INGENIA COMMUNITIES GROUP — Annual Report 2014

Aug 25, 2014

Page 1 Appendix 4E Preliminary Final Report Year ended 30 June 2014

APPENDIX 4E

Preliminary Final Report Year ended 30 June 2014

Name of Entity: Ingenia Communities Group (“INA”), a stapled entity comprising Ingenia Communities Holdings Limited ACN 154 444 925, Ingenia Communities Fund ARSN 107 459 576, and Ingenia Communities Management Trust ARSN 122 928 410.

Current period: Previous corresponding period:	1 July 2013 - 30 June 2014 1 July 2012 - 30 June 2013

Results for announcement to the market

Results for announcement to the market
	2014	2013	change
	$'000	$'000	%
Revenues from Continuing operations	45,784	28,593	60%
Profit/(loss) from ordinary activities after tax attributable to members	11,518	(10,290)	Refer note 1
Net profit/(loss) for the period attributable to members	11,518	(10,290)	Refer note 1
Underlying profit from continuing operations	10,963	3,341	228%
Underlying profit	11,568	5,867	97%
Net asset value per security (cents)	35.5	34.4	3.1%
Distributions - current period (cents) Final Distribution Interim Distribution(paid)	0.65 0.50	na na
Distributions - previous period (cents) Final Distribution (paid) Interim Distribution(paid)	na na	0.50 0.50
Record date for determining entitlement to the Final Distribution	5 pm, 2 September 2014
The Dividend and Distribution Reinvestment Plan is operational for this distribution

Note:

1. The variances that would otherwise be shown are not meaningful because the prior year number is negative.

Page 2

Appendix 4E Preliminary Final Report Year ended 30 June 2014

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Details of entities over which control has been gained or lost during the year: None

Details of any associates and joint venture entities required to be disclosed: None

Audit status

The Preliminary Final Report is based on accounts which are in the process of being audited.

Other significant information and commentary on results

See attached ASX announcement and materials referred to below.

For all other information required by Appendix 4E, including a results commentary, please refer to the following documents:

• Operating and financial review

• Preliminary Final Report (“financial report”)

• Results presentation and media release

==> picture [142 x 56] intentionally omitted <==

Tania Betts Company Secretary

26 August 2014

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INGENIA COMMUNITIES HOLDINGS LIMITED A.C.N. 154 444 925

PRELIMINARY FINAL REPORT

YEAR ENDED 30 JUNE 2014

www.ingeniacommunities.com.au

Registered Office: Level 5, 151 Castlereagh Street, Sydney NSW 2000

Ingenia Communities Holdings Limited Financial & Associated Reports Year ended 30 June 2014

Contents

Page Financial report Operating and financial review Consolidated statement of comprehensive income Consolidated balance sheet 11 Consolidated cash flow statement 12 Consolidated statement of changes in equity 13 Note 1 Summary of significant accounting policies 14 Note 2 Accounting estimates and judgements 25 Note 3 Segment information 26 Note 4 Earnings per security 29 Note 5 Revenue 29 Note 6 Finance expense 30 Note 7 Income tax benefit 30 Note 8 Discontinued operations and assets held for sale 31 Note 9 Cash and cash equivalents 32 Note 10 Trade and other receivables 33 Note 11 Inventories 33 Note 12 Investment properties 33 Note 13 Plant and equipment 40 Note 14 Trade and other payables 40 Note 15 Borrowings 41 Note 16 Retirement village resident loans 42 Note 17 Provisions 42 Note 18 Derivatives 42 Note 19 Deferred tax liabilities 43 Note 20 Issued securities 43 Note 21 Reserves 44 Note 22 Accumulated losses 44 Note 23 Commitments 44 Note 24 Contingent liabilities 45 Note 25 Share-based payment transactions 45 Note 26 Capital management 47 Note 27 Financial instruments 48 Note 28 Fair value measurement 55 Note 29 Auditor's remuneration 56 Note 30 Related parties 56 Note 31 Company financial information 56 Note 32 Subsidiaries 57 Note 33 Notes to the cash flow statements 58 Note 34 Subsequent events 59

Page 2

Ingenia Communities Holdings Limited Preliminary final report Year ended 30 June 2014

1. OPERATING AND FINANCIAL REVIEW

(a) Ingenia Communities Overview

The Group owns, manages and develops a diversified 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.

(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.

A key element to achieving growth is efficient operational 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 has allowed unrecognised carried forward and current year tax losses to be recognised, 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.

Page 3

Ingenia Communities Holdings Limited Preliminary final report Year ended 30 June 2014

1. OPERATING AND FINANCIAL REVIEW (continued)

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 5.10%.

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

• Full year distribution of 1.15 cent per security, with final distribution up 30%.

• Underlying profit was $11.6m, up 97% from FY13.

• Underlying profit per security was 1.8 cents, up 50% from FY13.

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

• Total Securityholder Return (TSR) of 55% for the twelve months.[(1)]

• Statutory profit was $11.5m, up $21.8m from FY13.

• Statutory profit per security was 1.8 cents, up 3.8 cents 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.

(e) Group results summary

Underlying profit for the financial year has been calculated as follows:

	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)

Page 4

Ingenia Communities Holdings Limited Preliminary final report Year ended 30 June 2014

1. OPERATING AND FINANCIAL REVIEW (continued)

Underlying Profit is a non-IFRS measure designed to present, in the opinion of the Directors, the results from the on-going 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

Active Lifestyle Estates launched in March 2013 and the Group now owns fifteen lifestyle parks and is the largest owner 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
Active Lifestyle Estates	FY14	FY13	Variance
New 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

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
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

Page 5

Ingenia Communities Holdings Limited Preliminary final report Year ended 30 June 2014

1. OPERATING AND FINANCIAL REVIEW (continued)

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
Settlers Lifestyle	FY14	FY13	Variance
Occupancy %	92.1%	89.9%	2.2%
New settlements $m	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)

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

The key strategic priorities of this business over the coming year are completing the construction and sell down of the final 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.

Page 6

Ingenia Communities Holdings Limited Preliminary final report Year ended 30 June 2014

1. OPERATING AND FINANCIAL REVIEW (continued)

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%.

On 23 August 2013, the Group refinanced its Bank of New Zealand debt facility, which funds the New Zealand Students 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

The following table provides a summary of the Group’s financial position as at 30 June 2014:

$000	30 June 2014	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	-	100%
Assets of discontinued operations	47,657	36,576	30%
Otherassets	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.

Page 7

Ingenia Communities Holdings Limited Preliminary final report Year ended 30 June 2014

1. OPERATING AND FINANCIAL REVIEW (continued)

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

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) Cashflow

(j) Cashflow
$’000	30 JUNE 2014	30 JUN 2013	Change %
Operating cashflows	14,240	11,240	27%
Investing cashflow	(126,084)	17,314	(828%)
Financing cashflow	89,012	(23,804)	(474%)
Net change in cash and cash equivalents	(22,832)	4,750	(581%)
Effects ofexchangeratefluctuationoncash held	(167)	(12)	n/m
Cash at the end of the period	**14,551 **	37,550	(61%)

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 offset by net borrowings proceeds 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: 0.5cps) amounting to $3,381,201, which was paid on 21 March 2014.

• On 26 August 2014, the directors resolved to declare a final distribution of 0.65 cps (2013: 0.5 cps) amounting to $4,407,379, to be paid on 17 September 2014.

The distributions are 100% tax deferred and the dividend reinvestment plan will apply to the final distribution.

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.

Page 8

Ingenia Communities Holdings Limited Preliminary final report Year ended 30 June 2014

1. OPERATING AND FINANCIAL REVIEW (continued)

There will be a strong focus on finalising divestment of the New Zealand Students portfolio and exploring opportunities 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.

Ingenia is confident of delivering further improved financial returns for securityholders during FY15 assuming no material decline in market conditions. Consistent with prior years, these returns will likely be skewed to the second half of the financial year.

2. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

Changes in the state of affairs during the financial year are set out in the various reports in this financial report. Refer to 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.

3. 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.

4. 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 have been rounded to the nearest thousand dollars, unless otherwise stated.

