Using disclosures made in the 2015 Woolworths Annual Report, 2015 Woolworths CSR Report or current website for Woolworths (http://www.woolworthslimited.com.au) identify and provide 4 examples where Woolworths is addressing attributes related to ?legitimacy theory?.

SECTION A - Multiple Choice Question (select the most right answer from the options (a-d) provided) 1 The Woolworths annual report shows in 2015, the auditors a) Deloitte charged Woolworths $2,518,000 in total audit service fees b) Deltoitte received $4,101,000 in fees c) Deloitte charged $798,000 in other audit fees d) Delpoint charged $525,000 in fees not related to audit 2 The Woolworths annual report shows in 2015, the subsidiary companies of Woolworths include a) Dan Murphy's, Big Wool, Masters and Langley's b) Cellar Man, BWS, Langton's and Masters c) Big W, Masters, EsiBuys and ALH Group d) Dan Murphy's, Masters, Langton's, and BWS 3 The Woolworths 2015 annual report shows that the 20 largest shareholders hold _______percent of the issued shares a) 45.05 b) 46.50 c) 47.3 d) None of the above 4 Woolworths show in their 2015 Annual report that liquidity risk is managed in part by: a) Checking interest rates regularly and negotiating the best rates with their bank b) Maintaining liquidity reserves in the form of bilateral standby facilities c) Having a business continuity plan d) Making sure they have a good reputation so the bank will lend them money 5 The Woolworths 2015 annual report financial data shows that the Home Improvement segment a) Is the most profitable area of the business b) comprised 14.8% of total consolidated capital expenditure in 2015 c) Earned $1,876,1000 revenue from sale of goods d) All of the above 6 The value of inventory disclosed in the Woolworths 2015 financial statements a) is measured as the lower of cost or net realisable value b) is measured at fair value c) is measured at replacement cost d) is measured at fair value less estimated selling costs 7 Earnings Management techniques used by Woolworths in their 2015 annual report include: a) Taking a \"big bath\" in 2015 by closing down Masters Home Improvement store and having to pay millions is salary related entitlements to staff affected by the closure. b) Income smoothing by creating a provision for employee entitlements c) Making accrual adjustments to their receivables and failing to account for impairment d) None of the above 8 Legitimacy theory in practice found in the Woolworths 2015 Corporate Responsibility Report a) Can be seen with the voluntary disclosure of Co2 emissions to maintain the social contract with the government stakeholder b) Is illustrated with the voluntary disclosure of selected CSR information to create a positive impression of the company to maintain the social contract with interested stakeholders c) The disclosure of compliance with Australian and New Zealand workplace laws d) None of the above 9 Good corporate governance in the Woolworths 2015 annual report a) Is shown with the disclosure that the auditors are no longer independent as there are only non-executive directors on the audit committee b) Is shown as there are no independent directors and this is important as all executives need to be intimately involved in the running of the business for it to be successful c) Is shown with the disclosure that executives are paid lucrative salaries d) Is shown as executives short term bonuses were not paid due to poor overall performance during 2015 10 As shown in the annual report, Woolworths remunerated its directors in 2015 a) With only fixed salaries and these increase regularly by 10% b) With only fixed salaries and bonuses that were all achieved in 2015 c) With fixed salaries, short term incentives and long term incentives d) None of the above SECTION B -Essay **required to write an essay of 1000-1500 words (+/- 5%) on the following topic: \"Companies disclosing compliance with Global Reporting Initiative G4 principles is a waste of time\". Discuss your agreement or disagreement with this statement. (In-text and end-text referencing for this question are required and should be included at the end of Section B). NEED references !!! SECTION C - Research and Analysis (20 Marks) Question 1 Using disclosures made in the 2015 Woolworths Annual Report, 2015 Woolworths CSR Report or current website for Woolworths (http://www.woolworthslimited.com.au) identify and provide 4 examples where Woolworths is addressing attributes related to \"legitimacy theory\". Students are required to answer this question in a structured organised format in up to 2000 words. Marks are allocated for format, content, originality, structure, spelling/grammar, and referencing. (Answers must be explained in full and the link of the examples to legitimacy theory must be clear). IMPORTANT NOTE: There are 20 marks allocated to Section C, therefore full explanation is required to receive high marks and cut and paste answers only are NOT appropriate. In-text and end-text referencing is required. Page numbers and/or reference links must be provided for examples and quotes from the Annual Report or CSR report or website. NEED REFERENCES!!! Annual Report 2015 Annual Report 2015 woolworthslimited.com.au Woolworths Limited aBn 88 000 014 675 Key FY15 Financial Highlights Woolworths is evolving and innovating to meet market challenges and finding new ways to delight our customers. TOTAL DIVIDENDS RETURNED TO SHAREHOLDERS IN RELATION TO FY15 Group Sales FY15 FULLY FRANKED DIVIDENDS PER SHARE EARNINGS PER SHARE BEFORE SIGNIFICANT ITEMS1 1.8 $ 60.7 $ b 139 c 195.2 1.5 % NET PROFIT AFTER TAX BEFORE SIGNIFICANT ITEMS1 2,453.3 $ b 0.2% m c 0.7% 0.1% For footnotes refer to page 25. CONTENTS Chairman's Report \b 2 Managing Director's Report\b 4 The Results in Brief\b6 Group Financial Performance \b8 Australian Food, Liquor and Petrol \b10 New Zealand Supermarkets\b14 General Merchandise\b16 Hotels\b18 Home Improvement\b20 Overheads, Balance Sheet and Cash Flow\b22 Capital Management \b23 Space Roll-out Plans\b23 Outlook\b24 Material Business Risks \b24 Footnotes for Chairman's and Managing Director's Report \b25 Board of Directors \b26 Management Board \b 30 Directors' Statutory Report \b31 Remuneration Report \b34 Auditor's Independence Declaration \b 55 Financial Report to Shareholders \b 56 Shareholder Information and Corporate Governance Statement\b 123 For footnotes refer to page 25. 2|WOOLWORTHS LIMITED | ANNUAL REPORT 2015 Chairman's Report On behalf of the Board of Directors and management team, I am pleased to present you with our detailed reports for financial year 2015. GORDON CAIRNS Chairman I am delighted and excited to have joined the Woolworths Board on 1 September 2015. While financial year 2015 was a challenging one for the Company, I am already working closely with my Board colleagues and management on the three year journey to regain momentum across our portfolio of businesses. In the financial year we delivered net profit after tax before significant items1 of $2.45 billion in line with last year's result, and dividends are slightly up on last year. In May we updated investors on the Company's strategy. Throughout the year we have also made a number of significant changes to our senior management team. At the core of these changes was a commitment to put customers at the heart of everything we do and deliver long-term value for shareholders. Financial Results Net profit after tax before significant items1 increased 0.1% on the prior year to $2,453.3 million. On a statutory basis, after reflecting the impact of significant items1, net profit after tax decreased 12.5% to $2,146.0 million. Group sales were $60.7 billion, representing a decrease of 0.2%. This was driven by lower fuel sales as a result For footnotes refer to page 25. of changes to the Woolworths-Caltex alliance2, the declining average fuel sale price, as well as a disappointing trading result in Australian Food and Liquor and General Merchandise. Excluding Petrol, sales increased 2.5% on the prior year. Dividends The Board announced a 1.5% increase in dividends per share to 139 cents for financial year 2015, up