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19 August 2019
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Lendlease Group 2019 Annual Report

Lendlease Group today announced its results for the year ended 30 June 2019. Attached is the 2019 Annual Report, including:

Directors’ Report
Remuneration Report
▪ FY19 Financial Statements

ENDS

FOR FURTHER INFORMATION, PLEASE CONTACT:

Investors: Media: Justin McCarthy Stephen Ellaway Mob: +61 422 800 321 Mob: +61 417 851 287

Lendlease Corporation Limited ABN 32 000 226 228 and Lendlease Responsible Entity Limited ABN 72 122 883 185 AFS Licence 308983 as responsible entity for Lendlease Trust ABN 39 944 184 773 ARSN 128 052 595

Telephone +61 2 9236 6111 Facsimile +61 2 9252 2192 lendlease.com

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Level 14, Tower Three, International Towers Sydney Exchange Place, 300 Barangaroo Avenue Barangaroo NSW 2000 Australia

Lendlease Annual Report 2019

As the world reinvents itself

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Lendlease Annual Report 2019 / 3

3 /

About this report

The Lendlease Annual Report 2019 has been prepared with reference to the International Integrated Reporting (IR) Framework that encourages businesses to consider what creates value for them and how this value contributes to long-term sustainable returns for securityholders.

Materiality

A matter is considered material if Lendlease’s senior management and those charged with governance believe it could significantly impact the value created and delivered in the short, medium and long term. Lendlease identifies and captures material matters through the following processes:

Project Control Group (PCG) sessions, which include key internal stakeholders and represent the governance structure for overseeing the completion of the annual report
Capturing feedback through engagement and research during the financial year from key external stakeholders including investors, analysts, and other relevant groups

Lendlease presents its fourth integrated annual report to communicate how our business operates, our competitive advantage, and our performance and outlook.

The world in which we operate is rapidly changing. A number of global trends, including urbanisation and technology, are reshaping the way people across the planet live. Increasingly, governments and our other customers are looking to Lendlease for solutions. Fittingly, the theme of this year’s annual report is ‘as the world reinvents itself’.

At Lendlease, we have five focus areas that contribute to creating long-term value for our securityholders and the broader community. Icons are used throughout the report linking our activities to this value creation.

Engagement with the Board
Confirming that the strategy and the global trends influencing our strategy are consistent and relevant with the information collected above.

The outcomes of these processes are the material issues noted on page 40, and our strategy and the global trends influencing it on pages 16 to 19.

Directors’ Report and Operating and Financial Review (OFR) The required elements of the Directors’ Report, including the OFR, are featured on pages 4 to 127 of this report and include the sections: Our Business, The Role We Play, The Value We Create, Managing and Measuring Value, Risk, Performance and Outlook, and Governance . The OFR is covered specifically on pages 4 to 75. All non-financial metrics included in the Directors’ Report on pages 4 to 61 have been verified through our internal verification process. The Remuneration Report on pages 92 to 123 and the Financial Statements on pages 128 to 190 have been audited by KPMG.

Reporting suite

Lendlease’s Reporting Suite provides information about the organisation and its key financial and operational achievements including:

The Annual Report . Features information on Lendlease, our strategy, integrated financial and operational performance, corporate governance, Directors’ Report, Remuneration Report and Financial Statements
Bi-annual Results Presentation. The current reporting period’s financial results and detailed segment information for projects, investments and pipeline
www.lendlease.com Includes additional information on sustainability reporting, corporate governance, tax compliance and historical financial information.

All financial amounts in this report are in Australian dollars unless otherwise specified.

Lendlease Corporation Limited ABN 32 000 226 228 Incorporated in NSW Australia Lendlease Responsible Entity Limited ABN 72 122 883 185 | AFS Licence 308983 as responsible entity for Lendlease Trust ABN 39 944 184 773 | ARSN 128 052 595

Award-winning International House, Barangaroo South, Sydney In shaping cities and creating noteworthy places, we look to innovate around product and design.

Directors’ Report

’
Directors Report 1. Our Business 4 Our vision to create the best places 6 FY19 highlights 8 Chairman’s Report 10 Group CEO and Managing Director’s Report 12 2. The Role We Play 14 Our strategy and capabilities 16 Global presence, gateway cities 17 Global trends influencing our strategy 18 Development 20 Construction 22 Investments 24 3. The Value We Create 26 Partnering 28 Connected developments 30 Populations are changing 32 Sustainable communities matter 34 Creating the future 36	4. Managing and Measuring Value 38
	Our five focus areas of value creation 40 Health and Safety 42 Financial 44 Our Customers 46 Our People 48 Sustainability 50 5. Risk 56
	Risk governance and management 58 Key risks and mitigation 60 6. Performance and Outlook 62
	7. Governance 76
	Board of Directors’ information 78 Remuneration Report 92 Directors’ Report 124 Lead Auditor’s Independence Declaration 126 8. Financial Statements 128
	9. Other Information 198
	Securityholder information 200 Glossary 203 Corporate Directory 204

Front Cover

The Exchange, Darling Square, Sydney

Almost 20km of sustainably sourced timber wraps The Exchange, or as locals call it, the ‘bamboo basket’.

Lendlease Annual Report 2019 / Our Business / 5

4 / As the world reinvents itself

Lendlease is an international property and infrastructure group with core expertise in shaping cities and creating strong and connected communities.

Being bold and innovative characterises our approach and doing what matters defines our intent.

Our Business

We create award-winning urban precincts, new communities for older people and young families just starting out, retail precincts, and work places to the highest sustainability standards. We are also privileged to create essential civic and social infrastructure including state-ofthe-art hospitals, universities and stadiums around the world.

Lendlease has been entrusted with many projects of public, cultural and social significance: constructing the Sydney Opera House, creating the National September 11 Memorial & Museum in New York, and restoring and renovating historic buildings such as London’s Tate Britain and National Theatre.

As we expand our experience and our footprint, we aspire to continue creating places people want and care about, and providing value for securityholders and the broader community.

Headquartered in Sydney, our people are located in four operating regions: Australia, Europe, the Americas and Asia.

Southbank, Chicago (artist’s impression) Lendlease is undertaking a major revitalisation on the banks of the Chicago River, on a site that has been mostly dormant for half a century.

6 / As the world reinvents itself

Lendlease Annual Report 2019 / Our Business / 7

Our vision To create the best places

Our values guide our actions so we can do our best work and create long-term value for securityholders and the community.

Our values.

Our best work.

Places where people want to be.

Respect Be dedicated to relationships.

Our expertise and track record span the imagining of a place, making it possible, its funding (whether it’s our funds or investors’), through to its development and construction. We also manage places.

Integrity

This is our integrated business model and we apply it in a disciplined way to shape cities and create and connect communities.

Be true to our word.

Through our growing urban regeneration expertise – the cornerstone of our strategy – we are a partner of choice; known, respected and trusted in the markets in which we operate.

Innovation

Be challenging in our approach.

Collaboration

Be one team.

Innovation is part of our heritage and embedded in our approach to business.

Excellence

Be exceptional in everything we do.

Trust

Be open and transparent.

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Long-term value. Every day millions of people live, work and play in the places we imagine, build and manage.

However, the value of what we do is far more than a financial transaction and the legacy we leave is far more than a physical presence. We measure our success by the positive outcomes we effect in five focus areas of value creation1:

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Financial

Sustainability

Health

Our

and Safety

Customers

People

Sustainability is core to our planning and clear in our outcomes.

A strong balance Everyone has the sheet and access Our Customers Our People right to go home to third party love the places we and culture are safely. We remain capital enables create when we the greatest committed to the Lendlease to fund partner effectively, contributors to health and safety the execution of collaborate and our success and of our people, our its pipeline and innovate. Only our ability to create subcontractors, deliver quality through these the best places. and all of those earnings for our actions can we who interact with securityholders. respond to a a Lendlease place. changing world.

We have a proud history of giving emphasis to environmental, social and economic impacts.

1. Please refer to Section 4, pages 38 to 55, for more detailed information on our five focus areas of value creation.

8 / As the world reinvents itself

Lendlease Annual Report 2019 / Our Business / 9

FY19 highlights[¹]

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90%
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90% plus

2018 Winner Multinational Employer category at the Global Centre for Healthy Workplaces Awards

of our people agreed that safety is a key priority in their teams and that Lendlease creates a culture of working safely

Health and Safety

Operations without a Critical Incident

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$467

$804

12.8%

Million

Financial

Profit after Tax

Core Profit after Tax

Core Return on Equity

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22,500 plus

Launched a range of digital solutions to enrich the lives of our customers including the trial of autonomous vehicles in a retirement village

Our Customers

People surveyed around the world in our annual customer research

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94%

Gender

key talent retention rate

Leadership positions held FY19 26.1% by women

Our target retention rate for key talent is 90 per cent or higher across all talent programs

Our People

Places we created

Delivered

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1,623
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Residential apartments for sale including in Sydney, Melbourne and London

Office precinct of

Our first

83,000 sqm at Paya Lebar Quarter

residential for rent apartment building, The Cooper at Southbank, Chicago with 452 units

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$9.7b
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Major urbanisation

project at Darling Square now complete after a decade in development

of construction work including Bankwest Stadium

Strengthened

Funds under management increased by 17 per cent to $35.2 billion

US$1b

Post balance date secured a major urbanisation project in the San Francisco Bay Area at c.$20 billion
residential investment partnership

Awarded

Places we will create

To be delivered

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$96.1b2 Development pipeline

2
• 21 major projects across 10 gateway cities
Three new major projects secured in FY19: Victoria Cross in Sydney, Lakeshore East in Chicago, and MIND in Milan
Preferred development partner for the $14.5 billion Thamesmead Waterfront and $2.7 billion Birmingham Smithfield projects in the UK
Development pipeline includes $14.7 billion communities and retirement pipeline, c.50,000 lots

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$15.6b
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$9.9b

of new secured work in Core Construction Core Construction backlog revenue

Future legacies

New Sustainability Framework supporting positive outcomes for the environment and society
Signatory to the Uluru Statement from the Heart
Partnerships to skill people and support them into meaningful employment: 2121 in Italy, Chicago Cook Workforce Partnership, and CareerSeekers in Australia
New philanthropic initiative, FutureSteps, with $500,000 seed funding to boost support for vulnerable people

2018 International Property Awards Best Office Development, Commonwealth Bank, Darling Square

LEED Gold Certification The Cooper, Southbank

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Sustainability

Total development 1100%00% pipeline achieved or targeting green certification

2018 GRESB The Australian Prime Property Fund (APPF) Commercial achieved the number one ranking of 874 participants internationally in the GRESB annual real estate assessment (the fourth time the fund has attained the top global ranking)

Workplace Wellbeing Awards 2018-19, held by UK mental health charity Mind, Lendlease Europe received the highest accolade

The Council on Tall Buildings and Urban Habitat 17th Annual Awards, Best Tall Building Awards, Residential or Hotel Building in the World, 277 Fifth Avenue, New York City

2018 GRESB Our Asia funds again topped the rankings in the Asia Retail category for leadership in sustainability

2019 Australasian Reporting Awards Integrated Reporting Award (FY18 Integrated Report) for the second year running

Cannes Lions International Festival of Creativity 2019 Silver Lion, Lendlease Mums for Safety campaign

2. Includes the San Francisco Bay Area project c.$20 billion secured post balance date.

1. Further information about these highlights, and more detailed analysis, can be found on the relevant pages throughout this report.

10 / As the world reinvents itself

Lendlease Annual Report 2019 / Our Business / 11

Our core strategic focus

Chairman’s Report

In my first report as Chairman, I acknowledge the past year has been a difficult one for the Group which has impacted our securityholders, customers and employees. The underperformance of the Engineering and Services business, and subsequent erosion of securityholder value, has been disappointing, and has overshadowed the underlying strong performance of our core business, which has achieved significant success.

My immediate priority as incoming Chairman was to lead the Board in a strategic review of the Engineering and Services business. This review made it clear that despite the strength of the sector in which Engineering and Services operates, and the ability of our team to deliver outstanding customer solutions, the business has a different risk and return profile to that of the broader Group.

Accordingly, we determined the business was non core and separating it from the Group was in the best interests of securityholders and employees. This would allow both the Group and the Engineering and Services business to focus on their core competitive advantages. The Board is currently overseeing a sale process for the non core business.

Our primary strategic focus for the past decade has been to respond to the global trend of major urbanisation in key gateway cities. Significant progress has been made and today Lendlease has a development pipeline approaching $100 billion of which approximately 70 per cent is offshore. This reflects our competitive advantage in placemaking and provides a substantial platform for future growth.

On behalf of the Board, I recognise we need to rebuild the confidence of the market in our ability to leverage this platform to deliver long-term sustainable growth in securityholder value. This is my personal accountability, and the Board and leadership team will work with determination to rebuild confidence in Lendlease and set the company up for future success as it delivers on its record pipeline.

Health and Safety

Health and Safety remains our number one priority and the human element of what we do takes precedence over everything else. Our people often work in challenging environments and Lendlease has an unrelenting focus on safety.

Following the tragic fatalities of 2018, we undertook a detailed review across our global businesses to gain deeper insights into how cultural factors link with safety performance across different geographies and sectors. We will apply these insights in our review of our Global Minimum Requirements for safety during 2020.

Financial Strength

The Group delivered Profit after Tax of $467 million for the financial year ended 30 June 2019, impacted by the underperformance of the Engineering and Services business.

Securityholders will receive a final distribution of 30 cents per security, taking full year distributions to 42 cents per security. The payout ratio for the year was 50.7 per cent, which is within the Board’s stated target range of 40 to 60 per cent of earnings.

The on market buyback was announced in February 2018 and completed in February 2019, with $352 million of securities purchased. This resulted in a three per cent reduction in the weighted average number of securities on issue.

The Group enters FY20 in a strong position with a record pipeline of work, cash and cash equivalents of

$1.3 billion and gearing of 9.9 per cent. The resilience of the balance sheet, along with continued capital partnering, provides the financial flexibility to capitalise on growth opportunities generated by our business model.

Governance

During the year, the Board undertook a comprehensive review of its governance practices. A range of opportunities were identified to enhance the effectiveness of Board processes and the responsibilities specifically reserved for the Board and its committees.

As a result, changes have been implemented to increase the focus of the Board on strategy, reputation, customers and our people. We have established a separate Risk Committee, of which all Directors are members, with a mandate to address risk frameworks, oversee specific exposures and consider major transactions for Board approval. The

for the past decade has been to respond Audit Committee will continue to focus to the global trend of on the effectiveness of the control major urbanisation in key gateway cities. environment and financial reporting. Significant progress The remit of the Sustainability Committee has been made and has been expanded to include the full today Lendlease has a spectrum of environmental, social and development pipeline governance matters. approaching $100 billion.

More detail on some of the areas where the Board has focused efforts to support value creation for the Group is provided on pages 88 and 89 of the Annual Report.

Culture

A number of elements contribute to a culture that is able to deliver the best places and create long-term value. These include our values, the quality, capability and passion of our people, and the diversity of our workforce.

Purpose

The financial health of an organisation is fundamental for any business. However, the non-financial value drivers such as safety, sustainability, culture, diversity and creating opportunities for people and communities have never been more important.

safety, sustainability, culture, diversity The Lendlease Global Employee Awards, and creating opportunities for people where our people are recognised for and communities have never been more their contribution in areas such as safety, important. customer care and the application of our Businesses must also demonstrate values, are an annual highlight for the purpose, long-term strategy and shared Board. The awards showcase the diversity value creation. of talent across all our disciplines that allow our people to deliver the best places.

Our vision is to create the best places. They are places that provide opportunities for society and that can stand the test of time. This has been a consistent ethos of Lendlease for over 50 years.

Looking to the future

time. This has been a consistent ethos of Lendlease has established a leading Lendlease for over 50 years. global presence in urbanisation which leverages our core capabilities In the coming year I look forward to in development, construction and working with the Board and CEO Steve McCann to continue to evolve our investment. Key to this has been the capability of our people and our acute purpose around the positive difference awareness of the need to drive positive we make for people and how that value is social and environmental outcomes in consistently woven through the physical order to deliver sustainable economic places we create. results for our securityholders.

When we do this, we help to create the best places for customers and the communities we serve, inspire our people and deliver sustainable growth for our securityholders.

2019 has been a difficult year and there remains much to be done in 2020 as we separate Engineering and Services. The Board however is confident that the strategic platform that has been established, positions the Group to leverage its competitive advantage for the benefit of our securityholders.

Customers

Trust is the foundation on which good business is done. And given the size, variety and scope of the projects Lendlease undertakes, we are acutely attuned to the importance of maintaining that trust with our stakeholders.

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This integrated report enables us to provide more transparency of our performance, progress on long-term value creation and risk mitigation. By applying more scrutiny on our progress, we are learning and improving.

Michael Ullmer, AO Chairman

12 / As the world reinvents itself

Lendlease Annual Report 2019 / Our Business / 13

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Group CEO
and Managing
Director’s Report
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It was a difficult year for Lendlease with the provision taken for underperforming Engineering projects impacting the overall financial result. I am very disappointed with this outcome and accept full accountability in my role as CEO. I am pleased to emphasise though that we have had a good year in other parts of our business, despite some market headwinds, and importantly we have built a very strong position to deliver longer term earnings growth.

The cornerstone of the Group’s strategy is to create the best urban precincts in key global gateway cities. During the year, we were chosen as the development partner for several transformational projects in those cities. This is a strong endorsement of our urbanisation capabilities from both public and private sector clients and why our development pipeline, now approaching $100 billion, has grown rapidly.

Health and Safety

Every day, tens of thousands of people around the world come to a Lendlease place to work. As our pipeline grows, so do the number of workers in our care. Our commitment to their health and safety, and everyone else who interacts with us, holds the highest priority for Lendlease.

We benchmark our performance often beyond industry standards. This year we maintained our Critical Incident Frequency Rate at 0.8 and 90 per cent of our operations did not experience a critical incident.

We continue to move towards a culture of care on our worksites. We have seen an exceptional uptake by our people to self-report incidents via a safety app. Through this we can continue to improve and refine our safety approach.

Our commitment goes beyond the physical care of people to their mental wellbeing. This year we were the Multinational Employer winner at the 2018 Global Healthy Workplace Awards.

Financial performance

It was a financially challenging year for the Group with Profit after Tax of $467 million or 82 cents per security for the year ended 30 June 2019. The Group’s core business, excluding Engineering and Services, had a solid year with Earnings per Security of 141.8 cents and a Return on Equity of 12.8 per cent.

As noted in the Chairman’s Report, the decision was made that the Engineering and Services business is non core and will be separated from the Group. This is detailed in the Directors’ Report and Performance and Outlook sections of this report. As the separation process progresses, we remain committed to delivering the best possible outcome for our clients, employees and securityholders.

The after tax loss of $337 million for the non core business included a $500 million pre-tax provision for underperforming Engineering projects that was brought to account in the first half of the financial year. We have reviewed the status of the entire Engineering portfolio as part of our full year reporting process and our provisioning is appropriate based on that review.

Strong apartment earnings, particularly at Darling Square in Sydney, underpinned the Development result. The team worked hard and did a great job achieving 100 per cent settlements on that project in a slowing market. The Development highlights included completion of the office precinct at Paya Lebar Quarter and the formation of a new residential investment partnership in the US with one of our key investors.

In Construction, margins were down in both Australia and the Americas, while Europe delivered an improved performance with both revenue and margin up strongly on the prior year. New work secured was strong with diversity by client, sector and geography.

In Investments, the Retirement Living business recovered strongly from a subdued period for the industry, with resales across the portfolio up 21 per cent. Higher investment income and solid asset value appreciation was derived from co-investment positions. Fee income was also higher, driven by growth in funds under management and strong performance across the asset management businesses.

Strategy

The world is urbanising rapidly. Our strategy must meet the needs of cities that are recording unprecedented density challenges, and provide new living and working solutions to keep pace with our customers’ expectations and preferences. We believe that by delivering thoughtfully designed urban precincts with a strong focus on environmental and social outcomes, we can play an important role in helping to mitigate the challenges of urbanisation and leave a positive legacy.

Lendlease is a great company

and our pipeline has never been stronger. We will work Our core business model delivers very hard to convert the tremendous backlog we now proven integrated capabilities across have to deliver attractive Development, Construction and returns for our securityholders Investments. These capabilities, over time while striving for combined with our financial strength leadership in health, safety and strong track record of delivery, are and sustainability. Lendlease’s points of difference.

Our portfolio of 21 major urbanisation projects across 10 cities delivers on our objective of diversifying to targeted Sustainability is also a core principle of international gateway cities. These longour organisation. During the period, our dated projects provide strong visibility of flagship office fund, APPF Commercial, future earnings. was ranked No. 1 globally in the 2018 GRESB survey for the fourth time in five Over the last five years, the urbanisation years. We are one of the early signatories pipeline has grown significantly from to the Financial Stability Board’s $25 billion to approximately $80 billion, Taskforce on Climate-Related Financial within the total development pipeline Disclosures and you will see scenario of $100 billion. That provides scope disclosures included in our Integrated for development activity to accelerate Report going forward. materially over the medium term with diversity by gateway city and product Outlook type, including our residential for rent platform. Lendlease is a great company and our

Lendlease is a great company and our pipeline has never been stronger.

A substantial uplift in the amount of institutional grade product will be created for capital partners and the Group’s Investments platform as development activity accelerates. Since FY14, funds under management has more than doubled from $16 billion to $35 billion. The Group is well placed to double funds under management again as the urbanisation pipeline is delivered.

The experience of the past year has highlighted the need to stay focused on our core strategy.

We believe our placemaking and origination capabilities are world leading. Our success internationally is testament to our strategy and the depth of talent we have been able to develop over many years. We will work very hard to convert the tremendous backlog we now have to deliver attractive returns for our securityholders over time while striving for leadership in health, safety and sustainability.

Culture

Lendlease is an organisation with a proud culture and history.

The strength of our pipeline is testament Welcome new Lendlease to the innovation of our people and their Chairman willingness to continually rise to the challenges and opportunities presented. Finally, I welcome our new Chairman An inclusive and diverse work Michael Ullmer. Michael is passionate environment inspires employees and about the value Lendlease creates for drives innovation and growth. We are our customers, and the legacy we leave working hard on our diversity agenda for future generations. I look forward to and helping to drive workplace flexibility continuing to work with Michael and the and gender pay parity in our industries. Board to lead this wonderful organisation. Today 26.1 per cent of our leadership positions are held by women. This is an improvement but we still have some way to go. Pleasingly, and for the second year running we have been named a Platinum employer by the Australian Workplace Stephen McCann Equality Index, recognising the work we Group Chief Executive Officer and do to promote LGBTI inclusion. Managing Director

14 / As the world reinvents itself

Lendlease Annual Report 2019 / The Role We Play / 15

The Role We Play

As the population grows, along with the stress on our environment, sustainable ways of living are in demand and the opportunities to get it right are many. Technology is opening up new, better, different ways to solve challenges but also creating some challenges in itself. We say we’re better connected, but many have never been so lonely. Expectations are shifting.

The population is ageing. Older or not, new experiences and wellbeing are top of mind and our creativity seemingly has no bounds.

Governments, communities and individuals around the world are re-imagining the way we live, work and play.

Silvertown Quays, London (now)

Lendlease, in partnership with Starwood Capital, is set to regenerate this disused East End industrial area.

Picture courtesy of a Lendlease graduate.

Lendlease Annual Report 2019 / The Role We Play / 17

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16 / As the world reinvents itself
Our strategy
and capabilities
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We pursue our integrated business model – where two or more of the operating segments of Development, Construction and Investments engage on the same project – to create major precincts, new communities and important civic and social infrastructure.

The call for new, sustainable and economically viable ways of living is loud and pressing. Our strategy enables us to create the best places to meet demand.

This model, our financial strength and exceptional track record provide a point of difference we believe few can match.

Our approach

To steer our presence we apply our gateway cities lens.

Recognised as a Leading International Property and Infrastructure Group

To leave a legacy people care about, and to be an organisation people want to work with and for, we manage and measure our impact and the value we create in five focus areas: Health and Safety, Financial, Our Customers, Our People and Sustainability.

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Our Approach Five Focus Areas
of Value Creation
Focus and Grow To
Health and Safety
Gateway Cities Create Financial
Key Trends the Best Our Customers
Places Our People
Disciplined Portfolio
Management Sustainability
at
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We’re proud of our heritage, and as we’ve done for the past 61 years, we strive to learn, to continue to embed innovation in our work, and to lead. As we expand our footprint and expertise, we look to share our learnings so cities and communities beyond our work benefit too.

Our approach is disciplined and underpinned by a strong risk management and governance framework.

The result is a business that creates positive economic outcomes, as well as safe and sustainable ones, for our customers, partners, securityholders and the community.

Maximising Long-Term Securityholder Value (target 10-14% Return on Equity)

Barangaroo South, Sydney

Around the world, people live, work and play in the places we create. Through these places we strive to leave positive economic and sustainable outcomes for customers, partners, securityholders and the community.

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London
Chicago
Milan
Boston
San Francisco New York Rome Beijing
Los Angeles Tokyo
Shanghai
Kuala Lumpur
Singapore
Brisbane
Perth
Sydney
Melbourne
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Global presence, gateway cities

Lendlease’s urbanisation-led strategy focuses on major ‘gateway cities’ around the world.

skills. They are where we can deliver the most value and create the best places. To identify the most relevant cities, we study global markets to evaluate key metrics: economic, business climate, geopolitical risks, urbanisation potential and capital market indicators.

Gateway cities, relative to their national average, typically experience higher population growth, have the most appealing employment prospects, are more resilient through property and economic cycles, and attract more global investment capital.

unique attributes, and policy and planning frameworks. In any city we target, we need to be able to operate in a way that complies with our robust safety and sustainability standards. Through this lens, we identified 17 target gateway cities. Today, we operate in 15 of these, of which ten feature major urbanisation projects.

Such cities often contain sites well suited to regeneration and infrastructure upgrades and play to the breadth of our

Our decisions are also defined by the impact of global trends, our capability and presence, property fundamentals,

Our major urbanisation pipeline¹

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Americas

Asia

Australia

Europe

Lakeshore East, Chicago (above) Milano Santa Giulia, Milan (above) 30 Van Ness, San Francisco Milan Innovation District (MIND) Southbank, Chicago Euston Station, London Silvertown Quays, London Elephant Park, London International Quarter, London High Road West, London All images are artist impressions The Timberyard Deptford, London

Victoria Cross, Sydney (above) Barangaroo South, Sydney Victoria Harbour, Melbourne Melbourne Quarter Brisbane Showgrounds Circular Quay Tower, Sydney Waterbank, Perth

The Exchange TRX, Kuala Lumpur (above) Paya Lebar Quarter, Singapore

1. Projects with an estimated end development value greater than $1 billion.

18 / As the world reinvents itself

Global trends influencing our strategy

Urbanisation Global

infrastructure

Today, 55 per cent of the world’s population lives in urban areas, and that’s expected to increase to 68 per cent by 2050. The human shift from rural to urban areas, combined with the overall growth of the world’s population, could add another 2.5 billion people to urban areas by 20501

Global infrastructure spending is estimated to rise to an average of US$5.1 trillion per year between now and 20353

Where we are today

We have secured an increasing Where we are today We have 21 major urbanisation projects2 number of projects as a result of the global infrastructure boom. Sydney located across 10 global gateway cities. Metro Martin Place and Victoria Cross Since FY14, the urbanisation pipeline has integrated station developments were risen from $25 billion to approximately secured this year. We have delivered $80 billion² which includes more than important infrastructure across numerous 30,000 residential units and over two sectors including health, entertainment, million square metres of commercial space. civic and defence. We are increasing our The strong growth in recent years presence in telecommunications assets. has been generated by extending our integrated business model to targeted international gateway cities. 81 per cent2 of the pipeline is in gateway cities outside of Australia.

Funds growth

Global assets under management are forecast to rise from US$85 trillion in 2016 to US$145 trillion by 20254

Where we are today

We manage $35.2 billion of property and infrastructure investments. Our funds under management has more than doubled since FY14, with approximately 80 per cent of the increase derived from our global urbanisation platform. A substantial uplift in the amount of investment grade product is expected to be created for our capital partners through our existing pipeline in traditional asset classes such as office, retail and industrial, as well as new asset classes such as residential for rent and telecommunications.

Technology, digital and data

The exponential growth of internet use has created a new society of hyper connected citizens. Estimates predict that by 2025, on average, every connected person will have a digital data engagement over 4,800 times per day5

Where we are today

The emergence of the 4th Industrial Revolution has created even more opportunities to create new virtual experiences supported and informed by the ease of access to data and technology. More people have access to digital technology than ever and more products are consistently creating data. Data supported technology solutions can improve and enrich the lives of customers with places that are safer (for example, through the use of digital twins), with experiences they will love, and through new ways of working.

~~Solutions can also drive higher levels~~ of predictability and repeatability not seen before.

Ageing population

Internationally, the number of people aged 60+ is projected to grow three times faster than the overall population (2.4% vs 0.8% p.a.) between 2015 and 20506

Where we are today

Demand for greater healthcare support services and retirement living is increasing and alternative models are emerging. Lendlease’s Retirement Living business is one of Australia’s largest operators of retirement villages. We continue to listen to customers so their transitions are the best they can be. We have also created highly awarded healthcare facilities and our expertise is expanding into innovation precincts that focus on solving human challenges, including those associated with ageing.

Sustainability

Climate change and society’s response to it are now widely recognised as foundational drivers of risk and opportunity within the global economy7

Where we are today

The frequency and financial impact of extreme weather events have increased over the last 30 years. We acknowledge our role in minimising impact on the environment and creating resilient places and communities. Our response aligns to the recommendations from the Task Force on Climate-related Financial Disclosure and we provide confidence to our investors by being a signatory to the United Nations Global Compact. We are recognised by GRESB as an international leader, with the Lendlease managed Australian Prime Property Fund Commercial ranked first. We are also focusing our efforts on developing initiatives that address critical social issues and integrating sustainability into every part of our business.

5. IDC’s DataAge 2025 - The Digitization of the World. 6. World Population Prospects: The 2017 Revision, United Nations. 7. Ref: https://www.apra.gov.au/sites/default/ files/climate_change_awareness_to_action_march_2019.pdf

1. World Urbanization Prospects: The 2018 Revision, United Nations. 2. Includes the San Francisco Bay Area project c.$20 billion secured post balance date. 3. McKinsey Global Institute: Bridging Infrastructure Gaps – Has the World Made Progress? October 2017. Includes some internal calculations. 4. Asset & Wealth Management Revolution: Embracing Exponential Change, PwC 2017.

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Development

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Financial returns for the segment are generated via development margins, development management fees received from external co-investors and origination fees for the facilitation of infrastructure Public Private Partnership transactions.

Our Development segment comprises Our first major1 urbanisation project, activities across urbanisation, Victoria Harbour in Melbourne, was residential communities and secured in 2001 and has a further eight infrastructure development. years to run. This is typical of the type of project we look to secure, involving Our capability a precinct-wide approach that spans multiple property cycles.

Placemaking is the capability that sets us apart to realise our vision to create the best places. Managing the entire development process is essential for success; from securing land, creating masterplans, consulting with authorities and communities, through to project management, sales and leasing. At scale, we are able to create more meaningful outcomes.

Broadening the urbanisation platform via targeted international gateway cities has driven rapid growth in our pipeline, which 2 now comprises 21 major projects across 10 gateway cities.

In five years, Lendlease’s urbanisation pipeline has more than trebled to over $80 billion, including the San Francisco Bay Area project secured post balance date.

We believe we are the pre-eminent urbanisation specialist with a growing track record of outcomes for placemaking, sustainability and connectivity.

We have the expertise to reinvent neglected and underutilised areas into thriving places that connect people through work, leisure and living.

Being awarded a number of largescale projects in recent years, including London’s Euston Station, Victoria Cross in Sydney, Chicago’s Lakeshore East, and Milano Santa Giulia in Milan, is a strong endorsement of our expertise and our status as a partner of choice.

A willingness to undertake ambitious projects, to challenge the status quo, and collaborate with a range of partners to generate the right solutions are key elements in our approach. These, combined with patience, thoughtfulness, experience and humility, lead to achieving great outcomes.

We expect development activity to accelerate over the medium term as the secured pipeline progresses through planning and into delivery.

We have a proud history of balancing environmental, social and economic outcomes. Success is not only measured by financial outcomes, it’s equally about the quality and sustainability of the places we create.

Lendlease’s integrated model is fundamental in delivering the extensive pipeline. Working alongside Development, our Construction segment provides design and delivery excellence, while Investments attracts capital partners for financing.

Urbanisation

The cornerstone of Lendlease’s strategy is to leverage our integrated business model to create the best urban precincts in key gateway cities. Securing major urbanisation projects where the breadth of Lendlease’s skills are applied to great effect, is where our competitive advantage comes to the fore.

Residential and

retirement communities

We have more than 50 years of experience in creating new suburban communities in Australia, with more than 50 projects delivered to date.

2. Includes the San Francisco Bay Area project c.$20 billion secured post balance date.

We masterplan and deliver the streetscape, open spaces, town centres and blocks of land. We have 16 active projects across key population growth corridors that are anticipated to deliver approximately 50,000 individual land parcels within Australia and the US.

We expect to create and upgrade thousands of retirement units over the coming decade across the portfolio of 72 retirement villages in Australia. Our development expertise in retirement living was recently extended to Shanghai. The first project is underway, with additional opportunities being explored. We expect there will be periodic redevelopment opportunities over the remaining 37-year average project life across our US Military Housing portfolio.

Infrastructure development

We provide infrastructure development services for Public Private Partnership projects in Australia. Financial arrangements, and transactional and other advisory services, are delivered in the capacity of sponsor for projects in a range of sectors, predominantly in social infrastructure. The Sydney International Convention, Exhibition and Entertainment Precinct was one such project.

The development of telecommunications towers in the US continues to gain traction. While still in its early stages, growth prospects remain solid.

The official launch of The Exchange TRX, Kuala Lumpur

Lendlease is partnering with the Malaysian Government to realise its vision to transform the precinct into a world-class lifestyle and business hub.

1. Includes $0.2 billion of infrastructure development.

2. Includes the San Francisco Bay Area project c.$20 billion secured post balance date.

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1. Projects with an estimated end development value greater than $1 billion.

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Construction

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Financial returns for the segment are generated via project management and construction management fees, in addition to construction margin.

The Construction segment provides project management, design and construction services across a wide range of sectors.

Our capability

Our construction capability is brought to life in the places and structures we create – workplaces for some of the world’s most well-known brands, vibrant retail centres, residential apartments, state-ofthe-art hospitals, and other buildings of civic and social importance.

We have delivered construction projects around the world for 61 years, creating thousands of buildings over this timeframe. And projects delivered by businesses acquired by Lendlease span more than a century.

We are recognised for creating innovative places that stand the test of time and entrusted to create iconic buildings that shape city skylines. It’s a legacy that makes us proud.

The Lendlease approach

The Construction segment combines the benefits of global scale and the rich heritage of corporate knowledge with a localised capability, capacity and network to deliver high quality projects.

Specialist design and project management teams combine deep sector and product knowledge with strong customer relationships to create places that are innovative, sustainable and commercially viable.

A successful project is more than just the delivery of buildings. An integral element is an approach where our team of industry experts work collaboratively with the client to identify, plan and deliver what is important for them.

A significant proportion of repeat business is testament to our focus on relationships.

Our risk management processes have evolved from decades of experience. Disciplined origination and diversity by client, contract type and sector are hallmarks of our approach.

Substantial de-risking takes place prior to commencement of construction. Production and programming controls monitor and manage delivery, while a rigorous commissioning process is applied for a smooth transition to the client.

Construction’s role in

Lendlease’s integrated model

Our Construction segment typically designs and delivers the built form for the urbanisation pipeline.

A shared vision generates superior outcomes for all stakeholders. For example, design iterations running in parallel with planning lead to more creative, cost effective and timely solutions to meet occupier and capital partner demand.

The Darling Harbour precinct is an example of where our delivery expertise and certainty we provide to partners on long-dated projects can be an important component of our offer.

We expect future built form environments to be increasingly tied to precincts and hubs. The experience and knowledge gained from the delivery of the extensive urbanisation pipeline strengthens our ability to be a partner of choice.

Innovation

We use our scale and capacity to innovate and disrupt the construction sector. Our investment in smart design and advanced manufacturing has improved safety, sustainability and efficiency, and has created exciting architectural and sustainable solutions.

We have innovated in the manufacture and use of engineered timber in Australia, and now use the product across our global business. We have also developed other product solutions across supply chain, prefabrication and modularisation. We are developing stronger digital capability to enhance our construction business. This is enabling us to simulate all aspects of construction from design to structural integrity to system performance and user preferences. We expect this to lead to a faster pace of innovation and productivity across the business.

Non core Engineering and Services

We are in the process of separating the Engineering and Services business following a strategic review that determined it was no longer core to Lendlease’s strategy. It no longer forms part of the Construction segment.

Further details can be found in the Chairman’s Report, Group CEO and Managing Director’s Report, Performance and Outlook section and the Governance section.

Bankwest Stadium, Sydney

In FY19, we completed work on the new 30,000 seat Bankwest Stadium on behalf of the New South Wales Government as it boosts the state’s major events standing. The stadium puts spectators closer to the field of play than any other stadium in Australia.

FY19 highlights

$9.7 billion of construction activity, including:

External client completions: Bankwest Stadium, Sunshine Plaza redevelopment

Integrated model completions: Nine apartment buildings, six office buildings, one retail centre redevelopment

Construction backlog revenue $15.6 billion

$9.9 billion of new work secured including:

Sydney Metro Martin Place and Victoria Cross integrated station developments, Circular Quay Tower in Sydney, Melbourne Park Redevelopment Stage 3, several high rise residential tower contracts in New York, and the regeneration of the former Birmingham City University Campus

Future construction work on integrated projects from growth in our urbanisation pipeline

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Investments

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Financial returns for the segment are generated via fund and asset management fees, and yield and capital growth on ownership interests.

The Investments segment owns and manages property and infrastructure assets.

Our capability

Our expertise in managing property investments is a cornerstone of Lendlease dating back to the 1950s.

We launched Australia’s first real estate investment trust in 1971, which provided investors an opportunity to invest in high quality commercial assets. Over time, we’ve fostered deep relationships with key global capital partners such as sovereign wealth funds and large public and private pension funds.

Today, we have 150 institutional capital partners.

The high quality and sustainable product we create through our integrated model is the key point of difference for our Investments segment. 100 per cent of our urbanisation pipeline is targeting green certification.

Funds management platform

Our global funds management platform manages $35.2 billion of investments, predominantly across the retail and office sectors. We offer investors a compelling proposition by providing access to a development pipeline approaching 1 $100 billion .

Our world-class asset creation capabilities focus on placemaking to create vibrant and diverse precincts. Buildings that respond to the needs of occupants typically outperform over the long term. Since FY14, our funds under management has more than doubled. The majority of that growth has been generated from the completion of assets across our urbanisation projects, such as the office component of Paya Lebar Quarter in Singapore.

Further growth is expected to continue over the medium term as the urbanisation pipeline converts into investment grade product. This includes residential for rent, a recent addition to our platform and a sector we expect to grow strongly. We launched a partnership to invest US$1 billion in the data centre sector across the Asia Pacific. Targeting key cities where the Group already has a strong presence, the partnership will enable us to leverage our integrated model in a sector with a strong growth outlook.

Demonstrating strong alignment with our capital partners, we have $1.7 billion of co-investments in our funds platform. This also provides a steady source of income for Lendlease.

Asset management

We’ve been managing retail centres across the world for more than 40 years and currently manage retail and office assets valued at more than $15 billion.

Our asset management capability enables us to create places that thrive for the long term. For example, our master-planning process looks holistically at the needs and potential for value creation of the assets as well as their ongoing relevance to the community.

We continually revitalise our assets to stay ahead of industry trends and deliver optimal customer experiences. The redevelopment of Sunshine Plaza in Queensland introduced a host of new retailers, a new dining promenade, and an innovative high ropes course to drive visitation and further create a sense of community.

Military Housing

In the US, we manage, and have an equity interest in a $13.3 billion Military Housing portfolio which provides a steady and high-quality source of earnings.

The portfolio comprises more than 50 Military Housing communities spanning 25 states.

We have long-term agreements with the US Department of Defense to manage these estates for military personnel and their families.

Retirement living

A key driver of our strategy, and a global trend, is the projected ageing of the population. This requires thoughtful solutions and greater healthcare support. We are one of the largest owners, operators and developers of retirement living communities in Australia. Our footprint extends nationally across 72 villages and offers a range of accommodation options including premium resort-style living and a variety of standalone units and apartments – with or without services.

Our placemaking and asset management skills provide a strong sense of community. Dining, retail and entertainment facilities are typical features across our villages.

Other investments

Lendlease’s other investments include telecommunications assets.

The ownership and asset management of telecommunications towers provides a prime opportunity to deploy our integrated business model.

Opening of the Sunshine Plaza retail precinct in Queensland after its $440 million redevelopment Our investment in retail aims to create exciting new destinations and experiences for customers.

FY19 highlights

US residential investment partnership with First State Super Capital partners increased their investment in the office precinct at Barangaroo Strong investment performance from office assets and funds Solid recovery in Retirement Living portfolio

Funds under management up 17% to $35.2 billion, including contributions from: The office precinct at Paya Lebar Quarter, Singapore One Melbourne Quarter Residential for rent assets in Chicago, Boston and London

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1. Includes the San Francisco Bay Area project c.$20 billion secured post balance date.

Lendlease Annual Report 2019 / The Value We Create / 27

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As the world reinvents itself, so does the work we do and the way we do it.

We have grown from an organisation that primarily created singular places for people to work, live or play. Today, we create and activate places that involve all three and this takes a whole new mindset.

Our core capability is placemaking. We design precincts that are vibrant, surprising and authentic. They are crafted and thoughtfully curated to help people feel safe, belong and thrive.

The Value We Create

As global trends guide our overall business strategy, it’s the preferences of people that guide the actual work we do. For our places to be the best, they need to be places where people love to be.

Silvertown Quays, London (artist’s impression of the future) Revitalising this disused East London industrial area is expected to create 3,000 new homes (900 of them affordable), commercial space and extensive high quality public areas. The historic Millennium Mills and the listed Silo-D building are planned to be restored.

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Lendlease Annual Report 2019 / The Value We Create / 29

Partnering. From billions to the bees.

Creating places where economic and social benefits are genuinely shared takes much more than the expertise and insights of one. It takes the power of many.

As we seek to do what matters, we look for common interests and we form partnerships. This becomes even more critical when creating intergenerational value – whether that’s contributing to sustainable precincts, assisting governments with solutions for growing populations (and creating new investment partnerships to fund them), or strengthening communities.

Capital partners

Government

Investors are looking for partners they trust to generate sustainable returns while also managing risk.

Meeting the challenges of a world in transition requires both public and private participation. Governments look to the private sector to facilitate change, creatively solve societal challenges, mobilise fast, and provide value for money. These are not short-term partnerships, but increasingly 10, 15, even 20-year journeys starting at the genesis of an idea.

Our demonstrated ability to partner with third party capital highlights the strength and attractiveness of our integrated model.

We have longstanding relationships with 150 significant money managers from around the world, many of who partner with us across multiple geographies and asset classes.

Trust and transparency are key, as is the ability to be insightful at the outset, deliver what’s promised at completion, and leave a sustainable legacy.

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In FY19, we progressed a number of initiatives with our capital partners.

In FY19, we were again selected to undertake important work for governments.

With First State Super we created a new investment partnership to develop and hold residential for rent assets in US cities (for example The Cooper, Chicago, above)
In January, Birmingham City Council selected Lendlease as preferred bidder for the $2.7 billion Birmingham Smithfield development scheme – a partnership aimed at transforming the heart of the city with more than 2,000 homes and integrated public transport (artist’s impression above)
Existing capital partners acquired interests in the office component of Barangaroo South. The office precinct is now valued at $6 billion
The New South Wales Government awarded Lendlease the contract to deliver a new metro railway station, Victoria Cross, and the building above it in the heart of the North Sydney business district. The development features retail and office space across 40 floors and improvements to the public domain. Its end development value is $1.1 billion
In Singapore, we reached a major milestone – practical completion of the office component of Paya Lebar Quarter, a major urbanisation project we are undertaking in partnership with the Abu Dhabi Investment Authority
Two existing capital partners purchased Daramu House in Sydney – an office building of approximately 10,000 square metres, built using Cross Laminated Timber, scheduled to be completed in FY20.
Lendlease delivered the purpose-built Joan Kirner Women’s and Children’s Hospital in March 2019. Lendlease worked alongside the Department of Health and Human Services through the Victorian Health and Human Services Building Authority, as well as the local community, to meet the needs of one of the fastest growing areas in Australia.

The community

Communities, too, grapple with change. To help, we partner with experts and passionate individuals – not-for-profits, councils, environmental experts, archaeologists, students and more. There’s no ‘one size fits all’ but learnings are shared as we move from one community to the next.

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A snapshot of our FY19 community-based relationships

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BUILDIING A
BRIGHTER
FUTURE
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FutureSteps
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If we can support young people to complete education through programs like FutureSteps and help them move into employment, their chances of experiencing homelessness as adults is drastically reduced. Platform Youth Services’ CEO, Stephanie Oatley

Property sales initiative assists the vulnerable

In December 2018, we launched Lendlease FutureSteps in Australia – a philanthropic initiative to boost community programs that support vulnerable people and families. The initiative received $500,000 seed funding from the Lendlease Foundation and is set to receive 0.1 per cent of future residential revenue from our Australian business. Our first partner, Platform Youth Services, received funding to assist six students with accommodation and support services to complete their education.

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Homes for the fauna

One-third of the world’s food relies on pollination by bees, but now bees are in trouble. At our Hungate project in the UK, we partnered with local groups to create bee banks along the River Foss. We also partnered with students in Chicago to design habitats to attract and nurture native birds.

Boosting youth facilities

Through Projek Komuniti Kita in Kuala Lumpur, we collaborated with local social enterprise, Surprise Ventures, to support community growth in public housing communities. We upgraded two futsal courts and provided sports clinics and arts and crafts classes. In East Boston, we’re a long-term partner of not-for-profit Zumix, which empowers youth to make positive change through music and creative technology.

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The Ministry’s strategy can’t only be carried out by the government alone. It truly requires co-operation of various parties and private entities like Lendlease who are experts in urban regeneration and the creation of places that are built with a focus on driving inclusive communities. Federal Territories Minister of Malaysia, Yang Berhormat Tuan Haji Khalid Samad

Our Sustainability pages 50 to 55 show more ways we’re endeavouring to create opportunity for people.

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Lendlease Annual Report 2019 / The Value We Create / 31

Connected developments. At scale, they address new city living.

Governments are challenged with providing ‘liveable’ communities in cities that may already feel the pressure of density, social issues or traffic congestion.

Shaping large-scale master-planned projects is key to transforming 21st century cities, solving car-based infrastructure constraints and breathing new life into urban centres.

They are places designed with a pulse. They deliver more new workplaces, housing and play areas and recognise that the space in between all three is just as important, if not more so.

Policy makers look to the private sector to meet benchmarks across all these elements, and then lift the bar.

There is strong demand for public spaces for collaboration and innovation, and our library at The Exchange will help us expand Sydney’s start-up ecosystem. Lord Mayor of Sydney, Clover Moore

Features and firsts

Darling Harbour precinct

84,000 square metres of workspace, including Darling Square’s Commonwealth Bank of Australia 6 Star Green Star building
2,700 square metres of retail and a 4,000 square metre playground with a 21-metre flying fox and water play
35,000 square metre International Convention Centre Sydney.

Darling Square component

A new urban neighbourhood and City of Sydney library
Lendlease settled 100 per cent of units across six buildings totalling $1.3 billion in revenue in FY19.

Awards

2018 Urban Taskforce Development Excellence Award for Commercial Office Development, Commonwealth Bank, Darling Square

2018 International Property Awards, Best Office Development, Commonwealth Bank, Darling Square 2018 Concrete Playground’s People’s Choice Award in the Best New Space category, Steam Mill Lane

Darling Harbour. A precinct transforms.

The New South Wales Government has rejuvenated the western edge of Sydney’s CBD, from Barangaroo to Central Station. At the heart of this is Darling Harbour – Sydney’s second harbour and a recreational focal point since 1988 when it was first transformed from a disused port to a place for people.

Lendlease’s association spans more than a decade with significant contributions across three sites – Darling Quarter (completed in 2011), the International Convention Centre Sydney (opened in 2016) and surrounding boulevard amenities, and Darling Square . Our work had an end development value of $4.7 billion, generated approximately $3 billion in construction revenue, and created $1.4 billion of funds under management. The new International Convention Centre Sydney, delivered in a Public Private Partnership with the NSW Government, is estimated to generate $5 billion in economic benefits for New South Wales over 25 years.

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Darling Square. A carefully crafted new neighbourhood.

The City of Sydney’s local area is diverse with more than 50 per cent of residents born overseas. Its rich history reaches way before European settlement.

In 2019, the final piece of Lendlease’s involvement came to fruition: the Darling Square neighbourhood featuring approximately 1,500 apartments, 3,000 workers, and beds for 1,300 students. It’s been designed to be one of Sydney’s most ‘walkable’ places.

Our vision was to create an enriched urban experience that stitches together the eclectic character of surrounding communities, celebrating their unique culture and past. In essence, to create a new place that felt already engrained within an older one.

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Community services at the heart

Locals told us they wanted to be connected so we designed 2,700 square metres of open space including a new large public square at the precinct’s heart. As the centrepiece of Darling Square, we created The Exchange, a spiralling six-storey community and retail structure with a market hall and the new two-storey home for the City of Sydney’s Haymarket Library. Set to open in early FY20, the library is about four times the size of the existing one and will feature a collection of more than 30,000 items.

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Supporting grass roots growth

In the mix of about 70 retailers, Lendlease is providing some lower rent and short-term lease space to attract diverse and new businesses. We’re also trialling a new entrepreneur program, Bright, providing practical business support.

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Fine details connect history and diverse people

The Eora people, the name given to the coastal Aboriginal people around Sydney, are acknowledged through ‘fish scale’ paving in Little Hay Street and public seating made by an Indigenous enterprise in Alice Springs. Inbuilt mahjong tables entice strangers to interact and colourful abstract art brings a fresh dynamic. Intricate brickwork mirrors existing century-old buildings to link the now to the past.

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The natural world is central to design

We used biophilic architectural design – natural shapes, textures and materials – to connect people with nature. A new office for the Commonwealth Bank of Australia was created on this basis. A climate change adaptation and resilience plan is in place.

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Populations are changing. As are people’s preferences.

Home ownership is not for everyone. Some people simply can’t afford to buy while others relish the flexibility that renting provides – to move, upgrade or downsize as work and life circumstances change.

Some markets in which we operate are experiencing a shift to renting – whether through necessity or through choice. The residential for rent model of housing (also referred to as build to rent or multi-family) is responding with much needed homes and an ethos that puts the tenant at the heart of the experience.

Residential for rent flips the traditional model of disconnected homes and unpredictable rent agreements with purpose-built, professionally managed and amenity-rich apartment living. Policy makers are embracing it as a legitimate solution to address undersupply, including a lack of housing affordability. The UK’s National Planning Policy Framework (March 2018) officially recognises the importance of the sector to deliver housing. In the US, residential for rent is well established and valued at US$3 trillion.

Southbank Chicago. Best residential for rent principles.

In 1971, Chicago’s Grand Central Station was demolished. Despite numerous development proposals, the brownfields site on the south branch of the Chicago River remained mostly dormant for half a century.

Lendlease saw its untapped potential and in 2015 we began its transformation.

The US$1.5 billion Southbank development is inspired by Printers Row, the bygone hub of America’s printing industry, to create a dynamic urban precinct with active connections to Chicago’s vibrant art scene and surrounding communities. It’s a new seven-acre neighbourhood, nestled in an old one, offering as many as 2,700 apartments across multiple towers and significant public space.

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The Cooper at Southbank. Niche experiences define modern living.

In FY19, we opened The Cooper – our first residential for rent tower at Southbank. The 29-storey tower features a mix of homes from luxury studio apartments to three-storey town houses that surround the base of the building. We know customers value rich experiences to pursue passions and connect with like-minded people. At The Cooper, residents can enjoy their own private space or interact with neighbours in more than 35,000 square feet of space that’s been designed to promote community, wellness and creativity, right on their doorstep.

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Features and firsts
Staff have been nothing • In FY19, we completed our first
short of amazing. Our one residential for rent product with
bedroom is spacious and 452 apartments delivered at
we have a beautiful view of The Cooper, Southbank. This
Lake Michigan, right from forms part of our residential for
our room! The amenities are rent partnership, launched in
definitely what sold us on FY19 with First State Super
this building, though. • The Cooper consistently exceeded
Julie and Tom, monthly leasing goals
residents • More than 150 trees have been
planted to date, and that’s expected
to double as the Southbank
development progresses
• Fresh honey comes from rooftop
beehives at The Cooper.
Awards
2019 The Cooper achieved
LEED Gold Certification
Artist’s impression
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From a yoga nook to a five-star kitchen

Environmentally friendly so everyone benefits

For music lovers, there’s a listening lounge with instruments and a high-fidelity sound system. Creativity can be shared at a shop space, complete with sewing machines and craft supplies, or solitude sought in a reading room with fireplace.

At The Cooper, energy consumption is minimised through efficient lighting systems and space heating and cooling, while low-flow fixtures reduce water use. Low-emitting materials and increased ventilation enhance indoor air quality, and the green roof and podium help to manage storm water, reduce the heat island effect, and reconnect people with nature.

There’s a games room, shuffleboard tables, a fitness centre with a yoga nook, and even a chef’s kitchen for five-star entertaining. Plus a raft of shared outdoor spaces including a pool.

Residents can buy fruit, vegetables and honey from five on-site beehives through a rooftop farming program, managed by The Roof Crop.

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Amenities to connect the broader community

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Inclusive placemaking creates a welcoming community for all. The new Southbank Park, currently at two acres, wraps around The Cooper and features lush landscaping, meandering walkways, and a new riverwalk. We partnered with industrial design students from the University of Illinois to create birdhouses to attract native species back to the area. Although privately maintained, the park is open to everyone.

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34 / As the world reinvents itself

Sustainable communities matter. A lot.

