Financial and other reports - 30 June 2007 For personal ... · Mr Steinke holds an MBA and a degree...

West Australian Newspapers Holdings LimitedA.B.N. 91 053 480 845

Financial and other reports - 30 June 2007F

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West Australian Newspapers Holdings Limited

Financial and other reports - 30 June 2007

Contents Page

Directors' report 1

Managing director's report 16

Corporate governance statement 26

Financial report

Financial statements

Income statements 30

Balance sheets 31

Statements of changes in equity 32

Cash flow statements 33

Notes to the financial statements 34

Directors' declaration 77

Independent audit report to the members of West AustralianNewspapers Holdings Limited 78

The financial report covers both West Australian Newspapers Holdings Limited as an individual entityand the Group consisting of West Australian Newspapers Holdings Limited and its subsidiaries. Thefinancial report is presented in the Australian currency.

West Australian Newspapers Holdings Limited is a company limited by shares, incorporated anddomiciled in Australia. Its registered office and principal place of business is Newspaper House,50 Hasler Road, Osborne Park, WA 6017.

A description of the nature of the Group's operations and its principal activities is included in thereview of operations and activities in the directors' and managing director's reports, both of which arenot part of the financial report.

The financial report was authorised for issue by the directors on 6 September 2007. The Companyhas the power to amend and reissue the financial report.

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Directors' report

Your directors present their report on the Group consisting of West Australian Newspapers Holdings Limitedand the entities it controlled at the end of, or during, the year ended 30 June 2007.

DirectorsThe following persons were directors of West Australian Newspapers Holdings Limited during the whole of thefinancial year and up to the date of this report, unless otherwise stated:

P.J. Mansell (Chairman since 1 November 2006)E. FraunschielW.G. Kent A.O. (Chairman until retiring from the board on 1 November 2006)J.A. SeabrookK.N. Steinke (appointed 3 August 2006)M.K. Ward A.O.

P.J. Mansell - Chairman - Independent non-executive directorMr Mansell, 60, holds commerce and law degrees from the University of Witwatersrand, Johannesburg.

Mr Mansell practised as a commercial lawyer for nearly 34 years until he retired as a partner in Freehills in 2004. Over the years as a solicitor he has advised extensively on a number of wide-ranging corporate transactions. MrMansell is chairman of Zinifex Limited (director since 2004), ThinkSmart Ltd (since it listed in April 2007),Electricity Networks Corporation, trading as Western Power (since 2006) and Ferngrove Vineyards Limited (anunlisted company). He is a director of Bunnings Property Management Limited (the responsible entity for theBunnings Warehouse Trust) (since 1998) and Great Southern Plantations Limited (since 2005). Mr Mansell was anon-executive director of JDV Limited (2001-2005), Tethyan Copper Company Limited (2005-2006), FoodlandAssociated Limited (2003-2005) and Hardman Resources Ltd (May - December 2006). He is past president of theAustralian Institute of Company Directors, Western Australia Division (2002-2003).

Mr Mansell joined the board in 2001 and became chairman in November 2006.

E. Fraunschiel - Independent non-executive directorMr Fraunschiel, 61, holds a commerce degree from the University of Western Australia and attended theAdvanced Management Programme at the Harvard Graduate School of Business Management.

He retired as an executive director (1992-2002) and chief financial officer of Wesfarmers Limited in July 2002.Prior to joining Wesfarmers in 1984, he had experience in petroleum marketing, management consulting, projectlending and venture capital investment.

Mr Fraunschiel is a director of Woodside Petroleum Limited (since 2002), WCM Group Limited (since 2005),Rabobank Australia Limited (since 2005), Worley Parsons Limited (since 2005) and is the chairman ofWesfarmers Federation Insurance Limited and Lumley General Insurance Limited (director since 2002). He is amember of the Finance and Treasury Association and a fellow of CPA Australia and the Australian Institute ofCompany Directors. Mr Fraunschiel was a non-executive director of Foodland Associated Limited from 2002-2004.

Mr Fraunschiel joined the board in 2002.

J.A. Seabrook - Non-executive directorMrs Seabrook, 50, holds a commerce degree from the University of Western Australia and is a member of theInstitute of Chartered Accountants in Australia.

She is an executive director of Gresham Partners Limited and Gresham Advisory Partners Limited, and the deputychairman and a non-executive director of Electricity Networks Corporation, trading as Western Power (since 1April 2006) and chairs its finance and risk committee. She is a member of the Takeovers Panel and the MarketsPolicy Group of Financial Services Institute of Australasia (FINSIA).

Mrs Seabrook has previously been a director of Hartley Poynton Limited (1994-1998), Western Power Corporationand the Gas Corporation (then trading as AlintaGas), and a member of the joint Princess Margaret and KingEdward Memorial Hospital Board and of the council of Edith Cowan University.

Mrs Seabrook is a fellow of the Australian Institute of Company Directors and of FINSIA.

Mrs Seabrook joined the board in 2006 and became chairman of the Company's audit and risk committee inNovember 2006.

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Directors' report (continued)

Directors (continued)K.N. Steinke - Managing director and chief executive officerMr Steinke, 52, commenced with the Company as Chief Executive Officer on 10 July 2006 and was appointedManaging Director on 3 August 2006. He was appointed a director of The Hoyts Corporation Pty Ltd andCommunity Newspapers Group Limited in 2006.

Before joining the Company, Mr Steinke was Chief Executive Officer of APN New Zealand National Publishingbased in Auckland, New Zealand, which publishes The New Zealand Herald and The Aucklander. He previouslyled APN's Australian newspapers division and has had a long print media career as a journalist and editor, and ingeneral management.

Mr Steinke holds an MBA and a degree in Marketing.

M.K. Ward A.O. - Independent non-executive directorMr Ward, 65, holds Bachelor of Engineering (Honours) and Master of Engineering Science degrees fromQueensland University.

From 1986 to 1992, he was managing director of Telecom Australia and chairman of Telecom Australia(International) Limited. He is currently chairman of Pro Medicus Limited (director since 2000) and a director ofCoca-Cola Amatil Limited (since 1999), Transfield Services Limited (since 2001) and Macquarie CommunicationsInfrastructure Limited (since 2003). Mr Ward is a fellow of the Australian Institute of Company Directors. Mr Wardwas a non-executive director of Insurance Manufacturers of Australia Pty Limited (1999-2006).

In January 1993, Mr Ward was appointed an Officer of the Order of Australia. Mr Ward joined the board in 2002.

Company secretaryThe company secretary is Mr B.O. Yates. He holds a commerce degree from University of Cape Town and is afellow of the Institute of Chartered Accountants in Australia and the Chartered Institute of Secretaries andAdministrators. Mr Yates was appointed in 1994 having previously been engaged in investment banking, corporatefinancial management and auditing.

Principal activitiesThe principal continuing activities of the Group consisted of newspaper publishing, commercial printing, radiobroadcasting, the provision of a radio communication facility and the cinema exhibition, cinema advertising andfilm distribution industries.

Dividends - West Australian Newspapers Holdings LimitedDividends paid to members during the financial year were as follows:

2007 2006 $'000 $'000

Final ordinary dividend for the year ended 30 June 2006 of 28cents (2005 - 23 cents) per share paid on 29 September 2006 57,392 46,948

Interim ordinary dividend for the year ended 30 June 2007 of30 cents (2006 - 22 cents) per share paid on 30 March 2007 61,728 44,960

119,120 91,908

In addition to the above dividends, since the end of the financial year the directors have declared the payment of afinal ordinary dividend of $63,929,000 (31 cents per share) to be paid on 28 September 2007.

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Review of operationsA summary of consolidated results is set out below:

2007 2006 $'000 $'000

Profit from ordinary activities before income tax expense 92,990 96,655

Income tax expense (39,022) (27,391)

Net profit attributable to members of West AustralianNewspapers Holdings Limited 53,968 69,264

Noteworthy items included in profit from ordinary activitiesbefore income tax expense

GainsDividend received - Australian Associated Press Pty Limited - 495

ExpensesAccelerated depreciation on Herdsman printing equipment (18,019) (23,990)Write-offs related to the production upgrade at Herdsman (167) (507)Employee redundancy provisions and payments

Related to production upgrade at Herdsman (501) (28,747)Other (1,780) (2,097)

Loss on impairment of interest in jointly controlled entity (60,142) -

(80,609) (54,846)

A review of operations of the Group is given on pages 16 to 25.

Significant changes in the state of affairsSignificant changes in the state of affairs of the Group which occurred during the financial year were as follows:

(a) A net decrease in investments accounted for using the equity method of $47,358,000 from $203,574,000 to$156,216,000 due mainly to the writing down of the Group's interest in the Hoyts Cinemas Group of$60,142,000 and the recognition of the Group's share of equity accounted profits (net of dividends received).

(b) An increase in property, plant and equipment of $22,470,000 from $232,861,000 to $255,331,000 due mainlyto the upgrade of the printing and publishing equipment at Herdsman.

(c) An increase in borrowings of $89,000,000 from $414,000,000 to $503,000,000 due mainly to the financing ofthe upgrade of equipment at Herdsman and associated redundancy payments.

(d) Noteworthy net expense of $80,609,000 included in profit before income tax - refer review of operations abovefor further details.

Matters subsequent to the end of the financial yearThere are no matters or circumstances which have arisen since 30 June 2007 that have significantly affected ormay significantly affect:(a) the Group's operations in future financial years; or(b) the results of those operations in future financial years; or(c) the Group's state of affairs in future financial years.

Likely developments and expected results of operationsIn the opinion of the directors it would prejudice the Company's interests if any further information on likelydevelopments in the operations of the Group and the expected results of operations were included inthis report, and the omission of such information is hereby disclosed.

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Environmental regulationThe Group's major production complex does not require a discharge licence under the EnvironmentalProtection Act 1986 and no formal reporting to the Environmental Protection Authority is required. In March 1999the site was reviewed by a specialist consultant who reported that emissions are such that the Group is notrequired to report to the National Pollutant Inventory on an annual basis.

Minor spillages in prior years have resulted in a need for remedial work to be carried out. Progress is beingprofessionally monitored on a regular basis and there exists no risk to either human health or the environment.

Meetings of directorsThe numbers of meetings of the Company's board of directors and of each board committee held during the yearended 30 June 2007, and the numbers of meetings attended by each director were:

Meetings of Directors

(a) (b)

P.J. Mansell 10 10 E. Fraunschiel 10 10 W.G. Kent A.O. 4 4 J.A. Seabrook 10 10 K.N. Steinke 10 10 M.K. Ward A.O. 10 10

(a) Number of meetings attended.(b) Number of meetings held during the time the director held office or was a member of the committee

during the year.(c) The nomination committee did not meet during the year.(d) Mr Steinke is not a member of these committees but attended certain meetings by invitation.

Directors' interests in sharesAs at the date of this report the interests of the directors in the shares of the Company were:

Number ofordinary shares

E. Fraunschiel 42,393P.J. Mansell 34,949J.A. Seabrook 26,247K.N. Steinke 18,000 *M.K. Ward 15,053

* In addition to Mr Steinke's shareholding of 18,000 shares, 202,000 share rights havebeen issued to him - refer to the remuneration report for further details.

Remuneration reportThis report describes the remuneration arrangements for directors and executives of the West AustralianNewspapers Holdings Limited Group.

One of the committees of the board is the remuneration committee ("the committee"). Its role is described in thecorporate governance statement in this annual report. The committee makes recommendations to the board inrelation to:

- remuneration of non-executive directors, within the aggregate approved by shareholders; - remuneration and other conditions of service of the chief executive officer; - remuneration and conditions of service for senior executives reporting to the chief executive officer; - the design of executive incentive plans (including equity based plans) and proposed payments or awards

under such plans, and - performance hurdles associated with the incentive plans.

5 5

(a) (b) Audit and Risk Remuneration

(a) (b)

2 2

Meetings of Board Committees (c)

2 2 2 (d) 5 (d)

5 5

2 2 1 1 2 2

5 5 3 3 5 5

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Remuneration report (continued)The report is set out under the following main headings:

A. Principles used to determine the nature and amount of remunerationB. Details of remunerationC. Service agreementsD. Share-based compensation

The information provided under headings A-D includes remuneration disclosures that are required underAccounting Standards AASB 124 Related Party Disclosures. These disclosures have been transferred from thefinancial report and have been audited.

A. Principles used to determine the nature and amount of remuneration (audited)DirectorsFees and payments to non-executive directors reflect the demands which are made on, and theresponsibilities of, the directors. Non-executive directors' fees and payments are reviewed by the committeeand recommended to the board. The committee seeks the advice of independent remuneration consultants toensure non-executive directors' fees are appropriate and in line with the market. The chairman's fees aredetermined in the same way.

Fees were set with effect from 1 July 2007 at $120,000 pa (previously $100,000 pa) for directors and$300,000 pa (previously $250,000 pa) for the chairman. The Company's statutory superannuationcontributions are included in these amounts.

In order to align the interests of the non-executive directors more closely with shareholder interests in thecreation of value for shareholders as a whole, non-executive directors are obliged to receive at least 25% oftheir annual fees in shares in the Company. These shares are purchased on-market at prevailing prices andmust be held for ten years unless the director retires or a specified event occurs, such as if a takeover bid ismade for the Company.

The aggregate of payments each year to non-executive directors must be no more than the amount approvedby shareholders in general meeting from time to time. On 1 November 2006 shareholders approved anaggregate of $850,000.

Managing director and chief executive officer The committee, which consists of the non-executive directors, reviews remuneration packages and policiesapplicable to the managing director and senior executives. This includes share schemes, incentiveperformance packages, superannuation entitlements, retirement and termination entitlements, fringe benefitpolicies and professional indemnity and liability insurance policies. External advice is sought as appropriate.

Mr Ken Steinke took up the role of chief executive officer on 10 July 2006 and was appointed managingdirector on 3 August 2006.

Mr Steinke's remuneration package was negotiated with the assistance of independent advice.

In addition to a fixed portion, or base remuneration, which is inclusive of motor vehicle, superannuation, otherbenefits and fringe benefits tax, his remuneration package contains a proportion (up to 75% of baseremuneration) relating to specific performance targets. These targets are set annually by the board on therecommendation of the committee. The targets for 2006/07 were focused on the Company's performancemeasured against an agreed budget, a reduction in the Company's lost time injury frequency rate;satisfactory completion of the press equipment upgrade; the performance of the Company's investment inHoyts; development of the key management team (including succession planning); development of an onlinestrategy; and further development of the strategic planning process.

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Remuneration report (continued)A. Principles used to determine the nature and amount of remuneration (audited) (continued)

Managing director and chief executive officer (continued)As an incentive to align his interests with those of shareholders, Mr Steinke can earn the right to have issuedor transferred to him shares having a value up to 75% of his base salary (at the time the rights are granted)for achievement of targets set by the board. In terms of his employment contract, the initial grant of rights(made on 10 July 2006) was double the annual grant to be made thereafter. Entitlement to half the rights available each year will be determined by reference to the Company's earnings per share performance andhalf by reference to the Company's total shareholder return performance. The proportion relating to earningsper share performance begins to be earned when the growth in earnings per share exceeds the rate ofinflation plus 6% and is maximised when the growth exceeds the rate of inflation plus 8% per annum. Thetotal shareholder return proportion begins to be earned when the Company's return is at or above the 50thpercentile of a comparator group of companies comprising the ASX 100 accumulation index, the maximumbeing earned only if the Company is placed at the 75th percentile or better. Pro-rata amounts are earnedbetween the minimum and maximum targets. The rights will vest, depending on the Company's performance,three years after being granted. However, Mr Steinke has a period of five years in respect of each tranche ofrights granted to him to have further shares vested in him if the level of performance of the Company improveswhen measured over a four and five year period.

A waiver was granted by the Australian Securities Exchange (ASX) allowing Mr Steinke's participation in thescheme.

If a person acquires a relevant interest in more than 50% of the shares in the Company as a result of atakeover bid, scheme of arrangement or other similar event nominated for this purpose by the board, anyincomplete performance period shall be taken to have ended and the performance hurdles shall be pro-rateddownward and applied to such shortened period.

In order to compensate Mr Steinke for entitlements in his previous employment which he forfeited or lost theability to earn by virtue of his accepting employment by the Company, he was granted 36,000 share rightscalculated by reference to his entitlements foregone. The value of these foregone entitlements and thenumber of the share rights were calculated as at 17 March 2006, being the date on which he accepted theCompany's offer of employment. These share rights, which are not subject to performance measurements,entitle Mr Steinke to have half the shares vested in him on or about each of the first and second anniversariesof his commencement date. The board has discretion as to whether to issue shares to him or to acquire theshares on-market on his behalf and have them transferred to him. The first tranche of 18,000 shares wasacquired on-market, on 11 July 2007.

Should the Company terminate Mr Steinke's contract, other than for serious misconduct, Mr Steinke will, inthe first two years after July 2006 be entitled to 18 months notice and thereafter 12 months notice. In lieu ofsuch notice, he may be paid an amount determined by reference to his base salary.

If Mr Steinke ceases to be managing director and chief executive officer of the Company or ceases to reportto the board or if his responsibilities or authorities are materially diminished without his consent, he shall beentitled to have vested in him any shares still capable of being converted from share rights. He will also beentitled to be paid, within three years of his commencement, an amount equal to double his base salary;thereafter the termination amount reduces until, after five years, his benefit would be an amount equal to hisbase salary.

ExecutivesThe remuneration packages of executives, including proportions linked to performance targets for their areasof specific responsibility, and the Company overall, are set by the board on the recommendation of thecommittee.

The objective of the Company's executive reward framework is to ensure reward for performance iscompetitive with other employers and appropriate for the results delivered. The framework aligns executivereward with achievement of strategic objectives and the creation of value for shareholders.

The reward structure aligns the interests of executives with shareholders' interests as it has normalised profitas a core component of performance targets, focuses executives on key non-financial drivers of value, andattracts and retains high calibre executives. It provides a clear structure for earning rewards and providesrecognition for contribution to growth in the Company's profits and value.

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Executives (continued)The framework provides a mix of fixed pay and incentives.

Its components are base pay and benefits, short-term performance incentives and a deferred bonus shareplan.

Executives' base pay comprises the fixed component of pay and rewards. External remuneration consultantsfrom time to time provide analysis and advice to ensure base pay is set to reflect the market for a comparablerole. Base pay is reviewed annually to ensure the executive's pay is competitive with the market. Pay isalso reviewed on promotion.

There are no guaranteed base pay increases included in any executive's contract.

Executives also receive benefits which include the use of a motor vehicle and telephone.

Should the Company achieve a pre-determined profit target set by the committee then short-term incentives(STIs) are payable to executives. The incentive targets are leveraged for performance above a threshold toprovide an incentive for executive out-performance.

Each executive also has target STI opportunities depending on the accountabilities of the role and its impacton organisation or business unit performance. Each year the committee considers the appropriate targetsand key performance indicators (KPIs) to link the STI plan and the level of payout if targets are met. Thisincludes setting any maximum payout under the STI plan, and minimum levels of performance to triggerpayment of STI.

For the year ended 30 June 2007, the KPIs linked to short term incentive plans were based on group,individual business and personal objectives. The KPIs required performance in reducing operating costs andachieving specific targets in relation to above budgeted profit results as well as other key strategicnon-financial measures.

The STI target annual payment is reviewed annually.

In lieu of a more traditional long term incentive plan, the Company has implemented a deferred bonus shareplan with the objective of rewarding senior executives for above average performance of the Company whileencouraging them to remain committed to the Company's long term achievements.

Each year, an amount equivalent to a proportion of the executive's salary package (excluding the short termincentive component) becomes available to be earned if the Company achieves a target earnings per sharegrowth rate at the end of that financial year. No deferred bonus is earned unless the annual growth innormalised earnings per share is equivalent to the rate of inflation plus 4%. At 4% above the rate of inflation, half the deferred bonus is earned and at 8% or more above the rate of inflation, the full bonus is earned. Pro-rata amounts are earned at growth rates between 4% and 8% above the rate of inflation. The bonus ispaid to executives in the form of fully paid shares in the Company, either purchased on-market or issued, asdecided by the board. The board has to date purchased the necessary shares on-market. These shares areheld in trust and can only be traded by the executive after expiry of the restriction period. This period is threeyears for 30% of the shares, four years for the next 20% and five years for the final 50%. The restrictionperiod is not affected by an executive leaving the Company but dividends are paid to executives during thisperiod.

