Off-Market Buy-Back Booklet. Woolworths Limited A.B.N THIS IS AN IMPORTANT DOCUMENT

Transcription

1 Woolworths Limited A.B.N Off-Market Buy-Back Booklet THIS IS AN IMPORTANT DOCUMENT If you are in doubt as to the action you should take, please consult your financial, taxation or other professional adviser immediately. Financial Advisers Legal Adviser

2 Important Dates August 2010 Announcement of Woolworths results and of Buy-Back Last day that Shares can be acquired to be eligible for Buy-Back franking entitlements Buy-Back Ex-Entitlement Date: the date that Shares commence trading on an ex-buy-back basis. Shares acquired on the ASX on or after this date will not confer an entitlement to participate in the Buy-Back Thursday, 26 August Thursday, 26 August Tuesday, 31 August September 2010 Buy-Back Record Date: determination of eligible shareholders entitled to participate in the Buy-Back Dividend ex-entitlement date: the date that Shares commence trading on an ex-entitlement date for the 2010 final dividend. Shares acquired on the ASX on or after this date will not confer an entitlement to receive the 2010 final dividend Dividend record date: determination of eligible shareholders entitled to receive the 2010 final dividend Mailing of Buy-Back Documents to shareholders completed by Tender Period Opening Date Monday, 6 September Monday, 13 September Friday, 17 September Friday, 17 September Monday, 20 September October 2010 Tender Period Closing Date: Tenders must be received by the Registry no later than 7.00pm (Sydney time) Buy-Back Date: determination of the Buy-Back Price and scale back (if any) and entry into Buy-Back Contracts Payment date for final dividend Dispatch/crediting of Buy-Back proceeds to participating shareholders. Updated holding statements sent to participating shareholders by Friday, 8 October Monday, 11 October Friday, 15 October Monday, 18 October While Woolworths does not anticipate any changes to these dates and times, it reserves the right to vary them without notifying you. Any change in date or time will take effect from the time it is authorised by the Board and will be publicly announced as soon as practicable following the Board s authorisation. Any such change will be taken to amend this booklet (and the other Buy-Back Documents) accordingly. Woolworths may in its absolute discretion also decide not to proceed with the Buy-Back and may vary the size of the Buy-Back depending on a number of factors including shareholder demand, market conditions and forecast future capital requirements. Citi and Greenhill Caliburn are acting as financial advisers to Woolworths in relation to the Buy-Back. Mallesons Stephen Jaques are acting as legal adviser to Woolworths in relation to the Buy-Back. The date of this booklet is 6 September Eligibility to Participate Subject to the following, you are eligible to participate in the Buy-Back if Shares are registered in your name on the Buy-Back Record Date (Monday, 6 September 2010) and, in accordance with the Settlement Rules, the Shares confer an entitlement to receive this Invitation. Restricted Employee Shares and shares issued under the DRP with respect to the 2010 final dividend may not be tendered into the Buy-Back. Excluded Foreign Shareholders are not eligible to participate in the Buy-Back (other than in the limited circumstances as described in Section 4.3). p a g e 2

3 Corporate Actions Shareholders should be aware that Woolworths may be involved in exploratory discussions with third parties from time to time regarding potential corporate transactions and other strategic initiatives. In the event that a significant corporate transaction develops as a result of these discussions, and if it is not appropriate to immediately disclose the transaction, it may become necessary for the Company to terminate or extend the Buy-Back to ensure that the Buy-Back only proceeds in circumstances where shareholders are fully informed of all material information. Any decision to terminate or extend the Buy-Back will only be made after due consideration of the best interests of Woolworths shareholders. Buy-Back Summary Woolworths is seeking to buy back up to $700 million worth of its Shares through an off-market tender. The Buy-Back is an opportunity for you to sell some or all of your Shares by submitting a Tender. Buy-Back size Tender Discount Range Buy-Back Price Capital component of the Buy-Back Price Dividend component of the Buy-Back Price Multiple Tender Discounts Final Price Tender Eligible Shareholders Woolworths is seeking to buy back up to $700 million worth of its Shares. However, Woolworths may vary the size of the Buy-Back depending on a number of factors including shareholder demand, market conditions and forecast future capital requirements Tenders can be lodged at discounts of 8 per cent to 14 per cent inclusive (at 1 per cent intervals) to the Market Price. The Market Price is calculated as the VWAP of Woolworths shares over the five trading days up to and including the Closing Date. The Market Price will be announced to the market as soon as possible after 4.30pm (Sydney time) on the Closing Date and will be available to shareholders on Woolworths website ( or by calling the Buy-Back Information Line on from within Australia and from outside Australia The Buy-Back Price will be calculated by applying the Buy-Back Discount selected by Woolworths under the tender process to the Market Price $3.08 (1) The Buy-Back Price less the $3.08 capital component With the exception of shareholders who own 85 Shares or less, eligible shareholders can tender different parcels of Shares at different Tender Discounts. Shareholders that own 85 Shares or less can only tender Shares at one discount or as a Final Price Tender Shareholders may submit a Final Price Tender which is an offer to sell Shares at the Buy-Back Price ultimately determined by Woolworths see above You are eligible to participate in the Buy-Back if Shares are registered in your name on the Buy-Back Record Date (Monday, 6 September 2010) and you are resident in, or are holding Shares on behalf of someone resident in, Australia, New Zealand, the United Kingdom, the United States, Hong Kong (professional investors only), Singapore or Japan Ineligible Shares Restricted Employee Shares and shares issued under the DRP with respect to the 2010 final dividend may not be tendered into the Buy-Back (see Section 4.2) (1) This amount is subject to ATO approval (see Section 2.1). Shares held by Excluded Foreign Shareholders may not be tendered into the Buy-Back (other than in the limited circumstances as described in Section 4.3) p a g e 3