From time immemorial humans have flocked to urban centres to seek safety, prosperity, new experiences, or simply to find a community that’s most ‘them’.

Whatever the motivation, the trend to urban living is accelerating. The United Nations reports that two out of every three humans are likely to live in urban centres by 2050, and by 2030 the world could have an additional 12 megacities, each with more than 10 million inhabitants.

While city life presents huge possibilities, the stark realities are the impacts on the environment and human wellbeing.

Alongside the notion of sustainability, we aim to achieve resilience; in other words, to minimise the impact of the places we create and look for ways to help communities thrive.

That’s why it’s important to take the long and human view.

Elephant & Castle. Revitalising a once vibrant precinct.

London’s Southwark Council is regenerating Elephant & Castle (known locally as ‘the Elephant’), a place once so lively and full of attractions it was likened to Piccadilly Circus.

As part of this, Lendlease is transforming three sites – One The Elephant, Trafalgar Place and Elephant Park . Our vision is to create a vibrant mixed-use precinct and new green heart for London.

At Elephant & Castle, we’re tackling head on some of the most challenging issues that affect cities: affordable housing, jobs, social isolation and resources stress.

And we aim to create one of the world’s most sustainable inner-city regeneration projects by 2025.

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The greening of Elephant Park

In FY19, our focus has been on creating the Elephant Park site, a residential-led place with more than 2,500 homes, 50 plus shops and office space.

It includes 11 acres of public space, 1,200 trees, and a new park for central London called Elephant Park. Buildings feature green roofs and green walls, and 15 pioneering ‘Futurehomes’, accredited to the world-leading Passivhaus standard, have been built.

An on-site Energy Hub provides low carbon, affordable heating and hot water to local residents and businesses (and those in the adjoining Trafalgar Place). It can resource a further 1,000 plus homes across the broader area.

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Lendlease Annual Report 2019 / The Value We Create / 35
Features and firsts
This is what regeneration Elephant & Castle
should be about. People of • The £2.3 billion Elephant & Castle
all backgrounds and incomes redevelopment features more than
living side by side in the 3,000 homes of which approximately
highest quality housing. 600 are affordable homes
Leader of Southwark Council, • A £300 million investment is
Peter John OBE being made to improve public
transport and infrastructure and
new community facilities.
The Elephant Park component
• 11 acres of public space including
a new park for central London
called Elephant Park
• 15 pioneering ‘Futurehomes’
• Living Wage accredited.
Awards
2018 Housebuilder Awards,
Sustainable Housebuilder of the Year
2018 Housebuilder Awards,
Best Sustainable Scheme or Initiative,
South Gardens at Elephant Park
2018 Landscape Institute Awards,
President’s Award
Artist’s impression
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Skills and jobs for local people

Coming together to tackle loneliness

Southwark Council’s Construction Skills Centre, delivered in partnership with Lendlease at Elephant Park, has trained more than 6,000 people, including Southwark residents, for construction industry jobs since its launch in 2016 and was recognised by the Mayor of London as high quality. More than 6,000 jobs are expected to be created including an anticipated 1,000 jobs once the development is completed.

Research has shown that London is one of the world’s loneliest cities. Parallel to our work at Elephant Park, we’re collaborating with Collectively, an innovation and social change organisation, to rethink how places and spaces connect people. Working with a range of experts and the community through a Loneliness Lab, we’re endeavouring to ‘design out’ loneliness from cities. One idea being explored, through design, is to encourage existing and new residents to talk to each other more.

Where possible, we employ locally. Since July 2013, we have employed 1,300 Southwark residents, more than half of whom were previously unemployed. Over one-third of the jobs for the previously unemployed were delivered through BeOnsite, Lendlease’s not-for-profit that works with the hardest to reach people in society, including ex-offenders. We’ve also included employment obligations in retail contracts.

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To create an early sense of community and place, a retail incubator space, Artworks Elephant, saw start-up retailers operate from brightly coloured shipping containers. Artworks had a social and economic return on investment of £12 million.

While Artworks came to a close in FY19, a number of these fledgling businesses are now taking space in the permanent retail offer.

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Lendlease Annual Report 2019 / The Value We Create / 37

Creating the future. Whatever that may be.

What we may consider to be the future is already here.

It’s the 4th Industrial Revolution (IR 4.0) and it’s merging machines and people. What makes IR 4.0 different is the pace at which it’s moving and the way it’s disrupting almost every part of our lives.

Leaders are seeking precincts that are designed for people to boldly create the future – to disrupt ourselves – and are asking Lendlease to deliver places dedicated to greater innovation and new ways to collaborate.

New projects with innovation at their heart

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Milan Innovation District

Melbourne Connect

Australia’s leading innovation precinct

Where great minds meet

Lendlease is lead partner for the University of Melbourne’s new purpose-built innovation precinct, Melbourne Connect (artist’s impression above). It’s a new model for collaborative innovation, co-locating the highest calibre research, industry, government, entrepreneurs, talent and other elite thinkers to address major societal, economic and environmental challenges. It is located on the former Royal Women’s Hospital site, and is scheduled to open late 2020.

In FY19, we signed an agreement to transform Milan’s 2015 World Expo site into a world-leading science, knowledge and technology centre called the Milan Innovation District (MIND). With partner Arexpo, this unique urbanisation project (artist’s impression above) has an end value of approximately €2.5 billion. Local students and communities – future workers and visitors – are helping to create the precinct.

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This collaboration between Arexpo and Lendlease will provide the foundation of a top-level international project, and a unique opportunity for Italy.

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Health and Wellbeing Precinct, Wollongong

Forward thinking health and aged care

In FY19, we signed an agreement with the University of Wollongong for the first stage of a $500 million state-of-the-art health and wellbeing precinct for the Illawarra region of New South Wales, Australia. With an anticipated opening of between 2023 and 2024, it will offer patient-centred healthcare, as well as aged care, early childhood education and care, retirement living facilities, research and teaching programs.

Giovanni Azzone, President of Arexpo

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We take the long view too

Sustainable services at Barangaroo

A holistic view to sustainably manage assets

Our Living Utilities start-up delivers innovative and cost-effective utility solutions. Expertise contributes to smart solutions for urban regeneration projects and masterplanned communities alike. For example, Green Utilities at Sydney’s Barangaroo South views the management of infrastructure services (district cooling, recycled water and solar generation) as a means to be carbon neutral and water positive. Shared infrastructure can improve the productivity of services by approximately 20 per cent for commercial and 40 per cent for residential users.

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Sustainable material development

In the 1960s Lendlease created Australia Square – Sydney’s first skyscraper and the world’s tallest lightweight concrete building. It established new principles in design and construction. In FY19, we continued to push boundaries in digital design, prefabrication and preassembly. The Exchange at Darling Square in Sydney features a circular façade wrapped in 20 kilometres of curved timber (pictured right). In Brisbane, we delivered one of the world’s tallest engineered timber offices, 25 King. Off-site construction results in a process that’s more streamlined and faster, and energy and material efficient. At completion, 25 King achieved 81 per cent of total waste recycled, exceeding industry best practice, with only 3.75 kilograms per square metre sent to landfill.

2019 Property Council of Australia Innovation and Excellence Awards, Australian Development of the Year, International House Sydney – the nation’s first engineered timber office.

Also in FY19 Lendlease celebrated a five year partnership with the University of Sydney as it researched modularised apartments.

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Community fit for the future

Lendlease’s Yarrabilba community, eventually home for approximately 45,000 people, aims to be Australia’s first circular economy community. It’s about being innovative with a focus on renewable energy, minimal waste and sustainable practices. Yarrabilba opened its sustainable display home in FY19 with a view to providing affordable and attractive housing with a reduced environmental footprint and employment opportunities for disadvantaged people living locally.

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Designing new ways of working

How people work today will be different tomorrow. In FY19, we continued to design ‘workplaces of the future’ with research to better understand the motivations of Generation Z. Via the proprietary X-Ray app, we recorded nearly three million observations of people and how they use their workspace. Through this, we can continue to deliver progressive workplace strategies. In Singapore, Lendlease partnered with JLL to hold Asia’s first regional proptech accelerator, Propell Asia, giving start-ups the opportunity to testbed their solutions with corporates. In the UK, our PitchIt program looked to ‘design out’ safety issues in construction before anyone even sets foot on site. And our Australian business again worked with instructors from Stanford University’s d.School to harness our people’s ideas and develop innovative and entrepreneurial thinking.

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38 / As the world reinvents itself

Lendlease Annual Report 2019 / Managing and Measuring Value / 39

We say we do what matters. But how do we know we do what people care about, and what creates positive outcomes?

Managing and Measuring Value

Take safety, for example. At Lendlease, it’s not a catchline, but a deeply held belief that is present in everything we do. Everyone has the right to go home safely and be safe in their interactions with us, and our endeavours focus on achieving that. Beyond this, doing what matters is as much about the macro impacts we all care about – such as social, environmental and financial outcomes – as to what matters to the very individuals whose lives we touch every day.

We benchmark ourselves, often beyond industry standards and expectations. Behind the metrics and measurement is a deep commitment to engage, collaborate, learn, improve and share, so our positive contribution can reach even those yet to be born.

NAIDOC Week 2018

Lendlease’s Cairns Central retail precinct in Queensland showcased Indigenous fashion and traditional dance performances.

Jeffrey Daniels, Minjil dance group

40 / As the world reinvents itself

Lendlease Annual Report 2019 / Managing and Measuring Value / 41

Our five focus areas of value creation

At Lendlease, we have five areas through which we focus our endeavours to create long-term value1.

These underpin our ability to create economic, safe and sustainable outcomes for our customers, partners, securityholders and the community.

While we approach our focus areas with an innovative mindset, our decisions are supported by disciplined governance and risk management.

Companies must start justifying their worth to society with greater emphasis placed on environmental and social impact, rather than just straight economics.

Lendlease founder, Dick Dusseldorp (1973)

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Area of focus Material issue How we deliver value Value created How we measure value
Operating safely across our We are committed to the safety of our people and Operating safely helps people feel Percentage of projects with no critical incidents: A critical incident is an event
operations and projects. those who interact with our assets and sites. Through valued and cared for, and fundamentally that has the potential to cause death or permanent disability. This is an indicator
Maintaining the health and our Global Minimum Requirements (GMRs) we operate makes us more consistent, reliable and unique to Lendlease.
wellbeing of our employees to a consistent standard across all operations. These efficient in everything we do. Critical Incident Frequency Rate: A Lendlease indicator measuring the rate of
and those who engage with GMRs extend to physical safety and people’s health critical incidents.
Health our assets and sites. and wellbeing.
Lost Time Injury Frequency Rate: An indicator and industry standard measuring
and Safety a workplace injury which prevents a worker from returning to duties the next day.
Delivering securityholder returns. We deliver returns to our securityholders and adopt Margins, fees and ownership returns Return on Equity: The annual Profit after Tax attributable to average securityholders’
Maintaining strong capital a prudent approach to capital management with a across Development, Construction and equity throughout the year.
management to support ongoing view to maintaining a strong balance sheet throughout Investments. Our Portfolio Management Earnings per Security: Profit after Tax attributable to securityholders divided by
investment in our future pipeline. market cycles. Framework sets target guidelines for the average number of securities on issue during the year.
how we manage our portfolio.
Financial
Understanding our customers Embedding a process of continuous improvement Evolves our ability to improve the Customer satisfaction and advocacy tracked: Measured at the regional and
and responding to changes in the based on customer insights and actions identified customer experience, building our business unit level and reported annually to our Global Leadership Team. Action plans
market. Designing and delivering through market research. This approach also consistently brand and reputation, enabling us are developed to drive continuous improvement in the customer experience, supporting
innovative, customer driven measures customer satisfaction and advocacy. to win more work and grow our the delivery and growth of our development pipeline, construction backlog and funds
solutions to win the projects business. Customer feedback under management.
Our we want to win and ultimately also provides greater insight into
deliver the best places. product development and innovation
Customers
opportunities.
Attracting, developing and We attract, develop and retain diverse talent by Capable and motivated people committed Retention of key talent: The organisation benefits from its investment in leaders
retaining diverse talent. Ensuring building a culture of collaboration and continuous to the long-term success of our business. and key workforce capabilities.
we have the right capability learning, where successes are recognised and people Effective succession planning and Succession strength: Demonstrates depth of capable talent ready to progress
across the organisation to deliver are rewarded. We invest in developing leaders and leadership transitions support business into leadership roles.
results for all stakeholders. capabilities to drive our success. continuity and can reduce risks. Diversity
Leadership positions held by women: Demonstrates our broader commitment to
Our People of thought and experience can support diversity and inclusion, and our objective of increasing female representation across
innovation, knowledge sharing and better
our business.
decision making.
Managing and optimising our As a signatory to the United Nations Global Compact, Recognised leadership in sustainability 2020 targets: Measurement of our 20 per cent reduction targets
performance in the context we are committed to the continuous improvement of enhances our brand and is a competitive by 2020 across water, waste and energy.
of challenges facing the built our operations. We integrate strategies to mitigate the differentiator. It also provides Total development pipeline targeting green certification: Demonstrates
environment, including climate impact of climate change. For example, as a developer, more opportunities to partner with our commitment to green buildings across our development pipeline.
change and social pressures Lendlease is committed to the creation of independently governments, investors and the private
Sustainability such as population growth and rated green certified buildings and precincts and climate sector who are placing increasing
housing affordability. resilient communities. We aim to deliver inclusive, healthy importance around Environmental
and adaptable places that can thrive through change. Social Governance (ESG) matters.
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1. Previously referred to as Pillars of Value.

42 / As the world reinvents itself

Lendlease Annual Report 2019 / Managing and Measuring Value / 43

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Health and Safety

Everyone has the right to go home safely. We remain committed to the health and safety of our people, our subcontractors, and all of those who interact with a Lendlease place.

It’s clear our people are serious about safety. In a culture and climate survey, more than 90 per cent of our employees agreed that safety is a key priority in their teams and that Lendlease creates a culture of working safely.

Key performance highlights

Every day, around the world, more than 50,000 people work on a Lendlease project, or in one of our assets or offices. The health, safety and wellbeing of each person, as well as the millions of people who pass through, live or work in our places, is our number one priority.

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FY18 FY19
92% 90%
Operations
without a
Critical Incident1
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From compliance checks to check ins

Safety metrics

Rather than impose more compliance checks, our teams are being asked to self-report on safety practices – both positive and at-risk – via a mobile app. Safety observations have increased from 25,000 per year three years ago, to more than 250,000 in FY19, giving us substantially more ‘in situ’ insights.

The underlying drivers of safety are culture, compliance governance and reporting, and we strive for excellence in all three.

In FY19, no corporate reportable fatalities were recorded across any of our operations. This is an improvement on the preceding two years and represents our ultimate performance goal.

And a culture of care

Shifting from a compliance to a risk-based approach

Innovation and knowledge sharing are vital to take people out of harm’s way. Across our regions, we look for better ways to do our jobs.

Lendlease has a comprehensive framework of safety compliance – our Global Minimum Requirements (GMRs) – that encourage a hierarchy of risk control and are revised as we learn.

Working at height, for example, accounts for the most fatalities in our industry. Critical Incident Frequency Rate2 In the Americas, our ‘no climb’ initiative is replacing traditional high-risk climbing with alternative methods using cranes FY18 0.8 and cherry pickers. In Australia, our team on the Richmond River Bridge project created a new precast construction FY19 0.8 method and eliminated approximately 20,000 hours of work at height. In FY19, Lendlease launched an awareness campaign featuring our Lost Time Injury Frequency Rate3 workers’ real mothers with a strong safety message. Called Mums for Safety, the campaign featured Lendlease Group CEO and Managing Director, Steve McCann’s FY18 1.7 mother Margaret, and won a Silver Lion at the 2019 Cannes Lions International FY19 1.8 Festival of Creativity.

Our culture also plays an important role. On Lendlease work sites, in corridors and meeting rooms, people ask, “what’s the worst that can happen?” This is an enquiry-based approach to interrogate a specific task and find the safest way to do it.

In FY19, we engaged PwC to provide insights into the challenges our people face each day and the approaches they take to overcome them to keep safe.

Changing our mindset about safety and mental health

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One in four people will experience a mental illness at some point in their life.

The issue is even more pressing in construction, an industry which experiences some of the highest rates of suicide.

In Australia, construction workers are six times more likely to die by suicide than from a workplace accident, and in the US, by industry, construction has the highest suicide rate. In 2014, Lendlease established a Global Health and Wellbeing Framework and developed a multi-faceted approach to mental health encompassing awareness, intervention and support. We now have an Employee Assistance Program in every country we operate and train employees to identify signs of poor mental health and direct people to the right assistance. Lendlease has a GMR around mental health and fatigue, and it is part of our Risk Event Mitigating Controls.

Gold Lendlease Europe received the highest accolade at UK mental health charity Mind’s annual Workplace Wellbeing Awards 2018-19

2018 Winner Multinational Employer category at the Global Centre for Healthy Workplaces Awards

We continue to engage with experts. For example, in the Americas we joined the Construction Industry Alliance for Suicide Prevention and launched an awareness pilot program with suicide prevention organisation, Living Works. In Australia, we turn to Mates in Construction as one of our partners.

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More than 1,500 of our employees have been trained in the Mental Health First Aid program. In March 2019, a leader’s program was launched, with approximately 245 leaders trained so far.

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If you or someone you know is experiencing symptoms you think may be a sign of mental illness, please contact your local doctor or a support organisation.

1. A Critical Incident is an event that caused, or had the potential to cause death or permanent disability. This is an indicator unique to Lendlease. 2. The Critical Incident Frequency Rate (CIFR) is calculated to provide a rate of instances per 1,000,000 hours worked. 3. The Lost Time Injury Frequency Rate (LTIFR) is calculated to provide a rate of instances per 1,000,000 hours worked.

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Lendlease Annual Report 2019 / Managing and Measuring Value / 45

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Financial

A strong balance sheet and access to third party capital enables Lendlease to fund the execution of its pipeline and deliver quality earnings for our securityholders.

Our approach to financial performance

The Portfolio Management Framework underpins our approach to how we govern our operations across the Development, Construction and Investments businesses globally. We generate earnings for our securityholders and deliver value for our customers through these businesses in their own right.

When these businesses combine and leverage the competitive advantage of our integrated model, value can be enhanced for our securityholders, partners and the community. This can include award-winning and innovative design excellence, creation of better public places, integrated transport outcomes and superior sustainable solutions.

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Victoria Cross, Sydney

(artist impressions above and opposite page) The NSW Government has awarded Lendlease the contract to deliver a new metro railway station and the building above it in the heart of North Sydney’s business district.

Financial strategy

Portfolio Management Framework

The Portfolio Management Framework is the core of our financial strategy. This framework sets target guidelines and is designed to:

Maximising long-term securityholder value

Maximise long-term securityholder value through a diversified, risk adjusted portfolio

1. Capital allocation

Leverage the competitive advantage of our integrated model

	1. Capital allocation
	Focused on gateway cities
	Australia	50-70%
	International regions	20% 1

Optimise our business performance relative to the outlook for our markets on a long-term basis
Provide financial strength to execute our strategy, maintain an investment grade credit rating, and capacity to both absorb and respond to market volatility.

2. Business model

	Integrated model synergies Target EBITDA mix:
	Development	40-50%
	Construction Investments	10-20% 35-45%

How we measure

financial performance

When measuring financial performance, we focus on Return on Equity and Earnings per Security to measure the returns we achieve for our securityholders. The Portfolio Management Framework outlines target returns at a segment level. These returns are used to derive a Return on Equity target within the 10 to 14 per cent range, and Earnings per Security used to make distributions within the 40 to 60 per cent payout ratio target.

3. Target returns

	3. Target returns
	Group ROE	10-14%
	Development ROIC	10-13% 2
	Construction EBITDA margin Investments ROIC	2-3% 8-11% 2

Detailed financial

4. Capital structure

performance and outlook

Investment grade credit rating

For detailed information on our FY19 financial performance as measured under the Portfolio Management Framework, refer to the Performance and Outlook section on pages 62 to 75 and the Financial Statements on pages 128 to 190.

Optimised Weighted Average Cost of Capital

	Cost of Capital
	Target gearing 3	10-20%
	5. Distribution policy
	Payout of earnings	40-60%
	Capital management discipline

1. Maximum per region. 2. Through-cycle target based on rolling three to five year timeline. 3. Gearing definition: Net debt to total tangible assets less cash.

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Lendlease Annual Report 2019 / Managing and Measuring Value / 47

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Our Customers

Designing and delivering innovative, customer driven solutions allows us to win the projects we want to win and ultimately deliver the best places.

The value of listening to our customers is realised in the places we create for them.

additional leverage when in a tender. Customers also value performance at key touchpoints and in delivery.

Listening to create value

In FY19, more than 22,500 customers globally participated in research enabling us to measure whether they were satisfied with our products and services (C-SAT rating) and whether our experience fostered loyalty (NPS rating).

To improve their experience, customers told us we need to be easier to do business with, be well coordinated and collaborative.

Over the past decade, Lendlease has evolved into an organisation that delivers large-scale, mixed-use urbanisation precincts, new communities, and important civic and social infrastructure. As we’ve changed, so too has the profile of a typical customer. We have direct relationships with millions of people across numerous settings including retail, work, leisure and retirement villages. We now need to understand what people value across many areas and stages of their lives – work life, home life, how they want to spend their spare time – and respond with experiences and services they love.

The actual delivery experience also has to be excellent, for example, responding quickly and effectively to customer requests and delivering on promises in a timely way. Anything less frustrates customers and causes them, and us, more effort.

Overall, the global average for business unit performance for C-SAT and NPS declined slightly in FY19 off solid results in FY18. Specifically, a small decline was recorded in the Development portfolio (mainly in the B2B area). Investment Management was up overall. Construction performance remained strong, with some decline in the NPS rating.

We continue to look for better ways to serve our customers.

Customers continue to value trust and strong relationships. These factors provide a buffer in difficult times and

Virtual reality gives customers a more personalised experience of our projects.

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Customer snapshot1

217m 125,000 443,500 17,000 Retail visitors Residents in Residents across Retirement living annually2 US Military Housing apartments and communities3 residents (approximate) (approximate) (approximate) (approximate)

1. As at 30 June 2019. Internal data capture, not audited. 2. Number excludes Sunshine Plaza, Harbour Town and Urban Regeneration retail. 3. An estimate of current and future residents based on our projects to date and existing pipeline.

Tailored technology to enrich the lives of customers and residents

An autonomous vehicle trial looked at ways residents of our villages can be more independent.

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Practical use of technology has endless applications.

Digitally-led service response

In apartments

At our Elephant Park regeneration project in London, we created a 360º virtual reality room, the Vroom (pictured opposite page), to give customers a more personal experience of our project and apartments. And at Park Place Residences at PLQ, we provide an app for residents to book their facilities and manage their RSVPs seamlessly. The app also allows residents to control their smart digital door lock via their smartphone any time.

Lendlease is making improvements to our customer digital experience platforms so we can better engage with customers and use data and insights to deliver products and services that they love.

Workspace and retail

In FY19, we launched a secure online Retailer Portal to help our approximately 1,200 retail tenant customers across 16 Australian retail precincts run their operations. It provides easy access to data, such as tax invoices and customer research. In Singapore, our Paya Lebar Quarter (PLQ) team implemented a smart building management system called Open Building System Integration (OBSI) to get a single view of services and insights of the asset, including heat-mapping of office and retail spaces, energy consumption and maintenance. OBSI gives a robust digital audit trail to eliminate downtimes and saves time and money for customers.

In retirement villages

An autonomous vehicle trial at our 27-hectare Elliot Gardens retirement village in South Australia showed how modern technology may extend mobility for our residents. The trial, part of the South Australian Government’s Future Mobility Lab Fund program, deployed four-person battery powered vehicles operating with speeds of up to 24 kilometres per hour.

Also in Singapore, we rolled out our loyalty program and mobile app, Lendlease Plus, so customers can enjoy shopping rewards and privileges.

With further technological advances in autonomous vehicles, we hope to help customers at our villages lead a more active and connected life.

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Our People

Our people are the greatest contributors to our success and enable us to fulfil our vision to create the best places.

We invest in the brightest new talent through our global graduate program, now in its third year. We have 486 graduates across our four operating regions. For all our people, we introduced new Lendlease capabilities to help them develop the skills they need to deliver our pipeline of work, meet the expectations of customers, and build rewarding careers. The launch of the Workday Learning platform in FY19 provides our people with access to an extensive suite of online learning and allows us to deliver programs that are targeted to support an employee’s development goals.

The nature of our work and the way we operate – a growing presence internationally, large-scale projects, partnering, and a genuine desire to innovate and create value – requires a diverse and capable workforce. Our ambition is to create a work environment that:

Diverse workforce and included people

Our focus on diversity and inclusion starts in the way we hire, so that our workforce represents the diversity in society, and runs through our programs so our people are included and have a voice.

Values and cares for its people, with safety our priority and people our greatest assets

Gender equity

We undertake regular gender pay reviews to eliminate any gender-based pay gaps. For the year ended 30 June 2019:

Is team oriented, inclusive and diverse
Has inspirational leaders who others aspire to emulate
Three out of our nine Directors are female
Fosters a unique culture that balances entrepreneurial spirit, innovation and risk management.
Three members of our global leadership team are female

Succession strength1

To support these ambitions, our people strategy has focused on developing global leadership and technical capability, creating a consistently positive employee experience, and fostering a diverse and inclusive workplace.

31.9 per cent of our employees are female.

FY18 3.5 FY19 3.8 Leadership positions held by women2

Flexible work: supporting diversity and attracting and retaining talent.

We focus on three areas: policies and procedures to support flexible working, encouraging open dialogue between managers and employees about flexible working, and considering flexibility and hours of work when we establish project scope and customer commitments.

Developing talent

Given the increasing breadth and required capability of placemaking, developing and retaining key talent is fundamental to our long-term success. In FY19, our pipeline of successors for key leadership roles, along with the number of females in our succession pool, increased. For senior executive positions, we have a target of three unique successors and in our FY19 talent and succession review, 64 per cent of senior executive positions met this target. Our target retention rate for key talent is 90 per cent or higher across all talent programs. In FY19, we achieved a retention rate of 94 per cent.

FY18 24.3% FY19 26.1%

The employee experience

Inclusive workplace

For an experience that’s positive and rewarding, we listen to our people and shape the cultural attributes we need to create the best places. To support this, we embarked on an enterprise-wide program of communication and employee engagement so that our people can participate in designing more collaborative, consistent and open ways of working.

2019 Australian Workplace Equality Index Awards, Platinum Employer (for the second year running), and LGBTI Employee Network of the Year (for having the best employee resource group for LGBTIQ)

We continue to develop our expertise in consistent and open ways of working. project and construction delivery. This year we launched our Delivery Directors We measure the effectiveness of our Program, focusing on construction, leaders through Our People Survey, to complement our Integrated Project conducted every six months. During the Directors Program. year, we were pleased to see an increase in the effectiveness of managers as measured by their direct employees.

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1. Succession strength measures the average number of unique successors identified for senior leadership roles included in our succession review. 2 . Leadership positions include executive level roles, people leader roles and other senior roles as defined in the Lendlease Career Job Framework.

Hoarding art at Lendlease’s Circular Quay Tower in Sydney, in partnership with social enterprise Two Good Co, gives thought to gender equity.

Gender equity. Where to next?

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Artist Sharon Billinge
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In higher education, UNESCO reports only 35 per cent of students enrolled in STEM¹-related fields are female and the attrition rate from then on is high.

This challenges our industry to realise gender equality aspirations.

In FY19, in his ambassador role as a Property Male Champion of Change, Lendlease Group CEO and Managing Director, Steve McCann, attended the Commission on the Status of Women at the United Nations in New York. He shared his experience and advocated for programs that increase participation for women.

2019 Australian Workplace Gender Equality Agency (WGEA) Employer of Choice

To attract more females to our industry, Lendlease has introduced a range of benefits and policies, and mentoring and networking programs. We also partner with universities, schools, and industry and peer companies to champion STEM subjects. In our global graduate program, we achieved a 50/50 gender balance, which is building a pipeline of talented women for future leadership roles. We will continue to focus on improving gender representation in our industry.

2018 Lendlease was accorded the highest certification ‘Eruboshi Level 3’ by Japan’s Minister of Health, Labour and Welfare in recognition of our efforts to advance the careers of women

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1. Science, technology, engineering and mathematics.

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Sustainability

We pride ourselves on reaching industry firsts – not just because they’re milestones, but because they’re signals that we’re pushing ourselves for new and better outcomes for people and the planet.

Total development pipeline achieved or targeting green certification

Lendlease has always had a powerful social ethos. It’s what we have built our reputation on; being bold and pioneering.

100%

We create places for the long term, and many places take a long time to create. Some of the challenges we’ve taken on are systemic and not easy to overcome, like loneliness in big cities and joblessness among the disadvantaged. It’s a case of thinking bigger than we’ve ever before.

20 by 20

At Lendlease, we’re keenly interested in sustainable thinking and how across our Development, Construction and Investments segments we can reduce environmental impacts.

In 2014, we set our flagship 20 by 20 sustainability goals: a 20 per cent reduction in energy, water and waste sent to landfill for our operations1 by the end of FY20.

Ultimately, our goal is to mitigate our impacts on climate change and build resilience into the places we create for the people and communities who occupy them.

These ambitious goals challenged our business and for the first time placed targets against our businesses. They’ve provided many learnings, for example, the impact on our goals of undertaking large remediation projects on former industrial sites.

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Energy2 17% reduction

Lendlease’s newer assets are more energy efficient with reduced energy used. However, improvements were overshadowed by more energy intensive projects, such as tunnelling.

Water2 8% reduction

More recent assets already have high water efficiency and most of our older assets have been retrofitted to improve efficiency. While this is positive, it has limited our ability to improve. Consumption on various large building and infrastructure projects impacted performance.

Waste2 25% increase

Over a third of waste in the past 12 months was predominately contaminated soils, unsuitable for reuse, which came from two projects. Lendlease includes contaminated soils, unlike other construction and investment organisations in our waste reporting. Removing this contaminated soil from our total waste, Lendlease would meet its nominated 20 per cent reduction target.

Our partnership with the Great Barrier Reef Foundation is a testament to our commitment 1st of 874 listed and non to think bigger. It’s a $5 million partnership supporting a range of programs to protect listed funds, 2018 GRESB critical habitats and species in the Reef over real estate assessment the next 10 years.

Lendlease hosted The Girls in Property program which raises awareness amongst high school students about career paths in property and helps create a sustainable pipeline of talent for the industry.

Sustainability: the next chapter

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Sustainability is more than energy, water and waste.

In FY19, we developed a new Lendlease Sustainability Framework for 2020 and beyond. It comes after extensive consultation with customers, investors, employees and other stakeholders on what matters to them and addresses environmental and social issues facing us. Our new framework responds to the need to plan for future generations and integrates sustainability into every part of our business. It’s an evolution of our 20 by 20 goals and is centred around three key sustainability imperatives, supported by environmental and social focus areas. Our ability to respond to the imperatives will vary by business and region and therefore the framework is tailored to the type of work and places we operate in.

Our new Sustainability Framework

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Supporting sustainable Creating vibrant and resilient Fostering a healthy planet
economic growth communities and cities and healthy people
Conserving natural resources Adapting to and doing Protecting and restoring
and selecting sustainably our part to mitigate the natural environment
sourced materials climate change
Generating prosperity for the Creating thriving communities Supporting and enhancing
communities we impact resilient to climate change, people’s physical and
rich with culture and context with mental wellbeing
a place for all
Our
imperatives
Focus Area
Environmental
Social
Focus Area
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1. Energy and water are measured as reductions in intensity. Waste is measured as a reduction in the rate of waste sent to landfill. 2. The above performance is at March 2019 and is a cumulative measure. Full FY19 performance is subject to Limited Assurance by KPMG and will be available on www.lendlease.com in October 2019.

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Sustainability

Communities are strong when the people living in them are safe, belong and have opportunities to participate.

Building stronger communities

Creating economic opportunities

Long-term relationships for meaningful change

Springboard is Lendlease Foundation’s global program investing in the wellbeing of our people, communities and the planet.

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BeOnsite
celebrates a
decade of creating
sustainable job
opportunities.
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It’s an innovative five-day residential program that each year brings together about 250 Lendlease employees from around the world to find new ways to make a difference to a local community. The program is held in the same community for four years so we can form long-term relationships.

In FY19, our Springboard program relocated to Yeppoon on the Capricorn Coast in Queensland, enabling us to leverage our partnership with the Great Barrier Reef Foundation. Our aim is to learn about threats to the southern region of the Great Barrier Reef and about the conservation, cultural and ecological practices of the region’s traditional owners.

Our people are working with local groups including the Darumbal and Woppaburra people and the Great Barrier Reef Marine Park Authority to build economic sustainability, for example by providing training and enhancing local facilities. By FY23, we estimate 1,000 Lendlease people will have made a connection and be inspired by these local communities to tackle challenges in their own communities.

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Skills and jobs for the disadvantaged

Across our projects we look to provide skills and employment opportunities for people who need them most.

In FY19, our UK not-for-profit organisation, BeOnsite, celebrated its 10th anniversary. It’s helped skill and employ scores of people. In FY19, we entered into a partnership with Italian authorities for a program called 2121, with the aim to provide prisoners with training and future job opportunities.

In FY19, we partnered with CareerSeekers, a not-for-profit supporting Australia’s humanitarian entrants into professional careers. We placed 24 people into jobs. This partnership complements Lendlease’s long running engagement with CareerTrackers, a not-for-profit supporting Indigenous university students. In FY19, we signed a Memorandum of Understanding with the Chicago Cook Workforce Partnership (CCWP), the largest workforce development system in the US, to remove hurdles for disadvantaged people looking to enter the construction industry. Through this partnership, which includes a special fund, we can provide people with access to transport, childcare and the tools needed to start a new role.

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Celebrating culture and working towards reconciliation

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In Australia, our commitment to reconciliation is demonstrated and guided by our Reconciliation Action Plan (RAP) – a framework for Lendlease to realise our vision for reconciliation, certified by Reconciliation Australia. Lendlease operates at Reconciliation Australia’s highest level, RAP Elevate, which recognises companies with a proven track record and that want to lead.

During National Reconciliation Week 2019, Lendlease joined some of Australia’s largest companies that have Elevate RAPs to support the Uluru Statement from the Heart and its call to establish a First Nations voice in the Australian Constitution.

While our second and current RAP is dated 2016 – 2018, we continue to deliver on the plan and its goals. We are now working with Reconciliation Australia to review and measure our progress and develop our next plan.

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RAP in action

5,200,200200

5,200,200200 63% Lendlease employees in Australia Of Lendlease Board members have completed face to face have had an On Country or online cultural awareness learning experience learning since FY12

Providing cultural awareness and engagement learning opportunities for Lendlease employees

2% 112 Increasing the number of Aboriginal and Torres Strait Islander people directly Of Lendlease employees Indigenous university interns hosted employed by Lendlease self identify as Indigenous by Lendlease through our partnership Australians (approximately) with CareerTrackers since FY12 110 $45.3m Increasing procurement activity with Aboriginal and Torres Strait Islander Supply Nations Businesses Spent in FY19 with registered and businesses engaged (registered and certified certified Indigenous businesses Indigenous Businesses)

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Sustainability Climate-related risk

Task Force on Climate-related Financial Disclosure (TCFD) aligned summary of our current and future climate-related disclosures.

Priorities to 2021

Where we are today

	Where we are today	Priorities to 2021
	•Board oversight: engagement through Sustainability	•Continue to strengthen and improve
	Committee three times per year	climate risk governance
Governance	•Management’s role: engagement through Quarterly Business Review (QBR) processes
	•Working committees: TCFD Steering Committee and
	Global Sustainability Leadership Team updates
	•Updated Sustainability Framework	•Stress test business strategies using four
	•Four Lendlease climate scenarios created	climate scenarios
Strategy	for scenario planning (see below)	•Identify risks and opportunities for each scenario •Set metrics and targets relevant to business
		outcomes
		•Engage with stakeholders across our value chain
	•Climate-related risks integrated into Risk Committee	•Continue to integrate climate-related risks
	•Climate-related risks integrated into Group Risk	into our Risk Management Framework
Risk	Appetite Framework •Acute physical risk analysis undertaken across portfolios	•Continue analysis of physical and transitional supply chain and market risks
management	•Shadow price on carbon integrated into Investment	•Disclosure of climate-related financial impacts
	Committee investment decisions – $20USD/Tonne
	in 2020, rising to $100USD/Tonne in 2030 and
	$140USD/Tonne by 2040
	•In 2014, we set 20% by 2020 targets for energy, water and waste on an intensity basis. We disclose our
	annual scope 1 and 2 carbon emissions on our website
	In FY20, we will embark on a process to co-design the new beyond 2020 metrics and targets with each
	of our businesses. The targets will be related to our new Sustainability Framework and informed by our TCFD
	scenario planning activities.
Metrics and targets	Our investment management business has reduced gross 15% 1	Our construction business has seen an increase in gross carbon 27% 2
	carbon emissions over the last five years whilst increasing floor area. The result is a 15 per cent reduction in emissions intensity on emissions per floor area. Reduction in emissions intensity in FY18 from FY14	emissions in FY18. The increase in emissions can be attributed to increased construction activity in general as well as an increase in tunnelling activities. Increase in gross emissions in FY18 from FY14

Our climate scenarios have been created to test our business strategies, align with our Sustainability Framework, respond to key trends and our vision to create the best places.

Details of the references and models that were used to create our scenarios will be made available on our website together with how we see each scenario playing out over the coming decades.

Lendlease

climate scenarios

>4 o C 3-4 o C

2-3 o C <2 o C

Resignation

Polarisation

Paris alignment

Transformation

Resources and efforts National self-interest Multi-lateral Collective self-limitation solely focused on prioritises local government climate and sharing of resources adaptation and survival adaptation over regulation from the enable a just zero multi-lateral action Paris Agreement transition

Lendlease Australia going carbon neutral

Rooftop solar panels at Barangaroo South, Sydney.

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In FY18, Lendlease committed to the recommendations of the TCFD and commenced analysis into the impact of different climate scenarios on our business strategy.

All remaining emissions in FY19 have been offset, making Lendlease’s Australian Construction business a carbon neutral construction service provider.

Research on future climate scenarios and market forces shows a clear need for us to continue to strengthen efforts to decarbonise our work across all stages of the property cycle: investment, development, procurement, construction, operation and end of life.

Supporting supplier manufacturing innovation

In Australia, 47 Lendlease office and industrial assets, representing more than $12 billion under management, have signed commitments to be carbon neutral before or by 2025, with the remaining retail assets in Australia targeting 2030. Combined, this represents approximately 20 per cent of Lendlease’s total annual emissions (based on FY18 emission profile).

Embodied emissions in cement, iron and steel account for nine per cent of global emissions and are considered some of the most difficult materials to decarbonise. Future work will see Lendlease work alongside clients and suppliers to focus on reducing emissions created during manufacture.

Leading the uptake of low carbon material options, and supporting supplier innovation in low carbon manufacturing techniques, is an important step in building business resilience across our supply chain.

Our Australian Construction business took serious steps to address construction-related emissions. Site sustainability standards were used to reduce emissions including the use of efficient appliances, solar hybrid generators and electric cranes. The business will now tackle emissions from liquid fuels like diesel.

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1. Overall reported reduction in intensity for all Assets undermanagement globally. 2. Gross increase in reported emissions for all Construction Projects and auxiliary offices globally.

Lendlease Annual Report 2019 / Risk / 57

56 / As the world reinvents itself

Our approach recognises the nature and level of risk we are willing to accept to achieve our strategic goals and key performance targets to create securityholder value.

It focuses on aligning Board and management to drive informed and consistent decisions, achieving effective and efficient allocation of capital and resources, providing an understanding of risk limits, providing context to identify, report and manage risks, and creating a culture of risk awareness and accountability.

Structure

Board Risk and Audit Committees

Risk

Review the effectiveness of the Group’s enterprise risk management system and seek assurances that material risks are identified and appropriate risk management processes in place.

Group risk function

Liaises with regional CEOs and risk specialists on business-specific and enterprise-wide risks in order to assist the Group’s businesses to further develop their risk management processes.

Internal audit

Formal processes provide supplementary assurance to operational businesses.

External audit

Formal independent regular reviews.

Policy and procedure

Board approval process

The Board has matters that are reserved for its determination under the risk appetite of Lendlease, and further, under the Limits of Authority. The Board approval process is set up so decisions and commitments of a predetermined magnitude require express Board approval, thereby supporting sound governance and continued alignment with strategy.

Investment committees

Investment committees are in place at regional and Group levels in order to assess and approve potential projects/commitments. Limits of Authority

Limits of Authority are in place to outline matters that are specifically reserved for determination by the Board and those matters that are delegated to management.

Risk tools

Risk management platform

Lendlease uses a risk management platform throughout all our regions to allow consistent risk identification and assessment.

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Risk governance and management

Three lines of defence

Specific examples of how risk governance and management have evolved in the reporting period include the implementation of some granular risk appetite principles Board and Committees and tolerances in areas of risk where value is known to erode. These focus on areas such as latent conditions, contamination and existing structural risk. Further Global Leadership Team developments of risk appetite will continue to evolve in other granular areas of our enterprise risks. Regional Risk Based Business In addition, each region of Lendlease Leadership Governance Integrity Internal External has a directly appointed ‘Voice of Risk’ Teams Functions Group Audit Audit executive who is part of each Regional Leadership Team. Importantly, these individuals do not have First line Second line Third line P&L accountability, nor are they part of of defence of defence of defence the risk function. They are independent and are mandated to challenge both the business and the risk function on genuine matters of strategic, tactical and Business Operations operational risk.

Identify	Assess	Control and Manage	Monitor	Report

First line of defence – responsibilities

Individual business units are the first line of defence responsible for identifying, managing and owning their risks. These business units have the appropriate tools and interaction with the various Group functions to execute business responsibilities effectively.

Stage Gates. Across our property and construction operations, the conversion and delivery of projects is governed by a number of ‘gates’ utilising proprietary and in-house developed systems, as follows: Business development pipeline. 1. Project go/no go. Protect conversion process. 2. Commit to pursuit costs. 3. Authority to submit to customers. Submit proposal. 4. Changes to initial proposal. Execute contract. 5. Authorisation to proceed. Delivery. 6. Regular project reviews. Review lessons learnt. 7 Implement for new projects. Stage gates are underpinned by business unit milestone views/health checks and portfolio reviews during delivery.

Inform Plan Oversee Guide Report

Second line of defence –

assurance measures

Group functions involved in the second line of defence include corporate risk and insurance, operational assurance and performance, safety, legal, information technology, sustainability, people and culture, and finance. Function-specific policies outline the assurance measures to enable each business to identify and manage risks appropriately

Third line of defence – independent processes

Assess Plan Execute Report Follow up

Internal and external audit make up the third line of defence, acting independently from the first and second lines of defence and reporting directly to the Board and Risk and Audit Committees.

Risk Appetite Framework

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----- Start of picture text -----

Risk
Introduction Strategy
Appetite
Lendlease recognises the importance of operating
Statements Capital
our business in accordance with best practice risk
allocation
management principles in a manner that protects our
clients and customers, stakeholders, employees and Will be Planning and
corporate reputation. The Risk Appetite Framework
Risk Appetite Tolerances applied Budgeting
forms a key part of the overarching Group Risk
Framework and aligns with existing documented in Investment
processes summarised below. It is in the process of being embedded into Lendlease. Will be aligned with decisions
The risk appetite and tolerances outlined
here is being implemented through Assurance
Risk Limits –
strategy, capital allocation, approvals,
policies, and Limits of Authority. In the new and existing business process include: QBR
event of an inconsistency, the relevant KPIs and Policies/ Reporting
functional or business unit lead Operating LOAs/
incentive Procedures/
should be consulted. model Delegations Board
structures Standards
Reporting
----- End of picture text -----

Purpose

The second part of the Framework outlines Lendlease’s Risk Tolerances. These provide guardrails that will assist in ensuring that decision making and review processes are aligned with the organisation’s appetite for risk.

The purpose of the Risk Appetite Framework is to set clear boundaries1 for the organisation and its employees, approved by the Board within which all business activities must be carried out. It assists in:

The risks outlined in this document are intended to be assessed as residual risks, rather than inherent risks, for example, it should be assumed that standard Lendlease controls have been applied before assessing the risk appetite or tolerance.

Maintaining alignment amongst the Board and management to drive more informed and consistent decision making within approved limits and guardrails2
Effectively allocating capital and resources to projects within these guardrails and therefore are more likely to be approved by management and the Board

Continuous Improvement

The Risk Appetite Framework is reviewed annually by the Group Chief Risk Officer and approved by the Lendlease Risk Committee of the Lendlease Board. Any changes outside of the annual review cycle that encompass the addition of new statements and measures are reviewed and approved by the Board Risk Committee.

Providing a clear understanding of risk limits where there is zero tolerance and where specialist approvals and endorsements are required to mitigate risks
Providing a mechanism for identifying, managing, and reporting on risks through the lifecycle of projects and investments

Changes that do not materially alter the statement, intent or measure, such as minor working amendments to remove ambiguity or improve clarity can be reviewed and approved by the Group Chief Risk Officer.

Providing an appropriate avenue for the ‘Voice of Risk’ to be heard, and a culture of proactive risk management to be embedded, within all levels of the organisation.
The Risk Appetite Framework comprises two parts: a Risk Appetite Statement and clear Risk Tolerances .

Application

A Risk Appetite Statement is “the amount of risk that an organisation is willing to seek or accept in the pursuit of its longterm objectives”³. It defines at a high level, the expectations of management and the Board regarding the nature and extent of risks the Group is willing to take in pursuit of its strategy and associated portfolio management objectives and is expected to be aligned with and further enforced through Lendlease’s:

This Risk Appetite Framework applies to Lendlease Corporation Limited and Lendlease Trust and each of their subsidiary entities in each region.

Lendlease has no tolerance for employees operating outside of the risk appetite and risk tolerances without the required approval.

Values • Code of Conduct • Limits of Authority • Policies and procedures

1. Boundaries are the limits of risk taking, outside of which the organisation is not prepared to venture in the pursuit of its long-term objectives. 2. Guardrails provide clarity in decision making and review processes so that these are aligned with the organisation’s appetite for risk. 3. Institute of Risk Management – Risk Appetite and Tolerance Guidance Paper (2011).

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Key risks and mitigation

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Description Mitigation The value we create
Health, Safety Failure to provide an environment which promotes health, safety and wellbeing impacts our We are committed to the health, safety and wellbeing of our people. Through our Global Minimum
ability to achieve our corporate and social responsibilities Requirements (GMRs), which include both physical safety and health and wellbeing, we empower our
and Wellbeing people to operate in a consistent standard across all our operations.
Disruption Responsiveness to disruption, including digital disruption as well as other new methods and With the increasing dependence on technology, our strategic intent aims to turn disruption into
materials emerging in the investment, development and construction sectors an opportunity by creating a culture that fosters innovation and focuses on adopting leading edge
technologies, to deliver innovative solutions and generate a competitive point of difference.
Commercial Commercial performance fails to meet our corporate objectives Our capital deployment guidelines mitigate risk and improve performance. Quarterly business reviews
assess business operations against approved strategy to drive consistent, focused and risk assessed
investment decisions.
Execution Failure to execute strategy or projects affects our ability to meet our corporate objectives Our risk management approach and use of stage gates across our property and construction operations,
which is articulated earlier in this section, contribute to the mitigation of execution risk. To inform our
investment decisions, we use internal research to develop a ‘house view’ of property cycles in every
region and the strength of our gateway cities.
Geopolitical Global and local events or shifts in government policy occur in the regions in which we We are committed to growing our business in sectors that are supported by positive global trends.
operate, adversely impacting our ability to achieve strategic objectives. Failure to adequately We are sensitive to geopolitical shifts and concentration risk and coordinate our approach to government
understand governments’ mandates, expectations and performance standards in all regions to mitigate against sovereign risk.
Regulatory and • Non-compliance with regulatory and policy requirements by Lendlease or our clients/suppliers To further improve our culture of compliance, we focus on aligning business priorities with the necessary
• Client, investor or supply chain ethics fail to meet Lendlease standards compliance and assurance measures. We are focused on maintaining an ethical supply chain to
Counterparty • Failure to adequately select, govern and drive value from counterparties ameliorate the risk of material substitution and modern slavery. We have an appetite for relationships
with parties who are aligned with our values.
• Failure to comply with government regulations impacts our ability to access government
opportunities
Corporate Failure to create and maintain culture which supports Lendlease’s core behaviours, principles Our values drive our approach to business and delivery of long-term value. We empower our people to
and values to drive disciplined strategy execution make business decisions that are aligned to our core values and behaviours, principles, and five areas of
Culture value creation. To provide a ‘voice of risk’, we have separate reporting routes outside of those who can
influence risk issues through optimism bias.
Cyber/Data Governance/ Failure of cyber resilience and defence systems. Leakage, misappropriation or unauthorised Physical and data security continue to be key focus areas globally. We invest in preventative technology
storage of data. Unauthorised control of systems and physical asset infrastructure and education of employees to achieve a sustainable security culture.
Asset Protection (i.e. lifts, security, air conditioning)
Customer Loss of existing client (including government) relationships, or inability to tailor services to Bid leadership training of key employees reinforces understanding of customers’ requirements. Recurrent
future clients’ needs, impacting Lendlease’s financial objectives client survey feedback informs our business strategy. A single platform assists in customer data security
and aligns customer service across all regions.
Non-scalable • People: inability to attract, retain and upskill key talent necessary to deliver To deliver the desired level of performance, we continue to invest in growing our core capabilities
strategic objectives through active talent management and targeted professional employee development to attract, retain
Growth • Process: lack of scalable processes to support predictable growth and grow the best people. Our processes are designed to be consistent, scalable and effective.
Corporate and Failure to comply with regulatory, societal and investor expectations of corporate and We are committed to creating the best places and optimising our corporate and environmental
environmental sustainability such as climate change and social responsibility sustainability performance (including climate change and social responsibility) through our Sustainability
Environmental Framework and integrating sustainability considerations into our business strategies. We continually
increase engagement through training programs to promote sustainable behaviours in the organisation
Sustainability globally. We have endorsed the TCFD recommendations on climate change and have begun reporting
Lendlease's resilience to the changes in both policies and the physical environment.
Business Failure to properly plan for and/or appropriately respond to events which may disrupt To achieve organisational resilience, we are committed to operating in a way that supports our ability to
Lendlease’s business respond to threats and disasters without affecting our core business operations. We continue to invest
Continuity in learning and development of our people to better prepare them in the event of disruption through
training programs and various threat scenario simulations to stress test the plan.
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Performance and Outlook

Official preview of Park Place Residences at Paya Lebar Quarter (PLQ)

Phase 2 Singapore’s PLQ is a centrally located mixed-use development and a key catalyst of the Urban Redevelopment Authority’s masterplan to regenerate Paya Lebar. In FY19 we completed the office precinct at PLQ.

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Group highlights

In Investments, the Retirement Living business delivered an improvement in resales across the portfolio. Solid investment income and asset value appreciation was derived from co-investment positions. Fee income was also higher, driven by growth in funds under management and strong performance across the asset management businesses.

It was a challenging year for the Group with Profit after Tax of $467 million or 82.4 cents per security for the year ended 30 June 2019. The distribution per security was 42.0 cents. The Group’s core business, excluding Engineering and Services, had a solid year with Earnings per Security of 141.8 cents and a Return on Equity of 12.8 per cent. Following underperformance in the Engineering and Services business, a comprehensive strategic review was undertaken during the year. The decision was made that the business is non core and would be separated from the Group. It has been reported in the Directors’ Report, including the Performance and Outlook section on this basis.

Group Services costs of $140 million were unchanged from the prior year. The Group continues to focus on underlying expense management, with ongoing investment in productivity and efficiency initiatives. Depreciation and amortisation was higher, reflecting investment in technology and systems and Property Plant and Equipment. Net finance costs of $125 million were up substantially on the prior year given the higher level of financing activity and higher average net debt during the year.

The non core Engineering and Services business recorded an EBITDA loss of $461 million, including a $500 million provision for underperforming projects that was brought to account in the first half. To maximise securityholder value over the long term, the Group will focus on its proven integrated capabilities across Development, Construction and Investments. The core business that operates across these segments performed well in the year.

Net debt ended the period at approximately $1.4 billion, which was up from $1.2 billion in the prior year, however down materially from $2.3 billion at the half year. The average cost of debt declined from 4.8 per cent to 4.0 per cent during the year. Average debt maturity improved to 4.8 years. The Group has no material debt expiries until FY22. Underlying Operating Cash Flow was $316 million. Over the five years to FY19, the cash conversion ratio was 85 per cent. A lower ratio in FY19 of 36 per cent reflected the impact of pre-sold apartment revenue collected in prior periods (through the PLLACes program). This resulted in EBITDA related to some pre-sold apartment revenue being recognised without the associated operating cash flow. Maintaining an optimal capital structure, an important component of the Portfolio Management Framework, is critical in maximising securityholder value. The three per cent reduction in the weighted average number of securities on issue in FY19 was a result of the on market buyback that was active between March and December 2018.

Core operating EBITDA was $1,493 million, with the Development, Construction and Investments segments delivering solid returns in line with portfolio targets. However, returns were down on the prior year when each segment outperformed its respective target returns. Strong apartment earnings, particularly at Darling Square in Sydney, underpinned the Development result. The office precinct at Paya Lebar Quarter completed during the year and a new residential investment partnership was formed in the US.

