2009/10 QR LIMITED ANNUAL REPORT - Queensland Rail

DarwinCairnsTownsvillePort HedlandDampierNorthern TerritoryMt IsaMackayWestern AustraliaAlice SpringsQueenslandRockhamptonGladstoneSouth AustraliaBrisbaneGeraldtonPerthFremantleAlbanyKalgoorlieEsperanceAdelaideNew South WalesPort AugustaCanberraVictoriaNewcastleSydneyPort KemblaMelbourneTasmaniaHobartQR National OperationsQueensland Rail Operations(QR National also operates on these lines)Our BusinessAlready a national transport and supply chain solutionscompany, as at 30 June 2010 QR is one of Australia’slargest integrated transport providers, demonstratingsignificant growth over the past five years. It has anational workforce of 16,500 people in more than500 locations around Australia.2 QR LIMITED AnnuAL REpoRT 2009/10

Sam Walsh - Senior HR Advisor and Doug Edwards - Senior Recruitment Consultant, Recruitment CentreGovernanceA continuing evolution.over the past two financial years, and especiallyin 2009/10, QR’s leadership and managementteam have accelerated the pace of changethroughout the organisation.2009/10 QR LIMITED AnnuAL REpoRT 3

Board of Directors - QR LimitedJohn B Prescott aCChairmanBCom (indus Rel), Hon.DSc,Hon.LLD, FaiCD, FaiM, FtSeAge 69, independent non-executivedirector of QR Limited sinceJuly 2006.Member of the Ipo, Governanceand nomination Committee, theRemuneration and SuccessionCommittee and the Safety andEnvironment Committee.John has substantial experience inthe mining, manufacturing, transportand government sectors. He was along-term executive of The BrokenHill proprietary Company Limited(now BHp Billiton Limited), including10 years as an executive director andseven years as Managing Director andChief Executive officer (1991-98). Hewas also Chairman of ASC (formerlyAustralian Submarine Corporationpty Ltd) from 2000 to 2009.John is a Director of newmont MiningCorporation, a Global Counsellor ofThe Conference Board since 2001and a Member of the CommonwealthRemuneration Tribunal since 2010.other directorships and consulting/advisory positions have includedConference Board uSA, WorldEconomic Forum, Booz Allen andHamilton, Jp Morgan Chase & Co,proudfoot Consulting, Asia pacificAdvisory Committee of new YorkStock Exchange, and many othercommunity, business, educationand government organisations.Lance HockridgeManaging Director & CeoFCiLt, FaiM, MaiCDAge 56, executive director ofQR Limited since April 2010.Director of QR network ptyLtd and member of the Safetyand Environment Committee,and the Ipo, Governance andnomination Committee.Lance joined QR Limited asChief Executive officer in 2007,with extensive experience inthe transportation and heavyindustrial sectors in Australiaand the united States.During a 30-year career withThe Broken Hill proprietaryCompany Limited (now BHpBilliton Limited) and BlueScopeSteel, he was a member of theleadership team that led toBlueScope Steel’s successfuldemerger from BHp and thecreation of a new publiclylisted company.In 2005 Lance was appointedpresident of BlueScope Steel’snorth American operations,where he led a major turnaroundin safety, production and financialperformance. other roles at BHpincluded Human Resourcesand Industrial Relations, GeneralManager of BHp Transport, headof Long products Business andpresident of Industrial Markets.John atkinnon-executive DirectorBa (Hons), LLB (Hons) MaiCDAge 53, independent non-executivedirector of QR Limited sinceApril 2010.Director of QR network pty Ltd andChairman of the Ipo, Governanceand nomination Committee.He is chief executive officer ofThe Trust Company Limited and adirector of The Australian outwardBound Foundation.John has over 20 years experiencein the management of professionalservice firms, and extensiveexperience in strategy developmentand execution. prior to his currentexecutive appointment in January2009, John was the managingpartner of Blake Dawson, where heled a successful transformation of thefirm. previously he had been a seniorpartner at Mallesons Stephen Jaqueswhere he specialised in mergersand acquisitions and equitycapital markets.4 QR LIMITED AnnuAL REpoRT 2009/10

