Mirvac Group Annual Report 2022 BUSINESS OVERVIEW Mirvac is a leading creator and curator of extraordinary urban places and experiences. Our mission is to build a better future for millions of Australians. ACKNOWLEDGEMENT OF COUNTRY Mirvac pays its respect to all Aboriginal and Torres Strait Islander peoples as the traditional custodians of the lands and waters of Australia where we live, work and play. Artwork created by Riki Salam (Mualgal, Kaurareg, Kuku Yalanji) of We are 27 Creative. ABOUT THIS REPORT The FY22 Annual Report is a consolidated summary of Mirvac Group’s operations, performance, and financial position for the year ended 30 June 2022. In this report, unless otherwise stated, references to ‘Mirvac’, ‘Group’, ‘company’, ‘parent entity’, ‘we’, ‘us’ and ‘our’ refer to Mirvac Limited and its controlled entities as a whole. Mirvac Limited also includes Mirvac Property Trust and its controlled entities. References in this report to a ‘year’ relate to the financial year ended 30 June 2022. All dollar figures are expressed in Australian dollars (AUD) unless otherwise stated. Mirvac’s Board acknowledges its responsibility for our FY22 Annual Report and has had oversight of its development. The Board reviewed, considered, and provided feedback during the production process and approved the Annual Report on 11 August 2022. The consolidated financial statements included in this report were also authorised for issue by the Directors on 11 August 2022. The Directors have the power to amend and reissue the financial statements. Our full-year financial statements can be found on pages 73 to 124. Mirvac is evolving its Annual Report to align with the International Integrated ReportingFramework (2021) ( Framework). In FY22, we used the Framework to identify, from an enterprise perspective, the key pillars that enable us to deliver sustained value for our stakeholders. Mirvac has referenced, but not yet fully applied, the fundamental principles, content elements and guiding principles within this report. All sustainability reporting within this report has been prepared in accordance with the Global Reporting Initiative (GRI) Standards: Core option. PwC has provided limited assurance over select environmental and social data within the annual reporting suite, covering the 12 months to 30 June 2022. Our assurance statement is available online at www.mirvac.com/sustainability/ our-performance. DIRECTORS’ REPORT AND OPERATING AND FINANCIAL REVIEW (OFR) The required elements of the Directors’ Report are featured on pages 48 to 50 of this report. Our financial and operational results for FY22 are covered specifically on pages 36 to 40. All financial and non-financial metrics included in this annual report have been verified through our internal verification process. The Remuneration Report on pages 51 to 71 and the Financial Statements have been audited by PwC. MATERIALITY We have defined ‘relevant matters’ for inclusion in our FY22 Annual Report, prepared with reference to the Framework, as those matters that are material to securityholders and other providers of financial capital in making their various decisions with respect to their ongoing investment, funding, and support for Mirvac. The FY22 process to determine material ‘relevant matters’ has been: IDENTIFYING RELEVANT MATTERS We conduct an assessment of our key risks each year to identify material operational and strategic matters that could potentially impact the achievement of our strategy over the short, medium and long term. As part of this process in FY22 we: > scanned the external environment to identify political, economic, societal, technological, and environmental threats and opportunities; > consulted with senior management and our Board to identify strengths, weaknesses, opportunities and threats regarding risk mitigation strategies; > engaged with industry; and > sought to understand our key stakeholders’ and investors’ needs and their expectations of us. EVALUATE AND PRIORITISE To evaluate the relevant matters for the report, our key risks and opportunities were discussed with the Executive Leadership Team and the Board in a structured workshop. Key risks and risk mitigation strategies were evaluated and prioritised based on likelihood of the material matter occurring, and the anticipated impact on value creation and protection. DISCLOSE Our material risks and risk mitigation strategies are set out on pages 42 to 43. These were reviewed and evaluated at least every quarter by our Executive Leadership Team and the Audit Risk & Compliance Committee (with the full Board in attendance at these meetings). Due to the complex nature of our risk profile, some of these material matters may impact on our ability to create and protect value over the short, medium and long term. As Mirvac moves to adopt Integrated Reporting and prepare an Integrated Annual Report in line with the Framework, we will also seek to more formally refine our stakeholder engagement and materiality processes and the ‘relevant matters’ required in an Integrated Report (that is, those that the Board understand to be material to Mirvac’s securityholders and other providers of financial capital in making decisions relating to their ongoing investment, funding and support for the company). Celebrating 50 years Mirvac GroupLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS HOW WE CREATE VALUE PERFORMANCE BY PILLAR FINANCIAL AND OPERATIONAL RESULTS RISK MANAGEMENT GOVERNANCE FINANCIAL REPORT OTHER CONTENTS About this report and reporting suite 01 About Mirvac 02 FY22 highlights 06 Letters to securityholders 08 12 Our strategy 14 Megatrends 16 18 How we create value Performance by pillar of value > Performance: Financial > Place: Asset creation and curation > People: People, culture and safety > Partners: Customers and stakeholders > Planet: Sustainability FY22 Financial and Operational Results 36 Risk and risk management 42 Governance 44 73 Financial report 125 Directors’ declaration 126 134 Securityholder information 136 Glossary 137 Directory & upcoming events Independent auditor’s report REPORTING SUITE This reporting suite sets out the Group’s financial and operational performance for the year ended 30 June 2022 across the following documents: MGR FY22 RESULTS PRESENTATION An overview of Mirvac’s financial, operational and sustainability performance for the financial year. MGR FY22 ADDITIONAL INFORMATION Information supporting Mirvac’s FY22 Results Presentation. MGR FY22 ANNUAL REPORT An in-depth overview of Mirvac’s financial, operational and sustainability performance for the 2022 financial year, along with the Group’s Directors’ Report, its Remuneration Report and its detailed financial statements. MGR FY22 PROPERTY COMPENDIUM A detailed summary of the Group’s investment portfolio, other investments, and its commercial and residential development pipeline as at 30 June 2022. MPT FY22 ANNUAL REPORT An overview of Mirvac Property Trust for the financial year. BUILDING CLIMATE RESILIENCE An overview of Mirvac’s approach to managing its climate-related risks and opportunities, which aligns with the recommendations set out by the Task Force on Climate-related Financial Disclosures. CORPORATE GOVERNANCE STATEMENT 2022 www.mirvac.com/about/corporate-governance. TAX GOVERNANCE STATEMENT www.mirvac.com/about/corporate-governance. Mirvac Group comprises Mirvac Limited ABN 92 003 280 699 and its controlled entities (including Mirvac Property Trust ARSN 086 780 645 and its controlled entities). Annual Report 2022 – 1 BUSINESS OVERVIEW ABOUT MIRVAC We are a purpose-driven organisation that strives to make a positive impact on people’s lives by shaping the urban landscape. This means we’re also able to see the bigger picture and take a longer- term view, with the ability to create multifaceted spaces and adapt to our customers’ diverse and changing needs. The value that our integrated approach delivers is further outlined on page 20. And key to everything we do are our people, who help us drive significant outcomes for our customers, communities, securityholders, and our planet. By harnessing the unique skillset of our people across each of the sectors we operate in, we’re able to create and curate outstanding urban environments that people want to work, shop and live in. Mirvac is an Australian Securities Exchange (ASX) top 50 company with an integrated asset creation and curation capability. For 50 years, we’ve dedicated ourselves to shaping Australia’s urban landscape, with a strong focus on sustainability, innovation, safety, and placemaking. Our contribution to Australian cities is reflected in the $26bn of assets we own and manage across office, industrial, retail and build to rent, along with our $12.4bn commercial development pipeline and our $17.3bn residential development pipeline. Located in Australia’s key cities of Sydney, Melbourne, Brisbane, Canberra and Perth, we create award-winning urban precincts that set new benchmarks in sustainability and design excellence. Underpinning the success of our urban strategy is our integrated and diversified business model, which ensures we maintain an appropriate balance of passive and active capital, enabling us to be agile and respond to fluctuations in the property cycle. Our integrated approach also gives us a competitive advantage across the lifecycle of a project. From site acquisition, urban planning and design, through to development and construction, leasing, sales and marketing, property management and long-term ownership, we exercise control over the entire value chain. 2 – Celebrating 50 years Mirvac GroupLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS OUR PURPOSE Our purpose, Reimagine Urban Life, is our passion and reason for being. When we reimagine urban life, we’re inspired to completely rethink how places are defined. We don’t just build buildings and houses; we create unique urban precincts and thriving residential communities, and we look to have a positive impact. This means we apply our expertise to design and deliver assets and projects that are at the forefront of sustainability and innovation; to create communities that connect the people within them; and to leverage our capabilities so that we leave a lasting legacy. OUR VALUES Our values are aligned with our purpose and guide us in what we do. WE PUT PEOPLE FIRST HOW WE WORK MATTERS WE ARE CURIOUS AND BOLD WE COLLABORATE WE ARE PASSIONATE ABOUT QUALITY AND LEGACY WE ARE GENUINE AND DO THE RIGHT THING OUR BUSINESS We have three core business segments that drive our financial performance and underpin our commitment to Reimagine Urban Life. INTEGRATED INVESTMENT PORTFOLIO OFFICE INDUSTRIAL RETAIL BUILD TO RENT > 25 assets 1 > Portfolio value: $8.3bn 2 > NLA: 857,762 sqm > 10 assets 1 > Portfolio value: $1.7bn 2 > NLA: 469,339 sqm > 12 assets 1 > Portfolio value: $2.9bn 2 > GLA: 347,800 sqm > 2,173 completed and pipeline apartments > Portfolio value: $0.7bn 2 FUNDS MANAGEMENT: $10.2BN THIRD-PARTY CAPITAL COMMERCIAL & MIXED USE RESIDENTIAL > ~$2.2bn active developments 3 > ~$12.4bn total pipeline value 3 > 25,352 pipeline lots > ~$14.5bn expected future revenue > ~$1.6bn pre-sales 4 Includes assets held for sale, on market for sale and excludes IPUC and properties being held for development. 1. 2. Portfolio value includes IPUC, assets held for sale/on market for sale, and properties being held for development and represents fair value (excludes gross up of lease liability under AASB 16). 3. Represents 100 per cent expected end value, subject to various factors outside Mirvac’s control such as planning outcomes, market demand and COVID-19 uncertainties. 4. Represents Mirvac’s share of total pre-sales and includes GST. Annual Report 2022 – 3 GOVERNANCEFINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS BUSINESS OVERVIEW CELEBRATING 50 YEARS Mirvac was founded in 1972, when Robert Hamilton and Henry Pollack identified a need for quality residential housing in Australia. Since then, Mirvac has evolved into a leading ASX-listed property group with activities across both commercial and residential, and our founders’ commitment to quality and care in every detail has endured. The significant contribution we’ve made to Australia’s urban landscape over the past 50 years can be seen in the large number of award- winning workplaces, homes, communities, and retail centres we’ve delivered - places that continue to be experienced and enjoyed by thousands of Australians. To everyone involved in our story, we’d like to say thank you for helping us reach this exciting milestone. We are proud to celebrate this achievement with our people, customers and partners, and we look forward to creating and curating extraordinary urban places and experiences well into the future. 1970s 1972 > Business founded by Henry Pollack, Robert Hamilton and AGC Corporation. > First residential property is built: Montrose, a block of twelve apartments in Rose Bay, NSW. 1976 1977 LATE ‘70s Castle Vale, the first large-scale, integrated development of its kind, is built in Willoughby on Sydney’s lower North Shore. > Hotel management and ownership begins with The Sebel Hotel in Elizabeth Bay. Residential building on subdivided land begins, leading to the creation of Mirvac Homes. 1990s 1990 1994 1995 1996 1999 Mirvac consolidates its unlisted property trusts into one (Barclays-Mirvac Property Trust). First major project in Melbourne: Beacon Cove. First major project in Queensland: The Quay West Suites. It sells out in three weeks. > Henry Pollack retires. > Mirvac buys back BZW shares to create Mirvac Property Trust. Capital Property Trust is acquired. Mirvac Ltd and staple trusts merge to form Mirvac Group. 2010s 2010 2013 2014 2017 2018 A new urban strategy is implemented, setting the Group up for the future. Mirvac embarks on the redevelopment of 8 Chifley Square, Sydney, signifying the Group’s evolution into an urban asset creator. Mirvac releases its groundbreaking This Changes Everything sustainability strategy, with ambitious targets around carbon, water and waste. By 2017, Mirvac’s innovation initiative has its own team. Hatch by Mirvac is Mirvac’s award-winning innovation program. Mirvac launches build to rent, pioneering the asset class in Australia. 4 – Celebrating 50 years Mirvac GroupLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS 1980s EARLY ‘80s 1983 1987 Luxury high-rise projects begin with The York, Sydney. The project sells out in four hours. Mirvac Premier Property Trust is formed to manage commercial properties. Mirvac lists on the ASX and is valued at $120m. AGC (since merged into Westpac) sells its share of the business for $60m. 2001 2004 2005 2008 Expansion into WA through Mirvac-Fini. Mirvac acquires James Fielding Group, providing an investment pipeline of $2.3bn. Bob Hamilton retires as MD, but keeps working. Impact of GFC hits hard. 2020s 2021 2022 2022 Mirvac becomes the first Australian property group to be net positive carbon for its scope 1 and 2 emissions. Mirvac is named number one in Equileap’s Global Report on Gender Equality. Mirvac is appointed trustee of the AMP Capital Wholesale Office Fund, increasing the Group’s funds under management by $7.7bn. 2000s Annual Report 2022 – 5 GOVERNANCEFINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS BUSINESS OVERVIEW FY22 HIGHLIGHTS Mirvac delivered a solid result in FY22, demonstrating our continued resilience in another challenging operating environment. STATUTORY PROFIT $906m up <1% on FY21 RESIDENTIAL GROSS DEVELOPMENT MARGIN 25% OPERATING EARNINGS PER STAPLED SECURITY 15.1c up 8% on FY21 OPERATING PROFIT OF $596m up 8% on FY21 OPERATING CASH FLOW $896m up 41% on FY21 GEARING1 21.3% LEASED OVER 110,800sqm of office, industrial and retail space DISTRIBUTIONS PER STAPLED SECURITY up 3% on FY2110.2c NTA2 $2.79 up 4% on FY21 5.3 star average NABERS Energy rating across the office portfolio 1. Net debt (at foreign exchange hedged rate) / total tangible assets – cash. 2. NTA per stapled security excludes intangibles, right of use assets and non-controlling interests, based on ordinary securities, including EIS securities. 3. Represents Mirvac’s share of total pre-sales and includes GST. 6 – Celebrating 50 years Mirvac GroupLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS #1 EQUILEAP GLOBALLY FOR GENDER EQUITY SECURED $1.6bn of residential pre-sales 3 AFR BOSS #1 Best Places to Work PROPERTY, CONSTRUCTION AND TRANSPORT First AUSTRALIAN PROPERTY GROUP TO BE NET POSITIVE CARBON FOR SCOPE 1 AND 2 EMISSIONS Annual Report 2022 – 7 GOVERNANCEFINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS LETTERS TO SECURITYHOLDERS LETTERS TO OUR SECURITYHOLDERS LETTER FROM THE CHAIR Dear securityholders, In our 50th year, we celebrate our significant history as we look towards the future. Despite the challenges we’ve faced over the 2022 financial year, Mirvac has remained resilient. Having quickly stabilised the business after COVID-19 first began to emerge over two years ago, we set ourselves a goal to be stronger than we were before. Thanks to the strength and commitment of our people and the leadership of Susan and the senior management team, we have largely achieved this ambition. Mirvac is a resolutely urban-focused company. Our forward-looking development pipeline - $30bn of secured projects across all asset classes - is increasingly spread across sectors, with Mirvac moving from a predominately residential and office developer to a recognised creator and curator of leading mixed use precincts and places. Having made it through lockdowns and border closures, we’re now facing a confluence of headwinds, including supply chain issues, labour shortages, cost pressures, and rising inflation and interest rates. However, while the macroenvironment has shifted, our capability as a business has continued to evolve. We’re fortunate to have a team of many experienced, long-serving employees, along with some highly-skilled newer team members, and together, we’re growing our mixed use capability and taking on developments through which we can leverage our deep expertise across design, development, construction, and asset management. This is also a time where the benefits of our integrated model are clear. Having had in-house construction capabilities for 50 years means we have long-standing relationships with tier one subcontractors and a proven track record of well-run sites – all of which help insulate us from the skill shortages and supply chain pressures that currently surround the construction sector. We have an exciting pipeline of opportunities ahead of us, and we can embrace them with confidence. FINANCIAL PERFORMANCE Our solid financial result in FY22 reflects the continued execution of our urban strategy and the strength of our diversified business. Strong momentum in our residential business in the first half, and the successful delivery of our commercial and mixed use development pipeline, helped to offset weaker market conditions across office, retail and build to rent as a result of COVID-19. And as markets continue to fluctuate, our diversified model will be key. Our statutory profit of $906m was up $5m on FY21. Included in this result were development revaluation gains of $70m and asset revaluation gains of $305m in our Integrated Investment Portfolio, however, the overall result was impacted by a $216m write-down of our Toombul retail asset in Brisbane, following extensive damage caused by flooding in February this year. Our operating profit of $596m was up 8 per cent on FY21, representing 15.1 cents per stapled security. This was slightly ahead of guidance provided earlier in the financial year of at least 15.0 cents per stapled security. Dr. John Mulcahy CHAIRMAN 8 – Celebrating 50 years As a result of this strong performance, the annual distribution to securityholders increased to 10.2 cents per stapled security, which was at the upper end of guidance provided. In addition to a strong earnings outcome, our operating cash flow of $896m was 41 per cent higher than FY21, helping to fund our distributions. Net tangible assets were up 4 per cent to $2.79, delivering a 6.9 per cent Return on Invested Capital overall. MANAGING OUR CAPITAL EFFECTIVELY We continued our prudent approach to capital management to ensure our capital position and balance sheet remain strong. In FY22, this enabled us to continue to navigate the ongoing impacts of the global pandemic and remain agile in the face of changing market conditions. We continued to conservatively manage our debt maturity profile, and as at 30 June 2022, our weighted average debt maturity was 5.6 years, with only $220m of debt maturing in FY23 and $250m in FY24. We increased liquidity to $1.4bn and gearing at 21.3 per cent is at the lower end of our target range of 20 to 30 per cent, ensuring Mirvac has the financial flexibility to take advantage of opportunities as they arise for the benefit of our securityholders. We maintained our A3 Moody’s and A- Fitch Ratings with stable outlooks. Our cost of funds increased by 50 basis points to 3.9 per cent as at 30 June 2022, and while interest rates are expected to continue to increase from historical lows, 55 per cent of our debt is hedged, which means we are well placed to withstand the increasing interest rate environment. Our capital position was further supported by the execution of our asset sales program during the financial year. Our Travelodge portfolio sold for a 19 per cent premium to book value, while strong capital demand for high-quality retail assets facilitated the sale of Cherrybrook Village and Tramsheds in Sydney for a 43 per cent and 53 per cent premium to book value respectively. Quay West Carpark was also sold for a 35 per cent premium to book value. As well as helping to enhance the quality of our business, the proceeds, totalling $820m, will be used to help fund our significant $30bn development pipeline. Susan Lloyd-Hurwitz CEO & MANAGING DIRECTOR Mirvac GroupBUSINESS OVERVIEWOUR STRATEGYMEGATRENDS And as we progress our substantial pipeline – across all asset classes – we will continue to focus on growing our capital partnership mandates and increasing our funds under management. This means leveraging our end-to-end development, management, and investment expertise to create high-quality property investments that foster shared success over the long term. During the financial year, we established a direct investment partnership with Australian Retirement Trust (formerly Sunsuper ) to manage their $800m direct property portfolio, selling down a 49 per cent interest in the Locomotive Workshop in Sydney as part of this. We also strengthened our relationship with M&G Real Estate, helping to secure a 49.9 per cent interest in EY Centre, 200 George Street, Sydney, with Mirvac providing property and investment management services to our aligned capital partner. More recently, in July 2022, we were honoured to have secured management rights via a vote of unitholders to the AMP Capital Wholesale Office Fund (AWOF), featuring a high-quality office portfolio valued at over $7.7bn. Mirvac is expected to become trustee by mid-October of this year and provide AWOF $500m in liquidity. As a result of the transaction, our third-party capital under management will grow to approximately $17.9bn, which is an approximate 75 per cent increase on our third-party capital under management as at 30 June 2022. It is intended that this unlisted fund will be known as Mirvac Wholesale Office Fund, and Mirvac will derive base management fees and property management fees that are earnings accretive from FY23 onwards. DIVERSITY & INCLUSION At Mirvac, we are committed to fostering an inclusive culture where everyone feels like they belong. In FY22, we refreshed our Diversity & Inclusion strategy, that builds on the excellent work we have been doing over the past several years around flexibility and gender diversity. Within the strategy, we have broadened our focus around Indigenous participation in the workforce (including in our supply chains), women in construction, and those with caring responsibilities beyond young families – such as caring for elderly parents. And to actively embed our awareness of inclusion, we developed a new Inclusive Leadership Program for our leaders, which dives deeper into the themes of true inclusion and the core characteristics of highly inclusive cultures. HEALTH, SAFETY, ENVIRONMENT AND SUSTAINABILITY (HSE&S) Providing a safe workplace for our employees, suppliers, and communities is absolutely paramount at Mirvac, and we work hard to embed a culture that has health, safety, and sustainability at top of mind. Last year, to assist the Board in fulfilling its oversight of our HSE&S governance frameworks, culture, and compliance, we established the HSE&S Board Committee. In FY22, the Committee Members participated in a number of site visits in order to increase their understanding of HSE&S performance across the Group, and to raise the profile of risk management with employees and site management. The site visits also provided an opportunity for Mirvac to ensure that the resources and systems that are in place to manage HSE&S matters are effective. CONTINUING OUR BOARD AND EXECUTIVE LEADERSHIP TEAM (ELT) RENEWAL Our Board and Nomination Committee regularly reviews our Board’s composition to ensure we have the right mix of skills, experience, attributes, and diversity to support and provide oversight of our business. At our Annual General and General Meetings in November last year, I announced that James Millar and I, being the longest serving members on the Board, anticipate stepping down from the Board before the end of this term. In preparation for this, and to ensure that we have the right people to oversee Mirvac’s continued success, we appointed Damien Frawley to our Board in December last year. Damien has wide-ranging experience in investment and asset management across real estate and infrastructure, both in Australia and overseas, and has worked in the financial services industry for over 30 years. He has a strong focus on developing and executing strategy, and has been a welcome addition to our team. We also welcomed Amy Menere to the ELT as our new Head of Stakeholder Relations. Amy brings to Mirvac over 20 years of experience in corporate affairs and stakeholder relations in the property, professional and financial services industries. I am confident that in our current Board and ELT, we have the right skills and experience to lead the company through its next phase of growth, and ensure we deliver value to all of our stakeholders. REMUNERATION As always, we remain committed to providing open and transparent reporting of our remuneration outcomes. In FY22, the strategic objectives set by the Group were either met or exceeded, resulting in a Group STI score of 113 per cent. For the Executive KMP, the FY20 LTP vested at 40 per cent reflecting the mixed results across the performance metrics. Mirvac’s absolute TSR performance was below the median of the comparator group, and, as a result, this portion of the award did not vest. Two-thirds of the ROIC component vested, taking into account the ROIC performance exceeding WACC and the outcomes delivered by management over the three-year performance period. The full remuneration report for FY22 is available on page 51. OUTLOOK While there is much uncertainty in macroeconomic and geopolitical environments, our business remains well placed. As demonstrated throughout the pandemic, the quality of our integrated investment portfolio, our reputation as a market-leading residential developer, and the value of our commercial and mixed use development pipeline will enable us to continue our long-term track record of delivering strong returns to securityholders through the cycle. Our key strategic priorities over the next financial year are to progress our secured $12.4bn commercial and mixed use development pipeline, secure strategically aligned capital partnerships for our assets, increase our funds under management further, and deliver our residential project launches and settlements. We will continue to have a disciplined approach to capital management, while focusing on maintaining a healthy balance sheet, protecting our credit ratings, and holding sufficient liquidity to capitalise on opportunities as they emerge. Our significant program of non-core asset sales will further support our activities, as we look to create the next generation of assets that deliver development profit, generate new recurring income, and improve the quality of our portfolio. Subject to no material change in the operating environment, the Group is targeting operating earnings in FY23 of at least 15.5 cents per stapled security and distributions of at least 10.5 cents per stapled security. As we celebrate Mirvac’s 50th year, I could not be more proud to chair a company that has achieved so much in that time. Not only have we delivered exceptional places and projects across Australia’s major cities, we have retained a reputation for quality, for care, for being a leader in sustainability and innovation, and for being a trusted partner. In 50 years, Mirvac has grown from delivering a block of 12 apartments in Sydney’s eastern suburbs, to a leading asset creator and curator that has over $26bn in total assets under management and a $30bn commercial and residential development pipeline. I would like to thank and congratulate all of the many, many people who have contributed to Mirvac’s journey along the way. DR JOHN MULCAHY CHAIR Annual Report 2022 – 9 GOVERNANCEFINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS LETTERS TO SECURITYHOLDERS LETTERS TO OUR SECURITYHOLDERS CONTINUED LETTER FROM THE CEO & MANAGING DIRECTOR I am pleased to report to you on Mirvac’s performance in FY22, in a challenging operating environment. Over the course of the financial year, we endured extended COVID-19-related lockdowns, rising inflation and interest rates, supply chain issues, labour shortages, international conflict, and extreme wet weather along the east coast of Australia. While we were certainly not immune to the impacts of these events, we were able to manage these risks effectively, and our business has remained in good shape. Key to this was our integrated and diversified business model, which positioned us well to respond and adapt to changing market conditions. We were able to procure well in advance of construction due to pipeline visibility, and retain core skillsets – across all asset classes – in-house. Our integrated model is a proven competitive advantage for Mirvac and has stood us in good stead for 50 years. MAINTAINING A CULTURE OF WHICH WE CAN ALL BE PROUD This second year of the pandemic was testing for our people, with some experiencing stress and fatigue as a result of the government mandated lockdowns, restrictions and other ongoing COVID-19 impacts. We remained steadfast in our commitment to provide our people with a safe and healthy environment, and in FY22, we broadened our focus around psychological health and safety. This included the launch of a new app called Sonder to support people’s mental health and wellbeing. The app connects users with medical experts and psychology support and counselling services 24 hours a day, seven days a week. During the financial year, we also continued to focus on creating a culture of which we can be proud; a culture that helps to attract and retain talent as we deliver on our urban strategy. Our efforts to create a cohesive culture – one that has flexibility, diversity and inclusion, sustainability and innovation at its core – continued to be recognised. Mirvac earned the top spot in the 2022 AFR BOSS Best Places to Work list for the Property, Construction and Transport sector, and was ranked the number one employer in the world for gender equality by Equileap. Just as pleasing, we achieved 96 per cent talent retention in a challenging year, and our employee engagement results showed that 93 per cent of our people say they are proud to work for Mirvac. We also began to explore a broader definition of diversity through our new Belonging strategy, and we focused on growing our innovation capability, introducing a new Board of Innovators to proactively monitor inflection points and provide a holistic view of our innovation pipeline. Our ambition to have a positive environmental and social impact has helped us achieve some big goals. We were absolutely thrilled to have met our net positive carbon target for our scope 1 and 2 emissions nine years ahead of schedule, with very little reliance on offsets. Since our sustainability strategy, This Changes Everything, was launched in 2014, our progress has continued to exceed expectations, demonstrating that doing good really is good for business. We’ve now set our sights on an ambitious scope 3 emissions target, while maintaining our leading water and waste goals, and we are intensifying our focus on how we measure our social impact. Reconciliation is also another key focus for us: across the business, our teams have been proactively focused on building a deeper understanding of Indigenous people, as we further embed recognition of culture into our developments. MAINTAINING POSITIVE MOMENTUM Although FY22 presented a number of challenges, our business continued to perform well, underpinned by our integrated and diversified model, and we achieved a number of key milestones. These included the completion of two major commercial developments during the financial year – The Locomotive Workshop in Sydney and Heritage Lanes in Brisbane - which were delivered ahead of our initial feasibilities. Along with development profit, NTA uplift, and management fees from our third party capital co-owners, these two assets will provide future recurring income within our Integrated Investment Portfolio, with contributions from the Locomotive Workshop commencing in the second half of FY22 and contributions from Heritage Lanes due to commence in FY23. Overall, our active commercial and mixed use pipeline has the potential to deliver an estimated $250m of future annual recurring income and $1.8bn of value created to the Group as they complete, while further enhancing the quality of our portfolio. Positive momentum also continued in our residential business, and despite wet-weather and COVID-19-related project delays, we achieved 2,523 residential settlements in the financial year, in line with our 2,500-lot target. Gross development margins were maintained at 25 per cent, and we expect that they will normalise, but remain above our through-cycle target into FY23. We also maintained solid sales activity, particularly at our masterplanned communities projects during the first half of the financial year, and while conditions normalised in the second half, the successful release of six major apartment projects helped to elevate pre-sales to $1.6bn, providing good visibility of future earnings. We expect that the relative affordability of apartments compared to established homes and the forecast upcoming undersupply of apartments along the east coast of Australia will position us well to capture future demand, even as interest rates rise. As buyers become more discerning, our well-recognised brand, the quality of the product we deliver, our focus on owner-occupiers, and the benefits of our integrated model will continue to differentiate Mirvac. Within Commercial and Mixed Use, we progressed a number of key projects, including the redevelopment of Harbourside in Sydney, and demolition works at 55 Pitt Street in Sydney and 200 Turbot Street in Brisbane. Our confidence in the resilience of Melbourne’s CBD was also reinforced, with a planning permit lodged to transform 90 Collins Street by refurbishing the existing 21-storey building and adding 15 levels above the existing building. This is expected to deliver an additional 15,000sqm of premium commercial space and an end value of approximately $650m. 10 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWOUR STRATEGYMEGATRENDS PENDING The high-quality office assets we create will eventually form part of our office portfolio, which has benefitted from strategic repositioning over the past 10 years, setting the business up for sustainable, long-term growth. Our well-located portfolio has a 99 per cent weighting to Prime assets, an average age of just 9.8 years, and a 5.3 star average NABERS Energy rating, ensuring our buildings remain attractive to tenants and capital partners alike. This will continue to be an important differentiator as the flight to quality in the sector gathers pace, with assets built after 2000 benefiting from lower vacancy, higher rental growth, and stronger asset valuations. As well as maintaining an overweight exposure to core CBD and fringe office and mixed use assets, we have a focus on increasing our industrial and build to rent allocation. Our $2.5bn industrial development pipeline continued to progress, with construction commencing at Switchyards in Auburn, which is 58 per cent pre-leased, and construction on track to commence at Aspect in Kemps Creek in the first half of FY23. At Aspect, we are pursuing our first net positive embodied carbon development, with 5 Star and 6 Star Green Star ratings being targeted for the first two buildings, and we have a commitment to deliver net positive carbon assets across all of our industrial developments going forward. Development approvals also progressed at Elizabeth Enterprise in Badgerys Creek, with good tenant enquiry received for this asset to date. In addition to this, we have approximately $1bn of build to rent assets under construction that will help grow our exposure to this burgeoning asset class. Our build to rent development pipeline of close to 2,200 lots across the east coast is well-placed to benefit from the anticipated upcoming undersupply in apartments, as well as the expected resumption of international migration. And we continue to see the customer value proposition of build to rent play out. While our flagship development, LIV Indigo in Sydney, faced challenges during the first half of FY22 (with resident amenities compromised due to COVID-19-related lockdowns), we saw leasing quickly rebound as restrictions eased, increasing to 98 per cent by the end of the financial year. Customers have told us that they value the new style of renting, and we have certainly proven the need for build to rent in Australia given the security of tenure and flexibility it provides. As we apply what we’ve learnt through LIV Indigo to subsequent projects, starting with LIV Munro in Melbourne which is on track to launch in the first half of FY23, the offering will only get better. Several years ago, in response to the growth in online retail, we began to reposition our retail centres as community hubs – places that provide our customers with social connection, entertainment, experiences and access to essential services. This focus ensured that our portfolio remained resilient throughout another challenging financial year in the retail sector, and we saw leasing enquiries and retail sales return to pre-pandemic levels over the period. We are also committed to bringing physical and online retail together and giving people genuine reasons to visit our centres. The WeShow concept, for example, has removed the barriers that have prevented online and small businesses from establishing a physical footprint, while adding diversity and local relevance to our customer experience. In February this year, the east coast of Australia experienced extreme wet weather, with widespread flooding in both Sydney and Brisbane. Our retail centre in Brisbane, Toombul Shopping Centre, sustained catastrophic damage, with flood waters inundating the centre – the first time in its 55-year history. Given the extent of the damage and the increased risk of a further flood event, we made the difficult decision that it was not practicable to reinstate the centre as is. We have offered financial and other support to our retailers to assist them through an incredibly difficult time, and we are committed to working with the local community as we explore our options for this iconic site. DELIVERING FOR OUR FUTURE CUSTOMERS Given the crisis of affordability in major cities, we are actively rethinking all types of housing typologies, which, as well as build to rent, includes disability housing and land lease. Through land lease, customers have the opportunity to buy their home within a Mirvac community, while we retain ownership of the land. This is a sector through which we can apply our asset creation and curation capability, and although still in its early days, we are excited by the potential this offering has for those aged 55 and over, who will benefit from the amenity, service, and sense of connection to be delivered. New, modular construction methodologies are also changing the way we build homes. We have now committed that every house or apartment built by Mirvac will have a pod bathroom, delivering savings in time and reducing the number of trades on site. REFLECTING ON OUR LEGACY As we celebrate Mirvac’s 50th anniversary, it’s important to reflect on how far we’ve come and to take stock of all we’ve achieved. It is an honour and a privilege to have led this company over the past 10 years; to have seen our asset creation and curation capability come to life with the delivery of many award-winning properties and projects across each of our asset classes; to have seen the culture evolve into what it is today – a culture through which we are consistently recognised for our commitment to gender equality, diversity and inclusion, sustainability, and innovation. I would like to thank our people for helping to make Mirvac what it is today and to everyone involved in our story for their contribution over the years. I would also like to thank our Board for their guidance and for setting the direction of the company, and to our leaders for their role in Mirvac’s success today. I would especially like to thank our securityholders for your continued support and for your trust in what we do. SUSAN LLOYD-HURWITZ CEO & MANAGING DIRECTOR Annual Report 2022 – 11 GOVERNANCEFINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS OUR STRATEGY Mirvac has a resolutely urban strategy, underpinned by a commitment to Reimagine Urban Life. That means we focus on Australia’s most attractive urban markets, with an ambition to create places and precincts for the long term, while delivering sustained value to our securityholders. OUR STRATEGY Since 2013, our urban strategy has delivered considerable benefits to our stakeholders, including a continued strong financial performance, over $5bn in new assets across the key cities in which we operate, numerous thriving residential communities and apartments projects, and leading sustainability outcomes. Our strategy is supported by our vision to be a leading creator and curator of extraordinary urban places and experiences to make life better for millions of Australians. Under this vision, we have set out the following key strategic priorities: DELIVER FINANCIAL OUTPERFORMANCE measured by EPS and DPS growth, ROIC, and strong total securityholder returns. ADVOCATE, RETAIN AND ATTRACT OUR PARTNERS AND CUSTOMERS by responding to their needs to drive positive outcomes, while taking a broad view of who they are to allow us to both tailor and expand our offerings. BE A TRUSTED PARTNER TO GOVERNMENT AND COMMUNITIES by striving to understand the diverse and changing needs of our stakeholders so that we build strong communities with an enduring legacy. REMAIN A GLOBAL LEADER IN ESG by striving to be planet positive in carbon, water and waste and by ensuring we leave a positive impact in our communities. BE FUTURE FIT through the transformation of our systems and processes and by digitising everything. BE A LEADER IN INNOVATION by putting the customer at the heart of the innovation process and generating ideas to drive commercial success. CREATE A COMPETITIVE ADVANTAGE THROUGH PEOPLE AND CULTURE ensuring that Mirvac is a company where people join, stay, grow, and belong. 12 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSMEGATRENDS Annual Report 2022 – 13 GOVERNANCEFINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS MEGATRENDS MEGATRENDS SHAPING OUR WORLD The environment we’re operating in is continuously evolving, with a number of key global megatrends shaping our world and the cities we live in. We’re focused on monitoring these trends and understanding their potential impact to our business, our workforce, our customers, and partners, so that we can both manage the risks and embrace the opportunities they present. CHANGING DEMOGRAPHICS AND CONSUMER BEHAVIOURS CHANGES IN OUR POPULATION DEMOGRAPHICS WILL IMPACT HOW PEOPLE WORK, LIVE AND PLAY. > Millennials and digital natives are expected to represent 75 per cent of the workforce by 2030, while over 55-year-olds are a growing cohort and projected to represent 28 per cent of the population. > Changing consumer behaviours accelerated by COVID-19. > Online, real-time and convenience is becoming the norm. HOW WE’RE RESPONDING We’re passionate about embedding a customer-centric culture throughout the organisation, and using our data insights to reach new customer segments, while delivering exceptional experiences, services and products. Within our retail business, we have focused on expanding our reach across a variety of channels, bringing the online world to bricks and mortar and ensuring a true omni-channel offering for our partners and customers. TECHNOLOGY DRIVING CHANGE THE PACE OF DIGITISATION IS INCREASING AND THE WORLD IN WHICH WE OPERATE IS CHANGING FAST. > Increased use of technology to enhance products and customer experiences. > Exponential growth in data-enabled analytics and process automation. > End-to-end digitisation supporting the growth of prefabrication methods in construction. HOW WE’RE RESPONDING We recognise the opportunity technology-driven change can bring, and our ongoing digital initiatives focus on further developing innovation in digital construction and prefabrication, curating enhanced customer experiences within and across our asset classes, and driving optimisation and efficiency across our business. URBANISATION, DENSIFICATION, AND REGENERATION THE URBANISATION OF AUSTRALIA’S MAJOR CAPITAL CITIES CONTINUES, WITH CHANGING TRENDS IMPACTING PROPERTY IN URBAN AREAS. > Increased densification as land becomes more scarce. > Government policy facilitating densification and regeneration. > Strong demographic tailwinds supporting continued urbanisation. > Housing affordability challenges exacerbated by recent rapid price growth across our markets. HOW WE’RE RESPONDING We focus on creating and curating new assets, precincts and communities in key urban markets that contribute to the vibrancy of our cities. We believe that our Australian cities will continue to be the drivers of economic output, and we apply our placemaking capabilities to deliver places people want to work, shop and live in. In addition to this, we are committed to exploring new housing typologies, such as land lease and build to rent, to help address housing affordability for our customers. 14 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGY FINANCIAL REPORT OTHER Annual Report 2022 – 15 CAPITAL SEARCHING FOR YIELD SIGNIFICANT GROWTH IN DOMESTIC AND INTERNATIONAL CAPITAL POOLS WITH COMPETITIVE COST OF CAPITAL. > Domestic superannuation is now more than $3 trillion and rising. > Global capital remains attracted to Australia. > Yields generated from real estate remain attractive on a relative basis. HOW WE’RE RESPONDING We continue to focus on being a responsible custodian and delivering strong returns for third-party capital by utilising our development capability, along with our expertise across multiple asset classes. ESG FRONT AND CENTRE CAPITAL IS FLOWING INTO INVESTMENTS THAT OFFER ATTRACTIVE ESG FUNDAMENTALS AS WELL AS SPECIFIC DECARBONISATION ACTIVITIES. > ESG and decarbonisation are now a primary focus for our investors and partners. > Global capital and employees are searching for socially responsible impact. > Trust, good governance, and transparency continue to be important factors across all industries and sectors. HOW WE’RE RESPONDING Our sustainability strategy, This Changes Everything, is integrated into the way we do business. It sets out our approach to environmental and social responsibility, as well as our commitment to transparency and doing the right thing. Having reached our goal to be net positive in scope 1 and 2 carbon emissions nine years early, we have taken the opportunity to refresh the strategy as it begins its third iteration. This phase will focus on scope 3 emissions and our community goal to create a strong sense of belonging. GOVERNANCEHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS BUSINESS OVERVIEW LETTERS TO SECURITYHOLDERS OUR STRATEGY MEGATRENDS HOW WE CREATE VALUE Creating value across our business helps to ensure our success both now and in the future. We have defined five key pillars that enable us to execute our strategy, deliver value for our stakeholders, and allow us to maintain a healthy and resilient business. The table below sets out these pillars, and more detail on our performance in effectively managing and leveraging these pillars during the financial year can be found from pages 18 to 35. PERFORMANCE FINANCIAL PLACE ASSET CREATION AND CURATION Having diversified and appropriately balanced sources of capital, including third-party capital, equity and debt, helps us execute on our urban strategy and deliver sustainable returns to our securityholders and capital partners. Our asset creation and curation capability delivers places that contribute to the vibrancy of our cities and improve people’s lives. By remaining agile through the property cycle and maintaining a strong focus on capital allocation. This is complemented by our capital partnerships focus, which helps us to fund our significant future development pipeline. By leveraging our integrated and diversified business model to create and curate high-quality assets, precincts and communities that have sustainability and technology embedded throughout, and support our strategy to Reimagine Urban Life. Excess returns for securityholders, above our cost of capital, in a sustainable manner, with appropriate levels of gearing maintained. Modern, high-quality assets and projects that deliver NTA uplift, development profit, and stable, recurring income and management fees to the Group. > Return on Invested Capital > Total shareholder return > Earnings per share > Distributions per share > IIP: Occupancy, WALE and WACR > Commercial & Mixed Use: Development EBIT and NTA uplift > Residential: Sales and settlements PILLAR OF VALUE HOW WE DELIVER VALUE VALUE CREATED HOW WE MEASURE VALUE 16 – Celebrating 50 years Mirvac Group HOW WE CREATE VALUE PEOPLE PEOPLE, CULTURE AND SAFETY PARTNERS CUSTOMERS AND STAKEHOLDERS PLANET SUSTAINABILITY Our people and culture are a source of competitive advantage in the delivery of our strategy and purpose. The relationships we build as a trusted partner allow us to deliver on our ambition to Reimagine Urban Life. Our rigorous focus on our environmental and social impact helps guide us to deliver outcomes that are planet positive and remain a global leader in ESG. By prioritising diversity and inclusion, flexibility, collaboration, learning, innovation, wellbeing, leadership and a pursuit of safety excellence. This fosters the capabilities, culture and engagement levels where people feel inspired to join, perform, grow and belong. A culture that provides a competitive advantage and inspires our people to deliver on our goals and our urban strategy, while managing the risks to our business. By listening to and understanding our customers, and by working closely with community groups, capital partners, suppliers, government and our industry partners to deliver on our promises. By developing and implementing ambitious plans with clear timelines and by encouraging our people to do the right thing and be a force for good. A trusted brand with a reputation for delivering quality products and services across each of our asset classes. > Employee engagement / talent retention > LTIFR, CIFR > % of women in senior management roles > Net promoter scores > Repeat purchasers A climate-resilient business that delivers assets and homes for our customers that are more sustainable and affordable to run, along with a positive community legacy. > Water, waste and emissions performance > MSCI and Sustainalytics ratings > Social procurement spend > Community investment delivered Annual Report 2022 – 17 GOVERNANCEFINANCIAL REPORTOTHERPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS BUSINESS OVERVIEW LETTERS TO SECURITYHOLDERS OUR STRATEGY MEGATRENDS PERFORMANCE FINANCIAL Maintaining a strong financial position is critical to delivering our urban strategy. It provides us with access to a diverse range of funds as well as the financial agility to deploy capital to activate our development pipeline. HOW WE LOOK AT FINANCIAL PERFORMANCE Our financial performance and success are guided by our Portfolio Management Framework. The design of this framework is intended to align our financial objectives with our goal of creating long-term value for our securityholders. It also achieves a balance of seeking superior returns while maintaining a prudent capital management approach, to enable us to deliver sustainable growth through the cycle. We will continue to leverage our deep expertise across multiple asset classes, our integrated asset creation capabilities, and our ability to access diversified pools of capital (including debt, third-party capital and equity) so that we can continue to create world-class urban assets, while delivering superior risk-adjusted returns to our securityholders and capital partners. FINANCIAL STRATEGY The Portfolio Management Framework forms the foundation of the Group’s financial strategy and is designed to: > Maximise long term securityholder value > Leverage competitive advantage of the integrated model > Maximise the performance of each business line > Ensure financial strength of the balance sheet > Diversify availability of capital sources GROWING OUR FUNDS UNDER MANAGEMENT We have over $10bn in third-party capital under management with domestic and international partners, which is split between separately managed accounts, co-investments and joint ventures across all of our sectors (office, retail, build to rent, and residential). Key to our capital partnership strategy is the continued engagement with aligned capital partners to cater for future mutual growth ambitions, including through the delivery of our $30bn multi-sector development pipeline. As the business shifts its focus towards the next phase of growth, building on and expanding relationships with pension funds, sovereign wealth funds and other institutional real estate investors will provide us with access to deep pools of capital to execute our large-scale commercial and mixed used development pipeline. We are committed to taking a considered and collaborative approach to forming long-lasting relationships with aligned investors and partners. As we look to grow our funds under management further, we will put in a robust set of governance structures, including the management of conflicts of interest, to ensure we hold ourselves to the highest standards in carrying out our fiduciary duties for our direct and third-party capital partners alike. Through this, we will not only seek to preserve our position as a leading property manager, developer and investor, but to be recognised as a best-in-class fund manager, reinforcing the strength of our brand and reputation in the market. 