Key Financials

Core Business EBITDA Mix

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FY18 FY19 Var.
Core Business
Revenue1 $m 13,288 13,414 1%
Development EBITDA $m 673 793 18%
Construction EBITDA $m 296 211 (29%)
Investments EBITDA $m 669 489 (27%)
Operating EBITDA $m 1,638 1,493 (9%)
Corporate EBITDA $m (175) (165) 6%
Group EBITDA $m 1,463 1,328 (9%)
Profit after Tax $m 960 804 (16%)
Non Core
Revenue1 $m 3,284 3,141 (4%)
EBITDA $m (218) (461) (111%)
Profit/(Loss) after Tax $m (167) (337) (102%)
Total Group
Revenue [1] $m 16,572 16,555 -
EBITDA $m 1,245 867 (30%)
Profit after Tax $m 793 467 (41%)
Underlying Operating Cash Flow2 $m 913 316 (65%)
Net Assets $m 6,414 6,357 (1%)
Net Debt $m 1,182 1,425 21%
Effective Tax Rate³ % 25.6 24.7 (4%)
Earnings per Security cents 136.1 82.4 (39%)
Distribution per Security cents 69.0 42.0 (39%)
Weighted avg Securities no.(m) 583 567 (3%)
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Development
Construction
Investments
33%
$1,493m
Core Business 53%
Operating
EBITDA⁴
14%
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Core Business Profit after Tax

FY18 $960m

FY19 $804m

Core Business Return on Equity

FY18 FY19 15.3% 12.8%

Core Business Earnings per Security

FY18 FY19 164.7¢ 141.8¢

1. Includes finance revenue. 2. Underlying Operating Cash Flow is derived by adjusting statutory cash flows to better reflect the operating cash generated by the Group from its operating model. 3. Lendlease’s approach to tax is outlined in the 2019 Tax Report (https://www.lendlease.com/au/investor-centre/distribution-and-tax/). Details on tax balances are included within the Consolidated Financial Statements. 4. Excludes Corporate.

Portfolio Management Framework

Group outlook

Despite a challenging period, the competitive advantage of the integrated business model was solidified during the year with strong growth in the urbanisation pipeline and funds under management, along with several new capital partner initiatives. Earnings visibility remains high, supported by the growing urbanisation pipeline that is diversified by both geography and sector.

The Portfolio Management Framework was revised at HY19 to reflect the decision that the Engineering and Services business was non core and the reclassification of internal construction margin to Development for the FY19 results and beyond. The framework is designed to maximise long-term securityholder value via: a diversified risk adjusted portfolio; leveraging the integrated model; optimising the business on a long-term basis; and providing financial strength to execute our strategy.

A formal sale process has commenced to separate the Engineering and Services business following a comprehensive strategic review completed during the year.

Group returns were adversely impacted by the underperformance in Engineering. However, returns for the core business were solid: Development at the mid-point of target range; the Construction margin within target range; and Investments at the top of the target range. The dividend payout ratio was at the mid-point of the target range. The Group remains in a strong financial position with gearing at the bottom of the target range. The balance sheet remains resilient with total liquidity improving to $3.9 billion.

The development pipeline has grown significantly with the Group’s focus on urbanisation in targeted gateway cities. Three major urbanisation projects were added to the pipeline during the year

in Sydney, Chicago and Milan. Post balance date we secured an urbanisation project in the San Francisco Bay Area. These four projects have a combined development end value of approximately $27 billion.

Funds under management rose by 17 per cent on the prior year to $35.2 billion. The development pipeline and our delivery capability support future growth potential. The Investments segment is well placed to continue to deliver a solid base of recurring earnings through both the operating platform and $3.7 billion in investment positions.

The segment invested capital mix continues to be weighted towards Development, reflecting the significant amount of development activity and the reduction in the Group’s investment in the office precinct at Barangaroo. This divestment, along with the continued implementation of our international gateway cities strategy, resulted in a reduced capital allocation to Australia.

The Group is focused on the delivery of our urbanisation portfolio and on leveraging the competitive advantage of the integrated model. The current portfolio, including the post balance date San Francisco Bay Area project, of 21 urbanisation projects across 10 gateway cities provides a strong platform to deliver enhanced risk adjusted returns to our securityholders over the long term.

The target earnings mix contribution from the Construction segment has been reduced. The Construction EBITDA margin target has been lowered to account for the exclusion of Engineering and Services. The Development ROIC target range has been raised by one percentage point to reflect that construction margin on integrated projects, previously reported in Construction, is now recognised as part of the Development segment.

$76.1b

Portfolio Management Framework

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Target1 FY18 FY19
Total Group Metrics
Return on Equity 10-14% 12.7% 7.4%
Dividend payout ratio 40-60% 50% 51%
Gearing 10-20%2 8.2% 9.9%
Core Business EBITDA Mix
Development 40-50% 41% 53%
Construction 10-20% 18% 14%
Investments 35-45% 41% 33%
Core Business Segment Returns
Development ROIC³ 10-13% [4] 13.4% 11.6%
Construction EBITDA margin 2-3% 3.1% 2.2%
Investments ROIC³ 8-11%⁴ 15.5% 10.8%
Segment Invested Capital Mix
Development 40-60% 57% 57%
Investments 40-60% 43% 43%
Regional Invested Capital Mix
Australia 50-70% 59% 45%
Asia 5-20% 12% 15%
Europe 5-20% 16% 22%
Americas 5-20% 13% 18%
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Development Pipeline5

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FY18 71.1
FY19 76.1
$15.6b
Core Business Construction Backlog
FY18 15.2
FY19 15.6
$35.2b
Funds Under Management
FY18 30.1
FY19 35.2
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1. Targets for EBITDA mix, Development ROIC and Construction EBITDA margin were revised at HY19 following the decision that the Engineering and Services business is no longer a required part of the Group’s strategy and following reclassification of internal construction margin to the Development segment. 2 . Review of capital structure underway to reflect change in business mix. 3. Return on Invested Capital (ROIC) is calculated using the annual Profit after Tax divided by the arithmetic average of beginning, half and year end invested capital. 4. Through-cycle target based on rolling three to five year timeline. 5. Remaining estimated development end value, excludes the San Francisco Bay Area project.

66 / As the world reinvents itself

Lendlease Annual Report 2019 / Performance and Outlook / 67

Development performance

The Development segment delivered EBITDA of $793 million, up 18 per cent on the prior year. The segment accounted for 53 per cent of Group core operating EBITDA. The Return on Invested Capital of 11.6 per cent was at the mid-point of the target range, with Invested Capital ending the year at $4.8 billion. Strong apartment earnings across a range of urbanisation projects underpinned the result.

In the Americas, a new residential investment partnership was secured with First State Super (FSS) for a US$1 billion equity commitment. The Cooper at Southbank is the partnership’s first completed asset, while two buildings at Clippership Wharf in Boston are in delivery and expected to complete in FY20.

Three new major urbanisation projects with a combined estimated end value of approximately $7 billion were secured. Victoria Cross in Sydney is an integrated station development project anchored by an office tower with an estimated end value of $1.1 billion. Lakeshore East in Chicago is a residential scheme comprising approximately 1,200 units, a mix of rental and for sale apartments, with an estimated end value of $2.1 billion. The first phase of this project will be delivered via the new investment partnership with FSS. Milan Innovation District, the site of World Expo 2015, is a mixed-use development with an estimated end value of $3.6 billion. There were 2,523 land lot settlements across the Communities portfolio, below our target range. The 2,377 lots in Australia reflect subdued market conditions, including tighter credit markets which have impacted both sales and settlements. The Horizon project in Colorado in the United States entered delivery, achieving 146 settlements in the year.

Our operations in Asia and the Americas made substantive contributions to earnings. Asia delivered EBITDA of $121 million and the Americas generated $79 million, compared to modest contributions in the prior year.

There were 1,623 residential for sale apartment settlements in the year, up significantly on the 1,314 completions in the prior year. Darling Square, Sydney; Victoria Harbour, Melbourne; and Elephant Park, London accounted for the large majority of these settlements. In addition, the Group completed its first ever residential for rent apartment building, The Cooper at Southbank in Chicago. Paya Lebar Quarter is taking shape as one of the largest business and lifestyle precincts in Singapore. The office precinct, which accounts for more than half of the project’s end value, completed during the year. The retail and residential components are scheduled to complete in FY20.

EBITDA by Region ($m)

Core Business EBITDA Mix

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53%
of EBITDA
50% TARGET
4
0
%
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FY18 FY19
793
673
551 556
121 110
79
27 37 (15)
Australia Asia Europe Americas Total
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Invested Capital¹ ($b)

Return on Invested Capital

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13% 13.4% 11.6%
TARGET
10%
FY18 FY19
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4.8
4.3
FY18 FY19
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Commercial Buildings in Delivery ($b)

Residential Settlements² (Units)

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By remaining
estimated 13
development Buildings
end value 7
Buildings
7.2
4.9
FY18 FY19
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FY18 FY19
3,912
2,523
2,075³
1,314
908
Communities Apartments
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Development outlook

The total development pipeline is approaching $100 billion following the addition of the San Francisco Bay Area project, secured post balance date. As at 30 June, the estimated end value of the pipeline was $76.1 billion, up seven per cent on the prior year. The pipeline comprises $61.2 billion of urbanisation projects and $14.7 billion of Communities projects. Diversification by geography and sector is expected to provide resilience through market cycles.

The origination focus in recent years has centred on our international gateway cities, which now account for three-quarters of the urbanisation pipeline. As these projects progress through planning and into delivery, we expect a greater contribution to the Group earnings from these global cities.

The Communities pipeline consists of c.50,000 lots, providing more than a decade of supply based on the 3,000 to 4,000 targeted settlements per annum. Due to current softer market conditions, the target is expected to be challenging in the near term.

During the year, three major urbanisation projects were added to the pipeline. Darling Square in Sydney reached completion, marking the culmination of almost a decade of development in the Darling Harbour precinct with approximately $4.7 billion of product delivered.

The strong growth in the pipeline provides scope for a substantial increase in the rate of delivery. In the last five years, the urbanisation pipeline has risen from $25 billion to approximately $80 billion, including the San Francisco Bay Area project secured post balance date. We expect this to result in an acceleration in the delivery of urbanisation product completed over time.

Post balance date, the Group secured a project to develop three mixed-use communities in the San Francisco Bay Area in conjunction with Google. The predominantly residential led scheme, with an end value of approximately $20 billion, will deliver more than 15,000 new homes over a 10-15 year timeframe.

Lendlease was also announced as preferred development partner on two urbanisation projects in the UK during FY19. The $14.5 billion Thamesmead Waterfront development in London and the $2.7 billion Birmingham Smithfield project. These projects are not currently included in the pipeline.

Pipeline1 by Product

Pipeline1 by Region

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Urbanisation
Communities
19%
$76.1b [²]
81%
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Australia
Asia 10%
Europe
Americas 39%
$76.1b [²]
44%
7%
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Apartment Profile (Units)

Commercial Profile

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Units for In delivery⁴
30,728 Target 2,421,000 sqm Target 2 - 3
rent in delivery³ Indicative launch
Units pre-sold 1,000 - 2,000 FY20 - FY24 commence-
Units for rent in delivery³ 22,273 settlements per annum Remaining secured 1,466,000 sqm ments per annum
secured
Units for sale
secured
5,041
18 buildings 633,000 sqm
1,881
7 buildings 322,000 sqm
1,533
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1. Securityholder equity plus net debt. 2. On adoption of AASB 15 from 1 July 2018, the recognition point of revenue (and associated units) on residential for sale development properties changed to settlement in Australia, Europe and Americas. Prior to the adoption of AASB 15, the recognition point of revenue (and associated units) was aligned with practical completion. 3. Settlements on residential for rent apartments are aligned with practical completion. Includes 452 apartments for rent which completed in FY19.

1. Remaining estimated development end value. 2. Includes $0.2 billion of Infrastructure pipeline. 3. Major apartment buildings in delivery only. 4 . Major commercial buildings in delivery only.

68 / As the world reinvents itself

Lendlease Annual Report 2019 / Performance and Outlook / 69

Core Construction performance

The Construction segment delivered EBITDA of $211 million. The EBITDA margin of 2.2 per cent was in line with the 2-3 per cent target range; however, it was down on the prior year driven by lower margins in Australia and the Americas. During the year, the decision was made to recognise internal construction margin on integrated projects through the Development segment. Earnings derived from the construction of buildings on integrated projects are now reported in the Development segment. This approach better reflects the returns we generate on our urbanisation projects through the integrated model. Australia delivered strong revenue growth of eight per cent to $4.1 billion, resulting in EBITDA of $126 million at a margin of 3.1 per cent. The margin over the last five years has averaged approximately four per cent, with the FY19 margin impacted by the revenue mix. Projects completed during the year included the Bankwest Stadium, the Sunshine Plaza redevelopment, the University of Melbourne Conservatorium of Music and apartment developments at our urbanisation projects.

integrated station developments, Gold Coast Airport Southern Terminal Expansion, Stage 2 Garden Island Critical Works Delivery Phase and Melbourne Park Redevelopment Stage 3.

Revenue from the Americas was down nine per cent to $4.3 billion, reflecting weaker activity in Los Angeles and Chicago, two of our five target gateway cities in the US. EBITDA of $46 million and margin of 1.1 per cent were down on the prior year, impacted by the reduced operating leverage from lower activity.

New work secured of $3.7 billion was broadly flat in local currency terms. There was diversity by client, city and sector including apartment building contracts that reinforce our leadership position in high rise residential construction in our target markets. Europe delivered an improved performance with both revenue and margin up strongly on the prior year. EBITDA was supported by some higher margin construction management projects and accelerated activity from a lower base in FY18. Perry Barr Residential Scheme was a key new contract secured in the year.

Asia continues to focus on the delivery of the internal development pipeline, with the internal margin on those projects now reported through the Development segment.

New work secured in Australia of $4.5 billion included the building components of Sydney Metro Martin Place and Victoria Cross

EBITDA by Region ($m)

Core Business EBITDA Mix

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FY18 FY19
296
211
195
14% 126
of EBITDA
63
40 46
15 (1) 23
Australia Asia Europe Americas Total
Revenue by Region EBITDA Margin
Australia
3.1%
Asia 3%
Europe
Americas TARGET 2.2%
44% 42%
2%
$9.7b
10%
4% FY18 FY19
10%
TA
R
G
E
T
2
0
%
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New Work Secured by Region

New Work Secured by Sector

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Australia
Asia
Europe
Americas 37%
46%
$9.9b
12%
5%
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Transport
7%
Residential
Hotel/ 24%
Entertainment 20%
Defence Commercial $9.9b
5%
Social 15%
Infrastructure 7%
Other
22%
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Core Construction outlook

The $1.7 billion backlog in Europe provides a stable base of work for the coming year. The large development pipeline in Europe will provide a significant amount of construction work in coming years. The Asian business will continue to focus predominantly on the internal development pipeline, while also continuing to specialise in niche sectors for external clients.

The outlook for the Construction segment is solid, with backlog revenue of $15.6 billion, including new work secured in the year of $9.9 billion. Approximately 80 per cent of this backlog will generate future revenue and margin for the Construction segment, with margin on the remainder that is derived from integrated projects, to be reported through the Development segment. The backlog is well diversified across multiple geographies, sectors and clients. Key sectors include residential, commercial and defence.

Beyond the current backlog position, there is approximately $9 billion of work for which the Group is in a preferred position, across both external and integrated projects. The business is well placed to convert a significant proportion of this preferred work into backlog revenue over coming periods.

Australia has a significant pipeline of work, with $6.9 billion in backlog revenue. Key projects include several Defence contracts, the Crown Sydney Hotel Resort, and Sydney Metro Martin Place and Victoria Cross integrated station developments.

The design and delivery capability for built form on our urbanisation projects is a critical component of the integrated model and the strong growth in our urbanisation pipeline is expected to translate into significant future work for the Construction segment.

In the Americas, the established Construction business has a strong market share in its target cities and sectors, with a backlog of $6.2 billion including the integrated pipeline which is in delivery. The significant growth in the urbanisation pipeline in the region, from zero in FY14 to the current level of approximately $28 billion, including the post balance date San Francisco Bay Area project, provides substantial opportunities for future construction backlog.

Backlog by Region

Backlog Realisation

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FY20
FY21
22%
Post FY21
54%
24%
$15.6b
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----- Start of picture text -----

Australia
Asia
Europe
Americas 40%
44%
11%
5%
$15.6b
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Backlog by Client

Backlog by Sector

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4%
Transport Lendlease
5%
Residential 14% Corporate 19%
Hotel/ Government
Entertainment 27%
Defence 43%
Commercial
Social 24%
Infrastructure 11% 38%
Other
15%
Major Major
Project¹ Project¹
Backlog Backlog
Revenue Revenue
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Backlog roll forward ($b)

Backlog ($b)

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9.9 (9.7) 13.7 15.2 15.7 15.2 15.6
15.2 0.2 15.6
FY18 New work Revenue FX and FY19 FY15 FY16 FY17 FY18 FY19
secured realised Other
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1. Includes all Construction projects with backlog greater than $100 million, which represents 81 per cent ($12.6 billion) of secured backlog.

70 / As the world reinvents itself

Lendlease Annual Report 2019 / Performance and Outlook / 71

Investments performance

The Investments segment delivered EBITDA of $489 million. This resulted in a Return on Invested Capital of 10.8 per cent, the top end of the target range. While a strong result, it was lower than FY18 EBITDA of $669 million, which was driven by substantial gains in underlying asset values.

Activity recovered following a period of industry-related weakness, while demand received a boost from the introduction of alternative contract types. The earnings contribution from the Retirement Living business was lower, given the reduction in ownership to 75 per cent and the associated valuation uplift in the prior year.

Solid investment income and asset value appreciation was derived from co-investment positions, in particular the Australian office portfolio. This was supported by a strong leasing and capital market environment.

The Group made further progress on its capital partnering strategy. In the residential sector, a recent addition to the investments platform, an investment partnership in the Americas was secured. First State Super and Lendlease committed an initial US$1 billion of equity.

The prior year included a substantial uplift in the value of the Group’s equity investment in the US Military Housing portfolio. This reverted to predominantly income-based returns on the Group’s investment in the current year.

The office precinct at Barangaroo generated strong interest from capital partners. To meet this demand and take advantage of strong Sydney office market conditions, the Group reduced its investment position in the precinct’s office assets. The current level of co-investment across these assets supports ongoing alignment with investors and maintains long-term asset management of the precinct. APPF Retail opened its liquidity window during the year, with redemption requests received from some of its investors. The Trustee and management are working on a plan to satisfy these redemption requests.

Operating EBITDA was $144 million, up eight per cent on the prior year. Higher fund management fees were generated from the 17 per cent growth in funds under management, with continued investment being made in the European and American operating platforms to position these businesses for growth and greater scale. Asset and property management fees from the US Military Housing portfolio and the Australian and Asian asset management businesses continue to support recurring earnings.

Ownership EBITDA was $345 million. The Retirement Living business delivered a solid underlying contribution, with resales up 21 per cent.

EBITDA by Region ($m)

Core Business EBITDA Mix

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33%
of EBITDA
45% TARG
E
T
3
5
%
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FY18 FY19
669
483 489
330
124 100
55 50
7 9
Australia Asia Europe Americas Total
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Invested Capital¹ ($b)

Return on Invested Capital

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3.6
3.3
FY18 FY19
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15.5%
10.8%
11%
TARGET
8%
FY18 FY19
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Investments EBITDA by Activity ($m)

Investments4 ($b)

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FY18 FY19 3.7
3.3 3.4
536 3.0 3.0
345
133 144
Ownership interests² Operating earnings³ FY15 FY16 FY17 FY18 FY19
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1. Securityholder equity plus net debt. 2. Returns derived from co-investments, the Group’s Retirement investment, US Military Housing equity investment and other investments. 3. Earnings primarily derived from the investment management platform and the management of US Military Housing operations.

Investments outlook

end value greater than $50 billion, including the San Francisco Bay Area project secured post balance date. We expect to create a significant amount of residential for rent product and FUM from this pipeline.

The Investments segment is well placed to continue providing a solid base of recurring earnings to the Group. The integrated business model, with the development pipeline providing product and the Construction segment providing delivery capability, is expected to remain the main source of growth for the Investments segment.

We launched a partnership to invest US$1 billion in the data centre sector across the Asia Pacific. The partnership will enable the Group to leverage the integrated business model in markets in which we have a strong presence and in a sector with a strong growth outlook.

The 17 per cent growth in funds under management (FUM) was underpinned by the delivery of the urbanisation pipeline. This includes the office precinct at Paya Lebar Quarter, which now contributes approximately $2 billion following the completion of the three office towers. Residential for rent FUM has grown to approximately $1 billion during the year, representing a new asset class for the segment.

Investments managed on behalf of the Group closed the year at $3.7 billion. This includes $1.7 billion of co-investments across our funds; $1.4 billion ownership interest in the Retirement Living business; and $0.6 billion in other investments including the Group’s equity interests in US Military Housing, US telecommunications assets and retail at Barangaroo.

Ongoing conversion of the development pipeline with our capital partners will provide future opportunities to grow funds under management. We expect to transition a significant proportion of the urbanisation pipeline into FUM as the pipeline is delivered. The current pipeline includes approximately $29 billion of commercial assets, where there remains strong demand from our capital partners for access to the end product. There are also more than 45,000 apartment units in the current pipeline with an

Diversification of investments across the Group supports improved risk adjusted returns. Lendlease has relationships with approximately 150 institutional investors and a strong track record of performance. Continuing to deliver attractive outcomes for our capital partners will be critical for the ongoing success of the Investments segment.

Funds Under Management1 by Region

Funds Under Management1 by Asset Class

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Retail 3% 3% [2%]
Offi ce
Industrial
Residential
42%
Other
50%
$35.2b
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4% 2%
Australia
Asia
Europe
Americas 23%
71%
$35.2b
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Investments[1,2] by Region

Investments[1,2] by Product

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Co-investments
Retirement 10%
US Military 6%
Housing
Other 46%
38%
$3.7b
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Australia
1%
Asia 11%
Europe
Americas
19%
69%
$3.7b
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Funds Under Management1 roll forward ($b)

Funds Under Management1 ($b)

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35.2
30.1
26.1
23.6
21.3
FY15 FY16 FY17 FY18 FY19
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2.0 0.3 35.2
3.7 (0.9)
30.1
FY18 Additions Divest- Revalua- FX and FY19
ments tions Other
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1. The Group’s assessment of market value. 2. The Group’s ownership interest. Total invested capital in the segment of $3.6 billion in FY19.

4. The Group’s assessment of market value of ownership interests.

72 / As the world reinvents itself

Lendlease Annual Report 2019 / Performance and Outlook / 73

Non core business performance

while the works on the rock anchor solution to rectify the design defect are well underway.

The Group announced at the half year results the decision that the Engineering and Services business is non core and would be separated from the Group. A comprehensive strategic review concluded that this decision is in the best interests of our employees and securityholders and allows both the Group and the Engineering and Services business to focus on their core competitive advantages. The EBITDA loss of $461 million included a $500 million provision for underperforming projects that was brought to account in the first half of the financial year.

The final major phase of work on NorthConnex M1 / M2 Tunnel, that is Mechanical and Electrical, commenced towards the end of the financial year. Phases that incorporated lining, waterproofing and paving are substantially complete.

New work secured in Australia was $2 billion, including the WestConnex 3A M4-M5 Link Tunnels and additional works on the Southern Program Alliance.

The provision related primarily to three Engineering projects with the estimated cost of completing these projects incorporated within that provision.

The Engineering business closed the year with a backlog of $3.8 billion and remains active in bidding for work that is in line with the revised lower risk appetite parameters that came out of the strategic review. There is currently more than $1.6 billion of projects in bid stage, including several road and rail upgrades, and additional Western Sydney Airport works.

Gateway Upgrade North has been operational since March 2019. The other two projects, Kingsford Smith Drive and NorthConnex M1 / M2 Tunnel, are both more than 85 per cent complete and are due to finish in calendar year 2020.

The two largest contracts, Melbourne Metro Tunnel Project and WestConnex 3A M4-M5 Link Tunnels, account for the majority of the current backlog. Both projects are less than 20 per cent complete. The entire Engineering portfolio has been reviewed as part of the year end process. This review has confirmed that the level of provisioning is appropriate.

Works on Kingsford Smith Drive that were unaffected by the redesign are scheduled to complete by the end of this calendar year,

Key Financials

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FY18 FY19 Var.
Revenue1 $m 3,284 3,141 (4%)
EBITDA $m (218) (461) (111%)
Profit/(Loss) after Tax $m (167) (337) (102%)
New Work Secured $b 4.3 3.0 (30%)
Backlog $b 5.9 5.4 (8%)
----- End of picture text -----

The Services business remains a solid contributor to both revenue and profit with an EBITDA margin of approximately 5 per cent delivered in the year. New work secured of $1 billion was diversified by sector, with contract wins across telecommunications, utilities, solar and transport. The business closed the year with a backlog of $1.6 billion and an attractive pipeline of future opportunities.

Revenue by Product

New Work Secured by Product

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----- Start of picture text -----

Engineering
Services
28%
72%
$3.1b
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----- Start of picture text -----

Engineering
Services
33%
67%
Backlog Realisation
FY20
FY21
21%
Post FY21
52%
27%
$3.0b
$5.4b
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Backlog by Sector

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----- Start of picture text -----

Transport Services
6%
Telecommunications
20%
Other
Services
Road Rail 30% $5.4b 4%
Other 18%
Engineering
22%
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Progress on separation of non core business

As part of the separation, a sale process has been initiated for Engineering and Services, which has generated a good level of interest. Several parties are currently undertaking detailed due diligence. We remain committed to delivering the best possible outcome from the sales process for our clients, employees and securityholders.

At the half year results we announced a preliminary estimate of future restructuring costs associated with the separation of $450 million - $550 million pre tax. It was anticipated that these costs may include implementation costs such as technology and systems, employee and advisory costs, and potential costs or indemnities to cover concluding existing customer contracts. The restructuring cost estimate excluded any revenue from ongoing operations or proceeds received from sale.

The restructuring cost estimate remains appropriate based on the current portfolio position and the progress made on the sale. In FY19, $15 million of restructuring costs were expensed relating entirely to implementation costs.

1. Includes finance revenue.

74 / As the world reinvents itself

Lendlease Annual Report 2019 / Performance and Outlook / 75

Financial position and cash flow movements

Group funding and debt facilities

Financial Position

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FY18 FY19
$m $m Var.
Cash and cash equivalents 1,177 1,290 10%
Inventories 5,546 5,583 1%
Equity accounted investments 2,627 3,452 31%
Investment properties 278 501 80%
Other assets (including financial) 7,336 6,352 (13%)
Total assets 16,964 17,178 1%
Borrowings and financing arrangements 2,359 2,715 15%
Other liabilities (including financial) 8,191 8,106 (1%)
Total liabilities 10,550 10,821 3%
Net assets 6,414 6,357 (1%)
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Inventories

Investment properties

Inventories increased by one per cent on the prior year. Additional investment into the development pipeline, combined with higher construction inventory, was broadly offset by settlements during the period.

Investment properties were up significantly, although at $501 million they account for less than five per cent of Group assets. The increase was driven by the transfer of retail assets at Barangaroo following their stabilisation and capital expenditure on telecommunications towers in the US.

Equity accounted investments

Total assets, total liabilities and net assets

Equity accounted investments increased by 31 per cent on the prior year. The creation of the residential investment partnership in the Americas was the largest contributor to the increase. Additional equity was also contributed to fund the Group’s interest in development projects including Melbourne Quarter, The Exchange TRX and Lendlease Residential Investment Partnership in the UK.

Total assets rose by one per cent with growth in equity accounted investments broadly offset by the reduction in the Group’s investment in the office precinct at Barangaroo and a reduction in receivables. The slight decline in net assets reflects marginal growth in assets and a rise in borrowings.

Cash movements ($b)

Operating and investing cash flow

The Group has introduced measures of underlying cash flows to better reflect the cash flows generated by the Group from its business model. This approach enables an assessment of cash conversion, that measures underlying operating cash flow relative to EBITDA. The measures are derived by adjusting statutory cash flows, with the largest adjustment relating to cash flow invested in development.

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0.3 (0.2) 0.1 (0.1) 1.3
1.2
FY18 Underlying Interest Underlying Net FY19
closing operating and tax investing financing closing
cash cash paid cash flow and other cash
flow adjustments
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Underlying operating cash flow was $316 million. The major operating cash inflows during the period included apartment settlements across our urbanisation projects, realised gains from the sale of part of the Group’s investment in the Trusts that own the office precinct at Barangaroo and the establishment of the US residential investment partnership. The losses in Engineering and the impact of presold apartment revenue collected in previous periods (through the PLLACes program) resulted in a lower cash conversion ratio of 36 per cent in FY19 compared to a the five year average of 85 per cent.

Financing cash flow

Underlying investing cash flow was $80 million. Positive investing cash flow reflects the substantial reduction in the Group’s stake in the office precinct at Barangaroo. Key investing activity during the year related to ongoing investment into the development pipeline, the establishment of the Americas Residential Investment Partnership and additional equity commitments for our coinvestment positions.

Net cash outflow from financing activities was $128 million. There was a significant amount of financing completed during the year as the Group increased available liquidity and lengthened debt maturity with $1.8 billion of gross debt refinanced and $1.0 billion of additional debt obtained. Distribution payments to securityholders and the on market buyback were sources of outflow during the year. The Group remains in a strong financial position with $3.9 billion of liquidity.

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FY18 FY19 Var.
Net debt $m 1,182 1,425 21%
Borrowings to total equity plus borrowings % 26.9 29.9 11%
Net debt to total tangible assets, less cash % 8.2 9.9 21%
Interest cover1 times 10.7 8.8 (18%)
Average cost of debt % 4.8 4.0 (17%)
Average debt maturity years 4.6 4.8 4%
Average debt mix fixed: floating ratio 86:14 52:48
Undrawn facilities $m 1,827 2,631 44%
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Net debt, cash and gearing increased during the year, although gearing of 9.9 per cent is at the bottom of 10-20 per cent target range. Interest cover, excluding the one-off impact from underperforming Engineering projects, was 8.8 times, with the weighted average debt maturity now 4.8 years. Cash and cash equivalents of $1.3 billion, that form part of the Group’s strong liquidity position of $3.9 billion, includes the Group’s share of cash from joint operations of approximately $650 million, access to which is subject to Joint Venture partner approval.

Debt Facilities2 ($m)

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----- Start of picture text -----

Drawn Facility 1,800
960
727 725
543 543 567 567
303 303 314 314
110 145
Australian Syndicated UK Club Asia Loan US$ Reg. Singapore
Medium Term Cash Advance Bond Revolving Facility S notes Bond
Notes Facility Issue Credit Facility S$300m
Debt Maturity Profile3 ($m)
Australian Medium Term Notes
Syndicated Cash Advance Facility
UK Bond Issue
Club Revolving Credit Facility
Asia Loan Facility
US$ Reg. S notes
Singapore Bond S$300m 546
Undrawn 727
545
900 900 960
571
225 316 80
FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29
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1. FY19 EBITDA has been adjusted to exclude the $500m provision on underperforming Engineering projects. 2. Values are shown at amortised cost. 3. Values are shown at gross facility value.

76 / As the world reinvents itself

Lendlease Annual Report 2019 / Governance / 77

Governance

Lendlease Chairman Michael Ullmer, AO presents Kaori Kawakami with the Lendlease Global Employee Award for Young Achiever.

As a young female project engineer in Japan, she says: “When the time comes, seize the opportunity”.

Lendlease Annual Report 2019 / Governance / 79

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78 / As the world reinvents itself
4
5
3
6
9
8
2
1
7
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Board of Directors’ information

The Lendlease Board is committed to exceptional corporate governance policies and practices which we see as fundamental to the long-term success and prosperity of the Group.

1. Michael J Ullmer, AO Chairman

In FY19, the Board continued its longstanding practice of reviewing its corporate governance and reporting practices. The Corporate Governance Statement is available on the Lendlease website at: www.lendlease.com/au/ company/governance. For detailed information on the skills, experience and qualifi cations of each of the Directors, refer to pages 80 to 85 of the Annual Report.

The Corporate Governance Framework is regularly assessed and amended as required to remain current. The Board’s fi ve permanent committees continue to assist, advise and make recommendations to the Board on matters falling within their areas of responsibility, as set out in the committee charters. The Board delegates authority for all other functions and matters necessary for the day to day management of the Group to the Group Chief Executive Offi cer, who delegates to senior management as required. Limits of Authority are in place that outline the matters specifi cally reserved for determination by the Board and those matters delegated to Board Committees or Group Executive Management. The Limits of Authority are reviewed at least annually, and changes were made during FY19.

(Independent Non Executive Director)

2. Stephen B McCann

Group Chief Executive Officer and Managing Director (Executive Director)

3. Colin B Carter, AM

(Independent Non Executive Director)

4. Philip M Coffey

(Independent Non Executive Director)

5. David P Craig

(Independent Non Executive Director)

6. Steve B Dobbs

(Independent Non Executive Director)

7. Jane S Hemstritch

(Independent Non Executive Director)

8. Elizabeth M Proust, AO

(Independent Non Executive Director)

9. Nicola M Wakefield Evans

(Independent Non Executive Director)

Board skills and experience

Industry experience Directors’ average tenure Gender diversity The Board views ‘industry experience’ The Board considers it has an The Lendlease Board adopted a target of as skills or experience gained in one or appropriate mix of new, mid and 30 per cent female Board members by the more of the core Lendlease operating longer tenured Directors. end of 2018 to improve gender diversity segments of Development, Construction The average term of the Board and to focus its attention on achieving this and/or Investments. is 5.6 years. objective. This target has been met. 5 of 9 100% 1-3 3-6 6-9 9+ 27% 33% years years years years Board members Have Directors’ Current female Current female have experience in experience in Directors as at Directors as at one or more of the governance and August 2018 August 2019 core segments financial acumen 2 3 3 1

The Directors have a mix of local and international experience and expertise, as well as specialised skills to assist with decision making and to effectively govern and direct the organisation for the benefit of securityholders. The table below sets out the skills and experience considered by the Board to be important for its Directors to have collectively.

These skill areas are reviewed regularly to assess their alignment and support the Group’s strategic direction. The skills matrix assists the Board with succession planning and professional development initiatives for Directors. In determining the skills matrix, each Director undertakes a self assessment of their skills and expertise.

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Skills/Experience Comments Total
Governance A commitment to and experience in setting exceptional corporate governance policies, practices and standards. 9
Possessing industry knowledge, exposure and experience gained in one or more of the core Lendlease
Industry
operating segments of Development, Construction and Investments. This includes acting in advisory roles for 5
Experience
these industries.
International Exposure to international regions either through experience gained directly in the region or through the
8
Operations management of regional clients and other stakeholder relationships.
Health and Experience in programs implementing safety, mental health and physical wellbeing, on-site and within the
7
Safety business. Monitoring the proactive management of workplace health and safety practices.
The ability to identify economically, socially and environmentally sustainable developments. Ability to set and
Sustainability 6
monitor sustainability aspirations.
Developing, setting and executing strategic direction. Experience in driving growth and executing against a
Strategy 9
clear strategy.
Risk Experience in anticipating and evaluating risks that could impact business. Recognising and managing these
9
Management risks by developing sound risk governance policies and frameworks.
Experience in identifying and resolving legal and regulatory issues and having the ability to assist the Board
Legal 4
on these matters.
Experience in building workforce capability, setting a remuneration framework which attracts and retains a
People and Culture 9
high calibre of executives, promoting workplace culture, diversity and inclusion.
Executive Skills gained while performing at a senior executive level for a considerable length of time including delivering
9
Leadership superior results, dealing with complex business models, projects, and issues and change management.
Financial Understanding of the financial drivers of a business. Experience in financial reporting and corporate financial
9
Acumen management.
Strong technology background including online communications, IT workplace knowledge, security and data
Technology 6
analysis skills.
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80 / As the world reinvents itself

Lendlease Annual Report 2019 / Governance / 81

Board of Directors’ profiles

The names, skills, experience and qualifications of each person holding the position of Director of the Company at the date of this report are outlined in the following section:

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Michael J Ullmer, AO

Chairman

(Independent Non Executive Director)

Term of Office

Mr Ullmer joined the Board in December 2011.

Skills, Experience and Qualifications

Mr Ullmer brings to the Board extensive strategic, financial and management experience accumulated over his career in international banking, finance and professional services. He was the Deputy Group Chief Executive Officer of the National Australia Bank (NAB) from 2007 until he retired from the Bank in August 2011. He joined NAB in 2004 as Finance Director and held a number of key positions including Chairman of the subsidiaries Great Western Bank (US) and JB Were. Prior to NAB, Mr Ullmer was at Commonwealth Bank of Australia, initially as Group Chief Financial Officer and then Group Executive with responsibility for Institutional and Business Banking. Before that, he was a Partner at accounting firms KPMG (1982 to 1992) and Coopers & Lybrand (1992 to 1997).

Mr Ullmer has a degree in mathematics from the University of Sussex. He is a Fellow of the Institute of Chartered Accountants, a Senior Fellow of the Financial Services Institute of Australia, and a Fellow of the Australian Institute of Company Directors.

Listed Company Directorships (held within the last three years)

Non Executive Director of Woolworths Limited (appointed January 2012)

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Stephen B McCann

Group Chief Executive Officer and Managing Director

(Executive Director)

Term of Office

Mr McCann was appointed Group Chief Executive Officer in December 2008 and joined the Board as Managing Director in March 2009.

Skills, Experience and Qualifications

Mr McCann joined Lendlease in 2005. Prior to his appointment as Group Chief Executive Officer, Mr McCann was Group Finance Director, appointed in March 2007 and Chief Executive Officer for Lendlease’s Investment Management business from September 2005 to December 2007.

Mr McCann is a highly regarded and experienced business leader with over 25 years of executive experience. Prior to joining Lendlease, Mr McCann had 15 years’ experience in property, funds management, investment banking and capital markets transactions gained through senior leadership roles at ABN AMRO and as Head of Property at Bankers Trust. Previous roles included four years as a mergers and acquisitions lawyer at Freehills and four years in taxation accounting.

Mr McCann is a member of the Business Council of Australia and the Property Council of Australia’s Property Male Champions of Change. In 2013, Mr McCann was announced as the Property Person of the Year by the Urban Taskforce Australia.

Mr McCann holds a Bachelor of Economics (Finance major) and a Bachelor of Laws from Monash University in Melbourne, Australia.

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Colin B Carter, AM (Independent Non Executive Director)

Term of Office

Mr Carter joined the Board in April 2012.

Skills, Experience and Qualifications

Mr Carter is one of the founding partners of The Boston Consulting Group in Australia, retiring as a Senior Partner in 2001, and continues as an advisor with that company. He has over 30 years of experience in management consulting advising on organisational, strategy and governance issues. His career has included major projects in Australia and overseas. Mr Carter has wide industry knowledge on corporate governance issues and has carried out Board performance reviews for a number of companies. He has co-authored a book on Boards, ‘Back to the Drawing Board’, published by Harvard Business School Press. Mr Carter was a Non Executive Director of Wesfarmers Limited, serving on that board for 12 years.

Mr Carter holds a Bachelor of Commerce from Melbourne University and a Master of Business Administration from Harvard Business School, where he graduated with Distinction and as a Baker Scholar. He is a Fellow of the Australian Institute of Company Directors.

Listed Company Directorships (held within the last three years) Non Executive Director of SEEK Limited (appointed March 2005, retired March 2018)

Other Current Appointments

Chairman of the Melbourne Symphony Orchestra Trustee of the National Gallery of Victoria

Other Directorships and Positions

Nil

President of Geelong Football Club Director of The National Golf Club Director of Australian Ballet Foundation Board

Board Committee Memberships

Member of the Nomination Committee Member of the Risk Committee

Member of the Risk Committee

Board Committee Memberships

Chairman of the Nomination Committee Member of the People and Culture Committee Member of the Risk Committee Member of the Sustainability Committee

82 / As the world reinvents itself

Lendlease Annual Report 2019 / Governance / 83

Board of Directors’ profiles

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Philip M Coffey (Independent Non Executive Director)

Term of Office

Mr Coffey joined the Board in January 2017.

Skills, Experience and Qualifications

Mr Coffey served as the Deputy Chief Executive Officer (CEO) of Westpac Banking Corporation from April 2014 until his retirement in May 2017. As the Deputy CEO, Mr Coffey had the responsibility of overseeing and supporting relationships with key stakeholders of Westpac including industry groups, regulators, customers and government. He was also responsible for the Group’s Mergers & Acquisitions function. Prior to this role, Mr Coffey held a number of executive positions at Westpac including Chief Financial Officer and Group Executive, Westpac Institutional Bank. He has successfully led operations based in Australia, New Zealand, the United States, the United Kingdom and Asia and has extensive experience in financial markets, funds management, balance sheet management and risk management. He began his career at the Reserve Bank of Australia and has also held executive positions at Citibank.

Mr Coffey holds a Bachelor of Economics (Hons) from the University of Adelaide and has completed the Executive Program at Stanford University Business School. He is a graduate member of the Australian Institute of Company Directors and Senior Fellow of the Financial Services Institute of Australasia.

Listed Company Directorships (held within the last three years)

Non Executive Director of Macquarie Group Limited (appointed August 2018)

Other Current Appointments

Chairman of the Westpac Bicentennial Foundation Director of Clean Energy Finance Corporation Board

Board Committee Memberships

Chairman of the Risk Committee Member of the Audit Committee Member of the Nomination Committee Member of the People and Culture Committee

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David P Craig

(Independent Non Executive Director)

Term of Office

Mr Craig joined the Board in March 2016.

Skills, Experience and Qualifications

Mr Craig is a business leader with a successful international career spanning over 37 years in finance, accounting, audit, risk management, strategy and mergers and acquisitions in the banking, property and professional services industries. He was the Chief Financial Officer (CFO) of Commonwealth Bank of Australia from 2006 through the GFC, until he retired in June 2017. At Commonwealth Bank, he was responsible for leading the finance, treasury, property, security, audit and investor relations teams.

Mr Craig’s previous leadership roles have included CFO for Australand Property Group, Global CFO for PwC Consulting and a Partner at PwC (17 years).

As well as his role as CFO of Australand Property Group (now Frasers), Mr Craig was responsible for Property for the last 22 years of his executive career, including overseeing three significant property transformations at CBA.

Mr Craig holds a Bachelor of Economics from the University of Sydney. He is a Fellow of the Institute of Chartered Accountants, ANZ and a Fellow of the Australian Institute of Company Directors.

Other Current Appointments

President of the Financial Executives Institute of Australia Deputy Chairman of the Victor Chang Cardiac Research Institute

Board Committee Memberships

Chairman of the Audit Committee Member of the Nomination Committee Member of the People and Culture Committee Member of the Risk Committee

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Steve B Dobbs

(Independent Non Executive Director)

Term of Office

Mr Dobbs joined the Board in January 2015.

Skills, Experience and Qualifications

Mr Dobbs was Senior Group President, Industrial and Infrastructure at Fluor Corporation until his retirement in June 2014. On joining Fluor in 1980, Mr Dobbs was responsible for a wide diversity of markets including infrastructure, mining, telecommunications, transportation, heavy manufacturing, health care, water and alternative power. He served the company in numerous locations including the United States, China, Europe and Southern Africa.

Mr Dobbs is an industry expert in Public Private Partnerships and Private Finance Initiatives and has served as an advisor on these issues to a number of government ministries. He was a governor of industry forums related to engineering and construction at the World Economic Forum from 2008 to 2014 and served as Vice-Chair of the Forum’s Global Agenda Council on Infrastructure in 2013 and 2014.

Mr Dobbs holds a Doctorate in Engineering from Texas A&M University and is a registered professional engineer (retired).

Listed Company Directorships (held within the last three years)

Non Executive Director of Cummins Inc (appointed October 2010)

Board Committee Memberships

Member of the Nomination Committee

Member of the Audit Committee Member of the Risk Committee Member of the Sustainability Committee

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Jane S Hemstritch

(Independent Non Executive Director)

Term of Office

Ms Hemstritch joined the Board in September 2011.

Skills, Experience and Qualifications

Ms Hemstritch has extensive senior executive experience in information technology, communications, change management and accounting. She also has broad experience across the financial services, telecommunications, government, energy and manufacturing sectors and in business expansion in Asia. During a 25 year career with Accenture and Andersen Consulting, Ms Hemstritch worked with clients across Australia, Asia and the US. Ms Hemstritch was Managing Director Asia Pacific for Accenture from 2004 until her retirement in 2007. She was a member of Accenture’s global Executive Leadership Team and oversaw the management of Accenture’s business in the Asia Pacific region, which spanned 12 countries and included 30,000 personnel.

Ms Hemstritch has a Bachelor of Science in Biochemistry and Physiology from the University of London and is a Fellow of the Institutes of Chartered Accountants in Australia and in England and Wales. She is a Member of the Council of the National Library of Australia and Chief Executive Women Inc.

Listed Company Directorships (held within the last three years)

Non Executive Director of Telstra Corporation Limited (appointed August 2016, retired January 2019)

Non Executive Director of Tabcorp Holdings Ltd (appointed November 2008, retired October 2017)

Other Current Appointments

President of the Board of The Walter and Eliza Hall Institute of Medical Research

Member of the Global Council of Herbert Smith Freehills Global LLP

Board Committee Memberships

Chairman of the People and Culture Committee Member of the Nomination Committee Member of the Risk Committee

84 / As the world reinvents itself

Lendlease Annual Report 2019 / Governance / 85

Board of Directors’ profiles

==> picture [89 x 89] intentionally omitted <==

Elizabeth M Proust, AO

Nicola M Wakefield Evans

(Independent Non Executive Director)

Term of Office

Ms Wakefield Evans joined the Board in September 2013.

Ms Proust joined the Board in February 2018.

Skills, Experience and Qualifications

Ms Wakefield Evans is an experienced non executive director and has considerable management and legal experience having spent 29 years at King & Wood Mallesons. She was a capital markets lawyer and held a number of senior management and leadership roles. Ms Wakefield Evans has been involved in a number of significant and ground-breaking M&A transactions and has advised some of the largest companies in Australia, Asia and globally. She has extensive international experience having worked in New York and Hong Kong, and is well known in Asia where she was the Managing Partner, International at King & Wood Mallesons, Hong Kong. Ms Wakefield Evans was included in the Australian Financial Review and Westpac Group’s inaugural list of ‘Australia’s 100 Women of Influence’. She is a member of Chief Executive Women Inc.

Ms Proust is one of Australia’s leading business figures and has had a diverse career holding leadership roles in the public and private sectors for over 30 years. Ms Proust spent eight years at ANZ Group including four years as Managing Director of Esanda, Managing Director of Metrobanking and Group General Manager, Human Resources, Corporate Affairs and Management Services. Before joining ANZ, Ms Proust was Secretary (CEO) of the Department of Premier and Cabinet (Victoria) and Chief Executive of the City of Melbourne.

Ms Proust has extensive board experience in listed and private companies, subsidiaries and joint ventures, as well as government and not for profits. She was made an Officer of the Order of Australia in 2010 for distinguished service to public administration and to business, through leadership roles in government and private enterprise, as a mentor to women, and to the community through contributions to arts, charitable and educational bodies.

Ms Wakefield Evans holds a Bachelor of Jurisprudence and a Bachelor of Laws from the University of New South Wales and is a qualified lawyer in Australia, Hong Kong and the United Kingdom.

Listed Company Directorships (held within the last three years)

Ms Proust holds a Bachelor of Arts (Hons) from La Trobe University and a Bachelor of Laws from the University of Melbourne.

Non Executive Director of Macquarie Group Limited (appointed February 2014)

Non Executive Director of Toll Holdings Limited (appointed May 2011, retired June 2017)

Other Current Appointments

Chairman of Nestlé (Australia) Chairman of the Westpac Victoria Advisory Board

Other Current Appointments

Chair of 30% Club, Australia Director of the Clean Energy Finance Corporation Director of UNSW Foundation Limited Director of Australian Institute of Company Directors Director of Chief Executive Women

Board Committee Memberships

Member of the Nomination Committee Member of the People and Culture Committee Member of the Risk Committee Member of the Sustainability Committee

Board Committee Memberships

Chairman of the Sustainability Committee Member of the Nomination Committee Member of the Audit Committee Member of the Risk Committee

David A Crawford, AO

(Retired 16 November 2018)

Mr Crawford joined the Board in July 2001 and was appointed Chairman in May 2003. He retired in November 2018.

Mr Crawford was most recently the Inaugural Chairman of South32 Limited (appointed May 2015, retired April 2019) and had an extensive experience in risk management and business reorganisation. He acted as a consultant, scheme receiver and manager, and liquidator to many large and complex corporations. Mr Crawford was previously Australian National Chairman of KPMG and a former Non Executive Director of BHP Billiton Corporation Limited.

Phillip M Colebatch

(Retired 16 November 2018)

Mr Colebatch joined the Board in December 2005 and retired in November 2018.

Mr Colebatch had extensive experience in insurance, strategy, risk management and investment banking, gained over an international career spanning 35 years. He held a number of senior roles at large international corporations including Swiss Reinsurance Company and Credit Suisse Group. Mr Colebatch also served 10 years as a director on the Man Group Board, a FTSE 250 company, until his retirement in September 2017, and six years as a Non Executive Director of international general insurance group IAG Limited.

General Counsel and Company Secretary qualifications and experience

==> picture [72 x 72] intentionally omitted <==

Karen Pedersen

Ms Pedersen was appointed Group General Counsel in January 2013. Prior to this she was General Counsel and Company Secretary for other large property and construction companies. Ms Pedersen has a Masters of Law from the University of Technology, Sydney and a Bachelor of Commerce/Bachelor of Laws from the University of New South Wales.

==> picture [72 x 72] intentionally omitted <==

Wendy Lee

Ms Lee joined Lendlease in September 2009 and was appointed Company Secretary in January 2010. Prior to her appointment, Ms Lee was a Company Secretary for several subsidiaries of a large financial institution listed on the Australian Securities Exchange. She has over 10 years of company secretarial experience. Ms Lee has a Bachelor of Arts and a Bachelor of Laws from the University of Sydney, a Graduate Diploma in Applied Corporate Governance, and is a Fellow of the Governance Institute Australia.

Officers who were previously partners of the audit firm KPMG or its predecessors was appointed as Lendlease’s auditor at its first Annual General Meeting in 1958.

Mr Crawford was a Partner and Australian National Chair of KPMG. He resigned from this position on 28 June 2001 prior to his appointment as a Director of Lendlease on 19 July 2001. Mr Ullmer was also a Partner at KPMG from 1982 until October 1992.

86 / As the world reinvents itself

Lendlease Annual Report 2019 / Governance / 87

Engagement. Board regional program FY19

As an international company and having regard to the material scale of individual projects, the Board program is formulated to reflect the geographic spread of Lendlease businesses.

Directors are also encouraged to make site visits outside of a scheduled Board program. The program is an important element of the Board’s activities and enables Directors to obtain the required deep understanding of the activities and operations within each region.

regularly meets with customers, investors, governments and media.

Engaging with Lendlease work

Board members attend program activities in addition to formal meetings. The Chair works with the Company Secretary to forward plan the program for the year. Depending on the time of year and the region, the program runs for a minimum of two days and up to five days where deeper project reviews are required. Each program comprises formal meetings and additional business briefings, presentations from internal and external sources, project site visits, client meetings and networking events with employees and key stakeholders.

Meeting with Lendlease people

In addition to these industry events, the Chairman and Board members also meet regularly with local Lendlease management and employees. These events typically take the form of employee ‘town hall’ style events. The Board members encourage employees to ask questions at these sessions which provide the opportunity for open and honest debate on organisational culture.

Stakeholder engagement

The Board members, led by the Chairman, maintain an active and extensive engagement program to represent the interests of Lendlease at various industry functions and bodies. The Chairman acts as a spokesperson for Lendlease and

Program for the reporting period between 1 July 2018 and 30 June 2019.

Board meetings are scheduled in Australia and each of the regions where Lendlease operates.

Americas

Australia

Europe

Board panel and networking session for the ‘Horizon’ Group, a young professionals networking group based in the London office (July 2018)
Presentation on the Melbourne Conservatorium project and customer interface with the Melbourne Conservatorium Board members. Site walk of Ian Potter Southbank Centre focusing on the Melbourne Conservatorium facilities (June 2019)
Received a deep dive presentation on the Southbank residential for rent building and Lakeshore East Master Plan in Chicago. Guided site visits of both developments occurred following the presentation (October 2018)
Guided walk of the Euston area for mixed-use urban regeneration project (July 2018)
Guided walk through the 277 Fifth Avenue and MoMa developments in New York (October 2018)
- Drive alongside sections of the Caulfield to Dandenong Level Crossing Removal Project in Victoria, and site walk of various sections and rail overpass followed by presentation by the project team (June 2019)
Guided walk of Kings Cross Google headquarters site (in development) (July 2018)
CEO update with all staff in New York (October 2018)
The Elephant, Elephant & Castle, (individual Director site visits July 2018)
Received a deep dive of the Javits project in New York followed by a site walk of the project (April 2019)
- Viewing of new aquarium at Royal Melbourne Children’s Hospital followed by viewing of the main facilities (June 2019)
Received a deep dive presentation on the Milano Santa Giulia project and viewed the mixed-use urban regeneration projects in the Milan precinct (individual Director site visits May 2018)
Guided site walk through 250 South Street and 520 Park Avenue New York residential developments (April 2019)
Overview and site walk of Melbourne Quarter project (June 2019)
Viewing of other mixed-use projects in the New York precinct (April 2019)
Board and all staff ‘town hall’ event and panel session in Melbourne (June 2019)

Board Project Assessment Southbank, Chicago

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One of the key responsibilities of the Lendlease Board is to oversee the strategy so the Group can pursue its integrated business model in targeted gateway cities around the world.

Since the project was secured, the Board has continued to receive updates on Southbank, as a standalone project and as part of the Americas regional strategy. The Board has also received presentations on the residential for rent model of housing. In October 2018, as part of the Board Regional Visitation Program, the Board visited The Cooper, the first residential for rent tower at Southbank, Chicago, prior to its release. The Cooper forms part of the residential for rent partnership launched in FY19 with First State Super. The Board received a detailed commercial update on the project and took a guided walk through the facilities offered to residents. The ability to view the site has been of benefit during updates on the Chicago developments, helping to put the project into context. Activities undertaken by the Board to assess the Southbank project are examples of how the Board oversees management, delivering in accordance with the Group’s strategy through its program of activities.

The Southbank, Chicago project is presented as a case study of the activities that the Board undertakes in reviewing and assessing strategic opportunities.

Many of these projects are long dated. Commencing in 2015, the Lendlease Board received various updates on the Chicago development opportunities ahead of formal requests for approval. In arriving at the decision to approve the investment, the Board considered numerous factors relevant to the development and received reports from internal and external sources on its viability.

In 2016, the Board received a presentation and attended a deep dive of several projects within the Lendlease Chicago development portfolio including Southbank, Chicago. This included the Board members visiting the area to view the site pre-construction. The Board was able to view the site and its location and the untapped potential for urban transformation.

