Explanatory Statement

Transcription

1 Explanatory Statement In relation to a proposal to staple the shares in Lend Lease Corporation Limited to the units in Lend Lease Trust. This document is issued by Lend Lease Corporation Limited ABN Lend Lease

2 Contents Chairman s letter 1 Key shareholder actions 2 Important dates 2 1 Overview of the Stapling Proposal 3 2 Rationale for the Stapling Proposal 5 3 Financial impacts of the Stapling Proposal 7 4 Mechanics of the Stapling Proposal 10 5 Tax Report 11 6 Additional Information 16 7 Glossary 18 Annexure A: Summary of proposed amendments to the Lend Lease constitution 20 Annexure B: Summary of LLT constitution 22 Important Notices What is this document? This document is an explanatory statement issued by Lend Lease Corporation Limited (ABN ) (Lend Lease) dated 12 October 2009 and provides shareholders of Lend Lease with details of the structure of Lend Lease and Lend Lease Trust (ARSN ) (the Lend Lease Group) following the stapling of Lend Lease Shares to units in the Lend Lease Trust (LLT) (if approved). It also sets out details of the rights and liabilities attaching to LLT Units. A product disclosure statement in relation to the Stapling Proposal will not be issued in Australia and this document will not be lodged or registered with any regulatory body in Australia or any other country. As detailed in section 6 Regulatory Consents, ASIC has provided relief to Lend Lease from the requirement that this explanatory statement be issued as a product disclosure statement. Neither ASIC nor ASX takes any responsibility for this document or the merits of the Stapling Proposal. LLT is a managed investment schemed registered under Chapter 5C of the Corporations Act. Lend Lease Responsible Entity Limited (ABN ) (RE) is the responsible entity of LLT. This document also contains a tax report by Greenwoods & Freehills Pty Ltd (see section 5). No investment advice The information outlined in this explanatory statement does not constitute financial product advice and has been prepared without reference to your particular investment objectives, financial situation, taxation position and particular needs. It is important that you read this explanatory statement in its entirety before making any decision on how to vote on the Stapling Proposal. If you are in any doubt in relation to these matters, you should consult your investment, financial, taxation or other professional adviser. Defined terms Capitalised terms used in this explanatory statement are defined in the Glossary in section 7. The Glossary also sets out some rules of interpretation which apply to this explanatory statement. Forward looking statements Statements of intent in relation to future events should not be taken to be a forecast or prediction that those events will occur. Actual events or results may differ materially from the events or results expressed or implied in any forward looking statement and deviations are both normal and to be expected. Lend Lease and the RE, their respective officers, and any person named in this explanatory statement or involved in the preparation of this explanatory statement do not make any representation or warranty (either express or implied) as to the accuracy or likelihood of fulfilment of any forward looking statement, or any events or results expressed or implied in any forward looking statement. Accordingly, you are cautioned not to place undue reliance on those statements. Any forward looking statements in this explanatory statement reflect views held by Lend Lease at the date of this explanatory statement. Notice to Lend Lease Shareholders in jurisdictions other than Australia The LLT Units have not been registered under the US Securities Act of 1933, as amended (the Securities Act), or any applicable United States securities laws. Such securities may not be offered or sold in the United States, or for the account or benefit of, a US Person (as defined in Regulation S under the Securities Act) unless such securities have been registered under the Securities Act or an exemption from the registration requirements of the Securities Act and applicable US State securities laws is available. Lend Lease Shareholders who are subject to taxation outside Australia should consult their tax adviser as to the applicable tax consequences of holding Stapled Securities and the transactions described in this explanatory statement. Stapling Proposal Information Line Within Australia: Outside Australia: Lease Corporation Limited registered office Level 4, 30 The Bond 30 Hickson Road Millers Point NSW 2000 Share registry Computershare Investor Services Pty Limited Level 3 60 Carrington Street Sydney, NSW 2000

3 Chairman s letter 12 October 2009 Dear Shareholder I have great pleasure in enclosing for your consideration a proposal to amend the Lend Lease constitution to allow the stapling of your Lend Lease shares to units in a new Lend Lease Trust (LLT). If approved, you will receive (by way of dividend) one unit in LLT for each of your Lend Lease shares and the shares and units will be stapled to trade together as a single stapled security on ASX. So, for example, any time you transfer a Lend Lease share, you will also transfer the attached LLT unit. The value of the dividend will be nominal. This explanatory statement sets out the information you need to know about the proposal, and I urge you to read it carefully. The current proposal does not signal an intention to depart from our existing strategy, neither is it our intention to be included within the Listed Property Trust index. The stapling simply provides greater flexibility for the optimum holding of assets acquired in the future. Our Annual General Meeting provides an excellent opportunity for shareholders to consider and vote on this proposal. Traditionally, Lend Lease targets to earn circa 20% of its EBITDA from recurring earning streams, including from the ownership of passive assets. If approved, the stapled structure should provide flexibility for Lend Lease to hold such assets in a more efficient manner, providing opportunities to improve shareholder returns. Please note that tax restrictions prevent the transfer of existing Lend Lease assets to LLT and therefore LLT would only acquire assets in the future. There are currently no specific assets identified to be acquired by LLT. LLT will initially have only minimal capital. Options for further capitalising LLT will be considered in light of any acquisition opportunities which may emerge over time, and put to shareholders if necessary at that time. I believe the Stapling Proposal as outlined in this booklet should further strengthen our existing platform for the long term future of Lend Lease. The directors unanimously support the proposal and urge you to vote in favour of the stapling resolutions at our Annual General Meeting on 12 November Yours sincerely, David Crawford AO Chairman 1

