INGENIA COMMUNITIES GROUP — Annual Report 2009

Sep 28, 2009

ING Real Estate Community Living Group

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INVESTING
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30 JUNE 2009

ING Real Estate Community Living Group

86% 103 73 23 10,029 $0.40

ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

01 ING REAL ESTATE COMMUNITY LIVING GROUP 02 KEY FINANCIAL DATA 04 LETTER FROM MANAGEMENT 06 FUND UPDATE 12 PROPERTY PORTFOLIO 24 OUR PEOPLE 26 CORPORATE GOVERNANCE 35 FINANCIAL INFORMATION 60 INVESTOR RELATIONS 61 CORPORATE DIRECTORY

ING Real Estate Communit Livin Grou y g p

■ ING Real Estate Community Living Group was the fi rst seniors housing REIT listed on the Australian Securities Exchange in July 2004. It remains a signifi cant owner of seniors and student housing communities, with a diversifi ed portfolio of 103 properties across Australia, Canada, New Zealand and the United States. The Fund has partnered with experienced organisations for the operation ~~and development functions in offshore markets, but has the ability to fulf l~~ these functions here in Australia.

■ ING Real Estate Community Living Group is one of six property trusts managed by ING Real Estate Investment Management Australia (INGREIMA) on behalf of 60,000 investors. INGREIMA meets the needs of both institutional and retail investors through listed and unlisted Funds. The Funds operate in key real estate sectors including offi ce, industrial, retail, seniors housing, entertainment and healthcare property. INGREIMA’s investment philosophy holds that real estate is an integral component of a well-diversifi ed portfolio, encompassing a broad range of opportunities, each with unique risk and reward characteristics.

■ INGREIMA is part of the global ING Real Estate Investment Management platform. ~~With over 80 Funds, off ces in 22 countries and more than 1,500 employees~~ across the globe, ING Real Estate Investment Management is one of the world’s leading property investment managers.

www.ingrealestate.com.au 01

Key Financial Data

	30 JUNE	2009	2008
	Total distributions(centsper unit)	1.5	11.0
Tax deferred component		100%	85.5%
Net asset valueper unit		$0.40	$0.94
Market capitalisation		$22.1m	$198.5m
Total assets(look through)1		$1.0b	$1.2b
Gearingratio(debt to total assets)2		74.0%	57.0%
Units on issue		441m	441m
	Number of unitholders	5,732	6,214

1) Look through gearing includes the Fund’s proportionate share of total assets and total debt within its equity accounted investments. 2) Look through assets includes the Fund’s proportionate share of total assets within its equity accounted investments.

02 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

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www.ingrealestate.com.au 03

Letter from Management

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“ Management will continue to work towards a simplifi ed model for the Fund, with greater focus on our core competencies to lead ILF to a more sustainable future”.

Ian Muir

Chief Investment Offi cer, ING Real Estate Community Living Group

Dear Unitholder,

The volatility in the fi nancial markets has drastically altered the global fi nancial landscape. The global property industry reacted with record amount of balance sheet repairing capital raisings, of which 30% were contributed by the Australian Real Estate Investment Trusts. In Australia, the effects of the economic crisis were not as severe but rising unemployment, dampened consumer confi dence and a weaker residential market have placed much fi nancial pressure on all businesses. Along with other sectors, the retirement industry suffered as retirees delayed their move-in decisions to seniors housing.

ILF’s 2009 results were a refl ection of the challenges it faced. Net operating income per unit fell 45% to 5.9 cents in FY09. This decline was mainly attributed to the restructuring of income from the Australian Seniors rental portfolio. On 30 June 2008 the Income Guarantee over the Garden Village portfolio ended and the income reverted to the net operating profi t generated by the underlying occupancy of its retirement villages. Unfortunately the underlying occupancy and income of the Garden Village portfolio had declined throughout 2008 under external management. Therefore ILF negotiated an early surrender of this agreement and commenced internally managing the portfolio on 30 September 2008. At the same time ILF accepted the surrender of the Operating Leases over three of its villages in the portfolio and also assumed management of these villages. We are pleased to report that we have increased occupancy over all 34 rental villages from 65.8% to 70.9% during the fi rst nine months of our internalised operations.

The Fund also experienced lower revenue from its Australian Settlers DMF portfolio due to the economic downturn. The development revenues fell sharply as seniors delayed their move-in decisions into our villages, following declines in suburban house prices and loss of retirement savings. We also experienced a fall in DMF income as the value of the homes in our villages declined along with the wider residential market. Despite the soft market conditions, we were pleased to transact a total of 48 sales across the Settlers portfolio for the fi nancial year, which included the sale of 34 new homes. We are particularly proud of the performance of the Settlers Ridgewood Rise Village and have chosen to showcase this property in a Case Study in this year’s Annual Report.

The Fund’s international portfolios experienced mixed results during FY09. Whilst the US Seniors portfolio experienced a decline in occupancy, it achieved income targets due to rental growth and savings in operating costs. We fi nished FY09 with portfolio occupancy of 89.2% which was in line with our peers in the US. Our US Students portfolio underperformed with lower than expected occupancy due to the subdued leasing market and increases in operating costs. The Canadian Seniors and NZ Students portfolios both experienced consistent demand and performed in accordance with expectations.

04 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

ASSET DIVERSIFICATION BY VALUE (A$M)[ 1 ]

GEOGRAPHIC DIVERSIFICATION BY VALUE (A$M)[ 1]

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AUSTRALIAN DMF 7.0% AUSTRALIAN RENTAL 15.6% CANADIAN SENIORS 10.4% US SENIORS 54.2% US STUDENTS 10.0% NZ STUDENTS 2.8%

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AUSTRALIA 22.6% CANADA 10.4% UNITED STATES 64.2% NEW ZEALAND 2.8%

Management refl ects on the achievements and setbacks from the operational results produced this past year and will continue to focus on the goals outlined in the Strategic Review. ILF has made good progress with some of its strategic initiatives. These include the exit of two capital intensive joint ventures (Oak Tree and CCV), the sale of two US Students assets, the successful refi nance of two maturing debt facilities in 2009 (with US and NZ lender), and the continued conservation of cashfl ow with reduction of nonessential capital expenditure and development activities.

Management acknowledges that the times ahead will continue to be challenging for the Fund. Uncertain market conditions and the limited availability of fi nance have affected the Fund’s ability to readily realise more asset sales and reduce gearing. As such, it is with regret that distributions will continue to be suspended until the Fund’s fi nancial certainty improves. To reiterate, the Fund’s immediate priority is the refi nance of its 2009 Australian main debt facility, which is critical for the Fund’s ongoing viability.

However, ILF still faces signifi cant challenges ahead. These include the pursuit of more asset sales, the need to strengthen balance sheet through debt repayments and most importantly, the refi nance of its 2009 Australian main debt facility.

Management will continue to work towards a simplifi ed model for the Fund, with greater focus on our core competencies to lead ILF to a more sustainable future. We would like to thank unitholders for their patience and support.

ILF remains exposed to risks associated with interest and foreign exchange movements due to its exposure to overseas markets and use of fi nancial derivatives. This is in spite of a signifi cant decrease in hedge liabilities brought on by the recent strengthening of the Australian Dollar.

Yours sincerely,

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IAN MUIR Chief Investment Offi cer ING Real Estate Community Living Group

1) ILF’S interest as at 30 June 2009.

www.ingrealestate.com.au 05

Fund Update

MARKET OVERVIEW – KEY INDUSTRY DRIVERS

Positive demographics supports the seniors housing sector outlook

The Australian Bureau of Statistics projects that the retirement aged population (persons aged 55+) will increase by 46% over the next 15 years, representing an additional 2.5 million people in this age group. In NSW alone, the population growth of 65+ will increase at twice the rate of the general population.[1] This demographic shift is attributed to the large number of post war baby boomers approaching retirement and increased life expectancy of the general population. The ageing population will not only infl uence future trends of housing and retirement options, they will also have signifi cant impact on future mix of services, employment and lifestyle opportunities.

Demand growth, supply shortage, sustainable occupancy

The economic downturn in the past year has hampered development in the seniors housing sector as tightened credit conditions and reduced resident demand have seen many companies curtail their development activities. This has been observed in both the US and Australia. In Australia, leading industry experts believe that the current conditions could create a chronic shortage of retirement housing, with more than 140,000 new dwellings (9,500 a year) needed in the next 15 years to cope with demand for retirement housing from the baby boomers generation.[2]

Given the projected ongoing demand, combined with the expected supply shortages, retirement living groups who continue to offer good quality housing at competitive prices will be well positioned to benefi t from this trend.

Impact of Seniors Income and Investments on retirement decisions

During the fi nancial crisis, superannuation funds sustained huge losses alongside other investment participants. This loss of wealth, combined with a weak housing market, forced many retirees to subsequently re-adjust their retirement plans and defer their move into a retirement village.

However, there are signs of an improvement in Seniors’ investments and income as median balance superannuation funds have increased 3.62% in the month of July, marking the fi fth successive monthly increase this year[ 4] . Most capital cities in Australia are showing signs of recovery in house prices[ 5] . Additionally, many Australian seniors will benefi t from the increase in the government pension from September 2009. ILF is also well positioned to benefi t with a combination of rental and DMF seniors accommodation options.

With increasing life expectancy in seniors, there is a growing demand for a continuum of care solution. Facilities which allow a resident to transition from Independent Living (IL) to Assisted Living (AL), or Memory Care (ALZ), where a higher level of care and additional services are offered, will continue to enjoy higher occupancies. These facilities extend a resident’s average stay in a community, and provide the operator with a stable rental income stream and a source of ancillary revenue. In the US, ILF owns a mix of IL, AL and ALZ units and has benefi ted from stabilised income and ancillary revenue streams in this portfolio.

Scale in a fragmented market

Despite continuing consolidation, the Australian seniors housing industry remains highly fragmented with over 670[ 3] owners and the majority (over 60%) of these operating one village only. Those market participants with scale are best positioned to remain competitive and grow their operations in response to market demand. With 34 rental villages across Australia, ILF is one of the largest owner/operators of rental villages leveraging its presence in the market.

1) Australian Bureau of Statistics Projections, Australia, 2006 to 2101, Cat 3222.0.

2) “Boomers to set off next boom”, Daily Telegraph, 19 August 2009.

3) Jones Lang LaSalle, National Summary Report, April 2008.

4) “Super funds mark fi ve months of gain”, Sydney Morning Herald, 24 August 2009.

5) “Australian residential market continues to record solid gains in July”, RP Data-Rismark Home Value Index, 31 August 2009.

06 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

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www.ingrealestate.com.au 07

Fund Update

PORTFOLIO OVERVIEW

Australian Seniors

Settlers Lifestyle

The Settlers brand continued to fl ourish in FY09 with good results achieved. Despite the weak residential markets, 34 new sales and 14 resales were achieved across the 4 villages in Western Australia and Queensland. Ridgewood Rise was an outstanding performer as it accounted for 69% of the total portfolio sales in FY09. Proactive marketing that generated further brand awareness and the appropriate use of market adjusted pricing strategies allowed the portfolio to compete effectively in these tough times. Furthermore, a successful resident referral program led to 50% of the new sales completed. This demonstrates the popularity of the Settlers villages and the high level of resident satisfaction that the team has cultivated since ILF acquired the portfolio in April 2007.

With continued operating effi ciencies, we are confi dent that Settlers will provide a good platform for better performance when the market recovers.

Garden Villages

The Garden Villages portfolio completed its rebranding and transition to in-house management in October 2008. To date, the experienced management team has successfully implemented renewed marketing efforts to better position the villages in the respective markets. Resident satisfaction is at an all time high, with resident referrals up from 1% to 10% since ILF internalised the operations. This has contributed to an occupancy rise of circa 6% in the last nine months. Although we did incur higher than expected marketing costs and one off set-up costs in FY09, it was necessary for the portfolio to target higher occupancy and scale going forward. The recent increase in government pension in September 2009 will aid tenant demand and have a positive impact on the portfolio’s rental growth.

Canadian Seniors

The Fund’s Regency Long Term Care (LTC) portfolio delivered another year of stable occupancy at 99% in FY09. Despite the effects of the global fi nancial crisis on the Canadian economy in the past year, the performance of this needs-driven asset class continues to be assisted by the on-going support of the Ministry of Health (who tightly regulates the sector and funds earnings of up to 100% for properties with occupancies of 97% or greater) and the ageing population in Canada.

US Seniors

The US Seniors portfolio was impacted by the global fi nancial crisis with many families suffering loss of income and savings, forcing them to withdraw their parents from seniors housing. Others were forced to defer their move into seniors housing until their fi nancial position improves. As a consequence, the Fund’s US Seniors portfolio ended the 2009 fi nancial year with a weighted average occupancy of 89.2% in the last quarter, compared to 92.6% in the fi nal quarter of June 2008. This drop in occupancy was in line with many of its industry peers. However, on a positive note, the portfolio achieved a rise in revenue per unit in FY09, with 23 out of 27 communities experiencing rental rate growth. Management is implementing cost reduction initiatives to mitigate the lower occupancies and improve income.

US Students

The Fund’s US Students portfolio suffered similarly in FY09, with a weaker average occupancy of 88% as a consequence of the depressed US economy. Operating costs continued to be high with a signifi cant amount of repair and maintenance incurred during the year. Pre-leasing for the new school year remains weaker than previous years, as our Connecticut assets face increased competition from University of Connecticut’s on-campus offerings, and our Florida assets are challenged by lower university enrolments due to government funding cut-backs and fi nancial diffi culties.

As part of ILF’s strategic review, this underperforming portfolio has been identifi ed as a non-core asset for the Fund. Two Virginia assets were sold in February 2009, with the Connecticut and Florida assets currently marketed for sale.

NZ Students

The NZ Student portfolio enjoyed a steady occupancy of 99% during the 2008/9 academic year. With four renovated fl oors completed in December 2008, uStay hotel apartments commenced trading and achieved a reasonable outcome for its fi rst summer period. Capital expenditure was spent during the year on value added initiatives such as the two ground fl oor retail tenancies and billboard leasing opportunities.

Going forward, pre-leasing for 2010 is expected to be slower due to the tough economic environment. This portfolio has been positioned for sale.

08 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

PERFORMANCE

The Fund’s distributable income suffered a 43.8% decline from A$46.6m in the previous corresponding year to A$26.2m. This deterioration is primarily attributable to:

• The transition of the Australian Seniors rental portfolio from a master lease and an income guarantee to direct occupancy driven rental income

• The deferral of the development pipeline in the Settlers DMF portfolio and limited growth in Settlers home prices affecting the overall DMF income

The ongoing underperformance of the US Student portfolio due to occupancy pressure and signifi cant increases in operating costs, also adversely impacted the Fund’s performance.