The committee believes that this plan aligns the interests of executives with those of shareholders as the realvalue of the shares awarded under the plan will be realised only through increased market value of the sharesaccruing over time.

For the year to 30 June 2007, 25% of the salary packages were available for the deferred bonus share plan(15% for the year ended 30 June 2006) and 35% per annum will be available in 2008 and thereafter. Link between remuneration policy and Company performanceThe past four years have seen the introduction of the new remuneration policy which directly aligns the levelof STI paid to approximately 200 executives and staff with the profit growth of the Company. The theme oflinking remuneration policy directly to Company performance is extended to long term incentives (LTIs)granted to the chief executive officer (where hurdles include both earnings per share measures and totalshareholder returns targets) and to senior executives who participate in the deferred bonus share plan (wherethe hurdle is earnings per share growth).

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Executives (continued)Link between remuneration policy and Company performance (continued)The structuring of the remuneration scheme in this manner ensures there is a direct link between theCompany performance and "at risk" executive remuneration, which is in accordance with good corporategovernance practice.

Short term incentives - link to Company performanceProfit performance of the Company is directly linked to the bonuses paid. As set out elsewhere in this report,the STIs have a significant element directly linked to achievement of budget out-performance. The committeeconsiders that the performance-linked remuneration structure adopted by the Company is generating anoutcome that is directly aligned with the generation of shareholder wealth.

The following table sets out the Company's performance over the last 5 financial years:

2004 2005 2006 2007(b) (b) (b)

Net profit after tax (before noteworthyitems) ($'000's) 81,108 97,215 107,508 128,437

Net profit after tax (as reported) ($'000's) 79,522 96,395 69,264 53,968Ordinary dividends per share with respect

to year (cents) 38.00 43.00 50.00 61.00Earnings per share (before noteworthy

items) (cents) 38.76 46.46 51.38 61.38Growth in earnings per share (before

noteworthy items) (%) 22.9 19.9 10.6 19.5Earnings per share (as reported) (cents) 38.00 46.07 33.10 25.79Growth in earnings per share

(as reported) (%) 23.8 21.2 (28.2) (22.1)Share price as at 30 June ($) 6.80 8.03 8.73 13.70

(a) Information from financial reports prepared in accordance with previous Australian Generally AcceptedAccounting Principles (AGAAP).

(b) Information from financial reports prepared in accordance with Australian equivalents to InternationalFinancial Reporting Standards (AIFRS).

Long term incentives - link to Company performanceThe LTI benefit available to the chief executive officer requires achievement of hurdles of EPS growth and totalshareholder returns in comparison to a comparator group of companies. Further details are providedearlier in this report.

Deferred bonus share plan - link to Company performanceThe deferred bonus share plan links rewards directly to achievement of above average growth in earnings pershare. Further details are provided earlier in this report.

B. Details of remuneration (audited)Amounts of remunerationDetails of the remuneration of the directors of West Australian Newspapers Holdings Limited and keymanagement personnel (as defined in AASB 124 Related Party Disclosures ) of the Group, are set out in thefollowing table. Personnel noted include the 5 highest paid executives of the entity.

The key management personnel of West Australian Newspapers Holdings Limited comprise the directorsas per page 1 above.

The key management personnel of the Group are the directors of West Australian Newspapers HoldingsLimited (as per page 1 above) and certain executives that report directly to the managing director being:

P.A. Armstrong Editor, The West AustralianA.R. Bradshaw Group General Manager - Human Resources (appointed 6 December 2006)T.L. Garven Chief Financial OfficerL.M. Roche General Manager - Group Operations and Information TechnologyJ.K. Rowsthorne General Manager - Special Projects (resigned 11 August 2006)P.F. Stevens General Manager - SalesB.O. Yates Company Secretary

8

2003

65,785

20.1

(a)(a)

31.55

5.90

30.00

64,014

30.70

23.7

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Remuneration report (continued)

2007

Cash bonusand Super- Retirement Share-based

Name incentives annuation benefits payments Total$ $ $ $ $

Non-executivedirectors of theCompanyW.G. Kent A.O. - - 133,323 - 216,657(retired as chair-man & director on1/11/06)E. Fraunschiel - 76,875 - - 100,000P.J. Mansell - 100,903 - - 199,056ChairmanJ.A. Seabrook - 9,000 - - 100,000M.K. Ward A.O. - 9,000 - - 100,000Executivedirector of theCompanyK.N. Steinke (ii) 711,730 (iv) 489,375 105,110 - (xii)538,521 1,850,695Manager Director& Chief ExecutiveOfficer (xiv)Other keymanagementpersonnel of theGroupT.L. Garven (v) 115,600 105,149 - (xiii) 85,712 541,658L.M. Roche (vi) 162,125 12,686 - (xiii) 72,000 530,836P.F. Stevens (vii)115,000 12,686 - (xiii) 72,000 471,617P.A. Armstrong (viii)104,650 37,545 - (xiii) 72,000 467,323B.O. Yates (ix) 74,260 105,110 - (xiii) 49,409 311,396A.R. Bradshaw (x) 37,800 8,571 - (xiii) 26,250 167,860(appointed 6/12/06)J.K. Rowsthorne (iii) 59,380 - 2,114 - - 64,796(resigned 11/8/06)

(i) Includes fees taken in cash and shares in the Company acquired on-market in terms of the Non-Executive DirectorsShare Plan approved by shareholders at the annual general meeting of the Company on 7 November 2002.

(ii) Includes relocation allowance of $34,000.(iii) Includes payout of annual leave on termination of employment of $26,579.(iv) STI being 81.6% of available STI (18.4% forfeited).(v) STI being 85% of available STI (15% forfeited).(vi) STI of $112,125 being 97.5% of available STI (2.5% forfeited) and an additional STI of $50,000 relating to the production

upgrade at Herdsman being 100% of available STI.(vii) STI being 100% of available STI.(viii) STI being 91% of available STI (9% forfeited).(ix) STI being 94% of available STI (6% forfeited).(x) STI being 90% of available STI (10% forfeited).(xi) Provision of motor vehicle.(xii) Includes $243,000 relating to 36,000 special share rights granted and $295,521 relating to share rights granted in relation

to his long-term incentive (LTI). Refer section D of the remuneration report for further details.(xiii) Deferred bonus being 100% of available bonus under the WANH Deferred Bonus Plan.(xiv) Mr Steinke was appointed Chief Executive Officer on 10 July 2006 and Managing Director on 3 August 2006.

Further information on remuneration of directors and other key personnel is set out in the corporategovernance statement and note 30 to the financial statements.

3,302

-

benefits (xi)$

29,393

-

--

5,959

29,393

-

(i) 91,000

205,80429,393

Cash

-

(i) 23,125

23,682

9

29,393

Non-monetarysalary and

Post-employmentbenefits

$fees

Short-term benefits

(i) 98,153

(i) 83,334

(i) 91,000

95,23958,935

223,735242,538254,632

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Remuneration report (continued)B. Details of remuneration (audited) (continued)

Amounts of remuneration (continued)

2006

Cash bonus Share-basedand Super- Retirement payments

Name incentives annuation benefits (xii) Total$ $ $ $ $

Non-executivedirectors of theCompanyW.G. Kent A.O. - 6,271 - - 239,583ChairmanE. Fraunschiel - - - - 95,833P.J. Mansell - 8,625 - - 95,833J.A. Seabrook - 3,641 - - 40,456M.K. Ward A.O. - 8,625 - - 95,833

Executivedirector of theCompanyI.F. Law (iii) 424,913 85,757 - - 1,181,440Managing Director& Chief ExecutiveOfficer (resigned5/5/06)

Other keymanagementpersonnel of theGroupT.L. Garven (iv) 64,600 100,585 - 40,413 463,228

(v) 20,000 J.K. Rowsthorne (vi) 58,735 12,139 - - 414,596

(vi) 43,750 P.A. Armstrong (vii) 59,075 35,000 - 33,971 363,772P.F. Stevens (viii) 47,600 12,139 - 33,449 352,463L.M. Roche (ix) 46,800 12,139 - 28,626 306,737B.O. Yates (x) 41,100 84,013 - 22,463 242,538

(i) Includes fees taken in cash and shares in the Company acquired on-market in terms of the Non-Executive DirectorsShare Plan approved by shareholders at the annual general meeting of the Company on 7 November 2002.

(ii) Includes payout of annual leave on termination of employment of $33,508.(iii) STI being 69.7% of available STI (30.3% forfeited).(iv) STI being 76% of available STI (24% forfeited).(v) Special bonus for acting as chief executive officer from 5 May 2006 to 10 July 2006.(vi) STI of $58,735 being 69.1% of available STI (30.9% forfeited) and an additional STI of $43,750 relating to the production

upgrade at Herdsman being 100% of available STI.(vii) STI being 69.5% of available STI (30.5% forfeited).(viii) STI being 56% of available STI (44% forfeited).(ix) STI being 78% of available STI (22% forfeited).(x) STI being 68.5% of available STI (31.5% forfeited).(xi) Provision of motor vehicle. Mr Law's benefit comprises the provision of a motor vehicle of $25,291 and an

interest benefit of $34,652.(xii) Deferred bonus being 82.5% of available bonus under the WANH Deferred Bonus Plan (17.5% forfeited).

Further information on remuneration of directors and other key personnel is set out in the corporategovernance statement and note 30 to the financial statements.

$

29,972

Post-employment

-

-

--

benefits (xi)

-

21,636

10

Short-term benefits benefitsCash

salary and monetaryNon-

(i) 87,208 (i) 36,815

207,658

(i) 87,208

fees$

(i) 233,312

(i) 95,833

59,943

29,972

(ii) 610,827

189,20073,326

270,000

229,30329,972

29,97229,972

205,754

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Remuneration report (continued)B. Details of remuneration (audited) (continued)

Amounts of remuneration (continued)The relative proportions of total possible remuneration that are linked to performance and those that are fixedare as follows:

Name2007 2007 2006 2007 2006

Executive directors of West Australian Newspapers Holdings LimitedI.F. Law - - 45% - -K.N. Steinke 52% 29% - 19% -

Other key management personnel of the GroupP.A. Armstrong 61% 24% 21% 15% 10%A.R. Bradshaw 80% - - 20% -T.L. Garven 61% 24% 21% 15% 10%L.M. Roche 56% 31% 18% 13% 11%J.K. Rowsthorne 100% - 26% - 10%P.F. Stevens 61% 24% 21% 15% 10%B.O. Yates 59% 25% 23% 16% 10%

C. Service agreements (audited)The terms of employment for the managing director and the other key management personnel are formalisedin service agreements, the major provisions of which are set out below.

K.N. Steinke, Managing Director and Chief Executive Officer (from 10 July 2006) - Service agreement, no fixed term, during the first two years 18 months notice of termination and

thereafter 12 months notice of termination; - A base salary package (part of which can be taken as a motor vehicle allowance or in other non-cash

forms) and a performance related short term incentive (of up to 75% of the base salary package) will bereviewed annually by the committee;

- A long term incentive intended to allow him, by achievement of performance hurdles described above, toearn the right to have issued or transferred to him shares in the Company having a value equal tobetween 50% and 75% of his base salary.

Other key management personnel - Service agreement, no fixed term, twelve months notice of termination required, redundancy entitlement

capped at twenty four months; - Base salary and a performance related bonus is reviewed annually; and - A motor vehicle may be provided and telephone rental and charges reimbursed.

D. Share based compensation (audited)(a) Executive and employee share plans

Plans for the purchase of shares in the Company by executives and employees have not been usedsince 2002. Details of the plans are as follows:

The issue price of shares allotted under the plans was the average sale price of all shares sold on theASX during the 5 days preceding allotment.

Under the plans West Australian Newspapers Limited (a subsidiary), lent the full issue price toemployees/executives on an interest-free basis. Loans were secured by share mortgages/liens overshares issued in accordance with the plans and during employment are repaid from net dividends (aftertaxation). While shares are subject to these restrictions, they are not permitted to be hedged or in anyother way dealt with.

In the event of cessation of employment of employees/executives, loans are repayable but WestAustralian Newspapers Limited cannot claim or demand outstanding moneys other than to the extent ofproceeds realised from the disposal of shares secured under the plans.

The total number of shares issued under the plans in the previous five years must not exceed 5% of thetotal number of shares on issue. At the reporting date the number of shares issued under the plans inthe previous five years represented 0.8% of the total number of shares on issue (2006 - 1.8%).

2006 At risk - LTIAt risk - STIFixed remuneration

11

-

69%-

67%

69%71%64%69%

55%

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Remuneration report (continued)D. Share based compensation (audited) (continued)

(a) Executive and employee share plans (continued)(i) West Australian Newspapers Holdings Limited Executive Share Purchase and Loan Plan

This plan was approved at the annual general meeting of the Company on 9 October 1992. Theoperation of this plan has been suspended and no executives have been invited to apply for sharessince 2002.

Senior executives of the Group were from time to time invited to apply for shares as determined bythe board of directors.

Shares issued under the plan were not able to be sold until the expiry of three years from date ofissue. Up to half the shares could have been sold during the fourth and fifth year and there were norestrictions on sale after five years from the date of issue. The loans are repayable immediatelyupon termination of employment except in cases of termination due to death, total and permanentdisablement, retirement or other circumstances approved by the directors, where two years areallowed for repayment of the loan.

In all other respects the shares previously issued in accordance with the plan rank equally withother fully-paid ordinary shares on issue.

(ii) West Australian Newspapers Holdings Limited Employee Share PlanThis plan was approved at the annual general meeting of the Company on 22 October, 1993. Theoperation of the plan has been suspended and no employees have been invited to apply for sharessince 2002.

Where an allocation of shares was made under the plan, eligible employees were invited toparticipate. Eligible employees were those who:

- were permanent employees of the Group on either a full-time or part-time (minimum 20 hoursper week) basis;

- were 18 years of age or over; - had completed 12 months continuous employment.

The total number of shares for which employees were invited to apply was determined by the boardof directors with allocations to individual employees being based on salary levels.

Shares under the plan were not able to be sold until the earlier of two years after issue orcessation of employment with the Group. In all other respects the shares rank equally with otherfully-paid ordinary shares on issue.

Under AASB 2 Share-based Payments , the plans are deemed as equity settled, share-basedremuneration and treated as an in-substance grant of options. The fair value of the options granted isrecognised as an employee benefit expense with a corresponding increase in equity. The fair value ismeasured at grant date and recognised over the period during which the employee becomesunconditionally entitled to the option. The Group has taken advantage of the exemption in AASB 1First-time Adoption of Australian Equivalents to International Financial Reporting Standards not to applyAASB 2 to equities granted prior to 7 November 2002 and vested before 1 January 2005.

(b) Share rights granted as compensationFurther information regarding shares rights issued as compensation to key management personnel canbe found in sections A to C of the remuneration report on pages 5 to 11.

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Remuneration report (continued)D. Share based compensation (audited) (continued)

(b) Share rights granted as compensation (continued)(i) Details of share rights granted as compensation to Mr K.N. Steinke, the Managing Director and

Chief Executive Officer, are as follows:

Vesting conditions TSR* EPS**Number of rights granted (Total 138,000) 69,000 69,000Class of equity right Ordinary OrdinaryGrant date 10 July 2006 10 July 2006Testing date 1 July 2009 1 July 2009Expiry date 11 July 2011 11 July 2011Fair value at grant date $5.37 $7.48Valuation methodology Monte-Carlo Simulation Binomial TreeExpected vesting date 16 October 2009 1 July 2009Expensed in 2006/07 (Total $295,521) $123,498 $172,023Total fair value of grant (Total $886,650) $370,530 $516,120Percentage vested/forfeited in 2006/07 0% 0%

* Total shareholder return** Earnings per share

There were no share rights granted as compensation at the commencement of the financial year.

A further 46,000 share rights were issued to Mr Steinke on 2 August 2007 in relation to hiscompensation for the 2007/08 financial year.

(ii) Details of share rights granted as compensation to other key personnel under the WANHDeferred Bonus Plan are as follows:

Name2006/07 2005/06

P.A. Armstrong 5,200 3,900A.R. Bradshaw 1,900 -T.L. Garven 6,200 4,600L.M. Roche 5,200 3,300P.F. Stevens 5,200 3,800B.O. Yates 3,600 2,600

The fair value of the rights granted was $377,371 (2006 - $158,922).

The rights were granted to the other key personnel on 2 August 2007 (2006 - 3 August 2006) andvest on conclusion of the annual general meeting of the Company provided the employee remainsin the employ of the Group at the time.

Insurance of directors and officersDuring the financial year, the Company paid a premium in respect of a contract insuring all directors and officers(including employees) of the Company and of related bodies corporate against certain liabilities specified in thecontract. The contract prohibits disclosure of the nature of the liabilities insured and the amount of the premium.

in respect ofRights granted

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Non-audit servicesThe Company may decide to employ the auditor on assignments additional to their statutory audit duties wherethe auditor's expertise and experience with the Company and/or the Group are important.

The board of directors has considered the position and, in accordance with the advice received from the auditcommittee, is satisfied that the provision of the non-audit services is compatible with the general standard ofindependence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision ofnon-audit services by the auditor, as set out in note 31 to the financial statements, did not compromise theauditor independence requirements of the Corporations Act 2001 for the following reasons:

- all non-audit services have been reviewed by the audit committee to ensure they do not impact theimpartiality and objectivity of the auditor

- none of the services undermine the general principles relating to auditor's independence as set out inAPES 110 Code of Ethics for Professional Accountants.

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001is set out on page 15.

Details of amounts paid or payable to the auditor, PricewaterhouseCoopers, for audit and non-audit servicesprovided during the year are set out in note 31 to the financial statements.

Rounding of amountsThe Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and InvestmentsCommission, relating to the "rounding off" of amounts in the directors' report. Amounts in the directors' reporthave been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, tothe nearest dollar.

This report is made in accordance with a resolution of the directors.

P.J. MansellChairman

K.N. SteinkeManaging Director

Perth, Western Australia6 September 2007

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15

Liability limited by a scheme approved under Professional Standards Legislation

PricewaterhouseCoopers

ABN 52 780 433 757

QV1

250 St Georges TerracePERTH WA 6000GPO Box D198

PERTH WA 6840DX 77 PerthAustralia

www.pwc.com/auTelephone +61 8 9238 3000Facsimile +61 8 9238 3999

Auditor’s Independence Declaration

As lead auditor for the audit of West Australian Newspapers Holdings Limited for the yearended 30 June 2007, I declare that to the best of my knowledge and belief, there havebeen:

a) no contraventions of the auditor independence requirements of the Corporations Act2001 in relation to the audit; and

b) no contraventions of any applicable code of professional conduct in relation to theaudit.

This declaration is in respect of West Australian Newspapers Holdings Limited and theentities it controlled during the period.

Justin Carroll PerthPartner 6 September 2007PricewaterhouseCoopers

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Managing Director’s report PRINT The West Australian Our flagship publication The West Australian again demonstrated its strong market position in a continuing strong economy with 17% growth (15% excluding the extra week) in Earnings Before Interest and Tax over the previous year. The result was driven by an excellent 16.1% growth in advertising revenue, 7.7% in circulation revenue, and an 11.4% growth in costs, primarily driven by volume growth. Advertising The advertising sales department delivered excellent results across the full range of business categories. In particular, the State’s buoyant economy underpinned continuing strong performances in the key employment and real estate categories. The national sales teams in Sydney and Melbourne drove good growth in the government, food, motor vehicle and telecommunications areas. In local display advertising, significant results were achieved by the agency team, while the direct sales team continued to make headway in important areas of retail, increasing market share in the department store, electrical, food and gambling categories. Among the highlights was the travel category, where revenue in the Travel Extra section rose by almost 30% over the previous year, and The West Magazine which maintained its solid performance. Our sections and features teams also made significant contributions. In the classifieds area, employment advertising grew by more than 20%, real estate by almost 30%, and New Homes by more than 50%, reflecting the state’s continuing population growth and innovations by the classifieds teams. New Homes grew market share to more than 60%. Again, the features teams made notable contributions.

