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Annual Report 2016

Ingenia Communities Holdings Limited Annual Reports

FOR THE YEAR ENDED 30 JUNE 2016

Contents	Contents
Directors’ Report		1
Auditor’s Independence Declaration		24
Consolidated Statement of Comprehensive Income		25
Consolidated Balance Sheet		27
Consolidated Cash Flow Statement		28
Consolidated Statement of Changes in Equity		29
Notes to the Financial Statements		30
1.	Summary of signifcant accounting policies	30
2.	Accounting estimates and judgements	36
3.	Segment information	37
4.	Earnings per security	40
5.	Revenue	41
6.	Finance expense	41
7.	Income tax beneft	42
8.	Discontinued operations	42
9.	Assets and liabilities held for sale	42
10.	Trade and other receivables	43
11.	Inventories	43
12.	Investment properties	43
13.	Plant and equipment	49
14.	Intangibles	49
15.	Trade and other payables	50
16.	Borrowings	50
17.	Retirement village resident loans	51
18.	Deferred tax assets and liabilities	52
19.	Issued securities	52
20.	Reserves	53
21.	Accumulated losses	53
22.	Commitments	54
23.	Contingent liabilities	54
24.	Share-based payment transactions	54
25.	Capital management	56
26.	Financial instruments	56
27.	Fair value measurement	61
28.	Auditor’s remuneration	62
29.	Related parties	62
30.	Company fnancial information	63
31.	Subsidiaries	63
32.	Notes to the cash fow statement	65
33.	Subsequent events	66
Directors’ Declaration		67
Independent Auditor’s Report		68
Securityholder Information		117
Investor Relations		119
Corporate Directory		120

www.ingeniacommunities.com.au

Ingenia Communities Holdings Limited

Directors’ Report

FOR THE YEAR ENDED 30 JUNE 2016

The directors of Ingenia Communities Holdings Limited (“ICH” or the “Company”) present their report together with the Company’s financial report for the year ended 30 June 2016 (the “current year”) and the Independent Auditor’s Report thereon. The Company’s financial report comprises the consolidated financial report of the Company and its controlled entities, including Ingenia Communities Fund (“ICF” or the “Fund”) and Ingenia Communities Management Trust (“ICMT”) (collectively, the “Trusts”).

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

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

1. Directors

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

Non-executive Directors (“NEDs”)

Jim Hazel (Chairman) Robert Morrison (Appointed as Deputy Chairman on 2 December 2015)

Philip Clark AM

Amanda Heyworth

Norah Barlow ONZM

Executive Directors Simon Owen (Chief Executive Officer & Managing Director) (“CEO” & “MD”)

Qualifications, Experience and Special Responsibilities

Jim Hazel – Non-executive Chairman

Mr Hazel was appointed to the Board in March 2012. Mr Hazel has had an extensive corporate career in both the banking and retirement sectors. His retirement village operations experience includes being Managing Director of Primelife Corporation Limited (now part of Lend Lease). Other current listed company directorships include Bendigo and Adelaide Bank Limited and Centrex Metals Limited. He also serves on the Boards of Coopers Brewery Limited and the Adelaide Football Club. Mr Hazel holds a Bachelor of Economics and is a Senior Fellow of the Financial Services Institute of Australasia and a Fellow of the Australian Institute of Company Directors. Mr Hazel is a member of the Investment Committee.

Other Current Listed Company Directorships: Bendigo and Adelaide Bank Limited, Centrex Metals Limited

Listed Company Directorships in past three years: ImpediMed Limited

Philip Clark AM – Non-executive Director

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Mr Clark was appointed to the Board in June 2012. Mr Clark is the Chair of SCA Property Group Limited and was the Chair of Hunter Hall Global Value Limited until 31 December 2015. He is a member of the J.P. Morgan Advisory Council and also chairs

a number of government and private company boards. He was Managing Partner and Chief Executive Officer of Minter Ellison and worked with that firm from 1995 until June 2005. Prior to joining Minter Ellison, Mr Clark was Director and Head of Corporate with ABN Amro Australia and prior to that he was Managing Partner with Mallesons Stephen Jaques for 16 years. Mr Clark’s qualifications include a Bachelor of Arts, Bachelor of Law and a Masters of Business Administration. Mr Clark is a member of the Remuneration and Nomination Committee.

Other Current Listed Company Directorships: SCA Property Group Limited.

Listed Company Directorships in past three years: Hunter Hall Global Value Limited.

Amanda Heyworth – Non-executive Director

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Ms Heyworth was appointed to the Board in April 2012. Ms Heyworth is a professional company director and currently chairs Executive Leadership Connection Pty Ltd and is a director of Itek Ventures Pty Ltd. She previously served as Executive

Director of Playford Capital Venture Capital Fund. She has a wealth of experience in the finance, technology and government sectors and teaches in the Australian Graduate School of Management’s MBA program. Ms Heyworth brings a finance and growth focus to the Group, having worked on many product launches and geographic expansions and over 40 capital raisings and M&A transactions. She sits on a number of public sector and private boards. Ms Heyworth has a BA (Accounting) with a major in finance from the University of South Australia and has postgraduate qualifications in accounting and finance. She also holds a MBA from the Australian Graduate School of Management. Ms Heyworth is Chair of the Audit and Risk Committee and is a member of the Remuneration and Nomination Committee.

Other Current Listed Company Directorships: Nil

Listed Company Directorships in past three years: Nil

Annual Report 2016

Directors’ Report

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

Robert Morrison – Deputy Chairman

Mr Morrison was appointed to the Board in February 2013. Mr Morrison has extensive experience in property investment and funds management. During his 21 years at AMP, Mr Morrison’s executive roles included Head of Property for Asia Pacific and Director of Asian Investments. Mr Morrison’s investment experience includes senior portfolio management roles where he managed both listed and unlisted property funds on behalf of institutional investors. Mr Morrison was previously a Non-Executive Director of Mirvac Funds Management Limited, an Executive Director of AMP Capital Limited and a National Director of the Property Council of Australia. He is a founding partner and Executive Director of alternative investments firm, Barwon Investment Partners. Mr Morrison holds a Bachelor of Town and Regional Planning (Hons) and a Master of Commerce. Mr Morrison is a member of the Audit and Risk Committee and is Chair of the Investment Committee.

Norah Barlow ONZM – Non-executive Director

Ms Barlow was appointed to the Board in March 2014. Ms Barlow is now a professional company director since retiring as the Chief Executive Officer of NZX and ASX listed Summerset Group Holdings Limited, one of the largest aged care and retirement village developers and operators in New Zealand. Ms Barlow currently sits on the Board of Estia Health Limited in Australia and a number of boards in NZ. She also serves as the Chair of the NZ government National Science challenge ‘Ageing Well’. Ms Barlow holds a Bachelor of Commerce and Administration and is a qualified Chartered Accountant. Ms Barlow was made an Officer of the New Zealand Order of Merit for services to business in 2014. Ms Barlow is a member of the Audit and Risk Committee and the Investment Committee and is Chair of the Remuneration and Nomination Committee.

Other Current Listed Company Directorships: Estia Health Limited, Evolve Education Group Limited, Methven Limited.

Other Current Listed Company Directorships: Nil

Listed Company Directorships in past three years: Mirvac Funds Management Limited.

Simon Owen – CEO and MD

Simon joined the Group in November 2009 as the Chief Executive Officer. He initiated the internalisation of management and exit from the ING Group as well as Ingenia’s focus on lifestyle communities. Simon leads the management team and has overall responsibility for all facets of the business. He brings to the Group in-depth sector experience. Simon is currently a Director of BIG4 Holiday Parks, Australia’s leading holiday parks group representing 180 parks across Australia and is a member of the Retirement Living Council (part of the Property Council of Australia). He is also a past National President of the Retirement Villages Association (now part of the Retirement Living Council), a role he held for four years. Simon has over 20 years’ experience working in ASX listed groups with roles across finance, funds management, mergers and acquisitions, business development and sales and marketing. Prior to joining Ingenia Communities, Simon was the CEO of Aevum, a formerly listed retirement company. Simon is a qualified accountant (CPA) with postgraduate diplomas in finance and investment and advanced accounting.

1.1 Meetings

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

						Remuneration &	Remuneration &	Investment
		Board		Audit & Risk	Committee	Nomination	Committee	Committee
	A		B	A	B	A	B	A	B
Jim Hazel	16		16	–	–	1	–	3	3
Philip Clark AM	16		16	–	–	3	3	–	–
Amanda Heyworth	16		15	7	7	3	3	–	–
Robert Morrison	16		16	7	7	–	–	3	3
Norah Barlow ONZM	16		15	7	7	2	2	3	3
Simon Owen	16		15	–	–	–	–	–	–

A: Meetings eligible to attend B: Meetings attended

Ingenia Communities Holdings Limited

1.2 Interests of Directors

Securities in the Group held by directors or their associates as at 30 June 2016 were:

	Issued stapled
	securities	Rights
Jim Hazel	287,276	–
Philip Clark AM	42,286	–
Amanda Heyworth	106,921	–
Robert Morrison	75,556	–
Norah Barlow ONZM	35,949	–
Simon Owen	1,003,985	651,174

2. Company Secretaries

Leanne Ralph

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

Tania Betts

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

3. Operating and Financial Review

a. Ingenia Communities Group Overview

The Group is an active owner, manager and developer of a diversified portfolio of retirement and lifestyle communities across Australia. Its real estate assets at 30 June 2016 were valued at $496.8 million (net of finance leases and resident loans), being 26 lifestyle communities (Ingenia Lifestyle & Holidays), 31 rental communities (Ingenia Garden Villages), and eight deferred management fee communities (Ingenia Settlers). The Group is in the ASX 300 with a market capitalisation of approximately $500 million.

b. Strategy

The Group’s strategy continues to focus on accelerating development of lifestyle communities and identifying ways to enhance the operational performance of its asset base through effective cost management and identification of additional revenue streams. Using a disciplined investment framework, the Group plans to acquire further lifestyle communities as identified in the recent June 2016 equity raising as well as recycling capital from lower yielding assets into accretive opportunities.

