BT Tailored Equities Facility, Information Memorandum

7/23/2019 BT Tailored Equities Facility, Information Memorandum

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BT TailoredEquitiesFacilityInformation Memorandum

8 April 2013


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Table of contents

Investment Overview 3

TEF overview 3

Options overview 3

Protected Loan overview 5

Funding the exercise of Executive Options overview 6

TEF features 7

What is TEF? 7

How do I apply to transact through TEF? 7

1 Options 8

1.1 What is an Option? 8

1.2 Sellers and purchasers 8

1.3 American and European Options 8

1.4 Settlement method 8

1.5 Option Transaction timing 8

1.6 Corporate Actions 9

1.7 Dividends & franking credits 9

1.8 Early termination 9

1.9 Fees and charges 9

1.10 Key benefits and risks of investing in Options 9

1.11 Expiry 10

1.12 Examples of using Options 12

2 Protected Loan 17

2.1 How does a Protected Loan work? 17

2.2 Using a Protected Loan to borrow money against

Securities you already own (Securityholder Application).

17

2.3 Protected Loan Transaction timing 17

2.4 Minimum Protected Loan Amount 17

2.5 Mortgage 18

2.6 Corporate Actions 18

2.7 Dividends & franking credits 18

2.8 Term 18

2.9 Early termination 18

2.10 Fees and charges 18

2.11 Key benefits and risks of investing with a Protected

Loan

18

2.12 Maturity 19

2.13 An example of using a Protected Loan 20

3 Funding Executive Options using a Protected

Loan

21

3.1 An example of funding Executive Options with a

Protected Loan

21

4 Tax 23

5 Terms and Conditions 36

6 Glossary 57

Westpac Banking Corporation ABN 33 007 457 141, AFSL233714 (Westpac) is the issuer of the BT Tailored EquitiesFacility (TEF). The Information Memorandum (IM) for TEF isissued by Westpac. The information contained in the IM isgeneral information only and has been prepared withouttaking into account your individual investment objectives,needs or financial circumstances. You should read the wholeof the IM, make sure you understand how TEF works andconsider the risk factors in light of your individual investmentobjectives, needs and financial circumstances beforedeciding whether to enter into TEF. If Westpac requires aGuarantee and Indemnity from any person in relation to aProtected Loan under TEF, the Guarantor(s) should also obtainappropriate legal and financial advice.

An investment in Options or a Protected Loan through TEF is

not a deposit with or other liability of Westpac or of anyWestpac Group company, and is subject to investment riskincluding possible delays in repayment and loss of amountsinvested. Neither Westpac nor any other Westpac Groupcompany guarantees the performance of any investmentoffered through TEF. TEF is only available to Australianresidents who are wholesale clients (as that term is definedin the Corporations Act 2001 (Cth)).


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The following table provides an overview of the BT Tailored EquitiesFacility (TEF). You should read this Information Memorandum in full,including the Terms and Conditions, and seek your own independent

legal, taxation and nancial advice before making any decision to investthrough TEF.

TEF overview

Who is the Issuer? Westpac Banking Corporation, Level 5, 275 Kent St, Sydney NSW 2000, ABN 33 007457 141, AFSL 233714 (Westpac).

What is TEF? TEF is an options and lending facility which offers you the opportunity to:

1. purchase and/or sell over-the-counter (OTC) Options

2. borrow to purchase Securities, or use Securities which you already own to borrowwholly or predominantly for Business or Investment Purposes, through a Protected

Loan3. fund the exercise of Executive Options with a Protected Loan.

What Securities areavailable through TEF?

Selected ASX-quoted securities and exchange-traded funds (ETFs) including generallythe top 50 ASX-quoted securities by market capitalisation. Westpac may extend orreduce the range of Securities available through TEF at its discretion.

What is the Term ofa TEF transaction?

TEF transactions may have a Term of up to five years, or as otherwise agreed byWestpac.

What are the taxconsiderations?

A general summary of the likely tax treatment of Transactions entered into in connectionwith TEF is provided in Section 4 of this IM. You should seek your own tax advice beforeinvesting through TEF.

Who can apply for TEF? The following entities can apply for TEF:` individuals` companies` trusts with individual trustees or` trusts with corporate trustees.

All applicants must be Australian residents for taxation purposes and wholesale clients(as that term is defined in Chapter 7 of the Corporations Act).

Options overview

What type of Options areavailable through TEF?

You can enter into the following types of Options (or combinations thereof) through TEF:

` Bought Call Options` Bought Put Options` Sold Call Options` Sold Put Options and` Collars.

Options through TEF can be American Options or European Options (other than Collars,which can generally only be European Options). The key features of Options throughTEF can be tailored to your needs.

Who is the Optioncounterparty?

Options through TEF are traded over-the-counter or OTC and are not traded on anyexchange or cleared through any clearing house. Westpac is your counterparty inrespect of all Options. As a result, you are exposed to the credit risk of Westpac.

What is a Call Option? A Call Option gives the purchaser the right, but not the obligation, to buy a specifiedparcel of Securities from the seller of the Call Option at a predetermined price on apredetermined Expiry Date (in the case of an European Option) OR on or before a

predetermined Expiry Date (in the case of an American Option). A Call Option may besettled by Physical Settlement or Cash Settlement.

Investment Overview


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What is a Put Option? A Put Option gives the purchaser the right, but not the obligation, to sell a specifiedparcel of Securities to the seller of the Put Option at a predetermined price on apredetermined Expiry Date (in the case of an European Option) OR on or before apredetermined Expiry Date (in the case of an American Option). A Put Option may be

settled by Physical Settlement or Cash Settlement.

What is a Collar? A Collar operates economically in a similar way to a combination of a Put Option and aCall Option, as if you had purchased a Put Option with a nominated Strike Price (calledthe Floor Price) at the same time as you had sold a Call Option to Westpac with a higherStrike Price (called the Cap Price). Collars can only generally be European Options. ACollar may be settled by Physical Settlement or Cash Settlement.

What is the minimumtransaction amount?

Each Option transaction must have a Notional Value of at least $500,000. This does notmean that you must invest $500,000 of your own capital, or that the Option must havea Premium of $500,000. Rather, the Notional Value for an Option is the number ofSecurities in the Parcel for that Option multiplied by the Strike Price for that Option (or, inthe case of a Collar, the Floor Price). Westpac may lower the minimum Notional Valueon a case by case basis at its absolute discretion.

What is the Premium? The Premium for an Option is the price that the purchaser of an Option pays topurchase the Option from the seller of the Option. If you purchase an Option other thana Collar or a Loan Put Option, you will pay a Premium. If you sell an Option, Westpacwill pay a Premium to you.

If you purchase a Collar, you may be required to pay a Premium to Westpac, Westpacmay be required to pay a Premium to you, or there may be no Premium required to bepaid by either party. Whether a Premium is required to be paid, and by which party, willdepend on the parameters of the Collar, in particular, the level of the Floor Price and theCap Price.

If you enter into a Protected Loan and are required to acquire a Loan Put Option, youwill not pay any separate Premium in respect of the Loan Put Option. Instead, thePremium will form part of the interest on the Protected Loan.

What is the Strike Price, the

Floor Price and the CapPrice?

The Strike Price refers to the price which must be paid to exercise an Option other than

a Collar (in the case of Physical Settlement). A Call Option will be automaticallyexercised at Expiry if the Expiry Price of the Securities underlying an Option is greaterthan the Strike Price (In-The-Money). A Put Option will be automatically exercised atExpiry if the Expiry Price of the Securities underlying an Option is less than the StrikePrice (In-The-Money).

In the case of a Collar, there is no Strike Price. Instead there are two relevant prices, theFloor Price and the Cap Price. A Collar will be automatically exercised at Expiry if theExpiry Price of the Securities underlying an Option is less than the Floor Price (In-The-Money) or greater than the Cap Price (In-The-Money).

The Strike Price for an Option other than a Collar, and the Floor Price and Cap Price fora Collar, will be specified in the relevant Confirmation.

What are the key benefits ofusing Options?

There are various potential benefits involved in entering into an Option Transaction.These benefits will differ depending on the type of Option you have entered into. Seesection 1.10 of this IM for an overview of the key benefits of investing in different typesof Options.

What are the key risks ofusing Options?

There are various risks involved in entering into an Option Transaction. These risks willdiffer depending on the type of Option you have entered into. See section 1.10 of thisIM for an overview of the key risks of investing in different types of Options.

How does the Mortgageoperate?

Sold Call Option

` If you have Sold Call Options, your obligations to Westpac will be secured by aMortgage granted to Westpac over the Security Collateral.

