George Weston Limited Q3 2010

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Nov 23, 2010, 09:07 ET

TORONTO, Nov. 23 /CNW/ - Quarterly Report to Shareholders

George Weston Limited

40 Weeks Ended October 9, 2010

FORWARD-LOOKING STATEMENTS
This Quarterly Report for George Weston Limited ("GWL") and its subsidiaries (collectively, the "Company"), including this Management's Discussion and Analysis ("MD&A"), contains forward-looking statements about the Company's objectives, plans, goals, aspirations, strategies, financial condition, liquidity, obligations, results of operations, cash flows, performance, prospects and opportunities. Words such as "anticipate", "expect", "believe", "foresee", "could", "estimate", "goal", "intend", "plan", "seek", "strive", "will", "may" and "should" and similar expressions, as they relate to the Company and its management, are intended to identify forward-looking statements. These forward-looking statements are not historical facts but reflect the Company's current expectations concerning future results and events.

These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including, but not limited to:

the possibility that the Company's plans and objectives will not be achieved;
changes in economic conditions including the rate of inflation or deflation;
changes in consumer spending and preferences;
heightened competition, whether from new competitors or current competitors;
the availability and increased costs relating to raw materials, ingredients and utilities, including electricity and fuel;
changes in the Company's or its competitors' pricing strategies;
failure of the Company's franchised stores to perform as expected;
risks associated with the terms and conditions of financing programs offered to the Company's franchisees;
failure to realize sales growth, anticipated cost savings or operating efficiencies from the Company's major initiatives, including investments in the Company's information technology systems, supply chain investments and other cost reduction initiatives, or unanticipated results from these initiatives;
the inability of the Company to successfully implement its infrastructure and information technology components of its plan;
the inability of the Company's information technology infrastructure to support the requirements of the Company's business;
the inability of the Company to manage inventory to minimize the impact of obsolete or excess inventory and to control shrink;
failure to execute successfully and in a timely manner the Company's major initiatives, including the implementation of strategies and introduction of innovative and reformulated products or new and renovated stores;
unanticipated results associated with the Company's strategic initiatives, including the impact of acquisitions or dispositions of businesses on the Company's future revenues and earnings;
the inability of the Company's supply chain to service the needs of the Company's stores;
failure to achieve desired results in labour negotiations, including the terms of future collective bargaining agreements which could lead to work stoppages;
changes to the regulatory environment in which the Company operates;
the adoption of new accounting standards and changes in the Company's use of accounting estimates;
fluctuations in the Company's earnings due to changes in the value of stock-based compensation and equity derivative contracts relating to GWL and Loblaw Companies Limited ("Loblaw") common shares;
changes in the Company's tax liabilities including changes in tax laws or future assessments;
reliance on the performance of and retention of third-party service providers, including those associated with the Company's supply chain and apparel business;
public health events;
risks associated with product defects, food safety and product handling;
changes in interest and foreign currency exchange rates;
the inability of the Company to collect on its credit card receivables;
any requirement of the Company to make contributions to its funded defined benefit pension plans in excess of those currently contemplated;
the inability of the Company to attract and retain key executives; and
supply and quality control issues with vendors.

These and other risks and uncertainties are discussed in the Company's materials filed with the Canadian securities regulatory authorities from time to time, including the Enterprise Risks and Risk Management section of the MD&A included in GWL's 2009 Annual Report. These forward-looking statements contained herein and in particular in the Report to Shareholders and MD&A reflect management's current assumptions regarding these risks and uncertainties and their respective impact on the Company.

Other risks and uncertainties not presently known to the Company or that the Company presently believes are not material could also cause actual results or events to differ materially from those expressed in its forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect the Company's expectations only as of the date of this Quarterly Report. The Company disclaims any intention or obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

CONSOLIDATED RESULTS OF OPERATIONS
George Weston Limited's third quarter 2010 basic net earnings per common share from continuing operations were $1.32 compared to $0.44 for the same period in 2009, an increase of $0.88. Of this increase, $0.31 was attributable to improvements in the operating performance of the Company's two operating segments, Weston Foods and Loblaw Companies Limited. The balance of the improvement of $0.57 was primarily attributable to the following:

the positive impact of $0.51 per common share related to unrealized foreign exchange losses;
the positive impact of $0.24 per common share related to the commodity derivatives fair value adjustment at Weston Foods; partially offset by
the negative impact of $0.21 per common share related to the accounting for Weston Holdings Limited's, a subsidiary of George Weston Limited, forward sale agreement for 9.6 million Loblaw common shares.

	16 Weeks Ended			40 Weeks Ended
(unaudited) ($ millions except where otherwise indicated)	Oct. 9, 2010	Oct. 10, 2009	Change	Oct. 9, 2010	Oct. 10, 2009	Change
Sales	$ 9,884	$ 9,777	1.1%	$ 24,591	$ 24,283	1.3%
Operating income	$ 490	$ 333	47.1%	$ 1,153	$ 722	59.7%
Operating margin	5.0%	3.4%		4.7%	3.0%
Interest expense and other financing charges	$ 100	$ 80	25.0%	$ 321	$ 264	21.6%
Net earnings from continuing operations	$ 184	$ 71	NM⁽³⁾	$ 351	$ 48	NM⁽³⁾
Net earnings	$ 184	$ 86	NM⁽³⁾	$ 351	$ 953	NM⁽³⁾
Basic net earnings per common share from continuing operations ($)	$ 1.32	$ 0.44	NM⁽³⁾	$ 2.46	$ 0.11	NM⁽³⁾
Basic net earnings per common share ($)	$ 1.32	$ 0.56	NM⁽³⁾	$ 2.46	$ 7.12	NM⁽³⁾
EBITDA⁽¹⁾	$ 707	$ 530	33.4%	$ 1,695	$ 1,212	39.9%
EBITDA margin⁽¹⁾	7.2%	5.4%		6.9%	5.0%
Net debt⁽¹⁾	$ 431	$ 233	85.0%	$ 431	$ 233	85.0%

The Company achieved strong financial results in operating performance at Weston Foods and Loblaw despite a marginal increase in sales of 1.1% to $9,884 million compared to $9,777 million in the same period in 2009. Operating income for the third quarter of 2010 was $490 million compared to $333 million in the same period in 2009, an increase of $157 million or 47.1%. Consolidated operating margin for the third quarter of 2010 was 5.0% compared to 3.4% for the same period in 2009.

Weston Foods operating income was positively impacted by the benefits realized from productivity improvements and other cost reduction initiatives, lower input costs and lower legal and restructuring charges, which were partially offset by the impact of lower pricing in certain product categories. Weston Foods brand and product development efforts continue in an effort to improve overall sales, while its focus on plant and distribution optimization along with other ongoing cost reduction initiatives continue to ensure a low cost operating structure.

The improvement in operating income at Loblaw was primarily attributable to continued buying synergies, disciplined vendor management, improved control label profitability and inventory management and a stronger Canadian dollar, partially offset by increased transportation costs, incremental costs related to the investment in information technology and supply chain, the cost in connection with the ratification of new collective agreements and increased labour costs. Loblaw continues to make progress towards the final stages of its renewal program in a market which remains highly competitive and under deflationary pressures. These factors, combined with the significant risk and cost associated with the major systems and infrastructure programs Loblaw is undertaking, will continue to put future sales and margins increasingly under pressure.

Interest expense and other financing charges for the third quarter of 2010 increased by $20 million to $100 million from $80 million in the third quarter of 2009 primarily due to an increase in the non-cash charge related to the fair value adjustment of Weston Holdings Limited's forward sale agreement for 9.6 million Loblaw common shares of $36 million when compared to the same period in 2009, partially offset by a loss of $8 million recorded in the third quarter of 2009 related to the redemption of the George Weston Limited 12.7% Promissory Notes. Excluding the impact of these items, interest expense and other financing charges for the third quarter of 2010 decreased by $8 million compared to the third quarter of 2009.

The effective income tax rate decreased to 30.0% in the third quarter of 2010 compared to 41.5% in the third quarter of 2009. The decrease in the effective income tax rate compared to the same period in 2009 was primarily due to a decrease in non-deductible foreign exchange losses and a decrease in income tax expense relating to certain prior year income tax matters.

Net Debt⁽¹⁾
The Company's net debt⁽¹⁾ as at the end of the third quarter of 2010 was $431 million compared to $299 million as at year end 2009. The increase was primarily due to fixed asset purchases at Loblaw, dividend payments and the acquisition of Keystone Bakery Holdings, LLC ("Keystone") by Weston Foods, partially offset by positive cash flows from operating activities.

OPERATING SEGMENTS

Weston Foods
As a result of the Company's ongoing review of its strategic options, the Company recently completed two bakery acquisitions. On September 24, 2010 the Company purchased Keystone for approximately $188 million (U.S. $186 million). Keystone is a U.S. manufacturer and supplier of frozen cupcakes, donuts and cookies. The results of Keystone operations from the date of acquisition were included in the Company's third quarter operating results and were not significant to consolidated net earnings from continuing operations. Subsequent to the end of the third quarter of 2010, the Company announced and completed the acquisition of ACE Bakery Ltd., a manufacturer and supplier of artisan and European-style rustic bread varieties for $110 million.

Weston Foods sales for the third quarter of 2010 of $494 million decreased 1.6% compared to the same period in 2009. Foreign currency translation negatively impacted sales by approximately 2.0%, while the Keystone acquisition positively impacted sales growth by approximately 1.1%. Of the remaining decline of 0.7%, approximately 1.0% was attributable to lower pricing in certain product categories. Volume increased in the third quarter of 2010 by 1.5% when compared to the same period in 2009, of which 1.2% was attributable to the acquisition of Keystone.

Weston Foods operating income was $111 million in the third quarter of 2010 compared to $36 million in the same period in 2009. Operating margin was 22.5% for the third quarter of 2010 compared to 7.2% in the third quarter of 2009. Excluding the impact of the effect of stock-based compensation net of equity derivatives and the commodity derivatives fair value adjustment, which are more fully described in the MD&A, Weston Foods operating income was strong when compared to the same period in 2009. Operating income was positively impacted by the benefits realized from productivity improvements and other cost reduction initiatives, lower input costs and lower legal and restructuring charges, which were partially offset by the impact of lower pricing in certain product categories.

Loblaw
Loblaw sales for the third quarter of 2010 of $9,593 million increased 1.3% compared to the third quarter of 2009. Sales in the third quarter of 2010 were positively impacted by 1.7% by the acquisition of T&T Supermarket Inc. ("T&T"), which was completed at the end of the third quarter of 2009. Sales in food were flat, sales in drugstore declined marginally, sales growth in apparel was strong while sales of other general merchandise declined significantly and gas bar sales increased significantly.

Loblaw operating income for the third quarter of 2010 was $388 million compared to $376 million in the same period in 2009, an increase of 3.2%. Loblaw operating margin was 4.0% for both the third quarter of 2010 and for the third quarter of 2009. Excluding the impact of the effect of stock-based compensation net of equity forwards and the asset impairment charge due to the closure of a distribution centre in Quebec, operating income improved as a result of continued buying synergies, disciplined vendor management, improved control label profitability and inventory management and a stronger Canadian dollar, partially offset by increased transportation costs, incremental costs related to the investment in information technology and supply chain, the cost in connection with the ratification of new collective agreements and increased labour costs.

OUTLOOK⁽²⁾
The consolidated results of George Weston Limited will continue to reflect the operating performance of both the Weston Foods and Loblaw operating businesses for the remainder of 2010. In addition, the Company's results will be subject to earnings volatility caused by the impact of changes in U.S. foreign currency exchange rates on a portion of the U.S. dollar denominated cash and short term investments. Earnings volatility may also result from other non-operating factors including commodity prices and their impact on the Company's commodity derivatives, the Loblaw common share price and its impact on the forward sale agreement for 9.6 million Loblaw common shares and short term interest rates.

For the remainder of 2010, Weston Foods expects continued strong operating performance with earnings reflecting seasonally lower operating margins and a modest contribution from the two recently completed bakery acquisitions. The Company continues its ongoing efforts to reduce costs through improved efficiencies and productivity. The Company remains focused on growing sales by optimizing product mix and product innovation to meet changing consumer buying preferences.

Loblaw continues to make progress towards the final stages of its overall renewal program. As a result of buying efficiencies related to its information technology and infrastructure initiatives and adjustments to the timing of certain phases of those initiatives, Loblaw now expects the impact to 2010 operating income of the incremental infrastructure and information technology costs to be lower than previously anticipated. The costs and risks associated with these investments combined with deflationary pressures and heightened competition will continue to challenge sales and margins.

George Weston Limited continues to assess opportunities for the deployment of its significant holdings of cash and short term investments.


[signed]

W. Galen Weston	Toronto, Canada
Chairman and President	November 22, 2010

Management's Discussion and Analysis
The following Management's Discussion and Analysis ("MD&A") for George Weston Limited ("GWL") and its subsidiaries (collectively, the "Company") should be read in conjunction with the Company's 2010 unaudited interim period consolidated financial statements and the accompanying notes of this Quarterly Report, the audited annual consolidated financial statements and the accompanying notes for the year ended December 31, 2009 and the related annual MD&A included in the Company's 2009 Annual Report. The Company's third quarter 2010 unaudited interim period consolidated financial statements and the accompanying notes have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and are reported in Canadian dollars. These unaudited interim period consolidated financial statements include the accounts of the Company and variable interest entities ("VIEs") that the Company is required to consolidate in accordance with Accounting Guideline 15, "Consolidation of Variable Interest Entities". A glossary of terms and ratios used throughout this Quarterly Report can be found beginning on page 114 of the Company's 2009 Annual Report. In addition, this Quarterly Report includes the following terms: "rolling year net debt⁽¹⁾ to EBITDA⁽¹⁾", which is defined as net debt⁽¹⁾ divided by cumulative EBITDA⁽¹⁾ for the latest four quarters; "rolling year return on average net assets⁽¹⁾", which is defined as cumulative operating income for the latest four quarters divided by average net assets⁽¹⁾; "rolling year return on average common shareholders' equity", which is defined as cumulative net earnings available to common shareholders from continuing operations for the latest four quarters divided by average total common shareholders' equity; and "operating working capital" which is defined as the sum of accounts receivable, inventories and prepaid expenses and other assets less accounts payable and accrued liabilities.

The information in this MD&A is current to November 22, 2010, unless otherwise noted.

CONSOLIDATED RESULTS OF OPERATIONS
As disclosed previously, the fresh bread and baked goods business in the United States ("U.S. fresh bakery business") was sold on January 21, 2009. The results and the gain on the sale of the U.S. fresh bakery business have been reflected separately as discontinued operations in the comparative results.

Sales
Sales for the third quarter of 2010 increased 1.1%, or $107 million, to $9,884 million from $9,777 million in the third quarter of 2009. On a year-to-date basis, sales increased 1.3% to $24,591 million. The impact of foreign currency translation on the Weston Foods operating segment negatively impacted consolidated sales growth by approximately 0.1% for the third quarter of 2010 and 0.2% on a year-to-date basis. When compared to the same period last year, the Company's consolidated sales for the third quarter of 2010 were impacted by each of its reportable operating segments as follows:

Negatively by 0.1% as a result of a sales decrease of 1.6% at Weston Foods. Foreign currency translation negatively impacted Weston Foods' sales by approximately 2.0%, while the Keystone Bakery Holdings, LLC ("Keystone") acquisition positively impacted sales growth by approximately 1.1%. Of the remaining decline of 0.7%, approximately 1.0% was attributable to lower pricing in certain product categories. Volume increased in the third quarter of 2010 by 1.5% when compared to the same period in 2009, of which 1.2% was attributable to the acquisition of Keystone.
Positively by 1.2% due to sales growth of 1.3% at Loblaw. T&T Supermarket Inc. ("T&T") sales positively impacted Loblaw's sales by 1.7%. Same-store sales in the quarter declined 0.4%. Sales in food were flat. Loblaw's internal retail food price index was flat compared to internal retail food price inflation in the third quarter of 2009. Sales in drugstore declined marginally, sales growth in apparel was strong while sales of other general merchandise declined significantly and gas bar sales increased significantly.