4 Key shareholder actions Important dates Read this document in full Vote on the Stapling Resolutions Directors recommendation Your vote is important SYDNEY TIME AND DATE :00 am, tuesday 10 November 10:00 am, thursday 12 November thursday 12 November friday 13 November 5:00 pm, thursday 19 November friday 20 November thursday 26 November friday 27 November You should read this explanatory statement in full. It contains important information to assist you in your voting decision. If you have any questions about the Stapling Proposal, please contact the Stapling Proposal Information Line on (if in Australia) or (if outside Australia). It is important that you vote on the Stapling Resolutions to be considered at the AGM on 12 November 2009 at the City Recital Hall, Angel Place, Sydney NSW. The stapling will not proceed unless it is approved by a 75% majority of the votes cast by Lend Lease Shareholders attending the meeting in person or by proxy. The directors believe approval of the Stapling Resolutions should give Lend Lease greater flexibility and a more efficient structure in relation to future asset holdings and property investments, providing opportunities to enhance returns to investors. The directors unanimously recommend that you vote in favour of the Stapling Proposal. If you are unable to attend the Lend Lease AGM on 12 November 2009, you may appoint a proxy to vote your shares on your behalf. If you wish to appoint a proxy, you need to complete the proxy form enclosed with this explanatory statement and return it to the address indicated on the form by no later than 10:00am on 10 November EVENT Closing date and time for receipt of completed proxy forms for the Lend Lease AGM Date and time for determining eligibility to vote at the Lend Lease AGM Lend Lease AGM Last day of trading in Lend Lease Shares separately on ASX* Deferred settlement trading commences in Stapled Securities* Record time for determining entitlements of Lend Lease Shareholders to Stapled Securities (i.e. record date both for stapling and dividend in specie)* Last day for Lend Lease to register transfers on a pre-stapling basis* Effective Date Dividend in specie paid to Lend Lease Shareholders* LLT Units and Lend Lease Shares become stapled* Last day of trading on ASX of Stapled Securities on a deferred settlement basis* Completion of despatch of holding statements for Stapled Securities and dividend statements* Commencement of normal trading on ASX of Stapled Securities on a T+3 basis* All dates and times are indicative only and items marked * will only apply if the Stapling Resolutions are approved. The actual times and dates will depend on factors outside the control of Lend Lease, including approval from ASX. Any changes to the above timetable will be notified on Lend Lease s website and announced to ASX. All times are referenced to the time in Sydney, New South Wales, except where stated otherwise. 2

5 1 Overview of the Stapling Proposal What is the purpose of this booklet? What is the reason for the Stapling Proposal? Who will manage LLT? Who owns LLT? What is an in specie dividend? How many LLT Units will I receive? What will happen after I receive my LLT Units? Lend Lease Shareholders are being asked to approve amendments to the Lend Lease constitution (by special resolution) to allow the stapling of Lend Lease Shares to LLT Units. This booklet provides information to shareholders about LLT and the Stapling Proposal. Lend Lease is proposing to establish LLT to allow Lend Lease the flexibility to hold property investment assets in the future in a more efficient structure, aimed at enhancing returns to investors from any such investments as may arise. Currently, there are no plans to buy any such assets, but the current economic environment may present opportunities. LLT will be established with only minimal capital. If appropriate assets are identified in the future, the Lend Lease Group will seek to reallocate capital from Lend Lease to LLT to ensure an appropriate spread of capital across the entities in the Lend Lease Group. If necessary, Lend Lease Shareholders will be approached further at that time to approve the proposal. Full information would be provided at the relevant time. Further details on possible capitalisation options are set out in section 2. More detail on the reasons for the Stapling Proposal is also set out below under the heading Rationale for the Stapling Proposal. LLT will be managed by its responsible entity Lend Lease Responsible Entity Limited (ABN ) (RE). LLT is currently 100% owned by Lend Lease. However, if the Stapling Proposal is approved, the units in LLT will be distributed to Lend Lease Shareholders as an in specie dividend. This means that the ownership of the units will be transferred from Lend Lease to its shareholders so that LLT will become 100% owned by Lend Lease Shareholders. An in specie dividend is a dividend of specific assets, as opposed to cash. When a company pays a dividend it distributes part of its assets to its shareholders. Usually a company pays dividends in the form of cash. Dividends can also be paid in the form of non-cash assets, where the company distributes actual property to shareholders. The Lend Lease constitution authorises the company to pay dividends in specie. The value of this dividend will be nominal, (approximately 0.1 cents per share). If the Stapling Proposal is approved, you will receive a dividend of one LLT Unit for every one of your Lend Lease Shares. For example, if you hold 1,000 Lend Lease Shares then, following the dividend, you will hold 1,000 Lend Lease Shares and 1,000 LLT Units. Following approval of the Stapling Proposal and payment of the dividend, the LLT Units will become stapled to Lend Lease Shares. Lend Lease Shares and LLT Units will then trade together on ASX as a single security, and will not be able to be dealt with separately. Following the stapling, Lend Lease and LLT will operate as a coordinated economic group. 3

