Wesfarmers Shareholder Review 2012 Contents Target 14 Board of directors 24 Highlights summary 2 Kmart 15 Corporate governance summary 26 Chairman’s message 4 Insurance 16 Remuneration overview 30 Managing Director’s review 6 Resources 17 Five-year financial history 34 Finance Director’s review 8 Chemicals, Energy and Fertilisers 18 Group structure 35 Coles 12 Industrial and Safety 19 brands 36 Home Improvement Other activities 20 Corporate directory 37 and Office Supplies 13 Sustainability summary 21

About Wesfarmers Wesfarmers is one of Australia’s largest Securities exchange listing Strength through diversity. employers and has a shareholder base Wesfarmers is a company limited From its origins in 1914 as a Western of approximately 500,000. by shares that is incorporated and Australian farmers’ cooperative, Our objective domiciled in Australia. Australian Wesfarmers has grown into one of Wesfarmers remains committed Securities Exchange (ASX) listing Australia’s largest listed companies. to providing a satisfactory return codes: Headquartered in Western Australia, to shareholders. – Wesfarmers (WES) its diverse business operations – Wesfarmers Partially Protected cover: supermarkets; department Proud history, strong future Shares (WESN) stores; home improvement and office Steeped in a foundation of distribution supplies; coal mining; insurance; and retailing since its formation, chemicals, energy and fertilisers; today Wesfarmers is one of Australia’s and industrial and safety products. leading retailers and diversified industrial companies.

Wesfarmers Limited ABN 28 008 984 049 Our people are our most important asset. We are proud to have them as representatives of the Wesfarmers team. This, combined with the strength of our diverse portfolio of businesses, strong commitment and sustainable practices, ensures that we create long-term value – and provide satisfactory returns for our shareholders. This is our story.

Wesfarmers Shareholder Review 2012 1 Highlights summary All our business divisions achieved improvements in underlying performance and profits exceeded $2 billion for the first time.

Results summary – year ended 30 June Key financial data 2012 2011 Revenue $m 58,080 54,875 Earnings before interest and tax $m 3,549 3,232 Net profit after tax $m 2,126 1,922 Dividends $m 1,909 1,735 Total assets $m 42,312 40,814 Net debt $m 4,904 4,343 Shareholders’ equity $m 25,627 25,329 Capital expenditure on property, plant and equipment and $m 2,626 2,062 intangibles Depreciation and amortisation $m 995 923

Key share data Earnings per share cents 184.2 166.7 Dividends per share cents 165.0 150.0 Net tangible assets per share $ 4.45 4.12 Operating cash flow per share $ 3.15 2.52

Key ratios Return on average shareholders’ equity (R12) % 8.4 7.7 Gearing (net debt to equity) % 19.1 17.1 Interest cover (cash basis) times 10.8 9.5

Key financial data

Net profit after tax ($m) Earnings per share (cents) $2,126 million 184.2 cents

2012 2,126 2012 184.2 2011 1,922 2011 166.7 2010 1,565 2010 135.7 2009 1,522* 2009 158.5* 2008 1,063 2008 174.2

* Restated for change in accounting policy for Stanwell royalty payment.

2 Wesfarmers Shareholder Review 2012

0.0 531.5 1063.0 1594.5 2126.0 0.000000 46.049999 92.099998 138.149998 184.199997 Financial highlights • Operating revenue of $58.1 billion, up 5.8 per cent • Earnings before interest and tax (EBIT) of $3,549 million, up 9.8 per cent • Net profit after tax of $2,126 million, up 10.6 per cent • Earnings per share of $1.84, up 10.5 per cent • Operating cash flows of $3,641 million, up 24.8 per cent • Free cash flow of $1,472 million, up 41.4 per cent • Fully-franked full-year dividend of $1.65 declared, up 10.0 per cent

2012 2011 Wealth created by Wesfarmers $12,280 million $11,449 million Employees – salaries, wages and other benefits % Government – tax and royalties 10 10% Lenders – borrowed funds 16% 15% 58% 59% Shareholders – dividends on their investment 4% 5% Reinvested in the business 12% 11%

Operational highlights Underlying earnings were maintained through a • COLES achieved strong earnings growth of focus on the profitability of promotions and lower 16.3 per cent to $1,356 million. Savings generated levels of clearance. through improved operating efficiencies supported • INSURANCE earnings were $5 million after continued price reinvestment, driving growth in increasing reserve estimates for the February volumes. The continued renewal refurbishment 2011 Christchurch earthquake by $108 million. program and the improvement of the store Excluding this event, earnings were ahead of last network benefited performance. year due to reduced catastrophe claims expenses • BUNNINGS recorded earnings growth of 4.9 per in underwriting and growth in broking. cent to $841 million. This result was underpinned • RESOURCES earnings increased by 19.0 per cent by solid transaction growth from a number of to $439 million due to higher export coal prices merchandise initiatives, investments in customer in the first half and improved sales volumes in the service and value, and improvements in the second half following the completion of expansion store network. projects at the Curragh and Bengalla mines. • KMART and recorded earnings • CHEMICALS, ENERGY AND FERTILISERS growth of 32 per cent and 6.3 per cent respectively. reported earnings of $258 million. Earnings Kmart and Officeworks continued to drive higher were supported by higher pricing and good customer transactions during the year, and Kmart’s plant production performances in the chemicals improvements in product sourcing and stock business and increased fertiliser sales. management supported continued reinvestment in lower prices. • INDUSTRIAL AND SAFETY delivered a good result, with earnings increasing by 14.5 per cent to • TARGET reported earnings of $244 million, which $190 million, supported by strong demand from the were in line with last year after excluding a one-off resources and engineering construction sectors $40 million provision in the current year for future and an enhanced competitive position. supply chain restructuring.

Dividends per share (cents) Operating cash flow ($m) 165 cents $3,641 million

2012 165 2012 3,641 2011 150 2011 2,917 2010 125 2010 3,327 2009 110 2009 3,044 2008 200 2008 1,451

Wesfarmers Shareholder Review 2012 3

0 50 100 150 200 0.00 910.25 1820.50 2730.75 3641.00 Chairman’s message Our objective must be to ensure Wesfarmers is successful in a sustainable way for our shareholders, our employees, our customers and suppliers.

Our Resources division reported a 19 per cent increase in earnings and improved sales volumes in the second half after completion of expansion projects at both Curragh and Bengalla. Our Insurance businesses had a very difficult year with the February 2011 earthquake in Christchurch, New Zealand, having a major impact on the performance of the Insurance division. I am especially pleased at the improvement shown in all the former businesses and at how these businesses represent further improvement opportunities and a platform for more growth. Wesfarmers has outperformed the market since the acquisition of Coles as confidence in the It gives me great pleasure to That result is very pleasing, and turnaround has increased. introduce the 2012 Wesfarmers demonstrates yet again the annual report in a year when our benefits of being a diversified Businesses sold profit exceeded $2 billion for the conglomerate. During 2012 we sold three first time. It is a milestone which businesses: the Premier Coal mine Business performance reflects the continued strength in Collie, Western Australia; the While there has been a lot of focus of our business model and enGen regional power generation on the performance of the former the tremendous expertise and business, also in Western Coles Group businesses since capacity for hard work residing Australia; and the gas distribution we acquired them in 2007, I am in our employee teams across business in Bangladesh. We delighted to point out that many our eight business divisions. were pleased with the outcomes of our established Wesfarmers of the sale processes, believing Ever since Wesfarmers became businesses have continued to good prices were obtained for our a listed company, it has been perform very well and make shareholders. I would like to put on our stated objective to provide a significant contributions to the record my thanks and appreciation satisfactory return to shareholders. Group’s results. to the employees at these That remains, and will continue to Bunnings has continued to deliver businesses for the contribution remain, the central focus of our outstanding results in generally they have made to our company efforts. In 2012, we recorded a tighter trading conditions. and for the way they conducted six per cent increase in operating themselves while the sales were revenue to $58 billion, and a 10.6 Industrial and Safety continued being progressed. per cent increase in after tax profit. its path of ongoing improvement In a year in which caution and and increased its profit and return Sustainability uncertainty marked consumer and on capital from previous years. Our objective must be to ensure Wesfarmers is successful in a investor sentiment in Australia, that Wesfarmers Chemicals, Energy is a good performance. sustainable way, not only for and Fertilisers had a solid year the benefit of our half-a-million The directors were able to declare with Board approval given and shareholders, but for our 200,000 a fully-franked dividend of 95 cents construction now underway on employees, millions of customers per share at year’s end, taking the the $550 million expansion of and thousands of suppliers in full-year dividend to $1.65, up from the ammonium nitrate facility at the communities in which we $1.50 per share fully-franked Kwinana, Western Australia. operate right across Australia in 2011. and New Zealand.

4 Wesfarmers Shareholder Review 2012 Good safety is good business The major reasons for the Significant capital expenditure and financial results will not reduction were energy efficiency projects for the year included be sustainable if we do not do investments, especially at Coles, continued investment in our retail everything to ensure safety is and nitrous oxide emission store networks, completion of part of daily work. Our safety abatement at our Chemicals, production expansions in our coal performance is improving, but Energy and Fertilisers business’ businesses, and commencement we still have a long way to go nitric acid plants. Incidentally, of the ammonium nitrate expansion on this critical measure of our if Premier Coal, enGen and project in the chemicals business. success as a company. I am the gas distribution business On behalf of the Board I would pleased that the leadership team in Bangladesh were still within like to thank all of our 200,000 has set up a group, led by John the Group, our 2012 emissions employees for their dedication and Gillam, to benchmark our safety would have been about 4.9 million hard work that has translated into performance across all aspects of tonnes, still a decrease from 2011. a good performance for the past the Wesfarmers business against Total electricity use around the financial year. We have an excellent the best in the world. Group was lower in 2012 than in culture within the company and the The team consists of individuals 2011, despite an increase in our Board is determined to maintain from all the divisions. The project retail floor space and the size of and sustain this strong culture. will look at how we compare with our businesses in general. There is no doubt that external best practice around the world The Board factors will continue to challenge but, more importantly, look at how I would like to thank my Board our company but, under Richard we can take the best learnings colleagues for their hard work Goyder’s excellent leadership from companies within the Group and support throughout the year. and his strong management team, and across the world to improve Although we had no departures I believe Wesfarmers is well-placed our own safety performance. from or new appointments to the to meet those challenges and One of the big challenges thrown Board during the 2012 financial continue to prosper in the interests out to businesses in Australia year, we have made provision of our shareholders and the wider recently has been the decision in our remuneration settings for communities of Australia and by the federal government to put the potential expansion of the New Zealand. a price on carbon. No business Board’s numbers. Finally, my thanks go to you, our looks forward to additional cost While the Board continues shareholders. Wesfarmers exists burdens, but I am pleased to to believe our current size for your benefit and the Board tell you about how our company is appropriate for Wesfarmers, and entire leadership are grateful has responded. the proposed increase is intended for your ongoing support of this The National Greenhouse and to provide sufficient ‘headroom’ great company. Energy Reporting Act 2007 to appoint up to two additional emissions for Wesfarmers members to allow for effective Limited in 2011 were 5.04 million Board succession over the next tonnes. Despite the fact that two to three years. our businesses have grown Investing for the future in the just completed financial We have every reason to be Bob Every AO, Chairman year, our greenhouse emissions confident about the future and have declined to approximately that confidence is reflected in our 4.67 million tonnes. I believe this capital expenditure decisions. is a remarkable accomplishment Net capital expenditure for 2012 and is a tribute to the way was $2.35 billion, which represents we have worked in previous a substantial investment in growth. years to position ourselves for what we considered to be an inevitable price on carbon in the Australian economy.