A key element to achieving growth is efficient capital management. During the year, the Group increased its debt facility by $25 million to $200 million and subsequent to year-end, increased this facility by a further $24 million to $224 million. As at 30 June 2016, the facility is drawn to $125.3 million (including bank guarantees), which represents a loan to value ratio (“LVR”) of 24.9%. LVR is well below our target range of 30-35% at 30 June 2016 following the temporary application of proceeds from the June 2016 capital raising against debt. These funds will be deployed into the four acquisition opportunities outlined to the market, which will move the LVR back into the target range.

The key immediate business priorities of the Group are:

Continue building velocity in the delivery and sale of new lifestyle community homes, with a focus on East Coast metro and coastal locations;
Acquire additional lifestyle communities as well as invest in existing yield assets;
Grow occupancy and average room rates for tourism rental accommodation;
Continue strategy of divesting the Ingenia Settlers portfolio and recycle this capital into development of lifestyle communities;
Continue to gradually grow occupancy rates within the Garden Villages portfolio; and
Improve asset cash yields through operational efficiencies including revenue optimisation and disciplined cost management.

The Group’s vision is to create Australia’s best lifestyle communities offering affordable permanent and tourism rental accommodation with a focus on the seniors demographic. The Board is committed to delivering continued earnings and security price growth to securityholders and providing a supportive community environment to permanent residents and holidaymakers.

Annual Report 2016

Directors’ Report

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

c. FY16 Financial Results

Significant investment in lifestyle communities continued during FY16, with the focus on scaling our sales and development platform to deliver development pipeline returns. Management has also remained focused on Garden Villages’s occupancy as well as room rate and occupancy growth within lifestyle communities.

Overall, FY16 has produced an Underlying Profit from continuing operations of $20.2 million ($3.4 million increase from FY15). Statutory profit of $24.3 million (decrease from FY15 of $1.4 million (5.6%). These results are underpinned by a significantly higher EBIT contribution from lifestyle communities of $16.5 million, up 98.1% from prior year.

Operating cashflow for the year was $21.0 million, up 132.8% from the prior year, reflecting growth in recurring rental income and new manufactured home settlements growing by 105.8% to 107.

In June 2016, the Group raised $60.0 million from an institutional placement, which will be used to fund four lifestyle community acquisitions, including a $33.0 million lifestyle community within the Sydney metro area with significant development upside. Over the year, the Group invested an additional $76.1 million (excluding transaction costs) into six lifestyle communities.

The Group has today announced a final distribution of 5.1 cents per security (cps), which brings the full year distribution to 9.3 cps. The dividend reinvestment plan will be available to securityholders and the Board reaffirms its commitment to further growth in securityholder returns.

d. Key Metrics

Full year distribution of 9.3 cps, up 14.8%.
Total Underlying Profit was $20.2 million, up 15.2% from FY15.
Total Underlying Profit per security was 13.4 cents, up from 12.3 cents at FY15.
Net asset value grew by 11 cents per security to $2.45.
Statutory profit was $24.3 million, down 5.6% from FY15.
Statutory profit per security was 16.1 cents, down 2.7 cents from FY15.

e. Group Results Summary

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

2016	2015
$’000	$’000
EBIT – continuing operations 24,200 Net interest expense (6,625) Tax benefit associated to Underlying Profit 2,586	18,050 (4,567) 3,319
Underlying Profit – continuing operations 20,161 Underlying Profit – discontinued operations –	16,802 705
Underlying Profit 20,161 Net foreign exchange gain 471 Net loss on disposal of investment properties (989) Net gain/(loss) on change in fair value of: Investment properties 7,496 Retirement village resident loans (1,388) Derivatives (414) Gain on revaluation of newly constructed retirement villages (1,525) Other – Discontinued operations (below Underlying Profit) net of income tax – Tax benefit associated with items below Underlying Profit 468	17,507 111 (69) 16,404 (8,878) 164 (2,422) 503 (883) 3,285
Statutory profit 24,280	25,722

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.

Ingenia Communities Holdings Limited

f. Segment Performance and Priorities

Ingenia Lifestyle and Holidays

Ingenia Lifestyle and Holidays now owns 27 lifestyle communities, following settlement of Ocean Lake Caravan Park in August 2016. This business is the major focus of growth for the Group offering an affordable housing alternative for seniors and tourism residents complemented by a capital light, low risk development cycle, delivering both development profits and incremental yield. Over the last year, the earnings contribution from development has grown rapidly with development now underway at 13 communities and new turnkey settlement volumes up 106% from FY15. The carrying value of these assets at 30 June 2016 is $299.7 million (net of finance leases).

i. Performance

i. Performance
Ingenia Lifestyle & Holidays 2016	2015	Change
New home settlements (#) 107	52	55.0
Gross new home development profit $m 9.4	5.2	4.2
Permanent rental income $m 12.3	8.3	4.0
Annuals rental income $m 3.0	1.0	2.0
Tourism rental income $m 17.6	10.3	7.3
Commercial rental income $m 0.4	0.2	0.2
EBIT contribution $m 16.5	8.4	8.1

Ingenia Lifestyle & Holidays delivered an EBIT contribution of $16.5 million in FY16, of which $9.4 million was attributable to development of new manufactured homes. Significant momentum was achieved in settlements during FY16 and indicates a growing customer awareness and understanding of the lifestyle communities. Further council approvals and acquisitions have seen the development pipeline increase to over 1,400 sites, with an increasing focus on metro locations. The rental accommodation earnings of this segment have grown strongly both through acquisitions and improved performance from the tourism rental accommodation, despite taking some tourism sites off line to facilitate development. This strong result reflects investment in a sales and development framework for new homes with further refinements expected in FY17. We remain confident of building on this strong result during the coming financial year.

ii. Strategic Priorities

The key strategic priorities for this business are continuing the rapid sales and settlement momentum achieved during FY16, securing further development approvals for new homes within our existing communities, optimising home designs for efficiency and customer demand, growing rental returns and leveraging scale efficiencies. In FY17, the Group will expand into greenfield development and focus on developments in metro locations.

Ingenia Garden Villages

Ingenia Garden Villages comprises 31 rental communities located across the eastern seaboard and Western Australia. These communities accommodate more than 1,800 residents, and generate $24.0 million in gross rental income per annum. The carrying value of these assets at 30 June 2016 is $134.6 million

i. Performance

i. Performance
Ingenia Garden Villages	2016	2015	Change
Occupancy %	90.7%	90.7%	–
Rental income $m	24.0	24.4	(0.4)
Catering income $m	3.3	3.5	(0.2)
EBIT $m	11.0	11.0	–

Ingenia Garden Villages continues to deliver a consistent stream of recurring cash income for the Group. Whilst the segment result is in line with prior year, the earnings have been generated from a reduced asset base due to the sale of three villages in late FY15.

6 Annual Report 2016

Directors’ Report

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

ii. Strategic Priorities

The key strategic priorities of this business over the coming year are increasing rents above CPI as units turnover, ensuring residents are actively engaged and maintaining affordability whilst further seeking opportunities to leverage scale.

Ingenia Settlers

Ingenia Settlers is comprised of eight deferred management fee communities. These communities are located in Queensland, New South Wales and Western Australia and accommodate more than 800 residents generating income from deferred management fees, rental income from communities not yet fully converted and development income from unit conversions and community expansion. The carrying value of these assets at 30 June 2016, net of resident loans and lease liabilities is $62.5 million.

i. Performance

i. Performance
Ingenia Settlers	2016	2015	Change
Occupancy %	97.0%	93.0%	4.0%
New settlements (#)	29	43	(14)
Development income $m	1.5	2.4	(0.9)
Accrued DMF income $m	4.2	6.8	(2.6)
EBIT $m	3.8	6.3	(2.5)

The Ingenia Settlers result generated $3.8 million EBIT. This is down $2.5 million from prior year, with lower settlement volumes and development margins as development continues to approach completion. Following significant capital growth in underlying unit value in FY15, which boosted the deferred management fee earnings, the slowing of residential markets in Western Australia and Central Queensland resulted in reduced deferred management fee earnings relative to prior year.

ii. Strategic Priorities

The key strategic priority remains divestment of this non-core segment.

g. Capital Management

The Group adopts a prudent and considered approach to capital management. During the year, the Group strengthened its capital position by undertaking a $60.0 million capital raising and negotiating a $25 million increase to its multilateral debt facility. Subsequent to 30 June 2016 the Group extended its facility by $24 million and a further $8.5 million was raised from the Security Purchase Plan in July 2016.

As at 30 June 2016, the current LVR is 24.9%, which is below our target LVR of 30-35%. Once the Group deploys the proceeds from the June capital raising and debt into further lifestyle communities, the LVR will move back within the target range.

h. Financial Position

The following table provides a summary of the Group’s financial position as at 30 June 2016:

$’000	2016 2015	Change
Cash and cash equivalents	15,057 15,117	(60)
Inventories	17,665 13,208	4,457
Investment properties	710,746 539,728	171,018
Assets held for sale	– 61,598	(61,598)
Deferred tax asset	9,399 6,348	3,051
Other assets	13,952 9,308	4,644
Total assets	766,819 645,307	121,512
Borrowings	104,090 66,782	37,308
Retirement village resident loans	207,483 161,878	45,605
Liabilities held for sale	– 42,041	(42,041)
Other liabilities	33,644 31,086	2,558
Total liabilities	345,217 301,787	43,430
Net assets/equity	421,602 343,520	78,082

Ingenia Communities Holdings Limited

Inventories, up $4.5 million, include 60 new completed homes, reflecting the Group’s rapidly growing lifestyle community development business. This balance will continue to gradually grow as the number of development projects increase.

Investment properties increased by $171.0 million due to acquisition of six lifestyle communities for $81.5 million (including transaction costs), development expenditure of $19.9 million, a $7.5 million fair value uplift and a $61.6 million reclassification of five deferred management fee communities from assets held for sale.

