INGENIA COMMUNITIES GROUP — Annual Report 2014

Sep 18, 2014

==> picture [125 x 96] intentionally omitted <==

ANNUAL REPORT 2014

Ingenia Communities Holdings Limited

57 quality Australian seniors living communities and growing

$11.6m $14.2m 49% Increase in Underlying profit Operating cashflow Increased by 97% Increased by 27% Total segment revenue on FY13 on FY13

www.ingeniacommunities.com.au

Annual Report 2014 1

==> picture [109 x 89] intentionally omitted <==

==> picture [188 x 64] intentionally omitted <==

==> picture [102 x 35] intentionally omitted <==

----- Start of picture text -----

Garden Villages
Settlers Lifestyle
Active Lifestyle Estates
----- End of picture text -----

==> picture [110 x 177] intentionally omitted <==

==> picture [163 x 63] intentionally omitted <==

Business Strategy

Ingenia Communities Group (ASX ticker: INA) is a leading property group that owns, operates and develops a diversified portfolio of seniors living communities in Australia. Since February 2013 Ingenia has become the largest owner, operator and developer of lifestyle and tourism parks in NSW and is presently assessing opportunities in South East Queensland.

2 Ingenia Communities Holdings Limited

Ingenia Communities Holdings Limited Annual Reports

for the year ended 30 June 2014

CONTENTS

CONTENTS
Directors’ Report	3
Auditors’ Independence Declaration	39
Consolidated Statement of Comprehensive Income	40
Consolidated Balance Sheet	42
Consolidated Cash Flow Statement	43
Statement of Changes in Equity	44
Notes to the Financial Statements	45
1. Summary of signifcant accounting policies	45
2. Accounting estimates and judgements	53
3. Segment information	54
4. Earnings per security	56
5. Revenue	57
6. Finance expense	57
7. Income tax beneft	57
8. Discontinued operations and assets held for sale	58
9. Cash and cash equivalents	60
10. Trade and other receivables	61
11. Inventories	61
12. Investment properties	61
13. Plant and equipment	66
14. Trade and other payables	66
15. Borrowings	67
16. Retirement village resident loans	68
17. Provisions	68
18. Derivatives	68
19. Deferred tax liabilities	69
20. Issued securities	69
21. Reserves	70
22. Accumulated losses	70
23. Commitments	71
24. Contingent liabilities	71
25. Share-based payment transactions	72
26. Capital management	73
27. Financial instruments	74
28. Fair value measurement	80
29. Auditor’s remuneration	80
30. Related parties	81
31. Company fnancial information	81
32. Subsidiaries	82
33. Notes to the cash fow statement	83
34. Subsequent events	84
Directors’ Declaration	85
Independent Auditors’ Report	86

Annual Report 2014 3

Directors’ Report

for the year ended 30 June 2014

The directors of Ingenia Communities Holdings Limited (“ICH” or the “Company”) present their report together with the Company’s financial report for the year ended 30 June 2014 (the “current year”) and the Independent Auditor’s Report thereon. The Company’s financial report comprises the consolidated financial report of the Company and its controlled entities, including Ingenia Communities Fund (“ICF” or the “Fund”) and Ingenia Communities Management Trust (“ICMT”) (collectively, the “Trusts”).

The shares of the Company are “stapled” with the units of the Trusts and trade on the Australian Securities Exchange (“ASX”) effectively as one security. Ingenia Communities RE Limited (“ICRE” or “Responsible Entity”), a wholly owned subsidiary of the Company is the responsible entity of the Trusts. In this report, the Company and the Trusts are referred to collectively as the Group.

In accordance with Accounting Standard AASB 3 Business Combinations , the stapling of the Company and the Trusts is regarded as a business combination. The Company has been identified as the parent for preparing consolidated financial reports.

1. DIRECTORS

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

Non-executive Directors (“NEDs”)

Jim Hazel (Chairman) Appointed 1 March 2012 Philip Clark AM Appointed 4 June 2012 Amanda Heyworth Appointed 16 April 2012 Robert Morrison Appointed 8 February 2013 Norah Barlow NZOM Appointed 31 March 2014

Executive Directors

Simon Owen Appointed 24 November 2011 (Managing Director and CEO)

Special Responsibilities

Jim Hazel – Chairman

==> picture [73 x 76] intentionally omitted <==

Mr Hazel has an extensive corporate career in both the banking and retirement sectors. His retirement village operations experience includes being Managing Director of Primelife Corporation Limited (now part of Lend Lease). Other listed company

directorships include Bendigo and Adelaide Bank Limited since 2010, Centrex Metals Limited since 2010 and Impedimed Limited since 2006. Mr Hazel also serves on the Boards of Motor Accident Commission, Coopers Brewery Limited and the Council for Ageing (SA) Inc.

Philip Clark AM

Mr Clark is the Chair of SCA Property Group Limited and Hunter Hall Global Value Limited. He is a member of the J.P. Morgan Advisory Council and also chairs a number of government and private company boards. He was Managing Partner and Chief Executive Officer of Minter Ellison and worked with that firm from 1995 until June 2005. Prior to joining Minter Ellison, Mr Clark was Director and Head of Corporate with ABN Amro Australia and prior to that he was Managing Partner with Mallesons Stephen Jaques for 16 years.

Mr Clark is Chair of the Remuneration and Nomination Committee.

Amanda Heyworth

==> picture [73 x 77] intentionally omitted <==

Ms Heyworth is a professional company director. She previously served as Executive Director of Playford Capital Venture Capital Fund. She has a wealth of experience in the finance, technology and government sectors and teaches in the Australian

Graduate School of Management’s MBA program. Ms Heyworth brings a finance and growth focus to the Group, having worked on many product launches and geographic expansions and over 40 capital raisings and M&A transactions. She sits on a number of public sector and private boards.

Ms Heyworth is Chair of the Audit and Risk Committee and a member of the Remuneration and Nomination Committee.

Robert Morrison

Mr Morrison has extensive experience in property investment and funds management. During his 21 years at AMP, Mr Morrison’s executive roles included Head of Property for Asia Pacific and Director of Asian Investments. Mr Morrison’s investment experience includes senior portfolio management roles where he managed both listed and unlisted property funds on behalf of institutional investors.

Mr Morrison was previously an Executive Director of AMP Capital and a National Director of the Property Council of Australia. He is a founding partner and Executive Director of alternative investments firm, Barwon Investment Partners and is a Non-executive Director to the Board of Mirvac Funds Management Limited.

Mr Morrison is a member of the Audit and Risk Committee.

Mr Hazel is a member of the Remuneration and Nomination Committee.

4 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014�|�continued

Norah Barlow NZOM

Ms Barlow is a professional company director. For the past 12 years, she served as the Chief Executive Officer of Summerset Group, the third largest retirement village operator and the second largest developer of villages in New Zealand. Ms Barlow is also a past President of Retirement Villages Association of New Zealand, a role she held for six years.

Ms Barlow currently sits on the Board of Cigna Life Insurance Limited, Vigil Monitoring Limited and Cooks Global Food Group Limited. She serves as a member of the New Zealand Government’s National Advisory Council for the Employment of Women and remains with Summerset as a Non-executive Director.

Ms Barlow is a member of the Audit and Risk Committee.

==> picture [73 x 77] intentionally omitted <==

Simon Owen – Managing Director and CEO

Mr Owen joined the Group in November 2009 as the Chief Executive Officer. He initiated the internalisation of management and exit from the ING Group as well as Ingenia’s recent focus on lifestyle parks. Mr Owen

brings to the Group in-depth experience in the retirement sector and is the immediate past National President of the Retirement Villages Association (now part of the Retirement Living Council), the peak industry advocacy group for the owners, operators, developers and managers of retirement communities in Australia.

Mr Owen’s experience spans multiple disciplines including finance, funds management, mergers and acquisitions, business development and sales and marketing. Prior to Ingenia Communities, Mr Owen was the CEO of Aevum, a formerly listed retirement company. Mr Owen is a qualified accountant (CPA) with postgraduate diplomas in finance and investment, and advanced accounting.

1.2 Meetings

The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director was as follows:

											Remuneration &	Remuneration &	Remuneration &
		Board					Audit & Risk		Committee		Nomination		Committee
	A				B		A		B		A		B
Jim Hazel	20				20		–		–		4		4
Philip Clark AM	20				19		4		4		4		4
Amanda Heyworth	20				20		5		5		4		4
Robert Morrison	20				20		5		5		–		–
Norah Barlow	4				4		1		1		–		–
Simon Owen	20				20		–		–		–		–

A: Meetings eligible to attend B: Meetings attended

1.3 Interests of Directors

Securities in the Group held by directors as at 30 June 2014 were:

		Issued stapled	Performance	Retention
		securities	quantum rights	quantum rights
Jim Hazel		1,333,334	–	–
Philip Clark AM		208,334	–	–
Amanda Heyworth		561,334	–	–
Robert Morrison		221,667	–	–
Norah Barlow		178,000	–	–
Simon Owen		2,179,667	4,720,000	1,070,000

Annual Report 2014 5

2. COMPANY SECRETARIES

Leanne Ralph

Ms Ralph was appointed to the position of Company Secretary in April 2012. Ms Ralph has over 20 years experience in chief financial officer and company secretarial roles for various publicly listed and unlisted entities. Ms Ralph is a member of the Governance Institute of Australia and the Australian Institute of Company Directors. Ms Ralph is the principal of Boardworx Australia Pty Ltd, which supplies bespoke outsourced Company Secretarial services to a number of listed and unlisted companies.

Tania Betts

in May 2012, after a six-year career at Stockland Group where she held various positions including National Finance Manager within their Retirement Living Division. Ms Betts’ previous experience includes several years within the chartered accounting profession as well as working for a leading health care provider. She holds a Bachelor of Business in Accounting and Finance, and is a member of both the Institute of Chartered Accountants and the Governance Institute of Australia. Ms Betts was the 2011 winner of the Urban Development Institute of Australia NSW and SMEC Young Developers’ Award for Excellence.

3. CORPORATE GOVERNANCE STATEMENT

This statement outlines the main corporate governance practices currently in place for Ingenia Communities Group and also addresses the 2nd Edition of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (ASX Recommendations). The Board believes the Group accords with the majority of the principles and recommendations of the ASX Corporate Governance Council with the exception of one recommendation, which is outlined in the report.

The corporate governance policies and practices described below are those that have been in place for the 2013-14 financial year, or as at the date of this report where indicated. The Board continues to review the governance framework and practices of the Group to ensure they meet the interests of securityholders. As at the date of this report, a process to review the Group’s governance practices against the 3rd Edition of the ASX Recommendations is underway.

All references to the Group’s website are to: www.ingeniacommunitites.com.au

3.1 Corporate Governance Structure

a. Ingenia Communities Group and its Constitutions

Ingenia Communities Group is a triple stapled structure comprising the parent company, Ingenia Communities Holdings Limited, Ingenia Communities Fund and Ingenia Communities Management Trust, (together known as the Group). ICF and ICMT each have their own Constitution (the Constitutions) both of which have been lodged with the Australian Securities and Investments Commission (“ASIC”). The rights and obligations of unitholders are governed by these Constitutions and the Corporations Act 2001 . The terms contained in each Constitution are substantially the same.

The responsible entity of ICF and ICMT, Ingenia Communities RE Limited is the holder of an Australian Financial Services Licence (“AFSL”).

As a result of the stapling, ICH and ICRE operate as a coordinated Group with the Boards of both companies having the same composition and the meetings held concurrently where appropriate. References to the ‘Board’ in this statement are references to the Board of ICH and ICRE (as the Responsible Entity of ICF and ICMT).

b. Compliance Plans

In accordance with Corporations Act requirements, the Responsible Entity has registered compliance plans for ICF and ICMT with ASIC. The compliance plans describe the procedures that the Responsible Entity will apply in operating ICF and ICMT to ensure compliance with the Corporations Act and the Constitutions of ICF and ICMT.

The Board of the Responsible Entity is responsible for monitoring the Group’s compliance with the compliance plans. Further details are provided under the section on risk management.

3.2 Role of the Board

The Board of Ingenia Communities Group is responsible for overseeing the effective management and operation of the Group. The Board operates under a formal charter, which can be found on the Group’s website. In addition to the functions prescribed by law, the Board has the following responsibilities outlined in its charter:

Corporate Strategy

• plans for the Group.

• budgets of the Group.

• Evaluate, approve and monitor major capital expenditure, capital management and all major corporate transactions.

Board Composition and Structure

• Review the composition of the Board and consider Board succession.

• Ensure an annual review of the performance of the Board, its committees and directors is carried out.

6 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014�|�continued

Other Corporate

• Approve changes to the Group’s capital structure.

• Approve the establishment and issue of any equity rights in the Group via incentive plans.

• Establish and approve a distribution policy to securityholders and any changes to that policy.

• the Group.

• Approve the issue of Public Disclosure Statements.

Executive Management

• (“CEO”).

• Approve the employment terms and conditions of the CEO.

• Review and provide feedback on the performance of the CEO.

• Approve the appointment of the CEO’s direct reports and oversee their performance and remuneration.

• Review and ratify the employment terms of the CEO’s direct reports (as recommended by the CEO).

• Review management succession planning.

• Approve the level of delegated authority to the CEO, via the Delegations and Authorities Policy.

• Appointment and removal of the Company Secretary.

Governance and Risk Management

• Monitor and review the overall Risk Management framework for the Group.

• Approve and monitor compliance with the Group’s key corporate policies, and conduct a review of these policies on an annual basis.

• Monitor the Group’s operations in relation to, and compliance with, relevant regulatory requirements, and any other contractual, statutory or legal obligation.

• Monitor compliance with the Group Delegations and Authorities Policy.

• Recommending to securityholders the appointment of the external auditor.

• Review and approve at least annually the Group’s Corporate Governance Statement.

Financial Reporting

• Establish an Audit and Risk Committee to review the Group’s financial reporting and oversee the independence of the external auditors, and to review reports provided by the Audit and Risk Committee.

• Review and approve the disclosure in the annual report and any departures from the ASX Corporate Governance Principles and Recommendations.

Investor Communications

• Approve all material reporting and other external communications by the Group in accordance with the Group’s Continuous Disclosure Policy.

• Review management’s strategy and program for investor communications annually.

• Review management’s written policies and procedures to ensure compliance with the ASX continuous disclosure requirements.

Generally, the CEO is responsible for all matters not specifically identified as the responsibility of the Board.

3.3 Role of the Board of the Responsible Entity

As the Responsible Entity, the Board of Ingenia Communities RE Limited has additional responsibilities for the operation of ICF and ICMT. The Responsible Entity must exercise its powers and perform the obligations conferred on it under the Constitutions and the Corporations Act 2001 and ensure that the activities of the Group are conducted in a proper and efficient manner in the best interests of unitholders. The Responsible Entity must also ensure compliance with the conditions of the AFSL and approve and monitor compliance with compliance plans.

3.4 Board size and Composition

The Constitution of the Group provides that there will be a minimum of three directors and not more than ten directors.

Directors are appointed 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 the industry in which it engages;

• performance of management and exercise independent judgement; and

• a majority of independent directors.

deemed appropriate for the Board to collectively possess are identified and if required, an executive search may be engaged to assist in this recruitment process.

a. Terms of Appointment

Non-executive directors are appointed pursuant to formal letters of appointment which, among other things, set out the key terms and conditions of the appointment, the Board’s expectations in relation to the performance of the director, procedures for dealing with a director’s potential conflict of interest and the disclosure obligations of the director, together with the details of the director’s remuneration.

Annual Report 2014 7

b. Directors’ Interests

Directors are required to keep the Board advised of any interest that may be in conflict with those of the Group, and restrictions are applied to directors’ rights to participate in discussion and to vote, as circumstances dictate when a conflict has been identified. In particular, where a potential conflict of interest may exist, directors concerned may be required to leave the Board meeting while the matter is considered in their absence.

The Group has also entered into a deed of disclosure with each director, which is designed to facilitate the Group’s compliance with its obligations under the ASX Listing Rules relating to disclosure of changes in directors’ security holdings. Directors and their nominated related party security holdings, are also monitored to identify changes that may require urgent disclosure.

c. Independent Advice

The Board has a policy of enabling directors to seek independent professional advice for Group related matters at the Group’s expense, subject to the prior notification of the Chairman and where the estimated costs are considered to be reasonable.

d. Directors’ Independence

to directors’ independence. The Board considers an independent director to be a non-executive director who is not a member of the Group’s management and who is free of any business or other relationship that could materially interfere with, or could reasonably be perceived to interfere with, the independent exercise of their judgement. The Board will consider the materiality of any given relationship on a case-by-case basis, having regard to both quantitative and qualitative principles.

executive directors, and one executive director. The Boards of ICH and ICRE have the same directors.

The current members of the Board are:

• Mr Jim Hazel (Chairman)

• Ms Amanda Heyworth (Non-executive Director)

• Mr Philip Clark (Non-executive Director)

• Mr Robert Morrison (Non-executive Director)

• Ms Norah Barlow (Non-executive Director)

• Mr Simon Owen (Managing Director and CEO)

Mr Jim Hazel, Ms Amanda Heyworth, Mr Philip Clark, Mr Robert Morrison and Ms Norah Barlow are considered by the Board to be independent. The Group recognises that having a majority of independent non-executive directors provides assurance that the Board is structured properly to fulfil its role in holding management accountable for the Group’s performance.

The Board considers that the existing Board structure is appropriate for the Group’s current operations and stage of development.

Directors’ details are listed in the Directors Report, including details of their other listed entity directorships and experience.

e. Chairman

The role of Chairman and CEO is not occupied by the same individual. The Board has agreed that it should continue to have a majority of independent non-executive directors, that the positions of Chairman and CEO must be separate, and that the Chairman should be an independent nonexecutive director.

Mr Jim Hazel was appointed Chairman of the Group on 1 March 2012 and is considered an independent director in accordance with recommendation 2.1 of the ASX recommendations.

f. Diversity

In appointing members to the Board, consideration is given to the skills, business experience and educational backgrounds of candidates. The advantage of having a mix of relevant business, executive and professional experience on the Board; the importance of cultural and ethical values; and the benefits of diversity, including gender diversity is also recognised. These factors will also be considered in any future appointments to the Board including any identified skills ‘gaps’.

The Remuneration and Nomination Committee oversees the director nomination process. Ultimately, the full Board determines who is invited to fill a casual vacancy after extensive one-on-one and collective interviews with candidates and thorough due diligence and reference checking.

The Group Board has two female non-executive directors out of six directors. Ms Amanda Heyworth was appointed to the Board for her specific skills and financial, investment and marketing experience. Ms Norah Barlow was appointed to the Board on 31 March 2014 for her extensive industry experience.

A formal diversity policy has been adopted by the Board that outlines the Group’s commitment to diversity in the workplace and the provision of a work environment that is free from discrimination and promotes equal opportunity for all. Ingenia promotes an inclusive workplace where employee differences in areas like gender, age, culture, disability and lifestyle choice are valued. The unique skills, perspectives and experience that the Group’s employees bring to the table encourage creativity and innovation in thought that better represents Ingenia’s diverse customer base, ultimately driving improved business performance.

The policy does not include measurable objectives for achieving gender diversity as the Group has always had a policy of actively encouraging gender diversity at all levels in the organisation, and a culture that supports workplace diversity. This is evidenced by:

• The proportion of female directors: 33%

• The proportion of female employees on the executive committee: 60%

• The proportion of female employees in the whole organisation: 70%

• The proportion of female employees in senior positions: 48%

In accordance with the requirements of the Workplace Gender Equality Act 2012, the Group has lodged its 2014 annual public report with the Workplace Gender Equality Agency which is available on the Group’s website.

8 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014�|�continued

g. Board Meetings

The Board typically schedules meetings on a monthly basis, with additional meetings convened as required. Agendas for each meeting are prepared by the Company Secretary together with the CEO and input from the Chairman, and are distributed prior to the meeting together with supporting papers.

report, as well as reports addressing matters of strategy, governance and compliance. Senior executives are directly involved in Board discussions, and directors have a number of further opportunities to contact a wider group of employees, including visits to business operations.

Board papers include minutes of Board committees and subsidiaries as well as papers on material issues requiring consideration. Significant matters are presented to the Board by senior executives, and the Board may seek further information on any issue, from any executive.

h. Board and Director Performance

through performance management and review. The Board review process is designed to help enhance performance by providing a mechanism to raise and resolve issues and to provide recommendations to enhance its effectiveness.

The Board has recently conducted its second performance review in accordance with the principles in this statement.

3.5 Board Committees

The ultimate responsibility for the oversight of the operations of the Group rests with the Board. However, the Board may discharge any of its responsibilities through committees of the Board in accordance with the Constitutions and the Corporations Act 2001 .

The Board has established the following committees, which assist it with the execution of its responsibilities. The composition and effectiveness of the committees are reviewed on an annual basis:

• Audit and Risk Committee

• Remuneration and Nomination Committee

Each of these committees operate in accordance with specific charters approved by the Board which can be found on the Group’s website.

a. Audit and Risk Committee

The Board has established an Audit and Risk Committee (“ARC”), which assists the Board in fulfilling its governance and disclosure responsibilities. The ARC has a written charter outlining its role and responsibilities.

The ARC has the following responsibilities:

• commentary prepared by management.

• by the Group’s external auditor.

• Assess the appropriateness of the accounting policies adopted in preparing the Group’s financial reports.

• for securityholder needs.

• Review compliance with disclosure requirements.

• Assess the adequacy of representations by management as to presentation of the financial reports.

• the Board.

ii. External auditors

• Establish and maintain procedures for the appointment and rotation of the Group’s external auditor.

• Assess the performance of the external auditor.

• Assess the independence of the external auditor, having regard to the provision of non-audit services.

• Review the reasonableness of the external audit fees.

iii. Internal control framework

• Review the written policies and procedures designed to ensure accurate external financial reporting and make recommendations to the Board thereon.

• Whilst the Group does not currently have an internal audit function, should there be one in the future, the ARC will receive reports from the internal audit function including all incidents of actual or suspected fraud or theft.

• Review of operational risk management framework.

• Review of the internal compliance and control systems in relation to functions other than financial reporting.

iv. Compliance

• Review the adequacy of the Group’s system for compliance with relevant laws, regulations, standards and codes.

The purpose of the ARC is to review the integrity of the Group’s financial reporting practices; oversee the independence of the external auditors; maintain open lines of communication among the Board and external auditors, serve as an independent and objective party to review the financial information submitted by management to the Board for issue to securityholders, regulatory authorities and the general public; review the adequacy of the reporting and accounting controls of the Group; and to oversee the Group’s legislative compliance and risk management policies and procedures.

Annual Report 2014 9

v. Risk management

• The ARC shall be responsible for implementing and overseeing the Group’s risk management policies.

• Identifying and assessing the Group’s material business risks.

• Regularly reviewing and updating the Group’s risk profile.

• Approving treasury and hedge policies.

• Overseeing the risk management policies and systems.

• Considering whether the Group has any material exposure to economic, environmental and social sustainability risks, and if applicable, review and monitor the systems in place to manage these risks.

The ARC consists of three non-executive directors, all of whom are independent directors, and is chaired by an independent director, who is not chair of the Board. The chair satisfies the test of independence.

The current members of the ARC are:

• Ms Amanda Heyworth (Chair);

• Mr Robert Morrison; and

• Ms Norah Barlow.

Mr Philip Clark AM was a member of the ARC until April 2014.

At least one member of the ARC has relevant accounting qualifications and experience and all members have a good understanding of financial reporting. Details of these directors’ qualifications and attendance at ARC meetings are set out in the Directors’ report.

The external auditor attends the annual general meeting and is available to answer securityholder questions about the conduct of the audit and the preparation and content of the audit report, accounting policies adopted by the Group, and the independence of the auditor in relation to the conduct of the audit.

b. Remuneration and Nomination Committee

The Board has an established Remuneration and Nomination Committee (“RNC”). The RNC has a written charter defining its role and responsibilities.

The RNC has been established by the Board to assist in the review of the overall strategies of the remuneration of the Group’s non-executive directors and executives and for the review of the composition of the Board.

The purpose of the RNC is to support and advise the Board in the following areas:

• Review the on-going appropriateness and relevance of the executive remuneration policy to enable the Group to attract and retain executives and directors who will create value for securityholders.

• Ensure that the executive remuneration policy demonstrates a clear relationship between key executive performance and remuneration.

• Recommend to the Board the remuneration of executive and non-executive directors.

• Fairly and responsibly reward executives having regard to the performance of the Group, the performance of the executive and the prevailing remuneration expectations in the market.

• Review the Group’s recruitment, retention and termination policies and procedures for senior management.

• Review and recommend to the Board the remuneration of direct reports to the CEO, and as appropriate other senior executives.

• Review and recommend to the Board any equity based plans and other incentive schemes.

• Develop a process for evaluation of the performance of the Board, its committees and directors.

• Oversee the annual performance evaluations of senior executives of the Group.

• Make recommendations to the Board on the appointment and re-election of directors.

• Review and report to the Board on the mix of skills and experience of the Board with the aim of ensuring it remains an effective decision-making body.

The RNC consists of three non-executive directors all of whom are independent directors and is chaired by an independent director, who is not chair of the Board. The chair satisfies the test of independence.

The current members of the RNC are:

• Mr Philip Clark AM (Chair);

• Ms Amanda Heyworth; and

• Mr Jim Hazel.

Each member of the senior executive team, including the executive director, signed formal employment contracts at the time of their appointment, covering a range of matters including their duties, rights, responsibilities and any entitlements on termination. Each contract refers to a specific formal job description. Each contract sets out the remuneration of the executive, including their entitlements to any rights under incentive plans.

The Group aims to have a clear process for evaluating the performance of senior executives. The Board has delegated to the RNC the responsibility to oversee the annual performance evaluation of the Group’s senior executives, but retains the performance evaluation of the CEO.

criteria, including the business performance of the Group, whether strategic objectives are being achieved, and the development of management and personnel.

Non-executive directors receive director’s fees outlined in their letters of appointment and reviewed on an annual basis pursuant to advice from an external remuneration consultant. No non-executive director has any entitlement to participate in any executive incentive plan.

Further information on directors’ and executives’ remuneration, including principles used to determine remuneration, is set out in the Directors’ Report under the heading ‘’Remuneration Report’’.

10 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014�|�continued

c. Investment Committee

The Investment Committee (“IC”) has been established to assist the Board oversee the investment activities of the Group by reviewing and making recommendations to the Board on:

• major capital expenditure;

• capital management;

• all major corporate transactions including acquisitions and divestment; and

• developments and refurbishments.

The IC reviews investment activities greater than $250,000 and provides endorsement to the CEO for execution. Investment activities greater than $500,000 are submitted to the Board for approval.

The IC monitors the performance of the Group’s investments by conducting quarterly reviews on development activities and bi-annual reviews on acquisitions.

The IC consists of:

• General Manager Operations;

• Senior Fund Analyst; and

• General Manager Commercial.

The Committee is chaired by the Senior Fund Analyst.

3.6 Risk Management

The Board is responsible for ensuring that sound risk management strategy and polices are in place. The Board has delegated to the ARC the responsibility for identifying and overseeing major risks and ensuring that systems are in place to manage them.

In addition, the ARC:

reviewing compliance on an ongoing basis; reporting on compliance matters, including breaches, to the ARC; and acting on recommendations of the ARC. Matters are escalated to the ICRE Board or ASIC when necessary.

the ARC to ensure the compliance officer is well placed to adequately deal with compliance issues. Management, via the compliance officer, is required to assess risk management and associated internal compliance and control procedures, and is required to report back quarterly to the ARC as to whether those risks are being managed effectively. A quarterly risk and compliance report is prepared by the compliance officer for review and consideration by the Board.

a. Compliance Plans

ICF and ICMT both have formal compliance plans that have been adopted by the Board and lodged with 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 2001 ;

• the Constitutions of ICF and ICMT;

• industry practice standards relevant to the particular scheme; 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 the Constitutions; 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, 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.

• business risks;

• regularly reviews and updates the Group’s risk profile; and

• oversees the risk management policies and systems.

The Group’s risk management framework is integrated with its day-to-day business processes and functional responsibilities, and is supported by a dedicated compliance officer.

of the compliance plans of ICF and ICMT. The compliance officer is responsible for ensuring adequate internal systems and controls have been implemented to ensure compliance with the Corporations Act 2001 , ICF and ICMT’s Constitutions, the Responsible Entity’s AFSL, and internal and industry standards. These duties include promoting a strong compliance culture within the organisation and to external service providers.

Annual Report 2014 11

3.7 External Auditors

a. Compliance Plan Audit

The external auditors conduct annual audits on the compliance plans and report on:

• whether the Responsible Entity has complied with the compliance plans of the Trusts’ for the financial year end; and

• whether the compliance plans continue to meet the requirements of Part 5C.4 of the Corporations Act 2001 as at year end.

b. Australian Financial Services Licence Audit

The AFSL audit is conducted annually by the external auditor. The auditor reports on the following:

• whether the Responsible Entity has complied with the specified provisions of Part 7.8 of the Corporations Act 2001 ;

• whether the Responsible Entity has complied with sections 981B and 982B of the Act (relating to the control and operation of trust accounts);

• whether the Responsible Entity has complied with specific AFSL conditions relating to financial requirements, including internal procedures used by the Licensee to comply with the financial requirements under the licence; and

• whether the cash projections meet the cash need requirement conditions of the AFSL.

3.8 Other External Review

a. ASIC

ASIC may undertake a review of the Responsible Entity’s risk and compliance processes and systems at any time.

3.9 Code of Conduct and Ethical Behaviour

The Board acknowledges the need for high standards of corporate governance practice and ethical conduct by all directors and employees of the Group.

The Board has endorsed a code of conduct which outlines ‘acceptable behaviour’ and attitudes expected from all staff to promote and maintain the confidence and trust of all those dealing with the Group.

Various measures have been established to ensure that a high standard of ethical business behaviour is observed by all staff members, including policies and procedures for:

• personal security trading;

• whistleblower procedures;

• acceptance of gifts and entertainment as part of the Gifts, Entertainment and Anti-bribery Policy; and

In addition to their obligations under the Corporations Act 2001 in relation to inside information, all directors, employees and consultants have a duty of confidentiality to the Group in relation to confidential information they possess.

3.10 Employee and Director Trading in Ingenia Communities Group Securities

The Group has a Personal Trading Policy that governs the ability of directors, executives and employees to trade in the Group’s securities. Subject to necessary prior written consents being obtained, the Group’s directors, executives and employees may trade in the Group’s securities at any time outside closed periods which cover the following:

• between 1 January and the release of half yearly results;

In accordance with the Group’s legal obligations, the CEO and CFO have made the following certifications to the Board:

• maintained in accordance with Section 286 of the Corporations Act 2001;

• present a true and fair view, in all material respects, of the consolidated group’s financial condition and operational results and are prepared in accordance with relevant Australian Accounting Standards, Corporations Regulations 2001 and other mandatory professional reporting requirements;

• between 1 July and the release of annual results; or

• for any other time period determined by the Board.

Directors and senior executives may, in exceptional circumstances as defined in the policy, trade during a closed period but only with the prior written consent of the Chair for directors, the CEO for key executives, and the CFO for other employees. Notwithstanding the closed periods and approval requirements, a person is prohibited from trading at any time if they possess material, pricesensitive information about the Group that is not generally available to the public.

The Group’s Securities Trading Policy may be viewed on the Group’s website.

• the statements made with respect to the integrity of the Group financial reports are founded on a sound system of risk management and internal compliance and control systems which, in all material respects, implement the policies adopted by the Board; and

• the risk management and internal compliance and control systems, to the extent they relate to the financial reporting, were operating efficiently and effectively in all material respects throughout the period.

has been no material change to any of the statements made above.

12 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014�|�continued

The Board aims to ensure that its securityholders are kept well-informed of all major developments and business events that are likely to materially affect the Group’s operations and financial standing, and the market price of its securities. Information is communicated to securityholders through:

• ASX and made available to all securityholders;

• announcement of market-sensitive and other information, including annual and half year results announcements and analyst presentations released to the ASX;

• the Chair’s and CEO’s addresses to, and the results of, the annual general meeting; and

• copies of announcements, presentations, past and current reports to securityholders made available on the Group website.

The Group has a Continuous Disclosure Policy that includes a formal procedure for dealing with potentially pricesensitive information. The policy sets out how the Group meets its disclosure obligations under ASX Listing Rule 3.1. The Group’s policy is to lodge with the ASX and place on its website all market-sensitive information, including annual and half year result announcements and analyst presentations, as soon as practically possible.

each financial year: the half year financial report for the six months ended 31 December and the annual financial report for the year ended 30 June. Both are made available to securityholders and other interested parties.

Securityholders have the right to attend the Group annual general meeting, held in November each year, and are provided with an explanatory memorandum on the resolutions proposed through the notice of meeting. A copy of the notice of meeting is also posted on the Group website and lodged with the ASX.

Securityholders are encouraged to vote on all resolutions. Unless specifically stated otherwise in the notice of meeting, all securityholders are eligible to vote on all resolutions. Securityholders who cannot attend the annual general meeting may lodge a proxy in accordance with the Corporations Act 2001 . Proxy forms may be lodged by facsimile or electronically.

3.12 Continuous Disclosure

Ingenia Communities Group is committed to continuous disclosure of material information as a means of promoting transparency and investor confidence.

The Group’s Continuous Disclosure Policy incorporates the continuous disclosure framework as set out in the ASX Listing Rules Chapter 3, as well as the revised ASX Listing Rules Guidance Note 8.

The company secretaries have been nominated as the persons responsible for communications with the ASX. This role includes the responsibility for monitoring compliance with the continuous disclosure requirements in the ASX listing rules and overseeing and coordinating information disclosure to the ASX.

The Group has written policies and procedures that focus on continuous disclosure of any information concerning the Group that a reasonable person would expect to have a material effect on the price of the Group’s securities.

4. OPERATING AND FINANCIAL REVIEW

a. Ingenia Communities Overview

portfolio of seniors living communities across Australia. Its real estate assets are valued at $355 million and include lifestyle parks, rental villages, deferred management fee villages, and three non-core New Zealand Student accommodation buildings.

The Group is a triple stapled structure, being a combination of a unit in Ingenia Communities Management Trust, a unit in Ingenia Communities Fund and a share in Ingenia Communities Holdings Limited, which are traded together on the ASX. The Group is in the ASX 300 with a market capitalisation of approximately $315 million.

The Group’s vision is to be a leading Australian provider of affordable seniors living accommodation whilst delivering value to all stakeholders, including delivering strong earnings growth to securityholders and providing an affordable community environment for residents.

Transcripts of the Chair and CEO’s reports to securityholders are also released to the ASX upon the commencement of the annual general meeting. These transcripts, together with the results of the annual general meeting are also posted on the Group website.

Annual Report 2014 13

b. Strategy

The Group’s strategy is to grow its Australian seniors living portfolio with a strong focus on the lifestyle parks sector. Using a disciplined investment framework, the Group is continuing to increase its exposure to lifestyle parks through targeted acquisitions and building out its development pipeline. The Group remains focused on divestment of its non-core New Zealand Students portfolio and reducing its investment in DMF assets. It is the Group’s intention to grow its investment in lifestyle parks through capital recycling, efficient inventory management and monetisation of stock.

and capital management. The Group is committed to maintaining loan to value ratio (“LVR”) within a target range of 30-35% and considering diversified sources of funding. In August 2014, indicative terms were agreed for a new multilateral Australian debt facility of $175 million, which replaces the existing facility and facilitates continued growth.

The key immediate business priorities of the Group are:

• increase rate of new home delivery within the Active Lifestyle Estates development pipeline;

• grow occupancy of the Garden Villages portfolio towards the mid-term target of 92%;

• sell recently completed homes and explore opportunities to reduce exposure to the Settlers portfolio; and

• invest available capital into further accretive lifestyle parks.

c. FY14 Financial Results

FY14 has been a year of strong acquisitive growth resulting in an underlying profit of $11.6m and a statutory profit of $11.5m, which respectively represent an increase of $5.7m and $21.8m on prior year. The results are underpinned by a significantly increased contribution from the Active Lifestyle Estates and Garden Villages portfolios following the acquisition of a further thirteen lifestyle parks and five rental villages during the year. Furthermore, Ingenia Communities Management Trust and its subsidiaries formed a tax consolidation group, which is the primary driver for the $7.3m income tax benefit recorded.