The Fund distributed 1.5 cents per unit in the September quarter of FY09 and suspended further distributions in December 2008 in order to reduce gearing levels and stay within loan covenants.

CAPITAL MANAGEMENT

As at 30 June 2009, the Fund had total borrowings of A$746.1m compared to A$706m at 30 June 2008. The increase in debt is attributable to the movement in foreign currency exchange rates with actual borrowings denominated in the US, Canada and Australia all decreasing.

Despite debt repayments, look through gearing (debt to assets) rose from 57% at 30 June 2008 to 74% as at 30 June 2009 due to negative asset revaluations across the Fund.

ILF has refi nanced two of its short term loan facilities. In June 2009, it entered into a refi nance agreement with its US lender and repaid US$7.4m, with the remainder to be repaid in equal instalments by June 2010. In August, ILF refi nanced its existing A$15.0m NZ facility for an interest only two-year term expiring in August 2011. The Fund has commenced discussions with its Australian lender to refi nance its main debt facility of A$132.5m which matures in December 2009. Notwithstanding the importance of the refi nance, the majority of ILF’s debt exposure remains long dated with 76% having a maturity of more than 5 years.

Interest Rate and Foreign Exchange Hedging

ILF’s exposure to interest rate movements is managed through a combination of fi xed rate loans and interest rate derivatives. As a result, interest on 97% of the Funds borrowings is fi xed for an average term of 9 years.

The Fund has derivatives in place to hedge its foreign net assets and income from fl uctuations in exchange rates. As at 30 June 2009, the derivatives represented a mark to market net liability of $28.7m. To the extent that the Fund’s foreign income and asset values have declined, the Fund will seek to close out its income and capital hedge derivatives.

ILF STRATEGIC REVIEW

In December 2008, Management conducted a wholeof-business Strategic Review for the Fund. Key priorities highlighted were:

• Improve Fund’s cashfl ow with exit of capital intensive joint ventures (JVs) and deferral of development projects

• Strengthen balance sheet through asset sales and debt refi nancing

• Greater focus on asset management

• Simplify Fund’s structure with exit of non-core portfolios and JVs

As at 30 June 2009, Management is pleased to update the following:

• Exit of two capital intensive Australian JVs (Oak tree and CCV) and relieving the Fund from short-term maturing debts associated with these JVs

• Deferral of development projects such as Settlers Ridgewood Stage 8 until existing stock is depleted

• Completed sale of two US student assets and a small uneconomic village, a development site and three manager’s units in Australia

• Successful refi nance of two short-term debts maturing in 2009

• Garden Villages portfolio has improved occupancy and Settlers has achieved reasonably strong sales in a weak residential market in FY09

www.ingrealestate.com.au 09

Fund Update

Case Study

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10 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

Focus on: Settlers Ridgewood Rise, Western Australia

Ridgewood Rise is one of four lifestyle retirement villages operated under the Settlers Lifestyle portfolio.

Since ILF’s acquisition of the portfolio in April 2007, Ridgewood Rise has consistently enjoyed above industry benchmark sales rates. In the 12 months to 30 June 2009, 30 new home sales and three resales were completed grossing $12m in revenue. Industry consensus confi rms this is an outstanding result particularly in a weak Western Australian (WA) residential market.

This outstanding result can be attributed to the following factors:

■ LOCATION, LOCATION, LOCATION

Ridgewood Rise is strategically located in a residential growth corridor, approximately 40 minutes north of Perth in WA. It is only 10 minutes drive from pristine beaches, large tracts of unspoilt bushland, State forest, market gardens and modern shopping facilities.

Ridgewood Rise forms part of the City of Wanneroo which is one of the fastest growing Local Government Areas in Australia, growing 7% in 2007/2008. It has a current population of circa 134,847. House prices and sales in the general area have remained relatively steady under the $500k threshold over the past 12 months.

Ridgewood Rise is also fortunate to be located in a market with limited direct competition.

■ NEW RESORT STYLE ENVIRONMENT

The village commenced construction on the fi rst stage of its 240 homes in late 2003. In September 2009, the seventh of eight stages of development will be handed over bringing the total of completed homes to 218. As at 30 June 2009 there were 182 occupied homes and a further 36 were awaiting sale.

■ GREAT HOMES AT GREAT PRICES

Ridgewood Rise offers quality two and three bedroom homes with single or double garages in seven stylish designs. They are an affordable luxury selling on an average price of $399k in FY09. This closely mirrors the local median house price and is an increase of 21% on FY08 average sale prices.

■ SOUND MANAGEMENT LEADING TO HIGH RESIDENT SATISFACTION

In April 2009, a resident survey was conducted across the four Settlers villages. This survey closely mirrored one carried out shortly after ILF acquired the villages in 2007. The overall level of resident satisfaction, ranging from a high to a very high level of satisfaction increased from 19% to 66% at Ridgewood Rise in under two years.

This can be attributed to the efforts of the Settlers Management team who have implemented many operational improvements at all four Settlers villages. The increase in overall resident satisfaction has led to 10 new settlements at Ridgewood Rise in FY09 as a direct result of internal resident referrals.

With the existing interest in our development pipeline and the strength of the Settlers brand within the WA market, Management is confi dent that Ridgewood Rise will continue to excel above industry benchmark levels, and is strategically placed to continue to be a successful and well sought after village into the future.

The village is serviced by an array of quality modern resort style facilities including bowling green, indoor swimming pool, gymnasium, club house with café, restaurant, games room and outdoor bar-be-que facilities and gardens. Spacious streetscapes, beautiful landscaped gardens and attractive homes further complement the site.

The fi nal and premium eighth stage of development has been temporarily deferred to allow for the existing supply of stock to be absorbed. To date we have 18 expressions of interest out of 22 undeveloped lots, 21 of which comprise stage eight.

www.ingrealestate.com.au 11

Property Portfolio

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12 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

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www.ingrealestate.com.au 13

Property Portfolio

Australian Seniors

In Australia, ILF has an interest in 38 seniors housing communities. As at 30 June 2009, this translated into 2,490 existing units and development potential for a further 304 units.

By value, approximately 69% of the Australian portfolio is based on the rental model. The remaining assets are invested in the Deferred Management Fee (DMF) model, providing income streams sourced from development profi t and deferred management fees.

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NT
ROCKHAMPTON
GLADSTONE
AUSTRALIA QLD BUNDABERG
WA
BRISBANE
SA
COFFS HARBOUR
NSW
PERTH
BUNBURY ALBURY SYDNEY
ALBANY ADELAIDE VIC CANBERRA
MELBOURNE
SETTLERS
LAUNCESTON
GARDEN VILLAGES TAS
HOBART
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14 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

	PORTFOLIO SETTLERS GARDEN VILLAGES BOOK VALUE AS AT 30 JUNE 2009(A$M) 68.1 152.9 OWNERSHIP INTEREST % 100% 100% NUMBER OF PROPERTIES 4 41 COMPLETED UNITS 644 1,846 PIPELINE UNITS 92 212 % OF TOTAL FUND(ASSETS) 7.0% 15.6%

www.ingrealestate.com.au 15

Property Portfolio

Canadian Seniors

The Fund owns a 50% interest in the Regency portfolio, consisting of eight Class A Long Term Care (LTC) facilities. The assets are located in the Greater Toronto Area of Ontario, Canada and represents the Fund’s diversifi cation into the Canadian seniors housing market and the LTC asset class.

All assets were constructed in 2001 or later and are located in areas with strong underlying demand for LTC facilities. The portfolio has a strong track record of high occupancy and waitlists.

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TORONTO
OSHAWA
MARKHAM
7 8
MISSISSAGUA 3 4 TORONTO CANADA
KITCHENER OAKVILLE 2
5 BURLINGTON 1
ANCASTER 6
ONTARIO
1 THE BRANT CENTRE, BURLINGTON
2 THE WATERFORD, OAKVILLE
3 TORONTO
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THE BRANT CENTRE, BURLINGTON THE WATERFORD, OAKVILLE THE WENLEIGH, MISSISSAUGA THE WESTBURY, TORONTO THE WESTMOUNT, KITCHENER THE WILLOWGROVE, ANCASTER THE WOODHAVEN, MARKHAM THE WYNFIELD, OSHAWA

16 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

PORTFOLIO	REGENCY
BOOK VALUE AS AT 30 JUNE 2009(A$M)1	101.7
OWNERSHIP INTEREST %	50%
NUMBER OF PROPERTIES	8
COMPLETED UNITS	1,179
PIPELINE UNITS	400
% OF TOTAL FUND(ASSETS)	10.4%

1) ILF’s ownership interest.

www.ingrealestate.com.au 17

Property Portfolio

US Seniors

The US Seniors portfolio represents 54% of the Fund’s assets, comprising 27 properties. The assets are primarily located in areas where there is solid demand for seniors housing. ILF has a 49% interest in 26 assets, which were acquired in conjunction with Chartwell REIT, a leading seniors housing REIT based in Ontario, Canada.

A number of internal growth opportunities are embedded within the portfolio, including a 98-unit extension in Richmond, Virginia which was completed in May 2009.

The properties are managed by two operators; Horizon Bay Seniors Communities (Horizon Bay), ranked in the Top 20 seniors accommodation managers by the American Seniors Housing Association, and Ultimate Care, managers of our premium Bristal brand in Long Island. Both of these operators continue to manage our portfolios effi ciently in challenging times.

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MICHIGAN
UNITED STATES RHODE ISLAND
OHIO NEW YORK
COLORADO OKLAHOMA TENNESSEE
VIRGINIA
ALABAMA
TEXAS
ASPEN
CYPRESS FLORIDA
MERIDIAN
BRISTAL
LAKE WORTH
POCASSET
TROWBRIDGE
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18 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

					LAKE
PORTFOLIO	ASPEN	BRISTAL 2	CYPRESS	MERIDIAN	WORTH	POCASSET	TROWBRIDGE
BOOK VALUE AS AT 30 JUNE 2009(A$M) 1	114.6	150.1	80.8	152.8	7.2	13.9	10.5
OWNERSHIP INTEREST	49%	49%	49%	49%	49%	49%	49%
NUMBER OF PROPERTIES	8	6	4	6	1	1	1
COMPLETED UNITS	1,461	760	818	1,042	168	169	300
PIPELINE UNITS	0	0	0	415	0	0	0
% OF TOTAL FUND(ASSETS)	11.7%	15.4%	8.3%	15.6%	0.7%	1.4%	1.1%

1) ILF’s ownership interest. 2) Includes 100% interest in Lynbrook.

www.ingrealestate.com.au 19

Property Portfolio

US Students

The US Student portfolio comprises 20 student accommodation assets in Connecticut and Florida. These assets are located in close proximity to University of Connecticut (18 assets), University of South Florida and Florida State University (2 assets).

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ELLINGTON
14
91
84 18 16 1
15
44 124 4 MANCHESTER 13115 193 87 MANSFIELD
ANDOVER
2 HARTFORD 10 2
6 3
17 91
HEBRON
COLCHESTER
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ASHFORD HILLS APARTMENTS CEDAR CREEK APARTMENTS CLUBHOUSE APARTMENTS 34 FAIRVIEW STREET

HUNTING LODGE APARTMENTS KELLY GARDENS APARTMENTS KNOLLWOOD APARTMENTS MAPLEWOOD APARTMENTS MILLBROOK APARTMENTS OAKRIDGE APARTMENTS OAKWOOD APARTMENTS 45 OAKWOOD AVENUE

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CONNECTICUT
UNITED STATES
FLORIDA
2 0 TALLAHASSEE
19
TAMPA
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• 14 PERRY HILLS ESTATES

RENWOOD APARTMENTS

RIDGEVIEW HEIGHTS

• SPRINGWOOD APARTMENTS

WILLINGTON OAKS APARTMENTS

• CAMPUS CLUB

THE PRESERVE UNIVERSITY OF CONNECTICUT

EASTERN CONNECTICUT STATE UNIVERSITY

CENTRAL CONNECTICUT STATE UNIVERSITY UNIVERSITY OF HARTFORD, UCONN LAW SCHOOL ST JOSEPH’S COLLEGE, TRINITY COLLEGE

ORCHARD ACRES APARTMENTS

20 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

	PORTFOLIO US STUDENTS BOOK VALUE AS AT 30 JUNE 2009(A$M) 98.0 OWNERSHIP INTEREST % 100% NUMBER OF PROPERTIES 20 NUMBER OF UNITS 1,283 % OF TOTAL FUND(ASSETS) 10.0%

www.ingrealestate.com.au 21

Property Portfolio

NZ Students

The New Zealand student housing portfolio comprises three properties located in the Central Business District of Wellington. These properties provide accommodation for students of the Victoria University of Wellington and have ground fl oor retail tenancies. The three properties accommodate 550 students and are operated by Campus Living Villages, specialist student accommodation managers.

In the past year, four fl oors of Cumberland House were renovated to hotel standard and the portfolio has been rebranded to ‘ustay’ to attract further interest over the summer holiday periods. The portfolio maintains a solid occupancy of 99% during the 2009 academic year.

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WILTON
1
KARORI 4
2
3 CBD
MOUNT COOK
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EDUCATION HOUSE, 178 WILLIS STREET MCKENZIE APARTMENTS, 222-232 WILLIS STREET CUMBERLAND HOUSE, 237-243 WILLIS STREET VICTORIA UNIVERSITY OF WELLINGTON

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WELLINGTON
NEW
ZEALAND
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22 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

PORTFOLIO	NZ STUDENTS
BOOK VALUE AS AT 30 JUNE 2009(A$M) 1	27.3
OWNERSHIP INTEREST %	90%
NUMBER OF PROPERTIES	3
NUMBER OF UNITS	359
% OF TOTAL FUND(ASSETS)	2.8%

1) ILF’s ownership interest.

www.ingrealestate.com.au 23

Our People

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1 2 3
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4 5 6
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1 Ian Muir

Ian has 31 years experience in the property industry, including valuations, consultancy, sales, acquisitions, due diligence and funds management. Ian has been with ING Real Estate for 11 years. Ian is a Fellow of the Australian Property Institute and is a Fellow of the Financial Services Institute of Australasia. He is a registered valuer in Queensland and New South Wales. Ian holds a Diploma of Business (Real Estate Valuation) and a Graduate Diploma in Applied Finance and Investment.