6 1 Overview of the Stapling Proposal continued What does it mean to staple LLT Units to Lend Lease Shares? How much are LLT Units worth? When do I receive my LLT Units? What are the tax consequences? What are the functions of the RE? Who are the directors of the RE? STRUCTURE DIAGRAM LLT Units are issued on particular terms which are contained in the LLT trust deed. These terms provide that each unit is stapled to a Lend Lease Share. Each unit must be dealt with as if it were stapled to the corresponding number of shares. For example, each unit can only be transferred if the share to which it is stapled is transferred to the same person. The proposed amendments to the Lend Lease constitution impose the same requirements on Lend Lease Shares. This will mean that you can t separately deal with your Lend Lease Shares and LLT Units. LLT will hold a cash amount of $460, paid to establish LLT, but no other assets. LLT has not undertaken any business activities. Accordingly, LLT Units have a nominal value only. As indicated above, the stapling provides the opportunity for the future acquisition of assets in the Trust through a more efficient structure, aimed at enhancing returns to investors from passive property investments which may be identified. Lend Lease will distribute LLT Units to eligible shareholders as an in-specie dividend if the Stapling Proposal is approved. The record date and time for determining entitlements to the LLT Units will be 5:00pm on 19 November 2009 and the distribution will be paid to eligible shareholders after close of trade on ASX on 20 November You do not have to pay anything (or complete any forms) to receive your units. After stapling, LLT will send you a form that you can use to re-supply your TFN or ABN or exemption so that tax is not withheld on your distributions. Your shareholding details will be updated automatically when the units are distributed. An overview of the Australian tax consequences of the Stapling Proposal for Lend Lease Shareholders is set out in the Tax Report from Greenwoods & Freehills in section 5. However, you should consult your own tax adviser for tax advice tailored to your own particular circumstances. Lend Lease Shareholders who are subject to taxation outside Australia should obtain their own advice as to the tax consequences of the Stapling Proposal, which may be different to those applicable to Australian Lend Lease Shareholders. The RE is wholly owned by Lend Lease and holds an Australian Financial Services License (AFSL). The RE will be responsible for managing LLT in accordance with the LLT constitution (summarised in Annexure B) and the Corporations Act. The directors of the RE will be the same as the directors of Lend Lease. Information about the Lend Lease directors has previously been disclosed to Lend Lease Shareholders. Set out below is a diagram that shows the relationships between Lend Lease, LLT and Lend Lease Shareholders, before and after the stapling. Before stapling: LEND LEASE SHAREHOLDERS 100% LEND LEASE CORPORATION LIMITED 100% LEND LEASE TRUST 1 After stapling: LEND LEASE SHAREHOLDERS LEND LEASE TRUST 1 100% Stapled entities LEND LEASE CORPORATION LIMITED 1 The responsible entity of Lend Lease Trust is Lend Lease Responsible Entity Limited, a wholly owned subsidiary of Lend Lease. 4 Explanatory Statement Lend Lease Corporation

7 2 Rationale for the Stapling Proposal Efficient structure to hold passive assets Lend Lease s vision is to be the leading international property company. We are committed to creating and building innovative and sustainable solutions, forging partnerships and delivering strong investment returns. The proposed change in corporate structure will not mean we will be digressing from our existing business strategy and model. Traditionally, Lend Lease targets to earn circa 20% of EBITDA from recurring earnings, including from passive asset ownership. From time to time it is likely we will be an acquirer of passive real estate assets. Given the tax transparent nature of a trust, a stapled structure should improve the efficiency of returns from passive asset ownership. Lend Lease currently owns passive assets in a corporate structure. Stapled structures are quite common in Australia. The directors believe there are benefits that should flow to shareholders from having a trust stapled to the company. Primarily the stapling allows the Lend Lease Group to acquire property assets and to distribute earnings to investors on a pre-tax basis. A portion of distributions may also be tax deferred (see below). Income generated from passive property investment assets acquired by LLT could be distributed to Stapled Security Holders without deduction of tax at the company tax rate of 30%, which is the rate which would apply if the assets were held by Lend Lease. Initially, while LLT holds no material assets, the stapling will have minimal impact. Taxation restrictions prevent a transfer of existing Lend Lease assets to LLT. Once assets (yet to be identified) are acquired and LLT is capitalised, potential benefits which are targeted to flow from the stapling are: more predictable distributions on income generated from passive assets; yield enhancement from income streams on passive assets; enhanced cash position of investors where distributions are treated as tax deferred (see below); and improved liquidity. Distributions to Stapled Security Holders from LLT will be taxable in the hands of the Stapled Security Holders at the tax rates applicable to them. Following capitalisation of LLT, a portion of these distributions may also be tax deferred. Tax deferred distributions are generally not taxable immediately, but reduce the cost base of the relevant securities. This reduction of cost base is then taken into account in calculating taxable gains when the securities are sold. However, if the amount of the distribution is greater than the Stapled Security Holder s current cost base, the cost base will be reduced to zero and any excess will be taxable as a gain on receipt. If the securities have been held for more than 12 months, discounted capital gains tax treatment may be available on any gains. It is noted that the cost base of LLT Units will initially be minimal, but the intention is that this would be substantially increased (if possible) on capitalisation of LLT. For further detail, see discussion under heading Tax deferred distributions in section 3. 5

