129892 woolworths financial prospectus pdf (1)

7/30/2019 129892 Woolworths Financial Prospectus PDF (1)

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WoolworthsNotes IIProspectus relating to an oer o

Woolworths Notes II at $100 eachto raise $700 million with the

ability to raise more or less.

Structuring Adviser

J.P. Morgan

Joint Lead Managers

J.P. Morgan

National Australia Bank

UBS

Co-managers

ANZ SecuritiesBell Potter

Commonwealth Bank

JBWere

Ord Minnett

RBS Morgans

Westpac

ABN 88 000 014 675

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Important

notices

This Prospectus This Prospectus is dated and was lodged with the Australian Securities and Investments Commission(ASIC) on 26 October 2011. This is a replacement prospectus that replaces the prospectus datedand lodged with A SIC on 18 October 2011 (Original Prospectus). No Woolworths Notes II

(Notes) will be issued on the basis o this Prospectus a ter the expiry date o 18 November 2012.

Neither ASIC nor ASX takes any responsibility or the contents o this Prospectus or the meritso the investment to which this Prospectus relates. Reer to Section 5.3.4 or ur ther inormation.

This Prospectus is available to Australian investors in electronic orm atww w.woolworthsnotesiioer.com.au. The Oer constituted by this Prospectus in electronicorm is available only to persons accessing and downloading or printing the electronic copy o theProspectus w ithin Australia and is not available to persons in any other jurisdictions (includingthe United States) without the prior approval o Woolworths and the Joint Lead Managers. Personsin Australia having received a copy o this Prospectus in its electronic orm may, beore the ClosingDate o the Oer, obtain a paper copy o this Prospect us (ree o charge) by telephoning the

Woolworths Notes II Oer Inormation Line on 1300 660 837 or +61 3 9415 4249 (Monday toFriday 8:30am to 5:30pm). Applications or Notes may only be made on an Application Formthat is attached to or accompanying this Prospectus ollowing the opening o the Oer. A printable

version o this Prospectus may be downloaded in its entirety rom ww w.woolworthsnotesiioer.com.au. I you access an electronic copy o this Prospectus, t hen you should read Electronic accessto Prospectus in Section 5.1 or urther inormation.

Oer and oeror The Oer contained in this Prospectus is an initial public oering by invitation o WoolworthsLimited (Woolworths) o seven million Notes at $100 per Note with the ability to raise moreor less. Reer to Section 1 or urther inormation.

Restrictions on distribution This Prospectus does not constitute an oer o Notes or invitation in any place in which, or to anyperson to whom, it would not be lawul to make such an oer or invitation. Reer to Sect ion 5.3 orurther inormation.

Exposure Period The Corporations Act prohibited Woolworths rom processing applications to subscribe or Notesunder this Prospectus in the seven day period ater the date o lodgement o the Original Prospectus(Exposure Period). The period was to enable the Original Prospect us to be examined by marketparticipants prior to the raising o unds. Applications received during the Exposure Period werenot processed until ater the expiry o that period. No preerence will be conerred on applicationsreceived during the Exposure Period.

Financial inormation andorward looking statements

Section 3.4 sets out in detail the na ncial inormation reerred to in this Prospectus. The basiso preparation o that inormation is set out in Section 3.4.

All nancial amounts contained in this Prospectus are expressed in Australian dollars androunded to the nearest $0.1 million unless otherwise stated. Any discrepancies between totalsand sums o components in tables contained in this Prospectus are due to rounding.

This Prospect us contains orward looking statements which are identied by words such asmay, could, believes, estimates, expects, intends and other similar words that involverisks and uncertainties.

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Financial inormation andorward looking statements Continued

Any orward looking statements are subject to various risk actors that could cause Woolworthsactual results to dier materially rom the results expressed or anticipated in these statements.Forward looking statements should be read in conjunction with risk actors as set out in Section 4,

and other inormation in this Prospectus.

Dened terms Certain terms and abbreviations used in this Prospectus have dened meanings which areexplained in the Glossary in Appendix B o this Prospectus and in Clause 1.1 o the Termsin Appendix A.

Time Unless otherwise stated or implied, reerences to times in this Prospectus are to AustralianEastern Daylight Time.

Disclaimer No person is authorised to give any inormation or to make any representation in connectionwith the Oer described in this Prospectus which is not contained in this Prospectus. You shouldrely only on inormation in this Prospectus.

Except as required by law, and only to the extent so required, neither Woolworths nor any otherperson warrants or guarantees the uture perormance o Woolworths, or any return on anyinvestment made pursuant to this Prospectus.

Website Woolworths maintains an internet site at www.woolworthslimited.com.au. Inormation containedin or otherwise accessible through this or a related internet site is not a par t o this Prospectus.

Further queries I you are considering applying or Notes under the Oer, this document is important and shouldbe read in its entirety.

I you have any questions in relation to the Oer, please call the Woolworths Notes II OerInormation Line on 1300 660 837 or +61 3 9415 4249 (Monday to Friday 8:30am to 5:30pm).

ASIC has published a guide or retail investors who are considering investing in corporate bondscalled Investing in corporate bonds? (the ASIC Guide). A ree copy o the ASIC Guide can

be obtained rom ASICs website at www.do.asic.gov.au/corporate-bonds or by calling ASICon 1300 300 630. The ASIC Guide describes, in general terms, potential eatures o corporate

bonds. Investors should careully assess the specic terms o Notes as described in this Prospectus,which may dier rom the general terms described in the ASIC Guide.

The inormation in this Prospectus is not nancial product advice and does not take into accountyour investment objectives, nancial situation or particular needs as an investor. In particular,i considering Woolworths prospects, you should consider the risk actors that could a ect

Woolworths nancial perormance. You should careully consider these actors in light o yourpersonal circumsta nces (including nancial and taxation issues). Reer to Section 4 or urt herinormation.

I you do not understand any part o this Prospectus, or a re in any doubt as to whether to investin Notes or not, it is recommended that you seek proessional guidance rom your stockbroker,solicitor, accountant or other independent and qualied proessional adviser beore deciding

whether to invest.

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Important notices i

Key dates 1

Chairmans letter 2

Section 1 Investment overviewInormation key to a decision to invest in Notes

3

Section 2Woolworths Notes IIInormation about Notes

13

Section 3 WoolworthsInormation about Woolworths and key components

o its business model

27

Section 4 Investment risksInormation about risks associated with Notes,

Woolworths and the Oer

39

Section 5 The OerFurther inormation about the Oer including

how to apply

48

Section 6 Taxation summarySummary o certain taxation consequences

o investing in Notes

62

Section 7 Key people, interests and benetsInormation about key people, interests o people

involved in the Oer and benets they might receive

68

Section 8 Additional inormationInormation about a number o other matters

not covered elsewhere in this Prospectus

75

Appendix AWoolworths Notes II TermsTerms and conditions o Notes

85

Appendix B Glossary 103

Corporate directory 107

Contents

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Key dates

Key dates or the Oer Date

Lodgement o the Original Prospectus with ASIC 18 October 2011

Bookbuild to determine the Margin 25 October 2011Announcement o the Margin and lodgement o thisProspectus with ASIC

26 October 2011

Opening Date o the Oer 26 October 2011

Closing Date o the Woolwor ths Shareholder Oer 5.00pm on 17 November 2011

Closing Date o the Broker Firm Oer 10.00am on 23 November 2011

Issue Date 24 November 2011

Notes begin trading on ASX (on a deerred settlement basis) 25 November 2011

Holding Statements despatched by 28 November 2011

Notes begin trading on ASX (on a normal settlement basis) 30 November 2011

Key dates or Woolworths Notes II(1) Date

First Interest Payment Date 24 February 2012

Step-up Date 24 November 2016

Maturity Date 24 November 2036

Dates may change

The key dates or the Oer are indicative only and may change without notice.

Woolworths and the Joint Lead Managers may close the Oer, or any part o it, early or extendany o the closing dates without notice, or accept late applications, whether generally or in par ticularcases. I a ny o the key dates are changed, subsequent dates may also be changed accordingly. Youare encouraged to consider submitting your application as soon as possible ater the Opening Date.

NOTE

(1)

Interest Payments are scheduled to be paid

quarterly in arrears on the Interest Payment

Dates being each 24 February, 24 May,

24 August and 24 November. I any InterestPayment Date is not a Business Day, then

the Interest Payment Date will occur on the

next Business Day. Notes may be redeemed

in certain circumstances beore the Step-up

Date or the Maturity Date. Reer to Sections

1 and 2 or urther inormation.

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18 October 2011

Dear Investor,

On behal o the Board, I a m pleased to oer you the opportunityto invest in Woolworths Notes II. Notes are dated, unsecured,subordinated, cumulative notes issued by Woolworths oeringinvestors a oating rate o interest plus a xed margin. Notes

will mature on 24 November 2036, unless redeemed earlier.Woolworths has the right to redeem Notes rom 24 November2016, or earlier in certain circumsta nces. I Woolworths doesnot redeem Notes by 24 November 2016, the margin will increase

by 1.00%. Notes are intended to be quoted on the ASX. The keyeatures o Notes are set out in Sections 1 and 2 o this Prospectus.