2 Michelle Calcarao

Financial Controller

Michelle joined ING Real Estate in September 2008. She has over 14 years experience across chartered accounting, funds management and fi nancial services sectors. Michelle holds a Bachelor of Commerce in Accounting and is a member of the Institute of Chartered Accountants in Australia.

3 Lenny Chen

Marketing and Communications Manager

Lenny joined the team in August 2008 and brings a range of marketing and events experience from the hospitality and property sectors. Lenny holds a Bachelor of Science (Hospitality Management) from Cornell University in the United States and is a member of the Property Council of Australia.

4 Denise Cosmetatos

Senior Asset Manager

Denise is responsible for the Fund’s Canadian portfolio. She has 14 years experience in fi nance and property funds management and has been with ING Real Estate since October 2001. She holds a Bachelor of Commerce, is a CPA and a Senior Associate of the Financial Services Institute of Australasia. Denise has expertise in fi nancial analysis, tax, accounting, negotiating acquisitions and undertaking due diligence.

5 Sancha Cromie

Senior Asset Manager

Sancha is responsible for the Fund’s US portfolios having joined ING Real Estate in October 2006. She has 16 years experience in various property and REIT industries incorporating roles such as property and asset management, consulting, and due diligence. Sancha has also worked in Canada for 8 years. She holds a Bachelor of Business and has recently commenced a Master of Applied Finance.

6 Alex Jelf

Development Manager

Alex has nine years of experience within the property industry with expertise in feasibilities, due diligence, acquisitions, valuations, approvals and delivery of projects within the retail, industrial and retirement sectors. Alex joined the team in July 2007 and holds a Bachelor of Property Economics from the Queensland University of Technology (QUT).

24 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

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7 Karen Landy

Senior Fund Analyst

Karen has 18 years experience in the fi nancial services and funds management sectors. She joined ING Real Estate in February 2008, and has expertise in fi nancial analysis, debt and capital management. Karen is a Chartered Accountant with a Bachelor of Economics and Masters in Applied Finance.

8 Nick Martinis

Senior Asset Manager

Nick is responsible for the Fund’s NZ Students portfolio. Nick joined ING Real Estate in November 2006 and has nine years experience in the property industry working on all stages of property development, corporate property consultancy and asset and property management. Nick has a Bachelor of Commerce (Property Economics) Degree, a Diploma of Business Studies (Finance & Accounting), is a member of the Australian Property Institute and is a Registered Valuer in NSW.

9 Mike McKechnie

Senior Asset Manager

Mike is responsible for the Fund’s Australian Seniors Garden Villages portfolio. He has been involved in the Australian Seniors rental market since July 2003. Mike’s qualifi cations include a Bachelor of Commerce, Chartered Accountant and a Masters in Business Administration.

10 Susanne Newhouse

Finance Manager

Susanne joined ING Real Estate in December 2008 having worked within the fi nancial services industry for the past three years, prior to this she worked for a chartered accounting practice. Her experience includes fi nancial and management accounting and tax. She is a Chartered Accountant, holds a Bachelor of Commerce and a Master of Applied Taxation.

11 Fiona Rinaldi

Senior Asset Manager

Fiona manages both the assets and operation of the Settlers Portfolio in Australia. She joined ING Real Estate in December 2005 and has nine years experience in the property industry working previously in the area of valuation, consultancy, feasibility analysis, due diligence and acquisitions predominantly in the retirement and health and aged care sectors. Fiona is an Associate member of the Australian Property Institute and has a Bachelor of Business, majoring in Property.

12 Robert Seymour

Acquisitions Manager

Robert has more than 22 years experience in the property industry including valuation, asset management, funds management, capital transactions and due diligence. Robert joined ING Real Estate in March 2007. Robert is a Registered Valuer in NSW and a Fellow of the Australian Property Institute. He holds a Bachelor of Business (Land Economy) from the University of Western Sydney.

www.ingrealestate.com.au 25

Corporate Governance

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DIRECTOR INFORMATION

1 Richard Colless AM

Independent Director and Chairman Appointed 30 May 2002

Richard is the Chairman of the ING Management Limited Board. He has considerable experience in funds management and property sectors. He sits on a number of public and private company, sporting and government boards.

2 Philip Clark AM

Independent Director, Chairman of the Audit Committee Appointed 21 February 2006

Acting most recently as Managing Partner and CEO of Minter Ellison, Philip has experience in a wide variety of sectors including: legal, funds management, property, and education. During his career Philip led the successful growth and development of Minter Ellison and Mallesons Stephen Jaques, Australia’s two largest law fi rms. Philip also sits on a number of public and private boards.

3 Michael Easson AM

Independent Director

Appointed 11 November 2004

Michael is co-founder and Executive Chairman of EG Property Group. Michael has a wealth of experience in high–level strategic consulting in both the private sector and government. Michael also sits on a number of public and private boards.

4 Philip Redmond

Independent Director

Appointed 17 August 2006

Philip has over 20 years experience in the real estate industry in Australia, including 12 years at UBS where he held the position of Managing Director – Head of Real Estate Australasia. Philip has played a leading role in the development of the listed property trust sector within Australia and has a comprehensive understanding of fi nancial markets.

5 Paul Scully

Independent Director, Chairman of the Board Compliance Committee Appointed 30 May 2002

Paul has over 30 years experience in investment management and many aspects of fi nancial services. Paul now maintains a portfolio of non-executive directorships and related activities, is a visiting lecturer at Macquarie University and provides a broad range of consulting services.

Hugh Thomson

Company Secretary Appointed 20 December 2002

Hugh is the Chief Executive Offi cer of ING Real Estate Investment Management Australia and is responsible for all property investment and funds management activities. Hugh has over 20 years experience and has been with the company since 1997, having previously held the role of Chief Financial Offi cer.

Hugh stepped down as Chief Executive Offi cer effective 1 September 2009.

Anna Wyke

Company Secretary Appointed 31 May 2002

Anna was the Company Secretary for ING Real Estate Investment Management Australia. Anna is a practising solicitor and has been with the company for over 10 years. Anna was responsible for the corporate governance functions as well as maintaining, promoting and instilling a high level of compliance awareness within the business.

Anna resigned as Company Secretary effective 19 August 2009.

26 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

This statement outlines the main corporate governance practices currently in place for ING Management Limited (IML), the Responsible Entity of the ING Real Estate Community Living Group (comprising ING Real Estate Community Living Fund (ILF Fund) and ING Real Estate Community Living Management Trust (ILF Trust)) (the Fund) and addresses the ASX Corporate Governance Council Corporate Governance Principles and Recommendations, 2nd edition and the extent of compliance with these recommendations. The Board of the Responsible Entity has followed all of the recommendations, except that it has not established a Nomination Committee or a Remuneration Committee or other recommendations related to disclosure of remuneration or executive performance, for the reasons set out in this Corporate Governance Statement. A checklist of compliance against the recommendations is available on the ING Real Estate website.

ING REAL ESTATE COMMUNITY LIVING GROUP AND ITS CONSTITUTIONS

The corporate governance structure that has been established by IML refl ects its role as the Responsible Entity of a listed property trust, which is different to the corporate governance structure adopted for a listed company. IML’s primary responsibility is to operate the Fund and perform functions conferred on it by the Fund Constitution, the ASX Listing Rules and Corporations Act 2001 (Cth) (the Law). Most importantly, IML must ensure it acts in the best interests of unitholders and ensure that the activities of the Fund are conducted in a proper and effi cient manner.

The ING Real Estate Community Living Group comprises two trusts, each with its own Constitutions.

Constitution for ING Real Estate Community Living Fund

The ING Real Estate Community Living Fund (ILF Fund) is governed by a Constitution dated 25 November 2003, as amended. The ILF Fund has been registered with the Australian Securities and Investments Commission (ASIC) as a managed investment scheme under Chapter 5C of the Corporations Act.

The following is a summary of the key features of the Constitution of the ILF Fund.

Responsible Entity

As the Responsible Entity of the ILF Fund, IML is responsible to unitholders for its operation and owes duties under Chapter 5C of the Corporations Act and also fi duciary duties as trustee of the ILF Fund. IML may retire as the Responsible Entity of the Fund if it complies with section 601FL of the Corporations Act, and must retire when required by law. Unitholders may remove IML by complying with the procedures set out in section 601FM of the Corporations Act.

Powers of the Responsible Entity

As the Responsible Entity, IML has all the powers in respect of the ILF Fund that it is possible under the law to confer on a trustee as though it were the absolute owner of the assets of the ILF Fund and acting in its personal capacity. IML may appoint a person, including an Affi liate of IML, as its delegate, attorney or agent to exercise its powers and perform its obligations. The Constitution allows IML during the lifetime of the ILF Fund to staple shares of a company to the ILF Fund’s units and to permit the stapling of ILF Fund’s units to units in ILF Trust.

Remuneration of the Responsible Entity

IML is entitled under the Constitution to receive fees for acting as the Responsible Entity of the ILF Fund and to be paid or reimbursed for certain expenses, out of the assets of the ILF Fund, incurred in the proper performance of its duties in relation to the ILF Fund.

Limitation on liability

Subject to the Corporations Act, the liability of the Responsible Entity to a unitholder or any person in respect of the ILF Fund is limited to IML’s ability to be indemnifi ed from the assets of the ILF Fund.

www.ingrealestate.com.au 27

Corporate Governance

Termination of the ILF Fund

The ILF Fund terminates on the earliest of the:

• the date unitholders fi x as a termination date, or the date on which unitholders resolve to terminate the ILF Fund, by a resolution of unitholders entitled to vote on a poll by at least 50% of the total votes that may be cast;

• the date determined by the Responsible Entity in a notice given to unitholders as the date on which the ILF Fund is to be terminated; and

• the date on which the ILF Fund is terminated in accordance with the Constitution, an order of court or by Law.

The benefi cial interest in the ILF Fund is divided into units which may be fully or partly paid units.

Issue of units

The power to issue units in the ILF Fund is governed by the provisions of the Corporations Act, the Constitution and the ASX Listing Rules.

Redemption

The Constitution does not provide for the redemption of units while the Fund is listed.

Transfer of units

Subject only to restrictions imposed by Law, the Constitution and the ASX Listing Rules, units in the ILF Fund may be transferred.

Stapling

The Constitution provides for the stapling of a unit to a share in a company or a unit in a trust.

Distribution of income

The distributable income of the ILF Fund is determined by the Responsible Entity and allocated to unitholders in accordance with the Constitution.

Constitution for ING Real Estate Community Living Management Trust

The ING Real Estate Community Living Management Trust (ILF Trust) is governed by a Constitution dated 24 November 2006, as amended. The rights and obligations of unitholders and IML are governed by the Constitution and the Corporations Act, the Constitution has been lodged with ASIC and a copy may be obtained from IML upon request.

The terms of the ILF Trust are substantially the same as the terms of the Constitution of the ILF Fund.

COMPLIANCE PLAN AND COMPLIANCE COMMITTEE

Under the Corporations Act, the Responsible Entity is required to register a Compliance Plan with ASIC. The Compliance Plan for the Fund describes the procedures that the Responsible Entity will apply in operating the Fund to ensure compliance with the Corporations Act and the Constitution.

A Board Compliance Committee has been established and is responsible for monitoring IML’s compliance with the Compliance Plan and report on its fi ndings to the Board. Further details are provided in 7.2.

ROLE OF BOARD AND MANAGEMENT

1.1 Role of the Board

ING Management Limited (IML) is wholly owned by ING Real Estate. IML has a board charter which details the functions and responsibilities of the Board and Management. A copy of the Board Charter is available on the ING Real Estate website. IML’s activities are confi ned almost exclusively to managing real estate based investment funds in its role as Responsible Entity.

ING Real Estate is responsible for providing the resources, including experienced and skilled staff, to enable IML to appropriately and adequately conduct its funds management operations and to administer its affairs.

Meeting of unitholders

Every unitholder is entitled to receive notices of unitholder meetings, to attend those meetings and subject to certain restrictions on voting by interested parties, to vote at those meetings.

Amendments

Subject to the Corporations Act, the Responsible Entity may by deed amend the Constitution.

28 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

The Board of IML oversees these activities and provides strategic guidance.

Key responsibilities of the Board include:

• assisting ING Real Estate in determining the composition and structure of the IML Board;

• reviewing the performance of Management, including the CEO and the adequacy of resources allocated by ING Real Estate to IML;

• providing input into and fi nal approval of Management’s strategy and performance objectives for the Fund;

• reviewing and if appropriate approving signifi cant transactions;

• overseeing the administration of IML, including risk and compliance monitoring functions;

• reviewing the appropriateness of Management’s risk management processes;

• reviewing IML’s Code of Conduct, unitholder communications procedures and Continuous Disclosure Policy annually; and

• establishing various formal committees to assist in discharging its responsibilities, e.g. Compliance and Audit Committees.

1.2 Role of Management

Management is responsible for all matters not specifi cally the responsibility of the Board and is responsible for implementing the strategy and performance objectives of the Fund and the day to day operations of the Fund.

BOARD STRUCTURE

2.1 Structure of the Board

The Constitution of IML provides for a minimum of three and not more than 12 Directors. As at 30 June 2009, the Board comprised of fi ve independent directors.

Directors’ appointment and selection

The Board’s policy and procedure for selection and appointment of directors is included in the Board Charter. Directors are appointed by the sole shareholder ING Real Estate, with the aim of ensuring the Board has:

• an appropriate range of skills, experience and expertise;

• a proper understanding of, and competence to deal with current and emerging issues in real estate and the funds management industry;

• the ability to effectively review and challenge the performance of Management and exercise independent judgement; and

The Board assists ING Real Estate in the process of appointing new directors by recommending and reviewing candidates when vacancies arise and by performing an annual review that covers, amongst other matters, the adequacy of the Board’s composition and the independence of existing directors.

Directors are appointed pursuant to formal letters of appointment setting out the key terms and conditions of the appointment to ensure they understand their key responsibilities and the Board’s expectations. The tenure of each director is determined by ING Real Estate, and for all directors is until 31 December 2009.

BOARD MEETINGS

There are 11 scheduled Board meetings each year.

The agenda for each meeting is prepared by the Company Secretary in conjunction with the Chairman and CEO.

2.2 Director Independence

As at 30 June 2009, all the directors of the IML Board were independent.

IML has adopted the following procedures for assessing the independence of each director, with the aim of ensuring that the majority of the ING Management Limited Board remains independent.

