as finance leases. Property acquired by way of a finance lease is stated at an amount equal to the lower of its fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation (see below) and impairment losses (refer Note 1 (M)). Lease payments are accounted for as described in Note 1(T).

101

F-58 NOTES TO THE FINANCIAL STATEMENTS continued

1 SIGNIFICANT ACCOUNTING POLICIES continued

(ii) Depreciation

(a) Buildings, plant and equipment Buildings and plant comprising lifts, air conditioning, fire protection systems and other installations are depreciated on a straight-line basis over the estimated useful life of the asset to the consolidated entity. Estimates of remaining useful lives are made on a regular basis for all assets.

The expected useful lives are as follows: 2010 2009 Buildings 25–40 years 25-40 years Plant and equipment* 3-10 years 3-10 years * Some immaterial assets have a useful life of greater than 10 years.

(b) Leasehold improvements The cost of leasehold improvements is amortised over the remaining period of the individual leases or the estimated useful life of the improvement to the consolidated entity, whichever is the shorter. Leasehold improvements held at the reporting date are amortised over a maximum period of 20 years for retail properties and 40 years for hotels.

(c) Plant and equipment Plant, equipment and shop fittings (including application software) are depreciated on a straight-line basis over the estimated useful life of the asset to the consolidated entity. Estimates of remaining useful lives are made on a regular basis for all assets.

The expected useful lives are as follows: 2010 2009 Plant and equipment* 2.5-10 years 2.5-10 years * Some immaterial assets have a useful life of greater than 10 years

(d) Proceeds from sale of assets The gross proceeds of asset sales are recognised at the date that an unconditional contract of sale is exchanged with the purchaser. The net gain/(net loss) is recorded in other income/(other expenses).

(H) Goodwill Business combinations prior to 27 June 2004 As part of its transition to A-IFRS, the consolidated entity elected to restate only those business combinations that occurred on or after 27 June 2004. In respect of business combinations prior to 27 June 2004, goodwill is included on the basis of its deemed cost, which represents the amount recorded under previous Australian GAAP.

Business combinations since 27 June 2004 All business combinations are accounted for by applying the purchase method. Entities and businesses acquired are accounted for using the cost method of accounting, whereby fair values are assigned to all the identifiable underlying assets acquired and liabilities assumed, including contingent liabilities, at the date of acquisition.

Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Goodwill is not amortised, but tested for impairment annually and whenever an indication of impairment exists, (refer Note 1(M)). Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units. Any impairment is recognised directly in the income statement and is not subsequently reversed.

(I) Other intangibles (i) Brand names Brand names recognised by the company generally have an indefinite useful life and are not amortised. Each period, the useful life of this asset is reviewed to determine whether events and circumstances continue to support an

102

F-59 NOTES TO THE FINANCIAL STATEMENTS continued

1 SIGNIFICANT ACCOUNTING POLICIES continued indefinite useful life assessment for the asset. Such assets are tested for impairment in accordance with the policy stated in Note 1 (M).

(ii) Liquor licences Liquor licences are valued at cost. Liquor licences are considered to have an indefinite useful life. As a consequence, no amortisation is charged. They are tested for impairment annually and whenever an indication of impairment exists. Any impairment is recognised immediately in profit or loss.

(iii) Gaming licences Gaming licences are valued at cost. Gaming licences are considered to have an indefinite useful life. As a consequence, no amortisation is charged. They are tested for impairment annually and whenever an indication of impairment exists. Any impairment is recognised immediately in profit or loss.

(iv) Research and development Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge and understanding, is recognised in the profit and loss as an expense as incurred.

Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible and the consolidated entity has sufficient resources to complete development. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads.

Other development expenditure is recognised in the income statement as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses (refer Note 1(M)).

(v) Other intangible assets Other intangible assets that are acquired by the consolidated entity are stated at cost. These are considered to have an indefinite useful life. As a consequence, no amortisation is charged. Expenditure on internally generated goodwill and brand names is recognised in profit or loss as an expense as incurred.

(J) Financial assets Financial assets valued though other comprehensive income The consolidated entity’s investments in equity securities are designated as financial assets valued through other comprehensive income. The investments are initially measured at fair value net of transaction costs.

Subsequent to initial recognition the equity investments are measured at fair value with any change recorded through the equity instrument reserve. Dividend income is recognised in profit or loss in accordance with AASB 118 Revenue. This treatment has been selected as the equity investments in the Warehouse Group Limited and the Australian Leisure and Entertainment Property Management Limited (“ALE Property Group”), are deemed to be strategic equity investments.

Trade and other receivables Trade and other receivables are stated at their cost less impairment losses (refer Note 1 (M)).

(K) Inventories Short life retail stocks are valued at the lower of average cost and net realisable value.

Long life retail stocks are valued using the retail inventory method to arrive at cost. The retail inventory method determines cost by reducing the value of the inventory by the appropriate gross margin percentage which takes into account markdown prices.

Warehouse stocks are valued at the lower of average cost and net realisable value.

103

F-60 NOTES TO THE FINANCIAL STATEMENTS continued

1 SIGNIFICANT ACCOUNTING POLICIES continued These methods of valuation are considered to achieve a valuation reasonably approximating the lower of cost and net realisable value. Cost includes all purchase related rebates, settlement discounts and other costs incurred to bring inventory to its condition and location for sale.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(L) Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the consolidated entity’s cash management are included as a component of cash and cash equivalents for the purpose of the statements of cash flows.

(M) Impairment The carrying amounts of the consolidated entity’s tangible assets, excluding inventories (refer Note 1(K)) and deferred tax assets (refer Note 1 (V)), are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated (refer below).

For goodwill and other intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated annually and whenever there is an impairment indicator.

An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit (‘CGU’) exceeds its recoverable amount. Impairment losses are recognised in the income statement unless the asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through the income statement.

(i) Calculation of recoverable amount The recoverable amount of the consolidated entity’s investments in held-to-maturity securities and receivables is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted.

Impairment of receivables is not recognised until objective evidence is available that a loss event has occurred. Significant receivables are individually assessed for impairment.

Impairment testing of significant receivables that are not assessed as impaired individually is performed by placing them into portfolios of significant receivables with similar risk profiles and undertaking a collective assessment of impairment.

Non-significant receivables are not individually assessed. Instead, impairment testing is performed by placing non- significant receivables in portfolios of similar risk profiles, based on objective evidence from historical experience adjusted for any effects of conditions existing at each balance date.

The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash- generating unit to which the asset belongs.

Impairment losses recognised in respect of a CGU will be allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to reduce the carrying amount of the other assets in the unit on a pro rata basis to their carrying amounts.

104

F-61 NOTES TO THE FINANCIAL STATEMENTS continued

1 SIGNIFICANT ACCOUNTING POLICIES continued (ii) Reversals of impairment An impairment loss in respect of a held-to-maturity security or receivable is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(N) Capital (i) Debt and equity instruments Debt and equity instruments are classified as either liabilities or equity in accordance with the substance of the contractual arrangement.

(ii) Transaction costs on the issue of equity instruments Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.

(iii) Interest and dividends Interest and dividends are classified as expenses or as distributions of profit consistent with the balance sheet classification of the related debt or equity instruments or component parts of compound instruments.

(O) Borrowings Borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, borrowings are stated at amortised cost with any difference between cost and redemption value recognised in the income statement over the period of the borrowings

Borrowing costs directly attributable to qualifying assets are capitalised as part of the cost of those assets.

(P) Employee benefits The Company sponsors a Superannuation Plan (the ‘Plan’) that provides accumulation type benefits to permanent salaried employees and their dependants on retirement or death. Defined benefits have been preserved for members of certain former superannuation funds sponsored by the Company, which are now provided for in the Plan.

The Company’s commitment in respect of accumulation benefits under the Plan is limited to making the specified contributions in accordance with the Rules of the Plan and/or any statutory obligations.

(i) Defined contribution plans Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred.

(ii) Defined benefit plans Woolworths is the employer sponsor of a defined benefit superannuation fund. Under A-IFRS, the employer sponsor is required to recognise a liability (or asset) where the present value of the defined benefit obligation, adjusted for unrecognised past service cost, exceeds (is less than) the fair value of the underlying net assets of the fund (hereinafter referred to as the “defined benefit obligation”).

The consolidated entity’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value.

105

F-62 NOTES TO THE FINANCIAL STATEMENTS continued

1 SIGNIFICANT ACCOUNTING POLICIES continued The discount rate is the yield at the balance sheet date on government bonds that have maturity dates approximating the terms of the consolidated entity’s obligations. The calculation is performed by a qualified actuary using the projected unit credit method.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the income statement on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the income statement.

All movements in the defined benefit obligation are recognised in the income statement except actuarial gains and losses. All actuarial gains and losses as at 28 June 2004, the date of transition to A-IFRS, were recognised. Actuarial gains and losses that arise subsequent to 28 June 2004 are recognised in full in retained earnings in the period in which they occur and are presented in the Statement of Comprehensive Income.

When the calculation results in plan assets exceeding liabilities to the consolidated entity, the recognised asset is limited to the net total of any unrecognised actuarial losses and past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan.

(iii) Long-term service benefits The consolidated entity’s net obligation in respect of long-term service benefits, other than pension plans, is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is calculated using expected future increases in wage and salary rates including related on-costs and expected settlement dates and is discounted using the rates attached to the Commonwealth Government bonds at the balance sheet date which have maturity dates approximating the terms of the consolidated entity’s obligations.

(iv) Share-based payment transactions Equity settled share based payments form part of the remuneration of employees (including executives) of both the consolidated entity and Company.

The consolidated entity and Company recognise the fair value at the grant date of equity settled share based payments (such as options) as an employee benefit expense proportionally over the vesting period with a corresponding increase in equity. Fair value is measured at grant date using a Monte-Carlo simulation option pricing model performed by an independent valuer which takes into account market based performance conditions. The fair value per instrument is multiplied by the number of instruments expected to vest based on achievement of non- market based performance conditions (e.g. service conditions) to determine the total cost. This total cost is recognised as an employee benefit expense proportionally over the vesting period during which the employees become unconditionally entitled to the instruments.

On vesting and over the vesting period the amount recognised as an employee benefit expense will be adjusted to reflect the actual number of options that vest except where forfeiture is due to failure to achieve market based performance conditions.

The consolidated entity operated an Employee Share Plan (ESP) whereby it provided interest free loans to selected employees to purchase shares in the Company. All shares acquired under the ESP are held by a wholly owned subsidiary of Woolworths as trustee of the share plan trust. Dividends paid by Woolworths are used to repay the loan (after payment of a portion of the dividend to the employee to cover any tax liabilities). The loans are limited recourse and if the employee elects not to repay the loan, the underlying shares are sold to recover the outstanding loan balance. These have been accounted for as an in-substance option in the financial statements of the consolidated entity and the Company.

106

F-63 NOTES TO THE FINANCIAL STATEMENTS continued

1 SIGNIFICANT ACCOUNTING POLICIES continued (v) Wages and salaries and related employee benefits Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave and sick leave when it is probable that settlement will be required and they are capable of being reliably measured. Provisions made in respect of employee benefits expected to be settled within 12 months are recognised and are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Provisions made in respect of employee benefits which are not expected to be settled within 12 months are recognised and measured as the present value of expected future payments to be made in respect of services provided by employees up to period end. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. The expected future cash flows are discounted, using interest rates attaching to Commonwealth Government guaranteed securities which have terms to maturity, matching their estimated timing as closely as possible.

(Q) Provisions A provision is recognised in the balance sheet when the consolidated entity has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

(i) Restructuring Provision for restructuring is recognised when the consolidated entity has developed a detailed formal plan for the restructuring and has either: i entered into firm contracts to carry out the restructuring; or ii raised a valid expectation in those affected by the restructuring that the restructuring will occur.

(ii) Onerous contracts A provision for onerous contracts is recognised when the expected benefits to be derived by the consolidated entity from a contract are lower than the unavoidable cost of meeting its obligations under the contract.

(iii) Self-insurance The consolidated entity provides for self-insured liabilities relating to workers' compensation and public liability claims. The provisions for such liabilities are based on independent actuarial assessments, which consider numbers, amounts and duration of claims, and allow for future inflation and investment returns.

Allowance is included for injuries which occurred before the balance sheet date, but where the claim is expected to be notified after the reporting date.

The provision is discounted using the Commonwealth Government bond rate with a maturity date approximating the term of the consolidated entity’s obligation.

(iv) Warranty The consolidated entity provides for anticipated warranty costs when the underlying products or services are sold. The provision is based upon historical warranty data.

107

F-64 NOTES TO THE FINANCIAL STATEMENTS continued

1 SIGNIFICANT ACCOUNTING POLICIES continued (v) Make good The consolidated entity has certain operating leases that require the asset to be returned to the lessor in its original condition. These obligations relate to wear and tear on the premises and not dismantling obligations. The operating lease payments do not include an element for repairs/overhauls. A provision for refurbishment costs is recognised over the period of the lease, measured at the expected cost of refurbishment at each reporting date.

(R) Financial liabilities (i) Trade and other payables These amounts represent liabilities for goods and services provided to the consolidated entity and Company which were unpaid at the end of the period. The amounts are unsecured and are usually settled within 45 days of recognition.

(ii) Put options over Non-controlling interests The consolidated entity’s put option over non-controlling interests is classified as a financial liability. The financial liability is initially measured at fair value. While the non-controlling interest continues to have access to voting rights and dividends in the subsidiary, the non-controlling interest continues to be attributed a share of profits. Subsequently changes in the financial liability are recorded directly in equity.

(S) Revenue recognition In general, revenue is recognised only when it is probable that the economic benefits comprising the revenue will flow to the entity, the flow can be reliably measured and the entity has transferred the significant risks and rewards of ownership.

In addition to these general criteria, specific revenue recognition criteria apply as follows:

(i) Sales revenue Sales revenue represents the revenue earned from the provision of products and rendering of services to parties external to the consolidated entity and Company. Sales revenue is only recognised when the significant risks and rewards of ownership of the products, including possession, have passed to the buyer and for services when a right to be compensated has been attained and the stage of completion of the contract can be reliably measured.

Revenue is recognised on a commission only basis where Woolworths acts as an agent rather than a principal in the transaction. Revenue is recognised net of returns.

Revenue from the sale of customer gift cards is recognised when the card is redeemed and the customer purchases the goods by using the card.

(ii) Rental income Rental income is recognised on a straight line basis over the term of the lease.

(iii) Financing income Interest income is recognised in the income statement as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date the entity’s right to receive payment is established which in the case of quoted securities is the ex-dividend date.

(T) Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

(i) Operating lease payments Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease.

108

F-65 NOTES TO THE FINANCIAL STATEMENTS continued

1 SIGNIFICANT ACCOUNTING POLICIES continued Fixed rate increases to lease rental payments, excluding contingent or index based rental increases, such as Consumer Price Index, turnover rental and other similar increases, are recognised on a straight line basis over the lease term.

An asset or liability arises for the difference between the amount paid and the lease expense brought to account on a straight line basis.

Lease incentives received are recognised in the income statement as an integral part of the total lease expense and spread over the lease term.

(U) Net financing costs Net financing costs comprise interest payable on borrowings calculated using the effective interest method, interest receivable on funds invested, dividend income, foreign exchange gains and losses, and gains and losses on hedging instruments that are recognised in the income statement (refer Note 1(F)). (V) Income tax

Income tax in the income statement for the periods presented comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Where it arises from the initial accounting for a business combination, it is taken into account in the determination of goodwill or excess.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date and any adjustment to tax payable in respect of previous years. Current tax for current and prior periods is recognised as a liability to the extent it is unpaid.

Deferred tax is provided using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. In accordance with AASB 112 Income Taxes, the following temporary differences are not provided for: goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future where the consolidated entity is able to control the reversal of the temporary differences.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences or unused tax losses and tax offsets can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the consolidated entity intends to settle its current tax assets and liabilities on a net basis.

109

F-66 NOTES TO THE FINANCIAL STATEMENTS continued

1 SIGNIFICANT ACCOUNTING POLICIES continued

Tax consolidation The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 1 July 2002 and are therefore taxed as a single entity from that date. The head entity within the tax consolidated group is Woolworths Limited. Tax expense/income, deferred tax assets and deferred tax liabilities arising from temporary differences of the members of the tax consolidated group are recognised by each member of the tax consolidated group where the member would have been able to recognise the deferred tax asset or deferred tax liability on a stand alone basis.

The head entity, in conjunction with other members of the tax consolidated group, has entered into a tax funding agreement which sets out the funding obligations of members of the tax consolidated group in respect of income tax amounts. The tax funding arrangements require payments to the head entity equal to the current tax liability assumed by the head entity.

In addition, the head entity is required to make payments equal to the current tax asset assumed by the head entity in circumstances where the subsidiary member would have been entitled to recognise the current tax asset on a stand alone basis.

These tax funding arrangements result in the head entity recognising an inter-entity receivable/payable equal in amount to the tax liability/asset assumed. The inter-entity receivable/payable amounts are at call.

In respect of carried forward tax losses brought into the group on consolidation by subsidiary members, the head entity will pay the subsidiary member for such losses when these losses are transferred to the Woolworths Limited tax consolidated group, where the subsidiary member would have been entitled to recognise the benefit of these losses on a stand alone basis.

(W) Assets held for sale Immediately before classification as held for sale, the measurement of the assets (and all assets and liabilities in a disposal group) is brought up to date in accordance with applicable Accounting Standards. Then, on initial classification as “held for sale”, assets and disposal groups are recognised at the lower of carrying amount and fair value less costs to sell.

Impairment losses on initial classification as held for sale are included in profit or loss, even when there is a revaluation. The same applies to gains and losses on subsequent remeasurement.

(X) Goods and services tax Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the tax authorities are included as a current asset or liability in the balance sheet.

Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the tax authorities are classified as operating cash flows.

110

F-67 NOTES TO THE FINANCIAL STATEMENTS continued

1 SIGNIFICANT ACCOUNTING POLICIES continued

(Y) Operating Segment reporting (i) Business Segments Segment information is presented in respect of the consolidated entity’s reportable segments which were identified on the basis of the consolidated entity’s internal reporting on the components of the Group. The identified reportable segments are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and assess its performance. Inter-segment pricing is determined on an arm’s length basis.

Retail Operations o Australian Food and Liquor – procurement of Food and Liquor and products for resale to customers in Australia o New Zealand Supermarkets – procurement of Food and Liquor and products for resale to customers in New Zealand o Petrol – procurement of Petroleum products for resale to customers in Australia o BIG W – procurement of discount general merchandise products for resale to customers in Australia o Consumer Electronics – procurement of electronic products for resale to global customers Hotels – provision of leisure and hospitality services including food and alcohol, accommodation, entertainment and gaming.

The Unallocated group consists of the group’s other operating segments that are not separately reportable (including Home Improvement) as well as various support functions including Property and Head office costs.

(ii) Geographical information Segment assets are based on the geographical location of the assets. Woolworths Limited operates in Australia, New Zealand, Hong Kong and India. The majority of business operations are in Australia and New Zealand. Woolworths operates in New Zealand following the acquisition of Foodland Supermarkets in 2006. The consumer electronics business operates stores based in Australia and New Zealand and has a business venture with TATA in India which operates stores under the Croma brand. The global sourcing office is located in Hong Kong.

(Z) Accounting estimates and judgments Management, together with the Audit, Risk Management and Compliance Committee, determines the development, selection and disclosure of the consolidated entity’s critical accounting policies and estimates and the application of these policies and estimates. The estimates and judgments that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are set out as appropriate in the Notes to the Financial Statements. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates and underlying assumptions are recognised in the period in which the estimate is revised if the revision affects only that period; or in the period and future periods if the revision affects both current and future periods.

111

F-68 NOTES TO THE FINANCIAL STATEMENTS continued

2 PROFIT FROM OPERATIONS

Consolidated Woolworths Limited 2010 2009 2010 2009 52 weeks 52 weeks 52 weeks 52 weeks $m $m $m $m

Profit before income tax expense includes the following items of revenue, income and expense: (a) Operating revenue Revenue from the sale of goods: Third parties 51,694.3 49,594.8 37,006.9 35,607.0 Other operating revenue 90.5 103.0 81.8 84.4 Revenue from operations 51,784.8 49,697.8 37,088.7 35,691.4

(b) Other revenue Rent 45.5 41.6 4.8 4.5 Other 133.8 106.8 112.3 92.5 Total other revenue 179.3 148.4 117.1 97.0

Total revenue 51,964.1 49,846.2 37,205.8 35,788.4

112

F-69 NOTES TO THE FINANCIAL STATEMENTS continued

2 PROFIT FROM OPERATIONS continued

Consolidated Woolworths Limited 2010 2009 2010 2009 52 weeks 52 weeks 52 weeks 52 weeks $m $m $m $m

Depreciation of: Development properties and freehold warehouses retail and other properties 30.5 23.1 2.2 2.0 Plant and equipment 659.5 604.9 490.7 456.5 Amortisation of: Leasehold improvements 102.9 96.8 80.5 73.8 Brand names 4.7 4.6 - - Other intangibles 0.1 - - - Total depreciation and amortisation 797.7 729.4 573.4 532.3

(1) Employee benefits expense 5,969.9 5,724.3 4,535.9 4,338.7

Net loss on disposal of property, plant and equipment 11.4 14.2 7.4 5.5

Operating lease rental expenses: – minimum lease payments 1,390.8 1,313.5 961.7 906.0 – contingent rentals 87.1 96.2 73.5 82.2 Total operating lease rental expense 1,477.9 1,409.7 1,035.1 988.2

(1) Employee benefits expense includes salaries and wages, defined benefit plan expense, defined contribution plan expense, termination benefits, taxable value of fringe benefits, payroll tax, leave entitlements and share-based payments expense.

113

F-70 NOTES TO THE FINANCIAL STATEMENTS continued

3 NET FINANCING COSTS Consolidated Woolworths Limited 2010 2009 2010 2009 52 weeks 52 weeks 52 weeks 52 weeks $m $m $m $m Financial expense Interest expense - other parties (268.6) (252.6) (261.7) (244.2) Less: interest capitalised (1) 30.1 17.4 27.8 17.3 (238.5) (235.2) (233.9) (226.9) Financial income Dividend income Related parties - - 50.5 65.1 Other parties 12.5 7.8 4.6 2.6 Interest income Related parties - - 212.0 230.6 Other parties 11.2 13.0 6.6 7.5 Foreign exchange gain 3.3 25.2 0.4 9.0 27.0 46.0 274.1 314.8 Net financing (cost)/benefit (211.5) (189.2) 40.2 87.9

(1) Weighted average capitalisation rate on funds borrowed generally: 7.23% (2009: 6.76%).

4 AUDITORS’ REMUNERATION

Consolidated Woolworths Limited 2010 2009 2010 2009 52 weeks 52 weeks 52 weeks 52 weeks $m $m $m $m Audit or review of the Financial Report Deloitte Touche Tohmatsu Australia 2.048 1.756 1.310 1.263 Deloitte Touche Tohmatsu network firms 0.296 0.476 - - 2.344 2.232 1.310 1.263

Other non audit services Tax compliance 0.090 0.083 0.090 0.053 Other advisory (1) 0.574 1.107 0.574 1.107 0.664 1.190 0.664 1.160

Total auditors’ remuneration 3.008 3.422 1.974 2.423

(1) Other advisory comprises assistance on various accounting matters and due diligence.

114

F-71 NOTES TO THE FINANCIAL STATEMENTS continued

5 INCOME TAXES

Consolidated Woolworths Limited 2010 2009 2010 2009

52 weeks 52 weeks 52 weeks 52 weeks

$m $m $m $m (a) Income tax recognised in the income statement Tax expense comprises: Current tax expense 818.1 752.0 654.7 597.2 Adjustments recognised in the current year (4.7) 3.5 (8.1) 11.2 in relation to the current tax of prior years

Deferred tax relating to the origination and 19.2 10.8 8.7 (2.1) reversal of temporary differences Total tax expense 832.6 766.3 655.3 606.3

Numerical reconciliation between tax expense and pre-tax net profit The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in the financial statements as follows:

Consolidated Woolworths Limited 2010 2009 2010 2009

52 weeks 52 weeks 52 weeks 52 weeks $m $m $m $m Profit from operations before income tax expense 2,870.6 2,626.3 2,272.5 2,054.6 Income tax using the domestic corporation tax rate of 30% (2009: 30%) 861.2 787.9 681.7 616.4 Non-deductible expenses 5.3 2.4 2.4 1.0 Impact on deferred tax balances from change in company tax rate (0.6) - - - Exempt dividend income (2.4) (2.3) (15.2) (20.3) Investment allowance (20.0) (18.9) (18.3) (18.9) Other (6.2) (6.3) 12.8 16.9 837.3 762.8 663.4 595.1

Under/(over) provided in prior years (4.7) 3.5 (8.1) 11.2 832.6 766.3 655.3 606.3

115

F-72 NOTES TO THE FINANCIAL STATEMENTS continued

5 INCOME TAXES continued

Consolidated Woolworths Limited 2010 2009 2010 2009 52 weeks 52 weeks 52 weeks 52 weeks $m $m $m $m (b) Income tax recognised directly in equity The following current and deferred amounts were charged/(credited) directly to equity during the period:

Current tax liability Transactions charged to foreign currency 0.3 0.1 - - translation reserve Actuarial movements on defined benefits - (0.3) - - plans 0.3 (0.2) - -

Deferred tax Cash flow hedges 26.9 (33.0) 26.9 (33.0) Transactions charged to foreign currency 7.1 (7.6) - - translation reserve Actuarial movements on defined benefits 0.6 (20.0) 0.6 (20.0) plans 34.6 (60.6) 27.5 (53.0)

(c) Current tax assets and liabilities The current tax liability for the consolidated entity of $199.0 million (2009: $279.5 million) and for Woolworths Limited of $160.1 million (2009: $232.5 million) represents the amount of income taxes payable in respect of current and prior financial periods. In accordance with the tax consolidation legislation, Woolworths Limited, as the head entity of the Australian tax consolidated group has assumed the current tax liabilities of the members in the tax consolidated group.

The current tax liability balance for the consolidated entity includes an amount of $37.3 million owing by Australian Leisure and Hospitality Group Limited in respect of prior year amended assessments issued by the ATO. These assessments relate to years when Australian Leisure and Hospitality Group Limited was a member of Fosters Group Limited. These liabilities are covered by indemnities in the sale agreement. Accordingly, a receivable for the same amount has also been recognised.

Consolidated Woolworths Limited 2010 2009 2010 2009 $m $m $m $m (d) Deferred tax balances

Deferred tax assets comprise:

Tax losses – revenue 1.4 1.5 - - Temporary differences 431.2 479.1 317.3 353.0 432.6 480.6 317.3 353.0

116

F-73 NOTES TO THE FINANCIAL STATEMENTS continued

5 INCOME TAXES continued Taxable and Deductable differences arise from the following

Opening Credited/ Credited/ Acquisitions Closing Balance (Charged) (Charged) Balance to income to equity CONSOLIDATED 2010 $m $m $m $m $m Gross deferred tax assets Property plant and 109.4 (8.2) - 0.4 101.6 equipment Provisions and accruals 407.1 (3.5) (0.3) 4.6 407.9 Unrealised foreign 25.7 (1.8) (7.4) - 16.5 exchange differences Recognised tax losses 1.5 (0.1) - - 1.4 Other 4.1 1.2 - - 5.3 547.8 (12.4) (7.7) 5.0 532.7

Gross deferred tax liabilities Intangible assets (14.0) - - - (14.0) Prepayments (4.9) 1.7 - - (3.2) Cash flow hedges (19.2) - (26.9) - (46.1) Other (29.1) (8.5) - 0.8 (36.8) (67.2) (6.8) (26.9) 0.8 (100.1) 480.6 (19.2) (34.6) 5.8 432.6

Opening Credited/ Credited/ Acquisitions Closing Balance (Charged) (Charged) Balance to income to equity WOOLWORTHS $m $m $m $m $m LIMITED 2010 Gross deferred tax assets Property plant and 87.7 (6.9) - - 80.8 equipment Provisions and accruals 288.9 (1.5) (0.6) 0.5 287.3 Other 1.7 (1.6) - - 0.1 378.3 (10.0) (0.6) 0.5 368.2

Gross deferred tax liabilities Prepayments (2.1) 1.0 (1.1) Unrealised foreign (2.1) (0.8) - - (2.9) exchange differences Cash flow hedges (19.2) - (26.9) - (46.1) Other (1.9) 1.1 - - (0.8) (25.3) 1.3 (26.9) - (50.9) 353.0 (8.7) (27.5) 0.5 317.3

117

F-74 NOTES TO THE FINANCIAL STATEMENTS continued

5 INCOME TAXES continued

Opening Credited/ Credited/ Acquisitions Closing Balance (Charged) (Charged) Balance to income to equity CONSOLIDATED 2009 $m $m $m $m $m Gross deferred tax assets Property plant and 128.0 (18.8) 0.2 109.4 equipment - Provisions and accruals 354.6 32.2 20.3 - 407.1 Unrealised foreign 18.9 (0.3) 7.1 25.7 exchange differences Recognised tax losses 2.2 (0.7) - - 1.5 Other 5.1 (1.0) - - 4.1 508.8 11.4 27.6 - 547.8

Gross deferred tax liabilities Intangible assets (14.0) - - - (14.0) Prepayments (0.5) (4.4) - - (4.9) Cash flow hedges (52.3) - 33.1 - (19.2) Other (11.3) (17.8) - - (29.1) (78.1) (22.2) 33.1 - (67.2) 430.7 (10.8) 60.7 - 480.6

Opening Credited/ Credited/ Acquisitions Closing Balance (Charged) (Charged) Balance to income to equity WOOLWORTHS LIMITED $m $m $m $m $m 2009 Gross deferred tax assets Property plant and 86.4 1.3 - 87.7 equipment - Provisions and accruals 262.0 6.9 20.0 - 288.9 Other 4.9 (3.2) - - 1.7 353.3 5.0 20.0 - 378.3 Gross deferred tax liabilities Prepayments (0.2) (1.9) - - (2.1) Unrealised foreign (3.0) 0.9 - (2.1) exchange differences - Cash flow hedges (52.3) - 33.1 - (19.2) Other - (1.9) - - (1.9) (55.5) (2.9) 33.1 - (25.3) 297.8 2.1 53.1 - 353.0

118

F-75 NOTES TO THE FINANCIAL STATEMENTS continued

6 DIVIDENDS

Cents per share Total amount Franked Date of payment 2010 $m Interim 2010 ordinary 53 657.2 100% 23/04/2010 Final 2009 ordinary 56 692.0 100% 09/10/2009 Total 109 1,349.2

Cents per share Total amount Franked Date of payment 2009 $m Interim 2009 ordinary 48 588.3 100% 24/04/2009 Final 2008 ordinary 48 586.0 100% 03/10/2008 Total 96 1,174.3

All dividends are fully franked at a 30% rate. On 26 August 2010, the Board of Directors determined a final dividend in respect of the 2010 year of 62c (2009: 56c) per share 100% franked at a 30% tax rate. The amount that will be paid on 15 October 2010 (2009: 9 October 2009) is expected to be $766.4 million (2009: $692.0 million). As the dividend was declared subsequent to 27 June 2010 no provision has been included as at 27 June 2010. In the opinion of the directors, this dividend was determined in accordance with the amended Corporations Act.

Dividend Reinvestment Plan (The Plan) Under the terms and conditions of the DRP, eligible shareholders may elect to participate in the Plan in respect to all or part of their shareholding, subject to any maximum and/or minimum number of shares to participate in the Plan that the Directors may specify. There is currently no minimum number of shares which a shareholder may designate as participating in the Plan. The maximum number of shares which a shareholder (other than broker's nominees and certain trustees) may designate as participating in the Plan is 20,000.

119

F-76 NOTES TO THE FINANCIAL STATEMENTS continued

6 DIVIDENDS continued Franked dividends

Consolidated Woolworths Limited 2010 2009 2010 2009 $m $m $m $m The franked portions of the dividends proposed as at 27 June 2010 will be franked out of existing franking credits or out of franked credits arising from the payment of income tax in the period ending 26 June 2011.

Franking credits available for the subsequent financial year 30% (2009: 30%) 1,655.9 1,419.8 1,492.7 1,297.1

The above amounts represent the balances of the franking accounts as at the end of the financial period, adjusted for: (a) Franking credits that will arise from the payment of income tax payable at the end of the financial period; (b) Franking debits that will arise from the payment of dividends provided at the end of the financial period.

Franking accounts are presented on a tax paid basis.

The franking account balances reported for the consolidated group are inclusive of $38.5 million (2009: $26.1 million) attributable to the non-controlling interest holders.

120

F-77 NOTES TO THE FINANCIAL STATEMENTS continued

7 SEGMENT DISCLOSURES

The group has six reportable segments, as described below that are the Group’s strategic business units.

The business units offer different products and services and are managed separately because they require different technology and marketing strategies. The following summary describes the operations in each of the Group’s reportable segments:

There are varying levels of integration between the supermarket and hotel reportable segments. This includes the common usage of property and services, and some common administration functions. The accounting policies of the reportable segments are the same as described in note 1.

Information regarding the operations of each segment is included below. Performance is measured based on segment earnings before interest and tax (EBIT). Segment EBIT is measured as management believes that such information is useful in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arms length basis.

Major customers

Revenues from no one single customer amount to greater than 10% of the Group’s revenues.

121

F-78 NOTES TO THE FINANCIAL STATEMENTS continued

7 SEGMENT DISCLOSURES continue

Consumer Australian Food & Liquor (1) New Zealand Supermarkets Petrol BIG W Hotels (3) Unallocated (4) Consolidated Electronics (2)

Segment disclosures 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 Busine ss se gme nts $M $M $M $M $M $M $M $M $M $M $M $M $M $M $M $M

Busine ss se gme nts Sales to customers 34,675.4 32,977.2 4,130.6 4,034.3 5,481.0 5,482.1 4,193.1 4,267.3 1,782.4 1,723.6 1,102.0 1,110.3 329.8 - 51,694.3 49,594.8 Other operating revenue 81.8 84.3 8.7 18.7 ------90.5 103.0 Inter-segment revenue ------0.2 - - 257.7 180.1 257.7 180.3 Segment revenue 34,757.2 33,061.5 4,139.3 4,053.0 5,481.0 5,482.1 4,193.1 4,267.3 1,782.4 1,723.8 1,102.0 1,110.3 587.5 180.1 52,042.5 49,878.1 Eliminations (0.2) (257.7) (180.1) (257.7) (180.3) Unallocated revenue/(expenses) (5) 179.3 148.4 179.3 148.4

Total revenue 34,757.2 33,061.5 4,139.3 4,053.0 5,481.0 5,482.1 4,193.1 4,267.3 1,782.4 1,723.6 1,102.0 1,110.3 509.1 148.4 51,964.1 49,846.2

Segment earnings before interest and tax 2,492.5 2,206.9 190.4 153.9 99.5 87.5 200.0 200.2 31.5 50.8 176.7 218.0 (108.5) (101.8) 3,082.1 2,815.5

Net financing cost (211.5) (189.2)

Profit before tax 2,870.6 2,626.3 Income tax expense (832.6) (766.3) Profit after tax 2,038.0 1,860.0

Segment depreciation and amortisation 457.8 444.2 67.0 54.9 29.5 24.9 72.5 64.1 31.2 30.8 75.4 64.6 64.3 45.9 797.7 729.4

Segment other non cash items 23.9 34.5 5.3 3.8 0.5 0.7 5.1 6.3 0.4 3.0 5.1 3.2 2.2 (19.9) 42.5 31.6

Capital expenditure (6) 646.3 832.4 195.6 220.3 50.7 64.5 129.0 131.0 45.1 54.0 176.9 234.6 711.6 315.1 1,955.2 1,851.9

(1) Australian Food & Liquor comprises of supermarket and liquor stores and wholesale food and liquor in Australia. (2) Consumer Electronics includes Woolworths Wholesale India. (3) Hotels comprise of on-premise liquor sales, food, accommodation, gaming and venue hire. (4) Unallocated comprise of corporate head office, property division and home improvement division. (5) Unallocated revenue comprises of rent and other revenue from operating activities. (6) Capital expenditure is property, plant and equipment and intangible asset additions.

122

F-79 NOTES TO THE FINANCIAL STATEMENTS continued

7 SEGMENT DISCLOSURES continued The consolidated entity operates predominantly in Australia and New Zealand. Intersegment pricing is determined on an arm’s length basis.

Geographical information The Group operates in two principal geographical areas – Australia and New Zealand.

The Group’s revenue from external customers and information about its geographical assets (non-current assets excluding investments in associates, finance lease receivables and ‘other’ financial assets) by geographical location are detailed below:

Australia New Zealand Consolidated 2010 2009 2010 2009 2010 2009 $M $M $M $M $M $M Segment disclosures Geographical segments

Sales to customers 47,293.3 45,266.0 4,401.0 4,328.8 51,694.3 49,594.8 Other operating revenue 81.8 84.3 8.7 18.7 90.5 103.0 Other revenue 158.1 129.9 21.2 18.5 179.3 148.4 Revenue from external customers 47,533.2 45,480.2 4,430.9 4,366.0 51,964.1 49,846.2 Non-current assets (1) 10,076.4 9,128.7 2,773.5 2,592.4 12,849.9 11,721.1

(1) Geographical non-current assets exclude financial instruments (fair value derivatives), deferred tax assets and intercompany receivables.

123

F-80 NOTES TO THE FINANCIAL STATEMENTS continued

8 TRADE AND OTHER RECEIVABLES

Consolidated Woolworths Limited as at as at 2010 2009 2010 2009 $m $m $m $m Current Trade receivables 217.7 105.1 63.8 45.0 Other receivables 473.5 361.4 233.1 212.0 Loans to controlled entities - - 974.0 824.4 Prepayments 225.6 197.7 180.5 173.0 916.8 664.2 1,451.4 1,254.4

Non-current Loans to controlled entities - - 5,867.2 5,602.6 Prepayments 2.3 2.5 1.0 2.0 Other receivables 11.0 0.2 - - 13.3 2.7 5,868.2 5,604.6

Trade and other receivables are presented net of impairment allowance. Impairment provision balance as at 27 June 2010 was $13.7m (2009 $12.7 million). All recovery risk has been provided for in the balance sheet.

9 OTHER FINANCIAL ASSETS Consolidated Woolworths Limited as at as at 2010 2009 2010 2009 $m $m $m $m Current Fair value derivatives Cross Currency swaps 73.1 91.9 73.1 91.9 Interest rate swaps 4.1 - 4.1 - Forward exchange contracts 15.5 11.0 15.5 11.0 92.7 102.9 92.7 102.9

Non-current Unlisted shares at cost - - 3,366.0 3,207.0 Fair value derivatives Cross currency swaps 3.4 - 3.4 - Interest rate swaps 2.4 24.0 2.4 24.0 Listed equity securities at fair value 123.7 130.7 36.4 39.4 Investment in associate 2.1 - 2.1 - Other 0.7 0.7 0.4 0.4 132.3 155.4 3,410.7 3,270.8

124

F-81 NOTES TO THE FINANCIAL STATEMENTS continued

10 PROPERTY, PLANT AND EQUIPMENT

Consolidated Woolworths Limited as at as at 2010 2009 2010 2009 $m $m $m $m Current Assets held for sale (1) 37.3 36.9 14.1 14.1

Non-current Development properties At cost 946.4 515.1 10.8 - Less: Accumulated depreciation (18.6) (11.7) - - 927.8 503.4 10.8 - Freehold warehouse, retail and other properties At cost 1,675.7 1,512.0 54.2 45.8 Less: Accumulated depreciation (101.1) (80.3) (16.0) (13.2) 1,574.6 1,431.7 38.2 32.6 Leasehold improvements At cost 1,889.0 1,627.0 1,280.6 1,080.6 Less: Accumulated amortisation (719.5) (622.6) (426.5) (347.5) 1,169.5 1,004.4 854.1 733.1

Plant and equipment At cost 9,499.7 8,710.8 6,100.8 5,434.7 Less: Accumulated depreciation (5,532.5) (4,996.4) (3,026.8) (2,546.4) 3,967.2 3,714.4 3,074.0 2,888.3

7,639.1 6,653.9 3,977.1 3,654.0 Total property, plant and equipment – net book value 7,676.4 6,690.8 3,991.2 3,668.1

(1) The consolidated entity intends to dispose of certain land and buildings over the next 12 months.

125

F-82 NOTES TO THE FINANCIAL STATEMENTS continued

10 PROPERTY, PLANT AND EQUIPMENT continued

Total property, plant and equipment – net book value An assessment as to the carrying value of Woolworths owned properties as at 27 June 2010 was performed. The basis of the assessment was a combination of external market assessments and/or valuations and Woolworths’ property group assessments. External valuations are obtained every three years. Based on the most recent assessments, a provision for development losses of $111.3 million (2009: $116.8 million) is held as at 27 June 2010.

Reconciliations of the carrying amounts of each class of non-current property, plant and equipment at the beginning and end of the current and previous financial periods are set out below:

Development Freehold Leasehold Plant and Total properties warehouse, improvements equipment retail and other properties Consolidated 2010 $m $m $m $m $m

Carrying amount at start of period 503.4 1,431.7 1,004.4 3,714.4 6,653.9 Additions (excluding additions arising from acquisition of businesses) 440.3 147.3 269.7 921.4 1,778.7 Additions arising from acquisition of businesses - 56.7 0.5 20.4 77.6 Disposals (8.5) (6.4) (2.8) (19.0) (36.7) Depreciation/amortisation expense (8.9) (21.6) (102.9) (659.5) (792.9) Other (1.8) (35.2) (1.5) (18.1) (56.6) Effect of movements in foreign exchange rates 3.3 2.1 2.1 7.6 15.1

Carrying amount at end of period 927.8 1,574.6 1,169.5 3,967.2 7,639.1

Development Freehold Leasehold Plant and Total properties warehouse, retail improvements equipment and other properties Consolidated 2009 $m $m $m $m $m

Carrying amount at start of period 376.8 1,218.6 766.6 3,276.8 5,638.8 Additions (excluding additions arising from acquisition of businesses) 165.0 149.0 333.4 1,046.8 1,694.2 Additions arising from acquisition of businesses - 65.2 0.4 10.0 75.6 Disposals (6.6) (1.7) (2.0) (19.1) (29.4) Depreciation/amortisation expense (5.1) (18.0) (96.8) (604.8) (724.7) Other (26.7) 18.7 2.5 2.3 (3.2) Effect of movements in foreign exchange rates - (0.1) 0.3 2.4 2.6

Carrying amount at end of period 503.4 1,431.7 1,004.4 3,714.4 6,653.9

126

F-83 NOTES TO THE FINANCIAL STATEMENTS continued

10 PROPERTY, PLANT AND EQUIPMENT continued

Development Freehold Leasehold Plant and Total properties warehouse, improvements equipment retail and other properties Woolworths Limited 2010 $m $m $m $m $m

Carrying amount at start of period - 32.6 733.1 2,888.3 3,654.0

Additions (excluding additions arising from acquisition of businesses) - 12.2 203.1 687.3 902.6

Additions arising from acquisition of businesses - - - 2.5 2.5 Disposals - - (1.6) (6.9) (8.5) Depreciation/amortisation expense - (2.2) (80.5) (490.7) (573.4) Other 10.8 (4.4) - (6.5) (0.1)

Carrying amount at end of period 10.8 38.2 854.1 3,074.0 3,977.1

Development Freehold Leasehold Plant and Total properties warehouse, retail improvements equipment and other properties Woolworths Limited 2009 $m $m $m $m $m

Carrying amount at start of period - 30.5 574.0 2,543.3 3,147.8 Additions (excluding additions arising - 4.3 234.0 810.5 1,048.8 from acquisition of businesses)

Additions arising from acquisition of - - - 0.9 0.9 businesses

Disposals - (0.2) (0.9) (10.1) (11.2) Depreciation/amortisation expense - (2.0) (73.8) (456.5) (532.3)

Other - - (0.2) 0.2 -

Carrying amount at end of period - 32.6 733.1 2,888.3 3,654.0

127

F-84 NOTES TO THE FINANCIAL STATEMENTS continued

10 PROPERTY, PLANT AND EQUIPMENT continued

Impairment of tangible assets At balance date the carrying amount of tangible assets is reviewed to determine whether there is an indication that the assets may be impaired. If such an indication exists the recoverable amount of the asset, which is the higher of its fair value less costs to sell and its value in use, is estimated in order to determine the extent of any impairment loss. The recoverable amount has been assessed at the cash generating unit (“CGU”) level, which is the smallest group of assets generating cash flows independent of other CGUs that benefit from the use of the respective tangible asset. The recoverable amount has been determined based on the value in use which is calculated using cash flow projections from the most recent financial budgets approved by management and the Board. The cash flows are discounted to present value using pre-tax discount rates between 13% and 15% (2009:12% and 14%) depending on the nature of the business and the country of operation. This discount rate is derived from the Group’s post-tax weighted average cost of capital. The key assumptions used in the value in use calculations include sales growth, cost of doing business (CODB) reductions and discount rates (which have been estimated as described above). The assumptions regarding sales growth and CODB reductions are based on past experience and expectations of changes in the market.

128

F-85 NOTES TO THE FINANCIAL STATEMENTS continued

11 INTANGIBLES

Consolidated Woolworths Limited as at as at 2010 2009 2010 2009 $m $m $m $m Goodwill 3,078.2 2,991.6 328.3 310.3 Brand names 237.1 230.4 - - Liquor and gaming licences 1,689.5 1,645.3 178.7 175.6 Other 66.2 65.8 - - Total 5,071.0 4,933.1 507.0 485.9

Brand names relate primarily to the supermarket business in New Zealand. These have been assessed for impairment in conjunction with the related goodwill.

Reconciliation of movements in intangibles Goodwill Brand Liquor, Other Total names petrol and intangibles gaming licences Consolidated 2010 $m $m $m $m $m Carrying amount at start of period 2,991.6 230.4 1,645.3 65.8 4,933.1 Additions arising from acquisition of businesses 47.7 8.4 22.9 0.5 79.5 Other acquisitions - - 19.3 - 19.3 Disposals - - - - - Other 0.3 - 2.0 - 2.3 Amortisation - (4.7) - (0.1) (4.8) Effect of movements in foreign exchange rates 38.6 3.0 - - 41.6 Carrying amount at end of period 3,078.2 237.1 1,689.5 66.2 5,071.0

Goodwill Brand Liquor, Other Total names petrol and intangibles gaming licences Consolidated 2009 $m $m $m $m $m Carrying amount at start of period 2,941.4 233.4 1,594.6 65.8 4,835.2 Additions arising from acquisition of businesses 28.2 - 52.5 - 80.7 Other acquisitions - - 1.4 - 1.4 Disposals (0.7) - (3.2) - (3.9) Other 0.1 - - - 0.1 Amortisation - (4.7) - - (4.7) Effect of movements in foreign exchange rates 22.6 1.7 - - 24.3 Carrying amount at end of period 2,991.6 230.4 1,645.3 65.8 4,933.1

129

F-86 NOTES TO THE FINANCIAL STATEMENTS continued

11 INTANGIBLES continued Goodwill Liquor & Total gaming intangibles licences Woolworths Limited 2010 $m $m $m Carrying amount at start of period 310.3 175.6 485.9 Additions arising from acquisition of businesses 18.0 3.1 21.1 Disposals - - - Reclassifications - - - Carrying amount at end of period 328.3 178.7 507.0

Goodwill Liquor & Total gaming intangibles licences Woolworths Limited 2009 $m $m $m Carrying amount at start of period 302.0 162.8 464.8 Additions arising from acquisition of businesses 8.9 12.8 21.7 Disposals (0.6) - (0.6) Reclassifications - - - Carrying amount at end of period 310.3 175.6 485.9

Goodwill and intangible assets with indefinite lives are tested for impairment annually and whenever there is an indication that the asset may be impaired. An impairment loss is recognised whenever the carrying amount exceeds the recoverable amount.

The recoverable amount is assessed at the cash generating unit (“CGU”) level, which is the smallest group of assets generating cash flows independent of other CGUs that benefit from the use of the respective intangible asset.

The recoverable amount is determined based on the value in use which is calculated using cash flow projections for five years using data from the Group’s latest internal forecasts, the results of which are reviewed by the Board. The key assumptions for the value in use calculation are those regarding discount rates, growth rates and expected changes in margins.

The cash flows are discounted to present value using pre-tax discount rates between 13% and 15% (2009:12% and 14%) depending on the nature of the business and the country of operation. This discount rate is derived from the Group’s post tax average cost of capital.

The forecasts are extrapolated beyond five years based on estimated long-term growth rates of generally 0%-7%, and do not exceed industry growth rates for the business in which the cash generating unit operates.

The assumptions regarding expected changes in margin (sales growth and CODB reductions) are based on past experience and expectations of changes in the market.

130

F-87 NOTES TO THE FINANCIAL STATEMENTS continued

11 INTANGIBLES continued The components of goodwill are as follows: Consolidated Woolworths Limited As at As at 2010 2009 2010 2009 $m $m $m $m Supermarkets - Australia 585.3 566.7 328.3 310.3 Supermarkets - New Zealand 1,771.3 1,732.6 - - Consumer Electronics 70.3 70.3 - - Hotels 632.1 622.0 - - Unallocated 19.2 - - - 3,078.2 2,991.6 328.3 310.3

No intangible assets were identified as impaired at reporting date.