Sold Put Option

` If you have Sold Put Options, you will be required to lodge Cash Collateral in aWestpac Account which will become subject to a Mortgage as security for yourobligations under the Sold Put Option.

Collar` If you enter into a Collar, your obligations to Westpac will be secured by a Mortgage

granted to Westpac over the Security Collateral.

Investment Overview (Continued)


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What happens at Expiry of anOption?

The outcomes at Expiry will depend upon the type of Option and whether you nominateCash Settlement or Physical Settlement. See section 1.11 of this IM for a table settingout the various potential consequences at Expiry for the different types of Options.

What are the costs and fees? Brokerage of up to 1.1% inclusive of GST (but generally 0.22% inclusive of GST) will bepayable in respect of the purchase and sale of Securities underlying Options to whichPhysical Settlement applies.

Premium for Bought Call Options, Bought Put Options and (depending on theparameters) Collars will be payable.

Any other fees as agreed between you and Westpac will also be payable.

Protected Loan overview

What is a Protected Loan? A Protected Loan is a loan which can be used to purchase Securities (or, if you alreadyown Securities, you can use a Protected Loan to borrow money against theseSecurities, wholly or predominantly for Business or Investment Purposes.

If you borrow using a Protected Loan, you must also purchase a Loan Put Option toprotect an amount at least equal to the Protected Loan Amount. You will not pay anyseparate Premium in respect of the Loan Put Option. Instead, the Premium will formpart of the interest on the Protected Loan.

What is the interest rate andhow is interest paid?

Interest rate

You can elect a fixed interest rate or annually resetting interest rate.

Interest payment frequency

Interest on your Protected Loan must be paid annually in advance (unless otherwiseagreed with Westpac). Westpac may alter the interest payment frequency upon requestat its absolute discretion. Your nominated bank account will be direct debited for thefirst Interest Period on the Business Day after the Issue Date. If your Protected Loan isfor a Term greater than one year, you will be direct debited for subsequent InterestPeriods on each anniversary of the Issue Date.

What is the minimumProtected Loan Amount?

The minimum Protected Loan Amount is $500,000. Westpac may lower the minimumProtected Loan Amount upon request at its absolute discretion.

How does limited recourseoperate?

A Protected Loan is a limited recourse loan only at Maturity, and provided you havecomplied with all your obligations under this IM and the Terms and Conditions in respectof the Protected Loan, and there is no Default.

What are the key benefits ofa Protected Loan?

There are various potential benefits involved in entering into a Protected Loan. Seesection 2.11 of this IM for an overview of the key benefits of investing in a ProtectedLoan.

What are the key risks ofa Protected Loan?

There are various potential risks involved in entering into a Protected Loan. See section2.11 of this IM for an overview of the key risks of investing in a Protected Loan.

How does the Mortgageoperate?

Your obligation to repay the Protected Loan Amount and your other obligations underthe Protected Loan will be secured by a Mortgage granted to Westpac over theSecurities as well as any other Secured Property.

What happens at Maturity? See section 2.12 of this IM for a table setting out the potential outcomes at Maturity fora Protected Loan.

What are the costs and fees? ` interest on the Protected Loan;` any Loan Establishment Fee as set out in your Confirmation;` brokerage of up to 1.1% inclusive of GST (but generally 0.22% inclusive of GST) for

the purchase and sale of Securities; and` any other fees as agreed between you and Westpac.


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Funding the exercise of Executive Options overview

How can a Protected Loan beused to fund the exercise of

Executive Options?

` Westpac will lend you money through a Protected Loan to fund the exercise ofExecutive Options.

` The Company will transfer the relevant Securities to your Westpac HIN where theywill be held as security for your Protected Loan, subject to a Mortgage in favour ofWestpac.

` You pay upfront interest on the Protected Loan, any Loan Establishment Fee andany other fees agreed between you and Westpac (if any).

What are the key benefits? ` Allows you to exercise your Executive Options without you providing the full exerciseprice upfront.

` The other key benefits will be the same as for a Protected Loan, as discussed insection 2.11 of this IM.

What are the key risks? ` If the Company fails to transfer the relevant Securities to your Westpac HIN, you willbe liable for the entire Protected Loan Amount, regardless of whether you haveownership of the relevant Securities.

` The other key risks will be the same as for a Protected Loan, as discussed insection 2.11 of this IM.

What happens at Maturity? Your choices at maturity will be the same as for a Protected Loan, as discussed insection 2.12 of this IM.

What are the other features ofthe Protected Loan?

See the Protected Loan overview above for other features of using a Protected Loan.

Investment Overview (Continued)


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This section provides a br ief description of thekey features of TEF. You should read this IM in full,including the Terms and Conditions, and seek yourown independent legal, taxation and financial advice

before making any decision to invest through TEF.

What is TEF?

TEF is the BT Tailored Equities Facil ity which allowswholesale clients to:

` purchase and/or sell Options;

` borrow money with a Protected Loan to purchaseSecurities or borrow against Securities youalready own; or

` fund the exercise of Executive Options with aProtected Loan.

How do I apply to transactthrough TEF?

You can apply to transact through TEF by completingthe Application Form attached to this IM. You mustbe a wholesale client (as that term is defined in theCorporations Act) to apply to establish a TEF.

If your application is approved, a TEF in yourname will be established. Once established, youcan contact Westpac and request to enter into aTransaction.

TEF Transactions can be tai lored to your investmentneeds. Westpac may prepare a Deal Sheet basedon your request that sets out the details of yourproposed Transaction. If you agree to the terms setout in the Deal Sheet, Westpac may then execute aTransaction with you. You should note that Westpaccannot guarantee that the indicative terms set out ina Deal Sheet will be achieved.

Alternatively, you may contact the TEF InvestorRelations team on 1800 990 107 and agree uponthe terms of a Transaction with Westpac over thephone.

The final terms of the Transaction will be set out in aConfirmation that will be sent to you.

If you are a trustee applicant (whether a corporatetrustee or an individual trustee) or a companyapplicant, we may require a Guarantee andIndemnity from a Guarantor. Under the Guaranteeand Indemnity, we will seek to recover from theGuarantor any amounts that you owe us in relationto a Transaction that exceed the amount recoveredunder the Mortgage. The Guarantor will alsounconditionally and irrevocably indemnify us againstliability, loss or costs we suffer or incur if you areunable to meet your obligations to us.

The Guarantor will be personally liable for theseamounts. Where there is more than one Guarantor,the Guarantors will be jointly and severally liablefor any amount owing under the Guarantee and

Indemnity.We will send details of the Guarantee and Indemnityto the Guarantor separately. Guarantors will needto have regard to the terms of the Guarantee andIndemnity (which will be provided to them followingthe receipt of a trustee or company application).

Depending on the types of Transactions you wishto enter into, we may require you to establish aWestpac HIN (in the case of a Sold Call Option,a Collar or a Protected Loan) or open a WestpacAccount (in the case of a Sold Put Option).

If you are required to establish a Westpac HIN, you

will need to enter into a sponsorship agreement withthe Sponsor.

If you are required to establish a Westpac Account,you will need to enter into separate account openingdocumentation with us.

Westpac may pay distributors, brokers, financialadvisers or other intermediaries (includingemployees or related bodies corporate of Westpac)commission of up to 2.2% (inclusive of GST) of theinitial value of a Transaction and on an ongoingbasis up to 0.55% per annum (inclusive of GST) ofthe value of a Transaction subject to applicable law.

These amounts will be paid by Westpac out of itsown funds and will not represent an additional costto you.

Please also note that although Securities willgenerally be held in your Westpac HIN, we may fromtime to time require the Custodian to hold, on yourbehalf, any Secured Property in connection with anyTransaction (including in the case of a CorporateAction).

You can contact us to enquire about transactingthrough TEF by calling us on 1800 990 107, orthrough your adviser.

TEF features


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1.1 What is an Option?

Options available through TEF allow you to enterinto a contract under which you have the right, but

not the obligation, to acquire (in the case of a CallOption) or dispose of (in the case of a Put Option)a Parcel of Securities at a predetermined price(known as the Strike Price, or in the case of a Collar,the Floor Price or the Cap Price) on or before apredetermined date (Expiry Date). You can also sellOptions, in which case an equivalent right is grantedto Westpac. To acquire this right, the purchaserof an Option must generally pay an amount to theseller of the Option called the Premium.

Options offered through TEF are over-the-counteror OTC which means that they represent a contractbetween you and Westpac, and are not traded on

any exchange. Therefore, when you enter into anOption with Westpac, you are exposed to the creditrisk of Westpac.

Options can be Put Options, Call Options or Collars.