from 137 cents in financial year 2014. Your Board Financial year 2015 has been one of significant renewal for your Board. On 1 September 2015, Chairman Ralph Waters stepped down and retired as a Director. Ralph served as Chairman for nearly three years and as a Director for more than four years. I thank him for his service to the Company. Non-Executive Director, Mr Ian Macfarlane AC, also retired from the Board in March 2015. This retirement formed part of the Board's succession process, and enabled a suitable transition following the appointment of Mr Scott Perkins in September 2014. As previously announced, the Board will continue to review its skills and capabilities. RESULTS FY11 174.6 FY12 178.3 FY13 190.2 196.5 FY14 FY15 195.2 EPS (cents) before significant items FY11 FY12 FY13 1 122 126 133 FY14 137 FY15 139 Dividends per share (cents) CHAIRMAN's report|3 The Board announced a 1.5% increase in dividends per share to 139 cents for financial year 2015, up from 137 cents in financial year 2014. People Significant changes have been made to our senior management team. In June 2015, Chief Executive Officer and Managing Director, Grant O'Brien, informed the Board of his intention to retire from the Company. Mr O'Brien has been CEO since October 2011. On behalf of the Board, senior management and staff, I would like to thank Grant for his commitment to Woolworths over 28 years, and his willingness to stay at the helm to ensure a smooth transition to his a successor. Given the importance of finding the right leader for Woolworths, the Board determined to conduct a global CEO search. This process is progressing well and a range of internal and external candidates have been identified. In February 2015, Brad Banducci was appointed Managing Director, Woolworths Food Group, following the departure of Tjeerd Jegen. Brad was replaced as the Managing Director of Woolworths Liquor Group by Martin Smith, former General Manager of Dan Murphy's. Alistair McGeorge, who was Managing Director of BIG W, left the company in August 2015, and Penny Winn is acting as Managing Director of BIG W. Penny will leave the Company by the end of this year to pursue a non-executive director career. Executive search processes for the roles of Managing Director of BIG W and Director of Group Retail Services are underway. Conclusion Financial year 2015 will be remembered as a year of significant change for Woolworths. This was inevitable given the new retail challenges outlined by management at the Investor Day in May 2015, and the Company's strategy to meet them, including accelerating our lean retail model to compete in a new environment. Finally, the Board would like to acknowledge the contribution made by our 190,000-plus employees. Staff work hard every day to serve our customers. It is their unstinting commitment to our customers that will ensure Woolworths continues to grow and deliver for shareholders. Group Sales decreased 0.2% to $60.7b 60.7b $ Group Sales excluding Petrol increased 2.5% to $55.0b 55.0b $ Net profit after tax before significant items1 increased 0.1% to $2,453.3m 2,453.3m $ Dave Chambers was appointed Director of Woolworths Supermarkets, with Pat McEntee appointed Acting Managing Director of Progressive Enterprises in New Zealand. For footnotes refer to page 25. 4|WOOLWORTHS LIMITED | ANNUAL REPORT 2015 Managing Director's Report Our scale, network, supply chain and proven ability to extract operating efficiencies provide a strong competitive advantage in an era that brings new challenges. Grant O'BRIEN Managing Director and Chief Executive Officer Woolworths is a company that strives to deliver growth year-on-year. Whilst we delivered a profit that was in line with last year, we did not deliver growth, which was disappointing. We know our shareholders want consistently strong returns year in and year out. Despite our profit results, we have increased our dividend to shareholders on last year. Our customers expect a consistently great shopping experience with the best range of products at the lowest prices in a convenient location. The challenges of the year have renewed our focus on winning customers. A strong business with lots of potential Woolworths is a strong business with lots of potential. Our scale, network, supply chain and proven ability to extract operating efficiencies provide a strong competitive advantage in an era that brings new challenges. Woolworths has market leading positions in all our key markets. In Australian Food and Liquor we are 30 per cent larger than our nearest competitor. Our Liquor business is a global leader and is growing its leadership in all its Australian formats and Countdown is New Zealand's foremost supermarket brand. Masters has the number two position in the highly attractive Home Improvement market. ALH is Australia's largest hotels operator. We are also Australia's largest domestic online retailer. The market environment has changed dramatically with stronger competition and significant shifts in customers' shopping behaviour. Woolworths is evolving and innovating to meet these challenges and finding new ways to delight our customers. We have a unique platform from which we serve more than 29 million customers per week. We are focused on improving the customer experience and increasing our share of wallet. We are focused on maintaining strong sustainable returns for our shareholders by ensuring customers put us first. For footnotes refer to page 25. We are focused on maintaining strong sustainable returns for our shareholders by ensuring customers put us first. Managing Director's report|5 This year 72% of our profit before significant items1 will be returned to our shareholders in dividends totalling $1.8b 1.8b $ In Australian Food and Liquor we are 30 per cent larger than our nearest competitor 30% We understand the challenges and are taking the steps required We recognise the challenges to realising our growth potential and have already made progress towards addressing these: 1.\t\u0007We need to regain momentum in Australian Supermarkets. This means winning the customer experience. In H2-15 we invested more than $200 million into lower prices. In a comparison of almost 9,000 items to Coles using Neilsen Homescan data over Q4-15 Woolworths was cheaper. 2.\t\u0007We need to continue to outperform in the liquor business. In the 2015 financial year we continued to grow and gain market share across all three formats; Dan Murphy's, BWS and The Wine Quarter. 3.\t\u0007We are making clear progress on Masters' path to profitability. We are adding new ranges and changing the store format. There are 11 stores now operating in the new format and all are outperforming the original format stores. Global leading brands, Sherwin-Williams (paint), Loctite (adhesives) and Honda (mowers) are due to be rolled out to stores before the end of calendar year 2015. 4.\t\u0007Accelerating the reset of BIG W. We need to convert the capabilities of BIG W into results. We have already cleared more than 80 per cent of non-productive inventory, rolled out the new Party category to 63 stores and increased the number of products available online to more than 28,000. 5. W \u0007 e are accelerating our lean retail model to compete in a new environment. In 2014, we commenced a Group-wide transformation to a lean retail model, with an emphasis on taking real dollar cost out in a low inflation environment. We are tracking ahead of our stated target of more than $500 million. We have reinvested 56,000 hours per week in service in-store, with a focus on Fresh and onshelf availability 56,000 6.\t\u0007Maintaining disciplined portfolio management and capital allocation. We are highly focused on driving long-term shareholder value. Signing off In June 2015, I announced I would be retiring from Woolworths. I am approaching my fifth year as CEO and believe it is in the best interests of the Company for new leadership to take these plans forward. Thank you for your support and I wish Woolworths and the team every success into the future. For footnotes refer to page 25. 