131

F-88 NOTES TO THE FINANCIAL STATEMENTS continued

12 TRADE AND OTHER PAYABLES

Consolidated Woolworths Limited as at as at 2010 2009 2010 2009 $m $m $m $m Accounts payable 4,211.3 4,055.1 3,229.5 3,247.1 Loans from controlled entities - - 3,713.0 3,509.2 Accruals 984.5 975.0 668.5 669.5 Unearned income 83.1 79.9 45.8 42.3 Trade and other payables 5,278.9 5,110.0 7,656.8 7,468.1

13 OTHER FINANCIAL LIABILITIES

Consolidated Woolworths Limited as at as at 2010 2009 2010 2009 $m $m $m $m

Current At fair value Fair value derivatives Interest rate swaps 21.0 63.5 21.0 63.5 Cross currency swaps - - - - Forward exchange contracts 3.7 35.8 3.7 35.8 24.7 99.3 24.7 99.3 Non current At fair value Other financial liabilities 77.3 - - - Fair value derivatives Interest rate swaps 14.6 - 14.6 - Cross-currency swaps 144.8 78.4 144.8 78.4 236.7 78.4 159.4 78.4

132

F-89 NOTES TO THE FINANCIAL STATEMENTS continued

14 BORROWINGS

Consolidated Woolworths Limited As at As at 2010 2009 2010 2009 $m $m $m $m

Current Unsecured Short term securities(1) 554.8 141.4 554.8 141.4 Short term money market loans(2) 25.5 20.3 12.0 - Bank loans(3) 289.4 25.9 225.0 - Finance leases 2.0 1.0 2.0 1.0 871.7 188.6 793.8 142.4

Non-current Unsecured Long term securities(4) 1,416.2 1,867.9 1,413.8 1,866.4 Bank Loans(5) 650.6 518.8 650.6 518.8 Woolworths Notes(6) 598.4 596.8 598.4 596.8 Finance leases 5.2 2.8 5.2 2.8 2,670.4 2,986.3 2,668.0 2,984.8

Total 3,542.1 3,174.9 3,461.8 3,127.2

(1) Comprised of: - $350.0 million Medium Term Notes (adjusted for unamortised discount and borrowing costs) issued in 2006 are due to mature in March 2011 (therefore, reclassified from non-current to current). On $200.0 million of the $350.0 million interest is payable semi-annually at a fixed bond rate, on the remaining $150.0 million, interest is payable quarterly at the Bank Bill Swap Rate plus a margin. - Short term Commercial Paper Issuances outstanding at year end (adjusted for unamortised discount).

(2) Total money Market borrowings on an at-call basis of A$25.5 million were outstanding at period end (2009: A$20.3 million). This includes a money market borrowing of NZ$16.5 million (A$13.5 million) by a controlled entity.

(3) Comprised of: - $225.0 million was drawn against committed 1 year bi-lateral facilities (2009: Nil). - INR$450.0 million (A$11.3 million) was drawn by a controlled entity against a committed Revolving Credit facility (2009: A$10.0 million). - NZ$65.0 million (A$53.1 million) was drawn by a controlled entity against a committed Revolving Credit facility (2009: Nil)

133

F-90 NOTES TO THE FINANCIAL STATEMENTS continued

14 BORROWINGS continued

(4) Comprised of: - US$500.0 million (A$577.8 million) from a private placement of senior notes in the United States in 2005, maturing: US$100.0 million in April 2015, US$300.0 million in April 2017 and US$100.0 million in April 2020. - US$725.0 million (A$837.8 million) of senior notes issued into the US 144a market in the United States in 2005, maturing $300.0 million in November 2011 and US$425.0 million in November 2015. - $1.5 million borrowings by a controlled entity. - $0.9 million borrowings by a controlled entity. - $1.8 million adjustment of unamortised borrowing costs (2009: $2.8 million).

(5) Comprised of: - The term component of a 3-year multi-currency syndicated loan facility drawn in 3 tranches: i. US$263.3 million (A$304.6 million) ii. JPY1,994.5 million (A$25.7 million) iii. $178.5 million Woolworths has entered into cross currency swaps in respect of these borrowings which eliminates all foreign currency exposures. This includes a $8.2 million adjustment of unamortised borrowing costs. The facility matures in May 2012. - $150.0 million was drawn against committed 3 year bi-lateral facilities (2009: Nil).

(6) $600.0m in Woolworths Notes were issued on 5 June 2006, with a perpetual maturity. Offset by unamortised borrowing costs of $1.6 million (2009: $3.2 million).

134

F-91 NOTES TO THE FINANCIAL STATEMENTS continued

15 FINANCING ARRANGEMENTS Unrestricted access was available at the balance date to the following lines of credit: Consolidated Woolworths Limited As at As at 2010 2009 2010 2009 $m $m $m $m Total facilities Bank overdrafts 39.0 32.4 11.0 11.0 Bank loan facilities 4,168.2 4,069.4 3,625.1 3,537.4 4,207.2 4,101.8 3,636.1 3,548.4 Used at balance date Bank overdrafts - 15.9 - - Bank loan facilities 1,179.7 704.1 1,101.8 673.8 1,179.7 720.0 1,101.8 673.8 Unused at balance date Bank overdrafts 39.0 16.5 11.0 11.0 Bank loan facilities 2,988.5 3,365.3 2,523.3 2,863.6 3,027.5 3,381.8 2,534.3 2,874.6

Bank loan facilities may be drawn at any time, subject to the terms of the lending agreements. The facilities are denominated in Australian dollars, NZ dollars, US dollars, Japanese yen and Indian rupees. The bank overdraft facilities may be drawn at any time.

135

F-92 NOTES TO THE FINANCIAL STATEMENTS continued

16 PROVISIONS

Consolidated Woolworths Limited As at As at 2010 2009 2010 2009 $m $m $m $m Current Employee benefits (Note 23) 656.7 623.0 511.5 494.2 Self-insured risks(1) 105.6 99.9 93.3 84.4 Other(2) 16.8 14.3 7.2 10.3 779.1 737.2 612.0 588.9 Non-current Employee benefits (Note 23) 95.1 79.2 71.9 59.1 Self-insured risks(1) 303.4 267.7 296.5 262.7 Other(2) 17.8 15.4 8.1 4.8 416.3 362.3 376.5 326.6 Total provisions 1,195.4 1,099.5 988.5 915.5 Movements in self-insured risk provisions were as follows: Balance at start of period 367.6 374.9 347.1 346.1 Additional provisions recognised 168.1 139.9 142.7 114.8 Reductions arising from payments/other sacrifices of future economic benefits (123.3) (131.4) (104.8) (108.8) Transfers (3.6) (15.8) 4.8 (5.0) Effect of movements in foreign exchange rates 0.2 - - - Balance at end of period 409.0 367.6 389.8 347.1 Current 105.6 99.9 93.3 84.4 Non-current 303.4 267.7 296.5 262.7 Movements in other provisions were as follows: Balance at start of period 29.7 38.2 15.1 15.5 Additional provisions recognised 7.5 6.4 0.2 0.2 Arising from acquisition of controlled entities 6.5 - - - Reductions arising from payments (9.9) (16.3) - (0.1) Transfers 0.7 1.2 - (0.5) Effect of movements in foreign exchange rates 0.1 0.2 - - Balance at end of period 34.6 29.7 15.3 15.1

Current 16.8 14.3 7.2 10.3 Non-current 17.8 15.4 8.1 4.8

(1) The provision for self-insured risks represents the estimated liability for workers compensation and public liability claims in all Woolworths’ self-insured jurisdictions based on actuarial valuations. (2) Current and non-current other provisions consist predominantly of provisions for onerous lease contracts including those arising on acquisitions

136

F-93 NOTES TO THE FINANCIAL STATEMENTS continued

17 ISSUED CAPITAL Consolidated Woolworths Limited As at As at 2010 2009 2010 2009 $m $m $m $m Issued and paid-up share capital 1,231,139,756 fully paid ordinary shares (2009: 1,229,041,431) Fully paid ordinary shares carry one vote per share and the right to dividends.

Reconciliation of fully paid share capital Balance at beginning of period 3,858.6 3,627.1 3,858.6 3,627.1 Issue of shares as a result of options exercised under Executive Share Option Plan 73.8 66.7 73.8 66.7 Issue of shares as consideration for acquired entity - 6.4 - 6.4 Issue of shares as a result of Dividend Reinvestment Plan 184.6 161.9 184.6 161.9 Adjustment to paid-up capital to reflect final proceeds for shares issued under Employee Share Plan (6.3) (3.5) (6.3) (3.5) Shares bought back (326.3) - (326.3)

Balance at end of period 3,784.4 3,858.6 3,784.4 3,858.6

Reconciliation of fully paid share capital (net of No.(m) No.(m) No.(m) No.(m) own shares held in trust) Balance at beginning of period 1,223.6 1,210.5 1,223.6 1,210.5 Issue of shares as a result of options exercised under Executive Share Option Plan 7.7 5.4 7.7 5.4 Issue of shares as consideration for acquired entity - 0.3 - 0.3 Issue of shares as a result of Dividend Reinvestment Plan 6.6 6.2 6.6 6.2 Incremental number of shares from sale of forfeited shares under Employee Share Plan 1.6 1.2 1.6 1.2 Shares bought back (12.1) - (12.1) Balance at end of period 1,227.4 1,223.6 1,227.4 1,223.6

Shares held in trust Reconciliation of shares held in trust $m $m $m $m Balance at beginning of period (51.2) (60.0) (51.2) (60.0) Issue of shares under Employee Share Plan 10.0 8.8 10.0 8.8 Balance at end of period (41.2) (51.2) (41.2) (51.2)

Reconciliation of shares held in trust No.(m) No.(m) No.(m) No.(m) Balance at beginning of period 5.4 6.6 5.4 6.6 Issue of shares under Employee Share Plan (1.6) (1.2) (1.6) (1.2) Balance at end of period 3.8 5.4 3.8 5.4

137

F-94 NOTES TO THE FINANCIAL STATEMENTS continued

17 ISSUED CAPITAL continued

Share capital Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings.

In the event of winding up of the Company, ordinary shareholders rank after all other shareholders and creditors and are fully entitled to any proceeds of liquidation.

Changes to the then Corporations Act abolished the authorised and par value concept in relation to share capital issued from 1 July 1998. Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a par value.

Share options In accordance with the provisions of the executive Management share option plan, executives had options over ordinary shares as follows-

Number of options over shares as at Expiry date 27 June 2010 28 June 2009 Option Grant 1999 - - 1 July 2009 2000 - - 1 July 2010 2001 153,600 192,500 1 July 2011 2003 - - 31 December 2008 2004 - 5,926,937 31 December 2009 2005 5,273,547 5,496,725 31 December 2010 2006 6,749,250 7,315,150 31 December 2011 2007 8,157,500 8,580,300 31 December 2012 2008 5,314,250 5,541,625 31 December 2013 2009 4,062,550 - 31 December 2014 29,710,697 33,053,237 Performance Rights 2007 - 1,515,000 Exp 1 July 2009 40,000 40,000 Exp 1 July 2010 2008 1,013,984 1,064,916 31 December 2013 2009 943,920 - 31 December 2014

Retention Rights 2008 65,000 80,000 1 September 2010 2009 15,000 15,000 2 February 2012 2009 60,000 - 1 November 2011 2009 20,000 - 24 December 2010 31,868,601 35,768,153

Executive share options carry no rights to dividends and no voting rights.

Further details of the Executive Share Option Plan are contained in Note 23 to the financial statements.

138

F-95 NOTES TO THE FINANCIAL STATEMENTS continued

18 RESERVES

Consolidated Woolworths Limited As at As at 2010 2009 2010 2009 $m $m $m $m Hedging reserve 107.6 44.5 107.6 44.5 Foreign currency translation reserve (262.3) (305.6) - - Remuneration reserve 200.6 157.5 200.6 157.5 Asset revaluation reserve 16.4 16.4 - - Equity instrument reserve (90.3) (86.3) (16.8) (18.2) (28.0) (173.5) 291.4 183.8

Hedging reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred. The cumulative deferred gain or loss on the hedge is recognised in profit and loss when the hedged transaction impacts the profit or loss, consistent with applicable accounting policy.

Foreign currency translation reserve The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the presentational currency of the reporting entity, as well as from the translation of liabilities that are designated as a hedge of the Company’s net investment in a foreign subsidiary.

Remuneration reserve The employee remuneration reserve comprises the fair value of share based payment plans recognised as an expense in the income statement.

Asset revaluation reserve The asset revaluation reserve arose on acquisition of the previously equity accounted investment in MGW and relates to the change in fair value of the consolidated entity’s interest in non current assets from the date of acquisition of the initial investment to the date control was achieved.

Equity instrument reserve The equity instrument reserve arises on the revaluation of investments in equity securities. Subsequent to initial recognition, they are measured at fair value with any changes recorded through the equity instrument reserve.

139

F-96 NOTES TO THE FINANCIAL STATEMENTS continued

18 RESERVES continued

Consolidated Woolworths Limited Movements As at As at 2010 2009 2010 2009 $m $m $m $m Hedging reserve Balance at start of period 44.5 122.1 44.5 122.1 Loss on cash flow hedges taken to equity (36.3) 112.9 (36.3) 112.9 Transfer to profit and loss - cash flow hedges 126.3 (223.5) 126.3 (223.5) Deferred tax arising on hedges (26.9) 33.0 (26.9) 33.0 Balance at end of period 107.6 44.5 107.6 44.5

Foreign currency translation reserve (FCTR) Balance at start of period (305.6) (300.6) - - Net exchange differences on translation of foreign controlled entities 50.7 (12.5) - - Deferred tax arising on FCTR (7.1) 7.6 - - Income tax related to FCTR (0.3) (0.1) - - Balance at end of period (262.3) (305.6) - -

Remuneration reserve Balance at start of period 157.5 94.0 157.5 94.0 Compensation on share-based payments 43.1 63.5 43.1 63.5 Balance at end of period 200.6 157.5 200.6 157.5

Asset revaluation reserve Balance at start of period 16.4 16.4 - - Balance at end of period 16.4 16.4 - -

Equity instrument reserve Balance at start of period (86.3) (65.8) (18.2) (7.2) Revaluation gain/(loss) during the period (4.0) (20.5) 1.4 (11.0) Balance at end of period (90.3) (86.3) (16.8) (18.2)

140

F-97 NOTES TO THE FINANCIAL STATEMENTS continued

19 RETAINED EARNINGS

Consolidated Woolworths Limited As at As at 2010 2009 2010 2009 $m $m $m $m Retained earnings attributable to the members of Woolworths Limited Balance at start of the period 3,178.6 2,559.7 1,535.0 1,303.3 Profit attributable to members of Woolworths Limited 2,020.8 1,835.7 1,617.2 1,448.3 Actuarial losses on defined benefit plans 1.7 (67.3) 1.7 (66.8) Tax effect of actuarial losses (0.6) 20.3 (0.6) 20.0 Employee Share Plan dividends and forfeitures 3.9 4.5 3.9 4.5 Dividends paid or provided (Note 6) (1,349.2) (1,174.3) (1,349.2) (1,174.3) Balance at end of period 3,855.2 3,178.6 1,808.0 1,535.0

141

F-98 NOTES TO THE FINANCIAL STATEMENTS continued

20 EARNINGS PER SHARE

Consolidated As at 2010 2009 Basic earnings per share (cents per share) 164.01 150.71 Diluted earnings per share (cents per share) 163.17 149.69 Basic earnings per share The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: $m $m Earnings (a) 2,020.8 1,835.7 No. (m) No. (m) (1) Weighted average number of ordinary shares (b) 1,232.1 1,218.0

Diluted earnings per share The earnings and weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted earnings per share are as follows: $m $m Earnings (a) 2,020.8 1,835.7 No. (m) No. (m)

Weighted average number of shares(1) and potential ordinary shares (c) 1,238.5 1,226.3

(a) Earnings used in the calculations of basic and diluted earnings per share reconciles to net profit in the income statement as follows:

$m $m Net profit attributable to the members of Woolworths Limited 2,020.8 1,835.7 Earnings used in the calculations of basic and diluted earnings per share 2,020.8 1,835.7 (b) Options are considered to be potential ordinary shares and are therefore excluded from the weighted average number of ordinary shares used in the calculation of basic earnings per share. Where dilutive, potential ordinary shares are included in the calculation of diluted earnings per share.

(c) Weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted earnings per share reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows: No. (m) No. (m) Weighted average number of ordinary shares used in the calculation of basic earnings per share. 1,232.1 1,218.0 Shares deemed to be issued for no consideration in respect of outstanding employee options 6.4 8.3 1,238.5 1,226.3 (1) Weighted average number of shares has been adjusted to remove the potential ordinary shares under the Employee Share Plan held by the Custodian company, which is consolidated under AIFRS.

Since 27 June to 27 August 2010, 78,275 shares (2009: 6,710,189) have been issued as a result of the maturity of retention rights under the LTIP in 2007, and the exercise of options granted under the LTIP in July 2005. No options (2009: nil) have been issued. On 1 July 2010, 954,870 performance rights were issued (1 July 2009: 1,077,444). A further 80,000 performance rights were offered under the Retention Plan with an effective date of 1 November 2009 and 24 December 2010 (98,000 with an effective date of 1 September 2008 and 2 February 2009). 142

F-99 NOTES TO THE FINANCIAL STATEMENTS continued

21 CONTINGENT LIABILITIES The details and estimated maximum amounts of contingent liabilities which may become payable are shown below. No provision has been made in the financial statements in respect of these contingencies, however there is a provision of $409.0 million for self-insured risks (2009: $367.6 million), which includes liabilities relating to workers’ compensation claims, that has been recognised in the balance sheet at balance date.

Consolidated Woolworths Limited as at as at 2010 2009 2010 2009 $m $m $m $m Guarantees Bank guarantees(1) 44.8 54.0 6.1 20.1 Workers’ compensation self-insurance guarantees(2) 474.2 448.5 474.2 448.5

Other Outstanding letters of credit issued to suppliers 19.0 36.0 1.2 10.7 Guarantees arising from the deed of cross guarantee - - 610.9 559.0 with other entities in the wholly-owned group 538.0 538.5 1,092.4 1,038.3

(1) This item mainly comprises guarantees relating to conditions set out in development applications and for the sale of properties in the normal course of business. (2) State WorkCover authorities require guarantees against workers' compensation self-insurance liabilities. The guarantee is based on independent actuarial advice of the outstanding liability. Guarantees held at each balance date do not equal the liability at these dates due to delays in issuing the guarantees.

143

F-100 NOTES TO THE FINANCIAL STATEMENTS continued

22 COMMITMENTS FOR EXPENDITURE

Consolidated Woolworths Limited As at As at 2010 2009 2010 2009 $m $m $m $m Capital expenditure commitments Estimated capital expenditure under firm contracts, not provided for in these financial statements, payable: Not later than one year 631.0 483.2 308.3 307.8 Later than one year, not later than two years 11.3 1.5 - - Later than two, not later than five years 124.7 - - - Later than five years 41.6 - - - 808.6 484.7 308.3 307.8 Operating lease commitments Future minimum rentals under non-cancellable operating leases not provided for in these Financial Statements, payable: Not later than one year 1,445.9 1,322.4 1,014.5 929.2 Later than one year, not later than five years 4,996.7 4,968.0 3,557.2 3,390.9 Later than five years 8,726.6 8,520.7 6,086.4 6,246.2 15,169.2 14,811.1 10,658.1 10,566.3

Total commitments for expenditure 15,977.8 15,295.8 10,966.4 10,874.1

The consolidated entity and the Company lease retail premises and warehousing facilities for periods of up to 40 years. The operating lease commitments include leases for the Norwest office and distribution centres. Generally the lease agreements are for initial terms of between 10 and 15 years and most include multiple renewal options for additional 5 year terms. Under most leases, the consolidated entity and the Company are responsible for property taxes, insurance, maintenance and expenses related to the leased properties. However many of the more recent lease agreements have been negotiated on a gross or semi gross basis, which eliminates or significantly reduces the lessee’s exposure to operational charges associated with the properties.

144

F-101 NOTES TO THE FINANCIAL STATEMENTS continued

23 EMPLOYEE BENEFITS Consolidated Woolworths Limited As at As at

2010 2009 2010 2009 $m $m $m $m The aggregate employee benefit liability recognised and included in the Financial Statements is as follows: Provision for employee benefits Current (Note 16) 656.7 623.0 511.5 494.2 Non-current (Note 16) 95.1 79.2 71.9 59.1 Accrued liability for defined benefit obligations (included in other non-current liabilities) 84.0 92.0 84.0 92.0 Accrued salaries and wages (included in trade and other payables) 259.6 292.5 201.3 235.4 1,095.4 1,086.7 868.7 880.7

A DEFINED BENEFIT SUPERANNUATION PLANS The following disclosures set out the accounting for the Plan as recognised in the financial statements of the consolidated entity and the Company in accordance with AASB 119 Employee Benefits.

Liability for defined benefit obligation As at 27 June 10 28 June 09 29 June 08 24 June 07 $m $m $m $m Defined benefit obligation(1) (1,837) (1,536) (1,609) (1,618) Fair value of assets 1,753 1,444 1,556 1,586 Liability for defined benefit obligations (84) (92) (53) (32)

Experience adjustments – liabilities 80 (310) (195) 119 Experience adjustments – assets (82) 377 235 (110)

(1) Includes contribution tax liability.

145

F-102 NOTES TO THE FINANCIAL STATEMENTS continued

23 EMPLOYEE BENEFITS continued

The consolidated entity and Company make contributions to a defined benefit plan, Woolworths Group Superannuation Plan (WGSP) that provides superannuation benefits for employees upon retirement.

The Company sponsors the WGSP which consists of members with defined contribution (accumulation) benefits as well as defined benefits members. The Plan also pays allocated pensions to a small number of pensioners.

The members and assets of the WGSP are held in the AMP Superannuation Savings Trust.

All disclosures in this note are for the consolidated entity and the Company.

Movements in the net liability for defined benefit obligations recognised in the balance sheet.

As at 2010 2009 $m $m Opening net liability for defined obligations (92) (53) Contributions by employer 135 148 Expense recognised in the income statement (129) (120) Actuarial gains/(losses) recognised directly in equity (Note 19) 2 (67) Closing net liability for defined benefit obligations (84) (92)

Actuarial gains recognised in other comprehensive income during the year were $1.7 million (2009 loss of $67.3 million), with cumulative actuarial losses of $140 million (2009: $142 million).

Changes in the present value of the defined benefit obligation are as follows:

As at 2010 2009 $m $m Opening defined benefit obligation 1,536 1,609 Current service cost 139 129 Interest cost 99 107 Actuarial losses/(gains) 80 (310) Employee contributions 85 92 Past service cost - - Benefits paid (102) (91) Closing defined benefit obligation 1,837 1,536

146

F-103 NOTES TO THE FINANCIAL STATEMENTS continued

23 EMPLOYEE BENEFITS continued Changes in the fair value of fund assets are as follows: As at 2010 2009 $m $m Opening fair value of fund assets 1,444 1,556 Expected return (1) 109 116 Actuarial gains/(losses)(1) 82 (377) Contributions by employer 135 148 Employee contributions 85 92 Benefits paid (102) (91) Closing fair value of fund assets 1,753 1,444

(1) The actual return on plan assets was a gain of $191 million (2009: loss of $261 million)

The fair value of assets includes no amounts relating to any of the Company’s own financial instruments nor any property occupied by, or other assets used by, the Company.

The major categories of fund assets as a percentage of total fund assets are as follows:

2010 2009 % % Overseas equities 25 27 Australian equities 29 30 Fixed interest securities 18 16 Property 6 6 Alternatives 19 17 Cash 3 4

Expense recognised in the income statement 2010 2009 $m $m Current service costs 139 129 Interest cost 99 107 Past service cost - - Expected return on fund assets (109) (116) 129 120

The expense is recognised in the employee benefit expense disclosed in Note 2(c).

147

F-104 NOTES TO THE FINANCIAL STATEMENTS continued

23 EMPLOYEE BENEFITS continued The defined benefit obligations have been determined by the Plan actuary, Mr John Burnett, FIAA, Towers Watson, using the projected unit cost method. The following are the principal actuarial assumptions used.

As at 2010 2009 % % Discount rate (gross of tax) 5.10 5.50 Discount rate (net of tax) 4.30 4.70 Expected return on fund assets 7.25 7.50 Future salary increases 3.50 3.50

Contributions for permanent salaried employees of the Company and its controlled entities are made to certain Company sponsored superannuation funds including the WGSP. These superannuation funds provide lump sum accumulation benefits to members on retirement or death. The Company and certain of its controlled entities are legally obliged to contribute to the Company sponsored WGSP at rates as set out in the Trust Deed and Rules and the Participation Deed between the Company and AMP Superannuation Limited. Members contribute to the WGSP at rates dependent upon their membership category.

The expected Company and employee contributions to the WGSP for the 2011 financial year are $141 million and $51 million respectively.

The Company is also obliged to contribute at fixed rates to defined contribution retirement plans for certain employees under industrial agreements, fund choice legislation and the Superannuation Guarantee Legislation. The Company and its controlled entities contribute to various industry based superannuation funds and to the WGSP for non-salaried employees.

The Company also pays superannuation contributions in New Zealand in accordance with KiwiSaver legislation.

148

F-105 NOTES TO THE FINANCIAL STATEMENTS continued

23 EMPLOYEE BENEFITS continued B SHARE BASED PAYMENTS

Executive Option Plan (EOP) The Executive Option Plan was approved by shareholders in November 1999 and was last offered with an effective grant date of 1 July 2004. As at 27 June 2010, there were 29,557,097 options outstanding under this Plan. Awards have been made under the EOP in five tranches with each tranche subject to performance hurdles established by the People Policy Committee and approved by the Board. The Executive Option Plan has the following features: An exercise period that commences after five years, subject to performance hurdles being met and with a maximum exercise period of five and a half years (10 years for options issued prior to 2002); Upon exercise, each option entitles the option holder to one ordinary fully paid Woolworths Limited share; For offers made from 2002 the 50% EPS component vests in four equal tranches of 12.5%, dependent on attaining average annual growth of either 10% or 11% ; The fifth tranche is comprised of the 50% TSR component which vests progressively where TSR equals or exceeds the 60th percentile of the comparator group up to the full 50% vesting where TSR equals the 75th percentile of the comparator group. No further grants have been made under this plan since 2004.

Woolworths Long Term Incentive Plan (LTIP) At the 2004 Annual General Meeting, shareholders approved the introduction of a new long term incentive, the Woolworths Long Term Incentive Plan. The Plan has four Sub-Plans, which are described below, that allows the Board flexibility to determine which of the Sub-Plan’s awards will be granted to deliver the overall LTIP objectives. From 2005 to 2007 the Option Sub-Plan has been used to satisfy Woolworths LTIP requirements. Offers made in 2008 and 2009 used a combination of the Option Sub-Plan and the Performance Rights Sub-Plan. Irrespective of Sub-Plan, stringent performance measures are set annually and relate to EPS and TSR hurdles. The Performance Shares and Cash Award Sub-Plans have not been used.

Summary of Sub-Plans Delivers a right to acquire….. Subject to performance hurdles being met and….

149

F-106 NOTES TO THE FINANCIAL STATEMENTS continued

23 EMPLOYEE BENEFITS continued

150

F-107 NOTES TO THE FINANCIAL STATEMENTS continued

23 EMPLOYEE BENEFITS continued The following table summarises movements for the financial year ended 27 June 2010 for outstanding options and performance rights:

Offer date Expiry date Exercise No. of Options/rights Options Options/rights No. of No. of price Options 28 granted exercised lapsed during options/rights options June 2009 during year during year at 27 June exercisable year 2010 27 June 2010

The weighted average share price during the financial year ended 27 June 2010 was $27.52.

The following table summarises movements for the financial year ended 28 June 2009 for outstanding options and performance rights:

Offer date Expiry date Exercise No. of Options/rights Options Options/rights No. of No. of price Options 29 granted exercised lapsed during options/rights options June 2008 during year during year year at 28 June exercisable 2009 28 June 2009

Options 01/07/1999 01/07/2009 $5.11 205,000 - (205,000) - - - 01/07/2000 01/07/2010 $6.17 20,000 - (20,000) - - - 01/07/2001 01/07/2011 $10.89 251,000 - (58,500) - 192,500 192,500 01/07/2002 31/12/2007 $12.94 ------01/07/2003 31/12/2008 $12.60 5,208,850 - (5,124,441) (84,409) - - 01/07/2004 31/12/2009 $11.54 6,181,250 - (30,313) (224,000) 5,926,937 - 01/07/2005 31/12/2010 $16.46 5,849,700 - - (352,975) 5,496,725 - 01/07/2006 31/12/2011 $19.47 7,618,400 - - (303,250) 7,315,150 - 01/07/2007 31/12/2012 $25.91 8,903,500 - - (323,200) 8,580,300 - 01/07/2008 31/12/2013 $24.90 - 5,598,000 - (56,375) 5,541,625 -

Rights 25/07/2007 01/07/2009 Nil 1,525,000 - - (10,000) 1,515,000 - 25/07/2007 01/07/2010 Nil 40,000 - - - 40,000 - 01/07/2008 31/12/2013 Nil - 1,077,444 - (12,528) 1,064,916 - 01/09/2009 01/09/2010 Nil - 83,000 - (3,000) 80,000 - 02/02/2009 02/02/2012 Nil - 15,000 - - 15,000 - 35,802,700 6,773,444 (5,438,254) (1,369,737) 35,768,153 192,500

The weighted average share price during the financial year ended 28 June 2009 was $26.42. 151

F-108 NOTES TO THE FINANCIAL STATEMENTS continued

23 EMPLOYEE BENEFITS continued The fair value of the services received in return for share options and performance rights granted are measured by reference to the fair value of the share options granted. The fair value of the services is recognised as an expense on a straight line basis over the vesting period and is determined by multiplying the fair value per option by the number of options expected to vest. During the financial year ended 27 June 2010, an expense of $43.1 million (2009: $63.5 million) was recognised in the income statement in relation to options and performance rights issued under the Executive Option Plan.

The estimate of the fair value per option is measured based on the Monte-Carlo simulation option pricing model performed by an independent valuer. The fair value is measured at the grant date which for the purposes of measurement is the date of unconditional offer by the Company and acceptance by the employee.

The contractual exercise period of the options set out above is used as an input into the model. Other inputs are:

Grant date Effective Share Exercise Expected Dividend Risk free Weighted Weighted average fair value of Date price at price yield interest average fair options grant Volatility rate value of options EPS TSR Retention date (1) granted (2) 3-Oct-03 1-Jul-03 $11.18 $12.60 18% 4.00% 5.15% $1.16 $1.32 $0.99 - 22-Apr-05 1-Jul-04 $15.32 $11.54 17% 3.20% 5.50% $3.88 $4.25 $3.50 - 2-Dec-05 1-Jul-05 $17.05 $16.46 16% 3.40% 5.40% $2.22 $2.50 $1.93 - 24-Nov-06 1-Jul-06 $21.64 $19.47 16% 3.20% 6.10% $3.50 $0.00 $0.00 - 30-Jan-07 1-Jul-06 $23.64 $19.47 16% 3.20% 6.10% $4.80 $5.73 $3.86 - 3-Dec-07 1-Jul-07 $33.39 $25.91 18% 3.10% 6.30% $8.90 $9.48 $8.32 - 3-Aug-07 25-Jul-07 $27.45 - - 3.20% - $24.34 - - $24.34 9-Dec-08 1-Jul-08 $26.63 $24.90 24% 3.50% 4.00% $4.96 $5.15 $4.76 - 9-Dec-08 1-Jul-08 $26.63 - 26% 3.50% 3.50% $21.25 $23.66 $18.83 - 9-Dec-08 1-Sep-08 $26.63 - 27% 3.50% 3.30% $24.89 - - $24.89 9-Dec-08 2-Feb-09 $26.63 - 27% 3.50% 3.30% $24.89 - - $24.89 27-Nov-09 1-Jul-09 $27.89 $25.88 19% 3.50% 5.00% $4.02 $4.77 $3.27 - 27-Nov-09 1-Jul-09 $27.89 - 19% 3.50% 4.60% $18.96 $24.74 $13.17 - 11-Dec-09 11-Dec-09 $26.83 - 19% 3.50% 4.50% $24.49 - - $24.49

(1) The expected volatility is based on the historical implied volatility calculated based on the weighted average remaining life of the share options adjusted for any expected changes to future volatility due to publicly available information. (2) In accordance with AIFRS transition rules, an expense has only been recognised for the fair value of options granted on or after 7 November 2002.

Grant date represents the offer acceptance date.

The probability of achieving market performance conditions (TSR) is incorporated into the determination of the fair value per option. No adjustment is made to the expense for options that fail to meet the market condition. The number of options and rights expected to vest based on achievement of non market conditions (EPS and service condition), are adjusted over the vesting period in determining the expense to be recognised in the income statement.

152

F-109 NOTES TO THE FINANCIAL STATEMENTS continued

23 EMPLOYEE BENEFITS continued

Employee Share Plan (Share Plan) The Share Plan was established to enable all employees (other than executive officers) the opportunity to participate in the acquisition of shares in the Company at market price with an interest free loan from the Company to finance the acquisition. Loans are limited in recourse to the proceeds of sale of shares acquired. Dividends and other distributions on the shares are applied to repay the loan. The loan may be repaid at any time after three years and in any event must be settled when the employee ceases employment or at the end of 10 years from grant or when a takeover offer is accepted for the shares, whichever is the earliest. Upon settlement, if the employee elects not to repay the loan, the shares will be sold and the funds received after payment of costs and expenses will be applied to repay the loan. All shares acquired under the Share Plan are held by a wholly owned subsidiary of the Company (Woolworths Custodian Pty Limited) as Trustee of the Share Plan. At any time after three years from the date of acquisition a participant may request the Trustee to transfer the shares, but only if the loan made to acquire those shares is repaid in full. Shares may be transferred earlier at the discretion of the Directors on the employee’s death or retirement but only if the loan made to acquire the shares is repaid in full. The Trustee may exercise the voting rights attached to the shares in the manner directed by the Directors until they are transferred to the participant.

As at 27 June 2010, there were 8,240 (2009:11,606) participating employees who held a total of 3,788,998 (2009: 5,407,738) shares. The total amount receivable by the Company in relation to these shares is $25,676,903 as at 27 June 2010 (2009: $33,102,817). During the 52 week period ended 28 June 2010, no shares were issued.

Due to the non-recourse nature of the loan, the loan is considered to be an option for accounting purposes as the employee is exposed to equity appreciation of the Company shares over the loan period with the option whether to repay the loan. The vesting period is 3 years from the offer date conditional on the employee remaining employed over this period. Any shares forfeited are sold on-market and the proceeds of this sale are contributed to the Woolworths’ Group Superannuation Plan. The number and weighted average exercise prices (being the loan value) of these options is as follows.

Weighted Number of Weighted Number of average options average options exercise price exercise price 2010 2010 2009 2009 Balance at the beginning of the period $6.12 5,407,738 $6.39 6,640,644 Forfeited during the period $5.47 (12,360) $6.10 (16,420) Exercised during the period $2.15 (1,606,390) $3.90 (1,216,486) Balance at the end of the period $6.77 3,788,988 $6.12 5,407,738 Exercisable at the end of the period $6.77 3,788,988 $6.12 5,407,738

The weighted average share price during the period was $27.52 (2009: $26.42).

Executive Management Share Plan (EMSP) The EMSP allows any executive management, including any Executive Director, to forgo some of their future pre-tax remuneration to acquire shares in the Company on-market at prevailing market prices on the Australian Securities Exchange (ASX). During the 52 week period ended 27 June 2010, 3,088 shares (2009: 4,274) were purchased under the EMSP. No additional expense is recognised in relation to these shares as they are acquired out of salary sacrificed remuneration.

Employee Share Purchase Plan (SPP) The SPP was launched in June 2008 and provides permanent full-time and part-time employees who are Australian tax residents and are aged 18 years or over, with the opportunity to purchase shares from pre-tax income via salary sacrifice. Woolworths Limited pays the associated brokerage costs. During the 52 week period ended 27 June 2010, 543,220 shares were purchased on behalf of 16,310 participating employees.

153

F-110 NOTES TO THE FINANCIAL STATEMENTS continued

24 KEY MANAGEMENT PERSONNEL Total remuneration for Non-executive Directors and other key management personnel for the group and the Company during the financial year are set out below.

Remuneration by category Consolidated Woolworths Limited 2010 2009 2010 2009 52 weeks 52 weeks 52 weeks 52 weeks $ $ $ $ Short term employee benefits 15,317,605 15,764,655 15,317,605 15,055,137 Post-employment benefits 1,182,710 1,403,122 1,182,710 1,289,122 Other long-term benefits 164,387 341,098 164,387 316,953 Share based payments 6,313,268 6,414,970 6,313,268 6,148,459 22,977,970 23,923,845 22,977,970 22,809,671

Shareholdings The table below summarises the movements during the year in holdings of shares in Woolworths Limited held by the Non-executive Directors and key management personnel.

Shareholding Shares Shares Shares Shares Shareholding at 28 June issued received on issued purchased at 27 June 2009 under exercise of under or (sold)(3) 2010 DRP(1) options NEDSP(2) No. No. No. No. No. No. J Strong 70,479 - - - - 70,479 M Luscombe 433,290 - 400,000 - (310,000) 523,290 J Astbury 12,797 - - - - 12,797 R Deane 40,000 - - - - 40,000 D Grady 36,259 - - - - 36,259 L L’Huillier 60,000 - - - (30,000) 30,000 I Macfarlane 4,000 - - - 4,000 8,000 A Watkins 11,859 - - - - 11,859 T Pockett 93,000 - 150,000 - (110,000) 133,000 J Coates 66,250 - 100,000 - (146,250) 20,000 G Foran 50,380 763 120,000 - (100,000) 71,143 A Hall ------P Horton 1,212 52 - - - 1,264 G O'Brien 20,000 - 32,000 - (32,000) 20,000 K Schmidt - - 12,000 - (12,000) -

M Hamnett(4) 5,000 - 150,000 - (150,000) 5,000 R Umbers(4) - - 30,000 - - 30,000

154

F-111 NOTES TO THE FINANCIAL STATEMENTS continued

24 KEY MANAGEMENT PERSONNEL continued Shareholding Shares Shares Shares Shares Shareholding at 29 June issued received on issued purchased at 28 June 2008 under exercise of under or (sold)(3) 2009 DRP(1) options NEDSP(2) No. No. No. No. No. No. J Strong 70,479 - - - - 70,479 M Luscombe 333,290 - 100,000 - - 433,290 J Astbury 12,295 82 - 420 - 12,797 R Deane 40,000 - - - - 40,000 D Grady 35,914 345 - - - 36,259 L L’Huillier 60,000 - - - - 60,000 I Macfarlane 3,000 - - - 1,000 4,000 A Watkins 10,279 177 - 1,403 - 11,859 T Pockett 54,000 - 150,000 - (111,000) 93,000 N Onikul 158,769 412 60,000 - (117,267) 101,914 P Smith 841 369 100,000 - (100,000) 1,210 J Coates 12,250 - 100,000 - (46,000) 66,250 G Foran - 380 100,000 - (50,000) 50,380 R Umbers ------

Grand Total 4,231,446 845,653 5,798,878 (994,000) 15,521,580 4,083,099 95,750 - 95,750 866,250

(1) Options and performance rights granted as remuneration is the total fair value of options and performance rights granted during the year determined by an independent actuary. This will be amortised over the vesting period. (2) The value of options exercised during the year is calculated as the market value of shares on the Australian Securities Exchange as at close of trading on the date the options were exercised after deducting the price paid to exercise the options. No other options were exercised by key management personnel. (3) The number of ordinary shares under option/performance rights as at 27 June 2010 is equivalent to the option/performance rights holding at that date. (4) Included as key management personnel to comply with the Corporations Act.

No other key management personnel hold options or performance rights. 155

F-112 NOTES TO THE FINANCIAL STATEMENTS continued

24 KEY MANAGEMENT PERSONNEL continued All share options issued to the key management personnel during the financial year were made in accordance with the provisions of the Executive Option Plan. The key management personnel in the table above were granted options with an effective date of 1 July 2009. The exercise value of the options granted was $25.88 per option while the performance rights issued to certain KMP had a nil exercise price. They also had an effective date of 1 July 2009.

Further details of the terms and conditions of the Executive Option Plan and the options and performance rights granted during the financial year are contained in Note 23.

Options granted as Options exercised (2) Options & Options Vested at 28 June 2009 remuneration (1) performance rights holding at 28 Jun 09(3) Total Exercisable Unexercisable Vested during the year No. No. $ No. $ No. No. No. No. No. M Luscombe 1,330,000 500,000 2,477,500 (100,000) (1,501,000) 1,730,000 37,500 - 37,500 112,500 T Pockett 880,000 250,000 1,238,750 (150,000) (2,251,500) 980,000 37,500 - 37,500 150,000 N Onikul 380,000 27,500 217,713 (60,000) (900,600) 347,500 25,000 25,000 70,000 P Smith 325,000 21,389 169,334 (100,000) (1,501,000) 246,389 20,000 - 20,000 95,000 J Coates 345,000 27,500 217,713 (100,000) (1,489,000) 272,500 20,000 - 20,000 95,000 G Foran 365,000 27,500 217,713 (100,000) (1,359,000) 292,500 25,000 - 25,000 100,000 R Umbers 155,000 21,389 169,334 - - 176,389 - - - - Total 3,780,000 875,278 4,708,056 (610,000) (9,002,100) 4,045,278 165,000 - 165,000 622,500

(1) Options and performance rights granted as remuneration is the total fair value of options and performance rights granted during the year determined by an independent actuary. This will be amortised over the vesting period. (2) The value of options exercised during the year is calculated as the market value of shares on the Australian Securities Exchange as at close of trading on the date the options were exercised after deducting the price paid to exercise the options. No other options were exercised by key management personnel. (3) The number of ordinary shares under option/performance rights as at 28 June 2009 is equivalent to the option/performance rights holding at that date.

Loans to Directors or key management personnel There were no loans to Directors of the Company or key management personnel.

156

F-113 NOTES TO THE FINANCIAL STATEMENTS continued

25 RELATED PARTIES

Parent entity The ultimate parent entity is Woolworths Limited, a company incorporated in New South Wales. The wholly-owned Group consists of Woolworths Limited and its wholly-owned subsidiaries. Disclosures relating to interests in subsidiaries are set out in Note 29.

Transactions within the Group During the financial period and previous financial periods, Woolworths Limited advanced and repaid loans to and received loans from, and provided treasury, accounting, legal, taxation and administrative services to other entities within the Group.

Entities within the Group also exchanged goods and services in sale and purchase transactions. All transactions occurred on the basis of normal commercial terms and conditions.

The details of transactions within the Group and with other partly owned subsidiaries is presented below:

Consolidated Woolworths Limited 2010 2009 2010 2009 $ $ $ $ Revenue from the sale of goods - - - - Dividend income - - 50,526,000 65,074,200 Interest income - - 211,972,858 230,569,212

The balances of loans to or from subsidiaries are shown in Note 8 and Note 12. Tax consolidation Under the application of the tax consolidation regime, the Company is assessed on the tax liabilities of the entities in the tax consolidated group. As a consequence of this, the tax exposures relating to wholly owned group members totalling $96.2 million (2009: $79.4 million) are included in the tax liability of the Company. Pursuant to the Group's Tax Funding Agreement, the Company has charged net tax expense to the group members totalling $96.2 million (2009: $79.4 million) through intercompany accounts. Directors and key management personnel Disclosures relating to Directors and key management personnel are set out in Note 24 and in the Remuneration Report.

157

F-114 NOTES TO THE FINANCIAL STATEMENTS continued

26 FINANCIAL INSTRUMENTS

(a) Significant accounting policies Details of significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset and financial liability are disclosed in Note 1 to the Financial Statements.

Forward exchange contracts and foreign currency options It is the policy of the consolidated entity to enter into forward exchange contracts and foreign currency options to cover foreign currency payments and receipts of up to 100% of the exposure generated.

At period end, the details of outstanding forward exchange contracts and foreign currency options, stated in Australian dollar equivalents for the consolidated group and Company are:

Average exchange Foreign Currency Contract value Mark to market Market value Outstanding contracts 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 FC’M FC’M $m $m $m $m $m $m Hedging imports: Forward contracts Maturing: Within 12 months Buy US Dollars 0.87 0.73 218.4 251.6 250.9 346.9 3.9 (32.1) 254.8 314.9 Buy US Dollars against NZ Dollars 0.71 0.59 6.3 2.3 7.3 3.2 - (0.2) 7.3 3.0

Buy Euro 0.65 0.52 11.5 14.8 17.6 28.5 (0.9) (2.6) 16.7 25.9 Buy British Pounds - 0.49 - 0.2 - 0.4 - - - 0.4 Sell New Zealand Dollars 1.24 - 0.5 - 0.4 - - - 0.4 -

Hedging balance sheet: Forward contracts Maturing: Within 12 Months Buy New Zealand Dollars ------Sell New Zealand Dollars 1.14 1.15 153.0 153.0 133.8 132.5 8.8 10.3 125.0 122.3

158

F-115 NOTES TO THE FINANCIAL STATEMENTS continued

26 FINANCIAL INSTRUMENTS continued As at reporting date, the net amount of unrealised gain under forward foreign exchange contracts relating to anticipated future transactions is $11.8 million (2009: $24.6 million unrealised loss). A portion of this amount qualifying as effective hedges has been recognised in the Hedge Reserve in the current year, with the remainder being recognised through the Income Statement.

Only NZ$153.0 million (2009: NZ$153.0 million) of the net investment in New Zealand is hedged for currency fluctuation. The remainder of the investment in New Zealand is not hedged for currency fluctuation as that element of the investment is not currently expected to be realised through disposal within 12 months.

Cross currency swap agreements To hedge the risk of adverse movements in foreign exchange rates in relation to borrowings denominated in foreign currency by the consolidated entity, it enters into cross currency swap agreements under which it agrees to exchange specified principal and interest foreign currency amounts at an agreed future date at a specified exchange rate.

The following table details the cross currency swaps outstanding for the consolidated group and Company at reporting date:

Average interest rate Average exchange rate Contract value Mark to Market Outstanding contracts 2010 2009 2010 2009 2010 2009 2010 2009 %% $’M $’M $’M $’M Maturing: Floating Rates USD Within 12 Months ------1 to 2 years (1) (2) (3) BBSW +145.0bp - 0.751 - 750.9 - (84.0) - 2 to 3 years (1) (2) (3) - BBSW +145.0bp - 0.751 - 750.9 - (26.6) 3 to 4 years ------4 to 5 years (1) (2) (3) BBSW +54.0bp - 0.787 - 127.1 - 2.9 - 5 years + (1) (2) (3) BBSW +67.6bp BBSW +66.2bp 0.757 0.760 1,089.6 1,216.7 (0.3) 30.3 1,967.6 1,967.6 (81.4) 3.7 JPY Within 12 Months ------1 to 2 years (1) (2) (3) BBSW +306bp - 74.4 - 26.8 - (1.3) - 2 to 3 years (1) (2) (3) - BBSW +306bp - 74.4 - 26.8 - (1.2) 3 to 4 years ------4 to 5 years ------5 years + ------26.8 26.8 (1.3) (1.2) 1,994.4 1,994.4 (82.7) 2.5

(1) These swap instruments include an interest rate swap component which has been disclosed in the interest rate swap contract section below and have therefore been designated as cash flow hedges due to the currency exposure being hedged in combination with the interest rate exposure via domestic interest rate swaps. (2) These swap contracts have cash flow hedge designation. (3) These fair value calculations include interest accruals as recorded in trade and other payables of $14.4m (2009: $11.0m) payable.

159

F-116 NOTES TO THE FINANCIAL STATEMENTS continued

26 FINANCIAL INSTRUMENTS continued (c) Interest rate risk management

The consolidated entity is exposed to interest rate risk as it borrows funds at both fixed and floating interest rates. The risk is managed by maintaining an appropriate mix between fixed and floating rate borrowings and by the use of interest rate swap contracts. Hedging activities are evaluated regularly with regard to Board approved policy, which requires a cash flow at risk approach in assessing residual interest rate exposure. The consolidated entity’s exposures to interest rates on financial assets and financial liabilities are detailed in the maturity profile of financial instruments section of this note.

Interest rate swap contracts Under interest rate swap contracts, the consolidated entity agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the consolidated entity to mitigate the risk of adverse movements in interest rates on the debt held. Interest in relation to the swaps is settled on a monthly or quarterly basis. The floating rate on interest rate swaps is the Australian BBSW and the consolidated entity settles the difference between the fixed and floating interest rate on a net basis. The fair value of interest rate swaps are based on market values of equivalent instruments at the reporting date and are disclosed below. The average interest rate is based on the outstanding balances at the end of the financial year.

The following table details the notional principal amounts and remaining terms of interest rate swap contracts outstanding for the consolidated group and Company as at reporting date:

Interest Rate Swaps Average contracted fixed Notional principal amount Mark to Market interest rate Outstanding floating for 2010 2009 2010 2009 2010 2009 fixed contracts % % $m $m $m $m Interest Rate Swaps Less than 1 year 5.86% - 250.0 - (2.0) - 1 to 2 years 5.50% 5.86% 1,456.2 250.0 (7.4) (7.8) 2 to 3 years - 5.50% - 1,456.2 - (29.6) 3 to 4 years ------4 to 5 years 5.80% - 127.1 - (2.2) - 5 years + 5.85% 5.85% 1,089.6 1,216.7 (20.2) (9.6) 2,922.9 2,922.9 (31.8) (47.0)

The consolidated entity classifies interest rate swaps as cash flow hedges and states them at fair value. All swaps have been designated and are effective as hedges. These fair value calculations include interest accruals as recorded in trade and other payables of $2.7m (2009: $7.5m) payable.