During the year, the Group funded the acquisition of numerous properties using a mix of debt and equity raised from a June 2013 institutional placement of $21.2m and a September 2013 rights issue of $61.7m. The total purchase value of assets acquired during the year was $116.9m, being thirteen lifestyle parks for $106.3m and five rental villages for $10.6m.

Operating cash flow for the Group was strong at $14.2m, up $3.0m from prior year. The improvement in operating cash flow reflects increasing contribution from the recurring rental income streams of both the Active Lifestyle Estates and Garden Villages portfolios offset by cessation of US distributions following divestment in the prior year.

The Group has continued to adopt a conservative capital management approach with LVR at 33.9%, which is comfortably within the 30-35% target range and the all in cost of Australian debt has reduced by 126 basis points to 5.1%.

The Group has today announced a full year distribution of 1.15 cents which is a 15% increase on prior year, which reflects the Board’s commitment to increasing securityholder returns. The Board announced in May 2014 the reinstatement of the dividend reinvestment plan which will help fund lifestyle park acquisitions and their development.

d. Key Metrics

• distribution up 30%.

• from FY13.

• Net asset value grew by 1.1 cents per security to 35.5 cents.

• Total Securityholder Return (TSR) of 55.8% for the twelve months.[(1)]

• from FY13.

• (1) TSR is the percentage gain from investment in the Group’s securities over the twelve months to 30 June 2014 assuming distributions are reinvested into the Group’s securities.

14 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014�|�continued

e. Group Results Summary

	2014	2013
	$’000	$’000
EBIT – continuing operations	12,144	8,933
Net interest expense	(4,077)	(5,549)
Tax benefit associated to underlying profit	2,896	(43)
Underlying profit – continuing operations	10,963	3,341
Underlying profit – discontinued operations	605	2,526
Underlying profit	11,568	5,867
Net foreign exchange gain/(loss)	(147)	37
Net loss on disposal of investment properties	–	(107)
Net gain/(loss) on change in fair value of:
Investment properties	(341)	3,457
Derivatives	41	752
Retirement village resident loans	(616)	327
Gain on revaluation of newly constructed retirement villages	(3,320)	(4,619)
Amortisation of intangible assets	–	(585)
Other	–	(185)
Discontinued operations (below underlying profit), net of tax	(35)	(15,644)
Tax benefit associated with items below underlying profit	4,368	410
Statutory profit	11,518	(10,290)

operating activities in a way that appropriately reflects underlying performance. Underlying profit excludes items such as unrealised fair value gains/(losses) and adjustments arising from the effect of revaluing assets/liabilities (such as derivatives and investment properties). These items are required to be included in Statutory Profit in accordance with Australian Accounting Standards.

f. Segment Performance and Priorities

Active Lifestyle Estates

and operator in New South Wales. This business is the key focus of growth for the Group as it provides an affordable yield focused housing alternative for seniors and short-term residents with a capital light, low risk development cycle. The carrying value of these assets at 30 June 2014 is $119.3m.

i. Performance

i. Performance
Active Lifestyle Estates	FY14 FY13	Variance
New and refurbished home settlements #	15 2	13
Development income $m	$1.3m $0.1m	$1.2m
Residential rental income $m	$4.2m $0.4m	$3.8m
Short-term rental income $m	$5.4m $0.1m	$5.3m
EBIT $m	$3.9m $0.4m	$3.5m

Annual Report 2014 15

Active Lifestyle Estates delivered a contribution of $3.9m in FY14, of which $1.3m was attributable to development of new manufactured homes. The lead time from property acquisition to achieving set up for delivery of the first new homes has taken longer than anticipated. Supply agreements have been negotiated with two key manufactured home builders to construct homes and further council approvals have been achieved in recent months. As delivery and settlement of homes continue to build each half, the business is forecast to produce a stronger result in FY15.

ii. Strategic priorities

The key strategic priorities for this business over the coming year are securing any approvals required to deliver FY16 settlements, repositioning parks to grow both short-term and permanent rental returns and leveraging scale efficiencies across a larger portfolio. The Group expects to deploy funds into the sector with expansion into the Southeast Queensland market likely in the near future.

Garden Villages

Garden Villages is comprised of 34 rental villages located across the eastern seaboard and Western Australia. These villages accommodate more than 1800 residents, and generate $21.0 million in gross rental income per annum. The carrying value of these assets at 30 June 2014 is $114.3m.

i. Performance metrics

i. Performance metrics
Garden Villages FY14	FY13	Variance
Occupancy % 84.6%	85.1%	(0.5%)
Like for like occupancy % 90.1%	85.1%	5.0%
Rental income $m $21.0m	$17.4m	$3.6m
Catering income $m $3.2m	$2.6m	$0.6m
EBIT $m $9.9m	$7.7m	$2.2m

Garden Villages delivers a consistent stream of recurring cash income for the Group. The results are up $2.2m on prior year due to growing occupancy levels which are up 5% on a like for like basis. In January 2014, the Group acquired five low occupancy rental villages with the intention of repositioning them to grow occupancy and be accretive to the results. Since acquisition, the occupancy level for these five villages has increased by 7% with repositioning efforts continuing to further enhance the performance of these assets.

The Ingenia Care Assist program launched in October 2013 has also been a strong contributor to the growing occupancy levels across this portfolio. This program enables residents to live independently for longer in the villages. Since this program was launched, it has achieved 58 move-out preventions and 45 new move-ins.

ii. Strategic priorities

The key strategic priorities of this business over the coming year continue to be growing village occupancy, in particular within the five recently acquired villages, improving cash operating margins, ensuring residents are actively engaged and maintaining affordability whilst leveraging scale efficiencies across the portfolio. Beyond continuing reinvestment in existing villages it is unlikely that any capital will be deployed in the Garden Villages portfolio.

Settlers Lifestyle

Settlers Lifestyle is comprised of nine deferred management fee villages, including those in the process of being converted from the rental to deferred management fee model. These villages are located in Queensland, New South Wales and Western Australia and accommodate more than 800 residents generating income from accrued deferred management fees, rental income where villages are not yet fully converted and development income from unit conversions and village expansion. The carrying value of these assets at 30 June 2014, net of resident loans and lease liabilities is $76.2m. The Group is exploring opportunities of reducing its exposure to this portfolio with the first divestment settling on 31 July 2014, when the Settlers Lifestyle Noyea Park village settled for an adjusted sales price of $5.4m.

i. Performance

i. Performance
Settlers Lifestyle	FY14	FY13	Variance
Occupancy %	92.1%	89.9%	2.2%
New unit settlements #	57	65	(8)
Development income $m	$3.3m	$4.6m	($1.3m)
Accrued Deferred Management Fee income $m	$5.3m	$4.7m	$0.6m
EBIT $m	$4.5m	$5.6m	($1.1m)

16 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014�|�continued

The Settlers Lifestyle business delivered a lower result than the prior year due to reduced settlement volumes with some development projects nearing completion and new product being under construction at Cessnock and Ridge Estate Villages. There has also been a weakening in the Hunter Valley residential market, where the Cessnock and Ridge Estate villages are located, which means incoming residents are requiring longer to sell their existing home in order to settle their new unit within our village. The Gladstone and Rockhampton Villages are both nearly sold out.

ii. Strategic priorities

stage at Ridge Estate and the sell down of remaining conversion units at Cessnock Gardens, Forest Lake, Rockhampton and Gladstone. There will also be a continued focus on exploring opportunities to reduce the investment in these assets.

Discontinued Operations

A sales campaign was undertaken for the sale of the New Zealand Students portfolio and terms have been agreed with a global real estate investment firm. The carrying value of these assets at 30 June 2014 is $45.9m.

g. Tax Consolidation

During the year ICMT and its Australian domiciled subsidiaries formed a tax consolidation group. The impact of entering into this tax consolidated group was that tax cost bases for certain assets were reset resulting in income tax benefits being recorded. Additionally, unrecognised tax losses incurred by entities within this tax consolidated group are now available for utilisation resulting in an additional income tax benefit being recorded.

h. Capital Management

The Group adopts a prudent and considered approach to capital management. During the period, the Group strengthened its capital position by undertaking a capital raising and renegotiating its core debt facility. The Group has maintained a strong focus on prudent balance sheet management with an LVR at 33.9%, well within its target range of 30-35%.

portfolio with a NZ$32.7m core debt facility expiring 31 July 2018.

On 17 October 2013, the Group completed a non-renounceable rights issue to raise $61.7m (excluding transaction costs) to fund the expansion of lifestyle parks. A total of 169.1m securities were issued at 36.5 cents each.

The Group has increased its full year distributions to 1.15 cents, in line with its commitment to grow distributions over the medium term. The final distribution represents a 30% increase over the previous period.

i. Financial position

$’000	30 Jun2014	30 Jun 2013	30 Jun 2013	Change %
Cash and cash equivalents	12,894		38,531	(67%)
Inventories	2,208		285	675%
Investment properties	498,863		370,931	34%
Assets held for sale	5,439		–	n/m
Assets of discontinued operations	47,657		36,576	30%
Other assets	7,863		13,251	(41%)
Total assets	574,924		459,574	25%
Borrowings	98,356		70,806	39%
Retirement village resident loans	190,122		175,703	8%
Liabilities from discontinued operations	30,449		21,528	41%
Other liabilities	15,820		16,885	(6%)
Total liabilities	334,747		284,922	17%
Net assets/equity	240,177		174,652	38%

Inventories increased by $1.9m reflecting the Group’s growing investment in the lifestyle sector. A key element of the Group’s strategy is development of new manufactured homes, which are classified as inventory until they are sold to new residents. This element of the Group’s balance sheet will continue to grow as the number of active development projects increases.

Investment properties increased by $127.9m largely from the acquisition of thirteen lifestyle parks and five rental villages during the year.

Annual Report 2014 17

Assets and liabilities of discontinued operations grew by $11.1m and $8.9m respectively which reflects completion of capital refurbishment works on the New Zealand Students portfolio in line with the divestment strategy.

Borrowings increased by $27.6m due to the lifestyle park acquisitions being funded with a mix of debt and equity.

Movements in other assets and liabilities mainly reflects the collection of US$6.8m of escrows from the divestment of US operations in prior periods together with movements in deferred tax balances following the tax consolidation of the ICMT group.

j. Cashfow
$’000	30 Jun 2014	30 Jun 2013	**Change **
Operating cashflows	14,240	11,240	3,000
Investing cashflow	(126,084)	17,314	(143,398)
Financing cashflow	89,012	(23,804)	112,816
Net change in cash and cash equivalents	(22,832)	4,750	(27,582)
Effects of exchange rate fluctuation on cash held	(167)	(12)	(155)
Cash at the end of the period	14,551	37,550	(22,999)

Operating cash flow for the Group was strong at $14.2m, up $3.0m from prior year. The improvement in operating cash flow reflects increasing contribution from the recurring rental income streams of both the Active Lifestyle Estates and Garden Villages portfolios offset by a decrease in US distributions the Group no longer receives subsequent to divestment.

Investing cash flows reflect the acquisition of thirteen lifestyle parks and five rental villages for $113.3m, along with capital refurbishment works of $18.7m, including $9.1m on the New Zealand Students portfolio. US sale proceeds account for $7.0m of the Investing cash flows, being $1.2m proceeds from sale of investment properties and $5.8m proceeds from sale of equity accounted investments. Financing cash flows include net proceeds of $58.9m from the September rights issue along with net proceeds from borrowings of $36.3m to partly fund the acquisition of lifestyle parks.

k. Distributions

The following distributions were made during or in respect of the period:

• On 25 February 2014 the directors declared an interim distribution of 0.5 cps (2012: 0.5 cps) amounting to $3,381,201, which was paid on 21 March 2014.

• $4,407,379, to be paid on 17 September 2014.

The Group is committed to continuing to grow distributions in the near term.

l. Outlook

The Group is well positioned to continue growing its lifestyle parks business and has agreed indicative terms for a new multilateral Australian debt facility of $175m. Whilst delays were encountered during FY14 delivering new manufactured homes, Ingenia is confident these issues have been largely resolved and the rate of delivery and sale of new manufactured homes will significantly increase during FY15.

for recycling capital from the Settlers Lifestyle portfolio. At the same time, the Group will continue to regularly assess the performance of its existing assets and where appropriate to recycle that capital into other opportunities delivering superior returns.

decline in market conditions. Consistent with prior years, these returns will likely be skewed to the second half of the financial year.

5. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

Note 8 of the accompanying financial statements for discontinued operations and assets held for sale, Note 12 for Australian investment properties acquired or disposed of during the year, Note 15 for details of Australian debt refinanced and Note 20 for issued securities.

18 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014�|�continued

6. EVENTS SUBSEQUENT TO REPORTING DATE

a. Retention Quantum Rights Vesting

On 1 July 2014, 1,818,000 Retention Quantum Rights (“RQRs”) granted to key management personnel (“KMP”) in 2012 vested. As a result, 1,818,000 fully paid stapled securities have been issued to the following KMP:

Simon Owen	1,070,000
Tania Betts	374,000
Nicole Fisher	374,000

b. Sale of Noyea

Settlement on the sale of Settlers Lifestyle Noyea Riverside Village (“Noyea”) was completed on 31 July 2014 at an adjusted sales price of $5.4 million resulting in $nil gain or loss recognised upon completion.

c. Bank Guarantee

On 1 July 2014, the Group obtained a bank guarantee of $10 million from the bank facility in relation to cash requirements under the Australian Financial Services Licence.

d. Sale of New Zealand Students Business

On 5 September 2014, the Group announced it had contracted to divest the New Zealand Students business for consideration of NZ$49.4 million, representing the book value at 30 June 2014. Upon settlement, disposal costs and a foreign currency translation reserve (“FCTR”) gain will be released through profit. At 30 June 2014, the FCTR balance was A$1.0 million.

The Group’s current Australian banking facility expires in September 2015. The Group has recently undertaken a debt refinance and obtained credit approval for a new $175 million Australian Multilateral banking facility. This facility will be split between a three year and five year maturity profile.

7. LIKELY DEVELOPMENTS

the seniors living industry during the next financial year, with a strong focus on the development and acquisition of manufactured home estates.

Other information about certain likely developments in the operations of Ingenia and the expected results of those operations in future financial years is included in the various reports in this Annual Report.

8. ENVIRONMENTAL REGULATION

the Commonwealth or of a State or Territory.

9. INDEMNITIES

officers and employees of the Group serving in their respective capacities. Key insurance policies include: directors and officers insurance, professional indemnity insurance and management liability insurance.

To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year.

10. 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 39.

Annual Report 2014 19

11. ROUNDING OF AMOUNTS

Ingenia Communities Group is an entity of the kind referred to in ASIC Class Order 98/100, and in accordance with that Class Order, amounts in the financial report and Director’s report have been rounded to the nearest thousand dollars, unless otherwise stated.

12. MESSAGE FROM THE REMUNERATION AND NOMINATION COMMITTEE

Dear Securityholders,

The Board of Ingenia Communities Group (“Ingenia”) is pleased to present the Remuneration Report for FY14.

12.1 Introduction

Remuneration Report which follows. The purpose of this message is to highlight those changes, explain why we have made them and to put them into the context of Ingenia’s strategy and performance.

12.2 Ingenia’s Performance

The Board has established a strong nexus between remuneration for executives and Ingenia’s performance and returns to securityholders.

We are pleased to report that in 2014, Ingenia sustained the strong performance record it has established since internalisation in June 2012. Some highlights of that performance are:

• Ranked # 1 in BDO A-REIT Survey 2012 and 2013

• Ingenia was included in S&P/ASX 300 Index in September 2013

• Ranked # 1 TSR performer in FY14 National Australia Bank review of S&P/AREIT 300

• Ingenia’s market capitalisation increased from $175m at 30 June 2013 to $338m at 30 June 2014, an increase of 93%

• In FY14 Ingenia’s underlying profit increased by 97% to $11.6m and the final six months distribution increased from 0.5 cents to 0.65 cents per security

• Securities are currently trading at a 41% premium to NAV

• The graph below compares Ingenia’s 1, 3 and 5 year percentage returns to 30 June 2014 against S&P/ASX 300 Property Index

==> picture [397 x 194] intentionally omitted <==

----- Start of picture text -----

80
67.2
70
60.8
60 55.8
50
INA (%)
40
S&P/ASX 300 (Property) (%)
30
20 15.2 14.3
11.1
10
0
1 Year 3 Years 5 Years
----- End of picture text -----

12.3 Ingenia’s Corporate Strategy

seniors accommodation, principally through the two core cash yielding businesses, outlined below, which now comprise 75% of the portfolio.

20 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014�|�continued

Active Lifestyle Estates (lifestyle parks)

largest lifestyle parks owner, operator and developer in NSW, with 15 parks acquired since March 2013. We have integrated tourism within our lifestyle parks business model.

Garden Villages (rental accommodation)

turnaround the performance of its Garden Villages rental business, which was previously seen as a poor quality asset class. Occupancy growth has increased significantly on a like for like basis, new operational management has been recruited and over the past two years ten additional low-occupancy villages have been acquired from a mortgagee in possession at very reasonable prices.

Other Operations

Ingenia’s New Zealand student accommodation has been contracted for sale and its DMF villages are under review to free up capital to be reinvested in Active Lifestyle Estates.

12.4 Ingenia’s Remuneration Strategy FY15

The Board has aligned Ingenia’s remuneration objectives and strategy to its corporate strategy.

The Remuneration and Nominations Committee (RNC) has established the following three key objectives for our remuneration strategy in FY15:

• from numerous investor and analyst meetings has sent a very clear message: investors support our strategy but want to see Ingenia deliver on that strategy and demonstrate that lifestyle parks can deliver profits for securityholders in FY15 and subsequent years.

• Provide long term value creation for securityholders and strong alignment between executive management and securityholders’ interests.

• Attract, retain and motivate key executive personnel.

More detailed information on those objectives in set out in Section 2.12 (b) of the Remuneration Report.

The Board has focussed our revised remuneration strategy on areas where we believe management can create the most value for securityholders.

arrangements for executive Key Management Personnel in FY15. Those changes have been made after extensive consultation with key stakeholders, including investors and proxy advisors, following Ingenia’s inclusion in the S&P/ASX 300 Index.

The changes made and the reasons for them are outlined below. Additional detail is included in the Remuneration Report which we recommend you read.

a. Appointment of new Independent Remuneration Consultants

In March 2014 the Board engaged Guerdon Associates Pty Ltd (Guerdon) to provide independent remuneration advice and to review the structure and operation of the Group’s remuneration and incentive plans for FY15. Guerdon worked closely with the RNC in a wide ranging review, which led to significant changes.

b. Change Review Date

1 October each year. The Board resolved to do so on a recommendation from the RNC.

The rationale for this change was:

• The later review date allows time for results to be audited for assessment of Short Term Incentives (STI) awards and for basing Long Term Incentives (LTI).

• It allows ample time for release and market assessment of annual results so equity grants are priced on an informed market.

• Assessment of Total Shareholder Returns (TSR) is made in an informed market.

Annual Report 2014 21

i. Increase STI

The percentage of total remuneration allocated to STI for each KMP has been increased. The FY15 maximum STI cash awards have only increased $20,000 for the CEO and have been reduced for other executive KMP, because of the introduction of deferred equity.

All FY14 STI awards were paid in cash. In FY15 50% of the STI award will be paid in cash and the other 50% will be deferred for 12 months and paid in equity. Deferred STI is subject to a malus or forfeiture provision if earnings are not sustained at a level within a set threshold of prior year’s earnings.

the key objective, delivering on our strategy, particularly delivering underlying profit growth and the key operational drivers of that growth, to meet investor expectations. The deferral has been introduced to recognise how important it is that Ingenia’s high growth expectations are achieved and sustained, and to align STI awards with securityholder interests.

ii. Deferred STI

Deferred STI will be awarded in Rights to stapled securities, plus additional securities equal to distributions paid on a reinvestment basis upon vesting. KMP will not receive cash distributions on unvested Rights, they will receive additional deferred Rights.

The rationale behind this change is to incentivise KMP to maintain and increase the level of distributions, in line with investor expectations.

iii. KPIs

KPIs for STI have been set to incorporate a strong focus on earnings (40%), strategic and operational metrics (50%) and people (10%). Quantified metrics have been preferred and KMP have been set challenging KPIs, with ‘Threshold’, ‘Target’ and ‘Stretch’ performance levels, based on Ingenia’s budget and business plan and taking account of analyst consensus.

iv. 2013-2014 bonuses

In FY14 all bonuses paid to other direct reports of the CEO and other senior executives, who are not KMP, were paid in cash. The STI arrangements outlined above (50% cash and 50% deferred equity) have been extended to all executive KMP in FY15.

Again, deferred equity has been introduced to recognise how important it is that Ingenia’s high growth expectations are achieved and sustained, and to align executive remuneration with securityholders’ interests.

i. Reduction in LTI

increases in STI.

FY15 LTI awards are still material, so management will continue to focus on long term value creation.

ii. TSR hurdle

FY15 LTI awards in the form of Rights will be assessed on a relative TSR hurdle rather than the absolute TSR hurdle applied in FY14. This change is in line with investors’ expressed preferences. The comparator for the relative TSR hurdle will be the S&P ASX 300 Industrials Index (“Index”).

This change is to align to investor preference of relative TSR and the Industrial Index was chosen because the Board considers it is better aligned to Ingenia’s core business operations and because it is transparent and readily available.

iii. Zero vesting at threshold

There will be zero vesting at Threshold, which is Index plus 1%. Ingenia must outperform the Index by at least 1% for LTI awards to vest. There will be no cliff vesting. Vesting will be straight line between Threshold (at Index plus 1%) to Maximum (at Index plus 6% or more).

22 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014�|�continued

iv. Rights vesting

The assessment date for LTI Rights vesting will be 30 September three years after grant and grants will be based on 30 day VWAP.

The timing helps to ensure an informed market post release of audited results and 30 day VWAP reduces the risk and impact of security price volatility.

v. Vested Rights

Vested Rights will be converted to stapled securities, plus additional securities equal to distributions paid on a reinvestment basis upon vesting.

The rationale for this change is to incentivise executive KMP to maintain and increase distributions, in line with investor expectations.

vi. Forfeiture provision

A ‘malus’ or forfeiture provision will be applied to all LTIs.

The basis of allocating LTI Rights has been changed in FY15. This change will reduce executive KMP entitlements to LTI awards and move towards market best practice.

In FY14, the formula provided by Ingenia’s Independent Remuneration Consultant to determine security value for the purpose of calculating the number of LTI Rights, included a 0.5% ‘probability of vesting’ factor, which effectively doubled the maximum LTI entitlement for each KMP. It was subject to some adverse comments from investors and proxy advisors.

The RNC and Board have consulted with proxy advisors and investors and have accepted a recommendation from our new Independent Remuneration Consultant to change the formula in FY15 to eliminate the ‘probability of vesting’ multiple.

Guerdon’s review has included a comprehensive review of Ingenia’s Plan Rules to accommodate the changes the Board wishes to make. The changes to Plan Rules will be the subject of a Resolution at the 2014 AGM and details are set out in the Notice of Meeting and Explanatory Memorandum. We urge securityholders to support that Resolution.

12.6 Conclusion

The advice we have received from our Independent Remuneration Consultant and extensive consultations undertaken by the RNC has led to change.

The Board believes those changes have resulted in a better remuneration strategy and structure which will achieve the remuneration objectives we set and which will serve all Ingenia’s stakeholders well.

I wish to thank all those involved, my RNC and Board colleagues, Guerdon, investors and proxy holders for their valuable input.

We recommend Ingenia’s Remuneration Report to investors and seek your support for the resolution to adopt the Remuneration Report at the Ingenia AGM on 12 November 2014.

Yours faithfully

==> picture [113 x 36] intentionally omitted <==

Philip Marcus Clark AM

Chairman – Remuneration and Nomination Committee

Annual Report 2014 23

13. REMUNERATION REPORT (AUDITED)

13.1 Introduction

The Board presents the Remuneration Report for the Group for the year ended 30 June 2014, which forms part of the Directors’ report and has been prepared in accordance with section 300A of the Corporations Act 2001 (“Act”). The data provided in the Remuneration Report was audited as required under section 308(3C) of the Act.

13.2 Remuneration Governance

a. Remuneration and Nomination Committee (RNC)

The Board has an established the RNC, which is directly responsible for reviewing and recommending remuneration arrangements for directors, the Chief Executive Officer (“CEO”) and senior executives who directly report to the CEO.

The RNC comprises the following NEDs:

• Philip Marcus Clark AM (Chairman);

• Jim Hazel; and

• Amanda Heyworth.

The RNC provides oversight for general remuneration levels of the Group ensuring they are set at appropriate levels to access the skills and capabilities the Group needs to operate successfully.

The RNC operates under the delegated authority of the Board for some matters related to remuneration arrangements for both executives and non-executives, and is required to make recommendations to the Board. The RNC also reviews and makes recommendations to the Board on incentive schemes.

The RNC is required to meet regularly throughout the year, and in any event at least twice per year, and considers recommendations from internal management and external consultants.

The Board is ultimately responsible for decisions made on recommendations from the RNC.

b. External Remuneration Advisers

The Board engaged Godfrey Remuneration Group Pty Ltd (“GRG”) to provide independent recommendations in relation to remuneration of the executive roles within the Group for FY14.

GRG provided a report on market benchmarking of executive remuneration which outlined the following:

• new legislation requirements and regulatory developments;

• overall remuneration framework and strategy;

• considerations relating to termination of contracts; and

• market data and trends in remuneration structures.

the key executives of the Group, including the CEO.

GRG provided a further report on market benchmarking of senior executive remuneration for the CEO, Chief Financial Officer (“CFO”) and Chief Operating Officer (“COO”) roles and made recommendations on their base remuneration and incentive schemes. They also provided a benchmarking report and recommendations on NED remuneration.

For the provision of the advice for FY14, GRG were commissioned by, engaged with, and addressed reports directly to the Chairman of the RNC.

In March 2014, the Board rotated external remuneration advisors and engaged Guerdon Associates to provide independent remuneration advice for Key Management Personnel (KMP), including senior executives and NEDs and to review the rules of the Group’s LTI and STI Plans for FY15.

For the provision of the advice and recommendations to date, Guerdon Associates have been commissioned by, engaged with, and addressed reports directly to the Chairman of the RNC.

influence by the KMP to whom the advice related, due to there being no engagement with the remuneration consultants outside of the Chairman of the RNC. Declarations of independence from GRG and Guerdon Associates were received by the Board prior to the acceptance of their engagements and accompanied their reports.

GRG were paid $26,400 for the remuneration advice work outlined above that they provided during the FY14.

of the Act, were made by Guerdon Associates. For the remuneration advice they have provided, Guerdon Associates have been paid $49,325 to the date of this report.

24 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014�|�continued

13.3 Details of KMP

planning, directing and controlling the activities of the Group, directly or indirectly, including any executive or NED of the Group.

The KMP of the Group for the year ended 30 June 2014 are:

	Position	Position		Appointment/Resignation date	Appointment/Resignation date
Non-Executive Directors
Jim Hazel	Chairman of the Board
	NED
	Member – Remuneration and Nomination
	Committee
Amanda Heyworth	NED
	Chair – Audit and Risk Committee
	Member – Remuneration and Nomination
	Committee
Philip Clark AM	NED
	Chair – Remuneration and Nomination
	Committee
	Member – Audit and Risk Committee
	(until April 2014)
Robert Morrison	NED
	Member – Audit and Risk Committee
Norah Barlow	NED			Appointed 31 March 2014
	Member – Audit and Risk Committee
Executive Director
Simon Owen	Managing Director and CEO
Other Executives
Tania Betts	CFO
Nicole Fisher	COO

13.4 Remuneration of KMP (Excluding Non-Executive Directors)

a. Remuneration Policy

responsibilities and that the remuneration is competitive in attracting, retaining and motivating people of suitable quality.

achievement of strategic objectives, and achieve the broader outcome of long-term value creation for securityholders. The remuneration structures take into account a range of factors, including the following:

• capability, skills and experience;

• ability to impact achievement of the strategic objectives of the Group;

• performance of the KMP in their roles;

• the Group’s overall performance;

• remuneration levels being paid by competitors for similar positions; and

• the need to ensure continuity of executive talent.

Refer below for detail of the mechanisms in place, which link the remuneration outcomes to individual and the Group’s performance.

Annual Report 2014 25

b. Link between Remuneration and Performance

The Board understands the importance of the relationship between the Group’s remuneration policy for KMP and the Group’s performance. The remuneration packages for KMP are aimed at achieving this balance and aligning KMP remuneration with the interests of securityholders.

Remuneration Component	Link to Group Performance
Fixed remuneration	Fixed remuneration is not directly linked to Group
	performance. It is set with reference to the individual’s role,
	responsibilities and performance and remuneration levels for
	similar positions in the market.
Short-term incentive (STI)	STIs are awarded to individuals whose achievements,
	behaviour and focus meets the Group’s business plan and key
	result expectations measured over the financial year.
	In FY14 the payment is in cash. For FY15 payment will be in
	cash and a deferred equity element linked to earnings growth
	sustainability.
Long-term incentive (LTI)	LTIs are granted to individuals to align their focus with the
	Group’s required TSR performance measured over three
	financial years.
	The Board maintains sole discretion over the granting of the
	LTI to eligible employees.
	Payment will be received in equity for alignment with
	securityholders.

The table below sets out summary information about the Group’s earnings and movement in securityholder wealth for the five years to 30 June 2014:

30 June	30 June	30 June	30 June	30 June
2014	2013	2012	2011	2010
Underlying profit ($000) 11,568	5,867	7,434	6,889	18,260
Statutory profit/(loss) ($000) 11,518	(10,290)	33,627	13,051	(67,717)
EPS (cents) 1.8(2)	(2.0)(1)	7.6	3.0	(15.4)
Net asset value per security (cents) 35.5(2)	34.4(1)	34.3	25.9	24.9
Security price 30 June (cents) 50.5	34.5	19.5	11.5	5.0
Distributions (cents) 1.0	1.0	–	–	–

(1) During the year ended 30 June 2013, the Group issued 66,150,000 shares under an institutional placement.

(2) During the year ended 30 June 2014, the Group issued 169,061,000 shares under the non-renounceable rights issue.

c. Target mix of Remuneration Components

with a mix of remuneration commensurate with their position and responsibilities and aligned with market practice.

The Group’s policy is to set the total employment cost of KMP by reference to the 50[th] percentile range of comparable industry peers and other Australian listed companies of similar size and complexity, whilst also taking into account the individual’s competence and the potential impact of incentives.

26 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014�|�continued

The target remuneration mix for executives for the year ended 30 June 2014, expressed as a percentage of total remuneration, is detailed in the table below:

		Total Fixed				LTI
		Remuneration (TFR)		STI		PQRs(1)		Total Remuneration
Target mix		(%)		(%)		(%)		(%)
CEO		50.0%		20.0%		30.0%		100.0%
CFO		62.5%		18.75%		18.75%		100.0%
COO		62.5%		18.75%		18.75%		100.0%

(1) PQRs: Performance Quantum Rights

13.5 Total Fixed Remuneration (Excluding Non-Executive Directors)

salary-packaged benefits grossed up for FBT payable, as well as employer contributions to superannuation funds and other non-cash benefits that may be agreed from time to time.

annual basis.

The table below details the TFR for each of the executives for the year ended 30 June 2014:

Executive	Position	Total Fixed Remuneration
Simon Owen	Managing Director and CEO	$612,746(1)
Tania Betts	CFO	$297,633(2)
Nicole Fisher	COO	$243,389(3)

(2) Leave without pay was taken during the year.

(3) Based on four days per week.

13.6 Short-Term Incentive Scheme (STI)

The STI scheme aims to reward eligible employees whose achievements, behaviour and focus meets the Group’s business plan and key result expectations during one or more specified measurement periods.

Initial participation in the scheme is completely at the discretion of the Board.

The quantum of the STI opportunity for the year ended 30 June 2014 was determined based upon recommendations from GRG.

employee, which are documented in a written statement (Plan Statement) identifying:

• The percentage weighting and measurement period for each KPI;

• The KPI outcome measures set with a threshold, on target and stretch performance measure; and

• The maximum STI award amount payable for achieving each of the performance levels, calculated on the employee’s base remuneration at the time the Plan Statement is issued.

strategy development and execution, business performance, people and stakeholder relationships.

Annual Report 2014 27

KPIs, their applicability, targets, and outcomes are tabulated below:

Key Performance Indicator	Executives to which KPI applied	Executives to which KPI applied	Key Considerations in assessments
Financial	CEO, CFO, COO		Operating income within 5% of threshold
			Access to debt and equity capital on
			acceptable terms
Strategy	CEO, CFO, COO		Execution of agreed business strategy
Operational	CEO, CFO, COO		Achievement of operational metrics that
			deliver on business strategy, established
			for each KMP specifc for their area of
			responsibility
People and Reporting	CEO, CFO, COO		Minimal regretted turnover
			Recruit and retain leading industry talent
			High quality level reporting and analysis

For the year ended 30 June 2014 the Board assessed the performance of the CEO and the CEO assessed the performance of the CFO and COO, against their respective KPIs. The RNC then recommended and the Board approved STI awards.

The Board approved STI awards for the year ended 30 June 2014 for each executive KMP as follows:

			Actual STI Awarded	Actual STI Awarded as
KMP	Position		$	a % of Maximum STI
Simon Owen	Managing Director and CEO		$205,200	85.5%
Tania Betts	CFO		$70,875	75.0%
Nicole Fisher(1)	COO		$56,160	78.0%

(1) The actual amount awarded was calculated on a pro-rata basis allowing for 4 days per week.

a. STI – Termination of Employment

The following table outlines the treatment of the short-term incentive scheme in place for FY14 at the time of a termination of employment:

Termination Circumstance	STI Awards
Dismissal (termination for cause)	All are forfeited.
Resignation	All are forfeited, unless otherwise determined by the Board at
	its complete discretion.
Other circumstances	A pro rata reduction in the STI opportunity for each KPI with
	the assessor taking into account a variety of relevant factors
	applicable to each KPI.

28 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014�|�continued

13.7 Long-Term Incentive Scheme

The objective of the Group’s LTI scheme is to align long-term securityholder returns with the ‘at risk’ compensation payable to executive level employees whilst also acting as a mechanism to retain key talent.

The scheme comprises two types of security rights, RQRs and PQRs (together referred to as “quantum rights”).

RQRs are applied for retention purposes. No RQRs were granted in 2013-2014. PQRs are applied to focus and reward executives on long term performance over 3 or more years. PQRs were granted during FY14.

Upon vesting of a number of quantum rights, the holder will be issued with securities equivalent to the value of vested quantum rights on the vesting date, provided and to the extent that the value of the quantum rights on the vesting date exceeds $1,000. The value of each quantum right on the vesting date shall be equivalent to the security price on the vesting date.

The FY14 LTI components of Simon Owen’s remuneration were approved by securityholders at the Annual General Meeting held on 19 November 2013. Any LTI components of Simon Owen’s remuneration for FY15 will be subject to securityholder approval at the 2014 Annual General Meeting to be held on 12 November 2014.

a. PQRs

The Board has adopted an LTI plan (“LTIP”) with the aim of rewarding executives for delivering returns to securityholders that are consistent with, or exceed, expectations.

PQRs granted in FY14 vest based on the Group’s performance as measured by the absolute TSR. TSR is calculated as the percentage gain from an investment in Ingenia Communities securities over the vesting period, assuming that distributions are reinvested.

appropriate measure for the Group to use. They confirmed that advice in 2013 and 2014.

For 2015, Guerdon Associates has recommended that the performance criterion be relative TSR from 1 October to 30 September 3 years later, against ASX 300 Industrials Index. The Board has accepted this recommendation.

The vesting period for PQRs granted in FY14 is 3 years from 1 July 2013.

The vesting conditions are based on Group performance over the vesting period as measured by the actual TSR.

The Board has absolute discretion to vary the vesting conditions outlined in the table below.

i. PQRs issued in FY13

In respect of the 2012-13 year, the percentage of PQRs held by an eligible employee on the vesting date in respect of a Scheme Year that may vest shall be determined in accordance with the table below:

Where Group’s Actual TSR over the	Percentage of Employee’s RQRs that may Vest	Percentage of Employee’s RQRs that may Vest
3 Year Vesting Period is:	in respect of the Scheme Year:
Below 26% - below threshold performance.	0%
26% (approximately 8%pa compound), on threshold	25%
performance.
At or above 26% but below 40% performance, between	25%-50%, in the same proportion as the Group’s actual
threshold and target performance.	TSR bears to the threshold and target performance.
40% (approximately 12%pa compound), on target performance.	50%
Above 40% but below 56% performance, between target and	50%-100%, in the same proportion as the Group’s actual
stretch performance.	TSR bears to the target TSR and stretch performance.
56% or above (approximately 16%pa compound), stretch	100%
performance.