Board of Directors - QR Limited cont.Peter Kennynon-executive DirectorAge 66, independent non-executivedirector of QR Limited sinceoctober 2009.Director of QR network pty Ltdand member of the Safety andEnvironment Committee.peter has extensive experience inthe rural sector. He is the Chairmanof Biosecurity Qld and a memberof the Australian Landcare Council,the national Biosecurity AdvisoryCouncil and the Cape YorkHeritage Committee. He representsQueensland agriculture on theQueensland premier’s AdvisoryCouncil on Climate Change.peter has owned and managed ruralproperties in different industries,including cattle, dairying, orchards,lucerne and piggeries. His work overmany years with AgForce includedmembership of the State council andState executive. He was presidentof AgForce Cattle for four years andthen AgForce General president forfour years. He was a Councillor andSecretary of the Cattlemen’s unionof Australia and its representative onthe AgForce unity Working Group,and a Director of the nationalFarmers Federation.Andrea Stainesnon-executive DirectorBecon, MBA, FAiCDAge 45, independent non-executivedirector of QR Limited sinceApril 2010.Chairman of QR network pty Ltdand member of the Audit and RiskManagement Committee.Andrea has extensive corporatefinancial and commercial experience,and advisory experience ingovernance, strategy and riskmanagement. She is a Director ofAllconnex Water and the BrisbaneRoyal Children’s Hospital Foundation.Former directorships include theAustralian Rail Track Corporation,Gladstone ports Corporation andEarly Learning Services (now G8).Andrea is a former Chief Executiveofficer of Australian Airlines, aQantas subsidiary she co-launchedin 2002 as a member of thecarrier’s 12-person senior team. Shepreviously held various financial,strategy and economic roles atQantas. prior to this, she held variousfinancial roles at American Airlines’headquarters in Dallas.Gene Tilbrooknon-executive DirectorBSc, MBAAge 59, independent non-executivedirector of QR Limited sinceApril 2010.Chairman of the Audit and RiskManagement Committee andmember of the Ipo, Governance andnomination Committee.Gene has broad experience incorporate strategy, investment andfinance. He joined Wesfarmers in 1985and was an Executive Director from2002 to 2009. Between 2000 and2006 when Wesfarmers was a jointowner of the Australian Railroad Group(ARG), he was a Director of ARG andChairman of Westnet Rail.Gene is Chairman of TranspacificIndustries, and a Director of FletcherBuilding, GpT Group, the FederalGovernment-owned broadbandgroup nBn Co, the perth InternationalArts Festival, the Bell ShakespeareCompany and the Committee forperth. He is also Councillor of Curtinuniversity and the Australian Instituteof Company Directors WA.6 QR LIMITED AnnuAL REpoRT 2009/10

Corporate GovernanceDirectors’ Appointment and AttendanceThe Board comprises nine Directors in office as at the date of this statement.DirectorDate firstappointedDate ofresignationMeetingsattended*Max no.possible**John B Prescott AC 1 July 2006 - 23 23Lance Hockridge 22 April 2010 - 2 2John Atkin 22 April 2010 - 2 2Russell Caplan 22 April 2010 - 2 2Allan Davies 1 October 2008 - 22 23Peter Gregg 7 May 2009 2 November 2009 2 6Maureen Hayes 1 October 2009 3 June 2010 13 18Robert Holloway 1 July 2005 9 April 2010 17 18Peter Holmes à Court 1 July 2006 23 March 2010 14 17Graeme John AO 22 April 2010 - 2 2Dr Leo Keliher AO I October 2008 3 June 2010 20 22Peter Kenny 1 October 2009 - 15 19Warren McLachlan 1 July 1998 30 September 2009 3 4Dawson Petie 1 July 1998 3 June 2010 17 22Susan Rix 1 July 2005 30 September 2009 4 4Andrea Staines 22 April 2010 - 2 2Gene Tilbrook 22 April 2010 - 2 2John West 1 July 2005 8 February 2010 11 13* Number of meetings attended** Number of meetings held during the time the director held office during the financial year8 QR LIMITED Annual Report 2009/10

Support ExecutivesManaging Director and Chief Executive OfficerChief Financial OfficerChief Corporate Services OfficerChief Human Resources OfficerChief Marketing OfficerExecutive General Manager QR National CoalExecutive General Manager QR FreightExecutive General Manager QR PassengerExecutive General Manager QR ServicesExecutive General Manager QR NetworkCompany Secretary (July to May)Company Secretary (May to June)Corporate CounselChief Legal Officer(Seconded Partner from Blake Dawson, May to June)Chief Safety OfficerLance HockridgeDeborah O’TooleGreg PringleJohn StephensLindsay WoodlandMarcus McAuliffeKen LewseyPaul ScurrahLindsay CooperMike CarterAndrew HaynesDominic SmithDavid DrewDavid WenckMichael (Mick) MaddenQR was a Government Owned Corporation (GOC) under the Government OwnedCorporations Act 1993 (GOC Act) throughout the 2009/10 financial year.Subsequent to the 2009/10 year, QR Limited ceased to be a GOC, in preparation for the State’s proposed sale viaan initial public offering as to QR National Limited, which has since become the parent company of QR Limited.This statement reflects QR’s corporate governancepractices in the 2009/10 financial year.QR has adopted the principles andrecommendations contained in theCorporate Governance Guidelines forGovernment Owned Corporations(the Guidelines).The Guidelines are intended to provide aframework for GOCs to develop, implement,review and report upon their corporategovernance arrangements.Principle 1Foundations of Managementand OversightThe roles and responsibilities of theBoard and Board Committee are definedin the Terms of Reference for each body.These roles and responsibilities arereviewed by the Board annually.Newly appointed Directors are takenthrough a formal induction process.Directors familiarised themselves withthe company through a comprehensiveBoard handbook that details QRand Board operational information,governance requirements and QRpolicies. The Board handbook isreviewed and updated annually.Management’s responsibilitiesare defined and documented informal position descriptions andperformance plans. Delegations from the Board to the CEOand from the CEO to management aredocumented and reviewed annually.Principle 2Structure the Board to Add ValueThe size and composition of theBoard is determined by theShareholding Ministers.2009/10 QR LIMITED Annual Report 9

