INGENIA COMMUNITIES GROUP — Annual Report 2007

Sep 25, 2007

ING REAL ESTATE COMMUNITY LIVING MANAGEMENT TRUST

FINANCIAL & ASSOCIATED REPORTS

PERIOD ENDED 30 JUNE 2007

ING Real Estate Community Living Management Trust Directors' report Period ended 30 June 2007

Contents

	Page
Directors' report Financial report
Income statements	6
Balance sheets	7
Cash flow statements
Statements of changes in equity	8 g
Note 1 Summary of significant accounting policies	10
Note 2 Accounting estimates and judgements	16
Note 3 Distributions	16
Note 4 Earnings per unit	16
Note 5 Income tax expense	17
Note 6 Cash and cash equivalents	17
Note 7 Trade and other receivables	17
Note 8 Property investments	18
Note 9 Payables	19
Note 10 Borrowings	19
Note 11 Issued units	21
Note 12 Retained earnings	21
Note 13 Commitments	21
Note 14 Financial instruments Note 15 Auditor's remuneration	22
	22
Note 16 Related parties Note 17 Subsidiaries	23 25
Note 18 Segment information	25
Note 19 Notes to the cash flow statements	26
Directors' declaration	27
Auditor's report	28

The ING Real Estate Community Living Management Trust (ARSN 122 928 410) is an Australian registered scheme. ING Management Limited, the Responsible Entity of the Trust, is incorporated and domiciled in Australia.

A description of the nature of the Trust's operations and its principal activities is included in the accompanying directors' report.

The registered office and principal place of business of the Responsible Entity is located at level 6, 345 George Street, Sydney, New South Wales.

The financial report was authorised for issue by the directors of the Responsible Entity on 19 September 2007. The Trust has the power to amend and reissue the financial report.

The ING Real Estate Community Living Group ("the Group") was formed on 11 January 2007 by the stapling of the units in two property trusts, ING Real Estate Community Living Fund and ING Real Estate Community Living Management Trust (collectively the "Trusts"). The Responsible Entity for both Trusts is ING Management Limited, which now presents its report together with the Trusts' financial report for the year ended 30 June 2007 and the auditor's report thereon.

In accordance with AASB Interpretation 1002 Post-Date-of-Transition Stapling Arrangements, the stapling arrangement discussed above is regarded as a business combination and ING Real Estate Community Living Fund has been identified as the parent for preparing consolidated financial reports. Consequently, the consolidated financial statements of the ING Real Estate Community Living Fund present the combined financial results of both Trusts.

The directors' report is a combined directors' report that covers both Trusts. The financial information given for the ING Real Estate Community Living Group is taken from the consolidated financial statements and notes of the ING Real Estate Community Living Fund.

Directors

The directors of the Responsible Entity at any time during or since the end of the financial year were:

Richard Colless AM David Blight	Chairman
Philip Clark AM
Michael Easson AM
Phillip Redmond	Appointed 17 August 2006
Paul Scully
Hugh Thomson	Alternate director for David Blight
Adrian Astridge	Alternate director for David Blight

Except as noted, these persons were directors of the Responsible Entity during the whole of the financial year and up to the date of this report.

Principal activity

The principal activity of the ING Real Estate Community Living Fund is investment in real estate. The principal activities of the ING Real Estate Community Living Management Trust are the development, management and operation of the Fund's real estate assets. There was no significant change in the nature of either Trust's activities during the financial year.

Review and results of operations

A summary of the Trusts' results for the financial year is:

	ING Real Estate Community Living		ING Real Estate Community Living
	Group		Management Trust
	2007	2006	2007	2006
Net profit for year (\$'000)	86,798	40.270	605
Distributable income (\$'000)	34,358	16.232	605
Distributions per stapled unit (cents) Earnings per unit - basic and diluted	10.70	9.78
Per stapled unit (cents) Distributable income per unit	27.0	24.2
Per stapled unit (cents)	10.7	9.8

The Responsible Entity uses the Trusts' distributable income as a quide to the level of distributions to be paid to unitholders. Distributable income does not take into account certain items recognised in the income statement including unrealised gains or losses on the revaluation of the Group's properties and derivative financial instruments.

Distributable income for the financial year has been calculated as follows:

	ING Real Estate		ING Real Estate
	Community Living		Community Living
	Group		Management Trust
	2007	2006	2007	2006
	\$'000	\$'000	\$'000	\$'000
Net profit for year	86,798	40,270	605
Adjusted for:
Lease revenue received from property under
construction	508	1,936
Gain on revaluation of newly constructed
retirement villages	1,022		601
(Gain)/loss on change in fair value of:
Investment properties	1,217	(4, 447)	(601)
Derivatives	(28, 882)	1,421
Gain on change in fair value of investment
properties included in share of associates' net
profit	(63, 285)	(31, 013)
Borrowing costs amortisation returned	555	811
Net foreign exchange loss	94	535
Deferred income tax expense	36,331	6,719
Distributable income	34,358	16,232	605
Attributable to unitholders of:
ING Real Estate Community Living Fund	33,753	16,232
ING Real Estate Community Living Management Trust
	605 34,358		605
		16,232	605

Distributable income for the Trusts for the 2007 financial year increased by 112% to \$34,358,000 from \$16,232,000 for the 2006 financial year. Distributable income per stapled unit was up 9.2% to 10.7 cents, compared to 9.8 cents per unit previously. The increase is due mainly to net property income derived from investment properties and associates acquired during the 2006 financial year.