Annual Report 2014 29

ii. PQRs Issued in FY14

In respect of FY14, the percentage of PQRs held by an eligible employee on the vesting date in respect of a Scheme Year that may vest shall be determined in accordance with the table below:

Where Group’s Actual TSR over the	Percentage of Employee’s PQRS that may Vest	Percentage of Employee’s PQRS that may Vest
3 Year Vesting Period is:	in respect of the Scheme Year:
Below 26% - below threshold performance.	0%
26% (approximately 8%pa compound), on threshold	25%
performance.
At or above 26% but below 33% performance, between	25%-50%, in the same proportion as the Group’s actual TSR
threshold and target performance.	bears to the threshold and target performance.
33% (approximately 10%pa compound), on target performance.	50%
Above 33% but below 40% performance, between target and	50%-100%, in the same proportion as the Group’s actual
stretch performance.	TSR bears to the target TSR and stretch performance.
40% or above (approximately 12%pa compound), stretch	100%
performance.

The table below sets out the participation level of KMP in the LTI Scheme – PQRs, in terms of grant size, fair value and the maximum amount to be expensed in the future. These PQRs were granted during the years ended 30 June 2013 and 30 June 2014 year.

					Number of	Number of			Fair	Fair			Maximum	Maximum
			LTI		Performance				Value of				to Expense
			Scheme –		Rights				Performance				in Future
KMP	Position		RQRs		Granted		Grant Date		Rights $		Vesting Date		Years $
	Managing Director
Simon Owen	and CEO		2013		2,260,000		31 May 2012		230,520		30 June 2015		76,840
			2014		2,460,000		19 November 2013		799,500		30 June 2016		533,243
Tania Betts	CFO		2013		791,000		14 May 2012		71,032		30 June 2015		23,730
			2014		641,000		19 November 2013		208,325		30 June 2016		138,947
Nicole Fisher	COO		2013		791,000		4 June 2012		80,287		30 June 2015		26,874
			2014		615,000		19 November 2013		199,875		30 June 2016		133,311

No PQRs vested or lapsed during the year ended 30 June 2014.

No other PQRs were granted during the year ended 30 June 2014.

b. Legacy RQRs

These are rights that were granted at the time the Group was internalised, to encourage the retention of key executives and were subject to the holder remaining an employee of the Group until the end of the retention period, which was two years. An employee is not required to pay for a RQR.

25% and 50% of the Executive’s total fixed annual remuneration in FY13 only. They were aimed at incentivising them to remain with the business during the important transitional phase of Internalisation.

These rights vested on 1 July 2014 and have been converted to Ingenia securities as at that date.

			Retention	Retention			Vesting			Number of	Number of
	Grant Date		Period		Vesting Date		Conditions	Value of RQRs		RQRs
Simon Owen	31 May 2012		2 years		1 July 2014		Remaining	50% of TFR in		1,070,000
							employed at	year 1, $200,000
							vesting date
Tania Betts	14 May 2012		2 years		1 July 2014		Remaining	25% of TFR in		374,000
							employed at	year 1, $70,000
							vesting date
Nicole Fisher	4 June 2012		2 years		1 July 2014		Remaining	25% of TFR in		374,000
							employed at	year 1, $70,000
							vesting date

There have been no additional RQRs issued during the year ended 30 June 2014 or to the date of this report.

30 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014�|�continued

c. LTI – Termination of Employment

The following table outlines the treatment of unvested rights at the time of a termination of employment:

Termination Circumstance	Unvested Quantum Rights
Dismissal (termination for cause)	All are forfeited.
Resignation	All are forfeited unless and to the extent otherwise determined by the Board.
Other circumstance	Rights granted in the financial year of termination of employment are forfeited in the
	same proportion as the remainder of the financial year bears to the full financial year.
	Rights that do not lapse at the termination of employment will continue to be held by
	participants with a view to testing for vesting at the end of the measurement period.
	If the security price at the end of the measurement period is less than the security price
	at the date of cessation of employment then:
	PQR – the rights will lapse and an amount up to the value of the Rights that would
	otherwise have vested will be paid in cash.
	If the security price at the end of the measurement period is not less than the security
	price at the date of termination of employment then:
	PQR – the rights will be tested for vesting in accordance with the terms of rights.

13.8 KMP Employment Contracts

Managing Director and CEO –	Simon Owen
Contract duration	Commenced 4 June 2012, open-ended.
Fixed remuneration	Total remuneration package includes fixed remuneration and superannuation.
Variable remuneration eligibility	Eligible for STI of up to 40% for any one year of the executive’s total cost fixed annual
	remuneration.
	Eligible for LTI of up to 80% for any one year of the executive’s total cost of fixed annual
	remuneration.
	The Board may withdraw or vary the STI and LTI schemes at any time by written notice
	to the executive, provided that the scheme will not be varied or withdrawn part way
	through a financial year in respect of that same financial year.
Non-compete period	12 months.
Non-solicitation period	12 months.
Notice by Ingenia	12 months.
Notice by executive	12 months.
Treatment on termination	Payment in lieu of notice: Payment may be made in lieu of notice, which would include
	pro rata fixed remuneration and statutory entitlements.
	Treatment of Incentives: As outlined above.

Annual Report 2014 31

Contract duration	Commenced 14 May 2012, open-ended.
Fixed remuneration	Total remuneration package includes fixed remuneration and superannuation.
Variable remuneration eligibility	Eligible for STI of up to 30% for any one year of the executive’s total cost fixed annual
	remuneration.
	Eligible for LTI of up to 30% for any one year of the executive’s total cost of fixed annual
	remuneration.
	The Board may withdraw or vary the STI and LTI schemes at any time by written notice
	to the executive, provided that the scheme will not be varied or withdrawn part way
	through a financial year in respect of that same financial year.
Non-compete period	12 months.
Non-solicitation period	12 months.
Notice by Ingenia	6 months.
Notice by executive	6 months.
Treatment on termination	Payment in lieu of notice: Payment may be made in lieu of notice, which would include
	pro rata fixed remuneration and statutory entitlements.
	Treatment of Incentives: As outlined above.

Contract duration	Commenced 4 June 2012, open-ended.
Fixed remuneration	Total remuneration package includes fixed remuneration and superannuation.
Variable remuneration eligibility	Eligible for STI of up to 30% for any one year of the executive’s total cost fixed annual
	remuneration.
	Eligible for LTI of up to 30% for any one year of the executive’s total cost of fixed annual
	remuneration.
	The Board may withdraw or vary the STI and LTI schemes at any time by written notice
	to the executive, provided that the scheme will not be varied or withdrawn part way
	through a financial year in respect of that same financial year.
Non-compete period	12 months.
Non-solicitation period	12 months.
Notice by Ingenia	6 months.
Notice by executive	6 months.
Treatment on termination	Payment in lieu of notice: Payment may be made in lieu of notice, which would include
	pro rata fixed remuneration and statutory entitlements.
	Treatment of Incentives: As outlined above.

32 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014�|�continued

13.9 Remuneration Tables

The following tables outline the remuneration provided to KMP excluding NEDs for the years ended 30 June 2014 and 30 June 2013.

No executive KMP appointed during the period received a payment as part of their consideration for agreeing to hold the position.

Key Management Personnel – Executive Remuneration

										Short-Term	Short-Term	Short-Term
								Non-				Super-				Total
								Monetary		Other		Annuation				Short-
						Salary		Benefits		Payments		Benefits		STI(2)		Term
						$		$		$		$		$		$
Executive Director
	Managing
	Director
Simon Owen	and CEO		2014			588,915		–		–		23,831		205,200		817,946
			2013			340,155		–		–		19,017		108,000		467,172
Senior Executives
Tania Betts	CFO		2014			279,989		–		–		17,644		70,875		368,508
			2013			262,516		–		–		17,585		52,500		332,601
Nicole Fisher	COO		2014			225,780		–		–		17,609		56,160		299,549
			2013(1)			154,064		–		–		12,355		21,882		188,301
Total Executive KMP			2014			1,094,684		–		–		59,084		332,235		1,486,004
			2013			756,735		–		–		48,957		182,382		988,074

(1) Nicole Fisher was on maternity leave from 19 November to 30 June 2013.

(2) STIs were accrued in the year ended 30 June 2014 and 30 June 2013.

(3) No rights vested or lapsed during the year. The RQRs vested on 1 July 2014 and 1,818,000 fully paid stapled securities were issued at that time. LTI expense for the year ended 30 June 2014 was $680,600 (2013: 293,113).

Annual Report 2014 33

	Other Long- Term	LTI(3)	Performance Related
	Long Service Leave	Performance Quantum Rights Retention Quantum Rights Termination Benefits Total	STI+LTI Percent of Total LTI Percent of Total
	$ $ $ $ $		% %
– 343,097 91,085 – 1,252,128 51 35 – 76,840 99,243 – 643,255 44 27 – 93,108 30,222 – 491,838 39 25 – 23,677 31,902 – 388,180 28 14 – 93,458 29,630 – 422,637 42 29 – 26,762 34,689 – 249,752 33 25
– 529,663 150,937 – 2,166,604 47 31 – 127,279 165,834 – 1,281,187 37 23

34 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014�|�continued

13.10 Non-Executive Directors Remuneration

a. Directors’ Fees

The maximum aggregate fee pool available to NEDs is $1,000,000 as stipulated in the Constitution that was adopted pre-internalisation.

b. Performance-based Remuneration

practices unless approved by securityholders. The Group currently has no intention to remunerate NEDs by any way other than cash benefits.

c. Equity-based Remuneration

There is currently no equity-based remuneration plan in place for NEDs, however all NEDs have self funded the purchase of securities on market thereby aligning their interests with securityholders. Details are shown below in Section 2.11.

d. NED Remuneration Table

The following table outlines the remuneration provided to NEDs for the year ended 30 June 2014 and 30 June 2013:

				Directors Fees
Non-Executive Directors				($)
Jim Hazel	2014			170,000
	2013			150,000
Amanda Heyworth	2014			90,000
	2013			70,000
Philip Clark	2014			90,000
	2013			70,000
Robert Morrison(1)	2014			90,000
	2013			29,167
Norah Barlow(2)	2014			22,500
	2013			–
Total Non-Executive KMP	2014			462,500
	2013			319,167

(1) Robert Morrison was appointed as Director on 8 February 2013.

(2) Norah Barlow was appointed as Director on 31 March 2014.

In addition to the above fees, all NEDs receive reimbursement for reasonable travel, accommodation and other expenses incurred while undertaking Ingenia business.

NEDs do not receive additional remuneration for chairing or being a member of Board committees.

The Board has introduced a policy guideline for Non-Executive Directors to hold the equivalent of one years gross fees in INA Securities within a period of two years from the date of appointment.

13.11 KMP Interests

		Balance	Balance					On Exercise	On Exercise	Balance
	1 July 2013			Acquisitions		Disposals		of Options		30 June 2014
Directors
Jim Hazel	1,000,000			333,334		–		–		1,333,334
Philip Clark AM		100,000		108,334		–		–		208,334
Amanda Heyworth		421,000		140,334		–		–		561,334
Robert Morrison		110,000		111,667		–		–		221,667
Norah Barlow		–		178,000		–		–		178,000
Simon Owen		1,517,750		661,917		–		–		2,179,667

Annual Report 2014 35

Performance quantum rights held by key management personnel were:

Balance	Balance					Balance
1 July 2013		Granted		Vested		30 June 2014
Director
Simon Owen 2,260,000		2,460,000		–		4,720,000
Executives
Tania Betts 791,000		641,000		–		1,432,000
Nicole Fisher 791,000		641,000		–		1,432,000
Retention quantum rights held by key management personnel were:

		Balance	Balance					Balance
		1 July 2013		Granted		Vested		30 June 2014
Director
Simon Owen		1,070,000		–		–		1,070,000
Executives
Tania Betts		374,000		–		–		374,000
Nicole Fisher		374,000		–		–		374,000

The retention quantum rights vested on 1 July 2014 and 1,818,000 fully paid stapled securities were issued at that time.

13.12 FY15 Remuneration

This section of the Remuneration Report deals with the period from 1 July 2014 to the date of this report.

changes are detailed and highlighted below.

a. External Remuneration Consultants

Guerdon Associates were appointed by the Board to provide independent remuneration advice for KMP remuneration in respect of FY15, including latest market practices and a review of the STI and LTI scheme rules.

b. Remuneration Drivers

The following are considered key drivers in dictating the direction of the remuneration structures for FY15:

• i. growth

• Operationalising strategy: management must deliver tangible results on the strategy presented to securityholders

• Re-mix of remuneration components, increase STI (and include a 50% deferred equity element) and reduce LTI

• ii. Provide long-term value creation for securityholders and strong alignment between management and securityholders

• Introduce STI awards with 50% deferred equity

• park sales, increasing occupancy, capital recycling

• LTI 100% deferred equity

• Rights to be allocated based on the 30 day volume weighted average price after results are announced

• Shift from absolute TSR to relative TSR against S&P ASX 300 Industrials Index

• Rights hurdle requires performance above Index with progressive vesting

• All deferred equity (STI and LTI) has a forfeiture provision

• iii. Attracting, retaining and motivating KMP

• FY12 Retention Rights vested 1 July 2014

• Small, cohesive senior management team

c. Details of KMP

There have been no changes to the KMP since 30 June 2014 and before the date of this report.

36 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014�|�continued

d. Review Date

Guerdon recommended that the Group change the annual remuneration review date from 1 July to 1 October each year, to ensure that remuneration reviews are based on final audited results and equity grants for deferred STI and LTI are based on an informed market.

e. Target mix of Remuneration Components

Based on market data from Guerdon Associates and recommendations from the RNC, the Board has set the target remuneration mix for executives for FY15, expressed as a percentage of total remuneration, as detailed in the table below:

Target mix		TFR	STI	LTI	Total Remuneration
CEO		43.5%	34.8%	21.7%	100.0%
CFO		62.5%	25.0%	12.5%	100.0%
COO		62.5%	25.0%	12.5%	100.0%

f. Total Fixed Remuneration

Based on market data from Guerdon Associates and recommendations from the RNC, the Board has set TFR for each of the executives for FY15 as detailed in the table below:

Executives	Position		TFR(p.a.)
Simon Owen	Managing Director and CEO		$650,000
Tania Betts	CFO		$328,000
Nikki Fisher(1)	COO		$315,000

(1) Currently pro-rated for 4 days per week.

The Board considers these increases reasonable in the context of:

• Over 90% increase in the total market capitalisation of the Group during FY14

• Over 55% total securityholder returns on a fully reinvested basis, during FY14

Data for TFR ranges for the CFO and COO for FY15 were provided by Guerdon Associates. The RNC used an element of judgement to determine the appropriate positioning within this range and arrived at the TFR amounts set out above. Those recommendations were approved by the Board.

g. Revised LTI and STI Scheme Rules

Guerdon Associates was engaged to review the rules of the plans for the STI and LTI scheme. Guerdon Associates proposed new Rights Plan Rules, which were endorsed by the RNC and approved by the Board. These new rules will be subject to securityholder approval at the Annual General Meeting to be held on 12 November 2014.

h. STI

A structural change has been implemented for the FY15 STI with 50% of the maximum STI for the executive KMP being paid in cash and the remaining 50% being a deferred equity element, subject to forfeiture where earnings growth is not sustained. The deferral is for 12 months and sustainability has been defined as earnings growth in the following year to be equal to or above a set threshold on prior year. The deferral is to be rights to INA stapled securities, plus additional stapled securities equal to distributions during the deferral period on a reinvestment basis.

		Maximum STI	Maximum STI Deferred	Total Maximum STI
Executives		Cash	(STI Rights)	Available
Simon Owen		40% of FY15 TFR	40% of FY15 TFR	80% of FY15 TFR
		$260,000	$260,000	$520,000
Tania Betts		20% of FY15 TFR	20% of FY15 TFR	40% of FY15 TFR
		$65,600	$65,600	$131,200
Nicole Fisher		20% of FY15 TFR	20% of FY15 TFR	40% of FY15 TFR
		$63,000	$63,000	$126,000

(1) Subject to securityholder approval at the Annual General Meeting to be held on 12 November 2014.

Annual Report 2014 37

The STI deferral rights are subject to the following terms and conditions:

• a ‘malus’ (forfeiture) provision during the deferral period

• a one-year deferral period and are eligible to vest on or following 1 October 2016

• on the vesting date Ingenia will cause the relevant number of INA securities to be issued to the executive in accordance with a prescribed formula

• no amount is payable by the executive for the issue or transfer of INA securities to the executive.

people and reporting metrics. In each case, the KPIs are set with ‘threshold’, ‘target’ and ‘stretch’ performance levels, with entitlements calculated on a pro-rata basis between these levels.

Details of the KPI split for each executive KMP is as follows:

		Underlying Profit	Strategic	Operational	People
		%	%	%	%
CEO		40	30	20	10
CFO		40	25	25	10
COO		40	10	40	10

i. LTI

There were no RQRs issued during the year ended 30 June 2014 or since then and before the date of this report, but note the comment in Section 2.7(b) above in relation to RQR which vested on 1 July 2014.

i. Long term incentive plan

	Value of LTIP Rights	Vesting Date	Vesting Date
Simon Owen(1)	50% of FY15 TFR	30 September 2017
	$325,000
Tania Betts	20% of FY15 TFR	30 September 2017
	$65,600
Nicole Fisher	20% of FY15 TFR	30 September 2017
	$63,000

(1) Subject to securityholder approval at the Annual General Meeting to be held on 12 November 2014.

ii. Rights Performance Conditions

• the performance conditions for vesting of Rights, and

• the methodology used to convert dollar amount awards to Rights entitlements.

The Rights are subject to the LTIP Performance Condition, which is based on growth in INA’s TSR relative to the ASX 300 Industrials Index return over the Rights Performance Period.

The ASX 300 Index was chosen because the Board considers it to be transparent and more closely aligned to the Group’s core business operations.

Total TSR is the growth in the security price plus distributions, assuming distributions are reinvested. To minimise the impact of any short-term volatility, INA’s TSR will be calculated using the weighted average of the closing security price over the 30 days up to and including the trading day prior to the start and the 30 days up to and including the end trading day of the Rights Performance Period.

38 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014�|�continued

The Rights will vest on the following basis:

The Rights will vest on the following basis:
	Growth Rate in INA’s TSR		% of Rights that Vest
Below Threshold	Index + less than 1% CAGR		Nil
At Threshold	Index + 1% CAGR		10%
Between Threshold and Maximum	Between Index + 1% and 6% CAGR		10% plus an additional amount
			progressively vesting on a straight line
			basis between Threshold and Maximum
Maximum	Index + 6% CAGR		100%

CAGR: compound annual growth rate

It is important to note that executive KMP must outperform the Index to qualify for an award of Rights.

The methodology recommended by the Group’s Independent Remuneration Consultant and used to calculate Rights entitlement in FY14 was subject to some criticism. That formula included a 0.5 “probability of vesting” factors, which effectively doubled Rights grants.

and adopted by the RNC and the Board.

The FY15 methodology determines security value as the volume weighted average price (“VWAP”) of INA securities in the period of 30 trading days ending on 30 September 2014. The number of Rights granted in FY15 will be calculated by dividing the Rights by the 30 day VWAP of the INA security price. Each Right vested equals one INA security plus an additional number of INA securities calculated on the basis of the distributions that would have been paid during the relevant period being reinvested.

iii. Entitlement to Distribution adjustment

LTI grants will be entitlements to Rights to stapled securities plus additional stapled securities equal to distributions paid during the vesting period. The Board is keen to see executive KMP incentivised to grow distributions to securityholders.

j. Total Maximum FY15 Remuneration

j. Total Maximum FY15 Remuneration
	Fixed	Maximum STI	Maximum STI	Maximum	Maximum Total
Executive	Remuneration	Cash	Deferred(1)	LTI(1)	Remuneration
Simon Owen	$650,000	$260,000	$260,000	$325,000	$1,495,000
Tania Betts	$328,000	$65,600	$65,600	$65,600	$524,800
Nicole Fisher	$315,000	$63,000	$63,000	$63,000	$504,000

(1) Subject to securityholder approval at the Annual General Meeting to be held on 12 November 2014.

in FY15 is performance based. The percentage of total maximum remuneration at risk for each executive KMP is:

CEO 56.5% CFO 37.5% COO 37.5%

It is worth noting that Simon Owen’s total maximum remuneration has reduced from an effective level of $1,971,600 in FY14 to a level of $1,495,000 in FY15. The principle factor contributing to that reduction is the change in the methodology used to calculate the Rights entitlement, detailed above.

k. Non-Executive Directors’ Remuneration

Guerdon Associates was engaged to provide a benchmarking report on the levels of NED remuneration in determining the appropriate level of fees for FY15.

Based on the Guerdon Associates report, the RNC recommended that the Chair’s remuneration for FY15 remain unchanged at $170,000 per annum. The Board approved the RNC’s recommendation. The Chair did not participate in that decision.

Based on the Guerdon Associates report, the RNC recommended that remuneration for FY15 be set at $93,000 per annum for each NED other than the Chair. The Board approved the RNC’s recommendation.

Signed in accordance with a resolution of the directors.

==> picture [103 x 38] intentionally omitted <==

Jim Hazel Chairman Sydney, 19 September 2014

Annual Report 2014 39

Auditors’ Independence Declaration

for the year ended 30 June 2014

==> picture [483 x 653] intentionally omitted <==

40 Ingenia Communities Holdings Limited

Consolidated Statement of Comprehensive Income

for the year ended 30 June 2014

		2014	2013
	Note	$’000	$’000
Continuing Operations
Revenue
Rental income	5(a)	31,643	19,287
Accrued deferred management fee income	16(b)	5,333	4,850
Manufactured home sales		3,442	405
Catering income		3,178	2,616
Other property income	5(b)	1,819	872
Interest income		369	563
Property expenses		45,784 (11,613)	28,593 (7,650)
Employee expenses		(15,341)	(10,239)
Administration expenses		(4,371)	(3,172)
Operational, marketing and selling expenses		(3,136)	(2,358)
Cost of manufactured homes sold		(2,130)	(297)
Finance expenses	6	(4,446)	(6,112)
Net foreign exchange gain/(loss)		(147)	37
Net loss on disposal of investment properties		–	(107)
Net gain/(loss) on change in fair value of:
Investment properties		(341)	3,457
Derivatives		41	752
Retirement village resident loans	16(b)	(616)	327
Amortisation of intangible assets		–	(585)
Other expenses		–	(185)
Profit from continuing operations before income tax		3,684	2,461
Income tax benefit	7	7,264	367
Profit from continuing operations		10,948	2,828
Profit/(loss) from discontinued operations	8(b)	570	(13,118)
Net profit/(loss) for the year		11,518	(10,290)
Other comprehensive income, net of income tax
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences arising during the year	21	269	327
Release of foreign currency translation reserve on disposal of foreign operations	21	–	17,463
Total comprehensive income for the year, net of tax		11,787	7,500

Annual Report 2014 41

		2014	2013
		$’000	$’000
Profit/(loss) attributable to securityholders of:
Ingenia Communities Holdings Limited		(2,736)	(1,245)
Ingenia Communities Fund		15,313	(644)
Ingenia Communities Management Trust		(1,059)	(8,401)
		11,518	(10,290)
Total comprehensive income attributable to securityholders of:
Ingenia Communities Holdings Limited		(2,736)	(1,731)
Ingenia Communities Fund		15,533	16,898
Ingenia Communities Management Trust		(1,010)	(7,667)
		11,787	7,500
		2014	2013
	Note	Cents	Cents
Distributions per security		1.0(2)	1.0
Earnings per security(1):
Basic earnings from continuing operations
Per security	4	1.7	0.6
Per security attributable to parent	4	(0.4)	(0.2)
Basic earnings
Per security	4	1.8	(2.0)
Per security attributable to parent	4	(0.4)	(0.2)
Diluted earnings from continuing operations
Per security	4	1.7	0.5
Per security attributable to parent	4	(0.4)	(0.2)
Diluted earnings
Per security	4	1.8	(2.0)
Per security attributable to parent	4	(0.4)	(0.2)

(1) Prior period weighted average number of securities and EPS have been adjusted in accordance with AASB 133 “Earnings per Share” (“AASB 133”). The weighted average number of securities on issue for the current period, prior to the rights issue in September 2013, has also been adjusted as required by AASB 133.

a total full year distribution of 1.15 cents.

42 Ingenia Communities Holdings Limited

Consolidated Balance Sheet

as at 30 June 2014

		2014	2013
	Note	$’000	$’000
Current assets
Cash and cash equivalents	9	12,894	38,531
Trade and other receivables	10	3,745	8,789
Inventories	11	2,208	285
Income tax receivable		960	757
Assets held for sale	8(a)	5,439	–
Assets of discontinued operations	8(b)	47,657	36,576
Total current assets		72,903	84,938
Non-current assets
Trade and other receivables	10	2,168	2,671
Investment properties	12	498,863	370,931
Plant and equipment	13	990	1,034
Total non-current assets		502,021	374,636
Total assets		574,924	459,574
Current liabilities
Trade and other payables	14	10,409	8,559
Borrowings	15	283	267
Retirement village resident loans	16	190,122	175,703
Provisions	17	718	507
Derivatives	18	84	–
Liabilities of discontinued operations	8(b)	30,449	21,528
Total current liabilities		232,065	206,564
Non-current liabilities
Trade and other payables	14	4,000	–
Borrowings	15	98,073	70,539
Provisions	17	249	140
Derivatives	18	84	209
Deferred tax liabilities	19	276	7,470
Total non-current liabilities		102,682	78,358
Total liabilities		334,747	284,922
Net assets		240,177	174,652
Equity
Issued securities	20	569,116	510,141
Reserves	21	2,023	1,074
Accumulated losses	22	(330,962)	(336,563)
Total equity		240,177	174,652
Attributable to securityholders of:
Ingenia Communities Holdings Limited
Issued securities	20	7,377	6,078
Reserves	21	988	308
Retained earnings/(accumulated losses)	22	(2,659)	77
		5,706	6,463
Ingenia Communities Fund		224,254	164,953
Ingenia Communities Management Trust		10,217	3,236
		240,177	174,652
Net asset value per security (cents)		35.5	34.4

Annual Report 2014 43

Consolidated Cash Flow Statement

for the year ended 30 June 2014

		2014	2013
	Note	$’000	$’000
Cash flows from operating activities
Rental and other property income		43,274	29,514
Payment of management fees		(29)	(166)
Property and other expenses		(34,847)	(26,270)
Proceeds from resident loans	16(b)	22,021	19,338
Repayment of resident loans	16(b)	(10,361)	(7,118)
Proceeds from sale of manufactured homes		3,511	450
Purchase of manufactured homes		(4,035)	(275)
Distributions received from formerly equity accounted investments		301	2,350
Interest received		358	578
Borrowing costs paid		(5,811)	(7,085)
Income tax paid		(142)	(76)
	33	14,240	11,240
Cash flows from investing activities
Purchase and additions of plant and equipment		(443)	(626)
Payments for investment properties		(113,255)	(31,023)
Additions to investment properties		(18,724)	(16,890)
Proceeds from sale of investment properties		1,200	29,322
Proceeds from sale of equity accounted investments		5,811	37,560
Amounts received from/(advanced to) villages		72	(330)
Payments for lease arrangements		(745)	(699)
		(126,084)	17,314
Cash flows from financing activities
Proceeds from issue of stapled securities		61,707	21,168
Payments for security issue costs		(2,771)	(1,056)
Receipts from derivatives		–	1,650
Payments for derivatives		–	(150)
Finance lease payments		(81)	(13)
Payments for internalisation		–	(600)
Distributions to securityholders		(5,885)	(4,235)
Payments for debt issue costs		(216)	(587)
Proceeds from borrowings		104,258	16,261
Repayment of borrowings		(68,000)	(56,242)
		89,012	(23,804)
Net increase/(decrease) in cash and cash equivalents		(22,832)	4,750
Cash and cash equivalents at the beginning of the year		37,550	32,812
Effects of exchange rate fluctuation on cash held		(167)	(12)
Cash and cash equivalents at the end of the year	9	14,551	37,550

44 Ingenia Communities Holdings Limited

Statement of Changes in Equity

for the year ended 30 June 2014

Note	ATTRIBUTABLE TO SECURITYHOLDERS
	INGENIA COMMUNITIES HOLDINGS LIMITED ICF and ICMT $’000 Total equity $’000 Issued capital $’000 Reserves $’000 Retained earnings $’000 Total $’000
Carrying amount at 1 July 2012 Net loss for the year Other comprehensive income	6,000 15 1,808 7,823 143,349 151,172 – – (1,245) (1,245) (9,045) (10,290) – – (486) (486) 18,276 17,790
Total comprehensive income for the year	– – (1,731) (1,731) 9,231 7,500
Transactions with securityholders in their capacity as securityholders: Issue of securities 20 Share-based payment transactions 21 Payment of distributions to securityholders 22	78 – – 78 20,019 20,097 – 293 – 293 – 293 – – – – (4,410) (4,410)
Carrying amount at 30 June 2013	6,078 308 77 6,463 168,189 174,652
Net profit/(loss) for the year Other comprehensive income	– – (2,736) (2,736) 14,254 11,518
	– – – – 269 269
Total comprehensive income for the year	– – (2,736) (2,736) 14,523 11,787
Transactions with securityholders in their capacity as securityholders: Issue of securities 20 Share-based payment transactions 21 Payment of distributions to securityholders 22
	1,299 – – 1,299 57,676 58,975
	– 680 – 680 – 680
	– – – – (5,917) (5,917)
Carrying amount at 30 June 2014	7,377 988 (2,659) 5,706 234,471 240,177

Annual Report 2014 45

Notes to the Financial Statements

for the year ended 30 June 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated.

a. The Group

Limited (the “Company”) comprises the consolidated financial report of the Company and its controlled entities, including Ingenia Communities Fund (“ICF” or the “Fund”) and Ingenia Communities Management Trust (“ICMT”) (collectively, the “Trusts”). The shares of the Company are “stapled” with the units of the Trusts and trade on the Australian Securities Exchange (“ASX”) effectively as one security. Ingenia Communities RE Limited (“ICRE”), a wholly owned subsidiary of the Company, is the Responsible Entity of the Trusts. In this report, the Company and the Trusts are referred to collectively as the Group.

The constitutions of the Company and the Trusts require that, for as long as they remain jointly quoted on the ASX, the number of shares in the Company and of units in each trust shall remain equal and those securityholders in the Company and unitholders in each trust shall be identical.

occur of:

• the Company or either of the Trusts resolving by special resolution in accordance with its constitution to terminate the stapling provisions; or

• the commencement of the winding up of the Company or either of the Trusts.

2014 was authorised for issue by the directors on 19 September 2014.

b. Basis of Preparation

which has been prepared in accordance with Australian Accounting Standards, Australian Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (“AASBs”) and the Corporations Act 2001 .

Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

As permitted by Class Order 05/642, issued by the Australian Securities and Investments Commission, the financial statements and accompanying notes of the Group have been presented in the attached combined financial report.

basis, except for investment properties, retirement village resident loans and derivative financial instruments, which are measured at fair value.

At 30 June 2014, the Group recorded a net current asset deficiency of $159,162,000. This deficiency includes retirement village resident loans of $190,122,000 and liabilities from discontinued operations of $30,449,000. Resident loans obligations of the Group are classified as current liabilities due to the demand feature of these obligations despite the unlikely possibility that the majority of the loans will be settled within the next twelve months. Furthermore, if required, the proceeds from new resident loans could be used by the Group to settle its existing loan obligations should those incumbent residents vacate their units. The liabilities of the discontinued operations consist mainly of borrowings of $30,081,000 related to a facility with the Bank of New Zealand and will be repaid upon disposal of the corresponding assets. Accordingly, there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable; and the financial report of the Group has been prepared on a going concern basis.

c. Adoption of New and Revised Accounting Standards

The Group has adopted all of the new and revised standards and interpretations issued by the Australian Accounting Standards Board that are relevant to its operations and effective for the current period. The following standards were most relevant to the Group:

• AASB 10 “Consolidated Financial Statements” and AASB 2011-7 “Amendments to Australian Accounting Standards arising from consolidation and Joint Arrangements standards”;

• AASB 13 “Fair Value Measurement” and AASB 2011-8 “Amendments to Australian Accounting Standards arising from AASB 13”;

• “Amendments to Australian Accounting Standards arising from AASB 119 (2011)”;

• AASB 2012-2 “Amendments to Australian Accounting Standards-Disclosures-Offsetting Financial Assets and Financial Liabilities”; and

• AASB 2011-4 “Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements”.

46 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The impact of application of each Standard is as follows:

Accounting Standard		Impact on the Group
AASB 10 and AASB 2011-7		AASB 10 amends the definition of control such that an investor controls an investee when
		a) it has power over an investee; b) it is exposed, or has rights, to variable returns from its
		involvement with the investee and c) has the ability to use its power to affect its returns.
		All three conditions have to be met for an investor to have control.
		The application of the standard did not have any impact on the Group.
AASB 13 and AASB 2011-8		AASB 13 establishes a single source of guidance for fair value measurements and
		disclosures about fair value. The standard is broad in scope and applies to both financial
		instrument and non-financial instrument items with the exception of a few items like
		share-based payments and leases, which are covered by other standards. AASB 13 defines
		fair value as the price that would be received to sell an asset or liability in an orderly
		transaction in the principal (or the most advantageous) market at the measurement
		date under current market conditions. Valuations made are categorised into three levels
		based on the inputs used. However, regardless of the valuation methodology applied,
		fair value represents the exit price in relation to the asset or liability. The standard applies
		prospectively from 1 January 2013.
		The Group has applied requirements of the Standard in all its valuations, in particular
		of investment properties. Additionally, the disclosure requirements of the standard,
		which include information about assumptions made and the qualitative impact of those
		assumptions on fair value, have been complied with.
AASB 119 and AASB 2011-10		AASB 119 amends the definition of short-term employee benefits, with the distinction
		now being based on whether the benefits are expected to be settled within 12 months
		after reporting date (short-term benefit). Long term employee benefits are required to
		be measured using the actuarial valuation method. The method involves projecting future
		cash flows and discounting back to present value. This requirement applies to the annual
		leave balance for the Group. The application of the standard’s requirement for both
		current and previous periods did not result in amendment to the figures disclosed, as the
		changes were not material.
AASB 2012-2		The standard provides application and presentation guidance to AASB 132 ‘Financial
		Instruments: Presentation’ for applying some offsetting criteria. The Group has applied the
		requirements of the Standard, which necessitates disclosure of information about rights of
		offset and related arrangements for financial instruments under an enforceable master netting
		arrangement or similar arrangement. This has resulted in changes to disclosure principally for
		retirement village resident loans for the Group.
AASB 2011-4		The standard amends AASB 124 ‘Related Party Disclosures’ to remove individual key
		management personnel disclosures required by Australian specific paragraphs. The
		application of the standard did not have any financial impact on the Group, though there
		have been some changes to disclosures as mandated by the standard.

d. Principles of Consolidation

are all those entities (including special purpose entities) over which the Company or the Trusts have the power to govern the financial and operating policies so as to obtain benefits from their activities.

policies. Inter-company balances and transactions including dividends and unrealised gains and losses from intra-group transactions have been eliminated.

Subsidiaries are consolidated from the date on which the parent obtains control. They are de-consolidated from the date that control ceases.

The Company was incorporated on 24 November 2011. In accordance with Accounting Standard AASB 3 Business Combinations , the stapling of the Company and the Trusts was regarded as a business combination. Under AASB 3, the stapling was accounted for as a reverse acquisition with ICF “acquiring” the Company and the Company subsequently being identified as the ongoing parent for preparing consolidated financial reports. Consequently, the consolidated financial statements are a continuation of the financial statements of the Trusts, and include the results of the Company from the date of incorporation.

