Our marketplace

Focus	Achievement	Result		In the future
Our customer Affordability	Made a significant change to the profile of the stock we have developed with an overall increase in the proportion of affordable lots. Developed a simple process for defining affordability in the catchments of our communities and tracking the current level of affordability of our land offerings. In Retirement Living, all new development projects set a weekly levy that is equal to or less than 25 per cent of the weekly pension.	Ongoing		> Use our new processes to shape our product initiatives in FY12. > Continue to uphold the positive customer experience across our business units. > Address key areas of feedback to better meet our customers' needs and improve/maintain our customer satisfaction ratings. > We will incorporate a relevant metric into State Sales Managers KPIs to meet the requirements of our Liveable Housing Design Policy. > Achieve the specified annual level of procurement from AIMSC certified suppliers. > Continue to engage with suppliers, making clear our expectations of social and environmental sustainability in their offering of services and products. > Continue to refine and expand our responsible supply chain management policies and practices. > Continue to rollout Cm3 communication workshops to our relevant employee work groups. > Continue to review and improve our online Contractor Induction process across other business functions. > Review and improve our Contractor risk management processes to align with the new WHS Harmonisation Laws. > Implement the Contractor Management Module in IRIS. > Continue to improve online communications offerings to improve ease of access to information and two-way channels for investors. > Improve our capacity to communicate the value of eco-efficient buildings and continue to contribute to effective and pragmatic policy. > Contribute to the completion of the Green Star PILOT tool, participate in trials and promote the tool to peers, government, and customers.
Customer engagement	Established a customer satisfaction tracking program in our Commercial Property business. Maintained a high level of resident satisfaction in our Retirement Living villages. Customer satisfaction remained high for Residential, with 9 in 10 enquiries rating the experience as excellent/very good/good.	FY12 Priority
Accessibility	Commenced reftrofiting our assets to improved access for people with disabilities. Formalised our Liveable Housing Design Policy outlining our commitment for: Retirement Living, all new Independent Living Units will be designed to meet or exceed the silver level Livable Housing Design Guidelines. Residential homes built by Stockland Residential Communities on any of our sites we will target for 25% of them per annum to comply to the silver level Liveable Housing Design Guidelines.	FY12 Priority
Our Suppliers Responsible supply chain management	Strengthened our commitment to diversity, sustainability and supplier engagement by joining the Australian Indigenous Minority Supplier Council (AIMSC) pilot program Further embedded sustainability clauses into contracts, particularly Green Star requirements. Improved and expanded the rigor of the tracking and measurement of supplier performance.	Ongoing
Supplier health and safety	Implemented the first phase of our new online Contractor OH&S Pre-Qualification system, Cm3. It will help us meet our legislative duty of care by requiring that all our contractors provide upfront evidence they have adequate safety systems and insurances in place. The Cm3 prequalification process includes an assessment of contractor OHS management systems, insurances & indemnities, licensing & training, as well as continuous monitoring of critical documents and notification of pending expiries. Implemented an online General Contractor OH&S Induction and a Site Specific OHS Induction that all contractors engaged to work on our Residential Projects are now required to complete.	Ongoing
Our Investors Investor relations	Continued to refine our retail securityholder communications in line with the insights we gained from our 2009 securityholder research including reducing jargon, improving ease of access, and educating securityholders about our business.	Ongoing
Our Industry and government Emerging regulations and voluntary tools	Trialled and provided feedback on the effectiveness of the NABERS Retail tool. Advocated complimentary measures to accelerate eco-efficiency in the built environment. Actively contributed to the development of Green Star Communities through workshop and committee participation and nomination of projects for BETA testing of indicators.	Ongoing

Residential - Customer Engagement

Residential business continues to place great emphasis on undertaking research to better understand our customers' needs. To track changes in the desires and experiences of our customers we use tracking research called Stockland Customer Pulse.

Conducted by a third party, this research uncovers feedback from people who inquire or purchase at 39 Stockland residential communities via weekly telephone interviews. In FY11 more than 4,600 interviews were conducted with customers giving us valuable insights about their experience and desires.

