LENDLEASE GROUP - Merger & Acquisition 2009

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ASX ANNOUNCEMENT

3 November 2009

LEND LEASE PRIMELIFE GROUP RELEASES SCHEME BOOKLET

Lend Lease Primelife Group ( LLP ) today released the Scheme Booklet ( Booklet ) in relation to Lend Lease Corporation’s ( LLC ) proposed acquisition of the remaining stapled securities in LLP that it does not already own for a cash price of A$0.31 per LLP security ( the Proposal ). The release of the Booklet followed on from an application made by LLP to the Supreme Court of New South Wales.

The Booklet contains a report from the Independent Expert, Deloitte Corporate Finance Pty Ltd, which has concluded that the Scheme is fair and reasonable to, and in the best interests of, LLP Securityholders who are not associated with LLC.

In reaching this conclusion, the Independent Expert has valued 100% of the stapled securities in LLP on a controlling interest basis at between $0.28 - $0.38 per security. The Independent Expert’s Report is set out in full in Attachment G to the Booklet.

The Independent Directors of LLP unanimously recommend that LLP Securityholders vote in favour of the resolutions to approve the Proposal in the absence of a superior proposal. In reaching the decision to recommend the Proposal, the Independent Directors have considered a range of factors including:

reducing gearing to the target range of 20% - 25%;
the requirement of LLP’s banks for LLP to reduce bank debt by approximately $100 million to a facility limit of $350m by June 2010; and
the need to renegotiate the remainder of the bank facility by 18 December 2010.

LLP’s net debt (comprising bank debt and convertible notes) as at 30 June 2009 is equivalent to a 44% gearing ratio. If the Proposal is not approved, the LLP Board’s view is that the appropriate amount of additional capital to raise is not less than $300 million, through a combination of an equity raising and assets sales, in order to achieve the target level of gearing. Compared to the $0.31 cash in the hand offered under the Proposal, the LLP Board has identified in the Booklet a number of concerns about the potential of equity raising and assets sales that will otherwise have to be undertaken if the Proposal is not approved and implemented. These concerns include:

Equity raising: The risks and uncertainties associated with a highly dilutive equity raising that would need to be priced at a substantial discount to the market price of LLP Securities and would likely result in a material reduction to LLP’s NTA and NAV. Further there is no assurance that LLP would be able to successfully complete a significant equity raising given the risk that a highly dilutive equity raising may not be broadly supported by securityholders, including LLC.
Asset sales: LLP may be required to sell high cashflow yielding assets. The LLP Board is reluctant to initiate large scale asset sales in the current environment because of the potential impact this would have on the LLP business model and future cashflows and gearing.

Level 4, 111 Cecil Street or PO Box 186 South Melbourne VIC 3205 Australia Telephone +61 3 8699 3300 Facsimile +61 3 8699 3399 www.llprimelife.com

Lend Lease Primelife Group comprising Lend Lease Primelife Limited ACN 010 622 901 Lend Lease Villages Responsible Entity Limited ACN 099 064 141 as responsible entity of the Lend Lease Primelife Trust ARSN 124 896 733

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Further information regarding the Independent Directors recommendation as well as the outlook for LLP if the Proposal is not implemented is outlined in Section 4 of the Booklet.

LLP Independent Chairman, Andrew Love said, “The Proposal offers LLP Securityholders the certainty of cash payment for their stapled securities at a premium to the recent trading price for LLP securities, it exceeds the net tangible asset backing of an LLP security and it is unanimously recommended by the LLP Independent Directors in the absence of a superior proposal.“

“The Proposal represents a compelling alternative when considered against the uncertainty and risks associated with a highly dilutive equity raising and the sale of assets in a weak market, which the LLP Board will need to implement if the Proposal does not proceed” Mr Love said.

Scheme Meetings, at which LLP Securityholders will vote on the Proposal, are scheduled to be held at 10.00am on Tuesday, 8 December 2009 at The Four Seasons Hotel, Sydney located at 199 George Street, Sydney, NSW 2000. LLP’s 2009 Annual General Meeting will be held immediately following the conclusion of the Scheme Meetings.

The Proposal

If the Schemes are approved and implemented, non-LLC Securityholders will receive cash payment equal to $0.31 per stapled security. The Proposal price of $0.31 represents a premium of:

26.5% to LLP’s closing security price of $0.245 on 25 September 2009, being the last trading day prior to the announcement of the Proposal;
48.3% to LLP’s rounded one month VWAP of $0.209 up to 25 September 2009;
103.9% to LLP’s rounded three month VWAP of $0.152 up to 25 September 2009; and
124.6% to LLP’s rounded six month VWAP of $0.138 up to 25 September 2009

Scheme Information

The Booklet has been registered by ASIC.

The Booklet sets out detailed information concerning the Proposal, including information concerning the relevant meetings of LLP Securityholders that will be held on 8 December 2009 to consider the resolutions to approve the Proposal and information about how to vote on those resolutions.

The Booklet will be sent to all LLP Securityholders by the end of this week.

LLP Securityholders should read the Booklet in its entirety, including the attached Independent Expert’s Report, as the documents set out detailed information about the Proposal, including the benefits and the potential disadvantages and risks before deciding how to vote.

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Key dates are expected to be as follows:

Scheme Booklet and notice of meeting dispatched to Securityholders	6 November, 2009
Date for determining eligibility to vote at the Scheme meetings	6 December, 2009
Last date by which Proxy forms for the Scheme meetings must be received	6 December, 2009
Scheme Meetings	8 December, 2009
Court hearing to consider the Schemes	11 December, 2009
Scheme record date	18 December, 2009
Implementation date	23 December, 2009

The Booklet and all other announcements relating to the Scheme are available on LLP’s website www.llprimelife.com.au. A LLP Securityholder information line is available on 1800 427 320 (free call) or +61 2 8280 7168 (outside Australia) between 9.00am and 5.00pm (Sydney time) Monday to Friday.

ENDS

For further information contact:

Lend Lease Primelife Group:

Andrew Love Chairman +61 2 9286 9999

Cosway Australia:

John Frey Director +61 411 361 361

RBS Investment Banking:

Morgan Hill Director +61 411 653 954

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Scheme Booklet Recommended proposal for Lend Lease Bidco to acquire all your LLP Securities.

The Independent Directors unanimously recommend that you VOTE IN FAVOUR of the Resolutions required to approve the Proposal, in the absence of a superior proposal.

IMMEDIATE ATTENTION IMPORTANT DOCUMENT

LLP SECURITYHOLDER INFORMATION LINE 1800 427 320 (FREE CALL) OR +61 2 8280 7168 (OUTSIDE AUSTRALIA)

THIS IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR IMMEDIATE ATTENTION. YOU SHOULD READ THIS DOCUMENT IN ITS ENTIRETY BEFORE DECIDING WHETHER OR NOT TO VOTE IN FAVOUR OF THE PROPOSAL. IF YOU ARE IN DOUBT AS TO WHAT YOU SHOULD DO, YOU SHOULD CONSULT YOUR LEGAL, INVESTMENT, TAXATION OR OTHER PROFESSIONAL ADVISER.

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Important Notices

Defined Terms

Capitalised terms used in this Scheme Booklet are defined in the Glossary.

This Scheme Booklet

This Scheme Booklet including Attachments A to I is the explanatory statement required to be sent to LLP Securityholders in relation to the Proposal under Part 5.1 of the Corporations Act and Part 6.2 of the Corporations Act.

You should read this Scheme Booklet in its entirety before making a decision as to how to vote on the Resolutions to be considered at the Scheme Meetings. If you are in doubt as to what you should do, you should consult your legal, investment, taxation or other professional adviser.

Responsibility for information

Except as outlined below, the information in this Scheme Booklet has been provided by LLP and is the responsibility of LLP. Neither Lend Lease, Lend Lease Bidco nor any of their respective directors, officers and advisors assume any responsibility for the accuracy or completeness of any such LLP information, except those officers who are LLP Directors.

Lend Lease and Lend Lease Bidco have provided and are responsible for information contained in section 6, including information as to the funding arrangements they have made to provide the Scheme Consideration and information as to Lend Lease’s opinions, views, intentions and decisions in relation to LLP (collectively the Lend Lease Information). LLP and its directors, officers and advisors do not assume any responsibility for the accuracy or completeness of the Lend Lease Information.

The Independent Expert, Deloitte, has provided and is responsible for the information contained in Attachment G. Neither LLP nor Lend Lease nor Lend Lease Bidco assumes any responsibility for the accuracy or completeness of the information contained in Attachment G. The Independent Expert does not assume any responsibility for the accuracy or completeness of the information contained in this Scheme Booklet other than that contained in Attachment G.

Greenwoods & Freehills have provided and are responsible for the information contained in Attachment H. Neither LLP nor Lend Lease nor Lend Lease Bidco assumes any responsibility for the accuracy or completeness of the information contained in Attachment H. Greenwoods & Freehills do not assume any responsibility for the accuracy or completeness of the information contained in this Scheme Booklet other than that contained in Attachment H.

Investment Decisions

This Scheme Booklet has been prepared without reference to the investment objectives, financial situation, tax situation or particular needs of any LLP Securityholder or any other person. This Scheme Booklet should not be relied on as the sole basis for any investment decision. Independent financial and taxation advice should be sought before making any investment decision in relation to your LLP Securities and how you vote on the Resolutions.

ASIC and ASX involvement

A copy of this Scheme Booklet (including the Independent Expert’s Report) has been lodged with and registered for the purposes of section 412(6) of the Corporations Act by ASIC. ASIC has been requested to provide a statement in accordance with section 411(17)(b) of the Corporations Act that ASIC has no objection to the Share Scheme. If ASIC provides that statement, then it will be produced to the Court on the Court Approval Date.

Neither ASIC nor any of its officers take any responsibility for the contents of this Scheme Booklet. A copy of this Scheme Booklet will be lodged with ASX. Neither ASX nor any of its officers take any responsibility for the contents of this Scheme Booklet.

Court involvement

The orders of the Court that the Share Scheme Meeting be convened and the giving of the First Judicial Advice are not, and should not, be treated as an endorsement by the Court of, or any other expression of opinion by the Court on, the Schemes.

Disclosure regarding forward looking statements

This Scheme Booklet contains both historical and forward-looking statements in connection with LLP and Lend Lease Bidco.

The forward-looking statements in this Scheme Booklet are not based on historical facts, but rather reflect the current expectations of LLP or, in relation to the Lend Lease Information, Lend Lease and Lend Lease Bidco concerning future results and events and generally may be identified by the use of forward-looking words or phrases such as “believe”, “aim”, “expect”, “anticipated”, “intending”, “foreseeing”, “likely”, “should”, “planned”, “may”, “estimated”, “potential”, or other similar words and phrases. Similarly, statements that describe LLP’s and Lend Lease’s or Lend Lease Bidco’s objectives, plans, goals or expectations are or may be forward-looking statements.

These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause either LLP’s or Lend Lease’s or Lend Lease Bidco’s actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed, projected or implied by these forward-looking statements. Deviations as to future results, performance and achievements are both normal and to be expected. LLP Securityholders should review carefully all of the information, including the financial information, included in this Scheme Booklet. The forward-looking statements included in this Scheme Booklet are made only as of the date of this Scheme Booklet. Neither LLP nor Lend Lease nor Lend Lease Bidco gives any representation, assurance or guarantee to LLP Securityholders that any forward looking statements will actually occur or be achieved. LLP Securityholders are cautioned not to place undue reliance on such forward looking statements.

Subject to any continuing obligations under law or the ASX Listing Rules, LLP, Lend Lease and Lend Lease Bidco do not give any undertaking to update or revise any forward-looking statements after the date of this Scheme Booklet to reflect any change in expectations in relation to those statements or any change in events, conditions or circumstances on which any such statement is based.

Privacy and personal information

LLP will need to collect personal information to implement the Schemes. The personal information may include the names, contact details and details of holdings of LLP Securityholders, plus contact details of individuals appointed by LLP Securityholders as proxies, corporate representatives or attorneys at the Scheme Meetings. The collection of some of this information is required or authorised by the Corporations Act. LLP Securityholders who are individuals, and other individuals in respect of whom personal information is collected, have certain rights to access the personal information collected about them and can contact LLP’s Company Secretary by calling +61 3 8699 3333 if they wish to exercise those rights. The information may be disclosed to print and mail service providers, and to LLP, Lend Lease and Lend Lease Bidco and their respective advisers to the extent necessary to effect the Schemes. If the information outlined above is not collected, LLP may be hindered in, or prevented from, conducting the Scheme Meetings or implementing the Schemes effectively or at all. LLP Securityholders who appoint an individual as their proxy, corporate representative or attorney to vote at the Scheme Meetings should inform that individual of the matters outlined above.

Notice to persons outside Australia

This Scheme Booklet and the Proposal is subject to Australian disclosure requirements, which may be different from the requirements applicable in other jurisdictions. The financial information included in this document is based on financial statements that have been prepared in accordance with Australian equivalents to International Financial Reporting Standards, which may differ from generally accepted accounting principles in other jurisdictions.

This Scheme Booklet has not been filed with or reviewed by any overseas securities commission or any other overseas regulatory authority, nor have any overseas authorities commented upon or endorsed the merits of the Schemes or the accuracy, adequacy or completeness of this Scheme Booklet.

Date

This Scheme Booklet is dated 2 November 2009

Proposal Highlights
3
Chairman’s Letter
4
1
Key Dates
6
2
Frequently askedquestions
8
3
Matters relevant toyour vote on the Proposal and LLP Directors’ Recommendation
13
4
Information regarding LLP
17
5
Overview and implementation of the Proposal
24
6
Information on Lend Lease
29
7
How to vote and details of the Meetings
32
8
Additional information
34
9
Annual General Meeting
40
~~Attachment A– Notice of Share Scheme Meeting~~
~~45~~
~~Attachment B – Notice of Unit Scheme Meeting~~
~~48~~
~~Attachment C – Scheme of Arrangement made under section 411 of the Corporations Act 2001 (Cth)~~
~~52~~
~~Attachment D – Deed Poll~~
~~63~~
~~Attachment E – Scheme Implementation Agreement~~
~~69~~
~~Attachment F – Supplemental Deed~~
~~120~~
~~Attachment G – Independent Expert’s Report~~
~~131~~
~~Attachment H – Taxation Considerations~~
~~220~~
~~Attachment I– Notice of Annual General Meeting~~
~~224~~
Glossary
229

Page 1

“In our view the Proposal represents a compelling alternative when considered against the uncertainty and risks associated with the potential of a highly dilutive equity raising and the sale of assets in a weak market and in circumstances where the sales would need to occur under a tight timetable.”

Andrew Love Chairman Lend Lease Primelife

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Proposal Highlights

		Refer to section
Proposal	Lend Lease Bidco offered to buy all LLP Securities that it does not already own for $0.31 cash consideration per LLP Security.	5
How does	The Proposal represents a premium of:	3.2 and 4.6
the Proposal	• 26.5% to LLP’s closing security price of $0.245 on
compare	25 September 2009, being the last trading day prior to the
	announcement of the Proposal;
	• 48.3% to LLP’s rounded one month VWAP of $0.209 up to
	25 September 2009;
	• 103.9% to LLP’s rounded three month VWAP of $0.152 up to
	25 September 2009; and
	• 124.6% to LLP’s rounded six month VWAP of $0.138 up to
	25 September 2009.
LLP Independent	Unanimously recommend the Proposal, in the absence of any	3.2
Directors	superior proposal, based on:
	• certainty of cash compared to risks associated with
	recapitalisation alternatives, including raising additional capital
	of not less than $300 million;
	• a substantial premium to recent trading prices of LLP Securities
	and a premium to NTA; and
	• the Independent Expert concluding that the Proposal is in the
	best interests of LLP Securityholders.
Independent	The Independent Expert, Deloitte Corporate Finance Pty Limited,	Attachment G
Expert	has determined that the Proposal is in the best interests of LLP Securityholders.
Consequence of	If the Proposal does not proceed, Lend Lease Bidco will not	4.5
the Proposal not proceeding	acquire your LLP Securities and you will not receive any Scheme Consideration. In that event, LLP will remain listed and will seek to implement recapitalisation alternatives, including raising not less
	than $300 million in additional capital (most likely to be achieved
	by way of an equity raising and asset sales).
Resolutions	Three Resolutions need to be passed to approve the Proposal,	Attachments
	being the Resolutions set out in the Notice of Share Scheme	A and B
	Meeting and the Notice of Unit Scheme Meeting.
Timing	The Scheme Meetings to approve the Proposal have been convened to be held at 10.00am on 8 December 2009 at The Four Seasons	7
	Hotel, Sydney located at 199 George Street, Sydney, NSW 2000.

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Chairman’s Letter

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On 28 September 2009, Lend Lease Primelife Limited and Lend Lease Primelife Trust (together, LLP) announced that an agreement had been reached with Lend Lease Corporation Limited (Lend Lease) under which Lend Lease proposes to acquire all of the LLP Securities that it does not already own for $0.31 per LLP Security (Proposal).

The Proposal is subject to the approval of LLP Securityholders and certain other conditions being satisfied. The Proposal is discussed in some detail in the accompanying Scheme Booklet.

When considering the Proposal the LLP Independent Directors urge you to have regard to the following important matters.

As a result of the global economic crisis, credit markets froze, liquidity dried up, alternative sources of traditional property finance disappeared, many foreign banks withdrew funding from the local market and property and other asset values declined materially. In this environment, property groups that faced a breach of their lending covenants or had near-term refinancing obligations faced an acute funding crisis with limited or no flexibility. In many cases, additional or transitional finance has been provided by banks but on more onerous commercial terms and on the basis that additional equity is raised or assets sold. These requirements have required some companies to undertake large and dilutive equity raisings and/or distressed asset sales.

LLP was not immune from these economic influences which had an adverse impact on the carrying value of our assets resulting in an impairment charge of $138 million at 31 December 2008 and a further impairment charge of $51 million at 30 June 2009 resulting in a total loss of $246.7 million for the year ending 30 June 2009.

The restructure and recapitalisation that was introduced by Lend Lease almost a year ago has proved extremely important in providing liquidity and stabilising LLP’s business. Despite this, a further deterioration in asset values since then resulted in a breach of LLP’s banking covenants at 30 June 2009. After a difficult and prolonged negotiation LLP, with the support of its convertible note holder (Lend Lease), successfully negotiated with the banks a waiver of that breach subject to a number of conditions. One of the conditions of that waiver requires LLP to reduce bank borrowings from $461 million at 30 June 2009 to $350 million by 30 June 2010. Once we have achieved that milestone, we will then need to renegotiate new banking arrangements before 18 December 2010, when the

Page 4 | Scheme Booklet

remaining tranche of our existing banking facilities falls due for renewal.

In my address in the 2009 Annual Report I indicated that the LLP Board would target a level of gearing in the range of 20% to 25%. LLP’s net debt of $579 million (comprising bank debt and convertible notes) is equivalent to a 44% gearing ratio at 30 June 2009. Accordingly, if the Proposal is not approved, the LLP Board’s view is that the appropriate amount of additional capital to raise is not less than $300 million in order to achieve the target level of gearing.

If the Proposal is not approved, there will be no distributions during the 2010 financial year. In those circumstances, depending on our success in raising additional capital, and subject to the requirements of the new banking arrangements that need to be agreed by 18 December 2010, we may be able in the 2011 financial year to resume some level of distributions from net operating cashflows. However, there can be no certainty as to the timing and quantum of future distributions for the reasons we explain in section 4.5 of the Scheme Booklet.

In considering that outlook, when Lend Lease approached LLP with the Proposal the LLP Independent Directors had to consider whether LLP Securityholders should be given the opportunity to consider the Proposal or whether we should press on with attempting to raise not less than $300 million of additional capital to reduce debt. We concluded that LLP Securityholders should be given the opportunity to consider it. We also agreed to recommend it in the absence of a superior proposal. The Proposal is at a premium of $0.01 to NTA as at 30 June 2009, at a substantial premium to the price at which LLP Securities had traded at all times during 2009 and a 48.3% premium to the one month VWAP calculated to 25 September 2009.

In our view the Proposal represents a compelling alternative when considered against the uncertainty and risks associated with the potential of a highly dilutive equity raising and the sale of assets in a weak market and in circumstances where the sales would need to occur under a tight timetable.

An equity raising may need to be very large, would require Lend Lease’s support, and, to be attractive, we believe it may need to be priced at a substantial discount to the market price of LLP Securities. This is consistent with other issues in the market place. The sheer size of any equity raising and the discount offered is likely to be highly dilutionary with key metrics such as NAV and NTA falling sharply on a per security basis, as we note in section 4.5 of the Scheme Booklet.

Accordingly, for these reasons (and for other reasons elaborated on in section 3 of the Scheme Booklet), the LLP Independent Directors recommend that you approve the Proposal and vote in favour of the Resolutions at the Scheme Meetings.

The LLP Independent Directors requested the Independent Expert, Deloitte Corporate Finance Pty Limited, to assess the Proposal on behalf of LLP Securityholders. The Independent Expert has concluded that the Proposal is in the best interests of LLP Securityholders.

The Independent Expert’s Report, including the reasons for its opinion, has been included in full in Attachment G of the Scheme Booklet.

Scheme Meetings

To be implemented, a number of conditions to the Proposal need to be satisfied, including approval of the Proposal by the Court and by LLP Securityholders at meetings to be held on 8 December 2009 at 10.00am.

Your vote is important

In order for the Proposal to proceed, LLP Securityholders must vote in favour of each of the Resolutions to be proposed at the Scheme Meetings.

I encourage you to consider the information in this Scheme Booklet carefully and, if required, to seek your own legal, investment, taxation or other professional advice.

Yours sincerely

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Andrew Love Chairman

Page 5

Key Dates

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Date Event
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	6 December 2009 at 10.00am	Last date and time by which proxy forms for the Scheme Meetings and AGM must be
		received by the Registry– please carefully read the instructions in relation to the completion
		of proxies set out in this Scheme Booklet and on the proxy forms for the Scheme Meetings and
		AGM. If the Registry does not receive your proxy forms by 10.00am on 6 December 2009 and
		you wish to vote on the Resolutions, you will need to attend the Scheme Meetings and AGM
		and vote in person
	6 December 2009 at 7.00pm	Date and time for determining eligibility to vote at the Scheme Meetings– if you are
		registered as an LLP Securityholder at 7.00pm on 6 December 2009, you will be entitled to
		attend the Scheme Meetings and vote on the Resolutions, unless otherwise noted in the notices
		of the Scheme Meetings (see Attachments A and B)
	8 December 2009 at 10.00am	Scheme Meetings– there are two Scheme Meetings. The Share Scheme Meeting will be held
		frst at 10.00am. The Unit Scheme Meeting will be held immediately following the conclusion of
		the Share Scheme Meeting
	8 December 2009	2009 AGM– LLP’s Annual General Meeting for 2009 will be held immediately following the
		conclusion of the Scheme Meetings
	If the Resolutions are approved	at the Scheme Meetings:
	11 December 2009	Court hearing for approval of Share Scheme and Second Judicial Advice
		(Court Approval Date)– the Court will consider whether to approve the Share Scheme and
		whether to grant the Second Judicial Advice
	11 December 2009	Effective Date– this is the date on which the Schemes come into effect and are binding on
		Scheme Participants
	11 December 2009	Cessation of trading in LLP Securities at the close of trading on ASX
	18 December 2009	Record Date– all Scheme Participants who hold Scheme Securities on the Record Date will
		be entitled to receive the Scheme Consideration
	23 December 2009	Implementation Date– Scheme Participants will be sent the Scheme Consideration to which
		they are entitled on this date

All dates following the date of the Scheme Meetings are indicative only and are subject to the Court approval process, ASX approval and the satisfaction or, where applicable, waiver of the conditions to the implementation of the Proposal (see section 5). Any changes to the above timetable will be announced to ASX and notified on LLP’s website at (www.llprimelife.com).

Unless otherwise stated all references to time in this Scheme Booklet are references to Sydney time.

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What you need to do

a) Carefully read this Scheme Booklet in its entirety before making a decision as to how to vote on the Resolutions.
b) Consult your legal, investment, taxation or other professional adviser and obtain independent advice before making any investment decision in relation to your LLP Securities and how to vote on the Resolutions.
c) Vote on the Resolutions. Section 7 provides information on how you may vote, either in person or by proxy, on the Resolutions.

Voting Options

Vote in favour of the Schemes

This is the course of action unanimously recommended by the LLP Independent Directors, in the absence of a

superior proposal. The reasons for the LLP Independent Directors’ unanimous recommendation are set out in section 3.

For the Proposal to be approved, each of the three Resolutions must be passed by the requisite majorities at the Scheme Meetings (see section 5.2).

To follow the LLP Independent Directors’ unanimous recommendation, you should vote in favour of the Resolutions at the Scheme Meetings, in the absence of a superior proposal. For a summary of how to vote at the Scheme Meetings (see section 7).

Vote against the Schemes

If, despite the LLP Independent Directors’ unanimous recommendation and the conclusion of the Independent Expert, you do not support the Proposal, you may vote against the Resolutions at the Scheme Meetings. See section 4.5 for further details on what will happen if the Proposal is not approved.

However, if the Schemes are approved by the requisite majorities at the Scheme Meetings and all of the conditions to the Schemes are satisfied or (where applicable) waived, the Schemes will bind all Scheme Participants, including those who vote against the Resolutions and those who do not vote at all.

Sell your LLP Securities

The Proposal does not preclude you from selling your LLP Securities on ASX, if you wish, on or before the Effective Date.

If you are considering selling your LLP Securities, you should have regard to the prevailing trading prices of LLP Securities on ASX and compare those to the Scheme Consideration being offered under the Proposal. You may ascertain current trading prices of LLP Securities on ASX through the ASX website (www.asx.com.au), or by contacting your stockbroker.

LLP Securityholders who sell their LLP Securities on ASX:

a) will receive the consideration for sale of their LLP Securities sooner than they would receive the Scheme Consideration under the Proposal;
b) may incur a brokerage charge; and
c) will not be able to participate in the Proposal.

Do nothing – i.e. neither vote in favour of nor against the Resolutions nor sell your LLP Securities

LLP Securityholders who do not elect to vote at the Scheme Meetings or sell their LLP Securities will:

a) if the Schemes are implemented – have their Scheme Securities compulsorily transferred to Lend Lease Bidco, by operation of the Schemes and receive payment of $0.31 cash per Scheme Security; and
b) if the Schemes are not implemented – retain their LLP Securities. See section 4.5 for further details on what will happen if the Proposal is not approved.

You should consult your legal, investment, taxation or other professional adviser and obtain independent advice before making any investment decision in relation to your LLP Securities and how to vote on the Resolutions.

Page 7

2. Frequently asked questions

2.1 Why have I received this Scheme Booklet?

This Scheme Booklet has been sent to you because you are an LLP Securityholder and LLP Securityholders are asked to vote on the Proposal which, if approved and implemented, will result in Lend Lease Bidco acquiring all Scheme Securities for the Scheme Consideration.

This Scheme Booklet is intended to help you to decide how to vote on the Resolutions which need to be passed at the Scheme Meetings to allow the Proposal to proceed. You should carefully read the Scheme Booklet in full and, if necessary, consult your legal, investment, taxation or other professional adviser before voting on the Resolutions.

2.2 What is the Proposal?

On 28 September 2009, LLP announced the Proposal to ASX. The Proposal involves an offer by Lend Lease (through its wholly owned subsidiary, Lend Lease Bidco) to acquire all Scheme Securities for the Scheme Consideration.

2.3 What will I receive for my LLP Securities?

If the Schemes become Effective, each Scheme Participant will receive cash consideration from Lend Lease Bidco of $0.31 for each Scheme Security they hold on the Record Date (without any brokerage charge).

2.4 When will I receive the Scheme Consideration?

Provided the Schemes become Effective, Scheme Participants are expected to receive the Scheme Consideration on or about the Implementation Date (23 December 2009).

2.5 Do the LLP Independent Directors recommend the Proposal?

The LLP Independent Directors unanimously recommend that you vote in favour of the Resolutions to approve the Proposal, in the absence of a superior proposal.

The reasons for the LLP Independent Directors’ unanimous recommendation are set out in detail in section 3.

2.6 What are the prospects of a superior proposal?

Since the Proposal was announced on 28 September 2009, no superior proposal has emerged. Given the time that has elapsed since the announcement of the Proposal and the fact that the Lend Lease Group currently holds 43.2% of the LLP Securities, the Lend Lease Notes and is the manager of LLP, it is the view of the LLP Independent Directors that a superior proposal is unlikely to emerge prior to the Scheme Meetings.

2.7 What does the Independent Expert say?

In summary, the Independent Expert has concluded as follows:

“In our opinion the Proposed Transaction is in the best interests of LLP Securityholders. Accordingly, we have also concluded that:

the Share Scheme is fair and reasonable and therefore in the best interests of LLPL Shareholders
the terms of the Trust Scheme are fair and reasonable for LLPT Unitholders who are not associated with LLC.”

A complete copy of the Independent Expert’s Report is contained in Attachment G.

2.8 What are the Schemes?

Because LLP Securities comprise a LLP Share stapled to an LLP Unit, the Proposal is to be implemented by two interdependent schemes:

a) Share Scheme: a scheme of arrangement between LLP and Scheme Shareholders for the transfer of all of the Scheme Shares to Lend Lease Bidco; and
b) Unit Scheme: an arrangement under which Lend Lease Bidco acquires all of the Scheme Units, facilitated by an amendment to the Trust Constitution as set out in the Supplemental Deed.

The Share Scheme will not be implemented if the Unit Scheme does not become Effective and vice versa.

Page 8 | Scheme Booklet

Frequently asked questions

2.9 What am I being asked to vote on?

In order for the Proposal to be implemented, each of three Resolutions must be approved by the requisite majorities at the Scheme Meetings:

a) Share Scheme Meeting: one resolution, the Share Scheme Resolution, will be considered at the Share Scheme Meeting. Details of the Share Scheme Resolution are set out in section 5.2; and
b) Unit Scheme Meeting: two resolutions, the Amendment Resolution and the Acquisition Resolution, will be considered at the Unit Scheme Meeting. Details of the Unit Scheme Resolutions are set out in section 5.2.

2.10 When and where will the Scheme Meetings be held?

The Scheme Meetings will be held one after the other on 8 December 2009 at The Four Seasons Hotel, Sydney located at 199 George Street, Sydney, NSW 2000 and will commence at 10.00am.

2.11 What voting majority is required to approve the Schemes?

The majority required to approve the Schemes depends on the particular Resolution being considered.

The Share Scheme Resolution must be approved by:

a) a majority in number (more than 50%) of Scheme Shareholders present and voting at the Share Scheme Meeting (in person, by proxy, by attorney or, in the case of a body corporate, by a corporate representative); and
b) at least 75% of the total number of votes cast on the Share Scheme Resolution (in person, by proxy, by attorney or, in the case of a body corporate, by a corporate representative).

Holders of Excluded Securities, including Lend Lease Bidco, will not vote on the Share Scheme Resolution.

There are two resolutions required in order to approve the Unit Scheme:

a) the Amendment Resolution must be approved by at least 75% of the total number of votes cast on that Resolution (in person, by proxy, by attorney or, in the case of a body corporate, by a corporate representative). LLVRE and its associates, including Lend Lease Bidco, are not entitled to vote on the Amendment Resolution; and
b) the Acquisition Resolution must be approved by at least 50% of the total number of votes cast on that Resolution (in person, by proxy, by attorney or, in the case of a body corporate, by a corporate representative). No votes may be cast in favour of the Acquisition Resolution by Lend Lease Bidco and its associates.

In order for the Proposal to be implemented, each of the three Resolutions must be approved by the requisite majorities of LLP Securityholders.

2.12 Am I entitled to vote?

If you are registered as an LLP Securityholder at 7.00pm on 6 December 2009, you will be entitled to attend the Scheme Meetings and vote on the Resolutions, unless otherwise noted in the notices of the Scheme Meetings (see Attachments A and B).

2.13 Who is excluded from voting?

Voting exclusions in respect of each Resolution depend on the particular Resolution being considered:

a) Share Scheme Resolution: Holders of Excluded Securities, including Lend Lease Bidco, are not entitled to participate in the Share Scheme Meeting as the Excluded Securities will not be subject of the Share Scheme. Accordingly, holders of Excluded Securities will not vote on the Share Scheme Resolution.
b) Amendment Resolution: LLVRE and its associates, including Lend Lease Bidco, are not entitled to vote on the Amendment Resolution as they have an interest in the Amendment Resolution other than as an LLP Unitholder.
c) Acquisition Resolution: No votes may be cast in favour of the Acquisition Resolution by Lend Lease Bidco and its associates.

Those exclusions are described more fully in the notices of the Scheme Meetings set out in Attachments A and B.

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Frequently asked questions

2. 2.14 Is voting compulsory?

No. However, if you do not vote, either in person or by proxy, and the Resolutions are approved by the requisite majorities at the Scheme Meetings and all conditions of the Schemes are satisfied or (where applicable) waived, the Schemes will still be binding upon you, your Scheme Securities will be compulsorily transferred to Lend Lease Bidco and you will receive the Scheme Consideration for your Scheme Securities. Your vote is important and is your opportunity to have your say on the success or failure of the Proposal.

2.15 What if I cannot or do not wish to attend the Scheme Meetings?

If you cannot or do not wish to attend the Scheme Meetings, you may appoint a proxy or attorney (or for a body corporate, a corporate representative) to vote at the Scheme Meetings on your behalf. Full details of how these appointments may be made are contained in section 7. Proxy forms accompany this Scheme Booklet.

2.16 What happens if I vote against the Schemes? Can I be forced to sell my LLP Securities?

If each of the Resolutions are approved by the requisite majorities at the Scheme Meetings and all conditions of the Schemes are satisfied or (where applicable) waived, the Schemes will bind all Scheme Participants, including those who vote against the Resolutions and those who do not vote at all. In these circumstances, all Scheme Securities that you hold as at the Record Date will be transferred to Lend Lease Bidco, and you will receive the Scheme Consideration.

2.17 What Court approvals are required to implement the Proposal?

The Proposal will not be implemented unless the Court grants the orders approving the Share Scheme under section 411(4)(b) of the Corporations Act and also grants the Second Judicial Advice.

If the Court does not approve the Share Scheme or does not grant the Second Judicial Advice, the Schemes will not become Effective and the Proposal will not be implemented.

2.18 Are there any conditions that must be satisfied in order for the Proposal to be implemented?

Yes there are. In particular, the Schemes are conditional on:

a) no “LLP Regulated Event” or “LLP Material Adverse Change” having occurred between the date that the Proposal was announced (28 September 2009) and the Court Approval Date (these terms are defined in section 1.1 of Attachment E);
b) the Resolutions being passed by the requisite majorities (see section 5.2);
c) Court approval of the Share Scheme under section 411(4)(b) of the Corporations Act and the grant by the Court of the Second Judicial Advice (see section 5.2); and
d) no other orders being made by any court of any jurisdiction or any Government Agency preventing the implementation of the Schemes as at the Court Approval Date.

For further details on the conditions to the Schemes, see section 8.15. A copy of the Scheme Implementation Agreement, which sets out the conditions to the Schemes, is contained in Attachment E.

As at the date of this Scheme Booklet, the LLP Directors are not aware of any reason why the conditions to the Schemes should not be satisfied.

LLP Securityholders should also be aware that the Scheme Implementation Agreement may be terminated in certain circumstances (details of which are set out in section 11 of Attachment E). If the Scheme Implementation Agreement is terminated, the Proposal will not proceed, Lend Lease Bidco will not acquire your LLP Securities and you will not receive any Scheme Consideration.

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Frequently asked questions

2.19 What happens if the Proposal is not approved or the conditions to the Proposal are not satisfied?

If the Proposal is not approved or the conditions of the Proposal are not satisfied or (where applicable) waived, the Proposal will not proceed, Lend Lease Bidco will not acquire your LLP Securities and you will not receive any Scheme Consideration.

If the Proposal does not proceed, LLP will remain listed on ASX and will seek to implement recapitalisation alternatives in order to achieve four key objectives that are described in section 4.5, including raising not less than $300 million in additional capital (most likely to be achieved by way of an equity raising and asset sales).

2.20 What happens if the Proposal is approved, all conditions are satisfied and the Proposal is implemented?

If you are a Scheme Participant and the Proposal is implemented, all of your Scheme Securities will be transferred to Lend Lease Bidco and you will receive the Scheme Consideration of $0.31 cash for each Scheme Security you hold. You will receive this even if you did not vote or may have voted against the Resolutions.

2.21 Will I be taxed on the proceeds?

The tax consequences of the Schemes for LLP Securityholders will depend on the personal taxation and financial circumstances of each LLP Securityholder.

However, general information about the Australian capital gains tax consequences of the Schemes is set out in Attachment H. This general information does not apply to LLP Securityholders who hold their LLP Securities on revenue account or as trading stock.

The LLP Directors recommend that LLP Securityholders consult their own taxation advisers about the taxation consequences for them if the Schemes are implemented.

2.22 Why is the Annual General Meeting being held together with the Scheme Meetings?

Prior to the Proposal being announced to ASX, LLP had convened its Annual General Meeting for 2009 to be held on 30 October 2009.

However, in order to reduce the costs and expenses associated with holding the 2009 Annual General Meeting and the Scheme Meetings on separate dates within approximately 6 weeks of each other, following the announcement of the Proposal, LLP postponed the 2009 Annual General Meeting to be held at the same venue as, and immediately after conclusion of, the Scheme Meetings. ASIC has consented to the 2009 Annual General Meeting being held at this time (see section 8.17 for further details).

The Proposal is not conditional on the outcome of the resolutions to be considered at the 2009 Annual General Meeting and vice versa.

See section 9 for further details on the 2009 Annual General Meeting including the explanatory notes. A copy of the Notice of Annual General Meeting is set out in Attachment I.

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Frequently asked questions

2. 2.23 What are my options?

If you are an LLP Securityholder, your options are to:

a) vote in favour of the Resolutions at the Scheme Meetings (this being the course of action unanimously recommended by the LLP Independent Directors, in the absence of a superior proposal);
b) vote against the Resolutions at the Scheme Meetings. See section 4.5 for further details on what will happen if the Proposal is not approved;
c) if you cannot attend the Scheme Meetings appoint a proxy or attorney (or for a body corporate, a corporate representative) to attend the Scheme Meetings and vote on your behalf;
d) sell your LLP Securities prior to the Schemes becoming Effective; or
e) do nothing – i.e. neither vote in favour of or against the Resolutions nor sell your LLP Securities.

2.24 What if I want further information?

If you have any questions about the Proposal or the Schemes, please contact the LLP Securityholder information line on 1800 427 320 (free call) or +61 2 8280 7168 (outside Australia).

If you have a question about LLP (other than in relation to the Proposal or to the Schemes), please contact the LLP registry line on 1800 881 047 (free call) or +61 2 8280 7923 (outside Australia).

For information about your individual financial or taxation circumstances please consult your investment, legal, taxation or other professional adviser.

Page 12 | Scheme Booklet

Matters relevant to your vote on the Proposal and LLP Directors’ Recommendation

3. 3.1 Directors’ recommendation

a) LLP Directors

The LLP Directors as at the date of this Scheme Booklet are:

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Director Position
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Mr Andrew Love	Chairman – Independent director
Mr GarySymons	Independent director
Mr Ian Crow	Independent director
Mr David Hutton	Non-independent director
Mr AnthonyLombardo	Non-independent director

b)

LLP Independent Directors’ recommendation

Mr Andrew Love, Mr Gary Symons and Mr Ian Crow are the LLP Independent Directors. Each of the LLP Independent Directors is assessed by the LLP Board to be independent in accordance with the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations. Further, Mr Crow resigned as a member of the Australian Prime Property Fund Investor Review Board in September 2009, after the Proposal was announced to ASX.

Each of the LLP Independent Directors considers himself justified in making a recommendation in relation to the Proposal and each of them recommends that LLP Securityholders vote in favour of the Resolutions, in the absence of a superior proposal.

Mr Love intends to vote in favour of the Resolutions in respect of the LLP Securities he owns, in the absence of a superior proposal. Each of Mr Symons and Mr Crow do not own any LLP Securities. Section 8.1 contains details of the LLP Directors’ interests in LLP Securities.

c) Non-independent Directors’ position

Mr Anthony Lombardo and Mr David Hutton are senior executives of the Lend Lease Group and remunerated by the Lend Lease Group. As previously disclosed, their positions at the Lend Lease Group are:

Mr Lombardo – Global Head of Strategy and Mergers & Acquisitions.
Mr Hutton – Chief Operating Officer, Asia Pacific.

Given their position as employees of the Lend Lease Group, each of Mr Lombardo and Mr Hutton does not consider himself justified in making a recommendation in respect of the Proposal and accordingly each of them makes no such recommendation.

Mr Hutton will abstain from voting on the Resolutions in respect of the LLP Securities he owns. Mr Lombardo does not own any LLP Securities. Section 8.1 contains details of the LLP Directors’ interests in LLP Securities.

3.2 Reasons to vote in favour of the Proposal

The LLP Independent Directors unanimously recommend that LLP Securityholders vote in favour of the Resolutions to approve the Proposal, in the absence of a superior proposal.

In making this recommendation, the LLP Independent Directors have taken into account that LLP Securityholders have a choice between:

1) the Proposal, that delivers to all LLP Securityholders certainty of value on a timely basis for their LLP Securities, in an amount that is in excess of the NTA for LLP Securities at 30 June 2009 and well in excess of the market price of LLP Securities in the 6 month period before the Proposal was announced to ASX on 28 September 2009; or
2) the uncertainty and risks associated with the alternative, namely to raise not less than $300 million in additional capital which will be required for the reasons referred to in the Chairman’s letter and in section 4.5. LLP Securityholders are urged to carefully read and consider the Chairman’s letter and section 4.5 in relation to the Proposal and the LLP Independent Directors’ recommendation.

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3. Matters relevant to your vote on the Proposal and LLP Directors’ Recommendation

The LLP Independent Directors consider that LLP Securityholders have been provided with a valuable opportunity to consider and determine whether they want to receive certainty in value for their LLP Securities in a timely manner (under the Proposal), or to accept the risks and uncertainties associated with the Proposal not being implemented and the steps that will need to be taken by LLP to raise not less than $300 million in additional capital and reduce debt.

In making their recommendation the LLP Independent Directors have also taken into account each of the factors referred to below:

a) Conclusion of the Independent Expert

The Independent Expert has concluded that the Share Scheme is fair and reasonable and therefore in the best interests of LLP Shareholders and that the terms of the Unit Scheme are fair and reasonable for LLP Unitholders who are not associated with Lend Lease.

Attachment G contains a complete copy of the Independent Expert Report. LLP Securityholders are urged to read the Independent Expert Report in full.

b) Certainty of cash for LLP Securityholders

There is timing and value certainty around the $0.31 cash per LLP Security which you will receive if the Proposal is approved and proceeds.

By contrast, if the Proposal does not proceed, the amount which you will be able to realise for your LLP Securities is uncertain and, given the matters set out in section 4.5 regarding the potentially dilutive effect of an equity raising and the potential for value erosion from asset sales, the LLP Independent Directors consider the market price for LLP Securities may trade below $0.31 if the Proposal does not proceed.

c) Premium to NTA

The Scheme Consideration of $0.31 cash per LLP Security, represents a premium of $0.01 to the LLP Group NTA at 30 June 2009.

The LLP Independent Directors have assessed that currently, with a lack of liquidity in the market for the aged care and retirement village asset classes, there is the potential for erosion of value in undertaking asset sales. The intangibles that make up the difference between LLP’s NTA ($0.30 per LLP Security as at 30 June 2009, see section 3.9.2 of the Independent Expert’s Report) and NAV ($0.55 per LLP Security as at 30 June 2009, see section 3.9.2 of the Independent Expert’s Report) include a significant portfolio premium which a large scale business such as LLP enjoys. If the Proposal is not approved, the requirement for LLP to sell individual or groups of assets in order to raise not less than $300 million in additional capital may erode that portfolio premium.

d) Premium to pre-announcement market price

The Scheme Consideration of $0.31 cash per LLP Security represents a premium of:

26.5% to LLP’s closing security price of $0.245 on 25 September 2009, being the last trading day prior to the announcement of the Proposal;
48.3% to LLP’s rounded one month VWAP of $0.209 up to 25 September 2009;
103.9% to LLP’s rounded three month VWAP of $0.152 up to 25 September 2009; and
124.6% to LLP’s rounded six month VWAP of $0.138 up to 25 September 2009.

VWAP Reference Data

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35
Total proceeds received = 31c
30 124% 104% 48% 27%
premium premium premium premium
25
20
15
10
5
0
6 month VWAP up to 3 month VWAP up to 1 month VWAP up to Last day prior to
25 Sept 2009 25 Sept 2009 25 Sept 2009 Proposal
announcement
(25 Sept 2009)
cents / security
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Page 14 | Scheme Booklet

Matters relevant to your vote on the Proposal and LLP Directors’ Recommendation

e) No brokerage or stamp duty

You will not incur any brokerage or stamp duty on the transfer of your Scheme Securities to Lend Lease Bidco pursuant to the Schemes. This is particularly relevant to holders of less than a marketable parcel of LLP Securities.

f) No superior proposal has emerged

Since the announcement of the Proposal to ASX on 28 September 2009, no superior proposal has emerged. LLP has agreed in the Scheme Implementation Agreement not to solicit offers from third parties, but this obligation does not restrict LLP from responding to a superior proposal. However, it is the view of the LLP Independent Directors that a superior proposal is unlikely to eventuate particularly given Lend Lease’s existing 43.2% holding of LLP Securities, its holding of the Lend Lease Notes and its management of LLP.

3.3 Reasons you may consider voting against the Proposal

Although the LLP Independent Directors unanimously recommend that you vote in favour of the Proposal in the absence of a superior proposal, and although the Independent Expert concluded that the Share Scheme is in the best interests of LLP Shareholders and that the terms of the Unit Scheme are fair and reasonable to the LLP Unitholders (other than Lend Lease Bidco and its associates), factors which may lead you to vote against the Proposal include the following:

a) Disagreement with the unanimous recommendation of the LLP Independent Directors and the conclusion of the Independent Expert

You may believe that the Proposal is not in the best interests of LLP Shareholders or that the terms of the Proposal are not fair and reasonable to the LLP Unitholders.

b) You do not accept that the Proposal alternatives are uncertain

You may not agree with the view of the LLP Independent Directors that there is uncertainty and risk for LLP to successfully implement recapitalisation alternatives to achieve the four key objectives described in section 4.5, including raising not less than $300 million in additional capital. However, you should note that these recapitalisation alternatives will need to be implemented if the Proposal does not proceed and by their nature cannot offer the same certainty or timeliness offered by the Proposal.

c) Maintain investment in LLP Group

You may wish to maintain an interest in LLP because you are seeking an investment in a publicly listed company with the specific characteristics of LLP such as industry, operational profile, capital structure, size and geography. Implementation of the Proposal may represent a disadvantage for LLP Securityholders who do not want a change in investment profile.

Further if the Proposal is approved and implemented, you will cease to hold an interest in LLP and will no longer have the rights of a LLP Securityholder. In particular, you will forego any future distributions from LLP (although there is no certainty of timing or quantum of any such distributions), the opportunity to benefit from any increases in its security price, and your voting rights as a Securityholder.

d) Expectation of a superior proposal

You may consider that there is the potential for a superior proposal to be made. However, since the announcement of the Proposal to ASX on 28 September 2009, no superior proposal has emerged. LLP has agreed in the Scheme Implementation Agreement not to solicit offers from third parties, but this obligation does not restrict LLP from responding to a superior proposal. It is the view of the LLP Independent Directors that a superior proposal is unlikely to eventuate particularly given Lend Lease’s existing 43.2% holding of LLP Securities, its holding of the Lend Lease Notes and its management of LLP.

e) Taxation consequences

If the Proposal is approved and implemented, it will potentially result in taxation consequences (potentially including capital gains tax) which will arise earlier than may otherwise would have been the case if the LLP Securityholders did not dispose of their LLP Securities. The tax consequences of the Schemes are considered in further detail in Attachment H. You should consult your own taxation advisers about the taxation consequences for you if the Schemes are implemented.

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3. Matters relevant to your vote on the Proposal and LLP Directors’ Recommendation

3.4 What if LLP Securityholders do not approve the Proposal?

a) Proposal not implemented and no Scheme Consideration paid

If the Proposal is not implemented, Lend Lease Bidco will not acquire your LLP Securities and you will not receive any Scheme Consideration.

b) LLP Securities will remain listed on ASX

If the Proposal is not implemented, LLP Securities will remain listed on ASX and will continue to incur the costs of being listed on ASX.

c) Recapitalisation alternatives

If the Proposal is not implemented, LLP will need to proceed with recapitalisation alternatives in order to achieve the four key objectives described in section 4.5, including raising not less than $300 million in additional capital (most likely to be achieved by way of an equity raising and asset sales).

d) LLP Security price risk

If the Proposal is not implemented the amount you will be able to realise for your LLP Securities is uncertain and, given the matters set out in section 4.5 regarding the potentially dilutive effect of an equity raising and the potential for value erosion from asset sales, the LLP Independent Directors consider that the market price for LLP Securities may trade below $0.31 if the Proposal does not proceed.

Page 16 | Scheme Booklet

Information regarding LLP

4. 4.1 Overview of Lend Lease Primelife

The LLP Group is one of Australia’s largest listed integrated owners, operators and developers of senior living communities.

The LLP Group owns and manages a portfolio of 61 retirement villages and 33 aged care facilities across Australia and New Zealand comprising approximately 11,212 retirement units and 2,313 residential aged care beds as at 30 June 2009. Additionally, the LLP Group has a development pipeline of approximately 911 retirement units, expected to be delivered over the next 9 years.

a) Background

The LLP Group comprises the formerly listed group Primelife (PLF), the Primeliving Trust and the Fini portfolio which were consolidated in 2007 to create LLP (formerly named “Babcock & Brown Communities” (BBC)) under the management of Babcock & Brown.

BBC undertook a strategic review in June 2008 which identified the need to reduce debt and implement capital management initiatives, and which resulted in a competitive price discovery process being undertaken. This process led to the Lend Lease recapitalisation proposal being announced in October 2008 and approved by BBC securityholders on 30 December 2008.

The key components were as follows:

Lend Lease acquired the management rights from Babcock & Brown to provide LLP with property, development, asset management, financial advisory and investment banking services on a preferred basis;
the LLP Group raised $149.7 million in cash through the issue of LLP Securities to Lend Lease;
the LLP Group acquired part of the Retirement by Design portfolio from Lend Lease;
the LLP Group issued $158.4 million in Lend Lease Notes to fund the acquisition of Retirement by Design for $133.4 million and the balance for additional funding to the LLP Group;
the LLP Group changed its name to Lend Lease Primelife Limited (LLPL) and Lend Lease Primelife Trust (LLPT) (formerly Babcock & Brown Communities Limited and Babcock & Brown Communities Trust);
LLVRE became the new responsible entity of LLPT; and
the LLP Group’s bank debt facilities and interest rate derivatives were restructured.

With the change in manager under the Lend Lease recapitalisation proposal, the following appointments to the LLP Group’s executive team were made on 27 November 2009: Rod Fehring as Chief Executive Officer, Paul Walsh as Chief Financial Officer and David Payne as General Manager – Retirement Villages.

In addition, there have been significant changes to the LLP Board over the last 12 months including:

David Hutton and Anthony Lombardo, employees of Lend Lease, being appointed as non-independent directors of LLP;
John Martin, Robert Topfer and Andrew Schwartz, who were employees of Babcock & Brown, resigned as directors of LLP; and
Professor Judith Sloane and Graeme Martin resigned on 28 April 2009 to make way for Ian Crow and Gary Symons to be appointed as independent directors of LLP.

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Information regarding LLP

4. b) Recent Performance

Since becoming manager of LLP, the Manager has focussed on improving operational performance through improving systems, simplifying the structure, strengthening the balance sheet and cashflow generation. Significant progress has been made to date which includes the following:

re-calibrating the balance sheet to reflect more conservative operating assumptions;
re-structuring financing arrangements;
recapitalising the business enabling debt reduction;
in conjunction with Lend Lease, resolving ongoing legacy issues associated with Prime Retirement & Aged Care Property Trust (PTN) (see below for further details);
initiating and completing several non-core asset sales;
reviewing all management agreements and joint ventures to ensure alignment of interests and begun the process to exit those with mis-alignment;
selectively recommencing development activity and restructuring the development business, with development and asset management services now provided by Lend Lease;
re-branding the business;
completing the integration of the Conform Aged Care business;
continuing the roll out of the Aged Care Group’s TRAX operating system; and
implementing cost savings initiatives across the business.

Despite progress being made, the LLP Group’s financial performance in the 2009 financial year was disappointing, resulting in a loss after tax of $246.7 million. Economic conditions have resulted in an adverse impact on asset values leading to an impairment charge for the 6 months ended 31 December 2008 of $138 million and followed by a further impairment charge of $51 million for the 6 months ended 30 June 2009.

Impairments and other non-cash balance sheet adjustments caused a breach in the LLP Group’s interest coverage covenant under its bank debt facilities. The waiver of this breach was received on 17 September 2009, subject to certain conditions being satisfied (see section 4.4 for further details).

In line with the strategy to simplify the business, on 13 August 2009 the LLP Group and Lend Lease reached agreement with PTN in relation to the following:

Lend Lease would acquire 9 aged care properties and 4 retirement living properties owned by PTN and managed by the LLP Group. The LLP Group continues to manage these facilities under the existing arrangements;
the LLP Group separately agreed with Lend Lease to grant and receive rights over these aged care properties and retirement properties to enable the LLP Group to consolidate the ownership of these properties at a future date. These rights lapse on 30 June 2011;
the LLP Group granted PTN an option, which expires on 30 June 2010, to acquire the management rights to the Retirement Guide portfolio of 12 Retirement Villages (owned by PTN and presently managed by the LLP Group) for between $42.5 million and $45 million (the final price contingent on the performance of the Retirement Guide portfolio in the year to 30 June 2010); and
the LLP Group and PTN agreed to the settlement and release of a number of long dated disputes and claims between the parties arising from the Retirement Guide portfolio.

Page 18 | Scheme Booklet

Information regarding LLP

4. 4.2 2009 Annual Report of the LLP Group

On 25 September 2009, the LLP Group lodged a copy of its 2009 Annual Report with ASX.

The 2009 Annual Report of the LLP Group contains more detailed information about the LLP Group’s asset, business, structure, securityholders’ profile and outlook. It also includes a copy of the audited consolidated financial statements of the LLP Group for the year ended 30 June 2009.

The LLP Group’s Annual General Meeting for 2009 was originally convened to be held on 30 October 2009. However, in order to reduce costs and expenses associated with holding the 2009 Annual General Meeting and the Scheme Meetings on separate dates within approximately 6 weeks of each other, the LLP Group announced to ASX on 22 October 2009 that, as ASIC had extended the time to hold the 2009 Annual General Meeting until no later than 31 January 2010, the Annual General Meeting that was convened to be held on 30 October 2009 had been cancelled. The 2009 Annual General Meeting has been reconvened to be held on the same day as the Scheme Meetings, on 8 December 2009, immediately following the conclusion of the Unit Scheme Meeting. The 2009 Annual Report of the LLP Group will be considered at the 2009 Annual General Meeting.

LLP Securityholders can view the 2009 Annual Report on the LLP Group website (www.llprimelife.com) or on the ASX website (www.asx.com.au). Any LLP Securityholder who wants a copy of the 2009 Annual Report can call the LLP Securityholder information line on 1800 427 320 (free call) or +61 2 8280 7168 (outside Australia) and a copy will be sent to them, free of charge.

4.3 LLP Group Distribution

The LLP Group last made a distribution to LLP Securityholders of $0.042 per LLP Security on 18 March 2008 and $0.021 per LLP Security on 25 September 2008 (funded by an underwritten dividend reinvestment plan), making total distributions of $0.063 per LLP Security for the year ended 30 June 2008.

The LLP Group did not make any distribution on LLP Securities for the financial year ended 30 June 2009.

Section 4.5 includes information in relation to the uncertainty of timing and conditions for future distributions.

4.4 Bank Covenant Breach

The LLP Group breached one of its banking covenants for the 12 months ended 30 June 2009, which resulted in it seeking a waiver from its banking group. A waiver was also sought and granted in December 2008 in order to prevent the LLP Group breaching a banking covenant at that time.

As announced to ASX on 18 September 2009, commercial negotiations between LLP, its banks and Lend Lease regarding the terms of a waiver in respect of the interest coverage covenant breach for the 12 months ended 30 June 2009 were finalised, subject to documentation which has now been completed (Waiver). Lend Lease has agreed to vary certain terms of the subordinated debt it has with LLP.

The key terms of the Waiver are:

the interest coverage ratio, which includes non-cash items, will be replaced with a cash covenant of 1.25 times;
the facility limit was reduced from $525 million to $475 million;
the facility limit is required to be further reduced to $350 million by 30 June 2010. The facility limit was drawn to $461 million at 30 June 2009 and was drawn to $442 million as at 9 October 2009;
the majority of the proceeds of asset sales and proceeds of equity raisings will be applied against bank debt until the facility limit of $350 million is achieved; and
there is no change to the bank leverage ratio covenant of 50%. The LLP Group maintains significant headroom in this covenant with a ratio of 34.6% at 30 June 2009. This compares to a more typical net debt to Adjusted Total Assets ratio of 32%.

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Information regarding LLP

4.

The LLP Group had already commenced selling non-core assets in order to reduce debt. In the absence of the Proposal being implemented, the LLP Group has a plan of further proposed asset sales under this programme to continue to reduce debt down to the required levels by 30 June 2010.

LLP bank debt has two tranches which mature on 18 December 2010 and 18 December 2012 respectively. LLP is required to pay down all of the second tranche by 30 June 2010 and as such the bank debt requires refinancing at the end of 2010. The LLP Group is maintaining engagement with its banks to refinance and further restructure borrowing facilities prior to this time.

The LLP Directors note that there are risks associated with meeting the conditions of the Waiver, including:

Failure of asset sales to generate sufficient proceeds to meet target debt levels: the current volatility in the market has reduced available liquidity, potentially making it more difficult to find buyers to acquire assets. In the absence of the Proposal, LLP has significant breadth in its portfolio of assets in terms of sector and geography to ensure that there are a number of alternatives available.
NAV Erosion: selling assets in the current market, within a specified time frame, creates risk that there will be further erosion of the NAV.
Continued business performance: the businesses that the LLP Group operates need to continue to operate at or above the current levels to meet cashflow targets in order to generate sufficient cashflow to meet any proposed cashflow based covenant. As the LLP Group sells parts of its asset base to reduce debt levels, the risk around the remaining business elements may increase due to reduced diversification or if the remaining businesses have less cashflow generating capacity.

The LLP Group is expected to meet the current cashflow based financial covenant for the financial years ending 30 June 2010 and 30 June 2011. However, no assurance can be given that these will be achieved as they involve circumstances and factors beyond the control of the LLP Group.