Test for independence

The procedures in place for determining independence is whether the director is independent of Management and free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of their unfettered and independent judgement.

Materiality

The IML Board has determined that where an assessment of materiality is required to determine whether a director is independent, this will be determined on a case by case basis taking into account all of the facts available at the time.

Annual performance reviews

The IML Board assesses directors’ independence annually in conjunction with the Board’s annual performance evaluation and a review of their register of interests and directorships.

Disclosure of directors who are independent

Those directors who are assessed to be independent are identifi ed in the Corporate Governance section of the Annual Report. In the event, an existing director is assessed to no longer be independent, IML on behalf of the Fund will disclose this fact to the ASX as soon as practicable after the assessment has been made.

• a majority of independent directors.

www.ingrealestate.com.au 29

Corporate Governance

Independent decision making

Directors of the Board have individually and collectively the right to seek independent professional advice on matters relating to the Fund, including matters relating to the discharge of its obligations under a Fund’s Constitution and the Law, the cost of which may be borne by IML, or where permitted, the Fund.

Directors must notify the Company Secretary if they are seeking independent professional advice, and as soon as possible provide an estimate of the likely cost.

Confl icts of Interest and Directors’ Standing Notice Register Directors owe a duty to avoid any confl icts of interest that may arise. A confl ict may arise through a personal interest or a duty to some third party.

Therefore, if faced with a possible confl ict of interest i.e. a material personal interest in a matter, the director should make full disclosure to the directors meeting as soon as possible or contact the Company Secretary.

Register of interests are maintained for each director and all directors are required to disclose any personal interests. The Board then considers the Register provided and decides on a collective basis whether the personal interest is material or not i.e. whether in the Board’s opinion a reasonable disinterested party would be considered likely to take it into account in exercising judgement or making a decision. This is noted on the Directors’ Standing Notice Register and forms a permanent agenda item at all Board meetings.

In the event a confl ict or potential confl ict situation exists, the confl icted director is absent from the meeting whilst the Board discusses the matter and may not vote on the matter, unless the other directors, who do not have a material personal interest in the matter are satisfi ed that the interest should not disqualify the director from voting or being present.

2.3 Role of the Chair

The role of the Chairman and CEO are not exercised by the same individual.

ING Real Estate has appointed an independent Chairman, Mr Richard Colless. In selecting the Chairman, due consideration has been given to their expertise and skills to ensure they complement those of the existing Board as well as reputation and standing in the market.

2.4 Board Nomination and Remuneration Committee

Nomination Committee

The existing size of the Board and the frequency of Board meetings are such that the Board’s role in assisting in the appointment process can be undertaken in an effi cient manner by the Board itself, without the need for a separate Nomination Committee.

Remuneration Committee

The fees of the directors of IML and the remuneration of its staff are determined and paid by ING Real Estate, and not by the Fund itself. For this reason no Remuneration Committee has been established.

The remuneration of IML in its capacity as Responsible Entity during the year was regulated by the Fund’s Constitution. The Company has a right to be paid a fee or reimbursed an expense from the Fund in relation to the proper performance of its duties.

Executive performance and remuneration

As stated above, ING Real Estate, and not the Fund itself, is responsible for remuneration and performance of any staff. However, the Board is responsible for reviewing the adequacy of the resources, including remuneration and incentive structures for key executives, and for making any recommendations to ING Real Estate it feels necessary. This process has been followed during the year.

Associates of IML are entitled to fees for the provision of property management, development and project management services to the Fund’s properties. Formal arms length agreements are in place to regulate these arrangements and these fees are based on normal commercial terms. The fees paid for these services are set out in the Financial Report of the Fund.

2.5 Board education and performance evaluation

IML undertakes a review of the Board’s performance annually, covering amongst other matters, the adequacy of the Board’s composition and the independence of existing directors. The last performance evaluation was undertaken in the fi rst quarter of 2009.

30 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

The Board’s performance evaluation is conducted by way of a questionnaire that assesses:

• the performance of the Board and each of its committees against the requirements of their respective charters;

• the individual performance of the Chairman and each director; and

• the procedures in place for dealing with the Responsible Entity’s continuous disclosure obligations under the Corporations Act and the ASX Listing Rules, as well as compliance and corporate governance procedures.

The questionnaire is completed by each director and the responses collated. The results of the questionnaire are provided to all directors for discussion at the Board meetings.

Board education & strategy days

Directors have the opportunity to visit the Fund’s properties and to meet with Management to gain a better understanding of the Fund’s operations. The Board also conducts Fund Strategy days to inform directors about current issues concerning the Fund and corporate strategies.

PROMOTING RESPONSIBLE AND ETHICAL BEHAVIOUR

3.1 Code of Conduct

ING Real Estate has established a Code of Conduct which outlines acceptable standards of behaviour and attitudes expected from staff to promote and maintain the confi dence and trust of all those dealing with ING Real Estate. The Code of Conduct covers amongst other matters:

■ Insider trading

■ Personal conduct

• Dealing with confl ict of interests

■ Whistleblower procedures ■ Privacy

■ Environment

In accordance with the Whistleblower Procedures set out in the ING Real Estate Whistleblower Policy, staff are expected to report any serious issues and these will be investigated fairly. Individuals who report serious issues in good faith are appropriately protected. A copy of IML’s Code of Conduct is available on the ING Real Estate website.

3.2 Personal Trading Policy

A personal trading policy is in place setting out the approval procedures to be followed by all ING Real Estate staff members and directors wishing to buy or sell units in the Fund and other listed real estate securities in order to satisfy the relevant legal requirements and protect the reputation and integrity of ING Real Estate.

Any director wishing to purchase or sell units in ING Real Estate Listed Funds is required to notify the Board’s Compliance Committee Chairman (or in his absence, the Chairman of the Board) prior to the trade taking place.

At the commencement of employment each staff member/ director must sign a declaration that he/she will abide by the Policy.

An extract of the personal trading policy for directors and staff is available on the ING Real Estate website in the Code of Conduct section.

FINANCIAL REPORTING

4.1 Review and authorisation

In accordance with section 295A of the Corporations Act, the CEO and CFO have declared in writing to the Board that the fi nancial records of the Fund for the fi nancial year have been properly maintained in accordance with section 286 of the Corporations Act and the Fund’s fi nancial reports present a true and fair view of the Fund’s fi nancial position and performance, and are in accordance with relevant accounting standards.

4.2 Board Audit Committee and Charter

The Audit Committee operates under a Board approved Charter which is available in the corporate governance section of the ING Real Estate website.

The purpose of the Board Audit Committee is to verify and safeguard the integrity of the Fund’s fi nancial reporting, oversee the independence of the external auditors and maintain the internal control framework.

The Committee consists of three members, all of which are non-executive directors, with an independent Chairman, who is not the Chairman of the Board. The membership includes at least one member who has fi nancial expertise, and some members who have an understanding of the property funds management industry.

As at 30 June 2009, the members of the Audit Committee comprised Philip Clark (Chairman), Richard Colless and Michael Easson. Nine meetings were held during the year.

www.ingrealestate.com.au 31

Corporate Governance

4.3 External audit fi rm guidelines

The Board Audit Committee is responsible for recommending the initial appointment of the external auditor, the appointment of a new external auditor when any vacancy arises and removal of external auditors. The Audit Committee is also responsible for maintaining procedures for the rotation of the external audit engagement partner.

Under the Audit Committee Charter, the external audit engagement partner must be rotated every fi ve years and the statutory Fund audit must be tendered at least every seven years.

The Fund’s statutory and compliance plan audit was put out to tender in 2007 and following careful consideration of all the proposals and recommendations from the Audit Sub Committee, the Board appointed Ernst & Young as the Fund’s Financial & Compliance Plan Auditor for the year ended 30 June 2008. The next tender process will take place in 2012.

CONTINUOUS DISCLOSURE

5.1 Continuous disclosure

As the Responsible Entity of listed funds, IML must comply with the continuous disclosure provisions of the ASX Listing Rules.

Broadly, IML is required to immediately notify the ASX of any information concerning the Fund of which it is or becomes aware of, which a reasonable person would expect to have a material effect on the price or value of units in the Fund, subject to certain limited exceptions, including but not limited to confi dential information.

IML has established a written policy document that deals with:

■ information that needs to be disclosed to the market;

■ responsibility for responding to market rumours or speculation;

■ communications with analysts and major investors; and

■ procedures for dealing with the media.

The Company Secretary has been appointed as the person responsible for communications with the ASX. This person is also responsible for ensuring compliance with the continuous disclosure requirements in the ASX Listing Rules and overseeing and coordinating information disclosure to the ASX, analysts, brokers, unitholders, media and the public.

INVESTOR COMMUNICATIONS

6.1 Unitholder meetings

IML may convene a unitholder meeting during the year at a time and place that is considered convenient for the majority of its investors.

The Fund will place a copy of the most recent notice of meeting and any accompanying explanatory memorandum on its website, when released to the ASX, under the ASX Announcements section.

The Chairman at the unitholder meeting ensures that a reasonable opportunity exists for unitholders to ask questions relating to the operations of the Fund and if applicable, the resolutions being voted on.

Unitholders are encouraged to attend all unitholder meetings.

Audit attendance at unitholder meetings

If the Responsible Entity convenes a unitholder meeting, the Company Secretary will request the external auditor or a qualifi ed representative of the auditor to attend the unitholder meeting and be available to answer any unitholder questions about the conduct of the audit, the auditor’s independence, accounting policies, the preparation and content of the auditor’s report.

6.2 Communication with unitholders

The ASX Corporate Governance guidelines state that listed entities must respect the rights of unitholders and facilitate the effective exercise of those rights.

This means the listed entity should have procedures in place for communicating with its unitholders, give them access to balanced and understandable information about the listed entity and make it easy for them to participate in unitholder meetings.

The Fund has procedures in place to ensure that all unitholders and other interested stakeholders have access to balanced, understandable and timely information concerning the operations of the Fund.

The Company Secretary, in conjunction with the Investor Services Manager and CEO, is primarily responsible for ensuring communications with unitholders are delivered in accordance with these procedures and the guidelines relating to continuous disclosure.

32 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

In addition to the formal requirements of half year and annual fi nancial statements, the Fund aims to keep unitholders informed about new developments within the Fund by making copies of all ASX Announcements and presentations available on the ING Real Estate website, circulating Fund Updates and encouraging participation of unitholders to attend the unitholder meetings.

Further details on the unitholder communication procedures may be obtained by accessing our website at www.ingrealestate.com.au

The website provides information specifi c to each Fund, as well as information relevant to existing or prospective investors.

This website is continually updated and contains recent announcements, webcasts, presentations, past and current reports to unitholders and answers to frequently asked questions. Analyst and investor roadshow presentations released to the ASX are included on the website.

The website also contains:

■ a corporate overview on ING Real Estate; ■ IML’s corporate governance policies; ■ profi les of Senior Management and IML’s Board; and ■ other relevant corporate information.

RISK MANAGEMENT AND COMPLIANCE PROCEDURES

7.1 Risk management framework

The Board and Management recognise that having a well developed system in place for risk management is an integral part of good management practice. ING Real Estate actively promotes a culture of compliance and risk management awareness with the aim of ensuring all activities comply with laws, regulations, codes and in-house policies and procedures.

An Operational and Risk Management Committee (ORMC) has been established, made up of key management executives, with the objective of promoting and facilitating the development of effective risk management processes.

The ORMC meets regularly and assists the Board by identifying, measuring and monitoring key risks affecting ING Real Estate and the Fund, as well as taking appropriate action to control and mitigate the level of risks.

In line with the ING Group guidelines, Integrated Risk Assessments (IRA) sessions are held at the ORMC meetings. The purposes of the IRA sessions are:

• to identify key risks that could lead to an operational loss;

■ assess the risk and identify any risk exposures; and

• put in place appropriate mitigation measures to address the risks including developing adequate procedures.

The key risks identifi ed through the IRA workshops are primarily risks associated with managing property as well as risks arising from the general business environment including, but not limited to, general market, capital management, fi nancial reporting, operational and compliance risks. Through the ORMC, Management puts in place adequate internal controls including specifi c policies and procedure manuals that are in suffi cient detail for individual staff members to refer to in performing their daily duties.

Compliance Plan

Each of the ILF Fund and ILF Trust has a formal Compliance Plan in place which is lodged upon registration of the scheme with the ASIC. The purpose of each Compliance Plan is to set out key processes, systems and measures the Responsible Entity will apply to ensure compliance with:

■ the Corporations Act (Cth) 2001;

■ constitution of the relevant fund;

■ industry practice standards relevant to the particular fund; and ■ internal policies and procedures.

Each Compliance Plan is a “how to” document and has been prepared following a structured and systematic process to consider the Responsible Entity’s key obligations under the Act and Constitution, the risk of non-compliance and measures required to meet the risks of non-compliance.

Each Compliance Plan describes the key obligations that must be met by the Responsible Entity, the measures in place to comply with these obligations, and how compliance with these measures will be monitored. In addition, the Compliance Plans detail the risk of not complying with these obligations, and how breaches are to be reported and addressed.

Each year Ernst & Young conducts an Annual Compliance Plan audit and reports to ASIC on:

• whether the procedures and controls set out in the Compliance Plans suffi ciently address the requirements of the Act; and

• if the controls and procedures described in the Compliance Plans have been in place and operating effectively over the year.

www.ingrealestate.com.au 33

Corporate Governance

Risk management review and reporting to the board and its committees

The ORMC reports to the Board and its Committees regularly on the effectiveness of the management of material business risks and the Board undertakes a review annually on whether Management’s risk management processes and internal controls are appropriate, including whether Management’s procedures for monitoring the effectiveness of the risk management processes are adequate.

The CEO and the CFO confi rm in writing to the Board, at the time the fi nancial statements are being considered for approval by the Board, that in all material respects:

• the fi nancial statements present a true and fair view;

• that this assertion is founded on a sound system of fi nancial risk management and internal compliance and control which implements the policies adopted by the Board; and

• that the Fund’s fi nancial risk management and internal compliance and control systems are operating effi ciently and effectively in all material respects in relation to fi nancial reporting risks.

7.2 Board Compliance Committee

SUSTAINABILITY

8.1 Board Sustainability Committee

The Board recognises that a sustainable future for its business depends upon the environmental sustainability of the communities, economies and societies in which it operates. As such the Board has established a Board Sustainability Committee to address sustainability issues for the Funds.