The survey data is integrated with internal information to paint a picture of our likely customer mix. On the whole, the customer profile for FY11 was very similar to the previous year which is a mix of first home buyers, upgraders, and to a lesser extent investors. As a result we continue to develop and market a mix of products for this wide range of customers.

In addition to this research, we use an online system that provides information on what customers are requesting and actually buying. The system has increased the efficiency of the design approval process and enabled us to work more closely with our builder partners in three ways:

1. We are able to understand customers' needs today, and so are able to promote those housing solutions which best meet the needs of today's customers.
2. We are also able to track trends in new house development, such as the growing demand for smaller homes, so that we can work towards satisfying tomorrow's customers.
3. We are able to focus new development on those parts of the market that may not have many housing solutions provided by major builders, and increase the choice in that segment to better address the specific needs of a wider range of segments.

Retirement Living Residents

In our Retirement Living business we conduct an annual Residents' Voice Survey to find out how our residents feel about life in a Stockland retirement village. The thrid survey was expanded to include the 30 newly acquired Aevum villages and achieved a 60 per cent response rate.

Overall, the most recent results show a continued high level of resident satisfaction in our villages. While the former Aevum villages performed slightly below our previous average, the overall results were still very strong:

• 87 per cent are satisfied with their community centre;
• 86 per cent are satisfied with their village; and
• 90 per cent are happy with their home.

See our case study on customer satisfaction to discover why our residents are so happy.

In last year's report we identified a key focus area being the improvement of the Stockland representative score in the villages. Over the last 12 months we have refined the role of the Stockland representative to ensure that they are more visible and available in the villages. As a result, the average score out of 10 for the Stockland representative improved by 12% to 7.67 (this includes the pre acquisition villages only to allow a like for like comparison). This represented a statistically significant improvement.

We have identified two key areas for improvement over the coming year:

• Identifying a consistent services offering that is aligned to our resident's service requirements.
• Refining the Village Manager role and establishing clear VM systems, procedures and training.

Commercial Property - Customer Engagement

In Commercial Property, while shoppers are very important, our primary customers are the almost 3200 retail, office and industrial tenants who collectively pay us circa $850 million rent per annum.

Recognising this, in FY11 we established an annual customer satisfaction tracking program. Retailers rated us number two in terms of market leadership. Given the size of our portfolio relative to competitors, this is a credible result. However, we were disappointed to learn that only 54 per cent of retailers involved in leasing negotiations were either satisfied or very satisfied with the service that they receive from Stockland. We also learnt that there is a correlation between the size of retailer and their satisfaction with major and national retailers overall more satisfied than independent retailers. We now know how important various business and relationship drivers are in our retailers' leasing decisions.

While there were many areas where Stockland performed above expectations, we have also identified key areas that we need to address in order to better meet our tenants' needs and improve our customer satisfaction rating. A number of initiatives are being implemented.

Shoppers

Our mystery shopping program has now been running for three years. This year our overall score was 91 per cent, a one per cent increase from last year's score and a nine per cent increase on FY09.

In FY11, all categories rated above the 85 per cent benchmark. Shoppers rated the interaction and visual impact of our casual leasing sites at 99 per cent. The lowest rating areas were related to car park maintenance. Our customers rated our customer service at 90 per cent, the maintenance of our facilities such as parents rooms and toilets scored 90 per cent with the main centre up keep scoring 96 per cent.

Online retailing

Over the last year, we made a significant investment in consumer and retailer research to help us better understand the short and longer term impact of online retailing on our shopping centres. This comprehensive quantitative and qualitative work revealed online retailing is currently small but growing and building towards an alternative shopping channel.* While there is risk, we are confident we can adapt to the shifts in consumer behaviour.

Shoppers have told us they see an important and ongoing role for shopping centres as social hubs, offering things to see, feel, touch and taste. Our centres provide tangible experiences that virtual shopping is unable to match. Importantly, the impact of online retailing is not linear and our response will vary by trade area. We need to remain flexible and have committed to continual monitoring so we can respond accordingly.