6|WOOLWORTHS LIMITED | ANNUAL REPORT 2015 The Results in Brief $million FY15 FY14 52 weeks 52 weeks Change GROUP SALES Australian Food and Liquor Petrol (dollars) Petrol (litres) Australian Food, Liquor and Petrol New Zealand Supermarkets New Zealand Supermarkets (NZD) General Merchandise Hotels Masters Home Timber and Hardware Home Improvement Total Group Sales 42,132 5,632 4,229 47,764 5,467 5,878 4,106 1,475 930 937 1,867 60,679 41,171 7,065 4,864 48,236 5,186 5,737 4,352 1,472 752 775 1,527 60,773 2.3% (20.3%) (13.1%) (1.0%) 5.4% 2.5% (5.7%) 0.2% 23.7% 20.9% 22.3% (0.2%) Total Group Sales excluding Petrol 55,047 53,708 2.5% Earnings Before Interest and Tax (EBIT) Before significant items1 Australian Food, Liquor and Petrol New Zealand Supermarkets New Zealand Supermarkets (NZD) General Merchandise Hotels Home Improvement Central Overheads Total Group EBIT (before significant items1) 3,439.8 303.2 326.0 114.2 234.5 (224.7) (118.6) 3,748.4 3,368.0 271.4 309.8 152.9 275.4 (169.0) (123.5) 3,775.2 2.1% 11.7% 5.2% (25.3%) (14.9%) 33.0% (4.0%) (0.7%) Significant Items1 (before tax) General Merchandise transformation Business transformation Redundancy Property portfolio review Total Group EBIT (after significant items1) For footnotes refer to page 25. (148.2) (199.1) (43.0) (35.6) 3,322.5 - - - - n.c n.c n.c n.c 3,775.2 (12.0%) Managing Director's report|7 FY15 FY14 52 weeks 52 weeks Change $million GROUP PROFIT AND LOSS Before significant items1 Earnings before interest, tax, depreciation, amortisation and rent (EBITDAR) Rent 6,814.7 (2,012.6) 6,670.2 (1,898.7) 2.2% 6.0% Earnings before interest, tax, depreciation and amortisation (EBITDA) Depreciation and amortisation(i) 4,802.1 (1,053.7) 4,771.5 (996.3) 0.6% 5.8% Earnings before interest and tax (EBIT) Net financing costs Income tax expense 3,748.4 (254.8) (1,048.1) 3,775.2 (260.1) (1,056.7) (0.7%) (2.0%) (0.8%) Net profit after income tax 2,445.5 2,458.4 Non-controlling interests Total Group net profit after income tax and non-controlling interests before significant items1 7.8 (0.5%) 216.4% 2,451.7 0.1% - n.c 2,146.0 2,451.7 (12.5%) 27.50 21.32 6.18 27.11 20.90 6.21 39 bps 42 bps (3) bps 1,256.6 195.2 1,248.0 196.5 0.7% (0.7%) Interim dividend per share (cents) Final dividend per share (cents)(ii) 67.0 72.0 65.0 72.0 3.1% -% Total dividend per share (cents) 139.0 137.0 1.5% Significant Items (after income tax) 1 Total Group net profit after income tax and non-controlling interests after significant items1 Margins (before significant items)1 Gross Profit (%) Cost of Doing Business (%) EBIT (%) Earnings per Share (EPS) and Dividends Weighted average ordinary shares on issue (million) Ordinary EPS (cents) - continuing operations before significant items1 2,453.3 (6.7) (307.3) (i) Depreciation and amortisation presented in the table excludes $88.7 million of accelerated depreciation relating to significant items1 (ii) Final 2015 dividend payable on 9 October 2015 will be fully franked at 30% Returns Funds employed (period end) Return on Average Funds Employed before significant items1 14,521.3 25.73 14,614.6 26.98 (0.6%) (125) bps For footnotes refer to page 25. 8|WOOLWORTHS LIMITED | ANNUAL REPORT 2015 Group Financial Performance* Sales were $60.7 billion, representing a decrease of 0.2% driven by lower fuel sales as a result of changes to the Woolworths - Caltex alliance2, the declining average fuel sale price, as well as a disappointing trading result in Australian Food and Liquor and General Merchandise. The new arrangement with Caltex became effective progressively during Q2'15 with 131 Caltex operated sites exiting the joint venture with Woolworths no longer recording sales from these sites. Excluding Petrol, sales increased 2.5% on the prior year. Gross profit (before significant items1) as a percentage of sales increased 39 bps on the prior year to 27.5% driven by the change in sales mix from Petrol to our higher margin businesses combined with Petrol margin accretion due to falling wholesale fuel prices, outweighing gross profit margin declines in both Australia and New Zealand Supermarkets as we continued to invest in lower prices. Earnings before interest and tax (before significant items1) decreased 0.7% on the prior year to $3,748.4 million. Net financing costs decreased 2.0% on the prior year, driven by interest savings as a result of the repayment of debt partially offset by lower capitalised interest associated with fewer active property development sites. Net profit after tax and non-controlling interests (before significant items1) increased 0.1% on the prior year to $2,453.3 million, with corresponding earnings per share (EPS) down 0.7% to 195.2 cents. On a statutory basis, after reflecting the impact of significant items1, NPAT decreased 12.5% to $2,146.0 million with corresponding EPS down 13.1% to 170.8 cents. Cost of doing business (CODB) (before significant items1) as a percentage of sales increased 42 bps on the prior year to 21.3% due to subdued sales growth impacted by the changes to the Woolworths - Caltex alliance2 limiting the ability to fractionalise costs. This was partially offset by cost savings generated through improved efficiency across store operations and support functions and lower employee incentive based remuneration. * Unless otherwise stated, growth percentages and metrics represent continuing operations before significant items For footnotes refer to page 25. Managing Director's report|9 10|WOOLWORTHS LIMITED | ANNUAL REPORT 2015 Australian Food, Liquor and Petrol We are resetting our Food business to ensure a sustainable competitive position and maintain strong returns to shareholders. We are delivering on our commitment not to be beaten on price and embedding a culture which puts customers at the heart of every decision. Trading Performance* Sales for the year were $47.8 billion, a decrease of 1.0% on the previous year as a result of the impact on our Petrol sales due to the changes to the Woolworths - Caltex alliance2 and the declining average fuel sale price. Earnings before interest and tax increased 2.1% on the prior year reflecting subdued sales growth in the second half impacted by our decision to significantly increase our investment in price. Australian Food and Liquor sales were $42.1 billion, an increase of 2.3% on the previous year. Comparable sales increased 0.7% on the previous year. We reported deflation in average prices (when the effects of promotions and volumes are included) of 5.2% in Q4'15, significantly above the 2.8% deflation for FY15 (FY14: deflation of 3.1%) as we accelerated our investment in lower prices for our Australian Food customers. The standard shelf price movement index3 which excludes the significant investment in price and promotional activity increased by 1.2% in Q4'15 which was also well below the FY15 increase of 3.0% (FY14: 2.1%). Despite significant inflation in categories like meat in Q4'15, shelf price increases were kept low as we absorbed higher cost price increases. * Unless otherwise stated, growth percentages and metrics represent continuing operations before significant items For footnotes refer to page 25. Managing Director's report|11 Woolworths Liquor Group continued its growth across all three formats - Dan Murphy's (Destination), BWS (Convenience) and The Wine Quarter (Online and Direct). Total Liquor sales for the year (including ALH Group on-premise liquor sales) were $7.7 billion, representing an increase of 4.2% on the previous year. We opened 30 (net) new supermarkets and 10 (net) new Dan Murphy's during the year and refurbished 58 supermarkets and 5 Dan Murphy's allowing us to better meet the needs of our customers. Petrol sales for the year were $5.6 billion, a decrease of 20.3% on the previous year primarily relating to changes in the Woolworths - Caltex alliance2 where sales for 131 Caltex-operated sites are no longer recognised by Woolworths. Declining average fuel sell prices also contributed to a lower sales result, with average unleaded fuel sell prices for the year declining from 151.1 cpl in FY14 to 134.4 cpl in FY15. Comparable petrol sales (dollars) decreased 10.7% for the year due to the impact