The Board visited the Asia region in July 2019. As this visit did not fall in the reporting period, details will be provided in the FY20 Annual Report.

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Supporting value creation

The Board recognises that the five focus areas of value creation, supported by disciplined governance and risk management, contribute to performance and drive the long-term value of our business.

During the year, in addition to the responsibilities and tasks set out in the charter documents, the Board and Board Committees deliberated on the following specific matters and undertook a number of activities to support value creation. While these do not represent the full scope of Board activities, they highlight some of the areas of focus by the Board.

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Health and Safety

Material Issue:

Operating safely across our operations and projects. Maintaining the health and wellbeing of our employees and those who engage with our assets and sites.

The Board and Sustainability Committee undertook the following activities as part of their continued review of the Lendlease Health and Safety Framework and the unwavering commitment to the safety of our people and those who interact with Lendlease assets and sites.

Board activities and actions:

Received the findings from an external review examining the relationship between culture, climate and safety in each of the regions where Lendlease operates
Received and discussed the measures and actions taken at a project and regional level in response to the fatality at the 217 West 57th Street project in New York, which occurred on 27 May 2018
Refreshed the reporting of health and safety issues to the Board by including enhanced reporting of metrics from a Group and regional perspective and ‘traffic light’ reporting of the Group’s Critical Incidents
Received and discussed reports focusing on Level 3 critical incident reports and the actions to address these incidents
Endorsed the further work being undertaken in each region to improve messaging and cultural development on health and safety issues including the launch of the award-winning ‘Mums for Safety’ campaign
Assessed the health and safety culture through regular visits to Lendlease projects as detailed in the Board’s Regional Visitation Program. Visits were conducted as part of the scheduled calendar of events and by individual Directors outside of the formal program
Board members questioned frontline leaders and employees on Lendlease’s Global Minimum Requirements (GMRs) during site visits

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Financial

Material Issue:

Delivering securityholder returns. Maintaining strong capital management to enable investment in our future pipeline.

The Board and Audit and Risk Committees undertook the following activities to help fulfil the Board’s oversight responsibilities in delivering returns to securityholders and by adopting a prudent approach to capital management with a view to maintaining a strong balance sheet throughout market cycles. Board activities and actions:

• The Engineering business was a major area of focus for the Board in FY19. In announcing in February 2019 that the Engineering and Services business was non core and no longer a required part of the Group’s strategy, the Board pursued a structured review process. The review concluded that it was in the best interests of clients, employees and securityholders to consider alternatives that will allow both businesses and the Group to focus on their core competitive advantages

• Following a review of the Group’s governance procedure, the Risk Management and Audit Committee was separated into two committees – the Audit Committee and the Risk Committee – recognising the importance of both functions in a healthy risk management culture and in maintaining the Board’s overall responsibility for risk oversight

Provided regular input on reviews undertaken to refresh the Group’s Risk Appetite Framework, Risk Statement and Risk Tolerances. Continued to receive reports from management on their examination of the Group’s top risks and mitigating activities
Received presentations from internal and external experts to brief the Board on key issues relevant to the business
Approved the Cyber Security strategy to progressively increase the maturity of the resolution of these issues in the Group

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Our Customers

Material Issue:

Understanding our customers and responding to changes in the market. Designing and delivering innovative, customer driven solutions to win the projects we want to win and ultimately deliver the best places.

The Board and its committees undertook the following activities as part of its support of the Group’s customer focused approach and to embed a process of continuous improvement based on customer insights and actions.

Board activities and actions:

Continued to engage with clients, investors and other stakeholders at various industry functions, site visits and events
Continued to provide feedback on initiatives to improve the reporting of customer satisfaction and advocacy to the Board and Risk Committee to drive continuous improvement in the customer experience
Received regular reports on key customer experience initiatives underway in various regions
Received a report from the Reputation Institute to validate the measuring of Lendlease’s reputation. Monitored the reporting of the program of activities to respond to the insights gained from the report
Engaged with securityholders through meetings and events including the Annual General Meeting and webcasts

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Sustainability

Our People

Material Issue:

Material Issue:

Attracting, developing and retaining diverse talent. Ensuring we have the right capability across the organisation to deliver results for all stakeholders.

Managing and optimising our performance in the context of challenges facing the built environment, including climate change and social pressures such as population growth and housing affordability.

The Board, People and Culture Committee and Nomination Committee undertook the following activities to help attract, develop and retain diverse talent and to monitor the investment in developing leaders and capabilities.

The Board and Sustainability Committee engaged in the following activities to help deliver inclusive, healthy and adaptable places that can thrive through change. Board activities and actions:

Board activities and actions:

• Following endorsement by • Approved the new Lendlease securityholders of the revised Sustainability Framework for 2020. Executive Reward Strategy (ERS) at The new framework responds to the the 2018 Lendlease Annual General need to plan for future generations and Meeting, approved management’s integrates sustainability into all parts of implementation of the revised ERS for the business the Global Leadership Team

Continued to support the commitment to reconciliation and the initiatives in the Elevate Reconciliation Action Plan. Supported and approved the Uluru Statement from the Heart
Demonstrated and reinforced accountability for the Engineering business outcomes through remuneration consequences
Reviewed and discussed the Group’s • Five Directors attended the Garma talent management and strategic Program in August 2018 supporting resourcing strategy and endorsed Indigenous culture in Australia. In total, actions to provide greater transparency seven of the current Board members on the talent process have attended the Garma Program

• Received and discussed the formal development plans for the Group CEO and Global Leadership Team and progress against these plans

Endorsed management’s evolution of the 20 by 20 goals with the aim of continuously improving the environmental performance of the Group’s projects and operations
Refreshed the Board engagement program with senior leaders by holding a series of dinners with the Board and the Regional and Functional Leadership Teams across the Group with the aim of gaining greater visibility of the emerging pool of potential internal successors to the GLT

• Engaged with management and discussed the four Lendlease Climate Scenarios created to test business strategies and respond to key trends in line with recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)

Embedded the reporting of the outcomes of the gender pay review to into the annual calendar

• Received reports on the establishment of the 10 year program between Lendlease and the Great Barrier Reef Foundation to support a range of programs to protect critical habitats in the Reef

Received reports on workplace culture metrics and endorsed management to enhance reporting in this area
Continued to support management in participating in industry roundtables on modern slavery and supply chain
Reviewed the evolution of the Group’s purpose and vision

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Board of Directors’ information

Interests in Capital

The interests of each of the Directors in the Stapled Securities of the Group at 19 August 2019 is set out below. The current Non Executive Directors acquired Lendlease securities using their own funds.

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Securities Held Securities Held
Securities Held Beneficially/ Total Securities Held Beneficially/ Total
Current Directors Directly 2019 Indirectly 20191 2019 Directly 2018 Indirectly 20181 2018
M J Ullmer - 100,000 100,000 50,000 50,000
S B McCann 481,478 268,540 750,018 495,492 270,644 766,136
C B Carter - 15,000 15,000 15,000 15,000
P M Coffey - 9,810 9,810 9,810 9,810
D P Craig - 50,000 50,000 24,870 24,870
S B Dobbs - 12,000 12,000 12,000 12,000
J S Hemstritch - 20,000 20,000 20,000 20,000
E M Proust - 25,000 25,000 - 10,000 10,000
N M Wakefield Evans - 30,248 30,248 16,766 16,766
Former Director
D A Crawford2 979 83,353 84,332 962 82,353 83,315
P M Colebatch2 8,790 9,533 18,323 8,790 9,533 18,323
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1. Includes securities in the Retirement Plan beneficially held by D A Crawford and P M Colebatch. 2. D A Crawford and P M Colebatch ceased to be a Non Executive Directors on

Attendance at Meetings of Directors 1 July 2018 to 30 June 2019

The number of Board and Board Committee meetings held, and the number of meetings attended by each Director during the 2019 financial year, are set out in the tables below.

(MH) Number of meetings held. (MA) Number of meetings attended.

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Board Subcommittee Nomination People and
Board2 Meetings³ Committee Culture Committee
Membership (Chairman M J Ullmer) (Chairman M J Ullmer) (Chairman C B Carter) (Chairman J S Hemstritch)
MH MA MH MA MH MA MH MA
M J Ullmer¹ 15 15 9 9 6 6 4 4
S B McCann¹ 15 15 8 8 6 6 5 5
C B Carter 15 13 - - 6 6 5 5
P M Coffey 15 15 7 7 6 6 5 5
D P Craig 15 15 7 7 6 6 5 5
S B Dobbs 15 15 1 1 6 6 - -
J S Hemstritch 15 14 1 1 6 6 5 5
E M Proust 15 15 - - 6 6 34 34
N M Wakefield Evans 15 15 8 8 6 6 - -
D A Crawford (retired 16 November 2018) 6 6 2 2 3 3 2 2
P M Colebatch (retired 16 November 2018) 6 6 - - 3 3 2 2
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16 November 2018. The balance of securities held at the end of the financial year shown here represents the balance held at that date.

Directors’ Meetings

Board meetings

The Board meets as often as necessary to fulfil its role. Directors are required to allocate sufficient time to the Group to perform their responsibilities effectively, including adequate time to prepare for Board meetings. During the financial year ended 30 June 2019, 15 Board meetings were held. Four of these meetings were held in Australia, two in the US and one in the UK. In addition, 8 meetings were held via teleconference to discuss specific matters, and matters were dealt with as required by circular resolution. From time to time special subcommittees are formed to give the Board better guidance and provide oversight concerning specific matters. During the reporting period, nine Board subcommittee meetings were also constituted to deal with specific matters.

The Board recognises the essential role of committees in guiding the organisation on specific issues. Following the appointment of the new Chairman in November 2018, a comprehensive review of the Board and its committees was undertaken. A range of opportunities was identified to enhance the effectiveness and efficiency of the Board process and the responsibilities reserved specifically for the Board and its committees. Following this review, there are now five standing Board committees to assist, advise and make recommendations to the Board on matters falling within their areas of responsibility.

The five permanent committees of the Board are:

Audit Committee

The Audit Committee assists the Board with its oversight responsibilities in relation to accounting policies and practices, tax matters, treasury reporting, monitoring of internal financial controls, internal and external audit functions and financial reporting of the Group.

People and Culture Committee

The People and Culture Committee assists the Board with its oversight responsibilities in relation to establishing people management and compensation policies for the Group.

Risk Committee

The Risk Committee assists the Board with its oversight responsibilities in relation to risk management and internal control systems, risk policies and practices, compliance, and approvals of project transactions of the Group. The Risk Committee also has another important role – to review, and if approved, recommend to the Board for approval major transactions as referred to the Committee by the Global Investment Committee. Given the review of major transactions moving to the Risk Committee, all members of the Board including the Managing Director and CEO, are members of the Risk Committee.

Sustainability Committee

The Sustainability Committee assists the Board to monitor the decisions and actions of management in achieving Lendlease’s aspiration to be a sustainable organisation. Sustainability is viewed as encompassing how Lendlease conducts business through the pursuit of workplace safety, a commitment to corporate social responsibility, environmentally sustainable solutions and employee diversity, development and opportunity. Lendlease is strategically and culturally committed to achieving commercial success in ways that honour ethical values and respect people, communities and the natural environment.

Nomination Committee

The Nomination Committee advises and supports the Board to fulfill its responsibilities to securityholders; to assure that the Board is comprised of individuals who in combination bring a mix of expertise, skills, experience and perspectives and contribute to the discharge of diligent oversight and effective corporate governance of the Group. The Nomination Committee also oversees activities for Director development and reviews of Board, Committee and Director performance.

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Sustainability
Committee Risk Management and Audit Risk
(Chairman Audit Committee⁵ Committee⁶ Committee7
Membership N M Wakefield Evans) (Chairman D P Craig) (Chairman D P Craig) (Chairman P M Coffey)
MH MA MH MA MH MA MH MA
M J Ullmer¹ 3 3 3 3 1 1 2 2
S B McCann¹ 3 3 3 3 1 1 2 2
C B Carter 3 3 - - - - 2 2
P M Coffey - - 3 3 1 1 2 2
D P Craig - - 3 3 1 1 2 2
S B Dobbs 3 3 3 3 1 1 2 2
J S Hemstritch - - 3 3 1 1 2 2
E M Proust 3 3 - - - - 2 2
N M Wakefield Evans 3 3 3 3 1 1 2 2
D A Crawford (retired 16 November 2018) 1 1 2 2 - - - -
P M Colebatch (retired 16 November 2018) - - 2 2 - - - -
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1. M J Ullmer and S B McCann as Board Chairman and CEO attend every meeting, including those meetings where they are not a member of the Committee.

2. Eight of the 15 Board meetings were called at short notice to deal with specific matters. C B Carter was not available for two of these teleconferences and J S Hemstritch was not available for one of these teleconferences as they were called at short notice.

3. Board Subcommittees are constituted to consider specific issues. Members are appointed during the year as required.

4. E M Proust was appointed to the People and Culture Committee with effect from 1 January 2019 and attended all meetings of the People and Culture Committee since her appointment.

5. Following a comprehensive review, the Risk Management and Audit Committees were separated into two committees.

6. The first meeting of the inaugural Audit Committee was held in June 2019.

7. The first meeting of the inaugural Risk Committee was held in April 2019.

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Remuneration Report

Message from the Board

In presenting the 2019 Remuneration Report, the Board acknowledges that the past year has been particularly challenging. The underperformance of our Engineering business, and consequent erosion of securityholder value, has been extremely disappointing. In addition, it has overshadowed the underlying performance of our core business, which has achieved significant successes.

As you would expect, the Board’s remuneration decisions for senior executives reflect the overall performance of the business for the year. The Board continues to work closely with the leadership team to rebuild confidence in Lendlease and to set the Company up for future success as it delivers its record pipeline of new work.

A new approach to executive remuneration

At the November 2018 Annual General Meeting, securityholders endorsed a number of changes to senior executive remuneration. These changes were developed to:

Create longer dated rewards that are aligned to earnings
Further align reward with securityholder interests
Promote team behaviours and an enterprise leadership mindset
Retain the senior leadership team.

The changes have contributed to a reward strategy that recognises the importance of delivering growth from long-dated urbanisation projects while also providing short-term awards for maintaining focus on disciplined execution and growth within the target portfolio mix. More than half of the Group CEO’s new target remuneration package is now directly linked to securityholder outcomes. Full details of the changes can be found on page 97 of this report.

Linking remuneration decisions and performance

Given the changes outlined above, and the disappointing performance in the Engineering business which has impacted the Group’s FY19 result, Short Term Awards for the Group CEO and senior executives have been significantly reduced compared to last year (in aggregate down by 80 per cent and $5.9 million). Consistent with Lendlease’s culture of accountability, the Board and the Group CEO agreed that he would forego, in full, any Short Term Award for FY19. The range of Short Term Award outcomes for other senior executives was between 25 per cent to 50 per cent of their target. Reported total remuneration outcomes for the Group CEO are lower in FY19 than they were in FY18. They include elements of remuneration that have been deferred from prior years or are

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Michael Ullmer, AO Chairman

subject to future performance hurdles. Further information can be found on pages 103 to 107 of this report.

The Board has not applied malus provisions to Deferred Short Term Incentives (STI) or Long Term Incentives (LTI) awarded in

prior years. The Board was satisfied that the events causing the underperformance related to FY19 and would be appropriately reflected in remuneration through:

Zero or significantly reduced FY19 Short Term Award outcomes
A reduction in the value of STI awards that were deferred from prior years
A reduction in the value of securities covered by the mandatory securityholdings policy
The value and future vesting potential of Long Term Incentives and awards.

We are pleased to be able to report that the year ended with no reportable fatalities. Our focus on safety is resolute and we will continue to strive to eliminate the most critical incidents.

The details of the Board’s decisions about this year’s remuneration can be found in the Remuneration Awarded table on page 103.

Our reward structures and the securityholder

experience

Our senior executives hold a significant number of securities. Senior executives included in this report have seen the value of interests that were held on 8 October 2018¹, and that were still held on 30 June 2019, fall by more than $8.4 million. Interests include mandatory securityholdings, unvested deferred awards and personal holdings. Our Group CEO saw the value of his 8 October 2018 holdings decline by more than $4.0 million over the same period. Further information can be found on page 105 of this report. The Board recognises that some securityholders may question remuneration decisions made in any given year. When these decisions are reviewed over time, the Board believes it has acted in the interests of securityholders. To illustrate this, the graph below tracks how the Group CEO’s short-term incentives and short-term award have changed over time and plots outcomes relative to the security price and the Group’s profit performance (NPAT). The Board continues to invite securityholders to provide feedback and commits to an ongoing review of remuneration outcomes to assess the effectiveness of our approach to executive remuneration.

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Jane Hemstritch

Chairman, People and Culture Committee

Executives and Non Executive Directors	Executives and Non Executive Directors
Covered by this Report		94
a.	Executive Remuneration at Lendlease
	and 2019 Performance	95
b.	Executive Remuneration Outcomes
	and Disclosures	102
c.	Remuneration Governance	108
d.	How Executive Rewards are Linked
	to Performance	110
e.	How Risk Management is Incorporated
	into Executive Reward	114
f.	Executive Contracts	115
g.	Equity Based Remuneration	116
h.	Non Executive Directors’ Fees	120
i.	Non Executive Directors’ Equity Holdings	121

This report forms part of the Directors’ Report and has been audited in accordance with the Corporations Act 2001 .

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1000 5000
19.81
800 16.65 4000
15.03
600 13.11 12.6 13.00 3000
400 8.35 2000
200 1000
0 0
FY13 FY14 FY15 FY16 FY17 FY18 FY19
NPAT ($m) CEO STI ($000s) 30 June Security Price ($)
NPAT ($m)
CEO STI ($'000s)
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1. 8 October 2018 is the first date at which all senior executives were restricted from trading after STI and LTI awards from prior years had vested, which occurred in September 2018.

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Lendlease Annual Report 2019 / Governance / 95

Remuneration Report

Executives and Non Executive Directors Covered by this Report

The following Executives and Non Executive Directors were considered Key Management Personnel (KMP) for the year ended 30 June 2019. Former Non Executive Directors who were KMP during the year are also covered by this report.

Group CEO and senior executives

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Current Executives
Stephen McCann Group Chief Executive Officer and Managing Director (Group CEO)
Johannes Dekker Group Head of Engineering and Building
Tarun Gupta Group Chief Financial Officer
Denis Hickey Chief Executive Officer, Americas
Daniel Labbad1 Chief Executive Officer, Europe
Anthony Lombardo Chief Executive Officer, Asia
Kylie Rampa Chief Executive Officer, Property Australia
David Andrew Wilson Group Chief Commercial and Risk Officer
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Note: the term ‘senior executives’ used throughout this Remuneration Report refers to all the executives listed above, unless stated otherwise.

Non Executive Directors

Current Non Executive Directors

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|||
|---|---|
|Michael Ullmer|Independent Chairman (appointed 16 November 2018)|
|Colin Carter|Independent Non Executive Director|
|Philip Coffey|Independent Non Executive Director|
|David Craig|Independent Non Executive Director|
|Steve Dobbs|Independent Non Executive Director|
|Jane Hemstritch|Independent Non Executive Director|
|Elizabeth Proust|Independent Non Executive Director|
|Nicola Wakefield Evans|Independent Non Executive Director|
|Former Non Executive Directors|
|David Crawford|Independent Chairman (ceased this role 16 November 2018)|
|Phillip Colebatch|Independent Non Executive Director (ceased this role 16 November 2018)|

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a. Executive Remuneration at Lendlease and 2019 Performance

Lendlease’s Executive Reward Strategy on a page

The following provides a high level overview of the key aspects of Lendlease’s Executive Reward Strategy, principles and remuneration components.

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----- Start of picture text -----

Vision To create the best places
Strategic direction To be recognised as a leading international property and infrastructure group
Executive A remuneration framework that aims to attract and retain the high calibre executives needed to deliver the strategy and that
Reward aligns rewards with sustainable performance
Strategy
Governance People and Culture Committee Board
Reviews and makes recommendations to the Board for Group CEO remuneration, Overall responsibility
performance targets and assessment against those targets for senior executive
Approves remuneration, performance targets and outcomes for senior executives remuneration
Objectives Aligned with Longer dated rewards, Promote team Consistent pay for Retention of senior
securityholder aligned to earnings and behaviours and common roles – executives
interests reflecting importance of enterprise leadership facilitating mobility
urbanisation projects mindset of talent
Principles Simple Responsive Balanced Risk Management Focused
Transparent and easy to Considers interests of A significant portion of Clear practices that
communicate both internal and external remuneration at risk, earned minimise potential conflicts
stakeholders for outstanding performance of interest and enable
effective and aligned
decision making
Tiered approach with target remuneration mix defined at each tier
Remuneration Fixed remuneration Short Term Awards (STA) – at risk Long Term Awards (LTA) – at risk
Components Target fixed remuneration set for each • Focus on priority areas in the current • Focused on future years, with a six
tier and established with reference financial year year time horizon
to market median and 75th percentile • Delivered as cash • Three year performance period
against ‘anchor roles’
• Assessed against financial (50%) and • Performance hurdles:
non-financial targets (50%) 50% relative Total Securityholder
• Outcomes range from 0% to Return (TSR) and 50% Average
150% of target Return on Equity (ROE)
• After testing, awards are delivered
in four equal tranches over a
further three years
• A minimum award promotes
alignment with securityholders and
a maximum award is paid only for
outstanding performance
Target Pay Mix 31% for Group CEO 17% for Group CEO 52% for Group CEO
36% for senior executives 15% for senior executives 49% for senior executives
Managing business and operational risks
Business and Performance hurdles Mandatory securityholding Robust forfeiture and Board discretion Qualitative
Operational Risk that reflect the for Group CEO and senior malus provisions and to reward good overlay built into
‘long tail’ of risk and executives deferral of awards for decisions, account performance
profitability up to six years for unforeseen assessment to
circumstances and provide a balanced
adjust appropriately and holistic
assessment
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1. Until 24 July 2018 Daniel Labbad held the role of Chief Executive Officer, International Operations in addition to his role as Chief Executive Officer, Europe.

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Remuneration Report

a. Executive Remuneration at Lendlease and 2019 Performance continued

Board objectives and alignment to strategy

Executive reward strategy changes in 2019

The Board’s key objectives in making changes to the remuneration structure are to:

In the 2018 Remuneration Report, the Board set out its intention to implement changes to the Executive Reward Strategy (ERS) during 2019.

Create longer dated rewards that align to earnings

At the 2018 Annual General Meeting, 91.5 per cent of votes cast were in favour of the adoption of the Remuneration Report. Consequently, the Board made the decision to adopt the changes to senior executive remuneration during 2019.

Further align with securityholder interests
Promote team behaviours and an enterprise leadership mindset
Retain the senior executive team
Better align reward and strategy.

Details of the new remuneration structure are included on the next page.

Summary of how the approach aligns to these objectives

Longer dated • Reduce short-term pay rewards, aligned • Increase the time horizon of Long Term Awards to six years, to align with Lendlease’s future earnings profile to earnings (a significant portion of the expected profit from business activities taking place in the current period will be recognised over five+ years)
• Retain Long Term Awards post employment, which aligns senior executives’ interests to creating long-term value and effective succession
Alignment to • Majority of variable reward is directly linked to securityholder outcomes and delivered in securities
securityholders

Team behaviours and enterprise leadership		• Shift the weighting of team-based reward in both long-term and short-term pay, with more than 85 per cent of target variable pay based on Group outcomes in order to promote an enterprise leadership mindset and collaborative approach • Align reward opportunity across similarly sized roles, supporting a team approach and senior executive mobility
Retention of senior executive team		• Increase the maximum Long Term Award to create a compelling reward opportunity if securityholder outcomes are achieved • Forfeiture of deferred rewards to disincentivise working for a competitor

An executive • Recognising the importance of the core strategy to deliver growth from long dated urbanisation projects reward strategy • Recognising the importance of securityholders, our customers, employees and communities with direct links to the focus that better areas of value creation aligns strategy and reward • Shifting the pay mix towards Long Term Awards that are strongly aligned to securityholder returns • Using short-term pay to reward senior executives for maintaining focus on disciplined execution and growth within a target portfolio mix

Changes to pay for the Group CEO and senior executives

Under the revised ERS, remuneration is structured as follows:

Fixed Pay	A tiered approach to setting fixed pay levels, aligned for similar sized roles, to simplify pay setting	A tiered approach to setting fixed pay levels, aligned for similar sized roles, to simplify pay setting
	and support mobility
Short Term Award (STA)	Designed to focus senior executives on priority areas for delivery in the current financial year, including key
	Group financial targets and other non-financial targets aligned to Lendlease’s focus areas of value creation:
	Health and Safety, Financial, Our Customers, Our People, and Sustainability
Long Term Award (LTA)		Designed to support behaviours that drive long-term securityholder value

Details of how the STA and LTA work are set out on pages 110 and 112 respectively.

The changes to pay which have been introduced during 2019 are summarised in the table below. The values in the table below represent target, minimum and maximum potential outcomes and do not reflect what has been received in the year.

	Group CEO	Typical Lendlease senior executive	Key Features
	FY18 FY19	FY18 FY19
Fixed Pay	2,034 2,200	1,100 1,200	A tiered approach is adopted to setting fixed pay, aligned for similar sized roles, to simplify pay setting and support mobility
Short Term Award Target1	1,750 1,200	1,000 500	Delivered as cash following the end of the performance year. Quantums are reduced compared to those under the previous Short Term Incentive (STI) plan, under which outcomes were delivered as a combination of cash and deferred securities Performance is assessed against our focus areas of value creation to drive collaboration and operational excellence
Short Term Award Maximum1	2,625 1,800	1,500 750	As above
Long Term Award Target 2,3	3,300 3,700	900 1,600	Increased weighting to focus senior executives on long-term value creation Awards delivered over a six year period, with performance assessed over a three year period Under the previous Long Term Incentive (LTI) plan, awards were measured and released over three years (50%) and four years (50%) ROE and relative TSR hurdles continue to be used to assess performance The LTA is reported on a face value basis
Long Term Award Maximum 2,3	3,300 5,550	900 3,200	Higher LTA for outstanding performance to create compelling wealth opportunity The LTA is reported on a face value basis
Long Term Award Minimum 2	0 500	0 500	Award minimum aligns senior executives and securityholders at all times and focuses senior executives on effective risk management
Total Target Reward	7,084 7,100	3,000 3,300	Higher total target reward offsets impact of longer dated reward for senior executives

Target remuneration mix for FY19 for the Group CEO and senior executives

	Group CEO Typical senior executive
Fixed Pay	31% 36% 17% 15%
Short Term Award
Long Term Award	52% 49%

1. For FY18, the values in the Short Term Award represent the corresponding target and maximum opportunity under the Short Term Incentive arrangements in that year. 2. For FY18, the values in the Long Term Award represent the face value of awards granted under Long Term Incentive arrangements in that year. There was no Award Minimum under the LTI. 3. Under the FY18 LTI plan the target and maximum values both represent the maximum award that can be received. Under the Long Term Award plan a distinction is drawn between target and maximum awards with the latter paid for delivering exceptional performance.

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Remuneration Report

a. Executive Remuneration at Lendlease and 2019 Performance continued

2019 Performance and Outlook

For a detailed analysis of our Group and segment Performance and Outlook, please refer to pages 62 to 75. A summary is included below.

Key Financials

Portfolio Management Framework

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FY18 FY19 Var. Target FY18 FY19
Core Business Total Group Metrics
Revenue1 $m 13,288 13,414 1% Return on Equity 10-14% 12.7% 7.4%
Development EBITDA $m 673 793 18%
Dividend payout ratio 40-60% 50% 51%
Construction EBITDA $m 296 211 (29%)
Investments EBITDA $m 669 489 (27%) Gearing 10-20%4 8.2% 9.9%
Operating EBITDA $m 1,638 1,493 (9%)
Corporate EBITDA $m (175) (165) 6%
Group EBITDA $m 1,463 1,328 (9%)
Profit after Tax $m 960 804 (16%)
Non Core
Revenue1 $m 3,284 3,141 (4%)
EBITDA $m (218) (461) (111%)
Profit/(Loss) after Tax $m (167) (337) (102%)
Total Group
Revenue [1] $m 16,572 16,555 -
EBITDA $m 1,245 867 (30%)
Profit after Tax $m 793 467 (41%)
Underlying Operating Cash Flow2 $m 913 316 (65%)
Net Assets $m 6,414 6,357 (1%)
Net Debt $m 1,182 1,425 21%
Effective Tax Rate³ % 25.6 24.7 (4%)
Earnings per Security cents 136.1 82.4 (39%)
Distribution per Security cents 69.0 42.0 (39%)
Weighted avg Securities no.(m) 583 567 (3%)
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Five year performance summary

The graphs below outline some key indicators of Group performance over the past five years.

Statutory Profit after Tax (PAT) Attributable to Securityholders ($m)¹

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698.2 758.6 792.8
618.6
467
FY15 FY16 FY17 FY18 FY19
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1,2

Total Dividends/Distributions ($m)

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384.9 399.6
349.1
313.2
237
FY15 FY16 FY17 FY18 FY19
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Earnings per Stapled Security (EPSS) (cents)3

(excluding treasury securities)

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112.4 126.3 135.2 137.0
82.9
FY15 FY16 FY17 FY18 FY19
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Annual Total Securityholder Return (%)4

		38
20	(13)		24	(33)
FY15	FY16	FY17	FY18	FY19

Return on Equity (ROE) (%)5

Performance and funding for Short Term Incentives

Incentives are funded from an incentive pool which represents a maximum that can be awarded. Using an incentive pool provides for a fair sharing of profits between securityholders and employees by capping the amount of profits that can be paid to employees. It also forges a strong link between Group performance and Short Term Incentive (STI) outcomes because they are influenced (up or down) by the available pool.

Group Profit after Tax (PAT) is one factor that determines the overall size of the incentive pool. An assessment of overall profit make-up, health of the business and other financial and non-financial factors are also considered.

Group PAT was substantially below target for FY19 as a result of the impact of underperformance in our Engineering business. Earnings, Return on Equity and cashflow performance from our core business were otherwise very strong. After an overall assessment of performance across each of the businesses in the Group, the Board approved an incentive pool that was substantially lower than in 2018, with funds being weighted to reward our front-line teams.

Group CEO scorecard and performance in 2019

Short Term Award (STA) outcomes are based on financial and nonfinancial measures and are designed to focus senior executives on priority areas for delivery in the current financial year.

50 per cent of awards are assessed against a set of team targets for Group financial performance against metrics that include:
Profit after Tax
EBITDA
Return on Equity
Overheads
Cash flow from operating and investing.
The overall financial health of the business is also included in the assessment.
50 per cent of awards are assessed against a range of non-financial performance measures including:
Safety performance
Progress against strategic initiatives
Sustainability – progress towards our 2020 targets
Our people – retention of critical talent and targets for women in leadership positions
Our customers – measures in line with our customer framework.
The Board is committed to the safety and wellbeing of employees and is pleased to report that the year ended with no reportable fatalities, a return to the level of performance we expect after two disappointing years. No reduction has been applied to non-financial performance outcomes for senior executives on the basis of safety performance.

Consistent with the Lendlease culture of accountability, the Group CEO announced at the Annual General Meeting in November 2018 that he and the Board had agreed he would forego any STA for FY19. The Board undertook an assessment of the Group CEO’s 2019 scorecard and the results are included in the table over the page.

12.4	13.0	12.9	12.7
				7.4
FY15	FY16	FY17	FY18	FY19

1. At June 2019, all values have been rounded off to the nearest million dollars unless otherwise indicated. 2. A $53.6m company unfranked dividend was declared subsequent to the reporting date for June 2019. 3. EPSS (Earnings per Stapled Security) is calculated using the weighted average number of securities on issue excluding treasury securities. EPSS, including treasury securities, is reported in the Performance and Outlook section of this report. 4. Represents the movement in the Group’s security price, distribution yield and any return on capital during the financial year. 5. ROE is calculated as the annual Statutory Profit after Tax attributable to securityholders divided by the arithmetic average of beginning, half year and year end securityholders’ equity.

1. Includes finance revenue. 2. Underlying Operating Cash Flow is derived by adjusting statutory cash flows to better reflect the operating cash generated by the Group from its operating model. 3. Lendlease’s approach to tax is outlined in the 2019 Tax Report (https://www.lendlease.com/au/investor-centre/distribution-and-tax/). Details on tax balances are included within the Consolidated Financial Statements. 4. Review of capital structure underway to reflect change in business mix.

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Remuneration Report

a. Executive Remuneration at Lendlease and 2019 Performance continued

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Performance Measures
For Year Ended 30 June 2019 Area of Focus Reason Chosen Result Performance Assessment
Financial performance
A summary of the result against each financial measure is below:
Profit after Tax Behind Target Target increased by 6 per cent from $780m in FY18 to $830m in FY19. Actual Profit after Tax is
A range of financial measures that include 44 per cent below target for FY19 and 41 per cent below FY18.
specific targets for: EBITDA $ Behind Target Target increased by 7 per cent from $1,277m in FY18 to $1,367m in FY19. Actual EBITDA was $867m,
- Profit after Tax behind target and down 30 per cent on FY18.
- EBITDA A breadth of financial measures, in combination with the forward-looking Return on Equity Behind Target At 7.4 per cent, the result is significantly below the target range of 10 per cent – 14 per cent.
- Return on Equity assessment of the financial health of the Operating and Ahead of Target Actual cash flow was $227m, and materially above target.
- Cash Flow from Operating and Investing business, focuses the Group CEO on the Investing Cash Flow
- Overheads. delivery of financial results in the short-term BELOW ABOVE Overheads Behind Target Overhead target reductions were exceeded, but reduction in NPAT resulted in Overhead / GPM ratio not
An assessment of the overall financial health of while taking decisions with an emphasis on being met.
the business: the long-term interests of securityholders. Group Profit after Tax is significantly below target as a result of underperformance in the Engineering business, however we have grown our pipeline and made
positive steps to set up for the future in terms of how we work, managing projects more consistently and where we work.
- Comparing the quality of the result relative to
Our globally diverse pipeline provides long term earnings visibility:
the targets set
$76.1b development pipeline (c.61 per cent offshore), $15.6b construction backlog (excl. Engineering and Services), $35.2b Funds Under Management
and $3.7b of investment positions.
Our Strategy remains focused on our integrated model which leverages more than one operating segment across a diversified portfolio.
Non-financial performance (aligned to our five focus areas of value creation)
There were no reportable fatalities during FY19.
We are committed to the health and safety of The Group CEO provided visible health and safety leadership throughout the year. The Mums for Safety campaign elevated awareness and received
our people. The Critical Incident Frequency external accolades, including a Silver Lion at the 2019 Cannes Lions International Festival of Creativity.
Health and Safety
Rate (CIFR) helps us assess how effective we In a culture and climate survey, more than 90 per cent of our people agreed that safety is a key priority in their teams and that Lendlease creates a
are at eliminating life threatening incidents. BELOW ABOVE culture of working safely.
In FY19, the frequency rate of Critical Incidents was maintained at FY18 levels.
A strategic review of the Engineering and Services business is complete.
The Group remains in a strong financial position with gearing at the bottom of the target range. The balance sheet remains resilient with total liquidity
improving to $3.9 billion. Establishment of US $1b residential for rent partnership with First State Super. Significant efforts to shift our portfolio offshore
Effective capital management drives longer-
Strategic initiatives and managing risk with c.61% development pipeline located offshore.
term securityholder returns.
BELOW ABOVE Key achievements on improving risk management include; enhanced reporting (embedding Enterprise Risks into the second line of defence risk
management framework, internal audit plans and reporting framework, and into Board reporting); and strengthened first line of defence risk capability
by appointing ‘Voice of Risk’ executive to every Regional Leadership Team to challenge and provide counterbalance.
Customer centricity has been further embedded within the business. During FY19, an increased number of business units completed research and nearly
Satisfied customers drive long-term all regions and business units invested in externally conducted research through independent research agencies or via our own internal research unit.
value. Innovation contributes to better
Our Customers and innovation Overall, the global average for business unit performance for C-SAT² and NPS³ declined slightly in FY19, off solid results in FY18.
performance – capturing and responding to
disruption creates opportunity. BELOW ABOVE The appointment of a CEO Digital during the year marks a significant shift in our digital focus and has brought the disruption, innovation and digital
agenda under one team.
Having the right people in leadership1 roles is The Group continues to invest in the development and deployment of talent across the Group, including our first Delivery Directors program aimed at
critical to long-term success. developing leadership capability for our major construction projects, completing our third Inspire (senior leaders) program, and delivering our fourth Aspire
The Group CEO sponsors key people program. Retention rates for talent segments was 94 per cent in FY19, ahead of our target of greater than 90 per cent.
Our People initiatives. The proportion of women in leadership roles has increased from 24.3 per cent to 26.1 per cent, with the majority of business units exceeding their targets.
The Group CEO actively promotes diversity BELOW ABOVE The Group CEO continues to address the issue of gender pay at an industry level and is a member of the Property Male Champions of Change group.
and inclusion to grow capability. Targets for increasing senior leadership effectiveness, measured using Our People Survey, were not achieved. This will be a key priority for FY20.
During FY19, a new Sustainability Framework was developed which will help shape a new leadership platform for Lendlease in sustainability.
We continue to maintain a leadership position against the Global Real Estate Sustainability Benchmarks (GRESB) Assessment, where the following
achieved number one rankings – Australian Prime Property Fund (APPF) Commercial, Australian Prime Property Fund (APPF) Retail and International
Towers Sydney Trust.
Capital investors, policy-makers, customers Continued to monitor progress against our 20 per cent by 2020 reduction targets for energy, water and waste. Improvements have been reported
and communities are seeking partners against FY14 baseline for water; however some of our intensive construction projects have seen a decline from last year’s results.
Sustainability who can deliver efficient, healthy, resilient, Major earthworks at some remediation projects saw large quantities of contaminated soils sent to landfill, above that of FY14.
culturally and socially inclusive outcomes BELOW ABOVE Cumulative results for Q3 FY19 are as follows (subject to audit confirmation)4:
which deliver long-term value.
• Energy: 17 per cent reduction⁵
• Water: 8 per cent reduction⁵
• Waste: 25 per cent increase⁵.
Lendlease achieved recognition at the 94th percentile on the Dow Jones Sustainability Index, up from the 90th percentile in FY18.
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1. Leadership roles include a number of levels in the Lendlease Career Job Framework, including executive level roles.

2. C-SAT measures whether customers were satisfied with our products and services. 3. NPS measures whether our customers’ experience fostered loyalty. 4. The above performance is at March 2019 and is a cumulative measure. Full FY19 performance is subject to Limited Assurance by KPMG and will be available on www.lendlease.com in October 2019. 5. Refer to Sustainability page 50 for detail around reported results.

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Remuneration Report

Remuneration awarded by the Board for the year ended 30 June 2019

The remuneration awarded is set out in the table below.

b. Executive Remuneration Outcomes and Disclosures

Comparison of remuneration tables

In this section, the value of remuneration for the Group CEO and each senior executive is included. In addition to the required statutory table (based on the accounting disclosures), we have included a further table setting out the remuneration awarded (page 103), and graphs showing the remuneration received (page 104), to provide a more complete illustration of our approach to executive remuneration. An explanation of the differences is set out below.


Disclosure	Awarded Table and Remuneration Received Graphs Statutory Table
Period Covered Fixed Remuneration	Remuneration disclosed relates to both time in their current role (as KMP) and any other role they have held at Lendlease during the financial year. Only shows remuneration for the time the senior executive was KMP. This includes the contractually awarded amount of Total Package Value (TPV)/Base Salary from 1 September 2018 or later. It excludes annual leave and long service leave accruals. For individuals employed for part of the year, only remuneration paid during the employment period is included. The statutory disclosures include a value for cash salary, non monetary benefits, superannuation and other long-term benefits in line with statutory remuneration disclosure requirements. Non monetary benefits also includes the movement in annual leave accruals.
Short Term Award (STA)	The 2019 STA that will be paid as cash in September 2019 in respect of the 2019 financial year. The 2019 STA that will be paid as cash in September 2019 in respect of the 2019 financial year.
Short Term Incentive (STI) Deferred	The STI was replaced by the STA in the 2019 financial year. No STI deferred securities were granted in relation to the 2019 financial year. The accounting expense attributed to this financial year for Deferred STI awards granted in September 2017 and September 2018.
Total Short Term Remuneration	For 2019, the Total Short Term Remuneration refers to the sum of Fixed Remuneration and STA received. For 2018, this is the sum of Fixed Remuneration and Total STI received, which includes both the cash and deferred components of the 2018 award.
Long Term Award (LTA)	The LTA replaces the LTI for this financial year. The Remuneration Awarded table shows the target face value of the 2019 LTA offered in November 2018. The 2019 LTA vests in September 2021, September 2022, September 2023 and September 2024 and the awards are subject to relative Total Securityholder Return (TSR) and average Return on Equity (ROE) performance hurdles (explained in detail on page 112). The LTA is reported as part of the LTI equity settled section of the statutory disclosures. This is the accounting expense attributed to the 2019 financial year.
Long Term Incentive (LTI)	No LTI was granted to senior executives in this financial year as it was replaced by the LTA. The accounting expense attributed to this financial year for LTI Awards made in the 2015, 2016, 2017 and 2018 financial years.
Prior STI and LTI Awards	The remuneration received graphs on page 104 show the value of any Deferred STI awards and LTI awards which vested during this financial year. The value shown represents the value of the awards at the grant date. Awards vested in September 2018. The Deferred STI awards which vested in September 2018 were granted in September 2016 and September 2017. The LTIs which vested in September 2018 were granted in September 2014 and September 2015.
Security Price Growth and Distributions	In the remuneration received graphs, the value of security price growth and distributions paid between the grant date and the vesting date for STI and LTI awards which vested during the year. For awards that vested in September 2018, the value shown in the remuneration received graphs reflects the September 2018 security price rather than the price at the balance date. Cash equivalent distributions paid on the LTA Minimum are also included in the remuneration received graphs.

Fixed remuneration changes were agreed for some senior executives as part of the transition to the new Executive Reward Strategy, endorsed by securityholders. The Group CEO was awarded a fixed pay increase for the first time since September 2011. The Board has reviewed senior executive remuneration and no further increases are anticipated for FY20. In addition, most executives and senior managers have had fixed remuneration frozen since May 2019.

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‘At Risk’ –
Deferred to Future Periods
Total Short Term
$A000’s1 Short Term STA Opportunity Remuneration LTA 2019⁵ LTI 2018
% of % of
Target Maximum Face
Name Fixed2 STA3 STA Paid STA Paid 2019 2018⁴ Min Target Max⁶ Value⁷
Stephen McCann 2,200 - 0% 0% 2,200 3,784 500 3,700 5,550 3,300
Johannes Dekker⁸ 1,200 125 25% 17% 1,325 298 500 1,600 3,200 -
Tarun Gupta 1,200 125 25% 17% 1,325 2,288 500 1,600 3,200 1,040
Denis Hickey 1,556 324 50% 33% 1,880 2,209 500 1,600 3,200 720
Daniel Labbad 1,309 273 50% 33% 1,582 2,067 500 1,600 3,200 890
Anthony Lombardo 1,093 227 50% 33% 1,320 1,876 500 1,600 3,200 790
Kylie Rampa 1,200 250 50% 33% 1,450 2,159 500 1,600 3,200 720
David Andrew Wilson 1,247 125 25% 17% 1,372 1,815 500 1,600 3,200 -
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The LTA Target value is the new Long Term Award under the revised Executive Reward Strategy endorsed by securityholders in 2018. The LTA seeks to align remuneration potential with long-term securityholder outcomes. The 2019 grant has been set using a security price of $20.80. The performance period for this grant began on 2 July 2018 when the security price was $19.87. The impact of the Engineering underperformance will materially reduce the likelihood of the relative TSR performance component of the LTA vesting.

Remuneration received for the year ended 30 June 2019

Remuneration received during the year consists of:

Fixed remuneration		This includes the contractually awarded amount of Total Package Value (TPV)/Base Salary from 1 September
		2018 or later. It excludes annual leave and long service leave accruals
2019 Short Term Award (STA)		The cash incentive payable in September 2019 following the end of the financial year
Prior year STI and LTI Awards		Made up of all Deferred STI and LTI awards from prior years that vested in the financial year
		(i.e. September 2018)
Security price growth		The value of security price growth and distributions paid between the grant date and the vesting date for
and distributions		STI and LTI awards which vested during the year

The Board made its decisions concerning the 2019 STA for senior executives during July and August 2019, once the final Group results were understood. The Group CEO’s STA was determined earlier, at the time of the announcement of the underperformance in the Engineering business. Prior year LTI awards that vested during the year were tested based on cumulative performance between the start of the year in which they were granted and the year ending 30 June 2018. These awards were released in September 2018 when the security price was $20.36. The value reported in the tables below reflects this security price.

Security price growth and distributions represents the shared ‘gain’ senior executives and securityholders have experienced over the life of awards. The table below illustrates the change for the awards that vested during the year.

	Grant	Vest price $	Gain	Distributions
Award	price $	(1 Sept 2018)	per security $	paid per security $	Total $
LTI 2015	13.53	20.36	6.83	2.98	9.81
LTI 2016	15.16	20.36	5.20	1.95	7.15

For more information on the impact of the security price performance on outstanding awards, refer to ‘The Impact of Security Price Performance on Executive Remuneration and Holdings’ on page 105.

1. All executives are paid in local currency but reported in the above table in AUD for 2019 based on the following 12 month average historic foreign exchange rates: GBP 0.55 (applied to Daniel Labbad), SGD 0.97 (applied to Anthony Lombardo), USD 0.71 (applied to Denis Hickey). 2. Fixed remuneration includes the contractually awarded amount of Total Package Value/Base Salary (including the value of any benefits salary sacrificed) but excludes any allowances or non monetary benefits. 3. The STA refers to the Short Term Award that replaces the STI for the Group CEO and senior executives for the year ended 30 June 2019, which is payable in cash in September 2019. 4. The Total Short Term Remuneration for 2018 includes both the cash and deferred components of the STI determined as part of the 2018 STI award. 2018 remuneration is reported in AUD based on the 12 month average historic foreign exchange rates for 2018: GBP 0.57 (applied to Daniel Labbad), SGD 1.04 (applied to Anthony Lombardo), USD 0.77 (applied to Denis Hickey). 5. The LTA refers to the Long Term Award that replaces the LTI for the Group CEO and senior executives for the year ended 30 June 2019. It is awarded on a face value basis. Refer to page 112 for a detailed explanation of LTA awards. 6. The LTA provides for the opportunity for outperformance if performance hurdles are achieved above target. The maximum opportunity is 150% of target for the Group CEO and 200% of target for senior executives. 7. LTI awards were granted on a face value basis in 2018. 8. Johannes Dekker became KMP from 1 May 2018 when he commenced employment with Lendlease as Group Head of Engineering and Building. His 2018 remuneration represents the total remuneration awarded in that year.

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The Impact of Security Price Performance on Executive Remuneration and Holdings

Remuneration Report

b. Executive Remuneration Outcomes and Disclosures continued

Impact on personal holdings and Short Term Incentives deferred from prior years

The security price decline following the announcement about underperformance in the Engineering business impacted both securityholders and executives.

The Group CEO and senior executives hold a large number of Lendlease securities and have experienced losses through the value of:

Personal direct and indirect holdings
Holdings restricted by the mandatory securityholding policy
Short Term Incentives deferred into Lendlease securities from prior years.

Remuneration received for the Group CEO during 2018 and 2019

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Remuneration received Remuneration received
relating to prior years relating to current year
2018 2,527 2,541 2,034 875 2018 Total
7,977
2019 Total
2019 2,084 2,263 2,200
6,547
Vested in September 2018
1$000s
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Fixed Remuneration[2] 2018 STI Cash[3] 2019 STA[4] Prior STI & LTI Awards Security Price Growth & Distributions[5]

The table below shows details of the loss in value of interests of senior executives held by them at 8 October 2018 and that were still held at 30 June 2019. 8 October 2018 is the first date at which all senior executives were restricted from trading after STI and LTI awards from prior years had vested, which occurred in September 2018. Interests (including mandatory security holdings, unvested deferred awards and personal holdings), held by senior executives on that date, that were still held at 30 June 2019, fell in value by approximately 29 per cent. The aggregate decline in value for all senior executives disclosed in this report was more than $8.4m. The Group CEO saw the value of his 8 October 2018 interests fall by more than $4.0m.

Balance held on 8 October		Value of 8 October 2018
still held on 30 June 2019	Value of balance held at	balance still held at
(inc Unvested Deferred STI)	8 October 2018 $	30 June 2019 $	Loss in Value $
Stephen McCann 751,611	13,837,159	9,770,943	(4,066,216)
David Andrew Wilson 230,052	4,235,257	2,990,676	(1,244,581)
Tarun Gupta 167,380	3,081,466	2,175,940	(905,526)
Daniel Labbad 109,703	2,019,632	1,426,139	(593,493)
Kylie Rampa 107,713	1,982,996	1,400,269	(582,727)
AnthonyLombardo 93,441	1,720,249	1,214,733	(505,516)
Denis Hickey 76,568	1,409,617	995,384	(414,233)
Johannes Dekker 30,978	570,305	402,714	(167,591)

Impact on Long Term Incentives granted in prior years

Remuneration received for other senior executives during 2018 and 2019

Remuneration in the form of awards that are subject to performance hurdles have, and will continue to be, impacted by the results of FY19. The vesting potential of five tranches of Long Term Incentives granted in prior years will be influenced by the security price decline and financial results of FY19. This is illustrated in the diagram below.

Performance measured over financial year

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607 525
575
561
934 337
986
886
811 676
2018 390 192
561 472 433 524
651
50 1,100 1,429 1,123 1,010 1,000 262
520
198
Johannes Tarun Denis Daniel Anthony Kylie David Andrew
Dekker Gupta Hickey Labbad Lombardo Rampa Wilson
531
630 515
842 543 377
404
43 803
2019 450 963 324 273 714 653 593
125 125 227 250 125
1,556
1,200 1,200 1,309 1,093 1,200 1,247
Johannes Tarun Denis Daniel Anthony Kylie David Andrew
Dekker⁶ Gupta Hickey Labbad Lombardo Rampa Wilson
1$000s
1$000s
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Long Term Awards FY2016 FY2017 FY2018 FY2019 FY2020 FY2021
2016 LTI grant – 4 Year Tranche 2019 financial
performance
2017 LTI grant – 3 Year Tranche
will impact
2017 LTI grant – 4 Year Tranche vesting
outcomes for
2018 LTI grant – 3 Year Tranche each of
2018 LTI grant – 4 Year Tranche these awards
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The movement in the Lendlease security price has directly impacted the relative TSR component of the awards shown above. Based on relative TSR performance test outcomes between the start of the performance period and 30 June 2019, all of these awards are currently without value. Cumulative performance for each outstanding award is shown below.

						Overall
		Performance	Vesting Based	Performance	Vesting based	Proportion of
	Grant	Period to Date	on Cumulative	Period to Date	on Cumulative	Performance
Long Term Incentives	Price $	relative TSR	Performance	Average ROE	Performance	Securities Vesting
2016 LTI grant – 4 Year Tranche	15.16	12th percentile	0%	11.5%	34.4%	16.0%
2017 LTI grant – 3 Year Tranche	13.49	26th percentile	0%	11.0%	25.0%	11.6%
2017 LTI grant – 4 Year Tranche	13.49	26th percentile	0%	11.0%	25.0%	11.6%
2018 LTI grant – 3 Year Tranche	16.44	15th percentile	0%	10.1%	2.5%	1.3%
2018 LTI grant – 4 Year Tranche	16.44	15th percentile	0%	10.1%	2.5%	1.3%

Impact on the value of Long Term Awards granted in 2019

The number of performance rights issued under the Long Term Award granted during FY19 used a volume-weighted average security price (VWAP) that was set with reference to the 20 trading days immediately prior to the announcement of the Group results for the year ending 30 June 2018. This VWAP was $20.80.

Fixed Remuneration[2] 2018 STI Cash[3] 2019 STA[4] Prior STI & LTI Awards Security Price Growth & Distributions[5]

1. All executives are paid in local currency but reported in the above table in AUD for 2019 based on the following 12 month average historic foreign exchange rates: GBP 0.55 (applied to Daniel Labbad), SGD 0.97 (applied to Anthony Lombardo), USD 0.71 (applied to Denis Hickey). For FY18 the following 12 month average historic foreign exchange rates have been used: GBP 0.57 (applied to Daniel Labbad), SGD 1.04 (applied to Anthony Lombardo), USD 0.77 (applied to Denis Hickey). 2. Fixed remuneration includes the contractually awarded amount of Total Package Value/Base Salary (including the value of any benefits salary sacrificed) but excludes any allowances or non monetary benefits. 3. 2018 STI Cash refers to the portion of the STI award for the year ended 30 June 2018 that was paid in cash in September 2018. 4. STA refers to the Short Term Award that replaces the STI for the Group CEO and senior executives for the year ended 30 June 2019, which is payable in cash in September 2019. For the Group CEO, the value of his STA is zero. 5. The value of security price growth and distributions includes the value of cash equivalent distributions on the 2019 LTA Minimum. More details about the LTA are included on page 112. 6. For Johannes Dekker, his prior year awards relate to Sign-On Awards that were that were granted in May 2018. The Awards were delivered in two tranches, one as cash and the other as deferred securities, in September 2018.

Like other Long Term Incentives granted in prior years, the likelihood for the new Long Term Award to vest in excess of the minimum has reduced.

At the balance date of 30 June 2019, the value of the minimum of these awards is now 37.5 per cent lower than when the VWAP was set. Under the new Executive Reward Strategy a larger proportion of senior executives’ remuneration is tied to securityholder returns, more than 50 per cent for the Group CEO. This strengthens alignment with securityholders’ interests and reinforces the link between remuneration outcomes and performance into the future.

1. More information concerning the Lendlease Securities Trading Policy can be found on page 109.

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Remuneration Report

Reconciliation of 2019 statutory remuneration with Remuneration Received for the Group CEO

The following table shows the difference between the Group CEO’s Remuneration Received (page 104) and the Statutory Disclosure (page 106).

b. Executive Remuneration Outcomes and Disclosures continued

Statutory disclosures – Remuneration of the Group CEO and senior executives for the years ended 30 June 2019 and 2018

Statutory disclosures are included in the table below. Short Term Benefits, Post Employment Benefits and Other Long Term Benefits relate to remuneration for the year. Values in the Security Based Payments columns reflect the accounting expense attributed to this year for STI and LTI awards from prior years, and the LTA from this year.