Wesfarmers Shareholder Review 2012 5 Managing Director’s review Wesfarmers is well-placed to grow and create value for all our stakeholders due to the strength of our businesses, our balance sheet and the quality of our people. Officeworks’ earnings increased 6.3 per cent to $85 million. The focus on the strategic agenda of the business continued to drive transaction growth during the year, offsetting heavy deflation and generally challenging trading conditions, particularly in technology-related areas. Kmart achieved pleasing growth in earnings for the year, up 31.4 per cent to $268 million. Improvements in range, together with better sourcing and stock management, continued to drive business efficiencies and support reinvestment in lower prices that were positively received by customers. Kmart has now achieved 10 consecutive quarters of growth in transactions and units sold. Target’s reported earnings of At Wesfarmers, we are fortunate Business divisions $244 million include a one-off to have a great portfolio of Coles achieved strong earnings $40 million provision in the current assets, a very strong balance growth of 16.3 per cent to year for future supply chain sheet and, most importantly, a $1,356 million, building on the restructuring. Excluding this provision, team of talented and enthusiastic 21.2 per cent earnings growth Target’s earnings of $284 million employees. Thanks to their efforts, achieved last year. Savings were just above the prior year, your company has enjoyed a year generated through improved despite difficult trading conditions, in which we returned profits of operating efficiencies supported particularly in consumer electronics. more than $2 billion for the very continued price reinvestment during Underlying earnings were maintained first time and lifted our dividends the year, driving growth in volumes through a focus on the profitability to shareholders by 10 per cent over and profitability. The continuation of promotions and lower levels of the previous year. of the renewal refurbishment clearance activity due to better program and the improvement of inventory management. We had turnover of $58 billion for the store network further benefited the year. Our profit after tax was The Insurance division reported performance in the year. $2,126 million, up 10.6 per cent, and earnings of $5 million after our earnings before interest and Bunnings’ earnings increased increasing reserve estimates for tax, which is how we measure the 4.9 per cent to $841 million the 22 February 2011 Christchurch divisional performance, was more which represented another earthquake by $108 million during than $3.5 billion. Our earnings per good result for the business. the year. Excluding this event, share were up and our cash flows In tighter trading conditions, underlying earnings were ahead were very strong. this result was underpinned by of last year. solid transaction growth from a In an underlying profit sense, The Resources division’s number of merchandise initiatives every one of the eight divisions earnings increased 19.0 per cent and investment in customer service recorded increased earnings to $439 million. The major driver of and value. Earnings were further compared to last year, which is the result was increased revenue supported by cost management a really outstanding outcome due to higher export coal prices in initiatives and the improvement in an environment that has the first half, and improved sales of the store network. been challenging economically volumes in the second half, following in Australia. the completion in the fourth quarter of expansion projects at the Curragh and Bengalla mines.

6 Wesfarmers Shareholder Review 2012 Higher revenue was partially offset I would like to sincerely thank We now purchase $1.6 billion by extra costs associated with Launa Inman for her significant per annum more from Australian flood recovery efforts, one-off mine contribution to Target as its primary producers than we did expansion preparation costs and Managing Director for seven years, when we took control of the higher government royalties. and for her support during the four business in 2007. We are committed years of Wesfarmers ownership. to outcomes that are beneficial for The Chemicals, Energy and our shareholders and suppliers. Fertilisers division reported Innovation earnings of $258 million, One of our key values as a company Looking ahead representing growth of 7.1 per is boldness. In order to progress Wesfarmers is well-placed to cent after excluding $42 million of and provide better products grow and create value for all our insurance proceeds in the prior and services to our customers, stakeholders due to the strength year related to the 2009 Varanus and to win the battle against of our businesses, our balance Island gas outage. Earnings were our competitors, we have to be sheet and the quality of our people. supported by higher prices in the prepared to be bold by innovating We will continue to invest to grow chemicals business and increased and being creative. During the our existing businesses and we fertiliser sales, which offset a lower year we launched the Wesfarmers have the capacity to further add contribution from Innovation Awards, an initiative to the portfolio should suitable and the loss of earnings from that came from the Leadership opportunities arise. As always, we the enGen business following its Conference two years ago. We had will be patient and disciplined, and divestment in August 2011. outstanding applicants and winners endeavour to make decisions which for these awards. I have had the are in the long-term interests of all The Industrial and Safety division great privilege of meeting these our stakeholders, particularly you, delivered a good result, with teams and congratulating them. our owners. earnings increasing by 14.5 per cent The depth of innovation underway to $190 million, supported by strong The leadership team has a very across the Group is encouraging. demand from the resources and positive working relationship with engineering construction sectors, Suppliers Bob Every and the Board and we and an enhanced competitive There has been a lot of public thank them for that. position. comment this year on Wesfarmers’ relationship with our suppliers Other businesses’ earnings through the Coles business. This were broadly in line with last year is an issue we take very seriously. with lower interest revenue and We know Coles is a big player and a $15 million expense associated that we buy a lot of product from with non-trading items largely Australian suppliers and producers. Richard Goyder offset by a reduction in the We provide an important way of Managing Director Group’s self-insurance expense. getting to market. Non-trading items for the year included a $181 million non-cash Coles, a once iconic Australian writedown in the carrying value of business, was in steep decline Coregas, which was partially offset prior to our acquisition. When we by gains on asset sales totalling walked into the business we had a $166 million. product range that was unwieldy and extensive. We had to get a Management change better range for our customers During the year, Dene Rogers and increase the efficiency and replaced Launa Inman as Managing cost-competitiveness of our supply Director of Target. Dene has chain. In that turnaround process, extensive retailing experience it was inevitable that some suppliers from North America and has been would miss out. making encouraging progress with several major initiatives in what has been a difficult retail environment for Target.

Wesfarmers Shareholder Review 2012 7 Finance Director’s review Cash flow from operations increased by 24.8 per cent to $3,641 million and was driven by strong earnings growth and effective working capital management.

Results overview Significant capital expenditure Balance sheet Net profit after tax for the Group projects during the year included The strength of the balance sheet in the 2012 financial year of continued retail network was maintained during the year, $2,126 million was 10.6 per cent expansion and refurbishment as evidenced by improvements ahead of last year. activity, completed production in all key liquidity ratios. Total net expansions of the Curragh and debt at 30 June 2012 increased to Earnings per share of 184.2 cents Bengalla coalmines and the $4,904 million (from $4,343 million were up 10.5 per cent on last year, commencement of the ammonium 12 months earlier) reflecting the in line with earnings growth, and nitrate capacity expansion in the Group’s growth in capital investment. average return on equity increased chemicals business. Despite this increase, finance costs to 8.4 per cent from 7.7 per cent in for the Group declined by 4.0 per the previous year. It is expected that the current cent to $505 million for the year, phase of strong capital investment Cash flow following successful refinancing will continue in the 2013 financial Cash flows from operations of initiatives and the progressive expiry year through plans to further $3,641 million for the year were of pre-global financial crisis interest improve and grow retail store 24.8 per cent higher than last year, swap hedges. networks and progress the representing a cash realisation 260,000 tonne ammonium nitrate Total property, plant and equipment ratio of 117 per cent. Operating expansion at Kwinana, Western increased over the year, from cash flows during the year were Australia. Proceeds from the sale $8,302 million to $9,463 million supported by earnings growth of businesses of $402 million, as at 30 June 2012, due to capital and improved working capital predominantly from the sales of the investment being well ahead of performance, particularly across Premier Coal mine and the enGen depreciation and amortisation. the Group’s retail businesses. business, offset higher net capital Strong working capital management, The Group continued to invest expenditure, resulting in a 41.4 per particularly in the retail divisions, strongly in capital expenditure over cent increase in free cash flows to kept capital employed in this area the year in order to drive future $1,472 million. Cash dividends paid to a similar level to last year, despite growth. Net capital expenditure increased to $1,789 million from the increased sales activity and of $2,351 million, which included $1,557 million in the previous year. retail footprint. a $245 million contribution from property sales in Coles and Bunnings, was up 27.4 per cent on last year.

8 Wesfarmers Shareholder Review 2012 Average debt tenor of 3.8 years across diversified sources of debt 1,500 1,500

1,000 1,000

5.9% 5.9% Bank bilaterals Bank bilaterals 1,500 500 500 15.1% 15.1% Syndicated Syndicated facilities facilities 23.4% 23.4% US Bonds US Bonds 27.1% 27.1% Euro Bonds Euro Bonds 26.7% 26.7% Aust Bonds Aust Bonds 1,000 1.8% 1.8% Other capital Other marketscapital markets 0 0

5.9% Bank bilaterals 500 15.1% Syndicated facilities -500 -500 23.4% US Bonds 27.1% Euro Bonds Capital marketsCapital markets SyndicatedSyndicated facilities facilities 26.7% Aust Bonds Cash at bank and on deposit Bank bilaterals 1.8% Other capital markets 0 Cash at bank and on deposit Bank bilaterals -1,000 -1,000 FY FY FYFY FYFY FYFY FYFY FYFY FYFY FYFY FYFY FYFY FY FYFY FY 2012 20132012012 42012013 52012014 62012015 2017 2016 2018 2017 2019 20208 20120219 20202022202120232022 2023 Note: Amounts shown and average tenor based on the drawn amount at balance date of 30 June 2012, adjusted for 10 year bond issued August 2012. -500 Detailed impairment testing of Debt management Strong operating performance Capital markets non-currentSyndicated facilities assets, including The Group aims to maintain a and debt management initiatives Cash at bank and on deposit goodwillBank bilaterals and other intangible strong investment-grade rating resulted in improvements in the -1,000 assets recognised on business through prudent balance sheet Group’s fixed charges cover ratio FY FY FY FY FY FY FY FY FY FY FY FY 2012 2013 2014 2015 2016 2017 201acquisitions,8 2019 2020 was2021 carried2022 2023 out during management. The Group’s credit to 2.8 times, up from 2.7 times a the year. External experts were ratings remained unchanged at year ago, and the cash interest engaged to provide support on A- (stable outlook) for Standard & cover ratio to 10.8 times, up from model inputs including discount Poor’s and Baa1 (positive outlook) 9.5 times. Refinancing initiatives rates and long-term growth rates. for Moody’s. contributed to a one percentage Non-cash impairment charges point decrease in the weighted During the year the Group totalling $197 million were made average cost of debt to 7.8 per cent continued to proactively diversify its during the year, compared to compared to 8.8 per cent last year. funding sources and extend its debt $27 million in the prior year. The maturity profile. Refinancing activity In August 2012, the Group current year’s impairment charge included two $500 million domestic raised ¤650 million in European was mainly due to a non-cash bond issues, comprising a five debt capital markets through writedown in the carrying value of year issue in November 2011 and a its first ten year bond issue, Coregas as a result of BlueScope seven year issue in March 2012. further confirming debt investors’ Steel Limited’s restructure of its confidence in the Group’s Port Kembla operations. In all other The proceeds of these issuances businesses and balance sheet. cases, recoverable amounts of were utilised to fund maturing non-current assets determined for bank debt and general business Equity management impairment testing exceeded their requirements, which resulted in a Over the year shares on issue carrying values. Future impairment lengthening of the Group’s average were stable, with 1,157 million shares testing of non-current assets tenor to 3.8 years across well on issue at 30 June 2012, made remains sensitive to changes in diversified sources of debt. up of 1,007 million ordinary shares and 150 million partially-protected general trading conditions and As at 30 June 2012, the Group ordinary shares. outlook, as well as discount rates. had available to it $598 million in cash at bank and on deposit and $2,298 million in committed but undrawn bank facilities.