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Circulation Circulation revenue in The West Australian rose 7.7% as a result of an increase of 20 cents to $2.20 in the cover price of the Saturday edition in February 2006, and an increase of 10 cents to $1.20 in the Monday to Friday editions in September 2006. While the cover price rises and other factors have marginally affected circulation and readership, The West Australian continues to maintain a solid margin over its nearest rivals. That success is based upon the newspaper’s determination to set the news agenda in Western Australia, staying close to its readers, and delivering information via a high-quality editorial team. During the year, the newspaper led the way in its coverage of the outcomes-based education debate, political affairs, and the Aboriginal health crisis. As well as dominating the state’s journalism awards, The West’s Steve Pennells won a Walkley Award, Australia’s highest journalism honour, for his coverage of the Aboriginals’ plight at Halls Creek. Regional Newspapers The efforts of the Regional Newspapers were again rewarded with solid profit growth and record results. Major centres Geraldton, Bunbury, Albany, Busselton and Kalgoorlie are enjoying major population growth as people take up the opportunity to decentralise to these larger cities. The resources boom in WA and the large number of fly-in, fly-out workers servicing the North West also contributed. Publications in the north west mining towns of Karratha and Port Hedland posted good trading profits despite higher costs and shortages of both labour and accommodation. Sound Telegraph, the group’s largest-circulating free paper covering the rapidly growing cities of Rockingham and Kwinana established its own distribution network, increasing revenue growth through both advertising and pamphlet distribution. The South Western Times in Bunbury won the PANPA 2007 Newspaper of the Year Award for a non-daily paid newspaper with greater than 15,000 circulation, following on from their win in 2005. Several acquisitions were made during the year that will contribute positively in 07/08. Kimberley Echo, a weekly paid publication based in Kununurra servicing the East Kimberley, was purchased in April. The activity of Argyle Diamond

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Mining, the growing importance of Ord River agriculture and the burgeoning tourist industry in the region add up to significant growth potential. The Bunbury Key, an annual business directory, will contribute both to the profitability of our Bunbury-based operation and also offer opportunities for the development of an associated online presence. Printing of all regional newspapers was transitioned from Colourpress in Victoria Park to the new upgraded press facility at Herdsman and the benefits of increased colour and improved print quality gave a boost to the last quarter. Reduced page costs will also enable publications to compete aggressively in the highly competitive southern market. During the year a number of our titles were restructured to provide strong foundations for future growth. The Countryman has been re-designed to service not only its traditional farm readership but also to reflect the rapid changes occurring within agriculture and the growing resource industry. Quokka Our free classifieds publication Quokka has continued its growth and is well positioned to meet both the challenges and opportunities posed by the internet. Plans are in place to extend the successful Quokka brand to the web, with a decision expected soon on an appropriate application and design, with implementation planned for early 2008. Quokka recorded a solid trading performance for the 2006/07 financial year on the back of more than 27,000 free classifieds published each week and a circulation of 48,000 weekly paid sales. The publication launched an additional section focusing on the Garden and Renovation sector that has been well received by the market and there are plans for further development in key sectors. West Australian Publishers The continuing construction and mining booms has helped make the 2006/07 financial year another positive one for West Australian Publishers. Its flagship publications, The Mining Chronicle and National Building News, continue to service the resource and construction sectors well, with both titles achieving record sales figures.

Both publications have undergone a major restructure with the introduction of dedicated news content and the addition of new sections featuring in-depth coverage of major mining and construction operations. Community Newspapers

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The Community Newspaper Group, which is a joint venture with News Limited, showed the benefits of staying close to its readers with another solid profit performance. Net Profit After Tax increased by 7.4% with strong growth in national, employment and real estate advertising. The company acquired a new publication during the year, the Ellenbrook Advocate, located in a strong growth area of Perth, and is continuing its drive to both improve its existing publications and seek out further expansion opportunities. Herdsman Print Centre The company’s major investment in future print publishing - the Herdsman press upgrade - is now nearing completion with all new presses and publishing lines in operation. While the $210 million project will take several months to bed down fully, the installation has been completed largely on time and within expected cost frames, despite the difficulties caused by labour and material shortages in Western Australia. This is a tribute to the contractors, consultants and suppliers, but most particularly the WAN staff who have single-mindedly pursued project milestones, while still producing a daily newspaper. The new press building is 130 metres long, 21 metres high and 31 metres wide, and houses 3125 tonnes of printing equipment. The new Koenig and Bauer presses from Germany provide both heatset and coldset capability, and have a top speed of 75,000 copies an hour. The plates for the presses are produced using computer-to-plate technology, utilising a thermal laser. Linked to the Ferag publishing systems, manufactured in Switzerland, the whole production complex represents world-leading technology and practice. The installation process has caused some short-term cost pressures and delays in deliveries, but these will largely dissipate as the project is completed. In addition to savings from redundancies, the new equipment has significantly increased the availability of colour for readers and advertisers, and allowed the production of new magazines and sections. These reader and advertiser benefits will flow into the company’s results in 07/08. In the past year, the Herdsman print centre has consumed 60,000 tonnes of newsprint, used more than 800,000 kilograms of ink and printed 18.5 billion pages.

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A new era of Colour at The West Australian The company’s future success is linked to the successful development of new products and on Saturday, August 11, two years of planning culminated with the creation of a better weekend newspaper for our readers. The new weekend edition will be permanently presented in two easy-to-navigate sections. One section contains Real Estate and the new-look New Homes section, providing readers with a superior guide to WA’s real estate market, allied with the new West Weekend Magazine, and Seven Days, our television and entertainment guide. The other section comprises The West Australian newspaper, with its complete weekend editorial coverage, and a range of classified sections. It also contains the stand-alone Travel section, as well as the regular Professional Appointments and Motoring liftouts. The 48-page West Weekend Magazine is being printed on our state-of-the-art KBA Comet heatset/coldset printing press, setting new standards in colour reproduction for The West Australian. This magazine brings in-depth, world-class features and a host of lifestyle columns to our biggest-selling edition. Major national and local advertisers have been quick to recognise the value of the West Weekend Magazine's uncluttered style, with only 15 pages of advertising in the 48-page full-colour magazine. The new Travel section has been well received with the first edition achieving over 40 pages of great travel editorial, providing an attractive platform for advertisers. The well-established New Homes section, the leading product in this important category, will also be presented in a stitched and trimmed format. On Saturday, August 18, the wider format Seven Days magazine took over from The West Magazine to provide not only a television guide, but a comprehensive entertainment guide, becoming the definitive guide to what’s on in WA.

With the installation of the new presses, unlimited colour is now also available for advertisers, an opportunity which is being quickly realised.

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Information technology The Information Technology Division has completed the installation and deployment of a new core publishing system for the editorial production of The West Australian. The $3 million project was successfully completed within the forecast timeframe and budget. The new editorial system has provided improved efficiencies and streamlined workflows within the editorial and production departments through its purpose designed workflows and its high level of flexibility and customisation. Work has started on migrating the Countryman and Kalgoorlie Miner publications to the new editorial system, which should provide further operational efficiencies. The next stage of the upgrade to our core publishing system is the installation and deployment of a new advertising booking and advertising production system. The scoping and project definition phase is underway and this major project to install the advertising section of the new core publishing system has now commenced. This project will be ongoing through 2008/2009. DIGITAL Digital Publishing built on the foundations laid in the previous financial year and has now established thewest.com.au as a clear market leader among local newspaper news websites. Several milestones were achieved in 2006/2007, including the complete redevelopment of thewest.com.au in early 2007. Site traffic increased sevenfold during the year, and site visitors more than quadrupled from July 2006 to June 2007. The site now attracts more than 440,000 Unique Browsers and generates around 7.5 million Page Impressions per month. The strong WA focus is evident with our locally-generated news being sought by our audience. We now have more than 20,000 subscribers to our daily newsletters. The launch of Mine4Jobs.com in mid-2007 provides a new portal for the mining industry with a particular focus on mining employment. The editorial team has been successfully integrated into a single unit, with all editorial units contributing to breaking news stories published on our site throughout the day. The advertising department is also operating as an integrated unit, giving advertisers the opportunity to access both digital and print the platforms through a single contact. We have also taken the first steps in user generated content, which we believe will gain momentum during the next few years.

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Our objective is to become the leading information site for West Australians, and with further initiatives in regional news, community generated news, and classified portals and partnerships, we are well placed to capitalise on the growing digital media market. RADIO Redwave Media operates commercial radio services in Karratha, Broome, Port Hedland, Geraldton and remote Western Australia, with strong performances being achieved by most centres in 2006/07. In January, an AM licence was added to the radio group. The licence covers the Bunbury Busselton region and provides the radio group with an opportunity to increase its revenues from one of the fastest growing regions in the state. The station has been relaunched with the Company’s “Spirit” brand. To date, there has been minimal effect on the radio group from the recently announced Media Law changes. New local content requirements will apply from January 2008. HOYTS Hoyts Cinemas is a joint venture with Publishing and Broadcasting Limited, and operates 337 screens in 40 locations in Australia, and 58 screens in nine locations in New Zealand. The division enjoyed another solid year, reflecting improvements in the underlying fundamentals of the business and good box office performance. During the year our joint venture partner in Hoyts Cinemas decided to sell their share of Hoyts. Following a review, the board decided to reduce the carrying value of this investment by $60 million to $145 million. PEOPLE The past year has brought an increased focus on People and Performance across all areas of the organisation. The Human Resources, and Health Safety and Environment, functions have been enhanced to provide improved service, advice and strategic support. The People and Performance program has been launched to ensure that all staff have clear performance objectives linked to the corporate plan, receive regular feedback on performance, and participate in a reward system where appropriate. In concert with “Making the West the Best” a set of Valued Behaviours has been developed by the executive management team. These behaviours have been

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used to identify high performing employees throughout the group. These “Key Talent” employees will participate in programs to accelerate their development, improve retention rates and increase company performance and growth. The group achieved a 20% reduction in the Lost Time Injury Frequency Rate (LTIFR) for the 2006 – 07 period. The Herdsman operations group exceeded its safety target during the challenging phases of construction and commissioning of the new presses and the decommissioning of the redundant presses and associated infrastructure. Over the next 12 months further resources and programs will be introduced throughout the group to further improve the group’s health, safety and environmental performance. Sponsorship support by The West Australian 2006/7 The West Australian newspaper is committed to supporting the West Australian community through an extensive annual sponsorship program. As a member of the corporate community, The West Australian believes it has an important role to play in demonstrating strong leadership and good corporate citizenship for the state. During 2006/7, The West Australian provided over $1.8 million dollars of advertising sponsorship support to more than 150 organisations and activities, as well as extensive editorial support through news coverage. The West Australian’s readership strength enables a wide range of organisations including arts, sport, business, charity and community based associations to achieve their business and fundraising objectives whether in growing audiences, fundraising or community participation and awareness. During 2006/7, The West Australian was a major sponsor of a wide range of charity and community events including: Activ Foundation City to Surf; Asthma Foundation Bike Hike; Carols by Candlelight; Community Service Awards; Celebrate WA Week; Citizenship of the Year Awards; Channel 7 Christmas Pageant; Freeway Bike Hike; Gynaecological Awareness Day, Harmony Week; Kings Park Wildflower Festival; Margaret River Wine Festival, Movies by Burswood; Oz Concert, Perth Fashion Festival; Seniors Week; WA Youth Awards, Young People Who Care Awards and Youth Focus Hawaiian Bike Ride. Major charity sponsorships during the year included: Australian Red Cross; Breast Cancer Institute; Cancer Support Foundation; Cerebral Palsy Association of WA; Charity Link; Crimestoppers; Cystic Fibrosis WA; Good Samaritan Industries; Juvenile Diabetes Research Foundation; Leukaemia Foundation; National Heart Foundation; Princess Margaret Children’s Hospital; Shenton Park Dog’s Refuge; Telethon; Therapy Focus; the Variety Club of WA and Youth Focus.

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The West Australian recognises the important role that sport plays in the lives of Western Australians at both professional and amateur levels. Each year the advertising sponsorship provided by The West Australian assists sporting bodies and organisations to help promote membership and attendance at sporting events. During the year, sport sponsorships included: Athletica; Avon Descent; Ben Allen Football Camp, Busselton Iron Man Triathalon; Eagles School Cup; Fremantle Football Club; Hyundai Hopman Cup; Justin Langer Cricket Camp, Little Athletics; Perth Glory; Perth Wildcats; Rottnest Channel Swim; Tom Hoad Water Polo Cup, WA Football League; WA Cricket Association; WA Disabled Sports, WA Netball, WA Racing Hall of Fame, WA Trotting Association, West Coast Eagles Football Club and Western Force. To recognise the efforts of our local sports people, The West Australian is the major sponsor of key local sporting awards including The West Australian/McInerney Ford Footballer of the Year; The West Australian/ANZ Sports Star of the Year Awards and The West Australian Sports Woman of the Year Awards. The West Australian is proud to provide advertising sponsorship for arts organisations in Western Australia, which assists in growing both audiences for and awareness of artistic activities within the community. Arts sponsorships during the year included: Art Gallery of WA; Barking Gecko Theatre Company; Black Swan Theatre Company; His Majesty’s Theatre; John Curtin Gallery; Perth International Arts Festival; WA Ballet; WA Museum; WA Opera and the WA Symphony Orchestra. In August 2007, The West Australian was recognised with a highly commended award at the Pacific Asia Newspaper Publishers Awards for the Best Sponsorship Program for the sponsorship of the 2007 Perth International Arts Festival. The West Australian provides cash sponsorship of $30,000 to the Foodbank charity organisation, which assists over 60 community and charity groups in providing food to needy families. Cash sponsorship of $12,000 is provided to Information Radio to assist in providing news services to the blind and hearing-impaired audience. The West Australian also assisted more than 250 school and community groups with their fundraising activities through the donation of merchandise and items.

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FINANCE Cash Flow Net cash inflow from operating activities fell $8.8 million to $93.9 million mainly due to the payment of $18.1 million in redundancies and an increase in tax payments of $6.2 million which offset the improved cash flows from trading activities. Debt and debt ratios Net debt at 30 June 2007 stood at $489.5 million, an increase of $85.0 million during the year. This increase is due to the capital expenditure and redundancy payments associated with the Herdsman production upgrade. At 30 June 2007 net debt to EBITDA was 2.3 times, compared to 2.2 times at 30 June 2006. Interest cover (EBITDA to net interest) was 11.2 times compared to 10.9 times at 30 June 2006. Both ratios comfortably meet banking covenants on the Group’s $520 million borrowing facilities. Treasury Policy The Group’s interest rate risk arises from long term borrowings. Borrowings made at variable rates expose the Group to cash flow interest rate risk. The Group manages its cash flow interest rate risk by using floating-to-fixed rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating to fixed interest rates. The Group has $200 million of debt fixed until 17 May 2010 at an average rate of 5.73% including bank margins. The Group has a contract with Norske Skog for the supply of newsprint. Under the terms of this contract, which will expire on 30 June 2010, newsprint is priced annually in Australian dollars.

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Corporate governance statement

This statement outlines the main corporate governance practices that were in place throughout the financial year,unless otherwise stated.

The boardThe board has adopted a board charter* setting out the purpose and role of the board, its responsibilities andpowers. The charter also documents the way the board functions.

The board is assisted in carrying out its responsibilities by the audit and risk committee, the nominationcommittee and the remuneration committee.

The board has established a framework for the management of the Company which includes a system of internalcontrol, a business risk management process and the establishment of appropriate ethical standards for directorsand employees.

The board usually consists of a single executive director (the managing director) and four non-executive directors,including the chairman, a majority of whom are independent directors. In determining whether a director isindependent, the guidelines contained in Accounting Standard AASB 1031 Materiality are followed indetermining whether a supplier or customer is a material supplier or customer. The board does not regard asmaterial professional advisory services provided to the Company amounting to less than 25% of total professionaladvisory services of a same or similar nature.

All non-executive directors other than Mrs Seabrook are independent directors. Mrs Seabrook is not regarded asindependent within the framework of the guidelines because she is a director of Gresham Partners Limited andGresham Advisory Partners Limited, which provide corporate advice to the Company. Procedures have been put inplace to ensure observance of both the letter and the spirit of dealing correctly with issues which might give rise toa conflict of interest.

The board has adopted a written code of conduct* for directors which establishes guidelines for their conduct inmatters such as ethical standards and conflicts of interests. The code is based on that developed by theAustralian Institute of Company Directors. Directors have the right to seek independent professional advice at theexpense of the Company. Directors are permitted to trade in securities of the Company at any time subject toapplicable statutory restrictions and after reference to the company secretary.

The board undertakes annual reviews of its own performance, with external advice as appropriate.

DirectorsDetails regarding the Company's directors are set out in the directors' report.

Meetings of directorsThe numbers of meetings of the Company's board of directors and of each board committee held during the yearended 30 June 2007, and the numbers of meetings attended by each director are set out in the directors' report.

Nomination committeeA charter* sets out the role and responsibilities of the committee which comprised the following members, all ofwhom are independent directors except for Mrs Seabrook:

P. J. Mansell (Chairman from 1 November 2006)W.G. Kent A.O. (Chairman until his retirement on 1 November 2006)E. FraunschielJ A SeabrookM.K Ward A.O.

The composition of the board is regularly reviewed by the committee to ensure that the board has the appropriatemix of expertise and experience. When a vacancy exists, through whatever cause, or where it is considered thatthe board would benefit from the services of a new director with particular skills, potential candidates are identifiedby the committee with advice from an external consultant if deemed appropriate. The board then appoints themost suitable candidate who must stand for election at the next general meeting.

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Corporate governance statement (continued)

Remuneration committeeA charter* sets out the role and responsibilities of the committee which comprised the following members, all ofwhom are independent directors except for Mrs Seabrook:

M.K. Ward A.O. (Chairman)E. FraunschielW.G. Kent A.O. (until his retirement on 1 November 2006)P.J. MansellJ.A. Seabrook

The committee reviews remuneration packages and policies applicable to the managing director and seniorexecutives. This includes share schemes, incentive performance packages, superannuation entitlements,retirement and termination entitlements, fringe benefit policies and professional indemnity and liability insurancepolicies. External advice is sought as appropriate.

The committee also obtains independent advice on the appropriateness of the level of fees payable tonon-executive directors and makes recommendations to the board.

Further details of directors' and executives' remuneration, superannuation and retirement payments are set out inthe remuneration report which forms part of the directors' report.

The chief executive officer is invited to committee meetings, as required, to discuss management performance andremuneration packages.

Audit and risk committeeA charter* sets out the role and responsibilities of the committee which during the year comprised the followingmembers, all of whom are independent directors except for Mrs Seabrook:

J.A. Seabrook (Chairman from 1 November 2006)P.J. Mansell (Chairman until 1 November 2006)E. FraunschielW.G. Kent A.O. (until his resignation on 1 November 2006)M.K. Ward A.O.

Mrs Seabrook is considered by the board to be suitably qualified to discharge the responsibilities of chairing thecommittee. The relationship between the Company and the Gresham companies is not such as to affect herindependence of mind regarding the office she holds.

The role of the committee is to advise on the establishment and maintenance of a framework of internal control forthe management of the Company, to ensure that the Company has an effective risk management system in orderfor risks to be identified and managed effectively, that accounting policies are appropriately applied and thatfinancial information is fairly and correctly reported. The internal and external auditors, and the managing directorand chief financial officer, are invited to meetings at the discretion of the committee.

Internal control frameworkThe board acknowledges that it is responsible for the overall internal control framework, but recognises that nocost effective control system will preclude all errors and irregularities. To assist in discharging this responsibility,the board has instigated an internal control framework which includes:

Internal auditAn internal auditor reports directly to the managing director and the chairman of the audit and risk committee andis responsible for monitoring, investigating and reporting on the internal control systems. Financial reportingThere is a comprehensive budgeting system with an annual budget approved by the directors. Monthly actualresults are reported against budget and revised forecasts for the year are prepared regularly. The Companyreports to the Australian Securities Exchange (ASX) quarterly - see "Continuous Disclosure" below.

Special reportsThe Company has identified a number of key areas which are subject to regular reporting to the board such asenvironmental, legal and health and safety matters.

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Business risksThe board requires reports on major risks affecting the Company and requires management to develop strategiesto mitigate these risks.

To assist the board in this regard, the audit and risk committee of the board established a risk assessment panelto investigate, monitor and report on all material areas of risk affecting the Group. The panel comprises seniorexecutives with group wide responsibilities under the chairmanship of the internal audit manager. External adviceis sought as appropriate.