Corporate Governance cont.QR Directors are appointed by theGovernor-in-Council.Non-executive directors are considered to beindependent and all Directors must declareactual or potential conflicts of interest andexcuse themselves from discussions onissues where they may have an actual orpotential conflict of interest.Directors are required to keep the Boardadvised, on an ongoing basis, of any interestthat could potentially conflict with thoseof QR. In circumstances where a conflict isbelieved to exist, the Director concerneddoes not take part in any decision orconsideration of the issue. In addition,the Director will not receive copies of therelevant Board papers.Directors declare their business interests andother directorships and employment rolesannually and must notify the Board via theCompany Secretary of changes to businessinterests and appointments.Details of Directors’ experience and expertiseare disclosed in the Annual Report, as isinformation on attendance at Board andCommittee meetings.• The Board composition during2009/10 and details of Director termsof appointment and remuneration isset out on the following pages.• For details of skills, experience andexpertise of individual Board Directors,please refer to pages 4 to 6.A process is in place whereby Directors,either collectively or individually, may seekindependent professional advice whereit is considered necessary to fulfil theirduties and responsibilities. This is done atQR’s expense. A Director wishing to seeksuch advice must obtain the approval ofthe Chairman.QR Directors are encouraged to furthertheir knowledge through participationin industry, governance and governmentforums, and attend seminars hosted by theAustralian Institute of Company Directors,Chartered Secretaries Australia and otherpeak professional bodies. In addition to peerreview, interaction and networking with otherDirectors and industry leaders, QR Directorsparticipate in QR leadership forums andactively engage with QR employees, andvisit QR operations to gain an understandingof operational employee requirements,challenges and issues.A whole-of-Board performance reviewis undertaken annually in addition toindividual evaluation sessions betweenthe Chairman and individual Directors.A formal self-evaluation questionnaire isused to facilitate the annual Boardperformance review process.Principle 3Promote Ethical and ResponsibleDecision MakingQR has a Code of Conduct to guide Directorsand employees in compliance with QR’sethical, legal and statutory obligations.QR has a Trading in Securities Policy.Principle 4Safeguard Integrity inFinancial ReportingThe CEO and CFO certify in writingthat QR’s annual financial report representsa true and fair view of QR’s financial positionand that the financial report has beenprepared in accordance with InternationalFinancial Reporting Standards.The Board Audit and Risk ManagementCommittee reviews the integrity of QR’sfinancial reporting systems. The BoardAudit and Risk Management Committeeis governed by its own Charter, which isreviewed annually.QR has a detailed internal audit plan that isapproved by the Audit and Risk ManagementCommittee and managed under the auspicesof the Chief Internal Auditor, who providesregular reports to the Audit and RiskManagement Committee.The external audit function is performed bythe Queensland Audit Office.Principle 5Make Timely andBalanced DisclosuresIn accordance with the requirements of theGOC Act, QR submits to its shareholdingMinisters a quarterly report detailing itsperformance outcomes for the quarter.10 QR LIMITED Annual Report 2009/10