Borrowings increased by $37.3 million reflecting acquisition and development of lifestyle community assets of $99.1 million offset by the $60.0 million June institutional placement proceeds. Full deployment of the placement funds is anticipated within the coming months, which will see debt levels increase.

Retirement village resident loans increased by $45.6 million following reclassification of retirement village resident loans held for sale of $42.0 million.

i. Cash Flow

i. Cash Flow
$’000	2016	2015	Change
Operating cash flow	21,028	9,034	11,994
Investing cash flow	(108,278)	(24,232)	(84,046)
Financing cash flow	87,126	15,564	71,562
Net change in cash and cash equivalents	(124)	366	(490)

Operating cash flow for the Group was $21.0 million reflecting growth in the recurring net rental income contribution from lifestyle communities and $5.1 million net cash inflow associated with the sale of new lifestyle community homes.

j. Distributions

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

On 23 February 2016, the directors declared an interim distribution of 4.2 cps (2015: 3.9 cps) amounting to $6,306,884 which was paid on 16 March 2016.
On 23 August 2016, the directors declared a final distribution of 5.1 cps (2015: 4.2 cps) amounting to $8,964,628, to be paid on 14 September 2016.

The full-year distribution is 41.8% 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.

k. FY17 Outlook

The Group remains well positioned to continue growing its lifestyle communities business with a significant and accretive acquisition pipeline in place and significant debt capacity. Further accelerated growth in sales and settlements volumes is expected in FY17 as further projects are launched.

The Group will continue to regularly assess the performance of its existing assets and where appropriate recycle that capital into other opportunities delivering superior returns.

Annual Report 2016

Directors’ Report

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

4. 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 Annual Report. Refer to Note 12 for Australian investment properties acquired during the year, Note 16 for details of increased debt facility, and Note 19 for issued securities.

5. Events Subsequent to Reporting Date

a. Performance Quantum Rights (PQRs)

On 1 July 2016, 619,333 PQRs vested and 598,833 fully paid stapled securities of the Group were subsequently issued to the Executive KMP.

b. Security Purchase Plan

On 20 July 2016, the Group issued 3,022,723 newly stapled securities pursuant to a security purchase plan announced on 14 June 2016. The Group received $8.5 million as consideration for the issued securities.

c. Acquisition of Ocean Lake

On 3 August 2016, the Group settled Ocean Lake Caravan Park on the NSW South Coast. The acquisition price was $9.2 million (excluding transaction costs) and was funded from proceeds of the capital raising in June 2016.

d. Amended Debt Facility

On 18 August 2016, the Group finalised an increase to its Australian multilateral debt facility limit of $24.0 million to $224.0 million. The revised facility has an expiry of $99.0 million on 12 February 2018 and $125.0 million on 12 February 2020 with facility pricing unchanged for the two participating banks. The Loan to Value Ratio and Interest Cover Ratio covenants are unchanged, whilst the Net Debt to Adjusted EBITDA covenant has been removed.

e. Final FY16 Distribution

On 23 August 2016, the directors of the Group resolved to declare a final distribution of 5.1 cps (2015: 4.2 cps) amounting to $8,964,628 to be paid on 14 September 2016. The full-year distribution is 41.8% tax deferred and the dividend reinvestment plan will apply to the final distribution.

7. Environmental Regulation

The Group has policies and procedures in place to ensure that, where operations are subject to any particular and significant environmental regulation under the law of Australia, those obligations are identified and appropriately addressed. The directors have determined that there has not been any material breach of those obligations during the financial year.

8. Group Indemnities

The Group has purchased various insurance policies to cover a range of risks (subject to specified exclusions) for directors, officers and employees of the Group serving in their respective capacities. Key insurance policies include: directors and officers insurance, professional indemnity insurance and management liability insurance.

9. Indemnification of Auditors

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

10. Auditor’s Independence Declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 24.

11. Auditor Extension

On 15 October 2015 at the recommendation of the Audit & Risk Committee, the directors granted an approval for the extension of the Group’s audit partner for a further one year, when the initial period of five years as permitted under the Corporations Act 2001 expired in June 2015. The Audit & Risk Committee’s recommendation was based on the need to ensure the completion of the audit firm’s succession plan for the audit. In doing so, the Audit & Risk Committee satisfied itself that the extension will maintain the quality of the audit and will not give rise to any conflicts of interest.

6. Likely Developments

The Group will continue to pursue strategies aimed at improving its cash earnings, profitability and market share within the rental property industry during the next financial year, with a continuing focus on the development and acquisition of lifestyle communities.

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

12. Rounding of Amounts

Ingenia Communities Group is an entity of the kind referred to in ASIC Instrument 2016/191, and in accordance with that Class Order, amounts in the financial report and Director’s report have been rounded to the nearest thousand dollars, unless otherwise stated.

Ingenia Communities Holdings Limited

13. Message from the Remuneration and Nomination Committee

Dear Securityholders

The Board of Ingenia Communities Group (Ingenia) is pleased to present the Remuneration Report for FY16.

13.1 Introduction

Ingenia undertakes regular reviews of its executive remuneration framework to ensure it is in line with Group strategy, group and individual performance and market relativities. There were only minor changes in the FY16 Key Management Personnel (KMP) remuneration structure.

No major changes to the FY17 KMP remuneration are proposed.

13.2 Ingenia’s Performance

The Board has established a strong nexus between executive remuneration and Ingenia’s performance and its securityholder return.

The Group’s FY16 result, as measured by underlying profit, is strong and significantly increased on the prior year, as supported by the on-target sales result achieved in the development business.

A key measure in determining the executives’ remuneration outcomes is Ingenia’s Total Shareholder Return (TSR) relative to that of the ASX 300 Industrials Index. Ingenia’s TSR over the three years ending 30 June 2016 was 59.0% in relation to the TSR of 9.2% for the ASX 300 Industrials Index for the same period.

Ingenia continues to identify opportunities for future growth with an expanding development pipeline of over 1,400 home sites. Our business continues to perform well and discussions are continuing in relation to the sale of the DMF business, which once completed, will allow the release of capital into higher returning opportunities.

13.3 Ingenia’s Corporate Strategy

The Group’s strategy is highlighted in the FY16 results presentation and the Operational and Financial Review section within this Directors’ report.

The Board has linked remuneration outcomes to the corporate strategy for medium to long-term returns. This is reflected in ensuring there is ongoing earnings growth before vesting of the deferred STI component, the retention of the second Long Term Incentive (LTI) Return on Equity (RoE) hurdle in addition to the requirement that Ingenia’s TSR outperform the ASX 300 Industrial Index for the second tranche of LTI.

13.4 Conclusion

Overall, Ingenia’s remuneration framework continues to be “fit for purpose”, which is why it remained substantially unchanged from 2015.

Remuneration levels are sufficient to attract and retain key executives, the performance measures focus management on board priorities for creating incremental value, and reward outcomes have varied in line with the Group’s performance.

We recommend Ingenia’s Remuneration Report to investors and seek your support for the resolution to adopt the Remuneration Report at Ingenia’s AGM on Tuesday 15 November 2016.

Yours sincerely

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Norah Barlow ONZM Chair – Remuneration and Nomination Committee

FY16 STI outcomes for KMP were in line with Ingenia’s strong performance.

The review of NED remuneration is deferred until December 2016.

10 Annual Report 2016

Directors’ Report

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

14. Remuneration Report (Audited)

14.1 Introduction

The Board presents the Remuneration Report for the Group for the year ended 30 June 2016, which forms part of the Directors’ Report and has been prepared in accordance with section 300A of the Corporations Act 2001 (Cth) (Corporations Act). The data provided in the Remuneration Report was audited as required under section 308(3C) of the Corporations Act.

14.2 Remuneration Governance

a. Remuneration and Nomination Committee (RNC)

The Board has an established RNC, which is directly responsible for reviewing and recommending remuneration arrangements for non-executive directors (NEDs), the Managing Director (MD) and Chief Executive Officer (CEO) and senior executives who report directly to the CEO.

The RNC comprises the following NEDs:

Norah Barlow ONZM (Chair) (Appointed 2 December 2015);
Amanda Heyworth; and
Philip Clark (Chair until 2 December 2015).

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

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

The RNC is required to meet regularly throughout the year (a minimum of twice per year), and considers recommendations from internal management and external advisors.

The Board is ultimately responsible for decisions made on recommendations from the RNC. No director votes on remuneration resolutions that directly impact on their remuneration.

b. External Remuneration Advisers

Guerdon Associates provided independent remuneration advice in respect of KMP and reviewed the rules of the Group’s incentive plan. Guerdon Associates were initially engaged in March 2014 and will continue to provide advice in FY17.

Guerdon Associates have been commissioned by, engaged with, and addressed reports directly to the Chair of the RNC.

The Board is satisfied that the remuneration advice from Guerdon Associates was made free from undue influence of the KMP in respect of whom the advice related, due to there being no engagement with the remuneration advisors outside of the Chair of the RNC. A declaration of independence from Guerdon Associates was provided to the Board in respect of their engagement and their reports to the RNC.

While remuneration services were received, no remuneration recommendations as defined under Division 1, Part 1.2.98 (1) of the Corporations Act, were made by Guerdon Associates.

Ingenia Communities Holdings Limited

14.3 Details of KMP

KMP for the year ended 30 June 2016 are those persons identified as having direct or indirect authority and responsibility for planning, directing and controlling the activities of the Group, and include any executive or NED of the Group.

KMP of the Group for the year ended 30 June 2016 have been determined by the Board as follows:

	Position	Position
NEDs
Jim Hazel	Chairman of the Board
	Member – Investment Committee
Amanda Heyworth	Chair – Audit and Risk Committee
	Member – Remuneration and Nomination Committee
Philip Clark AM	Member –Remuneration and Nomination Committee (Chair until
	2 December 2015)
Robert Morrison	Deputy Chairman of the Board (appointed 2 December 2015)
	Chair – Investment Committee
	Member – Audit and Risk Committee
Norah Barlow ONZM	Chair – Remuneration and Nomination Committee (appointed
	Chair on 2 December 2015)
	Member – Audit and Risk Committee
	Member – Investment Committee
Executive Director
Simon Owen	CEO and MD
Other Executive KMP
Tania Betts	CFO
Nicole Fisher	COO

14.4 Remuneration of Executive KMP

a. Remuneration Policy

The Group’s Remuneration Policy is to ensure that remuneration packages properly reflect the person’s duties and responsibilities and that the remuneration is competitive in attracting, retaining and motivating people of suitable quality.