Annual Report 2014 47

e. Business Combinations and Goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in other expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

f. Discontinued Operations and Assets Held for Sale

discontinued operations. A discontinued operation is a component of the entity that has been disposed of, or is classified as held for sale, and that represents a separate major line of business or geographical area of operations, or is part of a single co-ordinated plan to dispose of such a line of business or area of operations. The results of discontinued operations are presented separately on the face of the income statement.

their carrying amount will be recovered principally through a sale transaction rather than through continuing use. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as investment property, which are carried at fair value.

An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.

assets of a disposal group classified as held for sale, are presented separately from the other assets on the face of the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities on the face of the balance sheet.

Details of discontinued operations and assets held for sale are given at Note 8.

g. Dividends and Distributions

A liability for any dividend or distribution declared on or before the end of the reporting period is recognised on the balance sheet in the reporting period to which the dividend or distribution pertains.

h. Foreign Currency

i. Functional and presentation currencies

The presentation currency of the Group, and functional currency of the Company, is the Australian dollar.

ii. Translation of foreign currency transactions

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

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

subsidiaries

The functional currency of certain subsidiaries is not the Australian dollar. At reporting date, the assets and liabilities of these entities are translated into the presentation currency of the Group at the rate of exchange prevailing at balance date. Financial performance is translated at the average exchange rate prevailing during the reporting period. The exchange differences arising on translation are taken directly to the foreign currency translation reserve in equity.

On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that foreign operation is recognised in the income statement.

48 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

i. Leases

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in the income statement.

Finance leases, which transfer away from the Group substantially all the risks and benefits incidental to ownership of the leased item, are recognised at the inception of the lease. A finance lease receivable is recognised on inception at the present value of the minimum lease receipts. Finance lease receipts are apportioned between the interest income and reduction in the lease receivable to achieve a constant rate of interest on the remaining balance of the receivable. Interest is recognised as income in the income statement.

properties, are classified as finance leases under AASB 140 Investment Properties .

Leases where the lessor retains substantially all the risks and benefits of ownership are classified as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the term of the lease.

j. Plant and Equipment

Plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the property, plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.

k. Financial Assets and Liabilities

within the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as fair value through profit or loss; loans and receivables; held-tomaturity investments or as available-for-sale. The Group determines the classification of its financial assets and liabilities at initial recognition with the classification depending on the purpose for which the asset or liability was acquired or issued.

Financial assets and liabilities are initially recognised at fair value, plus directly attributable transaction costs unless their classification is at fair value through profit or loss. They are subsequently measured at fair value or amortised cost using the effective interest method. Changes in fair value of available-for-sale financial assets are recorded directly in equity. Changes in fair values of any other financial assets and liabilities classified as at fair value through profit or loss are recorded in the income statement.

traded in organised financial markets are determined by reference to quoted market bid prices at the close of business on the balance sheet date. For those with no active market, fair values are determined using valuation techniques. Such techniques include: using recent arm’s length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models, making as much use of available and supportable market data as possible and keeping judgemental inputs to a minimum.

l. Impairment of Non-Financial Assets

carried at fair value, are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Non-financial assets excluding goodwill which have suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

m. Cash and Cash Equivalents

Cash and cash equivalents in the balance sheet and cash flow statements comprise cash at bank and in hand and short-term deposits that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

n. Trade and Other Receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. An allowance for impairment is made when there is objective evidence that collection of the full amount is no longer probable.

o. Inventories

The Group holds inventory in relation to the acquisition and development of manufactured homes within its Active Lifestyle Estates segment.

Inventories are held at the lower of cost and net realisable value.

Annual Report 2014 49

Costs of inventories comprise all acquisition costs, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Inventory includes work in progress and raw materials used in the production of manufactured home units.

Net realisable value is determined on the basis of an estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale.

p. Derivative Financial Instruments

as foreign currency contracts and interest rate swaps to hedge its risks associated with foreign currency and interest rate fluctuations. Such derivative financial instruments are initially recognised at fair value on the date in which the derivative contract is entered into and are subsequently remeasured to fair value.

q. Investment Property

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 and equipment, are not depreciated.

Investment property includes property under construction and tourism cabins.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the period in which they arise, including corresponding tax effect.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal market for the asset or liability or in its absence, the most advantageous market.

It is the Group’s policy to have all investment properties externally valued at intervals of not more than two years and that such valuation be reflected in the financial reports of the Group. 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 materially differs to their fair values.

Changes in the fair value of the an investment property are recorded in the statement of comprehensive income.

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.

r. Intangible Assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination are their fair values as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.

Internally generated intangible assets are not capitalised and expenditure is reflected in the income statement in the year in which the expenditure is incurred.

The useful lives of intangible assets have been assessed as finite. Consequently, intangible assets are amortised on a straight-line basis over their useful economic lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. Amortisation expense is recognised in the income statement in the expense category consistent with the function of the intangible assets.

s. Payables

Trade and other payables are carried at amortised cost and due to their short-term nature are not discounted. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and are recognised when the Group becomes obliged to make future payments in respect of the purchase of these goods and services.

i. General

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit or loss net of any reimbursement.

ii. Wages, salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within twelve months of the reporting date are recognised in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Expenses for nonaccumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

iii. Long service leave

The liability for long service leave is recognised and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

50 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

u. Retirement Village Resident Loans

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

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

Refer to Notes 27(k) and 1(aa) for information regarding the valuation of retirement village resident loans.

v. Borrowings

Borrowings are initially recorded at the fair value of the consideration received less directly attributable transaction costs associated with the borrowings. After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest rate method. Under this method fees, costs, discounts and premiums that are yield related are included as part of the carrying amount of the borrowing and amortised over its expected life.

Group has an unconditional right to defer settlement to more than twelve months after reporting date.

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

w. Issued Equity

Issued and paid up securities are recognised at the fair value of the consideration received by the Group. Any transaction costs arising on issue of ordinary securities are recognised directly in equity as a reduction of the security proceeds received.

x. Revenue

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

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

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

Revenue from the sale of manufactured homes within the Active Lifestyle Estate segment is recognised when the significant risks, rewards of ownership and effective control has been transferred to the buyer.

Government incentives are recognised where there is reasonable assurance the incentive will be received and all attached conditions will be complied with. When the incentive relates to an expense item, it is recognised as income on a systematic basis over the periods that the incentive is intended to compensate.

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

y. Share-Based Payment Transactions

Certain senior executives of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (equity-settled transactions). The Group does not have any cash-settled share-based payment transactions in the financial year.

The cost of equity-settled transactions is recognised, together with a corresponding increase in reserves in equity, over the period in which the performance and service conditions are fulfilled. The cumulative expense recognised for these transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee expenses.

No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions for which vesting is conditional upon a market or non-vesting condition. These are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and service conditions are satisfied.

When the terms of an equity-settled transaction are modified, the minimum expense recognised is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognised for any modification that increases the total fair value of the transaction, or is otherwise beneficial to the employee as measured at the date of modification.

When an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of either the Group or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

Annual Report 2014 51

additional share dilution in the computation of diluted earnings per share.

z. Income Tax

i. Current income tax

Under the current tax legislation, ICF and its subsidiaries are not liable to pay Australian income tax provided that its taxable income (including any assessable capital gains) is fully distributed to securityholders each year. Tax allowances for building and fixtures depreciation are distributed to securityholders in the form of the taxdeferred component of distributions.

However, the Company, ICMT and their subsidiaries are subject to Australian income tax.

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

The subsidiaries that hold the Group’s foreign properties may be subject to corporate income tax and withholding tax in the countries in which they operate. Under current Australian income tax legislation, securityholders may be entitled to receive a foreign tax credit for this withholding tax.

ii. Deferred income tax

Deferred income tax represents tax (including withholding tax) expected to be payable or recoverable by taxable entities on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised through continuing use or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at reporting date. Income taxes related to items recognised directly in equity are recognised in equity and not against income.

iii. Tax Consolidation

Each of the Company and ICMT and their respective subsidiaries have formed a tax consolidation group with the Company or ICMT being the head entity. The head entity and the controlled entities in the tax consolidation group continue to account for their own current and deferred tax amounts. Each tax consolidated group has applied a group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to the members therein.

In addition to its own current and deferred tax amounts, each tax consolidated group also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from entities in their respective tax consolidated group.

Assets of liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the group.

aa. Fair Value Measurement

derivatives, and non-financial assets such as investment properties, at fair value at each balance sheet date. Also, fair values of financial instruments measured at amortised cost are disclosed in Note 27.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability, or

• In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of the reporting period.

The Group’s Audit and Risk Committee determines the policies and procedures for both recurring fair value measurement, such as investment properties and resident loans and for non-recurring measurement.

assets, such as properties and significant liabilities. Selection criteria include market knowledge, experience and qualifications, reputation, independence and whether professional standards are maintained.

On a six monthly basis management presents valuation results to the Audit and Risk Committee and the Group’s auditors. This includes a discussion of the major assumptions used in the valuations.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

52 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

bb. Goods and Services Tax (“GST”)

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

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

on a gross basis. The GST components of cash flows arising from investing and financing activities, which are recoverable from or payable to the tax authorities, are classified as operating cash flows.

cc. Earnings per Share (“EPS”)

of the Group, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

the Group divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

dd. Pending Accounting Standards

AASB 9 Financial Instruments is applicable to reporting periods beginning on or after 1 January 2018. The Group has not early adopted this standard. This standard provides requirements for the classification and measurement of financial assets and accounting for financial liabilities. These requirements seek to improve and simplify the requirements listed in AASB 139 Financial Instruments: Recognition and Measurement . The Group is currently evaluating the impact of this standard.

AASB 2012-3 Amendments to Australian Accounting Standards-Offsetting Financial Assets and Liabilities is applicable for annual financial periods beginning on or after 1 January 2014. The standard makes amendments to AASB 132 Financial Instruments-Presentation as a result of the issuance of International Financial Reporting Standard Offsetting Financial Assets and Financial Liabilities and provides application guidance to certain criteria mentioned in AASB 132. The application of the Standard does not have any impact on the results of the Group as retirement village resident loans are already offset as there is a current legally enforceable right and there is an intention to settle on a net basis.

AASB 2014-1 Amendments to Australian Accounting Standards is applicable for periods beginning on or after 1 July 2014. This standard clarifies that judgement is needed to determine whether an acquisition of investment property is solely the acquisition of an investment property or whether it is an acquisition of a group of assets or a business combination within the scope of AASB 3 Business Combinations that includes an investment property. The Group currently makes an assessment about this classification for each investment property acquired, therefore no impact is expected from this change except for additional disclosures regarding judgements and estimates.

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

The Group presents assets and liabilities in the balance sheet based on current/non-current classification. An asset is current when it is:

• Expected to be realised or intended to be sold or consumed in the normal operating cycle

• Held primarily for the purpose of trading

• Expected to be realised within twelve months after the reporting period, or

• Cash or cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after reporting period.

A liability is current when:

• It is expected to be settled in the normal operating cycle

• It is held primarily for the purpose of trading

• It is due to be settled within twelve months after the reporting period, or

• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

current assets and liabilities.

Annual Report 2014 53

2. ACCOUNTING ESTIMATES AND JUDGEMENTS

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

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

a. Critical Accounting Estimates and Assumptions

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

i. Valuation of investment property

The Group has investment properties with a carrying amount of $498,863,000 (2013: $370,931,000) (refer Note 12), and retirement village residents’ loans with a carrying amount of $190,122,000 (2013: $175,703,000) (refer Note 16), which together represent the estimated fair value of the Group’s interest in seniors living properties. In addition, the Group holds investment properties with carrying amounts of $45,902,000 (2013: $35,343,000) which are included in assets of discontinued operations (refer Note 8(b)).

expected future rentals, rent-free periods, operating costs and appropriate discount and capitalisation rates. The valuation assumptions for deferred management fee villages reflect assumptions relating to average length of stay, unit market values, estimates of capital expenditure, contract terms with residents, discount rates and projected property growth rates.

In forming these assumptions, the Responsible Entity considered information about current and recent sales activity, current market rents, and discount and capitalisation rates, for properties similar to those owned by the Group, as well as independent valuations of the Group’s property.

ii. Valuation of inventories

The Group has inventory in the form of manufactured homes, which it carries at the lower of cost or net realisable value. Estimates of net realisable value are based on the most reliable evidence available at the time the estimates are made, of the amount the inventories are expected to realise and the estimate of costs to complete. Key assumptions require the use of management judgement, which are continually reviewed.

iii. Fair value of derivatives

The fair value of derivative assets and liabilities is based on assumptions of future events and involves significant estimates. Given the complex nature of these instruments and various assumptions that are used in calculating mark-to-market values, the Group relies on counterparty valuations for derivative values. The counterparty valuations are usually based on mid-market rates and calculated using the main variables including the forward market curve, time and volatility.

iv. Valuation of share-based payments

Valuation of share-based payment transactions is performed using judgements around the fair value of equity instruments on the date at which they are granted. The fair value is determined using a Monte Carlo based simulation method. Refer to Note 25 for assumptions used in determining the fair value.

v. Valuation of assets acquired in business combinations Upon recognising the acquisition, management uses estimations and assumptions of the fair value of assets and liabilities assumed at the date of acquisition, including judgements related to valuation of investment property as discussed above.

vi. Valuation of retirement village resident loans

The fair value of the retirement village resident loans is calculated by reference to the initial loan amount plus the resident’s share of any capital gains in accordance with their contracts less any deferred management fee income accrued to date by the Group as operator. The key assumption for calculating the capital gain and deferred management fee income components is the value of the dwelling being occupied by the resident. This value is determined by reference to the valuation of investment property as referred to above.

vii. Calculation of deferred management fee (“DMF”) Deferred management fees are recognised by the Group over the estimated period of time the property will be leased by the resident and the accrued DMF is realised upon exit of the resident. The accrued DMF is based on various inputs including the initial price of the property, estimated length of stay of the resident, various contract terms and projected price of property at time of re-leasing.

b. Critical Judgements in Applying the Entity’s Accounting Policies

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

54 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

3. SEGMENT INFORMATION

a. Description of Segments

The Group invests in seniors living properties located in Australia with three reportable segments:

• Garden Villages – rental villages;

• Settlers Lifestyle – deferred management fee villages; and

• Active Lifestyle Estates – comprising permanent and short stay rentals within lifestyle parks and the sale of manufactured homes.

operating decision maker in assessing performance and in determining the allocation of resources. Other parts of the Group are neither an operating segment nor part of an operating segment. Assets that do not belong to an operating segment are described below as “unallocated”.

b. 30 June 2014

b. 30 June 2014
Active
Lifestyle		Garden	Corporate/
Estates	Settlers	Villages	Unallocated	Total
$’000	$’000	$’000	$’000	$’000
i.Segment revenue External segment revenue 13,589 Interest income – Reclassification of gain on revaluation of newly constructed villages –	10,575 – (3,320)	24,571 – –	– 369 –	48,735 369 (3,320)
Total revenue 13,589	7,255	24,571	369	45,784
ii.Segment underlying profit External segment revenue 13,589 Interest income – Property expenses (2,640) Employee expenses (4,096) Administration expenses (384) Operational, marketing and selling expenses (421) Manufactured home cost of sales (2,130) Finance expense – Income tax benefit –	10,575 – (1,900) (2,173) (226) (1,801) – – –	24,571 – (6,798) (6,365) (996) (512) – – –	– 369 (275) (2,707) (2,765) (402) – (4,446) 2,896	48,735 369 (11,613) (15,341) (4,371) (3,136) (2,130) (4,446) 2,896
Underlying profit/(loss) – continuing operations 3,918	4,475	9,900	(7,330)	10,963
Reconciliation of underlying profit to profit from continuing operations: Net foreign exchange loss – Net gain/(loss) on change in fair value of: Investment properties (2,124) Derivatives – Retirement village resident loans – Gain on revaluation of newly constructed villages – Income tax benefit associated with reconciliation items –	– (599) – (616) (3,320) –	– 2,382 – – – –	(147) – 41 – – 4,368	(147) (341) 41 (616) (3,320) 4,368
Profit from continuing operations per the Consolidated Statement of Comprehensive Income 1,794	(60)	12,282	(3,068)	10,948
iii.Segment assets Segment assets 130,243 Assets held for sale Discontinued operations	262,498	115,293	13,794	521,828 5,439 47,657
Total assets				574,924

Annual Report 2014 55

c. 30 June 2013

c. 30 June 2013
		Active
		Lifestyle				Garden		Corporate/
		Estates		Settlers		Villages		Unallocated	Total
		$’000		$’000		$’000		$’000	$’000
i.Segment revenue
External segment revenue		879		11,443		20,327		–	32,649
Interest income		–		–		–		563	563
Reclassification of gain on revaluation of newly
constructed villages		–		(4,619)		–		–	(4,619)
Total revenue		879		6,824		20,327		563	28,593
ii.Segment underlying profit
External segment revenue		879		11,443		20,327		–	32,649
Interest income		–		–		–		563	563
Property expenses		(37)		(2,390)		(5,312)		89	(7,650)
Employee expenses		(59)		(2,045)		(5,349)		(2,786)	(10,239)
Administration expenses		(51)		(218)		(991)		(1,912)	(3,172)
Operational, marketing and selling expenses		(80)		(1,125)		(984)		(169)	(2,358)
Manufactured home cost of sales		(297)		–		–		–	(297)
Finance expense		–		–		–		(6,112)	(6,112)
Income tax expense		–		–		–		(43)	(43)
Underlying profit/(loss) – continuing
operations		355		5,665		7,691		(10,370)	3,341
Reconciliation of underlying profit to profit from continuing operations:
Net foreign exchange gain		–		–		–		37	37
Net loss on disposal of investment property		–		–		(107)		–	(107)
Net gain/(loss) on change in fair value of:
Investment properties		(15)		(1,512)		4,984		–	3,457
Derivatives		–		–		–		752	752
Retirement village resident loans		–		327		–		–	327
Gain on revaluation of newly
constructed villages		–		(4,619)		–		–	(4,619)
Amortisation of intangibles		–		–		–		(585)	(585)
Other		–		–		–		(185)	(185)
Income tax benefit associated with
reconciliation items		–		–		–		410	410
Profit from continuing operations per the
Consolidated Statement of Comprehensive
Income		340		(139)		12,568		(9,941)	2,828
iii.Segment assets
Segment assets		18,559		255,006		101,108		48,325	422,998
Discontinued operations									36,576
Total assets									459,574

56 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

4. EARNINGS PER SECURITY[(1)]

4. EARNINGS PER SECURITY(1)
	Note	2014	2013
a. Per Security
Profit/(loss) attributable to securityholders ($’000)		11,518	(10,290)
Profit from continuing operations ($’000)		10,948	2,828
Profit/(loss) from discontinued operations ($’000)		570	(13,118)
Weighted average number of securities outstanding (thousands):
Issued securities		646,603	509,716
Dilutive securities
Performance quantum rights		2,310	3,842
Retention quantum rights	25	1,818	1,818
Weighted average number of issued and dilutive potential securities outstanding
(thousands)		650,731	515,376
Basic earnings per security from continuing operations (cents)		1.7	0.6
Basic earnings per security from discontinued operations (cents)		0.1	(2.6)
Basic earnings per security (cents)		1.8	(2.0)
Dilutive earnings per security from continuing operations (cents)		1.7	0.5
Dilutive earnings per security from discontinued operations (cents)		0.1	(2.5)
Dilutive earnings per security (cents)		1.8	(2.0)
b. Per Security Attributable to Parent
Loss attributable to securityholders ($’000)		(2,734)	(1,245)
Weighted average number of securities outstanding (thousands):
Issued securities		646,603	509,716
Dilutive securities
Performance quantum rights		2,310	3,842
Retention quantum rights	25	1,818	1,818
Weighted average number of issued and dilutive potential securities outstanding
(thousands)		650,731	515,376
Basic earnings per security (cents)		(0.4)	(0.2)
Dilutive earnings per security (cents)		(0.4)	(0.2)

(1) Prior year weighted average number of securities and EPS have been adjusted in accordance with AASB 133 “Earnings per Share (“AASB 133”). The weighted average number of securities on issue for the current year, prior to the rights issue in September 2013, has also been adjusted as required by AASB 133.

Annual Report 2014 57

5. REVENUE

5. REVENUE
2014	2013
$’000	$’000
a. Rental Income Residential rental income – Garden Villages 21,032	17,432
Residential rental income – Settlers Lifestyle 1,025	1,362
Residential rental income – Active Lifestyle Estates 4,231	437
Short-term rental income – Active Lifestyle Estates 5,355	56
Total rental income 31,643	19,287
b. Other Property Income Government incentives 219	127
Commissions and administrative fees 239	426
Linen fees 170	138
Land transfer duty refund 622	–
Sundry income 263	181
Utility recoveries 306	–
Total other property income 1,819	872

6. FINANCE EXPENSE

6. FINANCE EXPENSE
2014	2013
$’000	$’000
Interest paid or payable 4,189	6,076
Finance lease interest paid or payable(1) 257	36
Total finance expense 4,446	6,112

(1) Finance lease interest relates to a long term lease with Gosford City Council for the land and facilities of Ettalong Holiday Village and long term Crown leases in relation to One Mile Beach Holiday Park. Refer to Note 15(b).

7. INCOME TAX BENEFIT

7. INCOME TAX BENEFIT
2014	2013
$’000	$’000
a. Income Tax Beneft Current tax 84	(84)
Decrease in deferred tax liabilities 7,180	451
Income tax benefit 7,264	367
b. Reconciliation between Tax Expense and Pre-Tax Proft Profit before income tax 3,684	2,461
Less amounts not subject to Australian income tax (14,741)	(7,365)
(11,057)	(4,904)
Income tax at the Australian tax rate of 30% (2013: 30%) 3,317	1,471
ICMT tax consolidation impact 2,823	–
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income: Prior period income tax return true-ups 613	(52)
Movements in carrying value and tax cost base of investment properties 1,163	(80)
Movements in carrying value and tax cost base of DMF receivables (1,232)	(907)
Other timing differences 580	289
Non-recognition of Australian tax losses –	(354)
Income tax benefit 7,264	367

58 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

7. INCOME TAX BENEFIT (CONTINUED)

c. Tax Consolidation

ICH being the head entity. Under the tax funding agreement the funding of tax within the tax group is based on taxable income as if that entity was not a member of the tax group.

being the head entity. Under the tax funding agreement the funding of tax within the tax group is based on taxable income as if that entity was not a member of the tax group.

Upon entering into the ICMT tax consolidated group, the tax cost bases for certain assets were reset resulting in income tax benefits being recorded. In addition, unrecognised losses incurred by entities within the ICMT tax consolidated group are now available for utilisation by the ICMT tax consolidated group resulting in an additional income tax benefit being recorded.

8. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

a. Assets Held for Sale

i. Details of assets held for sale

Prior to 30 June 2014, the Group entered into discussions with a third party regarding the sale of Noyea Riverside Village (“Noyea”). Noyea was included within the Settlers Lifestyle segment. Settlement on the sale of Settlers Lifestyle Noyea was completed on 31 July 2014 at an adjusted sales price of $5.4 million resulting in $nil gain or loss recognised upon completion.

ii. Assets held for sale

The following is the breakdown of the assets held for sale at Noyea:

		2014
	Note	$’000
Investment property	12(b)	–
Deferred management fee receivable	16(b)	5,439
		5,439

b. Discontinued Operations

i. Details of discontinued operations

2011, which is consistent with the previously announced strategy to focus on transitioning to an actively managed Australian seniors living business. The Group holds a 100% interest in three facilities in Wellington, New Zealand that are primarily leased for 15 years to Victoria University of Wellington and Wellington Institute of Technology.

divestment of these operations the proceeds will be reinvested into its Australian lifestyle parks business.

as discontinued operations since November 2009. The Group completely exited US operations in February 2013 with some funds remaining in escrow. During the current year, the Group received US$6.8 million of escrows and based on an assessment of remaining amounts due an additional gain of $0.3 million has been booked.

Annual Report 2014 59

ii. Financial performance

2014	2013
$’000	$’000
Revenue 3,210	5,295
Net loss on change in fair value of Investment properties (1,630)	(2,783)
Unrealised net foreign exchange gain/(loss) 1,557	(718)
Other income –	31
Expenses (2,864)	(4,746)
Distributions from formerly equity accounted investments 274	2,350
Disposal costs associated with overseas investments (290)	(672)
Profit/(loss) from operating activities before income tax 257	(1,243)
Income tax expense (14)	(1,002)
Profit/(loss) from operating activities 243	(2,245)
Gain on sale of discontinued operations 327	6,590
Release of foreign currency translation reserve on disposal of foreign operations –	(17,463)
Profit/(loss) from discontinued operations for the year 570	(13,118)

Profit/(loss) from discontinued operations attributable to the Company for periods ending 30 June 2014 and 30 June 2013 is $nil.

2014	2013
$’000	$’000
Net cash flow from operating activities 1,135	1,156
Net cash flows from investing activities: (Payments)/proceeds on sale of discontinued operations (120)	64,349
Additions to investment properties (9,081)	(13,665)
Payments for lease arrangements (745)	–
Net cash flow from financing activities 11,449	(26,285)
Transfer to continuing operations –	(29,786)
Net cash flows from discontinued operations 2,638	(4,231)

60 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

8. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE (CONTINUED)

iv. Assets and liabilities

		2014	2013
	Note	$’000	$’000
Assets
Cash and cash equivalents	9	1,657	974
Trade and other receivables		98	259
Investment properties		45,902	35,343
Total assets		47,657	36,576
Liabilities
Bank overdraft		–	1,955
Payables		368	2,051
Borrowings		30,081	17,522
Total liabilities		30,449	21,528
Net assets of disposal groups		17,208	15,048

The change in investment properties increased for the year due to capitalised expenditure of $7.8 million, lease incentive payments of $0.4 million and foreign exchange gain of $4.0 million offset by a fair value loss of $1.6 million.

v. Capital commitments

There were no capital commitments under construction contracts for the New Zealand Students business for the year ended 30 June 2014 (2013: A$9,208,234).

vi. Capitalisation rate

The weighted average capitalisation rate of the New Zealand Students internal valuation within discontinued operations is 8.6% (2013: 7.75%).

9. CASH AND CASH EQUIVALENTS

9. CASH AND CASH EQUIVALENTS
	2014	2013
	$’000	$’000
Cash at bank and in hand	12,894	38,531
Reconciliation to statements of cash flows
Cash and cash equivalents attributable to:
Continuing operations – cash at bank	12,894	38,531
Discontinued operations – cash at bank	1,657	974
Discontinued operations – bank overdraft	–	(1,955)
Cash at the end of the year as per cash flow statement	14,551	37,550

Annual Report 2014 61

10. TRADE AND OTHER RECEIVABLES

10. TRADE AND OTHER RECEIVABLES
2014	2013
$’000	$’000
Current Other receivables 291	278
Prepayments and deposits 3,454	8,511
Total current trade and other receivables 3,745	8,789
Non-current Accrued income, prepayments and deposits 2,168	2,671

Rental amounts due are typically paid in advance and other amounts due are receivable within 30 days. There are no receivables which are neither past due nor impaired.

11. INVENTORIES

11. INVENTORIES
2014	2013
$’000	$’000
Current assets Manufactured homes 2,208	285

12. INVESTMENT PROPERTIES

a. Summary of Carrying Amounts

12. INVESTMENT PROPERTIES a. Summary of Carrying Amounts
2014	2013
$’000	$’000
Completed properties 495,048	367,116
Land not yet under construction 3,815	3,815
498,863	370,931

62 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

12. INVESTMENT PROPERTIES (CONTINUED)

b. Individual Valuations and Carrying Amounts

12. INVESTMENT PROPERTIES (CONTINUED) b. Individual Valuations and Carrying Amounts
Property Location Date of purchase Cost to date $’000 Latest external valuation date Valuation $’000	CARRYING AMOUNT CAPITALISATION RATE
	2014 $’000 2013 $’000 2014 % 2013 %
Completed properties Garden Villages Yakamia Gardens Yakamia, WA Jun 04 5,459 Dec 12 2,900 Mardross Gardens Albury, NSW Jun 04 5,610 Jun 14 2,400 Seville Grove Gardens Seville Grove, WA Jun 04 4,559 Dec 12 3,400 Hertford Gardens Sebastopol, VIC Jun 04 4,119 Jun 14 3,770 Carey Park Gardens Bunbury, WA Jun 04 4,944 Dec 12 2,600 Jefferis Gardens Bundaberg North, QLD Jun 04 4,992 Dec 13 2,600 Claremont Gardens Claremont, TAS Jun 04 4,293 Dec 13 3,320 Taloumbi Gardens Coffs Harbour, NSW Jun 04 5,072 Dec 12 4,200 Devonport Gardens Devonport, TAS Jun 04 4,028 Dec 12 2,500 Wheelers Gardens Dubbo, NSW Jun 04 4,362 Dec 13 3,800 Elphinwood Gardens Launceston, TAS Jun 04 4,464 Dec 12 2,750 Glenorchy Gardens Glenorchy, TAS Jun 05 4,164 Dec 13 3,250 Chatsbury Gardens Goulburn, NSW Jun 04 4,828 Dec 13 2,940 Grovedale Gardens Grovedale, VIC Jun 05 4,960 Dec 12 3,600 Horsham Gardens Horsham, VIC Jun 04 4,467 Jun 14 3,300 Sea Scape Gardens Erskine, WA Jun 04 4,577 Dec 12 4,200 Marsden Gardens Marsden, QLD Jun 05 10,375 Dec 12 8,150 Coburns Gardens Brookfield, VIC Jun 04 4,355 Dec 12 3,000 Brooklyn Gardens Brookfield, VIC Jun 04 4,186 Dec 12 2,400 Oxley Gardens Port Macquarie, NSW Jun 04 4,416 Dec 12 2,600 Townsend Gardens St Albans Park, VIC Jun 04 4,811 Jun 14 3,800 St Albans Park Gardens St Albans Park, VIC Jun 04 5,099 Jun 14 4,140 Swan View Gardens Swan View, WA Jan 06 7,888 Dec 12 5,650 Taree Gardens Taree, NSW Dec 04 4,635 Dec 12 2,400 Dubbo Gardens Dubbo, NSW Dec 12 2,700 Dec 13 3,290 Ocean Grove Gardens Mandurah, WA Feb 13 3,161 Dec 13 3,280 Peel River Gardens Tamworth, NSW Mar 13 3,642 Dec 13 2,970 Sovereign Gardens Ballarat, VIC Jun 13 3,321 Jun 14 3,100 Wagga Gardens Wagga Wagga, NSW Jun 13 4,010 Jun 14 3,930 Bathurst Gardens Bathurst, NSW Jan 14 2,405 Jun 14 2,580 Launceston Gardens Launceston, TAS Jan 14 2,462 Jun 14 2,510 Shepparton Gardens Shepparton, VIC Jan 14 1,668 Jun 14 1,780 Murray River Gardens Mildura, VIC Jan 14 2,316 Jun 14 2,170 Warrnambool Gardens Warrnambool, VIC Jan 14 1,933 Jun 14 1,800	2,730 2,500 10.0% 7.5% 2,400 2,320 10.0% 5.5%(2) 3,390 3,240 10.5% 9.8% 3,770 3,780 10.8% 10.5% 3,520 2,840 11.0% 10.0% 3,480 2,720 11.0% 10.0% 3,230 2,900 10.5% 9.5% 4,170 4,020 10.5% 10.3% 2,100 2,120 9.0% 5.3%(2) 4,300 3,950 10.0% 10.5% 2,910 2,740 10.5% 10.0% 3,370 3,010 10.5% 10.0% 3,430 3,340 10.5% 10.0% 4,010 4,090 10.5% 10.5% 3,300 3,170 10.8% 10.0% 4,170 4,180 11.0% 10.3% 8,380 7,900 12.5% 10.5% 3,290 3,260 10.5% 9.5% 3,270 2,790 10.5% 9.5% 3,120 2,320 10.5% 10.0% 3,800 3,390 11.0% 9.8% 4,140 4,030 11.0% 10.5% 5,990 5,780 11.5% 10.3% 2,320 2,950 9.0% 10.0% 2,670 2,652 10.3% 5.3%(2) 3,100 3,015 10.8% 11.0% 2,040 3,464 9.0% 7.3%(2) 3,100 3,265 10.5% 5.3%(2) 3,930 3,953 12.0% 11.8% 2,580 – 9.0% – 2,510 – 9.0% – 1,780 – 8.0% – 2,170 – 7.5% – 1,800 – 8.0% –
148,281	114,270 99,689

Annual Report 2014 63

Property Location Date of purchase Cost to date $’000 Latest external valuation date Valuation $’000	CARRYING AMOUNT	DISCOUNT RATE
	2014 $’000 2013 $’000	2014 % 2013 %
Settlers Lifestyle Forest Lake Forest Lake, QLD Nov 05 14,324 Jun 13 12,662 South Gladstone South Gladstone, QLD Nov 05 8,212 Jun 13 12,093 Rockhampton Rockhampton, QLD Nov 05 10,785 Dec 13 13,900 Cessnock Cessnock, NSW Jun 04 7,476 Dec 12 3,190 Lakeside Ravenswood, WA Apr 07 71,167 Dec 12 77,584 Noyea Riverside Mt Warren Park, QLD Apr 07 2,521 Dec 12 549 Meadow Springs Mandurah, WA Apr 07 18,430 Jun 13 17,066 Ridgewood Ridgewood, WA Apr 07 85,378 Jun 13 105,104 Ridge Estate Gillieston Heights, NSW Jul 12 10,174 – –	14,194 12,663 12,534 12,093 14,314 13,768 6,009 4,871 77,242 78,673 –(3) 324 16,510 17,066 103,552 105,104 11,765 5,471	16.7% 15.0% 15.0% 15.0% 17.9% 14.7% 19.0% 16.1% 14.2% 13.5% 13.8% 14.5% 14.0% 14.5% 14.3% 13.5% 20.0% 15.0%
228,467	256,120 250,033
Active Lifestyle Estates The Grange Morisset, NSW Mar 13 12,895 Dec 13 12,129 Ettalong Beach Holiday Village(1) Ettalong Beach, NSW Apr 13 5,581 Dec 13 5,850 Albury Citygate Caravan and Tourist Park Albury, NSW Aug 13 2,697 Jun 14 2,000 Nepean River Holiday Village Penrith, NSW Aug 13 10,932 Jun 14 11,000 Mudgee Valley Tourist Park Mudgee, NSW Sep 13 4,519 Jun 14 4,250 Mudgee Tourist and Van Resort Mudgee, NSW Oct 13 7,911 Jun 14 7,200 Drifters Holiday Village Kingscliff, NSW Nov 13 11,511 – – Lake Macquarie Holiday Village Morisset, NSW Nov 13 7,683 – – Macquarie Lakeside Holiday Village Chain Valley Bay, NSW Dec 13 4,045 – – One Mile Beach Holiday Park(4) Anna Bay, NSW Dec 13 11,975 – – Big4 Valley Vineyard Tourist Park Cessnock, NSW Feb 14 9,782 – – Wine Country Caravan Park Cessnock, NSW Feb 14 1,665 – – Sun Country Holiday Village Mulwala, NSW Apr 14 7,708 – – Town and Country Estate Marsden Park, NSW May 14 19,444 – – Rouse Hill Lifestyle Residential Park Rouse Hill, NSW Jun 14 7,362 – –	11,848 12,293 5,811 5,101 2,000 – 11,000 – 4,250 – 7,200 – 11,511 – 7,683 – 4,045 – 13,349 – 9,782 – 1,665 – 7,708 – 19,444 – 7,362 –	CAPITALISATION RATE
		9.1% –(5) 21.0% –(5) 10.5% – 10.4% – 10.5% – 8.8% – –(5) – –(5) – –(5) – –(5) – –(5) – –(5) – –(5) – –(5) – –(5) –
125,710	124,658 17,394
Total completed properties 502,458	495,048 367,116

64 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

12. INVESTMENT PROPERTIES (CONTINUED)

12. INVESTMENT PROPERTIES (CONTINUED)
Property Location Date of purchase Cost to date $’000 Latest external valuation date Valuation $’000	CARRYING AMOUNT
	2014 $’000 2013 $’000
Land not yet under construction Settlers South Gladstone Gardens – land South Gladstone, QLD Nov 05 199 Jun 13 750 Meadow Springs Mandurah, WA Apr 07 2,470 Jun 13 2,455 Active Lifestyle Estates The Grange Morisset, NSW Mar 13 300 – – Ettalong Beach Holiday Village(1) Ettalong Beach, NSW Apr 13 310 – –	750 750 2,455 2,455 300 300 310 310
Land not yet under construction 3,279	3,815 3,815
Total Investment Properties 505,737	498,863 370,931

(1) Ettalong Beach Holiday Village land component is leased from the Gosford City Council and is recognised as investment property with an associated finance lease.