Corporate Governance cont.Audit & Risk Management Committee;Remuneration & Succession Committee;Network Committee;Business Development Committee;IPO, Governance and Nomination Committee.The Board approved the cessation of theBusiness Development Committee inFebruary 2010 and the Network Committeein June 2010. The QR Network Pty Ltd Boardhas now been established.The inaugural meeting of the IPO, Governanceand Nomination Committee was held inJune 2010.The membership of each Board Committeeis made up of a minimum of three (3) and amaximum of five (5) Directors from the Board.Senior Executives attend meetings at thediscretion of the Committee.The Board has approved terms of reference foreach Committee.An annual evaluation of Committeeperformance is undertaken by the Board as partof the Board’s overall performance review.Audit and RiskManagement CommitteeThe purpose of the Audit and Risk ManagementCommittee is to assist the Board in the effectivedischarge of its responsibilities for the financialreporting, internal control structures, internal andexternal audit functions and risk managementand compliance systems of the QR LimitedGroup (“the QR Group”).The Committee reviews, oversees and reports tothe Board at least annually on the following:the annual financial reporting process forthe QR Group;the process implemented to support theannual certifications for the QR Group to beprovided by the Chief Financial Officer;accounting policies for the QR Group;the scope of QR Group internal audit andexternal audit programs and any materialissues arising from these audits;the performance of the internal andexternal auditors;the effectiveness of the systems ofaccounting and internal controls for theQR Group;the quality of reporting by the QR Group;the effectiveness of the processes used byQR Group management to monitor andensure compliance with laws, regulations,ethical guidelines, ring-fencing requirementsand obligations for external reporting offinancial information;identification and management of materialrisk exposures (actual or potential) to theQR Group;the effectiveness of the QR Group riskmanagement systems and strategies.Gene Tilbrook chairs the Committee.The composition of the Committee andattendance at Committee meetings in 2009/10is set out below:IPO, Governance andNomination CommitteeThe purpose of the IPO, Governance andNomination Committee is to assist the Board inthe effective discharge of its responsibilities for:MembersMeetingsattendedMax no.possibleGene Tilbrook (Chair) 1 1John B Prescott AC * 5 5Russell Caplan 1 1Peter Gregg(chair to resignation 02/11/09)Maureen Hayes(resigned 03/06/2010)Dr Leo Keliher AO(resigned 03/06/2010)1 11 24 4Peter Kenny 1 1Warren McLachlan(resigned 30/09/2009)Dawson Petie(chair to resignation 03/06/10)Susan Rix(chair to resignation 30/09/09)2 22 22 2Andrea Staines 1 1* John B Prescott AC attended all meetings in an ex officio capacitythe Initial Public Offering;the governance policies, framework andcompliance of QR Limited;the Code of Conduct and any breaches ofthe Code of Conduct;the performance of the Board;12 QR LIMITED Annual Report 2009/10

the independence of Directors;succession planning for non-executivedirectors;the terms and conditions on which nonexecutivedirectors are appointed andhold office;the appointment of the CEO;making recommendations to the Boardabout its composition and strategies toaddress Board diversity;the QR Limited Annual Report.John Atkin chairs the Committee.The composition of the Committee andattendance at Committee meetings in 2009/10is set out below:Remuneration and Succession CommitteeThe purpose of the Remuneration andSuccession Committee is to assist the Board inthe effective discharge of its responsibilities for:MembersMeetingsattendedthe appointment and review of performanceof the CEO;the system of remuneration and benefits forthe CEO and his/her direct reports.The Committee reviews and makesrecommendations to the QR Board on: the appointment and termination ofthe CEO and his/her direct reports; the performance measures for the CEOand his/her direct reports; annual performance payments to the CEOand his/her direct reports; succession planning for the CEO and his/herdirect reports; remuneration policies; collective agreements with unions; the professional development of Directors,the CEO, and direct reports to CEO.Allan Davies chairs the Committee.Max no.possibleJohn Atkin (Chair) 1 1John B Prescott AC 1 1Russell Caplan 1 1Lance Hockridge 1 1Gene Tilbrook 1 1The composition of the Committee andattendance at Committee meetings in 2009/10is set out below:Network CommitteeThe purpose of the Network Committee was toassist the Board in:MembersMeetingsattendedMax no.possibleAllan Davies (Chair) 3 3John B Prescott AC 5 5Robert Holloway2 2(chair until 14/10/09,resigned 09/04/10)Peter Holmes à Court (resigned 1 123/03/10)Graeme John AO 1 1Dawson Petie2 2(resigned 03/06/10)John West(resigned 08/02/10)1 1assessing the merits of below-rail businessdevelopment initiatives, as directed bythe Board;reviewing growth proposals for the Networkbusiness to ensure that these proposals arealigned with board approved strategies;reviewing prospective below-rail businessacquisitions, divestments and joint venturearrangements, as directed by the Board;providing direction to management onfurther work to be undertaken before majorNetwork business proposals are submitted tothe Board for consideration and/or approval;evaluating the adequacy of ring-fencingprocedures for the Business;ensuring that Network business activitiesare ring-fenced in accordance withring-fencing procedures.The Committee makes recommendations to theBoard as appropriate.Dawson Petie chaired the Committee until hisresignation in June 2010. John B Prescott ACthen became chair until the Committee wasreplaced in June 2010 by the QR Network Pty LtdBoard now chaired by Andrea Staines.2009/10 QR LIMITED Annual Report 13