18 – Celebrating 50 years Mirvac Group HOW WE CREATE VALUE PERFORMANCE BY PILLAR FINANCIAL AND OPERATIONAL RESULTS RISK MANAGEMENT GOVERNANCE FINANCIAL REPORT OTHER CAPITAL MANAGEMENT AND DISTRIBUTION POLICY Prudent capital management is part of our Framework and is critical to ensuring our balance sheet can both withstand market volatilities and capitalise on opportunities. To this end, we strive to maintain A3/A- credit ratings from Moody’s Investor Services and Fitch Ratings respectively, and to stay within our target gearing range of 20-30 per cent, giving us access to capital markets on attractive terms. We believe that maintaining a 60-80 per cent payout ratio of operating earnings strikes the right balance between delivering stable distributions to investors and reserving capital for future growth. CAPITAL ALLOCATION AND RETURNS We regularly update and review our cost of capital and adjust return hurdles to remain competitive in the market, while aiming to deliver excess returns. As part of managing the Group’s risk exposure, we have adopted a through-cycle active capital allocation of approximately 20 per cent. This achieves a balance between passive investments that provide steady income streams and active investments that add value through developments. Our detailed Financial and Operational Results for FY22 are outlined on pages 36 to 40. DIST R I B U T ION P O L I C Y 60-80% Payout Ratio A API T C L A LLOCA T I O N Passive ~80% Active ~20% Mirvac’s Portfolio Management Framework E N T RETU R M N S SE G Active/Passive L A M ANAGE M E N T APIT C 20-30% Gearing A-/A3 Credit Rating R OIC Segment Hurdles Annual Report 2022 – 19 PLACE ASSET CREATION AND CURATION As a leading Australian property group, we drive value for our securityholders through the places, precincts, and communities we deliver. This means leveraging our integrated and diversified capability to create new, high-quality assets, curating those assets (and the assets we manage on behalf of our partners) through customer experience and management, and progressing our substantial residential development pipeline. We are also one of very few property companies in Australia with the ability to manage and deliver large, complex, integrated mixed use projects that require high levels of stakeholder engagement, and even higher levels of expertise, across all facets of development. Our activities are focused in Australia’s key cities of Sydney, Melbourne, Canberra, Brisbane and Perth, with an overweight to Sydney and Melbourne. These two cities continue to be the economic powerhouses of Australia. THE VALUE OF OUR INTEGRATED MODEL As well as providing us with direct influence over a project’s lifecycle, our integrated model drives significant outcomes for our securityholders. The assets we create are owned and managed within our Integrated Investment Portfolio, delivering stable, recurring income to the Group. Our development earnings, both commercial and residential, are largely reinvested into the development pipeline, with our growing distribution funded by income from passive investments and property management. Our in-house asset creation capability: > delivers NTA uplift, development profit, management fees and new, high-quality recurring income to the Group; > reduces risk across supply chain, construction costs; and > allows us to incorporate customer feedback into front-end design, while driving sustainable outcomes from the beginning of a project’s lifecycle. Integrated Model Delivering Outperformance ASSET CREATION Development Development EBIT NTA Uplift Delivers new assets Funds distributions from recurring income and future developments ASSET CURATION Integrated investment portfolio New recurring high quality rental income Capital Partnerships drives asset & funds management fee income VALUE CREATED OVER THE PAST NINE YEARS 6.2% pa NTA GROWTH ~$120m NEW RECURRING ANNUAL INCOME ~$1.3bn CREATED VALUE $5.4bn 1 NEW ASSETS HOW THE INTEGRATED MODEL DELIVERS VALUE IN CONSTRUCTION Mirvac is one of a few tier-one builders in Australia, and we have a rich corporate memory across the team that has ensured the continual refinement of our processes and systems. As with many other aspects of our business, our integrated model offers a number of key benefits for our construction team. For example: > our integrated model provides us with considerably more pipeline visibility than other main contractors, allowing for critical procurement decisions to be made early in a project’s lifecycle; > we have experienced teams across each stage of delivery. Our cost planners, design managers and commercial teams are in constant dialogue, enabling us to more accurately forecast budgets for future projects; > the bulk of our pricing on live projects is market tested by competitive tendering. We carefully screen our subcontractors for their capability and financial capacity to perform, and we typically use fixed price subcontracts; and > we are nimble by nature. This means we can fast-track designs and align our procurement programs across multiple projects, which allows us to maximise bundle-priced contracts and leverage alliance deals that are in place. 1. Since 2013 and represents 100 per cent share. 20 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS PERFORMANCE BY PILLAR OUR INTEGRATED MODEL IN ACTION Heritage Lanes at 80 Ann Street in Brisbane was completed in April this year. This state-of-the-art 35-level asset offers more than 60,000 square metres of premium office space and was 98 per cent leased on completion, with our major tenant, Suncorp, committing to 66 per cent of the building for a 10-year term. A world-class workplace in every way, Heritage Lanes used a lower carbon concrete in its construction, has been designed to be all-electric in its operations, and is targeting the highest sustainability credentials. This includes the highest rating of the Green Building Council of Australia’s newly released rating tool, 5.5 star NABERS Energy and 4.5 star NABERS Water ratings, and a Platinum Core and Shell WELL Certification. Heritage Lanes is also at the forefront of smart building technology, with an integrated building platform delivering information from millions of data points throughout the building. This provides tenants of Heritage Lanes with control over many aspects of their office experience – such as lights, blinds, air-conditioning and security – through mobile apps and integrated AV systems. But as well as being an outstanding asset, the delivery of Heritage Lanes is a shining example of our integrated model in action. From the very beginning, we were able to respond to Suncorp’s design requirements easily because of our internal capability. “During the bid phase, we essentially redesigned a whole new building across a larger site because that’s what Suncorp wanted”, says Brett Draffen, Mirvac’s Chief Investment Officer and Head of Commercial and Mixed use. “And that was made easier because we had people from all across the business working on this and collaborating as we progressed.” Our integrated model also enabled greater coordination and collaboration between Suncorp, our co-owners, M&G Real Estate, and key trades during the development, which meant the project team was able to respond to design changes in real-time – a clear advantage over a traditional delivery model. This was aided by key stakeholders, including the architect, our co-owners, and our development and construction teams, having access to a 3D building information modelling, which resulted in a higher rate of clash detection and services co-ordination. And by leveraging our integrated model, we were able to deliver Heritage Lanes ahead of initial feasibilities, despite the numerous challenges presented by COVID-19 and global supply chain shortages. Now completed and forming a part of the Integrated Investment Portfolio, Heritage Lanes will deliver recurring income to the Group, with over $130m of value created for our securityholders. Our smartest, most sustainable building yet 6% YIELD ON COST 98% $867m 6 Star LEASED ON COMPLETION END VALUE GREEN STAR TARGET RATING Heritage Lanes, 80 Ann Street, Brisbane Annual Report 2022 – 21 GOVERNANCEFINANCIAL REPORTOTHERHOW WE CREATE VALUERISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS PLACE CONTINUED INTEGRATED INVESTMENT PORTFOLIO IIP comprises four businesses that deliver stable, recurring income to the Group: Office, Retail, Industrial and Build to Rent. We have approximately $13.5bn 1 of assets on our balance sheet across the portfolio, and $10.2bn of external assets and funds under management. The integration of the four sectors means we have a single view of our customers and scale, delivering a number of benefits and increased efficiencies to the Group, such as streamlined procurement, more diversified innovation, and resilience in investment. Through our decades of experience, we’re able to expertly curate the daily experiences of those who work in our office buildings and logistics assets, shop in our retail centres, or live in our build to rent apartments. Our unwavering focus on sustainability excellence, innovation, and on our occupants’ health and wellbeing also means we provide our tenants with modern spaces that serve to make the experience of urban life better. Our ability to leverage intelligent infrastructure and convert data into insights also helps us to continue to generate positive outcomes for our tenants, customers and our business. It allows us to run our buildings more seamlessly and efficiently and respond to our customers’ needs, which is becoming increasingly important as the way we live, work, shop and socialise evolves. At Heritage Lanes, for example, our major tenant, Suncorp, is tightly integrated with the building system so that data flows from the building to their own Workplace Management Platform. This allows them to manage and optimise their space while meeting their ESG targets. And as we continue to create physical assets and curate the experiences within and around those assets, we are increasingly blending in a digital experience that enhances the physical one. We’ve developed a Consumer Platform for our build to rent portfolio, for example, and through this, residents at LIV Indigo can download an app and book communal spaces (such as the media room), be notified of when parcels are delivered and then access the parcel room to collect them, and log issues with building management. We will continue to evolve the platform and roll it out across the LIV portfolio as it completes, as well as our other asset classes where appropriate. OFFICE Today’s workplace is designed to encourage connection, creativity, collaboration, and innovation. We are leading the work revolution through the creation of flexible and adaptable workplaces that have technology and sustainability embedded throughout. Our office portfolio, comprising 98 per cent Premium and A-grade assets, is primarily located in Sydney and Melbourne, which continue to be Australia’s economic powerhouses. Our young, modern, and high-quality portfolio that is future-fit has also benefitted from the bifurcation of tenant demand we have seen over the past two years, with assets like those in our portfolio continuing to attract higher occupancy, rents and valuations, and requiring lower capital expenditure. 97.3% OCCUPANCY 5.6 years WEIGHTED AVERAGE LEASE EXPIRY 5.00 WEIGHTED AVERAGE CAPITALISATION RATE 1. Includes investment properties under construction and assets classified as held for sale, and excludes AASB 16 lease liability gross up amounts. Aspect, Kemps Creek, Sydney | Artist's impression INDUSTRIAL Our industrial portfolio is 100 per cent weighted towards Sydney and located in the Western Sydney growth corridor, close to key transport infrastructure. As with our office portfolio, we focus on high-quality assets that provide our customers with flexibility, and through our close relationships with our tenants and our understanding of their business, we are able to develop facilities that allow them to fulfil their objectives and grow. RETAIL We own and manage a diverse portfolio of retail assets across Australia’s eastern seaboard, and each and every one offers a bespoke environment that reflects the core values and drivers of its community. While COVID-19 impacted foot traffic in our CBD centres and accelerated the trend towards online shopping, our retail centres continue to be a place for social connections and experiences. As we move to a new world of retail, we are focused on merging the physical and digital for our customers and partners to ensure a true omni-channel offering. BUILD TO RENT Mirvac has long championed build to rent in Australia, which gives renters flexibility, choice, and convenience. As both the builder and the landlord, we’re able to deliver a completely new property experience; one that’s designed to remove the downsides that typically come with renting. At our build to rent assets, our customers don’t have to pay a bond, have security of tenure, and are allowed to bring a pet and hang pictures on their walls. They’re also provided with high-quality amenity, communal spaces, and resident programs to help them connect with their neighbours. Our consistently strong customer survey results and leasing success at our operational asset, LIV Indigo, demonstrate the appeal of this growing asset class. 22 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS PERFORMANCE BY PILLAR COMMERCIAL & MIXED USE DEVELOPMENT One of our key competitive advantages is our ability to bring urban assets and precincts to life, and we focus on projects where we can leverage our combined skillset across different asset classes to deliver large-scale, city-shaping urban renewal projects. At Harbourside in Sydney, for example, we are revitalising a 34-year-old retail asset into a thriving mixed-use precinct that has been designed to bring people together. The proposed $1.8bn redevelopment is expected to deliver approximately 24,000 square metres of office space, 7,000 square metres of retail and 350 luxury apartments. As part of the project, we have also committed to delivering 10,000 square metres of public domain, including a proposed 3,500 square metre new neighbourhood park, as well as a widened waterfront promenade. At 55 Pitt Street, also in Sydney, we are transforming a B-grade asset into a 63,000 square metre commercial and retail asset, with sustainability and technology featured throughout. As well as demonstrating the strength our unique integrated and diversified capability, our ambition is for these projects to be enduring places recognised by all stakeholders, including our investors, government and the wider community. Our active commercial development pipeline has a total end value of $12.4bn and comprises large-scale urban renewal projects designed to support the growth and evolution of our cities. The majority of these projects have income in place or are held in capital efficient structures, providing optionality and future value. We focus on substantially de-risking our development pipeline through pre-leasing ahead of development completion. As at 30 June 2022, 42 per cent of our active development pipeline was pre-leased, which also provides us with visibility of future income. $591 REALISED DEVELOPMENT EBIT IN FY22 4.5% NTA UPLIFT ON FY21 REPRESENTING 12CPSS RESIDENTIAL For 50 years, Mirvac has delivered places of enduring value across Australia’s key cities of Sydney, Melbourne, Brisbane and Perth that our customers are proud to call home. We have over 25,350 lots under control across apartments and masterplanned communities, and a reputation for care and quality in everything we do. Our integrated model is key to our success, and enables us to deliver projects ranging from greenfield sites through to complex urban renewal projects and manage every aspect of development – from site acquisition to design, planning approvals, construction, marketing, and sales. We leverage our integrated capability to bring product to market when market conditions are favourable, and we have a track record of bringing releases forward to capture high demand. 2,523 SETTLEMENTS IN FY22 ~2,900 LOTS EXCHANGED Another advantage of our integrated offering is that we’re better placed to mitigate the impacts of supply chain disruption and rising costs, because we can strategically procure across our product lines, with good visibility of our forward pipeline. This will be important in an environment where supply chains are becoming disrupted and de-globalised, and where rising inflation continues to put pressure on the cost of materials. Our proven ability to restock our pipeline at the right time, in the right place, and for the right price is another key driver of our continued success. The active restocking of our masterplanned communities in FY18 and FY19, for instance, supported settlements in FY21, and will continue to support settlements over the next several years. Similarly, our focus on restocking in our apartments business over the past two years means we are well placed to capture demand from the return of immigration and the forecasted reduction in apartment supply in FY23 and FY24. Our track record of making the right decisions at the right time in the cycle, have benefited, and will continue to benefit, our earnings for many years to come. HOW WE MEASURE VALUE > IIP: Occupancy, WALE and WACR > Commercial & Mixed Use: Development EBIT and NTA uplift > Residential: Sales and settlements Olivine, Donnybrook, Victoria Annual Report 2022 – 23 GOVERNANCEFINANCIAL REPORTOTHERHOW WE CREATE VALUERISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS PEOPLE PEOPLE, CULTURE AND SAFETY People, culture and safety is one of the five pillars for creating value. By building a culture that is aligned to our values, inclusive and collaborative, we can continue to give Mirvac a competitive advantage, and inspire our people to deliver on our goals and urban strategy. Notwithstanding our engagement results, there is no doubt that we are in a more challenging labour market. There is fierce competition for talent (exacerbated by limited skilled migration), putting pressure on turnover and wages. We are proud of our culture, engagement, employment brand and employee value proposition, and we will remain sharply focused on maintaining and lifting these areas into FY23. PEOPLE AND CULTURE Our goal is to be the number one employer in the property sector, the place where people want to join, grow and belong. Flexibility continues to be a key part of this, and in the past 12 months we saw a rapid change in employee expectations around where and how we work. Along with employee surveys, we held 60 one-on-one employee interviews to gauge preferences around working in the office. The overarching response was that the office still has a role, but that employee expectations around flexibility and where they work from have shifted. In response to this shift, we formalised our approach to hybrid working with a set of flexible working principles. While our office- based people are expected to work from a Mirvac site or office each week, we haven’t prescribed a minimum amount of time. Instead, we believe in empowering our people and teams to agree on an approach that works for our customers, teams, and the individual. Taking care of our people throughout extended lockdowns was another key theme in FY22, and every permanent full-time employee received five ‘Thank You Days’ of paid leave in recognition of their continued hard work and perseverance during a challenging time. DIVERSITY AND INCLUSION Our long-standing focus on diversity and inclusion contributed to achieving 44 per cent of women in senior management, along with a zero pay gap for like-for-like roles for the past six years. While we maintained our well-recognised focus on gender equity in FY22, we also began to broaden our diversity focus at Mirvac. During the financial year, we finalised a new Belonging strategy that continues to build an inclusive culture – one in which differences are embraced and celebrated, and where everyone feels that they belong. As part of this, we will continue to expand on initiatives that focus on LGBTQ+ people, women in construction, First Nations Australians, those with caring responsibilities (in addition to young families), and non-nuclear families (such as SINKs, DINKs, and empty nesters). LEADERSHIP We believe the quality of leadership at every level is fundamental to fostering an engaging and positive culture across Mirvac. Through FY22, we continued to focus on creating the best leaders, supported by training and development on our ‘Big Five’ leadership framework. As part of our Belonging strategy, we are also growing our leaders’ capabilities to build inclusive environments through a new Inclusive Leadership Program. The program trains leaders on nine themes of inclusion: mental agility, personal awareness, conviction and drive, cognitive humility, psychological safety, transparency, diverse connections and courage. In a competitive recruitment market, we are also investing in establishing a deeper, wider pool of talent to create our next generation of asset creators and asset curators. At Mirvac, we know it’s not enough to say that we value our people – we need to demonstrate it too. During the financial year, many of our employees continued to be impacted by government-mandated lockdowns and restrictions. While we’d already learnt to stay connected and productive when working remotely, the isolation and uncertainty of the past financial year took its toll, particularly in terms of mental health and pandemic fatigue. Fortunately, our embedded flexibility and focus on health and safety, diversity and inclusion, innovation and gender equity ensured we remained an employer of choice in our sector. This year, we were thrilled to win the top spot in the 2022 AFR BOSS Best Places to Work list for the Property, Construction and Transport sector, and to be ranked number one employer in the world for gender equality by Equileap. Having refreshed our Flexibility Charter last year, FY22 saw us further refine our approach to hybrid working, as those based in our head offices gradually returned to the workplace. Our purpose to Reimagine Urban Life was put to the test, as we reconsidered the role of the office and invested in activations to help our people reconnect safely in a physical space. Our focus on mental health increased, and we strengthened and expanded our Employee Assistance Program with the adoption of a new support service called Sonder. We completed a thorough review of our safety approach, with a view to progressing towards an increased emphasis on major hazards and psychological health and safety. And while our Employee Engagement Survey was held in the midst of lockdowns last year, the results showed that our people still felt that Mirvac was a great place to work, with 93 per cent of employees saying they were proud to work for Mirvac, 92 per cent happy to recommend Mirvac as a great place to work, and 96 per cent confident that Mirvac is committed to the safety of employees. 24 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS PERFORMANCE BY PILLAR OUR WORKFORCE AT A GLANCE HEADCOUNT 1,550 GENDER SPLIT 45:55 RETENTION OF KEY TALENT 96% BOARD REPRESENTATION 44% WOMEN IN SENIOR MANAGEMENT 44% WA 50 54:46 EMPLOYMENT BY REGION & GENDER QLD 161 39:61 ACT 7 57:43 NSW 1,053 46:54 VIC 279 42:58 PAID PARENTAL LEAVE POLICY for the primary carer 20 weeks 4 weeks for the non-primary carer INDUSTRY LEADING DOMESTIC VIOLENCE & FAMILY LEAVE POLICY Uncapped paid leave for permanent employees Annual Report 2022 – 25 GOVERNANCEFINANCIAL REPORTOTHERHOW WE CREATE VALUERISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS PEOPLE CONTINUED INNOVATION Our innovation program, Hatch by Mirvac, was launched in 2014 and has seen us experiment with over 50 ideas aimed at adding value to our business in an ever-changing world. These have included award-winning initiatives such as Cultivate, where we transformed a basement carpark into an urban farm, as well as Build AI, a digital platform that uses real-time data to enhance safety, quality assurance, and other project outcomes. By identifying market trends and changing customer needs, we strive to anticipate and make the most of the challenges and opportunities that lie over the horizon. This year, our in-house innovation team, Hatch by Mirvac, continued to partner across the business to reimagine urban life in new ways. BOARD OF INNOVATORS During the financial year, Hatch by Mirvac introduced a Board of Innovators: a diverse group of 25 innovation ambassadors drawn from all parts of the business. The Board of Innovators is responsible for analysing key trends and inflection points that could impact our business, assessing their potential impact through a robust disruption framework, and identifying pathways to seize significant opportunities. This forum also provides us with a single view of our innovation pipeline and a platform from which to proactively monitor inflection points. YOUNG HEARTS BY MIRVAC In FY22, we partnered with our Residential team to explore how we could reimagine the living experience for young Australians with a disability, so they can live comfortable, autonomous, and enriching lives within our communities. Young Hearts by Mirvac is an initiative through which we seek to leverage our integrated model to deliver innovative and leading-edge specialist disability accommodation, providing a more diversified product offering within our existing communities. While still in a pilot phase, the initiative is aimed at improving the lives of people with a disability by providing independent living options that meet their life goals. In 2021, Mirvac came fourth in the property and construction category of the AFR Boss Most Innovative Companies list, making it the only company to be in the top five in the Property, Construction, Transport category for the past three years. 26 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS PERFORMANCE BY PILLAR SAFETY AND WELLBEING Health, Safety and Environment (HSE) is central to our business, and through an increased focus on major hazards and psychological health and safety, we can continue to take care of our people and stakeholders, and deliver on our strategy and commitments. In FY22, we maintained our high standards of health and safety across the business, stepped up our activities in several key areas, and considered how to improve our approach moving forward. We also launched a comprehensive Wellbeing and Mental Health strategy in FY22 in response to the growing risks relating to mental health. GREATER MENTAL HEALTH SUPPORT As part of our Wellbeing and Mental Health strategy, and as we faced a second year of COVID-19 lockdowns and restrictions, we recognised the rising mental health and social risks posed by the pandemic, particularly for younger employees. This led us to overhaul our existing Employee Assistance Program (EAP) and bring Sonder on board as our new provider. Through Sonder, our people can access 24-hour support from a network of trained safety, health and wellbeing specialists, all year round. Sonder also gives people the option to engage via phone, video call, or text, catering to all communication preferences. In addition, Sonder provides access to a range of wellbeing resources and self-help tools and offers employees real-time information on safety, security threats, or emerging scenarios, in their immediate vicinity. HSE STATISTICS IN FY22 INDICATOR We also accredited 70 employees as Mental Health First Aiders to establish a support network of people equipped to provide immediate assistance to someone in need of help. When it came to the physical impacts of COVID-19, we continued to exercise caution even when government restrictions lifted, maintaining CO� monitoring in our offices, and ensuring our Incident Management team met weekly to stay abreast of events. As well as 96 per cent of employees saying that they believe Mirvac is committed to the safety of its employees, 88 per cent agreed that their manager genuinely cares about their wellbeing (November 2021 Employee Engagement Survey). ADDRESSING SAFETY AT EVERY STAGE OF OUR BUSINESS LIFECYCLE Our approach to safety continues to be guided by our Mirvac Minimum Requirements (MMRs): a non-negotiable set of standards that either adhere to or exceed legislative standards. These requirements apply to all our employees, contractors, and sub-contractors, and they are carefully administered, governed, monitored and updated. As we continue to take on larger and more complex projects, our approach to health and safety will adapt accordingly. In light of this, we engaged an independent consultant in FY22 to assess how the increasing complexity could impact our ability to manage both our known and unknown major hazards. Looking ahead, we will work to evolve our MMRs and embed them further within the operating lifecycle of our business. This whole-of-lifecycle approach will see HSE being further embedded in every key stage of a project, from investment, to design and visioning, construction and operations, with all of our people encouraged to actively enquire and show curiosity when it comes to safety at work. Building on the work we began last financial year, we will also place an even greater emphasis on psychological health and safety at work, and in particular, focus on work-related psychosocial hazards. Left unmanaged, these risks can significantly impact a person’s overall wellbeing. HOW WE MEASURE VALUE: > Employee engagement / talent retention > LTIFR, CIFR > % of women in senior management HSE LEADER ACTIONS HOURS WORKED LTIFR TIMELY REPORTING WORKERS’ COMPENSATION CLAIM COUNT TRAINING FATALITIES CIFR FY20 FY21 FY22 178% 222% 214% TARGET 9,126,799 2.08 19hrs 6,782,607 3.24 22hrs 6,794,321 25hrs 13 10 6 97.0% 96.0% 97.2% 1.18 <2 100% N/A <24hrs N/A 100% 0 0 0 0 0.63 1.50 0.74 <1.5 Our HSE management systems within construction continued to be certified to ISO 14001, OHSAS 18001, and AS/NZS 4801. Limited assurance has been provided by PricewaterhouseCoopers. Data sets that have been assured are marked with a visit mirvac.com/sustainability. . For further information Annual Report 2022 – 27 GOVERNANCEFINANCIAL REPORTOTHERHOW WE CREATE VALUERISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS PARTNERS CUSTOMERS AND STAKEHOLDERS In order to properly Reimagine Urban Life, we need to ensure that we take our stakeholders perspectives into account. This includes our customers, our communities, and all levels of government. Alongside this, we recognise that the environment we’re operating in is becoming more complex, and that the requirements of those who lease our assets, rent in our build to rent communities, or purchase one of our homes are constantly changing. We’re committed to continuously learning and understanding what the changing wants and needs are of all our stakeholders, and how we can improve our products, services and experiences across all asset classes. Meanwhile, we will continue to focus on being open and transparent with all of our key stakeholders in order to build strong relationships, as well as striving to be a trusted partner. ENGAGING WITH OUR CUSTOMERS We have a wide and diverse range of customers across our business, from our office, retail and industrial tenants to our build to rent and residential customers. LEVERAGING TECHNOLOGY TO DRIVE INSIGHTS The foundation of good customer experience is knowing our customers – their needs, motivations, and aspirations. It’s also important to understand their pain points or what it is that we can improve on, so we can deliver solutions that make their experience with us easier. By connecting a wide range of data sources, we’re able to drive continuous improvements throughout the customer journey, deliver more personalised experiences at scale, make better, data-driven decisions, and create new products, services and revenue streams that leverage our data. In our build to rent business, our Consumer Platform allows us to gather feedback from our customers to get a better understanding of how they utilise their space, and, as we begin to roll it out across the rest of the organisation, will allow us to share our insights across teams. ADAPTING AND DISRUPTING The landscape across all of our sectors is changing, and to continue to deliver value to our customers, we need to anticipate their future needs and create changes to remain relevant. In response to the trend towards hybrid working, for example, which accelerated as a result of COVID-19, our IIP team launched the Adaptive Workspace during the financial year. This year-long pilot is aimed at helping us to reimagine the office for our customers as we navigate a new era of work. Comprising a mix of collaborative spaces and quiet zones for focused work, the Adaptive Workspace is hyper-flexible and can be changed depending on the type of work being undertaken. Within our residential business, our integrated development, design and construction capability has allowed us to nimbly adapt to our customers’ increasing need for home offices, multipurpose rooms and larger kitchens, and where there has been opportunity, we’ve also adapted our apartment projects to introduce shared co-working spaces and wellness facilities. 28 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS PERFORMANCE BY PILLAR MERGING PHYSICAL AND DIGITAL EXPERIENCES Our customers move fluidly between the physical and digital realms as they navigate life and work, and they expect their experiences to be frictionless and accessible across all channels. The demand for digital connectivity, omnichannel engagement, new services, amenity, and the vibrant activation of our places has already challenged us to embrace new capabilities and operating models. Within our retail business, for example, we have introduced WeShow, an Australian-first rapid delivery concept that provides online brands with a physical retail space that enables them to connect with their audience and attract new customers. The customisable, modular store design means that there is no expensive store fit-out, long lease or fixed rent. Retailers are also provided access to sales insights, and are supported by a team of retail experts, including store designers, visual merchandisers, marketing specialists and legal. During FY22, we hosted eight retailers in our WeShow space across four of our centres, and the feedback has been overwhelmingly positive to date. We’ve also continued to adopt digital technologies to allow our customers to research and explore our apartment and masterplanned communities projects online, while increasingly sophisticated 3D imaging has enhanced the customer experience in our display galleries, enabling greater visualisation of off-the-plan properties. MEASURING OUR CUSTOMER IMPACT Within our Integrated Investment Portfolio, we use Net Promoter Score (NPS) to measure customer experience at key moments of the customer journey and periodically for ongoing customer relationships. In the first half of FY22, we saw NPS slightly decline in each asset class as a result of the impacts of COVID-19, most notably in Build to Rent. These improved, however, as restrictions were lifted and the experiences we were able to deliver to our customers resumed. Another outcome of our customer focus is ongoing customer loyalty. We have a history or attracting high levels of repeat purchasers at our residential projects, a testament to the care and quality we provide. And in IIP, we have had significant tenures with a number of our customers. At Riverside Quay, our tenant, Nugents, has been with us for over 26 years, while IAG has been with us at 189 Grey Street for 17 years, and UGL has been with us at 40 Miller Street for nine years, and have just signed their third lease term. HOW WE MEASURE VALUE: > Net promoter scores > Customer satisfaction +40 OFFICE NET PROMOTER SCORE (NPS) +56 RETAIL CONSUMER NPS N/A1 INDUSTRIAL +24 BUILD TO RENT RESIDENT NPS 8.9/10 RESIDENTIAL CUSTOMER SATISFACTION 1. Due to an insufficient sample size. Annual Report 2022 – 29 GOVERNANCEFINANCIAL REPORTOTHERHOW WE CREATE VALUERISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS PARTNERS CONTINUED ENGAGING WITH OUR STAKEHOLDERS Over the past 50 years, Mirvac has built a reputation as a trusted developer, owner and manager, and partner of choice. We recognise the importance of maintaining strong, healthy relationships with our stakeholders and the communities in which we operate, and we strive to understand their diverse and changing needs in order to develop communities with an enduring legacy. This is because we understand that mutually-beneficial relationships help us look at complex problems from different angles and deliver maximum value where it matters most. We focus on being open and transparent to generate positive outcomes and know that we are most successful when our project teams take ownership to create genuine relationships; however, we recognise our approach across the business is not always consistent and can be introduced too late in the process. As we look to deliver the largest development pipeline in our history, in an increasingly complex environment, ensuring we maintain and extend our licence to operate will be more important than ever. In light of this, we developed an integrated stakeholder engagement framework during the financial year that sets out the vision, principles and tools to guide our interactions with our stakeholders. Anchored by an overarching ambition to foster relationships built on respect, trust, and doing what we say we will, its purpose is to: > set a consistent, One Mirvac approach, with key principles for engagement across all our projects; > encourage strong, healthy relationships with our stakeholders and the communities in which we operate; > allows us to actively monitor issues and maximise opportunities; > facilitate shared learnings from our previous experiences; and > help us to develop the capability of our people to create a stakeholder-centric culture. OUR APPROACH TO STAKEHOLDER ENGAGEMENT REFLECTS OUR DIVERSE BUSINESS AND ENCOURAGES REGULAR DIALOGUE WITH: > governments, agencies, and regulators at all levels; > our securityholders and the investment community; > local and national media outlets; > residents, tenants, and customers; > community groups, community partners, and the local communities in which we operate or have plans to do business with; > capital and development partners; > industry; and > our employees. GOVERNMENT We take pride in having a high level of engagement with all tiers of government. We strive to be a trusted partner of governments by coordinating this engagement across the organisation. We do not make donations to politicians or political parties at any level of government. Federal, state and local governments set the regulatory environment in which we operate. We maintain a bipartisan approach and actively engage with all levels of government about policy decisions in general and those that affect our properties and projects. During the financial year, we enhanced our internal government relations and stakeholder engagement structures. This included the introduction of state-based government engagement and advocacy plans to guide our engagement with key stakeholders. These plans ensure coordinated, cross-business policy and project advocacy and ensure consistency in our approach to government engagement. INDUSTRY We are a member of a number of industry groups and participate in advocacy on issues affecting our industry, as well as those that may affect our properties. We have representatives on a number of national and divisional committees, join briefings and conferences, and attend professional development courses. In FY22, we focused on a more coordinated approach to our industry engagement. Recognising the importance of the multitude of macro issues affecting the communities in which we operate, this year we also expanded our membership beyond the property industry groups to business groups, ESG-focused organisations, and think-tanks. 30 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS PERFORMANCE BY PILLAR COMMUNITY ENGAGEMENT AT HENLEY BROOK, WA One of the first things we do when planning a future masterplanned communities project is to identify the existing and future connections the area has to its community through focused community engagement. Creating a positive community legacy is at the core of our purpose to Reimagine Urban Life, and this early due diligence makes a significant difference to the finished product. With a focus on respectful development, our team at Henley Brook in Western Australia took a thoughtful approach to engaging with the Traditional Custodians, the Whadjuk-Noongar people, on whose land the project is located. Guiding the team were three key objectives: to garner an understanding of the cultural heritage of the site and surrounding areas; foster a meaningful relationship with the Traditional Custodians; and to actively listen to see how the project team could achieve a culturally safe and respectful development at Henley Brook. The engagement process started with a workshop, which gave our team the opportunity to listen to the stories and knowledge of the Traditional Custodians. Their accounts of Elders past and present allowed for a deeper understanding of the local landscape and the abundance of natural resources in the area. In May this year, we launched the first open space within the development – Wongin Park – which features an Acknowledgement of Country, along with an art display developed in collaboration with a local primary school, Moorditj Noongar Community College. This was just one of the many ideas that stemmed from the initial engagement workshop. The community engagement at Henley Brook is a leading example of how we build trusted relationships with our important stakeholder groups. It also embodies our Reconciliation Action Plan principle of Respectful Development, which ensures we work to find ways to reflect the local history in our projects. Annual Report 2022 – 31 GOVERNANCEFINANCIAL REPORTOTHERHOW WE CREATE VALUERISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS PLANET SUSTAINABILITY Mirvac is one of Australia’s most sustainable companies, and the aim of our This Changes Everything sustainability strategy is to be a force for good. This Changes Everything sets out the way we approach our ESG risks and opportunities so that we can continue to deliver positive outcomes for our people, the planet, our partners and customers, and the communities in which we operate. > Social inclusion: the launch of our second Reconciliation Action Plan, which focuses on how we can contribute to reconciliation in Australia, as well as our National Community Day, which saw 750 employees volunteer on 44 community projects across Australia. These outcomes are planet and people positive, and they are also driving commercial value for our business. We have conducted a study into the value of our energy efficiency efforts, which showed that having 75 per cent of our office assets rated 5 star NABERS Energy or above in our portfolio delivers 1 $2.4m in annual cost savings, and $43m in valuation uplifts, from an average spend maintenance capital expenditure below 0.5 per cent of asset value. OUR PERFORMANCE IN FY22 ENVIRONMENT We have one of Australia’s greenest office portfolios, with 18 office assets that have a 5 Star NABERS Energy rating or higher, operating assets that are on 100 per cent renewable energy, and high waste diversion rates across construction and operations. We don’t just set ambitious targets in carbon emissions, waste, and water, we also publish transparent plans with clear timelines around how we’ll reach these goals. This year, we completed implementation on the first of these plans, Planet Positive – Carbon, and met our goal to be net positive in scope 1 and 2 carbon emissions nine years ahead of our 2030 target. This constituted our most significant environmental achievement. The framework for our waste strategy was formed through our second plan, Planet Positive – Waste and Materials, which highlighted the importance of the circular economy waste model. We focus on what matters most to us and our stakeholders, and we strive to embed the practice of doing the right thing in our culture. Our people are a big part of our success in sustainability, and they feel the authenticity of our sustainability approach is an important factor in their engagement. The second iteration of our strategy focused on three areas – reimagining resources, enriching communities, and transparent governance. As a result of our choice to do fewer things better, we have made significant progress and achieved some of our key targets well ahead of schedule. OUR KEY ACHIEVEMENTS In the past financial year, we have delivered: > Carbon emissions: net positive in scope 1 and 2 emissions, nine years ahead of our 2030 target. > Water: released Planet Positive – Water, our plan to be net positive in water well ahead of our 2030 target. > Waste: our goal is to send zero waste to landfill by 2030. Key to moving towards this target is making improvements upstream in our process to avoid the waste in the first place. We are recycling 94 per cent of construction waste. In operations, our office and retail portfolios have increased waste diversion from 34 per cent in FY13 to 68 per cent in FY22. > Social procurement: $14m spent with Indigenous businesses, social enterprises, B-Corps, and charities, bringing our total since FY18 to $42m. This means we have met our goal of spending $30m by 2025, three years early. > Community investment: independently verified contribution of $9.6m to deliver initiatives that bring people together, such as social infrastructure and events - not just within our assets, but within the broader community. A standout circularity pilot was conducted during the financial year at our development site, 55 Pitt Street in Sydney, where we took approximately 900 cubic metres of furniture and fit-out materials, and diverted it from landfill. This initiative extended the life of more than 1,740 items from the site – worth an estimated $174,000 – which were either relocated, reused, or recycled by local charities, businesses, and homes. We are on track to procuring 25 per cent recycled content (concrete and steel) and to halving development waste. Since 2013, we’ve been looking at how we can use methods of Design for Manufacture and Assembly (DFMA) across our projects, which as well as helping us to reduce waste, delivers reduced program schedules, less management of trades onsite, and fewer safety risks. Most recently, 26 homes were constructed using DFMA at Woodlea in Rockbank, Victoria and in 2022, 45 homes at Georges Cove, Moorebank in Sydney. And in March this year, we released the third in our series of environmental plans, Planet Positive – Water, which sets out how we will reduce and reuse water, as well as influence consumption behaviour, to achieve net positive water ahead of our 2030 target. The plan is focused on three areas: 1. Efficiency – improving water efficiency at our assets (where we have operational control), using the recognised NABERS Water ratings. 2. Offsets – using captured and recycled water at our masterplanned communities projects where we can reduce drinking water demand. 3. Influence – leveraging our materials and electricity procurement volumes and choices to help achieve even more significant water savings. 1. Annual saving and valuation uplift based on office assets under operational management. Office assets with 5 star NABERS Energy or above and average spend maintenance capital expenditure, based on Mirvac’s ownership. Further details can be found in “Our Methodology” section of our report, Building Climate Resilience. 32 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS PERFORMANCE BY PILLAR ENERGY, GHG, WATER, WASTE Emissions tC02e Scope 1 Natural gas Refrigerants Diesel Petrol LPG Total Scope 1 Scope 2 (market-based) 1 Electricity Total scope 2 Total scope 1+2 Voluntary carbon offsets Net scope 1 + 2 2 Renewable electricity % Potable water usage Retail Office & Industrial Build to rent Total (kL) Total waste Construction Investment Total Construction Investment FY13 FY20 FY21 FY22 2,697 1,383 2,333 646 7 7,066 4,422 1,827 1,017 112 79 7,457 4,430 1,083 701 97 31 6,342 5,028 1,311 677 87 21 7,125 FY22 Source data 97,573GJ 858kg 250,013L 37,700L 13,380L 44,532 44,532 51,989 — 51,989 12,660 12,660 19,002 — 19,002 0 86,289,241 kWh 0 7,125 7,225 -100 45% 84% 100% 492,216 349,597 468,170 406,320 295,338 436,614 337,166 291,049 22,609 701,658 650,824 841,813 904,784 35,565 12,833 48,398 14,387 23,939 38,326 8,780 20,230 29,010 7,667 17,647 25,314 94% Recycled 68% Recycled 6% Landfill 32% Landfill 1. We began reporting market-based electricity in FY19. Location-based scope 2 and scope 3 emissions are included in the ESG Analyst Toolkit. 