160

F-117 NOTES TO THE FINANCIAL STATEMENTS continued

26 FINANCIAL INSTRUMENTS continued

Maturity profile of financial instruments The following tables details the consolidated and parent entity’s exposure to interest rate risk at 27 June 2010 and 28 June 2009:

Consolidated Fixed interest maturing in: 2010 Floating Non- Effective Interest 1 year 1 to 2 2 to 3 3 to 4 4 to 5 Over interest Interest rate or less years years years years 5 years bearing Total rate $m $m $m $m $m $m $m $m % Financial assets Cash and deposits 415.4 ------298.0 713.4 3.56 Receivables - 17.9 10.9 - - - - 673.4 702.2 7.27 Foreign currency forw ard contracts ------15.5 15.5 - Interest rate sw aps ------6.5 6.5 - Currency sw aps ------76.5 76.5 - Equity instruments ------123.7 123.7 - Other financial assets ------2.8 2.8 - 415.4 17.9 10.9 - - - - 1,196.4 1,640.6 - Financial liabilities Accounts payable ------4,211.3 4,211.3 - Accruals ------984.5 984.5 - Unearned income ------83.1 83.1 - Provisions ------1,195.4 1,195.4 - Short term securities 205.0 ------205.0 5.21 Other bank loans: Fixed ------Variable 965.5 ------965.5 4.79 Other loans - 0.9 - - - - - 1.5 2.4 6.85 Finance Leases - 2.0 2.4 1.8 0.9 0.1 - - 7.2 4.94 Variable rate domestic notes 150.0 ------150.0 5.70 Fixed rate domestic notes - 199.8 ------199.8 6.00 Foreign currency forw ard contracts ------3.7 3.7 - Interest rate sw aps (2,922.9) 250.0 1,456.2 - - 127.1 1,089.6 35.6 35.6 - Other financial liability (1) ------77.3 77.3 - USD notes - - 346.6 - - 115.3 951.9 - 1,413.8 5.84 Woolw orths Notes 598.4 ------598.4 6.43 Currency sw aps 1,627.1 - (410.4) - - (127.1) (1,089.6) 144.8 144.8 - 623.1 452.7 1,394.8 1.8 0.9 115.4 951.9 6,737.2 10,277.8 - Net financial assets/(liabilities) (207.7) (434.8) (1,383.9) (1.8) (0.9) (115.4) (951.9) (5,540.8) (8,637.2) -

(1) Other financial liability includes a put option over a non-controlling interest. Significant assumptions were used in determining the fair value of the put option over the Home Improvement non-controlling interest. Woolworths Limited owns 66.7% of the joint venture entity Hydrox Holdings Pty Ltd (Hydrox). The terms of the Agreement include exit provisions that may be exercised after the fourth anniversary of the Agreement. As a result, the put option over the non-controlling interest has been recorded as a non-current other financial liability as required by Australian Accounting Standards. This other financial liability has been recorded at fair value, determined using internal parameters including the cumulative cash contributions to date and the results of Hydrox.

161

F-118 NOTES TO THE FINANCIAL STATEMENTS continued

26 FINANCIAL INSTRUMENTS continued

Woolworths Limited Fixed interest maturing in: 2010 Floating Non- Effective Interest 1 year 1 to 2 2 to 3 3 to 4 4 to 5 Over interest Interest rate or less years years years years 5 years bearing Total rate $m $m $m $m $m $m $m $m % Financial assets Cash and deposits 306.4 ------152.7 459.1 4.09 Receivables ------296.9 296.9 - Loans to controlled entities 2,004.0 - 1,905.8 - - - - 2,931.4 6,841.2 5.88 Foreign currency forw ard contracts ------15.5 15.5 - Interest rate sw aps ------6.5 6.5 - Currency sw aps ------76.5 76.5 - Unlisted shares at cost ------3,366.0 3,366.0 - Equity instruments ------36.4 36.4 - Other financial assets ------2.5 2.5 - 2,310.4 - 1,905.8 - - - - 6,884.4 11,100.6 -

Financial liabilities Accounts payable ------3,229.5 3,229.5 - Accruals ------668.5 668.5 - Unearned Income ------45.8 45.8 - Loans from controlled entities ------3,713.0 3,713.0 - Provisions ------988.5 988.5 - Short term securities 205.0 ------205.0 5.21 Other bank loans: Fixed ------Variable 887.6 ------887.6 4.83 Other loans ------Finance Leases - 2.0 2.4 1.8 0.9 0.1 - - 7.2 4.94 Variable rate domestic notes 150.0 ------150.0 5.70 Fixed rate domestic notes - 199.8 ------199.8 6.00 Foreign currency forw ard contracts ------3.7 3.7 - Interest rate sw aps (2,922.9) 250.0 1,456.2 - - 127.1 1,089.6 35.6 35.6 - Other financial liability ------USD notes - - 346.6 - - 115.3 951.9 - 1,413.8 5.84 Woolw orths Notes 598.4 ------598.4 6.43 Currency sw aps 1,627.1 - (410.4) - - (127.1) (1,089.6) 144.8 144.8 - 545.2 451.8 1,394.8 1.8 0.9 115.4 951.9 8,829.4 12,291.2 - Net financial assets/(liabilities) 1,765.2 (451.8) 511.0 (1.8) (0.9) (115.4) (951.9) (1,945.0) (1,190.6) -

162

F-119 NOTES TO THE FINANCIAL STATEMENTS continued

26 FINANCIAL INSTRUMENTS continued

Consolidated Fixed interest maturing in: Floating Non- Effective Interest 1 year 1 to 2 2 to 3 3 to 4 4 to 5 Over interest Interest rate or less years years years years 5 years bearing Total rate 2009 $m $m $m $m $m $m $m $m % Financial assets Cash and deposits 454.9 ------307.7 762.6 2.53 Receivables ------466.5 466.5 - Foreign currency forw ard contracts ------11.0 11.0 - Interest rate sw aps ------24.0 24.0 - Currency sw aps ------91.9 91.9 - Equity instruments ------130.7 130.7 - Other financial assets ------0.7 0.7 - 454.9 ------1,032.5 1,487.4 -

Financial liabilities Accounts payable ------4,055.1 4,055.1 - Accruals ------975.0 975.0 - Unearned income ------79.9 79.9 - Provisions ------1,099.5 1,099.5 - Short term securities 141.4 ------141.4 4.07 Other bank loans: Fixed ------Variable 565.0 ------565.0 4.39 Other loans - - - - 3.8 - - 1.5 5.3 6.50 Variable rate domestic notes 150.0 ------150.0 5.70 Fixed rate domestic notes - - 199.7 - - - - - 199.7 6.00 Foreign currency forw ard contracts ------35.8 35.8 - Interest rate sw aps (2,922.9) 250.0 1,456.2 - - 1,216.7 63.5 63.5 - USD notes - - - 371.9 - - 1,144.8 - 1516.7 5.84 Woolw orths Notes 596.8 ------596.8 6.43 Currency sw aps 1,627.1 - - (410.4) - - (1,216.7) 78.4 78.4 - 157.4 - 449.7 1,417.7 3.8 - 1,144.8 6,388.7 9,562.1 - Net financial assets/(liabilities) 297.5 - (449.7) (1,417.7) (3.8) - (1,144.8) (5,356.2) (8,074.7) -

163

F-120 NOTES TO THE FINANCIAL STATEMENTS continued

26 FINANCIAL INSTRUMENTS continued

Woolworths Limited Fixed interest maturing in: Floating Non- Effective Interest 1 year 1 to 2 2 to 3 3 to 4 4 to 5 Over interest Interest rate or less years years years years 5 years bearing Total rate 2009 $m $m $m $m $m $m $m $m % Financial assets Cash and deposits 462.3 ------112.1 574.4 2.53 Receivables ------257.0 257.0 - Loans to controlled entities 1,923.7 - 1,932.6 - - - - 2,570.7 6,427.0 5.10 Foreign currency forward contracts ------11.0 11.0 - Interest rate swaps ------24.0 24.0 - Currency swaps ------91.9 91.9 - Unlisted shares at cost ------3,207.0 3,207.0 - Equity instruments ------39.4 39.4 - Other financial assets ------0.4 0.4 - 2,386.0 - 1,932.6 - - - - 6,313.5 10,632.1 -

Financial liabilities Accounts payable ------3,247.1 3,247.1 - Accruals ------669.5 669.5 - Unearned Income ------42.3 42.3 - Loans from controlled entities ------3,509.2 3,509.2 - Provisions ------915.5 915.5 - Short term securities 141.4 ------141.4 4.07 Other bank loans: Fixed ------Variable 518.8 ------518.8 4.39 Other loans - - - - 3.8 - - - 3.8 6.50 Variable rate domestic notes 150.0 ------150.0 5.70 Fixed rate domestic notes - - 199.7 - - - - - 199.7 6.00 Foreign currency forward contracts ------35.8 35.8 - Interest rate swaps (2,922.9) - 250.0 1,456.2 - - 1,216.7 63.5 63.5 - USD notes - - - 371.9 - - 1,144.8 - 1,516.7 5.84 Woolworths Notes 596.8 ------596.8 6.43 Currency swaps 1,627.1 - - (410.4) - - (1,216.7) 78.4 78.4 - 111.2 - 449.7 1,417.7 3.8 - 1,144.8 8,561.3 11,688.5 - Net financial assets/(liabilities) 2,274.8 - 1,482.9 (1,417.7) (3.8) - (1,144.8) (2,247.8) (1,056.4) -

164

F-121 NOTES TO THE FINANCIAL STATEMENTS continued

26 FINANCIAL INSTRUMENTS continued

Fair value of financial assets and financial liabilities The carrying value of cash and cash equivalents, financial assets and non-interest bearing monetary financial liabilities of the consolidated entity approximates their fair value and as such they have been omitted from these disclosures.

The fair value of other monetary financial assets and liabilities is based upon market prices where a market exists or the expected future cash flows, discounted where appropriate by current interest rates for assets and liabilities with similar risk profiles.

For interest rate and cross currency swaps, the fair value has been determined by the net present value of cash flows due under the contracts, using a discount rate appropriate to the type and maturity of the contract.

For forward foreign currency contracts, the fair value is taken to be the unrealised gain or loss at period end calculated by reference to the current forward rates for contracts with similar maturity profiles.

As at As at 27-Jun-10 28-Jun-09 Carrying Net fair Carrying Net fair amount value amount value $m $m $m $m Financial assets/(liabilities): Bank loans (1) (977.7) (969.5) (566.9) (554.4) Short term securities (1) (2) (558.7) (558.5) (141.4) (141.4) Other loans (1) (2) (3) (4) (2,038.3) (2,034.9) (2,487.9) (2,481.9) Total (3,574.7) (3,562.9) (3,196.2) (3,177.7)

Financial assets/(liabilities): Forward foreign currency contracts 11.8 11.8 (24.8) (24.8) Interest rate swaps (31.9) (31.9) (47.0) (47.0) Cross currency swaps (82.7) (82.7) 2.5 2.5 Total (102.8) (102.8) (69.3) (69.3)

For FY10, the carrying amount for financial assets/liabilities is based on the principal outstanding adjusted for:

(1) Interest accruals on outstanding debt (Total of $20.8m) (2) Unamortised borrowing costs (Total of $11.8m) (3) Effect of revaluation of USD borrowings (Total of $248.4m) (4) Unamortised discount on issue of Medium Term Notes (Total of $1.1m)

165

F-122 NOTES TO THE FINANCIAL STATEMENTS continued

26 FINANCIAL INSTRUMENTS continued

Fair value measurement recognised in the statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into levels 1 to 3 based on the degree to which the fair value is observable.

Level 1 – fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 – fair value measurements are those derived from inputs other than quoted price included within Level 1 that are observable for the asset or liability, whether directly (i.e. as prices) or indirectly (i.e. derived from prices);

Level 3 – fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

As at 27 June 2010 $m $m $m $m Level 1 Level 2 Level 3 Total Derivative Financial assets: Forward foreign currency contracts - 15.5 - 15.5 Interest rate swaps - 6.5 - 6.5 Cross currency swaps - 76.5 - 76.5

Other financial Assets: Listed equity securities 123.7 - - 123.7

Total 123.7 98.5 - 222.2

Derivative Financial Liabilities: Forward foreign currency contracts - (3.7) - (3.7) Interest rate swaps - (35.6) - (35.6) Cross currency swaps - (144.8) - (144.8)

Total - (184.1) - (184.1)

There were no transfers between Level 1 and Level 2 in the period

166

F-123 NOTES TO THE FINANCIAL STATEMENTS continued

27 FINANCIAL RISK MANAGEMENT The Group’s Treasury function provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal communication which identifies exposures. These exposures include credit risk, liquidity risk and market risk (including interest rate risk, foreign currency risk and equity price risk).

The Group seeks to minimise the effects of these risks, by using derivative financial instruments to hedge these risk exposures. The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which provide written principles on liquidity risk, foreign exchange risk, interest rate risk, credit risk and the use of derivative and non-derivative financial instruments.

The Treasury function reports on its compliance with the policy on a monthly basis to the Board of Directors and such compliance is reviewed regularly by its internal auditors.

The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

Unless otherwise stated, all calculations and methodologies used are unchanged from prior period reporting.

Credit Risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has adopted a policy of dealing only with creditworthy counterparties (as measured by their Standard and Poor’s long term credit rating), as a means of mitigating the risk of financial loss from defaults and does not require collateral in respect of financial assets.

In line with Board approved policy, counterparties are assigned a maximum exposure value, based on their credit rating, which limits concentration of credit risk. The consolidated entity’s exposure to counterparties and their credit ratings are continuously monitored and compared against the board approved counterparty credit limits. The consolidated entity measures credit risk using methodologies customarily used by financial institutions, which will yield different results to the balances reported in the balance sheet. There were no unauthorised breaches of credit limits during the reporting period.

The maximum exposure to credit risk of the consolidated entity at balance sheet date, by class of financial asset is represented by the carrying amount of the financial assets presented in the balance sheet and notes thereto unless otherwise depicted in the table below:

Consolidated and Woolworths Limited 2010 Exposure by Financial Instrument $m Counterparty Forward Cross S&P Credit Money Market Exchange Currency Interest Rate Currency Total Rating Deposits Contracts Options Swaps Swaps Exposure AA - or above - 33.3 - 110.9 105.8 250.0 A - 6.6 - 63.3 93.6 163.5

Consolidated and Woolworths Limited 2009 Exposure by Financial Instrument $m Counterparty Forward Cross S&P Credit Money Market Exchange Currency Interest Rate Currency Total Rating Deposits Contracts Options Swaps Swaps Exposure AA - or above 13.0 43.6 - 132.2 105.8 294.6 A - 6.8 - 79.4 93.6 179.8

All of the above exposures are on an unsecured basis.

167

F-124 NOTES TO THE FINANCIAL STATEMENTS continued

27 FINANCIAL RISK MANAGEMENT continued The recognised financial assets of the consolidated entity include amounts receivable arising from unrealised gains on derivative financial instruments. For derivatives, which are deliverable, credit risk may also arise from the potential failure of the counterparties to meet their obligations under the respective contracts at maturity.

As at 27 June 2010, no material credit risk exposure existed in relation to potential counterparty failure on such financial instruments (2009: Nil). Other than amounts provided for impairment of receivables in Note 8, no financial assets were impaired or past due.

Liquidity Risk

Liquidity risk is the risk that the consolidated entity will not be able to meet its financial obligations as they fall due. This risk arises through the possibility that sales income may be reduced due to adverse factors, unusually large amounts may fall due for payment, or existing maturing debt is unable to be refinanced.

The company has established an appropriate liquidity risk management framework for the consolidated entity’s short, medium and long-term funding liquidity management requirements, which has been approved by the Board of Directors.

The consolidated entity maintains a liquidity reserve in the form of undrawn bilateral standby facilities of at least $1 billion with unexpired tenures of at least 12 months at all times. Additionally, to minimise refinancing and repricing risk, there are limitations placed upon amounts which may expire in a twelve month period and amounts which may be from a single source. Included in Note 15 is a summary of undrawn facilities that the consolidated entity has at its disposal to draw upon if required.

The following table details the consolidated entity’s and parent entity’s undiscounted financial liabilities and their contractual maturities:

Woolworths Limited Group Woolworths Limited Parent Entity As At 27 June 2010 ($m) As At 27 June 2010 ($m)

Less than 1 to 2 2 to 5 Over 5 Less than 1 to 2 2 to 5 Over 5 Maturity Analysis of Financial Liabilities 1 Year Years Years Years Total 1 Year Years Years Years Total Non Derivative Liabilities Bank Loans (487.8) (564.5) - (1.5) (1,053.8) (409.7) (564.5) - - (974.2) Short term securities (206.0) - - - (206.0) (206.0) - - - (206.0) Finance leases (2.0) (2.4) (2.8) - (7.2) (2.0) (2.4) (2.8) - (7.2) Domestic Notes (367.8) - - - (367.8) (367.8) - - - (367.8) USD Notes (75.5) (476.7) (298.8) (1,170.3) (2,021.3) (75.5) (476.7) (298.8) (1,170.3) (2,021.3) Woolworths Notes (36.0) (36.0) (108.1) (1,019.9) (1,200.0) (36.0) (36.0) (108.1) (1,019.9) (1,200.0) Other Financial Liabilities (4,211.2) - - - (4,211.2) (3,229.5) - - - (3,229.5) Loans from Controlled Entities - - - - - (3,713.0) - - - (3,713.0) Accruals (984.5) - - - (984.5) (668.5) - - - (668.5) Total Non Derivative Liabilities (6,370.8) (1,079.6) (409.7) (2,191.7) (10,051.8) (8,708.0) (1,079.6) (409.7) (2,190.2) (12,387.5) Derivative Liabilities Foreign Exchange Contracts Pay (401.2) - - - (401.2) (401.2) - - - (401.2) Foreign Exchange Contracts Rec 410.2 - - - 410.2 410.2 - - - 410.2 Net Foreign Exchange Contracts 9.0 - - - 9.0 9.0 - - - 9.0

Interest Rate Swaps Pay Fixed (163.4) (114.0) (213.6) (99.4) (590.4) (163.4) (114.0) (213.6) (99.4) (590.4) Interest Rate Swaps Rec Floating 138.8 99.7 176.5 81.7 496.7 138.8 99.7 176.5 81.7 496.7 Net Pay IRS ** (24.6) (14.3) (37.1) (17.7) (93.7) (24.6) (14.3) (37.1) (17.7) (93.7)

Cross Currency Swaps Pay Floating (115.2) (882.1) (327.8) (1,182.1) (2,507.2) (115.2) (882.1) (327.8) (1,182.1) (2,507.2) Cross Currency Swaps Rec Fixed 83.9 851.6 298.8 1,170.3 2,404.6 83.9 851.6 298.8 1,170.3 2,404.6 Net Pay CCS (31.3) (30.5) (29.0) (11.8) (102.6) (31.3) (30.5) (29.0) (11.8) (102.6)

Total Derivative Liabilities (46.9) (44.8) (66.1) (29.5) (187.3) (46.9) (44.8) (66.1) (29.5) (187.3)

Total Financial Liabilities (6,417.7) (1,124.4) (475.8) (2,221.2) (10,239.1) (8,754.9) (1,124.4) (475.8) (2,219.7) (12,574.8) Including interest accruals and excluding unamortised borrowing costs ** Interest rate swaps are net settled

168

F-125 NOTES TO THE FINANCIAL STATEMENTS continued

27 FINANCIAL RISK MANAGEMENT continued

Consolidated Woolworths Limited As At 28 June 2009 ($m) As At 28 June 2009 ($m)

Less than 1 to 2 2 to 5 Over 5 Less than 1 to 2 2 to 5 Over 5 Maturity Analysis of Financial Liabilities 1 Year Years Years Years Total 1 Year Years Years Years Total Non Derivative Liabilities Bank Loans (64.7) (18.4) (562.3) (1.5) (646.9) (18.5) (18.4) (562.3) - (599.2) Short term securities (142.5) - - - (142.5) (142.5) - - - (142.5) Finance leases (1.0) (1.0) (1.8) - (3.8) (1.0) (1.0) (1.8) - (3.8) Domestic Notes (17.4) (366.0) - - (383.4) (17.4) (366.0) - - (383.4) USD Notes (81.0) (81.0) (604.5) (1,364.7) (2,131.2) (81.0) (81.0) (604.5) (1,364.7) (2,131.2) Woolworths Notes (26.4) (26.4) (79.1) (1,068.1) (1,200.0) (26.4) (26.4) (79.1) (1,068.1) (1,200.0) Other Financial Liabilities (4,055.1) - - - (4,055.1) (3,247.1) - - - (3,247.1) Loans from Controlled Entities - - - - - (3,509.2) - - - (3,509.2) Accruals (975.0) - - - (975.0) (669.5) - - - (669.5) Total Non Derivative Liabilities (5,363.1) (492.8) (1,247.7) (2,434.3) (9,537.9) (7,712.6) (492.8) (1,247.7) (2,432.8) (11,885.9) Derivative Liabilities Foreign Exchange Contracts Pay (543.0) - - - (543.0) (543.0) - - - (543.0) Foreign Exchange Contracts Rec 514.4 - - - 514.4 514.4 - - - 514.4 Net Foreign Exchange Contracts (28.6) - - - (28.6) (28.6) - - - (28.6)

Interest Rate Swaps Pay Fixed (166.2) (163.4) (256.5) (170.4) (756.5) (166.2) (163.4) (256.5) (170.4) (756.5) Interest Rate Swaps Rec Floating 93.1 91.5 141.5 90.9 417.0 93.1 91.5 141.5 90.9 417.0 Net Receive IRS ** (73.1) (71.9) (115.0) (79.5) (339.5) (73.1) (71.9) (115.0) (79.5) (339.5)

Cross Currency Swaps Pay Floating (82.7) (82.2) (944.6) (1,326.4) (2,435.9) (82.7) (82.2) (944.6) (1,326.4) (2,435.9) Cross Currency Swaps Rec Fixed 89.9 89.9 979.7 1,364.7 2,524.2 89.9 89.9 979.7 1,364.7 2,524.2 Net Pay CCS 7.2 7.7 35.1 38.3 88.3 7.2 7.7 35.1 38.3 88.3

Total Derivative Liabilities (94.5) (64.2) (79.9) (41.2) (279.8) (94.5) (64.2) (79.9) (41.2) (279.8)

Total Financial Liabilities (5,457.6) (557.0) (1,327.6) (2,475.5) (9,817.7) (7,807.1) (557.0) (1,327.6) (2,474.0) (12,165.7) Including interest accruals and excluding unamortised borrowing costs ** IRSs are net settled

For floating rate instruments, the amount disclosed is determined by reference to the interest rate at the last re-pricing date.

Cash flows represented are contractual and calculated on an undiscounted basis, based on current rates at year end.

The principal repayment of Woolworths Notes, being a perpetual instrument, is represented in 5+ years. The coupon payments disclosed in 5+ years in relation to Woolworths Notes have been calculated using a perpetuity interest calculation less the coupon payments up to year 5.

Market Risk i Interest Rate Risk The consolidated entity manages the majority of its exposure to interest rate risk by borrowing at fixed rates of interest, or by using approved financial instruments. Consistent with Board approved policy the consolidated entity manages risk and reports compliance based upon whether a change in interest rates (measured as an assumed parallel shift in the yield curve of 1%) will cause a reduction in earnings (profit after tax) greater than maximum accepted levels.

The following table summaries the potential impact, on unhedged debt, to profit and equity from a 1% parallel increase and decrease in the yield curve:

Consolidated 2010 Woolworths Limited 2010

Profit $m Equity $m (1) (2) Profit $m (1) Equity $m (2) After Tax Impact of 1% (4.8) 8.5 9.8 8.5 Increase in Yield Curve After Tax Impact of 1% 4.8 (8.3) (9.8) (8.3) Decrease in Yield Curve

(1) Impact due to unhedged year end net debt position (2) Impact due to derivative instruments being cash flow hedge accounted

169

F-126 NOTES TO THE FINANCIAL STATEMENTS continued

27 FINANCIAL RISK MANAGEMENT continued Consolidated 2009 Woolworths Limited 2009

Equity $m Profit $m (1) (2) Profit $m (1) Equity $m (2) After Tax Impact of 1% Increase in Yield Curve (1.3) 14.4 26.1 14.4 After Tax Impact of 1% Decrease in Yield Curve 1.3 (14.3) (26.1) (14.3)

(1) Impact due to unhedged year end net debt position (2) Impact due to derivative instruments being cash flow hedge accounted

Foreign currency exposures arising on the translation of net investments in foreign subsidiaries are predominantly unhedged. Changes in value of these foreign subsidiaries due to movements in foreign exchange rates are recorded in equity.

Income of certain foreign subsidiaries is hedged for movements in foreign exchange rates via the use of foreign exchange derivatives. There were no such derivatives outstanding as at reporting date (2009: Nil).

The following table illustrates the effect on profit and equity as at 27 June 2010 and 28 June 2009 if the currency prices were to move by the changes identified below:

After Tax Impact on Profit Impact on Equity Currency Sensitivity Assumptions* Consolidated Woolworths Limited Consolidated Woolworths Limited Pair 2010 2009 2010 $m 2009 $m 2010 $m 2009 $m 2010 $m 2009 $m 2010 $m 2009 $m

+-+- +-+- +- + -+-+-

AUD/USD 16.30% 18.50% (2.17) 3.02 (0.09) 0.14 (2.17) 3.02 (0.09) 0.14 (17.81) 24.75 (27.94) 40.63 (17.81) 24.75 (27.94) 40.63

AUD/EUR 14.24% 13.47% (0.96) 1.28 (1.78) 2.33 (0.96) 1.28 (1.78) 2.33 0.09 (0.12) 0.26 (0.34) 0.09 (0.12) 0.26 (0.34)

AUD/NZD 8.74% 9.92% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.13) 0.16 (0.25) 0.31 0.11 (0.13) 0.06 (0.07)

NZD/USD 16.70% 20.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.49) 0.68 (0.04) 0.06 0.00 0.00 0.00 0.00

NZD/EUR 14.46% 14.68% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.13 (0.17) 0.18 (0.24) 0.00 0.00 0.00 0.00

* based on 1yr implied market volatility at balance date

Sensitivity to foreign exchange exposure are calculated on significant amounts payable in foreign currency less hedges of both foreign currency payables and forecast foreign currency payables. This analysis is based on our position as at reporting date and it is not considered representative of our position during the year.

170

F-127 NOTES TO THE FINANCIAL STATEMENTS continued

27 FINANCIAL RISK MANAGEMENT continued iii Equity Price Risk The consolidated entity is exposed to changes in the market price of certain equity investments, being the interests held in the Warehouse Group and ALE Group. Subsequent to initial recognition they are measured at fair value with any change recorded in a revaluation reserve in equity. No hedging of this risk is undertaken. iv Capital Management Woolworths currently sets its capital structure with the objective of enhancing shareholder value through optimising its weighted average cost of capital while retaining flexibility to pursue growth and undertake capital management initiatives. Consistent with this objective, Woolworths has targeted, achieved and maintained its strong credit ratings of A- from Standard and Poor’s and A3 from Moody’s Investor Services, which underpin our debt profile.

Capital Returns

Woolworths will seek to return capital to shareholders when that is consistent with its capital structuring objectives and where it will enhance shareholder value. Between July 2001 and June 2010, over $7 billion has been returned to shareholders through dividends, on-market and off- market Buy-Backs. The final dividend payable 15 October 2010 and proposed off-market share Buy-Back are expected to increase that amount by a further $1.4 billion.

The combination of the on-market share Buy-Back conducted by Woolworths in the first half of Calendar 2010 and the off-market share Buy-Back announced 26 August 2010, means that Woolworths will be returning over $1 billion of capital (excluding dividends) to shareholders in the 2010 calendar year. Our ability to return such a large sum and still retain our strong credit rating and flexibility to pursue growth highlight the strength of our core business and our focus on shareholder value.

Following completion of the off-market share Buy-Back and payment of the October 2010 dividend, Woolworths expects to have $1 billion of franking credits available for distribution.

The off-market Buy-Back announced is the next step in Woolworths’s ongoing capital management program. Capital management initiatives will continue to be assessed in light of investment and growth opportunities available to the company, the company’s focus on maintaining a strong credit rating, the capital markets environment from time to time and the overriding objective of enhancing shareholder value.

Financing Transactions

It is intended that the off-market Buy-Back will be ultimately financed via long term debt issued into both domestic and international (in particular the US) debt capital markets within the coming months, subject to financial market conditions, however Woolworths has access to sufficient undrawn bank facilities to fund the Buy-Back should the need arise.

The maturity profile of our debt facilities is such that the only immediate need to refinance any long term debt in the current financial year is an A$350 million medium term note maturing in March 2011. Refinancing requirements immediately following this include a A$600 million hybrid note (a perpetual instrument whose non-call period ends in September 2011), followed by USD300 million in US 144A notes (hedged at A$410 million) maturing in November 2011. Pre-funding these maturities is under consideration.

171

F-128 NOTES TO THE FINANCIAL STATEMENTS continued

28 DEED OF CROSS GUARANTEE Pursuant to ASIC Class Order 98/1418, the wholly-owned subsidiaries listed below are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports.

It is a condition of the class order that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee (Deed). Under the Deed the Company guarantees the payment of all debts of each of the subsidiaries in full, in the event of a winding up. The subsidiaries in turn guarantee the payment of the debts of the Company in full in the event that it is wound up.

The subsidiaries that are party to the Deed are: A.C.N. 001 259 301 Pty Limited Advantage Supermarkets Pty Ltd Advantage Supermarkets WA Pty Ltd Andmist Pty. Limited Australian Liquor and Grocery Wholesalers Pty Ltd Australian Safeway Stores Pty. Ltd. Barjok Pty Ltd Calvartan Pty. Limited Cenijade Pty. Limited Charmtex Pty Ltd Dentra Pty. Limited Dick Smith Electronics Franchising Pty Ltd Dick Smith Electronics Pty Limited Dick Smith Electronics Staff Superannuation Fund Pty Limited Dick Smith Management Pty Ltd Dick Smith (Wholesale) Pty Ltd Drumstar Pty Ltd DSE Holdings Pty Limited Fabcot Pty Ltd Gembond Pty. Limited GreenGrocer.com.au Pty Ltd Grocery Wholesalers Pty Ltd Highlands No. 1 Nominees Pty Limited Hydrogen Nominees Pty Limited InterTAN Australia Pty Ltd Jack Butler & Staff Pty. Ltd. Josona Pty Ltd Kiaora Lands Pty Limited Langtons Pty Limited Leasehold Investments Pty Ltd Mac’s Liquor Stores Pty Limited Nalos Pty Ltd Oxygen Nominees Pty Limited PEH (NZ IP) Pty Ltd Philip Leong Stores Pty Limited Progressive Enterprises Holdings Limited QFD Pty. Limited Queensland Property Investments Pty Ltd Universal Wholesalers Pty Limited Vincentia Nominees Pty Limited Votraint No. 1622 Pty Limited Weetah Pty. Limited Woolies Liquor Stores Pty. Ltd Woolstar Pty. Limited Woolworths Australian Communities Foundation Pty Limited Woolworths Custodian Pty Ltd Woolworths Executive Superannuation Scheme Pty Limited

172

F-129 NOTES TO THE FINANCIAL STATEMENTS continued

28 DEED OF CROSS GUARANTEE continued Woolworths Group Superannuation Scheme Pty Limited Woolworths (International) Pty Limited Woolworths Management Pty Ltd Woolworths (Project Finance) Pty. Limited Woolworths Properties Pty Limited Woolworths (Publishing) Pty Ltd Woolworths (Q’land) Pty Limited Woolworths (R & D) Pty Limited Woolworths (South Australia) Pty Limited Woolworths Townsville Nominee Pty Ltd Woolworths Trustee No. 2 Limited Woolworths Trust Management Pty Limited Woolworths (Victoria) Pty Limited Woolworths (W.A.) Pty Limited

173

F-130 NOTES TO THE FINANCIAL STATEMENTS continued

28 DEED OF CROSS GUARANTEE continued A consolidated income statement and consolidated balance sheet for the closed group representing the Company and the subsidiaries noted on pages 179 to 181, which are party to the Deed as at 27 June 2010 is set out below. The following controlled entities (see Note 29) are excluded from this consolidation:

ALH Group Pty Ltd Albion Charles Hotel (BMG) Pty Ltd ALH Group Property Holdings Pty Limited Australian Leisure and Hospitality Group Limited ALH Group (No. 1) Pty Ltd Balaclava Hotel (BMG) Pty Ltd Chelsea Heights Hotel (BMG) Pty Ltd Cherry Hill Tavern (BMG) Pty Ltd Club Management (BMG) Pty Ltd Courthouse Brunswick Hotel (BMG) Pty Ltd Courthouse Hotel Footscray (BMG) Pty Ltd Croxton Park Hotel (BMG) Pty Ltd Daisey’s Club Hotel (BMG) Pty Ltd Excelsior Hotel (BMG) Pty Ltd First and Last Hotel (BMG) Pty Ltd Glengala Hotel (BMG) Pty Ltd Lyndhurst Club Hotel (BMG) Pty Ltd Management (BMG) Pty Ltd Manningham Hotel (BMG) Pty Ltd MGW Hotels Pty Ltd Aceridge Pty Limited Chatswood Hills Tavern Pty. Ltd. Dapara Pty Ltd Stadform Developments Pty. Limited Fenbridge Pty. Ltd. Kawana Waters Tavern No. 3 Pty Ltd Kawana Waters Tavern No. 1 Pty Ltd Kawana Waters Tavern No. 2 Pty Ltd Vicpoint Pty Ltd Milanos Hotel (BMG) Pty Ltd Monash Hotel (BMG) Pty Ltd Moreland Hotel (BMG) Pty Ltd Nu Hotel (BMG) Pty Ltd Oakleigh Junction Hotel (BMG) Pty Ltd Palace Hotel Hawthorn (BMG) Pty Ltd Powel Hotel Footscray (BMG) Pty Ltd Preston Hotel (BMG) Pty Ltd Queensbridge Hotel (BMG) Pty Ltd Racecourse Hotel (BMG) Pty Ltd Shoppingtown Hotel (BMG) Pty Ltd Taverner Hotel Group Pty. Ltd. Amprok Pty. Ltd. Auspubs Pty Ltd Cooling Zephyr Pty Ltd

174

F-131 NOTES TO THE FINANCIAL STATEMENTS continued

28 DEED OF CROSS GUARANTEE continued E. G. Functions Pty. Ltd. Elizabeth Tavern Pty. Ltd. FG Joint Venture Pty Ltd Fountain Jade Pty. Ltd. Hadwick Pty Ltd Kilrand Hotels (Hallam) Pty. Ltd. Ashwick (Vic.) No.88 Pty. Ltd. Markessa Pty. Ltd. Playford Tavern Pty Ltd Seaford Hotel Pty. Limited The Common Link Pty Ltd The Second P Pty Ltd Warm Autumn Pty. Ltd. Werribee Plaza Tavern Pty. Ltd. Waltzing Matilda Hotel (BMG) Pty Ltd Wheelers Hill Hotel (BMG) Pty Ltd Australian Independent Retailers Pty Ltd Bergam Pty Limited DSE (NZ) Limited David Reid Electronics (1992) Limited(1) Dick Smith Electronics Limited Hydrox Holdings Pty Ltd Shellbelt Pty Ltd Hydrox Nominees Pty Ltd Carboxy Pty Ltd Danks Holdings Pty Limited Danks Events Pty Ltd Home Hardware Australasia Pty Ltd Homestead Hardware Australasia Pty Ltd Thrifty-Link Hardware Pty Ltd John Danks and Son Proprietary Limited Australian Hardware Distributors Pty Ltd Blue Mountains Hardware Pty Ltd Hammer Hardware Stores Pty Ltd Woolstar Investments Limited Woolworths (HK) Sales Limited Woolworths (HK) Procurement Limited Woolworths Wholesale (India) Private Limited Woolworths New Zealand Group Limited BWS (2008) Limited Progressive Enterprises Limited Caledonian Leasing Limited Countdown Foodmarkets Limited Foodtown Supermarkets Limited Fresh Zone Limited General Distributors Limited S R Brands Limited Supervalue/ Freshchoice Limited

175

F-132 NOTES TO THE FINANCIAL STATEMENTS continued

28 DEED OF CROSS GUARANTEE continued

The Supplychain Limited Wholesale Services Limited Wholesale Distributors Limited Woolworths (New Zealand) Limited Statewide Independent Wholesalers Limited Woolworths Insurance Pte Limited

(1) David Reid Electronics (1992) Limited was deregistered on 18 December 2009.

176

F-133 NOTES TO THE FINANCIAL STATEMENTS continued

28 DEED OF CROSS GUARANTEE continued

INCOME STATEMENT

2010 2009 52 weeks 52 weeks $m $m

Revenue from the sale of goods 42,405.0 40,860.9 Other operating revenue 81.8 84.4 Total revenue from operations 42,486.8 40,945.3 Cost of sales (31,441.5) (30,473.1) Gross profit 11,045.3 10,472.2 Other revenue 154.7 131.6 Branch expenses (6,554.9) (6,268.3) Administration expenses (2,042.9) (2,007.9) Earnings before interest and tax 2,602.2 2,327.6 Financial expense (239.6) (249.5) Financial income 336.8 389.5 Net financing cost 97.2 140.0 Net profit before income tax expense 2,699.4 2,467.6 Income tax expense (774.6) (699.9) Profit after income tax expense 1,924.8 1,767.7

Retained earnings Balance at start of period 2,730.7 2,179.7 Profit attributable to members 1,924.8 1,767.7 Dividends paid or provided (Note 6) (1,349.2) (1,174.3) Actuarial gain/(loss) recognised direct to equity 1.7 (66.8) Other 3.4 24.4 Balance at end of period 3,311.4 2,730.7

177

F-134 NOTES TO THE FINANCIAL STATEMENTS continued

28 DEED OF CROSS GUARANTEE continued

BALANCE SHEET

As at 2010 2009 $m $m Current assets Cash 487.3 571.0 Trade and other receivables 1,557.6 1,340.1 Inventories 2,911.5 2,827.7 Assets held for sale 14.1 33.4 Other financial assets 92.6 102.9 Total current assets 5,063.1 4,875.1 Non-current assets Trade and other receivables 3,367.1 3,269.1 Other financial assets 2,063.8 1,923.9 Property, plant and equipment 5,403.0 4,705.8 Intangibles 756.7 740.2 Deferred tax assets 369.0 420.1 Total non-current assets 11,959.6 11,059.1 Total assets 17,022.7 15,934.2 Current liabilities Trade and other payables 4,575.3 4,499.4 Borrowings 860.4 162.7 Other financial liabilities 24.7 99.3 Current tax liabilities 162.8 241.1 Provisions 673.5 651.0 Total current liabilities 6,296.7 5,653.5 Non-current liabilities Borrowings 2,668.0 2,984.8 Other financial liabilities 159.3 78.4 Provisions 389.4 338.9 Other 163.7 157.4 Total non-current liabilities 3,380.4 3,559.5 Total liabilities 9,677.1 9,213.0 Net assets 7,345.6 6,721.2 Equity Issued capital 3,784.4 3,858.6 Shares held in trust (41.2) (51.2) Reserves 291.0 183.1 Retained earnings 3,311.4 2,730.7 Equity attributable to the members 7,345.6 6,721.2 Non-controlling interest - - Total equity 7,345.6 6,721.2

178

F-135 NOTES TO THE FINANCIAL STATEMENTS continued

29 SUBSIDIARIES Beneficial Holding Name of entity 2010 2009 % % Woolworths Limited A.C.N. 001 259 301 Pty Limited 100 100 Advantage Supermarkets Pty Ltd 100 100 Advantage Supermarkets WA Pty Ltd 100 100 ALH Group Pty Ltd 75 75 Albion Charles Hotel (BMG) Pty Ltd 100 100 ALH Group Property Holdings Pty Limited 100 100 Australian Leisure and Hospitality Group Limited 100 100 ALH Group (No. 1) Pty Ltd 100 100 Balaclava Hotel (BMG) Pty Ltd 100 100 Chelsea Heights Hotel (BMG) Pty Ltd 100 100 Cherry Hill Tavern (BMG) Pty Ltd 100 100 Club Management (BMG) Pty Ltd 100 - Courthouse Brunswick Hotel (BMG) Pty Ltd 100 100 Courthouse Hotel Footscray (BMG) Pty Ltd 100 100 Croxton Park Hotel (BMG) Pty Ltd 100 100 Daisey’s Club Hotel (BMG) Pty Ltd 100 100 Excelsior Hotel (BMG) Pty Ltd 100 100 First and Last Hotel (BMG) Pty Ltd 100 100 Glengala Hotel (BMG) Pty Ltd 100 100 Lyndhurst Club Hotel (BMG) Pty Ltd 100 100 Management (BMG) Pty Ltd 100 - Manningham Hotel (BMG) Pty Ltd 100 100 MGW Hotels Pty Ltd 100 100 Aceridge Pty Limited 100 100 Chatswood Hills Tavern Pty. Ltd. 100 100 Dapara Pty Ltd 100 100 Stadform Developments Pty. Limited 100 100 Fenbridge Pty. Ltd. 100 100 Kawana Waters Tavern No. 3 Pty Ltd 100 100 Kawana Waters Tavern No. 1 Pty Ltd 100 100 Kawana Waters Tavern No. 2 Pty Ltd 100 100 Vicpoint Pty Ltd 100 100 Milanos Hotel (BMG) Pty Ltd 100 100 Monash Hotel (BMG) Pty Ltd 100 100 Moreland Hotel (BMG) Pty Ltd 100 100 Nu Hotel (BMG) Pty Ltd 100 100 Oakleigh Junction Hotel (BMG) Pty Ltd 100 100 Palace Hotel Hawthorn (BMG) Pty Ltd 100 100 Powel Hotel Footscray (BMG) Pty Ltd 100 100 Preston Hotel (BMG) Pty Ltd 100 100 Queensbridge Hotel (BMG) Pty Ltd 100 100 Racecourse Hotel (BMG) Pty Ltd 100 100 Shoppingtown Hotel (BMG) Pty Ltd 100 100 Taverner Hotel Group Pty. Ltd. 100 100 Amprok Pty. Ltd. 100 100 Auspubs Pty Ltd 100 100 Cooling Zephyr Pty Ltd 100 100 The Common Link Pty Ltd 100 100 E. G. Functions Pty. Ltd. 100 100 Elizabeth Tavern Pty. Ltd. 100 100 FG Joint Venture Pty Ltd 100 100 Fountain Jade Pty. Ltd. 100 100 Hadwick Pty Ltd 100 100 Markessa Pty. Ltd. 100 100 Playford Tavern Pty Ltd 100 100 Seaford Hotel Pty. Limited 100 100

179

F-136 NOTES TO THE FINANCIAL STATEMENTS continued

29 SUBSIDIARIES continued

Beneficial Holding Name of entity 2010 2009 % % The Second P Pty Ltd 100 100 Kilrand Hotels (Hallam) Pty. Ltd. 100 100 Ashwick (Vic.) No.88 Pty. Ltd. 100 100 Warm Autumn Pty. Ltd. 100 100 Werribee Plaza Tavern Pty. Ltd. 100 100 Waltzing Matilda Hotel (BMG) Pty Ltd 100 100 Wheelers Hill Hotel (BMG) Pty Ltd 100 100 Andmist Pty. Limited 100 100 Australian Independent Retailers Pty Ltd 49 49 Australian Liquor and Grocery Wholesalers Pty Ltd 100 100 Australian Safeway Stores Pty. Ltd. 100 100 Barjok Pty Ltd 100 100 Bergam Pty Limited 75 75 Calvartan Pty. Limited 100 100 Cenijade Pty. Limited 100 100 Charmtex Pty Ltd 100 100 DSE Holdings Pty Limited 100 100 Dick Smith (Wholesale) Pty Ltd 100 100 Dick Smith Management Pty Ltd 100 100 Dick Smith Electronics Franchising Pty Ltd 100 100 Dick Smith Electronics Pty Limited 100 100 Dick Smith Electronics Staff Superannuation Fund Pty Limited 100 100 DSE (NZ) Limited 100 100 David Reid Electronics (1992) Limited(1) 100 100 Dick Smith Electronics Limited 100 100 InterTAN Australia Pty Ltd 100 100 Fabcot Pty Ltd 100 100 Kiaora Lands Pty Limited 100 100 Gembond Pty. Limited 100 100 GreenGrocer.com.au Pty Ltd 100 100 Grocery Wholesalers Pty Ltd 100 100 Highlands No.1 Nominees Pty Ltd 100 100 Hydrogen Nominees Pty Ltd 100 100 Hydrox Holdings Pty Ltd 67 - Shellbelt Pty. Limited 100 100 Hydrox Nominees Pty Ltd 100 - Carboxy Pty Ltd 100 - Danks Holdings Pty Limited 100 - Danks Events Pty Ltd 100 - Home Hardware Australasia Pty. Ltd. 100 - Homestead Hardware Australasia Pty Ltd 100 - Thrifty-Link Hardware Pty. Ltd. 100 - John Danks and Son Proprietary Limited 100 - Australian Hardware Distributors Pty. Limited 100 - Blue Mountains Hardware Pty Ltd 100 - Hammer Hardware Stores Pty Ltd 100 - Jack Butler & Staff Pty. Ltd. 100 100 Josona Pty Ltd 100 100 Langtons Pty Ltd 100 100 Leasehold Investments Pty Ltd 100 100 Mac’s Liquor Stores Pty Limited 100 100 Nalos Pty Ltd 100 100 Oxygen Nominees Pty Ltd 100 100

180

F-137 NOTES TO THE FINANCIAL STATEMENTS continued

29 SUBSIDIARIES continued

Beneficial Holding Name of entity 2010 2009 % % Philip Leong Stores Pty Limited 100 100 Progressive Enterprises Holdings Limited 100 100 Drumstar Pty Ltd 100 100 PEH (NZ IP) Pty Ltd 100 100 Queensland Property Investments Pty Ltd 100 100 Universal Wholesalers Pty Limited 100 100 Vincentia Nominees Pty Ltd 100 100 Votraint No. 1622 Pty Limited 100 100 Woolies Liquor Stores Pty. Ltd. 100 100 Woolstar Investments Limited 100 100 Woolstar Pty. Limited 100 100 Woolworths (International) Pty Limited 100 100 Woolworths (HK) Sales Limited 100 100 Woolworths (HK) Procurement Limited 100 100 Woolworths Wholesale (India) Private Limited 100 100 Woolworths New Zealand Group Limited 100 100 BWS (2008) Limited 100 100 Progressive Enterprises Limited 100 100 Caledonian Leasing Limited 100 100 Countdown Foodmarkets Limited 100 100 Foodtown Supermarkets Limited 100 100 Fresh Zone Limited 100 100 General Distributors Limited 100 100 S R Brands Limited 100 100 Supervalue/ Freshchoice Limited 100 100 The Supplychain Limited 100 100 Wholesale Services Limited 100 100 Wholesale Distributors Limited 100 100 Woolworths (New Zealand) Limited 100 100 Woolworths (Project Finance) Pty. Limited 100 100 Woolworths (Publishing) Pty Ltd 100 100 Woolworths (Q’land) Pty Limited 100 100 Woolworths (R & D) Pty Limited 100 100 Woolworths (South Australia) Pty Limited 100 100 Woolworths (Victoria) Pty Limited 100 100 Statewide Independent Wholesalers Limited 60 60 Woolworths (W.A.) Pty Limited 100 100 Woolworths Australian Communities Foundation Pty Limited 100 100 Woolworths Custodian Pty Ltd 100 100 Woolworths Executive Superannuation Scheme Pty Limited 100 100 Woolworths Group Superannuation Scheme Pty Ltd 100 100 Woolworths Insurance Pte Limited 100 100 Woolworths Management Pty Ltd 100 100 Woolworths Properties Pty Limited 100 100 Dentra Pty. Limited 100 100 Weetah Pty. Limited 100 100 QFD Pty. Limited 100 100 Woolworths Townsville Nominee Pty Ltd 100 100 Woolworths Trust Management Pty Limited 100 100 Woolworths Trustee No. 2 Pty Limited 100 100

(1) David Reid Electronics (1992) Limited was deregistered on 18 December 2009

181

F-138 NOTES TO THE FINANCIAL STATEMENTS continued

30 BUSINESS ACQUISITIONS Over the course of the year, the group acquired various hotel venues and other businesses. Each acquisition was for 100% of the respective enterprise. Total consideration paid was $203.4 million comprising plant and equipment ($77.6 million); liquor and gaming licences ($23.4 million) and other working capital balances ($54.7 million), with goodwill on acquisition of $47.7 million. Goodwill has arisen on acquisition of these businesses primarily because of their capacity to generate recurring revenue streams in the future. Acquisition costs totalling $9.9 million were recognised in the income statement.

Entity / business Principal activity Date of Proportion of Cost of acquisition acquired acquisition ownership $m 2010 acquired Consolidated Woolworths Limited o Danks Holdings Hardware 11 100% 87.6 - Limited (1) wholesale November 2009 o Miscellaneous Supermarkets, various 100% 115.8 - businesses hotels and liquor retail (incl Langtons) o Miscellaneous Supermarkets various 100% - 23.6 businesses and retail liquor Total 203.4 23.6

(1) Danks Holdings Limited was 100% acquired by Hydrox Holdings Pty Limited. Woolworths Limited has a 66.7% ownership in Hydrox Holdings Pty Limited.