4 How to Participate It is your choice whether or not to participate in the Buy-Back. If you choose NOT to participate in the Buy-Back, you do not need to take any action, and the number of Shares you hold will not change as a result of the Buy-Back. If you DO choose to participate in the Buy-Back: You can choose the Tender Discount(s) within the Tender Discount Range at which you are willing to sell some or all of your Shares (your Tender price): -- If the Buy-Back Price is higher than your Tender price, you will receive the higher Buy-Back Price for any of your Shares that are bought back by Woolworths; and -- If the Buy-Back Price is less than your Tender price, Woolworths will not buy back your Shares. Under no circumstances will your Shares be bought back at a price lower than your Tender price; Alternatively, you can choose to Tender some or all of your Shares as a Final Price Tender. This means you are willing to sell your Shares at the Buy-Back Price that Woolworths determines following the tender process; If your Shares are bought back, you will receive a fully franked dividend as part of the Buy-Back Price; and You should not have to pay brokerage or appoint a stockbroker to sell your Shares. To participate in the Buy-Back, you need to: STEP 1 STEP 2 STEP 3 STEP 4 Decide how many Shares you wish to sell Sele ct your Tender Discount(s) and/or a Final Price Tender Select your Minimum Price (optional) Submit your Tender(s) by completing the enclosed Tender Form Further details regarding each of these steps are set out in Section Enquiries If you have any questions in relation to the Buy-Back or the content of this booklet, please call the Buy-Back Information Line on from within Australia or on from outside Australia between the hours 8.30am to 5.30pm (Sydney time), Monday to Friday. Alternatively, information on the Buy-Back is also available on the Woolworths website at Definitions and Interpretation Some words used in this booklet have defined meanings. Section 5 Definitions and Interpretation defines the capitalised words used throughout this booklet. Further Advice This document does not provide financial product advice and has been prepared without taking into account your particular objectives, financial situation or needs. You should consider obtaining independent advice before making any financial decisions. p a g e 4

5 Chairman s Letter Dear Shareholder, On behalf of the Board of Directors, I am pleased to invite you to participate in an off-market buy-back tender to sell some or all of your Woolworths Shares: At specified discounts of between 8 per cent to 14 per cent inclusive (at 1 per cent intervals) to the Market Price; or As a Final Price Tender (which is an election to receive the Buy-Back Price). In other words you choose to sell your Shares at the price determined by Woolworths following receipt of the Tenders lodged by participating shareholders. Woolworths is aiming to buy back up to $700 million worth of Shares representing up to 2.4 per cent of its outstanding Shares. The actual number of Shares bought back will be determined by Woolworths having regard to a number of factors including the Tenders lodged by shareholders, market conditions and forecast capital requirements. We will only buy back Shares at a price we believe is in the best interests of all shareholders, including those who choose not to participate in the Buy-Back. Further details of the tender process are set out in Section 1 of this booklet. Woolworths has obtained a preliminary indication from the Australian Taxation Office that for Australian tax purposes, the Buy-Back Price will comprise a capital component of $3.08, with the remainder of the price paid to you deemed a fully franked dividend. Woolworths expects that this will be confirmed by the ATO in a Class Ruling. The Buy-Back will have different tax consequences for different shareholders depending on their original purchase price and individual tax situations. Detailed information on the Australian tax consequences for participants is provided in Section 2 of this booklet. The Board and management are committed to growing our business and managing our capital so we can increase shareholder value and increase returns to you, our shareholders. The Buy-Back is aimed at achieving a balance between returning capital, retaining sufficient flexibility to invest capital, pursuing growth options and maintaining strong credit metrics. Participation in the Buy-Back is optional. If you wish to submit a Tender, you must ensure that your completed and signed Tender Form is received by the Registry if you have an Issuer Sponsored Holding or, if you have a CHESS Holding, your controlling participant (usually your broker) processes your Tender, no later than 7.00pm (Sydney time) on the Closing Date. I urge you to consider this document carefully. If you have any queries on any aspects of the Buy-Back after reading this booklet, please call the Woolworths Buy-Back Information Line on within Australia or from outside Australia. Yours faithfully James Strong Chairman p a g e 5

6 Table of Contents 1 Overview of the Buy-Back and the Tender Process 7 2 Australian Tax Implications for Shareholders 21 3 Effect of the Buy-Back on Woolworths 26 4 Additional Information on the Buy-Back 31 5 Definitions and Interpretation 38 p a g e 6