4.5 Outlook for LLP if Proposal does not proceed

LLP needs to be recapitalised in the short term in order to achieve the following four key objectives:

a) To comply with the terms of the Waiver, referred to in section 4.4, requiring a reduction of the current bank facility limits from $475 million to $350 million as at 30 June 2010.
b) To achieve a Target Gearing Ratio in the range of 20% to 25%. At 30 June 2009, LLP’s net debt (including Lend Lease Notes) reflected a gearing ratio of 44%.
c) To successfully refinance LLP’s bank debt, assuming the conditions of the Waiver are satisfied by 30 June 2010. The refinancing of the remaining tranche of the LLP bank debt is due by no later than 18 December 2010.
d) To resume distributions to LLP Securityholders.

In LLP’s 2009 Annual Report the LLP Board stated that it was confident that acceptable returns for LLP Securityholders could be achieved over time through an orderly reduction of debt to the Target Gearing Ratio of 20% to 25%.

Until a Target Gearing Ratio of 20% to 25% is met it will not be possible to resume distributions.

Future distributions will also need to take into account the requirements of LLP’s banks when LLP’s bank debt is refinanced at the end of 2010.

Even if these conditions for future distributions are met, you should also be aware of another important factor that will influence both the timing and quantum of future distributions. Accounting profits from retirement village assets can vary significantly from underlying cash flows. In the past this has not been an issue because distributions were supported by asset revaluations and development profits and financed by bank borrowings. Future distributions will need to be funded from net operational cashflows.

As a result of these matters there will be no distributions in the 2010 financial year and there are risks and uncertainties surrounding LLP’s ability to resume making distributions and the quantum of distributions for the 2011 financial year and beyond.

To bring the LLP debts into the Target Gearing Ratio of 20% to 25% this will require the injection of approximately $250 million of equity capital (to achieve a Target Gearing Ratio of 25%) to $300 million of equity capital (to achieve a Target Gearing Ratio of 21%).

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Information regarding LLP

4.

The LLP Directors have considered and continue to consider a number of alternatives to raise this additional capital. Although no final decisions will be made before LLP Securityholders consider the Proposal at the Scheme Meetings, it is anticipated that the additional capital will most likely be sought through a combination of:

asset sales; and
an equity raising (most likely an underwritten entitlements issue to LLP Securityholders).

In order to better realise value, LLP may have to sell high cashflow yielding assets. The LLP Board is reluctant to initiate large scale asset sales in the current environment because of the potential impact this would have on the LLP business model and future cashflows and gearing.

The size of asset sales has the potential to limit the number of purchasers and the time constraint may limit LLP’s flexibility and its desire to follow an orderly and competitive sale process.

In this situation, the sale of assets at distressed prices or at a discount to their underlying book value becomes a distinct possibility. In a worst case scenario, LLP may become a forced seller as lenders seek to recover their capital if the funding deadlines described above are not met.

An equity raising (most likely an underwritten entitlements issue to LLP Securityholders) would, in the opinion of the LLP Board:

require the support of the major shareholder, Lend Lease;
need to be priced at a substantial discount to the market price of LLP Securities. Comparable transactions in the listed property trust sector during the last six months[1] have seen average discounts of 25%. Discounts of this size to the 5 day VWAP of LLP Securities immediately before the announcement of the Proposal on 28 September 2009 would imply an entitlements offering price of $0.18 per LLP Security; and
need to be underwritten, so that there is a level of certainty at the time that the issue is announced that it will be successful. Such underwriting fees typically range between 2% and 3.5% of the equity raising which is underwritten.

Moreover, there are risks in achieving a successful equity raising in the circumstances of LLP, including:

that it would need to be priced at a material discount to the prevailing market price, potentially greater than the recent average of 25% in order to maximise the prospects of the equity raising being successful;
that Lend Lease may not support the equity raising;
that all other LLP Securityholders (who hold approximately 57% of the LLP Securities) may not support the equity raising, particularly given the distribution profile set out above;
the risk that LLP may not be able to achieve an underwriting of the equity raising on acceptable terms or at all given the distribution profile set out above;
there can be no assurance that any future equity raising can be successfully completed by LLP. The future trading price of LLP Securities may fluctuate with movements in equity capital markets in Australia and overseas. Such movements may be caused by, amongst other things, the economic conditions in Australia and overseas, investor sentiment in the local and international stock markets, consumer sentiment, changes in fiscal, monetary, regulatory and other government policies, global political and economic stability, interest and inflation rates and foreign exchange rates. These factors could also impact the support from existing LLP Securityholders or demand from new investors for any future equity raising by LLP.

In addition, any future underwritten equity raising could also be terminated by the underwriters following its announcement for customary termination events such as material adverse changes in financial markets or material adverse change in the financial or operational conditions of LLP;

1 Comparable transactions include recent capital raisings for greater than $100 million for Goodman Group, ALE Property Group, Australand, FKP Property, ING Office, Mirvac, Stockland, GPT, Bunnings and Dexus.

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Information regarding LLP

4.

depending on the final structure of an equity raising, LLP Securityholder approval may be required, thus creating timing risks and market risks in addition to the risk that any required approval may not be forthcoming; and
as a consequence of capital management initiatives or other structural changes to the Register, there is a risk that LLP would lose the benefit of the circa $450 million (gross) in accumulated tax losses available to the LLP Group, resulting in the LLP Group paying tax significantly earlier than would otherwise have been the case if carried forward tax losses were available for utilisation, reducing cash available to pay down debt, operate the business and pay any distributions.

By way of illustration only, if an underwritten entitlements issue to existing LLP Securityholders to raise $300 million were to proceed (and no material asset sales undertaken) at an issue price of $0.18 then, after the issue, the following metrics could apply:

a reduction in the NTA from $0.30 per LLP Security to potentially less than $0.24;
a reduction in the NAV from $0.55 per LLP Security to potentially less than $0.33; and
a Theoretical Ex-Rights Trading Price per LLP Security of potentially less than $0.22.

Although a successful capital raising of not less than $300 million may result in a re-rating of LLP Securities on ASX, this cannot be guaranteed.

Despite these risks, if the Proposal is not approved by LLP Securityholders, or the conditions of the Proposal are not satisfied or (where applicable) waived, then the LLP Board will need to undertake steps with a view to raising not less than $300 million of capital during 2010 by a combination of an equity raising and asset sales.

Given the uncertainties described above, the LLP Board has not formed any intentions as to any changes that may be made to LLP’s business, or to the future employment of LLP’s current employees, if the Proposal is not implemented.

4.6 Recent security price performance

Since commencing trade on ASX as LLP on 31 December 2008, LLP’s security price has traded with an average weekly volume of approximately 5,739,062 securities.

The chart below sets out the daily closing price of LLP Securities on ASX from 31 December 2008 to 25 September 2009. (Source: IRESS)

==> picture [518 x 219] intentionally omitted <==

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

$0.35 10,000
9,000
$0.30
8,000
$0.25 7,000
6,000
$0.20
5,000
$0.15
4,000
$0.10 3,000
2,000
$0.05
1,000
$0.00 0
Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09
LLP volume LLP security price All Ords (rebased)
Security Price (A$)
Securities traded (000s)
----- End of picture text -----

Page 22 | Scheme Booklet

Information regarding LLP

4.

The Scheme Consideration of $0.31 cash for each LLP Security represents a:

26.5% premium to LLP’s closing security price of $0.245 on 25 September 2009, being the last trading day prior to the announcement of the Proposal;
48.3% premium to LLP’s rounded one month VWAP of $0.209 up to 25 September 2009;
103.9% premium to LLP’s rounded three month VWAP of $0.152 up to 25 September 2009; and
124.6% premium to LLP’s rounded six month VWAP of $0.138 up to 25 September 2009.

4.7 LLP Options

The following LLP Options are outstanding:

Number 300,000	Grant Date 10/02/2005	Expiry Date 22/03/2010	Exercise Price $ 1.38	Value per option at grant date $ 0.5868	Date Exercisable From To 23/03/2005 23/03/2010	Date Exercisable From To 23/03/2005 23/03/2010
300,000	10/02/2005	23/03/2011	1.52	0.6065	23/03/2006	23/03/2011
200,000	01/07/2007	01/07/2012	1.12	0.5289	01/07/2007	01/07/2012

LLP Options do not carry any dividend or voting rights. When exercisable, each LLP Option is convertible into one LLP Security. The exercise price of LLP Options is based on the weighted average price of LLP Securities traded on ASX during the period nominated by the LLP Board.

LLP and Lend Lease have agreed that LLP may make an offer to each holder of LLP Options to cancel all of the LLP Options held by them (subject to compliance with all legal requirements, including the ASX Listing Rules) for payment of an amount to be funded by Lend Lease. If the offer is accepted LLP will provide details of the offer to ASX by public announcement.

The cancellation of the LLP Options and payment of any consideration will be conditional on the Schemes becoming Effective. If:

a) LLP and Lend Lease do not make a cancellation offer or such a cancellation is not implemented in respect of any LLP Options; and
b)
the Schemes become Effective,

Lend Lease may exercise rights to compulsorily acquire any outstanding LLP Options at or shortly after that time (refer to section 6.6).

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5. Overview and implementation of the Proposal

5.1 Background

On 28 September 2009, LLP announced to ASX that it had entered into a Scheme Implementation Agreement with Lend Lease pursuant to which LLP agreed to give LLP Securityholders the opportunity to consider the Proposal. At that time, the LLP Independent Directors unanimously recommended the Proposal in the absence of a superior proposal and subject to the Independent Expert concluding that the Proposal is in the best interests of LLP Securityholders.

Prior to that announcement being made, Lend Lease had access to the LLP Group’s confidential information pursuant to a confidentiality deed executed by LLP and Lend Lease to govern the disclosure of LLP Group confidential information to Lend Lease in relation to Lend Lease’s formulation and assessment of the Proposal.

Transaction protocols were also put in place by the LLP Board to deal with any conflicts of interest arising in relation to the formulation and assessment of the Proposal and the implementation of the decisions made by the LLP Independent Directors arising from their assessment of the Proposal. The transaction protocols were also intended to supplement existing protocols and policies put in place by LLP and the Manager under the management agreements between them to deal with conflicts of interest.

The Independent Expert has also had access to the LLP Group’s confidential information that was provided to Lend Lease for the purpose of formulating and assessing the Proposal. The Independent Expert has also conducted interviews with certain members of LLP’s management team, the LLP Independent Directors and LLP’s auditors.

5.2 Overview of the Schemes

Because LLP Securities comprise a LLP Share stapled to an LLP Unit, the Proposal comprises two interdependent schemes:

Share Scheme: a scheme of arrangement between LLP and Scheme Shareholders for the transfer of all of the Scheme Shares to Lend Lease Bidco; and
Unit Scheme: an arrangement under which all of the Scheme Units are transferred to Lend Lease Bidco, facilitated by an amendment to the Trust Constitution as set out in the Supplemental Deed.

a)

Share Scheme

The Share Scheme is a Court approved scheme of arrangement between LLP and Scheme Shareholders for the transfer to Lend Lease Bidco of all Scheme Shares in return for the total Scheme Consideration. A copy of the Share Scheme is set out in Attachment C.

In order for the Share Scheme to become Effective, the Share Scheme Resolution must be approved by the requisite majorities of Scheme Shareholders at the Share Scheme Meeting and must be subsequently approved by the Court under section 411(4)(b) of the Corporations Act. The Share Scheme is also subject to the satisfaction of the conditions set out in section 3.1 of Attachment E, which include the approval of the Unit Scheme.

In order for the Share Scheme Resolution to be passed:

a majority in number (more than 50%) of Scheme Shareholders present and voting at the Share Scheme Meeting (in person, by proxy, by attorney or, in the case of a body corporate, by a corporate representative); and
at least 75% of the total number of votes cast on the Share Scheme Resolution (in person, by proxy, by attorney or, in the case of a body corporate, by a corporate representative),

must be in favour of the Share Scheme Resolution.

Holders of Excluded Securities, including Lend Lease Bidco, are not entitled to participate in the Share Scheme Meeting as the Excluded Securities will not be the subject of the Share Scheme. Accordingly, holders of Excluded Securities will not vote on the Share Scheme Resolution.

The Share Scheme Resolution and applicable voting exclusions are set out in the Notice of Share Scheme Meeting in Attachment A.

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Overview and implementation of the Proposal

b) Unit Scheme

The Unit Scheme is an arrangement under which Lend Lease Bidco acquires all Scheme Units in return for the Scheme Consideration, that arrangement being facilitated by an amendment to the Trust Constitution as set out in the Supplemental Deed. A copy of the Supplemental Deed is set out in Attachment F.

In order for the Unit Scheme to become Effective, the Unit Scheme Resolutions must be approved by the requisite majorities of LLP Unitholders at the Unit Scheme Meeting and the Court must subsequently grant the Second Judicial Advice. The Unit Scheme is also subject to the satisfaction of the conditions set out in section 3.1 of Attachment E, which include approval of the Share Scheme.

Amendment of Trust Constitution – Unit Scheme

It is necessary to amend the Trust Constitution in order to implement the Unit Scheme. The amendments, which are contained in the Supplemental Deed, authorise LLP to do all things which it considers necessary or desirable for the purposes of giving effect to the Unit Scheme.

The Amendment Resolution must be approved as a special resolution that has been passed by at least 75% of the total number of votes cast on that Resolution at the Unit Scheme Meeting (in person, by proxy, attorney, or in the case of corporate LLP Unitholders, by corporate representative).

LLVRE and its associates, including Lend Lease Bidco, are not entitled to vote on the Amendment Resolution as they have an interest in the Amendment Resolution other than as an LLP Unitholder.

Approval of acquisition of LLP Units by Lend Lease Bidco

In addition to the Amendment Resolution, LLP Unitholders must approve the acquisition by Lend Lease Bidco of all the Scheme Units for the purposes of item 7 of section 611 of the Corporations Act ( Acquisition Resolution ).

The Acquisition Resolution must be approved as an ordinary resolution that has been passed by at least 50% of the total number of votes cast on that Resolution (in person, by proxy, attorney or, in the case of corporate LLP Unitholders, by corporate representative).

An ASIC modification in respect of this approval requirement has been obtained and is described in section 8.17. No votes may be cast in favour of the Acquisition Resolution by Lend Lease Bidco and its associates.

The Unit Scheme Resolutions and applicable voting exclusions are set out in the Notice of Unit Scheme Meeting in Attachment B.

Judicial Advice

On 2 November 2009, LLP applied to the Court for the grant of the First Judicial Advice. The First Judicial Advice was granted by the Court on 2 November 2009. The First Judicial Advice confirmed that LLVRE was justified in convening the Unit Scheme Meeting and proceeding on the basis that amending the Trust Constitution, as set out in the Supplemental Deed, would be within the powers of alteration conferred by the Trust Constitution and section 601GC of the Corporations Act.

If:

the Resolutions are approved by the requisite majorities at the Scheme Meetings; and
all conditions to the Schemes have been satisfied or remain capable of being satisfied, or (where applicable) waived (see section 8.15),

LLP will apply to the Court for the grant of the Second Judicial Advice. The Second Judicial Advice, if granted, will confirm that LLVRE is justified in acting upon the Unit Scheme Resolutions in doing all things necessary and taking all necessary steps to put the Unit Scheme into effect. If the Court does not grant the Second Judicial Advice, the Schemes will not become Effective and the Proposal will not be implemented.

Page 25

5. Overview and implementation of the Proposal

5.3 Steps for implementing the Schemes

a) Preliminary steps

LLP and Lend Lease entered into a Scheme Implementation Agreement on 28 September 2009 pursuant to which they agreed to implement the Proposal.

On 30 October 2009, Lend Lease and Lend Lease Bidco executed the Deed Poll pursuant to which Lend Lease and Lend Lease Bidco agreed, subject to the Schemes becoming Effective, to provide the Scheme Consideration to which each Scheme Participant is entitled under the terms of the Schemes. A copy of the Deed Poll is set out at Attachment D.

b) Scheme Meetings

The Court has ordered that the Share Scheme Meeting be held at 10.00am on 8 December 2009 for the purposes of approving the Share Scheme Resolution. The Notice of Share Scheme Meeting is included in Attachment A, which sets out the Share Scheme Resolution.

LLP has convened the Unit Scheme Meeting to be held immediately after the Share Scheme Meeting for the purpose of approving the Unit Scheme Resolutions. The Notice of Unit Scheme Meeting for LLP Unitholders is included in Attachment B, which sets out the Unit Scheme Resolutions.

Each person who is registered as a LLP Securityholder at 7.00pm on 6 December 2009 is entitled to vote at the Scheme Meetings, either in person or by proxy or attorney or, in the case of a body corporate, by corporate representative (unless otherwise noted in the notices of the Scheme Meetings).

Instructions on how to attend and vote at the Scheme Meetings in person, or to appoint a proxy to attend and vote on your behalf, are set out in section 7 and in the notices of the Scheme Meetings (see Attachments A and B).

c) Court Approval

If:

the Resolutions are approved by the requisite majorities at the Scheme Meetings; and
all conditions to the Proposal have been satisfied or remain capable of being satisfied, or (where applicable) waived (see section 8.15),

LLP will apply to the Court for orders approving the Share Scheme under section 411(4)(b) of the Corporations Act.

Each LLP Securityholder has the right to appear at the application by LLP for orders approving the Share Scheme under section 411(4)(b) of the Corporations Act.

d) Second Judicial Advice

If:

the Resolutions are approved by the requisite majorities at the Scheme Meetings; and
all conditions to the Proposal have been satisfied or remain capable of being satisfied, or (where applicable) waived (see section 8.15),

LLP will apply to the Court, at the same time as it will apply for orders approving the Share Scheme, for the Second Judicial Advice.

Each LLP Securityholder has the right to appear at the application by LLP for the grant of the Second Judicial Advice.

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Overview and implementation of the Proposal

e)

Steps to implement the Proposal

If the Court makes orders approving the Share Scheme and grants the Second Judicial Advice, LLP, Lend Lease and Lend Lease Bidco will take or procure the taking of the steps required for the Schemes to be implemented, including:

LLP will lodge with ASIC an office copy of the Court orders given under section 411(4)(b) of the Corporations Act approving the Share Scheme and a copy of the Supplemental Deed giving effect to the Unit Scheme Resolutions. It is anticipated that this will occur on 11 December 2009. Upon the lodgement of the Court orders and a copy of the Supplemental Deed with ASIC, the Schemes will become Effective;
in consideration for the transfer to Lend Lease Bidco of all the Scheme Securities, Lend Lease Bidco will provide to the Scheme Consideration to which each Scheme Participant is entitled under the terms of the Schemes. Lend Lease Bidco is required to deposit the total Scheme Consideration in clear funds into a trust account for the purposes of providing each Scheme Participant with its entitlement in cash under the Schemes before the Scheme Securities are transferred to Lend Lease Bidco under the Scheme. It is expected that the date of payment of the Scheme Consideration to each Scheme Participant will be on or about the Implementation Date (23 December 2009); and
LLP will execute a master transfer on behalf of all Scheme Participants to transfer the Scheme Securities to Lend Lease Bidco and deliver the master transfer to Lend Lease Bidco and enter the name of Lend Lease Bidco in the Register in respect of all Scheme Securities.

5.4 Payment of Scheme Consideration

The Scheme Consideration will be paid by LLP making a payment to each Scheme Participant’s bank account nominated with the Registry as at the Record Date.

If a Scheme Participant has not previously notified the Registry of a bank account or would like to change the existing nominated bank account, the Scheme Participant should contact the Registry on 1800 881 047 (free call) or +61 2 8280 7923 (outside Australia) before the Record Date.

If a Scheme Participant does not have a nominated bank account with the Registry as at the Record Date, that Scheme Participant will be sent a cheque for any Scheme Consideration that the Scheme Participant is entitled to receive under the Schemes. If the Scheme Participant’s whereabouts are unknown as at the Record Date, the Scheme Consideration will be paid into a separate bank account and held by LLP on trust until claimed or applied under laws dealing with unclaimed money.

5.5 Determination of persons entitled to Scheme Consideration

a)

Dealings on or prior to the Record Date

For the purpose of establishing the persons who are Scheme Participants, dealings in LLP Securities will only be recognised if:

in the case of dealings of the type to be effected by CHESS, the transferee is registered in the Register as a holder of the relevant LLP Securities by the Record Date; and
in all other cases, registrable transfers or transmission applications are received by the Registry by 7.00pm on the Record Date. LLP must register such transfers or transmission applications which it receives at or before 7.00pm on the Record Date.

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Overview and implementation of the Proposal

5. b) Dealings after the Record Date

LLP will not accept for registration or recognise for any purpose any transmission application or transfer in respect of LLP Securities received after 7.00pm on the Record Date (other than a transfer of LLP Securities to Lend Lease Bidco in accordance with the Schemes) or received prior to the Record Date and not in registrable form.

For the purposes of determining entitlements to Scheme Consideration, LLP will from the Record Date until registration of Lend Lease Bidco in respect of all of the LLP Securities, maintain the Register in this form, which, together with the terms of the Schemes, will determine entitlements to the Scheme Consideration.

As from 7.00pm on the Record Date, each entry on the Register will cease to be of any effect other than as evidence of entitlement to the Scheme Consideration in respect of Scheme Participants to the Scheme Consideration relating to that entry.

Any statements of holding in respect of LLP Securities shall, from the Record Date, cease to have any effect as documents of evidence of title in respect of such LLP Securities.

5.6 End date

If the Proposal is not implemented on or before 31 January 2010, either LLP or Lend Lease is able to terminate the Scheme Implementation Agreement. If the Scheme Implementation Agreement is terminated, the Proposal will not proceed, Lend Lease Bidco will not acquire your LLP Securities and you will not receive any Scheme Consideration. See section 4.5 for further details on what will happen if the Proposal does not proceed.

5.7 Further questions

If you have any further questions about the Proposal or the Schemes, you should call the LLP Securityholder information line on 1800 427 320 (free call) or +61 2 8280 7168 (outside Australia).

If you have a question about LLP (other than in relation to the Proposal or Schemes), please contact the LLP registry line on 1800 881 047 (free call) or +61 2 8280 7923 (outside Australia).

Page 28 | Scheme Booklet

Information on Lend Lease

6. 6.1 Overview of Lend Lease

Lend Lease is one of the leading international property groups listed on ASX. As at 12 October 2009, Lend Lease’s market capitalisation was approximately $4.8 billion, ranking it as the 47th largest company in the S&P/ASX 200.

Lend Lease focuses on capturing value across the property value chain through its integrated model. The Lend Lease Group delivers this business model through five key operations comprising:

a) Retail;
b) Communities (including Lend Lease’s retirement village interests);
c) Public Private Partnerships (PPP);
d)

e)

Project Management and Construction; and
Investment Management.

On 12 October 2009, Lend Lease announced a stapling proposal ( Lend Lease Stapling Proposal ). Under the proposal, which is subject to Lend Lease shareholder approval, shares in Lend Lease will be stapled to units in a new Lend Lease Trust. The stapling will provide Lend Lease with greater flexibility for the optimum holding of assets which Lend Lease acquires in the future. There are no current assets identified to be acquired by the Lend Lease Trust and the Lend Lease Stapling Proposal does not impact on Lend Lease’s implementation of the Proposal.

6.2 History of Lend Lease’s relationship with LLP

Lend Lease initially acquired securities in LLP (previously named “Babcock & Brown Communities Group”) in mid-2008, when it purchased a 7.3% stake in LLP.

Following a public price discovery process conducted by LLP, Lend Lease and LLP entered into an implementation agreement in October 2008 in relation to a recapitalisation of LLP, the acquisition of management rights from Babcock & Brown Group, and the sale by Lend Lease of part of its existing retirement business to LLP. The proposal was revised in November 2008, and received LLP Securityholder approval in December 2008. The recapitalisation involved a total capital injection by Lend Lease of $195 million.

As part of the implementation of the proposal, LLP was renamed to its current name, “Lend Lease Primelife Group”. After the implementation of the proposal was completed in February 2009, Lend Lease held:

a) a 43.2% interest in LLP Securities; and

b)

the following convertible note interests in LLP:
22,333,333 ‘First Notes’ – face value $0.60;
200,000,000 ‘RBD Convertible Notes’ – face value $0.60; and
100,000,000 ‘Second Notes’ – face value $0.25.

6.3 Rationale for Lend Lease’s proposed acquisition of LLP

In its current corporate structure, LLP remains highly leveraged with bank debt of $461 million as at 30 June 2009 (the Existing LLP Bank Facilities ) and convertible notes of $158.4 million outstanding as at 30 June 2009. Total gearing net of cash was 44% at 30 June 2009. Under the terms of the Waiver announced by LLP on 18 September 2009, LLP is required to reduce the Existing LLP Bank Facilities to $350m by June 2010. Lend Lease believes its acquisition of the Scheme Securities is preferable to other options available to LLP, such as reducing leverage through asset sales or raising capital, which are likely to erode LLP Securityholder value in the current environment.

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Information on Lend Lease

6. 6.4 Acquiring entity

If the Schemes become Effective, on the Implementation Date, Lend Lease Bidco will acquire all of the Scheme Securities so that following implementation of the Schemes, Lend Lease Bidco will own 100% of the issued LLP Securities.

6.5 Funding arrangements for Scheme Consideration

a) Lend Lease’s internal funding arrangements: Lend Lease has agreed to provide Lend Lease Bidco with all amounts that Lend Lease Bidco is required to pay for the acquisition of the Scheme Securities pursuant to the Schemes (as and when those payments are required to be made).
b) Overview of funding arrangements: If the Schemes become Effective, Lend Lease Bidco will pay Scheme Participants a cash amount of $0.31 per LLP Security on the Implementation Date.

The maximum amount of cash required to be paid by Lend Lease Bidco to Scheme Participants under the Schemes is $170.1 million. As at 30 June 2009 Lend Lease had cash and cash equivalents of approximately $1.1 billion. These cash reserves are not subject to security interests, rights of set off or other arrangements that might materially affect Lend Lease’s ability to use them to procure payment of the Scheme Consideration.

Lend Lease’s cash reserves are sufficient to fund the Scheme Consideration without recourse to external borrowings. Currently, Lend Lease has not determined whether to use cash and cash equivalents or external borrowings for this purpose. As at 30 June 2009, Lend Lease also had approximately $560 million of undrawn existing debt facilities. Lend Lease could draw on undrawn facilities to fund the Scheme Consideration if required.

6.6 Lend Lease’s intentions if the Schemes are implemented

The intentions set out in this section 6.6 have been formed on the basis of facts and information concerning LLP and the general business environment which is known to Lend Lease as at the time of preparing this Scheme Booklet. Final decisions on these matters will only be made by Lend Lease in light of all material facts and circumstances at the relevant time. Accordingly, the statements set out in this section 6.6 are statements of current intention only, which may change as new information becomes available or as circumstances change.

This section 6.6 sets out the intentions of Lend Lease in relation to:

a) the continuation of the business of LLP;
b)
any major changes to be made to the business of LLP, including any redeployment of fixed assets of LLP;
c) the future employment of the present employees of LLP; and
d) other general matters in relation to the implementation of the Schemes.

Continuation of Business / Major changes

If the Schemes are implemented, Lend Lease’s strategy is to enhance LLP’s position in owning, operating and developing products for the senior living sector. Lend Lease believes the business will be able to operate more effectively as part of the broader Lend Lease Group, that is not subject to the type of capital constraints currently faced by LLP as a listed entity.

Following implementation, Lend Lease will conduct a general review of the LLP operations, assets and employees with the aim of determining the optimal structure for the business under 100% Lend Lease ownership. Final decisions on operations, assets and employment will only be reached after that review and in light of all material facts, information and circumstances at that time.

On or following implementation of the Schemes, Lend Lease intends to refinance the Existing LLP Bank Facilities with either its existing cash reserves, available debt capacity or a new unsecured Lend Lease corporate facility or to maintain any of the facilities on terms to be agreed with any of the existing lenders.

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Information on Lend Lease

Future Employment

It is Lend Lease’s present intention to continue the employment of LLP’s current employees.

The general review outlined above may lead to some redeployment of resources from Lend Lease’s existing operations, and some limited redundancies to take account of consolidation of roles across Lend Lease’s retirement business.

LLP Options

As noted in section 4.7, LLP and Lend Lease have agreed (subject to compliance with all legal requirements, including the ASX Listing Rules) that LLP will make a cancellation offer to the holders of the LLP Options. If the Schemes become Effective and any LLP Option holder has not accepted the cancellation offer, Lend Lease may exercise rights to compulsorily acquire the LLP Options, following the implementation of the Schemes.

Other matters

If the Schemes are implemented, Lend Lease will:

a) seek to have LLP removed from the official list of ASX;
b) make changes and/or appoint further nominees of Lend Lease as directors to the LLP Board. Such nominees have not yet been identified and their identity will depend on the circumstances at the relevant time. Lend Lease will not give any benefit to any current LLP Director in connection with his/her retirement from office as a result of the implementation of the Schemes;
c) continue to retain LLVRE as the responsible entity of LLPT; and
d) continue to maintain LLPT’s registration as a managed investment scheme.

Lend Lease does not currently intend that the new Lend Lease Trust (which will be established if the Lend Lease Stapling Proposal is implemented – see section 6.1) will acquire any LLP assets.

6.7 Lend Lease’s interest in LLP Securities

As at the date of this Scheme Booklet, Lend Lease has voting power in approximately 43.2% of the issued LLP Securities.

a) No dealings in the last four months: Except for the consideration to be provided under the Schemes, during the period of four months before the date of this Scheme Booklet, neither Lend Lease nor any of its associates (as defined in the Corporations Act) have provided or agreed to provide consideration for any LLP Securities under a purchase or an agreement.
b) Benefits to LLP Securityholders: During the four months before the date of this Scheme Booklet, neither Lend Lease nor any of its associates (as defined in the Corporations Act) have given or offered to give or agreed to give a benefit to another person where the benefit was likely to induce the other person, or an associate, to:
vote in favour of the Schemes; or
dispose of securities,

and where the benefit was not offered to all LLP Securityholders.

c) Benefits to LLP Directors: Lend Lease will not be making any payment or giving any benefit to any current member of the LLP Board as compensation or consideration for, or otherwise in connection with, their resignation from the LLP Board, to the extent that the LLP Board is reconstituted following the implementation of the Schemes.

Page 31

7. How to vote and details of the Meetings

7.1 Your vote is important

Holders of LLP Securities as at 7.00pm on 6 December 2009 are entitled to vote at the Scheme Meetings, unless otherwise noted in the Notice of Share Scheme Meeting and the Notice of Unit Scheme Meeting.

In order for the Proposal to proceed, each Resolution must be passed by the requisite majorities of LLP Securityholders. If any Resolution is not passed, the Proposal will not proceed.

For this reason the LLP Independent Directors unanimously recommend that you vote in favour of each Resolution, in the absence of a superior proposal. If you are unable to attend the Scheme Meetings, the LLP Independent Directors urge you to complete and return, in the enclosed reply paid envelope, the proxy forms that accompany this Scheme Booklet.

7.2 Location of Scheme Meetings

The details of the Scheme Meetings are as follows:

Location The Four Seasons Hotel, Sydney 199 George Street Sydney NSW 2000

Date 8 December 2009

Time 10.00am – the Share Scheme Meeting will be held first and the Unit Scheme Meeting will immediately follow the Share Scheme Meeting.

A copy of the Notice of Share Scheme Meeting is set out in Attachment A and a copy of the Notice of Unit Scheme Meeting is set out in Attachment B.

LLP’s 2009 Annual General Meeting will be held immediately following the conclusion of the Scheme Meetings. See section 9 for details of the 2009 Annual General Meeting including the explanatory notes. A copy of the Notice of Annual General Meeting is set out in Attachment I.

7.3 The Resolutions

There are three Resolutions, each of which must be passed by the requisite majorities of LLP Securityholders for the Proposal to proceed – one Resolution is to be considered at the Share Scheme Meeting and two Resolutions are to be considered at the Unit Scheme Meeting. If any of the Resolutions are not passed by the requisite majorities at the Scheme Meetings, the Proposal will not proceed.

Section 5.2 provides details of the Resolutions and the voting majorities that are required for the Resolutions to be passed.

7.4 Entitlement to vote

If you are registered on the Register as an LLP Securityholder at 7.00pm on 6 December 2009, then you will be entitled to attend and vote at the Scheme Meetings, unless otherwise noted in the Notice of Share Scheme Meeting and the Notice of Unit Scheme Meeting.

7.5 Voting exclusions

Holders of Excluded Securities, including Lend Lease Bidco, are not entitled to participate in the Share Scheme Meeting as the Excluded Securities will not be subject of the Share Scheme. Accordingly, holders of Excluded Securities will not vote on the Share Scheme Resolution.

LLVRE and its associates, including Lend Lease Bidco, are not entitled to vote on the Amendment Resolution as they have an interest in the Amendment Resolution other than as an LLP Unitholder.

No votes may be cast in favour of the Acquisition Resolution by Lend Lease Bidco or its associates.

The voting exclusions in respect of each Resolution are described more fully in the Notice of Share Scheme Meeting set out in Attachment A and the Notice of Unit Scheme Meeting set out in Attachment B.

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How to vote and details of the Meetings

7.6 Voting in person, by attorney or corporate representative

If you wish to vote in person, you must attend the Scheme Meetings.

If you cannot attend the Scheme Meetings, you may vote by proxy, attorney or if you are a body corporate, by appointing a corporate representative.

Attorneys who plan to attend the Scheme Meetings should bring with them the original or a certified copy of the power of attorney under which they have been authorised to attend and vote at the Scheme Meetings.

A body corporate which is an LLP Securityholder may appoint an individual to act as its corporate representative. The appointment must comply with the requirements of section 250D and 253B of the Corporations Act. The corporate representative should bring to the Scheme Meetings evidence of his or her appointment, including any authority under which it is signed.

7.7 Voting by proxy

If you wish to appoint a proxy to attend and vote at the Scheme Meetings on your behalf, please complete and sign both of the proxy forms for the Scheme Meetings accompanying this Scheme Booklet in accordance with the instructions set out on the proxy forms. You may complete the proxy forms in favour of the Chairman of the Scheme Meetings or appoint up to two proxies to attend and vote on your behalf at each Scheme Meeting.

The proxy forms, duly completed in accordance with the instructions set out on each proxy form, may be returned to the Registry by:

a)
posting them in the reply paid envelope provided;
b) delivering them during business hours on a Business Day to Level 12, 680 George Street, Sydney, NSW 2000;
c) faxing them to +61 2 9287 0309; or
d)
posting them to C/- Link Market Services, Locked Bag A14, Sydney South, NSW 1235.

Proxy forms may also be lodged on-line at Link Market Services’ website (www.linkmarketservices.com.au) in accordance with the instructions given there.

A separate proxy form is provided in respect of the resolutions to be considered at the 2009 Annual General Meeting. Details on how to complete that proxy form are set out in the Notice of Annual General Meeting (see Attachment I).

TO BE VALID, YOUR PROXY FORMS MUST BE RECEIVED BY THE REGISTRY BY NO LATER THAN 10.00AM ON 6 DECEMBER 2009.

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8. Additional Information

8.1 LLP Securities and Lend Lease securities held by LLP Directors

The LLP Directors and the number of LLP Securities and Lend Lease securities which are held by or on behalf of each LLP Director as at the date of this Scheme Booklet are set out in the table below:

==> picture [299 x 31] intentionally omitted <==

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

No. of Lend
Director No. of LLP Securities Lease securities
----- End of picture text -----

Mr Andrew Love	62,972	Nil
Mr GarySymons	Nil	Nil
Mr Ian Crow	Nil	2,838
Mr David Hutton	50,000	127,5292
Mr AnthonyLombardo	Nil	31,4683

8.2 Interests held by LLP Directors in contracts of Lend Lease or Lend Lease Bidco

Apart from David Hutton and Anthony Lombardo’s employment contracts with the Lend Lease Group, no LLP Director has an interest in any contract entered into by Lend Lease or Lend Lease Bidco.

8.3 Other interests of LLP Directors

No LLP Director has any other interest, whether as a director, member or creditor of LLP or otherwise, material to the Schemes.

8.4 Agreements or arrangements with LLP Directors

There is no agreement or arrangement made between any LLP Director and any other person, including Lend Lease or Lend Lease Bidco, in connection with or conditional upon the outcome of the Schemes.

8.5 Payments and other benefits to directors, secretaries or executive officers of LLP

No payment or other benefit is proposed to be made or given to a director, secretary or executive officer of LLP or any member of the LLP Group as compensation for loss of, or as consideration for or in connection with their retirement from, office in LLP or any member of the LLP Group as a result of the Proposal.

8.6 Trading of LLP Securities

The latest recorded sale price of LLP Securities on ASX before the date of this Scheme Booklet was $0.305.

8.7 LLP’s substantial holders

The substantial holders of LLP Securities as at the date of this Scheme Booklet are as follows:

Name	Number of LLP Securities Voting power in LLP securities
Lend Lease Corporation Group	417,684,727 43.2%

LLP has relied on substantial holder notices provided to it up to the date of this Scheme Booklet, which are available on the ASX website, to compile the above table. Information in regard to substantial holdings arising, changing or ceasing before this time or in respect of which the relevant announcement is not available on the ASX website is not included above.

2 74,279 shares held through Lend Lease employee share acquisition scheme ( ESAP ) and 53,250 shares held beneficially. 3 Shares held through ESAP.

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Additional Information

8.8 Creditors of LLP

The LLP Directors consider that the acquisition of LLP Securities under the Schemes will not materially prejudice LLP’s ability to pay its creditors. LLP has paid and is paying all its trade creditors within normal terms of trade, is solvent and is trading in an ordinary commercial manner.

8.9 Material changes in financial position

Within the knowledge of each of the LLP Directors, there has been no material change in the financial position of LLP since 30 June 2009, the date of the last audited balance sheet that was sent to members in accordance with section 314 of the Corporations Act except as disclosed elsewhere in this Scheme Booklet including the information contained in section 4.

Except as disclosed in the reviewed financial statements of LLP dated 30 June 2009, and as disclosed in section 4, the financial position of LLP has not changed materially since 30 June 2009.

8.10 Suspension of trading of LLP Securities

If the Court approves the Share Scheme and grants the Second Judicial Advice, LLP will immediately notify ASX. It is expected that suspension of trading on ASX in LLP Securities will occur at the close of business on the Effective Date.

8.11 Warranty by Scheme Participants about their Scheme Securities

The effect of clause 8.4 of the Share Scheme and clause 21A.5 of the Trust Constitution as amended by the Supplemental Deed is that all Scheme Participants, including those who vote against the Resolutions and those who do not vote at all, will be deemed to have warranted to Lend Lease Bidco that their Scheme Securities are not subject to any of the encumbrances specified in that clause and that they have full power and capacity to transfer their Scheme Securities. Clause 8.4 of the Share Scheme is set out in Attachment C and clause 21A.5 of the Trust Constitution as amended by the Supplemental Deed is set out in Attachment F.

8.12 Information disclosed to ASX and documents lodged with ASIC

a) LLP continuous disclosure

LLP is a “disclosing entity” for the purposes of the Corporations Act and as such is subject to periodic reporting and continuous disclosure obligations.

Publicly disclosed information about all listed entities, including LLP, is available on the ASX website (www.asx.com.au). Publicly disclosed information about LLP is also available at its website (www.llprimelife.com).

b)

LLP documents

In addition, LLP is also required to lodge various documents with ASIC. Copies of documents lodged with ASIC by LLP may be obtained from, or inspected at, ASIC offices.

LLP will provide free of charge, to any LLP Securityholder who requests it before the Effective Date, a copy of:

the audited financial report of LLP and its controlled entities for the year ended 30 June 2009 (being the annual financial report most recently lodged with ASIC before this Scheme Booklet was lodged with ASIC); and
each continuous disclosure notice given to ASX by LLP after lodgement with ASIC of the annual report referred to above on 25 September 2009 and before the Scheme Meetings.

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Additional Information

8. 8.13 Consents

The Independent Expert has given and not withdrawn its consent to the inclusion of the Independent Expert’s Report in Attachment G and to the references to the Independent Expert’s Report in this Scheme Booklet being made in the form and context in which each such reference is included in this Scheme Booklet.

Greenwoods & Freehills has given and not withdrawn its consent to the inclusion of the tax report in Attachment H and to the references to that report in this Scheme Booklet being made in the form and context in which each such reference is included in this Scheme Booklet.

Each of Lend Lease and Lend Lease Bidco has given and has not withdrawn its consent to the inclusion of all the information that is contained in section 6 and to the references to that information in this Scheme Booklet being made in the form and context in which each such reference is included in the Scheme Booklet.

8.14 Supplementary information

LLP will issue a supplementary document to this Scheme Booklet if it becomes aware of any of the following between the date of the lodgement of this Scheme Booklet for registration with ASIC and the Court Approval Date:

a) a material statement in this Scheme Booklet is false or misleading;
b) there is a material omission from this Scheme Booklet;
c) there is a significant change affecting a matter in this Scheme Booklet; or
d) a significant new matter has arisen and it would have been required to be included in this Scheme Booklet if known about at the date of lodgement with ASIC.

Depending on the nature and the timing of the changed circumstances and subject to obtaining any relevant approvals, LLP may circulate and publish any supplementary document by:

a) placing an advertisement in a prominently placed newspaper which is circulated generally throughout Australia;
b) posting the supplementary document on LLP’s website (www.llprimelife.com); and/or
c) posting the supplementary document to all LLP Securityholders.

8.15 Conditions to Schemes

The Schemes and the obligations of Lend Lease and LLP under the Schemes are subject to the following relevant conditions being satisfied (or waived) in accordance with the terms of the Scheme Implementation Agreement:

a) Independent Expert’s Report: the Independent Expert concluding that the Schemes are in the best interests of LLP Securityholders and the Independent Expert not changing its conclusion or withdrawing its report prior to 8:00am on the Court Approval Date;
b) Shareholder approval: the Share Scheme Resolution being approved by the requisite majorities at the Scheme Meetings;
c) Unitholder approval: the Unit Scheme Resolutions being approved at the Unit Scheme Meeting by the requisite majorities at the Scheme Meetings;
d) Court approval: the Court approving the Share Scheme and granting the Judicial Advice;
e) Execution and lodgement of Supplemental Deed: LLVRE (in its capacity as responsible entity of LLPT) executing the Supplemental Deed and lodging it with ASIC;
f) No restraints: there being no judgment, temporary restraining order, preliminary or permanent injunction or other order issued by any court or Government Agency of competent jurisdiction in effect as at 8:00am on the Court Approval Date prohibiting or materially restricting the implementation of the Schemes;

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Additional Information

g) LLP Regulated Event: no LLP Regulated Event occurring between the date of the Scheme Implementation Agreement and 8:00am on the Court Approval Date;
h) LLP Material Adverse Change: no LLP Material Adverse Change occurring between the date of the Scheme Implementation Agreement and 8:00am on the Court Approval Date;
i) Market Disruption Event: no Market Disruption Event occurring between the date of the Scheme Implementation Agreement and 8:00am on the Court Approval Date;
j) LLP Closing Certificate: LLP providing the LLP Closing Certificate to Lend Lease at or prior to 8:00am on the Court Approval Date; and
k) Lend Lease Closing Certificate: Lend Lease providing the Lend Lease Closing Certificate to LLP at or prior to 8:00am on the Court Approval Date.

Capitalised terms appearing in this section 8.15 and not otherwise defined in the Glossary are defined in section 1.1 of Attachment E.

Full details of the conditions, the ability of Lend Lease and LLP to rely on various of the conditions and the provisions relating to the satisfaction or waiver of those conditions, are set out in section 3 of Attachment E.

As at the date of this Scheme Booklet, the LLP Directors are not aware of any reason why these conditions should not be satisfied.

8.16 Material Agreements

The following material agreements have been entered into in connection with the Proposal:

a) Scheme Implementation Agreement between Lend Lease and LLP dated 28 September 2009 (see Attachment E for a copy of the Scheme Implementation Agreement).
b) Deed Poll executed by Lend Lease and Lend Lease Bidco on 30 October 2009 (see Attachment D for a copy of the Deed Poll).

The Deed Poll executed by Lend Lease Bidco on 30 October 2009 is for the benefit of Scheme Participants. Under the Deed Poll, Lend Lease Bidco covenants in favour of the Scheme Participants to perform its obligations under the Scheme Implementation Agreement, the Share Scheme and the Unit Scheme, subject to the Schemes becoming Effective, and Lend Lease covenants in favour of Scheme Participants that it will procure that Lend Lease Bidco performs those obligations. In particular, Lend Lease Bidco agrees to do all those things which it is required to do under the Schemes and to provide the Scheme Consideration to Scheme Participants.

c) Supplemental Deed which is to be executed by LLVRE (in its capacity as responsible entity of LLPT) if the Resolutions are approved, the Court approves the Share Scheme for the purposes of section 411(4)(b) of the Corporations Act and the Court grants the Second Judicial Advice (see Attachment F for a copy of the Supplemental Deed).

The Supplemental Deed will amend the Trust Constitution in order to facilitate the Unit Scheme and contains specific provisions which are necessary to implement the Unit Scheme. Also, the Supplemental Deed provides that each Scheme Unitholder, without the need for any further act, irrevocably appoints LLVRE and each of its directors and officers, jointly and severally, as that Scheme Unitholder’s attorney and agent for the purpose of doing all things and executing any document necessary or desirable to give full effect to the terms of the Unit Scheme. In particular, each Scheme Unitholder:

agrees to the transfer of all of their Scheme Units to Lend Lease Bidco in accordance with the Supplemental Deed;
agrees to the modification or variation (if any) of the rights attaching to their Scheme Units arising as a result of the Supplemental Deed;
consents to LLVRE, Lend Lease and Lend Lease Bidco doing all things and executing all deeds, instruments, transfers or other documents as may be necessary or desirable to give full effect to the Unit Scheme; and
appoints LLVRE to enforce the Deed Poll against Lend Lease Bidco on behalf of and as agent and attorney for the Scheme Unitholder.

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Additional Information

8.

From the Effective Date until Lend Lease Bidco is registered as the holder of all LLP Units in the Register, each Scheme Unitholder is deemed to have appointed Lend Lease Bidco as its attorney and agent to appoint any director or officer of Lend Lease or Lend Lease Bidco (or other nominee of Lend Lease Bidco) as its proxy (and, where applicable, corporate representative) to attend meetings of LLP Unitholders, exercise the votes attaching to the Scheme Units of which they are the registered holder and sign any LLP Unitholders’ resolution. No Scheme Unitholder may attend or vote at any of those meetings or sign or vote on any resolutions (whether in person, by proxy or by corporate representative) other than pursuant to the Supplemental Deed.

The Supplemental Deed will bind LLP and all LLP Unitholders, including those who do not attend the Scheme Meetings, those who do not vote at that meeting and those who vote against the Resolutions.

8.17 ASIC modification

ASIC has granted LLP, Lend Lease and Lend Lease Bidco the exemptions, modifications and consents described below:

a) The Acquisition Resolution seeks approval for Lend Lease Bidco to acquire all of the LLP Units from LLP Unitholders pursuant to item 7 of section 611 of the Corporations Act. Item 7 of section 611 of the Corporations Act requires that no votes may be cast in favour of the Acquisition Resolution by the person proposing to make the acquisition and their associates or the persons from whom the acquisition is to be made and their associates.

ASIC has granted LLP and Lend Lease a modification of item 7 of section 611 of the Corporations Act so that all LLP Unitholders (other than Lend Lease Bidco and its associates) may cast votes in favour of the Acquisition Resolution.

b) Subsection 250N(2) of the Corporations Act requires a public company to hold its annual general meeting at least once in each calendar year and within 5 months after the end of its financial year.

ASIC has allowed LLP to depart from this obligation on the basis that LLP’s 2009 Annual General Meeting is held on the same date as the Scheme Meetings provided that the relevant date is no later than 31 January 2010.

c) Regulation 8302(d) of Part 3 of Schedule 8 of the Corporations Regulations requires this Scheme Booklet to disclose particulars of any payment or benefit that is proposed to be made or given to any director, secretary or executive officer of LLP or a related body corporate of LLP as compensation for loss of office, or as consideration for or in connection with their retirement from office.

ASIC has allowed LLP to depart from certain requirements of Regulation 8302(d) of Part 3 of Schedule 8 to the Corporations Regulations. The effect of this relief is that this Scheme Booklet:

is not required to disclose particulars of payments or benefits which may be made to a director, secretary or executive officer of the LLP Group in relation to their loss of office or retirement from office, unless the person will lose office or retire from office in connection with the Proposal or the amount of any payment or benefit which may be made to the person upon their loss of office or retirement from office may be materially affected by the Proposal;
is not required to disclose the name of any director, executive officer or secretary of the LLP Group who will lose office or retire from office in connection with the Proposal except where that person is an LLP Director; and
may describe payments or benefits to any director, executive officer or secretary of the LLP Group who will lose office or retire from office in connection with the Proposal on an aggregate rather than an individual basis.
d) ASIC has granted Lend Lease and Lend Lease Bidco an exemption from the requirement to comply with the conduct provisions in section 949A(2)(c) and Division 2 of the Corporations Act for any general advice (as defined in subsection 766B(4) of the Corporations Act) which is provided in connection with the Schemes and is contained in this Scheme Booklet.
e) ASIC has exempted Lend Lease and Lend Lease Bidco from the requirement to comply with Division 5A of Part 7.9 of the Corporations Act in relation to unsolicited offers made to holders of LLP Stapled Securities to acquire LLP Stapled Securities pursuant to the Unit Scheme.

Page 38 | Scheme Booklet

Additional Information

8. 8.18 Costs and expenses

LLP has and will incur costs in connection with the Proposal. It is estimated that these costs will total approximately $2.6 million. As at the date of this Scheme Booklet, costs of approximately $800,000 have been incurred by LLP in connection with the Proposal. These costs include advisory fees, fees payable in relation to the Independent Expert’s Report and costs associated with the publication of the Scheme Booklet and the holding of the Scheme Meetings. These costs will be payable by LLP regardless of whether or not the Schemes become Effective and are implemented.

8.19 Other

a) Lodgement of Scheme Booklet with ASIC

This Scheme Booklet was lodged with ASIC on 16 October 2009 in accordance with section 411(2)(b) of the Corporations Act.

b) Other material information

LLP is not aware of any material information about LLP that is material to a decision by a LLP Securityholder on how to vote in relation to the Schemes and which:

has not been available to the Independent Expert in the manner referred to above for the purpose of preparing the Independent Expert’s Report; or
is not set out or referred to in this Scheme Booklet; or
has not otherwise been made available publicly by LLP.

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9. Annual General Meeting

This section 9 sets out the explanatory notes to be read in conjunction with the Notice of Annual General Meeting set out in Attachment I.

9.1 Background

Prior to the Proposal being announced to ASX on 28 September 2009, LLP had convened its Annual General Meeting for 2009 to be held on 30 October 2009.

However, in order to reduce the costs and expenses associated with holding the 2009 Annual General Meeting and the Scheme Meetings on separate dates within approximately 6 weeks of each other, following the announcement of the Proposal, LLP postponed the 2009 Annual General Meeting to be held, immediately after conclusion of, the Scheme Meetings at the same venue. ASIC has consented to the 2009 Annual General Meeting being held at this time (see section 8.17 for further details).

The Proposal is not conditional on the outcome of the resolutions to be considered at the 2009 Annual General Meeting and vice versa.

9.2 Location of 2009 Annual General Meeting

The details of the 2009 Annual General Meeting is as follows:

Location The Four Seasons Hotel, Sydney

199 George Street Sydney NSW 2000

Date 8 December 2009 Time The 2009 Annual General Meeting will be held immediately following the conclusion of the Scheme Meetings.

The 2009 Annual General Meeting of LLP Shareholders will be held in conjunction with a general meeting of LLP Unitholders.

A copy of the Notice of Annual General Meeting is set out in Attachment I.

9.3 Ordinary Business

a)

Financial Report

The Corporations Act requires the financial report, directors’ report and auditors report for the LLP Group for the financial year ended 30 June 2009 to be tabled before the Annual General Meeting, and the LLPL Constitution provides for such reports to be received and considered at that meeting. Neither the Corporations Act nor LLPL’s Constitution requires a vote of LLP Securityholders at the Annual General Meeting on such reports.

The LLP Group’s annual report has been made available on the LLP website (www.llprimelife.com). Annual reports have been sent to those LLP Securityholders who have elected to receive a printed copy in the mail.

The Annual General Meeting provides a forum for LLP Securityholders to ask questions and make comments on the LLP Group’s management, reports and accounts and on the business and operations of the LLP Group for the financial year ended 30 June 2009.

In addition, LLP Securityholders may at the meeting ask questions of the LLP Group’s auditors in relation to the following matters:

the conduct of the audit;
the preparation and content of the auditor’s report;
the accounting policies adopted by the LLP Group for the preparation of the financial statements; and
the auditors’ independence in relation to the conduct of the audit.

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Annual General Meeting

9.

LLP Securityholders may submit written questions to the auditors in relation to the above items. Any written questions to the auditors must be submitted to the Company no later than 5 Business Days before the Annual General Meeting, that is, on or by 1 December 2009.

Please send any written questions for the auditor:

to the LLP Group’s registered office, Level 4, 111 Cecil Street, South Melbourne VIC 3205, Attention: Company Secretary;
to Link Market Services Limited at the address included in the accompanying Notice of Annual General Meeting set out in Attachment I; or
by facsimile to + 61 2 9287 0309,

no later than 5:00pm on 1 December 2009.

b) AGM Resolution 1 – Remuneration Report

As part of the annual report provided to LLP Securityholders, a remuneration report is required to be included which sets out details of the remuneration of each director, key management personnel and other group/company executives who are among the five highest earning executives for the year, in addition to describing LLP Board policy in respect of remuneration, its relationship to LLP’s performance, along with a detailed summary of any relevant performance conditions, why those particular performance conditions were chosen and how performance is measured against them.

The Corporations Act also provides that at a listed company’s Annual General Meeting, a resolution that the remuneration report be adopted must be put to the vote. LLP Securityholders will be given the opportunity to ask questions about and make comments on the remuneration report at the meeting. The vote on the resolution is advisory only, and does not bind the LLP Directors or LLP.

The remuneration report in respect of the financial year ended 30 June 2009 is included in LLP’s Annual Report 2009 on pages 30 to 40 and is also available from LLP’s website, (www.llprimelife.com).

The LLP Board unanimously recommends that LLP Securityholders vote in favour of adopting the remuneration report.

c)

AGM Resolution 2 – Election of Mr Anthony Lombardo as a Director

Mr Lombardo was appointed to the Board of LLPL to fill a casual vacancy on 30 December 2008.

Mr Lombardo ceases to hold office in accordance with rule 69.2 of LLPL’s Constitution and, being eligible, offers himself for election as a director of LLPL.

Mr Lombardo is Global Head of Strategy and Mergers & Acquisitions for Lend Lease. Mr Lombardo joined Lend Lease from GE Capital where he worked for 9½ years with cross-functional experience, having held roles in Strategy, Mergers and Acquisitions and Finance, across both GE Consumer Finance and GE Corporate. In his last 3½ years of this role, Mr Lombardo was based in Connecticut USA where he was Vice President – Strategy of GE Money. Prior to this, he worked at KPMG in Audit for a period of 4½ years.

Mr Lombardo has a degree in Accounting and Finance from RMIT University, and is a member of the Institute of Chartered Accountants in Australia.

The LLP Directors (other than Mr Lombardo) unanimously recommend that LLP Securityholders vote in favour of AGM resolution 2.

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Annual General Meeting

9. d) AGM Resolution 3 – Election of Mr Ian Crow as a Director

Mr Crow was appointed to the Board of LLPL to fill a casual vacancy on 28 April 2009.

Mr Crow ceases to hold office in accordance with rule 69.2 of LLPL’s Constitution and, being eligible, offers himself for election as a director of LLPL.

Mr Crow has over 40 years experience in property and financial services. Mr Crow has been the Chief Executive of MLC and an Executive Director of Lend Lease. Mr Crow is currently a non-executive director of Cambridge Industrial Trust Management Limited (Singapore), National Wealth Management Holdings Limited and a number of its associated boards.

Mr Crow holds a Bachelor of Commerce and a Master of Business Administration from the University of New South Wales and is also a member of the Australian Society of Certified Practising Accountants.

The LLP Directors (other than Mr Crow) unanimously recommend that LLP Securityholders vote in favour of AGM Resolution 3.

e) AGM Resolution 4 – Election of Mr Gary Symons as a Director

Mr Symons was appointed to the Board of LLPL to fill a casual vacancy on 28 April 2009.

Mr Symons ceases to hold office in accordance with rule 69.2 of LLPL’s Constitution and, being eligible, offers himself for election as a director of LLPL.

Mr Symons has extensive experience in property and financial markets. He is a former Head of Asset Management and Chief Investment Officer of BT Funds Management (formerly Bankers Trust Australia). In his time at BT he was also Head of Real Estate where he had overall responsibility for the group’s listed property trusts and unlisted institutional property portfolios. More recently, Mr Symons developed, pioneered and later sold a leading alternative real estate management company (UniLodge), which specialised in student accommodation in Australia, New Zealand and Asia. Mr Symons is a non-executive director of National Wealth Management Holdings Limited and a number of its associated boards.

Mr Symons holds degrees in Commerce and Accounting and is a Chartered Accountant (ACA) by training.

The LLP Directors (other than Mr Symons) unanimously recommend that LLP Securityholders vote in favour of AGM Resolution 4.

f) AGM Resolution 5 – Election of Mr David Hutton as a Director

Mr Hutton was appointed to the Board of LLPL to fill a casual vacancy in December 2008.

Mr Hutton ceases to hold office in accordance with rule 69.2 of LLPL’s Constitution and, being eligible, offers himself for election as a director of LLPL.

Mr Hutton is Chief Operating Officer, Lend Lease Asia Pacific and is responsible for all Lend Lease’s development projects both in Australia and Singapore – including commercial offices, master planned communities, retail, retirement, apartments and large mixed use projects. He has significant experience in property development, fund, asset and property management, urban residential and mixed use project and has held numerous senior positions during his 20 year career at Lend Lease.

Mr Hutton holds a Bachelor of Business (with distinction) from Charles Sturt University, formal qualifications in retail management and is a licensed Real Estate Agent.

The LLP Directors (other than Mr Hutton) unanimously recommend that LLP Securityholders vote in favour of AGM Resolution 5.

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Annual General Meeting

9. g) AGM Resolution 6 – Re-election of Mr Andrew Love as a Director

Mr Love was appointed to the Board of LLPL in July 2005 and was re-elected at LLP’s 2008 Annual General Meeting.

Mr Love retires in accordance with rule 70.1 of the LLPL’s Constitution and, being eligible, offers himself for re-election as a director of LLPL.

Mr Love has more than 30 years experience in corporate recovery, reconstruction and insolvency practice in Australia. In addition, he established Ferrier Hodgson in Hong Kong in 1985. He has been appointed across a broad range of industry sectors but in particular he has worked in the resources and mining industry. He is a director of both public and private companies in the energy and mining industries. He has acted as an adviser or appointee in most of the major mining insolvencies and workouts in the gold, coal and base metal industries in Australia. Mr Love is currently Chairman and Non-Executive Director of ROC Oil Company Limited, Deputy Chairman of Riversdale Mining Limited and Non-Executive Director of Eircom Holdings Limited.