Wesfarmers Shareholder Review 2012 9 Finance Director’s review (continued)

Dividend policy The main sources of foreign The internal audit plan is approved Wesfarmers’ dividend policy seeks exchange risk include: the sale by the Board. The internal audit to deliver growing dividends over of export coal, denominated in function delivers the approved time, with the declared amount US dollars; purchases in foreign internal audit plan by engaging reflective of the Group’s current currency, mainly retail inventory in a single outsource audit provider. and projected cash position, profit US dollars; and current US dollar As part of the annual operating generation and available franking and Euro denominated debt. cycle, each business is also credits. Consistent with this policy, Businesses exposed to foreign required to review and report a fully-franked, full-year dividend of exchange risk use forward on: legal liabilities; financial 165 cents per share was declared, contracts to minimise currency controls; information systems; an increase of 10.0 per cent on exposure. US dollar and Euro environment, health and safety last year. The final dividend, to be denominated debt and associated planning; risk assessment and paid on 28 September 2012, is not interest costs are fully hedged at mitigation; and post implementation provided for in the accounts. Given the time the debt is drawn down. reviews on all major capital a preference by many shareholders The Group uses interest rate and investment expenditure. to receive dividends in the form cross currency interest rate swaps of shares, the directors decided to manage interest rate risk. Interest to continue the operation of the rate swaps covering $2.2 billion Dividend Investment Plan (the Plan). of debt are currently in place No discount applies to shares for the 2013 financial year. The allocated under the Plan and in annual corporate planning process Terry Bowen recognition of the Group’s capital includes an established framework Finance Director structure and strong balance sheet, for assessing broad business risk all shares issued under the Plan will as well as considering appropriate be acquired on-market by a broker risk mitigation strategies. and transferred to participants. Internal control and Risk management assurance The Group maintains and adheres The Group maintains an internal to clearly defined policies covering audit function with a Group-wide areas such as liquidity risk, market mandate that is fully independent risk (including foreign exchange, of the business operations to interest rate and commodity price monitor and provide assurance risk) and credit risk. to the Board’s Audit Committee and ultimately the Board as to the It is, and has been throughout effectiveness of risk management the year, the Group’s policy that and internal control systems. no speculative trading in financial The annual internal audit plan is instruments be undertaken. developed within a combined assurance framework and applies a risk-based methodology to ensure that the Group’s key risks are appropriately and regularly reviewed.

10 Wesfarmers Shareholder Review 2012 Divisional review summary

Coles page 12 Target page 14

Home Improvement and Office Supplies page 13

Kmart page 15 Insurance page 16 Resources page 17

Industrial and Safety page 19

Chemicals, Energy and Fertilisers page 18

Wesfarmers Shareholder Review 2012 11 Coles The Coles turnaround produced strong trading results in 2012 by improving quality, service and value. The business achieved its thirteenth quarter of industry out-performance. Activities ••National full service supermarket retailer operating 749 stores ••Liquor retailer operating three brands through 792 liquor outlets, as well as 92 hotels ••National fuel and convenience operator managing 627 sites ••More than 18 million customer transactions each week ••Employing more than 100,000 team members Year in brief ••Full-year revenue of $34.1 billion ••EBIT of $1,356 million ••Food and liquor store sales growth of 4.6 per cent, with comparable store sales growth of 3.7 per cent1 ••13 consecutive quarters of industry out-performance Contribution to operating The business ••Continued focus on quality, divisional EBIT Coles is a leading food, liquor service and value and convenience retailer, with ••108 new format supermarket a presence in every Australian stores delivered during state and territory. The business the year and 252 since operates more than 2,200 retail the Coles acquisition 37% outlets across Coles, BiLo, ••Easy ordering and easy First Choice Liquor, , warehousing complete , ••Responsible sourcing and Spirit Hotels. initiatives on track ••Loyalty program reinvigorated ••Improved safety performance Revenue ($m) $34,117 Future directions 2012 34,117 ••Enter second wave of transformation 2011 32,073 ••Further improvements in 2010 30,002 quality and value 2009 28,799 ••Investment in store network 2008* 16,876 and multi-channel offer ••Relentless focus on generating EBIT ($m) savings through efficiency $1,356 ••Continued cultural transformation 2012 1,356 2011 1,166 2010 962 2009 831 2008* 475 1 For the 52 week period 27 June 2011 * For the ownership period from 23 November 2007 to 30 June 2008. to 24 June 2012.

12 Wesfarmers Shareholder Review 2012 0.00 8529.25 17058.50 25587.75 34117.00

0 339 678 1017 1356 Home Improvement and Office Supplies Bunnings and Officeworks are the leading retailers in home improvement and office supplies products in Australia.

Activities ••Bunnings: Retailing home improvement and outdoor living products and servicing project builders, commercial tradespeople and the housing industry across Australia and New Zealand ••Officeworks: Retailer and supplier of office products and solutions for home, business and education across Australia Year in brief Bunnings ••5.6 per cent increase in revenue ••4.9 per cent increase in EBIT ••Growth in consumer and commercial sales ••13 new stores opened ••One smaller format Bunnings store opened Contribution to operating The business ••Two new trade centres opened divisional EBIT Bunnings is the leading retailer of Office Supplies home improvement and outdoor living products in Australia and ••0.7 per cent increase in revenue New Zealand and a major supplier ••6.3 per cent increase in EBIT to project builders, commercial ••Strong online sales growth from 25% tradespeople and the housing ‘every channel’ strategy industry. Officeworks is Australia’s ••Six new stores, six full store leading retailer and supplier of upgrades office products and solutions for ••Good progress on actions to home, business and education. improve the customer offer

Future directions Revenue ($m) $8,644 ••Bunnings: Growth to be achieved 2012 8,644 through increased service levels, category development, network 2011 8,251 expansion and reinvestment, 2010 7,822 an improved light and heavy 2009 7,151 commercial offer, and through investment of productivity gains in 2008* 6,160 lower prices to drive volume ••Office Supplies: Continued growth from improving the EBIT ($m) $926 customer offer and expanding 2012 926 and renewing the network. 2011 882 Increasing business-to-business sales and more online initiatives 2010 802 8644 remain high priorities. Ongoing 2009 724 8251 investment in the development of 7822 2008* 625 the Officeworks team will underpin 7151 all strategic initiatives 6160 * Officeworks’ contribution for the ownership period from 23 November 2007 to 30 June 2008. 4939 Wesfarmers Shareholder Review 2012 13 0 2161 4322 6483 8644

0.0 231.5 463.0 694.5 926.0 Target Target’s four-year transformation journey began with early success from communicating value to customers and improving the profitability of promotions. Activities ••Mid-tier retailer offering superior value through style, quality, experience ••Customer destination for fashionable clothing, underwear, footwear and accessories for women, children and men, in addition to homewares, entertainment and general merchandise ••Network of 301 stores located throughout regional and metropolitan Australia ••Online store that now offers free delivery to store via click and collect Year in brief ••Full-year revenue of $3.7 billion ••$284 million EBIT (excluding a $40 million restructuring provision), with EBIT margin of 7.6 per cent Contribution to operating The business ••Comparable store sales decrease divisional EBIT Target is a mid-tier retailer, of 2.1 per cent1, with an improved aimed at offering customers second half performance due to value through style, quality the 2012 mid-year toy sale brought and an enhanced in-store forward to June and online experience. ••Four year transformation journey 7% started ••Number of items available for sale online increased from 6,000 to 36,000 in six months, with plans to grow to 60,000 in 12 months Revenue ($m) ••12 new stores and 26 stores $3,738 upgraded 2012 3,738 Future directions 2011 3,782 ••Customer remains the first priority in decision making which will inform 2010 3,825 the transformation initiatives to build 2009 3,788 a sustainable growth company 2008* 2,198 ••Continued expansion of online range and functionality to world EBIT ($m) class $244 ••Investment in systems to support 2012 244 improvement in stock planning, replenishment, supply chain and 2011 280 buying processes 2010 381 ••10 new stores and four 2009 357 replacement stores to be completed in 2013 2008* 221

1 For the 52 weeks from 26 June 2011 * For the ownership period from 23 November 2007 to 30 June 2008. to 23 June 2012.

14 Wesfarmers Shareholder Review 2012 0.00 956.25 1912.50 2868.75 3825.00

0 100 200 300 400 Kmart Kmart achieved strong EBIT growth, with 10 consecutive quarters of growth in customer transactions and units sold.