7 1 Overview of the Buy-Back and the Tender Process p a g e 7

8 This booklet invites you to tender your Shares to Woolworths in the Buy-Back. It sets out the terms of the Buy-Back and other information to assist you in making a decision on whether or not to participate in the Buy-Back. 1.1 What is a Buy-Back? Under a buy-back, a company buys its own shares from its shareholders. Any shares bought back are cancelled, with the result that the number of shares on issue is reduced by the number of shares bought back. 1.2 Why is Woolworths implementing another Buy-Back? The Buy-Back is being undertaken as part of Woolworths capital management strategy designed to achieve a balance between returning capital, retaining sufficient flexibility to invest capital, pursuing growth options and maintaining strong credit metrics. 1.3 what are the advantages and disadvantages of the Buy-Back? Conducting the Buy-Back as an off-market tender provides a number of advantages to Woolworths and its shareholders. The advantages for Woolworths (and therefore its shareholders generally) include the following: The Buy-Back is expected to improve EPS and ROE for shareholders who continue to hold Woolworths shares; The Buy-Back allows Woolworths to buy back Shares at a discount of between 8 per cent to 14 per cent to the Market Price. This is likely to enable Woolworths to buy back a greater number of Shares than under an on-market buy-back for the same amount of capital; The Buy-Back represents an efficient means of returning capital to shareholders; Woolworths is able to determine the most appropriate number of Shares to buy back based on shareholder demand; and Woolworths targeted amount of capital can be bought back within a relatively short period of time. The advantages for individual shareholders of participating in the Buy-Back may include: Participation is optional and shareholders who choose to participate can tailor their participation to suit their own circumstances. In particular, you can choose: -- Whether to tender your Shares into the Buy-Back; -- How many Shares to tender if the number of Shares you own and that you intend to tender is greater than 85 Shares; and -- The basis upon which to tender your Shares (for example, at what Tender Discount(s) or as a Final Price Tender, with the option to make your Tender conditional on a Minimum Price); For some shareholders, depending on their tax status, the after-tax return from participating in the Buy-Back may be greater than the sale of their Shares on-market; Shareholders with Small Holdings are able to sell all of their Shares into the Buy-Back so as not to be left with a small parcel of Shares; and Shareholders should not have to pay any brokerage to sell their Shares into the Buy-Back. The disadvantages for individual shareholders of participating in the Buy-Back may include: You may be able to sell your Shares for a higher price on the stock market, and may receive a higher after-tax return, depending on your tax position: refer to Section 2.5 for a comparison of illustrative examples of the total after-tax proceeds if you tender your Shares under the Buy-Back or sell them on the stock market; There is no assurance that any Tender will be successful; and Successful Tenders may be subject to a scale back and hence might not be accepted in full. p a g e 8

9 1.4 Can I offer to sell Shares in the Buy-Back? You may offer to sell Shares in the Buy-Back if you were an eligible shareholder and the registered holder of those Shares at the close of business on the Buy-Back Record Date (Monday, 6 September 2010) (in accordance with the ASTC Settlement Rules). The maximum number of Shares you may tender is set out on your personalised Tender Form. Shares acquired on the ASX on or after the Buy-Back Ex-Entitlement Date (Tuesday, 31 August 2010) will not be registered in your name by the Buy-Back Record Date (Monday, 6 September 2010) and therefore will not carry an entitlement to participate in the Buy-Back. Restricted Employee Shares and shares issued under the DRP with respect to the 2010 final dividend may not be tendered into the Buy-Back. Excluded Foreign Shareholders are not eligible to participate in the Buy-Back (other than in the limited circumstances as described in Section 4.3). 1.5 Do I have to participate in the Buy-Back? No, participation in the Buy-Back is optional. If you do not want to sell any of your Shares, you do not need to take any action. If you do nothing, the number of Shares you hold will not change as a result of the Buy-Back, although your proportional shareholding in Woolworths will increase slightly. 1.6 How many Shares will Woolworths buy back? Woolworths currently intends to buy back up to $700 million worth of Shares equivalent to approximately 2.4 per cent of issued capital based on an assumed Market Price of and an assumed 14 per cent Buy-Back Discount. However, Woolworths may, in its complete discretion, choose to buy back a significantly higher or lower amount or no Shares at all, depending on a number of factors including the Tenders lodged by shareholders and market conditions. If the total number of Shares tendered at or below the Buy-Back Price and as Final Price Tenders exceeds the number of Shares Woolworths determines to buy back, Woolworths will scale back the allocations to the successful participants. Under the Corporations Act, Woolworths has discretion to buy back any number of Shares up to a maximum of 10 per cent of the smallest number of Shares it has had on issue over the 12 months preceding the Buy-Back. 1.7 How long will the Buy-Back be open? The Buy-Back will be open from the Opening Date (Monday, 20 September 2010) to the Closing Date (Friday, 8 October 2010). Shareholders may only lodge Tenders within this period. Woolworths, in its absolute discretion, may withdraw or extend this period, but does not expect to do so. If the Tender Period is extended, the new Closing Date will be announced to the ASX. 1.8 How will the Buy-Back be conducted? Woolworths is conducting this Buy-Back through an off-market tender process. All shareholders eligible to participate in the Buy-Back will be able to submit offers to sell their Shares ( Tenders ) at specified discounts in the Tender Discount Range from 8 per cent to 14 per cent (at 1 per cent intervals) to the Market Price or as a Final Price Tender (see Section 1.15). At the end of the Tender Period, Woolworths and its advisers will consider the Tenders and determine the Buy-Back Price. All successful Tenders will receive the Buy-Back Price for each Share bought back, even if they tendered Shares at a Tender Discount greater than the Buy-Back Discount. Any Shares tendered at a Tender Discount lower than the Buy-Back Discount will not be accepted. If the number of Shares tendered at or above the Buy-Back Discount (including Final Price Tenders) exceeds the number of Shares Woolworths determines to buy back, a scale back will operate on the basis set out in Section 1.11 (see examples therein for more details on the Tenders that will be successful). p a g e 9