The Group has delivered distribution growth of 9.4% with distributions per stapled unit of 10.70 cents for the financial year, compared with 9.78 cents in 2006.

Earnings per stapled unit of the Trusts as calculated under accounting standards for the year ended 30 June 2007 were up 11.6% to 27.0 cents, compared to 24.2 cents per stapled unit for the previous financial year.

Total assets increased by \$361,286,000 or 65.7% to \$911,427,000 over the year primarily due to acquisitions in the US seniors, US students and Australian seniors portfolios. Asset revaluation increases and acquisitions contributed \$62,068,000 and \$338,352,000 respectively to the increase. The basis of the valuations is described in note 1 in the financial report.

Revaluations during the 2007 financial year added \$62,068,000 (including share of associates' revaluations), increasing net asset value per stapled unit by 8.0% to \$1.22.

A total of \$163,276,000 of new equity (after costs) was raised by the Trusts during the year. As a result, issued units increased by 125,894,000 to 430,267,000.

Distributions

Details of distributions are given in note 3 in the financial report.

Significant changes in the state of affairs

The Group was formed on 11 January 2007 by the stapling of the units in the Trusts. ING Real Estate Community Living Management Trust was constituted on 24 November 2006.

The stapling was effected by a distribution of capital of \$2,500,000 from ING Real Estate Community Living Fund made on 11 January 2007 that was applied in subscription for units in ING Real Estate Community Living Management Trust.

In the opinion of the directors of the Responsible Entity, there were no other significant changes in the state of affairs of either Trust that occurred during the financial year.

Events subsequent to reporting date

There has not arisen in the interval between the end of the financial year and the date of this report any matter or circumstance that has significantly affected, or may significantly affect, the operations of the Trusts, the results of those operations, or the state of affairs of the Trusts, in future financial years.

Likely developments

The Responsible Entity will continue to actively manage the existing portfolio. New acquisitions, including overseas acquisitions, will be considered on the relative value they may add to the Trusts. Where appropriate the Trusts may raise additional capital to fund new acquisitions. The Responsible Entity will continue to review the property portfolio and dispose of non-core assets.

Environmental regulation

The Trusts' operations are not subject to any particular and significant environmental regulation under a law of the Commonwealth or of a State or Territory.

Indemnities

The Trusts have not indemnified, nor paid any insurance premiums for, a person who is or has been an officer of the Responsible Entity or an auditor of the Trusts.

Interests of directors of the Responsible Entity

Units in the Group held by directors of the Responsible Entity as at 30 June 2007 were:

	Number of units
Paul Scully	19.076
Adrian Astridge (alternative for David Blight)	20.375

The other directors of the Responsible Entity did not hold any units in the Group at that date.

Other information

Fees paid to the Responsible Entity and its associates, and the number of units in the Trusts held by the Responsible Entity and its associates as at the end of the financial year are set out in note 21 in the financial report.

Auditors' 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 5.

Rounding of amounts

The Trusts are of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the "rounding off" of amounts in this report and in the financial report. Amounts in this report and in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, unless stated otherwise.

Signed in accordance with a resolution of the directors of the Responsible Entity.

Hugh Thomson Director Sydney 19 September 2007

ELERNST & YOUNG

Example 25 Finst & Young Centre
680 George Street
Sydney NSW 2000 Australia

Tel 61 2 9248 5555 Fax 61 2 9248 5959 DX Sydney Stock Exchange 10172

GPO Box 2646 Sydney NSW 2001

Auditor's Independence Declaration to the Directors of ING Management Limited as Responsible Entity for the ING Real Estate Community Living Fund and ING Real Estate Community Living Trust

In relation to our audit of the financial report of the ING Real Estate Community Living Fund and its controlled entities and the ING Real Estate Community Living Management Trust and its controlled entities for the financial year ended 30 June 2007, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

EIMPT JOURS

Ernst & Young

Douglas Bain Partner 19 September 2007

ING Real Estate Community Living Management Trust Income statements Period ended 30 June 2007

$\langle \Phi \rangle$

		Note Consolidated 2007 \$'000	Parent 2007 \$'000
Revenue
Deferred management fee		481
Other property income		108
Interest income		31	31
		620	31
Other income
Gain on change in fair value of investment properties		601
Expenses
Property expenses		(33)
Finance costs		(291)
Other		(292)
Profit before income tax		605	31
Income tax expense	5
Net profit attributable to unitholders of the Fund		605	31
		Cents	Cents
Distributions per unit	3
Earnings per unit - basic and diluted		0.4
Distributable income per unit		0.4

ING Real Estate Community Living Management Trust Balance sheets As at 30 June 2007