Page 9

Ingenia Communities Holdings Limited Consolidated statement of comprehensive income 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
Interestincome		369	563
		45,784	28,593
Property expenses		(11,613)	(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)
Netprofit/(loss) for theyear		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	21	269	327
year
Release of foreign currency translation reserve on	21	-	17,463
disposal of foreign operations
Total comprehensive income for theyear, net of tax		11,787	7,500

Page 10

Ingenia Communities Holdings Limited Consolidated statement of comprehensive income (continued) Year ended 30 June 2014

		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
	Note	2014	2013
		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)
Persecurity 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.

(2) Distributions relate to the amount paid during FY14. Subsequent to the end of the year, a final distribution was declared for 0.65 cents for a total full year distribution of 1.15 cents.

Page 11

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/(accumulatedlosses)	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 valueper security (cents)		35.5	34.4

Page 12

Ingenia Communities Holdings Limited Consolidated cash flow statement 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		301	2,350
investments
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 theyear	9	14,551	37,550

Page 13

Ingenia Communities Holdings Limited Statement of changes in equity Year ended 30 June 2014

Note	ATTRIBUTABLE TO SECURITY HOLDERS
	INGENIACOMMUNITIES HOLDINGS LIMITED ICF & ICMT Total equity
	Issued capital Reserves Retained earnings Total $’000 $’000 $’000 $’000 $’000 $’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 78 - - 78 20,019 20,097 Share-based payment transactions 21 - 293 - 293 - 293 Payment of distributions to securityholders 22 - - - - (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 - - (2,736) (2,736) 14,254 11,518 Other comprehensive income - - - - 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 1,299 - - 1,299 57,676 58,975 Share-based payment transactions 21 - 680 - 680 - 680 Payment of distributions to securityholders 22 - - - - (5,917) (5,917)
Carrying amount at 30 June 2014 7,377 988 (2,659) 5,706 234,471 240,177

Page 14

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies

(a) The Group

The financial report of Ingenia Communities Holdings 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.

The stapling structure will cease to operate on the first 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.

The financial report as at and for the year ended 30 June 2014 was authorised for issue by the directors on 26 August 2014.

(b) Basis of preparation

The financial report is a general purpose financial report 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 .

The financial report complies with Australian Accounting 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.

The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated.

The financial report is prepared on an historical cost 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.

Page 15

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

(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”;

• AASB 119 “Employee Benefits” (2011) and AASB 2011-10 “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”.

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.

Page 16

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

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 AASB 2012-2 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. The standard amends AASB 124 ‘Related Party Disclosures’ to remove individual key management personnel disclosures required by Australian AASB 2011-4 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

The Group’s consolidated financial statements comprise the Company and its subsidiaries (including the Trusts). Subsidiaries 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.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent, using consistent accounting 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 deconsolidated from the date that control ceases.

Investments in subsidiaries are carried at cost in the parent’s financial statements.

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.

(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.

Page 17

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

(f) Discontinued operations and assets held for sale

The Group has classified certain components as 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.

Components of the entity are classified as held for sale if 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 noncurrent asset (or disposal group) is recognised at the date of derecognition.

Non-current assets classified as held for sale, and the 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.

(iii) Translation of financial statements of foreign 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.

Page 18

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

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.

Leases of properties that are classified as investment 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

Current and non-current 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-to-maturity 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.

The fair values of financial instruments that are actively 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.

Page 19

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

(l) Impairment of non-financial assets

Assets other than investment property and 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.

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

The Group uses derivative financial instruments such 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.

Page 20

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

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.

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

(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.

(t) Provisions, including employee benefits

(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 non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

Page 21

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

(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.

(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.

Borrowings are classified as current liabilities unless the 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.

Page 22

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

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 (equitysettled 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.

The dilutive effect of outstanding rights is reflected as 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 tax-deferred 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.

Page 23

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

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

The Group measures financial instruments, such as, 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.

A fair value measurement of a non-financial asset takes 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.

For assets and liabilities that are recognised in the financial 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.

Page 24

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

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.

External valuers are involved for valuation of significant 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.

(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.

Cash flows are included in the cash flow statement 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”)

Basic EPS is calculated as net profit attributable to members of the Group, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted EPS is calculated as net profit attributable to 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.

Page 25

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

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.

(ee) Current versus non-current classification

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.

All other assets are classified as non-current.

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.

The Group classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

2. Accounting estimates and judgements

The preparation of financial statements requires the use 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)).

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.

Page 26

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

2. Accounting estimates and judgements (continued)

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.

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.

Page 27

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

3. Segment information (continued)

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

Page 28

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

3. Segment information (continued)

(c) 30 June 2013

(c) 30 June 2013
	Active	Settlers	Garden	Corporate/	Total
	Lifestyle		Villages	Unallocated
	Estates
	$’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	-	(4,619)	-	-	(4,619)
of newly constructedvillages
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	(80)	(1,125)	(984)	(169)	(2,358)
expenses
Manufactured home cost of sales	(297)	-	-	-	(297)
Finance expense	-	-	-	(6,112)	(6,112)
Income taxexpense	-	-	-	(43)	(43)
Underlying profit/(loss) –	355	5,665	7,691	(10,370)	3,341
continuing operations
Reconciliation of underlying profit to	profit from	continuing	operations:
Net foreign exchange gain	-	-	-	37	37
Net loss on disposal of investment	-	-	(107)	-	(107)
property
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	-	(4,619)	-	-	(4,619)
constructed villages
Amortisation of intangibles	-	-	-	(585)	(585)
Other	-	-	-	(185)	(185)
Income tax benefit associated with	-	-	-	410	410
reconciliation items
Profit from continuing operations	340	(139)	12,568	(9,941)	2,828
per the Consolidated Statement of
Comprehensive Income
(iii) Segment assets
Segment assets	18,559	255,006	101,108	48,325	422,998
Discontinued operations					36,576
Total assets					459,574

Page 29

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

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 ($’000)		570	(13,118)
Weighted average number of securities outstanding (thousands):
Issued securities		646,603	509,716
Dilutive securities
Performance quantum rights		2,310	3,842
Retention quantum rights	25	1,818	1,818
Weighted average number of issued and dilutive potential		650,731	515,376
securities outstanding (thousands)
Basic earnings per security from continuing operations (cents)		1.7	0.6
Basic earnings per security from discontinued operations (cents)		0.1	(2.6)
Basic earnings per security (cents)		1.8	(2.0)
Dilutive earnings per security from continuing operations (cents)		1.7	0.5
Dilutive earnings per security from discontinued operations (cents)		0.1	(2.5)
Dilutive earnings per security (cents)		1.8	(2.0)
(b) Per security attributable to parent
Loss attributable to securityholders ($’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		650,731	515,376
securities outstanding (thousands)
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.

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

Page 30

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

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

	2014	2013
	$’000	$’000
(a) Income tax benefit
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 profit
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

(c) Tax consolidation

Effective from 1 July 2011, ICH and its Australian domiciled wholly owned subsidiaries formed a tax consolidation group with 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.

Effective from 1 July 2012, ICMT and its Australian domiciled owned subsidiaries formed a tax consolidation group with 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.

Page 31

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

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

The Group’s investment in the New Zealand Students business has been classified as a discontinued operation since 30 June 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.

The Group has completed a sales campaign and terms have been agreed with a global real estate investment firm. Following divestment of these operations the proceeds will be reinvested into its Australian lifestyle parks business.

The comparative figures include results from certain properties held is the United States, which had been classified 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.

(ii) Financial performance

The financial performance of components of the Group disposed of or classified as discontinued operations was:

operations was:
	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 taxexpense	(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	-	(17,463)
operations
**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.