of declining global oil prices and a decline in comparable volumes of 2.3%, which were impacted by an undertaking to the Australian Competition and Consumer Commission (ACCC) that limited fuel discounts that are available to customers. Australian Food and Liquor sales for the year were $42.1 billion, an increase of 2.3% on the prior year 42.1b $ Growth in non-fuel categories continued with total merchandise sales for the year increasing 9.3% and comparable merchandise sales increasing 6.2%. Australian Food, Liquor and Petrol (FLP) gross margin increased 51 bps, a result primarily driven by changes to Woolworths - Caltex alliance2 and a change in sales mix from Petrol toward the higher margin Food and Liquor businesses. Our continued investment in lowering prices has resulted in our Australian Food and Liquor gross margin declining by 53 bps. FLP costs of doing business (CODB) as a percentage of sales increased 29 bps on the prior year, driven predominately by the lower sales result and investment in store labour to improve the customer experience, partly offset by lower employee incentive-based remuneration and cost savings generated through improved efficiency across store operations and support functions. RESULTS* FY11 42,201 44,263 FY12 46,825 FY13 FY14 48,236 FY15 47,764 Sales ($m) 2,797 FY11 2,944 FY12 3,199 FY13 FY14 3,368 FY15 3,440 EBIT ($m) FLP EBIT of $3,439.8 million increased 2.1% with EBIT margin increasing 22 bps primarily due to the mix benefit from lower petrol sales. Our continued investment in stores and refurbishments across supermarkets, liquor and petrol on lower EBIT growth resulted in a decrease in the return on average funds employed (ROFE) for FLP of 195 bps on the previous year. Before Significant Items1 FY15 52 weeks FY14 52 weeks Change Sales Food and Liquor ($ million) 42,132 41,171 2.3% 5,632 7,065 (20.3%) 47,764 48,236 (1.0%) Food Liquor & Petrol ($ million) 3,439.8 3,368.0 2.1% Funds Employed ($ million) Petrol ($ million) Food Liquor & Petrol ($ million) EBIT 4,756.4 4,576.9 3.9% Gross Margin (%) 25.70 25.19 51 bps Cost of Doing Business (%) 18.50 18.21 29 bps 7.20 6.98 22 bps 73.71 75.66 (195) bps EBIT to Sales (%) Return on Average Funds Employed (%) For footnotes refer to page 25. 12|WOOLWORTHS LIMITED | ANNUAL REPORT 2015 Australian Food, Liquor and Petrol Australian Food customers benefited from our investment of MORE than $200 million in lower prices 200m $ We reinvested an incremental 56,000 hours per week in service in storeS 56,000 Total Liquor sales for the year were $7.7 billion, an increase of 4.2% on the prior year 7.7b $ Net new Australian Supermarkets opened during the year 30 Net new National Liquor stores 41 Dan Murphy's new loyalty program launched, members to date +900,000 Progress against plans - Woolworths Food Group 1.\t\u0007Firmly embedded the customer at the core of all decision making. 2. D \u0007 elivered on our price promise for customers including investing more than $200 million in price in FY15, with internal measures showing price parity with Coles at the end of June 2015. 3.\t\u0007We reinvested an incremental 56,000 hours per week in service in stores with a particular focus on Fresh and on-shelf availability. 4.\t\u0007We established a new leadership team and focused on implementing a customer-led strategy. 5.\t\u0007We were the first Australian retailer to sign the Australian Food & Grocery Industry Code of Conduct providing greater transparency and certainty for food and grocery suppliers. 6. \u0007We reinforced our position as Australia's leading online grocery retailer with another year of strong sales growth in FY15. Progress against plans - Woolworths Liquor Group 1.\t\u0007We continued our growth and market share gains in a low-growth market environment. 2.\t\u0007We balanced our growth across our formats with Dan Murphy's (Destination), BWS (Convenience) and The Wine Quarter (Online & Direct) all reporting improved results. 3.\t\u0007We better engaged customers through MyDanMurphy's, a new loyalty program successfully launched in November 2014 with over 900,000 members to date. 4.\t\u0007We reinforced danmurphys.com.au as Australia's premier online liquor destination. Managing Director's report|13 NUMBER of Australian Supermarkets FY11 255 FY11 FY12 262 FY12 FY13 271 282 FY14 FY15 292 NSW & ACT FY11 FY12 FY13 FY14 FY15 203 FY11 214 FY12 FY13 221 FY13 FY14 224 FY14 FY15 234 194 203 209 225 FY15 230 QUEENSLAND VICTORIA FY11 76 FY11 FY12 78 FY12 30 88 FY13 78 FY13 30 89 FY14 80 FY14 31 FY15 82 FY15 31 83 85 92 WESTERN AUSTRALIA SOUTH AUSTRALIA AND NORTHERN TERRITORY 29 TASMANIA Progress against plans - Petrol 1.\t\u0007We invested in forecourt improvements at more than 326 of our sites to improve the customer experience including new electronic price boards at 174 sites. 2.\t\u0007We accelerated merchandise sales with promotional offers and new range including coffee and bakery. 3.\t\u0007We increased our network profile by opening 14 (net) new Petrol sites during the year taking the total number of Woolworths owned sites to 516. 4.\t\u0007Our customers can now access their fuel discount at a further 11 Woolworths - Caltex alliance2 sites with 103 sites across the country. For footnotes refer to page 25. 14|WOOLWORTHS LIMITED | ANNUAL REPORT 2015 New Zealand Supermarkets Sales and customer numbers increased following our strategy to invest in lower prices. Managing Director's report|15 Trading performance* 4 New Zealand Supermarkets' sales for the year were NZ$5.9 billion, an increase of 2.5% on the previous year (5.4% increase in AUD). Comparable sales increased 0.9%, benefiting from our strategy to invest in lower prices and as we cycled a weaker sales performance in the prior year. EBIT increased 5.2% on the previous year to NZ$326.0 million. The Countdown Supermarkets food price index showed deflation of 0.2% (FY14: inflation of 0.7%), with deflation across a number of categories particularly Grocery and Bakery, as the Price Lockdown and Price Drop campaigns gained momentum, as well as Liquor. We have continued to see comparable growth in customer numbers and units sold since we launched these campaigns. Progress against plans - New Zealand Supermarkets 1.\t\u0007We delivered better prices by substantially increasing the number of product ranges on Price Lockdown and Price Drop (our price down programs) beating internal targets and improving our price competitiveness compared to our competitors. Gross margin decreased 17 bps on the previous year, driven by our reinvestment in price. CODB as a percentage of sales decreased 32 bps on the previous year due to the impact of lower employee incentive compensation combined with strong cost control across support functions. ROFE was 75 bps higher than the previous year, propelled by EBIT growth. In 2015, Countdown Supermarkets opened 6 (net) stores, bringing the total to 177 nationwide. 2.\t\u0007We extended and enlivened our offer by rolling out Bulk Food and continued to build our offer in Kitchenware, Sushi, Better for You, Manchester and Pharmacy. 3.\t\u0007Countdown.co.nz cemented its position as New Zealand's leading online grocery retailer with another year of strong sales growth. RESULTS* 4 FY11 5,362 5,522 FY12 FY13 5,749 FY14 5,737 FY15 5,878 Sales(NZD) ($m) 244 FY11 287 FY12 303 FY13 310 FY14 FY15 326 EBIT(NZD) ($m) FY11 207 215 FY12 221 FY13 FY14 230 FY15 237 NZ Stores (no.) including franchise stores $NZD Before Significant Items1 FY15 52 weeks FY14 52 weeks Change Sales ($ million) 5,878 5,737 2.5% EBIT ($ million) 326.0 309.8 5.2% 3,080.7 3,052.9 0.9% 23.50 23.67 (17) bps Cost of Doing Business (%) 17.95 18.27 (32) bps EBIT to Sales (%) 5.55 5.40 15 bps 10.63 9.88 75 bps Funds Employed ($ million) Gross Margin (%) Return on Average Funds Employed (%) * Unless otherwise stated, growth percentages and metrics represent continuing operations before significant items New Zealand Supermarkets sales for the year were NZ$5.9 bILLION, an increase of 2.5% on the prior year 5.9b NZ$ EBIT increased 5.2% on the prior year to NZ$326 mILLION 326m NZ$ For footnotes refer to page 25. 