Woolworths intends to raise $700 million through the issueo Notes with the ability to raise more or less.

The oer o Notes orms par t o Woolworths ongoing capitalmanagement strategy, with the proceeds o the oer to be usedor general corporate purposes. Woolworths expects Notesto lend support to Woolworths corporate credit rating romStandard & Poors until 24 November 2016. Notes themselves

will not be rated.

This Prospectus contains details o the oer which you shouldread careully a nd in particular, you should consider the riskactors set out in Section 4 beore deciding whether to apply orNotes. I you have any questions about the oer please call the

Woolworths Notes II Oer Inormation Line on 1300 660 837or +61 3 9415 4249 (Monday to Friday 8:30am to 5:30pm) orcontact your broker or other proessional adviser. The key datesor the oer are summarised on page 1. The oer may close earlyso you are encouraged to consider submitting your applicationas soon as possible ater the opening date.

On behal o the Board, I invite you to consider this investmentopportunity.

Yours aithully

James StrongChairmanWoolworths Limited

Chairmans

letter

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Topic Summary For more inormation

Key eatures o Notes

Who is the issuer? Woolworths Limited. Section 3

What are Notes? Notes are dated, unsecured, subordinated, cumulative notesissued by Woolworths, which will mature on 24 November 2036unless redeemed beore that date.

Section 2

What are the key Oer details? Oer size is $700 million, with the ability to raise more or less.

Issue Price is $100 per Note. This is also the Face Value.

Section 2.1

What is the purposeo the Oer?

The oer o Notes orms part o Woolworths ongoing capitalmanagement strategy, with the proceeds o the oer to be usedor general corporate purposes. Woolworths expects Notes tolend support to Woolworths corporate credit rating rom

Standard & Poors until 24 November 2016. Notes themselveswill not be rated.

Section 2.1

What are the key terms and conditions o Notes?

Interest Payments Floating interest rate equal to the sum o the Bank Bill Rateplus the Margin.

Margin is 3.25% per annum as determined under the Bookbuild.

Interest is to be paid quarterly in arrears.

Interest to be paid in cash.

Section 2.2

Clause 4.2 o the Terms

Step-up Date I not redeemed on 24 November 2016 (Step-up Date),the Margin will increase by 1.00%.


Deerrable Interest Payments Woolworths may deer any Interest Payment at its discretion. Section 2.2

All Deerred Interest Payments are cumulative and must bepaid within 5 years o the deerral o the longest outstandingDeerred Interest Payment.


Woolworths is restricted rom paying dividends or otherdistributions or capital returns on any Equal RankingObligations, Shares or other Junior Ranking Obligations(subject to certain exceptions) while any interest amountis outstanding.


Term and Maturity Date 25 years (maturing on 24 November 2036) unless redeemedearlier.

Section 2.3


Investment

overviewThis Section provides a summar y o inormationthat is key to a decision to invest in Notes. 1

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Woolworths redemption rights Redeemable on 24 November 2016, or any Interest PaymentDate ater this date.

Redeemable at any time prior to 24 November 2016i a Gross-Up Event, Accounting Event, Rating Eventor Tax Event occurs.

Redeemable at any time i a Change o Control Event occurs.

Section 2.3

Clauses 5.2-5.4 o the Terms

Holders redemption rights Holders redemption rights are limited.

Holders may only request redemption i both a Changeo Control Event and a Negative Rating Event subsists.

Section 2.3


Unsecured Repayment is not secured by a mortgage, charge or othersecurity over any asset.

Section 2.4


Ranking Rank behind all Senior Obligations but ahead o Shares(including Ordinar y Shares) and other Junior Ranking

Obligations.

Rank equally amongst themselves and any other EqualRanking Obligations.

Section 2.4


Listing Application has been made or Notes to be quoted on ASXunder the code WOWHC.

Section 5

What are Woolworthskey nancial ratios calculatedas at 26 June 2011?

Net debt/net debt and equity: 33.83%

EBITDA/net interest expense: 12.43x

EBITDAR/xed charges: 3.03x

Net debt/EBIT: 1.01x

Section 3.4

Key components o Woolworths business model

Leading market positions Australias largest ood and grocery retailer and alsoone o Australias largest retailers.

Provides scale and operating efciencies.

Section 3.2

Successul retailing strategyand execution history

Established history o ood and grocery retailing andsuccessully introducing new categories and business lines.

Retail strategy centres on providing a diverse range o highquality products and good service at consistently low prices.

Assists in increasing sales volumes while maintaining margins,as well as responding to changing customer preerences.

Section 3.2

Section 1

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1Topic Summary For more inormation

Non-cyclical businesses Supermarkets, comprising ood, groceries, petrol and liquorsales (businesses that have traditionally been less sensitive

to economic cycles), accounted or 85.5% o Woolworthstotal sales a nd 91.3% o EBIT in the 2011 nancial year.

Contributes to stable cash ows and earnings.

Section 3.2

Well-recognised brand names Woolworths brand name is a symbol o qualityand excellence, dating back over 85 years in Austra lia.

Other well-known brands include BIG W, Dick Smithand Dan Murphys.

Assists in engendering customer loyalty, underpinningsales volumes, and servicing o dierent market segments.

Section 3.2

State o the art supplychain systems

Contribute to Woolworths ability to sell quality productsat competitive prices.

Assists in improving customer service levels andinventory management, in turn contributing to salesand EBIT perormance.

Section 3.2

Geographic andbusiness diversity

Geographic diversity, with operations conducted throughoutall states and territories in Australia and New Zealand.

Diversied business mix, providing a broad revenue baseand driving incremental sales.

Section 3.2

Strong relationships withcustomers and suppliers

Strong customer base built rom ocus on quality, valueand customer engagement.

Many long standing relationships with domestic andinternational suppliers, providing consistency o productoering, product diversity, and value oering to customers,

underpinning sales and stability o earnings.

Section 3.2

Strong nancial prole Prominent positions in the ood, liquor, grocery and petrolretailing business in Australia and New Zealand lead tostability in earnings and cash ow.

Conservative balance sheet, assists in maintaining accessto domestic and international capital markets.

Section 3.2

Experienced seniormanagement team

The average number o years o service at Woolworths bythe senior management team is over 11 years.

Managing Director and Chie Executive Ofcer, Grant OBrien,has worked across a number o Woolworths businesses, havingjoined the company in 1987.

Section 3.2

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Section 1


Woolworths key business strategies

Growth strategies Growth in market share.

Continued space roll-out.

Expansion o global sourcing activities.

Grow home improvement oer.

Section 3.3

Cost reduction andefciency strategies

Reduction in costs and improved efciencies.

Leveraging Woolworths supply chain capabilities.

Section 3.3

Customer andproduct strategies

Continued reinvestment in all businesses.

Continued emphasis on exclusive brand goods.

Developing the customer engagement strategy.

Continued investment in nancial services capability.

Section 3.3

Key investment risks

Key risks associated with Notes Notes are subordinated obligations

There may be a shortall o unds to pay all amounts rankingsenior to and equally with Notes in the event a winding-up o

Woolworths occurs. This would result in Holders not receivinga ull return o capital or any Interest Payments due and unpaidat that time.

Section 4.1

Interest Payments may be deerred

Deerral o Interest Payments may have an adverse eect onthe market price o Notes and may make the market price o

Notes more volatile than the market prices o other debtsecurities that are not subject to such payment deerral rights.Deerral may also be disadvantageous to Holders rom a cashow timing perspective.

Section 4.1

Woolworths may redeem Notes on or ater 24 November 2016,or earlier in certain circumstances

Relevant Redemption Amount may be less than the currentmarket value o Notes.

Timing o redemption o Notes may not accord with a Holdersindividual nancial circumstances or tax position.

Section 4.1

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Key risks associated with Notes Continued

Limited rights or Holders to request redemption priorto Maturity Date

Holders are unable to request Woolworths to redeem theirNotes unless both a Change o Control Event and a NegativeRating Event subsists, with limited exceptions. Holders may

be unable to liquidate their investment in Notes until theMaturity Date other than by selling their Notes to a third party.

Section 4.1

Changes in Interest Rate

Interest Rate calculated by reerence to the Bank Bill Rate,which is inuenced by a number o actors and may uctuateover time.

Interest Rate may become less attractive compared torates o return available on other comparable securities.

Section 4.1

Future incurring o liabilities and uture issuanceo securities

Issue o equal or senior ranking securities or the incurrence oany such other debt obligations may reduce the amount (i any)recoverable by Holders on a winding-up o Woolworths.

Section 4.1

Risks related to themarket generally

Market price and liquidity

Market price o Notes may uctuate and trade below theIssue Price.

Market or Notes may be less liquid than the ma rket orWoolworths Ordinary Shares.

Holders who wish to sell their Notes may be unable to doso at an acceptable price, i at all.

Section 4.2

Key risks relatingto Woolworths

The ollowing risks may have a negative impact on Woolworthsbusinesses and trading results:

Weakening o the general economic activity and theretail sector

Any adverse developments in economic conditions, particularlyduring the Christ mas trading period when Woolworths salesand protability are typically strongest, may result in a ailureto grow or loss o revenues or margins.