Corporance Governance cont.The composition of the Committee andattendance at Committee meetings in 2009/10is set out below:Business Development CommitteeThe purpose of the Business DevelopmentCommittee was to assist the Board in theeffective discharge of its responsibilities for:MembersMeetingsattendedMax no.possibleDawson Petie (Chair)2 2(chair until andresigned 03/06/10)John B Prescott AC 3 3Maureen Hayes1 1(resigned 03/06/10)Robert Holloway1 1(resigned 09/04/10)Peter Holmes à Court1 1(resigned 23/03/10)Dr Leo Keliher AO2 2(resigned 03/06/10)Warren McLachlan2 2(resigned 30/09/09)Susan Rix(resigned 30/09/09)2 2assessing the merits of above-rail businessdevelopment initiatives, as directed bythe Board;reviewing growth proposals for the Freight,Passenger and Services businesses to ensurethat these proposals are aligned with Boardapproved strategies;reviewing prospective above-rail businessacquisitions and divestments and joint venturearrangements, as directed by the Board;providing direction to management onfurther work to be undertaken before majorFreight, Passenger and Services businessproposals are submitted to the Board forconsideration and/or approval;monitoring specific aspects of theimplementation of approved strategies asdirected by the Board.John West chaired the Committee until hisresignation in February 2010. John B PrescottAC then chaired this committee until itscessation in February 2010.The composition of the Committee andattendance at Committee meetings in 2009/10is set out below:MembersJohn West (Chair)(chair until resigned 08/02/10)John B Prescott AC(chair to cessation of committee)MeetingsattendedMax no.possible1 13 3Allan Davies 3 3Robert Holloway(resigned 09/04/10)Peter Holmes à Court(resigned 23/03/10)Dr Leo Keliher AO(resigned 03/06/10)2 21 21 1Peter Kenny 1 1Dawson Petie(resigned 03/06/10)1 1Risk ManagementQR is committed to managing its risks in anintegrated, systematic and practical manner.The overall objective of risk managementis to assist QR to achieve its objectives byappropriately considering both threats andopportunities and making informed decisions.QR’s risk management framework,responsibilities and accountabilities arealigned with the QR business model, wherethe individual businesses are accountablefor demonstrating they are managing theirrisks effectively and in accordance with theBoard approved risk management policy andframework. The corporate Risk and Assurancebusiness unit is responsible for providingoversight of the risk management function andassurance on the management of significantrisks to the CEO and the Board.The risk management framework has astrong focus on key organisational controls.Focusing on the key organisational controlshelps to shape the strategies, capabilities andculture of the organisation, identify and addressvulnerabilities, strengthen the system of internalcontrols and build a more resilient organisation.14 QR LIMITED Annual Report 2009/10

For QR, business resilience builds upon ourability to rapidly adapt and respond todynamic changes involving our operations,with a view to minimising any adverse impactsby facilitating continued business operations.Adverse events may include threats, disruptionsand demands. This is achieved through theadoption of an integrated approach towardsecurity, incident management and businesscontinuity disciplines.QR is actively involved in the promotion of thesekey concepts within the rail and greater transportindustries. QR is a participant in State andnational forums relating to security, continuityand incident-response specialisations, and hasforged strong working relationships with fellowtransport operators, government agencies andresponse agencies. This provides continuedconfidence that major events affecting theorganisation and broader community will bemanaged in a coordinated manner, minimisingadverse impacts, and that QR will continue tomeet customer needs.QR Limited - Corporate Hospitalityand EntertainmentDATE EVENTS > $5,000 EXPENDITUREJUL 09 -JUN 10JUL -SEP 09OCT -DEC 09JAN -MAR 10APR -JUN 10QUT Business LeadersForums*QR Reds HospitalityProgram - Wallabiestest match$5,000.00$5,042.00AFL Grand Final Day $18,000.00Graduate ShowcaseAwardsTownsville FamilyStaff DayRockhamptonFamily Staff Day$7,814.00$5,221.00$6,754.00Brisbane Family Staff Day $35,007.00QR National Coal SouthStaff event$19,800.00QR Excellence Awards $35,277.00Launch of QR YoungProfessionals ProgramApprentice and Traineeof the Year AwardsQR Reds HospitalityProgram - QR Redshome gamesCEO CustomerFunction - TownsvilleQR Bulk (ARG)Hospitality Program -InternationalCricket PerthQR National Coal -Brisbane Customer eventQR Bulk (ARG)Hospitality Program -InternationalCricket PerthQR Reds HospitalityProgram - Wallabiestest matchQR Bulk (ARG)Hospitality Program- North QueeslandCowboysQR Bulk (ARG)Hospitality Program- Troy Dunn$5,421.00$6,672.00$14,608.00$5,263.00$10,000.00$11,809.00$10,000.00$24,106.00$9,742.00$4,095.00$239,631.00* QR Limited supported four (4) business leadersforums throughout the 2009-10 financial year.2009/10 QR LIMITED Annual Report 15