	Note	Consolidated 2007 \$'000	Parent 2007 \$'000
Current assets
Cash and cash equivalents	6	4,193	741
Trade and other receivables	$\overline{7}$	2,468	890
		6,661	1,631
Non-current assets
Investments in subsidiaries	17		1,789
Investment properties	8	111,991
Properties under construction	8	5,176
		117,167	1,789
Total assets
		123,828	3,420
Current liabilities
Payables	9	12,549	150
Retirement village residents' loans	1(q)	84,428
Borrowings	10	$\overline{2}$
		96,979	150
Non-current liabilities
Borrowings	10	23,005
Total liabilities		119,984	150
Net assets		3,844	3,270
Unitholders' interest
Issued units	11	3,239	3,239
Retained earnings	12	605	31
Total unitholders' interest		3,844	3,270
Net asset value per stapled unit		\$0.01

ING Real Estate Community Living Management Trust Cash flow statements Period ended 30 June 2007

	Note	Consolidated 2007 \$'000	Parent 2007 \$'000
Cash flows from operating activities	19
Rental and other property income		1,589
Property and other expenses		(325)
Interest received		31	31
		1,295	31
Cash flows from investing activities Purchase of and additions to investment
properties and properties under construction		(9, 977)
Investment in subsidiaries	17		(1,789)
Loans to subsidiaries			(150)
Other loans made		(590)	(590)
		(10, 567)	(2,529)
Cash flows from financing activities
Proceeds from issue of units		3,437	3,437
Unit issue costs		(198)	(198)
Proceeds from borrowings		10,226
		13,465	3,239
Net increase/(decrease) in cash Cash at the beginning of the year		4,193	741
Cash at the end of the year	6	4,193	741

ING Real Estate Community Living Management Trust
Statements of changes in unitholders' interest
Period ended 30 June 2007

	Consolidated 2007 \$'000	Parent 2007 \$'000
Total unitholders' interest at the beginning of the period Profit for the period	605	31
Total recognised income and expense for the period	605	31
Transactions with unitholders in their capacity as unit holders: capacity as equity holders:
Issue of units:	3,239	3,239
Total unitholders' interest at the end of the period	3,844	3,270

ING Real Estate Community Living Management Trust Period ended 30 June 2007

$1.$ Summary of significant accounting policies

$(a)$ The Trust

The ING Real Estate Community Living Management Trust ("the Trust" or "Parent") was constituted on 24 November 2006. The Responsible Entity for the Trust is ING Management Limited. ING Management Limited is an Australian domiciled company and is a wholly owned company within the ING Groep NV group of companies.

The ING Real Estate Community Living Group was formed on 11 January 2007 by the stapling of the units in the Trust with those of ING Real Estate Community Living Fund.

$(b)$ Basis of preparation

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards ("AASB"), Australian Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (the "Board") and the Corporations Act 2001.

Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards ("AIFRS"). Compliance with AIFRS ensures that the consolidated financial statements and notes of the Trust comply with International Financial Reporting Standards ("IFRS").

The Parent's financial statements and notes also comply with IFRS, except that it has elected to apply the relief provided to parent entities in respect of certain disclosure requirements contained in AASB 132 Financial Instruments: Presentation and Disclosure.

The financial report is presented in Australian dollars.

The financial report is prepared on the historical cost basis, except for investment properties and derivative financial instruments, which are measured at fair value.

Principles of consolidation $(c)$

The consolidated financial statements comprise the Parent and its subsidiaries as at 30 June 2007 (the "Trust"). Subsidiaries are all those entities (including special purpose entities) whose financial and operating policies the Trust has the power to govern, which generally accompanies a shareholding of more than one-half of the voting rights.

The financial statements of the subsidiaries are prepared for the same reporting period as the Parent, using consistent accounting policies. Adjustments are made to bring into line dissimilar accounting policies. Inter-company balances and transactions including unrealised profits have been eliminated.

Subsidiaries are consolidated from the date on which control is transferred to the Parent. They are de-consolidated from the date that control ceases.

Minority interests represent the interests in subsidiaries not held by the Trust.

Investments in subsidiaries are carried at cost in the Parent's financial statements.

Distribution policy $(d)$

Distributions are paid to unitholders each quarter out of distributable income, which includes realised income available for distribution and transfers from equity. A provision for distribution for any distribution declared on or before the end of the reporting period is recognised on the balance sheet in the reporting period to which the distribution pertains.

$1.$ Summary of significant accounting policies (continued)

Investment property $(e)$

Land and buildings have the function of an investment and are regarded as composite assets. In accordance with applicable accounting standards, the buildings, including plant & equipment, are not depreciated.

It is the Trust's policy to have all investment properties externally valued at intervals of not more than three years and that such valuation be reflected in the financial reports of the Trust. It is the policy of the Responsible Entity to review the fair value of each investment property every six months and to cause investment properties to be revalued to fair values whenever their carrying value in aggregate differs materially to their fair values.