Section 4.3

Failure to achieve expected reductions in costs

May result in inability to compete eectively, leadingto increased costs or loss o margins.

Section 4.3

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Section 1


Key risks relatingto Woolworths

Continued

Damage or dilution to Woolworths retail brands

Brands may be damaged or diluted, which may reduce consumercondence in them and adversely aect Woolworths uturetrading results a nd protability. The cost o repairing damagedor diluted brands may be signicant.

Section 4.3

Retail oer may not cater to customer demands

Woolworths may ail to gauge and satisy customer preerencesor adapt or expand its product oering to the changing demandso its customer base, which many adversely aect Woolworthsmarket share or revenues.

Section 4.3

Increased competition rom existing competitors and/ornew entrants

Woolworths may ail to compete successully in the marketsin which it operates or its existing competition in those marketsmay become stronger, which may result in a material ailureto grow or loss o market share, revenues or margins.

Section 4.3

Other

There are a number o other risks that Woolworths aces,which are discussed in more detail in Section 4.3.

Section 4.3

Further inormation about the Oer

What is the Oer Period? The key dates, including details o the Oer Period, are set outon page 1. Further deta ils are included in Section 5.

Key DatesSection 5

Is there a minimum amount

to be raised?

No. The Oer is or the issue o Notes to raise $700 million,

with the ability to raise more or less.

Is the Oer underwritten? No.

What is the pro orma balancesheet o Woolworths ollowingthe Oer?

Reer to Section 3.4.

What is the capitalisation andindebtedness o Woolworths

beore and ater the Oer?

Reer to Section 3.4.

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How is the Oer structuredand who can apply?

The Oer comprises:

an Institutional Oer to Institutional Investors;

a Broker Firm Oer made to retail clients, o Syndicate Brokers,who are resident in Australia to apply or an allocation; and

a Woolworths Shareholder Oer made to Eligible WoolworthsShareholders.

Section 5.1

Who is an EligibleWoolworths Shareholder?

A registered holder o Ordinary Shares with a registered addressin Australia at 7:00pm on 7 October 2011.

Section 5.2

How ca n I apply? Broker Firm Applica nts should cont act their Sy ndicate Broker.Woolworths Shareholder Applicants should complete anelectronic or paper copy o the Application Form and pay theapplication monies either electronically or by cheque ormoney order.

Section 5.2

What is the allocation policy? The allocation policy or Broker Firm Applicants will be determinedby the Syndicate Brokers. Allocations or Woolworths ShareholderApplicants will be determined by Woolworths and the Joint LeadManagers ater the Closing Date. Up to $25 million o the Oer

will be allocated to the Woolworths Shareholder Oer.

Section 5.2

Is there a minimum andmaximum application size?

Your application must be or a minimum o 50 Notes ($5,000).I your application is or more than 50 Notes, then you must applyin incremental multiples o 10 Notes that is, or incrementalmultiples o $1,000.

Section 5.2

Is brokerage, commissionor stamp duty payable?

No brokerage, commission or stamp duty is payable by you onyour application. You may be required to pay brokerage i you sellyour Notes on ASX ater Notes have been quoted on ASX.

Section 5.1

What are the tax implicationso investing in Notes?

A general description o the Australian ta xation consequenceso investing in Notes is set out in the summary byPricewaterhouseCoopers to Woolworths in Section 6. T hatdiscussion is in general terms and is not intended to providespecic advice in relation to the circumstances o any par ticularinvestor. Accordingly, investors should seek independent advicein relation to their individual tax position.

Section 6

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Section 1


When will I receiveconrmation that my

application has beensuccessul?

I you are an applicant in the Woolworths Sha reholder Oer orBroker Firm Oer, you will be able to ca ll the Woolworths Notes

II Oer Inormation Line on 1300 660 837 or +61 3 9415 4249(Monday to Friday 8:30am to 5:30pm) rom 24 November 2011to conrm your allocation.

Applicants under the Broker Firm Oer will also be able toconrm their allocation through the Syndicate Broker rom

whom they received their allocation.

Section 5.2

When will Notes be issued? Woolworths expects that Notes will be issued on 24 November 2011. Key Dates

Section 5.2

When will Notesbegin trading?

Woolworths expects that Notes will begin tradingon 25 November 2011 on a deerred settlement basis.

Key Dates

Section 5.2

When will Holding Statements

be despatched?

Woolworths expects that Holding Statements will be despatched

by 28 November 2011.

Key Dates

Section 5.2

Where can I nd moreinormation about thisProspectus or the Oer?

I you have any questions in relation to the Oer, please call theWoolworths Notes II Oer Inormation Line on 1300 660 837or +61 3 9415 4249 (Monday to Friday 8:30am to 5:30pm).

I you are a Broker Firm Applicant, you should contact yourSyndicate Broker.

Key inormation about people, interests and benets

Who are the WoolworthsDirectors?

James Alexander Strong (Chairman)

Grant OBrien

Tom Pockett John Astbury

Jillian Broadbent

Roderick Deane

Jayne Hrdlicka

Leon LHuillier*

Ian Macarlane

Ralph Waters

Section 7.1

(*)

Mr LHuilliers retirement as a Non-Executive D irector, to become eective at the conclusion o the Annual General Meeting to be held on 24 November 2011, was announced

on 21 October 2011.

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Who are the seniormanagement team?

Grant OBrien (Executive Director, MD & CEO) joined Woolworths in 1987.

Tom Pockett (Executive Director, Finance Director) joined Woolworths in 2002.

Julie Coates (Director o BIG W) joined Woolworths in 2002.

Steve Greentree (General Manager, Liquor) joined Woolworths in 1980.

Andrew Hall (Director o Corporate and Public Aairs) joined Woolworths in 2007.

Peter Horton (Group General Counsel and Company Secretar y) joined Woolworths in 2005.

Tjeerd Jegen (Director o Australian Supermarkets and Petrol) joined Woolworths in 2011.

Kim Schmidt (Director o Human Resources) joined Woolworths in 2000.

Section 7.2

What signicant benets andinterests are payable to Directorsand other persons associated withthe Oer or Woolworths?

Interest or benet: Section 7.3

Directors Directors ees.

Management Remuneration.

Advisers and other serviceproviders

Fees or services.

How will the expenseso the Oer be paid?

The total expenses o the Oer will be paid out o the proceedso the Oer.

Section 7.4

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Section 1

Topic Summary

What should you do?

Read this Prospectus in ull I you are considering applying or Notes under the Oer,this document is important and should be read in its entirety.

Determine i you are eligibleto apply

The Oer is being made to:

Institutional Investors;

retail clients, o Syndicate Brokers, resident in Australiawho are invited to apply under the Broker Firm Oer; and

Eligible Woolworths Shareholders, who may applyunder the Woolworths Shareholder Oer.

Who are Eligible WoolworthsShareholders?

You are an Eligible Woolworths Shareholder i you werea registered holder o Ordinary Shares with a registeredaddress in Australia at 7:00pm on 7 October 2011.

Consider and consult Consider all risks and other inormation regarding an investmentin Notes in light o your particular investment objectives andcircumstances.

I you do not understand any part o this Prospectus, or arein any doubt as to whether to invest in Notes or not, it isrecommended that you seek proessional guidance rom yourstockbroker, solicitor, accountant or other independent andqualied proessional adviser beore deciding whether to invest.

Complete and submit yourApplication Form

The application process varies depending on whether youparticipate in the Institutional Oer, Broker Firm Oer or

Woolworths Shareholder Oer. See Section 5.2 or more details.

The Oer may close early so you are encouraged to consider submitting your application as soon as possible a ter the Opening Date.

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2Woolworths

Notes IIThis Section provides inormation about Notes.

Section Question Page

Section 2.1 General

2.1.1 What are Notes? 14

2.1.2 What is the Oer? 14

2.1.3 What am I required to pay? 14

2.1.4 Why is Woolworths issuing Notes? 14

2.1.5 What is equity credit? 14

2.1.6 What is the term and maturity o Notes? 15

2.1.7 Will Notes be quoted on ASX? 15

2.1.8 Will Notes be rated? 15

Section 2.2 Interest Payments

2.2.1 What are Interest Payments? 152.2.2 Will Interest Payments be ranked or gross pay? 15

2.2.3 How will the Interest Rate be determined? 16

2.2.4 W hat is the Ba nk Bill Rate? 17

2.2.5 How will Interest Payments be calculatedor each Interest Period?

17

2.2.6 When are Interest Payments scheduledto be paid?

18

2.2.7 Can Woolworths deer Interest Payments? 19

2.2.8 A re Deerred Interest Payments cumulative? 19

2.2.9 Is Woolwor ths per mit ted to pay a ny outstanding Deerred Interest Payments

at its discretion at any time beore theynally become payable?