Mr Love holds a Bachelor of Commerce and is Fellow member of the Institute of Chartered Accountants in Australia and is also a member of the Australian Institute of Company Directors.

The LLP Directors (other than Mr Love) unanimously recommend that LLP Securityholders vote in favour of AGM Resolution 6.

Page 43

Attachments A – I

Page 44 | Scheme Booklet

Attachment A Notice of Share Scheme Meeting

NOTICE OF SHARE SCHEME MEETING

Lend Lease Primelife Limited ACN 010 622 901

Notice is hereby given that by an order of the Supreme Court of New South Wales ( Court ) made on 2 November 2009 pursuant to section 411(1) of the Corporations Act 2001 ( Corporations Act ) a meeting of the holders of ordinary shares in Lend Lease Primelife Limited ACN 010 622 901 (other than holders of Excluded Securities) will be held at 10.00am on 8 December 2009 at The Four Seasons Hotel, Sydney located at 199 George Street, Sydney, NSW 2000.

The Court has also directed that Andrew Love act as Chairman of the meeting or failing him Gary Symons or Ian Crow, and has directed the Chairman to report the result of the meeting to the Court if the resolution is approved.

Business of the meeting – Share Scheme Resolution

To consider, and if thought fit, to pass the following resolution in accordance with section 411(4)(a)(ii) of the Corporations Act:

“ That, pursuant to and in accordance with section 411 of the Corporations Act, the Share Scheme, the terms of which are contained in and more particularly described in the Scheme Booklet (of which this Notice of Share Scheme Meeting forms part) is approved (with or without modification as approved by the Court).”

By Order of the Supreme Court of New South Wales

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Notice of Share Scheme Meeting

A

Explanatory statement

To enable you to make an informed decision on the Share Scheme Resolution, further information on the Share Scheme is set out in the Scheme Booklet, of which this Notice of Share Scheme Meeting forms part. Terms used in this Notice of Share Scheme Meeting have the same meaning as set out in the Glossary of the Scheme Booklet.

These notes should be read in conjunction with the Notice of Share Scheme Meeting.

Majority required

In accordance with section 411(4)(a)(ii) of the Corporations Act, the Share Scheme Resolution must be approved by:

a) a majority in number (more than 50%) of Scheme Shareholders present and voting at the Share Scheme Meeting (in person, by proxy or attorney or, in the case of a body corporate, corporate representative); and
b) at least 75% of the total number of votes cast on the Share Scheme Resolution being cast on the Share Scheme Resolution (in person, by proxy or attorney or, in the case of a body corporate, by corporate representative).

Entitlement to vote

The Court has ordered that, for the purposes of the Share Scheme Meeting, LLP Shares will be taken to be held by the persons who are registered as members as of 7.00pm on 6 December 2009. Accordingly, transfers registered after this time will be disregarded in determining entitlements to vote at the Share Scheme Meeting.

Voting exclusions

Holders of Excluded Securities are not entitled to participate in the Share Scheme Meeting. Accordingly, holders of Excluded Securities are not permitted to vote on the Share Scheme Resolution.

Voting at the Share Scheme Meeting

You may vote in person at the Share Scheme Meeting or appoint a proxy or attorney to attend and vote for you.

a) Jointly held securities

If the LLP Shares are jointly held, only one of the joint shareholders is entitled to vote. If more than one LLP Shareholder votes in respect of jointly held LLP Shares, only the vote of the LLP Shareholder whose name appears first in the Register will be counted.

b) Corporate shareholders

To vote at the Share Scheme Meeting (other than by proxy or attorney), a corporation that is an LLP Shareholder must appoint a person to act as its representative. The appointment must comply with section 250D of the Corporations Act. The representative must bring to the Share Scheme Meeting evidence of his or her appointment including any authority under which it is signed.

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c) Voting by proxy

An LLP Shareholder entitled to attend and vote at the Share Scheme Meeting is also entitled to vote by proxy. The proxy form is enclosed with this Scheme Booklet. You may appoint not more than two proxies to attend and act for you at the Share Scheme Meeting. A proxy need not be a holder of LLP Shares. If two proxies are appointed, each proxy may be appointed to represent a specified number or proportion of your votes. If no such number or proportion is specified, each proxy may exercise half your votes.

If you do not instruct your proxy on how to vote, your proxy may vote as he or she sees fit at the Share Scheme Meeting.

Please refer to the enclosed proxy form for instructions on completion and lodgement. Please note that proxy forms must be received at the registered office of LLP or the address listed below no less than 48 hours prior to the commencement of the Share Scheme Meeting. The date and time to do so will be no later than 10.00am on 6 December 2009.

d) Voting by attorney

Powers of attorney must be received by the Registry, or at LLP’s registered office, by no later than 10.00am on 6 December 2009 (or if the Share Scheme Meeting is adjourned, at least 48 hours before the resumption of the Share Scheme Meeting in relation to the resumed part of the Share Scheme Meeting).

An attorney will be admitted to the Share Scheme Meeting and given a voting card upon providing at the point of entry to the Share Scheme Meeting written evidence of their appointment, of their name and address and the identity of their appointer.

The sending of a power of attorney will not preclude an LLP Shareholder from attending in person and voting at the Share Scheme Meeting if the LLP Shareholder is entitled to attend and vote.

Lodgement of proxies and queries

Proxy forms, powers of attorney and authorities should be sent to LLP at the address specified on the enclosed reply paid envelope or:

By mail: C/- Link Market Services, Locked Bag A14, Sydney South, NSW 1235 By fax: +61 2 9287 0309 Online: www.linkmarketservices.com.au By hand: during business hours on a Business Day to Level 12, 680 George Street, Sydney, NSW, 2000

LLP Shareholders should contact the Registry at the above address or the LLP Securityholder information line on 1800 427 320 (free call) or +61 2 8280 7168 (outside Australia) with any queries.

Court approval

If the Share Scheme Resolution is approved at the Share Scheme Meeting by the requisite majorities, the implementation of the Share Scheme (with or without modification) will be subject, among other things, to the subsequent approval of the Court.

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Attachment B Notice of Unit Scheme Meeting

B

NOTICE OF UNIT SCHEME MEETING

Lend Lease Villages Responsible Entity Limited ACN 099 064 141 as responsible entity of Lend Lease Primelife Trust ARSN 124 896 733

Notice is hereby given that a meeting of holders of units in the Lend Lease Primelife Trust will be held at 10.00am on 8 December 2009 at The Four Seasons Hotel, Sydney located at 199 George Street, Sydney, NSW 2000 or as soon after that time as the Share Scheme Meeting convened for 10.00am on the same day has concluded or is adjourned.

On 2 November 2009, the Supreme Court of New South Wales made an order pursuant to section 63 of the Trustee Act 1925 (NSW) confirming that LLVRE is justified in convening the Unit Scheme Meeting.

Andrew Love will act as Chairman of the meeting, or failing him Gary Symons or Ian Crow.

Terms used in this Notice of Unit Scheme Meeting have the same meaning as set out in the Glossary of the Scheme Booklet.

Business of the meeting

Resolution 1 – Amendment Resolution

To consider, and if thought fit, to pass the following resolution as a special resolution:

“That, subject to and conditional on:

a) the Share Scheme being approved by the Court under section 411(4)(b) of the Corporations Act 2001 (with or without modification as approved by the Court);
b) an office copy of the Order of the Court approving the Share Scheme being lodged with the Australian Securities and Investments Commission; and
c) resolution 2 in this Notice of Unit Scheme Meeting being passed,

the Constitution of LLPT be amended with effect on and from the Effective Date as set out in the Supplemental Deed for the purposes of giving effect to the Unit Scheme and the responsible entity of LLPT be authorised to execute and lodge with the Australian Securities and Investments Commission a copy of the Supplemental Deed.”

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Notice of Unit Scheme Meeting

Resolution 2 – Acquisition Resolution

To consider, and if thought fit, to pass the following resolution as an ordinary resolution:

“That, subject to, and conditional on:
a) the Share Scheme being approved by the Court under section 411(4)(b) of the Corporations Act 2001 (with or without modification as approved by the Court);
b) an office copy of the Order of the Court approving the Share Scheme being lodged with the Australian Securities and Investments Commission; and
c) resolution 1 in this Notice of Unit Scheme Meeting being passed and an executed copy of the Supplemental Deed being lodged with the Australian Securities and Investments Commission at the same time as the office copy of the Order of the Court approving the Share Scheme is lodged with that Commission,

the Unit Scheme (as described in the Scheme Booklet of which this Notice of Unit Scheme Meeting forms part) be approved and, in particular, the acquisition by Lend Lease Capital Services Pty Limited ACN 000 001 114 of a relevant interest in all the Units held by Scheme Participants as at the Record Date pursuant to the Unit Scheme be approved for the purposes of item 7 of section 611 of the Corporations Act 2001.”

By Order of the Board of Lend Lease Villages Responsible Entity Limited as responsible entity of the Lend Lease Primelife Trust

Melissa Hennessy

Company Secretary

2 November 2009

Page 49

Notice of Unit Scheme Meeting

B

Explanatory statement

To enable you to make an informed decision on the Unit Scheme Resolutions, further information on the Unit Scheme is set out in the Scheme Booklet, of which this Notice of Unit Scheme Meeting forms part.

These notes should be read in conjunction with the Notice of Unit Scheme Meeting.

Quorum

The quorum for the Unit Scheme Meeting is two LLP Unitholders (in person or by proxy, attorney or by representative).

Majority required

Resolution 1 – Amendment Resolution will not be passed unless at least 75% of the votes cast on the resolution are in favour of the resolution (either in person, by proxy or attorney, or in the case of a body corporate, by corporate representative).

Resolution 2 – Acquisition Resolution will not be passed unless at least 50% of the votes cast on the resolution are in favour of the resolution (either in person, by proxy or attorney, or in the case of a body corporate, by corporate representative).

Entitlement to vote

LLVRE has determined that, for the purpose of the Unit Scheme Meeting, Units will be taken to be held by the persons who are registered as LLP Unitholders as at 7.00pm on 6 December 2009. Accordingly, transfers registered after this time will be disregarded in determining entitlements to vote at the Unit Scheme Meeting.

Voting exclusions

LLVRE and its associates, including Lend Lease Bidco, are not entitled to vote on resolution 1 as they have an interest in that resolution other than as an LLP Unitholder.

Lend Lease Bidco or its associates who hold LLP Units may not cast votes in favour of resolution 2.

In accordance with section 253E of the Corporations Act, LLVRE, the responsible entity of LLPT, and its associates are not entitled to vote their interest on any resolution of LLPT if they have an interest in the resolution other than as a member of LLPT, unless such votes are cast as proxy for another LLP Unitholder who is entitled to vote and their appointment specifies the way they are to vote on the relevant Unit Scheme Resolution and they vote that way.

Voting at the Unit Scheme Meeting

You may vote in person at the Unit Scheme Meeting or appoint a proxy to attend and vote for you.

a) Jointly held securities

If the LLP Units are jointly held, only one of the joint unitholders is entitled to vote. If more than one LLP Unitholder votes in respect of jointly held LLP Units, only the vote of the LLP Unitholder whose name appears first in the Register will be counted.

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b) Corporate unitholders

To vote at the Unit Scheme Meeting (other than by proxy or attorney), a corporation that is an LLP Unitholder must appoint a person to act as its representative. The appointment must comply with section 253B of the Corporations Act 2001. The representative must bring to the Unit Scheme Meeting evidence of his or her appointment including any authority under which it is signed.

c) Voting by proxy

An LLP Unitholder entitled to attend and vote at the Unit Scheme Meeting is also entitled to vote by proxy. The proxy form is enclosed with this Scheme Booklet. You may appoint not more than two proxies to attend and act for you at the Unit Scheme Meeting. A proxy need not be an LLP Unitholder. If two proxies are appointed, each proxy may be appointed to represent a specified number or proportion of your votes. If no such number or proportion is specified, each proxy may exercise half your votes.

If you do not instruct your proxy on how to vote, your proxy may vote as he or she sees fit at the Unit Scheme Meeting.

Please refer to the enclosed proxy form for instructions on completion and lodgement. Please note that proxy forms must be received at the registered office of LLPT or the address listed below no less than 48 hours prior to the commencement of the Unit Scheme Meeting. The last date and time to do so will be no later than 10.00am on 6 December 2009.

d) Voting by attorney

Powers of attorney must be received by the Registry, or at LLP’s registered office, by no later than 10.00am on 6 December 2009 (or if the Unit Scheme Meeting is adjourned, at least 48 hours before the resumption of the Unit Scheme Meeting in relation to the resumed part of the Unit Scheme Meeting).

An attorney will be admitted to the Unit Scheme Meeting and given a voting card upon providing at the point of entry to the Unit Scheme Meeting written evidence of their appointment, of their name and address and the identity of their appointer.

The sending of a power of attorney will not preclude an LLP Unitholder from attending in person and voting at the Unit Scheme Meeting if the LLP Unitholder is entitled to attend and vote.

Lodgement of proxies and queries

Proxy forms, powers of attorney and authorities should be sent to LLPT at the address specified on the enclosed reply paid envelope or:

LLP Unitholders should contact the Registry at the above address or the LLP Securityholder information line on 1800 427 320 (free call) or +61 2 8280 7168 (outside Australia) with any queries.

Judicial Advice

If the Unit Scheme Resolutions are approved by the requisite majorities, the implementation of the Unit Scheme will be subject, among other things, to the subsequent grant by the Court of the Second Judicial Advice.

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Attachment C Scheme of Arrangement made under section 411 of the Corporations Act 2001 (Cth)

C

Date:

Parties

1 Lend Lease Primelife Limited (ACN 010 622 901) of Level 4, 111 Cecil Street, South Melbourne VIC 3205 ( LLPL ).
2 The holders of Scheme Shares (as defined below).

The parties agree

Recitals

A. LLPL, LLVRE (in its capacity as responsible entity of LLPT) and Lend Lease have entered into a scheme implementation agreement dated 28 September 2009 ( Scheme Implementation Agreement ), pursuant to which, subject to the satisfaction or waiver of certain conditions precedent, Lend Lease Bidco will acquire (amongst others) all of the Scheme Securities (including the Scheme Shares) from the Scheme Participants for the Scheme Consideration.
B. If the Schemes become Effective, then:
a) all the Scheme Securities (including the Scheme Shares) will be transferred to Lend Lease Bidco and the Scheme Consideration will be provided to the Scheme Participants in accordance with the terms of the Schemes; and
b) LLP will enter the name and address of Lend Lease Bidco in the Register as the holder of the Scheme Securities.
C. Each of Lend Lease and Lend Lease Bidco has entered into the Deed Poll for the purpose of covenanting in favour of the Scheme Participants that it will observe and perform its obligations under the Schemes, and (in the case of Lend Lease) that it will procure that Lend Lease Bidco performs its obligations under the Schemes.

1 Definitions and Interpretation

1.1 Definitions

In this document, unless the context requires otherwise:

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited (ABN 98 008 624 691) or, as the context requires, the financial market known as the Australian Securities Exchange operated by it.

ASX Listing Rules means the official listing rules, from time to time, of ASX.

Business Day means any day that is each of the following:

a) a Business Day within the meaning given in the ASX Listing Rules; and
b) a day that banks are open for business in Sydney, New South Wales.

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CHESS means the Clearing House Electronic Subregister System for the electronic transfer of securities, operated by ASX Settlement and Transfer Corporation Pty Limited (ABN 49 008 504 532).

Corporations Act means the Corporations Act 2001 (Cth).

Court means the Supreme Court of New South Wales.

Deed Poll means the deed poll dated 30 October 2009 executed by Lend Lease and Lend Lease Bidco in favour of the Scheme Participants.

Effective means:

a) in relation to the Share Scheme, the coming into effect, pursuant to section 411(10) of the Corporations Act, of the orders of the Court under section 411(4)(b) of the Corporations Act (and, if applicable, section 411(6) of the Corporations Act) in relation to the Share Scheme; and
b) in relation to the Unit Scheme, the coming into effect, pursuant to section 601GC(2) of the Corporations Act, of the Supplemental Deed.

Effective Date means the date on which both the Schemes have become Effective.

Effective Time means the date and time at which both the Schemes have become Effective.

End Date means 31 January 2010, or such later date as Lend Lease and LLP may agree in writing.

Excluded Securities means LLP Securities held as at the Record Date by any member of the Lend Lease Group or by any person on behalf of, or for the benefit of, any member of the Lend Lease Group, being, as at the date of the Scheme Booklet, 417,684,727 LLP Securities held by Lend Lease Bidco.

Implementation Date means the date that is 4 Business Days after the Record Date, or such other date as LLP and Lend Lease may agree in writing or as may be required by ASX.

Lend Lease Bidco means Lend Lease Capital Services Pty Limited (ACN 000 001 114).

Lend Lease Group means Lend Lease and its related bodies corporate.

Lend Lease means Lend Lease Corporation Limited (ACN 000 226 228).

LLP means LLPL and LLVRE (in its capacity as responsible entity of LLPT).

LLP Security means a LLP Share stapled to a LLP Unit.

LLP Share means a fully paid ordinary share in the capital of LLPL.

LLP Shareholder means a person who is registered in the Register as a holder of a LLP Share.

LLPT means Lend Lease Primelife Trust (ARSN 124 896 733) (acting through Lend Lease Villages Responsible Entity Limited (ACN 099 064 141) (LLVRE) as responsible entity of LLPT).

LLP Unit means a unit on issue in LLPT.

LLP Untiholder means a person who is registered in the Register as a holder of a LLP Unit.

LLVRE means Lease Villages Responsible Entity Limited (ACN 099 064 141).

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Record Date means 7pm on the date that is 5 Business Days after the Effective Date, or such other date as may be agreed in writing between Lend Lease and LLP or as may be required by ASX.

Registered Address means, in relation to a LLP Shareholder, the address of that LLP Shareholder shown in the Register.

Register means the register of members of LLP (including LLPL and LLPT) maintained by or on behalf of LLP in accordance with section 168(1) of the Corporations Act.

Registry means Link Market Services Limited (ABN 54 083 214 537).

Scheme Booklet means the Scheme Booklet in respect of the Schemes dated 2 November 2009.

Scheme Consideration means $0.31 cash for each Scheme Security.

Scheme Participant means each LLP Securityholder who is registered in the Register as a holder of Scheme Securities as at the Record Date (other than any holder of Excluded Securities).

Schemes means the Share Scheme and the Unit Scheme.

Scheme Securities means the LLP Securities on issue as at the Record Date (other than any Excluded Securities).

Scheme Shareholder means each LLP Shareholder who is registered in the Register as a holder of Scheme Shares as at the Record Date (other than any holder of LLP Shares that are comprised in the Excluded Securities).

Scheme Shares means the LLP Shares comprised in the Scheme Securities (other than any LLP Shares that are comprised in the Excluded Securities).

Scheme Transfer means, in relation to each Scheme Participant, a proper instrument of transfer of their Scheme Securities for the purpose of section 1071B of the Corporations Act, which may be a master transfer of all or part of all of the Scheme Securities.

Scheme Units means the LLP Units comprised in the Scheme Securities (other than any LLP Units that are comprised in the Excluded Securities).

Second Court Date means the first day of hearing of an application made to the Court by LLP for orders pursuant to section 411(4)(b) of the Corporations Act approving the Share Scheme and for the Second Judicial Advice or, if the hearing of such application is adjourned for any reason, means the first day of the adjourned hearing.

Second Judicial Advice means confirmation from the Court under section 63 of the Trustee Act 1925 (NSW) that, subject to LLP Unitholders passing the Unit Scheme Resolutions, LLVRE would be justified in acting upon the Unit Scheme Resolutions in doing all things and taking all necessary steps to put the Unit Scheme into effect.

Share Scheme means the scheme of arrangement under Part 5.1 of the Corporations Act between LLP and Scheme Shareholders as set out in this document, subject to any alterations or conditions made or required by the Court under section 411(6) of the Corporations Act as are acceptable to Lend Lease and LLP.

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Share Scheme Meeting means the meeting of Scheme Shareholders ordered by the Court to be convened under section 411(1) of the Corporations Act in relation to the Share Scheme, and includes any adjournment of that meeting.

Supplemental Deed means a deed poll pursuant to which LLVRE (in its capacity as responsible entity of LLPT) will amend the constitution of LLPT for the purpose of facilitating the Unit Scheme.

Unit Scheme means the arrangement under which Lend Lease Bidco acquires all of the Scheme Units, that is facilitated by amendments to the constitution of LLPT as set out in the Supplemental Deed, subject to relevant resolutions at the Scheme Meetings being approved by the requisite majorities of LLP Unitholders.

1.2 Interpretation

Headings are for convenience only and do not affect interpretation. The following rules apply unless the context requires otherwise.

a) The singular includes the plural and conversely.
b) A gender includes all genders.
c) If a word or phrase is defined, its other grammatical forms have a corresponding meaning.
d) A reference to a person, corporation, trust, partnership, unincorporated body or other entity includes any of them.
e) A reference to a clause is a reference to a clause of this document.
f) A reference to an agreement or document (including a reference to this document) is to the agreement or document as amended, varied, supplemented, novated or replaced, except to the extent prohibited by this document or that other agreement or document.
g) A reference to a person includes a reference to the person’s executors, administrators, successors, substitutes (including persons taking by novation) and assigns.
h) A reference to legislation or to a provision of legislation includes a modification or re enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it.
i) A reference to $ is to the lawful currency of Australia.
j) A reference to time is a reference to time in Sydney, New South Wales.
k) If the day on which any act, matter or thing is to be done is a day other than a Business Day, such act, matter or thing must be done on the immediately succeeding Business Day.
l) The meaning of general words is not limited by specific examples introduced by including, or for example, or similar expressions.
m) Words and phrases not specifically defined in this document have the same meanings (if any) given to them in the Corporations Act.

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2 Conditions precedent

2.1 Conditions Precedent to the Scheme

This Share Scheme is conditional upon, and will have no force or effect until, the satisfaction of each of the following conditions precedent:

a) as at 8.00am on the Second Court Date each of the conditions precedent set out in clause 3.1 of the Scheme Implementation Agreement (other than the conditions precedent relating to the approval of the Court and lodgement of the Supplemental Deed set out in clauses 3.1(d) and 3.1(e) of the Scheme Implementation Agreement) has been satisfied or waived in accordance with the Scheme Implementation Agreement;
b) as at 8.00am on the Second Court Date, the Scheme Implementation Agreement has not been terminated;
c) the Court makes orders approving this Share Scheme under section 411(4)(b) of the Corporations Act, including with such alterations made or required by the Court under section 411(6) of the Corporations Act as are acceptable to Lend Lease and LLP and grants the Second Judicial Advice; and
d) such other conditions made or required by the Court under section 411(6) of the Corporations Act in relation to the Share Scheme as are acceptable to Lend Lease and LLP have been satisfied.

2.2 Termination

Without limiting any rights under the Scheme Implementation Agreement, in the event that the Scheme Implementation Agreement is terminated in accordance with its terms before 8.00am on the Second Court Date or if the Schemes do not become Effective on or before the End Date, LLP, Lend Lease and Lend Lease Bidco are each released from:

a) any further obligation to take steps to implement this Share Scheme; and
b) any liability with respect to this Share Scheme.

3 Scheme becoming effective

3.1 Effective Date of the Scheme

Subject to clause 3.2, this Share Scheme will take effect on and from the Effective Time.

3.2 End Date

This Share Scheme will lapse and be of no further force or effect if the Effective Date has not occurred on or before the End Date.

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4 Implementation of Scheme

4.1 Lodgement

a) If the Court makes the orders under section 411(4)(b) (and, if applicable, section 411(6)) of the Corporations Act in relation to the Share Scheme coming into effect, LLP will lodge with ASIC office copies of those orders on the day on which the Court approves the Share Scheme.
b) When LLP makes the lodgement in accordance with paragraph (a), LLP will procure that LLVRE, in its capacity as responsible entity of LLPT, also lodges with ASIC, for the purposes of section 601GC(2) of the Corporations Act, a copy of the Supplemental Deed.

4.2 Transfer of Scheme Shares

a) On the Implementation Date, in consideration for, and prior to, the transfer to Lend Lease Bidco of the Scheme Shares (together with the Scheme Units that are stapled to those Scheme Shares) under the Schemes, Lend Lease Bidco will pay (and Lend Lease will procure that Lend Lease Bidco pays) to each Scheme Participant the Scheme Consideration for each Scheme Security held by that Scheme Participant, such payment to be made in accordance with this Share Scheme.
b) On the Implementation Date, Lend Lease Bidco will provide (and Lend Lease will procure that Lend Lease Bidco provides) written confirmation that Lend Lease Bidco has fulfilled its obligations under clause 4.2(a).
c) On the Implementation Date, subject to the provision of the Scheme Consideration in accordance with this Share Scheme and Lend Lease Bidco having provided LLP with written confirmation in accordance with clause 4.2(b), all of the Scheme Shares, together with all rights and entitlements attaching to the Scheme Shares as at the Implementation Date, will be transferred to Lend Lease Bidco (together with the Scheme Units which are stapled to those Scheme Shares), without the need for any further act by any Scheme Shareholder (other than acts performed by LLP or any of its directors and officers as attorney and agent for Scheme Shareholders under this Share Scheme), by:
i) LLPL delivering to Lend Lease Bidco for execution duly completed Scheme Transfers to transfer all of the Scheme Shares to Lend Lease Bidco, duly executed by LLPL (or any of its directors and officers) as the attorney and agent of each Scheme Shareholder as transferor under clause 8.3;
ii) Lend Lease Bidco executing the Scheme Transfers as transferee, attending to the stamping of the Scheme Transfers (if required) and delivering them to LLPL for registration; and
iii) LLPL, immediately after receipt of the executed Scheme Transfers under clause 4.2(c) (ii), entering, or procuring the entry of, the name and address of Lend Lease Bidco in the Register as the holder of all of the Scheme Shares.

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5 Scheme Consideration

5.1 Entitlement to Scheme Consideration

The Scheme Consideration in respect of each of the Scheme Securities for which a Scheme Participant is registered in the Register as the holder as at the Record Date comprises $0.31 in cash, being the amount payable pursuant to the Schemes for each Scheme Security, subject to the terms of the Schemes.

5.2 Payment of cash amounts

a) The obligation of Lend Lease Bidco to pay the Scheme Consideration under clause 4.2(a) will be deemed to be satisfied if Lend Lease Bidco, before 12.00 noon on the Implementation Date, deposits in cleared funds the aggregate Scheme Consideration payable to all Scheme Participants into an account nominated by LLP (the details of which must be notified by LLP to Lend Lease Bidco at least five Business Days before the Implementation Date), such amount to be held on trust by LLP for the Scheme Participants (except that any interest on the amount will be for the account of Lend Lease Bidco) and for the purpose of LLP sending the Scheme Consideration to each Scheme Participant by:
i) despatching, or procuring the despatch, to each Scheme Participant of a pre printed cheque in the name of that Scheme Participant and for the relevant amount (denominated in $), with such despatch to be made by pre-paid post to the Registered Address of that Scheme Participant (as at the Record Date); or
ii) making, or procuring the making of, a deposit for a Scheme Participant of the relevant amount (denominated in $) in an account with any Australian ADI in Australia notified by that Scheme Participant to LLP and recorded in or for the purposes of the Register as at the Record Date.
b) In the event that LLP believes that a Scheme Participant is not known at the Scheme Participant’s Registered Address, and no account has been notified for the purposes of clause 5.2(a)(ii) or a deposit into such an account is rejected or refunded, LLP may credit the amount payable to the relevant Scheme Participant to a separate bank account of LLP to be held on trust by LLP for that Scheme Participant until the Scheme Participant claims the amount or the amount is dealt with in accordance with any applicable unclaimed money legislation (except that any interest accruing on the amount will be for the account of Lend Lease Bidco). An amount credited to the account is to be treated as having been paid to the Scheme Participant when credited to the account. LLP must maintain records of the amounts paid, the people who are entitled to the amounts and any transfers of the amounts.

5.3 Joint holders

In the case of Scheme Securities held in joint names, any cheque required to be paid to Scheme Participants will be payable to the joint holders and will be forwarded to the holder whose name appears first in the Register as at the Record Date.

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6 Dealings in LLP Shares

6.1 Dealings in LLP Shares by Scheme Shareholders

a) For the purpose of establishing the persons who are Scheme Shareholders, dealings in LLP Shares will be recognised by LLPL provided that:
i) in the case of dealings of the type to be effected using CHESS, the transferee is registered in the Register as the holder of the relevant LLP Shares by the Record Date; and
ii) in all other cases, registrable transfers or transmission applications in respect of those dealings are received by the Registry by 7pm on the day which is the Record Date (in which case LLPL must register such transfers or transmission applications at or before 7pm on that day).
b) The persons shown in the Register, and the number of LLP Shares shown as being held by them, after registration of transfers and transmission applications of the kind referred to in clause 6.1(a) will be taken to be LLP Shareholders, and the number of LLP Shares held by them on the Record Date.
c) LLPL will not accept for registration, nor recognise for the purpose of establishing the persons who are Scheme Shareholders, any transfer or transmission application in respect of LLP Shares received after the Record Date, or received prior to the Record Date but not in registrable form.

6.2 Register

LLPL will, until the Scheme Consideration has been provided and the name and address of Lend Lease Bidco has been entered in the Register as the holder of all of the Scheme Securities, maintain, or procure the maintenance of, the Register in accordance with this clause 6, and the Register in this form and the terms of the Schemes will solely determine the persons who are Scheme Shareholders and their entitlements to the Scheme Consideration. As from the Record Date (and other than for Lend Lease Bidco following the Implementation Date), each entry in the Register as at the Record Date relating to Scheme Shares will cease to have any effect other than as evidence of the entitlements of Scheme Shareholders to the Scheme Consideration in respect of the Scheme Shares.

6.3 Effect of share certificates and holding statements

As from the Record Date (and other than for Lend Lease Bidco following the Implementation Date), all share certificates and holding statements for Scheme Shares will cease to have effect as documents of title in respect of those Scheme Shares.

6.4 Information to be given to Lend Lease

LLPL must procure that, as soon as practicable after the Record Date and in any event at least 3 Business Days before the Implementation Date, details of the names, Registered Addresses and holdings of LLP Shares of every Scheme Shareholder as shown in the Register as at the Record Date are given to Lend Lease (or as it directs) in such form as Lend Lease may reasonably require.

6.5 No disposals after Record Date

If the Share Scheme becomes Effective, each Scheme Shareholder, and any person claiming through that Scheme Shareholder, must not dispose of or purport or agree to dispose of any Scheme Shares or any interest in them after the Record Date.

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7 Suspension and Termination of Quotation of LLP Securities

a) LLPL must apply to ASX for suspension of trading of the LLP Securities on ASX with effect from the close of business on the Effective Date.
b) LLPL must apply to ASX for termination of official quotation of the LLP Shares on ASX and the removal of LLP from the official list of ASX with effect from the Business Day immediately following the Implementation Date, or from such later date as may be determined by Lend Lease.

8 General Provisions

8.1 Further assurances

a) Each Scheme Shareholder and LLPL will do all things and execute all deeds, instruments, transfers or other documents as may be necessary or desirable to give full effect to the terms of the Schemes and the transactions contemplated by them.
b) Without limiting LLPL’s other powers under this Share Scheme, LLPL has power to do all things that it considers necessary or desirable to give effect to the Schemes and the Scheme Implementation Agreement.

8.2 Scheme Shareholders’ agreements and consents

Each Scheme Shareholder:

a) irrevocably agrees to the transfer of their Scheme Shares, together with all rights and entitlements attaching to those Scheme Shares, to Lend Lease Bidco in accordance with the terms of this Share Scheme; and
b) irrevocably consents to LLPL, Lend Lease and Lend Lease Bidco doing all things and executing all deeds, instruments, transfers or other documents as may be necessary or desirable to give full effect to the terms of the Share Scheme and the transactions contemplated by it,

without the need for any further act by that Scheme Shareholder.

8.3 Appointment of LLP as attorney for implementation of Share Scheme

Each Scheme Shareholder, without the need for any further act by that Scheme Shareholder, irrevocably appoints LLP and each of its directors and officers, jointly and severally, as that Scheme Shareholder’s agent and attorney for the purpose of:

a) doing all things and executing all deeds, instruments, transfers or other documents as may be necessary or desirable to give full effect to the terms of the Share Scheme and the transactions contemplated by it, including the effecting of a valid transfer or transfers (or the execution and delivery of any Scheme Transfers) under clause 4.1(a); and
b) enforcing the Deed Poll against Lend Lease or Lend Lease Bidco,

and LLP accepts such appointment. LLP, as agent and attorney of each Scheme Shareholder, may sub delegate its functions, authorities or powers under this clause 8.3 to all or any of its directors and officers (jointly, severally, or jointly and severally).

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8.4 Warranty by Scheme Shareholders

Each Scheme Shareholder is deemed to have warranted to Lend Lease Bidco, and, to the extent enforceable, to have appointed and authorised LLP as that Scheme Shareholder’s agent and attorney to warrant to Lend Lease Bidco, that all of their Scheme Shares (including any rights and entitlements attaching to those Scheme Shares) will, at the time of the transfer of them to Lend Lease Bidco pursuant to this Share Scheme, be fully paid and free from all mortgages, charges, liens, encumbrances, pledges, security interests and other interests of third parties of any kind, whether legal or otherwise, and restrictions on transfer of any kind, and that they have full power and capacity to sell and to transfer their Scheme Shares (together with any rights and entitlements attaching to those Scheme Shares) to Lend Lease Bidco pursuant to this Share Scheme. LLP undertakes in favour of each Scheme Shareholder that it will provide such warranty, to the extent enforceable, to Lend Lease Bidco on behalf of that Scheme Shareholder.

8.5 Title to Scheme Shares

Lend Lease Bidco will be beneficially entitled to the Scheme Shares transferred to it under this Share Scheme pending registration by LLP of the name and address of Lend Lease Bidco in the Register as the holder of the Scheme Shares.

8.6 Appointment of Lend Lease as attorney for Scheme Shares

a) From the time at which the Scheme Consideration is paid by Lend Lease Bidco in accordance with clause 5.2(a) until Lend Lease Bidco is registered in the Register as the holder of all Scheme Shares, each LLP Shareholder:
i) without the need for any further act by that LLP Shareholder, irrevocably appoints Lend Lease Bidco as its agent and attorney for the purpose of appointing any director or officer of Lend Lease or Lend Lease Bidco as that LLP Shareholder’s proxy and, where appropriate, its corporate representative to:
- A) attend shareholders’ meetings of LLPL;
- B) exercise the votes attaching to the LLP Shares registered in the name of the LLP Shareholder; and
- C) sign any LLP Shareholders’ resolution; and
ii) must take all other action in the capacity of a LLP Shareholder as Lend Lease Bidco reasonably directs.
b) From the time at which the Scheme Consideration is paid by Lend Lease Bidco in accordance with clause 5.2(a) until Lend Lease Bidco is registered in the Register as the holder of all Scheme Shares, no LLP Shareholder may attend or vote at any meetings of LLP Shareholders or sign any LLP Shareholders’ resolution (whether in person, by proxy or by corporate representative) other than under this clause 8.6.

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8.7 Alterations and conditions to Share Scheme

If the Court proposes to approve this Share Scheme subject to any alterations or conditions, LLP may, by its counsel or solicitors, and with the prior consent of Lend Lease, consent on behalf of all persons concerned, including each LLP Shareholder, to those alterations or conditions.

8.8 Binding effect of Share Scheme

This Share Scheme binds LLP and all of the Scheme Shareholders from time to time (including those who did not attend the Share Scheme Meeting, did not vote at that meeting or voted against the Share Scheme) and, to the extent of any inconsistency, overrides the constitutions of LLP.

8.9 Enforcement of Deed Poll

LLP undertakes in favour of each Scheme Shareholder that it will enforce the Deed Poll against Lend Lease and Lend Lease Bidco (as applicable) on behalf of and as agent and attorney for the Scheme Shareholder.

8.10 Notices

Where a notice, transfer, transmission application, direction or other communication referred to in this Share Scheme is sent by post to LLP, it will not be deemed to be received in the ordinary course of post or on a date other than the date (if any) on which it is actually received at LLP’s registered office or by the Registry, as the case may be.

8.11 Costs and stamp duty

Each of Lend Lease and LLP will pay their share of the costs of this Share Scheme in accordance with the Scheme Implementation Agreement. Lend Lease must pay or procure that Lend Lease Bidco pays, any stamp duty that is payable on the transfer to Lend Lease Bidco of the Scheme Securities pursuant to the Schemes.

8.12 Governing law and jurisdiction

This Scheme is governed by the laws of New South Wales. Each party submits to the non-exclusive jurisdiction of courts exercising jurisdiction there in connection with matters concerning this Scheme.

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Attachment E Scheme Implementation Agreement

(Without Annexures or Attachments)

Scheme Implementation Agreement

Lend Lease Corporation Limited

Lend Lease Primelife Limited Lend Lease Villages Responsible Entity Limited as responsible entity of Lend Lease Primelife Trust

Allens Arthur Robinson Level 28 Deutsche Bank Place Corner Hunter and Phillip Streets Sydney NSW 2000 Australia Tel +61 2 9230 4000 Fax +61 2 9230 5333 www.aar.com.au © Copyright Allens Arthur Robinson, Australia 2009

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Table	of Contents	of Contents
1.	Definitions and Interpretation		1
	1.1	Definitions	1
	1.2	Interpretation	12
	1.3	Best and reasonable endeavours	13
2.	Agreement to proceed with Schemes		13
	2.1	LLP to propose Scheme	13
	2.2	LLC to assist	13
3.	Conditions Precedent and Pre-Implementation Steps		14
	3.1	Conditions Precedent	14
	3.2	Benefit and waiver of Conditions Precedent	15
	3.3	Best endeavours and co-operation	16
	3.4	Notifications	16
	3.5	Failure of Conditions Precedent	16
	3.6	Conditions of Regulatory Approvals	17
	3.7	Fulfillment of Conditions Precedent	17
4.	Scheme and Scheme Consideration		17
	4.1	Outline of Scheme	17
	4.2	Scheme Consideration	18
5.	Steps for Implementation		18
	5.1	LLP's obligations in respect of the Scheme	18
	5.2	Appeal process	21
	5.3	LLC's obligations in respect of the Scheme	22
	5.4	Preparation of Scheme Booklet	23
6.	Conduct of Business and Requests for Access		25
	6.1	Conduct of LLP business	25
	6.2	LLC Covenants	25
	6.3	Access to information and co-operation	25
	6.4	No Regulated Events	26
7.	LLP	Board Recommendations and Intentions	26
	7.1	LLP Board recommendation	26
	7.2	Independent Director intentions	27
8.	Public Announcements, Communications and Confidentiality		28
	8.1	Required announcements	28
	8.2	Agreement on other Communications	28
	8.3	Disclosure on termination of this Agreement	28
	8.4	Confidentiality Deed	29
9.	Representations and Warranties		29
	9.1	LLC representations and warranties	29
	9.2	LLP representations and warranties	29
	9.3	Reliance by parties	31
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	9.4	Notifications	31
	9.5	Status of representations and warranties	31
10.	Exclusivity		32
	10.1	No shop restriction	32
	10.2	No talk restriction	32
	10.3	No due diligence	32
	10.4	Notification by LLP	33
	10.5	Normal provision of information	34
	10.6	Acknowledgement	34
11.	Termination		34
	11.1	Termination by either party	34
	11.2	Termination by LLC	35
	11.3	Termination by LLP	35
	11.4	Effect of termination	35
12.	Damages		35
13.	GST		36
	13.1	Definitions	36
	13.2	GST to be added to amounts payable	36
	13.3	Liability net of GST	36
	13.4	Cost exclusive of GST	37
	13.5	GST obligations to survive termination	37
14.	Miscellaneous		37
	14.1	Notices	37
	14.2	No waiver	38
	14.3	Remedies cumulative	38
	14.4	Entire agreement	38
	14.5	Amendment	38
	14.6	Assignment	38
	14.7	No merger	38
	14.8	Further assurances	38
	14.9	Costs and stamp duty	38
	14.10	Severability of provisions	39
	14.11	Governing law and jurisdiction	39
	14.12	Counterparts	39
Schedule 1			40
	Timetable		40
Schedule 2			41
	Responsibility Statement		41
Schedule 3			42
	LLP Closing Certificate		42
Schedule 4			43
	LLC Closing Certificate		43
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Annexure A	45
Share Scheme	45
Annexure B	46
LLC Deed Poll	46

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Date 2009 Parties 1. Lend Lease Corporation Limited (ACN 000 226 228) of 30 The Bond, 30 Hickson Road, Millers Point NSW 2000 ( LLC ). 2. Lend Lease Primelife Limited (ACN 010 622 901) of Level 4, 111 Cecil Street, South Melbourne VIC 3205 ( LLPL ). 3. Lend Lease Villages Responsible Entity Limited (ACN 099 064 141) ( LLVRE ) as responsible entity of Lend Lease Primelife Trust (ARSN 124 896 733) of Level 4, 111 Cecil Street, South Melbourne VIC 3205 ( LLPT ).

Recitals

A LLC, through BidCo, proposes to acquire all of the Scheme Securities pursuant to the Schemes. B LLP has agreed to propose the Schemes to the LLP Securityholders and to issue the Scheme Booklets to the LLP Securityholders, and LLC and LLP have agreed to implement the Schemes, upon and subject to the terms and conditions of this Agreement.

It is agreed as follows.

1. Definitions and Interpretation

1.1 Definitions

The following definitions apply unless the context requires otherwise.

Adviser means, in relation to an entity, a financier, financial adviser, corporate adviser, legal adviser, or technical or other expert adviser or consultant who provides advisory services in a professional capacity to the market in general and who has been engaged by that entity.

Agreed Public Announcements means the public announcements to be made by each of LLC and LLP in the form agreed by those parties.

Announcement Date means:

(a) the date on which this Agreement is executed; or

(b) if this Agreement is executed on a day that is not a Trading Day, the first Trading Day immediately following the day of execution.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited (ABN 98 008 624 691) or, as the context requires, the financial market known as the Australian Securities Exchange operated by it.

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ASX Listing Rules means the official listing rules of ASX.

Bank Waiver Process means the process (described in the LLP ASX announcement dated 18 September 2009) of LLP obtaining a waiver from its financiers in respect of a breach by LLPL of an interest coverage covenant under its finance facilities and the documents and transactions entered into by LLP, BidCo and others in connection with that waiver process or satisfying any conditions of the waiver.

BidCo means a Wholly-Owned Subsidiary of LLC nominated by LLC, being Lend Lease Capital Services Pty Limited (ACN 000 001 114).

Business Day means any day that is each of the following:

(a) a Business Day within the meaning given in the ASX Listing Rules; and
(b) a day that banks are open for business in Sydney, New South Wales.

Communications means all forms of communications, whether written, oral, in electronic format or otherwise, and whether direct or indirect via agents or Representatives.

Competing Proposal means any expression of interest, proposal, offer, transaction or arrangement (other than the Transaction) by or with any person pursuant to which, if the expression of interest, proposal, offer, transaction or arrangement is entered into or completed substantially in accordance with its terms:

(a) a Third Party will (other than as custodian, nominee or bare trustee):
(i) acquire an interest in, or a Relevant Interest in, or become the holder of, 20% or more of the shares in any LLP Group Member;
(ii) directly or indirectly acquire, obtain a right to acquire, or otherwise obtain an economic interest in all, or a substantial part of, the assets or business of any LLP Group Member;
(iii) otherwise acquire control (within the meaning of section 50AA of the Corporations Act) of any LLP Group Member; or
(iv) otherwise directly or indirectly acquire, merge or amalgamate with, or acquire a significant shareholding or economic interest in, any LLP Group Member or in all or a substantial part of their respective assets or business, whether by way of takeover offer, scheme of arrangement, shareholder approved acquisition, capital reduction, share buy-back or repurchase, sale or purchase of assets, joint venture, reverse takeover, dual-listed company structure, recapitalisation, establishment of a new holding company for the LLP Group or other synthetic merger or any other transaction or arrangement; or
(b) LLP would be required to abandon or otherwise fail to proceed with the Schemes or the Transaction, by whatever means,

provided that any acquisition by a third party of all, or a substantial part of, the assets or business of any LLP Group Member that has been the subject of a recommendation from the Manager (whether made before or after the date of this Agreement) does not constitute a Competing Proposal.

Conditions Precedent means the conditions precedent set out in clause 3.1.

Confidentiality Deed means the agreement of that name between LLC and LLP.

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Control has the meaning given in section 50AA of the Corporations Act.
Controlled Entity means, in relation to an entity, another entity which is a Subsidiary of it, or which
is Controlled by it.
Corporations Act means the Corporations Act 2001 (Cth).
Court means the Supreme Court of New South Wales or such other court of competent jurisdiction
as LLC and LLP may agree in writing.
Effective means:
(a) in relation to the Share Scheme, the coming into effect, pursuant to section 411(10) of the
Corporations Act, of the orders of the Court under section 411(4)(b) (and, if applicable,
section 411(6)) of the Corporations Act in relation to the Share Scheme; and
(b) in relation to the Trust Scheme, the coming into effect, pursuant to section 601GC(2) of the
Corporations Act of the Supplemental Deed.
Effective Date means the date on which all Scheme have become Effective.
End Date means 31 January 2010, or such later date as LLC and LLP may agree in writing.
Exclusivity Period means the period commencing on the date of this Agreement and ending on the
earlier of:
(a) the termination of this Agreement in accordance with its terms;
(b) the Implementation Date; and
(c) the End Date.
First Court Date means the first day of hearing of an application made to the Court by LLP for
orders, pursuant to section 411(1) of the Corporations Act, convening the Share Scheme Meeting
and for the grant of the First Judicial Advice or, if the hearing of such application is adjourned for
any reason, means the first day of the adjourned hearing.
First Judicial Advice means confirmation from the Court under section 63 of the Trustee Act 1925
(NSW) that LLVRE would be justified in convening the Trust Scheme Meeting and proceeding on
the basis that amending the Trust Constitution as set out in the Supplemental Deed would be within
the powers of alteration conferred by the Trust Constitution and section 601GC of the Corporations
Act.
Governmental Agency means any government or representative of a government or any
governmental, semi-governmental, administrative, fiscal, regulatory or judicial body, department,
commission, authority, tribunal, agency, competition authority or entity and includes any minister
(including, for the avoidance of doubt, the Commonwealth Treasurer), ASIC, ASX and any
regulatory organisation established under statute or any stock exchange.
Guidance Note 15 means Guidance Note 15: Listed Trusts and Managed Investment Scheme
Mergers issued by the Takeovers Panel of Australia.
Implementation Date means the date that is 4 Business Days after the Record Date, or such other
date as LLP and LLC may agree in writing or as may be required by ASX.
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Independent Board Committee means the independent board committee comprising the nonexecutive directors of the LLP Boards which is established in accordance with the Participation Protocols.

Independent Expert means an independent expert to be engaged by LLP to prepare the Independent Expert's Report and express an opinion on the Schemes.

Independent Expert's Report means the report from the Independent Expert commissioned by LLP for inclusion in the Scheme Booklet, which includes a statement by the Independent Expert on whether, in its opinion:

(a) the Share Scheme is in the best interests of LLP Shareholders; and

(b) the terms of the Trust Scheme are fair and reasonable for LLP Unitholders (other than a member of the LLC Group that holds LLP Securities),

and includes any update of that report by the Independent Expert.

Judicial Advice means the First Judicial Advice and the Second Judicial Advice.

LLC Board means the board of directors of LLC.

LLC Closing Certificate means a certificate to be given by LLC in the form of Schedule 4.

LLC Deed Poll means the deed poll to be executed by LLC and BidCo in favour of the Scheme Participants in relation to the acquisition by LLC (or BidCo) of the Scheme Participants' Scheme Securities, in the form of annexure B or in such other form as LLP determines with the consent of LLC (such consent not to be unreasonably withheld or delayed).

LLC Director means a director of LLC.

LLC Disclosed Information means all information (in whatever form) provided by LLC or any of its Representatives to LLP or any of its Representatives in connection with the Scheme or relating to the LLC Group’s past, present or future operations, affairs, business and/or strategic plans, whether provided before or after entry into this Agreement.

LLC Group means LLC and its Related Bodies Corporate.

LLC Provided Information means all information regarding the LLC Group and the Merged Group that is provided by or on behalf of LLC to LLP or any of its Representatives to enable the Scheme Booklet to be prepared and completed in accordance with clause 5.1 (and that is specifically identified as such by LLC or any of its Representatives), and any updates to that information provided by or on behalf of LLC to LLP or any its Representatives in accordance with clause 5.3(h).

LLC Securities means LLP Securities held by any person on behalf of, or for the benefit of, LLC.

LLP means each of LLPL and LLVRE (in its capacity as responsible entity of LLPT).

LLP Board means the board of directors of LLPL and LLVRE (in its capacity as responsible entity of LLPT).

LLP Closing Certificate means a certificate to be given by LLP in the form of Schedule 3.

LLP Director means a director on a LLP Board.

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strategic plans, whether provided before or after entry into this Agreement and whether provided for the purpose of facilitating LLC's due diligence investigations in relation to the LLP Group, the management of the LLP Group or otherwise (including information provided by way of access to data rooms, site visits, management presentations, and interviews and discussions with or other access to the LLP Group's external auditors and Advisers).

LLP Entity means each of LLPL and LLPT (acting through LLVRE in its capacity as responsible entity of LLPT).

LLP Group means each of LLPL and LLPT (acting through LLVRE in its capacity as responsible entity of LLPT) and their Controlled Entities and LLP Group Member means any member of that group.

LLP Material Adverse Change means any event, occurrence or matter that individually or when aggregated with all such events, occurrences or matters has had or is reasonably likely to have an adverse effect on the business, assets, liabilities, operations, financial or trading position or performance of the LLP Group (taken as a whole) and:

(a) that adverse effect is material when compared to the LLP Group's position as at the date of this Agreement; or (b) that adverse effect is such as would cause a reasonable person in the position of LLC not to proceed with the Schemes on the terms and subject to the conditions of this Agreement, other than an event, occurrence or matter: (c) required to be undertaken or procured by LLP pursuant to the Transaction Documents; (d) which LLC and LLP agree is not a LLP Material Adverse Change; or (e) to the extent that event, occurrence or matter was known to LLC or any member of the LLC Group prior to the date of this Agreement. LLP Provided Information means all information included in the Scheme Booklet, and any updates to that information prepared by or on behalf of LLP in accordance with clause 5.1(l), other than: (a) the LLC Provided Information and any information solely derived from, or prepared solely in reliance on, the LLC Provided Information; and (b) the Independent Expert’s Report. LLP Register means the register of members of LLP (including LLPL and LLPT) maintained by or on behalf of LLP in accordance with section 168(1) of the Corporations Act.

LLP Regulated Event means the occurrence of any of the following events:

(a) any LLP Group Securities are converted into a larger or smaller number of securities; (b) a LLP Group Member's capital is reduced or resolved to be reduced in any way; (c) a LLP Group Member: (i) enters into a buy-back agreement; or (ii) resolves to approve the terms of a buy-back agreement under the Corporations Act;
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(d) a LLP Group Member issues securities, or grants an option over or to subscribe for securities, or agrees to make such an issue or grant such an option, other than to a LLP Entity or its Wholly-Owned Subsidiary or pursuant to an obligation that exists at the date of this Agreement and has been disclosed in writing to LLC;
(e) a LLP Group Member issues, or agrees to issue, convertible notes or any other security or instrument convertible into shares, other than to a LLP Entity or its Wholly-Owned Subsidiary;
(f) a LLP Group Member issues, or agrees to issue, or grants an option to subscribe for, debentures (as defined in section 9 of the Corporations Act), other than to a LLP Entity or its Wholly-Owned Subsidiary;
(g) a LLP Group Member agrees to pay, declares, pays or makes, or incurs a liability to pay or make, a dividend, distribution of income, profits, assets or capital, other than where the recipient is a LLP Entity or its Wholly-Owned Subsidiary;
(h) a LLP Group Member makes any change to its constitution or other constituent documents; (i) a LLP Group Member disposes, or agrees to dispose, of securities in any LLP Group Member;
(j) a LLP Group Member: (i) acquires, leases or disposes of; (ii) agrees to acquire, lease or dispose of; or (iii) offers, proposes or announces a bid or tenders for, any entity, business or assets, other than: (iv) trading inventories and consumables in the ordinary and usual course of business; or

(v) as legally committed in any contract fairly disclosed to LLC or otherwise known by the Manager in the LLP Disclosed Information before the date of this Agreement, where the value of such entity, business or assets, or the amount involved in the relevant transaction, exceeds $5 million (either individually or, in the case of related businesses or classes of assets or a series of related transactions, collectively); (k) a LLP Group Member creates, or agrees to create, any mortgage charge, lien or other encumbrance over the whole, or a substantial part, of its business or assets other than in the ordinary course of its business; (l) other than as legally committed in any contract fairly disclosed to LLC in the LLP Disclosed Information before the date of this Agreement (or otherwise known by the Manager), a LLP Group Member enters into any contract or commitment (or any series of related contracts or commitments) that:

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or a LLP Group Member undertakes capital expenditure in excess of $500,000;
(m) a LLP Group Member incurs any financial indebtedness or issues any indebtedness or debt
securities, other than in the ordinary course of business or pursuant to advances under its
credit facilities in existence as at the date of this Agreement where the funds drawn
pursuant to those advances are used in the ordinary course of business or in connection with
a purpose that is contemplated and permitted in paragraph (j) of this definition;
(n) a LLP Group Member makes any loans, advances or capital contributions to, or
investments in, any other person, other than to or in a LLP Entity or its Wholly Owned
Subsidiary in the ordinary course of business, or otherwise in the ordinary course of
business;
(o) a LLP Group Member:
(i) pays any bonus to any Officer of a LLP Group Member;
(ii) increases the remuneration or compensation of any Officer of a LLP Group
Member other than in accordance with LLP's normal salary review procedure
conducted in good faith and in the ordinary and usual course of business on the
basis of principles consistent with those applied for LLP's normal salary review
procedure;
(iii) grants to any Officer of a LLP Group Member any increase in severance or
termination pay or superannuation entitlements; or
(iv) makes or agrees to make any material change to the terms of, or waives any claims
or rights under, or waives the benefit of any provisions of, any contract of
employment with any executive of a LLP Group Member;
(p) a LLP Group Member:
(i) changes the terms of any Material Contract;
(ii) pays, discharges or satisfies any claims, liabilities or obligations under any
Material Contract other than the payment, discharge or satisfaction consistent with
past practice and in accordance with its terms; or
(iii) waives any material claims or rights under, or waives the benefit of any provision
of, any Material Contract,
where the consequences of such action are material to any LLP Group Member;
(q) a material LLP Group Member resolves that it be wound up or an application or order is
made for the winding up or dissolution of a material LLP Group Member other than where
the application or order (as the case may be) is set aside within 14 days;
(r) a material LLP Group Member liquidator or provisional liquidator of a material LLP Group
Member is appointed;
(s) a court makes an order for the winding up of a material LLP Group Member;
(t) an administrator of a material LLP Group Member is appointed under the Corporations
Act;
(u) a material LLP Group Member ceases, or threatens to cease, to carry on business;
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(v) a material LLP Group Member executes a deed of company arrangement;
(w) a receiver, or a receiver and manager, is appointed in relation to the whole, or a substantial part, of the property of a material LLP Group Member;
(x) a material LLP Group Member is deregistered as a company or otherwise dissolved; or
(y) a material LLP Group Member is or becomes unable to pay its debts when they fall due,

provided that a LLP Regulated Event will not include a matter:

(z) that is done in the ordinary course of business (including for the avoidance of doubt and without limitation entering into residential leases) and consistent with past practice;
(aa) that is required to be undertaken or procured by LLP pursuant to, or otherwise as contemplated by, the Transaction Documents;
(bb) that is required to be undertaken pursuant to a resolution of the LLP Board prior to the date of this Agreement;
(cc) that is required to be undertaken pursuant to a resolution of the LLP Board after the date of this Agreement where such Board resolution was passed following a recommendation from the Manager in relation to that matter;
(dd) that is required to be undertaken in accordance with any banking arrangements to which a LLP Group Member is a party, including without limitation the Bank Waiver Process;
(ee) to the extent that LLC has provided its prior written consent, such consent not to be unreasonably withheld or delayed; or
(ff) that is agreed to, undertaken or procured by the Manager in its capacity as manager under the Management Agreements.

LLP Security means a LLP Share stapled to a LLP Unit.

LLP Securityholder means a person who is registered in the LLP Registers as a holder of LLP Securities.

LLP Share means a fully paid ordinary share issued in the capital of LLPL.

LLP Shareholder means a person who is registered in the register of members of LLPL as the holder of a LLP Share.

LLP Unit means a unit on issue in LLPT.

LLP Unitholder means a holder of a LLP Unit.

LLVM means Lend Lease Village Management Pty Limited (ACN 004 515 977).

Management Agreements means:

(a) the Management Agreement between LLVM and LLPL dated 26 July 2007 (as amended); and
(b) the Management Agreement between LLVM and LLVRE as responsible entity of LLPT dated 26 July 2007 (as amended).

Manager means LLVM in its capacity as the manger of each of LLPL and the assets of LLPT under the Management Agreements.

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Market Disruption Event means a sustained materially adverse dislocation to the Australian or international financial markets due to acts of terrorism, political unrest, natural calamities or international economic or financial crisis.

Material Contract means any agreement, arrangement or understanding to which any LLP Group Member is party that:

(a) is for a period of 12 months or more; (b) requires or may result in expenditure by any LLP Group Member (either alone or together with any other LLP Group Member) of $500,000 or more in any year; or (c) is otherwise material to the business or operations of any LLP Group Member. Merged Group means LLC and its Related Bodies Corporate, immediately after implementation of the Transaction. Notice of Meeting means the notice convening the Scheme Meetings, together with the proxy form for the Scheme Meetings.

Officer means, in relation to an entity, any of its directors, officers and employees.

Participation Protocols means the transaction protocol adopted by the LLP Board for the purpose of considering, assessing and implementing the Transaction.

Record Date means 7pm on the date that is 5 Business Days after the Effective Date, or such other date as may be agreed in writing between LLC and LLP or as may be required by ASX. Regulatory Approval means:

(a) any approval, consent, authorisation, registration, filing, lodgment, permit, franchise, agreement, notarisation, certificate, permission, licence, direction, declaration, authority, waiver, modification or exemption from, by or with a Governmental Agency; or (b) in relation to anything that would be fully or partly prohibited or restricted by law if a Governmental Agency intervened or acted in any way within a specified period after lodgment, filing, registration or notification, the expiry of that period without intervention or action.

Related Body Corporate has the meaning given in the Corporations Act.

Relevant Interest has the meaning given in sections 608 and 609 of the Corporations Act. Representative means, in relation to a person:

(a) a Related Body Corporate of the person; or (b) an Officer of the person or any of the person's Related Bodies Corporate; or (c) an Adviser to the person or any of the person's Related Bodies Corporate. Responsibility Statement means a statement that is included in the Scheme Booklet in the form set out in Schedule 2 or in such other form as the parties reasonably agree. Schemes means the Share Scheme and the Trust Scheme. Scheme Booklet means the explanatory memorandum to be prepared in respect of the Schemes in accordance with the terms of this Agreement and to be despatched by LLP to LLP Securityholders,

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including the Independent Expert's Report, the Share Scheme, the LLC Deed Poll and the Notice of Meeting.