2. This means we now offset 100 more tonnes of scope 1 and scope 2 carbon emissions than we emit, meeting our Net Positive Carbon by 2030 target. MIRVAC’S CLIMATE-RELATED RISKS AND OPPORTUNITIES This year, we released our fourth climate resilience report which details the ways in which we are addressing our climate-related risks and opportunities, in line with the requirements set out by the Taskforce for Climate-related Financial Disclosures. This report provides a clear and transparent update on the progress that we have achieved to date, our plans moving forward, as well as an outline of the physical and transition risks and opportunities we face. The full report can be downloaded here: www.mirvac.com/sustainability BUILDING CLIMATE RESILIENCE MIRVAC’S APPROACH TO MANAGING ITS CLIMATE-RELATED RISKS AND OPPORTUNITIES Annual Report 2022 – 33 GOVERNANCEFINANCIAL REPORTOTHERHOW WE CREATE VALUERISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS PLANET CONTINUED SOCIAL We have a longstanding commitment to measuring our social impact. This includes our voluntary spend on community engagement, community investment, social procurement, community partnerships, and advocacy. We know that delivering upfront amenity at our assets supports vibrant and thriving communities, and we aim to give back through our annual National Community Day – which ran again in FY22 for the seventh time – and by helping those who are more vulnerable in the communities in which we operate. We are proud to provide unlimited, fully-paid volunteer leave for all employees, and with recent natural disasters, such as bushfires and floods, our people have stepped up to lend a hand. Together with a corporate donation, and a commitment to quadruple our employee donations, we contributed $115,000 via GIVIT to support people impacted by the 2022 floods. Since 2018, we have spent $42m in social procurement, exceeding our target to spend $30m by 2025, and putting us well on our way to achieving our goal of directing $100m to the social sector by 2030. This year alone, we spent $14m in social procurement, which includes buying from social enterprises, Indigenous businesses, B-Corps, and charities. In doing so, we are helping to change lives, and with $9.6m spent in verified community investment in FY22, we have been recognised as the number one best workplace to give back by GoodCompany. Our second Reconciliation Action Plan, which was launched in July last year, provides a framework through which we are working to meaningfully embed reconciliation in the way we do business. As land developers, we have a special opportunity to listen to and recognise First Nations Australians as part of how we build upon the rich histories of the communities in which we work. FY22 ENRICHING COMMUNITIES In FY22, in line with the Modern Slavery Act 2018, we released our second Modern Slavery Statement that looks at our exposure to one of the worst forms of human rights violations, modern slavery, and where it may be present in our operations and our supply chains. We remain focused on establishing effective governance structures and building our capability to address this important issue. We are proud of the progressive human rights policies we have in place, including our gender equality focus and our inclusion and diversity policies, and in 2021 we published our first Human Rights Commitment. $9,620,691 OF COMMUNITY INVESTMENT (including $397,260 of management costs) $7,986,582 CASH DONATIONS $1,038,139 VALUE OF HOURS OF SUPPORT $198,710 IN-KIND CONTRIBUTIONS $646,620 LEVERAGE CONTRIBUTIONS 34 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS PERFORMANCE BY PILLAR Artist's impression | The Langlee, Sydney GOVERNANCE We recognise the important role we play in making good investment choices, buying better materials and being diligent about the integrity of our supply chain. We’re forming partnerships with values-aligned organisations and leveraging our good track record to attract both capital and debt. ESG choices are embedded in our key investment decisions, monitored regularly by several senior oversight groups, and the whole company is held to account on the basis that we’re delivering on our ESG promises. We have maintained excellent ESG disclosures and performance, including an AAA rating from MSCI, an Advanced rating from the United Nations Global Compact, and a Negligible risk rating from Sustainalytics. We align our targets with the following United Nations Sustainable Development Goals (UNSDG): WHAT’S NEXT? Having reached our goal to be net positive in scope 1 and 2 carbon emissions, as well as our target to triple community investment, both ahead of schedule, we’ve now taken the opportunity to refresh our ESG strategy and consider where the next set of targets will lead. After undertaking extensive consultation, both across our business and externally, we identified several ways in which we think we can continue to ‘change everything.’ This third iteration of This Changes Everything brings together our obsession with regenerative cities with the needs of our stakeholders and the capability of our people to focus on our planet, our communities, and our shared values. The next stage of our strategy will include a sharp focus on scope 3 emissions with a view to collaborating with suppliers and customers to accelerate emissions reduction, as well as a significant step up in our community activities. We anticipate sharing more information about these later in 2022. We also continue to work on other climate- related activities, such as further strengthening our strategic resilience to the future impacts of climate change through the implementation of the TCFD Framework, and through our in-house minimum design guidelines. In addition, we are significantly stepping up our social performance with a commitment to create a strong sense of belonging in our communities. We look forward to sharing our progress and impact of this work with our securityholders through a refreshed social performance scorecard in FY23. HOW WE MEASURE VALUE: > Water, waste and emissions performance > MSCI and Sustainalytics ratings > Social procurement spend > Community investment delivered This year, we were proud to join 22 of Australia’s largest companies in signing up to the new Corporate Emissions Reduction Transparency (CERT) reporting pilot, administered by the Clean Energy Regulator, making it easier to compare carbon and renewable energy targets. Annual Report 2022 – 35 GOVERNANCEFINANCIAL REPORTOTHERHOW WE CREATE VALUERISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS FY22 FINANCIAL AND OPERATIONAL RESULTS The financial year 2022 (FY22) began under COVID-19-induced lockdowns (particularly in Sydney and Melbourne), which caused significant disruptions to operations across our business, largely concentrated to our CBD-based office and retail assets. This was followed by extreme wet weather along the eastern seaboard during the second half of the financial year, which impacted project delivery and led to the flooding of Toombul Shopping Centre in Brisbane. In a macro context, global geopolitical instability had (and continues to have) a systemic impact on supply chains and energy costs, leading to accelerated inflation and central banks rapidly tightening monetary policies. Despite these headwinds, we delivered a strong set of financial results in FY22. Our operating profit increased by 8 per cent to $596m. This translated into earnings of 15.1 cents per stabled security (cpss), which is in line with our market guidance of at least 15.0 cpss. Key drivers of our operational result were: > growth in the Integrated Investment Portfolio NOI from newly completed office developments, including Locomotive Workshop, South Eveleigh, Sydney, combined with a lower COVID-19 impact; > lost NOI due to the disposal of non-core assets, including 340 Adelaide Street, Brisbane in FY21, and Cherrybrook Village, Tramsheds and Quay West Carpark (all in Sydney); > development profit contribution from the delivery of Locomotive Workshop, South Eveleigh, Sydney and Heritage Lanes, Brisbane; and > residential settlements of 2,523 lots, which was in line with market guidance. Statutory profit for the financial year was $906m, a $5m increase on FY21. This was supported by asset revaluations within our office, industrial and retail portfolios of $305m, offset by a $216m write-down of Toombul Shopping Centre. Investment EBIT Development EBIT Segment EBIT Unallocated overheads Group operating EBIT Operating profit after tax Development revaluation gain Investment property revaluation Other non-operating items Statutory profit attributable to stapled securityholder KEY PERFORMANCE METRICS EPS (cpss) DPS (cpss) Net tangible assets ($ per stapled security) CASH FLOW The Group’s operating cash flow in FY22 of $896m was up $261m (or 41 per cent) on FY21, driven by an increase in cash receipts from Commercial & Mixed Use for Locomotive Workshop, South Eveleigh in Sydney and 80 Ann Street, Brisbane, as well as Residential development projects, including receipts predominantly from Victorian MPC and apartments. Investing cash outflows decreased by $73m to $436m, driven by proceeds from the sale of Cherrybrook Shopping Village, Tramsheds, and Quay West Carpark, all in Sydney, together with the proceeds from the sale of the Tucker Box hotel portfolio. FY22 $m 570 285 855 (82) 773 596 70 305 (65) 906 15.1 10.2 2.79 FY21 $m 576 201 777 (73) 704 550 121 274 (44) 901 14.0 9.9 2.67 MOVEMENT $m (6) 84 78 (9) 69 46 (51) 31 (21) 5 1.1 0.3 0.12 This was offset by payments for investment properties under construction, including Aspect, Kemps Creek and 55 Pitt Street in Sydney, Flinders West Office and LIV Aston in Melbourne, and 80 Ann Street in Brisbane, along with development contributions for Switchyard Industrial Estate, Auburn in Sydney. Financing cash outflows were $19m, resulting in a $314m lower net cash outflow compared to FY21, driven by a lower repayment of borrowings. This was offset by higher distributions paid to securityholders during the period. 1. These statements are future looking and based on our reasonable assumptions at the time they were made. They include possible outlooks for our operating environments, but are subject to external factors outside of Mirvac’s control. 36 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS CAPITAL MANAGEMENT Our approach to capital management in FY22 ensured we maintained ample liquidity and financial flexibility to manage the continuing impacts of COVID-19. Our capital position remains strong, despite the volatility in markets, and we are continuing to deploy capital to advance our record development pipeline for the benefit of securityholders. Key outcomes of our capital management focus in FY22 included: > a well-diversified maturity profile, which has delivered a weighted average debt maturity of 5.6 years, with only $220m of debt facilities due for repayment in the next 12 months; > A- and A3 credit ratings with stable outlooks from Fitch Ratings and Moody’s Investor Services maintained; > $1.4bn of cash and undrawn debt facilities at 30 June 2022; and > gearing at the lower end of our target range of 20-30 per cent. THIRD-PARTY CAPITAL During the financial year, third-party capital was introduced to new co-investments in stabilised assets, fund-through structures with development delivery on completion, and full shared development risk. The acquisition by M&G Real Estate (M&G) of a 49.9 per cent interest of 200 George Street, Sydney and the finalisation of M&G’s acquisition of Investa Commercial Property Fund’s 25 per cent interest in 400 George Street, Sydney facilitated the appointment of Mirvac as trustee, investment and property manager of significant investments. We also entered into an investment management agreement with leading domestic superannuation fund Australian Retirement Trust, commencing management of the $0.8bn direct property portfolio. Post 30 June 2022, Mirvac secured management rights to the AMP Capital Wholesale Office Fund. The portfolio comprises 11 Prime grade assets concentrated to Sydney and Melbourne. It is expected that we will become trustee by mid-October this year. As a result of the transaction, our third-party capital under management will grow by approximately 75 per cent to approximately $17.9bn. FINANCIAL AND OPERATIONAL RESULTS Gearing (%) 1 Liquidity ($m) Weighted average debt maturity (years) Net debt ($m) Average borrowing rate (% per annum) 2 Credit rating Fitch Ratings and Moody’s Investor Services DRAWN DEBT MATURITIES AS AT 30 JUNE 2022 FY22 21.3 1,368 5.6 3,532 3.9 A-/A3 FY21 MOVEMENT 22.8 867 6.6 3,582 3.4 A-/A3 (1.5) 501 (1.0) (50) 0.5 — 800 600 400 200 0 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35 FY36 FY37 FY38 FY39 FY40 FY41 FY42 Bank MTN USPP EMTN In the residential business, we entered into a Joint Venture with Supalai Australia Holdings Pty Ltd (Supalai) for the Smiths Lane Project in Melbourne. The Smiths Lane Joint Venture comprises over 2,100 lots and includes parks, public open spaces, and community facilities. Supalai is the Australian arm of Supalai Public Company Limited, a leading Thai real estate development company listed on the Thai Stock Exchange. Interest and support for our asset creation activities remains positive. This includes the next wave of the commercial and mixed use development pipeline opportunities at 7 Spencer Street, Melbourne, 200 Turbot Street, Brisbane, and 55 Pitt Street, Sydney, allowing considerable opportunities for growth in capital partnership activity. GROUP OUTLOOK 1 As we learn to live with COVID-19, uncertainty in macroeconomic and geopolitical environments continue. As demonstrated throughout the pandemic, the quality of our integrated investment portfolio, our reputation as a market-leading residential developer, and the value of our commercial and mixed use development pipeline will enable us to continue our long-term track record of delivering strong returns to securityholders through the cycle. In FY23, our key strategic priorities are to progress our $12.4bn commercial and mixed use development pipeline, secure strategically aligned capital partnerships, continue to increase our funds under management, and deliver our residential programs and settlements. Of increasing importance in volatile conditions, we will continue to focus on maintaining a disciplined approach to capital management, building a strong balance sheet, protecting our credit rating, and holding sufficient liquidity to capitalise on opportunities as they emerge. We will also target $1.3bn of non-core asset sales, with proceeds supporting the next generation of assets that deliver development profit, generate new recurring income, and improve the quality of our portfolio. Subject to no material change in the operating environment, the Group is targeting operating earnings in FY23 of at least 15.5 cents per stapled security (cpss) 3 and distributions of at least 10.5cpss. Annual Report 2022 – 37 1. Net debt (at foreign exchange hedged rate) / tangible assets – cash. 2. Reflects average borrowing cost at end of period. Weighted average cost of debt for FY22 was 3.4 per cent (FY21: 3.8 per cent). 3. Assumes a weighted average cost of debt of approximately 4.6 per cent over FY23. GOVERNANCEFINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENT FY22 FINANCIAL AND OPERATIONAL RESULTS CONTINUED COMMERCIAL & MIXED-USE DEVELOPMENT We substantially progressed our Commercial & Mixed Use Development pipeline in FY22, completing two major projects – the refurbishment of the Locomotive Workshop, South Eveleigh, Sydney and Heritage Lanes, Brisbane. Profit recognition from these two projects contributed to a higher Commercial and Mixed Use Development EBIT in FY22 compared to FY21, along with valuation gains generated from our retained ownership interest in each. Our overall development revaluation gain of $70m in FY22 recognises the value created from our development activities, and in FY22 related to the fair value gain on investment properties under construction (namely, Switchyards in Auburn) and the initial fair value uplift from independent valuations of Heritage Lanes and the Locomotive Workshop. In addition to the completion of Heritage Lanes and the Locomotive Workshop, we advanced a number of key office and mixed use projects. Demolition commenced at 55 Pitt Street in Sydney, with civil works due to commence in 1Q23, and at Harbourside, Sydney, we issued all vacant possession notices, with demolition due to commence in the second half of FY23. Commercial & Mixed Use EBIT Development revaluation gain Total Commercial & Mixed Use return KEY METRICS Total development pipeline 3 Committed development pipeline Invested capital 4 A number of our industrial developments across Sydney progressed, with construction commencing at Switchyard Industrial Estate in 1) Auburn in FY22 (58 per cent pre-committed and development approval received at Aspect 1). in Kemps Creek (48 per cent pre-committed At Aspect, we have committed to delivering our first net positive embodied carbon development, with 5 Star and 6 Star Green Star ratings on the first two buildings being targeted. Construction for this estate is expected to commence in 1H23 2. Further, we have approximately $1bn of build to rent developments under construction, including LIV Anura in Brisbane, LIV Aston and LIV Munro in Melbourne. Construction at LIV Munro (490 apartments) remained on track through FY22, and is expected to complete in 2Q23, and pre-leasing expected to commence in the first quarter of FY23. LIV Anura (396 apartments) and LIV Aston, Melbourne (474 apartments) also continued to progress, and we received planning approval for LIV Albert Fields, Brunswick (474 apartments). When the current development pipeline completes, we will have close to 2,200 apartments across our build to rent platform. FY22 $m 90 70 160 12,452 2,197 195 FY21 $m MOVEMENT $m 33 121 151 12,283 1,949 304 57 (51) 9 169 248 (109) COMMERCIAL & MIXED USE OUTLOOK 1 Office Despite ongoing uncertainty around the impacts of the COVID-19 pandemic, tenant and capital demand for modern, well-located office buildings in CBD locations remains strong, supporting our substantial office and mixed use pipeline. While there is uncertainty around the longer-term impacts of the pandemic and the adoption of hybrid work practices, there is positive tenant enquiry for new office buildings that offer the latest in sustainability, wellness and technology features and facilitate collaboration, and our secured office and mixed use development pipeline is well placed to benefit from this trend. Industrial We continue to see strong customer demand for our industrial developments, in a market with ongoing elevated demand and very low vacancy. This strong customer interest continues to support the roll-out of our Sydney-based industrial development pipeline, secured on attractive terms, which includes Switchyard Industrial Estate in Auburn, Aspect Industrial Estate at Kemps Creek, and Elizabeth Enterprise Precinct at Badgery’s Creek. Build to Rent Metropolitan rental markets continue to rapidly improve, being well timed to match delivery of our secured pipeline of build to rent projects between FY23 and FY25. This is expected to be supported by record low unemployment rates, low rental vacancy, rising levels of migration, and population growth in cities, while broader apartment supply is expected to moderate further. Including non-binding heads of agreements. 1. 2. Subject to factors outside Mirvac’s control, such as planning outcomes and market demand. 3. Represents 100 per cent of expected end value/revenue, subject to various factors outside of Mirvac’s control, such as planning, market demand and COVID-19 uncertainties. 4. Excludes investment properties under construction. 38 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS FINANCIAL AND OPERATIONAL RESULTS EBIT in FY22 also reflected a $12m COVID- 19-related impact (FY21: $20m), largely related to Retail, as well as an increase in management and administration expenses related to the investment in our technology platform. These losses were offset by income contributions from 477 Collins Street, Melbourne and The Foundry at South Eveleigh, Sydney, increased EBIT at LIV Indigo, and increased asset and funds management EBIT to $33m. Despite macroeconomic and geopolitical headwinds, strong capital demand supported asset revaluation gains of $305m, and our weighted average capitalisation rate tightened by 17 basis points to 5.00 per cent, with valuation gains of $224m in Office (up 2.9 per cent), $207m in Industrial (up 14 per cent), and a revaluation loss of ($126m) in Retail (down 4.3 per cent), primarily driven by Toombul, Brisbane ($216m net revaluation decrease) following flood impacts in February this year. FY22 $m 581 369 55 153 4 33 (44) 570 305 875 FY22 13,492 5.00 97.3 97 5.6 FY21 $m MOVEMENT $m 581 366 56 157 2 30 (35) 576 274 850 FY21 12,379 5.17 97.4 98 5.6 0 3 (1) (4) 2 3 (9) (6) 31 25 MOVEMENT 1,113 (0.17) (0.1) (1) — INTEGRATED INVESTMENT PORTFOLIO Our high-quality, modern portfolio of assets that require low capital expenditure remained resilient, despite the headwinds caused by COVID-19. Extended lockdowns in the first half of the year impacted our CBD retail assets in particular, however, we saw an uptick in sales and leasing activity as conditions normalised over the second half of the year, supported by the reopening of international and domestic borders, along with strong employment growth. As a result, solid occupancy and a long WALE were maintained, while limited lease expiries have positioned us well for the future. Cash collections also improved in the second half of FY22 to 97 per cent across the portfolio. EBIT for IIP was down 1 per cent on FY21, as a result of the loss of income at 55 Pitt Street, Harbourside Shopping Centre, and 34 Waterloo Road, Macquarie Park (all in Sydney) due to redevelopment, as well as lower income due to the sale of Tramsheds, Cherrybrook Village and Quay West Car Park (all in Sydney), in addition to the sale of 340 Adelaide Street, Brisbane in FY21. The non-core assets sold in FY22 achieved an average premium to book value of 43 per cent, with the proceeds from these sales to be redeployed into our active development pipeline. Net operating income Office Industrial Retail Build to Rent and other Assets and funds under management EBIT Management and administration expenses Investment EBIT Investment property revaluation 2 Total Integrated Investment Portfolio return PORTFOLIO METRICS Investment property portfolio value 3 ($m) Weighted average capitalisation rate (%) Occupancy (%) 4 Cash collection (%) Weighted average lease expiry (years) 5 Leasing (sqm) 110,879 144,003 (33,124) IIP OUTLOOK 1 Office Momentum within Australia’s major markets continues to improve as we learn to live with COVID-19. Leasing volumes are increasing, and in aggregate, businesses that made leasing decisions through the pandemic have taken more space than they have vacated, and this space has generally been taken in higher quality assets, supporting our view that the flight to quality theme will continue. Our portfolio, which is 99 per cent weighted to Prime assets and has an average age of 9.8 years, is well placed to benefit from this trend. Industrial Operating fundamentals remain positive in the industrial sector, with strong occupier demand and tight vacancy resulting in positive rental growth. Capital demand remains firm, with recent transactional evidence supporting a tightening of capitalisation rates across our Industrial portfolio over the past 12 months. Our industrial portfolio, which is 100 per cent occupied and located in Sydney, is expected to benefit from market rent growth and continued capital demand for high quality, well located industrial assets. Retail Convenience-based and out-of-trade retail assets continued to show an improvement over the second half of the financial year, supported by a more stable operating environment. CBD-based retail remains a challenge and has been slower to recover from the impact of COVID-19 restrictions, with foot traffic remaining well below pre-COVID-19 levels. Our urban based retail assets are well placed to benefit from the resumption of migration, as well as the normalisation of trading conditions. Build to Rent Market conditions across the build to rent sector are buoyant, with residential vacancy nearing 16-year lows and renters expected to be one of the fastest growing cohorts of the residential market. As one of the pioneers of build to rent in Australia, we have benefited from ongoing feedback from our customers at our completed asset, LIV Indigo in Sydney, which reached a stabilised 98 per cent leased in FY22. We expect that this will position us well for the upcoming release of our second build to rent asset, LIV Munro in Melbourne, which is expected to complete in the second quarter of FY23. 1. These statements are future looking and based on our reasonable assumptions at the time they were made. They include possible outlooks for our operating environments, but are subject to external factors outside of Mirvac’s control. Includes investment properties under construction, assets classified as held for sale, Mirvac’s share of JVA investment properties, and AASB 16 lease liability gross up amounts. 2. Excludes development revaluation gain and includes Mirvac’s share in the joint ventures and associates (JVA) revaluation of investment properties, which is included within share of net profit of JVAs. 3. 4. By area, excludes Build to Rent. 5. By income, excludes Build to Rent. Annual Report 2022 – 39 GOVERNANCEFINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENT FY22 FINANCIAL AND OPERATIONAL RESULTS CONTINUED RESIDENTIAL Residential EBIT in FY22 was higher than FY21, due to settlements of 2,523 residential lots being weighted towards stronger EBIT contributing projects across masterplanned communities (MPC) and apartments. The main contributors were our masterplanned communities at Smiths Lane, Woodlea, Tullamore, and Olivine in Melbourne, along with our apartment project, Voyager, also in Melbourne. In addition to this, Residential EBIT benefitted from a joint venture with Supalai to deliver the Smiths Lane project, which we entered into during the financial year. Positive sales momentum – particularly at MPC projects in Melbourne in the first half of the year – contributed to 2,898 exchanges in FY22. This was down 17 per cent on FY21, however, represents a normalisation of market conditions following 18 months of unprecedented demand. Overall, 83 per cent of sales were in MPC, while owner-occupiers continued to represent the largest segment of purchasers at 74 per cent, a testament to our focus on delivering well designed, owner-occupier product. We released 2,748 residential lots throughout the financial year, with 70 per cent of all released lots pre-sold. This included the launch of six major apartment projects. As a result, our pre-sales increased to $1.6bn 1, providing good visibility of future earnings. Defaults at Voyager in Melbourne resulted in a default rate of 2.7 per cent. Excluding Voyager, defaults remained low at 0.2 per cent. Our development margin of 25 per cent was above our through-cycle target. The addition of 1,600 lots to our residential development pipeline, including Cobbitty in Sydney’s south-west, supports our future near-term release profile. RESIDENTIAL OUTLOOK 1 While market momentum has normalised as a result of rising interest rates and inflation, underlying fundamentals remain strong. This includes low unemployment, above average wage growth, rising overseas migration, tight rental vacancy, low supply, compelling relative affordability of new product, and strong household balance sheets. We continue to experience good demand from owner-occupiers focused on high-quality, well-located, designed product with good amenity. KEY METRICS Residential EBIT ($m) Lots released Lots exchanged Lots settled Pre-sales secured ($m) Defaults (%) Gross development margin (%) Pipeline lots Against this backdrop, we expect to launch a further six major apartment projects over FY23, including: > 699 Park Street, Melbourne, a premium offering of 168 apartments overlooking Princes Park; > the next stage at Yarra’s Edge in Melbourne, comprising 191 apartments, and our most premium offering in the precinct to date; > our newly acquired site on 31 Queens Road, Melbourne, a boutique offering of 110 apartments overlooking Albert Park; > Isle, the next stage at our premium Waterfront Newstead precinct in Brisbane, comprising 133 apartments; > O’Connell House, the fourth stage at Ascot Green, comprising 128 apartments; and > the last stages at NINE by Mirvac, Willoughby, comprising 107 apartments. This launch profile, complemented by a further release of over 2,000 MPC lots, is expected to elevate pre-sales in the coming years and contribute to future residential earnings. FY22 195 2,748 2,898 2,523 1,635 2.7 25 25,352 FY21 MOVEMENT 168 3,319 3,375 2,526 1,215 2.7 26 26,569 27 (517) (477) (3) 420 — (1) (1,217) Olivine, Donnybrook, Victoria 1. Represents Mirvac’s share of total pre-sales and includes GST. 2. These statements are future looking and based on our reasonable assumptions at the time they were made. They include possible outlooks for our operating environments, but are subject to external factors outside of Mirvac’s control. 40 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS HOW WE CREATE VALUE PERFORMANCE BY PILLAR FINANCIAL AND OPERATIONAL RESULTS RISK MANAGEMENT GOVERNANCE FINANCIAL REPORT OTHER Artist’s impression | Isle waterfront, Brisbane Annual Report 2022 – 41 RISK AND RISK MANAGEMENT RISK GOVERNANCE The Mirvac Board is responsible for ensuring the effectiveness of Mirvac’s risk management framework. This framework outlines our governance, risk appetite, accountability for risk management, and operational resilience, and is consistent with the Australian and New Zealand standard on risk management (ISO 31000:2018). The Board has charged our leadership team with the responsibility for managing risk across the Group and implementing mitigation strategies under the direction of the CEO & Managing Director, supported by other senior executives. Each business unit is responsible for identifying and managing their risks. An enterprise-wide risk management system is in place to drive consistency in risk recording and reporting. The Group Risk function is responsible for embedding the risk management framework, advising business units on risk management plans, and consolidating risk reporting to senior executives, the Audit, Risk & Compliance Committee, and the Board. A strong risk management culture is the key element underpinning the risk management framework. In FY22, we faced a challenging and uncertain operating environment. Global supply chains were disrupted, interest rates and inflation increased, as did geopolitical tensions, competition for talent intensified, climate risks accelerated, and we began learning to live with COVID-19. We will continue to work on positioning the Group for long-term success by managing the risks that have the potential to impact the achievement of our targeted financial outcomes. KEY RISKS AND OPPORTUNITIES HOW WE’RE ADDRESSING THEM The Risk Management Policy is available on our website: https://www.mirvac.com/about/ corporate-governance RISK MANAGEMENT: OUR PRINCIPAL RISKS AND OPPORTUNITIES A number of the risks and opportunities we face in delivering our strategic plan are set out in the table below. They are largely related to our portfolio of assets and are typical of a property group. These are not the only risks associated with Mirvac. The risks are grouped by theme, rather than order of importance. INVESTMENT PERFORMANCE Our business is impacted by the value of our property portfolio. This can be influenced by many external aspects outside our direct control, including the health of the economy and the strength of the property market. MACRO-ENVIRONMENT We collaborate with aligned investors to leverage capability and develop recurring income streams. Prudent capital decisions are based on due diligence and market research to ensure investor confidence is retained. Buying and selling at the right time in the property cycle has enabled us to deliver sustainable returns to our securityholders. We have a disciplined approach to acquisitions, and are mindful of the fundamentals needed to maintain growth through our sustainable and diversified urban-focused business model. Mirvac is impacted by changing domestic and international economic and macroprudential and regulatory measures, which impact access to capital, investor activity, and foreign investment. We monitor a wide range of macro-economic, property market and capital market indicators and use trend analysis to assess macro-economic changes, and we are attentive to these shifts. We maintain a robust balance sheet and appropriate gearing to ensure we can respond to unforeseen economic shocks. SOCIAL RESPONSIBILITY In an Australian context of low institutional trust, we must maintain and enhance trust and reputation to retain a social licence to operate. SUPPLY CHAIN With a broad range of suppliers providing an equally diverse range of goods and services, our stakeholders can be directly and indirectly impacted by the practices of our suppliers, and the materials they’re supplying. PLANNING AND REGULATION Our activities can be affected by government policies in many ways, from local decisions regarding zoning and developments, right through to the national position on immigration. We provide consistent, high-quality communication, and transparent and responsible reporting. We have committed to proactively sharing our progress as a business to help us earn and retain trust. We track trust and reputation through stakeholder research and are pleased to see strong results. We provide good earnings visibility, guidance and full disclosure to our securityholders so they can make informed choices. We have well-established process and oversight bodies to manage key areas, such as modern slavery, worker exploitation, material import risk, high-risk materials, and cyber security. We are elevating our controls to identify and mitigate our exposure to these risks and ensure full compliance to emerging legislation. Supply chain disruption, accelerated by COVID-19, geopolitical tensions, and the impact of cost-escalation and labour shortages in the construction industry, are actively managed through supply continuity plans and alternative supply arrangements. We take the lead to have proactive and constructive engagements with all levels of government to ready our business to respond to changing community expectations. Approval timeframes are built into project delivery plans and are actively managed to minimise the impact on returns. 42 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS RISK MANAGEMENT KEY RISKS AND OPPORTUNITIES HOW WE’RE ADDRESSING THEM IMPACTS OF CLIMATE CHANGE Climate change can not only affect our assets, it can affect our business operations. It is vital that we respond to the implications of climate change by implementing appropriate adaptation and mitigation strategies for the portfolio, as well as building resilience throughout the business. We regularly assess our portfolio for climate risk and resilience and we report under the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. We strive to design developments and major renovations to a high standard for green building and community certifications, as well as energy and water performance ratings. In FY22, we met our ambition to be net positive carbon for our scope 1 and 2 emissions nine years ahead of schedule, and we were the first Australian property company to reach a net positive target. CAPITAL MANAGEMENT Maintaining a diversified capital structure to support delivery of stable investor returns and maintain access to equity and debt funding. HEALTH AND SAFETY Maintaining the health, safety and wellbeing of our people is our most important duty of care obligation, and critical to our ongoing success. PEOPLE We require a motivated, high-performing, and capable workforce to deliver business strategy and a desired culture. We have a capital management framework that is approved and monitored by the Board. The framework aims to address the market, credit and liquidity risks, while also meeting the Group’s strategic objectives. We seek to maintain an investment-grade credit rating of A-/A3 to reduce the cost of capital and diversify our sources of debt capital. Our target gearing ratio is between 20 and 30 per cent. We continue to pursue safety excellence and to improve the overall wellbeing of our employees, our suppliers, our community, and the environment. During FY22, we continued to strengthen our health and safety practices and culture, while recognising that the ongoing management and response to COVID-19 will continue for the foreseeable future (particularly with respect to mental health). We focus on having the right culture and capabilities, so that our people are engaged and enabled to deliver on our strategy, particularly in an uncertain and changing operating environment, in which labour markets are currently constrained. We have a range of programs aimed at creating great leaders, growing and retaining key talent, and fostering a diverse and inclusive workplace, and have been defining, measuring and curating our desired culture for some time. Our remuneration strategy is designed to attract the best talent, and motivate and retain individuals, while aligning to the interests of executives, securityholders and community expectations. DIGITAL DISRUPTION Technology is changing our world at a rapid pace. It is important we embrace new digitally-enabled ways of working and enhance customer experiences to maintain relevance and continue to innovate. A core element of our strategy is understanding and preparing for disruption, and building a resilient business. We are committed to ensuring that we have the right people, processes, and systems to take advantage of disruption and to create a competitive advantage. Our innovation program, Hatch, ensures that we continue to innovate in a meaningful way. We also continue to invest in people and technology to ensure that digital experiences are continually evolving. BUSINESS RESILIENCE It is crucial we have the ability to manage a major incident causing physical or information disruption in a timely and efficient manner, and that we adapt to changes in our operating markets. We have an embedded operational resilience program that enables the business to effectively manage and continue business-critical processes during an event that impacts the business. This includes breaches to our information systems and/or damage to physical assets that could cause significant damage to our business and reputation. CYBER RISK Cyber security and information privacy are an increasing risk for our business given the dynamic nature of these threats, and the importance of safeguarding intellectual property, Information and Operational Technology systems, contractual agreements, and employee and customer information. KEY PARTNERS Our partners play a vital role in our business and our sustained success is driven by the strength of these relationships. It is crucial that we build long-term relationships that are driven by trust, transparency and shared values. We have a cyber security strategy and framework (which aligns to the National Institute of Standards and Technology cyber security framework) to prevent and detect cyber threats and respond and recover from cyber-related incidents. Our partner relationships are based on delivering mutual benefits to all parties. Our value creation model has a focus on trusted partnerships and enables the delivery of our strategy through the partner lens. Fit-for-purpose governance frameworks are in place to manage our capital partnerships. Annual Report 2022 – 43 GOVERNANCEFINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARFINANCIAL AND OPERATIONAL RESULTS Mirvac Group BUSINESS OVERVIEW LETTERS TO SECURITYHOLDERS OUR STRATEGY MEGATRENDS GOVERNANCE 46 Board of Directors 48 Directors’ report 51 Remuneration report 72 Auditor’s independence declaration Financial report 73 125 Directors’ declaration 126 134 Securityholder information 136 Glossary 137 Directory & upcoming events Independent auditor’s report 44 – Celebrating 50 years 44 – Celebrating 50 years Mirvac Group HOW WE CREATE VALUE PERFORMANCE BY PILLAR FINANCIAL AND OPERATIONAL RESULTS RISK MANAGEMENT GOVERNANCE FINANCIAL REPORT OTHER Annual Report 2022 – 45 Annual Report 2022 – 45 BOARD OF DIRECTORS DIRECTORS’ EXPERIENCE AND AREAS OF SPECIAL RESPONSIBILITY The members of the Mirvac Board and their qualifications, experience and responsibilities are set out below: DR JOHN MULCAHY PhD (Civil Engineering), FIEAUST, MAICD SUSAN LLOYD-HURWITZ BA (Hons), MBA (Dist) CHRISTINE BARTLETT BSc, MAICD JANE HEWITT BAS Land Economics, MAICD JAMES M. MILLAR AM BCom, FCA, FAICD Independent Non-Executive > Member of the Audit, Risk and Compliance Committee > Member of the Health, Safety, Environment & Sustainability Committee Jane Hewitt was appointed a Non-Executive Director of Mirvac in December 2018. Jane has over 27 years of experience in real estate development and asset management. She founded UniLodge in 1996 and pioneered the corporatisation and professional development and management of student accommodation facilities on and off University campuses in Australia and New Zealand. As an entrepreneur and founder, Jane has extensive operational experience and a strong track record in developing successful partnerships in real estate and business ventures. She developed UniLodge into an operation with assets of approximately $1 billion. Since 2012, Jane has worked on a number of non-profit ventures in housing, homelessness and youth disadvantage. She is Chair of the Beacon Foundation and is a board member of the National Housing Investment Finance Corporation. Independent Non-Executive > Chair of the Audit, Risk and Compliance Committee > Member of the Nomination Committee James M. Millar was appointed a Non-Executive Director of Mirvac in November 2009. He is the former Chief Executive Officer of Ernst & Young (EY) in the Oceania Region, and was a Director on their global board. James commenced his career in the Insolvency & Reconstruction practice at EY, being involved in a number of sizeable corporate workouts. He has qualifications in both business and accounting. James is currently the Chair of the Export Finance Australia and Cambooya Pty Ltd, and a Director of Credit Corp Group Limited. James serves a number of charities and is Chair of the Vincent Fairfax Family Foundation and Director of Vincent Fairfax Ethics in Leadership Foundation. James is a former Director of Forestry Corporation of NSW (February 2013 to June 2022); Macquarie Media Limited (April 2015 to October 2019), Fairfax Media Limited (July 2012 to December 2018), Slater & Gordon Ltd (December 2015 to December 2017) and former Chair of The Smith Family. Independent Non-Executive Chair > Chair of the Nomination Committee > Member of the Audit, Risk and Compliance Committee > Member of the Human Resources Committee > Member of the Health, Safety, Environment & Sustainability Committee John Mulcahy was appointed a Non-Executive Director of Mirvac in November 2009 and the Independent Non-Executive Chair in November 2013. John has more than 30 years of leadership experience in financial services and property investment. John is the former Managing Director and Chief Executive Officer of Suncorp-Metway Limited. Prior to joining Suncorp-Metway, John held a number of senior executive roles at Commonwealth Bank, including Group Executive, Investment and Insurance Services. He also held a number of senior roles during his 14 years at Lend Lease Corporation, including Chief Executive Officer, Lend Lease Property Investment and Chief Executive Officer, Civil and Civic. John is currently a Director of ALS Limited (formerly Campbell Brothers Limited) (appointed February 2012), Zurich Australian Insurance subsidiaries, Deputy Chair of GWA Group Limited (appointed November 2010) and Chair of ORIX Australia Corporation Limited. John is a former Director and Chair of Coffey International Limited (September 2009 to January 2016), a former Director of The Shore Foundation Limited and former Guardian of the Future Fund Board of Guardians. Chief Executive Officer & Managing Director (CEO/MD) – Executive Susan Lloyd-Hurwitz was appointed Chief Executive Officer & Managing Director in August 2012 and a Director of Mirvac Board in November 2012. Prior to this appointment, Susan was Managing Director at LaSalle Investment Management. Susan has also held senior executive positions at MGPA, Macquarie Group and Lend Lease Corporation, working in Australia, the US and Europe. Susan is the Chair of the Green Building Council of Australia, a Director of the Business Council of Australia, member of the NSW Public Service Commission Advisory Board, a member of the INSEAD Global Board and a Trustee of the Australian Museum Foundation. Susan holds a Bachelor of Arts (Hons) from the University of Sydney and an MBA (Distinction) from INSEAD (France). Independent Non-Executive > Chair of the Human Resources Committee > Member of the Audit, Risk and Compliance Committee > Member of the Nomination Committee Christine Bartlett was appointed a Non-Executive Director of Mirvac in December 2014. She is currently a Director of Reliance Worldwide Corporation Limited (appointed November 2019), Sigma Healthcare Limited (appointed March 2016) and TAL Life Limited (appointed January 2017). Christine is currently a member of the UNSW Australian School of Business Advisory Council. Christine is a former Director of iCare (February 2018 to February 2021), GBST Holdings Ltd (June 2015 to November 2019) and Director (2007 to 2019) and Chair (2016 to 2019) of The Smith Family. Christine is an experienced chief executive officer and senior executive, with extensive line management experience gained through roles with IBM, Jones Lang LaSalle and National Australia Bank Limited. Her executive career has included Australian, regional and global responsibilities based in Australia, the USA and Japan. Christine brings a commercial perspective, especially in the areas of financial discipline, identifying risk, complex project management, execution of strategy, fostering innovation and taking advantage of new emerging technologies. Christine holds a Bachelor of Science from the University of Sydney and has completed senior executive management programs at INSEAD. 46 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS GOVERNANCE SAMANTHA MOSTYN AO BA, LLB PETER NASH BComm, FCA, F Fin ROBERT SINDEL BEng, MBA, GAICD, FIEAust DAMIEN FRAWLEY Independent Non-Executive > Member of the Human Resources Committee > Member of the Nomination Committee > Member of the Health, Safety, Environment & Sustainability Committee Samantha Mostyn was appointed a Non-Executive Director of Mirvac in March 2015. Samantha is currently a corporate advisor and Director of GO Foundation and Alberts Group. Samantha has significant experience in the Australian corporate sector both in executive and non-executive capacities, in particular in the areas of human resources, corporate and government affairs, sustainability management and diversity. Samantha has held senior executive positions including Group Executive Culture and Reputation, IAG and Global Head HR and Culture, Cable & Wireless in London. She serves on the Australian faculty of the Cambridge University Business & Sustainability Leadership Program. Samantha is a former Director of Virgin Australia Holdings Limited (September 2010 to May 2019), Transurban Holdings Limited (December 2010 to November 2021), Cover-More Group Limited (December 2013 to April 2017), Sydney Theatre Company, National Sustainability Council, National Mental Health Commission, Carriageworks, Sydney Swans, Commissioner with the Australian Football League, Deputy Chair of the Diversity Council of Australia and Chair of an Australian APRA regulated Citibank subsidiary board. Independent Non-Executive > Member of the Audit, Risk and Compliance Committee > Member of the Health, Safety, Environment & Sustainability Committee Peter Nash was appointed a Non-Executive Director of Mirvac in November 2018. Peter is currently the Chair of Johns Lyng Group Limited (appointed October 2017), Director of Westpac Banking Corporation (appointed March 2018), ASX Limited (appointed June 2019), Koorie Heritage Trust and General Sir John Monash Foundation. Peter was a Senior Partner with KPMG until September 2017, having been admitted to the partnership of KPMG Australia in 1993. He served as the National Chair of KPMG Australia from 2011 until August 2017, where he was responsible for the overall governance and strategic positioning of KPMG in Australia. In this role, Peter also served as a member of KPMG’s global and regional boards. Peter’s previous positions with KPMG included Regional Head of Audit for Asia Pacific, National Managing Partner for Audit in Australia and Head of KPMG Financial Services. Peter has worked in geographically diverse and complex operating environments providing advice on a range of topics, including business strategy, risk management, business processes and regulatory change. Peter has also provided financial and commercial advice to many government businesses at both a federal and state level. Peter is a former member of the Business Council of Australia and its Economic and Regulatory Committee. Independent Non-Executive > Chair of the Health, Safety, Independent Non-Executive > Member of the Audit Risk and Environment & Sustainability Committee > Member of the Human Resources Committee > Member of the Nomination Committee Robert Sindel was appointed a Non-Executive Director of Mirvac in September 2020. He has 30 years of experience in the construction industry both in Australia and the United Kingdom as well as experience operating in high-risk industries. Most recently, Rob has held roles in senior executive management and leadership, in the building industry supply chain, manufacturing, sales and marketing in business-to- business environments and strategic management. Robert is currently the Chair of Orora Limited (appointed February 2020), a Non- Executive Director of Boral Limited (appointed September 2020) and is a Member of Australian Business Community Network Foundation (appointed April 2020) and the Yalari NSW Advisory Committee (appointed August 2017). Rob is the former Managing Director and Chief Executive Officer of CSR Limited (January 2011 to September 2019), a former Member of UNSW Australian School of Business Advisory Council and a former Director of Green Building Council of Australia. Compliance Committee > Member of the Human Resources Committee Damien Frawley was appointed a Non-Executive Director of Mirvac on 1 December 2021. Damien has wide-ranging experience in investment management and asset management in real estate and infrastructure in Australia and offshore as well as public markets. From 2012 to 2022, Damien was the CEO of Queensland Investment Corporation (QIC), one of Australia’s leading investment managers. He has led the Queensland Government-owned global institutional investment manager for the past 9 years, retiring as CEO in 2022. In June 2022, Damien was appointed as Chair of Host-Plus Pty Limited and Queensland Treasury Corporation Capital Markets. Damien has over 35 years of experience in the financial services sector, with a strong focus on developing and executing strategy. Prior to his QIC role, Damien was the country head of BlackRock Australia. Damien’s career has also included roles at Merrill Lynch Investment Management, Barclays Global Investors and Citibank. MICHELLE FAVELLE BBus, FGIA Company Secretary Michelle Favelle was appointed as Company Secretary in December 2019, having joined Mirvac in February 2018 as Deputy Group Company Secretary. She has over 20 years of corporate experience and has held a range of governance and company secretary roles in the property, financial services, media and not-for-profit sectors. She holds a Bachelor of Business and is a fellow of the Governance Institute of Australia. Annual Report 2022 – 47 FINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS DIRECTORS’ REPORT The Directors of Mirvac Limited present their report, together with the consolidated financial report of Mirvac Group (Mirvac or Group) for the year ended 30 June 2022. Mirvac comprises Mirvac Limited (parent entity) and its controlled entities, which include Mirvac Property Trust and its controlled entities. PRINCIPAL ACTIVITIES The principal continuing activities of Mirvac consist of real estate investment, development, third party capital management and property asset management across three segments: Integrated Investment Portfolio, Commercial & Mixed Use and Residential. DIRECTORS The Directors of Mirvac in office at any time during the financial year and up to the date of this report together with information on their qualifications and experience are set out on pages 46 to 47. The number of board and board committee meetings held and attended by Directors of which they were members during the year ended 30 June 2022 is detailed below. REMUNERATION REPORT The Remuneration report as required under section 300A (1) of the Corporations Act 2001 is set out on pages 51 to 71 and forms part of the Directors’ report. MEETINGS OF DIRECTORS The number of Directors’ meetings held and attended by each Director during the year ended 30 June 2022 is detailed below: Board Audit, Risk & Compliance Committee 1 Human Resources Committee 1 Nomination Committee 1 Health, Safety, Environment & Sustainability Committee 1 Director Held Attended Held Attended Held Attended Held Attended Held Attended John Mulcahy (Chair) Susan Lloyd- Hurwitz (CEO/MD) Christine Bartlett Jane Hewitt James M. Millar AM Samantha Mostyn AO Peter Nash Robert Sindel Damien Frawley 2 13 13 13 13 13 13 13 13 6 13 13 13 13 13 12 13 13 6 6 — 6 6 6 — 6 — 4 6 — 6 6 6 — 6 — 4 1. Voluntary attendances at meetings by Directors who were not committee members are not included. 