10 1.9 What price will Woolworths pay to buy back my Shares? All Shares successfully tendered will be bought back at the Buy-Back Price. The Buy-Back Price will be calculated by applying the Buy-Back Discount to the Market Price (see below). The Buy-Back Discount is the largest Tender Discount in the range of 8 per cent to 14 per cent inclusive (at 1 per cent intervals) to the Market Price that will allow Woolworths to purchase the amount of capital it determines to buy back. For each Share purchased from you under the Buy-Back, you will receive a cash payment determined in accordance with the following formula: A = B x (1 - C); where: A = Buy-Back Price B = Market Price C = Buy-Back Discount (expressed as a decimal to 2 places) For example, if the relevant Market Price is $27.00 and the Buy-Back Discount is 14 per cent, then the Buy-Back Price would be $23.22 (i.e. $27.00 x (1-0.14)). Woolworths does not intend to set the Buy-Back Price at a level above the Tax Value. The Tax Value is the price used by the ATO to determine the market value of the relevant Shares when the Buy-Back occurs for Australian tax purposes. See Section 2.2 for a detailed explanation of the method for determining the Tax Value Will all the Shares I tender be bought back? Whether all or any of the Shares you tender will be bought back by Woolworths will depend on the Tender Discount to the Market Price at which you offer to sell your Shares and the number of Shares and Tender Discounts set out in the Tenders lodged by you and other shareholders. Successful Tenders and the scale back process will be determined as follows: If your Tender Discount is equal to or greater than the Buy-Back Discount or if you lodged a Final Price Tender, your Tender will be successful and your Shares will be bought back, subject to any scale back and, if applicable, any Minimum Price condition; If your Tender Discount is less than the Buy-Back Discount, your Tender will be rejected and your Shares will not be bought back; and If you have chosen a Minimum Price and the Buy-Back Price is below that price, your Tender will be rejected and your Shares will not be bought back How will a scale back affect my Tender? There is no assurance that any Tender will be successful in the Buy-Back, or that successful Tenders will be accepted in full. Woolworths will need to apply a scale back if the number of Shares tendered at Tender Discounts greater than or equal to the Buy-Back Discount and as Final Price Tenders exceeds the total number of Shares that Woolworths determines it will buy back. The scale back will be undertaken on a pro-rata basis after taking into account Small Holding Tenders and Priority Parcels. As Restricted Employee Shares do not confer an entitlement to Tender, those shares will be disregarded in determining whether a shareholder has tendered 100 per cent of their Shares and whether a Small Holding would otherwise arise as a result of a Tender being successful. The details of any scale back will be announced after the close of the Buy-Back. Woolworths expects to make this announcement on the Buy-Back Date (Monday, 11 October 2010). Note that when the scale back is calculated all Shares bought back will be rounded down to the nearest Share. p a g e 1 0

11 What is a Small Holding Tender? A Small Holding Tender is a Tender submitted by a shareholder who has tendered all of their Shares at one or more Tender Discounts greater than or equal to the Buy-Back Discount and/or as a Final Price Tender and who would otherwise be left with 85 Shares or less as a result of a scale back. No scale back will apply to such Tenders. What is a Priority Parcel? A Priority Parcel applies to shareholders who have tendered Shares at one or more Tender Discounts greater than or equal to the Buy-Back Discount and/or as a Final Price Tender and whose Tenders are subject to scale back. In such cases, Woolworths will buy back a Priority Parcel from each shareholder. The scale back will only apply to the Shares remaining after the Priority Parcel has been acquired. A Priority Parcel is equal to a parcel of 210 Shares or such lesser number of Shares as determined by Woolworths to ensure that applying this minimum to every successful Tender does not cause the value of Shares bought back to exceed the amount of capital Woolworths wishes to buy back. Where the aggregate number of Shares tendered at Tender Discounts greater than or equal to the Buy-Back Discount is less than or equal to 210 Shares (i.e. the Priority Parcel), such Shares will be purchased without any scale back. If the Buy-Back Discount is set between 8 per cent and 13 per cent inclusive: Tender submitted Final Price Tender The Tender Discount you select is greater than the Buy-Back Discount (1) Outcome Tenders accepted in full Tenders accepted in full The Tender Discount you select is equal to the Buy-Back Discount (1) Tenders (other than Final Price Tenders, Priority Parcels and Small Holding Tenders) will be accepted but will be scaled back on a pro-rata basis (2) A Priority Parcel will be bought back from each shareholder Small Holding Tenders will be accepted in full The Tender Discount you select is smaller than the Buy-Back Discount Tenders will be rejected If the Buy-Back Discount is set at 14 per cent: Tender submitted: Final Price Tender and/or the Tender Discount you select is equal to the Buy-Back Discount (1) The Tender Discount you select is smaller than the Buy-Back Discount Outcome Tenders (other than Priority Parcels and Small Holding Tenders) will be accepted but will be scaled back on a pro-rata basis (2) A Priority Parcel will be bought back from each shareholder Small Holding Tenders will be accepted in full Tenders will be rejected (1) If a Minimum Price has been specified in addition to the Tender Discount, and the Buy-Back Price is below the Minimum Price, then the Tender will be rejected in full and none of the Shares tendered will be bought back. (2) Fractions of Shares will be rounded down to the nearest Share. Example 1: 14 per cent Buy-Back Discount and a 50 per cent scale back (illustrative example only) In Example 1, it is assumed that the Market Price is $27.00 and the Buy-Back Discount is 14 per cent, resulting in a Buy-Back Price of $ It is also assumed in this example that the Priority Parcel is 210 Shares, the Small Holding Tender is 85 Shares, there is a 50 per cent scale back and shareholders have not specified a Minimum Price condition. Please note that this is an example only. You should not rely on $27.00 being the Market Price, $23.22 being the Buy-Back Price, a Priority Parcel being 210 Shares, a Small Holding Tender being 85 Shares or 50 per cent being the level of scale back. p a g e 1 1