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Post
Short Term Employment Security Based
$000s¹ Benefits Benefits Payments7
Non Other
Cash STI Monetary Superannu- long term STI
Year Salary2 Cash3 Benefits4 ation5 benefits⁶ Sub-total LTI Deferred Total
Executive Director
Stephen McCann 2019 2,155 - - 25 33 2,213 2,375 875 5,463
2018 2,014 875 - 20 30 2,939 2,483 948 6,370
Senior executives
Johannes Dekker8 2019 1,191 125 287 11 230 1,844 708 318 2,870
2018 195 50 198 3 122 568 - 151 719
Tarun Gupta 2019 1,166 125 - 21 - 1,312 757 635 2,704
2018 1,080 561 - 20 1 1,662 648 677 2,987
Denis Hickey 2019 1,558 324 251 - - 2,133 588 467 3,188
2018 1,429 390 50 11 - 1,880 461 624 2,965
Daniel Labbad 2019 1,311 273 284 113 - 1,981 669 519 3,169
2018 1,145 472 75 99 - 1,791 544 601 2,936
Anthony Lombardo 2019 1,094 227 291 - - 1,612 655 425 2,692
2018 1,010 433 226 - - 1,669 555 389 2,613
Kylie Rampa 2019 1,149 250 3 21 18 1,441 538 593 2,572
2018 967 524 11 20 15 1,537 362 504 2,403
David Andrew Wilson 2019 1,287 125 - 21 18 1,451 735 278 2,464
2018 511 262 43 9 8 833 282 139 1,254
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1. All executives are paid in local currency but reported in the above table in AUD for 2019 based on the following 12 month average historic foreign exchange rates: GBP 0.55 (applied to Daniel Labbad), SGD 0.97 (applied to Anthony Lombardo), USD0.71 (applied to Denis Hickey). For FY18 the following 12 month average historic foreign exchange rates have been used: GBP 0.57 (applied to Daniel Labbad), SGD 1.04 (applied to Anthony Lombardo), USD 0.77 (applied to Denis Hickey). 2. Cash salary includes the payment of cash allowances such as motor vehicle allowance and cash equivalent distributions on the 2019 Long Term Award minimum. For David Andrew Wilson, the value includes back pay of salary relating to 2018. 3. Short Term Incentive (STI) Cash refers to the Short Term Award for the year ended 30 June 2019 that will be paid in cash in September 2019. 4. Non monetary benefits may include items such as car parking, relocation and expatriate benefits (such as house rental, health insurance, shipping of goods and tax return preparation), motor vehicle costs, travel benefits and annual leave. 5. Superannuation includes the value of insurance premiums funded by Lendlease for Australian executives who are members of the Lendlease default superannuation fund and pension contributions for non Australian based executives. For Daniel Labbad, the value includes an allowance paid in lieu of pension contributions. 6. Other long term benefits represent the accrual of long term leave entitlements (e.g. long service leave). 7. The amounts for security based payments reflect the accounting expense on a fair value basis. 8. For Johannes Dekker, amounts under Other Long Term Benefits, STI Deferred and LTI include the pro rated accounting expense of future payments relating to remuneration foregone on resignation from his previous employer, and a retention award relating to the strategic review of the Engineering and Services business.

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Remuneration Remuneration Remuneration
relating to Prior Years relating to Current Year relating to Prior Years
6,547 (2,839)
1,959 5,463
(1,505) 875
416
(3) (2,200) 2,155 25 33
Total LTI Deferred 2019 LTA Contractual Actual Other LTA STI Expense LTI Expense Total
Remuneration Vesting STI Vesting Distribution¹ Fixed Rem Cash Superann- Long Term Expense (relating to (relating to Statutory
Received at Sept 18 Salary uation³ Benefits⁴ (2019 grant) prior years) prior years)
in 2019²
Less Add
$000s
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Long Term Incentive performance

During 2019, two LTI awards were subject to performance testing. The performance hurdles were relative Total Securityholder Return (TSR) and average Return on Equity (ROE). Each hurdle is tested over a three and four year performance period. The outcomes are shown below.

2015 Award

The four year relative TSR test was conducted in July 2018. Lendlease’s relative TSR performance achieved the 55th percentile when compared to the comparator group over the period from 1 July 2014 to 30 June 2018. As a result, 60 per cent of the tested award vested. The four year average ROE test was also conducted in July 2018. Lendlease’s four year average ROE performance was 12.8 per cent over the period from 1 July 2014 to 30 June 2018. As a result, 58.8 per cent of the tested award vested.

2016 Award

The three year relative TSR test was conducted in July 2018. Lendlease’s relative TSR performance achieved the 55th percentile when compared to the comparator group over the period from 1 July 2015 to 30 June 2018. As a result, 60 per cent of the tested award vested. The three year average ROE test was also conducted in July 2018. Lendlease’s three year average ROE performance was 12.9 per cent over the period from 1 July 2015 to 30 June 2018. As a result, 60.6 per cent of the tested award vested.

The four year relative TSR and four year ROE tests for this award are scheduled for July 2019 and the results will be shown in the 2020 Remuneration Report.

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100
Average ROE %
90 for 2016 LTI plan
(Sept 2015 grant)
80
= 12.9%
60.6% of
70 awards
vested
60
58.8% of
50
awards
2015 LTI 2016 vested
plan – plan – 40
4 year 3 year
30
TSR TSR
Test Test Average ROE %
20 for 2015 LTI plan
60% 60%
(Sept 2014 grant)
vested vested 10 = 12.8% Vesting schedule
0
10% 11% 12% 13% 14% 15% 16%
Average ROE achieved over performance period
% of tested awards vesting
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1. 2019 LTA Distribution refers to the cash equivalent distributions paid on the Award Minimum of the Long Term Award (LTA). More details of the LTA are on page 112.

2. There is a difference between Actual Cash Salary received during 2019 and the contractually awarded Fixed Remuneration (excluding superannuation), as the Group CEO received a pay increase in September 2018. The value of cash equivalent distributions on the Award Minimum of the 2019 LTA are also included here. 3. Superannuation includes the value of insurance premiums paid by Lendlease. 4. Other Long Term Benefits represent the accrual of long term leave entitlements (e.g. long service leave).

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Remuneration Report

c. Remuneration Governance

Robust governance is a critical part of Lendlease’s approach to executive remuneration.

Board

The Board has overall responsibility for executive remuneration at Lendlease. The Board assesses the performance of, and determines the remuneration outcome for the Group CEO.

Setting remuneration levels

Lendlease benchmarks remuneration mix and levels to confirm market competitive total rewards for on target performance, and total rewards above the market median if outstanding performance is achieved

Remuneration is reviewed annually by the People and Culture Committee for the Group CEO and senior executives (or during the year if there are any role changes or new senior executive appointments).

People and Culture Committee

The Committee’s agenda reflects the importance of human capital to the Group’s strategy and business planning, and it assists the Board in establishing appropriate policies for people management and remuneration across the Group. A description of the People and Culture Committee’s scope can be found on page 90.

Management

Management makes recommendations to the People and Culture Committee in relation to developing and implementing the Executive Reward Strategy and structure. The Group CEO also provides his recommendations on fixed pay and Short Term Award (STA) outcomes for his direct reports for approval by the People and Culture Committee.

Independent Remuneration Advisor (PwC)

The Board has appointed PwC as its independent remuneration advisor. Strict governance protocols were observed to ensure PwC’s advice to the People and Culture Committee was made free from undue influence by Key Management Personnel (KMP). The following arrangements were made to ensure that PwC’s advice was free of undue influence:

PwC was engaged by, and reported directly to, the Chair of the People and Culture Committee
The agreement for the provision of remuneration consulting services was executed by the Chair of the People and Culture Committee on behalf of the Board
Reports delivered by PwC were provided by PwC directly to the Chair of the People and Culture Committee
PwC was permitted, where approved by the People and Culture Committee Chair, to speak to management to understand company processes, practices and other business issues and obtain management’s perspectives.

As a consequence, the Board is satisfied that advice provided by PwC was made free from undue influence from any of the KMP.

During the year, PwC did not provide a remuneration recommendation as defined in Section 9B of the Corporations Act 2001 . PwC did not conduct remuneration benchmarking for KMP in 2019.

Primary Sources	The People and Culture Committee typically uses a number of sources for benchmarking Group CEO and senior executive
of Data	remuneration including:
	• Data provided by the Board’s remuneration advisor about remuneration for similar roles in companies of a similar size,
	such as:
	- comparable roles in companies listed on the ASX that are ranked between 26 and 75 by market capitalisation
	(excluding companies domiciled overseas and property trusts where management is not typically employed by the trust)
	- comparable roles in ASX listed companies with revenue of between 50 and 200 per cent of Lendlease’s revenue
	• Publicly available data for comparable roles at organisations in Australia such as CIMIC, Mirvac and Stockland
	• Published remuneration surveys, remuneration trends and other data sourced from external providers.
Market Positioning	The People and Culture Committee has adopted a tiered approach to setting pay levels, with a target remuneration mix
	defined for senior executives at each tier as part of changes implemented in 2019. For more information, please see page 97.
	A target fixed and total remuneration position is set for each tier, which is established with reference to the market median
	and 75th percentile, benchmarked against a number of ‘anchor roles’.
Application of Data	The People and Culture Committee adopts the following principles when considering data and its application to setting pay:
to Lendlease Senior	• Understanding the relative size, scale and complexity of the organisations in the data set (so that a fair comparison can be
Executives	made to organisations with similar global breadth and operational complexities as Lendlease)
	• Understanding the relative size, scale and complexity of the roles in the data set
	• Aligning reward opportunity across similarly sized roles, supporting a team approach and facilitating mobility among
	senior executives
	• For senior executives based outside Australia, target pay is adjusted to account for cost of living, housing and currency
	differences, to achieve similar pay levels.

Mandatory securityholding

The mandatory securityholding requires the Group CEO and senior executives to hold a minimum number of Lendlease securities so that they have a significant personal investment in Lendlease and they consider long-term securityholder value when making decisions. The Group CEO and other senior executives are required to accumulate and maintain a holding of Lendlease securities calculated with reference to their fixed remuneration (divided by the security price to determine the number of securities that must be held). In the case of:

The Group CEO – the requirement is 150 per cent of Total Package Value (TPV)
Senior executives – the requirement is 100 per cent of TPV or 100 per cent of base salary for senior executives outside of Australia. The mandatory securityholding for each senior executive is outlined in the Equity Based Remuneration tables on page 120.

Personally held securities may be counted towards the mandatory securityholding requirement. Unvested deferred securities and unvested awards under the previous STI and LTI do not count towards this mandatory holding. Under the new Long Term Award (LTA), the minimum number of performance rights will count toward the mandatory holding.

Until such time as the senior executive meets the mandatory securityholding requirements, Lendlease imposes a disposal restriction on 50 per cent of any senior executives’ Deferred STI, LTI or LTA that vests (for senior executives based in Australia). This disposal restriction means that the senior executive will not be able to sell these securities until such time as Lendlease agrees to lift the disposal restriction. Senior executives based outside of Australia are required to achieve the mandatory holding requirement within six years of their appointment to a Key Management Personnel (KMP) role.

Securities Trading Policy

The Lendlease Securities Trading Policy applies to all employees of the Lendlease Group. In accordance with the policy, Directors and senior executives may only deal in Lendlease securities during designated periods. Directors and senior executives must not enter into transactions or arrangements that operate to limit the economic risk of unvested entitlements to Lendlease securities. No Director or senior executive may enter into a margin loan arrangement in respect of Lendlease securities.

Hedging

Deferred STI, LTI and LTA awards are subject to the Securities Trading Policy which prohibits executives from entering into any type of ‘protection arrangements’ (including hedging, derivatives and warrants) in respect of those awards before vesting.

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Remuneration Report

d. How Executive Rewards are Linked to Performance

Short Term Award (STA)

Prior Year Short Term Incentive (STI)

Key features of the 2017 and 2018 STI plans are the same as the 2019 STA, except for the following which apply to the 2017 and 2018 STI plans only.

STAs are based on performance against a scorecard of financial and non-financial measures

This section presents a summary of the key features of the 2019 STA plan. Page 111 shows the key differences between the STA and the previous Short Term Incentive (STI), for which some awards remain on-foot. The key features of the 2019 STA are outlined in the table below:

STA Design		How the STA Works
STA Quantum		• Under the 2019 STA, the amount of STA achieved at target has been reduced compared to prior years and has been set
		with reference to the Group CEO and senior executive target remuneration mix set out on page 97.
STA Funding		• The pool of funds available to reward executives under the STA plan is determined by direct reference to Group financial
		performance.
		• In determining the pool of funds available, the Board examines safety performance, and the overall health of the business,
		which considers a broader set of metrics around origination, sustainability and how we have managed risk.
STA Targets and		• The minimum possible STA outcome is zero and the maximum STA outcome is limited to 150 per cent of the senior
Opportunity		executive’s target STA opportunity.
STA Key		• STA outcomes are based on performance during the financial year, primarily measured through the use of the Group CEO
Performance		and senior executive scorecards.
Indicators		• The Group CEO 2019 scorecard (approved by the Board) and performance against the scorecard is set out in summary on
		pages 100 and 101. The Group CEO agreed that he would forego his FY19 STA as a result of the underperformance in the
		Engineering business.
		• Lendlease is committed to the safety and wellbeing of all of its employees. The Board considers safety leadership
		behaviours and outcomes in assessing the overall performance of the Group CEO and each senior executive. While the
		assessment is not structured formulaically or as a ‘gateway’ measure, expectations are clearly communicated to the
		Group CEO and senior executives that poor health and safety outcomes may lead to reduction in STA outcomes for the
		year. No reductions were applied in FY19 as a result of safety outcomes.
		• The People and Culture Committee considers feedback from the direct reports and teams of each senior executive. In
		this way the STA considers ‘what’ is achieved as well as ‘how’ it is achieved.
How The STA is		• As part of the Executive Reward Strategy (ERS) changes that were implemented during 2019, the STA is delivered as cash
Delivered		in September following the end of the performance year.

STI Design		How the STI Works
How the STI is		• The STI award is delivered as a mix of cash and Deferred STI, which is settled in Lendlease securities or cash as
Delivered		determined by the Board.
		• For STI awards ‘up to target’, 50 per cent of the award was paid in cash in September following the end of the
		performance year. The remaining 50 per cent is deferred – half of which vests one year after the grant and the other half
		vests after two years. Deferred STI awards are held in an employee share plan trust until vesting.
		• For ‘above target’ STI awards, the above target portion was delivered one-third as cash and two-thirds deferred on the
		same basis as set out above.
		• Distributions are not paid on any unvested Deferred STI for the Group CEO and senior executives; however, the value
		of any distributions made during the vesting period is taken into consideration in calculating the amount of Lendlease
		securities or cash provided on vesting.
		• To satisfy Deferred STI awards, securities were purchased on market around September 2017 and September 2018
		respectively.
Malus		• The Board has the discretion to forfeit part or all of any unvested Deferred STI awards prior to their vesting where it
		considers vesting would provide a participant with a benefit that was unwarranted or inappropriate. The Board may
		delay vesting of any unvested Deferred STI in the event it is reviewing whether to exercise discretion to reduce or forfeit
		unvested awards.
Treatment of		• Malus provisions work alongside the Deferred STI terms to provide discretion for the Board to adjust unvested awards on
Deferred STI on		termination of employment. In particular:
Termination		- If an employee is terminated for fraud or other serious misconduct, unvested Deferred STI awards will lapse
		- Where an employee is terminated for poor performance, the number of unvested Deferred STI awards can be
		adjusted downwards
		- Deferred STI awards are forfeited by the individual if they resign during the vesting period.
		• For ‘good leavers’, the Deferred STI awards may remain on-foot until the original vesting date, subject to the original
		terms. In exceptional circumstances (such as death or total and permanent disability), the Board may exercise its
		discretion and pay the award at the time of termination of employment.

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d. How Executive Rewards are Linked to Performance continued

Long Term Award (LTA)

The key features of the LTA plan are set out in the table below. Page 113 shows the key differences between this award and awards from prior years, some of which remain on-foot.

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LTA Design How the LTA Works
Objective • Reward executives for delivering on Lendlease’s strategy and for delivering sustained long-term securityholder value
• Align the interests of senior executives and securityholders.
Eligibility An annual grant of ‘performance rights’ is made to a limited number of senior executives on a face value basis.
Determining The number of performance rights allocated is based on the volume weighted average price (VWAP) of stapled securities
the Number of traded on the ASX over the 20 trading days prior to the release of the full year results for the financial year ending
Performance 30 June preceding the grant date.
Rights
Instrument • The award is delivered as a target number of ‘performance rights’ to acquire securities. The number of ‘performance
rights’ is adjusted up or down at vesting based on performance over the assessment period
• The Board intends that the awards be settled in Lendlease securities, although the award may be settled in cash or other
means at the Board’s discretion.
Deferral • Once the award has been determined, awards are retained and released in four equal tranches over a further three year
period.
Performance • Three years. The performance period was chosen as the Board believes that the timeframe appropriately reflects a
Period balance between reward that motivates executives while reflecting the ‘long tail’ of profitability and risk associated with
‘today’s decisions’.
Performance Market Measure 50% Non Market Measure 50%
Hurdles
Relative Total Shareholder Return (RTSR) Average Return On Equity (ROE)
• Total Shareholder Return is measured by the growth in • ROE is calculated by dividing the annual statutory Profit
share price and any dividends/distributions paid during after Tax by the weighted average equity for the year
the performance period • Average ROE will be based on the average of ROE results
• Relative TSR is measured against companies that over the three year performance period
comprise the Standard & Poor’s (S&P)/Australian • Target and maximum ROE are set by the Board for each
Securities Exchange (ASX) 100 index three year period and are set with reference to the Group’s
• Maximum vesting is achieved if TSR performance is Portfolio Management Framework.
at or above the 75th percentile.
Vesting Relative TSR % of Target Award Vesting Average ROE % of Target Award Vesting
Schedule Percentile
Ranking Group CEO Senior Executives Group CEO Senior Executives
Below the 50th 13.50% 31.25% 10% or less 13.50% 31.25%
At the 50th 50% 50% Between 10% and Pro rata straight line Pro rata straight line
target ROE set by vesting between vesting between
At or above the 51st Pro rata straight line Pro rata straight line the Board 13.5% and 100% 31.25% and 100%
and below the 75th vesting between vesting between
54% and 146% 56% and 194%
75th or greater 150% 200% At target set by the 100% 100%
Board
Between target set Pro rata straight line Pro rata straight line
by the Board and vesting between vesting between
14% 100% and 150% 100% and 200%
At 14% or above 150% 200%
Below the 50th percentile vesting is at the award minimum At 10% or less vesting is at the award minimum
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LTA Design How the LTA Works
Performance • The Board believes that these measures, combined with other features of ‘at risk’ remuneration at Lendlease, provide a
Measure suitable link to long-term securityholder value creation because:
Selection - Total Securityholder Return incentivises senior executives to deliver returns that outperform what a securityholder
could achieve in the market and promotes management to maintain a strong focus on securityholder outcomes
- Return on Equity (ROE) reflects the capital intensive nature of Lendlease’s activities and is an important long-term
measure of how well the management team generates acceptable earnings from capital invested and rewards decisions
in respect of developing, managing, acquiring and disposing of assets
• The Group’s currently stated ROE target range is 10 to 14 per cent
• The Board believes that the vesting range provides a realistic goal at the lower end (in the context of risk free rates of
return, cost of capital and market consensus) and a stretch at the upper end
• The hurdles are reviewed annually by the Board with the aim of setting an average ROE hurdle range that will drive
outperformance without incentivising excessive risk taking. The Board also has governance protocols in place to monitor
levels of net debt and is conscious of the impact that debt can have on the ROE result
• While the Board appreciates that there are at times different views held by different stakeholders, we believe that these
measures provide the appropriate balance between market and non market measures.
Award Target The amount of LTA achieved at target has been set with reference to:
• the Group CEO and senior executive target remuneration mix set out on page 97 and
• having regard to the benchmark data and market positioning as described on page 109.
Award Minimum • Promotes alignment with securityholders as a portion of target remuneration is delivered in Lendlease securities
• This balances the dominant weighting of Long Term Awards in the pay mix and better aligns reward to risk management.
Award Maximum Opportunity to earn an award above target for outperformance across both performance hurdles.
Retesting There is no retesting of the LTA. If the performance hurdle is not met at the time of testing, the awards are forfeited.
Distributions Distributions are paid on the award minimum as ‘cash equivalents’ during the performance period, and as an adjustment of
additional securities or cash to any awards that vest in excess of the minimum.
Malus • The Board may adjust the number of performance rights downwards prior to the date of vesting in the case of a material
misstatement of the Group’s financial accounts
• The number of ‘performance rights’ can be reduced in circumstances where the Board considers that delivery of all or part
of the award would result in a benefit that is unwarranted or inappropriate.
Termination of • If the executive is terminated for cause, the unvested LTA lapses
Employment • If the executive is terminated for poor performance, the Board can adjust unvested LTA prior to the vesting date
• For ‘good leavers’, including executives who resign but do not engage in activities that are competitive with the Group,
the LTA grant may remain on-foot subject to the original performance hurdle.
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Prior year Long Term Incentive Awards

Key differences between the LTI plan for the years 2015-2018 and the current LTA plan are as follows:

LTI awards for 2015-2017 were allocated on a fair value basis
A target number of performance securities were awarded under the LTI plan. There is no opportunity to earn an award above target for outperformance, nor is there a minimum award delivered if performance hurdles are not met
For LTI awards, 50 per cent of the performance securities are assessed over a three year period, and the remaining 50 per cent are assessed after four years
Under the LTI plan, in exceptional circumstances (such as death or total and permanent disability), the Board may exercise its discretion and pay the award at the time of termination of employment.

The vesting schedules for LTI awards on-foot are shown below:

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100
Relative TSR Percentage of
Percentile Ranking relative TSR
performance
securities that vest 75
if the hurdle is met
Below the 50th No vesting
percentile 50
At the 50th 50% vesting
percentile 25
2015-2017
At or above the 51st Pro rata vesting on
2018
percentile but below a straight line basis
the 75th percentile between 52% and 0
98% 9% 10% 11% 12% 13% 14% 15% 16%
At the 75th percentile 100% vesting
or greater
Average ROE achieved over performance period
% of tested awards vesting
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Average ROE achieved over performance period

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e. How Risk Management is Incorporated into Executive Reward

The Board has placed a significant focus on incorporating risk management into the reward framework.

Governance	• The establishment of a separate Risk Committee, of which all Directors are a member, has allowed the Board agenda to	• The establishment of a separate Risk Committee, of which all Directors are a member, has allowed the Board agenda to
		be restructured to focus on strategy, culture, customer outcomes, reputation, performance and succession planning.
		Drawing all risk elements under a single committee allows for risk management to be considered in an integrated fashion
	• The Chairs of both the Risk Committee and the Audit Committee are members of the People and Culture Committee
	• The Board has overall responsibility for remuneration decisions concerning senior executives
	• The People and Culture Committee regularly considers matters outside of remuneration – including organisational
		culture, talent development and succession, and feedback from employees through Our People Survey.
A Holistic	• A risk adjustment is considered in the determination of the performance assessment of senior executives
Performance	• The Group Chief Financial Officer and the Group Chief Commercial and Risk Officer jointly present to the People and
Assessment to		Culture Committee on the ‘Health of the Business’ when the Committee is considering year end STA outcomes
Determine Short Term Award (STA) Outcomes	• The Board determines the weighting of both financial and non-financial performance for STA and communicates this in executive scorecards.
Mandatory	• The Group CEO is expected to accumulate and maintain a securityholding of 150% of his TPV
Securityholding	• Senior executives are expected to accumulate and maintain a securityholding of 100% of their TPV or base salary for
		senior executives outside of Australia
	• While senior executives’ holdings are below their mandatory securityholding level, a restriction is placed on half of any
		securities that vest (for senior executives in Australia).
Deferral	• The Long Term Award (LTA) for senior executives has a six year time horizon, tested after three years and progressively
		vesting over the next three years – reflecting the long-dated nature of our projects. The LTA represents approximately
		half of senior executives’ total target remuneration.
Forfeiture and	• Awards are lapsed if senior executives resign to work for competitor organisations
Malus	• If senior executives are considered to be a ‘good leaver’, awards are retained beyond the cessation of employment.
		The Board believes that this appropriately motivates executives to make decisions in the long-term interests of
		the Company
	• The Board retains an overarching discretion to reduce or forfeit any unvested awards (during the deferral period beyond
		the performance testing period) if it considers that vesting of such awards would result in the participant receiving a
		benefit that was unwarranted or inappropriate.
Board Discretion	• The Board makes, reviews and approves decisions concerning executive remuneration throughout the year
	• The Board uses its discretion to influence individual outcomes or to steer management toward appropriate outcomes
		based on a culture of accountability. Recent examples include:
		- The announcement the Group CEO made concerning his STA for FY19
		- Significantly reduced STA outcomes in FY19 for senior executives when compared to FY18
		- Reductions in the overall STI pool made available to the Group during FY17 and FY18 as a consequence of the
		fatalities in those years.

f. Executive Contracts

KMP employment contracts

Each KMP has an ongoing employment contract. All KMP have termination benefits that are within the limit allowed by the Corporations Act 2001 without securityholder approval.

Contracts also set out the treatment on termination for other reasons including, but not limited to, resignation, termination with notice and termination for cause. The Group may make a payment in lieu of notice. Key terms for each KMP are set out below:

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Notice by Notice by
Lendlease Executive Treatment on Termination with Notice by Lendlease
Stephen McCann 12 months 6 months In the case where the Group CEO is not employed for the full period of notice, a
payment in lieu of notice may be made. The payment in lieu of notice includes pro
rata fixed remuneration and the cash value of statutory entitlement and benefits
Johannes Dekker¹ 12 months 6 months Notice payment is based on Total Package Value. Payment for accrued leave is
based on Total Package Value less superannuation
Tarun Gupta 6 months 6 months Notice payment is based on Total Package Value. Payment for accrued leave is
based on Total Package Value less superannuation
Denis Hickey 6 months 6 months Notice payment is based on base salary and other minimum benefits as required
by applicable United States legislation
Daniel Labbad 9 months 6 months Notice payment and accrued leave is based on base salary
Anthony Lombardo 12 months 6 months Notice payment and accrued leave is based on base salary
Kylie Rampa 6 months 6 months Notice payment is based on Total Package Value. Payment for accrued leave is
based on Total Package Value less superannuation
David Andrew Wilson 6 months 6 months Notice payment is based on Total Package Value. Payment for accrued leave is
based on Total Package Value less superannuation
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Additional disclosure for the Group CEO contract

In addition, the Group CEO has a non compete notice period of 12 months and a non solicitation period of 12 months. Upon termination the Group CEO:

May continue to receive an STA award for the latest financial year based on an assessment of his performance by the Board
LTA and LTI will be treated in accordance with the plan rules at that time
Deferred STI awards from prior years will remain on-foot in certain mutually agreed termination circumstances.

1. Notice by Lendlease for the first four years of employment is 12 months and reverts to 6 months notice by Lendlease thereafter.

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Lendlease Annual Report 2019 / Governance / 117

Remuneration Report

g. Equity Based Remuneration

Deferred securities

Deferred Securities continued

During 2019, Deferred Short Term Incentives (STI) were granted to the Group CEO and senior executives that related to the 2018 STI award (from the prior year). These represented the Deferred STI component of the 2018 STI award. Details of Deferred STI awards are set out in the following table:

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Fair Value Total Fair Expense For
Per Value At the Year
STI Award Deferred Grant Ended 30
Performance Grant Vesting Number Security1 Date1,2 June 2019 % %
Name Plan Year Date Date Granted $ $ $ Vested Forfeited
Group CEO
Stephen McCann Deferred STI 2016 Sept 2016 Sept 2018 43,434 13.43 583,336 - 100% -
Deferred STI 2017 Sept 2017 Sept 2018 26,725 16.37 437,512 - 100% -
Deferred STI 2017 Sept 2017 Sept 2019 26,725 16.37 437,512 218,756 - -
Deferred STI 2018 Sept 2018 Sept 2019 22,434 19.50 437,510 437,510 - -
Deferred STI 2018 Sept 2018 Sept 2020 22,434 19.50 437,510 218,755 - -
Total 141,752 2,333,380 875,021
Current Senior Executives
3
Johannes Dekker Sign-On Award 2017 May 2018 Sept 2018 14,225 17.57 250,000 125,000 100% -
Sign-On Award 2017 May 2018 Sept 2019 8,535 17.57 150,000 112,500 - -
Sign-On Award 2017 May 2018 Sept 2020 5,690 17.57 100,000 42,857 - -
Deferred STI 2018 Sept 2018 Sept 2019 1,264 19.79 25,015 25,015 - -
Deferred STI 2018 Sept 2018 Sept 2020 1,264 19.79 25,015 12,508 - -
Total 30,978 550,030 317,880
Tarun Gupta Deferred STI 2016 Sept 2016 Sept 2018 26,324 13.79 363,013 - 100% -
Deferred STI 2017 Sept 2017 Sept 2018 19,285 17.11 330,004 - 100% -
Deferred STI 2017 Sept 2017 Sept 2019 19,285 17.11 330,004 165,002 - -
Deferred STI 2018 Sept 2018 Sept 2019 15,842 19.79 313,519 313,519 - -
Deferred STI 2018 Sept 2018 Sept 2020 15,842 19.79 313,519 156,760 - -
Total 96,578 1,650,059 635,281
Denis Hickey Deferred STI 2016 Sept 2016 Sept 2018 23,642 13.79 326,028 - 100% -
Deferred STI 2017 Sept 2017 Sept 2018 17,966 17.11 307,434 - 100% -
Deferred STI 2017 Sept 2017 Sept 2019 17,966 17.11 307,434 153,717 - -
Deferred STI 2018 Sept 2018 Sept 2019 10,554 19.79 208,868 208,868 - -
Deferred STI 2018 Sept 2018 Sept 2020 10,554 19.79 208,868 104,434 - -
Total 80,682 1,358,632 467,019
Daniel Labbad Deferred STI 2016 Sept 2016 Sept 2018 19,302 13.79 266,178 - 100% -
Deferred STI 2017 Sept 2017 Sept 2018 18,234 17.11 312,020 - 100% -
Deferred STI 2017 Sept 2017 Sept 2019 18,234 17.11 312,020 156,010 - -
Deferred STI 2018 Sept 2018 Sept 2019 12,234 19.79 242,115 242,115 - -
Deferred STI 2018 Sept 2018 Sept 2020 12,234 19.79 242,115 121,058 - -
Total 80,238 1,374,448 519,183
Anthony Lombardo Deferred STI 2016 Sept 2016 Sept 2018 20,121 13.79 277,473 - 100% -
Deferred STI 2017 Sept 2017 Sept 2018 9,753 17.11 166,893 - 100% -
Deferred STI 2017 Sept 2017 Sept 2019 9,753 17.11 166,893 83,447 - -
Deferred STI 2018 Sept 2018 Sept 2019 11,517 19.79 227,926 227,926 - -
Deferred STI 2018 Sept 2018 Sept 2020 11,517 19.79 227,926 113,963 - -
Total 62,661 1,067,111 425,336
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Name	Plan STI Award Performance Year Grant Date Vesting Date Number Granted Fair Value Per Deferred Security 1 $ Total Fair Value At Grant Date 1,2 $ Expense For the Year Ended 30 June 2019 $ % Vested % Forfeited
Kylie Rampa	Deferred STI 2016 Sept 2016 Sept 2018 22,062 13.79 304,239 - 100% -
	Deferred STI 2017 Sept 2017 Sept 2018 13,710 17.11 234,605 - 100% -
	Deferred STI 2017 Sept 2017 Sept 2019 13,710 17.11 234,605 117,303 - -
	Deferred STI 2018 Sept 2018 Sept 2019 16,039 19.79 317,418 317,418 - -
	Deferred STI 2018 Sept 2018 Sept 2020 16,039 19.79 317,418 158,709 - -
Total	81,560 1,408,285 593,430
David Andrew Wilson	Deferred STI 2016 Sept 2016 Sept 2018 22,843 13.79 315,010 - 100% -
	Deferred STI 2017 Sept 2017 Sept 2018 5,698 17.11 97,504 - 100% -
	Deferred STI 2017 Sept 2017 Sept 2019 5,698 17.11 97,504 48,752 - -
	Deferred STI 2018 Sept 2018 Sept 2019 7,719 19.79 152,762 152,762 - -
	Deferred STI 2018 Sept 2018 Sept 2020 7,719 19.79 152,762 76,381 - -
Total	49,677 815,542 277,895

1. The fair value at grant date is the value of the Deferred STI award (as advised to the executive). 2. At vesting, the minimum value is nil and the estimate of the maximum value is the fair value multiplied by the number of securities granted. 3. Johannes Dekker received a sign-on award in lieu of forfeited awards from his previous employer. The award is split into three tranches and has vested, or will vest, during the first, second and third years of his employment.

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Remuneration Report

g. Equity Based Remuneration continued

Long Term Incentive Awards

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Fair Value Total Fair Expense
Per Value At For the Year
Performance Grant Ended 30
Plan Grant Vesting Number Security4 Date1,2,3,4 June 2019 % %
Name (For the Year Ended) Date Date Granted $ $ $ Vested Forfeited
Group CEO
Stephen McCann June 2015 LTI (50%) Sept 2014 Sept 2018 106,128 11.27 1,195,532 49,814 59% 41%
June 2016 LTI (50%) Sept 2015 Sept 2018 101,818 10.34 1,052,289 58,461 60% 40%
June 2016 LTI (50%) Sept 2015 Sept 2019 101,818 10.56 1,074,689 268,672 - -
June 2017 LTI (50%) Sept 2016 Sept 2019 122,440 11.33 1,386,633 462,211 - -
June 2017 LTI (50%) Sept 2016 Sept 2020 122,440 11.44 1,400,714 350,178 - -
June 2018 LTI (50%) Sept 2017 Sept 2020 100,388 13.07 1,311,569 437,190 - -
June 2018 LTI (50%) Sept 2017 Sept 2021 100,388 13.23 1,327,631 331,908 - -
June 2019 LTA (25%) Nov 2018 Sept 2021 44,476 9.94 442,091 104,022 - -
June 2019 LTA (25%) Nov 2018 Sept 2022 44,476 9.94 442,091 104,022 - -
June 2019 LTA (25%) Nov 2018 Sept 2023 44,476 9.94 442,091 104,022 - -
June 2019 LTA (25%) Nov 2018 Sept 2024 44,476 9.94 442,091 104,022 - -
Total 933,324 10,517,421 2,374,522
Current Senior Executives
Johannes Dekker⁵ June 2019 LTA (25%) Nov 2018 Sept 2021 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2022 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2023 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2024 19,234 11.49 220,999 52,000 - -
Retention Award Jan 2019 Jan 2022 251,168 11.94 3,000,000 500,000 - -
Total 328,104 3,883,996 708,000
Tarun Gupta June 2015 LTI (50%) Sept 2014 Sept 2018 21,226 11.27 239,111 9,963 59% 41%
June 2016 LTI (50%) Sept 2015 Sept 2018 23,679 10.34 244,722 13,596 60% 40%
June 2016 LTI (50%) Sept 2015 Sept 2019 23,679 10.56 249,932 62,483 - -
June 2017 LTI (50%) Sept 2016 Sept 2019 33,272 11.33 376,805 125,602 - -
June 2017 LTI (50%) Sept 2016 Sept 2020 33,272 11.44 380,632 95,158 - -
June 2018 LTI (50%) Sept 2017 Sept 2020 31,638 13.07 413,350 137,783 - -
June 2018 LTI (50%) Sept 2017 Sept 2021 31,638 13.23 418,413 104,603 - -
June 2019 LTA (25%) Nov 2018 Sept 2021 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2022 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2023 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2024 19,234 11.49 220,999 52,000 - -
Total 275,340 3,206,961 757,188
Denis Hickey June 2015 LTI (50%) Sept 2014 Sept 2018 18,573 11.27 209,225 8,718 59% 41%
June 2016 LTI (50%) Sept 2015 Sept 2018 16,576 10.34 171,313 9,517 60% 40%
June 2016 LTI (50%) Sept 2015 Sept 2019 16,576 10.56 174,960 43,740 - -
June 2017 LTI (50%) Sept 2016 Sept 2019 22,626 11.33 256,239 85,413 - -
June 2017 LTI (50%) Sept 2016 Sept 2020 22,626 11.44 258,841 64,710 - -
June 2018 LTI (50%) Sept 2017 Sept 2020 21,904 13.07 286,176 95,392 - -
June 2018 LTI (50%) Sept 2017 Sept 2021 21,904 13.23 289,680 72,420 - -
June 2019 LTA (25%) Nov 2018 Sept 2021 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2022 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2023 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2024 19,234 11.49 220,999 52,000 - -
Total 217,721 2,530,430 587,910
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1. For LTIs: at vesting, the minimum value is nil and the estimate of the maximum value is the fair value multiplied by the number of securities granted. 2 . For the 2019 LTA: at vesting for the Group CEO, the estimate of the minimum value is the fair value multiplied by 13.5% of the number of performance rights granted and the estimate of the maximum value is the fair value multiplied by 150% of the number of performance rights granted. Please refer to page 97 for more details. 3. For the 2019 LTA: at vesting for other senior executives, the estimate of the minimum value is the fair value multiplied by 31.25% of the number of performance rights granted and the estimate of the maximum value is the fair value multiplied by 200% of the number of performance rights granted. Please refer to page 97 for more details.

Long Term Incentive Awards continued

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Fair Value Total Fair Expense
Per Value At For the Year
Performance Grant Ended 30
Plan Grant Vesting Number Security4 Date1,2,3,4 June 2019 % %
Name (For the Year Ended) Date Date Granted $ $ $ Vested Forfeited
Daniel Labbad June 2015 LTI (50%) Sept 2014 Sept 2018 18,573 11.27 209,225 8,718 59% 41%
June 2016 LTI (50%) Sept 2015 Sept 2018 18,943 10.34 195,776 10,876 60% 40%
June 2016 LTI (50%) Sept 2015 Sept 2019 18,943 10.56 199,943 49,986 - -
June 2017 LTI (50%) Sept 2016 Sept 2019 27,683 11.33 313,510 104,503 - -
June 2017 LTI (50%) Sept 2016 Sept 2020 27,683 11.44 316,694 79,173 - -
June 2018 LTI (50%) Sept 2017 Sept 2020 27,076 13.07 353,748 117,916 - -
June 2018 LTI (50%) Sept 2017 Sept 2021 27,076 13.23 358,080 89,520 - -
June 2019 LTA (25%) Nov 2018 Sept 2021 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2022 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2023 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2024 19,234 11.49 220,999 52,000 - -
Total 242,913 2,830,972 668,692
Anthony Lombardo June 2015 LTI (50%) Sept 2014 Sept 2018 21,226 11.27 239,111 9,963 59% 41%
June 2016 LTI (50%) Sept 2015 Sept 2018 23,679 10.34 244,722 13,596 60% 40%
June 2016 LTI (50%) Sept 2015 Sept 2019 23,679 10.56 249,932 62,483 - -
June 2017 LTI (50%) Sept 2016 Sept 2019 26,618 11.33 301,449 100,483 - -
June 2017 LTI (50%) Sept 2016 Sept 2020 26,618 11.44 304,510 76,127 - -
June 2018 LTI (50%) Sept 2017 Sept 2020 24,034 13.07 314,004 104,668 - -
June 2018 LTI (50%) Sept 2017 Sept 2021 24,034 13.23 317,850 79,462 - -
June 2019 LTA (25%) Nov 2018 Sept 2021 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2022 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2023 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2024 19,234 11.49 220,999 52,000 - -
Total 246,824 2,855,574 654,782
Kylie Rampa June 2015 LTI (50%) Sept 2014 Sept 2018 9,552 11.27 107,603 4,483 59% 41%
June 2016 LTI (50%) Sept 2015 Sept 2018 9,472 10.34 97,893 5,439 60% 40%
June 2016 LTI (50%) Sept 2015 Sept 2019 9,472 10.56 99,977 24,994 - -
June 2017 LTI (50%) Sept 2016 Sept 2019 19,165 11.33 217,044 72,348 - -
June 2017 LTI (50%) Sept 2016 Sept 2020 19,165 11.44 219,248 54,812 - -
June 2018 LTI (50%) Sept 2017 Sept 2020 21,904 13.07 286,176 95,392 - -
June 2018 LTI (50%) Sept 2017 Sept 2021 21,904 13.23 289,680 72,420 - -
June 2019 LTA (25%) Nov 2018 Sept 2021 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2022 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2023 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2024 19,234 11.49 220,999 52,000 - -
Total 187,570 2,201,617 537,888
David Andrew June 2015 LTI (50%) Sept 2014 Sept 2018 15,920 11.27 179,339 7,472 59% 41%
Wilson⁶ DE Award (50%) May 2016 May 2021 80,000 13.42 1,073,904 214,781 - -
DE Award (50%) May 2016 May 2023 80,000 13.42 1,073,904 153,415 - -
June 2016 LTI (50%) Sept 2015 Sept 2018 14,208 10.34 146,840 8,158 60% 40%
June 2016 LTI (50%) Sept 2015 Sept 2019 14,208 10.56 149,965 37,491 - -
June 2017 LTI (50%) Sept 2016 Sept 2019 15,971 11.33 180,872 60,291 - -
June 2017 LTI (50%) Sept 2016 Sept 2020 15,971 11.44 182,708 45,677 - -
June 2019 LTA (25%) Nov 2018 Sept 2021 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2022 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2023 19,234 11.49 220,999 52,000 - -
June 2019 LTA (25%) Nov 2018 Sept 2024 19,234 11.49 220,999 52,000 - -
Total 313,214 3,871,527 735,285
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4. The fair value at grant date represents an actuarial valuation of the award using assumptions underlying the Black-Scholes methodology to produce a Monte-Carlo simulation model in accordance with Australian Accounting Standards rounded to two decimal places. 5. Johannes Dekker received a retention award, relating to the strategic review of the Engineering and Services business. The award is allocated as one tranche, and may vest in January 2022. 6. David Andrew Wilson was granted a Distinguished Executive (DE) Award in May 2016 that vests in two equal tranches over five and seven years. Refer to Note 33(e) of the Notes to Consolidated Financial Statements.

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Remuneration Report

g. Equity Based Remuneration continued

Equity Holdings and Transactions for the Year Ended 30 June 2019

						Total Securities/
Number of						Performance
Securities	Securities				Award Minimum	Rights That May
Required Under	Held at	Securities			(Performance	Count Towards
the Mandatory	Beginning of	Received	Other Net	Securities	Rights) Under	The Mandatory
Securityholding	Financial	During	Change to	Held at End Of	the Long Term	Securityholding
Year as at Period End1	Year	the Year²	Securities	Financial Year	Award³	Requirement
Executive Director Stephen McCann 2019 169,500 2018 186,000	766,136 744,997	213,386 405,249	(229,504) (384,110)	750,018 766,136	24,024 -	774,042 766,136
Senior Executives Johannes Dekker 2019 62,000 2018 -	- -	14,225 -	- -	14,225 -	24,048 -	38,273 -
Tarun Gupta 2019 62,000 2018 67,000	158,332 110,487	78,079 98,670	(120,000) (50,825)	116,411 158,332	24,048 -	140,459 158,332
Denis Hickey 4 2019 76,000 2018 88,000	49,063 38,202	37,494 40,522	(49,063) (29,661)	37,494 49,063	24,048 -	61,542 49,063
Daniel Labbad 4 2019 66,000 2018 67,000	67,001 100,227	33,184 48,565	(33,184) (81,791)	67,001 67,001	24,048 -	91,049 67,001
Anthony Lombardo 2019 54,000 2018 58,000	136,708 174,680	61,614 84,204	(87,668) (122,176)	110,654 136,708	24,048 -	134,702 136,708
Kylie Rampa 2019 62,000 2018 61,000	11,478 34,081	50,447 62,168	- (84,771)	61,925 11,478	24,048 -	85,973 11,478
David Andrew Wilson 2019 64,000 2018 -	22,997 -	49,210 51,788	(22,843) (28,791)	49,364 22,997	24,048 -	73,412 22,997
Total 2019	1,211,715	537,639	(542,262)	1,207,092	192,360	1,399,452
Total 2018	1,202,674	791,166	(782,125)	1,211,715	-	1,211,715

Loans to Key Management Personnel

No loans were made to Key Management Personnel or their related parties during the current year or prior year.

Other transactions with Key Management Personnel

From time to time, Directors and executives of Lendlease or its consolidated entities, or parties related to them, may purchase goods from the Consolidated Entity. These purchases are on terms and conditions no more favourable than those entered into by unrelated customers.

h. Non Executive Directors’ Fees

Non Executive Directors receive a Board fee and fees for chairing or participating on Board Committees. The Chairman does not receive extra fees for participating on committees.

The maximum aggregate remuneration payable to Non Executive Directors is $3.5 million per year, as approved at the 2015 Annual General Meeting.

Board and Committee Fees

Board and Committee Fees
	Nomination	People and Culture	Risk	Audit	Sustainability
Board	Committee	Committee	Committee	Committee	Committee
Chair fee $ 640,000	36,000	48,000	48,000	48,000	48,000
Member fee $ 160,000	Nil	36,000	Nil	36,000	36,000

All Directors may be required to travel to attend Board meetings. This can involve significant additional time, particularly when visiting project sites in the regions where Lendlease operates. Where significant additional time has been spent travelling to fulfil the requirements of the program, fees are paid to compensate Directors for the extra time commitment.

The program is an important element of the Board’s activities to enable the Directors to obtain the required deep understanding of the operations within the regions.

	Fee (each way) $	Fee (each way) $
Travel	less than 4 hours Nil
Travel	between 4 and 10 hours 2,800
Travel	over 10 hours 6,000

Board and committee fees are paid as cash. The current Non Executive Directors are not entitled to retirement benefits other than superannuation. However, some Former Non Executive Directors¹ have retirement benefits or securities which were previously accrued.

i. Non Executive Directors’ Equity Holdings

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Securities
Year Held at Beginning of Financial Year Other Net Change to Securities Securities Held at End Of Financial Year
Non Executive Directors
Michael Ullmer 2019 50,000 50,000 100,000
2018 50,000 - 50,000
Colin Carter 2019 15,000 - 15,000
2018 15,000 - 15,000
Philip Coffey 2019 9,810 - 9,810
2018 4,810 5,000 9,810
David Craig 2019 24,870 25,130 50,000
2018 14,870 10,000 24,870
Steve Dobbs 2019 12,000 - 12,000
2018 8,000 4,000 12,000
Jane Hemstritch 2019 20,000 - 20,000
2018 20,000 - 20,000
Elizabeth Proust 2019 10,000 15,000 25,000
2018 - 10,000 10,000
Nicola Wakefield Evans 2019 16,766 13,482 30,248
2018 16,131 635 16,766
Former Non Executive Directors
David Crawford² 2019 83,315 1,017 84,332
2018 81,363 1,952 83,315
Phillip Colebatch³ 2019 18,323 - 18,323
2018 18,323 - 18,323
Total 2019 260,084 104,629 364,713
Total 2018 228,497 31,587 260,084
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Purchase of Lendlease Securities by Non Executive Directors

The current Non Executive Directors acquired Lendlease securities using their own funds.

No changes were made to fees payable to Non Executive Directors during the year, with the exception of the introduction of the Chair fee for the Risk Committee.

As an international company and having regard to the material scale of individual projects, the Board program is formulated to reflect the geographic spread of the Lendlease businesses. Board meetings are scheduled in Australia and in each of the regions where Lendlease operates. Generally, the program runs over two or three days and includes a number of activities outside of the formal meeting. These include business briefings, presentations from external sources, project site visits, client meetings and networking events with employees and key stakeholders. Where deeper project reviews are required, the program may take up to five days.

1. Mandatory securityholding requirements are reviewed in August each year. Mandatory securityholding requirements for Johannes Dekker and David Andrew Wilson were set for the first time in August 2018. 2. For the Executive Director and senior executives, securities received relate to security entitlements under employee benefit vehicles. 3. Under the new Long Term Award, a minimum number of performance rights will vest (Award Minimum) over a period of up to six years. This number of performance rights counts toward mandatory securityholding requirements.The LTA was introduced in 2019 and therefore no Award Minimum is shown for 2018. 4. Securities received during the period were after withholding tax obligations.

1. Applies to David Crawford and Phillip Colebatch. 2. David Crawford ceased to be a Non Executive Director on 16 November 2018. The balance of securities held at the end of the financial year shown here represents the balance held at that date. 3. Phillip Colebatch ceased to be a Non Executive Director on 16 November 2018. The balance of securities held at the end of the financial year shown here represents the balance held at that date.

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Remuneration Report

h. Non Executive Directors’ Fees continued

The table below sets out fees paid to Non Executive Directors during 2019 and 2018.

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$000s Short Term Benefits Post Employment Benefits
Committee
Committee Membership Travel
Year Base Fees Chair Fees Fees Fees Superannuation1 Total
Non Executive Directors
Michael Ullmer² 2019 460 20 15 36 21 552
2018 160 48 36 35 20 299
Colin Carter 2019 160 36 72 24 21 313
2018 160 36 72 35 20 323
Philip Coffey 2019 160 24 72 36 21 313
2018 160 - 36 35 20 251
David Craig 2019 160 48 36 36 21 301
2018 160 48 18 35 20 281
Steve Dobbs 2019 160 - 72 63 21 316
2018 160 - 72 75 20 327
Jane Hemstritch 2019 160 48 36 36 21 301
2018 160 48 18 35 20 281
Elizabeth Proust 2019 160 - 60 36 21 277
2018 67 - 6 6 7 86
Nicola Wakefield Evans 2019 160 24 54 36 21 295
2018 160 - 72 35 20 287
Former Non Executive Directors
David Crawford3 2019 267 - - 24 9 300
2018 640 - - 35 20 695
Phillip Colebatch4 2019 67 - 30 24 9 130
2018 160 - 54 38 20 272
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1. Directors have superannuation contributions paid on their behalf in accordance with superannuation legislation. 2. Michael Ullmer was appointed Chairman on 16 November 2018.

3. David Crawford ceased to be Chairman and Non Executive Director on 16 November 2018. 4. Phillip Colebatch ceased to be a Non Executive Director on 16 November 2018.

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Lendlease Annual Report 2019 / Governance / 125

Directors’ Report

The Directors’ Report for the financial year ended 30 June 2019 has been prepared in accordance with the requirements of the Corporations Act 2001 . The information below forms part of this Directors’ Report:

Principal activities on page 5
Operating and Financial Review on pages 4 to 75 incorporating the Performance and Outlook on pages 62 to 75
Biographical information for the Directors and Company Secretary on pages 80 to 85
Officers who were previously partners of the audit firm on page 85
Directors’ interests in capital on page 90
Board and committee meetings and attendance on pages 90 to 91
Remuneration Report on pages 92 to 122
Lead Auditor’s Independence Declaration on page 126.

a. Dividends/Distributions

The 2018 final dividend/distribution of $201 million (25.0 cents per security, unfranked) referred to in the Directors’ Report dated 22 August 2018, was paid on 21 September 2018. Details of dividends/distributions in respect of the current year are as follows:

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$m
Interim dividends/distributions of 12.0 cents per security (unfranked) paid on 20 March 20191 68
Final dividends/distributions of 30.0 cents per security (unfranked) declared by Directors to be payable on 16 September 20192 169
Total dividends/distributions 237
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1. Comprised of an unfranked trust distribution of 12.0 cents per unit paid by Lendlease Trust.

2. Comprised of an unfranked dividend of 9.5 cents per share payable by the Company and an unfranked trust distribution of 20.5 cents per unit payable by Lendlease Trust.

b. Significant Changes in State of Affairs

There have been no significant changes in the Group’s state of affairs.

c. Events Subsequent to Balance Date

On 7 August 2019, Lendlease Corporation and Lendlease Responsible Entity (Lendlease Group) were served with a shareholder class action proceeding filed in the Supreme Court of New South Wales on 6 August 2019 by Martin John Fletcher, represented by Phi Finney McDonald. This proceeding alleges breaches of Lendlease Group’s continuous disclosure obligations and misleading and deceptive conduct in relation to matters concerning projects within the engineering and services business and the effect that those projects had on Lendlease Group’s financial performance and results. It is currently not possible to determine the ultimate impact of these claims, if any, on Lendlease Group. Lendlease Group denies the allegations and intends to vigorously defend this proceeding. The potential liability and costs in respect of the proceeding cannot be accurately assessed at this time.

d. Security Options

No security options were issued during the year by the Company or any of its controlled entities, and there are no such options on issue.

e. Indemnification and Insurance of Directors and Officers

Rule 12 of the Company’s Constitution provides for indemnification in favour of each of the Directors named on pages 80 to 85 of this report, the officers of the Company or of wholly owned subsidiaries or related entities of the Company (Officers) to the extent permitted by the Corporations Act 2001 . Rule 12 does not indemnify a Director, Company Secretary or Officer for any liability involving a lack of good faith. In conformity with Rule 12 of the Company’s Constitution, the Company has entered into Deeds of Indemnity, Insurance and Access with each of the Directors named on pages 80 to 85 of this report and for officers of the Company and Directors of related entities of the Company. The indemnities operate to the full extent permitted by law and are not subject to a monetary limit. The Company is not aware of any liability having arisen, and no claims have been made during or since the financial year under the Deeds of Indemnity, Insurance and Access.

For unrelated entities in which the Group has an interest, Deeds of Indemnity may be entered into between Lendlease Corporation Limited and the Director or Officer. Since the date of the last report, the Company has not entered into any separate Deeds of Indemnity with a Director or Officer of an unrelated entity.

No indemnity has been granted to an auditor of the Company in their capacity as auditor of the Company.

In accordance with the Corporations Act 2001 , Rule 12 of the Constitution also permits the Company to purchase and maintain insurance or pay or agree to pay a premium for insurance for Officers against any liability incurred as an Officer of the Company or of a related body corporate. This may include a liability for reasonable costs and expenses incurred in defending proceedings, whether civil or criminal, and whatever their outcome. Due to confidentiality obligations and undertakings of the policy, no further details in respect of the premium or policy can be disclosed.

f. Environmental Regulation

The Group is subject to various state and federal environmental regulations in Australia.