In 2009, the group acquired various hotel venues and other businesses. Each acquisition was for 100% of the respective enterprise. Total consideration paid was $165.8 million comprising plant and equipment ($75.6 million); liquor and gaming licences ($52.5 million) and other working capital balances ($9.5 million), with goodwill on acquisition of $28.2 million. Goodwill has arisen on acquisition of these businesses primarily because of their capacity to generate recurring revenue streams in the future changes in the composition of the group.

Entity / business Principal activity Date of Proportion of Cost of acquisition acquired acquisition ownership $m 2009 acquired Consolidated Woolworths Limited o Miscellaneous Supermarkets, various 100% 165.8 - businesses hotels and liquor retail (Incl Langtons) o Miscellaneous Supermarkets various 100% - 28.5 businesses and retail liquor Total 165.8 28.5

182

F-139 NOTES TO THE FINANCIAL STATEMENTS continued

31 SUBSEQUENT EVENTS Woolworths Limited announced on 26 August its intention to return $700 million to shareholders through an off-market share Buy-Back. The proposed $700m Buy-Back will be conducted as an off- market tender, with the proceeds received by participating shareholders treated in part as a capital component and in part as a fully-franked dividend subject to confirmation in a ruling that is being sought from the Australian Taxation Office. Participation in the Buy-Back is optional, with the tender period expected to close on Friday, 8 October 2010.

183

F-140 DIRECTORS DECLARATION

At the date of this declaration, the Company is within the class of companies affected by ASIC Class Order 98/1418. The nature of the deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee.

In the Directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC Class Order applies, as detailed in Note 28 to the Financial Statements will, as a group, be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee.

Signed in accordance with a resolution of the Directors made pursuant to s.295(5) of the Corporations Act 2001.

On behalf of the Directors

James Strong Michael Luscombe Chairman Managing Director and Chief Executive Officer

7 September 2010

184

F-141 INPEPENDENT AUDITOR’S REPORT

185

F-142 INPEPENDENT AUDITOR’S REPORT continued

186

F-143 DIRECTORS’ STATUTORY REPORT

This Report is given by the Directors PRINCIPAL ACTIVITIES CONSOLIDATED RESULTS AND in respect of Woolworths Limited Woolworths Limited operates in REVIEW OF THE OPERATIONS (the Company) and the consolidated Australia and New Zealand with The net amount of consolidated profit entity consisting of the Company 3,162 stores and more than 191,000 for the financial period after income tax and the entities it controlled (the Group) employees. The Company operates 951 expense attributable to members of the for the financial period ended supermarkets under the Woolworths Company and its controlled entities was 28 June 2009. and Safeway brands in Australia and $1,835.7 million (2008: $1,626.8 million). under Woolworths, Foodtown and THE DIRECTORS A review of the operations of the Countdown brands in New Zealand. consolidated entity and its principal The persons who have been Directors The liquor retailing division services of the Company at any time during or businesses during the financial period different customer needs through BWS, and the results of those operations are since the end of the financial period Dan Murphy’s, Woolworths/Safeway and up to the date of this Report are: set out in the Chairman’s Report and attached liquor outlets and through the Managing Director’s Report from Non-executive Directors supermarket outlets in New Zealand. pages 4 to 22 inclusive. J A Strong Chairman The petrol retailing division has J F Astbury 542 canopies at year end across Australia DIVIDENDS R S Deane which are co-branded Woolworths/ The amounts set out below have D J Grady Caltex. The general merchandise division been paid by the Company during the L M L’Huillier services customers’ everyday needs financial period or have been declared I J Macfarlane through 156 BIG W stores and supplies by the Directors of the Company, by A M Watkins consumers with the latest technology way of dividend, but not paid during the Executive Directors through Dick Smith and Tandy stores financial period up to the date of this MG Luscombe Chief Executive Officer operating throughout Australia and Report. All dividends were fully franked and Managing Director New Zealand in 436 outlets. The at the tax rate indicated. TW Pockett Finance Director business venture with TATA in India now provides wholesale services to 33 retail Details of the experience, qualifications, stores operating under the “Croma” special responsibilities and other brand. The Hotel division includes directorships of listed companies in 280 premium hotels, including bars, respect of each of the Directors are dining, gaming, accommodation and set out against their respective names venue hire operations. from pages 28 to 29.

Franking tax rate Dividend Total paid/payable COMPANY SECRETARY % cents/share $m Mr Peter John Horton BA LLB.

Mr Horton joined Woolworths in Final 2008 dividend November 2005 as Group General Paid on 3 October 2008 30 48 586.0 Counsel and Company Secretary. Previously Mr Horton was General Interim 2009 dividend Manager Legal and Company Secretary Paid on 24 April 2009 30 48 588.3 at WMC Resources Limited. Final 2009 dividend Payable on 9 October 2009 30 56 692.0

32 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-144 SIGNIFICANT CHANGES IN GRANT OF OPTIONS Woolworths/Lowe’s have offered THE STATE OF AFFAIRS On 9 December 2008 an offer was $13.50 per share (representing total Other than as referred to in the Managing made under the Long Term Incentive equity consideration of $87.6 million), Director’s Report, the significant changes Plan (LTIP) with an effective date of to acquire all the ordinary shares of in the state of affairs of the Group during 1 July 2008 granting 5,598,000 options Danks, Australia’s second largest the financial period are as follows. and 1,077,444 performance rights hardware distributor. Further information A net increase in the issued share capital with stringent performance measures is available from the Danks and Lowes of the Company of 11,883,479 fully paid relating to EPS and TSR hurdles. stock exchange announcements. ordinary shares as a result of: A further 98,000 performance rights were offered under the Retention Plan Final dividend (i) the issue on 3 October 2008 of with an effective date of 1 September On 27 August 2009, the Directors 2,993,478 fully paid ordinary 2008 or 2 February 2009. declared a final dividend of 56 cents per shares and the issue on 24 April share, fully franked at the 30% tax rate, 2009 of 3,207,161 fully paid There were no issues of fully paid on each of the issued ordinary shares ordinary shares pursuant to ordinary shares pursuant to the of the Company. The final dividend is the Dividend Reinvestment Employee Share Plan or to the Employee payable on 9 October 2009. Plan. Neither the 2008 final Share Issue Plan made during the dividend nor the 2009 interim financial period. Transactions with the ALH Group and related companies dividend was underwritten and MATTERS SUBSEQUENT TO THE Details of certain transactions between a cap of 20,000 maximum share END OF THE FINANCIAL PERIOD participation in the Dividend the ALH Group and related companies On 25 August 2009, Woolworths are set out below. Reinvestment Plan was in announced plans to enter the $24 billion operation for both dividends; plus hardware sector with a multi format ALH Group Limited purchased various (ii) the issue on various dates, for strategy designed to meet the everyday building supplies and services totalling cash at the relevant exercise price, home improvement needs of Australian $75,656,952 (2008: $76,522,273) of 5,438,254 fully paid ordinary consumers with: from Lifetime Developments Pty Ltd, shares as a result of the exercise a company with which Mr Bruce − a recommended takeover offer for Mathieson is a related party through of options held by a number of Danks Holdings Limited (Danks), executives under the Executive family member/s who is/are a Director/ Australia’s second largest hardware Directors of Lifetime Developments Option Plan (EOP) and the Long distributor supplying 583 Home Term Incentive Plan (LTIP); and Pty Ltd. Amounts were billed based Timber and Hardware, Thrifty-Link on commercial market rates for such (iii) the issue on 2 February 2009 of Hardware, and Plants Plus Garden supplies and were due and payable 236,043 fully paid ordinary shares Centre stores plus 939 independent under commercial payment terms. and the issue on 2 March 2009 of hardware stores; 8,543 fully paid ordinary shares − the development of a network of ALH Group Limited purchased various pursuant to the acquisition of destination home improvement building supplies and services totalling Langtons Pty Ltd at an issue price stores with a target to secure more $20,299,852 (2008: $28,003,202) from of $26.326 per share, being the than 150 store sites within the next TAG Constructions Pty Ltd, a company five day volume weighted average five years; and with which Mr Bruce Mathieson is a price of Woolworths shares up to – a joint venture equity agreement related party through family member/s and including 30 January 2009 with leading US Home who is/are a Director/Directors of TAG which was completion date of Improvement retailer Lowe’s Constructions Pty Ltd. Amounts were the acquisition. Companies Inc (Lowe’s). Lowe’s billed based on commercial market investment will represent a 33.3% rates for such supplies and were stake in the Woolworths’ home due and payable under commercial improvement business. payment terms.

F-145 DIRECTORS’ STATUTORY REPORT

ALH Group purchased various Grant of options DIRECTORS’ INTERESTS IN marketing services totalling $300,316 On 9 December 2008 an offer was SHARES/OPTIONS (2008: $143,773) from Capricornia made under the Long Term Incentive Particulars of Directors’ relevant interests Pty Ltd, a company with which Plan (LTIP) with an effective date of in shares and options in the Company as Mr Bruce Mathieson is a related party. 1 July 2008 granting 5,598,000 options at 15 September 2009 are set out below: Amounts relate to a pro-rata of shared and 1,077,444 performance rights marketing costs associated with the with stringent performance measures Director Shares Options promotion of two ALH accommodation relating to EPS and TSR hurdles. properties jointly with one Capricornia A further 98,000 performance rights J A Strong 70,479 – accommodation property. were offered under the Retention Plan M G Luscombe 523,290 1,330,000 These transactions were subject with an effective date of 1 September J F Astbury 12,797 – to review and testing on a sample 2008 or 2 February 2009. R S Deane 40,000 – basis by Woolworths internal audit. Between 28 June 2009 and D J Grady 36,259 – Signiﬁcant construction activity is 15 September 2009, 6,710,189 shares L M L’Huillier 60,000 – also subject to independent review were allotted as a result of the maturity I J Macfarlane 4,000 – by a quantity surveyor. of retention rights under the LTIP in T W Pockett 133,000 830,000 2007, and the exercise of options granted A M Watkins 11,859 – under the LTIP in July 2004, July 2005 and July 2006.

MEETINGS OF DIRECTORS The table below sets out the number of meetings of the Company’s Directors (including meetings of Committees of Directors) held during the ﬁnancial period ended 28 June 2009 and the number of meetings attended by each Director. In addition to attending formal Board and Board Committee meetings, the Directors undertake other duties including attending strategic review sessions, retail market study trips, as well as Board and Board Committee Meeting preparation and research. These additional responsibilities constitute a further signiﬁcant time commitment by Directors. Audit, Risk Ad hoc Management Board Board and Compliance People Policy Directors Meetings Meetings Committee Committee

J A Strong(1)(2)(3) 9/9 5/5 7/7 5/5 M G Luscombe 9/9 5/5 J F Astbury(1)(3) 9/9 5/5 7/7 R S Deane(2a)(3) 9/9 5/5 5/5 D J Grady(1)(3) 9/9 5/5 7/7 L M L’Huillier(1)(2)(3)(4)(5)(6) 7/9 5/5 2/3 2/3 I J Macfarlane(1)(3) 9/9 5/5 6/7 T W Pockett 9/9 5/5 A M Watkins(1a)(2)(3) 9/9 5/5 7/7 5/5

Meetings attended/held while in ofﬁce. Notes (1) (3) (5) Member of the Audit, Risk Member of the Corporate Director of ALH Group Pty Limited Management and Compliance Governance Committee which and Chairman of its Audit Committee. Committee. meets at the same time as the (6) Board meetings. (1a) Mr L’Huillier retired from the ARMCC Chairman of the Audit, Risk (4) on 19 September 2008 and joined Management and Compliance Chairman of the Superannuation the People Policy Committee on Committee. Working Group and the Woolworths 19 September 2008. Group Superannuation Plan’s Policy (2) Committee. Member of the People Policy Committee. (2a) Chairman of the People Policy Committee.

34 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-146 DIRECTORS’ STATUTORY REPORT REMUNERATION REPORT

1 INTRODUCTION 2 REMUNERATION POLICY 2.1 Role of the People Policy All of our employees play an important Remuneration policy is aligned with Committee role in delivering the Company’s financial both our financial and strategic business The Committee works closely with performance and our remuneration objectives and recognises that people management to review processes and policies have been developed to provide are a major contributor to sustained programs to ensure the Remuneration market competitive remuneration in improvements in performance. Policy is implemented. The Committee order to sustain Woolworths’ competitive Woolworths’ approach to remuneration also obtains independent external advantage and protect the interests is in line with principles endorsed by advice on key remuneration issues, as of shareholders. the Australian Institute of Company required. The Committee acts on behalf Woolworths recognises that Directors, Australian Employee of the Board and shareholders to ensure remuneration is an important factor Ownership Association and Australian that in relation to its human resources, in attracting, motivating and retaining Shareholders Association. the Company: talented employees, in conjunction with Woolworths’ Remuneration Policy for all − establishes and implements a human other elements of our approach to people executives ensures: resources strategy to ensure that management. The Woolworths Academy appropriately talented and trained − remuneration is market competitive provides training and development for and designed to attract, motivate and people are available to achieve the employees to learn and develop the skills retain key executives; Business Strategy; they need to succeed in their current undertakes the appropriate − demanding performance measures − roles and the development opportunities are applied to both short and performance management, to enable them to reach their full long term “at risk” remuneration; succession planning and potential. Effective succession planning development activities and programs; − short term performance is linked includes promotion and appointment to both financial and non-financial − provides effective remuneration of employees to new challenges performance measures; and policies having regard to the creation within the business. – long term performance is measured of value for shareholders and the Woolworths has an achievement and through the creation of value for external remuneration market; performance-oriented culture which our shareholders. − provides a safe working environment remuneration policies drive and support. for all employees; Company protection and employment − complies with all legal and regulatory In recognising the importance of our stability is provided through people to our success, approximately requirements and principles of good pre-established employment agreements governance; and 40,000 Woolworths’ employees limiting the amount of termination hold shares in the Company through – reports to shareholders in line with payments and providing restrictive required standards. participation in various equity based covenants on future employment by schemes, sharing in the Company’s competitors. Membership of the Committee consists success and aligning their experience of four independent Non-executive with that of other shareholders. Directors who, for the financial year, were Roderick Deane (Chair), James Strong, Leon L’Huillier and Alison Watkins. The members’ attendance at meetings of the People Policy Committee is set out on page 34.

F-147 DIRECTORS’ STATUTORY REPORT REMUNERATION REPORT CONTINUED

3 EXECUTIVE REMUNERATION Specific arrangements exist for the The STIP provides an annual cash INCLUDING EXECUTIVE DIRECTORS CEO which are described in Section 3.5 incentive that is calculated based on 3.1 Overview Executive Service Agreements. These financial year results and is based on a Woolworths’ current remuneration specific arrangements may vary from maximum percentage of the executive’s structure is comprised of two the general principles outlined in the base salary, except for the CEO and components: following sections. Finance Director STIPs which are 3.1.1 Base salary calculated on fixed remuneration. − fixed remuneration which is base salary, superannuation contributions The amount of base salary is determined STIP is payable upon the achievement and, where appropriate, the use of a by reference to independent research of a number of measures, generally fully maintained motor vehicle; and considering the scope and nature of 70% of the total maximum percentage – the variable or “at risk” component the role and appropriate market rates is based on key financial objectives which is performance-based and as well as the executive’s individual and 30% based on non-financial or comprised of a cash-based Short performance and experience. Base individual objectives. Term Incentive Plan (STIP) and a salaries are aligned to the median of There are four main financial key result Long Term Incentive Plan (LTIP). the relevant market. While Woolworths areas (KRAs) that are standard in plans conducts annual remuneration The total remuneration package of all and are designed to ensure the Company reviews, there are no guaranteed achieves long term sustainable profitable executives is designed to ensure an remuneration increases contained in appropriate mix of fixed remuneration growth. The KRAs are sales, profit which Executive Service Agreements. Any may be earnings before interest and tax with short and long term incentive increases are determined by individual opportunities. The relative weighting (EBIT), gross profit or controllable profit performance, economic indicators dependent on the role, return on funds of fixed and variable components, for and market data. target performance, varies with role level employed (ROFE) and cost of doing and complexity. Generally, the “at risk” 3.1.2 Variable “at risk” remuneration business (CODB). component increases with organisation Remuneration that is variable and In line with the strategy of achieving long responsibility and accountability level. dependent upon performance is term sustainable profit growth, it was Woolworths requires a significant delivered through the STIP and the LTIP. recognised that non-financial measures proportion of senior executives’ 3.1.2.1 Short Term Incentive Plan (STIP) potentially impact the bottom line. total potential reward to be at risk to The STIP has been structured to ensure Non-financial measures such as reducing reward performance in both the short that payments are closely aligned staff turnover rates and improved and long term. To ensure alignment to business performance and are performance in areas such as safety, between Company performance and designed to: shrinkage, inventory control and food individual performance, Woolworths safety compliance ratings have been − deliver Company performance aims to position all senior executives’ improvements over the prior year; targeted to provide a balanced approach. remuneration at: In line with achieving our “Destination − provide rewards subject to ZERO” objectives, safety measures have − the median of the relevant market the achievement of rigorous for fixed remuneration; and performance targets; and been added to or increased in all STIPs to – the third quartile of the relevant – align individual objectives to ensure there is sufficient focus on both market for total remuneration for Company and business-specific employee and customer safety. outstanding performance. objectives. The targets and weightings for each measure are adjusted at the beginning of the financial year to reflect the specific financial objectives of each business within the Woolworths Group for that Woolworths targets the mix of fixed and variable remuneration as follows: financial year and are designed to deliver Percentage of total target remuneration improvements on the prior year’s results. Target Target This results in each executive having a short-term long-term STIP that is directly linked to their annual Fixed incentive incentive business objectives. remuneration (STIP) (LTIP) % % %

Executive Directors 33 33 33 Direct reports to CEO 40 30 30 Other senior executives 60 20 20

36 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-148 There are three levels of targeted From 1999 through to 2004 long term The Executive Option Plan has the performance for each measure: incentives were provided through the following features: Executive Option Plan (EOP). At the 2004 − threshold, which is the minimum − the exercise price is set at the improvement to last year’s Annual General Meeting shareholders weighted average market price of a results required to qualify for any approved the introduction of the Woolworths Limited ordinary share incentive payment; Woolworths Long Term Incentive Plan on the five trading days prior to the (LTIP). Both the EOP and the LTIP are − target, where established date approved by the Board as the performance targets have been described below. effective date of options for the achieved; and Since 2002 long term incentive awards purpose of determining the exercise – stretch, where performance have been linked to executives entering period and performance hurdles; targets have been exceeded. into Service Agreements that offer the − an exercise period that commences STIPs for each financial year are not paid Company protection and provide clarity after five years, subject to until the release of Woolworths’ financial for executives. Effective from 2003 all performance hurdles being met and results to the ASX. Supermarket and BIG W store managers with a maximum exercise period of and buyers as well as distribution centre five and a half years (10 years for The People Policy Committee reviews managers became eligible to receive long options issued prior to 2002); annually the ongoing appropriateness term incentive awards. − upon exercise, each option entitles of the STIP including performance In the event of cessation of employment, the option holder to one ordinary fully measures, weighting of performance paid Woolworths Limited share; measures, performance hurdles, both the EOP Rules and the LTIP Rules provide the Board with discretion as to − vesting is subject to two performance and assessment of performance and hurdles based on cumulative EPS reward outcomes. the treatment of unvested long term incentive awards. growth and relative TSR measured 3.1.2.2 Long Term Incentive Plan (LTIP) over the performance period; The other variable remuneration Executive Option Plan − the performance measures, EPS component is the Long Term Incentive The Executive Option Plan (EOP) growth and relative TSR, each Plan which is designed to: was approved by shareholders in represent 50% of the options granted; November 1999 and was last offered − EPS is the non-dilutive EPS which attract, retain and motivate all − with an effective grant date of 1 July is measured as the net profit executives; 2004. As at 28 June 2009, there were of the consolidated entity after align executive rewards to − 6,119,437 options outstanding under outside equity interests divided by shareholder value creation; and this Plan. the weighted average number of – provide rewards that are linked to the shares on issue (including ordinary Company’s strategic, financial and Awards have been made under the shares and dividend reinvestment human resources objectives. EOP in five tranches with each tranche subject to performance hurdles allotments, but excluding shares held Long term incentives have been in place established by the People Policy by Woolworths custodian) over the since 1993 and have been provided Committee and approved by the Board. performance period; through various executive option plans. Hurdles relate to cumulative earnings per – for offers made from 2002 to 2007, share (EPS) growth and to relative total the EPS component vests in four shareholder return (TSR). tranches, dependent on attaining average annual growth of either 10% or 11% as follows:

Percentage of Performance options in total hurdle to grant that may be achieved Tranche be exercised for vesting Exercise period

Tranche 1 12.5% 4 year Between 5 and 5.5 years from the effective date 10% EPS Tranche 2 12.5% 4 year Between 5 and 5.5 years from the effective date 11% EPS Tranche 3 12.5% 5 year Between 5 and 5.5 years from the effective date 10% EPS Tranche 4 12.5% 5 year Between 5 and 5.5 years from the effective date 11% EPS

F-149 DIRECTORS’ STATUTORY REPORT REMUNERATION REPORT CONTINUED

− the fifth tranche (50% of options) is The following table sets out the TSR Like the previous Executive Option Plan, linked to relative TSR and measures vesting schedule: stringent performance measures are the growth in the Company’s share set annually and relate to EPS and TSR Woolworths TSR equals Percentage of price plus dividends notionally or exceeds the following options in total hurdles. These are described in detail reinvested in the Company’s shares percentile of the grant that vest and following the description of the Plan’s comparative to a peer group, comparator companies may be exercised Sub-Plans. measured over five years from 60th percentile 12.5% In addition, the Performance Rights the grant date but averaged for Sub-Plan has been used as a Retention 65th percentile 25.0% three months to eliminate volatility. Plan since 2007 to ensure that key This reflects the increase in value 70th percentile 37.5% employees are retained to protect and delivered to shareholders over the deliver on the Company’s strategic performance period; 75th percentile 50.0% direction. It has been delivered to senior − TSR performance is measured executives who had either no or relatively against comparator companies Woolworths Long Term Incentive Plan small option grants scheduled to vest comprised of the S&P/ASX 100, At the 2004 Annual General Meeting, over the ensuing two years. excluding companies in the ASX shareholders approved the introduction This Plan does not have performance classified as financial services and of a new long term incentive, the measures attached to it and vests resources and any companies in Woolworths Long Term Incentive Plan. subject to the executive remaining the comparator group that have The Plan has four Sub-Plans, which employed by the Company for a two-year merged, had a share reconstruction, are described below, that together can period. It is intended that this Plan be been delisted or subject to takeover provide options, performance rights, used only in special circumstances. or takeover offer during the performance shares or cash awards. measurement periods; 1 Option Sub-Plan This Plan allows the Board flexibility − TSR performance measurement The Option Sub-Plan delivers a right to to determine which of the Sub-Plans’ for the purpose of calculating the the holder of an option to acquire a share awards will be granted to deliver the number of options to vest is audited at a future date, subject to performance overall LTIP objectives. by an independent third party; and hurdles being met and the payment of an – the percentage of the total number From 2005 the Option Sub-Plan has exercise price. As at 28 June 2009, there of options granted that vest is been used to satisfy Woolworths LTIP were 26,933,800 options outstanding dependent on Woolworths’ ranking requirements however, from the offer under this Sub-Plan. relative to the performance of the made in 2008, a combination of options above comparator companies. and performance rights have been used.

Year 2005 2006 2007 2008 Total

Options 5,496,725 7,315,150 8,580,300 5,541,625 26,933,800

38 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-150 2 Performance Rights Sub-Plan 3 Performance Share Sub-Plan Woolworths Long Term Incentive The Performance Rights Sub-Plan The Performance Share Sub-Plan Plan renewal delivers a contractual right to a provides for a contractual right to an The Woolworths Long Term Incentive future grant of a Company share immediate grant of Company shares Plan was approved by shareholders to the right holder at a future date, to participants, entitlement to which is at the 2004 Annual General Meeting. subject to the performance hurdles subject to performance hurdles being Shareholder approval of the Plan was also being met. Each performance right achieved. Each performance share has obtained under an exception to Australian has the following features: the following features: Securities Exchange (ASX) Listing Rule 7.1 which restricts (in certain circumstances) − it can be exercised for no − it can be exercised for no monetary the issue of new securities in any one monetary payment; and payment; and – upon exercise, each performance year to 15% of issued shares without – participants receive dividends or shareholder approval. right entitles the right holder to other distributions and entitlements the issue of one ordinary fully paid as an ordinary Company shareholder. The applicable exception is contained in Woolworths Limited share. ASX Listing Rule 7.2, exception 9. The No offers of performance shares have effect of shareholder approval under that As at 28 June 2009, there were been made. 2,714,916 performance rights exception is that any issues of securities outstanding under this Sub-Plan. 4 Cash Award Sub-Plan under the Plan are treated as having been The Cash Award Sub-Plan provides made with the approval of shareholders for participants to receive cash-based for the purpose of Listing Rule 7.1. long term incentives subject to speciﬁed Approval under the exception lasts for performance hurdles being met. three years. Accordingly, Woolworths No offers of cash awards have sought and obtained approval at the been made to date. 2007 Annual General Meeting to refresh that approval for a further three years. Performance hurdles LTIP The Board is mindful of the need for Year 2008 Total Woolworths to stay competitive and retain high calibre employees in the Performance rights 1,064,916 1,064,916 retail sector and has determined (in accordance with the Plan rules and as

Retention Plan approved at the 2007 AGM) to amend Year 2007 2008 Total the performance hurdles for grants to be made under the Plan beginning with the 2009 ﬁnancial year (referred to below as Performance rights 1,555,000 95,000 1,650,000 “the 2008 grant” or “the grant”). The 2008 grant was made using a combination of the Option Sub-Plan and the Performance Rights Sub-Plan with vesting subject to the achievement of EPS growth and relative TSR performance hurdles, each representing 50% of the grant, as described below.

F-151 DIRECTORS’ STATUTORY REPORT REMUNERATION REPORT CONTINUED

EPS performance hurdle For the 2007 and previous grants, the While the Board has retained the EPS is the non-dilutive EPS, which TSR hurdle is described in the Executive discretion to review the performance is measured as the net profit of the Option Plan on page 37. hurdles applicable to a grant of options, consolidated entity after minority Vesting, exercise period and expiry period it is intended that the performance interests divided by the weighted The 2008 performance hurdles are hurdles for grants in 2009 and 2010 will average number of shares on issue subject to the vesting scale measured also be TSR- and EPS-based. These (including ordinary shares and dividend over a four year period from the date of performance hurdles, together with the reinvestment allotments, but excluding grant but will be subject to early testing relevant exercise periods and expiry shares held by Woolworths’ custodian) on the third anniversary of the date of dates, will be disclosed each year in the over the performance period. grant and vesting may occur subject to Annual Report. For the 2008 grant, the EPS component the performance hurdles outlined above Hedging Policy partially vests upon Woolworths being met. The Woolworths Hedging Policy was attaining an average annual growth rate If the minimum performance hurdles introduced in July 2008. As part of the of equal to or greater than 10% which are met on the third anniversary of introduction of the policy, all members is deemed market competitive. An EPS the date of grant, then those options of the Senior Management Group have growth rate of equal to 10% over the and performance rights meeting the signed a declaration that they have not performance period will result in 12.5% performance hurdle shall vest. If the entered into any arrangements that of the grant vesting, while an EPS growth minimum performance hurdles are not would contravene the policy. rate of equal to or greater than 15% over met on the third anniversary, those Under the hedging policy, executives the performance period will result in 50% options and performance rights shall may not enter into any hedging of the grant vesting. remain unvested. Where this occurs, the transaction that will protect the value For the 2005, 2006 and 2007 grants, the 2008 performance hurdles will be tested of unvested securities issued as EPS component vests in four tranches as on the fourth anniversary of the date of part of the Woolworths Long Term described in the Executive Option Plan the grant and vesting may occur on this Incentive Plan. on page 37. date subject to the performance hurdles Compliance with the Hedging Policy TSR performance hurdle outlined above being met. Any option has been introduced as a condition of The TSR performance hurdle for the and performance rights that do not vest participation in the Long Term Incentive 2008 grant requires a minimum TSR at on the fourth anniversary of the grant will Plan with effect from 2008. To enter into the 51st percentile measured against be forfeited. any such arrangement would breach the comparator companies comprised Options and performance rights granted conditions of the grant and would result of the S&P/ASX 100 Index, excluding during financial year 2008 which have in forfeiture of the relevant securities. any non-comparable companies (such vested but remain unexercised expire Executive compliance with this policy as financial services and resources after the earlier of 5.5 years from the will be monitored through an annual sector companies, trusts and any date of grant, or up to 12 months after declaration by executives stating that companies in the comparator group termination of employment. they have not entered into any hedging that are under takeover or takeover transaction in relation to their unvested speculation, have merged, had a share Woolworths securities. reconstruction or been delisted during the measurement periods). Achieving maximum TSR vesting requires TSR at the 75th percentile.

40 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-152 Directors and executives The following is a list of the Non-executive Directors and key management personnel of Woolworths Limited and their positions during the year: Position title

Executive Directors Michael Gerard Luscombe Chief Executive Ofﬁcer and Managing Director Thomas (Tom) William Pockett Finance Director Chairman James Alexander Strong Chairman of the Board, member of the Audit, Risk Management and Compliance Committee, member of the People Policy Committee and member of the Corporate Governance Committee Non-executive Directors John Frederick Astbury Non-executive Director, member of the Audit, Risk Management and Compliance Committee and member of the Corporate Governance Committee Roderick Sheldon Deane Non-executive Director, Chairman of the People Policy Committee and member of the Corporate Governance Committee Diane Jennifer Grady Non-executive Director, member of the Audit, Risk Management and Compliance Committee and member of the Corporate Governance Committee Leon Michael L’Huillier Non-executive Director; member of the Audit, Risk Management and Compliance Committee until 19 September 2008 and member of the People Policy Committee since 19 September 2008. Chairman of the Superannuation Working Group and the Woolworths Group Superannuation Plan’s Policy Committee and member of the Corporate Governance Committee. Director of ALH Group Pty Ltd and Chairman of its Audit Committee Ian John Macfarlane Non-executive Director, member of the Audit, Risk Management and Compliance Committee and member of the Corporate Governance Committee Alison Mary Watkins Non-executive Director, Chairman of the Audit, Risk Management and Compliance Committee and member of the People Policy Committee and member of the Corporate Governance Committee Executives Greg Foran(1) Director of Food, Liquor and Petrol Peter Smith Managing Director of Progressive Enterprises Julie Coates(2) General Manager BIG W Richard Umbers General Manager – Customer Engagement

Notes (1) (2) Greg Foran replaced Naum Onikul Julie Coates replaced Greg Foran as as Director of Food, Liquor and General Manager of BIG W effective Petrol on 3 November 2008. 3 November 2008. Ms Coates was appointed Director of BIG W effective 18 September 2009.

All key management personnel were employed by Woolworths Limited during the year apart from Mr Peter Smith who was employed by a subsidiary. Non-executive Directors do not consider themselves part of management.

F-153 DIRECTORS’ STATUTORY REPORT REMUNERATION REPORT CONTINUED

3.2 Conditional entitlement to and share holdings The table below summarises the movements during the year in holdings of option and performance rights interests for the key management personnel in the Company for the period. An option or performance right entitles the holder to one ordinary fully paid Woolworths Limited share. There is no amount unpaid on options exercised.

Options and performance rights holding at 29 Jun 2008 Granted as remuneration (1) Options exercised (2) No. No. $ No. $

M Luscombe 1,330,000 500,000 2,477,500 (100,000) (1,501,000) T Pockett 880,000 250,000 1,238,750 (150,000) (2,251,500) N Onikul 380,000 27,500 217,713 (60,000) (900,600) P Smith 325,000 21,389 169,335 (100,000) (1,501,000) J Coates 345,000 27,500 217,713 (100,000) (1,489,000) G Foran 365,000 27,500 217,713 (100,000) (1,359,000) R Umbers 155,000 21,389 169,335 – – Total 3,780,000 875,278 4,708,059 (610,000) (9,002,100)

Notes (1) (2) Options and performance rights The value of options exercised granted as remuneration is the total during the year is calculated as fair value of options and performance the market value of shares on the rights granted during the year Australian Securities Exchange determined by an independent as at close of trading on the actuary. This will be amortised over date the options were exercised the vesting period. after deducting the price paid to exercise the options. No other options were exercised by key management personnel.

In 2009, no options lapsed or were forfeited relating to the key management personnel above during the year as a result of failure to meet performance hurdles.

Options holding at 24 Jun 2007 Granted as remuneration (1) Options exercised (2) No. No. $ No. $

M Luscombe 990,000 500,000 4,402,500 (152,000) (2,573,360) T Pockett 830,000 250,000 2,226,250 (190,000) (3,140,700) N Onikul 310,000 70,000 623,250 – – P Smith 275,000 50,000 445,250 – – J Coates 385,000 70,000 932,650 (104,500) (1,949,448) G Foran 295,000 70,000 932,650 – – R Umbers 45,000 110,000 1,877,450 – – Total 3,130,000 1,120,000 11,440,100 (446,500) (7,663,508)

42 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-154 Options vested at 28 June 2009

Options and performance rights holding Vested during Options lapsed at 28 Jun 2009 (3) Total Exercisable Unexercisable the year No. $ No. No. No. No. No.

– – 1,730,000 37,500 – 37,500 112,500 – – 980,000 37,500 – 37,500 150,000 – – 347,500 25,000 – 25,000 70,000 – – 246,389 20,000 – 20,000 95,000 – – 272,500 20,000 – 20,000 95,000 – – 292,500 25,000 – 25,000 100,000 – – 176,389 – – – – – – 4,045,278 165,000 – 165,000 622,500

(3) The number of ordinary shares under option/performance rights as at 28 June 2009 is equivalent to the option/performance rights holding at that date.

Options vested at 29 June 2008

Options and performance rights holding Vested during Options lapsed (3) at 29 Jun 2008 (4) Total Exercisable Unexercisable the year No. $ No. No. No. No. No.

(8,000) (135,440) 1,330,000 25,000 – 25,000 137,000 (10,000) (165,300) 880,000 37,500 – 37,500 177,500 – – 380,000 15,000 – 15,000 15,000 – – 325,000 25,000 – 25,000 25,000 (5,500) (112,475) 345,000 25,000 – 25,000 102,000 – – 365,000 25,000 – 25,000 25,000 – – 155,000 – – – – (23,500) (413,215) 3,780,000 152,500 – 152,500 481,500

(3) (4) The value of options lapsed during The number of ordinary shares the year is calculated as the market under option/performance rights as value of shares on the Australian at 29 June 2008 is equivalent to the Securities Exchange as at close option/performance rights holding of trading on the lapse date after at that date. deducting the exercise price.

F-155 DIRECTORS’ STATUTORY REPORT REMUNERATION REPORT CONTINUED

The table below summarises the movements during the year in holdings of shares in Woolworths Limited held by the Non-executive Directors and key management personnel. Shareholding at Shares issued Shares received on Shares issued Shares purchased Shareholding at 29 June 2008 under DRP (1) exercise of options under NEDSP (2) or (sold) (3) 28 June 2009 No. No. No. No. No. No.

J Strong 70,479 – – – – 70,479 M Luscombe 333,290 – 100,000 – – 433,290 J Astbury 12,295 82 – 420 – 12,797 R Deane 40,000 – – – – 40,000 D Grady 35,914 345 – – – 36,259 L L’Huillier 60,000 – – – – 60,000 I Macfarlane 3,000 – – – 1,000 4,000 A Watkins 10,279 177 – 1,403 – 11,859 T Pockett 54,000 – 150,000 – (111,000) 93,000 N Onikul 158,769 412 60,000 – (117,267) 101,914 P Smith 841 369 100,000 – (100,000) 1,210 J Coates 12,250 – 100,000 – (46,000) 66,250 G Foran – 380 100,000 – (50,000) 50,380 R Umbers – – – – – –

Notes (1) (2) (3) Comprises new shares issued as a Comprises shares issued under Figures in brackets indicate that result of participation in the Dividend the Non-executive Directors’ these shares have been sold or Reinvestment Plan on the same basis Share Plan (NEDSP). otherwise disposed of. as transactions by other shareholders and on-market transactions.

The table below sets out the grants and outstanding number of options and performance rights for the key management personnel in Woolworths Limited for the period 30 June 2008 to 28 June 2009. No amounts were paid or payable by the recipient on receipt of the option or performance right. Fair value per option/performance right (5) No. of options Exercise Maximum Effective and rights at Expiry price per Exercise value of award Grant date date 29 June 2008 (1) date option/right date (2) to vest $ (4) EPS TSR Retention

M Luscombe 22/04/05 1/07/04 150,000 31/12/09 $11.54 1/07/09 581,250 $4.25 $3.50 2/12/05 1/07/05 80,000 31/12/10 $16.46 1/07/10 177,200 $2.50 $1.93 24/11/06 1/07/06 500,000 31/12/11 $19.47 1/07/11 1,726,250 $4.23 $2.68 3/12/07 1/07/07 500,000 31/12/12 $25.91 1/07/12 4,402,500 $9.42 $8.19 9/12/08 1/07/08 500,000 31/12/13 $24.90 1/07/12(3) 2,477,500 $5.15 $4.76 1,730,000 9,364,700

T Pockett 22/04/05 1/07/04 150,000 31/12/09 $11.54 1/07/09 581,250 $4.25 $3.50 2/12/05 1/07/05 80,000 31/12/10 $16.46 1/07/10 177,200 $2.50 $1.93 24/11/06 1/07/06 250,000 31/12/11 $19.47 1/07/11 898,750 $4.26 $2.93 3/12/07 1/07/07 250,000 31/12/12 $25.91 1/07/12 2,226,250 $9.48 $8.33 9/12/08 1/07/08 250,000 31/12/13 $24.90 1/07/12(3) 1,238,750 $5.15 $4.76 980,000 5,122,200

44 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-156 Fair value per option/performance right (5) No. of options Exercise Maximum Effective and rights at Expiry price per Exercise value of award Grant date date 29 June 2008 (1) date option/right date (2) to vest $ (4) EPS TSR Retention

N Onikul 22/04/05 1/07/04 100,000 31/12/09 $11.54 1/07/09 387,500 $4.25 $3.50 2/12/05 1/07/05 80,000 31/12/10 $16.46 1/07/10 177,200 $2.50 $1.93 30/01/07 1/07/06 70,000 31/12/11 $19.47 1/07/11 335,650 $5.73 $3.86 3/12/07 1/07/07 70,000 31/12/12 $25.91 1/07/12 623,350 $9.48 $8.33 9/12/08 1/07/08 22,500 31/12/13 $24.90 1/07/12(3) 111,488 $5.15 $4.76 9/12/08 1/07/08 5,000 31/12/13 Nil 1/07/12(3) 106,225 $23.66 $18.83 347,500 1,741,413

P Smith 22/04/05 1/07/04 80,000 31/12/09 $11.54 1/07/09 310,000 $4.25 $3.50 2/12/05 1/07/05 50,000 31/12/10 $16.46 1/07/10 110,750 $2.50 $1.93 30/01/07 1/07/06 45,000 31/12/11 $19.47 1/07/11 215,775 $5.73 $3.86 3/12/07 1/07/07 50,000 31/12/12 $25.91 1/07/12 445,250 $9.48 $8.33 9/12/08 1/07/08 17,500 31/12/13 $24.90 1/07/12(3) 86,713 $5.15 $4.76 9/12/08 1/07/08 3,889 31/12/13 Nil 1/07/12(3) 82,622 $23.66 $18.83 246,389 1,251,110

J Coates 22/04/05 1/07/04 80,000 31/12/09 $11.54 1/07/09 310,000 $4.25 $3.50 2/12/05 1/07/05 50,000 31/12/10 $16.46 1/07/10 110,750 $2.50 $1.93 30/01/07 1/07/06 45,000 31/12/11 $19.47 1/07/11 215,775 $5.73 $3.86 3/12/07 1/07/07 50,000 31/12/12 $25.91 1/07/12 445,250 $9.48 $8.33 3/08/07 25/07/07 20,000 1/07/09 Nil 1/07/09 487,400 – – $24.37 9/12/08 1/07/08 22,500 31/12/13 $24.90 1/07/12(3) 111,488 $5.15 $4.76 9/12/08 1/07/08 5,000 31/12/13 Nil 1/07/12(3) 106,225 $23.66 $18.83 272,500 1,786,888

G Foran 22/04/05 1/07/04 100,000 31/12/09 $11.54 1/07/09 387,500 $4.25 $3.50 2/12/05 1/07/05 50,000 31/12/10 $16.46 1/07/10 110,750 $2.50 $1.93 30/01/07 1/07/06 45,000 31/12/11 $19.47 1/07/11 215,775 $5.73 $3.86 3/12/07 1/07/07 50,000 31/12/12 $25.91 1/07/12 445,250 $9.48 $8.33 3/08/07 25/07/07 20,000 1/07/09 Nil 1/07/09 487,400 – – $24.37 9/12/08 1/07/08 22,500 31/12/13 $24.90 1/07/12(3) 111,488 $5.15 $4.76 9/12/08 1/07/08 5,000 31/12/13 Nil 1/07/12(3) 106,225 $23.66 $18.83 292,500 1,864,388

R Umbers 30/01/07 1/07/06 45,000 31/12/11 $19.47 1/07/11 215,775 $5.73 $3.86 3/12/07 1/07/07 50,000 31/12/12 $25.91 1/07/12 445,250 $9.48 $8.33 3/08/07 25/07/07 30,000 1/07/09 Nil 1/07/09 731,100 – – $24.37 3/08/07 25/07/07 30,000 1/07/10 Nil 1/07/10 701,100 – – $23.37 9/12/08 1/07/08 17,500 31/12/13 $24.90 1/07/12(3) 86,713 $5.15 $4.76 9/12/08 1/07/08 3,889 31/12/13 Nil 1/07/12(3) 82,622 $23.66 $18.83 176,389 2,262,560

Grant date represents the offer acceptance date. The minimum value yet to vest is the minimum value of options that may vest if the performance criteria are not met. It is assessed as nil for each option grant and has not been specifically detailed in the table above on the basis that no options will vest if the performance criteria are not satisfied. Notes (1) (2) (4) (5) The number of options at Represents the first day the The maximum value of award The fair value per option/ 28 June 2009 comprises both option/right can be exercised. to vest represents the value performance right options that have vested and of employee benefit expense was determined by an (3) have not been exercised and that will be recorded in future independent actuary using Vesting may occur on 1 July options yet to vest. reporting periods in respect the Monte Carlo Simulation 2011 if the performance of options currently on issue. Binomial method. hurdles are met as outlined 45 on page 40. F-157 DIRECTORS’ STATUTORY REPORT REMUNERATION REPORT CONTINUED

Exercise No. of options/ Options/ Options Options/ No. of options/ No. of options price rights at rights granted exercised rights lapsed rights at exercisable at Effective date Expiry date $ 29 June 2008 during year during year during year 28 June 2009 28 June 2009

Rights 25/07/2007 01/07/2009 Nil 1,525,000 – – (10,000) 1,515,000 – 25/07/2007 01/07/2010 Nil 40,000 – – – 40,000 – 01/07/2008 31/12/2013 Nil Nil 1,077,444 – (12,528) 1,064,916 – 01/09/2008 01/09/2010 Nil Nil 83,000 – (3,000) 80,000 – 02/02/2009 02/02/2012 Nil Nil 15,000 – – 15,000 35,802,700 6,773,444 (5,438,254) (1,369,737) 35,768,153 192,500

3.3 Relationship of variable remuneration to Woolworths’ ﬁnancial performance Woolworths’ executive remuneration is directly related to the performance of the following results through linking of short and long term incentive targets to these measures. Ten years ago, Woolworths did not have the same structure around short and long term incentives with very few employees participating in either. Since then, short term incentives have been aligned to key business drivers, standardised, and now apply to approximately 20,000 Woolworths’ employees. Long term incentives eligibility has been broadened and currently applies to in excess of 2,000 employees including store managers, buyers and other key personnel as well as our executives. In addition, our preference for redeployment over redundancy reinforces the culture of performance improvement at the individual level.

46 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-158 Woolworths believes there is a direct link to our improved business performance over the last decade through these changes and believes there is a significant financial benefit linked to both short and long term decision making. The effectiveness of the STIP in driving year-on-year growth and business improvements is highlighted in the following table. In monetary terms, since 2005:

Five Year Performance Table 2005 2006 2007 2008 2009

Sales ($m) 31,352 37,734 42,477 47,035 49,595 EBIT ($m) 1,302 1,722 2,111 2,529 2,816 ROFE (%) 42.6 28.6 (1) 27.1 31.4 31.9 CODB (%) 20.73 20.47 20.35 19.92 19.98

Note (1) Impacted by increase in Funds Employed following the acquisition of ALH. Each of these elements is currently linked to Woolworths STIP. − Sales have increased by more than 50% since 2005; − EBIT has increased by more than 100%; – CODB has decreased by 75bps over the past five years. While EBIT has doubled over the period, STIP paid to executives has remained at less than 10% of EBIT over the same period. A comparison of the improved financial performance and benefits for shareholder wealth derived from Woolworths’ long term incentive arrangements and the number of options granted to all executives are shown in the following table:

Year ended June 2005 2006 2007 2008 2009

EPS (cents per share) 79.2 90.9 108.8 134.9 150.7 Total dividends (cents per share) 51.0 59.0 74.0 92.0 104.0 Market capitalisation ($ million) 17,493 22,822 33,322 30,453 31,906 No. of options granted to executives (million) 7.8 6.9 8.3 9.0 5.6 No. of executives granted options 1,354 1,464 1,730 1,961 2,410

Fair value per option ($) – Total weighted 3.88 2.22 4.68 8.90 4.96 Fair value per option ($) – TSR 3.50 1.93 3.76 8.32 4.76 Fair value per option ($) – EPS 4.25 2.50 5.60 9.48 5.15

No. of performance rights granted to executives (million) – – – 1.6 1.2 Fair value per performance right ($) – Total weighted – – – 24.34 21.55 Fair value per performance right ($) – TSR – – – – 18.83 Fair value per performance right ($) – EPS – – – – 23.66 Fair value per performance right ($) – Retention – – – 24.34 24.89 No. of executives granted performance rights – – – 182 2,416 Share price (closing) ($) 16.48 19.36 27.60 25.02 25.96

F-159 DIRECTORS’ STATUTORY REPORT REMUNERATION REPORT CONTINUED

3.4 Remuneration tables Set out in the following table is the remuneration for the Non-executive Directors and key management personnel of Woolworths Limited and its subsidiary during the financial year ended 28 June 2009. Post- employment Short term employee benefits benefits

Short term cash bonus

Salary % of % of Non-monetary and fees Paid potential potential beneﬁts(1) Superannuation 2009 $ $ bonus paid bonus forfeited $ $

Non-executive Directors J Astbury* 222,917 – – – 1,317 13,745 R Deane 243,093 – – – 1,317 13,745 D Grady 222,917 – – – 1,317 13,745 L L’Huillier(2) 346,667 – – – 1,317 13,745 J Strong 595,000 – – – 1,317 13,745 A Watkins* 264,583 – – – 1,317 13,745 I Macfarlane 222,917 – – – 1,317 13,745 Executive Directors M Luscombe 2,044,307 3,037,720 92% 8% 33,114 444,341 T Pockett 1,021,906 1,424,795 87% 13% 22,080 266,733 Executives N Onikul(3) 670,397 466,063 90% 10% 24,082 217,420 P Smith(5) 483,654 150,273 31% 69% 75,591 114,000 J Coates 688,955 516,738 96% 4% 25,571 50,000 R Umbers 734,649 481,284 86% 14% 29,015 50,000 G Foran 949,148 723,193 92% 8% 34,807 164,413 Total 8,711,110 6,800,066 253,479 1,403,122

Notes (1) (2) (3) Non-monetary benefits include Included in the table above, Mr Onikul was on annual leave from * These fees include fees the cost to the Company of motor Mr L’Huillier also received an 1 January 2009 until year end. sacrificed for the purchase of vehicles, fringe benefits tax and additional $80,000 per annum as shares in the Company under other items where applicable, in Director of ALH Group Pty Ltd and the Non-Executive Directors’ addition to the deemed premium $25,000 as Chairman of the ALH Share Plan. in respect of the Directors’ and Audit Committee. Officers’ Indemnity insurance.

48 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-160 Other long term Share-based beneﬁts payments (4) Retirement allowance

Proportion of Options and remuneration performance rights Retirement Long service performance as a % of total Opening Indexation allowance leave Total related remuneration balance required balance $ $ $ % % $ $ $

– – 237,979 – – – – – – – 258,155 – – 470,227 22,274 492,501 – – 237,979 – – – – – – – 361,729 – – – – – – – 610,062 – – – – – – – 279,645 – – – – – – – 237,979 – – – – –

150,949 2,617,336 8,327,767 67.9% 31.4% – – – 31,936 1,203,169 3,970,619 66.2% 30.3% – – –

62,912 371,869 1,812,743 46.2% 20.5% – – – 24,145 266,511 1,114,174 37.4% 23.9% – – – 20,140 549,424 1,850,828 57.6% 29.7% – – – 15,261 845,987 2,156,196 61.6% 39.2% – – – 35,755 560,674 2,467,990 52.0% 22.7% – – – 341,098 6,414,970 23,923,845 470,227 22,274 492,501

(4) (5) These numbers represent the Mr Smith was employed by a current year apportionment of the Woolworths subsidiary during fair value of unvested options and the year. performance rights, on a pro-rata basis over the total vesting period.