Page 32

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

8. Discontinued operations and assets held for sale (continued)

(iii) Cash flows

The cash flows of components of the Group disposed of or classified as discontinued operations were:

	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)

(iv) Assets and liabilities

The assets and liabilities of components of the Group classified as disposal groups at each reporting date were:

date were:
		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

	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

Page 33

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

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
		2014	2013
		$’000	$’000
Completed properties		495,048	367,116
Land	not yet under construction	3,815	3,815
		498,863	370,931

Page 34

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

12. Investment properties (continued)

(b) Individual valuations and carrying amounts

Property	Location	Date of	Cost to	Latest external	Valuation	Carrying	amount	Capitalisation rate	Capitalisation rate
		purchase	date	valuation date
						2014	2013	2014	2013
			$’000		$’000	$’000	$’000	%	%
Completed properties
Garden Villages
Yakamia Gardens	Yakamia, WA	Jun 04	5,459	Dec 12	2,900	2,730	2,500	10.0%	7.5%
Mardross Gardens	Albury, NSW	Jun 04	5,610	Jun 14	2,400	2,400	2,320	10.0%	5.5%(2)
Seville Grove Gardens	Seville Grove, WA	Jun 04	4,559	Dec 12	3,400	3,390	3,240	10.5%	9.8%
Hertford Gardens	Sebastopol, VIC	Jun 04	4,119	Jun 14	3,770	3,770	3,780	10.8%	10.5%
Carey Park Gardens	Bunbury, WA	Jun 04	4,944	Dec 12	2,600	3,520	2,840	11.0%	10.0%
Jefferis Gardens	Bundaberg North, QLD	Jun 04	4,992	Dec 13	2,600	3,480	2,720	11.0%	10.0%
Claremont Gardens	Claremont, TAS	Jun 04	4,293	Dec 13	3,320	3,230	2,900	10.5%	9.5%
Taloumbi Gardens	Coffs Harbour, NSW	Jun 04	5,072	Dec 12	4,200	4,170	4,020	10.5%	10.3%
Devonport Gardens	Devonport, TAS	Jun 04	4,028	Dec 12	2,500	2,100	2,120	9.0%	5.3%(2)
Wheelers Gardens	Dubbo, NSW	Jun 04	4,362	Dec 13	3,800	4,300	3,950	10.0%	10.5%
Elphinwood Gardens	Launceston, TAS	Jun 04	4,464	Dec 12	2,750	2,910	2,740	10.5%	10.0%
Glenorchy Gardens	Glenorchy, TAS	Jun 05	4,164	Dec 13	3,250	3,370	3,010	10.5%	10.0%
Chatsbury Gardens	Goulburn, NSW	Jun 04	4,828	Dec 13	2,940	3,430	3,340	10.5%	10.0%
Grovedale Gardens	Grovedale, VIC	Jun 05	4,960	Dec 12	3,600	4,010	4,090	10.5%	10.5%
Horsham Gardens	Horsham, VIC	Jun 04	4,467	Jun 14	3,300	3,300	3,170	10.8%	10.0%
Sea Scape Gardens	Erskine, WA	Jun 04	4,577	Dec 12	4,200	4,170	4,180	11.0%	10.3%
Marsden Gardens	Marsden, QLD	Jun 05	10,375	Dec 12	8,150	8,380	7,900	12.5%	10.5%
Coburns Gardens	Brookfield, VIC	Jun 04	4,355	Dec 12	3,000	3,290	3,260	10.5%	9.5%
Brooklyn Gardens	Brookfield, VIC	Jun 04	4,186	Dec 12	2,400	3,270	2,790	10.5%	9.5%
Oxley Gardens	Port Macquarie, NSW	Jun 04	4,416	Dec 12	2,600	3,120	2,320	10.5%	10.0%
Townsend Gardens	St Albans Park, VIC	Jun 04	4,811	Jun 14	3,800	3,800	3,390	11.0%	9.8%
St Albans Park Gardens	St Albans Park, VIC	Jun 04	5,099	Jun 14	4,140	4,140	4,030	11.0%	10.5%
Swan ViewGardens	Swan View,WA	Jan06	7,888	Dec12	5,650	5,990	5,780	11.5%	10.3%

Page 35

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

12. Investment properties (continued)

12. Investment properties (continued)
Property Location Date of purchase Cost to date Latest external valuation date Valuation Carrying amount	Capitalisation rate
2014 2013 $’000 $’000 $’000 $’000	2014 2013 % %
Completed properties (continued) Garden Villages (continued) Taree Gardens Taree, NSW Dec 04 4,635 Dec 12 2,400 2,320 2,950 Dubbo Gardens Dubbo, NSW Dec 12 2,700 Dec 13 3,290 2,670 2,652 Ocean Grove Gardens Mandurah, WA Feb 13 3,161 Dec 13 3,280 3,100 3,015 Peel River Gardens Tamworth, NSW Mar 13 3,642 Dec 13 2,970 2,040 3,464 Sovereign Gardens Ballarat, VIC Jun 13 3,321 Jun 14 3,100 3,100 3,265 Wagga Gardens Wagga Wagga, NSW Jun 13 4,010 Jun 14 3,930 3,930 3,953 Bathurst Gardens Bathurst, NSW Jan 14 2,405 Jun 14 2,580 2,580 - Launceston Gardens Launceston, TAS Jan 14 2,462 Jun 14 2,510 2,510 - Shepparton Gardens Shepparton, VIC Jan 14 1,668 Jun 14 1,780 1,780 - Murray River Gardens Mildura, VIC Jan 14 2,316 Jun 14 2,170 2,170 - Warrnambool Gardens Warrnambool, VIC Jan 14 1,933 Jun 14 1,800 1,800 -	9.0% 10.0% 10.3% 5.3%(2) 10.8% 11.0% 9.0% 7.3%(2) 10.5% 5.3%(2) 12.0% 11.8% 9.0% - 9.0% - 8.0% - 7.5% - 8.0% -
148,281 114,270 99,689
Settlers Lifestyle Forest Lake Forest Lake, QLD Nov 05 14,324 Jun 13 12,662 14,194 12,663 South Gladstone South Gladstone, QLD Nov 05 8,212 Jun 13 12,093 12,534 12,093 Rockhampton Rockhampton, QLD Nov-05 10,785 Dec 13 13,900 14,314 13,768 Cessnock Cessnock, NSW Jun-04 7,476 Dec 12 3,190 6,009 4,871 Lakeside Ravenswood, WA Apr 07 71,167 Dec 12 77,584 77,242 78,673 Noyea Riverside Mt Warren Park, QLD Apr 07 2,521 Dec 12 549 -(3) 324 Meadow Springs Mandurah, WA Apr 07 18,430 Jun 13 17,066 16,510 17,066 Ridgewood Ridgewood, WA Apr 07 85,378 Jun 13 105,104 103,552 105,104 Ridge Estate Gillieston Heights, NSW Jul 12 10,174 - - 11,765 5,471	Discount rate
	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

Page 36

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

12. Investment properties (continued)

Property		Date of	Cost to	Latest external	Valuation	Carrying	amount	Capitalisation rate	Capitalisation rate
		purchase	date	valuation date
						2014	2013	2014	2013
			$’000		$’000	$’000	$’000	%	%
Active Lifestyle Estates
The Grange	Morisset, NSW	Mar 13	12,895	Dec 13	12,129	11,848	12,293	9.1%	-(5)
Ettalong Beach Holiday Village(1)	Ettalong Beach, NSW	Apr 13	5,581	Dec 13	5,850	5,811	5,101	21.0%	-(5)
Albury Citygate Caravan and	Albury, NSW	Aug 13	2,697	Jun 14	2,000	2,000	-	10.5%	-
Tourist Park
Nepean River Holiday Village	Penrith, NSW	Aug 13	10,932	Jun 14	11,000	11,000	-	10.4%	-
Mudgee Valley Tourist Park	Mudgee, NSW	Sep 13	4,519	Jun 14	4,250	4,250	-	10.5%	-
Mudgee Tourist and Van	Mudgee, NSW	Oct 13	7,911	Jun 14	7,200	7,200	-	8.8%	-
Resort
Drifters Holiday Village	Kingscliff, NSW	Nov 13	11,511	-	-	11,511	-	-(5)	-
Lake Macquarie Holiday	Morisset, NSW	Nov 13	7,683	-	-	7,683	-	-(5)	-
Village
Macquarie Lakeside Holiday	Chain Valley Bay, NSW	Dec 13	4,045	-	-	4,045	-	-(5)	-
Village
One Mile Beach Holiday Park(4)	Anna Bay, NSW	Dec 13	11,975	-	-	13,349	-	-(5)	-
Big4 Valley Vineyard Tourist	Cessnock, NSW	Feb 14	9,782	-	-	9,782	-	-(5)	-
Park
Wine Country Caravan Park	Cessnock, NSW	Feb 14	1,665	-	-	1,665	-	-(5)	-
Sun Country Holiday Village	Mulwala, NSW	Apr 14	7,708	-	-	7,708	-	-(5)	-
Town and Country Estate	Marsden Park, NSW	May 14	19,444	-	-	19,444	-	-(5)	-
Rouse Hill Lifestyle	Rouse Hill, NSW	Jun 14	7,362	-	-	7,362	-	-(5)	-
Residential Park
			125,710			124,658	**17,394 **
Total completed properties			502,458			495,048	367,116

Page 37

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

12. Investment properties (continued)

Property		Date of	Cost to	Latest external	Valuation	Carrying	amount
		purchase	date	valuation date
						2014	2013
			$’000		$’000	$’000	$’000
Land not yet under construction
Settlers
South Gladstone Gardens	South Gladstone, QLD	Nov 05	199	Jun 13	750	750	750
– land
Meadow Springs	Mandurah, WA	Apr 07	2,470	Jun 13	2,455	2,455	2,455
Active Lifestyle Estates
The Grange	Morisset, NSW	Mar 13	300	-	-	300	300
Ettalong Beach Holiday	Ettalong Beach, NSW	Apr 13	310	-	-	310	310
Village (1)
Total properties 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.

