Chairman's Review

Frank Lowy AC

I am pleased to report that Westfield Group has recorded another successful year.

It is with great pleasure that I present this 2012 Westfield Group Shareholders’ Review, which summarises the achievements of the year and provides an overview of the company’s strategic plan.

I am pleased that the Westfield Group recorded another successful year and in February released its annual results for 2012 which showed a net profit of $1.72 billion, up 18.3% on the previous year. Funds from Operations were $1.47 billion, representing 65 cents per security. The distribution of 49.5 cents per security was an increase of 2.3% on the prior year.

Our operations saw continued high levels of occupancy, growth in average rents and comparable specialty sales growth in each market. The operating performance in the United States and United Kingdom markets continued to be favourable, with the United States well into a recovery from the period of the global financial crisis. While retail sales in Australia/New Zealand were relatively subdued for most of last year the business performed well in those markets.

The results and performance of the past year reflect the benefits of our operating and capital management strategies which are focussed on positioning the Group, which now owns interests in and operates a portfolio of assets valued at $64.4 billion, to generate greater shareholder value for the long term.

Our operating strategy is to develop and own superior retail destinations in major cities by integrating food, fashion, leisure and entertainment, using technology to better connect retailers with consumers. Our capital strategy is to actively manage our financial position to improve the return on contributed equity.

A key aspect of our capital strategy is the redeployment of capital into higher return opportunities globally. Since late 2010, we have pursued a program of disposing of non-core assets globally and introducing joint venture partners into assets, particularly in the United States.

Our plan is to redeploy the capital available from these transactions into long-term opportunities. These include our $12 billion development pipeline, of which Westfield’s share is approximately $5 billion, as well as potential acquisition opportunities in existing and new markets and the buyback of Westfield Group securities. This process is ongoing, and while the disposal of assets may be dilutive to earnings in the short term we believe that this strategy will create greater long-term value as the capital is redeployed.

The combined effect of the operating and capital strategies has kept Westfield malls around the world popular with shoppers and with retailers. Last year there were more than 1.1 billion shopping visits to Westfield malls and demand for retail space remained strong, with nearly 98% of the global portfolio leased. In short, the operational and financial performance of the Group remains sound and the prospects for future growth are bright.

Adaptation and innovation have been continuing themes for Westfield since its earliest days. We have modified our capital structure several times. We have moved into new markets. We have sold shopping centres that no longer meet our overall portfolio requirements and recycled capital into activities that create greater value for investors.

And a decade ago we embarked on a major shift towards developing much higher quality shopping centres capable of delivering unique experiences in everything from fashion to food, entertainment and major events.

This move anticipated not just the emerging demand by consumers for better designed buildings and improved customer services, but also the demand by retailers, and especially international and luxury brand retailers, for space in high-profile and prestigious locations in some of the world’s leading cities.

Westfield today is at the intersection of so much that is new and exciting in the global retail property industry, including in digital and other emerging technologies.

Our close relationship with global high street and luxury retailers is unique and provides us with the ability to work with these retailers at the highest quality locations on multiple continents. This interaction has accelerated the evolution towards creating the very different kinds of shopping centres from those we traditionally developed.

The adaption and innovation, together with our relationship with retailers globally, is evident at our iconic developments at Sydney, London and Stratford. We are now working on the next generation of centres - in Milan, at Westfield World Trade Center in New York, at Croydon in South London and the next stage of Westfield London.

These centres, and many more in our portfolio, reflect the changing face of retail.

This change is creating great customer experiences and entrenching our malls as vibrant and essential community assets and you will see examples of this depicted throughout this review.

I would like to acknowledge here the contribution made to the success of Westfield Group made by two long-serving directors who will not be standing for re-election this year.

Stephen Johns joined Westfield in 1971 and has served the company in many capacities for 42 years: as a senior executive, Finance Director, non-Executive Director, as chairman of numerous board committees and as a trusted advisor to me.

Professor Fred Hilmer joined the board in 1991 and served on a number of board committees and has been a much admired and highly-respected director.

On behalf of my fellow directors, and the entire company, I would like to place on record my deep appreciation for their outstanding contribution over so many years.

I would also like to thank my colleagues on the board, our senior executive team and staff around the world for the role they have played in helping keep Westfield Group at the forefront of the global shopping centre industry.

These are exciting times for our business, with opportunities to accelerate the move towards better-designed retail and entertainment destinations located in the heart of some of the world’s leading cities. It continues to be a hallmark of Westfield that we embrace change and continually adapt and innovate.

For 2013 the Group has forecast growth in FFO per security to 66.5 cents, prior to the impact of any transactional activity during the year and the redeployment of capital. Distribution is expected to increase to 51 cents per security. I look forward to another exciting year in which Westfield continues to flourish.

Frank Lowy Frank Lowy AC.

Chairman