8 2 Rationale for the Stapling Proposal continued Future intentions for asset acquisitions Future capitalisation of LLT There are currently no specific property assets proposed for acquisition. The company s AGM simply provides a good opportunity for the introduction of the Stapling Proposal with a shareholder vote. If the Stapling Proposal is approved, LLT will have minimal capital. If suitable property assets are acquired in the future, the intent is that LLT will be further capitalised. This may be effected by way of a reallocation of capital from LLC to LLT. Potentially this could involve a capital reduction (requiring further Lend Lease Shareholder approval) with the amount of the reduction being applied as capital of LLT on behalf of Lend Lease Shareholders. Any capital reduction of Lend Lease would be equally applied to all Lend Lease Shareholders and would require a shareholder vote and taxation approvals. The proceeds of any such reduction would be applied on behalf of Lend Lease Shareholders to further capitalise LLT, so that the relevant capital of Lend Lease would from that time become capital of LLT, to be applied pro-rata across each of the existing stapled units. The constitution of LLT and the proposed amendments to the LLC constitution provide flexibility for this mechanism to be effected with majority shareholder approval. Another capitalisation mechanism could be by LLT issuing Unstapled Units to LLC. Any issue of such units would be subject to all necessary approvals and waivers, including ASX and taxation (with ASX already having provided in principle approval). If issued, the rights of the Unstapled Units would be the same as for LLT Units but they would not be stapled to Lend Lease Shares while held by Lend Lease or any of its subsidiaries and would not be quoted for trading on ASX. The Unstapled Units (if issued) would be a solely intra-staple funding mechanism, with transfers not permitted outside the group. Consistent with this, voting of Unstapled Units would also be restricted so that they would only be voted in the same proportions that Stapled Security Holders vote their units. Again, flexibility for this mechanism has been included in the LLT constitution, but subject to all necessary approvals. No firm decision has been made for the best means of capitalising LLT. This will be considered in light of any specific asset acquisition opportunities, having regard to the efficiency and cost of any capitalisation structures and the interests of Stapled Security Holders. 6 Explanatory Statement Lend Lease Corporation

9 3 Financial impacts of the Stapling Proposal Implementation of the staple Financial impact for Lend Lease The Stapling Proposal simply involves an in specie dividend, comprising units having a nominal value. The stapling itself will have no financial impact on the Lend Lease Group other than implementation costs and a small reduction in retained earnings equal to the amount of the dividend, (i.e. $460,768.61). The amount of the dividend will become the equity of LLT. Financial impact for Lend Lease Shareholders The financial impact for Lend Lease Shareholders is that they will receive a dividend valued at 0.1 cents per share, which will be fully franked. Tax impacts for Lend Lease Shareholders will therefore be negligible. The Tax Report in section 5 addresses this in more detail. RE costs The RE will not receive any fees for performing its role as responsible entity of LLT, but will recover its costs. The additional costs of administering the Trust are not anticipated to be material. Distribution policy Lend Lease s current dividend policy is to pay out between 40% and 60% of net operating profit after tax. If and when any assets are acquired in LLT, this dividend policy will be reviewed in light of prevailing circumstances. Future operation of the staple Flexibility LLT will not initially hold any material assets. Prior to any asset acquisition, the impact of the staple will be negligible. However, on a passive asset acquisition, Lend Lease believes that the greater flexibility offered by the stapled structure creates the potential for enhanced returns to shareholders. Hypothetical example To illustrate the potential advantages of the staple for Lend Lease and its shareholders, we have set out below a simple hypothetical example assuming acquisition of a $1 billion passive property portfolio. The example has been prepared on a number of assumptions (as set out below) and is purely for illustrative purposes. While it seeks to approximate the position on an asset acquisition, it does not precisely reflect the detail of any asset acquisition which may occur. Hypothetical returns in the example are not a forecast or target and should not be relied on as such. 7

10 3 Financial impacts of the Stapling Proposal continued Hypothetical example Part A Impacts of Staple on Lend Lease Group The example below illustrates the potential difference in net profit of the proposed Stapled structure relative to the existing Company structure on the hypothetical acquisition of a $1 billion passive property portfolio (based on the assumptions set out below) for a full year. Company Structure Stapled Structure Profit & Loss ($ millions) Company Company Trust Net operating income from asset $90.0 $90.0 Interest expense ($70.0) ($70.0) ($35.0) Interest Received $35.0 Net profit before tax $20.0 ($35.0) $55.0 Tax ($6.0) $10.5 Net profit/(loss) after tax $14.0 ($24.5) $55.0 Consolidated group profit after tax $14.0 $30.5 Assumptions General assumptions Assets yield 9% per annum. The example does not include transaction costs, operating costs, capital expenditure or depreciation and amortisation. Numbers have been rounded to the nearest $100,000. Company structure assumptions Assets financed 100% by 3rd party debt ($1 billion) at 7% per annum. Company tax rate of 30%. Company pays dividends equal to 50% of net profit after tax. The company has the ability to fully frank dividend payments. Stapled structure assumptions LLT acquires the assets. LLT is capitalised with $500 million indirectly from the Company. Company lends LLT $500 million and charges LLT 7% interest per annum on the loan. Company borrows $1 billion from a 3rd party at 7% per annum. Company tax rate of 30%. 8 Explanatory Statement Lend Lease Corporation

