Scentre : Appendix 4E and 2016 Annual Financial Report

(previous corresponding period being the year ended 31 December 2015)

2016

2015

Funds from operations (FFO) attributable to members of Scentre

Group ($million)

FFO per security attributable to members of Scentre Group (cents per stapled security) (i)

up

3.2%

1,237.6

1,199.2

up

3.2%

23.30

22.58

(i) The number of securities on issue as at 31 December 2016 was 5,324,296,678 (31 December 2015: 5,324,296,678). In calculating the FFO per stapled security 5,311,595,241 (31 December 2015: 5,311,595,241) weighted average securities was used. This excluded 12,701,437 (31 December 2015: 12,701,437) securities held by the Scentre Executive Option Plan Trust which have been consolidated and eliminated in accordance with accounting standards.

10.65

2.70

3.45

4.33

0.17

Dividend/distributions for the year ended 31 December 2016

Cents per

stapled security

21.30

Final dividend/distributions in respect of Scentre Group earnings to be

paid on 28 February 2017 comprising: (ii)

• dividend in respect of a Scentre Group Limited share

• distribution in respect of a Scentre Group Trust 1 unit

• distribution in respect of a Scentre Group Trust 2 unit

• distribution in respect of a Scentre Group Trust 3 unit

  Interim dividend/distributions in respect of Scentre Group earnings paid on 31 August 2016 comprising: (iii)

• dividend in respect of a Scentre Group Limited share

• distribution in respect of a Scentre Group Trust 1 unit

• distribution in respect of a Scentre Group Trust 2 unit

• distribution in respect of a Scentre Group Trust 3 unit

10.65

Nil 3.50

7.15

Nil

(ii) The number of securities entitled to distributions on the record date, 14 February 2017 was 5,324,296,678.

(iii) The number of securities entitled to distributions on the record date, 15 August 2016 was 5,324,296,678.

The dividend/distributions per security have been determined by reference to the number of securities on issue at the record date. The record date for determining entitlements to the final distribution was 5pm, 14 February 2017 and the distribution will be paid on 28 February 2017. The Group does not operate a distribution reinvestment plan.

The dividend in respect of Scentre Group Limited and distribution in respect of Scentre Group Trust 3 are fully franked. Details of the full year components of distributions in respect of Scentre Group Trust 1 and Scentre Group Trust 2 will be provided in the Annual Tax Statements which will be sent to members in July 2017.

Commentary on the results is contained in the media release and the results presentation released to the Australian Securities Exchange (ASX). The additional information requiring disclosure to comply with listing rule 4.3A is contained in the attached Annual Financial Report which includes the audited consolidated financial report. The annual general meeting will be held on 5 April 2017.

[1]

Scentre Group comprises Scentre Group Limited ABN 66 001 671 496 (SGL); Scentre Group Trust 1 ARSN 090 849 746 (SGT1); Scentre

Group Trust 2 ARSN 146 934 536 (SGT2) and Scentre Group Trust 3 ARSN 146 934 652 (SGT3) and their respective controlled entities.

Annual Financial Report 31December 2016

Scentre Group Limited ABN 66 001 671 496

Annual Financial Report

SCENTRE GROUP (1)

For the Financial Year ended 31 December 2016

1 Directors' Report

25 Independent Auditor's Report

1. Income Statement

2. Statement of Comprehensive Income

3. Balance Sheet

4. Statement of Changes in Equity

5. Cash Flow Statement

6. Notes to the Financial Statements

1. Directors' Declaration

2. Corporate Governance Statement

82 Investor Relations

84 Members' Information

IBC Directory

(1) Scentre Group comprises Scentre Group Limited and its controlled entities as defined in Note 1.

Directors' Report

The Directors of Scentre Group Limited (Company) submit the following report for the period 1 January 2016 to 31 December 2016 (Financial Year).

1. OPERATIONS AND ACTIVITIES
2. Financial results

   We are pleased to report on the performance of Scentre Group (Group or SCG) for the Financial Year.