12 On the basis of these assumptions, the outcome of each Tender would be as follows: Shareholder Total Holding of Shares Shares Tendered Tender Discount Price Represented by Tender Discount Outcome A 2,400 1,200 - Final Price Tender 1,200 13% $23.49 Partially successful, 705 Shares bought back Not successful, no Shares bought back B % $23.22 C % $23.22 Successful, all 200 Shares bought back Successful, all 250 Shares bought back D % $ % $23.49 Successful, all 200 Shares bought back Not successful, no Shares bought back E % $23.49 Not successful, no Shares bought back Shareholder A tendered 1,200 Shares as a Final Price Tender and 1,200 Shares at a 13 per cent Tender Discount. The Final Price Tender would be successful but only 705 of the 1,200 Shares tendered would be bought back as a result of the Priority Parcel and the 50 per cent scale back. The Tender submitted at a 13 per cent Tender Discount would not be successful. Following the Buy-Back, Shareholder A would be left with 1,695 Shares. Shareholder B tendered 200 Shares at a 14 per cent Tender Discount. Shareholder B would have the entire Tender accepted in full as a result of the Priority Parcel. Shareholder C tendered 250 Shares at a 14 per cent Tender Discount. Shareholder C would have the entire Tender accepted in full as 230 Shares would be bought back under the Priority Parcel and the 50 per cent scale back and the residual Small Holding of 20 Shares would be bought back under the Small Holding Tender. Shareholder D tendered 200 Shares at a 14 per cent Tender Discount and 50 Shares at a 13 per cent Tender Discount. Shareholder D would only have the 200 Shares tendered at the Buy-Back Discount bought back. Even though Shareholder D is left with a Small Holding of 50 Shares after the 200 Shares are bought back, the residual Small Holding would not be bought back because Shareholder D submitted the Tender at a Tender Discount less than the Buy-Back Discount. Shareholder E tendered 600 Shares at a 13 per cent Tender Discount which is less than the Buy-Back Discount. Shareholder E would have the entire Tender rejected. See the following scale back table for Example 1. p a g e 1 2

13 Shareholder Shares tendered at a 14% Tender Discount or as Final Price Tenders Shares subject to scale back (1) Scale back (2) Tender post scale back and Priority Parcel (2),(3) Shares remaining (4) Small Holding Tender? (5) Shares that are bought back A 1, % No 705 B No 200 C % Yes 250 D No 200 E (1) Under the Priority Parcel, the first 210 Shares are bought back from each shareholder who tenders Shares at the Buy-Back Discount (including Shares tendered as a Final Price Tender under this example), before the scale back applies. (2) A scale back of 50 per cent means 50 per cent of the Shares subject to scale back would be bought back (not including Priority Parcels and Small Holding Tenders). (3) When the scale back is calculated, fractions of Shares will be rounded down to the nearest Share. (4) Shares remaining refer only to Shares remaining from those Shares which were tendered at a 14 per cent Tender Discount or as Final Price Tenders. (5) Shareholder C tendered all of their Shares at the Buy-Back Discount. As a result of the Priority Parcel and scale back, Shareholder C would be left with a Small Holding Tender (i.e. 85 Shares or less). Example 2: 13 per cent Buy-Back Discount and 30 per cent scale back (illustrative example only) In Example 2, it is assumed that the Market Price is $27.00 and the Buy-Back Discount is 13 per cent, resulting in a Buy-Back Price of $ It is also assumed in this example that the Priority Parcel is 210 Shares, there is a 30 per cent scale back, the Small Holding Tender is 85 Shares and shareholders have not specified a Minimum Price condition. Please be aware that this is an example only. You should not rely on $27.00 being the Market Price, $23.49 being the Buy-Back Price, a Priority Parcel of 210 Shares, a Small Holding Tender of 85 Shares or 30 per cent being the level of scale back. On the basis of these assumptions, the outcome of each Tender would be as follows: Shareholder Total Holding of Shares Shares Tendered Tender Discount Price Represented by Tender Discount Outcome A 2,400 1,200 - Final Price Tender 1,200 13% $23.49 Successful, all 1,200 Shares bought back Partially successful, 903 Shares bought back B % $23.22 C % $23.22 Successful, all 200 Shares bought back Successful, all 250 Shares bought back D % $ % $23.49 Successful, all 200 Shares bought back Successful, all 50 Shares bought back E % $23.49 Partially successful, 483 Shares bought back Shareholder A tendered 1,200 Shares as a Final Price Tender and 1,200 Shares at a 13 per cent Tender Discount. The Final Price Tender would be accepted in full. The 1,200 Shares tendered at a 13 per cent Tender Discount would be successful but only 903 of the 1,200 Shares tendered would be bought back as a result of the Priority Parcel first being bought back (210 Shares) and the 30 per cent scale back applying to the balance of 990 Shares, meaning that only 693 of these Shares are bought back. Following the Buy-Back, Shareholder A would therefore be left with 297 Shares. p a g e 1 3

