ASX Announcement 2012 Annual Report to Securityholders and 2012 Securityholder Review 15 October 2012 Copies of the 2012 Annual Report to securityholders of Lend Lease and the 2012 Securityholder Review are attached. These documents are also available online at www.lendlease.com. Both documents will be sent to securityholders who have elected to receive a copy. ENDS For further information, please contact: Investor Relations: Corporate Affairs: Sally Cameron Iwona Polski Group Executive - Investor Relations Media & External Communications Manager Tel: 02 9236 6464 Tel: 02 9237 5034 Lend Lease Corporation Limited ABN 32 000 226 228 and Lend Lease Responsible Entity Limited ABN 72 122 883 185 AFS Licence 308983 as responsible entity for Lend Lease Trust ABN 39 944 184 773 ARSN 128 052 595 Level 4, 30 The Bond Telephone +61 2 9236 6111 30 Hickson Road Facsimile +61 2 9252 2192 Millers Point NSW 2000 www.lendlease.com Australia DELIVERING OUR PIPELINE AND DRIVING GROWTH Annual Report 2012 LEND LEASE ANNUA L REPORT 2012 CONTENTS Chairman’s Report 2 Chief Executive Officer’s Report 3 Corporate Governance 4 Management Discussion and Analysis of Financial Condition and Results of Operations (MD&A) 15 Portfolio Report 33 Directors’ Report 62 Lead Auditor’s Independence Declaration 100 Five Year Profile 101 Consolidated Financial Statements 102 Securityholder Information 164 Corporate Directory 168 Lend Lease Corporation Limited ABN 32 000 226 228 Lend Lease Responsible Entity Limited ABN 72 122 883 185 AFS Licence 308983 as responsible entity for Lend Lease Trust ABN 39 944 184 773 ARSN 128 052 595 Cover: Athlete’s Village, London, UK Victoria Harbour, Melbourne, Australia Lend Lease 2 ANNUAL REPORT 2012 ChAIRMAN’S REPORT Lend Lease has delivered continued profit growth in a difficult market environment. Our financial strength and access to a variety of capital sources gives the Group considerable flexibility to deliver our significant pipeline and fund growth. Strong performance People and Diversity I am pleased to report that Lend Lease delivered continued profit The Board has been working with Group Chief Executive Officer and growth for the financial year ended 30 June 2012, with an Operating Managing Director, Steve McCann, to ensure we have appropriate Profit after Tax of $507.2 million, a 4.5 per cent increase on the prior management depth. During the year a number of senior appointments year. This result reflects the continued success of the Group from were made, both to support the Group’s growth strategy and maintain focused execution of the Group strategy and a full year contribution operational excellence. Diversity has always been a cornerstone of the of earnings from the infrastructure business. Lend Lease culture and in the past year we maintained our target with 23 per cent of senior executive positions held by women. Statutory Profit after Tax for the year was $501.4 million, including net property revaluation losses of $5.8 million after tax. Securityholders will Board composition receive a final distribution of 22.0 cents per security, unfranked. This During the year we appointed three new Directors to the Board, brings the full year distribution to 38.0 cents per security, an increase Ms Jane Hemstritch, and Messrs Michael Ullmer and Colin Carter. of 8.6 per cent on 2011. These appointments add to the diversity and breadth of experience across our Board. Financial strength The Group retained a strong financial position with cash of Subsequent Events $957.9 million as at 30 June 2012, gearing of 6.5 per cent and On 10 September 2012, the Group announced it had identified certain undrawn capacity of $1,242.5 million. Our balance sheet and access discrepancies and issues in relation to the reporting and recognition to third party capital means we have the financial flexibility to fund our of profits and losses on two projects within the Abigroup operations, development pipeline and invest in new opportunities that are in line which involve the potential under-reporting of anticipated profit on one with our strategy. project and the potential under-reporting of the anticipated loss on another project. Executing the right strategy This year we introduced a unifying Lend Lease vision that underpins A thorough investigation of these matters and all the surrounding our strategy and the way we operate. Our vision is ‘to create the best circumstances is being conducted in conjunction with the Group’s places’, a phrase that encapsulates what we aspire to do. Our strategy external auditors. You can be assured that Lend Lease takes its is to achieve a balanced and diversified portfolio and to continue to financial reporting and compliance obligations very seriously and that recycle capital from property assets and non-core businesses to invest we are committed to resolving this matter as quickly as possible. in higher yielding opportunities. We believe this is the right approach to generate attractive returns for our securityholders. Outlook The Group’s continued earnings growth in what remains a challenging Safety