Activities ••Kmart is committed to offering its customers low prices on all products every day, right across its network of 185 stores throughout Australia and New Zealand ••Categories include menswear, womenswear, childrenswear, beauty, footwear, toys and sporting, events and food, entertainment, newsagency and home ••Kmart Tyre & Auto Service is one of Australia’s largest retail automotive service, repair and tyre businesses with 260 stores Year in brief ••Full-year revenue of $4.1 billion ••EBIT of $266 million1 ••The ‘OK’ campaign, highlighting Kmart’s everyday low prices, was well received by customers ••Comparable store sales2 for the year Contribution to operating The business were in line with last year’s result divisional EBIT Kmart is one of Australia’s ••The business is continuing to operate largest retailers with 185 stores on an everyday low-priced model throughout Australia and New Zealand, product sourcing ••Strong continued growth in volumes offices in Hong Kong, China, and customer transactions Bangladesh and India, and more ••One new Kmart store opened during 7% than 28,000 team members. the year ••Six Kmart store refurbishments completed ••238 Kmart Tyre & Auto Service stores re-imaged during the year Revenue ($m) $4,055 Future directions ••Continue to lead on price 2012 4,055 ••Continue to source more products 2011 4,036 directly to keep costs down 2010 4,019 ••Continue to drive prices down for 2009 3,998 Australian and New Zealand families ••Continue to improve the flow of stock 2008* 2,454 and reduce out of stocks EBIT ($m) ••Continue to improve product ranges $268 that connect with customers 20121 268 ••Continue to search for new and fresh products that customers want 20111 204 ••Continue to refurbish stores and 20101 196 open new sites 2009 109 2008* 111 1 Excludes $2 million earnings related to Coles * For the ownership period from 23 November 2007 to 30 June 2008. Group Asia overseas sourcing operations. 1 2012 includes $2 million earnings related to Coles Group Asia overseas sourcing operations 2 For the 52 weeks from 27 June 2011 (2011: $3 million; 2010: $6 million). to 24 June 2012. Wesfarmers Shareholder Review 2012 15 0.00 1013.75 2027.50 3041.25 4055.00

0 67 134 201 268 Insurance Wesfarmers Insurance delivered on rate increases, exposure management and made solid progress with efficiency initiatives that have set the business up for the year ahead. Activities ••Key brands: Lumley, WFI, OAMPS and Crombie Lockwood ••Provision of general insurance products ••Insurance broking, risk management and financial services distribution ••Operations in Australia, New Zealand and the United Kingdom Year in brief ••10.1 per cent increase in revenue to $1.9 billion ••EBIT of $5 million, adversely affected by a $108 million increase in claims reserves associated with the Christchurch earthquake ••18.7 per cent growth in broking income, reflecting solid sales growth in core business and the successful integration of acquired Contribution to operating The business businesses divisional EBIT Wesfarmers Insurance provides ••Gross earned premium growth insurance and risk management of 9.1 per cent achieved solutions to corporates, small-to-medium-sized ••Strong premium rate increases businesses, not-for-profit achieved in Australia and organisations and individuals New Zealand <1% across Australia, New Zealand ••Targeted reduction in exposures and the United Kingdom. to higher hazard regions and industries ••Strong growth in Coles home and motor insurance Revenue ($m) ••IT investment, claims optimisation $1,915 and efficiency initiatives delivering 2012 1,915 value 2011 1,739 Future directions 2010 1,698 ••Continue improvements in the underlying underwriting 2009 1,720 performance 2008 1,649 ••Continue to grow broking platform through acquisitions and sales EBIT ($m) optimisation $5 ••Continue to grow and expand 2012 5 capabilities in personal lines 2011 20 ••Strive to consistently deliver outstanding client service 2010 122 across all businesses 2009 91 ••Invest in the development 2008 122 of employees

16 Wesfarmers Shareholder Review 2012 0.00 478.75 957.50 1436.25 1915.00

0.0 30.5 61.0 91.5 122.0 Resources Stronger first half export coal prices, plus increased production and sales volumes upon completion of mine expansion projects during the second half saw earnings increase 19.0 per cent on the previous year. Activities ••Australian open-cut miner with investments in coal mining: »»Curragh, Queensland (100 per cent) – metallurgical coal for export and domestic markets »»Bengalla, New South Wales (40 per cent) – export steaming coal for Asian market ••Mine operation and development Year in brief ••19.9 per cent increase in revenue to $2.1 billion ••EBIT up 19.0 per cent to $439 million ••Curragh metallurgical coal export sales up 34.1 per cent to 7.2 million tonnes ••Significant second half improvement in Curragh’s mine cash costs ••Record fourth quarter production and sales from both Contribution to operating The business mines as current ‘Stage One’ divisional EBIT Wesfarmers Resources is a mine expansions completed significant Australian open-cut ••Feasibility studies into next-stage miner, with investments in two expansions of export capacity world-scale coalmines. at both Curragh and Bengalla continuing ••Second half decline in export 12% coal prices ••Premier Coal (WA) divested 30 December 2011: profit on sale of $98m (not included in operating results) Revenue ($m) $2,132 Future directions ••Focus on future growth – maximise 2012 2,132 exports 2011 1,778 ••Feasibility study continuing to expand 2010 1,416 Curragh further from 8.0-8.5 to 2009 2,411 10 million tonnes annual metallurgical export capacity (plus continuation of 2008 1,311 existing 3.5 million tonnes steaming coal annual production capacity) EBIT ($m) ••Feasibility study continuing to expand $439 Bengalla to 10.7 million tonnes 2012 439 annual Run of Mine capacity (100 per cent basis) 2011 369 ••Strong business sustainability 2010 165 commitment 2009 885 ••Short-term global economic 2008 423 uncertainty, but longer term strong export market fundamentals and customer demand Wesfarmers Shareholder Review 2012 17 0.00 602.75 1205.50 1808.25 2411.00

0.00 221.25 442.50 663.75 885.00 Chemicals, Energy and Fertilisers The division reported a strong result for the year and commenced construction of its ammonium nitrate expansion in Western Australia.

Activities ••Manufacture and marketing of chemicals for mining, minerals processing and industrial sectors ••Production, marketing and distribution of liquefied petroleum gas (LPG) and liquefied natural gas (LNG) ••Importation, manufacture and marketing of broadacre and horticultural fertilisers ••Manufacture, marketing and distribution of industrial, medical and specialty gases Year in brief ••8.8 per cent increase in revenue to $1.8 billion ••7.1 per cent increase in EBIT (excluding insurance proceeds from the 2009 Varanus Island gas disruption claims) to $258 million ••Construction underway for Contribution to operating The business $550 million expansion of current divisional EBIT The activities of Wesfarmers ammonium nitrate production Chemicals, Energy & Fertilisers capacity include the manufacture and ••Sale of enGen, remote power marketing of chemicals for generation business in August mining, minerals processing 2011, and Bangladesh LPG joint and industrial sectors through venture in January 2012 7% CSBP, Australian Gold Reagents (75 per cent owned), Queensland Future directions Nitrates (50 per cent owned) ••Ammonium nitrate expansion on and Australian Vinyls. track to be operational in 2014 ••Completion of detailed engineering Revenue ($m) to debottleneck sodium cyanide $1,786 production 2012 1,786 ••Seek to grow sales of LPG and 2011 1,641 manage the impact of increased gas costs and lower LPG content 2010 1,570 ••Continue development of the 2009 1,760 LNG business 2008 1,562 ••Enhance fertiliser earnings through market-focused customer EBIT ($m) offers $258 ••Continuing strong demand for 2012 258 chemicals; ammonia earnings increasingly dependent on 2011 283 international ammonia pricing 2010 196 following transition to import 2009 127 parity pricing 2008 214

18 Wesfarmers Shareholder Review 2012 0.00 446.75 893.50 1340.25 1787.00

0.00 70.75 141.50 212.25 283.00 Industrial and Safety Strong sales and earnings momentum supported by strong delivery performance and customer service.

Activities ••Leading provider of industrial and safety products and services in Australia and New Zealand to a wide range of customers ••Strong focus on security of supply to customers of broadest product range ••Cost efficiency to customers through local and global procurement, supply chain and eBusiness solutions Year in brief ••8.5 per cent increase in revenue to $1.7 billion ••EBIT increased by 14.5 per cent ••Strongest results in Blackwoods, Protector Alsafe and Bullivants ••Strong contract, projects, services and eBusiness growth ••Increased industry diversification Contribution to operating The business ••Opened a Blackwoods branch in Indonesia divisional EBIT Wesfarmers Industrial and Safety is the leading provider of industrial ••Restructured Coregas, Total and safety products and services Fasteners and Blackwoods in Australia and New Zealand. It Tasmania services customers across mining, ••Improvement in Coregas, 5% oil and gas, construction and increased collaboration with infrastructure, retail, manufacturing, other businesses in the division health and government. ••Operational and capital management contributing to improved returns ••Non-cash writedown in the Revenue ($m) carrying value of Coregas of $1,690 $181 million (not included in 2012 1,690 operating results) 2011 1,557 Future directions 2010 1,412 ••Move to a more customer centric 2009 1,294 organisation ••Grow share of customers’ 2008 1,309 products and services spend ••Invest in developing people and EBIT ($m) broaden the talent pool $190 ••Continue to improve portfolio 2012 190 performance and efficiency 2011 166 through technology 2010 138 ••Develop new growth platforms, ongoing revenue diversification 2009 114 ••Growth through acquisitions 2008 130

Wesfarmers Shareholder Review 2012 19 0.0 422.5 845.0 1267.5 1690.0

0.0 47.5 95.0 142.5 190.0 Other activities Wesfarmers is also a major investor in Gresham Partners, Wespine Industries and BWP Trust.

Gresham Partners Wespine Industries BWP Trust Wesfarmers has a 50 per cent The 50 per cent-owned Wespine Wesfarmers’ investment in BWP shareholding in Gresham Partners Industries, which operates a Trust contributed earnings of Group Limited, the holding company plantation softwood sawmill in $16 million, compared to $19 million for the Gresham Partners investment Dardanup in Western Australia, recorded last year. banking operations. Gresham is a contributed earnings of $5 million The Trust was established in 1998 leading independent investment after tax, a 28.6 per cent decrease with a focus on warehouse retailing house focused primarily on the on last year. Sales volume in the properties and, in particular, provision of financial advisory second half were constrained by Bunnings Warehouses leased services, structured finance, weak Western Australian house to Bunnings Group Limited. and property and private equity construction activity, combined BWP Management Limited, the funds management. with continued import competition responsible entity for the Trust, driven by the strong Australian In addition, Wesfarmers is a is a wholly-owned subsidiary of dollar and a global softwood timber participant in the Gresham Private Wesfarmers Limited. supply surplus. An improved safety Equity wholesale investment funds performance was achieved during Units in the Trust are listed on the with underlying investments in the year with no lost time injuries Australian Securities Exchange and mining services, retail, logistics and a 35 per cent reduction in the Wesfarmers holds, through a wholly and other specialist sectors. number of total recordable injuries. owned subsidiary, 23.5 per cent of During the 2012 financial year, Wespine is targeting a further the total units issued by the Trust. Wesfarmers’ investment in Gresham reduction in total recordable injuries During the 2012 financial year, the Private Equity Funds recorded a loss in the coming year. Trust completed the acquisition of of $55 million due to downward non- The local housing market is forecast three new Bunnings Warehouses, cash revaluations following a difficult to improve during the coming and construction of two new year for some of the funds’ trading year, but with continued import Bunnings Warehouses on existing businesses and generally lower competition and subdued housing development sites. The Trust also industry valuation multiples. construction in overseas markets, sold the Bunnings Warehouse Gresham participated in a number is expected to see a continuation of at Hoppers Crossing in Victoria, of significant corporate advisory the challenging market conditions. realising a capital profit of transactions during the year, $6.2 million, which was distributed to including mergers and acquisitions, unit holders via a special distribution. corporate restructurings and The Trust’s current portfolio consists refinancings on behalf of a range of a total of 72 properties: 62 of domestic and international clients. established Bunnings Warehouses; Its property funds management four Bunnings Warehouses with business, which is the manager other showrooms; one Bunnings of three established funds with distribution centre; one total capital commitments of development site for a Bunnings more than $227 million, continued Warehouse; three office/warehouse to support a range of projects industrial properties; and one retail/ primarily in New South Wales, bulky goods showrooms complex. Victoria and Queensland.