14 Shareholder B tendered 200 Shares at a 14 per cent Tender Discount which is greater than the Buy-Back Discount. Hence, Shareholder B would have the entire Tender accepted in full. Shareholder C tendered 250 Shares at a 14 per cent Tender Discount which is greater than the Buy-Back Discount. Hence, Shareholder C would have the entire Tender accepted in full. Shareholder D tendered 200 Shares at a 14 per cent Tender Discount and 50 Shares at a 13 per cent Tender Discount. Shareholder D would have the 200 Shares tendered at a 14 per cent Tender Discount, which is greater than the Buy-Back Discount, bought back in full. The 50 Shares tendered at a 13 per cent Tender Discount would be bought back in full under the Priority Parcel. Shareholder E tendered 600 Shares at a 13 per cent Tender Discount which is equal to the Buy-Back Discount. Shareholder E would only have 483 of the 600 Shares tendered bought back as a result of the Priority Parcel first being bought back (210 Shares) and the 30 per cent scale back applying to the balance of 390 Shares, meaning that only 273 of these Shares are bought back. Following the Buy-Back, Shareholder E would therefore be left with 117 Shares. See the following scale back table for Example 2. Shareholder Shares tendered at a 13% Tender Discount (1) Shares subject to scale back (2) Scale back (3) Tender post scale back and Priority Parcel (3),(4) Shares remaining (5) Small Holding Tender? (6) Shares that are bought back A 1, % No 903 B Scale back not applicable C Scale back not applicable D No 50 E % No 483 (1) Shares tendered as Final Price Tenders or at Tender Discounts greater than the Buy-Back Discount (i.e. 13 per cent) are not shown here as they are not subject to scale back if the Buy-Back Discount is not the largest Tender Discount of 14 per cent. (2) Under the Priority Parcel, the first 210 Shares are bought back from each shareholder who tenders Shares at the Buy-Back Price, before the scale back applies. (3) A scale back of 30 per cent means 70 per cent of the Shares subject to scale back would be bought back (not including Priority Parcels and Small Holding Tenders). (4) When the scale back is calculated, fractions of Shares will be rounded down to the nearest Share. (5) Shares remaining refer only to Shares remaining from those Shares which were tendered at a 13 per cent Tender Discount. (6) Shareholder E tendered all of their Shares at the Buy-Back Discount. As a result of the Priority Parcel and scale back, Shareholder E would be left with more than 85 Shares and so the Tender is not a Small Holding Tender will I still receive the final dividend if my Shares are bought back? Yes. All shareholders with a registered holding on the final dividend record date (Friday, 17 September 2010) will be entitled to receive the final dividend of 62 per Share. It is expected to be paid on Friday, 15 October Under the Buy-Back, Shares will not be bought back until the Buy-Back Date (Monday, 11 October 2010) which is after the final dividend record date. As a result, you will still receive the final dividend on any Shares that are bought back from you under the Buy-Back, as long as you are the registered holder of those Shares on the final dividend record date (Friday, 17 September 2010). If you intend to offer to sell all of your Shares into the Buy-Back and you currently participate in the DRP for any of the Shares, you should reconsider your DRP participation. Shares issued under the DRP in respect of the final dividend will not carry an entitlement to participate in the Buy-Back as they will not be issued until after the Closing Date. If you would like to change your DRP nomination please call from within Australia or from outside Australia, or see Woolworths website, p a g e 1 4

15 1.13 How does the Buy-Back compare to selling my Shares on the stock market? Refer to Section 2.5 for illustrative examples of the total after-tax proceeds if you sell your Shares under the Buy-Back and if you sell your Shares on the stock market. You may be able to sell your Shares for a higher price on the stock market. However, you may have to pay brokerage if you sell your Shares on the stock market. You should not have to pay brokerage if you sell your Shares in the Buy-Back. The market price of Woolworths Shares on the ASX may be, or may move, higher than the Buy-Back Price during the Tender Period. It may also vary significantly in the future. By making the Invitation and in setting the Tender Discount Range, Woolworths is not making any recommendation or giving any advice on the value of its Shares, or whether (or how) you should sell your Shares. Before you decide what to do with your Shares, we strongly recommend you seek your own professional advice (including taxation advice) How have Woolworths Shares performed over recent times? The closing price of Woolworths Shares on the ASX on Wednesday, 25 August 2010, being the last trading day before the Company announced details of the Buy-Back, was $ The highest and lowest market sale prices of Woolworths Shares during each of the six months up to 31 August 2010 were as follows: Period Low (1) High (1) VWAP (2) March 2010 $27.54 $28.78 $28.22 April 2010 $26.82 $28.78 $27.52 May 2010 $26.35 $27.48 $26.87 June 2010 $26.71 $27.91 $27.30 July 2010 $25.56 $27.11 $26.32 August 2010 $25.75 $28.06 $27.26 Note: (1) Based on the closing prices for Woolworths Shares. (2) As per the definition of VWAP in Section 5 Definitions and Interpretation. Source: IRESS p a g e 1 5