16|WOOLWORTHS LIMITED | ANNUAL REPORT 2015 General Merchandise We are focused on transforming BIG W into the number one choice for Australian families. Trading performance* Sales for the year were $4.1 billion, a decrease of 5.7% on the previous year and comparable store sales decreased 7.2%. Sales continue to be impacted by the ongoing BIG W transformation plan. As part of the BIG W transformation, we introduced a new merchandising system to improve insights into trading and inventory management as the business mix changes towards soft goods. Issues with implementation during Q4'15 led to low stock availability in a number of categories impacting sales. These issues are now largely resolved with final resolution expected in late September 2015. 2015 sales were also impacted by ongoing price deflation (FY15: 2.6%) and inventory clearance activity which cannibalised the sales and margins of full priced merchandise. Trading in July and August, whilst still disappointing, has improved relative to Q4'15 with comparable sales for the first eight weeks of the financial year declining by 8.9%. Categories such as Entertainment, Toys, Books, and Womenswear, are showing an improved performance while Footwear and Homewares remains weak. * Unless otherwise stated, growth percentages and metrics represent continuing operations before significant items Managing Director's report|17 The improvement in the gross margin of 94 bps reflects changes in sales mix towards higher margin apparel, improvements in buying and lower shrinkage costs and a full year contribution of EziBuy (which trades at a higher margin), partially offset by price markdowns and clearance activity. Progress against plans - General Merchandise 1.\t\u0007Delivered strong progress in the clearance of non-productive inventory through our Drop Zone campaign, with approximately 80% cleared to date and we are on track to complete all clearance activity before Christmas. CODB as a percentage of sales increased 167 bps on the prior year, driven by a disappointing trading result limiting the ability to fractionalise costs and the inclusion of EziBuy for the whole year. Total CODB was flat despite opening 2 BIG W stores and 1 EziBuy store as central store and support function costs were well managed. 2.\t\u0007Successfully rolled-out visual merchandising improvement programs in Womenswear, Menswear and Childrenswear to 40 stores in FY15, with another 67 stores planned for the first half of FY16. We have made good progress in the clearance of unproductive inventory with approximately 80% by value sold to date ahead of our initial expectations. We expect to have cleared all unproductive inventory before Christmas. EBIT of $114.2 million decreased 25.3% on the previous year. ROFE decreased 385 bps impacted by lower EBIT despite a reduction in funds employed due to the clearance of unproductive inventory. 3.\t\u0007Rolled out new Party category to 63 stores with planning underway for a further 67 stores in the first half of FY16. 4.\t\u0007Significantly increased the number of products available online to more than 28,000, with a further 8,000 products for customers to research. 5.\t\u0007Ongoing focus on newness of stock offerings with the exclusive Arts & Craft, Toys and Kardashian Kids Clothing Collection in stores in August. RESULTS* FY11 4,158 FY12 4,180 FY13 4,383 FY14 4,352 FY15 4,106 Sales(AUD) ($m) FY11 177 FY12 178 191 FY13 153 FY14 FY15 114 EBIT ($m) 165 FY11 172 FY12 178 FY13 FY14 182 FY15 184 We continue to target an improvement in profitability in FY16 but this will require an improvement in sales momentum over the key Christmas trading period. BIG W Stores (no.) 2 (net) BIG W stores opened in 2015. Sales for the year were $4.1 bILLION, a decrease of 5.7% on the previous year 4.1b $ FY15 52 weeks FY14 52 weeks Sales ($ million) 4,106 4,353 (5.7%) EBIT ($ million) 114.2 152.9 (25.3%) 1,075.6 1,230.5 (12.6%) Gross Margin (%) 34.72 33.78 94 bps Cost of Doing Business (%) Before Significant Items1 Funds Employed ($ million) Change 31.94 30.27 167 bps EBIT to Sales (%) 2.78 3.51 (73) bps Return on Average Funds Employed (%) 9.90 13.75 (385) bps Our new Party category was rolled out to 63 stores, with another 67 PLANNED FOR THE FIRST HALF OF FY16 63 For footnotes refer to page 25. 18|WOOLWORTHS LIMITED | ANNUAL REPORT 2015 Hotels We continued to improve our venues, food and entertainment offer to increase sales. Managing Director's report|19 Trading performance Hotel sales for the year were $1.5 billion, an increase of 0.2% on the previous year, with comparable sales decreasing 0.4%. Excluding the impact of the Victorian gaming tax, which came into effect in May 2014, Hotel sales increased 1.5% and comparable sales increased 0.9%. The majority of Hotel sites are located in Victoria and Queensland, where trading remains subdued. However, there has been an improvement in trading conditions over the second half of FY15 due to improved promotional offerings. Changes in sales mix saw a 29 bps increase in gross margin compared to the previous year. CODB as a percentage of sales increased 310 bps on the prior year, impacted by additional rental expenses (net of depreciation savings) following the sale and leaseback of 54 freehold sites in October 2014 and the lower trading results following the introduction of the Victorian gaming tax. Cost savings from improved efficiency across support functions and venue operations were offset by an increase in marketing and promotional spend. Progress against plans - Hotels 1.\t\u0007We progressed the roll-out of voluntary pre-commitment functionality, with the NSW roll-out completed in June. It is anticipated Queensland and Victoria will be complete by December 2015. 2.\t\u0007We refurbished 39 key venues including the Brunswick Hotel, Melbourne Hotel, Jimboomba Hotel and Dublin Docks in Queensland, the Pascoe Vale Hotel in Victoria and the Village Tavern in South Australia, with more to be completed in FY16. RESULTS FY11 FY12 1,204 FY13 1,469 FY14 1,472 FY15 1,475 Sales(AUD) ($m) FY11 3.\t\u0007We refocused our vision to improve bar sales, with entertainment, sponsorships and events beginning to show good results. FY12 4.\t\u0007We achieved continued growth in food and accommodation sales through the use of improved menus, promotions and online growth. FY15 184 196 264 FY13 275 FY14 235 EBIT ($m) FY11 FY12 Reported EBIT of $234.5 million decreased 14.9%. Excluding the impact of the additional Victorian gaming tax and additional net rental expense following the sale of the hotel sites, EBIT increased marginally on the prior year to $277.4 million. 1,153 282 294 FY13 326 FY14 329 FY15 330 Venues (no.) FY15 52 weeks FY14 52 weeks Change Sales ($ million) 1,475 1,472 0.2% EBIT ($ million) 234.5 275.4 (14.9%) Gross Margin (%) 83.11 82.82 29 bps Cost of Doing Business (%) 67.21 64.11 310 bps EBIT to Sales (%) 15.90 18.71 (281) bps Hotel sales for the year were $1,475 million, an increase of 0.2% on the previous year 1,475m $ We have 330 Hotels, with 39 key venues refurbished during the year 330hotels 20|WOOLWORTHS LIMITED | ANNUAL REPORT 2015 Home Improvement Our new format Masters stores are delivering 30% better average sales than original format stores. * Unless otherwise stated, growth percentages and metrics represent continuing operations before significant items Trading performance* Home Improvement sales for the year were $1.9 billion, an increase of 22.3% on the previous year. Masters sales for the year were $930 million, an increase of 23.7%. We opened our 58th store before the end of the financial year. At the end of FY15, Masters stores had traded on average for two years. In April this year we opened our first store with the new format and range and by the end of FY15 we had opened 9. These new stores are delivering pleasing results with the average sales per stores being 30% higher than the original format stores. The uplifts we are seeing reflect investments we have made in space and ranges in our core categories. Managing Director's report|21 In FY15 we also commenced a program to retrofit the new format and range into the existing network. We successfully retrofitted 2 stores by the end of FY15 with another store completed in early July. The early results from these stores are pleasing. At the end of FY15 approximately 20% of our store network was trading in the new format and by the end of FY16 we are aiming to have half of the store network in the new format and range. We will continue to carefully assess the performance of these new format stores and have reduced the roll-out to focus on key metropolitan areas and high potential sites as previously advised. Masters loss before interest and tax increased by 39.5% to $245.6m with the annualisation of the 18 original format stores we opened in FY14 contributing to the increase. Home Timber and Hardware sales for the year were $937 million, an increase of 20.9% on the previous year. This was driven by the acquisition of Hudson Building Supplies and Belmont Timber and Hardware, as well as strong growth in our wholesale operations benefitting from a buoyant market. Home Timber and Hardware reported strong growth in EBIT on the back of the improved sales performance and recent acquisitions. Progress against plans - Home Improvement 1.