(2) The replacement value exceeds the value implied by the capitalisation rate valuation approach resulting in implied capitalisation rates below market.

(4) One Mile Beach land component is leased from the Crown under 40 year and perpetual leases and is recognised as investment property with an associated finance lease.

(5) Acquired during the year and carried at cost at balance date. Cost to date is deemed to represent fair value at the end of the year.

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 1(q). Properties acquired during the year are held at cost, which is reflective of the estimate of fair value.

Valuations made in a foreign currency have been converted at the rate of exchange ruling at valuation date which are subsequently translated at exchange rates prevailing at reporting date.

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

Select Settlers Lifestyle villages continue to be in the process of converting from a rental to a deferred management fee model. The discount rate reflects a combination of development risk on vacant units and DMF from both occupied and vacant units. Over time, these properties’ discount rates will likely revert downwards as project risk diminishes.

c. Movements in Carrying Amounts

c. Movements in Carrying Amounts
	2014	2013
	$’000	$’000
Carrying amount at beginning of year	370,931	327,632
Acquisitions	118,303	39,313
Expenditure capitalised	10,336	4,076
Disposals	–	(3,140)
Sale of units – Strata title	(492)	–
Transferred from plant and equipment	320	–
Transfer to inventory	(194)	(195)
Transferred to discontinued operations	–	(212)
Net gain/(loss) on change in fair value	(341)	3,457
Carrying amount at end of year	498,863	370,931

Fair value hierarchy disclosures for investment properties have been provided in Note 28.

Annual Report 2014 65

d. Reconciliation of Fair Value

d. Reconciliation of Fair Value
			Active
	Garden	Settlers	Lifestyle
	Villages	Lifestyle	Estates	Total
	$’000	$’000	$’000	$’000
Carrying amount at 1 July 2013	99,689	253,238	18,004	370,931
Acquisitions	10,617	–	107,686	118,303
Expenditure capitalised	1,588	7,182	1,566	10,336
Sale of units – Strata title	–	(492)	–	(492)
Transferred from plant and equipment	–	–	320	320
Transferred to inventory	–	–	(194)	(194)
Net gain/(loss) on change in fair value	2,376	(603)	(2,114)	(341)
Carrying amount at 30 June 2014	114,270	259,325	125,268	498,863

e. Description of Valuations Techniques used and Key Inputs to Valuation on Investment Properties

			Significant	Significant	Range	Range	Relationship of	Relationship of
	Valuation		unobservable		(weighted		unobservable
	technique		inputs		average)		input to fair value
Garden	Capitalisation		Stabilised		62-98% (87%)		As costs are fixed in nature, occupancy has a direct
Villages	method		occupancy				correlation to valuation (i.e. the higher the occupancy,
							the greater the value).
			Capitalisation rate		8-13% (11%)		Capitalisation has an inverse relationship to valuation.
Settlers	Discounted		Current market		$115,000-$470,000		Market value and growth in value have a direct
Lifestyle	cash flow		value per unit		($307,000)		correlation to valuation, while length of stay and
							discount rate have an inverse relationship to valuation.
			Growth in value		0-4%
			Average length		11.4 years
			of stay – future
			residents
			Average length		14.6 years
			of stay – current
			residents
			Discount rate		14-20% (15%)
Active	Capitalisation		Short-term		15-70% based on		Higher the occupancy, the greater the value.
Lifestyle	method (for		occupancy		seasonality and
Estates	existing rental				accommodation
	streams)				categories
			Residential		90-100%
			occupancy
			Operating profit		50-70% dependent		Higher the profit margin, the greater the value.
			margin		upon short-term
					and residential
					accommodation mix
			Capitalisation rate		9-12%		Capitalisation has an inverse relationship to valuation.
	Discounted		Discount rate		15-25%		Discount rate has an inverse relationship to valuation.
	cash flow
	(for future
	development)

66 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

12. INVESTMENT PROPERTIES (CONTINUED)

Capitalisation Method

The capitalisation method involves estimating the expected income projections of the property into perpetuity and applying a capitalisation rate. The capitalisation rate is based on current market evidence. Future income projections take into account occupancy, rental income and operating expenses.

Discounted Cash Flow Method

ownership over the asset’s life including an exit or terminal value. This method involves the projection of a series of cash flows on a real property interest. To this projected cash flow series, a market-derived discount rate is applied to establish the present value of the income stream associated with the asset. The exit yield normally reflects the exit value expected to be achieved upon selling the asset and is a function of the risk adjusted returns of the asset and expected capitalisation growth rate.

reviews, lease renewal and related re-letting, redevelopment, or refurbishment as well as the development of new units. The appropriate duration is typically driven by market behaviour that is a characteristic of the class of real property. Periodic cash flow is typically estimated as gross income less vacancy, non-recoverable expenses, collection losses, lease incentives, maintenance cost, agent and commission costs and other operating and management expenses. The series of periodic net underlying cash flows, along with an estimate of the terminal value anticipated at the end of the projection period, is then discounted.

13. PLANT AND EQUIPMENT

13. PLANT AND EQUIPMENT
	2014	2013
	$’000	$’000
a. Summary of Carrying Amounts
Plant and equipment	1,880	1,774
Less: accumulated depreciation	(890)	(740)
Total plant and equipment	990	1,034
b. Movements in Carrying Amount
Carrying amount at beginning of year	1,034	769
Acquired through acquisitions	–	320
Assets written off	(82)	–
Transferred to investment property	(320)	(173)
Additions	569	296
Depreciation	(211)	(178)
Carrying amount at end of year	990	1,034

14. TRADE AND OTHER PAYABLES

	2014	2013
	$’000	$’000
Current liabilities
Trade and other payables	8,814	8,175
Deposits and other unearned income	1,595	384
Total current liabilities	10,409	8,559
Non-current liabilities
Deferred land payment	4,000	–

Annual Report 2014 67

15. BORROWINGS

15. BORROWINGS
		2014	2013
	Note	$’000	$’000
Current liabilities
Finance leases	(c)	283	267
Non-current liabilities
Bank debt	(a)	94,000	68,000
Prepaid borrowing costs		(312)	(578)
Finance leases	(c)	4,385	3,117
Total non-current borrowings		98,073	70,539

a. Bank Debt

On 21 February 2014, the Group refinanced its Australian dollar denominated bank debt facility to $129,500,000. The facility expires on 30 September 2015 and has the following principal financial covenants:

• Loan to value ratio (“LVR”) is less than or equal to 50%;

• Total leverage ratio does not exceed 50%; and

As at 30 June 2014, the facility has been drawn to $94,000,000 (2013: $68,000,000). The carrying value of investment property net of resident liabilities at reporting date for the Group’s Australian properties pledged as security is $290,375,000 (2013: $179,320,000).

b. Bank Guarantees

The Group has the ability to utilise a portion of its $129.5 million bank facility to provide bank guarantees. Bank guarantees at 30 June 2014 were $4.4 million. Refer to Note 24.

c. Finance Leases

On 23 April 2013, the Group was assigned a commercial lease with 16.5 years remaining with the Gosford City Council for land and facilities as part of its Ettalong Beach Holiday Village acquisition. The lease is for an initial three years commencing September 2012 with two renewal options of seven years each. The below table is based on the expectation that the lease options will be exercised.

In December 2013, the Group acquired One Mile Beach Holiday Park, accounted for as investment property. Two Crown leases are attached to the land, one for 40 years expiring on 19 September 2031 and one for perpetuity.

i. Minimum lease payments – excluding perpetual lease

i. Minimum lease payments – excluding perpetual lease
2014	2013
$’000	$’000
Minimum lease payments: Within one year 292	267
Later than one year but not later than five years 1,242	1,135
Later than five years 3,761	3,766
Total minimum lease payments 5,295	5,168
Future finance charges (1,765)	(1,784)
Present value of minimum lease payments 3,530	3,384
Present value of minimum lease payments: Within one year 283	258
Later than one year but not later than five years 1,056	962
Later than five years 2,191	2,164
3,530	3,384

68 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

15. BORROWINGS (CONTINUED)

ii. Minimum lease payments – perpetual lease

The perpetual lease is recognised as investment property and non-current liability at a value of $1.1 million based on a capitalisation rate of 10.6% applied to the current lease payment. Payments each period in relation to the lease are recognised as finance expenses in the statement of comprehensive income, therefore, there is no subsequent change to the originally determined present value of the minimum lease payments as calculated above.

As this is a perpetual lease, the lease liability will not amortise and no fair value adjustments in relation to the lease will be recognised unless circumstances of the lease change. Under the terms of the lease, lease payments will continue into perpetuity. The current annual lease payment is $121,000.

16. RETIREMENT VILLAGE RESIDENT LOANS

	2014	2013
	$’000	$’000
a. Summary of Carrying Amounts
Gross resident loans	218,639	206,629
Accrued deferred management fee	(28,517)	(30,926)
Net resident loans	190,122	175,703
b. Movements in Carrying Amounts
Carrying amount at beginning of year	175,703	162,603
Net (gain)/loss on change in fair value of resident loans	616	(327)
Accrued deferred management fee income	(5,333)	(4,850)
Deferred management fee cash collected	1,811	1,368
Acquired resident loans	–	4,473
Proceeds from resident loans	22,021	19,338
Repayment of resident loans	(10,361)	(7,118)
Transfer to assets held for sale	5,439	–
Other	226	216
Carrying amount at end of year	190,122	175,703

Fair value hierarchy disclosures for retirement village resident loans have been provided in Note 28.

17. PROVISIONS

	2014	2013
	$’000	$’000
Current liabilities
Employee liabilities	718	507
Non-current liabilities
Employee liabilities	249	140

18. DERIVATIVES

18. DERIVATIVES
		2014	2013
	Note	$’000	$’000
Current liabilities
Interest rate swap contracts	27	84	–
Non-current liabilities
Interest rate swap contracts	27	84	209

Annual Report 2014 69

19. DEFERRED TAX LIABILITIES

19. DEFERRED TAX LIABILITIES
2014	2013
$’000	$’000
Deferred tax assets Tax losses 14,228	8,317
Other 1,081	430
Deferred tax liabilities DMF receivable 8,176	6,756
Investment properties 7,409	9,461
Net deferred tax liabilities 276	7,470
Deductible temporary differences and carried forward losses tax effected for which no deferred tax asset has been recognised 7,488	4,220

The availability of carried forward tax losses of $7.5 million to the ICMT tax consolidated group is subject to recoupment rules at the time of recoupment. Further, the rate at which these losses can be utilised is determined by reference to market values at the time of tax consolidation and subsequent events. Accordingly, a portion of these carried forward tax losses may not be available in the future.

current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

20. ISSUED SECURITIES

20. ISSUED SECURITIES
2014	2013
$’000	$’000
a. Carrying Values At beginning of year 510,141	490,044
Issued during the year: Institutional placement securities –	21,168
Transaction costs of institutional placement securities –	(1,071)
Rights issue 61,707	–
Rights issue costs (2,732)	–
At end of year 569,116	510,141
The closing balance is attributable to the securityholders of: Ingenia Communities Holding Limited 7,377	6,078
Ingenia Communities Fund 547,642	497,957
Ingenia Communities Management Trust 14,097	6,106
569,116	510,141
2014	2013
Thousands	Thousands
b. Number of Issued Securities At beginning of year 507,179	441,029
Issued during the year 169,061	66,150
At end of year 676,240	507,179

c. Terms of Securities

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

70 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

21. RESERVES

21. RESERVES
	2014	2013
	$’000	$’000
Foreign currency translation reserve
Balance at beginning of year	766	(17,024)
Translation differences arising during the year	269	327
Amounts transferred to profit and loss on disposal of foreign operations	–	17,463
Balance at end of year	1,035	766
Share-based payment reserve
Balance at beginning of year	308	15
Share-based payment transactions	680	293
Balance at end of year	988	308
Total reserves at end of year	2,023	1,074
The closing balance is attributable to the securityholders of:
Ingenia Communities Holding Limited	988	308
Ingenia Communities Fund	866	646
Ingenia Communities Management Trust	169	120
	2,023	1,074

of foreign subsidiaries.

The share-based payment reserve records the value of equity-settled share-based payment transactions provided to employees, including key management personnel, as part of their remuneration. Refer Note 25.

22. ACCUMULATED LOSSES

22. ACCUMULATED LOSSES
	2014	2013
	$’000	$’000
Balance at beginning of year	(336,563)	(321,863)
Net profit/(loss) for the year	11,518	(10,290)
Distributions	(5,917)	(4,410)
Balance at end of year	(330,962)	(336,563)
The closing balance is attributable to the securityholders of:
Ingenia Communities Holding Limited	(2,659)	77
Ingenia Communities Fund	(324,254)	(333,650)
Ingenia Communities Management Trust	(4,049)	(2,990)
	(330,962)	(336,563)

Annual Report 2014 71

23. COMMITMENTS

a. Capital Commitments

There were commitments for capital expenditure on investment property contracted but not provided for at reporting date of $3,266,000 (2013: $nil).

For commitments for capital expenditure on discontinued operations, refer to Note 8(b)(v).

b. Operating Lease Commitments

of 1.5 years and five years respectively.

Future minimum rentals payable under these leases as at reporting date were:

2014	2013
$’000	$’000
Within one year 482	346
Later than one year but not later than five years 1,106	395
1,588	741

c. Finance Lease Commitments

The Group was assigned a commercial lease with 16.5 years remaining with the Gosford City Council for land and facilities as part of its Ettalong Holiday Village acquisition. The lease is for an initial three years commencing September 2012 with two renewal options of seven years each.

In December 2013, the Group acquired One Mile Beach Holiday Park, accounted for as investment property. Two Crown leases are attached to the land, one for 40 years expiring on 19 September 2031 and one for perpetuity.

Refer to Note 15 for future minimum lease payments payable and the present value of minimum lease payments payable at reporting date for the finance leases at Ettalong Holiday Village and One Mile Beach Holiday Park.

24. CONTINGENT LIABILITIES

There are no known contingent liabilities other than the bank guarantees of $4.4 million provided for under the $129.5 million bank facility (Note 15). Bank guarantees of $4.0 million are in relation to deferred land payments recognised as non-current payables (refer to Note 14). These guarantees will not be called by the counterparty unless the payable is not paid per the terms of the agreement.

72 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

25. SHARE-BASED PAYMENT TRANSACTIONS

The Group has established a long-term incentive scheme (“Scheme”), which provides for the grant of conditional rights to receive securities in the Group. The intention of the Scheme is to align long-term securityholder returns with the ‘at-risk’ compensation potentially payable to executive level employees and to reward managers who remain in employment and perform at the required levels of performance.

The Scheme encompasses two types of security rights: performance quantum rights (“PQRs”) and retention quantum rights (“RQRs”). PQRs vest on completion of a period of service, with the number of rights vesting based on the Group’s performance, as measured by total securityholder returns, and RQRs vest on completion of a period of service. On vesting, each right entitles the employee to receive one security of the Group for no consideration.

Movements in rights during the year were:

	2014	2013
	Thousands	Thousands
PQRs
Outstanding at beginning of year	3,842	3,842
Granted during the year	3,716	–
Outstanding at end of year	7,558	3,842
Exerciseable at end of year	–	–
Weighted average remaining contractual life of outstanding rights (years)	1.5	2.0
RQRs
Outstanding at beginning of year	1,818	1,818
Granted during the year	–	–
Outstanding at end of year	1,818	1,818
Exerciseable at end of year(1)	–	–
Weighted average remaining contractual life of outstanding rights (years)	–	0.9

(1) The RQRs vested on 1 July 2014 and 1,818,000 fully paid stapled securities were issued at that time.

On 19 November 2013, 3,716,000 Performance Quantum Rights (“PQR”) were granted to senior executives of the Group under the long-term incentive scheme (“Scheme”). The number of PQRs that will vest under the Scheme depends on Total Securityholder Return (“TSR”) achieved and is also conditional on the individual being in employment of the Group on the vesting date (30 June 2016). The measurement period for the PQRs is 1 July 2013 to 30 June 2016 and full rights vest if a TSR above 40% is achieved during the measurement period. A sliding scale applies for lower TSRs with the number of PQRs vesting being nil for a TSR below 26%. One PQR equates to one security in the Group.

The fair value of the PQRs issued during the year was estimated using a Monte Carlo Simulation model. Assumptions made in determining these fair value, and the results of these assumptions, are:

Price of stapled securities at grant date	$0.495
Volatility of security price	30.0%
Distribution yield	3.93%
Risk-free rate at grant date	2.96%
Expected remaining life at grant date	2.6 years
Fair value of each right	$0.325

fair value is expensed on a straight-line basis over the vesting period. The expense recognised for the financial year was $680,600 (2013: $293,113).

Annual Report 2014 73

26. CAPITAL MANAGEMENT

The Group aims to meet its strategic objectives and operational needs and to maximise returns to securityholders through the appropriate use of debt and equity, while taking account of the additional financial risks of higher debt levels.

In determining the optimal capital structure, the Group takes into account a number of factors, including the views of investors and the market in general, the capital needs of its portfolio, the relative cost of debt versus equity, the execution risk of raising equity or debt, and the additional financial risks of debt including increased volatility of earnings due to exposure to interest rate movements, the liquidity risk of maturing debt facilities and the potential for acceleration prior to maturity.

its debt profile, the degree of hedging and the overall level of debt as measured by gearing.

The actual capital structure at a point in time is the product of a number of factors, many of which are market driven and to various degrees outside of the control of the Group, particularly the impact of revaluations on gearing levels, the availability of new equity and the liquidity in real estate markets. While the Group periodically determines the optimal capital structure, the ability to achieve the optimal structure may be impacted by market conditions and the actual position may often differ from the optimal position.

The Group’s capital position is primarily monitored through its ratio of total liabilities to total assets (“Leverage Ratio”), calculated on a look-through basis. The Group’s medium term strategy is to maintain the Leverage Ratio in the range of 45% - 55%. At 30 June 2014, the Leverage Ratio was 58.2%, compared to 62.0% at 30 June 2013, calculated as follows:

2014	2013
$’000	$’000
Total look-through liabilities 334,747	284,922
Total look-through assets 574,924	459,574
Leverage ratio 58.2%	62.0%

In addition, the Group monitors the ratio of debt to total assets (“Gearing Ratio”), calculated on a look-through basis. At 30 June 2014, the Gearing Ratio was 30.7%, compared to 20.6% at 30 June 2013, calculated as follows:

2014	2013
$’000	$’000
Total consolidated borrowings 128,437	88,328
Less cash & cash equivalents (including associates) (14,551)	(37,550)
Total look-through debt 113,886	50,778
Total consolidated assets 575,924	459,574
Less cash & cash equivalents (14,551)	(37,550)
Less retirements village residents loans (190,122)	(175,703)
Total look-through assets 371,251	246,321
Gearing ratio 30.7%	20.6%

74 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

27. FINANCIAL INSTRUMENTS

a. Introduction

liabilities, other financial liabilities, and derivative financial instruments.

liquidity risk. The Group manages its exposure to these risks primarily through its treasury policy. The policy sets out various targets aimed at restricting the financial risk taken by the Group. Management reviews actual positions of the Group against these targets on a regular basis. If the target is not achieved, or forecast not to be achieved, a plan of action is, where appropriate, put in place with the aim of meeting the target within an agreed timeframe. Depending on the circumstances of the Group at a point in time, it may be that positions outside of the treasury policy are accepted and no plan of action is put in place to meet the treasury targets, because, for example, the risks associated with bringing the Group into compliance outweigh the benefits. The adequacy of the treasury policy in addressing the risks arising from the Group’s financial instruments is reviewed on a regular basis.

at any one time it will not meet all its targets. For example, the Group may be unable to negotiate the extension of bank facilities sufficiently ahead of time, so that it fails to achieve its liquidity target. When refinancing loans it may be unable to achieve the desired maturity profile or the desired level of flexibility of financial covenants, because of the cost of such terms or their unavailability. Hedging instruments may not be available, or their cost may outweigh the benefit of risk reduction or they may introduce other risks such as mark to market valuation risk. Changes in market conditions may limit the Group’s ability to raise capital through the issue of new securities or sale of properties.

b. Interest Rate Risk

The Group’s exposure to the risk of changes in market interest rates arises primarily from its use of borrowings. The main consequence of adverse changes in market interest rates is higher interest costs, reducing the Group’s profit. In addition, one or more of the Group’s loan agreements may include minimum interest cover covenants. Higher interest costs resulting from increases in market interest rates may result in these covenants being breached, providing the lender the right to call in the loan or to increase the interest rate applied to the loan.

borrowings. Fixed rate debt is achieved either through fixed rate debt funding or through derivative financial instruments permitted under the treasury policy. The policy sets minimum and maximum levels of fixed rate exposure over a ten-year time horizon.

are at a fixed rate of interest (2013: 26%).

subject to floating interest rate terms. Changes in market interest rates will also change the fair value of any interest rate hedges.

c. Interest Rate Risk Exposure

30 June 2014 Floating interest rate	FIXED INTEREST MATURING IN: Less than 1year 1 to 5 Years More than 5years Total
Principal amounts $’000 Financial assets Cash at bank 12,894 – – – 12,894 Financial liabilities Bank debt denominated in AUD 94,000 – – – 94,000 Finance leases (excluding perpetual lease) – 283 1,056 2,191 3,530 Interest rate swaps: - denominated in AUD; Group pays fixed rate (45,000) 45,000 – – –
	– – – 12,894
	– – – 94,000
	283 1,056 2,191 3,530

Annual Report 2014 75

financial year was:

30 June 2013 Floating interest rate	FIXED INTEREST MATURING IN: Less than 1year 1 to 5 Years More than 5years Total
Principal amounts $’000 Financial assets Cash at bank 38,531 – – – 38,531 Financial liabilities Bank debt denominated in AUD 68,000 – – – 68,000 Finance leases – 258 962 2,164 3,384 Interest rate swaps: - denominated in AUD; Group pays fixed rate (45,000) 45,000 – – –

subject to interest rate risk.

d. Interest Rate Sensitivity Analysis

The impact of an increase or decrease in average interest rates of 1% (100 basis points) at reporting date, with all other variables held constant, is illustrated in the tables below. This analysis is based on the interest rate risk exposures in existence at balance sheet date. As the Group has no derivatives that meet the documentation requirements to qualify for hedge accounting, there would be no impact on securityholders interest (apart from the effect on profit).

i. Increase in average interest rates of 1%

	EFFECT ON PROFIT AFTER TAX HIGHER/(LOWER)
	2014 $’000 2013 $’000
Variable interest rate instruments denominated in: Australian dollars	(940) (680)
The efect on change in fair value of derivatives would have been:	EFFECT ON PROFIT AFTER TAX HIGHER/(LOWER)
	2014 $’000 2013 $’000
Interest rate swaps denominated in: Australian dollars	417 793

76 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

27. FINANCIAL INSTRUMENTS (CONTINUED)

ii. Decrease in average interest rates of 1%

	EFFECT ON PROFIT AFTER TAX HIGHER/(LOWER)
	2014 $’000 2013 $’000
Variable interest rate instruments denominated in: Australian dollars	940 680
The efect on change in fair value of derivatives would have been:	EFFECT ON PROFIT AFTER TAX HIGHER/(LOWER)
	2014 $’000 2013 $’000
Interest rate swaps denominated in: Australian dollars	(297) (810)

e. Foreign Exchange Risk

Foreign exchange rate movements may reduce the Australian dollar equivalent of the carrying value of the Group’s offshore properties, and may result in lower Australian dollar equivalent proceeds when an offshore property is sold. In addition, foreign exchange rate movements may reduce the Australian dollar equivalent of the earnings from the offshore properties while they are owned by the Group.

interests in offshore investments by partly or wholly funding their acquisition using borrowings denominated in the particular offshore currency, and by using derivatives. The treasury policy sets a target for minimum and maximum hedging of the carrying value of its offshore properties.

mitigated by the foreign denominated interest expense of its foreign denominated borrowings and any derivative hedges. The Group aims to reduce any residual exposure to its earnings arising because of its investment in offshore markets by using forward exchange contracts. The Treasury Policy sets out targets of minimum and maximum hedging of its earnings from offshore properties over a five-year time horizon.

f. Net Foreign Currency Exposure

as at reporting date is shown in the following table. The net foreign currency exposure reported is of foreign currencies held by entities whose functional currency is the Australian dollar. It excludes assets and liabilities of entities, including equity accounted investments, whose functional currency is not the Australian dollar.

	NET FOREIGN CURRENCY ASSETS/(LIABILITY)
	2014 $’000 2013 $’000
Net foreign currency exposure: United States dollars	157 1,282

Annual Report 2014 77

g. Foreign Exchange Sensitivity Analysis

The impact of an increase or decrease in average foreign exchange rates of 10% at reporting date, with all other variables held constant, is illustrated in the tables below. This analysis is based on the foreign exchange risk exposures in existence at balance sheet date. In these tables, the effect on securityholders interest excludes the effect on profit after tax.

i. Efect of appreciation in Australian dollar of 10%:
	EFFECT ON PROFIT AFTER TAX HIGHER/(LOWER)
	2014 $’000 2013 $’000
Foreign exchange risk exposures denominated in: United States dollars	(16) (128)

ii. Efect of depreciation in Australian dollar of 10%:
	EFFECT ON PROFIT AFTER TAX HIGHER/(LOWER)
	2014 $’000 2013 $’000
Foreign exchange risk exposures denominated in: United States dollars	16 128

instruments.

operations with a change in exchange rates.

h. Foreign Exchange Derivatives Held

Forward exchange contracts, options and foreign exchange swaps outstanding at reporting date are taken out to mitigate the effect of foreign exchange movements on the financial statements.

At balance sheet date, the Group did not hold any foreign exchange derivatives. There was no impact to the consolidated result for the year for the change in fair value for foreign exchange derivatives ended 30 June 2014 (2013: loss $9,000).

i. Credit Risk

Group.

The major credit risk for the Group is default by tenants, resulting in a loss of rental income while a replacement tenant is secured and further loss if the rent level agreed with the replacement tenant is below that previously paid by the defaulting tenant.

The Group assesses the credit risk of prospective tenants, the credit risk of in-place tenants when acquiring properties and the credit risk of existing tenants renewing upon expiry of their leases. Factors taken into account when assessing credit risk include the financial strength of the prospective tenant and any form of security, for example a rental bond, to be provided.

The decision to accept the credit risk associated with leasing space to a particular tenant is balanced against the risk of the potential financial loss of not leasing up vacant space.

Rent receivable balances are monitored on an ongoing basis and arrears actively followed up in order to reduce, where possible, the extent of any losses should the tenant subsequently default.

to the Group. The Group’s treasury policy sets target limits for credit risk exposure with financial institutions and minimum counterparty credit ratings. Counterparty exposure is measured as the aggregate of all obligations of any single legal entity or economic entity to the Group, after allowing for appropriate set offs which are legally enforceable.

amount as reported in the balance sheet.

78 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

27. FINANCIAL INSTRUMENTS (CONTINUED)

j. Liquidity Risk

The main objective of liquidity risk management is to reduce the risk that the Group does not have the resources available to meet its financial obligations and working capital and committed capital expenditure requirements. The Group’s treasury policy sets a target for the level of cash and available undrawn debt facilities to cover future committed capital expenditure in the next year, 75% of forecast net operating cash flow in the next year, six months estimated distributions and 5% of the value of resident loan liabilities.

The Group may also be exposed to contingent liquidity risk under its term loan facilities, where term loan facilities include covenants which if breached give the lender the right to call in the loan, thereby accelerating a cash flow which otherwise was scheduled for the loan maturity. The Group monitors adherence to loan covenants on a regular basis, and the treasury policy sets targets based on the ability to withstand adverse market movements and remain within loan covenant limits.

In addition, the Group targets the following benchmarks to ensure resilience to breaking covenants on its primary debt facilities:

• 10% reduction in value of assets and 15% fall in the exchange rate for LVR covenants; and

• 2% nominal increase in interest rates combined with a 5% fall in income for ICR covenants.

table. It shows the undiscounted contractual cash flows required to discharge the liabilities at market rates. Foreign currencies have been converted at rates of exchange ruling at reporting date.

current liabilities, as required by Accounting Standards, because the Group does not have an unconditional right to defer settlement to more than twelve months after reporting date.

	Less than	1 to 5	More than
	1 year	Years	5 years	Total
2014	$’000	$’000	$’000	$’000
Trade and other payables	10,624	4,398	–	15,022
Retirement village residents loans	190,122	–	–	190,122
Borrowings	4,521	99,653	–	104,174
Provisions	718	249	–	967
Finance leases (excluding perpetual lease)	292	1,242	3,761	5,295
Finance lease (perpetual lease)(1)	121	483	–	604
	206,398	106,025	3,761	316,184
2013
Trade and other payables	8,559	–	–	8,559
Retirement village residents loans	175,703	–	–	175,703
Borrowings	3,271	72,089	–	75,360
Provisions	507	140	–	647
Finance leases	267	1,135	3,766	5,168
	188,307	73,364	3,766	265,437

It shows the undiscounted contractual cash flows required to discharge the instruments at market rates. Foreign currencies have been converted at rates of exchange ruling at reporting date.

Annual Report 2014 79

		Less than	1 to 5	More than
		1 year	Years	5 years	Total
2014		$’000	$’000	$’000	$’000
Liabilities
Derivative	liabilities – net settled	84	84	–	168
2013
Liabilities
Derivative	liabilities – net settled	–	209	–	209

k. Other Financial Instrument Risk

The Group carries retirement village residents’ loans at fair value with resulting fair value adjustments recognised in the income statement. The fair value of these loans is dependent on market prices for the related retirement village units. The impact of an increase or decrease in these market prices of 10% at reporting date, with all other variables held constant, is shown in the table below. This analysis is based on the retirement village residents’ loans in existence at reporting date.

	EFFECT ON PROFIT AFTER TAX HIGHER/(LOWER)
	2014 $’000 2013 $’000
Increase in market prices of investment properties of 10%	(21,864) (20,700)
Decrease in market prices of investment properties of 10%	21,864 20,700

on equity would be the same as the effect on profit.

l. Fair Value

The Group uses the following fair value measurement hierarchy:

Level 1: fair value is calculated using quoted prices in active markets for identical assets or liabilities;

Level 2: fair value is calculated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and

Level 3: fair value is calculated using inputs for the asset or liability that are not based on observable market data.

Quoted market price represents the fair value determined based on quoted prices on active markets as at the reporting date without any deduction for transaction costs.

date:

Financial assets/	Valuation technique(s)	Significant	Significant	Relationship of unobservable	Relationship of unobservable
financial liabilities	and key inputs	unobservable inputs		inputs to fair value
Retirement village	Loans measured as the ingoing	Long-term capital appreciation		The higher the appreciation, the
resident loans	resident’s contribution plus	rates for residential property		higher the value of resident loans.
	the resident’s share of capital	between 0-4%.		The longer the length of stay, the
	appreciation to reporting date, less DMF accrued to reporting date.	Estimated length of stay of residents based on life tables.		lower the value of resident loans.
Deferred	DMF measured using the initial	Estimated length of stay of		The longer the length of stay, the
management fee	property price, estimated length	residents based on life tables.		higher the DMF accrued, capped
accrued	of stay, various contract terms			at a predetermined period of time.
	and projected property price at
	time of re-leasing.
Derivative interest	Net present value of future cash	N/A		N/A
rate swaps	flows discounted at market rates
	adjusted for the Group’s credit
	risk.

There has been no movement from Level 3 to Level 2 during the current period.

Changes in the Group’s retirement village resident loans which are Level 3 instruments are presented in Note 16. The carrying amounts of the Group’s other financial instruments approximate their fair values.

80 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

28. FAIR VALUE MEASUREMENT

The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities:

a. Assets Measured at Fair Value

30 June 2014 Date of valuation Total $’000	FAIR VALUE MEASUREMENT USING
	Quoted prices in active markets (Level 1) $’000 Significant observable inputs (Level 2) $’000 Significant unobservable inputs (Level 3) $’000
Investment properties 30 June 2014 Refer to Note 12 498,863 Discontinued operations- investment property 30 June 2014 Refer to Note 8(b) 45,902 Assets held for sale – investment property 30 June 2014 Refer to Note 8(a) – Assets held for sale – deferred management fee receivable 30 June 2014 Refer to Notes 8(a) and 16 5,439	– – 498,863
	– – 45,902
	– – –
	– – 5,439

b. Liabilities Measured at Fair Value

30 June 2014 Date of valuation Total $’000	FAIR VALUE MEASUREMENT USING
	Quoted prices in active markets (Level 1) $’000 Significant observable inputs (Level 2) $’000 Significant unobservable inputs (Level 3) $’000
Retirement village resident loans 30 June 2014 Refer to Note 16 190,122 Derivatives 30 June 2014 168	– – 190,122
	– 168 –

There have been no transfers between Level 1 and Level 2 during the year.

c. Fair Value Hierarchy for Financial Instruments Measured at Fair Value as at 30 June 2013:

	Total		Level 1		Level 2		Level 3
30 June 2013	$’000		$’000		$’000		$’000
Retirement village resident loans	175,703		–		–		175,703
Derivatives	209		–		209		–
	175,912		–		209		175,703

29. AUDITOR’S REMUNERATION

29. AUDITOR’S REMUNERATION
	2014	2013
	$	$
Amounts received or receivable by Ernst & Young for:
Audit or review of the financial reports	333,355	277,423
Other audit related services	34,450	32,683
Non-audit related services	27,295	–
	395,100	310,106

Annual Report 2014 81

30. RELATED PARTIES

a. Key Management Personnel

The aggregate compensation paid to Key Management Personnel (“KMP”) of the Group is as follows:

		2014	2013
	Note	$	$
Directors fees		462,500	319,167
Salaries and other short-term benefits		1,094,684	756,735
Short-term incentives		332,235	182,382
Superannuation benefits		59,084	48,957
Share-based payment	25	680,600	293,113
		2,629,103	1,600,354

The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key management personnel.

The aggregate PQRs and RQRs (refer to Note 25) of the Group held directly, by KMP, are as follows:

Issue date Rights Expiry date	NUMBER OUTSTANDING
	2014 2013
2012 RQR 2014 2012 PQR 2015 2013 PQR 2016	1,818,000 1,818,000 3,842,000 3,842,000 3,716,000 –

31. COMPANY FINANCIAL INFORMATION

2014	2013
$’000	$’000
Current assets –	190
Total assets 7,870	6,459
Current liabilities 7,320	3,494
Total liabilities 7,320	3,117
Net assets 550	3,342
Securityholders’ equity Issued securities 7,377	6,078
Reserves 988	308
Accumulated losses (7,815)	(3,044)
Total securityholders’ equity 550	3,342
Profit from continuing operations (4,771)	(3,636)
Net profit attributable to securityholders (4,771)	(3,636)
Total comprehensive income (4,771)	(3,636)

The Company is a joint guarantor of the Commonwealth Bank of Australia debt facility, which has an outstanding balance of $94,000,000 at 30 June 2014 (2013: $68,000,000).