(3) Noyea Park was classified as held for sale at 30 June 2014. Refer to note 8(a) for additional information.

• (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.

Page 38

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

12. Investment properties (continued)

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

The net change in fair value are recognised in profit or loss as net gain/(loss) on change in fair value of investment properties.

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

(d) Reconciliation of fair value

(d) Reconciliation of fair value
	Garden	Settlers	Active	Total
	Villages	Lifestyle	Lifestyle
			Estates
	$’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) onchangein fair value	2,376	(603)	(2,114)	(341)
Carrying amount at 30 June 2014	114,270	259,325	125,268	498,863

Page 39

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

12. Investment properties (continued)

• (e) Description of valuations techniques used and key inputs to valuation on investment properties

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

Page 40

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

12. Investment properties (continued)

Capitalisation method

Under the capitalisation method, fair value is estimated using assumptions regarding the expectation of future benefits. 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

Under the discounted cash flow method, fair value is estimated using assumptions regarding the benefits and liabilities of 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.

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	-

Page 41

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

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

• Interest cover ratio (as defined) of at least 1.50x in financial year ending 2014 increasing to at least 1.75x in FY2015.

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

	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

Page 42

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

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

Page 43

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

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	7,488	4,220
effected for which no deferred tax asset has been recognised

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.

The Group offsets tax assets and liabilities, if and only if, it has a legally enforceable right to set off current tax assets and 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

	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 security holders 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.

Page 44

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

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 security holders of:
Ingenia Communities Holding Limited	988	308
Ingenia Communities Fund	866	646
Ingenia Communities Management Trust	169	120
	2,023	1,074

The foreign currency translation reserve records exchange differences arising from the translation of the financial statements 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 security holders 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)

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

The Group has two non-cancellable operating leases for its Sydney and Brisbane offices. These leases have remaining lives of 1.5 years and five years respectively.

Page 45

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

23. Commitments (continued)

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.

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.

Page 46

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

25. Share-based payment transactions (continued)

Movements in rights during the year were:

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	1.5	2.0
(years)
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	-	0.9
(years)

(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

The fair value of the rights is recognised as an employee benefit expense with a corresponding increase in reserves. The 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).

Page 47

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

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.

In assessing this risk, the Group takes into account the relative security of its income flows, the predictability of its expenses, 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 lookthrough basis. At 30 June 2014, the Gearing Ratio was 30.7%, compared to 20.6% at 30 June 2013, calculated as follows:

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%

Page 48

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

27. Financial instruments

(a) Introduction

The Group's principal financial instruments comprise cash and short-term deposits, receivables, payables, interest bearing liabilities, other financial liabilities, and derivative financial instruments.

The main risks arising from the Group's financial instruments are interest rate risk, foreign exchange risk, credit risk and 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.

While the Group aims to meet its treasury policy targets, many factors influence its performance, and it is probable that 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.

The Group manages the risk of changes in market interest rates by maintaining an appropriate mix of fixed and floating rate 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.

At 30 June 2014, after taking into account the effect of interest rate swaps, approximately 47% of the Group's borrowings are at a fixed rate of interest (2013: 26%).

Exposure to changes in market interest rates also arises from financial assets such as cash deposits and loan receivables subject to floating interest rate terms. Changes in market interest rates will also change the fair value of any interest rate hedges.

Page 49

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

27. Financial instruments (continued)

(c) Interest rate risk exposure

The Group’s exposure to interest rate risk and the effective interest rates on financial instruments at reporting date was:

30 June 2014	Floating	Fixed interest maturing in:	Fixed interest maturing in:	Fixed interest maturing in:
	interest	Less	1 to 5	More	Total
Principal amounts	rate	than		than
$’000		**1year **	Years	5 years
Financial assets
Cash at bank	12,894	-	-	-	12,894
Financial liabilities
Bank debt denominated in AUD	94,000	-	-	-	94,001
Finance leases (excluding perpetual lease)	-	283	1,056	2,191	3,530
Interest rate swaps:
denominatedin AUD; Group paysfixedrate	(45,000)	45,000	-	-	-

The Group’s exposure to interest rate risk and the effective interest rates on financial instruments at the end of the previous financial year was:

30 June 2013	Floating	Fixed interest maturing in:	Fixed interest maturing in:	Fixed interest maturing in:
	interest	Less	1 to 5	More	Total
Principal amounts	rate	than		than
$’000		**1year **	Years	5 years
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:
denominatedin AUD; Group paysfixedrate	(45,000)	45,000	-	-	-

Other financial instruments of the Group not included in the above tables are non-interest bearing and are therefore not 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%

The effect on net interest expense for one year would have been:

	Effect on profit after tax higher/(lower)
	2014 2013 $’000 $’000
Variable interest rate instruments denominated in: Australian dollars	(940) (680)

Page 50

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

27. Financial instruments (continued)

The effect on change in fair value of derivatives would have been:

The effect on change in fair value of derivatives would have been:
	Effect on profit after tax higher/(lower)
	2014 2013 $’000 $’000
Interest rate swaps denominated in: Australian dollars	417 793

(ii) Decrease in average interest rates of 1%

The effect on net interest expense for one year would have been:

(ii) Decrease in average interest rates of 1% The effect on net interest expense for one year would have been:
	Effect on profit after tax higher/(lower)
	2014 2013 $’000 $’000
Variable interest rate instruments denominated in: Australian dollars	940 680

The effect on change in fair value of derivatives would have been:

	Effect on profit after tax higher/(lower)
	2014 2013 $’000 $’000
Interest rate swaps denominated in: Australian dollars	(297) (810)

(e) Foreign exchange risk

By holding properties in offshore markets, the Group is exposed to the risk of movements in foreign exchange rates. 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.

The Group reduces its exposure to the foreign exchange risk inherent in the carrying value of its offshore properties and 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 Group’s exposure to the impact of exchange rate movements on its earnings from its offshore properties is partly 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.

Page 51

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

27. Financial instruments (continued)

(f) Net foreign currency exposure

The Group’s net foreign currency monetary exposure, after taking into account the effect of foreign exchange derivatives, 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 2013 $’000 $’000
Net foreign currency exposure: United States dollars	157 1,282

(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) Effect of appreciation in Australian dollar of 10%:

(i) Effect of appreciation in Australian dollar of 10%:
	Effect on profit after tax higher/(lower)
	2014 2013 $’000 $’000
Foreign exchange risk exposures denominated in: United States dollars	(16) (128)

(ii) Effect of depreciation in Australian dollar of 10%:

	Effect on profit after tax higher/(lower)
	2014 2013 $’000 $’000
Foreign exchange risk exposures denominated in: United States dollars	16 128

The Group believes that the reporting date risk exposures are representative of the risk exposure inherent in its financial instruments.

These tables do not show the effect on equity that would occur from the translation of the financial statements of foreign 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).

Page 52

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

27. Financial instruments (continued)

(i) Credit risk

Credit risk refers to the risk that a counterparty defaults on its contractual obligations resulting in a financial loss to the 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.

The Group believes that its receivables that are neither past due nor impaired do not give rise to any significant credit risk.

Credit risk also arises from deposits placed with financial institutions and derivatives contracts that may have a positive value 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.

The Group’s maximum exposure to credit risk at reporting date in relation to each class of financial instrument is its carrying amount as reported in the balance sheet.

(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.

The contractual maturities of the Group's non-derivative financial liabilities at reporting date are reflected in the following 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.

Page 53

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

27. Financial instruments (continued)

Although the expected average residency term is more than ten years, retirement village residents’ loans 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.