The structure of remuneration, as explained below, is designed to attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader outcome of long-term value creation for securityholders. The remuneration structures take into account a range of factors, including the following:

Capability, skills and experience;
Ability to impact achievement of the strategic objectives of the Group;
Performance of each individual executive KMP;
The Group’s overall performance;
Remuneration levels being paid by competitors for similar positions; and
The need to ensure continuity of executive talent.

Refer below for detail of the mechanisms that link the remuneration outcomes to individual and the Group’s performance.

Annual Report 2016

Directors’ Report

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

b. Link between Remuneration and Performance

The Board understands the importance of the relationship between the executive KMP remuneration policy and the Group’s performance. Executive KMP remuneration packages are structured to align remuneration outcomes with the interests of securityholders.

Remuneration component	Link to Group performance
Total Fixed Remuneration(TFR)	TFR is set with reference to the executive KMP’s role,
	responsibilities and performance and remuneration levels for
	similar positions in the market.
Short-term incentive(STI)	STIs are awarded to executive KMP whose achievements,
	behaviour and focus meet the Group’s business plan and
	individual Key Performance Indicators(KPIs)measured over
	the financial year. Details of the KPIs are explained below.
	The Board maintains sole discretion over the granting of STIs
	to employees.
	For achievement of STIs in relation to executive KMP, the
	payment is 50% cash and a 50% deferred equity element
	linked to earnings growth sustainability.
	Deferred STI’s are subject to a malus provision.
Long-term incentive(LTI)	LTIs are granted to executive KMP to align their focus with the
	Group’s required Total Shareholder Return(TSR)and Return on
	Equity(ROE)performance measured over three financial years.
	The Board maintains sole discretion over the granting of LTIs.
	LTI grants are made in equity to ensure alignment with
	securityholders’ interests.
	LTIs are subject to a malus provision.

The table below sets out summary information about the Group’s earnings and movement in securityholder wealth for the five years to 30 June 2016, noting that where applicable, certain amounts have been restated for the security consolidation that occurred in November 2015:

	FY16	FY15	FY14	FY13	FY12
Total Underlying Profit ($000)	20,161	17,507	11,568	5,867	7,434
Statutory profit/(loss) ($000)	24,280	25,722	11,518	(10,290)	33,627
Basic EPS(1)	16.1¢	18.8¢	10.8¢	(12.0)¢	45.6¢
Net asset value per security(1)	$2.45	$2.34	$2.13	$2.06	$2.06
Security price at 30th June	$2.87	$2.58	$3.03	$2.07	$1.17
Distributions	9.3¢	8.1¢	6.9¢	6.0¢	–

(1) Movements in securities on issue during the above periods were:

a. FY13, 11,025,000 securities issued under an institutional placement.

b. FY14, 28,176,833 securities issued under the non-renounceable rights issue.

c. FY15, 32,994,679 securities issued under the institutional placement and rights issue, 303,000 upon vesting of RQRs, and 1,112,256 under the distribution reinvestment plan.

d. FY16, 21,428,571 under an institutional placement, 640,333 upon vesting of PQRs, 2,968,285 under the distribution reinvestment plan and associated shortfall placement.

Ingenia Communities Holdings Limited

c. Mix of Remuneration Components

Executive remuneration packages include a mix of TFR, STIs and LTIs. The Group aims to reward executives with a mix of remuneration commensurate with their position and responsibilities and aligned with market practice.

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

The remuneration mix the RNC is aiming to achieve for executives for FY16, expressed as a percentage of total remuneration, is detailed in the table below:

		Maximum	Maximum	Total
KMP	TFR	STI	LTI	remuneration
CEO	43.5%	34.8%	21.7%	100.0%
CFO	55.6%	33.3%	11.1%	100.0%
COO	55.6%	33.3%	11.1%	100.0%

14.5 Total Fixed Remuneration of Executive KMP

TFR is annual salary, calculated on a total cost basis to include salary-packaged benefits grossed up for FBT, employer superannuation contributions and other non-cash benefits that may be agreed from time to time.

The RNC reviews and makes recommendations to the Board in relation to TFR levels for executive KMP on an annual basis.

The TFR for each of the executives for FY16 is:

KMP	TFR(1)
CEO	$650,004
CFO	$334,193
COO(2)	$265,241
Total	$1,249,438

(1) TFR increases for FY16 took effect on 1 October 2015, so they only applied for part of the year.

(2) The COO’s notional full-time TFR is $330,750. The above TFR is based on a 4 day week.

No increase was made to the CEO’s FY16 TFR. The FY16 TFR increases for the CFO and COO were 2.5% and 5.0% respectively. The Board considered these increases reasonable in the context of market remuneration levels for matched positions in comparable companies.

Data ranges for the CFO and COO FY16 TFR were provided by Guerdon Associates. The RNC used an element of judgement to determine the appropriate positioning within this range. Those recommendations were approved by the Board.

14.6 Rights Plan

The current Rights Plan was approved by securityholders at the Annual General Meeting (AGM) held on 12 November 2014.

The Rights Plan provides for the grant of Rights, which upon a determination by the Board that the performance conditions have been met, will result in the issue of stapled securities in the Group for each Right.

The Rights Plan provides for the grant of STI and LTI Rights to both executive KMP and other eligible employees.

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14.7 Short-Term Incentive Plan (STIP)

Under the FY16 Rights Plan, 50% of the maximum STI for the executive KMP will be paid in cash and 50% will be a deferred equity element. The deferred equity component is for a period of 12 months and subject to forfeiture where earnings growth is not sustained. The deferral element is rights to INA stapled securities, plus additional stapled securities equal to the value of distributions during the deferral period on a reinvestment basis.

	Maximum STIP	Maximum STIP	Total Maximum
KMP	(Cash)	Deferred(Rights)	STIP Available
CEO(1)	40% of TFR	40% of TFR	80% of TFR
	$260,000	$260,000	$520,000
CFO	30% of TFR	30% of TFR	60% of TFR
	$100,860	$100,860	$201,720
COO(2)	30% of TFR	30% of TFR	60% of TFR
	$79,380	$79,380	$158,760
Total	$440,240	$440,240	$880,480

(1) Approved by securityholders at the Annual General Meeting held on 17 November 2015.

(2) Based on a 4 day working week.

The FY16 STI Rights are subject to the following terms and conditions:

A ‘malus’ provision during the deferral period, which means that some or all of the STIP Rights may be forfeited if:
the Board determines Ingenia’s earnings growth is not sustainable (in general, this will require earnings growth to be 5% or more on the prior year); or
any of the circumstances set out in the rules of the Rights Plan occur, such as fraud or dishonesty, a breach of obligations or material misstatement of Ingenia’s financial statements;
A one-year deferral period and are eligible to vest on or following 1 October 2017;
On the vesting date Ingenia will cause the relevant number of Ingenia securities to be issued to the executive in accordance with a prescribed formula;
No amount is payable by the executive KMP for the issue or transfer of Ingenia securities to the executive KMP.

The STI award is subject to performance conditions that focus on operating earnings, capital management (for the CEO and CFO only), operational targets, system implementation targets and people and reporting assessments. Each assessment area is weighted. These KPIs have been chosen as they aim to focus individuals on meeting the Group’s business plan. The KPIs specific to the executive are outlined below, together with what the board will consider in determining the achievement of the KPI.

The KPIs are set with ‘threshold’, ‘target’ and ‘stretch’ performance levels, with entitlements calculated on a pro-rata basis between these levels.

The weighting of KPIs for each executive KMP is as follows:

		Capital
KMP	Financial	Management	Operational	Systems	People	Reporting	Total
CEO	40%	25%	20%	–	10%	5%	100%
CFO	30%	15%	–	15%	10%	30%	100%
COO	30%	–	40%	10%	10%	10%	100%

Ingenia Communities Holdings Limited

The key considerations in assessing performance against the KPIs are:

KPI	Executive	Key Considerations in achievement
Financial	CEO, CFO, COO	EBITDA and Underlying Proft per Security measures are used to
		assess fnancial performance. Threshold levels are determined by
		reference to growth on the prior year.
Capital management	CEO, CFO	Non-core asset divestment, capital and debt available on
		competitive pricing and fexible terms.
Systems	CFO, COO	Successful implementation of various fnance and operational
		systems.
Operational	CEO, CFO, COO	Achievement of operational and sales metrics that deliver on
		business strategy, established for each executive KMP specifc for
		their area of responsibility.
People and reporting	CEO, CFO, COO	Recruit and retain leading industry talent. High calibre leadership
		team ofering clear succession opportunities. High quality board
		and statutory reporting, analysis and forecasting. High quality
		management budgeting, reporting, analysis and forecasting.

For FY16 the Board assessed the performance of the CEO, and the CEO assessed the performance of the CFO and COO, against their respective KPIs. The RNC then recommended and the Board approved STIP awards.

The Board approved the FY16 STIP awards as follows:

KMP	Actual STI awarded(1)	Actual STI awarded as a % of maximum STI
CEO	$416,000	80.0%
CFO	$140,195	69.5%
COO	$138,915	87.5%

(1) 50% deferred for 12 months

The CEO’s maximum potential FY16 STIP deferred equity component was approved by securityholders at the AGM held on 17 November 2015. Any FY17 CEO deferred equity component will be subject to securityholder approval at the 2016 AGM to be held on 15 November 2016.

14.8 Long–Term Incentives

a. Long Term Incentive Plan (LTIP)

The objective of the Group’s LTIP is to align the ‘at risk’ compensation of executives with long-term securityholder returns whilst also acting as a mechanism to retain key talent.