82 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

32. SUBSIDIARIES

a. Names of Subsidiaries

with the accounting policy described in Note 1(d):

Name Country of residence	OWNERSHIP INTEREST
	2014 % 2013 %
Bridge Street Trust Australia Browns Plains Road Trust Australia Casuarina Road Trust Australia Edinburgh Drive Trust Australia Garden Villages Management Trust Australia INA CC Holdings Pty Ltd Australia INA CC Pty Ltd Australia INA Community Living Lynbrook Trust Australia INA Community Living Subsidiary Trust Australia INA Community Living Subsidiary Trust No. 2 Australia INA Garden Villages Pty Ltd Australia INA Kiwi Communities Pty Ltd Australia INA Kiwi Communities Subsidiary Trust No. 1 Australia INA Management Pty Ltd Australia INA CC Trust Australia INA Regency Co Pty Ltd Australia INA Settlers Co Pty Ltd Australia INA Sunny Communities Pty Ltd Australia INA Sunny Trust Australia Ingenia Communities RE Limited Australia Jefferis Street Trust Australia Lovett Street Trust Australia ILF Regency Operations Trust Australia ILF Regency Subsidiary Trust Australia Settlers Operations Trust Australia Settlers Subsidiary Trust Australia SunnyCove Gladstone Unit Trust Australia SunnyCove Rockhampton Unit Trust Australia Ridge Estate Trust Australia Taylor Street (2) Trust Australia INA Subsidiary Trust No.1 Australia INA Subsidiary Trust No.2 Australia INA Subsidiary Trust No.3 Australia INA Operations Pty Ltd Australia INA Operations Trust No.1 Australia INA Operations Trust No.2 Australia INA Operations Trust No.3 Australia Noyea Pty Ltd Australia Noyea Operations Pty Ltd Australia IGC NZ Student Holdings Ltd New Zealand INA NZ Subsidiary Trust No 1 New Zealand	100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 – 100 – 100 100 100 100

Annual Report 2014 83

Name Country of residence	OWNERSHIP INTEREST
	2014 % 2013 %
CSH Lynbrook GP LLC United States of America CSH Lynbrook LP United States of America Lynbrook Freer Street Member LLC United States of America Lynbrook Management, LLC United States of America INA Community Living LLC (formerly ING Community Living LLC) United States of America INA Community Living II (formerly ING Community Living II) United States of America INA US Community Living Fund LLC (formerly ING US Community Living Fund LLC) United States of America	100 100 100 100 100 100 100 100 100 100 100 100 100 100

The Group’s voting interest in its subsidiaries is the same as its ownership interest.

33. NOTES TO THE CASH FLOW STATEMENT

33. NOTES TO THE CASH FLOW STATEMENT Reconciliation of proft to net cash fow from operating activities
2014	2013
$’000	$’000
Net profit for the year 11,518 Adjustments for: Net foreign exchange (gain)/loss (1,410) Release of FCTR on disposal of foreign operations – Net loss on disposal of investment properties - continuing – Net loss on disposal of investment properties - discontinuing – Disposal costs associated with overseas investments - continuing – Disposal costs associated with overseas investments - discontinued 290 Gain on disposal of equity accounted investments (327) Net (gain)/loss on change in fair value of: Investment properties – continuing 341 Investment properties – discontinued 1,630 Derivatives (41) Retirement village residents’ loan 616 Income tax expense/(benefit): Continuing (7,264) Discontinued 14 Amortisation of intangibles – Share-based payments expense 681 Other non-cash items 211	(10,290) 718 17,463 107 994 150 672 (7,584) (3,457) 2,783 (752) (327) (367) 1,002 585 293 35
Operating profit for the year before changes in working capital 6,259 Changes in working capital: (Increase)/decrease in receivables 5,237 Increase in inventory (1,923) Increase in retirement village residents’ loans 6,327 Increase/(decrease) in other payables and provisions (1,660)	2,025 (3,309) – 12,220 304
Net cash provided by operating activities 14,240	11,240

84 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014�|�continued

34. SUBSEQUENT EVENTS

a. RQR Vesting

On 1 July 2014, 1,818,000 Retention Quantum Rights (“RQRs”) granted to KMP in 2012 vested. As a result, 1,818,000 fully paid stapled securities have been issued to the following KMP:

Simon Owen	1,070,000
Tania Betts	374,000
Nicole Fisher	374,000

b. Sale of Noyea

Settlement on the sale of Settlers Lifestyle Noyea was completed on 31 July 2014 at an adjusted sales price of $5.4 million resulting in $nil gain or loss recognised upon completion.

c. Bank Guarantee

On 1 July 2014, the Group obtained a bank guarantee of $10 million from the bank facility in relation to cash requirements under the Australian Financial Services Licence.

d. Sale of New Zealand Students Business

On 5 September 2014, the Group announced it had contracted to divest the New Zealand Students business for consideration of NZ$49.4 million, representing the book value at 30 June 2014. Upon settlement, disposal costs and a FCTR gain will be released through profit. At 30 June 2014, the FCTR balance was A$1.0 million.

The Group’s current Australian banking facility expires in September 2015. The Group has recently undertaken a debt refinance and obtained credit approval for a new $175 million Australian Multilateral banking facility. This facility will be split between a three year and five year maturity profile.

Annual Report 2014 85

Directors’ Declaration

for the year ended 30 June 2014

In accordance with a resolution of the directors of Ingenia Communities Holdings Limited, I state that:

1. In the opinion of the directors:

2. a. 2014 are in accordance with the Corporations Act 2001 , including:

   • i. on that date; and

   • ii. complying with Accounting Standards (including Australian Accounting Interpretations) and Corporations Regulations 2001 ; and

3. b. there are reasonable grounds to believe that Ingenia Communities Holdings Limited will be able to pay its debts as and when they become due and payable.

4. Note 1(b).

5. This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 .

On behalf of the Board

==> picture [103 x 38] intentionally omitted <==

Jim Hazel Chairman Sydney, 19 September 2014

86 Ingenia Communities Holdings Limited

Independent Auditors’ Report

for the year ended 30 June 2014

==> picture [483 x 653] intentionally omitted <==

Annual Report 2014 87

==> picture [483 x 653] intentionally omitted <==

88 Ingenia Communities Holdings Limited

==> picture [231 x 198] intentionally omitted <==

==> picture [176 x 252] intentionally omitted <==

==> picture [145 x 63] intentionally omitted <==

==> picture [143 x 123] intentionally omitted <==

Annual Report 2014 89

Ingenia Communities Fund & Ingenia Communities Management Trust Annual Reports

for the year ended 30 June 2014

Directors’ Report	Directors’ Report	90
Auditors’ Independence Declaration		93
Consolidated Statements of Comprehensive Income		94
Consolidated Balance Sheets		96
Consolidated Cash Flow Statements		97
Statements of Changes in Unitholders’ Interest		98
Notes to the Financial Statements		100
1.	Summary of signifcant Accounting policies	100
2.	Accounting estimates and judgements	107
3.	Segment information	108
4.	Earnings per unit	112
5.	Finance expense	112
6.	Income tax beneft	113
7.	Discontinued operations and assets held for sale	114
8.	Cash and cash equivalents	116
9.	Trade and other receivables	116
10.	Inventories	117
11.	Investment properties	117
12.	Plant and equipment	119
13.	Trade and other payables	119
14.	Borrowings	119
15.	Retirement village resident loans	121
16.	Provisions	121
17.	Derivatives	121
18.	Deferred tax liabilities	122
19.	Issued units	122
20.	Reserves	123
21.	Accumulated losses	123
22.	Commitments	124
23.	Contingencies	124
24.	Capital management	124
25.	Financial instruments	125
26.	Fair value measurement	131
27.	Auditor’s remuneration	132
28.	Related parties	132
29.	Parent fnancial information	135
30.	Subsidiaries	136
31.	Notes to the cash fow statements	137
32.	Subsequent events	137
Directors’ Declaration		138
Independent Auditors’ Report		139
Securityholder Information		141
Investor Relations		142
Corporate Directory		143

90 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014

The Ingenia Communities Fund (ARSN 107 459 576) and the Ingenia Communities Management Trust (ARSN 122 928 410) are Australian registered schemes. Ingenia Communities RE Limited (ACN 154 464 990; Australian Financial Services Licence number 415862), the Responsible Entity of both Trusts, is incorporated and domiciled in Australia.

The parent company of Ingenia Communities RE Limited is Ingenia Communities Holdings Limited (the “Company”). The shares of the Company and the units of the Trusts are “stapled” and trade on the Australian Securities Exchange (“ASX”) as a single security. The Company and the Trusts along with their subsidiaries are collectively referred to as the Group in this report.

The directors’ report is a combined directors’ report that covers both Trusts.

DIRECTORS

The directors of the Ingenia Communities RE Limited at any time during or since the end of the financial year were:

Jim Hazel (Chairman) Appointed 27 March 2012 Philip Clark AM Appointed 4 June 2012 Amanda Heyworth Appointed 16 April 2012 Robert Morrison Appointed 8 February 2013 Norah Barlow Appointed 31 March 2014

Simon Owen Appointed 25 November 2011 (Managing Director and CEO)

PRINCIPAL ACTIVITY

The principal activity of ICF is investment in seniors living communities in Australia. The principal activities of ICMT are the development, management and operation of seniors living communities in Australia. There was no significant change in the nature of either Trust’s activities during the financial year.

OPERATING AND FINANCIAL REVIEW

a. ICF and ICMT Overview

ICF and ICMT are two of the entities forming part of Ingenia Communities Group which is a triple stapled structure traded on the ASX.

The Group’s vision is to be a leading Australian provider of affordable seniors living accommodation whilst delivering value to all its stakeholders, including strong earnings growth for securityholders and providing an affordable community environment for residents.

b. Strategy

The strategies of ICF and ICMT are aligned with the Group’s strategy of growing its Australian seniors living portfolio with a focus on the lifestyle parks sector. Using a disciplined investment framework, the Group is continuing to increase its exposure to lifestyle parks through targeted acquisitions and building out its development pipeline. The Group remains focused on divestment of its non-core New Zealand Students portfolio and reducing its investment in DMF assets. It is the Group’s intention to grow its investment in lifestyle parks through capital recycling, efficient inventory management and monetisation of stock.

c. FY14 Financial Results

FY14 has been a year of strong acquisitive growth. The results are underpinned by a significantly increased contribution from the Active Lifestyle Estates and Garden Villages portfolios following the acquisition of a further thirteen lifestyle parks and five rental villages during the year. Furthermore, ICMT and its subsidiaries formed a tax consolidation group which is the primary driver for the $6.5m income tax benefit recorded in ICMT.

During the year, the acquisition of numerous properties were funded using a mix of debt and equity raised from a June 2013 institutional placement of $21.2m and a September 2013 rights issue of $61.7m.

d. Key Metrics

• Net profit for the year of $15.4 million for ICF and a loss of $1.2 million for ICMT

• Full year distribution of 1.15 cent per security by ICF, nil for ICMT

divest overseas operations, which is now largely complete, and redeploy that capital into the Australian market to generate strong returns for securityholders.

e. Continuing Operations

The key strategic priorities of the continuing operations are:

• increase rate of new home delivery within the Active Lifestyle Estates development pipeline;

• grow occupancy of the Garden Villages portfolio towards the mid-term target of 92%;

• sell recently completed homes and explore opportunities to reduce exposure to the Settlers portfolio; and

• invest available capital into further accretive lifestyle parks.

f. Discontinued Operations

A sales campaign was undertaken for the sale of the New Zealand Students portfolio and terms have been agreed with a global real estate investment firm. The carrying value of these assets at 30 June 2014 is $45.9m.

Annual Report 2014 91

g. Capital Management

ICF strengthened its capital position by undertaking a capital raising and renegotiating its core debt facility.

Zealand debt facility, which funds the New Zealand Students portfolio with a NZ$32.7m core debt facility in place expiring 31 July 2018.

On 17 October 2013, ICF completed a non-renounceable rights issue to raise $61.7m (excluding transaction costs) to fund the expansion of lifestyle parks. A total of 169.1m securities were issued at 36.5 cents each.

b. Sale of Noyea

Settlement on the sale of Settlers Lifestyle Noyea was completed on 31 July 2014 at an adjusted sales price of $5.4 million resulting in $nil gain or loss recognised upon completion.

c. Bank Guarantee

On 1 July 2014, ICF obtained a bank guarantee of $10 million from the bank facility in relation to cash requirements under the Australian Financial Services Licence.

d. Sale of New Zealand Students Business

ICF has increased its full year distributions to 1.15 cents, in line with its commitment to grow distributions over the medium term. The final distribution represents a 30% increase over the previous period.

h. Outlook

The Trusts are well positioned to continue growing their lifestyle parks business and ICF has agreed indicative terms for a new multilateral Australian debt facility of $175m, which replaces the existing facility. Whilst the lead time from property acquisition to achieving set up for delivery of the first new homes has taken longer than anticipated, Ingenia is confident the rate of delivery and settlement of new homes will continue to slowly build each half and deliver a much stronger result in FY15.

of the New Zealand Students portfolio and exploring opportunities for recycling capital from the Settlers Lifestyle portfolio. At the same time, the Trusts will continue to regularly assess the performance of its existing assets and where appropriate to recycle that capital into other opportunities delivering superior returns.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

year are set out in the various reports in this Annual Report. Refer to Note 7 of the accompanying financial statements for discontinued operations, Note 11 for Australian investment properties acquired or disposed of during the year, Note 14 for details of Australian debt refinanced and Note 19 for units issued.

EVENTS SUBSEQUENT TO REPORTING DATE

a. Retention Quantum Rights Vesting

On 1 July 2014, 1,818,000 Retention Quantum Rights (“RQRs”) granted to KMP in 2012 vested. As a result 1,818,000 fully paid stapled securities have been issued to the following KMP:

On 5 September 2014, the Trusts announced they had contracted to divest the New Zealand Students business for consideration of NZ$49.4 million, representing the book value at 30 June 2014. Upon settlement, disposal costs and a foreign currency translation reserve (“FCTR”) gain will be released through profit. At 30 June 2014, the FCTR balance was A$1.0 million.

ICF’s current Australian banking facility expires in September 2015. ICF has recently undertaken a debt refinance and obtained credit approval for a new $175 million Australian multilateral banking facility. This facility will be split between a three year and five year maturity profile.

LIKELY DEVELOPMENTS

The Trusts will continue to pursue strategies aimed at improving cash earnings, profitability and market share within the seniors living industry during the next financial year, with a strong focus on the development and acquisition of manufactured home estates.

Other information about certain likely developments in the operations of the Trusts and the expected results of those operations in future financial years is included in the various reports in the Ingenia Communities Annual Report.

ENVIRONMENTAL REGULATION

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

INDEMNITIES

premiums for, a person who is or has been an officer of the Responsible Entity or an auditor of either Trust.

Simon Owen 1,070,000 Tania Betts 374,000 Nicole Fisher 374,000

92 Ingenia Communities Holdings Limited

Directors’ Report

for the year ended 30 June 2014

INTERESTS OF DIRECTORS OF THE RESPONSIBLE ENTITY

Units in each Trust held by directors of the Responsible Entity as at 30 June 2014 were:

	Number	Performance	Retention
	of units	quantum rights	quantum rights
	Jim Hazel 1,333,334 Philip Clark AM 208,334 Amanda Heyworth 561,334 Robert Morrison 221,667 Norah Barlow 178,000 Simon Richard Owen 2,179,667	– – – – – 4,720,000	– – – – – 1,070,000

OTHER INFORMATION

Fees paid to the Responsible Entity and its associates, and the number of units in each Trust held by the Responsible Entity and its associates as at the end of the financial year; are set out in Note 28 in the financial 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 93.

ROUNDING OF AMOUNTS

The Trusts are of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the ‘’rounding off’’ of amounts in this report and in the financial report. Amounts in 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 [103 x 39] intentionally omitted <==

Jim Hazel Chairman Sydney, 19 September 2014

Annual Report 2014 93

Auditors’ Independence Declaration

for the year ended 30 June 2014

==> picture [483 x 653] intentionally omitted <==

94 Ingenia Communities Holdings Limited

Consolidated Statements of Comprehensive Income

for the year ended 30 June 2014

Note	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Revenue Rental income Accrued deferred management fee income Manufactured home sales Catering income Other property income Interest income	9,354 8,439 31,643 19,287 – – 5,333 4,850 – – 3,442 405 – – 3,178 2,617 – 142 1,819 871 10,339 3,524 16 14
Property expenses Employee expenses Administration expenses Operational, marketing and selling expenses Manufactured home cost of sales Finance expense 5 Net foreign exchange gain/(loss) Net loss on disposal of investment properties Net gain/(loss) on change in fair value of: Investment properties Derivatives Retirement village resident loans Responsible Entity’s fees and expenses 28 Other expenses	19,693 12,105 45,431 28,044 (274) – (20,693) (16,198) – – (11,131) (7,226) (682) (797) (2,050) (1,439) (295) (96) (2,734) (2,189) – – (2,130) (297) (3,955) (3,841) (10,145) (5,212) (147) 37 – – – (107) – 1,530 1,618 (1,871) 1,839 41 752 – – – – (616) 327 (1,170) (1,101) (1,626) (1,456) – (185) – –
Profit/(loss) from continuing operations before income tax Income tax benefit/(expense) 6	14,741 8,385 (7,565) (3,807) – – 6,506 (17)
Profit/(loss) from continuing operations Profit/(loss) from discontinued operations 7	14,741 8,385 (1,059) (3,824) 681 (5,715) (111) (7,891)
Net profit/(loss) for the year	15,422 2,670 (1,170) (11,715)
Attributable to unitholders of: Ingenia Communities Fund Ingenia Communities Management Trust	15,422 2,670 (111) (3,314) – – (1,059) (8,401)
	15,422 2,670 (1,170) (11,715)

Annual Report 2014 95

Note	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Net profit/(loss) for the year Other comprehensive income, net of income tax: Items that may be reclassified subsequently to profit or loss: Foreign currency translation differences arising during the year 20 Release of foreign currency translation reserve on disposal of foreign operations 20	15,422 2,670 (1,170) (11,715) (226) 1,389 495 (1,064) – 15,507 – 2,444
Total comprehensive income for the year, net of tax	15,196 19,566 (675) (10,335)
Total comprehensive income/(loss) for the year is attributable to: Ingenia Communities Fund Ingenia Communities Management Trust	15,196 19,566 335 (2,668) – – (1,010) (7,667)
	15,196 19,566 (675) (10,335)
Note	2014 Cents 2013 Cents 2014 Cents 2013 Cents
Distributions per unit Earnings per unit(1): Basic earnings from continuing operations 4 Basic earnings 4 Diluted earnings from continuing operations 4 Diluted earnings 4	1.0(2) 1.0 – – 2.3 1.6 (0.2) (0.8) 2.4 0.5 (0.2) (2.3) 2.3 1.6 (0.2) (0.7) 2.4 0.5 (0.2) (2.3)

• (1) Prior period weighted average number of units and earnings per unit have been adjusted in accordance with AASB 133 “Earnings per Share” (“AASB 133”). The weighted average number of units on issue for the current period, prior to the rights issue in September 2013, has also been adjusted as required by AASB 133.

• a total full year distribution of 1.15 cents.

96 Ingenia Communities Holdings Limited

Consolidated Balance Sheets

as at 30 June 2014

Note	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Current assets Cash and cash equivalents 8 Trade and other receivables 9 Inventories 10 Income tax receivable Assets held for sale Assets of discontinued operations 7	2,658 31,014 3,893 1,229 4,280 9,204 3,131 2,819 – – 2,208 285 975 882 – – – – 5,439 – 3,874 3,874 47,657 36,576
Total current assets	11,787 44,974 62,328 40,909
Non-current assets Trade and other receivables 9 Receivable from related party 28 Investment properties 11 Plant and equipment 12	39,334 39,472 40 438 135,805 31,870 – – 134,488 120,167 364,375 250,764 239 339 180 547
Total non-current assets	309,866 191,848 364,595 251,749
Total assets	321,653 236,822 426,923 292,658
Current liabilities Trade and other payables 13 Borrowings 14 Retirement village resident loans 15 Provisions 16 Derivatives 17 Provision for income tax Payable to related party 28 Liabilities of discontinued operations 7	1,210 1,569 8,480 6,305 – – 3,461 3,589 – – 190,122 175,703 – – 590 507 84 – – – – – 29 126 – – 133,249 30,769 – – 30,449 21,527
Total current liabilities	1,294 1,569 366,380 238,526
Non-current liabilities Trade and other payables 13 Borrowings 14 Provisions 16 Derivatives 17 Deferred tax liabilities 18	– – 4,000 – 93,688 67,422 41,883 40,475 – – 249 140 84 209 – – – – 1,433 7,855
Total non-current liabilities	93,772 67,631 47,565 48,470
Total liabilities	95,066 69,200 413,945 286,996
Net assets	226,587 167,622 12,978 5,662
Equity Issued units 19 Reserves 20 Accumulated losses 21	547,642 497,956 14,097 6,106 (226) – 169 120 (320,829) (330,334) (4,049) (2,990)
Unitholders’ interest Non-controlling interest	226,587 167,622 10,217 3,236 – – 2,761 2,426
Total equity	226,587 167,622 12,978 5,662
Attributable to unitholders of: Ingenia Communities Fund Ingenia Communities Management Trust	226,587 167,662 2,761 2,426 – – 10,217 3,236
	226,587 167,622 12,978 5,662

Annual Report 2014 97

Consolidated Cash Flow Statements

for the year ended 30 June 2014

Note	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Cash flows from operating activities Rental and other property income Payment of management fees (including arrears) Property and other expenses Proceeds from resident loans Repayment of resident loans Proceeds from manufactured home sales Payments for manufactured homes Distributions received from equity accounted investments Interest received Borrowing costs paid Income taxes received/(paid)	– 33 43,274 29,478 – – (29) (167) (51) (210) (30,286) (21,487) – – 22,021 19,338 – – (10,361) (7,118) – – 3,511 450 – – (4,035) (275) 295 2,353 6 – 205 243 12 54 (4,123) (5,249) (1,689) (1,836) (125) (76) 4 –
31	(3,799) (2,906) 22,428 18,437
Cash flows from investing activities Payments for plant and equipment Additions to investment properties Proceeds/(costs) from sale of investment properties Payments for investment properties Amounts received from/(advanced to) villages Payments for lease arrangements Proceeds of equity accounted investments	– (81) (150) (329) (2) (474) (18,723) (16,416) 1,321 3,030 (120) 26,292 (10,452) (23,315) (102,803) (7,708) – – 72 (330) – – (745) (699) 5,695 37,560 116 –
	(3,438) 16,720 (122,353) 810
Cash flows from financing activities Proceeds from the issue units Payment for issue costs Internalisation costs Distributions to unitholders Receipts from derivatives Payments for derivatives Finance lease payments (Repayment of)/proceeds from borrowings with related parties Proceeds from borrowings Repayment of borrowings Payment of borrowing costs	61,707 18,170 – 2,900 (2,528) (907) (243) (145) – (600) – – (5,885) (4,235) – – – 1,650 – – – (150) – – – – (81) (13) (100,124) – 108,231 – 94,000 16,261 – – (68,000) (33,195) (2,581) (27,749) (142) (586) (75) –
	(20,972) (3,592) 105,251 (25,007)
Net increase/(decrease) in cash Cash at beginning of the year Effects of exchange rate changes on cash	(28,209) 10,222 5,326 (5,760) 31,014 20,777 248 6,029 (147) 15 (24) (21)
Cash at the end of the year 8	2,658 31,014 5,550 248

98 Ingenia Communities Holdings Limited

Statements of Changes in Unitholders’ Interest

for the year ended 30 June 2014

Note	INGENIA COMMUNITIES FUND
	ATTRIBUTABLE TO UNITHOLDERS Non- controlling interest $’000 Total equity $’000 Issued capital $’000 Reserves $’000 Retained earnings $’000 Total $’000
Carrying amounts at 1 July 2012 Net profit for the year Other comprehensive income	480,693 (16,896) (328,594) 135,203 – 135,203 – – 2,670 2,670 – 2,670 – 16,896 – 16,896 – 16,896
Total comprehensive income for the year	– 16,896 2,670 19,566 – 19,566
Transactions with unitholders in their capacity as unitholders: Placement securities 19 Distributions paid or payable 21	17,263 – 17,263 – 17,263 – – (4,410) (4,410) – (4,410)
Carrying amounts at 30 June 2013	497,956 – (330,334) 167,622 – 167,622
Net profit for the year Other comprehensive income 20	– – 15,422 15,422 – 15,422
	– (226) – (226) – (226)
Total comprehensive income for the year	– (226) 15,422 15,196 – 15,196
Transactions with unitholders in their capacity as unitholders: Placement securities 19 Distributions paid or payable 21
	49,686 – – 49,686 – 49,686
	– – (5,917) (5,917) – (5,917)
Carrying amounts at 30 June 2014	547,642 (226) (320,829) 226,587 – 226,587

Annual Report 2014 99

Note	INGENIA COMMUNITIES MANAGEMENT TRUST ATTRIBUTABLE TO UNITHOLDERS Non- controlling interest(1) $’000 Total equity $’000 Issued capital $’000 Reserves $’000 Retained earnings $’000 Total $’000 3,351 (614) 5,411 8,148 5,094 13,242 – – (8,401) (8,401) (3,314) (11,715) – 734 – 734 646 1,380 – 734 (8,401) (7,667) (2,668) (10,335) 2,755 – – 2,755 – 2,755 6,106 120 (2,990) 3,236 2,426 5,662 – – (1,059) (1,059) (111) (1,170) – 49 – 49 446 495 – 49 (1,059) (1,010) 335 (675) 7,991 – – 7,991 – 7,991 14,097 169 (4,049) 10,217 2,761 12,978
Carrying amounts at 1 July 2012 Net profit for the year Other comprehensive income
Total comprehensive income for the year
Transactions with unitholders in their capacity as unitholders: Placement securities 19
Carrying amounts at 30 June 2013
Net loss for the year Other comprehensive income
Total comprehensive income for the year
Transactions with unitholders in their capacity as unitholders: Placement securities 19
Carrying amounts at 30 June 2014

(1) Non-controlling interest relates to the portion in which ICF owns subsidiaries consolidated within ICMT.

100 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. The Trusts

The Ingenia Communities Fund (“ICF” or the “Fund”) (ARSN 107 459 576) and the Ingenia Communities Management Trust (“ICMT”) (ARSN 122 928 410) (together the “Trusts”) are Australian registered schemes. Ingenia Communities RE Limited (ACN 154 464 990; Australian Financial Services Licence number 415862), the Responsible Entity of the Trusts, is incorporated and domiciled in Australia.

The parent company of Ingenia Communities RE Limited is Ingenia Communities Holdings Limited (the “Company”). The shares of the Company and the units of the Trust are “stapled” and trade on the Australian Securities Exchange (“ASX”) as a single security. The Company and the Trust along with their subsidiaries are collectively referred to as the Group in this report.

to occur of:

• the Company or either of the Trusts resolving by special resolution in accordance with its constitution to terminate the stapling provisions; or

• the commencement of the winding up of the Company or either of the Trusts.

b. Basis of Preparation

that has been prepared in accordance with Australian Accounting Standards (“AASB”), Australian Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (the “Board”) and the Corporations Act 2001 .

As permitted by Class Order 05/642, issued by the Australian Securities and Investments Commission, this financial report is a combined financial report that presents the financial statements and accompanying notes of both the Ingenia Communities Fund and Ingenia Communities Management Trust. The financial statements and accompanying notes of the Trusts have been presented in the attached associated financial report.

Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.

all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated.

As at 30 June 2014, ICMT recorded a net current asset deficiency of $304,052,000. This deficiency includes retirement village resident loans of $190,122,000, liabilities from discontinued operations of $30,449,000 and payables to other entities within the Group of $133,249,000. Resident loan obligations of the Trusts are classified as current liabilities due to the demand feature of these obligations despite the unlikely possibility that the majority of the loans will be settled within the next twelve months. Furthermore, if required, the proceeds from new resident loans could be used by the Group to settle its existing loan obligations should those incumbent residents vacate their units. Intercompany loan balances are payable on demand, however ICF has undertaken not to call its loan receivable from ICMT within twelve months of the date of this report, if calling the loan would result in ICMT being unable to pay its debts as and when they are due and payable.The liabilities of the discontinued operations consist mainly of borrowings of $30,081,000 related to a facility with the Bank of New Zealand, which has been refinanced recently for a five year period and will be repaid upon disposal of the corresponding assets. Accordingly, there are reasonable grounds to believe that ICMT will be able to pay its debts as and when they become due and payable; and the financial report of ICMT has been prepared on a going concern basis.

c. Adoption of New and Revised Accounting Standards

The Group has adopted all of the new and revised standards and interpretations issued by the Australian Accounting Standards Board that are relevant to its operations and effective for the current period. The following standards were most relevant to the Group:

• AASB 10 ”Consolidated Financial Statements” and AASB 2011-7 “Amendments to Australian Accounting Standards arising from consolidation and Joint Arrangements standards”;

• AASB 13 ‘Fair Value Measurement’ and AASB 2011-8 ‘Amendments to Australian Accounting Standards arising from AASB 13’;

• ‘Amendments to Australian Accounting Standards arising from AASB 119 (2011);

• AASB 2012-2 ‘Amendments to Australian Accounting Standards-Disclosures-Offsetting Financial Assets and Financial Liabilities’

• AASB 2011-4 ‘Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements’

basis, except for investment properties, retirement village residents’ loans and derivative financial instruments, which are measured at fair value.

Annual Report 2014 101

The impact of application of each Standard is as follows:

	Accounting Standard	Impact on the Group
	AASB 10 and AASB 2011-7	AASB 10 amends the definition of control such that an investor controls an investee when
		a) it has power over an investee; b) it is exposed, or has rights, to variable returns from its
		involvement with the investee and c) has the ability to use its power to affect its returns.
		All three conditions have to be met for an investor to have control.
		The application of the standard did not have any impact on the Group.
	AASB 13 and AASB 2011-8	AASB 13 establishes a single source of guidance for fair value measurements and disclosures
		about fair value. The standard is broad in scope and applies to both financial instrument and
		non-financial instrument items with the exception of a few items like share-based payments
		and leases, which are covered by other standards. AASB 13 defines fair value as the price that
		would be received to sell an asset or liability in an orderly transaction in the principal (or the
		most advantageous) market at the measurement date under current market conditions.
		Valuations made are categorised into three levels based on the inputs used. However,
		regardless of the valuation methodology applied, fair value represents the exit price in relation
		to the asset or liability. The standard applies prospectively from 1 January 2013.
		The Group has applied requirements of the Standard in all its valuations in particular of
		investment properties. Additionally, the disclosure requirements of the standard, which
		includes information about assumptions made and the qualitative impact of those assumptions
		on fair value, have been complied with.
	AASB 119 and AASB 2011-10	AASB 119 amends the definition of short-term employee benefits, with the distinction now
		being based on whether the benefits are expected to be settled within 12 months after
		reporting date (short-term benefit). Long term employee benefits are required to be measured
		using the actuarial valuation method. The method involves projecting future cash flows and
		discounting back to present value. This requirement applies to the annual leave balance for the
		Group. The application of the standard’s requirement for both current and previous periods did
		not result in amendment to the figures disclosed, as the changes were not material.
	AASB 2012-2	The standard provides application and presentation guidance to AASB 132 ‘Financial
		Instruments: Presentation’ for applying some offsetting criteria. The Group has applied the
		requirements of the Standard, which necessitates disclosure of information about rights of
		offset and related arrangements for financial instruments under an enforceable master netting
		arrangement or similar arrangement. This has resulted in changes to disclosure principally for
		retirement village resident loans for the Group.
	AASB 2011-4	The standard amends AASB 124 ‘Related Party Disclosures’ to remove individual key
		management personnel disclosures required by Australian specific paragraphs. The application
		of the standard did not have any financial impact on the Group.

d. Principles of Consolidation

comprise ICMT and its subsidiaries. Subsidiaries are all those entities (including special purpose entities) whose financial and operating policies a trust has the power to govern, so as to obtain benefits from their activities.

accounting policies. Adjustments are made to bring into line dissimilar accounting policies. Inter-company balances and transactions including unrealised profits have been eliminated.

Subsidiaries are consolidated from the date on which the parent obtains control. They are de-consolidated from the date that control ceases.

102 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014 �|�continued

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

e. Business Combinations and Goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Trusts elect whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in other expenses.

When the Trusts acquire a business, they assess the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

f. Discontinued Operations and Assets Held for Sale

discontinued operations. A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, or is part of a single co-ordinated plan to dispose of such a line of business or area of operations. The results of discontinued operations are presented separately on the face of the income statement.

their carrying amount will be recovered principally through a sale transaction rather than through continuing use. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as investment property, which are carried at fair value.

An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.

assets of a disposal group classified as held for sale are presented separately from the other assets on the face of the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities on the face of the balance sheet.

g. Distributions

A liability for any distribution declared on or before the end of the reporting period is recognised on the balance sheet in the reporting period to which the distribution pertains.

h. Foreign Currency

i. Functional and presentation currencies

The functional currency and presentation currency of the Trusts and their subsidiaries, other than foreign subsidiaries, is the Australian dollar.

ii. Translation of foreign currency transactions

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

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

subsidiaries

The functional currency of certain subsidiaries is not the Australian dollar. At reporting date, the assets and liabilities of these entities are translated into the presentation currency of the Trusts at the rate of exchange prevailing at balance date. Financial performance is translated at the average exchange rate prevailing during the reporting period. The exchange differences arising on translation are taken directly to the foreign currency translation reserve in equity.

On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that foreign operation is recognised in the income statement.

i. Leases

Finance leases, which transfer to the Trusts substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in the income statement.

Finance leases, which transfer away from the Trusts substantially all the risks and benefits incidental to ownership of the leased item, are recognised at the inception of the lease. A finance lease receivable is recognised on inception at the present value of the minimum lease receipts. Finance lease receipts are apportioned between the interest income and reduction in the lease receivable to achieve a constant rate of interest on the remaining balance of the receivable. Interest is recognised as income in the income statement.

Details of discontinued operations and assets held for sale are given at Note 7.

Annual Report 2014 103

properties, are classified as finance leases under AASB 140 Investment Properties .

Leases where the lessor retains substantially all the risks and benefits of ownership are classified as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the term of the lease.

j. Financial Assets and Liabilities

within the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as at fair value through profit or loss; loans and receivables; heldto-maturity investments; or as available-for-sale. The Trusts determine the classification of their financial assets and liabilities at initial recognition with the classification depending on the purpose for which the asset or liability was acquired or issued. Financial assets and liabilities are initially recognised at fair value, plus directly attributable transaction costs unless their classification is at fair value through profit or loss. They are subsequently measured at fair value or amortised cost using the effective interest method. Changes in fair value of available-for-sale financial assets are recorded directly in equity. Changes in fair values of financial assets and liabilities classified as at fair value through profit or loss are recorded in the income statement.

traded in organised financial markets are determined by reference to quoted market bid prices at the close of business on the balance sheet date. For those with no active market, fair values are determined using valuation techniques. Such techniques include: using recent arm’s length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models, making as much use of available and supportable market data as possible and keeping judgemental inputs to a minimum.

l. Cash and Cash Equivalents

Cash and cash equivalents in the balance sheet and cash flow statement comprise cash at bank and in hand and short-term deposits that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

m. Trade and Other Receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. An allowance for impairment is made when there is objective evidence that collection of the full amount is no longer probable.

n. Inventories

The Trusts hold inventory in relation to the acquisition and development of manufactured homes within their Active Lifestyle Estates segment.

Inventories are held at the lower of cost and net realisable value.

Costs of inventories comprise all acquisition costs, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Inventory includes work in progress and raw materials used in the production of manufactured home units.

Net realisable value is determined on the basis of an estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale.

o. Derivative Financial Instruments

as foreign currency contracts and interest rate swaps to hedge its risks associated with foreign currency and interest rate fluctuations. Such derivative financial instruments are initially recognised at fair value on the date in which the derivative contract is entered into and are subsequently remeasured to fair value.

k. Impairment of Non-Financial Assets

carried at fair value are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Non-financial assets excluding goodwill which have suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

104 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014 �|�continued

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

p. Investment Property

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 and equipment, are not depreciated.

Investment property includes property under construction and tourism cabins.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the period in which they arise, including corresponding tax effect.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal market for the asset or liability or in its absence, the most advantageous market.

It is the Trusts’ policy to have all investment properties externally valued at intervals of not more than two years and that such valuation be reflected in the financial reports of the Trusts. It is the policy of the responsible trust 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 materially differs to their fair values.

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.

q. Payables

Trade and other payables are carried at amortised cost and due to their short-term nature are not discounted. They represent liabilities for goods and services provided to the Trusts prior to the end of the financial year that are unpaid and are recognised when the Trusts become obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 60 days of recognition.

r. Retirement Village Resident Loans

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

Refer to Notes 25(k) and 1(y) for information regarding the valuation of retirement village resident loans.

s. Borrowings

Borrowings are initially recorded at the fair value of the consideration received less directly attributable transaction costs associated with the borrowings. After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest rate method. Under this method fees, costs, discounts and premiums that are yield related are included as part of the carrying amount of the borrowing and amortised over its expected life.

the Trusts do not have an unconditional right to defer settlement to more than twelve months after reporting date.

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

t. Issued Units

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

u. Revenue

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

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

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

Revenue from the sale of manufactured homes within the Active Lifestyle Estate segment is recognised when the significant risks, rewards of ownership and effective control has been transferred to the buyer.