Operating Income
Operating income for the third quarter of 2010 was $490 million compared to $333 million in the third quarter of 2009. Consolidated operating margin of 5.0% for the third quarter of 2010 increased compared to 3.4% for the same period in 2009. When compared to the same period last year, the Company's change in operating income for the third quarter 2010 was impacted positively by 22.5% due to an increase in operating income at Weston Foods, and positively by 3.6% due to an increase in operating income at Loblaw. In addition, the reduction in foreign exchange losses associated with the effect of foreign exchange on a portion of the U.S. dollar denominated cash and short term investments held by Dunedin Holdings S.à r.l. ("Dunedin"), a subsidiary of GWL, positively impacted operating income growth by 21.0%.

The year-over-year change in the following items influenced operating income for the third quarter of 2010 compared to the third quarter of 2009:

a charge of $9 million (2009 - $79 million) related to unrealized foreign exchange losses associated with the effect of foreign exchange on a portion of the U.S. dollar denominated cash and short term investments held by Dunedin, a subsidiary of GWL, and certain of its affiliates;
income of $24 million (2009 - a charge of $17 million) related to the commodity derivatives fair value adjustment at Weston Foods;
a charge of $9 million (2009 - $11 million) related to the effect of stock-based compensation net of equity derivatives of both GWL and Loblaw; and
a charge of $3 million (2009 - nil) related to an asset impairment due to the closure of a Loblaw distribution centre in Quebec.

Year-to-date operating income for 2010 was $1,153 million compared to $722 million in 2009. Operating margin for year-to-date 2010 was 4.7% compared to 3.0% in 2009.

The year-over-year change in the following items influenced operating income for year-to-date 2010 compared to 2009:

a charge of $44 million (2009 - $265 million), of which $44 million (2009 - $231 million) related to foreign exchange losses associated with the effect of foreign exchange on a portion of the U.S. dollar denominated cash and short term investments held by Dunedin and certain of its affiliates and nil (2009 - a charge of $34 million) related to the reversal of cumulative foreign currency translation losses;
nil (2009 - a charge of $73 million) related to the non-cash goodwill impairment in Weston Foods' biscuits, cookies, cones and wafers business;
a charge of $26 million (2009 - nil) related to an asset impairment due to the closure of a Loblaw distribution centre in Quebec;
income of $34 million (2009 - $12 million) related to the commodity derivatives fair value adjustment at Weston Foods; and
a charge of $19 million (2009 - $23 million) related to the effect of stock-based compensation net of equity derivatives of both GWL and Loblaw.

Included in the foreign exchange loss reported in year-to-date 2009 was a $48 million charge related to the conversion of U.S. $2.4 billion of cash and short term investments to approximately $3.0 billion Canadian dollars following the sale of the U.S. fresh bakery business. This loss was a result of the appreciation of the Canadian dollar relative to the U.S. dollar between the closing date of the sale and the dates on which the proceeds were converted to Canadian dollars.

Excluding the impact of the specific items noted above, operating income for the third quarter and year-to-date 2010 was strong compared to the same periods in 2009.

EBITDA⁽¹⁾ increased by $177 million to $707 million in the third quarter of 2010 compared to $530 million in the third quarter of 2009. EBITDA margin⁽¹⁾ for the third quarter of 2010 increased to 7.2% from 5.4% in the same period in 2009. On a year-to-date basis, EBITDA⁽¹⁾ increased by $483 million to $1,695 million compared to $1,212 million in 2009. Year-to-date EBITDA margin⁽¹⁾ increased to 6.9% from 5.0% in 2009. EBITDA⁽¹⁾ and EBITDA margins⁽¹⁾ for the third quarter and year-to-date 2010 were positively impacted by the reduction in foreign exchange losses associated with the effect of foreign exchange on a portion of the U.S. dollar denominated cash and short term investments held by Dunedin and certain of its affiliates, and higher EBITDA margins⁽¹⁾ at both Weston Foods and Loblaw. The year-to-date 2009 EBITDA margin⁽¹⁾ at Weston Foods was negatively impacted by the non-cash goodwill impairment charge recorded in the first quarter of 2009.

Interest Expense and Other Financing Charges
Interest expense and other financing charges for the third quarter of 2010 increased by $20 million to $100 million from $80 million in the third quarter of 2009 primarily due to:

an increase in the non-cash charge related to the fair value adjustment of Weston Holdings Limited's ("WHL"), a subsidiary of GWL, forward sale agreement for 9.6 million Loblaw common shares of $36 million when compared to the same period in 2009; partially offset by
a loss of $8 million recorded in the third quarter of 2009 related to the redemption of the GWL 12.7% Promissory Notes.

Excluding the impact of the specific items noted above, interest expense and other financing charges decreased by $8 million.

Year-to-date interest expense and other financing charges increased by $57 million to $321 million from $264 million in 2009. This increase was primarily due to an increase in the non-cash charge related to the fair value adjustment of WHL's forward sale agreement for 9.6 million Loblaw common shares of $104 million when compared to 2009, partially offset by a loss of $49 million recorded in 2009 on the redemption of the GWL 12.7% Promissory Notes.

Income Taxes
The effective income tax rates for the third quarter and year-to-date 2010 were 30.0% and 32.3% (2009 - 41.5% and 48.0%), respectively. Both the third quarter and year-to-date decreases in the effective income tax rates compared to the same periods in 2009 were primarily due to decreases in non-deductible foreign exchange losses. The third quarter was further impacted by a decrease in income tax expense relating to certain prior year income tax matters when compared to the same period in 2009.

In March 2010, the federal budget proposed changes that impact the tax deductibility of cash-settled stock options. As at the end of the third quarter of 2010, the Company had $14 million in current and future tax assets relating to outstanding employee stock options that will be expensed when the proposed changes are substantively enacted.

Subsequent to the end of the third quarter of 2010, the Canada Revenue Agency ("CRA") advised GWL of its intent to challenge the characterization of a gain reported in a previous tax return filing. Should the CRA be successful in its assertion, the maximum exposure to the Company's net earnings would be approximately $70 million. GWL intends to vigorously defend its filing position. No amount has been recorded in the Company's financial statements.

Net Earnings from Continuing Operations
Net earnings from continuing operations for the third quarter of 2010 were $184 million compared to $71 million in the third quarter of 2009 and on a year-to-date basis, net earnings from continuing operations were $351 million compared to $48 million in 2009. Basic net earnings per common share from continuing operations for the third quarter of 2010 were $1.32 compared to $0.44 in the same period in 2009 and year-to-date 2010 basic net earnings per common share from continuing operations were $2.46 compared to $0.11 in 2009.

Basic net earnings per common share from continuing operations in the third quarter of 2010 compared to the third quarter of 2009 were affected by the following factors:

a $0.07 per common share charge (2009 - $0.58) related to unrealized foreign exchange losses associated with the effect of foreign exchange on a portion of the U.S. dollar denominated cash and short term investments held by Dunedin and certain of its affiliates;
$0.14 per common share income (2009 - $0.10 per common share charge) related to the commodity derivatives fair value adjustment at Weston Foods;
a $0.04 per common share non-cash charge (2009 - $0.17 per common share non-cash income) related to the accounting for WHL's forward sale agreement for 9.6 million Loblaw common shares;
a $0.05 per common share charge (2009 - $0.08) related to the effect of stock-based compensation net of equity derivatives of both GWL and Loblaw;
a $0.01 per common share charge (2009 - nil) related to an asset impairment due to the closure of a Loblaw distribution centre in Quebec; and
nil per common share (2009 - $0.01 per common share charge) related to the redemption of the GWL 12.7% Promissory Notes.

The 2010 year-to-date basic net earnings per common share from continuing operations compared to 2009 were affected by the following factors:

a $0.34 per common share charge (2009 - $1.86), of which $0.34 (2009 - $1.60) related to foreign exchange losses associated with the effect of foreign exchange on a portion of the U.S. dollar denominated cash and short term investments held by Dunedin and certain of its affiliates and nil (2009 - $0.26 per common share charge) related to the reversal of cumulative foreign currency translation losses;
a $0.40 per common share non-cash charge (2009 - $0.21 per common share non-cash income) related to the accounting for WHL's forward sale agreement for 9.6 million Loblaw common shares;
nil per common share (2009 - $0.38 per common share charge) related to the non-cash goodwill impairment in Weston Foods' biscuits, cookies, cones and wafers business;
nil per common share (2009 - $0.29 per common share charge) related to the redemption of the GWL 12.7% Promissory Notes;
$0.19 per common share income (2009 - $0.05) related to the commodity derivatives fair value adjustment at Weston Foods;
a $0.05 per common share charge (2009 - $0.15) related to the effect of stock-based compensation net of equity derivatives of both GWL and Loblaw; and
a $0.09 per common share charge (2009 - nil) related to an asset impairment due to the closure of a Loblaw distribution centre in Quebec.

Discontinued Operations
Net earnings from discontinued operations were nil for the third quarter of 2010 compared to $15 million in the same period in 2009. On a year-to-date basis, net earnings from discontinued operations were nil in 2010 compared to $905 million in 2009. Included in year-to-date 2009 net earnings from discontinued operations was a gain on disposal of the U.S. fresh bakery business of $936 million ($898 million, net of tax).

Net Earnings
Net earnings for the third quarter of 2010 were $184 million compared to $86 million in the same period in 2009 and on a year-to-date basis, net earnings were $351 million compared to $953 million in 2009. Basic net earnings per common share for the third quarter of 2010 were $1.32 compared to $0.56 in the same period in 2009 including net earnings from discontinued operations per common share of nil compared to $0.12 in the same period in 2009. Year-to-date 2010 basic net earnings per common share of $2.46 compared to $7.12 in 2009, including net earnings from discontinued operations per common share of nil compared to $7.01 in 2009.

GWL's ownership of Loblaw was 62.8% as at the end of the third quarter of 2010 and 62.5% as at year end 2009. GWL's ownership of Loblaw was 62.1% as at the end of the third quarter of 2009 and 61.9% as at year end 2008. The increases in GWL's ownership were due to the Company's participation in the Loblaw Dividend Reinvestment Plan and Loblaw's repurchase of 1.7 million of its common shares during the fourth quarter of 2009.

REPORTABLE OPERATING SEGMENTS

Weston Foods
The Weston Foods operating segment achieved strong financial results despite soft sales in the third quarter of 2010. Weston Foods sales were negatively impacted by foreign currency translation and lower pricing in certain product categories. Operating income increased in the third quarter of 2010 compared to the same period in 2009 and after excluding the impact of the commodity derivatives fair value adjustment, the impact of stock-based compensation net of equity derivatives and also foreign currency translation, operating income in the third quarter of 2010 remained strong. Operating income was positively impacted by the benefits realized from productivity improvements and other cost reduction initiatives, lower input costs, and lower legal and restructuring charges, which were partially offset by the impact of lower pricing in certain product categories.

On September 24, 2010, the Company purchased Keystone, a U.S. manufacturer and supplier of frozen cupcakes, donuts and cookies for approximately $188 million (U.S. $186 million). The results of Keystone operations from the date of acquisition were included in the Company's third quarter operating results and were not significant to consolidated net earnings from continuing operations.

Sales
Weston Foods sales for the third quarter of 2010 of $494 million decreased 1.6% compared to the same period in 2009. Foreign currency translation negatively impacted sales by approximately 2.0%, while the Keystone acquisition positively impacted sales growth by approximately 1.1%. Of the remaining decline of 0.7%, approximately 1.0% was attributable to lower pricing in certain product categories. Volume increased in the third quarter of 2010 by 1.5% when compared to the same period in 2009, of which 1.2% was attributable to the acquisition of Keystone.

On a year-to-date basis, sales of $1,238 million decreased 7.2% compared to 2009. Foreign currency translation negatively impacted sales by approximately 4.8%, while the Keystone acquisition positively impacted sales growth by approximately 0.5%. Of the remaining decline of 2.9%, approximately 2.5% was attributable to lower pricing across key product categories. Volume increased on a year-to-date basis by 0.1% when compared to 2009. The acquisition of Keystone contributed 0.5% to volume growth.

The following sales analysis excludes the impact of foreign currency translation.

Fresh bakery sales decreased approximately 0.9% in the third quarter of 2010 compared to the same period in 2009 mainly driven by lower sales volumes. On a year-to-date basis, sales decreased 1.1% compared to 2009, driven by lower sales volumes and lower pricing including increased promotional spending. Volume decreased in the third quarter of 2010 and on year-to-date basis mainly due to lower sales of private label products. Year-to-date volumes were positively impacted by growth in the Gadoua, D'Italiano and Wonder brands. The introduction of new products, such as Gadoua MultiGo, Wonder Invisibles, Jake's Bake House, Country Harvest Ancient Grains, Wonder SimplyFree and D'Italiano Focaccia, contributed positively to branded sales during the third quarter and year-to-date 2010.

Frozen bakery sales increased approximately 3.4% in the third quarter of 2010 and were flat on a year-to-date basis compared to the same periods in 2009, mainly due to the acquisition of Keystone. Excluding the effect of this acquisition, frozen bakery sales increased approximately 0.4% in the third quarter of 2010 compared to the same period in 2009. On a year-to-date basis, sales decreased 1.4% compared to 2009 due to lower sales volumes and lower pricing. Volume in the third quarter was flat and volume year-to-date decreased compared to the same periods in 2009 due to decreases in certain product categories including the continued softness in the food service market and the loss of certain distributed products.

Biscuit sales, principally wafers, ice-cream cones, cookies and crackers, decreased approximately 3.8% in the third quarter of 2010 and 8.5% year-to-date compared to the same periods in 2009, mainly due to lower pricing in certain product categories. Volume increased in the third quarter of 2010 compared to the same period in 2009 mainly due to growth in cookie and wafer sales, partially offset by lower cone and cup sales. On a year-to-date basis, volume increased compared to 2009 due to growth in cookie sales, partially offset by cone and cup sales.

Operating Income
Weston Foods operating income was $111 million in the third quarter of 2010 compared to $36 million in the same period in 2009. Operating margin was 22.5% for the third quarter of 2010 compared to 7.2% in the third quarter of 2009.

The year-over-year change in the following items influenced operating income for the third quarter of 2010 compared to the third quarter of 2009:

income of $24 million (2009 - a charge of $17 million) related to the commodity derivatives fair value adjustment; and
income of $1 million (2009 - a charge of $6 million) related to the effect of stock-based compensation net of equity derivatives.

On a year-to-date basis, Weston Foods operating income increased to $223 million from $65 million in 2009. Operating margin for 2010 was 18.0% compared to 4.9% in 2009.

The year-over-year change in the following items influenced operating income for year-to-date 2010 compared to 2009:

nil (2009 - a charge of $73 million) related to the non-cash goodwill impairment in Weston Foods' biscuits, cookies, cones and wafers business;
income of $34 million (2009 - $12 million) related to the commodity derivatives fair value adjustment; and
income of $11 million (2009 - a charge of $6 million) related to the effect of stock-based compensation net of equity derivatives.

In addition, operating income for the third quarter and year-to-date 2010 was negatively impacted by foreign currency translation due to a stronger Canadian dollar relative to the U.S. dollar.

Weston Foods is exposed to commodity price fluctuations primarily as a result of purchases of certain raw materials, fuels and utilities. In accordance with the Company's risk management strategy, Weston Foods enters into commodity derivatives to reduce the impact of price fluctuations in forecasted raw material purchases over a specified period of time. These commodity derivatives are not acquired for trading or speculative purposes. Certain of these derivatives are not designated for financial reporting purposes as cash flow hedges of anticipated future raw material purchases, and accordingly hedge accounting does not apply. As a result, changes in the fair value of these derivatives, which include realized and unrealized gains and losses related to future purchases of raw materials, are recorded in operating income. Weston Foods recorded income of $24 million (2009 - a charge of $17 million) during the third quarter of 2010, and on a year-to-date basis income of $34 million (2009 - $12 million), related to the fair value adjustment of exchange traded commodity derivatives that were not designated within a hedging relationship. Despite the impact of accounting for these commodity derivatives on the Company's reported results, the derivatives have the economic impact of largely mitigating the associated risks arising from price fluctuations in the underlying commodities during the period that the commodity derivatives are held.