11 Part B Impacts of Staple on Lend Lease Shareholders Distribution policy Distributions payable from the stapled structure could include a distribution from LLT and a dividend from the Company. It is intended that distributions from the Trust will be equivalent to all net operating income of LLT after any allowance that the RE considers prudent as a provision for future expenditures. Lend Lease will need to assess the dividend payout policy of the Company from time to time in light of prevailing circumstances. As indicated above, Lend Lease s current dividend policy is to pay out between 40% and 60% of the Company s net operating profit after tax. Portfolio distributions Stapled structure From the above example, under the stapled structure LLT would have distributable operating income of $55 million, which could be distributed to Stapled Security Holders. All Stapled Security Holders would be required to pay their tax obligations at the tax rate applicable to their individual situation. The distribution from LLT could be offset to some extent by some reduction in the amount that could be distributed from the Company as a result of the diminution in the after tax profit of the Company. Based on the above example, the funds available for the Company to distribute would be reduced by the loss after tax of $24.5 million. Company structure Utilising the same example, the Company could pay a fully-franked dividend of $7 million (assuming the Company had a dividend policy of paying 50% of net profit after tax). Each Lend Lease Shareholder s tax profile will differ according to their personal circumstances and they should therefore seek their own personal tax advice. Other benefits of the stapled structure for Stapled Security Holders Another feature of the stapled structure is that significant benefits may flow from tax deferred income that may be distributed from the Trust. These potential benefits are discussed further below. The stapled structure could also be beneficial for non-resident Stapled Security Holders due to the different withholding tax regime applicable to trust distributions to non-residents. Capital gains realised by LLT on the disposal of assets held for at least 12 months would be taxable to Australian Stapled Security Holders under the discount capital gains method. This means that only half the gain would be taxed in the Stapled Security Holders hands. A Stapled Security Holder on a top marginal rate of 46.5% would effectively only pay tax at the rate of 23.25% on the capital gain. Discount capital gains is explained in the Tax Report. This discount capital gains regime does not apply to gains realised by a company or to dividends distributed by a company. Potential for enhanced returns With these characteristics, Lend Lease believes that the stapled structure creates the potential for enhanced returns to shareholders from passive property investments over time. Tax deferred distributions What is tax deferred income? A significant benefit of a stapled structure is usually the passing of tax deferred income streams directly to Stapled Security Holders. Tax deferred income arises, for example, from depreciation benefits associated with building ownership. For amounts of tax deferred income, tax is not generally payable immediately, but the amount received by the Stapled Security Holder reduces the cost base of their securities. Tax is then paid by way of additional capital gains tax on disposal, but a discount may apply where the security has been held for more than 12 months. This can substantially reduce the amount of tax paid on that income. Cost base This benefit is only applicable where there is sufficient cost base of the security. If not, tax will apply to the tax deferred income received by the Stapled Security Holder. Initially the tax cost base on the units distributed in specie will be approximately 0.1 cents. However, on capitalisation of the Trust (as described above) the intention is (if possible) that the cost base of the LLT Units could be substantially increased to allow Stapled Security Holders the benefits of tax deferred income. Non-residents In the case of non-residents tax deferred income streams are not subject to Managed Investment Trust (MIT) withholding tax and capital gains tax should not apply on disposal. Australian tax treatment for these Stapled Security Holders may therefore be attractive. We have not sought to model these benefits in the above examples, given the number of variables. However these benefits may be significant. 9

12 4 Mechanics of the Stapling Proposal How does stapling work? The stapling means that Lend Lease Shares and LLT Units trade as one security on ASX and cannot be traded or dealt with separately. For example: a transfer of LLT Units can only occur if accompanied by a transfer of the same number of Lend Lease Shares; a LLT Unit will automatically transfer to a transferee of the attached Lend Lease Share; and any issue, repurchase, capital reduction or redemption of Lend Lease Shares can only occur if matched by a corresponding issue, repurchase, capital reduction or redemption of the same number of LLT Units (and vice versa). These features arise from the stapling provisions proposed in the Lend Lease and LLT constitutions. Other features of the stapling are: Lend Lease and LLT will operate as a co ordinated economic group; Lend Lease and LLT will have identical investors with an identical proportionate interest in each entity; Lend Lease and the RE will have the same directors, enabling the Lend Lease Group to operate in a co-ordinated manner; the Lend Lease and LLT constitutions allow for the affairs of each entity to be operated in a co-ordinated manner. For example, general meetings of Lend Lease and LLT may be held simultaneously, as Stapled Security Holder meetings ; and Stapled Security Holders will receive a single distribution and dividend cheque. Process for implementing stapling The process for achieving the stapling is as follows (if approved): 1 The Lend Lease constitution will be amended to insert the stapling provisions (summarised in Annexure A). The LLT constitution already contains equivalent provisions. 2 Lend Lease will pay Lend Lease Shareholders an in specie dividend comprising LLT Units, which until this point have been held by Lend Lease. The LLT Units will be distributed in the proportion of one LLT Unit for every Lend Lease Share on issue. Following the in specie dividend, LLT will be wholly owned by Lend Lease Shareholders. 3 Simultaneously with the in specie dividend, the stapling provisions in the Lend Lease and LLT constitutions take effect to achieve the stapling. 4 On 27 November 2009, normal trading in the Stapled Securities will commence on ASX. 5 The Stapled Securities will continue to trade under the ASX code LLC. Terms of issue of Stapled Securities The rights and obligations of Stapled Security Holders will be principally governed by the constitutions of Lend Lease and LLT and the Corporations Act. They may also be affected by the Listing Rules and other laws applicable to Lend Lease, LLT and Stapled Security Holders from time to time. The proposed stapling provisions of the LLC constitution are summarised in Annexure A. The LLT constitution is summarised in Annexure B. 10 Explanatory Statement Lend Lease Corporation