   Profit after tax, funds from operations and distribution for the period (i)

   31 Dec 16

   $million

   31 Dec 15

   $million

   Net property income 1,762.0 1,785.9

   Net project and management income 127.5 131.1

   Overheads (86.4) (91.0)

   Net financing costs (461.6) (499.3)

   Interest on other financial liabilities (63.0) (81.0)

   Mark to market of derivatives and property linked notes 148.8 (166.6) Exchange differences (including amounts transferred from foreign currency translation reserve)

   on realisation of net investment in foreign operations 24.2 130.9

   Gain in respect of capital transactions 35.5 19.2

   Property revaluations 1,580.1 1,538.8

   Tax expense (45.6) (38.3)

   Profit after tax 3,021.5 2,729.7

   Adjusted for:

   • Property revaluations (1,580.1) (1,538.8)

   • Amortisation of tenant allowances 47.7 38.6

   • Net fair value loss/(gain) and associated credit risk on currency derivatives that do not qualify

     for hedge accounting (23.6) 27.5

   • Exchange differences (including amounts transferred from foreign currency translation reserve)

     on realisation of net investment in foreign operations (24.2) (130.9)

   • Net fair value loss/(gain) on interest rate hedges that do not qualify for hedge accounting (144.3) 113.6

   • Net fair value loss on other financial liabilities 19.1 25.5

   • Deferred tax benefit (29.5) (33.6)

   • Gain in respect of capital transactions (35.5) (19.2)

   • Funds from operations attributable to external non controlling interests (ii) (13.5) (13.2)

   Funds from operations (FFO) (iii) 1,237.6 1,199.2

   Less: amount retained (106.2) (89.0)

   Dividend/distributions 1,131.4 1,110.2

   (i) The Group's income and expenses have been prepared on a proportionate basis. The proportionate basis presents the net income from equity accounted entities on a gross basis.

   (ii) FFO attributable to external non controlling interests of $13.5 million (31 December 2015: $13.2 million) consists of profit after tax attributable to external non controlling interests of $31.0 million (31 December 2015: $21.9 million) less FFO adjustments of $17.5 million (31 December 2015: $8.7 million).

   (iii) A key measure of the financial performance of the Group is FFO. FFO is a widely recognised measure of the performance of real estate investment groups by the property industry and is a useful measure of operating performance.

   The Group's measure of FFO is based upon the National Association of Real Estate Investment Trusts' (NAREIT) definition, adjusted to reflect the Group's profit after tax and non controlling interests reported in accordance with the Australian Accounting Standards and International Financial Reporting Standards (IFRS).

   The Group's FFO excludes property revaluations of consolidated and equity accounted property investments, unrealised currency gains/losses, net fair value gains or losses on interest rate hedges and other financial liabilities, deferred tax, gains/losses from capital transactions and amortisation of tenant allowances from the reported profit after tax and non controlling interests.

   31 Dec 16

   cents

   31 Dec 15

   cents

   FFO per security (iv) 23.30 22.58

   Dividend/distribution per security 21.30 20.90

   (iv) In calculating the FFO per stapled security, 5,311,595,241 (31 December 2015: 5,311,595,241) weighted average number of securities was used.

   The Group's FFO earnings for the Financial Year was $1.238 billion representing 23.30 cents per security up 3.2% and distribution of 21.30 cents per security up 2%. Excluding the impact of transactions FFO growth would have been approximately 5%.

   The Group's profit for the year was $2.991 billion including revaluations of $1.6 billion. These revaluations reflect the strong net operating income growth throughout the portfolio, the value creation from the completion of major redevelopments and the continued improvement in capitalisation rates.

   Return on contributed equity (ROCE) was 11.8% compared to 11.4% in 2015.

3. Operating environment

The Group's portfolio comprises 34 centres in Australia and 5 centres in New Zealand with a combined value of A$32.3 billion(i). Comparable net operating income increased 2.9%, at the top end of guidance.

The Group continues to improve the retail product offering by introducing more relevant, on-trend and desirable retailers. These retailers continue to drive demand for retail space across the Scentre Group portfolio which remains more than 99.5% leased.

The portfolio achieved solid sales growth, with comparable specialty sales growing 2.6% for the 12 months with average annual specialty sales of $11,203 per square metre. Strong sales performance was seen across most categories, with good increases in the jewellery, health & beauty, food retail and technology categories.

(i) Pro forma post the sale of WestCity expected to settle in 2017.

SCENTRE GROUP ANNUAL FINANCIAL REPORT 2016 // PAGE 1