Weston Foods continuously evaluates strategic and cost reduction initiatives related to its manufacturing assets, distribution networks and administrative infrastructure with the objective of ensuring a low cost operating structure. Restructuring activities related to these initiatives are ongoing. In the third quarter of 2010, income of $4 million (2009 - a charge of $2 million), and on a year-to-date basis a charge of $2 million (2009 - $9 million) were recorded in operating income related to restructuring activities. Subsequent to the end of the third quarter of 2010, the Company reversed its previously communicated decision to close a fresh bakery manufacturing facility in Quebec as a result of its ability to reach a satisfactory collective agreement with a new union. As a result, in the third quarter of 2010, the Company reversed a charge of $4 million recorded in the first quarter of 2010 relating to certain employee termination benefits which are no longer expected to be incurred as at the end of the third quarter of 2010.

Weston Foods operating income for the third quarter and year-to-date 2010 were impacted by changes in the following items when compared to the same periods in 2009: the commodity derivatives fair value adjustment, the effect of stock-based compensation net of equity derivatives, and also foreign currency translation. Operating income on a year-to-date basis was also positively impacted by the non-cash goodwill impairment charge in Weston Foods' biscuits, cookies, cones and wafers business recorded in the first quarter of 2009. Excluding these specific items, operating income in the third quarter and year-to-date 2010 remained strong compared to the same periods in 2009. Operating income was positively impacted by the benefits realized from productivity improvements and other cost reduction initiatives, lower input costs and lower legal and restructuring charges, which were partially offset by the impact of lower pricing in certain product categories.

Gross margin, including the impact of the commodity derivatives fair value adjustment, increased in the third quarter of 2010 and on a year-to-date basis compared to the same periods in 2009.

EBITDA⁽¹⁾ increased by $73 million to $127 million in the third quarter of 2010 compared to $54 million in the third quarter of 2009. On a year-to-date basis EBITDA⁽¹⁾ increased by $154 million to $263 million compared to $109 million in 2009, mainly due to the non-cash goodwill impairment charge recorded in the first quarter of 2009 and the increase in operating income as described above. EBITDA margin⁽¹⁾ increased in the third quarter of 2010 to 25.7% from 10.8% in 2009 and on a year-to-date basis to 21.2% from 8.2% in 2009.

Subsequent to the end of the third quarter of 2010, the Company announced and completed the acquisition of ACE Bakery Ltd., a manufacturer and supplier of artisan and European-style rustic bread varieties, for $110 million.

Loblaw

Sales

Sales for the third quarter of 2010 increased by 1.3% to $9,593 million compared to the third quarter of 2009. The following factors explain the major components of the increase:

T&T sales positively impacted Loblaw's sales by 1.7%;
same-store sales declined by 0.4%;
sales in food were flat;
Loblaw's internal retail food price index was flat. This compared to internal retail food price inflation in the third quarter of 2009. National food price inflation was 1.3% as measured by the "Consumer Price Index for Food Purchased from Stores" ("CPI"). CPI does not necessarily reflect the effect of inflation on the specific mix of goods sold in Loblaw stores;
sales in drugstore declined marginally, impacted by deflation due to regulatory changes in Ontario and the introduction of generic versions for certain prescription drugs;
sales growth in apparel was strong while sales of other general merchandise declined significantly due to reductions in assortment and square footage and lower discretionary consumer spending;
gas bar sales increased significantly as a result of higher retail gas prices and strong volume growth; and
during the third quarter of 2010, net retail square footage remained flat, as 2 stores opened and 2 stores closed. During the last four quarters, 14 stores were opened and 24 stores were closed, resulting in a net decrease of 0.1 million square feet, or 0.2%.

On a year-to-date basis, sales increased by 1.8% to $23,836 million compared to 2009. The following factors, in addition to the quarterly factors mentioned above, further explain the increase:

T&T sales positively impacted Loblaw's sales by 1.8%;
same-store sales declined by 0.3%; and
sales and same-store sales were positively impacted by approximately 0.2% as a result of a labour disruption during the first quarter of 2009 in certain Maxi stores in Quebec. These stores reopened in the first quarter of 2009, except for two stores that were permanently closed.

Operating Income
Operating income was $388 million for the third quarter of 2010 compared to $376 million in the same period in 2009, an increase of 3.2%. Operating margin was 4.0% for both the third quarter of 2010 and the third quarter of 2009.

Gross profit increased by $152 million to $2,317 million in the third quarter of 2010 compared to $2,165 million in the third quarter of 2009. Gross profit as a percentage of sales was 24.2% in the third quarter of 2010 compared to 22.9% in the same period in 2009. In the third quarter of 2010, the increase in gross profit and gross profit as a percentage of sales was primarily attributable to continued buying synergies, disciplined vendor management, improved control label profitability and inventory management and a stronger Canadian dollar, partially offset by increased transportation costs.

The increase in operating income was primarily due to the change in gross profit as described above, partially offset by a charge of $10 million (2009 - $5 million) related to the effect of stock-based compensation net of the equity forwards, a $3 million asset impairment charge due to the closure of a distribution centre in Quebec, incremental costs of $46 million related to Loblaw's investment in information technology and supply chain and increased labour costs. In addition, in connection with the ratification of new 5-year collective agreements with certain Ontario locals of the United Food and Commercial Workers Canada union, Loblaw incurred a cost of approximately $17 million in the third quarter of 2010. With the ratification of these collective agreements, Loblaw expects improved operational flexibility.

EBITDA⁽¹⁾ increased by $34 million, or 6.1%, to $589 million in the third quarter of 2010 compared to $555 million in the third quarter of 2009. EBITDA margin⁽¹⁾ increased in the third quarter of 2010 to 6.1% from 5.9% in the same period in 2009. The increases in EBITDA⁽¹⁾ and EBITDA margin⁽¹⁾ were primarily due to the changes in operating income as described above.

Year-to-date operating income for 2010 increased by $52 million, or 5.6%, to $974 million, and resulted in an operating margin of 4.1% compared to 3.9% in 2009.

Year-to-date gross profit increased by $362 million to $5,830 million compared to $5,468 million in 2009. Year-to-date gross profit as a percentage of sales was 24.5% compared to 23.3% in 2009. The year-to-date 2010 increase in gross profit and gross profit as a percentage of sales was primarily attributable to continued buying synergies, disciplined vendor management, improved control label profitability and inventory management and a stronger Canadian dollar, partially offset by increased transportation costs.

The year-to-date increases in operating income and operating margin were primarily due to the changes in gross profit as described above, partially offset by a charge of $30 million (2009 - $17 million) related to the effect of stock-based compensation net of the equity forwards, incremental costs of $115 million related to Loblaw's investment in information technology and supply chain, the $17 million cost incurred in the third quarter of 2010 in connection with the ratification of new collective agreements and increased labour costs. Included in the incremental costs was $16 million of costs related to changes in Loblaw's distribution network in Quebec recorded in the second quarter of 2010. In addition, in connection with the distribution network changes, a $26 million asset impairment charge was recorded for the closure of a distribution centre. Year-to-date operating income in 2009 included a gain of $8 million from the sale of financial investments by President's Choice Bank ("PC Bank"), a wholly owned subsidiary of Loblaw.

Year-to-date EBITDA⁽¹⁾increased by $108 million, or 7.9% to $1,476 million compared to $1,368 million in 2009. EBITDA margin⁽¹⁾improved to 6.2% compared to 5.8% in 2009. The year-to-date increases in EBITDA⁽¹⁾ and EBITDA margin⁽¹⁾ were primarily due to the changes in year-to-date operating income as described above.

CONSOLIDATED FINANCIAL CONDITION

Financial Ratios
The Company's net debt⁽¹⁾ to equity ratio at the end of the third quarter of 2010 was 0.06:1 compared to 0.04:1 at year end 2009. The slight increase in this ratio when compared to year end 2009 was due to the increase in net debt⁽¹⁾ as discussed in the net debt⁽¹⁾ section below.

The rolling year net debt⁽¹⁾ to EBITDA⁽¹⁾ ratio was 0.2 times at the end of the third quarter of 2010 and at year end 2009 compared to 0.1 times at the end of the third quarter of 2009.

The interest coverage ratio in the third quarter of 2010 increased to 4.6 times compared to 3.9 times in the third quarter of 2009. On a year-to-date basis, the interest coverage ratio increased to 3.4 times in 2010 compared to 2.6 times in 2009. The increases were primarily due to the increase in operating income, partially offset by the increase in interest expense.

The Company's rolling year return on average net assets⁽¹⁾ at the end of the third quarter of 2010 was 13.1% compared to 10.0% at the end of the same period in 2009 and 9.3% at year end 2009. The Company's rolling year return on average common shareholders' equity was 6.3% at the end of the third quarter of 2010 compared to 6.9% at the end of the same period in 2009 and 1.5% at year end 2009.

Capital Securities
Of the 12.0 million authorized non-voting Loblaw second preferred shares, Series A, 9.0 million were outstanding at the end of the third quarter of 2010.

Dividends on capital securities are presented in interest expense and other financing charges in the consolidated statements of earnings.

Outstanding Share Capital
GWL's outstanding share capital is comprised of common shares and preferred shares. An unlimited number of common shares is authorized and 129.1 million common shares were outstanding at the end of the third quarter of 2010. Ten million preferred shares, Series I, are authorized and 9.4 million were outstanding, 10.0 million preferred shares, Series III, are authorized and 8.0 million were outstanding and 8.0 million preferred shares, Series IV and Series V, are authorized and were outstanding, in each case, at the end of the third quarter of 2010.

During the second quarter of 2010, GWL renewed its Normal Course Issuer Bid ("NCIB") to purchase on the Toronto Stock Exchange or enter into equity derivatives to purchase up to 5% of its common shares outstanding. GWL did not purchase any shares under its NCIB in the first three quarters of 2010 or in 2009.

Dividends
On October 1, 2010, common share dividends of $0.36 per share and preferred share dividends of $0.32 per share for the Series III and Series IV preferred shares and dividends of $0.30 per share for the Series V preferred shares were paid as declared by GWL's Board of Directors. On September 15, 2010, preferred share dividends of $0.36 per share for the Series I preferred shares were paid as declared by the Board.

Subsequent to the end of the third quarter of 2010, common share dividends of $0.36 per share and preferred share dividends of $0.32 per share for the Series III and Series IV preferred shares and dividends of $0.30 per share for the Series V preferred shares, payable on January 1, 2011, were declared by GWL's Board of Directors. In addition, dividends of $0.36 per share for Series I preferred shares, payable on December 15, 2010, were also declared.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows from Operating Activities of Continuing Operations
Third quarter 2010 cash flows from operating activities of continuing operations were $681 million compared to $879 million in the same period in 2009. On a year-to-date basis, cash flows from operating activities of continuing operations were $1,100 million compared to $1,349 million in 2009. The decreases when compared to the same periods in 2009 were primarily due to the change in non-cash working capital, partially offset by the increases in EBITDA⁽¹⁾ as described in the results of operations section above.

Cash Flows used in Investing Activities of Continuing Operations

Third quarter 2010 cash flows used in investing activities of continuing operations were $649 million compared to $164 million in the same period in 2009. On a year-to-date basis, cash flows used in investing activities of continuing operations were $756 million compared to $1,311 million in 2009. The increase in the third quarter when compared to the same period in 2009 was primarily due to the changes in short term investments and security deposits, and the increase in fixed asset purchases. The year-to-date decrease when compared to 2009 was primarily due to the change in short term investments, partially offset by the increase in fixed asset purchases and the change in security deposits. Also impacting third quarter and year-to-date 2010 cash flows from investing activities was $188 million net cash consideration in connection with the acquisition of Keystone by Weston Foods. Capital investment amounted to $485 million (2009 - $293 million) for the third quarter and $877 million (2009 - $640 million) year-to-date 2010, including $17 million and $36 million, respectively, that was financed by Loblaw through capital leases. The Company's estimate of capital expenditures has increased to approximately $1.3 billion for the year 2010 due to an increase in Loblaw's planned retail renovations driven by better than expected performance of renovated stores.

Cash Flows used in Financing Activities of Continuing Operations
Third quarter 2010 cash flows used in financing activities of continuing operations were $131 million compared to $213 million in the same period in 2009. On a year-to-date basis, cash flows used in financing activities of continuing operations were $179 million compared to $853 million in 2009. The decrease in the third quarter when compared to the same period in 2009 was due to an increase in long term debt. The year-to-date decrease when compared to 2009 was primarily due to the redemption of GWL's 10.6 million preferred shares, Series II, for $265 million in the second quarter of 2009, the repayment of short term and bank indebtedness in the second quarter of 2009 and the decrease in long term debt repayments in 2010.

During the third quarter of 2010 PC Bank began accepting deposits under a new Guaranteed Investment Certificate ("GIC") program. The GICs, which are sold through an independent broker channel, are issued with fixed terms ranging from 12 to 60 months and are non-redeemable prior to maturity. Individual balances up to $100,000 are Canada Deposit Insurance Corporation insured. As at October 9, 2010, $7 million was recorded as long term debt on the consolidated balance sheet.

During the second quarter of 2010, Loblaw issued $350 million principal amount of 10 year unsecured Medium Term Notes ("MTN"), Series 2-B pursuant to its MTN, Series 2 program. Interest on the notes is payable semi-annually at a fixed rate of 5.22%. The notes are unsecured obligations and are redeemable at the option of Loblaw. In the second quarter of 2009, Loblaw issued $350 million principal amount of 5 year unsecured MTN, Series 2-A which pay a fixed rate of interest of 4.85% payable semi-annually.

During the second quarter of 2010 Loblaw's $300 million, 7.10% MTN due May 11, 2010 matured and was repaid. During the first quarter of 2009, Loblaw repaid its $125 million 5.75% MTN and GWL repaid its $250 million 5.90% MTN, both of which matured.

Net Debt⁽¹⁾
The Company's net debt⁽¹⁾as at the end of the third quarter of 2010 was $431 million compared to $299 million as at year end 2009. The increase was primarily due to fixed asset purchases at Loblaw, dividend payments and the acquisition of Keystone by Weston Foods, partially offset by positive cash flows from operating activities.

Sources of Liquidity

The Company holds significant cash and short term investments denominated in Canadian and United States dollars. These funds are invested in highly liquid marketable short term investments consisting primarily of Canadian and United States government treasury bills and treasury notes, United States government sponsored debt securities, Canadian bank term deposits and corporate commercial paper.

Loblaw expects that cash and cash equivalents, short term investments, future operating cash flows and the amounts available to be drawn against its credit facility will enable it to finance its capital investment program and fund its ongoing business requirements, including working capital, pension plan funding and financial obligations over the next twelve months. In addition, given reasonable access to capital markets, Loblaw does not foresee any impediments in securing financing to satisfy its long term obligations.

PC Bank participates in various securitization programs that provide the primary source of funds for the operation of its credit card business. Under these securitization programs, a portion of the total interest in the credit card receivables is sold to independent trusts pursuant to co-ownership agreements. PC Bank purchases receivables from and sells receivables to the trusts from time to time depending on PC Bank's financing requirements. In the third quarter of 2010, PC Bank accumulated $150 million of collections that will be used in the fourth quarter to repurchase a portion of its co-ownership interest in securitized receivables from two of the independent trusts. In the fourth quarter of 2010, PC Bank intends to simultaneously increase the co-ownership interest of another trust leaving the total level of securitization unchanged but rebalanced between trusts. A portion of the securitization receivables that is held by an independent trust facility was also renewed for 2 years during the third quarter of 2010. During the first quarter of 2010, PC Bank also repurchased $90 million (2009 - nil) of co-ownership interest in securitized receivables from an independent trust.

On March 17, 2011, the five-year $500 million senior notes and subordinated notes issued by Eagle Credit Card Trust will mature. Eagle Credit Card Trust has declared an accumulation commencement date of December 1, 2010 at which time collections will be accumulated until an amount sufficient to repay the notes at maturity has been accumulated. Loblaw is considering alternatives for refinancing these notes in the securitization market. In the absence of additional securitization of receivables, Loblaw would be required to use its cash and short term investments or raise alternative financing by issuing additional debt or equity instruments.