*Online retailing currently represents around five percent of total Australian retail sales. Source: Quantum Research 2011.

Housing affordability and tenant value

Housing affordability remains a key focus for the Residential Communities business, particularly as broader economic pressures weigh negatively on the Australian housing market. We have made good progress in understanding and addressing this critical issue in FY11.

During the year our focus has been to:

• Better understand and measure 'affordability'.
• Include more affordable land products broadly across our portfolio.
• Undertake new initiatives to achieve a significant improvement in affordability for entry level housing.

We have developed a simple process for defining affordability in the catchments of our communities and tracking the current level of affordability of our land offerings. The first results of this analysis were completed in late FY11 and will be used to shape our product initiatives in FY12.

The process involves three phases:

1. Identifying the typical 'land budget' of each of our five buyer segments (based on household segmentation).
2. Identifying the core land product which each of these segments most typically demands.
3. Comparing the current land price against the budget to the average price.

This process enables us to reconcile the aspirational wishes of customers with the realities of their budgets and practicalities of their housing demands.

Improving average affordability

FY11 saw significant change in the profile of the stock we have developed with an overall increase in the proportion of affordable lots. Projects in all the States where we operate were reconfigured to ensure a higher proportion of affordable lots were included in the mix of developed lots.

The increased proportion of lots under 300 sqm is the result of our strong focus on working with our partner builders to innovate and create new housing forms to suit these smaller block sizes. This has enabled us to deliver products specifically designed to be affordable for first home buyers.

Since 2007, across our communities, we have seen new house sizes reduced by 20 per cent for four bedroom houses, and 26 per cent for three bedroom houses. At $800-$1,000 per sqm, reducing house sizes is presenting our customers potential savings of $40,000 - $60,000 in purchase cost, and further cost savings through lower energy costs. Decline in customer preferences for larger five bedroom houses has been replaced by increased demand for more efficienct three bedroom houses. In turn this will also lead to lower energy costs

See our case study on delivery diverse and affordable products.

Tenant Value

Affordability extends beyond our Residential business as we aim to provide good quality space and good value services to our tenants throughout our retail, office and industrial assets. The significant customer research that has been conducted will assist us in this key focus area.

For many years we have worked with a variety of external agents, such as marketing experts, financial planners and merchandising specialists, to help our tenants facing financial difficulties. A key initiatives has been a partnership with Westpac to provide financial literacy training for tenants. This training provides skills in business management and financial understanding and links to our community development focus on "Learning and Economic Development".

We also provide low cost or free casual leasing space to not-for-profit and community groups in our retail centres. We see this as a tangible way to support community organisations (see Our Community for more information).

Livable Housing Design and Universal Access

In June 2011, Stockland established a policy for livable housing design, comfirming its support for the national dialogue on Universal Housing Design and Livable Housing Design. The policy is forward looking for our Residential Communities. It applies to any house or display villages committed to (or allocated) after 1 October 2011 and applies to all of our Retirement Living Independent Living Units committed to after 1 July 2011.

We support the principle of building a significant number of homes in our communities that are adaptable for multiple living purposes. In FY12 we will pilot several initiatives to encourage the appetite of customers and our partner builders for adaptable housing, in support of the Government's voluntary targets. Stockland will also lead by example.

Stockland Retirement Living has undertaken extensive consultation with our team, partner builders and our residents to produce our Independent Living Units - Design Principles. These principles focus on creating a better way to live for our customers and, for new homes in our Retirement Living Portfolio, establishes the Silver level of Liveable Housing Design Guidelines as our benchmark. The Principles also identify certain elements to exceed Liveable Housing Silver level and meet the specific needs of our residents. The key is to deliver affordable homes that are responsive to the changing needs of the resident, so as they grow older they can enjoy living independently in their home and community.