In determining fair values, expected net cash flows are discounted to their present value using a market determined risk adjusted discount rate. The assessment of fair value of investment properties does not take into account potential capital gains tax assessable. Changes in the fair value of an investment property are recorded in the income statement.

The expected net cash flows of retirement villages include deferred management fees receivable and the receipt and repayment of residents' incoming contributions.

All property interests held under operating leases are classified and accounted for as investment property.

$(f)$ Property under construction

Property under construction is carried at historical cost. Cost includes the cost of acquisition and additions and, during development, includes financing charges, related professional fees incurred and other directly attributable costs.

Property under construction is transferred to investment property on completion of the construction. Any difference between the fair value of the property at that date and its previous carrying amount is recognised in profit or loss.

$(g)$ Leases

Leases where the lessor retains substantially all the risk and benefits of ownership are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised as an expense over the term of the lease on the same basis as the lease income. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the term of the lease.

Incentives maybe provided to tenants to enter into an operating lease. These incentives may be in the form of cash, rent free periods, lessee or lessor owned fit outs. The incentive is amortised over the term of the lease as a reduction in rental income. The unamortised carrying amount of the incentive is reflected in the carrying value of the investment property.

Leasing fees that are directly associated with the negotiation and execution of a lease agreement (including commissions, legal fees and costs of preparing and processing documentation) are capitalised as part of the carrying value of the property and amortised over the lease term.

Leasing fees in relation to the initial leasing of the investment property after a redevelopment are capitalised to the carrying value of the property as a cost of bringing the investment property to completion and intended use.

1. Summary of significant accounting policies (continued)

$(h)$ Foreign currency

$(i)$ Functional and presentation currencies

The functional currency and presentation currency of the Trust (with the exception of its foreign subsidiaries) is the Australian dollar.

$(ii)$ Translation of foreign currency transactions

Transactions in foreign currency are initially recorded in the functional currency at the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currency are retranslated at the rate of exchange prevailing at the balance date. All differences in the consolidated financial report are taken to the income statement with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the net investment at which time they are recognised in the income statement.

A non-monetary item that is measured at fair value in a foreign currency is translated using the exchange rates at the date when the fair value was determined.

$(i)$ Revenue

Revenue from rents, interest and distributions is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. Revenue brought to account but not received at balance date is recognised as a receivable.

Rental income from operating leases is recognised on a straight-line basis over the lease term. Contingent rentals are recognised as income in the financial year that they are earned. Fixed rental increases that do not represent direct compensation for underlying cost increases or capital expenditures are recognised on a straight-line basis until the next market review date.

Reflecting this accounting policy, deferred management fee income is calculated as the expected fee to be earned on a resident's ingoing loan, allocated pro-rata over the resident's expected tenure. together with any share of capital appreciation that has occurred at reporting date.

Interest income is recognised as the interest accrues using the effective interest method.

$(i)$ Income tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the current period's taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

$(k)$ Earnings per unit

Basic earnings per unit is calculated as net profit attributable to unitholders of the Trust divided by the weighted average number of issued units. As there are no potentially dilutive units on issue, diluted earnings per unit is the same as basic earnings per unit.

$\mathbf 1$ . Summary of significant accounting policies (continued)

Derivative financial instruments $(1)$

The Trust may use derivative financial instruments such as foreign currency contracts and interest rate swaps to hedge its risks associated with foreign currency and interest rate fluctuations. The Trust may also invest in derivatives related to listed property equities and indices and may issue derivatives related to its own units. Such derivative financial instruments are stated at fair value and recognised as an asset or liability in the balance sheet.

The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values of similar instruments. The fair value of derivatives related to listed property equities and indices (including those related to the Trust's own units) is calculated by reference to the market value of the underlying equities or indices.

For hedge accounting, hedges are classified as a fair value hedges when they hedge the exposure to changes in the fair value of a recognised asset or liability; cash flow hedges where they hedge exposure to variability in cash flows that is attributable either to a particular risk associated with a recognised asset or liability or to a forecast transaction; or hedges of a net investment in a foreign operation.

Any gain or loss arising from measuring fair value hedges that meet the conditions for hedge accounting is recognised in the income statement. Any gain or loss on the hedged item attributable to the hedged risk is adjusted against the carrying amount of the relevant financial instrument.

Any gain or loss arising on cash flow hedges which hedge firm commitments and which qualify for hedge accounting are recognised directly in equity.

For derivatives that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are recognised in the income statement.

Hedge accounting is discontinued when the hedge instrument expires, is sold, exercised, terminated or no longer deemed effective. Any cumulative gains or losses relating to the hedge that were previously recognised in equity are transferred to the Income Statement.

$(m)$ Business combinations

Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the Trust's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired. Subsequently, goodwill is measured at cost less any accumulated impairment losses and is not amortised.

Goodwill generally arises as a result of the recognition of deferred taxes based on the difference Impairment is determined by assessing the recoverable amount of the cash-generating unit or group of units ("CGU") to which the goodwill relates. When the recoverable amount of the CGU is less than the carrying amount, an impairment loss is recognised. When goodwill forms part of a CGU and an operation within that CGU is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation.