The FY16 LTIP Rights are subject to the following LTIP Performance Conditions:

i) 70% based on Relative Total Shareholder Return (Relative TSR), and

ii) 30% based on Return on Equity (ROE).

Relative TSR Performance Condition:

The Relative TSR hurdle is growth in Ingenia’s TSR relative to growth in the ASX 300 Industrials Index (Index), measured over a three-year period ending on 30 September 2018.

The Index was chosen because the Board considers it transparent and more closely aligned to the Group’s core business operations than alternative peer groups.

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

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Ingenia must outperform the Index for the LTIP rights to vest in the executive KMP. The FY16 LTIP Rights will vest on the following basis:

	Growth rate in INA’s Relative TSR	% of Rights that vest
At or Below Threshold	Equal to or less than Index + 1% CAGR	Nil
Between Threshold and Maximum	Between Index + 1% and Index +6%	10% plus an additional amount
	CAGR	progressively vesting on a straight line
		basis between Threshold and Maximum
Maximum	Index + 6% CAGR	100%

CAGR: compound annual growth rate

ROE Performance Condition:

The ROE Performance Condition is intended to focus executive KMP on improving medium to long-term returns.

ROE is defined as underlying profit divided by weighted average net assets. For FY16, the relevant metric is ROE achieved for FY18 on the following basis:

for FY18 on the following basis:
	ROE	% of Rights that vest
At or Below Threshold	Greater than 8.0%	Nil
Between Threshold and Maximum	Equal to or greater than 9.0%	30% plus an additional amount
		progressively vesting on a straight line basis
		between Threshold and Maximum
Maximum	Equal to or greater than 10.0%	100%

The FY16 LTIP methodology determines security value as the VWAP of Ingenia securities in the 30 day trading period ending on the grant date of 1 October 2015 (for the CFO and COO) and 17 November 2015 (for the CEO).

The number of LTIP Rights granted in FY16 was calculated by dividing the LTIP value by the 30 day VWAP of the Ingenia security price as outlined above. Each LTI Right vested equals one Ingenia security plus an additional number of Ingenia securities calculated based on the distributions that would have been paid during the relevant period being reinvested.

FY16 LTIP Rights grants will be entitlements to Rights to stapled securities plus additional stapled securities equal to distributions paid during the vesting period. The Board aims to have executive KMP incentivised to grow distributions to securityholders.

b. Performance Quantum Rights (PQRs) Issued in FY14

Prior to FY15, the Board adopted an LTI scheme that provided for the grant of PQRs that entitled the holder to one Ingenia stapled security if the performance conditions are met.

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

No PQRs have been granted since FY14.

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

Ingenia Communities Holdings Limited

The percentage of FY14 PQRs vesting on 1 July 2016 is determined as follows:

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

c. Summary of PQRs and LTIPs on Issue

The following table sets out all LTIs granted to-date and not vested at 30 June 2016 (note: number of rights granted has been restated for the 6:1 consolidation of Ingenia securities in November 2015):

							Maximum to
	Scheme		Number of		Fair value of	Vesting	expense in
KMP	year	LTI type	rightsgranted	Grant date	rights	date	futureyears
CEO	FY14	PQR	410,000	19-Nov-13	$799,500	1-Jul-16	–
	FY15	LTIP	118,236	12-Nov-14	$179,481	1-Oct-17	$74,839
	FY16	LTIP	122,938	17-Nov-15	$234,444	1-Oct-18	$175,833
CFO	FY14	PQR	106,833	19-Nov-13	$208,325	1-Jul-16	–
	FY15	LTIP	23,257	1-Oct-14	$33,909	1-Oct-17	$14,139
	FY16	LTIP	25,674	1-Oct-15	$48,960	30-Sep-18	$36,720
COO	FY14	PQR	102,500	19-Nov-13	$199,875	1-Jul-16	–
	FY15	LTIP	22,336	1-Oct-14	$32,565	1-Oct-17	$13,579
	FY16	LTIP	25,258	1-Oct-15	$48,167	1-Oct-18	$36,125
Total			957,032		$1,785,226		$351,235

d. LTIP – Termination of Employment

The following outlines the treatment of unvested LTIP Rights at the time of termination of employment. This treatment also applies to unvested STIP Rights.

Where a Participant holding unvested Rights ceases to be an employee of the Group, those Rights immediately lapse.
Notwithstanding the above, where a Participant holding unvested Rights ceases to be an employee of the Group due to a Qualifying Reason, the Board may determine in its discretion, the treatment of those unvested Rights.
Qualifying Reason means:
the death, total and permanent disablement, retirement or redundancy of the Participant as determined by the Board in its absolute discretion; or
any other reason with the approval of the Board.

e. LTIP – Change in Control

In the event of a change in control, the board has absolute discretion as to the treatment of unvested LTIP. In exercising discretion, the board will take into account:

The employee’s length of service in relation to each unvested grant;
Performance to the date of the change in control on any performance measures specified for each grant;
Any other factors that the Board considers relevant.

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14.9 KMP Employment Contracts

CEO and MD

CEO and MD
Contract duration	Commenced 4 June 2012, open-ended
Fixed remuneration	Total fxed remuneration includes cash salary, superannuation and other non-
	cash benefts.
Variable remuneration	Eligible for STI of up to 80% for any one year of the fxed annual
	remuneration, of which 50% is in the form of deferred equity.
	Eligible for LTI of up to 50% for any one year of the fxed annual remuneration.
	The Board may withdraw or vary the STI and LTI schemes at any time by
	written notice to the executive, provided the scheme will not be varied or
	withdrawn part way through a fnancial year in respect of that same fnancial
	year.
Non-compete period	12 months.
Non-solicitation period	12 months.
Notice by Ingenia	12 months.
Notice by executive	12 months.
Treatment on termination	Payment in lieu of notice: Payment may be made in lieu of notice, which would
	include pro rata fxed remuneration and statutory entitlements.
	Treatment of Incentives: As outlined above.

CFO

Contract duration	Commenced 14 May 2012, open-ended.
Fixed remuneration	Total fxed remuneration includes cash salary, superannuation and other non-
	cash benefts.
Variable remuneration eligibility	Eligible for STI of up to 60% for any one year of fxed annual remuneration, of
	which 50% is in the form of deferred equity.
	Eligible for LTI of up to 20% for any one year of fxed annual remuneration.
	The Board may withdraw or vary the STI and LTI schemes at any time by
	written notice to the executive, provided the scheme will not be varied or
	withdrawn part way through a fnancial year in respect of that same fnancial
	year.
Non-compete period	12 months.
Non-solicitation period	12 months.
Notice by Ingenia	6 months.
Notice by executive	6 months.
Treatment on termination	Payment in lieu of notice: Payment may be made in lieu of notice, which
	would include pro rata fxed remuneration and statutory entitlements.
	Treatment of Incentives: As outlined above.

Ingenia Communities Holdings Limited

COO
Contract duration	Commenced 4 June 2012, open-ended.
Fixed remuneration	Total fxed remuneration includes cash salary, superannuation
	and other non-cash benefts, currently based on a four day
	working week.
Variable remuneration eligibility	Eligible for STI of up to 60% for any one year of fxed annual
	remuneration, of which 50% is in the form of deferred equity.
	Eligible for LTI of up to 20% for any one year of fxed annual
	remuneration.
	The Board may withdraw or vary the STI and LTI schemes at any
	time by written notice to the executive, provided the scheme will
	not be varied or withdrawn part way through a fnancial year in
	respect of that same fnancial year.
Non-compete period	12 months.
Non-solicitation period	12 months.
Notice by Ingenia	6 months.
Notice by executive	6 months.
Treatment on termination	Payment in lieu of notice: Payment may be made in lieu of notice,
	which would include pro rata fxed remuneration and statutory
	entitlements.
	Treatment of Incentives: As outlined above.

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14.10 Remuneration Tables

The following tables outline the remuneration provided to KMP excluding NEDs for FY16 and FY15.

				Short-Term
			Super-		STI(1)	Total
			Annuation	STI(1)	Deferred	Short-
KMP	Period	Salary	Benefits	Cash	Rights	Term
CEO	FY16	$630,696	$19,308	$208,000	$208,000	$1,066,004
	FY15	$618,592	$19,506	$136,500	$136,500	$911,098
CFO	FY16	$314,885	$19,308	$70,098	$70,098	$474,388
	FY15	$305,482	$19,506	$31,488	$31,488	$387,964
COO	FY16	$245,933	$19,308	$69,458	$69,458	$404,156
	FY15	$234,067	$19,506	$32,490	$32,490	$318,553
Total	FY16	$1,191,514	$57,924	$347,555	$347,555	$1,944,548
	FY15	$1,158,141	$58,518	$200,478	$200,478	$1,617,615

(1) STIs were accrued in the year ended 30 June 2016 and 30 June 2015.

Ingenia Communities Holdings Limited

	Performance Related
LTI Total	STI+LTI Percent of Total LTI Percent of Total
$385,534 $1,451,538 55% 27% $387,803 $1,298,901 51% 30% $93,132 $567,520 41% 16% $101,555 $489,519 34% 21% $89,663 $493,819 46% 18% $101,570 $420,123 40% 24%
$568,329 $2,512,877 50% 23% $590,928 $2,208,543 45% 27%

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14.11 Non-Executive Directors’ Remuneration

a. NED Fees

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

b. Performance-Based Remuneration

NEDs are remunerated by way of cash and mandated superannuation. They do not participate in performance based remuneration practices unless approved by securityholders. The Group currently has no intention to remunerate NEDs by any way other than cash benefits.

c. Equity-Based Remuneration

Directors are eligible to participate in the existing Rights Plan; however, there is no current intention to grant any Rights to NEDs under this plan. To this end, all NEDs have self-funded the purchase of Ingenia securities on market thereby aligning their interests with securityholders. Details are shown below in Section 14.12.