	Less than	1 to 5	More than	Total
	1 year	Years	5 years
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)	121	483	-(1)	**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 **

(1) For purposes of the table above, the lease payments are included for five years for the perpetual lease. Refer to note 15(c)(ii).

The contractual maturities of the Group's derivative financial liabilities at reporting date are reflected in the following table. 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.

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

Page 54

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

27. Financial instruments (continued)

(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 2013 $’000 $’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

These effects are largely offset by corresponding changes in the fair value of the Group’s investment properties. The effect 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.

The following table presents the Group’s financial instruments that were measured and recognised at fair value at reporting date:

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

Page 55

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

27. Financial instruments (continued)

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.

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

(a) Assets measured at fair value
Date of valuation Total $’000 30 June 2014	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

(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 note16 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

Page 56

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

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

30. Related parties

(a) Key management personnel

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

	Note	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	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

Summary financial information about the Company is:

Summary financial information about the Company is:
	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).

Page 57

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

32. Subsidiaries

(a) Names of subsidiaries

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

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

Page 58

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

32. Subsidiaries (continued)

32. Subsidiaries (continued)
Name	Country	Ownership	interest
	of residence	2014	2013
		%	%
CSH Lynbrook GP LLC	United States of America	100	100
CSH Lynbrook LP	United States of America	100	100
Lynbrook Freer Street Member LLC	United States of America	100	100
Lynbrook Management, LLC	United States of America	100	100
INA Community Living LLC (formerly ING	United States of America	100	100
Community Living LLC)
INA Community Living II (formerly ING	United States of America	100	100
Community Living II)
INA US Community Living Fund LLC (formerly	United States of America	100	100
ING US CommunityLivingFundLLC)

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

33. Notes to the cash flow statement

Reconciliation of profit to net cash flow from operating activities

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

Page 59

Ingenia Communities Holdings Limited Notes to the financial statements Year ended 30 June 2014

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.

==> picture [166 x 151] intentionally omitted <==

INGENIA COMMUNITIES FUND AND INGENIA COMMUNITIES MANAGEMENT TRUST

PRELIMINARY FINAL REPORTS YEAR ENDED 30 JUNE 2014

www.ingeniacommunities.com.au

Registered Office: Level 5, 151 Castlereagh Street, Sydney NSW 2000

Page 2

Ingenia Communities Fund & Ingenia Communities Management Trust Management Trust Preliminary Final Reports Year ended 30 June 2014

Contents

Contents
	Page
Financial report
Consolidated statements of comprehensive income	7
Consolidated balance sheets	9
Consolidated cash flow statements	10
Statements of changes in unitholders’ interest	11
Note 1 Summary of significant accounting policies	13
Note 2 Accounting estimates and judgements	23
Note 3 Segment information	25
Note 4 Earnings per unit	29
Note 5 Finance expense	29
Note 6 Income tax benefit	29
Note 7 Discontinued operations and assets held for sale	30
Note 8 Cash and cash equivalents	33
Note 9 Trade and other receivables	33
Note 10 Inventories	34
Note 11 Investment properties	34
Note 12 Plant and equipment	37
Note 13 Trade and other payables	37
Note 14 Borrowings	38
Note 15 Retirement village resident loans	40
Note 16 Provisions	40
Note 17 Derivatives	40
Note 18 Deferred tax liabilities	41
Note 19 Issued units	41
Note 20 Reserves	42
Note 21 Accumulated losses	43
Note 22 Commitments	43
Note 23 Contingencies	44
Note 24 Capital management	44
Note 25 Financial instruments	44
Note 26 Fair value measurement	52
Note 27 Auditor's remuneration	54
Note 28 Related parties	54
Note 29 Parent financial information	56
Note 30 Subsidiaries	57
Note 31 Notes to the cash flow statements	58
Note 32 Subsequent events	58

Page 3

Ingenia Communities Fund & Ingenia Communities Management Trust Preliminary final reports (continued) 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 preliminary final report is a combined preliminary final 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 (Managing Director) Appointed 25 November 2011

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 has allowed unrecognised carried forward and current year tax losses to be recognised, which is the primary driver for the $6.5m income tax benefit recorded in ICMT.

Page 4

Ingenia Communities Fund & Ingenia Communities Management Trust Preliminary final reports (continued) Year ended 30 June 2014

Operating and financial review (continued)

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

These results are reflective of execution of the strategy to 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.

(g) Capital Management

ICF strengthened its capital position by undertaking a capital raising and renegotiating its core debt facility.

On 23 August 2013, ICF refinanced its Bank of New 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.

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.

There will be a strong focus on finalising divestment 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.

Page 5

Ingenia Communities Fund & Ingenia Communities Management Trust Preliminary final reports (continued) Year ended 30 June 2014

Significant changes in the state of affairs

Changes in the state of affairs during the financial year are set out in the various reports in this Preliminary Final 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:

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.

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

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

Page 6

Ingenia Communities Fund & Ingenia Communities Management Trust Preliminary final reports (continued) 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 of	Performance	Retention
	units	quantum	quantum
		rights	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.

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.

Page 7

Ingenia Communities Fund & Ingenia Communities Management Trust Consolidated statements of comprehensive income Year ended 30 June 2014

Note	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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)

Page 8

Ingenia Communities Fund & Ingenia Communities Management Trust Consolidated statements of comprehensive income (continued) Year ended 30 June 2014

Note	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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 ondisposalof foreignoperations 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)
	2014 2013 2014 2013 Cents Cents Cents 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.

(2) Distributions relate to the amount paid during FY14. Subsequent to the end of the year, a final distribution was declared for 0.65 cents for a total full year distribution of 1.15 cents.

Page 9

Ingenia Communities Fund & Ingenia Communities Management Trust Consolidated balance sheets As at 30 June 2014

Note	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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

Page 10

Ingenia Communities Fund & Ingenia Communities Management Trust Consolidated cash flow statements Year ended 30 June 2014

Note	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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 taxesreceived/(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 ofborrowing 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 ofexchangerate changes oncash	(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

Page 11

Ingenia Communities Fund & Ingenia Communities Management Trust Statements of changes in unitholders’ interest Year ended 30 June 2014

Note	Ingenia Communities Fund
	Attributable to unitholders Non- controlling interest Total equity Issued capital Reserves Retained earnings Total $’000 $’000 $’000 $’000 $’000 $’000
Carrying amounts at 1 July 2012 Net profit for the year Othercomprehensiveincome	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 orpayable 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 **

Page 12

Ingenia Communities Fund & Ingenia Communities Management Trust Statements of changes in unitholders’ interest (continued) Year ended 30 June 2014

Note	Ingenia Communities Management Trust
	Attributable to unitholders Non- controlling interest(1) Total equity Issued capital Reserves Retained earnings Total $’000 $’000 $’000 $’000 $’000 $’000
Carrying amounts at 1 July 2012 Net loss for the year Other comprehensive income	3,351 (614) 5,411 8,148 5,094 13,242 - - (8,401) (8,401) (3,314) (11,715) - 734 - 734 646 1,380
**Total comprehensive income for the year **	- 734 (8,401) (7,667) (2,668) (10,335)
Transactions with unitholders in their capacity as unitholders: Placement securities 19	2,755 - - 2,755 - 2,755
Carrying amounts at 30 June 2013	6,106 120 (2,990) 3,236 2,426 **5,662 **
Net loss for the year Othercomprehensiveincome	- - (1,059) (1,059) (111) (1,170) - 49 - 49 446 495
**Total comprehensive income for the year **	- 49 (1,059) (1,010) 335 (675)
Transactions with unitholders in their capacity as unitholders: Placement securities 19	7,991 - - 7,991 - 7,991
Carrying amounts at 30 June 2014	14,097 169 (4,049) 10,217 2,761 12,978

(1) Non-controlling interest relates to the portion in which ICF owns subsidiaries consolidated within ICMT.

Page 13

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements 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.

The stapling structure will cease to operate on the first 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

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

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.

The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.

The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated.

The financial report is prepared on an historical cost basis, except for investment properties, retirement village residents’ loans and derivative financial instruments, which are measured at fair value.

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.

Page 14

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

(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’;

• AASB 119 ‘Employee Benefits’ (2011) and AASB 2011-10 ‘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’

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.

Page 15

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

Accounting Standard	Impact on the Group
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

ICF’s consolidated financial statements comprise the parent and its subsidiaries. ICMT’s consolidated financial statements 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.