Scheme Consideration means the consideration to be provided to Scheme Participants under the terms of the Schemes for the transfer to BidCo of their Scheme Securities.

Scheme Meeting means each of the Share Scheme Meeting and the Trust Scheme Meeting.

Scheme Participant means each person who is a LLP Securityholder on the Record Date (other than BidCo).

Scheme Resolutions means the Share Scheme Resolution and the Trust Scheme Resolution.

Scheme Securities means the LLP Securities on issue as at the Record Date (other than those LLP Securities held by BidCo).

Second Judicial Advice means confirmation from the Court under section 63 of the Trustee Act 1925 (NSW) that, subject to LLP Unitholders passing the Trust Scheme Resolutions, LLVRE would be justified in acting upon the Trust Scheme Resolutions in doing all things and taking all necessary steps to put the Trust Scheme into effect.

Share Scheme means a scheme of arrangement under Part 5.1 of the Corporations Act between LLPL and LLP Shareholders substantially in the form of annexure A, or in such other form as LLP determines with the consent of LLC (such consent not to be unreasonably withheld or delayed).

Share Scheme Meeting means the meeting of LLP Shareholders to be ordered by the Court to be convened under section 411(1) of the Corporations Act in relation to the Share Scheme, and includes any adjournment of that meeting.

Share Scheme Resolution means the resolution to be put to LLP Shareholders to approve the Share Scheme (such resolution to be put to LLP Shareholders at the Share Scheme Meeting and that, to be passed, must be approved by the requisite majorities of LLP Shareholders under section 411(4)(a)(ii) of the Corporations Act).

Subsidiary has the meaning given in the Corporations Act.

Superior Proposal means a bona fide Competing Proposal that the Independent Board Committee determines, acting in good faith and in order to satisfy what the Independent Board Committee considers to be their fiduciary or statutory duties (and after having taken advice from its financial and legal advisers):

(a) is capable of being valued and completed, taking into account all aspects of the Competing Proposal; and

(b) would, if completed substantially in accordance with its terms, be more favourable to the LLP Shareholders than the Transaction, taking into account all the terms and conditions of the Competing Proposal,

after taking into account a qualitative assessment of the identity, reputation and financial standing of the party making the Competing Proposal.

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Supplemental Deed means a deed poll pursuant to which LLVRE (in its capacity as responsible entity of LLPT) will amend the Trust Constitution, to be executed by LLVRE in such form as LLP determines with the consent of LLC (such consent not to be unreasonably withheld or delayed). Third Party means any of the following: (a) a person other than any member of the LLC Group; or (b) a consortium, partnership, limited partnership, syndicate or other group in which no member of the LLC Group (except LLVRE in its capacity as responsible entity of LLPT) has agreed in writing to be a participant. Timetable means the indicative timetable in relation to the Schemes set out in schedule 1, or such other indicative timetable as LLC and LLP may agree in writing or as may be required by ASX. Trading Day has the meaning given in the ASX Listing Rules. Transaction means the proposed transaction pursuant to which BidCo will acquire all of the Scheme Securities under the Schemes, in consideration for the provision of the Scheme Consideration. Transaction Documents means: (a) this Agreement; (b) the Share Scheme; (c) the Supplemental Deed; and (d) the LLC Deed Poll. Trust Constitution means the deed poll establishing LLPT, as amended from time to time. Trust Scheme means the arrangement, in accordance with Guidance Note 15, under which BidCo acquires all of the LLP Units held by Scheme Participants, that is facilitated by amendments to the Trust Constitution as set out in the Supplemental Deed, subject to the Trust Scheme Resolutions being approved by the requisite majorities of LLP Unitholders. Trust Scheme Meeting means the meeting of LLP Unitholders that is convened to consider resolutions to approve the Trust Scheme. Trust Scheme Resolutions means resolutions of the LLP Unitholders to approve the Trust Scheme, including: (a) an ordinary resolution for the purpose of item 7 of section 611 of the Corporations Act to approve the acquisition by LLC or a Related Body Corporate of LLC of all of the LLP Units held by Scheme Participants; (b) a special resolution for the purpose of section 601GC(1) of the Corporation Act to approve the amendments to the Trust Constitution as set out in the Supplemental Deed and to authorise LLVRE to execute and lodge with ASIC the Supplemental Deed to give effect to those amendments; and (c) an ordinary resolution approving, for all purposes, the steps required to implement the Schemes. Wholly-Owned Subsidiary means, in relation to a party, a body corporate, all of the issued shares of which are or will be directly or indirectly owned by that party.

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1.2 Interpretation

Headings are for convenience only and do not affect interpretation. The following rules apply unless the context requires otherwise.

(a) The singular includes the plural and conversely.
(b) A gender includes all genders.
(c) If a word or phrase is defined, its other grammatical forms have a corresponding meaning.
(d) A reference to a person, corporation, trust, partnership, unincorporated body or other entity includes any of them.
(e) A reference to a clause, schedule or annexure is a reference to a clause of, or schedule or annexure to, this Agreement.
(f) A reference to an agreement or document (including a reference to this Agreement) is to the agreement or document as amended, varied, supplemented, novated or replaced, except to the extent prohibited by this Agreement or that other agreement or document.
(g) A reference to a person includes a reference to the person's executors, administrators, successors, substitutes (including persons taking by novation) and assigns.
(h) A reference to legislation or to a provision of legislation includes a modification or re enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it.
(i) A reference to $ is to the lawful currency of Australia.
(j) Words and phrases not specifically defined in this Agreement have the same meanings (if any) given to them in the Corporations Act.
(k) A reference to time is a reference to time in Sydney, New South Wales.
(l) If the day on which any act, matter or thing is to be done is a day other than a Business Day, such act, matter or thing must be done on the immediately succeeding Business Day.
(m) The meaning of general words is not limited by specific examples introduced by including , or for example , or similar expressions.
(n) A reference to a liability incurred by any person includes any liability of that person arising from or in connection with any obligation (including indemnities and all other obligations owed as principal or guarantor) whether liquidated or not, whether present, prospective or contingent and whether owed, incurred or imposed by or to or on account of or for the account of that person alone, severally or jointly or jointly and severally with any other person.
(o) A reference to a loss incurred by any person includes any loss, liability, damage, cost, charge or expense that the person pays, incurs or is liable for and any other diminution of value of any description that the person suffers, including all liabilities on account of taxes or duties, all interest, penalties, fines and other amounts payable to third parties and all reasonable legal expenses and other expenses in connection with investigating or defending any claim, action, demand or proceeding, whether or not resulting in any liability, and all amounts paid in settlement of any such claims.

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(p) Nothing in this Agreement is to be interpreted against a party solely on the ground that the party put forward this Agreement or a relevant part of it.
1.3 Best and reasonable endeavours

Any provision of this Agreement that requires a party to use best endeavours, or reasonable endeavours, or to take all steps reasonably necessary, to procure that something is performed or occurs, requires that party to do so as soon as is reasonably practicable, but does not include any obligation:

(a) to pay any significant sum of money or to provide any significant financial compensation, valuable consideration or any other incentive to or for the benefit of any person, except for payment of any applicable fee for the lodgement or filing of any relevant application with any Governmental Agency or fees to any professional advisers; or

(b) to commence any legal action or proceeding against any person, to procure that that thing is done or happens,

except where that provision expressly specifies otherwise.

2. Agreement to proceed with Schemes

2.1 LLP to propose Scheme

(a) LLPL agrees to propose and implement the Share Scheme upon and subject to the terms and conditions of this Agreement, and to use all reasonable endeavours to do so as soon as is reasonably practicable and otherwise in accordance with the Timetable.
(b) LLVRE, in its capacity as responsible entity of LLPT, agrees to propose and implement the Trust Scheme upon and subject to the terms and conditions of this Agreement, and to use all reasonable endeavours to do so as soon as is reasonably practicable and otherwise in accordance with the Timetable.

2.2 LLC to assist

LLC agrees to assist LLP to implement the Schemes upon and subject to the terms and conditions of this Agreement, and to use all reasonable endeavours to do so as soon as is reasonably practicable and otherwise in accordance with the Timetable.

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3. Conditions Precedent and Pre-Implementation Steps

3.1 Conditions Precedent

Subject to this clause 3, the obligations of LLP under clause 5.1(p) and LLC's obligation to pay, or procure the payment of, the Scheme Consideration in accordance with the LLC Deed Poll and clause 5.3(k) are subject to the satisfaction (or waiver in accordance with clause 3.2) of each of the following Conditions Precedent:

Conditions Precedent for the benefit of LLC and LLP

(a) ( Regulatory Approvals )
(i) ( ASIC modification ) before the date of the Trust Scheme Meeting, ASIC has granted a modification of item 7 of section 611 of the Corporations Act, allowing LLP Unitholders to vote in favour of the Trust Scheme for the purpose of item 7 of section 611 of the Corporations Act or indicated in writing that such a modification is not required; and
(ii) ( Other Regulatory Approvals ) before 8:00am on the Second Court Date, all Regulatory Approvals that LLC and LLP agree within 5 Business Days of the date of this Agreement are required to implement the Transaction are granted or obtained and those Regulatory Approvals are not withdrawn, cancelled or revoked;
(b) ( Independent Expert's Report ) the Independent Expert provides the Independent Expert's Report to LLP, stating that in its opinion, the Schemes are in the best interests of LLP Securityholders and the Independent Expert does not change its conclusion that the Schemes are in the best interests of LLP Securityholders or withdraw the Independent Expert's Report by notice in writing to LLP prior to 8:00am on the Second Court Date;
(c) ( Securityholder approvals ) before 8.00am on the Second Court Date, the:
(i) Share Scheme Resolution is approved by the requisite majorities of LLP Shareholders under the Corporations Act; and
(ii) the Trust Scheme Resolutions are approved at the Trust Scheme Meeting by the requisite majorities of LLP Unitholders under the Corporations Act and in accordance with Guidance Note 15 (subject to any exemption from or modification to the provisions of the Corporations Act granted by ASIC);
(d) ( Court approval of Scheme s ) the Court approves the Share Scheme in accordance with section 411(4)(b) of the Corporations Act and the Court grants the Judicial Advice;
(e) ( execution and lodgement of the Supplemental Deed ) LLVRE (in its capacity as responsible entity of LLPT) executes the Supplemental Deed and lodges a copy of the executed Supplemental Deed with ASIC;
(f) ( no restraints ) no judgment, order, decree, statute, law, ordinance, rule or regulation, or other temporary restraining order, preliminary or permanent injunction, restraint or prohibition, entered, enacted, promulgated, enforced or issued by any court or other Governmental Agency of competent jurisdiction, remains in effect as at 8:00am on the Second Court Date that prohibits, materially restricts, makes illegal or restrains the completion of the Transaction or any Transaction Document;

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Conditions Precedent for the benefit of LLC only

(g) ( no LLP Regulated Events ) no LLP Regulated Event occurs or becomes known to LLC between the date of this Agreement and 8:00am on the Second Court Date;
(h) ( no LLP Material Adverse Change ) no LLP Material Adverse Change occurs, or is discovered, announced or disclosed or otherwise becomes known to LLC, between the date of this Agreement and 8:00am on the Second Court Date;
(i) ( no Market Disruption Event ) no Market Disruption Event occurs between the date of this Agreement and 8:00am on the Second Court Date;
(j) ( LLP Closing Certificate ) at or prior to 8.00am on the Second Court Date, LLP provides LLC with the LLP Closing Certificate; and

Conditions Precedent for the benefit of LLP only

(k) ( LLC Closing Certificate ) at or prior to 8.00am on the Second Court Date, LLC provides LLP with the LLC Closing Certificate.
3.2 Benefit and waiver of Conditions Precedent
(a) The Conditions Precedent in clauses 3.1(a) to 3.1(f) are for the benefit of each party, and (except in the cases of the Conditions Precedent in clauses 3.1(c), 3.1(d) and 3.1(e), which cannot be waived) any breach or non-fulfilment of any of those Conditions Precedent may only be waived with the written consent of both parties.
(b) The Conditions Precedent in clauses 3.1(g) to 3.1(j) are for the sole benefit of LLC, and any breach or non-fulfilment of any of those Conditions Precedent may only be waived by LLC giving its written consent.
(c) The Condition Precedent in clause 3.1(k) is for the sole benefit of LLP, and any breach or non-fulfilment of any of that Condition Precedent may only be waived by LLP giving its written consent.
(d) A party entitled to waive the breach or non-fulfilment of a Condition Precedent pursuant to this clause 3.2 may do so in its absolute discretion.
(e) If a waiver by a party of a Condition Precedent is itself expressed to be conditional and the other party accepts the conditions, the terms of the conditions apply accordingly. If the other party does not accept the conditions, the relevant Condition Precedent has not been waived.
(f) If a party waives the breach or non-fulfilment of a Condition Precedent, that waiver will not preclude it from suing the other party for any breach of this Agreement constituted by the same event that gave rise to the breach or non-fulfilment of the Condition Precedent.
(g) Waiver of a breach or non-fulfilment in respect of one Condition Precedent does not constitute:

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3.3 Best endeavours and co-operation

Without prejudice to any other obligations of the parties under this Agreement:

(a) LLC must use its best endeavours to satisfy, or procure the satisfaction of, the Condition Precedent in clause 3.1(k);
(b) LLP must use its best endeavours to satisfy, or procure the satisfaction of, the Conditions Precedent in clauses 3.1(b), 3.1(g), 3.1(h) and 3.1(j) and, unless the Independent Board Committee changes its unanimous recommendation of the Share Scheme and the Trust Scheme, clause 3.1(c);
(c) each of LLP and LLC must use their respective best endeavours to satisfy, or procure the satisfaction of, the Conditions Precedent in clauses 3.1(a), 3.1(d), 3.1(e) and 3.1(f), to the extent that it is within their respective control; and
(d) neither party will take any action that will or is likely to hinder or prevent the satisfaction of any Condition Precedent, except to the extent that such action is required to be done or procured pursuant to, or is otherwise permitted by, the Transaction Documents, or is required by law.

3.4 Notifications

Each party must:

(a) keep the other party promptly and reasonably informed of the steps it has taken and of its progress towards satisfaction of the Conditions Precedent;
(b) promptly notify the other party in writing if it becomes aware that any Condition Precedent has been satisfied, in which case the notifying party must also provide reasonable evidence that the Condition Precedent has been satisfied; and
(c) promptly notify the other party in writing of a failure to satisfy a Condition Precedent or of any fact or circumstance that results in that Condition Precedent becoming incapable of being satisfied or that may result in that Condition Precedent not being satisfied in accordance with its terms (having regard to the obligations of the parties under clause 3.3 and the terms of clause 3.6).

3.5 Failure of Conditions Precedent

(a) If:
(i) there is a breach or non-fulfilment of a Condition Precedent that is not waived in accordance with clause 3.2 before the date specified in this Agreement for the satisfaction of that Condition Precedent; or
(ii) a Condition Precedent becomes incapable of satisfaction, having regard to the obligations of the parties under clause 3.3 and the terms of clause 3.6 (and the breach or non-fulfilment of the Condition Precedent that would otherwise occur has not already been waived in accordance with this Agreement),

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either party may serve notice on the other party, and the parties must then consult in good
faith with a view to determining whether:
(iii) the Schemes or the Transaction may proceed by way of alternative means or
methods;
(iv) to extend the relevant time or date for satisfaction of the Condition Precedent;
(v) to change the date of the relevant Court application to be made for orders
approving the Share Scheme and for the grant of the Judicial Advice or to adjourn
those applications (as applicable) to another date agreed by the parties; or
(vi) to extend the End Date.
(b) If LLC and LLP are unable to reach agreement under clauses 3.5(a)(iii), 3.5(a)(iv),
3.5(a)(v) or 3.5(a)(vi) within 5 Business Days after the delivery of the notice under that
clause or any shorter period ending at 5pm on the day before the Second Court Date, either
party may terminate this Agreement by notice in writing to the other party, provided that:
(i) the Condition Precedent to which the notice relates is for the benefit of that party
(whether or not the Condition Precedent is also for the benefit of the other party);
and
(ii) there has been no failure by that party to comply with its obligations under this
Agreement, where that failure directly and materially contributed to the Condition
Precedent to which the notice relates becoming incapable of satisfaction, or being
breached or not fulfilled before the End Date,
in which case clause 11.4 will have effect.
3.6 Conditions of Regulatory Approvals
A Regulatory Approval will be regarded as having been obtained notwithstanding that a condition or
conditions may have been attached to that Regulatory Approval, if such conditions are reasonably
satisfactory to both parties.
3.7 Fulfillment of Conditions Precedent
Each party must provide to the other, by 10.00am on the Second Court Date, a certificate
confirming, to the best of the first party's knowledge as at 8.00am on the Second Court Date,
whether or not all of the Conditions Precedent (other than the Condition Precedent in clauses 3.1(d)
and 3.1(e) have been fulfilled or waived in accordance with this Agreement. A draft of the
certificate referred to in this clause must be provided by each party to the other party by 5.00pm on
the day that is 2 Business Days prior to the Second Court Date.
4. Scheme and Scheme Consideration
4.1 Outline of Scheme
(a) The parties agree that LLP will propose:
(i) the Share Scheme; and
(ii) the Trust Scheme,
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upon and subject to the terms of this Agreement.

(b) Subject to both Schemes becoming Effective, on the Implementation Date the general effect of the Schemes will be as follows:
(i) all of the LLP Shares comprised in the Scheme Securities will be transferred to BidCo in accordance with the terms of the Share Scheme;

(ii) all of the LLP Units comprised in the Scheme Securities will be transferred to BidCo in accordance with the terms of the Trust Scheme; and

(iii) in consideration for the transfer to BidCo of all Scheme Securities held by the Scheme Participants, the Scheme Participants will receive the Scheme Consideration in accordance with clause 4.2 and the terms of the Schemes.
4.2 Scheme Consideration

Subject to the Schemes becoming Effective, LLC agrees in favour of LLP (in its own right and as trustee on behalf of Scheme Participants) that, in consideration of the transfer to BidCo of each Scheme Security under the Schemes, LLC will procure that BidCo accepts such transfer, and will provide or procure that BidCo provides to each Scheme Participant A$0.31 in cash for each Scheme Security held by them, in accordance with the terms of the Schemes. For the avoidance of doubt and despite anything to the contrary in this Agreement, LLC acknowledges and agrees that the deposit of the total Scheme Consideration in cleared funds into a trust account for the purposes of providing each Scheme Participant with its entitlement in cash under the Schemes must be made before the Scheme Securities are transferred to BidCo under the Schemes.

5. Steps for Implementation

5.1 LLP's obligations in respect of the Scheme

LLP must take all steps reasonably necessary to propose and implement the Schemes as soon as is reasonably practicable after the date of this Agreement and otherwise substantially in accordance with the Timetable, and in particular LLP must:

(a) ( preparation of Scheme Booklet ) as soon as reasonably practicable after the date of this Agreement, prepare the Scheme Booklet in accordance with clause 5.4;

(b) ( Independent Expert ) promptly appoint the Independent Expert and provide all assistance and information reasonably requested by the Independent Expert in connection with the preparation of the Independent Expert's Report;

(c) ( liaison with ASIC ) as soon as reasonably practicable after the date of this Agreement but no later than 14 days before the First Court Date, provide an advanced draft of the Scheme Booklet to ASIC for its review and approval for the purposes of section 411(2) of the Corporations Act, and to LLC, and (to the extent reasonably practicable) keep LLC reasonably informed of any matters raised by ASIC in relation to the draft Scheme Booklet (and of any resolution of those matters), and use its best endeavours, in co-operation with LLC, to resolve any such matters (which will include allowing LLC to participate in LLP's meetings and discussions with ASIC);

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(d) ( ASIC relief ) as soon as reasonably practicable after the date of this Agreement, apply to ASIC, or provide reasonable assistance to LLC in applying to ASIC, as applicable, for such modifications and exemptions as LLP determines are required to implement the Schemes;
(e) ( ASX waivers and confirmations ) as soon as reasonably practicable after the date of this Agreement, apply to ASX, or provide reasonable assistance to LLC in applying to ASX, as applicable, for such waivers and confirmations as LLP determines are required to implement the Schemes;
(f) ( section 411(17)(b) statement ) apply to ASIC for the production of statements in writing pursuant to section 411(17)(b) of the Corporations Act stating that ASIC has no objection to the Scheme;
(g) ( approval of Scheme Booklet ) as soon as practicable after ASIC has confirmed that it has no objection to the Scheme or, if ASIC raises any objection to the Scheme, after that objection has been resolved, procure that a meeting of the LLP Board is convened to approve the Scheme Booklet for despatch to LLP Securityholders (and provide LLC with a copy of an extract of the applicable resolutions from the applicable minutes of meeting, as soon as practicable after those minutes have been prepared and signed), subject to the First Judicial Advice and the Court making orders under section 411(1) of the Corporations Act directing LLP to convene the Share Scheme Meeting;
(h) ( Court documents ) prepare all documents necessary for the Court proceedings (including any appeals) relating to the Schemes (including originating process, affidavits, submissions and draft minutes of Court orders) in accordance with all applicable laws, and provide LLC with drafts of those documents for review and (acting reasonably and in good faith) take into account, for the purpose of amending those drafts, any comments from LLC and its Representatives on those drafts;
(i) ( first Court hearing ) lodge all documents with the Court and take all other reasonable steps to ensure that an application is heard by the Court for orders under section 411(1) of the Corporations Act directing LLP to convene the Share Scheme Meeting and for the First Judicial Advice;
(j) ( registration of Scheme Booklet ) if the Court directs LLP to convene the Scheme Meeting, as soon as possible after such orders are made, request ASIC to register the explanatory statement included in the Scheme Booklet in relation to the Share Scheme in accordance with section 412(6) of the Corporations Act;
(k) ( Scheme Meeting ) take all reasonable steps necessary to comply with the orders of the Court, Guidance Note 15, the Trust Constitution and the Corporations Act (as applicable), including, as required, despatching the Scheme Booklet to LLP Securityholders, convening and holding the Scheme Meetings and putting the Scheme Resolutions to LLP Securityholders at the Scheme Meetings, provided that if this Agreement is terminated under clause 11 it will take all steps reasonably required to ensure the Scheme Meetings are not held;
(l) ( update Scheme Booklet ) if it becomes aware of information after the date of despatch of the Scheme Booklet, that is material for disclosure to LLP Securityholders in deciding
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whether to approve the Scheme Resolutions or that is required to be disclosed to LLP Securityholders under any applicable law, as expeditiously as practicable:

(i) inform LLP Securityholders of the information in an appropriate and timely manner, and in accordance with applicable law and after consultation with LLC as to the manner of provision of that information to LLP Securityholders; and
(ii) to the extent it is reasonably practicable to do so, provide LLC with drafts of any documents that it proposes to issue to LLP Securityholders under this clause 5.1(l) and (acting reasonably and in good faith) take into account, for the purpose of amending those drafts, any comments received in a timely manner from LLC or its Representatives on those drafts;
(m) ( Court approval ) if the Scheme Resolutions are passed by the requisite majorities of LLP Securityholders, as soon as practicable after such time apply to the Court for orders approving the Share Scheme under section 411(4) of the Corporations Act and for the Second Judicial Advice (as applicable);
(n) ( execution and lodgement of Supplemental Deed ) if the Court approves the Share Scheme and grants the Second Judicial Advice, as soon as practicable after, and in any event by no later than 4.00pm on the first Business Day after, the later of the Second Court Date and the date on which all of the Conditions Precedent (other than the Condition Precedent in clause 3.1(e)) are satisfied or waived in accordance with this Agreement, execute the Supplemental Deed and lodge with ASIC a copy of the executed Supplemental Deed;
(o) ( provide LLP Register information ) as soon as practicable after the Record Date, and in any event at least 3 Business Days before the Implementation Date, give to LLC (or as it directs) details of the names, registered addresses and holdings of LLP Securities of every Scheme Securityholder as shown in the LLP Registers as at the Record Date, in such form as LLC may reasonably require;
(p) ( implementation of the Schemes ) if the Court approves the Share Scheme and grants the Second Judicial Advice:
(i) lodge with ASIC an office copy of the orders approving the Share Scheme in accordance with section 411(10) of the Corporations Act, as soon as possible after the Court makes those orders, and in any event by no later than 4pm on the first Business Day after the date on which the Court makes those orders or such other Business Day as LLP and LLC may agree in writing;
(ii) use best endeavours to ensure that ASX suspends trading in LLP Securities with effect from the close of trading on the Effective Date;
(iii) close the LLP Registers as at the Record Date to determine the identity of Scheme Securityholders and to determine their entitlements to the Scheme Consideration in accordance with the Schemes;
(iv) promptly execute proper instruments of transfer of, and register all transfers of, the Scheme Securities to BidCo in accordance with the Schemes; and

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(v) promptly do all other things contemplated by or necessary to give effect to the Schemes and the orders of the Court approving the Share Scheme and granting the Judicial Advice and to effect the transfer of the Scheme Securities to LLC; (q) ( information ) provide all necessary information, or have the registry of LLP provide all necessary information, to LLC about the Schemes and (subject to compliance with privacy laws) LLP Securityholders, in each case in a form reasonably requested by LLC and at least on a weekly basis, which LLC reasonably requires in order to: (i) canvass approval of the Schemes by, or discuss the Schemes with, LLP Securityholders (including the results of directions by LLP to LLP Securityholders under Part 6C.2 of the Corporations Act); and (ii) facilitate the provision by LLC and BidCo of the Scheme Consideration; (r) ( representation ) allow, and not oppose, any application by LLC or BidCo for leave of the Court to be represented, or the separate representation of LLC or BidCo by counsel, at the Court hearings heard for the purposes of sections 411(1) and 411(4)(b) of the Corporations Act or the Judicial Advice (as applicable) in relation to the Schemes, provided that in making any application for representation or in appearing before the Court, LLC and BidCo act in accordance with the Transaction Documents and do not oppose any application by LLP in exercise of its rights under the Transaction Documents; (s) ( ASX listing ) not do anything to cause the LLP Securities to cease to be listed on ASX prior to the close of business on the Effective Date; (t) ( keep LLC informed ) from the First Court Date until the Implementation Date, promptly inform LLC if it becomes aware that the Scheme Booklet contains a statement that is or has become misleading or deceptive in a material respect or that contains a material omission; (u) ( LLC Provided Information ) during the period until the LLC Provided Information (or any information solely derived from, or prepared solely in reliance on, the LLC Provided Information) becomes publicly available, only use that information with the prior written consent of LLC (not to be unreasonably withheld or delayed); and (v) ( all things necessary ) do all other things contemplated by or necessary to lawfully give effect to the Schemes and the orders of the Court approving the Share Scheme and the orders of the Court granting the Judicial Advice.

5.2 Appeal process

If the Court refuses to make any orders convening the Scheme Meeting or approving the Share Scheme or to grant the Judicial Advice, LLP must appeal the Court's decision to the fullest extent possible (except to the extent that the parties agree otherwise, or an independent barrister with at least 10 years' experience advises that, in his/her view, an appeal would have no reasonable prospect of success before the End Date).

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5.3 LLC's obligations in respect of the Scheme

LLC must take all steps reasonably necessary to assist LLP to propose and implement the Schemes as soon as is reasonably practicable after the date of this Agreement and otherwise substantially in accordance with the Timetable, and in particular LLC must:

(a) ( provide information ) provide to LLP the information referred to in clause 5.4(d) which information must not be misleading or deceptive in any material respect (whether by omissions or otherwise);
(b) ( preparation of Scheme Booklet ) provide assistance with the preparation of the Scheme Booklet in accordance with clause 5.4;
(c) ( Independent Expert information ) provide all assistance and information reasonably requested by LLP or by the Independent Expert in connection with the preparation of the Independent Expert's Report;
(d) ( liaison with ASIC ) provide reasonable assistance to LLP to assist LLP to resolve any matter raised by ASIC regarding the Scheme Booklet or the Schemes during its review of the Scheme Booklet;
(e) ( ASIC relief ) as soon as reasonably practicable after the date of this Agreement, apply to ASIC, or provide reasonable assistance to LLP in applying to ASIC, as applicable, for such modifications and exemptions as LLP determines are required to implement the Schemes;
(f) ( ASX waivers and confirmations ) as soon as reasonably practicable after the date of this Agreement, apply to ASX, or provide reasonable assistance to LLP in applying to LLP, as applicable, for such waivers and confirmations as LLP determines are required to implement the Schemes;
(g) ( approval of Scheme Booklet ) as soon as practicable after ASIC has confirmed that it has no objection to the Schemes or, if ASIC raises any objection to the Schemes, after that objection has been resolved, procure that a meeting of the LLC Board (or of a committee of the LLC Board appointed for the purpose) is convened to approve those sections of the Scheme Booklet that comprise the LLC Provided Information as being in a form appropriate for despatch to LLP Securityholders’ and consenting in writing to the dispatch of that information in that form to LLP Securityholders (and provide LLP with a copy of an extract of the applicable resolutions from the applicable minutes of meeting, as soon as practicable after those minutes have been prepared and signed);
(h) ( keep LLP informed ) from the First Court Date until the Implementation Date, promptly inform LLP if it becomes aware (or ought reasonably to have become aware, after making all reasonable and diligent enquiries) that the LLC Provided Information contains a statement that, in the form and context in which it appears in the Scheme Booklet, is or has become misleading or deceptive in any material respect or that contains any material omission, and provide such further or new information as is required to ensure that such information is no longer misleading or deceptive in any material respect or does not contain any material omission;
(i) ( Court representation ) procure that, if requested by LLP, it and BidCo are represented by counsel at the Court hearings convened for the purposes of section 411(4)(b) of the Corporations Act in relation to the Scheme and the Judicial Advice, at which, through its

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counsel and if requested by the Court, LLC will undertake (and will procure that BidCo undertakes) to do all such things and take all such steps within its power as may be necessary in order to ensure the fulfilment of its obligations under this Agreement and the Scheme;
(j) ( LLC Deed Poll ) prior to the First Court Date, execute (and procure that BidCo executes) the LLC Deed Poll;
(k) ( Scheme Consideration ) if the Scheme becomes Effective, provide, or procure the provision of, the Scheme Consideration in accordance with this Agreement, the Schemes and the LLC Deed Poll on the Implementation Date;
(l) ( LLP Provided Information ) during the period until the LLP Provided Information becomes publicly available, only use the LLP Provided Information with the prior written consent of LLP (not to be unreasonably withheld or delayed); and
(m) ( approval of Schemes ) approve the Schemes or procure the approval of the Schemes, as necessary, by any member of the LLC Group.
5.4 Preparation of Scheme Booklet (a) ( LLP to prepare ) Subject to LLC complying with its obligations under clause 5.4(d), LLP must prepare the Scheme Booklet as soon as is reasonably practicable after the date of this Agreement and otherwise substantially in accordance with the Timetable.
(b) ( Compliance requirements ) LLP must ensure that the Scheme Booklet complies with all applicable laws and regulatory guidance, in particular the requirements of the Corporations Act, the ASX Listing Rules, Guidance Note 15 and all ASIC Regulatory Guides (as applicable), except that the obligation to do so in respect of the LLC Provided Information is subject to LLC complying with its obligations under clause 5.4(d).
(c) ( Content of Scheme Booklet ) Without limiting clause 5.4(b), the Scheme Booklet will include or be accompanied by:
- (i) the Share Scheme;
- (ii) the Notice of Meeting;
- (iii) a copy of this Agreement (without the schedules and annexures) or a summary of it;
- (iv) a copy of the executed LLC Deed Poll;
- (v) the Independent Expert's Report;
- (vi) a statement that the Independent Board Committee unanimously recommends that LLP Securityholders approve the Scheme Resolutions, in the absence of a Superior Proposal, unless prior to the issue of the Scheme Booklet the Independent Board Committee has changed or withdrawn those statements and recommendations in accordance with clause 7.1;
- (vii) a statement that each LLP Director who is able to control voting rights in relation to LLP Securities intends to vote those LLP Securities, or procure that those LLP Securities are voted, in favour of the Scheme Resolutions, in the absence of a

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Superior Proposal, unless prior to the issue of the Scheme Booklet the LLP Director has changed his or her voting intention in accordance with clause 7.2; and

(viii) the Responsibility Statement.
(d) ( LLC Provided Information ) LLC must provide the LLC Provided Information to LLP as soon as is reasonably practicable after the date of this Agreement and otherwise substantially in accordance with the Timetable, in a form that includes all information regarding the LLC Group that is required by all applicable laws and regulatory guidance including the Corporations Act, the ASX Listing Rules, Guidance Note 15 and all relevant ASIC Regulatory Guides and must provide to LLP such assistance as LLP may reasonably require in order to adapt such information for inclusion in the Scheme Booklet.
(e) ( Review by LLC ) LLP must make available to LLC drafts of the Scheme Booklet (including any draft of the Independent Expert's Report, but excluding those sections containing the Independent Expert's opinions or conclusions), consult with LLC in relation to the content of those drafts (including the inclusion of any LLC Provided Information and any information solely derived from, or prepared solely in reliance on, the LLC Provided Information), and (acting reasonably and in good faith) take into account, for the purpose of amending those drafts, any comments from LLC and its Representatives on those drafts.
(f) ( Dispute as to Scheme Booklet ) If, after a reasonable period of consultation and compliance by LLP with its obligations under clauses 5.4(e), LLC and LLP, acting reasonably and in good faith, are unable to agree on the form or content of the Scheme Booklet, then:
(i) if the disagreement relates to the form or content of the LLC Provided Information (or any information solely derived from, or prepared solely in reliance on, the LLC Provided Information), LLP will, acting in good faith, make such amendments to that information in the Scheme Booklet as LLC may reasonably require; and
(ii) if the disagreement relates to the form or content of the LLP Provided Information, LLP will, acting in good faith, decide the final form of that information in the Scheme Booklet.
(g) ( Consent of LLC ) Without limiting clause 5.4(f), LLC must provide written consent to LLP in relation to the form and context in which any LLC Provided Information (and any information solely derived from, or prepared solely in reliance on, the LLC Provided Information) is included in the Scheme Booklet.
(h) ( Verification ) LLP must undertake appropriate verification processes in relation to the LLP Provided Information included in the Scheme Booklet, and LLC and BidCo must undertake appropriate verification processes in relation to the LLC Provided Information included in the Scheme Booklet.
(i) ( Responsibility Statement ) LLP and LLC each represents to the other that the Responsibility Statement is to be included in the Scheme Booklet.

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6. Conduct of Business and Requests for Access
6.1 Conduct of LLP business
During the period from the date of this Agreement up to and including the earlier of the
Implementation Date, the date that this Agreement is terminated and the End Date, LLP must:
(a) procure that the LLP Group conducts its business and operations in the ordinary course and
substantially consistent (subject to any applicable laws, regulations and Regulatory
Approvals) with the manner in which each such business and operation has been conducted
in the period prior to the date of this Agreement
(b) to the extent consistent with that obligation, use its best endeavours to preserve intact the
LLP Group's current business organisation, to keep available the services of the current
Officers of it and the other LLP Group Members, and to preserve the LLP Group's
relationship with Governmental Agencies, ratings agencies, customers, suppliers, licensors,
licensees and others having business dealings with it,
except to the extent required to be done or procured by LLP pursuant to, or that is otherwise
expressly permitted by, the Transaction Documents, or the undertaking of which LLC has approved
in writing, such approval not to be unreasonably withheld or delayed.
6.2 LLC Covenants
During the period from the date of this Agreement up to and including the earlier of the
Implementation Date, the date that this Agreement is terminated and the End Date, LLC must ensure
that the Manager:
(a) performs its obligations in accordance with the Management Agreements and consistent
with past performance; and
(b) does not take any step or action, or fails to take any step or action, that would cause LLPL
or LLPT to breach a provision of this Agreement.
6.3 Access to information and co-operation
(a) ( Provision of access and information ) During the period from the date of this Agreement
up to and including the earlier of the Implementation Date, the date of termination of this
Agreement and the End Date, LLP must, and must procure each of the LLP Group
Members to, respond to reasonable requests from LLC and its Representatives for
information concerning the LLP Group businesses and operations, and give LLC and its
Representatives reasonable access to its Officers and records, and otherwise provide
reasonable co-operation to LLC and its Representatives, in each case for the purposes of:
(i) the implementation of the Transaction;
(ii) the integration of the LLP Group and the LLC Group following the
implementation of the Transaction; or
(iii) any other purpose that is agreed in writing between the parties,
subject to the proper performance by the directors and officers of LLP and its Subsidiaries
of their fiduciary duties.
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(b) ( Co-operation regarding tax calculations ) During the period from the date of this Agreement up to and including the earlier of the Implementation Date, the date of termination of this Agreement and the End Date, LLP will do all things reasonably necessary, and provide LLC with all information reasonably necessary, to enable LLC to calculate: (i) stamp duty; and (ii) any other necessary tax consolidation calculations, subject to the proper performance by the directors and officers of LLP of their fiduciary duties. (c) ( Limits on LLP obligations ) Without limiting clause 9.2(c), the obligations in clauses 6.3(a) and 6.3(b) do not require LLP to: (i) provide information to LLC concerning the LLP Board’s consideration of the Transaction; (ii) provide any commercially sensitive or competitive information; or (iii) breach an obligation of confidentiality that is owed by any member of the LLP Group to any person. (d) The parties acknowledge that all information that is provided pursuant to this clause 6.3 will be provided subject to the terms of the Confidentiality Deed and the Participation Protocols. 6.4 No Regulated Events Without limiting clause 6.3(a), during the period from the date of this Agreement up to and including the earlier of the Implementation Date, the date of termination of this Agreement and the End Date, LLP must ensure, to the extent within the control of any LLP Group Member (or two or more of them), that no LLP Regulated Event occurs, without the prior written consent of LLC (such consent not to be unreasonably withheld or delayed). 7. LLP Board Recommendations and Intentions

7.1 LLP Board recommendation (a) The Agreed Public Announcements to be issued by each of LLP and LLC following the execution of this Agreement must state (on the basis of written statements or resolutions made by the Independent Board Committee) that the Independent Board Committee unanimously recommends that LLP Securityholders approve the Scheme Resolutions, in the absence of a Superior Proposal and subject to the Independent Expert concluding that the Schemes are in the best interests of LLP Securityholders. (b) LLP must use its best endeavours to procure that the Independent Board Committee: (i) does not withdraw the statements and recommendations set out in the Agreed Public Announcements; (ii) in the Scheme Booklet states that the Independent Board Committee unanimously recommends the Share Scheme and the Trust Scheme and that LLP asbs A0113311961v3 206210123 28.9.2009 Page 26

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Securityholders approve the Scheme Resolutions, in the absence of a Superior
Proposal, and does not withdraw those recommendations once made; and
(iii) does not make any public statement to the effect, or take any other action that
suggests, that the Schemes is no longer so recommended,
unless either:
(iv) the Independent Expert concludes in the Independent Expert's Report that the
Schemes are not in the best interests of LLP Securityholders;
(v) the Independent Board Committee determines in accordance with clause 10.4 that
a Competing Proposal constitutes a Superior Proposal; or
(vi) the Independent Board Committee has:
(A) first consulted with LLC as to the matters, occurrences or events that
would give rise to its consideration of the withdrawal or modification of
its recommendation; and
(B) acting reasonably and in good faith determined after obtaining financial
advice from its financial advisors and legal advice from its legal advisors
that the Independent Board Committee is justified or required to withdraw
or modify its recommendation in accordance with the proper exercise of
the Independent Board Committee members' fiduciary or statutory duties.
7.2 Independent Director intentions
(a) This Agreement and the Scheme Booklet despatched to LLP Securityholders, must state
that each Independent Board Committee member who holds LLP Securities, or who has
control over voting rights attaching to LLP Securities, intends to vote in favour of the
Schemes, or procure that the LLP Securities the voting rights of which the relevant LLP
Director has control over are voted in favour of the Schemes, in the absence of a Superior
Proposal and subject to the Independent Expert concluding that the Schemes are in the best
interests of LLP Securityholders.
(b) LLP must use its best endeavours to ensure that each Independent Board Committee
member who holds LLP Securities, or who has control over voting rights attaching to LLP
Securities:
(i) intends to vote in favour of the Scheme Resolutions, or procure that the LLP
Securities the voting rights of which the relevant LLP Director has control over are
voted in favour of the Scheme Resolutions; and
(ii) does not change that voting intention,
unless either:
(iii) the Independent Expert concludes in the Independent Expert's Report that the
Schemes are not in the best interests of LLP Securityholders;
(iv) the Independent Board Committee determines in accordance with clause 10.4 that
a Competing Proposal constitutes a Superior Proposal; or
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(v) the Independent Board Committee has withdrawn or modified its recommendation of the Schemes in accordance with clause 7.1(b)(vi).

8. Public Announcements, Communications and Confidentiality

8.1 Required announcements

(a) On the Announcement Date, LLC and LLP must each release the Agreed Public Announcements, which have attached to each of them a summary of the key terms of this Agreement.
(b) Subject to clause 8.3, where a party is required by applicable law, the ASX Listing Rules or any other applicable stock exchange regulation to make any announcement or to make any disclosure in connection with this Agreement (including its termination), the Schemes, the Transaction or any other transaction contemplated by this Agreement or the Schemes or the Transaction, it may do so only after it has given the other party as much notice as is reasonably practicable in the context of any deadlines imposed by law or applicable requirement, but in any event if practicable prior notice, and to the extent practicable has consulted with the other party as to (and has given the other party a reasonable opportunity to comment on) the form and content of that announcement or disclosure. Nothing in this clause requires the giving of prior notice or the taking of any action if doing so would lead to a party breaching an applicable law, the ASX Listing Rules or any other stock exchange regulation.

8.2 Agreement on other Communications

Except in relation to Communications regulated by clause 8.1 and to the extent permitted by applicable law:
(a) LLC and LLP must in good faith and on a timely and pragmatic basis consult with each other and agree in advance any material aspect (including the timing, form, content and manner) of any Communications with any Governmental Agency in relation to the implementation of the Scheme, whether or not such Communications are for the purposes of satisfying a Condition Precedent;
(b) each of LLC, BidCo and LLP is entitled to be represented and to make submissions in any meeting with any Governmental Agency relating to any Regulatory Approval;
(c) each party must provide copies to the other party of any written Communications sent to or received from a person referred to in clause 8.2(a) promptly upon despatch or receipt (as the case may be); and
(d) each party will have the right to be present and make submissions at or in relation to any proposed meeting with any Governmental Agency in relation to the Schemes.

8.3 Disclosure on termination of this Agreement

The parties agree that, if this Agreement is terminated under clause 11, either party may disclose by way of announcement to ASX the fact that this Agreement has been terminated provided, where reasonably practicable, that party consults with the other party as to (and gives the other party a

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reasonable opportunity to comment on) the form and content of the announcement prior to its disclosure.

8.4 Confidentiality Deed

Except as set out in clause 8.3, the parties acknowledge and agree that:

(a) they continue to be bound by the Confidentiality Deed after the date of this Agreement; and
(b) the rights and obligations of the parties under the Confidentiality Deed survive termination of this Agreement.

9. Representations and Warranties

9.1 LLC representations and warranties

LLC represents and warrants to LLP that (except as consented to in writing by LLP) on the date of this Agreement and on the Second Court Date:

(a) LLC is a corporation validly existing under the laws of its place of incorporation;
(b) LLC has the power to enter into and perform its obligations under this Agreement and to carry out the transactions contemplated by this Agreement;
(c) LLC has taken all necessary corporate action to authorise the entry into this Agreement and has taken or will take all necessary corporate action to authorise the performance of this Agreement;
(d) this Agreement is LLC's valid and binding obligation enforceable in accordance with its terms;

(e) LLC is solvent and no resolutions have been passed nor has any other step been taken or legal proceedings commenced or threatened against LLC for the winding up, dissolution or termination of LLC or for the appointment of a liquidator, receiver, administrator, or similar officer over any or all of LLC's assets; and

(f) the execution and performance by LLC of this Agreement and each transaction contemplated by this Agreement did not and will not violate in any respect a provision of:
(i) a law, judgment, ruling, order or decree binding on it;
(ii) its constitution; or
(iii) any other document or agreement that is binding on LLC's assets.

9.2 LLP representations and warranties

LLP represents and warrants to LLC that, except as consented to in writing by LLC:

(a) on the date of this Agreement and on the Second Court Date:
(i) ( incorporation )

(A) LLPL and LLVRE are corporations validly existing under the laws of its place of incorporation; and

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(B) LLPT is validly established and registered under Part 5C of the Corporations Act;
(ii) LLP has the power to enter into and perform its obligations under this Agreement and, subject to the satisfaction or, as appropriate, waiver of each Condition Precedent, to carry out the transactions contemplated by this Agreement;
(iii) LLP has taken all necessary corporate action to authorise the entry into this Agreement and has taken or will take all necessary corporate action to authorise the performance of this Agreement in accordance with and subject to its terms;
(iv) this Agreement is LLP's valid and binding obligation enforceable in accordance with its terms;
(v) the execution and performance by LLP of this Agreement and each transaction contemplated by this Agreement in each case in accordance with and subject to the terms of this Agreement did not and will not violate in any respect a provision of:
(A) a law or treaty or a judgment, ruling, order or decree binding on it or any of its Related Bodies Corporate;
(B) its constitution or the Trust Constitution; or
(C) any other document or agreement that is binding on it or any LLP Group Member's assets;
(vi) each LLP Group Member is solvent and no resolutions have been passed nor has any other step been taken or legal proceedings commenced or threatened against any LLP Group Member for the winding up, dissolution or termination of that LLP Group Member or for the appointment of a liquidator, receiver, administrator, or similar officer over any or all of any LLP Group Member's assets;
(vii) so far as each member of the Independent Board Committee and the General Counsel of LLP are aware, there has been no material breach of law by any LLP Group Member of any Australian or foreign laws and regulations applicable to it or orders of Australian or foreign Governmental Agencies having jurisdiction over it and so far as each member of the Independent Board Committee and the General Counsel of LLP are aware, the LLP Group has all material licences, permits and franchises necessary for it to conduct its activities as presently being conducted;

(viii) as at the date of this Agreement to the knowledge of the Independent Board Committee, neither ASIC nor ASX (as applicable) has made a determination against any LLP Group Member for any contravention of the requirements of the Corporations Act or the ASX Listing Rules or any rules, regulations or regulatory guides under the Corporations Act or the ASX Listing Rules; and

(ix) so far as each member of the Independent Board Committee is aware as at the date of this Agreement, there has not been any event, change, effect or development that would require LLP to restate the LLP Group's financial statements for the period ending 30 June 2009 as disclosed to ASX;

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(b) so far as each member of the Independent Board Committee is aware as at the date of this Agreement, the total securities of the LLP Entities on issue are as follows: (i) 966,252,666 LLP Shares; (ii) 966,252,666 LLP Units; (iii) 1,100,000 options; (iv) 22,333,333 "First Notes"; (v) 200,000,000 "RBD Convertible Notes"; and (vi) 100,000,000 "Second Notes". and no LLP Group Member has issued (or is actually or contingently required to issue) any other securities or instruments that are still outstanding (or may become outstanding) and that may convert into LLP Securities (except for any security that LLP may be contingently required to issue to LLC in accordance with the Bank Waiver Process); (c) on the date of this Agreement, the First Court Date, the date of the Scheme Meetings and the Second Court Date following the making by LLP of its Agreed Public Announcement, LLP is not in breach of its continuous disclosure obligations under ASX Listing Rule 3.1 and is not withholding any information from LLC that is being withheld from public disclosure in reliance on ASX Listing Rule 3.1A. 9.3 Reliance by parties Each party ( Representor ) acknowledges that: (a) in entering into this Agreement the other party has relied on the representations and warranties provided by the Representor under this clause 9; (b) any breach of the representations and warranties provided by the Representor under this clause 9 after the Schemes become Effective may only give rise to a claim in damages and cannot result in a termination of this Agreement; and (c) it has not entered into this Agreement in reliance on any warranty or representation made by or on behalf of the other party except those warranties and representations set out in this Agreement. This acknowledgment does not prejudice the rights any party may have in relation to the LLP Provided Information, the LLP Disclosed Information, the LLC Provided Information or any information or filed by the other party with ASX or ASIC. 9.4 Notifications Each party will promptly advise the other party in writing if it becomes aware of any fact, matter or circumstance that constitutes or may constitute a breach of any of the representations or warranties given by it under this clause 9. 9.5 Status of representations and warranties Each representation and warranty in this clause 9: (a) is severable; (b) will survive the termination of this Agreement; and asbs A0113311961v3 206210123 28.9.2009 Page 31

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(c) is given with the intent that liability under it will not be confined to breaches that are discovered prior to the date of termination of this Agreement.

10. Exclusivity

10.1 No shop restriction

During the Exclusivity Period, LLP must not, and must ensure that each of its Representatives (other than any Representative who is also an employee of any member of the LLC Group) does not, except with the prior written consent of LLC, directly or indirectly solicit, invite, facilitate, encourage or initiate any Competing Proposal or any enquiries, negotiations or discussions with any Third Party in relation to, or that may reasonably be expected to lead to, a Competing Proposal, or communicate any intention to do any of those things.

10.2 No talk restriction

During the Exclusivity Period, LLP must not, and must ensure that each of its Representatives does not, except with the prior written consent of LLC, enter into, continue or participate in negotiations or discussions with, or enter into any agreement, arrangement or understanding with, any Third Party in relation to, or that may reasonably be expected to lead to, a Competing Proposal, even if:

(a) the Competing Proposal was not directly or indirectly solicited, invited, facilitated, encouraged or initiated by LLP or any of its Representatives (other than any Representative who is also an employee of any member of the LLC Group); or

(b) the Competing Proposal has been publicly announced,

unless the Independent Board Committee, acting in good faith and in order to satisfy what the Independent Board Committee reasonably considers to be its fiduciary or statutory duties, determines that, where there is a Competing Proposal, the Competing Proposal is a Superior Proposal or, where there is not yet a Competing Proposal, the steps that the Independent Board Committee proposes to take may reasonably be expected to lead to a Competing Proposal that is a Superior Proposal.

10.3 No due diligence

Without limiting the general nature of clause 10.2, during the Exclusivity Period, LLP must not, and must ensure that each of its Representatives (other than any Representative who is also an employee of any member of the LLC Group) do not, except with the prior written consent of LLC, make available to any Third Party (other than to LLC or any of its Representatives) or permit any such Third Party to receive any non-public information relating to any LLP Group Member in connection with such Third Party formulating, developing or finalising, or assisting in the formulation, development or finalisation of, a Competing Proposal, unless:

(a) the Independent Board Committee, acting in good faith and in order to satisfy what the Independent Board Committee reasonably considers to be its fiduciary or statutory duties, determines that, where there is a Competing Proposal, the Competing Proposal is a Superior Proposal or, where there is not yet a Competing Proposal, the steps that the Independent Board Committee proposes to take may reasonably be expected to lead to a Competing Proposal that is a Superior Proposal; and

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(b) if LLP proposes to provide any confidential information to a Third Party, before LLP provides such information to the Third Party the Third Party has entered into a written agreement in favour of LLP regarding the use and disclosure of the confidential information by the person and that restricts the Third Party's ability to solicit the employees of the LLP Group.

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10.4 Notification by LLP
(a) During the Exclusivity Period, LLP must promptly notify LLC if:
(i) it is approached by any Third Party to take any action of a kind that would breach
its obligations under clause 10.2 or 10.3 (or that would breach its obligations under
clause 10.2 or 10.3 if it were not for the provisos to the relevant clause); or
(ii) it proposes to take any action of a kind that would breach its obligations under
clause 10.2 or 10.3 (or that would breach its obligations under clause 10.2 or 10.3
if it were not for the provisos to the relevant clause),
unless (and only to the extent that) the Independent Board Committee, acting reasonably
and in good faith, determines that it would be a breach of its fiduciary or statutory duties to
so notify LLC.
(b) If LLP receives a Superior Proposal, and as a result the Independent Board Committee
proposes to publicly change or withdraw its recommendation of the Schemes, LLP must
(unless the Independent Board Committee, acting reasonably and in good faith, determines
that it would be a breach of its fiduciary or statutory duties to do so) give LLC 5 clear
Business Days notice (such notice to be in writing) of such proposed change or withdrawal,
and provide to LLC all material terms of the applicable Competing Proposal, including
details of the proposed price or implied value (including details of the consideration if not
simply cash), conditions, timing and break fee (if any). LLP will use its reasonable
endeavours to ask the person who has made the applicable Competing Proposal (the
Competing Party ) for their consent to their name being provided by LLP to LLC on a
confidential basis. For the avoidance of doubt, LLP will have no obligation to disclose the
identity of the Competing Party to LLC if the Competing Party does not consent to such
disclosure. Any information provided pursuant to this clause 10.4(b) will be provided
subject to the terms of the Confidentiality Deed.
(c) During the period of 5 clear Business Days referred to in clause 10.4(b), LLC will have the
right to offer to amend the terms of the Schemes or the Transaction (a LLC
Counterproposal ) so that the terms of the Schemes or the Transaction (as amended) would
provide a superior outcome for the LLP Securityholders than the applicable Competing
Proposal.
(d) LLP must procure that the Independent Board Committee considers any such LLC
Counterproposal and if the Independent Board Committee, acting in good faith, determines
that:
(i) the LLC Counterproposal would provide a superior outcome for the LLP
Shareholders than the applicable Competing Proposal (it being acknowledged that
the price or value implied by the LLC Counterproposal does have to be above, but
does not have to be materially above, the price or value implied by the applicable
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Competing Proposal for the Independent Board Committee to consider the LLC Counterproposal in relation to price to be superior); and

(ii) the other terms and conditions of the LLC Counterproposal taken as a whole are not less favourable than those in the applicable Competing Proposal,

then LLP and LLC must use their best endeavours to agree the amendments to the Transaction Documents that are reasonably necessary to reflect the LLC Counterproposal (including amendments to the Scheme Consideration that are reasonably necessary to reflect the LLC Counterproposal), and to enter into one or more appropriate amended agreements to give effect to those amendments and to implement the LLC Counterproposal, in each case as soon as reasonably practicable.

10.5 Normal provision of information

Nothing in this clause 10 prevents a party from:

(a) providing information to its Representatives;
(b) providing information to any Governmental Agency;
(c) providing information to its auditors, Advisers, customers, joint venturers and suppliers acting in that capacity in the ordinary course of business;
(d) providing information required to be provided by law or any Governmental Agency; or
(e) making presentations to brokers, portfolio investors, analysts and other third parties in the ordinary course of business.

10.6 Acknowledgement

LLC has required LLP to agree to the obligations set out in this clause 10 in consideration of it proceeding with the Scheme and incurring significant costs in doing so. In the absence of obtaining these obligations from LLP, LLC would not have entered into this Agreement.

11. Termination

11.1 Termination by either party

Either party ( terminating party ) may terminate this Agreement by notice to the other:

(a) in accordance with clause 3.5; or
(b) at any time before 8:00am on the Second Court Date if the other party is in material breach of any clause of this Agreement (including a breach of a representation or warranty given by LLC under clause 9.1(e) or LLP under clause 9.2(a)(vi), 9.2(a)(vii), 9.2(a)(viii), 9.2(a)(ix) or 9.2(c)), provided that (except, where LLC is the terminating party, in the case of a material breach by LLP of clause 7 or 10) the terminating party has given notice to the other party setting out the relevant circumstances and stating an intention to terminate this Agreement, and the relevant circumstances have continued to exist for five Business Days (or any shorter period ending at 5pm on the last Business Day before the Second Court Date) from the time such notice is given.

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11.2 Termination by LLC

LLC may terminate this Agreement at any time before 8:00am on the Second Court Date by notice in writing to LLP:

(a) if a LLP Regulated Event, a LLP Material Adverse Change or a Market Disruption Event occurs, provided that LLC has given notice to LLP setting out the relevant circumstances and stating an intention to terminate this Agreement, and the relevant circumstances have continued to exist for five Business Days (or any shorter period ending at 5pm on the last Business Day before the Second Court Date) from the time such notice is given;
(b) if any LLP Director:
(i) publicly states that they do not, or qualifies a statement to the effect that they, recommend that LLP Securityholders approve the Schemes in the absence of a Superior Proposal and subject to the Independent Expert concluding that the Schemes are in the best interests of LLP Securityholders; or

(ii) publicly recommends a Competing Proposal, whether or not in accordance with clause 7.1(b); or

(c) if a Competing Proposal is announced, made, or becomes open for acceptance and a majority of LLP Directors recommend the Competing Proposal.

11.3 Termination by LLP

LLP may terminate this Agreement at any time before 8:00am on the Second Court Date by notice in writing to LLC if the Independent Board Committee publicly changes its unanimous recommendation of the Share Scheme and the Trust Scheme, or publicly recommends, promotes or otherwise endorses a Superior Proposal.

11.4 Effect of termination

In the event of termination of this Agreement by either LLC or LLP pursuant to clause 11.1, 11.2 or 11.3, this Agreement will have no further force or effect and the parties will have no further obligations under this Agreement, provided that:

(a) this clause 11 and clauses 1, 8.3, 8.4, 12 and 14 will survive termination; and
(b) each party will retain any accrued rights and remedies, including any rights and remedies it has or may have against the other party in respect of any past breach of this Agreement.

12. Damages

(a) Notwithstanding any other provision of this Agreement the maximum aggregate liability that LLPL have LLPT can have to LLC under or in connection with this Agreement (including in respect of any breach by a party to this Agreement) is $1,250,000. Payments aggregating $1,250,000 to LLC by either or both of LLPL and LLPT represent the sole and absolute liability of LLPL and LLPT to LLC under or in connection with this Agreement and no further damages, fees, expenses or reimbursements of any kind will be payable to LLC under or in connection with this Agreement.

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(b) Notwithstanding any other provision of this Agreement the maximum liability that LLC can have to either or both of LLPL and LLPT under or in connection with this Agreement (including in respect of any breach by a party of this Agreement) is $1,250,000. Payments aggregating $1,250,000 by LLC to LLPL or LLPT represent its sole and absolute liability under or in connection with this Agreement and no further damages, fees, expenses or reimbursements of any kind will be payable by LLC to LLPL and LLPT under or in connection with this Agreement.
(c) Nothing in paragraphs (a) or (b) shall be taken to prevent or restrict a party from terminating this Agreement in accordance with its terms.
(d) This clause 12 shall survive termination of this Agreement.

13. GST

13.1 Definitions

In this clause 13:

Consideration has the meaning given by the GST Law.

GST has the meaning given by the GST Law.

GST Amount means in relation to a Taxable Supply the amount of GST payable in respect of that Taxable Supply.

GST Group has the meaning given by the GST Law.

GST Law has the meaning given by A New Tax System (Goods and Services Tax) Act 1999 (Cth), or, if that Act does not exist means any Act imposing or relating to the imposition or administration of a goods and services tax in Australia and any regulation made under that Act.