As at 30 June 2009 the members of the Sustainability Committee comprised Paul Scully (Chairman), Richard Colless and Hugh Thomson. Three meetings were held during the year. The Sustainability Committee reports to the Board after each meeting and otherwise as required.

CORPORATE GOVERNANCE DOCUMENTS

In accordance with the ASX Corporate Governance Guidelines, the following documents are available in the corporate governance section of the ING Real Estate website:

■ Board Charter

■ Board Compliance Committee Charter ■ Board Audit Committee Charter

• Code of Conduct

• Unitholder Communications Procedures

• IML Company Constitution

The Board places a strong emphasis on compliance and has established a Compliance Committee that operates under an approved charter.

Under the managed investments regime, the Responsible Entity is required to register a Compliance Plan with ASIC. The Compliance Plan outlines the measures which are to be applied by the Company to ensure compliance with the Corporations Act and the relevant fund’s Constitution.

The Compliance Committee is responsible for:

• monitoring the Responsible Entity’s compliance with the Compliance Plan and reporting on its fi ndings to the Board; and

• assessing at regular intervals whether the relevant fund’s Compliance Plan is adequate to ensure compliance with the Law and the relevant fund’s constitution, and to monitor the extent to which the Responsible Entity complies with the relevant fund’s Compliance Plan.

As at 30 June 2009 the members of the Compliance Committee comprised Paul Scully (Chairman), Richard Colless and Hugh Thomson. Four meetings were held during the year. The Compliance Committee reports to the Board after each meeting and otherwise as required.

34 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

Financial Information

Directors’ report	36
Auditor’s independence declaration	40
Concise f nancial report:
Income statements	41
Balance sheets	42
Cash f ow statements	43
Statements of changes in unitholders’ interest	44
Discussion and analysis of f nancial statements	45
Notes to the f nancial statements
Note 1 Basis ofpreparation	47
Note 2 Goingconcern	47
Note 3 Basis of valuation of non-current assets	48
Note 4 Distributions	49
Note 5 Net operatingincome	50
Note 6 Earningsper unit	51
Note 7 Propertyinvestments	51
Note 8 Segment information	54
Note 9 Responsible Entity	55
Note 10 Subsequent events	56
Independent audit report to the unitholders	57

RELATIONSHIP OF THE CONCISE FINANCIAL REPORT TO THE FULL FINANCIAL REPORT

The concise fi nancial report is an extract from the full fi nancial reports for the year ended 30 June 2009. The fi nancial statements and specifi c disclosures included in the concise fi nancial report have been derived from the full fi nancial reports.

The concise fi nancial report cannot be expected to provide as full an understanding of the fi nancial performance, fi nancial position and fi nancing and investing activities of the Group as the full fi nancial reports. Further fi nancial information can be obtained from the full fi nancial reports.

The full fi nancial reports and auditor’s reports will be sent to unitholders on request, free of charge. Please call (02) 9033 1035 (from outside Australia: +61 2 9033 1035) and a copy will be forwarded to you. Alternatively, you can access both the full fi nancial reports and the concise report via the internet at our website: www.ingrealestate.com.au

www.ingrealestate.com.au 35

Directors’ Report

Year ended 30 June 2009

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 fi nancial report for the year ended 30 June 2009 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 identifi ed as the parent for preparing consolidated fi nancial reports. Consequently, the consolidated fi nancial statements of the ING Real Estate Community Living Fund present the combined fi nancial results of both Trusts.

The directors’ report is a combined directors’ report that covers both Trusts. The fi nancial information given for the ING Real Estate Community Living Group is taken from the consolidated fi nancial 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 fi nancial year were:

Richard Colless AM Chairman Philip Clark AM Michael Easson AM Philip Redmond Paul Scully David Blight Resigned 1 December 2008 Hugh Thomson Alternate director for David Blight – ceased 1 December 2008 Adrian Astridge Alternate director for David Blight – ceased 1 December 2008

Except as stated, these persons were directors of the Responsible Entity during the whole of the fi nancial 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 signifi cant change in the nature of either Trust’s activities during the fi nancial year.

Review and results of operations

A summary of the Trusts’ result for the fi nancial year is:

Review and results of operations A summary of the Trusts’ result for the f nancial year is:
	ING	Real Estate	ING Real Estate
	Community Living		Community Living
		Group	Management Trust
	2009	2008	2009	2008
Net profit/(loss) for the year ($’000)	(284,176)	(38,803)	1,276	10,879
Distributable income ($’000)	26,210	46,567	(6,361)	10,225
Distributions per stapled unit (cents)	1.5	11.0	—	—
Earnings per stapled unit – basic and diluted (cents)	(64.4)	(8.9)	0.3	2.5
Net operatingincomeper stapled unit(cents)	5.9	10.7	(1.4)	2.3

The Responsible Entity uses the Fund’s net operating income as an additional performance indicator. Net operating income does not take into account certain items recognised in the income statement including unrealised gains or losses on the revaluation of the Fund’s properties and derivatives.

36 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

Net operating income for the fi nancial year has been calculated as follows:

Net operating income for the f nancial year has been calculated as follows:
	Consolidated
	2009	2008
	$’000	$’000
Net loss attributable to unitholders of the Fund	(284,176)	(38,803)
Adjusted for:
– Net foreign exchange loss	547	—
– Net loss on disposal of investment property	1,085	—
– Net (gain)/loss on change in fair value of:
– Investment properties	71,939	25,188
– Derivatives	55,071	(15,505)
– Retirement village residents’ loans	(7,774)	13,237
– Items included in share of net profit of equity accounted investments:
– Investment properties	178,951	44,478
– Derivatives	341	—
– Retirement village residents’ loans	—	1,937
– Gain on revaluation of newly constructed retirement villages	3,154	6,096
– Borrowing cost amortisation returned	185	217
– Impairment loss on:
– Receivables	20,612	—
– Equity accounted investments	21,350	3,145
– Other non-current assets	773	—
– Other items included in share of net profit of equity accounted investments:
– Non-current asset depreciation and amortisation	4,621	4,495
– Discount on deferred purchase consideration	529	1,818
– Deferred income tax (benefit)/expense	(44,131)	264
– Other	3,133	—
Net operating income	26,210	46,567
Net operating income is attributable to the unitholders of:
– ING Real Estate Community Living Fund	32,571	36,342
– ING Real Estate CommunityLivingManagement Trust	(6,361)	10,225
	26,210	46,567

Net operating income for the 2009 fi nancial year decreased by 44% to $26,210,000 from $46,567,000 for the 2008 fi nancial year. The decrease is mainly due to lower Australian Seniors net operating income after the rental portfolio transitioned from master lease income and income guarantee to direct occupancy driven rental income.

Net operating income per stapled unit for the 2009 fi nancial year was down 45% to 5.9 cents, compared to 10.7 cents per stapled unit previously.

The Fund made distributions per stapled unit of 1.5 cents for the fi nancial year, compared with 11.0 cents per stapled unit in 2008.

www.ingrealestate.com.au 37

Directors’ Report

Year ended 30 June 2009

Earnings per stapled unit as calculated under applicable accounting standards for the year ended 30 June 2009 were down 55.5 cents to a loss of 64.4 cents, compared to a loss of 8.9 cents per stapled unit for the previous fi nancial year. Investment property devaluations (including share of revaluations of equity accounted investments) and impairments accounted for losses of 56.9 cents and 9.7 cents per stapled unit respectively during the year.

Total assets decreased $246,801,000 or 28% to $632,446,000 over the year primarily due to investment property devaluations. Investment property devaluations during the 2009 fi nancial year were $250,890,000 (including share of revaluations of equity accounted investments), decreasing net asset value per stapled unit by $0.57 or 60%. The basis of the valuations is described in note 3 in the fi nancial report.

Distributions

Details of distributions are given in note 4 in the fi nancial report.

Signifi cant changes in the state of affairs

The directors resolved not to make any distributions for the nine months ended 30 June 2009. Cash retained from this distribution reduction was applied to strengthen the balance sheet. In the opinion of the directors of the Responsible Entity, there were no other signifi cant changes in the state of affairs of either Trust that occurred during the fi nancial year.

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

Likely developments

The Responsible Entity will continue to review capital management initiatives in order to strengthen the balance sheet and the Fund’s position against debt covenants. These initiatives include the ongoing program of asset sales and may include the sale of large portfolios. The Fund may issue equity as part of its capital management strategy.

Environmental regulation

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

Indemnities

The Fund has not indemnifi ed, nor paid any insurance premiums for, a person who is or has been an offi cer of the Responsible Entity or an auditor of the Fund.

Events subsequent to reporting date

On 20 August 2009 the Group announced that one of its equity accounted investments (ING NZ Subsidiary Trust No 1), which owns the New Zealand Students portfolio, fi nalised negotiations with its lender on terms of a refi nance of its existing facility $16,656,000 (New Zealand dollars 20,800,000). The refi nance agreement is for an interest only two year term expiring in August 2011.

38 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

Interests of directors of the Responsible Entity

Units in the Group held by directors of the Responsible Entity as at 30 June 2009 were:

Interests of directors of the Responsible Entity Units in the Group held by directors of the Responsible Entity	as at 30 June 2009 were:
	Number of units
Paul Scully	20,352
PhilipClark	30,000

The other directors of the Responsible Entity did not hold any units in the Fund 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 fi nancial year are set out in note 9 in the fi nancial report.

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 40.

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 fi nancial report. Amounts in these reports have been rounded off in accordance with that Class Order to the nearest thousand dollars, unless otherwise stated.

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

==> picture [140 x 74] intentionally omitted <==

Richard Colless Chairman Sydney 26 August 2009

www.ingrealestate.com.au 39

==> picture [68 x 56] intentionally omitted <==

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

In relation to our audit of the concise 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 2009, 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.

==> picture [137 x 57] intentionally omitted <==

Ernst & Young

==> picture [150 x 67] intentionally omitted <==

Douglas Bain Partner

26 August 2009

Liability limited by a scheme approved under Professional Standards Legislation

40 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

Income Statements

Year ended 30 June 2009

	ING	Real Estate	ING Real Estate	ING Real Estate
	Community Living		Community Living
		Group	Management Trust
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Revenue
Rental income	37,687	33,544	16,458	291
Deferred management fee	3,123	5,356	3,123	5,356
Other property income	6,449	2,926	2,982	1,000
Interest income	1,541	2,470	325	356
	48,800	44,296	22,888	7,003
Other income
Net foreign exchange gain/(loss)	(109)	2,649	82	—
Net loss on disposal of investment properties	(1,085)	—	—	—
Net gain/(loss) on change in fair value of:
– Investment properties	(71,939)	(25,188)	243	22,652
– Derivatives	(55,071)	15,505	—	—
– Retirement village residents’ loans	7,774	(13,237)	7,774	(13,237)
Expenses
Property expenses	(38,289)	(17,472)	(29,348)	(3,700)
Finance costs	(7,979)	(6,565)	(3,058)	(1,468)
Responsible Entity’s fees	(3,355)	(3,280)	(327)	—
Impairment loss on:
– Loans	(20,612)	—	—	—
– Equity accounted investment	(21,350)	(3,145)	(602)	—
– Other non-current assets	(773)	—	—	—
Other	(3,751)	(1,435)	(116)	(3)
Share of netprofit/(loss)of equityaccounted investments	(160,396)	(30,667)	2,164	5,252
Profit/(loss) before income tax	(328,135)	(38,539)	(300)	16,499
Income tax benefit/(expense)	43,959	(264)	1,576	(5,620)
Netprofit/(loss) for theyear	(284,176)	(38,803)	1,276	10,879
Attributable to unit holders of:
– ING Real Estate Community Living Fund	(285,452)	(49,682)	—	—
– ING Real Estate CommunityLivingManagement Trust	1,276	10,879	1,276	10,879
	(284,176)	(38,803)	1,276	10,879
	Cents	Cents	Cents	Cents
Distributions per unit (note 4)	1.5	11.0	—	—
Earnings per unit – basic and diluted (note 6)	(64.4)	(8.9)	0.3	2.5
Net operatingincomeper unit(note 6)	5.9	10.7	(1.4)	2.3

www.ingrealestate.com.au 41

Balance Sheets

As at 30 June 2009

	ING	Real Estate	ING Real Estate	ING Real Estate
	Community Living		Community Living
		Group	Management Trust
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Current assets
Cash and cash equivalents	13,233	31,525	2,371	6,522
Trade and other receivables	9,830	15,091	13,397	4,844
Investment properties	33,922	—	—	—
Derivatives	301	26,674	—	—
	57,286	73,290	15,768	11,366
Non-current assets
Trade and other receivables	2,087	21,558	1,726	—
Investment properties	429,009	504,910	197,757	181,327
Properties under construction	8,575	12,742	2,680	3,683
Plant and equipment	743	—	744	—
Equityaccounted investments	134,746	266,747	10,406	12,801
	575,160	805,957	213,313	197,811
Total assets	632,446	879,247	229,081	209,177
Current liabilities
Payables	25,983	21,768	15,016	13,250
Retirement village residents loans	119,569	113,961	119,569	113,961
Borrowings	167,219	9,452	181	180
Derivatives	28,699	—	—	—
Provision for distribution	—	10,640	—	—
	341,470	155,821	134,766	127,391
Non-current liabilities
Borrowings	108,094	269,816	76,301	59,782
Deferred tax liabilities	5,214	37,928	4,048	5,620
	113,308	307,744	80,349	65,402
Total liabilities	454,778	463,565	215,115	192,793
Net assets	177,668	415,682	13,966	16,384
Unitholders’ interest
Issued units	490,186	490,371	3,351	3,351
Reserves	(11,552)	(64,329)	(2,145)	1,549
Accumulated losses	(300,966)	(10,360)	12,760	11,484
Total unitholders’ interest	177,668	415,682	13,966	16,384
Attributable to unitholders of:
ING Real Estate Community Living Fund:
– Issued units	486,835	487,020	—	—
– Reserves	(9,407)	(65,878)	—	—
– Retained earnings	(313,726)	(21,844)	—	—
	163,702	399,298	—	—
ING Real Estate CommunityLivingManagement Trust	13,966	16,384	13,966	16,384
	177,668	415,682	13,966	16,384
Net asset value per unit	$0.40	$0.94	$0.03	$0.04