Stockland Residential will also lead by example. In the rare instances where we control the exact dwelling outcome, we will achieve the agreed Silver level targets for 2013. Furthermore, Stockland will continue to participate in the development of the national dialogue on Universal Housing Design's Strategic Plan and Liveable Housing Design Guidelines.

While Stockland is a developer and not a builder, our Residential business is committed to finding a pragmatic and equitable way to identify the 25 per cent of new dwellings in our communities that would be selected to meet the 2013 voluntary compliance target. Using covenants would potentially have an inequitable financial impact. Nevertheless, Stockland will promote the benefits of moving to Liveable Housing design with both builders and customers with a view to achieving the 25 per cent Silver target across our residential communities.

Stockland will review its approach to Liveable Housing on an annual basis. This will include a qualitative review of our initiatives and their success. We will continue to contribute to government policy formation in this area through the work of Universal Housing Australia and the Federal Department of Families, Housing, Community Services and Indigenous Affairs.

In May 2011, new accessibility standards were introduced via the Building Code of Australia. To prepare for this introduction and to better undertsand the level of accessibility in our commercial property portfolio, an assessment was undertaken of 35 shopping centres and 29 office buildings during 2010.

As part of this assessment, an Accessibility Checklist was created to assess how Stockland accommodates people with mobility, hearing, vision and dexterity impairments. The information collected helped establish an inventory of facilities that currently exist and identified what may be easily provided in the short term, and what was needed to inform decision making and planning for access upgrades in the long term. Following the assessment, a report and action plan was presented summarising the key findings and recommendations for immediate and short term actions.

We are seeking to improve the quality of our public amenities, including facilities for those with accessibility needs, through capital upgrades and whenever redevelopments and refurbishments are undertaken. Work is being undertaken to update our standard signage with a view to improving the quality of way- finding within our assets.

Engaging Our Suppliers

Stockland continues to engage with and guide our suppliers in setting clear and concise CR&S objectives and targets, relevant to their specific supply and/or service agreement.
We provide all tenderers with the opportunity to comment on the form of proposed contracts through the use of a standard proforma contract. This forms the basis for any commercial negotiation of terms.

In FY11, we conducted a number of in depth interviews with some of our major suppliers spanning across all three business units. These discussions help us understand these suppliers' approach to CR&S  and highlight areas that both parties can focus on in future projects.

Our major supplier engagement projects in FY11 were:

Supplier Relationship Management (SRM) Program

The Project Management division within Commercial Property commenced a Supplier Relationship Management (SRM) program with our major builders engaged in the development of our Retail and Retirement Living assets. As part of the SRM program our senior management and project execution teams conducted site visits at our shopping centres at Shellharbour and Merrylands and participated in interactive workshops with our major builders. Through this process we gained a good understanding of our suppliers' capabilities and shared Stockland's CR&S approach.

Group Procurement Strategy

The strategy addresses aspects related to procurement procedural compliance, performance monitoring and ongoing governance, including fair contracting, risk management, and aligning our corporate values and procurement practices.

Suppliers expect Stockland to provide clear CR&S objectives and targets as they relate to their policies. Throughout FY11, we continued our focus on the area of Sustainable Supply Chain Management (SSCM) by working closely with 20 of our key suppliers to review their current practices and assist our suppliers to improve their SSCM outcomes, systems and processes.

Stockland has taken a pragmatic approach to setting deliverable CR&S targets and incorporating them in contractual agreements with suppliers. These include, but are not limited to, waste diversion targets, energy and water usage reduction targets, and creating employment opportunities for local indigenous and non-indigenous communities.

Waste diversion targets are being reported monthly by the waste service providers and audited when required. Trends are noted and actions taken when targets are not met.  Energy and water usage reduction targets are monitored through smart meters.  Where applicable, suppliers are required to provide reports in accordance with National Greenhouse and Energy Reporting Act requirements.

Stockland requires all contractors to report on OH&S objectives in accordance with contractual guidelines, this is discussed in detail in the Supplier Safety and Performance section.

In FY11 we improved and expanded the rigor of the tracking and measurement of supplier performance and will continue to improve our approach to monitoring supplier CR&S performance.