Ben Hansen, Andrew Hardiman and Terry Bickey Locomotive Workshop, RACS RockhamptonOperational & Financial Performance2009/10 financial data and comparisonswill be released with approved auditedfinancial statements in october 2010.16 QR LIMITED AnnuAL REpoRT 2009/10

Summary of QR OperationsSummary of Traffic2009/10 2008/09Tonnes (000s)Tonnes (000s)QR Group Freight (QR National)Coal 198,400 186,658Freight (including minerals, otherfreight and intermodal) 63,800 61,874Total Freight 262,200 248,532Trips (000’s) Trips (000’s)QR Group Passenger TripsCitytrain 59,733 65,098Traveltrain (includes tourist services) 775 866Total Passenger Trips 60,508 65,964Rail Network Owned (Leased) in Use30 Jun 10 30 Jun 09(length inkilometres)(length inkilometres)Route Kilometres1067 mm GaugeOwned 8,576 9,539Less: Lines suspended from use - 246Lines with no freight or passenger services 739 1,389Sub total 7,837 7,9041435 mm Gauge 3 98Dual Gauge 36 36Total in use as at 30 June 7,876 8,038Line Section Opened During 2009/10Robina to Varsity LakesLine Section Transferred toARTC During 2009/10Acacia Ridge to QLD Border(1435 mm Gauge)Line Sections Closed/Surrendered to DTMR495967Rollingstock in Use30 June 10 30 June 09Locomotive 703 708Coal Wagons 8,993 8,529Minerals & Freight Wagons 7,153 7,076Passenger Rollingstock 779 7472009/10 QR LIMITED Annual Report 17

Operational & Financial Performance cont.Financial SummaryConsolidated ResultsThe consolidated financial report includesthe results of the continuing operations ofthe QR Limited Group (Group) and also thediscontinued operations (comprising thepassenger and non-coal network businesses)which were transferred out of the Group as at30 June 2010.The loss of the Group for the financial yearamounted to $36.8 million, comprising a lossof $222.1 million from continuing operationsand profit of $185.3 million from discontinuedoperations. The loss from continuingoperations does not reflect the underlyingresults of the business due to the impact ofindividually significant non-operating items,including asset impairments and restructuringcosts, as outlined in the table below. Furtherexplanation of these items is provided in theDirectors’ Report.No dividend has been declared in respect ofthe year ended 30 June 2010.Consolidated Financial PerformanceFor the year ended 30 June 20102010 2009 2008$m $m $mContinuing OperationsRevenue from continuing operations 2,865.9 2,517.2 2,250.3EBITDA and individually significantnon-operating items 628.5 492.5 417.5Individually significantnon-operating items (276.0) (86.0) 30.0EBITDA 352.5 406.5 447.5Depreciation and amortisation (423.9) (351.5) (318.2)(Loss)/profit before interest and tax (EBIT) (71.4) 55.0 129.3Net finance costs (225.7) (197.6) (184.4)(Loss) before tax from continuing operations (297.1) (142.6) (55.1)Income Tax 75.0 44.9 9.4(Loss) from continuing operations (222.1) (97.7) (45.7)Discontinued OperationsProfit from discontinued operations 185.3 279.8 271.3(Loss)/profit for the year (36.8) 182.1 225.6Sales revenue from continuing operationsincreased by $348.7 million to $2,865.9million due to organic growth in the coalfreight business and higher coal networkaccess tariffs.Earnings before interest, taxation,depreciation and amortisation (EBITDA) andindividually significant items from continuingoperations increased by $136 million to $628.5million in the year ended 30 June 2010 largelyas a result of the impact of revenue upliftsarising from the regulatory determinationmade by the QCA (which was published inJune 2010 and applies retrospectively from1 July 2009), record coal volumes hauledand a higher average above rail rate pertonne hauled, partially offset by increasesin employee numbers in preparation forgrowth, escalation of employee entitlementsin line with negotiated EBAs and increasesin corporate costs associated with thedevelopment of QR National’s enterprisestrategy and operating model. In arriving atearnings before interest and tax (EBIT) forcontinuing operations of $71.4 million loss,depreciation increased in the year by$72.4 million to reflect the additionalinvestment in infrastructure and rollingstock.18 QR LIMITED Annual Report 2009/10