A Call Optiongives the purchaser the right, butnot the obligation, to buy a Parcel of Securitiesat a predetermined Strike Price on or before apredetermined Expiry Date. If the purchaser of theCall Option exercises their right to buy, the Optionseller must sell the Parcel of Securities to the CallOption purchaser at the Strike Price.

A Put Option gives the purchaser the right, butnot the obligation, to sell a Parcel of Securitiesat a predetermined Strike Price on or before apredetermined Expiry Date. If the purchaser of thePut Option exercises their right to sell, the Optionseller must buy the Parcel of Securities from the PutOption purchaser at the Strike Price.

A Collaroperates economically in a similar way to acombination of a Put Option and a Call Option, as ifyou had purchased a Put Option with a nominatedStrike Price (called the Floor Price) at the same timeas you had sold a Call Option to Westpac with a

higher Strike Price (called the Cap Price).Options (other than Collars) can be AmericanOptions or Europeans Options, as discussed insection 1.3 below. Collars can generally only beEuropean Options.

Options can be subject to Physical Settlement orCash Settlement, as discussed in section 1.4 below.

1.2 Sellers and purchasers

Every Option (other than a Collar) has both a sellerand a purchaser.

A purchaser of an Option buys the right to acquire ordispose of a parcel of Securities at a predeterminedprice on or before a predetermined Expiry Date. Thebuyer of an Option is also known as the taker as

they have the option to take up the right to purchaseor sell the Securities covered by the Option, or not.If you buy an Option, this IM will refer to the Optionas a Bought Call Option, a Bought Put Option or a

Collar.A seller of an Option sells the right to acquire ordispose of a Parcel of Securities at a predeterminedprice on or before a predetermined Expiry Date.The Seller of an Option is also known as the writerbecause the seller underwrites the obligation todeliver or accept the Securities covered by theOption. If you sell an Option, this IM will refer to theOption as a Sold Call Option or a Sold Put Option.

1.3 American and EuropeanOptions

Both American and European Options will beavailable through TEF.

European Options can only be exercised on theExpiry Date, before the Expiry Time. Collars willgenerally be required to be European Options.

American Options can be exercised up until theExpiry Time on the Expiry Date.

You may exercise an Option by giving an ExerciseNotice to Westpac within the relevant timeframespecified above. Both American Options andEuropean Options which are In-The-Money at the

Expiry Time will be automatically exercised.

1.4 Settlement method

You can choose to settle your Option either by:

` Physical Settlement the physical delivery orreceipt of the Securities; or

` Cash Settlement the payment or receipt of acash amount.

At the time of entry into an Option, you will berequired to elect whether Physical Settlement orCash Settlement will apply to your Option. Yourelection will be set out in the Confirmation for theOption. If you do not make an election, the defaultsettlement method will be Cash Settlement (otherthan in the case of a Loan Put Option, wherePhysical Settlement must apply).

You may change the election set out in yourConfirmation by contacting the TEF InvestorRelations team on 1800 990 107 at least 3 BusinessDays prior to the Expiry Date.

1.5 Option Transaction timing

If Westpac agrees to enter into an Option with you,

Westpac will enter into the Option with you on theIssue Date. If you have bought an Option and arerequired to pay a Premium, your nominated bankaccount will be direct debited for the Premium

1. Options


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on the Business Day after the Issue Date. If youhave sold an Option or entered into a Collar, andare to receive a Premium, your nominated bankaccount will be direct credited the Premium on the

Business Day after the Issue Date (provided youhave complied with your obligation to lodge SecurityCollateral or Cash Collateral in a Westpac HIN orWestpac Account, as applicable).

1.6 Corporate Actions

Westpac has broad rights should a CorporateAction occur, as set out in clause 23 of the Termsand Conditions. You should read the Terms andConditions carefully before entering into an Optionwith Westpac.

1.7 Dividends & franking creditsFor Sold Call Options and Collars, you may stillbe entitled to receive any Dividends paid on theSecurity Collateral and you may be entitled to receivethe benefit of any franking credits attached to theDividend (subject to being a qualified person seesection 4). Where you own the Securities the subjectof a Bought Put Option, you may be entitled toreceive the benefit of any franking credits attached toDividends paid on the Securities (subject to being aqualified person see section 4).

1.8 Early terminationIf you wish to terminate an Option which you haveentered into prior to its Expiry Date, you may contactthe TEF Investor Relations team on 1800 990 107to request an Early Termination Notice. If Westpacagrees to allow you to terminate an Option, you mustpay to Westpac the amounts indicated in the finalEarly Termination Notice (including any Break Costs).

You may be able to terminate Options prior to theirExpiry Date and enter into new Options at the sametime, with Westpacs consent. For example, if youwish to change the Strike Price of a Bought Call

Option during the term, you could terminate theBought Call Option early, and on the same day,enter into a new Bought Call Option with the sameExpiry Date but with a different Strike Price.

1.9 Fees and charges

This Section describes the fees and chargesinvolved with investing in Options through TEF.

Before investing through TEF, you should make sureyou understand the fees and charges associatedwith your investment.

At the date of this IM, the fees and charges that maybe payable are:

` Premium for a Bought Call Option, a Bought PutOption and a Collar (if applicable)

` Brokerage of up to 1.1% inclusive of GST (butgenerally 0.22% inclusive of GST) on the value ofthe Securities

` Break Costs if you terminate an Option early;

` any other fees and charges the Broker is entitledto require you to pay in accordance with theirterms and conditions, and

` any other fees, duties, charges or expenses

associated with anything to be done through TEFor as otherwise agreed with you from time to time.

Fees and charges may be changed by Westpacat its discretion at any time. If GST is payable inrespect of a fee or charge, it is added to that fee orcharge at the current rate.

1.10 Key benets and risks of investing in Options

Type of Option Key benefits Key risks

Bought CallOption

` Potential to benefit from an increase in theprice of the Securities.

` Exposure to the potential upside of Securitieswith a lower initial outlay than purchasing theSecurities directly with your own funds.

` Losses are limited to the Option Premium.

` The Call Option may expire Out-Of-The-Money in which case it will not be exercisedand you will have a loss equal to the Premiumwhich you paid.

` If the Call Option is not exercised, you will notreceive any exposure to the underlyingSecurities.

Bought PutOption

` If you own the Securities, the ability to hedgeyour downside exposure to the Securitieswhile still maintaining exposure to a potentialincrease in the price or value of Securitiesand, subject to being a qualified person (seesection 4), any entitlement to any dividendsand franking credits received.

` If you do not own the Securities, the potentialto benefit from a decrease in the price of theSecurities.

` The Put Option may expire Out-Of-The-Money in which case it will not be exercisedand you will have a loss equal to the Premiumyou paid.

` If you own the underlying Securities, any

increase in the price of the Securities over theterm of the Put Option may not offset the costof the Premium.


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Type of Option Key benefits Key risks

Sold Call Option ` Receive the Premium on the Call Option onthe Business Day after the Issue Date.

` Continue to receive any dividends and,subject to being a qualified person (seesection 4), franking credits on the Securitiesheld as collateral (the Security Collateral).

` You will be required to provide SecurityCollateral in relation to the Call Option. Youwill not be able to sell the Security Collateralwhile the Call Option remains open.

` If the value of the underlying securitiesincreases during the Term, such that the CallOption is In-The-Money at Expiry, you will notparticipate in any increase in the value of theSecurities making up the Security Collateralabove the Strike Price of the Call Option.

Sold Put Option ` Receive the Premium on the Put Option.

` Opportunity to earn interest on the CashCollateral.

` You will be required to provide Cash Collateralequal to the Notional Value of the Put Optionyou enter into and will not be able to use thisCash Collateral for other purposes during theterm of the Put Option.

` If the Securities underlying the Put Optiondecrease in value such that the Put Option isIn-The-Money at Expiry, you will make a lossproportionate to the decrease in the value ofthe underlying Securities.

Collar ` The ability to hedge your downside exposureto the Securities.

` Pay a lower Premium than would be the casefor a Bought Put Option with a Strike Priceequal to the Floor Price for the Collar, andpotentially pay no Premium or receive aPremium from Westpac, due to the inclusionof a Cap Price.

` Continue to receive any dividends and,

subject to being a qualified person (seesection 4), franking credits on the Securities.

` The Collar may expire Out-Of-The-Money inwhich case it will not be exercised and youwill have a loss equal to the Premium (if any)you paid.

` You will be required to provide SecurityCollateral in relation to a Collar. You will not beable to sell the Security Collateral while youhold an open Collar.

` If the value of the underlying Securities

increases during the Term, such that theExpiry Price is above the Cap Price, you willnot participate in any increase in the value ofthe Securities making up the SecurityCollateral above the Cap Price.