The Board has introduced a policy guideline for NEDs to hold the equivalent of one year’s gross fees in Ingenia securities within a period of two years from the date of appointment.

d. NED Remuneration Table

The following table outlines the remuneration provided to NEDs for the FY16 and FY15:

		Directors’
NEDs		fees
Jim Hazel	FY16	$172,917
	FY15	$170,000
Amanda Heyworth	FY16	$98,250
	FY15	$93,000
Philip Clark AM	FY16	$94,750
	FY15	$93,000
Robert Morrison	FY16	$97,500
	FY15	$93,000
Norah Barlow ONZM	FY16	$96,250
	FY15	$93,000
Total	FY16	$559,667
	FY15	$542,000

The FY16 NED annual fees were increased effective 1 December 2015 as follows:

Chairman of the board: from $170,000 to $175,000;
Non-executive directors: from $93,000 to $96,000;
Chairs of ARC and RNC: an additional $6,000; and
Deputy chair of the board: an additional $6,000.
In addition to the above fees, all NEDs receive reimbursement for reasonable travel, accommodation and other expenses incurred while undertaking Ingenia business.

Ingenia Communities Holdings Limited

14.12 KMP Interests

Securities held directly, indirectly or beneficially by each KMP, including their related parties, were:

	Balance			On vesting		Balance
Directors	1 July 2015(1)	Acquisitions	Disposals	of rights	30 June 2016
Jim Hazel	278,265	9,011	–	–		287,276
Philip Clark AM	39,683	2,603	–	–		42,286
Amanda Heyworth	106,921	–	–	–		106,921
Robert Morrison	75,556	–	–	–		75,556
Norah Barlow ONZM	34,844	1,105	–	–		35,949
Simon Owen	627,318	–	–	376,667		1,003,985
Total	1,162,587	12,719	–	376,667		1,551,973

(1) Restated for 6:1 consolidation of Ingenia securities in November 2015.

PQRs held by KMP were:

	Balance				Balance
KMP	1 July 2015(1)	Granted	Vested	30 June 2016
Directors
Simon Owen	786,667	–	(376,667)		410,000
Executives
Tania Betts	238,666	–	(131,833)		106,833
Nicole Fisher	234,333	–	(131,833)		102,500
Total	1,259,666	–	(640,333)		619,333

(1) Restated for 6:1 consolidation of Ingenia securities in November 2015.

The balance of 619,333 PQRs vested on 1 July 2016 and 598,833 fully paid stapled securities were issued at that time. LTIP Rights held by KMP were:

	Balance				Balance
	1 July 2015(1)	Granted	Vested	30 June 2016
Directors
Simon Owen	118,236	122,938	–		241,174
Executives
Tania Betts	23,257	25,674	–		48,931
Nicole Fisher	22,336	25,258	–		47,594
Total	163,829	173,870	–		337,699

(1) Restated for 6:1 consolidation of Ingenia securities in November 2015.

Signed in accordance with a resolution of the directors

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Jim Hazel Chairman Sydney, 23 August 2016

24 Annual Report 2016

Auditor’s Independence Declaration

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

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Ingenia Communities Holdings Limited

Consolidated Statement of Comprehensive Income

FOR THE YEAR ENDED 30 JUNE 2016

		2016	2015
	Note	$’000	$’000
Continuing Operations
Revenue
Rental income	5(a)	57,692	44,984
Accrued deferred management fee income	17(b)	4,222	6,788
Manufactured home sales		32,009	14,937
Catering income		3,258	3,538
Service station sales		6,745	2,359
Other property income	5(b)	3,045	3,235
Interest income		170	180
Property expenses		107,141 (21,242)	76,021 (18,024)
Employee expenses		(26,153)	(21,230)
Administrative expenses		(5,129)	(4,880)
Operational, marketing and selling expenses		(3,555)	(3,931)
Cost of manufactured homes sold		(21,729)	(9,256)
Service station expenses		(5,862)	(1,910)
Finance expenses	6	(6,795)	(4,747)
Net foreign exchange gain/(loss)		471	111
Net loss on disposal of investment properties		(989)	(69)
Net gain/(loss) on change in fair value of:
Investment properties		7,496	16,404
Derivatives		(414)	164
Retirement village resident loans	17(b)	(1,388)	(8,878)
Depreciation expense	13(b)	(360)	(322)
Amortisation of intangible assets	14(b)	(266)	(157)
Profit from continuing operations before income tax		21,226	19,296
Income tax benefit	7(a)	3,054	6,604
Profit from continuing operations		24,280	25,900
Profit from discontinued operations(1)	8	–	(178)
Net profit for the year		24,280	25,722
Other comprehensive income, net of income tax
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences during the year		–	1,339
Release of foreign currency translation reserve on disposal of foreign operations		–	(2,374)
Total comprehensive income for the year net of income tax		24,280	24,687

(1) The previous corresponding period profit from discontinued operations relates to the sale of the New Zealand Students business in December 2014.

Annual Report 2016

Consolidated Statement of Comprehensive Income

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

		2016	2015
		$’000	$’000
Profit/(loss) attributable to securityholders of:
Ingenia Communities Holdings Limited		2,243	(850)
Ingenia Communities Fund		21,981	31,039
Ingenia Communities Management Trust		56	(4,467)
		24,280	25,722
Total comprehensive income attributable to securityholders of:
Ingenia Communities Holdings Limited		2,243	(1,942)
Ingenia Communities Fund		21,981	31,265
Ingenia Communities Management Trust		56	(4,636)
		24,280	24,687
		2016	2015
	Note	Cents	Cents
Distributions per security(1)(2)		8.4	7.8
Earnings per security(2):
Basic earnings from continuing operations
Per security	4(a)	16.1	18.9
Per security attributable to parent	4(b)	1.5	(0.6)
Basic earnings
Per security	4(a)	16.1	18.8
Per security attributable to parent	4(b)	1.5	(0.6)
Diluted earnings from continuing operations
Per security	4(a)	16.0	18.9
Per security attributable to parent	4(b)	1.5	(0.6)
Diluted earnings
Per security	4(a)	16.0	18.8
Per security attributable to parent	4(b)	1.5	(0.6)

(1) Distributions relate to the amount paid during the financial year. A final FY16 distribution of 5.1 cps was declared on 23 August 2016 (payment due 14 September 2016) resulting in a total FY16 distribution of 9.3 cps.

(2) Current and previous corresponding period amounts have been restated to account for the 6:1 stapled security consolidation that was completed on 19 November 2015.

Ingenia Communities Holdings Limited

Consolidated Balance Sheet

AS AT 30 JUNE 2016

		2016	2015
	Note	$’000	$’000
Current assets
Cash and cash equivalents		15,057	15,117
Trade and other receivables	10	6,852	4,327
Inventories	11	17,665	13,208
Income tax receivable		18	33
Assets held for sale–investment properties	9	–	61,598
Total current assets		39,592	94,283
Non-current assets
Other receivables	10	3,140	2,649
Investment properties	12	710,746	539,728
Plant and equipment	13	1,943	720
Intangibles	14	1,999	1,579
Deferred tax asset	18	9,399	6,348
Total non-current assets		727,227	551,024
Total assets		766,819	645,307
Current liabilities
Trade and other payables	15	24,857	15,073
Borrowings	16	497	291
Retirement village resident loans	17	207,483	161,878
Employee liabilities		1,382	992
Interest rate swaps		121	3
Liabilities held for sale–retirement village resident loans	9	–	42,041
Total current liabilities		234,340	220,278
Non-current liabilities
Other payables	15	6,770	14,770
Borrowings	16	103,593	66,491
Employee liabilities		227	248
Interest rate swaps		287	–
Total non-current liabilities		110,877	81,509
Total liabilities		345,217	301,787
Net assets		421,602	343,520
Equity
Issued securities	19	722,670	657,214
Reserves	20	1,810	1,334
Accumulated losses	21	(302,878)	(315,028)
Total equity		421,602	343,520
Attributable to securityholders of:
Ingenia Communities Holdings Limited
Issued securities	19	9,492	8,900
Reserves	20	1,810	1,334
Accumulated losses	21	(552)	(3,175)
		10,750	7,059
Ingenia Communities Fund		385,994	315,951
Ingenia Communities Management Trust		24,858	20,510
		421,602	343,520
Net asset value per security(1)		$2.45	$2.34

(1) The previous corresponding period net asset value per security has been restated to account for the 6:1 stapled security consolidation that was completed on 19 November 2015.

28 Annual Report 2016

Consolidated Cash Flow Statement

FOR THE YEAR ENDED 30 JUNE 2016

		2016	2015
	Note	$’000	$’000
Cash flows from operating activities
Rental and other property income		71,193	58,085
Property and other expenses		(56,039)	(51,225)
Proceeds from resident loans	17(b)	11,056	19,815
Repayment of resident loans	17(b)	(5,757)	(10,544)
Proceeds from sale of manufactured homes		35,054	15,736
Purchase of manufactured homes		(29,986)	(19,358)
Proceeds from sale of service station inventory		6,708	2,359
Purchase of service station inventory		(6,113)	(1,936)
Interest received		124	198
Borrowing costs paid		(5,216)	(4,902)
Income tax received		4	806
	32	21,028	9,034
Cash flows from investing activities
Purchase and additions of plant and equipment		(1,729)	(446)
Purchase and additions of intangible assets		(568)	(1,371)
Payments for investment properties		(85,132)	(64,423)
Additions to investment properties		(19,884)	(14,112)
(Costs)/proceeds on sale of investment properties		(989)	56,161
(Costs)/proceeds from sale of equity accounted investments		–	(209)
Amounts received from villages		24	168
		(108,278)	(24,232)
Cash flows from financing activities
Proceeds from issue of stapled securities		67,699	91,968
Payments for security issue costs		(2,243)	(3,870)
Payments for derivatives		–	(444)
Payments for finance leases		(450)	(126)
Distributions to securityholders		(12,513)	(10,105)
Proceeds from borrowings		103,742	65,205
Repayment of borrowings		(68,542)	(125,197)
Payments for debt issue costs		(567)	(1,867)
		87,126	15,564
Net (decrease)/increase in cash and cash equivalents		(124)	366
Cash and cash equivalents at the beginning of the year		15,117	14,551
Effects of exchange rate fluctuation on cash held		64	200
Cash and cash equivalents at the end of the year		15,057	15,117