42 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

Cash Flow Statements

Year ended 30 June 2009

	ING	Real Estate	ING Real Estate	ING Real Estate
	Community Living		Community Living
		Group	Management Trust
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Cash f ows from operating activities
Rental and other property income	53,842	37,680	22,159	1,410
Property and other expenses	(41,952)	(21,888)	(29,105)	(5,587)
Proceeds from residents’ loans	13,740	22,887	13,740	22,887
Repayment of residents’ loans	(403)	(1,235)	(403)	(1,235)
Distributions received from equity accounted investments	18,046	34,174	2,800	690
Interest received	1,278	931	325	356
Borrowing costs paid	(9,162)	(6,541)	(1,445)	(1,154)
Goods and services taxes received
from investingand financingactivities	215	281	170	592
	35,604	66,289	8,241	17,959
Cash f ows from investing activities
Purchase of and additions to investment
properties and properties under construction	(18,416)	(55,624)	(12,278)	(43,491)
Proceeds from sale of investment properties	30,994	—	—	—
Purchase of equity accounted investments	(15,612)	(46,242)	—	(6,723)
Loan to stapled entity	—	—	—	(2,369)
	(3,034)	(101,866)	(12,278)	(52,583)
Cash f ows from f nancing activities
Unit issue costs	—	(82)	—	—
Distributions to unitholders	(17,255)	(35,249)	—	—
Proceeds on restructure of derivatives	1,244	15,000	—	—
Proceeds from borrowings	12,244	86,033	—	37,006
Repayment of borrowings	(47,369)	(18,479)	—	(53)
	(51,136)	47,223	—	36,953
Net increase/(decrease) in cash	(18,566)	11,646	(4,037)	2,329
Cash at the beginning of the year	31,525	20,061	6,522	4,193
Effects of exchange rate changes on cash	274	(182)	(114)	—
Cash at the end of theyear	13,233	31,525	2,371	6,522

www.ingrealestate.com.au 43

Statements of Changes in Unitholders’ Interest

Year ended 30 June 2009

	ING	Real Estate	ING Real Estate	ING Real Estate
	Community Living		Community Living
		Group	Management Trust
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Total unitholders’ interest at the beginning of theyear	415,682	523,101	16,384	3,844
Exchange differences on translation of foreign operations	56,424	(37,802)	(2,081)	(64)
Share of revaluations of property, plant and
equipment made by equity accounted investment	(3,647)	3,647	(1,613)	1,613
Net income recognised directly in unitholders’ interest	52,777	(34,155)	(3,694)	1,549
Netprofit/(loss)for theyear	(284,176)	(38,803)	1,276	10,879
Total recognised income and expense for theyear	(231,399)	(72,958)	(2,418)	12,428
Transactions with unitholders in their capacity as equity holders:
– Issue of units	—	13,697	—	112
– Distributionspaid orpayable	(6,615)	(48,158)	—	—
	(6,615)	(34,461)	—	112
Total unitholders’ interest at the end of theyear	177,668	415,682	13,966	16,384
Total recognised income and expense for the year
is attributable to:
– ING Real Estate Community Living Fund	(228,981)	(85,386)	—	—
– ING Real Estate CommunityLivingManagement Trust	(2,418)	12,428	(2,418)	12,428
	(231,399)	(72,958)	(2,418)	12,428

44 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

Discussion and Analysis of the FInancial Statements Year ended 30 June 2009

1. INCOME STATEMENT

The ING Real Estate Community Living Group (the “Group”) recorded a net decrease in operating income of 44% to $26,210,000 from $46,567,000 for the 2008 fi nancial year. The decrease is mainly due to lower Australian Seniors net operating income after the rental portfolio transitioned from master lease income and income guarantee to direct occupancy driven rental income.

The ING Real Estate Community Living Management Trust (the “Management Trust”) recorded a loss on net operating income of $6,361,000 for the 2009 fi nancial year compared to a profi t of $10,225,000 for the previous fi nancial year. The decrease is mainly due to lower Australian Seniors net operating income after the rental portfolio transitioned from master lease income and income guarantee to direct occupancy driven rental income.

Total revenue for the Group increased by 10% to $48,800,000, mainly due to the transition of the Australian Seniors rental portfolio from net master lease income and income guarantee to direct occupancy driven rental income. Total revenue for the Management Trust increased from $7,003,000 to $22,888,000, for the same reason.

Change in fair value of investment properties (including share of equity accounted investments) contributed a loss of $250,890,000 to the Group’s 2009 result. This refl ected a reduction in the fair value of its investment properties across all portfolios.

The Group and Management Trust results for 2009 include other income of $7,774,000 being the decrease in fair value of loans from retirement village residents. This item is matched by a corresponding decrease in the fair value of the underlying investment properties.

The Group’s share of profi t or loss from its equity accounted investments was a loss of $160,396,000 in 2009 compared to a loss of $30,667,000 in 2008. This change was driven by changes in the fair value of investment properties included in the results of the associates being a loss of $178,951,000 in 2009 compared to a loss of $44,478,000 in 2008.

The Group’s tax benefi t for the 2009 fi nancial year amounted to $43,959,000 compared to deferred tax expense for 2008 of $264,000, whilst the Management Trust recorded a benefi t of $1,576,000 for 2009 compared to an expense of $5,620,000 for the previous year. The changes were largely due to changes in fair value of investment properties and retirement villages residents’ loans.

As a result of the factors discussed above, the group’s net loss increased from $38,803,000 for the 2008 fi nancial year to $284,176,000 for 2009, whilst the Management Trust’s net profi t declined from $10,879,000 to $1,276,000.

2. BALANCE SHEET

The Group’s total assets decreased by $246,801,000 or 28.1% to $632,446,000 over the 2009 year primarily due to investment property devaluations of $250,890,000. Total liabilities decreased by $8,787,000, largely due to a reduction in the deferred tax liability arising from the lower valuation of investment properties partially offset by the liability arising from derivatives.

Because of these changes, the Group’s net assets decreased from $415,682,000 or $0.94 per stapled unit at 30 June 2009, to $177,668,000 or $0.40 cents per stapled unit at 30 June 2008.

The Group recognised impairment losses of $42,735,000 during the year, primarily on its investments in the Country Club Villages joint venture and Oak Tree Group.

www.ingrealestate.com.au 45

Discussion and Analysis

of the FInancial Statements Year ended 30 June 2009

3. GROUP CASH FLOW STATEMENT

The Group’s cash fl ow from operating activities decreased from $66,289,000 in 2008 to $35,604,000 in 2009. This was mainly due to distributions from equity accounted investments decreasing from $34,174,000 to $18,046,000, and a reduction of $8,315,000 in net proceeds from retirement village residents’ loans on completion of retirement village units.

The Group invested $34,028,000 in the 2009 fi nancial year largely on the continued development of the Settlers portfolio and capital expenditure across all portfolios. The proceeds from the sale of investment properties in the year of $30,994,000 arose largely from the sale of two US Students’ assets.

4. STATEMENT OF CHANGES IN UNITHOLDERS’ INTEREST

The change in the Group’s net assets from $415,682,000 to $177,668,000 during the 2009 fi nancial year was mostly due to the net loss for the year of $284,176,000, partially offset by exchange differences on translation of the foreign operations of $56,424,000 due to the weaker Australian dollar, and net distributions to unitholders.

The decrease in net assets of the Management Trust from $16,384,000 to $13,966,000 largely refl ected exchange differences on translation of the foreign operations.

Cash outfl ows from fi nancing activities were $51,136,000 for the 2009 fi nancial year, mainly refl ecting a net repayment of borrowings of $35,125,000, primarily due to the sale of US Students portfolio assets, proceeds of $1,224,000 received on restructure of the group’s derivatives and distributions to unitholders of $17,255,000.

Investing and fi nancing cash fl ows for the Management Trust were largely the result of continued development of the Settlers portfolio and the continued development of the Lynbrook investment property, together with borrowings to fund those expenditures.

46 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

Notes to the Financial Statements

Year ended 30 June 2009

NOTE 1. BASIS OF PREPARATION

The Group was formed on 11 January 2007 by the stapling of the units in two property trusts, ING Real Estate Community Living Fund (the “Fund”) and ING Real Estate Community Living Management Trust (collectively the “Trusts”). The Responsible Entity for both Trusts is ING Management Limited.

In accordance with AASB Interpretation 1002 Post-Date-ofTransition Stapling Arrangements , the stapling arrangement discussed above is regarded as a business combination and the Fund has been identifi ed as the parent for preparing consolidated fi nancial reports. Consequently, the consolidated fi nancial statements of the Fund present the combined fi nancial results of both Trusts.

As permitted by Class Order 05/642, issued by the Australian Securities and Investments Commission, the concise fi nancial report is a combined report that presents the fi nancial statements and accompanying notes of both the Group (being the consolidated fi nancial statements and notes of the Fund) and the Management Trust.

The concise fi nancial report has been prepared in accordance with the Corporations Act 2001 , Accounting Standard AASB 1039 Concise Financial Reports and applicable Australian Interpretations. The fi nancial statements and specifi c disclosures required by AASB 1039 have been derived from the Trusts’ full fi nancial reports for the fi nancial year. Other information included in the concise fi nancial report is consistent with the Trusts’ full fi nancial reports. The concise fi nancial report does not provide, and cannot be expected to provide, as full an understanding of the fi nancial performance, fi nancial position and fi nancing and investing activities of the Trusts as their full fi nancial reports.

The fi nancial reports are prepared on the historical cost basis except that investment properties and derivative fi nancial instruments are stated at their fair value. These accounting policies have been consistently applied to all years presented. A full description of the accounting policies adopted by the Trusts may be found in their full fi nancial reports in note 1.

The concise fi nancial report is presented in Australian dollars.

NOTE 2. GOING CONCERN

At 30 June 2009, the carrying amount of the Group’s Australian secured bank debt was $132,500,000 under a fully drawn facility. As at 26 August 2009, there was no change to this amount. This debt is due for repayment on 22 December 2009 and is secured by mortgages over the Group’s Australian investment properties and properties under construction.

The fair value of liabilities to that bank under interest rate and foreign currency derivative agreements at 30 June 2009 was $28,398,000. That fair value is sensitive to movements in foreign exchange and interest rates. Payments under these agreements extend to 1 November 2012, but may be accelerated in the circumstances described below.

The Group’s ability to refi nance the Australian bank debt on or before its expiry is dependent on future market conditions including the state of credit and real estate markets, foreign currency exchange rates and interest rates. The Group may be able to reduce the amount of the debt to be refi nanced by asset sales or by a capital raising. However, there can be no assurance that these could be achieved. If this debt was not refi nanced on its expiry, the bank would have the right to require immediate repayment of the debt and settlement of the derivatives entered into with it. If the bank exercised that right, it is likely that assets would not be realised, and liabilities would not be discharged, in the ordinary course of business.

Compliance with any revised facility agreement for the Australian bank debt is also dependent on future market conditions including fair values of investment properties and interest rates. If changes in future market conditions result in a breach of any revised facility agreement, the breach could be waived by the bank or the breach may be able to be rectifi ed or prevented by a capital raising or by asset sales. However, there can be no assurance that these could be achieved. If a breach occurred and was not waived or rectifi ed, the bank would have the right to require immediate repayment of the debt and settlement of the related derivatives. If the bank exercised that right, it is likely that assets would not be realised, and liabilities would not be discharged, in the ordinary course of business.

www.ingrealestate.com.au 47

Notes to the Financial Statements

Year ended 30 June 2009

NOTE 2. GOING CONCERN (CONTINUED)

The Fund has guaranteed its share of a deferred purchase obligation of a joint venture entity. The Fund’s share amounts to $7,291,000 (United States dollars 5,880,000) and the obligation is due on February 2010. In the normal course of business, the obligation would be satisfi ed by the joint venture partners contributing additional capital to the equity accounted investment. The Fund expects to be able to contribute as required. If the Fund does not contribute, its joint venture partner may contribute on its behalf, with an appropriate adjustment to the partners’ shares in the joint venture. However, there can be no assurance that the Fund’s cash fl ow will be suffi cient to meet its contribution, or that its partner will contribute on its behalf if required. If the obligation is not met, the benefi ciary of the Fund’s guarantee would have the right to sue the Fund. In addition, failure to meet the guarantee would constitute an event of default under any revised facility agreement for the Australian bank debt, giving the bank concerned the right to require immediate repayment of the debt and settlement of the related derivatives. In these circumstances, it is likely that assets would not be realised, and liabilities would not be discharged, in the ordinary course of business.

Despite these signifi cant uncertainties, the directors have concluded that there are reasonable grounds to believe that the going concern basis is appropriate.

NOTE 3. BASIS OF VALUATION OF NON-CURRENT ASSETS

a) Investment properties

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 Trusts’ policy to have all investment properties externally valued at intervals of not more than three years and that such valuation be refl ected in the fi nancial reports of the Trusts. 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.

Fair value represents the amount at which an asset could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction at the date of valuation. It is based on current prices in an active market for similar property in the same location and

condition and subject to similar lease and other contracts, adjusted for any differences in the nature, location or condition of the property, or in the contractual terms of the leases and other contracts relating to the property.

In the absence of current prices in an active market, the Responsible Entity considers information from a variety of sources, including current prices in an active market for properties of different nature, condition or location, adjusted to refl ect those differences, recent prices of similar properties on less active markets, with adjustments to refl ect any changes in economic conditions since the date of the transactions that occurred at those prices, and discounted cash fl ow projections based on reliable estimates of future cash fl ows, using discount rates that refl ect current market assessments of the uncertainty in the amount and timing of the cash fl ows.

In determining fair values, expected net cash fl ows 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.

b) Properties under construction

Property under construction is carried at historical cost. Cost includes the cost of acquisition and additions and, during development, includes fi nancing 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 profi t or loss.

c) Investments in associates

Associates are those entities which the Trusts have signifi cant infl uence, but not control. Investments in associates are accounted for using the equity method. The share of the associates’ net profi t is recognised in the income statement and the share in movement in reserves is recognised in reserves in the balance sheet. The accumulation of postacquisition movements in the Trusts’ share of net assets of the associate is adjusted against the carrying value of the investment. Distributions from associates reduce the carrying value of the investment in the fi nancial statements.