Input Tax Credit has the meaning given by the GST Law and a reference to an Input Tax Credit entitlement of a party includes an Input Tax Credit for an acquisition made by that party but to which another member of the same GST Group is entitled under the GST Law.

Recipient has the meaning given by the GST Law.

Tax Invoice has the meaning given by the GST Law.

Taxable Supply has the meaning given by the GST Law excluding the reference to section 84 5 of A New Tax System (Goods and Services Tax) Act 1999 (Cth).

13.2 GST to be added to amounts payable

If GST is payable on a Taxable Supply made under, by reference to or in connection with this Agreement, the party providing the Consideration for that Taxable Supply must also pay the GST Amount as additional Consideration. This clause does not apply to the extent that the Consideration for the Taxable Supply is expressly stated to be GST inclusive. Payment of the GST Amount is conditional upon the prior delivery to the Recipient of the supply of a valid Tax Invoice.

13.3 Liability net of GST

Any reference in the calculation of Consideration or of any indemnity, reimbursement or similar amount to a cost, expense or other liability incurred by a party, must exclude the amount of any

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Input Tax Credit entitlement of that party in relation to the relevant cost, expense or other liability. A party will be assumed to have an entitlement to a full Input Tax Credit unless it demonstrates otherwise prior to the date on which the Consideration must be provided.

13.4 Cost exclusive of GST

Any reference in this Agreement (other than in the calculation of Consideration) to cost, expense or other similar amount (Cost), is a reference to that Cost exclusive of GST.

13.5 GST obligations to survive termination

This clause 13 will continue to apply after expiration or termination of this Agreement.

14. Miscellaneous

14.1 Notices

Any notice, demand, consent or other communication (a Notice ) given or made under this Agreement:

(a) must be in writing and signed by a person duly authorised by the sender;
(b) must be delivered to the intended recipient by prepaid post or by hand or fax to the address or fax number below or the address (being an address in Australia) or fax number last notified by the intended recipient to the sender:
(i) to LLC: 30 The Bond, 30 Hickson Road, Millers Point

NSW 2000

Attention: Company Secretary Fax No: +61 2 9383 8154;
(ii) to LLP: Level 4, 111 Cecil Street, South Melbourne VIC 3205

Attention: Company Secretary

Fax No: +61 3 8699 3399; and

(c) will be taken to be duly given or made:
(i) in the case of delivery in person, when delivered;
(ii) in the case of delivery by post, two Business Days after the date of posting (if posted to an address in the same country); and
(iii) in the case of fax, on receipt by the sender of a transmission control report from the dispatching machine showing the relevant number of pages and the correct destination fax machine number or name of recipient and indicating that the transmission has been made without error,

but if the result is that a Notice would be taken to be given or made on a day that is not a business day in the place to which the Notice is sent or is later than 4pm (local time) it will be taken to have been duly given or made at the commencement of business on the next business day in that place.

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14.2 No waiver

No failure to exercise nor any delay in exercising any right, power or remedy by a party operates as a waiver. A single or partial exercise of any right, power or remedy does not preclude any other or further exercise of that or any other right, power or remedy. A waiver of any right, power or remedy on one or more occasions does not operate as a waiver of that right, power or remedy on any other occasion, or of any other right, power or remedy. A waiver is not valid or binding on the party granting that waiver unless made in writing.

14.3 Remedies cumulative

The rights, powers and remedies provided to each party in this Agreement are in addition to, and do not exclude or limit, any right, power or remedy provided by law or equity or by any agreement.

14.4 Entire agreement

This Agreement and the Confidentiality Deed contain the entire agreement between the parties as at the date of this Agreement with respect to its subject matter and supersedes all prior agreements and understandings between the parties in connection with it.

14.5 Amendment

No amendment or variation of this Agreement is valid or binding on a party unless made in writing executed by LLC and LLP, which may so make an amendment or variation notwithstanding that one or more other parties or persons may be entitled to the benefit of all or any of the provisions of this Agreement.

14.6 Assignment

The rights and obligations of each party under this Agreement are personal. They cannot be assigned, encumbered or otherwise dealt with and no party may attempt, or purport, to do so without the prior consent of the other party. 14.7 No merger

The rights and obligations of the parties will not merge on the completion of any transaction contemplated by this Agreement. They will survive the execution and delivery of any assignment or other document entered into for the purpose of implementing a transaction.

14.8 Further assurances

Each party agrees to do all things and execute all deeds, instruments, transfers or other documents as may be necessary or desirable to give full effect to the provisions of this Agreement and the transactions contemplated by it.

14.9 Costs and stamp duty

Except as provided below, each party must bear its own costs, charges and expenses arising out of or incidental to the negotiations leading to or the preparation of this Agreement and the proposed, attempted or actual implementation of this Agreement. LLC must pay, or procure that BidCo pays, any stamp duty that is payable on the transfer to BidCo of the Scheme Securities pursuant to the Schemes. asbs A0113311961v3 206210123 28.9.2009 Page 38

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14.10 Severability of provisions

Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction is ineffective as to that jurisdiction to the extent of the prohibition or unenforceability. That does not invalidate the remaining provisions of this Agreement nor affect the validity or enforceability of that provision in any other jurisdiction.

14.11 Governing law and jurisdiction

This Agreement is governed by the laws of New South Wales. Each party submits to the non exclusive jurisdiction of courts exercising jurisdiction there in connection with matters concerning this Agreement.

14.12 Counterparts

This Agreement may be executed in any number of counterparts. All counterparts together will be taken to constitute one instrument.

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Schedule 1

Timetable

Event	Date
LLP lodges draft Scheme Booklet with ASIC	Friday, 16 October 2009
First Court Date	Monday, 2 November 2009
Despatch of Scheme Booklet completed	Monday, 9 November 2009
Scheme Meetings	Tuesday, 8 December 2009
Second Court Date	Friday, 11 December 2009
Effective Date	Monday, 14 December 2009
Record Date	Monday, 21 December 2009
Implementation Date	Monday, 28 December 2009

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Schedule 2

Responsibility Statement

(a) Except as provided in paragraphs (b) and (c) the information in this Scheme Booklet has been provided by LLP and is the responsibility of LLP. LLC and its directors, officers and advisors do not assume any responsibility for the accuracy or completeness of any such LLP information.
(b) LLC has provided and is responsible for information contained in sections [insert] of this Scheme Booklet, including information as to the funding arrangements it has made to provide the Scheme Consideration, and information as to LLC's opinions, views, intentions and decisions in relation to LLP (collectively the LLC Information ). LLP and its directors, officers and advisors do not assume any responsibility for the accuracy or completeness of the LLP Information.

(c) The Independent Expert, [insert], has provided and is responsible for the information contained in section [insert] of this Scheme Booklet. Neither LLP nor LLC assumes any responsibility for the accuracy or completeness of the information contained in section [insert]. The Independent Expert does not assume any responsibility for the accuracy or completeness of the information contained in this Scheme Booklet other than that contained in section [insert].

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Schedule 3

LLP Closing Certificate

This LLP Closing Certificate is given pursuant to clause 3.1(j) of the Scheme Implementation Agreement dated [] between [insert details] (the _SIA*_ ).

Terms in this certificate have the same meaning as those terms in the SIA.

After due and careful enquiry, to the best of the knowledge and belief of LLP, no fact, matter or circumstance has arisen that:

(a) makes any representation or warranty of LLP contained in clause 9.2(a)(vi), 9.2(a)(vii), 9.2(a)(viii), 9.2(a)(ix) or 9.2(c)of the SIA false or inaccurate as at the time each such representation or warranty is taken as being given; or
(b) otherwise materially qualifies a warranty or representation of LLP contained in clause 9.2(a)(vi), 9.2(a)(vii), 9.2(a)(viii), 9.2(a)(ix) or 9.2(c) of the SIA at each time such representation or warranty is taken as being given,

except as disclosed by LLP to LLC.

Dated [#]

[insert name] Director

Lend Lease Primelife Limited; and

Lend Lease Villages Responsible Entity Limited as responsible entity of Lend Lease Primelife Trust.

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Scheme Implementation Agreement Schedule 4 LLC Closing Certificate

This LLC Closing Certificate is given pursuant to clause 3.1(k) of the Scheme Implementation Agreement dated [] between [insert details] (the _SIA*_ ).

Terms in this certificate have the same meaning as those terms in the SIA.

After due and careful enquiry, to the best of the knowledge and belief of LLC, no fact, matter or circumstance has arisen that makes the representation or warranty of LLC contained in clause 9.1(e) of the SIA false or inaccurate or otherwise materially qualifies such representation or warranty. Dated [#]

_________ [insert name] Director Lend Lease Corporation Limited

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Annexure A

Share Scheme

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Scheme Implementation Agreement Annexure B LLC Deed Poll

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Attachment F Supplemental Deed

F

Supplemental Deed

Lend Lease Primelife Trust ARSN 124 896 733 Lend Lease Villages Responsible Entity Limited ACN 099 064 141

Gilbert + Tobin

2 Park Street Sydney NSW 2000 Australia GPO Box 3810 Sydney NSW 2001 T +61 2 9263 4000 F +61 2 9263 4111 DX 10348 SSE www.gtlaw.com.au

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Contents Page
1 Recitals 1
2 Definitions and interpretation 2
2.1 Definitions 2
2.2 Interpretation 2
2.3 Benefit of this deed poll 2
3 Lodgement with ASIC 2
4 Amendments to the Constitution 2
5 No resettlement 8
6 Governing law 8
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Date:

Party

Lend Lease Villages Responsible Entity Limited ACN 099 064 141 (Trustee) in its capacity as trustee and responsible entity of the Lend Lease Primelife Trust ARSN 124 896 733 (Trust)

1 Recitals

A The Trustee is a public company limited by shares, incorporated in Australia and registered in New South Wales. Its registered office is at 30 The Bond, Level 4, 30 Hickson Road Sydney, NSW 2000.
B The Trustee is also the responsible entity of the Trust established under a trust deed dated 13 April 2007 (as amended from time to time) ( Constitution ).
C The Trust has been registered by the Australian Securities and Investments Commission ( ASIC ) as a managed investment scheme pursuant to section 601EB of the Corporations Act 2001 (Cth) ( Corporations Act ).
D Units are Stapled to LLP Shares on a one-for-one basis and the Stapled Securities are Officially Quoted. As at the date of this deed, [•] Stapled Securities, comprised of [•] Units and [•] Attached Securities, were on issue.
E Lend Lease Capital Services Pty Limited ACN 000 001 114 ( Lend Lease Bidco ) is a proprietary company limited by shares, incorporated in Australia and registered in New South Wales. Its registered office is at 30 The Bond, Level 4, 30 Hickson Road Sydney, NSW 2000.
F The Trustee (acting in its capacity as responsible entity of the Trust) and Lend Lease Corporation Limited ACN 000 226 228 ( Lend Lease ) agreed, by executing a scheme implementation agreement dated 28 September 2009, to propose and implement the Unit Scheme and the Share Scheme.
G The Constitution must be amended to facilitate the Unit Scheme.
H Clause 15 of the Constitution provides that, subject to any approval required by law, the Trustee may by deed amend the Constitution.
I Section 601GC(1)(a) of the Corporations Act provides that the Constitution may be modified by special resolution of the LLP Unitholders.
J At a meeting held on [•] 2009 convened in accordance with the Corporations Act and the Constitution, LLP Unitholders approved the Unit Scheme Resolutions, including a special resolution to make the amendments to the Constitution contained in this deed.
K Pursuant to section 601GC(2) of the Corporations Act, the Trustee must lodge a copy of this deed with ASIC and the amendments to the Constitution contained in this deed cannot take effect until a copy of this deed is lodged with ASIC.

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2 Definitions and interpretation

2.1 Definitions

Terms defined in the scheme of arrangement under Part 5.1 of the Corporations Act between LLP and Scheme Shareholders ( Share Scheme ) have the same meaning in this deed, unless the context requires otherwise.

2.2 Interpretation

The provisions of clause 1.2 of the Share Scheme form part of this deed as if set out in full in this deed, and on the basis that references to 'this Agreement' in that clause are references to 'this deed, unless the context makes it clear that a rule is not intended to apply.

2.3 Benefit of this deed poll

This deed is made by the Trustee with the intent that the benefit of this deed shall ensure to the benefit of LLP Unitholders jointly and severally.

3 Lodgement with ASIC

The Trustee must lodge a copy of this deed with ASIC on the same day as LLPL lodges with ASIC an office copy of the order of the Court approving the Share Scheme under section 411(4)(b) of the Corporations Act.

4 Amendments to the Constitution

With effect on and from the Effective Time, the Constitution is amended as follows:

(a) in clause 22.1, by amending the following definition to read as set out below:

Business Day means any day that is each of the following:

(a) a Business Day within the meaning given in the Listing Rules; and

(b) a day that banks are open for business in Sydney, New South Wales.

(b) in clause 22.1, by inserting the following definitions in alphabetical order:

CHESS means the Clearing House Electronic Subregister System for the electronic transfer of securities, operated by ASX Settlement and Transfer Corporation Pty Limited (ABN 49 008 504 532).

Court means the Supreme Court of New South Wales.

Deed Poll means the deed poll dated 30 October 2009 executed by Lend Lease and Lend Lease Bidco in favour of the Scheme Participants.

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Effective means:

(a) in relation to the Share Scheme, the coming into effect, pursuant to section 411(10) of the Corporations Act, of the orders of the Court under section 411(4)(b) of the Corporations Act (and, if applicable, section 411(6) of the Corporations Act) in relation to the Share Scheme; and
(b) in relation to the Unit Scheme, the coming into effect, pursuant to section 601GC(2) of the Corporations Act, of the supplemental deed making amendments to this Constitution to facilitate the Unit Scheme, including the insertion of clause 21A.

Effective Date means the date on which both the Schemes have become Effective.

Excluded Securities means Stapled Securities held as at the Record Date by any member of the Lend Lease Group or by any person on behalf of, or for the benefit of, any member of the Lend Lease Group, being, as at the date of the Scheme Booklet, 417,684,727 Stapled Securities held by Lend Lease Bidco.

Implementation Date means the date that is 4 Business Days after the Record Date, or such other date as LLP and Lend Lease may agree in writing or as may be required by ASX.

Lend Lease means Lend Lease Corporation Limited (ACN 000 226 228).

Lend Lease Bidco means Lend Lease Capital Services Pty Limited (ACN 000 001 114).

Lend Lease Group means Lend Lease and its related bodies corporate.

LLP means each of LLPL and the Trustee (in its capacity as responsible entity of the Trust).

LLPL means Lend Lease Primelife Limited (ACN 010 622 901).

LLP Securityholder means each person who is registered in the Register as the holder of a Stapled Security.

Record Date means 7.00pm on the date that is 5 Business Days following the Effective Date, or such other date as may be agreed in writing between Lend Lease and LLP or as may be required by ASX.

Registered Address means, in relation to a Unitholder, the address of that Unitholder shown in the Register.

Registry means Link Market Services Limited (ABN 54 083 214 537).

Scheme Consideration means $0.31 cash for each Scheme Security.

Scheme Participant means each LLP Securityholder who is registered in the Register as a holder of Scheme Securities as at the Record Date (other than any holder of Excluded Securities).

Scheme Securities means the Stapled Securities on issue as at the Record Date (other than Stapled Securities that are comprised in the Excluded Securities).

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Scheme Shares means all of the Attached Securities comprised in the Scheme Securities (other than any Attached Securities that are comprised in the Excluded Securities).

Scheme Unitholder means each Unitholder who is a registered in the Register as a holder of Scheme Units as at the Record Date (other than any holder of any Units that are comprised in the Excluded Securities).

Scheme Units means all of the Units comprised in the Scheme Securities (other than any Units that are comprised in the Excluded Securities).

Share Scheme means the scheme of arrangement under Part 5.1 of the Corporations Act between LLPL and Scheme Participants, for the transfer of Scheme Shares to Lend Lease Bidco.

Unit Scheme means the arrangement under which Lend Lease Bidco acquires all of the Scheme Units, that is facilitated by amendments to the Constitution, including the insertion of clause 21A.

Unit Scheme Meeting means the meeting of Unitholders to approve the Unit Scheme Resolutions.

Unit Scheme Resolutions means the resolutions of the Unitholders set out in the notice of meeting of Unitholders dated 2 November 2009.

21A Unit Scheme

21A.1 Dealings in Units

(a) For the purpose of establishing the persons who are Scheme Unitholders, dealings in Units will only be recognised by the Trustee if:
(i) in the case of dealings of the type to be effected using CHESS, the transferee is registered in the Register as the holder of the relevant Units by the Record Date; and
(ii) in all other cases, registrable transfers or transmission applications in respect of those dealings are received at the Registry by 7.00pm on the Record Date (in which case the Trustee must register such transfers or transmission applications on or before 7.00pm on that day).
(b) The persons shown in the Register, and the number of Units shown as being held by them, after registration of transfers and transmission applications of the kind referred to in clause 21A.1(a) will be taken to be the Scheme Unitholders, and the number of Units held by them on the Record Date.
(c) The Trustee will not accept for registration, nor recognise for the purpose of establishing the persons who are Scheme Unitholders, any transfer or transmission application in respect of Units received after the Record Date, or received prior to the Record Date but not in registrable form.

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(d) The Trustee will, until the Scheme Consideration has been provided and the name and address of Lend Lease Bidco has been entered into the Register as the holder of all the Scheme Securities, maintain, or procure the maintenance of, the Register in accordance with this clause 21A.1, and the Register in this form and the terms of the Schemes will solely determine the persons who are Scheme Unitholders and their entitlements to the Scheme Consideration. As from the Record Date (and other than for Lend Lease Bidco following the Implementation Date), each entry in the Register as at the Record Date relating to the Scheme Units will cease to have any effect other than as evidence of the entitlements of Scheme Unitholders to the Scheme Consideration in respect of the Scheme Units.
(e) As from the Record Date (and other than for Lend Lease Bidco following the Implementation Date), all unit certificates and holding statements for Scheme Units will cease to have effect as documents of title in respect of those Scheme Units.
(f) The Trustee must procure that, as soon as practicable after the Record Date and in any event at least 3 Business Days before the Implementation Date, details of the names, Registered Addresses and holdings of Units of every Scheme Shareholder as shown in the Register as at the Record Date are given to Lend Lease (or as it directs) in such form as Lend Lease may reasonably require.
(g) Each Scheme Unitholder, and any person claiming through that Scheme Unitholder, must not dispose of or purport or agree to dispose of any Scheme Units or any interest in them after the Record Date.

21A.2 Scheme Consideration

(a) The Scheme Consideration in respect of each of the Scheme Securities for which a Scheme Participant is registered in the Register as the holder as at the Record Date comprises $0.31 in cash, being the amount payable pursuant to the Schemes for each Scheme Security, subject to the terms of the Schemes.
(b) On or before 12.00 noon on the Implementation Date, in consideration for the transfer of the Scheme Securities to Lend Lease Bidco in accordance with clause 21A.3 and clause 4.2 of the Share Scheme, Lend Lease Bidco must satisfy its obligations under clause 5.2 of the Share Scheme to deposit in cleared funds the aggregate Scheme Consideration payable to all Scheme Participants into an account nominated by LLP in accordance with clause 5.2 of the Share Scheme.
(c) The Trustee must send the Scheme Consideration paid by Lend Lease Bidco in accordance with clause 21A.2(a) and clause 5.2(a) of the Share Scheme to Scheme Participants in accordance with clauses 5.2 and 5.3 of the Share Scheme.
(d) For the avoidance of doubt, the Scheme Consideration paid to each Scheme Participant under this Unit Scheme is the total consideration for the Scheme Participant transferring the Scheme Units comprised in the Scheme Securities of the Scheme Participant to Lend Lease Bidco under clause 21A.3 of this Unit Scheme and for the Scheme Participant transferring the Scheme Shares comprised in the Scheme Securities of the Scheme Participant to Lend Lease Bidco under the Share Scheme.

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21A.3 Transfers to Lend Lease Bidco

(a) On the Implementation Date, subject to Lend Lease Bidco satisfying its obligations to pay the Scheme Consideration in the manner contemplated by clause 21A.2, all of the Scheme Units, together with all rights and entitlements attaching to those Scheme Units as at the Implementation Date, will be transferred to Lend Lease Bidco (together with the Scheme Shares which are Stapled to those Scheme Units), without the need for any further act by any Scheme Unitholder (other than acts performed by the Trustee or its directors or officers as attorney and agent for Scheme Unitholders under clause 21A.4) by:
(i) the Trustee delivering to Lend Lease Bidco for execution duly completed Scheme Transfers to transfer all of the Scheme Units to Lend Lease Bidco, duly executed by the Trustee (or any of its directors and officers) as the attorney and agent of each Scheme Unitholder as transferor under clause 21A.4.
(ii) Lend Lease Bidco executing the Scheme Transfers as transferee, attending to the stamping of the Scheme Transfers (if required) and delivering them to the Trustee for registration.
(iii) the Trustee, immediately after receipt of the executed Scheme Transfers under clause 21A.3(a)(ii), entering, or procuring the entry of, the name and address of Lend Lease Bidco in the Register as the holder of all of the Scheme Units.

21A.4 Covenants by Trustee and Unitholders

(a) Each Scheme Unitholder and the Trustee must do all things and execute all deeds, instruments, transfers or other documents as may be necessary or desirable to give full effect to the Unit Scheme and the transactions contemplated by it.
(b) Each Scheme Unitholder:
(i) irrevocably agrees to the transfer of all of their Scheme Units to Lend Lease Bidco in accordance with this clause 21A;
(ii) irrevocably agrees to the modification or variation (if any) of the rights attaching to their Scheme Units arising from this clause 21A;
(iii) irrevocably appoints the Trustee and each of its directors and officers, jointly and severally, as that Scheme Unitholder's attorney and agent for the purpose of doing all things and executing all deeds, instruments, transfer or other documents as may be necessary or desirable to give full effect to the terms of the Unit Scheme and the transactions contemplated by it, including the effecting of a valid transfer or transfers (or the execution and delivery of any Scheme Transfers) under clause 21A.3;
(iv) irrevocably consents to the Trustee, Lend Lease and Lend Lease Bidco doing all things and executing all deeds, instruments, transfers or other documents as may be necessary or desirable to give full effect to the Unit Scheme, this clause 21A and the transactions contemplated by them; and

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(v) appoints the Trustee to enforce the Deed Poll against Lend Lease Bidco on behalf of and as agent and attorney for the Scheme Unitholder.
(c) The Trustee, as agent and attorney of each Scheme Unitholder, may sub delegate its functions, authorities or powers under this clause 21A.4 to all or any of its directors and officers (jointly, severally, or jointly and severally).
(d) From the time at which the Scheme Consideration is paid by Lend Lease Bidco in accordance with clause 21A.2 until Lend Lease Bidco is registered in the Register as the holder of all Scheme Units, each Scheme Unitholder:
(i) without the need for any further act by that Scheme Unitholder, irrevocably appoints Lend Lease Bidco as its agent and attorney for the purpose of appointing any director or officer of Lend Lease or Lend Lease Bidco as that Scheme Unitholder’s proxy and, where appropriate, its corporate representative to:
- (A) attend Unitholder meetings of the Trust;
- (B) exercise the votes attaching to the Scheme Units registered in the name of the Scheme Unitholder; and
- (C) sign any Unitholders' resolution,
(ii) must take all other action in the capacity of a Unitholder as Lend Lease Bidco reasonably directs.
(e) From the time at which the Scheme Consideration is paid by Lend Lease Bidco in accordance with clause 21A.2 until Lend Lease Bidco is registered in the Register as the holder of all Scheme Units, no Scheme Unitholder may attend or vote at any meetings of Unitholders or sign any Unitholders’ resolution (whether in person, by proxy or by corporate representative) other than pursuant to this clause 21A.4.

21A.5 Status of Scheme Units

(a) Each Scheme Unitholder is deemed to have warranted to Lend Lease Bidco, and, to the extent enforceable, to have appointed and authorised the Trustee as that Scheme Unitholder's agent and attorney to warrant to Lend Lease Bidco, that all of their Scheme Units (including any rights and entitlements attaching to those Scheme Units) will, at the time of the transfer of them to Lend Lease Bidco pursuant to the Unit Scheme, be fully paid and free from all mortgages, charges, liens, encumbrances, pledges, security interests and other interests of third parties of any kind, whether legal or otherwise, and restrictions on transfer of any kind, and that they have full power and capacity to sell and to transfer their Scheme Units (together with any rights and entitlements attaching to those Scheme Units) to Lend Lease Bidco pursuant to the Unit Scheme. The Trustee undertakes in favour of each Scheme Unitholder that it will provide such warranty, to the extent enforceable, to Lend Lease Bidco on behalf of that Scheme Unitholder.
(b) Lend Lease Bidco will be beneficially entitled to the Scheme Units transferred to it under this clause 21A pending registration by the Trustee of the name and address of Lend Lease Bidco in the Register as the holder of those Scheme Units.

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21A.6 Effect of clause 21A

This clause 21A:

(a) binds the Trustee and all Scheme Unitholders, including those who do not attend the Unit Scheme Meeting, those who do not vote at that meeting and those who vote against the Unit Scheme Resolutions at that meeting; and
(b) overrides the other provisions of this Constitution to the extent of any inconsistency.

21A.7 Trustee's limitation of liability

Without limiting clause 6 and subject to the Corporations Act, the Trustee will not have any liability of any nature whatsoever beyond the assets of the Trust to Unitholders arising, directly or indirectly, from the Trustee doing or refraining from doing any act (including the execution of a document), matter or thing pursuant to or in connection with the implementation of the Unit Scheme.

5 No resettlement

The Trustee confirms that it is not by this deed intending to:

(a) resettle or redeclare the Trust declared under the Constitution; or
(b) cause the transfer, vesting or accruing of any property comprising the assets of the Trust in any person.

6 Governing law

This deed is governed by the laws of the State of New South Wales.

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Executed as a deed poll.

Sealed and delivered by Lend Lease Villages Responsible Entity Lim ited as responsible entity of the Lend Lease Prim elife Trust by: Signature of director Signature of director/secretary Name of director (print) Name of director/secretary (print)

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Attachment G Independent Expert’s Report

Lend Lease Primelife Group

Independent expert’s report and financial services guide 2 November 2009

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Deloitte Corporate Finance Pty Limited A.B.N. 19 003 833 127 AFSL 241457 Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1220 Australia

Financial Services Guide

2 November 2009

What is a Financial Services Guide?

This Financial Services Guide (FSG) provides important information to assist you in deciding whether to use any of the general financial product advice provided by Deloitte Corporate Finance Pty Limited (Deloitte Corporate Finance, we, us or our) the holder of Australian Financial Services Licence (AFSL) No. 241457. The contents of this FSG include:

who we are and how we can be contacted
what services we are authorised to provide under our AFSL
how we (and any other relevant parties) are remunerated in relation to any general financial product advice we may provide
details of any potential conflicts of interest
details of our dispute resolution systems and how you can access them.

Information about us

We have been engaged by Lend Lease Primelife Group to give general financial product advice in the form of a report to be provided to you in connection with the proposed takeover offer for Lend Lease Primelife Group via a concurrent trust and company scheme of arrangement. You are not the party or parties who engaged us to prepare this report. We are not acting for any person other than the party or parties who engaged us. We are required to give you an FSG by law because our report is being provided to you. You may contact us using the details located above.

Deloitte Corporate Finance is ultimately owned by the Australian partnership of Deloitte Touche Tohmatsu. The Australian partnership of Deloitte Touche Tohmatsu and its related entities provide services primarily in the areas of audit, tax, consulting, and financial advisory services. Our directors may be partners in the Australian partnership of Deloitte Touche Tohmatsu.

The Australian partnership of Deloitte Touche Tohmatsu is a member of Deloitte Touche Tohmatsu (a Swiss Verein). As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other‟s acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names “Deloitte,” “Deloitte & Touche,” “Deloitte Touche Tohmatsu,” or other, related names. Services are provided by the member firms or their subsidiaries and affiliates and not by the Deloitte Touche Tohmatsu Verein.

The general financial product advice in our report is provided by Deloitte Corporate Finance and not by the Australian partnership of Deloitte Touche Tohmatsu, its related entities, or the Deloitte Touche Tohmatsu Verein.

Associations and relationships

We do not have any formal associations or relationships with any entities that are issuers of financial products. However, you should note that we and the Australian partnership of Deloitte Touche Tohmatsu (and its related bodies corporate) may from time to time provide professional services to financial product issuers in the ordinary course of business.

What financial services are we licensed to provide?

The AFSL we hold authorises us to provide the following financial services to retail and wholesale clients:

provide general financial product advice in respect of:

debentures, stocks or bonds to be issued or proposed to be issued by a government
interests in managed investment schemes including investor directed portfolio services
securities
deal in a financial product by arranging for another person to apply for, acquire, vary or dispose of financial products in respect of:
debentures, stocks or bonds issued or to be issued by a government
interests in managed investment schemes including investor directed portfolio services
securities.

Information about the general financial product advice we provide

The financial product advice provided in our report is known as “general advice” because it does not take into account your personal objectives, financial situation or needs. You should consider whether the general advice contained in our report is appropriate for you, having regard to your own personal objectives, financial situation or needs.

If our advice is being provided to you in connection with the acquisition or potential acquisition of a financial product issued by another party, we recommend you obtain and read carefully the relevant offer document provided by the issuer of the financial product. The purpose of the offer document is to help you make an informed decision about the acquisition of a financial product.

How are we and our employees remunerated?

Our fees are usually determined on a fixed fee or time cost basis and may include reimbursement of any expenses incurred in providing the services.

Fee arrangements are agreed with the party or parties who actually engage us, and we confirm our remuneration in a written letter of engagement to the party or parties who actually engage us.

Our fee is $250,000 exclusive of GST. Deloitte Corporate Finance, its directors and officers, any related bodies corporate or associates and their directors and officers, do not receive any

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commissions or other benefits, except for the fees rendered to the party or parties who actually engage us.

All employees receive a salary. Our employees are eligible for annual salary increases and bonuses based on overall performance but do not receive any commissions or other benefits arising directly from services provided to you. The remuneration paid to our directors reflects their individual contribution to the company and covers all aspects of performance.

We do not pay commissions or provide other benefits to other parties for referring prospective clients to us.

What should you do if you have a complaint?

If you have any concerns regarding our report or service, you may wish to advise us. Our internal complaint handling process is designed to respond to your concerns promptly and equitably. All complaints must be in writing addressed to:

The Complaints Officer PO Box N250 Grosvenor Place Sydney NSW 1220 E-mail: [email protected] Fax: (02) 9255 8678

If you are not satisfied with the steps we have taken to resolve your complaint, you may contact the Financial Ombudsman Service (FOS). FOS provides free advice and assistance to consumers to help them resolve complaints relating to members of the financial services industry.

Complaints may be submitted to FOS at:

Financial Ombudsman Service Limited GPO Box 3 Melbourne VIC 3001 Telephone: 1300 780 808 Fax: (03) 9613 6399 Email: [email protected] Internet: http://www.fos.org.au

What compensation arrangements do we have?

We are required by the Corporations Act 2001 (Cth) to have arrangements for compensating retail clients for losses they suffer as a result of a breach of our obligations under Chapter 7 of the Corporations Act. The Australian partnership of Deloitte Touche Tohmatsu holds a professional indemnity insurance policy that covers the financial services provided by Deloitte Corporate Finance. This policy satisfies the requirements of section 912B of the Corporations Act and provides coverage of former representatives and Deloitte Corporate Finance employees in respect of financial services performed whilst they were engaged by us.

Privacy

Any personal information collected by us will be handled in accordance with our Privacy Statement, which summarises our policies and practices governing the treatment of personal information that we acquire from and about you. We do not disclose any personal information about you to other parties without your permission, except as required or permitted by law. A copy of our Privacy Statement can be downloaded from our website at www.deloitte . com.au or by contacting us using the details located on the first page of this FSG.

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The Independent Directors Lend Lease Primelife Group Level 4, 111 Cecil Street South Melbourne VIC 3205

Deloitte Corporate Finance Pty Limited A.B.N. 19 003 833 127 AFSL 241457 Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1220 Australia DX 10307SSE Tel: +61 (0) 2 9322 7000 Fax: +61 (0) 2 9322 7001 www.deloitte.com.au

2 November 2009

Dear Directors

Independent expert’s report

Introduction

On 28 September 2009 (Announcement Date), the board of directors of Lend Lease Primelife Limited (LLPL) and Lend Lease Villages Responsible Entity Limited (LLVRE), as responsible entity for the Lend Lease Primelife Trust (LLPT), (collectively, LLPL and LLPT will be referred to as LLP or the LLP Group) (the LLP Board), announced LLP had entered into a Scheme Implementation Agreement (SIA) whereby Lend Lease Corporation Limited (LLC) would acquire all the stapled securities in LLP (LLP Securities) it does not already own for cash consideration of $0.31 per LLP Security (the Consideration).

The Proposed Transaction is to be implemented by way of a company scheme of arrangement (the Share Scheme) and a concurrent trust scheme (the Trust Scheme) (collectively the Proposed Transaction), on which the holders of LLP Securities (LLP Securityholders) will be asked to vote in December 2009. Upon completion of the Proposed Transaction, each entity within the LLP Group will become a wholly owned subsidiary of LLC and LLP will subsequently be delisted from the Australian Securities Exchange (ASX).

Purpose of the report

The Independent Directors have requested that Deloitte Corporate Finance Pty Limited (Deloitte Corporate Finance) provide an independent expert‟s report (IER) advising whether, in our opinion:

the Share Scheme is in the best interests of the holders of shares in LLPL not associated with LLC (LLPL Shareholders)

the terms of the Trust Scheme are fair and reasonable for holders of units on issue in LLPT not associated with LLC (LLPT Unitholders).

Since LLP is a stapled security, LLPL Shareholders and LLPT Unitholders who are not associated with LLC are the same and are collectively referred to as LLP Securityholders.

This IER is required pursuant to:

Part 3 of Schedule 8 of the Corporations Regulations 2001 (Cwlth) (Part 3) to assist LLPL Shareholders in their consideration of the Share Scheme

the terms of the Trust Scheme will require the approval of LLPT Unitholders pursuant to an ordinary resolution for the purpose of item 7 of section 611 of the Corporations Act 2001 (Section 611) to approve the acquisition of LLP units and pursuant to a special resolution to authorise amendments to the LLP constitution to give effect to the Trust Scheme.

Whilst separate opinions are required on the Share Scheme and the Trust Scheme from a legal perspective, since LLPL Shareholders and LLPT Unitholders are the same, we have assessed whether the Proposed Transaction as a whole is in the best interests of LLP Securityholders.

We have prepared this report having regard to Part 3, the relevant Australian Securities and Investments Commission (ASIC) Regulatory Guides and the relevant Takeover Panel Guidance Notes.

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This IER is to be included in the scheme booklet to be sent to LLP Securityholders (Scheme Booklet) and has been prepared for the exclusive purpose of assisting LLP Securityholders in their consideration of the Proposed Transaction. We are not responsible to you, or anyone else, whether for our negligence or otherwise, if the IER is used by any other person for any other purpose.

Basis of evaluation

Schemes of arrangement can include many different types of transactions, including being used as an alternative to a takeover offer. The basis of evaluation selected by the expert must be appropriate for the nature of each specific transaction. Whilst the legal mechanics to enact the transaction is via schemes of arrangement, the Proposed Transaction is in substance a takeover offer by LLC of the LLP Securities which it does not already own. We have therefore considered the relevant regulatory guidelines in respect of takeover offers as well as schemes of arrangements. Section 640 of the Corporations Act 2001 (Section 640) requires an IER in connection with a takeover offer to state whether, in the expert‟s opinion, the takeover offer is fair and reasonable. Where the scheme of arrangement has the same effect as a takeover, the form of analysis used by the expert should be substantially the same as for a takeover bid, however, the opinion reached should be whether the proposed scheme is „in the best interests of the members of the company‟. Accordingly, if an expert were to conclude that a proposal was „fair and reasonable‟ if it was in the form of a takeover bid, it will also be able to conclude that the proposed scheme is in the best interests of the members of the company. If an expert was to conclude that a scheme was „not fair but reasonable‟ if it was in the form of a takeover bid it is still open to the expert to also conclude that the scheme is „in the best interests‟ of the members of the company based on whether there are sufficient reasons for securityholders to vote in favour of the scheme in the absence of a superior offer, however, the expert should clearly state that the consideration is not equal to or greater than the value of the securities subject to the scheme.

To assess whether the Proposed Transaction is in the best interests of LLP Securityholders, we have adopted the test of whether the Proposed Transaction is either fair and reasonable, not fair but reasonable, or neither fair nor reasonable, as set out in ASIC Regulatory Guide 111 (RG 111).

In order to assess whether the Proposed Transaction is fair and reasonable, we have considered the following:

Fairness

We have assessed whether the Proposed Transaction is fair by estimating the fair market value of an LLP Security (assuming 100% ownership) and comparing that value to the estimated fair market value of the consideration to be received by LLP Securityholders pursuant to the Proposed Transaction (in this case cash of $0.31 per LLP Security).

Based on our understanding of ASIC policy intent on the appropriate interpretation of the „fair‟ and „reasonable‟ tests in RG 111, we note the following:

in assessing the fairness of a transaction, an expert should not have regard to any entity specific or structural issues such as excess gearing which may temporarily impair an entity‟s ability to realise full fair market value for its assets and which may be reflected in the market price of its securities. Instead, in assessing fairness, an orderly market for the underlying assets should be assumed

entity specific factors may be appropriate matters to be taken into account when assessing the reasonableness of the Proposed Transaction.

As a result of the above, in considering the fairness of the Proposed Transaction we have not considered any potential valuation implications that may arise as consequence of the potential near term covenant breaches or short-term liquidity and funding constraints currently faced by LLP in our assessment of the fair market value of an LLP Security.

Reasonableness

To assess the reasonableness of the Proposed Transaction we considered the following significant factors in addition to determining whether the Proposed Transaction is fair:

the current status and future prospects of LLP on a stand-alone basis

the existing securityholding of LLC in LLP and any other significant securityholding blocks in LLP

the likely price and market liquidity of an LLP Security in the absence of the Proposed Transaction other advantages and disadvantages of the Proposed Transaction to LLP Securityholders

other implications for LLP Securityholders of rejecting the Proposed Transaction.

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Summary and conclusion

In our opinion the Proposed Transaction is in the best interests of LLP Securityholders. Accordingly, we have also concluded that:

the Share Scheme is fair and reasonable and therefore in the best interests of LLPL Shareholders not associated with LLC

the terms of the Trust Scheme are fair and reasonable for LLPT Unitholders who are not associated with LLC.

In arriving at this opinion, we have had regard to the following factors:

The Proposed Transaction is fair

Set out in the table below is a comparison of our assessment of the fair market value of an LLP Security with the consideration offered by LLC.

Table 1: Evaluation of fairness of the Proposed Transaction

Table 1: Evaluation of fairness of the Proposed Transaction
	Low ($) High ($) $0.28 $0.38 $0.31 $0.31
Assessed fair market value of a security in LLP Cash consideration per LLP Security

Source: LLP and Deloitte Corporate Finance analysis

The estimated fair market value of the consideration offered by LLC is within the range of our estimate of the fair market value of an LLP Security on a control basis, although in the lower half of the range. Accordingly we have concluded that the Proposed Transaction is fair.

Our assessed valuation range for an LLP Security is relatively wide due to the high level of debt within LLP and current market conditions.

Valuation of a security in LLP

We have estimated the fair market value of an LLP Security on a sum-of-the-parts basis and deducted the present value of the corporate costs (including the management fees payable to LLC).

We have estimated the fair market value of each of the underlying business units of LLP using the discounted cash flow (DCF) method, which estimates the value by discounting the respective future cash flows to their present value. Where appropriate, the assessment of value for each of the business units has been cross-checked with reference to appropriate valuation multiples based on either net tangible assets (NTA) or earnings before interest, tax, depreciation and amortisation (EBITDA). The DCF method represents the control value of each of the business units.

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We have estimated the fair market value of a security in LLP to be in the range of $0.28 per security to $0.38 per security as set out in the table below.

Table 2: Estimated fair market value of a security in LLP

	Low	High
	($ million)	($ million)
LLP’s businesses:
Retirement Living	675.0	725.0
Aged Care	180.0	210.0
Retirement Living Development	140.0	150.0
Corporate costs	(140.0)	(140.0)
100% enterprise value of LLP	855.0	945.0
Surplus assets and non-operating liabilities	15.0	25.0
Net debt of LLP	(599.6)	(599.6)
100% equity value of LLP	270.4	370.4
Total securities of LLP on issue (million)	966.3	966.3
Value of LLP per security ($)	$0.28	$0.38

Source: Deloitte Corporate Finance analysis

The estimated fair market value of an LLP Security is sensitive to a number of assumptions, in particular the discount rate and long-term growth rates assumed in our DCF analysis as set out below.

Table 3: Sensitivity of estimated value of an LLP Security to changes in assumptions

		Terminal growth rate	Terminal growth rate
Discount rate	-2.0%	-1.0%	Base 1	+1.0%	+2.0%
-1.0%	$0.46	$0.57	$0.59	$0.68	$0.83
-0.5%	$0.39	$0.49	$0.49	$0.57	$0.68
Low	$0.29	$0.32	$0.38	$0.42	$0.50
Mid-point2	$0.27	$0.29	$0.33	$0.38	$0.44
High	$0.21	$0.24	$0.28	$0.30	$0.36
+0.5%	$0.17	$0.23	$0.21	$0.25	$0.29
+1.0%	$0.12	$0.18	$0.16	$0.19	$0.22

Source: Deloitte Corporate Finance analysis

Notes:

Base case terminal growth rate represents the growth rate applied to the cash flows subsequent to the discrete cash flow period and has been estimated at 4% for the Retirement Living and 3% for the Aged Care business
Mid-point discount rates are defined as follows:

Retirement Living (Australia) 11.5% Retirement Living (New Zealand) 12.0% Aged Care 10.0%

Retirement Living Development 16.0%.

Furthermore, our estimate of the fair market value of the Retirement Living business is also sensitive to assumptions in respect of resident tenure and capital growth rate for each underlying village. Broadly speaking:

a +/- 1 year movement in the resident tenure assumption results in an approximate -/+ 3% change to the estimated fair market value of the Retirement Living business

a +/- 1% change in the capital growth assumption results in an approximate +/- 13% change to the estimated fair market value of the Retirement Living business.

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The Proposed Transaction is reasonable

Introduction

In accordance with RG 111 an offer is reasonable if it is fair. An offer might also be reasonable if, despite being „not fair‟, the expert believes that there are sufficient reasons for LLP Securityholders to accept the offer in the absence of any higher offer.

Whilst the Proposed Transaction is fair (and therefore by definition reasonable), we have also assessed the reasonableness of the Proposed Transaction by considering whether the advantages of the Proposed Transaction proceeding sufficiently outweigh the disadvantages.

Advantages of the Proposed Transaction

The Proposed Transaction appears to be the best option available to LLP Securityholders after considering the relative risks of the alternatives

The global financial crisis and the continued contraction in the debt and equity markets since the Initial LLC Transaction (as defined in Section 1.2 of our report) have resulted in a significant reduction in the availability, and has increased the cost, of debt financing. The lack of funding available, particularly in the property sector, has constrained growth as participants have focused on recapitalising their balance sheets with little or no capital available for growth.

As at 30 June 2009, LLP breached its interest coverage covenant, primarily as a consequence of fair value adjustments to its retirement village investment properties due largely to increases in discount rates. In September 2009, LLP finalised negotiations with its banks and LLC regarding the terms of a waiver in respect of the breach. As part of the waiver, LLP‟s interest coverage covenant (which was previously calculated based on earnings including investment property revaluations) was replaced with a cash interest coverage covenant of 1.25 times. Concurrent with this, the banks also required the facility to be reduced to $350 million by 30 June 2010.

Although LLP has a plan in place to reduce debt to the levels required pursuant to the waiver through sales of existing assets (including $25 million in identified asset sales in addition to the $20 million already executed in the last financial year), the prices ultimately realised (and the net proceeds retained) are still subject to a significant level of execution risk. Furthermore, maintaining the required interest coverage is subject to the business operating at or above existing levels in the period to 30 June 2010.

If another breach of covenants were to occur, LLP could potentially be faced with a sale of assets within an accelerated timeframe in order to remedy the breach or lending banks could force LLP into administration or to enter a liquidation process.

In addition, LLP‟s bank facilities mature in December 2010 and there is a risk that the banks may further reduce their exposure and/or make the existing covenants more restrictive as part of that refinancing process.

The LLP Board has a stated intention to target a more sustainable level of gearing in the range of 20% to 25%. To achieve this target the LLP Board has estimated that LLP will be required to raise in excess of $300 million of additional capital.

In order to raise the additional capital required, the LLP Board has considered a sale of existing assets or options with respect to undertaking an equity capital raising or a combination thereof. All of these options are subject to significant execution risk in the current environment due to:

the lack of pricing tension in the current market for asset sales creates downside risk to asset values. In order to meet debt reduction targets, LLP has informally spoken to potential buyers of assets or businesses. Interest from these buyers to date has been at prices which may result in a discount to LLP‟s book value depending on market conditions. In addition some of the assets which may be separated more easily from the LLP business provide a high cash flow yield and the sale of these assets may therefore not alleviate the current cash interest cover pressures faced by LLP

whilst capital markets have shown signs of improvement in recent months, a large scale equity raising for LLP is likely to be difficult to execute and may expose LLP to additional risks since:

it is likely to represent a multiple of the total market capitalisation of LLP prior to the announcement of the Proposed Transaction
LLP has approximately 9,500 retail securityholders and sourcing an underwriter for the retail component may be challenging due to the likely size of the retail component of any offering and the uncertainty regarding LLC‟s actions during any such raising

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if LLC (as major shareholder) were to fully or partially underwrite such a raising, there would be the potential for LLC to obtain a more significant interest in, and even control of, LLP. If LLC did not participate, this could send a negative signal to the market which could limit the proceeds raised and/or result in a negative rerating of LLP
even if sufficient capital could be raised through this process recent market evidence suggests that significant discounts to the recent security price and the NTA of LLP would be required in order to make it attractive to potential investors. Accordingly such a raising could significantly dilute the underlying interests of LLP Securityholders who did not participate. For example, a $300 million capital raising assuming a discount of 25% to the 5 day volume weighted average price (VWAP) of LLP Securities immediately before the Announcement Date of $0.18 per security could result in:
a reduction in the net asset value (NAV) from $0.55 per security as at 30 June 2009 to approximately $0.32 per security
a reduction in the NTA from $0.30 per security as at 30 June 2009 to approximately $0.23 per security.
a large capital raising could result in LLP failing to meet certain continuity of ownership requirements for utilising existing tax losses of the group. As at 30 June 2009 LLP had in excess of $446 million in gross tax losses available to shelter future taxable profit. An inability to utilise some or all of these losses could significantly reduce the future cash flows of LLP
LLP will not be in a position to pay any distributions during the year ending 30 June 2010 (FY10) and the timing of future distributions (which will only be made from net operating cash flow) remains uncertain depending on the size of any equity raising. The lack of short-term distributions could also limit investor appetite for participation in an equity raising.

The Consideration represents a premium to recent trading in LLP Securities and to LLP’s NTA per security

The Consideration represents a premium to the historical share market trading in LLP Securities. An analysis of recent trading in LLP Securities and the Consideration is set out in the figure below.

==> picture [197 x 7] intentionally omitted <==

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

Figure 1: Offer price premium to Security trading price of LLP
----- End of picture text -----

==> picture [332 x 221] intentionally omitted <==

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

$0.70
Announcement Date of
Proposed Transaction
$0.60
$0.50
$0.40
$0.30
$0.20
$0.10
$0.00
LLP price (LHS) Consideration (31 cents)
Source: Deloitte Corporate Finance analysis
LLP Security price
01-Jun-09 08-Jun-09 15-Jun-09 22-Jun-09 29-Jun-09 06-Jul-09 13-Jul-09 20-Jul-09 27-Jul-09 03-Aug-09 10-Aug-09 17-Aug-09 24-Aug-09 31-Aug-09 07-Sep-09 14-Sep-09 21-Sep-09 28-Sep-09 05-Oct-09 12-Oct-09
----- End of picture text -----

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The Consideration offered pursuant to the Proposed Transaction represents the following premia to recent trading in LLP‟s Securities:

a 26.5% premium to the closing price of LLP Securities on the day prior to the Announcement Date

a 31.5% premium to the VWAP of LLP Securities subsequent to the announcement that a bank waiver had been received by LLP and prior to the Announcement Date

a 48.3% premium to the 1-month VWAP of LLP Securities prior to the Announcement Date

a 103.9% premium to the 3-month VWAP of LLP Securities prior to the Announcement Date.

The Proposed Transaction also represents a slight premium of 3% to the most recently reported NTA per security of LLP.

LLP Securities would likely trade below the implied offer price in the absence of the Proposed Transaction

In the absence of the Proposed Transaction or an alternate recapitalisation proposal it is likely that LLP Securities will trade at prices below the offer price and potentially more in line with the prices observed prior to the Announcement Date due to the lack of distributions expected in the near term, the current liquidity and funding constraints of LLP and taking into consideration that the valuation incorporates a control premium.

Alternate higher offer unlikely

We have been advised that since the announcement of the Proposed Transaction no other offers for LLP have been received.

If LLP Securityholders do not approve the Proposed Transaction it is possible that LLC will make an alternate offer at some future time. However, a higher offer from LLC appears to be unlikely as we understand that LLC has already raised the offer price after extensive negotiations with the Independent Directors of LLP.

It may also be possible that a higher offer from an alternate bidder may emerge. However, LLC‟s existing 43.2% stake in LLP and the fact that LLC is the manager and a subordinated debtholder of LLP would act as a significant deterrent against other prospective acquirers making an offer for LLP without prior negotiations with LLC.

Under these circumstances it would not be likely for an alternate control transaction for LLP to emerge except through a transaction supported by LLC. Accordingly, in the absence of the Proposed Transaction there may be limited alternative opportunities through which LLP Securityholders will be able to realise a value in excess of the trading prices of LLP Securities.

Disadvantages of the Proposed Transaction

Inability to participate in upside growth potential of LLP

Whilst there is no certainty that the value of LLP‟s underlying assets will appreciate, general market sentiment indicates that the current stage in the economic cycle is unlikely to be an optimum time to sell senior living investments.

Due to the current high financial leverage of LLP, any appreciation in the investment properties of LLP over time, combined with a reduction in leverage as intended by the LLP Board, would be likely to translate to a significant improvement in the NTA value and NAV of LLP. High financial leverage may also impact cash flows and restrict future growth of LLP Securities especially in a high interest rate environment.

LLP Securityholders will therefore forego the opportunity to participate in this leveraged exposure to any medium term upside in the values of the underlying retirement village and aged care assets of LLP which may result in the LLP Securities trading at prices in excess of the Consideration over time.

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Other considerations

Tax consequences

Approval of the Proposed Transaction may result in adverse tax consequences for LLP Securityholders. Whilst we note that the tax implications will vary depending on the circumstances of each securityholder, possible tax consequences for Australian resident securityholders include potential capital gains regime consequences related to the consideration received. The approval of the Proposed Transaction may therefore accelerate tax payable for LLP Securityholders as it may crystallise a tax liability in the short-term, which would otherwise have been deferred. LLP Securityholders should evaluate the capital gains or other tax consequences of acceptance in assessing whether to approve the Proposed Transaction. For further details of the tax consequences of accepting the Proposed Transaction to securityholders, you should refer to Annexure H of the Scheme Booklet.

Conclusion on reasonableness

On balance, in our opinion, the advantages of the Proposed Transaction outweigh the disadvantages.

Opinion

In our opinion, the Proposed Transaction is fair and reasonable and in the best interests of LLP Securityholders. Therefore, the Share Scheme is in the best interests of LLPL Securityholders and the terms of the Trust Scheme are fair and reasonable for LLPT Unitholders.

An individual LLP Securityholder‟s decision in relation to the Proposed Transaction may be influenced by his or her particular circumstances. If in doubt LLP Securityholders should consult an independent adviser.

This opinion should be read in conjunction with our detailed report which sets out our scope and findings.

Yours faithfully

DELOITTE CORPORATE FINANCE PTY LIMITED

Tapan Parekh Mark Pittorino Director Director

Note: All amounts stated in this report are in Australian dollars ($) unless otherwise stated, and may be subject to rounding.

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Contents	Contents
Financial Services Guide		2
1	Terms of the Proposed Transaction	11
1.1	Summary	11
1.2	Background to the Proposed Transaction	11
2	Scope of the report	13
2.1	Purpose of the report	13
2.2	Basis of evaluation	13
2.3	Limitations and reliance on information	15
3	Overview of LLP	16
3.1	Introduction	16
3.2	Corporate history	16
3.3	Corporate structure	17
3.4	The Retirement Living business	17
3.5	The Aged Care business	21
3.6	The Retirement Living Development business	23
3.7	Relationships with LLC	25
3.8	Capital structure	26
3.9	Financial Overview	30
3.10	Current position of LLP	32
4	Valuation of LLP	34
4.1	Introduction and summary	34
4.2	Future cash flows	35
4.3	Discount rates	39
4.4	Discounted cash flow summary	39
4.5	Sensitivity analysis	40
4.6	Assessed value	41
4.7	Valuation cross-check for operating assets	41
4.8	Corporate costs	43
4.9	Surplus assets and non-operating liabilities	44
4.10	Net debt	45
4.11	Number of LLP Securities	45
4.12	Valuation cross-check for LLP as a whole	46
4.13	Valuation conclusion	47
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5 Evaluation and conclusion	48
5.1 Summary of conclusion	48
5.2 Assessment of fairness	48
5.3 Assessment of reasonableness	48
5.4 Opinion	51
Appendices
Appendix 1: Overview of the senior living sector	52
Appendix2: Summary of LLP‟s portfolio	57
Appendix 3: Overview of valuation methodologies	61
Appendix 4: Discount rate	63
Appendix 5: Comparable listed entities	73
Appendix 6: Comparable transactions	75
Appendix 7: Recent capital raisings	77
Appendix 8: Control premium studies	79
Appendix 9: Sources of information	81
Appendix 10: Glossary	82
Appendix 11: Qualifications, declarations and consents	85

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1 Terms of the Proposed Transaction

1.1 Summary

On 28 September 2009, the LLP Board announced that LLP had entered into a Scheme Implementation Agreement (SIA) with LLC whereby LLC proposes to acquire all the stapled securities in LLP it does not already own for a cash price of $0.31 per LLP Security (the Proposed Transaction).

The Proposed Transaction is to be implemented by way of a company scheme of arrangement (the Share Scheme) and a concurrent trust scheme (Trust Scheme) (collectively the Proposed Transaction), in respect of which the holders of LLP Securities not associated with LLC (LLP Securityholders) will be asked to vote in December 2009. Upon completion of the Proposed Transaction, the LLP Group will become a wholly owned subsidiary of LLC and will be delisted from the ASX. The Proposed Transaction is subject to various conditions precedent, including approval from LLP Securityholders, ASIC and ASX as well as other approvals which are set out in Section 3.1 of the SIA.

1.2 Background to the Proposed Transaction

In the second half of 2008, the LLP Board undertook a strategic review of the operations of LLP (at the time named Babcock & Brown Communities Group (BBC)) in the context of reducing debt and implementing capital management initiatives. The ultimate outcome of this strategic review was a competitive price discovery process which resulted in a recapitalisation proposal by LLC being announced in October 2008 and approved by securityholders in December 2008 (Initial LLC Transaction) whereby:

LLC acquired the interests in LLP previously owned by Babcock & Brown Limited (B&B). As well, LLC acquired the management rights of LLP from B&B for $17.5 million. Under the management agreement, LLC provides LLP with property, development, asset management, financial advisory and investment banking services on a preferred basis
injected $149.7 million of additional capital into LLP in the form of additional equity

LLP acquired retirement village and aged care assets from LLC as consideration for convertible notes with a face value of $120.0 million and $13.4 million in cash

BBC changed its name to LLPL and LLPT
LLVRE became the new responsible entity of LLPT; and
LLP‟s bank debt facilities and interest rate derivatives were restructured.

Subsequent to the Initial LLC Transaction, LLC had an equity interest of 43.2% in LLP (prior to any conversion of any of the convertible securities). Deloitte Corporate Finance prepared an IER for the benefit of LLP Securityholders in respect of the Initial LLC Transaction.

Since becoming manager of LLP, LLC has focussed on improving operational performance through improving systems, simplifying the structure and strengthening the balance sheet and cash flow generation. Significant progress has been made to date, however, capital constraints for LLP and the sector as a whole resulted in LLP significantly reducing development activities in order to preserve capital (although this process commenced prior to the Initial LLC Transaction). Whilst significant progress has been made to date in these areas, the global financial crisis and the continued contraction in the debt markets since the Initial LLC Transaction has resulted in a significant reduction in the availability and increased cost of debt financing. Deteriorating economic conditions during FY09 resulted in a significant decline in asset values for LLP and the sector as a whole, which led to LLP taking significant impairment charges for asset revaluations, development writedowns and other charges for the period ended December 2008 followed by further impairment charges for the period ended June 2009.

Impairments and other non-cash balance sheet adjustments resulted in LLP seeking and being granted a waiver in December 2008 to prevent the LLP Group breaching the interest coverage ratio under its bank debt facilities. As a result of further impairments and other non-cash balance sheet adjustments for the period ended June 2009, LLP was in breach of the interest coverage ratio at June 2009, which resulted in LLP‟s financiers agreeing to a waiver of the breach in return for a number of conditions, including a revised interest coverage covenant and the reduction in the facility by 30 June 2010.

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Whilst LLP would likely be able to satisfy the debt repayment in accordance with the waiver through execution of smaller scale asset sales (including the $20 million to $25 million in sales which are well advanced), the LLP Board has a stated intention to target a more sustainable level of gearing in the range of 20% to 25%. To achieve this target the LLP Board has estimated that LLP will be required to raise in excess of $300 million of additional capital.

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2 Scope of the report

2.1 Purpose of the report

Section 411 of the Corporations Act 2001 (Section 411) regulates schemes of arrangement between companies and their securityholders. Section 412(1) of the Corporations Act 2001 together with Part 3 prescribes the information to be provided to securityholders in relation to schemes of arrangement. These provisions require the preparation of a report by an independent expert stating whether or not, in the expert‟s opinion, the Proposed Transaction is in the best interests of the securityholders of the company subject to the scheme where either:

the corporation which is party to the scheme (in this case LLC and its associates) has a director in common with the company subject to the scheme of arrangement (LLP)

the corporation which is the other party to the scheme is entitled to more than 30% of the voting shares in the company subject to the scheme.

As LLC has more than 30% of the voting shares in LLP, there is a legal requirement for an IER.

The Trust Scheme will require the approval of LLPT Unitholders pursuant to an ordinary resolution for the purpose of Section 611 to approve the:

acquisition of LLP units

a special resolution to authorise amendments to the LLPT constitution to give effect to the Trust Scheme.

Section 611 requires in certain situations where securityholder approval is required that a company commissions an IER, or the directors of the company prepare a report of equivalent standard. The independent expert is required to provide an opinion as to whether the transaction is fair and reasonable to securityholders whose votes are not to be disregarded (in this case LLC and its associates).