The Directors are not aware of any material non compliance with environmental regulations pertaining to the operations or activities during the period covered by this report. In addition, the Lendlease Group is registered and publicly reports the annual performance of its Australian operations under the requirements of the National Greenhouse and Energy Reporting (NGER) Act 2007 and Energy Efficiency Opportunities (EEO) Act 2006.

All Lendlease businesses continue to operate an integrated Environment, Health and Safety Management System, ensuring that non compliance risks and opportunities for environmental improvements are identified, managed and reported accordingly.

g. Non Audit Services

During the year, KPMG, the Company’s auditor, performed certain other services in addition to its statutory duties.

The Board has considered the other services provided during the year by the auditor and, in accordance with written advice provided by resolution of the Audit Committee, is satisfied that the provision of those services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:

All other services were subject to the corporate governance procedures adopted by the Group and the Audit Committee is satisfied that those services do not impact the integrity and objectivity of the auditor
The other services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants , as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards.

A copy of the Lead Auditor's Independence Declaration, as required under Section 307C of the Corporations Act 2001 , is included at the end of the Directors’ Report.

Details of the amounts paid to the auditor of the Company, KPMG, and its related practices for audit and other services provided during the year are set out below.

year are set out below.
	Consolidated
	June 2019 $000s June 2018 $000s
Audit and Other Assurance Services
Audit services	7,141 6,338
Other assurance services	495 399
Total audit and other assurance services	7,636 6,737
Non audit services	714 447
Total audit, non audit and other assurance services	8,350 7,184

h. Rounding Off

Lendlease Corporation Limited is a company of the kind referred to in the ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191 dated 24 March 2016 and, in accordance with that Instrument, amounts in the Consolidated Financial Statements and this report have been rounded off to the nearest million dollars unless specifically stated to be otherwise. June 2018 comparative balances have been restated where required to reflect the change in rounding.

This report is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the Directors.

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M J Ullmer, AO Chairman Sydney, 19 August 2019

S B McCann

Group Chief Executive Officer and Managing Director Sydney, 19 August 2019

Lendlease Annual Report 2019 / Governance / 127

126 /

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Lead Auditor’s IndependenceDeclaration under Section 307C of the Corporations Act 2001

To the Directors of Lendlease Corporation Limited

I declare that, to the best of my knowledge and belief, in relation to the audit of Lendlease Corporation Limited for the financial year ended 30 June 2019 there have been:

i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
ii. no contraventions of any applicable code of professional conduct in relation to the audit.

==> picture [76 x 41] intentionally omitted <==

KPMG

==> picture [166 x 45] intentionally omitted <==

Duncan McLennan Partner

This page is intentionally left blank.

Sydney 19 August 2019

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

128 / As the world reinvents itself

Lendlease Annual Report 2019 / Financial Statements / 129

Financial Statements

Transformation of Sydney’s Martin Place (artist’s impression) In FY19, Macquarie Group appointed Lendlease as its design and construction contractor to deliver the new Sydney Metro Martin Place Station, retail space, pedestrian connections and the buildings above the station.

Lendlease Annual Report 2019 / Financial Statements / 131

130 /

Financial Statements

Consolidated Financial Statements

Table of Contents Consolidated Financial Statements	Table of Contents Consolidated Financial Statements
Income Statement		131
Statement of Comprehensive Income		132
Statement of Financial Position		133
Statement of Changes in Equity		134
Statement of Cash Flows		136
Notes to the Consolidated Financial Statements		137
Notes Index
Section A: Performance
1.	Segment Reporting	138
2.	Dividends/Distributions	141
3.	Earnings Per Share/Stapled Security	141
4.	Revenue from Contracts with Customers	142
5.	Share of Proft of EquityAccounted Investments	144
6.	Other Income	147
7.	Other Expenses	148
8.	Finance Revenue and Finance Costs	150
9.	Taxation	151
10.	Events Subsequent to Balance Date	154
Section B: Investment
11.	Inventories	155
12.	EquityAccounted Investments	156
13.	Other Financial Assets	160
Section C: Liquidity and Working Capital
14.	Cash and Cash Equivalents	161
15.	Notes to Statement of Cash Flows	161
16.	Borrowings and FinancingArrangements	162
17.	Issued Capital	163
18.	Capital Management	164
19.	LiquidityRisk Exposure	164
20.	Commitments	165
21.	Loans and Receivables	166
22.	Trade and Other Payables	167
Section D: Risk Management
23.	Financial Risk Management	169
24.	Hedging	171
25.	Fair Value Measurement	172
26.	Contingent Liabilities	173
Section E: Basis of Consolidation
27.	Consolidated Entities	174
28.	Employee Beneft Vehicles	175
29.	Parent EntityDisclosures	176
30.	Related PartyInformation	177
Section F: Other Notes
31.	Intangible Assets	179
32.	Defned Beneft Plans	181
33.	Employee Benefts	184
34.	Impact of New and Revised AccountingStandards	187
35.	Other Signifcant AccountingPolicies	189
Directors’ Declaration		190

Lendlease Corporation Limited (the Company) is incorporated and domiciled in Australia. The consolidated financial report of the Company for the financial year ended 30 June 2019 comprises the Company and its controlled entities including Lendlease Trust (LLT) (together referred to as the consolidated entity or the Group). The Group is a for profit entity and is an international property and infrastructure group. Further information about the Group’s primary activities is included in Note 1 ‘Segment Reporting’. Shares in the Company and units in LLT are traded as one security under the name of Lendlease Group on the Australian Securities Exchange (ASX). The Company is deemed to control LLT for accounting purposes and therefore LLT is consolidated into the Group’s financial report. The issued units of LLT, however, are not owned by the Company and are therefore presented separately in the consolidated entity Statement of Financial Position within equity, notwithstanding that the unitholders of LLT are also the shareholders of the Company. The consolidated financial report was authorised for issue by the Directors on 19 August 2019.

Consolidated Financial Statements

Income Statement

Year Ended 30 June 2019

Year Ended 30 June 2019
		June 2019	June 2018
		Note $m	$m
Revenue from contracts with customers1		4 16,386	16,422
Other revenue1		152	134
Cost of sales		(15,438)	(15,038)
Gross proft		1,100	1,518
Share of proft of equity accounted investments		5 338	131
Other income		6 295	496
Other expenses		(988)	(1,007)
Results from operating activities		745	1,138
Finance revenue		8 17	16
Finance costs		8 (142)	(88)
Net fnance costs		(125)	(72)
Proft before tax		620	1,066
Income tax expense		9 (153)	(272)
Proft after tax		467	794
Proft after tax attributable to:
Members of Lendlease Corporation Limited		313	580
Unitholders of Lendlease Trust		154	213
Proft after tax attributable to securityholders		467	793
External non controlling interests			1
Proft after tax		467	794
Basic/Diluted Earnings per Lendlease Corporation Limited Share (EPS)
Shares excluding treasury shares	(cents)	3 55.6	100.2
Shares on issue	(cents)	3 55.2	99.6
Basic/Diluted Earnings per Lendlease Group Stapled Security (EPSS)
Securities excluding treasury securities	(cents)	3 82.9	137.0
Securities on issue	(cents)	3 82.4	136.1

June 2018 balances have been reclassified to align the presentation of comparative information to disclosures required under AASB 15 Revenue from Contracts with Customers which has been adopted from 1 July 2018. $134 million has been reclassified from Revenue from contracts with customers to Other revenue. Refer to Impact of New and Revised Accounting Standards for details.

The accompanying notes form part of these consolidated financial statements.

Lendlease Annual Report 2019 / Financial Statements / 133

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Consolidated Financial Statements continued

Statement of Comprehensive Income

Year Ended 30 June 2019

Year Ended 30 June 2019
		June 2019	June 2018
	Note	$m	$m
Proft after Tax		467	794
Other Comprehensive Income/(Expense) After Tax
Items that may be reclassifed subsequently to proft or loss:
Movements in hedging reserve	9b	(61)	(7)
Movements in foreign currency translation reserve	9b	92	81
Total items that may be reclassifed subsequently to proft or loss1		31	74
Items that will not be reclassifed to proft or loss:
Movements in non controlling interest acquisition reserve	9b	(5)	(4)
Defned beneft plan remeasurements	9b	(39)	55
Total items that will not be reclassifed to proft or loss		(44)	51
Total comprehensive income after tax		454	919
Total comprehensive income after tax attributable to:
Members of Lendlease Corporation Limited		300	705
Unitholders of Lendlease Trust		154	213
Total comprehensive income after tax attributable to securityholders		454	918
External non controlling interests			1
Total comprehensive income after tax		454	919

Includes $3 million (June 2018: $28 million) relating to share of other comprehensive income of equity accounted investments.

Statement of Financial Position

As at 30 June 2019

As at 30 June 2019
	June 2019	June 2018
	Note $m	$m
Current Assets
Cash and cash equivalents	14 1,290	1,177
Loans and receivables	21 2,050	2,670
Inventories	11 2,238	2,369
Other fnancial assets	13 97	7
Current tax assets	11
Other assets	70	91
Total current assets	5,756	6,314
Non Current Assets
Loans and receivables	21 688	788
Inventories	11 3,345	3,177
Equityaccounted investments	12 3,452	2,627
Investmentproperties	501	278
Other fnancial assets	13 1,103	1,548
Deferred tax assets	9c 101	120
Property, plant and equipment	548	465
Intangible assets	31 1,457	1,421
Defned beneftplan asset	32 140	155
Other assets	87	71
Total non current assets	11,422	10,650
Total assets	17,178	16,964
Current Liabilities
Trade and otherpayables	22 5,724	5,770
Provisions	332	330
Borrowings and fnancingarrangements	16a 225	475
Current tax liabilities		10
Other fnancial liabilities	6	3
Total current liabilities	6,287	6,588
Non Current Liabilities
Trade and otherpayables	22 1,401	1,531
Provisions	45	67
Borrowings and fnancingarrangements	16a 2,490	1,884
Other fnancial liabilities	1	1
Deferred tax liabilities	9c 597	479
Total non current liabilities	4,534	3,962
Total liabilities	10,821	10,550
Net assets	6,357	6,414
Equity
Issued capital	17 1,300	1,297
Treasurysecurities	(68)	(44)
Reserves	105	61
Retained earnings	3,815	3,855
Total equity attributable to members of Lendlease Corporation Limited	5,152	5,169
Total equityattributable to unitholders of Lendlease Trust	1,182	1,244
Total equity attributable to securityholders	6,334	6,413
External non controllinginterests	23	1
Total equity	6,357	6,414

The accompanying notes form part of these consolidated financial statements.

Lendlease Annual Report 2019 / Financial Statements / 135

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Consolidated Financial Statements continued

				RESERVES
Statement of Changes in Equity					Non Controlling				Members of		External
				Foreign	Interest		Equity		Lendlease	Unitholders	Non
Year Ended 30 June 2019	Issued	Treasury	Hedging	Currency Translation	Acquisition	Other	Compensation	Retained	Corporation	of Lendlease	Controlling	Total
	Capital	Securities1	Reserve	Reserve	Reserve	Reserve	Reserve	Earnings	Limited	Trust	Interests	Equity
	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m
Balance as at 1 July2017	1,290	(25)	(17)	(95)	(86)	106	77	3,697	4,947	1,117	103	6,167
Total Comprehensive Income
Proft for the period								580	580	213	1	794
Other comprehensive income(net of tax)			(7)	81	(4)			55	125			125
Total comprehensive income	-	-	(7)	81	(4)	-	-	635	705	213	1	919
Other Comprehensive Income (Net of Tax)
Net investment hedging				(8)					(8)			(8)
Efect of foreign exchange movements				89	(4)				85			85
Efective cash fow hedges			(7)						(7)			(7)
Defned beneftplan remeasurements								55	55			55
Other comprehensive income(net of tax)	-	-	(7)	81	(4)	-	-	55	125	-	-	125
Transactions with Owners of the Company
Capital contributed by non controllinginterests									-		22	22
Distribution Reinvestment Plan (DRP)	7								7	1		8
On market buyback of securities								(145)	(145)	(33)		(178)
Dividends and distributions								(337)	(337)	(54)		(391)
Treasurysecurities acquired		(46)							(46)			(46)
Treasurysecurities vested		27							27			27
Fair value movement on allocation and vestingof securities							18		18			18
Asset disposal and transfers			1	(11)					(10)		(125)	(135)
Other movements					(2)			5	3			3
Total other movements through reserves	7	(19)	1	(11)	(2)	-	18	(477)	(483)	(86)	(103)	(672)
Balance as at 30 June 2018	1,297	(44)	(23)	(25)	(92)	106	95	3,855	5,169	1,244	1	6,414
Balance as at 1 July2018	1,297	(44)	(23)	(25)	(92)	106	95	3,855	5,169	1,244	1	6,414
Total Comprehensive Income
Proft for the period								313	313	154		467
Other comprehensive income(net of tax)			(61)	92	(5)			(39)	(13)			(13)
Total comprehensive income	-	-	(61)	92	(5)	-	-	274	300	154	-	454
Other Comprehensive Income (Net of Tax)
Net investment hedging				(8)					(8)			(8)
Efect of foreign exchange movements				100	(5)				95			95
Efective cash fow hedges			(61)						(61)			(61)
Defned beneftplan remeasurements								(39)	(39)			(39)
Other comprehensive income(net of tax)	-	-	(61)	92	(5)	-	-	(39)	(13)	-	-	(13)
Transactions with Owners of the Company
Capital contributed bynon controllinginterest									-		22	22
Distribution Reinvestment Plan(DRP)2	3								3	1		4
On market buyback of securities								(140)	(140)	(34)		(174)
Dividends and distributions								(174)	(174)	(183)		(357)
Treasurysecurities acquired		(57)							(57)			(57)
Treasurysecurities vested		33							33			33
Fair value movement on allocation and vestingof securities							17		17			17
Asset disposal and transfers3				1					1			1
Other movements									-			-
Total other movements through reserves	3	(24)	-	1	-	-	17	(314)	(317)	(216)	22	(511)
Balance as at 30 June 2019	1,300	(68)	(84)	68	(97)	106	112	3,815	5,152	1,182	23	6,357

Opening balance for number of treasury securities 1 July 2018 was 4 million (1 July 2017: 4 million) and closing balance at 30 June 2019 was 4 million.
The Group neutralised stapled securities issued under the 2018 Interim Distribution Reinvestment Plan by acquiring an equivalent number of stapled securities on market.
These movements in reserves were transferred to profit and loss in the year.

The accompanying notes form part of these consolidated financial statements.

Lendlease Annual Report 2019 / Financial Statements / 137

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Consolidated Financial Statements continued

Statement of Cash Flows

Year Ended 30 June 2019

	June 2019	June 2018
	Note $m	$m
Cash Flows from Operating Activities
Cash receipts in the course of operations	17,026	16,354
Cash payments in the course of operations	(16,902)	(16,216)
Interest received	13	13
Interest paid	(152)	(122)
Dividends/distributions received	105	77
Income tax paid in respect of operations	(30)	(33)
Net cash provided by operating activities	15 60	73
Cash Flows from Investing Activities
Sale/redemption of investments	571	74
Acquisition of investments	(378)	(449)
Acquisition of/capital expenditure on investment properties	(53)	(112)
Net loan (drawdowns)/repayments from associates and joint ventures	(22)	410
Disposal of consolidated entities (net of cash disposed and transaction costs)	266	434
Disposal of property, plant and equipment	14	7
Acquisition of property, plant and equipment	(165)	(110)
Acquisition of intangible assets	(66)	(32)
Net cash provided by investing activities	167	222
Cash Flows from Financing Activities
Proceeds from borrowings	4,640	2,021
Repayment of borrowings	(4,347)	(1,871)
Dividends/distributions paid	(258)	(372)
Payments for on market buyback of stapled securities	(174)	(178)
Payments for on market buyback of stapled securities – Distribution Reinvestment Plan	(11)	(10)
Increase in capital of non controlling interest	22	22
Other fnancing activities		(10)
Net cash used in fnancing activities	(128)	(398)
Other Cash Flow Items
Efect of foreign exchange rate movements on cash and cash equivalents	14	31
Net increase/(decrease) in cash and cash equivalents	113	(72)
Cash and cash equivalents at beginning of fnancial year	1,177	1,249
Cash and cash equivalents at end of fnancial year	14 1,290	1,177

Notes to Consolidated Financial Statements

Basis of Preparation

The consolidated financial report is a general purpose financial report which:

Has been prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board, and the Corporations Act 2001 ;
Complies with International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board;
Is presented in Australian dollars ($). At June 2019, all values have been rounded off to the nearest million dollars unless otherwise indicated, in accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. June 2018 comparative balances have been restated where required to reflect the change in rounding; and
Is prepared under the historical cost basis except for the following assets and liabilities, which are stated at their fair value: derivative financial instruments, fair value through profit or loss investments, investment properties and liabilities for cash settled share based compensation plans. Recognised assets and liabilities that are hedged are stated at fair value in respect of the risk that is hedged. Refer to the specific accounting policies within the notes to the financial statements for the basis of valuation of assets and liabilities measured at fair value.

Significant accounting policies have been:

Included in the relevant notes to which the policies relate, while other significant accounting policies are discussed in Note 35 ‘Other
Significant Accounting Policies’; and
Consistently applied to all financial years presented in the consolidated financial statements and by all entities in the Group, except as explained in Note 34 ‘Impact of New and Revised Accounting Standards’.

The preparation of a financial report that complies with AASBs requires management to make judgements, estimates and assumptions.

This can affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
The significant accounting policies highlight information about accounting judgements in applying accounting policies that have the most significant effects on reported amounts and further information about estimated uncertainties that have a significant risk of resulting in material adjustments within the next financial year.

The Group presents assets and liabilities in the Statement of Financial Position as current or non current.

Current assets include assets held primarily for trading purposes, cash and cash equivalents, and assets expected to be realised in, or intended for sale or use in, the course of the Group’s operating cycle. All other assets are classified as non current.
Current liabilities include liabilities held primarily for trading purposes, liabilities expected to be settled in the course of the Group’s operating cycle and those liabilities due within one year from the reporting date. All other liabilities are classified as non current.

The accompanying notes form part of these consolidated financial statements.

Lendlease Annual Report 2019 / Financial Statements / 139

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Notes to Consolidated Financial Statements continued

Section A: Performance

Profit after tax (PAT) is the key measure used to assess the Group’s performance. This section of the Financial Report focuses on disclosure that enhances a user’s understanding of PAT. Segment Reporting below provides a breakdown of profit and revenue by the operational activity. The key line items of the Income Statement along with their components provide detail behind the reported balances. Group performance will also impact the earnings per stapled security and dividend payout, therefore disclosure on these items has been included in this section. Further information and analysis on performance and allocation of resources can be found in the Performance & Outlook section of the Directors’ Report.

1. Segment Reporting

Accounting Policies

The Group’s segments are Development, Construction, Investments and Non core. The Group has identified these operating segments based on the distinct products and services provided by each segment, the distinct target returns profile and allocation of resources for each segment, and internal reports that are reviewed and used by the Group Chief Executive Officer and Managing Director (the Chief Operating Decision Maker) in assessing performance, determining the allocation of resources, setting operational targets, and managing the Group.

The Group has arranged the segments around business activity rather than geography due to the Group’s business model being broadly consistent in all regions.

Segment performance is based on PAT. PAT is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain reportable segments relative to other entities that operate within these industries. The Group does not consider corporate activities to be an operating segment.

The operating segments are as follows:

Development

Operates in all four geographic regions. Its products and services include the development of communities, inner city mixed use developments, apartments, retirement, retail, commercial assets and social and economic infrastructure. Construction margin earned on internal projects is recognised in this segment.

Construction

Operates across all four geographic regions. Its products and services include the provision of project management, design and construction services, predominantly in the defence, mixed use, commercial and residential sectors.

Investments

Services include owning and/or managing investments across all four geographic regions. The investments segment includes a leading wholesale investment management platform and also includes the Group’s ownership interests in property and infrastructure CoInvestments, Retirement Living and US Military Housing.

Non core

Non core includes the provision of project management, design and construction services, predominantly in the infrastructure sector in Australia. These products and services represent the Engineering and Services business. The Chief Operating Decision Maker now receives additional information about this business given the Group announced in February 2019 the Engineering and Services business is no longer a required part of the Group’s strategy.

Financial information regarding the performance of each reportable segment and a reconciliation of these reportable segments to the financial statements is included below.

The following tables set out other financial information by reportable segment.

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----- Start of picture text -----

Depreciation Non Current Group
Segment Finance Finance Share of and Material Non Segment Total
Revenue [1 ] Revenue Expense Results EAI [2 ] Amortisation Cash Items [3 ] Assets [4 ] Assets
$m $m $m $m $m $m $m $m
Year Ended June 2019
Core
Development 3,355 9 (4) 184 (12) 21 5,275 7,101
Construction 9,680 (1) 23 (12) (3) 1,440 3,710
Investments 348 1 (1) 126 (7) 138 2,597 4,028
Total core segments 13,383 10 (6) 333 (31) 156 9,312 14,839
Non core 3,141 5 (28) 3 490 2,089
Total segments 16,524 10 (6) 338 (59) 159 9,802 16,928
Corporate activities 31 7 (136) (63) (8) 276 250
Statutory result 16,555 17 (142) 338 (122) 151 10,078 17,178
Year Ended June 2018
Core
Development 3,204 3 (2) 40 (6) 15 4,649 7,227
Construction [5] 9,656 (1) (1) (11) (5) 1,617 4,146
Investments 394 1 (1) 87 (8) 256 1,969 3,762
Total core segments 13,254 4 (4) 126 (25) 266 8,235 15,135
Non core [5] 3,284 1 5 (24) (60) 336 1,403
Total segments 16,538 5 (4) 131 (49) 206 8,571 16,538
Corporate activities 34 11 (84) (58) 18 256 426
Statutory result 16,572 16 (88) 131 (107) 224 8,827 16,964
----- End of picture text -----

Segment revenue as disclosed in the Performance and Outlook, is comprised of Revenue from contracts with customers, Other revenue and Finance revenue.
Equity Accounted Investments.
The Material Non Cash Items relate to impairments and provisions raised or written back, unrealised foreign exchange movements and fair value gains or losses.
Excludes deferred tax assets, financial instruments and defined benefit plan assets.
June 2018 comparatives have been restated to separately present the results of the Engineering and Services business as a non core operating business.

fnancial statements is included below.
Financial Disclosure	PROFIT BEFORE TAX June 2019 $m June 2018 $m	INCOME TAX (EXPENSE)/ BENEFIT June 2019 $m June 2018 $m	PROFIT AFTER TAX
			June 2019 $m June 2018 $m
Core Development
	787 669	(233) (177)	554 492
Construction1	198 283	(57) (94)	141 189
Investments	482 662	(114) (168)	368 494
Total core segments	1,467 1,614	(404) (439)	1,063 1,175
Non core1	(489) (241)	152 74	(337) (167)
Total segments	978 1,373	(252) (365)	726 1,008
Reconciling items Corporate activities
	(358) (307)	99 92	(259) (215)
Statutory result attributable to securityholders	620 1,066	(153) (273)	467 793
External non controllinginterests		1	1
Statutory result	620 1,066	(153) (272)	467 794

June 2018 comparatives have been restated to separately present the results of the Engineering and Services business as a non core operating business.

Lendlease Annual Report 2019 / Financial Statements / 141

140 /

Notes to Consolidated Financial Statements continued

Section A: Performance continued

1. Segment Reporting continued

NON CURRENT ASSETS[1]

	June 2019	June 2018
	$m	$m
Australia	5,462	4,932
Asia	1,176	856
Europe	1,158	1,181
Americas	2,006	1,602
Total segment	9,802	8,571
Corporate activities	276	256
Statutory result	10,078	8,827

Excludes deferred tax assets, financial instruments and defined benefit plan assets and is based on the geographical location of assets.

The operating segments generate revenue in the following regions.

2. Dividends/Distributions[1]

COMPANY/TRUST

	Cents	June 2019	June 2018
	Per Share/Unit	$m	$m
Parent Company Interim Dividend
December 20182
December 2017 –paid 22 March 2018	29.4		172
Lendlease Trust Interim Distribution
December 2018 –paid 20 March 2019	12.0	68
December 2017 –paid 22 March 2018	4.6		27
Parent Company Final Dividend
June 2019 – declared subsequent to reportingdate3	9.5	53
June 2018 –paid 21 September 2018	30.3		174
Lendlease Trust Final Distribution
June 2019 –provided for(payable 16 September 2019)	20.5	116
June 2018 –paid 21 September 2018	4.7		27
Total		237	400

Final and interim dividends/distributions were not franked in the current and prior year.

June 2019 Australia	REVENUE1	REVENUE1	REVENUE1	REVENUE1
	Development $m Construction $m	Investments $m Total Core Segments $m Non Core $m	Total Segments $m Corporate Activities $m	Statutory Result $m
	2,712 4,052 210 6,974 3,141 10,115 31 10,146
Asia	18 401 63 482 482 482
Europe	544 941 13 1,498 1,498 1,498
Americas	81 4,286 62 4,429 4,429 4,429
Total	3,355 9,680 348 13,383 3,141 16,524 31 16,555
June 2018
Australia	2,856 3,742 274 6,872 3,284 10,156 34 10,190
Asia	67 536 49 652 652 652
Europe	198 680 22 900 900 900
Americas	83 4,698 49 4,830 4,830 4,830
Total	3,204 9,656 394 13,254 3,284 16,538 34 16,572

Segment revenue as disclosed in the Performance and Outlook, is comprised of Revenue from contracts with customers, Other revenue and Finance revenue.

No revenue from transactions with a single external customer amounts to 10 per cent or more of the Group’s revenue.

No interim dividend was declared for the Company for the 31 December 2018 half year.
No provision for this dividend has been recognised in the Statement of Financial Position at 30 June 2019, as it was declared after the end of the financial year.

Dividend Franking

The amount of franking credits available for use in subsequent reporting periods as at 30 June 2019 is $16 million, based on a 30 per cent tax rate (30 June 2018: $14 million). This is calculated after adjusting for franking credits which will arise from the payment of income tax provided in the financial statements and tax losses utilised in the current financial year.

3. Earnings Per Share/Stapled Security (EPS/EPSS)

Accounting Policies

The Group presents basic and diluted EPS/EPSS in the Income Statement. This is a key performance measure for the Group. Refer to further details in the Finance Area of Focus section of the Annual Report.

Basic EPS/EPSS is determined by dividing Profit/(loss) after tax attributable to members of the Company and Group, excluding any costs of servicing equity other than ordinary shares/securities, by the weighted average number of ordinary shares/securities outstanding during the financial year, adjusted for bonus elements in ordinary shares/securities issued during the financial year.

Diluted EPS/EPSS is determined by adjusting the Profit/(loss) after tax attributable to members of the Company and Group, and the weighted average number of ordinary shares/securities outstanding for the effects of all dilutive potential ordinary shares/securities. The Group currently does not have any dilutive potential ordinary shares/securities. Dilution occurs when treasury shares and employee share options are included in outstanding shares.

The issued units of Lendlease Trust (LLT) are presented separately within equity, and therefore the profit attributable to LLT is excluded from the calculation of basic and diluted earnings per Company share presented in the Income Statement.

Financial Disclosure	JUNE 2019 Shares/ Securities Excluding Treasury Securities Shares/ Securities on Issue	JUNE 2018
		Shares/ Securities Excluding Treasury Securities Shares/ Securities on Issue
Basic/Diluted Earnings Per Share (EPS) Proft attributable to members of Lendlease Corporation Limited(Company) $m
	313 313	580 580
Weighted average number of ordinaryshares m	563 567	579 583
Basic/Diluted EPS cents	55.6 55.2	100.2 99.6
Basic/Diluted Earnings Per Stapled Security (EPSS) Proft attributable to securityholders of Lendlease Group $m
	467 467	793 793
Weighted average number of stapled securities m	563 567	579 583
Basic/Diluted EPSS cents	82.9 82.4	137.0 136.1

Lendlease Annual Report 2019 / Financial Statements / 143

142 /

Notes to Consolidated Financial Statements continued

Section A: Performance continued

Accounting Policies continued

4. Revenue from Contracts with Customers

Accounting Policies

The Group’s accounting policies for recognition of revenue have been revised with effect from 1 July 2018 to reflect the adoption of AASB 15 Revenue from Contracts with Customers .

Provision of Construction and Development services

Construction services include project management, design and construction services predominantly in the infrastructure, defence, mixed use, commercial and residential sectors. Development services include development fees earned on development of inner city mixed use developments, retirement, retail, commercial assets and social and economic infrastructure.

Contracts with customers to provide Construction or Development services can include either one performance obligation or multiple integrated performance obligations within each contract. The Group assesses each of its contracts individually and where there are separate performance obligations identified, the transaction price is allocated based on the relative stand-alone selling prices of the services provided. Typically, the Construction or Development services in contracts are not considered distinct as the services are highly interrelated and an integrated bundle of services, therefore are accounted for as a single performance obligation.

The transaction price for each contract may include variable consideration in the form of contract variations or modifications, and contract claims (collectively, ‘Modifications’). Variable consideration may also include performance or other incentive fees. The transaction price is the amount of consideration to which the Group expects to be entitled to receive in exchange for transferring promised goods or services to a customer per the contract.

Variable consideration is only included in the transaction price for a contract to the extent it is highly probable that a significant reversal of that revenue will not occur, which is an area of accounting judgement. Factors considered in assessing whether the estimated revenue associated with Modifications should be recognised include the following:

i. Status of negotiations with customers;
ii. The contract or other evidence provides a legal basis for the Modifications;
iii. Additional costs incurred were caused by circumstances that were unforeseen at the contract date and for which entitlement contractually exists;
iv. Modification-related costs are identifiable, measurable, and considered reasonable in view of the work performed;
v. Evidence supporting the Modification is objective and verifiable, which may include independent third-party advice;
vi. Commercial and market factors specific to the Modifications; and
vii. Historical experience in resolving Modifications.

This assessment is reviewed each reporting period or when facts and circumstances change during the reporting period.

Revenue is recognised over time, typically based on an input method using an estimate of costs incurred to date as a percentage of total estimated costs. These contracts are typically executed on the customer’s land so they control the assets as it is being built or the customer benefits from the service as the work is performed. Differences between amounts recognised as revenue and amounts billed to customers are recognised as contract assets or liabilities in the Statement of Financial Position.

The measurement of revenue is an area of accounting judgement. Management use judgement to estimate:

i. Progress in satisfying the performance obligations within the contract which includes estimating contract costs expected to be incurred to satisfy performance obligations; and

ii. The probability of the amount to be recognised as variable consideration for approved variations and claims where the final price has not been agreed with the customer.

Sale of Development Properties

The Group develops and sells residential land lots and built form products, including residential apartments, commercial and retail buildings. Sale of residential land lots and apartments typically are recognised at a point in time with each contract treated as a single performance obligation to transfer control of an asset to a customer. Residential land lots and apartments are recognised on settlement with the customer.

The sale of retail, commercial and mixed use assets may include land, construction, development management and investment service components. Where there are multiple components within one contract, the transaction price is allocated based on the stand-alone selling prices of each component, typically using the residual approach, and revenue is recognised based on the policies noted above. Sales of commercial and retail buildings are recognised when the customer obtains control of the asset based on the specific terms and conditions of the sales contract.

The Group discounts deferred proceeds to reflect the time value of money where the period between the transfer of control of a development property and receipt of payment from the customer exceeds one year. Deferred proceeds from customers are recognised in trade and other receivables where the right to receive payment is unconditional. Deposits received in advance from customers are recognised as a contract liability until the performance obligation has been met.

The measurement and recognition of revenue from the sale of development properties is an area of accounting judgement as it requires management to exercise judgement in valuing the individual components of a development property sale, given the due consideration to cost inputs, market conditions and commercial factors.

Proceeds from the sale of residential land lots and apartments are received upon settlement, which will typically occur between 6-12 weeks following practical completion on the asset. Proceeds from the sale of retail, commercial and mixed use assets are received in accordance with the specific terms of each contract.

Financial Disclosure	June 2019	June 20181
	$m	$m
Revenue from the provision of services
Core Construction2	9,678	9,620
Non core - Engineering and Services2	3,141	3,302
Construction	12,819	12,922
Development	738	605
Investments	260	292
Total revenue from the provision of services	13,817	13,819
Revenue from the sale of development properties	2,569	2,603
Total revenue from contracts with customers3	16,386	16,422

June 2018 balances have been reclassified to align the presentation of comparative information to disclosures required under AASB 15 Revenue from Contracts with Customers with $134 million reclassified to Other revenue on the Income Statement. Refer to Impact of New and Revised Accounting Standards for details.
June 2018 balances have been reclassified to align the presentation of comparative information to the change in segments disclosed in Note 1 'Segment Reporting'.
Further information on revenue by geography and by segments is included in Note 1 'Segment Reporting'. Segment revenue as disclosed in the Performance and Outlook, is comprised of Revenue from contracts with customers, Other revenue and Finance revenue.

Revenue is invoiced based on the terms of each individual contract which may include a periodic billing schedule or achievement of specific milestones. Invoices are issued under commercial payment terms which is typically 30 days from when an invoice is issued. A provision for loss making contracts is recorded for the difference between the expected costs of fulfilling a contract and the expected remaining economic benefits to be received where the forecast remaining costs exceed the forecast remaining benefits.

Provision of Investment services

Investment services include funds management, asset management, leasing and origination services.

Each contract with a customer to provide Investment services is typically one performance obligation with revenue recognised over time as services are rendered. Typically, our performance obligation is to manage a client’s capital and/or property for a specified period of time and is delivered as a series of daily performance obligations over time.

The transaction price for each contract may include variable consideration in the form of performance fees. Variable consideration is only included in the transaction price for a contract to the extent it is highly probable that a significant reversal of that revenue will not occur. The Group assesses probability of receiving variable consideration using a combination of commercial and market factors, and historical experience.

Revenue is invoiced either monthly or quarterly based on the terms of each individual contract. Invoices are issued under commercial payment terms which are typically 30 days from when an invoice is issued.

Lendlease Annual Report 2019 / Financial Statements / 145

144 /

Notes to Consolidated Financial Statements continued

Section A: Performance continued

5. Share of Profit of Equity Accounted Investments

Accounting Policies

Investments in associates and joint ventures are accounted for using the equity method. The share of profit recognised under the equity method is the Group’s share of the investment’s profit or loss based on ownership interest held. Associates (including partnerships) are entities in which the Group, as a result of its voting rights, has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

For associates, this is from the date that significant influence commences until the date that significant influence ceases, and for joint ventures, this is from the date joint control commences until the date joint control ceases.

Financial Disclosure	June 2019	June 2018
	$m	$m
Associates
Share of proft	24	24
Joint Ventures
Share of proft	314	107
Total share of proft of equity accounted investments	338	131
a. Associates1	June 2019 $m	June 2018 $m
Australia
Investments
Lendlease Sub Regional Retail Fund	(1)	2
Total Australia	(1)	2
Asia
Investments
Lendlease Asian Retail Investment Fund 2	(1)	1
Lendlease Asian Retail Investment Fund 3	23	19
Total Asia	22	20
Americas
Investments
Other	3	2
Total Americas	3	2
Total share of proft from associates	24	24

Reflects the contribution to the Group’s profit, and is after tax paid by the Equity Accounted Investment vehicles themselves, where relevant. However, for various Equity Accounted Investments, the share of tax is paid by the Group and is included in the Group’s current tax expense.

b. Joint Ventures1	June 2019	June 2018
	$m	$m
Australia Development Circular Quay Tower	18	(1)
Other	3	6
Investments Lendlease Retirement Living Trust	100	52
Other	(1)
Total Australia	120	57
Asia Development Paya Lebar Quarter	130	19
Investments CDR JV Ltd (313@somerset)	5	4
Total Asia	135	23
Europe Development Hungate (York) Regeneration Ltd	(1)
Intown SRL Joint Venture	(1)
LRIP LP	9
Silvertown	(3)
Stratford City Business District Limited (International Quarter London)	4	23
Victoria Drive Wandsworth	(5)
Other		1
Investments Other	(2)	8
Total Europe	1	32
Americas Development Lendlease Towers LLC	(3)
Americas Residential Partnership2	37
Other		(3)
Construction Lendlease Turner Joint Venture	24
Other		(2)
Total Americas	58	(5)
Total share of proft from joint ventures	314	107
Total share of proft of equity accounted investments	338	131

Reflects the contribution to the Group’s profit, and is after tax paid by the Equity Accounted Investment vehicles themselves, where relevant. However, for various Equity Accounted Investments, the share of tax is paid by the Group and is included in the Group’s current tax expense.
During the year, the Group sold a 50 per cent interest in its investment in the Americas Residential Partnership. Following the transaction, the Group equity accounts its residual interest in the investment as the Group has joint control over the major decisions of the entity with its joint venture partner.

Lendlease Annual Report 2019 / Financial Statements / 147

146 /

Notes to Consolidated Financial Statements continued

Section A: Performance continued

5. Share of Profit of Equity Accounted Investments continued

c. Material Associates and Joint Ventures Summarised Financial Information

The table below provides summarised financial information for those associates and joint ventures that are material to the Group. Refer to Note 12c ‘Equity Accounted Investments’ for determination of material associates and joint ventures. The information disclosed reflects the amounts presented in the financial statements of the relevant joint ventures and associates and, where indicated, the Group’s share of those amounts. They have been amended to reflect adjustments made by the Group when using the equity method, including fair value adjustments and differences in accounting policies. The nature and principal activities of the material joint ventures is investment in and development of property assets.

Income Statement	PAYA LEBAR QUARTER	LENDLEASE RETIREMENT LIVING TRUST
	June 2019 $m June 2018 $m	June 2019 $m June 20181 $m
Revenue and other income	636 157	233 146
Depreciation and amortisation		(1) (1)
Other expenses	(53) (8)	(99) (76)
Proft for the period	583 149	133 69
Other comprehensive loss		(8)
Total comprehensive income	583 149	125 69
Group’s ownership interest	30.0% 30.0%	75.0% 75.0%
Group’s total share of: Proft for the period	175 45
		100 52
Other adjustments	(45) (26)
Total proft for the period	130 19	100 52
Other comprehensive income/(expense)	18 10	(6)
Total comprehensive income	148 29	94 52

6. Other Income

Accounting Policies

Other Income

Net gains or losses on sale/transfer of investments , including consolidated entities and Equity Accounted Investments are recognised when an unconditional contract is in place.

Net gains or losses on fair value remeasurements are recognised in accordance with the policies stated in Note 13 ‘Other Financial Assets’.

Financial Disclosure	June 2019	June 2018
	$m	$m
Net gain on sale/transfer of investments
Consolidated entities1	74	69
Other fnancial assets at fair value2	20
Other assets and liabilities	5	3
Total net gain on sale/transfer of investments	99	72
Net gain on fair value measurement
Investment properties	85	30
Fair value through proft or loss assets3	97	276
Total net gain on fair value measurement	182	306
Other	14	118
Total other income	295	496

The Group sold a 50 per cent interest in its investment in the Americas Residential Partnership for cash consideration of $172 million. The profit on disposal was $73 million, which includes a revaluation gain of $8 million.
During the year, the Group partially disposed of units in Lendlease One International Towers Sydney Trust and Lendlease International Towers Sydney Trust for cash consideration of $210 million and $334 million respectively. At 30 June 2019, the Group holds a 2.5% interest in Lendlease One International Towers Sydney Trust (June 2018: 12.5%). It also holds a 6.2% interest in Lendlease International Towers Sydney Trust (June 2018: 15.0%) with 3.9% being an ongoing interest.
The assets comprising the fair value uplift are disclosed in Note 13 ‘Other Financial Assets’.
Lendlease Retirement Living Trust Income Statement has been presented from when the investment was deconsolidated on 18 December 2017.

The table below provides summarised financial information for those associates and joint ventures that are individually immaterial to the Group.

Income Statement	ASSOCIATES	ASSOCIATES	JOINT VENTURES June 2019 $m June 20181 $m
	June 2019 $m	June 2018 $m	June 2019 $m
Aggregate amounts of the Group’s share of: Proft from continuing operations
	24 24		84 55
Other comprehensive income/(expense)	12 10		(21) 18
Aggregate amounts of Group’s share of total comprehensive income of individually immaterial equity accounted investments	36 34		63 73

Paya Lebar Quarter was disclosed as an immaterial joint venture for June 2018. At June 2019 it is considered to be a material equity investment for the Group as the total comprehensive income of $148 million and the net book value of $382 million is material to the overall equity accounted investment balance. This investment has been disclosed as a material joint venture for June 2019. No figures in the above table have been restated.

Lendlease Annual Report 2019 / Financial Statements / 149

148 /

Notes to Consolidated Financial Statements continued

Section A: Performance continued

7. Other Expenses

Accounting Policies

Other expenses in general are recognised as incurred.

Employee Benefit Expenses

Employee benefits are expensed as the related service by the employee is provided and includes both equity and cash based payment transactions. Employee benefits recognised in the Income Statement are net of recoveries.

For cash bonuses, the Group recognises an accrued liability for the amount expected to be paid. This is based on a formula that takes into consideration the profit attributable to the Group’s securityholders after certain adjustments. Refer to Note 33a ‘Short Term Incentives’ for further detail.

Share Based Compensation

The Group operates equity settled share based compensation plans that are linked to Lendlease’s security price. The fair value of the equity received in exchange for the grant is recognised as an expense and a corresponding increase in equity, in the Equity Compensation Reserve. The total amount to be expensed over the vesting period is determined by reference to the fair value of the securities granted. The fair value is primarily determined using a Monte-Carlo simulation model. Refer to Note 33f ‘Amounts Recognised in the Financial Statements’ for further detail. Management considers the fair value assigned to be an area of estimation uncertainty as it requires judgements on Lendlease’s security price and whether vesting conditions will be satisfied.

At each balance sheet date, the Group revises its estimates of the entitlement due. It recognises the impact of revision of original estimates, if any, in the Income Statement, and a corresponding adjustment to equity over the remaining vesting period. Changes in entitlement for equity settled share based compensation plans are not recognised if they fail to vest due to market conditions not being met.

Superannuation Accumulation Plan Expense

All employees in the Australia region are entitled to benefits on retirement, disability or death from the Group’s superannuation accumulation plan. The majority of these employees are party to a defined contribution plan and receive fixed contributions from the Group. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense when they are due. The Group also operates a defined benefit superannuation plan, membership of which is now closed. Refer to Note 32 ‘Defined Benefit Plans’ for further detail.

Impairment

The carrying amounts of the Group’s assets, subject to impairment tests, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. The calculation of this recoverable amount is dependent on the type of asset. The material assets’ accounting policies will contain further information on these calculations. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the Income Statement.

Financial Disclosure	June 2019	June 2018
	$m	$m
Proft before income tax includes the following other expense items:
Employee beneft expenses1	2,780	2,627
Superannuation accumulation plan expense	55	66
Net defned beneft plans expense	1	4
Expenses include impairments raised/(reversals) relating to:
Loans and receivables	1	1
Property inventories	(1)	(2)
Equity accounted investments	6	2
Operating lease expense	96	93
Depreciation and amortisation	122	107
Net foreign exchange loss	6
1. Total expense before recoveries through projects.
Auditors’ Remuneration	June 2019	June 2018
	$000s	$000s
Amounts received or due and receivable by the auditors of Lendlease Group for: Audit and Other Assurance Services Audit services	7,141	6,338
Other assurance services	495	399
Total audit and other assurance services	7,636	6,737
Non audit services1	714	447
Total audit, other assurance and non audit services	8,350	7,184

Non audit services include amounts charged for work relating to financial, tax, and asset due diligence and financing arrangements of the Group.

Reversals of Impairment

Impairment losses on assets can be reversed (other than goodwill) when there is a subsequent increase in the recoverable amount. The increase could be due to a specific event, the indication that impairment may no longer exist or there is a change in estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Operating Lease Expense

Payments made under operating leases, including lease incentives, are recognised in the Income Statement on a straight line basis over the term of the lease.

Depreciation and Amortisation

Depreciation is charged to the Income Statement on a straight line basis over the estimated useful lives of items of property, plant and equipment, and major components that are accounted for separately. Amortisation is provided on leasehold improvements over the remaining term of the lease. Most plant is depreciated over a period not exceeding 20 years, furniture and fittings over three to 15 years, motor vehicles over four to eight years and computer equipment over three years.

Lendlease Annual Report 2019 / Financial Statements / 151

150 /

Notes to Consolidated Financial Statements continued

Section A: Performance continued

8. Finance Revenue and Finance Costs

Accounting Policies

Finance revenue is recognised as it is earned using the effective interest method, which applies the interest rate that discounts estimated future cash receipts over the expected life of the financial instrument. The discount is then recognised as finance revenue over the remaining life of the financial instrument.

Finance costs include interest, amortisation of discounts or premiums relating to borrowings and amortisation of costs incurred in connection with the arrangement of new borrowings facilities. Costs incurred in connection with the arrangement of borrowings are capitalised and amortised over the life of the borrowings. Finance costs are expensed immediately as incurred unless they relate to acquisition and development of qualifying assets. Qualifying assets are assets that take more than six months to prepare for their intended use or sale. Finance costs related to qualifying assets are capitalised.

9. Taxation

Accounting Policies

Income Taxes

Income tax on the profit or loss for the financial year comprises current and deferred tax. Income tax is recognised in the Income Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Under current Australian income tax law, LLT is not liable for income tax, including capital gains tax, to the extent that unitholders are attributed the taxable income of LLT.

Current tax is the expected tax payable on the taxable income for the financial year, using applicable tax rates (and tax laws) at the balance sheet date in each jurisdiction, and any adjustment to tax payable in respect of previous financial years.

Deferred tax is the expected tax payable in future periods as a result of past transactions or events and is calculated by comparing the accounting balance sheet to the tax balance sheet. Temporary differences are provided for any differences in the carrying amounts of assets and liabilities between the accounting and tax balance sheets. The following temporary differences are not provided for:

The initial recognition of goodwill;

Financial Disclosure	June 2019	June 2018
	$m	$m
Finance Revenue
Other corporations	8	12
Other fnance revenue	5	1
Total interest fnance revenue	13	13
Interest discounting	4	3
Total fnance revenue	17	16
Finance Costs
Other corporations	156	118
Less: Capitalised interest fnance costs1	(25)	(36)
Total interest fnance costs	131	82
Non interest fnance costs2	11	6
Total fnance costs	142	88
Net fnance costs	(125)	(72)

The weighted average interest rate used to determine the amount of interest finance costs eligible for capitalisation was 4.0 per cent (30 June 2018: 4.8 per cent), which is the effective interest rate.
The initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and

• Differences relating to investments in subsidiaries to the extent that they are not likely to reverse in the foreseeable future. Measurement of deferred tax is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using applicable tax rates (and tax laws) at the balance sheet date.

Recognition of deferred tax assets is only to the extent it is probable that future taxable profits will be available so as the related tax asset will be realised. Deferred tax assets may include the following:

Deductible temporary differences;
Unused tax losses; and
Unused tax credits.

Management considers the estimation of future taxable profits to be an area of estimation uncertainty as a change in any of the assumptions used in budgeting and forecasting would have an impact on the future profitability of the Group. The Group prepares financial budgets and forecasts, covering a five year period, which are reviewed on a regular basis. These forecasts and budgets form the basis of future profitability to support the carrying value of the deferred tax assets. The performance of the Group is influenced by a variety of general economic and business conditions, which are outside the control of the Group, including the level of inflation, interest rates, exchange rates, commodity prices, ability to access funding, oversupply and demand conditions and government fiscal, monetary and regulatory policies.

Presentation of deferred tax assets and liabilities can be offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity or on different tax entities, but are intended to be settled on a net basis or to be realised simultaneously.

Tax Consolidation

The Company is the head entity of the Australian Tax Consolidated Group comprising all the Australian wholly owned subsidiaries, excluding LLT. As a consequence, all members of the Australian Tax Consolidation Group are taxed as a single entity.

June 2018 comparatives have been restated to include $1 million of discounting costs which was previously separately disclosed.

Lendlease Annual Report 2019 / Financial Statements / 153

152 /

Notes to Consolidated Financial Statements continued

Section A: Performance continued

Taxation continued

Section A: Performancecontinued 9. Taxation continued	Section A: Performancecontinued 9. Taxation continued
		June 2019 $m June 2018 $m
a. Income Tax Expense Recognised in the Income Statement Current Tax Expense Currentyear
		82 238
Adjustments forprioryears		(4) 4
Beneft of tax losses recognised		(2)
		76 242
Deferred Tax Expense Origination and reversal of temporarydiferences
		72 141
Temporarydiferences recovered		6 (82)
Net tax losses recognised		(2) (15)
Change in tax rate		1 (14)
		77 30
Total income tax expense		153 272
Reconciliation of Efective Tax Rate Proft before Tax
		620 1,066
Income tax using the domestic corporation tax rate 30%		186 320
Adjustments forprioryear		(5) 4
Non assessable and exempt income1		(51) (72)
Non allowable expenses2		8 10
Net write of/(recognition)of tax losses through income tax expense		8 (18)
Temporarydiferences recognised through income tax expense3		7 47
Utilisation of capital losses on disposal of assets		(3) (2)
Efect of tax rates in foreignjurisdictions4		(1) (20)
Other		4 3
Income tax expense		153 272
Deferred Tax Recognised Directly in Equity Relating to: Defned beneftplan remeasurements

		(8) 16
Foreign currencytranslation reserve		7 4
Non controllinginterest acquisition reserve		3 3
Total deferred tax expense recognised directly in equity		2 23
b. Tax Efect Relating to Other Comprehensive Income	June 2019	June 2018 Before Tax $m Tax (Expense)/ Beneft $m Net of Tax $m
	Before Tax $m Tax (Expense)/ Beneft $m Net of Tax $m
Movements in hedgingreserve	(61) (61)	(7) (7)
Movements in foreign currencytranslation reserve	99 (7) 92	85 (4) 81
Movements in non controllinginterest acquisition reserve	(5) (5)	(4) (4)
Movements in defned beneftplan remeasurements	(47) 8 (39)	71 (16) 55
Total other comprehensive income net of tax	(14) 1 (13)	145 (20) 125

Includes Lendlease Trust profit.
Includes accounting expenses for which a tax deduction is not allowed permanently.
Includes temporary differences recognised in a previous year but are subsequently written off to income tax expense in the current year and temporary
differences that arose in a previous year but were not recognised until the current year.
The Group operates in a number of foreign jurisdictions for trading purposes which have significantly lower tax rates than Australia such as the United Kingdom and Singapore and higher tax rates such as the United States of America (blended federal, state and local rate) and Japan. Also includes the effect of change in tax rates.

c. Deferred Tax Assets and Liabilities	June 2019	June 2019	June 2019	June 2018	June 2018	June 2018
	Assets $m		Liabilities $m	Assets $m		Liabilities $m
Recognised Deferred Tax Assets and Liabilities Deferred tax assets and liabilities are attributable to the following: Loans and receivables

	(64)			2 (131)
Inventories	67 (424)			112 (375)
Other fnancial assets	2 (61)			1 (55)
Other assets	93 (96)			32 (29)
Equityaccounted investments	7 (398)			7 (299)
Investmentproperties	(8)
Property, plant and equipment	3 (37)			13 (42)
Intangible assets	(23)			(15)
Net defned beneftplan	23 (29)			14 (24)
Trade and otherpayables	192			133
Provisions	118 (1)			125
Borrowings and fnancingarrangements	20			6
Other fnancial and non fnancial liabilities				10
Unused revenue tax losses recognised	75			99
Items with a tax base but no carryingvalue	65 (20)			77 (20)
Total deferred tax assets/(liabilities)	665 (1,161)			631 (990)
Deferred tax set of	(564) 564			(511) 511
Net deferred tax assets/(liabilities)	101 (597)			120 (479)

	1 July 2018 $m	Recognised in Income $m Recognised in Equity $m			Other/ Foreign Exchange $m 30 June 2019 $m
June 2019 Movement in temporary diferences during the fnancial year: Loans and receivables

	(129) 64 1 (64)
Inventories	(264) (88) (5) (357)
Other fnancial assets	(54) (2) (3) (59)
Other assets	3 (4) (2) (3)
Equityaccounted investments	(292) (90) (11) 2 (391)
Investmentproperties	(8) (8)
Property, plant and equipment	(29) (4) (1) (34)
Intangible assets	(15) (8) (23)
Net defned beneftplan	(10) (4) 8 (6)
Trade and otherpayables	133 55 4 192
Provisions	125 (11) 3 117
Borrowings and fnancingarrangements	6 10 4 20
Other fnancial and non fnancial liabilities	10 (10)
Unused revenue tax losses recognised	99 33 (57) 75
Items with a tax base but no carryingvalue	58 (10) (3) 45
Total net deferred tax assets/(liabilities)	(359) (77) (2) (58) (496)

Lendlease Annual Report 2019 / Financial Statements / 155

154 /

Notes to Consolidated Financial Statements continued

Section A: Performance continued

9. Taxation continued

Section A: Performancecontinued 9. Taxation continued
1 July 2017 $m	Recognised in Income $m Recognised in Equity $m	Other/Foreign Exchange $m 30 June 2018 $m
June 2018 Movement in temporary diferences during the fnancial year: Loans and receivables (285) 156 (129)
Inventories (49) (212) (3) (264)
Other fnancial assets (49) (3) (2) (54)
Other assets (3) 6 3
Equity accounted investments (28) (257) (7) (292)
Investment properties (273) 273
Property, plant and equipment (3) (30) 4 (29)
Intangible assets (11) (4) (15)
Net defned beneft plans 6 (16) (10)
Trade and other payables 161 (30) 2 133
Resident liabilities 82 (82)
Provisions 110 14 1 125
Borrowings and fnancing arrangements 15 3 (12) 6
Other fnancial liabilities 1 13 (4) 10
Unused revenue tax losses recognised 231 51 (183) 99
Items with a tax base but no carrying value (14) 75 (3) 58
Total net deferred tax assets/(liabilities) (109) (30) (23) (197) (359)

	June 2019	June 2018
	$m	$m
Unrecognised Deferred Tax Assets
Deferred tax assets have not been recognised in respect of the following items:
Unused revenue tax losses	43	64
Unused capital tax losses	16	16
Net deductible temporary diferences	65	32
Total unrecognised deferred tax assets	124	112

Of the unrecognised deferred tax assets of $124 million, only $4 million expires by 2038. The remainder of the unrecognised deferred tax assets have no expiry date.