F-161 DIRECTORS’ STATUTORY REPORT REMUNERATION REPORT CONTINUED

Set out in the following table is the remuneration for the Non-executive Directors and key management personnel of Woolworths Limited during the financial year ended 29 June 2008 Post-employment Other long term Short-term employee benefits benefits benefits

Salary Short-term Non-monetary Long-service and fees cash bonus beneﬁts(1) Superannuation leave 2008 $ $ $ $ $

Non-executive Directors J Astbury* 221,708 – 1,370 13,129 – R Deane 230,008 – 1,370 13,129 – D Grady 212,333 – 1,370 13,129 – A Clarke(2) 49,000 – 342 3,282 – L L’Huillier(3) 340,250 – 1,370 13,129 – J Strong 569,500 – 1,370 13,129 – A Watkins 236,708 – 1,370 13,129 – I Macfarlane 212,333 – 1,370 13,129 – Executive Directors M Luscombe 1,843,541 2,652,650 30,978 363,015 159,253 T Pockett 961,956 1,315,028 20,194 137,717 23,684 Executives N Onikul 906,020 816,524 29,054 132,283 33,825 P Smith 579,595 393,116 96,951 93,000 20,718 J Coates 633,706 414,392 24,143 50,000 12,974 R Umbers 675,062 491,568 32,169 50,000 13,114 G Foran 718,668 508,130 25,369 97,718 16,704 Total 8,390,388 6,591,408 268,790 1,018,918 280,272

Notes (1) (2) (3) Non-monetary benefits include Professor Clarke retired as Included in the table above, * These fees include fees the cost to the Company of motor Non-executive Director on Mr L’Huillier receives an additional sacrificed for the purchase of vehicles, fringe benefits tax and other 30 September 2007. fee of $80,000 per annum as a shares in the Company under items where applicable, in addition Non-executive Director and $25,000 the Non-executive Directors’ to the deemed premium in respect of per annum as Chairman of the Share Plan. the Directors’ and Officers’ Indemnity Audit Committee of ALH Group insurance. Pty Limited.

50 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-162 Share-based payments Retirement allowance

Options and performance rights Retirement as a % of total Opening Indexation allowance Total remuneration balance required balance $ $ % $ $ $

– 236,207 – – – – – 244,507 – 435,528 34,699 470,227 – 226,832 – – – – – 52,624 – – – – – 354,749 – – – – – 583,999 – – – – – 251,207 – – – – – 226,832 – – – –

1,847,846 6,897,283 26.8% – – – 854,846 3,313,425 25.8% – – –

202,796 2,120,502 9.6% – – – 152,841 1,336,221 11.4% – – – 468,428 1,603,643 29.2% – – – 582,381 1,844,294 31.6% – – – 390,016 1,756,605 22.2% – – – 4,499,154 21,048,930 435,528 34,699 470,227

(4) These numbers represent the current year apportionment of the fair value of unvested options and performance rights, on a pro-rata basis over the total vesting period.

F-163 DIRECTORS’ STATUTORY REPORT REMUNERATION REPORT CONTINUED

3.5 Executive Service Agreements Long Term Incentive Plan They do not provide for a fixed term 3.5.1 Chief Executive Officer The CEO is a participant in the although these Service Agreements The CEO’s Service Agreement has Woolworths LTIP. At the 2006 Annual can be terminated on specified notice. effect from 1 October 2006 and is a General Meeting shareholder approval For all of the executives, the Company rolling contract. The service agreement was given for up to a maximum of is required to give a minimum of two provides for 12 months’ notice of 1,500,000 options to be granted to the months’ notice, however the Company termination on the part of the Company CEO comprising annual grants in 2006, retains the right to terminate any and six months’ notice on the part of 2007 and 2008. Service Agreement immediately in a the CEO. In addition, the Company number of circumstances including − For the 2006 and 2007 grants, the may invoke a restraint period of up performance hurdles that apply fraud, dishonesty, breach of duty to 12 months’ following separation, under the Woolworths LTIP will apply or improper conduct. preventing the CEO from engaging to options allocated to the CEO, All executives are required to provide the in any business activity with major however 50% of the allocation will Company with a minimum of four weeks’ competitors of Woolworths. vest and become exercisable three notice of termination. In addition, for all The CEO will not be entitled to any years from the effective date subject executives, the Company may elect to termination payment other than: to meeting the performance hurdles. invoke a restraint period not exceeding The remaining 50% of the allocation 12 months. − Fixed Remuneration for the duration of the notice period (or payment in will vest and become exercisable All executives are entitled to receive lieu of working out the notice period) after five years in accordance with their statutory leave entitlements the prescribed conditions. − pro-rated Short Term Incentive and superannuation benefits upon Plan payment; and – For the 2008 grant, the performance termination. In relation to incentive plans – any accrued statutory entitlements. hurdles that apply under the on termination, where an executive Woolworths LTIP described in Short Term Incentive Plan has resigned, STIP is paid only if the section 3.1.2.2 apply to the allocation executive is employed on the last day The Short Term Incentive Plan made to the CEO. (STIP) provides for a maximum of the financial year. In relation to LTIP, annual payment of 130% of Fixed At the 2008 Annual General Meeting the treatment of vested and unvested Remuneration. The actual payment shareholder approval was given for up options, in all instances of separation, will be calculated with regard to to a maximum of 1,500,000 options or a remains subject to the discretion of the achievement of key performance combination of options and performance Board in accordance with the Plan rules. indicators agreed annually with the rights to an equivalent value to be granted to the CEO comprising over 4 NON-EXECUTIVE DIRECTORS’ Board. The performance indicators REMUNERATION are based on a combination of three years commencing with the 2010 detailed measurements of corporate financial year. 4.1 Non-executive Directors’ and financial performance and For the 2009 grant, the performance remuneration policy and structure the implementation of strategic hurdles that apply to the 2008 grant, Non-executive Directors’ fees are operational objectives. under the Woolworths LTIP described in determined by the Board within the section 3.1.2.2, apply to the allocation to aggregate amount, approved by be made to the CEO. shareholders. The current maximum aggregate amount which may be 3.5.2 All other executives paid in Directors’ fees, as approved Since 2002, LTIP participation has been at the Annual General Meeting on offered subject to executives entering 16 November 2007, is $3,000,000 per into Service Agreements with the annum. No Directors’ fees are paid to Company. The Service Agreements Executive Directors. include the components of remuneration paid to executives (as detailed in During the financial year ended 28 June section 3.2) but do not prescribe how 2009, the amount of Directors’ base fees remuneration levels are to be modified paid to each Non-executive Director was from year to year. increased to $200,000 per annum. The Chairman receives a multiple of three times this amount.

52 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-164 In addition to the above base fees, the 4.2 Non-executive Director 4.4 Remuneration tables for Non-executive Directors, other than the Share Plan Non-executive Directors Chairman, received a fee for service The Non-executive Director Share Plan For the financial year ended 28 June on a Board Committee (except the (NEDSP) was established following 2009, details of the remuneration of the Corporate Governance Committee). approval by shareholders at the Non-executive Directors are set out at The fee for serving as a member of Company’s Annual General Meeting on section 3.4 of this report. a Board Committee was $25,000 for 26 November 1999. The NEDSP allows the Audit, Risk Management and Non-executive Directors to forgo some 4.5 Shareholdings of Non-executive Compliance Committee and $17,500 for of their future pre-tax Directors’ fees Directors the People Policy Committee. A Board to acquire shares in the Company at For the financial year ended 28 June Committee Chairman received $50,000 prevailing market prices on the Australian 2009 details of shareholdings by for chairing the Audit, Risk Management Securities Exchange. The rules of the Non-executive Directors is set out at and Compliance Committee, $35,000 NEDSP are virtually identical to the section 3.2 of this report. for the People Policy Committee and Woolworths Executive Management 4.6 Appointment Letters, Deeds of $25,000 for the Woolworths Group Share Plan as described in Note 23. Access, Insurance and Indemnity, Superannuation Scheme. During the 52 week period ended Disclosure Deeds 28 June 2009, 1,823 shares (2008: 103) Fees for Directors who were also The Company and each of the were purchased under the NEDSP. Directors of the controlled entity Non-executive Directors have entered Following September 2008, no further ALH Group Pty Ltd (ALH) were $80,000 into an Appointment Letter together shares have been purchased and the and for Chairing of the ALH Audit with a Deed of Access, Insurance NEDSP has been suspended. Committee $25,000. and Indemnity and a Disclosure An overseas Directors’ Allowance 4.3 Non-executive Directors’ Deed (as required under the ASX of $10,670 was also provided to any retirement benefits cease Listing Rules). The Appointment Non-executive Director residing Directors’ Retirement Deeds, which were Letter covers the key aspects of the outside Australia, representing the approved by shareholders in November duties, role and responsibilities of additional time and cost involved 1998, entitled each Non-executive Non-executive Directors. in attending to Board and Board Director (appointed prior to January 2004) Non-executive Directors are not Committee responsibilities. to receive an allowance on retirement as appointed for a specific term and their The structure and level of Non-executive a Director (“Allowance”) after a minimum appointment may be terminated by Directors’ fees was based on period of service. The Board determined notice from the Director or otherwise independent research and advice that it should implement changes to pursuant to sections 203B or 203D of from external remuneration advisers. Non-executive Director remuneration the Corporations Act 2001. The advice takes into consideration the consistent with developing market fees paid to non-executive directors practice and guidelines by discontinuing of Australian listed corporations, the the ongoing accrual of benefits under the size and complexity of the Company’s existing retirement benefits arrangements operations and the responsibilities and on 1 August 2006. workload requirements of Directors. The benefits accrued to that date are Directors (with the exception of the indexed by reference to the bank bill rate Chairman) receive a base fee for being or have been rolled into a defined benefit a Director of the Board, and additional superannuation fund until retirement fees for either chairing or being a occurs. With the cessation of the member of a Board Committee or retirement benefits, all Non-executive serving on the Boards of controlled Directors (other than the Chairman) entities. No element of the remuneration receive the same base fees. of any Non-executive Director is dependent on the satisfaction of a performance condition.

F-165 DIRECTORS’ STATUTORY REPORT

ENVIRONMENTAL REGULATION (ii) Each Director has entered into a Details of amounts paid or payable Except as set out below, the operations Deed of Indemnity and Access to the auditor for non-audit services of the Group are not subject to any which provides for indemnity provided during the year by the auditor particular and significant environmental against liability as a Director, are outlined in Note 4 to the financial regulation under a law of the except to the extent of indemnity statements. Commonwealth of Australia or of any of under an insurance policy or its States or Territories. where prohibited by statute. The ROUNDING OF AMOUNTS The Company is of a kind referred to in The Woolworths’ Petrol operations are Deed also entitles the Director to access Company documents and Australian Securities and Investments subject to regulations and standards Commission Class Order 98/0100 dated governing the construction and operation records, subject to undertakings as to confidentiality. 10 July 1998 pursuant to section 341(1) of the facilities relating to the storage and of the Corporations Act 2001 relating to dispensing of petroleum products. (iii) During or since the end of the the “rounding off” of amounts in the The Group may also from time to time financial period, the Company has Financial Report and Directors’ Report. be subject to various State and Local paid or agreed to pay a premium in In accordance with that Class Order, Government food licensing requirements respect of a contract of insurance amounts therein have been rounded off and environmental and town planning insuring Officers (and any persons to the nearest tenth of a million dollars regulations incidental to the development who are Officers in the future except where otherwise indicated. of shopping centre sites. and employees of the Company or its subsidiaries) against certain This Report is made out in accordance As outlined in the Managing Director’s liabilities incurred in that capacity. with a Resolution of the Directors of the Report, the Group has implemented Disclosure of the total amount of Company on 24 September 2009. a number of environmental initiatives. the premiums and the nature of The Group has not incurred any the liabilities in respect of such significant liabilities under any insurance is prohibited by the environmental legislation. contract of insurance.

DIRECTORS’ AND OFFICERS’ AUDITOR’S INDEPENDENCE INDEMNITY INSURANCE DECLARATION James Strong (i) The Constitution of the Company The auditor’s independence declaration Chairman provides that the Company may is included on page 55 of the indemnify (to the maximum Annual Report. extent permitted by law) in favour of each Director of the NON-AUDIT SERVICES Company, the Company Secretary, During the year, Deloitte Touche directors and secretaries of Tohmatsu, the Company’s auditors, related bodies corporate of the have performed certain other services Michael Luscombe Company, and previous directors in addition to their statutory duties. The Managing Director and and secretaries of the Company Board is satisfied that the provision of Chief Executive Officer and its related bodies corporate those non-audit services during the year (“Officers”), against any liability provided by the auditor is compatible to third parties (other than related with, and did not compromise, the Woolworths Group companies) auditor independence requirements of incurred by such Officers unless the Corporations Act 2001 or as set out the liability arises out of conduct in Code of Conduct APES 110 Code of involving a lack of good faith. Ethics for Professional Accountants The indemnity includes costs issued by the Accounting Professional or expenses incurred by an & Ethical Standards Board, as they Officer in successfully defending did not involve reviewing or auditing proceedings or in connection the auditor’s own work, acting in a with an application in which management or decision making the Court grants relief to the capacity for the Company, acting as specified persons under the an advocate for the Company or jointly Corporations Act 2001. sharing risks or rewards.

54 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-166 AUDITOR’S DECLARATION

Deloitte Touche Tohmatsu A.B.N. 74 490 121 060 Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1220 Australia DX 10307SSE Tel: +61 (0) 2 9322 7000 Fax: +61 (0) 2 9322 7001 www.deloitte.com.au The Board of Directors Woolworths Limited 1 Woolworths Way Bella Vista NSW 2153

24 September 2009 Dear Board Members Woolworths Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Woolworths Limited. As lead audit partner for the audit of the ﬁnancial statements of Woolworths Limited for the 52 weeks ended 28 June 2009, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit.

Yours faithfully

DELOITTE TOUCHE TOHMATSU

G Couttas Partner Chartered Accountants

Member of Liability limited by a scheme approved under Professional Standards Legislation. Deloitte Touche Tohmatsu 55

F-167 INCOME STATEMENTS

Consolidated Woolworths Limited 2009 2008 2009 2008 52 weeks 53 weeks 52 weeks 53 weeks Note $m $m $m $m

Revenue from the sale of goods 2a 49,594.8 47,034.8 35,607.0 33,412.3 Other operating revenue 2a 103.0 123.3 84.4 99.2 Revenue from operations 49,697.8 47,158.1 35,691.4 33,511.5 Cost of sales (36,974.4) (35,257.8) (26,586.1) (25,198.0) Gross profit 12,723.4 11,900.3 9,105.3 8,313.5 Other revenue 2b 148.4 129.6 97.0 95.4 Other income 2c – 34.4 – – Branch expenses (7,800.4) (7,330.5) (5,381.8) (4,952.5) Administration expenses (2,255.9) (2,205.0) (1,853.8) (1,777.9) Earnings before interest and tax 2,815.5 2,528.8 1,966.7 1,678.5 Financial expense 3 (235.2) (230.8) (226.9) (231.1) Financial income 3 46.0 39.5 314.8 325.6 Net financing cost (189.2) (191.3) 87.9 94.5 Net profit before income tax expense 2,626.3 2,337.5 2,054.6 1,773.0 Income tax expense 5a (766.3) (686.0) (606.3) (529.5) Profit after income tax expense 1,860.0 1,651.5 1,448.3 1,243.5 Net profit attributable to: Equity holders of the parent entity 1,835.7 1,626.8 1,448.3 1,243.5 Minority interest 24.3 24.7 – – 1,860.0 1,651.5 1,448.3 1,243.5 Earnings per share (EPS) Basic EPS (cents per share) 20 150.71 134.89 – – Diluted EPS (cents per share) 20 149.69 133.55 – – Weighted average number of shares used in the calculation of basic EPS (million) 20 1,218.0 1,206.0 – –

The income statements should be read in conjunction with the Notes to the Financial Statements set out on pages 77 to 145.

72 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-168 STATEMENTS OF RECOGNISED INCOME AND EXPENSE

Consolidated Woolworths Limited 2009 2008 2009 2008 52 weeks 53 weeks 52 weeks 53 weeks Note $m $m $m $m

Movement in translation of foreign operations taken to equity 18 (12.5) (298.4) – – Movement in the fair value of available-for-sale financial assets 18 (20.5) (54.0) (11.0) (7.2) Movement in fair value of cash flow hedges 18 112.9 5.1 112.9 5.1 Actuarial losses on defined benefit plans 19 (67.3) (39.7) (66.8) (39.7) Tax effect of items recognised directly to equity 5b 60.9 58.4 53.1 (36.6) Net income/(expense) recognised directly in equity 73.5 (328.6) 88.2 (78.4) Transfer to income statement cash flow hedges 18 (223.5) 156.7 (223.5) 156.7 Profit for the period 1,860.0 1,651.5 1,448.3 1,243.5 Total recognised income and expense for the period 1,710.0 1,479.6 1,313.0 1,321.8 Attributable to: Equity holders of the parent 1,685.8 1,454.9 1,313.0 1,321.8 Minority interest 24.2 24.7 – – 1,710.0 1,479.6 1,313.0 1,321.8

The statements of recognised income and expense should be read in conjunction with the Notes to the Financial Statements set out on pages 77 to 145.

F-169 BALANCE SHEETS

Consolidated Woolworths Limited as at as at 2009 2008 2009 2008 Note $m $m $m $m

Current assets Cash 762.6 754.6 574.4 550.5 Trade and other receivables 8 664.2 637.8 1,254.4 1,091.9 Inventories 3,292.6 3,010.0 2,285.9 2,130.1 Assets held for sale 10 36.9 34.7 14.1 14.1 Other ﬁnancial assets 9 102.9 65.1 102.9 65.1 Total current assets 4,859.2 4,502.2 4,231.7 3,851.7

Non-current assets Trade and other receivables 8 2.7 3.6 5,604.6 5,559.0 Other ﬁnancial assets 9 155.4 262.0 3,270.8 3,254.7 Property, plant and equipment 10 6,653.9 5,638.8 3,654.0 3,147.8 Intangibles 11 4,933.1 4,835.2 485.9 464.8 Deferred tax assets 5d 480.6 430.7 353.0 297.8 Total non-current assets 12,225.7 11,170.3 13,368.3 12,724.1

Total assets 17,084.9 15,672.5 17,600.0 16,575.8

Current liabilities Trade and other payables 12 5,110.0 4,804.9 7,468.1 7,385.0 Borrowings 14 188.6 550.2 142.4 299.9 Current tax liabilities 5c 279.5 330.2 232.5 267.5 Other ﬁnancial liabilities 13 99.3 61.9 99.3 61.9 Provisions 16 737.2 677.2 588.9 549.9 Total current liabilities 6,414.6 6,424.4 8,531.2 8,564.2

Non-current liabilities Borrowings 14 2,986.3 2,224.0 2,984.8 2,222.5 Other ﬁnancial liabilities 13 78.4 274.7 78.4 274.7 Provisions 16 362.3 380.0 326.6 328.8 Other 186.0 134.1 152.8 106.3 Total non-current liabilities 3,613.0 3,012.8 3,542.6 2,932.3

Total liabilities 10,027.6 9,437.2 12,073.8 11,496.5

Net assets 7,057.3 6,235.3 5,526.2 5,079.3

Equity Issued capital 17 3,858.6 3,627.1 3,858.6 3,627.1 Shares held in trust 17 (51.2) (60.0) (51.2) (60.0) Reserves 18 (173.5) (133.9) 183.8 208.9 Retained earnings 19 3,178.6 2,559.7 1,535.0 1,303.3

Equity attributable to the members of Woolworths Limited 6,812.5 5,992.9 5,526.2 5,079.3 Minority interest 244.8 242.4 – – Total equity 7,057.3 6,235.3 5,526.2 5,079.3

The balance sheets should be read in conjunction with the Notes to the Financial Statements set out on pages 77 to 145.

74 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-170 CASH FLOW STATEMENTS

Consolidated Woolworths Limited 2009 2008 2009 2008 52 weeks 53 weeks 52 weeks 53 weeks $m $m $m $m

Cash flows from operating activities Receipts from customers 53,184.3 50,347.4 37,364.2 34,691.4 Receipts from vendors and tenants 41.6 36.5 4.8 4.4 Payments to suppliers and employees (49,575.2) (46,940.5) (34,631.8) (32,285.9) Interest and costs of finance paid (257.4) (236.7) (248.3) (235.5) Interest received 13.0 21.2 238.0 264.1 Income tax paid (802.1) (573.9) (722.1) (485.1) Net cash provided by operating activities 2,604.2 2,654.0 2,004.8 1,953.4 Cash flows from investing activities Proceeds from the sale of property, plant and equipment 18.7 228.4 6.3 84.5 Payments for property, plant and equipment (1,676.8) (1,733.6) (1,031.4) (1,069.7) Payments for the purchase of intangibles (1.4) (14.5) – (5.8) Payment for purchase of investments – (57.3) (52.3) (57.3) (Repayments)/Advances (to)/from related entities – – (411.9) 86.5 Dividend received 7.8 14.7 90.1 42.8 Payments for purchase of businesses (154.5) (191.1) (28.5) (20.1) Net cash (used in)/provided by investing activities (1,806.2) (1,753.4) (1,427.7) (939.1) Cash flows from financing activities Proceeds from issue of equity securities 66.7 63.3 66.7 63.3 Proceeds from external borrowings 13,619.3 6,334.0 12,364.6 5,378.0 Repayment of external borrowings (13,458.5) (6,466.2) (11,977.3) (5,659.2) Dividends paid (1,012.4) (862.5) (1,012.4) (862.5) Dividends paid to minority interest (29.2) (14.3) – – Repayment of employee share plan loans 5.2 8.9 5.2 8.9 Net cash (used in) financing activities (808.9) (936.8) (553.2) (1,071.5) Net (decrease)/increase in cash held (10.9) (36.2) 23.9 (57.2) Effects of exchange rate changes on balance of cash held in foreign currencies 3.0 (8.0) – – Cash at the beginning of the financial period 754.6 798.8 550.5 607.7 Cash at the end of the financial period 746.7 754.6 574.4 550.5

Non-cash ﬁnancing and investing activities In accordance with the Company’s Dividend Reinvestment Plan (DRP) 14% (2008: 14%) of the dividend paid was reinvested in the shares of the Company Dividend (Note 6) 1,174.3 1,006.4 1,174.3 1,006.4 Issuance of shares under the (DRP) (161.9) (143.9) (161.9) (143.9) Net cash outﬂow 1,012.4 862.5 1,012.4 862.5

The cash ﬂow statements should be read in conjunction with the Notes to the Financial Statements set out on pages 77 to 145.

F-171 CASH FLOW STATEMENTS

Consolidated Woolworths Limited 2009 2008 2009 2008 52 weeks 53 weeks 52 weeks 53 weeks $m $m $m $m

Reconciliation of net cash provided by operating activities to profit from ordinary activities after income tax expense Profit from ordinary activities after income tax expense 1,860.0 1,651.5 1,448.3 1,243.5 Depreciation/amortisation charged to income statement 729.4 650.1 532.3 465.1 Difference between defined benefit expense and cash contributions (4.1) (9.9) (3.7) (9.9) (Profit)/Loss on sale of property, plant and equipment 14.2 (34.4) 5.5 7.6 (Increase)/decrease in deferred tax asset 3.6 (3.7) (2.2) (53.6) Increase/(decrease) in current tax liability (50.8) 115.9 (35.0) 127.7 (Increase)/decrease in trade and other receivables (15.4) (154.7) (5.0) (140.6) (Increase)/decrease in inventories (273.1) (303.4) (152.2) (226.6) Increase/(decrease) in trade creditors 169.9 644.8 162.3 519.8 Increase/(decrease) in sundry creditors and provisions 160.0 68.5 103.1 19.4 Dividend received (7.8) (14.7) (90.1) (42.8) Share-based payments expense 63.5 48.5 63.5 48.5 Other non-cash movements (45.2) (4.5) (22.0) (4.7) Net cash provided by operating activities 2,604.2 2,654.0 2,004.8 1,953.4

Acquisition of businesses Details of the aggregate cash outﬂow relating to the acquisition of businesses and the aggregate assets and liabilities of those businesses as at the date of the acquisition were as follows: – property, plant and equipment 75.6 99.5 0.9 4.0 – inventories 5.7 2.7 3.7 0.6 – liquor and gaming licences 52.5 52.8 12.8 2.5 – cash acquired 0.5 0.2 – – – other assets 4.8 1.4 2.2 0.5 – provisions (0.3) (0.2) – – – other liabilities (1.2) – – – Net assets acquired 137.6 156.4 19.6 7.6 Goodwill on acquisition 28.2 34.9 8.9 12.5 Fair value of net assets acquired 165.8 191.3 28.5 20.1 Analysed as follows: Consideration – equity issued 6.4 – – – – contingent consideration 4.4 – – – – cash paid 155.0 191.3 28.5 20.1 Total consideration 165.8 191.3 28.5 20.1 Cash paid 155.0 191.3 28.5 20.1 Less: cash balances acquired (0.5) (0.2) – – Cash consideration paid this year 154.5 191.1 28.5 20.1

Details of acquisitions are shown at Note 30. Reconciliation of cash For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the Cash flow Statements is reconciled to the related items in the statement of financial position as follows:

2009 2008

Cash 762.6 754.6 Bank overdraft (15.9) – 746.7 754.6

76 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-172 NOTES TO THE FINANCIAL STATEMENTS

1 SIGNIFICANT ACCOUNTING POLICIES – AASB 101 Presentation of Financial Statements (revised Woolworths Limited (the Company) is a company domiciled September 2007), AASB 2007-8 Amendments to Australian in Australia. The financial report of the Company for the Accounting Standards arising from AASB 101 and AASB 52 weeks ended 28 June 2009 comprises the Company and its 2007-10 Further amendments to Australian Accounting subsidiaries (together referred to as the consolidated entity). Standards arising from AASB 101. The requirements The financial report was authorised for issue by the directors apply to annual reporting periods beginning on or after on 24 September 2009. 1 January 2009. – AASB 2009-2 Amendments to Australian Accounting (A) Statement of compliance Standards – Improving Disclosures about Financial The financial report is a general purpose financial report which Instruments. The requirements apply to annual reporting has been prepared in accordance with the Corporations Act periods beginning on or after 1 January 2009. 2001, Accounting Standards and Interpretations, and complies The consolidated entity will adopt these standards in the with other requirements of the law. financial year ending 27 June 2010 and is currently evaluating The financial report includes the separate Financial Statements their impact on the consolidated entity’s financial statements. of the Company and the consolidated Financial Statements Adoption of the following Interpretations and amended of the consolidated entity. Accounting Standards include Standards is not expected to have any significant impact on Australian equivalents to International Financial Reporting the results of the business: Standards (AIFRS). Compliance with AIFRS ensures that the Financial Statements and notes of the Company and − Interpretation 16 Hedges of a Net Investment in a Foreign consolidated entity comply with International Financial Operation. This applies prospectively to annual reporting Reporting Standards (IFRS). periods beginning on or after 1 October 2008. − Interpretation 17 Distributions of Non-Cash Assets to (B) Basis of preparation Owners and AASB 2008-13 Amendments to Australian The financial report is presented in Australian dollars. Accounting Standards arising from AASB Interpretation 17 Distributions of Non-Cash Assets to Owners applicable to The financial report has been prepared on the historical annual reporting periods beginning on or after 1 July 2009. cost basis except that the following assets and liabilities are − AASB 2008-1 Amendments to Australian Accounting stated at their fair value: derivative financial instruments, Standards – Share-based Payments: Vesting Conditions financial instruments held for trading and financial instruments and Cancellations. These amendments clarify that vesting classified as available-for-sale. conditions comprise service conditions and performance The Company is of a kind referred to in ASIC Class Order conditions only and that other features of a share-based 98/0100 dated 10 July 1998 and in accordance with the Class payment transaction are not vesting conditions. They Order, amounts in the financial report and Directors’ Report also specify that all cancellations, whether by the entity have been rounded off to the nearest million dollars, unless or by other parties, should receive the same accounting otherwise stated. treatment. This Standard is applicable to annual reporting In the current year, the consolidated entity has adopted all of periods beginning on or after 1 January 2009. the new and revised Standards and Interpretations issued by − AASB 2008-5 Amendments to Australian Accounting the Australian Accounting Standards Board (the AASB) that Standards arising from the Annual Improvements are relevant to its operations and effective for annual reporting Project. This standard makes amendments to 25 different periods beginning on or after 30 June 2008. Standards and is equivalent to the IASB Standard Improvement to IFRSs issued in May 2008. The Standard Issued standards and interpretations not early adopted is applicable retrospectively to annual reporting periods The following Standards and Amendments to Standards beginning on or after 1 January 2009. were available for early adoption and were applicable to − AASB 2008-6 Further Amendments to Australian the consolidated entity but have not been applied by the Accounting Standards arising from the Annual consolidated entity in these Financial Statements. Adoption Improvements Project. The amendments cannot be early of these standards is not expected to have an impact on the adopted for annual reporting periods beginning before financial results of the Company or the consolidated entity as 1 July 2009 unless AASB 127 Consolidated and Separate the standards are only concerned with disclosures: Financial Statements (as amended by AASB 2008-5 in − AASB 8 Operating Segments replaces the presentation July 2008) is also applied. requirements of segment reporting in AASB 114 Segment − AASB 2008-7 Amendments to Australian Accounting Reporting. AASB 8 is applicable for annual reporting Standards – Cost of an Investment in a Subsidiary, Jointly periods beginning on or after 1 January 2009. Controlled Entity or Associate. The requirements of AASB 2008-7 are applicable from 1 January 2009, with early adoption permitted.

F-173 NOTES TO THE FINANCIAL STATEMENTS

1 SIGNIFICANT ACCOUNTING POLICIES CONTINUED (ii) Transactions eliminated on consolidation − AASB 2008-8 Amendments to Australian Accounting Intragroup balances, and any unrealised gains and losses or Standards – Eligible Hedged Items. This requirement is income and expenses arising from intragroup transactions, are effective for annual reporting periods beginning on or after eliminated in preparing the consolidated financial report. 1 July 2009. − AASB 2009-4 Amendments to Australian Accounting (D) Foreign currency Standards arising from the Annual Improvements Process. Transactions in foreign currencies are translated at the foreign This requirement is effective for annual reporting periods exchange rate ruling at the date of the transaction. Monetary beginning on or after 1 July 2009. assets and liabilities denominated in foreign currencies at the − AASB 2009-5 Further Amendments to Australian balance sheet date are translated to Australian dollars at the Accounting Standards arising from the Annual foreign exchange rate ruling at that date. Non-monetary assets Improvements Process. This requirement is effective for and liabilities that are measured in terms of historical cost in a annual reporting periods beginning on or after 1 January foreign currency are translated using the exchange rate at the 2010, excepted for the amendments made to the guidance date of the transaction. to AASB 118 ‘Revenue’ that have no explicit application Exchange differences are recognised in the profit or loss in the date and are taken to be immediately effective. period in which they arise except that: − AASB 2009-6 Amendments to Australian Accounting exchange differences on transactions entered into in order Standards. This requirement is effective for reporting − to hedge certain foreign currency risks are reported initially periods beginning on or after 1 January 2009 that end in the hedging reserve to the extent the hedge is effective on or after 30 June 2009. (refer Note 1(F)); and – AASB 2009-7 Amendments to Australian Standards. – exchange differences on monetary items receivable from This requirement is effective for reporting periods or payable to a foreign operation for which settlement is beginning on or after 1 July 2009. neither planned nor likely to occur, and which form part of The accounting policies set out below have been applied the net investment in a foreign operation, are recognised in consistently to all periods presented in these Financial the foreign currency translation reserve and recognised in Statements. profit or loss on disposal of the net investment. The preparation of a financial report in conformity with Financial Statements of foreign operations Australian Accounting Standards requires management to The assets and liabilities of foreign operations, including make judgements, estimates and assumptions that effect the goodwill and fair value adjustments arising on consolidation, application of policies and reported amounts of assets and are translated to Australian dollars at foreign exchange rates liabilities, income and expenses. The estimates and associated ruling at the balance sheet date. Revenue and expense assumptions are based on historical experience and various items are translated at the average exchange rates for the other factors that are believed to be reasonable under the period. Exchange differences arising on translation of foreign circumstances, the results of which form the basis of making operations, if any, are recognised in the foreign currency the judgements about carrying values of assets and liabilities translation reserve and recognised in consolidated profit and that are not readily apparent from other sources. Actual results loss on disposal of the foreign operation. may differ from these estimates. (E) Derivative financial instruments (C) Basis for consolidation The consolidated entity uses derivative financial instruments to (i) Subsidiaries hedge its exposure to foreign exchange and interest rate risks In these Financial Statements, Woolworths Limited is referred arising from operational, financing and investment activities. to as “the Company” and the “Consolidated” Financial In accordance with its treasury policy, the consolidated entity Statements are those of the consolidated entity, comprising does not hold or issue derivative financial instruments for Woolworths Limited and its subsidiaries. trading purposes. However, derivatives that do not qualify for Subsidiaries are entities controlled by the Company. Control hedge accounting are accounted for as trading instruments. exists when the Company has the power, directly or indirectly, Derivative financial instruments are recognised initially to govern the financial and operating policies of an entity so at fair value on the date a derivative contract is entered as to obtain benefits from its activities. In assessing control, into. Subsequent to initial recognition, derivative financial potential voting rights that presently are exercisable or instruments are stated at fair value. The gain or loss on convertible are taken into account. The Financial Statements of remeasurement to fair value is recognised immediately subsidiaries are included in the financial report from the date in profit or loss unless the derivatives qualify for hedge that control commences until the date that control ceases. accounting whereby the timing of the recognition of any Interests in subsidiaries are accounted for at cost in resultant gain or loss depends on the nature of the hedge Woolworths Limited’s Financial Statements. relationship (refer Note 1(F)). Minority interests in the equity and results of subsidiaries are shown as a separate item in the consolidated financial report.

78 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-174 The fair value of interest rate swaps is the estimated amount (ii) Fair value hedge that the consolidated entity would receive or pay to terminate A fair value hedge is a hedge of a fair value (i.e. “mark-to- the swap at the balance sheet date, taking into account current market”) exposure arising on a recognised balance sheet asset interest rates and the current creditworthiness of the swap or liability. A fair value hedge results in the fair value exposure counterparties. The fair value of forward exchange contracts is being offset. Woolworths’ fair value hedges include: their quoted market price at the balance sheet date, being the – cross-currency interest rate swaps (CCIRS) that convert present value of the quoted forward price. fixed interest rate foreign currency borrowings into floating (F) Hedging rate Australian dollar borrowings. The CCIRS offsets the (i) Cash flow hedge foreign currency and fixed interest rate fair value exposures A cash flow hedge is a hedge of an exposure to uncertain arising on those borrowings. future cash flows. A cash flow hedge results in the uncertain Changes in the fair value of derivatives that are designated future cash flows being hedged back into fixed amounts. and qualify as fair value hedges are recorded in profit or loss Woolworths’ cash flow hedges include: immediately, together with any changes in the fair value of the hedged asset or liability that is attributable to the hedged risk. − interest rate swap contracts that convert floating interest rate payments on borrowings into fixed amounts; Hedge accounting is discontinued when the hedge instrument − cross-currency interest rate swaps (CCIRS) that convert expires or is sold, terminated, exercised, or no longer qualifies foreign currency denominated principal and interest rate for hedge accounting. The adjustment to the carrying amount payments on offshore loans into fixed Australian dollar of the hedged item arising from the hedged risk is amortised to amounts; and profit or loss from that date. – forward foreign exchange contracts that convert foreign (iii) Hedge of monetary assets and liabilities currency denominated payments to offshore suppliers When a derivative financial instrument is used to hedge and income of offshore subsidiaries into Australian dollar economically the foreign exchange exposure of a recognised amounts. monetary asset or liability, hedge accounting is not applied and Where a derivative financial instrument is designated as a any gain or loss on the hedging instrument is recognised in the hedge of the variability in cash flows of a recognised asset income statement. or liability, or a highly probable forecasted transaction, the effective part of any gain or loss on the derivative financial (G) Property, plant and equipment instrument is recognised directly in equity. Freehold warehouse, retail, development and other properties are held at the lower of cost less accumulated depreciation When the forecasted transaction subsequently results in and net realisable value. Borrowing, holding and development the recognition of a non-financial asset or non-financial costs on property under development are capitalised until liability, the associated cumulative gain or loss is removed completion of the development. from equity and included in the initial cost or other carrying amount of the non-financial asset or liability. If a hedge of a Land and buildings held for sale are classified as current assets forecasted transaction subsequently results in the recognition and are valued at the lower of cost and fair value less costs to of a financial asset or a financial liability, then the associated sell and are not depreciated. gains and losses that were recognised directly in equity Items of plant and equipment are stated at cost less are reclassified into profit or loss in the same period or accumulated depreciation (see below) and impairment losses periods during which the asset acquired or liability assumed (refer Note 1(M)). affects profit or loss (i.e. when interest income or expense is The cost of self-constructed assets includes the cost of recognised). materials, direct labour, and an appropriate proportion of The ineffective part of any derivative designated as a hedge is overheads. The cost of self-constructed assets and acquired recognised immediately in the income statement. assets includes estimates of the costs of dismantling and When a hedging instrument expires or is sold, terminated removing the items and restoring the site on which they are or exercised, or the entity revokes designation of the hedge located where it is probable that such costs will be incurred, relationship but the hedged forecast transaction still is and changes in the measurement of existing liabilities expected to occur, the cumulative gain or loss at that point recognised for these costs resulting from changes in the timing remains in equity and is recognised in accordance with the or outflow of resources required to settle the obligation or from above policy when the transaction occurs. If the hedged changes in the discount rate. transaction is no longer expected to take place, then the Property that is being constructed or developed for future cumulative unrealised gain or loss recognised in equity is use as investment property is classified as development recognised immediately in the income statement. properties and stated at the lower of cost less accumulated Gains or losses removed from equity during the period in depreciation and net realisable value until construction or relation to interest rate hedge instruments are recognised development is complete. within “net finance costs” in the income statement.

F-175 NOTES TO THE FINANCIAL STATEMENTS

1 SIGNIFICANT ACCOUNTING POLICIES CONTINUED (H) Goodwill Where parts of an item of property, plant and equipment have Business combinations prior to 27 June 2004 different useful lives, they are accounted for as separate items As part of its transition to A-IFRS, the consolidated entity of property, plant and equipment. elected to restate only those business combinations that (i) Leased assets occurred on or after 27 June 2004. In respect of business Leases whereby the consolidated entity assumes substantially combination prior to 27 June 2004, goodwill is included on all of the risks and rewards of ownership are classified as the basis of its deemed cost, which represents the amount finance leases. Property acquired by way of a finance lease recorded under previous Australian GAAP. is stated at an amount equal to the lower of its fair value and Business combinations since 27 June 2004 the present value of the minimum lease payments at inception All business combinations are accounted for by applying of the lease, less accumulated depreciation (see below) and the purchase method. Entities and businesses acquired are impairment losses (refer Note 1(M)). Lease payments are accounted for using the cost method of accounting, whereby accounted for as described in Note 1(T). fair values are assigned to all the identifiable underlying assets (ii) Depreciation acquired and liabilities assumed, including contingent liabilities, (a) Buildings, plant and equipment at the date of acquisition. Buildings and plant comprising lifts, air conditioning, fire Goodwill represents the difference between the cost of protection systems and other installations are depreciated on the acquisition and the fair value of the net identifiable a straight-line basis over the estimated useful life of the asset assets acquired. Goodwill is not amortised, but tested for to the consolidated entity. Estimates of remaining useful lives impairment annually and whenever an indication of impairment are made on a regular basis for all assets. exists (refer Note 1(M)). Goodwill is stated at cost less any The expected useful lives are as follows: accumulated impairment losses. Goodwill is allocated to cash-generating units. Any impairment is recognised directly 2009 2008 in the income statement and is not subsequently reversed.

Buildings 25–40 years 25–40 years (I) Other intangibles (i) Brand names Plant and equipment 3–10 years 3–10 years Brand names recognised by the company have an indefinite useful life and are not amortised. Each period, the useful (b) Leasehold improvements life of this asset is reviewed to determine whether events The cost of leasehold improvements is amortised over the and circumstances continue to support an indefinite useful remaining period of the individual leases or the estimated life assessment for the asset. Such assets are tested for useful life of the improvement to the consolidated entity, impairment in accordance with the policy stated in Note 1(M). whichever is the shorter. Leasehold improvements held at the reporting date are amortised over a maximum period of (ii) Liquor licences 20 years for retail properties and 40 years for hotels. Liquor licences are valued at cost. Liquor licences are considered to have an indefinite useful life. As a consequence, (c) Plant and equipment no amortisation is charged. They are tested for impairment Plant, equipment and shop fittings (including application annually and whenever an indication of impairment exists. software) are depreciated on a straight-line basis over the Any impairment is recognised immediately in profit or loss. estimated useful life of the asset to the consolidated entity. Estimates of remaining useful lives are made on a regular (iii) Gaming licences basis for all assets. Gaming licences are valued at cost. Gaming licences are considered to have an indefinite useful life. As a consequence, The expected useful lives are as follows: no amortisation is charged. They are tested for impairment 2009 2008 annually and whenever an indication of impairment exists. Any impairment is recognised immediately in profit or loss. Plant and equipment 2.5–10 years 2.5–10 years (iv) Research and development Expenditure on research activities, undertaken with (d) Proceeds from sale of assets the prospect of gaining new technical knowledge and The gross proceeds of asset sales are recognised at the date understanding, is recognised in the profit and loss as that an unconditional contract of sale is exchanged with the an expense as incurred. purchaser. The net gain/(net loss) is recorded in other income/ (other expenses). Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible and the consolidated entity has sufficient resources to complete development. The expenditure capitalised includes the cost of materials, direct labour and an 80 WOOLWORTHS LIMITED ANNUAL REPORT 2009 appropriate proportion of overheads.

F-176 Other development expenditure is recognised in the income (M) Impairment statement as an expense as incurred. Capitalised development The carrying amounts of the consolidated entity’s tangible expenditure is stated at cost less accumulated amortisation assets, excluding inventories (refer Note 1(K)) and deferred tax and impairment losses (refer Note 1(M)). assets (refer Note 1(V)), are reviewed at each reporting date (v) Other intangible assets to determine whether there is any indication of impairment. If Other intangible assets that are acquired by the any such indication exists, the asset’s recoverable amount is consolidated entity are stated at cost. These are considered estimated (refer below). to have an indefinite useful life. As a consequence, no For goodwill and other intangible assets that have an indefinite amortisation is charged. Expenditure on internally generated useful life and intangible assets that are not yet available goodwill and brand names is recognised in profit or loss as for use, the recoverable amount is estimated annually and an expense as incurred. whenever there is an impairment indicator.

(J) Financial assets An impairment loss is recognised whenever the carrying Available-for-sale financial assets amount of an asset or its cash-generating unit (CGU) exceeds The consolidated entity’s investments in equity securities its recoverable amount. Impairment losses are recognised in are classified as available-for-sale financial assets. the income statement unless the asset has previously been The investments are initially measured at fair value, net of revalued, in which case the impairment loss is recognised as transaction costs except for those financial assets classified a reversal to the extent of that previous revaluation with any as at fair value through the profit or loss which are initially excess recognised through the income statement. measured at fair value. (i) Calculation of recoverable amount Subsequent to initial recognition, they are measured at fair The recoverable amount of the consolidated entity’s investments value with any change recorded through an available-for-sale in held-to-maturity securities and receivables is calculated as revaluation reserve in equity with the exception of impairment the present value of estimated future cash flows, discounted losses which are recognised directly in the income statement. at the original effective interest rate (i.e. the effective interest When an investment is derecognised, the cumulative gain or rate computed at initial recognition of these financial assets). loss in equity is transferred to the income statement. Receivables with a short duration are not discounted. Trade and other receivables Impairment of receivables is not recognised until objective Trade and other receivables are stated at their cost less evidence is available that a loss event has occurred. Significant impairment losses (refer Note 1(M)). receivables are individually assessed for impairment. Impairment testing of significant receivables that are not (K) Inventories assessed as impaired individually is performed by placing Short life retail stocks are valued at the lower of average cost them into portfolios of significant receivables with similar and net realisable value. risk profiles and undertaking a collective assessment of Long life retail stocks are valued using the retail inventory impairment. method to arrive at cost. The retail inventory method Non-significant receivables are not individually assessed. determines cost by reducing the value of the inventory by Instead, impairment testing is performed by placing the appropriate gross margin percentage which takes into non-significant receivables in portfolios of similar risk profiles, account markdown prices. based on objective evidence from historical experience adjusted Warehouse stocks are valued at the lower of average cost and for any effects of conditions existing at each balance date. net realisable value. The recoverable amount of other assets is the greater of their These methods of valuation are considered to achieve a fair value less costs to sell and value in use. In assessing value valuation reasonably approximating the lower of cost and in use, the estimated future cash flows are discounted to net realisable value. Cost includes all purchase-related rebates, their present value using a pre-tax discount rate that reflects settlement discounts and other costs incurred to bring current market assessments of the time value of money and inventory to its condition and location for sale. the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable Net realisable value is the estimated selling price in the amount is determined for the cash-generating unit to which ordinary course of business, less the estimated costs of the asset belongs. completion and selling expenses. Impairment losses recognised in respect of a CGU will be (L) Cash and cash equivalents allocated first to reduce the carrying amount of any goodwill Cash and cash equivalents comprise cash balances and call allocated to the CGU and then to reduce the carrying amount deposits with an original maturity of three months or less. of the other assets in the unit on a pro-rata basis to their Bank overdrafts that are repayable on demand and form an carrying amounts. integral part of the consolidated entity’s cash management are included as a component of cash and cash equivalents for the purpose of the statements of cash flows. 81

F-177 NOTES TO THE FINANCIAL STATEMENTS

1 SIGNIFICANT ACCOUNTING POLICIES CONTINUED (i) Defined contribution plans (ii) Reversals of impairment Obligations for contributions to defined contribution pension An impairment loss in respect of a held-to-maturity security or plans are recognised as an expense in the income statement receivable is reversed if the subsequent increase in recoverable as incurred. amount can be related objectively to an event occurring after (ii) Defined benefit plans the impairment loss was recognised. Woolworths is the employer sponsor of a defined benefit An impairment loss in respect of goodwill is not reversed. superannuation fund. Under A-IFRS, the employer sponsor In respect of other assets, an impairment loss is reversed if is required to recognise a liability (or asset) where the there has been a change in the estimates used to determine present value of the defined benefit obligation, adjusted for the recoverable amount. unrecognised past service cost, exceeds (is less than) the An impairment loss is reversed only to the extent that the fair value of the underlying net assets of the fund (hereinafter asset’s carrying amount does not exceed the carrying amount referred to as the “defined benefit obligation”). that would have been determined, net of depreciation or The consolidated entity’s net obligation in respect of defined amortisation, if no impairment loss had been recognised. benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in (N) Capital return for their service in the current and prior periods. That (i) Debt and equity instruments benefit is discounted to determine its present value. Debt and equity instruments are classified as either liabilities or equity in accordance with the substance of the contractual The discount rate is the yield at the balance sheet date on arrangement. government bonds that have maturity dates approximating the terms of the consolidated entity’s obligations. The calculation (ii) Transaction costs on the issue of equity instruments is performed by a qualified actuary using the projected unit Transaction costs arising on the issue of equity instruments are credit method. recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction When the benefits of a plan are improved, the portion of costs are the costs that are incurred directly in connection with the increased benefit relating to past service by employees the issue of those equity instruments and which would not is recognised as an expense in the income statement have been incurred had those instruments not been issued. on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest (iii) Interest and dividends immediately, the expense is recognised immediately in the Interest and dividends are classified as expenses or as income statement. distributions of profit consistent with the balance sheet classification of the related debt or equity instruments or All movements in the defined benefit obligation are recognised component parts of compound instruments. in the Income Statement except actuarial gains and losses. All actuarial gains and losses as at 28 June 2004, the date of (O) Borrowings transition to A-IFRS, were recognised. Actuarial gains and Borrowings are recognised initially at fair value less attributable losses that arise subsequent to 28 June 2004 are recognised transaction costs. Subsequent to initial recognition, borrowings in full in retained earnings in the period in which they occur are stated at amortised cost with any difference between cost and are presented in the Statement of Recognised Income and redemption value recognised in the income statement and Expense. over the period of the borrowings When the calculation results in Plan assets exceeding liabilities Borrowing costs directly attributable to qualifying assets are to the consolidated entity, the recognised asset is limited to the capitalised as part of the cost of those assets. net total of any unrecognised actuarial losses and past service costs and the present value of any future refunds from the Plan (P) Employee benefits or reductions in future contributions to the Plan. The Company sponsors a Superannuation Plan (the Plan) that (iii) Long-term service benefits provides accumulation type benefits to permanent salaried The consolidated entity’s net obligation in respect of long-term employees and their dependants on retirement or death. service benefits, other than pension plans, is the amount of Defined benefits have been preserved for members of certain future benefit that employees have earned in return for their former superannuation funds sponsored by the Company, service in the current and prior periods. The obligation is which are now provided for in the Plan. calculated using expected future increases in wage and salary The Company’s commitment in respect of accumulation rates including related on-costs and expected settlement benefits under the Plan is limited to making the specified dates, and is discounted using the rates attached to the contributions in accordance with the rules of the Plan and/or Commonwealth Government bonds at the balance sheet date any statutory obligations. which have maturity dates approximating the terms of the consolidated entity’s obligations.