2. Damien Frawley was appointed as Director on 1 December 2021. 5 — 5 — — 5 — 5 3 5 — 5 — — 4 — 5 3 5 — 5 — 5 5 — 1 — 5 — 5 — 5 5 — — — 6 — — 6 — 6 6 6 — 6 — — 6 — 6 5 6 — OTHER DIRECTORSHIPS Details of all directorships of other listed companies held by each Director in the three years immediately before 30 June 2022 are as follows: Director John Mulcahy Company Date appointed Date ceased ALS Limited (formerly Campbell Brothers Limited) GWA Group Limited February 2012 November 2010 Current Current Susan Lloyd-Hurwitz Nil GBST Holdings Ltd Reliance Worldwide Corporation Limited Sigma Healthcare Limited June 2015 November 2019 March 2016 November 2019 Current Current Christine Bartlett Jane Hewitt James M. Millar AM Nil Credit Corp Group Limited Macquarie Media Limited Samantha Mostyn AO Transurban Holdings Limited Peter Nash Robert Sindel ASX Limited Johns Lyng Group Limited Westpac Banking Corporation Boral Limited Orora Limited Damien Frawley 1 Nil 1. Damien Frawley was appointed as Director on 1 December 2021. 48 – Celebrating 50 years December 2021 March 2015 Current October 2019 December 2010 October 2021 June 2019 October 2017 March 2018 September 2020 March 2019 Current Current Current Current Current Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS GOVERNANCE Environment and Sustainability During FY22, Mirvac continued to deliver on its commitment to have a positive impact on the planet, its people, customers and the communities in which it operates, most notably by achieving its ambitious plan to become net positive in carbon nine years ahead of schedule. During the year, the Board approved Mirvac’s Planet Positive Water commitment which sets out how Mirvac will achieve a net positive water target well ahead of its initial 2030 target. The Board’s strong support of these commitments was supplemented by the HSE&S Committee’s monitoring and oversight of Mirvac’s sustainability strategy and performance reporting, as well as attending site visits and briefings. For example, Mirvac’s successful pilot of a waste reduction at its 55 Pitt Street development in Sydney, which was the subject of an HSE&S Committee deep dive briefing, resulted in approximately 900 cubic metres of furniture and fit-out materials diverting from landfill. Inclusion and Diversity During FY22 the Human Resources Committee (HRC) maintained oversight of diversity and inclusion initiatives and people metrics, in support of Mirvac’s commitment to fostering an inclusive and diverse workplace. Gender equality remains a clear priority, and as at 30 June 2022, women held 44 per cent of Board positions, exceeding the target of 40 per cent, with 45 per cent of women representing Mirvac’s workforce. Core to Mirvac’s overall people strategy is to foster a sense of belonging by broadening the types of diversity we focus on through an inclusive leadership and culture. Following the HRC’s review of a refreshed belonging strategy during the year, the Board participated in a new, externally facilitated inclusive leadership program focused on the true themes of inclusion, which will be rolled out to all teams at Mirvac. COMPLIANCE Mirvac’s governance arrangements and practices met the requirements of the fourth edition of the Australian Securities Exchange (ASX) Corporate Governance Council Corporate Governance Principles and Recommendations (the ASX Principles) during FY22. Further information on our corporate governance policies and practices are contained in our 2022 Corporate Governance Statement located at www.mirvac.com/about/corporate-governance. ACTIVE GOVERNANCE BOARD GOVERNANCE Mirvac is committed to ensuring that its operations, procedures and practices reflect high standards of corporate governance, to foster a culture that values ethical behaviour, integrity, and respect. This ensures that Mirvac is well placed to protect the interests of its stakeholders. In addition to the regular program of meetings, briefings and site tours, the Board continued to strengthen and enhance its corporate governance practices and oversight during FY22 in the following key areas: Board Succession Planning Ensuring that the Board maintains the right combination of skills and experience is critical in driving the Group’s strategic objectives and to maintaining appropriate oversight of the performance of the business. Accordingly, a comprehensive succession planning program and transitioning of Directors continued with the oversight of the Board and the Nomination Committee during FY22, including: > the appointment of Damien Frawley as a Non-Executive Director in December 2021, complementing the Board’s skills and experience in investment management, asset management, financial services and strategy; and > continuation of proactive Board succession planning, in particular following the announcement at the 2021 AGM by the Chair of the Board, Dr John Mulcahy that he, and the Chair of the Audit, Risk & Compliance Committee (ARCC), James M. Millar AM, both being the longest serving Directors anticipate retiring from the Board before their next re-election in 2024. Director Education As part of ensuring that the Board maintains the right combination of skills and experience, each year the Nomination Committee approves and oversees the continuing professional development programs for Directors. The FY22 education program was developed with reference to the results of the 2021 Board self-evaluation, and focused on health and safety, innovation, digital technology, and corporate culture. A key component of the Board’s FY22 education program was a four-day immersive, future-focused agenda aimed at educating and challenging the Board’s thinking about advancements and technologies that might influence how people will live, work and play, and ultimately, Mirvac’s strategic ambitions. This program was delivered via a mix of interstate site visits, externally facilitated presentations and interactive workshops, and was attended by Directors and Executive Leadership Team members. Health and Safety Established in 2021, the Board’s Health, Safety, Environment & Sustainability (HSE&S) Committee has continued to evolve its oversight of the health and safety of Mirvac’s people and the key strategies, systems, policies, and practices that are in place in this critically important area. Quarterly site visits and deep dive presentations are an integral part of this Committee’s role, which functions to drive health, safety and sustainability outcomes and performance, as well as to demonstrate the practical application of Mirvac’s HSE&S policy and culture. Annual Report 2022 – 49 FINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS NON-AUDIT SERVICES From time to time, Mirvac may engage its external auditor, PricewaterhouseCoopers, to perform services additional to their statutory audit duties. Details of the amounts paid or payable to PricewaterhouseCoopers for audit and non-audit services provided during the year ended 30 June 2022 are set out in note H4 to the consolidated financial statements. In accordance with the advice received from the ARCC, the Board is satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 and did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: > all non-audit services were reviewed by the ARCC to ensure they did not affect the impartiality and objectivity of the auditor; and > none of the services undermined the general principles relating to auditor independence as set out in Accounting Professional & Ethical Standards 110 Code of Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the Group, acting as advocate for the Group or jointly sharing economic risk and rewards. AUDITOR’S INDEPENDENCE DECLARATION A copy of the Auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 72 and forms part of the Directors’ report. ROUNDING OF AMOUNTS The amounts in the consolidated financial statements have been rounded off to the nearest million (m) dollars in accordance with ASIC Corporations Instrument 2016/191. This statement is made in accordance with a resolution of the Directors. Susan Lloyd-Hurwitz Director Sydney 11 August 2022 DIRECTORS’ REPORT REVIEW OF OPERATIONS A review of the operations of the Group during the financial year and the results of those operations are detailed in the FY22 Financial and Operational Results section on pages 36 to 40 of the report. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Details of the state of affairs of the Group are disclosed on pages 36 to 40. Other than those matters disclosed, there were no significant changes to the state of affairs during the financial year under review that are not otherwise disclosed in this annual report. EVENTS OCCURRING AFTER THE END OF THE YEAR On 18 July 2022, the unitholders of AMP Capital Wholesale Office Fund (AWOF) approved a resolution for Mirvac Funds Management Australia Limited to become the trustee of the fund. Effective around mid-October 2022, Mirvac will become the investment manager of AWOF and property manager in respect of AWOF’s wholly owned assets. As a result of this appointment, Mirvac’s third-party capital under management will grow by $7.7bn. In addition, Mirvac will offer a total of $500m of liquidity with an expectation that this will be utilised within six months of the transition date. No other events have occurred since the end of the year which have significantly affected or may significantly affect Mirvac’s operations, the results of those operations, or Mirvac’s state of affairs in future years. DISTRIBUTIONS Distributions paid or payable by the Group for the year ended 30 June 2022 were 10.2 cents per stapled security (2021: 9.9 cents per stapled security). Refer to note E1 in the consolidated financial statements. ENVIRONMENTAL REGULATIONS Mirvac and its business operations are subject to compliance with both commonwealth and state environment protection legislation. The Board is satisfied that adequate policies and procedures are in place to ensure Mirvac’s compliance with the applicable legislation. In addition, Mirvac is also subject to the reporting requirements of the National Greenhouse and Energy Reporting Act 2007 and Building Energy Efficiency Disclosure Act 2010. Mirvac is not aware of any incidents that have resulted in material non-compliance with environmental regulations during the financial year. TAX GOVERNANCE STATEMENT Mirvac has adopted the Board of Taxation’s Tax Transparency Code (TTC). As part of the TTC, Mirvac has published a Tax governance Statement (TGS) which details Mirvac’s corporate structure and tax corporate governance systems. Mirvac’s TGS for the year ended 30 June 2022 can be found on Mirvac’s website at: www.mirvac.com/about/corporate-governance. FRAUD, BRIBERY AND CORRUPTION Mirvac has zero tolerance regarding fraud, bribery and corruption and requires all employees and service providers to adhere to the highest standards of honesty and integrity in the conduct of all its activities. Mirvac will uphold all laws relevant to countering bribery, fraud and corruption in the jurisdictions in which it operates. Any allegation of a person from within or associated with Mirvac (notwithstanding the capacity in which they are acting), acting in a manner inconsistent with this statement will be treated seriously, regardless of the seniority of those involved. Disciplinary action including dismissal may result. Where it is believed that a criminal offence may have been committed, the police and other relevant bodies may be informed. 50 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS GOVERNANCE REMUNERATION REPORT 51 52 53 55 58 58 62 64 65 66 66 67 68 69 69 70 71 1 Message from the Human Resources Committee 2 Who is covered by this report 3 Key questions 4 Our remuneration strategy and the link to business strategy and performance 5 Executive KMP remuneration at Mirvac 6 How remuneration is structured 7 Business and executive remuneration outcomes 8 Summary of FY22 remuneration 9 Actual remuneration received in FY22 10 Total remuneration in FY22 11 LTP grants in FY22 12 Equity instrument disclosures relating to Executive KMP 13 Other transactions with KMP 14 Service agreements for Executive KMP 15 Governance and how remuneration decisions are made 16 Non-Executive Directors’ remuneration 17 Additional required disclosures 1 MESSAGE FROM THE HUMAN RESOURCES COMMITTEE (HRC) The HRC is pleased to present securityholders with the FY22 Remuneration Report. This report sets out Mirvac’s approach to remuneration for its executives and in particular the link between Mirvac’s strategy and its remuneration framework, the link between performance and reward, and remuneration outcomes for senior executives. The HRC has oversight of Mirvac’s People Strategy, Culture and key Human Resources practices. Mirvac’s remuneration framework is an integral component of our People Strategy. PEOPLE AND CULTURE KEY HIGHLIGHTS The HRC has for many years recognised Mirvac’s culture as a key source of competitive advantage, a differentiator for attracting and retaining the best talent in our sector, and a driver of employee, team and organisational performance. Throughout the COVID-19 pandemic, our purpose, culture, and values have guided our decision making and actions, including our values to ‘do the right thing’ and to ‘put people first’. Key highlights for the year include: > Mirvac ranked number one globally in Equileap’s Global Report on Gender Equality; > awarded AFR Boss Best Place to Work for the property sector; > supported our people through the COVID-19 pandemic, with increased communications and initiatives to support physical and mental wellbeing. This included providing employees with ‘Thank You Days’, which provided a week of paid leave in recognition of our people’s continued hard work and perseverance during a challenging time; > maintained employee engagement in the top-quartile of companies globally; > maintained a like-for-like zero gender pay gap for the sixth year in a row; > maintained female representation above targets, including 44 per cent of senior leadership roles held by women; > retained 96 per cent of key talent, notwithstanding a highly competitive labour market, and secured preferred candidates for a number of senior General Manager appointments, reflecting the strength of our employer brand in securing top talent; > supported employees facing cost of living pressures, providing employees earning <$100k with an average remuneration review increase of 5.3 per cent, effective 1 July 2022; and > refreshed our People Strategy, including updating our talent approach and approving a new Belonging Strategy that aims to maintain our leadership in gender diversity while expanding our focus and initiatives to ensure Mirvac remains a place where everyone belongs. More on our People Strategy and how this supports Mirvac’s performance can be found in the People section, page 24. Supporting our people through ongoing uncertainty Our people have shown remarkable strength, resilience and dedication throughout FY22. We are committed to supporting our people, focusing on their wellbeing, resilience and engagement, and continuing – even in lock-down or in a hybrid working environment – to be the #1 employer in our sector and a place where people want to join, grow and belong. Annual Report 2022 – 51 FINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS REMUNERATION REPORT 1 MESSAGE FROM THE HUMAN RESOURCES COMMITTEE (HRC) CONTINUED REMUNERATION OUTCOMES FOR FY22 The remuneration outcomes for FY22 reflect the intended operation of the remuneration framework. At the heart of Mirvac’s remuneration framework is our commitment to deliver competitive remuneration for excellent performance in order to attract the best, and motivate and retain talented individuals, while aligning the interests of executives and securityholders. It does this through: > incentives based on the achievement of financial measures and strategic objectives that reflect key goals critical to sustained organisational success; > consideration of business and operational risk through the design of performance objectives, clawbacks and the exercise of Board discretion; > incentives, and a minimum securityholding requirement, that align the interests of executives to those of securityholders; > vesting periods for deferred incentives that reflect the time horizons over which Mirvac invests, while providing appropriate stretch and incentive for executives; > best-practice governance and ensuring remuneration outcomes are reasonable taking into account community and stakeholder expectations; and > target remuneration levels and remuneration outcomes that appropriately reflect the challenge and complexity of being an active developer and of being an integrated and diverse property company. As in previous years, we have maintained a financial gateway of 90 per cent of budget for the Group STI Pool to open, which the HRC believes is important in aligning financial performance with individual STI outcomes. Pleasingly, the gateway opened for FY22, reflecting the performance of the Group. STI outcomes (detailed pages 55 to 57) reflect financial performance and performance against the non-financial strategic priorities on the Group Scorecard. The Long-term Performance Plan (LTP) vested at 40 per cent for Executive KMP: > The relative Total Shareholder Return (TSR) metric did not vest as a result of Mirvac’s securityprice performance. While the Board are disappointed with this relative result, the outcome for executives is aligned to securityholders and demonstrates the alignment between performance and reward that our remuneration framework is designed to deliver; and > The ROIC component vested at 66.67 per cent based on the communicated/approved methodology. The Board determined this vesting outcome for the ROIC component, taking into account the ROIC performance, which exceeded WACC over the three-year performance period (the primary driver of the vesting calculation) and taking into account the outcomes delivered by management over the performance period, including steering Mirvac through the pandemic; protecting the balance sheet; de-risking future earnings; rapid growth of the Build to Rent business and pipeline; and delivering on critical non-financial outcomes over the three-year period, including Mirvac becoming net positive carbon for its scope 1 and 2 emissions nine years early and Mirvac being ranked the Best Place to Work in the property sector. There were no significant changes made to our remuneration approach in FY22. As always, Mirvac conducts a detailed review of our executive remuneration framework each year. While the Board prefers stability in the framework and avoids one-off retention awards to supplement the approach, we believe a full review ensures the approach remains fit for purpose. Notwithstanding the more challenging trading conditions for FY23, the Board and Management believe that the current STI and LTP design remains fit for purpose, including a financial gateway for the STI plan, use of TSR and ROIC as the LTP measures, and maintaining ROIC exceeding WACC as a key component of our LTP design. 2 WHO IS COVERED BY THIS REPORT This report covers the key management personnel (KMP) of Mirvac, who are the people responsible for determining and executing Mirvac’s strategy. This includes both the Executive KMP (the CEO/MD, CFO and heads of business units who are part of the ELT) as well as Non-Executive Directors. For FY22, the KMP were: Non-Executive Directors John Mulcahy Christine Bartlett Damien Frawley Jane Hewitt James M. Millar AM Samantha Mostyn AO Peter Nash Robert Sindel Executive KMP Susan Lloyd-Hurwitz Brett Draffen Campbell Hanan Stuart Penklis Courtenay Smith Chair Non-Executive Director Non-Executive Director since 1 December 2021 Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director CEO/MD Chief Investment Officer Head of Integrated Investment Portfolio Head of Residential CFO The information provided in this remuneration report has been audited as required by section 308 (3C) of the Corporations Act 2001. 52 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS REMUNERATION REPORT GOVERNANCE 3 KEY QUESTIONS Key questions REMUNERATION IN FY22 How is Mirvac’s performance reflected in this year’s remuneration outcomes? What changes have been made to the remuneration structure in FY22? Are any changes planned for FY23? Mirvac approach Further information Mirvac’s reward framework aims to align the interests of our employees with those of our securityholders and stakeholders. The remuneration outcomes reflect a pay-for-performance approach that considers a number of factors, including Group, team and individual performance, as well as behaviours that help build and protect Mirvac’s culture and reputation. Short-term: Mirvac has delivered strong performance with both operating profit and ROIC outperforming targets, and the strategic objectives were either met or exceeded, see pages 55 to 57. A Group operating profit gateway is applied, such that no STI pool is funded unless operating profit is at least 90 per cent of plan. Subject to the gateway being met, the STI pool is funded up to a maximum of 6 per cent of operating profit. The FY22 operating profit was above both the gateway and plan, and the HRC approved a Group STI score of 113 per cent, down from 123 per cent in FY22. Long-term: The three-year performance period for the FY20 Long-term Performance Plan (LTP) completed on 30 June 2022. The FY20 LTP was divided into two components, with 40 per cent tested against relative TSR and 60 per cent tested against ROIC, both over a three-year period. Mirvac’s absolute TSR performance was below the median of the comparator group and as a result this portion of the award did not vest. The Board determined that the ROIC component of the award has vested at 66.67 per cent taking into account the ROIC performance exceeding WACC over the three-year performance period (the primary driver of the vesting calculation) and the outcomes delivered by management over the performance period, including: steering Mirvac through the pandemic; protecting the balance sheet; de-risking future earnings; rapid growth of the Build to Rent business and pipeline; and delivering on critical non-financial outcomes over the three-year period including Mirvac becoming net positive carbon nine years early and Mirvac being ranked the ‘Best Place to Work’ in our sector. Total vesting of the FY20 LTP for Executive KMP is 40 per cent. Fixed remuneration: There were no increases to the fixed remuneration or total target remuneration for any Executive KMP during FY22. Short-term incentives: There were no changes to STI methodology. Consistent with prior years, the STI pool has a gateway requirement of Group operating profit being at least 90 per cent of target, and the pool funding is moderated by the Board based on the achievement of a scorecard of strategic objectives. Long-term incentives: Following the suspension of the ROIC hurdle for the FY21 LTP award, the Board determined the performance measures for the FY22 LTP award to KMP would revert to relative TSR and ROIC: 40 per cent weighting for relative TSR; and 60 per cent weighting for ROIC. The performance period of the FY22 LTP began on 1 July 2021 and will end on 30 June 2024. Minimum securityholding requirement: The minimum securityholding requirement for Non-Executive Directors has increased from 50,000 securities to 100 per cent of base fees. Non-Executive Directors will have three years from their date of appointment to the Board, or for current Non-Executive Directors three years from September 2021, to acquire securities up to the minimum. Fixed remuneration: Stuart Penklis, Head of Residential, has received a fixed pay increase from $800,000 to $950,000 per annum, effective 1 July 2022. While Mirvac generally does not provide year-on-year increases to senior executives’ fixed remuneration, the adjustment was made after benchmarking this role relative to both external market and internal peers, and the broader scope of his role. Variable remuneration: There are no significant changes planned for FY23. However, in line with previous years, the Board will review and adjust (if necessary) the threshold and stretch performance levels for the performance objectives applicable to the STI and LTP awards. Section 4 Page 55 Section 6 Page 58 Section 6 Page 58 Annual Report 2022 – 53 FINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS REMUNERATION REPORT 3 KEY QUESTIONS CONTINUED Key questions Mirvac approach REMUNERATION FRAMEWORK Further information Where does Mirvac’s remuneration sit relative to the market? Fixed and variable pay are both aimed at the market median, with remuneration opportunities for outstanding performance extending up to the 75th percentile of the market. What proportion of remuneration is ‘at risk’? The majority of Executive KMP’s remuneration is based on performance and is therefore at risk. The remuneration package for the CEO/MD is 70 per cent performance-related pay, and for other Executives the remuneration package is, on average, 58 per cent performance-related pay. Are there any clawback provisions for incentives? Yes, the Board has the ability to claw back incentives in the event of a material financial misstatement, any misconduct that is, or may be, harmful to the Group, and/or gross negligence. What is Mirvac’s minimum securityholding requirement? The minimum securityholding requirement is: > 150 per cent of fixed remuneration for the CEO/MD; > 100 per cent of fixed remuneration for other Executives; and > 100 per cent of base fees for Non-Executive Directors. Executives have five years from the commencement of their role on the ELT, or for current Executives five years from 1 July 2018, to establish their Mirvac security ownership to the minimum. Non-Executive Directors have three years from their date of appointment to the Board to acquire securities up to the minimum. SHORT-TERM INCENTIVES Are any STI payments deferred? Yes, 25 per cent of STI for Executives are awarded as rights over Mirvac securities, half of which vest in one year and half in two years. If the Executive resigns before the vesting period ends, the rights do not vest and are forfeited. Are STI payments capped? Yes, an Executive’s STI is capped at double their STI target, achievable only in circumstances of both exceptional individual and Group performance. LONG-TERM INCENTIVES What are the performance measures for the LTP plan? For the FY20 and FY22 LTP awards, performance is measured over a three-year period with 40 per cent of the award subject to relative TSR, and 60 per cent of the award subject to ROIC, with the Board having overarching discretion to ensure vesting outcomes are appropriately aligned to performance. For the FY21 LTP award, performance is measured over the period 1 October 2020 to 30 June 2023 with 100 per cent of the award subject to relative TSR, with the Board having overarching discretion to ensure vesting outcomes are appropriately aligned to performance. Does the LTP have re-testing? No, there is no re-testing. Are dividends/distributions paid on unvested LTP awards? No, dividends/distributions are not paid on unvested LTP awards. This ensures that Executives are only rewarded when performance hurdles have been achieved at the end of the performance period. Is the size of LTP grants increased in light of performance conditions? No, there is no adjustment to reflect the performance conditions. The grant price for allocation purposes is not reduced based on performance conditions. Mirvac uses a ‘face value methodology’ for allocating performance rights to each Executive KMP, being the average security price for the month leading up to grant, discounted for the assumed value of dividends and distributions not paid during the three-year performance period. Section 6 Page 58 Section 5 Page 58 Section 6 Page 58 Section 12 Page 67 Section 16 Page 71 Section 5 Page 58 Section 6 Page 60 Section 6 Page 59 Section 6 Page 60 Section 6 Page 60 Section 6 Page 60 Section 6 Page 60 Can LTP participants hedge their unvested LTP? Consistent with the Corporations Act 2001, participants are prohibited from hedging their unvested performance rights. Section 6 Page 61 For deferred STI awards, securities are purchased on-market. For LTP awards, the Board has discretion to issue new securities or buy existing securities on-market. Section 6 Pages 60 and 61 No, Mirvac uses performance rights for the deferred STI and LTP awards. EXECUTIVE KMP SERVICE AGREEMENTS What is the maximum an executive can receive on termination? Executive KMP termination entitlements are limited to 12 months’ fixed remuneration. 54 – Celebrating 50 years Section 6 Pages 60 and 61 Section 14 Page 69 Does Mirvac buy securities or issue new securities for security-based awards? Does Mirvac issue share options? Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS REMUNERATION REPORT GOVERNANCE 4 OUR REMUNERATION STRATEGY AND THE LINK TO BUSINESS STRATEGY AND PERFORMANCE Mirvac’s remuneration strategy is designed to support and reinforce its business strategy. The at-risk components of remuneration are tied to measures that reflect the successful execution of our business strategy in both the short and long term. Our strategic drivers are reflected in STI performance measures and LTP performance measures, so Mirvac’s actual performance directly affects what executives are paid. Our pillars for creating value … … are reflected in incentive performance measures Commentary on actual performance Achievement PERFORMANCE FINANCIAL LTP PERFORMANCE MEASURES RELATIVE TOTAL SHAREHOLDER RETURN (TSR) Measures the performance of Mirvac securities over time, relative to other entities in a comparison group. RETURN ON INVESTED CAPITAL (ROIC) Reflects how efficiently Mirvac is using its assets to generate earnings. It is calculated by dividing Total Return by average Invested Capital over the three-year period. STI PERFORMANCE MEASURES OPERATING PROFIT Reflects how much revenue the business has generated for the year, less operating costs and represents a key driver of securityholder value. RETURN ON INVESTED CAPITAL (ROIC) Reflects how efficiently Mirvac is using its capital to generate earnings. It is calculated by dividing Total Return by average Invested Capital. OTHER PERFORMANCE MEASURES Mirvac’s absolute TSR performance was below the median relative to its comparator group. Below target Mirvac’s average annual ROIC was 6.4 per cent over the three-year period. Within target range Within target range Within target range Within target range In FY22, operating profit was $596m up from $550m in FY21. In FY22, ROIC was 6.9 per cent up from 6.8 per cent in FY21. EPS In FY22 EPS (cpss) was 15.1. DPS In FY22 DPS (cpss) was 10.2. Capital Management > As at 30 June 2022, weighted average debt maturity of 5.6 years, with only $220m of debt maturing in FY23 and $250m in FY24; > A- and A3 credit ratings with stable outlooks from Fitch Ratings and Moody’s Investor Services maintained; > $1.4bn of cash and undrawn debt facilities at 30 June 2022; and > gearing at the lower end of our preferred range of 20-30 per cent. More recently, in July 2022, we were delighted to secure management rights to the AMP Capital Wholesale Office Fund (AWOF), featuring a high-quality office portfolio valued at over $7.7bn. As a result of the transaction, our third-party capital under management will grow to approximately $17.9bn, which is an approximate 75 per cent increase on our funds under management as at 30 June 2022. Annual Report 2022 – 55 FINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS REMUNERATION REPORT 4 OUR REMUNERATION STRATEGY AND THE LINK TO BUSINESS STRATEGY CONTINUED Our pillars for creating value … … are reflected in incentive performance measures Commentary on actual performance PLACE ASSET CREATION AND CURATION STRATEGY EXECUTION Ensures management delivers on core initiatives relating to Group strategy and operating model. Measures include performance against Group-or divisional-specific initiatives and/or integrated projects. Commercial & Mixed Use > Completed two major projects – the refurbishment of the Locomotive Workshop, South Eveleigh, Sydney and Heritage Lane, Brisbane; and > Advanced key office and mixed use projects at 55 Pitt Street in Sydney and at Harbourside, Sydney. Integrated Investment Portfolio > Approximately $13.8bn of assets on our balance sheet across the IIP portfolio; > $10.2bn of external assets and funds under management; and > 5.6 years WALE, 97.3 per cent occupancy and 5.0 WACR. Residential > Settlements of 2,523 lots; > Positive sales momentum was demonstrated by 2,898 exchanges; and > Released 2,748 residential lots, with 70 per cent of all released lots pre-sold. As a result, our pre-sales increased to $1.6bn, providing good visibility of future earnings. Achievement Within target range PEOPLE PEOPLE, CULTURE AND SAFETY PEOPLE & LEADERSHIP Have an engaged and motivated workforce with superior skills and capabilities. There is a strong correlation between high levels of employee engagement and a positive culture with securityholder returns. Measures include engagement, key talent retention, gender diversity and flexibility targets. INNOVATION LEADERSHIP A culture of innovation will drive and safeguard long-term securityholder returns. Measures include performance against agreed innovation missions. HSE Mirvac is committed to providing a safe workplace for its employees, suppliers and communities. Measures include Lost Time Injury Frequency Rate, Critical Injury Frequency Rate, and timely incident reporting. People & Leadership targets set were either met or exceeded: > ranked number one employer in the world for gender equality by Equileap; > 2022 AFR BOSS Best Places to Work for the Property, Construction and Above target Transport sector; > maintained employee engagement in the top quartile of companies globally; > strong scores on leadership and culture in employee surveys, including 93 per cent favourable score on the statement ‘I am proud to work at Mirvac’ and 92 per cent of employees happy to recommend Mirvac as a great place to work; > achieved 44 per cent women in senior management; > maintained a zero like-for-like gender pay gap for the sixth year; and > retention of 96 per cent of employees identified as key talent. > Young Hearts by Mirvac is an initiative aimed at improving the lives of people with a disability by providing independent living options that meet their life goals. While still in a pilot phase, we seek to leverage our integrated model to deliver innovative and leading-edge specialist disability accommodation, providing a more diversified product offering within our existing communities; and > Introduced a Board of Innovators: a diverse group of innovation ambassadors from across the business who are responsible for analysing key trends and inflection points that could impact our business, and identify pathways to seize significant opportunities. Within target range > Performance against key metrics: > CIFR of 0.74 against a target of less than 1.5; > LTIFR of 1.18 against a target of less than 2; Above target > In our most recent engagement survey, 96 per cent of employees said they believe Mirvac is committed to the safety of employees, and 88 per cent agreed that their manager genuinely cares about their wellbeing; > We launched our new ‘Work Well, Stay Well’ strategy, which includes: > Mental Health First Aid Training with over 70 certified trainers across the business; > the overhaul of our Employee Assistance Program, which included partnering with a new provider, Sonder, provides a range of wellbeing resources and support from a network of trained safety, health and wellbeing specialists 24 hours a day, 365 days a year; and > Ongoing COVID-19 response management to safeguard the safety of our people and our stakeholders, and the continuity of our business operations. 56 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS GOVERNANCE REMUNERATION REPORT 4 OUR REMUNERATION STRATEGY AND THE LINK TO BUSINESS STRATEGY CONTINUED Our pillars for creating value … … are reflected in incentive performance measures Commentary on actual performance PARTNERS CUSTOMERS AND STAKEHOLDERS PLANET SUSTAINABILITY CUSTOMER & INVESTOR SATISFACTION Provide customers and investors with an experience that delivers excellence, consistently exceeds expectations and engenders loyalty. Represents how well Mirvac is meeting the expectations of key external stakeholders. Measures include retail customer, office tenant and residential customer satisfaction surveys, as well as qualitative feedback from key institutional investors and third-party capital investors. SUSTAINABILITY Mirvac’s sustainability strategy, This Changes Everything, sets out the way we approach our environmental, social and governance (ESG) risks and opportunities so that we can continue to deliver positive outcomes for our people, the planet, our partners and customers, and the communities in which we operate. We focus on six material issues: > Climate change, target: net positive carbon by 2030; > Natural resources, targets: net positive water and zero waste to landfill by 2030; > Our communities, target: net positive legacy; > Social inclusion, target: $100m investment in social sector by 2030; > Our people, target: highly engaged, capable, and diverse workforce; and > Trusted partner, target: most trusted owner and developer. Mirvac uses Net Promoter Score (NPS) to measure customer experience at key moments of the customer journey and periodically for ongoing customer relationships. In the first half of FY22, we saw NPS slightly decline in each asset class as a result of the impacts of COVID-19, most notably in Build to Rent. These improved, however, as restrictions were lifted and the experiences we were able to deliver to our customers resumed. Overall, NPS across the business in FY22 was: > +56% Retail consumer; > +40% Office; and > +24% Build to Rent. Within our Residential business, 30 per cent of apartment purchasers in FY22 had bought with Mirvac before, a testament to the care and quality we provide. Read more about Customers and Stakeholders on pages 28 to 31. Achieved a sustainability score of 96 per cent against a hurdle of 80 per cent. Highlights include: > Carbon emissions: net positive in scope 1 and 2 emissions, nine years ahead of our 2030 target; > Water: released Planet Positive – Water, our plan to be net positive in water well ahead of our 2030 target; > Waste: on track to halving development waste and buying 25 per cent recycled content in major materials; > Social procurement: $14m spent with Indigenous businesses, social enterprises, B-Corps, and charities, bringing our total since FY18 to $42m. This means we have met our $30m by 2025 goal, three years early; > Community investment: $9.6m in independently verified investment delivered, which includes initiatives such as social infrastructure and events and activities that bring people together – not just within our assets but within our broader community; > Released our second Modern Slavery Statement; and > Embedded our second Reconciliation Action Plan across Mirvac. Read more about Sustainability at Mirvac on pages 32 to 35. Achievement Within target range Above target HOW PERFORMANCE DIRECTLY AFFECTS WHAT EXECUTIVES ARE PAID Incentive outcomes LTP OUTCOMES LTP vesting outcome for Executive KMP in FY22 = 40 per cent STI OUTCOMES CEO/MD STI outcome in FY22 = 130 per cent of target Average STI in FY22 for other eligible Executives = 130 per cent of target Annual Report 2022 – 57 FINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS REMUNERATION REPORT 5 EXECUTIVE KMP REMUNERATION AT MIRVAC Mirvac’s executive remuneration approach is strongly performance focused. A significant proportion of executive remuneration is based on sustained performance, aligned with the business strategy. Executive remuneration at Mirvac is: > performance based: > the remuneration package for the CEO/MD is 70 per cent performance related pay; > the remuneration package for other Executive KMP is, on average, 58 per cent performance related pay is therefore at risk; > equity focused: > 52 per cent of the CEO/MD’s total remuneration is paid in equity; > about one-third of other Executive KMP members’ total remuneration is paid in equity; > encouraging an ownership mindset through equity-based incentives (above) and minimum securityholding requirements: > the CEO/MD is required to hold 150 per cent of fixed remuneration as Mirvac securities; > other Executive KMP are required to hold 100 per cent of their fixed remuneration as Mirvac securities; > multi-year focused: > 50 per cent of STI deferral is subject to a one-year holding lock and the remaining 50 per cent to a two-year holding lock; and > LTP performance is measured over a three-year period. REMUNERATION MIX The graphs below set out the remuneration structure and mix for the CEO/MD and other Executive KMP members at Mirvac for FY22: 6 HOW REMUNERATION IS STRUCTURED CEO/MD PERFORMANCE DEPENDENT Fixed remuneration 30% Target STI 24% Maximum LTP 2 46% Cash 18% Deferred 1 6% Maximum LTP 46% Other Executive KMP PERFORMANCE DEPENDENT Fixed remuneration 43% Target STI 31% Maximum LTP 2 26% 1. Deferred STI: 50% deferred for 12 months and 50% deferred for 24 months. Subject to clawback. 2. LTP granted as performance rights with performance measured over a three-year period. Subject to clawback. Cash 23% Deferred 1 8% Maximum LTP 26% Mirvac’s executive remuneration framework adopts a market positioning strategy designed to attract and retain talented employees, and to reward them for delivering strong performance. The market positioning strategy also supports fair and equitable outcomes among employees. FIXED REMUNERATION Fixed remuneration acts as a base-level reward for a competent level of performance. It includes cash salary, compulsory superannuation and any salary-sacrificed items (including fringe benefits tax). The Board engages its independent remuneration advisor, as needed, to provide external remuneration benchmarking data as input into setting remuneration for Executive KMP, ensuring that remuneration remains competitive. When determining the relevant market for each role, Mirvac considers the companies from which it sources talent, and to whom it could potentially lose talent: For business roles > primary comparison group: the A-REIT, plus Lendlease; and > secondary comparison group: general industry with a similar market capitalisation (50 per cent to 200 per cent of Mirvac’s 12-month average market capitalisation). For corporate roles > primary comparison group: general industry with a similar market capitalisation (50 per cent to 200 per cent of Mirvac’s 12-month average market capitalisation). The use of general industry reflects the greater transferability of skills for these roles; and > secondary comparison group: specific peers in the A-REIT, plus Lendlease. 58 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS GOVERNANCE REMUNERATION REPORT 6 HOW REMUNERATION IS STRUCTURED CONTINUED STI: HOW DOES IT WORK? Purpose Value Group STI scorecard/ pool funding Motivate and reward employees for contributing to the delivery of annual business performance. Target Maximum CEO/MD 80 per cent of fixed remuneration 160 per cent of fixed remuneration Other Executive KMP 70-80 per cent of fixed remuneration 140-160 per cent of fixed remuneration Gateway: Group operating profit must be at least 90 per cent of plan before any STI payments are made. STI pool funding: Subject to the gateway being met, the STI pool is funded up to a maximum of 6 per cent of operating profit. Pool moderation: The Board has discretion to moderate the above calculated outcome based on achievement of strategic objectives (see below). The objectives are quantitative in nature and are set in line with the short- and medium-term strategic objectives. SCORECARD At the start of the year, a scorecard of objectives is agreed with management. At the end of the year, the Board makes a rigorous assessment, taking into account quantitative and qualitative factors. The Board has discretion to increase or decrease the pool funding taking into account performance against these strategic objectives and the Group’s risk framework and tolerance. Our performance against targets will be disclosed retrospectively as we have done this year on pages 55 and 57, noting that some of the targets for individual strategic objectives are not disclosed as they are commercially sensitive. Measure Rationale for using Financial performance Capital efficiency Strategy execution and operational excellence Reflects how much revenue the business has generated for the year, less operating costs, and represents a key driver of securityholder value. Reflects how efficiently Mirvac is using its capital to generate earnings, and the alignment of business strategy to create sustainable value for securityholders. Ensures management delivers on core initiatives relating to Group strategy and operating model. Customer and investor satisfaction Represents how well Mirvac is meeting the expectations of key external stakeholders. People & Leadership There is a strong correlation between high levels of employee engagement and a positive culture with securityholder returns. Measurement Operating profit AFFO ROIC Progress on strategic capital allocation initiatives, and third-party funds under management growth. Measures include performance against Group or divisional specific initiatives and/or integrated projects. Measures include retail customer, office tenant and residential customer satisfaction surveys, as well as qualitative feedback from key institutional investors and third-party capital investors. Measures include engagement, key talent retention, gender diversity and flexibility targets. Innovation leadership A culture of innovation will drive and safeguard long-term securityholder returns. Measures include performance against agreed innovation missions. HSE&S leadership Risk Mirvac is committed to providing a safe workplace for its employees, suppliers and communities and to ensuring its activities do not have an adverse impact on the environment. Alignment of remuneration/reward and prudent risk-taking. The scorecard includes specific risk objectives and the HRC makes an overall assessment of how each individual ELT member has managed risk before approving individual STI outcomes. Measures include Lost Time Injury Frequency Rate, Critical Incident Frequency Rate, timely incident reporting and sustainability targets. Measures include an assessment of risk culture and compliance (including training and open audit items), with a broad view of risk, including financial and non-financial risks and reputation matters. Individual performance objectives Performance assessment Each Executive KMP agrees an individual scorecard of performance objectives at the start of the year against which their performance will be assessed. Individual performance objectives are set based on the specific responsibilities for each role and include specific risk objectives, and an assessment by the HRC at year-end on risk leadership and risk outcomes. When determining executive remuneration outcomes, the Board use their judgement and oversight to consider a range of quantitative and qualitative factors to ensure outcomes align to business performance, investor outcomes, and stakeholder expectations. Individual awards are proposed by the CEO/MD, endorsed by the HRC and approved by the Board. For the CEO/MD, the HRC proposes the STI award for Board approval. Annual Report 2022 – 59 FINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS REMUNERATION REPORT 6 HOW REMUNERATION IS STRUCTURED CONTINUED STI: HOW DOES IT WORK? Delivery/deferral For Executive KMP: > 75 per cent is paid as cash; and > 25 per cent of any STI award is deferred into performance rights over Mirvac securities (granted on the same date as the cash payment is made). The rights vest in two tranches: 50 per cent after one year and 50 per cent after two years. If the deferred rights vest, entitlements are satisfied by the purchase of existing securities on-market. Executives are expected to retain the resulting securities they receive until they satisfy the minimum securityholding guidelines. Termination/ forfeiture The deferred portion of a STI award is forfeited if an employee resigns or is dismissed for performance reasons prior to the vesting date. Unvested deferred STI awards may be retained if an employee leaves due to circumstances such as retirement, redundancy, agreed transfer to an investment partner, total and permanent disablement or death. Clawback policy The policy gives the Board the ability to claw back incentives in the event of a material financial misstatement, any misconduct that is, or may be, harmful to the Group, and/or gross negligence. Hedging Consistent with the Corporations Act 2001, participants are prohibited from hedging their unvested performance rights. LTP: HOW DOES IT WORK? Purpose Value Instrument Assist in attracting and retaining the required executive talent; focus executive attention on driving sustainable long-term growth; and align the interests of executives with those of securityholders. The maximum LTP opportunity during FY22 was equivalent to: CEO/MD Other Executive KMP 150 per cent of fixed remuneration 50-90 per cent of fixed remuneration Awards under this plan are made in the form of performance rights. A performance right is a right to acquire one fully paid Mirvac security provided a specified performance hurdle is met. No dividends/distributions are paid on unvested LTP awards. This ensures that Executives are only rewarded when performance hurdles have been achieved at the end of the performance period. Grant value/price Mirvac uses a ‘face value methodology’ for allocating performance rights to each Executive KMP, being the average security price for the month leading up to grant, discounted for the assumed value of dividends and distributions not paid during the three-year performance period. The grant price for allocation purposes is not reduced based on performance conditions. Performance period Performance hurdle for FY22 grant Performance is measured over a three-year period. The FY22 grant has a performance period commencing 1 July 2021 and ending 30 June 2024. The HRC reviews the performance conditions annually to determine the appropriate hurdles based on Mirvac’s strategy and prevailing market practice. Two performance measures apply to the LTP grants made during FY22: Relative TSR: (40 per cent of the LTP allocation) Relative TSR is used because it is an objective measure of securityholder value creation and is widely understood and accepted by the various key stakeholders. Mirvac’s TSR performance is measured relative to a comparison group consisting of Mirvac’s primary market competitors (the A-REIT) as this is aligned to the peer group in which we compete for capital. ROIC: (60 per cent of the LTP allocation) ROIC is used because it is aligned to Mirvac’s strategic drivers, in particular financial performance and capital efficiency. ROIC is calculated as Total Return divided by average Invested Capital. The vesting schedule set out below reflects the Board’s view that vesting of the ROIC component ought to commence on the achievement of Mirvac’s WACC, the point at which management create value for securityholders, with full vesting on achieving a premium above WACC. The premium to WACC for the ROIC component of the FY22 award was one per cent, which at the time represented both significant stretch and value creation for securityholders. After calculating the outcome based on the vesting schedule detailed below, the Board shall have +/-20 per cent discretion to adjust the vesting outcomes for the ROIC performance hurdle to ensure vesting outcomes reflect management’s performance over the performance period. 