The independent trusts' recourse to PC Bank's assets is limited to PC Bank's excess collateral of $114 million as at October 9, 2010 (October 10, 2009 - $124 million; December 31, 2009 - $121 million) as well as standby letters of credit issued as at October 9, 2010 of $103 million (October 10, 2009 - $116 million; December 31, 2009 - $116 million) based on a portion of the securitized amount.

During the third quarter of 2010, Loblaw's Short Form Base Shelf Prospectus dated June 5, 2008 which allowed for the issuance of up to $1 billion of unsecured debt and/or preferred shares expired. On November 19, 2010, Loblaw filed a Short Form Base Shelf Prospectus which allows for the issuance of up to $1 billion of unsecured debt and/or preferred shares over a 25-month period.

Loblaw has traditionally obtained its long term financing primarily through a MTN program. Loblaw may refinance maturing long term debt with MTN if market conditions are appropriate or it may consider other alternatives.

During the third quarter of 2010, Dominion Bond Rating Service ("DBRS") reaffirmed Loblaw's credit ratings and trend. During the second quarter of 2010, Standard & Poor's ("S&P") reaffirmed Loblaw's credit ratings and outlook. The following table sets out the current credit ratings of Loblaw:


	Dominion Bond Rating Service		Standard & Poor's
Credit Ratings (Canadian Standards)	Credit Rating	Trend	Credit Rating	Outlook
Commercial paper	R-2 (middle)	Stable	A-2	Stable
Medium term notes	BBB	Stable	BBB	Stable
Preferred shares	Pfd-3	Stable	P-3 (high)	Stable
Other notes and debentures	BBB	Stable	BBB	Stable

The rating organizations listed above base their credit ratings on quantitative and qualitative considerations. These credit ratings are forward-looking and are intended to give an indication of the risk that Loblaw will not fulfill its obligations in a timely manner.

Loblaw's and PC Bank's ability to obtain funding from external sources may be restricted by downgrades in Loblaw's current credit ratings should Loblaw's financial performance and condition deteriorate. In addition, credit and capital markets are subject to inherent global risks that may negatively affect Loblaw's access and ability to fund its financial and other liabilities. Loblaw mitigates these risks by maintaining appropriate levels of cash and short term investments, committed lines of credit and by diversifying its sources of funding and the maturity profile of its debt and capital obligations.

The Company (excluding Loblaw) expects that cash and cash equivalents, short term investments and future operating cash flows will enable it to finance its capital investment program and fund its ongoing business requirements, including working capital and pension plan funding over the next 12 months. The Company (excluding Loblaw) does not foresee any impediments in satisfying its long term obligations.

During the third quarter of 2010, DBRS and S&P both reaffirmed GWL's credit ratings and reaffirmed the Company's trend and outlook, respectively. The following table sets out the current credit ratings of GWL:


	Dominion Bond Rating Service		Standard & Poor's
Credit Ratings (Canadian Standards)	Credit Rating	Trend	Credit Rating	Outlook
Commercial paper	R-2 (high)	Stable	A-2	Stable
Medium term notes	BBB	Stable	BBB	Stable
Preferred shares	Pfd-3	Stable	P-3 (high)	Stable
Other notes and debentures	BBB	Stable	BBB	Stable

The rating organizations listed above base their credit ratings on quantitative and qualitative considerations. These credit ratings are forward-looking and are intended to give an indication of the risk that GWL will not fulfill its obligations in a timely manner.

GWL's ability to obtain funding from external sources may be restricted by downgrades in its current credit ratings, should its financial performance and condition deteriorate. In addition, credit and capital markets are subject to inherent global risks that may negatively affect GWL's access and ability to fund its financial and other liabilities. The Company (excluding Loblaw) mitigates these risks by maintaining appropriate levels of cash and short term investments, committed lines of credit when required and by diversifying its sources of funding and the maturity profile of its debt and capital obligations.

Independent Funding Trusts
Certain independent franchisees of Loblaw obtain financing through a structure involving independent funding trusts, which were created to provide loans to the independent franchisees to facilitate their purchase of inventory and fixed assets, consisting mainly of fixtures and equipment. These trusts are administered by a major Canadian chartered bank.

The gross principal amount of loans issued to Loblaw's independent franchisees by the independent funding trusts as at October 9, 2010 was $395 million (October 10, 2009 - $377 million; December 31, 2009 - $390 million), including $188 million (October 10, 2009 - $143 million; December 31, 2009 - $163 million) of loans payable by VIEs consolidated by the Company. Loblaw has agreed to provide credit enhancement of $66 million (October 10, 2009 - $66 million; December 31, 2009 - $66 million) in the form of a standby letter of credit for the benefit of the independent funding trust representing not less than 15% of the principal amount of the loans outstanding. This standby letter of credit has never been drawn upon. This credit enhancement allows the independent funding trust to provide financing to Loblaw's independent franchisees. As well, each independent franchisee provides security to the independent funding trust for its obligations by way of a general security agreement. In the event that an independent franchisee defaults on its loan and Loblaw has not, within a specified time period, assumed the loan, or the default is not otherwise remedied, the independent funding trust would assign the loan to Loblaw and draw upon this standby letter of credit.

During the second quarter of 2010, the $475 million, 364-day revolving committed credit facility that is the source of funding to the independent trusts was renewed. The financing structure has been reviewed and Loblaw has determined there were no additional VIEs to consolidate as a result of this financing.

Equity Derivative Contracts
As at October 9, 2010, Glenhuron Bank Limited ("Glenhuron"), a subsidiary of Loblaw, had equity forward contracts to buy 1.5 million (October 10, 2009 - 3.2 million; December 31, 2009 - 1.5 million) Loblaw common shares at an average forward price of $56.27 (October 10, 2009 - $53.76; December 31, 2009 - $66.25) including $0.05 (October 10, 2009 - $9.14; December 31, 2009 - $10.03) per common share of interest expense. As at October 9, 2010, the interest and unrealized market loss of $23 million (October 10, 2009 - $71 million; December 31, 2009 - $48 million) was included in accounts payable and accrued liabilities. In the second quarter of 2009, Glenhuron paid $38 million to a counterparty to terminate a portion of the equity forwards representing 1.6 million shares, which led to the extinguishment of a corresponding portion of the associated liability.

Also as at October 9, 2010, GWL had equity swaps to buy 1.7 million (October 10, 2009 - 1.7 million; December 31, 2009 - 1.7 million) GWL common shares at an average forward price of $103.17 (October 10, 2009 - $103.17; December 31, 2009 - $103.17). As at October 9, 2010, the unrealized market loss of $44 million (October 10, 2009 - $78 million; December 31, 2009 - $61 million) was included in accounts payable and accrued liabilities.

Employee Future Benefit Contributions
During the third quarter of 2010, the Company contributed $39 million (2009 - $40 million) and on a year-to-date basis, contributed $93 million (2009 - $89 million) to its funded defined benefit pension plans. The Company expects to contribute $29 million to these plans during the fourth quarter of 2010. The actual amount paid may vary from the estimate based on actuarial valuations being completed, market performance and regulatory requirements. The Company regularly monitors and assesses plan experience and the impact of changes in participant demographics, changes in capital markets and other economic factors that may impact funding requirements, employee future benefit costs and actuarial assumptions.

QUARTERLY RESULTS OF OPERATIONS
Under an accounting convention common to the food distribution industry, the Company follows a 52-week reporting cycle which periodically necessitates a fiscal year of 53 weeks. 2008 was a 53-week year. The 52-week reporting cycle is divided into four quarters of 12 weeks each except for the third quarter, which is 16 weeks in duration. The following is a summary of selected consolidated financial information derived from the Company's unaudited interim period consolidated financial statements for each of the eight most recently completed quarters. This information was prepared in accordance with Canadian GAAP.

Quarterly Financial Information (unaudited)

	Third Quarter		Second Quarter		First Quarter		Fourth Quarter
($ millions except where otherwise indicated)	2010	2009	2010	2009	2010	2009	2009	2008
Sales	$ 9,884	$ 9,777	$ 7,530	$ 7,484	$ 7,177	$ 7,022	$ 7,537	$ 8,050
Net earnings (loss) from continuing operations	$ 184	$ 71	$ 125	$ 4	$ 42	$ (27)	$ 79	$ 357
Net earnings	$ 184	$ 86	$ 125	$ 4	$ 42	$ 863	$ 82	$ 405
Net earnings (loss) per common share from continuing operations ($)
Basic	$ 1.32	$ 0.44	$ 0.89	$ (0.05)	$ 0.25	$ (0.28)	$ 0.53	$ 2.69
Diluted	$ 1.31	$ 0.44	$ 0.89	$ (0.05)	$ 0.25	$ (0.28)	$ 0.52	$ 2.69
Net earnings (loss) per common share ($)
Basic	$ 1.32	$ 0.56	$ 0.89	$ (0.05)	$ 0.25	$ 6.61	$ 0.56	$ 3.06
Diluted	$ 1.31	$ 0.56	$ 0.89	$ (0.05)	$ 0.25	$ 6.61	$ 0.55	$ 3.06

Quarterly sales for the last eight quarters were impacted by the following significant items:

the acquisition of Keystone in the third quarter of 2010;
the acquisition of T&T by Loblaw in the third quarter of 2009;
foreign currency exchange rates;
seasonality and the timing of holidays;
the additional week of operating results in the fourth quarter of 2008; and
the sales of Weston Foods' dairy and bottling operations which was sold in the fourth quarter of 2008.

Quarterly net earnings for the last eight quarters were impacted by the following significant items:

foreign exchange losses associated with the effect of foreign exchange on a portion of the U.S. dollar denominated cash and short term investments held by Dunedin and certain of its affiliates, beginning in the first quarter of 2009;
the commodity derivatives fair value adjustment at Weston Foods;
accounting for WHL's forward sale agreement of 9.6 million Loblaw common shares;
fluctuations in stock-based compensation net of equity derivatives of both GWL and Loblaw;
the loss on the redemption of the GWL 12.7% Promissory Notes in the second and the third quarters of 2009;
the asset impairment charge due to the closure of a Loblaw distribution centre in Quebec;
the non-cash goodwill impairment charge in Weston Foods' biscuits, cookies, cones and wafers business in the first quarter of 2009;
the reversal of the cumulative foreign currency translation loss associated with Dunedin and certain of its affiliates in the first quarter of 2009;
the reversal of the cumulative foreign currency translation loss associated with the reduction in the Company's U.S. net investment in self-sustaining foreign operations in the fourth quarter of 2009;
the incremental costs related to Loblaw's investment in information technology and supply chain;
restructuring and other charges incurred by Weston Foods and Loblaw;
the gain on sale of Weston Foods' U.S. fresh bakery business in the first quarter of 2009;
the income of Weston Foods' dairy and bottling operations which was sold in the fourth quarter of 2008; and
the gain on disposal of Weston Foods' dairy and bottling operations and the gain on sale of Loblaw's food service business in the fourth quarter of 2008.

INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining a system of disclosure controls and procedures to provide reasonable assurance that all material information relating to the Company and its subsidiaries is gathered and reported to senior management on a timely basis so that appropriate decisions can be made regarding public disclosure.

Management is also responsible for establishing and maintaining adequate internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian GAAP.

In designing such controls, it should be recognized that due to inherent limitations, any controls, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and may not prevent or detect misstatements. Additionally, management is necessarily required to use judgment in evaluating controls and procedures.

On July 18, 2010, Loblaw successfully implemented the second phase of its Enterprise Resource Planning ("ERP") system. This implementation resulted in changes to the internal controls over financial reporting during the third quarter of 2010 for Loblaw's corporate administration functions and general ledger. The changes in controls have materially affected the Company's internal controls over financial reporting related to these areas. Except for the preceding changes, there was no other change in the Company's internal control over financial reporting during the third quarter of 2010 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

ENTERPRISE RISKS AND RISK MANAGEMENT
Detailed descriptions of the operating and financial risks and risk management strategies are included in the Enterprise Risks and Risk Management Section on page 35 of the 2009 annual MD&A as well as note 28 to the audited annual consolidated financial statements, included in the Company's 2009 Annual Report. The following is an update to those enterprise risks and risk management strategies:

Information Technology, Integrity and Reliability
To support the current and future requirements of the business in an efficient, cost-effective and well-controlled manner, the Company is reliant on information technology ("IT") systems. These systems are essential in providing management with relevant, reliable and accurate information for decision making, including its key performance indicators. Any significant failure or disruption of these systems or the failure to successfully migrate from legacy systems to new systems as part of Loblaw's significant IT infrastructure initiatives could negatively affect the Company's reputation, ability to carry on business, revenues and financial performance. If the information provided by the IT systems is inaccurate, the risk of disclosing inaccurate or incomplete information is increased.

Loblaw has under invested in its IT infrastructure in the past and its systems are in need of upgrading. An IT strategic plan was developed to guide the new systems environment that Loblaw requires. On July 18, 2010, Loblaw successfully implemented the second phase of its ERP which involved integrating its general ledger and related reporting for finance across the business and launching additional functionality including its Corporate accounts payable and marketing procurement processes and now has close to 1,000 colleagues working on its new ERP. In addition, at the beginning of September 2010, Loblaw's next major ERP release related to its merchandising management module began a pilot focusing on two smaller Merchandise categories. Loblaw will roll-out the category management module pilot to additional categories in the fourth quarter of 2010. Loblaw leveraged this new ERP functionality to successfully close its third quarter reporting period.

Loblaw is planning for additional system implementations in 2011 to streamline merchandising and operations activities. This is one of the largest technology infrastructure programs ever implemented by Loblaw and is fundamental to its long-term growth strategies. Completing it will require intense focus and significant investment over the next two years.

Change management risk and other associated risks will arise from the various projects which will be undertaken to upgrade existing systems and introduce new systems to effectively manage the business going forward. Failure by Loblaw to appropriately invest in IT or failure to implement IT infrastructure in a timely or effective manner may negatively impact the Company's financial performance.

Labour Relations
A majority of Loblaw's store level and distribution centre workforce is unionized. Renegotiating collective agreements may result in work stoppages or slowdowns, which could negatively affect the Company's financial performance, depending on their nature and duration. In 2010, 73 collective agreements affecting approximately 35,000 Loblaw colleagues expire. In the third quarter of 2010, Loblaw was successful in negotiating the renewal of its major Ontario retail collective agreements including its single largest agreement covering approximately 13,700 colleagues. Loblaw continues to negotiate the 66 remaining collective agreements carried over from prior years. Although Loblaw attempts to mitigate work stoppages and disputes through early negotiations, work stoppages or slowdowns remain possible.

Regulatory
Beginning in the first quarter of 2010, the provincial governments of Quebec, Ontario, Alberta, Nova Scotia and British Columbia introduced amendments to the regulation of generic prescription drug prices paid by provincial governments pursuant to their respective public drug benefit plans. Under these amendments, manufacturer costs of generic drugs paid by the provincial drug plans will be reduced, and in Ontario, the current system of drug manufacturers paying professional allowances to pharmacies will be eliminated. The amendments also reduce the manufacturer costs of generic drugs purchased out-of-pocket or through private employer drug plans. Loblaw continues to identify opportunities to mitigate the impact of these amendments, including programs to add new services and enhance existing services to attract customers. The amendments could have a material impact on the financial results of the Company if Loblaw is not able to effectively mitigate their negative impact.

FUTURE ACCOUNTING STANDARDS

Business Combinations
In January 2009, the Canadian Institute of Chartered Accountants ("CICA") issued Section 1582, "Business Combinations", which will replace Section 1581 of the same title and issued Sections 1601, "Consolidated Financial Statements", and 1602, "Non-Controlling Interests". These standards will harmonize Canadian GAAP with International Financial Reporting Standards ("IFRS"). The amendments establish principles and requirements for determining how an enterprise recognizes and measures the fair value of certain assets and liabilities acquired in a business combination, including non-controlling interests, contingent consideration and certain acquired contingencies. The amendments also require that acquisition related transaction expenses and restructuring costs be expensed as incurred rather than capitalized as a component of the business combination. The impact of implementing these amendments is currently being assessed.