This report is to be included in the Scheme Booklet to be sent to LLP Securityholders and has been prepared for the exclusive purpose of assisting LLP Securityholders in their consideration of the Proposed Transaction. We are not responsible to you, or anyone else, whether for our negligence or otherwise, if the report is used by any other person for any other purpose.

2.2 Basis of evaluation

2.2.1 Guidance

Schemes of arrangement can include many different types of transactions, including being used as an alternative to a Chapter 6 takeover bid. The basis of evaluation selected by the expert must be appropriate for the nature of each specific transaction.

Section 640 requires an IER in connection with a takeover offer to state whether, in the expert‟s opinion, the takeover offer is fair and reasonable. Where the scheme of arrangement has the same effect as a takeover, the form of analysis used by the expert should be substantially the same as for a takeover bid, however, the opinion reached should be whether the proposed scheme is „in the best interests of the members of the company‟. Accordingly, if an expert were to conclude that a proposal was „fair and reasonable‟ if it was in the form of a takeover bid, it will also be able to conclude that the proposed scheme is in the best interests of securityholders. If an expert was to conclude that the scheme is „not fair but reasonable‟ it would be open to the expert to conclude whether the scheme is in the best interests of securityholders based on whether there are sufficient reasons for securityholders to vote in favour of the scheme in the absence of a higher offer, however, the expert should clearly state that the consideration is not equal to or greater than the value of the securities subject to the scheme.

In our determination as to whether the Share Scheme is fair and reasonable and therefore in the best interests of LLPL Shareholders and whether the Trust Scheme is fair and reasonable for LLPT Unitholders (who are not associated with LLC), we have had regard to common market practice, RG 111 issued by ASIC in relation to the content of IERs.

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RG 111

This regulatory guide provides guidance in relation to the content of independent expert‟s reports prepared for transactions under Chapters 5, 6 and 6A of the Corporations Act, including scheme of arrangements.

RG 111 refers to a „control transaction‟ as being the acquisition (or increase) of a controlling stake in a company that could be achieved, for example, by way of a takeover offer, scheme of arrangement, approval of an issue of shares using item 7 of Section 611, a selective capital reduction or selective buy back under Ch 2J.

In respect of control transactions, under RG 111 an offer is:

fair, when the value of the consideration is equal to or greater than the value of the LLP Securities subject to the Proposed Transaction. The comparison must be made assuming 100% ownership of the target company (i.e. including a control premium)

reasonable, if it is fair, or, despite not being fair, after considering other significant factors, LLP Securityholders should accept the offer under the Proposed Transaction, in the absence of any higher bids before the close of the offer.

To assess whether the Share Scheme is in the best interests of LLPL Shareholders and whether the Trust Scheme is fair and reasonable for LLPT Unitholders who are not associated with LLC, we have adopted the tests of whether the Proposed Transaction is either fair and reasonable, not fair but reasonable, or neither fair nor reasonable to LLP Securityholders as set out in RG 111.

2.2.2 Fairness

RG 111 defines an offer as being fair if the value of the offer price is equal to or greater than the value of the securities being the subject of the offer. The comparison must be made assuming 100% ownership of the target company.

The LLP Securities have been valued at fair market value, which we have defined as the amount at which the LLP Securities would be expected to change hands between a knowledgeable willing buyer and a knowledgeable willing seller, neither of whom is under any compulsion to buy or sell. Special purchasers may be willing to pay higher prices to reduce or eliminate competition, to ensure a source of material supply or sales, or to achieve cost savings or other synergies arising on business combinations, which could only be enjoyed by the special purchaser. Our valuation of an LLP Security has not been premised on the existence of a special purchaser.

Based on our understanding of ASIC‟s policy intent on the appropriate interpretation of the „fair‟ and „reasonable‟ tests in RG 111, we note the following:

in assessing the fairness of a transaction, an expert should not have regard to any entity specific or structural issues, such as excess gearing, which may temporarily impair an entity‟s ability to realise full fair market value for its assets. Instead, in assessing fairness, an orderly market for the underlying assets of the entity should be assumed

entity specific factors may be appropriate matters to be taken into account when assessing the reasonableness of the transaction.

Taking this into account, in considering the fairness of the Proposed Transaction we did not consider any potential valuation impact that may arise as a consequence of the potential near term covenant breaches of LLP or short-term liquidity constraints in our assessment of the fair market on the value of a security in LLP but have instead considered these factors in our assessment of the reasonableness of the Proposed Transaction.

We have assessed whether the Proposed Transaction is fair by comparing the value of an LLP Security with the value of the Consideration to be received from LLC. We have assessed the value of each LLP Security by estimating the current fair market value of LLP on a control basis and dividing this value by the number of LLP Securities on issue.

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2.2.3 Reasonableness

RG 111 considers an offer in respect of a control transaction to be reasonable if either:

the offer is fair

despite not being fair, but considering other significant factors, the securityholders should accept the offer in the absence of any higher bid before the close of the offer.

To assess the reasonableness of the Proposed Transaction we considered the following significant factors in addition to determining whether the Proposed Transaction is fair:

the existing securityholding of LLC in LLP

any other significant securityholdings in LLP

the likely market price and liquidity of LLP Securities in the absence of the Proposed Transaction

the likelihood of an alternative offer being made

other implications associated with LLP Securityholders rejecting the Proposed Transaction.

2.2.4 Individual circumstances

We have evaluated the Proposed Transaction for LLP Securityholders as a whole and have not considered the effect of the Proposed Transaction on the particular circumstances of individual investors. Due to their particular circumstances, individual investors may place a different emphasis on various aspects of the Proposed Transaction from the one adopted in this report. Accordingly, individuals may reach different conclusions to ours on whether the Proposed Transaction is fair and reasonable and therefore in the best interests of LLPL Shareholders and fair and reasonable to LLPT Unitholders. If in doubt investors should consult an independent adviser.

2.3 Limitations and reliance on information

The opinion of Deloitte Corporate Finance is based on economic, market and other conditions prevailing at the date of this report. Such conditions can change significantly over relatively short periods of time. This report should be read in conjunction with the declarations outlined in Appendix 11.

We would specifically draw to the attention of LLP Securityholders that recent volatility in capital markets and the current economic outlook has created significant uncertainty with respect to the valuation of assets. Recognising these factors, we consider that our opinions may be more susceptible to change than would normally be the case.

This engagement has been conducted in accordance with professional standard APES 225 Valuation Services issued by the Accounting Professional and Ethical Standards Board Limited (APESB).

Our procedures and enquiries do not include verification work nor constitute an audit or a review engagement in accordance with standards issued by the Auditing and Assurance Standards Board (AUASB).

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3 Overview of LLP

3.1 Introduction

LLP is currently the largest „pure play‟ owner, operator and developer of senior living communities listed on the ASX. LLP is structured as three integrated business divisions consisting of retirement living, aged care and property development of senior living facilities. We have therefore provided an overview of the senior living sector with particular emphasis on the segments in which LLP operates at Appendix 1.

As at 30 June 2009, LLP owned or managed a portfolio of 61 retirement villages and 33 aged care facilities across Australia and New Zealand (with a further eight sites under development) comprising 11,212 retirement village units (Retirement Living) and 2,313 residential aged care beds under management (Aged Care).

LLP‟s Retirement Living division has historically been the main contributor of profits as set out below.

Figure 2: LLP FY09 EBITDA contributions

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

Development
6%
Aged care
28%
Retirement
living
66%
Source: LLP
Note:
----- End of picture text -----

Excludes corporate costs of $23.5 million, annual fees to facility owners, impairment charges and other write offs.

LLP has achieved significant growth in total assets since listing as BBC in 2007 with total assets net of resident loans and accommodation bond liabilities of more than $1.3 billion as at 30 June 2009. This growth has been driven through a combination of organic growth, asset revaluations and acquisitions.

The principal operations of each of the divisions of LLP and their geographical segmentation are discussed below.

3.2 Corporate history

On 31 July 2007, LLP listed on the ASX (trading as BBC) as a stapled security subsequent to the restructure of three significant senior living businesses, the ASX listed Primelife Corporation Limited (PCL), the PrimeLiving Trust (PLT) and the Fini portfolio of retirement villages comprising 1,260 units located in Western Australia and 160 units under construction (the Fini Portfolio)[1] . Since its listing, LLP has been an active player in the senior living sector having undertaken the following acquisitions:

The Lakes Retirement Village (September 2007): The Lakes Retirement Village in Bundaberg, Queensland was acquired for $34.1 million. It comprised 259 independent living units (ILUs) and surplus land which had development approval for 78 ILUs, a residential aged care facility and a medical centre

Prime Retirement & Aged Care Property Trust (Prime Trust) management rights (September 2007): LLP acquired management rights for 3,610 ILUs across 12 retirement villages in Queensland and New South Wales (NSW) owned by Prime Trust for $65.2 million

1 The Fini Portfolio was acquired through the exercise of a call option shortly after BBC was officially listed on the ASX.

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The Homestay Village (October 2007): LLP acquired the Homestay Village in Perth consisting of 80 ILUs and associated community facilities for $7.8 million

Conform Health Group (November 2007): LLP completed its acquisition, on a debt-free basis, of Conform Health Group (Conform) for $164.4 million or an implied FY08 EBITDA multiple of 11.5 times. Conform‟s portfolio comprised 13 aged care facilities consisting of 1,126 aged care beds.

LLP underwent a major restructure in December 2008 as a consequence of the Initial LLC Transaction whereby LLC took over the management of LLP, injected additional capital into LLP and sold to LLP seven retirement villages and the management rights for one aged care facility. LLC also became the largest securityholder of LLP, owning 43.2% of LLP Securities (prior to conversion of the convertible securities).

In August 2009, LLC and Prime Trust reached agreement for LLC to acquire nine aged care properties and four retirement villages owned by Prime Trust and managed by LLP. In addition, LLP granted an option to Prime Trust to acquire the Retirement Guide portfolio for $42.5 million to $45 million. Further detail is provided in Section 3.7.

Significant developments in LLP subsequent to the Initial LLC Transaction are discussed in Section 3.10.

3.3 Corporate structure

LLP is a stapled security listed on the ASX. The figure below provides an overview of LLP‟s structure.

Figure 3: Corporate structure

Securityholder Stapled structure Lend Lease Villages Lend Lease Primelife Lend Lease Primelife Responsible Entity Limited Responsible Trust Limited (LLVRE) Entity (Collectively LLP) Lend Lease Village Management Pty Limited (LLVM) Manager

Source: LLP

Note: LLVRE and LLVM are entities owned by LLC.

3.4 The Retirement Living business

3.4.1 Introduction

LLP currently operates and/or manages a portfolio of 61 retirement villages comprising 11,212 units as at 30 June 2009. This portfolio provides the major source of EBITDA for LLP and had net assets of approximately $722 million as at 30 June 2009.

LLP either owns, leases from external third party landlords (including LLC) under contractual agreements or manages on a profit share basis the retirement villages held within its portfolio with the majority of the portfolio comprising ILUs.

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The composition of LLP‟s portfolio by accommodation type and ownership interest as at 30 June 2009 is set out below.

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

Figure 4: Retirement Living portfolio accommodation type Figure 5: Retirement Living portfolio ownership structure
----- End of picture text -----

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

Serviced
Apartments
(SA) Managed
15% Villages -
Profit Share
33%
Owned
Joint Villages
Ventures 54%
2%
Independent Living Units Managed
(ILU) Villages -
85% Leased
11%
Source: LLP Source: LLP
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Whilst LLP is entitled to 100% of the deferred management fees (DMF) in respect of the owned villages, its entitlements under the various other agreements vary. This is discussed in greater detail in Section 3.4.3.

A detailed listing of LLP‟s retirement village portfolio is provided at Appendix 2.

LLP previously leased four retirement villages from Prime Trust under long-term leases. As discussed in Section 3.7, in August 2009 Prime Trust and LLC agreed to a transaction whereby LLC would acquire these assets from Prime Trust. Whilst LLP would be the natural owner for these assets, due to the current financial position of LLP, LLP did not have the ability to fund this transaction on a stand-alone basis.

3.4.2 Portfolio details

LLP‟s retirement village portfolio is diverse with reference to village maturity, location and product offering providing the company with less volatile cash flows and the ability to potentially capitalise on more growth opportunities. The composition of LLP‟s portfolio by geographic location (based on number of units) and maturity is set out below.

Figure 6: Retirement Living age of village profile Figure 7: Retirement Living geographic location

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0 to 5 yrs NZ
10% SA 9% VIC
3% 24%
> 20 yrs WA
34% 12%
5 to 10 yrs
28%
NSW
21%
QLD
10 to 20 yrs 31%
28%
Source: LLP Source: LLP
----- End of picture text -----

LLP‟s portfolio has current occupancy levels of 95% with an average resident age of 80.3 years. The average age of villages is estimated at 14.7 years with the average length of stay at the mature villages being 9.7 years for an ILU and 4.7 years for a serviced apartment (SA), increasing the likelihood of future turnover which should have a positive impact on cash flows. The majority of villages are located in metropolitan locations.

In addition, 38% of LLP‟s managed aged care beds are co-located with LLP‟s retirement communities providing LLP with the ability to offer prospective residents a continuum of care between retirement villages and aged care facilities.

Despite softer property market conditions, LLP has recorded an average turnover of units of 4.8% over the past year allowing existing contracts to be renegotiated under more favourable terms, providing increased DMF cash flow and additional earnings potential. The average capital growth rate realised on these turnovers for the year ended 30 June 2009 was 10% resulting primarily from the refurbishment program that the business has implemented.

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3.4.3 Cash flow profile

LLP‟s participation in DMF, the capital gains and portfolio management of the DMF profile is a major determinant of cash flows for retirement living businesses. LLP‟s diversification across geographic regions and village maturity profile can provide both a competitive advantage and act as a hedge against cash flow volatility and exposure to particular markets.

The cash flow profile for LLP‟s retirement villages is variable over the life of the village but would include the following elements:

typically the resident makes an entry payment equivalent to the market value of the ILU to the retirement village on taking up residency in an ILU which is captured as a resident loan and is repaid at exit

during the term of the residency, a DMF is offset against the resident loan and the retirement village operator recognises the DMF at an agreed amount per annum as accounting revenue, capped at a certain percentage of the entry price. In calculating the DMF, the resale value of the accommodation, share of capital gains and length of the resident‟s stay are taken into account. The DMF can be calculated as a percentage of either the ingoing or outgoing property value. When the DMF is calculated based on ingoing property value, the operator often participates in any capital appreciation of the property. This participation can vary between 0% and 100% depending on the contractual arrangements in place

in addition to the DMF, residents may also pay a regular service fee for the management, use and maintenance of shared facilities in the complex, however these are largely used to fund the direct day to day costs of operating the village and may be subject to regulation

upon a resident vacating and the resale of the dwelling, the loan is repaid less any DMF paid to the retirement village operator. Generally speaking, the average length of stay assumed by industry participants is typically 10 to 12 years for an ILU and six to eight years for a SA.

The figure below provides an indicative profile of the cash flows from a single ILU. In the context of a single resident the operator receives cash flows dependent on resident turnover rates and upgrade requirements.

Figure 8: Example of the indicative expected cash flow profile of a single ILU (not to scale)

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1,400
3rd turnover
of ILU
1,200
1,000
2ndturnover
of ILU
800
1stturnover
600 of ILU
400 enters ILUResident
Initial
200 construction
of ILU
-
Year 0 Year 1 Year 11 Year 22 Year 33
-200
-400
Cashflow due to retirment village operator Cashflow due to departing occupant
Source: LLP
Note: Cash flow net of refurbishment costs
Cashflow in $'000
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However, a portfolio of retirement villages with a staged construction program will typically generate stable cash flows for the retirement village operator. This has the potential to create a recurring and growing (on a long-term basis) income stream comparable with the rental income stream of a property trust.

DMF contracts generally only terminate in the event of a resale with LLP accruing the respective DMF until that sale. LLP typically sells the unit on behalf of the outgoing resident for which it is also entitled to a selling fee. The table below provides a breakdown of LLP‟s most common DMF contracts.

Table 4: LLP’s most common DMF contracts

	% of total number of contracts % of total value of units Accrual Period (years) Maximum DMF DMF basis LLP share of capital gain 17% 20% 10 25% Outgoing 0% 10% 10% 12 36% Outgoing 0% 7% 7% 1 0% Ingoing 50% 5% 6% 8 20% Ingoing 100% 3% 3% 4 20% Ingoing 100% 3% 2% 10 25% Ingoing 75% 3% 2% 10 30% Ingoing 50% 2% 2% 8 25% Outgoing 0% 49% 52% average 23% 47%
Type 1 2 3 4 5 6 7 8 Top 8 Weighted

% of total
number of
contracts
% of
total value
of units
Accrual
Period (years)
Maximum
DMF
DMF
basis
LLP share of
capital gain
17%
20%
10
25%
Outgoing
0%
10%
10%
12
36%
Outgoing
0%
7%
7%
1
0%
Ingoing
50%
5%
6%
8
20%
Ingoing
100%
3%
3%
4
20%
Ingoing
100%
3%
2%
10
25%
Ingoing
75%
3%
2%
10
30%
Ingoing
50%
2%
2%
8
25%
Outgoing
0%
49%
52%
average
23%
47%

Type
1
2
3
4
5
6
7
8
Top 8
Weighted

Source: LLP

As set out above, depending on the specific contract structure, the capital gain is normally shared between the owner of the retirement village and the departing resident, although in some cases, the capital gain/loss is 100% attributable to the owner of the retirement village. As such, the capital growth of residential properties is a key driver of the profitability of retirement village operators. A number of LLP‟s contracts contain a capital gain component with most New Zealand contracts entitling LLP to 100% of the capital gain. In FY09, LLP reported a weighted average capital growth of 10% primarily as a result of the refurbishment program.

Along with LLP‟s portfolio of owned villages (in respect of which it is entitled to 100% of the DMF), LLP also has a number of villages which are operated under different ownership structures:

leased villages (10 villages comprising 1,206 ILUs and 195 SAs) LLP is entitled to 100% of the DMF in respect of such villages but pays an annual lease rental charge to the landlords, LLC and APN Property Group (APN). The remaining lease period on the five APN properties is 10 years with an option to renew for another 10 years. The lease terms for the five sites leased from LLC vary according to the respective locations and range for a remaining term of 12-18 years. Further options for renewal on these can extend the initial lease periods for a further 10 to 20 years depending upon the site
villages managed on behalf of Prime Trust (12 villages comprising 3,745 ILUs and SAs). LLP generates a management fee in respect of such villages of $445 on a net basis per occupied unit (indexed to the consumer price index (CPI)) per annum and 12% of the DMF and capital gain on resale of the unit. The remaining term of these agreements is 23 years
villages held through joint venture arrangements which are managed on a profit share basis (3 villages comprising –
230 ILUs) LLP is entitled to approximately 50% of operating profits after management and marketing fees.

3.4.4 Key value drivers

The key value drivers for LLP‟s Retirement Living business may be summarised as follows:

the structure of the DMF earned across each village, in particular, the ability to create a stable and recurring cash and income stream as part of a diversified portfolio of villages that provides cash flow stability and the ability to create a portfolio benefit
the composition of the residents across the portfolio in terms of average age and expected length of stay as this will influence the ultimate realisation of the DMF

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periodic upgrade of community and residential facilities to maximise asset values

provision of services and activities to enhance the appeal to residents of each of the facilities

residential property growth rates in the areas in which the villages operate and the extent of operator participation in unit capital growth.

3.5 The Aged Care business

3.5.1 Introduction

As at 30 June 2009, LLP had 33 aged care facilities located across four states. Care is provided to circa 2,093 people with a total of 2,313 beds currently under management. Of the total beds available, 38% are co-located with LLP retirement villages.

The Aged Care business contributed $131.1 million in reported revenue in FY09 and have consolidated net assets of approximately $152.6 million as at 30 June 2009. The Aged Care business employs the majority of staff within LLP and currently has over 1,900 employees.

LLP either owns, leases from external third party landlords (including LLC) or manages on a profit share basis the aged care facilities held within its portfolio. The composition of LLP‟s portfolio by ownership structure and location as at 30 June 2009 is set out in the figures below.

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Figure 9: Portfolio segregation by location Figure 10: Ownership structure
QLD SA
5% 3%
Leased
28%
VIC
45%
NSW47% Managed8% Owned64%
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Source: LLP

A detailed breakdown of LLP‟s aged care portfolio is provided in Appendix 2.

LLP previously leased nine aged care facilities from Prime Trust under long-term leases. As discussed in Section 3.7, in August 2009 Prime Trust and LLC agreed to a transaction whereby LLC would acquire these assets from Prime Trust.

Whilst LLP would be the natural owner for these aged care assets, due to the current financial position of LLP, LLP did not have the ability to fund this transaction on a stand-alone basis.

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3.5.2 Portfolio details

LLP‟s portfolio of aged care facilities offer high care, low care, specialised dementia units and ageing in place. A summary of LLP‟s aged care portfolio split by location and the level of service provided as well as current occupancy of the portfolio is set out below:

Figure 11: LLP’s Aged Care portfolio overview

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1,400
1,200
1,000
800
600
400
200
0
Low care High care Extra services care
NSW QLD VIC SA
Number of beds
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Source: LLP and Deloitte Corporate Finance analysis Note: Includes owned, leased and managed facilities.

LLP‟s current occupancy rate (including facilities in the ramp-up phase) for its portfolio of Aged Care facilities is approximately 90.5%. The average age of residents for FY09 was 84 years with an average tenure of two years. LLP has been granted 158 new licences across three of their aged care facilities since 30 June 2009.

3.5.3 Cash flow profile

LLP‟s Aged Care business derives the majority of its revenues from federal government subsidies which are largely known in advance and secure. The Australian federal government provided $79.1 million in funding[2] which accounted for approximately 71% of LLP‟s Aged Care FY09 operating revenue.

The two main resident funding contributions are resident fees and charges, which cover the daily cost of providing aged care and accommodation payments. Accommodation bonds are typically lump sum payments made by residents in low care beds or extra service beds. Bond prices are dictated by market forces and there is no legislative maximum. Whilst the quantum of the bond is not regulated (however, this is influenced by the local residential market) operators are allowed to retain $299 per month from these bonds. This retention amount is set by the federal government and applies for a maximum of five years. Operators cannot charge a bond that would leave the resident with less than $36,000 in assets.

Short-term growth in the Aged Care business is expected to be underpinned from new beds to be occupied. The new beds (to be opened at a number of facilities in FY10) include a number of beds which allow LLP to charge a bond which will contribute to the future cash flow of the business.

2 Source: LLP

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3.5.4 Key value drivers

The key cash flow drivers for LLP‟s Aged Care business include:

maintaining high occupancy. LLP has historically maintained high occupancy rates within its Aged Care portfolio and has continued to do so across all of its aged care facilities. In order to sustain high occupancy levels, LLP closely monitors such levels at each facility and proactively manages foreseeable vacancy gaps

maintaining a diversified bed range between high and low care and extra service places

LLP is currently implementing TRAX, a „Full Continuum of Service and Care‟ solution for Aged Care. TRAX is based on Microsoft Dynamics AX and will deliver a fully integrated and comprehensive system for financials, resident management and clinical care. The implementation of this system will allow LLP to more quickly and accurately realise federal government subsidy revenues as well as assisting in minimising the risk associated with federal compliance

effective cost management, particularly in respect of care staff and nursing staff. Wages and salaries are the most significant drivers of operating costs for the aged care sector representing more than 65% of operating expenditure for LLP‟s aged care division in FY09. The ability to recruit and retain a skilled and flexible workforce is equally a growing risk factor faced by the sector with a shortage of trained nurses driving wage rate increases. To help manage such factors, LLP has implemented various strategies in order to create opportunities to control costs. Such strategies include the recruitment of overseas trained nurses, thus reducing the reliance on nursing agencies, close monitoring of rosters to ensure alignment with care needs, employing multi-skilled staff and negotiating more flexible employment practices

maintaining a creditable reputation in the market is of major importance to LLP as a poor reputation could ultimately affect occupancy rates, allocated bed licences, the ability to attract and retain quality staff and the likelihood of non-compliance with regulatory requirements, which ultimately jeopardises funding received by the federal government. As at 30 June 2009, LLP‟s facilities maintained 100% accreditation by the Department of Health & Ageing. Furthermore, LLP management is currently in the process of processing asset management plans for each facility to focus on asset lifecycle planning and value enhancement underpinning ongoing property asset growth.

3.6 The Retirement Living Development business

3.6.1 Introduction

LLP restructured the Retirement Living Development business in April 2009 so that development services are now performed by LLC and delivered in accordance with development briefs issued by LLP‟s Retirement Living and Aged Care teams. LLP‟s Retirement Living Development business contributed $4.7 million to FY09 revenue. Development services included asset management of existing facilities to sustain and grow asset values.

Development projects are either wholly owned or partly owned with third parties in joint venture agreements and managed by LLP under management agreements and comprise both new developments and expansions to existing facilities. All of LLP‟s development operations are solely for its own portfolio with the construction for the discrete stages of each development project outsourced on a fixed price basis to construction companies with industry-based experience. LLP performs all sales and marketing functions. LLP has historically received „project management fees‟ when acting as development manager for a third party.

Due to capital constraints and the significant number of development projects of LLP, LLP has continued to reduce development activity in an effort to ration capital and to focus only on development projects which are seen to be more core to LLP‟s longer term strategy.

From December 2008 to 30 June 2009, LLP has reduced inventory on hand by 27%, divested non-core land for proceeds of $20 million, re-commenced development in Victoria and reduced stage sizes of specific development projects to improve capital management and ensure stock is kept to a minimum. LLP expects to complete the sale of a total of 7 non-core properties by 30 June 2010 which is expected to generate an additional $25 million in net proceeds.

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3.6.2 Retirement Living Development portfolio details

As at 30 June 2009, LLP‟s Retirement Living Development pipeline comprised 112 brownfield and greenfield units on hand with a further 729 units to be developed over the next nine years, at a combined gross value of approximately $320 million (an expected average sales value of approximately $385,000 per unit). There are an additional 70 completed units with an expected gross sales value of $23.5 million waiting for first time settlement.

As set out below, the Retirement Living Development pipeline as at 30 June 2009 is expected to be completed and sold within the next nine years, with approximately 69.7% of the development pipeline to be completed by FY15. The development pipeline represents 7.5% of all LLP retirement village units as at 30 June 2009.

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Figure 12: Development pipeline profile Figure 13: Development portfolio by location
Joint Venture WA
8% 14%
SA
6%
QLD VIC
5% 45%
NSW
Owned 30%
92%
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Source: LLP and Deloitte Corporate Finance analysis

In the context of the current capital position of the group, LLP may consider the sale of non-core assets in this portfolio to realise cash proceeds to meet debt repayments.

3.6.3 Cash flow profile

Revenue and cash flows related to this business are mainly dependent on the number of units sold, the sales price and the construction costs. Development profits which typically range between 10% and 20% (including the future value of DMF) of the sale value of the project are derived from the process of developing and constructing a village and selling completed units to first-time residents (through the signing of a DMF contract with the resident).

LLP also has developments which are being undertaken through joint venture arrangements. In respect of such joint ventures, LLP is entitled to a share of the cash flows generated by the joint venture based on its shareholding in the joint venture. Typically in joint ventures, LLP is also entitled to a share in the DMF contract related to first time and subsequent residents.

LLP, in some limited circumstances, also derives revenue from the sale of parcels of surplus land and through the redevelopment of established retirement villages.

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3.7 Relationships with LLC

Since the Initial LLC Transaction, LLC and LLP have entered into a number of commercial and contractual arrangements. The details of the existing arrangements between LLC and LLP are discussed below.

Management agreements

Subsequent to the acquisition of the management rights of LLP from B&B in December 2008, LLC became responsible for the services previously provided by B&B, in particular acting as manager for LLP which included providing members of the senior management team of LLP.

There are two management agreements, one between LLVM (a wholly owned subsidiary of LLC) and LLPL and one between LLVM and LLVRE in its capacity as responsible entity of the LLPT. The terms of the management agreements are almost identical.

Under the existing management agreement between LLP and LLVM, LLVM is entitled to base fees, incentive fees, origination and disposal fees (O&D fees) and fees for non-designated services as follows:

base fee of 0.5% of adjusted gross assets of LLP, defined as total assets of LLP less residential liabilities (AGA)

incentive fees of up to 20% of any excess return of LLP as compared to the benchmark return (S&P/ASX 300 Index return) capped at 0.75% of the AGA of LLP

O&D fees of 1.25% of the capital invested or divested by LLP plus the amount of any debt financing for an investment

fees for non-designated services at rates equivalent to market rates charged by third parties for like services. During FY09, LLP paid fees of approximately $4.7 million to LLVM under these management agreements.

Development agreement

Under an in-principle agreement between Retirement by Design Pty Limited (RBD) (a wholly owned subsidiary of LLC) and LLP, RBD acts as development manager for LLP with the following broad responsibilities (Development Agreement):

development management services in relation to existing projects and new projects

assist LLP in the management of asset divestments

provide asset management services in relation to LLP‟s existing retirement village and aged care assets.

The services provided pursuant to the Development Agreement must be performed with the degree of professional skill, care and diligence and to the standard expected of a development manager experienced in providing the same or similar services. Payment for these services is at prescribed rates and have been independently assessed as being on an arm‟s length basis.

During FY09, LLP paid fees of approximately $0.4 million to RBD[3] under this agreement.

Prime Trust transaction

In August 2009, LLC, LLP and Prime Trust announced a three way transaction whereby LLC acquired nine aged care facilities and four retirement villages from Prime Trust for $76.8 million (Prime Trust Transaction). As part of the Prime Trust Transaction, LLP granted Prime Trust a call option (which expires on 30 June 2010) to acquire the management rights of 12 retirement villages, known as the Retirement Guide portfolio (owned by Prime Trust and presently managed by LLP) for between $42.5 million and $45 million.

Disputes between LLP and Prime Trust and between LLP and other parties associated with Prime Trust in relation to the Retirement Guide portfolio were released on settlement of the first tranche of the Prime Trust Transaction.

3 Source: LLP

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Other

In addition to these arrangements, LLP is also liable for annual interest payments to LLP on the 9.5% convertible bonds issued to Lend Lease Capital Services Pty Limited (LLCS) (a wholly owned subsidiary of LLC) as part of the Initial LLC Transaction. The annual interest on these instruments is approximately $15 million.

There are three sets of convertible notes issued to LLCS. These convertible notes have a term of five years and are subordinated to LLP‟s bank debt.

3.8 Capital structure

3.8.1 Debt facilities

Bank debt facilities comprise two tranches of $350 million (Tranche A) and $125 million[4] (Tranche B) held with a syndicate of Australian financial institutions (comprising ANZ Bank Limited, National Australia Bank Limited and Commonwealth Bank of Australia).

As at 30 June 2009 LLP had drawn 100% of Tranche A and approximately 65% of Tranche B. The Tranche A facility is due to mature in December 2010 and the Tranche B facility is due to mature in December 2012.

In June 2009, LLP announced that it was at risk of potentially breaching its interest coverage ratio for FY09 due to noncash impairment charges expected to be taken as at 30 June 2009. Accordingly, LLP began negotiations with its financiers to have a waiver granted with respect to this covenant.

The waiver was approved by the banks and announced to the market on 18 September 2009 and contained the following terms:

adoption of a cash flow based covenant from December 2009 of 1.25 times (to replace the previous interest coverage ratio which included non cash items)

the facility limit to be reduced to $350 million by 30 June 2010. As at the date of this report, the facility limit was $475 million

the majority of the proceeds of asset sales and equity raising are to be applied against the bank debt until the facility limit of $350 million is achieved

no change to the leverage covenant ratio of 50%. LLP maintains significant headroom in this covenant, achieving a ratio of 34.6% as at 30 June 2009.

LLP commenced divestment of assets in the first half of FY09 in order to reduce debt. Proceeds from the sale of $20 million of non-core assets have been received in the first half of FY10.

In addition to bank debt, $158.4 million in 9.5% convertible notes is outstanding. As part of the Initial LLC Transaction, three separate tranches of convertible notes were issued to LLC with a total face value of $158.4 million and their key terms are summarised below:

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Table 5: LLP convertible notes
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	First Notes	Second Notes	RBD Notes
Face value	$13.4 million	$25.0 million	$120.0 million
Conversion price	$0.60	$0.25	$0.60
Maturity date	31 December 2013	31 December 2013	31 December 2013
Conversion (at LLC‟s option)	31 December 2013	Anytime before 31 December 2013	31 December 2013

Source: LLP

The convertible notes are subordinated unsecured debt instruments and are not guaranteed.

4 The facility limit for Tranche B was reduced from $175 million to $125 million in early October 2009

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3.8.2 Equity capital

As at 28 August 2009, LLP had the following securities on issue:

966,252,666 stapled securities

1.1 million employee options issued under the previous LLP option plan. These options were granted to B&B executives under previous management for no consideration. This plan is no longer in place, however, some of the options granted under the plan are still outstanding. As at 30 June 2009 these options had a weighted average exercise price of $1.34.

The following table summarises the top ten securityholders in LLP.

Table 6: Top ten security holders of LLP as at 28 August 2009

	Number of	Percentage of
	securities	total issued
Securityholder name	(‘000)	securities
Lend Lease Capital Services Pty Limited	417,685	43.2%
Citicorp Nominees Pty Limited (CFS Future Leaders Fund A/C)	30,072	3.1%
Citicorp Nominees Pty Limited	24,598	2.5%
Pagodatree Investments Limited	20,000	2.1%
Forbar Custodians Limited	17,642	1.8%
Citicorp Nominees Pty Limited (CFS Developing Companies A/C)	12,509	1.3%
JP Morgan Nominees Australia Limited	11,679	1.2%
HSBC Custody Nominees (Australia) Limited	11,118	1.2%
National Nominees Limited	9,082	0.9%
Mr Ronald Stanley Moloney & Mrs Gillian Sue Moloney	7,370	0.8%
Total of top ten securityholdings	561,756	58.1%
Other securityholders	404,497	41.9%
Total securities on issue	966,253	100.0%

Source: LLP

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3.8.3 Equity capital security trading

Since June 2008 the closing unit price for LLP has ranged between a low of $0.08 per security in March 2009 and a high of $0.53 per security in September 2008. The discount to NTA at which the securities have traded has ranged between a discount of 1% subsequent to the Announcement Date up to a discount of 86% in March 2009. Total turnover of LLP Securities over this period was approximately 0.5 times the total outstanding securities with average daily volume of 1.5 million securities.

A summary of LLP‟s Security VWAP movements and trading volumes over the period from 1 June 2008 to 13 October 2009 is provided in Figure 14 below.

Figure 14: LLP’s security trading history

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0.70 100
BBC LLP AnnouncementDate of
Proposed Transaction 90
0.60
80
0.50 70
60
0.40
50
0.30
40
0.20 30
20
0.10
10
0.00 0
Volume VWAP rebased NTA
Security price
Volume ('million)
----- End of picture text -----

Source: Bloomberg

LLP Securities are listed on the ASX and trade under the ticker LLP.

The LLP price has been trending downwards and trading at a significant discount to the NTA per security in recent periods which may be attributable to the following:

specific financing risks of LLP and associated uncertainty in respect of LLP‟s financial position

negative market sentiment regarding the lack of near term distributions expected from LLP compared to other companies in the sector

negative market sentiment towards externally managed vehicles

market sentiment regarding the property sector as a whole (which is a key driver for the value of LLP‟s underlying retirement village assets) which is likely to have negatively affected the security price of LLP. The global credit crisis has caused significant capital constraints, in particular the availability of debt financing which is critical to the industry and has resulted in a significant decline in security prices across the sector as set out in the comparison of recent trading in LLP Securities compared to the price of the S&P/ASX 300 Property Accumulation Index below

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Figure 15: LLP’s relative performance to the S&P/ASX 300 Index and S&P/ASX 300 Property Accumulation Index

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1.20
1.00
0.80
0.60
0.40
0.20
0.00
LLP S&P/ASX 300 Index S&P/ASX 300 Property Accumulation Index
Price $ (rebased)
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Source: Bloomberg and Deloitte Corporate Finance analysis

Note: LLP Security price, S&P/ASX 300 index and S&P/ASX 300 Property Accumulation Index rebased to 1.0 as of 1 January 2008

as set out above, LLP underperformed the S&P/ASX 300 Property Accumulation Index and the broader S&P/ASX 300 Index over the period from 1 January 2008 to 13 October 2009 with LLP‟s security price falling 66.9% over the period. Over the same period, the S&P/ASX 300 Index fell 24.8% and the S&P/ASX 300 Property Accumulation Index fell 49.6%

the price of LLP has recently been influenced by announcement of the Proposed Transaction with LLP Securities generally trading in line with the consideration of $0.31 per security.

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3.9 Financial Overview

3.9.1 Financial performance

The audited income statement of LLP for FY08 and FY09 are summarised in the table below.

Table 7: Financial performance

	FY08	FY09
	Actual	Actual
	($’000)	($’000)
Retirement Living	62,777	45,530
Aged Care	10,365	19,750
Retirement Living Development	6,306	4,272
Corporate/Other	(22,355)	(23,463)
Annual fees to facility owners	(13,009)	(13,919)
Total operating EBITDA	44,084	32,170
Fair value adjustments to retirement villages–gain/(loss)	70,889	(70,589)
Mark to market on interest rate swaps	(3,466)	(25,254)
Impairments and related provisions	(5,999)	(117,946)
Restructure costs	-	(7,280)
Depreciation and amortisation	(9,389)	(10,102)
Interest expense	(40,198)	(45,622)
Profit/(loss) before income tax	55,921	(244,623)
Income tax (expense)/benefit	(14,848)	(2,055)
Profit/(loss) attributable to security holders of LLP	41,073	(246,678)

Source: LLP annual report and Deloitte Corporate Finance analysis

We note the following commentary in relation to LLP‟s financial performance:

LLP reported a significant loss of $246.7 million for FY09 which was impacted by the following factors:
poor operating conditions for the Retirement Living and Retirement Living Development divisions which resulted in a significant decline in revenue during FY09
impairment and fair value adjustments relating to retirement villages of approximately $190 million which is largely attributable to lower capital growth rates and higher discount rates in the underlying investment property valuations as a consequence of poor market conditions
a downwards fair value adjustment for interest rate derivatives held of $25.3 million in FY09
costs and charges associated with restructuring the business
the Aged Care division EBITDA increased significantly in FY09 due largely to the full year impact of previous acquisitions as well as facility ramp-up.

Distribution history

Since listing, LLP has paid the following distributions:

a fully tax-deferred interim distribution of 4.2 cents per stapled security ($27.4 million) in respect of the six months ended 31 December 2007

a fully tax-deferred final distribution of 2.1 cents per stapled security ($13.7 million) in respect of the 12 months ended 30 June 2008.

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The above two payments equated to a total full year distribution of 6.3 cents per stapled security which was below the forecast distribution of 8.4 cents provided in the Initial Public Offering (IPO) prospectus, resulting in a distribution yield of 6.0%[5] , rather than the projected yield of 8.0%. Distributions were paid primarily from profits derived from asset revaluations and funded primarily through increased borrowings and a dividend reinvestment plan.

No distributions were declared in FY09 and LLP has announced that they do not intend to make distributions until the group is at a more optimal position with respect to its level of gearing and surplus cash flow.

3.9.2 Financial position

LLP‟s audited balance sheets as at 30 June 2008 and 30 June 2009 are summarised in the table below.

Table 8: Financial position

	30-Jun-08	30-Jun-09
	Actual	Actual
	($’000)	($’000)
Cash and cash equivalents	18,818	35,023
Receivables	53,366	56,676
DMF	70,828	57,483
Inventory	29,113	33,359
Property, plant & equipment	396,527	299,628
Investment property	1,786,868	2,222,996
Intangibles	238,482	238,972
Other	113,536	96,592
Total current and non current assets	2,707,538	3,040,729
Resident loans	1,188,762	1,576,389
Accommodation bond liabilities	105,560	119,443
Payables	61,726	70,441
Borrowings	591,730	614,902
Deferred revenue	19,318	26,043
Deferred tax liabilities	97,111	78,521
Other	30,485	26,333
Total current and non current liabilities	2,094,692	2,512,072
Net assets	612,846	528,657
NTA	374,364	289,685
Book value gearing (total) 1	41%	44%
Book value gearing (excluding convertible securities)1	30%	32%
Net asset backing per security	$0.94	$0.55
NTA per security	$0.57	$0.30

Source: LLP and Deloitte Corporate Finance analysis

Notes:

Book value gearing based on net debt (borrowings less cash and cash equivalents) divided by adjusted total assets (total assets less resident loans, accommodation bond liabilities and cash and cash equivalents)

5 Annualised distribution yield with actual distributions based on the offer price of $1.15.

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We note the following commentary in respect of LLP‟s financial position as at 30 June 2009:

cash position of $35.0 million

inventory of $33.3 million includes land held for sale

property, plant and equipment consists of land and buildings, plant and equipment at cost, leasehold improvements and plant and equipment under lease and hire purchase

the carrying value of the owned retirement village portfolio to LLP represents the net of investment property, resident loans and deferred revenue. This value represents the expected future benefit from the owned Retirement Living portfolio calculated by discounting future DMFs due to LLP. As at 30 June 2009, the net investment property value to LLP was $620 million

investment properties relate to the assessed fair value of retirement villages and aged care facilities owned by LLP. The valuations as at 30 June 2009 are based on both directors‟ valuations and independent valuations. Approximately 39% of the investment property valuations were based on independent valuations as at 30 June 2009. Key assumptions adopted in the basis of valuation as at 30 June 2009 included:

weighted average discount rate of 12.93% which represented an increase of 80 basis points (bps) from 30 June 2008
weighted average capital growth rates of 3.95% across the portfolio which represented a decrease of 58 bps from 30 June 2008
average length of stay of 11 years for ILUs and five years for SAs
resident loans of $1.6 billion pertain to the licence liability in respect of the loan-licence agreements of retirement village units. Resident loans are measured at face value representing the resident‟s share of capital gains based on market values of the underlying property at 30 June 2009, less any DMF. Resident loans are non interest bearing and are repayable out of the amounts paid by the incoming residents
intangible assets of $238.9 million relate to the following:
$90.6 million of goodwill related to retirement villages
$42.5 million in management rights related to the agreements acquired from Prime Trust in 2007 and $9.9 million relates to Keperra management rights
$95.9 million in relation to Aged Care, being bed licences ($59.5 million) and goodwill ($36.4 million)

accommodation bond liabilities of $119.4 million are typically paid by residents of low care Aged Care beds

borrowings of $614.9 million incorporate current borrowings of $457.3 million (the majority of which is largely owed to the banking syndicate as discussed in Section 3.8.1) and non current borrowings of approximately $157.6 million which largely relates to the convertible notes that were issued to LLC as part of the LLP restructure in December 2008. The convertible notes incurred interest expense of $7.6 million for the six months ended 30 June 2009.

3.10 Current position of LLP

The global financial crisis and the continued contraction in the debt and equity markets since the Initial LLC Transaction has resulted in a significant reduction in the availability, and increased cost, of debt financing. The lack of funding available, particularly in the property sector, has constrained growth as participants have focused on recapitalising their balance sheets with little or no capital available for growth.

These developments in capital markets have significantly constrained the ability to fund retirement village assets. Retirement village assets have historically been evaluated by lenders using similar metrics as companies with direct property investments (such as yield). Investors and lenders have begun to understand the sometimes significant disconnect between reported earnings and cash flows and have started to consider these in investment decisions either through demanding higher returns, or in the case of financiers, implementing interest coverage covenants based on cash flows rather than accounting earnings. In most instances this has significantly reduced the debt capacity of these vehicles.

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These events have had the following general effects for LLP:

the significant level of gearing in place for LLP and the lack of capital available generally resulted in LLP delaying and/or abandoning a number of development projects

the tenure within the existing retirement village portfolio has extended as villages mature (and therefore the cash flows have been delayed)

new residents have been delaying purchases of ILUs and SAs

a significant devaluation of LLP‟s investment properties due to reduction in short-term capital growth expectations and expansion of risk margins incorporated in discount rates applied in the investment property valuations.

As at 30 June 2009 LLP breached its interest cover covenant, primarily as a consequence of fair value adjustments to its retirement village investment properties due to the above factors, in particular increases to discount rates. In September 2009, LLP finalised negotiations with its banks and LLC regarding the terms of a waiver in respect of the breach. As part of the waiver, LLP‟s interest coverage covenant (which was previously calculated based on earnings including investment property revaluations) was replaced with a cash interest coverage covenant of 1.25 times. Concurrent with this, the banks also required the facility to be reduced to $350 million by 30 June 2010.

In addition to the waiver, LLP‟s bank facilities will mature in December 2010 and there is a risk that the banks may further reduce their exposure and/or make the existing covenants more restrictive as part of that refinancing process.

it is likely to represent a multiple of the total market capitalisation of LLP prior to the announcement of the Proposed Transaction
LLP has approximately 9,500 retail securityholders on its register and sourcing an underwriter for the retail component would be challenging due to the likely size of the retail component of any offering and the uncertainty regarding LLC‟s actions during any such raising
if LLC were to fully or partially underwrite such a raising, there would be the potential for LLC to obtain a more significant interest in, and even control of, LLP. If LLC did not participate, this could send a negative signal to the market which could limit the proceeds raised and/or result in a negative re-rating of LLP
even if sufficient capital could be raised through this process recent market evidence suggests that significant discounts to the recent unit price and the NTA of LLP would be required in order to make it attractive to potential investors. Accordingly such a raising could significantly dilute the underlying interests of LLP Securityholders who did not participate
the prospects of LLP Securities trading at prices above the value of the implied consideration offered under the Proposed Transaction in the short-term would be limited.

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4 Valuation of LLP

4.1 Introduction and summary

For the purpose of our opinion fair market value is defined as the amount at which the securities would be expected to change hands between a knowledgeable willing buyer and a knowledgeable willing seller, neither being under a compulsion to buy or sell. We have not considered special value in this assessment.

Based on our understanding of ASIC policy intent on the appropriate interpretation of the „fair‟ and „reasonable‟ tests in RG 111, we note the following:

entity specific factors may be appropriate matters to be taken into account when assessing the reasonableness of the Proposed Transaction.

As a result of the above, in considering the fairness of the Proposed Transaction we have not specifically considered any potential valuation implications that may arise as a consequence of the potential near term covenant breaches or short-term liquidity and funding constraints currently faced by LLP in our assessment of the fair market value of an LLP Security. However, we have considered the impact of these issues in our analysis of the reasonableness of the Proposed Transaction.

We have estimated the fair market value of a security in LLP to be in the range of $0.28 to $0.38 on a control basis. This has been estimated by aggregating the fair market value of the underlying businesses of LLP on a sum-of-the-parts basis and deducting the present value of any costs not captured within the cash flows related to these businesses (including corporate overheads and management fees).

In undertaking the sum-of-the-parts analysis we have estimated the fair market value of each operating business unit of LLP separately using the discounted cash flow method. The discounted cash flow method implicitly represents the fair market value of a controlling interest in each of the business units. Our rationale as to the appropriateness of use of this methodology is set out at Appendix 3.

We are of the opinion that the most appropriate methodology to value the Retirement Living business, the Aged Care business and the Retirement Living Development business is the discounted cash flow method due to the following factors:

LLP‟s management has prepared long-term cash flow forecasts

the discounted cash flow method is commonly accepted as the most appropriate method for valuing retirement living, development and aged care assets given it provides the ability to incorporate rollover rates of residents and specific DMF related cash flows

there are few companies that are directly comparable to LLP and its individual businesses in terms of its asset portfolio, given its mix of Australian-based aged care facilities and retirement villages spread across both Australia and New Zealand

the cash flow profile of the Retirement Living Development business is relatively uneven over time making use of earnings multiple based approaches less meaningful.

In addition, for the Retirement Living and Aged Care businesses we have also compared the asset and earnings multiples implied by our estimated fair market value of these businesses to the asset and earnings multiples implied by the share trading and transactions involving broadly comparable companies. For the Retirement Living Development business we have also considered the most recent book values of the development projects in our assessment of the fair market value of this business.

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The following table sets out a summary of our estimate of the fair market value of an LLP Security, on a control basis.

Table 9: Summary – estimated fair market value of an LLP Security

	Low	High
	($ million)	($ million)
LLP’s businesses:
Retirement Living	675.0	725.0
Aged Care (including development projects)	180.0	210.0
Retirement Living Development	140.0	150.0
Corporate costs	(140.0)	(140.0)
100% enterprise value of LLP	855.0	945.0
Surplus assets and non-operating liabilities	15.0	25.0
Net debt of LLP	(599.6)	(599.6)
100% equity value of LLP	270.4	370.4
Total securities of LLP on issue(‘million)	966.3	966.3
Value of LLP per security ($)	$0.28	$0.38

Source: Deloitte Corporate Finance analysis

We provide below details of our application of the discounted cash flow methodology and the consequent views on value.

4.2 Future cash flows

4.2.1 Introduction

The management of LLP has prepared a detailed business plan and financial model to estimate the expected cash flows for each underlying business of LLP. The financial model includes projections of nominal after tax cash flows for each business unit of LLP and for LLP as a whole (Fund Model). The Fund Model was prepared after a detailed analysis of the near term expectations regarding resident turnover, capital growth and other operating assumptions on a facility by facility basis having particular regard to the current environment. The Fund Model has formed the basis of LLP‟s business planning decisions and discussions with lenders. The Fund Model was prepared having regard to the individual models prepared for each retirement village and aged care facility which were utilised to estimate carrying values for financial reporting purposes (Asset Models).

The main difference between the Fund Model and the Asset Models with respect to the retirement villages is that the retirement villages‟ Asset Models have been prepared on a „through the cycle‟ basis in that capital growth, resident turnover and other assumptions have been estimated based on expectations over the long-term whereas the Fund Model represents LLP management‟s best estimate of the cash flows to be generated in the near-term for each facility which may include deviations expected to occur in the shorter term relative to longer term expectations.

The Asset Models corresponding to the aged care facilities were not prepared on a „through the cycle‟ basis and effectively represent LLP management‟s best estimate of the cash flows to be generated in the near-term. However, in the case of aged care facilities, key assumptions such as resident turnover, occupancy and government revenue are not impacted directly by the current environment and a significant difference between current and „through the cycle‟ assumptions would be unlikely.

We have performed an analysis of LLP‟s projections contained within the Fund Model and the Asset Models that has included:

analysing the financial models provided by LLP management, including limited procedures regarding the mathematical accuracy of the models (but we have not undertaken a review nor an audit of the models)

holding discussions with LLP management concerning the preparation of the projections and their views regarding the assumptions on which they are based

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analysing historical results and available industry publications, assessing the reasonableness of the significant assumptions, such as occupancy rates, property growth rates, retirement village turnover, accommodation bond turnover, etc to assess the inputs for the purposes of our valuation analysis.

Our work did not constitute an audit or review of the projections in accordance with the AUASB Standards (or equivalents) and accordingly we do not express any opinion as to the reliability of the projections or the reasonableness of the underlying assumptions. However, nothing has come to our attention as a result of our analysis that suggests that the assumptions on which the projections are based have not been prepared on a reasonable basis.

Since projections relate to the future, they may be affected by unforeseen events and they depend, in part, on the effectiveness of management‟s actions in implementing the projections. Accordingly, actual results are likely to be different from those projected because events and circumstances frequently do not occur as expected, and those differences may be material.

Based on the Fund Model and the Asset Models we developed our own long-term discounted cash flow models. The significant assumptions underlying each business unit are discussed below.

4.2.2 Significant cash flow assumptions

Retirement Living

The Retirement Living cash flow model has been compiled using both the Fund Model for short-term projections and the Asset Model for medium to long-term projections. These models set out the cash flow projections for:

the villages in Australia in which LLP has 100% ownership of the DMF entitlement

the villages in New Zealand in which LLP has 100% ownership of the DMF entitlement

the villages subject to lease or management agreements in which LLP has an entitlement to part or all of the DMF.

The cash flows attributable to each of the villages extend to 30 June 2029 with a terminal yield and have been based on the current underlying contractual arrangements. In order to estimate the expected cash flows for the Retirement Living business we have had primary regard to the Fund Model for the short-term cash flow estimates and have assumed that over the longer term, the cash flow profile for each village will trend towards the Asset Model.

The following significant assumptions were made for the valuation of the Retirement Living business:

the cash flows for the Retirement Living division are largely driven by the timing of when the DMF crystallises which in turn is a function of resident turnover and capital growth assumptions for each individual unit

the average length of resident stay across the Australian portfolio of villages is assumed to be 11 years for ILUs and five years for SAs. The average length of resident stay across the New Zealand portfolio of villages is assumed to be nine years for ILUs and five years for SAs. These assumptions are in line with industry averages, LLP‟s historical performance and assumptions currently adopted by companies comparable to LLP. An allowance has been made to account for the typically lower turnover rates in younger villages as compared to more mature villages

with respect to the above and residents currently in the villages, LLP has recently undertaken an exercise of evaluating forecast tenure for all residents. We have had regard to this in our analysis

high levels of occupancy are assumed in each of the villages which is broadly in line with published industry averages and LLP‟s operating history

in the Fund Model, LLP management has assumed capital growth rates ranging from nil to 6.0% which reflects the potential constrained capital growth in the short-term for the Retirement Living business

in the Asset Model, LLP management has estimated long-term annual capital growth rates ranging from 2.75% to 4.88% which reflect the long-term expectations after considering the maturity, type and location of the village. The weighted average growth rate (by gross asset value) amounts to 3.95% which is in line with market analysts‟ publications and those applied by independent valuers and comparable companies

we have estimated a nominal long-term growth rate of 4.0% having regard to long-term observed industry growth rates, long-term real growth expectations in the underlying economy and long-term forecasts for inflation

all maintenance capital expenditure is either fully funded by the resident or is accounted for through a reduced DMF cash flow

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the cash flows attributable to the New Zealand portfolio of villages have been converted to Australian dollars based on the current forward curve to FY13 and assumed to be constant from FY14 onwards

based on the Fund Model and discussions with management, we have incorporated certain operating costs attributable to the Retirement Living business which are not captured within the DMF profile of each village. These costs have been escalated annually by inflation

we have applied an income tax rate of 30%. We have incorporated the tax losses available to LLP within our valuation of the Retirement Living portfolio in Australia. As at 30 June 2009, LLP had approximately $446 million in gross tax losses ($134 million on a tax-effected basis) which may be capable of being utilised against future taxable income from LLP‟s operations in Australia. Approximately $142 million of these losses ($43 million on a tax-effected basis) are „transferred losses‟ relating to the period prior to LLP forming a tax consolidated group and are subject to a very low available fraction which substantially limits the availability of these losses for utilisation in any financial year

with respect to the New Zealand portfolio of villages, due to the level of tax losses and deductible depreciation available to the business, we have assumed no tax is payable for the New Zealand business in the foreseeable future
the cash flows in relation to the villages which are managed and/or leased have been estimated with regard to the contractual arrangements in place
in estimating the Prime Trust management rights we have had regard to the projected cash flows under this contract as well as the exercise price of the call option held by Prime Trust.

Aged Care

The operational revenues for the Aged Care business are largely regulated and are a function of the level of care provided and the occupancy achieved for each facility. We note the following significant assumptions in relation to Aged Care:

revenue from government funding represents approximately 71% of total revenue, with the remainder comprising service fees (approximately 25%) and bond retentions and sundry income (approximately 4%). These elements of revenue are assumed to grow in line with projected long-term inflation
CPI rate expectations are assumed to be 3% per annum, which is broadly in line with the Reserve Bank of Australia‟s forecasts

operating margin is assumed to remain at levels that are in line with historical trends, as there are no material changes expected in the structure of operating costs (subject to the comments below)

occupancy levels for the business have been estimated by LLP after considering the particular circumstances of each facility and they are expected to reach 92.8% (on a weighted average basis) in the near term. This appears reasonable given the historical trend in occupancy levels recorded by LLP, its large scale diversified asset base and the favourable industry dynamics. Occupancy levels have not been impacted materially by the economic environment and it is reasonable to assume that they will remain stable, assuming no changes in legislation (although ongoing sustainability in the long-term will be dependent on greater asset management and investment)

the average length of resident stay across the Australian portfolio of aged care facilities is assumed to be 2.4 years. This assumption is based on LLP‟s historical averages including all facilities. This assumption is broadly in line with industry averages

operating lease payments are assumed to remain in line with historical trends and the existing contractual arrangements in place (with LLC previously Prime Trust). Pursuant to the underlying lease agreements, lease payments are assumed to grow in line with projected long-term inflation

„ramp-up‟ occupancy associated with new residents (from recently developed facilities and from the planned redevelopment of an existing property) results in an increase in accommodation bond cash inflow for FY10. This activity decreases until it levels out in the near term and normalised operations are assumed thereon

the total number of beds considered in the Asset Model corresponding to the Aged Care business includes the recently obtained bed licences for the Keperra (19 beds) and Princeton View (19 beds) facilities

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LLP management has assumed no new developments are undertaken in the near term, except for the redevelopment of an existing property, which will imply the incorporation of additional beds. LLP management has considered the inclusion of new developments in short-term projections not realistic due to LLP‟s current capital constraints. However, we are of the view that a potential acquirer may consider the likely effect on the value of the Aged Care business of new developments. Accordingly we have considered the development of a new facility that was originally planned, The Lakes Bundaberg (120 new beds)

a tax rate of 30%.

LLP expects to realise significant additional revenue for the Aged Care business as a result of the implementation of the TRAX operating system (refer Section 3.5.4). The TRAX implementation has been 100% completed in Victoria and South Australia and 50% completed in NSW and Queensland. Additional revenue is expected over the coming years. Based on discussions with LLP‟s management with respect to the possible risks associated with the TRAX implementation and based on the recent completions track record, we are of the view that it is not unreasonable to assume that the expected benefits will be realised according to management‟s expectations. We are not aware of any risk inherent in the system‟s implementation that could prevent LLP from realising these benefits.

Accommodation bond liabilities are a unique instrument in that they bear no interest and are only (indirectly) repayable to the extent that occupancy levels are not maintained (or there is a change in regulation). In addition, since bond prices are broadly linked to underlying residential housing markets, aged care operators participate in the appreciation of these bonds when departing residents are replaced. This cash flow is non-taxable.

We note the following in respect of the accommodation bond liability:

there is a relatively common view that these bonds do not represent a real economic liability since this liability will never have to be repaid provided occupancy levels are maintained. As a result, the bond liability can therefore be argued to be an interest free perpetual liability. However, there is a risk that this liability may require repayment at some point due to:
changes in federal government regulation
occupancy rates being difficult to sustain over the long-term due to potential increased supply from a federal government response to increased demand and/or difficulty in maintaining occupancy rates as older facilities require refurbishment.

We have considered the net cash inflows from accommodation bonds in our cash flows for the Aged Care business (including appreciation of the bonds at 4.0% which is consistent with the weighted average capital growth assumption for the Retirement Living business). We have also assumed that the accommodation bond liability is as part of the terminal value.