\t\u0007We opened 11 stores in new format during the financial year, including 9 new stores and 2 retrofitted stores, with financial performance significantly better than the performance of the original store formats. 2.\t\u0007We have made significant progress in our comprehensive range review with 5,300 new lines added to stores. Global leading brands, Sherwin-Williams (paint) and Loctite (adhesives) and Honda (mowers) are expected to be rolled out by the end of calendar year 2015. 3.\t\u0007We have successfully refocused our store roll-out to strategic and high potential locations, with stores opening in Penrith and Northmead in NSW during FY16. Change Masters 930 752 23.7% Home Timber and Hardware 937 775 20.9% 1,867 1,527 22.3% (245.6) (176.0) 39.5% Sales EBIT Masters Home Timber and Hardware Home lmprovement 828 1,239 FY13 1,527 FY14 FY15 1,867 Sales(AUD) ($m) FY12 15 FY13 31 49 FY14 FY15 58 Masters Stores (no.) Home Improvement sales for the year were $1.9 bILLION, an increase of 22.3% on the previous year 1.9b FY14 52 weeks Home lmprovement FY12 $ FY15 52 weeks Before Significant Items1 RESULTS 20.9 (224.7) 7.0 (169.0) 198.6% 33.0% Masters sales for the year were $930 mILLION, an increase of 23.7% on the prior year 23.7% HOME TIMBER AND HARDWARE SALES FOR FY15 WERE $937 MILLION, AN INCREASE OF 20.9% ON THE PRIOR YEAR 20.9% For footnotes refer to page 25. 22|WOOLWORTHS LIMITED | ANNUAL REPORT 2015 Managing Director's Report OVERHEADS, BALANCE SHEET AND CASH FLOW Central Overheads Central Overheads before significant items1 were $118.6 million for the year (FY14: $123.5 million), and were lower than we anticipated driven by lower employee incentive payments due to business performance and other minor one-off benefits. Central Overheads are expected to be approximately $150 million in FY16. Balance Sheet Key balance sheet movements relative to the prior year were as follows: Closing inventory increased 3.8%, driven by new store openings, in particular 30 (net) Australian Supermarkets, nine Masters and 41 (net) Liquor stores and business acquisitions in Liquor and Home Improvement. Closing inventory increased 1.6 days to 40.2 days. Average inventory increased 2.1 days or increased 1.0 days after excluding Home Improvement Net investment in inventory of -$167.8 million decreased $272.6 million, impacted by differences in the timing of creditor payments relative to the reporting date (approximately $155 million) Fixed assets and investments increased $151.1 million to $10,545.6 million, reflecting ongoing property development and capital expenditure, with 157 new stores added to the network and 211 refurbishments during the year offset by the disposal of property assets (primarily the sale of 54 freehold hotel sites) and the divestment of shares held in The Warehouse Group Intangible assets decreased $90.5 million to $6,244.5 million, primarily reflecting decreased intangible assets in our New Zealand Supermarkets business attributable to the weaker New Zealand dollar partially offset by acquisitions Net repayable debt (which includes cash, borrowings, hedge assets and liabilities) decreased $664.3 million to $3,067.3 million, driven by $925.4 million of proceeds from the sale of property (primarily the sale of 54 freehold hotel sites) and investments Other financial liabilities increased $95.6 million to $976.1 million, primarily reflecting the movement in the value of the Lowe's put option in our Home Improvement business Shareholders' equity increased $581.7 million to $10,834.2 million primarily reflecting profits generated by the Group offset by the payment of dividends Return on Average Funds Employed before significant items1 was 25.73%, a decrease of 125 bps or a decrease of 37 bps after excluding the investment in our Home Improvement business. Cash Flow Free cash flow generated by the business (before the payment of dividends and movements in borrowings) was $2,167.7 million after the acquisition of businesses and capital expenditure. Cash flow from operating activities before interest and tax decreased $262.3 million to $4,711.1 million, impacted by approximately $100 million of operating cash outflows relating to significant items1 and the timing of creditor payments relative to the reporting date (approximately $145 million). Excluding these, cash flow from operating activities before interest and tax was largely flat on the prior year. Our cash realisation ratio5 before significant items1 was 102.7% after adjusting for differences in the timing of creditor payments. Net interest paid of $310.3 million decreased $27.9 million driven by lower average net debt throughout the year due to proceeds received from the sale of fixed assets and investments. Tax payments decreased to $1,055.7 million for year (FY14: $1,162.5 million) predominately due to a higher number of payments in FY14 due to changes to Australian tax legislation. Cash used in investing activities was $1,333.9 million, a decrease of $697.5 million on the prior year. During the period, cash proceeds of $603.0 million were received from the sale of 54 freehold hotel sites, $84.2 million from the sale of shares in The Warehouse Group and $238.2 million from the sale of other property assets. Payments for the purchase of businesses were $88.7 million, reflecting the acquisition of Summergate Fine Wines and Spirits, Hudson Building Supplies, Belmont Timber and Hardware and other hotel acquisitions. Expenditure on property development of $595.7 million was higher than the prior year (FY14: $534.9 million) driven by property investment activities supporting our future store network. Investment in property, plant and equipment of $1,535.3 million included continued investment in new stores and increased store refurbishments, investment in new merchandising systems, and spend associated with our supply chain initiative, Mercury 2. Cash contributions from Lowe's in relation to our Home Improvement business were $170.0 million (FY14: $183.0 million). Transactions with non-controlling interests of $13.5m represents the acquisition of the remaining 40% interest in Hardings Hardware in October 2014. Proceeds from share issues of $6.0 million were lower than the prior year (FY14: $35.5 million) as a result of fewer employee options exercised under long term incentive plans given the transition by the Group to the use of performance rights, which do not have an exercise price. Our fixed charges cover ratio6 before significant items1 is 2.9 times. For footnotes refer to page 25. Managing Director's report|23 Capital Management Credit rating7 Woolworths remains committed to strong investment grade credit ratings. We have been reviewing our balance sheet and capital framework, including the most appropriate credit ratings to support the business going forward. On 28 August 2015, both S&P and Moody's revised Woolworths long-term senior unsecured credit ratings one notch lower. The S&P rating was revised from