19

2.2.10 What are the consequences o deerringan Interest Payment?

20

Section Question Page

Section 2.3 Redemption

2.3.1 When can Woolworths redeem Notes? 20

2.3.2 What will happen on the Step-up Date? 21

2.3.3 What will happen on the Maturity Date? 21

2.3.4 What will I receive on redemption o Noteson the Step-up Date, an Interest PaymentDate ater the Step-up Date, the MaturityDate or i the aggregate Face Value o allNotes on issue is less than 20% o the originalaggregate Face Value o Notes?

21

2. 3.5 Ca n I request redemption beore theMaturity Date?

21

2.3.6 What is a Negative Rating Event? 21

2. 3.7 W hat is a Gross-Up Event , Cha ngeo Control Event, Accounting Event,Rating Event or Tax Event?

22

2.3.8 What will I receive on redemption due to aGross-Up Event, Change o Control Event,

Accounting Event, Rating Event or Tax Event?

22

2.3.9 Can Woolworths buy Notes on ASX? 23

2.3.10 What is the Replacement Capital Deed? 23

Section 2.4 Security and ranking

2.4.1 Notes a re described as unsecured.

What does this mean?

24

2.4.2 Notes are described as subordinated.What does this mean?

24

2.4.3 What will Holders receive in a Winding-Up? 25

Section 2.5 Other

2 .5.1 Ca n Woolwor ths issue ur ther Notesor other instruments?

25

2.5.2 What voting rights do Notes have at meetingso Ordinar y Shareholders o Woolworths?

25

2.5.3 What is an Event o Deault? 25

2.5.4 What will happen i an Event o Deaultoccurs?

26

2.5.5 Can Woolworths amend the terms o Notes? 26

Table o contents

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Section 2


2.1 General

2.1.1

What are Notes?

Notes are dated, unsecured, subordinated, cumulative notesissued by Woolworths, which will mature on 24 November 2036unless redeemed beore that date.

Notes entitle Holders to receive oating rate, deerrable,cumulative Interest Payments quarterly in arrears.

Notes are not convertible into Ordinary Shares or anyother securities.

Appendix A

2.1.2

What is the Oer?

The Oer is or the issue o Notes to raise $700 million,with the ability to raise more or less.

Section 5.1

2.1.3

What am I required to pay?

The Issue Price is $100 per Note. This is also the Face Value.

Applications must be or a minimum o 50 Notes ($5,000).

I your application is or more than 50 Notes, then you mustapply in incremental multiples o 10 Notes that is,incremental multiples o $1,000.

Section 5.2

2.1.4

Why is Woolworthsissuing Notes?

The oer o Notes orms par t o Woolworths ongoing capitalmanagement strategy, with the proceeds o the oer to be usedor general corporate purposes.

Woolworths expects that Notes will provide an amount o equitycredit until 24 November 2016, lending support to Woolworthscorporate credit rating rom Standard & Poors until that date.

2.1.5

What is equity credit?

The equity credit classication o an instrument providesan indication o the extent to which a rating agency treatsan instrument partly as equity rather than entirely as debt,

when evaluating the corporate credit rating o the issuer.It is not a credit rating o the instrument itsel.

Woolworths expects that Notes will cease to provide equitycredit ater 24 November 2016 and will thereater be classiedentirely as a debt instrument by Standard & Poors whenevaluating Woolworths corporate credit rating.

In Woolworths nancial st atements, Notes will be classiedas debt or their term.

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2.1.6

What is the term andmaturity o Notes?

25 years (maturing on 24 November 2036), unless redeemed beore that date. The circumstances in which Woolworths may redeem

Notes beore 24 November 2036 are described in Section 2.3.

In particular, Woolworths may elect to redeem Notes at its optionon 24 November 2016 or any Interest Payment Date thereater.

I not redeemed on 24 November 2016, the Margin will increaseby 1.00%. As reerred to previously, this is also the date thatWoolworths expects that the Notes will cease to provide anyequity credit or the purpose o Standard & Poors assessmento Woolworths corporate credit rating.

Notes are described as dated because they have a maturity date(24 November 2036).




2.1.7

Will Notes be quoted on ASX?

Woolworths has applied or Notes to be quoted on ASX andNotes are expected to trade under ASX code WOWHC.

Section 5

2.1.8

Will Notes be rated?

No. Notes will not be rated.

2.2 Interest payments

2.2.1

What are Interest Payments?

Interest Payments are quarterly, oating rate, payments inrespect o each Note.

Interest Payments on Notes will be calculated as a percentageo the Face Value.


2.2.2

Will Interest Payments

be ranked or gross pay?

Gross pay. That is, Interest Payments will be paid wholly in cash.

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Section 2


2.2.3

How will the Interest Ratebe determined?

The Interest Rate or each Interest Period will be set onthe rst Business Day or each Interest Period as ollows:

Interest Rate = Bank Bill Rate + Margin


where:

Bank Bill Rate means the Bank Bill Rate on the rstBusiness Day o the Interest Period; and

Margin is 3.25% per annum as determined under the Bookbuild.The Margin will be increased by 1.00% rom 24 November 2016i not redeemed (this is reerred to as the Step-up Margin).

As an example, assuming the Bank Bill Rate on the rstBusiness Day o the Interest Period is 4.80% per annumand given that the Margin is 3.25% per annum:

Bank Bill Rate 4.80% per annum

plus Margin 3.25% per annum

Illustrative Interest Rate 8.05% per annum

Section 2.2.4

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2.2.4

What is the Bank Bill Rate?

The Bank Bill Rate is a benchmark interest rate or the Australianmoney market commonly used by major Australian nancial

institutions to lend short-term cash to each other over a 90 dayperiod. This rate changes to reect the supply and demand

within the cash market.

The graph below illustrates the movement in the Bank Bill Rateover the last 10 years. The rate on 14 October 2011 was 4.80%per annum.

90-day Bank Bill Rate

2%

4%

6%

8%

10%

Oct-01 Oct-02 Oct-03 Oct-04 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11

The above graph is or illustrative purposes only and does notindicate, guarantee or orecast the actual Bank Bill Rate. Theactual Bank Bill Rate or the rst and subsequent InterestPeriods may be higher or lower than the rates in the above graph.


2.2.5

How will Interest Paymentsbe calculated or eachInterest Period?

Interest Payments scheduled to be paid on each Interest PaymentDate will be calculated using the ollowing ormula:

Face Value x Interest Rate x N

365

where:

Face Value means $100 per Note;

Interest Rate means the rate (expressed as a percentageper annum) calculated as set out in Section 2.2.3; and

N means the number o days in the Interest Period calculatedas set out in the Terms.


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Section 2


2.2.5

How will Interest Paymentsbe calculated or eachInterest Period?

Continued

As an example, i the Interest Rate were 8.05% per annum, thenthe Interest Payment on each Note or that Interest Period (i the

Interest Period was or 91 days) would be calculated as ollows:

Illustrative Interest Rate

Multiplied by the Face Value

Multiplied by the number o daysin the Interest Period

Divided by 365

8.05% per annum

x $100.00

x 91

365

Illustrative Interest Paymentor the Interest Period per Note $2.01

The above example is or illustrative purposes only and doesnot indicate, guarantee or orecast the actual Interest Payment

or any Interest Period. Actual Interest Payments may be higheror lower than this example.

The Interest Rate or the rst Interest Period will be set onthe Issue Date and will include the Margin o 3.25% per annumas determined under the Bookbuild.

Interest Payments will be paid in Australian dollars by directcredit into an Australian dollar account (excluding credit cardaccounts) o an Australian nancial institution nominated bythe Holder or in any other manner determined by the Directorsin accordance with Woolworths constitution.

2.2.6

When are Interest Payments

scheduled to be paid?

Interest Payments are scheduled to be paid quarterly in arrearson the Interest Payment Dates being each 24 February, 24 May,

24 August a nd 24 November. I any o these dates are notBusiness Days, then the Interest Payment Date will occuron the next Business Day.

The rst Interest Payment Date will be 24 February 2012.


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2.2.7

Can Woolworths deerInterest Payments?

Woolworths may, at its discretion, deer any Interest Payment.However, all Deerred Interest Payments must be paid within

5 years o the deerral o the longest outstanding DeerredInterest Payment.

Further, all Deerred Interest Payments must be paid i anyo the ollowing occur:

any dividend or distribution or interest is paid on any EqualRanking Obligations, Junior Ranking Obligations or Shares(other than a payment made pro rata on Notes and EqualRanking Obligations in relation to that payment);

any redemption, purchase, buy-back or capital retur n is madein relation to, any Equal Ranking Obligations, Junior RankingObligations or Shares (other than in respect o employeeincentive plans);

any Notes are redeemed; Notes mature; or

an order or the winding-up o Woolworths is made andthe Trustee serves notice o an Event o Deault.


2.2.8

Are Deerred InterestPayments cumulative?

Yes. All Deerred Interest Payments are cumulative.

Deerred Interest Payments will accrue interest at the prevailingInterest Rate up to but excluding the date o actual payment othat Deerred Interest Payment. This amount will be calculatedon a daily basis and compounded quarterly.


2.2.9

Is Woolworths permitted to

pay any outstanding DeerredInterest Payments at itsdiscretion at any time beorethey nally become payable?

Yes. Clause 4.5 o the Terms

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Section 2


2.2.10

What are the consequences odeerring an Interest Payment?