Ingenia Communities Holdings Limited

Consolidated Statement of Changes in Equity

FOR THE YEAR ENDED 30 JUNE 2016

Note	Attributable to Securityholders
	Ingenia Communities Holdings Limited ICF & ICMT $’000 Total equity $’000 Issued capital $’000 Reserves $’000 Retained earnings $’000 Total $’000
Carrying amount at 1 July 2014 Net profit/(loss) Other comprehensive income	7,377 988 (2,659) 5,706 234,471 240,177 – – (850) (850) 26,572 25,722 – – – – (1,035) (1,035)
Total comprehensive income for the year	– – (850) (850) 25,537 24,687
Transactions with securityholders in their capacity as securityholders: Issue of securities 19 Share-based payment transactions 20 Payment of distributions to securityholders 21 Transfer from reserves to retained earnings	1,523 – – 1,523 86,575 88,098 – 678 – 678 – 678 – – – – (10,120) (10,120) – (332) 332 – – –
Carrying amount at 30 June 2015	8,900 1,334 (3,177) 7,057 336,463 343,520
Carrying amount at 1 July 2015 Net profit/(loss) Other comprehensive income	8,900 1,334 (3,177) 7,057 336,464 343,521
	– – 2,243 2,243 22,037 24,280
	– – – – – –
Total comprehensive income for the year	– – 2,243 2,243 22,037 24,280
Transactions with securityholders in their capacity as securityholders: Issue of securities 19 Share-based payment transactions 20 Payment of distributions to securityholders 21 Transfer from reserves to retained earnings
	592 – – 592 64,864 65,456
	– 858 – 858 – 858
	– – – – (12,513) (12,513)
	– (382) 382 – – –
Carrying amount at 30 June 2016	9,492 1,810 (552) 10,750 410,852 421,602

30 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016

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 2016 was authorised for issue by the directors on 23 August 2016.

At 30 June 2016, the Group recorded a net current asset deficiency of $194,748,000. This deficiency includes retirement village resident loans of $207,483,000. 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. Accordingly, there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable; and the financial report of the Group has been prepared on a going concern basis.

c. Adoption of New and Revised Accounting Standards

No new or revised standards and interpretations were issued by the Australian Accounting Standards Board that are relevant to the Group during the period.

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.

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 Instrument 2015/838, 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 as permitted by Instrument 2016/191.

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.

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

Ingenia Communities Holdings Limited

1. Summary of significant accounting policies (continued)

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

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

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

f. 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.

g. 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.

h. 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 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.

i. Plant and Equipment

Plant and equipment is stated at cost, net of accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing part of the 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 require replacing 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.

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 fair value through profit or loss; loans and receivables; held-tomaturity investments or as available-for-sale. The Group determines the classification of its financial assets and liabilities at initial recognition with the classification depending on the purpose for which the asset or liability was acquired or issued. Financial assets and liabilities are initially recognised at fair value plus directly attributable transaction costs, unless their classification is at fair value through profit or loss. They are subsequently measured at fair value or amortised cost using the effective interest method. Changes in fair value of available-for-sale financial assets are recorded directly in equity. Changes in fair values of any other financial assets and liabilities classified as at fair value through profit or loss are recorded in the income statement.

32 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

1. Summary of significant accounting policies (continued)

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.

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 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.

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 Group holds inventory in relation to the acquisition and development of manufactured homes and service station fuel and supplies both within its Lifestyle & Holidays 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 based on 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 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.

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, tourism cabins and associated amenities.

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. In determining the fair value of certain assets, recent market offers have been taken into consideration.

It is the Group’s policy to have all investment properties independently valued at intervals of not more than two years. It is the policy of the Group 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 investment property are recorded in the statement of comprehensive income.

In determining fair values, the Group considers relevant information including the capitalisation of rental streams using market assessed capitalisation rates, expected net cash flows discounted to their present value using market determined risk adjusted discount rates and other available market data such as recent comparable transactions. The assessment of fair value of investment properties does not take into account potential capital gains tax assessable.

q. Intangible Assets

An intangible asset arising from development expenditure related to software is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use; how the asset will generate future economic benefits; the availability of resources to complete the asset; and the ability to measure reliably the expenditure during its development. Costs capitalised include external direct costs of materials and service, and direct payroll and payroll related costs of employees’ time spent on the project.

Ingenia Communities Holdings Limited

1. Summary of significant accounting policies (continued)

Following the initial recognition of expenditure, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when the development is complete and the asset is available for use. Amortisation is over the period of expected future benefit.

Intangible assets acquired separately, are initially recognised 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.

The Group’s policy applied to capitalised development costs is as follows:

Software and associated development to capitalised development costs (assets in use)

Useful life: Finite Amortisation method using 7 years on a straight line basis; and
Impairment test: Amortisation method reviewed at each financial year-end; closing carrying value reviewed annually for indicators of impairment.

Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed, as incurred. Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is de-recognised.

r. 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.

s. 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.

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 corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

t. 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 1(z) and 26(k) for information regarding the valuation of retirement village resident loans.

u. 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.

34 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

1. Summary of significant accounting policies (continued)

v. 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.

w. 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 on a resident’s ingoing loan, allocated pro-rata over the resident’s expected tenure, together with any share of capital appreciation that has occurred at reporting date. Revenue from the sale of manufactured homes within the Lifestyle & Holidays segment is recognised when the significant risks, rewards of ownership and effective control has been transferred to the buyer.

Service station sales revenue represents the revenue earned from the provision of products to external parties. Sales revenue is only recognised when the significant risks and rewards of ownership of the products including possession are passed to the buyer.

Government incentives are recognised where there is reasonable assurance the incentive will be received, and attached conditions 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.

x. Share-based Payment Transactions

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

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

The income statement expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee expenses.

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

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

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

The dilutive effect of outstanding rights is reflected as additional share dilution in the computation of diluted earnings per share.

y. Income Tax

i. Current income tax

Under the current tax legislation, ICF and its subsidiaries are not liable to pay Australian income tax if their 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. ICMT and its wholly-owned subsidiaries formed a tax consolidated group on 1 July 2012. The ICMT tax consolidated group is subject to Australian income tax.

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

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

Ingenia Communities Holdings Limited

1. Summary of significant accounting policies (continued)

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. Deferred tax assets are recognised for deductible temporary differences only if it is probable that future taxable amounts will be available to utilise those temporary differences. Income taxes related to items recognised directly in equity are recognised in equity and not against income. Critical accounting estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Trust and that are believed to be reasonable under the circumstances.

iii. Tax consolidation

Each of the Company and ICMT and their respective subsidiaries had formed a tax consolidation group by 1 July 2012, 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, the head entity of 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.

z. 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.

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.

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.

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 based on the nature, characteristics and risks of the asset or liability, and the level of the fair value hierarchy, as explained at Note 26.

aa. 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.

bb. 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 securities, adjusted for any bonus element.

Diluted EPS is calculated as net profit attributable to the Group divided by the weighted average number of ordinary securities and dilutive potential ordinary securities, adjusted for any bonus element.

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.

36 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

1. Summary of significant accounting policies (continued)

cc. Pending Accounting Standards

The Group has not early adopted the following standards, interpretations, or amendments that have been issued but are not yet effective:

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, measurement and de-recognition of financial assets and financial liabilities. Changes in the Group’s credit risk, which affect the value of liabilities designated at fair value through profit and loss, can be presented in other comprehensive income. The application of the Standard is not expected to have any material impact on the Group’s financial reporting in future periods.

AASB 15 Revenue from Contracts with Customers is applicable to reporting periods beginning on or after 1 January 2018. The Group has not early adopted this standard. The standard is based on the principle that revenue is recognised when control of a good or service is transferred to a customer. It contains a single model that applies to contracts with customers and two approaches to recognising revenue; at a point in time or over time. The model features a contract-based five-step analysis of transactions, to determine if, how much, and when revenue is recognised. It applies to all contracts with customers except leases, financial instruments and insurance contracts. It requires reporting entities to provide users of financial statement with more informative and relevant disclosures. The Group is currently assessing the impact of this standard, however it does not expect it to have a material impact on future reporting.

AASB 16 Leases is applicable to reporting periods beginning on or after 1 January 2019. The Group has not early adopted this standard. This standard provides requirements for classification, measurement, and disclosure of all leases with a term of more than 12 months unless the underlying asset is of low value. A lease must now measure right-of-use assets similarly to other non-financial assets and lease liabilities similarly to other financial liabilities. Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes non-cancellable lease payments (including inflation-linked payments) and payments made in optional periods, if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease. The Group is currently the lessee of two non-cancellable operating leases, which will be included under this new standard. These leases relate to the Group’s Sydney and Brisbane offices, which have future minimum lease payments totalling $2,527,000 at 30 June 2016. The Group is also the lessee of four finance leases (relating to the land component of investment properties), which are not expected to be materially impacted by the new standard because they are already substantially treated in the manner prescribed by the new standard.

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

dd. 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 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 $710,746,000 (2015: $601,326,000) (refer Note 12 and Note 9), and retirement village residents’ loans with a carrying amount of $207,483,000 (2015: $203,919,000) (refer Note 17 and Note 9), which together represent the estimated fair value of the Group’s property business.

Ingenia Communities Holdings Limited

2. Accounting estimates and judgements (continued)

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. The valuation assumption for properties to be developed reflect assumptions around sales prices for new homes, sales rates, new rental tariffs, estimates of capital expenditure, discount rates and projected property growth rates.

In forming these assumptions, the Group 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 and service station fuel and supplies, 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, and are continually reviewed.

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”) DMF is recognised by the Group over the estimated period of time the property will be leased by the resident, and is realised upon exit of the resident. 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

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. Counterparty valuations are normally 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 for long-term incentive performance rights and the security price at grant date of short-term incentive rights. Refer to Note 24 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.

The Group invests predominantly in rental properties located in Australia with three reportable segments:

Ingenia Garden Villages – rental communities;
Ingenia Settlers – deferred management fee communities; and
Ingenia Lifestyle & Holidays – lifestyle communities comprising permanent and tourism accommodation and the development and sale of manufactured homes.