Impairment losses recognised for goodwill are not subsequently reversed.

$(n)$ Cash and cash equivalents

Cash at bank and short-term deposits are stated at their nominal values.

For the purposes of the cash flow statement, cash includes cash on hand and in banks, and money market investments readily convertible to cash, net of outstanding bank overdrafts.

$\mathbf{1}$ . Summary of significant accounting policies (continued)

Trade and other receivables $(0)$

Receivables are recognised and carried at original invoice amount less a provision for any uncollectible debts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified. Receivables from related parties are initially recognised at original invoice amount and are subsequently carried at amortised cost using the effective interest method.

Pavables $(p)$

Liabilities are recognised for amounts to be paid in the future for goods or services received, whether or not billed to the Trust. The amounts are unsecured and are usually paid within 60 days of recognition.

Retirement village residents' loans $(q)$

These loans, which are repayable on the departure of the resident, are classified as financial liabilities at fair value through profit and loss with resulting fair value adjustments recognised in the income statement. The fair value of the obligation is measured as the ingoing contribution plus the resident's share of capital appreciation to reporting date. Although the expected average residency term is around eleven years, these obligations are classified as current liabilities, as required by Accounting Standards, because the Group does not have an unconditional right to defer settlement to more than twelve months after reporting date.

This liability is stated net of deferred management fee accrued to reporting date, because the Group's contracts with residents require net settlement of those obligations.

$(r)$ Borrowings

Borrowings are initially recorded at the fair value of the consideration received net of issue and other transaction costs associated with the borrowings. After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest rate method. Under this method fees, costs, discounts and premiums directly relating to the financial liability are amortised over its expected life.

Borrowing costs are expensed as incurred except where they are directly attributable to the acquisition, construction or production of a qualifying asset. When this is the case, they are capitalised as part of the acquisition cost of that asset.

Financial assets and liabilities $(s)$

Current and non-current financial assets and liabilities are classified as fair value through profit or loss; loans and receivables; held-to-maturity investments; or as available-for-sale. The Trust determines the classification of its financial assets and liabilities at initial recognition and these are subsequently held at fair value or amortised cost. Changes in fair value of available-for-sale financial assets are recorded directly in equity. Changes in fair values of financial assets and liabilities classified as fair value through profit or loss are recorded in the income statement.

Issued units $(t)$

Issued and paid up units are recognised at the fair value of the consideration received by the Trust. Any transaction costs arising on issue of ordinary units are recognised directly in unitholders' interest as a reduction of the units proceeds received.

Goods and services tax ("GST") $(u)$

Revenue, expenses and assets (with the exception of receivables) are recognised net of the amount of GST to the extent that the GST is recoverable from the taxation authority. Where GST is not recoverable, it is recognised as part of the cost of the acquisition, or as an expense.

1. Summary of significant accounting policies (continued)

Receivables and payables are stated inclusive of GST. The net amount of GST recoverable from or payable to the tax authority is included in the balance sheet as an asset or liability.

Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities, which is recoverable from or payable to the tax authorities, is classified as an operating cash flow.

Pending Accounting Standards $(v)$

Accounting Standards AASB 7 Financial Instruments: Disclosures and AASB 2006-10 Amendments to Australian Accounting Standards are applicable to annual reporting periods beginning on or after 1 January 2007. In addition, AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8 are applicable to annual reporting periods beginning on or after 1 January 2009. The Trust has not adopted these standards early. Application of the standards will not affect any of the amounts recognised in the financial statements, but will affect the type of information disclosed.

Other new accounting standards, amendments to accounting standards and interpretations have been published that are not mandatory for the current reporting period. These are not expected to have any material impact on the Trust's financial report in future reporting periods.

(w) Financial year and comparative data

The 2007 financial statements cover the period from formation on 24 November 2006 to 30 June 2007. There is no comparative data.

$2.$ Accounting estimates and judgements

The preparation of financial statements requires the use of certain critical accounting estimates. It also requires the Responsible Entity to exercise its judgement in the process of applying the Trust's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed below.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

$(a)$ Critical accounting estimates and assumptions

The Trust makes estimates and assumptions concerning the future. The resulting accounting estimates, by definition, will seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

At 30 June 2007, the Trust had investment properties with a carrying amount of \$111,991,000. representing estimated fair value. These carrying amounts reflect certain assumptions about expected future rentals, rent-free periods, operating costs and appropriate discount and capitalisation rates. In forming these assumptions, the Responsible Entity considered information about current and recent sales activity, current market rents, and discount and capitalisation rates, for properties similar to those owned by the Trust, as well as independent valuations of the Trust's property.

$(b)$ Critical judgements in applying the entity's accounting policies

There were no judgements, apart from those involving estimations, that management has made in the process of applying the entity's accounting policies that had a significant effect on the amounts recognised in the financial report.