20 Wesfarmers Shareholder Review 2012 Sustainability summary Sustainability is integral to how we do business, and we continue to strive for innovative and efficient approaches to improve our social, environmental and economic performance. The importance of people • Improve talent management With more than 200,000 employees, – at least once a year, the Wesfarmers is committed Group Managing Director meets to continually improving the with each division to review: development and retention of its senior leader performance and people. Wesfarmers’ employees development; succession plans are crucial to the success of the for critical roles; and the pipeline organisation, and there are a of high-potential leaders. number of overarching principles During the 2012 financial year, and practices across the Group, talent reviews were conducted in addition to the many programs with all divisions for senior happening within the businesses. manager level staff and above and is trialling hybrid vans in This included more than 2.2 million included 138 women. This is in Burwood, New South Wales, with a hours invested in training and view to a national transport solution addition to detailed talent reviews development across the Group that reduces fuel consumption and conducted with employees by in 2011/12. carbon emissions for home deliveries individual businesses within the Wesfarmers’ sustainability Wesfarmers’ commitment to the Wesfarmers Group. Throughout priorities safety of its employees, customers the Group, all high-potential As one of Australia and and visitors is absolute and the leaders benefit from an array New Zealand’s largest companies, organisation has a number of of development opportunities with a diverse portfolio of systems in place to focus on, and such as internal and external businesses, Wesfarmers has a drive, safety performance. The development programs, significant responsibility to get its Group’s lost time injury frequency stretch assignments, action sustainability efforts right. This is rate was 10.90 compared to 12.78 learning projects, coaching, a responsibility not only towards in the previous year, and the total mentoring and 360-degree its employees and shareholders, recordable injury frequency rate was feedback. 42.67 compared to 40.94 in 2011. but also its customers, suppliers, • Enhance recruitment practices Safety will continue to be prioritised communities and environment. – in 2012, 37 per cent of externally across all of the businesses. Wesfarmers has long recognised recruited positions and 30 per the value of sustainable business Diversity cent of internal promotions (all practices, and this is the fifteenth A diverse workforce is of significant manager level and above roles) year it has reported on a number social and commercial value were filled by women. of key outcomes and performance and Wesfarmers recognises the • Ensure pay equity – a pay audit metrics. This year’s report will be importance of being an inclusive is conducted annually on a Group available in November. employer. basis (which includes a review Wesfarmers has five sustainable The Wesfarmers Diversity Policy of gender pay equity). Results business strategies which focus on: outlines four core objectives which are reviewed by the Board and • the importance of people are used to measure performance divisional Managing Directors. in this area: In addition, a pay equity review • carbon emissions reduction and of all Wesfarmers divisions was • Foster an inclusive culture – energy management undertaken during the year, in Wesfarmers divisions undertake line with previous years, which • community partnerships and different initiatives and practices did not indicate any observable investment based on the needs of their discrepancies in pay across each business, such as flexible work • a reduced overall environmental level, after taking into account practices at senior levels and paid footprint performance, experience, parental leave. • a strong economic contribution. location and job nature. Specific targets are linked to senior executive key performance objectives under the annual incentive plan.

Wesfarmers Shareholder Review 2012 21 Sustainability summary (continued)

Details of female representation Through investment in new A strong economic across the Group are set out below: technologies and systems, contribution Wesfarmers’ businesses are Wesfarmers seeks to maximise its Percentage of 30 30 focused on improving environmental contribution to the economy through female June June outcomes with a commercial focus. long-term growth that increases employees 2011 2012 overall economic activity and its Many energy efficiency initiatives capacity to generate additional direct Wesfarmers Ltd 25% 25% throughout the Group are starting and indirect employment. In 2011/12, non-executive to become evident in reducing Wesfarmers paid $7,156 million in the organisation’s base carbon directors salaries, wages and other benefits to footprint. In 2011/12 direct (Scope Senior executive 22% 21% employees. 1) and indirect (Scope 2) emissions positions reduced by two per cent to Through the taxes it pays, the (general 4,896,847 tonnes carbon dioxide company plays its part in enabling manager or equivalent compared to last year governments to invest in better above) (excluding the businesses sold development-focused infrastructure, All management 26% 28% during 2011). This reduction was health, education and other valuable and professional largely the result of energy efficiency community services. In 2011/12, roles initiatives in the businesses, offset Wesfarmers paid $1,499 million in to an extent by business growth, taxes and royalties to government. Total workforce 57% 57% and emission abatement activities By providing dividends ($1,909 million where feasible. Further details on the Diversity in 2011/12) and other investment Policy are set out on page 62 of the Wesfarmers submitted its fourth returns to shareholders, Wesfarmers annual report. report under the Energy Efficiency contributes to individual wealth In 2009 Wesfarmers prepared and Opportunities Act 2006 (EEO) in generation and to a more prosperous committed to its first Reconciliation December 2011 and our third report general community. under the National Greenhouse Action Plan (RAP). Wesfarmers’ The company’s businesses all and Energy Reporting Act 2007 in long-term objective is to have continued to improve the processes October 2011. a workforce that reflects the supporting the verification and representation of Aboriginal people Community partnerships auditing of suppliers to ensure in the broader community. Each and investment the responsible sourcing of division now has its own plan and Wesfarmers has long held the belief products and services. programs to ensure that Aboriginal that to have a healthy business, Wesfarmers sustainability people feel welcomed in our you must have strong vibrant report businesses as customers, team communities in which to live and The Wesfarmers 2012 sustainability members and citizens. The 2012 work. One aspect of contributing report will be published in November, RAP review and 2013 plan will be positively to local communities is and contains much more detail – and available in November. through community partnerships specific data – on all of the above and investments. Carbon emissions reduction priorities. and energy management In addition to each division’s On 1 July 2012 the federal programs and initiatives, government’s Clean Energy Wesfarmers has a number of Future legislation became law in key partnerships across the arts, Australia. Wesfarmers has a clear Indigenous development, medical focus not only on legal compliance research and education in Australia but, through strong investment in and New Zealand. energy efficiency and emission abatement, is seeking to reduce its In 2011/12 our total community emission intensity as its businesses contributions, including direct (cash grow, including reducing absolute and product) and indirect (facilitating emissions where possible. contributions by customers and others) contributions, exceeded $70 million in Australia and New Zealand.

22 Wesfarmers Shareholder Review 2012 Sustainability performance

Greenhouse gas emissions Energy use Water use (Scope 1, 2 and 3) (million gigajoules) (megalitres) (tonnes carbon dioxide equivalent) 2012 5,808,553 2012 30.00 2012 13,151 2011 6,349,576 2011 33.75 2011 12,107 2010* 6,132,809 2010* 32.40 2010* 12,243 2009 6,298,544 2009 29.76 2009 9,704 2008∆ 6,139,222 2008∆ 31.07 2008 9,966

* The reduction in FY10 is primarily due to more * The increase in FY10 is primarily due to the full- * Increase due to improved reporting. accurate measurement of refrigerant gas year availability of gas supplies to our Western emissions in Coles, and nitrous oxide emissions Australian industrial businesses. in WesCEF. ∆ Includes the former Coles Group except ∆ Includes the former Coles Group except Officeworks. Officeworks.

Lost time injury frequency rate Community contributions (LTIFR) ($m)

2012 10.90 2012 31.82 40.42 72.24 Direct, in-kind and product. 2011 12.78 2011 33.8 43.8 77.6 Community raised contributions 0 10000002000000300000040000005000000600000070000008000000 supported by Wesfarmers. 2010 10.95 0.0000020104.21875 8.4375019.612.6562516.8750021.0937526.225.3125045.829.5312533.75000 0.0000001.5250003.0500004.5750006.1000007.6250009.15000110.675001 2009 13.06 2009 25.8 31.8 57.6 2008∆ 9.94

∆ Excludes Coles and Officeworks.

Wesfarmers’ greenhouse gas emissions (Scope 1 and 2) as measured under the NGER Act from 2009 to 2012 (tonnes CO2e) 6,000,000 5,000,000

0.0000009.72500019.45000129.17500138.90000248.62500258.35000268.07500377.800003 0.0000004,000,0001.6375003.2750004.9125006.5500008.1875009.82500011.46249913.099999 3,000,000 2,000,000 1,000,000 0 2009 2010 0.0 7.5 15.0 22.5 201130.0 37.5 45.0 52.5 60.02012 Scope 1 Scope 2 Total

More information More information regarding Wesfarmers activities can also be found at: • Carbon Disclosure Project w ww.cdproject.net • Dow Jones Sustainability Index w ww.sustainability-index.com • Australian Packaging Covenant w ww.packagingcovenant.org.au • Energy Efficiency Opportunities Act w ww.energyefficiencyopportunities.gov.au • National Greenhouse and Energy Reporting Act in Australia w ww.climatechange.gov.au/reporting