Throughout FY11, we partnered with specialist providers such as the Salvation Army and Australian Indigenous Minority Supplier Council to create training and employment opportunities around our projects, such as:

Australian Indigenous Minority Supplier Council (AIMSC)

Stockland is now a member of the Australian Indigenous Minority Supplier Council (AIMSC).  AIMSC provides a direct business-to-business purchasing link between corporate Australia and Indigenous-owned businesses. As part of our membership we aim to achieve a specified annual level of procurement from AIMSC certified suppliers in FY12.

The Salvation Army

The Salvation Army Employment Plus (TSAEP) initiative at Stockland Shellharbour clearly demonstrates our commitment to creating local employment strategies and indigenous contracting opportunities. TSAEP provides training to local indigenous workers with the aim of increasing their chances of finding jobs. 18 trainees are currently completing a four week carpentry training course at The Salvation Army Training Centre at Stockland Shellharbour.  We envision this will help the trainees gain employment with our principal contractor at Shellharbour, Brookfield Multiplex and other sub-contractors locally.

In the coming year, Stockland will work with major suppliers across key spend categories such as civil contractors and builders, cleaners, and waste contractors. We will focus on delivering targeted outcomes in the areas of sustainable raw material sourcing, waste management, and driving innovation through our facilities management service providers. We will work with our suppliers to establish contractual obligations that, where appropriate, require contractors to meet or exceed Stockland CR&S targets.

We have close to 50,000 securityholders in Australia and overseas. We aim to keep them well-informed of major developments and business events that are likely to affect our operations, financial standing and the market price of our securities. We communicate with our securityholders through our annual and half year financial reports, announcements of market-sensitive and other information, results, and analyst presentations. These documents are lodged with the ASX and are available electronically on our website at www.stockland.com.au. In addition, the annual and half year financial reports are made available to all securityholders. Securityholders are encouraged to engage with senior management and our Board of Directors at our Annual General Meeting. Copies of addresses by the Chairman and Managing Director and the minutes of the Annual General Meeting are also lodged with the ASX and are available electronically on our website. We also communicate with the investment community through regular group and one-on-one management meetings with institutional investors and analysts, site visits, presentations by senior management and participate in domestic and offshore investor conferences and roadshows. Group briefings are webcast over the internet and telecast. Over the past year we have continued to refine our communications using the insights we gained from our 2009 securityholder research. We have focused on removing jargon from our Shareholder Review, making the information securityholders have requested easy to find, providing appealing easy access to information online, and continuing to utilise the AGM to educate shareholders more broadly about our business through information displays. A copy of our policy on our communication to securityholders is provided in our Annual Report and is available on our website (www.stockland.com.au), in accordance with Principle 6 of the ASX Corporate Governance Principles and Recommendations.

Investor communications   Shareholder Review  Financial Report   CR&S Report Property Portfolio

Government Relations

Second only to market conditions, government regulations have the most substantial impact on the profitability of our businesses. By necessity we actively engage with governments, public servants, regulators and our industry bodies with respect to policy decisions in general and those that affect our many properties. This engagement is governed by a Board-endorsed government and stakeholder engagement policy that applies to all our people and covers donations, consultants, access to our properties, gifts and personal political participation. The policy is updated annually and communicated to our people through our Executive Committee.

Stakeholders take great interest in our stance on political donations. In July 2008, as part of our annual review, our Board moved from a bi-partisan donations policy to implement a zero political donations policy. We do not make direct or indirect transfers of money to political parties or politicians at any level of government. In adopting this policy we seek to reinforce our longstanding view that our projects be judged solely on their merits.

We actively monitor legislative and regulatory change directly through our businesses and the corporate affairs team, as well as via key industry bodies. The Property Council of Australia (PCA), Green Building Council of Australia (GBCA) and Shopping Centre Council of Australia continue to be our primary representative bodies at both federal and state levels.