1.11 Expiry

The table below summarises what happens at Expiry for each Option scenario. You will receive the relevantcash amount or Securities (if applicable) on the relevant Settlement Date.

Type of Option At Expiry Cash Settlement Physical Settlement

Bought CallOption

Expiry Price Strike Price

The Call Option expires worthless andno action occurs.

The Call Option expires worthless andno action occurs.

Expiry Price >Strike Price

The Call Option is automaticallyexercised. You will receive an amountequal to (Expiry Price Strike Price) xnumber of Securities in the Parcel.

The Call Option is automaticallyexercised. An amount calculated as theStrike Price x number of Securities inthe Parcel is direct debited from yournominated bank account. Uponclearance of funds the Securitiesmaking up the Parcel will be transferredto you.

1. Options (Continued)


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Type of Option At Expiry Cash Settlement Physical Settlement

Bought PutOption

Expiry Price Strike Price

The Call Option is automaticallyexercised. Westpac will direct debit

your bank account for an amount equalto (Expiry Price Strike Price) x numberof Securities in the Parcel. Uponclearance of funds, the SecurityCollateral will be transferred to you.

The Call Option is automaticallyexercised. Westpac will retain the

Security Collateral and direct credit toyour nominated bank account anamount equal to Strike Price x numberof Securities in the Parcel.

Sold Put Option Expiry Price Strike Price

You must elect whether:

` you will repay the Protected Loan from your own funds and receive theSecurities (less, if applicable, any amount payable by us if the Loan Put Optionis exercised)

` you wish to apply for an extension of the Protected Loan` you wish to apply for a new Protected Loan or

` you wish us to sell the Secured Property, and arrange for the Proceeds to beapplied to repay the Protected Loan, with any excess to be paid to you.


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2.13 An example of using a Protected Loan

If you believe the price of a Security will increase over a period of time, a Protected Loan may be an effectiveway to gain exposure to the Security, while limiting your potential losses and initial capital outlay.

Assume the following for this example:

` Security: BHP

` Protected Loan Term: 1 year

` Security price at Issue Date: $35

` Strike Price of Loan Put Option: $35

` Loan Establishment Fee: $0

` Protected Loan Amount: $999,985

` Interest on Protected Loan: 15.5714% per annum

` Number of underlying Securities: 28,571

` Assumed Dividends per share: $1.00 per annum

Protected Loan

BHP Security price at Maturity $25 $30 $35 $40 $45 $50

Value of Securities at Maturity $714,275 $857,130 $999,985 $1,142,840 $1,285,695 $1,428,550

Loan Put Option value at Maturity $285,710 $142,855 $0 $0 $0 $0

Assumed Dividends $28,571 $28,571 $28,571 $28,571 $28,571 $28,571

Interest on Protected Loan -$155,712 -$155,712 -$155,712 -$155,712 -$155,712 -$155,712

Repay Protected Loan Amount -$999,985 -$999,985 -$999,985 -$999,985 -$999,985 -$999,985

Total profit/loss -$127,141 -$127,441 -$127,141 $15,714 $158,569 $301,424

The graph below shows in diagrammatic form the potential profit or loss for this example.

-$1000,000

-$800,000

-$600,000

-$400,000

-$200,000

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

Totalprofit/loss

Interest onProtected Loan

Security profit/loss

Put Optionpayoff

Protected Loan payoff

profit/loss

$0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 $55 $60 $65 $70

$

2. Protected Loan (Continued)


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21

You may, subject to Westpacs approval, use aProtected Loan to fund the exercise of ExecutiveOptions that have been issued to you.

If a Protected Loan is approved in suchcircumstances, an amount sufficient to fund theexercise of the Executive Options will be sent directlyto the Company issuing the Executive Options. TheCompany will then transfer the relevant Securities toyour Westpac HIN. The money advanced to fund theexercise of Executive Options forms part (if not all) ofthe Protected Loan Amount.

When you use a Protected Loan to fund the exerciseof Executive Options, you may borrow between50-100% (inclusive) of the value of the Securities.If the Protected Loan Amount you borrow is morethan the amount required to fund the exercise of

the Executive Options, then you will receive thedifference as a cash amount to be used wholly orpredominantly for business or investment purposes(other than investment in residential property), andnot for personal, domestic or household purposes.

For example if the amount required to exerciseExecutive Options is $90,000 (strike price of $90x 1,000 Executive Options) and the value of theSecurities is $100,000 (Security Price of $100 x1,000), then you can borrow between $50,000-$100,000. If you borrowed $100,000 (ie the fullvalue of the Securities), then you would receive$10,000 cash (i.e. $100,000 less $90,000 to fund

the exercise of the Executive Options) to be usedwholly or predominantly for Business or InvestmentPurposes.

The Protected Loan used for funding ExecutiveOptions has the same features, terms andconditions as a Protected Loan used to purchaseSecurities or borrow against Securities. Thosefeatures, terms and conditions are described insection 2 of this IM.

If the Company fails to transfer the relevantSecurities to your Westpac HIN within a reasonabletime determined at the sole discretion of Westpac,

you will be in Default under the Terms andConditions.

To use a Protected Loan to fund the exerciseof Executive Options, you must arrange for theCompany issuing the Executive Options to confirmin writing to Westpac:

1_that you own the specified number of ExecutiveOptions

2_that the Executive Options are fully vested andpresently exercisable by you

3_that the Executive Options and underlying

Securities following the Executive Optionsexercise are not subject to any security interest orother encumbrances

4_that you have all permissions required by theCompany employee trading policy to exercise theExecutive Options

5_that the Companys employee trading policy

permits the use of the Protected Loan describedin this IM

6_that there is no Company imposed tradingblackout which would restrict you from exercisingthe Executive Options

7_the timetable for exercise of the ExecutiveOptions and share allotment and

8_the payment instructions for Executive Optionexercise price payment.

This confirmation will be sought in writing as aresponse to a standard questionnaire that Westpacwill send to the Company.

In addition, you will need to provide Westpac with:

` the original security holders certificate (or similardocument) in relation to the Executive Optionswhich shows you as the registered holder of theExecutive Options

` an executed exercise notice in relation to theExecutive Options and

` an irrevocable direction instructing the Companyto accept receipt of the Executive Option strikeprice from Westpac and subsequently deliver theSecurities to your Westpac HIN.

To enquire about using a Protected Loan to fund theexercise of Executive Options, please call the TEFInvestor Relations team on 1800 990 107.

3.1 An example of fundingExecutive Options with aProtected Loan

Assume the following:

` investor is employed by Company XYZ

` investor has 10,000 Company XYZ ExecutiveOptions over one Company share each with a

strike price of $70` Company XYZ shares are trading at $100.

Scenario 1

Through TEF, the investor borrows $700,000 (10,000x $70) to fund the exercise of Executive Options.Upon receipt of the required documentation,Westpac transfers $700,000 to Company XYZ.Company XYZ issues 10,000 XYZ shares into theinvestors Westpac HIN, where they are held assecurity for the Protected Loan. Interest on theProtected Loan is paid annually in advance.

3. Funding Executive Options using a Protected Loan


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22 1800 990 107

Scenario 2

Through TEF, the investor borrows $1,000,000(10,000 x $100) to fund the exercise ofExecutive Options. Upon receipt of the required

documentation, Westpac transfers $700,000 toCompany XYZ. Company XYZ issues 10,000 XYZshares into the investors Westpac HIN, where theyare held as security for the Protected Loan. Theinvestor receives the remaining $300,000 in cashwhich they use wholly or predominantly for Businessor Investment Purposes. Interest on the ProtectedLoan is paid annually in advance.

3. Funding Executive Options using a Protected Loan (Continued)


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4. Tax

AUSTRALIA BELGIUM CHINA FRANCE GERMANY HONG KONG SAR INDONESIA (ASSOCIATED OFFICE) ITALY JAPAN

PAPUA NEW GUINEA SINGAPORE SPAIN SWEDEN UNITED ARAB EMIRATES UNITED KINGDOM UNITED STATES OF AMERICA

Ashurst Australia (ABN 75 304 286 095) is a general partnership constituted under the laws of the Australian Capital Territory carrying on practice

under the name "Ashurst" under licence from Ashurst LLP. Ashurst LLP is a limited liability partnership registered in England and Wales, and is a

separate legal entity from Ashurst Australia. In Asia, Ashurst Australia, Ashurst LLP and their respective affiliates provide legal services under the

name "Ashurst". Ashurst Australia, Ashurst LLP or their respective affiliates has an office in each of the places listed above.