Total equity of the Group has decreased by34.8% to $2,683.9 million during the yearas a result of the loss for the year of $36.8million and transfer of the net assets of thediscontinued operations of $1,778.1 million toQueensland Rail Limited on 30 June 2010.Further balances related to discontinuedoperations, totalling $330.8 million, areclassified as held for distribution at balancedate and will reduce equity by this amountConsolidated Financial PositionAs at 30 June 2010once transferred during the year ended30 June 2011.During the current financial year theGroup has invested more than $1.8 billionin capital expenditure programs in line withQR’s capital expenditure and growth strategy.The most significant investments were inrollingstock and infrastructure expenditure inSouth East Queensland.2010 2009 2008$m $m $mCurrent Assets 1,079.1 856.8 751.1Non-current Assets 7,494.7 12,247.9 10,381.2Total Assets 8,573.8 13,104.7 11,132.3Current Liabilities 4,957.4 1,323.5 1,757.0Non-current Liabilities 932.5 7,661.6 5,826.1Total Liabilities 5,889.9 8,985.1 7,583.1Net Assets 2,683.9 4,119.6 3,549.2Contributed Equity 2,066.9 3,412.9 2,834.5Retained Profits 619.0 708.2 741.1Reserves (2.0) (1.5) (26.4)Total Equity 2,683.9 4,119.6 3,549.2Consolidated Cash FlowsFor the year ended 30 June 20102010 2009 2008$m $m $mNet cash flow from operating activities 638.9 812.2 716.1Net cash flow from investing activities (1,721.0) (2,428.1) (1,651.9)Net cash flow from financing activities 984.5 1,667.0 941.8Net (decrease)/increase in cash held (97.6) 51.1 6.0The above cash flow statement for the year ended 30 June 2010 includes cash flows related to bothcontinuing and discontinued operations.2009/10 QR LIMITED Annual Report 19

Operational & Financial Performance cont.Net operating cash flows from alloperations decreased by (21.3%) to$638.9 million in the year ended 30June 2010 compared with the previouscorresponding period primarily due to adecrease in trade working capital inflows,primarily as a result of the increase inreceivables at year end.Net investing cash outflows from alloperations of $1,721.0 million decreased by$707.1 million from $2,428.1 millionin the previous corresponding period due tolower capital expenditure during the year.Net financing cash inflows from alloperations decreased by $682.5 millionto $984.5 million principally as a resultof lower borrowings required to fundcapital expenditure.Notifications byShareholdingMinisters to theQR Limited BoardThe company received a number ofProject Directions during the financialyear to 30 June 2010 from the Treasurerunder the Infrastructure Investment(Asset Restructuring and Disposal)Act 2009, in respect of the separation ofQueensland Rail Limited fromQR Limited which was effected on30 June 2010 and represents the primaryimpact upon the financial position of thecompany during the financial year.The notifications were2. It was noted in the QueenslandGovernment Gazette dated the29th of July 2009:Government Owned CorporationsAct 1993Section 114We hereby give notice that the publicsector policy entitled State ProcurementPolicy, as amended from time to time,is to apply to QR Limited and as far aspracticable to all of its subsidiaries.ANDREW FRASER MPTreasurer and Minister for Employmentand Economic DevelopmentRACHEL NOLAN MPMinister for TransportQR Limited has governance andmanagement guidelines to define therequirements, responsibilities andmethods that shall be employed in thepurchasing of goods and services fromexternal sources, consistent with theState Procurement Policy. QR’s internalpolicies and standards ensure that QRcommits to, and delivers on the primaryobjectives of the policy:1. Seeking value for money;2. Purchasing with probity andaccountability; and3. Giving local business and industryfull, fair and reasonable competitiveopportunity to supply.1. On 9 December 2009, the QR LimitedBoard received direction from TheShareholding Ministers to surrender QRNetwork Pty Ltd (QR Network) subleaseover the interstate rail corridor to theState of Queensland (represented by theDepartment of Main Roads) and transferof the structures which are the subjectof the sublease to Australian Rail TrackCorporation Limited (ARTC) fornil consideration.20 QR LIMITED Annual Report 2009/10