International Financial Reporting Standards
The Canadian Accounting Standards Board requires that all public companies adopt IFRS for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. As a result, the Company's audited annual consolidated financial statements for the year ended December 31, 2011 will be the first audited annual consolidated financial statements that will be prepared in accordance with the requirements of IFRS. Starting in the first quarter of 2011 the unaudited interim period consolidated financial statements will be prepared in accordance with International Accounting Standard ("IAS") 34, "Interim Financial Reporting", including comparative figures for 2010.

Project Status
A detailed description of the Company's IFRS project structure is included in section 16 "Future Accounting Standards" on page 47 of the 2009 annual MD&A included in the Company's 2009 Annual Report. The following is an update on the project status.

The IFRS conversion project continues to progress. Targeted training regarding anticipated changes resulting from IFRS implementation continues to be provided to appropriate business units and finance colleagues. In addition, the Company has continued its quarterly and additional IFRS information sessions for the Board of Directors providing updates on certain transitional and 2010 quarterly IFRS adjustments and disclosures (including certain preliminary policy choices), implications of IFRS standards to the business, and their impact on the financial statement disclosure. The Company also intends to provide an information session to key external stakeholders regarding the impacts of IFRS in early 2011.

The IFRS conversion project is integrated with Loblaw's ERP implementation. As ERP phases have been deployed, Loblaw has ensured that the requirements of IFRS adoption were incorporated. For ERP phases that have not yet been deployed, Loblaw is ensuring that the requirements of IFRS are identified and incorporated.

The implementation of IFRS is expected to have an impact on certain financial metrics that are used in calculating Loblaw's financial covenants under certain of its debt agreements. These debt agreements provide for the opportunity to negotiate the covenants to reflect the impact of the transition to IFRS. Loblaw has begun preliminary discussions with certain of its lenders to formalize these adjustments. To the extent that Loblaw and its lenders are unable to agree upon the covenant adjustments, the existing covenants will continue to apply and will be calculated on the basis of Canadian GAAP as it existed prior to the conversion to IFRS.

The Company continues to integrate IFRS into the Company's budgeting and internal reporting processes. In accordance with the Company's transition plan, during the third quarter of 2010, the Company also completed its preliminary Q1 2011 IFRS financial statement format and draft note disclosures.

Key milestones for the remainder of the year are in line with the Company's original plan and include the completion of the opening transitional balance sheet and compilation of the quarterly financial statements. The Company continues to progress on its IFRS transition plan as previously disclosed.

Changes to the Company's internal controls over financial reporting which include enhancement of existing controls and the design and implementation of new controls, where needed, are in process. At this time the Company expects no material change in internal controls over financial reporting resulting from the adoption and implementation of IFRS.

Changes in Accounting Policies and First-Time Adoption of IFRS
The information below is provided as an update to allow investors and others to obtain a better understanding of the possible effects on the Company's consolidated financial statements and operating performance measures. The changes identified below should not be regarded as a complete list of changes that will result from the transition to IFRS as it is intended to highlight those areas where significant progress has been made and that are believed to be most significant at this point in the project. Readers are cautioned that it may not be appropriate to use such information for any other purpose and the information is subject to change.

The International Accounting Standards Board has significant ongoing projects that could affect the ultimate differences between Canadian GAAP and IFRS and their impact on the Company's consolidated financial statements. Therefore, the Company's analysis of changes and accounting policy decisions have been made based on the accounting standards that are currently in effect. To date, the Company has determined preliminary conclusions for certain policy decisions as discussed below and included in the MD&A included in the Company's 2009 Annual Report. These preliminary conclusions are contingent on the standards that will be effective at the time of transition.

The Company continues to assess the quantitative impact of certain of the transitional adjustments on the consolidated opening balance sheet and consolidated interim period financial statements as a result of changes in accounting policies as well as certain IFRS 1, "First Time Adoption of IFRS" ("IFRS 1") elections and exemptions. The preliminary impacts provided below represent updates to those provided in the 2009 annual MD&A pertaining to the transitional balance sheet as at January 1, 2010. The Company expects to provide additional updates in its 2010 annual MD&A.

Consolidation
IAS 27, "Consolidated and Separate Financial Statements" and Standing Interpretations Committee 12, "Consolidation - Special Purpose Entities" ("IAS 27") assess consolidation using a control model. Under IFRS, Loblaw will be required to consolidate Eagle Credit Card Trust, the independent trust that funds the purchase of credit card receivables from PC Bank through the issuance of notes resulting in an increase of approximately $500 million of credit card receivables and related notes before the provision for loan losses. In addition Loblaw will be required to consolidate the independent funding trust through which franchisees obtain financing. Loblaw will no longer be required to consolidate certain independent franchisees and other entities providing warehouse and distribution service agreements that were previously consolidated under Canadian GAAP pursuant to the requirements of Accounting Guideline 15, "Consolidation of Variable Interest Entities" ("AcG 15"). Upon implementation of IFRS, the Company expects to record an increase in assets and liabilities. The Company continues to quantify the remaining impact of this standard.

Revenue
Under Canadian GAAP each franchise arrangement was evaluated under AcG 15. As a result of Loblaw no longer consolidating certain independent franchisees, Loblaw was required to evaluate each franchise arrangement under IAS 18, "Revenue" ("IAS 18") at its inception. Based on the guidance in IAS 18, Loblaw concluded that each franchise arrangement contains separately identifiable components. As a result of this multi-element arrangement Loblaw was required to determine the fair value of all consideration exchanged including certain loans and receivables. The impact of applying these requirements has resulted in Loblaw concluding that the fair value of certain consideration was lower than its face value at inception. Furthermore, Loblaw has made a policy choice to allocate the consideration to each component in the multi-element arrangement on a relative fair value basis to both the delivered and undelivered components. Upon implementation of IFRS the Company expects to record a decrease in certain assets and deferred consideration. The Company continues to quantify the impact of this standard.

Financial Instruments
Under Canadian GAAP each Loblaw franchise arrangement was evaluated under AcG 15. IFRS has no concept of a variable interest resulting in certain financial assets no longer being eliminated on consolidation. As a result Loblaw was required to evaluate certain financial assets relating to the franchise arrangement in accordance with IAS 39, "Financial Instruments: Recognition and Measurement" ("IAS 39") which requires application retrospectively to the inception of each arrangement. Loblaw's evaluation identified that one or more events that provided objective evidence that the cash flows associated with certain financial assets relating to certain of the franchise arrangements were impaired. Upon implementation of IFRS the Company expects to record a decrease in certain financial assets. The Company continues to quantify the impact of this standard.

IAS 39 contains criteria that are different from Canadian GAAP for the derecognition of financial assets and requires an evaluation of the extent to which an entity retains the risks and rewards of ownership. Under Canadian GAAP these financial assets qualify for sale treatment. The Company has determined that under IFRS securitized credit card receivables will not qualify for derecognition. Upon implementation of IFRS the Company expects to record an increase in credit card receivables of approximately $1.2 billion, excluding Eagle Trust, before the provision for loan losses with a corresponding increase to liabilities.

IAS 39 requires the incorporation of credit value adjustments in the measurement of effectiveness and ineffectiveness of a hedging relationship. Cross-currency and interest rate swaps were designated as effective cash flow hedging relationships under Canadian GAAP. Certain tranches of the swaps that were part of the hedging relationship have expired in 2010 and will continue to expire up to mid-2011. Loblaw has concluded to not assess hedge effectiveness under IFRS which will result in derecognition at the date of transition to IFRS. Upon implementation of IFRS the Company expects to record a transitional adjustment of approximately $10 million, net of allocation to minority interest, from accumulated other comprehensive loss to retained earnings within shareholders' equity. Minority interest is referred to as "non-controlling interest" under IFRS.

Employee Benefits
IAS 19, "Employee Benefits", provides a policy choice regarding recognition of actuarial gains and losses for defined benefit pension plans and other defined benefit plans, permitting deferred recognition using the corridor method or immediate recognition in either other comprehensive income within shareholders' equity or through earnings. Under Canadian GAAP the Company applies the corridor method. Upon implementation of IFRS the Company currently intends to recognize actuarial gains and losses immediately through other comprehensive income within shareholders' equity for defined benefit pension plans and other defined benefit plans and through earnings for other long term employee benefits.

In addition, IFRS 1 provides an optional election which the Company expects to apply that will result in the recognition of all cumulative actuarial gains and losses through retained earnings on transition to IFRS. The Company's choice must be applied to all defined benefit pension plans, other defined benefit plans and other long term employee benefits consistently. As a result of this election the Company has engaged its external actuaries to quantify this amount and will reclassify the unamortized net actuarial loss to retained earnings on transition to IFRS.

Share-based Payments
IFRS 2, "Share-Based Payments", requires that cash-settled stock-based compensation be measured based on fair value of the awards. Canadian GAAP requires that such compensation be measured based on the intrinsic values of the awards. This difference is expected to impact the accounting measurement of the Company's stock options, restricted share units and deferred share units. Upon implementation of IFRS the Company expects to record a transitional adjustment to decrease shareholders' equity by approximately $10 million, net of non-controlling interest.

Foreign Currency
IFRS 1 provides an optional election whereby cumulative translation gains or losses in accumulated other comprehensive loss can be reclassified to retained earnings on transition to IFRS. The Company currently expects to utilize this election by reclassifying the cumulative translation loss of $103 million recorded in accumulated other comprehensive loss at December 31, 2009 to retained earnings. Cumulative translation gains and losses will be recognized prospectively from the date of transition.

Property, Plant and Equipment
IAS 16, "Property, Plant and Equipment", provides specific guidance such that when an individual component of an item within property, plant and equipment is replaced and capitalized, the replaced component of the original asset must be derecognized even if the replacement part was not originally componentized. In addition IFRS is more prescriptive with respect to eligible costs such as site-dismantling and restoration costs. The Company expects to record a transitional adjustment of a decrease in assets and a decrease in shareholders' equity of approximately $50 million, net of non-controlling interest.

Impairment of Assets
IAS 36, "Impairment of Assets", requires that assets be tested for impairment at the level of cash generating units ("CGU"), which are defined as the lowest level of assets that generate largely independent cash inflows. The Company has completed its analysis and concluded that the CGU for Weston Foods will be at a lower level than under Canadian GAAP but will continue to be the major production categories and geographic regions where cash inflows are largely dependent on each other. For Loblaw, the CGU will predominantly be an individual store compared to Canadian GAAP where store net cash flows are grouped together by primary market areas, where they are largely dependent on each other. The Company has completed its preliminary assessment of the events triggering potential impairments and reversal of impairments. On transition the Company expects to record a reduction of assets and a reduction in shareholders' equity. The Company continues to quantify the impact of this standard.

Leases
IAS 17, "Leases", requires the allocation of minimum lease payments between the land and building elements of a lease to be in proportion to the relative fair values of the leasehold interests in the land and building, whereas under Canadian GAAP it is based on the fair value of the land and building in aggregate. In addition, IFRS permits the immediate recognition of gains and losses on sale leaseback transactions which result in an operating lease, provided that the transaction is established at fair value. Under Canadian GAAP, gains and losses are generally deferred and amortized in proportion to the lease payments over the lease term. Upon implementation of IFRS the Company expects to record additional finance leases on the balance sheet. The Company continues to quantify the impact of this standard.

Customer Loyalty Programs
International Financial Reporting Interpretations Committee 13, "Customer Loyalty Programs", requires the fair value of loyalty programs to be recognized as a separate component of the initial sales transaction. Loblaw will be required to defer a portion of the initial sales transaction in which the awards are granted. Loblaw has made a policy choice to defer the portion of the sales transaction on the relative fair value of the awards granted. Under Canadian GAAP, Loblaw recognizes the net cost of the program in operating expenses. Upon implementation of IFRS, the Company expects to record a transitional adjustment to decrease shareholders' equity by approximately $10 million, net of non-controlling interest.

Borrowing Costs
IAS 23 "Borrowing Costs" ("IAS 23") requires the capitalization of borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. IFRS 1 provides an election to permit application of the requirements of IAS 23 prospectively from the date of transition. The Company intends to apply this election prospectively and apply IAS 23 from the date of transition. Upon implementation of IFRS, the Company expects to record a transitional adjustment to decrease shareholders' equity by approximately $120 million, net of non-controlling interest.

George Weston Limited continues to assess opportunities for the deployment of its significant holdings of cash and short term investments.

ADDITIONAL INFORMATION
Additional information about the Company has been filed electronically with the Canadian securities regulatory authorities through the System for Electronic Document Analysis and Retrieval (SEDAR) and is available online at www.sedar.com.

This Quarterly Report includes selected information on Loblaw Companies Limited, a 62.8%-owned public reporting company with shares trading on the Toronto Stock Exchange. For information regarding Loblaw, readers should also refer to the materials filed by Loblaw with the Canadian securities regulatory authorities from time to time.

----------------------------------------------------------------------------------

(1) See Non-GAAP Financial Measures.
(2) To be read in conjunction with "Forward-Looking Statements".
(3) NM - not meaningful.

NON-GAAP FINANCIAL MEASURES
The Company uses the following non-GAAP measures: EBITDA and EBITDA margin, net debt, rolling year net debt to EBITDA, net debt to equity and rolling year return on average net assets. The Company believes these non-GAAP financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the Company for the reasons outlined below. These measures do not have a standardized meaning prescribed by Canadian GAAP and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies and should not be construed as an alternative to other financial measures determined in accordance with Canadian GAAP.

EBITDA and EBITDA Margin The following tables reconcile earnings from continuing operations before minority interest, income taxes, interest and depreciation and amortization ("EBITDA") to Canadian GAAP net earnings reported in the unaudited interim period consolidated statements of earnings for the sixteen and forty week periods ended as indicated. For each of its reportable operating segments, segment EBITDA is reconciled to segment operating income. EBITDA is useful to management in assessing the performance of the Company's ongoing operations and its ability to generate cash flows to fund its cash requirements, including the Company's capital investment program.

EBITDA margin is calculated as EBITDA divided by sales.

		16 Weeks Ended				16 Weeks Ended
		Oct. 9, 2010				Oct. 10, 2009
($ millions)		Weston Foods	Loblaw	Other⁽²⁾	Consolidated	Weston Foods	Loblaw	Other⁽²⁾	Consolidated
Net earnings from continuing operations					$ 184				$ 71
Add impact of the following:
	Minority interest				89				77
	Income taxes				117				105
	Interest expense and other financing charges				100				80
Operating income (loss)		$ 111	$ 388	$ (9)	$ 490	$ 36	$ 376	$ (79)	$ 333
Depreciation and amortization⁽¹⁾		16	201		217	18	179		197
EBITDA		$ 127	$ 589	$ (9)	$ 707	$ 54	$ 555	$ (79)	$ 530

		40 Weeks Ended				40 Weeks Ended
		Oct. 9, 2010				Oct. 10, 2009
($ millions)		Weston Foods	Loblaw	Other⁽²⁾	Consolidated	Weston Foods	Loblaw	Other⁽²⁾	Consolidated
Net earnings from continuing operations					$ 351				$ 48
Add impact of the following:
	Minority interest				212				190
	Income taxes				269				220
	Interest expense and other financing charges				321				264
Operating income (loss)		$ 223	$ 974	$ (44)	$ 1,153	$ 65	$ 922	$ (265)	$ 722
Depreciation and amortization⁽¹⁾		40	502		542	44	446		490
EBITDA		$ 263	$ 1,476	$ (44)	$ 1,695	$ 109	$ 1,368	$ (265)	$ 1,212

(1)

Includes depreciation of $13 million (2009 - $13 million) and year-to-date of $32 million (2009 - $34 million) included in cost of inventories sold.