224330570.01

Our ref: POD\MRY\02 3001 1734 Ashurst Australia

Level 36, Grosvenor Place

225 George Street

Sydney NSW 2000

Australia

GPO Box 9938

Sydney NSW 2001

Australia

Tel +61 2 9258 6000

Fax +61 2 9258 6999

DX 388 Sydney

www.ashurst.com

26 March 2013

The Directors

Westpac Banking Corporation

Level 5

275 Kent StreetSYDNEY NSW 2000

Dear Directors

BT Tailored Equities Facility ("TEF")Tax summary

You have asked for a summary of the key Australian income tax, stamp duty and goods and

services tax ("GST") implications for an Investor who enters into transactions under the terms of

the TEF. Our comments are based on review of an Information Memorandum for the TEF to be

dated 8 April 2013.

Unless indicated otherwise, legislative references are to provisions of the Income Tax Assessment

Act 1997and Income Tax Assessment Act 1936 (together, the "Tax Act") and capitalised termsare references to defined terms in the Information Memorandum.

1. SCOPE

The discussion contained in this tax summary is of a general nature only and does not take into

account each Investor's specific circumstances. The information provided in this letter does not

take into account the objectives or circumstances of individual investors and we recommend thatInvestors seek their own independent advice on the taxation implications of investing through the

TEF. For investors that are complying superannuation entities, this tax summary does not address

whether an Option or Protected Loan entered into under the TEF complies with the SuperannuationIndustry (Supervision) Act 1993.

This summary has been prepared by Ashurst Australia based on the laws in force andadministrative practice as at 9am (Sydney time) on the date of this letter, and addresses only the

position of investors who are Australian residents who enter into transactions other than in thecourse of carrying on a business, and who acquire and hold their Securities or Options on capitalaccount ("Investors"). The comments in this summary are not binding on the Australian Taxation

Office ("ATO") or a state or territory revenue office ("OSR") and it is not assurance that the ATO

or an OSR will agree with the comments in this summary or that any contrary view of the ATO oran OSR would not ultimately be upheld by a Court. It should be noted that tax laws (and their

interpretation by the Courts) and administrative practices change over time and this may impact

upon the comments made in this summary.

This tax summary is provided by Ashurst Australia solely for the benefit of Westpac Banking

Corporation ("Westpac") and may not be relied on by any other person. The representatives ofAshurst Australia involved in preparing this letter are not licensed to provide financial product


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24 1800 990 107

4. Tax (Continued)

Westpac Banking Corporation 26 March 2013 Page 2

224330570.01

advice in relation to dealing in securities. Ashurst Australia does not seek to recommend, promote

or otherwise encourage any Investor to enter into transaction under the terms of the TEF.

2. ASSUMPTIONS

This summary of taxation implications assumes:

(a) an Investor is an Australian resident for income tax purposes and will not enter into

any transaction connected with the TEF in carrying on business outside Australia at

or through a permanent establishment of the Investor outside Australia;

(b) an Investor acquires and holds Securities or Options on capital account or sells

Options to hedge Securities that are held on capital account, for example:

(i) for a Security - an Investor acquires the Security with the intention of

holding it as a long term investment to derive assessable distribution

income;

(ii) for a Bought Put Option or Collar the Investor acquires the Put Option or

Collar with the intention of protecting downside risk in relation to a Security

held on capital account;

(iii) for a Bought Call Option the Investor acquires the Call Option with the

intention of exercising it to acquire the relevant Security if the Call Option is

In-the-Money on its Exercise Date and hold the Security on capital account.

An Investor who carries on a business of dealing in shares or other securities, or

who has a purpose of acquiring Securities or entering into an Option for disposal or

settlement at a profit, would generally not be regarded as holding their Securities or

Options on capital account.

(c) Investors are not acquiring Securities, entering into a Protected Loan or buying andselling Options for speculative, gambling or recreational purposes;

(d) Securities in respect of a Protected Loan or Option (including Securities acquired

using a Protected Loan) are:

(i) ordinary shares in companies limited by shares or units in a "widely held"1

Australian unit trusts that is a registered managed investment scheme or

stapled securities of such types; and

(ii) at all times quoted on the Australian Securities Exchange (ASX);

(e) Westpac will execute any agreements with Investors in New South Wales;

(f) as a result of entry into the agreements, no Investor will acquire, either individually

or together with 'associated ' or 'related persons' (as defined in the State andTerritory stamp duties legislations), a 90% or greater interest in the relevant

company or unit trust of the type referred to in paragraphs (d)(i) and (d)(ii) above;

1 For the purposes of this tax summary, a widely held Australian unit trust is a fixed trust with an Australian resident

trustee or a fixed trust which is centrally managed and controlled in Australia with at least 300 beneficiaries and

75% or more of the fixed entitlements to the income and capital of the trust are not held, directly or indirectly, by

20 or fewer unrelated individuals.


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224330570.01

(g) for Securities that are shares in a foreign company, an Investor is not an

"attributable taxpayer" in relation to that company for the purposes of the

controlled foreign company rules in the Tax Act; and

(h) all transactions Investors enter into with Westpac will be at prevailing market prices

and otherwise on arm's length terms.

If the assumptions above do not apply to an Investor, the comments in this letter may not be

applicable to the Investor and the Investor should obtain their own advice having regard to their

particular circumstances.

3. OPTIONS

Options will be CGT assets. The CGT consequences of buying a Put Option, Collar or Call Option or

selling a Put Option or Call Option are summarised below.

Where an Investor has acquired a Loan Put Option acquired in conjunction with a Protected Loan,the cost of the Loan Put Option will be built into the interest on the Protected Loan and the CGT

consequences of the Loan Put Option are affected by Division 247 of the Tax Act (see section

4.1(b) below).

3.1 Bought Put Option

Grant of Bought Put Option

The Premium paid for the Put Option plus any incidental costs of acquiring the Put Option should be

included in the CGT cost base and reduced cost base of the Put Option.

Exercise of Bought Put Option Physical Settlement

Any capital gain or capital loss made on exercise of the Put Option is disregarded.

The Premium is included in the CGT cost base and reduced cost base of the Securities disposed of

on exercise. The disposal of the Securities will result in a capital gain if the Strike Price exceedstheir CGT cost base or a capital loss if the Strike Price is less than their CGT reduced cost base.

Some investors may be eligible to apply the CGT discount (see below).

Exercise of Bought Put Option Cash Settlement

If the Cash Settlement Amount exceeds the CGT cost base of the Put Option, the Investor willmake a capital gain. If the Cash Settlement Amount is less than the CGT reduced cost base of the

Put Option, the Investor will make a capital loss.


Lapse of Bought Put Option

If the Put Option lapses unexercised, the Investor will make a capital loss equal to CGT reduced

cost base of the Put Option.

3.2 Collar

Grant of Collar

Any Premium paid for the Collar plus any incidental costs of acquiring the Collar should be includedin the CGT cost base and reduced cost base of the Collar.

If an amount is paid to an Investor for buying a Collar, the Investor should obtain their own adviceon the tax treatment of this amount.


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26 1800 990 107

4. Tax (Continued)


224330570.01

Exercise of Collar Physical Settlement

Any capital gain or capital loss made on exercise of the Collar is disregarded.

Any Premium paid for the Collar is included in the CGT cost base and reduced cost base of the

Securities disposed of on exercise. The disposal of the Securities will result in a capital gain if the

Floor Price or Cap Price (as applicable) exceeds their CGT cost base or a capital loss if the Floor

Price or Cap Price (as applicable) is less than their CGT reduced cost base.


Exercise of Bought Collar Cash Settlement

If the Cash Settlement Amount exceeds the CGT cost base of the Collar, the Investor will make a

capital gain. If the Cash Settlement Amount is less than the CGT reduced cost base of the Collar,

the Investor will make a capital loss.


If a Cash Settlement Amount is paid to Westpac on exercise of a Collar, the Cash Settlement

Amount should be included in cost base and reduced cost base of Securities retained.

Lapse of Collar

If the Collar lapses unexercised, the Investor will make a capital loss equal to CGT reduced cost

base of the Collar.

3.3 Bought Call Option

Grant of Bought Call Option

The Premium paid for the Call Option plus any incidental costs of acquiring the Call Option shouldbe included in the CGT cost base and reduced cost base of the Call Option.

Exercise of Bought Call Option Physical Settlement

Any capital gain or loss made on exercise of the Call Option is disregarded.

The Premium and Strike Price paid are included in CGT cost base and reduced cost base of the

Securities acquired on exercise.