82 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-178 (iv) Share-based payment transactions Provisions made in respect of employee benefits which are not Equity settled share-based payments form part of the expected to be settled within 12 months are recognised and remuneration of employees (including executives) of both the measured as the present value of expected future payments to consolidated entity and Company. be made in respect of services provided by employees up to The consolidated entity and Company recognise the period end. Consideration is given to expected future wage and fair value at the grant date of equity settled share-based salary levels, experience of employee departures and periods payments (such as options) as an employee benefit expense of service. The expected future cash flows are discounted, proportionally over the vesting period with a corresponding using interest rates attaching to Commonwealth Government increase in equity. Fair value is measured at grant date using guaranteed securities which have terms to maturity, matching a Monte Carlo Simulation option pricing model performed their estimated timing as closely as possible. by an independent valuer which takes into account market (Q) Provisions based performance conditions. The fair value per instrument A provision is recognised in the balance sheet when the is multiplied by the number of instruments expected to vest consolidated entity has a present legal or constructive obligation based on achievement of non-market based performance as a result of a past event, and it is probable that an outflow of conditions (e.g. service conditions) to determine the total cost. economic benefits will be required to settle the obligation. This total cost is recognised as an employee benefit expense proportionally over the vesting period during which the When some or all of the economic benefits required to settle a employees become unconditionally entitled to the instruments. provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that On vesting and over the vesting period the amount recognised recovery will be received and the amount of the receivable can as an employee benefit expense will be adjusted to reflect the be measured reliably. actual number of options that vest except where forfeiture is due to failure to achieve market based performance conditions. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at As permitted by the elections available under AASB 1 reporting date, taking into account the risks and uncertainties First-time Adoption of Australian Equivalents to International surrounding the obligation. Where a provision is measured Financial Reporting Standards, Woolworths has not using the cash flows estimated to settle the present obligation, retrospectively recognised the fair value of share-based its carrying amount is the present value of those cash flows. payments that have vested prior to 1 January 2005. Furthermore, no adjustment has been made for share-based (i) Restructuring payments granted before 7 November 2002. Provision for restructuring is recognised when the consolidated entity has developed a detailed formal plan for The consolidated entity operated an Employee Share Plan the restructuring and has either: (ESP) whereby it provided interest free loans to selected employees to purchase shares in the Company. All shares − entered into firm contracts to carry out the restructuring; or acquired under the ESP are held by a wholly owned – raised a valid expectation in those affected by the subsidiary of Woolworths as trustee of the share plan trust. restructuring that the restructuring will occur. Dividends paid by Woolworths are used to repay the loan (ii) Onerous contracts (after payment of a portion of the dividend to the employee A provision for onerous contracts is recognised when the to cover any tax liabilities). expected benefits to be derived by the consolidated entity The loans are limited recourse and if the employee elects not from a contract are lower than the unavoidable cost of meeting to repay the loan, the underlying shares are sold to recover its obligations under the contract. the outstanding loan balance. These have been accounted (iii) Self-insurance for as an in-substance option in the Financial Statements of The consolidated entity provides for self-insured liabilities the consolidated entity and the Company. relating to workers’ compensation and public liability claims. (v) Wages and salaries and related employee benefits The provisions for such liabilities are based on independent Provision is made for benefits accruing to employees in respect actuarial assessments, which consider numbers, amounts and of wages and salaries, annual leave, long service leave and sick duration of claims, and allow for future inflation and investment leave when it is probable that settlement will be required and returns. they are capable of being reliably measured. Provisions made Allowance is included for injuries which occurred before the in respect of employee benefits expected to be settled within balance sheet date, but where the claim is expected to be 12 months are recognised and are measured at their nominal notified after the reporting date. values using the remuneration rate expected to apply at the The provision is discounted using the Commonwealth time of settlement. Government bond rate with a maturity date approximating the term of the consolidated entity’s obligation.

F-179 NOTES TO THE FINANCIAL STATEMENTS

1 SIGNIFICANT ACCOUNTING POLICIES CONTINUED (T) Leases (iv) Warranty Leases are classified as finance leases whenever the terms The consolidated entity provides for anticipated warranty of the lease transfer substantially all the risks and rewards costs when the underlying products or services are sold. of ownership to the lessee. All other leases are classified as The provision is based upon historical warranty data. operating leases. (v) Make good (i) Operating lease payments The consolidated entity has certain operating leases that Payments made under operating leases are recognised in require the asset to be returned to the lessor in its original the income statement on a straight-line basis over the term condition. These obligations relate to wear and tear on the of the lease. premises and not dismantling obligations. Fixed rate increases to lease rental payments, excluding The operating lease payments do not include an element contingent or index based rental increases, such as Consumer for repairs/overhauls. A provision for refurbishment costs Price Index, turnover rental and other similar increases, are is recognised over the period of the lease, measured at the recognised on a straight line basis over the lease term. expected cost of refurbishment at each reporting date. An asset or liability arises for the difference between the (R) Trade and other payables amount paid and the lease expense brought to account on These amounts represent liabilities for goods and services a straight line basis. provided to the consolidated entity and Company which were Lease incentives received are recognised in the income unpaid at the end of the period. The amounts are unsecured statement as an integral part of the total lease expense and are usually settled within 45 days of recognition. and spread over the lease term.

(S) Revenue recognition (U) Net financing costs In general, revenue is recognised only when it is probable that Net financing costs comprise interest payable on borrowings the economic benefits comprising the revenue will flow to the calculated using the effective interest method, interest entity, the flow can be reliably measured and the entity has receivable on funds invested, dividend income, foreign transferred the significant risks and rewards of ownership. exchange gains and losses, and gains and losses on hedging In addition to these general criteria, specific revenue instruments that are recognised in the income statement (refer recognition criteria apply as follows: Note 1(F)). (i) Sales revenue (V) Income tax Sales revenue represents the revenue earned from the Income tax in the income statement for the periods presented provision of products and rendering of services to parties comprises current and deferred tax. Income tax is recognised external to the consolidated entity and Company. Sales in the income statement except to the extent that it relates revenue is only recognised when the significant risks and to items recognised directly in equity, in which case it is rewards of ownership of the products, including possession, recognised in equity. Where it arises from the initial accounting have passed to the buyer and for services when a right to be for a business combination, it is taken into account in the compensated has been attained and the stage of completion determination of goodwill or excess. of the contract can be reliably measured. Current tax is the expected tax payable on the taxable income Revenue is recognised on a commission only basis where for the year, using tax rates enacted or substantively enacted Woolworths acts as an agent rather than a principal in the at the balance sheet date, and any adjustment to tax payable transaction. Revenue is recognised net of returns. in respect of previous years. Current tax for current and prior Revenue from the sale of customer gift cards is recognised periods is recognised as a liability to the extent it is unpaid. when the card is redeemed and the customer purchases the Deferred tax is provided using the balance sheet method, goods by using the card. providing for temporary differences between the carrying (ii) Rental income amounts of assets and liabilities for financial reporting Rental income is recognised on a straight line basis over the purposes and the amounts used for taxation purposes. In term of the lease. accordance with AASB 112 Income Taxes, the following temporary differences are not provided for: goodwill, the initial (iii) Financing income recognition of assets or liabilities in a transaction that is not Interest income is recognised in the income statement as it a business combination and that affects neither accounting accrues, using the effective interest method. Dividend income nor taxable profit, and differences relating to investments in is recognised in the income statement on the date the entity’s subsidiaries to the extent that they will probably not reverse in right to receive payment is established, which in the case of the foreseeable future where the consolidated entity is able to quoted securities is the ex-dividend date. control the reversal of the temporary differences.

84 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-180 The amount of deferred tax provided is based on the expected (W) Assets held for sale manner of realisation or settlement of the carrying amount of Immediately before classification as held for sale, the assets and liabilities, using tax rates enacted or substantively measurement of the assets (and all assets and liabilities in enacted at the balance sheet date. a disposal group) is brought up to date in accordance with A deferred tax asset is recognised only to the extent that it is applicable Accounting Standards. Then, on initial classification probable that future taxable profits will be available against as held for sale, assets and disposal groups are recognised at which the deductible temporary differences or unused tax the lower of carrying amount and fair value less costs to sell. losses and tax offsets can be utilised. Deferred tax assets are Impairment losses on initial classification as held for sale are reduced to the extent that it is no longer probable that the included in profit or loss, even when there is a revaluation. related tax benefit will be realised. The same applies to gains and losses on subsequent Additional income taxes that arise from the distribution of remeasurement. dividends are recognised at the same time as the liability (X) Goods and services tax to pay the related dividend. Revenue, expenses and assets are recognised net of the Deferred tax assets and liabilities are offset when they relate amount of goods and services tax (GST), except where the to income taxes levied by the same taxation authority and the amount of GST incurred is not recoverable from the taxation consolidated entity intends to settle its current tax assets and authority. In these circumstances, the GST is recognised liabilities on a net basis. as part of the cost of acquisition of the asset or as part of Tax consolidation the expense. The Company and its wholly owned Australian resident Receivables and payables are stated with the amount of GST entities have formed a tax consolidated group with effect included. The net amount of GST recoverable from, or payable from 1 July 2002 and are therefore taxed as a single entity to, the tax authorities is included as a current asset or liability from that date. The head entity within the tax consolidated in the balance sheet. group is Woolworths Limited. Cash flows are included in the statement of cash flows on a Tax expense/income, deferred tax assets and deferred tax gross basis. The GST components of cash flows arising from liabilities arising from temporary differences of the members investing and financing activities which are recoverable from, of the tax consolidated group are recognised by each member or payable to, the tax authorities are classified as operating of the tax consolidated group where the member would have cash flows. been able to recognise the deferred tax asset or deferred tax liability on a stand alone basis. (Y) Segment reporting Segment information is presented in respect of the The head entity, in conjunction with other members of the tax consolidated entity’s business and geographical segments. consolidated group, has entered into a tax funding agreement The primary format, business segments is based on the which sets out the funding obligations of members of the tax consolidated entity’s management and internal reporting consolidated group in respect of income tax amounts. The tax structure. Inter-segment pricing is determined on an arm’s funding arrangements require payments to the head entity length basis. Segment results, assets and liabilities include equal to the current tax liability assumed by the head entity. items directly attributable to a segment as well as those In addition, the head entity is required to make payments that can be allocated on a reasonable basis. equal to the current tax asset assumed by the head entity Business segments in circumstances where the subsidiary member would have The consolidated entity comprises the following main been entitled to recognise the current tax asset on a stand segments: alone basis. − Supermarket Group – encompasses supermarkets, retail These tax funding arrangements result in the head entity liquor outlets and petrol outlets; recognising an inter-entity receivable/payable equal in amount − General Merchandise Group – encompasses BIG W to the tax liability/asset assumed. The inter-entity receivable/ discount department stores; payable amounts are at call. − Consumer Electronics Group – encompasses Dick Smith In respect of carried forward tax losses brought into the Electronics, Tandy and Dick Smith Electronics group on consolidation by subsidiary members, the head PowerHouse stores; entity will pay the subsidiary member for such losses when − Hotels Group – encompasses on-premise liquor sales, these losses are transferred to the Woolworths Limited tax food, accommodation, gaming and venue hire; and consolidated group, where the subsidiary member would – Wholesale Group – comprises Statewide Independent have been entitled to recognise the benefit of these losses Wholesalers (SIW). on a stand alone basis.

F-181 NOTES TO THE FINANCIAL STATEMENTS

1 SIGNIFICANT ACCOUNTING POLICIES CONTINUED Unallocated items comprise mainly income-earning assets and revenue, interest-bearing borrowings and expenses, and corporate assets and expenses. Geographical segments Segment assets are based on the geographical location of the assets. Woolworths Limited operates in Australia, New Zealand, Hong Kong and India. The majority of business operations are in Australia and New Zealand. Woolworths operates in New Zealand following the acquisition of Foodland supermarkets in 2006. The consumer electronics business operates stores based in Australia and New Zealand and has a business venture with TATA in India which operates stores under the “Croma” brand. The global sourcing ofﬁce is located in Hong Kong.

(Z) Accounting estimates and judgements Management, together with the Audit, Risk Management and Compliance Committee, determines the development, selection and disclosure of the consolidated entity’s critical accounting policies and estimates and the application of these policies and estimates. The estimates and judgements that have a signiﬁcant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next ﬁnancial year are set out as appropriate in the Notes to the Financial Statements. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates and underlying assumptions are recognised in the period in which the estimate is revised if the revision affects only that period; or in the period and future periods if the revision affects both current and future periods.

86 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-182 Consolidated Woolworths Limited 2009 2008 2009 2008 52 weeks 53 weeks 52 weeks 53 weeks $m $m $m $m

2 PROFIT FROM OPERATIONS Proﬁt before income tax expense includes the following items of revenue, income and expense: (a) Operating revenue Revenue from the sale of goods: Third parties 49,594.8 47,034.8 35,607.0 33,386.5 Related parties – – – 25.8 Other operating revenue 103.0 123.3 84.4 99.2 Revenue from operations 49,697.8 47,158.1 35,691.4 33,511.5 (b) Other revenue Rent 41.6 36.5 4.5 4.1 Other 106.8 93.1 92.5 91.3 Total other revenue 148.4 129.6 97.0 95.4 Total revenue 49,846.2 47,287.7 35,788.4 33,606.9

(d) Expenses Amounts provided for: Self-insured risks (Note 16) 139.9 110.8 114.8 97.5 Depreciation of: Development properties and freehold warehouses retail and other properties 23.1 12.3 2.0 1.9 Plant and equipment 604.9 559.6 456.5 408.0 Amortisation of: Leasehold improvements 96.8 78.2 73.8 55.2 Total depreciation and amortisation 724.8 650.1 532.3 465.1 Employee beneﬁts expense(1) 5,724.3 5,542.2 4,338.7 4,180.6 Net loss on disposal of property, plant and equipment 14.2 – 5.5 7.6 Operating lease rental expenses: – minimum lease payments 1,313.5 1,223.3 906.0 835.6 – contingent rentals 96.2 92.6 82.2 76.6 Total operating lease rental expense 1,409.7 1,315.9 988.2 912.2

Note (1) Employee benefits expense includes salaries and wages, defined benefit plan expense, defined contribution plan expense, termination benefits, taxable value of fringe benefits, payroll tax, leave entitlements and share-based payments expense.

F-183 NOTES TO THE FINANCIAL STATEMENTS

Consolidated Woolworths Limited 2009 2008 2009 2008 52 weeks 53 weeks 52 weeks 53 weeks $m $m $m $m

3 NET FINANCING COSTS Financial expense Interest expense – other parties (252.6) (235.2) (244.2) (233.8) Less: interest capitalised(1) 17.4 4.4 17.3 4.0 Foreign exchange loss – – – (1.3) (235.2) (230.8) (226.9) (231.1) Financial income Dividend income Related parties – – 65.1 65.3 Other parties 7.8 14.7 2.6 – Interest income Related parties – – 230.6 245.3 Other parties 13.0 21.2 7.5 15.0 Foreign exchange gain 25.2 3.6 9.0 – 46.0 39.5 314.8 325.6 Net ﬁnancing cost (189.2) (191.3) 87.9 94.5

Note (1) Weighted average capitalisation rate on funds borrowed generally: 6.76% (2008: 7.08%). 4 AUDITORS’ REMUNERATION Audit or review of the ﬁnancial report Deloitte Touche Tohmatsu Australia 1.756 1.648 1.263 1.223 Deloitte Touche Tohmatsu network ﬁrms 0.476 0.469 – – 2.232 2.117 1.263 1.223 Other non-audit services Tax compliance 0.083 0.049 0.053 – Other advisory(1) 1.107 0.684 1.107 0.682 1.190 0.733 1.160 0.682 Total auditors’ remuneration 3.422 2.850 2.423 1.905

Note (1) Other advisory comprises assistance on various accounting matters and due diligence.

88 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-184 Consolidated Woolworths Limited 2009 2008 2009 2008 52 weeks 53 weeks 52 weeks 53 weeks $m $m $m $m

5 INCOME TAXES (a) Income tax recognised in the income statement Tax expense comprises: Current tax expense 752.0 747.6 597.2 580.8 Adjustments recognised in the current year in relation to the current tax of prior years 3.5 3.1 11.2 2.3 Deferred tax relating to the origination and reversal of temporary differences 10.8 (64.7) (2.1) (53.6) Total tax expense 766.3 686.0 606.3 529.5

Numerical reconciliation between tax expense and pre-tax net profit The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in the financial statements as follows: Profit from operations before income tax expense 2,626.3 2,337.5 2,054.6 1,773.0 Income tax using the domestic corporation tax rate of 30% (2008: 30%) 787.9 701.3 616.4 531.9 Non-deductible expenses 2.4 3.6 1.0 0.3 Impact of differences in offshore tax rates – 1.3 – – Exempt dividend income (2.3) (4.4) (20.3) (19.6) Investment allowance (18.9) – (18.9) – Other (6.3) (18.9) 16.9 14.6 762.8 682.9 595.1 527.2 Under provided in prior years 3.5 3.1 11.2 2.3 766.3 686.0 606.3 529.5

F-185 NOTES TO THE FINANCIAL STATEMENTS

5 INCOME TAXES CONTINUED Consolidated Woolworths Limited 2009 2008 2009 2008 52 weeks 53 weeks 52 weeks 53 weeks $m $m $m $m

(b) Income tax recognised directly in equity The following current and deferred amounts were charged/(credited) directly to equity during the period: Current tax liability Transactions charged to foreign currency translation reserve 0.1 (59.6) – – Actuarial movements on defined benefit plans (0.3) – – – (0.2) (59.6) – Deferred tax Cash flow hedges (33.1) 48.5 (33.1) 48.5 Transactions charged to foreign currency translation reserve (7.6) (35.4) – – Actuarial movements on defined benefits plans (20.0) (11.9) (20.0) (11.9) (60.7) 1.2 (53.1) 36.6

(c) Current tax assets and liabilities The current tax liability for the consolidated entity of $279.5 million (2008: $330.2 million) and for Woolworths Limited of $232.5 million (2008: $267.5 million) represents the amount of income taxes payable in respect of current and prior ﬁnancial periods. In accordance with the tax consolidation legislation, Woolworths Limited, as the head entity of the Australian tax consolidated group has assumed the current tax liabilities of the members in the tax consolidated group. The current tax liability balance for the consolidated entity includes an amount of $37.3 million owing by Australian Leisure and Hospitality Group Limited in respect of prior year amended assessments issued by the ATO. These assessments relate to years when Australian Leisure and Hospitality Group Limited was a member of Fosters Group Limited. These liabilities are covered by indemnities in the sale agreement. Accordingly, a receivable for the same amount has also been recognised. Consolidated Woolworths Limited 2009 2008 2009 2008 $m $m $m $m

(d) Deferred tax balances Deferred tax assets comprise: Tax losses – revenue 1.5 2.2 – – Temporary differences 479.1 428.5 353.0 297.8 480.6 430.7 353.0 297.8

90 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-186 Taxable and deductible differences arise from the following: Credited/ Credited/ Opening (Charged) to (Charged) to Closing balance income equity balance Consolidated 2009 $m $m $m $m

Gross deferred tax assets Property plant and equipment 128.0 (18.8) 0.2 109.4 Provisions and accruals 354.6 32.2 20.3 407.1 Unrealised foreign exchange differences 18.9 (0.3) 7.1 25.7 Recognised tax losses 2.2 (0.7) – 1.5 Other 5.1 (1.0) – 4.1 508.8 11.4 27.6 547.8 Gross deferred tax liabilities Intangible assets (14.0) – – (14.0) Prepayments (0.5) (4.4) – (4.9) Cash ﬂow hedges (52.3) – 33.1 (19.2) Other (11.3) (17.8) – (29.1) (78.1) (22.2) 33.1 (67.2) 430.7 (10.8) 60.7 480.6

Credited/ Credited/ Opening (Charged) to (Charged) to Closing balance income equity balance Woolworths Limited 2009 $m $m $m $m

Gross deferred tax assets Property plant and equipment 86.4 1.3 – 87.7 Provisions and accruals 262.0 6.9 20.0 288.9 Other 4.9 (3.2) – 1.7 353.3 5.0 20.0 378.3 Gross deferred tax liabilities Prepayments (0.2) (1.9) – (2.1) Unrealised foreign exchange differences (3.0) 0.9 – (2.1) Cash ﬂow hedges (52.3) – 33.1 (19.2) Other – (1.9) – (1.9) (55.5) (2.9) 33.1 (25.3) 297.8 2.1 53.1 353.0

F-187 NOTES TO THE FINANCIAL STATEMENTS

5 INCOME TAXES CONTINUED Credited/ Credited/ Opening (Charged) to (Charged) to Closing balance income equity balance Consolidated 2008 $m $m $m $m

Gross deferred tax assets Property plant and equipment 80.0 49.3 (1.3) 128.0 Provisions and accruals 332.3 13.6 8.7 354.6 Unrealised foreign exchange differences – (21.1) 40.0 18.9 Recognised tax losses 2.7 (0.5) – 2.2 Other 3.4 1.8 (0.1) 5.1 418.4 43.1 47.3 508.8 Gross deferred tax liabilities Intangible assets (14.0) – – (14.0) Prepayments (2.5) 2.0 – (0.5) Unrealised foreign exchange differences (16.5) 16.5 – – Cash ﬂow hedges (3.8) – (48.5) (52.3) Other (14.4) 3.1 – (11.3) (51.2) 21.6 (48.5) (78.1) 367.2 64.7 (1.2) 430.7

Credited/ Credited/ Opening (Charged) to (Charged) to Closing balance income equity balance Woolworths Limited 2008 $m $m $m $m

Gross deferred tax assets Property plant and equipment 71.0 15.4 – 86.4 Provisions and accruals 217.6 32.5 11.9 262.0 Other 2.5 2.4 – 4.9 291.1 50.3 11.9 353.3 Gross deferred tax liabilities Prepayments (2.1) 1.9 – (0.2) Unrealised foreign exchange differences (3.7) 0.7 – (3.0) Cash ﬂow hedges (3.8) – (48.5) (52.3) Other (0.7) 0.7 – – (10.3) 3.3 (48.5) (55.5) 280.8 53.6 (36.6) 297.8

92 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-188 6 DIVIDENDS

2009 Cents per share Total amount $m Franked Date of payment

Interim 2009 ordinary 48 588.3 100% 24/04/2009 Final 2008 ordinary 48 586.0 100% 03/10/2008 Total 96 1,174.3

2008 Cents per share Total amount $m Franked Date of payment

Interim 2008 ordinary 44 534.5 100% 24/04/2008 Final 2007 ordinary 39 471.9 100% 5/10/2007 Total 83 1,006.4

All dividends are fully franked at a 30% rate. On 27 August 2009, the Board of Directors declared a ﬁnal dividend in respect of the 2009 year of 56c (2008: 48c) per share 100% franked at a 30% tax rate. The amount that will be paid on 9 October 2009 (2008: 3 October 2008) will be $692.0 million (2008: $586.0 million). As the dividend was declared subsequent to 28 June 2009 no provision has been included as at 28 June 2009. Dividend Reinvestment Plan (the Plan or DRP) Under the terms and conditions of the DRP, eligible shareholders may elect to participate in the Plan in respect to all or part of their shareholding, subject to any maximum and/or minimum number of shares to participate in the Plan that the Directors may specify. There is currently no minimum number of shares which a shareholder may designate as participating in the Plan. The maximum number of shares which a shareholder (other than broker’s nominees and certain trustees) may designate as participating in the Plan is 20,000.

Franked dividends Consolidated Woolworths Limited 2009 2008 2009 2008 $m $m $m $m

The franked portions of the dividends proposed as at 28 June 2009 will be franked out of existing franking credits or out of franked credits arising from the payment of income tax in the period ending 27 June 2010. Franking credits available for the subsequent ﬁnancial year 30% (2008: 30%) 1,419.8 1,194.7 1,297.1 1,075.1

The above amounts represent the balances of the franking accounts as at the end of the financial period, adjusted for: (a) Franking credits that will arise from the payment of income tax payable at the end of the financial period; and (b) Franking debits that will arise from the payment of dividends provided at the end of the financial period. Franking accounts are presented on a tax paid basis. The franking account balances reported for the consolidated group are inclusive of $26.1 million (2008: $35.4 million) attributable to the minority interest holders.

F-189 NOTES TO THE FINANCIAL STATEMENTS

Supermarkets(1) BIG W 2009 2008 2009 2008 $m $m $m $m

7 SEGMENT DISCLOSURES Business segments Sales to customers 42,325.6 40,312.8 4,267.3 3,915.9 Other operating revenue 103.0 123.3 – – Inter-segment revenue – – – – Segment revenue 42,428.6 40,436.1 4,267.3 3,915.9 Eliminations Unallocated revenue(5) Total revenue Segment result before tax 2,444.0 2,164.8 200.2 161.2 Unallocated revenue/(expenses) – Property(6) – Head Office Net financing cost Profit before tax Income tax expense Profit after tax Segment assets 9,619.9 8,776.3 1,286.8 1,152.5 Unallocated(7) Total assets Segment liabilities 3,776.5 3,663.2 638.5 597.2 Unallocated(7) Total liabilities Capital expenditure 1,111.6 1,148.3 131.0 152.9 Unallocated(7) Acquisition of assets Segment depreciation and amortisation 522.3 467.2 64.1 55.0 Unallocated(7) Total depreciation and amortisation Segment other non cash expenses 38.8 29.1 6.2 4.6 Unallocated(8) Total other non-cash expenses

Notes (1) (2) (3) Supermarkets comprise Consumer Electronics includes Hotels comprise on-premise liquor supermarket stores, liquor stores Woolworths Wholesale India. sales, food, accommodation, gaming and petrol canopies in Australia and venue hire. and New Zealand.

94 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-190 Consumer Electronics(2) Hotels(3) Wholesale(4) Consolidated 2009 2008 2009 2008 2009 2008 2009 2008 $m $m $m $m $m $m $m $m

1,723.6 1,530.6 1,110.3 1,113.4 168.0 162.1 49,594.8 47,034.8 – – – – – – 103.0 123.3 0.2 0.4 – – 291.1 264.2 291.3 264.6 1,723.8 1,531.0 1,110.3 1,113.4 459.1 426.3 49,989.1 47,422.7 (291.3) (264.6) 148.4 129.6 49,846.2 47,287.7 50.8 63.1 218.0 215.1 4.3 4.3 2,917.3 2,608.5

(7.2) 33.1 (94.6) (112.8) (189.2) (191.3) 2,626.3 2,337.5 (766.3) (686.0) 1,860.0 1,651.5 538.7 498.6 3,057.4 2,893.8 57.7 57.6 14,560.5 13,378.8 2,524.4 2,293.7 17,084.9 15,672.5 192.7 150.6 160.8 149.2 47.4 45.6 4,815.9 4,605.8 5,211.7 4,831.4 10,027.6 9,437.2 54.0 36.2 234.6 333.4 5.5 1.7 1,536.8 1,672.5 315.1 269.2 1,851.9 1,941.7 30.8 25.7 64.6 57.8 1.7 1.4 683.5 607.1 45.9 43.0 729.4 650.1 1.9 1.5 3.0 2.2 – – 49.9 37.4 133.6 115.1 183.5 152.5

(4) (6) (7) (8) Wholesale comprises Statewide 2008 includes other significant items Unallocated comprises corporate Includes non-cash transactions Independent Wholesalers (SIW). including the profit on sale of certain head office and property division. including the defined benefit liability properties ($49.7 million). movement, employee shares scheme (5) expenses and unrealised foreign Unallocated revenue comprises exchange losses. rent and other revenue from operating activities.

F-191 NOTES TO THE FINANCIAL STATEMENTS

7 SEGMENT DISCLOSURES CONTINUED The consolidated entity operates predominantly in Australia and New Zealand. Inter-segment pricing is determined on an arm’s length basis. Geographical segments Australia New Zealand Consolidated 2009 2008 2009 2008 2009 2008 $m $m $m $m $m $m

Sales to customers 45,266.0 42,571.2 4,328.8 4,463.6 49,594.8 47,034.8 Other revenue 375.6 363.8 18.7 24.1 394.3 387.9 Segment revenue 45,641.6 42,935.0 4,347.5 4,487.7 49,989.1 47,422.7 Segment assets 11,669.1 10,733.2 2,891.4 2,645.6 14,560.5 13,378.8 Capital expenditure 1,310.2 1,482.2 226.6 190.3 1,536.8 1,672.5

Consolidated Woolworths Limited as at as at 2009 2008 2009 2008 $m $m $m $m

8 TRADE AND OTHER RECEIVABLES Current Trade receivables 105.1 99.1 45.0 42.2 Other receivables 361.4 356.1 212.0 280.4 Loans to controlled entities – – 824.4 625.4 Prepayments 197.7 182.6 173.0 143.9 664.2 637.8 1,254.4 1,091.9 Non-current Loans to controlled entities – – 5,602.6 5,556.0 Prepayments 2.5 3.6 2.0 3.0 Other receivables 0.2 – – – 2.7 3.6 5,604.6 5,559.0

Trade and other receivables are presented net of impairment allowance. Impairment provision balance as at 28 June 2009 was $12.7 million (2008: $14.3 million). All recovery risk has been provided for in the balance sheet.

96 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-192 Consolidated Woolworths Limited as at as at 2009 2008 2009 2008 $m $m $m $m

9 OTHER FINANCIAL ASSETS Current Fair value derivatives Cross-currency swaps 91.9 – 91.9 – Interest rate swaps – 49.3 – 49.3 Forward exchange contracts 11.0 15.8 11.0 15.8 102.9 65.1 102.9 65.1 Non-current Unlisted shares at cost – – 3,207.0 3,094.0 Fair value derivatives Interest rate swaps 24.0 110.1 24.0 110.1 Available-for-sale listed equity securities at fair value 130.7 151.2 39.4 50.2 Other 0.7 0.7 0.4 0.4 155.4 262.0 3,270.8 3,254.7

10 PROPERTY, PLANT AND EQUIPMENT Current Assets held for sale(1) 36.9 34.7 14.1 14.1 Non-current Development properties At cost 515.1 384.8 – – Less: Accumulated depreciation (11.7) (8.0) – – 503.4 376.8 – – Freehold warehouse, retail and other properties At cost 1,512.0 1,280.9 45.8 41.9 Less: Accumulated depreciation (80.3) (62.3) (13.2) (11.4) 1,431.7 1,218.6 32.6 30.5 Leasehold improvements At cost 1,627.0 1,295.7 1,080.6 851.8 Less: Accumulated amortisation (622.6) (529.1) (347.5) (277.8) 1,004.4 766.6 733.1 574.0 Plant and equipment At cost 8,710.8 7,964.1 5,434.7 4,851.1 Less: Accumulated depreciation (4,996.4) (4,687.3) (2,546.4) (2,307.8) 3,714.4 3,276.8 2,888.3 2,543.3 6,653.9 5,638.8 3,654.0 3,147.8 Total property, plant and equipment – net book value 6,690.8 5,673.5 3,668.1 3,161.9

Note (1) The consolidated entity intends to dispose of certain land and buildings over the next 12 months.

F-193 NOTES TO THE FINANCIAL STATEMENTS

10 PROPERTY, PLANT AND EQUIPMENT CONTINUED Total property, plant and equipment – net book value An assessment as to the carrying value of Woolworths-owned properties as at 28 June 2009 was performed. The basis of the assessment was a combination of external market assessments and/or valuations and Woolworths’ property group assessments. External valuations are obtained every three years. Based on the most recent assessments, a provision for development losses of $116.8 million (2008: $115.2 million) is held as at 28 June 2009. Reconciliations of the carrying amounts of each class of non-current property, plant and equipment at the beginning and end of the current and previous ﬁnancial periods are set out below: Freehold warehouse, Development retail and other Leasehold Plant and properties properties improvements equipment Total Consolidated 2009 $m $m $m $m $m

Carrying amount at start of period 376.8 1,218.6 766.6 3,276.8 5,638.8 Additions (excluding additions arising from acquisition of businesses) 165.0 149.0 333.4 1,046.8 1,694.2 Additions arising from acquisition of businesses – 65.2 0.4 10.0 75.6 Disposals (6.6) (1.7) (2.0) (19.1) (29.4) Depreciation/amortisation expense (5.1) (18.0) (96.8) (604.8) (724.7) Other (26.7) 18.7 2.5 2.3 (3.2) Effect of movements in foreign exchange rates – (0.1) 0.3 2.4 2.6 Carrying amount at end of period 503.4 1,431.7 1,004.4 3,714.4 6,653.9

Freehold warehouse, Development retail and other Leasehold Plant and properties properties improvements equipment Total Consolidated 2008 $m $m $m $m $m

Carrying amount at start of period 265.1 1,049.4 595.1 2,713.4 4,623.0 Additions (excluding additions arising from acquisition of businesses) 126.3 193.9 264.4 1,147.2 1,731.8 Additions arising from acquisition of businesses – 84.8 0.1 14.6 99.5 Disposals – (0.5) (3.0) (17.8) (21.3) Depreciation/amortisation expense – (12.3) (78.2) (559.6) (650.1) Other (7.4) (91.1) (2.8) (0.9) (102.2) Effect of movements in foreign exchange rates (7.2) (5.6) (9.0) (20.1) (41.9) Carrying amount at end of period 376.8 1,218.6 766.6 3,276.8 5,638.8

98 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-194 Freehold warehouse, Development retail and other Leasehold Plant and properties properties improvements equipment Total Woolworths Limited 2009 $m $m $m $m $m

Carrying amount at start of period – 30.5 574.0 2,543.3 3,147.8 Additions (excluding additions arising from acquisition of businesses) – 4.3 234.0 810.5 1,048.8 Additions arising from acquisition of businesses – – – 0.9 0.9 Disposals – (0.2) (0.9) (10.1) (11.2) Depreciation/amortisation expense – (2.0) (73.8) (456.5) (532.3) Other – – (0.2) 0.2 – Carrying amount at end of period – 32.6 733.1 2,888.3 3,654.0

Freehold warehouse, Development retail and other Leasehold Plant and properties properties improvements equipment Total Woolworths Limited 2008 $m $m $m $m $m

Carrying amount at start of period – 29.8 420.7 2,089.3 2,539.8 Additions (excluding additions arising from acquisition of businesses) – 2.1 205.8 860.8 1,068.7 Additions arising from acquisition of businesses – – – 4.0 4.0 Disposals – – (1.5) (16.4) (17.9) Depreciation/amortisation expense – (1.9) (55.2) (408.0) (465.1) Other – 0.5 4.2 13.6 18.3 Carrying amount at end of period – 30.5 574.0 2,543.3 3,147.8

Impairment of tangible assets At balance date the carrying amount of tangible assets is reviewed to determine whether there is an indication that the assets may be impaired. If such an indication exists, the recoverable amount of the asset, which is the higher of its fair value less costs to sell and its value in use, is estimated in order to determine the extent of any impairment loss. The recoverable amount has been assessed at the cash-generating unit (CGU) level, which is the smallest group of assets generating cash flows independent of other CGUs that benefit from the use of the respective tangible asset. The recoverable amount has been determined based on the value in use, which is calculated using cash flow projections from the most recent financial budgets approved by management and the Board. The cash flows are discounted to present value using pre-tax discount rates between 12% and 14% (2008: 12% and 14%) depending on the nature of the business and the country of operation. This discount rate is derived from the Group’s post-tax average cost of capital. The key assumptions used in the value in use calculations include sales growth, cost of doing business (CODB) reductions and discount rates (which have been estimated as described above). The assumptions regarding sales growth and CODB reductions are based on past experience and expectations of changes in the market.

F-195 NOTES TO THE FINANCIAL STATEMENTS

Consolidated Woolworths Limited as at as at 2009 2008 2009 2008 $m $m $m $m

11 INTANGIBLES Goodwill 2,991.6 2,941.4 310.3 302.0 Brand names 230.4 233.4 – – Liquor and gaming licences 1,645.3 1,594.6 175.6 162.8 Other 65.8 65.8 – – Total 4,933.1 4,835.2 485.9 464.8

Reconciliation of movements in intangibles Liquor and Total Goodwill Brand names gaming licences Other intangibles Consolidated 2009 $m $m $m $m $m

Carrying amount at start of period 2,941.4 233.4 1,594.6 65.8 4,835.2 Additions arising from acquisition of businesses 28.2 – 52.5 – 80.7 Other acquisitions – – 1.4 – 1.4 Disposals (0.7) – (3.2) – (3.9) Other 0.1 – – – 0.1 Amortisation – (4.7) – – (4.7) Effect of movements in foreign exchange rates 22.6 1.7 – – 24.3 Carrying amount at end of period 2,991.6 230.4 1,645.3 65.8 4,933.1

Liquor and Total Goodwill Brand names gaming licences Other intangibles Consolidated 2008 $m $m $m $m $m

Carrying amount at start of period 3,156.2 252.3 1,529.2 65.8 5,003.5 Additions arising from acquisition of businesses 34.9 – 52.8 – 87.7 Other acquisitions – – 14.5 – 14.5 Reclassiﬁcation 0.7 – (1.9) – (1.2) Effect of movements in foreign exchange rates (250.4) (18.9) – – (269.3) Carrying amount at end of period 2,941.4 233.4 1,594.6 65.8 4,835.2

100 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-196 Liquor and Total Goodwill gaming licences intangibles Woolworths Limited 2009 $m $m $m

Carrying amount at start of period 302.0 162.8 464.8 Additions arising from acquisition of businesses 8.9 12.8 21.7 Disposals (0.6) – (0.6) Reclassiﬁcations – – – Carrying amount at end of period 310.3 175.6 485.9

Liquor and Total Goodwill gaming licences intangibles Woolworths Limited 2008 $m $m $m

Carrying amount at start of period 289.5 156.3 445.8 Additions arising from acquisition of businesses 12.5 2.5 15.0 Other acquisitions – 5.8 5.8 Reclassiﬁcations – (1.8) (1.8) Carrying amount at end of period 302.0 162.8 464.8

Goodwill and intangible assets with indefinite lives are tested for impairment annually and whenever there is an indication that the asset may be impaired. An impairment loss is recognised whenever the carrying amount exceeds the recoverable amount. The recoverable amount is assessed at the cash-generating unit (CGU) level, which is the smallest group of assets generating cash flows independent of other CGUs that benefit from the use of the respective intangible asset. The recoverable amount is determined based on the value in use which is calculated using cash flow projections from the most recent financial budgets approved by management and the Board. The cash flows are discounted to present value using pre-tax discount rates between 12% and 14% (2008: 12% and 14%) depending on the nature of the business and the country of operation. This discount rate is derived from the Group’s post-tax average cost of capital. The key assumptions used in the value in use calculations include sales growth, CODB reductions and discount rates (which have been estimated as described above). The assumptions regarding sales growth and COBD reductions are based on past experience and expectations of changes in the market. Brand names relate primarily to the Progressive Enterprises business in New Zealand. These have been assessed in conjunction with the related goodwill. The components of goodwill are as follows: Consolidated Woolworths Limited as at as at 2009 2008 2009 2008 $m $m $m $m

Supermarkets – Australia 565.2 554.3 310.3 302.0 Supermarkets – New Zealand 1,732.6 1,710.0 – – Consumer Electronics 70.3 70.3 – – Hotels 622.0 605.3 – – Wholesale 1.5 1.5 – – 2,991.6 2,941.4 310.3 302.0

No intangible assets were identiﬁed as impaired at reporting date.

101

F-197 NOTES TO THE FINANCIAL STATEMENTS

Consolidated Woolworths Limited as at as at 2009 2008 2009 2008 $m $m $m $m

12 TRADE AND OTHER PAYABLES Accounts payable 4,055.1 3,878.1 3,247.1 3,084.8 Loans from controlled entities – – 3,509.2 3,675.7 Accruals 975.0 859.6 669.5 594.8 Unearned income 79.9 67.2 42.3 29.7 Trade and other payables 5,110.0 4,804.9 7,468.1 7,385.0

13 OTHER FINANCIAL LIABILITIES Current At fair value Fair value derivatives Interest rate swaps 63.5 – 63.5 – Cross-currency swaps – 55.9 – 55.9 Forward exchange contracts 35.8 6.0 35.8 6.0 99.3 61.9 99.3 61.9 Non current At fair value Fair value derivatives Cross-currency swaps 78.4 274.7 78.4 274.7 78.4 274.7 78.4 274.7

102 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-198 Consolidated Woolworths Limited as at as at 2009 2008 2009 2008 $m $m $m $m

14 BORROWINGS Current Unsecured Short term securities(1) 141.4 299.9 141.4 299.9 Short term money market loans(2) 20.3 – – – Bank loans(3) 25.9 250.3 – – Finance leases(4) 1.0 – 1.0 – 188.6 550.2 142.4 299.9 Non-current Unsecured Long term securities(5) 1,867.9 1,629.0 1,866.4 1,627.5 Bank Loans(6) 518.8 – 518.8 – Woolworths Notes(7) 596.8 595.0 596.8 595.0 Finance leases(4) 2.8 – 2.8 – 2,986.3 2,224.0 2,984.8 2,222.5 Total 3,174.9 2,774.2 3,127.2 2,522.4

Notes (1) (5) (6) Short term Commercial paper Comprises of: The term component of a three-year Issuances outstanding at year end – $350.0 million Medium Term multi-currency syndicated loan (adjusted for unamortised discount). Notes issued in 2006, to mature in facility was drawn in three tranches: March 2011. On $200.0 million of – US$263.6 million (A$327.0 million) (2) the $350 million interest is payable – JPY 1,994.5 million (A$25.8 million) NZ$25.4 million (A$20.3 million) semi-annually at a ﬁxed bond rate, – A$178.5 million money market borrowings, on an on the remaining $150.0 million, at-call basis were outstanding at Woolworths has entered into interest is payable quarterly at the period end for a controlled entity cross-currency swaps in respect of Bank Bill Swap Rate plus a margin. (2008: nil). these borrowings which eliminates – US$500.0 million (A$620.2 million) all foreign currency exposures. (3) from a private placement of senior This includes a $12.5 million An amount of INR390.0 million notes in the United States in 2005, adjustment of unamortised Indian rupees (A$10.0 million) was maturing: US$100.0 million in borrowing costs. The facility drawn by a controlled entity against April 2015, US$300.0 million in matures in May 2012. a committed Revolving Credit facility April 2017 and US$100.0 million (2008: A$3.9 million). Bank overdrafts in April 2020. (7) of A$15.9 million were outstanding at – US$725.0 million (A$899.3 million) $600.0 million in Woolworths Notes period end for all controlled entities of senior notes issued into the were issued on 5 June 2006, with (2008: nil). US 144a market in the United a perpetual maturity. Offset by States in 2005, maturing: unamortised borrowing costs of (4) US$300.0 million in November $3.2 million (2008: $5.1 million). Finance leases executed in 2009 2011 and US$425.0 million ﬁnancial year (2008: nil). in November 2015 – $1.5 million borrowings by a controlled entity – $2.8 million adjustment of unamortised borrowing costs (2008: $3.3 million) – $0.3 million adjustment of unamortised premium on Medium Term Notes (2008: $0.5 million)

103

F-199 NOTES TO THE FINANCIAL STATEMENTS

Consolidated Woolworths Limited as at as at 2009 2008 2009 2008 $m $m $m $m

15 FINANCING ARRANGEMENTS Unrestricted access was available at the balance date to the following lines of credit: Total facilities Bank overdrafts 32.4 30.6 11.0 11.0 Bank loan facilities 4,069.4 2,511.3 3,537.4 2,145.0 4,101.8 2,541.9 3,548.4 2,156.0 Used at balance date Bank overdrafts 15.9 0.4 – – Bank loan facilities 704.1 250.1 673.8 – 720.0 250.5 673.8 – Unused at balance date Bank overdrafts 16.5 30.2 11.0 11.0 Bank loan facilities 3,365.3 2,261.2 2,863.6 2,145.0 3,381.8 2,291.4 2,874.6 2,156.0

104 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-200 Consolidated Woolworths Limited as at as at 2009 2008 2009 2008 $m $m $m $m

16 PROVISIONS Current Employee beneﬁts (Note 23) 623.0 564.3 494.2 457.1 Self-insured risks(1) 99.9 89.7 84.4 82.3 Other(2) 14.3 23.2 10.3 10.5 737.2 677.2 588.9 549.9 Non-current Employee beneﬁts (Note 23) 79.2 79.8 59.1 60.1 Self-insured risks(1) 267.7 285.2 262.7 263.8 Other(2) 15.4 15.0 4.8 4.9 362.3 380.0 326.6 328.8 Total provisions 1,099.5 1,057.2 915.5 878.7

Movements in self-insured risk provisions were as follows: Balance at start of period 374.9 368.8 346.1 337.9 Additional provisions recognised 139.9 110.8 114.8 97.5 Reductions arising from payments/other sacriﬁces of future economic beneﬁts (131.4) (99.0) (108.8) (84.0) Transfers (15.8) (5.2) (5.0) (5.3) Effect of movements in foreign exchange rates – (0.5) – – Balance at end of period 367.6 374.9 347.1 346.1 Current 99.9 89.7 84.4 82.3 Non-current 267.7 285.2 262.7 263.8

Movements in other provisions were as follows: Balance at start of period 38.2 47.1 15.5 18.8 Additional provisions recognised/(released) 6.4 3.5 0.2 (5.4) Reductions arising from payments (16.3) (12.7) (0.1) (0.5) Transfers 1.2 2.5 (0.5) 2.5 Effect of movements in foreign exchange rates 0.2 (2.2) – – Balance at end of period 29.7 38.2 15.1 15.4 Current 14.3 23.2 10.3 10.5 Non-current 15.4 15.0 4.8 4.9

Notes (1) (2) The provision for self-insured risks Current and non-current other represents the estimated liability for provisions consist predominantly workers’ compensation and public of provisions for onerous lease liability claims in all Woolworths’ contracts including those arising self-insured jurisdictions based on on acquisitions. actuarial valuations.

105

F-201 NOTES TO THE FINANCIAL STATEMENTS

Consolidated Woolworths Limited as at as at 2009 2008 2009 2008 $m $m $m $m

17 ISSUED CAPITAL Issued and paid-up share capital 1,223,633,693 fully paid ordinary shares (2008: 1,210,517,308) Fully paid ordinary shares carry one vote per share and the right to dividends. Reconciliation of fully paid share capital Balance at beginning of period 3,627.1 3,422.7 3,627.1 3,422.7 Issue of shares as a result of options exercised under Executive Share Option Plan 66.7 63.3 66.7 63.3 Issue of shares as consideration for acquired entity 6.4 – 6.4 – Issue of shares as a result of Dividend Reinvestment Plan 161.9 143.9 161.9 143.9 Adjustment to paid-up capital to reﬂect ﬁnal proceeds for shares issued under Employee Share Plan (3.5) (2.8) (3.5) (2.8) Balance at end of period 3,858.6 3,627.1 3,858.6 3,627.1

No. (m) No. (m) No. (m) No. (m)

Reconciliation of fully paid share capital Balance at beginning of period 1,210.5 1,199.4 1,210.5 1,199.4 Issue of shares as a result of options exercised under Executive Share Option Plan 5.4 5.1 5.4 5.1 Issue of shares as a result of Dividend Reinvestment Plan 6.2 4.8 6.2 4.8 Incremental proceeds from sale of forfeited shares under Employee Share Plan 1.2 1.2 1.2 1.2 Issue of shares as consideration for acquired entity 0.3 – 0.3 – Balance at end of period 1,223.6 1,210.5 1,223.6 1,210.5

$m $m $m $m

Shares held in trust Reconciliation of shares held in trust Balance at beginning of period (60.0) (71.6) (60.0) (71.6) Issue of shares under Employee Share Plan 8.8 11.6 8.8 11.6 Balance at end of period (51.2) (60.0) (51.2) (60.0)

No. (m) No. (m) No. (m) No. (m)

Reconciliation of shares held in trust Balance at beginning of period 6.6 7.9 6.6 7.9 Issue of shares under Employee Share Plan (1.2) (1.3) (1.2) (1.3) Balance at end of period 5.4 6.6 5.4 6.6

106 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-202 Share capital Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings. In the event of a winding up of the Company, ordinary shareholders rank after all other shareholders and creditors and are fully entitled to any proceeds of liquidation. Changes to the then Corporations Law abolished the authorised and par value concept in relation to share capital issued from 1 July 1998. Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a par value.

Share options In accordance with the provisions of the Executive Share Option Plan, executives had options over ordinary shares as follows: Number of options over shares as at 28 June 2009 29 June 2008 Expiry date

Option grant 1999 – 205,000 1 July 2009 2000 – 20,000 1 July 2010 2001 192,500 251,000 1 July 2011 2003 – 5,208,850 31 December 2008 2004 5,926,937 6,181,250 31 December 2009 2005 5,496,725 5,849,700 31 December 2010 2006 7,315,150 7,618,400 31 December 2011 2007 8,580,300 8,903,500 31 December 2012 2008 5,541,625 – 31 December 2013 33,053,237 34,237,700 Performance rights 2007 1,515,000 1,525,000 1,525,000 – Exp 1 July 2009 40,000 40,000 40,000 – Exp 1 July 2010 2008 1,064,916 – 31 December 2013 Retention rights 2008 80,000 – 1 September 2010 2009 15,000 2 February 2012 35,768,153 35,802,700

Executive share options carry no rights to dividends and no voting rights. Further details of the Executive Share Option Plan are contained in Note 23 to the Financial Statements.