(2)

Operating income for the third quarter and year-to-date 2010 includes a loss of $9 million and $44 million (2009 - $79 million and $231 million), respectively, related to foreign exchange losses associated with the effect of foreign exchange on a portion of the U.S. dollar denominated cash and short term investments held by Dunedin and certain of its affiliates, which are integrated foreign subsidiaries for accounting purposes. Year-to-date 2009 operating income also includes the cumulative foreign currency translation loss of $34 million associated with Dunedin and certain of its affiliates, which was reversed from accumulated other comprehensive loss on the date of the sale of the U.S. fresh bakery business.

Net Debt
The following table reconciles net debt used in the net debt to equity and rolling year net debt to EBITDA ratios to Canadian GAAP measures reported as at the periods ended as indicated.

The Company calculates net debt as the sum of bank indebtedness, short term debt, long term debt, certain other liabilities and the fair value of the related financial derivatives less cash and cash equivalents, short term investments, security deposits and the fair value of the related financial derivatives. The Company believes this measure is useful in assessing the amount of financial leverage employed.

			As at
($ millions)		Oct. 9, 2010	Oct. 10, 2009	Dec. 31, 2009
Bank indebtedness		$ 5	$ 6	$ 2
Short term debt		326	291	300
Long term debt due within one year		407	342	343
Long term debt		5,398	5,271	5,377
Other liabilities		37	36	36
Fair value of financial derivatives related to the above		(325)	(298)	(327)
		5,848	5,648	5,731
Less:
	Cash and cash equivalents	3,487	3,452	3,368
	Short term investments	1,316	1,397	1,538
	Security deposits	436	373	348
	Fair value of financial derivatives related to the above	178	193	178
		$ 5,417	$ 5,415	$ 5,432
Net debt		$ 431	$ 233	$ 299

Capital securities are excluded from the calculation of net debt. For the purpose of calculating net debt, the fair values of financial derivatives are not credit value adjusted in accordance with Emerging Issues Committee Abstract 173, "Credit Risk and the Fair Value of Financial Assets and Financial Liabilities". As at October 9, 2010, the credit value adjustment was a loss of $4 million (October 10, 2009 - $5 million; December 31, 2009 - $4 million).

Net Assets
The following table reconciles net assets used in the rolling year return on average net assets ratio to Canadian GAAP measures reported as at the periods ended as indicated. The Company believes the rolling year return on average net assets ratio is useful in assessing the return on productive assets.

Net assets is calculated as total assets less cash and cash equivalents, short term investments, security deposits, the fair value of Weston Holdings Limited's ("WHL"), a subsidiary of GWL, forward sale agreement for 9.6 million Loblaw common shares and accounts payable and accrued liabilities.

			As at
($ millions)		Oct. 9, 2010	Oct. 10, 2009	Dec. 31 , 2009
Canadian GAAP total assets		$ 20,434	$ 19,769	$ 20,143
Less:	Cash and cash equivalents	3,487	3,452	3,368
	Short term investments	1,316	1,397	1,538
	Security deposits	436	373	348
	Fair value of WHL's forward sale agreement for 9.6 million Loblaw shares	406	461	446
	Accounts payable and accrued liabilities	3,435	3,458	3,616
Net assets		$ 11,354	$ 10,628	$ 10,827

Consolidated Statements of Earnings
(unaudited)

		16 Weeks Ended		40 Weeks Ended
($ millions except where otherwise indicated)		Oct. 9, 2010	Oct. 10, 2009	Oct. 9, 2010	Oct. 10, 2009
Sales		$ 9,884	$ 9,777	$ 24,591	$ 24,283
Operating Expenses
	Cost of inventories sold (note 11)	7,353	7,447	18,268	18,338
	Selling, administrative and other expenses	1,837	1,813	4,660	4,694
	Depreciation and amortization (note 11)	204	184	510	456
	Goodwill impairment (note 12)				73
		9,394	9,444	23,438	23,561
Operating Income		490	333	1,153	722
Interest Expense and Other Financing Charges (note 6)		100	80	321	264
Earnings from Continuing Operations Before the Following:		390	253	832	458
Income Taxes (note 7)		117	105	269	220
		273	148	563	238
Minority Interest		89	77	212	190
Net Earnings from Continuing Operations		184	71	351	48
Discontinued Operations (note 4)			15		905
Net Earnings		$ 184	$ 86	$ 351	$ 953
Net Earnings per Common Share - Basic ($)
	Continuing Operations (note 8)	$ 1.32	$ 0.44	$ 2.46	$ 0.11
	Discontinued Operations		$ 0.12		$ 7.01
	Net Earnings	$ 1.32	$ 0.56	$ 2.46	$ 7.12
Net Earnings per Common Share - Diluted ($)
	Continuing Operations (note 8)	$ 1.31	$ 0.44	$ 2.45	$ 0.11
	Discontinued Operations		$ 0.12		$ 7.01
	Net Earnings	$ 1.31	$ 0.56	$ 2.45	$ 7.12

See accompanying notes to the unaudited interim period consolidated financial statements.

Consolidated Statements of Changes in Shareholders' Equity
(unaudited)

			40 Weeks Ended
($ millions except where otherwise indicated)			Oct. 9, 2010	Oct. 10, 2009
Share Capital
Preferred Shares			$ 817	$ 817
Common Shares			133	133
Total Share Capital, Beginning and End of Period			$ 950	$ 950

Retained Earnings, Beginning of Period			$ 6,084	$ 5,282
Cumulative impact of implementing new accounting standards (note 2)				(4)
Net earnings			351	953
Dividends declared
	Per common share ($)	- $1.08 (2009 - $1.08)	(139)	(139)
	Per preferred share ($)	- Series I - $1.09 (2009 - $1.09)	(10)	(10)
		- Series III - $0.97 (2009 - $0.97)	(8)	(8)
		- Series IV - $0.97 (2009 - $0.97)	(7)	(7)
		- Series V - $0.89 (2009 - $0.89)	(7)	(7)
Retained Earnings, End of Period			$ 6,264	$ 6,060

Accumulated Other Comprehensive Loss, Beginning of Period			$ (92)	$ (322)
Cumulative impact of implementing new accounting standards (note 2)				(1)
Other comprehensive (loss) income			(25)	166
Accumulated Other Comprehensive Loss, End of Period (note 18)			$ (117)	$ (157)

Total Shareholders' Equity			$ 7,097	$ 6,853

See accompanying notes to the unaudited interim period consolidated financial statements.

Consolidated Statements of Comprehensive Income
(unaudited)

		16 Weeks Ended		40 Weeks Ended
($ millions)		Oct. 9, 2010	Oct. 10, 2009	Oct. 9, 2010	Oct. 10, 2009
Net earnings		$ 184	$ 86	$ 351	$ 953
Other comprehensive (loss) income, net of income taxes and minority interest
	Foreign currency translation adjustment	(7)	(59)	(20)	24
	Reclassification of cumulative foreign currency translation loss to net earnings (note 18)				144
		(7)	(59)	(20)	168
	Net unrealized loss on available-for-sale financial assets	(3)	(7)	(6)	(14)
	Reclassification of net loss (gain) on available-for-sale financial assets to net earnings	1	10	6	(5)
		(2)	3		(19)
	Net (loss) gain on derivatives designated as cash flow hedges		(1)	(1)	1
	Reclassification of net (gain) loss on derivatives designated as cash flow hedges to net earnings		(1)	(4)	16
			(2)	(5)	17
Other comprehensive (loss) income		(9)	(58)	(25)	166
Total Comprehensive Income		$ 175	$ 28	$ 326	$ 1,119

See accompanying notes to the unaudited interim period consolidated financial statements.

Consolidated Balance Sheets

			As at
		Oct. 9, 2010	Oct. 10, 2009	Dec. 31, 2009
($ millions)		(unaudited)	(unaudited)
ASSETS
Current Assets
	Cash and cash equivalents (note 9)	$ 3,487	$ 3,452	$ 3,368
	Short term investments	1,316	1,397	1,538
	Accounts receivable (note 10)	691	666	851
	Inventories (note 11)	2,267	2,266	2,210
	Future income taxes	82	66	87
	Prepaid expenses and other assets	116	146	98
Total Current Assets		7,959	7,993	8,152
Fixed Assets		9,293	8,744	9,020
Goodwill and Intangible Assets (note 12)		1,473	1,261	1,296
Future Income Taxes		48	93	61
Other Assets		1,661	1,678	1,614
Total Assets		$ 20,434	$ 19,769	$ 20,143
LIABILITIES
Current Liabilities
	Bank indebtedness	$ 5	$ 6	$ 2
	Accounts payable and accrued liabilities	3,435	3,458	3,616
	Income taxes	70	38	78
	Short term debt (note 14)	326	291	300
	Long term debt due within one year	407	342	343
Total Current Liabilities		4,243	4,135	4,339
Long Term Debt (note 15)		5,398	5,271	5,377
Future Income Taxes		278	322	269
Other Liabilities		654	603	617
Capital Securities (note 16)		220	219	220
Minority Interest		2,544	2,366	2,379
Total Liabilities		13,337	12,916	13,201
SHAREHOLDERS' EQUITY
Share Capital		950	950	950
Retained Earnings		6,264	6,060	6,084
Accumulated Other Comprehensive Loss (note 18)		(117)	(157)	(92)
Total Shareholders' Equity		7,097	6,853	6,942
Total Liabilities and Shareholders' Equity		$ 20,434	$ 19,769	$ 20,143

Contingencies, commitments and guarantees (note 19).

See accompanying notes to the unaudited interim period consolidated financial statements.

Consolidated Cash Flow Statements
(unaudited)

			16 Weeks Ended		40 Weeks Ended
($ millions)			Oct. 9, 2010	Oct. 10, 2009	Oct. 9, 2010	Oct. 10, 2009
Operating Activities
	Net earnings from continuing operations before minority interest		$ 273	$ 148	$ 563	$ 238
	Depreciation and amortization		217	197	542	490
	Goodwill impairment (note 12)					73
	Foreign exchange losses (note 20)		9	79	44	265
	Loss on redemption of debt (notes 6 & 15)			8		49
	Settlement of equity forward contracts (note 17)					(38)
	Future income taxes		40	(16)	27	(45)
	Fair value adjustment of Weston Holdings Limited's forward sale agreement (note 6)		7	(29)	68	(36)
	Change in non-cash working capital		101	490	(210)	375
	Other		34	2	66	(22)
Cash Flows from Operating Activities of Continuing Operations			681	879	1,100	1,349
Investing Activities
	Fixed asset purchases		(468)	(293)	(841)	(640)
	Short term investments		108	294	190	(801)
	Proceeds from fixed asset sales		21	4	37	10
	Business acquisition - net of cash acquired (note 3)		(188)	(194)	(188)	(194)
	Credit card receivables, after securitization (note 10)		21	28	145	236
	Franchise investments and other receivables		(20)	5	(13)	(4)
	Security deposits and other		(123)	(8)	(86)	82
Cash Flows used in Investing Activities of Continuing Operations			(649)	(164)	(756)	(1,311)
Financing Activities
	Bank indebtedness		(8)	3	2	(89)
	Short term debt		9	9	26	(162)
	Long term debt	- Issued (note 15)	28	10	405	370
		- Retired (note 15)	(20)	(91)	(342)	(480)
	Capital securities	- Retired (note 16)				(265)
	Dividends	- To common shareholders	(93)	(92)	(186)	(139)
		- To preferred shareholders	(19)	(19)	(41)	(33)
		- To minority shareholders	(28)	(33)	(43)	(55)
Cash Flows used in Financing Activities of Continuing Operations			(131)	(213)	(179)	(853)
Effect of Foreign Currency Exchange Rate Changes on Cash and Cash Equivalents			(13)	(124)	(46)	(196)
Cash Flows (used in) from Continuing Operations			(112)	378	119	(1,011)
Cash Flows from Discontinued Operations (note 4)				15		3,017
Change in Cash and Cash Equivalents			(112)	393	119	2,006
Cash and Cash Equivalents, Beginning of Period			3,599	3,059	3,368	1,446
Cash and Cash Equivalents, End of Period			$ 3,487	$ 3,452	$ 3,487	$ 3,452

See accompanying notes to the unaudited interim period consolidated financial statements.

Notes to the Unaudited Interim Period Consolidated Financial Statements

1. Summary of Significant Accounting Principles

Basis of Presentation
The unaudited interim period consolidated financial statements were prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and follow the same accounting policies and methods of application as those used in the preparation of the audited annual consolidated financial statements for the year ended December 31, 2009. Under Canadian GAAP, additional disclosure is required in annual financial statements and accordingly the unaudited interim period consolidated financial statements should be read together with the audited annual consolidated financial statements and the accompanying notes included in George Weston Limited's 2009 Annual Report.

Basis of Consolidation
The unaudited interim period consolidated financial statements include the accounts of George Weston Limited ("GWL") and its subsidiaries (collectively, the "Company") with provision for minority interest. The Company's interest in the voting share capital of its subsidiaries is 100% except for Loblaw Companies Limited ("Loblaw"), which was 62.8% at the end of the third quarter of 2010, 62.1% at the end of the third quarter of 2009 and 62.5% at year end 2009. In addition, the Company consolidates variable interest entities ("VIEs") pursuant to the Canadian Institute of Chartered Accountants ("CICA") Accounting Guideline 15, "Consolidation of Variable Interest Entities", ("AcG 15"), that are subject to control by Loblaw on a basis other than through ownership of a majority of voting interest. AcG 15 defines a variable interest entity as an entity that either does not have sufficient equity at risk to finance its activities without subordinated financial support or where the holders of the equity at risk lack the characteristics of a controlling financial interest. AcG 15 requires the primary beneficiary to consolidate VIEs and considers an entity to be the primary beneficiary of a VIE if it holds variable interests that expose it to a majority of the VIEs' expected losses or that entitle it to receive a majority of the VIEs' expected residual returns or both. The Company has two reportable operating segments: Weston Foods and Loblaw.

Use of Estimates and Assumptions
The preparation of the unaudited interim period consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures made in the unaudited interim period consolidated financial statements and accompanying notes. These estimates and assumptions are based on management's historical experience, best knowledge of current events and conditions and activities that may be undertaken in the future. Actual results could differ from these estimates.

Certain estimates, such as those related to valuation of inventories, impairment of fixed assets, employee future benefits, goodwill and intangible assets and income and other taxes depend upon subjective or complex judgments about matters that may be uncertain, and changes in those estimates could materially impact the consolidated financial statements. Illiquid credit markets, volatile equity, foreign currency, energy markets and declines in consumer spending have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

Future Accounting Standards
Business Combinations
In January 2009, the CICA issued Section 1582, "Business Combinations", which will replace Section 1581 of the same title, and issued Sections 1601, "Consolidated Financial Statements", and 1602, "Non-Controlling Interests". These standards will harmonize Canadian GAAP with International Financial Reporting Standards. The amendments establish principles and requirements for determining how an enterprise recognizes and measures the fair value of certain assets and liabilities acquired in a business combination, including non-controlling interests, contingent consideration and certain acquired contingencies. The amendments also require that acquisition related transaction expenses and restructuring costs be expensed as incurred rather than capitalized as a component of the business combination. The impact of implementing these amendments is currently being assessed.

Comparative Information
Certain prior year information has been reclassified to conform with the current year presentation.

2. Implementation of New Accounting Standards

Accounting Standards Implemented in 2009
Goodwill and Intangible Assets
In November 2007, the CICA issued amendments to Section 1000, "Financial Statement Concepts", and Accounting Guideline 11, "Enterprises in the Development Stage", issued a new Section 3064, "Goodwill and Intangible Assets" ("Section 3064") to replace Section 3062, "Goodwill and Other Intangible Assets", withdrew Section 3450, "Research and Development Costs" and amended Emerging Issues Committee ("EIC") Abstract 27, "Revenues and Expenditures During the Pre-operating Period" to not apply to entities that have adopted Section 3064. These amendments, in conjunction with Section 3064, provide guidance for the recognition of intangible assets, including internally developed assets from research and development activities, ensuring consistent treatment of all intangible assets, whether separately acquired or internally developed. The Company implemented these requirements as at January 1, 2009, retroactively with restatement of the comparative periods.