Retirement Living Development

The valuation of the Retirement Living Development business has been based on the expected cash flows over the development period for each project, which currently includes the phased development of eight retirement living villages that are expected to be delivered over a period of ten years. The delivery of this development pipeline reflects the deferral of certain projects in order to manage the business cash flow and excess stock build up.

The following significant assumptions were made for the Retirement Living Development business:

cash flows are derived as the net sales proceeds after deducting costs such as those relating to sales and marketing, construction, infrastructure and agency costs
Elliot Gardens, Ellenbrook Waterford and Woodland contribute the majority of cash flows for the Retirement Living Development business in the short-term to medium-term

the cash flow projections include a 15% premium on sales revenue achieved which represent the expected future DMF cash flow earned on units once sold. We have assumed this revenue stream will grow at 4.0% which is consistent with the long-term assumptions for mature villages

the cash flow projections also include development fees paid to LLC

generally there is no tax effect from undertaking Retirement Living Development, with the exception of strata title villages.

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4.3 Discount rates

The discount rate used to equate the future cash flows to a present value reflects the risk adjusted rate of return demanded by a hypothetical investor. We have selected nominal post tax discount rates to discount the future cash flows of the appropriate businesses of LLP to their present value, as set out in the table below.

Table 10: Summary – Nominal post-tax discount rates

	Low	High
Business unit	(%)	(%)
Retirement Living (Australia)	11.0	12.0
Retirement Living (New Zealand)	11.5	12.5
Aged Care	9.5	10.5
Retirement Living Development	15.0	17.0

Source: Deloitte Corporate Finance analysis

In selecting these discount rates we have considered the following factors which are relevant to each operating division: the required rates of returns on listed companies in Australia and New Zealand with similar businesses or in similar sectors

specific business and financing risks relating to the operating businesses of LLP including:

its large, diverse retirement living portfolio which results in the business deriving a relatively stable cash flows
the majority of LLP‟s aged care revenues are derived from federal government subsidies. Funding changes are a significant risk to the business cash flows given that the types and amount of funding differ between high, low and extra service care
companies specialising in the development of senior living accommodation generally have additional risks to manage when compared to companies that only operate existing senior living facilities. However, the majority of LLP‟s current development portfolio is in the form of brownfield projects which tend to have a lower risk profile than greenfield projects.

LLP‟s current cost of debt and the likely quantum and cost of funding that could be secured in the current market

LLP‟s debt capacity by reference to listed company gearing levels and current credit market conditions. A detailed consideration of these matters is provided in Appendix 4.

Having regard to the above, and the implied demanded cost of capital in the current environment, we do not consider the above discount rates unreasonable.

4.4 Discounted cash flow summary

Based on the above assumptions, the results of our discounted cash flow analysis are set out below:

Table 11: Summary – discounted cash flow method

Table 11: Summary – discounted cash flow method
	Low ($ million) High ($ million) 644.2 731.5 177.1 207.2 127.3 138.9
Business unit Retirement Living Aged Care Retirement Living Development

Source: Deloitte Corporate Finance analysis

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4.5 Sensitivity analysis

In estimating the valuation range for each of the business units we have considered a range of valuation sensitivity scenarios to our discounted cash flow analysis. The relative change in enterprise value for each business unit as a result of changes in selected key valuation inputs is presented below.

Table 12: Sensitivity of the Retirement Living business to changes in assumptions

			Terminal growth rate
Discount rate	-2.0%	-1.0%	Base	+1.0%	+2.0%
Less 1.0%	759.9	793.3	837.8	899.8	992.2
Less 0.5%	710.5	737.7	773.1	821.3	890.6
Selected Low	666.7	689.0	731.5	755.6	808.5
Mid-point	625.3	643.4	666.4	696.3	736.9
Selected High	592.7	608.0	644.2	651.5	684.0
Add 0.5%	561.1	573.9	589.6	609.5	635.5
Add 1.0%	527.5	538.0	550.8	566.7	587.0

Source: Deloitte Corporate Finance analysis

Table 13: Sensitivity of the Aged Care business to changes in assumptions

			Terminal growth rate
Discount rate	-2.0%	-1.0%	Base	+1.0%	+2.0%
Less 1.0%	214.4	226.1	241.9	264.8	300.8
Less 0.5%	201.4	210.7	223.1	240.5	266.5
Selected Low	189.9	197.4	207.3	220.7	240.0
Mid-point	177.1	183.2	191.1	201.6	216.3
Selected High	165.7	170.8	177.1	185.4	196.8
Add 0.5%	158.2	162.3	167.5	174.2	183.0
Add 1.0%	151.3	154.7	159.0	164.4	171.4

Source: Deloitte Corporate Finance analysis

Table 14: Sensitivity of the Retirement Living Development business to changes in assumptions

			Terminal growth rate
Discount rate	-2.0%	-1.0%	Base	+1.0%	+2.0%
Less 1.0%	137.9	141.6	146.0	151.3	158.0
Less 0.5%	135.0	138.3	142.3	147.1	152.9
Selected Low	132.2	135.3	138.9	143.1	148.3
Mid-point	127.1	129.7	132.7	136.2	140.4
Selected High	122.6	124.8	127.3	130.2	133.7
Add 0.5%	120.5	122.6	124.9	127.5	130.7
Add 1.0%	118.5	120.4	122.6	125.0	127.9

Source: Deloitte Corporate Finance analysis

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The sensitivities on an aggregated basis are presented below:

Table 15: Sensitivity of estimated combined value of the LLP business units to changes in assumptions

			Terminal growth rate
Discount rate	-2.0%	-1.0%	Base	+1.0%	+2.0 %
Less 1.0%	1,112.2	1,161.0	1,225.7	1,315.9	1,451.0
Less 0.5%	1,046.8	1,086.7	1,138.5	1,208.8	1,310.0
Selected Low	988.8	1,021.7	1,077.6	1,119.4	1,196.9
Mid-point	929.5	956.4	990.2	1,034.1	1,093.5
Selected High	881.0	903.5	948.6	967.1	1,014.4
Add 0.5%	839.8	858.7	882.0	911.2	949.2
Add 1.0%	797.4	813.2	832.3	856.1	886.3

Source: Deloitte Corporate Finance analysis

Furthermore, our estimate of the fair market value of the Retirement Living business is also sensitive to assumptions in respect of resident tenure and capital growth rates. Broadly speaking:

a +/- 1 year movement in the resident tenure assumption results in an approximate -/+ 3% change to the estimated fair market value of the Retirement Living business

a +/- 1% change in the capital growth assumption results in an approximate +/- 13% change to the estimated fair market value of the Retirement Living business.

4.6 Assessed value

Based on the above analysis, our estimate of the fair market value of the underlying business units is as follows:

Table 16: Summary

	Low ($ million) High ($ million) 675.0 725.0 180.0 210.0 140.0 150.0 995.0 1,085.0

Retirement Living Aged Care Retirement Living Development Enterprise value

Source: Deloitte Corporate Finance analysis

The above estimates of the fair market value of each of the business units of LLP are ultimately a matter of judgement. Notwithstanding this, we have been mindful of the lower capital growth assumptions adopted in respect of the Retirement Living and Retirement Living Development businesses. Such lower growth rates would normally be offset by higher capital growth rates in later years. However, having regard to the sensitivities set out in Section 4.5, we have judgementally selected a value for the Retirement Living business of $675 million to $725 million and $140 million to $150 million for the Retirement Living Development business.

4.7 Valuation cross-check for operating assets

In order to assess the reasonableness of our assessed fair market value of the Retirement Living and Aged Care businesses of LLP, we have considered asset and earnings based multiples for broadly comparable listed companies and transactions. We have also assessed the reasonableness of our assessed value of an LLP Security with reference to recent trading in LLP Securities and the most recently reported NAV and NTA per security.

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4.7.1 Retirement Living business

The Retirement Living business is predominantly an asset backed business which derives a significant portion of its returns from participation in underlying capital growth in its properties (it could also be argued that even the DMF component is effectively a rental yield derived from the property assets). Given these factors, we consider it relevant to cross-check our assessment of value to the implied ungeared NTA multiple of comparable companies.

Our estimate of the implied NTA multiple for the Retirement Living business is set out below.

Table 17: Retirement Living valuation cross-check
	Retirement Living
		(LLP)
	Low	High
Assessed enterprise value (on a control basis) ($ million)	675.0	725.0
NTA of LLP‟s retirement living business ($ million)1	669.01	669.01
NAVof LLP‟s retirement living business ($ million) 2	759.02	759.02
Implied ungeared historical NTA multiple (on a control basis)	1.0x	1.1x
Implied ungeared historical NAV multiple (on a control basis)	0.9x	1.0x
Average recent comparable transactions NTA multiple (on a control basis)	0.7x	0.7x

Source: Deloitte Corporate Finance analysis

Notes:

Based on 30 June 2009 carrying values and is composed of total investment property ($2,223 million), DMF receivable ($57 million), Prime Trust management rights ($42.5 million) less resident loans ($1,576 million), deferred revenue ($26 million), deferred tax liability ($52 million) attributable to investment properties and DMF ($52 million) as per Section 3.9.2. 2. As per above and adjusted to include the goodwill attributable to the Retirement Living business of $90.6 million.

The calculation of the implied ungeared NTA valuation multiples has been based on recent transactions involving such businesses or the prices implied by the trading in the securities of those businesses listed on the ASX or other similar exchange. Further detail on the identified businesses is set out at Appendix 5 and Appendix 6. However, we note that this analysis is limited by the following factors:

there are only a limited number of companies and none are precisely comparable. We have not included companies in regions other than Australia or New Zealand due to the different regulatory and operational regimes in place the multiples relating to comparable listed companies shown above are based on share market prices and do not reflect a premium for control (which may be in the order of 20% to 40% at the equity value level, as set out in Appendix 8)

a number of the comparable listed companies and transactions have been impacted by recent volatility in the share market due to high levels of gearing which has had a downward impact on observed NTA and NAV multiples (notwithstanding the revaluations undertaken)

a number of the transactions identified could be argued to have been undertaken in a distressed market or under distressed conditions and therefore not reflective of fair market value

anecdotal evidence indicates that there have been a number of smaller transactions between individuals and privately held companies which have occurred however valuation metrics for these transactions are not publicly available.

Recognising the above, the ungeared NTA and NAV multiples implied by our assessed valuation range of the Retirement Living business do not appear unreasonable.

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4.7.2 Aged Care

The Aged Care business derives its returns from the efficient use of its asset base to provide nursing and other care to residents. Its revenues are predominantly generated from fees charged to residents or provided by the federal government. Given these factors, we consider it relevant to cross-check our assessment of value to the implied EBITDA multiple of comparable businesses in the aged care sector.

Our analysis, at Appendix 5 and Appendix 6, identified only one company in the region, Ryman Healthcare Limited (Ryman), which can be considered relevant for the purposes of this exercise in the current environment, although Ryman operates in a different market and has a different business model. We have not considered companies in regions other than Australia or New Zealand due to the different regulatory and operational regimes in place.

Table 18: Aged Care valuation cross-check

		Aged Care
		(LLP)
	Low		High
Assessed enterprise value (on a control basis) ($ million)	180.0		210.0
EBITDA ($ million)1	11.9		11.9
EBITDA multiple (on a control basis)	15.1x		17.6x
Ryman EBITDA multiple (on a minority basis)	14.9x		14.9x

Source: Bloomberg, annual reports and Deloitte Corporate Finance analysis

Note:

For the purposes of the above analysis, we have estimated the EBITDA for the Aged Care business by annualising the reported EBITDA for the second half of FY09 after corporate charges, considering the expected TRAX related benefits and an annual growth rate of circa 3.5%.

Similar to retirement villages, the above analysis is limited by the following factors:

Ryman cannot be considered precisely comparable due its main market being New Zealand and different business model and regulatory regime to LLP‟s Aged Care business

the share trading multiples shown above are based on share market prices and do not reflect a premium for control (which may be in the order of 20% to 40% at the equity value level as set out in Appendix 8).

Furthermore, the multiple implied by our estimated fair market value of the Aged Care business is also influenced by the significant cash flow and EBITDA growth expected in the near term (but not reflected in the above EBITDA) from implementation of the TRAX system across all facilities and from earnings growth expected from additional beds to be added at existing facilities as discussed in Section 4.2.2.

Recognising the above, our assessed value of LLP‟s Aged Care business implies an EBITDA multiple which does not appear unreasonable.

4.8 Corporate costs

The cost structure of LLP encompasses a number of administrative overheads, including management fees and costs relating to finance and accounting, information technology, corporate services and head office functions of the company. In analysing the fair market value of LLP on a going concern basis, these costs need to be considered as the value benefits (but not the costs) derived from these services (including the management fees paid to LLC) are included in our valuation of each of the operating divisions of LLP.

LLC receives a base management fee equal to 0.5% per annum of the adjusted asset value of LLP as well as a performance fee if certain return hurdles are met. Due to the uncertainty in respect of achieving the incentive fee, no specific allowance was made for this fee but we did have regard to the potential for LLC to earn an incentive fee in the future in our assessment of the valuation impact of corporate costs as a whole. The management fees expected to be paid to LLC for FY10 onwards are based on an annualised $7 million paid in FY09.

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In addition to the management fees, LLP incurs additional overhead costs which have not been allocated to the LLP business units for the purpose of our valuation. These costs were approximately $16 million in FY09, which included one off restructure costs of approximately $7 million and generally relate to administration and back office functions. We have allowed for the management fees and unallocated corporate costs in our valuation taking into account the following factors:

growth in net investment properties (investment properties less resident loans less deferred revenue) is in line with capital growth assumptions included in our valuation of the Retirement Living business

assumed renewal of the management contracts at the end of the current term on the expectation that a similar economic arrangement will be put in place between LLC and LLP at the end of the current contractual term
ongoing corporate overheads of approximately $10 million reflecting the intention of LLP management to more efficiently manage corporate overhead costs going forward
a discount rate of 12% in line with our assessed weighted average discount rate for LLP as a whole
a tax rate of 30% was assumed.

Applying the above assumptions, we have calculated the present value of the corporate costs of LLP to be in the order of $140 million.

4.9 Surplus assets and non-operating liabilities

Surplus assets are those assets owned by a company that are surplus to its operating activities, such as unused property, loans or investments. Such assets have been valued separately from the operating activities of the company, after adjusting the cash flow projections operating results to remove the cash flow (if any) expected to be generated by the surplus assets.

The table below summarises the surplus assets and non-operating liabilities identified and their estimated fair market values:

Table 19: Surplus assets and non-operating liabilities of LLP

	Assessed fair market value	Assessed fair market value
	Low	High
	($ million)	($ million)
Assets to be divested1	20.0	25.0
Contingent liabilities	(5.0)	-
Total	15.0	25.0

Source: Deloitte Corporate Finance analysis

Note:

Excludes $20 million in proceeds already received in FY10 as a result of the divestment of non-core land.
We note the following in respect of these surplus assets and non-operating liabilities:

Assets to be divested

LLP is currently in advanced negotiations regarding the sale of a number of surplus parcels of developable land and facilities which have been deemed to be non-core to LLP‟s future operations. For a number of these assets, LLP has negotiated prices and has signed conditional or unconditional agreements for the sale of these assets. The book value of these properties as at 30 June 2009 was approximately $25 million. The prices negotiated for these properties is broadly consistent with the book values and as such we have adopted a range of $20 million to $25 million for the purpose of our valuation.

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Contingent liabilities

There are claims currently against LLP in excess of $4.2 million plus interest and costs and therefore in the absence of any contrary information, we have selected a value range of nil to $5.0 million.

4.10 Net debt

The net debt position of LLP as at 9 October 2009 is set out in the following table.

Table 20: Net debt of LLP

	($ million)
Interest bearing liabilities	442.0
Convertible securities	158.4
Financial instruments	8.2
Cash	(9.0)
Total	599.6

Source: Deloitte Corporate Finance analysis

We note the following in respect of the above:

we have not included any dilutionary impacts for the convertible instruments on issue as these instruments are significantly out of the money and unlikely to be exercised based on current prices

we have not adjusted the net debt attributable to LLP which is held within its joint venture arrangements as these items have been taken into account in our valuation of the underlying businesses of LLP.

4.11 Number of LLP Securities

As at 28 August 2009, LLP had 966,252,666 securities on issue. We note that there are currently 1.1 million options which were granted to B&B executives under previous management. The weighted average exercise price of the issued options is $1.17 per stapled security, ranging between $1.07 and $1.52 per stapled security. Based on recent trading in LLP Securities all outstanding options are significantly out of the money and therefore we have assumed they are unlikely to be exercised. As such, no net debt adjustment or dilution impact has been taken into account in our valuation.

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4.12 Valuation cross-check for LLP as a whole

In order to assess the reasonableness of our estimate of the fair market value of an LLP Security we have compared our assessed fair market value to recent trading in LLP Securities.

The security price of LLP ranged from $0.09 to $0.26 for the six months prior to the Announcement Date and traded between $0.295 and $0.305 subsequent to the Announcement Date. The table below sets out the further details on the recent historical trading prices of LLP Securities.

Table 21: Summary – analysis of recent LLP Security trading

					Premium /
					(discount)
	Intra-day	Intra-day		Volume	implied by the
	Low ($)	High ($)	VWAP ($)	daily average	Proposed Transaction	1
Prior to the Announcement Date
Six months	0.09	0.26	0.14	1,328,994	124%
Three months	0.09	0.26	0.15	1,519,067	104%
One month	0.17	0.26	0.21	1,290,614	48%
One week	0.20	0.26	0.23	1,956,225	31%
One day	0.22	0.25	0.25	1,996,871	27%
From 17 September 2009 to the Announcement Date	0.20	0.26	0.24	3,162,446	31%
From the Announcement Date to 13 October 2009	0.295	0.305	0.30	3,363,171	4%

Source: Deloitte Corporate Finance analysis

Note:

1. Based on VWAP.

We are of the opinion that the most appropriate benchmark of the unaffected price for LLP Securities is the security price subsequent to the announcement that LLP had received a waiver from its financiers on 17 September 2009 up until the Announcement Date (28 September 2009).

The VWAP over this period was $0.24 per security as set out above. Based on studies of the premiums required to obtain control of companies, it is our opinion that control premiums generally range between 20% and 40% of the portfolio holding values, as summarised in Appendix 8. Applying a notional control premium of 20% to 40% to the VWAP of LLP over this period results in an estimated control price of $0.28 to $0.33 per LLP Security.

This analysis is broadly supportive of our estimated fair market value range of an LLP Security on a control basis of $0.28 to $0.38 per security.

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4.13 Valuation conclusion

The following table sets out a summary of our estimate of the fair market value of an LLP Security, on a control basis.

Table 22: Summary – estimated fair market value of an LLP Security

	Low	High
	($ million)	($ million)
LLP’s businesses:
Retirement Living	675.0	725.0
Aged Care (including development projects)	180.0	210.0
Retirement Living Development	140.0	150.0
Corporate costs	(140.0)	(140.0)
100% enterprise value of LLP	855.0	945.0
Surplus assets and non-operating liabilities	15.0	25.0
Net debt of LLP	(599.6)	(599.6)
100% equity value of LLP	270.4	370.4
Total securities of LLP on issue (‘million)	966.3	966.3
Value of LLP per security ($)	$0.28	$0.38

Source: Deloitte Corporate Finance analysis

After considering all of the above factors we are of the opinion that the fair market value of LLP on a control basis is $0.28 to $0.38 per security.

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5 Evaluation and conclusion

5.1 Summary of conclusion

In our opinion the Proposed Transaction is in the best interests of LLP Securityholders. Accordingly, we have also concluded that:

the Share Scheme is fair and reasonable and therefore in the best interests of LLPL Shareholders not associated with LLC

the terms of the Trust Scheme are fair and reasonable for LLPT Unitholders who are not associated with LLC.

In arriving at this opinion, we have had regard to the following factors.

5.2 Assessment of fairness

Set out in the table below is a comparison of our assessment of the fair market value of an LLP Security with the consideration offered by LLC.

Table 23: Evaluation of fairness of the Proposed Transaction

Table 23: Evaluation of fairness of the Proposed Transaction
	Low ($) High ($) $0.28 $0.38 $0.31 $0.31

Assessed fair market value of a security in LLP Cash consideration per LLP Security

Source: LLP and Deloitte Corporate Finance analysis

Our assessed valuation range for an LLP Security is relatively wide due to the high level of debt within LLP.

5.3 Assessment of reasonableness

5.3.1 Introduction

5.3.2 Advantages of the Proposed Transaction

The Proposed Transaction appears to be the best option available to LLP Securityholders after considering the relative risks of the alternatives

The global financial crisis and the continued contraction in the debt and equity markets since the Initial LLC Transaction has resulted in a significant reduction in the availability, and has increased the cost, of debt financing. The lack of funding available, particularly in the property sector, has constrained growth as participants have focused on recapitalising their balance sheets with little or no capital available for growth.

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In addition to the waiver, LLP‟s bank facilities mature in December 2010 and there is a risk that the banks may further reduce their exposure and/or make the existing covenants more restrictive as part of that refinancing process.

whilst capital markets have shown signs of improvement in recent months, a large scale equity raising for LLP is likely to be difficult to execute and may expose LLP to additional risks since:
it is likely to represent a multiple of the total market capitalisation of LLP prior to the announcement of the Proposed Transaction
LLP has approximately 9,500 retail securityholders and sourcing an underwriter for the retail component would be challenging due to the likely size of the retail component of any offering and the uncertainty regarding LLC‟s actions during any such raising
if LLC (as major shareholder) were to fully or partially underwrite such a raising, there would be the potential for LLC to obtain a more significant interest in, and even control of, LLP. If LLC did not participate, this could send a negative signal to the market which could limit the proceeds raised and/or result in a negative rerating of LLP
even if sufficient capital could be raised through this process recent market evidence suggests that significant discounts to the recent unit price and the NTA of LLP would be required in order to make it attractive to potential investors. Accordingly such a raising could significantly dilute the underlying interests of LLP Securityholders who did not participate. For example, a $300 million capital raising assuming a discount of 25% to the 5 day VWAP of LLP Securities immediately before the Announcement Date of $0.18 per security could result in:
a reduction in the NAV from $0.55 per security as at 30 June 2009 to approximately $0.32 per security
a reduction in the NTA from $0.30 per security as at 30 June 2009 to approximately $0.23 per security.
a large capital raising could result in LLP failing to meet certain continuity of ownership requirements for utilising existing tax losses of the group. As at 30 June 2009 LLP had in excess of $446 million in gross tax losses available to shelter future taxable profit. An inability to utilise some or all of these losses could significantly reduce the future cash flows of LLP

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LLP will not be in a position to pay any distributions during FY10 and the timing of future distributions (which will only be made from net operating cash flow) remains uncertain depending on the size of any equity raising. The lack of short-term distributions could also limit investor appetite for participation in an equity raising.

The Consideration represents a premium to recent trading in LLP Securities and to LLP’s NTA per security

The Consideration represents a premium to the historical share market trading in LLP Securities. An analysis of recent trading in LLP Securities and the Consideration is set out in the figure below.

Figure 16: Offer price premium to Security trading price of LLP

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

$0.70
Announcement Date of
Proposed Transaction
$0.60
$0.50
$0.40
$0.30
$0.20
$0.10
$0.00
LLP price (LHS) Consideration (31 cents)
Source: Deloitte Corporate Finance analysis
The Consideration offered pursuant to the Proposed Transaction represents the following premia to recent trading in
LLP‟s Securities: ‟s Securities: Securities:
a 26.5% premium to the closing price of LLP Securities on the day prior to the Announcement Date
a 31.5% premium to the VWAP of LLP Securities subsequent to the announcement that a bank waiver had been
received by LLP and prior to the Announcement Date
a 48.3% premium to the 1-month VWAP of LLP Securities prior to the Announcement Date
a 103.9% premium to the 3-month VWAP of LLP Securities prior to the Announcement Date.
The Proposed Transaction also represents a slight premium of 3% to the most recently reported NTA per security of
LLP.
LLP Security price
01-Jun-09 08-Jun-09 15-Jun-09 22-Jun-09 29-Jun-09 06-Jul-09 13-Jul-09 20-Jul-09 27-Jul-09 03-Aug-09 10-Aug-09 17-Aug-09 24-Aug-09 31-Aug-09 07-Sep-09 14-Sep-09 21-Sep-09 28-Sep-09 05-Oct-09 12-Oct-09
----- End of picture text -----

The Consideration offered pursuant to the Proposed Transaction represents the following premia to recent trading in LLP‟s Securities: ‟s Securities: Securities:

a 31.5% premium to the VWAP of LLP Securities subsequent to the announcement that a bank waiver had been received by LLP and prior to the Announcement Date

LLP Securities would likely trade below the implied offer price in the absence of the Proposed Transaction

In the absence of the Proposed Transaction or an alternate recapitalisation proposal it is likely that LLP Securities will trade at prices below the offer price and potentially more in line with the prices observed prior to the Announcement Date due to the lack of distributions expected in the near term and the current liquidity and funding constraints of LLP and taking into consideration that the valuation implies a control premium.

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Alternate higher offer unlikely

We have been advised that since the announcement of the Proposed Transaction no other offers for LLP have been received.

5.3.3 Disadvantages of the Proposed Transaction

Inability to participate in upside growth potential of LLP

5.3.4 Other considerations

Tax consequences

Approval of the Proposed Transaction may result in adverse tax consequences for LLP Securityholders. Whilst we note that the tax implications will vary depending on the circumstances of each securityholder, possible tax consequences for Australian resident securityholders include potential capital gains consequences for the consideration to be received. The approval of the Proposed Transaction may therefore accelerate tax payable for LLP Securityholders as it may crystallise a tax liability in the short-term, which would otherwise have been deferred. LLP Securityholders should evaluate the capital gains or other tax consequences of acceptance in assessing whether to approve the Proposed Transaction. For further details of the tax consequences of accepting the Proposed Transaction to securityholders, you should refer to Annexure H of the Scheme Booklet.

5.3.5 Conclusion on reasonableness

On balance, in our opinion, the advantages of the Proposed Transaction outweigh the disadvantages.

5.4 Opinion

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Appendix 1: Overview of the senior living sector

Introduction

LLP is currently the largest „pure play‟ owner, operator and developer of senior living communities listed on the ASX. As at 30 June 2009, LLP owned or managed 11,212 retirement village units and 2,313 residential aged care beds under management. We have therefore provided an overview of the senior living sector with particular emphasis on the segments in which LLP operates.

The senior living industry focuses on providing accommodation and/or care to individuals aged over 55, many with concerns regarding their health, mobility or current lifestyle.

A detailed breakdown of the senior living industry, including the residential aged care and retirement village segments in which LLP operates, is set out in the table below.

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Table 24: Overview of the spectrum of care in the senior living industry
Retirement living Residential aged care Community care
ILUs SAs High care Low care Home and community care
Accommodation Units Apartments Nursing homes Hostels Home
Personal
Level of care None services High Low Low/High
Key risks Property values Regulatory/operational Regulatory/operational
Regularity of cash flows With property turnover Periodic Periodic
Moderate (state and
Regulation High (federal) Moderate (federal)
national - New Zealand)
Federal government
Source of revenue Unit sales, resident fees and subsidies, resident fees and Federal government subsidies
development profits accommodation bonds and fees
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Source: LLP and Deloitte Corporate Finance analysis

As set out above, the industry is separated into three distinct sectors based on the level of care and accommodation provided as follows:

retirement villages – focus on individuals that are independent and self-sufficient and are not in need of regular medical assistance. Retirement villages can vary significantly depending on the target market, the type of accommodation offered and their proximity to major urban centres. The decision to enter a retirement village is typically driven by a lifestyle choice (such as downsizing from the family home to an easier to maintain retirement unit) or health requirements. The accommodation products offered typically fall into one of the following two categories:
ILUs – designed for those who are generally self-sufficient and wish to maintain an independent lifestyle while enjoying the benefits and security of living in a retirement community
SAs – designed for those who want to retain as independent a lifestyle as possible but require some assistance on a day-to-day basis with meals and cleaning

residential aged care – provides accommodation and personal or nursing care to the elderly. Revenue is largely regulated, sourced from the federal government and is based on the level of care provided. Aged care residents can be split into two broad categories:

low care – residents have a low level of dependency, requiring occasional care and support
high care – residents have a high level of dependency, often requiring continuous nursing care

Extra Service Care (ES) may be offered to low and high care residents at an additional cost to the resident. ES may include a higher standard of accommodation and non-care services. The decision to enter residential aged care is generally not a lifestyle choice and demand is driven by care needs resulting from

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chronic illness, disability, reduced mobility, isolation or inability/unwillingness of family to provide the required level of care

community care – provision of health care services to the elderly living in the community. Residents are generally in need of some care which will allow them to live in their own home. The accommodation products offered include:
Community Aged Care Packages (CACP) – individuals who require low level residential needs are provided with care and assistance allowing them to remain in the community
Extended Aged Care at Home – individuals who require a high level of care are provided with care and assistance allowing them to continue to live in the community.

There is some discussion that the federal government may allocate additional funding towards the provision of CACPs which may reduce demand in the aged care (particularly low care beds) and the retirement living market particularly in respect to serviced apartments. As Australia‟s ageing population and demand on the provision of senior living facilities increase, it is expected that there will be an increase in CACP funding to motivate older Australians to remain in their own homes.

Factors influencing the senior living industry

The senior living industry has experienced significant growth in recent years. Future growth is expected to be influenced by the following factors.

Demographic factors

Australia and New Zealand, like many other developed countries, are experiencing an ageing of their population driven primarily by the ageing of the post-World War II „baby boomers‟ as well as increased life expectancy. These factors are expected to contribute to the demographic shift in the structure of the population going forward as set out below:

Figure 17: Projected ageing of the Australian population

Source: Australian Bureau of Statistics (ABS)

According to the ABS, the average age of the Australian population is expected to increase steadily over the next 50 years, with more than four million people expected to be over 75 years old in 2060, representing 15% of the projected Australian population.

The over 65 age group is the fastest growing segment of the population, with the group projected to grow at rates of 36% and 26% over the ten year periods to 2021 and 2031, respectively[7] . According to the ABS, the largest increase from current levels is expected to be for the over 85 age group. Similar demographic trends are also being experienced in New Zealand.

In order to accommodate this expected ageing of the population, senior living facilities will need to increase capacity at similar rates, particularly if current or greater market penetration (as discussed in greater detail below) is achieved. For example, if the penetration rate in the Australian market remain constant, a further 140,000 new retirement living dwellings will be needed over the next 15 years to meet projected demand in Australia, which equates to approximately 9,150 new units and $42.0 billion in new construction spend according to Jones Lang Lasalle.

7 Source: Australian Institute of Health and Welfare

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Market penetration

Compared to the United States of America (US), the Australian and New Zealand senior living markets have historically achieved lower penetration rates (expressed as a percentage of the total population) of senior living.

One contributing factor for the difference is due to the variances in funding types between markets. A large portion of occupancy agreements in the US are in the form of rental tenure agreements, whereby the resident pays a monthly rental fee with no other significant up-front charges or bonds. In contrast, the majority of retirement village residents in Australia and New Zealand enter loans and licence agreements (or similar), where no actual transfer of ownership is made.

Whilst an opportunity does exist for the Australian and New Zealand market to convert towards the rental model (and therefore potentially increase penetration rates), based on the historical levels of home ownership amongst Australian and New Zealand residents, this conversion is expected to be limited in at least the short-term.

Notwithstanding this, due to the diversity in retirement products becoming available, market penetration rates in Australia and New Zealand (and therefore facility demand) are expected to increase, however they are not expected to achieve the levels observed in the US market in the near-term.

Economic factors

High levels of home ownership (in historically appreciating assets) and growing personal wealth (in real terms) amongst the ageing population is expected to lead to a greater proportion seeking the lifestyle benefits and improved care offered by the senior living industry.

However, demand for senior living accommodation is also influenced by the supply and demand factors of the residential real estate market as the sale of the home typically forms the asset base from which the ingoing purchase price of a retirement village unit is paid. We note however that the movements in the broader residential market may not be fully reflected in the aged care industry given the services offered are generally a demand driven by need rather than a discretionary decision.

Whilst the property market in Australia has been less susceptible to the adverse impacts of the global credit crisis most residential markets have slowed in recent years after experiencing 8% capital growth in residential house prices in FY08. The global credit crisis has also affected the New Zealand economy with negative economic growth being recorded in the past two consecutive quarters. As a result, the New Zealand residential property market has recorded a decline in year-on-year prices. However, the New Zealand economy appears to be emerging from recession and the majority of property pricing indicators (such as supply and demand balances, housing sales and migration trends) continue to improve.

The Australian property market has achieved 7.9% of cumulative growth[8] over the first nine months of calendar year 2009. There is optimism throughout the market place due to the strong growth being experienced accompanied by low interest rates, continuing population increases and first home buyer financial assistance driving demand. Growth rates achieved will be difficult to maintain owing to the anticipated interest rate increases and decrease in the stimulus received by first home owners from September 2009 onwards.

Regulation

Both the retirement living and aged care sectors are highly regulated by government in Australia (state and/or federal levels), the national government in New Zealand or industry bodies. This regulation ranges from restriction of the provision of services in the sector through to regulating the level of revenues and/or charges operators are allowed to generate. However, regulation does vary between the two sectors.

Retirement living

The retirement living sector is regulated by the Australian federal government and the national government of New Zealand self-governed by the Retirement Villages Associations (RVA).

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The Australian Retirement Village Accreditation (ARVA) scheme, which is administered by the RVA, is a national accreditation scheme which sets the minimum benchmark standards villages must meet. The standards range from ensuring resident services and lifestyle are adequate to ensuring residents have representation in village affairs. Whilst the scheme is voluntary, it is strongly recommended to all member organisations and allows the village to display a logo of accreditation, something which is looked upon favourably by residents (current and future). The individual state and federal governments (with the exception of Tasmania) have put in place regulations which are enforced on operators in the sector. These regulations are largely based around appropriate disclosure regarding the retirement village and the manner in which fees can be charged to residents.

In recent years, the future growth prospects for this sector (due to favourable demographic factors and the - market structure) have attracted corporate „pure plays‟ and community property developers such as LLC to invest in the sector.

The Retirement Villages Association New Zealand is the equivalent industry body in New Zealand, which is responsible for setting best practices and standards for the retirement village industry. The Retirement Villages Act came into operation 1 May 2007 and introduced Government oversight and protection to consumers on the sale and purchasing of retirement villages. The Department of Building and Housing assumed responsibility for the Retirement Villages Act on 1 July 2005 from the Retirement Commissioner. According to the Retirement Villages Act, retirement villages are to be registered before purchase and sales of rights to occupy can occur and residents are able to withdraw from the retirement living contract under a 15 day cooling-off period.

Aged care

Federal government policy is a key driver of the aged care industry providing 71% of funding[9] , which impacts regulation, funding and care. Residential aged care is highly regulated with licences being issued by the federal government. The result of assessment by the Department of Health and Ageing ultimately determines if an individual is eligible for a bed.

The aged care operators receive subsidies from the federal government. Until early 2008, this was based on a system titled Resident Classification System (RCS). On 20 March 2008, it was replaced by a more complicated system titled Aged Care Funding Instrument (ACFI). The introduction of ACFI, indirectly, has resulted in a greater level of independent review and/or audits being undertaken of operators which has resulted in an increased documentation requirement for aged care operators in order to ensure that subsidies received are consistent with the level of care given.

Operators providing low care or ES can also generate some of their returns from the levy of accommodation bonds to residents. Accommodation bonds are lump sum amounts of money paid by residents in low care beds or extra services. Bond prices are dictated by market forces and there is no legislative maximum. Whilst the quantum of the bond is not regulated (however, this is influenced by the local residential market) operators are allowed to retain $299 per month from these bonds. Operators cannot charge a bond that would leave the tenant with less than $36,000 in assets. Approved providers can generate income from accommodation bonds through the retention amount, any interest earned if the bond proceeds are invested, as well as capital appreciation realised when the bond is replaced by the next resident. They may also use bonds (subject to strict prudential requirements) for working capital purposes and to reduce debt.

There has been some discussion recently in respect of potential deregulation within the aged care sector to allow increased choice for potential users. Whilst there has been no formal discussion or plan in respect of any deregulation, this would likely result in increased competition within the sector and a requirement for operators to differentiate their product offering from their competitors (through superior facilities, branding or otherwise).

Products offered

Higher affluence levels and higher expectations from ageing „baby boomers‟ are anticipated to continue to increase the standard and quality of senior living accommodation and services. Residents are increasingly seeking „one stop shop‟ senior living solutions. Residents are also likely to be more educated and healthier than previous generations and are more willing to pay for these lifestyle and quality choices. The product offering as well as strong brand quality and reputation of service providers will be significant factors influencing the future success of operators in the sector.

9 Source: LLP

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Market structure

In the senior living market, ASX listed operators own or manage approximately 33% of all aged care and retirement village units. Approximately 23% of units are owned or managed by smaller „for profit‟ operators and not-for-profit operators own or manage the remaining 44% of units that exist in the Australian senior living market.

Retirement living

The retirement living sector is highly fragmented with no player controlling more than 10% of the market. - Operators in the sector range from the „for profit‟ private sector through to churches and community groups, who control a significant but declining component of the market. The New Zealand market is even more fragmented with less than 15% of the market controlled by the five largest for-profit players. LLP is one of the largest five for-profit operators in this market in Australia and New Zealand.

Aged care

The aged care market within Australia is comprised of for-profit, privately owned operators, not-for-profit and local federal government operators. The sector is dominated by not-for-profit and religious based operators, with for-profit operators accounting for only 26% of the market in 2009, an increase from 22% in the previous year[10] . The market is highly fragmented characterised by a large number of small operators with no dominant player. As at 30 June 2009, the largest for profit provider controlled only 3.4% of the market[11] . LLP is the fifth largest of the for-profit operators in the aged care market.

Current and future expectations

The global financial crisis and the subsequent contraction in the debt and equity markets has had a significant impact on the availability and cost of debt financing. This, and the subsequent widespread fall in asset prices, particularly in the property sector, has adversely impacted retirement village operators, in particular those with high levels of debt. The debt market has changed considerably since late 2007 with increasing interest rate margins, more stringent covenants, and reduced liquidity as financiers reprice risk.

Within the senior living sector, market sentiment although somewhat improving, is still relatively negative with many industry participants delaying/abandoning development projects, implementing asset sale programs and/or undertaking significant capital raisings in an attempt to lower balance sheet gearing levels. Recent reported financial results for the sector have been characterised by property devaluations (driven by increases in discount rates assessed by property valuers) and intangible asset impairments which have reduced the NAV and NTA. In spite of this, companies in the sector continue to trade at significant discounts to reported NAV and NTA. The substantial asset write downs have put pressure on debt covenants and pushed bank lenders to demand either aggressive asset sales or equity raisings to re-capitalise balance sheets. Consequently, within the general Australian Real Estate Investment Trust (A-REIT) sector, companies have raised over $18 billion through 30 capital raisings undertaken since late 2007. These raisings have been undertaken at substantial discounts to prevailing trading price and NTA, with an average discount of 18.7% to 30 day VWAP and 54.7% to NTA, as set out in Appendix 7.

The recent lack of liquidity in debt markets has significantly constrained the ability to fund retirement village assets. Retirement village assets have historically been evaluated by lenders using similar metrics as companies with direct property investments (such as yield). Investors and lenders have begun to understand the sometimes significant disconnect between reported earnings and cash flows and have started to consider these in investment decisions either through demanding higher returns, or in the case of financiers, implementing interest coverage covenants which based on cash flows rather than accounting earnings. In most instances, this has significantly reduced the debt capacity of these vehicles.

10 Source: LLP 11 Source: Ibid Page 56 Deloitte: Lend Lease Primelife Group – Independent expert‟s report

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Appendix 2: Summary of LLP’s portfolio

Retirement Living portfolio as at 30 June 2009

Table 25: LLC’s Retirement Living portfolio

			Age of
		Number of	village	DMF
Village	Location	units	(years)	exposure
Owned
Allora Gardens	QLD	240	10.9	100%
Annesley	NSW	72	8.3	100%
Bayside	NSW	250	12.0	100%
Bibra Lake	WA	288	23.0	100%
Burwood Terrace	VIC	107	12.7	100%
Camberwell Green	VIC	36	5.6	100%
Coastal Waters	NSW	76	7.0	100%
Eaglemount	QLD	96	7.8	100%
Elliot Gardens	SA	149	6.6	100%
Evelyn Ridge	VIC	29	3.3	100%
Forest Hills	VIC	162	25.4	100%
Glenaeon	NSW	270	23.0	100%
Goodwin Close	VIC	43	8.0	100%
Harbourside Mindarie	WA	141	8.0	100%
Henry Kendall	NSW	640	24.0	100%
Highvale	VIC	190	24.4	100%
Homestay	WA	81	7.9	100%
Knightsbridge Retirement Village	NZ	245	9.8	100%
Lexington	VIC	294	8.7	100%
Lutanda Manor	NSW	134	20.8	100%
Mayfair Retirement Village	NZ	168	17.4	100%
Ocean Shores Retirement Village	NZ	206	14.2	100%
Parkland - Mandurah	WA	121	23.0	100%
Parkland Booragoon	WA	185	23.0	100%
Parkland Ellenbrook	WA	33	2.1	100%
Parkland Woodlands	WA	240	25.0	100%
Parklane Retirement Village	NZ	155	20.7	100%
Peninsula Club Retirement Village	NZ	206	21.7	100%
Peppertree Hill	VIC	210	21.8	100%
Pittwater	NSW	85	20.6	100%
The Lakes - Bundaberg	QLD	282	9.3	100%
The Pines Ellenbrook	WA	139	9.0	100%
Timberside Woodvale	WA	140	15.0	100%
Waterford Park	VIC	75	3.4	100%
Waterford Valley Lakes	VIC	185	7.4	100%
Woodlands Park	VIC	58	3.3	100%
Sub-total / weighted average		6,031	16.2

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			Age of
		Number of	village	DMF
Village	Location	units	(years)	exposure
Profit share
Brighton on the Bay	VIC	76	4.1	50%
Claremont Terrace	VIC	79	8.4	50%
Martha's Point	VIC	75	3.0	50%
Sub-total / weighted average		230	5.2
Leased
Geelong-Tannoch Brae	VIC	88	13.1	100%
Glen Woodley	SA	75	17.3	100%
Heathglen - Village	VIC	114	19.3	100%
Koorootang Court	VIC	122	24.9	100%
Meadowvale	VIC	204	24.4	100%
Port Phillip	VIC	162	15.9	100%
Riverwood	NSW	130	23.9	100%
Vermont	SA	118	19.6	100%
Viewbank	VIC	52	22.7	100%
Williamstown	VIC	141	12.0	100%
Sub-total / weighted average		1,206	19.5
RM Leased
Argyle Gardens Retirement Village	QLD	401	24.3	12%
Ashton	NSW	61	8.1	12%
Bellflower	QLD	461	7.3	12%
Brentwood	NSW	601	25.6	12%
Buderim Gardens	QLD	401	28.1	12%
Carlyle Gardens - Mackay	QLD	283	8.4	12%
Carlyle Gardens - Townsville	QLD	458	12.2	12%
Hibiscus Buderim Meadows	QLD	204	16.5	12%
Hibiscus Chancellor Park	QLD	404	13.8	12%
Hibiscus Nambour	QLD	56	13.5	12%
Hibiscus Noosa Outlook	QLD	235	28.6	12%
Lindfield	QLD	180	7.3	12%
Sub-total / weighted average		3,745	17.6
Retirement Living portfolio total		11,212	16.8

Source: LLP

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Retirement Living Development pipeline as at 30 June 2009

Table 26: LLP’s Retirement Living Development pipeline

	‘Pipeline’- units to be sold Future stock Total units – project Project stage Expected year of completion of sales
Project Location
Completed and awaiting first time sale
Bayside NSW	2 - 250 Stage 5 2009
Brighton on the Bay VIC	26 - 79 Stage 1 2011
Camberwell Green VIC	10 - 42 Stage 1 2010
Claremont Terrace VIC	15 - 294 Stage 1 2011
Lexington Gardens VIC	8 - 76 Stage 1 2010
Mindarie WA	9 - 150 Stage 5 2010
Sub total / weighted average	70 - 891
Brownfieldprojects
Coastal Waters NSW	24 231 331 Stage 3 2019
Ellenbrook WA	26 92 151 Stage 3 2015
Elliot Gardens SA	18 30 197 Stage 7 2012
Evelyn Ridge VIC	10 83 122 Stage 2 2014
The Lakes,Bundaberg QLD	19 27 328 Stage 10 2013
Martha's Point VIC	8 35 118 Stage 4 2012
Waterford Park VIC	6 61 142 Stage 6 2013
Woodlands Park VIC	1 170 229 Stage 4 2016
Sub total / weighted average	112 729 1,618

Retirement Living Development pipeline total
	182 729 2,509

Source: LLP

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Aged Care portfolio as at 30 June 2009

Table 27: LLP’s Aged Care portfolio

	Age of facility (years) Number of beds
Village Location
Owned
Avonlea VIC Bass Hill NSW Bayside (Conform) NSW Beechwood NSW Brentwood NSW Calare NSW Coastal Waters (Jervis Bay) NSW Greenwood NSW Henry Kendall (Wyoming) NSW Highwood Court VIC Lexington VIC Montclaire Hostel VIC Pendle Hill NSW Princeton View VIC Redleaf Manor NSW Rosemore NSW Sylvan Woods QLD Willandra NSW Sub-total	10 70 30+ 78 7 124 5 110 30+ 84 30+ 66 5 126 30+ 53 25 110 8 75 6 60 7 36 30+ 84 2 106 2 65 30+ 90 30+ 89 25 64 n/a 1,490
Leased
Bayside (Primelife) VIC Cumberland NH VIC Glendale VIC Lilydale Nursing Home VIC Little Para SA Orden on Glendale VIC Riddell Gardens VIC Riverwood NSW Summerwood VIC Tannoch Brae VIC Trevi Court VIC Sub-total / weighted average	10 41 18 30 19 135 21 30 6 62 3 105 5 74 16 29 6 31 14 50 8 52 10.9 639
Managed
Claremont Terrace VIC Keperra QLD Medina Manor VIC Villa del Sole VIC Sub-total / weighted average	8 57 13 30 8 45 10 52 9.6 184
Aged Care portfolio total	14.4 2,313

Source: LLP Note: n/a- not available

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Appendix 3: Overview of valuation methodologies

Valuation methodologies

To estimate the fair market value of the securities in LLP we have considered common market practice and the valuation methodologies recommended by ASIC Regulatory Guide 111, which deals with the content of IERs. These are discussed below.

Market based methods

Market based methods estimate a company‟s fair market value by considering the market price of transactions in its securities or the market value of comparable companies. Market based methods include:

capitalisation of maintainable earnings

analysis of a company‟s recent security trading history

industry specific methods.

The capitalisation of maintainable earnings method estimates fair market value based on the company‟s future maintainable earnings and an appropriate earnings multiple. An appropriate earnings multiple is derived from market transactions involving comparable companies. The capitalisation of maintainable earnings method is appropriate where the company‟s earnings are relatively stable.

The most recent security trading history provides evidence of the fair market value of the securities in a company where they are publicly traded in an informed and liquid market.

Industry specific methods estimate market value using rules of thumb for a particular industry. Generally rules of thumb provide less persuasive evidence of the market value of a company than other valuation methods because they may not account for company specific factors.

Discounted cash flow methods

Discounted cash flow methods estimate market value by discounting a company‟s future cash flows to a net present value. These methods are appropriate where a projection of future cash flows can be made with a reasonable degree of confidence. Discounted cash flow methods are commonly used to value early stage companies or projects with a finite life.

Asset based methods

Asset based methods estimate the market value of a company‟s securities based on the realisable value of its identifiable net assets. Asset based methods include:

orderly realisation of assets method

liquidation of assets method

net assets on a going concern basis.

The orderly realisation of assets method estimates fair market value by determining the amount that would be distributed to securityholders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the company is wound up in an orderly manner.

The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame. Since wind up or liquidation of the company may not be contemplated, these methods in their strictest form may not necessarily be appropriate. The net assets on a going concern basis method estimates the market values of the net assets of a company but does not take account of realisation costs.

These asset based methods ignore the possibility that the company‟s value could exceed the realisable value of its assets as they ignore the value of intangible assets such as customer lists, management, supply arrangements and goodwill. Asset based methods are appropriate when companies are not profitable, a significant proportion of a company‟s assets are liquid, or for asset holding companies.

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Selection of valuation methodologies

LLP‟s management has prepared long-term cash flow forecasts

the cash flow profile of the Retirement Living Development business is relatively uneven over time making use of earnings multiple based approaches less meaningful.

In addition, for the Retirement Living and Aged Care businesses we have also compared the earnings and asset multiples implied by our estimated fair market value of these businesses to the earnings and asset multiples implied by the share trading and transactions involving broadly comparable companies. For the Retirement Living Development business we have also considered the most recent book values of the development projects in our assessment of the fair market value of this business.

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Appendix 4: Discount rate

The discount rate used to equate the future cash flows to their present value reflects the risk adjusted rate of return demanded by a hypothetical investor for the asset or business being valued.

Selecting an appropriate discount rate is a matter of judgement having regard to relevant available market pricing data and the risks and circumstances specific to the asset or business being valued.

Whilst the discount rate is in practice normally estimated based on a fundamental ground up analysis using one of the available models for estimating the cost of capital (such as the Capital Asset Pricing Model (CAPM)), market participants often use less precise methods for determining the cost of capital such as hurdle rates or target internal rates of return and often do not distinguish between investment type or region or vary over economic cycles.

Investment in the senior living sector has largely evolved from the property sector. Direct property investments have historically been evaluated with reference to pre-tax rates of returns or yields as these assets are generally held in pass through trusts which do not pay tax at the entity level and the tax profile of the investment returns will therefore vary depending on the tax position of each individual investor. Whilst the operations of retirement villages are often influenced by trends in the residential markets, the cash flows and tax position of these assets have very different characteristics than typical direct property investments. Retirement village operators are often able to defer a large portion of tax payments due to losses generated during the development phase and through the deferral of DMF income until the DMF cash is received. However, a mature portfolio of villages will likely be in a tax paying position (particularly on an un-geared basis). We have therefore considered the expected tax profile for LLP in our assessment of the fair market value of an LLP Security and have estimated an appropriate rate of return on a post tax basis.

For ungeared cash flows, discount rates are determined based on the cost of an entity‟s debt and equity weighted by the proportion of debt and equity used. This is commonly referred to as the weighted average cost of capital (WACC).

The WACC can be derived using the following formula:

The components of the formula are:

E D WACC V * _Ke V_ _*Kd (1 t c_ )

K e = cost of equity capital

K d = cost of debt

t c = corporate tax rate E/V = proportion of enterprise funded by equity D/V = proportion of enterprise funded by debt

The adjustment of K d by (1- t c ) reflects the tax deductibility of interest payments on debt funding. The corporate tax rate has been assumed to be 30%, in line with the Australian and New Zealand corporate tax rate.

Cost of equity capital (K e )

The cost of equity, K e , is the rate of return that investors require to make an equity investment in a firm. We have used the CAPM to estimate the K e for LLP. CAPM calculates the minimum rate of return that the company must earn on the equity-financed portion of its capital to leave the market price of its shares unchanged. The CAPM is the most widely accepted and used methodology for determining the cost of equity capital.

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The cost of equity capital under CAPM is determined using the following formula:

Ke R f ( R m R f ) a The components of the formula are: K e = required return on equity R f = the risk free rate of return Rm = the expected return on the market portfolio β = beta, the systematic risk of a stock α = specific company risk premium

Each of the components in the above equation is discussed below.

Risk free rate (R f )

The risk free rate compensates the investor for the time value of money and the expected inflation rate over the investment period. The frequently adopted proxy for the risk free rate is the long-term government bond rate.

In determining R f we have selected a 10-year Australian Government Bond yield of 5.8% and the 10-year New Zealand Government Bond yield of 6.0%. The 10-year bond rate is a widely used and accepted benchmark for the risk free rate in Australia and New Zealand. This rate represents a nominal rate and thus includes inflation.

Equity market risk premium (EMRP)

– The EMRP (Rm Rf) represents the risk associated with holding a market portfolio of investments, that is, the excess return a shareholder can expect to receive for the uncertainty of investing in equities as opposed to investing in a risk free alternative. The size of the EMRP is dictated by the risk aversion of investors – the lower (higher) an investor‟s risk aversion, the smaller (larger) the equity risk premium.

The EMRP is not readily observable in the market and therefore represents an estimate based on available data. There are generally two main approaches used to estimate the EMRP, the historical approach and the prospective approach, neither of which is theoretically more correct or without limitations. The former approach relies on historical share market returns relative to the returns on a risk free security; the latter is a forward looking approach which derives an estimated EMRP based on current share market values and assumptions regarding future dividends and growth.

In evaluating the EMRP, we have considered both the historically observed and prospective estimates of EMRP.

Historical approach

The historical approach is applied by comparing the historical returns on equities against the returns on risk free assets such as Government bonds, or in some cases, Treasury bills. The historical EMRP has the benefit of being capable of estimation from reliable data; however, it is possible that historical returns achieved on stocks were different from those that were expected by investors when making investment decisions in the past and thus the use of historical market returns to estimate the EMRP would be inappropriate. It is also likely that the EMRP is not constant over time as investors‟ perceptions of the relative riskiness of investing in equities change. Investor perceptions will be influenced by several factors such as current economic conditions, inflation, interest rates and market trends. The historical risk premium assumes the EMRP is unaffected by any variation in these factors in the short to medium term. Historical estimates are sensitive to the following:

the time period chosen for measuring the average

the use of arithmetic or geometric averaging for historical data selection of an appropriate benchmark risk free rate the impact of franking tax credits exclusion or inclusion of extreme observations.

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The EMRP is highly sensitive to the different choices associated with the measurement period, risk free rate and averaging approach used and as a result estimated of the EMRP can vary substantially.

We have considered the most recent studies undertaken by the Centre for Research in Finance at the Australian Graduate School of Management (AGSM), Morningstar Inc (Morningstar), ABN AMRO/London Business School and Aswath Damodaran (Damodaran). These studies generally calculate the EMRP to be in the range of 5% to 8%.

Prospective approach

The prospective approach is a forward looking approach that is current, market driven and does not rely on historical information. It attempts to estimate a forward looking premium based on either surveys or an implied premium approach.

The survey approach is based on investors, managers and academics providing their long-term expectations of equity returns. Survey evidence suggests that the EMRP is generally expected to be in the range of 6% to 8%.

The implied approach is based on either expected future cash flows or observed bond default spreads and therefore changes over time as share prices, earnings, inflation and interest rates change. The implied premium may be calculated from the markets total capitalisation and the level of expected future earnings and growth.

Selected EMRP

We have considered both the historically observed EMRP and the prospective approaches as a guideline in determining the appropriate EMRP to use in this report. Australian studies on the historical risk premium approach generally indicate that the EMRP would be in the range of 5% to 8%.

In recent years it has been common market practice in Australia in expert‟s reports and regulatory decisions to adopt an EMRP of 6%.

The recent severe decline worldwide in equity values and the difficulty companies are experiencing in raising equity capital may be indicative of investors demanding a greater risk premium. In addition, current prospective measures appear to indicate an increase in the EMRP.

Having considered the various approaches and their limitations, we consider an EMRP of 6.5% to be appropriate for Australia and New Zealand.

Beta estimate (β)

Description

The beta coefficient measures the systematic risk or non-diversifiable risk of a company in comparison to the market as a whole. Systematic risk, as separate from specific risk as discussed below, measures the extent to which the return on the business or investment is correlated to market returns. A beta of one indicates that an equity investor can expect to earn the market return (i.e. the risk free rate plus the EMRP) from this investment (assuming no specific risks). A beta of greater than one indicates greater market related risk than average (and therefore higher required returns), while a beta of less than one indicates less risk than average (and therefore lower required returns).

Betas will primarily be affected by three factors which include:

the degree of operating leverage employed by the firm in that companies with a relatively high fixed cost base will be more exposed to economic cycles and therefore have higher systematic risk compared to those with a more variable cost base

the degree of financial leverage employed by a firm in that as additional debt is employed by a firm, equity investors will demand a higher return to compensate for the increased systematic risk associated with higher levels of debt

correlation of revenues and cash flows to economic cycles, in companies that are more exposed to economic cycles (such as retailers), will generally have higher levels of systemic risk (i.e. higher betas) relative to companies that are less exposed to economic cycles (such as regulated utilities).

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The betas of various Australian industries listed on the ASX are reproduced below and provide an example of the relative industry betas for a developed market.

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Figure 18: Betas for various industries (as at 30 June 2009)
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
-
Capital goods Metals & mining Retailing Diversified financials Energy Media Transportation Software & services Consumer services Insurance Utilities Banks
sciences
Real estate excluding investment trusts Technology hardware & equipment Automobile & components Commercial services & supplies Materials (excl metals & mining) Real estate investment trusts Consumer durables & apparel Pharmaceuticals, biotechnology & life Food & staples retail and household & personal products Food, beverage & tobacco Health care equipment & services Telecommunication services
----- End of picture text -----

Source: AGSM Risk Management Service

The differences are related to the business risks associated with the industry. For example, the above diagram indicates transportation companies are more correlated to overall market returns with a beta close to one whereas telecommunications and other infrastructure companies (in particularly those that are regulated) typically have betas lower than one.

The geared or equity beta can be estimated by regressing the returns of the business or investment against the returns of an index representing the market portfolio, over a reasonable time period. However, there are a number of issues that arise in measuring historical betas that can result in differences, sometimes significant, in the betas observed depending on the time period utilised, the benchmark index and the source of the beta estimate. For unlisted companies it is often preferable to have regard to sector averages or a pool of comparable companies rather than any single company‟s beta estimate due to the above measurement difficulties.

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Market evidence

In estimating an appropriate beta for LLP‟s various business operations we have considered the betas of listed companies that are comparable to LLP. These betas, which are presented below, have been calculated based on weekly returns over a two year period, compared to the local country index.

Table 28: Analysis of betas for listed companies with comparable operations to LLP

		Enterprise value 1	Book	Market	Levered	Unlevered
Company name	Country	($ million)	Gearing 4	Gearing	beta	beta 5
Senior Living
FKP Property Group	Australia	2,036	46%	48%	1.74	1.09
Ryman	New Zealand	860	27%	14%	1.11	0.89
Prime Trust	Australia	366	56%	67%	1.08	0.57
Metlifecare Limited	New Zealand	363	26%	33%	0.50	0.41
Aevum Limited	Australia	281	21%	27%	0.97	0.81
INGREC2	Australia	241	45%	82%	1.51	0.96
LLP	Australia	880	47%	53%	1.77	1.09
Average			38%	46%	1.24	0.83
Australian residential /aged	care development
Stockland	Australia	11,246	24%	27%	1.30	1.06
Mirvac Group	Australia	5,682	29%	41%	1.15	0.90
LLC	Australia	5,020	12%	3%	1.07	0.98
Becton Property Group	Australia	360	63%	71%	1.58	0.72
Average		5,577	32%	35%	1.27	0.92

Source: Bloomberg and Deloitte Corporate Finance analysis

Notes:

Enterprise value as at 13 October 2009 for market gearing
ING Real Estate Community Living Group
Metlifecare Limited (Metlifecare) and Ryman have been converted using an $/New Zealand dollar (NZD) exchange rate of 1.24
Book gearing is the average of book gearing as at 30 June 2008 and 30 June 2009
Unlevered betas are unlevered using the average book gearing over periods ending 30 June 2008 and 30 June 2009.