107

F-203 NOTES TO THE FINANCIAL STATEMENTS

Consolidated Woolworths Limited as at as at 2009 2008 2009 2008 $m $m $m $m

18 RESERVES Hedging reserve 44.5 122.1 44.5 122.1 Foreign currency translation reserve (305.6) (300.6) – – Remuneration reserve 157.5 94.0 157.5 94.0 Asset revaluation reserve 16.4 16.4 – – Available-for-sale revaluation reserve (86.3) (65.8) (18.2) (7.2) (173.5) (133.9) 183.8 208.9

Hedging reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred. The cumulative deferred gain or loss on the hedge is recognised in profit and loss when the hedged transaction impacts the profit or loss, consistent with applicable accounting policy.

Foreign currency translation reserve The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the Financial Statements of foreign operations where their functional currency is different to the presentational currency of the reporting entity, as well as from the translation of liabilities that are designated as a hedge of the Company’s net investment in a foreign subsidiary.

Remuneration reserve The employee remuneration reserve comprises the fair value of share-based payment plans recognised as an expense in the income statement.

Asset revaluation reserve The asset revaluation reserve arose on acquisition of the previously equity accounted investment in MGW and relates to the change in fair value of the consolidated entity’s interest in non-current assets from the date of acquisition of the initial investment to the date control was achieved.

Available-for-sale revaluation reserve The available-for-sale revaluation reserve arises on the revaluation of available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value with any changes recorded through an available-for-sale revaluation reserve in equity with the exception of impairment losses which are recognised directly in profit and loss. Determining whether available-for-sale investments are impaired requires an assessment as to whether declines are significant or prolonged. Management has taken into account a number of qualitative and quantitative factors in making this assessment. An assessment that the decline in value represented an impairment would result in a transfer from the available-for-sale reserve to the income statement.

108 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-204 Consolidated Woolworths Limited as at as at 2009 2008 2009 2008 $m $m $m $m

Movements Hedging reserve Balance at start of period 122.1 8.8 122.1 8.8 Loss on cash flow hedges taken to equity 112.9 5.1 112.9 5.1 Transfer to profit and loss – cash flow hedges (223.5) 156.7 (223.5) 156.7 Deferred tax arising on hedges 33.0 (48.5) 33.0 (48.5) Balance at end of period 44.5 122.1 44.5 122.1

Foreign currency translation reserve (FCTR) Balance at start of period (300.6) (97.2) – – Net exchange differences on translation of foreign controlled entities (12.5) (298.4) – – Deferred tax arising on FCTR 7.6 35.4 – – Income tax related to FCTR (0.1) 59.6 – – Balance at end of period (305.6) (300.6) – –

Remuneration reserve Balance at start of period 94.0 45.5 94.0 45.5 Compensation on share-based payments 63.5 48.5 63.5 48.5 Balance at end of period 157.5 94.0 157.5 94.0

Asset revaluation reserve Balance at start of period 16.4 16.4 – – Balance at end of period 16.4 16.4 – –

Available-for-sale revaluation reserve Balance at start of period (65.8) (11.8) (7.2) – Revaluation loss during the period (20.5) (54.0) (11.0) (7.2) Balance at end of period (86.3) (65.8) (18.2) (7.2)

19 RETAINED EARNINGS Retained earnings attributable to the members of Woolworths Limited Balance at start of the period 2,559.7 1,962.5 1,303.3 1,089.4 Profit attributable to members of Woolworths Limited 1,835.7 1,626.8 1,448.3 1,243.5 Actuarial losses on defined benefit plans (67.3) (39.7) (66.8) (39.7) Tax effect of actuarial losses 20.3 11.9 20.0 11.9 Employee Share Plan dividends and forfeitures 4.5 4.6 4.5 4.6 Dividends paid or provided (Note 6) (1,174.3) (1,006.4) (1,174.3) (1,006.4) Balance at end of period 3,178.6 2,559.7 1,535.0 1,303.3

109

F-205 NOTES TO THE FINANCIAL STATEMENTS

Consolidated as at 2009 2008

20 EARNINGS PER SHARE Basic earnings per share (cents per share) 150.71 134.89 Diluted earnings per share (cents per share) 149.69 133.55

Basic earnings per share The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: $m $m

Earnings (a) 1,835.7 1,626.8

No. (m) No. (m)

Weighted average number of ordinary shares(1) (b) 1,218.0 1,206.0

Diluted earnings per share The earnings and weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted earnings per share are as follows: $m $m

Earnings (a) 1,835.7 1,626.8

No. (m) No. (m)

Weighted average number of shares(1) and potential ordinary shares (c) 1,226.3 1,218.1 (a) Earnings used in the calculations of basic and diluted earnings per share reconciles to net proﬁt in the income statement as follows: $m $m

Net proﬁt attributable to the members of Woolworths Limited 1,835.7 1,626.8 Earnings used in the calculations of basic and diluted earnings per share 1,835.7 1,626.8

(b) Options are considered to be potential ordinary shares and are therefore excluded from the weighted average number of ordinary shares used in the calculation of basic earnings per share. Where dilutive, potential ordinary shares are included in the calculation of diluted earnings per share.

110 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-206 (c) Weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted earnings per share reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows: Consolidated as at 2009 2008 No. (m) No. (m)

Weighted average number of ordinary shares used in the calculation of basic earnings per share 1,218.0 1,206.0 Shares deemed to be issued for no consideration in respect of outstanding employee options 8.3 12.1 1,226.3 1,218.1

Since 28 June 2009, 6,710,189 shares (2008: 3,831,525) have been issued as a result of the maturity of retention rights under the LTIP in 2007, and the exercise of options granted under the LTIP in July 2004, July 2005 and July 2006. No options (2008: nil) have been issued. On 1 July 2008, 1,077,444 performance rights were issued (25 July 2007: 1,590,000). A further 98,000 performance rights were offered under the Retention Plan with an effective date of 1 September 2008 or 2 February 2009. Note (1) Weighted average number of shares has been adjusted to remove the potential ordinary shares under the Employee Share Plan held by the custodian Company, which is consolidated under AIFRS.

21 CONTINGENT LIABILITIES The details and estimated maximum amounts of contingent liabilities which may become payable are shown below. No provision has been made in the Financial Statements in respect of these contingencies; however there is a provision of $367.6 million for self-insured risks (2008: $374.9 million), which includes liabilities relating to workers’ compensation claims, that has been recognised in the balance sheet at balance date. Consolidated Woolworths Limited as at as at 2009 2008 2009 2008 $m $m $m $m

Guarantees Bank guarantees(1) 54.0 51.6 20.1 18.0 Workers’ compensation self-insurance guarantees(2) 448.5 425.9 448.5 425.9 Other Outstanding letters of credit issued to suppliers 36.0 11.2 10.7 6.0 Guarantees arising from the deed of cross guarantee with other entities in the wholly owned group – – 559.0 774.0 538.5 488.7 1,038.3 1,223.9

Notes (1) (2) This item mainly comprises State WorkCover authorities guarantees relating to conditions require guarantees against workers’ set out in development applications compensation self-insurance and for the sale of properties in the liabilities. The guarantee is based on normal course of business. independent actuarial advice of the outstanding liability. Guarantees held at each balance date do not equal the liability at these dates due to delays in issuing the guarantees.

111

F-207 NOTES TO THE FINANCIAL STATEMENTS

Consolidated Woolworths Limited as at as at 2009 2008 2009 2008 $m $m $m $m

22 COMMITMENTS FOR EXPENDITURE Capital expenditure commitments Estimated capital expenditure under firm contracts, not provided for in these Financial Statements, payable: Not later than one year 483.2 421.9 307.8 258.5 Later than one year, not later than two years 1.5 – – – Later than two, not later than five years – – – – 484.7 421.9 307.8 258.5 Operating lease commitments Future minimum rentals under non-cancellable operating leases not provided for in these Financial Statements, payable: Not later than one year 1,322.4 1,168.2 929.2 814.7 Later than one year, not later than five years 4,968.0 4,124.8 3,390.9 2,944.9 Later than five years 8,520.7 7,876.0 6,246.2 5,495.5 14,811.1 13,169.0 10,566.3 9,255.1 Total commitments for expenditure 15,295.8 13,590.9 10,874.1 9,513.6

The commitments set out above do not include contingent turnover rentals, which are charged on many of the retail premises leased by the Company and its subsidiaries. These rentals are calculated as a percentage of the turnover of the store occupying the premises, with the percentage and turnover threshold at which the additional rentals commence varying with each lease agreement. The consolidated entity and the Company lease retail premises and warehousing facilities for periods of up to 40 years. The operating lease commitments include leases for the Norwest office and distribution centres. Generally the lease agreements are for initial terms of between 10 and 15 years and most include multiple renewal options for additional five-year terms. Under most leases, the consolidated entity and the Company are responsible for property taxes, insurance, maintenance and expenses related to the leased properties. However many of the more recent lease agreements have been negotiated on a gross or semi gross basis, which eliminates or significantly reduces the lessee’s exposure to operational charges associated with the properties.

Consolidated Woolworths Limited 2009 2008 2009 2008 52 weeks 53 weeks 52 weeks 53 weeks $m $m $m $m

23 EMPLOYEE BENEFITS The aggregate employee benefit liability recognised and included in the Financial Statements is as follows: Provision for employee benefits Current (Note 16) 623.0 564.3 494.2 457.1 Non-current (Note 16) 79.2 79.8 59.1 60.1 Accrued liability for defined benefit obligations (included in other non-current liabilities) 92.0 53.0 92.0 53.0 Accrued salaries and wages (included in trade and other payables) 292.5 268.2 235.4 217.6 1,086.7 965.3 880.7 787.8

112 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-208 (A) DEFINED BENEFIT SUPERANNUATION PLANS The following disclosures set out the accounting for the Plan as recognised in the Financial Statements of the consolidated entity and the Company in accordance with AASB 119 Employee Benefits. Liability for defined benefit obligation As at 28 June 2009 29 June 2008 24 June 2007 25 June 2006 $m $m $m $m

Defined benefit obligation(1) (1,536) (1,609) (1,618) (1,282) Fair value of assets 1,444 1,556 1,586 1,244 Liability for defined benefit obligations (92) (53) (32) (38) Experience adjustments – liabilities (310) (195) 119 102 Experience adjustments – assets 377 235 (110) (71)

Note (1) Includes contribution tax liability.

The consolidated entity and Company make contributions to a defined benefit plan, Woolworths Group Superannuation Plan (WGSP) that provides superannuation benefits for employees upon retirement. The Company sponsors the WGSP which consists of members with defined contribution (accumulation) benefits as well as defined benefits members. The Plan also pays allocated pensions to a small number of pensioners. The members and assets of the WGSP are held in the AMP Superannuation Savings Trust. All disclosures in this note are for the consolidated entity and the Company. Movements in the net liability for defined benefit obligations recognised in the balance sheet As at 2009 2008 $m $m

Opening net liability for defined obligations (53) (32) Contributions by employer 148 123 Expense recognised in the income statement (120) (104) Actuarial losses recognised directly in equity (Note 19) (67) (40) Closing net liability for defined benefit obligations (92) (53)

Actuarial losses recognised in the statement of recognised income and expense during the year were $67.3 million (2008: $39.7 million), with cumulative actuarial losses of $140 million (2008: $73 million). Changes in the present value of the defined benefit obligation are as follows: Opening defined benefit obligation 1,609 1,618 Current service cost 129 114 Interest cost 107 102 Actuarial losses (310) (195) Employee contributions 92 105 Past service cost – – Benefits paid (91) (135) Closing defined benefit obligation 1,536 1,609

113

F-209 NOTES TO THE FINANCIAL STATEMENTS

23 EMPLOYEE BENEFITS CONTINUED Changes in the fair value of fund assets are as follows: As at 2009 2008 $m $m

Opening fair value of fund assets 1,556 1,586 Expected return(1) 116 112 Actuarial (losses)/gains(1) (377) (235) Contributions by employer 148 123 Employee contributions 92 105 Beneﬁts paid (91) (135) Closing fair value of fund assets 1,444 1,556

Note (1) The actual return on plan assets was a loss of $261 million (2008: loss of $123 million).

The fair value of assets includes no amounts relating to any of the Company’s own ﬁnancial instruments nor any property occupied by, or other assets used by, the Company. The major categories of fund assets as a percentage of total fund assets are as follows: As at 2009 2008 % %

Overseas equities 27 29 Australian equities 30 29 Fixed interest securities 16 23 Property 6 10 Alternatives 17 6 Cash 4 3

Expense recognised in the income statement As at 2009 2008 $m $m

Current service costs 129 114 Interest cost 107 102 Past service cost – – Expected return on fund assets (116) (112) 120 104

The expense recognised in the employee beneﬁt expense is disclosed in Note 2(d).

114 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-210 The deﬁned beneﬁt obligations have been determined by the Plan actuary, Mr John Burnett, FIAA, Watson Wyatt, using the projected unit cost method. The following are the principal actuarial assumptions used. As at 2009 2008 % %

Discount rate (gross of tax) 5.50 6.45 Discount rate (net of tax) 4.70 5.50 Expected return on fund assets 7.50 7.50 Future salary increases 3.50 4.50

The expected returns on assets assumption is determined by weighting the expected long-term return for each asset class by the target allocation of assets to each class. The returns used for each asset class are net of investment tax and investment fees. Contributions for permanent salaried employees of the Company and its controlled entities are made to certain Company sponsored superannuation funds including the WGSP. These superannuation funds provide lump sum accumulation benefits to members on retirement or death. The Company and certain of its controlled entities are legally obliged to contribute to the Company sponsored WGSP at rates as set out in the Trust Deed and Rules and the Participation Deed between the Company and AMP Superannuation Limited. Members contribute to the WGSP at rates dependent upon their membership category. The expected Company and employee contributions to the WGSP for the 2010 financial year are $128 million and $53 million respectively. The Company is also obliged to contribute at fixed rates to defined contribution retirement plans for certain employees under industrial agreements, fund choice legislation and the Superannuation Guarantee Legislation. The Company and its controlled entities contribute to various industry based superannuation funds and to the WGSP for non-salaried employees. The Company also pays superannuation contributions in New Zealand in accordance with KiwiSaver legislation.

(B) SERVICE AGREEMENTS Chief Executive Officer The CEO’s Service Agreement has effect from 1 October 2006 and is a rolling contract. The Service Agreement provides for 12 months’ notice of termination on the part of the Company and six months’ notice on the part of the CEO. In addition, the Company may invoke a restraint period of up to 12 months following separation, preventing the CEO from engaging in any business activity with major competitors of Woolworths. The CEO will not be entitled to any termination payment other than: − Fixed Remuneration for the duration of the notice period (or payment in lieu of working out the notice period); − pro-rated Short Term Incentive Plan payment; and – any accrued statutory entitlements. Short Term Incentive Plan The Short Term Incentive Plan (STIP) provides for a maximum annual payment of 130% of Fixed Remuneration. The actual payment will be calculated with regard to achievement of key performance indicators agreed annually with the Board. The performance indicators are based on a combination of detailed measurements of corporate and financial performance and the implementation of strategic operational objectives. Long Term Incentive Plan The CEO is a participant in the Woolworths LTIP. At the 2006 Annual General Meeting, shareholder approval was given for up to a maximum of 1,500,000 options to be granted to the CEO comprising annual grants in 2006, 2007 and 2008. − For the 2006 and 2007 grants, the performance hurdles that apply under the Woolworths LTIP will apply to options allocated to the CEO, however 50% of the allocation will vest and become exercisable three years from the effective date subject to meeting the performance hurdles. The remaining 50% of the allocation will vest and become exercisable after five years in accordance with the prescribed conditions. – For the 2008 grant, the performance hurdles that apply under the Woolworths LTIP apply to the allocation made to the CEO. At the 2008 Annual General Meeting shareholder approval was given for up to a maximum of 1,500,000 options or a combination of options and performance rights to an equivalent value to be granted to the CEO comprising over three years commencing with the 2010 financial year. For the 2009 grant, the performance hurdles that apply to the 2008 grant, under the Woolworths LTIP, apply to the allocation to be made to the CEO.

115

F-211 NOTES TO THE FINANCIAL STATEMENTS

23 EMPLOYEE BENEFITS CONTINUED (C) SHARE-BASED PAYMENTS Executive Option Plan (Long Term Incentive Plan) Long term incentives have been in place since 1993 and have been provided through various executive option plans. From 1999 through to 2004 long term incentives were provided through the Executive Option Plan (EOP). At the 2004 Annual General Meeting shareholders approved the introduction of the Woolworths Long Term Incentive Plan (LTIP). Both the EOP and the LTIP are described below. Since 2002, long term incentive awards have been linked to executives entering into Service Agreements that offer the Company protection and provide clarity for executives. Effective from 2003, all Supermarket and BIG W store managers and buyers as well as distribution centre managers became eligible to receive long term incentive awards. In the event of cessation of employment, both the EOP and the LTIP Rules provide the Board with discretion as to the treatment of unvested long term incentive awards. Executive Option Plan The Executive Option Plan (EOP) was approved by shareholders in November 1999 and was last offered with an effective grant date of 1 July 2004. As at 28 June 2009, there were 6,119,437 options issued under this Plan. Awards have been made under the EOP in five tranches with each tranche subject to performance hurdles established by the People Policy Committee and approved by the Board. Hurdles relate to cumulative EPS growth and to relative TSR. The Executive Option Plan has the following features: − the exercise price is set at the weighted average market price of a Woolworths Limited ordinary share on the five trading days prior to the date approved by the Board as the effective date of options for the purpose of determining the exercise period and performance hurdles; − an exercise period that commences after five years, subject to performance hurdles being met and with a maximum exercise period of five and a half years (10 years for options issued prior to 2002); − upon exercise, each option entitles the option holder to one ordinary fully paid Woolworths Limited share; − vesting is subject to two performance hurdles based on cumulative EPS growth and relative TSR measured over the performance period; − the performance measures, EPS growth and relative TSR, each represent 50% of the options granted; − EPS, is the non-dilutive EPS which is measured as the net profit of the consolidated entity after outside equity interests divided by the weighted average number of shares on issue (including ordinary shares and dividend reinvestment allotments, but excluding shares held by Woolworths Custodian) over the performance period; – for offers made from 2002 to 2007, the EPS component vests in four tranches, dependent on attaining average annual growth of either 10% or 11% as follows: Percentage of Performance options in total hurdle to grant that may be achieved Tranche be exercised for vesting Exercise period

116 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-212 − the fifth tranche (50% of options) is linked to relative TSR and measures the growth in the Company’s share price plus dividends notionally reinvested in the Company’s shares comparative to a peer group, measured over five years from the grant date but averaged for three months to eliminate volatility. This reflects the increase in value delivered to shareholders over the performance period; − TSR performance is measured against comparator companies comprised of the S&P/ASX 100, excluding companies in the ASX classified as financial services and resources and any companies in the comparator group that have merged, had a share reconstruction, been delisted or subject to takeover or takeover offer during the measurement periods; − TSR performance measurement for the purpose of calculating the number of options to vest is audited by an independent third party; and – the percentage of the total number of options granted that vest is dependent on Woolworths’ ranking relative to the performance of the above comparator companies. The following table sets out the TSR vesting schedule: Woolworths TSR equals or exceeds the following Percentage of options in total grant percentile of the comparator companies that vest and may be exercised

60th percentile 12.5% 65th percentile 25.0% 70th percentile 37.5% 75th percentile 50.0%

Woolworths Long Term Incentive Plan At the 2004 Annual General Meeting, shareholders approved the introduction of a new long term incentive, the Woolworths Long Term Incentive Plan. The Plan has four Sub-Plans, which are described below, that together can provide options, performance rights, performance shares or cash awards. This Plan allows the Board ﬂexibility to determine which of the Sub-Plans’ awards will be granted to deliver the overall LTIP objectives. From 2005 the Option Sub-Plan has been used to satisfy Woolworths LTIP requirements, however from the offer made in 2008, a combination of options and performance rights have been used. Like the previous Executive Option Plan, stringent performance measures are set annually and relate to EPS and TSR hurdles. These are described in detail following the description of the Plan’s Sub-Plans. In addition, the Performance Rights Sub-Plan has been used as a Retention Plan since 2007 to ensure that key employees are retained to protect and deliver on the Company’s strategic direction. It has been delivered to senior executives who had either none or relatively small option grants scheduled to vest over the ensuing two years. This Plan does not have performance measures attached to it and vests subject to the executive remaining employed by the Company for a two-year period. It is intended that this Plan be used only in special circumstances. 1 Option Sub-Plan The Option Sub-Plan delivers a right to the holder of an option to acquire a share at a future date, subject to performance hurdles being met and the payment of an exercise price. As at 28 June 2009, there were 26,933,800 options outstanding under this Sub-Plan. Year 2005 2006 2007 2008 Total

Options 5,496,725 7,315,150 8,580,300 5,541,625 26,933,800

117

F-213 NOTES TO THE FINANCIAL STATEMENTS

23 EMPLOYEE BENEFITS CONTINUED 2 Performance Rights Sub-Plan The Performance Rights Sub-Plan delivers a contractual right to a future grant of a Company share to the right holder at a future date, subject to the performance hurdles being met. Each performance right has the following features: − it can be exercised for no monetary payment; and – upon exercise, each performance right entitles the right holder to the issue of one ordinary fully paid Woolworths Limited share. As at 28 June 2009, there were 2,714,916 performance rights outstanding under this Sub-Plan. LTIP 2008 Total

Performance rights 1,064,916 1,064,916

Retention Plan 2007 2008 Total

Performance rights 1,555,000 95,000 1,650,000

3 Performance Share Sub-Plan The Performance Share Sub-Plan provides for a contractual right to an immediate grant of Company shares to participants, entitlement to which is subject to performance hurdles being achieved. Each performance share has the following features: − it can be exercised for no monetary payment; and – participants receive dividends or other distributions and entitlements as an ordinary Company shareholder. No offers of performance shares have been made. 4 Cash Award Sub-Plan The Cash Award Sub-Plan provides for participants to receive cash-based long-term incentives subject to speciﬁed performance hurdles being met. No offers of cash awards have been made. Woolworths Long Term Incentive Plan Renewal The Woolworths Long Term Incentive Plan was approved by shareholders at the 2004 Annual General Meeting. Shareholder approval of the Plan was also obtained under an exception to Australian Securities Exchange (ASX) Listing Rule 7.1 which restricts (in certain circumstances) the issue of new securities in any one year to 15% of issued shares without shareholder approval. The applicable exception is contained in ASX Listing Rule 7.2, exception 9. The effect of shareholder approval under that exception is that any issues of securities under the Plan are treated as having been made with the approval of shareholders for the purpose of Listing Rule 7.1. Approval under the exception lasts for three years. Accordingly, Woolworths sought and obtained approval at the 2007 Annual General Meeting to refresh that approval for a further three years. Performance hurdles The Board is mindful of the need for Woolworths to stay competitive and retain high calibre employees in the retail sector and has determined (in accordance with the Plan rules and as approved at the 2007 AGM) to amend the performance hurdles for grants to be made under the Plan beginning with the 2009 ﬁnancial year (referred to below as “the 2008 grant” or “the grant”). The 2008 grant was made using a combination of the Option Sub-Plan and the Performance Rights Sub-Plan with vesting subject to the achievement of EPS growth and relative TSR performance hurdles, each representing 50% of the grant, as described below.

118 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-214 EPS performance hurdle EPS is the non-dilutive EPS, which is measured as the net profit of the consolidated entity after minority interests divided by the weighted average number of shares on issue (including ordinary shares and dividend reinvestment allotments, but excluding shares held by Woolworths’ custodian) over the performance period. For the 2008 grant, the EPS component partially vests upon Woolworths attaining an average annual growth rate of equal to or greater than 10%. An EPS growth rate of equal to 10% over the performance period will result in 12.5% of the grant vesting, while an EPS growth rate of equal to or greater than 15% over the performance period will result in 50% of the grant vesting. For the 2005, 2006 and 2007 grants, the EPS component vests in four tranches as described in the Executive Option Plan in the Remuneration Report. TSR performance hurdle The TSR performance hurdle for the 2008 grant requires a minimum TSR at the 51st percentile measured against comparator companies comprised of the S&P/ASX 100 Index, excluding any non-comparable companies (such as financial services and resources sector companies, Trusts and any companies in the comparator group that are under takeover or takeover speculation, have merged, had a share reconstruction or been delisted during the measurement periods). Achieving maximum TSR vesting requires TSR at the 75th percentile. For the 2007 and previous grants, the TSR hurdle is described in the Executive Option Plan in the Remuneration Report. Vesting, exercise period and expiry period The 2008 performance hurdles are subject to the vesting scale measured over a four-year period from the date of grant but will be subject to early testing on the third anniversary of the date of grant and vesting may occur subject to the performance hurdles outlined above being met. If the minimum vesting hurdles are met on the third anniversary of the date of grant then those options and performance rights meeting the performance hurdle shall vest. If the minimum performance hurdles are not met on the third anniversary, those options and performance rights shall remain unvested. Where this occurs, the 2008 performance hurdles will be tested on the fourth anniversary of the date of the grant and vesting may occur on this date subject to the performance hurdles outlined above being met. Any option and performance rights that do not vest on the fourth anniversary of the grant will be forfeited. Options and performance rights granted during financial year 2008 which have vested but remain unexercised expire after the earlier of 5.5 years from the date of grant, or up to 12 months after termination of employment. While the Board has retained the discretion to review the performance hurdles applicable to a grant of options, it is intended that the performance hurdles for grants in 2009 and 2010 will also be TSR and EPS based. These performance hurdles, together with the relevant exercise periods and expiry dates, will be disclosed each year in the Annual Report. Hedging Policy The Woolworths hedging policy was introduced in July 2008. As part of the introduction of the policy, all members of the Senior Management Group have signed a declaration that they have not entered into any arrangements that would contravene the policy. Under the hedging policy, executives may not enter into any hedging transaction that will protect the value of unvested securities issued as part of the Woolworths Long Term Incentive Plan. Compliance with the hedging policy has been introduced as a condition of participation in the Long Term Incentive Plan with effect from 2008. To enter into any such arrangement would breach the conditions of the grant and would result in forfeiture of the relevant securities. Executive compliance with this policy will be monitored through an annual declaration by executives stating that they have not entered into any hedging transaction in relation to their unvested Woolworths securities.

119

F-215 NOTES TO THE FINANCIAL STATEMENTS

23 EMPLOYEE BENEFITS CONTINUED The following table summarises movements for the ﬁnancial year ended 28 June 2009 for outstanding options and performance rights: Exercise No. of options/ Options/ Options Options/ No. of options/ No. of options price rights at rights granted exercised rights lapsed rights at exercisable at Offer date Expiry date $ 29 June 2008 during year during year during year 28 June 2009 28 June 2009

Options 01/07/1999 01/07/2009 5.11 205,000 – (205,000) – – – 01/07/2000 01/07/2010 6.17 20,000 – (20,000) – – – 01/07/2001 01/07/2011 10.89 251,000 – (58,500) – 192,500 192,500 01/07/2003 31/12/2008 12.60 5,208,850 – (5,124,441) (84,409) – – 01/07/2004 31/12/2009 11.54 6,181,250 – (30,313) (224,000) 5,926,937 – 01/07/2005 31/12/2010 16.46 5,849,700 – – (352,975) 5,496,725 – 01/07/2006 31/12/2011 19.47 7,618,400 – – (303,250) 7,315,150 – 01/07/2007 31/12/2012 25.91 8,903,500 – – (323,200) 8,580,300 – 01/07/2008 31/12/2013 24.90 – 5,598,000 – (56,375) 5,541,625 – Rights 25/07/2007 01/07/2009 Nil 1,525,000 – – (10,000) 1,515,000 – 25/07/2007 01/07/2010 Nil 40,000 – – – 40,000 – 01/07/2008 31/12/2013 Nil Nil 1,077,444 – (12,528) 1,064,916 – 01/09/2008 01/09/2010 Nil Nil 83,000 – (3,000) 80,000 – 02/02/2009 02/02/2012 Nil Nil 15,000 – – 15,000 35,802,700 6,773,444 (5,438,254) (1,369,737) 35,768,153 192,500

The weighted average share price during the ﬁnancial year ended 28 June 2009 was $26.42. The following table summarises movements for the ﬁnancial year ended 29 June 2008 for outstanding options and performance rights: Exercise No. of Options/ Options Options/ No. of options/ No. of options price options at rights granted exercised rights lapsed rights at exercisable at Offer date Expiry date $ 24 June 2007 during year during year during year 29 June 2008 28 June 2008

01/07/1999 01/07/2009 5.11 222,500 – (17,500) – 205,000 205,000 01/07/2000 01/07/2010 6.17 45,000 – (25,000) – 20,000 20,000 01/07/2001 01/07/2011 10.89 1,161,000 – (910,000) – 251,000 251,000 01/07/2002 31/12/2007 12.94 4,340,000 – (4,084,740) (255,260) – – 01/07/2003 31/12/2008 12.60 5,557,100 – (19,250) (329,000) 5,208,850 – 01/07/2004 31/12/2009 11.54 6,708,250 – – (527,000) 6,181,250 – 01/07/2005 31/12/2010 16.46 6,348,100 – – (498,400) 5,849,700 – 01/07/2006 31/12/2011 19.47 8,184,200 – – (565,800) 7,618,400 – 01/07/2007 31/12/2012 25.91 – 9,049,400 – (145,900) 8,903,500 – 25/07/2007 01/07/2009 – – 1,550,000 – (25,000) 1,525,000 – 25/07/2007 01/07/2010 – – 40,000 – – 40,000 32,566,150 10,693,400 (5,056,490) (2,346,360) 35,802,700 476,000

The weighted average share price during the ﬁnancial year ended 29 June 2008 was $29.60.

120 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-216 The fair value of the services received in return for share options and performance rights granted are measured by reference to the fair value of the share options granted. The fair value of the services is recognised as an expense on a straight-line basis over the vesting period and is determined by multiplying the fair value per option by the number of options expected to vest. During the ﬁnancial year ended 28 June 2009, an expense of $63.5 million (2008: $48.5 million) was recognised in the income statement in relation to options and performance rights issued under the Executive Option Plan. The estimate of the fair value per option is measured based on the Monte Carlo Simulation option pricing model performed by an independent valuer. The fair value is measured at the grant date, which for the purposes of measurement is the date of unconditional offer by the Company and acceptance by the employee. The contractual exercise period of the options set out above is used as an input into the model. Other inputs are: Weighted average fair value of options Weighted average Share Risk free fair value Effective price at Exercise Expected Dividend interest of options Grant date date grant date price volatility (1) yield rate granted (2) EPS TSR Retention

3-Oct-03 1-Jul-03 $11.18 $12.60 18% 4.00% 5.15% $1.16 $1.32 $0.99 – 22-Apr-05 1-Jul-04 $15.32 $11.54 17% 3.20% 5.50% $3.88 $4.25 $3.50 – 2-Dec-05 1-Jul-05 $17.05 $19.47 16% 3.40% 5.40% $2.22 $2.50 $1.93 – 24-Nov-06 1-Jul-06 $21.64 $19.47 16% 3.20% 6.10% $3.50 $0.00 $0.00 – 30-Jan-07 1-Jul-06 $23.64 $25.91 16% 3.20% 6.10% $4.80 $5.73 $3.86 – 3-Dec-07 1-Jul-07 $33.39 – 18% 3.10% 6.30% $8.90 $9.48 $8.32 – 3-Aug-07 25-Jul-07 $27.45 $24.90 – 3.20% – $24.34 – – $24.34 9-Dec-08 1-Jul-08 $26.63 – 24% 3.50% 4.00% $4.96 $5.15 $4.76 – 9-Dec-08 1-Jul-08 $26.63 – 26% 3.50% 3.50% $21.25 $23.66 $18.83 – 9-Dec-08 1-Sep-08 $26.63 – 27% – 3.30% $24.89 – – $24.89 9-Dec-08 2-Feb-09 $26.63 – 27% – 3.30% $24.89 – – $24.89

Notes (1) (2) The expected volatility is based In accordance with AIFRS transition on the historical implied volatility rules, an expense has only been calculated based on the weighted recognised for the fair value average remaining life of the share of options granted on or after options, adjusted for any expected 7 November 2002. changes to future volatility due to publicly available information.

Grant date represents the offer acceptance date. The probability of achieving market performance conditions (TSR) is incorporated into the determination of the fair value per option. No adjustment is made to the expense for options that fail to meet the market condition. The number of options and rights expected to vest based on achievement of non market conditions (EPS and service condition) are adjusted over the vesting period in determining the expense to be recognised in the income statement. Employee Share Plan (Share Plan) The Share Plan was established to enable all employees (other than executive ofﬁcers) the opportunity to participate in the acquisition of shares in the Company at market price with an interest free loan from the Company to ﬁnance the acquisition. Loans are limited in recourse to the proceeds of sale of shares acquired. Dividends and other distributions on the shares are applied to repay the loan. The loan may be repaid at any time after three years and in any event must be settled when the employee ceases employment or at the end of 10 years from grant or when a takeover offer is accepted for the shares, whichever is the earliest. Upon settlement, if the employee elects not to repay the loan, the shares will be sold and the funds received after payment of costs and expenses will be applied to repay the loan. All shares acquired under the Share Plan are held by a wholly owned subsidiary of the Company (Woolworths Custodian Pty Limited) as Trustee of the Share Plan. At any time after three years from the date of acquisition a participant may request the Trustee to transfer the shares, but only if the loan made to acquire those shares is repaid in full. Shares may be transferred earlier at the discretion of the Directors on the employee’s death or retirement but only if the loan made to acquire the shares is repaid in full. The Trustee may exercise the voting rights attached to the shares in the manner directed by the Directors until they are transferred to the participant. As at 28 June 2009, there were 11,606 (2008: 14,444) participating employees who held a total of 5,407,738 (2008: 6,640,644) shares. The total amount receivable by the Company in relation to these shares is $33,102,817 as at 28 June 2009 (2008: $42,431,823). During the 52 week period ended 28 June 2009, no shares were issued. 121

F-217 NOTES TO THE FINANCIAL STATEMENTS

23 EMPLOYEE BENEFITS CONTINUED Due to the non-recourse nature of the loan, the loan is considered to be an option for accounting purposes as the employee is exposed to equity appreciation of the Company shares over the loan period with the option whether to repay the loan. The vesting period is three years from the offer date, conditional on the employee remaining employed over this period. Any shares forfeited are sold on-market and the proceeds of this sale are contributed to the Woolworths’ Group Superannuation Plan. The number and weighted average exercise prices (being the loan value) of these options is as follows. Weighted average Weighted average exercise price No. of options exercise price No. of options 2009 2009 2008 2008

Balance at the beginning of the period $6.39 6,640,644 $7.01 7,940,057 Forfeited during the period $6.10 (16,420) $7.21 (13,760) Exercised during the period $3.90 (1,216,486) $6.62 (1,285,653) Balance at the end of the period $6.12 5,407,738 $6.39 6,640,644 Exercisable at the end of the period $6.12 5,407,738 $6.39 6,640,644

The weighted average share price during the period was $26.42 (2008: $29.60). Employee Share Issue Plan (ESIP) The ESIP allowed for the issue of shares to eligible employees for no monetary consideration. The ESIP complies with the various conditions specified by Government taxation legislation which enabled permanent employees to obtain a benefit of up to the $1,000 per employee per annum by way of a tax free concession on discounts under employee incentive schemes. During the 52 week period ended 28 June 2009 no shares (2008: nil) were issued. Executive Management Share Plan (EMSP) The EMSP allows any executive management, including any Executive Director, to forgo some of their future pre-tax remuneration to acquire shares in the Company on-market at prevailing market prices on the Australian Securities Exchange (ASX). During the 52 week period ended 28 June 2009, 4,274 shares (2008: 6,187) were purchased under the EMSP. No additional expense is recognised in relation to these shares as they are acquired out of salary sacrificed remuneration. Employee Share Purchase Plan (SPP) The SPP was launched in June 2008 and provides permanent full-time and part-time employees who are Australian tax residents and are aged 18 years or over, with the opportunity to purchase shares from pre-tax income via salary sacrifice. Woolworths Limited pays the associated brokerage costs. During the 52 week period ended 28 June 2009, 582,464 shares were purchased on behalf of 16,923 participating employees.

122 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-218 24 KEY MANAGEMENT PERSONNEL Directors and Executives The following is a list of the Non-executive Directors and key management personnel of Woolworths Limited and their positions during the year: Position title

Non-executive Directors do not consider themselves part of management. All key management personnel were employed by Woolworths Limited during the year apart from Mr Peter Smith who was employed by a subsidiary.

123

F-219 NOTES TO THE FINANCIAL STATEMENTS

24 KEY MANAGEMENT PERSONNEL CONTINUED Total remuneration for Non-executive Directors and other key management personnel for the Group and the Company during the ﬁnancial year are set out below.

Remuneration by category Consolidated Woolworths Limited 2009 2008 2009 2008 52 weeks 53 weeks 52 weeks 53 weeks $ $ $ $

Short term employee benefits 15,764,655 15,250,586 15,055,137 14,180,924 Post-employment benefits 1,403,122 1,018,918 1,289,122 925,918 Other long-term benefits 341,098 280,272 316,953 259,554 Share-based payments 6,414,970 4,499,154 6,148,459 4,346,313 23,923,845 21,048,930 22,809,671 19,712,709

Equity instrument disclosures relating to key management personnel Details of equity instruments provided as compensation to key management personnel and shares issued on exercise, together with terms and conditions of the options, are disclosed in tables in section 3.2 of the Remuneration Report on pages 42 to 46. Shareholdings The table below summarises the movements during the year in holdings of shares in Woolworths Limited held by the Non-executive Directors and key management personnel. Shareholding at Shares issued Shares received on Shares issued Shares purchased Shareholding at 29 June 2008 under DRP (1) exercise of options under NEDSP (2) or (sold) (3) 28 June 2009 No. No. No. No. No. No.

Notes (1) (2) (3) Comprises new shares issued as a Comprises shares issued under the Figures in brackets indicate that these result of participation in the Dividend Non-executive Directors’ Share Plan shares have been sold or otherwise Reinvestment Plan on the same basis (NEDSP). disposed of. as transactions by other shareholders and on-market transactions.

124 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-220 Shareholding at Shares issued Shares received on Shares issued Shares purchased Shareholding at 24 June 2007 under DRP (1) exercise of options under NEDSP (2) or (sold) (3) 29 June 2008 No. No. No. No. No. No.

J Strong 70,479 – – – – 70,479 M Luscombe 408,290 – 152,000 – (227,000) 333,290 J F Astbury 12,071 121 – 103 – 12,295 R Deane 40,000 – – – – 40,000 D Grady 35,360 554 – – – 35,914 L L’Huillier 60,000 – – – – 60,000 I Macfarlane 2,000 – – – 1,000 3,000 A Watkins 5,065 214 – – 5,000 10,279 T Pockett – – 190,000 – (136,000) 54,000 N Onikul 201,360 554 – – (43,145) 158,769 P Smith 819 22 – – – 841 J Coates – – 104,500 – (92,250) 12,250 G Foran – – – – – – R Umbers – – – – – –

Option holdings The table below summarises the movements during the year in holdings of option and performance rights interests for the key management personnel in the Company for the period. An option or performance right entitles the holder to one ordinary fully paid Woolworths Limited share. There is no amount unpaid on options exercised. Options vested at 28 June 2009 Options and performance Options and rights granted as performance Opening remuneration Options rights holding Vested during balance exercised at 28 June 2009 Total Exercisable Unexercisable the year 2009 No. No. No. No. No. No. No. No.

M Luscombe 1,330,000 500,000 (100,000) 1,730,000 37,500 – 37,500 112,500 T Pockett 880,000 250,000 (150,000) 980,000 37,500 – 37,500 150,000 N Onikul 380,000 27,500 (60,000) 347,500 25,000 – 25,000 70,000 P Smith 325,000 21,389 (100,000) 246,389 20,000 – 20,000 95,000 J Coates 345,000 27,500 (100,000) 272,500 20,000 – 20,000 95,000 G Foran 365,000 27,500 (100,000) 292,500 25,000 – 25,000 100,000 R Umbers 155,000 21,389 – 176,389 – – – – Total 3,780,000 875,278 (610,000) 4,045,278 165,000 – 165,000 622,500

No other key management personnel hold options or performance rights. All share options issued to the key management personnel during the ﬁnancial year were made in accordance with the provisions of the Executive Option Plan. The key management personnel in the table above were granted options with an effective date of 1 July 2008. The exercise value of the options granted was $24.90 per option while the performance rights issued to certain KMP had a nil exercise price. They also had an effective date of 1 July 2008. Further details of the terms and conditions of the Executive Option Plan and the options and performance rights granted during the ﬁnancial year are contained in Note 23 to the Financial Statements.

125

F-221 NOTES TO THE FINANCIAL STATEMENTS

24 KEY MANAGEMENT PERSONNEL CONTINUED Options Options and performance performance Balance Vested Options Opening rights granted as Options Options rights holding at vested as at but not Vested and vested balance remuneration exercised lapsed 29 June 2008 29 June 2008 exercisable exercisable during year 2008 No. No. No. No. No. No. No. No. No.

M Luscombe 990,000 500,000 (152,000) (8,000) 1,330,000 25,000 – 25,000 137,500 T Pockett 830,000 250,000 (190,000) (10,000) 880,000 37,500 – 37,500 177,500 N Onikul 310,000 70,000 – – 380,000 15,000 – 15,000 15,000 P Smith 275,000 50,000 – – 325,000 25,000 – 25,000 25,000 J Coates 385,000 70,000 (104,500) (5,500) 345,000 25,000 – 25,000 102,000 G Foran 295,000 70,000 – – 365,000 25,000 – 25,000 25,000 R Umbers 45,000 110,000 – – 155,000 – – – –

Loans to directors or key management personnel There were no loans to directors of the Company or key management personnel.

25 RELATED PARTIES Parent entity The ultimate parent entity is Woolworths Limited, a company incorporated in New South Wales. The wholly-owned Group consists of Woolworths Limited and its wholly-owned subsidiaries. Disclosures relating to interests in subsidiaries are set out in Note 29. Transactions within the Group During the ﬁnancial period and previous ﬁnancial periods, Woolworths Limited advanced and repaid loans to and received loans from, and provided treasury, accounting, legal, taxation and administrative services to other entities within the Group. Entities within the Group also exchanged goods and services in sale and purchase transactions. All transactions occurred on the basis of normal commercial terms and conditions. The details of transactions within the Group and with other partly owned subsidiaries is presented below: Consolidated Woolworths Limited 2009 2008 2009 2008 $ $ $ $

Revenue from the sale of goods – – – 25,807,394 Dividend income – – 65,074,200 65,330,079 Interest income – – 230,569,212 245,328,111

The balances of loans to or from subsidiaries are shown in Note 8 and Note 12.

Tax consolidation Under the application of the tax consolidation regime, the Company is assessed on the tax liabilities of the entities in the tax consolidated group. As a consequence of this, the tax exposures relating to wholly owned group members totalling $79.4 million (2008: $27.7 million) are included in the tax liability of the Company. Pursuant to the Group’s Tax Funding Agreement, the Company has charged net tax expense to the Group members totalling $79.4 million (2008: $27.7 million) through intercompany accounts. Directors and key management personnel Disclosures relating to Directors and key management personnel are set out in Note 24 and in the Remuneration Report, set out in section 3 and section 4 (except for sub-section 4.6) of the Directors’ Report.

126 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-222 26 FINANCIAL INSTRUMENTS (a) Significant accounting policies Details of significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset and financial liability are disclosed in Note 1 to the Financial Statements.

(b) Foreign currency risk management The consolidated entity has exposure to movements in foreign currency exchange rates through term borrowings and anticipated purchases of inventory and equipment, which are denominated in foreign currencies. In order to hedge against the majority of this exposure, the consolidated entity enters into forward exchange contracts and cross-currency swap agreements. The term borrowings are fully hedged. Forward exchange contracts and foreign currency options It is the policy of the consolidated entity to enter into forward exchange contracts and foreign currency options to cover foreign currency payments and receipts of up to 100% of the exposure generated. At period end, the details of outstanding forward exchange contracts and foreign currency options, stated in Australian dollar equivalents for the consolidated group and Company are: Average exchange rate Foreign currency Contract value Mark to market Market value 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 Outstanding contracts FC’m FC’m $m $m $m $m $m $m

Hedging imports: Forward contracts Maturing: Within 12 months Buy US dollars 0.73 0.92 251.6 75.1 346.9 81.8 (32.1) (2.5) 314.9 79.3 Buy US dollars against NZ dollars 0.59 – 2.3 – 3.2 – (0.2) – 3.0 – Buy Euro 0.52 – 14.8 – 28.5 – (2.6) – 25.9 – Buy British pounds 0.49 – 0.2 – 0.4 – – – 0.4 – Hedging balance sheet: Forward contracts Maturing: Within 12 months Buy New Zealand dollars – 1.25 – 266.6 – 214.0 – (3.5) – 210.5 Sell New Zealand dollars 1.15 1.15 153.0 197.0 132.5 171.4 10.3 15.8 122.3 155.6

As at reporting date, the net amount of unrealised loss under forward foreign exchange contracts relating to anticipated future transactions is $24.6 million (2008: $9.8 million unrealised gain). A portion of this amount qualifying as effective hedges has been recognised in the Hedge Reserve in the current year, with the remainder being recognised through the Income Statement. Only NZ$153.0 million (2008: NZ$197.0 million) of the net investment in New Zealand is hedged for currency fluctuation. The remainder of the investment in New Zealand is not hedged for currency fluctuation as that element of the investment is not currently expected to be realised through disposal within 12 months. Cross-currency swap agreements To hedge the risk of adverse movements in foreign exchange rates in relation to borrowings denominated in foreign currency by the consolidated entity, it enters into cross-currency swap agreements under which it agrees to exchange specified principal and interest foreign currency amounts at an agreed future date at a specified exchange rate.

127

F-223 NOTES TO THE FINANCIAL STATEMENTS

26 FINANCIAL INSTRUMENTS CONTINUED The following table details the cross-currency swaps outstanding for the consolidated group and Company at reporting date: Average interest rate Average exchange rate Contract value Fair value 2009 2008 2009 2008 2009 2008 2009 2008 Outstanding contracts % % $m $m $m $m

Maturing: Floating Rates United States dollars Within 12 months – – – – – – – – 1 to 2 years – – – – – – – – 2 to 3 years(1)(2)(3) BBSW +145.0bp – 0.751 – 750.9 – (26.6) – 3 to 4 years(1)(2)(3) – BBSW +55.9bp – 0.731 – 410.4 – (93.6) 4 to 5 years – – – – – – – – 5 years+(1)(2)(3) BBSW +66.2bp BBSW +66.2bp 0.760 0.760 1,216.7 1,216.7 30.3 (256.8) 1,967.6 1,627.1 3.7 (350.4) Japanese yen Within 12 Months – – – – – – – – 1 to 2 years – – – – – – – – 2 to 3 years(1)(2)(3) BBSW +306bp – 74.4 – 26.8 – (1.2) – 3 to 4 years – – – – – – 4 to 5 years – – – – – – – – 5 years+ – – – – – – – – 26.8 – (1.2) – 1,994.4 1,627.1 2.5 (350.4)

Notes (1) (2) (3) These swap instruments include These fair value calculations include an interest rate swap component interest accruals as recorded in trade which has been disclosed in the and other payables of $11.0 million interest rate swap contracts section (2008: $19.8 million) payable. below and have therefore been designated as cash ﬂow hedges due to the currency exposure being hedged in combination with the interest rate exposure via domestic interest rate swaps.