Credit Risk and the Fair Value of Financial Assets and Financial Liabilities
On January 20, 2009, the EIC issued Abstract 173, "Credit Risk and the Fair Value of Financial Assets and Financial Liabilities". The committee reached a consensus that a company's credit risk and the credit risk of its counterparties should be considered when determining the fair value of its financial assets and financial liabilities, including derivative instruments. The transitional provisions require the abstract to be applied retrospectively without restatement of prior periods. Financial assets and financial liabilities, including derivative instruments were remeasured as at January 1, 2009 to take into account the appropriate Company's credit risk and counterparty credit risk. As a result, a decrease in other assets of $12 million, a decrease in other liabilities of $4 million, a decrease in minority interest of $3 million, an increase net of income taxes and minority interest in accumulated other comprehensive loss of $1 million and a decrease in retained earnings net of income taxes and minority interest of $4 million were recorded on the consolidated balance sheet.

Financial Instruments - Disclosures
In June 2009, the CICA amended Section 3862, "Financial Instruments - Disclosures", to include additional disclosure relating to the measurement of fair value for financial instruments and liquidity risk. The amendment establishes a three level hierarchy that reflects the significance of the inputs used in fair value measurements on financial instruments. The amendment was implemented by the Company in 2009 and the additional disclosures are included in the notes to the audited annual consolidated financial statements included in the Company's 2009 Annual Report.

3. Business Acquisitions
On September 24, 2010, Maplehurst Bakeries, LLC, a subsidiary of GWL, acquired all of the outstanding shares of Keystone Bakery Holdings, LLC ("Keystone"), for total consideration of approximately $188 million (U.S. $186 million), including $1 million of transaction costs. The acquisition was accounted for using the purchase method of accounting and accordingly, the consolidated financial statements include the results of operations since the date of the acquisition and are reported in the Weston Foods segment.

The timing of the acquisition date relative to the quarter end was such that a determination or estimation of fair value of certain assets acquired has not yet been finalized. As a result, the actual amount allocated to each of the identifiable net assets may vary from preliminary amounts.

The preliminary purchase price allocation is as follows:

($ millions)
Net assets acquired:
	Accounts receivable	$ 9
	Inventories	6
	Fixed assets	17
	Goodwill and intangible assets	164
	Accounts payable and accrued liabilities	(8)
Cash consideration, net of cash acquired		$ 188

In the first quarter of 2010, Loblaw finalized the purchase price allocation related to the acquisition of T&T Supermarket Inc. acquired in the third quarter of 2009 which resulted in a reduction of goodwill of $2 million (note 12).

During the second and the third quarters of 2010, Loblaw issued shares from treasury under its Dividend Reinvestment Plan (the "DRIP"). As a result of the Company's participation in the DRIP, the Company's proportional ownership of Loblaw increased and was accounted for as a step acquisition of Loblaw by the Company, resulting in a year-to-date increase to goodwill of $9 million (2009 - $6 million) (note 12).

4. Discontinued Operations
As part of the sale of the fresh bread and baked goods business in the United States ("U.S. fresh bakery business") in the first quarter of 2009 and typical of the normal process of selling a business, Dunedin Holdings S.à r.l. ("Dunedin") agreed to indemnify Grupo Bimbo in the event of inaccuracies in representations and warranties or if it fails to perform agreements and covenants provided for in the agreement of purchase and sale. The terms of the indemnification provisions vary in duration and may extend for an unlimited period of time. The indemnification provisions could result in future cash outflows and statement of earnings charges. The Company is unable to reasonably estimate its total maximum potential liability as certain indemnification provisions do not provide for a maximum potential amount and the amounts are dependent on the outcome of future contingent events, the nature and likelihood of which cannot be determined at this time.

The results of discontinued operations presented in the comparative period consolidated statement of earnings were as follows:

	16 Weeks Ended		40 Weeks Ended
($ millions)		Oct. 10, 2009	Oct. 10, 2009⁽¹⁾
Sales			$ 145
Operating income			9
Gain on disposal⁽²⁾		$ 15	936
Interest incomeand other financing charges⁽³⁾			(1)
Earnings before the following:		15	946
Income taxes			41
Earnings from discontinued operations		$ 15	$ 905

(1)	Reflects results of the U.S. fresh bakery business up to the date of sale, January 21, 2009 and the gain on disposal.
(2)	Net of the reclassification of cumulative foreign currency translation loss of $110 million associated with the U.S. fresh bakery business that was previously reflected in accumulated other comprehensive loss (note 18).
(3)	In calculating earnings from discontinued operations, no general interest expense was allocated to these operations.

The cash flows from discontinued operations presented in the comparative period consolidated cash flow statement were as follows:

	16 Weeks Ended		40 Weeks Ended
($ millions)	Oct. 10, 2009		Oct. 10, 2009⁽¹⁾
Cash flows used in operations			$ (105)
Cash flows from investing		$ 15	3,107
Cash flows from financing			15
Cash flows from discontinued operations		$ 15	$ 3,017


(1)	Reflects the proceeds received on the sale and the cash flows of the U.S. fresh bakery business up to the date of sale, January 21, 2009.

5. Distribution Network Costs
On April 27, 2010, Loblaw announced changes to its distribution network in Quebec. In connection with these changes a certain distribution centre was closed and an asset impairment charge of $3 million and $26 million for the third quarter and year-to-date 2010, respectively, was recorded as the carrying value of the facility exceeded the fair value. In addition, employee termination charges and other costs of $16 million were incurred. As at October 9, 2010, $10 million was recorded on the consolidated balance sheet in accounts payable and accrued liabilities related to these charges.

6. Interest Expense and Other Financing Charges

	16 Weeks Ended		40 Weeks Ended
($ millions)	Oct. 9, 2010	Oct. 10, 2009	Oct. 9, 2010	Oct. 10, 2009
Interest on long term debt	$ 115	$ 115	$ 287	$ 285
Loss on redemption of debt (note 15)		8		49
Interest expense on financial derivative instruments	(5)		(1)	3
Other financing charges⁽¹⁾		(36)	53	(52)
Net short term interest income	(8)	(4)	(12)	(16)
Interest income on security deposits		(1)	(1)	(4)
Dividends on capital securities	4	4	11	15
Capitalized to fixed assets	(6)	(6)	(16)	(16)
Interest expense and other financing charges	$ 100	$ 80	$ 321	$ 264

(1)

Other financing charges for the third quarter and year-to-date 2010 include a non-cash charge of $7 million (2009 - non-cash income of $29 million) and a non-cash charge of $68 million (2009 - non-cash income of $36 million), respectively, related to the fair value adjustment of Weston Holdings Limited's ("WHL"), a subsidiary of GWL, forward sale agreement for 9.6 million Loblaw common shares. The fair value adjustment of the forward contract is a non-cash item resulting from fluctuations in the market price of the underlying Loblaw common shares that WHL owns. WHL does not record any change in the market price associated with the Loblaw common shares it owns. Any cash paid under the forward contract could be offset by the sale of the Loblaw common shares. Also included in other financing charges for the third quarter and year-to-date 2010 is forward accretion income of $12 million (2009 - $11 million) and $28 million (2009 - $28 million), respectively, and the forward fee of $5 million (2009 - $4 million) and $13 million (2009 - $12 million), respectively, associated with WHL's forward sale agreement.

Interest on debt and dividends on capital securities paid in the third quarter and year-to-date 2010 were $119 million and $351 million (2009 - $134 million and $389 million), respectively, and interest received on cash, short term investments and security deposits was $23 million and $51 million (2009 - $18 million and $74 million), respectively.

7. Income Taxes
The effective income tax rates for the third quarter and year-to-date 2010 were 30.0% and 32.3% (2009 - 41.5% and 48.0%), respectively. Both the third quarter and year-to-date decreases in the effective income tax rates compared to the same periods in 2009 were primarily due to decreases in non-deductible foreign exchange losses. The third quarter was further impacted by a decrease in income tax expense relating to certain prior year income tax matters when compared to the same period in 2009.

Net income taxes paid in the third quarter and year-to-date 2010 were $63 million and $242 million (2009 - $63 million and $267 million), respectively.

8. Basic and Diluted Net Earnings per Common Share from Continuing Operations

	16 Weeks Ended		40 Weeks Ended
($ millions except where otherwise indicated)	Oct. 9, 2010	Oct. 10, 2009	Oct. 9, 2010	Oct. 10, 2009
Net earnings from continuing operations	$ 184	$ 71	$ 351	$ 48
Prescribed dividends on preferred shares in share capital	(14)	(14)	(34)	(34)
Net earnings from continuing operations available to common shareholders for basic earnings per share	$ 170	$ 57	$ 317	$ 14
Reduction in net earnings due to dilution at Loblaw	(1)		(1)
Net earnings from continuing operations available to common shareholders for diluted earnings per share	$ 169	$ 57	$ 316	$ 14
Weighted average common shares outstanding (in millions)	129.1	129.1	129.1	129.1
Dilutive effect of stock-based compensation⁽¹⁾ (in millions)
Diluted weighted average common shares outstanding (in millions)	129.1	129.1	129.1	129.1
Basic net earnings per common share from continuing operations ($)	$ 1.32	$ 0.44	$ 2.46	$ 0.11
Diluted net earnings per common share from continuing operations ($)	$ 1.31	$ 0.44	$ 2.45	$ 0.11

(1)

Stock options outstanding with an exercise price greater than the quarter and year-to-date average market prices of GWL's common shares are not included in the computation of diluted net earnings per common share from continuing operations. Accordingly, for the third quarter and year-to-date 2010, 422,733 and 425,684 stock options, with a weighted average exercise price of $100.81 and $100.64, respectively, were excluded from the computation of diluted net earnings per common share from continuing operations. For the third quarter and year-to-date 2009, 1,476,502 stock options, with an average exercise price of $81.91, were excluded from the computation of diluted net earnings per common share from continuing operations.

9. Cash and Cash Equivalents
The components of cash and cash equivalents were as follows:

			As at
($ millions)		Oct. 9, 2010	Oct. 10, 2009	Dec. 31, 2009
Cash		$ 155	$ 124	$ 294
Cash equivalents - short term investments with a maturity of 90 days or less:
	Bank term deposits	1,616	1,004	1,140
	Government treasury bills	1,101	1,694	1,446
	Government-sponsored debt securities	206	231	99
	Corporate commercial paper	388	399	389
	Foreign bonds	21
Cash and cash equivalents		$ 3,487	$ 3,452	$ 3,368

As at October 9, 2010, October 10, 2009 and December 31, 2009, U.S. $2,144 million, U.S. $2,231 million and U.S. $2,220 million (October 9, 2010 - $2,168 million; October 10, 2009 - $2,324 million; December 31, 2009 - $2,338 million), respectively, was included in cash and cash equivalents, short term investments and security deposits on the consolidated balance sheets.

The following is a summary of unrealized foreign exchange losses as a result of translating U.S. dollar denominated cash and cash equivalents, short term investments and security deposits:

			16 Weeks Ended		40 Weeks Ended
($ millions)			Oct. 9, 2010	Oct. 10, 2009	Oct. 9, 2010	Oct. 10, 2009
		Loblaw⁽¹⁾	$ 10	$ 93	$ 39	$ 156
		The Company (excluding Loblaw)⁽²⁾	9	117	48	200
	Consolidated		$ 19	$ 210	$ 87	$ 356

(1)	Includes losses of $6 million and $19 million (2009 - $54 million and $77 million) related to cash and cash equivalents, for the third quarter and year-to-date 2010, respectively.
	During the third quarter and year-to-date 2010, the loss on cash and cash equivalents, short term investments and security deposits was partially offset in operating income and other comprehensive (loss) income by the unrealized foreign exchange gain of $10 million and $39 million (2009 - $93 million and $155 million), respectively, on Loblaw's cross currency swaps.
(2)	Includes losses of $7 million and $27 million (2009 - $70 million and $119 million) related to cash and cash equivalents, for the third quarter and year-to-date 2010, respectively.
	During the third quarter and year-to-date 2010, unrealized foreign exchange losses associated with the effect of foreign exchange on a portion of the U.S. dollar denominated cash and cash equivalents and short term investments held by Dunedin and certain of its affiliates of $9 million and $44 million (2009 - $79 million and $183 million), respectively, were recognized in operating income (note 20). The remaining unrealized foreign exchange losses as a result of translating U.S. dollar denominated net assets, including cash and cash equivalents, short term investments and security deposits held in self-sustaining foreign operations are recognized in other comprehensive (loss) income (note 18).

10. Accounts Receivable
The components of accounts receivable were as follows:

		As at
($ millions)	Oct. 9, 2010	Oct. 10, 2009	Dec. 31, 2009
Credit card receivables	$ 1,875	$ 1,955	$ 2,128
Amount securitized	(1,635)	(1,775)	(1,725)
Net credit card receivables	240	180	403
Other receivables	451	486	448
Accounts receivable	$ 691	$ 666	$ 851

Credit Card Receivables
President's Choice Bank ("PC Bank"), a wholly owned subsidiary of Loblaw, participates in various securitization programs that provide the primary source of funds for the operation of its credit card business. Under these securitization programs, a portion of the total interest in the credit card receivables is sold to independent trusts pursuant to co-ownership agreements. PC Bank purchases receivables from and sells receivables to the trusts from time to time depending on PC Bank's financing requirements. In the third quarter of 2010, PC Bank accumulated $150 million of collections that will be used in the fourth quarter to repurchase a portion of its co-ownership interest in securitized receivables from two of the independent trusts. A portion of the securitized receivables that is held by an independent trust facility was also renewed for two years during the third quarter of 2010. During the first quarter of 2010, PC Bank also repurchased $90 million of co-ownership interest in securitized receivables from an independent trust.

Other Receivables
Other receivables consist mainly of receivables from Loblaw's independent franchisees, associated stores and independent accounts, and receivables from Weston Foods customers.

11. Inventories

The components of inventories were as follows:

		As at
($ millions)	Oct. 9, 2010	Oct. 10, 2009	Dec. 31, 2009
Raw materials and supplies	$ 37	$ 34	$ 36
Finished goods	2,230	2,232	2,174
Inventories	$ 2,267	$ 2,266	$ 2,210

Cost of inventories sold includes $13 million and $32 million (2009 - $13 million and $34 million) of depreciation during the third quarter and year-to-date 2010, respectively.

For inventories recorded as at October 9, 2010, Loblaw recorded $13 million (October 10, 2009 - $15 million) as an expense for the write-down of inventories below cost to net realizable value.

12. Goodwill and Intangible Assets

				As at
($ millions)	Weston Foods	Loblaw	Oct. 9, 2010 Total	Oct. 10, 2009	Dec. 31, 2009
Goodwill, beginning of period	$ 92	$ 1,103	$ 1,195	$ 1,116	$ 1,116
Goodwill, acquired during the period (note 3)	164	10	174	193	156
Adjusted purchase price allocation (note 3)		(2)	(2)
Goodwill impairment⁽¹⁾				(73)	(73)
Impact of foreign currency translation	(1)		(1)	(5)	(4)
Goodwill, end of period	255	1,111	1,366	1,231	1,195
Trademarks and brand names	13	51	64	14	64
Other intangible assets	4	39	43	16	37
Goodwill and intangible assets	$ 272	$ 1,201	$ 1,473	$ 1,261	$ 1,296

(1)	Weston Foods reorganized its remaining operations subsequent to the disposition of the U.S. fresh bakery business in the first quarter of 2009 resulting in a write-down of goodwill related to the biscuits, cookies, cones and wafers business.

In connection with the acquisition of Keystone, Weston Foods has recorded goodwill and intangible assets of $164 million as at October 9, 2010. For purposes of this note disclosure, the entire $164 million has been presented as goodwill acquired. As discussed in note 3, management has yet to finalize the amount to be allocated to each of the identifiable net assets acquired and therefore, the actual amount allocated to goodwill and intangible assets may vary from the preliminary amount.

13. Employee Future Benefits
The Company's total net benefit plan cost recognized in operating income was $68 million and $166 million (2009 - $64 million and $160 million) for the third quarter and year-to-date 2010, respectively. The total net benefit plan cost included costs for the Company's defined benefit pension and other benefit plans, defined contribution pension plans and multi-employer pension plans.