48 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

NOTE 4. DISTRIBUTIONS
	ING	Real Estate	ING Real Estate
	Community Living		Community Living
		Group	Management Trust
	2009	2008	2009	2008
	Cents	Cents	Cents	Cents
a) Rates and amounts of distributions
Distributions have been paid or are payable in respect of the
following periods at the following rates (in cents per unit):
– Quarter ended 30 September	1.5000	2.8625	—	—
– Quarter ended 31 December	—	2.8625	—	—
– Quarter ended 31 March	—	2.8625	—	—
– Quarter ended 30 June	—	2.4125	—	—
	1.5000	11.0000	—	—
	$’000	$’000	$’000	$’000
The total amounts of these distributions were:
– Quarter ended 30 September	6,615	12,389	—	—
– Quarter ended 31 December	—	12,505	—	—
– Quarter ended 31 March	—	12,624	—	—
– Quarter ended 30 June	—	10,640	—	—
	6,615	48,158	—	—

The distribution for the quarter ended 30 June 2008 was recognised in the 2008 fi nancial year and paid on 29 August 2008.

www.ingrealestate.com.au 49

Notes to the Financial Statements

Year ended 30 June 2009

NOTE 5. NET OPERATING INCOME

The Responsible Entity uses the Fund’s net operating income as an additional performance indicator. Net operating income does not take into account certain items recognised in the income statement including unrealised gains or losses on the revaluation of the Fund’s properties and derivatives.

Net operating income is calculated as follows:

Net operating income is calculated as follows:
	ING	Real Estate	ING Real Estate
	Community Living		Community Living
		Group	Management Trust
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Net operating income is calculated as follows:
Net profit/(loss) attributable to unitholders	(284,176)	(38,803)	1,276	10,879
Adjusted for:
– Net foreign exchange loss	547	—	—	—
– Net loss on disposal of investment properties	1,085	—	—	—
– Net (gain)/loss on change in fair value of:
– Investment properties	71,939	25,188	(243)	(22,652)
– Derivatives	55,071	(15,505)	—	—
– Retirement village residents’ loans	(7,774)	13,237	(7,774)	13,237
– Items included in share of net profit of equity
accounted investments:
– Investment properties	178,951	44,478	(4,434)	(5,416)
– Derivatives	341	—	—	—
– Retirement village residents’ loans	—	1,937	—	—
– Gain on revaluation of newly constructed retirement villages	3,154	6,096	3,157	6,096
– Borrowing cost amortisation returned	185	217	—	—
– Impairment loss on:
– Receivables	20,612	—	—	—
– Equity accounted investments	21,350	3,145	602	—
– Other non-current assets	773	—	—	—
– Other items included in share of net profit of equity
accounted investments:
– Non-current asset depreciation and amortisation	4,621	4,495	2,631	2,461
– Discount on deferred purchase consideration	529	1,818	—	—
– Deferred income tax (benefit)/expense	(44,131)	264	(1,576)	5,620
– Asset manager termination costs	3,133	—	—	—
Net operating income	26,210	46,567	(6,361)	10,225
Distributable income is attributable to the unitholders of:
– ING Real Estate Community Living Fund	32,571	36,342
– ING Real Estate CommunityLivingManagement Trust	(6,361)	10,225	(6,361)	10,225
	26,210	46,567	(6,361)	10,225

50 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

NOTE 6. EARNINGS PER UNIT

NOTE 6. EARNINGS PER UNIT
		ING	Real Estate			ING Real	Estate
		Community Living			Community Living
			Group		Management Trust
		2009	2008		2009		2008
Net operating income – $’000		26,210	46,567		(6,361)		10,225
Profit/(loss) attributable to unitholders – $’000		(284,176)	(38,803)		1,276		10,879
Weighted average number of units outstanding – thousands		441,029	436,475		441,029		436,475
Net operating income per unit – cents		5.9		10.7	(1.4)		2.3
Basic and diluted earnings per unit – cents		(64.4)		(8.9)	0.3		2.5
Net assets attributable to unitholders – $’000		177,668	415,682		13,966		16,384
Number of issued units at end of year – thousands		441,029	441,029		441,029		441,029
Net tangible assetsper unit		$0.40	$0.94		$0.03		$0.04
NOTE 7. PROPERTY INVESTMENTS
Property	Cost	Latest external		Carrying		Capitalisation
	to date	valuation		amount			rate
			Valuation	2009	2008	2009	2008
	$’000	Date	$’000	$’000	$’000	%	%
Investment property – current (1)
Garden Villages
Bendigo 1	347	30-Jun-09	260	260	—	8.0%	—
Bendigo 2	347	30-Jun-09	260	260	—	8.0%	—
Caboolture 2	251	30-Jun-09	260	260	—	8.0%	—
Salisbury	338	30-Jun-09	290	290	—	8.0%	—
Toowoomba 1	337	30-Jun-09	285	285	—	8.0%	—
Wynnum 2	280	30-Jun-09	285	285	—	8.0%	—
US Students
34 Fairview Street	1,444	30-Jun-09	1,240	1,175	—	8.7%	—
45 Oakwood Ave.	1,998	30-Jun-09	899	852	—	8.3%	—
Hunting Lodge Apartments	4,929	30-Jun-09	6,045	5,952	—	8.4%	—
The Preserve	28,998	30-Jun-09	24,303	24,303	—	8.8%	—
	39,269		34,127	33,922	—	8.6%	—
Investment property – non-current
Garden Villages Portfolio
Yakamia Gardens	5,910	30-Jun-09	5,350	5,350	5,100	8.3%	7.3%
Mardross Gardens	5,561	30-Jun-09	5,300	5,300	5,600	8.0%	7.5%
Seville Grove Gardens	4,027	30-Jun-09	3,800	3,800	3,700	8.0%	7.5%
Hertford Gardens	3,703	30-Jun-09	3,050	3,050	3,300	8.5%	8.0%
Bendigo 1	—		—	—	325	—	8.0%
Bendigo 2	—		—	—	325	—	8.0%
Carey Park Gardens	4,854	30-Jun-09	3,950	3,950	3,900	8.3%	7.8%
Jefferis Gardens	5,048	30-Jun-09	3,750	3,750	4,200	8.5%	8.0%
Caboolture 2	—		—	—	300	—	8.0%

www.ingrealestate.com.au 51

Notes to the Financial Statements

Year ended 30 June 2009

NOTE 7. PROPERTY INVESTMENTS (CONTINUED)	NOTE 7. PROPERTY INVESTMENTS (CONTINUED)
Property	Cost	Latest external		Carrying		Capitalisation
	to date	valuation		amount			rate
			Valuation	2009	2008	2009	2008
	$’000	Date	$’000	$’000	$’000	%	%
Investment property – non-current (continued)
Garden Villages Portfolio (continued)
Cessnock Gardens	5,594	30-Jun-09	5,430	5,430	5,500	8.0%	7.5%
Claremont Gardens	4,676	30-Jun-09	3,550	3,550	3,600	8.5%	8.0%
Taloumbi Gardens	4,935	30-Jun-09	4,750	4,750	4,900	8.3%	7.5%
Davenport Gardens	4,205	30-Jun-09	93,150	3,150	3,400	8.8%	8.3%
Dromana	—		—	—	440	—	8.0%
Wheelers Gardens	4,611	30-Jun-09	3,900	3,900	4,100	8.3%	7.8%
Elphinwood Gardens	4,546	30-Jun-09	3,800	3,800	3,800	8.5%	8.0%
Glenorchy Gardens	4,346	30-Jun-09	4,000	4,000	3,800	8.0%	7.5%
Chatsbury Gardens	4,968	30-Jun-09	3,800	3,800	4,000	8.3%	7.8%
Grovedale	—		—	—	355	—	8.0%
Grovedale Gardens	5,423	30-Jun-09	4,500	4,500	4,800	8.0%	7.5%
Horsham Gardens	4,617	30-Jun-09	4,350	4,350	4,600	8.0%	7.5%
Ipswich Gardens	4,879	30-Jun-09	2,400	2,400	3,700	8.0%	7.5%
Kingston Gardens	4,490	30-Jun-09	2,799	2,799	3,100	8.8%	8.3%
Lovely Banks Gardens	5,927	30-Jun-09	4,100	4,100	5,250	8.5%	8.0%
Sea Scape Gardens	4,472	30-Jun-09	4,300	4,300	3,900	8.5%	8.0%
Marsden Gardens	8,776	30-Jun-09	8,550	8,550	8,840	8.5%	8.0%
Coburns Gardens	4,304	30-Jun-09	3,150	3,150	3,300	8.5%	8.0%
Brooklyn Gardens	4,231	30-Jun-09	3,050	3,050	3,400	8.5%	8.0%
Oxley Gardens	4,569	30-Jun-09	3,550	3,550	3,800	8.5%	8.0%
Salisbury	—		—	—	280	—	8.0%
Townsend Gardens	4,971	30-Jun-09	3,500	3,500	4,000	8.5%	8.0%
St Albans Park Gardens	4,975	30-Jun-09	3,850	3,850	4,000	8.5%	8.0%
Swan View Gardens	7,124	30-Jun-09	7,100	7,100	6,400	8.3%	7.8%
Taree Gardens	4,631	30-Jun-09	4,150	4,150	4,100	8.5%	8.0%
Toowoomba 1	—		—	—	315	—	8.0%
Toowoomba Gardens	3,967	30-Jun-09	3,600	3,600	4,150	8.8%	8.3%
Newtown Gardens	4,413	30-Jun-09	3,950	3,950	4,300	8.8%	8.3%
Glenvale Gardens	3,966	30-Jun-09	2,700	2,700	3,300	8.8%	8.3%
Welcome Inn	—		—	—	1,350	—	9.0%
Wynnum	—		—	—	335	—	8.0%
Forest Lake Gardens	13,464	30-Jun-09	10,650	10,650	11,100	8.3%	7.8%
South Gladstone Gardens	7,950	30-Jun-09	5,460	5,460	7,000	8.3%	7.8%
Rockhampton Gardens	10,296	30-Jun-09	7,350	7,350	7,600	8.3%	7.8%
US Students
Ashford Hills Apartments	5,021	30-Jun-09	1,550	1,550	2,698	9.4%	7.5%
Campus View	6,683	30-Jun-09	4,805	4,805	3,632	8.7%	7.9%
Clubhouse Apartments	6,098	30-Jun-09	3,968	3,968	4,151	8.7%	7.2%
Kelly Gardens Apartments	5,014	30-Jun-09	2,077	2,077	1,816	10.4%	7.5%
Knollwood Apartments	18,157	30-Jun-09	7,068	7,068	7,886	8.6%	7.4%
Maplewood Apartments	4,850	30-Jun-09	2,573	2,573	2,957	8.7%	7.1%
Millbrook Apartments	1,663	30-Jun-09	775	775	1,064	9.3%	7.2%

52 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

NOTE 7. PROPERTY INVESTMENTS (CONTINUED)

Property Cost Latest external Carrying to date valuation amount	Capitalisation rate 2009 2008 % % 9.5% 7.5% 9.1% 7.0% 8.9% 7.3% 8.9% 7.3% 9.2% 7.3% 9.0% 7.3% 10.4% 10.0% 8.9% 7.3% 8.0% 6.8% — 6.5% — 7.4% — 7.3% — 7.3% — 7.0% — 7.0% 8.3% 7.0% Discount rate 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.5% 4.9% 4.8% 5.2% 4.8%
Valuation 2009 2008 $’000 Date $’000 $’000 $’000
Investment property – non-current (continued) US Students (continued) Oakridge 3,502 30-Jun-09 1,859 1,859 2,415 Oakwood 970 30-Jun-09 434 434 493 Orchard Acres Apartments 10,023 30-Jun-09 4,865 4,865 7,865 Perry Hill estates 5,909 30-Jun-09 2,883 2,883 4,477 Renwood Apartments 8,212 30-Jun-09 4,338 4,338 6,856 Ridgeview heights 5,371 30-Jun-09 2,976 2,976 4,251 Springwood Apartments 7,632 30-Jun-09 3,162 3,162 2,854 Willington Oaks Apartments 17,895 30-Jun-09 10,818 10,818 14,923 Campus Club 16,072 30-Jun-09 11,531 11,531 13,801 Ramz Hall — — — 16,364 Capital Garage Apartments — — — 5,396 34 Fairview Street — — — 1,505 45 Oakwood Ave. — — — 1,038 Hunting Lodge Apartments — — — 8,128 The Preserve — — — 24,385 US Seniors Lynbrook, New York 26,990 30-Jun-09 32,238 32,238 21,782 Settlers (2) Lakeside 69,645 31-Dec-08 78,216 73,975 83,221 Noyea Park 2,463 31-Dec-08 2,662 2,497 3,110 Meadow Springs 20,200 31-Dec-08 18,350 17,822 19,682 Ridgewood 73,849 31-Dec-08 81,685 86,156 74,595
Consolidated – non-current 500,648 429,472429,009504,910
Total investment properties 539,917 463,599462,931504,910 Property under construction – non current (3) Garden Villages Portfolio Lovely Banks Gardens – land 862 — 330 862 Wangaratta – land 551 — 311 551 Settlers Noyea Park 500 — 500 500 Ridgewood 7,037 — 4,037 7,037 Meadow Springs 3,792 — 3,397 3,792
12,742 — 8,575 12,742
Total allproperty investments 552,659 463,599471,506517,652

• 1) These properties were disclosed as non current in 2008. Investment properties that are held for sale and are expected to be realised within twelve months after the reporting date are classifi ed as current.

• 2) Valuations of retirement villages are provided to the Group net of residents’ loans (after deducting any accrued deferred management fees and maintenance reserve fund liabilities). For presentation in this note, the external valuations shown are stated before deducting this liability to refl ect its separate balance sheet presentation. The carrying amounts include the fair value of units completed since the date of the external valuation.

• 3) Valuations of these properties under construction were as at an earlier stage of development and thus are no longer comparable to the carrying amounts shown.

• 4) Investment property that has not been valued by external valuers at reporting date is carried at the Responsible Entity’s estimate of fair value in accordance with the accounting policy detailed at note 3(a). Properties acquired during the period are held at cost, which is refl ective of the estimate of fair value.