environment demonstrates that we are pursuing the right strategy. A commitment to safety is fundamental to our strategy. It remains We have a significant project pipeline and clear priorities on where we our number one priority and focus. While significant progress has will allocate our capital and are well on the way to delivering our target been made, it is with regret that we experienced one fatality on a 15 per cent return on equity over the medium-term. Lend Lease controlled operation in the past year. This tragedy only My thanks go to fellow Board members, as well as the Lend Lease heightens our resolve to take the necessary steps at all times to be management team and employees for their dedicated efforts incident and injury free. throughout the year. I also thank investors for their continued support Sustainability as we build Lend Lease into the leading international property and Lend Lease’s reputation as a sustainability leader was further enhanced infrastructure group. during the year with continued investment in sustainability products and services. We progressed our innovative approach to sustainable building solutions such as using Cross Laminated Timber at Forté in Melbourne, and implementing green utilities on Barangaroo South in Sydney. David Crawford AO CHAIRMAN Lend Lease ANNUAL REPORT 2012 3 CEO’S REPORT Lend Lease has made significant progress on executing our strategy and repositioned the portfolio to generate over 60 per cent of earnings from our home market. Development of major projects in our $20 billion urban regeneration pipeline is now underway. Our strong market position is enhanced by $15.3 billion in construction backlog revenue, circa 90,000 residential units backlog and funds under management of $12.3 billion. Lend Lease had a strong year in 2012, delivering profit ahead of In addition to Barangaroo South, our urban regeneration portfolio market expectations and making good progress on our strategy. In includes Showground Hill in Brisbane, Waterbank in Perth, JemTM in 2013, execution will be the key theme. We need to execute our key Singapore, Elephant & Castle in London and The International Quarter projects well and ensure we deliver the right risk weighted returns for at Stratford in London. We have made significant progress in planning securityholders. on all key projects and will now focus on extracting maximum value from these opportunities. Safety and governance Safety is our number one priority. It is pleasing to note that our critical Portfolio reshaping is a key element of the Group strategy and in the incident frequency rate trended down compared with the previous year past financial year the Group realised $0.95 billion in capital from our and 74 per cent of our operations did not record a serious incident. We project portfolio. This capital is being reinvested in the execution of our have now rolled out our updated Global Minimum Requirements and development pipeline and securing new opportunities. Enablon reporting system across all of our operations. We will continue Outlook to take an uncompromising approach to ensure workers go home Our focus on repositioning the Group has created a diversified platform without incident or injury. of businesses and investments that aim to deliver sustained long term Lend Lease takes corporate governance very seriously and is growth in line with our strategy. The markets in which we operate committed to the highest standards. As the Chairman reported, post will continue to be volatile and uncertain, and we will be vigilant financial year end we identified certain discrepancies and issues in in managing the Group risk exposure while continuing to source relation to the reporting and recognition of profits and losses on two opportunities that will deliver growth. Abigroup projects. A review of these matters is currently underway. Lend Lease takes a zero tolerance approach to safety, corporate governance or compliance breaches. People and performance management To ensure Lend Lease has the right people to lead the company over the longer term and a consistent approach to leadership, we have created a new curriculum of development programs for senior executives, middle management and junior executives. Steve McCann We also continued to improve bench strength with internal and GROUP CHIEF EXECUTIVE OFFICER AND MANAGING DIRECTOR external appointments to senior executive positions both in Australia and offshore. Progress on strategy Lend Lease has a clear ‘Restore, Build, Lead’ strategy to realise and deliver long term sustainable growth for the Group. As part of the Restore phase, we have reorganised the Group into a regional structure and we are now focused on continuous business improvement by investing in systems, processes and people to drive efficiency. In the Build phase, the Group has secured a significant portfolio with $20 billion across our urban regeneration pipeline, circa 90,000 residential units backlog (land lots and built-form), $15.3 billion construction backlog revenue, together with $12.3 billion of funds under management.