I or any reason an Interest Payment has not been paid in ullwithin 20 Business Days o the relevant Interest Payment Date,

Woolworths must not without approval by a Special Resolutiono Holders:

declare or pay any dividend, interest or distribution on anyEqual Ranking Obligations, Junior Ranking Obligations orShares (other than a payment made pro rata on Notes andEqual Ranking Obligations in relation to that payment); or

redeem, reduce, cancel, purchase or buy-back any EqualRanking Obligations, Junior Ranking Obligations or Shares(other than in respect o employee incentive plans),

unless:

all Deerred Interest Payments that then remainoutstanding are paid; or

all Notes have been redeemed.

Further, i or any reason an Interest Payment is not paid withina specied period ater it becomes due and payable, an Event oDeault will occur.


Section 2.5

Section 2.5.3

2.3 Redemption

2.3.1

When can Woolworthsredeem Notes?

Woolworths may, subject to the Replacement Capital Deed,elect to redeem Notes at its option on:

24 November 2016 (the Step-up Date); or

any Interest Payment Date ater the Step-up Date.

Prior to the Step-up Date, Woolworths may elect to redeemNotes at any time i:

a Gross-Up Event;

Accounting Event;

Rating Event; or

Tax Event occurs.

Woolworths can also elect to redeem Notes at any time i:

a Change o Control Event occurs; or

the aggregate Face Value o all Notes on issue is less than20% o the aggregate Face Value o Notes issued on theIssue Date.




Clause 5.5 (b) o the Terms

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2.3.2

What will happen onthe Step-up Date?

Woolworths may, but is not obliged to, redeem Notes on theStep-up Date. At this time, Woolworths can:

elect not to redeem Notes in which case the Step-up Marginwill apply; or

redeem Notes, in which case Woolworths is required to replaceNotes in accordance with the Replacement Capital Deed andHolders will receive the Redemption Amount.

Woolworths expects that, i Notes remain on issue ater theStep-up Date, they will cease to provide equity credit rom thatdate and be classied entirely as a debt instrument by Standard& Poors when evaluating Woolworths corporate credit rating.

Clauses 4.2 and 5.2o the Terms

Section 2.3.4 and 2.3.10

2.3.3

What will happen on theMaturity Date?

Unless previously redeemed, all outstanding Notes will beredeemed on 24 November 2036 (the Maturity Date).


2.3.4

What will I receive onredemption o Notes on theStep-up Date, an InterestPayment Date ater the Step-upDate, the Maturity Date or ithe aggregate Face Value oall Notes on issue is less than20% o the original aggregateFace Value o Notes?

Holders will receive the sum o:

$100 per Note;

all Deerred Interest Payments in respect o that Notethat remain unpaid; and

any accrued but unpaid Interest Payment or the nalInterest Period in respect o that Note.

The aggregate o those amounts is ca lled the RedemptionAmount.


2.3.5

Can I request redemptionbeore the Maturity Date?

Holders do not have a right to request redemption unless botha Change o Control Event and a Negative Rating Event subsists

and Woolworths does not elect to redeem Notes.


Upon redemption, Holders will receive the Redemption Amount. Section 2.3.4

2.3.6

What is a Negative RatingEvent?

A Negative Rating Event will occur i due to a Change o ControlEvent, the rating assigned to Woolworths senior unsecureddebt (ie. Woolworths corporate credit rating) is lowered bythe relevant rating agencies to a rating below investment gradeor is withdrawn.


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2.3.7

What is a Gross-Up Event,Change o Control Event,

Accounting Event, RatingEvent or Tax Event?

A summary o these events, which give Woolworths the rightto redeem Notes at any time prior to the Step-up Date (except

or a Change o Control Event which gives Woolworths the rightto redeem Notes at any time) is as ollows:

a Gross-Up Eventwill occur i Woolworths is requiredto pay more than a minimum additional amount above athreshold in relation to Notes as a result o a change in taxlaws or regulations, or any change in the application orofcial interpretation o such laws or regulations;

a Change o Control Eventwill occur, in summary, i a personand their associates come to have a relevant interest in morethan 50% o the voting shares in the capital o Woolworths;

an Accounting Eventwill occur i Notes may no longer berecorded as a nancial liability in the audited consolidated

accounts o Woolworths; a Rating Eventwill occur i Notes will no longer be eligibleor the same or higher category o equity credit as was initiallyattributed to Notes on the Issue Date; or

a Tax Eventwill occur i any Interest Payment would notbe deductible or tax purposes.


2.3.8

What will I receive onredemption due to a Gross-UpEvent, Change o Control Event,

Accounting Event, Rating Eventor Tax Event?

I a Gross-Up Event, Change o Control Event, Accounting Eventor Tax Event occurs, a Holder will receive the Redemption

Amount.

I a Rating Event occurs, a Holder will receive the Make WholeAmount being the sum o:

$101 per Note;

all Deerred Interest Payments in respect o that Note thatremain unpaid; and

any accrued but unpaid Interest Payment or the nalInterest Period in respect o that Note.


Section 2

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2.3.9

Can Woolworths buyNotes on ASX?

Yes. Woolworths or any Subsidiary o Woolworths may at anytime purchase or procure others to purchase benecially or its

account Notes in any manner and at any price subject to anyapplicable laws, ASX Listing Rules and the Replacement CapitalDeed. Such acquired Notes may be surrendered or cancellationor held or resold.


2.3.10

What is the ReplacementCapital Deed?

Woolworths will enter into a Replacement Capital Deed onor beore the Issue Date that requires Woolworths (and itsSubsidiaries) not to redeem or purchase any Notes unless

Woolworths has issued Ordinary Shares or qualiying securities(being securities which attract an equity credit at least equivalentto Notes) in the 12 months prior to such redemption or purchaseo Notes to at least the value required by the deed.

The Replacement Capital Deed will terminate on the Maturity

Date and may cease to apply i certain events set out in the deedoccur beore that time.

Section 8.2

2

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2.4 Security and ranking2.4.1

Notes are described asunsecured. What doesthis mean?

Repayment o the Face Value (or other money owing in respecto Notes) is not secured by a mortgage, charge or other securityover any o Woolworths a ssets. Notes are unsecured notesor the purposes o the Corporations Act (section 283BH).


2.4.2

Notes are described assubordinated. W hatdoes this mean?

The Notes will, in the Winding-Up o Woolworths, rank behindall Senior Obligations (including the claims o creditorsmandatorily preerred by law) and equally amongst themselvesand any Equal Ranking Obligations. Notes will, however, rankahead o Ordinary Shares and other Junior Ranking Obligationsor payments on a Winding-Up.

Illustration o ranking upon liquidation

ClassicationType oinstrument

Existing debtobligations and equity

Amount drawn as at 26 June 2011,adjusted or the amount to beraised under the Ofer(1)

Higher

Ranking

Lower

Ranking

Senior

Obligations

Secured debt None None

Unsubordinated and

unsecured debt

Bank loans, commercial paper

and medium term notes$4,244.9m

Equal Ranking

Obligations

Subordinated and

unsecured debtWoolworths Notes II $700m(2)

Junior Ranking

Obligations

Preerence shares None None

Ordinary shares Woolworths Ordinary Shares $7,845.8m(3)

(1)

The Woolworths Notes issued in 2006 have not been included in this table because

they were redeemed on 15 September 2011 beore the issue o this Prospectus.

(2)

Assuming $700m is raised under the Oer.

(3)

As set out in Section 3.4 o this Prospectus, Woolworths total equity

as at 26 June 2011 was $7,845.8m.

NOTEThe actual amount o Woolworths debt varies throughout the course o the year,

in large part because o seasonal retail trading patterns.


Section 2

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2.4.3

What will Holders receivein a Winding-Up?

Holders will be entitled to be paid the Redemption Amountater all creditors ranking in priority to Holders at the time

o the Winding-Up and any debts that receive priority by lawhave been paid in ull.

In the event o a shortall o unds on a Winding-Up, there is a riskthat Holders will not receive the Redemption Amount in ull.

Clauses 3.2 and 8.1 o the Terms

2.5 Other

2.5.1

Can Woolworths issue ur therNotes or other instruments?

Yes. Woolworths reserves the right to issue urther Notes or otherinstruments which rank behind, equal with or ahead o Notes.

For so long as any Notes are on issue, Woolworths is notpermitted to incur (without the prior approval o Holders bySpecial Resolution) any debt obligation which is subordinated

and ranking in priority to Notes in respect o interest, dividendsor distributions o capital on a Winding-Up, but otherwise thereis no restriction on Woolworths incurring any other debtobligations, including secured or unsubordinated debtobligations which will ran k ahead o Notes.

Notes do not give Holders any right to subscribe or newsecurities in Woolworths, to participate in any bonus issueso shares in Woolworths or to participate in Woolworthsdividend reinvestment or bonus option plans.

Clauses 8.2 and 9 o the Terms

2.5.2

What voting rights do Noteshave at meetings o Ordinary

Shareholders o Woolworths?

Holders have no voting rights at meetings o shareholderso Woolworths.