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

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

Investments in subsidiaries are carried at cost in the parent’s financial statements.

(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.

Page 16

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

(f) Discontinued operations and assets held for sale

The Trusts have classified certain components as 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.

Components of the entity are classified as held for sale if 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 noncurrent asset (or disposal group) is recognised at the date of derecognition.

Non-current assets classified as held for sale, and the 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 7.

(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.

Page 17

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

(iii) Translation of financial statements of foreign 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.

Leases of properties that are classified as investment 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

Current and non-current 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; held-to-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.

The fair values of financial instruments that are actively 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.

Page 18

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

(k) Impairment of non-financial assets

Assets other than investment property and 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.

(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

The Trusts use derivative financial instruments such as foreign currency contracts and interest rate swaps to hedge its risks associated with foreign currency and interest rate fluctuations. 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.

(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.

Page 19

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

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.

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

(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.

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.

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.

Borrowings are classified as current liabilities unless 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.

Page 20

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

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.

(v) Provisions, including for employee benefits

(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 non-accumulating 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.

Page 21

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

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.

Cash flows are included in the cash flow statement 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

The Trusts measure financial instruments, such as, 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.

A fair value measurement of a non-financial asset takes 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 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.

Page 22

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

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

For assets and liabilities that are recognised in the financial 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.

External valuers are involved for valuation of significant 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.

Page 23

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

1. Summary of significant accounting policies (continued)

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.

(aa) Current versus non-current classification

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.

All other assets are classified as non-current.

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.

The Group classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

2. Accounting estimates and judgements

The preparation of financial statements requires the use of certain critical accounting estimates. It also requires the Responsible Entity to exercise its judgement in the process of applying the 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.

Page 24

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

2. Accounting estimates and judgements (continued)

(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, rentfree 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.

Page 25

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

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.

The Trusts have identified their operating segments based on the internal reports that are reviewed and used by the chief 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	Settlers	Garden	Corporate/	Total
	Lifestyle		Villages	Unallocated
	Estates
	$’000	$’000	$’000	$’000	$’000
(i) Segment revenue
External segment revenue	-	-	9,354	-	9,354
Interestincome	-	-	-	10,339	10,339
Total revenue	-	-	**9,354 **	10,339	19,693
(ii) Segment underlying profit
External segment revenue	-	-	9,354	-	9,354
Interest income	-	-	-	10,339	10,339
Property expenses	-	-	-	(274)	(274)
Administration expenses	-	-	-	(682)	(682)
Operational, marketing and selling	-	-	-	(295)	(295)
expenses
Finance expense	-	-	-	(3,955)	(3,955)
Underlying profit – continuing	-	-	9,354	5,133	14,487
operations
Reconciliation of underlying profit to profit from		continuing	operations:
Net foreign exchange gain	-	-	-	(147)	(147)
Net gain/(loss) on change in fair
value of:
Investment properties	(852)	-	2,382	-	1,530
Derivatives	-	-	-	41	41
Responsible Entity fees	-	-	-	(1,170)	(1,170)
Profit from continuing operations	(852)	-	11,736	3,857	14,741
per the Consolidated Statement
of Comprehensive Income
(iii) Segment assets
Segment assets	6,904	53,992	114,286	142,597	317,779
Discontinued operations					3,874
Total assets					321,653

Page 26

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

3. Segment information (continued)

(c) Ingenia Communities Fund - 30 June 2013

	Active	Settlers	Garden	Corporate/	Total
	Lifestyle		Villages	Unallocated
	Estates
	$’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	-	-	-	(96)	(96)
expenses
Finance expense	-	-	-	(3,841)	(3,841)
Underlying profit/(loss) –	118	-	8,341	(1,088)	7,371
continuing operations
Reconciliation of underlying profit to profit from		continuing	operations:
Net foreign exchange gain	-	-	-	37	37
Net gain/(loss) on disposal of	-	-	(107)	-	(107)
investment property
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	118	-	9,852	(1,585)	8,385
per the Consolidated Statement
of Comprehensive Income
(iii) Segment assets
Segment assets	7,154	54,009	99,704	72,081	232,948
Discontinued operations					3,874
Total assets					236,822

Page 27

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

3. Segment information (continued)

(d) Ingenia Communities Management Trust - 30 June 2014

	Active	Settlers	Garden	Corporate/	Total
	Lifestyle		Villages	Unallocated
	Estates
	$’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	-	(3,320)	-	-	(3,320)
revaluation of newly constructed
villages
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	(377)	(3)	(2,354)	-	(2,734)
expenses
Manufactured home cost of sales	(2,130)	-	-	-	(2,130)
Finance expense	-	-	-	(10,145)	(10,145)
Income taxbenefit	-	-	-	2,137	**2,137 **
Underlying profit/(loss) –	5,825	7,827	(3,211)	(8,436)	2,005
continuing operations
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	-	(3,320)	-	-	(3,320)
constructed villages
Responsible Entity fees	-	-	-	(1,626)	(1,626)
Income tax benefit associated with	-	-	-	4,369	4,369
reconciliation items
Profit from continuing operations	4,552	3,293	(3,211)	(5,693)	(1,059)
per the Consolidated Statement
of Comprehensive Income
(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

Page 28

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

3. Segment information (continued)

(e) Ingenia Communities Management Trust - 30 June 2013

	Active	Settlers	Garden	Corporate/	Total
	Lifestyle		Villages	Unallocated
	Estates
	$’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	-	(4,619)	-	-	(4,619)
revaluation of newly constructed
villages
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	(80)	(1,087)	(1,022)	-	(2,189)
expenses
Manufactured home cost of sales	(297)	-	-	-	(297)
Finance expense	-	-	-	(5,212)	(5,212)
Income tax expense	-	-	-	(427)	(427)
Underlying profit – continuing	273	5,709	(448)	(5,859)	(325)
operations
Reconciliation of underlying profit to profit from		continuing	operations:
Net gain/(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	-	(4,619)	-	-	(4,619)
constructed villages
Responsible Entity fees	-	-	-	(1,456)	(1,456)
Income tax benefit associated with	-	-	-	410	410
reconciliation items
Profit from continuing operations	258	(96)	2,919	(6,905)	(3,824)
per the Consolidated Statement
of Comprehensive Income
(iii) Segment assets
Segment assets	11,489	241,674	1,390	1,529	256,082
Discontinued operations					36,576
Total assets					292,658

Page 29

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

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)forthe 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 2013 2014 2013 $’000 $’000 $’000 $’000
Interest paid or payable	3,955 3,841 10,145 5,212

6. Income tax benefit

6. Income tax benefit
	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’000
(a) Income tax benefit/(expense) Current tax Decrease in deferred tax liabilities	- - 83 (83) - - 6,423 66
Income tax benefit/(expense)	- - 6,506 (17)

Page 30

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

6. Income tax benefit (continued)

6. Income tax benefit (continued)
	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’000
(b) Reconciliation between tax expense and pre-tax net profit Profit/(loss) before income tax 14,741 8,385 (7,565) (3,807) Less amountsnot subject toAustralian income tax (14,741) (8,385) - -
- - (7,565) (3,807) Income tax at the Australian tax rate of 30% (2013: 30%) - - 2,270 1,142 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 - - 588 (92) Movement 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 - - 406 101 Non-recognition of Australian tax losses - - - (181) Recognition of Australian tax losses 488
Income tax benefit/(expense) - - 6,506 (17)

(c) Tax consolidation

Effective from 1 July 2012, ICMT and its Australian domiciled owned subsidiaries formed a tax consolidation group with the 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.

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.

Page 31

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

7. Discontinued operations and assets held for sale (continued)

(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

The Trusts’ investment in the New Zealand Students business has been classified as a discontinued operation since 30 June 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.

The Trusts have completed a sales campaign and terms have been agreed with a global real estate investment firm. Following divestment of these operations the proceeds will be reinvested into its Australian lifestyle parks business.

(ii) Financial performance

The financial performance of components of the Trusts disposed of or classified as discontinued operations at each reporting date were:

	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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 taxbenefit/(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 disposalof foreignoperations	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).

Page 32

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

7. Discontinued operations and assets held for sale (continued)

(iii) Cash flows

The cash flows of components of the Trusts disposed of or classified as discontinued operations at each reporting date were:

	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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

The assets and liabilities of components of the Trusts classified as disposal groups at each reporting date were:

	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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).