60 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS GOVERNANCE REMUNERATION REPORT 6 HOW REMUNERATION IS STRUCTURED CONTINUED LTP: HOW DOES IT WORK? Vesting schedule for FY22 grant Relative TSR ROIC Relative TSR (percentile) Percentage of ROIC-tested rights to vest Average annual ROIC (%) Percentage of ROIC tested rights to vest < 50th 50th > 50th to 75th Nil 50% Pro-rata between 50% and 100% 75th and above 100% < WACC Nil Between WACC and WACC + 0.2% Between WACC + 0.2% and WACC + 0.4% Between WACC + 0.4% and WACC + 1.0% Pro-rata between 0% and 50% Pro-rata between 50% and 75% Pro-rata between 75% and 100% > WACC + 1.0% 100% Vesting/delivery Vesting of LTP grants is dependent on achieving relative TSR performance and ROIC targets over the period 1 July 2021 to 30 June 2024, with the Board having overarching discretion to ensure vesting outcomes are appropriately aligned to performance. The performance rights will automatically exercise if and when the Board determines the performance conditions are achieved. If the performance rights vest, entitlements are satisfied by either an allotment of new securities to participants or by the purchase of existing securities on-market. Any performance rights that do not vest at the end of the performance period will lapse. There is no re-testing. Executive KMP members will be expected to retain the resulting securities until they satisfy the minimum securityholding guidelines. Termination/ forfeiture Resignation or dismissal: all unvested performance rights are forfeited. Retirement, redundancy, agreed transfer to an investment partner, total and permanent disablement or death: the HRC determines the number of rights that will lapse or are retained, subject to both the original performance period and hurdles. Change of control event: the Board, in its absolute discretion, determines the number of performance rights that vest, if any, taking into account the performance from the date of grant to the event. Clawback policy The policy gives the Board the ability to claw back incentives in the event of a material financial misstatement, any misconduct that is, or may be, harmful to the Group, and/or gross negligence. Dilution Dilution that may result from securities being issued under Mirvac’s LTP plan is capped at the limit set out in ASIC Class Order 14/1000, which provides that the number of unissued securities under those plans must not exceed 5 per cent of the total number of securities of that class as at the time of the relevant offer. Hedging Consistent with the Corporations Act 2001, participants are prohibited from hedging their unvested performance rights. REMUNERATION DELIVERY The graphs below set out the remuneration structure so that a substantial portion of remuneration is delivered as equity through STI and LTP, encouraging an ownership mindset and aligning the interests of the executives with those of our securityholders: FIXED Base salary, superannuation & any salary-sacrificed items STI LTP Based on individual and business performance (financial & strategic objectives) Cash 12.5% deferred for 12 months 12.5% deferred for 24 months Performance rights subject to three-year performance period & continued service Year 0 Year 1 Year 2 Year 3 Annual Report 2022 – 61 FINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS REMUNERATION REPORT 7 BUSINESS AND EXECUTIVE REMUNERATION OUTCOMES HOW THE GROUP’S PERFORMANCE HAS TRANSLATED INTO STI AWARDS Mirvac’s financial performance directly affects the STI awards in two ways: > Gateway: Group operating profit must be at least 90 per cent of plan before any STI payments are made; and > STI pool funding: Subject to the gateway being met, the STI pool is funded up to a maximum of 6 per cent of operating profit. The Board then has discretion to moderate the calculated outcome based on achievement of strategic objectives. Performance was strong across the Group in FY22, with operating profit outperforming the target set by the Board. The Group’s STI scorecard of 113 per cent (of a potential 150 per cent) reflects the strong financial results. This graph shows how the average STI outcome for all employees has been closely tied to financial performance on operating profit and ROIC. Financial performance in each case is expressed as a percentage of the business target set for the year, while the STI outcome represents the average STI award to participants that year as a percentage of target. The diagram below sets out Mirvac’s performance and the resulting STI outcomes: Financial performance vs average STI outcome 160 Per cent of target 120 80 40 0 FY18 FY19 FY20 FY21 FY22 Operating profit STI score ROIC Operating earnings per stapled security 18.0 15.0 12.0 9.0 6.0 3.0 0 GATEWAY ACHIEVED (AT LEAST 90% OF TARGET OPERATING PROFIT ACHIEVED) OPERATING PROFIT + STRATEGIC OBJECTIVES STI pool funding: Subject to the gateway being met, the STI pool is funded up to a maximum of 6 per cent of operating profit. Pool moderation: The HRC can moderate the score, up or down, based on achievement of strategic objectives to ensure STI awards are consistent with Mirvac’s remuneration strategy, and is appropriately aligned to business performance, investor outcomes, and stakeholder expectations. FY22 STI outcome: The HRC approved a Group STI score of 113 per cent of target (from a maximum potential pool of 150 per cent of target). FY22 cash STI pool – $35.8m (6 per cent of Mirvac’s operating profit). Fixed remuneration + Individual STI target + Group STI score (0-150%) + Individual STI score (0-150%) = Individual STI award (capped at 200% of target) Each Executive KMP is awarded an individual STI score between zero and 150 per cent of their target. Scores are based on an assessment of their performance for the year against their individual objectives. When determining executive remuneration outcomes, the Board use their judgement and oversight to consider a range of quantitative and qualitative factors to ensure outcomes align to business performance, investor outcomes, and stakeholder expectations. STEP 1 STEP 2 STEP 3 STEP 4 Calculated STI pool outcomes Assessment of Group scorecard outcomes Consider other factors affecting performance that are not reflected in the scorecard Apply judgement ensuring outcomes align to investor outcomes, stakeholder expectations, Mirvac Values 62 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS REMUNERATION REPORT GOVERNANCE 7 BUSINESS AND EXECUTIVE REMUNERATION OUTCOMES CONTINUED HOW THE GROUP’S PERFORMANCE HAS TRANSLATED INTO LTP AWARDS Mirvac’s financial and security price performance directly affects the vesting of the LTP awards. For the FY20 award: > 40 per cent of the LTP is subject to a relative TSR performance measure; and > 60 per cent is subject to a ROIC performance measure. Vesting of LTP grants is dependent on achieving relative TSR performance and ROIC targets over a three-year period, with the Board having over-arching discretion to ensure vesting outcomes are appropriately aligned to performance. In the three years to 30 June 2022: > Mirvac’s absolute TSR performance was below the median of the comparator group and as a result the relative TSR component did not vest; > the Group’s three-year average ROIC performance was 6.4 per cent, exceeding WACC over the same period, with the Board determining that 66.67 per cent of the ROIC component vested; and > as a result, total vesting of the FY20 LTP for Executive KMP is 40 per cent. The diagram below sets out the Group’s performance and the resulting LTP outcomes for the Executive KMP: FY20 LTP GRANTS TO ELIGIBLE PARTICIPANTS AND RELATIVE TSR AND ROIC PERFORMANCE HURDLES SET 30 June 2022: three-year performance period ends for the FY20 grants and performance is measured for relative TSR and ROIC > RELATIVE TSR Mirvac’s security price & distributions over the past five years $500m $3.50 Mirvac’s Total Shareholder Return (1 July 2019 – 30 June 2022) 30% 400 300 200 100 0 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 0 25% 20% 15% 10% 5% 0 FY18 FY19 FY20 FY21 FY22 Jun 19 Jun 20 Jun 21 Distributions paid ($m) Security price ($) 25th percentile 50th percentile 75th percentile Jun 22 MGR Mirvac’s absolute TSR performance was below the median relative to the comparator group. None of the performance rights linked to the relative TSR measure vested. + ROIC ROIC performance Mirvac’s ROIC performance over the three years 9% Performance over the three-year period: > FY20 performance was significantly impacted by COVID-19 resulting in the threshold performance hurdle not being met; > FY21 and FY22 performance exceeded the threshold; > Mirvac’s average annual ROIC over the three-year performance period was 6.4 per cent, resulting in the threshold target being exceeded; and > the WACC methodology used for determining vesting has been independently validated by an independent advisor. Stretch 6% Threshold 5.2% 3% 0 7.2% 6.9% 6.4% 66.67 per cent of the performance rights linked to the ROIC measure vested. FY20 FY21 FY22 3-year average 40 PER CENT OF THE TOTAL FY20 LTP AWARD VESTED FOR EXECUTIVE KMP = Annual Report 2022 – 63 FINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS 43.4 76.0 40.0 FY18 1,089 608 408 2.17 29.4 15.6 REMUNERATION REPORT 7 BUSINESS AND EXECUTIVE REMUNERATION OUTCOMES CONTINUED EXECUTIVE KMP VESTING OUTCOMES FOR THE PAST THREE YEARS A summary of vesting under Mirvac’s performance-based equity grants that have vested in the last three years is shown in the following table: Grant year FY18 FY19 FY20 Performance hurdle Performance period Performance period ended Vested % Relative TSR and ROIC Relative TSR and ROIC Relative TSR and ROIC 3 years 3 years 3 years 30 June 2020 30 June 2021 30 June 2022 PAST FINANCIAL PERFORMANCE The table below provides summary information on the Group’s earnings and securityholders’ wealth for the five years to 30 June 2022: Profit attributable to the stapled securityholders of Mirvac ($m) Operating profit ($m) 1 Distributions paid ($m) Security price at 30 June ($) Statutory EPS – basic (cents) Operating earnings per stapled security (EPS) – diluted (cents) FY22 906 596 404 1.98 23.0 15.1 FY21 827 550 390 2.92 21.0 14.0 FY20 558 602 357 2.17 14.2 15.3 FY19 1,019 631 440 3.13 27.6 17.1 1. Consistent with the financial statements disclosures, the FY18 operating profit has been updated to $608m as a result of the 1 July 2018 operating profit definition change. 8 SUMMARY OF FY22 REMUNERATION CEO/MD remuneration The CEO/MD’s remuneration was not changed during FY22. Remuneration for the CEO/MD in the table in section 9 decreased to $3.5m from $5.9m in FY21 due to: > STI at 130 per cent of target for FY22 v 166 per cent of target for FY21; > 40 per cent vesting of the FY20 LTP award v 76 per cent vesting of the FY19 LTP award; and > the decrease in security price ($1.98 at 30 June 2022 v $2.92 at 30 June 2021). The CEO/MD has not had an increase to her fixed remuneration since she commenced in 2012. Fixed and total target remuneration STI LTP There were no increases to the fixed remuneration or total target remuneration for any Executive KMP during FY22. Strong results across all operating metrics resulted in an above target STI pool of 113 per cent, down from 123 per cent in FY22. The STI pool in FY22 was driven by: > operating profit of $596m outperforming the target set by the Board, up from $550m in FY22; and > strong performance against the scorecard of the strategic objectives (see pages 55 to 57). Vesting of LTP grants is dependent on achieving relative TSR performance and ROIC targets over a three-year period, with the Board having over-arching discretion to ensure vesting outcomes are appropriately aligned to performance. The three-year performance period for the FY20 LTP completed on 30 June 2022. Mirvac’s absolute TSR performance was below the median of the comparator group and as a result none of the relative TSR component of the award vested. The Board determined that the ROIC component of the award has vested at 66.67 per cent taking into account the ROIC performance exceeding WACC over the three-year performance period (the primary driver of the vesting calculation) and the outcomes delivered by management over the performance period, including: steering Mirvac through the pandemic; protecting the balance sheet; de-risking future earnings; rapid growth of the Build to Rent business and pipeline; and delivering on critical non-financial outcomes over the three-year period, including Mirvac becoming net positive carbon nine years early and Mirvac being ranked the ‘Best Place to Work’ in our sector. Total vesting of the FY20 LTP for Executive KMP is 40 per cent. Non-Executive Director fees No changes. 64 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS REMUNERATION REPORT GOVERNANCE 9 ACTUAL REMUNERATION RECEIVED IN FY22 The following table sets out the actual value of the remuneration received by Executive KMP members during the year. The figures in this table are different from those shown in the accounting table in section 10, which includes an apportioned accounting value for all unvested STI and LTP grants during the year (some of which remain subject to satisfaction of performance and service conditions and may not ultimately vest). The table below, on the other hand, shows: > cash STI: the cash portion of any STI payments to be made in September 2022 in recognition of performance during FY22; > deferred STI vested: the value of the deferred STI from prior years that vested in FY22 (being the number of rights that vested multiplied by the security price on the vesting date); and > LTP vested: the value of performance rights having a performance period that ended 30 June 2022 (being the number of performance rights that vested multiplied by the security price on 30 June 2022, being the last business day of the performance period). ACTUAL REMUNERATION RECEIVED IN FY22 Executive KMP Susan Lloyd-Hurwitz Brett Draffen Campbell Hanan 2 Stuart Penklis Courtenay Smith 3 Fixed remuneration 1 $ Cash STI $ Deferred STI vested $ LTP vested $ Other 1 $ Total $ 1,500,000 1,500,000 1,169,315 1,494,450 950,000 950,000 950,000 899,167 800,000 800,000 800,000 252,174 676,305 946,485 704,485 828,175 593,250 697,410 498,330 162,842 193,457 330,308 124,254 212,148 92,797 158,439 92,797 147,106 112,821 — 610,274 2,573,813 231,904 978,048 108,492 457,566 108,492 457,566 — — 24,617 24,648 15,768 21,459 15,446 15,478 17,383 12,977 12,627 4,689 3,497,663 5,923,219 1,998,231 3,108,140 1,871,220 2,358,825 1,611,922 2,115,059 1,423,778 419,705 Year FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 Includes long service leave accrued during the year. 1. 2. Campbell Hanan received a fixed remuneration increase from $800,000 to $950,000 per annum effective 1 October 2020. 3. Courtenay Smith commenced employment with Mirvac as CFO on 8 March 2021. EXECUTIVE KMP STI AWARDS IN FY22 The following table shows the actual STI outcomes (including any deferred component) for each of the Executive KMP for FY22: STI target % of fixed remuneration STI max % of fixed remuneration Actual STI % max STI forfeited % max Actual STI (total) $ Executive KMP Susan Lloyd-Hurwitz Brett Draffen Campbell Hanan Stuart Penklis Courtenay Smith 80 80 70 70 70 160 160 140 140 140 65 59 71 71 59 35 41 29 29 41 1,559,087 901,740 939,313 791,000 664,440 Annual Report 2022 – 65 FINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS REMUNERATION REPORT 10 TOTAL REMUNERATION IN FY22 The following statutory table shows the total remuneration for the Executive KMP for FY21 and FY22. These disclosures are calculated in accordance with the accounting standards and accordingly differ from the information presented in the actual remuneration received in FY22 table in section 9. Short-term benefits Cash salary and fees 1 $ Cash STI 2 $ Non-cash benefits 3 $ Post- employment Super- annuation contributions $ Security-based payments Value of LTP rights 4 $ Value of Deferred STI rights 4 $ Other long-term benefits Long service leave 5 $ Termination benefits $ Total remuneration $ % o f t o t a l r e m u n e r a t i o n P e r f o r m a n c e r e a t e d l r e m u n e r a t i o n 1,476,432 1,478,306 1,169,315 1,494,450 917,410 919,284 926,432 877,473 766,696 778,306 765,109 242,224 676,305 946,485 704,485 828,175 593,250 697,410 498,330 162,842 — — 9,494 15,154 — — 14,453 — 11,323 — 23,568 21,694 23,568 21,694 23,568 21,694 23,568 21,694 23,568 9,950 1,533,475 1,625,342 718,938 617,630 309,000 303,942 272,617 288,949 142,074 18,216 431,313 188,498 314,172 120,174 239,017 100,055 201,278 89,117 209,719 72,176 24,617 24,648 15,296 15,327 15,446 15,478 12,666 12,977 12,627 4,689 — 4,658,720 4,832,938 — — — — — 2,675,183 2,655,748 2,217,948 2,146,817 — 1,884,528 1,888,453 — — 1,662,750 510,097 — 67% 68% 64% 63% 56% 57% 57% 57% 51% 50% Executive KMP Susan Lloyd-Hurwitz Brett Draffen Campbell Hanan Stuart Penklis Courtenay Smith 6 Year FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 1. Cash salary and fees includes accrued annual leave paid out as part of salary. 2. Cash STI relates to cash portion of STI awards accrued for the relevant year and payable in September following the end of the relevant financial year. 3. Non-cash benefits include salary-sacrificed benefits and related fringe benefits tax where applicable. 4. Valuation of rights is conducted by an independent advisor. Lower STI values in FY21 is a result of no STI in FY20, therefore no deferral vesting in future periods. 5. Long service leave relates to amounts accrued during the year. 6. Courtenay Smith commenced employment with Mirvac as CFO on 8 March 2021. 11 LTP GRANTS IN FY22 The table below shows LTP grants made during FY22, subject to performance conditions over the performance period 1 July 2021 to 30 June 2024. Accounting standards require the estimated valuation of the grants be recognised over the performance period. The minimum value of the grant is nil if the vesting conditions are not met. The maximum value is based on the estimated fair value calculated at the time of the grant and amortised in accordance with the accounting standard requirements. Executive KMP Susan Lloyd-Hurwitz Total Brett Draffen Total Campbell Hanan Total Stuart Penklis Total Courtenay Smith Total LTP max as a % of fixed remuneration Performance measure Relative TSR ROIC Relative TSR ROIC Relative TSR ROIC Relative TSR ROIC Relative TSR ROIC 150 90 50 50 50 Number of Fair value per performance performance right $ rights granted 342,889 514,335 857,224 130,298 195,447 325,745 72,387 108,582 180,969 60,958 91,437 152,395 60,958 91,437 152,395 1.36 1.96 1.36 1.96 1.36 1.96 1.36 1.96 1.36 1.96 Maximum total value of grant 1 $ 467,015 1,008,281 1,475,296 177,466 383,146 560,612 98,591 212,860 311,451 83,025 179,249 262,274 83,025 179,249 262,274 1. The value of performance rights reflects the fair value at the time of grant. For the LTP grants subject to ROIC, 75 per cent vesting is assumed in the above valuation. 66 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS GOVERNANCE REMUNERATION REPORT 11 LTP GRANTS IN FY22 CONTINUED Key inputs used in valuing performance rights granted during FY22 were as follows: Grant date Performance hurdles Performance period start Performance period end Security price at grant date 30 November 2021 Relative TSR and ROIC Exercise price Expected life 1 July 2021 Volatility 30 June 2024 Risk-free interest rate (per annum) $2.86 Dividend/distribution yield (per annum) $nil 2.6 years 36.80% 1.05% 3.46% The valuation of rights is conducted by an independent advisor. The fair value is determined using a Monte-Carlo simulation for the relative TSR component and a Binomial tree methodology for the ROIC component. 12 EQUITY INSTRUMENT DISCLOSURES RELATING TO EXECUTIVE KMP SECURITYHOLDINGS Executives are expected to establish and maintain a minimum securityholding (excluding performance rights) to the value of 150 per cent of fixed remuneration for the CEO/MD and 100 per cent of fixed remuneration for all other Executives. Executives have five years from the date they commenced their role on the ELT to build up their securityholding to the expected level. As at 30 June 2022, the number of ordinary securities in Mirvac held by Executive KMP, including their personally related parties, is set out below: Executive KMP Susan Lloyd-Hurwitz Brett Draffen Campbell Hanan Stuart Penklis 2 Courtenay Smith 3 Balance 1 July 2021 5,020,678 845,000 420,344 215,727 — Changes 44,613 195,077 70,000 126,548 45,218 Balance 30 June 2022 5,065,291 1,040,077 490,344 342,275 45,218 Value 30 June 2022 $ Minimum securityholding guideline $ Date securityholding to be attained 1 10,029,276 2,059,352 970,881 677,705 89,532 2,250,000 950,000 950,000 800,000 800,000 June 2021 June 2021 June 2021 May 2022 March 2026 1. Attainment date is based on the minimum securityholding requirement effective from FY19. 2. Stuart Penklis had met the minimum securityholding guideline based on security price during the year, and is expected to meet the guideline with future vesting and security price growth. 3. Courtenay Smith has five years from the date she commenced in March 2021 to build up her securityholding to the expected level. OPTIONS No options (i.e. a right to acquire a security upon payment of an exercise price) were granted as remuneration during FY22 and no unvested or unexercised options are held by Executive KMP as at 30 June 2022. PERFORMANCE RIGHTS HELD DURING THE YEAR The number of performance rights in Mirvac held during the year by each Executive KMP, including their personally related parties, is set out below: Executive KMP Susan Lloyd-Hurwitz Brett Draffen Campbell Hanan Stuart Penklis Courtenay Smith Balance 1 July 2021 1,850,357 719,501 381,704 347,790 180,872 Rights issued 857,224 325,745 180,969 152,395 152,395 LTP Rights vested/ forfeited relating to performance period ended 30 June 2022 Deferred STI Rights issued Rights vested/ forfeited Balance 30 June 2022 (770,547) (292,808) (136,986) (136,986) — 181,145 114,725 100,384 84,534 19,738 (62,398) (40,077) (29,931) (29,931) (45,218) 2,055,781 827,086 496,140 417,802 307,787 Annual Report 2022 – 67 FINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS REMUNERATION REPORT 12 EQUITY INSTRUMENT DISCLOSURES RELATING TO EXECUTIVE KMP CONTINUED Details of the movement in the number and value of performance rights held by Executive KMP during the year are set out below: Number of rights granted Value at grant date 1 $ Vesting date Number of rights % of total grant Value of rights $ Number of rights % of total grant Value of rights $ Vested Lapsed Executive KMP Susan Lloyd-Hurwitz Total Brett Draffen Total Campbell Hanan Total Stuart Penklis Total Courtenay Smith Grant date 30 Sep 19 2 Dec 19 3 Dec 20 31 Aug 21 31 Aug 21 30 Nov 21 30 Sep 19 2 Dec 19 3 Dec 20 31 Aug 21 31 Aug 21 30 Nov 21 30 Sep 19 2 Dec 19 3 Dec 20 31 Aug 21 31 Aug 21 30 Nov 21 30 Sep 19 2 Dec 19 3 Dec 20 31 Aug 21 31 Aug 21 30 Nov 21 26 Mar 21 26 Mar 21 26 Mar 21 31 Aug 21 31 Aug 21 30 Nov 21 Plan STI LTP LTP STI STI LTP STI LTP LTP STI STI LTP STI LTP LTP STI STI LTP STI LTP LTP STI STI LTP STI STI LTP STI STI LTP 62,398 770,547 1,017,412 90,573 90,572 857,224 176,996 1,684,444 1,649,225 273,735 265,156 1,475,296 2,888,726 5,524,852 40,077 292,808 386,616 57,363 57,362 325,745 113,681 640,089 626,705 173,366 167,931 560,612 1,159,971 2,282,384 29,931 136,986 214,787 50,192 50,192 180,969 84,901 299,457 348,170 151,693 146,941 311,451 663,057 1,342,613 29,931 136,986 180,873 42,267 42,267 152,395 84,901 299,457 293,195 127,742 123,740 262,274 584,719 1,191,309 45,218 45,218 90,436 9,869 9,869 152,395 106,579 103,233 127,515 29,827 28,892 262,274 30 Sep 21 30 Jun 22 30 Jun 23 31 Aug 22 31 Aug 22 30 Jun 24 30 Sep 21 30 Jun 22 30 Jun 23 31 Aug 22 31 Aug 22 30 Jun 24 30 Sep 21 30 Jun 22 30 Jun 23 31 Aug 22 31 Aug 22 30 Jun 24 30 Sep 21 30 Jun 22 30 Jun 23 31 Aug 22 31 Aug 22 30 Jun 24 8 Mar 22 8 Mar 23 30 Jun 23 31 Aug 22 31 Aug 22 30 Jun 24 Total 353,005 658,320 62,398 308,219 — — — — 370,617 40,077 117,123 — — — — 157,200 29,931 54,794 — — — — 84,725 29,931 54,794 — — — — 84,725 45,218 — — — — — 45,218 100% 40% 176,996 716,936 — — — — — 462,328 — — — — 0% — 60% 967,508 — — — — 893,932 462,328 967,508 100% 113,681 40% 272,435 — — — — — 175,685 — — — — 0% — 60% 367,654 — — — — 100% 40% 100% 40% 386,116 175,685 367,654 84,901 127,454 — — — — — 82,192 — — — — 0% — 60% 172,003 — — — — 212,355 82,192 172,003 84,901 127,454 — — — — — 82,192 — — — — 0% — 60% 172,003 — — — — 212,355 82,192 172,003 100% 106,579 — — — — — 106,579 — — — — — — — 0% — — — — — — — 1. The calculation of the value of performance rights used the fair value as determined at the time of grant. For the LTP grants subject to ROIC performance, the initial accounting treatment assumes 75 per cent vesting, which is reflected in the above valuation. 13 OTHER TRANSACTIONS WITH KMP There are a number of transactions between KMP and the Group. On occasions, Directors and other KMP participate in arrangements available to directly purchase Mirvac developed residential property. These transactions are made on terms equivalent to those that prevail in arm’s length transactions and are at market rates. As set out in the Directors’ report, a number of the Directors of Mirvac are also Directors of other companies. On occasions, the Group may purchase goods and services from or supply goods and services to these companies. These transactions are undertaken on normal commercial terms and conditions and the Director or other KMP does not directly influence these transactions. 68 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS REMUNERATION REPORT GOVERNANCE 14 SERVICE AGREEMENTS FOR EXECUTIVE KMP Each Executive KMP member, including the CEO/MD, has a formal contract, known as a service agreement. These agreements are of a continuing nature and have no fixed term of service. There were no changes to the service agreements for Executive KMP in FY22. The key terms of the service agreements for the CEO/MD and other Executive KMP members are summarised below: Susan Lloyd-Hurwitz Other Executive KMP Notice period Contract term Employee Group Termination payment 1 No fixed term No fixed term 6 months 3 months 6 months 3 months 6 months 9 months 1. Payable if Mirvac terminates employee with notice, for reasons other than unsatisfactory performance. 15 GOVERNANCE AND HOW REMUNERATION DECISIONS ARE MADE The Board, the HRC, advisors and management work closely to apply our remuneration principles and ensure our strategy supports sustainable securityholder value. Board Oversees remuneration WITH ADVICE FROM HRC Four independent Non-Executive Directors Advises Board on remuneration strategy Specific recommendations on Director remuneration Approves KMP terms of employment BASED ON REMUNERATION PRINCIPLES Align and contribute to Mirvac’s key strategic business objectives and desired business outcomes Align the interests of employees with those of securityholders Assist Mirvac in attracting and retaining the employees required to execute the business strategy Support Mirvac’s desired performance-based culture Encompass the concept of pay parity and be fair and equitable Be simple and easily understood The HRC has appointed EY as its external remuneration advisor. EY provides both information on current market practice and independent input into key remuneration decisions. EY’s terms of engagement include specific measures designed to protect its independence. To effectively perform its role, EY needs to interact with members of Mirvac management, particularly those in the Human Resources team. However, to ensure independence, members of Mirvac’s management are precluded from requesting services that would be considered to be a ‘remuneration recommendation’ as defined by the Corporations Act 2001. During FY22, the HRC were provided with: > market remuneration benchmarking and information, used as an input to the annual review of Executive KMP remuneration; and > regulatory updates and market trend analysis. No remuneration recommendations were provided by EY or any other advisor during the year. Annual Report 2022 – 69 FINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS REMUNERATION REPORT 16 NON-EXECUTIVE DIRECTORS’ REMUNERATION APPROACH TO NON-EXECUTIVE DIRECTOR FEES In contrast to Executive KMP remuneration, the remuneration of Mirvac’s Non-Executive Directors is not linked to performance. This is consistent with Non-Executive Directors being responsible for objective and independent oversight of the Group. Mirvac Limited’s Constitution provides that Non-Executive Directors may determine their own remuneration, but the total amount provided to all Directors (not including the CEO/MD and any other Executive Directors) must not exceed the sum agreed by securityholders at a general meeting. The maximum aggregate remuneration of $2.25m per annum was approved by securityholders at the 2014 AGM. Non-Executive Directors have not received any fees other than those described in this section, and do not receive bonuses or any other incentive payments or retirement benefits. The Non-Executive Directors are reimbursed for expenses properly incurred in performing their duties as a Director of Mirvac. The schedule of fees for Non-Executive Directors during FY22 is set out in the table below and fees are annual fees, unless otherwise stated: Board/committee Mirvac Limited and Mirvac Funds Limited Board Chair Mirvac Limited and Mirvac Funds Limited Board member ARCC, HRC and HSE&E Chair Committee member Due Diligence Committee (per diem fee) 1. Chair fee covers all Board and committee responsibilities. 2. The ARCC, HRC and HSE&E Chair fee is in addition to the committee member fee. 3. The single committee fee is paid once for all committee memberships. ACTUAL REMUNERATION FOR NON-EXECUTIVE DIRECTORS Non-Executive Directors John Mulcahy Christine Bartlett 2 Damien Frawley 3 Jane Hewitt James M. Millar AM Samantha Mostyn AO Peter Nash Robert Sindel 4 Total Short-term benefits Post-employment 1 Cash salary and fees $ Superannuation contributions $ 456,432 458,306 211,818 202,240 107,652 — 184,545 185,388 211,818 212,785 184,546 188,911 199,540 189,791 229,028 160,302 1,785,379 1,597,723 23,568 21,694 21,182 19,213 10,765 — 18,455 17,612 21,182 20,215 18,454 14,089 3,460 13,209 3,972 15,229 121,038 121,261 Year FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 1. Relates to payments required under superannuation legislation. 2. Christine Bartlett was appointed Chair of the HRC on 19 November 2020. 3. Damien Frawley joined the Board as a Non-Executive Director on 1 December 2021. 4. Robert Sindel joined the Board as a Non-Executive Director on 1 September 2020, and was appointed Chair of the HSE&E Committee on 15 April 2021. $ 480,000 1 185,000 30,000 2 18,000 3 4,000 Total $ 480,000 480,000 233,000 221,453 118,417 — 203,000 203,000 233,000 233,000 203,000 203,000 203,000 203,000 233,000 175,531 1,906,417 1,718,984 70 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS REMUNERATION REPORT GOVERNANCE 16 NON-EXECUTIVE DIRECTORS’ REMUNERATION CONTINUED MINIMUM SECURITYHOLDING FOR NON-EXECUTIVE DIRECTORS AND ACTUAL SECURITYHOLDING In order to further strengthen the alignment of interests between Non-Executive Directors and securityholders, the Board established minimum Mirvac Securityholding Guidelines, which recommend Non-Executive Directors build up to a minimum securityholding level. In December 2017, this minimum securityholding level was increased from 25,000 Mirvac securities to 50,000 Mirvac securities, and in September 2021 this was further increased to 100 per cent of base fees. Non-Executive Directors appointed to the Mirvac Board will have three years to establish their securityholding to the minimum level from their date of appointment, or for Non-Executive Directors who were appointed to the Board prior to FY22 three years from September 2021, to acquire securities up to the minimum. In addition to this minimum securityholding requirement, in FY18, a voluntary Non-Executive Director Fee Sacrifice Rights Plan was introduced to further encourage Directors to build an ownership stake in Mirvac. Non-Executive Directors John Mulcahy Christine Bartlett Damien Frawley 1 Jane Hewitt James M. Millar AM Samantha Mostyn AO Peter Nash Robert Sindel Balance 1 July 2021 Changes Balance 30 June 2022 Minimum securityholding requirement $ Date securityholding to be attained 105,172 65,172 — 50,000 55,172 74,045 65,123 70,000 — 15,000 — 20,000 — — 17,597 20,198 105,172 80,172 — 70,000 55,172 74,045 82,720 90,198 480,000 185,000 185,000 185,000 185,000 185,000 185,000 185,000 September 2024 September 2024 December 2024 September 2024 September 2024 September 2024 September 2024 September 2024 1. Damien Frawley joined the Board as a Non-Executive Director on 1 December 2021. 17 ADDITIONAL REQUIRED DISCLOSURES OTHER BENEFITS Fees paid by Mirvac for Directors’ and Officers’ liability insurance are not itemised for each Director as their disclosure would breach the terms of the policy. Executives and Directors (including Non-Executive Directors) are entitled to participate in arrangements available to directly purchase Mirvac developed residential property. These transactions are made on terms equivalent to those that prevail in arm’s length transactions and are at market rates. TERMS USED IN THIS REMUNERATION REPORT Term Meaning A-REIT Clawback S&P/ASX 200 Australian Real Estate Investment Trust Index. Mirvac’s clawback policy gives the HRC the ability to claw back incentives in the event of a material financial misstatement, for misconduct that is, or may be, harmful to the Group, and/or gross negligence. The clawback provisions apply to unvested STI and LTP awards received after the introduction of the policy in February 2013. Executive KMP Includes the CEO/MD, CFO, Chief Investment Officer, Head of Integrated Investment Portfolio and the Head of Residential. Executives Members of Mirvac’s Executive Leadership Team (including the Executive KMP). Invested Capital Invested Capital equals investment properties, inventories and indirect investments, less fund-through adjustments (deferred revenue) and deferred payment for land. Average Invested Capital is the average of the current period and the prior two reporting periods. KMP Key management personnel are those people with authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly. Performance right A right to a Mirvac security at the end of a performance period, subject to the satisfaction of performance measures. ROIC Total Return TSR ROIC is calculated as Total Return divided by average Invested Capital. Total Return is the profit for the year attributable to securityholders adjusted for development interest costs and other interest costs; net gain or loss on financial instruments; and income tax expense. Total Shareholder Return measures the percentage growth in a company’s security price together with the value of dividends/ distributions received during the period, assuming that all of those dividends/distributions are reinvested into new securities. Annual Report 2022 – 71 FINANCIAL REPORTOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS AUDITOR’S INDEPENDENCE DECLARATION AUDITOR’S INDEPENDENCE DECLARATION Auditor’s Independence Declaration As lead auditor for the audit of Mirvac Limited for the year ended 30 June 2022, I declare that to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Mirvac Limited and the entities it controlled during the period. Voula Papageorgiou Partner PricewaterhouseCoopers Sydney 11 August 2022 PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999 Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T: +61 2 9659 2476, F: +61 2 8266 9999 Liability limited by a scheme approved under Professional Standards Legislation. 72 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS FINANCIAL REPORT Mirvac Group comprises Mirvac Limited (ABN 92 003 280 699) and its controlled entities (including Mirvac Property Trust (ARSN 086 780 645) and its controlled entities). FINANCIAL REPORT CONSOLIDATED FINANCIAL STATEMENTS Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS A BASIS OF PREPARATION B RESULTS FOR THE YEAR B1 Segment information B2 Revenue B3 Expenses B4 Events occurring after the end of the year B5 Income tax C PROPERTY AND DEVELOPMENT ASSETS C1 Property portfolio C2 C3 C4 Investment properties Investments in joint ventures and associates Inventories D CAPITAL STRUCTURE AND RISKS D1 Capital management D2 Borrowings and liquidity D3 Cash flow information D4 Derivative financial instruments D5 Financial risk management D6 Fair value measurement of financial instruments E EQUITY E1 Distributions E2 Contributed equity E3 Reserves E4 Security-based payments F OPERATING ASSETS AND LIABILITIES F1 Receivables F2 Other financial assets F3 Intangible assets F4 Payables F5 Provisions F6 Leases G GROUP STRUCTURE G1 Group structure and Deed of Cross Guarantee G2 Parent entity G3 Non-controlling interests G4 Business combinations H OTHER DISCLOSURES H1 Contingent liabilities H2 Earnings per stapled security H3 Related parties H4 Auditor’s remuneration I APPENDICES Property portfolio listing I1 I2 Controlled entities I3 Interests in joint ventures and associates 74 75 76 77 78 79 82 85 87 87 89 91 93 95 97 97 98 99 100 103 104 104 105 105 107 108 109 110 111 111 112 114 114 116 117 117 117 118 119 122 124 Annual Report 2022 – 73 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2022 Revenue Other income Revaluation of investment properties Share of net profit of joint ventures and associates Gain on sale of assets Gain on financial instruments Total revenue and other income Development expenses Cost of goods sold interest Inventory write-downs and losses Selling and marketing expenses Investment property expenses and outgoings Depreciation and amortisation expenses Impairment loss on receivables Employee and other expenses Finance costs Loss on financial instruments Loss on disposal of assets Profit before income tax Income tax expense Profit from continuing operations Profit for the year is attributable to: Stapled securityholders Non-controlling interests Other comprehensive income/(loss) that may be reclassified to profit or loss Changes in the fair value of cash flow hedges Other comprehensive income/(loss) for the year Total comprehensive income for the year Total comprehensive income for the year is attributable to: Stapled securityholders Non-controlling interests Earnings per stapled security (EPS) attributable to stapled securityholders Basic EPS Diluted EPS Note B2 C2 C3 B2 B3 B3 B3 B3 B3 B3 B3 B5 B1 E3 G3 H2 H2 2022 $m 2,306 347 109 16 64 2,842 1,152 24 15 46 212 83 24 204 96 — 1 985 78 907 906 1 17 17 924 923 1 924 Cents 23.0 23.0 2021 $m 1,808 392 109 2 68 2,379 779 17 12 34 200 71 20 177 112 23 — 934 35 899 901 (2) (16) (16) 883 885 (2) 883 Cents 22.9 22.9 The above consolidated statement of comprehensive income (SoCI) should be read in conjunction with the accompanying notes. 74 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2022 FINANCIAL REPORT Current assets Cash and cash equivalents Receivables Inventories Derivative financial assets Other assets Assets classified as held for sale Total current assets Non-current assets Receivables Inventories Investment properties Investments in joint ventures and associates Derivative financial assets Other financial assets Other assets Property, plant and equipment Right-of-use assets Intangible assets Deferred tax assets Total non-current assets Total assets Current liabilities Payables Deferred revenue Borrowings Derivative financial liabilities Lease liabilities Provisions Current tax liabilities Total current liabilities Non-current liabilities Payables Deferred revenue Borrowings Lease liabilities Derivative financial liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Total equity attributable to the stapled securityholders Non-controlling interests Total equity Note F1 C4 D4 C2 F1 C4 C2 C3 D4 F2 F6 F3 B5 F4 B2 D2 D4 D2 F5 B5 F4 B2 D2 D2 D4 F5 E2 E3 G3 2022 $m 558 144 622 63 42 — 1,429 30 1,639 12,189 1,481 178 73 49 13 28 79 17 15,776 17,205 730 17 281 — 8 232 42 1,310 571 3 3,930 72 116 11 4,703 6,013 11,192 7,527 23 3,576 11,126 66 11,192 2021 $m 117 117 632 — 43 133 1,042 97 1,461 11,821 783 248 78 222 11 17 78 55 14,871 15,913 503 54 — 5 4 223 — 789 367 1 3,922 64 99 12 4,465 5,254 10,659 7,510 13 3,070 10,593 66 10,659 The above consolidated statement of financial position (SoFP) should be read in conjunction with the accompanying notes. Annual Report 2022 – 75 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2022 Attributable to stapled securityholders Note Contributed equity $m 7,503 Reserves $m Retained earnings $m Non-controlling interests $m Total $m Balance 30 June 2020 Profit for the year Other comprehensive loss for the year Total comprehensive income for the year Transactions with owners of the Group Security-based payments Expense recognised – EEP Expense recognised – LTI and STI LTI vested STI vested Distributions Non-controlling interests of subsidiary Total transactions with owners of the Group Balance 30 June 2021 Balance 1 July 2021 Profit for the year Other comprehensive income for the year Total comprehensive income for the year E2 E4 E2/E4 E4 E1 G3 Transactions with owners of the Group Security-based payments E2 Expense recognised – EEP E4 Expense recognised – LTI and STI E2/E4 LTI vested E4 STI vested E2 Legacy schemes vested Transfer from SBP reserve for unvested awards E4 E1 Distributions G3 Non-controlling interests of subsidiary Total transactions with owners of the Group Balance 30 June 2022 — — — 1 — 6 — — — 7 7,510 7,510 — — — 1 — 15 — 1 — — — 17 7,527 2,559 10,090 901 — 901 — — — — (390) — (390) 3,070 3,070 906 — 906 — — — — — 4 (404) — (400) 901 (16) 885 1 9 (1) (1) (390) — (382) 10,593 10,593 906 17 923 1 13 — (1) 1 — (404) — (390) 51 (2) — (2) — — — — — 17 17 66 66 1 — 1 — — — — — — — (1) (1) Total equity $m 10,141 899 (16) 883 1 9 (1) (1) (390) 17 (365) 10,659 10,659 907 17 924 1 13 — (1) 1 — (404) (1) (391) 3,576 11,126 66 11,192 28 — (16) (16) — 9 (7) (1) — — 1 13 13 — 17 17 — 13 (15) (1) — (4) — — (7) 23 The above consolidated statement of changes in equity (SoCE) should be read in conjunction with the accompanying notes. 76 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2022 Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Distributions received from joint ventures and associates Distributions received Interest paid Income tax paid Net cash inflows from operating activities Cash flows from investing activities Payments for investment properties Proceeds from sale of investment properties Repayments of loans from unrelated parties Payments for property, plant and equipment Contributions to joint ventures Proceeds from joint ventures and associates Payments for software under development Proceeds from/(payments for) investments Proceeds from acquisitions of subsidiary, net of cash acquired Deconsolidation of cash and cash equivalents upon disposal of controlled entities Net cash outflows from investing activities Cash flows from financing activities Proceeds from borrowings Repayments of borrowings Distributions paid Proceeds from stapled securities issued Proceeds from non-controlling interests Distributions paid to non-controlling interests Principal element of lease payments Net cash outflows from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Note D3 G4 G4 FINANCIAL REPORT 2022 $m 2,461 (1,531) 930 6 95 1 (130) (6) 896 (792) 231 22 (7) (70) 163 (1) 9 11 (2) (436) 1,711 (1,320) (402) — — (1) (7) (19) 441 117 558 2021 $m 2,221 (1,533) 688 6 84 1 (144) — 635 (631) 85 51 (3) (12) 5 (2) (2) — — (509) 2,224 (2,264) (307) 1 17 — (4) (333) (207) 324 117 The above consolidated statement of cash flows (SoCF) should be read in conjunction with the accompanying notes. Annual Report 2022 – 77 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS Mirvac Group A BASIS OF PREPARATION MIRVAC GROUP – STAPLED SECURITIES A Mirvac Group stapled security comprises one Mirvac Limited share ‘stapled’ to one unit in Mirvac Property Trust (MPT) to create a single listed security traded on the ASX. The stapled securities cannot be traded or dealt with separately. Mirvac Limited (the deemed parent entity) and Mirvac Funds Limited (as responsible entity for MPT) have common directors and operate as Mirvac Group. Mirvac Limited and MPT have a Deed of Cooperation to recharge each other on a cost recovery basis, where permitted by law, to maintain the best interests of Mirvac as a whole. The stapled security structure will cease to operate on the first of: > Mirvac Limited or MPT resolving by special resolution in a general meeting, and in accordance with its Constitution, to terminate the stapled security structure; or > Mirvac Limited or MPT commencing winding up. The ASX reserves the right (but without limiting its absolute discretion) to remove entities with stapled securities from the official list if their securities cease to be stapled together, or either one or more stapled entities issues any equity securities of the same class that are not stapled. Mirvac Limited and MPT remain separate legal entities in accordance with the Corporations Act 2001. For accounting purposes, Mirvac Limited has been deemed the parent entity of MPT. STATEMENT OF COMPLIANCE These consolidated financial statements are general purpose financial statements. They have been prepared in accordance with Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board, the Corporations Act 2001 and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). BASIS OF PREPARATION Mirvac Group is a for-profit entity for the purposes of preparing the financial statements. These financial statements have been prepared on a going concern basis, using historical cost conventions except for investment properties, investment properties under construction (IPUC), derivative financial instruments and other financial assets and financial liabilities which have been measured at fair value. All figures in the financial statements are presented in Australian dollars and have been rounded to the nearest million (m) dollars in accordance with ASIC Corporations Instrument 2016/191, unless otherwise indicated. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of financial statements requires estimation and judgement. The areas involving a higher degree of estimation or judgement are discussed in the following notes: Revenue Income tax Investment properties Investments in joint ventures and associates Inventories Fair value measurement of financial instruments Security-based payments Intangible assets Note B2 B5 C2 C3 C4 D6 E4 F3 COMPARATIVE INFORMATION Where necessary, comparative information has been restated to conform to the current year’s disclosures. NEW AND AMENDED STANDARDS ADOPTED BY THE GROUP Amended standards and interpretations adopted by the Group for the year ended 30 June 2022 have not had a significant impact on the current period or any prior period and are not likely to have a significant impact in future periods. These are listed below: > AASB 2020-8 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform – Phase 2 [AASB 4, AASB 7, AASB 9, AASB 16 & AASB 139]. > AASB 2021-3 Amendments to Australian Accounting Standards – Covid-19-Related Rent Concessions beyond 30 June 2021 [AASB 16]. MACRO ENVIRONMENT IMPACTS As a property group involved in property investment, investment management, and residential and commercial development, Mirvac is subject to macroeconomic factors throughout the business cycle that have the potential to impact a number of financial and non-financial metrics of the Group. IMPACT OF GLOBAL CONFLICT ON THE GROUP The magnitude and complexity of the consequences of the Russia-Ukraine conflict remain highly uncertain, driving geopolitical fragmentation, ongoing sanctions and diversified supply chains. Key areas of exposure relate to economic sanctions, oil and gas supply and impacts on global indices. While Mirvac does not have direct exposure to the conflict or region, market data continues to be highly volatile and uncertain, with any escalation likely to have an impact on global markets and place additional pressures on supply chains. SUPPLY CHAIN PRESSURE Disruptions linked to COVID-19 lockdowns in China, the Russia-Ukraine conflict, severe weather events, lack of migration and new variants of COVID-19 continue to exacerbate supply shortages, labour/skills shortages and construction materials price increases. The Group’s long standing experience and capabilities are well placed to see through the supply challenges, with a number of initiatives in place to analyse, assess and flex across suppliers, timing and lead times for supplies with a number of development project trade costs locked in for the medium term. INFLATION RISING AND INTEREST RATES INCREASING Higher cost price inflation has led to negative real wage growth in 2022. This combined with heightened geopolitical tensions and increasing interest rates has lowered consumer sentiment. A faster than expected economic recovery from COVID-19, and stronger inflationary pressures have brought forward interest rate hikes, with the Reserve Bank of Australia raising the cash rate by 125 bps from May to July 2022. The Group’s capital management is well placed to steer through the tide of rising interest rates, with gearing maintained at the lower end of the target range of between 20-30 per cent, a large portion of the debt at fixed or hedged rates and maintenance of the Group’s credit rating. Consumer sentiment around inflation and rising interest rates are likely to impact residential purchases as consumers are weary of mortgage stress, particularly as wages growth has lagged behind inflation and rising living costs. Retail spending is expected to curb away from discretionary spend as the uncertainty around increasing interest rates and rising living costs (fuel, food and so on) tighten household spending. The above factors have been considered in the preparation of the financial statements though they have not had a material impact to date. 78 – Celebrating 50 years 78 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS B RESULTS FOR THE YEAR FINANCIAL REPORT This section explains the results and performance of the Group, including segmental analysis and detailed breakdowns. THREE-YEAR PERFORMANCE REVIEW $901m $906m $558m $602m $550m $596m $796m $773m $704m FY21 FY20 Statutory profit after tax FY22 B1 SEGMENT INFORMATION FY20 FY21 Earnings before interest and tax FY22 FY20 FY21 Operating profit after tax FY22 The Group identifies its operating segments based on the internal reporting provided to the ELT, who are the Group’s chief operating decision makers. The Group’s operating segments are as follows: INTEGRATED INVESTMENT PORTFOLIO Manages the office, industrial, retail and build to rent property portfolio to produce rental income and capital appreciation. This segment also manages joint ventures and associates, properties and funds for capital partners. COMMERCIAL & MIXED USE Designs, develops and constructs office buildings, industrial warehouses, retail precincts, build to rent apartments and mixed use offerings which leverages Mirvac’s multi-asset expertise. RESIDENTIAL Designs, develops, markets and sells residential properties to external customers. These include masterplanned communities and apartments in core metropolitan markets at times in conjunction with capital partners. Geographically, the Group operates in major urban areas across Australia. During the year, the Group recognised revenue of $528 million from two external customers. This represents 23 per cent of total revenue and was attributed to the Commercial & Mixed Use segment. No other single customer in the current or prior period provided more than 10 per cent of the Group’s revenue. Presented below are the key profit metrics, a breakdown of revenue by function and other required information for each segment: KEY PROFIT METRICS Investment Integrated Investment Portfolio NOI Asset and funds management EBIT Management and administration expenses Investment EBIT Development Commercial & Mixed Use Residential Development EBIT Segment EBIT 1 Unallocated overheads Group EBIT Net financing costs 2 Operating income tax expense Operating profit after tax Development revaluation gain 3 Investment property revaluation Other non-operating items Statutory profit attributable to stapled securityholders 1. EBIT includes share of net operating profit of joint ventures and associates. 