(c) Interest rate risk management The consolidated entity is exposed to interest rate risk as it borrows funds at both fixed and floating interest rates. The risk is managed by maintaining an appropriate mix between fixed and floating rate borrowings and by the use of interest rate swap contracts. Hedging activities are evaluated regularly with regard to Board-approved policy, which requires a cash flow at risk approach in assessing residual interest rate exposure. The consolidated entity’s exposures to interest rates on financial assets and financial liabilities are detailed in the Maturity Profile of Financial Instruments section of this note. Interest rate swap contracts Under interest rate swap contracts, the consolidated entity agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the consolidated entity to mitigate the risk of adverse movements in interest rates on the debt held. Interest in relation to the swaps is settled on a monthly or quarterly basis. The floating rate on interest rate swaps is the Australian BBSW and the consolidated entity settles the difference between the fixed and floating interest rate on a net basis. The fair value of interest rate swaps is based on market values of equivalent instruments at the reporting date and is disclosed below. The average interest rate is based on the outstanding balances at the end of the financial year. The following table details the notional principal amounts and remaining terms of interest rate swap contracts outstanding for the consolidated group and Company as at reporting date:

128 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-224 Average contracted fixed interest rate Notional principal amount Fair value Outstanding floating 2009 2008 2009 2008 2009 2008 for fixed contracts % % $m $m $m $m

Interest rate swaps Less than 1 year – 6.02% – 270.0 – 5.0 1 to 2 years 5.86% – 250.0 – (7.8) – 2 to 3 years 5.50% 5.86% 1,456.2 250.0 (29.6) 12.5 3 to 4 years – 5.80% – 410.4 – 25.2 4 to 5 years – – – – – – 5 years+ 5.85% 5.85% 1,216.7 1,216.7 (9.6) 121.6 2,922.9 2,147.1 (47.0) 164.3

The consolidated entity classifies interest rate swaps as cash flow hedges and states them at fair value. All swaps have been designated and are effective as hedges. Maturity profile of financial instruments The following tables detail the consolidated entity‘s and parent entity’s exposure to interest rate risk at 28 June 2009 and 29 June 2008: Fixed interest maturing in: Floating Non- Effective interest 1 year 1 to 2 2 to 3 3 to 4 4 to 5 Over interest interest Consolidated rate or less years years years years 5 years bearing Total rate 2009 $m $m $m $m $m $m $m $m $m %

Financial assets Cash and deposits 454.9 – – – – – – 307.7 762.6 2.53 Receivables – – – – – – – 466.5 466.5 – Foreign currency forward contracts – – – – – – – 11.0 11.0 – Interest rate swaps – – – – – – – 24.0 24.0 – Currency swaps – – – – – – – 91.9 91.9 – Assets available-for-sale – – – – – – – 130.7 130.7 – Other ﬁnancial assets – – – – – – – 0.7 0.7 – 454.9 – – – – – – 1,032.5 1,487.4 – Financial liabilities Accounts payable – – – – – – – 4,055.1 4,055.1 – Accruals – – – – – – – 975.0 975.0 – Unearned income – – – – – – – 79.9 79.9 – Provisions – – – – – – – 1,099.5 1,099.5 – Short term securities 141.4 – – – – – – – 141.4 4.07 Other bank loans: Fixed – – – – – – – – – – Variable 565.0 – – – – – – – 565.0 4.39 Other loans – – – – 3.8 – – 1.5 5.3 6.50 Variable rate domestic notes 150.0 – – – – – – – 150.0 5.70 Fixed rate domestic notes – – 199.7 – – – – – 199.7 6.00 Foreign currency forward contracts – – – – – – – 35.8 35.8 – Interest rate swaps (2,922.9) 250.0 1,456.2 – – 1,216.7 63.5 63.5 – USD notes – – – 371.9 – – 1,144.8 – 1,516.7 5.84 Woolworths Notes 596.8 – – – – – – – 596.8 6.43 Currency swaps 1,627.1 – – (410.4) – – (1,216.7) 78.4 78.4 – 157.4 – 449.7 1,417.7 3.8 – 1,144.8 6,388.7 9,562.1 – Net ﬁnancial assets/(liabilities) 297.5 – (449.7) (1,417.7) (3.8) – (1,144.8) (5,356.2) (8,074.7) –

129

F-225 NOTES TO THE FINANCIAL STATEMENTS

26 FINANCIAL INSTRUMENTS CONTINUED Fixed interest maturing in: Floating Non- Effective interest 1 year 1 to 2 2 to 3 3 to 4 4 to 5 Over interest interest Woolworths Limited rate or less years years years years 5 years bearing Total rate 2009 $m $m $m $m $m $m $m $m $m %

Financial assets Cash and deposits 462.3 – – – – – – 112.1 574.4 2.53 Receivables – – – – – – – 257.0 257.0 – Loans to controlled entities 1,923.7 – 1,932.6 – – – – 2,570.7 6,427.0 5.10 Foreign currency forward contracts – – – – – – – 11.0 11.0 – Interest rate swaps – – – – – – – 24.0 24.0 – Currency swaps – – – – – – – 91.9 91.9 – Unlisted shares at cost – – – – – – – 3,207.0 3,207.0 – Assets available-for-sale – – – – – – – 39.4 39.4 – Other ﬁnancial assets – – – – – – – 0.4 0.4 – 2,386.0 – 1,932.6 – – – – 6,313.5 10,632.1 – Financial liabilities Accounts payable – – – – – – – 3,247.1 3,247.1 – Accruals – – – – – – – 669.5 669.5 – Unearned income – – – – – – – 42.3 42.3 – Loans from controlled entities – – – – – – – 3,509.2 3,509.2 – Provisions – – – – – – – 915.5 915.5 – Short term securities 141.4 – – – – – – – 141.4 4.07 Other bank loans: Fixed – – – – – – – – – – Variable 518.8 – – – – – – – 518.8 4.39 Other loans – – – – 3.8 – – – 3.8 6.50 Variable rate domestic notes 150.0 – – – – – – – 150.0 5.70 Fixed rate domestic notes – – 199.7 – – – – – 199.7 6.00 Foreign currency forward contracts – – – – – – – 35.8 35.8 – Interest rate swaps (2,922.9) – 250.0 1,456.2 – – 1,216.7 63.5 63.5 – USD notes – – – 371.9 – – 1,144.8 – 1,516.7 5.84 Woolworths Notes 596.8 – – – – – – – 596.8 6.43 Currency swaps 1,627.1 – – (410.4) – – (1,216.7) 78.4 78.4 – 111.2 – 449.7 1,417.7 3.8 – 1,144.8 8,561.3 11,688.5 – Net ﬁnancial assets/(liabilities) 2,274.8 – 1,482.9 (1,417.7) (3.8) – (1,144.8) (2,247.8) (1,056.4) –

130 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-226 Fixed interest maturing in: Floating Non- Effective interest 1 year 1 to 2 2 to 3 3 to 4 4 to 5 Over interest interest Consolidated rate or less years years years years 5 years bearing Total rate 2008 $m $m $m $m $m $m $m $m $m %

Financial assets Cash and deposits 469.1 – – – – – – 285.4 754.5 6.93 Receivables – – – – – – – 455.2 455.2 – Foreign currency forward contracts – – – – – – – 15.8 15.8 – Interest rate swaps – – – – – – – 159.4 159.4 – Assets available-for-sale – – – – – – – 151.2 151.2 – Other ﬁnancial assets – – – – – – – 0.7 0.7 – 469.1 – – – – – – 1,067.7 1,536.8 – Financial liabilities Accounts payable – – – – – – – 3,878.1 3,878.1 – Accruals – – – – – – – 859.6 859.6 – Unearned income – – – – – – – 67.2 67.2 – Provisions – – – – – – – 1,057.2 1,057.2 – Other bank loans: 249.6 – – – – – – – 249.6 8.75 Other loans – – – – – – – 1.5 1.5 – Variable rate domestic notes 150.0 – – – – – – – 150.0 5.70 Fixed rate domestic notes – 299.9 – 199.2 – – – – 499.1 5.85 Foreign currency forward contracts – – – – – – – 6.0 6.0 – Interest rate swaps (2,147.1) 270.0 – 250.0 410.4 – 1,216.7 – – – USD notes – – – – 313.5 – 965.5 – 1,279.0 5.84 Woolworths Notes 595.0 – – – – – – – 595.0 7.12 Currency swaps 1,627.1 – – – (410.4) – (1,216.7) 330.6 330.6 – 474.6 569.9 – 449.2 313.5 – 965.5 6,200.2 8,972.9 – Net ﬁnancial assets/(liabilities) (5.5) (569.9) – (449.2) (313.5) – (965.5) (5,132.5) (7,436.1) –

131

F-227 NOTES TO THE FINANCIAL STATEMENTS

Financial assets Cash and deposits 416.2 – – – – – – 134.2 550.4 6.94 Receivables – – – – – – – 322.6 322.6 – Loans to controlled entities 1,867.7 – 1,932.6 – – – – 2,381.1 6,181.4 7.13 Foreign currency forward contracts – – – – – – – 15.8 15.8 – Interest rate swaps – – – – – – – 159.4 159.4 – Unlisted shares at cost – – – – – – – 3,094.0 3,094.0 – Assets available-for-sale – – – – – – – 50.2 50.2 – Other ﬁnancial assets – – – – – – – 0.4 0.4 – 2,283.9 – 1,932.6 – – – – 6,157.7 10,374.2 – Financial liabilities Accounts payable – – – – – – – 3,084.8 3,084.8 – Accruals – – – – – – – 594.8 594.8 – Unearned income – – – – – – – 29.7 29.7 – Loans from controlled entities 214.1 – – – – – – 3,461.6 3,675.7 8.04 Provisions – – – – – – – 905.8 905.8 – Other bank loans – – – – – – – (0.7) (0.7) – Other loans – – – – – – – – – – Variable rate domestic notes 150.0 – – – – – – – 150.0 5.70 Fixed rate domestic notes – 299.9 – 199.2 – – – – 499.1 5.85 Foreign currency forward contracts – – – – – – – 6.0 6.0 – Interest rate swaps (2,147.1) 270.0 – 250.0 410.4 – 1,216.7 – – – USD notes – – – – 313.5 – 965.5 – 1,279.0 5.84 Woolworths Notes 595.0 – – – – – – – 595.0 7.12 Currency swaps 1,627.1 – – – (410.4) – (1,216.7) 330.7 330.7 – 439.1 569.9 – 449.2 313.5 – 965.5 8,412.7 11,149.9 – Net ﬁnancial assets/(liabilities) 1,844.8 (569.9) 1,932.6 (449.2) (313.5) – (965.5) (2,255.0) (775.7) –

132 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-228 Fair value of financial assets and financial liabilities The carrying value of cash and cash equivalents, financial assets and non-interest-bearing monetary financial liabilities of the consolidated entity approximates their fair value and as such they have been omitted from these disclosures. The fair value of other monetary financial assets and liabilities is based upon market prices where a market exists, or the expected future cash flows, discounted where appropriate by current interest rates for assets and liabilities with similar risk profiles. For interest rate and cross-currency swaps, the fair value has been determined by the net present value of cash flows due under the contracts, using a discount rate appropriate to the type and maturity of the contract. For forward foreign currency contracts, the fair value is taken to be the unrealised gain or loss at period end calculated by reference to the current forward rates for contracts with similar maturity profiles. As at As at 28 June 2009 29 June 2008 Carrying Net fair Carrying Net fair amount value amount value $m $m $m $m

Financial assets/(liabilities): Bank loans(1)(5) (566.9) (554.4) (199.6) (199.6) Short term securities(1)(2) (141.4) (141.4) (304.4) (304.4) Other loans(1)(2)(3)(4) (2,487.9) (2,481.9) (2,258.3) (2,250.4) Total (3,196.2) (3,177.7) (2,762.3) (2,754.4)

Financial assets/(liabilities): Forward foreign currency contracts (24.8) (24.8) 9.8 9.8 Interest rate swaps (47.0) (47.0) 164.3 164.3 Cross-currency swaps 2.5 2.5 (350.4) (350.4) Total (69.3) (69.3) (176.3) (176.3)

Notes (1) (3) (4) For FY09, the carrying amount Interest accruals on outstanding debt Effect of revaluation of USD Unamortised discount on issue for ﬁnancial assets/liabilities is (total of $15.8 million). borrowings (total of $122.2 million). of Medium Term Notes (total of based on the principal outstanding $1.4 million). (2) adjusted for: Unamortised borrowing costs (5) (total of $18.5 million). Includes short term money market deposits (total of $13.0 million).

27 FINANCIAL RISK MANAGEMENT The Group’s Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal communication which identifies exposures. These exposures include credit risk, liquidity risk and market risk (including interest rate risk, foreign currency risk, and equity price risk). The Group seeks to minimise the effects of these risks, by using derivative financial instruments to hedge these risk exposures. The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which provide written principles on liquidity risk, foreign exchange risk, interest rate risk, credit risk and the use of derivative and non-derivative financial instruments. The Treasury function reports on its compliance with the policy on a monthly basis to the Board of Directors and such compliance is reviewed regularly by its internal auditors. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. Unless otherwise stated, all calculations and methodologies used are unchanged from prior period reporting.

133

F-229 NOTES TO THE FINANCIAL STATEMENTS

27 FINANCIAL RISK MANAGEMENT CONTINUED Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has adopted a policy of dealing only with creditworthy counterparties (as measured by their Standard and Poor’s long term credit rating), as a means of mitigating the risk of financial loss from defaults and does not require collateral in respect of financial assets. In line with Board-approved policy, counterparties are assigned a maximum exposure value, based on their credit rating, which limits concentration of credit risk. The consolidated entity’s exposure to counterparties and their credit ratings are continuously monitored and compared against the Board-approved counterparty credit limits. The consolidated entity measures credit risk using methodologies customarily used by financial institutions, which will yield different results to the balances reported in the balance sheet. There were no unauthorised breaches of credit limits during the reporting period. The maximum exposure to credit risk of the consolidated entity at balance sheet date, by class of financial asset is represented by the carrying amount of the financial assets presented in the balance sheet and notes thereto unless otherwise depicted in the table below: Consolidated and Woolworths Limited 2009 Exposure by financial instrument $m Counterparty Money market Forward exchange Currency Interest rate Cross-currency S&P credit rating deposits contracts options swaps swaps Total exposure

AA– or above 13.0 43.6 – 132.2 105.8 294.6 A – 6.8 – 79.4 93.6 179.8

Consolidated and Woolworths Limited 2008 Exposure by ﬁnancial instrument $m Counterparty Money market Forward exchange Currency Interest rate Cross-currency S&P credit rating deposits contracts options swaps swaps Total exposure

AA– or above 51.0 44.3 – 412.0 162.7 670.0 A – – – – – –

All of the above exposures are on an unsecured basis. The recognised financial assets of the consolidated entity include amounts receivable arising from unrealised gains on derivative financial instruments. For derivatives, which are deliverable, credit risk may also arise from the potential failure of the counterparties to meet their obligations under the respective contracts at maturity. As at 28 June 2009, no material credit risk exposure existed in relation to potential counterparty failure on such financial instruments (2008: nil). Other than amounts provided for impairment of receivables in Note 8, no financial assets were impaired or past due.

Liquidity risk Liquidity risk is the risk that the consolidated entity will not be able to meet its financial obligations as they fall due. This risk arises through the possibility that sales income may be reduced due to adverse factors, unusually large amounts may fall due for payment, or existing maturing debt is unable to be refinanced. The Company has established an appropriate liquidity risk management framework for the consolidated entity’s short, medium and long-term funding liquidity management requirements, which has been approved by the Board of Directors. The consolidated entity maintains a liquidity reserve in the form of undrawn bilateral standby facilities of at least $1 billion with unexpired tenures of at least 12 months at all times. Additionally, to minimise refinancing and repricing risk, there are limitations placed upon amounts which may expire in a 12-month period and amounts which may be from a single source. Included in Note 15 is a summary of undrawn facilities that the consolidated entity has at its disposal to draw upon if required.

134 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-230 The following table details the consolidated entity’s and parent entity’s undiscounted ﬁnancial liabilities and their contractual maturities: Consolidated Woolworths Limited as at 28 June 2009 ($m) as at 28 June 2009 ($m) Maturity analysis Less than 1 1 to 2 2 to 5 Over 5 Less than 1 1 to 2 2 to 5 Over 5 of ﬁnancial liabilities year years years years Total year years years years Total

Non-derivative liabilities Bank loans (64.7) (18.4) (562.3) (1.5) (646.9) (18.5) (18.4) (562.3) – (599.2) Short term securities (142.5) – – – (142.5) (142.5) – – – (142.5) Finance leases (1.0) (1.0) (1.8) – (3.8) (1.0) (1.0) (1.8) – (3.8) Domestic notes (17.4) (366.0) – – (383.4) (17.4) (366.0) – – (383.4) USD notes (81.0) (81.0) (604.5) (1,364.7) (2,131.2) (81.0) (81.0) (604.5) (1,364.7) (2,131.2) Woolworths Notes (26.4) (26.4) (79.1) (1,068.1) (1,200.0) (26.4) (26.4) (79.1) (1,068.1) (1,200.0) Other ﬁnancial liabilities (4,055.1) – – – (4,055.1) (3,247.1) – – – (3,247.1) Loans from controlled entities – – – – – (3,509.2) – – – (3,509.2) Accruals (975.0) – – – (975.0) (669.4) – – – (669.4) Total non-derivative liabilities (5,363.1) (492.8) (1,247.7) (2,434.3) (9,537.9) (7,712.6) (492.8) (1,247.7) (2,432.8) (11,885.9)

Derivative liabilities Foreign exchange contracts payable (543.0) – – – (543.0) (543.0) – – – (543.0) Foreign exchange contracts receivable 514.4 – – – 514.4 514.4 – – – 514.4 Net foreign exchange contracts (28.6) – – – (28.6) (28.6) – – – (28.6)

Interest rate swaps payable ﬁxed (166.2) (163.4) (256.5) (170.4) (756.5) (166.2) (163.4) (256.5) (170.4) (756.5) Interest rate swaps receivable ﬂoating 93.1 91.5 141.5 90.9 417.0 93.1 91.5 141.5 90.9 417.0 Net receivable interest rate swaps(1) (73.1) (71.9) (115.0) (79.5) (339.5) (73.1) (71.9) (115.0) (79.5) (339.5)

Cross-currency swaps payable ﬂoating (82.7) (82.2) (944.6) (1,326.4) (2,435.9) (82.7) (82.2) (944.6) (1,326.4) (2,435.9) Cross-currency swaps receivable ﬁxed 89.9 89.9 979.7 1,364.7 2,524.2 89.9 89.9 979.7 1,364.7 2,524.2 Net payable cross-currency swaps 7.2 7.7 35.1 38.3 88.3 7.2 7.7 35.1 38.3 88.3 Total derivative liabilities (94.5) (64.2) (79.9) (41.2) (279.8) (94.5) (64.2) (79.9) (41.2) (279.8)

Total ﬁnancial liabilities (5,457.6) (557.0) (1,327.6) (2,475.5) (9,817.7) (7,807.1) (557.0) (1,327.6) (2,474.0) (12,165.7)

Notes (1) Including interest accruals Interest rate swaps are net settled. and excluding unamortised borrowing costs.

135

F-231 NOTES TO THE FINANCIAL STATEMENTS

27 FINANCIAL RISK MANAGEMENT CONTINUED Consolidated Woolworths Limited as at 29 June 2008 ($m) as at 29 June 2008 ($m) Maturity analysis Less than 1 1 to 2 2 to 5 Over 5 Less than 1 1 to 2 2 to 5 Over 5 of ﬁnancial liabilities year years years years Total year years years years Total

Non-derivative liabilities Bank loans (251.1) – – (1.5) (252.6) – – – – – Domestic notes (332.7) (24.1) (371.0) – (727.8) (332.7) (24.1) (371.0) – (727.8) USD notes (68.3) (68.3) (494.0) (1,144.3) (1,774.9) (68.3) (68.3) (494.0) (1,144.3) (1,774.9) Woolworths Notes (53.3) (53.3) (159.9) (933.5) (1,200.0) (53.3) (53.3) (159.9) (933.5) (1,200.0) Other financial liabilities (3,878.1) – – – (3,878.1) (3,084.8) – – – (3,084.8) Loans from controlled entities – – – – – (3,675.7) – – – (3,675.7) Accruals (859.6) – – – (859.6) (594.8) – – – (594.8) Total non-derivative liabilities (5,443.1) (145.7) (1,024.9) (2,079.3) (8,693.0) (7,809.6) (145.7) (1,024.9) (2,077.8) (11,058.0) Derivative liabilities Foreign exchange contracts payable (450.6) (0.8) – – (451.4) (450.6) (0.8) – – (451.4) Foreign exchange contracts receivable 459.8 0.7 – – 460.5 459.8 0.7 – – 460.5 Net foreign exchange contracts 9.2 (0.1) – – 9.1 9.2 (0.1) – – 9.1 Interest rate swaps payable fixed (125.7) (109.9) (261.5) (241.8) (738.9) (125.7) (109.9) (261.5) (241.8) (738.9) Interest rate swaps receivable floating 167.3 146.8 349.2 322.2 985.5 167.3 146.8 349.2 322.2 985.5 Net receivable interest rate swaps(1) 41.6 36.9 87.7 80.4 246.6 41.6 36.9 87.7 80.4 246.6 Cross-currency swaps payable floating AUD (137.2) (137.8) (770.7) (1,565.8) (2,611.5) (137.2) (137.8) (770.7) (1,565.8) (2,611.5) Cross-currency swaps receivable fixed USD 68.3 68.3 494.0 1,144.3 1,774.9 68.3 68.3 494.0 1,144.3 1,774.9 Net payable cross-currency swaps (68.9) (69.5) (276.7) (421.5) (836.6) (68.9) (69.5) (276.7) (421.5) (836.6) Total derivative liabilities (18.1) (32.7) (189.0) (341.1) (580.9) (18.1) (32.7) (189.0) (341.1) (580.9) Total financial liabilities (5,461.2) (178.4) (1,213.9) (2,420.4) (9,273.9) (7,827.7) (178.4) (1,213.9) (2,418.9) (11,638.9)

Notes (1) Including interest accruals Interest rate swaps are net settled. and excluding unamortised borrowing costs. For ﬂoating rate instruments, the amount disclosed is determined by reference to the interest rate at the last re-pricing date. Cash ﬂows represented are contractual and calculated on an undiscounted basis, based on current rates at year end. The principal repayment of Woolworths Notes, being a perpetual instrument, is represented in 5+ years. The coupon payments disclosed in 5+ years in relation to Woolworths Notes have been calculated using a perpetuity interest calculation less the coupon payments up to year 5.

136 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-232 Market risk (i) Interest rate risk The consolidated entity manages the majority of its exposure to interest rate risk by borrowing at fixed rates of interest, or by using approved financial instruments. Consistent with Board-approved policy, the consolidated entity manages risk and reports compliance based upon whether a change in interest rates (measured as an assumed parallel shift in the yield curve of 1%) will cause a reduction in earnings (profit after tax) greater than maximum accepted levels. The following table summaries the potential impact, on unhedged debt, to profit and equity from a 1% parallel increase and decrease in the yield curve: Consolidated 2009 Woolworths Limited 2009 Profit $m(1) Equity $m(2) Profit $m(1) Equity $m(2)

After tax impact of 1% increase in yield curve (1.3) 14.4 26.1 14.4 After tax impact of 1% decrease in yield curve 1.3 (14.3) (26.1) (14.3)

Notes (1) (2) Impact due to unhedged year end Impact due to derivative instruments net debt position. being cash ﬂow hedge accounted.

Consolidated 2008 Woolworths Limited 2008 Proﬁt $m Equity $m Proﬁt $m Equity $m

After tax impact of 1% increase in yield curve (3.0) 6.4 23.6 6.4 After tax impact of 1% decrease in yield curve 3.0 (6.3) (23.6) (6.3)

This analysis is based on our position as at reporting date. It is not considered representative of our position during the year, due to changes in the net funding position of the entity. (ii) Foreign currency risk The consolidated entity has exposure to movements in foreign currency exchange rates through term borrowings and anticipated purchases of inventory and equipment, which are denominated in foreign currencies. In order to hedge against the majority of this exposure, the consolidated entity enters into foreign exchange derivatives and cross-currency swap agreements. The term borrowings and equipment purchases are fully hedged and inventory purchases are partially hedged. Foreign currency exposures arising on the translation of net investments in foreign subsidiaries are predominantly unhedged. Changes in value of these foreign subsidiaries due to movements in foreign exchange rates are recorded in equity. Income of certain foreign subsidiaries is hedged for movements in foreign exchange rates via the use of foreign exchange derivatives. There were no such derivatives outstanding as at reporting date (2008: nil). The following table illustrates the effect on profit and equity as at 28 June 2009 and 29 June 2008 if the currency prices were to move by the changes identified below: After tax impact on profit Impact on equity Sensitivity assumptions(1) Consolidated Woolworths Limited Consolidated Woolworths Limited 2009 2008 Currency % % 2009 $m 2008 $m 2009 $m 2008 $m 2009 $m 2008 $m 2009 $m 2008 $m Pair + – + – + – + – + – + – + – + –

AUD/USD 18.50 11.10 (0.09) 0.14 (3.13) 3.91 (0.09) 0.14 (3.13) 3.91 (27.94) 40.63 0.00 0.00 (27.94) 40.63 0.00 0.00 AUD/EUR 13.47 10.40 (1.78) 2.33 0.39 (0.48) (1.78) 2.33 0.39 (0.48) 0.26 (0.34) 0.00 0.00 0.26 (0.34) 0.00 0.00 AUD/NZD 9.92 8.36 0.00 0.00 (0.11) 0.13 0.00 0.00 0.04 (0.05) (0.25) 0.31 0.00 0.00 0.06 (0.07) 0.00 0.00 NZD/USD 20.00 12.45 0.00 0.00 0.13 (0.17) 0.00 0.00 0.00 0.00 (0.04) 0.06 0.00 0.00 0.00 0.00 0.00 0.00 NZD/EUR 14.68 12.10 0.00 0.00 0.06 (0.07) 0.00 0.00 0.00 0.00 0.18 (0.24) 0.00 0.00 0.00 0.00 0.00 0.00

Note (1) Based on 1yr implied market volatility at balance date. Source: Bloombergs Sensitivity to foreign exchange exposure is calculated on signiﬁcant amounts payable in foreign currency less hedges of both currency payables and forecast foreign currency payables.

137

F-233 NOTES TO THE FINANCIAL STATEMENTS

27 FINANCIAL RISK MANAGEMENT CONTINUED been fully hedged against movements in interest rates, and (iii) Equity price risk the amounts drawn in USD and JPY have been hedged The consolidated entity is exposed to changes in the market against fluctuations in exchange rates. As stated previously price of certain equity investments, being the interests held in these committed working capital facilities replaced existing the Warehouse Group and ALE Group. Subsequent to initial uncommitted facilities. recognition, they are measured at fair value with any change The maturity profile of our debt facilities is such that there is no recorded in a revaluation reserve in equity. No hedging of this immediate need to refinance any long term debt in the current risk is undertaken. financial year with the next maturity being A$350 million in (iv) Capital management March 2011. Woolworths currently sets its capital structure with the objectives of enhancing shareholder value through minimising 28 DEED OF CROSS GUARANTEE its weighted average cost of capital while retaining flexibility Pursuant to ASIC Class Order 98/1418, the wholly owned to pursue growth and capital management opportunities. subsidiaries listed below are relieved from the Corporations Consistent with these objectives, Woolworths has maintained Act 2001 requirements for preparation, audit and lodgement its credit ratings of A– from Standard and Poor’s and A3 from of financial reports. Moody’s Investor Services. It is a condition of the Class Order that the Company and each To the extent consistent with these objectives and target of the subsidiaries enter into a Deed of Cross Guarantee (Deed). ratings, Woolworths will from time to time undertake capital Under the Deed, the Company guarantees the payment of all return strategies that seek to increase EPS and distribute debts of each of the subsidiaries in full, in the event of a winding franking credits to shareholders, mainly through ordinary up. The subsidiaries in turn guarantee the payment of the debts dividends and share buybacks. Since 2001, $7,050 million, of the Company in full in the event that it is wound up. comprising off- and on-market buybacks and dividends, has The subsidiaries that are party to the Deed are: been returned to shareholders (including the final dividend for A.C.N. 001 259 301 Pty Limited the financial year ending 28 June 2009). Advantage Supermarkets Pty Ltd Franking credits available for distribution after 28 June 2009 Advantage Supermarkets WA Pty Ltd are estimated to be $1,123.5 million (following payment of the Andmist Pty. Limited final dividend). Australian Liquor and Grocery Wholesalers Pty Ltd Australian Safeway Stores Pty. Ltd. Our focus on enhancing shareholder value and maintaining Barjok Pty Ltd a capital structure that will preserve our capital strength Calvartan Pty. Limited giving us the flexibility to pursue further growth opportunities Cenijade Pty. Limited remains unchanged. While capital management remains an Charmtex Pty Ltd important issue, given the uncertainty in the debt and equity Dentra Pty. Limited markets and the economy, it is not intended to implement Dick Smith (Wholesale) Pty Ltd any capital management activity at this time. While economic Dick Smith Electronics Franchising Pty Ltd confidence appears to be building, there are still significant Dick Smith Electronics Pty Limited challenges ahead. Nearly all developed countries are in Dick Smith Electronics Staff Superannuation Fund Pty Limited recession and many companies are repairing balance sheets Dick Smith Management Pty Ltd and deleveraging. Until much greater certainty exists in regard Drumstar Pty Ltd to economic recovery, prudence would dictate not returning DSE Holdings Pty Limited capital. Capital management, including a share buyback, will Fabcot Pty Ltd be continually assessed in the context of growth initiatives Gembond Pty. Limited and the capital market environment and the maintenance of GreenGrocer.com.au Pty Ltd our credit ratings. Our balance sheet, debt profile and strength Grocery Wholesalers Pty Ltd of our credit ratings ensure we are very well placed for future Highlands No. 1 Nominees Pty Limited growth both organically and through acquisition. Hydrogen Nominees Pty Limited A small amount of debt (A$300 million) in domestic medium InterTAN Australia Pty Ltd term notes matured in September 2008 and was refinanced Jack Butler & Staff Pty. Ltd. within existing debt facilities. As at 28 June 2009, undrawn Josona Pty Ltd committed bank debt facilities available to Woolworths Limited Kiaora Lands Pty Limited totalled A$3.37 billion. Langtons Pty Limited In May 2009, a new syndicated bank debt facility totalling Leasehold Investments Pty Ltd US$700 million was established with participation mainly Mac’s Liquor Stores Pty Limited by Asian banks. The facility included a combination of fully Nalos Pty Ltd drawn term debt and revolving debt, in USD, AUD and Oxygen Nominees Pty Limited JPY, with a tenure of three years. The term drawings have PEH (NZ IP) Pty Ltd

138 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-234 Philip Leong Stores Pty Limited Kawana Waters Tavern No. 2 Pty Ltd Progressive Enterprises Holdings Limited Vicpoint Pty Ltd QFD Pty. Limited Milanos Hotel (BMG) Pty Ltd Queensland Property Investments Pty Ltd Monash Hotel (BMG) Pty Ltd Shellbelt Pty. Limited Moreland Hotel (BMG) Pty Ltd Universal Wholesalers Pty Limited Nu Hotel (BMG) Pty Ltd Vincentia Nominees Pty Limited Oakleigh Junction Hotel (BMG) Pty Ltd Votraint No. 1622 Pty Limited Palace Hotel Hawthorn (BMG) Pty Ltd Weetah Pty. Limited Powel Hotel Footscray (BMG) Pty Ltd Woolies Liquor Stores Pty. Ltd Preston Hotel (BMG) Pty Ltd Woolstar Pty. Limited Queensbridge Hotel (BMG) Pty Ltd Woolworths Australian Communities Foundation Pty Limited Racecourse Hotel (BMG) Pty Ltd Woolworths Custodian Pty Ltd Shoppingtown Hotel (BMG) Pty Ltd Woolworths Executive Superannuation Scheme Pty Limited Taverner Hotel Group Pty. Ltd. Woolworths Group Superannuation Scheme Pty Limited Amprok Pty. Ltd. Woolworths (International) Pty Limited Auspubs Pty Ltd Woolworths Management Pty Ltd Cooling Zephyr Pty Ltd Woolworths (Project Finance) Pty. Limited The Common Link Pty Ltd Woolworths Properties Pty Limited E. G. Functions Pty. Ltd. Woolworths (Publishing) Pty Ltd Elizabeth Tavern Pty. Ltd. Woolworths (Q’land) Pty Limited FG Joint Venture Pty Ltd Woolworths (R & D) Pty Limited Fountain Jade Pty. Ltd. Woolworths (South Australia) Pty Limited Hadwick Pty Ltd Woolworths Townsville Nominee Pty Ltd Markessa Pty. Ltd. Woolworths Trustee No. 2 Limited Playford Tavern Pty Ltd Woolworths Trust Management Pty Limited Seaford Hotel Pty. Limited Woolworths (Victoria) Pty Limited The Second P Pty Ltd Woolworths (W.A.) Pty Limited Kilrand Hotels (Hallam) Pty. Ltd. A consolidated income statement and consolidated balance Ashwick (Vic.) No.88 Pty. Ltd. sheet for the closed group representing the Company and the Warm Autumn Pty. Ltd. subsidiaries noted on pages 140 to 141, which are party to the Werribee Plaza Tavern Pty. Ltd. Deed as at 29 June 2008 is set out below. The following controlled Waltzing Matilda Hotel (BMG) Pty Ltd entities (see Note 29) are excluded from this consolidation: Wheelers Hill Hotel (BMG) Pty Ltd Australian Independent Retailers Pty Ltd ALH Group Pty Ltd Bergam Pty Limited Albion Charles Hotel (BMG) Pty Ltd DSE (NZ) Limited ALH Group Property Holdings Pty Limited David Reid Electronics (1992) Limited Australian Leisure and Hospitality Group Limited Dick Smith Electronics Limited ALH Group (No. 1) Pty Ltd Woolstar Investments Limited Balaclava Hotel (BMG) Pty Ltd Woolworths (HK) Sales Limited Chelsea Heights Hotel (BMG) Pty Ltd Woolworths (HK) Procurement Limited Cherry Hill Tavern (BMG) Pty Ltd Woolworths Wholesale (India) Private Limited Courthouse Brunswick Hotel (BMG) Pty Ltd Woolworths New Zealand Group Limited Courthouse Hotel Footscray (BMG) Pty Ltd BWS (2008) Limited Croxton Park Hotel (BMG) Pty Ltd Progressive Enterprises Limited Daisey’s Club Hotel (BMG) Pty Ltd Caledonian Leasing Limited Excelsior Hotel (BMG) Pty Ltd Countdown Foodmarkets Limited First and Last Hotel (BMG) Pty Ltd Foodtown Supermarkets Limited Glengala Hotel (BMG) Pty Ltd Fresh Zone Limited Lyndhurst Club Hotel (BMG) Pty Ltd General Distributors Limited Manningham Hotel (BMG) Pty Ltd S R Brands Limited MGW Hotels Pty Ltd Supervalue/ Freshchoice Limited Aceridge Pty Limited The Supplychain Limited Chatswood Hills Tavern Pty. Ltd. Wholesale Services Limited Dapara Pty Ltd Wholesale Distributors Limited Stadform Developments Pty. Limited Woolworths (New Zealand) Limited Fenbridge Pty. Ltd. Statewide Independent Wholesalers Limited Kawana Waters Tavern No. 3 Pty Ltd Woolworths Insurance Pte Limited Kawana Waters Tavern No. 1 Pty Ltd 139

F-235 NOTES TO THE FINANCIAL STATEMENTS

28 DEED OF CROSS GUARANTEE CONTINUED

INCOME STATEMENT 2009 2008 52 weeks 53 weeks $m $m

Revenue from the sale of goods 40,860.9 38,371.5 Other operating revenue 84.4 99.2 Total revenue from operations 40,945.3 38,470.7 Cost of sales (30,473.1) (28,803.1) Gross profit 10,472.2 9,667.6 Other revenue 131.6 132.2 Other income – 40.0 Branch expenses (6,268.3) (5,870.3) Administration expenses (2,007.9) (1,918.7) Earnings before interest and tax 2,327.6 2,050.8 Financial expense (249.5) (435.8) Financial income 389.5 398.2 Net financing cost 140.0 (37.6) Net profit before income tax expense 2,467.6 2,013.2 Income tax expense (699.9) (506.5) Profit after income tax expense 1,767.7 1,506.7 Retained earnings Balance at start of period 2,179.7 1,702.6 Profit attributable to members 1,767.7 1,506.7 Dividends paid or provided (Note 6) (1,174.3) (1,006.4) Actuarial gain/(loss) recognised direct to equity (66.8) (39.7) Other 24.4 16.5 Balance at end of period 2,730.7 2,179.7

140 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-236 BALANCE SHEET As at 2009 2008 $m $m

Current assets Cash 571.0 566.3 Trade and other receivables 1,340.1 1,152.7 Inventories 2,827.7 2,603.9 Assets held for sale 33.4 33.7 Other financial assets 102.9 65.1 Total current assets 4,875.1 4,421.7 Non-current assets Trade and other receivables 3,269.1 3,387.1 Other financial assets 1,923.9 1,964.3 Property, plant and equipment 4,705.8 4,004.2 Intangibles 740.2 712.6 Deferred tax assets 420.1 370.8 Total non-current assets 11,059.1 10,439.0 Total assets 15,934.2 14,860.7 Current liabilities Trade and other payables 4,499.4 4,468.9 Borrowings 162.7 546.0 Other financial liabilities 99.3 61.9 Current tax liabilities 241.1 271.5 Provisions 651.0 584.2 Total current liabilities 5,653.5 5,932.5 Non-current liabilities Borrowings 2,984.8 2,222.5 Other financial liabilities 78.4 274.7 Provisions 338.9 366.6 Other 157.4 109.7 Total non-current liabilities 3,559.5 2,973.5 Total liabilities 9,213.0 8,906.0 Net assets 6,721.2 5,954.7 Equity Issued capital 3,858.6 3,627.1 Shares held in trust (51.2) (60.0) Reserves 183.1 207.9 Retained earnings 2,730.7 2,179.7 Equity attributable to the members 6,721.2 5,954.7 Minority interest – – Total equity 6,721.2 5,954.7

141

F-237 NOTES TO THE FINANCIAL STATEMENTS

29 SUBSIDIARIES Beneﬁcial holding 2009 2008 Name of entity % %

Woolworths Limited A.C.N. 001 259 301 Pty Limited 100 100 Advantage Supermarkets Pty Ltd 100 100 Advantage Supermarkets WA Pty Ltd 100 100 ALH Group Pty Ltd 75 75 Albion Charles Hotel (BMG) Pty Ltd 100 100 ALH Group Property Holdings Pty Limited 100 100 Australian Leisure and Hospitality Group Limited 100 100 ALH Group (No. 1) Pty Ltd 100 100 Balaclava Hotel (BMG) Pty Ltd 100 100 Chelsea Heights Hotel (BMG) Pty Ltd 100 100 Cherry Hill Tavern (BMG) Pty Ltd 100 100 Courthouse Brunswick Hotel (BMG) Pty Ltd 100 100 Courthouse Hotel Footscray (BMG) Pty Ltd 100 100 Croxton Park Hotel (BMG) Pty Ltd 100 100 Daisey’s Club Hotel (BMG) Pty Ltd 100 100 Excelsior Hotel (BMG) Pty Ltd 100 100 First and Last Hotel (BMG) Pty Ltd 100 100 Glengala Hotel (BMG) Pty Ltd 100 100 Lyndhurst Club Hotel (BMG) Pty Ltd 100 100 Manningham Hotel (BMG) Pty Ltd 100 100 MGW Hotels Pty Ltd 100 100 Aceridge Pty Limited 100 100 Chatswood Hills Tavern Pty. Ltd. 100 100 Dapara Pty Ltd 100 100 Stadform Developments Pty. Limited 100 100 Fenbridge Pty. Ltd. 100 100 Kawana Waters Tavern No. 3 Pty Ltd 100 100 Kawana Waters Tavern No. 1 Pty Ltd 100 100 Kawana Waters Tavern No. 2 Pty Ltd 100 100 Vicpoint Pty Ltd 100 100 Milanos Hotel (BMG) Pty Ltd 100 100 Monash Hotel (BMG) Pty Ltd 100 100 Moreland Hotel (BMG) Pty Ltd 100 100 Nu Hotel (BMG) Pty Ltd 100 100 Oakleigh Junction Hotel (BMG) Pty Ltd 100 100 Palace Hotel Hawthorn (BMG) Pty Ltd 100 100 Powel Hotel Footscray (BMG) Pty Ltd 100 100 Preston Hotel (BMG) Pty Ltd 100 100 Queensbridge Hotel (BMG) Pty Ltd 100 100 Racecourse Hotel (BMG) Pty Ltd 100 100 Shoppingtown Hotel (BMG) Pty Ltd 100 100 Taverner Hotel Group Pty. Ltd. 100 100 Amprok Pty. Ltd. 100 100 Auspubs Pty Ltd 100 100 Cooling Zephyr Pty Ltd 100 100 The Common Link Pty Ltd 100 100 E. G. Functions Pty. Ltd. 100 100 Elizabeth Tavern Pty. Ltd. 100 100 FG Joint Venture Pty Ltd 100 100 Fountain Jade Pty. Ltd. 100 100 Hadwick Pty Ltd 100 100

142 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-238 Beneﬁcial holding 2009 2008 Name of entity % %

Markessa Pty. Ltd. 100 100 Playford Tavern Pty Ltd 100 100 Seaford Hotel Pty. Limited 100 100 The Second P Pty Ltd 100 100 Kilrand Hotels (Hallam) Pty. Ltd. 100 100 Ashwick (Vic.) No.88 Pty. Ltd. 100 100 Warm Autumn Pty. Ltd. 100 100 Werribee Plaza Tavern Pty. Ltd. 100 100 Waltzing Matilda Hotel (BMG) Pty Ltd 100 100 Wheelers Hill Hotel (BMG) Pty Ltd 100 100 Andmist Pty. Limited 100 100 Australian Independent Retailers Pty Ltd 49 49 Australian Liquor and Grocery Wholesalers Pty Ltd 100 100 Australian Safeway Stores Pty. Ltd. 100 100 Barjok Pty Ltd 100 100 Bergam Pty Limited 75 75 Calvartan Pty. Limited 100 100 Cenijade Pty. Limited 100 100 Charmtex Pty Ltd 100 100 DSE Holdings Pty Limited 100 100 Dick Smith (Wholesale) Pty Ltd 100 100 Dick Smith Management Pty Ltd 100 100 Dick Smith Electronics Franchising Pty Ltd 100 100 Dick Smith Electronics Pty Limited 100 100 Dick Smith Electronics Staff Superannuation Fund Pty Limited 100 100 DSE (NZ) Limited 100 100 David Reid Electronics (1992) Limited 100 100 Dick Smith Electronics Limited 100 100 InterTAN Australia Pty Ltd 100 100 Fabcot Pty Ltd 100 100 Kiaora Lands Pty Limited 100 100 Gembond Pty. Limited 100 100 GreenGrocer.com.au Pty Ltd 100 100 Grocery Wholesalers Pty Ltd 100 100 Highlands No.1 Nominees Pty Ltd 100 – Hydrogen Nominees Pty Ltd 100 – Jack Butler & Staff Pty. Ltd. 100 100 Josona Pty Ltd 100 100 Langtons Pty Ltd 100 – Leasehold Investments Pty Ltd 100 100 Mac’s Liquor Stores Pty Limited 100 100 Nalos Pty Ltd 100 100 Oxygen Nominees Pty Ltd 100 – Philip Leong Stores Pty Limited 100 100 Progressive Enterprises Holdings Limited 100 100 Drumstar Pty Ltd 100 100 PEH (NZ IP) Pty Ltd 100 100 Queensland Property Investments Pty Ltd 100 100 Shellbelt Pty. Limited 100 100 Universal Wholesalers Pty Limited 100 100 Vincentia Nominees Pty Ltd 100 – Votraint No. 1622 Pty Limited 100 100

143

F-239 NOTES TO THE FINANCIAL STATEMENTS

29 SUBSIDIARIES CONTINUED Beneﬁcial holding 2009 2008 Name of entity % %

Woolies Liquor Stores Pty. Ltd. 100 100 Woolstar Investments Limited 100 100 Woolstar Pty. Limited 100 100 Woolworths (International) Pty Limited 100 100 Woolworths (HK) Sales Limited 100 100 Woolworths (HK) Procurement Limited 100 100 Woolworths Wholesale (India) Private Limited 100 100 Woolworths New Zealand Group Limited 100 100 BWS (2008) Limited (formerly Wandalla Investments Limited)(1) 100 100 Progressive Enterprises Limited 100 100 Caledonian Leasing Limited 100 100 Countdown Foodmarkets Limited 100 100 Foodtown Supermarkets Limited 100 100 Fresh Zone Limited 100 100 General Distributors Limited 100 100 S R Brands Limited 100 100 Supervalue/ Freshchoice Limited 100 100 The Supplychain Limited 100 100 Wholesale Services Limited 100 100 Wholesale Distributors Limited 100 100 Woolworths (New Zealand) Limited 100 100 Woolworths (Project Finance) Pty. Limited 100 100 Woolworths (Publishing) Pty Ltd 100 100 Woolworths (Q’land) Pty Limited 100 100 Woolworths (R & D) Pty Limited 100 100 Woolworths (South Australia) Pty Limited 100 100 Woolworths (Victoria) Pty Limited 100 100 Statewide Independent Wholesalers Limited 60 60 Woolworths (W.A.) Pty Limited 100 100 Woolworths Australian Communities Foundation Pty Limited 100 100 Woolworths Custodian Pty Ltd 100 100 Woolworths Executive Superannuation Scheme Pty Limited 100 100 Woolworths Group Superannuation Scheme Pty Ltd 100 100 Woolworths Insurance Pte Limited 100 100 Woolworths Management Pty Ltd 100 100 Woolworths Properties Pty Limited 100 100 Dentra Pty. Limited 100 100 Weetah Pty. Limited 100 100 QFD Pty. Limited 100 100 Woolworths Townsville Nominee Pty Ltd 100 100 Woolworths Trust Management Pty Limited 100 100 Woolworths Trustee No. 2 Pty Limited 100 100

Note (1) BWS (2008) Limited changed its name from Wandalla Investments Limited on 22 January 2009.

144 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-240 30 BUSINESS ACQUISITIONS Over the course of the year, the Group acquired various hotel venues and other businesses. Each acquisition was for 100% of the respective enterprise. Total consideration paid was $165.7 million comprising plant and equipment ($75.6 million), liquor and gaming licences ($52.5 million) and other working capital balances ($9.4 million), with goodwill on acquisition of $28.2 million. Goodwill has arisen on acquisition of these businesses primarily because of their capacity to generate recurring revenue streams in the future. Proportion 2009 Date of of ownership Cost of acquisition Entity/business acquired Principal activity acquisition acquired $m

Consolidated Woolworths Limited

Miscellaneous businesses Supermarkets, hotels and retail liquor (including Langtons) various 100% 165.8 – Miscellaneous businesses Supermarkets and retail liquor various 100% – 28.5 Total 165.8 28.5

In 2008, the Group acquired various hotel venues and other businesses. Each acquisition was for 100% of the respective enterprise. Total consideration paid was $191.3 million comprising plant and equipment ($99.5 million), liquor and gaming licences ($52.8 million) and other working capital balances ($4.1 million), with goodwill on acquisition of $34.9 million. Goodwill has arisen on acquisition of these businesses primarily because of their capacity to generate recurring revenue streams in the future. Changes in the composition of the Group Proportion 2008 Date of of ownership Cost of acquisition Entity/business acquired Principal activity acquisition acquired $m

Consolidated Woolworths Limited

Miscellaneous businesses Supermarkets, hotels and retail liquor various 100% 191.3 – Miscellaneous businesses Supermarkets and retail liquor various 100% – 20.1 Total 191.3 20.1

31 SUBSEQUENT EVENTS On 25 August 2009, Woolworths announced plans to enter the $24 billion plus hardware sector with a multi-format strategy designed to meet the everyday home improvement needs of Australian consumers with: − a recommended takeover offer for Danks Holdings Limited (Danks), Australia’s second largest hardware distributor supplying 583 Home Timber and Hardware, Thrifty-Link Hardware, and Plants Plus Garden Centre stores plus 939 independent hardware stores; − the development of a network of destination home improvement stores with a target to secure more than 150 store sites within the next ﬁve years; and – a joint venture equity agreement with leading US Home Improvement retailer Lowe’s Companies Inc (Lowe’s). Woolworths/Lowe’s have offered $13.50 per share (representing total equity consideration of $87.6 million) to acquire all the ordinary shares of Danks, Australia’s second largest hardware distributor.

145

F-241 DIRECTORS’ DECLARATION

The Directors declare that: (a) in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; (b) in the Directors’ opinion, the attached Financial Statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the ﬁnancial position and performance of the consolidated entity; and (c) the Directors have been given the declarations required by s.295A of the Corporations Act 2001. At the date of this declaration, the Company is within the class of companies affected by ASIC Class Order 98/1418. The nature of the Deed of Cross Guarantee is such that each company which is party to the deed guarantees to each creditor payment in full of any debt in accordance with the Deed of Cross Guarantee. In the Directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC Class Order applies, as detailed in Note 28 to the Financial Statements will, as a group, be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the Deed of Cross Guarantee. Signed in accordance with a resolution of the Directors made pursuant to s.295(5) of the Corporations Act 2001. On behalf of the Directors

James Strong Michael Luscombe Chairman Managing Director and Chief Executive Ofﬁcer 24 September 2009

146 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-242 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WOOLWORTHS LIMITED

REPORT ON THE FINANCIAL REPORT We have audited the accompanying financial report of Woolworths Limited (the company), which comprises the balance sheet as at 28 June 2009, and the income statement, cash flow statement and statements of recognised income and expense for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year as set out on pages 72 to 145.

Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, 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 financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Member of Liability limited by a scheme approved under Professional Standards Legislation. Deloitte Touche Tohmatsu 147

F-243 INDEPENDENT AUDIT REPORT TO THE MEMBERS OF WOOLWORTHS LIMITED

Auditor’s Independence Declaration In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s Opinion In our opinion: (a) the financial report of Woolworths Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the company’s and the consolidated entity’s financial position as at 28 June 2009 and of their performance for the year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Report on the Remuneration Report We have audited the Remuneration Report included in pages 35 to 53 of the directors’ report for the year ended 28 June 2009. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion In our opinion the Remuneration Report of Woolworths Limited for the year ended 28 June 2009, complies with section 300A of the Corporations Act 2001.

Yours faithfully

DELOITTE TOUCHE TOHMATSU

G Couttas Partner Chartered Accountants Sydney, 24 September 2009

148 WOOLWORTHS LIMITED ANNUAL REPORT 2009

F-244