Once a major risk is identified, an action plan is instigated. Corrective action is taken as soon as practicable andthe committee informed of the action taken. Major business risks arise from such matters as action bycompetitors; government policy changes; changes in the price of raw materials; difficulties in sourcing rawmaterials; and the purchase, development and use of information and production systems.

Continuous disclosureThe Company is committed to complying with the continuous disclosure obligations of the Corporations Act andthe listing rules of the ASX and has adopted a continuous disclosure policy*.

The Company follows a program of quarterly disclosures to the market on financial and operational results and hasestablished policies and procedures to ensure that a wide audience of investors has access to information given toASX for market release. Media releases, quarterly financial reports and AGM speeches are lodged with ASX andupon confirmation of receipt by ASX, they are posted to the Company's website.

In order to protect against inadvertent disclosure of price sensitive information, the Company imposescommunication blackout periods for financial information between the ends of financial reporting periods (31March, 30 June, 30 September and 31 December) and the announcement of results to the market.

Code of conductThe Company has adopted a code of conduct for employees*. It provides a framework of ethical principles forconducting business and dealing with customers, employees and other stakeholders. The code sets out theresponsibilities of employees to the Company and requires employees to avoid conflicts of interest, misuse ofcompany property and accepting or offering inappropriate gifts. Employees are permitted to trade in securities ofthe Company at any time subject to applicable statutory restrictions and, if senior executives, after reference tothe company secretary.

Shareholder communicationThe Company recognises the right of shareholders to be informed of matters which affect their investment in theCompany and has adopted a shareholder communication policy*. Consequently it maintains a website whichdisplays both corporate governance documents and up to date information released to ASX.

The Company keeps abreast of changes in technology which can enhance its communication with shareholdersand, when considered economically viable and valuable to shareholders, will adopt them.

ASX corporate governance council best practice recommendationsIn March 2003, the ASX Corporate Governance Council issued a paper entitled 'Principles of Good CorporateGovernance and Best Practice Recommendations'. In accordance with the ASX listing rules, the extent to whichthe Company has followed these recommendations is summarised below:

1. Management and oversightThe board has adopted a charter setting out its roles and responsibilities*.

Key terms and conditions relating to the appointment of non-executive directors appointed after therecommendations became effective are set out in formal engagement letters.

The chief executive officer and chief financial officer are employed pursuant to engagement agreements whichinclude formal job descriptions.

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ASX corporate governance council best practice recommendations (continued)2. Board structure

The board has adopted the recommended definition of 'independent director' and has addressed the issue ofmateriality.

The chairman and a majority of non-executive directors are independent.

The roles of the chairman and chief executive officer are separate.

The board has established a nomination committee* to oversee the selection and appointment of newdirectors.

3. Responsible decision makingThe board has adopted a code of conduct for directors* which includes a policy on trading in the Company'ssecurities.

4. Integrity of financial reportingThe board requires the chief executive officer and chief financial officer to state in writing to it that theCompany's financial reports represent a true and fair view, in all material respects, of the Company's financialcondition and operational results in accordance with the relevant accounting standards.

The board has established an audit and risk committee*. While the chairman is not an independent director,she is considered suitable for the role.

5. Timely and balanced disclosureThe board has adopted a continuous disclosure policy*.

6. Shareholder rightsThe board has adopted a shareholder communication policy*.

Shareholders are given a reasonable opportunity to ask questions of the board at general meetings. Theexternal auditor is available at such meetings to answer questions from shareholders on matters relating tothe audit of the Company's financial statements.

7. Risk managementThe board has adopted an internal control framework and a risk management policy both of which arediscussed earlier in this report.

The chief executive officer and chief financial officer are required to state in writing to the board that the riskmanagement and internal compliance and control systems are operating effectively and efficiently in allmaterial respects.

8. Enhancement of performanceThe board, with external assistance as required, reviews annually the performance of the board, itscommittees and its members. Such a review was carried out by the chairman during the course of thereporting period.

The performance of the chief executive officer is reviewed annually by the remuneration committee. The chiefexecutive officer and the remuneration committee review the performances of senior managers.

9. RemunerationThe board's remuneration policy is discussed in the remuneration report which forms part of the directors'report.

Non-executive directors do not receive options, bonus payments or retirement benefits (other than statutorysuperannuation).

10. Stakeholder interestsThe board has adopted a code of conduct for all employees*.

* These documents can be found on the Company's website at www.thewest.com.au, or copies can berequested from the company secretary.

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Income statements for the year ended 30 June 2007

Notes Consolidated Parent entity2007 2006 2007 2006 $'000 $'000 $'000 $'000

Revenue 5 447,043 396,468 135,035 95,917

Other income 6 293 321 - -

Finance costs 7 (20,472) (18,613) (16,456) (2,958)

Depreciation and amortisation 7 (36,554) (42,047) - -Editorial contributions (2,892) (2,655) - -Electricity (1,828) (1,881) - -Marketing and promotion expenses (4,926) (4,355) - -Newsprint consumed (67,648) (58,466) - -News services (2,525) (2,382) - -Personnel costs including payroll tax and

termination benefits (119,880) (139,221) (2,709) (564)Printing services - external (7,489) (7,303) - -Raw materials and consumables used

(excluding newsprint) (8,719) (7,289) - -Repairs and maintenance (1,864) (2,184) - -Road and air freight (15,421) (11,614) - -Share registry expenses (348) (315) (348) (315)Other expenses from ordinary activities (25,325) (20,713) (979) (697)

Loss on impairment of interest in jointlycontrolled entity 38(b) (60,142) - - -

Share of net profit of associate and jointly controlledentity accounted for using the equity method 38(c) 21,687 18,904 - -

Profit before income tax 92,990 96,655 114,543 91,383

Income tax (expense)/benefit 9 (39,022) (27,391) 6,137 797

Profit attributable to members of West AustralianNewspapers Holdings Limited 28(d) 53,968 69,264 120,680 92,180

Earnings per share for profit attributable tothe ordinary equity holders of the CompanyBasic earnings per share 40(a) 26.4 cents 34.2 centsDiluted earnings per share 40(b) 25.8 cents 33.1 cents

The above income statements should be read in conjunction with the accompanying notes.

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Balance sheets as at 30 June 2007


ASSETSCurrent assetsCash and cash equivalents 10 13,483 9,532 76 78Trade and other receivables 11 66,107 53,643 48,407 45,764Inventories 12 11,246 10,005 - -Derivative financial instruments 13 2,699 1,413 - -

Total current assets 93,535 74,593 48,483 45,842

Non-current assetsReceivables 14 - - 3,227 3,227Investments accounted for using the equity method 15 156,216 203,574 - -Available-for-sale financial assets 16 777 811 - -Derivative financial instruments 13 5,080 4,074 - -Other financial assets 17 - - 144,380 144,380Property, plant and equipment 18 255,331 232,861 - -Deferred tax assets 19 3,214 - 201 38Intangible assets 20 125,714 119,938 - -

Total non-current assets 546,332 561,258 147,808 147,645

Total assets 639,867 635,851 196,291 193,487

LIABILITIESCurrent liabilitiesTrade and other payables 21 39,905 50,039 757 138Current tax liabilities 4,436 16,977 4,436 16,977Provisions 22 4,184 4,361 - -Other 23 170 2,855 - -

Total current liabilities 48,695 74,232 5,193 17,115

Non-current liabilitiesBorrowings 24 503,000 414,000 62,964 54,651Deferred tax liabilities 25 - 427 - -Provisions 26 2,561 2,886 - -

Total non-current liabilities 505,561 417,313 62,964 54,651

Total liabilities 554,256 491,545 68,157 71,766

Net assets 85,611 144,306 128,134 121,721

EQUITYContributed equity 27 85,751 81,486 85,751 81,486Reserves 28 6,033 3,841 8,940 8,352(Accumulated deficit) / retained profits 28 (6,173) 58,979 33,443 31,883

Total equity 85,611 144,306 128,134 121,721

The above balance sheets should be read in conjunction with the accompanying notes.

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Statements of changes in equity for the year ended 30 June 2007


Total equity at the beginning of the financial year 144,306 158,171 121,721 116,511Adjustment to reserves on adoption of AASB 132 andAASB 139, net of tax - 842 - -

Restated total equity at the beginning of thefinancial year 144,306 159,013 121,721 116,511

Cash flow hedges, net of tax recognised directlyin equity 1,604 2,999 - -

Net income recognised directly in equity 1,604 2,999 - -

Profit for the year 53,968 69,264 120,680 92,180

Total recognised income and expense for the yearattributable to members of West AustralianNewspapers Holdings Limited 55,572 72,263 120,680 92,180

Transactions with equity holders in their capacity asequity holders

Increase in equity compensation reserve 588 - 588 -Proceeds relating to shares issued pursuant to the

executive and employee share purchase plans 4,265 4,938 4,265 4,938Dividends provided for or paid 29 (119,120) (91,908) (119,120) (91,908)

(114,267) (86,970) (114,267) (86,970)

Total equity at the end of the financial year 85,611 144,306 128,134 121,721

The above statements of changes in equity should be read in conjunction with the accompanying notes.

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Cash flow statements for the year ended 30 June 2007


Cash flows from operating activitiesReceipts from customers (inclusive of goods and

services tax) 474,223 434,363 - -Payments to suppliers and employees (including

redundancy payments and inclusive of goods andservices tax) (313,895) (274,354) (2,834) (1,588)

160,328 160,009 (2,834) (1,588)Dividends received 4,500 5,635 135,000 48,128Interest received 833 629 35 37Interest paid (20,240) (18,258) - -Income taxes paid (51,488) (45,272) (51,442) (36,289)

Net cash inflow from operating activities 42 93,933 102,743 80,759 10,288

Cash flows from investing activitiesPayments for purchase of businesses and subsidiaries,

net of cash acquired 35(b) (4,879) (13,165) - -Payment of additional costs in relation to purchase of

equity accounted investments (Hoyts) - (9) - -Receipt in respect of reduction in purchase price of

equity accounted investment (Hoyts) - 2,590 - -Payments for computer software (3,199) (2,835) - -Payments for property, plant and equipment (47,604) (117,130) - -Interest paid capitalised to Herdsman production upgrade (9,209) (4,369) - -Proceeds from sale of property, plant and equipment 725 1,031 - -Proceeds from sale of available-for-sale and other

financial assets 39 - - -Receipt in respect of loan to related parties - 731 - 31,761

Net cash (outflow)/inflow from investing activities (64,127) (133,156) - 31,761

Cash flows from financing activitiesProceeds relating to shares issued pursuant to the

executive and employee share purchase plans 4,265 4,938 4,265 4,938Proceeds from borrowings 148,000 244,000 - -Repayment of borrowings (59,000) (128,000) - -Loans from related parties - - 34,094 44,944Dividends paid (119,120) (91,908) (119,120) (91,908)

Net cash (outflow)/inflow from financing activities (25,855) 29,030 (80,761) (42,026)

Net increase/(decrease) in cash held 3,951 (1,383) (2) 23Cash and cash equivalents at the beginning of

the financial year 9,532 10,915 78 55

Cash and cash equivalents at end of the year 10 13,483 9,532 76 78

Financing arrangements 24(a)Non-cash financing and investing activities 43

The above cash flow statements should be read in conjunction with the accompanying notes.

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Notes to the financial statements - 30 June 2007

Contents of the notes to the financial statements Page

1. Summary of significant accounting policies 352. Financial risk management 463. Critical accounting estimates 464. Segment information 475. Revenue 496. Other income 497. Expenses 498. Noteworthy items 499. Income tax expense 50

10. Current assets - Cash and cash equivalents 5111. Current assets - Trade and other receivables 5212. Current assets - Inventories 5213. Derivative financial instruments 5314. Non-current assets - Receivables 5415. Non-current assets - Investments accounted for

using the equity method 5416. Non-current assets - Available-for-sale financial assets 5417. Non-current assets - Other financial assets 5418. Non-current assets - Property, plant and equipment 5419. Non-current assets - Deferred tax assets 5520. Non-current assets - Intangible assets 5621. Current liabilities - Trade and other payables 5722. Current liabilities - Provisions 5723. Current liabilities - Other 5824. Non-current liabilities - Borrowings 5825. Non-current liabilities - Deferred tax liabilities 5926. Non-current liabilities - Provisions 5927. Contributed equity 5928. Reserves and (accumulated deficit) / retained profits 6029. Dividends 6130. Key management personnel disclosures 6231. Remuneration of auditors 6532. Contingent liabilities 6533. Commitments 6634. Related party transactions 6635. Business combination 6836. Deed of cross guarantee 7037. Subsidiaries 7138. Investments in associates and jointly controlled entities 7239. Events occurring after the balance sheet date 7340. Earnings per share 7341. Share-based payments 7442. Reconciliation of profit after income tax to net cash

inflow from operating activities 7643. Non-cash financing and investing activities 76

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Notes to the financial statements - 30 June 2007 (continued)

1. Summary of significant accounting policiesThe principal accounting policies adopted in the preparation of the financial report are set out below.These policies have been consistently applied to all the years presented, unless otherwise stated. Thefinancial report includes separate financial statements for West Australian Newspapers Holdings Limited asan individual entity and the Consolidated Entity consisting of West Australian Newspapers Holdings Limitedand its subsidiaries.

(a) Basis of preparationThis general purpose financial report has been prepared in accordance with Australian AccountingStandards, other authoritative pronouncements of the Australian Accounting Standards Board, UrgentIssues Group Interpretations and the Corporations Act 2001.

Compliance with IFRSAustralian Accounting Standards include Australian equivalents to International Financial ReportingStandards (AIFRS). Compliance with AIFRS ensures that the consolidated financial statements andnotes of West Australian Newspapers Holdings Limited comply with International Financial ReportingStandards (IFRS). The parent entity financial statements and notes also comply with IFRS except thatit has elected to apply the relief provided to parent entities in respect of certain disclosure requirementscontained in AASB 132 Financial Instruments: Disclosure and Presentation.

Historical cost conventionThese financial statements have been prepared under the historical cost convention, as modified by therevaluation of available-for-sale financial assets and derivative instruments held at fair value.

(b) Principles of consolidation(i) Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries ofWest Australian Newspapers Holdings Limited (''Company'' or ''Parent Entity'') as at 30 June 2007and the results of all subsidiaries for the year then ended. West Australian Newspapers HoldingsLimited and its subsidiaries together are referred to in this financial report as the Group or theConsolidated Entity.

Subsidiaries are all those entities over which the Group has the power to govern the financial andoperating policies, generally accompanying a shareholding of more than one half of the votingrights.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. Theyare de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by theGroup (refer to note 1(h)).

Intercompany transactions, balances and unrealised gains on transactions between Groupcompanies are eliminated. Accounting policies of subsidiaries have been changed wherenecessary to ensure consistency with the policies adopted by the Group.

Investments in subsidiaries are accounted for at cost in the individual financial statements of theCompany.

(ii) Associates and jointly controlled entitiesAssociates and jointly controlled entities are all entities over which the Group has significantinfluence but not control, generally accompanying a shareholding of between 20% and 50% of thevoting rights. Investments in associates and jointly controlled entities are accounted for in theconsolidated financial statements using the equity method of accounting, after initially beingrecognised at cost. The Group’s investment in associates and jointly controlled entities includesgoodwill (net of any accumulated impairment loss) identified on acquisition.

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1. Summary of significant accounting policies (continued)(b) Principles of consolidation (continued)

(ii) Associates and jointly controlled entities (continued)The Group’s share of its associates’ and jointly controlled entities' post-acquisition profits orlosses is recognised in the income statement, and its share of post-acquisition movements inreserves is recognised in reserves. The cumulative post-acquisition movements are adjustedagainst the carrying amount of the investment. Dividends/distributions receivable from associatesand jointly controlled entities are recognised in the consolidated financial statements as areduction in the carrying amount of the investment.

Unrealised gains on transactions between the Group and its associates and jointly controlledentities are eliminated to the extent of the Group’s interest in the associates and jointly controlledentities. Unrealised losses are also eliminated unless the transaction provides evidence of animpairment of the asset transferred. Accounting policies of associates and jointly controlledentities have been changed where necessary to ensure consistency with the policies adopted bythe Group.

(c) Segment reportingA business segment is identified for a group of assets and operations engaged in providing products orservices that are subject to risks and returns that are different to those of other business segments. Ageographical segment is identified when products or services are provided within a particular economicenvironment subject to risks and returns that are different from those of segments operating in othereconomic environments.

(d) Foreign currency translation(i) Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using thecurrency of the primary economic environment in which the entity operates ('the functionalcurrency'). The consolidated financial statements are presented in Australian dollars, which isWest Australian Newspapers Holdings Limited's functional and presentation currency.

(ii) Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange ratesprevailing at the dates of the transactions. Foreign exchange gains and losses resulting from thesettlement of such transactions and from the translation at year-end exchange rates of monetaryassets and liabilities denominated in foreign currencies are recognised in the income statement.

(e) Revenue recognitionRevenue is measured at the fair value of the consideration received or receivable. Amounts disclosed asrevenue are net of commissions, discounts, rebates, returns, trade allowances and duties and taxespaid. The Group recognises revenue when the amount of revenue can be reliably measured, it isprobable the future economic benefits will flow to the entity and specific criteria have been met for eachof the Group's activities as described below.

Revenue is recognised for the major business activities as follows:

(i) AdvertisingRevenue is recognised when the advertisement has been published or broadcast.

(ii) Circulation and commercial printingRevenue is recognised when control of goods has passed to the buyer.

(iii) Rendering of servicesRevenue is recognised when the service has been performed.

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1. Summary of significant accounting policies (continued)(e) Revenue recognition (continued)

(iv) RentsRents are recognised on a time proportion basis.

(v) InterestInterest revenue is recognised on a time proportion basis that takes into account the effective yieldon the asset.

(vi) DividendsDividends are recognised when the right to receive payment is established.

(f) Income taxThe income tax expense for the period is the tax payable on the current period’s taxable income basedon the national income tax rate adjusted by changes in deferred tax assets and liabilities attributable totemporary differences and to unused tax losses.

Deferred income tax is provided in full, using the liability method, on temporary differences arisingbetween the tax bases of assets and liabilities and their carrying amounts in the consolidated financialstatements. Deferred income tax is determined using tax rates (and laws) that have been enacted orsubstantially enacted by the balance sheet date and are expected to apply when the related deferredincome tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if itis probable that future taxable amounts will be available to utilise those temporary differences andlosses. Management have determined that deferred tax assets and deferred tax liabilities associatedwith intangibles that have an indefinite useful life, such as mastheads, should be measured based onthe tax consequences that would follow from the sale of that asset. Deferred tax assets are only bookedwhere recovery of that asset is probable.

Deferred tax liabilities and assets are not recognised for temporary differences between the carryingamount and tax bases of investments in controlled entities where the parent entity is able to control thetiming of the reversal of the temporary differences and it is probable that the differences will not reversein the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset currentassets and liabilities and when the deferred tax balances relate to the same taxation authority. Currenttax assets and liabilities are offset where the entity has a legally enforceable right to offset and intendseither to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax balances attributable to amounts recognised directly in equity are alsorecognised directly in equity.

Tax consolidation legislationWest Australian Newspapers Holdings Limited and its wholly-owned Australian controlled entities haveimplemented the tax consolidation legislation and formed a tax consolidated group.

Each member of the tax consolidated group continues to account for their own current and deferred taxamounts as if they continued to be a stand alone taxpayer in its own right.

In addition to its own current and deferred tax amounts, West Australian Newspapers Holdings Limited,the head entity of the consolidated group, also recognises the current tax liabilities (or assets) and thedeferred tax assets arising from available tax losses assumed from controlled entities in the taxconsolidated group.

Assets and liabilities arising under tax funding agreements with the tax consolidated entities arerecognised as amounts receivable from or payable to other entities in the Group. Details about the taxfunding agreement are disclosed in note 9(e).

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1. Summary of significant accounting policies (continued)(g) Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessorare classified as operating leases. Payments made under operating leases are charged to the incomestatement on a straight line basis over the period of the lease.

Lease income from operating leases, where the Group is a lessor, is recognised in income on astraight-line basis over the lease term.

(h) Acquisition of assets and business combinationsThe purchase method of accounting is used to account for all acquisitions of assets (including businesscombinations) regardless of whether equity instruments or other assets are acquired. Cost is measuredas the fair value of the assets given, shares issued or liabilities incurred or assumed at the date ofexchange plus costs directly attributable to the acquisition.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combinationare measured initially at their fair values at the acquisition date, irrespective of the extent of any minorityinterest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiablenet assets acquired is recorded as goodwill (refer to note 1(q)). If the cost of acquisition is less than theGroup's share of the fair value of the identifiable net assets of the subsidiary acquired, the difference isrecognised directly in the income statement.