3. Distributions

	Consolidated 2007 \$'000	Parent 2007 \$'000
Distributable income
Distributable income for the Fund is calculated as follows:
Net profit for the year	605	31
Distributable income	605	31
Earnings per unit 4.
	Note	Consolidated 2007
Distributable income - \$'000	3(b)	605
Profit attributable to unitholders - \$'000		205

$\sim$ . To the dimensional conditional condition $\sim$	uuu
Weighted average number of units outstanding - thousands	148.262
Distributable income per unit - cents Basic and diluted earnings per unit - cents	0.4 0.4

5. Income tax expense

	Consolidated 2007	Parent 2007
	\$'000	\$'000
Reconciliation between tax expense and
pre-tax net profit
Profit before income tax	605	31
Income tax at the Australian tax rate of 30%	182	9
Tax effect of amounts which are not
deductible/(taxable) in calculating taxable income:	(182)	(9)
Income tax expense

6. Cash and cash equivalents

		Note Consolidated 2007	Parent 2007
		\$'000	\$'000
Cash at bank and in hand	14	665	741
Short term deposits	14	3.528
		4,193	741

7. Trade and other receivables

	Consolidated 2007 \$'000	Parent 2007 \$'000
Current
Rental and other amounts due	1.728
Amounts receivable from related parties	740	740
Amounts receivable from subsidiaries		150
	2,468	890

Rental and other amounts due are receivable within 30 days.

8. Property investments

$(a)$ Summary of carrying amounts

	Consolidated	Parent
	2007	2007
	\$'000	\$'000
Investment properties	111.991
Properties under construction	5.176
	117.167

$(b)$ Valuations and carrying amounts

Property	Cost to date	Latest external valuation Valuation Date		Carrying amount 2007
	\$'000		\$'000	\$'000
Investment properties
5 Martens Street
Mount Warren Park, Qld (1)	7,555	1 Mar 07	7,001	7,555
Ridgewood Blvd & Whitsunday Ave,
Ridgewood, WA (1)	38,828	1 Mar 07	49,526	38,828
Lot 601 Old Mandurah Road,
Ravenswood, WA (1)	52,716	1 Mar 07	56,409	52,716
21& 43 Oakmont Avenue,
Meadow Springs, WA (1)	12,892	1 Mar 07	20,390	12,892
Total investment properties	111,991		133,326	111,991
Property under construction
5 Martens Street
Mount Warren Park, Qld (1)	1,627	1 Mar 07		1,627
Ridgewood Blvd & Whitsunday Ave,
Ridgewood, WA (1)	979	1 Mar 07	2,509	979
Lot 601 Old Mandurah Road,
Ravenswood, WA (1)	2,151	1 Mar 07	1,124	2,151
21& 43 Oakmont Avenue,
Meadow Springs, WA (1)	419	1 Mar 07	1,855	419
Total properties under construction	5,176		5,488	5,176
Total all property investments	117,167		138,814	117,167

• $(1)$ Valuations of retirement villages are provided to the Group net of residents' loans (after deducting any accrued deferred management fees). For presentation in this note, the external valuations shown are stated before deducting this liability to reflect its separate balance sheet presentation.
• Investment property that has not been valued by external valuers at reporting date is carried at $(2)$ the Responsible Entity's estimate of fair value in accordance with the accounting policy detailed at note 1(e). Properties acquired during the period are held at cost, which is reflective of the estimate of fair value.

8. Property investments (continued)

$(c)$ Movements in carrying amounts

	Consolidated 2007 \$'000	Parent 2007 \$'000
Investment property
Additions - initial acquisitions	112,592
Net change in fair value	(601)
Carrying amount at end of period	111,991
Property under construction
Additions	5,176
Carrying amount at end of period	5,176

Payables 9.

	Consolidated 2007	Parent 2007
	\$'000	\$'000
Current liabilities
Other payables	12,549	150
	12,549	150

10. Borrowings

	Note	Consolidated 2007 \$'000	Parent 2007 \$'000
Current liabilities
Finance leases	(a)
Non-current liabilities
Finance leases	(a)	17,536
Loan from stapled entity	(b)	5,469
		23.005

$10.$ Borrowings (continued)

$(a)$ Finance leases

A subsidiary of the Trust has entered into a series of lease agreements with a related party, Settlers Subsidiary Trust, a subsidiary of ING Real Estate Community Living Fund. The subject of each lease is a retirement village, the total carrying amount of which at reporting date was \$138,814,000. The term of each lease is 99 years. There are no purchase options. Lease payments are reviewed to market rates every three years. Minimum payments under the leases and their present values are:

	Consolidated 2007 \$'000	Parent 2007 \$'000
Minimum lease payments:
Within one year	1,298
Later than one year but not later than five years	5,192
Later than five years	122,015
Total minimum lease payments	128,505
Future finance charges	(110, 967)
Present value of minimum lease payments	17,538
Present value of minimum lease payments:
Within one year	2
Later than one year but not later than five years
Later than five years	17,532
	17.538

Loan from stapled entity $(b)$

A subsidiary of the Trust has also entered into a loan agreement with Settlers Subsidiary Trust, which is a 5 year facility, repayable upon maturity.