Emerging regulation and voluntary tools The most significant areas of policy  that will inform our business decisions in the coming years are policies  about  population levels and  land use planning. We believe that population growth and both brownfield and greenfield development are sustainable in the long term if governments engage in significant infrastructure and planning reform. We have engaged in this discussion with every level of government and many other stakeholders in Australia over the past year. This year there were many state regulations and policy announcements that had substantial influences on our business. These include regulations relating to the introduction of health and safety harmonisation, planning panels, land tax valuation changes, industrial land zoning, developer levies, urban boundary extensions and competition policy. Both in response to governments' actions and proactively, we have made many proposals and submissions to governments on matters such as planning, taxation and environmental regulation.

The government has continued to increase its focus on energy efficiency as a means to reduce greenhouse gas emissions. Regulators recognise that buildings represent a key opportunity in realising significant improvements in energy efficiency. As a consequence, our sector has encountered increasing regulatory requirements. Areas of strengthening regulation include:

• Emissions and energy efficiency disclosure - particularly for buildings,
• Identification of opportunities to improve energy efficiency,
• Adaptation to the physical impacts of climate change,
• Increasingly stringent building code requirements.

In general, regulation related to environmental sustainability performance has become increasingly complex with different layers of government seeking to take action. Through the Property Council of Australia and the Green Building Council of Australia we have advocated for the harmonisation and streamlining of reporting and regulatory requirements. Over the year, we have also engaged with government on urban planning, energy, climate change and wider environmental policy development.

Specific engagement in relation to a range of sustainability matters has included:

• Tax Breaks for Green Buildings: specifically that the provision $1billion of funds to accelerate green retrofits of commercial buildings will not be available to real estate investment trusts such as Stockland;
• Commercial Building Disclosure – Tenancy Lighting Energy Efficiency Assessment: an inefficient tool that is unlikely to provide reliable information nor drive significant improvements in energy efficiency performance;
• Review of Energy Efficiency Opportunities Act: proposed to become more complex, principally focused large major-emitting industrial plants, and not tailored to the complexities of a diverse property portfolio and contractor activities across a large array of sites;
• NABERS Rating Scale Expansion: supporting NABERS expansion to 6 star aligning with Green Star;
• Sustainable Population Strategy Issues Paper; and
• National Urban Policy Discussion Paper "Our Cities"

Key pieces of government policy and programs that have affected our business in FY11 include:

• Energy Efficiency Opportunities (EEO) Act
• National Greenhouse and Energy Reporting System (NGERS)
• Council of Australian Governments (COAG) - National Strategy on Energy Efficiency (NSEE)
• Commercial Building Disclosure (CBD)
• Low Carbon Australia
• Green Building Fund
• Environmental Upgrade Agreements Act (New South Wales)
• Carbon Price Announcement

Industry Engagement

We are an active member of the Property Council of Australia (PCA), the Green Building Council of Australia (GBCA) and the Shopping Centre Council of Australia. We also engage in the work of the Urban Development Institute of Australia and increasingly the Housing Industry Association. Additionally, we are an active member of the Investor Group on Climate Change and an Organisational Stakeholder of the Global Reporting Initiative. Over the past year, our employees have been active in groups such as the Australian Institute of Architects, the Planning Institute of Australia, the Australian Building Codes Board and the Federal Government’s Built Environment Industry Innovation Council and Built Environment Roundtable.

Our key areas of engagement are:

• Promoting dialogue between our sector and government, through both direct discussion and involvement in the many industry body forums that involve elected representatives and public servants,
• Continuing to take a key role in the development of voluntary tools, most notably the National Australian Built Environment Rating System (NABERS) Retail Energy and Water tools and the GBCA’s Green Star Communities Framework,
• Working with sector peers through the PCA to take a collaborative approach in creating a more eco-efficient built environment,
• On state regulations relating to the introduction of planning panels, land tax valuation changes, industrial land zoning, bans on covenants, developer levies, urban boundary extensions and greater strictures relating to moth populations.

Over the past year this engagement has led to more balanced outcomes regarding key federal and state regulations.