Exercise of Bought Call Option Cash Settlement

If the Cash Settlement Amount exceeds the CGT cost base of the Call Option, the Investor will

make a capital gain. If the Cash Settlement Amount is less than the CGT reduced cost base of the

Call Option, the Investor will make a capital loss.


Lapse of Bought Call Option

If the Call Option lapses unexercised, the Investor will make a capital loss equal to CGT reduced

cost base of the Call Option.


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224330570.01

3.4 Sold Put Option

Grant of Sold Put Option

An Investor will make a capital gain equal to the Premium received from Westpac for the grant of

the Put Option. However, this capital gain is disregarded if the Put Option is exercised and Physical

Settlement applies.

The CGT discount cannot be applied to the capital gain.

Exercise of Sold Put Option Physical Settlement

Any capital gain that was made on the grant of the Put Option to Westpac is disregarded.

The Strike Price less the Premium for the Put Option is included in CGT cost base and reduced cost

base of Securities acquired from Westpac on exercise of Put Option.

Exercise of Sold Put Option Cash Settlement

Investors should obtain their own advice on the tax treatment of any Cash Settlement Amount paid

to Westpac.

Lapse of Sold Put Option

If the Put Option sold to Westpac lapses, no further tax consequences should arise.

3.5 Sold Call Option

Grant of Sold Call Option

An Investor will make a capital gain equal to the Premium received from Westpac on grant of the

Call Option. However, this capital gain will be disregarded if the Call Option is exercised andPhysical Settlement applies.

The CGT discount cannot be applied to the capital gain.

Exercise of Sold Call Option Physical Settlement

Any capital gain that was made on the grant of the Call Option to Westpac is disregarded.

If sum of the Premium and Strike Price received from Westpac exceeds the CGT cost base of the

Securities transferred to Westpac on exercise, an Investor will make a capital gain in respect of

those Securities. If the sum of the Premium and Strike Price received from Westpac is less thanthe CGT reduced cost base of the Securities transferred to Westpac on exercise, an Investor will

make a capital loss in respect of those Securities.

Some investors may be eligible to apply the CGT discount to any capital gain made in respect ofthe disposal of Securities to Westpac (see below).

Exercise of Sold Call Option Cash Settlement

Any Cash Settlement Amount paid to Westpac should be included in the CGT cost base and reducedcost base of Securities retained by Investor.

Lapse of Sold Call Option

If the Call Option sold to Westpac lapses, no further tax consequences should arise.


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4. Tax (Continued)


224330570.01

3.6 Other Option transactions

If an Option is renegotiated, rolled-over or terminated early, Investors should obtain their own tax

advice.

4. PROTECTED LOAN

4.1 Deductibility of interest payable under the Protected Loan

(a) General requirements

Generally, an investor who borrows money to acquire an asset may be able to claim a deduction

for borrowing costs (such as interest) associated with that asset if the investor is able to show that

they incurred the costs in deriving (or expecting to derive) assessable income (other than capital

gains) and the costs are not of a capital nature.

Assessable income may include assessable dividends or trust distributions from Securities acquiredusing the Protected Loan. The ATO may seek to deny a claim for a deduction in respect of interest

paid under the Protected Loan if, for example, an Investor intends and expects to dispose of their

Securities before assessable income (other than capital gains) has been derived in respect of the

Securities in excess of the interest and other deductible costs which are expected to be incurred.

Interest paid under the Protected Loan will not be deductible merely because the Protected Loan is

secured by existing Securities owned by an Investor. It is only the purpose for which the proceeds

of the Protected Loan are used that is relevant in determining whether the interest is deductible.

Investors should obtain their own tax advice in relation to the deductibility of interest (and other

borrowing costs) associated with the Protected Loan. Without limiting the matters which should beconsidered by Investors, Investors should consider the capital protected borrowing rules (see

below) and the thin capitalisation rules. In particular, if an Investor uses the Protected Loan for

purposes other than to acquire Securities (for example, if an investor acquires an Option (other

than the Loan Put Option acquired in conjunction with a Protected Loan) and uses the ProtectedLoan to fund the Premium for the Option), the Investor should obtain their own advice in relation to

whether interest payable under the Protected Loan will be deductible having regard to the specificpurpose of the Protected Loan, as the comments above may not be applicable to such an Investor.

(b) Capital protected borrowing provisions

As Investors who borrow using a Protected Loan are protected against a fall in the aggregate

market value of the Investor's Securities that are mortgaged to Westpac as security for theProtected Loan below the Protected Loan Amount, the capital protected borrowing provisions in

Division 247 of the Tax Act should apply and may limit the extent to which interest under the

Protected Loan is deductible.

Broadly, where Division 247 of the Tax Act applies to a Protected Loan, a portion of the interest

paid under the Protected Loan may be treated as if it were incurred for a put option granted by the

Lender ("Notional Put Option"). In such a case, the tax treatment of that portion of the interestwill generally be the same as for the cost of any explicit Put Option acquired by the Investor. For

Investors who would hold an explicit Put Option on capital account (eg to hedge the risk of loss onSecurities held on capital account), any portion of the interest treated as being incurred for a

Notional Put Option under Division 247 of the Tax Act is likely to form part of the CGT cost base

and reduced cost base of the Notional Put Option. The Notional Put Option will be taken to be anasset of the Investor in addition to the actual Loan Put Option that must be acquired with the

Protected Loan.

The amount treated as incurred for the Notional Put Option is broadly calculated as the excess (if

any) of the interest payable under the Protected Loan and the interest that would be payable if the


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224330570.01

interest rate determined under Division 247 of the Tax Act (the "Adjusted Protected LoanRate") applied to the Protected Loan.

The Adjusted Protected Loan Rate is the Reserve Bank of Australia's Indicator Lending Rate for

Standard Variable Housing Loans at that time plus 100 basis points (ie 7.45% per annum as at

February 2013). On the basis that the interest rate will be fixed for the term of the Protected Loan

or, if an Investor elects for an annually resetting interest rate, the interest rate will be fixed for at

least one year and interest must be paid annually in advance, Investors should use the Adjusted

Protected Loan Rate which applies when they incur a payment for interest paid in advance.

If the Loan Put Option associated with a Protected Loan is exercised or the limited recourse feature

of the Protected Loan is invoked (as a result of the market value of a Security falling below the

Protected Loan Amount), the Notional Put Option is taken to be exercised for tax purposes. In

addition, to the extent that Westpac acquires the relevant Securities, those Securities are taken to

have been disposed of by the Investor as a result of the Notional Put Option being exercised.

If the Loan Put Option associated with a Protected Loan is not exercised or the limited recoursefeature of the Protected Loan is not invoked because the market value of a Security is above the

Protected Loan Amount, the Notional Put Option is taken to have expired (ie lapsed).

Where an Investor has multiple Parcels of Securities and Westpac has treated the Protected Loans

as one loan with a single interest rate (a "Consolidated Loan"), the Consolidated Loan should be

treated as one "arrangement" for the purposes of Division 247 of the Tax Act. This is consistent

with the approach adopted by the ATO in product rulings for products with similar features to TEF.

Accordingly, for the purpose of calculating any excess is calculated by comparing the interest

payable under the Consolidated Loan (using the single interest rate) and the interest that would be

payable under the Consolidated loan if the single interest rate was equal to the Adjusted Protected

Loan Rate. However, as capital protection is provided separately in respect of each Parcel ofSecurities, the excess should be reasonably apportioned to a separate Notional Put Option over

each Parcel.

If a Protected Loan is used by an Investor to acquire a share or option acquired at a discount underan employee share scheme, Division 247 of the Tax Act may not apply to re-characterise the

interest paid under the Protected Loan. This exclusion would not apply if the Protected Loan isused to fund the exercise price of an Executive Option as the Protected Loan is funding the

acquisition of the shares covered by the Executive Option and not the Executive Option itself.

The tax treatment of the application of Division 247 can be complex and Investors should obtain

their own advice on the application of the Division to their circumstances.

4.2 Timing of deductions for interest

(a) Individuals or small business entities

Where an Investor is an individual or a small business entity (ie a business with annual turnover of

less than $2 million), the Investor should be able to claim interest deductions at the time it is paid

(ie upfront) if:

the interest is in respect of an Interest Period not longer than 12 months ending on orbefore 30 June of the next income year (eg, Prepaid Interest); and

the Protected Loan is used to acquire Securities or real property where the Investor hasobtained, or can reasonably be expected to obtain, dividends, trust income or rent and no

other kind of assessable income.

However, a small business entity may elect to claim the prepaid interest deduction over the

Interest Period to which the interest relates on a straight line accruals basis rather than upfront.