(i) Impairment of assetsGoodwill and intangible assets that have an indefinite useful life are not subject to amortisation and aretested annually for impairment, or more frequently if events or changes in circumstances indicate thatthey might be impaired. Other assets are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount may not be recoverable. An impairment loss isrecognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Therecoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there areseparately identifiable cash flows which are largely independent of the cash inflows from other assets orgroups of assets (cash generating units). Non-financial assets other than goodwill that suffered animpairment are reviewed for possible reversal of the impairment at each reporting date.

(j) Cash and cash equivalentsFor cash flow statement presentation purposes, cash and cash equivalents includes cash on hand anddeposits held at call with financial institutions.

(k) Trade receivablesTrade receivables are recognised initially at fair value and subsequently measured at amortised costusing the effective interest method, less provision for impairment. Trade receivables are generally due forsettlement within 45 days.

Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to beuncollectible are written off. A provision for impairment of trade receivables is established when there isobjective evidence that the Group will not be able to collect all amounts due according to the originalterms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enterbankruptcy or financial reorganisation, and default or delinquency in payments (more than 45 daysoverdue) are considered indicators that the trade receivable is impaired. The amount of the provision isthe difference between the asset’s carrying amount and the present value of estimated future cashflows, discounted at the effective interest rate. Cash flows relating to short-term receivables are notdiscounted if the effect of discounting is immaterial. The amount of the provision is recognised in theincome statement in other expenses.

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1. Summary of significant accounting policies (continued)(l) Inventories

Finished goods, raw materials and stores are stated at the lower of cost and net realisable value. Costcomprises direct materials and direct labour. Costs are assigned to individual items of inventory,generally on the basis of first-in first-out. Net realisable value is the estimated selling price in theordinary course of business less the estimated costs of completion and the estimated costs necessaryto make the sale.

(m) Investments and other financial assetsThe Group classifies its investments in the following categories:

(i) Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments thatare not quoted in an active market. They arise when the Group provides money, goods or servicesdirectly to a debtor with no intention of selling the receivable. They are included in current assets,except for those with maturities greater than 12 months after the balance sheet date which areclassified as non-current assets. Loans and receivables are included in receivables in the balancesheet. Loans and receivables are carried at amortised cost using the effective interest method.

(ii) Available-for-sale financial assets Available-for-sale financial assets are non-derivative assets and include investments in equitysecurities in which the Group does not have significant influence or control. They are included innon-current assets unless management intends to dispose of the investment within 12 months ofthe balance sheet date.

Regular purchases and sales of financial assets are recognised on trade-date - the date on whichthe Group commits to purchase or sell the asset. Financial assets, other than those at fair valuethrough profit and loss, are initially recognised at fair value plus transaction costs. Financialassets are derecognised when the rights to receive cash flows from the financial assets haveexpired or have been transferred and the Group has transferred substantially all the risks andrewards of ownership.

Available-for-sale financial assets are subsequently carried at fair value. Unrealised gains andlosses arising from changes in their fair value are recognised in equity.

When securities classified as available-for-sale are sold, the accumulated fair value adjustmentsrecognised in equity are included in the income statement as gains and losses from investmentsecurities.

The fair values of quoted investments are based on current bid prices. If the market for a financialasset is not active (and for unlisted securities), the Group establishes fair value by using valuationtechniques. These include the use of recent arm’s length transactions, reference to otherinstruments that are substantially the same, discounted cash flow analysis, and option pricingmodels making maximum use of market inputs and relying as little as possible on entity-specificinputs.

The Group assesses at each balance date whether there is objective evidence that a financialasset or group of financial assets is impaired. In the case of equity securities classified asavailable-for-sale, a significant or prolonged decline in the fair value of a security below its cost isconsidered in determining whether the security is impaired. If any such evidence exists foravailable-for-sale financial assets, the cumulative loss - measured as the difference between theacquisition cost and the current fair value, less any impairment loss on that financial assetpreviously recognised in profit and loss - is removed from equity and recognised in the incomestatement. Impairment losses recognised in the income statement on equity instrumentsclassified as available-for-sale are not reversed through the income statement.

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1. Summary of significant accounting policies (continued)(n) Derivatives

The Group is party to derivative financial instruments in the normal course of business in order to hedgeexposure to fluctuations in interest rates and are designated as cash flow hedges.

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and aresubsequently remeasured to their fair value at each reporting date. The fair values of derivative financialinstruments used for hedging purposes are disclosed in note 13. Movements in the hedging reserve inshareholders' equity are shown in note 28(b). The full fair value of a hedging derivative is classified as anon-current asset or liability when the remaining maturity of the hedged item is more than 12 months; itis classified as a current asset or liability when the remaining maturity of the hedged item is less than12 months.

The Group documents at the inception of the transaction the relationship between hedging instrumentsand hedged items, as well as its risk management objective and strategy for undertaking various hedgetransactions. The Group also documents its assessment, both at hedge inception and on an ongoingbasis, of whether the derivatives that are used in hedging transactions have been and will continue to behighly effective in offsetting changes in fair values or cash flows of hedged items.

The gain or loss from remeasuring the hedging instruments to fair value is deferred in equity in thehedging reserve, to the extent that the hedge is effective, and is recognised in the income statementwhen the hedged interest expense is recognised.

The gain or loss relating to the ineffective portion is recognised immediately in the income statement.

When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets thecriteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains inequity and is recognised when the forecast transaction is ultimately recognised in the incomestatement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss thatwas reported in equity is immediately transferred to the income statement.

(o) Fair value estimationThe fair value of financial assets and financial liabilities must be estimated for recognition andmeasurement or for disclosure purposes.

The fair value of financial instruments traded in active markets is based on quoted market prices at thebalance sheet date. The quoted market price used for financial assets held by the Group is the currentbid price; the appropriate quoted market price for financial liabilities is the current ask price.

The fair value of financial instruments that are not traded in an active market (for example,over-the-counter derivatives) is determined using valuation techniques. The Group uses a variety ofmethods and makes assumptions that are based on market conditions existing at each balance date.Quoted market prices or dealer quotes for similar instruments are used for long term debt instrumentsheld. Other techniques, such as estimated discounted cash flows, are used to determine fair value forthe remaining financial instruments. The fair value of interest-rate swaps is calculated as the presentvalue of the estimated future cash flows.

The carrying value less impairment provision of trade receivables and payables are assumed toapproximate their fair values due to their short term nature. The fair value of financial liabilities fordisclosure purposes is estimated by discounting the future contractual cash flows at the current marketinterest rate that is available to the Group for similar financial instruments.

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1. Summary of significant accounting policies (continued)(p) Property, plant and equipment

All property, plant and equipment is stated at historical cost to the Group less depreciation. Historicalcost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, asappropriate, only when it is probable that future economic benefits associated with the item will flow tothe Group and the cost of the item can be measured reliably. All other repairs and maintenance arecharged to the income statement during the financial period in which they are incurred.

Land is not depreciated. Depreciation on other assets is calculated using the straight line method toallocate their cost, net of their residual values, over their estimated useful lives, as follows:

Operational buildings 40 yearsPrinting presses 15 yearsPublishing equipment 15 yearsOther plant and equipment 5-10 years

Certain printing equipment is subject to accelerated depreciation.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balancesheet date. An asset’s carrying amount is written down immediately to its recoverable amount if theasset's carrying amount is greater than its estimated recoverable amount (note 1(i)). Gains and losseson disposals are determined by comparing proceeds with carrying amount. These are included in theincome statement.

(q) Intangible assets(i) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’sshare of the net identifiable assets of the acquired subsidiary, associate or jointly controlled entityat the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets.Goodwill on acquisitions of associates and jointly controlled entities is included in investments inassociates and jointly controlled entities. Goodwill acquired is not amortised. Instead, goodwill istested for impairment annually, or more frequently if events or changes in circumstances indicatethat it might be impaired, and is carried at cost less accumulated impairment losses. Gains andlosses on the disposal of an entity include the carrying amount of goodwill relating to the entitysold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of thosecash-generating units represents the Group’s investment in each industry of operation by eachprimary reporting segment.

(ii) Newspaper mastheads and radio licenses The newspaper mastheads and radio licences of the Group are considered by the directors to beidentifiable intangible assets. The carrying amounts of these assets are not amortised as thedirectors have determined them to have indefinite useful lives. Instead, mastheads and radiolicences are tested for impairment annually, or whenever there is an indication that they may beimpaired - refer note 1(i). Mastheads and radio licences are carried at cost less accumulatedimpairment losses.

(iii) Computer softwareCosts incurred in developing products or systems and costs incurred in acquiring software andlicences that will contribute to future period financial benefits through revenue generation and/orcost reduction are capitalised to software and systems. Cost capitalised include external directcosts of materials and service. Amortisation is calculated on a straight line basis over periodsgenerally ranging from 3 to 5 years.

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1. Summary of significant accounting policies (continued)(r) Trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end offinancial year which are unpaid. The amounts are unsecured and are usually paid within 45 days ofrecognition.

(s) BorrowingsBorrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings aresubsequently measured at amortised cost. Any difference between the proceeds (net of transactioncosts) and the redemption amount is recognised in the income statement over the period of theborrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defersettlement of the liability for at least 12 months after the balance sheet date.

(t) Borrowing costsBorrowing costs incurred for the construction of any qualifying asset are capitalised during the period oftime that is required to complete and prepare the asset for its intended use. Other borrowing costs areexpensed.

The capitalisation rate used to determine the amount of borrowing costs to be capitalised is theweighted average interest rate applicable to the entity's outstanding borrowings during the period, in thiscase 6.57% (2006 - 5.99%).

(u) ProvisionsProvisions for libel and legal claims against the Group are recognised when it is more likely than notthat the Group has an obligation to settle the claims and the amount has been reliably estimated.

Provisions are measured at the present value of management's best estimate of the expenditurerequired to settle the present obligation at the balance sheet date. The discount rate used to determinethe present value reflects current market assessments of the time value of money and the risks specificto the liability. The increase in the provision due to the passage of time is recognised as interestexpense.

(v) Employee benefits(i) Wages and salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to besettled within 12 months of the reporting date are recognised in trade payables and other accruedexpenses in respect of employees' services up to the reporting date and are measured at theamounts expected to be paid when the liabilities are settled. Sick leave is recognised in theincome statement when the leave is taken and measured at the rates paid.

(ii) Long service leave The liability for long service leave is recognised in the provision for employee benefits andmeasured as the present value of expected future payments to be made in respect of servicesprovided by employees up to the reporting date using the projected unit credit method.Consideration is given to expected future wage and salary levels, experience of employeedepartures and periods of service. Expected future payments are discounted using market yieldsat the reporting date on national government bonds with terms to maturity and currency thatmatch, as closely as possible, the estimated future cash outflows.

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1. Summary of significant accounting policies (continued)(v) Employee benefits (continued)

(iii) Share-based payments Share-based compensation benefits are provided to executives and employees in accordance withthe Company's share purchase and loan plans. Information relating to these plans is set out innote 41. Under AASB 2 Share-based Payments , the plans are deemed as equity settled,share-based remuneration and treated as an in-substance grant of options. The fair value of theoptions granted is recognised as an employee benefit expense with a corresponding increase inequity. The fair value is measured at grant date and recognised over the period during which theemployee becomes unconditionally entitled to the option.

Share rights have been granted under an employment agreement with the chief executive officer.The fair value of these rights is recognised as an employee benefit expense with a correspondingincrease in equity. The fair value is measured at grant date and recognised over the period duringwhich the employees become unconditionally entitled to the rights.

The fair value of the rights granted is adjusted to reflect market vesting conditions, but excludesthe impact of any non-market vesting conditions (for example, profitability and sales growthtargets). Non-market vesting conditions are included in assumptions about the number of rightsthat are expected to be granted. At each balance sheet date, the entity revises its estimate of thenumber of share rights that are expected to be vested. The employee benefit expense recognisedeach period takes into account the most recent estimate. The impact of the revision to originalestimates, if any, is recognised in the income statement with a corresponding adjustment toequity.

(iv) Short term incentives and bonus plansA liability for employee benefits in the form of short term incentives and bonus plans is recognisedin trade payables and other accrued expenses when there is no realistic alternative but to settlethe liability and at least one of the following conditions is met:

- there are formal terms in the plan for determining the amount of the benefit - the amounts to be paid are determined before the time of completion of the financial report,

or - past practice gives clear evidence of the amount of the obligation.

Liabilities for short term incentives and bonus plans are expected to be settled within 12 monthsand are measured at the amounts expected to be paid when they are settled.

(v) Termination benefitsTermination benefits are payable when employment is terminated before the normal retirementdate, or when an employee accepts voluntary redundancy in exchange for these benefits. TheGroup recognises termination benefits when it is demonstrably committed to either terminating theemployment of current employees according to a detailed formal plan without possibility ofwithdrawal or providing termination benefits as a result of an offer made to encourage voluntaryredundancy. Benefits falling due more then 12 months after balance sheet date are discounted topresent value.

(vi) Superannuation Contributions made by the Company to employee superannuation funds are charged to the incomestatement in the period employees' services are provided.

(w) Contributed equityOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of newshares or options are shown in equity as a deduction, net of tax, from the proceeds.

(x) DividendsProvision is made for the amount of any dividend declared, determined or publicly recommended by thedirectors on or before the end of the financial year but not distributed at balance date.

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1. Summary of significant accounting policies (continued)(y) Earnings per share

(i) Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of theCompany by the weighted average number of ordinary shares outstanding during the financial year.

(ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings pershare to take into account the after income tax effect of interest and other financing costsassociated with dilutive potential ordinary shares and the weighted average number of sharesassumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(z) Financial guarantee contractsFinancial guarantee contracts are recognised as a financial liability at the time the guarantee is issued.The liability is initially measured at fair value and subsequently at the higher of the amount determinedin accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets and the amountinitially recognised less cumulative amortisation, where appropriate.

The fair value of financial guarantees is determined as the present value of the difference in net cashflows between the contractual payments under the debt instrument and the payments that would berequired without the guarantee, or the estimated amount that would be payable to a third party forassuming the obligations.

Where guarantees in relation to loans or other payables of subsidiaries or associates are provided for nocompensation, the fair values are accounted for as contributions and recognised as part of the cost ofthe investment.

(aa) Goods and service tax (GST)Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GSTincurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost ofthe acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The netamount of GST recoverable from, or payable to, the taxation authority is included with other receivablesor payables in the balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing orfinancing activities which are recoverable from, or payable to the taxation authority, are presented asoperating cash flow.

(ab) Rounding of amountsThe Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities andInvestments Commission, relating to the "rounding off" of amounts in the financial report. Amounts inthe financial report have been rounded off in accordance with that Class Order to the nearest thousanddollars, or in certain cases, to the nearest dollar.

(ac) New accounting standards and interpretationsCertain new accounting standards and interpretations have been published and are not mandatoryfor 30 June 2007 reporting periods. The Group's and the Company's assessment of the impact of thesenew standards and interpretations is set out below.

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1. Summary of significant accounting policies (continued)(ac) New accounting standards and interpretations (continued)

(i) AASB 7 Financial Instruments: Disclosures and AASB 2005-10 Amendments to AustralianAccounting Standards (AASB 132, AASB 101, AASB 114, AASB 117, AASB 133, AASB 139,AASB 1, AASB 4, AASB 1023 & AASB 1038)AASB 7 and AASB 2005-10 are applicable to annual reporting periods beginning on or after 1January 2007. The Group has not adopted the standards early. Application of the standards willnot affect any of the amounts recognised in the financial statements, but will impact the type ofinformation disclosed in relation to the Group's financial instruments.

(ii) AASB-1 10 Interim Financial Reporting and ImpairmentAASB-1 10 is applicable to reporting periods commencing on or after 1 November 2006. The Grouphas not recognised an impairment loss in relation to goodwill, investments in equity instruments orfinancial assets carried at cost in an interim reporting period but subsequently reversed theimpairment loss in the annual report. Application of the interpretation will therefore have no impacton the Group's or the Company's financial statements.

(iii) Revised AASB 101 Presentation of Financial StatementsA revised AASB 101 was issued in October 2006 and is applicable to annual reporting periodsbeginning on or after 1 January 2007. The Group has not adopted the standard early. Applicationof the revised standard will not affect any of the amounts recognised in the financial statements,but will remove some of the disclosures currently required.

(iv) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standardsarising from AASB 8AASB 8 and AASB 2007-3 are effective for annual reporting periods commencing on or after 1January 2009. AASB 8 will result in a significant change in the approach to segment reporting, asit requires adoption of a management approach to reporting on the financial performance. Theinformation being reported will be based on what the key decision-makers use internally forevaluating segment performance and deciding how to allocate resources to operating segments. The Group has not yet decided when to adopt AASB 8. Application of AASB 8 may result indifferent segments, segment results and different type of information being reported in the segmentnote of the financial report. However, it will not affect any of the amounts recognised in thefinancial statements.

(v) AASB 2007-4 Amendments to Australian Accounting Standards arising from ED 151 and OtherAmendments and AASB 2007-7 Amendments to Australian Accounting Standards (AASB 1,AASB 2, AASB 4, AASB 5, AASB 107 & AASB 128)AASB 2007-4 and AASB 2007-7 are applicable to annual reporting periods beginning on or after 1July 2007. The amendments introduce a number of options that existed under IFRS but had notbeen included in the original Australian equivalents to IFRS and remove many of the additionalAustralian disclosure requirements. The Group will adopt the amendments arising from AASB2007-4 and AASB 2007-7 for the financial year ending 30 June 2008. However, it does not intendto apply any of the new options now available. As a consequence, application of the revisedstandard will not affect any of the amounts recognised in the financial statements, but will removesome of the disclosures currently required

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2. Financial risk managementThe Group's activities expose it to financial risks, the main ones being credit risk, cash flow interest rate riskand liquidity risk. The Group's overall risk management program focuses on the unpredictability of financialmarkets and seeks to minimise potential adverse effects on the financial performance of the Group. TheGroup uses derivative financial instruments such as interest rate swaps to hedge certain risk exposures.

(a) Credit riskThe Group has no significant concentrations of credit risk. The Group has policies in place to ensurethat sales are made to customers with an appropriate credit history. Derivative counterparties and cashtransactions are limited to high credit quality financial institutions.

(b) Cash flow interest rate riskAs the Group has no significant long-term interest-bearing assets, the Group's income and operatingcash flows are substantially independent of changes in market interest rates relating to such assets.

The Group's interest-rate risk arises from long-term borrowings. Borrowings issued at variable ratesexpose the Group to cash flow interest rate risk. Borrowings at fixed rates expose the Group to fairvalue interest rate risk. At the year end $200,000,000 of borrowings were at fixed rates(2006 - $200,000,000).

The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Suchinterest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates.Under the interest rate swaps, the Group agrees with other parties to exchange, at specified intervals(mainly quarterly), the difference between fixed contract rates and floating rate interest amountscalculated by reference to the agreed notional principal amounts.

(c) Liquidity riskPrudent liquidity risk management implies maintaining sufficient cash and marketable securities, theavailability of funding through an adequate amount of committed credit facilities. Due to the nature of theunderlying businesses, the Group aims at maintaining flexibility in funding by keeping committed creditlines available.

3. Critical accounting estimatesEstimates and judgements are continually evaluated and are based on historical experience and otherfactors, including expectations of future events that may have a financial impact on the Group and that arebelieved to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will,by definition, seldom equal the related actual results. The estimates and assumptions that have a significantrisk of causing a material adjustment to the carrying amounts of assets within the next financial year arediscussed below.

The Group tests annually whether mastheads, radio licences and goodwill have suffered any impairment inaccordance with the accounting policy stated in note 1(i). The recoverable amounts of cash-generating unitshave been determined based on value-in-use calculations. These calculations require the use of assumptions.Refer to note 20 for details of these assumptions.

The Group also tests other assets for impairment whenever events or changes in circumstances indicate thatthe carrying amount may not be recoverable. Refer note 38(b) regarding impairment loss on investment in theGroup's interest in a joint venture entity recognised during the current financial year.