2. 3. Relates to the fair value movement on IPUC. Includes cost of goods sold interest of $7m for Commercial & Mixed Use (2021: $1m) and $17m for Residential (2021: $16m) and interest revenue of $5m (2021: $5m). 2022 $m 581 33 (44) 570 90 195 285 855 (82) 773 (115) (62) 596 70 305 (65) 906 2021 $m 581 30 (35) 576 33 168 201 777 (73) 704 (124) (30) 550 121 274 (44) 901 Annual Report 2022 – 79 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS B RESULTS FOR THE YEAR B1 SEGMENT INFORMATION CONTINUED SEGMENT EBIT: FY21 TO FY22 $777m ($6m) $57m $27m $885m EBIT BY SEGMENT $195m $90m $168m $33m $576m $570m FY21 Integrated Investment Portfolio Commercial & Mixed Use REVENUE BY FUNCTION Residential FY22 FY21 FY22 Residential Commercial & Mixed Use Integrated Investment Portfolio Investment Integrated Investment Portfolio 2022 $m 786 — 39 11 836 50 — 50 886 336 2021 $m 781 — 43 10 834 27 — 27 861 379 1,222 1,240 Property rental revenue Development revenue 1 Asset and funds management revenue 2 Other revenue Total operating revenue Share of net profit/(loss) of joint ventures and associates 3 Gain on sale of assets Other income Total operating revenue and other income Non-operating items 4 Total statutory revenue and other income Segments Development Commercial & Mixed Use 2022 $m 2021 $m — 535 — 3 538 — — — 538 — 538 — 183 — 2 185 — — — 185 — 185 Residential Unallocated Total 2022 $m — 950 — 16 966 36 16 52 1,018 — 2021 $m — 821 — 13 834 55 — 55 889 — 1,018 889 2022 $m 2021 $m — — — 5 5 (1) — (1) 4 60 64 — — — 6 6 (1) — (1) 5 60 65 2022 $m 786 1,485 39 35 2021 $m 781 1,004 43 31 2,345 1,859 85 16 101 81 — 81 2,446 1,940 396 439 2,842 2,379 Includes development management fees. 1. 2. Property management revenue incurred on the Group’s investment properties of $19m (2021: $20m) has been eliminated on consolidation. 3. Revenue excludes non-operating items. 4. Relates mainly to fair value of investment properties and IPUC. 80 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS FINANCIAL REPORT B RESULTS FOR THE YEAR B1 SEGMENT INFORMATION CONTINUED ADDITIONAL SEGMENT INFORMATION Investment Integrated Investment Portfolio 2022 $m 2021 $m Segments Development Commercial & Mixed Use 2022 $m 2021 $m Residential Unallocated Total 2022 $m 2021 $m 2022 $m 2021 $m 2022 $m 2021 $m Segment assets and liabilities Assets Investment properties Inventories Assets held for sale Indirect investments 1 Other assets Total assets Total liabilities Net assets Other segment information Share of net profit/(loss) of joint ventures and associates Depreciation and amortisation expenses Additions for investment properties and PPE Additions of investments in joint ventures and associates 12,189 — — 1,487 74 11,821 — 133 949 117 13,750 13,020 372 375 13,378 12,645 74 72 55 62 1,702 657 61 1 — 136 — 62 8 206 197 9 — — — 7 — 326 — 23 31 380 150 230 — — — 11 — 2,125 — 130 38 2,293 746 1,547 36 1 — — — 1,767 — 164 46 1,977 399 1,578 55 1 — — — — — 15 941 956 — — — 14 522 536 4,698 4,330 (3,742) (3,794) 12,189 2,261 — 1,694 1,061 17,205 6,013 11,192 11,821 2,093 133 1,150 716 15,913 5,254 10,659 (1) (1) 109 109 10 6 — 8 1 — 83 71 1,708 658 68 12 1. Includes carrying value of investments in joint ventures and associates and other indirect investments. Annual Report 2022 – 81 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS B RESULTS FOR THE YEAR B1 SEGMENT INFORMATION CONTINUED RECONCILIATION OF STATUTORY PROFIT TO OPERATING PROFIT AFTER TAX The following table shows how profit for the year attributable to stapled securityholders reconciles to operating profit after tax: Segments Investment Development Investment Portfolio $m Integrated Commercial & Mixed Use $m Profit for the year attributable stapled securityholders 836 Exclude specific non-cash items Revaluation of investment properties 1 Net gain on financial instruments Depreciation of right-of-use assets Straight-lining of lease revenue 2 Amortisation of lease incentives and leasing costs Share of net profit of joint ventures and associates relating to movement of non-cash items 3 AASB 16 Leases – net movement Exclude other non-operating items Net gain from sale of assets Net loss from fair value of investment properties included in non-controlling interests Tax effect Tax effect of non-operating adjustments 4 Operating profit after tax SaaS implementation costs 5 FFO (347) (4) — (5) 114 (24) — — — — 570 5 575 83 — — — — — — — — — — 83 2 85 Residential $m Unallocated $m 164 (177) — — — — — — — — — — 164 6 170 — (60) 7 — — — (7) — — 16 (221) 5 (216) 2022 Total $m 906 (347) (64) 7 (5) 114 (24) (7) — — 16 596 18 614 2021 Total $m 901 (392) (45) 4 (12) 125 (28) (4) (2) (2) 5 550 15 565 Includes development revaluation gain and excludes Mirvac’s share in the JVA revaluation of investment properties which is included within Share of net profit of joint ventures and associates. Included within Revenue. Included within Share of net profit of joint ventures and associates. Included within Income tax expense. 1. 2. 3. 4. 5. Adjustment for the configuration and customisation costs incurred in implementing SaaS arrangements in accordance with the Property Council of Australia’s Interim Guidance Note 2021-1 – An interim guide to Software as a Service implementation costs issued in June 2021. B2 REVENUE The Group has two main revenue streams: property rental revenue and development revenue. Property rental revenue comes from holding properties as investment properties and earning rental yields over time. Development revenue is derived from constructing and selling properties as well as management developments for third parties and capital partners. Revenue is measured at the fair value of the consideration received or receivable, net of returns, trade allowances and duties and taxes paid. The Group recognises revenue from the transfer of goods or services over time and at a point in time in the following revenue streams. 82 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS B RESULTS FOR THE YEAR B2 REVENUE CONTINUED FINANCIAL REPORT PROPERTY RENTAL REVENUE Lease revenue The Group invests in properties for rental yields and capital appreciation. Rental revenue from investment properties is recognised on a straight-line basis over the lease term, net of any incentives. Modifications to the leases are accounted for as a new lease from the effective date of the modification, considering any prepaid or accrued lease payments relating to the original lease as part of the lease payments for the new lease. Service revenue The Group also provides services to the lessees, which primarily consist of general building management and operations in accordance with their lease agreements. Service income, representing the recovery of associated costs from the lessees, is recognised over time when the services are provided. Asset and funds management revenue The Group provides property management and leasing, investment funds management, and facilities management services. These services are provided on an ongoing basis and over the term of the agreements. The management fees are generally calculated based upon the value of the managed assets, which is a variable consideration and recognised upon delivery of services. DEVELOPMENT REVENUE Settlement revenue The Group develops and sells properties comprising apartments, land lots, masterplanned communities and commercial and mixed-use properties held as inventory. The sales contracts typically contain one performance obligation satisfied when control of the property is transferred to the customer. This generally occurs on settlement, at which point revenue is recognised. The revenue is measured at the transaction price agreed under the contract. Development management service revenue Development management fees are received to remunerate the Group for management services, time and the risk of developing a commercial, mixed-use or residential project. Contracts can include one or multiple performance obligations depending on the terms of the contract. Revenue is recognised as the performance obligations are satisfied. Hourly rate fees are recognised when service is provided, and fixed rate fees are recognised on a percentage of completion basis. Construction service revenue The Group provides services to construct office, industrial, retail and residential buildings or a combination thereof as mixed-use on customer-owned land. There is ordinarily one performance obligation, being the ‘macro-promise’ to deliver a completed building to the customer, including the design, construction and leasing (if applicable) of the building. The performance obligation is satisfied, and revenue including costs and margin is recognised, over time with progress determined in line with the building’s percentage of completion. The percentage of completion is determined by costs incurred to date as a percentage of total expected costs. This method best represents the passing of control of the building to the customer as it is being built. Estimates of costs and project completion and associated revenue are revised if circumstances change, with any resulting increases or decreases reflected in the consolidated SoCI. Certain development contracts may include variable revenue, which is dependent on predetermined metrics, for example, capitalised net rental income. Variable revenue is recognised when highly probable based on historical experience, forecasts and current economic conditions. Deferred revenue Some development contracts are funded by a capital partner throughout the life of the project or construction phase, generally known as fund through projects. Payments received for these projects are recognised as deferred revenue which is classified as a liability in the consolidated SoFP. Associated revenue is recognised in the consolidated SoCI when the performance obligations are satisfied. The recognition of deferred revenue is contractually-based. Judgement is required in determining whether performance obligations have been satisfied for the recognition of the associated revenue. At 30 June 2022, the Group held $20m of deferred revenue (2021: $55m). During the year, the Group recognised $45m in revenue from contracts for which deferred revenue was held at the beginning of the financial year (2021: $49m). Annual Report 2022 – 83 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS B RESULTS FOR THE YEAR B2 REVENUE CONTINUED FY22 REVENUE BY FUNCTION REVENUE: FY20 TO FY22 $2,306m $2,116m $1,808m FY20 FY21 FY22 2022 $m 620 104 8 732 39 1,014 471 1,485 5 45 2,306 2021 $m 618 113 — 731 43 623 381 1,004 5 25 1,808 Development: 64% Property rental: 32% Asset and funds management: 2% Interest and other: 2% Revenue Lease revenue 1 Service revenue Other property rental revenue Total property rental revenue Asset and funds management revenue Settlement revenue Development and construction management services revenue Total development revenue Interest revenue Other revenue Total revenue 1. Includes straight-lining of lease revenue of $5m (2021: $12m). COSTS TO OBTAIN A CONTRACT Sales commissions, incurred to obtain a contract, are capitalised and included within other assets on the consolidated SoFP and expensed when the associated settlement revenue is recognised. 2022 $m 22 3 6 9 2021 $m 17 7 4 11 Expensed during the period 1 Incremental costs to obtain a contract Current Non-current Total incremental costs to obtain a contract 1. No impairment loss was recognised during the year (2021: $nil). 84 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS B RESULTS FOR THE YEAR B2 REVENUE CONTINUED TRANSACTION PRICE ALLOCATED TO REMAINING PERFORMANCE OBLIGATIONS The transaction price allocated to partially unsatisfied performance obligations at 30 June 2022 is as set out below. Within one year More than one year Total GAIN ON FINANCIAL INSTRUMENTS Gain on interest rate derivatives Gain on assets at fair value through profit or loss Gain on cross currency derivatives Total gain on financial instruments B3 EXPENSES FINANCIAL REPORT 2022 $m 985 650 1,635 2022 $m 49 4 11 64 2021 $m 1,239 259 1,498 2021 $m 57 8 3 68 DEVELOPMENT EXPENSES Development expenses are initially capitalised as inventory on the consolidated SoFP until the associated revenue is recognised. These expenses include the costs of acquisition and development and all other costs directly related to the specific projects, including an allocation of direct overhead expenses. COST OF GOODS SOLD INTEREST Interest previously capitalised to incomplete inventory is expensed when the associated revenue is recognised. Upon completion of the project, borrowing costs and other holding charges are no longer capitalised and are expensed as incurred. SELLING AND MARKETING EXPENSES Costs to promote and market projects are expensed as incurred. Direct costs incurred in obtaining a contract, such as sales commissions are capitalised as a contract asset and included within other assets on the consolidated SoFP. These costs are expensed when the associated revenue is recognised. INVESTMENT PROPERTY EXPENSES AND OUTGOINGS Investment property expenses relate to those costs which are required to be incurred to allow for the occupation and maintenance of investment properties in order to continue to earn rental revenue. Expenses include statutory levies, insurance and other property outgoings and are recognised on an accruals basis. Government grants Government grants are accounted for under AASB 120 Accounting for Government Grants and Disclosure of Government Assistance. The standard provides the option to present these amounts as income or as a reduction in expenses. During the year, the Group received land tax rebates from various state revenue agencies totalling $13m (2021: $nil). These rebates were provided to landlords who provided rental relief to tenants. These amounts have been recognised as a reduction to Investment property expenses and outgoings in the consolidated SoCI. DEPRECIATION AND AMORTISATION Depreciation on property, plant and equipment is calculated on a straight-line basis over the estimated useful life of the asset, usually between 3-15 years. Amortisation on lease incentives, software and management rights is calculated on a straight-line basis over the estimated useful life of the asset. Annual Report 2022 – 85 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS B RESULTS FOR THE YEAR B3 EXPENSES CONTINUED Profit before income tax includes the following specific expenses: Total inventory write-downs and losses Provision for impairment of inventories Inventory costs written off Total inventory write-downs and losses Total investment property expenses and outgoings Statutory levies Insurance Power and gas Property maintenance Other Total investment property expenses and outgoings Total impairment loss on receivables Loss allowance on trade debtors Loss allowance on loans receivable Total impairment loss on receivables Total employee and other expenses Employee benefits expenses Security-based payments expense Total employee expenses Compliance, consulting and professional fees Office and administration expenses IT infrastructure 1 Insurance and other expenses Total other expenses Total employee and other expenses Interest and borrowing costs Interest paid/payable Interest on lease liabilities Interest capitalised 2 Borrowing costs amortised Total finance costs Add: cost of goods sold interest 3 Total interest and borrowing costs Loss on financial instruments Loss on interest rate derivatives Total loss on financial instruments 2022 $m 2021 $m 5 10 15 46 6 26 55 79 212 25 (1) 24 107 15 122 19 11 35 17 82 204 127 3 (36) 2 96 24 120 — — 5 7 12 48 9 26 52 65 200 20 — 20 99 10 109 16 10 32 10 68 177 136 3 (32) 5 112 17 129 23 23 Includes employee benefits expenses $7m (2021: $10m) relating to the implementation of SaaS arrangements. 1. 2. Relates to Integrated Investment Portfolio $11m (2021: $13m), Commercial and & Mixed Use $12m (2021: $7m) and Residential $13m (2021: $12m). 3. This interest was previously capitalised and has been expensed in the current period. Relates to Commercial & Mixed Use $7m (2021: $1m) and Residential $17m (2021: $16m). 86 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS FINANCIAL REPORT B RESULTS FOR THE YEAR B4 EVENTS OCCURRING AFTER THE END OF THE YEAR On 18 July 2022, the unitholders of AMP Capital Wholesale Office Fund (AWOF) approved a resolution for Mirvac Funds Management Australia Limited to become the trustee of the fund. Effective around mid-October 2022, Mirvac will become the investment manager of AWOF and property manager in respect of AWOF’s wholly owned assets. As a result of this appointment, Mirvac’s third-party capital under management will grow by $7.7bn. In addition, Mirvac will offer a total of $500m of liquidity with an expectation that this will be utilised within six months of the transition date. No other events have occurred since the end of the year which have significantly affected or may significantly affect Mirvac’s operations, the results of those operations, or Mirvac’s state of affairs in future years. B5 INCOME TAX This section includes the Group’s tax accounting policies and details of the income tax expense and deferred tax balances. ACCOUNTING FOR INCOME TAX Most of the Group’s profit is earned by Mirvac Property Trust and its sub-trusts which are not subject to taxation, provided that the stapled securityholders of the Group are attributed the taxable income of the Mirvac Property Trust. Stapled securityholders are liable to pay tax at their effective tax rate on the amounts attributed. Income tax expense for Mirvac Limited and its wholly-owned controlled entities is calculated at the applicable tax rate (currently 30 per cent in Australia). This is recognised in the profit for the year, unless it relates to other comprehensive income or transactions recognised directly in equity. The tax expense comprises both current and deferred tax. Broadly, current tax represents the tax expense paid or payable for the current year. Accounting income is not always the same as taxable income, creating temporary differences. These differences usually reverse over time. Until they reverse, a deferred asset or liability is recognised on the consolidated SoFP. Deferred tax is not recognised on the initial recognition of goodwill. Deferred tax assets, including those arising from tax losses, are only recognised to the extent it is probable that sufficient taxable profits will be available to utilise the losses in the foreseeable future. The Group estimates future taxable profits based on approved budgets and forecasts extending five years. Future taxable profits are influenced by a variety of general economic and business conditions, which are outside the control of the Group. A change in any of these assumptions could have an impact on the future profitability of the Group and may affect the recovery of deferred tax assets. MIRVAC LIMITED TAX CONSOLIDATED GROUP Mirvac Limited and its wholly-owned controlled entities are in a tax consolidated group. The entities in the tax consolidated group have entered into a tax sharing agreement which, in the opinion of the Directors, limits the joint and several liability of the wholly-owned entities in the case of a default by the head entity, Mirvac Limited. Accordingly, the deferred tax assets and deferred tax liabilities are permitted to be offset in the consolidated SoFP. The entities in the tax consolidated group have also entered into a tax funding agreement to fully compensate/be compensated by Mirvac Limited for current tax balances and the deferred tax assets for unused tax losses and credits transferred. INCOME TAX ANALYSIS Reconciliation to effective tax rate Profit before income tax Less: Group elimination entries not subject to corporate taxation Less: MPT profit not subject to taxation Add: Mirvac Ltd trust profits not subject to taxation 1 Profit which is subject to taxation Income tax expense calculated at 30% Tax effect of amounts which are not deductible/(taxable) in calculating taxable income Non-deductible/assessable equity accounted profit/(loss) Other non-deductible/(non-assessable) items Income tax expense Effective tax rate 2 2022 $m 985 (6) (712) 1 268 80 1 (3) 78 29% 2021 $m 934 — (798) 2 138 41 (8) 2 35 31% 1. Trust income that is not subject to corporate taxation as not wholly owned by the Mirvac Ltd tax consolidated group. 2. Effective tax rate is calculated as the income tax expense divided by the profit which is subject to taxation. The effective tax rate has been normalised by excluding equity accounted profit/(loss) on joint ventures and associates. Annual Report 2022 – 87 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS B RESULTS FOR THE YEAR B5 INCOME TAX CONTINUED Reconciliation of income tax expense to tax paid and payable Income tax expense Temporary differences Deferred revenue Inventories Unrealised gain on financial instruments Changes in the value of cash flow hedges Receivables Right-of-use assets Lease liabilities Other temporary differences Transfer from tax losses Current tax expense Less: current tax paid during the year Current tax liability Unrecognised tax and capital losses Unused capital losses which have not been recognised as deferred tax assets due to uncertainty of utilisation 1 Potential tax benefit at 30 per cent 1. Unused capital losses can only be utilised against capital gains. 2022 $m 78 (32) 84 (10) (5) (18) — (1) (4) (44) 48 (6) 42 2022 $m 62 19 Movement in deferred tax Recognised in other Recognised in comprehensive income $m profit or loss $m 1 July 2020 $m Recognised in other Balance Recognised in comprehensive income $m profit or loss $m 30 June 2021 $m Unrealised gain/(loss) from JVAs Accruals Employee provisions and accruals Deferred revenue Derivative financial instruments Impairment of loans and doubtful debts PPE Tax losses Lease liabilities Foreign exchange translation losses Other Deferred tax assets Investments in JVAs Inventories 1 Derivative financial instruments Land and buildings Prepayments Receivables Right-of-use assets Other Deferred tax liabilities Net deferred tax assets 8 22 10 50 53 1 2 114 26 172 6 464 (7) (127) (182) — (5) (45) (12) (4) (382) 82 (1) 8 1 (3) (3) 6 (1) (70) (2) (8) 3 (70) 1 (6) — (3) 1 38 2 2 35 (35) — — — — (6) — — — — (94) — (100) — — 108 — — — — — 108 8 7 30 11 47 44 7 1 44 24 70 9 294 (6) (133) (74) (3) (4) (7) (10) (2) (239) 55 1. Includes investment properties that are considered trading stock for tax purposes. Deferred tax assets expected to be recovered after more than 12 months are $189m (2021: $263m). 88 – Celebrating 50 years — (1) 3 (32) (3) (5) 1 (44) (1) (5) (1) (88) (2) 84 (7) (2) 1 (18) — 2 58 (30) — — — — 13 — — — — (30) — (17) — — 9 — — — — — 9 (8) 2021 $m 35 (3) (6) (3) (8) 38 2 (2) 17 (70) — — — 2021 $m 214 64 Balance 30 June 2022 $m 7 29 14 15 54 2 2 — 23 35 8 189 (8) (49) (72) (5) (3) (25) (10) — (172) 17 Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS C PROPERTY AND DEVELOPMENT ASSETS FINANCIAL REPORT This section includes investment properties, investments in joint ventures and associates and inventories. They represent the core assets of the business and drive the value of the Group. C1 PROPERTY PORTFOLIO Mirvac holds a property portfolio for long-term rental yields. Depending on the specific arrangements for each property, they are classified as investment properties or properties held through joint ventures. Refer to note I1 for a detailed listing of Mirvac’s property portfolio. INVESTMENT PROPERTIES Investment properties are properties owned by Mirvac and not occupied by the Group. Investment properties include investment properties under construction (IPUC), which will become investment properties once construction is completed. Mirvac accounts for its investment properties at fair value and revaluation gains are recognised as Other income. For the year ended 30 June 2022, $347m of revaluation gains had been recognised in Other income (2021: $392m). INVESTMENTS IN JOINT ARRANGEMENTS Mirvac enters into arrangements with third parties to jointly own investment properties. If Mirvac has joint control over the activities and joint rights to the net assets of an arrangement held in a separate entity, then it is classified as a joint venture or associate (JVA). The JVA holds investment property at fair value and Mirvac recognises its share of the JVA’s profit or loss as Other income. Mirvac also holds joint operations with third parties whereby the parties have rights to the assets, and obligations for the liabilities, relating to the arrangement. For further details on accounting for JVAs, refer to note C3. JUDGEMENTS IN FAIR VALUE ESTIMATION Fair value is the price that would be received to sell an asset in an orderly transaction between market participants. For all investment property that is measured at fair value, the existing use of the property is considered the highest and best use. The Group assesses its property portfolio for climate related risks and resilience, where appropriate, in determining the fair value of investment properties. The fair values of properties are calculated using a combination of market sales comparisons, discounted cash flows and capitalisation rates. To assist with calculating reliable estimates, Mirvac uses independent valuers on a rotational basis. Approximately 25 per cent of the portfolio is independently valued every six months, with management internally estimating the fair value of the remaining properties using estimation techniques by suitably qualified personnel. As at 30 June 2022, the Group undertook independent valuations covering 35 per cent of its investment property portfolio, by value, excluding IPUC. The fair values are a best estimate but may differ to the actual sales price if the properties were to be sold. The key judgements for each valuation method are explained below: Discounted cash flow (DCF): Projects a series of cash flows over the property’s life and a terminal value, discounted using a discount rate to give the present value. The projected cash flows incorporate expected rental income (based on contracts or market rates), operating costs, lease incentives, lease fees, capital expenditure, and a terminal value from selling the property. The terminal value is calculated by applying the terminal yield to the net market income. The discount rate is a market rate reflecting the risk associated with the cash flows, the nature, location and tenancy profile of the property relative to comparable investment properties and other asset classes. Capitalisation rate: The rate or yield at which the annual net income from an investment is capitalised to ascertain its capital value at a given date. The annual net income is based on contracted rents, market rents, operating costs and future income on vacant space. The capitalisation rate reflects the nature, location and tenancy profile of the property together with current market evidence and sales of comparable properties. Direct comparison approach: Utilises recent sales of comparable properties, adjusted for any differences including the nature, location, town planning/zoning, flooding and environmental impediments. Investment properties under construction: There generally is not an active market for investment properties under construction, so fair value is measured using DCF or residual valuations. DCF valuations for investment properties under construction are as described above but also consider the costs and risks of completing construction and letting the property. Residual: Estimates the value of the completed project, less the remaining development costs which include construction, finance costs and an allowance for the developer’s risk and profit. This valuation is then discounted back to the present value. Note C2 explains the key inputs and sensitivity to changes in the measurement of fair value of investment properties. LEASE INCENTIVES The carrying amount of investment properties includes lease incentives provided to tenants. Lease incentives are capitalised and recognised on a straight-line basis over the lease term. Annual Report 2022 – 89 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS C PROPERTY AND DEVELOPMENT ASSETS C1 PROPERTY PORTFOLIO CONTINUED GROUND LEASES A lease liability reflecting the leasehold arrangements of investment properties is separately disclosed in the consolidated SoFP and the carrying value of the investment properties adjusted (i.e. increased) so that the net of these two amounts equals the fair value of the investment properties. The lease liabilities are calculated as the net present value of the future lease payments discounted at the incremental borrowing rate. At 30 June 2022, $48m of lease liabilities for ground leases has been recognised in the consolidated SoFP (2021: $47m). Lease liabilities are subsequently measured by: > increasing the carrying amount to reflect interest on the lease liability; > reducing the carrying amount to reflect the lease payments made; and > remeasuring the carrying amount to reflect any reassessment or lease modifications. Some ground leases contain variable payment terms that are linked to sales generated. Variable lease payments that depend on sales are recognised in the consolidated SoCI in the period in which the condition that triggers those payments occurs. Interest on the lease liabilities and any variable lease payments not included in the measurement of the lease liabilities are recognised in the consolidated SoCI to the period in which they relate. DERECOGNITION OF INVESTMENT PROPERTIES Investment properties are reclassified from non-current to current assets held for sale when they satisfy the conditions under AASB 5 Non-current Assets Held for Sale and Discontinued Operations. For reclassification to occur, the disposal of the investment property must be highly probable with an exchanged contract and settlement pending. Once control of an investment property transfers to a purchaser, usually upon settlement, the Group will derecognise the book value of the Investment property with any resultant gain or loss recognised in the consolidated SoFP. As at 30 June 2022, there were no investment properties held for sale (2021: $133m). Occasionally, the Group will reassess the status of an investment property and determine that its highest and best use may be different from its current use, for example an office building may better suited to redevelopment and sale as apartments. In these cases, once development commences with a view to resale, and the investment property ceases to be classified as an investment property, all or part is reclassified from Investment properties to Inventory. During the year, a net of $37m of investment properties was transferred to inventory (2021: $56m). COMMITMENTS Capital expenditure commitments At 30 June 2022, capital commitments on Mirvac’s investment property portfolio were $645m (2021: $527m). There were no investment properties pledged as security by the Group (2021: nil). Lease commitments Lease revenue from investment properties is accounted for as operating leases. The revenue from leases is recognised in the consolidated SoCI on a straight-line basis over the lease term. The future receipts are shown as undiscounted contractual cash flows. Future operating lease receipts as a lessor 2022 2021 $521m $1,666m $1,481m $558m $1,675m $1,447m Within one year Between one and five years Later than five years PROPERTY PORTFOLIO AS AT 30 JUNE 2022 Note Investment properties Investment properties under construction Total investment properties C2 Investments in JVA 1 Assets classified as held for sale Total property portfolio Integrated Investment Portfolio Total Office $m 6,653 401 7,054 1,283 — 8,337 Industrial $m Retail $m Build to Rent $m 1,242 341 1,583 67 — 2,576 342 2,918 — — 1,650 2,918 221 413 634 — — 634 2022 $m 10,692 1,497 12,189 1,350 — 13,539 2021 $m 10,978 843 11,821 472 133 12,426 1. Represents Mirvac’s share of the JVA’s investment properties which is included within the carrying value of investments in JVA. 90 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS C PROPERTY AND DEVELOPMENT ASSETS C1 PROPERTY PORTFOLIO CONTINUED BY ASSET CLASS BY GEOGRAPHY Office: 62% Retail: 21% Industrial: 12% Build to Rent: 5% FINANCIAL REPORT NSW: 63% VIC: 21% QLD: 10% ACT: 3% WA: 3% REVALUATION OF INVESTMENT PROPERTIES FY22 net revaluation gain $347m $0 C U P I / P I FY21 net revaluation gain $392m $0 C U P I / P I ($126m) $265m $208m $275m $137m ($7m) ($13m) Build to Rent Retail Office Industrial C2 INVESTMENT PROPERTIES Investment properties, including investment properties under construction, are held at fair value and any gains or losses are recognised in revenue and Other income. The fair value movements are non-cash and do not affect the Group’s distributable income. Office $m Industrial $m Retail $m Build to Rent $m Movements in investment properties Balance 1 July Expenditure capitalised Acquisitions Disposals Net revaluation gain/(loss) from fair value adjustments Transfer from/(to) inventories Transfer to assets classified as held for sale Transfer to joint ventures and associates Amortisation expense 7,191 380 755 (661) 265 18 — (819) (75) 1,186 62 188 — 208 (55) — — (6) Balance 30 June 7,054 1,583 3,074 52 — (50) (126) — — — (32) 2,918 370 172 93 — — — — — (1) 634 2022 Total $m 11,821 666 1,036 (711) 347 (37) — (819) (114) 12,189 2021 Total $m 11,167 473 185 (82) 392 (56) (133) — (125) 11,821 Annual Report 2022 – 91 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS C PROPERTY AND DEVELOPMENT ASSETS C2 INVESTMENT PROPERTIES CONTINUED FAIR VALUE MEASUREMENT AND VALUATION BASIS The basis of valuation of investment properties is fair value. Fair values are based on market values, being the price that would be received to sell an asset in an orderly transaction between market participants at the reporting date. Investment properties are measured as Level 3 financial instruments. Refer to note D6 for explanation of the levels of fair value measurement. The following are the unobservable inputs used in determining the fair value measurement of investment properties. Movement in any of the unobservable inputs is likely to have an impact on the fair value of investment property. The higher the net market income or 10-year compound annual growth rate, the higher the fair value. The higher the capitalisation rate, terminal yield or discount rate, the lower the fair value. Unobservable inputs Details Capitalisation rate Discount rate The rate at which net market income is capitalised to determine the value of a property. The rate of return used to convert a monetary sum, payable or receivable in the future, into present value. This should reflect the opportunity cost of capital, that is, the required rate of return the capital can earn if put to other uses having regard to a similar risk profile. Terminal yield The capitalisation rate used to convert income into an indication of the anticipated value of the property at the end of the holding period when carrying out a discounted cash flow calculation. Market rent and growth rate The rent at which a tenancy could be leased in the market including rental growth in future years at the date of valuation. Market rent includes gross rent and net rent. Gross rent is where outgoings are incorporated in the rent being paid. Net market rent is where the owner recovers outgoings from the tenant on a pro-rata basis. Market rate The market rate per square metre uses recent transactional evidence of comparable properties to determine the fair value of the investment property under the direct comparison method. The discounted cash flow, capitalisation rate, residual valuation and direct comparison methods all use unobservable inputs in determining fair value; ranges of the inputs are included below per asset class: Inputs used to measure fair value Level 3 fair value $m Net market income $/sqm 10-year compound Capitalisation rate annual growth rate % % Market rate $/sqm Terminal yield % Discount rate % 2021 Office Industrial Retail Build to Rent Total investment properties 2022 Office Industrial Retail Build to Rent Total investment properties 7,191 1,186 3,074 370 11,821 7,054 1,583 2,918 634 12,189 312 – 1,519 104 – 407 311 – 1,121 539 1 — 365 – 1,199 110 – 410 314 – 1,127 547 1 — 1. Average net market income per apartment per week. 2.50 – 3.80 2.82 – 3.02 2.30 – 3.84 3.00 4.38 – 7.50 4.00 – 5.75 4.75 – 8.75 4.00 — — — — — — — 4.50 – 7.50 4.50 – 6.00 5.00 – 9.00 4.00 5.85 – 8.25 5.25 – 6.75 6.25 – 9.50 6.25 — — 2.60 – 4.20 3.27 – 3.32 1.87 – 4.13 3.30 4.50 – 6.75 3.50 – 5.00 4.75 – 8.75 4.00 — — — — 865-1,612 — — 4.75 – 7.00 3.75 – 5.25 5.00 – 9.00 4.00 6.00 – 7.75 4.88 – 6.25 6.00 – 9.50 6.25 — — 92 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS FINANCIAL REPORT C PROPERTY AND DEVELOPMENT ASSETS C2 INVESTMENT PROPERTIES CONTINUED SENSITIVITY ANALYSIS Due to the rapidly changing economic climate and the judgement required to assess the fair value of the Group’s investment properties, a sensitivity analysis has been undertaken to further stress test the Group’s assessment of fair value as at 30 June 2022. The following sensitivity analysis is based on upward and downward movement scenarios of 25 bps and 50 bps on the movement of capitalisation rates, discount rates and terminal yields per asset class compared to the capitalisation rates, discount rates and terminal yields adopted by the Group as at 30 June 2022. These are considered to be the key unobservable inputs that would be expected to have the most material impact on the fair values adopted if they moved. Valuations use a blended capitalisation rate and DCF approach whereby the current market income and the cash flow of the investment property are considered to determine the final fair value. Varying the capitalisation rates alone will only impact the valuations derived through capitalisation method and has no impact on the DCF analysis. A change in discount rate and terminal capitalisation rate will only impact the DCF valuation. Accordingly, all three metrics need to be moved proportionately to ensure a consistent methodology when performing the sensitivity analysis. Presented below is the outcome of the sensitivity analysis as the decrement or increment to the fair value of each asset class of the Group’s investment property portfolio (including office JV but excluding IPUC and development assets) should the unobservable inputs increase or decrease by 25 bps or 50 bps. For example, an increase of 25 bps of the capitalisation rate, discount rate and terminal yield in the Group’s office portfolio would have resulted in a decrement of $414m in addition to the fair value presented as at 30 June 2022. Investment properties at fair value assessed using DCF, market capitalisation and capitalisation rate Office Industrial Retail Build to Rent Total Capitalisation rate, discount rate and terminal yield movement by 25 bps $m (414) (73) (119) (13) (619) 50 bps $m (813) (138) (229) (25) (1,205) 25 bps $m 50 bps $m 407 82 115 15 619 805 175 258 32 1,270 For investment properties at fair value assessed using the direct comparison approach, a sensitivity analysis was performed. Using an increase of 10 per cent in the rate per square metre and a decrease of 10 per cent in the rate per square metre, the impact to the fair value presented as at 30 June 2022 was not material. C3 INVESTMENTS IN JOINT VENTURES AND ASSOCIATES A joint venture or an associate (JVA) is an arrangement where Mirvac has joint control or significant influence over the activities and joint rights to the net assets. Refer to note G1 for details on how Mirvac decides if it controls an entity. Refer to note I3 for the Group’s joint venture and associate entities and ownership percentages. Mirvac initially records its investment in JVAs at cost and subsequently accounts for them using the equity method. Under the equity method, the Group’s share of the JVA’s profit or loss is added to/deducted from the carrying amount each year. Distributions received or receivable are recognised by reducing the carrying amount of the JVA. When transactions between Mirvac and its JVAs create an unrealised gain, the Group eliminates the unrealised gain relating to Mirvac’s proportional interest in the JVA. Unrealised losses are eliminated in the same way unless there is evidence of impairment, in which case the loss is realised. JUDGEMENT IN TESTING FOR IMPAIRMENT OF INVESTMENTS IN JVA At each reporting period, the Group assesses whether there is any indication that its investments in JVAs may be impaired. If any such indication exists, the Group estimates the recoverable amount of the asset. The recoverable amount is calculated as the estimated present value of future distributions to be received from the JVA and from its ultimate disposal. There were no impairments of JVAs in 2022 (2021: nil). All JVAs are established or incorporated in Australia. The movements in the carrying amount of the JVAs are as follows: Movements in the carrying amount of JVA Balance 1 July Share of profit 1 Equity acquired Other movements Transfer from investment properties Return of capital Distributions received/receivable Balance 30 June 1. Share of net profit of JVAs reconciles to the consolidated SoCI net of expenses associated with the Tucker Box Hotel Group transaction. 2022 $m 783 111 73 (33) 819 (174) (98) 1,481 2021 $m 744 114 12 2 — (5) (84) 783 Annual Report 2022 – 93 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS C PROPERTY AND DEVELOPMENT ASSETS C3 INVESTMENTS IN JOINT VENTURES AND ASSOCIATES CONTINUED The table below provides summarised financial information for those JVAs that are significant to the Group. The information presented reflects the total amounts presented in the financial statements of the relevant JVAs and not the Group’s share, unless otherwise stated. The information has been amended to reflect any unrealised gains or losses on transactions between Mirvac and its JVAs. The George Street Trust 1 Mirvac (Old Treasury) Trust 2 Mirvac Locomotive Trust 1,2 Mirvac 8 Chifley Trust 2 Tucker Box Hotel Group Other JVAs Total 2022 $m 2021 $m 2022 $m 2021 $m 2022 $m 2021 $m 2022 $m 2021 $m 2022 $m 2021 $m 2022 $m 2021 $m 2022 $m 2021 $m Property investment Property investment Property investment Property investment Hotel investment Various 4 12 16 1,159 1,175 — 18 18 — — — 18 1,157 50 579 — — — — — — — — — — — — — — — 6 — 6 497 503 — 7 7 — — — 7 6 1 7 4 3 7 487 494 471 478 — 7 7 — — — 7 — 7 7 — — — 7 496 487 471 50 248 50 244 51 240 579 — 242 237 223 — — — — — — — — — — — — — — — — 7 1 8 462 470 — 6 6 — — — 6 2 — 2 458 460 — 7 7 — — — 7 464 453 50 232 50 227 31 38 69 — 69 — 25 25 — — — 25 44 50 22 1 621 622 — 622 197 43 240 — — — 240 382 50 191 67 67 134 492 626 — 17 17 64 160 224 241 385 — 195 76 102 178 119 121 240 85 724 809 340 3,081 1,285 518 3,321 2,094 24 23 47 33 160 193 240 278 — 139 — 80 80 64 160 224 304 221 80 301 33 160 193 494 3,017 1,600 — 1,516 — 801 216 210 22 191 199 145 1,481 783 Principal activities Summarised SoFP Cash and cash equivalents Other current assets Total current assets Total non-current assets Total assets Borrowings Other current liabilities Total current liabilities Borrowings Other non-current liabilities Total non-current liabilities Total liabilities Net assets Group’s ownership of the JVA in % Group’s share of net assets in $m Carrying amount in Group’s consolidated SoFP 1. This entity was previously consolidated into the Group; however control was lost during the year and is now accounted for as a JVA. Refer to note G4. 2. The difference between the carrying amount and the Group’s share in the net assets of its investment is a result of eliminations due to the Group’s transactions with its investee. The George Street Trust 1 Mirvac (Old Treasury) Trust Mirvac Locomotive Trust 1 Mirvac 8 Chifley Trust Tucker Box Hotel Group Other JVAs Total 2022 $m 2021 $m 2022 $m 2021 $m 2022 $m 2021 $m 2022 $m 2021 $m 2022 $m 2021 $m 2022 $m 2021 $m 2022 $m 2021 $m Property investment Property investment Property investment Property investment Hotel investment Various 50 — 6 56 — 14 — 42 19 — — — — — — — — — 42 — 5 47 — 9 — 38 15 42 — 25 67 — 8 — 59 14 28 — — 28 — 8 — 20 10 — — — — — — — — — 23 — 2 25 — 5 — 20 10 32 — — 32 — 25 — 7 14 10 — 2 12 5 7 — — — 8 — 62 70 5 3 1 61 — 254 — 15 269 1 184 — 84 246 — 1 247 1 140 — 106 407 — 30 437 6 227 — 204 328 — 88 416 6 176 1 233 44 56 98 84 Principal activities Summarised SoCI Revenue Interest income Other income Total revenue and other income Interest expense Other expenses Income tax expense Profit from continuing operations Distributions received/receivable by the Group from JVAs 1. This entity was previously consolidated into the Group; however control was lost during the year and is now accounted for as a JVA. Refer to note G4. CAPITAL EXPENDITURE COMMITMENTS At 30 June 2022, the Group’s share of its JVA’s capital commitments which have been approved but not yet provided for was $56m (2021: $42m). 94 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS FINANCIAL REPORT C PROPERTY AND DEVELOPMENT ASSETS C4 INVENTORIES The Group develops residential, commercial and mixed use properties for sale in the ordinary course of business. Inventories are classified as current if they are expected to be settled within 12 months or otherwise they are classified as non-current. DEVELOPMENT PROJECTS Development projects are valued at the lower of cost and net realisable value (NRV). Following a review and assessment of the project forecasts and new development opportunities, there were Inventory write-downs and losses recognised during the year of $15m (2021: $12m); refer to note B3. Cost includes the costs of acquisition, development, interest capitalised and all other costs directly related to specific projects. An allocation of direct overhead expenses is also included. JUDGEMENT IN CALCULATING NRV OF INVENTORIES NRV is the estimated selling price in the ordinary course of business less the estimated costs to complete and sell the development. NRV is estimated using the most reliable evidence available at the time, including expected fluctuations in selling price and estimated costs to complete and sell. The key assumptions used in the project forecasts for the Group’s NRV assessments include: Key assumption Details of key assumption Sales rates/volumes The rate at which lots are sold over a given period. Sales price The price which a given lot is sold to the general public. Sales incentives Recognised as a percentage of the purchase price, which is allocated to either direct or indirect expenditure to induce the sale of a lot. Settlement volumes The number of lot settlements achievable over a given period. Cost to complete All remaining costs to complete the program of works and sell unsold stock, measured at reporting date. Program duration The duration of a project from commencement to completion of all stages, a project program generally extends from the approval to purchase through to the final settlement of lots and may extend over many years. Annual Report 2022 – 95 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS C PROPERTY AND DEVELOPMENT ASSETS C4 INVENTORIES CONTINUED Movements in inventories Balance 1 July Costs incurred Settlements Provision for impairment of inventories Inventory costs written off Transfer from investment properties Transfer to other assets Balance 30 June Inventory represented by Current inventory Provision for impairment Total current inventory Non-current inventory Provision for impairment Total non-current inventory Total inventories Residential Apartments $m 924 319 (316) — (4) — — 923 MPC $m 843 776 (412) — (1) — (4) 1,202 Residential MPC $m Apartments $m 228 (3) 225 983 (6) 977 1,202 332 (2) 330 644 (51) 593 923 Commercial & Mixed Use Total $m 326 235 (433) (5) (5) 37 (19) 136 Commercial & Mixed Use Total $m 67 — 67 76 (7) 69 136 Total $m 1,767 1,095 (728) — (5) — (4) 2,125 Total $m 560 (5) 555 1,627 (57) 1,570 2,125 INVENTORIES AS AT 30 JUNE 2022 By product line By geography Apartments: 41% Masterplanned communities: 53% Commercial & Mixed Use: 6% 2022 Total $m 2,093 1,330 (1,161) (5) (10) 37 (23) 2,261 2022 Total $m 627 (5) 622 1,703 (64) 1,639 2,261 NSW: 63% VIC: 24% QLD: 8% WA: 5% 2021 Total $m 1,684 1,137 (772) (5) (7) 56 — 2,093 2021 Total $m 651 (19) 632 1,516 (55) 1,461 2,093 96 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS D CAPITAL STRUCTURE AND RISKS FINANCIAL REPORT This section outlines the market, credit and liquidity risks that the Group is exposed to and how it manages these risks. Capital comprises stapled securityholders’ equity and net debt. D1 CAPITAL MANAGEMENT Mirvac has a capital management framework, approved and monitored by the Board. The framework aims to address the market, credit and liquidity risks while also meeting the Group’s strategic objectives. These objectives include: > The Group’s target allocation of capital is 80 per cent investment and 20 per cent development with the current allocation being 88 per cent/12 per cent; > The Group’s distribution policy is a minimum of trust taxable earnings and up to 80 per cent of operating earnings. The payout ratio for FY22 was 67.5 per cent; > The Group’s target credit rating is Fitch A- and Moody’s A3 which was maintained as at 30 June 2022; and > The Group’s target gearing ratio is between 20 and 30 per cent and was 21.3 per cent as at 30 June 2022. GEARING RATIO 21.3% 30 June 2022 22.8% 30 June 2021 If the Group is required to change its gearing ratio, it could adjust its payout ratio, issue new equity, buy back securities, or realise capital through disposals of investment properties to repay borrowings. The Group was in compliance with all debt covenants in 2022 and in the prior year. The Group uses derivatives to hedge its underlying exposures to changes in interest rates on its borrowings and to changes in foreign exchange rates on its foreign currency transactions. D2 BORROWINGS AND LIQUIDITY The Group enters into borrowings at both fixed and floating interest rates and also uses interest rate derivatives to reduce interest rate risks. During the year, the Group has undertaken $450m of new financing transactions with maturities ranging from 2 – 10 years. At 30 June 2022, the Group had $1,368m of cash and committed undrawn facilities available. DRAWN DEBT SOURCES AS AT 30 JUNE 2022 $800m $600m $400m $200m 0 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35 FY36 FY37 FY38 FY39 FY40 BORROWINGS Borrowings are initially recognised at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest rate method. Under the amortised cost method, any difference between the initial amount recognised and the redemption amount is recognised in the consolidated SoCI over the period of the borrowings using the effective interest rate method. MTN USPP EMTN Bank Unsecured facilities Bank loans Bonds Total unsecured borrowings Prepaid borrowing costs Total borrowings Undrawn facilities Other Lease liabilities 2022 2021 Current Non-current $m $m Total carrying amount $m — 281 281 — 281 818 3,123 3,941 (11) 3,930 818 3,404 4,222 (11) 4,211 810 Total fair value $m 818 3,397 4,215 (11) 4,204 Current Non-current $m $m Total carrying amount $m — — — — — 578 3,356 3,934 (12) 3,922 578 3,356 3,934 (12) 3,922 750 Total fair value $m 578 3,464 4,042 (12) 4,030 8 72 80 80 4 64 68 68 Annual Report 2022 – 97 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS D CAPITAL STRUCTURE AND RISKS D2 BORROWINGS AND LIQUIDITY CONTINUED The fair value of bank loans is considered to approximate their carrying amount. The fair value of bonds is calculated as the expected future cash flows discounted by the relevant current market rates. The following table sets out Mirvac’s net exposure to interest rate risk by maturity periods. Exposures arise predominantly from liabilities bearing variable interest rates as the Group intends to hold fixed rate liabilities to maturity. 