Wesfarmers Shareholder Review 2012 23 Board of directors

1 2 3 4 5

Bob Every AO, age 67 (1) roles at Tubemakers of Australia Investor Relations and Business Chairman Limited. He has held a number of Development departments. In 2010, Status and term: Appointed in commercial positions in Wesfarmers’ Terry also assumed responsibility for 2006 as a non-executive director Business Development Department the Group’s Chemicals, Energy and (independent) and appointed including General Manager. In 1999 Fertilisers and Industrial and Safety Chairman in November 2008. Richard was Managing Director of businesses. Chairman of the Remuneration and Wesfarmers Dalgety Limited, which Nomination committees and member subsequently became Wesfarmers Colin Carter AM, age 69 (4) of the Audit Committee. Landmark Limited, a position he retained until his appointment as Status and term: Appointed Skills and experience: Bachelor of Finance Director of Wesfarmers in 2002 as a non-executive Science degree and a Doctorate Limited in 2002. He was appointed director (independent). Member of of Philosophy (Metallurgy) from Deputy Managing Director and Chief the Remuneration and Nomination the University of New South Financial Officer of Wesfarmers committees. Wales. Bob was the Chairman Limited in 2004 and assumed the Skills and experience: Bachelor of of the New Zealand-based listed role of Managing Director and Chief Commerce degree from company Steel and Tube Holdings Executive Officer in July 2005. University and a Master of Business Limited and a director of OneSteel Administration from Harvard Terry Bowen, age 45 (3) Limited. Other executive positions Business School. Colin has had Finance Director previously held include Managing extensive experience advising on Director of Tubemakers of Australia Status and term: Appointed in corporate strategy and corporate Limited, President of BHP Steel, 2009 as an executive director (non- governance and his consultancy and Managing Director and Chief independent). Attends committee career has included major projects Executive Officer of OneSteel meetings by invitation. in Australia and overseas. Limited, a position from which Skills and experience: Bachelor he retired in May 2005. Bob’s of Accountancy degree and Fellow James Graham AM, age 64 (5) considerable experience as both of CPA Australia. Terry has held a Status and term: Appointed in an executive officer and a director number of finance positions with 1998 as a non-executive director of major Australian companies has Tubemakers of Australia Limited, (non-independent). Member of the given him a good insight into, culminating in his appointment Remuneration and Nomination and understanding of, the roles as General Manager Finance. committees. and responsibilities of both senior Terry joined Wesfarmers in 1996 management and directors. and undertook various roles with Skills and experience: Bachelor of Richard Goyder, age 52 (2) Wesfarmers Landmark Limited, Engineering in Chemical Engineering Managing Director where he was appointed Chief with Honours from the University of Sydney and a Master of Business Status and term: Appointed in Financial Officer, until its acquisition Administration from the University of 2002 as an executive director (non- by AWB Limited in 2003. He was New South Wales. James has had independent). Attends committee then appointed the inaugural Chief an active involvement in the growth meetings by invitation. Financial Officer for Jetstar Airways, prior to rejoining Wesfarmers as of Wesfarmers since 1976 in his roles Skills and experience: Bachelor Managing Director, Wesfarmers as Managing Director of Gresham of Commerce degree from the Industrial and Safety in November Partners Limited since 1985 and University of Western Australia. 2005. Terry became Finance Director, previously as Managing Director of Completed the Advanced Coles in 2007 and Wesfarmers Rothschild Australia Limited and Management Programme at the Finance Director in May 2009 a director of Hill Samuel Australia Harvard Business School in 1998. with responsibility for the Group’s Limited. Richard joined Wesfarmers in 1993 Finance, Treasury, Risk & Assurance, after working in various commercial

24 Wesfarmers Shareholder Review 2012 6 7 8 9 10

Tony Howarth AO, age 60 (6) formulating strategy and advising a Master of Business Administration Status and term: Appointed in on off-shore and on-shore from the University of Sydney. Diane 2007 as a non-executive director investment opportunities. has more than 11 years experience (independent). Chairman of the as a banking executive, which Audit Committee and member of Wayne Osborn, age 61 (8) culminated in her appointment the Nomination Committee. as the head of Westpac Banking Status and term: Appointed Corporation’s Business and Skills and experience: Senior Fellow in 2010 as a non-executive Technology Solutions and Services of the Financial Services Institute director (independent). Member of Division. She was a Partner with of Australia. Tony has more than the Remuneration and Nomination McKinsey & Company in the USA, 30 years experience in the banking committees. where she led major transformation and finance industry. He has held Skills and experience: Diploma projects and had exposure to several senior management positions of Engineering (Electrical) from the a wide variety of businesses in during his career, including Managing Gordon Institute of Technology, a areas such as financial services, Director of Challenge Bank Limited Master of Business Administration pharmaceuticals and retail. and Chief Executive Officer of from Deakin University and is Hartleys Limited. Tony is also Adjunct a Member of The Institution of Vanessa Wallace, age 49 (10) Professor (Financial Management) Engineers, Australia. Wayne started at the University of Western Australia his career in telecommunications Status and term: Appointed in Business School. and moved to the iron ore industry 2010 as a non-executive director in the mid-1970s. He joined Alcoa (independent). Member of the Audit Charles Macek, age 65 (7) in 1979 and worked in a variety and Nomination committees. Status and term: Appointed in of roles and locations across the Skills and experience: Bachelor 2001 as a non‑executive director Australian business, including of Commerce degree from the (independent). Member of the Audit, accountability for Alcoa’s Asia University of New South Wales and Nomination and Remuneration Pacific operations, prior to being a Master of Business Administration committees. appointed Managing Director from the IMD Switzerland. Vanessa in 2001. Wayne was appointed currently leads Booz & Company’s Skills and experience: Bachelor of Chairman of the Australian Institute financial services practice in Economics degree and a Master of Marine Science in 2010. He has Australia, New Zealand and South of Administration from Monash an interest in whale conservation East Asia and previously led the University. Charles is the Chairman of and wildlife photography and was strategy practice. She has held the Sustainable Investment Research elected an International Fellow of the multiple governance roles at the Institute Pty Limited, Racing New York-based Explorers Club in highest level within Booz’s global Information Services Australia Pty 2004. His work in support of the arts partnership. She is an experienced Limited, and the Vice-Chairman of through the Australian Business Arts management consultant who has the IFRS Advisory Council (formerly Foundation was recognised with the been with Booz & Company for more the Standards Advisory Council 2007 WA Business Leader Award. than 20 years. She is actively involved of the International Accounting in the firm’s customer, channels and Standards Board). He is also a Diane Smith-Gander, age 54 (9) markets activities which focus on member of the investment committee areas such as customer experience, of Unisuper Limited and the AICD Status and term: Appointed in offer design and channels to market Corporate Governance Committee. 2009 as a non-executive director across a number of industries. She With a strong background in (independent). Member of the Audit has had hands on experience in corporate governance and a long and Nomination committees. mergers and acquisitions and post career in financial services working Skills and experience: Bachelor merger integration. at a senior executive level, Charles of Economics degree from the brings extensive experience in University of Western Australia and

Wesfarmers Shareholder Review 2012 25 Corporate governance summary The Board of Wesfarmers Limited is committed to providing a satisfactory return to its shareholders and fulfilling its corporate governance obligations and responsibilities in the best interests of the Company and its stakeholders. The Board is a strong advocate The Board aims to protect Mr Archie Norman, who has of good corporate governance and enhance the interests of significant retail experience, was as evidenced by the policies and its shareholders, while taking appointed in 2009 as an adviser practices outlined below. into account the interests of to the Board on retail issues. In other stakeholders, including this role, Mr Norman attends Introduction employees, customers, suppliers Board meetings on a regular basis, This corporate governance and the wider community. as well as the Board’s annual summary outlines Wesfarmers’ planning session. Mr Norman has corporate governance policies The Board has a Charter which had a major role in helping guide and practices for the year ended clearly sets out the role and the turnaround of the former Coles 30 June 2012, and at the date responsibilities of the Board, group businesses. of the annual report. and describes the separate functions of management and Director independence The corporate governance responsibilities delegated. Directors are expected to bring framework of Wesfarmers views and judgement to the operates according to a series of Functions of management Board’s deliberations that are governance charters and policies The Wesfarmers Managing independent of management which have been adopted by the Director has responsibility for and free of any business or other Board. The Board recognises the day-to-day management of relationship or circumstance that that corporate governance is Wesfarmers and its businesses, could materially interfere with the not a static concept, and it and is supported in this function exercise of objective, unfettered or regularly reviews and updates by the Wesfarmers executive independent judgement. the Company’s governance leadership team (which comprises charters and policies by reference the direct reports to the The Board regularly reviews the to corporate governance Wesfarmers Managing Director, independence of each non- developments and best practice divisional managing directors executive director in light of the in Australia and overseas. and the Executive General information which each director is Manager, Business Development). required to disclose in accordance Compliance with Australian The Board maintains ultimate with the Corporations Act, the corporate governance responsibility for strategy and Board Charter and Wesfarmers’ standards control of Wesfarmers and Conflicts of Interest Policy. In accordance with the disclosure its businesses. requirements of the ASX Listing The Board has reviewed the Rules, the Board believes that the Structure and composition position and relationships of all governance policies and practices of the Board directors in office as at the date adopted by Wesfarmers during Wesfarmers is committed to of this report and considers that: the reporting period for the year ensuring that the composition of • seven of the eight non-executive ended 30 June 2012 follow the the Board continues to comprise directors are independent; and recommendations contained in directors who bring an appropriate the ASX Corporate Governance mix of skills, experience, expertise • Mr Graham is deemed not to Principles and Recommendations and diversity (including gender be independent by virtue of his (“ASX Principles”). diversity) to Board decision position as Managing Director making. of Gresham Partners Limited, Role and responsibilities of which acts as an investment The Board is currently comprised the Board and Management adviser to the Company. Functions of the Board of 10 directors, with eight non- The role of the Board is to executive directors. The Board Conflicts of interest approve the strategic direction is of the view that its current The directors have a duty not to of the Group, guide and monitor directors possess an appropriate place themselves in a position the management of Wesfarmers mix of skills, experience, expertise which gives rise to a real or and its businesses in achieving and diversity to enable the Board substantial possibility of conflict of its strategic plans, and oversee to discharge its responsibilities interest or duty, in relation to any overall good governance practice. and deliver the Company’s matter which is or is likely to be corporate objectives. brought before the Board.

26 Wesfarmers Shareholder Review 2012 Directors are under an ongoing Evaluation of the Board and This policy encourages obligation to disclose to the its committees employees, contractors and Board such interests immediately, The Nomination Committee is suppliers to raise any concerns in addition to the statutory responsible for scheduling formal and report instances of unethical, obligation to disclose to the performance reviews of the Board illegal, fraudulent or undesirable Board any material personal and its committees at least every conduct either internally with interests in a matter. two years. This includes the Audit management within his or her and Remuneration Committees. division (as applicable) or with a The Board has adopted a Conflicts The Board then undertakes an Protected Disclosure Officer, or of Interest Policy, setting out the evaluation process to review externally via a telephone helpline disclosure obligations of each its performance. managed by an independent third director with respect to conflicts of party. Wesfarmers is committed interest, and the procedures to be A Board performance review to absolute confidentiality and followed where: was conducted in July 2011, fairness in all matters raised and the Board committees • a director has disclosed a and will support and protect performance review was conflict of interest in accordance those who report violations in conducted in December 2010. with the policy; or good faith. The Audit Committee Both were facilitated by an is responsible for overseeing • the Board has identified a matter external consultant. which is or is likely to be brought compliance with this policy. With respect to the Nomination before the Board, which may Anti-bribery Policy Committee, the Board is place a particular director in a Wesfarmers is committed to responsible for periodically position of conflict. operating in a manner consistent assessing its effectiveness, with the laws of the jurisdictions Committees of the Board with a view to ensuring that its in which its businesses operate, The Board has established an performance accords with best including those relating to anti- Audit Committee, a Nomination practice. Committee, a Remuneration bribery and corruption. Since Committee and a Gresham Governance policies our annual report last year, we Code of Conduct Mandate Review Committee as have updated our Anti-bribery Wesfarmers has adopted a Code standing committees to assist Policy, which strictly prohibits of Conduct for all employees the Board in the discharge of its our personnel from engaging (including directors). This code responsibilities. All directors have in activity that constitutes details policies, procedures and a standing invitation to attend bribery or corruption. The policy guidelines aimed at ensuring that committee meetings. also includes processes for the highest ethical standards, implementing appropriate controls Performance evaluation corporate behaviour and to ensure that the actions of third Evaluation of the performance accountability are maintained parties who are engaged to act for of senior executives across Wesfarmers. or on behalf of Wesfarmers will not Senior executives comprising The managing directors and adversely affect the Group. members of the Wesfarmers chief financial officers of each leadership team, have an annual Wesfarmers has in place an division are required to report and long-term incentive or ‘at risk’ extensive training program on annually to the Audit Committee component as part of their total its Anti-bribery Policy. The terms on their division’s compliance remuneration package. The mix of of the policy are also required to with the code. remuneration components and the be communicated to suppliers, measures of performance used Whistleblower protection contractors and business partners, in the incentive plans have been The Whistleblower Policy of both at the outset of a business chosen to ensure that there is a Wesfarmers has been adopted relationship, and as appropriate strong link between remuneration to promote and support a culture during the course of their work earned and the achievement of of honest and ethical behaviour, for the Group. sustainable performance, which corporate compliance and good leads to satisfactory returns for corporate governance. shareholders.