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4. Segment informationThe Group operates predominantly in two business segments for primary reporting, being the publishingindustry and the cinema exhibition, cinema advertising and film distribution industry (Hoyts). The businesssegments operate predominantly in one geographical segment for secondary reporting, being Australia.

Primary reporting - business segments

Inter-segmentCinemas eliminations/

2007 (Hoyts) Other unallocated Consolidated$'000 $'000 $'000 $'000

Sales to external customers - 21,049 - 445,788Intersegment sales (a) - 16,468 (16,468) -

Total sales revenue - 37,517 (16,468) 445,788Share of net profits of associates and

jointly controlled entities 16,205 - - 21,687Other revenue/income - - 833 1,548

Total segment revenue/income 16,205 37,517 (15,635) 469,023

Segment result (43,938) 3,076 - 116,682Unallocated revenue less unallocated

expenses (23,692)

Profit before income tax 92,990Income tax expense (39,022)

Profit for the year 53,968

Segment assets 145,000 27,170 5,627 639,867

Segment liabilities - 2,439 508,572 554,256

Investments in associates and jointlycontrolled entities 145,000 - - 156,216

Acquisitions of property, plant andequipment, intangibles and othernon-current segment assets - 1,990 - 66,820

Depreciation and amortisation expense - 1,743 - 36,554

Impairment of inventories - - - 167

Impairment of trade receivables - - - 88

Impairment of interest in jointlycontrolled entity - - 60,142

157,544

47

64,830

60,142

-

424,739

Publishing

462,070

715

430,936

11,216

167

34,811

88

$'000

-

424,739

43,245

5,482

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4. Segment information (continued)

Primary reporting - business segments (continued)

Inter-segmentCinemas eliminations/

2006 (Hoyts) Other unallocated Consolidated$'000 $'000 $'000 $'000

Sales to external customers - 20,246 - 394,675Intersegment sales (a) - 13,743 (13,743) -

Total sales revenue - 33,989 (13,743) 394,675Share of net profits of associates and

jointly controlled entities 13,799 - - 18,904Other revenue/income - - 1,264 2,114

Total segment revenue/income 13,799 33,989 (12,479) 415,693

Segment result 13,799 3,563 - 115,580Unallocated revenue less unallocated

expenses (18,925)

Profit before income tax 96,655Income tax expense (27,391)

Profit for the year 69,264

Segment assets 193,340 28,261 1,100 635,851

Segment liabilities - 2,568 431,542 491,545

Investments in associates and jointlycontrolled entities 193,340 - - 203,574

Acquisitions of property, plant andequipment, intangibles and othernon-current segment assets 9 4,374 - 139,936

Depreciation and amortisation expense - 2,220 - 42,047

Impairment of inventories - - - 167

Impairment of trade receivables - - - 345

(a) Intersegment transfersSegment revenues, expenses and results, include transfers between segments. Such transfers arepriced on an "arm's-length" basis and are eliminated on consolidation.

135,553

39,827

374,429-

345

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167

850

Publishing$'000

374,429

5,105

10,234

380,384

98,218

57,435

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Consolidated Parent entity2007 2006 2007 2006 $'000 $'000 $'000 $'000

5. RevenueSales revenueAdvertising 332,199 287,522 - -Circulation 88,792 83,282 - -Commercial printing 12,601 12,848 - -Rendering of services 8,373 7,618 - -Other 3,823 3,405 - -

445,788 394,675 - -

Other revenueDividends - 635 135,000 94,164Interest 833 629 35 1,753Rents 422 529 - -

1,255 1,793 135,035 95,917

Revenue (excluding share of equity accounted netprofit of associates and jointly controlled entities) 447,043 396,468 135,035 95,917

6. Other incomeNet gain on disposal of property, plant and equipment

and computer software 288 321 - -Net gain on disposal of available-for-sale financial assets 5 - - -

293 321 - -

7. ExpensesProfit before income tax includes the followingspecific expenses:

Depreciation and amortisationBuildings 1,220 1,544 - -Plant and equipment (includes accelerated depreciation

disclosed in note 8) 33,650 38,793 - -Computer software 1,684 1,710 - -

Total depreciation and amortisation 36,554 42,047 - -

Finance costsInterest and finance charges paid/payable 29,681 22,982 16,456 2,958Amount capitalised (9,209) (4,369) - -

Finance costs expensed 20,472 18,613 16,456 2,958

Rental expense relating to operating leases 1,177 1,061 - -

8. Noteworthy itemsProfit before income tax expense includes the followingspecific net gains and expenses whose disclosure isrelevant in explaining the financial performance of theGroup:

GainsDividend received - Australian Associated Press PtyLimited (included in dividends in note 5) - 495 - -

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8. Noteworthy items (continued)ExpensesAccelerated depreciation on Herdsman printing

equipment (18,019) (23,990) - -Write-offs related to the production upgrade at Herdsman (167) (507) - -Employee redundancy provisions and payments

Related to production upgrade at Herdsman (501) (28,747) - -Other (1,780) (2,097) - -

Loss on impairment of interest in jointly controlledentity (note 38(b)) (60,142) - - -

(80,609) (55,341) - -

(80,609) (54,846) - -

9. Income tax expense(a) Income tax expense

Current tax (38,942) (46,009) 5,918 776Deferred tax (423) 18,528 163 3Adjustments for current tax of prior periods 343 90 56 18

Aggregate income tax (expense)/benefit (39,022) (27,391) 6,137 797

Deferred income tax (revenue)/expense included inincome tax expense comprises:Reclassification of deferred tax impact of jointly

controlled entity (note 38(b)) 4,750 - - -Increase in deferred tax assets (note 19) (253) (9,041) (163) (3)Decrease in deferred tax liabilities (note 25) (4,074) (9,487) - -

423 (18,528) (163) (3)

(b) Numerical reconciliation of income taxexpense to prima facie tax payableProfit before income tax expense 92,990 96,655 114,543 91,383

Tax at the Australian tax rate of 30% (2006 - 30%) (27,897) (28,997) (34,363) (27,415)Tax effect of amounts which are not (deductible)/taxable in calculating taxable income:

Building construction allowance 406 406 - -Non-deductible depreciation and amortisation (323) (295) - -Non-deductible expenses (361) (306) (56) (55)Non-taxable dividends - 191 40,500 28,249Share of net profit of associates and jointly

controlled entities 6,853 1,520 - -Loss on impairment of interest in jointly

controlled entity (18,043) - - -

(39,365) (27,481) 6,081 779Adjustments for current tax of prior periods 343 90 56 18

Income tax (expense)/benefit (39,022) (27,391) 6,137 797

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9. Income tax expense (continued)(c) Amounts recognised directly in equity

Net deferred tax arising in the reporting period andnot recognised in net profit but directly debited toequity (note 25) 688 1,285 - -

(d) Tax lossesUnused capital tax losses for which no deferred taxasset has been recognised 31,341 31,587 31,341 31,587

Potential tax benefit @ 30% (2006 - 30%) 9,402 9,476 9,402 9,476

All unused capital tax losses were incurred byAustralian entities.

(e) Tax consolidation legislationWest Australian Newspapers Holdings Limited and its wholly-owned Australian controlled entitiesimplemented the tax consolidation legislation from 1 July 2003. The accounting policy onimplementation of the legislation is set out in note 1(f).

On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into atax sharing agreement which, in the opinion of the directors, limits the joint and several liability of thewholly-owned entities in the case of a default by the head entity, West Australian Newspapers HoldingsLimited.

The entities have also entered into a tax sharing and funding agreement under which the wholly-ownedentities fully compensate West Australian Newspapers Holdings Limited for any current tax payableassumed and are compensated by West Australian Newspapers Holdings Limited for any current taxreceivable and deferred tax assets relating to unused tax losses or unused tax credits that aretransferred to West Australian Newspapers Holdings Limited under the tax consolidation legislation. Thefunding amounts are determined by reference to the amounts recognised in the wholly-owned entities'financial statements.

The amounts receivable/payable under the tax funding agreement are due upon receipt of the fundingadvice from the head entity, which is issued as soon as practicable after the end of each financial year.The head entity may also require payment of interim funding amounts to assist with its obligations topay tax instalments. The funding amounts are recognised as current intercompany receivables orpayables (see note 34(e)(ii)).


10. Current assets - Cash and cash equivalentsCash at bank, on hand and at call 13,483 9,532 76 78

Cash at bank and deposits at call bear interest at afloating rate which was 5.75% at the reporting date(2006 - 5.25%).

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11. Current assets - Trade and other receivablesTrade receivables 64,644 51,182 - -Provision for impairment of receivables (311) (879) - -

64,333 50,303 - -Loans from wholly-owned entities (a) - - 48,355 45,718Prepayments 1,774 3,340 52 46

66,107 53,643 48,407 45,764

(a) Loans from wholly-owned entitiesAmounts receivable in accordance with tax sharingand funding agreements - refer notes 9(e) and 34(e).

(b) Impaired trade receivablesThe Group has recognised a loss of $88,000 (2006 -$345,000) in respect of impaired trade receivablesduring the year ended 30 June 2007. The loss hasbeen included in 'other expenses' in the incomestatement.

(c) Interest rate riskThe Group's current receivables do not bearinterest.

(d) Credit riskThere is no concentration of credit risk with respectto current receivables, as the Group has a largenumber of customers dispersed over manybusiness sectors. Refer to note 2 for moreinformation on the risk management policy of theGroup.

12. Current assets - InventoriesNewsprint - at cost 9,870 8,758 - -Other raw materials and stores - at net realisable value 1,062 1,051 - -Finished goods - at cost 314 196 - -

11,246 10,005 - -

Inventory expenseInventories recognised as expense during the year ended30 June 2007 amounted to $76,367,000 (2006 -$65,755,000).

Write-downs of inventories to net realisable valuerecognised as an expense during the year ended 30 June2007 amounted to $167,000 (2006 - $167,000). Theexpense has been included in 'raw material andconsumables used' in the income statement.

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13. Derivative financial instrumentsCurrent assetsInterest rate swap contracts - cash flow hedges 2,699 1,413 - -

Non-current assetsInterest rate swap contracts - cash flow hedges 5,080 4,074 - -

7,779 5,487 - -

(a) Interest rate swap contracts - cash flow hedgesThe Group is party to derivative financial instruments in the normal course of business in order to hedgeexposure to fluctuations in interest rates. It is the practice of the Group, when considered appropriate,to protect part of its borrowings from exposure to increasing interest rates by entering into interest rateswap contracts under which it is obliged to receive interest at variable rates and to pay interest at fixedrates.

Of the total debt of $503,000,000 (2006 - $414,000,000), $200,000,000 (2006 - $200,000,000) is coveredby fixed interest rates through to 17 May 2010 at an average rate of 5.73% (2006 - 5.70%) includingbank margins.

The contracts require settlement on net interest receivable or payable each 90 days. The settlementdates coincide with the dates on which interest is payable on the underlying debt. The contracts aresettled on a net basis.

The gain or loss from remeasuring the hedging instruments at fair value is deferred in equity in thehedging reserve, to the extent that the hedge is effective, and re-classified into profit and loss when thehedged interest expense is recognised. The ineffective portion, if any, is recognised in the incomestatement immediately. All hedges were effective during the current and previous financial years.

At balance date these contracts were assets with fair value of $7,779,000 (2006 - $5,487,000). In theyear ended 30 June 2007 there was a gain from the increase in fair value of $2,292,000 (2006 -$4,284,000).

(b) Interest rate risk exposureRefer to note 24 for the Group's exposure to interest rate risk on interest rate swaps.

(c) Credit risk exposureCredit risk arises from the potential failure of counterparties to meet their obligations under therespective contracts at maturity. This arises with amounts receivable from unrealised gains on derivativefinancial instruments.


14. Non-current assets - ReceivablesLoans to related parties - - 3,227 3,227

Further information relating to loans to related parties isset out in note 34.

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15. Non-current assets - Investments accounted forusing the equity methodInterest in jointly controlled entity 145,000 193,340 - -Shares in associated company 11,216 10,234 - -

156,216 203,574 - -

Refer note 38 for details of investments accounted forusing the equity method.

16. Non-current assets - Available-for-salefinancial assetsListed equity securities - 18 - -Unlisted equity securities 777 793 - -

777 811 - -

The investment in unlisted securities is stated at costbecause its fair value cannot be reliably measured.

17. Non-current assets - Other financial assetsShares in subsidiary company - at cost(notes 1(b)(i) and 37) - - 144,380 144,380

18. Non-current assets - Property, plant and equipment

Freehold Residential Plant and ConstructionConsolidated land properties equipment in progress* Total

$'000 $'000 $'000 $'000 $'000

At 1 July 2005Cost 13,549 718 253,462 - 314,767Accumulated depreciation - - (153,747) - (167,967)

Net book amount 13,549 718 99,715 - 146,800

Year ended 30 June 2006Opening net book amount 13,549 718 99,715 - 146,800Additions - - 6,040 117,700 123,740Additions through acquisition

of business operations 344 - 1,353 - 3,368Disposals - (63) (647) - (710)Depreciation charge - - (38,793) - (40,337)

Closing net book amount 13,893 655 67,668 117,700 232,861

At 30 June 2006Cost 13,893 655 261,966 117,700 442,799Accumulated depreciation - - (194,298) - (209,938)

Net book amount 13,893 655 67,668 117,700 232,861

(1,544)

32,818-

1,671-

(15,640)

54

32,945

48,585

47,038

32,945

32,818

(14,220)

buildings$'000

Freehold

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18. Non-current assets - Property, plant and equipment (continued)

Freehold Residential Plant and ConstructionConsolidated land properties equipment in progress* Total

$'000 $'000 $'000 $'000 $'000

Year ended 30 June 2007Opening net book amount 13,893 655 67,668 117,700 232,861Additions - 1,267 5,024 52,432 58,737Additions through acquisition

of business operations - - 25 - 25Transfers from construction in

progress - - 46,648 (46,648) -Disposals - (65) (1,357) - (1,422)Depreciation charge - - (33,650) - (34,870)

Closing net book amount 13,893 1,857 84,358 123,484 255,331

At 30 June 2007Cost 13,893 1,857 271,981 123,484 459,817Accumulated depreciation - - (187,623) - (204,486)

Net book amount 13,893 1,857 84,358 123,484 255,331

* Relates to the production upgrade at Herdsman.


19. Non-current assets - Deferred tax assetsThe balance comprises temporary differencesattributable to:

Deferred revenue 6,926 1,355 - -Doubtful debts 94 264 - -Employee benefits 6,334 11,915 - -Property, plant and equipment 67 62 - -Provisions 1,803 1,373 201 38

15,224 14,969 201 38Set-off against deferred tax liabilities pursuantto set-off provisions (note 25) (12,010) (14,969) - -

Net deferred tax assets 3,214 - 201 38

Deferred tax assets to be recovered after morethan 12 months 832 923 - -

Deferred tax assets to be recovered within 12 months 14,392 14,046 201 38

15,224 14,969 201 38

-

-

Freeholdbuildings

14

$'000

32,945

31,739

-(1,220)

31,739

48,602

55

(16,863)

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19. Non-current assets - Deferred tax assets (continued)Movements - Consolidated

Property,Deferred Employee plant andrevenue benefits equipment Provisions Total$'000 $'000 $'000 $'000 $'000

Movements - Consolidated

At 1 July 2005 516 3,625 57 1,389 5,813Charged/(credited) to the

income statement 839 8,188 5 (16) 9,041Acquisition of businesses and

subsidiaries - 102 - - 115

At 30 June 2006 1,355 11,915 62 1,373 14,969Charged/(credited) to the

income statement 5,571 (5,583) 5 430 253Acquisition of businesses - 2 - - 2

At 30 June 2007 6,926 6,334 67 1,803 15,224

Movements - Company

At 1 July 2005 - - - 35 35Charged/(credited) to the

income statement - - - 3 3

At 30 June 2006 - - - 38 38Charged/(credited) to the

income statement - - - 163 163

At 30 June 2007 - - - 201 201

20. Non-current assets - Intangible assets

Radio ComputerConsolidated licences Goodwill software Total

$'000 $'000 $'000 $'000

At 1 July 2005Cost 11,584 - 4,344 109,860Accumulated amortisation - - (1,031) (1,031)

Net book amount 11,584 - 3,313 108,829

Year ended 30 June 2006Opening net book amount 11,584 - 3,313 108,829Additions 4,132 2,404 2,835 12,819Amortisation charge * - - (1,710) (1,710)

Closing net book amount 15,716 2,404 4,438 119,938

At 30 June 2006Cost 15,716 2,404 7,178 122,678Accumulated amortisation - - (2,740) (2,740)

Net book amount 15,716 2,404 4,438 119,938

-

Mastheads

-

-

$'000

93,932

(170)

94

-

-

-

Doubtfuldebts$'000

226

264

25

13

97,380

93,932

-

56

-

97,380

97,380

3,44893,932

-

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20. Non-current assets - Intangible assets (continued)

Radio ComputerConsolidated licences Goodwill software Total

$'000 $'000 $'000 $'000

Year ended 30 June 2007Opening net book amount 15,716 2,404 4,438 119,938Additions 1,600 80 3,199 8,057Disposals - - (597) (597)Amortisation charge * - - (1,684) (1,684)

Closing net book amount 17,316 2,484 5,356 125,714

At 30 June 2007Cost 17,316 2,484 9,355 129,713Accumulated amortisation - - (3,999) (3,999)

Net book amount 17,316 2,484 5,356 125,714

* Amortisation of $1,684,000 (2006 - $1,710,000) is included in depreciation and amortisation expense inthe income statement.

Impairment of cash generating units (CGU) including goodwill and indefinite life assetsThe recoverable amount of each CGU which includes goodwill or indefinite life intangibles has been reviewed.Where goodwill or other intangible assets represent a significant component of the Group total, value in usecalculations have been performed.

Where value in use calculations have been used, these calculations have been based on managementbudgets and forecasts for a five year period extrapolated at estimated growth rates between 3.0% and 4.0%being rates no higher than the long term average growth rates for the CGU. A discount rate of 11.8% (beforeincome tax) (2006 - 11.7%) has been used.

No impairment losses for intangibles have been incurred or reversed during the period.


21. Current liabilities - Trade and other payablesEmployee redundancy payments accrued 9,824 27,673 - -Trade payables and other accrued expenses 30,081 22,366 757 138

39,905 50,039 757 138

22. Current liabilities - ProvisionsEmployee benefits - long service leave 3,834 4,151 - -Libel expenses (i) 350 210 - -

4,184 4,361 - -

(i) Movements in provision for libel expensesCarrying amount at start of year 210 210 - -Increase in provision 140 - - -

Carrying amount at end of year 350 210 - -

The amount at year end represents a provision forlibel claims against the Group in relation topublished material.

Mastheads$'000

-

57

-3,178

100,558

97,380

100,558-

100,558

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23. Current liabilities - OtherDeferred revenue 170 2,855 - -

24. Non-current liabilities - BorrowingsBills payable - secured (a) 503,000 414,000 - -Loans from related entities - unsecured (note 34(f)) - - 62,964 54,651

503,000 414,000 62,964 54,651

(a) Financing arrangementsBills payable are drawn under various bill facilities totalling $520,000,000 (2006 - $475,000,000) whichhave an average maturity of 1.6 years from 30 June 2007 (2006 - 1.9 years from 30 June 2006). Thefacilities are covered by interlocking guarantees and indemnities given by the Company andsubsidiaries. The facilities are subject to a negative pledge that imposes certain covenants upon theCompany and certain subsidiaries, being:

(i) the ratio of total external debt (excluding contingent liabilities) to earnings before interest, tax,depreciation and amortisation (EBITDA) will not exceed 3.5 times;

(ii) EBITDA will not at any time fall below a figure of 5 times the total amount of net interest; and(iii) the 'guarantee group' comprises not less than 85% to consolidated group's total assets and

earnings before interest and tax (EBIT).

(b) Interest rate risk exposuresThe following table sets out the Group's exposure to interest rate risk, including the contractual repricingdates and the effective weighted average interest rate by maturity periods.

Exposures arise predominantly from liabilities bearing variable interest rates as the Group intends tohold fixed rate liabilities to maturity.