11. Issued units

$(a)$ Carrying amounts

	Consolidated 2007 \$'000	Parent 2007 \$'000
At beginning of year	٠
Issued during the year:
Placements and rights issues	3,437	3,437
Unit issue costs	(198)	(198)
At end of year	3,239	3,239

(b) Number of issued units

	Consolidated 2007 thousands	Parent 2007 thousands
At beginning of year
Issued during the year:
Placements	425,212	425,212
Distribution reinvestment plan	5.055	5,055
At end of year	430,267	430,267

The units of the Trust were stapled to the ING Real Estate Community Living Fund, together $(c)$ known as the ING Real Estate Community Living Group, on 11 January 2007.

$(d)$ Terms of units

All units are fully paid and rank equally with each other for all purposes. Each unit entitles the holder to one vote, in person or by proxy, at a meeting of unitholders.

12. Retained earnings

	Consolidated 2007 \$'000	Parent 2007 \$'000
Balance at beginning of year
Net profit for the year	605	31
Balance at end of year	605	31
The balance at the end of the year comprises:
Distributable income	605

13. Commitments

Commitments for capital expenditure on investment property contracted but not provided for at reporting date amounted to \$20,100,000, \$15,200,000 payable within one year and \$4,900,000 payable between one and two years.

$14.$ Financial instruments

The Trust's activities expose it to a variety of financial risks including interest rate risk and credit risk.

$(a)$ Interest rate risk

The Trust's exposure to the risk of changes in market interest rates relates primarily to its borrowings. The Trust's exposure to interest rate risk and the effective interest rates on financial instruments at reporting date was:

30 June 2007	Consolidated
	Floating Fixed interest maturing in:		Total
		interest Less than	1 to $5$	More than
	rate	1 year	years	5 years
Principal amounts \$'000
Financial assets
Cash at bank	665	್		۰	665
Short term deposits	3,528	۰		۰	3,528
Financial liabilities
Finance leases		2	17,536		17,538
Loan from stapled entity	5,469	۰			5,469
Weighted average interest rates
Financial assets
Cash at bank	5.6%				na
Short term deposits	6.2%				na
Financial liabilities
Finance leases		7.4%	7.4%		na
Loan from stapled entity	6.4%				na

The other financial instruments of the Trust that are not included in the above tables are non-interest bearing and are therefore not subject to interest rate risk.

$(b)$ Credit risk

Credit risk arises from the potential failure of counterparties to meet their obligations under the relevant contract or arrangement. The Trust's maximum exposure to credit risk at reporting date in relation to each class of financial instrument is their carrying amount as reported in the balance sheet. The Trust minimises credit risk by undertaking transactions with counterparties of sound credit quality.

15. Auditor's remuneration

Audit fees have been paid by a related party, ING Real Estate Community Living Fund.

16. Related parties

$(a)$ Responsible Entity

The Responsible Entity of the Trust is ING Management Limited ("IML"), a member of the ING group of companies for which the ultimate holding company is ING Groep NV, a company incorporated in the Netherlands.

$(b)$ Fees of the Responsible Entity and its related parties

These fees were paid by a related party, the ING Real Estate Community Living Fund.

$(c)$ Holdings of the Responsible Entity and its related parties

Holdings of the Responsible Entity and its related parties (including managed investment schemes for which a related party is the Responsible Entity) as at 30 June 2007, and distributions receivable for the year then ended, were:

30 June 2007

	Number	Distributions Receivable
	of units	Consolidated	Parent
	held	2007	2007
Name
ING Community Property Management Pty Ltd	5,104,194
ING Investment Management Pty Ltd
ING Real Estate International Investments III BV	14,590,931
ING Real Estate Investment Management Australia
Pty Ltd	8,325,500	۰.
ING Tax Effective Income Fund
	28,020,625

$(d)$ Other transactions with the Responsible Entity and its related parties

The Trust has entered into a series of lease agreements, and a loan agreement, with a related party, Settlers Subsidiary Trust, a subsidiary of ING Real Estate Community Living Fund. Details of these agreements are given at note 10.

(e) Key management personnel

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director of the Responsible Entity.

The names of the directors of the Responsible Entity, and their dates of appointment or resignation if they were not directors for all of the financial year, are:

Alternate director for David Blight
Alternate director for David Blight

16. Related parties (continued)

The names of other key management personnel, and their dates of appointment or resignation if they did not occupy their position for all of the financial year, are:

lan Muir David Hunt Chief Executive Officer Chief Financial Officer

Key management personnel do not receive any remuneration directly from the Trust. They receive remuneration from the Responsible Entity in their capacity as directors or employees of the Responsible Entity or its related parties. Consequently, the Trust does not pay any compensation as defined in Accounting Standard AASB 124 Related Parties to its key management personnel.