GlossaryAbove RailOwnership and operation of rollingstock,such as locomotives and wagons.ARGAustralian Railroad Group(QR subsidiary company).AWAAustralian Workplace Agreement.Below RailTrack infrastructure, such as signalling,overheads and the track itself.Bulk FreightCommodities such as coal, mineralsand grain. Bulk trains generally carrya single commodity.CEOChief Executive Officer.CRT GroupColin Rees Transport Pty Ltd.EGMExecutive General Manager.Environmental IncidentAn undesired, unplanned anduncontrolled event that underdifferent circumstances may leadto environmental harm.GAPGoonyella to Abbot Pointexpansion project.General FreightFreight that does not travel in a blocktrain and does not include intermodaland industrial products.Goonyella SystemThe Goonyella System services the coalmines in the northern and central areasof the Bowen Basin. Coal is transportedvia rail to the two coal terminals at theport: the Dalrymple Bay Coal Terminaland the Hay Point Services Coal Terminal.LTILost Time Injury.LTIFRLost Time Injury Frequency Rate, ameasure of the number of lost-timeinjuries per million hours worked, usedby QR to monitor and report employeehealth and safety.Missing linkThe Northern Missing Link (NML) – a69km long new railway to provide a railconnection between the Goonyella andNewlands rail systems.NetworkQueensland’s rail system, including allmain railway lines, marshalling yards,bulk loading and unloading pointsand passenger stations.Newlands SystemThe Newlands System services thecoal mines in the northern end of theBowen Basin. Coal is transported viarail to the coal terminal at Abbott PointPort as well as domestic coal to theQueensland Nickel Refinery and theBowen Coke Works.QRQR Limited.Rail OperatorA party (QR and non QR) that operatesrollingstock (ie. trains) on a railway.RollingstockLocomotives and wagons.SEQIPRAILThe rail component of the QueenslandGovernment’s overarching South EastQueensland Infrastructure Program(SEQIP).SCIStatement of Corporate Intent.Signals Passed at Danger (SPAD)An incident where a train passes ared signal without authority to do so,used as a measure of risk.ZEROHarmZEROHarm is a journey towardsZERO incidents, ZERO injuries, ZEROwork-related illnesses and ZEROenvironmental incidents.2009/10 QR LIMITED ANNUAL REPORT

FINANCIAL REPORTThe Financial Report for QR Limited and its controlled entities for the year ended30 June 2010 is presented on the attached disc / in the accompanying report.This report includes the Directors’ Report, the Financial Statements, Notes to theFinancial Statements, the Directors’ Declaration and the Independent Auditor’s Report.The key financial measures presented in the Financial Report include: Loss for the Group for the financial year of $36.8 million. This result should beconsidered in conjunction with the significant non-operating items detailed inthe Directors’ Report. The Group result comprises a loss of $222.1 million from continuing operationsand profit of $185.3 million from discontinued operations. Revenue from continuing operations increased 13.9% to $2,865.9 million. Earnings before interest and tax and individually significant non-operatingitems for continuing operations increased by 44.7% to $204 million. While an additional $1,793.3 million was invested in property, plant andequipment during the year, property, plant and equipment decreased 38.6%to $7,383.8 million as a result of the transfer of $5,174.1 million in property,plant and equipment to Queensland Rail Limited in the financial separation. While borrowings increased throughout the year to fund capital expenditure, thetransfer of $3,000.0 million to Queensland Rail Limited in the financial separationresults in a decrease of 33.8% to $4,266.1 million in borrowings at year end. Net assets of $330.8 million, related to the discontinued operations, were heldfor distribution at 30 June 2010. Additional shares amounting to $379.8 million were issued to existingshareholders, followed at 30 June 2010 by a capital reduction of$1,725.8 million as a result of the financial separation.Further details of the financial performance and position of the QR Group isavailable in the QR Limited Financial Report.

HEAD OFFICELevel 14, Rail Centre 1, 305 Edward StreetBrisbane Qld 4000GPO Box 456, Brisbane QLD 4001Telephone 13 16 17ROCKHAMPTON1st Floor, Administration Building320 Murray Street, Rockhampton Qld 4700PO Box 198, Rockhampton Qld 4700Telephone +61 (07) 4932 0251Facsimile +61 (07) 4932 0714TOWNSVILLE502 Flinders Street, Townsville Qld 4810PO Box 1102, Townsville 4810Telephone +61 (07) 4772 8308Facsimile +61 (07) 4772 8392SYDNEYQR Freight IntermodalStocklands Distribution CentreBuilding 8B, 60 Loftus Road, Yennora NSW 2161Telephone +61 (02) 9721 6200Facsimile +61 (02) 9721 6207MELBOURNEQR Freight Intermodal11 – 13 Chambers RoadAltona North VIC 3025Telephone +61 (03) 9392 8333Facsimile +61 (03) 9392 8322CRT Group21 – 43 Barnes RoadAltona North VIC 3025Telephone +61 (03) 9290 1700Facsimile +61 (03) 9290 1791PERTHQR FreightFloor 1, 56 Ord Street West Perth WA 6005GPO Box S1422 Perth WA 6845Telephone +61 (08) 9366 3501Facsimile +61 (08) 9366 3520ARG – a QR Company2 – 10 Adams Drive Welshpool WA 6106GPO Box S1422 Perth WA 6845Telephone +61 (08) 9212 2500Facsimile +61 (08) 9212 2734FURTHER INFORMATIONFor assistance, publications or informationconcerning QR and the customer serviceswe provide, please visit our website atwww.qr.com.au or contact Marketing andStrategy, Telephone +61 (07) 3235 56112009/10 QR LIMITED ANNUAL REPORT