2022 Fixed interest maturing in: 2021 Fixed interest maturing in: Floating interest rate $m 818 2,515 (900) 2,433 Less than 1 year $m — 50 400 450 Bank loans Bonds Interest rate derivatives Total 1 to 2 years $m 2 to 5 Over years 5 years $m $m Total $m 818 3,272 — — 250 300 550 — 75 400 475 — 382 (200) 182 4,090 Floating interest rate $m Less than 1 year $m 320 2,065 (1,200) 1,185 — — 300 300 1 to 2 years $m 2 to 5 Over years 5 years $m $m — 50 400 450 258 325 600 1,183 — 681 (100) Total $m 578 3,121 — D3 CASH FLOW INFORMATION For the purpose of presentation in the consolidated SoCF, cash and cash equivalents include cash at bank and short-term deposits at call. RECONCILIATION OF PROFIT TO OPERATING CASH FLOW Profit from continuing operations Revaluation of investment properties Share of net profit of assets JVA distributions received Net gain on sale of assets Net loss on sale of PPE Net gain on financial instruments Inventory write-downs and losses Depreciation and amortisation expenses Impairment loss on receivables Security-based payments expense Change in operating assets and liabilities Net cash inflows from operating activities NET DEBT RECONCILIATION 2022 $m 907 (347) (109) 95 (16) 1 (64) 15 77 24 15 298 896 Liabilities from financing activities Current lease liabilities $m Non-current lease liabilities $m Current borrowings $m Non-current liabilities $m Total Cash and cash equivalents $m liabilities $m Balance 1 July 2020 Net cash flow movements Other non-cash movements Balance 30 June 2021 Net cash flow movements Other non-cash movements Balance 30 June 2022 (4) 4 (4) (4) (12) 8 (8) (68) — 4 (64) — (8) (72) (200) 200 — — (219) (62) (281) (4,100) (162) 340 (3,922) (173) 165 (3,930) (4,372) 42 340 (3,990) (404) 103 (4,291) 324 (207) — 117 441 — 558 98 – Celebrating 50 years 581 3,699 2021 $m 899 (392) (109) 84 (2) — (45) 12 71 20 10 87 635 Total $m (4,048) (165) 340 (3,873) 37 103 (3,733) Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS FINANCIAL REPORT D CAPITAL STRUCTURE AND RISKS D4 DERIVATIVE FINANCIAL INSTRUMENTS Mirvac uses derivative financial instruments to hedge its exposure to movements in interest and foreign exchange rates and not for trading or speculative purposes. Refer to note D5 for further details of how Mirvac manages financial risk. HEDGING PROFILE AT 30 JUNE 2022 Derivatives are classified as held for trading and accounted for at fair value through profit or loss unless they are designated as hedges. All derivative financial instruments used for hedge accounting are recognised initially at fair value and reported subsequently at fair value in the consolidated SoFP. The chart below shows the net amount of debt subject to fixed interest rates and the maximum average fixed interest rate payable each year: $2.0bn $1.5bn $1.0bn $0.5bn 0 2.42% 2.46% 2.44% 2.47% 2.73% 2.67% 4.0% 3.5% 3.0% 2.5% 2.0% FY22 FY23 FY24 FY25 FY26 FY27 Fixed Collar Swap Average Rate DERIVATIVES THAT QUALIFY FOR HEDGE ACCOUNTING Mirvac’s treasury policy sets out the hedging strategy and objectives to manage exposures arising from fluctuations in interest rates and foreign currency exchange rates. At implementation, Mirvac formally designates and documents the relationship between hedging instruments (cross currency interest rate swaps only) and the hedged items (foreign currency bonds) as well as the proposed effectiveness of the risk management objective that the hedge relationship addresses. On an ongoing basis, Mirvac documents its assessment of retrospective and prospective hedge effectiveness of all hedge relationships for changes in fair values or cash flows. FAIR VALUE HEDGE A fair value hedge is a hedge of the exposure to changes in fair value of an asset or liability (such as a bond) that is attributable to a particular risk (such as movements in interest rates). Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the consolidated SoCI, together with any changes in the fair value of the hedged asset/liability that are attributable to the hedged risk. CASH FLOW HEDGE A cash flow hedge is a hedge of the exposure to variability in cash flows attributable to a particular risk associated with an asset, liability or highly probable forecast transaction that could affect profit or loss. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity via the cash flow hedge reserve. Any gain or loss relating to the ineffective portion is recognised in the consolidated SoCI. Annual Report 2022 – 99 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS D CAPITAL STRUCTURE AND RISKS D4 DERIVATIVE FINANCIAL INSTRUMENTS CONTINUED COST OF HEDGING Currency basis spread is a liquidity premium that is charged for exchanging different currencies, and the changes over time impacting the fair value of cross currency swaps. Mirvac defers the change in fair value to currency basis spreads in the cost of hedging reserve. All derivatives require settlement on a monthly or quarterly basis. Translation gains or losses on the net investment in foreign operations are recorded through the foreign currency translation reserve. Current Interest rate derivatives – through profit or loss Cross currency interest rate swaps – cash flow hedge Total current derivative financial instruments Non-current Interest rate derivatives – through profit or loss Cross currency interest rate swaps – cash flow hedges Total non-current derivative financial instruments Total derivative financial assets/liabilities 2022 2021 Asset $m Liability $m Asset $m Liability $m 1 62 63 17 161 178 241 — — — 47 69 116 116 — — — 3 245 248 248 5 — 5 75 24 99 104 MASTER NETTING ARRANGEMENTS – NOT CURRENTLY ENFORCEABLE Agreements with derivative counterparties are based on an ISDA Master Agreement. Under the terms of these arrangements, only where certain credit events occur (such as default), may the net position owing/receivable to a single counterparty in the same currency be taken as owing and all the relevant derivative arrangements terminated. As the Group does not presently have a legally enforceable right of set-off, these amounts have not been offset in the consolidated SoFP. If a credit event had occurred, the ISDA Master Agreement would have the effect of netting, allowing a reduction to derivative assets and derivative liabilities of the same amount of $107 million (2021: $128 million). D5 FINANCIAL RISK MANAGEMENT Mirvac’s activities expose it to a variety of financial risks including market risk, credit risk and liquidity risk. Mirvac seeks to minimise the potential impact of these financial risks on financial performance, for example, by using derivative financial instruments to protect against interest rate and foreign exchange risk. Financial risk management is carried out by a central treasury department (Mirvac Group Treasury) under policies approved by the Board. The Board provides overall risk management principles and policies covering specific areas. Mirvac Group Treasury identifies, evaluates, reports and manages financial risks in close cooperation with the Group’s operating units in accordance with Board policy. The table below summarises key financial risks and how they are managed: Risk Definition Exposures arising from Management of exposures Market risk – interest rate The risk that the fair value or cash flows of financial instruments will fluctuate due to changes in market interest rates > Borrowings issued at fixed rates and variable rates > Derivatives > Interest rate derivatives manage cash flow interest rate risk by converting floating rate borrowings to fixed or capped rates with target of 55 per cent > Mirvac does not manage the fair value risk for debt instruments from interest rates, as it does not have an impact on the cash flows paid by the business > Refer to note D2 for details on the interest rate exposure for borrowings Market risk – foreign exchange The risk that the fair value of a financial commitment, asset or liability will fluctuate due to changes in foreign exchange rates > Bonds denominated in other currencies > Receipts and payments which are denominated in other currencies > Cross currency interest rate swaps to convert non-Australian dollar borrowings to Australian dollar exposures. These cross currency interest rate swaps have been designated as cash flow hedges with the movements in fair value recognised while they are still in an effective hedge relationship 100 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS FINANCIAL REPORT D CAPITAL STRUCTURE AND RISKS D5 FINANCIAL RISK MANAGEMENT CONTINUED Market risk – price Credit risk The risk that the fair value of other financial assets at fair value through profit or loss will fluctuate due to changes in the underlying share/unit price The risk that a counterparty will not make payments to Mirvac as they fall due > Other financial assets at fair value through profit or loss, with any resultant gain or loss recognised in other comprehensive income > Cash and cash equivalents > Receivables > Derivative financial assets > The Group is exposed to minimal price risk and so does not manage the exposures > Setting credit limits and obtaining collateral as security (where appropriate) > Diversified trading spread across large financial institutions with investment grade credit ratings > Regularly monitoring the exposure to each counterparty and their > Other financial assets credit ratings > Refer to note F1 for details on credit risk exposure on receivables. The Group deems the exposure to credit risk as not significant for all other classes of financial assets and liabilities Liquidity risk The risk that Mirvac will not be able to meet its obligations as they fall due > Payables > Borrowings > Derivative financial liabilities > Regular forecasts of the Group’s liquidity requirements. Surplus funds are only invested in highly liquid instruments > Availability of cash, marketable securities and committed credit facilities > Ability to raise funds through issue of new securities through MARKET RISK Foreign exchange risk The cross currency interest rate swaps (CCIRS) that are in place cover 100 per cent of the foreign denominated bonds (interest payments and redemption value) with the same maturity profiles as the bonds. This removes exposure to foreign exchange movements between the foreign currencies and Australian dollar. Foreign currency transactions are translated into the entity’s functional currency using the exchange rate at the transaction date. Foreign exchange gains and losses resulting from settling foreign currency transactions and from translating foreign currency monetary assets and liabilities at year end are recognised in the consolidated SoCI. Sensitivity analysis – interest rate risk and foreign exchange risk This sensitivity analysis shows the impact on profit after tax and equity if Australian interest rates changed by 100 basis points (bps). placements or DRP > Refer to note D2 for details of liquidity risk of the Group’s financing arrangements NOTIONAL AMOUNT AND EXPIRY OF CCIRS $2,473m $2,322m $1,637m $1,286m $1,017m $515m $170m $170m 1 to 2 years 2 to 5 years Over 5 years Total 30 June 2021 30 June 2022 Given the recent significant upward shift in the interest rate environment that the Group is operating in and with official interest rates at the beginning of a tightening cycle, a 100 bps movement is deemed an appropriate sensitivity to consider for 30 June 2022. The Group has borrowings and CCIRS which reference foreign interest rates and foreign exchange rates however these are hedge accounted in effective hedge relationships, therefore the net profit impact is nil. Total impact on profit after tax and equity Interest rate risk 1 Changes in: Australian interest rates Foreign exchange risk 2 Foreign interest rates Foreign exchange risk 2 Foreign exchange rates 2022 2021 100 bps $m 100 bps $m 25 bps $m 25 bps $m $15.5m decrease $14.2m increase $1.1m increase $3.3m decrease — — — — — — — — 1. This calculation shows the impact on borrowings, cash and derivative financial instruments held as an economic hedge. It assumes that no interest is capitalised into qualifying assets as discussed in note B3. If fair value movements were excluded, operating profit would reduce if interest rates were to rise. 2. The Group has borrowings and CCIRS which reference foreign interest rates and foreign exchange rates; however, these are hedge accounted in effective hedge relationships, therefore the net profit impact is nil. Annual Report 2022 – 101 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS D CAPITAL STRUCTURE AND RISKS D5 FINANCIAL RISK MANAGEMENT CONTINUED EFFECTS OF HEDGE ACCOUNTING The effects of the foreign currency-related hedging instruments on the Group’s financial position and performance are as follows: Carrying amount Original debt amount Original hedged amount Maturity date Hedge ratio Change in discounted spot value of outstanding hedging instruments since inception of the hedge Change in value of hedged item used to determine hedge ineffectiveness Weighted average hedged rate for outstanding hedging instruments against AU$1 2022 $2,605m $2,473m $2,473m 2021 $2,557m $2,322m $2,322m Dec 2022 – Mar 2034 Dec 2022 – Mar 2034 1:1 $136m ($151m) US$0.79 YEN79.82 HK$5.74 1:1 $206m ($246m) US$0.79 YEN79.82 HK$6.04 LIQUIDITY RISK Maturities of financial liabilities and derivative financial assets Mirvac’s maturity of financial liabilities and derivative financial assets is provided in the following table. The amounts disclosed in the table are the contractual undiscounted cash flows: 2022 Maturing in: 2021 Maturing in: Less than 1 year $m 747 22 414 8 1 to 2 years $m 242 21 368 7 2 to 5 years $m 332 794 1,307 16 Over 5 years $m — — 2,167 49 Less than 1 year $m Total $m 1,321 837 4,256 80 557 5 126 4 1 to 2 years $m 43 6 383 4 2 to 5 years $m Over 5 years $m 325 568 938 11 — — 2,672 49 Total $m 925 579 4,119 68 1 1 16 15 33 24 15 14 6 59 289 (328) 1,153 131 (88) 682 1,360 (1,379) 2,446 1,545 (1,532) 2,244 3,325 (3,327) 6,525 50 (85) 681 225 (294) 382 715 (766) 1,805 1,855 (1,840) 2,742 2,845 (2,985) 5,610 Payables 1 Unsecured bank loans Bonds Lease liabilities Net settled derivatives Interest rate derivatives – floating to fixed Gross settled derivatives (cross currency swaps) > Outflow > (Inflow) 1. Includes deferred revenue. 102 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS FINANCIAL REPORT D CAPITAL STRUCTURE AND RISKS D6 FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS Mirvac measures various financial assets and liabilities at fair value which, in some cases, may be subjective and depend on the inputs used in the calculations. The different levels of measurement are described below: > Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; > Level 2: not traded in an active market but calculated with significant inputs coming from observable market data; and > Level 3: significant inputs to the calculation that are not based on observable market data (unobservable inputs). Mirvac holds no Level 1 financial instruments. The methods and assumptions used to estimate the fair value of Mirvac’s financial instruments are as follows: DERIVATIVE FINANCIAL INSTRUMENTS Mirvac’s derivative financial instruments are classified as Level 2, as the fair values are calculated based on observable market interest rates and foreign exchange rates. The fair values of interest rate derivatives are calculated as the present value of the estimated future cash flows based on observable yield curves. OTHER FINANCIAL ASSETS Other financial assets include units in unlisted entities; refer to note F2 for further details. The carrying value of other financial assets is equal to the fair value. Investments in unlisted entities are traded in inactive markets and the fair value is determined by the unit or share price as advised by the trustee of the unlisted entity, based on the value of the underlying assets. The unlisted entity’s assets are subject to regular external valuations using the valuation methods explained in note C1. The following table summarises the financial instruments measured and recognised at fair value on a recurring a basis: 2022 2021 Level 1 $m Level 2 $m Level 3 $m Total $m Level 1 $m Level 2 $m Level 3 $m Total $m Financial assets carried at fair value Investments in unlisted entities Derivative financial instruments Total financial assets carried at fair value Financial liabilities carried at fair value Derivative financial instruments Total financial liabilities carried at fair value — — — — — — 241 241 116 116 73 — 73 — — 73 241 314 116 116 — — — — — — 248 248 104 104 78 — 78 — — 78 248 326 104 104 There were no transfers between the fair value hierarchy levels during the year. The following table presents a reconciliation of the carrying value of Level 3 instruments held by the Group (excluding investment properties): Investments in unlisted funds Balance 1 July Acquisitions Net gain recognised in gain on financial instruments Return of capital Balance 30 June Refer to note C2 for a reconciliation of the carrying value of investment properties, also classified as Level 3. 2022 $m 78 8 4 (17) 73 2021 $m 68 2 8 — 78 Annual Report 2022 – 103 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS E EQUITY This section includes details of distributions, stapled securityholders’ equity and reserves. It represents how the Group raised equity from its stapled securityholders in order to finance the Group’s activities both now and in the future. E1 DISTRIBUTIONS Half yearly ordinary distributions paid/payable and distribution per security: 9.9cpss 10.2cpss 4.8cpss 5.1cpss 5.1cpss 5.1cpss $390m paid $404m paid/payable $189m paid on 1 Mar 2021 $202m paid on 28 Feb 2022 $201m paid on 31 Aug 2021 $202m payable on 31 Aug 2022 FY21 FY22 31 December FY21 FY22 30 June FY21 FY22 Annual All distributions in the current and prior periods were unfranked. Franking credits available for future years, based on a tax rate of 30 per cent, total $30m (2021: $24m). E2 CONTRIBUTED EQUITY Mirvac’s contributed equity includes ordinary shares in Mirvac Limited and ordinary units in MPT which are stapled to create stapled securities. Each ordinary security entitles the holder to receive distributions when declared, to one vote at securityholders’ meetings and on polls and to a proportional share of proceeds on winding up of Mirvac. When new securities or options are issued, the directly attributable incremental costs are deducted from equity, net of tax. CONTRIBUTED EQUITY Mirvac Limited – ordinary shares issued MPT – ordinary units issued Total contributed equity 2022 2021 No. securities m Securities $m No. securities m Securities $m 3,942 3,942 2,165 5,362 7,527 3,936 3,936 2,162 5,348 7,510 The total number of stapled securities issued as listed on the ASX at 30 June 2022 was 3,943m (2021: 3,938m) which included 1m of stapled securities issued under the LTI plan and EIS (2021: 1m). Securities issued to employees under the Mirvac employee LTI plan and EIS are accounted for as options and are recognised in the security-based payments reserve, not in contributed equity. MOVEMENTS IN PAID UP EQUITY Balance 1 July Securities issued under EEP 1 LTI vested 2 Legacy schemes vested Balance 30 June 1. Mirvac issues securities to employees as security-based payments; refer to note E3 for details. 2. Stapled securities issued for LTIs during the year, relate to LTIs granted in prior years. 2022 2021 No. securities 3,936,111,448 401,059 5,111,753 97,782 3,941,722,042 Securities $m 7,510 1 15 1 7,527 No. securities 3,932,737,261 525,021 2,746,083 103,083 3,936,111,448 Securities $m 7,503 1 6 — 7,510 104 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS FINANCIAL REPORT E EQUITY E3 RESERVES COST OF HEDGING RESERVE The cost of hedging reserve is used to record gains or losses on derivatives that relate to the currency basis spread. Currency basis spread is the liquidity premium that is charged for exchanging different currencies, and changes over time impacting the fair value of a cross currency swap. CASH FLOW HEDGE RESERVE The cash flow hedge reserve is used to record gains or losses on derivatives that qualify as cash flow hedges and that are recognised in other comprehensive income. SECURITY-BASED PAYMENTS (SBP) RESERVE The SBP reserve recognises the SBP expense. Further details on SBP are explained in note E4. NON-CONTROLLING INTERESTS (NCI) RESERVE The NCI reserve was used to record the discount received on acquiring the non-controlling interest in Mirvac Real Estate Investment Trust in December 2009. Note E4 E4 Balance 1 July 2020 Hedging reserve movements Cash flow hedge movements SBP movements Balance 30 June 2021 Hedging reserve movements Cash flow hedge movements SBP movements Balance 30 June 2022 E4 SECURITY-BASED PAYMENT Cost of Cash flow hedging reserve hedge reserve $m $m SBP reserve $m NCI reserve $m Capital reserve $m Total reserves $m — 9 — — 9 (7) — — 2 (9) — (25) — (34) — 24 — (10) 30 — — 1 31 — — (7) 24 8 — — — 8 — — — 8 (1) — — — (1) — — — (1) 28 9 (25) 1 13 (7) 24 (7) 23 Mirvac currently operates the following SBP schemes: > Employee Exemption Plan (EEP); > Long-term Incentives Plan (LTI); and > Short-term incentive (STI) awards. The total of all securities issued under all employee security schemes is limited to five per cent of the issued securities of the stapled group in any five year period. EEP The EEP provides eligible employees with up to $1,000 worth of Mirvac securities at no cost. Employees cannot sell the securities for three years or until they cease employment with the Group, in which case they keep any securities already granted. Other than the restriction on selling, holders have the same rights and benefits as other securityholders. LTI The LTI provides senior executives with performance rights to both reward and retain executives and strengthen the alignment between the performance of the Group and the executives. The performance rights vest based on Mirvac’s TSR and ROIC performance over a three-year period. STI The STI is to motivate and reward employees for contributing to the delivery of annual business performance. For Executive KMP, 75 per cent of any STI award is paid as cash and 25 per cent is deferred into rights. The rights vest in two equal tranches: 50 per cent of the rights vest after one year and 50 per cent after two years. Accounting for the SBP schemes The EEP securities issued each year are recognised as an expense and a movement in contributed equity. The securities issued in FY22 were issued on 3 March 2022 at a stapled security price of $2.57. At 30 June 2022, a total of 9.3m (2021: 8.9m) stapled securities have been issued to employees under the EEP. The LTI, STI and legacy EIS are accounted for as equity-settled SBP. The fair value is estimated at grant date and recognised over the vesting period as an expense and in the SBP reserve. When the SBP vest, ordinary securities are issued and recognised as a transfer from the SBP reserve to contributed equity. Annual Report 2022 – 105 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS E EQUITY E4 SECURITY-BASED PAYMENT CONTINUED RECONCILIATION OF RIGHTS OUTSTANDING UNDER SBP SCHEMES LTI STI Total rights FY21 LTI STI Total rights FY22 Balance 1 July 12,879,742 945,421 13,825,163 10,629,320 394,801 11,024,121 Issued Vested Forfeited 6,759,759 144,321 6,904,080 5,883,107 601,007 6,484,114 (5,111,753) (674,776) (5,786,529) (2,789,136) (349,583) (3,138,719) (3,898,428) (20,165) (3,918,593) (2,058,072) — (2,058,072) Balance 30 June 10,629,320 394,801 11,024,121 11,665,219 646,225 12,311,444 The weighted average remaining contractual life of SBP schemes as at 30 June 2022 was 1.45 years (2021: 1.53 years). SBP expense recognised within employee benefits expenses is as follows: LTI STI Total SBP expense taken to SBP reserve EEP recognised directly in contributed equity Total SBP expense The movements in the SBP reserve are as follows: Balance 1 July Total SBP expense taken to SBP reserve LTI vested and taken to contributed equity STI vested Transfer of unvested awards to retained earnings Balance 30 June 2022 $000 9,925 3,515 13,440 1,322 14,762 2022 $000 31,362 13,440 (15,284) (1,037) (4,149) 24,332 2021 $000 8,580 1,245 9,825 — 9,825 2021 $000 29,856 9,825 (7,314) (1,005) — 31,362 JUDGEMENT IN CALCULATING FAIR VALUE OF SBP To calculate the expense for equity-settled SBP, the fair value of the equity instruments at grant date has to be estimated. The fair value is determined using the Monte-Carlo simulation for the relative TSR component (key judgements and assumptions include exercise price, vesting and performance criteria, security price at grant date, volatility, distribution yield and risk-free interest rate) and a Binomial tree method for the ROIC component. These judgements and assumptions relating to fair value measurement may impact the SBP expense taken to profit or loss and reserves. Assumptions used for the fair value of performance rights awarded during the current year are as follows: Grant date Performance hurdles Performance period start Performance period end Security price at grant date 30 November 2021 Relative TSR and ROIC Exercise price Expected life 1 July 2021 Volatility 30 June 2024 Risk-free interest rate (per annum) $2.86 Dividend/distribution yield (per annum) $nil 2.6 years 36.80% 1.05% 3.46% The valuation of rights is conducted by an independent advisor. The fair value is determined using a Monte-Carlo simulation for the relative TSR component and a Binomial tree methodology for the ROIC component. 106 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS FINANCIAL REPORT F OPERATING ASSETS AND LIABILITIES F1 RECEIVABLES Receivables are initially recognised at their fair value. Receivables are subsequently measured at amortised cost using the effective interest rate method, less loss allowance if required. Due to the short-term nature of current receivables, their carrying amount (less loss allowance) is assumed to be the same as their fair value. For the majority of the non-current receivables, the carrying amount is also not significantly different to their fair value. The expected credit loss (ECL) of receivables is reviewed on an ongoing basis. The Group applies the simplified approach to measuring ECL as appropriate based on the different characteristics of each financial asset class. To measure the ECL, management has grouped together its receivables based on shared credit risk characteristics and the days past due. The Group uses judgement in making assumptions about risk of default and ECL rates and the inputs to the impairment calculation, based on the Group’s past history, existing market conditions and future looking estimates at the end of each reporting period. Receivables which are determined to be uncollectable are written off. For loans receivable, at inception of a loan, an ECL provision is recognised which considers the following: > The historical bad debt write offs incurred for similar loan arrangements; and > The collateral held over the loan; and > The creditworthiness of the borrower. Over the life of the loan, the risk profile is reassessed in accordance with the three-stage approach. > Stage 1 – Performing includes loans that have not had a significant increase in credit risk since initial recognition or that have low credit risk at the reporting date. For these loans, 12-month expected credit losses are recognised and interest revenue is calculated on the gross carrying amount of the loan. > Stage 2 – Underperforming includes loans that have had a significant increase in credit risk since initial recognition but are not credit-impaired. For these loans a lifetime ECL over the life of the loan is recognised, and interest revenue is still calculated on the gross carrying amount of the asset. > Stage 3 – Non-performing consists of loans that are credit-impaired, which is when one or more events that have a detrimental impact on the estimated future cash flows of the loan has occurred. For these assets, a lifetime ECL is also recognised, but interest revenue is calculated on the net carrying amount (net of the ECL provision). The consideration of the stage of the loan requires significant judgement, in particular when assessing whether there has been a significant increase in credit risk and in estimating ECL provision. As at 30 June 2022, the Group did not have any stage 2 or stage 3 loans receivable. Note Gross $m 2022 Loss allowance $m H3 40 70 53 163 — 16 14 30 193 (19) — — (19) — — — — (19) Net $m 21 70 53 144 — 16 14 30 174 Gross $m 98 65 28 191 5 89 3 97 288 Current receivables Trade receivables Loans to unrelated parties Other receivables Total current receivables Non-current receivables Loans to related parties Loans to unrelated parties Other receivables Total non-current receivables Total receivables Movements in loss allowance Balance 1 July Loss allowance recognised Amounts utilised for write-off of receivables Balance 30 June 2021 Loss allowance $m (35) (39) — (74) — — — — (74) 2022 $m (74) (24) 79 (19) Net $m 63 26 28 117 5 89 3 97 214 2021 $m (80) (20) 26 (74) Annual Report 2022 – 107 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS F OPERATING ASSETS AND LIABILITIES F1 RECEIVABLES CONTINUED AGEING Trade receivables 1 Loans Other receivables Loss allowance Balance 30 June 2021 Trade receivables 1 Loans Other receivables Loss allowance Balance 30 June 2022 Not past due $m 1 – 30 $m 31 – 60 $m 61 – 90 $m 91 – 120 $m Over 120 $m Total $m Days past due 59 115 31 (1) 204 13 86 67 — 166 8 — — (5) 3 6 — — — 6 8 — — (7) 1 2 — — (1) 1 3 — — (3) — 3 — — (2) 1 3 — — (3) — 2 — — (2) — 17 44 — (55) 6 14 — — (14) — 98 159 31 (74) 214 40 86 67 (19) 174 1. The Group has recognised a provision for impairment for all investment property tenant trade receivables that are greater than 30 days overdue. The Group does not have any significant credit risk exposure to a single customer. The Group holds collateral of $166m (2021: $164m). The quantum, terms and conditions of collateral are outlined in the lease agreements, however generally as lessor, the Group has the right to call upon the collateral if a lessee breaches their lease. Refer to note D5 for further details on the Group’s exposure to, and management of, credit risk. LOANS RECEIVABLE 2022 2021 Stage 1 $m Stage 2 $m Stage 3 $m Total $m Stage 1 $m Stage 2 $m Stage 3 $m Total $m Opening loss allowance Loss allowance utilised during the year Closing loss allowance — — — — — — 39 (39) — 39 (39) — — — — — — — 39 — 39 The gross carrying amount of loans receivables representing the maximum exposure to loss, is as follows: Stage 1 – Performing Stage 2 – Underperforming Stage 3 – Non-performing 1 Total gross loans receivable Less: Loan allowance Total net loans receivable 2022 $m 86 — — 86 — 86 39 — 39 2021 $m 110 5 44 159 (39) 120 1. During the year, the Group became mortgagee in possession of land held as security for this loan. As the Group had control of the land, it reclassified the net loan receivable to Inventory, which was subsequently disposed of during the year. F2 OTHER FINANCIAL ASSETS INVESTMENTS IN UNLISTED ENTITIES The Group holds units in unlisted entities which do not give Mirvac control, as explained in note G1, or significant influence, as explained in note C3. Distributions received are recognised in revenue and any changes in fair value are recognised in the gain or loss on financial instruments in the consolidated SoCI. FAIR VALUE MEASUREMENT Other financial assets are carried at fair value. Fair value is estimated as explained in note D6. Non-current Investments in unlisted entities Total other financial assets 108 – Celebrating 50 years 2022 $m 73 73 2021 $m 78 78 Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS FINANCIAL REPORT F OPERATING ASSETS AND LIABILITIES F3 INTANGIBLE ASSETS Mirvac’s intangible assets consists of goodwill, management rights and software. GOODWILL The goodwill acquired in a business combination is attributable to the profitability of the acquired business, as well as benefits derived from the acquired workforce and other intangible assets that cannot be separately recognised. The goodwill is not expected to be deductible for income tax. MANAGEMENT RIGHTS Management rights are the rights to manage properties and funds and have been initially recognised at fair value as part of business combinations. Management rights relating to office are estimated to have a useful life of 10 years and are carried at cost less accumulated amortisation and impairment losses. Management rights relating to retail are considered to be open-ended and therefore have no expiry. Management considers the useful life as indefinite and the management rights are tested annually for impairment. SOFTWARE Software consists of purchased and internally generated capitalised development costs where it is evident that these costs will generate probable future economic benefits. Software is held at cost less accumulated amortisation. Once ready for use, the Group amortises software using a straightline method over the estimated useful life. Costs incurred to configure or customise cloud computing software, and the ongoing fees to obtain access to the cloud provider’s application software, are recognised as an expense when the services are received. In a contract where the cloud provider provides both the SaaS configuration and customisation, and the SaaS access over the contract term, the services are assessed to determine if they are distinct. Where the services are not distinct, the configuration and customisation costs incurred are capitalised on the consolidated SoFP as a prepayment and expensed over the SaaS contract term. The breakdown of intangible assets by type and operating segment is set out below. Carrying amounts Goodwill Integrated Investment Portfolio Total goodwill Management rights Integrated Investment Portfolio Office Retail Total management rights Software under development Unallocated Total software under development Software Unallocated Total software Total intangible assets Balance 1 July 2020 $m 67 67 8 3 11 — — — — 78 Balance Additions Amortisation 30 June 2021 $m $m $m — — — — — 2 2 — — 2 — — (2) — (2) — — — — (2) 67 67 6 3 9 2 2 — — 78 Additions $m Balance Transfers 30 June 2022 $m $m — — — — — 1 1 — — 1 — — — — — (2) (2) 2 2 — 67 67 6 3 9 1 1 2 2 79 MANAGEMENT RIGHTS Management rights include property management rights for office and retail properties managed by the Group. Management rights with a finite life are amortised using the straight-line method over their useful life. For indefinite management rights, the Group tests for impairment at the reporting date. Assets are impaired if the carrying value exceeds their recoverable amount. The recoverable amount is determined using a discounted cash flow. A 13.50 per cent pre-tax discount rate and 2 per cent growth rate have been applied to the cash flow projections. GOODWILL Goodwill acquired in a business combination is tested annually for impairment. Goodwill is impaired if the recoverable amount, calculated as the higher of the value in use and the fair value less costs to sell, is less than its carrying amount. For the purpose of assessing impairment, assets are grouped at the lowest levels for which goodwill is monitored for internal management purposes and allocated to cash generating units (CGU). The estimation of the recoverable amount of goodwill depends on the nature of the CGU. For the IIP CGU, the value in use is the discounted present value of estimated cash flows that the CGU will generate, which primarily comprise of the Group’s investment properties. Annual Report 2022 – 109 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS F OPERATING ASSETS AND LIABILITIES F3 INTANGIBLE ASSETS CONTINUED The key assumptions used to determine the forecast cash flows in the goodwill model include: Key assumption Details of key assumption Inputs used Net market rent The rent at which a tenancy could be leased in the market including outgoings recovery Lease specific assumptions including Other cash flows These cashflows are minimal in comparison to the rental cashflows but form part of the IIP CGU Capital expenditure The amount of additional investment required to upgrade or maintain the Group’s investment properties Growth rate Cash flow period The rate at which cashflows will grow over time. The growth rate has been adjusted to reflect current market conditions and does not exceed the long-term average growth rate for IIP. The cash flow projections are based on management approved forecasts covering an initial period of five years and the subsequent five years are based on a growth rate of 3.0-3.5 per cent p.a (2021: 3.0 per cent p.a) AASB 136 Impairment of Assets recommends that cash flow projections should cover a maximum period of five years, unless a longer period can be justified. As the cash flow projections used for budgeting and forecasting are based on long-term, predictable and quantifiable leases, with renewal assumptions based on asset class and industry experience, management is comfortable that a ten year cash flow projection is appropriate let up periods and incentives Cash flows from the Asset & Funds Management and Management & Administration parts of IIP Investment property assumptions based on the age and condition of the property 3.0-3.5% (2021: 3.0%) 10 years (2021: 10 years) Terminal growth rate The constant rate that cash flows are expected to grow at into perpetuity 2.5% (2021: 3.0%) Pre-tax discount rate The rate of return used to convert cashflows into present value, these are specific 5.8-11.5% (2021: 5.9%-10.4%) to the risks of each of the cash flows within the IIP segment. This includes using the weighted investment property portfolio discount rate, which was 6.1 per cent as at 30 June 2022 (2021: 6.4 per cent), and then applying a premium adjustment to this rate on the basis that a prospective purchaser would expect there to be multiple benefits to acquiring a portfolio of assets Sensitivity If the cash flow projections used in the value in use calculations increased or decreased the pre-tax discount rate by 50 bps and the terminal growth rate or growth rate were increased or decreased by 50 bps, and 100 bps respectively, the Group would have sufficient headroom and this would not result in an impairment. Based on information available and market conditions as at 30 June 2022 and up to the date of this report, management have considered that a reasonably foreseeable change in the other assumptions used in the goodwill assessment would not result in an impairment to the value of goodwill as at 30 June 2022. F4 PAYABLES Payables are measured at amortised costs. Due to the short-term nature of current payables, their carrying amount is assumed to be the same as their fair value. For the majority of non-current payables, the carrying amount is also not significantly different to their fair value. Trade payables due more than 12 months after year end are classified as non-current. Current Trade payables Accrued expenses Deferred land payable Annual leave accrued Other payables Total current payables Non-current Deferred land payable Other payables Total non-current payables Total payables 110 – Celebrating 50 years 2022 $m 47 510 91 26 56 730 569 2 571 1,301 2021 $m 50 400 7 18 28 503 332 35 367 870 Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS FINANCIAL REPORT F OPERATING ASSETS AND LIABILITIES F5 PROVISIONS LONG SERVICE LEAVE (LSL) Where the LSL provision is expected to be settled more than 12 months after year end, the expected future payments are discounted to present value. The corporate bond rates used to discount the expected future payments have maturities aligned to the estimated timing of future cash flows. In calculating the LSL provision, judgement is required to estimate future wages and salaries, on-cost rates and employee service periods. DISTRIBUTION PAYABLE A provision is made for the amount of distribution declared at or before year end but not yet paid; refer to note E1. WARRANTIES The Group is obliged to rectify any defective work during the warranty period of its developments. Warranties are also known as post-completion maintenance costs. Movements in each class of provision during the year are set out below: Balance 1 July 2021 Additional provisions Payments made/amounts utilised Balance 30 June 2022 Current Non-current F6 LEASES RIGHT-OF-USE ASSETS The right-of-use assets recognised in the consolidated SoFP include: Property leases Total right-of-use assets Long service leave $m Distribution payable $m Warranties $m 18 4 (1) 21 15 6 201 404 (403) 202 202 — 16 10 (6) 20 15 5 2022 $m 28 28 Total $m 235 418 (410) 243 232 11 2021 $m 17 17 Due to the deconsolidation of The George Street Trust as outlined in note G4, an additional right-of-use asset of $18m was recognised during the year. RIGHT-OF-USE ASSETS AMOUNTS RECOGNISED IN THE CONSOLIDATED SOCI The consolidated SoCI shows the following amounts relating to leases: Depreciation on property leases Total depreciation Interest expense on property leases Total interest expense (included in finance costs) 2022 $m 7 7 3 3 2021 $m 4 4 3 3 THE GROUP’S LEASING ACTIVITIES AND HOW THESE ARE ACCOUNTED FOR The Group leases include ground leases and property leases. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of property for which the Group is a lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component. Lease payments are allocated between principal and finance cost. The finance cost is charged to the consolidated SoCI over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life. Right-of-use assets which meet the definition of an investment property form part of the investment property balance and are measured at fair value in accordance with AASB 140 Investment Property, refer to note C1. Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis as an expense in the consolidated SoCI. Short-term leases are leases with a lease term of 12 months or less. Annual Report 2022 – 111 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS G GROUP STRUCTURE This section explains how the Group is structured, the Deed of Cross Guarantee between Group companies and disclosures for the parent entity. G1 GROUP STRUCTURE AND DEED OF CROSS GUARANTEE CONTROLLED ENTITIES The consolidated financial statements of Mirvac incorporate the assets, liabilities and results of all controlled entities. Controlled entities are all entities over which the Group has power to direct the activities of the entity and an exposure to and ability to influence its variable returns from its involvement with the entity. Controlled entities are fully consolidated from the date control is obtained until the date that control ceases. Intra-group transactions and balances are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the assets transferred. Refer to note I2 for Mirvac’s controlled entities. STRUCTURED ENTITIES A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity. Mirvac considers that all funds and trusts in which it currently has an investment, or from which it currently earns income, to be structured entities. Depending on the Group’s power to direct the activities of the entity and its exposure to and ability to influence its own returns, it may consolidate the entity. In other cases, it may sponsor or have some form of exposure to a structured entity but not consolidate it. If Mirvac does not control a structured entity but has significant influence it is treated as an associate. FUNDS AND TRUSTS Mirvac invests in a number of funds and trusts which invest in real estate as investment properties. The funds and trusts finance their operations through borrowings and through equity issues. The Group determines whether it controls or has significant influence over these funds and trusts as discussed above. CLOSED GROUP Mirvac Limited and certain wholly-owned entities (collectively the Closed Group) are parties to a Deed of Cross Guarantee. The members of the Closed Group guarantee to pay any deficiency in the event that another member winds up. Refer to note I2 for the members of the Closed Group. 2022 $m 2,128 38 23 60 2,249 1,589 25 58 39 1 14 — 161 143 — 219 77 142 2021 $m 1,467 — 48 60 1,575 967 — 11 29 1 12 1 159 216 23 156 86 70 Closed Group SoCI Revenue Other income Revaluation of investment properties Share of net profit of joint ventures Gain on financial instruments Total revenue and other income Development expenses Cost of goods sold interest Inventory write-downs and losses Selling and marketing expenses Investment properties expenses and outgoings Depreciation and amortisation expenses Impairment loss on receivables Employee and other expenses Finance costs Loss on financial instruments Profit before income tax Income tax expense Profit for the year 112 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS G GROUP STRUCTURE G1 GROUP STRUCTURE AND DEED OF CROSS GUARANTEE CONTINUED FINANCIAL REPORT Closed Group SoFP Current assets Cash and cash equivalents Receivables Inventories Derivative financial assets Other assets Total current assets Non-current assets Receivables Inventories Investment properties Investments in joint ventures Derivative financial assets Other financial assets Property, plant and equipment Right-of-use assets Intangible assets Deferred tax assets Other assets Total non-current assets Total assets Current liabilities Payables Deferred revenue Borrowings Lease liabilities Derivative financial liabilities Provisions Current tax liabilities Total current liabilities Non-current liabilities Payables Deferred revenue Borrowings Derivative financial liabilities Provisions Lease liabilities Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Accumulated losses Total equity 2022 $m 457 3,781 657 63 19 4,977 1,914 1,783 70 41 178 1,181 10 45 40 — 27 5,289 10,266 3,069 51 281 12 — 29 128 3,570 570 3 3,957 116 11 41 4,698 8,268 1,998 2,340 8 (350) 1,998 2021 $m 72 2,996 574 — 19 3,661 1,966 1,730 4 56 248 1,270 7 32 40 11 3 5,367 9,028 2,507 148 — 8 5 21 — 2,689 332 7 3,922 99 12 32 4,404 7,093 1,935 2,436 (2) (499) 1,935 Annual Report 2022 – 113 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS G GROUP STRUCTURE G2 PARENT ENTITY The financial information for the parent entity, Mirvac Limited, is prepared on the same basis as the consolidated financial statements, except as set out below: Tax consolidation legislation – Mirvac Limited is the head entity of a tax consolidated group as discussed in note B5. As the head entity, Mirvac Limited recognises the current tax balances and the deferred tax assets for unused tax losses and credits assumed from other members as well as its own current and deferred tax amounts. Amounts receivable from or payable to the other members are recognised by Mirvac Limited as intercompany receivables or payables. Parent entity Current assets Total assets Current liabilities Total liabilities Equity Contributed equity SBP reserve Retained earnings Total equity Loss/(profit) for the year Total comprehensive loss/(profit) for the year 2022 $m 5,852 6,319 4,031 4,031 2,164 24 100 2,288 (1) (1) 2021 $m 5,398 5,888 3,598 3,598 2,162 31 97 2,290 1 1 The parent entity is party to the Deed of Cross Guarantee discussed in note G1 and therefore guarantees the debts of the other Closed Group members. At 30 June 2022, the parent entity did not provide any other guarantees (2021: $nil), have any contingent liabilities (2021: $nil), or any capital commitments (2021: $nil). G3 NON-CONTROLLING INTERESTS NON-CONTROLLING INTERESTS The Group holds a 69.9 per cent interest in the Australian Build to Rent Club (ABTRC or the club). Non-controlling interest in the results and equity of the club are shown separately in the consolidated SoCI, SoCE and SoFP separately. The club was established in Australia. The financial information of ABTRC is provided below and is before intercompany eliminations. Accumulated balances of the NCI Profit/(loss) allocated to the NCI for the year Summarised Consolidated Statement of Comprehensive Income Revenue Total revenue and other income Expenses Revaluation loss on investment property Profit/(loss) before tax Income tax expense/(benefit) Profit/(loss) for the year Total comprehensive income/(loss) Attributable to: Stapled securityholders Non-controlling interest 114 – Celebrating 50 years 2022 $m 66 1 2022 $m 9 9 4 — 5 1 4 4 3 1 2021 $m 66 (2) 2021 $m 4 4 3 7 (6) (2) (4) (4) (2) (2) Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS G GROUP STRUCTURE G3 NON-CONTROLLING INTERESTS CONTINUED Summarised Consolidated Statement of Financial Position Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Equity Contributed equity Retained earnings Total equity Attributable to: Stapled securityholders Non-controlling interest Summarised Consolidated Cash Flow Information Net operating cash inflows Net investing cash outflows Net financing cash (outflows)/inflows Net increase in cash FINANCIAL REPORT 2022 $m 4 221 225 3 3 6 219 209 10 219 153 66 2022 $m 6 — (4) 2 2021 $m 1 220 221 1 — 1 220 208 12 220 154 66 2021 $m 1 (46) 46 1 Annual Report 2022 – 115 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS G GROUP STRUCTURE G4 BUSINESS COMBINATIONS ACQUISITIONS OF SUBSIDIARIES During the year, the Group purchased the remaining interests in the following entities which were previously accounted for as investments in joint ventures. Control of these entities was gained from their acquisition date and they have been consolidated from then. At the acquisition date, the carrying amount of the Group’s previously held interest in these entities approximated its fair value and accordingly, no gain or loss as a result of the remeasurement of the equity interest in these entities to fair value was recognised in the consolidated SoCI. The cash consideration paid to acquire the remaining interest of these entities approximated the fair value of assets acquired and liabilities assumed and accordingly no goodwill arose from the acquisitions. Entity Mirvac Ping An Waterloo Development Trust Mirvac SLS Development Trust Mirvac Lucas Real Estate Unit Trust 1. Values not shown due to rounding. Pre-consolidation ownership % Cash consideration paid $m Net assets acquired $m Inflow/(outflow) of cash, net of cash acquired $m 51 51 50 — 1 4 2 6 — 1 4 2 6 3 10 (2) 11 The Mirvac Ping An Waterloo Development Trust acquired, developed and sold residential inventory in Waterloo, NSW with the project nearing completion. On 4 August 2021, the Group consolidated the assets and liabilities held by the Mirvac Ping An Waterloo Development Trust which included cash of $2m. The Mirvac SLS Development Trust acquired, developed and sold residential inventory in St Leonards, NSW with the project nearing completion. On 4 August 2021, the Group consolidated the assets and liabilities held by the Mirvac SLS Development Trust which included cash of $14m and inventory of $1m. The Mirvac Lucas Real Estate Unit Trust performs residential property management in Victoria. On 31 July 2021, when completion of the acquisition occurred, the Group consolidated the assets and liabilities held by the Mirvac Lucas Real Estate Unit Trust which included an intangible asset of $3m. There were no acquisitions of subsidiaries for the year ended 30 June 2021. DISPOSAL OF SUBSIDIARIES During the year, the Group disposed of partial interests in two previously controlled and consolidated entities. 