Units held directly, indirectly or beneficially in the Trust by each key management person, including their related parties, were:

	2007
Jan Muir
Held at the beginning of the financial year
Acquisitions	340,383
Held at the end of the financial year	340,383
Adrian Astridge
Acquisitions	20,375
Held at the end of the financial year	20,375
Paul Scully
Acquisitions	19,076
Held at the end of the financial year	19,076
David Hunt
Acquisitions	111,205
Held at the end of the financial year	111,205

Distributions received and receivable from the Trust by each key management person were:

	2007
Ian Muir	$\bullet$
Adrian Astridge	$\sim$
Paul Scully	$\overline{\phantom{a}}$
David Hunt	٠

17. Subsidiaries

$(a)$ Names of subsidiaries

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(c):

Name	Country of residence	Ownership interest 2007 ℅
ING Settlers Management Pty Limited	Australia	100
ING Settlers Operations Trust	Australia	100
ING Community Living Oak Tree Subsidiary Trust No.2	Australia	100
ING Regency Operations Trust	Australia	100

The Trust's voting interest in its subsidiaries is the same as its ownership interest.

$(b)$ Acquisition of business

On 27 April 2007 the Group acquired the Settlers retirement villages ("Settlers") located at:

(a) 5 Martens Street Mount Warren park, QLD;

(b) Ridgewood Blvd & Whitsunday Avenue, Ridgewood, WA;

(c) Lot 601 Old Mandurah Road, Ravenswood, WA; and

(d) 21 & 43 Oakmont Avenue, Meadow Springs, WA.

The fair value of the assets and liabilities arising from the acquisition were:

	Fair
	values
	\$'000
Cash	244
Property investments	102,603
Retirement village residents' loans	(82, 157)
Payables	(7,056)
Net assets	13,634

The purchase consideration compares to net assets acquired as follows:

Purchase consideration:
Cash paid/payable	13,634
Cash included in net assets	(244)
	13,390

18. Segment information

The Trust operates in the one business segment, investment in real estate utilised as social infrastructure, in Australia.

19. Notes to the cash flow statements

Reconciliation of profit to net cash flows from operations

	Consolidated 2007	Parent 2007
	\$'000	\$'000
Net profit for the year	605	31
Adjustments for:
Gain on change in fair value of investment properties	(601)
Net proceeds from resident's loans	1,221
Operating profit for the year before changes
in working capital	1,225	31
Changes in working capital:
(Increase)/decrease in receivables	(560)
Increase/(decrease) in payables	339
Increase/(decrease) in interest payable	291
Net cash used by operating activities	1.295	31

ING Real Estate Community Living Management Trust Directors' declaration Period ended 30 June 2007

In accordance with a resolution of the directors of ING Management Limited, I state that:

• 1. In the opinion of the directors:
• the financial statements and notes of ING Real Estate Community Living Management Trust $(a)$ are in accordance with the Corporations Act 2001, including:
  • $(i)$ giving a true and fair view of their financial position as at 30 June 2007 and of their performance for the period ended on that date; and
  • $(ii)$ complying with Accounting Standards and Corporations Regulations 2001; and
• $(b)$ there are reasonable grounds to believe that ING Real Estate Community Living Management Trust will be able to pay its debts as and when they become due and payable.
• 1. This declaration has been made after receiving the declarations required to be made by the chief executive officer and chief financial officer to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2007.

On behalf of the directors

Hugh Thomson Director Sydney, 19 September 2007

ELLERNST& YOUNG

■ Ernst & Young Centre 680 George Street Sydney NSW 2000 Australia

Tel 61 2 9248 5555 Fax 61 2 9248 5959 DX Sydney Stock Exchange 10172

GPO Box 2646 Sydney NSW 2001

Independent auditor's report to the unitholders of ING Real Estate Community Living Management Trust

We have audited the accompanying financial report of ING Real Estate Community Living Management Trust (the Trust) which comprises the balance sheet as at 30 June 2007, and the income statement, statement of changes in unitholders interest and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors' declaration of the consolidated entity (the Group). The consolidated entity comprises of ING Real Estate Community Living Management Trust and the entities it controlled, at the year's end or from time to time during the financial year.

Directors' Responsibility for the Financial Report

The directors of ING Management Limited as Responsible Entity of the Trust are responsible for the preparation and fair presentation of the financial report in accordance with the Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1 (b), the directors also state that the financial report, comprising the consolidated financial statements and notes, complies with International Financial Reporting Standards.

Auditor's Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the entity's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit we have met the independence requirements of the Corporations Act 2001. We have given to the directors of the Responsible Entity a written Auditor's Independence Declaration, a copy of which is included in the directors' report. In addition to our audit of the financial report, we were engaged to undertake the services disclosed in the notes to the financial statements. The provision of these services has not impaired our independence.

Auditor's Opinion

In our opinion:

• $1.$ the financial report of ING Real Estate Community Living Management Trust is in accordance with:
• $(a)$ the Corporations Act 2001, including:
• $(i)$ giving a true and fair view of the financial position of ING Real Estate Community Living Management Trust and the consolidated entity at 30 June 2007 and of their performance for the year ended on that date; and
• $(ii)$ complying with Australian Accounting Standards (including the Australian Accounting Interpretations).
• $2.$ the consolidated financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 1(b).

Eimpt Jours

Ernst & Young

Douglas Bain Partner Sydney

19 September 2007