10. Events Subsequent to Balance Date

Section B: Investment

Investment in the Development pipeline, joint ventures in property projects, the retirement sector, and more passive assets, such as property funds, drives the current and future performance of the Group. This section includes disclosures for property such as Inventories and indirect property assets such as Equity Accounted Investments and Other Financial Assets contained within the Statement of Financial Position.

11. Inventories

Accounting Policies

Development Properties

Property acquired for development and sale in the ordinary course of business is carried at the lower of cost and Net Realisable Value (NRV). The cost of development properties includes expenditure incurred in acquiring the property, preparing it for sale and borrowing costs incurred.

The NRV is the estimated selling price, less the estimated costs of completion and selling expenses. Management considers the estimation of both selling prices and costs of completion to be an area of estimation uncertainty, as these estimations take into consideration market conditions affecting each property and the underlying strategy for selling the property.

The recoverable amount of each property is assessed at each balance date and accounting judgement is required to assess whether a provision is raised where cost (including costs to complete) exceeds NRV.

Inventories are expensed as cost of sales in the Income Statement. Management uses accounting judgement in determining the following:

The apportionment of cost of sales through sales revenue;
The amount of cost of sales, which includes costs incurred to date and final forecast costs; and
The nature of the expenditure, which may include acquisition costs, development costs, borrowing costs and those costs incurred in preparing the property for sale.

Construction Contract Assets

The gross amount of Construction and Development work in progress consists of costs attributable to work performed, including recoverable pre contract and project bidding costs and emerging profit after providing for any foreseeable losses. In applying the accounting policies on providing for these losses, accounting judgement is required.

Construction contract assets are presented as part of inventories for all contracts in which costs incurred plus recognised profits exceed progress billings. If progress billings and recognised losses exceed costs incurred plus recognised profits, then the difference is presented in trade and other payables as a Construction contract liability.

Financial Disclosure	June 2019	June 2018
	$m	$m
Current
Development properties	1,031	1,476
Construction contract assets1	1,180	883
Other	27	10
Total current	2,238	2,369
Non Current
Development properties	3,345	3,177
Total non current	3,345	3,177
Total inventories	5,583	5,546

As a result of the adoption of AASB 15 Revenue from Contracts with Customers, the description has been changed from Construction work in progress to Construction contract assets.

Lendlease Annual Report 2019 / Financial Statements / 157

156 /

Notes to Consolidated Financial Statements continued

Section B: Investment continued

12. Equity Accounted Investments

Accounting Policies

Equity Accounted Investments (Associates and Joint Ventures)

As outlined in Note 5 ‘Share of Profit of Equity Accounted Investments’, investments in Associates and Joint Ventures are equity accounted. The share of investment recognised under the equity method is the Group’s share of the investment’s net assets based on ownership interest held. Investments in associates and joint ventures are carried at the lower of the equity accounted carrying amount and the recoverable amount. When the Group’s share of losses exceeds the carrying amount of the equity accounted investment (including assets that form part of the net investment in the associate or joint venture entity), the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has obligations in respect of the associate or joint venture.

Dividends from associates and joint ventures represent a return on the Group’s investment and, as such, are applied as a reduction to the carrying value of the investment. Unrealised gains arising from transactions with equity accounted investments are eliminated against the investment in the associate or joint venture to the extent of the Group’s interest in the associate or joint venture. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Other movements in associates’ and joint ventures’ reserves are recognised directly in the Group’s consolidated reserves.

Service Concession Arrangements (SCAs)

The Group equity accounts its investment in project companies with SCAs through public private partnerships (PPPs). These arrangements provide facilities management and maintenance services with terms generally of 25 to 30 years. They also incorporate contractual obligations to make available the individual assets for their prescribed use and, where necessary, overhaul or replace major items of plant and equipment related to the assets with payment obtained through periodic draw downs from the relevant government authorities.

Joint Operations

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities relating to the arrangement.

Investments in joint operations are accounted for by recognising amounts on a line by line basis in accordance with the accounting standards applicable to the particular assets, liabilities, revenues and expenses in relation to the Group’s interest in the joint operation.

Financial Disclosure		June 2019	June 2018
	Note	$m	$m
Associates
Investment in associates	12a	277	248
Less: Impairment		(7)	(7)
Total associates		270	241
Joint Ventures
Investment in joint ventures	12b	3,195	2,393
_Les_s: Impairment		(13)	(7)
Total joint ventures		3,182	2,386
Total equity accounted investments		3,452	2,627

	INTEREST June 2019 % June 2018 %	NET BOOK VALUE
		June 2019 $m June 2018 $m
a. Associates Australia Development Lendlease Communities Fund 1
	20.8 20.8	4 4
Investments Lendlease Sub Regional Retail Fund1
	10.0 10.0	36 39
Total Australia		40 43
Asia Investments Lendlease Asian Retail Investment Fund 2

	38.2 36.8	30 27
Lendlease Asian Retail Investment Fund 3	20.1 20.1	201 173
Total Asia		231 200
Europe Development Other

		4 4
Total Europe		4 4
Americas Investments Other

		2 1
Total Americas		2 1
Total		277 248
Less: Impairment		(7) (7)
Total associates		270 241

Although the Group has a 10 per cent ownership interest in Lendlease Sub Regional Retail Fund, it holds 20 per cent of the voting rights over the fund and has significant influence over the investment. As a result, the Group applies equity accounting for its ownership interest.

Lendlease Annual Report 2019 / Financial Statements / 159

158 /

Notes to Consolidated Financial Statements continued

Section B: Investmentcontinued 12. Equity Accounted Investments continued	INTEREST June 2019 % June 2018 %	NET BOOK VALUE
		June 2019 $m June 2018 $m
b. Joint Ventures Australia Development Circular Quay Tower
	20.0 20.0	93 44
Melbourne Quarter R1	50.0 50.0	66 12
Melbourne Metro1	30.0 30.0	58
Other		16 16
Investments Lendlease Retirement Living Trust
	75.0 75.0	1,397 1,303
Other		12
Total Australia		1,584 1,433
Asia Development Paya Lebar Quarter

	30.0 30.0	382 218
The Exchange TRX	60.0 60.0	364 316
Investments CDR JV Ltd (313@somerset)
	25.0 25.0	96 85
Total Asia		842 619
Europe Development Hungate (York) Regeneration Limited

	50.0 50.0	6 7
Intown SRL Joint Venture	50.0 50.0	38 22
LRIP LP	20.0 20.0	39 12
Silvertown	50.0	6
Stratford City Business District Limited (International Quarter London)	50.0 50.0	130 119
Victoria Drive Wandsworth	50.0 50.0	40 38
Investments Treviso
	50.0 50.0	14 14
Other		8 4
Total Europe		281 216
Americas Development 277 Fifth Avenue

	40.0 40.0	64 55
845 Madison	37.5 70.0	44 32
Lendlease Towers LLC	50.0 50.0	30 31
Americas Residential Partnership2	50.0	341
Other		9 6
Construction Other
		1
Total Americas		488 125
Total		3,195 2,393
Less: Impairment		(13) (7)
Total joint ventures		3,182 2,386
Total equity accounted investments		3,452 2,627

c. Material Associates and Joint Ventures Summarised Financial Information

The table below provides summarised financial information for those associates and joint ventures that are material to the Group. Material associates and joint ventures have been determined by comparing individual investment net book value with the total equity accounted investment carrying value and share of profit, along with consideration of relevant qualitative factors. The information disclosed reflects the amounts presented in the financial statements of the relevant joint ventures and associates and, where indicated, the Group’s share of those amounts. They have been amended to reflect adjustments made by the Group when using the equity method, including fair value adjustments and differences in accounting policies. The nature and principal activities of the material associates and joint ventures is development of property assets.

Statement of Financial Position	PAYA LEBAR QUARTER	LENDLEASE RETIREMENT LIVING TRUST
	June 2019 $m June 2018 $m	June 2019 $m June 2018 $m
Current assets Cash and cash equivalents	84 37
		34 25
Other current assets	256 400	75 41
Total current assets	340 437	109 66
Non current assets Investment properties	3,263 2,268
		7,288 6,969
Other non current assets		2 2
Total non current assets	3,263 2,268	7,290 6,971
Current liabilities Residentliabilities
		4,759 4,686
Financial liabilities (excluding trade payables)	1,911
Other current liabilities	37 111	63 46
Total current liabilities	1,948 111	4,822 4,732
Non current liabilities Financialliabilities (excluding trade payables)1	1,694
		586 439
Other non current liabilities1	64 25	146 146
Total non current liabilities	64 1,719	732 585
Net assets	1,591 875	1,845 1,720
Reconciliation to Carrying Amounts Opening net assets 1 July	875 636
		1,720
Total comprehensive income for the period	583 149	125 52
Acquisition/contributions	64 53	1,668
Foreign currency translation for the period	69 37
Closing net assets	1,591 875	1,845 1,720
% ownership	30.0% 30.0%	75.0% 75.0%
Group’s share of net assets	477 262	1,384 1,290
Other adjustments	(95) (44)	13 13
Carrying amount at end of period	382 218	1,397 1,303

June 2018 Financial liabilities (excluding trade payables) balance for Lendlease Retirement Living Trust has been adjusted to reclassify $146 million to Other non current liabilities.

Material joint ventures had $99 million (June 2018: $112 million) in capital expenditure commitments and nil (June 2018: $2 million) in operating lease commitments as at 30 June 2019.

Balance includes the Melbourne Metro equity accounted investment of $70 million (June 2018: $70 million) net of a hedge reserve of $70 million (June 2018: $12 million).
During the year, the Group sold a 50 per cent interest in its investment in the Americas Residential Partnership. Following the transaction, the Group equity accounts its residual interest in the investment as the Group has joint control over the major decisions of the entity with its joint venture partner.

Lendlease Annual Report 2019 / Financial Statements / 161

160 /

Notes to Consolidated Financial Statements continued

Section B: Investment continued

Section C: Liquidity and Working Capital

12. Equity Accounted Investments continued

The table below provides summarised financial information for those associates and joint ventures that are individually immaterial to the Group.

	ASSOCIATES	JOINT VENTURES	JOINT VENTURES
	June 2019 $m June 2018 $m	June 2019 $m	June 2018 $m
Aggregate carrying value of individually immaterial equity accounted investments1	270 241	1,403 1,083

Paya Lebar Quarter was disclosed as an immaterial joint venture for June 2018. At June 2019 it is considered to be a material equity investment for the Group as the total comprehensive income of $148 million and the net book value of $382 million is material to the overall equity accounted investment balance. This investment has been disclosed as a material joint venture for June 2019. No figures in the above table have been restated.

13. Other Financial Assets

Accounting Policies

Financial Assets at fair value through profit or loss on initial recognition are measured at fair value (generally transaction price) and subsequently stated at fair value. Transaction costs are recorded as expenses when they are incurred. Any gain or loss arising from a change in fair value is recognised in the Income Statement.

Financial Assets at amortised cost are presented within loans and receivables in Note 21.

	Fair Value	June 2019	June 2018
	Level1	$m	$m
Current Measured at Fair Value
Fair Value Through Proft or Loss – Designated at Initial Recognition
Lendlease International Towers SydneyTrust	Level 3	87
Derivatives	Level 2	10	7
Total current		97	7
Non Current Measured at Fair Value
Fair Value Through Proft or Loss – Designated at Initial Recognition
Lendlease International Towers SydneyTrust	Level 3	151	515
Lendlease One International Towers SydneyTrust	Level 3	54	246
Australian Prime PropertyFund – Industrial	Level 3	96	75
Australian Prime PropertyFund – Commercial	Level 3	369	292
Australian Prime PropertyFund – Retail	Level 3	74	76
Lendlease Public Infrastructure Investment Company	Level 3	40	41
MilitaryHousingProjects Initiative	Level 3	211	195
Lendlease Asian Retail Investment Fund	Level 3	44	39
ParkwayParade PartnershipLimited	Level 3	43	40
Other investments	Level 3	11	10
	Level 1	10	19
Total non current		1,103	1,548
Total other fnancial assets		1,200	1,555

Refer to Note 25 ‘Fair Value Measurement’ for details on basis of determining fair value and valuation technique.

a. Fair Value Reconciliation

The reconciliation of the carrying amount for Level 3 financial assets is set out as follows.

	June 2019	June 2018
	$m	$m
Carryingamount at beginningof fnancialyear	1,529	1,195
(Disposals)/Additions	(493)	73
Gains recognised in Income Statement	106	258
Transfers		(10)
Other movements	38	13
Carrying amount at end of fnancialyear	1,180	1,529

The ability of the Group to fund the continued investment in the property and infrastructure pipeline, invest in new opportunities and meet current commitments is dependent on available cash, undrawn debt facilities and access to third party capital. This section contains disclosure on the financial assets, financial liabilities, cash flows and equity that are required to finance the Group’s activities, including existing commitments and the liquidity risk exposure associated with financial liabilities. The section also contains disclosures for the Group’s trading assets, excluding inventories, and the trading liabilities incurred as a result of trading activities used to generate the Group’s performance.

14. Cash and Cash Equivalents

Accounting Policies

Cash and cash equivalents include cash on hand, deposits held at call with banks, bank overdrafts and other short term highly liquid investments that are readily convertible to known amounts of cash within three months and which are subject to an insignificant risk of changes in value.

Bank overdrafts (if applicable) are shown as a current liability on the Statement of Financial Position and are shown as a reduction to the cash balance in the Statement of Cash Flows.

Financial Disclosure	June 2019	June 2018
	$m	$m
Cash	731	647
Short term investments1	559	530
Total cash and cash equivalents	1,290	1,177

Short term investments earned variable rates of interest which averaged 2.3 per cent per annum during the year (30 June 2018: 1.7 per cent).

15. Notes to Statement of Cash Flows

15. Notes to Statement of Cash Flows
	June 2019	June 2018
	$m	$m
Reconciliation of Proft after Tax to Net Cash Provided by Operating Activities
Proft after tax(includingexternal non controllinginterests)	467	794
Amortisation and depreciation	122	107
Netgain on sale of investments, plant and equipment	(99)	(72)
Impairment of equityaccounted investments	6	2
Net unrealised foreign exchange loss/(gain)and currencyhedgingcosts	8	(3)
Net fair valuegain on investments	(97)	(276)
Share ofproft of equityaccounted investments	(338)	(131)
Dividends/distributions from equityaccounted investments	43	16
Fair valuegain on investmentproperties	(85)	(30)
Other	(19)	(173)
Net cash provided by operating activities before changes in assets and liabilities	8	234
Changes in Assets and Liabilities Adjusted for Efects of Purchase and
Disposal of Consolidated Entities and Operations During the Financial Year
Decrease/(increase)in receivables	644	(18)
Increase in inventories	(224)	(319)
Decrease/(increase)in other assets	9	(10)
Increase in net defned beneftplans	(13)	(16)
Decrease inpayables	(439)	(79)
Increase in operatingderivatives assets/liabilities		(14)
Decrease in deferred tax items	130	233
(Increase)/decrease in current tax	(23)	4
(Decrease)/increase in otherprovisions	(32)	58
Net cash provided by operating activities	60	73

The potential effect of using reasonably possible alternative assumptions for valuation inputs would not have a material impact on the Group.

Lendlease Annual Report 2019 / Financial Statements / 163

162 /

Notes to Consolidated Financial Statements continued

Section C: Liquidity and Working Capital continued

16. Borrowings and Financing Arrangements

Accounting Policies

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost using the effective interest rate method. Under the amortised cost method the difference between the amount initially recognised and the redemption value is recorded in the Income Statement over the period of the borrowing on an effective interest basis. Borrowings are referred to in this section using their redemption value when describing the terms and conditions.

Financial Disclosure	June 2019	June 2018
	$m	$m
a. Borrowings – Measured at Amortised Cost
Current
Commercial notes	225	250
Bank credit facilities		225
Total current	225	475
Non Current
Commercial notes	1,502	1,590
Bank credit facilities	988	294
Total non current	2,490	1,884
Total borrowings	2,715	2,359
b. Finance Facilities
The Group has access to the following lines of credit:
Commercial Notes
Facility available	1,727	1,840
Amount of facility used	(1,727)	(1,840)
Amount of facility unused	-	-
Bank Credit Facilities
Facility available	3,495	2,222
Amount of facility used	(988)	(519)
Amount of facility unused	2,507	1,703
Bank Overdrafts
Facility available and amount unused	124	124

Commercial notes include:

£300 million of guaranteed unsecured notes issued in October 2006 in the UK bond market with a 6.125 per cent per annum coupon maturing in October 2021;
US$400 million of guaranteed unsecured senior notes issued in May 2016 in the US Reg. S market under Lendlease’s Euro Medium Term Note Programme with a 4.5 per cent per annum coupon maturing in May 2026;
S$300 million of guaranteed unsecured senior notes issued in April 2017 in the Singapore bond market under Lendlease’s Euro Medium Term Note Programme with a 3.9 per cent coupon maturing in April 2027;
$475 million of unsecured medium term notes issued in May 2013 ($375 million) and June 2014 ($100 million) in the Australian bond market comprising $250 million with a 5.5 per cent per annum coupon that matured and was repaid in November 2018 and $225 million with a 6.0 per cent per annum coupon maturing in May 2020 and has been classified as current for June 2019; and
$80 million of unsecured medium term notes issued as an A$ private placement in December 2018 with a 5.4 per cent per annum coupon maturing in December 2028.

Bank credit facilities include:

£400 million club bank facility maturing in March 2023 drawn to $145 million as at 30 June 2019;
$1,800 million syndicated cash advance facility. During the year, tranche A of the facility was increased to $900m and the maturity extended to December 2021 (June 2018: $600 million maturing in June 2019) and the maturity of tranche B was extended to September 2022. As at 30 June 2019, tranche A was drawn to $110 million and tranche B was undrawn; and

	INTEREST EXPOSURE Fixed $m Floating $m Total $m 768 980 1,748 959 8 967 1,727 988 2,715 1,008 511 1,519 832 8 840 1,840 519 2,359	CURRENCY
		A$ $m US$ $m £ $m S$ $m Total $m
June 2019 Between one and fveyears
		1,060 688 1,748
More than fveyears		78 567 8 314 967
Total		1,138 567 696 314 2,715
June 2018 Between one and fveyears
		700 819 1,519
More than fveyears		536 8 296 840
Total		700 536 827 296 2,359

c. Movement in Borrowings and Financing Arrangements

c. Movement in Borrowings and Financing Arrangements
		June 2019	June 2018
	Note	$m	$m
Balance at beginningof fnancialyear	16a	2,359	2,152
Netproceeds from borrowings		293	151
Efect of foreign exchange rate movements		64	54
Other movements		(1)	2
Balance at end of fnancialyear	16a	2,715	2,359

17. Issued Capital

Accounting Policies

Issued Capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity.

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a change in equity. Repurchased shares are classified as treasury shares and are recognised as a deduction from equity.

Financial Disclosure	LENDLEASE CORPORATION LIMITED	LENDLEASE TRUST	LENDLEASE TRUST
	June 2019 June 2018	June 2019	June 2018
	No. of Shares m $m No. of Shares m $m	No. of Units m $m	No. of Units m $m
Issued capital at beginning of fnancial year Distribution reinvestment plan (DRP)1	584 1,297 583 1,290	584 920	583 919
	3 1 7	1	1 1
Issued capital at end of fnancial year	584 1,300 584 1,297	584 921	584 920
Buyback at beginning of fnancial year2	(10) (145) - -	(10) (33)	- -
On market buyback of stapled securities2	(10) (140) (10) (145)	(10) (34)	(10) (33)
Buyback at end of fnancialyear2	(20) (285) (10) (145)	(20) (67)	(10) (33)
Balance refected in Retained Earnings/ Reserves2	285 145	67	33
Issued capital at end of fnancialyear	564 1,300 574 1,297	564 921	574 920

The final distribution reinvestment plan for the year ended June 2018 was neutralised by acquiring an equivalent number of stapled securities on market.
Stapled securities acquired as part of the Group’s on market stapled security buyback have been recorded in retained earnings for the Company and in Buyback Reserves for Lendlease Trust.

a. Issuance of Securities

As at 30 June 2019, the Group had 564 million stapled securities on issue, equivalent to the number of Lendlease Corporation shares and Lendlease Trust (LLT) units on issue as at that date. The issued units of LLT are not owned by the Company and are therefore presented separately in the Consolidated Statement of Financial Position within equity.

$960 million A$ syndicated loan facility, maturing in March 2024. As at 30 June 2019, the $725 million tranche A was fully drawn and the $235 million tranche B was undrawn.

The bank overdraft facilities may be drawn at any time and are repayable on demand.

The Group has not defaulted on any obligations in relation to its borrowings and financing arrangements.

Lendlease Annual Report 2019 / Financial Statements / 165

164 /

Notes to Consolidated Financial Statements continued

Section C: Liquidity and Working Capital continued

17. Issued Capital continued

b. Security Accumulation Plans

The Group’s Distribution Reinvestment Plan (DRP) was reactivated in February 2011. The last date for receipt of an election notice for participation in the DRP is 27 August 2019. The issue price is the arithmetic average of the daily volume weighted average price of Lendlease Group stapled securities traded (on the Australian Securities Exchange) for the period of five consecutive business days immediately following the record date for determining entitlements to distribution. If that price is less than 50 cents, the issue price will be 50 cents. Stapled securities issued under the DRP rank equally with all other stapled securities on issue.

c. Terms and Conditions

Issued capital for Lendlease Corporation Limited comprises ordinary shares fully paid. A stapled security represents one share in the Company stapled to one unit in LLT. Stapled securityholders have the right to receive declared dividends from the Company and distributions from LLT and are entitled to one vote per stapled security at securityholders’ meetings. Ordinary stapled securityholders rank after all creditors in repayment of capital.

The Group does not have authorised capital or par value in respect of its issued stapled securities.

18. Capital Management

The Group assesses capital management as part of its broader strategic plan. The Group focuses on interrelated financial parameters, including return on equity, earnings growth and borrowing capacity. The Group also monitors its gearing ratio, leverage ratio, interest coverage ratio and weighted average cost of debt and maturity profile. These are all taken into account when the Group makes decisions on how to invest its capital and evaluate its existing investments.

The Group’s capital includes total equity, borrowings and other interest bearing liabilities. When investing capital, the Group’s objective is to deliver strong total securityholder returns and to maintain an investment grade credit rating by maintaining an appropriate financial profile. The Moody’s/Fitch long term credit ratings at 30 June 2019 are Baa3/BBB- respectively (June 2018: Baa3/BBB-).

The capital structure of the Group can be changed by equity issuance, paying distributions to securityholders, the Distribution Reinvestment Plan and changing the level of debt. For further information on how the Group allocates and manages capital, refer to details of the Portfolio Management Framework in the Financial Area of Focus and Performance & Outlook sections of this Annual Report.

19. Liquidity Risk Exposure

Further information on liquidity risk is disclosed in Note 23 ‘Financial Risk Management’. As disclosed in Note 26 ‘Contingent Liabilities’, in certain circumstances, the Company guarantees the performance of particular Group entities in respect of their obligations including bonding and bank guarantees. Issued bank guarantees have cash collateralisation requirements if the bank guarantee facility is not renewed by the provider. At 30 June 2019, the Group does not anticipate a significant liquidity risk in relation to these facilities in the next 12 months. This is due to its continued strong cash flows and the Group’s financial profile, which includes significant committed undrawn facilities and low gearing ratio. The Group has provided collateral of $nil (June 2018: $nil) against letter of credit facilities.

The following are the contractual cash flow maturities of financial liabilities including estimated interest payments.


Note	Carrying Amount $m Contractual Cash Flows $m Less Than One Year $m	One to Two Years $m Two to Five Years $m	More Than Five Years $m
June 2019 Non Derivative Financial Liabilities Trade and otherpayables1 22 5,566 5,785 4,513 662 559 51
Borrowings and fnancingarrangements 16a 2,715 3,295 354 119 1,749 1,073
Total 8,281 9,080 4,867 781 2,308 1,124
Derivative Financial Liabilities (Outfow) (434) (428) (4) (1) (1)
Infow 7 432 432
Total 7 (2) 4 (4) (1) (1)
June 2018 Non Derivative Financial Liabilities Trade and otherpayables1 22 5,408 5,426 4,237 547 593 48
Borrowings and fnancingarrangements 16a 2,359 3,101 622 367 1,150 963
Other fnancial liabilities 1 1
Total 7,768 8,528 4,859 914 1,743 1,011
Derivative Financial Liabilities (Outfow) (148) (140) (6) (1) (1)
Infow 3 148 141 6 1
Total 3 - 1 - - (1)

20. Commitments

The Group leases land and buildings, and plant and equipment under non cancellable operating leases. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.

escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.
	June 2019	June 20181
	$m	$m
a. Operating Lease Commitments
The estimated aggregate amount of non cancellable operating lease expenditure agreed or
contracted but not provided for in the fnancial statements is as follows:
Land and buildings – self occupied	700	669
Plant and equipment	52	25
Total	752	694
	June 2019 $m	June 20182 $m
At balance date, commitments in relation to non cancellable operating leases are payable as
follows:
Due within one year	127	92
Due between one and fve years	298	236
Due later than fve years	327	366
Total	752	694
	June 2019 $m	June 20183 $m
b. Investments
At balance date, capital commitments existing in respect of interests in equity accounted
investments and other investments contracted but not provided for in the fnancial statements
are as follows:
Due within one year	292	220
Due between one and fve years	340	278
Due later than fve years		28
Total	632	526

June 2018 Land and buildings - self occupied has been restated by a $73 million increase to reflect updated management information. 2. June 2018 Due within one year has been restated by a $1 million increase, Due between one and five years has been restated by a $7 million increase, and Due later than five years by a $65 million increase to reflect updated management information.
June 2018 Due within one year has been restated by a $93 million increase and Due between one and five years has been restated by a $252 million increase to reflect updated management information.
The carrying amount of trade and other payables excludes $1,375 million of current and $184 million of non current amounts (June 2018: $1,533 million of current and $360 million of non current amounts) as they do not meet the definition of a financial liability under Australian Accounting Standards.

Other contractually committed cash flows the Group is exposed to are detailed in Note 20 ‘Commitments’.

Lendlease Annual Report 2019 / Financial Statements / 167

166 /

Notes to Consolidated Financial Statements continued

Section C: Liquidity and Working Capital continued

21. Loans and Receivables

Accounting Policies

Loans and receivables, which include trade and other receivables, are non derivative financial assets with fixed or determinable payments that are not equity securities. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable. Other receivables include receivables related to investment management, property development, and miscellaneous items.

Loans and receivables are carried at amortised cost using the effective interest method, which applies the interest rate that discounts estimated future cash receipts over the term of the loans and receivables. Cash flows relating to short term trade and other receivables are not discounted if the effect of discounting is immaterial. The discount, if material, is then recognised as revenue over the remaining term.

The Group assesses provision for impairment of loans and receivables based on expected loss, if material. The Group considers reasonable and supportable information that is relevant and available. This includes both quantitative and qualitative information and analysis, based on the Group’s historical impairment experience, credit assessment of customers and any relevant forward looking information. The amount of the provision is recognised in the Income Statement.

Retentions receivable on construction contracts represent deposits held by the Group until the satisfaction of conditions specified in the contract are rectified.

a. Financial Disclosure		June 2019	June 2018
	Note	$m	$m
Current
Trade receivables1		1,012	929
Less: Impairment		(13)	(12)
		999	917
Relatedparties		76	120
Retentions		330	308
Contract debtors1	21b	349	688
Accrued income1	21b	57	377
Other receivables1		241	261
Less: Impairment		(2)	(1)
Total current		2,050	2,670
Non Current
Relatedparties		38	78
Less: Impairment		(1)	(1)
Retentions		351	364
Other receivables		300	347
Total non current		688	788
Total loans and receivables		2,738	3,458

As at the reporting date, $640 million of the trade debtors were current (30 June 2018: $631 million[1] ) and $372 million were past due (30 June 2018: $298 million). Of the past due amount, $359 million was not impaired (30 June 2018: $286 million). ‘Past due’ is defined under accounting standards to mean any amount outstanding for one or more days after the contractual due date. Of the total trade debtors, 18.6 per cent (30 June 2018: 13.0 per cent[1] ) are aged greater than 90 days. Other than trade debtors, no other loans and receivables are considered past due at 30 June 2019 (30 June 2018: $nil).

	June 2019	June 2018
	$m	$m
Impairment
Carryingamount at beginningof fnancialyear	14	108
Bad and doubtful debts impairment loss net ofprovisions written back	2	2
Utilised bad and doubtful debts impairmentprovision		(100)
Other movements(includingforeign exchange rate movements)		4
Carrying amount at end of fnancial year	16	14
Total impairment as a percentage of total loans and receivables	0.6%	0.4%

The credit quality of all loans and receivables, including those neither past due nor impaired, is assessed and monitored on an ongoing basis. To determine the impairment provision for the financial year, the Group considers how economic and market conditions will affect the creditworthiness of certain entities. The impairment provision relates to specific loans and receivables that have been identified as being impaired, including related party loans where the Group’s interest in a development was via an equity accounted investment.

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June 2019 June 2018
b. Contract Assets Note $m $m
Current
Contract debtors 349 688
Construction contract assets 11 1,180 883
Accrued income 57 377
Total contract assets [1] 1,586 1,948
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Movements in contract assets during the year relate primarily to the transfer of balances into Trade receivables as the right to receive payment from customers becomes unconditional.

22. Trade and Other Payables

Accounting Policies

Trade Creditors

Liabilities are recognised for amounts to be paid in the future for goods or services received, whether or not billed to the Group. Trade and other payables are settled in the normal course of business. Trade and other payables are carried at amortised cost using the effective interest method, which applies the interest rate that discounts estimated future cash outflows over the term of the trade and other payables. Cash flows relating to short term trade and other payables are not discounted if the effect of discounting is immaterial. The discount, if material, is then recognised as an expense over the remaining term.

Construction contract liabilities

Construction contracts where the total progress billings issued to clients (together with foreseeable losses if applicable) on a project exceed the costs incurred to date plus recognised profit on the contract are recognised as a liability.

Retentions

Retentions are amounts payable for the purpose of security and for the provision of defects in accordance with contract terms. Release of retention amounts are in accordance with contractual terms.

Unearned Income

Primarily relates to unearned income and deposits received in advance on presold apartments. These amounts will be recognised as income in line with the ‘Sale of development properties’ accounting policy in Note 4 ‘Revenue from Contracts with Customers’.

June 2018 balances have been reclassified to align the presentation of comparative information to disclosures required under AASB 15 Revenue from Contracts with Customers. $688 million of Trade receivables and $377 million of Other receivables have been reclassified to Contract debtors and Accrued income respectively.

Lendlease Annual Report 2019 / Financial Statements / 169

168 /

Notes to Consolidated Financial Statements continued

Section C: Liquidity and Working Capitalcontinued
22. Trade and Other Payables continued
a. Financial Disclosure		June 2019	June 2018
	Note	$m	$m
Current
Trade and accrued creditors		3,136	3,407
Construction contract liabilities1	22b	1,404	1,014
Related parties		18	11
Retentions2		476	396
Deferred land payments2		98	85
Unearned Income3,4	22b	283	689
Other4		309	168
Total current		5,724	5,770
Non Current
Trade and accrued creditors		7	13
Retentions2		309	331
Deferred land payments2		635	549
Unearned income3,4	22b	183	360
Other4		267	278
Total non current		1,401	1,531
Total trade and other payables		7,125	7,301

As a result of the adoption of AASB 15 Revenue from Contracts with Customers, the June 2018 description has been changed from Construction revenue - amounts due to customers to Construction contract liabilities.
June 2018 current ($481 million) and non current ($880 million) Retentions and Deferred payments balance has been reclassified to separately present Retentions and Deferred land payments.
Includes unearned income liabilities from PLLACes transactions. PLLACes transactions involve selling the presold apartment cash flows for a specific development project to a third party for cash consideration.
June 2018 balances have been reclassified to align the presentation of comparative information to disclosures required under AASB 15 Revenue from Contracts with Customers. $689 million of current other payables and $360 million of non current other payables has been reclassified to current and non current unearned income respectively.

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June 2019 June 2018
b. Contract Liabilities $m $m
Current
Unearned income [1] 283 689
Construction contract liabilities [2] 1,404 1,014
Total current 1,687 1,703
Non Current
Unearned income [1] 183 360
Total non current 183 360
Total contract liabilities 1,870 2,063
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Movements in Unearned income relates primarily to PLLACes transactions and residential pre-sales settled during the year, deposits received for development properties and transfers between non current and current.
Movements in Construction contract liabilities relate primarily to billings raised during the year in excess of revenue recognised on construction contracts with customers and losses recognised on engineering projects during the year. The increase in billings during the year relates primarily to new projects secured and commencing during the year.

During the year the Group recognised $1,405 million in revenue from contracts that held a contract liability balance at the beginning of the financial year.

The total transaction price allocated to unsatisfied performance obligations on the Group’s construction contracts as at June 2019 is $15.6 billion for the core business and $5.4 billion for the non core business, which is the construction backlog reported in the Performance and Outlook section of the Director’s report. This includes new work secured during the period. Of the total construction backlog, 53 per cent is expected to be realised within the next 12 months to June 2020, 25 per cent to June 2021 and the remaining 22 per cent realised post June 2021.

Section D: Risk Management

The Group’s activities expose it to a variety of financial risks. The Group’s overall financial risk management strategy focuses on the unpredictability of financial markets and seeks to minimise adverse effects on the Group’s performance. Treasury policies have been approved by the Board for managing this risk. This section contains disclosures of financial risks the Group is exposed to and how the Group manage these risks. The impact of contingent liabilities is also considered in this section.

23. Financial Risk Management

The Group operates across numerous jurisdictions and markets. The Lendlease Asset and Liability Committee oversees the management of the Group’s treasury risks, within the parameters of a Board approved Treasury Policy, and maintains a Group wide framework for financial risk management and reviews issues of material risk exposure within the scope of the Treasury Policy. A summary of key risks identified, exposures and management of exposures is detailed in the table below.

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Risks Identified Definition Exposures Management of Exposures
Foreign Currency The risk in local currency terms • Foreign currency earnings • Physical financial instruments, including
that the value of a financial • Net investments in natural hedges from matching foreign
commitment or a recognised foreign operations assets and liabilities
asset or liability, will fluctuate • Transactions settled in • Derivative financial instruments, mainly
due to changes in foreign foreign currency foreign exchange contracts
currency exchange rates • Further information on • Contracting out
exposures is detailed in Note • Speculative trading is not permitted
23a ‘Foreign Currency
Risk Exposure’
Credit The risk that a counterparty will • Recoverability of loans and • Policies in place so that customers and
not be able to meet its obligations receivables suppliers are appropriately credit assessed
in respect of a financial instrument, • Recoverability of other • Treasury Policy sets out credit limits for
resulting in a financial loss to the financial assets and cash each counterparty based on minimum
Group deposits investment grade ratings
• Further information on
exposures is detailed in Note
23b ‘Credit Risk Exposure’
Liquidity The risk of having insufficient • Insufficient levels of • Maintaining sufficient levels of cash
funds to settle financial liabilities committed credit facilities and committed credit facilities to meet
as and when they fall due • Settlement of financial financial commitments and working
liabilities capital requirements
• Further information on • Managing to funding portfolio benchmarks
exposures is detailed in Note as outlined in the Treasury Policy
19 ‘Liquidity Risk Exposure’ • Timely review and renewal of credit
facilities
Interest Rate The risk that the value of a • Financial assets, mainly cash • Physical financial instruments
financial instrument or cash flow at bank • Derivative financial instruments,
associated with the instrument • Financial liabilities, mainly mainly interest rate swaps
will fluctuate due to changes in borrowings and financing • Managing to hedging limits in respect
market interest rates arrangements of recourse funding as outlined in the
• Further information on Treasury Policy
exposures is detailed in • Speculative trading is not permitted
Note 23c ‘Interest Rate
Risk Exposure’
Equity Price The risk that the fair value of either • All traded and/or non traded • Material investments within the portfolio
a traded or non traded equity financial instruments are managed on an individual basis. The
investment, derivative equity measured at fair value Group’s portfolio is monitored closely as
instrument, or a portfolio of such part of capital recycling initiatives
financial instruments, increases or
decreases in the future
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The total transaction price relating to the Group’s unearned income on the Group's development contracts at June 2019 is $2,417 million, relating primarily to presold residential apartments at Elephant and Castle and Deptford. The difference between the Unearned income amount noted in the table above and this amount primarily relates to the remaining value of apartments versus the deposit amount received. Revenue from these contracts is expected to be realised as control over each asset is transferred to the customer.

Lendlease Annual Report 2019 / Financial Statements / 171

170 /

Notes to Consolidated Financial Statements continued

Section D: Risk Management continued

23. Financial Risk Management continued

a. Foreign Currency Risk Exposure

The net asset exposure by currency is detailed below.

Thenet asset exposureby currency is detail	ed below.
	A$m US$m £m S$m €m CNY m MYR m1 Other m2
June 2019
Net asset/(liability)exposure(local currency)	3,380 645 476 462 118 569 1,047 37
June 2018
Net asset/(liability)exposure(local currency)	4,587 507 173 264 90 290 977 43

The June 2018 balance has been restated to include the total MYR net asset exposure.
Other currency is translated and disclosed in AUD.

Sensitivity Analysis

The sensitivity analysis of the Group’s Australian dollar denominated Income Statement and Statement of Financial Position to foreign currency movements is based on a 10 per cent fluctuation (June 2018: 10 per cent fluctuation) on the average rates during the financial year and the spot rate at balance date respectively. This analysis assumes that all other variables, in particular interest rates, remain constant, and excludes the effects of the foreign exchange contracts.

A 10 per cent movement in the average foreign exchange rates would have impacted the Group’s Profit after tax as follows.

	10% WEAKENING LEADS TO INCREASE/(DECREASE) IN PROFIT AFTER TAX June 2019 $m June 2018 $m 14 23 3 13 8 3	10% STRENGTHENING LEADS TO INCREASE/(DECREASE) IN PROFIT AFTER TAX
		June 2019 $m June 2018 $m
USD		(12) (18)
GBP		(5) (11)
SGD		(6) (3)
EUR		1
CNY	1 (1)	(1)
MYR	(2) (1) 24 37	1 1
		(22) (31)

A 10 per cent movement in the foreign exchange spot rates at balance date would have impacted the Group’s net assets as follows.

	10% WEAKENING LEADS TO INCREASE/(DECREASE) IN NET ASSETS June 2019 $m June 2018 $m 103 72 86 37 51 29 20 15 13 7	10% STRENGTHENING LEADS TO INCREASE/(DECREASE) IN NET ASSETS
		June 2019 $m June 2018 $m
USD		(83) (59)
GBP		(86) (30)
SGD		(46) (24)
EUR		(17) (13)
CNY		(11) (5)
MYR1	40 37 313 197	(33) (30)
		(276) (161)

The June 2018 balance has been restated to include the total MYR net asset exposure.

b. Credit Risk Exposure

The maximum exposure to credit risk at balance date on financial instruments recognised in the Statement of Financial Position (excluding investments of the Group) equals the carrying amount, net of any impairment.
The Group is not exposed to any significant concentrations of credit risk on either a geographic or industry specific basis.
Credit risk on financial instruments is managed under a Board approved credit policy that determines acceptable counterparties. Derivative counterparties and cash deposits are limited to recognised financial intermediaries with a minimum investment grade credit rating as determined by a recognised rating agency.
Refer to Note 21 ‘Loans and Receivables’ for information relating to impairment on loans and receivables.
In certain circumstances, the Group will hold either financial or non financial assets as collateral to further mitigate the potential credit risk on selected transactions. During the current and prior year, the Group did not hold financial or non financial assets as collateral. At any point in time, the Group will hold other collateral such as bank guarantees and performance bonds to mitigate potential credit risk as a result of default by a counterparty or otherwise.

c. Interest Rate Risk Exposure

The Group’s exposure to interest rate risk on its financial assets and liabilities is set out as follows.

	CARRYING AMOUNT June 2019 $m June 2018 $m
Fixed Rate Financial assets
	770 437
Financial liabilities	(1,806) (1,900)
	(1,036) (1,463)
Variable Rate Financial assets
	476 654
Financial liabilities	(990) (521)
	(514) 133

Sensitivity Analysis

At 30 June 2019 it is estimated that an increase of one percentage point in interest rates would have decreased the Group’s equity and Profit after tax by $21 million (June 2018: $10 million decrease in the Group’s equity and Profit after tax). A one percentage point decrease in interest rates would have increased the Group’s equity and Profit after tax by $21 million (June 2018: $10 million increase in the Group’s equity and Profit after tax). The increase or decrease in interest income/(expense) is proportional to the increase or decrease in interest rates. Interest rate derivatives have been included in this calculation.

24. Hedging

Accounting Policies

The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operating, financing and investing activities. Derivative financial instruments are recognised initially at fair value on the date a derivative contract is entered into and subsequently remeasured at fair value. Hedge accounting recognises the offsetting effects on profit or loss of changes in the fair value of the derivative financial instruments and the hedged item. The accounting for hedges that meet the criteria for hedge accounting are classified as either fair value hedges, cash flow hedges or investment hedges.

The Group has minimal hedges designated at fair value. The Group primarily uses forward foreign exchange contracts as cash flow hedges for highly probable sale, purchase and dividend transactions. The Group also uses forward foreign exchange contracts to hedge cross border intercompany loans and transactions which mainly net off in the Income Statement. Interest rate swaps and interest rate options are used to manage the Group’s exposure to interest rates arising from borrowings. These are treated as cash flow hedges and are mainly on borrowings within equity accounted investments.

The Group has foreign exchange derivative contracts primarily held in USD, EUR, SGD, JPY and MYR at reporting date to hedge specific foreign currency exposures. The total gross payable exposure is $249 million (June 2018: $168 million).

There are 72 foreign currency contracts that will mature in more than one year (June 2018: 47 foreign currency contracts).

Lendlease Annual Report 2019 / Financial Statements / 173

172 /

Notes to Consolidated Financial Statements continued

Section D: Risk Management continued

25. Fair Value Measurement

Accounting Policies

The accounting policies for financial instruments held at fair value are included in Note 13 ‘Other Financial Assets’ and Note 24 ‘Hedging’. Management considers the valuation of the financial instruments to be an area of estimation uncertainty. While this represents the best estimation of fair value at the reporting date, the fair values may differ if there is volatility in market prices or foreign exchange rates in future periods.

All financial instruments recognised in the Statement of Financial Position, including those instruments carried at amortised cost, are recognised at amounts that represent a reasonable approximation of fair value, with the exception of the following borrowings.

Note	JUNE 2019	JUNE 2018
	Carrying Amount $m Fair Value $m
Liabilities Current Commercial notes 16a

	225 234	250 253
Non Current Commercial notes 16a
	1,502 1,640	1,590 1,803

26. Contingent Liabilities

The Group has the following contingent liabilities:

There are a number of legal claims and exposures that arise from the normal course of the Group's business in respect of which no provision has been made. There is significant uncertainty as to whether a future liability will arise in respect to these items. Also, the amount of liability, if any, that may arise, cannot be measured reliably at this time. The Directors are of the opinion that all known liabilities have been brought to account and that adequate provision has been made for any anticipated losses arising from such liabilities.
In certain circumstances, the Company guarantees the performance of particular Group entities in respect of their obligations. This includes bonding and bank guarantee facilities used primarily by the Construction business as well as performance guarantees for certain of the Company’s subsidiaries.
Securities Class Action
On 18 April 2019, Lendlease Corporation and Lendlease Responsible Entity (Lendlease Group) were served with a shareholder class action proceeding filed in the Supreme Court of New South Wales on 18 April 2019 by David William Pallas and Julie Ann Pallas as trustees for the Pallas Family Superannuation Fund, represented by Maurice Blackburn. This proceeding alleges breaches of Lendlease Group’s continuous disclosure obligations and misleading and deceptive conduct in relation to matters concerning projects within the engineering and services business and the effect that those projects had on Lendlease Group’s financial performance and results. It is currently not possible to determine the ultimate impact of these claims, if any, on Lendlease Group. Lendlease Group denies the allegations and intends to vigorously defend this proceeding. The potential liability and costs in respect of the proceeding cannot be accurately assessed at this time.

The fair value of commercial notes has been calculated by discounting the expected future cash flows by the appropriate government bond rates and credit margin applicable to the relevant term of the commercial note.

a. Basis of Determining Fair Value

The determination of fair values of financial assets and liabilities that are measured at fair value are summarised as follows:

The fair value of unlisted equity investments, including investments in property funds, is determined based on an assessment of the underlying net assets, which may include periodic independent and Directors’ valuations, future maintainable earnings and any special circumstances pertaining to the particular investment;
The fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted valuation techniques; these include the use of recent arm’s length transactions, reference to other assets that are substantially the same, and discounted cash flow analysis; and
The fair value of derivative instruments comprises forward foreign exchange contracts, which are valued using forward rates at balance date, and interest rate swap contracts, which are measured at the present value of future cash flows estimated and discounted based on applicable yield curves derived from quoted interest rates and includes consideration of counterparty risk adjustments.

b. Fair Value Measurements

The different levels for valuation method have been defined as follows:

Level 1: The fair value is determined using the unadjusted quoted price for an identical asset or liability in an active market for identical assets or liabilities;
Level 2: The fair value is calculated using predominantly observable market data other than unadjusted quoted prices for an identical asset or liability; and
Level 3: The fair value is calculated using inputs that are not based on observable market data.

During the period, there were no material transfers between Level 1, Level 2 and Level 3 fair value hierarchies.

Lendlease Annual Report 2019 / Financial Statements / 175

174 /

Notes to Consolidated Financial Statements continued

Section E: Basis of Consolidation

This section provides information on how the Group structure affects the financial position and performance of the Group as a whole. The disclosures detail the types of entities and transactions included in the consolidation and those excluded.

27. Consolidated Entities

Accounting Policies

The Group consolidation comprises all subsidiaries controlled by the Company. Control exists when the Company:

Has the power to direct the relevant activities such as key operating, financial and investing decisions;
Has exposure or rights to variable returns from its involvement with the investee such as dividends, loans and fees; and
Has the ability to use its power over the investee to affect the amount of returns.

In assessing control, potential voting rights that are presently exercisable or convertible are taken into account. Management uses accounting judgement in determining whether the Group controls an entity by applying the above control criteria and reviewing the substance of its relationship with the entity.

The following material disposals of consolidated entities occurred during the current and prior year.

	Ownership		Gross Consideration
	Interest Disposed	Date	Received/Receivable
	%	Disposed	$m
June 2019
Australia
Americas Residential Partnership1	50.0	19 July 2018	172
June 2018
Australia
Lendlease Retirement Living Trust	25.0	18 December 2017	510
LRIP LP	80.0	21 December 2017	197

Represents the disposal of four entities relating to the Americas Residential Partnership. Refer to Note 6 Other Income for further details.

28. Employee Benefit Vehicles

The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies with adjustments made to bring into line any dissimilar accounting policies that may exist.

External non controlling interests are allocated their share of total comprehensive income and are presented within equity in the consolidated Statement of Financial Position, separately from the equity of securityholders.

The material consolidated entities of the Group listed below were wholly owned during the current and prior year. Refer to the following section for details on the disposal of entities.

PARENT ENTITY EUROPE Lendlease Corporation Limited Lendlease Construction (Europe) Limited AUSTRALIA Lendlease Construction Holdings (Europe) Limited Capella Capital Lendlease Pty Limited Lendlease Europe Finance plc Capella Capital Partnership Lendlease Europe Limited Lendlease Building Pty Limited Lendlease Residential (CG) Limited Lendlease Building Contractors Pty Limited Lendlease (Elephant & Castle) Limited Lendlease Communities (Australia) Limited ASIA Lendlease Development Pty Limited Lendlease Japan Inc. Lendlease Engineering Pty Limited Lendlease Singapore Pte. Limited Lendlease Finance Limited AMERICAS Lendlease Infrastructure Investments Pty Limited Lendlease (US) Capital, Inc. Lendlease International Pty Limited Lendlease (US) Construction, Inc. Lendlease Real Estate Investments Limited Lendlease (US) Construction LMB, Inc. Lendlease Responsible Entity Limited Lendlease (US) Public Partnerships, LLC Lendlease Services Pty Limited Lendlease (US) Public Partnerships Holdings LLC Lendlease Trust[1] Lendlease Development, Inc.

The Company sponsors a number of employee benefit vehicles, including employee security plans and employee security ownership vehicles. These vehicles while not legally controlled, are currently required to be consolidated for accounting purposes.

a. Employee Security Plans

As at 30 June 2019, employees own approximately 1.0 per cent (June 2018: 1.0 per cent) of the issued capital of the Group through various active Lendlease employee security plans and ownership vehicles details of which are outlined below.

Australia: Employee Share Acquisition Plan (ESAP): ESAP was established in December 1988 for the purpose of employees acquiring securities in the Group and is funded by Lendlease subscriptions, and employee salary sacrifice contributions.
Americas: US Rabbi Trust (Rabbi Trust) was established in 2004 and updated in 2005 for the acceptance of employee profit share contributions used to acquire Group securities for US based employees. This part of the plan is not currently accepting new contributions.
Employee Share Acquisition Plan (STI) (ESAP STI): ESAP STI was established in July 2014 for the purpose of acquiring and allocating securities granted as the deferred component of Short Term Incentive (STI) awards which are funded by Lendlease subscriptions. Securities are currently allocated to employees across Australia, Singapore, Malaysia, the United Kingdom and the United States.

Eligibility

The eligibility rules for each plan are determined by reference to the regulatory, legal and tax rules of each country in which the Group operates.

Distributions and/or Voting Rights

Generally, employees in the various operating security plans are entitled to distributions and voting rights for allocated securities. The plans reflect this intention subject to regulatory, legal and tax constraints. The trustee may exercise these rights in accordance with any fiduciary or governance rules pertaining to the deed or trust laws in the legal and tax jurisdiction within which the trust operates.

b. Employee Security Ownership Vehicles

In addition to the plans discussed above, Lendlease has an employee security ownership vehicle, Lendlease Retirement Benefit Fund (RBF).

RBF was established in 1984 with shareholder approval for the benefit of employees. RBF holds Lendlease securities. The Lendlease securities in RBF are not available for allocation to employees other than in the event of a change of control of the Group and, in accordance with RBF’s trust deed, the capital of the trust is not available to the Group. The RBF trustee has discretion as to the distribution of the RBF funds. In 1992, a deed poll was executed which allows for the distribution of the income of RBF to the Company to fund employee benefit activities through the Lendlease Foundation. As a result of changes to the constitution and governance structure of the RBF trustee on 22 June 2017, Lendlease currently does not have control of RBF and therefore RBF is currently not required to be consolidated for accounting purposes.
The RBF arrangement is subject to periodic review to assess its ongoing role and operation.
Lendlease Trust is a consolidated entity of the Group as the parent entity is deemed to control it. Lendlease Trust is not wholly owned.

During the current and prior year, there were no acquisitions of material consolidated entities.

Lendlease Annual Report 2019 / Financial Statements / 177

176 /

Notes to Consolidated Financial Statements continued

Section E: Basis of Consolidation continued

29. Parent Entity Disclosures

The following summarises the financial information of the Group’s parent entity, Lendlease Corporation Limited (the Company), as at and for the year ended 30 June 2019.

for the year ended 30 June 2019.
	COMPANY
	June 2019 $m June 2018 $m
Results Proft after tax
	110 752
Other comprehensive income after tax
Total comprehensive income after tax	110 752
Financial Position Current assets
	5,738 4,540
Non current assets	1,978 2,014
Total assets	7,716 6,554
Current liabilities	4,844 3,483
Non current liabilities	6 23
Total liabilities	4,850 3,506
Net assets	2,866 3,048
Issued capital	1,300 1,297
Treasury securities	(68) (57)
Reserves	179 175
Retained earnings	1,455 1,633
Total equity	2,866 3,048

30. Related Party Information

a. Consolidated Entities

Intragroup balances and transactions, and any unrealised gains or losses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. Investments in subsidiaries are carried at their cost of acquisition less impairments in the Company’s financial statements.

Lendlease Corporation Limited provides financing and treasury services, which includes working capital facilities and long term financing. Interest is earned or incurred only on long term loans provided to or drawn with subsidiaries based on project specific risks and returns. Outstanding balances arising from working capital facilities and long term financing are typically unsecured and repayable on demand.

In addition, guarantees are provided to particular Group entities in respect of their obligations. These include bonding and bank guarantee facilities used primarily by the Construction business as well as performance guarantees for certain Development business commercial built form developments. Guarantee fees are charged under normal terms and conditions.

The following represents the transactions that occurred during the financial year and the balances outstanding at year end between Lendlease Corporation Limited and its consolidated entities.

Corporation Limited and its consolidated entities.
	COMPANY
	June 2019 $000s June 2018 $000s
Transactions Guarantee fees
	29,497 36,481
Dividend income	306,217 795,156
Interest income	10,249 10,212
Interest expense	106,282 61,027
Outstanding Balances (Net of Provisions Raised) Receivables
	4,730,795 3,435,339
Payables	4,772,546 3,409,408

Transactions that occurred during the financial year between entities in the Lendlease Group included:

Provision of project management, design services, construction management and engineering services to development projects;
Provision of development management services;

In respect of the contingent liabilities of the Group disclosed in Note 26 ‘Contingent Liabilities’, the Company participates in the provision of guarantees to Group entities.

Provision of investment management services;
Provision of payroll, transaction and management services;
Receipt and payment of superannuation contributions;
Reimbursement of expenses made on behalf of subsidiaries;
Loan advances and repayments between subsidiaries;
Premium payments and receipts for the Group’s insurance policies; and
Dividends received or due and receivable from subsidiaries.

Lendlease Annual Report 2019 / Financial Statements / 179

178 /

Notes to Consolidated Financial Statements continued

Section E: Basis of Consolidation continued

30. Related Party Information continued

Section F: Other Notes

31. Intangible Assets

b. Associates and Joint Ventures

Interests held in associates and joint ventures by Lendlease are set out in Note 12 ‘Equity Accounted Investments’.