2.5.3

What is an Event o Deault?

An Event o Deault will occur i:

Woolworths ails to pay an amount that has becomedue and payable under Notes;

Woolworths ails to comply with any o its other materialobligations under the Terms or t he Trust Deed; or

an order is made or a resolution is passed or thewinding-up o Woolworths.


2

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2.5.4

What will happen i anEvent o Deault occurs?

I an Event o Deault occurs as a result o Woolworths ailing topay an amount that has become due and payable, or as a result o

an order being made or a resolution being passed or the winding-up o Woolworths, the Trustee may notiy Woolworths that theRedemption Amount on the Notes (being $100 per Note plus anyaccrued and outstanding Interest Payments and any outstandingDeerred Interest Payments) is immediately due and payable.

I an Event o Deault occurs as a result o Woolworths ailingto comply with any o its other material obligations under theTerms or the Trust Deed, the Trustee may serve notice on

Woolworths that it is in deault under the Terms and bringlegal proceedings to seek a declaration, order or specicperormance or an injunction.

The Trustees ability to enorce any r ight or remedy under or inrespect o Notes is l imited as provided by the Terms. Events odeault may also trigger cross-deault provisions in Woolworthsother debt acilities.

Generally, only the Trustee (and not a Holder) has the rightto enorce any right or remedy under or in respect o Notes.


2.5.5

Can Woolworths amendthe Terms o Notes?

Yes. Subject to complying with all applicable laws and theTerms, Woolworths may amend the Terms without the consento Holders i the a mendment is, in the opinion o the Trustee:

made to correct a maniest error;

o a ormal, minor or technical nature;

made to comply with any law or ASX Listing Rules; or

is not materially prejudicial to Holders generally.

Woolworths may also amend the Terms i the amendment hasbeen approved by Special Resolution o Holders, provided therights and obligations o the Trustee a re not altered as a result.

Clause 11 o the Terms

Section 2

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WoolworthsThis Section provides inormation about

Woolworths and the key components oits business model that help underpin itsnancial perormance and position.

3.1 Overview

Woolworths is Australias largest ood and grocery retailer and the second largest ood and groceryretailer in New Zealand by sales revenue and number o stores, with 840 supermarkets in Australiaand 156 supermarkets in New Zealand as at 26 June 2011. Woolworths is also one o Australiaslargest retailers measured by sales revenue and number o stores with over 3,200 total retail locationsin Australia and New Zealand as at 26 June 2011. Woolworths is a major liquor retailer, operating1,250 retail liquor outlets and 282 hotels. Woolworths is also a large discount department store,consumer electronics and petrol retailer with 165 stores, 394 stores and 581 outlets, respectively.In addition, Woolworths provides wholesale services to 543 home improvement stores in Australia,51 supermarkets in New Zealand and 64 electronic stores in India.

Woolworths entered the Australian home improvement market in a joint venture with the U.S.based Lowes Companies, Inc. (Lowes), with its purchase o the Danks business in 2009. As at26 June 2011, it had 19 stores and provided wholesale services to 543 home improvement storesin Australia. Woolworths recently opened its rst Masters branded Big Box home improvementstore in Victoria in 2011.

As at 26 June 2011, Woolworths employed over 190,000 people working in stores, support ofcesand distribution centres.

Woolworths total sales revenue in the 2011 nancial year was $54.1 billion, o which $49.7 billionwas rom Australia and $4.4 billion was rom New Zealand. Woolworths EBIT in the 2011 nancialyear was $3.3 billion, with approximately $3.1 billion coming rom Australian operations and$196 million rom New Zealand.

Woolworths has demonstrated consistently strong nancial perormance. Sales and EBIT haveexhibited solid growth over each o the past ve nancial years with a compound average growthrate or sales o 7.5% and 13.7% or EBIT rom the period 2006 - 2011.

As at 14 October 2011, Woolworths was one o the 10 largest companies listed on ASX, with a marketcapitalisation o $29.9 billion.

3

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NOTES

(2)

Segmental EBIT is not adjusted

or unallocated costs. Excluding

unallocated costs o $99.5 million,

segment EBIT is $3,376 million. Hence

total percentage is greater than 100%.

Unallocated costs are comprised o the

corporate head oce, the property division

and the home improvement division.

(3)

Includes the Danks Holdings Limited

business acquired in 2009.

Section 3

Summary o nancial contribution by division (or the 52 weeks ended 26 June 2011)

Sales EBIT(2)

Woolworths activities are primarily conducted through the ollowing divisions: Supermarkets:Woolworths Supermarkets division is the companys largest division

and comprises:

Australian Food and Liquor:Woolworths Australian supermarkets and retail liquoroutlets and Austra lian ood and liquor wholesale operations;

New Zealand Supermarkets:Woolworths New Zealand Supermarkets andsupermarkets wholesale operations;

Petrol:Australian petroleum products retail outlets;

BIG W: Discount department store operations;

Consumer Electronics: Consumer electronics retailing;

Hotels: Pub operations including bars, restaurants, gaming, unctions and accommodation(but excluding any retail liquor outlets); and

Home Improvement(3): Home improvement wholesale services and retail stores.

$54,143 million

Australian Food& Liquor66.8%

New Zealand Supermarkets 7.6%

Petrol11.1%

Big W 7.7%

Consumer Electronics 3.5%

Hotels 2.1%

Home Improvement 1.2%$3,276 million

New Zealand Supermarkets 5.9%

Petrol3.6%

Big W 5.4%

Consumer Electronics0.8%

Hotels 5.6%

Australian Food& Liquor81.8%

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3

NOTE

(4)

Hotels reer to pubs or bars that may

also provide restaurants, wagering and

gaming acilities, unction acilities and

in some cases accommodation.

The diagra m below provides an overview o some o Woolworths brands by division, illustratingeach divisions sales contribution or the 2011 nancial year and number o outlets, highlightingthe importance to Woolworths o its Supermarkets division (unless otherwise noted, all gu res

are as at 26 June 2011):Supermarkets BIG W Consumer Electronics Hotels(4) Home Improvement

AUSFood&Liquor

NZSupermarkets

Petrol

85.5% o FY11 sales

840 Woolworths

supermarkets

156 New Zealand

supermarkets

1,250 Retail liquor outlets

581 Petrol outlets

7.7% o FY11 sales

165 BIG W

department stores

3.5% o FY11 sales

394 consumer

electronics stores

2.1% o FY11 sales

282 Hotels

1.2% o FY11 sales

19 Danks retail stores

and

543 wholesale stores

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Section 3

Woolworths spread o business operations is complemented by its geographic diversication as highlighted by the map below.

Number o Woolworths stores in Australia and New Zealand (as at 26 June 2011)

SA/NT

Supermarkets 76

BWS 58

Dan Murphy 9

Petrol 51

BIG W 15

Consumer Electronics 30

ALH Hotels 32

Total 271

WA

Supermarkets 83

BWS 53

Dan Murphy 8

Petrol 58

BIG W 15


ALH Hotels 14

Total 267

Group Total

Supermarkets 840(incl. Attached Liquor o 457)

Thomas Dux 11

NZ supermarkets 156

BWS 653

Dan Murphy 140

Petrol 581

BIG W 165


ALH Hotels 282

Danks 19

Total 3,241

TAS

Supermarkets 29BWS 21

Petrol 16

BIG W 3


ALH Hotels 5

Danks 11

Total 91

NSW/ACT

Supermarkets 255

Thomas Dux 6

BWS 116

Dan Murphy 40

Petrol 191

BIG W 62


ALH Hotels 27

Danks 6

Total 814

New Zealand

Supermarkets 156

Petrol


Total 223

VIC

Supermarkets 203

Thomas Dux 5

BWS 88Dan Murphy 49

Petrol 144

BIG W 28


ALH Hotels 97

Danks 2

Total 688

QLD

Supermarkets 194

BWS 317

Dan Murphy 34

Petrol 121

BIG W 42


ALH Hotels 107

Total 887

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3.2 What are the key components o Woolworths business model?

Woolworths believes that there are a number o key components o its business model that helpunderpin its nancial perormance and position:

Leading market positions

Woolworths is Australias largest ood and grocery retailer and also one o Australias largestretailers by sales revenue and number o stores. Woolworths had the leading market share in

Australia with over 30% o ood retailing (including supermarket and grocery stores, liquorretailing and other specialised ood retailing) as at June 2011. Woolworths leading ma rketpositions provide scale and operating efciencies to its retail businesses.

Successul retailing strategy and execution history

Woolworths has an established history o ood and grocery retailing and in successullyintroducing new categories and business lines. Woolworths retail strateg y centres on providinga diverse range o high quality products and good serv ice at consistently low prices. For example,

when Woolworths has been able to lower its prices by reducing its cost o doing business, it hassought to pass on some o these cost savings to consumers.

This strategy assists Woolworths to increase its sales volumes while maintaining its margins,as well as to respond to changing customer preerences, including through its multi-channelonline oering.

Predominantly non-cyclical businesses

Woolworths Supermarkets division, comprising ood, groceries, petrol and liquor sales,accounted or 85.5% o Woolworths total sales and 91.3% o EBIT in the 2011 nancial year.