16 A graph indicating the Share price performance of Woolworths over the period from 1 January 2008 to 31 August 2010 is set out below. Woolworths share price $36.00 $34.00 Daily clos ing s hare price $32.00 $30.00 $28.00 $26.00 $24.00 $22.00 $20.00 J an 08 May 08 Aug 08 Dec 08 May 09 Aug 09 Dec 09 May 10 Aug 10 Source: IRESS 1.15 How do I participate in the Buy-Back? Step 1 Decide how many Shares you wish to sell To participate in the Buy-Back, you first need to consider how many Shares you wish to sell. The personalised Tender Form accompanying this booklet sets out the maximum number of Shares you can tender into the Buy-Back. If you hold more than 85 Shares, you may tender any number of Shares in different parcels at one or more Tender Discounts or as a Final Price Tender. The total number of Shares you tender must not be greater than the number in Box A of your Tender Form. If you hold 85 Shares or less, and you wish to tender Shares into the Buy-Back, you must tender all your Shares at the same Tender Discount or as a Final Price Tender. You should not sell to others the Shares you have offered to sell to Woolworths. Step 2 Select your Tender Discount(s) and/or a Final Price Tender Once you have determined the number of Shares you wish to sell, you need to indicate the Tender Discount, or Tender Discounts, to the Market Price at which you are willing to sell these Shares. You may tender your Shares at any of the specified discounts between 8 per cent to 14 per cent inclusive (at 1 per cent intervals) to the Market Price as set out on the Tender Form and/or as a Final Price Tender. If you hold more than 85 Shares, you may tender different parcels of your Shares at different Tender Discounts and/or as a Final Price Tender. However, you may not tender the same Shares at different Tender Discounts (or at both a specified Tender Discount and as a Final Price Tender). Each parcel of Shares tendered at a different Tender Discount or as a Final Price Tender is a separate Tender. If you hold 85 Shares or less, you may only submit one Tender in respect of all of your Shares and such a Tender must be at one of the specified Tender Discounts or as a Final Price Tender. You should note that if you submit a Tender, there is no obligation on Woolworths to accept your Tender and therefore there is no guarantee that your Shares will be bought back by Woolworths. Whether a Tender is successful will depend upon the Tender Discount to the Market Price at which you offer to sell your Shares relative to the Buy-Back Discount and any applicable scale back (see Section 1.11 for more details of the scale back process). By submitting a Final Price Tender, however, you will ensure that at least some of your Shares will be bought back, unless the Buy-Back does not proceed for some reason. p a g e 1 6

17 What is a Final Price Tender? Shareholders wishing to increase the likelihood that their Tender will be successful should submit a Final Price Tender. Final Price Tenders are designed to make it easier for retail shareholders to participate successfully in the Buy-Back. A Final Price Tender means the shareholder is willing to sell Shares at whatever Buy-Back Price is determined under the Buy-Back tender process. The Buy-Back Price could be as low as a 14 per cent discount to the Market Price. Final Price Tenders will only be scaled back if the Buy-Back Price is set at a 14 per cent discount to the Market Price and the total number of Shares tendered at that discount and as Final Price Tenders is more than Woolworths determines to buy back (see Section 1.11 for more details on the scale back process). Step 3 Select your Minimum Price (optional) In addition to choosing to tender your Shares at the specified Tender Discounts and/or as a Final Price Tender, you may also elect to impose a Minimum Price condition on your Tender. You do not need to select a Minimum Price on your Tender Form. What is a Minimum Price? If you choose to tender Shares into the Buy-Back, you will need to nominate a Tender Discount or lodge a Final Price Tender. In addition, you may make your Tender conditional on the Buy-Back Price being no less than one of the specified Minimum Prices set out on the Tender Form. Note that this is an additional option available to you but it may affect the success of your Tender. If you do not wish to specify a Minimum Price, leave the Minimum Price section on the Tender Form blank. You must ensure that you still nominate a Tender Discount or a Final Price Tender. If you are concerned that movements in the Woolworths Share price after you lodge your Tender may result in your Tender corresponding to a lower Buy-Back Price than you are willing to sell your Shares for, then you may wish to make your Tender conditional on the Buy-Back Price being no less than a specified Minimum Price. If the Buy-Back Price is below your Minimum Price, then your Tender will be rejected and your Shares will not be bought back. Please remember that if you fail to nominate a Tender Discount or a Final Price Tender, and only make your Tender conditional on a specified Minimum Price, your Tender will be invalid and will not be accepted by Woolworths. Step 4 Submission of Tenders The way you complete Step 4 will depend on the type of holding you have. This will be specified on your Tender Form. Tenders must be received no later than 7.00pm (Sydney time) on the Closing Date. (a) Issuer Sponsored Holdings If you have an Issuer Sponsored Holding and wish to submit a Tender for your Shares to be bought back, you need to complete and sign your personalised yellow Tender Form and return it to the Registry at either of the following addresses: If sending by mail Woolworths Limited Buy-Back c/o Computershare Investor Services Pty Limited GPO Box 2115 Melbourne VIC 8060 You can use the enclosed reply-paid envelope if you are posting in Australia. You should allow sufficient time for your yellow Tender Form to be received by the Registry. If delivering in person (during business hours only) Computershare Investor Services Pty Limited Level 4, 60 Carrington Street Sydney NSW 2000 (b) CHESS Holdings If you have a CHESS Holding, you will need to contact your controlling participant (usually your broker) in sufficient time for your controlling participant to process your Tender no later than 7.00pm (Sydney time) on the Closing Date. The name of the controlling participant who manages your CHESS Holding as at the Buy-Back Record Date is printed on your blue Tender Form. You should not send your blue Tender Form to the Registry. p a g e 1 7