Transactions between the Lendlease Group and its associates and joint ventures principally relate to:

Development: development management services, infrastructure bid and advisory services and the sale and purchase of development properties with Lendlease managed funds;
Construction: provision of project management, building, engineering and construction services; and
Investments: provision of property and infrastructure investment management, property management and asset management services.

There were no non interest bearing loans provided to joint ventures at 30 June 2019 (June 2018: $nil).

Except as noted above, transactions and outstanding balances are typically on normal terms and conditions.

Revenue earned by Lendlease during the year as a result of transactions with its associates and joint ventures is as follows:

	June 2019	June 2018
	$000s	$000s
Revenue
Associates	5,808	5,917
Joint ventures	1,197,961	1,195,750
Total	1,203,769	1,201,667

Other transactions and outstanding balances with associates, joint ventures and other related parties have been disclosed in Note 4 ‘Revenue from Contracts with Customers’, Note 6 ‘Other Income’, Note 7 ‘Other Expenses’, Note 8 ‘Finance Revenue and Finance Costs’, Note 13 ‘Other Financial Assets’, Note 21 ‘Loans and Receivables’ and Note 22 ‘Trade and Other Payables’. Transactions with joint operations are included in the consolidated Income Statement and Statement of Financial Position.

c. Key Management Personnel

The key management personnel compensation is as follows:

c. Key Management Personnel The key management personnel compensation is as follows:
	June 2019	June 2018
	$000s	$000s
Short term employee benefts	16,388	15,545
Post employment benefts	398	381
Security based payments	11,135	9,368
Other long term benefts	299	176
Total	28,220	25,470

Information regarding individual Directors’ and senior executives’ remuneration is provided in the Remuneration Report within the Directors’ Report.

Accounting Policies

Goodwill represents the excess of the purchase price over the fair value of the Group’s share of the net identifiable assets and contingent liabilities of the acquired business at the date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets as goodwill. Goodwill on acquisition of associates is included in the carrying value of investments in associates.

Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Goodwill is not amortised. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

For the purposes of impairment testing, goodwill is allocated to cash generating units (CGUs) (or groups of CGUs), that are expected to benefit from the business combination in which the goodwill arose. CGUs are an identifiable group of assets that generate cash associated with the goodwill. Management considers this is an area of estimation uncertainty as these calculations involve an estimation of the recoverable amount of the CGU to which the goodwill is allocated. The Construction CGU uses the value in use basis, which requires the Group to estimate the future cash flows expected to arise from the CGU and a suitable discount rate in order to calculate the recoverable amount.

Management agreements and other intangible assets acquired by the Group are stated at cost less accumulated amortisation and impairment losses (see Note 7 ‘Other Expenses’). Amortisation is charged to the Income Statement on a straight line basis over the estimated useful lives of the intangible assets, ranging from three to 20 years.

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Financial Disclosure June 2019 June 2018
Note $m $m
Goodwill 31a 1,232 1,215
Management agreements 39 42
Other intangibles 186 164
Total intangible assets 1,457 1,421
a. Goodwill
Construction 1,200 1,185
Development 32 30
Total goodwill 1,232 1,215
Reconciliations
Reconciliations of the carrying amounts for each category of goodwill are as follows:
Construction
Carrying amount at beginning of financial year 1,185 1,165
Effect of foreign exchange rate/other movements 15 20
Carrying amount at end of financial year 31b 1,200 1,185
Development
Carrying amount at beginning of financial year 30 29
Effect of foreign exchange rate movements 2 1
Carrying amount at end of financial year 32 30
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Lendlease Annual Report 2019 / Financial Statements / 181

180 /

Notes to Consolidated Financial Statements continued

Section F: Other Notes continued

31. Intangible Assets continued

b. Goodwill Allocation

Goodwill relating to the Construction business is allocated to CGUs identified as set out below. During the financial year, the Group has identified an additional segment Non core - Engineering and Services as noted in Note 1 ‘Segment Reporting’. As a result of this change in segments, the Group has identified a corresponding change in CGU for goodwill impairment testing. The Construction Australia CGU has now been split into two CGUs, Construction Australia Core and Construction Australia Non core. Construction Australia Non core contains the Engineering and Services business. Goodwill has been re-allocated to each CGU on a relative value basis.

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June 2019 June 2018
$m $m
Construction
Australia 743
Australia Core 573
Australia Non core 170
Europe 248 244
Americas 201 190
Asia 8 8
Total construction goodwill 1,200 1,185
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c. Impairment Tests and Key Assumptions Used – Construction

The recoverable amount of the Construction CGUs is determined based on value in use (VIU) calculations. For the Construction CGUs, the assumptions used for determining the recoverable amount of each CGU are based on past experience and expectations for the future, utilising both internal and external sources of data and relevant industry trends.

No impairment arose as a result of the review of goodwill for the Construction CGUs for the year ended 30 June 2019. Based on information available and market conditions at 30 June 2019, a reasonably foreseeable change in the assumptions made in this assessment would not result in impairment of Construction goodwill.

The following describes the key assumptions on which management has based its cash flow projections when determining VIU relating to the Construction CGUs.

Cash Flows

The VIU calculations use pre tax cash flow projections based on actual operating results, and financial forecasts covering a five year period which have been approved by management. These forecasts are based on management estimates to determine income, expenses, capital expenditure and cash flows for each CGU.

Growth Rate

The terminal value growth rate used to extrapolate the cash flows beyond the five year period is 3.0 per cent (June 2018: 3.0 per cent). The growth rate reflects the forecast long term average growth rate for each CGU and the countries in which they operate.

Discount Rate

The discount rates applied to the cash flow projections vary between 10.0 per cent and 13.2 per cent (June 2018: between 10.1 per cent and 13.2 per cent)[1] . The Group’s weighted average cost of capital is used as a starting point for determining the discount rate, with appropriate adjustments for the risk profile relating to the relevant CGUs and the countries in which they operate. The discount rates used are pre tax.

The June 2018 pre tax discount rates have been restated to reflect a change in calculation methodology during the current financial year. There is no impact to the impairment assessment at June 2018 as a result of this change.

32. Defined Benefit Plans

Accounting Policies

Group companies operate pension plans. The plans are generally funded through payments to insurance companies or trustee administered funds as determined by periodic actuarial calculations.

A defined benefit plan is a pension plan that defines the amount of pension benefit an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The asset or liability recognised in the Statement of Financial Position in respect of defined benefit plans is the present value of the defined benefit obligation i.e. ‘the pension liability’ at the balance sheet date less the fair value of plan assets. The present value of the pension liability is determined by discounting the estimated future cash outflows using interest rates of high quality corporate or government bonds, that:

Are denominated in the currency in which the benefits will be paid; and

• Have terms to maturity approximating the terms of the related pension liability.

The defined benefit obligation is calculated at least annually by independent actuaries using the projected unit credit method, which in simplistic terms proportions the benefit based on service. Management considers the valuation of defined benefit plans undertaken by the actuaries to be an area of estimation uncertainty as a number of key assumptions must be adopted to determine the valuation.

Actuarial losses/(gains) will arise where there is a difference between previous estimates and actual experience, or a change to assumptions in relation to demographic and financial trends. These actuarial losses/(gains) are recognised in the period they occur, directly in other comprehensive income as remeasurements. They are included in retained earnings in the Statement of Changes in Equity and in the Statement of Financial Position.

Past service costs are recognised immediately in the Income Statement.

Financial Disclosure		June 2019	June 2018
	Note	$m	$m
Lend Lease Superannuation Plan		1	4
Lend Lease UK Pension Scheme	32a	139	151
Total defned beneft plan asset		140	155

a. Lend Lease UK Pension Scheme

Lendlease Construction Holdings (Europe) Limited (UK Construction) sponsors a funded defined benefit pension scheme (the Scheme) for qualifying UK employees. The Scheme is administered by a separate board of Trustees which is legally separate from UK Construction. The Scheme’s Trustees are composed of representatives of both the employer and employees. The Trustees are required by law to act in the interest of all relevant beneficiaries and are responsible for the investment policy with regard to the assets plus the day to day administration of the benefits.

The Scheme is a funded defined benefit scheme, with final salary section providing retirement benefits based on final salary and the index linked section providing retirement benefits based on career average salary. A separate section, the Personal Investment Section, provides retirement benefits on a defined contribution basis. The UK Construction’s contributions to members’ Personal Investment Fund accounts are not included in these disclosures.

The final salary section closed to future accruals on 31 August 2008 and the index linked section closed to future accruals on 31 January 2012. There were no Scheme amendments affecting defined benefits payable, curtailments or settlements during the year. UK Construction pays deficit funding contributions plus four per cent of members’ basic salaries to cover the Scheme’s expected administration costs and costs of benefits payable on death in service. The Scheme expects to pay $21 million in contributions to its defined benefit plan in 2019. This includes the annual deficit recovery payment as well as a one off contribution of $16 million, following the triennial valuation for 31 March 2017 where deficit repair contributions have been agreed for the period to March 2024. These contributions reduce the actuarial deficit.

The defined benefit plan is exposed to actuarial risk and market (investment) risk. Information which follows provides additional detail on risk.

Financial Disclosure	June 2019	June 2018
	$m	$m
i. Statement of Financial Position Amounts
The amounts recognised in the Statement of Financial Position are determined as follows:
Defned beneft obligations	(1,208)	(1,077)
Fair value of plan assets	1,347	1,228
Net defned beneft plan asset	139	151

Lendlease Annual Report 2019 / Financial Statements / 183

182 /

Notes to Consolidated Financial Statements continued

Section F: Other Notes continued

Defined Benefit Plans continued

32. Defned Beneft Plans continued
	June 2019	June 2018
Financial Disclosure	$m	$m
ii. Reconciliation of Defned Beneft Obligations
Defned beneft obligations at beginningof fnancialyear	1,077	1,140
Included in Income Statement
Interest cost	30	29
Remeasurements Included in Other Comprehensive Income
Actuarial loss/(gain) arising from:
Financial assumptions	116	(87)
Experience adjustments	7	24
Demographic assumptions	7	(32)
Other
Benefts paid	(48)	(56)
Efect of foreign exchange rate movements	19	59
Defned beneft obligations at end of fnancialyear	1,208	1,077
iii. Reconciliation of the Fair Value of Plan Assets
Fair value of plan assets at beginningof fnancialyear	1,228	1,199
Included in Income Statement
Interest income	35	31
Administration costs	(4)	(4)
Remeasurements Included in Other Comprehensive Income
Actual return on plan assets excludinginterest income	83	(23)
Other
Contributions byGroup companies	31	18
Benefts paid	(48)	(56)
Efect of foreign exchange rate movements	22	63
Fair value ofplan assets at end of fnancialyear	1,347	1,228
iv. Expense Recognised in the Income Statement
Net interest cost	(5)	(2)
Administration costs	4	4
Net defned beneftplan (income)/expense	(1)	2
v. Fair Value of Plan Assets
Plan assets comprise of:
Global equities	422	382
Investment funds	417	359
Infrastructure	82	120
Government index linked bonds	335	305
Other assets	91	62
Fair value ofplan assets at the end of the fnancialyear	1,347	1,228

Financial Disclosures	June 2019	June 2018
vi. Principal Actuarial Assumptions
Discount rate (%)	2.3	2.8
RPI infation (%)	3.4	3.3
Average pension increase in payments (%)	2.7	2.7
Future mortality (years):
Male	24.9	24.8
Female	26.4	26.3

The liabilities are calculated using a discount rate set with reference to corporate bond yield. If assets underperform this yield will create a deficit.

A decrease in corporate bond yield will increase the value placed on the Scheme’s liabilities, although this will be partially offset by an increase in the value of the Scheme’s corporate bond holdings. The majority of the Scheme’s benefit obligations are linked to inflation and higher inflation will lead to higher liabilities, although in most cases this will be capped to protect against extreme inflation. The majority of the assets are either unaffected by or loosely correlated with inflation, meaning that an increase in inflation will also increase the deficit. The majority of the Scheme’s obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the liabilities. The mortality assumptions are based on standard mortality tables which allow for expected future mortality improvements. The assumption is that a member aged 63 will live for a further 24.9 years (June 2018: 24.8 years) if they are male and 26.4 years if they are female (June 2018: 26.3 years).

At 30 June 2019, the weighted average duration of the defined benefit obligation was 19 years (June 2018: 19 years).

vii. Sensitivity Analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligations by the amounts shown below.

	0.1% Increase in Discount Rate $m 0.1% Decrease in Discount Rate $m 0.1% Increase RPI Infation and Pension Payment $m	0.1% Decrease RPI Infation and Pension Payment $m 1 Year Increase in Future Mortality $m	1 Year Decrease in Future Mortality $m
June 2019 Defned beneft asset/(obligations) 21 (20) (16) 13 (41) 41
June 2018 Defned beneft asset/(obligations) 20 (20) (16) 12 (40) 39

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Non pensioner benefits are linked to RPI in the period up to retirement. Once in payment, pension increases are linked to RPI but with a zero per cent floor and different caps applying to different periods of pensionable service. The inflation sensitivity reflects a change in RPI inflation and the associated increases in payment.

The investment funds target an absolute level of return. The plan assets can be categorised as Level 1, where the fair value is determined using an unadjusted quoted price for an identical asset, or Level 2, where the fair value is derived either directly or indirectly from observable inputs, or Level 3, where inputs are unobservable (i.e for which market data is unavailable). At year end, approximately $1,246 million (June 2018: $1,214 million) and $82 million (June 2018: nil) of total plan assets were categorised as Level 2 and Level 3 respectively. UK Construction and Trustees have agreed a long term strategy for reducing investment risk as and when appropriate. This includes an asset–liability matching policy which aims to reduce the volatility of the funding level of the pension plan by investing in assets that perform in line with the liabilities of the plan so as to protect against inflation being higher than expected. The current benchmark allocation is 75.0 per cent growth assets and 25.0 per cent matching assets (June 2018: 75.0 per cent growth assets and 25.0 per cent matching assets).

Lendlease Annual Report 2019 / Financial Statements / 185

184 /

Notes to Consolidated Financial Statements continued

Section F: Other Notes continued

33. Employee Benefits

Detailed information regarding the Group’s Executive Reward strategy is provided in the Remuneration Report within the Directors’ Report. The key incentive plans are as follows:

Short Term Incentive (STI);
Short Term Award (STA);
Long Term Incentive (LTI);
Long Term Award (LTA); and
Distinguished Executives Award (DE Award).

Short Term Incentive (STI)

a.

The STI plan is an annual incentive plan whereby a number of employees receive benefits which are dependent upon the achievement of both Lendlease financial and non financial targets, and individual goals. The total value of the potential benefit varies by individual and is tested against relevant market levels for each role.

The STI plan comprises a cash component, which is paid in September following year end. For more senior employees, where the potential benefit is typically higher, the plan also includes a deferred component.
Deferral periods are generally for one or two years. The deferred component is normally awarded as Lendlease securities and in some instances as cash. Securities are held in Lendlease employee security plan trusts on behalf of employees for the deferral period (refer to Note 28a ‘Employee Security Plans’). For employees to receive the deferred component in full, they must generally be employed by the Group at the time of vesting.

b. Short Term Award (STA)

The STA plan is an annual incentive plan which replaces the STI for a limited number of senior executives from 2019. It is designed to focus senior executives on priority areas for delivery in the current financial year, including key Group financial targets, safety and other non financial targets aligned to the Group’s areas of focus.

Whilst performance is assessed against a set of group metrics when determining awards, the Board will assess the overall performance and contribution of individual senior executives, with a particular focus on safety.

The total value of the potential benefit varies by individual and is set with reference to both internal peers and external market levels. The STA plan is intended to be awarded as cash in September following year end.

c. Long Term Incentive (LTI)

The LTI plan is designed to:

Motivate executives to achieve the Group’s long term strategic goals and provide reward where the Group delivers better value to securityholders than its peers; and
Align the interests of executives and securityholders, given that the reward received is linked to the Group’s security price and average Return on Equity performance.

A summary of arrangements for LTI awards is provided in Note 33d below.

d. Long Term Award (LTA)

The LTA plan replaces the LTI for a limited number of executives from 2019. It is designed to motivate and reward key executives to deliver on the Group’s long term strategy and to allow them to share in the value created for securityholders. Specifically, the objectives are to:

Create rewards that are aligned to earnings
Align the interests of securityholders and our most senior executives
Promote team behaviours and an enterprise leadership mindset
Retain the senior executive team

The intended outcome is that reward and strategy are better aligned.

Arrangements for LTI awards

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LTI design How the LTI works
Performance • An annual grant of ‘performance securities’ is made to a limited number of executives.
Securities • The Board intends that the awards be settled in Lendlease securities, although the award may be settled in cash or
other means at the Board’s discretion.
• On vesting, each performance security entitles executives to one Lendlease stapled security, or at the Board’s
discretion, cash or other instruments of equivalent value.
• In the event of a change in control of the Group, the Board has the discretion to determine whether the vesting of
some or all performance securities should be accelerated.
Performance • 50 per cent of the performance securities are assessed over a three year period. If the performance hurdle is not
Period (applicable fully achieved at this time, those performance securities that have not vested will lapse.
to June 2015 to • The remaining 50 per cent of the performance securities are assessed after four years.
2018 financial • If the performance hurdle is not met, the awards are forfeited.
years) • There is no retesting on any portion of the LTI grant.
Performance • 100 per cent of the performance securities are assessed over a three year period. If the performance hurdle is not
Period (applicable fully achieved at this time, those performance securities that have not vested will lapse.
to June 2019 • If the performance hurdle is not met, the awards are forfeited.
financial year) • There is no retesting on any portion of the LTI grant.
Termination of • If the executive resigns or is terminated for cause, the unvested LTI is forfeited.
Employment • If the executive is terminated and if the Board considers vesting would provide a benefit that was unwarranted or
inappropriate, the Board can adjust unvested LTI prior to the vesting date.
• For ‘good leavers’, the LTI grant may remain on foot, subject to the original performance hurdles.
• In exceptional circumstances (such as death or total permanent disability), the Board may exercise discretion and
settle the award at the time of termination of employment.
Performance June 2014 to 2019 Financial Years
Hurdles
• 50 per cent subject to Lendlease’s Total Securityholder Return (TSR) compared to the companies in the S&P/ASX
100 Index. The S&P/ASX 100 companies are determined at the start of the performance period.
• 50 per cent subject to Average Return on Equity (ROE) hurdle.
Vesting Schedule Percentage of relative TSR performance securities that
– TSR Relative TSR percentile ranking vest if the hurdle is met
(applicable to
June 2015 to 2019 Below the 50th percentile No vesting
financial years)
At the 50th percentile 50 per cent vesting
At or above the 51st percentile but below the 75th Pro rata vesting on a straight line basis between 52 per cent
percentile and 98 per cent
At the 75th percentile or greater 100 per cent vesting
Vesting Schedule Percentage of ROE performance securities that vest if the
– ROE Average ROE over the performance period hurdle is met
(applicable to June
2015 to 2017 Less than 11 per cent No vesting
financial years)
Pro rata vesting on a straight line basis between 25 per cent
At or above 11 per cent but below 15 per cent
and 100 per cent
15 per cent or greater 100 per cent vesting
Vesting Schedule Average ROE over the Percentage of ROE performance securities that vest if the
– ROE performance period hurdle is met
(applicable to June
2018 to 2019 10 per cent or less No vesting
financial years)
Pro rata vesting on a straight line basis between 0 per cent and
Above 10 per cent but below 14 per cent
100 per cent
14 per cent or greater 100 per cent vesting
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Lendlease Annual Report 2019 / Financial Statements / 187

186 /

Notes to Consolidated Financial Statements continued

Section F: Other Notes continued

33. Employee Benefits continued

Arrangements for LTA awards

LTA design How the LTA works

Performance • An annual grant of ‘performance rights’ is made to a limited number of executives on the Global Leadership Team. Rights • The Board intends that the awards be settled in Lendlease securities, although some or all of the award may be settled in cash at the Board’s discretion.
Performance rights are rights to receive a variable number of Lendlease securities or at the discretion of the Board, cash with an equivalent value, upon vesting.
Outcomes against performance hurdles will determine how many Lendlease securities will be received following vesting between a minimum and maximum number.
In the event of a change in control of the Group, the Board has the discretion to determine whether the vesting of some or all performance rights should be accelerated.
Performance • 100 per cent of the performance rights are assessed over a three year period and the number of Lendlease Period (applicable securities that may be delivered on vesting is determined. The first tranche will vest immediately thereafter, and to June 2019 the second, third and fourth tranches will be deferred and will vest progressively four, five and six years after the financial year) grant date.
If the performance hurdle is not met, the awards above the minimum award number are forfeited
There is no retesting on any portion of the LTA grant.
Termination of • If the executive resigns and becomes engaged in activities that are competitive with the Group or is terminated for Employment cause, the unvested LTA is forfeited.
If the executive is terminated and if the Board considers vesting would provide a benefit that was unwarranted or inappropriate, the Board has the discretion to lapse some or all performance rights prior to the vesting date.
• For ‘good leavers’, the LTA grant may remain on foot, subject to the original performance hurdles.

Performance June 2019 Financial Year Hurdles

50 per cent subject to Lendlease’s Total Securityholder Return (TSR) compared to the companies in the S&P/ASX 100 Index. The S&P/ASX 100 companies are determined at the start of the performance period.
• 50 per cent subject to Return on Equity (ROE) hurdle.

Vesting Schedule - TSR (applicable to June 2019 fnancial year) Vesting Schedule – ROE (applicable to June 2019 fnancial year)	Relative TSR percentile ranking Percentage of relative TSR performance securities that vest if the hurdle is met (Group CEO) Percentage of relative TSR performance securities that vest if the hurdle is met (Senior Executives)
	Below the 50th percentile 13.5 per cent vesting (Award Minimum) 31.25 per cent vesting (Award Minimum)
	At the 50th percentile 50 per cent vesting 50 per cent vesting
	At or above the 51st percentile but below the 75th percentile Pro rata vesting on a straight line basis between 54 per cent and 146 per cent Pro rata vesting on a straight line basis between 56 per cent and 194 per cent
	At the 75th percentile or greater 150 per cent vesting 200 per cent vesting
	Average ROE over the performance period Percentage of ROE performance securities that vest if the hurdle is met (Group CEO) Percentage of ROE performance securities that vest if the hurdle is met (Senior Executives)
	10 per cent or less 13.5 per cent vesting (Award Minimum) 31.25 per cent vesting (Award Minimum)
	Between 10 per cent and the target ROE per cent set by the Board Pro rata on a straight line basis between 13.5 per cent and 100 per cent Pro rata on a straight line basis between 31.25 per cent and 100 per cent
	At the target ROE per cent set by the Board 100 percent vesting 100 per cent vesting
	Between the target ROE per cent set by the Board and 14 per cent Pro rata vesting on a straight line basis between 100 per cent and 150 per cent Pro rata vesting on a straight line basis between 100 per cent and 200 per cent
	At 14 percent or above 150 per cent vesting 200 per cent vesting

e. Distinguished Executives Award

The Distinguished Executives Award (DE Award) is a program established to recognise and reward Lendlease technical mastery and significant contribution to the business. DE Awards are generally deferred over five and seven years. The deferred component is awarded as Lendlease securities and held in Lendlease employee security plan trusts on behalf of the employees. For employees to receive the deferred component, they must generally be employed by the Group at the time of vesting. DE Awards are valued based on the average price of on market purchases made in respect of these awards at the time of grant.

f. Amounts Recognised in the Financial Statements

LTI and LTA awards are valued using Monte-Carlo simulation methodology where the security price can be projected based on the assumptions underlying the Black-Scholes formula. Retention awards are valued by discounting the security price by the expected dividends assumed to be paid from the valuation date until the vesting date (if applicable). The model inputs include the Lendlease Group security price, a risk free interest rate, expected volatility and dividend yield. During the financial year ended 30 June 2019, a $50 million expense was recognised in the Income Statement in relation to equity settled security based payment awards (June 2018: $45 million).

34. Impact of New and Revised Accounting Standards

New and Revised Accounting Standards Adopted 1 July 2018

From 1 July 2018 the Group adopted AASB 15 Revenue from Contracts with Customers and consequential amendments. AASB 15 provides a new model for recognising revenue earned from a contract with a customer. AASB 15 is based on the principle that revenue is recognised when control of a good or service is transferred to a customer.

The Group utilised the cumulative approach to transition to AASB 15, therefore comparatives have not been restated. Comparatives continue to be accounted for in accordance with the Group’s previous accounting policies outlined in the 30 June 2018 annual consolidated financial report.

The Group has assessed that all contracts where goods and services have been transferred in accordance with AASB 111 Construction Contracts , AASB 118 Revenue and related interpretations at 1 July 2018 are considered completed contracts, and therefore have not been retrospectively adjusted. There has been no material financial impact as a result of adopting AASB 15 and therefore no adjustments to opening retained earnings. New disclosures have been included where required. Changes to disclosures include reclassification of prior period balances to align the presentation of comparative information to the new disclosure requirements.

See below for details on impact on adoption of the new standard:

Revenue	Recognition in previous reporting periods	Recognition under AASB 15
Construction and	Revenue was recognised in proportion to the stage of completion of	The Group continues to recognise
Development	the transaction measured by reference to contract costs incurred to	revenue over time on a percentage of
services	date as a percentage of total forecast contract costs.	completion basis by reference to contract
		costs incurred to date as a percentage of
		total forecast contract costs.
Investment services	Revenue was recognised as services were rendered.	Revenue continues to be recognised as
		services are rendered.
Sale of development	Revenue was recognised when the signifcant risks and rewards of	The revenue recognition point for the
properties	ownership had been transferred to the buyer, this was at practical	sale of development properties has
	completion of the asset. For the year ended 30 June 2019, revenue	changed under the new standard from
	recognised based on this policy would have resulted in an increase	practical completion to settlement.
	to the Group's revenue by $148 million and an increase in cost of
	sales by $109 million. Trade receivables and inventories would have
	been adjusted by these amounts respectively.

Lendlease Annual Report 2019 / Financial Statements / 189

188 /

Notes to Consolidated Financial Statements continued

Section F: Other Notes continued

34. Impact of New and Revised Accounting Standards continued

35. Other Significant Accounting Policies

a. Foreign Currency Translation

Functional and Presentation Currency

New Accounting Standards and Interpretations Not Yet Adopted

Accounting Standard	Requirement	Impact on Financial Statements
AASB 2014-10	AASB 2014-10 amends AASB 10 and AASB 128 to	Based on preliminary analysis performed, the
Amendments to	clarify the requirements for recording the sale or	amendments are not expected to have a material impact
Australian Accounting Standards – Sale or Contribution of Assets	contribution of assets between an investor and its associate or joint venture.	on the Group.
between an Investor and	The amendment becomes mandatory for the June
its Associate or Joint	2023 fnancial year and will be applied prospectively.
_Venture_and
consequential
amendments
AASB 16	AASB 16 provides a new model for accounting for	Based on analysis performed, as a lessor, there is no
Leases	leases.	material impact on the Group.
	The standard becomes mandatory for the June 2020	As a lessee, on adoption the Group estimates it will:
	fnancial year and will be applied retrospectively using a cumulative approach.	• Record a ‘right to use’ lease asset of approximately $465 million and lease obligation liabilities of
	Using this approach, there is no requirement to	approximately $547 million in the Statement of
	restate comparatives.	Financial Position for its material operating lease
	When applying this method, the Group can elect to	commitments;
	apply a number of practical expedients on transition.	• The net diference between these balances will be
	The Group expects to apply the following practical	recorded as an adjustment to equity to refect the
	expedients:	cumulative impact on initial adoption of the
	• The ability to not reassess whether a contract is	standard; and

The ability to not reassess whether a contract is, or contains, a lease at the date of initial application;
Revise the Income Statement presentation of operating lease expense to record an amortisation and finance expense for the ‘right to use’ lease assets and the lease obligation liabilities, respectively. The estimated impact to the Income Statement for the June 2019 financial year would have been an approximately $15 million increase in expense.
The application of a single discount rate to a portfolio of leases;
• The use of hindsight in determining the lease term; and
• The decision to exclude a lease for which the lease term ends within 12 months of initial application.

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial report is presented in Australian dollars, which is the Company’s functional and presentation currency.

Transactions and Balances

Foreign currency transactions are translated into Australian dollars using the exchange rate on the date of the transactions. Assets and liabilities denominated in foreign currencies are translated to Australian dollars at balance date.

Foreign exchange gains or losses are recognised in the Income Statement for monetary assets and liabilities such as receivables and payables, except for qualifying cash flow hedges and qualifying net investment hedges in foreign operations that are recognised in other comprehensive income. Refer to Note 24 ‘Hedging’ for further detail.

Translation differences on non monetary items, such as equities held at fair value through profit or loss, are reported as part of the fair value gain or loss.

Group Entities

The results and Statement of Financial Position of all Group entities that are not presented in Australian dollars (none of which has the currency of a hyperinflationary economy) are translated as follows:

Revenue and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of transaction rate, in which case revenue and expenses are translated at the date of the transactions);
Assets and liabilities for each Statement of Financial Position presented are translated at the closing rate at balance date; and
All resulting exchange differences are recognised in other comprehensive income, in the foreign currency translation reserve.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

b. Goods and Services Tax

Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the Australian Taxation Office (ATO) is included as a current asset or liability in the Statement of Financial Position. Cash flows are included in the Statement of Cash Flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

Lendlease Annual Report 2019 / Financial Statements / 191

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Directors’ Declaration

In the opinion of the Directors of Lendlease Corporation Limited (the Company):

The financial statements and notes and the remuneration disclosures contained in the Remuneration Report in the Directors’ Report are in accordance with the Corporations Act 2001, including:

Independent Auditor’s Report

a. Giving a true and fair view of the financial position of the Company and Consolidated Entity as at 30 June 2019 and of their performance for the financial year ended on that date; and
b. Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.

To the members of Lendlease Corporation Limited

The financial statements and notes also comply with International Financial Reporting Standards as disclosed in the Basis of Preparation.
There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Report on the audit of the Financial Report

The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Group Chief Executive Officer and Group Chief Financial Officer for the financial year ended 30 June 2019.

Opinion

Signed in accordance with a resolution of the Directors:

M J Ullmer, AO

Chairman

S B McCann

Group Chief Executive Officer and Managing Director

Sydney, 19 August 2019

We have audited the Financial Report of Lendlease Corporation Limited as the deemed parent presenting the stapled security arrangement of Lendlease Group (the Financial Report).

In our opinion, the accompanying

Financial Report is in accordance with the Corporations Act 2001 , including:

giving a true and fair view of the Lendlease Group’s financial position as at 30 June 2019 and of its financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001 .

The Financial Report of Lendlease Group comprises:

Consolidated statement of financial position as at 30 June 2019;
Consolidated income statement, Consolidated statement of comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended;
Notes including a summary of significant accounting policies; and
Directors' Declaration.
The Lendlease Group (the Group) consists of Lendlease Corporation Limited and the entities it controlled at the year end or from time to time during the financial year and Lendlease Trust.
Shares in Lendlease Corporation Limited and units in Lendlease Trust are jointly traded as a Stapled Security on the Australian Securities Exchange under the name of Lendlease Group.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards . We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report.

We are independent of Lendlease Group and Lendlease Corporation Limited in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.

KPMG, an Australian partnership and a member firm of the KPMG Liability limited by a scheme approved under network of independent member firms affiliated with KPMG Professional Standards Legislation. International Cooperative (“KPMG International”), a Swiss entity.

Lendlease Annual Report 2019 / Financial Statements / 193

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Key Audit Matters

The Key Audit Matters we identified for Lendlease Group are:

Construction Revenue Recognition
Development Revenue Recognition
Recoverability of Development Property Inventory

Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period.

These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

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The revenue on construction contracts may also include variations and claims, which fall under either the variable consideration or contract modification requirements of AASB 15. These are recognised on a contract-by-contract basis when evidence supports that it is highly probable that a significant reversal in the amount of revenue recognised will not occur.

Development Revenue recognition (A$2,569m)

correspondence between the Group and the customer;
The Group’s legal basis for the variations and claims includes, where necessary external legal opinions; and
Management’s evidence of the amounts they consider meet the recognition requirement of highly probable including historical experience in resolving variations and claims, commercial factors and the linkage of additional costs incurred to the claim or variation.
Asset Valuation

Refer to Note 4 ‘Revenue from Contracts with Customers’ to the financial report

Construction Revenue Recognition (A$12,819m)

Refer to Note 4 ‘Revenue from Contracts with Customers’ to the financial report

Construction Revenue Recognition (A$12,819m)	Construction Revenue Recognition (A$12,819m)
Refer to Note 4 ‘Revenue from Contracts with Customers’ to the financial report
The key audit matter	How the matter was addressed in our audit
The Group performs various building, engineering and services construction contract works (projects) for a wide range of customers. The Group contracts in a variety of ways. Each project has a different risk profile based on its individual contractual and delivery characteristics. Revenue on construction contracts is earned over time typically using costs incurred as a proportion of total forecast costs as the measure of progress. We focused on construction revenue due to the judgment required in assessing the range of factors that impact the Group’s estimate of costs and revenue, and the potential impact on profit. Estimating total forecast costs to complete during project life is complex and requires judgment. Typical cost estimates include labour, subcontractors, equipment, materials, and project overheads. Changes to these cost estimates could give rise to variances in the amount of revenue recognised.	Our procedures included: • Evaluation and testing of management’s review and approval of revenue and cost forecasting; • Selection of a sample of contracts for testing using: - Data Analytic routines based on a number of quantitative and qualitative factors, related to size and risk of projects; and - the Group’s project reporting tool. • For the sample selected, we: - conducted visits to a selection of project sites to understand project schedule, forecast revenue/cost and risks and opportunities and worked with KPMG engineering specialists where required; - read relevant contract terms and conditions to evaluate the inclusion of individual characteristics and project risks in the Group’s estimates; - tested incurred costs to supplier invoices or other supporting evidence; - tested forecast costs for labour, subcontractors, equipment, materials, and project overheads by comparing to actual incurred spend and committed future contracts; and - tested the variations and claims included within revenue against the criteria for recognition in the accounting standards via assessment of:

The revenue on construction contracts may also include variations and claims, which fall under either the variable consideration or contract modification requirements of AASB 15. These are recognised on a contract-by-contract basis when evidence supports that it is highly probable that a significant reversal in the amount of revenue recognised will not occur.	`o` correspondence between the Group and the customer; `o` The Group’s legal basis for the variations and claims includes, where necessary external legal opinions; and `o` Management’s evidence of the amounts they consider meet the recognition requirement of highly probable including historical experience in resolving variations and claims, commercial factors and the linkage of additional costs incurred to the claim or variation.
Development Revenue recognition (A$2,569m)
Refer to Note 4 ‘Revenue from Contracts with Customers’ to the financial report
The key audit matter	How the matter was addressed in our audit
The Group develops for sale both built form product (for example residential apartments, commercial and retail buildings) and residential land communities. As development revenue is recognised based on an assessment of when control transfers to the purchaser, an assessment of the contractual terms of sale is required. This was a key audit matter due to the number of judgments required by us in assessing development revenue and profit recognition, in particular for commercial and retail building. The assessment of profit recognition includes judgment as cost allocation for site infrastructure costs is typically based on the proportion of revenue for each unit, lot or building as compared to total forecast project revenue.	Our procedures included: • Evaluation and testing of management’s review and approval of development revenue and cost forecasting; • Selection of a sample of developments based on quantitative and qualitative information such as transaction size, settlements and the complexity of the contractual terms of sale; and • For the sample selected we: - compared revenue recognised to contractual terms of sale and cash settlements; - assessed the Group’s determination of when control transfers by a detailed analysis of the contractual terms of sale against the criteria in the accounting standards; - tested settlements by performing statistical sampling of residential land communities and apartment sales to cash proceeds; and - assessed the Group’s cost allocation methodology by comparing costs allocated to sales recognised in the year relative to the total project, against the Group’s accounting policy and the requirements of the accounting standards.

Lendlease Annual Report 2019 / Financial Statements / 195

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Asset Valuation

Recoverability of Development Property Inventory (A$4,376m)

Refer to Note 11 ‘Inventories’ to the financial report

Recoverability of Development Property Inventory (A$4,376m)	Recoverability of Development Property Inventory (A$4,376m)
Refer to Note 11 ‘Inventories’ to the financial report
The key audit matter	How the matter was addressed in our audit
The Group capitalises development costs into inventory over the life of its projects. Development costs include the purchase of land, site infrastructure costs, construction costs for built form product and borrowing costs. Inventory is carried at the lower of cost and net realisable value and the recoverability of these costs is a significant judgment as the assessment is based on forecasts of: • sales prices • forecast construction and infrastructure costs to complete the development Where a development is forecast to be loss making and the inventory is no longer considered to be recoverable, it is considered to be impaired and an expense is recognised. This was a key audit matter due to many developments being long term, which increases the level of forecasting judgment and audit complexity in estimating sales prices and future costs to complete the development.	Our procedures included: • Selection of a sample of projects for testing using: - Data Analytic routines based on a number of quantitative and qualitative factors, related to size, duration and risk of projects; and - the Group’s project reporting tool. • For the sample selected, we: - compared expected sales prices to published industry forecasts and comparable sales prices achieved in the year; and - tested forecast construction and infrastructure costs to underlying supplier contracts, historical experience of similar costs and our industry expectation of cost contingency levels and cost escalation assumptions.

Refer to Note 12 ‘Equity accounted investments’ (A$3,452m), Note 13 ‘Other Financial Assets’ (A$1,200m) and Note 25 ‘Fair Value Measurement’ to the financial report The key audit matter How the matter was addressed in our audit The Group is required to assess the value of Our procedures included: equity accounted investments and other financial • Assessment of the scope, competence and assets at each reporting date. Valuations of objectivity of external valuation experts
assets are generally performed using internal engaged by management for assets valued
valuation methodologies (discounted cash flow or by external valuation experts;
capitalised income approach) or through the use • Evaluating and testing management’s review of external valuation experts. External valuations and approval of internal valuations based on
are obtained on a routine basis by management the Group’s policies for internally valued
each year, with the remaining investments being assets;
valued internally. • Assessment of the valuation methodology for Other financial assets are predominantly consistency with accounting standards and investments in entities which in turn own industry practice for the asset’s class; and commercial and retail property. Accordingly, the • Comparing, with market data published by valuation assumptions are predominantly the commercial real estate agents and/or our capitalisation of earnings rates, discount rates, knowledge of the nature of the asset and its future rental income, capital expenditure historical performance, key assumptions such projections and leasing incentives. as:
discount rates

Equity accounted investments include the Group’s interest in the retirement living business. The key assumptions used in determining the value of retirement villages are discount rates, changes in village residents, current units/homes market prices and growth rates.

changes in village residents
units/home current market prices
capitalisation of earnings rates
- future rental income
capital expenditure projections
leasing incentives

The fair value of the properties held by various investment entities directly impacts the Group’s interests in these assets.

The valuations of these assets is a key audit matter as they:

are judgmental;
contain certain assumptions with estimation uncertainty, which are inherently challenging to audit; and
• lead to additional audit effort often due to the high number of differing assumptions and models, across varying asset classes.

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Other Information

Other Information is financial and non-financial information in Lendlease Group’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors of Lendlease Corporation Limited are responsible for the Other Information.

Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinions.

In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we have obtained prior to the date of this Auditor’s Report we have nothing to report.

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Report on the Remuneration Report

Opinion

In our opinion, the Remuneration Report of Lendlease Corporation Limited for the year ended 30 June 2019, complies with Section 300A of the Corporations Act 2001 .

Directors’ responsibilities

The Directors of Lendlease Corporation Limited are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001 .

Our responsibilities

We have audited the Remuneration Report included in pages 92 to 122 of the Directors’ report for the year ended 30 June 2019.

Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards .

Responsibilities of the Directors for the Financial Report

The Directors are responsible for:

preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001;
implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error; and
assessing Lendlease Group’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Lendlease Group or to cease operations, or have no realistic alternative but to do so.

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KPMG

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Duncan McLennan Partner

Sydney 19 August 2019

Auditor’s responsibilities for the audit of the Financial Report

Our objective is:

to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report.

A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our Auditor’s Report.

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Lendlease Annual Report 2019 / Other Information / 199

Other Information

Joan Kirner Women’s and Children’s Hospital Lendlease delivered the purpose-built Joan Kirner Women’s and Children’s Hospital in March 2019. The hospital will provide access to children’s services so women in Melbourne’s west are able to give birth closer to home.

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Lendlease Annual Report 2019 / Other Information / 201

Securityholder information

Securities exchange listing and code

Lendlease Group is listed on the Australian Securities Exchange and trades under the code LLC.

In the United States, Lendlease securities are traded on the ‘over the counter’ market in the form of sponsored American Depositary Receipts (ADRs) under the symbol LLESY. Each ADR represents one ordinary security. Information about ADRs is available from the depositary, The Bank of New York Mellon (www.adrbny.com).

Voting rights

Each stapled security in Lendlease Group and each ADR entitles the holder to one vote. Rights to Lendlease Group securities granted under Lendlease Group’s employee equity incentive plans do not carry voting rights.

Share Accumulation Plan

The Share Accumulation Plan is designed to be a convenient way for securityholders with a registered address in Australia or New Zealand to build their securityholdings without incurring transaction costs. The laws of other countries make it difficult for us to offer securities in this way. Lendlease securityholders are able to reinvest their distributions to acquire more Lendlease securities through the Distribution Reinvestment Plan (DRP) or the Share Election Plan (SEP). Securityholders may also make contributions of between $500 and $2,500 to acquire new Lendlease securities under the Share Purchase Plan (SPP). Together the DRP, SEP and SPP constitute the Share Accumulation Plan.

The rules of each of these plans are set out in the Share Accumulation Plan Information Sheet. Copies are available on the Lendlease website. Please note that the Share Election Plan and the Share Purchase Plan are currently suspended.

Key sources of information for securityholders

We report the following to securityholders each year:

Annual Report
Half Year Financial Report
March and September distribution statements.

Electronic communications

Securityholders have the option of receiving the following communications and all other Company related information electronically:

Annual Report
Distribution statements

• Notice of Annual General Meetings. Lendlease makes the Annual Report available in an online version. A hard copy of the Annual Report will only be sent to those securityholders who elect to receive it in that form. In addition, securityholders may elect to receive notification when the Annual Report is available online.

Securityholders who wish to register their email address should go to the website of the Lendlease share registry www.investorcentre.com/ecomms. For registry contact details, see page 204.

Privacy legislation

Under Chapter 2C of the Corporations Act 2001 , a securityholder’s information (including their name, address and details of securities held) is required to be included in Lendlease’s public register. This information must continue to be included in Lendlease’s public register for seven years after a person ceases to be a securityholder. These statutory obligations are not altered by the Privacy Amendment (Private Sector) Act 2000 . Information is collected to administer the securityholder’s holding and if some or all of the information is not collected, then it may not be possible to administer the holding. Lendlease’s privacy policy is available on its website.

Dispute resolution

There is a dispute resolution mechanism that covers complaints by securityholders. For more information, please contact Lendlease Investor Relations at +61 2 9236 6111 or email us at [email protected].

Distribution and Share Accumulation Plan

issue price history

For historical distribution and Share Accumulation Plan Issue Price information, please see the below link to our website www.lendlease.com/au/investor-centre/ distribution-and-tax.

Security information at a glance at 1 August 2019 (comparative 1 August 2018)

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2019 2018
Number of securityholders 63,121 56,118
Units issued 564,131,072 574,260,939
Percentage owned by 20 largest securityholders 72.18% 76.29%
Interim dividend/distribution 12.0 cents per security 34.0 cents per security
Total dividend/distribution 42.0 cents per security 69.0 cents per security
Dividend payout ratio 51% 50%
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Spread of securityholdings as at 1 August 2019 (comparative 1 August 2018)

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2019 2018
1 to 1,000 securities 33,122 29,486
1,001 to 5,000 24,680 21,939
5,001 to 10,000 3,463 3,008
10,001 to 100,000 1,764 1,602
100,001 securities and over 92 83
Total number of securityholders 63,121 56,118
2,544 2,100
Securityholders with less than a marketable parcel
(representing 28,947 securities) (representing 15,548 securities)
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Securities purchased on market

The following securities were purchased on market during the financial year for the purpose of funding employee incentive awards through Lendlease securities.

	Number of Securities Purchased	Average Price Paid Per Security
Stapled	Securities 3,241,399	$18.30

Buyback

On 21 February 2018, Lendlease Group announced an on market buyback of up to $500 million. Purchasing commenced on 13 March 2018 and the program completed in February 2019. As at 30 June 2019, Lendlease Group had purchased 20,131,011 securities under the on market buyback for a total consideration of $352 million.

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Securityholder information

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Rank Name Units % of Units
1 HSBC Custody Nominees (Australia) Limited 166,050,254 29.43
2 J P Morgan Nominees Australia Pty Limited 95,596,151 16.95
3 Citicorp Nominees Pty Limited 48,076,630 8.52
4 National Nominees Limited 24,677,663 4.37
5 LL Employee Holdings Custodian Pty Limited 14,075,522 2.50
6 BNP Paribas Noms Pty Ltd 13,400,885 2.38
7 BNP Paribas Nominees Pty Ltd 12,994,242 2.30
8 HSBC Custody Nominees (Australia) Limited 5,111,189 0.91
9 LL Employee Holdings Custodian Pty Limited 4,001,511 0.71
10 Argo Investments Limited 3,893,609 0.69
11 BNP Paribas Nominees Pty Ltd 2,716,000 0.48
12 HSBC Custody Nominees (Australia) Limited-GSCO ECA 2,627,193 0.47
13 Custodial Services Limited 2,257,201 0.40
14 Avanteos Investments Limited 2,040,383 0.36
15 BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd DRP 2,009,104 0.36
16 LL Employee Holdings Custodian Pty Limited 1,684,836 0.30
17 Citicorp Nominees Pty Limited 1,583,015 0.28
18 Netwealth Investments Limited 1,570,548 0.28
19 AMP Life Limited 1,511,170 0.27
20 HSBC Custody Nominees (Australia) Limited 1,286,615 0.23
Total Top 20 holders of fully paid ordinary shares 407,163,721 72.18
Total Remaining Holders Balance 156,967,351 27.82
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Substantial securityholders as shown in the Company’s Register at 1 August 2019

Name Date of Last Notice Received No. of Units % of Issued Capital
BlackRock Group 20/4/2017 29,288,950 5.01
The Vanguard Group 29/4/2019 33,903,122 6.01

Glossary

Co-investment: The total market value of Lendlease equity invested across Lendlease managed funds as at period end. Represents the Group’s assessment of the market value.

Construction backlog realisation: The proportion of Construction backlog revenue which is expected to be earned across future years.

Construction backlog revenue: Current year Construction backlog revenue is the total revenue to be earned across future periods.

Critical incident: An event that had the potential to have caused death or permanent disability.

Development pipeline: Estimated remaining end value of all of the Group’s secured development projects based on values as at period end; includes 100 per cent of joint venture projects and therefore will not necessarily correlate with the Group’s Profit after Tax. Distribution payout ratio: Distribution divided by Profit after Tax.

Distribution per security: Amount of interim and final distribution per stapled security from the Company/Trust. Earnings per security: Profit after Tax divided by the weighted average number of securities on issue during the year (including treasury securities) unless otherwise stated.

EBITDA: Earnings before interest, tax, depreciation and amortisation.

Effective tax rate: Income tax expense as a percentage of Profit before Tax.

Face value of a security: The value of a Lendlease security at the applicable time. Funds under management (FUM): The total market value of investments across Lendlease managed funds. Gearing: Net debt to total tangible assets less cash.

Global Minimum Requirements (GMRs): GMRs are Lendlease’s minimum environment, health and safety standards designed to control the risks across our operations.

Good leaver: A senior executive who is leaving Lendlease for a reason such as retirement, redundancy, or resignation where the senior executive is not joining a competitor, and who may remain eligible for part or all of an incentive opportunity. Green Star rating: Green Star is a national voluntary environmental rating system used by the Green Building Council of Australia to evaluate the environmental design and achievements of buildings.

Investments: Includes equity invested

in Lendlease managed funds and direct investment in property and propertyrelated assets. Represents the Group’s assessment of market value.

Investments performance: The performance of our Investments business which includes our funds under management, assets under management, co-invested equity in Lendlease managed funds and direct investment in property and property-related assets.

Key Management Personnel (KMP): Those executives who have the authority and responsibility for planning, directing and controlling the activities of the Group directly or indirectly (as per Accounting Standard AASB 124 Related Party Disclosures ).

KPIs: Key Performance Indicators.

Long Term Incentive (LTI)/Long Term

Award (LTA): An incentive scheme which provides Lendlease equity (or cash, in some circumstances) to participating executives that may vest, in whole or part, if specified performance measures are met over a three or four year period. Lost Time Injury Frequency Rate (LTIFR): An indicator and industry standard measuring a workplace injury which prevents a worker from returning to duties the next day. LTIFR refers to the number of lost time injuries within a year, relative to the total number of hours worked in the financial year.

Market capitalisation: The number of securities on issue multiplied by the security price at year end.

Net debt: Borrowings, including certain other financial liabilities, less cash.

New work secured revenue: Estimated revenue to be earned from construction contracts secured during the period. New work is secured and forms part of Construction backlog revenue when formal contracts are signed.

People and Culture Committee: The Board subcommittee that helps the Board fulfil its responsibilities in people management and reward policies. It is made up entirely of independent Non Executive Directors.

Profit after Tax (PAT): Profit after Tax attributable to securityholders, determined in accordance with Australian Accounting Standards.

Public Private Partnerships (PPP): A joint procurement arrangement for infrastructure development contracts between the public and private sectors.

Residential for rent: Residential

apartments, typically in the form of an entire building, that are made available for rent as separate dwellings. Lendlease and its capital partners maintain ownership of these apartments.

Return on Equity (ROE): ROE is calculated using annual statutory Profit after Tax attributable to securityholders divided by the arithmetic average of beginning, half year and year end securityholders’ equity. Securityholders: An individual or entity that owns Lendlease securities.

Senior executive: Employees who hold a position at executive level according to the Lendlease Career Job Framework. This generally includes Regional Business Unit Heads, Regional Function Heads and in some cases, direct reports to Group Function Heads.

Settlements (units): Apartments – units cash settled in the period on completed units in Australia, Europe and Americas, and units which have reached practical completion in Asia; Communities and Retirement – units settled in the period on completed land lots or units; Commercial – buildings that have achieved practical completion during the period.

Short Term Incentive (STI)/Short Term

Award (STA): Incentives awarded with direct reference to financial and nonfinancial performance over a one year period. Measures are designed to focus individuals on priority areas for the current financial year.

Total Package Value (TPV): Salary plus the value of salary package items such as motor vehicles and parking and compulsory superannuation contributions paid on behalf of an employee.

Total Shareholder Return/Total

Securityholder Return (TSR): The movement in a company’s share/security price, dividend yield and any return of capital over a specific period. It is often expressed as a percentage.

Urbanisation pipeline: Estimated remaining end value of all of the Group’s secured development projects (excluding Communities projects and Retirement projects) based on values as at period end; includes 100 per cent of joint venture projects and therefore will not necessarily correlate with the Group’s Profit after Tax.

Weighted average number of securities: The time weighted number of securities outstanding during the period.

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Annual General Meeting 2019
The Annual General Meeting of shareholders of Lendlease
Corporation Limited and the general meeting of unitholders
of Lendlease Trust (together, Lendlease Group) will be held at
10am on Wednesday 20 November 2019 at the Four Seasons
the Notice of Meetings.
2019 Financial Calendar
19 August
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23 August
16 September
20 November
2020 Financial Calendar
20 February
27 February
28 February
17 March
A current calendar is available online at www.lendlease.com
Entity Details
Lendlease Corporation Limited
ABN 32 000 226 228
Incorporated in NSW Australia
Lendlease Responsible Entity Limited
ABN 72 122 883 185
AFS Licence 308983 as responsible
entity for Lendlease Trust
ABN 39 944 184 773
ARSN 128 052 595
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Registered Office
Level 14, Tower Three
International Towers Sydney
Exchange Place
300 Barangaroo Avenue
Barangaroo NSW 2000
Contact
T: +61 2 9236 6111
F: +61 2 9252 2192
www.lendlease.com
Share Registry Information
Computershare Investor Services Pty Limited
ABN 48 078 279 277
GPO Box 242, Melbourne Victoria 3000 Australia
T: 1800 230 300 (within Australia)
T: +61 3 9946 4460 (outside Australia)
www.computershare.com.au
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in the new workplace for 4,000 Google employees.

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Our paper goes another round This report is printed on locally sourced recycled paper and contains waste from Lendlease assets around Australia including Melbourne Quarter and Barangaroo South, Sydney.

International Towers Sydney Exchange Place 300 Barangaroo Avenue Barangaroo NSW 2000 www.lendlease.com @lendlease @lendleasegroup @lendlease

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LENDLEASE GROUP — Annual Report 2019

65243_rns_2019-08-18_6f5fe387-a550-4e19-906f-b60b49331910.pdf

Lendlease Group 2019 Annual Report

ENDS

About this report

Materiality

Contents

Lendlease presents its fourth integrated annual report to communicate how our business operates, our competitive advantage, and our performance and outlook.

Reporting suite

Directors’ Report

Front Cover

The Exchange, Darling Square, Sydney

Our Business

Our vision To create the best places

Our values.

Our best work.

Places where people want to be.

Integrity

Innovation

Collaboration

Excellence

Trust

Financial

FY19 highlights[¹]

90% plus

22,500 plus

94%

Gender

key talent retention rate

Places we created

Delivered

Our first

Major urbanisation

Strengthened

US$1b

Awarded

Places we will create

To be delivered

$9.9b

Future legacies

Our core strategic focus

Health and Safety

Financial Strength

Governance

Culture

Purpose

Looking to the future

Customers

Health and Safety

Financial performance

Strategy

Culture

The Role We Play

Our approach

Barangaroo South, Sydney

Global presence, gateway cities

Americas

Asia

Australia

Europe

Global trends influencing our strategy

Urbanisation Global

infrastructure

Where we are today

Funds growth

Where we are today

Technology, digital and data

Where we are today

Ageing population

Where we are today

Sustainability

Where we are today

Development

Urbanisation

Residential and

retirement communities

Infrastructure development

Construction

Our capability

LENDLEASE GROUP Annual Report 2019