Page 33

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

7. Discontinued operations and assets held for sale (continued)

(vi) Capitalisation rate

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

8. Cash and cash equivalents

8. Cash and cash equivalents
Note	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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

	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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.

Page 34

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

9. Trade and other receivables (continued)

ICF has leased a number of its properties to ICMT under leases that are classified as finance leases. The remaining term of each agreement varies between 92 and 115 years. There are no purchase options. Minimum payments under the agreements and their present values are:

	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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 3,178 3,178 - - Later than one year and not later than five years 10,399 10,400 - - Later than five years 27,101 27,102 - -
40,678 40,680 - -
Finance income recognised and included in interest income inthe income statement 3,320 3,160 - -

Information about the related finance lease payable by ICMT is given in note 14.

10. Inventories

10. Inventories
	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’000
Current assets Manufactured homes	- - 2,208 285

11. Investment properties

(a) Summary of carrying amounts

(a) Summary of carrying amounts
	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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

Page 35

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

11. Investment properties (continued)

(b) Movements in carrying amounts

(b) Movements in carrying amounts
	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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) onchangein 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

The net change in fair value is recognised in profit or loss as net gain/(loss) on change in fair value of investment properties.

Fair value hierarchy disclosures for investment properties have been provided in note 26.

Page 36

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

11. Investment properties (continued)

• (c) Description of valuation techniques used and key inputs to valuation of investment properties:

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

Capitalisation method

Under the capitalisation method, fair value is estimated using assumptions regarding the expectation of future benefits. 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.

Page 37

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

11. Investment properties (continued)

Discounted cash flow method

Under the discounted cash flow method, fair value is estimated using assumptions regarding the benefits and liabilities of 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.

12. Plant and equipment

12. Plant and equipment
	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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

13. Trade and other payables
	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’000
Current liabilities Trade and other payables	1,210 1,569 8,480 6,305
Non-current liabilities Otherpayables	- - 4,000 -

Page 38

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

14. Borrowings

14. Borrowings
Note	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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

(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

• Interest cover ratio (as defined) of at least 1.50x in financial year ending 2014 increasing to at least 1.75x in FY2015.

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.

Page 39

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

14. Borrowings (continued)

(i) Minimum lease payments – excluding perpetual lease

	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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.

Page 40

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

15. Retirement village resident loans

15. Retirement village resident loans
	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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 2013 2014 2013 $’000 $’000 $’000 $’000
Current liabilities Employee liabilities	- - 590 507
Non-current liabilities Employeeliabilities	- - 249 140

17. Derivatives

17. Derivatives
Note	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’000
Current liabilities Interest rate swap contracts 25	84 - - -
Non-current liabilities Interest rate swap contracts 25	84 209 - -

Page 41

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

18. Deferred tax liabilities

18. Deferred tax liabilities
	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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.

The Group offsets tax assets and liabilities, if and only if, it has a legally enforceable right to set off current tax assets and 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

(a) Carrying amounts
	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’000
At beginning of year 497,956 480,693 6,106 3,351 Placement securities - 18,179 - 2,908 Transaction costs of institutional placement securities - (916) - (153) Rights issue 51,985 - 8,364 - Rights issue costs (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 547,642 497,956 - - Ingenia Communities Management Trust - - 14,097 6,106
547,642 497,956 14,097 6,106

Page 42

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

19. Issued units (continued)

(b) Number of issued units

(b) Number of issued units
	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 Thousands Thousands Thousands 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.

20. Reserves

20. Reserves
	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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 (226) - 1,092 646 Ingenia Communities Management Trust - - 169 120
(226) - 1,261 766

The foreign currency translation reserve records exchange differences arising from the translation of the financial statements of foreign subsidiaries.

Page 43

Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

21. Accumulated losses

21. Accumulated losses
	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 $’000 $’000 $’000	2013 $’000
Balance at beginning of year Net profit/(loss) for the year Distributions	(330,334) (328,594) (6,304) 15,422 2,670 (1,170) (5,917) (4,410) -	5,411 (11,715) -
**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 (320,829) (330,334) (3,425) Ingenia Communities Management Trust - - (4,049)		(3,314) (2,990)
(320,829) (330,334) (7,474)		(6,304)

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

A subsidiary of ICMT has entered into a non-cancellable operating lease for its Brisbane office. The lease has a remaining life of five years.

Future minimum rentals payable under this lease as at reporting date were:

	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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.

For commitments for inter-staple related party finance leases refer to notes 9, 14 and 25.

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Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

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.

In assessing this risk, the Group takes into account the relative security of income flows, the predictability of expenses, 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 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 lookthrough basis.

25. Financial instruments

(a) Introduction

The Trusts principal financial instruments comprise receivables, payables, interest bearing liabilities, other financial liabilities, cash and short-term deposits and derivative financial instruments.

The main risks arising from the Trusts’ financial instruments are interest rate risk, foreign exchange risk, credit risk and 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.

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Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

25. Financial instruments (continued)

While the Trusts aim to meet the Treasury Policy targets, many factors influence the performance, and it is probable that at 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.

The main risks arising from ICMT's financial instruments are interest rate risk, foreign exchange risk, credit risk and liquidity 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.

The Trusts manage the risk of changes in market interest rates by maintaining an appropriate mix of fixed and floating rate 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.

At 30 June 2014, after taking into account the effect of interest rate swaps, approximately 47% of ICF’s borrowings are at a fixed rate of interest (30 June 2013: 26%).

Exposure to changes in market interest rates also arises from financial assets such as cash deposits and loan receivables 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

ICF’s exposure to interest rate risk and the effective interest rates on financial instruments at reporting date were:

date were:
	Ingenia Communities Fund
Floating interest rate 30 June 2014 Principal amounts $’000	Fixed interest maturing in: Total
	Less than One to five More than 1year Years 5 years
Financial assets Cash at bank 2,658 Financial liabilities Bank debt denominated in AUD 94,000 Interest rate swaps: denominatedin AUD;Fund paysfixedrate (45,000)	- - - 2,658 - - - 94,000 45,000 - - -

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Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

25. Financial instruments (continued)

ICMT’s exposure to interest rate risk and the effective interest rates on financial instruments at reporting date were:

Ingenia Communities Management Trust	Ingenia Communities Management Trust
Floating interest rate 30 June 2014 Principal amounts $’000	Fixed interest maturing in: Total
	Less than One to five More than 1year Years 5 years
Financial assets Cash at bank 3,893 Financial liabilities Finance leases (excluding perpetual lease) -	- - - 3,893 3,461 11,456 29,290 **44,207 **

ICMT’s exposure to interest rate risk and the effective interest rates on financial instruments at the end of the previous financial year were:

of the previous financial year were:	of the previous financial year were:
Ingenia Communities Management Trust
Floating interest rate 30 June 2013 Principal amounts $’000	Fixed interest maturing in: Total Less than One to five More than 1year Years 5 years
Financial assets Cash at bank 1,229 Financial liabilities Finance leases -	- - - 1,229 3,436 11,362 29,266 **44,064 **

Other financial instruments of the Trusts not included in the above tables are non-interest bearing and are therefore not 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%

The effect on net interest expense for one year would have been:

	**Effect on profit after tax **
	Ingenia Communities Fund Ingenia Communities Management Trust
	Higher/(lower) Higher/(lower) 2014 2013 2014 2013 $’000 $’000 $’000 $’000
Variable interest rate instruments denominated in: Australian dollars	(940) (680) - -

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Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

25. Financial instruments (continued)

The effect on change in fair value of derivatives would have been:

	**Effect on profit after tax **
	Ingenia Communities Fund Ingenia Communities Management Trust
	Higher/(lower) Higher/(lower) 2014 2013 2014 2013 $’000 $’000 $’000 $’000
Interest rate swaps denominated in: Australian dollars	417 793 - -

(ii) Decrease in average interest rates of 1%

The effect on net interest expense for one year would have been:

	**Effect on profit after tax **
	Ingenia Communities Fund Ingenia Communities Management Trust
	Higher/(lower) Higher/(lower) 2014 2013 2014 2013 $’000 $’000 $’000 $’000
Variable interest rate instruments denominated in: Australiandollars	940 680 - -

The effect on change in fair value of derivatives would have been:

	**Effect on profit after tax **
	Ingenia Communities Fund Ingenia Communities Management Trust
	Higher/(lower) Higher/(lower) 2014 2013 2014 2013 $’000 $’000 $’000 $’000
Interest rate swaps denominated in: Australian dollars	(297) (810) - -

(e) Foreign exchange risk

By holding properties in offshore markets, the Trusts are exposed to the risk of movements in foreign exchange rates. 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.