Floatinginterest 2 to 3 3 to 4

rate years years Total$'000 $'000 $'000 $'000

2007Bills payable 503,000 - - 503,000Interest rate swaps * (200,000) 200,000 - -

303,000 200,000 - 503,000

Weighted average interest rate 6.62% 5.73%

2006Bills payable 414,000 - - 414,000Interest rate swaps * (200,000) - 200,000 -

214,000 - 200,000 414,000

Weighted average interest rate 6.21% 5.70%

* Notional principal amounts

(c) Fair valueThe carrying value and fair value of Group borrowingsat the end of the financial year was $503,000,000(2006 - $414,000,000).

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25. Non-current liabilities - Deferred tax liabilitiesThe balance comprises temporary differencesattributable to:

Amounts recognised in the profit and lossProperty, plant and equipment 8,414 12,034 - -Intangible assets 1,080 1,123 - -Other 182 593 - -

9,676 13,750 - -Amounts recognised directly in equityCash flow hedges 2,334 1,646 - -

12,010 15,396 - -Set-off of deferred tax assets (note 19) (12,010) (14,969) - -

Net deferred tax liabilities - 427 - -

Deferred tax liabilities to be settled after morethan 12 months 8,481 6,462 - -

Deferred tax liabilities to be settled within 12 months 3,529 8,934 - -

12,010 15,396 - -

Movements - ConsolidatedProperty,plant and Intangible

equipment assets Other Total$'000 $'000 $'000 $'000

At 1 July 2005 21,496 1,123 583 23,202Change on adoption of AASB 132 and

AASB 139 - - - 360Credited to the income statement

(note 9(a)) (9,497) - 10 (9,487)Charged to equity (note 28(b)) - - - 1,285Acquisition of subsidiary (note 35(c)) 36 - - 36

At 30 June 2006 12,034 1,123 593 15,396Credited to the income statement

(note 9(a)) (3,620) (43) (411) (4,074)Charged to equity (note 28(b)) - - - 688

At 30 June 2007 8,414 1,080 182 12,010


26. Non-current liabilities - ProvisionsEmployee benefits - long service leave 2,561 2,886 - -

27. Contributed equity(a) Share capital

205,288,487 (2006 - 203,358,737) Ordinaryshares fully paid (notes 27(b) and 27(c)) 85,751 81,486 85,751 81,486

59

-

-

2,334

Cash flowhedges$'000

1,285

360

688

-

-

1,646

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27. Contributed equity (continued)(b) Movements in ordinary share capital

Number ofDate Details shares $'000

1 July 2005 Opening balance 202,006,137 76,548Proceeds received relating to the executive and employeeshare purchase plans (note 41)) 1,352,600 4,938

30 June 2006 Balance 203,358,737 81,486Proceeds received relating to the executive and employeeshare purchase plans (note 41)) 1,929,750 4,265

30 June 2007 Balance 205,288,487 85,751

(c) Ordinary sharesOrdinary shares entitle the holder to participate in dividends and the proceeds on winding up of theCompany in proportion to the number of and amounts paid on the shares held.

On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, isentitled to one vote, and upon a poll each share is entitled to one vote.

The total number of shares issued by the Company is 209,253,637 (2006 - 209,253,637) and differsfrom the amount disclosed in note 27(a) as shares relating to outstanding loans pursuant to theexecutive and employee share plans and numbering 3,965,150 shares (2006 - 5,894,900) are treated asoptions under AIFRS.

(d) Share buy-backsThere is no current on-market buy-back.


28. Reserves and (accumulated deficit) / retained profits(a) Asset revaluation reserve

Balance at the beginning and end of thefinancial year - - 8,352 8,352

(b) Hedging reserve - cash flow hedgesBalance at the beginning of the financial year 3,841 - - -Adjustment of adoption of AASB 132 and AASB 139,

net of tax - 842 - -Revaluation - gross (note 13) 2,292 4,284 - -Deferred tax (note 25) (688) (1,285) - -

Balance at the end of the financial year 5,445 3,841 - -

(c) Equity compensation reserveBalance at the beginning of the financial year - - - -Increase during the financial year 588 - 588 -

Balance at the end of the financial year 588 - 588 -

6,033 3,841 8,940 8,352

Nature and purpose of reserves(i) Asset revaluation reserve

The asset revaluation reserve is used to record increments and decrements on the revaluation ofnon-current assets.

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28. Reserves and (accumulated deficit) / retained profits (continued)Nature and purpose of reserves (continued)

(ii) Hedging reserve - cash flow hedgesThe hedging reserve is used to record gains or losses on a hedging instrument in a cash flowhedge that are recognised directly in equity, as described in note 1(n). Amounts are recognisedin profit and loss when the associated hedged transaction affects profit and loss.

(iii) Equity compensation reserveThe equity compensation reserve is used to recognise the fair value of share rights granted ascompensation.


(d) (Accumulated deficit) / retained profitsRetained profits at the beginning of the financial

year 58,979 81,623 31,883 31,611Net profit for the year 53,968 69,264 120,680 92,180Dividends provided for or paid (note 29) (119,120) (91,908) (119,120) (91,908)

(Accumulated deficit) / retained profits at the end ofthe financial year (6,173) 58,979 33,443 31,883

29. DividendsFinal ordinary dividend for the year ended 30 June 2006of 28 cents per share (2005 - 23 cents), fully frankedbased on tax paid @ 30%, paid on 29 September 2006(2005 - 30 September 2005) 57,392 46,948 57,392 46,948

Interim ordinary dividend for the year ended 30 June 2007of 30 cents per share (2006 - 22 cents), fully frankedbased on tax paid @ 30%, paid on 30 March 2007 (2006- 31 March 2006) 61,728 44,960 61,728 44,960

119,120 91,908 119,120 91,908

Dividends not recognised at year endIn addition to the above dividends, since year end thedirectors have declared a final dividend of 31 cents perordinary share (2006 - 28 cents), fully franked based ontax paid @ 30%. The aggregate amount of the dividendpayable on 28 September 2007, but not recognised as aliability at year end, is 63,929 57,330 63,929 57,330

Franked dividendsThe franked dividend declared after 30 June 2007 will befranked out of existing franking credits or out of frankingcredits arising from the receipt of franked dividends andthe payment of income tax in the year ending 30 June2008.

Franking credits available for subsequent financial yearsbased on a tax rate of 30% (2006 - 30%) 28,875 39,305 28,875 39,305

The above amounts represent the balance of the franking account as at the end of the financial year,adjusted for:(a) franking credits that will arise from the payment of the current tax liability;(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting

date;(c) franking credits that will arise from the receipt of dividends recognised as receivables at the

reporting date.

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29. Dividends (continued)The impact on the franking account of the dividend declared by the directors since year end, but notrecognised as a liability at year end, will be a reduction in the franking account of $27,398,000(2006 - $24,570,000).

30. Key management personnel disclosures(a) Directors

The following persons were directors of West Australian Newspapers Holdings Limited during thefinancial year:

Chairman - non-executiveW.G. Kent A.O. (Chairman until retiring from the board on 1 November 2006)P.J. Mansell (Chairman since 1 November 2006)Non-executive directorsE. FraunschielJ.A. Seabrook (appointed 3 February 2006)M.K. Ward A.O.Executive directorsK.N. Steinke(appointed Chief Executive Officer on 10 July 2006 and Managing Director on 3 August 2006)

Except where indicated otherwise, the persons listed above were also directors during the whole of theyear ended 30 June 2006. In addition, Mr I.F. Law was Managing Director and Chief Executive Officeruntil his resignation on 5 May 2006.

(b) Other key management personnelThe following persons also had authority and responsibility for planning, directing and controlling theactivities of the Group, directly or indirectly, during the financial year:

Name PositionP.A. Armstrong Editor, The West AustralianA.R. Bradshaw Group General Manager - Human Resources (appointed 6 December 2006)T.L. Garven Chief Financial OfficerL.M. Roche General Manager - Group Operations and Information TechnologyJ.K. Rowsthorne General Manager - Special Projects (resigned 11 August 2006)P.F. Stevens General Manager - SalesB.O. Yates Company Secretary

All of the persons listed above were employed by West Australian Newspapers Limited.

Except where indicated otherwise, the persons listed above were also the key management personnelduring the whole of the year ended 30 June 2006.

Consolidated Parent entity2007 2006 2007 2006

$ $ $ $

(c) Key management personnel compensationShort-term employee benefits 3,487,930 3,364,458 1,593,676 1,636,059Post-employment benefits 718,072 368,935 434,211 112,919Share based payments 915,892 158,922 538,521 -

5,121,894 3,892,314 2,566,408 1,748,978

The Company has taken advantage of the relief provided by Corporations Regulation 2M.6.04 and hastransferred the detailed remuneration disclosures to the directors' report. The relevant information can befound in sections A to C of the remuneration report on pages 5 to 11.

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30. Key management personnel disclosures (continued)(d) Equity instrument disclosures relating to key management personnel

ShareholdingsThe numbers of shares in the Company held during the financial year by each director of WestAustralian Newspapers Holdings Limited and each of the other key management personnel of theGroup, including their personally-related entities, are set out below.

2007 Balance at Changes Balance atthe start of during the end of

Name the year the year the year

Directors of West Australian NewspapersHoldings LimitedW.G. Kent (retired 1 November 2006) 52,647 1,696 (i)E. Fraunschiel 40,447 1,946 42,393P.J. Mansell 28,340 6,609 34,949J.A. Seabrook 24,362 1,885 26,247K.N. Steinke - - -M.K. Ward 13,169 1,884 15,053

Other key management personnel of the GroupP.A. Armstrong - 3,900 3,900T.L. Garven - 176,500 176,500L.M. Roche 618 7,450 8,068P.F. Stevens 5,000 3,800 8,800B.O. Yates - 2,600 2,600



Directors of West Australian NewspapersHoldings LimitedW.G. Kent 45,681 6,966 52,647E. Fraunschiel 37,574 2,873 40,447I.F. Law 100,000 (100,000) -P.J. Mansell 23,109 5,231 28,340J.A. Seabrook (appointed 3 February 2006) 23,500 862 24,362M.K. Ward 10,554 2,615 13,169

Other key management personnel of the GroupL.M. Roche 618 - 618P.F. Stevens 5,000 - 5,000

(i) Mr Kent retired on 1 November 2006. The balance of his shareholding on this date was 54,343.

Share rights174,000 share rights have been issued to Mr Steinke - refer Section C of the remuneration report forfurther details.

Shares held under share plansThe numbers of shares in the Company held under employee and executive share plans during thefinancial year and treated as options under AIFRS by each director of West Australian NewspapersHoldings Limited and each of the other key management personnel of the Group, are set out below:

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30. Key management personnel disclosures (continued)(d) Equity instrument disclosures relating to key management personnel (continued)

Shares held under share plans (continued)



Key management personnel of the GroupT.L. Garven 171,900 (171,900) -L.M. Roche 82,700 (4,150) 78,550J.K. Rowsthorne (resigned 11 August 2006) 40,000 (40,000) -P.F. Stevens 113,700 - 113,700B.O. Yates 69,600 (63,400) 6,200



Directors of West Australian NewspapersHoldings LimitedI.F. Law 500,000 (500,000) -

Other key management personnel of the GroupT.L. Garven 171,900 - 171,900L.M. Roche 82,700 - 82,700J.K. Rowsthorne 40,000 - 40,000P.F. Stevens 113,700 - 113,700B.O. Yates 69,600 - 69,600

For further details refer note 1(v)(iii) and section D of the remuneration report on pages 11 to 13.

(e) Loans to key management personnelDetails of loans made to directors of West Australian Newspapers Holdings Limited and other keymanagement personnel of the Group, including their personally related entities, are set out below.Interest is not charged on the loans.

Aggregates for key management personnel and individuals with loans above $100,000

Number in HighestBalance at Group at the indebted-

Interest not the end of end of the ness duringYear Name charged the year year the year

$ $ $

2007 No loans given - - - -

2006 I.F. Law 34,652 - - 731,416

No write-downs or provisions for impairment of receivables have been recognised in relation to any loansmade to key management personnel.

The amounts shown for interest not charged in the tables above represent the difference betweenthe amount paid and payable for the year and the amount of interest that would have been chargedon an arm's-length basis.

731,476

Balance at

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30. Key management personnel disclosures (continued)(f) Other transactions with key management personnel

During the financial year consultancy services were provided to the Group by Gresham AdvisoryPartners Limited of which Mrs J.A. Seabrook is a director. The services were provided under normalcommercial terms and conditions and fees and expenses aggregating $83,096, including GST, werepaid (2006 - nil).

Consolidated Parent entity2007 2006 2007 2006

$ $ $ $

31. Remuneration of auditorsRemuneration of the auditors of the Company or anyentity in the Group for:

Audit or review of the financial reports (includes additionalcosts associated with the introduction of AIFRS) 294,500 267,500 51,085 79,140

Other servicesTaxation consulting services 42,000 - - -Taxation compliance services 80,575 77,260 - -Other audit services 33,980 52,300 - 4,300

Total other services 156,555 129,560 - 4,300

451,055 397,060 51,085 83,440

PricewaterhouseCoopers have been the Company's auditors since incorporation - 29 August 1991.


32. Contingent liabilitiesThe Company and Group had contingent liabilities at30 June 2007 in respect of:

Guarantee given by the Company in respect ofborrowings of a subsidiary (note 24) - - 503,000 414,000

Termination benefits in respect of service agreementsentered into by the Company and subsidiarieswhich may, in appropriate circumstances, becomepayable to directors/executives 2,990 2,728 1,260 1,200

Cross guarantees have also been given by the Companyand its subsidiaries - refer note 36.

For contingent liabilities relating to associates and jointlycontrolled entities refer to note 38(f).

No material losses are anticipated in respect of any of theabove contingent liabilities.

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33. Commitments(a) Capital commitments

Commitments for the acquisition of property, plantand equipment contracted for at the reporting datebut not recognised as liabilities, payable:

Within one year 17,615 48,479 - -Later than one year but not later than five years 197 1,336 - -

17,812 49,815 - -

(b) Operating lease commitmentsThe Group leases various offices, radiotransmission equipment and sites and residentialpremises under non-cancellable operating leasesexpiring within 6 years. The leases have varyingterms, escalation clauses and renewal rights. Onrenewal, the terms of the leases are renegotiated.

Commitments for minimum lease payments inrelation to non-cancellable operating leasescontracted for at the reporting date but notrecognised as liabilities, payable:

Within one year 1,017 907 - -Later than one year but not later than 5 years 1,000 1,499 - -Later than 5 years 7 14 - -

2,024 2,420 - -

34. Related party transactions(a) Parent entity

West Australian Newspapers Holdings Limited is the ultimate Australian parent entity within the group.

(b) SubsidiariesInterests in subsidiaries are set out in note 37.

(c) Key management personnelDisclosures relating to key management personnel are set out in note 30.

(d) Transactions with related partiesThe following transactions occurred with related parties:

(i) Transactions between the Parent Entity and its subsidiariesCentrally provided servicesThe Company was provided with taxation and accounting services by West Australian NewspapersLimited (subsidiary) at cost. The Company was also provided with management and secretarialservices for which no charge was made.

LoansLoans were advanced by the Company to subsidiaries and vice versa. Loans are interest-freeexcept for a loan between the Company and West Australian Newspapers Limited (subsidiary) onwhich interest is charged at commercial rates. There are no set terms for repayment of loanswhich are periodically repaid or offset.

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34. Related party transactions (continued)(d) Transactions with related parties (continued)

(i) Transactions between the Parent Entity and its subsidiaries (continued)Tax consolidation legislationTransactions have occurred between the Company and its wholly-owned tax consolidated entities inaccordance with tax sharing and funding agreements described in note 9(e).The current tax payable assumed by the Parent Entity from wholly-owned tax consolidated entitiesand charged to those entities was $48,354,747 (2006 - $45,717,976).

Insurance of directors and officersThe Company has paid a premium in respect of a contract insuring all directors and officers(including employees) of the Company and of related bodies corporate against certain liabilitiesspecified in the contract.

Interest revenueInterest revenue included in the determination of profit before income tax expense of the Companythat resulted from transactions between the Company and its subsidiaries was $nil(2006 - $1,716,297). Interest is charged at commercial rates.

Interest paidInterest paid included in the determination of profit before income tax expense of the Company thatresulted from transactions between the Company and its subsidiaries was $16,455,693(2006 - $2,958,141). Interest is charged at commercial rates.

Dividend revenueDividend revenue from a subsidiary included in the determination of profit before income tax of theCompany was $135,000,000 (2006 - $85,793,991).

(ii) Transactions between the Group and other related partiesPrinting servicesColourPress Pty Ltd (subsidiary) provides printing services under normal trading terms andconditions to Community Newspaper Group Ltd (associated company). Charges amounting to$2,005,850 (2006 - $1,417,841) were made for these services during the year.

Dividend revenueRefer note 38(b) for details of dividends received from Community Newspaper Group Ltd(associated company).

(e) Outstanding balances arising from sales/purchases of goods and servicesThe following balances are outstanding at the reporting date in relation to transactions withrelated parties:Current receivables

(i) Sales of goods and servicesAt the reporting date a current receivable of $23,394 (2006 - $117,896) relating to trading activitieswas due to ColourPress Pty Ltd (subsidiary) from Community Newspaper Group Ltd (associatedcompany).

(ii) Tax funding agreementThe aggregate receivable by the Company from wholly-owned tax consolidated entities at thereporting date was $48,354,747 (2006 - $45,717,976).

No provisions for doubtful debts have been raised in relation to any outstanding balances, and noexpense has been recognised in respect of bad or doubtful debts due from related parties.

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34. Related party transactions (continued)(f) Loans to/from related parties

2007 2006 $ $

Loans to subsidiariesBeginning of the year 3,226,716 33,272,336 Loans advanced - 93,182 Loan repayments received - (31,855,099)Interest charged - 1,716,297

End of year (note 14) 3,226,716 3,226,716

Loans from subsidiariesBeginning of the year 54,651,148 65,337,835 Loans advanced 175,169,868 100,340,052 Loan repayments (183,312,444) (113,984,880)Interest charged 16,455,693 2,958,141

End of year (note 24) 62,964,265 54,651,148

(g) GuaranteesThe Company has provided guarantees in respect of bank borrowings of a subsidiary totalling$503,000,000 (2006 - $414,000,000). Refer note 24 for further details.

35. Business combination (a) Summary of acquisitions

2007On 31 January 2007, the Group purchased an AM radio licence in Bunbury (AM621 Bunbury). Theconsideration paid for the business, including acquisition costs, was $1,603,265. The businesscontributed revenues of $176,992 and profit of $29,232 to the Group for the period from 31 January2007 to 30 June 2007. It is impractical to obtain the amounts of revenue and profit for the year hadacquisition occurred on 1 July 2006 as the information is not available to the Group.

On 30 March 2007 the Group acquired Bunbury Key, a business directory, for the consideration of$239,297 including acquisition costs. Bunbury Key is an annual publication (February) and no revenuehas been recorded for the period from 30 March 2007 to 30 June 2007. Expenses for this periodamounted to $34,004. It is impractical to obtain the amounts of revenue and profit for the year hadacquisition occurred on 1 July 2006 as the information is not available to the Group.

On 2 April 2007 the Group acquired The Kimberley Echo to add to its network of newspapers in theresources-based centres in the north of Western Australia. The consideration paid for the business,including acquisition costs, was $2,956,479. The Kimberley Echo contributed revenues of $224,940 andprofit of $60,798 to the Group for the period from 2 April 2007 to 30 June 2007. It is impractical to obtainthe amounts of revenue and profit for the year had acquisition occurred on 1 July 2006 as theinformation is not available to the Group.

2006Pursuant to a takeover offer dated 23 May 2005, West Australian Newspapers Limited (WAN)(subsidiary) on 12 July 2005 acquired 90.4% of the shares in Geraldton Newspapers Limited (GNL).GNL publishes the tri-weekly Geraldton Guardian newspaper, the weekly Midwest Mail newspaper andoperates two commercial FM radio stations in the Geraldton area.

Additionally, WAN exercised a call option over a further 8.5% of the shares in GNL giving WAN arelevant interest in 98.9% of the shares in GNL. WAN compulsorily acquired the remaining shares,obtaining 100% of the shares on 13 October 2005.

Parent entity

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35. Business combination (continued)(a) Summary of acquisitions (continued)

2006 (continued)From date of acquisition to 30 June 2006, GNL contributed to the Group - revenues of $6,590,000 andnet profit after tax of $806,000 (after redundancy expense of $406,000 - net of income tax).