Wesfarmers Shareholder Review 2012 27 Corporate governance summary (continued)

Diversity Policy Share Trading Policy Integrity in financial Wesfarmers recognises the The Share Trading Policy of reporting social and commercial value of Wesfarmers states that all Role of the Audit Committee diversity and strives to create employees and directors of the The Audit Committee monitors a work environment which is Group are expressly prohibited internal control policies and inclusive of all people regardless of from trading in Wesfarmers’ procedures designed to safeguard gender, age, race, disability, sexual securities, or securities in other company assets and to maintain orientation, cultural background, entities in which Wesfarmers the integrity of financial reporting. religion, family responsibilities has an interest, if they are in The Wesfarmers Managing or any other area of potential possession of ‘inside information’. Director, Finance Director, the difference. Directors and senior executives are Group General Counsel, the While Wesfarmers is committed generally prohibited from trading Executive General Manager Group to fostering all types of diversity, in the Company’s securities Accounting, Assurance and Risk, gender diversity has and continues during ‘black out’ periods (which the General Manager Group to be a priority for the Group. are the periods from the close of Assurance & Risk, the Company As set out in the Wesfarmers books to one day following the Secretary, the external auditor Diversity Policy, the Group’s announcement of the full-year (Ernst & Young), and any other approach to gender diversity is or half-year results). Trading persons considered appropriate, based on four core objectives: during these periods may only attend meetings of the Audit foster an inclusive culture; improve be permitted with prior approval Committee by invitation. talent management; enhance of the Chairman in exceptional Role of the external auditor recruitment practices; and ensure circumstances (such as severe The Company’s external auditor is pay equity. financial hardship), subject at all Ernst & Young. The effectiveness, times to the general prohibition As part of Wesfarmers’ performance and independence on insider trading. commitment to diversity, the of the external auditor is reviewed Company strives to make its Market Disclosure Policy annually by the Audit Committee. businesses a place where Wesfarmers understands and Ernst & Young has provided the Aboriginal and Torres Strait respects that timely disclosure required independence declaration Islander people feel welcome of price sensitive information is to the Board for the financial year and valued, as employees, central to the efficient operation ended 30 June 2012. customers and citizens. To do this, of the securities market and has Wesfarmers has a Reconciliation adopted a comprehensive Market Risk management Action Plan, which outlines Disclosure Policy. Risk is an accepted part of doing specific measurable actions business and Wesfarmers is The Market Disclosure Policy, to be undertaken across the committed to the identification, and the associated training and Wesfarmers Group, targeting monitoring and management of education program, are reviewed employment and community material business risks associated and monitored by the Audit engagement. with its business activities across Committee. Compliance with the Group to create long-term As a large employer, Wesfarmers the policy is also monitored by shareholder value. can provide Aboriginal and Torres the Board. Strait Islander people with greater Risk management oversight Shareholder Communications opportunities to participate in the and responsibility Policy country’s economic prosperity, The division of the key risk The Communications Policy through sustainable employment management functions is set of Wesfarmers promotes the and support through community out in the diagram opposite. communication of information partnership programs. The to shareholders through the Wesfarmers Reconciliation distribution of an annual report Action Plan acts as an ‘umbrella’ and announcements through the document to the Aboriginal ASX and the media regarding strategies developed in each of the changes in its businesses, and the Company’s business divisions. Chairman’s address at the annual general meeting.

28 Wesfarmers Shareholder Review 2012 Board

• Reviewing, approving and monitoring the Group’s risk management systems, including internal compliance and control mechanisms. • Approving and monitoring the systems and policies to ensure integrity of budgets, financial statements and other reporting.

Wesfarmers Managing Director Audit Committee and Finance Director

• Providing a declaration to the Board regarding • Reviewing and assessing the Group’s the financial statements. processes which ensure the integrity of financial statements and reporting, and • Assessing and providing assurance to the associated compliance with legal and Board that the Group’s risk management regulatory requirements, including accounting and internal control systems are operating standards. effectively in all material respects. • Reviewing the qualifications, independence, performance and remuneration of, and relationship with, the Group’s external auditors. • Overseeing the internal controls, assurance, policies and procedures which the Group uses to identify and manage business risks. • Overseeing the policies and procedures for ensuring the Group’s compliance with relevant regulatory and legal requirements.

Management Group Assurance and Risk • Implementing and maintaining risk • Monitoring the effectiveness of risk management and internal control systems. management systems through a single outsourced audit provider. • Preparing divisional Risk Compliance Reports (approved by each divisional board). • Preparing internal audit reports and reporting to the Audit Committee on the adequacy of • Preparing a consolidated Group Risk risk management and the internal control Compliance Report setting out key risks and environment. In addition, the General Manager the controls and processes implemented Group Assurance & Risk maintains direct and to mitigate these risks (approved by the unfettered access to the Audit Committee. Wesfarmers executive leadership team). • Facilitating the annual risk compliance reporting • Reporting to the Board on the adequacy of the and preparing the Group Risk Compliance systems and processes in place to manage report for review by the Audit Committee. material business risks.

The complete corporate governance statement is included on pages 57 to 64 of the 2012 annual report.

Wesfarmers Shareholder Review 2012 29 Remuneration overview This summary provides an overview of Wesfarmers’ executive remuneration framework and key changes for the 2012 financial year.

The Wesfarmers Limited Board is committed to an executive remuneration framework that is focused on driving a performance culture and linking executive pay to the achievement of the Group’s strategy and business objectives and, ultimately, generating satisfactory returns for shareholders. The remuneration report, which can be found on pages 70 to 86 of the 2012 annual report, explains how Wesfarmers’ performance for the 2012 financial year has driven remuneration outcomes for senior executives. Key changes A summary of the key changes to remuneration-related matters approved for the 2012 financial year is set out below: Executive directors and senior executives Senior executive fixed annual remuneration increased effective 1 October 2011, based on business and individual performance and aligned to market remuneration levels. The average senior executive (i.e. Wesfarmers leadership team) fixed remuneration increase was 5.4 per cent. The Board has determined that no increase will be made to the fixed remuneration for the Group Managing Director for the 2013 financial year. As set out in the 2011 Remuneration Report, having considered current market practice and shareholder views, the Board approved various changes to the November 2011 Wesfarmers Long Term Incentive Plan (WLTIP) allocation including: • introducing relative Total Shareholder Return (TSR) as a second performance metric; • extending the performance period from three to four years; and • increasing the level of performance required for full vesting in relation to both performance hurdles to the 75th percentile of the comparator group. The Board continued to review the WLTIP during 2012. To better align the WLTIP with prevailing market practice, the Board has approved further changes to the 2012 WLTIP, including that executives will receive an allocation of performance rights (rather than performance shares, as in prior years). As performance rights are a right to be allocated a share in the future, executives are not entitled to dividend or voting rights during the performance period. Shareholder approval will be sought at the 2012 Annual General Meeting (AGM) for 2012 WLTIP allocations proposed to be made to the Group Managing Director and the Finance Director.

Non-executive directors A thorough review of the level of fees paid to Wesfarmers non-executive directors was undertaken during the year. This included a broad ranging review of the number of hours spent by each non-executive director on Wesfarmers’ matters over the year (including preparation for and attendance at Board and Board Committee meetings, site visits, strategy sessions and other Company events), as well as an assessment of the reasonableness of the compensation provided in return for the time commitment required to oversee the business of the Wesfarmers Group, including benchmarking against comparable size companies and the hourly rates paid to professional consultants. Following this review, non-executive director fees were increased effective 1 January 2012. Main Board fees increased by 4.0 per cent and the Audit Committee chair fee increased; however, Audit Committee and Remuneration Committee member fees were not increased. The Board has determined that no increase will be made to non-executive director fees prior to 1 July 2013. Shareholder approval will be sought at the 2012 AGM to increase the maximum aggregate amount of remuneration that may be paid to the non-executive directors by $300,000 to $3,300,000 per annum (inclusive of superannuation). The current fee pool was approved by shareholders at the 2007 AGM. While the Board continues to believe the current size of the Board is appropriate for Wesfarmers, the proposed increase is intended to provide sufficient ‘headroom’ to appoint up to two additional members for a limited duration to allow for effective Board succession.

Other changes In line with the 1 July 2011 changes made to the Corporations Act 2001, the Board has implemented procedures and protocols regarding the engagement of external remuneration consultants.