13 5 Tax Report The Directors Lend Lease Corporation Limited 30 The Bond 30 Hickson Road Millers Point NSW October 2009 Dear Directors Australian Taxation Report We have been asked by Lend Lease Corporation Limited ( Lend Lease ) to prepare a report on the Australian taxation issues arising in relation to the transactions described in detail in the Explanatory Statement and summarised below (the Stapling Proposal ). The information contained in this report is of a general nature only. It does not constitute tax advice and should not be relied upon as such. This report outlines the general Australian taxation implications for Lend Lease Shareholders in respect of their participation in the Stapling Proposal and from the holding and disposing of Stapled Securities. We have dealt with resident Stapled Security holders, which includes Lend Lease Shareholders (as they will become Stapled Security holders as a result of the Stapling Proposal) ( Stapled Security Holders ) who are individuals, complying superannuation entities and companies holding their investments on capital account. We have also considered non-resident Stapled Security Holders, but only on the basis that there will be no non-resident who holds, together with associates, an interest of 10% or more in the Stapled Securities. We have not addressed the tax treatment for Stapled Security Holders who hold their securities on revenue account such as banks and other trading entities or non-resident Stapled Security Holders who currently hold Lend Lease Shares (or who will hold Stapled Securities) through a permanent establishment in Australia. All investors should seek independent professional advice on the consequences of their participation in the Stapling Proposal, based on their particular circumstances. Lend Lease Shareholders who are not resident in Australia should obtain advice on the taxation implications arising in their local jurisdiction of participating in the Stapling Proposal. Unless otherwise stated, terms used in this report are defined in the same way as they are in the Explanatory Statement. This report is based on the provisions of the Income Assessment Act 1936, the Income Tax Assessment Act 1997, the A New Tax System (Goods and Services Tax) Act 1999 and related acts, regulations and Australian Taxation Office ( ATO ) rulings and determinations applicable as at the date of this letter. 1 Background 1.1 Stapling Proposal Under the Stapling Proposal, Lend Lease Shares will be stapled to Lend Lease Trust ( LLT ) Units. To effect the Stapling Proposal: Lend Lease has established LLT by subscribing 0.1 cents per LLT Unit with the total number of LLT Units being equal to the number of Lend Lease Shares on issue; Lend Lease Shareholders participating in the Stapling Proposal will receive a fully franked in specie stapling dividend (the Stapling Dividend ) that will comprise one LLT Unit for every Lend Lease Share they hold at the Stapling Record Date; and each Lend Lease Share and LLT Unit will be stapled and listed on the Australian Securities Exchange (each a Stapled Security ). The general taxation consequences of participating in the Stapling Proposal are outlined in section 2 below. A description of the Stapling Proposal is set out in section 4 of the Explanatory Statement. 11

14 5 Tax Report continued 2 Tax Consequences of Stapling Proposal 2.1 Payment of Stapling Dividend In relation to the payment of the fully franked in specie dividend, Lend Lease Shareholders who are Australian residents should be required to include the value of the Stapling Dividend plus the attached franking credit in their assessable income and may be entitled to a tax offset equal to the amount of the franking credit. To be eligible for the franking credit and tax offset, the Lend Lease Shareholder must generally have held the Lend Lease Shares at risk for at least 45 days (not including the day of the share s acquisition or disposal). However, this rule does not apply to a Lend Lease Shareholder who is an individual and whose tax offset entitlement (on all shares and interests in shares held) does not exceed $5,000 for the income year ending 30 June Non-residents will not be subject to Australian income tax (including withholding tax) in relation to the payment of the fully franked Stapling Dividend. 2.2 Stapling An effect of stapling is to apply restrictions to the transferability of the individual securities comprising the Stapled Security, such that each individual security (i.e. the Lend Lease Share and the LLT Unit) will retain its legal character without any change of beneficial ownership. As there is no change in beneficial ownership of the Lend Lease Shares by simply stapling them, there will be no taxable event for Capital Gains Tax ( CGT ) purposes in relation to the stapling. 3 Holding Stapled Securities 3.1 Summary If the Stapled Security Holder is an Australian resident taxpayer, the Stapled Security Holder will generally be taxable on: the Stapled Security Holder s share of the net income of LLT for tax purposes; the tax deferred (non-assessable) component of distributions made in relation to LLT Units to the extent the tax deferred amount exceeds the cost base of the LLT Unit; the amount of any dividend received from Lend Lease and any franking credits attached to the dividend; and any gain arising from the subsequent disposal of the Lend Lease Share and LLT Unit representing the Stapled Security (except where the Lend Lease Share is a pre-cgt Lend Lease Share). Where a distribution from LLT includes foreign-sourced income and foreign taxes have been paid in relation to that income, Australian resident Stapled Security Holders are generally entitled to receive a foreign tax credit for an amount equal to the lesser of the foreign tax paid and the Australian tax payable in respect of such income. If the Stapled Security Holder is a non-resident, the Stapled Security Holder will be taxed on: the Stapled Security Holder s share of the net income of LLT for tax purposes to the extent that it is attributable to sources in Australia (LLT will deduct this by way of withholding tax); and the amount of any unfranked dividend received from Lend Lease to the extent that amount is not declared to be paid out of conduit foreign income for Australian tax purposes (Lend Lease will deduct this by way of dividend withholding tax). 3.2 Ownership of Stapled Securities General Stapled Security Holders will need to treat each component making up the Stapled Security separately for tax purposes. That is: Stapled Security Holders will receive, and separately deal with the tax consequences of, dividends from Lend Lease and distributions from LLT; and when the Stapled Securities are disposed of, the Stapled Security Holder will have to separately consider the tax issues associated with the disposal of the Lend Lease Shares and LLT Units. 3.3 Income Distributions from LLT The Trustee of LLT is not liable to income tax, including CGT, provided Stapled Security Holders are presently entitled to all of the income of LLT. 12 Explanatory Statement Lend Lease Corporation