• 5) Valuations made in a foreign currency have been converted at the rate of exchange ruling at reporting date.

www.ingrealestate.com.au 53

Notes to the Financial Statements

Year ended 30 June 2009

NOTE 8. SEGMENT INFORMATION

Primary reporting segment – geographical segments

The Group operates in one business segment, investment in real estate utilised as social infrastructure, in three geographical areas, Australia, North America and New Zealand.

areas, Australia, North America and New Zealand.
	ING	Real Estate	ING Real Estate
	Community Living		Community Living
		Group	Management Trust
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Segment revenue:
– Australia	24,446	22,711	22,031	6,647
– North America	22,813	19,115	532	—
– New Zealand	—	—	—	—
Total segment revenue	47,259	41,826	22,563	6,647
Interest income	1,541	2,470	325	356
Total revenue	48,800	44,296	22,888	7,003
Segment result:
– Australia	(19,768)	4,665	(5,047)	28,015
– North America	(39,867)	(25,034)	5,952	(2,416)
– New Zealand	—	(127)	—	—
	(59,635)	(20,496)	905	25,599
Share of net profit/(loss) of equity accounted investments
– Australia	(779)	1,751	(529)	(12,106)
– North America	(154,838)	(33,017)	2,693	4,121
– New Zealand	(4,779)	599	—	—
	(160,396)	(30,667)	2,164	(7,985)
Interest income	1,541	2,470	325	356
Net foreign exchange gain/(loss)	(109)	2,649	82	—
Net gain/(loss) on change in fair value of derivatives	(55,071)	15,505	—	—
Finance costs	(7,979)	(6,565)	(3,058)	(1,468)
Impairment loss on:
– Loans	(20,612)	—	—	—
– Equity accounted investments	(21,350)	—	(602)	—
– Other non-current assets	(773)	—	—	—
Other expenses	(3,751)	(1,435)	(116)	(3)
Profit/(loss) before income tax	(328,135)	(38,539)	(300)	16,499

54 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

NOTE 8. SEGMENT INFORMATION (CONTINUED)

Primary reporting segment – geographical segments (continued)

	ING	Real Estate	ING Real Estate	ING Real Estate
	Community Living		Community Living
		Group	Management Trust
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
Segment assets:
– Australia	344,797	394,162	181,030	165,354
– North America	266,103	405,851	47,243	39,842
– New Zealand	11,466	14,041	—	—
– Unallocated	10,080	65,193	808	3,981
Consolidated assets	632,446	879,247	229,081	209,177
Segment liabilities:
– Australia	141,789	133,050	168,838	129,731
– North America	151,660	40,607	38,780	3,100
– Unallocated	161,329	289,908	7,497	59,962
Consolidated liabilities	454,778	463,565	215,115	192,793

NOTE 9. RESPONSIBLE ENTITY

a) Identity

The Responsible Entity of the Fund is ING Management Limited, 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

		ING	Real Estate	ING Real Estate
		Community Living		Community Living
	Note		Group	Management Trust
		2009	2008	2009 2008
		$	$	$ $
ING Management Limited:	(i)
Asset management fees		3,355,487	3,280,220	— —

Asset management fees on United States and Canadian investment properties were waived for the period 1 October 2006 to 30 June 2007. Asset management fees before 1 October 2006 were waived on all investment properties. In addition, the Responsible Entity has waived $1,306,290 of its fee for the year ended 30 June 2008 and $724,458 of its fee for the year ended 30 June 2009.

www.ingrealestate.com.au 55

Notes to the Financial Statements

Year ended 30 June 2009

NOTE 9. RESPONSIBLE ENTITY (CONTINUED)

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 reporting date were:

is the Responsible Entity) as at reporting date were:
		Number	of units held
	ING	Real Estate	ING	Real Estate
	Community Living		Community Living
		Group	Management Trust
	2009	2008	2009	2008
ING Clarion	—	237,000	—	237,000
ING (NZ) Limited	—	1,845,013	—	1,845,013
ING Real Estate International Investments III BV	28,193,963	28,111,342	28,193,963	28,111,342
	28,193,963	30,193,355	28,193,963	30,193,355

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

In prior periods, some of the Group’s investment properties were leased to a related party of the Responsible Entity at commercial rates. The lease expired on 30 June 2008. The group has not received any rental income from related parties during the year. Rental income recognised for the year ended 30 June 2008 was $13,200,000.

NOTE 10. SUBSEQUENT EVENTS

On 20 August 2009 the Group announced that one of its equity accounted investments (ING NZ Subsidiary Trust No 1), which owns the New Zealand Students portfolio, fi nalised negotiations with its lender on terms of a refi nance of its existing facility $16,656,000 (New Zealand dollars 20,800,000). The refi nance agreement is for an interest only two year term expiring in August 2011.

56 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

==> picture [68 x 56] intentionally omitted <==

Independent auditor’s report to the stapled security unitholders of the ING Real Estate Community Living Fund and the ING Real Estate Community Living Management Trust (collectively ‘the Funds’)

Report on the Concise Financial Report

The accompanying concise financial report of the ING Real Estate Community Living Group, prepared in accordance with ASIC Class Order 05/642, comprises:

• the balance sheet as at 30 June 2009, the income statement, statement of changes in equity and cash flow statement for the year then ended and related notes, derived from the audited financial report of the ING Real Estate Community Living Group for the year ended 30 June 2009 for the consolidated stapled entity (the Group) comprising both the ING Real Estate Community Living Fund and the entities it controlled during the year ended 30 June 2009; and

• the balance sheet as at 30 June 2009, the income statement, statement of changes in equity and cash flow statement for the year then ended and related notes, derived from the audited financial report of the ING Real Estate Community Living Management Trust and the entities it controlled during the year ended 30 June 2009.

The concise financial report also includes discussion and analysis. The concise financial report does not contain all the disclosures required by the Australian Accounting Standards.

Directors’ Responsibility for the Concise Financial Report

The Directors of ING Management Limited, the Responsible Entity of the Funds, are responsible for the preparation and presentation of the concise financial report in accordance with Accounting Standard AASB 1039 Concise Financial Reports , and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation of the concise financial report; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on the concise financial report based on our audit procedures. We have conducted an independent audit, in accordance with Australian Auditing Standards, of the concise financial report of the Funds for the year ended 30 June 2009. Our audit reports on the financial reports of the Funds for the year were signed on 26 August 2009. The Australian 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 for the year is free from material misstatement.

Our procedures in respect of the concise financial report included testing that the information in the concise financial report is derived from, and is consistent with, the financial report for the year, and examination on a test basis, of evidence supporting the amounts, discussion and analysis, and other disclosures which were not directly derived from the financial report for the year. These procedures have been undertaken to form an opinion whether, in all material respects, the concise financial report complies with Accounting Standard AASB 1039 Concise Financial Reports and whether the discussion and analysis complies with the requirements laid down in AASB 1039 Concise Financial Reports .

Liability limited by a scheme approved under Professional Standards Legislation

www.ingrealestate.com.au 57

2

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 complied with the independence requirements of the Corporations Act 2001 .

Auditor’s Opinion

In our opinion, the concise financial report, including the discussion and analysis of ING Real Estate Community Living Group, for the year ended 30 June 2009, complies with Accounting Standard AASB 1039 Concise Financial Reports .

Significant Uncertainty as to Going Concern

Without qualifying our conclusion, we draw attention to Note 2 in the concise financial report which indicates that the Group need to refinance its Australian secured bank debt within 12 months; that continued compliance with the terms of the Australian secured bank debt is dependent on future market conditions including fair value of investment properties; and the Group may have insufficient finances to satisfy a guarantee provided in relation to its share of a deferred purchase obligation of a joint venture. These factors cast doubt over whether the Funds will realise their assets and liabilities in the normal course of the business and at the amounts stated in the concise financial report. The concise financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that might be necessary should the Funds not continue as a going concern.

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Ernst & Young

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Douglas Bain Partner 26 August 2009

58 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

Top 20 Unitholders

Rank Name of unitholder	Rank Name of unitholder	Number of units held at 31 August 2009	Number of units held at 31 August 2009	%
1	J P Morgan Nominees Australia Limited		37,833,640	8.58%
2	National Nominees Limited		25,947,126	5.88%
3	HSBC Custody Nominees (Australia) Limited		24,702,587	5.60%
4	UBS Nominees Pty Ltd		15,900,511	3.61%
5	Mr Simon Marais		15,688,264	3.56%
6	ING Real Estate International Investments III BV		14,958,145	3.39%
7	Citicorp Nominees Pty Limited		14,365,457	3.26%
8	ING Real Estate International Investments III BV		11,735,818	2.66%
9	Murdesk Investments Pty Ltd		11,000,000	2.49%
10	Citicorp Nominees Pty Limited		10,204,701	2.31%
11	ANZ Nominees Limited		8,121,512	1.84%
12	ANZ Nominees Limited		6,186,006	1.40%
13	Woodduck Pty Ltd		6,000,000	1.36%
14	Multiplex Funds Management Limited		5,730,191	1.30%
15	Y S Chains Pty Ltd		5,000,000	1.13%
16	McNeil Nominees Pty Limited		3,500,000	0.79%
17	Netwealth Investments Limited		3,434,600	0.78%
18	McNeil Nominees Pty Limited		3,200,000	0.73%
19	Hanhill Capital Pty Ltd		2,700,000	0.61%
20	UBS Wealth Management Australia Nominees PtyLtd		2,378,565	0.54%
Total number of units reported:			228,587,123	51.83%
Total number of units on issue:			441,029,194
% of total number of units reported:			51.83%

RANGE OF UNITHOLDERS

Range	Holders	Number of units	%
1 to 1,000	190	77,820	0.02
1,001 to 5,000	1,029	3,438,763	0.78
5,001 to 10,000	1,190	9,535,866	2.16
10,001 to 100,000	2,378	74,333,856	19.42
100,001 and Over	355	304,445,548	77.62
Total	5,142	391,831,853	100

SUBSTANTIAL UNITHOLDERS

The table below gives details of the last notice for each substantial unitholder lodged with the Australian Securities Exchange to 31 August 2009.

Date	Party	Number of units	%
12-Dec-08	Orbis Investment Management	66,066,174	14.98%
18-May-07	ING Group	25,430,266	6.47%
20-Nov-08	Renaissance Property Securities	24,476,242	5.55%

www.ingrealestate.com.au 59

Investor Relations

Enquiries relating to ING Real Estate Community Living Group can be directed to the ING Real Estate Investor Services line on 1300 653 497 (or from outside Australia +61 2 8280 7057). This service is available from 8.30am to 5.30pm (Sydney time) on all business days.

WWW.INGREALESTATE.COM.AU

You can visit the ING Real Estate website to fi nd information on the Fund, its property portfolio and recent unit price. While visiting the site unitholders can access their investment details including holding balance and payment history. Recent Annual and Half Year reports along with all ASX announcements are also available.

INVESTOR BENEFITS

ING Real Estate is pleased to offer an Investor Benefi ts program offering investors the opportunity to purchase from entertainment and lifestyle providers at special discount and promotional rates. To participate in this program you need to go online to www.ingrealestate.com.au and access ‘My Unitholding’ within the Investor Centre section. Further details of how to log in to the benefi ts program can be found on this page.

DISTRIBUTION PAYMENTS AND ANNUAL TAXATION STATEMENT

Distributions are currently suspended. On recommencement, distribution payments are at the end of each calendar quarter as per below. You can view your 2008/2009 Annual Taxation Statement online by visiting www.ingrealestate.com.au and accessing ‘My Unitholding’ within the Investor Centre section.

2009/2010 UNITHOLDER CALENDAR[ 1]

Distribution paid for the quarter ending 30 September 2009 (if applicable)	30 October 2009
Annual Unitholder Brief ng	November 2009
Distribution paid for the quarter ending 31 December 2009 (if applicable)	26 February 2010
Half Year Update available	26 February 2010
Distribution paid for the quarter ending 31 March 2010 (if applicable)	30 April 2010
Distribution paid for the quarter ending 30 June 2010 (if applicable)	31 August 2010
Annual Taxation Statement for 2009/2010 f nancial year mailed	31 August 2010
Annual Report available	30 September 2010

1) These dates are indicative only and are subject to change.

60 ING REAL ESTATE COMMUNITY LIVING GROUP ANNUAL REPORT 2009

Corporate Directory

ANTI-MONEY LAUNDERING AND COUNTER TERRORISM FINANCING LEGISLATION

Laws were implemented from 12 December 2007 to improve Australia’s existing anti-money laundering and counter terrorism fi nancing (AML/CTF) system. These laws meet higher international standards to protect Australian businesses from being used for money laundering and terrorism fi nancing.

As a result, ING Real Estate is required to identify their clients for certain transactions, such as:

• Application for an issue of securities submitted by an investor (i.e. the applicant);

• Off market ‘standard’ transfer submitted by an investor (i.e. the buyer/transferee);

• Transfers or Transmissions from a deceased estate submitted by an investor (i.e the next of kin, executor, surviving joint holder, benefi ciary).

The verifi cation requirements only apply to transactions after 12 December 2007.

Generally, your fi nancial adviser will advise you of the necessary documents you will need to provide for verifi cation (such as your current driver’s licence or passport). If you undertake the transaction without a fi nancial adviser, you will need to provide certifi ed copies of these documents to the Unit Registry along with your transfer request.

If you do not provide identifying documents we will not be able to process your transaction.

PRIVACY POLICY

ING Management Limited is committed to ensuring the confi dentiality and security of your personal information. The ING Privacy Policy, detailing our handling of personal information, is available on our website www.ingrealestate.com.au

COMPLAINTS

ING Management Limited is a member of an independent dispute resolution scheme, the Financial Ombudsman Service (FOS). Any unitholder wishing to register a complaint should direct it to Investor Services in the fi rst instance, at the Responsible Entity’s address listed in the Corporate Directory in this Report.

ING REAL ESTATE COMMUNITY LIVING GROUP

ING Real Estate Community Living Management Trust ARSN 122928410

ING Real Estate Community Living Fund ARSN 107459576

RESPONSIBLE ENTITY

ING Management Limited ABN 15 006 065 032 AFS Licence No: 237534

REGISTERED OFFICE

Level 6, 345 George Street Sydney NSW 2000

Telephone: +61 2 9033 1035 Facsimile: +61 2 9033 1060 Email: realestate@ingrealestate.com Website: www.ingrealestate.com.au

DIRECTORS OF IML

R J Colless AM (Chairman) P M Clark AM M B Easson AM P J Redmond P F Scully

SECRETARY

H S Thomson

UNIT REGISTRY

Link Market Services Limited

Level 12, 680 George Street Sydney NSW 2000

Locked Bag A14 Sydney South NSW 1235

Telephone: 1300 653 497 (local call cost) or from outside Australia: +61 2 8280 7057 Facsimile: +61 2 9287 0303 Email: ingrealestate@linkmarketservices.com.au

AUDITORS

Ernst and Young

680 George Street Sydney NSW 2000

www.ingrealestate.com.au 61

ING REAL ESTATE INVESTMENT MANAGEMENT AUSTRALIA

LEVEL 6, 345 GEORGE STREET SYDNEY NSW 2000 T : + 61 2 9033 1035 F : + 61 2 9033 1060

ING REAL ESTATE GLOBAL NETWORK

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