As providers o ood and other basic necessities, the earnings o these businesses havetraditionally been less sensitive to economic cycles than the earnings o businesses thatpredominantly provide discretionary goods.

The less cyclical nature o this business has assisted to provide Woolworths with stable cashows and earnings.

Well-recognised brand names

The Woolworths brand na me is a sy mbol o quality and excellence and dates back over 85 yearsin Australia. The brand is presented with The Fresh Food People tagline to promote Woolworthsquality ood and groceries. The Countdown brand name has been in existence in New Zealandsince 1981. In addition, Woolworths has several other well-known brands including BIG W,Dick Smith and Dan Murphys. Woolworths well-recognised brand names assist it to engendercustomer loyalty, underpinning sales volumes, and to service dierent market segments.

State o the art supply chain systems

Woolworths believes its purchasing and distribution systems have contributed to its ability to sellquality products at competitive prices. These systems have also assisted Woolworths to improvecustomer service levels and inventory management, which in turn have contributed to sales andEBIT perormance. Woolworths is now applying the supply chain technologies developed or its

Australian Supermarkets division to its other divisions, including New Zealand Supermarkets,

BWS, Dan Murphys, BIG W and Consumer Electronics.

3

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Section 3

Geographic and business diversity

Woolworths has a geographically diverse business, with operations conducted throughout allstates and territories in Australia and New Zealand, which provides risk diversication benets

as well as a ssisting Woolworths to continue to serve its customers wherever they are locatedin Australia or New Zealand. In addition, Woolworths has diversied its business mix andrevenue base through the growth o existing categories other than superma rkets and throughthe introduction o new categories such as home improvement. This diversity provides

Woolworths with a broad revenue base and drives incremental sales.

Strong relationships with customers and suppliers

Woolworths has a strong customer base built rom its ocus on quality, value and customerengagement.

Woolworths has long standing relationships with many o its domestic and international supplierswhich assists it to provide consistency o product, a diverse range, and a value oering to customers,underpinning sales and stability o earnings.

Strong nancial prole

Food, liquor and petrol reta iling represented 85.5% o Woolworths sales revenue or the 2011nancial year. Woolworths believes its prominent positions in industries selling non-discretionaryproducts in Australia and New Zealand lead to stability in earnings and cash ow. As illustratedin the chart below, Woolworths EBIT growth is underpinned by solid growth in Australian Foodand Liquor.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

FY07

$m

FY08 FY09 FY10 FY11

+24.2%

+22.6%

+19.8%

+15.1%

+12.9%

+7.5%+19.8%

+11.3%

+9.5%

+6.3%

Total Group EBIT

Australian Food & Liquor EBIT

Note: Woolworths nancial year end nishes on the last Sunday in June. The eect o this is that periodically Woolworths has a 53 week

as opposed to a 52 week nancial year. The 2008 nancial year was a 53 week year. All other nancial years depicted above were

52 week years.

Woolworths maintains a conservative balance sheet. This has assisted it historically to maintainaccess to domestic and international capital markets.

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3 Experienced senior management team

Woolworths has an experienced senior management team. The average number o years o serviceat Woolworths by the senior management team is over 11 years. Woolworths Group Managing

Director and Chie Executive Ofcer, Grant OBrien, has worked across a number o Woolworthsbusinesses, having joined the company in 1987.

3.3 What are Woolworths business strategies?

Woolworths vision is to continue to drive each o its retail businesses with a ocus on continuallyimproving the customer oer, rewarding customers with lower prices, better value, qualit y, range,reshness, ser vice and convenience.

Woolworths has adopted a number o key strategies which include the ollowing:

Growth in market share o existing and new businesses, including entry into the homeimprovement ma rket;

Continued reinvestment in all businesses driven by customer eedback and changingconsumer demand;

Continued space roll-out adding 15-25 Australian superma rkets each year, with the intentionto open 15-20 new BIG W stores in the next three years and acquire hotels selectively;

Reduction in costs and improved eciencies through the continued implementation o initiativesto improve gross margin and Cost o Doing Business, the benets o which Woolworths proposes

will be shared between customers and shareholders. The current ocus o these initiativesincludes improving Woolworths end-to-end supply chain management, lowering non-inventoryprocurement costs, improving efciency and lowering costs in operational work practices,investing in global direct sourcing to enhance procurement capability and lower costs or theconsumer, and improving efciency in support structures;

Leveraging Woolworths supply chain capabilities by sharing the intellectual property thatit has developed in its supply chain and retailing systems with other Woolworths businesses;

Expansion o global sourcing activities urt her developing its international logistics capability

to support its growth plans; Continued emphasis on exclusive brand goods across supermarket, liquor, BIG W andDick Smith stores;

Grow home improvement oer through its joint venture with Lowes, targeting to secure150 Masters sites in 5 years rom its announcement in 2009 and to open 15-20 homeimprovement stores per year;

Developing the customer engagement strategy building on the 8.4 million loyalty customersacross Australia and New Zealand through the Everyday Rewards and Onecard programmes;and

Continued investment in fnancial services capability beyond its existing in-store ATM networksand credit card, pre-paid Mastercard and stored-value card oerings, into additional nancialservice oerings through its retail network and its own nancial switch (which was developed

to process card based payments delivering signicant cost sav ings).

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Section 3

3.4 Financials

Consolidated income statement

The ollowing table sets out Woolworths consolidated results or the 52 week periods ended26 June 2011 and 27 June 2010:

52 weeks ended27 June 2010

$m

52 weeks ended26 June 2011

$m

Revenue rom the sale o goods 51,694.3 54,142.9

Other operating revenue 90.5 136.6

Revenue rom operations 51,784.8 54,279.5

Cost o sales (38,391.2) (40,186.3)

Gross prot 13,393.6 14,093.2

Other revenue 179.3 226.2

Branch expenses (8,165.4) (8,583.8)

Administration expenses (2,325.4) (2,459.2)

Earnings beore interest and tax 3,082.1 3,276.4Financial expense (238.5) (300.0)

Financial income 27.0 38.5

Net nancing cost (211.5) (261.5)

Net prot beore income tax expense 2,870.6 3,014.9

Income tax expense (832.6) (874.6)

Prot ater income tax expense 2,038.0 2,140.3

Net prot attributable to equity holders o Woolworths Limited 2,020.8 2,124.0

Net prot attributable to non-controlling interests 17.2 16.3

Source: Woolworths Limited Annual Report or the nancial year ended 26 June 2011.

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3Pro orma consolidated balance sheet

The ollowing table sets out Woolworths summarised consolidated balance sheets as at 26 June 2011and 27 June 2010, as well as the pro orma consolidated balance sheet as at 26 June 2011 assuming

$700 million is raised through the issue o Notes.

Actual as at27 June 2010

$m

Actual as at26 June 2011

$m

Adjustment orissuance o Notes(5)

$m

As adjustedpro orma as at

26 June 2011$m

Current assets

Cash 713.4 1,519.6 686.9 2,206.5

Trade and other receivables 916.8 1,122.2 1,122.2

Inventories 3,438.8 3,736.5 3,736.5

Assets held or sale 37.3 93.9 93.9

Other nancial assets 92.7 120.8 120.8

Total current assets 5,199.0 6,593.0 686.9 7,279.9

Non-current assets

Trade and other receivables 13.3 14.9 14.9

Other nancial assets 132.3 119.3 119.3Property, plant and equipment 7,639.1 8,620.3 8,620.3

Intangibles 5,071.0 5,236.6 5,236.6

Deerred tax assets 432.6 510.4 510.4

Total non-current assets 13,288.3 14,501.5 14,501.5

Total assets 18,487.3 21,094.5 686.9 21,781.4

Current liabilities

Trade and other payables 5,278.9 5,512.8 5,512.8

Borrowings 871.7 1,471.1 1,471.1

Current tax liabilities 199.0 204.7 204.7

Other nancial liabilities 24.7 238.7 238.7

Provisions 779.1 861.0 861.0

Total current liabilities 7,153.4 8,288.3 8,288.3

Non-current liabilities

Borrowings 2,670.4 3,373.8 686.9 4,060.7

Other nancial liabilities 236.7 915.5 915.5

Provisions 416.3 465.2 465.2

Other 192.8 205.9 205.9

Total non-current liabilities 3,516.2 4,960.4 686.9 5,647.3

Total liabilities 10,669.6 13,248.7 686.9 13,935.6

Net assets 7,817.7 7,845.8 7,845.8

Equity

Issued capital 3,784.4 3,988.6 3,988.6

Shares held in trust (41.2) (56.1) (56.1)

Reserves (28.0) (236.8) (236.8)

Retained earnings 3,855.2 3,897.5 3,897.5

Equity attributable to the members

o Woolworths Limited 7,570.4 7,593.2 7,593.2Non-controlling interests 247.3 252.6 252.6

Total equity 7,817.7 7,845.8 7,845.8


NOTE

(5)

Refects the net proceeds o the Oer,

taking into account $700 million gross

proceeds, less $13.1 million es timated

Oer costs.