14. Short Term Debt
Included in short term debt are GWL's Series B debentures, due on demand, of $326 million (October 10, 2009 - $291 million; December 31, 2009 - $300 million) as at the end of the third quarter of 2010.

15. Long Term Debt
As at October 9, 2010, October 10, 2009 and December 31, 2009, U.S. $300 million (October 9, 2010 - $303 million; October 10, 2009 - $313 million; December 31, 2009 - $316 million) of Loblaw fixed rate notes was recorded in long term debt on the consolidated balance sheets.

During the second quarter of 2010, Loblaw issued $350 million principal amount of unsecured Medium Term Notes ("MTN"), Series 2-B pursuant to its MTN, Series 2 program. The Series 2-B notes pay a fixed rate of interest of 5.22% payable semi-annually commencing on December 18, 2010 until maturity on June 18, 2020. During the second quarter of 2009, Loblaw issued $350 million principal amount of unsecured MTN, Series 2-A which pay a fixed rate of interest of 4.85% payable semi-annually. The Series 2-A and 2-B notes are subject to certain covenants and are unsecured obligations of Loblaw and rank equally with all the unsecured indebtedness of Loblaw that has not been subordinated. The Series 2-A and 2-B notes may be redeemed at the option of Loblaw, in whole at any time or in part from time to time, upon not less than 30 days and not more than 60 days notice to the holders of the notes.

During the second quarter of 2010, Loblaw's $300 million 7.10% MTN matured and was repaid. During the first quarter of 2009, Loblaw's $125 million 5.75% MTN matured and was repaid.

During the second quarter of 2009, GWL entered into an agreement to repurchase a portion of the 12.7% Promissory Notes, due 2030. During the third quarter of 2009, GWL repurchased these and all of the remaining notes, pursuant to the terms of the notes, for an aggregate purchase price of $73 million. As a result, GWL recorded a loss of $8 million in the third quarter of 2009 and $49 million, year-to-date 2009, in interest expense and other financing charges (note 6).

During the first quarter of 2009, GWL's $250 million 5.90% MTN matured and was repaid.

16. Capital Securities
During the second quarter of 2009, GWL's 10.6 million 5.15% non-voting preferred shares, Series II, which were presented as capital securities and included in current liabilities, were redeemed for cash of $25.00 per share, or $265 million in aggregate plus accrued and unpaid dividends to but excluding April 1, 2009.

Of the 12.0 million authorized non-voting Loblaw second preferred shares, Series A, 9.0 million were outstanding at the end of the third quarter of 2010.

Dividends on capital securities are presented in interest expense and other financing charges in the consolidated statements of earnings (note 6).

17. Stock-Based Compensation
The following table summarizes the Company's cost recognized in operating income related to its stock-based compensation plans, restricted share unit plans and GWL's and Glenhuron Bank Limited's ("Glenhuron"), a subsidiary of Loblaw, equity derivatives:

	16 Weeks Ended		40 Weeks Ended
($ millions)	Oct. 9, 2010	Oct. 10, 2009	Oct. 9, 2010	Oct. 10, 2009
Stock option plans / share appreciation right plan expense (income)	$ 10	$ (5)	$ 35	$ (2)
Restricted share unit plan expense	6	3	15	9
Equity derivative contracts (income) loss	(7)	13	(31)	16
Net stock-based compensation expense	$ 9	$ 11	$ 19	$ 23

Stock Option Plan
The following is a summary of GWL's stock option and share appreciation right plan activity:

	16 Weeks Ended		40 Weeks Ended
Number of Options/Rights	Oct. 9, 2010	Oct. 10, 2009	Oct. 9, 2010	Oct. 10, 2009
Outstanding options/rights, beginning of period	1,448,553	1,786,328	1,761,345	1,616,344
Granted	128,774		300,573	230,430
Exercised	(33,878)	(520)	(119,911)	(19,507)
Forfeited/cancelled		(28,001)	(398,558)	(69,460)
Outstanding options, end of period	1,543,449	1,757,807	1,543,449	1,757,807
Share appreciation value paid ($ millions)	$	$	$ 1	$

During the third quarter of 2010, GWL granted stock options with an exercise price of $81.05.

The share appreciation value paid by GWL in the third quarters of 2010 and 2009 and year-to-date 2009 was nominal.

The following is a summary of Loblaw's stock option plan activity:

	16 Weeks Ended		40 Weeks Ended
Number of Options	Oct. 9, 2010	Oct. 10, 2009	Oct. 9, 2010	Oct. 10, 2009
Outstanding options, beginning of period	9,585,006	9,560,681	9,207,816	7,892,660
Granted	21,782	44,032	2,510,877	2,709,647
Exercised	(138,836)	(34,950)	(563,811)	(116,358)
Forfeited/cancelled	(119,314)	(308,218)	(1,806,244)	(1,224,404)
Outstanding options, end of period	9,348,638	9,261,545	9,348,638	9,261,545
Share appreciation value paid ($ millions)	$ 2	$ 1	$ 5	$ 1

During the third quarter of 2010, Loblaw granted stock options with an exercise price of $43.42 (2009 - $34.31).

At the end of the third quarter of 2010, GWL outstanding stock options represented approximately 1.2% (2009 - 1.3%) of GWL's issued and outstanding common shares. Loblaw's outstanding stock options represented approximately 3.3% (2009 - 3.3%) of its issued and outstanding common shares. The number of stock options outstanding was within the Companies' guidelines of 5% of the total number of outstanding shares.

Restricted Share Unit ("RSU") Plan
The following is a summary of GWL's RSU plan activity:

	16 Weeks Ended		40 Weeks Ended
Number of Awards	Oct. 9, 2010	Oct. 10, 2009	Oct. 9, 2010	Oct. 10, 2009
RSUs, beginning of period	162,213	151,526	152,555	151,769
Granted	1,157		49,056	61,677
Cash settled			(34,148)	(59,423)
Cancelled			(4,093)	(2,497)
RSUs, end of period	163,370	151,526	163,370	151,526
RSUs cash settled ($ millions)	$	$	$ 2	$ 4

The following is a summary of Loblaw's RSU plan activity:

	16 Weeks Ended		40 Weeks Ended
Number of Awards	Oct. 9, 2010	Oct. 10, 2009	Oct. 9, 2010	Oct. 10, 2009
RSUs, beginning of period	1,081,909	997,618	973,351	829,399
Granted	2,590	13,373	375,315	442,460
Cash settled	(12,073)	(12,585)	(183,837)	(199,920)
Cancelled	(12,513)	(20,537)	(104,916)	(94,070)
RSUs, end of period	1,059,913	977,869	1,059,913	977,869
RSUs cash settled ($ millions)	$ 1	$ 1	$ 7	$ 7

Equity Derivative Contracts
As at October 9, 2010, Glenhuron had equity forward contracts to buy 1.5 million (October 10, 2009 - 3.2 million; December 31, 2009 - 1.5 million) Loblaw common shares at an average forward price of $56.27 (October 10, 2009 - $53.76; December 31, 2009 - $66.25) including $0.05 (October 10, 2009 - $9.14; December 31, 2009 - $10.03) per common share of interest expense. As at October 9, 2010, the interest and unrealized market loss of $23 million (October 10, 2009 - $71 million; December 31, 2009 - $48 million) was included in accounts payable and accrued liabilities. In the second quarter of 2009, Glenhuron paid $38 million to terminate a portion of the equity forwards representing 1.6 million shares, which led to the extinguishment of a corresponding portion of the associated liability.

18. Accumulated Other Comprehensive Loss

The following tables provide further detail regarding the composition of accumulated other comprehensive loss:

40 Weeks Ended Oct. 9, 2010

($ millions)

Foreign
currency
translation
adjustment

Available-for-
sale assets

Cash
flow
hedges

Total

Balance, beginning of period

(103)

(3)

(92)

Foreign currency translation adjustment

(20)

Net unrealized loss on available-for-sale
financial assets⁽¹⁾

(6)

Reclassification of loss on available-for-sale
financial assets⁽²⁾

Net loss on derivatives designated as
cash flow hedges⁽³⁾

(1)

Reclassification of gain on derivatives
designated as cash flow hedges⁽⁴⁾

(4)

Balance, end of period

(123)

(3)

(117)

(1)   Net of income taxes of nil and minority interest of $4 million.
(2)   Net of income taxes of nil and minority interest of $3 million.
(3)   Net of income taxes recovered of $1 million and minority interest of nil.
(4)   Net of income taxes recovered of $1 million and minority interest of $2 million.

The change in the foreign currency translation adjustment in the first three quarters of 2010 of $20 million resulted from the appreciation of the Canadian dollar relative to the U.S. dollar.

	40 Weeks Ended Oct. 10, 2009
($ millions)			Foreign currency translation adjustment		Available-for- sale assets		Cash flow hedges		Total
Balance, beginning of period		$	(334)	$	10	$	2	$	(322)
Cumulative impact of implementing new accounting standards⁽¹⁾							(1)		(1)
Foreign currency translation adjustment			24						24
Reclassification of cumulative foreign currency translation loss to net earnings			144						144
Net unrealized loss on available-for-sale financial assets⁽²⁾					(14)				(14)
Reclassification of gain on available-for-sale financial assets⁽³⁾					(5)				(5)
Net gain on derivatives designated as cash flow hedges⁽⁴⁾							1		1
Reclassification of loss on derivatives designated as cash flow hedges⁽⁵⁾							16		16
Balance, end of period		$	(166)	$	(9)	$	18	$	(157)

(1)   Net of income taxes recovered of $1 million and minority interest of $1 million.
(2)   Net of income taxes recovered of $1 million and minority interest of $9 million.
(3)   Net of income taxes recovered of $3 million and minority interest of $3 million.
(4)   Net of income taxes of $7 million and minority interest of $2 million.
(5)   Net of income taxes recovered of $10 million and minority interest of $5 million.

The change in the foreign currency translation adjustment in the first three quarters of 2009 of $24 million resulted primarily from the depreciation of the Canadian dollar relative to the U.S. dollar in the period prior to the sale of the U.S. fresh bakery business, partially offset by the appreciation of the Canadian dollar thereafter.

The Company also reversed a cumulative foreign currency translation loss of $144 million in the first quarter of 2009, of which $34 million was recorded in operating income and $110 million was included in the results of discontinued operations (note 4).

19. Contingencies, Commitments and Guarantees

Guarantees - Independent Funding Trusts
Certain independent franchisees of Loblaw obtain financing through a structure involving independent trusts, which were created to provide loans to the independent franchisees to facilitate their purchase of inventory and fixed assets, consisting mainly of fixtures and equipment. The trusts are administered by a major Canadian chartered bank.

Standby Letters of Credit
Standby letters of credit for the benefit of independent trusts with respect to the credit card receivables securitization program of PC Bank have been issued by major Canadian chartered banks. These standby letters of credit could be drawn upon in the event of a major decline in the income flow from or in the value of the securitized credit card receivables. Loblaw has agreed to reimburse the issuing banks for any amount drawn on the standby letters of credit. The aggregate gross potential liability under these arrangements, which represents 9% (October 10, 2009 - 9%; December 31, 2009 - 9%) on a portion of the securitized credit card receivables amount, is approximately $103 million (October 10, 2009 - $116 million; December 31, 2009 - $116 million) (note 10).

Legal Proceedings
The Company is the subject of various legal proceedings and claims that arise in the ordinary course of business. The outcome of all of these proceedings and claims is uncertain. However, based on information currently available, these proceedings and claims, individually and in the aggregate, are not expected to have a material impact on the Company.

20. Segment Information
The Company has two reportable operating segments: Weston Foods and Loblaw. The accounting policies of the reportable operating segments are the same as those described herein and in the Company's 2009 Annual Report. The Company measures each reportable operating segment's performance based on operating income. Neither reportable operating segment is reliant on any single external customer.

			16 Weeks Ended			40 Weeks Ended
($ millions)				Oct. 9, 2010	Oct. 10, 2009	Oct. 9, 2010	Oct. 10, 2009
Sales
		Weston Foods		$ 494	$ 502	$ 1,238	$ 1,334
		Loblaw		9,593	9,473	23,836	23,424
		Intersegment		(203)	(198)	(483)	(475)
	Consolidated			$ 9,884	$ 9,777	$ 24,591	$ 24,283
Operating Income
		Weston Foods		$ 111	$ 36	$ 223	$ 65
		Loblaw		388	376	974	922
		Other⁽¹⁾		(9)	(79)	(44)	(265)
	Consolidated			$ 490	$ 333	$ 1,153	$ 722

			As at
($ millions)					Oct. 9, 2010		Oct. 10, 2009		Dec. 31, 2009
Total Assets
		Weston Foods		$	1,707	$	1,886	$	1,674
		Loblaw			15,667		14,818		15,151
		Other⁽²⁾			3,060		3,065		3,318
	Consolidated			$	20,434	$	19,769	$	20,143

(1) Operating income for the third quarter and year-to-date 2010 includes a loss of $9 million and $44 million (2009 - $79 million and $231 million), respectively, related to foreign exchange losses associated with the effect of foreign exchange on a portion of the U.S. dollar denominated cash and short term investments held by Dunedin and certain of its affiliates, which are integrated foreign subsidiaries for accounting purposes. Year-to-date 2009 operating income also includes the cumulative foreign currency translation loss of $34 million associated with Dunedin and certain of its affiliates, which was reversed from accumulated other comprehensive loss on the date of the sale of the U.S. fresh bakery business (note 18).

(2) Other includes cash and cash equivalents and short term investments held by Dunedin and certain of its affiliates.

Corporate Profile

George Weston Limited is a Canadian public company, founded in 1882, engaged in food processing and distribution. The Company has two reportable operating segments: Loblaw and Weston Foods, and holds cash and short term investments. The Loblaw operating segment, which is operated by Loblaw Companies Limited and its subsidiaries, is Canada's largest food distributor and a leading provider of drugstore, general merchandise and financial products and services. The Weston Foods operating segment is a leading fresh and frozen baking company in Canada and is engaged in frozen baking and biscuit manufacturing in the United States.

Trademarks

George Weston Limited and its subsidiaries own a number of trademarks. These trademarks are the exclusive property of George Weston Limited and its subsidiary companies. Trademarks where used in this report are in italics.

Shareholder Information

Registrar and Transfer Agent
Computershare Investor Services Inc.
100 University Avenue
Toronto, Canada
M5J 2Y1

Toll free (Canada and U.S.A.): 1-800-564-6253
International direct dial: (514) 982-7555
Fax: (416) 263-9394
Toll free fax: 1-888-453-0330

To change your address or eliminate multiple mailings or for other shareholder account inquiries, please contact Computershare Investor Services Inc.

Investor Relations

Shareholders, security analysts and investment professionals should direct their requests to Mr. Geoffrey H. Wilson, Senior Vice President, Financial Control and Investor Relations, at the Company's Executive Office or by e-mail at [email protected].

Additional financial information has been filed electronically with the Canadian securities regulatory authorities in Canada through the System for Electronic Document Analysis and Retrieval (SEDAR). The Company holds an analyst call shortly following the release of its quarterly results. This call will be archived in the Investor Zone section of the Company's website.

This Quarterly Report includes selected information on Loblaw Companies Limited, a 62.8%-owned public reporting subsidiary company with shares trading on the Toronto Stock Exchange. For information regarding Loblaw, readers should also refer to the materials filed by Loblaw with the Canadian securities regulatory authorities from time to time. These filings are also maintained at Loblaw's corporate website at www.loblaw.ca.

Third Quarter Conference Call and Webcast

George Weston Limited will host a conference call as well as an audio webcast on Tuesday, November 23, 2010 at 11:00 a.m. (EST). To access via tele-conference, please dial (647) 427-7450. The playback will be made available two hours after the event at (416) 849-0833, passcode: 19301683#. To access via audio webcast, please visit the "Investor Zone" section of www.weston.ca. Pre-registration will be available.

Ce rapport est disponible en français.

For further information:

Mr. Geoffrey H. Wilson, Senior Vice President, Financial Control and Investor Relations at the Company's Executive Office, (416) 922-2500 or by e-mail at [email protected].

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