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

Annual Report 2014 105

i. General

Provisions are recognised when the Trusts have a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Trusts expect some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit or loss net of any reimbursement.

ii. Wages, salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within twelve months of the reporting date are recognised in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Expenses for nonaccumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

iii. Long service leave

The liability for long service leave is recognised and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

w. Income Tax

i. Current income tax

Under the current tax legislation, the Fund is not liable to pay Australian income tax provided that its taxable income (including any assessable capital gains) is fully distributed to unitholders each year. Tax allowances for building and fixtures depreciation are distributed to unitholders in the form of the tax-deferred component of distributions.

However, ICMT and its subsidiaries are subject to Australian income tax.

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

The subsidiaries that hold the Trusts foreign properties may be subject to corporate income tax and withholding tax in the countries in which they operate. Under current Australian income tax legislation, unitholders may be entitled to receive a foreign tax credit for this withholding tax.

ii. Deferred income tax

Deferred income tax represents tax (including withholding tax) expected to be payable or recoverable by taxable entities on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised through continuing use or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at reporting date. Income taxes related to items recognised directly in equity are recognised in equity and not against income.

x. Goods and Services Tax (“GST”)

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

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

on a gross basis. The GST components of cash flows arising from investing and financing activities, which are recoverable from or payable to the tax authorities, are classified as operating cash flows.

y. Fair Value Measurement

derivatives, and non-financial assets such as investment properties, at fair value at each balance sheet date. Also, fair values of financial instruments measured at amortised cost are disclosed in Note 26.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability, or

• In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to the Trusts.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

106 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014 �|�continued

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Trusts use valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities

• Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

• Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

statements on a recurring basis, the Trusts determine whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of the reporting period.

The Trusts’ Audit and Risk Committee determines the policies and procedures for both recurring fair value measurement, such as investment properties and resident loans and for non-recurring measurement.

assets, such as properties and significant liabilities. Selection criteria include market knowledge, experience and qualifications, reputation, independence and whether professional standards are maintained.

On a six monthly basis management presents valuation results to the Audit and Risk Committee and the Trusts’ auditors. This includes a discussion of the major assumptions used in the valuations.

For the purpose of fair value disclosures, the Trusts have determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

z. Pending Accounting Standards

AASB 9 Financial Instruments is applicable to reporting periods beginning on or after 1 January 2018. The Group has not early adopted this standard. This standard provides requirements for the classification and measurement of financial assets and accounting for financial liabilities. These requirements seek to improve and simplify the requirements listed in AASB 139 Financial Instruments: Recognition and Measurement. The Group is currently evaluating the impact of this standard.

AASB 2012-3 “Amendments to Australian Accounting Standards- Offsetting Financial Assets and Liabilities” is applicable for annual financial periods beginning on or after 1 January 2014. The standard makes amendments to AASB 132 “Financial Instruments- Presentation” as a result of the issuance of International Financial Reporting Standard “Offsetting Financial Assets and Financial Liabilities” and provides application guidance to certain criteria mentioned in AASB 132. The application of the Standard does not have any impact on the results of the Group as retirement village resident loans are already offset as there is a current legally enforceable right and there is an intention to settle on a net basis.

AASB 2014-1 Amendments to Australian Accounting Standards is applicable for periods beginning on or after 1 July 2014. This standard clarifies that judgement is needed to determine whether an acquisition of investment property is solely the acquisition of an investment property or whether it is an acquisition of a group of assets or a business combination within the scope of AASB 3 Business Combinations that includes an investment property. The Trusts are currently making an assessment about this classification for each investment property acquired, therefore no impact is expected from this change except for additional disclosures regarding judgements and estimates.

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

The Trusts present assets and liabilities in the balance sheet based on current/non-current classification. An asset is current when it is:

• Expected to be realised or intended to be sold or consumed in the normal operating cycle

• Held primarily for the purpose of trading

• Expected to be realised within twelve months after the reporting period, or

• Cash or cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after reporting period.

A liability is current when:

• It is expected to be settled in the normal operating cycle

• It is held primarily for the purpose of trading

• It is due to be settled within twelve months after the reporting period, or

• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

current assets and liabilities.

Annual Report 2014 107

2. ACCOUNTING ESTIMATES AND JUDGEMENTS

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

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

a. Critical Accounting Estimates and Assumptions

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

i. Valuation of investment property

The Trusts have investment properties with a combined carrying amount of $498,863,000 (2013: $370,931,000) (refer Note 11), and combined retirement village residents’ loans with a carrying amount of $190,122,000 (2013: $175,703,000) which together represent the estimated fair value of the Trusts interest in retirement villages. In addition, the Trusts hold investment properties with carrying amounts of $45,902,000 (2013: $35,343,000) which are included in assets of discontinued operations. These carrying amounts reflect certain assumptions about expected future rentals, rent-free periods, operating costs and appropriate discount and capitalisation rates. The valuation assumptions for deferred management fee villages reflect assumptions relating to average length of stay, unit market values, estimates of capital expenditure, contract terms with residents, discount rates and projected property growth rates. In forming these assumptions, the Responsible Entity considered information about current and recent sales activity, current market rents, and discount and capitalisation rates, for properties similar to those owned by the Trusts, as well as independent valuations of the Trusts’ property.

ii. Fair value of derivatives

The fair value of derivative assets and liabilities is based on assumptions of future events and involves significant estimates. Given the complex nature of these instruments and various assumptions that are used in calculating mark-to-market values, the Trusts rely on counterparty valuations for derivative values. The counterparty valuations are usually based on mid-market rates and calculated using the main variables including the forward market curve, time and volatility.

iii. Valuation of assets acquired in business combinations

Upon recognising the acquisition, management uses estimations and assumptions of the fair value of assets and liabilities assumed at the date of acquisition, including judgements related to valuation of investment property as discussed above.

iv. Valuation of retirement village resident loans

The fair value of the retirement village resident loans is calculated by reference to the initial loan amount plus the resident’s share of any capital gains in accordance with their contracts less any deferred management fee income accrued to date by the operator. The key assumption for calculating the capital gain and deferred management fee income components is the value of the dwelling being occupied by the resident. This value is determined by reference to the valuation of investment property as referred to above.

v. Calculation of deferred management fee (“DMF”)

Deferred management fees are recognised by the Trusts over the estimated period of time the property will be leased by the resident and the accrued DMF is realised upon exit of the resident. The accrued DMF is based on various inputs including the initial price of the property, estimated length of stay of the resident, various contract terms and projected price of property at time of re-leasing.

b. Critical Judgements in Applying the Entity’s Accounting Policies

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

108 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014 �|�continued

3. SEGMENT INFORMATION

a. Description of Segments

The Trusts invest in seniors living properties located in Australia with three reportable segments:

• Garden Villages – rental villages;

• Settlers Lifestyle – deferred management fee villages; and

• Active Lifestyle Estates – comprising permanent and short stay rentals within lifestyle parks and the sale of manufactured homes.

operating decision maker in assessing performance and in determining the allocation of resources. Other parts of the Trusts are neither operating segments nor part of an operating segment. Assets that do not belong to an operating segment are described below as “unallocated”.

b. Ingenia Communities Fund – 30 June 2014

	Active
	Lifestyle		Garden	Corporate/
	Estates	Settlers	Villages	Unallocated	Total
	$’000	$’000	$’000	$’000	$’000
	i_._Segment revenue External segment revenue – Interest income –	– –	9,354 –	– 10,339	9,354 10,339
	Total revenue –	–	9,354	10,339	19,693
	ii_._Segment underlying profit External segment revenue – Interest income – Property expenses – Administration expenses – Operational, marketing and selling expenses – Finance expense –	– – – – – –	9,354 – – – – –	– 10,339 (274) (682) (295) (3,955)	9,354 10,339 (274) (682) (295) (3,955)
	Underlying profit – continuing operations –	–	9,354	5,133	14,487
	Reconciliation of underlying profit to profit from continuing operations: Net foreign exchange gain – Net gain/(loss) on change in fair value of: Investment properties (852) Derivatives – Responsible Entity fees –	– – – –	– 2,382 – –	(147) – 41 (1,170)	(147) 1,530 41 (1,170)
	Profit from continuing operations per the Consolidated Statement of Comprehensive Income (852)	–	11,736	3,857	14,741
	iii_._Segment assets Segment assets 6,904 Discontinued operations	53,992	114,286	142,597	317,779 3,874
	Total assets				321,653

Annual Report 2014 109

c. Ingenia Communities Fund – 30 June 2013

	c. Ingenia Communities Fund – 30 June 2013
		Active
		Lifestyle		Garden	Corporate/
		Estates	Settlers	Villages	Unallocated	Total
		$’000	$’000	$’000	$’000	$’000
	i. Segment revenue
	External segment revenue	118	–	8,341	122	8,581
	Interest income	–	–	–	3,524	3,524
	Total revenue	118	–	8,341	3,646	12,105
	ii. Segment underlying profit
	External segment revenue	118	–	8,341	122	8,581
	Interest income	–	–	–	3,524	3,524
	Administration expenses	–	–	–	(797)	(797)
	Operational, marketing and selling expenses	–	–	–	(96)	(96)
	Finance expense	–	–	–	(3,841)	(3,841)
	Underlying profit/(loss) – continuing operations	118	–	8,341	(1,088)	7,371
	Reconciliation of underlying profit to profit from
	continuing operations:
	Net foreign exchange gain	–	–	–	37	37
	Net gain/(loss) on disposal of investment property	–	–	(107)	–	(107)
	Net gain/(loss) on change in fair value of:
	Investment properties	–	–	1,618	–	1,618
	Derivatives	–	–	–	752	752
	Responsible Entity fees	–	–	–	(1,101)	(1,101)
	Other	–	–	–	(185)	(185)
	Profit from continuing operations per the
	Consolidated Statement of Comprehensive Income	118	–	9,852	(1,585)	8,385
	iii. Segment assets
	Segment assets	7,154	54,009	99,704	72,081	232,948
	Discontinued operations					3,874
	Total assets					236,822

110 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014 �|�continued

3. SEGMENT INFORMATION (CONTINUED)

d. Ingenia Communities Management Trust – 30 June 2014

	Active
	Lifestyle		Garden	Corporate/
	Estates	Settlers	Villages	Unallocated	Total
	$’000	$’000	$’000	$’000	$’000
i. Segment revenue
External segment revenue	13,589	10,576	24,570	–	48,735
Interest income	–	–	–	16	16
Reclassification of gain on revaluation of newly
constructed villages	–	(3,320)	–	–	(3,320)
Total revenue	13,589	7,256	24,570	16	45,431
ii. Segment underlying profit
External segment revenue	13,589	10,576	24,570	–	48,735
Interest income	–	–	–	16	16
Property expenses	(2,570)	(1,738)	(16,385)	–	(20,693)
Employee expenses	(2,367)	(851)	(7,913)	–	(11,131)
Administration expenses	(320)	(157)	(1,129)	(444)	(2,050)
Operational, marketing and selling expenses	(377)	(3)	(2,354)	–	(2,734)
Manufactured home cost of sales	(2,130)	–	–	–	(2,130)
Finance expense	–	–	–	(10,145)	(10,145)
Income tax benefit	–	–	–	2,137	2,137
Underlying profit/(loss) – continuing operations	5,825	7,827	(3,211)	(8,436)	2,005
Reconciliation of underlying profit to profit from
continuing operations:
Net loss on change in fair value of:
Investment properties	(1,273)	(598)	–	–	(1,871)
Retirement village resident loans	–	(616)	–	–	(616)
Gain on revaluation of newly constructed villages	–	(3,320)	–	–	(3,320)
Responsible Entity fees	–	–	–	(1,626)	(1,626)
Income tax benefit associated with reconciliation items –		–	–	4,369	4,369
Profit from continuing operations per the
Consolidated Statement of Comprehensive Income	4,552	3,293	(3,211)	(5,693)	(1,059)
iii. Segment assets
Segment assets	122,955	249,183	1,420	269	373,827
Assets held for sale					5,439
Discontinued operations					47,657
Total assets					426,923

Annual Report 2014 111

e. Ingenia Communities Management Trust – 30 June 2013

	Active
	Lifestyle		Garden	Corporate/
	Estates	Settlers	Villages	Unallocated	Total
	$’000	$’000	$’000	$’000	$’000
i. Segment revenue
External segment revenue	940	11,444	20,265	–	32,649
Interest income	–	–	–	14	14
Reclassification of gain on revaluation of newly
constructed villages	–	(4,619)	–	–	(4,619)
Total revenue	940	6,825	20,265	14	28,044
ii. Segment underlying profit
External segment revenue	940	11,444	20,265	–	32,649
Interest income	–	–	–	14	14
Property expenses	(216)	(3,577)	(12,405)	–	(16,198)
Employee expenses	(59)	(939)	(6,228)	–	(7,226)
Administration expenses	(15)	(132)	(1,058)	(234)	(1,439)
Operational, marketing and selling expenses	(80)	(1,087)	(1,022)	–	(2,189)
Manufactured home cost of sales	(297)	–	–	–	(297)
Finance expense	–	–	–	(5,212)	(5,212)
Income tax benefit	–	–	–	(427)	(427)
Underlying profit/(loss) – continuing operations	273	5,709	(448)	(5,859)	(325)
Reconciliation of underlying profit to profit from
continuing operations:
Net loss on change in fair value of:
Investment properties	(15)	(1,513)	3,367	–	1,839
Retirement village resident loans	–	327	–	–	327
Gain on revaluation of newly constructed villages	–	(4,619)	–	–	(4,619)
Responsible Entity fees	–	–	–	(1,456)	(1,456)
Income tax benefit associated with reconciliation items	–	–	–	410	410
Profit from continuing operations per the
Consolidated Statement of Comprehensive Income	258	(96)	2,919	(6,905)	(3,824)
iii. Segment assets
Segment assets	11,489	241,674	1,390	1,529	256,082
Discontinued operations					36,576
Total assets					292,658

112 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014 �|�continued

4. EARNINGS PER UNIT

4. EARNINGS PER UNIT
	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 2013 2014 2013
Earnings per unit Profit/(loss) from continuing operations ($’000) Profit/(loss) from discontinued operations ($’000) Net profit/(loss) for the year ($’000)	14,741 8,385 (1,059) (3,824) 681 (5,715) (111) (7,891) 15,422 2,670 (1,170) (11,715)
Weighted average number of units outstanding (thousands) Dilutive securities: Performance quantum rights (thousands) Retention quantum rights (thousands)	646,603 509,716 646,603 509,716 2,310 3,842 2,310 3,842 1,818 1,818 1,818 1,818
Weighted average number of issued and dilutive potential securities outstanding (thousands)	650,731 515,376 650,731 515,376
Basic earnings per unit from continuing operations (cents)(1) Basic earnings per unit from discontinued operations (cents)(1) Basic earnings per unit (cents)(1) Diluted earnings per unit from continuing operations (cents)(1) Diluted earnings per unit from discontinued operations (cents)(1) Diluted earnings per unit (cents)(1)	2.3 1.6 (0.2) (0.8) 0.1 (1.1) – (1.5) 2.4 0.5 (0.2) (2.3) 2.3 1.6 (0.2) (0.7) 0.1 (1.1) – (1.5) 2.4 0.5 (0.2) (2.3)

(1) Prior period weighted average number of units and earnings per unit have been adjusted in accordance with AASB 133 “Earnings per Share” (“AASB 133”). The weighted average number of units on issue for the current period, prior to the rights issue in September 2013, has also been adjusted as required by AASB 133.

5. FINANCE EXPENSE

5. FINANCE EXPENSE
	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Interest paid or payable	3,955 3,841 10,145 5,212

Annual Report 2014 113

6. INCOME TAX BENEFIT

6. INCOME TAX BENEFIT
	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
a. Income Tax Beneft/(Expense) Current tax Decrease in deferred tax liabilities	– – 83 (83) – – 6,423 66
Income tax benefit/(expense)	– – 6,506 (17)
b. Reconciliation between Tax Expense and Pre-Tax Net Proft Profit/(loss) before income tax Less amounts not subject to Australian income tax	14,741 8,385 (7,565) (3,807) (14,741) (8,385) – –
Income tax at the Australian tax rate of 30% (2013: 30%) ICMT tax consolidation impact Tax effect of amounts which are not deductible/(taxable) in calculating taxable income Prior period income tax return true-ups Movement in carrying value and tax cost base of investment properties Movements in carrying value and tax cost base of DMF receivables Other timing differences Non-recognition of Australian tax losses Recognition of Australian tax losses	– – (7,565) (3,807) – – 2,270 1,142 – – 2,823 – – – 588 (92) – – 1,163 (80) – – (1,232) (907) – – 406 101 – – – (181) 488
Income tax benefit/(expense)	– – 6,506 (17)

c. Tax Consolidation

ICMT being the head entity. Under the tax funding agreement the funding of tax within the tax group is based on taxable income as if that entity was not a member of the tax group.

Upon entering into the ICMT tax consolidated group, the tax cost bases for certain assets were reset resulting in income tax benefits being recorded. In addition, unrecognised losses incurred by entities within the ICMT tax consolidated group are now available for utilisation by the ICMT tax consolidated group resulting in an additional income tax benefit being recorded.

114 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014 �|�continued

7. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

a. Assets Held for Sale

i. Details of assets held for sale

Prior to 30 June 2014, a subsidiary of ICMT entered into discussions with a third party regarding the sale of Noyea Riverside Village (“Noyea”). Noyea was included within the Settlers Lifestyle segment.

Settlement on the sale of Settlers Lifestyle Noyea was completed on 31 July 2014 at an adjusted sales price of $5.4 million resulting in $nil gain or loss recognised upon completion.

ii. Assets held for sale

The following is the breakdown of the assets held for sale at Noyea:

			2014
		Note	$’000
	Investment property		–
	Deferred management fee receivable	15	5,439
			5,439

b. Discontinued Operations

i. Details of discontinued operations

2011, consistent with the previously announced strategy to focus on transitioning to an actively managed Australian seniors living business. The Trusts holds a 100% interest in three facilities in Wellington, New Zealand that are primarily leased for 15 years to Victoria University of Wellington and Wellington Institute of Technology.

Following divestment of these operations the proceeds will be reinvested into its Australian lifestyle parks business.

ii. Financial performance

reporting date were:

	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Revenue Net loss on change in fair value of investment properties Unrealised net foreign exchange gain/(loss) Other income (Expenses)/income Gain on disposal of equity investments Distributions from formerly equity accounted investments Disposal costs associated with overseas investments	– 40 3,211 5,256 – (43) (1,630) (2,740) 104 – 1,453 (718) – 31 – – (5) 759 (2,859) (5,505) 320 – 7 – 268 2,262 5 24 – – (290) (672)
Profit/(loss) from operating activities before income tax Income tax benefit/(expense)	687 3,049 (103) (4,355) (6) (747) (8) (255)
Profit/(loss) from operating activities Gain/(loss) on sale of discontinued operations Release of foreign currency translation reserve on disposal of foreign operations	681 2,302 (111) (4,610) – 7,490 – (837) – (15,507) – (2,444)
Net profit/(loss) for the year	681 (5,715) (111) (7,891)

Net profit attributable to the parent of ICF is $681,000 (2013: loss of $5,715,000), and net loss attributable to the parent of ICMT is $nil (2013: $4,577,000).

Annual Report 2014 115

	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Net cash flow from operating activities Net cash flow from investing activities: Proceeds/(payments) on sale of discontinued operations Additions to investment properties Payments for lease arrangements Net cash flow from financing activities	– 1,155 1,135 – – 28,531 (120) 35,818 – – (9,081) (13,666) – – (745) – – (29,786) 11,448 (26,283)
Net cash flows from discontinued operations	– (100) 2,637 (4,131)

iv. Assets and liabilities

	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Assets Cash and cash equivalents Trade and other receivables Investment properties Plant and equipment Equity accounted investments	– – 1,657 974 – – 98 259 – – 45,902 35,343 – – – – 3,874 3,874 – –
Total assets	3,874 3,874 47,657 36,576
Liabilities Bank overdraft Payables Borrowings Deferred tax liabilities	– – – 1,955 – – 368 2,050 – – 30,081 17,522 – – – –
Total liabilities	– – 30,449 21,527
Net assets of disposal groups	3,874 3,874 17,208 15,049

The change in investment properties increased for the year due to capitalised expenditure of $7.8 million, lease incentive payments of $0.4 million and foreign exchange gain of $4.0 million offset by a fair value loss of $1.6 million.

v. Capital commitments

There were no capital commitments under construction contracts for the New Zealand Students business for the year ended 30 June 2014 (2013: A$9,208,234).

vi. Capitalisation rate

The weighted average capitalisation rate of the New Zealand Students properties within discontinued operations is 8.6% (2013: 7.75%).

116 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014 �|�continued

8. CASH AND CASH EQUIVALENTS

8. CASH AND CASH EQUIVALENTS
Note	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Cash at bank and in hand 25	2,658 31,014 3,893 1,229
Reconciliation to statements of cash flows Cash and cash equivalents attributable to: Continuing operations – cash at bank Discontinued operations – cash at bank Discontinued operations – bank overdraft	2,658 31,014 3,893 1,229 – – 1,657 974 – – – (1,955)
Cash at end of the year as per cash flow statement	2,658 31,014 5,550 248

9. TRADE AND OTHER RECEIVABLES

9. TRADE AND OTHER RECEIVABLES
	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Current Rental and other amounts due Finance lease receivable from stapled entity Accrued income, prepayments and deposits	866 4,822 1,648 1,336 3,322 3,322 – – 92 1,060 1,483 1,483
Total current trade and other receivables	4,280 9,204 3,131 2,819
Non-current Finance lease receivable from stapled entity Accrued income, prepayments and deposits	37,356 37,358 – – 1,978 2,114 40 438
Total non-current trade and other receivables	39,334 39,472 40 438

Rental amounts due are typically paid in advance and other amounts due are receivable within 30 days. There are no receivables which are neither past due nor impaired.

of each agreement varies between 92 and 115 years. There are no purchase options. Minimum payments under the agreements and their present values are:

agreements and their present values are:
	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Minimum lease payments receivable: Not later than one year Later than one year and not later than five years Later than five years	3,322 3,322 – – 13,287 13,287 – – 301,540 304,862 – –
Unearned finance income	318,149 321,471 – – (277,471) (280,791) – –
Net present value of minimum lease payments	40,678 40,680 – –
Net present value of minimum lease payments receivable: Not later than one year Later than one year and not later than five years Later than five years	3,178 3,178 – – 10,399 10,400 – – 27,101 27,102 – –
	40,678 40,680 – –
Finance income recognised and included in interest income in the income statement	3,320 3,160 – –

Annual Report 2014 117

10. INVENTORIES

10. INVENTORIES
	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Current assets Manufactured homes	– – 2,208 285

11. INVESTMENT PROPERTIES

a. Summary of Carrying Amounts

11. INVESTMENT PROPERTIES a. Summary of Carrying Amounts
	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Completed properties Land not yet under construction	134,188 119,867 360,860 247,249 300 300 3,515 3,515
Total investment properties	134,488 120,167 364,375 250,764

b. Movements in Carrying Amounts

b. Movements in Carrying Amounts
	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Completed investment property Carrying amount at beginning of year Acquisitions Expenditure capitalised Transferred from plant and equipment Disposals Sale of units – Strata title Transfer (to)/from finance lease Transfer to inventory Net gain/(loss) on change in fair value	119,867 100,357 247,249 225,005 10,616 23,317 108,300 16,006 2,175 474 7,551 3,070 – – 320 – – (2,830) – – – – (495) – – (3,069) – 3,069 – – (194) (195) 1,530 1,618 (1,871) 294
Carrying amount at end of year	134,188 119,867 360,860 247,249
Land not yet under construction Carrying amount at beginning of year Expenditure capitalised Net gain/(loss) on change in fair value Disposals	300 310 3,515 1,660 – 300 – 310 – – – 1,545 – (310) – –
Carrying amount at end of year	300 300 3,515 3,515

Fair value hierarchy disclosures for investment properties have been provided in Note 26.

118 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014 �|�continued

11. INVESTMENT PROPERTIES (CONTINUED)

c. Description of Valuation Techniques used and Key Inputs to Valuation of Investment Properties:

							Relationship of
				Significant		Range	unobservable input
		Valuation technique		unobservable inputs		(weighted average)	to fair value
	Garden Villages	Capitalisation		Stabilised occupancy		62-98% (87%)	As costs are fixed in
		method					nature, occupancy has
							a direct correlation to
							valuation (ie. the higher
							the occupancy, the
							greater the value).
				Capitalisation rate		8-13% (11%)	Capitalisation has an
							inverse relationship to
							valuation.
	Settlers Lifestyle	Discounted cash		Current market value		$115,000-$470,000	Market value and growth
		flow		of property		($307,000)	in value have a direct
				Growth in value		0-4%	correlation to valuation, while length of stay and
				Average length		11.4 years	discount rate have an
				of stay – future			inverse relationship to
				residents			valuation.
				Average length		14.6 years
				of stay – current
				residents
				Discount rate		14-20% (15%)
	Active Lifestyle	Capitalisation		Short-term		15-70% based on	Higher the occupancy,
	Estates	method (for existing		occupancy		seasonality and	the greater the value.
		rental streams)				accommodation
						categories
				Residential		90-100%
				occupancy
				Operating profit		50-70% dependent upon	Higher the profit margin,
				margin		short-term and residential	the greater the value.
						accommodation mix
				Capitalisation rate		9-12%	Capitalisation has an
							inverse relationship to
							valuation.
		Discounted cash		Discount rate		15-25%	Discount rate has an
		flow (for future					inverse relationship to
		development)					valuation.

Capitalisation Method

capitalisation method involves estimating the expected income projections of the property into perpetuity and applying a capitalisation rate. The capitalisation rate is based on current market evidence. Future income projections take into account occupancy, rental income and operating expenses.

Discounted Cash Flow Method

ownership over the asset’s life including an exit or terminal value. This method involves the projection of a series of cash flows on a real property interest. To this projected cash flow series, a market-derived discount rate is applied to establish the present value of the income stream associated with the asset. The exit yield normally reflects the exit value expected to be achieved upon selling the asset and is a function of the risk adjusted returns of the asset and expected capitalisation growth rate. The duration of the cash flows and the specific timing of inflows and outflows are determined by events such as rent reviews, lease renewal and related re-letting, redevelopment, or refurbishment as well as the development of new units. The appropriate duration is typically driven by market behaviour that is a characteristic of the class of real property. Periodic cash flow is typically estimated as gross income less vacancy, non-recoverable expenses, collection losses, lease incentives, maintenance cost, agent and commission costs and other operating and management expenses. The series of periodic net underlying cash flows, along with an estimate of the terminal value anticipated at the end of the projection period, is then discounted.

Annual Report 2014 119

12. PLANT AND EQUIPMENT

12. PLANT AND EQUIPMENT
	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
a. Summary of Carrying Amounts Plant and equipment Less: accumulated depreciation	423 423 824 1,185 (184) (84) (644) (638)
Total plant and equipment	239 339 180 547
b. Movements in Carrying Amount Carrying amount at beginning of year Acquired through acquisitions Assets written off Transferred to investment property Additions Depreciation	339 342 547 427 – – – 320 – – (82) – – – (320) (173) – 81 102 49 (100) (84) (67) (76)
Carrying amount at end of year	239 339 180 547

13. TRADE AND OTHER PAYABLES

	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Current liabilities Trade and other payables	1,210 1,569 8,480 6,305
Non-current liabilities Other payables	– – 4,000 –

14. BORROWINGS

14. BORROWINGS
Note	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Current liabilities Finance leases (c)	– – 3,461 3,589
	– – 3,461 3,589
Non-current liabilities Bank debt (a) Prepaid borrowing costs Finance leases (c)	94,000 68,000 – – (312) (578) – – – – 41,883 40,475
	93,688 67,422 41,883 40,475

120 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014 �|�continued

14. BORROWINGS (CONTINUED)

a. Bank Debt

On 21 February 2014, ICF refinanced its Australian dollar denominated bank debt facility to $129,500,000. The facility expires on 30 September 2015 and has the following principal financial covenants:

• Loan to value ratio (“LVR”) is less than or equal to 50%;

• Total leverage ratio does not exceed 50%; and

As at 30 June 2014, the facility has been drawn to $94,000,000 (2013: $68,000,000).

The carrying value of investment property net of resident liabilities at reporting date for the Group’s Australian properties pledged as security is $290,375,000 (2013: $179,320,000).

b. Bank Guarantees

ICF has the ability to utilise a portion of its $129.5 million bank facility to provide bank guarantees. Bank guarantees at 30 June 2014 were $4.4 million. Refer to Note 23.

c. Finance Leases

Subsidiaries of ICMT have entered into agreements with subsidiaries of ICF. The subject of each agreement is to lease a retirement village. The remaining term of each agreement varies between 92 and 115 years. There are no purchase options.

On 23 of April 2013, ICMT was assigned a commercial lease with 16.5 years remaining with the Gosford City Council for land and facilities as part of its Ettalong Holiday Beach acquisition. The lease is for an initial three years commencing September 2012 with two renewal options of seven years each. The below table is based on the expectation that the lease options will be exercised.

In December 2013, ICMT acquired One Mile Beach Holiday Park, accounted for as investment property. Two Crown leases are attached to the land, one for 40 years expiring on 19 September 2031 and one for perpetuity.

i. Minimum Lease Payments – excluding Perpetual Lease

i. Minimum Lease Payments – excluding Perpetual Lease
	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Minimum lease payments: Within one year Later than one year but not later than five years Later than five years	– – 3,613 3,589 – – 14,530 14,422 – – 305,301 308,628
Total minimum lease payments Future finance charges	– – 323,444 326,639 – – (279,237) (282,575)
Present value of minimum lease payments	– – 44,207 44,064
Present value of minimum lease payments: Within one year Later than one year but not later than five years Later than five years	– – 3,461 3,436 – – 11,456 11,362 – – 29,290 29,266
	– – 44,207 44,064

ii. Minimum Lease Payments – Perpetual Lease

The perpetual lease is recognised as investment property and non-current liability at a value of $1.1 million based on a capitalisation rate of 10.6% applied to the current lease payment. Payments each period in relation to the lease are recognised as finance expenses in the statement of comprehensive income therefore there is no subsequent change to the originally determined present value of the minimum lease payments as calculated above.

As this is a perpetual lease, the lease liability will not amortise and no fair value adjustments in relation to the lease will be recognised unless circumstances of the lease change. Under the terms of the lease, lease payments will continue into perpetuity. The current annual lease payment is $121,000.

Annual Report 2014 121

15. RETIREMENT VILLAGE RESIDENT LOANS

15. RETIREMENT VILLAGE RESIDENT LOANS
	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
a. Summary of Carrying Amounts Gross resident loans Accrued deferred management fee	– – 218,639 206,629 – – (28,517) (30,926)
Net resident loans	– – 190,122 175,703
b. Movements in Carrying Amounts Carrying amount at beginning of year Net (gain)/loss on change in fair value of resident loans Accrued deferred management fee income Deferred management fee cash collected Acquired resident loans Proceeds from resident loans Repayment of resident loans Transfer to assets held for sale Other	– – 175,703 162,603 – – 616 (327) – – (5,333) (4,850) – – 1,811 1,368 – – – 4,473 – – 22,021 19,338 – – (10,361) (7,118) – – 5,439 – – – 226 216
Carrying amount at end of year	– – 190,122 175,703

Fair value hierarchy disclosures for retirement village resident loans have been provided in Note 26.

16. PROVISIONS

16. PROVISIONS
	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Current liabilities Employee liabilities	– – 590 507
Non-current liabilities Employee liabilities	– – 249 140

17. DERIVATIVES

17. DERIVATIVES
Note	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Current liabilities Interest rate swap contracts 25	84 – – –
Non-current liabilities Interest rate swap contracts 25	84 209 – –

122 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014 �|�continued

18. DEFERRED TAX LIABILITIES

	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Deferred tax assets Tax losses Other Deferred tax liabilities DMF receivable Investment properties	– – 13,269 8,120 – – 883 242 – – 8,176 6,756 – – 7,409 9,461
Net deferred tax liabilities	– – 1,433 7,855
Deductible temporary differences and carried forward losses tax effected for which no deferred tax asset has been recognised	– – 7,488 4,220

The availability of carried forward tax losses of $7.5 million to the ICMT tax consolidated group is subject to recoupment rules at the time of recoupment. Further, the rate at which these losses can be utilised is determined by reference to market values at the time of tax consolidation and subsequent events. Accordingly, a portion of these carried forward tax losses may not be available in the future.

current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

19. ISSUED UNITS

a. Carrying Amounts

19. ISSUED UNITS a. Carrying Amounts
	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
At beginning of year Placement securities Transaction costs of institutional placement securities Rights issue Rights issue costs	497,956 480,693 6,106 3,351 – 18,179 – 2,908 – (916) – (153) 51,985 – 8,364 – (2,299) – (373) –
At end of year	547,642 497,956 14,097 6,106
The closing balance is attributable to the unitholders of: Ingenia Communities Fund Ingenia Communities Management Trust	547,642 497,956 – – – – 14,097 6,106
	547,642 497,956 14,097 6,106

b. Number of Issued Units

	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 Thousands 2013 Thousands 2014 Thousands 2013 Thousands
At beginning and end of year Placement securities	507,179 441,029 507,179 441,029 169,061 66,150 169,061 66,150
At end of year	676,240 507,179 676,240 507,179

c. Terms of Units

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

Annual Report 2014 123

20. RESERVES

20. RESERVES
	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Foreign currency translation reserve Balance at beginning of year Translation differences arising during the year Amounts transferred to profit and loss on disposal of foreign operations Deconsolidation of ICMT	– (16,896) 766 (614) (226) 1,389 495 (1,064) – 15,507 – 2,444 – – – –
Balance at end of a year	(226) – 1,261 766
The closing balance is attributable to the unitholders of: Ingenia Communities Fund Ingenia Communities Management Trust	(226) – 1,092 646 – – 169 120
	(226) – 1,261 766

of foreign subsidiaries.

21. ACCUMULATED LOSSES

	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Balance at beginning of year Net profit/(loss) for the year Distributions	(330,334) (328,594) (6,304) 5,411 15,422 2,670 (1,170) (11,715) (5,917) (4,410) – –
Balance at end of year	(320,829) (330,334) (7,474) (6,304)
The closing balance is attributable to the unitholders of: Ingenia Communities Fund Ingenia Communities Management Trust	(320,829) (330,334) (3,425) (3,314) – – (4,049) (2,990)
	(320,829) (330,334) (7,474) (6,304)

124 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014 �|�continued

22. COMMITMENTS

a. Capital Commitments

ICMT had commitments for capital expenditure on investment property contracted but not provided for at reporting date amounting to $3,266,000 (2013: $nil), all payable within one year.

b. Operating Lease Commitments

of five years.

Future minimum rentals payable under this lease as at reporting date were:

	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Within one year Later than one year but not later than five years Later than five years	– – 220 95 – – 973 – – – – –
	– – 1,193 95

c. Finance Lease Commitments

A subsidiary of ICMT was assigned a commercial lease with 16.5 years remaining with the Gosford City Council for land and facilities as part of its Ettalong Holiday Beach acquisition. The lease is for an initial three years commencing September 2012 with two renewal options of seven years each.

In December 2013, a subsidiary of ICMT acquired One Mile Beach Holiday Park, accounted for as investment property. Two Crown leases are attached to the land, one for 40 years expiring on 19 September 2031 and one for perpetuity.

Refer to Note 14 for future minimum lease payments payable and the present value of minimum lease payments payable at reporting date for the finance leases at Ettalong Holiday Village and One Mile Beach Holiday Park.

23. CONTINGENCIES

There are no known contingent liabilities other than the bank guarantees of $4.4 million provided for under the ICF $129.5 million bank facility (Note 14). Bank guarantees of $4.0 million are in relation to deferred land payments within ICMT recognised as non-current payables (refer to Note 13). These guarantees will not be called by the counterparty unless the payable is not paid per the terms of the agreement.

24. CAPITAL MANAGEMENT

The capital management of ICF and ICMT is not managed separately, but rather, is managed at a consolidated Group level (ICH and subsidiaries).

At the Group level, the aim is to meet strategic objectives and operational needs and to maximise returns to security holders through the appropriate use of debt and equity, while taking account of the additional financial risks of higher debt levels.