18 1.16 Can I withdraw or amend my Tender? Once you have submitted a Tender, you may only withdraw or amend your Tender by following the procedures set out below: (a) Issuer Sponsored Holdings If you have an Issuer Sponsored Holding, you can withdraw or amend a Tender you have submitted by completing and submitting a Withdrawal/Amendment Form to the address provided so that it is received by no later than 7.00pm (Sydney time) on the Closing Date. A copy of the Withdrawal/Amendment Form is included at the back of this booklet or on the Woolworths website at Any amendment or withdrawal will NOT be effective unless it is received by 7.00pm (Sydney time) on the Closing Date. (b) CHESS Holdings If you have a CHESS Holding, you will need to contact your controlling participant (usually your broker) in sufficient time for your controlling participant to process your withdrawal no later than 7.00pm (Sydney time) on the Closing Date. The effect of your controlling participant withdrawing or amending your Tender will be to withdraw your previous Tender in favour of your replacement Tender (if any). You will need to give your controlling participant instructions in relation to your replacement Tender (if any) as if you had not previously submitted a Tender. The effect of withdrawing or amending one or more of your Tenders will be to withdraw those Tenders, and in the case of an amendment to replace the amended Tenders with new Tenders. If you are a CHESS Holder, you will receive written confirmation from CHESS of the withdrawals/amendments made in relation to your holding. Irrespective of its wording, this confirmation is not an acceptance by Woolworths of your withdrawal or amendment of any Tender. Using a Withdrawal/Amendment Form Withdrawal of Tenders You may withdraw your Tender by ticking the Withdrawal Box on the Withdrawal/Amendment Form at the back of this booklet, completing your shareholder details, signing the form and sending it to the Registry at the address provided or to your controlling participant so that it is received or processed (as applicable) by no later than 7.00pm (Sydney time) on the Closing Date. You may not withdraw your Tender after this time. Amendment of Tenders If you wish to change the terms of your Tender, you must tick the Amendment Box on the Withdrawal/Amendment Form at the back of this booklet, complete your shareholder details complete the details of your revised Tender on that form in accordance with the instructions shown on it and send it to the Registry or to your controlling participant as specified above. The effect of submitting a Withdrawal/Amendment Form will be to withdraw your previous Tender in favour of your replacement Tender (if any). On the Withdrawal/Amendment Form you will need to complete the details of your revised Tender as if you had not previously submitted a Tender and ensure the form is received by the Registry or processed by your controlling participant no later than 7.00pm (Sydney time) on the Closing Date How can I obtain additional Tender Withdrawal/ Amendment Forms? If you require replacement Tender Forms or additional Withdrawal/Amendment Forms, please call the Buy-Back Information Line on within Australia or from outside Australia. p a g e 1 8

19 1.18 How will I receive payment for Shares bought back? Woolworths will send you a cheque for your Buy-Back proceeds, unless you have a valid direct credit authority in place before 7.00pm (Sydney time) on the Closing Date. In either case, you are taken to have accepted the risks associated with the payment. If you have an existing direct credit authority for the payment of dividends, by submitting your Tender Form you authorise Woolworths to pay your Buy-Back proceeds (if any) into your nominated account. If you do not currently have a direct credit authority in place for the receipt of dividends, or if you wish to receive your Buy-Back proceeds by direct credit to a new or different bank account, you must complete and submit a new direct credit authority form which you can obtain by calling the Buy-Back Information Line on within Australia or from outside Australia the Registry must receive your direct credit authority form before 7.00pm (Sydney time) on the Closing Date. Please note that if you choose to complete a new direct credit authority form, your nominated bank account details in that form will be used for the payment of the Buy-Back proceeds and will be taken to be your nominated bank account for future payments (including dividends) by Woolworths to you. Cheques and direct credit advices will be mailed to your address as shown on the Woolworths Share Register at 7.00pm (Sydney time) on the Closing Date at your own risk. It is your responsibility to inform the Registry of any changes to your contact details. Payments to bank accounts and dispatch of cheques are expected to be completed by Monday, 18 October Payments to the accounts and the dispatch of cheques to the addresses on the Woolworths Share Register will satisfy Woolworths obligation to pay you for any Shares bought back What if I have more than one holding of Shares? You will receive a personalised Tender Form for each separate holding of Shares (for example, if you hold some Shares in your name and some Shares jointly with your spouse you will receive two Tender Forms). You may tender Shares in the Buy-Back from any or all of your separate holdings provided that you complete the Tender Form and follow the instructions on each Tender Form for each holding you wish to tender What if I hold my Shares jointly with another person? If you hold your Shares jointly with another person (for example, your spouse) you must complete and return the Tender Form in accordance with instructions for joint holdings on the Tender Form can I still vote if a general meeting is held during the Tender Period? Yes. Shareholders who tender their Shares to Woolworths will still be entitled to vote (in accordance with the voting rights attached to their Shares) at any general meeting of Woolworths held during the Tender Period. In any event, it is not intended that any general meeting be held during that period. The 85th Annual General Meeting of Woolworths will be held on Thursday, 18 November 2010 which is after completion of the Buy-Back. p a g e 1 9