30 Wesfarmers Shareholder Review 2012 Link to 2012 financial performance Annual incentive plan The Wesfarmers Group performance for the 2012 financial year has been positive and the threshold performance level was achieved. The graph below shows Wesfarmers’ net profit after tax (NPAT) for the financial year and the previous four financial years, which is an important indicator of performance and a key measure in the annual incentive plan. In addition, the majority of divisions achieved earnings improvements from 2011 to the 2012 financial year, as shown in the earnings before interest and tax (EBIT) graph below, and a number of divisions saw improvements in return on capital (ROC) while others maintained a strong double digit ROC (graph below). The financial performance for the Coles, Kmart, Chemicals, Energy and Fertilisers and Industrial and Safety divisions met or exceeded the annual financial targets set by the Board for 2012, resulting in the annual incentive plan (which is linked to divisional performance) delivering at or above target awards for the executive directors and for senior executives in those divisions. For the divisions that exceeded threshold performance levels or did not meet the annual financial targets, this was reflected in the annual incentives for senior executives in those divisions. Group net profit after tax

$m Group NPAT ($m) 2,500 $2,126 $1,922 Increase of 2,000 Increase of 10.6% $1,565 $1,522 22.8% 1,500 Increase of Increase of 2.8% $1,063 43.2%

1,000 Increase from 2007 of 35.2% 500

2008 2009 2010 2011 2012

Earnings before interest and tax

$m 2011 EBIT ($m) 2012 EBIT ($m) 1,600 $1,356 1,400 $1,166 1,200 $926 1,000 $882 800

600 $439 $369 400 $268 $283 $258 $280 $244 $204 $166 $190 200 $20 $5 Coles Home Improvement Resources Kmart Chemicals, Energy Target Industrial & Safety Insurance and Office Supplies and Fertilisers Return on capital

% 2011 ROC 2012 ROC

35 29.5% 28.5% 28.0% 30 25.9% 25 21.8% 20.1% 18.8% 20 15.2% 16.0% 13.1% 15 9.7% 7.8% 8.7% 8.4% 10 6.7% 7.1%

5 1.6% 0.4% Resources Home Chemicals, Energy Kmart Industrial Coles Target Officeworks Insurance Improvement and Fertilisers & Safety

Wesfarmers Shareholder Review 2012 31 Remuneration overview (continued)

Wesfarmers Long Term Incentive Plan A number of senior executives received an allocation of shares during the year under the 2011 WLTIP, which is subject to Wesfarmers achieving strong growth in return on equity (ROE) and relative total shareholder return. During the 2012 financial year, shares vested under the 2008 WLTIP for participating senior executives, with Wesfarmers’ compound average growth rate (CAGR) in ROE over the three-year performance period to 30 June 2011 at the 71st percentile of the S&P/ASX 50 Index. Remuneration policy and principles The Remuneration Committee has adopted four core guiding principles that are used as a reference when considering remuneration plans and policies that apply to senior executives. The overriding objective is to provide satisfactory returns to shareholders and the remuneration principles are focused on driving the leadership performance and behaviours consistent with achieving this objective. These guiding principles also reaffirm the Board’s commitment to communicating key management personnel remuneration arrangements to key stakeholders in an open and transparent manner. • ownership aligned – remuneration arrangements generally encourage Wesfarmers’ senior executives to behave like long-term ‘owners’ through performance-based equity plans to increase shareholdings. The mix of remuneration components and the measures used in the performance incentive plans were chosen to ensure there is a strong link between remuneration earned and the achievement of sustainable performance that leads to satisfactory returns for shareholders; • performance focused – generally remuneration arrangements reward strategic, operational and financial performance of the business. A significant proportion of each executive’s remuneration is dependent upon Wesfarmers’ success and individual performance; • consistency and market competitiveness – a core common set of remuneration practices will generally apply to all senior executive roles. However, differential management will be applied by the Remuneration Committee to meet specific needs. Wesfarmers positions fixed remuneration and incentives to be competitive with executives in comparable companies, with an opportunity for highly competitive total remuneration for superior performance; and • open and fit for purpose – remuneration arrangements can be innovative to respond to business and operational needs. However, all remuneration arrangements for KMP will be communicated to key stakeholders in an open and transparent manner. Overview of remuneration components Details of the remuneration framework and actual outcomes for the 2012 financial year are set out in the remuneration report, which can be found on pages 70 to 86 of the 2012 annual report.

Participants Group Managing Finance Managing Non-executive Remuneration Director Director / senior Director, Coles directors component executives division Fixed Fixed Annual Page 77 Page 77 Page 77 Remuneration Fees Page 85 Annual incentive Page 77 Page 77 Page 77 Long-term WLTIP – page WLTIP – page CLTIP – page 82 incentive 79 79 Post- Superannuation Page 74 Page 74 Page 74 Page 86 employment arrangements

32 Wesfarmers Shareholder Review 2012 Components and mix of executive remuneration The executive remuneration framework consists of the following components:

Base salary At risk components Fixed Annual Remuneration (FAR) Short-term incentives (STI) Long-term incentives (LTI) The Board considers that a significant portion of executives’ remuneration should be ‘at risk’ in order to provide a strong alignment with the interests of shareholders. Incentives are set at levels competitive with the market. In setting FAR: • based on the achievement • based on achievement of of annual performance performance conditions over a • reference is made to the median conditions four-year period of salaries for executives in ASX • performance conditions: • move from performance shares 25 companies • heavily weighted to return to performance rights for the • consideration is given to and earnings-based 2012 WLTIP allocation business and individual measures • performance conditions performance as well as the • include non-financial comprise growth in ROE and ability to retain key talent performance measures relative TSR, in order to ensure • additional sector or industry- set to drive leadership a strong link with the creation specific data is taken into performance and of shareholder value consideration in benchmarking behaviours consistent • to encourage longer-term share the senior executives where with achieving the Group’s ownership and further align appropriate long-term objectives in executives’ interests with those areas including safety, of shareholders, executives can diversity and succession elect to have a trading restriction planning and talent placed on shares received management on vesting of the rights for a • vested incentive comprises further one or three years both: • one-off specific plan operated • a cash component – paid for select Coles executives, following the end of the the performance conditions performance year for which are linked to • a restricted share the turnaround of the Coles component – subject to division forfeiture in the 12 months following allocation and restricted for a minimum of three years

Within this framework, the Board considers it essential to have remuneration arrangements that reflect the diversified nature of the Wesfarmers business and are structured to reward executives for performance at a Group level and, for divisional executives, also at a divisional level. Wesfarmers’ mix of fixed and at risk components for each of the executives disclosed in the remuneration report, as a percentage of total target annual remuneration for the 2012 financial year, is as follows:

Group MD Managing Director Coles Other senior executives

Fixed pay 34% Fixed pay 19% Fixed pay 42% STI 33% STI 11% STI 25% LTI 33% LTI 70% LTI 33%

Fixed remuneration ‘At risk’ pay – annual incentive (STI) and long-term incentive (LTI)

Wesfarmers Shareholder Review 2012 33 Five-year financial history Wesfarmers Limited and its controlled entities

All figures in $m unless shown otherwise 2012 2011 2010 2009 2008 SUMMARISED INCOME STATEMENT Sales revenue 57,685 54,513 51,485 50,641 33,301 Other operating revenue 395 362 342 341 283 Operating revenue 58,080 54,875 51,827 50,982 33,584 Operating profit before depreciation and amortisation, finance costs and income tax 4,544 4,155 3,786 3,803 2,889 Depreciation and amortisation (995) (923) (917) (856) (660) Finance costs (505) (526) (654) (951) (800) Income tax expense (918) (784) (650) (474) (366) Operating profit after income tax attributable to members of Wesfarmers Limited 2,126 1,922 1,565 1,522 1,063 CAPITAL AND DIVIDENDS Ordinary shares on issue (number) ’000s as at 30 June 1,157,072 1,157,072 1,157,072 1,157,072 799,438 Paid up ordinary capital as at 30 June 23,286 23,286 23,286 23,286 18,173 Fully-franked dividend per ordinary share (cents) 165 150 125 110 200 FINANCIAL PERFORMANCE Earnings per share (weighted average) (cents) 184.2 166.7 135.7 158.5 174.2 Earnings per share growth 10.5% 22.8% (14.4%) (9.0%) (10.8%) Return on average ordinary shareholders’ funds 8.4% 7.7% 6.4% 7.3% 8.6% Net interest cover – cash basis (times) 10.8 9.5 6.8 5.0 4.9 FINANCIAL POSITION AS AT 30 JUNE Total assets 42,312 40,814 39,236 39,062 37,178 Total liabilities 16,685 15,485 14,542 14,814 17,580 Net assets 25,627 25,329 24,694 24,248 19,598 Net tangible asset backing per ordinary share $4.45 $4.12 $3.61 $3.13 ($1.36) Net debt to equity 19.1% 17.1% 16.3% 18.3% 47.3% Total liabilities/total assets 39.4% 37.9% 37.1% 37.9% 47.3% STOCK MARKET CAPITALISATION AS AT 30 JUNE 34,846 36,913 33,171 26,337 29,819

34 Wesfarmers Shareholder Review 2012 Group structure

Retail Industrial and other businesses

Home Chemicals, Industrial Other Coles Improvement Target Kmart Insurance Resources Energy and and Safety activities and Office Fertilisers Supplies

Coles/Bilo Target Curragh CSBP Bunnings Australia Gresham (Aust/NZ) (Aust/NZ) Lumley Blackwoods Partners (50%) Coles Target insurance Bengalla Australian Bullivants Express Officeworks Country (40%) Gold Kmart Tyre WFI Coregas Reagents & Auto Oamps (75%) Total Wespine Liquorland Harris Urban Service Fasteners Industries Technology by target New Zealand Protector (50%) Vintage Alsafe Lumley Queensland Cellars Nitrates Crombie (50%) BWP Trust Lockwood (23.5%) first Choice New Zealand Liquor Blackwoods Australian protector Oamps UK Vinyls Coles NZ Safety Online Packaging Air Liquide House WA (40%) Hotels Safety Source Kleenheat Gas

Wesfarmers Shareholder Review 2012 35 Wesfarmers brands Wesfarmers owns some of the best-known businesses in Australia and New Zealand.

Coles

Home Improvement and Office Supplies

Target

Kmart

Insurance

Resources

Chemicals, Energy and Fertilisers

Industrial and Safety

Other activities

36 Wesfarmers Shareholder Review 2012 Corporate directory Wesfarmers Limited ABN 28 008 984 049

Registered office Financial calendar+ Level 11, Wesfarmers House Record date for final dividend 27 August 2012 40 The Esplanade, Perth, Final dividend paid 28 September 2012 Western Australia 6000 Annual general meeting 14 November 2012 Telephone: (+61 8) 9327 4211 Half-year end 31 December 2012 Facsimile: (+61 8) 9327 4216 Half-year profit announcement February 2013 Record date for interim dividend February 2013 Website: ww w‌.wesfarmers.c om.au Interim dividend payable March 2013 Email: info @ wesfarmers.c om.au Year end 30 June 2013

Executive directors + Timing of events is subject to change. Richard Goyder Group Managing Director and Chief Executive Officer Annual general meeting The 31st Annual General Meeting of Wesfarmers Terry Bowen Limited will be held at the Perth Convention and Finance Director Exhibition Centre, Mounts Bay Road, Perth, Western Australia on Wednesday, 14 November 2012 Non-executive directors at 1:00 pm (Perth time). Bob Every AO, Chairman Colin Carter AM Website James Graham AM To view the 2012 annual report, shareholder and Tony Howarth AO company information, news announcements, Charles Macek background information on Wesfarmers’ businesses Wayne Osborn and historical information, visit Wesfarmers’ website Diane Smith-Gander at ww w‌.wesfarmers.c om.au Vanessa Wallace

Company Secretary Linda Kenyon

Share registry Computershare Investor Services Pty Limited Level 2, 45 St Georges Terrace, Perth, Western Australia 6000 Telephone Australia: 1300 558 062 International: (+61 3) 9415 4631 Facsimile Australia: (03) 9473 2500 International: (+61 3) 9473 2500 Website: ww w‌.investorcentre.c om/contact Designed and produced Designed and produced by Precinct Wesfarmers Shareholder Review 2012 37