During the year ended 30 June 2006, WAN also acquired the operations of Midwest Times for anamount of $705,000 including acquisition costs. Midwest Times is a newspaper published in theGeraldton area.

Details of the fair value of the assets and liabilities acquired and goodwill are as follows:

2007 2006 $'000 $'000

Purchase consideration (refer to (b) below)Cash paid 4,514 12,508Direct costs relating to the acquisition 285 156

Total purchase consideration of acquisitions during thecurrent financial year 4,799 12,664

Additional costs relating to acquisitions during the previousfinancial year 80 -

Total purchase consideration 4,879 12,664Fair value of net identifiable assets acquired (refer to (c) below) 4,799 10,260

Goodwill (note 20) 80 2,404

The goodwill is attributable to the increased profitability of the acquired operations arising fromrationalisation and synergies within the Group. The fair value of assets and liabilities acquired are basedon discounted cash flow models. No acquisition provisions were created.

(b) Purchase consideration

2007 2006 $'000 $'000

Outflow of cash to acquire business and subsidiaries,net of cash acquired

Cash consideration 4,879 12,664

Balances acquiredCash - (309)Bank loans - 810

- 501

Outflow of cash 4,879 13,165

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35. Business combination (continued)(c) Assets and liabilities acquired

The assets and liabilities arising from the acquisitions during the year are as follows:

Acquiree's Acquiree'scarrying carryingamount Fair value amount Fair value$'000 $'000 $'000 $'000

Cash - 309 309Receivables - 875 843Inventories - 69 69Investments - 26 34Property, plant and equipment Refer 25 3,197 3,368Deferred tax asset note (i) 2 115 115Mastheads below 3,178 - 3,448Radio licences 1,600 550 4,132Trade payables - (744) (744)Tax liabilities - (52) (52)Bank loans - (810) (810)Provision for employee benefits (6) (316) (316)Other provisions - (100) (100)Deferred tax liability - (36) (36)

Net identifiable assets acquired 4,799 3,083 10,260

(i) The acquiree's carrying amounts are not known to the Group.

36. Deed of cross guaranteeWest Australian Newspapers Holdings Limited and its subsidiaries (note 37) are party to a Deed of CrossGuarantee under which each company guarantees the debts of the others. By entering into the deed, thewholly-owned entities required to prepare a financial report and directors' report have been relieved from therequirement to do so under Class Order 98/1418 (as amended) issued by the Australian Securities andInvestments Commission. The Deed of Cross Guarantee was entered into on 8 April 2004.

West Australian Newspapers Holdings Limited and its subsidiaries represent a 'Closed Group' for thepurposes of the Class Order, and as there are no other parties to the Deed of Cross Guarantee that arecontrolled by West Australian Newspapers Holdings Limited, they also represent the 'Extended ClosedGroup'.

As the Group and the Closed Group both comprise West Australian Newspapers Holdings Limited and itssubsidiaries, the consolidated income statements and consolidated balance sheets for the Closed Group arethe same as those for the Group presented on pages 30 and 31 of the financial statements.

2006 2007

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37. SubsidiariesThe consolidated financial statements incorporate the assets, liabilities and results of the followingsubsidiaries in accordance with the accounting policy described in note 1(b).

West Australian Newspapers Holdings Limited (ultimate parent entity)Its subsidiary being:

Harlesden Investments Pty LtdIts subsidiary being:

Western Mail Operations Pty LtdIts subsidiary being:

West Australian Newspapers LimitedIts subsidiaries being:

Albany Advertiser Pty LtdComsNet Pty LtdColorpress Australia Pty LtdColourPress Pty LtdGeraldton Newspapers Pty LtdIts subsidiaries being:

Geraldton FM Pty LtdGreat Northern Broadcasters Pty Ltd

Herdspress Leasing Pty LtdHocking & Co. Pty Ltd Redwave Media Pty LtdIts subsidiaries being: North West Radio Pty Ltd Its subsidiary being:

Australian Regional Broadcasters Pty Ltd Spirit Radio Network Pty LtdSouth West Printing and Publishing Company LimitedW.A. Broadcasters Pty LtdIts subsidiary being: Quokka Press Pty Ltd

Its subsidiaries being:Dansted and McCabe Holdings Pty LtdRiverlaw Holdings Pty Limited

West Australian Entertainment Pty LtdIts subsidiary being:

WAN Cinemas Pty LimitedWestern Mail Pty LtdWestroyal Pty Ltd

(i) All subsidiaries are wholly-owned and, except for 100,000 preference shares held in WestAustralian Newspapers Limited (2006 - 100,000), the class of shares is ordinary. All subsidiarieswere also subsidiaries at 30 June 2006.

(ii) All subsidiaries are incorporated in Australia.

(iii) West Australian Newspapers Holdings Limited and its subsidiaries have entered into a Deed ofCross Guarantee under which each company guarantees the debts of the others. For furtherinformation see note 36.

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38. Investments in associates and jointly controlled entities(a) Carrying amounts

Information relating to associates and jointly controlled entities is set out below.

Name of entity Principal activities2007 2006 2007 2006

% % $'000 $'000

Community Newspaper Newspaper publishing 49.9 49.9 11,216 10,234Group Ltd

Hoyts Cinemas Group Cinema exhibition, 50.0 50.0 145,000 193,340advertising and distribution

156,216 203,574

Each of the above associates is incorporated in Australia.

Consolidated2007 2006 $'000 $'000

(b) Movements in carrying amountsCarrying amount at the beginning of the financial year 203,574 192,251Acquisition of jointly controlled entity during the year - 9Reduction in purchase price of jointly controlled entity - (2,590)Share of operating profit after income tax (note 38(c)) 22,034 18,904Dividends received/receivable (4,500) (5,000)Reclassification of deferred tax impact (note 9(a)) (4,750) -Loss on impairment of interest in jointly controlled entity - refer note below (60,142) -

Carrying amount at the end of the financial year (note 15) 156,216 203,574

Loss on impairment of interest in jointly controlled entity (Hoyts Cinemas)The Company completed an impairment testing process at 30 June 2007 andin the light of the results obtained wrote down the carrying value of theinvestment by $60,142,000 to $145,000,000.

The impairment test was based on a value in use calculation with 5 year cashflow projections and utilising appropriate transaction multiples.

The key assumption in the impairment testing process is the level of annualdecline in existing cinema admission numbers (before new builds) of 2.0% perannum for the 5 year period. This assumption was rigorously tested and is inline with actual performance over the preceding 20 month period.

The carrying value is extremely sensitive to this key assumption as a 0.5%reduction in this decline (to 1.5%) alters the net present value of the cashflows by $18,000,000.

(c) Share of associate's and jointly controlled entity's profitsProfit before income tax 24,094 21,123Income tax expense (2,407) (2,219)

Share of net profit of associate and jointly controlled entity disclosed in theincome statement 21,687 18,904

Income tax credit/(expense) relating to jointly controlled entity included inincome tax expense of the Group 347 (4,152)

Deferred tax impact (reclassified in the current financial year and includedin the amount of $4,750,000 in note 38(b)) - 4,152

Share of operating profit after income tax 22,034 18,904

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38. Investments in associates and jointly controlled entities (continued)Consolidated

2007 2006 $'000 $'000

(d) Summarised financial information of associates and jointlycontrolled entitiesThe Group's share of assets, liabilities, revenues and profits are:

Assets 250,519 241,620Liabilities 114,990 126,495Revenues 190,147 176,591Profits after income tax 22,034 18,904

(e) Share of associate's and jointly controlled entity's expenditurecommitments, other than for the supply of inventoriesCapital commitments 35 2,500Lease commitments 311,788 348,171

(f) Contingent liabilitiesTermination benefits in respect of service agreements entered into by anassociated company which may, in appropriate circumstances, becomepayable to executives 517 143

Bank guarantees provided 1,102 1,047

No material loss is anticipated in respect of the above contingent liabilities

39. Events occurring after the balance sheet dateThere are no matters or circumstances which have arisen since 30 June 2007 that have significantly affectedor may significantly affect the operations of the Company and the Group, the results of those operations, orthe state of affairs of the Company and the Group in financial years subsequent to 30 June 2007.

40. Earnings per shareConsolidated

2007 2006

(a) Basic earnings per shareProfit attributable to the ordinary equity holders of the Company 26.4 cents 34.2 cents

(b) Diluted earnings per shareProfit attributable to the ordinary equity holders of the Company 25.8 cents 33.1 cents

(c) Earnings used in calculating earnings per share $53,968,000 $69,264,000

(d) Weighted average number of shares used as the denominatorWeighted average number of ordinary shares outstanding duringthe year used in the calculation of basic earnings per share 204,323,612 202,682,437

Adjustment for calculation of diluted earnings per share being shares issuedpursuant to the executive and employee share plans treated as options underAIFRS deemed to have been converted into ordinary shares at the beginningof the financial year 4,930,025 6,571,200

Weighted average number of ordinary shares and potential ordinary sharesused as the denominator in calculating diluted earnings per share 209,253,637 209,253,637

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41. Share-based payments(a) Executive and employee share plans

Plans for the purchase of shares in the Company by executives and employees have not been usedsince 2002. Details of the plans are as follows:

The issue price of shares allotted under the plans was the average sale price of all shares sold on theASX during the 5 days preceding allotment.

Under the plans West Australian Newspapers Limited (a subsidiary), lent the full issue price toemployees/executives on an interest-free basis. Loans were secured by share mortgages/liens overshares issued in accordance with the plans and during employment are repaid from net dividends (aftertaxation). While shares are subject to these restrictions, they are not permitted to be hedged or in anyother way dealt with.

In the event of cessation of employment of employees/executives, loans are repayable but WestAustralian Newspapers Limited cannot claim or demand outstanding moneys other than to the extent ofproceeds realised from the disposal of shares secured under the plans.

The total number of shares issued under the plans in the previous five years must not exceed 5% of thetotal number of shares on issue. At the reporting date the number of shares issued under the plans inthe previous five years represented 0.8% of the total number of shares on issue (2006 - 1.8%).

(i) West Australian Newspapers Holdings Limited Executive Share Purchase and Loan PlanThis plan was approved at the annual general meeting of the Company on 9 October 1992. Theoperation of this plan has been suspended and no executives have been invited to apply for sharessince 2002.

Senior executives of the Group were from time to time invited to apply for shares as determined bythe board of directors.

Shares issued under the plan were not able to be sold until the expiry of three years from date ofissue. Up to half the shares could have been sold during the fourth and fifth year and there were norestrictions on sale after five years from the date of issue. The loans are repayable immediatelyupon termination of employment except in cases of termination due to death, total and permanentdisablement, retirement or other circumstances approved by the directors, where two years areallowed for repayment of the loan.

In all other respects the shares previously issued in accordance with the plan rank equally withother fully-paid ordinary shares on issue.

(ii) West Australian Newspapers Holdings Limited Employee Share PlanThis plan was approved at the annual general meeting of the Company on 22 October, 1993. Theoperation of the plan has been suspended and no employees have been invited to apply for sharessince 2002.

Where an allocation of shares was made under the plan, eligible employees were invited toparticipate. Eligible employees were those who:

- were permanent employees of the Group on either a full-time or part-time (minimum 20 hoursper week) basis;

- were 18 years of age or over; - had completed 12 months continuous employment.

The total number of shares for which employees were invited to apply was determined by the boardof directors with allocations to individual employees being based on salary levels.

Shares under the plan were not able to be sold until the earlier of two years after issue orcessation of employment with the Group. In all other respects the shares rank equally with otherfully-paid ordinary shares on issue.

Refer note 1(v)(iii) for accounting policy relating to share based payments.

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41. Share-based payments (continued)(b) Share rights granted as compensation

Information regarding shares rights issued as compensation to key management personnel can be found in sections A to C of the remuneration report on pages 5 to 11.

(i) Details of share rights granted as compensation to Mr K.N. Steinke, the Managing Director andChief Executive Officer, are as follows:

Vesting conditions TSR* EPS**Number of rights granted (Total 138,000) 69,000 69,000Class of equity right Ordinary OrdinaryGrant date 10 July 2006 10 July 2006Testing date 1 July 2009 1 July 2009Expiry date 11 July 2011 11 July 2011Fair value at grant date $5.37 $7.48Valuation methodology Monte-Carlo Simulation Binomial TreeExpected vesting date 16 October 2009 1 July 2009Expensed in 2006/07 (Total $295,521) $123,498 $172,023Total fair value of grant (Total $886,650) $370,530 $516,120Percentage vested/forfeited in 2006/07 0% 0%

* Total shareholder return** Earnings per share

There were no share rights granted as compensation at the commencement of the financial year.

A further 46,000 share rights were issued to Mr Steinke on 2 August 2007 in relation to hiscompensation for the 2007/08 financial year.

(ii) Details of share rights granted as compensation to other key personnel under the WANHDeferred Bonus Plan are as follows:

Name2006/07 2005/06

P.A. Armstrong 5,200 3,900A.R. Bradshaw 1,900 -T.L. Garven 6,200 4,600L.M. Roche 5,200 3,300P.F. Stevens 5,200 3,800B.O. Yates 3,600 2,600

The fair value of the rights granted was $377,371 (2006 - $158,922).

The rights were granted to the other key personnel on 2 August 2007 (2006 - 3 August 2006) andvest on conclusion of the annual general meeting of the Company provided the employee remainsin the employ of the Group at the time.

Rights granted

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42. Reconciliation of profit after income tax to net cashinflow from operating activitiesProfit for the year 53,968 69,264 120,680 92,180Non-cash items

Depreciation and amortisation 36,554 42,047 - -Dividend revenue - - - (46,036)Interest charged - related corporation (net) - - 16,456 1,242Net gain on sale of non-current assets (293) (321) - -Share of associated and jointly controlled entities'

net profit not received as cash dividends/distributions (12,784) (13,904) - -

Loss on impairment of interest in jointlycontrolled entity 60,142 - - -

Increase in tax related non-current receivablesfrom subsidiaries (net) - - (42,237) (12,553)

Non-cash employee benefits expense -share-based payments 588 - 588 -

Changes in operating assets and liabilities, net of effectsfrom purchase of controlled entities

Increase in receivables (14,030) (1,493) (2,637) (25,230)Increase in inventories (1,241) (719) - -Decrease/(increase) in other operating assets 1,566 (131) (6) (2)(Increase)/decrease in deferred tax assets (3,214) 115 (164) (3)(Decrease)/increase in payables (10,481) 25,554 620 (10)(Decrease)/increase in other operating liabilities (2,685) 857 - -(Decrease)/increase in tax liabilities (12,541) 648 (12,541) 700Decrease in deferred tax liabilities (1,114) (18,644) - -Decrease in other provisions (502) (530) - -

Net cash inflow from operating activities 93,933 102,743 80,759 10,288

43. Non-cash financing and investing activitiesConstruction in progress accrued for but not paidat year end 4,164 2,241 - -

Proceeds on disposal of plant and equipmentaccounted for but not received at year end 1,581 - - -

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Directors' declaration

In the directors' opinion:

(a) the financial statements and notes set out on pages 30 to 76 are in accordance with theCorporations Act 2001, including:

(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatoryprofessional reporting requirements; and

(ii) giving a true and fair view of the Company's and Group's financial position as at 30 June 2007 and oftheir performance for the financial year ended on that date; and

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when theybecome due and payable; and

(c) the audited remuneration disclosures set out on pages 5 to 13 of the directors' report comply with AccountingStandard AASB 124 Related Party Disclosures and the Corporations Regulations 2001 ; and

(d) at the date of this declaration, there are reasonable grounds to believe that the members of the ExtendedClosed Group identified in note 37 will be able to meet any obligations or liabilities to which they are, or maybecome, subject by virtue of the deed of cross guarantee described in note 36.

The directors have been given the declarations by the chief executive officer and chief financial officer required bysection 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the directors.

P.J. MansellChairman

K.N. SteinkeManaging Director

Perth, Western Australia6 September 2007

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ABN 52 780 433 757

QV1

250 St Georges TerracePERTH WA 6000GPO Box D198

PERTH WA 6840DX 77 PerthAustralia

www.pwc.com/auTelephone +61 2 8266 0000Facsimile +61 2 8266 9999

www.pwc.com/au

Independent auditor’s report to the members ofWest Australian Newspapers Holdings Limited

Report on the financial report and the AASB 124 Remuneration disclosurescontained in the directors’ report

We have audited the accompanying financial report of West Australian NewspapersHoldings Limited (the company), which comprises the balance sheet as at 30 June 2007,and the income statement, statement of changes in equity and cash flow statement for theyear ended on that date, a summary of significant accounting policies, other explanatorynotes and the directors’ declaration for both West Australian Newspapers Holdings Limitedand the West Australian Newspapers Holdings Group (the consolidated entity). Theconsolidated entity comprises the company and the entities it controlled at the year's endor from time to time during the financial year.

We have also audited the remuneration disclosures contained in the directors’ report. Aspermitted by the Corporations Regulations 2001, the company has disclosed informationabout the remuneration of directors and executives (“remuneration disclosures”), requiredby Accounting Standard AASB 124 Related Party Disclosures, under the heading“remuneration report” in pages 4 to 13 of the directors’ report and not in the financialreport.

Directors’ responsibility for the financial report and the AASB 124 remunerationdisclosures contained in the directors' report.

The directors of the company are responsible for the preparation and fair presentation ofthe financial report in accordance with Australian Accounting Standards (including theAustralian Accounting Interpretations) and the Corporations Act 2001. This responsibilityincludes establishing and maintaining internal control relevant to the preparation and fairpresentation of the financial report that is free from material misstatement, whether due tofraud or error; selecting and applying appropriate accounting policies; and makingaccounting estimates that are reasonable in the circumstances. In Note 1, the directorsalso state, in accordance with Accounting Standard AASB 101 Presentation of FinancialStatements, that compliance with the Australian equivalents to International FinancialReporting Standards ensures that the financial report, comprising the financial statementsand notes, complies with International Financial Reporting Standards.

The directors of the company are also responsible for the remuneration disclosurescontained in the directors’ report.

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Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. Weconducted our audit in accordance with Australian Auditing Standards. These AuditingStandards require that we comply with relevant ethical requirements relating to auditengagements and plan and perform the audit to obtain reasonable assurance whether thefinancial report is free from material misstatement. Our responsibility is to also express anopinion on the remuneration disclosures contained in the directors’ report based on ouraudit.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial report and the remuneration disclosures contained in thedirectors’ report. The procedures selected depend on the auditor’s judgement, includingthe assessment of the risks of material misstatement of the financial report and theremuneration disclosures contained in the directors’ report, whether due to fraud or error.In making those risk assessments, the auditor considers internal control relevant to theentity’s preparation and fair presentation of the financial report and the remunerationdisclosures contained in the directors’ report in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity’s internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accountingestimates made by the directors, as well as evaluating the overall presentation of thefinancial report and the remuneration disclosures contained in the directors’ report.

Our procedures include reading the other information in the Annual Report to determinewhether it contains any material inconsistencies with the financial report.

For further explanation of an audit, visit website http://www.pwc.com/au/financialstatementaudit.

Our audit did not involve an analysis of the prudence of business decisions made bydirectors or management.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinions.

It does not provide an opinion on any other information which may have been hyperlinkedto/from the financial report or remuneration disclosures. If users of this report areconcerned with the inherent risks arising from electronic data communications they areadvised to refer to the hard copy of the audited financial report and remunerationdisclosures to confirm the information included in the audited financial report andremuneration disclosures presented on this web site.

Independence

In conducting our audit, we have complied with the independence requirements of theCorporations Act 2001.

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Auditor’s opinion on the financial report

In our opinion:

(a) the financial report of West Australian Newspapers Holdings Limited is inaccordance with the Corporation Act 2001, including:

(i) giving a true and fair view of the company’s and consolidated entity’sfinancial position as at 30 June 2007 and of their performance for the yearended on that date; and

(ii) complying with Australian Accounting Standards (including the AustralianAccounting Interpretations) and the Corporations Regulations 2001; and

(b) the consolidated financial statements and notes also comply with InternationalFinancial Reporting Standards as disclosed in Note 1.

Auditor’s opinion on the AASB 124 remuneration disclosures contained in the directors’report.

In our opinion, the remuneration disclosures that are contained in pages 4 to 13 of thedirectors’ report comply with Accounting Standard AASB 124.


Justin Carroll Perth

Partner 6 September 2007

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