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Chairman's Letter

When I reported to you In August last year, it was clear the outlook for the property sector was challenging. Accordingly, we prepared stockland for a downturn. We streamlined our organisation, sold non-core properties, and husbanded our capital resources with care. nothing we did, however, could insulate us from the financial crisis that occurred. As this global financial crisis spilt over to world economies, we saw steep falls in share markets, rising unemployment and a sharp downturn in consumer confidence. these economic conditions endured through most of Fy09. property values around the world were inevitably pulled down by these factors, with the value of quality commercial property in Australia falling 20-30 per cent. stockland's results for Fy09 must be viewed against the backdrop of these extraordinary events. Our respOnse stockland's management responded decisively to the market conditions that emerged last year. We moved fast to adjust our residential projects to offer more affordable house sites to appeal to first home buyers. We did well; we sold more lots in Fy09 than we did in Fy08, and we ended the year with more residential contracts on hand than ever before. We continued to dispose of non-core commercial property - with sales totalling $592 million during the past year. We reduced our operating costs by managing discretionary spending tightly, reducing full-time headcount by 11 per cent and maintaining for a second year our freeze on executive remuneration. We also undertook capital raisings to strengthen our balance sheet and be prepared should attractive acquisition opportunities emerge. In all, we raised about $2.7 billion through new share issues and placements during Fy09. Our results helped by our quick response to difficult market conditions, our underlying profit for Fy09 was $631.4 million, down 6 per cent from $674.0 million last year. In the circumstances, this was a creditable result. underlying profit measures profit from ongoing operations adjusted for non-recurring and significant items such as inventory impairments, goodwill impairments, investment property revaluations and other non-cash accounting items charged to our income statement. It is disappointing, however, to report substantial impairments of our residential Communities and Apartment inventories and our uK property portfolios during the past year - impairments totalling $461.9 million after tax - resulting from declining valuations and changed market outlook. our statutory net result was a loss of $1,801.9 million. this result takes into account inventory impairments, the substantial but unrealised decrease in the value of our investment properties of $1,126.1 million and other significant items fully set out in the directors' report.

The quality of Stockland's Asset portfolio will continue to underpin our performance as Australia moves Closer to economic recovery.

Graham Bradley
Chairman