15 (a) Australian Residents An Australian resident Stapled Security Holder will include in their assessable income the taxable component of the LLT distributions to which the Stapled Security Holder is entitled (being the Stapled Security Holder s proportionate share of LLT s taxable income) even if the distributions are reinvested. If a net capital gain is included in the taxable income of LLT (for example, on disposal of an asset), Australian-resident Stapled Security Holders will be regarded as having derived a capital gain equal to their proportionate share of that net capital gain. However, where discount capital gains treatment has been applied in calculating the net capital gain for LLT, Australian-resident Stapled Security Holders will be required to gross-up the amount of the capital gain included in their assessable income. Australian-resident investors can then apply any available capital losses from other sources to offset the capital gain and then apply their CGT discount factor, if applicable. If the total cash distributions that an Australian-resident Stapled Security Holder receives in an income year exceeds his or her proportionate share of the taxable income of LLT, the excess will represent a tax deferred distribution. The tax deferred component of a distribution an Australian-resident Stapled Security Holder receives will generally not be included in that Stapled Security Holder s assessable income. However the tax deferred component will reduce the cost base of the Stapled Security Holder s LLT Units. Where the cost base of a Stapled Security Holder s LLT Unit is reduced to zero, any further receipts of tax deferred distributions in respect of that unit will be assessable to the Australian-resident Stapled Security Holder on receipt as a capital gain. Australian-resident Stapled Security Holders who are individuals, trustees or complying superannuation entities and who have held the relevant unit for 12 months or more at the time of the receipt of the distribution should be entitled to apply the applicable CGT discount factor to reduce the capital gain (after offsetting capital losses). For more information on applying the CGT discount see section 4.2 of this letter below. It should be noted that the LLT Units acquired by Lend Lease Shareholders pursuant to the Stapling Proposal will have an initial CGT cost base equal to the value of the Stapling Dividend, which we have been advised will be 0.1 cents. (b) Non-Residents Non-resident Stapled Security Holders will generally not be assessable on the amount of any income or gains distributed to them by LLT. However, LLT will be required to withhold tax from such distributions. The amount to be withheld is dependent on a range of factors including the source of the distributed amount and the country of residence of the Stapled Security Holder. The withholding tax is a final tax. Unfranked dividends, interest and royalties distributed by LLT will be subject to withholding tax which is generally imposed at a rate of 30% for dividends and royalties and 10% for interest. Non-resident Stapled Security Holders who are residents of a country that has entered into a Double Tax Agreement with Australia might be entitled to a lower rate of withholding tax. Distributions from LLT of income other than dividends, interest and royalties should be subject to managed investment trust withholding tax. LLT will withhold tax from such distributions to the extent they represent taxable income of LLT other than non-australian sourced income or capital gains on assets that are not taxable Australian property ( taxable Australian property mainly includes direct and indirect interest in land situated in Australia). Any tax deferred amount distributed by LLT to non-resident Stapled Security Holders should not be subject to withholding and should not result in a CGT gain. The managed investment trust withholding tax rate will depend on the country in which the relevant non-resident Stapled Security Holder is a resident. For residents of countries with which Australia has an effective exchange of information on tax matters the rate will be 15% for the year ending 30 June 2010 and 7.5% for later income years. Examples of such countries include New Zealand, the United Kingdom and the United States. For residents of other countries the managed investment trust withholding rate will be 30%. 13

16 5 Tax Report continued 3.4 Dividends from Lend Lease (a) Australian Residents An Australian resident Stapled Security Holder will include in the Stapled Security Holder s assessable income dividends paid to the Stapled Security Holder by Lend Lease. In addition to the amount of the dividends, the Stapled Security Holder will generally include any franking credits attached to the dividends in the Stapled Security Holder s assessable income. Where franking credits are included in a Stapled Security Holder s assessable income, the Stapled Security Holder will generally be entitled to a corresponding tax offset. Relevantly, to be eligible for the franking credit and tax offset, the Stapled Security Holder must have held the shares at risk for at least 45 days (not including the date of the share s acquisition or disposal). This rule should not apply to a Stapled Security Holder if the Stapled Security Holder is an individual whose tax offset entitlement (on all shares and interests in shares held) does not exceed $5,000 for the income year in which the franked dividend is paid. Where the Stapled Security Holder is an individual, a complying superannuation entity or a registered charity (in certain circumstances), the Stapled Security Holder may be entitled to a refund to the extent that the franking credits attached to the Stapled Security Holder s dividends exceed the Stapled Security Holder s tax liability for the income year. Where the Stapled Security Holder is a corporate shareholder, any franked dividends the Stapled Security Holder receives will generally give rise to a franking credit in the Stapled Security Holder s franking account. (b) Non-Residents Non-resident Stapled Security Holders should not be assessable on the amount of any dividend received from Lend Lease. However, Lend Lease will be required to withhold tax from the unfranked component of dividends paid to a non-resident Stapled Security Holder. The tax withheld will, in the absence of a Double Tax Agreement, be equal to 30% of the unfranked component of the dividends paid. This rate may be reduced where the Stapled Security Holder is a resident of a country with which Australia has concluded a Double Tax Agreement. To the extent the unfranked component of the dividend is declared to have been paid out of conduit foreign income for Australian taxation purposes then the amount is exempt from dividend withholding tax. 4 Disposal of Stapled Securities 4.1 General As a consequence of stapling, each Lend Lease Share and LLT Unit comprising a Stapled Security may not be traded separately. However, as discussed above at 3.2, each Lend Lease Share and LLT Unit comprising a Stapled Security is a separate CGT asset. Accordingly, where there is a disposal of a Stapled Security, there will necessarily be a disposal for CGT purposes of a Lend Lease Share and a LLT Unit. Where consideration is received in connection with a transaction that relates to more than one CGT asset, the capital proceeds for each asset is so much of the total consideration as is reasonably attributable to that asset. Accordingly, the capital proceeds referable to the disposal of each individual Lend Lease Share and LLT Unit comprising a Stapled Security will be determined by apportioning the total capital proceeds received in respect of the disposal of the Stapled Security between the Lend Lease Share and the LLT Unit on a reasonable basis. 4.2 Australian Residents Upon disposal of a Stapled Security, a Stapled Security Holder will make a capital gain if: the portion of the consideration reasonably attributable to a LLT Unit exceeds the cost base of the LLT Unit (the LLT Units acquired by Lend Lease Shareholders pursuant to the Stapling Proposal will have an initial cost base equal to the value of the Stapling Dividend, which we have been advised will be 0.1 cents); and/or the portion of the consideration reasonably attributable to the Lend Lease Share exceeds the cost base of the Lend Lease Share. A Stapled Security Holder will make a capital loss if: the portion of the consideration reasonably attributable to a LLT Unit is less than the reduced cost base of the LLT Unit; and/or the portion of the consideration reasonably attributable to the Lend Lease Share is less than the reduced cost base of the Lend Lease Share. Importantly, capital gains and losses in relation to Lend Lease Shares acquired, or taken to have been acquired, prior to 20 September 1985 for CGT purposes are disregarded. In broad terms, the cost base of a Lend Lease Share and LLT Unit is the amount the Stapled Security Holder paid for them (including incidental costs of acquisition and disposal) less any reductions for the tax deferred component of distributions received. 14 Explanatory Statement Lend Lease Corporation