A(Negative Outlook) to BBB+ (Stable Outlook), whilst the Moody's rating was revised from A3 (Negative Outook) to Baa1 (Stable Outlook). These credit ratings revisions by S&P and Moody's are not expected to have a material impact on the business and will continue to provide both adequate capacity and acceptable pricing of debt for future needs. SPACE ROLL-OUT plans Space roll-out is supported by detailed plans for the next 3 - 5 years identifying specific sites. Dividends The Board have approved a final dividend per share of 72c resulting in a total dividend of 139c for FY15, an increase of 1.5% on the prior year. Franchise Stores The payment of the April 2015 and October 2015 dividends will return $1.8 billion and $0.8 billion in franking credits to shareholders. Woolworths expects that after these events, there will be approximately $1.9 billion of franking credits available for future distribution. FY15 Net Store Openings (incl. acquisitions) Australian Supermarkets New Zealand Supermarkets Countdown Long Term Target (Net) 30 20 - 30 new full range supermarkets per annum 6 3 - 5 new supermarkets per annum 1 Dan Murphy's 10 10 - 15 new stores per annum BWS (including attached) 31 6 - 10 new stores per annum (117) Grow as appropriate to support the Supermarket new store strategy FY15 net decline of 117 stores due to changes to the Woolworths-Caltex alliance2 Petrol Debt Maturities The following borrowings were refinanced or repaid during FY15: A$580 million revolving syndicated bank loan facility which matured in October 2014 was re-financed with a new A$600 million syndicated bank loan facility which will mature in October 2019; and US$100 million tranche of the US$500 million US Private Placement matured in April 2015 and was repaid using surplus cash. General Merchandise BIG W 2 EziBuy 1 In December 2014, a total of A$1.1 billion in committed bank loan facilities was terminated and a further NZ$200 million was terminated in April 2015. These facilities were identified as surplus to Woolworths' funding requirements and as a result of early termination, Woolworths will benefit from savings in borrowing costs. Hotels (ALH Group) 1 A cquire as appropriate opportunities arise 9 Plan to open approximately 5-8 Masters stores per year for the next few years During FY16 US$855.1 million of US144A Senior Notes and A$500 million domestic Senior Medium Term Notes are maturing and are planned to be repaid through a combination of surplus cash, undrawn bank loan facilities and the issuance of new Senior Notes. At the end of the year, Woolworths had $2.3 billion in undrawn bank loan facilities across the Group. Home Improvement Masters Home Timber and Hardware (Retail) 16 Only where contracted commitment Acquire as appropriate opportunities arise Property Sales Program Woolworths is generally not a long term holder of property assets and will continue its strategy of divesting property assets as appropriate market opportunities arise as demonstrated through the sale and leaseback of 54 freehold hotel sites during the year. For footnotes refer to page 25. 24|WOOLWORTHS LIMITED | ANNUAL REPORT 2015 Managing Director's Report OUTLOOK MATERIAL BUSINESS RISKS As required by S.299A(1) of the Corporations Act 2001 (Cth), and in accordance with ASIC Regulatory Guide 247 Effective Disclosure in an Operating and Financial Review (RG 247) issued in March 2013, material business risks that could adversely affect financial performance include: Market Woolworths faces increasing competition from existing and new competitors A decline in economic activity in key markets such as Australia and New Zealand and further disruption in global economies Damage or dilution to Woolworths' retail brands Failure to hedge appropriately or effectively against adverse fluctuations in interest rates and exchange rates or default by a hedge counterparty Strategic There is a risk that Woolworths' retail businesses may be adversely affected if the customer value proposition does not adequately cater to customer demands impacting results from operations and future growth Woolworths' earnings could be adversely affected by possible acquisition and divestment activities and Woolworths may face unforeseen liabilities arising from any future possible acquisitions and disposals of assets and/or businesses Regulatory There is a risk of non-compliance with, or additional obligations relating to, legal and regulatory obligations and expectations Regulation by the Australian Competition & Consumer Commission and New Zealand Commerce Commission may impair Woolworths' ability to operate and may expose it to investigations or prosecutions for violations of Australian or New Zealand competition laws Workplace health and safety regulations could impose significant costs Litigation or legal proceedings could expose Woolworths to significant liabilities Operational Risk that major business transformation and change programs fail to deliver expected benefits impacting its cost of doing business and change in business operations . Risk that Woolworths is unable to locate appropriate store sites for purchase or lease, or is unable to effectively refurbish existing stores as planned Woolworths' retail businesses are unable to effectively source merchandise and transport products to stores and customers Inability to effectively manage inventory in Woolworths' retail businesses may impair competitive position There is a risk that Woolworths' future performance may be adversely affected by unforeseen system and computer network interruptions Interruptions at Woolworths' workplaces arising from industrial disputes, work stoppages and accidents As a result of the products it sells, Woolworths faces the risk of exposure to product liability claims, public liability claims and adverse publicity Operation of certain Woolworths' businesses through significant joint ventures and strategic alliances creates additional risks and uncertainties in its business There is a risk that Woolworths may not achieve the expected growth in its exclusive brand lines There is a risk that Woolworths' expansion into new lines of business, such as home improvement, may ultimately be unsuccessful An inability to attract or retain key management Breaches of security or privacy measures, unauthorised access to or disclosure of data relating to Woolworths' customers and fraudulent activity could adversely affect Woolworths' reputation or harm performance Environmental Woolworths' operations, in particular its petrol, meat processing plants and winemaking businesses, expose it to potential environmental liability for contamination, which could have an adverse effect on Woolworths' results of operations Woolworths is subject to risks from natural disasters and adverse weather conditions Managing Director's report|25 FOOTNOTES 1 Total significant items of $425.9 million before tax ($307.3 million after tax and non-controlling interests) was recognised in FY15. Details of these costs have been provided in Note 3 to the Financial Report to Shareholders on page 65. There were no significant items in FY14. Where noted, profit and loss items have been adjusted to reflect these significant items. 2 Petrol sales and volumes are not comparable with the prior year given changes to the Woolworths - Caltex alliance that became effective progressively during H1'15. At the end of FY14, the Woolworths - Caltex fuel network comprised 633 sites, including 131 Caltex-operated sites with the remainder operated by Woolworths. Under the revised arrangements, 92 of the Caltex-operated sites were rebranded as 'Star Mart' or 'Star Shop' convenience stores and have continued to offer the Woolworths fuel discount redemption. The remaining 39 sites, which were located in close proximity to Woolworths Petrol sites, have exited the Woolworths - Caltex alliance and no longer offer Woolworths fuel discount redemptions. Since January 2015, an additional 11 Caltex-operated 'Star Mart' or 'Star Shop' sites have begun offering Woolworths fuel discount redemptions. Woolworths' petrol discounts are redeemable at 103 Caltex-operated 'Star Mart' or 'Star Shop' sites and at more than 500 Woolworths-operated sites. Woolworths has no plans to close sites as a result of any of these changes to the alliance. Given operational changes under the new arrangements with Caltex, Woolworths no longer recognises sales from the Caltexoperated sites in its financial results. The new arrangements do not have a material profit impact on the Woolworths Group. Further details on the revised arrangements with Caltex were provided in our ASX announcement dated 20 November 2014. 