Wesfarmers Financial Strategy

1. Pro-forma Financials assuming that Wesfarmers re-financed the $4bn bridging facility with debt.

i) Pro-forma financial statements

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Comments on results:

Under the alternative financing scenario, the $4 billion bridging facility used to fund Coles acquisition and working capital is replaced by a long term debt facility. The debt facility has the same terms as the USD650 million (i.e. AUD $711 million) bond issue which has a 5-year duration at 6.998% p.a. interest rate.

The interest bearing debt will increase by $3,289 million from the 2009 level, assuming the USD650 bond issue is treated as long term liabilities in the 2009 report. The interest expense will increase by AUD$230 million (6.998% of $3,289 million equity funding equivalent).

Shareholder equity is $3,289 million less under the alternative scenario, which also means that annual dividend payout is reduced by $470 million assuming $1.10 per share payout for FY2009.

Financing Cash Flow

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Interest Expense increases with increased debt from $737m to $938m

Profit after Tax reduces by $313m from $1,535m to $1,224m. This is due to the increase in interest which is partially offset by the tax benefit of interest.

Interest Bearing Debt will increase by $3,289m

Shareholder Equity reduces by $3,289m. This is due to the rights issue being replaced by long-term debt, increasing the debt-holders interest in WES.

Financing Cash Flow increases by $240m. Whilst the cash outflow of servicing the debt (interest) has increased by $230m, this is more than offset by the decreased cash outflow to equity holders (dividends) of $470m.

Imputation Credit Balance decreases by...

ii) Standard and Poors

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Under the alternative financing arrangement, the key debt ratios have moved back to the 2008 levels, specifically,