17 (a) CGT discount If a Stapled Security Holder is an individual, a complying superannuation entity or a trustee and acquired (or is taken to have acquired) for CGT purposes Lend Lease Shares or LLT Units at least 12 months prior to the date of their disposal (or other eligible CGT event happening in relation to the relevant Security), the amount of the Stapled Security Holder s capital gain is reduced by the relevant CGT discount. In calculating the Stapled Security Holder s capital gain, the cost base must not be indexed. In calculating the period of 12 months for CGT purposes, LLT Units acquired pursuant to the Stapling Proposal are considered to have been acquired on the Effective Date, which is expected to be 20 November If a Stapled Security Holder who is an individual or trustee applies the CGT discount method, the Stapled Security Holder s taxable capital gain (after offsetting any current year capital losses or carry forward net capital losses from previous years) will be reduced by one-half (or one-third if the Stapled Security Holder is a complying superannuation entity). If the Stapled Security Holder is a company, the CGT discount is not available. The Stapled Security Holder may be entitled to index the cost base of their Lend Lease Shares (see below). (b) Indexed cost base For Lend Lease Shares acquired (or taken to have been acquired) prior to 21 September 1999, for CGT purposes, Stapled Security Holders (other than those who adopt the CGT discount method, outlined above) may choose to calculate any capital gain on disposal using a cost base indexed for inflation. If the Stapled Security Holder makes a capital loss, the reduced cost base is not indexed. The cost base may only be indexed for inflation up to 30 September Stapled Security Holders who choose to calculate the gain on their Lend Lease Shares using an indexed cost base cannot apply the CGT discount to that capital gain. However, the Stapled Security Holder may be eligible to apply the CGT discount method in calculating the gain on their LLT Units. 4.3 Non-Residents There will be no CGT consequences for a non-resident Stapled Security Holder on disposal of their Stapled Securities. 5 Goods and Services Tax ( GST ) No GST should generally be payable in respect of the transactions outlined above. As these all involve dealings with securities, the various supplies will be input taxed (i.e. not subject to GST). There may be an indirect GST cost for Stapled Security Holders who are registered for GST as input tax credits will generally not be available for GST charged to the acquirer in respect of supplies relating to the dealings with these Securities (e.g. legal and other adviser fees). 6 Other Issues Lend Lease Shareholders would have been invited to provide Lend Lease with their Tax File Number ( TFN ) or Australian Business Number ( ABN ) when they first acquired their Lend Lease Shares. If no TFN or ABN were quoted, Lend Lease would have deducted tax from the unfranked component of dividends paid to the Lend Lease Shareholder at the highest marginal rate of tax (plus Medicare Levy). Lend Lease Shareholders who participate in the Stapling Proposal will acquire LLT Units. Specific provisions of the Privacy Act 1988 and the Taxation Administration Act 1953 prevent Lend Lease from disclosing the TFNs of Lend Lease Shareholders to third parties (which includes LLT). Accordingly, if the Stapling Proposal proceeds Lend Lease will be unable to disclose the TFNs of Lend Lease Shareholders to LLT without their consent. After approval of the Stapling Proposal, LLT will send Stapled Security Holders a form that the Stapled Security Holder can use to provide their TFN or ABN or exemption to LLT. Stapled Security Holders are not obliged to provide their TFN or ABN to LLT. However, if a Stapled Security Holder does not provide their TFN or ABN or exemption to LLT, tax may be withheld at a rate of 46.5% on any gross distributions made by LLT. However, Stapled Security Holders will be entitled to claim an income tax credit/refund (as applicable) in respect of the tax withheld in their income tax returns. Yours sincerely Michael Moschner Director Greenwoods & Freehills 15