3 The standard shelf price movement index is calculated by comparing the number of comparable products sold in the current year using the current year prices to the number of comparable products sold in the current year using the prior year prices. The price used for this comparison is the standard shelf price. Products on promotion are excluded from the calculation (i.e., the volume of these items sold is removed from both years' sales). The calculation removes the impact of any changes in volumes and the distortion of promotional activity. 4 Growth for New Zealand Supermarkets is quoted in New Zealand Dollars. 5 Operating cash flow as a percentage of Group net profit after tax before depreciation and amortisation. 6 Group earnings before interest, tax, depreciation, amortisation and rent (EBITDAR) divided by rent and interest costs. Rent and interest costs include capitalised interest but exclude foreign exchange gains / losses and dividend income. 7 The credit ratings referred to in this document have been issued by a credit rating agency which holds an Australian Financial Services Licence with an authorisation to issue credit ratings to wholesale clients only. The credit ratings in this document are published for the benefit of Woolworths' debt providers 26|WOOLWORTHS LIMITED | ANNUAL REPORT 2015 Board of Directors GORDON CAIRNS Appointed effective 1 September 2015 Grant O'Brien Managing Director and Chief Executive Officer Jillian Rosemary Broadbent, AO Christine Cross Carla (Jayne) Hrdlicka Allan Douglas (David) Mackay Scott Redvers Perkins Michael James Ullmer Retired Directors Ralph Graham Waters Retired effective 1 September 2015 Ian John Macfarlane, AC Retired effective 31 March 2015 Thomas (Tom) William Pockett Retired effective 1 July 2014 BOARD OF DIRECTORS|27 Gordon McKellar Cairns Chairman MA (Hons) (Edin) Gordon Cairns is a Member of the Nomination Committee, People Policy Committee, Sustainability Committee and the Audit, Risk Management and Compliance Committee. Mr Cairns has held extensive Australian and international experience as a senior executive, as Chief Executive Officer of Lion Nathan Limited, and held senior management positions in marketing, operations and finance with PepsiCo, Cadbury Limited and Nestle. Mr Cairns is Chairman of Origin Energy Limited (Chairman since October 2013, Director since 2007), a non-executive director of Macquarie Group Limited (since November 2014), Macquarie Bank Limited (since November 2014) and World Education Australia Limited. He is also Director of Quick Service Restaurant Group Pty Ltd. Mr Cairns was previously Chairman of David Jones Limited (March 2014 to August 2014) and a non-executive director of Westpac Banking Corporation (July 2004 to December 2013) and Rebel Group Limited. Mr Cairns was appointed as Chairman and Director of Woolworths Limited effective 1 September 2015. Grant O'Brien Managing Director and Chief Executive Officer Grant O'Brien's career extends more than 25 years with Woolworths, starting as an accountant in Purity Supermarkets in Tasmania, a division of Woolworths Limited. He was appointed Managing Director and Chief Executive Officer in 2011. He has held the roles of Deputy Chief Executive Officer and CEO Designate, Chief Operating Officer Australian Food and Petrol, Director New Business Development, General Manager Woolworths Liquor, Senior Business Manager Marketing Supermarkets, and Marketing and Merchandise Manager for Purity. He completed the Advanced Management Program at Harvard in 2010. Mr O'Brien is a Director of The Consumer Goods Forum, the peak global body for food and grocery retailers and manufacturers and a member of the Business Council of Australia. Mr O'Brien is also a Director of the Avner Nahmani Pancreatic Cancer Research Fund. Mr O'Brien was appointed a Director of Woolworths Limited in April 2011. Jillian Rosemary Broadbent, AO Jillian Broadbent is a member of the Audit, Risk Management and Compliance Committee (since February 2011) and the Nomination Committee. Ms Broadbent has a Bachelor of Arts degree (economics and maths majors) from the University of Sydney and was recognised with an Honorary Doctorate of Letters from the University of Western Sydney. Ms Broadbent has extensive experience in corporate banking and finance in both Australia and internationally, primarily with Bankers Trust Australia. She is currently Chair of the Board of Swiss Re Life & Health Australia Limited, Chair of the Clean Energy Finance Corporation and Chancellor of the University of Wollongong. Ms Broadbent was a Member of the Board of the Reserve Bank of Australia (1998 to 2013) and has served as a Director of ASX Limited (2010 to 2012), Coca-Cola Amatil Limited, Special Broadcasting Service Corporation (SBS), Qantas Airways Limited, Westfield Property Trusts and Woodside Petroleum Ltd. Ms Broadbent was appointed a Director of Woolworths Limited in January 2011. Christine Cross BEd and MSc in Food Science and a Diploma in Management Christine Cross is Chair of the People Policy Committee (Chair since November 2012 and Member since January 2012), Member of the Sustainability Committee and a Member of the Nomination Committee. Ms Cross has a Bachelor Education from Newcastle University, a Master of Science in Food Science from Reading University and a Diploma in Management from the Open University. She is a food scientist by background and previously lectured at Edinburgh and Bath Universities. Ms Cross has extensive experience in international retail and consumer goods and now runs a retail advisory consultancy business. She started her executive career with Tesco PLC in 1989 holding many key positions throughout the company, including the Group Business Development Director for Tesco PLC from April 2002 to June 2003. Ms Cross was variously responsible for Own Brand development, establishment of the Global Sourcing Function and finally Business Development focused on international and small format expansion. She has previously held the role of Chief Retail and Consumer Advisor and was a member of the Advisory Board of Pricewaterhouse Coopers LLP. Ms Cross is a Director of Sonae SGPS SA (since 2009), Plantasgen (since 2009), Kathmandu Holdings Limited (since 2012) and Brambles Limited (since January 2014). She was formerly a director of Next Group plc (formerly known as Next PLC) (20052014), of Fairmont Hotels & Resorts Inc, Empire Company Limited (2003 to 2011), Taylor Wimpey plc and Premier Foods plc (2008 to 2010). Ms Cross is a Retail Advisor to Apax Partners Venture Capital & Private Equity (since 2005). Ms Cross was appointed a Director of Woolworths Limited in January 2012. 28|WOOLWORTHS LIMITED | ANNUAL REPORT 2015 Carla (Jayne) Hrdlicka BA, MBA Jayne Hrdlicka is a Member of the People Policy Committee and the Nomination Committee. Ms Hrdlicka holds a Bachelor of Arts degree (honours) in Economics and Mathematics from the Colorado College, Colorado Springs, Colorado USA and an MBA from Dartmouth College, Hanover, New Hampshire USA. Ms Hrdlicka is an experienced executive and advisor. She is the CEO of Jetstar Group, running one of the region's largest low fares airline groups with airlines based in Australia, New Zealand, Japan, Singapore and Vietnam. Jetstar is also one of the largest travel retailers in the region. Prior to her role as the CEO of Jetstar, Ms Hrdlicka was the Qantas Group Executive of Strategy, Technology and Transformation. She set the foundation for both customer and cost transformation across the Qantas Group. Prior to her executive career, Jayne was a Senior Partner with management consulting