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Section 3

Consolidated cash ow statement

The ollowing table sets out Woolworths consolidated cash ow statements or the 52 week periodsended 26 June 2011 and 27 June 2010:

52 weeks ended27 June 2010$m

52 weeks ended26 June 2011$m

Cash fows rom operating activities

Receipts rom customers 55,664.6 58,886.6

Receipts rom vendors and tenants 45.5 52.9

Payments to suppliers and employees (51,811.4) (54,797.3)

Interest and costs o nance paid (260.5) (332.1)

Interest received 10.7 22.5

Income tax paid (896.9) (841.5)

Net cash provided by operating activities 2,752.0 2,991.1

Cash fows rom investing activities

Proceeds rom the sale o property, plant and equipment 55.4 394.4

Proceeds rom the sale o investments 4.2 -Payments or capital expenditure (1,817.7) (2,138.5)

Payment or purchase o investments (1.9) -

Dividend received 12.5 10.6

Payments or purchase o businesses (204.7) (443.9)

Net cash used in investing activities (1,952.2) (2,177.4)

Cash fows rom nancing activities

Proceeds rom issue o equity securities 73.8 97.7

Proceeds rom issue o equity securities in subsidiary to non-controlling interests 79.5 176.6

Payments or share buyback (294.6) (738.7)

Proceeds rom external borrowings 12,833.8 13,349.2

Repayment o external borrowings (12,347.7) (11,590.9)

Dividends paid (1,164.6) (1,260.0)

Dividends paid to non-controlling interests (16.8) (13.2)

Repayment o employee share plan loans 3.7 7.4

Payments or shares acquired by the Woolworths Limited Employee Share Trust - (28.8)

Net cash used in nancing activities (832.9) (0.7)

Net increase/(decrease) in cash held (33.1) 813.0

Eects o exchange rate changes on balance o cash held in oreign currencies (0.2) (6.8)

Cash at the beginning o the nancial period 746.7 713.4

Cash at the end o the nancial period 713.4 1,519.6

Non-cash nancing and investing activities

Dividend 1,349.2 1,457.7

Issuance o shares under the DRP(6) (184.6) (197.7)

Net cash outfow 1,164.6 1,260.0


NOTE

(6)

In accordance with the companys Dividend

Reinvestment Plan (DRP) 14% (2010: 14%)

o the dividend paid was reinvested in the

shares o the company.

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Capital Management

Woolworths currently sets its capital structure with the objective o enhancing shareholder valuethrough optimising its weighted average cost o capital while retaining exibility to pursue growth

and underta ke capital management initiatives. Consistent with this objective, Woolworths hastargeted, achieved and maintained its strong credit ratings which underpin its debt prole.

Woolworths has historically accessed a diverse range o debt unding sources, including bankacilities (bilateral and syndicated), the Australian domestic bond market (both commercialpaper and medium-term notes) and the international capital markets.

Woolworths debt acility maturit y prole as at 26 June 2011 is shown below.

Woolworths debt acility maturity prole

0

500

1000

1500

2000

2500

3000

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Beyond

$m

Financial year

1,662

1,401

1,901

500127

381

127

1,327

381

1,327

410

600

2,672Syndicated Facilities

A$ Domestic MTN

US Private Placement Notes

US144A Notes

2006 WOW Notes(7)

Denotes facilities already pre-nanced

NOTE: Excludes $2,173 million o bi -lateral credit acilities ex tended annually.

In the nancial year ending June 2012, Woolworths has $2,672 million o debt acilities alling due,

o which $1,010 million had been pre-nanced at 26 June 2011. In April and May 2012, two syndicatedbank loan acilities totalling $1,662 million will mature, o which approximately $546 million wasdrawn at 26 June 2011. Woolworths intends to replace $1,200 million o this amount with newrevolving syndicated nance acilities and the balance with bridge acilities. These acilities may

be entered into during the oer period. Woolworths had $3.2 billion in undrawn bank loan acilitiesas at 26 June 2011. Following the issue o Notes, Woolworths debt acility maturity prole wouldinclude an additional amount in the Beyond period in respect o the total unds raised under theOer, assumed to be $700 million.

Woolworths seeks to return capital to shareholders when it is consistent with its capital structuringobjectives and where it will enhance shareholder value. Since July 2001, over $10.3 billion has beenreturned to shareholders through dividends, on-market and o-market buy-backs (including thenal div idend or the nancial year ended 26 June 2011).

Woolworths currently operates a dividend reinvestment plan which provides shareholders with

the ability to reinvest all or pa rt o their dividends (to a maximum o 20,000 shares) to obtainadditional shares in the company. Historically, Woolworths has entered into an underw riting

3

NOTE

(7)

2006 Woolworths Notes were redeemed

on 15 September 2011.

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agreement in relation to the Woolworths dividend reinvestment plan to ully underw rite dividendswhen consistent with its capital structuring objectives.

Woolworths will continue to assess capital management initiatives in light o investment and growth

opportunities available to Woolworths, its ocus on maintaining a strong credit rating and theprevailing capital markets environment.

Financial Ratios

Woolworths believes its prominent position in the ood and liquor industries, among others, providesa relatively high degree o stability in earnings and cash ow. In the 2011 nancial year, Woolworthsgenerated net operating cash ow o $2,991.1 million.

Woolworths key nancial ratios or the 52 weeks ended on 26 June 2011 are as ollows:

Gearing Ratio (Net debt / Net debt and equity) o 33.83%(8)

The Gearing Ratio indicates the extent to which the assets o Woolworths are unded by debt.Generally, a higher ratio indicates greater use o borrowings to und a business. As calculatedabove, Woolworths has a gear ing ratio o 33.83%, meaning it has $0.34 o Net debt or every$1 o Net debt and equity outstanding.

Interest Cover Ratio (EBITDA / net interest expense) o 12.43x(9)

The Interest Cover Ratio provides an indication o Woolworths ability to meet its interestpayments rom earnings. It thereore provides important inormation about Woolworths abilityto meet its interest payments rom operating cashows and the risks associated with Woolworthslevel o borrowings. A low interest cover ratio may indicate that a company could ace difcultiesin servicing the interest payable on its debt (including the interest payable on a debt instrumentlike Notes) i earnings decrease or interest rates increase. A s calculated above, Woolworths hasan Interest Cover Ratio o 12.43x, meaning Woolworths EBITDA was 12.43x larger than its netinterest expense.

Fixed Charges Cover Ratio (EBITDAR / xed charges) o 3.03x(10)

The Fixed Charges Cover Ratio provides an indication o Woolworths ability to meet its xedcharges payments (including interest and rental costs) rom earnings ( beore the payment o

rental expense). It thereore provides important inormation about Woolworths ability to meet itsinterest and rental payments rom operating cashows and the risks associated with Woolworthslevel o borrowings. A low xed charges cover ratio may indicate that a company could acedifculties in servicing the interest payable on its debt (including the interest payable on a debtinstrument like Notes) and rental payments i ea rnings decrease or interest rates increase.

As calculated above, Woolworths has a Fixed Charges Cover Ratio o 3.03x, meaningWoolworths EBITDAR was 3.03x larger than its xed charges.

Net Debt-to-EBIT Ratio (Net debt / EBIT) o 1.01x(11)

The Net Debt-to-EBIT Ratio provides an indication o the number o years it would takeWoolworths to pay o its existing debt i Net debt and EBIT are held constant (ignoring actorso interest and ta xes). It thereore provides important inormation about Woolworths ability torepay its existing debt a nd capacity to ta ke on additional debt obligations. A high Net Debt-to-EBIT Ratio may indicate that Woolworths may not be able to service its debt and could place

downward pressure on Woolworths corporate credit rating. A s calculated above, Woolworthshas a Net Debt-to-EBIT Ratio o 1.01x, meaning that Woolworths had net debt that was 1.01xlarger than its EBIT.

NOTES

(8)

Net debt is dened as current and

non-current interest bearing liabilities,

including Woolworths Notes, less cash on

hand, cash at bank and cash on short term

deposit and provision or dividends, and

includes hedge liabilities less hedge assets.

The Gearing Ratio has not been adjusted

to include operating leases.

(9)

Net interest expense excludes oreign

exchange gains/losses, dividend income

and includes interest capitalised. The

Interest Cover Ratio has not been adjusted

to include operating leases.

(10)

EBITDAR means operating prot rom

continuing operations beore net interest

expense, depreciation and amortisation,

income tax and rent expense. Fixed

charges includes net interest on all

indebtedness, including interest on

deposits, and all rent expense, and is stated

beore non-controlling interests. Interest

excludes oreign exchange gains/losses,

dividend income and includes interest

capitalised. The Fixed Charges Cover Ratio

includes rent under operating leases.

(11)

Net debt is as dened in Footnote 8 but

excludes hedge liabilities less hedge assets.

The Net Debt-to-EBIT Ratio has not been

adjusted to include operating leases.

Section 3

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4Investment

risksThis Section provides inormation about risks associatedwith Notes, Woolworths and the Oer.

As this document is a prospectus Woolworths is required to explain risks associated with its businessand the risks a ssoc

129892 woolworths financial prospectus pdf (1)

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