1. On 5 August 2021, the Group disposed of 49 per cent of the units in the Mirvac Locomotive Trust, which holds a 100 per cent interest in the recently completed Locomotive Workshop, South Eveleigh NSW. Following the sale, the Group lost control of the Mirvac Locomotive Trust and reclassified its remaining 51 per cent interest to an Investment in a joint venture. The consideration from the sale of the 49 per cent interest in the Mirvac Locomotive Trust was recognised as revenue of $231m, and is reflected as sale of inventory in the ordinary course of business. The net cash inflow representing total proceeds less cash disposed of following deconsolidation was $231m. 2. On 26 August 2021, the Group exercised its pre-emptive right as existing co-owner to acquire the remaining 50 per cent of the investment property at 200 George Street, Sydney, NSW. On the same day following this purchase, the Group disposed of 49.9 per cent of the units in The George Street Trust, the controlled entity owning the investment property. Following the sale, the Group lost control of The George Street Trust and reclassified its remaining 50.1 per cent interest to an Investment in a joint venture. The consideration received from the sale of the 49.9 per cent interest in The George Street Trust was $609m. The Group did not outlay cash for the 50 per cent purchase of the property, with the proceeds from the sale of the controlled entity being directed to satisfy payment to the vendor of 50 per cent interest of the property. The net cash outflow, being the cash disposed of following deconsolidation was $2m. The carrying value of the net assets at the time of disposal approximated the consideration received, resulting in no gain or loss on the sale recognised in the consolidated SoCI. There were no disposal of subsidiaries for the year ended 30 June 2021. 116 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS H OTHER DISCLOSURES FINANCIAL REPORT This section provides additional required disclosures that are not covered in the previous sections. H1 CONTINGENT LIABILITIES A contingent liability is a possible obligation that may become payable depending on a future event or a present obligation that is not probable to require payment/cannot be reliably measured. A provision is not recognised for contingent liabilities. Bank guarantees and performance bonds granted in the normal course of business Health and safety claims Payments for investment properties, inventory and other assets contingent on approvals Total contingent liabilities As at 30 June 2022, the Group had no contingent liabilities relating to joint ventures and associates (2021: $nil). H2 EARNINGS PER STAPLED SECURITY Basic earnings per stapled security (EPS) is calculated by dividing: > the profit attributable to stapled securityholders; by > the weighted average number of ordinary securities (WANOS) outstanding during the year. Diluted EPS adjusts the WANOS to take into account dilutive potential ordinary securities from security-based payments. 2022 $m 226 4 29 259 2021 $m 179 2 33 214 Profit attributable to stapled securityholders used to calculate basic and diluted EPS ($m) WANOS used in calculating basic EPS (m) WANOS used in calculating diluted EPS (m) H3 RELATED PARTIES 2022 906 3,941 3,942 2021 901 3,936 3,938 Basic and diluted EPS (cents) 23.0 22.9 FY21 FY22 A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged. KEY MANAGEMENT PERSONNEL COMPENSATION The Remuneration report on pages 51 to 71 provides detailed disclosures of key management personnel compensation. The total expense is summarised below: Short-term employment benefits Security-based payments Post-employment benefits Other long-term benefits Termination benefits Total key management personnel compensation There are no outstanding loans to directors or employees (2021: nil). 2022 $000 10,313 4,370 239 81 — 15,003 2021 $000 11,170 3,313 253 73 1,639 16,448 Annual Report 2022 – 117 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS H OTHER DISCLOSURES H3 RELATED PARTIES CONTINUED TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL From time to time key management personnel participate in arrangements available to directly purchase Mirvac developed residential property. These transactions are made on terms equivalent to those that prevail in arm’s length transactions and are at market rates. The deposits received and the amounts committed by key management personnel for Mirvac developed residential property exchanged are summarised below: Mirvac developed property purchased by key management personnel Exchanges Deposits received Outstanding commitments Transactions with JVAs Interest income Project development fees Management and service fees Trustee fees Total transactions with JVAs Loans due from JVAs and other related parties Balance 1 July Interest capitalised Loan repayments received Balance 30 June 2022 $000 5,027 251 4,776 2022 $000 175 88,976 7,943 10,398 107,492 2022 $000 5,104 175 (5,279) — 2021 $000 1,403 70 1,333 2021 $000 139 123,100 8,142 7,377 138,758 2021 $000 5,000 104 — 5,104 Transactions between Mirvac and its related parties were made on commercial terms and conditions. Distributions received from JVAs were on the same terms and conditions that applied to other securityholders. Equity interests in JVAs are set out in note I3. H4 AUDITOR’S REMUNERATION During the year the following fees were paid or payable for services provided by PricewaterhouseCoopers Australia (PwC) as the auditor of the Group, and by PwC’s related network firms. 2021 1 $000 2,570 645 3,215 50 50 3,265 Audit services Audit and review of financial reports Other assurance services Total audit services Other services Advisory services Total other services Total auditor’s remuneration 1. 2021 fees have been revised to reflect additional billings relating to FY21 not agreed as at the date of signing. 2022 $000 2,442 789 3,231 262 262 3,493 118 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS FINANCIAL REPORT I APPENDICES This section provides detailed listings of Mirvac’s properties and controlled entities. I1 PROPERTY PORTFOLIO LISTING This table shows details of Mirvac’s properties portfolio. Refer to notes C1 to C3 for further details. Fair value 2022 $m Lease liability gross up 2022 $m Book value Capitalisation rate Discount rate 2022 $m 2021 $m 2022 % 2021 % 2022 % 2021 % Office 1 Darling Island, Pyrmont NSW 101-103 Miller Street, North Sydney NSW (50% interest) 10-20 Bond Street, Sydney NSW (50% interest) 189 Grey Street, Southbank QLD 2 Riverside Quay, Southbank VIC (50% interest) 23 Furzer Street, Phillip ACT 275 Kent Street, Sydney NSW (50% interest) 367 Collins Street, Melbourne VIC 380 St Kilda Road, Melbourne VIC 383 La Trobe Street, Melbourne VIC 80 Ann Street, Brisbane QLD (50% interest) 1 40 Miller Street, North Sydney NSW 477 Collins Street, Melbourne VIC (50% interest) 60 Margaret Street, Sydney NSW (50% interest) 65 Pirrama Road, Pyrmont NSW 664 Collins Street, Melbourne VIC (50% interest) 699 Bourke Street, Melbourne, VIC (50% interest) 75 George St, Paramatta NSW 90 Collins Street, Melbourne VIC Quay West Car Park, 109-111 Harrington Street, Sydney NSW 2 Allendale Square, 77 St Georges Terrace, Perth WA Locomotive Carpark, South Eveleigh NSW Riverside Quay, Southbank VIC South Eveleigh Precinct, Eveleigh NSW (33.3% interest) Various lots, 53 Walker Street & 97 Pacific Highway, North Sydney NSW Total investment properties 55 Pitt Street, Sydney NSW 3 7-23 Spencer Street, Melbourne VIC 4 377 Botany Road, Zetland NSW 5 Total investment properties under construction Total investment properties and investment properties under construction 200 George Street, Sydney NSW (50.1% interest) 6 Locomotive Workshop, South Eveleigh NSW (51% interest) 6 8 Chifley Square, Sydney NSW (50% interest) David Malcolm Justice Centre, 28 Barrack Street, Perth WA (50% interest) Total investments in joint ventures Total office property portfolio 319 326 349 93 155 380 922 427 196 121 400 180 462 377 220 166 106 87 263 — 207 21 380 465 31 6,653 252 128 21 401 7,054 581 223 231 248 1,283 8,337 1. 2. 3. 4. 5. 6. IPUC was completed during the year and was reclassified to investment property. Investment property was disposed of during the year. Investment property was transferred to IPUC during the year. IPUC was acquired during the year. IPUC was transferred from Inventories during the year. Investment property was transferred to a JVA during the year. — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 319 326 349 93 155 380 922 427 196 121 400 180 462 377 220 166 106 87 263 — 207 21 380 465 31 304 315 345 90 150 324 890 426 183 122 204 180 441 362 211 155 109 88 263 38 232 13 355 453 31 6,653 6,284 252 128 21 401 178 — — 178 7,054 6,462 581 223 231 248 1,283 8,337 579 150 229 243 1,201 7,663 5.38 5.00 5.00 6.63 5.00 5.25 4.50 5.25 5.75 5.13 4.88 5.38 4.75 5.13 5.50 4.88 5.00 5.38 5.25 — 6.75 6.00 5.25 4.88 — — — — 5.38 5.25 5.00 6.63 5.00 5.75 4.63 5.25 5.75 5.38 — 5.38 4.75 5.13 5.50 5.00 5.13 5.75 5.25 7.25 6.75 7.50 5.38 4.88 — — — — 6.13 6.00 6.13 7.00 6.25 6.00 6.00 6.25 6.25 6.25 6.00 6.13 6.00 6.13 6.13 6.00 6.00 6.25 6.25 — 7.25 7.75 6.25 6.00 — — — — 4.38 4.88 4.88 4.38 — 4.88 5.88 6.13 6.00 5.25 5.25 6.50 6.50 6.25 6.25 7.00 6.25 7.00 6.38 6.25 6.25 6.50 — 6.38 6.25 6.13 6.25 6.50 6.50 7.00 6.25 7.25 7.25 8.25 6.75 6.26 — — — — 5.85 — 6.00 6.75 Annual Report 2022 – 119 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS I APPENDICES I1 PROPERTY PORTFOLIO LISTING CONTINUED Industrial 1-47 Percival Road, Smithfield NSW 274 Victoria Rd, Rydalmere NSW 34-38 Anzac Avenue, Smeaton Grange NSW 36 Gow Street, Padstow NSW 39 Britton Street, Smithfield NSW 39 Herbert Street, St Leonards NSW 8 Brabham Drive, Huntingwood NSW Calibre, 60 Wallgrove Road, Eastern Creek NSW (50% interest) Hoxton Distribution Park, Hoxton Park NSW (50% interest) Nexus Industry Park, Lyn Parade, Prestons NSW Total investment properties 1669A Elizabeth Drive, Badgerys Creek NSW 1 864-882 Mamre Road, Kemps Creek NSW 2 Total investment properties under construction Total investment properties and investment properties under construction Switchyard, 300 Manchester Road, Auburn NSW (51% Interest) 1 Total investments in joint ventures Total industrial property portfolio Retail 1-3 Smail Street, Ultimo NSW (50% interest) 80 Bay St, Glebe NSW (50% interest) Birkenhead Point Brand Outlet, Drummoyne NSW 3 Broadway Sydney, Broadway NSW (50% interest) Cooleman Court, Weston ACT East Village, Zetland NSW Greenwood Plaza, North Sydney NSW (50% interest) Kawana Shoppingworld, Buddina QLD (50% interest) Metcentre, Sydney NSW (50% interest) Moonee Ponds Central, Moonee Ponds VIC Orion Springfield Central, Springfield QLD Rhodes Waterside, Rhodes NSW (50% interest) South Village, Kirrawee NSW Stanhope Village, Stanhope Gardens NSW Tramsheds Sydney, Glebe NSW 4 Fair value 2022 $m Lease liability gross up 2022 $m Book value Capitalisation rate Discount rate 2022 $m 2021 $m 2022 % 2021 % 2022 % 2021 % 70 77 57 54 40 254 35 184 246 225 1,242 221 120 341 1,583 67 67 1,650 40 16 402 368 76 327 89 186 57 105 467 179 103 154 — — — — — — — — — — — — — — — — — — — — — 6 1 — — — — — — — — — — — 7 70 77 57 54 40 254 35 184 246 225 50 64 36 46 29 223 26 5.00 4.50 5.75 5.00 4.75 4.25 4.00 4.00 4.50 4.00 6.25 6.00 6.50 6.25 6.00 4.75-5.00 5.00-5.50 6.00-6.25 6.50-6.75 6.50 5.50 5.38 5.38 5.75 5.50 5.50 4.25 5.50 147 3.50-4.13 4.51-4.76 5.25-5.38 5.88 218 186 3.63-3.88 4.00-4.25 5.00-5.25 5.25-5.50 3.88-4.50 4.50-5.25 4.88-5.50 5.50-6.00 1,242 1,025 221 120 341 134 27 161 1,583 1,186 67 67 — — 1,650 1,186 — — — — — — — — — — — — 40 16 408 369 76 327 89 186 57 105 467 179 103 154 — 39 14 400 369 69 302 89 186 60 100 450 175 102 142 34 5.00 5.25 5.50-8.75 4.75 5.50 5.00 5.75 5.75 5.75 5.75 5.25 5.50 5.50 5.50 — 2,576 2,531 5.25 5.50 6.25 6.00 6.50 6.00 5.50-8.75 6.50-9.50 6.50-9.50 6.25 6.00 7.00 6.00 7.00 6.25 6.50 6.50 6.75 6.75 6.50 6.50 6.75 6.50 6.75 6.50 6.25 6.25 6.25 6.25 7.00 6.75 7.00 — 4.75 6.25 5.25 5.75 5.75 5.75 6.00 5.25 5.50 5.50 5.75 5.50 Total investment properties 2,569 IPUC was acquired during the year. 1. 2. A portion of IPUC was transferred to inventories during the year. 3. Book value includes Birkenhead Point Marina, Drummoyne NSW and 64 Roseby Street, Drummoyne NSW. 4. Investment property was disposed of during the year. 120 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS I APPENDICES I1 PROPERTY PORTFOLIO LISTING CONTINUED Retail continued Toombul, Nundah QLD 1 Harbourside, Sydney NSW 1 Total investment properties under construction Total investment properties and investment properties under construction Cherrybrook Village, Cherrybrook NSW Total assets classified as held for sale Total retail property portfolio Build to Rent LIV Indigo, 2 Figtree Drive, Sydney Olympic Park NSW Total investment properties LIV Munro, Melbourne VIC LIV Aston, Melbourne VIC 2 LIV Anura, Newstead QLD LIV Albert Fields, Brunswick VIC Total investment properties under construction Total investment properties and investment properties under construction Total Build to Rent property portfolio 1. 2. Investment property was transferred to IPUC during the year. IPUC was acquired during the year. Fair value 2022 $m 90 211 301 2,870 — — 2,870 221 221 213 86 44 70 413 634 634 FINANCIAL REPORT Lease liability gross up 2022 $m Book value Capitalisation rate Discount rate 2022 $m 2021 $m 2022 % 2021 % 2022 % 2021 % — — 5.75 — — — 7.00 — 4.00 4.00 6.25 6.25 — — — — — — — — — — — — — — — — — 41 41 48 — — 48 — — — — — — — — — 90 252 342 303 240 543 2,918 3,074 — — 133 133 2,918 3,207 221 221 213 86 44 70 413 634 634 220 220 103 — 22 25 150 370 370 Property portfolio Total investment properties and investment properties under construction Total assets classified as held for sale Total investments in joint ventures Total property portfolio Fair value 2022 $m 12,141 — 1,350 13,491 Lease liability gross up 2022 $m Book value 2022 $m 2021 $m 48 — — 48 12,189 — 1,350 13,539 11,821 133 472 12,426 Annual Report 2022 – 121 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS I APPENDICES I2 CONTROLLED ENTITIES All entities controlled by the Group are shown below. Unless otherwise noted, they are wholly owned and were incorporated or established in Australia during the current year and prior years. During the year, the Group established MGR Insurance International Pte Ltd, a company incorporated in Singapore. This entity complies with IFRS. Members of the Closed Group CN Collins Pty Ltd Hoxton Park Airport Pty Ltd Mirvac (Docklands) Pty Limited Mirvac (WA) Pty Limited Mirvac Capital Investments Pty Limited Mirvac Constructions (QLD) Pty Limited Mirvac Constructions (VIC) Pty Limited Mirvac Constructions (WA) Pty Limited Mirvac Constructions Pty Ltd Mirvac Design Pty Limited Mirvac Doncaster Pty Ltd Mirvac Finance Pty Ltd 1, 2 Mirvac Group Finance Limited Mirvac Group Funding Pty Ltd 1, 3 Mirvac Holdings Limited Mirvac Home Builders (VIC) Pty Limited Mirvac Homes (NSW) Pty Limited Mirvac Industrial Developments Pty Limited Mirvac International Investments Pty Ltd Mirvac Limited Mirvac National Developments Pty Limited Mirvac Office Developments Pty Ltd Mirvac Pacific Pty Ltd Mirvac Projects Pty Ltd Mirvac Queensland Pty Limited Mirvac Real Estate Pty Ltd Mirvac Residential (NSW) Developments Pty Ltd Mirvac Retail Developments Pty Ltd Mirvac Rockbank Pty Ltd Mirvac Spring Farm Pty Ltd 1, 4 Mirvac Treasury Ltd Mirvac Treasury No. 3 Limited Mirvac Victoria Pty Limited Mirvac Wholesale Funds Management Pty Ltd 1, 5 Mirvac Wholesale Industrial Developments Pty Ltd 1, 6 Mirvac Woolloomooloo Pty Limited 1. This company was converted from a public company to a proprietary limited company on 7 July 2022. 2. Previously registered as Mirvac Finance Limited. 3. Previously registered as Mirvac Group Funding Limited. 4. Previously registered as Mirvac Spring Farm Limited. 5. Previously registered as Mirvac Wholesale Funds Management Limited. 6. Previously registered as Mirvac Wholesale Industrial Developments Limited. Interests in controlled entities of Mirvac not included in the Closed Group 197 Salmon Street Pty Limited 477 Collins Street No. 2 Trust 699 Bourke Street Services Pty Limited A.C.N. 087 773 859 Pty Limited A.C.N. 110 698 603 Pty Ltd A.C.N. 150 521 583 Pty Ltd A.C.N. 165 515 515 Pty Ltd ABTRC Head Trust A ABTRC Head Trust B Ascot Chase Nominee Stages 3-5 Pty Ltd Banksia Unit Trust BL Developments Pty Ltd Bligh Street Office Trust BTR Brunswick Trust A BTR Brunswick Trust B BTR Foreshore Trust BTR Head Company Pty Limited BTR Indigo Trust A BTR Indigo Trust B BTR QLD Pty Limited BTR QVM Trust A BTR QVM Trust B BTR Vic Head Trust A BTR Vic Head Trust B Eveleigh Commercial Holdings Pty Limited Eveleigh Commercial Pty Limited Eveleigh Precinct Pty Limited EZ Power Pty Ltd Fast Track Bromelton Pty Limited Gainsborough Greens Pty Ltd HIR Boardwalk Tavern Pty Limited HIR Golf Club Pty Limited HIR Golf Course Pty Limited HIR Property Management Holdings Pty Limited HIR Tavern Freehold Pty Limited Home Loans by Mirvac Pty Ltd 1 HPAL Holdings Pty Limited ICDPL Pty Limited 2 ICPL Pty Limited 3 IN3PL Pty Limited 4 Industrial Commercial Property Solutions (Constructions) Pty Limited Industrial Commercial Property Solutions (Finance) Pty Limited Industrial Commercial Property Solutions (Holdings) Pty Limited Industrial Commercial Property Solutions (Queensland) Pty Limited Industrial Commercial Property Solutions Pty Limited IPGH Pty Limited 5 IPPL Pty Limited 2 JF ASIF Pty Limited JFM Hotel Trust Joynton North Pty Ltd Kirrawee South Centre Pty Ltd Kirrawee South Centre Trust La Trobe Office Trust Magenta Shores Finance Pty Ltd Magenta Shores Unit Trust Magenta Unit Trust Marrickville Projects Pty Limited MGR Insurance International Pte. Ltd 6 Mirvac (Beacon Cove) Pty Limited Mirvac (Old Treasury Development Manager) Pty Limited Mirvac (Old Treasury Hotel) Pty Limited Mirvac (Retail and Commercial) Holdings Pty Limited Mirvac (Walsh Bay) Pty Limited Mirvac 275 Kent Street Services Pty Ltd Mirvac 699 Bourke Street Trust Mirvac 90CS No.2 Trust 7 Mirvac Advisory Pty Limited Mirvac Aero Company Pty Ltd Mirvac Altona North Pty Ltd Mirvac AOP SPV Pty Limited Mirvac Auburn Industrial Trust Mirvac Badgerys Creek Industrial Trust Mirvac Birkenhead Point Marina Pty Limited Mirvac Blue Trust Mirvac Bourke Street No. 3 Sub-Trust Mirvac BST Pty Limited Mirvac BTR Developments Pty Ltd Mirvac BTR Head Company A Pty Ltd Mirvac BTR Head Company B Pty Ltd Mirvac BTR Head SPV Pty Ltd Mirvac BTR Head Trust Mirvac BTR Sub Company A Pty Ltd Mirvac BTR Sub Company B Pty Ltd Mirvac BTR Sub SPV Pty Ltd Mirvac BTR Sub-Trust 1 Mirvac BTR Trust Mirvac Capital Assurance Pty Ltd Mirvac Capital Partners Pty Ltd Mirvac Capital Pty Limited Mirvac Chifley Holdings Pty Limited Mirvac Commercial Finance Pty Limited Mirvac Commercial Sub SPV Pty Limited Mirvac Constructions (Homes) Pty. Limited Mirvac Constructions (SA) Pty Limited Mirvac Developments Pty Limited Mirvac Duck River Pty Ltd Mirvac Elizabeth Trust Mirvac Energy Pty Limited 1. Previously registered as TMT Finance Pty Limited. 2. This entity commenced a Creditor’s Voluntary Liquidation on 9 July 2021. 3. This entity commenced a Member’s Voluntary Liquidation on 8 December 2021. 4. This entity commenced a Member’s Voluntary Liquidation on 3 November 2021. 5. This entity commenced a Member’s Voluntary Liquidation on 8 December 2021. 6. This entity was established during the year in Singapore. 7. This entity was established during the year. 122 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS I2 CONTROLLED ENTITIES CONTINUED Interests in controlled entities of Mirvac not included in the Closed Group CONTINUED Mirvac ESAT Pty Limited Mirvac Funds Limited Mirvac Funds Management Australia Limited 1 Mirvac Funds Management Limited Mirvac George Street Holdings Pty Limited Mirvac George Street Pty Limited Mirvac Green Square Pty Limited Mirvac Green Trust Mirvac Harbourside Sub-Trust Mirvac Harbourtown Pty Limited Mirvac Harold Park Pty Limited Mirvac Harold Park Trust Mirvac Hatch Pty Ltd Mirvac Hoist Pty Ltd Mirvac Holdings (WA) Pty Limited Mirvac Homes (QLD) Pty Limited Mirvac Homes (SA) Pty Limited Mirvac Homes (VIC) Pty Limited Mirvac Homes (WA) Pty Limited Mirvac Hotel Services Pty Limited Mirvac ID (Bromelton) Pty Limited Mirvac ID (Bromelton) Sponsor Pty Limited Mirvac Industrial No. 2 Sub-Trust Mirvac Industrial Sub SPV Pty Limited Mirvac International (Middle East) No. 2 Pty Limited Mirvac Investment Manager Pty Ltd Mirvac JV’s Pty Limited Mirvac Kemps Creek Trust Mirvac Kensington Pty Ltd Mirvac Kent Street Holdings Pty Limited Mirvac King Street Pty Ltd Mirvac Leader Pty Limited Mirvac Living Investment Company Pty Ltd Mirvac Living Investment Manager Pty. Ltd. Mirvac Living Real Estate Services Pty. Ltd. Mirvac Lucas Real Estate Unit Trust 2 Mirvac Maker Space Pty Limited Mirvac Mandurah Pty Limited Mirvac McCormacks Road Pty Limited Mirvac Newcastle Pty Limited Mirvac NIC Trust Mirvac Nike Holding Pty Limited Mirvac North Sydney Office Holdings Pty Limited Mirvac North Sydney Office Holdings Trust Mirvac Old Treasury Holdings Pty Limited Mirvac Parking Pty. Limited Mirvac Parramatta Sub-Trust No. 2 Mirvac Pennant Hills Residential Trust Mirvac Ping An Residential Developments Pty Limited 2 Mirvac Ping An Waterloo Development Trust 2 Mirvac Pitt Street Trust No. 2 Mirvac Precinct 2 Pty Limited 1 Mirvac Precinct Trust Mirvac Procurement Pty Ltd Mirvac Project Trust Mirvac Projects (Retail and Commercial) Pty Ltd Mirvac Projects Dalley Street Pty Limited Mirvac Projects Dalley Street Trust Mirvac Projects George Street Pty Limited Mirvac Projects George Street Trust Mirvac Projects No. 2 Pty. Limited Mirvac Projects Norwest No. 2 Trust Mirvac Projects Norwest Trust Mirvac Properties Pty Ltd Mirvac Property Advisory Services Pty. Limited Mirvac Property Services Pty Limited Mirvac Property Trust Mirvac Real Estate Debt Funds Pty Limited Mirvac REIT Management Pty Ltd Mirvac Retail Head SPV Pty Limited Mirvac Retail Sub SPV Pty Limited Mirvac Services Pty Limited Mirvac Showground Pty Ltd Mirvac Showground Trust Mirvac SLS Development Pty Limited 2 1. This entity was established during the year. 2. This entity became wholly owned during the year. 3. Previously registered as Mirvac International No.3 Pty Limited. 4. This entity commenced a Member’s Voluntary Liquidation on 8 December 2021. Interests in controlled entities of MPT 10-20 Bond Street Trust 367 Collins Street No. 2 Trust 367 Collins Street Trust 380 St Kilda Road Trust 477 Collins Street No. 1 Trust Australian Office Partnership Trust Eveleigh Trust James Fielding Trust Joynton North Property Trust Joynton Properties Trust Meridian Investment Trust No. 1 Meridian Investment Trust No. 2 Meridian Investment Trust No. 3 Meridian Investment Trust No. 4 Meridian Investment Trust No. 5 Meridian Investment Trust No. 6 Mirvac 90 Collins Street Trust Mirvac Allendale Square Trust Mirvac Ann Street Trust Mirvac Bay St Trust Mirvac Bourke Street No. 1 Sub-Trust Mirvac Broadway Sub-Trust Mirvac Capital Partners 1 Trust Mirvac Collins Street No. 1 Sub-Trust Mirvac Commercial No. 3 Sub-Trust Mirvac Commercial Trust Mirvac Group Funding No.2 Pty Limited Mirvac Group Funding No.3 Pty Limited Mirvac Hoxton Park Trust Mirvac Industrial No. 1 Sub-Trust Mirvac Kensington Trust Mirvac Kirrawee Trust No. 1 Mirvac Kirrawee Trust No. 2 Mirvac La Trobe Office Trust Mirvac Living Trust Mirvac Padstow Trust No. 1 Mirvac Parramatta Sub-Trust No. 1 Mirvac Pitt Street Trust FINANCIAL REPORT Mirvac SLS Development Trust 2 Mirvac South Australia Pty Limited Mirvac Spare No.2 Pty Limited 1 Mirvac Spare Pty Limited Mirvac SPV 1 Pty Limited Mirvac St Leonards Pty Limited Mirvac St Leonards Trust Mirvac T6 Pty Ltd Mirvac T6 Trust Mirvac Trademarks Pty Limited Mirvac TS Pty Limited Mirvac Ventures Pty Limited Mirvac Wholesale Sub Pty Limited 3 MirvacX Retail Solutions Pty Limited MLJV Pty Ltd 2 MRV Hillsdale Pty Limited MWID (Brendale) Pty Limited MWID (Brendale) Unit Trust MWID (Mackay) Pty Limited Newington Homes Pty Limited Oakstand No.15 Hercules Street Pty Ltd Picket & Co Development Pty Limited Picket & Co NSW Head Trust Picket & Co Operations Pty Limited Picket & Co Property Pty Limited Picket & Co Pty Ltd Pigface Unit Trust Planned Retirement Living Pty Ltd Post Bidco Pty Limited 4 Rovno Pty. Limited Spring Farm Finance Pty Limited Springfield Development Company Pty Limited SPV Magenta Pty Limited Suntrack Holdings Pty Limited Suntrack Property Trust Treasury Square Trust TS Triangle Pty Limited TS Triangle Trust Tucker Box Management Pty Limited Mirvac Property Trust No. 3 Mirvac Property Trust No. 4 Mirvac Property Trust No. 5 Mirvac Property Trust No. 6 Mirvac Property Trust No. 7 Mirvac Real Estate Investment Trust Mirvac Retail Head Trust Mirvac Retail Sub-Trust No. 1 Mirvac Retail Sub-Trust No. 2 Mirvac Retail Sub-Trust No. 3 Mirvac Retail Sub-Trust No. 4 Mirvac Rhodes Sub-Trust Mirvac Rydalmere Trust No. 1 Mirvac Rydalmere Trust No. 2 Mirvac Smail St Trust Mirvac Toombul Trust No. 1 Mirvac Toombul Trust No. 2 Old Treasury Holding Trust Springfield Regional Shopping Centre Trust Annual Report 2022 – 123 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS I APPENDICES INTERESTS IN JOINT VENTURES AND ASSOCIATES I3 This table shows details of Mirvac’s interests in joint ventures and associates. Barangaroo EDH Pty Ltd BuildAI Pty Ltd Domaine Investments Management Pty Ltd Duck River Auburn Trust Googong Township Pty Ltd Googong Township Unit Trust Harold Park Real Estate Trust HPRE Pty Ltd Leakes Road Rockbank Pty Ltd Leakes Road Rockbank Unit Trust Mirvac (Old Treasury) Pty Limited Mirvac (Old Treasury) Trust Mirvac 8 Chifley Pty Ltd Mirvac 8 Chifley Trust Mirvac Locomotive Trust 1 Mirvac Lucas Real Estate Unit Trust 2 Mirvac Ping An Residential Developments Pty Limited 3 Mirvac Ping An Waterloo Development Trust 3 Mirvac SLS Development Pty Limited 3 Mirvac SLS Development Trust 3 MLJV Pty Ltd 2 MVIC Finance 2 Pty Ltd TM Management Services Pty Ltd 5 The George Street Trust 4 Tucker Box Hotel Group Walsh Bay Finance Pty Ltd 5 Walsh Bay Properties Pty Ltd 5 Walsh Bay SPV Pty Ltd 5 WL Developer Pty Ltd WL Developer Trust 1. This entity was previously consolidated into Mirvac Group, however control was lost on 5 August 2021 and the entity is now accounted for as a JVA. 2. This entity was previously accounted for as a JVA, however control was gained on 31 July 2021 and the entity was consolidated into the Mirvac Group from that date. 3. This entity was previously accounted for as a JVA, however control was gained on 4 August 2021 and the entity was consolidated into the Mirvac Group from that date. 4. This entity was previously consolidated into Mirvac Group, however control was lost on 26 August 2021 and the entity is now accounted for as a JVA. 5. This entity entered into administration on 10 May 2022. Ownership % 2022 2021 33 37 50 51 50 50 50 50 50 50 50 50 50 50 51 — — — — — — 50 50 50 50 50 50 50 50 50 33 37 50 51 50 50 50 50 50 50 50 50 50 50 — 50 51 51 51 51 50 50 50 — 50 50 50 50 50 50 124 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS FINANCIAL REPORT DIRECTORS’ DECLARATION In the Directors’ opinion: a) the financial statements and the notes set out on pages 73 to 124 are in accordance with the Corporations Act 2001, including: i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and ii) giving a true and fair view of the consolidated entity’s financial position at 30 June 2022 and of its performance for the financial year ended on that date; b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended Closed Group identified in note I2 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the Deed of Cross Guarantee described in note G1. The basis of preparation note confirms that the financial statements also comply with IFRS as issued by the IASB. The Directors have been given the declarations by the CEO & Managing Director and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors. Susan Lloyd-Hurwitz Director Sydney 11 August 2022 Annual Report 2022 – 125 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MIRVAC LIMITED Independent auditor’s report To the stapled securityholders of Mirvac Limited Report on the audit of the financial report Our opinion In our opinion: The accompanying financial report of Mirvac Limited (the Company) and its controlled entities (together the Group) is in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the Group's financial position as at 30 June 2022 and of its financial performance for the year then ended (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. What we have audited The Group’s financial report comprises: ● ● ● ● ● ● the consolidated statement of financial position as at 30 June 2022 the consolidated statement of comprehensive income for the year then ended the consolidated statement of changes in equity for the year then ended the consolidated statement of cash flows for the year then ended the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information the directors’ declaration. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999 Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T: +61 2 9659 2476, F: +61 2 8266 9999 Liability limited by a scheme approved under Professional Standards Legislation. 126 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MIRVAC LIMITED FINANCIAL REPORT Our audit approach An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and the industry in which it operates. Materiality Audit scope Key audit matters For the purpose of our audit we used overall Group materiality of $30.73 million, which represents approximately 5% of the Funds from Operations of the Group. We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole. We chose Funds from Operations of the Group because, in our view, it is the benchmark against which the performance of the Group is most commonly measured. We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds. Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. The Group owns and manages investment property assets across Sydney, Melbourne, Brisbane, Canberra, and Perth. The Group's development activities also create and deliver commercial assets and residential projects across these locations. The accounting processes are structured around a Group finance function at its head office in Sydney. Amongst other relevant topics, we communicated the following key audit matters to the Audit and Risk Committee: • • • Carrying value of residential inventories Fair value of investment properties Recognition of development & construction management services revenue These are further described in the Key audit matters section of our report. Annual Report 2022 – 127 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MIRVAC LIMITED Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context. Key audit matter How our audit addressed the key audit matter Carrying value of residential inventories (Refer to note C4) $2,125m Residential inventories are recognised at the lower of cost and net realisable value for each residential development project. The Group’s estimate of net realisable value includes assumptions about future market and economic conditions which are inherently subject to the risk of change. The faster than expected economic recovery from COVID-19, supply chain issues and global conflicts have led to stronger inflationary pressures and a rapidly changing economic environment in which interest rate hikes have been brought forward. This has increased the level of judgement and uncertainty in the assumptions used in determining the net realisable value of residential inventories as described in note C4. This was a key audit matter given: ● ● The relative size of the residential inventories balance in the Consolidated Statement of Financial Position; and The significant judgement and uncertainty involved in estimating net realisable value. We evaluated the design of the Group’s relevant controls over the carrying value of residential inventories process and assessed whether a sample of these controls operated effectively throughout the year including: ● ● The Group’s review of capitalised costs relating to new residential development projects; and The Group’s process for review of key assumptions used in the estimation of net realisable value across the residential development project portfolio. We performed a risk assessment over the Group’s residential development project portfolio to determine those residential inventories at greater risk of being carried at an amount in excess of their recoverable amount. Our risk assessment was informed by our understanding obtained of the significant assumptions relevant to the net realisable value of each project, consideration of the results of the Group’s process for estimation of net realisable value, the stage of development progress of each project, our observations made through site visits during the year and our understanding of current economic conditions relevant to individual project locations. For those projects which were assessed as being at greater risk, we performed procedures to assess the appropriateness of key assumptions used in the Group’s estimate of net realisable value. In our audit procedures we: ● Obtained the project feasibility model that the Group uses to assess net realisable value and held discussions with management to develop an understanding of the basis for assumptions used in the model. 128 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MIRVAC LIMITED FINANCIAL REPORT ● Assessed the appropriateness of key assumptions by: ○ Comparing forecast sales rates against actual sales rates for a month before and a month after balance date. ○ Comparing estimated sales prices to recent market sales data for the project location or internal data for recently executed sales at the project. ○ Considering the basis for other key assumptions including whether costs to complete are consistent with the expected project completion programmes, the planned sales incentives and any allocation of costs across stages on multistage projects. ● Assessed whether the carrying value was the lower of cost and net realisable value. We also assessed the reasonableness of the Group’s disclosures against the requirements of Australian Accounting Standards. Key audit matter How our audit addressed the key audit matter Fair value of investment properties (Refer to note C1) $12,189m Investment properties are recognised at fair value. The Group’s estimate of fair value of investment properties includes assumptions about unobservable inputs including future market and economic conditions which are inherently subject to the risk of change. The faster than expected economic recovery from COVID-19, supply chain issues and global conflicts have led to stronger inflationary pressures and a rapidly changing economic environment in which interest rate hikes have been brought forward. This has increased the level of judgement and uncertainty in the assumptions used in determining the fair value of investment properties as described in note C1. We evaluated the design of the Group’s relevant controls over the investment property valuation process and assessed whether a sample of these controls operated effectively throughout the year including: ● The Group’s compliance with its policy to externally value all properties at least once in the last two years and to rotate valuation firms. ● The approval of the adopted fair values for all individual properties by the Directors of the Group. We evaluated the appropriateness of the valuation methodologies used against the requirements of Australian Accounting Standards. We agreed the fair values of all properties to the external valuation or internal valuation model Annual Report 2022 – 129 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MIRVAC LIMITED At each reporting period, the Directors determine the fair value of the Group’s investment property portfolio having regard to the Group’s valuation policy which requires all properties to be externally valued by valuation experts at least once every two years. In the period between external valuations the Directors’ valuation is supported by internal Mirvac valuation models. Fair value of investment properties was a key audit matter because: ● Investment property balances are financially significant in the Consolidated Statement of Financial Position. ● The impact of changes in the fair value of investment properties can have a significant effect on the Group’s total comprehensive income. ● Investment property valuations are inherently subjective due to the use of unobservable inputs in the valuation methodology. ● Fair values are highly sensitive to changes in key assumptions. (together, the ‘valuations’) and assessed the competency, capability and objectivity of the relevant external or internal valuer. We read recent independent property market reports to develop our understanding of the prevailing market conditions in which the Group invests. We engaged PwC valuation experts to join our discussions with several valuation firms to obtain an understanding and assess the appropriateness of the methodology used. We met with management to discuss the specifics of the property portfolio including, amongst other things, any significant leasing activity, capital expenditure and vacancies impacting the portfolio. We evaluated the completeness and accuracy of tenancy schedules used in the valuations on a sample basis to evaluate whether the relevant leasing information had been correctly input. We performed a risk assessment over the Group’s investment property portfolio to determine those properties at greater risk of fair value being materially misstated. Our risk assessment was informed by our understanding of each property, consideration of the results of the Group’s estimate of fair value and our understanding of current market conditions. For those properties which were assessed as being at greater risk, we performed procedures to assess the appropriateness of key assumptions used in the Group’s assessment of fair value. In our audit procedures over the valuations we: ● Obtained the valuation and held discussions with management to develop an understanding of the basis for assumptions used. ● Assessed the appropriateness of the methodology adopted and the mathematical accuracy of the valuations. ● Assessed the appropriateness of the capitalisation rate, discount rate and market rents used in the valuation by comparing them against market data for comparable properties. 130 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MIRVAC LIMITED FINANCIAL REPORT ● Assessed the appropriateness of rental income data used in the valuation against rental income recorded in the general ledger in FY22 for each property. We also assessed the reasonableness of the Group’s disclosures against the requirements of Australian Accounting Standards. Key audit matter How our audit addressed the key audit matter Recognition of development & construction management services revenue (Refer to note B2) $471m Construction and development management services revenue is recognised based on the satisfaction of performance obligations. There is judgement required by the Group to determine when performance obligations are met. In particular, where revenue is recognised on a percentage of completion basis, it involves the use of forward-looking assumptions including forecast costs of completion and the date of project completion. Revenue recognition on construction projects was a key audit matter because: ● ● There is significant judgement in determining the amount of revenue to be recognised in the year; These revenue streams are significant to the Group’s comprehensive income; and ● Changes in the assumptions used to estimate the percentage of completion on construction projects can have a significant effect on the Group’s comprehensive income. We evaluated the design of the Group’s relevant controls over the recognition of development & construction management services revenue and assessed whether a sample of these controls operated effectively throughout the year including: ● The Group’s process for review of key assumptions used in the estimation of forward-looking assumptions including forecast costs of completion and the date of project completion. For a sample of projects we: ● Obtained the relevant development agreements executed between the Group and the external customer(s) and evaluated the terms of the agreement to obtain an understanding of the performance obligations and transaction price. ● Performed site visits to obtain an understanding of the overall project scope and stage of progress. We performed audit procedures over a sample of projects for which revenue was recognised in the year. In our audit procedures we: ● Obtained and discussed the project feasibility model with management to develop an understanding of project status and risks and the basis of the assumptions used by the Group in their assessment of revenue and costs for the year. ● Obtained and assessed the appropriateness of evidence used by the Group to support forecast project revenue. Annual Report 2022 – 131 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MIRVAC LIMITED ● Performed look-back procedures, comparing current year revenue recognised to prior year revenue forecasts for FY22. ● Obtained and assessed the appropriateness of evidence used by the Group to support forecast costs of completion and date of project completion. ● Performed look-back procedures, comparing current year costs recognised to prior year costs forecasts for FY22. ● Assessed the appropriateness of capitalisation of costs incurred to date and agreed forecast costs to completion to the project feasibility model. We also assessed the reasonableness of the Group’s disclosures against the requirements of Australian Accounting Standards. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report for the year ended 30 June 2022, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the 132 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MIRVAC LIMITED FINANCIAL REPORT going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our auditor's report. Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in pages 51 to 71 of the directors’ report for the year ended 30 June 2022. In our opinion, the remuneration report of Mirvac Limited for the year ended 30 June 2022 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. PricewaterhouseCoopers Voula Papageorgiou Partner Joe Sheeran Partner Sydney 11 August 2022 Annual Report 2022 – 133 GOVERNANCEOTHERHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS SECURITYHOLDER INFORMATION MANAGING YOUR SECURITYHOLDING Securityholders with queries concerning their holding, distribution payments or other related matters should contact Mirvac’s registry, Link Market Services Limited, as follows: > Mirvac information line (toll free within Australia): +61 1800 356 444; or > Website: www.linkmarketservices.com.au When contacting the registry, please quote your current address details together with your Securityholder Reference Number (SRN) or Holder Identification Number (HIN) as shown on your Issuer Sponsored or CHESS statements. The most efficient way to access your securityholding details is online at www.linkmarketservices.com.au. You will need your SRN or your HIN (this reference number is recorded in statements that you receive about your holding in Mirvac) when you log-in online. You can do the following online at www.linkmarketservices.com.au: > elect to receive important communications by email; > choose to have your distribution payments paid directly into your bank account; > provide your tax file number (TFN) or Australian Business Number (ABN); > lodge your votes for securityholder meetings; and > Complete Tax Residency Certification (CRS/FATCA). Managing your securityholding online is speedier, cost-effective and environmentally friendly. If it is easier for you to update your securityholding information by post, you can download the forms from www.linkmarketservices.com.au or by contacting the Mirvac information line (toll free within Australia) on +61 1800 356 444 to request the appropriate forms to be sent out to you. The information set out below was prepared at 29 July 2022 and applies to Mirvac’s stapled securities (ASX code: MGR). As at 29 July 2022 there were 3,943,069,322 stapled securities on issue. SUBSTANTIAL SECURITYHOLDERS As disclosed in substantial holding notices lodged with the ASX at 29 July 2022: Date of change Number of stapled securities Percentage of issued equity 1 % 15/11/2021 29/11/2021 14/07/2020 01/12/2021 375,102,424 410,682,477 202,695,923 289,943,287 9.51 10.41 5.15 7.35 Number of holders Number of stapled securities Percentage of issued equity 1 % 7,351 9,407 4,374 5,441 251 3,286,849 25,762,083 32,412,678 129,932,377 3,751,675,335 0.08 0.65 0.82 3.30 95.15 26,824 3,943,069,322 100.00 Name The Vanguard Group, Inc BlackRock Group (BlackRock Inc. and subsidiaries) APG Asset Management N.V. State Street Corporation and subsidiaries 1. Percentage of issued equity held as at the date notice provided. RANGE OF SECURITYHOLDERS Range 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Total 1. Percentage of issued equity held as at the date notice provided. 134 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS SECURITYHOLDER INFORMATION 20 LARGEST SECURITYHOLDERS Name 1. HSBC Custody Nominees (Australia) Limited 2. J P Morgan Nominees Australia Pty Limited 3. Citicorp Nominees Pty Limited 4. National Nominees Limited 5. BNP Paribas noms Pty Ltd 6. BNP Paribas Nominees Pty Ltd 7. Citicorp Nominees Pty Limited 8. Australian Foundation Investment Company Limited 9. HSBC Custody Nominees (Australia) Limited 10. BNP Paribas Nominees Pty Ltd 11. BNP Paribas Noms(Nz) Ltd 12. Solium Nominees (Australia) Pty Ltd 13. Djerriwarrh investments Limited 14. BNP Paribas Nominees Pty Ltd ACF CLEARSTREAM 15. one managed investment funds Ltd 16. Medich Capital Pty Ltd 17. Argo Investments Limited 18. HSBC Custody Nominees (Australia) Limited - A/C 2 19. HSBC Custody Nominees (Australia) Limited 20. Sobeda Pty Ltd Total for 20 largest securityholders Total other securityholders Total stapled securities on issue OTHER Number of stapled securities Percentage of issued equity % 1,756,149,118 868,708,848 474,005,844 173,351,680 160,921,809 52,614,153 40,782,129 29,350,000 21,592,077 18,690,000 14,185,500 11,009,142 8,900,000 8,374,652 6,850,000 6,033,980 6,000,551 5,919,297 5,620,636 5,065,291 3,674,124,707 268,944,615 3,943,069,322 44.54 22.03 12.02 4.40 4.08 1.33 1.03 0.74 0.55 0.47 0.36 0.28 0.23 0.21 0.17 0.15 0.15 0.15 0.14 0.13 93.18 6.82 100.00 Number of securityholders holding less than a marketable parcel (being 233 securities at the closing market price of $2.15 on 29 July 2022): 2,258. VOTING RIGHTS Subject to the Constitutions of Mirvac Limited and of MPT and to any rights or restrictions for the time being attached to any class or classes of shares, units or stapled securities: > on a show of hands, each Member present in person or by proxy, attorney, or representative has one vote; and > on a poll, each Member has: > in the case of a resolution of Mirvac Limited, one vote for each share in Mirvac Limited held; and > in the case of a resolution of MPT, one vote for each whole $1.00 of unit value in MPT held. Annual Report 2022 – 135 GOVERNANCEFINANCIAL REPORTHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS NABERS NED NOI NRV PPE PwC RAP ROIC SBP SaaS SoCI SoFP SRN STI TFN TGS TSR TTC USPP WACC WALE National Australian Built Environment Rating System Non-Executive Directors Net operating income Net realisable value Property, plant and equipment PricewaterhouseCoopers Reconciliation action plan Return on invested capital Security-based payments Software-as-a-Service Statement of comprehensive income Statement of financial position Securityholder Reference Number Short-term incentives Tax file number Tax governance statement Total shareholder return Tax Transparency Code US Private Placement Weighted average cost of capital Weighted average lease expiry GLOSSARY AASB ABN AGM ARCC SoCE ARSN ASIC ASX AUD BTR CCIRS CEO CEO/MD CFO CGU CHESS CPSS DCF DRP EBIT EBITDA ECL EEP EIS ELT EPS FFO FY20 FY21 FY22 GLA HIN HRC HSE HSE&S IASB IFRS IIP IP IPUC JVA KMP LSL LTI LTIFR MPC MPT MTN Australian Accounting Standards Board Australian business number Annual General and General Meeting Audit, Risk & Compliance Committee Statement of changes in equity Australian Registered Scheme Number Australian Securities and Investments Commission Australian Securities Exchange Australian dollar Build to Rent Cross currency interest rate swap Chief Executive Officer Chief Executive Officer/Managing Director Chief Financial Officer Cash generating unit Clearing House Electronic Subregister System Cents per stapled security Discounted cash flow Dividend/distribution reinvestment plan Earnings before interest and taxes Earnings before interest, taxes, depreciation and amortisation Expected credit loss Employee Exemption Plan Employee Incentive Scheme Executive Leadership Team Earnings per stapled security Funds From Operations Year ending 30 June 2020 Year ending 30 June 2021 Year ending 30 June 2022 Gross leasable area Holder Identification Number Human Resources Committee Health, safety and environment Health, safety, environment and sustainability International Accounting Standards Board International Financial Reporting Standards Integrated Investment Portfolio Investment properties Investment properties under construction Joint ventures and associates Key management personnel Long service leave Long-term incentives Lost time injury frequency rates Masterplanned communities Mirvac Property Trust Medium-term notes 136 – Celebrating 50 years Mirvac GroupBUSINESS OVERVIEWLETTERS TO SECURITYHOLDERSOUR STRATEGYMEGATRENDS OTHER DIRECTORY & UPCOMING EVENTS REGISTERED OFFICE/PRINCIPAL OFFICE Mirvac Group (comprising Mirvac Limited ABN 92 003 280 699 and Mirvac Funds Limited ABN 70 002 561 640, AFSL 233121 as responsible entity of MPT ARSN 086 780 645) Level 28 200 George Street Sydney NSW 2000 Telephone +61 2 9080 8000 Facsimile +61 2 9080 8111 www.mirvac.com SECURITIES EXCHANGE LISTING Mirvac is listed on the Australian Securities Exchange (ASX code: MGR). DIRECTORS John Mulcahy (Chair) Susan Lloyd-Hurwitz (CEO/MD) Christine Bartlett Damien Frawley Jane Hewitt James M. Millar AM Samantha Mostyn AO Peter Nash Robert Sindel COMPANY SECRETARY Michelle Favelle STAPLED SECURITY REGISTRY Link Market Services Limited Parramatta Square, Level 22, Tower 6 10 Darcey Street, Parramatta NSW 2150 Telephone +61 1800 356 444 Securityholder enquiries Telephone +61 1800 356 444 Correspondence should be sent to: Mirvac Group C/- Link Market Services Limited Locked Bag 14 Sydney South NSW 1235. Further investor information can be located in the Investor Centre tab on Mirvac’s website at www.mirvac.com. AUDITOR PricewaterhouseCoopers One International Towers Sydney, Watermans Quay Barangaroo NSW 2000 ANNUAL GENERAL AND GENERAL MEETING Mirvac Group’s 2022 AGM will be held at 11.00am (AEDT) Friday, 18 November 2022 UPCOMING EVENTS 26 October 2022 18 November 2022 Annual General and General Meetings First Quarter Operational Update y e v a d n g i s e d Annual Report 2022 – 137 GOVERNANCEFINANCIAL REPORTHOW WE CREATE VALUEPERFORMANCE BY PILLARRISK MANAGEMENTFINANCIAL AND OPERATIONAL RESULTS