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4. Tax (Continued)


224330570.01

Prepaid interest which relates to an Interest Period of over 12 months or which ends after 30 June

of the income year after the one in which the prepaid interest is paid should not be deducted

upfront, but should be deducted over that Interest Period on a straight line accruals basis.

(b) Other entities

If an Investor is not an individual or a small business entity, the deductions for prepaid interest

should be spread on a straight line accruals basis over the Interest Period to which the interest

relates.

5. HOLDING SECURITIES

5.1 Distributions and franking credits

Investors should include in their assessable income any dividends (including unit trust dividends

paid by unit trusts that are public trading trusts) received in respect of their Securities.

If the dividends are franked, the Investor's assessable income will generally include any franking

credits attached to the dividends (or the Investor's share of any franking credits attached to

dividends derived through a trust), provided the Investor is a "qualified person" (and, in the case of

franked dividends derived through a trust (other than a public trading trust), the trustee of the

trust is also a qualified person); see below.

Investors that are companies and which receive dividends from foreign companies may be eligible

for an exemption if they hold a substantial interest in the foreign company (refer section 23AJ of

the Tax Act).

(a) Imputation system

If an Investor is a "qualified person" in relation to the dividend, any franking credits attached to the

dividend may be allowed as a tax offset (equal to the amount of the franking credit on the

dividend). Whether an Investor is ultimately entitled to a tax offset or franking credit depends ontheir particular circumstances. In addition, as this area of the law is still subject to change, an

Investor should obtain specific independent tax advice relevant to their circumstances.

(i) Individuals and complying superannuation funds

If the Investor is an individual or complying superannuation fund and has a tax offset in excess of

their tax liability, the Investor may be entitled to a refund of that excess tax offset.

(ii) Companies

If the Investor is a company, the Investor should not be entitled to a refund of any excess taxoffset, but may convert excess franking credits into tax losses. A franking credit equal to the

franking credit attached to the dividends received should also arise in the company's franking

account.

(iii) 45 day holding rule "qualified person"

An Investor should be a "qualified person"2 in relation to a dividend paid on their share Securities

where the Investor has held their Securities "at risk" for 45 days or more during a relevant

qualification period ("45 day rule").

2 Although the provisions in the Tax Act which determine whether a taxpayer is a qualified person have been repealed,

they continue to have effect as if they were not repealed by operation of paragraphs 207-145(1)(a) and 207-

150(1)(a) of the Tax Act. See also ATO Taxation Determination TD 2007/11. The previous Federal Government

indicated that it still intended to introduce legislation to insert new "qualified person" rules (largely in a rewritten


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Ordinarily, the qualification period is a period commencing when the Investor acquired their

Securities and ending on the 45th day after the ex-date for that dividend (but excluding the days of

acquisition and disposal of the Securities). Provided an Investor is not under a related payment

obligation (broadly, an obligation to pay away the benefit of the dividend), the Investor only needs

to satisfy the 45 day rule once. Accordingly, if an Investor already held their Securities before

entering into an Option, the Investor may have already satisfied the 45 day rule.

Where an Investor transfers Securities already held by the Investor as security for the Protected

Loan, the transfer of the Securities to the nominee should not affect the determination of whether

the Investor is a qualified person.

Where an Investor is entitled to a share of the income of a unit trust which includes franked

dividends, broadly speaking, both the Investor and the trustee of the unit trust need to be qualified

persons. However, if the unit trust is a widely held3 trust, the Investor will generally only need to

have regard to their interest in the unit trust in determining whether they satisfy the 45 day rule

rather than their interest in the underlying shares held by the unit trust.

Alternatively, for Investors who are individuals and who are not under a related payment

obligation, they should be taken to be a "qualified person" where the total franking tax offsets to

which they are entitled in any given income year does not exceed $5,000.

(iv) Related payments rule

If an Investor is under a related payment obligation in relation to any dividend, the Investor will

need to hold their interest in the Securities "at risk" for at least 45 days during the qualification

period commencing on the 45th day before the ex-date for the relevant dividend and ending on the

45th day after the ex-date for that dividend ("related payments rule").

(v) Held "at risk"

To satisfy the 45 day rule or the related payment rule, the Securities need to have been held "at

risk" for the relevant qualification period. In determining whether their Securities are held "atrisk", any days where Investors have materially diminished risks of loss or opportunities for gain in

relation to their Securities will not be counted (but will not be taken to break the continuity of the

ownership period). Investors will be taken to have materially diminished risks of loss or

opportunities for gain in respect of shares or an interest in shares on a particular day if their net

position in relation to the shares on that day has a delta of less than 0.3. Their net position inrelation to Securities will take into account the delta of all positions Investors hold in relation to the

Securities. This includes Options bought or sold under the TEF, including the Loan Put Options

associated with a Protected Loan, the limited recourse features of the Protected Loan, and anyother positions Investors enter into in relation to their Securities. In some circumstances,

Investors may need to also take into account positions entered into by their associates.

Provided the related payment rule does not apply to Investors, Investors should be taken to have

the same net position they had in relation to the Securities on the day their last position was

entered into. For example, the delta of a Put Option should be taken not to change from its value

on the day Investors acquire the Put Option and enters into a Protected Loan, unless and untilInvestors enter into another position in relation to the Securities (e.g. selling a Call Option). Where

an Investor enters into another position, their net position in respect of the Securities will need tobe re-calculated, taking into account the delta of all positions on that day in order to determine

whether the Investor continues to hold their Securities sufficiently "at risk" for the purposes of the

45 day rule.

form, but more substantive changes may be made). The new rules are expected to have retrospective effect from 1

July 2002. Investors should monitor developments in this area.

3 A trust is widely held if 75% or more of the fixed entitlements to the income or capital of the trust are not held,

directly or indirectly, by 20 or fewer unrelated individuals.


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4. Tax (Continued)


224330570.01

Where the related payment rule applies to Investors, Investors will also be required to re-calculate

their net position on the 45th day prior to the ex-date for each dividend over which Investors have

a related payment obligation.

The nature of the Options bought or sold under the TEF is such that an Investor's net position may

fall below 0.3 after the day on which the Investor enters into an Option. Therefore, each Investor

should be aware that if they enter into other positions before the Investor satisfies the 45 day rule

or if the related payment rule applies, it will be necessary for Investors to recalculate their net

position and there is a risk that the Investor will not be a qualified person in relation to franking

credits attached to dividends paid in respect of their Securities.

(b) Trust4 distributions (other than those attributable to dividends)

Trust distributions may include a number of components, including dividends (discussed above),

capital gains and other assessable amounts.

Where a trust distribution is attributable to a taxable capital gains derived by a unit trust in whichan Investor holds units, this may be included in the Investor's assessable income. Certain

Investors (including individuals, trusts or complying superannuation funds) may be entitled to

discount CGT treatment on part or all of their capital gains attributed to them.

Where a trust distribution includes amounts which are non-assessable (sometimes referred to as

tax deferred distributions), the receipt of such non-assessable amounts may result in a reduction of

the CGT cost base of the Investor's units in the unit trust or a capital gain.

The gain on disposal of certain assets held by a unit trust and/or assets held by the underlying

portfolios in which the unit trust invests (including foreign exchange gains) may be assessed as

income under provisions other than the CGT provisions of the Tax Act and Investors should include

their share of such assessable amounts in their assessable income.

(c) Foreign income tax offset

Where dividends or distributions have been subject to foreign tax (eg foreign dividend withholding

tax), Investors should include the gross amount of the dividend or distribution in their assessable

income (ie without deducting the amount of any foreign tax withheld from the dividend or

distribution).

Investors should generally be entitled to a foreign income tax offset for any foreign tax paid in

respect of dividends or distributions, but subject to an overall foreign tax offset limit each year

being the greater of:

$1,000; and

very broadly, the amount of Australian income tax of the Investor that is attributable to

income subject to foreign tax or other foreign sourced income (ignoring any potential

foreign income tax offset).

5.2 Acquisition of Securities

Securities acquired using a Protected Loan, Securities provided as security for a Protected Loan and

Securities acquired as a result of a Bought Call Option or Sold Put Option being exercised are CGT

assets. The Securities acquired by Investors will generally have an initial CGT cost base andreduced cost base equal to the amount paid for Securities (including by applying the proceeds of a

Protected Loan) and any incidental costs associated with acquiring the Securities. As referred to

above in the discussion on Options, the CGT cost base and reduced cost base of a Security

4 Other than a public trading trust.


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acquired as a result of exercising a Bought Call Option or Westpac exercising a Sold Put Option will

include any Premium paid for the Bought Call Option and the Strike Price paid on exercise of the

relevant Option.