In determining the optimal capital structure, the Group takes into account a number of factors, including the views of investors and the market in general, the capital needs of its portfolio, the relative cost of debt versus equity, the execution risk of raising equity or debt, and the additional financial risks of debt including increased volatility of earnings due to exposure to interest rate movements, the liquidity risk of maturing debt facilities and the potential for acceleration prior to maturity.

profile, the degree of hedging and the overall level of debt as measured by gearing.

The actual capital structure at a point in time is the product of a number of factors, many of which are market driven and to various degrees outside of the control of the Group, particularly the impact of revaluations on gearing levels, the availability of new equity and the liquidity in real estate markets. While the Group periodically determines the optimal capital structure, the ability to achieve the optimal structure may be impacted by market conditions and the actual position may often differ from the optimal position.

The Group’s capital position is primarily monitored through the ratio of total liabilities to total assets (“Leverage Ratio”), calculated on a look-through basis.

In addition, the Trusts monitor the ratio of debt to total assets (“Gearing Ratio”), calculated on a look through basis.

Annual Report 2014 125

25. FINANCIAL INSTRUMENTS

a. Introduction

cash and short-term deposits and derivative financial instruments.

liquidity risk. The Trusts manage the exposure to these risks primarily through the Treasury Policy. The policy sets out various targets aimed at restricting the financial risk taken by the Trusts. Management reviews actual positions of the Trusts against these targets on a regular basis. If the target is not achieved, or forecast not to be achieved, a plan of action is, where appropriate, put in place with the aim of meeting the target within an agreed timeframe. Depending on the circumstances of the Trusts at a point in time, it may be that positions outside of the Treasury Policy are accepted and no plan of action is put in place to meet the treasury targets, because, for example, the risks associated with bringing the Trusts into compliance outweigh the benefits. The adequacy of the Treasury Policy in addressing the risks arising from the Trust’s financial instruments is reviewed on a regular basis.

any one time, not all targets will be met. For example, the Trusts may be unable to negotiate the extension of bank facilities sufficiently ahead of time, so that they fail to achieve their liquidity target. When refinancing loans they may be unable to achieve the desired maturity profile or the desired level of flexibility of financial covenants, because of the cost of such terms or their unavailability. Hedging instruments may not be available, or their cost may outweigh the benefit of risk reduction or they may introduce other risks such as mark to market valuation risk. Changes in market conditions may limit the Trusts ability to raise capital through the issue of units or sale of properties.

risk. These risks are not separately managed. Management of these risks for the ICF may result in consequential changes for ICMT.

b. Interest Rate Risk

The Trusts exposure to the risk of changes in market interest rates arises primarily from its use of borrowings. The main consequence of adverse changes in market interest rates is higher interest costs, reducing the Trust’s profit. In addition, one or more of the Trust’s loan agreements may include minimum interest cover covenants. Higher interest costs resulting from increases in market interest rates may result in these covenants being breached, providing the lender the right to call in the loan or to increase the interest rate applied to the loan.

borrowings. Fixed rate debt is achieved either through fixed rate debt funding or through derivative financial instruments permitted under the Treasury Policy. The policy sets minimum and maximum levels of fixed rate exposure over a ten-year time horizon.

a fixed rate of interest (30 June 2013: 26%).

subject to floating interest rate terms. Changes in market interest rates will also change the fair value of any interest rate hedges.

c. Interest Rate Risk Exposure

30 June 2014		INGENIA COMMUNITIES FUND
	Floating interest rate	FIXED INTEREST MATURING IN: Less than 1year One to five Years More than 5years Total
Principal amounts $’000 Financial assets Cash at bank Financial liabilities Bank debt denominated in AUD Interest rate swaps: – denominated in AUD; Fund pays fixed rate
	2,658	– – – 2,658
	94,000	– – – 94,000
	(45,000) 45,000 – – –

126 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014 �|�continued

25. FINANCIAL INSTRUMENTS (CONTINUED)

30 June 2014	INGENIA COMMUNITIES MANAGEMENT TRUST	INGENIA COMMUNITIES MANAGEMENT TRUST
	Floating interest rate	FIXED INTEREST MATURING IN: Less than 1year One to five Years More than 5years Total
Principal amounts $’000 Financial assets Cash at bank Financial liabilities Finance leases (excluding perpetual lease)
	3,893	– – – 3,893
	–	3,461 11,456 29,290 44,207

financial year were:

30 June 2013	INGENIA COMMUNITIES MANAGEMENT TRUST	INGENIA COMMUNITIES MANAGEMENT TRUST
	Floating interest rate	FIXED INTEREST MATURING IN: Less than 1year One to five Years More than 5years Total
Principal amounts $’000 Financial assets Cash at bank Financial liabilities Finance leases	1,229 –	– – – 1,229 3,436 11,362 29,266 44,064

subject to interest rate risk.

d. Interest Rate Sensitivity Analysis

The impact of an increase or decrease in average interest rates of 1% (100 basis points) at reporting date, with all other variables held constant, is illustrated in the tables below. This analysis is based on the interest rate risk exposures in existence at balance sheet date. As the Trusts have no derivatives that meet the documentation requirements to qualify for hedge accounting, there would be no impact on unitholders’ interest (apart from the effect on profit).

i. Increase in average interest rates of 1%

	EFFECT ON PROFIT AFTER TAX
	INGENIA COMMUNITIES FUND HIGHER/(LOWER) INGENIA COMMUNITIES MANAGEMENT TRUST HIGHER/(LOWER)
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Variable interest rate instruments denominated in: Australian dollars	(940) (680) – –
The efect on change in fair value of derivatives would have been:	EFFECT ON PROFIT AFTER TAX
	INGENIA COMMUNITIES FUND HIGHER/(LOWER) INGENIA COMMUNITIES MANAGEMENT TRUST HIGHER/(LOWER)
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Interest rate swaps denominated in: Australian dollars	417 793 – –

Annual Report 2014 127

ii. Decrease in average interest rates of 1%

	EFFECT ON PROFIT AFTER TAX
	INGENIA COMMUNITIES FUND HIGHER/(LOWER) INGENIA COMMUNITIES MANAGEMENT TRUST HIGHER/(LOWER)
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Variable interest rate instruments denominated in: Australian dollars	940 680 – –

	EFFECT ON PROFIT AFTER TAX
	INGENIA COMMUNITIES FUND HIGHER/(LOWER) INGENIA COMMUNITIES MANAGEMENT TRUST HIGHER/(LOWER)
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Interest rate swaps denominated in: Australian dollars	(297) (810) – –

e. Foreign Exchange Risk

Foreign exchange rate movements may reduce the Australian dollar equivalent of the carrying value of the Trusts offshore properties, and may result in lower Australian dollar equivalent proceeds when an offshore property is sold. In addition, foreign exchange rate movements may reduce the Australian dollar equivalent of the earnings from the offshore properties while they are owned by the Trusts.

interests in offshore investments by partly or wholly funding their acquisition using borrowings denominated in the particular offshore currency, and by using derivatives. The Treasury Policy sets a target for minimum and maximum hedging of the carrying value of its offshore properties.

the foreign denominated interest expense of its foreign denominated borrowings and any derivative hedges. The Trusts aim to reduce any residual exposure to earnings arising because of investment in offshore markets by using forward exchange contracts. The Treasury Policy sets out targets of minimum and maximum hedging of earnings from offshore properties over a five-year time horizon.

at reporting date is shown in the following table. The net foreign currency exposure reported is of foreign currencies held by entities whose functional currency is the Australian dollar. It excludes assets and liabilities of entities, including the Trusts’ United States subsidiaries and equity accounted investments, whose functional currency is not the Australian dollar.

	NET FOREIGN CURRENCY ASSET/(LIABILITY)
	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Net foreign currency exposure: United States dollars	157 1,282 – –

128 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014 �|�continued

25. FINANCIAL INSTRUMENTS (CONTINUED)

f. Foreign Exchange Sensitivity Analysis

The impact of an increase or decrease in average foreign exchange rates of 10% at reporting date, with all other variables held constant, is illustrated in the tables below. This analysis is based on the foreign exchange risk exposures in existence at balance sheet date. In these tables, the effect on unitholders’ interest excludes the effect on profit after tax.

i. Efect of appreciation in Australian dollar of 10%:
	EFFECT ON PROFIT AFTER TAX
	INGENIA COMMUNITIES FUND HIGHER/(LOWER) INGENIA COMMUNITIES MANAGEMENT TRUST HIGHER/(LOWER)
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Foreign exchange risk exposures denominated in: United States dollars	(16) (128) – –

ii. Efect of depreciation in Australian dollar of 10%:
	EFFECT ON PROFIT AFTER TAX
	INGENIA COMMUNITIES FUND HIGHER/(LOWER) INGENIA COMMUNITIES MANAGEMENT TRUST HIGHER/(LOWER)
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Foreign exchange risk exposures denominated in: United States dollars	16 128 – –

g. Foreign Exchange Derivatives Held

movements on the financial statements.

At balance sheet date, the Trusts did not hold any foreign exchange derivatives. There was no impact to the consolidated result for the year for the change in fair value for foreign exchange derivatives ended 30 June 2014 (2013: loss $9,000).

h. Credit Risk

the Trusts.

The major credit risk for the Trusts is default by tenants, resulting in a loss of rental income while a replacement tenant is secured and further loss if the rent level agreed with the replacement tenant is below that previously paid by the defaulting tenant.

The Trusts assess the credit risk of prospective tenants, the credit risk of in-place tenants when acquiring properties and the credit risk of existing tenants renewing upon expiry of their leases. Factors taken into account when assessing credit risk include the financial strength of the prospective tenant and any form of security, for example a rental bond, to be provided.

The decision to accept the credit risk associated with leasing space to a particular tenant is balanced against the risk of the potential financial loss of not leasing up vacant space.

Rent receivable balances are monitored on an ongoing basis and arrears actively followed up in order to reduce, where possible, the extent of any losses should the tenant subsequently default.

The Responsible Entity believes that the Trust’s receivables that are neither past due nor impaired do not give rise to any significant credit risk.

to the Trusts. The Trust’s Treasury Policy sets target limits for credit risk exposure with financial institutions and minimum counterparty credit ratings. Counterparty exposure is measured as the aggregate of all obligations of any single legal entity or economic entity to the Trusts, after allowing for appropriate set offs which are legally enforceable.

amount as reported in the balance sheet.

Annual Report 2014 129

i. Liquidity Risk

The main objective of liquidity risk management is to reduce the risk that the Trusts do not have the resources available to meet their financial obligations and working capital and committed capital expenditure requirements. The Trust’s Treasury Policy sets a target for the level of cash and available undrawn debt facilities to cover future committed expenditure in the next year, loan maturities within the next year and an allowance for unforeseen events such as tenant default.

The Trusts may also be exposed to contingent liquidity risk under term loan facilities, where term loan facilities include covenants which if breached give the lender the right to call in the loan, thereby accelerating a cash flow which otherwise was scheduled for the loan maturity. The Trusts monitor adherence to loan covenants on a regular basis, and the Treasury Policy sets targets based on the ability to withstand adverse market movements and remain within loan covenant limits.

facilities, where possible, to reduce refinance risk in any one year.

table. It shows the undiscounted contractual cash flows required to discharge the liabilities including interest at market rates. Foreign currencies have been converted at rates of exchange ruling at reporting date.

current liabilities, as required by Accounting Standards, because the Trusts do not have an unconditional right to defer settlement to more than twelve months after reporting date.

2014	INGENIA COMMUNITIES FUND
	Less than 1 year $’000 1 to 5 years $’000 More than 5 years $’000 Total $’000
Trade and other payables Borrowings	1,210 – – 1,210
	4,521 99,653 – 104,174
	5,731 99,653 – 105,384
2013
Trade and other payables Borrowings	1,569 – – 1,569 3,271 72,089 – 75,360
	4,840 72,089 – 76,929

2014	INGENIA COMMUNITIES MANAGEMENT TRUST
	Less than 1 year $’000 1 to 5 years $’000 More than 5 years $’000 Total $’000
Trade and other payables Retirement village resident loans Borrowings (excluding perpetual lease) Finance lease (perpetual lease) Provisions	8,480 4,000 – 12,480
	190,122 – – 190,122
	3,613 14,530 305,301 323,444
	121 483 – 604
	590 249 – 839
	202,926 19,262 305,301 527,489
2013
Trade and other payables Retirement village resident loans Borrowings Provisions	6,305 – – 6,305 175,703 – – 175,703 3,589 14,422 308,628 326,639 507 140 – 647
	186,104 14,562 308,628 509,294

the undiscounted contractual cash flows required to discharge the instruments including interest at market rates. Foreign currencies have been converted at rates of exchange ruling at reporting date.

130 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014 �|�continued

25. FINANCIAL INSTRUMENTS (CONTINUED)

25. FINANCIAL INSTRUMENTS (CONTINUED)
2014	INGENIA COMMUNITIES FUND
	Less than 1 year $’000 1 to 5 years $’000 More than 5 years $’000 Total $’000
Liabilities Derivative liabilities – net settled
	84 84 – 168
2013
Liabilities Derivative liabilities – net settled	– 209 – 209

j. Other Financial Instrument Risk

The Trusts carry retirement village residents’ loans at fair value with resulting fair value adjustments recognised in the income statement. The fair value of these loans is dependent on market prices for the related retirement village units. The impact of an increase or decrease in these market prices of 10% at reporting date, with all other variables held constant, is shown in the table below. This analysis is based on the retirement village residents’ loans in existence at reporting date.

shown in the table below. This analysis is based on the retirement	village residents’ loans in existence at reporting date.
	EFFECT ON PROFIT AFTER TAX
	INGENIA COMMUNITIES FUND HIGHER/(LOWER) INGENIA COMMUNITIES MANAGEMENT TRUST HIGHER/(LOWER)
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Increase in market prices of investment properties of 10% Decrease in market prices of investment properties of 10%	– – (21,864) (20,700) – – 21,864 20,700

The effect on unitholders’ interest would have been the same as the effect on profit.

k. Fair Value

The Trusts use the following fair value measurement hierarchy:

Level 1: fair value is calculated using quoted prices in active markets for identical assets or liabilities; Level 2: fair value is calculated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and

Level 3: fair value is calculated using inputs for the asset or liability that are not based on observable market data.

Quoted market price represents the fair value determined based on quoted prices on active markets as at the reporting date without any deduction for transaction costs.

reporting date:

	reporting date:
		Valuation	Significant		Relationship of		Sensitivity to
	Financial assets/	technique(s) and	Unobservable		unobservable		the input to
	financial liabilities	key inputs	Inputs		inputs to fair value		fair value
	Retirement village resident loans	Loans measured as	Long-term capital		The higher the		The higher the
		the ingoing resident's	appreciation rates		appreciation, the		appreciation, the
		contribution plus the	for residential		higher the value		higher the value of
		resident's share of	property between		of resident loans.		resident loans. The
		capital appreciation	0-4%. Estimated		The longer the		longer the length of
		to reporting date,	length of stay of		length of stay, the		stay, the lower the
		less DMF accrued to	residents based		lower the value of		value of resident
		reporting date.	on life tables.		resident loans.		loans.
	Derivative interest rate swaps	Net present value	N/A		N/A		The longer the length
		of future cash flows					of stay, the higher the
		discounted at market					DMF accrued, capped
		rates adjusted for the					at a predetermined
		Group's credit risk.					period of time.

There has been no movement from Level 3 to Level 2 during the current period. Changes in ICMT’s retirement village resident loans which are level 3 instruments are presented in Note 26.

Annual Report 2014 131

26. FAIR VALUE MEASUREMENT

a. Ingenia Communities Fund

The following table provides the fair value measurement hierarchy of Ingenia Communities Fund assets and liabilities:

i. Assets measured at fair value

30 June 2014 Date of valuation Total	FAIR VALUE MEASUREMENT USING
	Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Significant unobservable inputs (Level 3)
Investment properties 30 June 2014 Refer to Note 11 134,488	– – 134,488
ii. Liabilities measured at fair value 30 June 2014 Date of valuation Total	FAIR VALUE MEASUREMENT USING
	Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Significant unobservable inputs (Level 3)
Derivatives 30 June 2014 168	– 168 –

There have been no transfers between Level 1 and Level 2 during the year.

b. Ingenia Communities Management Trust

The following table provides the fair value measurement hierarchy of Ingenia Communities Management Trust assets and liabilities:

i. Assets measured at fair value

30 June 2014 Date of valuation Total	FAIR VALUE MEASUREMENT USING
	Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Significant unobservable inputs (Level 3)
Investment properties 30 June 2014 Refer to Note 11 364,375 Discontinued operations – investment property 30 June 2014 Refer to Note 7(b) 45,902 Assets held for sale – investment property 30 June 2014 Refer to Note 7(a) – Assets held for sale – deferred management fee receivable 30 June 2014 Refer to Notes 7(a) and 15 5,439	– – 364,375
	– – 45,902
	– – –
	– 5,439 –

ii. Liabilities measured at fair value

30 June 2014 Date of valuation Total	FAIR VALUE MEASUREMENT USING
	Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Significant unobservable inputs (Level 3)
Retirement village resident loans 30 June 2014 Refer to Note 15 190,122	– – 190,122

There have been no transfers between Level 1 and Level 2 during the year.

132 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014 �|�continued

26. FAIR VALUE MEASUREMENT (CONTINUED)

c. Fair Value Hierarchy for Financial Instruments Measured at Fair Value as at 30 June 2013:

30 June 2013	INGENIA COMMUNITIES FUND
	Total $’000 Level 1 $’000 Level 2 $’000 Level 3 $’000
Financial liabilities – derivatives	209 – 209 –
30 June 2013	INGENIA COMMUNITIES MANAGEMENT TRUST
	Total $’000 Level 1 $’000 Level 2 $’000 Level 3 $’000
Financial liabilities – retirement village resident loans	175,703 – – 175,703

27. AUDITOR’S REMUNERATION

27. AUDITOR’S REMUNERATION
	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $ 2013 $ 2014 $ 2013 $
Amounts received or receivable by Ernst & Young for: Audit or review of financial reports Other audit related services	146,025 120,339 146,025 122,364 9,350 9,183 9,350 –
	155,375 129,522 155,375 122,364

28. RELATED PARTIES

a. Responsible Entity

The Responsible Entity for both trusts from 4 June 2012 is Ingenia Communities RE Limited (“ICRE”). ICRE is an Australian domiciled company and is a wholly owned subsidiary of ICH.

b. Fees of the Responsible Entity and its Related Parties

	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $ 2013 $ 2014 $ 2013 $
Ingenia Communities RE Limited: Asset management fees	1,170,374 1,101,265 1,625,516 1,456,230

The Responsible Entity is entitled to a fee of 0.5% of total assets. In addition, it is entitled to recover certain expenses.

The amount accrued and recognised but unpaid at reporting date was:

	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $ 2013 $ 2014 $ 2013 $
Current trade payables	2,340,175 1,169,801 3,167,572 1,542,056

These are included in current trade payables in the balance sheet.

Annual Report 2014 133

c. Holdings of the Responsible Entity and its Related Parties

There were no holdings of the Responsible Entity and its related parties (including managed investment schemes for which a related party is the Responsible Entity) as at 30 June 2014 and 30 June 2013.

d. Other Related Party Transactions

Subsidiaries of ICMT have entered into agreements with subsidiaries of ICF for the leases of land that retirement villages are operated on. The remaining term of each agreement varies between 92 and 115 years. There are no purchase options. Rental villages have been classified as operating leases and DMF villages have been classified as finance leases.

Intercompany loans are subject to a loan deed dated 29 June 2012 encompassing ICH, ICF and ICMT and their respective subsidiaries. The deed stipulates that on the last business day of each month intercompany balances are set off within each of the ICH, ICF and ICMT sub-groups and the balances between ICH, ICF and ICMT incur interest at 8.5%pa. Intercompany loan balances are payable on demand, however ICF has undertaken not to call its loan receivable from ICMT within twelve months of the date of this report, if calling the loan would result in ICMT being unable to pay its debts as and when they are due and payable.

There are a number of other transactions and balances that occur between the Trusts, which are detailed below:

Note	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $ 2013 $ 2014 $ 2013 $
Finance lease fees received or accrued/(paid or payable) for the year between ICF and ICMT Finance lease balance receivable/(payable) between ICF and ICMT 9 Finance lease commitments Operating lease fees received or accrued/(paid or payable) for the year between ICF and ICMT Interest on intercompany loans received or accrued/(paid or payable) between stapled entities Intercompany loan balances between stapled entities	3,319,833 3,321,780 (3,319,833) (3,321,780) 40,677,551 40,679,518 (40,677,551) (40,679,518) 318,149,045 321,470,845 (318,149,045) (321,470,845) 9,354,036 8,467,260 (9,354,036) (8,467,260) 6,807,133 2,039,631 6,335,522 1,820,680 135,805,451 31,870,000 (133,249,024) (30,769,000)

134 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014 �|�continued

28. RELATED PARTIES (CONTINUED)

e. Key Management Personnel

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

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

Jim Hazel (Chairman)

Philip Clark AM

Amanda Heyworth

Robert Morrison

Norah Barlow

Appointed 31 March 2014

Simon Owen (Managing Director and CEO)

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

Simon Owen Managing Director and CEO Nicole Fisher Chief Operating Officer Tania Betts Chief Financial Officer

Key management personnel do not receive any remuneration directly from the Trusts. They receive remuneration from ICH in their capacity as Directors or employees of ICH. Consequently, the Trusts do not pay any compensation as defined in Accounting Standard AASB 124 Related Parties to its key management personnel.

The aggregate compensation paid to Key Management Personnel (“KMP”) of the Group is as follows:

		2014	2013
		$	$
	Directors fees	462,500	319,167
	Salaries and other short-term benefits	1,094,684	756,735
	Short-term incentives	332,235	182,382
	Superannuation benefits	59,084	48,957
	Share-based payment	680,600	293,113
		2,629,103	1,600,354

The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key management personnel.

The aggregate PQRs and RQRs of the Group held directly, by KMP, are as follows:

Issue date Rights Expiry date	NUMBER OUTSTANDING
	2014 2013
2012 RQR 2014 2012 PQR 2015 2013 PQR 2016	1,818,000 1,818,000 3,842,000 3,842,000 3,716,000 –

Annual Report 2014 135

29. PARENT FINANCIAL INFORMATION

	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Current assets Total assets Current liabilities Total liabilities	134,675 57,833 178 3 253,843 183,749 3,165 2,991 1,379 1,779 8,108 9,332 95,067 69,202 5,772 9,332
Net assets/(liabilities) Unitholders equity: Issued units Accumulated losses	158,776 114,547 (2,607) (6,341) 547,643 497,957 14,092 6,106 (388,867) (383,410) (16,699) (12,447)
Total unitholders’ equity	158,776 114,547 (2,607) (6,341)
Profit/(loss) from continuing operations	460 (4,744) (4,252) (3,511)
Net profit/(loss) attributable to unitholders of each Trust Total comprehensive income/(loss)	460 19,704 (4,252) (9,088) 460 19,703 (4,252) (9,055)

136 Ingenia Communities Holdings Limited

Notes to the Financial Statements

for the year ended 30 June 2014 �|�continued

30. SUBSIDIARIES

a. Names of Subsidiaries

with the accounting policy described in Note 1(d):

Name Country of residence	OWNERSHIP INTEREST
	2014 % 2013 %
Subsidiaries of Ingenia Communities Fund Bridge Street Trust Australia Browns Plains Road Trust Australia Casuarina Road Trust Australia Edinburgh Drive Trust Australia INA CC Trust Australia INA Community Living Subsidiary Trust No. 2 Australia INA Community Living Subsidiary Trust Australia INA Kiwi Communities Subsidiary Trust No. 1 Australia INA Sunny Trust Australia Jefferis Street Trust Australia Lovett Street Trust Australia ILF Regency Subsidiary Trust Australia Settlers Subsidiary Trust Australia SunnyCove Gladstone Unit Trust Australia SunnyCove Rockhampton Unit Trust Australia Taylor Street (2) Trust Australia INA Subsidiary Trust No.1 Australia INA Subsidiary Trust No.2 Australia Noyea Pty Ltd Australia INA Community Living LLC (formerly ING Community Living LLC) United States of America INA US Community Living Fund LLC (formerly ING US Community Living Fund LLC) United States of America Subsidiaries of Ingenia Communities Management Trust Garden Villages Management Trust Australia INA Community Living Lynbrook Trust Australia ILF Regency Operations Trust Australia Settlers Operations Trust Australia INA Operations Trust No.1 Australia INA Operations Trust No.2 Australia INA Operations Trust No.3 Australia Noyea Operations Pty Ltd Australia Ridge Estate Trust Australia INA Subsidiary Trust No.3 Australia INA NZ Subsidiary Trust No. 1 New Zealand CSH Lynbrook GP LLC United States of America CSH Lynbrook LP United States of America INA Community Living II (formerly ING Community Living II) United States of America Lynbrook Freer Street Member LLC United States of America Lynbrook Management, LLC United States of America	100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 – 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 – 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

The Trusts voting interest in all other subsidiaries is the same as the ownership interest.

Annual Report 2014 137

31. NOTES TO THE CASH FLOW STATEMENTS

	INGENIA COMMUNITIES FUND INGENIA COMMUNITIES MANAGEMENT TRUST
	2014 $’000 2013 $’000 2014 $’000 2013 $’000
Net profit for the year Adjustments for: Net foreign exchange (gain)/loss Release of FCTR on disposal of foreign operations Net (gain)/loss on disposal of equity accounted investment Net loss on disposal of investment properties Net (gain)/loss on change in fair value of: Investment properties – continuing Investment properties – discontinued Derivatives Retirement village resident loans Disposal costs associated with overseas investments Income tax expense/(benefit) Other non-cash items	15,422 2,670 (1,170) (11,715) 42 – (1,453) 718 – 15,507 – 2,444 320 (7,584) – – – 107 – 994 (1,530) (1,618) 1,871 (1,839) – 43 1,630 2,740 (41) (752) – – – – 616 (327) – 150 290 672 6 748 (6,498) 273 – 35 – –
Operating profit/(loss) for the year before changes in working capital Changes in working capital: (Increase)/decrease in receivables (Increase)/decrease in other assets Increase in retirement village resident loans Increase/(decrease) in other payables and provisions	14,219 9,306 (4,714) (6,040) (18,310) (12,676) 20,710 12,060 – – (1,923) – – – 6,327 12,220 292 464 2,028 197
Net cash provided by operating activities	(3,799) (2,906) 22,428 18,437

32. SUBSEQUENT EVENTS

a. RQR Vesting

On 1 July 2014, 1,818,000 Retention Quantum Rights (“RQRs”) granted to KMP in 2012 vested. As a result 1,818,000 fully paid stapled securities have been issued to the following KMP:

Simon Owen 1,070,000 Tania Betts 374,000 Nicole Fisher 374,000

b. Sale of Noyea

Settlement on the sale of Settlers Lifestyle Noyea was completed on 31 July 2014 at an adjusted sales price of $5.4 million resulting in $nil gain or loss recognised upon completion.

c. Bank Guarantee

On 1 July 2014, ICF obtained a bank guarantee of $10 million from the bank facility in relation to cash requirements under the Australian Financial Services Licence.

d. Sale of New Zealand Students business

On 5 September 2014, the Trusts announced they had contracted to divest the New Zealand Students business for consideration of NZ$49.4 million, representing the book value at 30 June 2014. Upon settlement, disposal costs and a FCTR gain will be released through profit. At 30 June 2014, the FCTR balance was A$1.0 million.

obtained credit approval for a new $175 million Australian multilateral banking facility. This facility will be split between a three year and five year maturity profile.

138 Ingenia Communities Holdings Limited

Directors’ Declaration

for the year ended 30 June 2014

In accordance with a resolution of the directors of Ingenia Communities RE Limited, I state that:

1. In the opinion of the directors:

2. in accordance with the Corporations Act 2001 , including:

   • year ended on that date; and

   • (ii) complying with Accounting Standards and Corporations Regulations 2001 ; and

3. (b) there are reasonable grounds to believe that Ingenia Communities Fund and Ingenia Communities Management Trust will be able to pay their debts as and when they become due and payable.

4. financial reporting standards at Note 1(b).

5. This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2014.

On behalf of the Board

==> picture [103 x 38] intentionally omitted <==

Jim Hazel Chairman Sydney, 19 September 2014

Annual Report 2014 139

Independent Auditors’ Report

for the year ended 30 June 2014

==> picture [483 x 653] intentionally omitted <==

140 Ingenia Communities Holdings Limited

Independent Auditors’ Report

for the year ended 30 June 2014

==> picture [483 x 652] intentionally omitted <==

Annual Report 2014 141

Securityholder Information

for the year ended 30 June 2014

The information set out below was prepared as at 4 September 2014 and applies equally to units in the trusts and shares in the company under the terms of the joint quotation on the Australian Securities Exchange.

Twenty Largest Securityholders as at 4 September 2014

Twenty Largest Securityholders as at 4 September 2014
	Number of		% of Issued
Securityholder	Securities Held		Capital
J P MORGAN NOMINEES AUSTRALIA LIMITED	151,820,670		22.39%
NATIONAL NOMINEES LIMITED	107,560,963		15.86%
CITICORP NOMINEES PTY LIMITED	74,958,077		11.05%
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	54,600,979		8.05%
BNP PARIBAS NOMS PTY LTD	31,278,400		4.61%
MERCANTILE INVESTMENT COMPANY LTD	19,514,519		2.88%
MCNEIL NOMINEES PTY LIMITED	16,400,531		2.42%
CITICORP NOMINEES PTY LIMITED	14,109,792		2.08%
MERCANTILE INVESTMENT COMPANY LTD	13,103,817		1.93%
MIRRABOOKA INVESTMENTS LIMITED	8,500,000		1.25%
BNP PARIBAS NOMS (NZ) LTD	6,444,114		0.95%
GWYNVILL TRADING PTY LTD	6,166,667		0.91%
UBS NOMINEES PTY LTD	4,941,940		0.73%
CUSTODIAL SERVICES LIMITED	4,207,549		0.62%
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED	3,413,091		0.50%
BOND STREET CUSTODIANS LIMITED	3,249,667		0.48%
BODIAM PROPERTIES PTY LTD	3,123,000		0.46%
MRS MONIKA BATKIN	3,100,000		0.46%
FORSYTH BARR CUSTODIANS LTD	2,442,900		0.36%
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED	2,374,473		0.35%
TOTAL	531,311,149		78.36%

Distribution of securityholders as at 4 September 2014

Distribution of securityholders as at 4 September 2014
		Number of		% of Issued
Holding (securities)	Securityholders			Capital
1 to 1,000		252		6.24
1,001 to 5,000		814		20.15
5,001 to 10,000		785		19.44
10,001 to 100,000		1,906		47.19
100,001 and over		282		6.98
Total		4,039		100.00

The number of securityholders holding less than a marketable parcel on 4 September 2014 is 265 and they hold 92,420 securities.

Substantial holders in INA as at 4 September 2014

Substantial holders in INA as at 4 September 2014
	Number of
Securityholder	Securities
Mercantile Investment Company Limited	35,428,533
Fisher Funds Management Limited	35,202,706

VOTING

Securityholders in Ingenia Communities Group are entitled to 1 vote for each security they hold in the Group.

142 Ingenia Communities Holdings Limited

Investor Relations

for the year ended 30 June 2014

Enquiries relating to Ingenia Communities Group (ASX code: INA) can be directed to the Link Market Services Investor Information line on 1300 554 474 (or from outside Australia +61 1300 554 474). This service is available from 8:30am to 5:30pm (Sydney time) on all business days.

Link Market Services can assist with:

• Change of address details

• Requests to receive communications online

• Changes to payment instructions

• General enquiries about your securityholding.

www.ingeniacommunities.com.au

information on Ingenia and its property portfolios; the latest financial information; reports; announcements; and corporate governance information.

Securityholders can access their investment details, including holding balance and payment history, from the site.

Distribution Payments

Distribution payments are made twice a year, for the six months ending 30 June and the six months ending 31 December. Distributions are declared and paid in Australian dollars.

The table below details distribution payments for the 2013/2014 financial year. A history of distribution payments made since 2005 is available from the Group’s website www.ingeniacommunities.com.au.

Period Ended	Date Paid	Total Amount
June 2014	17 Sept 2014	$0.0065
December 2013	21 March 2014	$0.0050

• For resident securityholders the distribution is tax deferred. For non-resident securityholders, the total FY14 distributions comprised 0.496 cents of tax deferred amount and 0.654 cents of interest income.

Ingenia Communities Group operates a Distribution Reinvestment Plan through which securityholders can elect to reinvest all or part of their distributions in additional Ingenia securities. The rules of the Plan and how to apply can be found on the website or obtained from the Registry, Link Market Services.

Annual Taxation Statement

Annual Taxation Statements, which summarise payments made during the year and include information required to complete an Australian tax return, are dispatched each September. Details of past distributions and relevant tax information are available on Ingenia’s website.

Annual General Meeting

The Annual General Meeting will be held on 12 November 2014 at the Grace Hotel in Sydney.

2014/2015 Securityholder Calendar*

17 September 2014	Final FY14 distribution paid
17 September 2014	Annual Tax Statement dispatched
12 November 2014	Annual General Meeting
February 2015	1H15 Result announced
March 2015	Interim FY15 distribution paid

*Dates are indicative.

Privacy Policy

Group’s Privacy Policy, detailing our handling of personal information, is available online at www.ingeniacommunities.com.au

Complaints

Responsible Entity’s address listed in this Report.

Ingenia Communities RE Limited is a member of an independent dispute resolution scheme, the Financial Ombudsman Service (FOS). If a securityholder feels that a complaint remains unresolved or wishes it to be investigated further, FOS can be contacted as detailed below:

By telephone: 1300 780 808

In writing: Financial Ombudsman Service Limited GPO Box 3, Melbourne VIC 3001 Website: www.fos.org.au

Annual Report 2014 143

Corporate Directory

for the year ended 30 June 2014

Ingenia Communities Group

Ingenia Communities Holdings Limited ACN 154 444 925

Ingenia Communities Management Trust ARSN 122 928 410

Ingenia Communities Fund ARSN 107 459 576

Responsible Entity

Ingenia Communities RE Limited ACN 154 464 990 (AFSL 415 862)

Level 5, 151 Castlereagh Street Sydney NSW 2000

Telephone: 1300 132 946 Facsimile: +61 2 8263 0500 Email: investor@ingeniacommunities.com.au Website: www.ingeniacommunities.com.au

Directors of INA (as at 4 September 2014)

J Hazel (Chairman) A Heyworth N Barlow NZOM P Clark AM R Morrison S Owen

Secretary

L Ralph T Betts

Security Registry

Link Market Services Limited

Level 12, 680 George Street Sydney NSW 2000 Locked Bag A14 Sydney South NSW 1235

Telephone: 1300 554 474 (local call cost) or from outside Australia: +61 1300 554 474 Facsimile: +61 2 9287 0303

Email: registrars@linkmarketservices.com.au

Auditors

EY

680 George Street Sydney NSW 2000

Stock Exchange Quotation

Ingenia Communities Group is listed on the Australian Securities Exchange under ASX listing code: INA.

144 Ingenia Communities Holdings Limited

==> picture [154 x 45] intentionally omitted <==

Disclaimer

This report was prepared by Ingenia Communities Holdings Limited (ACN 154 444 925) and Ingenia Communities RE Limited (ACN 154 464 990) as responsible entity for Ingenia Communities Fund (ARSN 107 459 576) and Ingenia Communities Management Trust (ARSN 122 928 410) (together Ingenia Communities Group, INA or the Group). Information contained in this report is current as at 30 June 2014. This report is provided for information purposes only and has been prepared without taking account of any particular reader’s financial situation, objectives or needs. Nothing contained in this report constitutes investment, legal, tax or other advice. Accordingly, readers should, before acting on any information in this report, consider its appropriateness, having regard to their objectives, financial situation and needs, and seek the assistance of their financial or other licensed professional adviser before making any investment decision. This report does not constitute an offer, invitation, solicitation or recommendation with respect to the subscription for, purchase or sale of any security, nor does it form the basis of any contract or commitment.

www.ingeniacommunities.com.au

Ingenia Communities Group Level 5, 151 Castlereagh Street Sydney NSW 2000 T. 1300 132 946 E. investor@ingeniacommunities.com.au

W. www.ingeniacommunities.com.au