The Trusts reduce exposure to the foreign exchange risk inherent in the carrying value of its offshore properties and 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.

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Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

25. Financial instruments (continued)

The Trusts exposure to the impact of exchange rate movements on earnings from offshore properties is partly mitigated by 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 fiveyear time horizon.

The Trusts net foreign currency monetary exposure, after taking into account the effect of foreign exchange derivatives, 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 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
	2013 2013 2013 2013 $’000 $’000 $’000 $’000
Net foreign currency exposure: United States dollars	157 1,282 - -

(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) Effect of appreciation in Australian dollar of 10%:

(i) Effect of appreciation in Australian dollar	of 10%:
	**Effect on profit after tax **
	Ingenia Communities Fund Ingenia Communities Management Trust
	Higher/(lower) Higher/(lower) 2014 2013 2014 2013 $’000 $’000 $’000 $’000
Foreign exchange risk exposures denominated in: United States dollars	(16) (128) - -

(ii) Effect of depreciation in Australian dollar of 10%:

(ii) Effect of depreciation in Australian dollar	of 10%:
	**Effect on profit after tax **
	Ingenia Communities Fund Ingenia Communities Management Trust
	Higher/(lower) Higher/(lower) 2014 2013 2014 2013 $’000 $’000 $’000 $’000
Foreign exchange risk exposures denominated in: United States dollars	16 128 - -

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Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

25. Financial instruments (continued)

(g) Foreign exchange derivatives held

Forward exchange contracts, options and foreign exchange swaps are taken out to mitigate the effect of foreign exchange 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

Credit risk refers to the risk that a counterparty defaults on its contractual obligations resulting in a financial loss to 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.

Credit risk also arises from deposits placed with financial institutions and derivatives contracts that may have a positive value 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.

The Trust’s maximum exposure to credit risk at reporting date in relation to each class of financial instrument is the carrying amount as reported in the balance sheet.

(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.

The Trusts monitor the debt expiry profile and aims to achieve debt maturities below a target level of total committed debt facilities, where possible, to reduce refinance risk in any one year.

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Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

25. Financial instruments (continued)

The contractual maturities of the Trust's non-derivative financial liabilities at reporting date are reflected in the following 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.

Although the expected average residency term is more than ten years, retirement village residents’ loans 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.

	Ingenia Communities Fund
	Less than 1 year 1 to 5 years More than 5 years Total $’000 $’000 $’000 $’000
2014 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
	Ingenia Communities Management Trust
	Less than 1 year 1 to 5 years More than 5 years Total $’000 $’000 $’000 $’000
2014 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 **

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Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

25. Financial instruments (continued)

The contractual maturities of ICF's derivative financial liabilities at reporting date are reflected in the following table. It shows 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.

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

ICMT did not have any derivative financial liabilities at either 30 June 2014 or 30 June 2013.

(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.

	**Effect on profit after tax **
	Ingenia Communities Fund Ingenia Communities Management Trust
	Higher/(lower) Higher/(lower) 2014 2013 2014 2013 $’000 $’000 $’000 $’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

However, these effects are largely offset by corresponding changes in the fair value of the Trusts investment properties.

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.

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Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

25. Financial instruments (continued)

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.

The following table presents the Trusts’ financial instruments that were measured and recognised at fair value at reporting date:

Financial	Valuation	Significant	Relationship of	Sensitivity to the
assets/	technique(s) and	Unobservable	unobservable	input to fair value
financial	key inputs	Inputs	inputs to fair value
liabilities
Retirement	Loans measured as	Long-term capital	The higher the	The higher the
village	the ingoing	appreciation rates	appreciation, the	appreciation, the
resident	resident's	for residential	higher the value of	higher the value of
loans	contribution plus the	property between 0-	resident loans. The	resident loans. The
	resident's share of	4%.	longer the length of	longer the length of
	capital appreciation	Estimated length of	stay, the lower the	stay, the lower the
	to reporting date,	stay of residents	value of resident	value of resident
	less DMF accrued to	based on life tables	loans.	loans.
	reportingdate
Derivative	Net present value of	N/A	N/A	The longer the
interest	future cash flows			length of stay, the
rate swaps	discounted at market			higher the DMF
	rates adjusted for			accrued, capped at a
	the Group's credit			predetermined
	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.

The carrying amounts of the Trusts’ other financial instruments approximate their fair values.

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

(i) Assets measured at fair value
Date of valuation Total 30 June 2014	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 June2014 168	- 168 -

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

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Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

26. Fair value measurement (continued)

(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

(i) Assets measured at fair value
Date of valuation Total 30 June 2014	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) and15 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.

(c) Fair value hierarchy for financial instruments measured at fair value as at 30 June 2013:

(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 residentloans	175,703 - - 175,703

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Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

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 146,025 120,339 146,025 122,364 Other audit related services 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.

(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.

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Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

28. Related parties (continued)

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:

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 betweenstapled 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) 318,149,045321,470,845(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)

(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)

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 Nicole Fisher Chief Operating Officer Tania Betts Chief Financial Officer

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Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

28. Related parties (continued)

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 -

29. Parent financial information

Summary financial information about the parent of each Trust is:

	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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)fromcontinuing operations	460 (4,744) (4,252) (3,511)
Net profit/(loss) attributable to unitholders of each Trust 460 19,704 (4,252) (9,088) Total comprehensive income/(loss) 460 19,703 (4,252) (9,055)

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Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

30. Subsidiaries

(a) Names of subsidiaries

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

Name	Country of residence	Ownership	interest
		2014	2013
		%	%
Subsidiaries of Ingenia Communities Fund
Bridge Street Trust	Australia	100	100
Browns Plains Road Trust	Australia	100	100
Casuarina Road Trust	Australia	100	100
Edinburgh Drive Trust	Australia	100	100
INA CC Trust	Australia	100	100
INA Community Living Subsidiary Trust No. 2	Australia	100	100
INA Community Living Subsidiary Trust	Australia	100	100
INA Kiwi Communities Subsidiary Trust No. 1	Australia	100	100
INA Sunny Trust	Australia	100	100
Jefferis Street Trust	Australia	100	100
Lovett Street Trust	Australia	100	100
ILF Regency Subsidiary Trust	Australia	100	100
Settlers Subsidiary Trust	Australia	100	100
SunnyCove Gladstone Unit Trust	Australia	100	100
SunnyCove Rockhampton Unit Trust	Australia	100	100
Taylor Street (2) Trust	Australia	100	100
INA Subsidiary Trust No.1	Australia	100	100
INA Subsidiary Trust No.2	Australia	100	100
Noyea Pty Ltd	Australia	100	-
INA Community Living LLC (formerly ING	United States of America	100	100
Community Living LLC)
INA US Community Living Fund LLC (formerly ING	United States of America	100	100
US CommunityLivingFundLLC)
Subsidiaries of Ingenia Communities Management Trust
Garden Villages Management Trust	Australia	100	100
INA Community Living Lynbrook Trust	Australia	100	100
ILF Regency Operations Trust	Australia	100	100
Settlers Operations Trust	Australia	100	100
INA Operations Trust No.1	Australia	100	100
INA Operations Trust No.2	Australia	100	100
INA Operations Trust No.3	Australia	100	100
Noyea Operations Pty Ltd	Australia	100	-
Ridge Estate Trust	Australia	100	100
INA Subsidiary Trust No.3	Australia	100	100
INA NZ Subsidiary Trust No. 1	New Zealand	100	100
CSH Lynbrook GP LLC	United States of America	100	100
CSH Lynbrook LP	United States of America	100	100
INA Community Living II (formerly ING Community	United States of America	100	100
Living II)
Lynbrook Freer Street Member LLC	United States of America	100	100
Lynbrook Management,LLC	United States of America	100	100

The Trusts voting interest in all other subsidiaries is the same as the ownership interest.

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Ingenia Communities Fund & Ingenia Communities Management Trust Notes to the financial statements Year ended 30 June 2014

31. Notes to the cash flow statements

(a) Reconciliation of profit to net cash flows from operations

	Ingenia Communities Fund Ingenia Communities Management Trust
	2014 2013 2014 2013 $’000 $’000 $’000 $’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.