5.3 Disposal of Securities (other than as a result of exercising an Option)

A CGT event should happen on disposal of the Securities. The capital proceeds in respect of the

disposal should generally be the sale price of the Securities. Investors should have a taxable

capital gain if the capital proceeds received for the disposal of the Securities are greater than their

cost base. A capital loss should arise if the capital proceeds are less than their reduced cost base.

Investors' cost base and reduced cost base in their Securities should include the amount paid to

acquire the Securities plus any incidental costs of acquisition or disposal.

Investors that are companies and which make a capital gain or capital loss on the disposal of

shares in a foreign company may have their capital gain or capital loss reduced if they hold a

substantial interest in the foreign company and if, broadly, the foreign company carries on anactive business (refer Subdivision 768-G of the Tax Act).

6. DISCOUNT CAPITAL GAINS

6.1 Individuals, trusts and complying superannuation funds

Investors that are individuals, trusts with certain beneficiaries or complying superannuation funds

may be entitled to discount CGT treatment on the disposal of Options or Securities where the

Investor acquired the Option or Securities for CGT purposes at least 12 months prior to the

disposal. In the case of an Investor that is the trustee of a trust, discount CGT treatment will

generally only apply to the extent that the capital gain is attributed to an individual or complying

superannuation fund that is the ultimate beneficiary of the trust. Where an Investor acquires

Securities as a result of exercising a Call Option, the Securities will be taken to be acquired for CGT

purposes when the Call Option is exercised.

Circumstances where discount CGT treatment apply to capital gains made in relation to

transactions involving Options are discussed in section 3 above. Where discount CGT treatmentapplies, an Investor may reduce their capital gains by 50% if they are an individual or trust, or by33 % if they are a complying superannuation fund. Discount treatment is not available where an

indexed cost base is chosen to determine the amount of any capital gain (indexation wouldgenerally only be relevant if an Investor acquired their Securities on or prior to 21 September

1999).

Investors should not be taken to have disposed of their Securities in circumstances where the

Securities are transferred to the Custodian by way of security. Investors should therefore retain

their original acquisition date in respect of the Securities for CGT discount purposes.

6.2 Companies

Discount CGT treatment is not available to Investors that are companies.

7. FUNDING EXERCISE OF EXECUTIVE OPTIONS

Where Westpac provides a Protected Loan to an Investor to fund the exercise price of Executive

Options, the exercise of the Executive Options could have tax consequences for the Investor.

In this regard, we note that the operation of the tax rules for employee share schemes in Division

83A of the Tax Act, former Division 13A of Part III of the Tax Act or former section 26AAC of theTax Act could result in an amount being included in an Investor's assessable income at or around

the time their Executive Options are exercised.


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The tax rules for employee share schemes are complex, depend on the terms of the relevant

scheme, the individual circumstances of the Investor and, in some cases, any elections made by an

Investor. Investors should seek their own advice on the application of the tax rules for employee

share schemes, taking into account their own personal circumstances.

8. FEES

Any upfront fees (such as any Loan Establishment Fee) payable in respect of the Protected Loan

may be deductible to Investors under section 25-25 of the Tax Act over the lesser of five years and

the term of the loan under the Protected Loan, provided Investors use the Protected Loan for the

purpose of producing assessable income in the income year in which a deduction is sought.

Any Break Costs payable by Investors on early termination or repayment of a loan under the

Protected Loan should be allowable as a deduction to the extent that those amounts are incurred to

reduce or eliminate their deductible interest expense.

Brokerage fees payable upon the acquisition or sale of any Securities should be included in the CGTcost base and reduced cost base of the Securities as an incidental cost of ownership or disposal.

9. PROPOSED FOREIGN ACCUMULATION FUND RULES

Investors who acquire Securities in foreign companies or trusts (eg certain exchange-traded funds

established outside Australia that issue securities quoted on the ASX) should be aware that the

Federal Government has proposed the introduction of attribution rules for interests in a "foreign

accumulation fund" ("FAF"). The legislation is still under development and the then Assistant

Treasurer announced on 29 June 2011 that the proposed FAF rules will have application for income

years starting on or after the date it receives Royal Assent. Investors should monitor

developments and seek their own advice on the final legislation.

10. TAXATION OF FINANCIAL ARRANGEMENTS

Division 230 of the Tax Act operates to tax gains and losses (including foreign exchange gains andlosses) arising from certain "financial arrangements" on revenue account and in some cases on a

compounding accruals basis.

Individuals are generally exempt from the application of Division 230 of the Tax Act, and

superannuation funds, managed investment schemes, financial entities and other entities which areconsidered small may be exempt from the application of Division 230 of the Tax Act, unless they

make an election for it to apply. As the application of Division 230 of the Tax Act is complex and

dependent on the facts and circumstances of the Investor, Investors should obtain their own advicein relation to the potential applicability of Division 230 of the Tax Act to them, in light of their own

individual facts and circumstances.

11. GENERAL ANTI-AVOIDANCE PROVISIONS

The question of the applicability of the general anti-avoidance provisions in Part IVA of the Tax Act

(which can operate to cancel certain tax benefits) is something which can only be conclusivelydetermined on a case-by-case basis in light of the relevant facts and circumstances arising for a

particular taxpayer. The provisions will apply if a taxpayer obtains, or would but for the applicationof Part IVA obtain, a more favourable outcome (called a "tax benefit") in connection with a scheme

that was entered into by any entity for the dominant purpose of obtaining that tax benefit.

In identifying whether a taxpayer has obtained a tax benefit, it is necessary to determine, very

broadly, whether the tax outcomes under the scheme entered into by the Investor are more

favourable than that which would, or might reasonably be expected to, have been the tax outcomeif the scheme had not been entered into.


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However, even if a tax benefit has been obtained by an Investor, Part IVA can only apply if the

scheme was entered into by any entity for the dominant purpose of obtaining that tax benefit. The

existence of a dominant purpose should be determined on an objective basis, having regard to the

list of relevant factual circumstances contained in Part IVA of the Tax Act.

As at the date of this letter the Tax Laws Amendment (Countering Tax Avoidance and Multinational

Profit Shifting) Bill 2013 is before Federal Parliament and that Bill proposes amendments to Part

IVA of the Tax Act intended (according to the accompanying Explanatory Memorandum) to broadly

clarify the operation of the general anti-avoidance provisions. For example, in determining a

reasonable alternative to the scheme entered into, an alternative is not discounted merely because

of the tax cost associated with that alternative. If the Bill is enacted into law, the amendments will

take effect retrospectively from 16 November 2012.

Investors should not be affected by the general anti-tax avoidance provisions contained in Part IVA

of the Tax Act, provided that the TEF was not entered into as part of a scheme with the dominant

purpose of obtaining a tax benefit.

12. GOODS AND SERVICES TAX

GST should not be payable in respect of the Protected Loan, the entry into and exercise of an

Option, or the acquisition or other dealing with the Securities. However, GST will be payable in

respect of certain supplies (ie advice in respect of the Securities, insurance, legal services, brokingservices, commissions and other transaction fees incurred by Westpac or Investors).

If any GST becomes payable by Westpac in connection with a supply made to an Investor then

Westpac can require the Investor to pay an additional amount for the GST.

Generally Investors will not be entitled to input tax credits in respect of GST on acquisitions they

make. Where an Investor is registered for GST and their investment activities are part of an

enterprise they carry on, the Investor may be entitled to a reduced input tax credit in respect of

some of this GST.

13. STAMP DUTY

No stamp duty should be payable in any Australian State or Territory on the entry into an Option or

on the exercise of an Option. This is provided that the Securities the subject of the Option are

quoted on the ASX or other recognised stock exchange at the time of entry into the agreement andat the time of exercise of the Option.

We expect that no mortgage duty will be payable in relation to any mortgage granted by anInvestor in favour of Westpac. If a stamp duty liability were to arise in connection with a

transaction entered into under the TEF, the Investor would be required to pay that stamp duty

liability.

14. OTHER TRANSACTIONS

This letter may not cover all possible transactions and events that may happen in connection withthe Options and Protected Loan. Accordingly, Investors should not solely rely on the comments in

this letter and should obtain their own advice having regarded to their particular circumstances.

Yours sincerely

Ashurst Australia


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The legal terms and conditions of each Transactionunder the BT Tailored Equities Facility (TEF) areset out in these Terms and Conditions, the IM andthe Application Form. Indicative financial terms

and other details of a Transaction may be advisedin a Deal Sheet provided to you following yourapplication but will be finalised at the Issue Date andset out in the Confirmation provided to you.

Under the power of attorney (contained in theAppli

Documents

BT Tailored Equities Facility, Information Memorandum