Descriptions for each of the above companies are provided in Appendix 5.

The observed beta is a function of the underlying risk of the cash flows of the company, together with the capital structure and tax position of that company. This is described as the levered beta.

The capital structure and tax position of the entities in the table above may not be the same as those of LLP. The levered beta is often adjusted for the effect of the capital structure and tax position. This adjusted beta is referred to as the unlevered beta. The unlevered beta is a reflection of the underlying risk of the pre-financing cash flows of the entity.

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Selected beta (β)

In selecting an appropriate beta we have considered the above analysis and the following factors for each business.

Retirement Living

in addition to LLP itself, the comparable companies that have the closest characteristics to LLP‟s Retirement Living operations include Aevum, FKP and Prime Trust in Australia, and Ryman and Metlifecare in New Zealand. Each of these companies operate more than 2,000 retirement village units across a diverse geographical base within Australia and New Zealand. However Ryman may be less comparable as it also has a substantial aged care component and the recent funding and capital structure issues faced by Prime Trust may result in a less meaningful observed beta

we note that Metlifecare is a relatively illiquid security and therefore we have placed less emphasis on its beta

estimating future cash flows for retirement villages is inherently uncertain as it requires long-term estimates of regional property growth and resident turnover which are difficult to predict with precision. This uncertainty and the relative differences it brings with it in respect of potential volatility in future cash flows relative to other traditional property classes (which many of the comparables have significant operations in) are factors which we consider are likely to be priced into the rate of return demanded from a potential purchaser of retirement village assets but may not be fully captured in the observed beta‟s above

current debt to equity levels are higher than historical levels (refer to Table 32)

we have assumed an unlevered beta for LLP‟s Retirement Living business in the range of 0.9 to 1.1, a corporate tax rate of 30% and gearing in the range of 25% (as discussed below) which results in a selected relevered beta in the range of 1.11 to 1.36.

Aged Care

there are no „pure play‟ listed aged care operators in Australia or New Zealand. Ryman is the closest comparable as it operates a large number of rest homes, and hospitals for the elderly which are comparable to LLP‟s aged care facilities. We have therefore placed most emphasis on the observed beta for Ryman

we have also considered that there is the potential for significant changes in respect of the regulation of the aged care sector as discussed in Appendix 1. Whilst there has been no formal decisions in respect of any deregulation, this could result in increased competition within the sector and could impact the ability to require residents to put up accommodation bonds in future

the differences between the comparable set of companies and LLP include the regulatory environment, operations outside of aged care, size of operations, services offered and profile of patients

we have assumed an unlevered beta for LLP‟s Aged Care business in the range of 0.7 to 0.8, a corporate tax rate of 30% and gearing in the range of 30% (as discussed below) to give a selected relevered beta in the range of 0.91 to 1.04.

Retirement Living Development

In selecting an appropriate beta for LLP‟s Retirement Living Development business we have considered the following:

the comparable companies that have the closest characteristics to LLP‟s Retirement Living Development operations include FKP and Becton Property Group (Becton). FKP and Becton each have more than 900 senior living units under development, representing a senior living development pipeline of $420 million and $300 million respectively. The unlevered betas for each of these companies is 1.09 and 0.72 respectively

the AGSM calculated levered beta for the Real Estate (excluding investment trusts) sector of 1.64

as set out above, there is a wide range of betas observed for companies that are broadly comparable to the business. In order to estimate an appropriate beta for this business we have had regard to the betas observed as well as more general and anecdotal rates of return expected for development projects in the current

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environment in the order 15% to 20%. We have assumed a levered beta for LLP‟s Retirement Living Developments in the range of 1.2 to 1.3.

Specific company risk premium (α

The specific company risk premium adjusts the cost of equity for company specific factors, including unsystematic risk factors such as, company size, reliance on key persons, etc.

The CAPM assumes, amongst other things, that rational investors seek to hold efficient portfolios, that is, portfolios that are fully diversified. One of the major conclusions of the CAPM is that investors do not have regard to specific company risks (often referred to as unsystematic risk).

There are several empirical studies that demonstrate that the investment market does not ignore specific company risks. In particular, studies show that on average, smaller companies have higher rates of return than larger companies (often referred to as the size premium)

These are discussed separately below.

Selection of specific company risk premium

We have selected the following specific company risk premiums in our estimate of an appropriate cost of equity.

Table 29: Specific company risk premium applied to valuation of LLP’s operations

			Retirement Living	Retirement Living
	Retirement Living		Development		Aged Care
	Low	High	Low	High	Low	High
Specific company risk premium	-	-	2.0%	3.0%	-	-

Source: Deloitte Corporate Finance analysis

We have selected a specific company risk premium for the Retirement Living Development division of 2.0% to 3.0% after considering the following factors:

the small size of LLP‟s development operations relative to the comparable development companies. On average, smaller companies are valued using higher discount rates than larger companies (often referred to as the size premium). Our estimated value would place the Retirement Living Development business in the eighth decile of ASX listed companies. Based on a study of listed companies in the US over the period 1926 to 2008[12] , Ibbotson SBBI estimated that companies within the 6th decile to the 10th decile had a size premium of 1.74% to 3.74%

the comparable development companies have little or no direct exposure to retirement living development activities. Retirement living development activities are likely to have a higher risk profile relative to more typical developments. This would increase the risk profile, and therefore the return demanded, for LLP‟s development activities relative to the comparable development companies and is not captured in the observed beta‟s above

the recent lack of liquidity for raising capital in the property sector has been more pronounced in the retirement living sector. In particular lenders have adopted a more prudent view of the risk of these assets and have consequently have attempted to reduce their exposures and have demanded more onerous covenants. We would therefore expect the rate of return required on development projects in the retirement living sector to be higher than typical development companies. However due to the lack of pure play listed retirement living development companies, this is not reflected in the observed beta‟s

more general and anecdotal rates of return expected for development projects in the current environment in the order 15% to 20%.

12 Ibbotson SBBI. „Market Results for Stocks, Bonds, Bills, and Inflation 2009 Yearbook‟

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Dividend imputation

Dividends paid by Australian corporations may be franked, unfranked, or partly franked. A franked dividend is one that is paid out of company profits which have borne tax at the company rate, currently 30%. Where the shareholder is an Australian resident individual or complying superannuation fund, it will generally be entitled to a tax credit (called an imputation credit) in respect of the tax paid by the company on the profits out of which the dividend was paid. If the recipient of the dividend is another company, the dividend will give rise to a credit in that company‟s franking account thereby increasing the potential of the company to pay a franked dividend at a later stage.

We have not adjusted the cost of capital or the projected cash flows for the impact of dividend imputation due to the diverse views as to the value of imputation credits and the appropriate method that should be employed to calculate this value. Determining the value of franking credits requires an understanding of Securityholders‟ personal tax profiles to determine the ability of Securityholders to use franking credits to offset personal income. Furthermore, the observed EMRP already includes the value that Securityholders ascribe to franking credits in the market as a whole. In our view, the evidence relating to the value that the market ascribes to imputation credits is inconclusive.

Conclusion on cost of equity

Based on the above factors we arrive at a cost of equity, K e , as follows:

Table 30: K e applied to valuation of LLP

	Retirement Living	Retirement Living Development
Retirement Living	(New Zealand) Aged Care
Low High	Low High Low High	Low High
Risk free rate (%) 5.8% 5.8% EMRP (%) 6.5% 6.5% Unlevered beta 0.90 1.10 Relevered beta 1.11 1.36 Specific company risk premium (%) 0.0% 0.0% Ke– calculated 13.0% 14.6%	6.0% 6.0% 5.8% 5.8% 6.5% 6.5% 6.5% 6.5% 0.90 1.10 0.70 0.80 1.11 1.36 0.91 1.04 0.0% 0.0% 0.0% 0.0% 13.2% 14.8% 11.7% 12.6%	5.8% 5.8% 6.5% 6.5% 1.20 1.30 1.20 1.30 2.0% 3.0% 15.6% 17.3%

Source: Deloitte Corporate Finance analysis

Cost of debt capital (K d )

We have estimated LLP‟s pre-tax cost of debt to be approximately 7.5% to 8.5% for the Australian operations and approximately 8.0% to 9.0% for the New Zealand operations after consideration of the following:

LLP‟s current weighted average cost of debt comprising the syndicated bank facility of $475 million at 7.4% and $158.4 million convertible note at 9.5%

likely debt margins applicable to a facility of similar nature to LLP

the current risk-free rate of 5.8% for Australia and 6.0% of New Zealand as a proxy for the base rate for corporate funding over the life of the business

our assessed target gearing for each business as discussed below and the average tax rate of LLP

the recent lack of liquidity in global debt markets which has significantly increased funding costs relative to historical levels.

Based on the above factors we have applied a credit margin of 200 bps to 300 bps in estimating the cost of debt. The assessed after tax cost of debt is set out below:

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Table 31: K d applied to valuation of LLP

	Australia	Australia	New Zealand	New Zealand
	Low	High	Low	High
Base rate nominal (%)	5.8%	5.8%	6.0%	6.0%
Credit margin (%)	2.0%	3.0%	2.0%	3.0%
Calculated pre tax cost of debt (%)	7.8%	8.8%	8.0%	9.0%

Source: Deloitte Corporate Finance analysis

Gearing

Selecting an appropriate gearing level for valuation purposes requires subjective judgement having regard to the quality of the cash flows of the business and the nature of the industry. In considering the appropriate level of gearing to apply to LLP‟s business units we have had regard to:

LLP‟s stated intention to reduce gearing for the Group to 20% to 25%

the debt levels of companies operating across relevant segments of the senior living and residential development sector from June 2005 through to June 2009, as set out below:

Table 32: Gearing trend analysis1

	2005 (Jun) 2006 (Jun) 2007 (Jun) 2008 (Jun) 2009 (Jun) 16.6% 28.6% 17.6% 32.3% 32.6% 8.6% 6.7% 16.2% 35.9% 55.7%

Australian residential / aged care development All senior living excluding LLP

Source: Deloitte Corporate Finance analysis and Bloomberg

Note:

Gearing is defined as the net debt to enterprise value, where enterprise value is calculated using the market capitalisation of the relevant company adding back net debt.

the nature and quality of the future cash flows of LLP and its underlying assets

recent lack of liquidity in debt markets which has constrained the ability to fund retirement village assets. Retirement village assets have historically been evaluated by lenders using similar metrics as companies with direct property investments. Lenders have adopted a more prudent view of the risk of these assets and have started to implement interest coverage covenants based on cash earnings rather than accounting earnings. In some instances, such as LLP, this has reduced the debt capacity of these vehicles

for the Retirement Living Development business we have assumed that the current projects are fully equity funded due to the constraints in debt funding for retirement villages mentioned above. Obtaining funding for development projects may be difficult in the current environment.

Based on the above factors, in particular the current state of the credit markets and the de-leveraging occurring across the sector, we have applied the following gearing levels:

Retirement Living operations: 25%

Aged Care operations: 30%

Retirement Living Development operations: 0% (debt funded).

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Calculation of WACC

Based on the above, we have assessed the nominal post-tax WACC for LLP to be:

Table 33: WACC applied to valuation of LLP

	Retirement Living	Retirement Living	Retirement Living	Retirement Living			Retirement Living	Retirement Living
	(Australia)		(New Zealand)		Aged	Care	Development
	Low	High	Low	High	Low	High	Low	High
Cost of equity capital	13.0%	14.6%	13.2%	14.8%	11.7%	12.6%	15.6%	17.3%
Base rate	5.8%	5.8%	6.0%	6.0%	5.8%	5.8%	5.8%	5.8%
Margin	2.0%	3.0%	2.0%	3.0%	2.0%	3.0%	2.0%	2.0%
Cost of debt (pre-tax)	7.80%	7.80%	8.00%	9.00%	7.80%	8.80%	7.80%	7.80%
Net debt to enterprise value	25.0%	25.0%	25.0%	25.0%	30.0%	30.0%	0.0%	0.0%
Tax rate	30.0%	30.0%	30.0%	30.0%	30.0%	30.0%	30.0%	30.0%
Calculated WACC	11.1%	12.5%	11.3%	12.7%	9.8%	10.6%	15.6%	17.3%
Selected WACC	11.0%	12.0%	11.5%	12.5%	9.5%	10.5%	15.0%	17.0%

Source: Deloitte Corporate Finance analysis

The above calculations of WACC, which equate to the rates of return demanded by investors (both equity and debt), do not appear unreasonable based on our experience and taking account of the current markets and specific constraints presented by such conditions in the short-term to gearing levels and development projects.

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Appendix 5: Comparable listed entities

For the purposes of our cross-check and the beta calculation, we reviewed companies listed on the Australian and New Zealand stock exchanges to identify companies with operations similar to the assets being valued. The results of our research (and descriptions of the relevant companies) are set out below.

Table 34: Implied NTA multiples for comparable listed companies

					Price/	FY09	FY10	FY11
	Enterprise	Market	Book		Ungeared	EBITDA	EBITDA	EBITDA
	value	Capitalisation	Gearing	Price/NTA	NTA	multiple	multiple	multiple
Company	($ million)	($ million)	(%)	(historical)	(historical)	(times)	(times)	(times)
Senior living
Aevum	281	205	21.5%	0.8 x	0.8 x	14.1 x	16.3 x	10.4 x
Metlifecare1	450	276	26.1%	0.6 x	0.7 x	12.5 x	n/a	n/a
Ryman1	1,067	925	27.0%	2.3 x2	1.9 x	13.6 x	14.9 x	14.0 x
INGREC	241	51	45.4%	0.3 x	0.9 x	7.0 x	5.5 x	n/a
Prime Trust	366	95	55.9%	0.3 x	0.7 x	31.8 x	n/a	n/a
FKP	2,036	889	45.7%	0.8 x	0.9x	16.7 x	14.5 x	13.3 x
Residential development
Stockland	11,246	9413	24.1%	1.1 x	1.1 x	17.6 x	15.4 x	13.9 x
Lend Lease	5,020	4824	11.5%	2.5 x	1.6 x	12.3 x	11.4 x	9.8 x
Mirvac	5,682	4475	28.8%	0.9 x	0.9 x	16.5 x	17.8 x	15.7 x
Becton	360	22	62.8%	0.2 x	0.9 x	10.9 x	14.6 x	12.3 x

Source: Bloomberg, company annual reports and Deloitte Corporate Finance analysis

n/a = not available

Notes:

Metlifecare and Ryman figures are presented in NZD
Price/NTA multiples for Ryman are not meaningful as Ryman does not include retirement village assets as investment properties on its balance sheet.

With the exception of Ryman which has significant aged care operations, the majority of the selected companies are only suitable for comparison to retirement living operations.

Aevum

Aevum owns, operates and develops retirement villages and aged care facilities in Australia. The company owns and manages 2,165 retirement units and 202 aged care beds across 17 villages in NSW and 4 in Western Australia. Its development pipeline as at 30 June 2009 consisted of circa 610 ILUs with an expected completion value of $375 million.

Metlifecare

Metlifecare owns and operates 17 retirement villages in New Zealand, incorporating 10 care facilities. Metlifecare operated 2,469 villas and apartments and 466 care beds, providing a continuum of care for over 3,300 residents. The company reports future developments of 269 independent living operations and 15 serviced apartment settlements.

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Ryman

Ryman develops and manages retirement villages across New Zealand, providing a range of senior living options for over 4,500 residents across 21 operational retirement villages. Ryman facilities include independent townhouses, serviced apartments and a care centre, with plans to open two new villages, and a goal to build 300 retirement village units and 100 care beds per annum.

INGREC

INGREC invests in senior living and student living assets with a diversified portfolio of 103 properties across Australia, Canada, New Zealand and US. In Australia, INGREC has an interest in 38 seniors housing communities. As at 30 June 2009, this translated into 2,490 existing ILUs and a development pipeline of 304 units. Approximately 69% of the Australian portfolio is based on a rental model with the remaining units based on a DMF model.

Prime Trust

Prime Trust has an investment in 12 retirement villages across Australia and has undertaken a strategic review to divest its non-core facilities including 13 aged care facilities and retirement villages leased to LLP (the proposed transaction), 12 retirement pension assets and 2 aged care facilities.

Prime Trust holds a portfolio of 3,733 retirement village units across Australia.

FKP

FKP is engaged in a range of property development and investment activities throughout Australia and New Zealand. Its operations span residential developments, commercial, industrial and retail projects, the ownership and management of retirement villages, construction, design and project management and property funds management. FKP owns and operates 80 retirement villages and 5,988 retirement units across Australia with an additional 1,003 units in the development pipeline through the Aveo Live Well brand. Furthermore FKP manages 4,254 units for RVG, with an additional 937 units in the development pipeline.

Stockland Stockland is a diversified property group with operations in Australia and the United Kingdom with significant exposure to the residential development market. As at 30 June 2009, Stockland had 24 existing retirement villages comprising 3,974 established units across Victoria and Queensland and a development pipeline of 2,900 units. LLC LLC is a property group specialising in project management and construction, real estate investment and development and operates in three geographic regions, namely Asia Pacific, Europe and the US. 19% of LLC‟s operations are involved in the communities segment, which has a focus on urban regeneration and large scale mixed use urban development.

Mirvac Mirvac is an integrated real estate group with a focus on investment and management, and has $27.2 billion of activities under control across the real estate spectrum. Mirvac manages large scale residential and nonresidential development projects, with $12.9 billion in residential development planned over the next eight to 10 years.

Becton

Becton is a diversified property group involved in property development and construction, property funds development and the ownership and operation of retirement villages. Becton has 936 retirement dwellings under management with $300 million of units in the development pipeline (which have now been transferred – into a joint venture vehicle refer below).

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Appendix 6: Comparable transactions

For the purposes of our cross-check, we also reviewed recent transactions in the Australian and New Zealand markets to identify companies with operations similar to the assets being valued. Our research identified the following transactions:

Transactions in the retirement living sector

Table 35: Implied NTA multiples for recent transactions in the retirement living sector

				Transaction	NTA	Ungeared
Date			Interest	price	Multiple	NTA
announced	Target	Acquirer	acquired	($ million)	(Historical)	(times)
14/08/2009	Certain assets of	LLC	100%	77	0.8 x	0.8 x
	Prime Trust
17/04/2009	Summerset	Quadrant Private	49.9%	n/a	n/a	n/a
	Management	Equity
	Group
14/04/2009	Certain assets of	Government of the	50%	31	0.25 x	0.70 x
	Becton	Sultanate of Oman
15/10/2008	FKP Property	Stockland	14.9%	563	0.42 x	0.70 x
	Group Limited
10/10/2008	Aevum Limited	Stockland	14.4%	188	0.69 x	0.75 x

Source: Bloomberg, company annual reports, Mergermarket, ASX releases and Deloitte Corporate Finance analysis

Note:

Excluded on the basis that the market capitalisation of the portfolio represents the reported book value of equity for the portfolio.

Certain assets of Prime Trust

In August 2009, LLC acquired nine aged care facilities and four Retirement Villages from Prime Trust, for a total consideration of $77 million. All of the facilities were leased to LLP. The transaction was also part of a larger transaction which involved Prime Trust acquiring an option over certain assets owned by LLP and various parties agreeing to cease legal disputes between each other.

Summerset Management Group

In April 2009, a fund associated with Quadrant Private Equity acquired a 49.9% stake in Summerset Management Group. Summerset Management Group develops retirement villages and rest home/continuing care facilities in the central North Island of New Zealand. The remaining 50.1% continues to be owned by AMP Capital Investors.

Certain assets of Becton

Becton sold its retirement living assets into a joint venture with the Oman Investment Fund in April 2009. The cash proceeds to Becton were $28 million. The assets subject to the joint venture included four completed retirement villages and three development projects. In addition to the establishment of the joint venture, the Oman Investment Fund subscribed for $3.1 million in stapled securities at a price of $0.15 per security.

FKP / Stockland

In October 2008, Stockland, the diversified property group, acquired a 5% stake in FKP, the diversified property and investment group operating in Australia and New Zealand. The company acquired a stake of up to 13% of FKP through the partial sub-underwriting of a rights issue. Currently FKP owns and operates 5,988 retirement units across Australia with an additional 1,003 units in the development pipeline. Furthermore, FKP holds the operational responsibility for both Aveo Live Well brand and Retirement Villages Group.

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Aevum / Stockland

Stockland acquired B&B‟s 14.4% stake in Aevum in October 2008. Aevum owns, operates and develops retirement villages and aged care facilities in Australia. Currently, Aevum owns and manages 2,165 retirement units and 202 aged care beds across 17 villages in NSW and four in Western Australia.

Transactions in the aged care sector

Our analysis did not identify any recent transactions in the aged care sector which could form the basis of a cross-check of our valuation of the Aged Care business.

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Appendix 7: Recent capital raisings

There have been an increasing number of equity capital raisings in the A-REIT market in the past nine months. The table below presents a summary of the recent capital raisings undertaken in the A-REIT sector and the substantial discount to NTA value and VWAP prior to the announcement of the capital raising at which they have transacted.

Table 36: Recent capital raisings in the A-REIT and retirement living sectors

				Premium/
		Capital raised	Discount to NTA	(discount) to
Company	Announced	($ million)	per security	30-day VWAP
*Placements*
Mirvac Group	24-Jan-08	300	(36.8%)	(17.8%)
CFS Retail Property	8-Oct-08	325	(13.8%)	(10.4%)
Stockland Group	8-Oct-08	300	(2.9%)	0.7%
FKP Property Group	15-Oct-08	28	(60.3%)	(17.8%)
Aspen Group	17-Oct-08	22	(36.2%)	(15.1%)
Goodman Group	28-Oct-08	230	(54.1%)	(51.8%)
Mirvac Group	5-Nov-08	72	(76.1%)	(52.0%)
Dexus Property Group	3-Dec-08	302	(56.5%)	(6.7%)
ING Office Fund	5-Dec-08	150	(55.8%)	(9.9%)
Macquarie Office Trust	12-Dec-08	100	(86.8%)	(33.3%)
Abacus Property Group	20-Jan-09	24	(80.2%)	25.0%
Commonwealth Property Office Fund	22-Jan-09	192	(50.6%)	(28.3%)
Westfield Group	3-Feb-09	2,900	(16.9%)	(17.9%)
Dexus Property Group	21-Apr-09	90	(51.1%)	(10.1%)
GPT Group	7-May-09	120	(75.5%)	(12.7%)
Stockland	13-May-09	200	(44.4%)	(12.8%)
Growthpoint Properties Australia	18-May-09	56	(70.9%)	(89.7%)
Charter Hall Group	27-May-09	24	(69.7%)	(11.0%)
Mirvac Group	4-Jun-09	153	(59.0%)	(5.20%)
ING Office Fund	17-Jun-09	90	(65.4%)	(5.4%)
Goodman Group	6-Aug-09	167	(52.9%)	1.5%
Valad Property Group	23-Sep-09	19	(58.3%)	(5.4%)
*Average*			*(53.3%)*	*(17.5%)*
Entitlements/Rights Issues
Australand Property	28-Jul-08	461	(63.9%)	(28.3%)
FKP Property Group	15-Oct-08	150	(70.2%)	(37.5%)
GPT Group	23-Oct-08	1,619	(83.7%)	(41.9%)
Goodman Group	28-Oct-08	604	(54.1%)	(51.8%)
LLC	5-Nov-08	428	(76.1%)	(52.0%)
ING Office Fund	5-Dec-08	265	(55.8%)	(9.9%)
Macquarie Office Trust	12-Dec-08	408	(86.8%)	(33.3%)
Abacus Property Group	20-Jan-09	187	(80.2%)	25.0%
Peet Limited	27-Mar-09	82	(20.9%)	2.8%
Metlifecare	27-Feb-09	NZ37	(79.4%)	(56.6%)
Dexus Property Group	21-Apr-09	659	(51.1%)	(10.1%)
GPT Group	7-May-09	1,600	(75.5%)	(12.7%)
Bunnings Warehouse	7-May-09	150	(20.2%)	(7.9%)

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				Premium/
		Capital raised	Discount to NTA	(discount) to
Company	Announced	($ million)	per security	30-day VWAP
Stockland	13-May-09	1,780	(44.4%)	(12.8%)
Growthpoint Properties Australia	18-May-09	144	(70.9%)	(89.7%)
Aspen Group	19-May-09	82	(73.9%)	(17.5%)
Charter Hall Group	27-May-09	49	(56.0%)	(11.0%)
Mirvac	4-Jun-09	948	(59.0%)	5.2%
ING Office Fund	17-Jun-09	325	(65.4%)	(5.4%)
FKP Property Group	25-Jun-09	324	(89.0%)	(26.3%)
Australand Property	30-Jun-09	475	(56.5%)	(52.2%)
CDI	6-Aug-09	130	(54.5%)	(8.4%)
Goodman Group	6-Aug-09	1,112	(52.9%)	1.5%
Valad Property Group	23-Sep-09	40	(58.3%)	(19.0%)
*Average*			*(62.5%)*	*(22.9%)*
*Overall average*			*(58.1%)*	*(20.3%)*

Source: Deloitte Corporate Finance analysis, MergerMarket, CapitalIQ, MergerStat

We make the following comments in relation to these recent A-REIT capital raisings:

all of the recent equity capital raisings were undertaken at discounts relative to the NTA values prior to the announcement of the equity raising. The discounts ranged from 2.9% to 89.0%

the average discount to the NTA value is lower for placements compared to entitlement offers

there does not appear to be a correlation between the amount or proportion of capital raised and the discount to NTA observed

substantial equity capital has been raised primarily to satisfy short-term debt requirements, reduce balance sheet gearing and meet capital expenditure/working capital obligations. Furthermore, some vehicles with significant portions of debt and interest costs denominated in foreign currencies were required to raise capital to meet debt covenants which were breached following the depreciation of the Australian dollar in late 2008.

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Appendix 8: Control premium studies

We summarise below the empirical data and evidence available in respect of control premiums.

Deloitte Corporate Finance study - Australia

We conducted a study of premiums paid in Australian transactions completed between 1 January 2000 and 25 September 2009. Our merger and acquisition data was sourced from Bloomberg and various other databases and yielded 460 transactions that were completed during the period under review.

We excluded 80 transactions from our analysis where there was insufficient data. As a result, our data set was refined to 380 transactions where an acquiring company increased its shareholding in a target company from a minority interest to a majority stake or acquired a majority stake in the target company.

We assessed the premiums by comparing the offer price to the closing trading price of the target company one month prior to the date of the announcement of the offer. Where the consideration included shares in the acquiring company, we used the closing share price of the acquiring company on the day prior to the date of the offer.

Summary of findings

As the following figure shows, premiums paid in Australian transactions between 1 January 2000 and 25 September 2009 are widely distributed with a long „tail‟ of transactions with high premiums.

Figure 19: Distribution of data

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Source: Deloitte Corporate Finance analysis
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The following table details our findings.

Table 37: Premium analysis - findings

Control premiums Average 29% Median 25% Upper quartile 41% Lower quartile 10%

Source: Deloitte Corporate Finance analysis

Many of the observed control premiums below 20% are likely to have been instances where the market has either been provided with information or anticipated a takeover offer in advance of the offer being announced. Accordingly, the pre-bid share trading price may already reflect some price appreciation in advance of a bid being received, which creates a downward bias on some of the observed control premiums in our study.

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Many of the observed control premiums above 40% are likely to have been influenced by the following factors which create an upward bias on some of the observed control premiums in our study:

some acquirers are prepared to pay above fair market value to realise „special purchaser‟ value which is only available to a very few buyers. Such „special purchaser‟ value would include the ability to access very high levels of synergistic benefits in the form of cost and revenue synergies or the ability to gain a significant strategic benefit
abnormally high control premiums are often paid in contested takeovers where there are multiple bidders for a target company. In such cases, bidders may be prepared to pay away a greater proportion of their synergy benefits from a transaction than in a non-contested situation

some of the observations of very high premiums are for relatively small listed companies where there is typically less trading liquidity in their shares and they are not closely followed by major broking analysts. In such situations, the traded price is more likely to trade at a deeper discount to fair market value on a control basis.

Accordingly, the observed control premiums to share trading prices for such stocks will tend to be higher. As such, we consider the control premium range of 20% to 40% to be representative of general market practice.

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Appendix 9: Sources of information

In preparing this report we have had access to the following principal sources of information:

LLP business plans and supporting short-term cash flow forecasts which were prepared for internal strategy purposes as well as for financing purposes (Fund Model)

LLP long-term models prepared for each retirement village and aged care facility which were utilised to estimate carrying values for financial reporting purposes (Asset Model)

independent property valuations published by CB Richard Ellis

LLP annual reports and the annual reports of comparable companies

LLP management presentations, internal board papers, internal accounting papers

quarterly business reviews for the Aged Care and Retirement Living Development business units

publicly available information on comparable companies and market transactions published by ABS, Capital IQ, IBIS World Pty Limited, Thomson Financial, Bloomberg Financial Markets, MergerMarket, CorpFin and Factiva

other publicly available information, ASX announcements, media releases, brokers reports on LLP and the senior living industry and Australian and New Zealand government publications.

In addition, we have had discussions and correspondence with certain executives of LLP and RBS Morgans (advisors to LLP) and the commercial and operational management of each of LLP‟s business units in relation to the above information and to understand in greater detail the current operations and prospects of LLP.

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Appendix 10: Glossary

Reference Definition α Specific company risk premium AUASB Auditing and Assurance Standards Board ABS Australian Bureau of Statistics ACFI Aged Care Funding Instrument AFSL Australian Financial Services Licence AGA Adjusted gross assets Aged Care Aged Care business unit of LLP AGSM Australian Graduate School of Management Announcement Date 28 September 2009 APN APN Property Group APESB Accounting Professional and Ethical Standards Board Limited A-REIT Australian Real Estate Investment Trust ARVA Australian Retirement Village Accreditation Asset Models Models prepared for each retirement village and aged care facility which were utilised to estimate carrying values for financial reporting purposes ASIC Australian Securities and Investments Commission ASX Australian Securities Exchange Limited $ Australian dollars B&B Babcock and Brown Limited BBC Babcock and Brown Communities Group Becton Becton Property Group bps Basis points β beta CACP Community Aged Care Packages CAPM Capital Asset Pricing model Conform Conform Health Group Consideration Cash price of $0.31 per LLP Security CPI Consumer price index Damodaran Aswath Damodaran DCF Discounted cash flow Deloitte Corporate Finance Deloitte Corporate Finance Pty Limited Development Agreement Under an in-principle agreement between LLC and LLP, LLC acts as development manager for LLP DMF Deferred management fees EBITDA Earnings before interest, tax, depreciation and amortisation EMRP Equity Market Risk Premium ES Extra Service Care Fini Portfolio Fini portfolio of retirement villages FOS Financial Ombudsman Service FSG Financial Services Guide

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Reference Definition FY Financial year Fund Model The financial model which includes projections of nominal after tax cash flows for each business unit of LLP and for LLP as a whole IER Independent experts report Independent Directors Directors of LLP who are not also employees of LLC or LLC subsidiary entities ILUs Independent Living Units INGREC ING Real Estate Community Living Group Initial LLC Transaction A strategic review conducted by the LLP Board in the second half of 2008 in the context of reducing debt and implementing capital management initiatives. IPO Initial public offering Kd Cost of debt capital Ke Cost of equity capital LLC Lend Lease Corporation Limited LLCS Lend Lease Capital Services Pty Limited LLP or LLP Group collectively, LLPL and LLPT will be referred to as LLP or the LLP Group LLP Board The board of directors of LLP LLPL Lend Lease Primelife Limited LLPL Shareholders Holders of shares in LLPL LLP Securityholders Holders of LLP Securities LLP Securities Stapled securities in LLP LLPT Lend Lease Primelife Trust LLPT Unitholders Non-associated holders of units on issue in LLPT LLVRE Lend Lease Villages Responsible Entity Limited Metlifecare Metlifecare Limited Morningstar Morningstar Inc NAV Net asset value NSW New South Wales NTA Net tangible assets NZD New Zealand dollar O&D fees Origination and disposal fees Part 3 Part 3 of Schedule 8 of the Corporations Regulations 2001 (Cwlth) PCL Primelife Corporation Limited Prime Trust Prime Retirement & Aged Care Property Trust PLT PrimeLiving Trust Prime Trust Transaction Transaction entered into with Prime Trust in August 2009, refer Section 3.7 for further detail Proposed Transaction The implementation of the Trust Scheme and the Share Scheme Rf Risk free rate of return Rm Expected return on the market portfolio RBD Retirement by Design Pty Limited RCS Resident Classification System Retirement Living Retirement Living business unit of LLP

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Reference Definition
Retirement Living Retirement Living Development business unit of LLP
Development
RG 111 ASIC Regulatory Guide 111
RVA Retirement Villages Association
Ryman Ryman Healthcare Limited
SAs Serviced Apartments
Scheme Booklet Scheme booklet to be sent to LLP Securityholder
Section 411 Section 411 of the Corporation Act 2001
Section 611 Section 611 of the Corporations Act 2001
Section 640 Section 640 of the Corporations Act 2001
Share Scheme Company scheme of arrangement
SIA Scheme Implementation Agreement
Tranche A $350 million debt facility expiring December 2010
Tranche B $125 million debt facility expiring December 2012
Trust Scheme Trust scheme
US United States of America
VWAP Volume weighted average price
WACC Weighted average cost of capital
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Page 84 Deloitte: Lend Lease Primelife Group – Independent expert‟s report

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G

Appendix 11: Qualifications, declarations and consents

The report has been prepared at the request of the Independent Directors of LLP and is to be included in the Scheme Booklet to be provided to LLP Securityholders for approval of the Proposed Transaction in accordance with Section 411 and Section 611. Accordingly, it has been prepared only for the benefit of the Independent Directors and those persons entitled to receive the Scheme Booklet in their assessment of the Proposed Transaction outlined in the report and should not be used for any other purpose. We are not responsible to you, or anyone else, whether for our negligence or otherwise, if the report is used by any other person for any other purpose. Further, recipients of this report should be aware that it has been prepared without taking account of their individual objectives, financial situation or needs. Accordingly, each recipient should consider these factors before acting on the Proposed Transaction. This engagement has been conducted in accordance with professional standard APES 225 Valuation Services issued by the APESB.

The report represents solely the expression by Deloitte Corporate Finance of its opinion as to whether the Proposed Transaction is in the best interests of LLP Securityholders as a whole. Deloitte Corporate Finance consents to this report being included in the Scheme Implementation Agreement in the form and context in which it is to be included in the Scheme Implementation Agreement.

Statements and opinions contained in this report are given in good faith but, in the preparation of this report, Deloitte Corporate Finance has relied upon the completeness of the information provided by LLP and its officers, employees, agents or advisors which Deloitte Corporate Finance believes, on reasonable grounds, to be reliable, complete and not misleading. Deloitte Corporate Finance does not imply, nor should it be construed, that it has carried out any form of audit or verification on the information and records supplied to us. Drafts of our report were issued to LLP management for confirmation of factual accuracy.

In recognition that Deloitte Corporate Finance may rely on information provided by LLP and its officers, employees, agents or advisors, LLP has agreed that it will not make any claim against Deloitte Corporate Finance to recover any loss or damage which LLP may suffer as a result of that reliance and that it will indemnify Deloitte Corporate Finance against any liability that arises out of either Deloitte Corporate Finance‟s reliance on the information provided by LLP and its officers, employees, agents or advisors or the failure by LLP and its officers, employees, agents or advisors to provide Deloitte Corporate Finance with any material information relating to the Proposed Transaction.

To the extent that this report refers to prospective financial information we have considered the prospective financial information and the basis of the underlying assumptions. The procedures involved in Deloitte Corporate Finance‟s consideration of this information consisted of enquiries of LLP personnel and analytical procedures applied to the financial data. These procedures and enquiries did not include verification work nor constitute an audit or a review engagement in accordance with standards issued by the auditing and Assurance Standards Board.

Based on these procedures and enquiries, Deloitte Corporate Finance considers that there are reasonable grounds to believe that the prospective financial information for LLP included in this report has been prepared on a reasonable basis. In relation to the prospective financial information, actual results may be different from the prospective financial information of LLP referred to in this report since anticipated events frequently do not occur as expected and the variation may be material. The achievement of the prospective financial information is dependent on the outcome of the assumptions. Accordingly, we express no opinion as to whether the prospective financial information will be achieved.

Deloitte Corporate Finance holds the appropriate Australian Financial Services licence to issue this report and is owned by the Australian Partnership Deloitte Touche Tohmatsu. The employees of Deloitte Corporate Finance principally involved in the preparation of this report were Tapan Parekh, BBus, MCom, CA, F Fin, Mark Pittorino, B Comm, M App Fin, CA, Dave Pearson, B Comm, CFA, CA, CBV, Michel Brun, BA, MBA and Carene Lee, B Comm/BBus, CA, G Dip App Fin. Tapan Parekh and Mark Pittorino are Directors, Dave Pearson is an Associate Director, Michel Brun is a Senior Manager and Carene Lee is a Manager of Deloitte Corporate Finance. Each has many years experience in the provision of corporate financial advice, including specific advice on valuations, mergers and acquisitions, as well as the preparation of expert reports.

We have provided tax, accounting and valuation services to LLP and its related entities in the last two years including the IER in relation to the Initial LLC Transaction. We have also provided limited tax advice to LLC in the last two years.

Deloitte: Lend Lease Primelife Group – Independent expert‟s report

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We have considered these relationships and regard ourselves as independent of LLP and LLP for the purpose of the preparation of an IER for the Proposed Transaction in accordance with ASIC Regulatory Guide 112.

Neither Deloitte Corporate Finance, Deloitte Touche Tohmatsu, nor any partner or executive or employee thereof has any financial interest in the outcome of the proposed transaction which could be considered to affect our ability to render an unbiased opinion in this report. Deloitte Corporate Finance will receive a fee of $250,000 exclusive of GST in relation to the preparation of this report. This fee is based upon time spent at our normal hourly rates and is not contingent upon the success or otherwise of the Proposed Transaction.

Deloitte Corporate Finance Pty Limited (ACN 003 833 127) of 225 George Street, Sydney NSW 2000 acknowledges that:

LLP proposes to issue an Scheme Booklet in respect of the Proposed Transaction

the Scheme Booklet will be issued in hard copy and be available in electronic format

it has previously received a copy of the draft Scheme Booklet for review.

On the basis that the Scheme Booklet is consistent in all material respects with the draft Notice of Meeting received, Deloitte Corporate Finance Pty Limited consents to it being named in the Scheme Booklet in the form and context in which it is so named, to the inclusion of its independent expert‟s report at Annexure G to the Scheme Booklet and to all references to its independent expert‟s report in the form and context in which they are included, whether the Scheme Booklet is issued in hard copy or electronic format or both.

Deloitte Corporate Finance Pty Limited has not authorised or caused the issue of the Scheme Booklet and takes no responsibility for any part of the Scheme Booklet, other than any references to its name and the independent expert‟s report as included in Annexure G of the Scheme Booklet.

About Deloitte

In Australia, Deloitte has 12 offices and over 4,500 people and provides audit, tax, consulting, and financial advisory services to public and private clients across the country. Known as an employer of choice for innovative human resources programs, we are committed to helping our clients and our people excel. Deloitte's professionals are dedicated to strengthening corporate responsibility, building public trust, and making a positive impact in their communities.

For more information, please visit Deloitte‟s web site at www.deloitte.com.au

Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member firms.

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Deloitte: Lend Lease Primelife Group – Independent expert‟s report

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Attachment H Tax Consideration

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H

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Attachment I Notice of Annual General Meeting

Notice of Annual General Meeting

Notice of Annual General Meeting of Lend Lease Primelife Limited (ABN 16 010 622 901) (“Company”)

and

A General Meeting of holders of units in Lend Lease Primelife Trust (ARSN 124 896 733) (“Trust” (together the “Group”)

1 Location

Details of the 2009 Annual General Meeting are as follows:

Location The Four Seasons Hotel, Sydney 199 George Street Sydney NSW 2000 Date 8 December 2009 Time The 2009 Annual General Meeting will be held immediately following the conclusion of the Scheme Meetings.

The Annual General Meeting of the Company will be held in conjunction with a General Meeting of holders of units in the Trust.

A proxy form accompanies the Scheme Booklet of which this Notice of Annual General Meeting forms part.

2 Ordinary Business

Financial Report

To receive and consider the Directors’ Report and consolidated financial statements of the Group for the year ended 30 June 2009, together with the Auditor’s Report.

Resolution 1 - Remuneration Report – LLPL only

To consider and, if thought fit, pass the following non-binding advisory resolution of the Company:

“That the Remuneration Report for the year ended 30 June 2009 be adopted.”

Votes on this resolution are advisory only and do not bind the Company.

Resolution 2 – Election of Mr Anthony Lombardo as a Director – Company only

To consider and, if thought fit, pass the following ordinary resolution of the Company:

“ That Mr Anthony Lombardo, who ceases to hold office in accordance with rule 69.2 of the Company’s Constitution, being eligible, be elected as a director of the Company.”

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Notice of Annual General Meeting

Resolution 3 – Election of Mr Ian Crow as a Director – Company only

To consider and, if thought fit, pass the following ordinary resolution of the Company:

“ That Mr Ian Crow, who ceases to hold office in accordance with rule 69.2 of the Company’s Constitution, being eligible, be elected as a director of the Company.”

Resolution 4 – Election of Mr Gary Symons as a Director – Company only

To consider and, if thought fit, pass the following ordinary resolution of the Company:

“ That Mr Gary Symons, who ceases to hold office in accordance with rule 69.2 of the Company’s Constitution, being eligible, be elected as a director of the Company.”

Resolution 5 – Election of Mr David Hutton as a Director – Company only

To consider and, if thought fit, pass the following ordinary resolution of the Company:

“ That Mr David Hutton, who ceases to hold office in accordance with rule 69.2 of the Company’s Constitution, being eligible, be elected as a director of the Company.”

Resolution 6 – Re-election of Mr Andrew Love as a Director – Company only

To consider and, if thought fit, pass the following ordinary resolution of the Company:

“ That Mr Andrew Love, who retires in accordance with rule 70.1 of the Company’s Constitution, being eligible, be re-elected as a director of the Company.”

By order of the Board

Dated: 30 October 2009

Melissa Hennessy

Company Secretary Lend Lease Primelife Limited Lend Lease Villages Responsible Entity Limited as responsible entity of the Lend Lease Primelife Trust.

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Notice of Annual General Meeting

Notes:

On a poll, LLP Securityholders have one vote for every fully paid ordinary stapled security held. On a show of hands, every person present and qualified to vote has one vote and if one proxy has been appointed, that proxy will have one vote on a show of hands. If an LLP Securityholder appoints more than one proxy, neither proxy may vote on a show of hands, but both proxies will be entitled to vote on a poll.
An LLP Securityholder entitled to attend and vote is entitled to appoint not more than two proxies. If it is desired to appoint two proxies, then an additional proxy form can be obtained from the Group’s security registry, Link Market Services, by telephoning + 61 2 8280 7923.
Where more than one proxy is appointed, each proxy may be appointed to represent a specified proportion or number of the LLP Securityholder’s voting rights. If an LLP Securityholder appoints two proxies and the appointment does not specify the proportion or number of the LLP Securityholder’s votes each proxy may exercise, each proxy may exercise half of the votes.
A proxy need not be an LLP Securityholder and may be an individual or body corporate. If a Securityholder appoints a body corporate as a proxy, that body corporate will need to ensure that it appoints an individual as its corporate representative to exercise its powers at the Annual General Meeting and the General Meeting of the Trust, in accordance with section 250D and section 253B of the Corporations Act and will need to ensure that it provides satisfactory evidence of the appointment of its corporate representative prior to commencement of those Annual General Meeting and the General Meeting of the Trust. If such evidence is not received prior to the commencement of the Annual General Meeting and the General Meeting of the Trust, then the body corporate proxy (through its representative) may not be permitted to act as the LLP Securityholder’s proxy.
Proxy forms (and if the appointment is signed by the appointor’s attorney, the original authority under which the appointment was signed or a certified copy of the authority) must be received by the Group’s security registry, Link Market Services:
by mail to Locked Bag A14, Sydney South NSW 1235; or
by hand to Level 12, 680 George Street, Sydney NSW 2000; or
by fax to +61 2 9287 0309;
by electronic lodgement online at Link Market Services’ website www.linkmarketservices.com.au in accordance with the instructions provided on the website. You will need your Holder Identification Number (HIN) or Security Reference Number (SRN) to lodge your proxy online,

at least 48 hours before the Annual General Meeting and the General Meeting of the Trust, that is, prior to 10.00am on 6 December 2009.

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Notice of Annual General Meeting

The Board of the Company and the responsible entity of the Trust have determined that, for the purposes of the meeting securities will be taken to be held by the persons who are registered as Securityholders as at 7.00pm on 6 December 2009. Accordingly security transfers registered after that time will be disregarded in determining entitlement to attend and vote at the Annual General Meeting and the General Meeting of the Trust.

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Glossary

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Glossary

Definitions

In this Scheme Booklet unless the context otherwise requires:

Adjusted Total Assets means total assets (excluding cash) less residential liabilities (being resident loans and accommodation bond liabilities).

Annual General Meeting or AGM means the annual general meeting of LLPL (to be held in conjunction with a general meeting of LLP Unitholders).

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited (ACN 008 624 691) or, as the context requires, the financial market known as the Australian Securities Exchange operated by it.

ASX Listing Rules means the official listing rules, from time to time, of ASX.

ATO means the Australian Taxation Office.

Business Day means any day that is each of the following:

a) a Business Day within the meaning given in the ASX Listing Rules; and
b) a day that banks are open for business in Sydney, New South Wales.

CHESS means the Clearing House Electronic Subregister System for the electronic transfer of securities, operated by ASX Settlement and Transfer Corporation Pty Limited (ABN 49 008 504 532).

Corporations Act means the Corporations Act 2001 (Cth).

Court means the Supreme Court of New South Wales.

Court Approval Date means the first day of hearing of an application made to the Court by LLP for orders pursuant to section 411(4)(b) of the Corporations Act approving the Share Scheme and for the Second Judicial Advice or, if the hearing of such application is adjourned for any reason, means the first day of the adjourned hearing.

Deed Poll means the deed poll dated 30 October 2009 executed by Lend Lease and Lend Lease Bidco in favour of the Scheme Participants, a copy of which is set out in Attachment D.

Deloitte means Deloitte Corporate Finance Pty Limited (ACN 003 833 127).

Effective means:

a) in relation to the Share Scheme, the coming into effect, pursuant to section 411(10) of the Corporations Act, of the orders of the Court under section 411(4)(b) of the Corporations Act (and, if applicable, section 411(6) of the Corporations Act) in relation to the Share Scheme; and
b) in relation to the Unit Scheme, coming into effect, pursuant to section 601GC(2) of the Corporations Act, of the Supplemental Deed.

Effective Date means the date on which all the Schemes have become Effective.

Excluded Securities means LLP Securities held as at the Record Date by any member of the Lend Lease Group or by any person on behalf of, or for the benefit of, any member of the Lend Lease Group, being, as at the date of this Scheme Booklet 417,684,727 LLP Securities held by Lend Lease Bidco.

Existing LLP Bank Facilities has the meaning given in section 6.3.

First Judicial Advice means confirmation from the Court under section 63 of the Trustee Act 1925 (NSW) granted on 2 November 2009 that LLVRE is justified in convening the Unit Scheme Meeting and proceeding on the basis that amending the Trust Constitution as set out in the Supplemental Deed is within the powers of alteration conferred by the Trust Constitution and section 601GC of the Corporations Act.

Government Agency means a government or governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity whether foreign, federal, state, territorial or local.

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Glossary

GST means a goods and services tax or similar value added tax levied or imposed under the GST Law.

GST Law has the meaning given to it in the A New Tax System (Goods and Services Tax) Act 1999 (Cth).

Implementation Date means the date that is 4 Business Days after the Record Date, or such other date as LLP and Lend Lease may agree in writing or as may be required by ASX.

Independent Expert means Deloitte Corporate Finance Pty Limited (ACN 003 833 127).

Independent Expert’s Report means the report prepared by Deloitte, a copy of which is set out in Attachment G.

Judicial Advice means the First Judicial Advice and the Second Judicial Advice.

Lend Lease means Lend Lease Corporation Limited (ACN 000 226 228).

Lend Lease Bidco means Lend Lease Capital Services Pty Limited (ACN 000 001 114).

Lend Lease Group means Lend Lease and its related bodies corporate.

Lend Lease Notes means the convertible notes issued by LLP to a member of the Lend Lease Group.

Lend Lease Stapling Proposal has the meaning given in section 6.1.

LLP means each of LLPL and LLVRE (in its capacity as responsible entity of LLPT).

LLPL means Lend Lease Primelife Limited (ACN 010 622 901).

LLP Board means the board of directors of LLPL and LLVRE (in its capacity as responsible entity of LLPT).

LLP Director means a director on a LLP Board as at the date of this Scheme Booklet.

LLP Group means LLP and its subsidiaries.

LLP Independent Directors means Andrew Love, Gary Symons and Ian Crow.

LLP Options means options over LLP Securities.

LLP Security means an LLP Share stapled to an LLP Unit.

LLP Securityholder means each person who is registered in the Register as the holder of an LLP Security.

LLP Share means a fully paid ordinary share issued in the capital of LLPL.

LLP Shareholder means a person who is registered in the Register as the holder of an LLP Share.

LLPT means Lend Lease Primelife Trust (ARSN 124 896 733).

LLP Unit means a unit on issue in LLPT.

LLP Unitholder means a person who is registered in the Register as the holder of an LLP Unit.

LLVRE means Lend Lease Villages Responsible Entity Limited (ACN 099 064 141).

Manager means Lend Lease Village Management Pty Limited (ACN 004 515 977) in its capacity as manager of each of LLPL and the assets of LLPT.

Merged Group means Lend Lease and its related bodies corporate immediately after the Implementation Date.

NAV means total assets less total liabilities.

NTA means net tangible assets (being NAV less intangible assets).

Proposal means the acquisition by Lend Lease Bidco of all the LLP Securities not already held by or on behalf of it or another member of the Lend Lease Group pursuant to the Schemes.

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Glossary

Record Date means 7.00pm on the date that is 5 Business Days after the Effective Date, or such other date as may be agreed in writing between Lend Lease and LLP or as may be required by ASX.

Register means the register of members of LLP (including LLPL and LLPT) maintained by or on behalf of LLP in accordance with section 168(1) of the Corporations Act.

Registry means Link Market Services Limited (ABN 54 083 214 537).

Resolutions means the Share Scheme Resolution and the Unit Scheme Resolutions.

Retirement Guide means a portfolio of 12 retirement village assets managed by LLP and owned by PTN.

Scheme Booklet means this scheme booklet.

Scheme Consideration means $0.31 cash for each Scheme Security.

Scheme Implementation Agreement means the Scheme Implementation Agreement dated 28 September 2009 between LLP and Lend Lease, a copy of which is set out in Attachment E.

Scheme Meetings means the Share Scheme Meeting and the Unit Scheme Meeting.

Scheme Participant means each LLP Securityholder who is registered in the Register as a holder of Scheme Securities as at the Record Date (other than any holder of Excluded Securities).

Scheme Securities means the LLP Securities on issue as at the Record Date (other than any Excluded Securities).

Scheme Shares means the LLP Shares comprised in the Scheme Securities (other than any LLP Shares that are comprised in the Excluded Securities).

Scheme Shareholder means each LLP Shareholder who is registered in the Register as a holder of the Scheme Shares as at the Record Date (other than any holder of LLP Shares that are comprised in the Excluded Securities).

Schemes means the Share Scheme and the Unit Scheme.

Scheme Units means the LLP Units comprised in the Scheme Securities (other than any LLP Units that are comprised in the Excluded Securities).

Scheme Unitholder means each LLP Unitholder who is registered in the Register as a holder of Scheme Units as at the Record Date (other than any holder of LLP Units that are comprised in the Excluded Securities).

Share Scheme means the scheme of arrangement under Part 5.1 of the Corporations Act proposed between LLP and Scheme Shareholders, in the form of Attachment C, together with any alterations or conditions made or required by the Court under section 411(6) of the Corporations Act as are acceptable to Lend Lease and LLP.

Share Scheme Resolution means the resolution to approve the terms of the Share Scheme as set out in the Notice of Share Scheme Meeting in Attachment A.

Supplemental Deed means a deed poll pursuant to which LLVRE (in its capacity as responsible entity of LLPT) will amend the Trust Constitution for the purpose of facilitating the Unit Scheme, a copy of which is set out in Attachment F.

Target Gearing Ratio means total interest bearing net debt to total assets (excluding cash) less residential liabilities (being resident loans and accommodation bond liabilities).

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Glossary

Theoretical Ex-Rights Trading Price or TERP means the theoretical price that the security should trade at immediately post rights issue, and is calculated as (market capitalisation pre capital raising + capital raised from rights issue)/total securities outstanding post rights issue. The theoretical ex-rights price is a theoretical calculation only and the actual price at which LLP Securities would trade after the ex-date for the rights issue would depend on many factors and may not equal the theoretical ex-rights price.

Trust Constitution means the constitution establishing LLPT dated 13 April 2007 (as amended from time to time).

Unit Scheme means the arrangement under which Lend Lease Bidco acquires all of the Scheme Units, that is facilitated by amendments to the Trust Constitution as set out in the Supplemented Deed, subject to the Unit Scheme Resolutions being approved by the requisite majorities of LLP Unitholders.

Unit Scheme Meeting means the meeting of LLP Unitholders to approve the Unit Scheme Resolutions.

Unit Scheme Resolutions means resolutions of the LLP Unitholders to:

a) amend the Trust Constitution (by adoption of the Supplemental Deed) to give effect to the Unit Scheme ( Amendment Resolution ); and
a) approve under item 7 of section 611 of the Corporations Act the acquisition by Lend Lease Bidco of the Scheme Units under the Unit Scheme ( Acquisition Resolution ),

which are set out in the Notice of Unit Scheme Meeting in Attachment B.

VWAP means volume-weighted average price which is the ratio of securities traded to total volume securities traded over a particular time frame.

Waiver has the meaning given in section 4.4.

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Corporate Directory

DIRECTORS

A Love (Chairman) I Crow G Symons D Hutton A Lombardo

COMPANY SECRETARY

ADvISERS IN RELATION TO ThE SChEMES

Gilbert + Tobin 2 Park Street Sydney NSW 2000

The Royal Bank of Scotland Level 29, RBS Tower 88 Phillip Street Sydney NSW 2000

M Hennessy

INDEPENDENT EXPERT

PRINCIPAL REGISTERED OFFICE

Level 4 111 Cecil Street South Melbourne Victoria 3205 Ph: (03) 8699 3300

Deloitte Corporate Finance Pty Limited Grosvenor Place 225 George Street Sydney NSW 2000

AUDITORS

PricewaterhouseCoopers Darling Park Tower 2 201 Sussex Street Sydney New South Wales 2000

SChEME MEETINGS/ANNUAL GENERAL MEETING

Time: commencing from 10.00am Date: Tuesday, 8 December 2009 Location: The Four Seasons Hotel 199 George Street Sydney NSW 2000

STOCK EXChANGE LISTING

Lend Lease Primelife Group is listed on the Australian Securities Exchange (Listing Code: LLP)

ShARE REGISTRY

Link Market Services Limited Level 12 680 George Street Sydney New South Wales 2000

LLP Securityholder Information Line (in relation to the Proposal or to the Schemes): 1800 427 320 (freecall) or +61 2 8280 7168 (outside Australia)

LLP Registry Line (for queries other than in relation to the Proposal or to the Schemes): 1800 881 047 (freecall) or +61 2 8280 7923 (outside Australia)

WEBSITE ADDRESS

www.llprimelife.com

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AI assistant

LENDLEASE GROUP — Merger & Acquisition 2009

65243_rns_2009-11-02_127a10fb-146e-4d8c-8026-470298af482a.pdf

ASX ANNOUNCEMENT

LEND LEASE PRIMELIFE GROUP RELEASES SCHEME BOOKLET

The Proposal

Scheme Information

ENDS

Lend Lease Primelife Group:

Cosway Australia:

RBS Investment Banking:

Scheme Booklet Recommended proposal for Lend Lease Bidco to acquire all your LLP Securities.

IMMEDIATE ATTENTION IMPORTANT DOCUMENT

Important Notices

Defined Terms

This Scheme Booklet

Responsibility for information

Investment Decisions

ASIC and ASX involvement

Court involvement

Disclosure regarding forward looking statements

Privacy and personal information

Notice to persons outside Australia

Date

Contents

Proposal Highlights

Scheme Meetings

Your vote is important

What you need to do

What you need to do

Voting Options

Vote in favour of the Schemes

This is the course of action unanimously recommended by the LLP Independent Directors, in the absence of a

Vote against the Schemes

Sell your LLP Securities

Do nothing – i.e. neither vote in favour of nor against the Resolutions nor sell your LLP Securities

2.

Frequently asked questions

2.1 Why have I received this Scheme Booklet?

2.2 What is the Proposal?

2.3 What will I receive for my LLP Securities?

2.4 When will I receive the Scheme Consideration?

2.5 Do the LLP Independent Directors recommend the Proposal?

2.6 What are the prospects of a superior proposal?

2.7 What does the Independent Expert say?

2.8 What are the Schemes?

2.9 What am I being asked to vote on?

2.10 When and where will the Scheme Meetings be held?

2.11 What voting majority is required to approve the Schemes?

2.12 Am I entitled to vote?

2.13 Who is excluded from voting?

2.

2.14 Is voting compulsory?

2.15 What if I cannot or do not wish to attend the Scheme Meetings?

2.16 What happens if I vote against the Schemes? Can I be forced to sell my LLP Securities?

2.17 What Court approvals are required to implement the Proposal?

2.18 Are there any conditions that must be satisfied in order for the Proposal to be implemented?

2.19 What happens if the Proposal is not approved or the conditions to the Proposal are not satisfied?

2.20 What happens if the Proposal is approved, all conditions are satisfied and the Proposal is implemented?

2.21 Will I be taxed on the proceeds?

2.22 Why is the Annual General Meeting being held together with the Scheme Meetings?

2.

2.23 What are my options?

2.24 What if I want further information?

Matters relevant to your vote on the Proposal and LLP Directors’ Recommendation

3.

3.1 Directors’ recommendation

a) LLP Directors

b)

LLP Independent Directors’ recommendation

c) Non-independent Directors’ position

3.2 Reasons to vote in favour of the Proposal

3.

Matters relevant to your vote on the Proposal and LLP Directors’ Recommendation

a) Conclusion of the Independent Expert

b) Certainty of cash for LLP Securityholders

c) Premium to NTA

d) Premium to pre-announcement market price

VWAP Reference Data

Matters relevant to your vote on the Proposal and LLP Directors’ Recommendation

LENDLEASE GROUP Merger & Acquisition 2009