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 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”.

The results of the Group are affected by the seasonality of lifestyle communities. Occupancy rates of tourism cabins are typically higher in the period December through to March each year due to their geographic location and summer holiday months increasing demand for holiday bookings.

38 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

3. Segment information (continued)

3. Segment information (continued)
b. 2016
	Lifestyle &		Garden	Corporate/
	Holidays	Settlers	Villages	Unallocated	Total
	$’000	$’000	$’000	$’000	$’000
i. Segment revenue
External segment revenue	73,965	6,949	27,516	66	108,496
Interest income	–	–	–	170	170
Reclassification of gain on revaluation of newly
constructed villages	–	(1,525)	–	–	(1,525)
Total revenue	73,965	5,424	27,516	236	107,141
ii. Segment Underlying Proft
External segment revenue	73,965	6,949	27,516	66	108,496
Interest income	–	–	–	170	170
Property expenses	(11,801)	(1,438)	(7,565)	(438)	(21,242)
Employee expenses	(14,010)	(1,054)	(7,154)	(3,935)	(26,153)
Administration expenses	(1,911)	(147)	(872)	(2,199)	(5,129)
Operational, marketing and selling expenses	(2,023)	(480)	(910)	(142)	(3,555)
Manufactured home–cost of sales	(21,729)	–	–	–	(21,729)
Service station expenses	(5,862)	–	–	–	(5,862)
Finance expense	–	–	–	(6,795)	(6,795)
Income tax benefit	–	–	–	2,586	2,586
Depreciation and amortisation	(139)	(9)	(38)	(440)	(626)
Underlying Profit/(Loss) – continuing operations	16,490	3,821	10,977	(11,127)	20,161
Reconciliation of underlying profit to profit from
continuing operations:
Net foreign exchange gain	–	–	–	471	471
Net loss on disposal of investment property	–	(989)	–	–	(989)
Net gain/(loss) on change in fair value of:
Investment properties	(2,283)	2,317	7,462	–	7,496
Retirement village resident loans	–	(1,388)	–	–	(1,388)
Derivatives	–	–	–	(414)	(414)
Gain on revaluation of newly constructed villages	–	(1,525)	–	–	(1,525)
Income tax expense associated with reconciliation
items	–	–	–	468	468
Profit/(loss) from continuing operations per
the consolidated statement of comprehensive
income	14,207	2,236	18,439	(10,602)	24,280
iii. Segment assets	332,851	273,841	140,587	19,540	766,819

Ingenia Communities Holdings Limited

3. Segment information (continued)

3. Segment information (continued)
c. 2015
	Lifestyle &		Garden	Corporate/
	Holidays	Settlers	Villages	Unallocated	Total
	$’000	$’000	$’000	$’000	$’000
i. Segment revenue
External segment revenue	38,810	11,132	28,162	159	78,263
Interest income	–	–	–	180	180
Reclassification of gain on revaluation of newly
constructed villages	–	(2,422)	–	–	(2,422)
Total revenue	38,810	8,710	28,162	339	76,021
ii. Segment Underlying Proft
External segment revenue	38,810	11,132	28,162	159	78,263
Interest income	–	–	–	180	180
Property expenses	(7,918)	(1,694)	(8,042)	(370)	(18,024)
Employee expenses	(8,514)	(1,786)	(7,450)	(3,480)	(21,230)
Administration expenses	(979)	(191)	(959)	(2,751)	(4,880)
Operational, marketing and selling expenses	(1,794)	(608)	(591)	(938)	(3,931)
Manufactured home cost of sales	(9,256)	–	–	–	(9,256)
Service station expenses	(1,910)	–	–	–	(1,910)
Finance expense	–	–	–	(4,747)	(4,747)
Income tax benefit	–	–	–	3,319	3,319
Depreciation and amortisation expense	(113)	(46)	(101)	(219)	(479)
Other	–	(503)	–	–	(503)
Underlying Profit/(Loss) – continuing operations	8,326	6,304	11,019	(8,847)	16,802
Reconciliation of underlying profit to profit from
continuing operations:
Net foreign exchange gain	–	–	–	111	111
Net gain/(loss) on disposal of investment property	(23)	(365)	319	–	(69)
Net gain/(loss) on change in fair value of:
Investment properties	(2,818)	3,269	15,953	–	16,404
Retirement village resident loans	–	(8,878)	–	–	(8,878)
Derivatives	–	–	–	164	164
Gain on revaluation of newly constructed villages	–	(2,422)	–	–	(2,422)
Other	–	503	–	–	503
Income tax benefit associated with reconciliation
items	–	–	–	3,285	3,285
Profit/(loss) from continuing operations per
the consolidated statement of comprehensive
income	5,485	(1,589)	27,291	(5,287)	25,900
iii. Segment assets
Segment Assets	228,329	205,357	129,604	20,419	583,709
Assets held for sale	–	–	–	–	61,598
Total Assets	228,329	205,357	129,604	20,419	645,307

40 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

4. Earnings per security

4. Earnings per security
	2016	2015
a. Per security
Profit attributable to securityholders ($’000)	24,280	25,722
Profit from continuing operations ($’000)	24,280	25,900
Profit/(loss) from discontinued operations ($000)	–	(178)
Weighted average number of securities outstanding (thousands):
Issued securities	150,408	136,944
Dilutive securities (thousands):
Performance quantum rights	620	78
Long-term incentive rights	269	–
Short-term incentive rights	56	–
Weighted average number of issued and dilutive potential securities
outstanding (thousands)	151,353	137,022
Basic earnings per security from continuing operations (cents)	16.1	18.9
Basic earnings per security from discontinued operations (cents)	–	(0.1)
Basic earnings per security (cents)	16.1	18.8
Diluted earnings per security from continuing operations (cents)	16.0	18.9
Diluted earnings per security from discontinued operations (cents)	–	(0.1)
Diluted earnings per security (cents)	16.0	18.8
b. Per security attributable to parent
Profit/(loss) attributable to securityholders ($’000)	2,243	(850)
Weighted average number of securities outstanding (thousands):
Issued securities	150,408	136,944
Dilutive securities (thousands):
Performance quantum rights	620	78
Long-term incentive rights	269	–
Short-term incentive rights	56	–
Weighted average number of issued and dilutive potential securities
outstanding (thousands)	151,353	137,022
Basic earnings per security (cents)	1.5	(0.6)
Diluted earnings per security (cents)	1.5	(0.6)
Basic earnings per security from continuing operations (cents)	1.5	(0.6)
Diluted earnings per security from continuing operations (cents)	1.5	(0.6)

The previous corresponding period weighted average number of securities and earnings per security have been adjusted for the 6:1 stapled security consolidation effective 19 November 2015. Refer to Note 19(c) for further details on the stapled security consolidation.

Ingenia Communities Holdings Limited

5. Revenue

5. Revenue
	2016	2015
	$’000	$’000
a. Rental income
Residential rental income – Garden Villages	23,961	24,367
Residential rental income – Settlers	462	707
Residential rental income – Lifestyle & Holidays	12,311	8,329
Annuals rental income – Lifestyle & Holidays	2,970	1,020
Tourism rental income – Lifestyle & Holidays	17,565	10,323
Commercial rental income – Lifestyle & Holidays	423	238
Total rental income	57,692	44,984
b. Other property income
Government incentives	142	301
Commissions and administrative fees	809	758
Anciliary lifestyle park income	644	307
Sundry income	374	1,067
Utility recoveries	1,076	802
Total other property income	3,045	3,235

6. Finance expense

6. Finance expense
2016	2015
$’000	$’000
Debt facility interest paid or payable 5,636	3,950
Deferred consideration interest on acquisitions 793	533
Finance lease interest paid or payable(1) 366	264
Total finance expense 6,795	4,747

(1) Finance leases relate to certain investment properties and are long-term in nature. Refer to Note 16(c) for further detail.

42 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

7. Income tax benefit

7. Income tax beneft
	2016	2015
	$’000	$’000
a. Income tax beneft
Current tax	–	–
Increase in deferred tax asset	3,054	6,604
Income tax benefit	3,054	6,604
b. Reconciliation between tax expense and pre-tax proft
Profit before income tax	21,226	19,296
Less amounts not subject to Australian income tax	(25,855)	(31,901)
	(4,629)	(12,605)
Income tax benefit at the Australian tax rate of 30% (2015: 30%)	1,389	3,781
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Prior period income tax return true-ups	369	263
Movements in carrying value and tax cost base of investment properties	1,399	1,373
Movements in carrying value and tax cost base of DMF receivables	(59)	1,683
Non deductible expenses	(44)	(496)
Income tax benefit	3,054	6,604

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 during the year ended 30 June 2016.

8. Discontinued operations

The Group completed the sale of the New Zealand Students business in December 2014. Accordingly, there were no results of discontinued operations for 2016. The Group’s 2015 prior comparative period results of ‘disposed of or discontinued operations’ were a loss of $178,000 and net cash outflows of $1,657,000.

9. Assets and liabilities held for sale

As disclosed at 31 December 2015, the five Settlers assets held-for-sale at 30 June 2015 were deemed to no longer meet the required criteria to maintain such classification. Accordingly, the assets were transferred back to investment property ($61,598,000), and the associated loans were transferred back to retirement village resident loans ($42,041,000).

Ingenia Communities Holdings Limited

10. Trade and other receivables

10. Trade and other receivables
	2016	2015
	$’000	$’000
Current
Trade and other receivables	2,218	960
Prepayments	3,946	2,452
Deposits	688	915
Total current trade and other receivables	6,852	4,327
Non-current
Other receivables	3,140	2,649

Rental amounts due are typically paid in advance and other amounts due are receivable within 30 days.

11. Inventories

11. Inventories
	2016	2015
	$’000	$’000
Manufactured homes:
Completed	11,140	7,975
Under construction	6,331	4,900
Service station fuel and supplies	194	333
Total inventories	17,665	13,208

The manufactured homes balance includes:

60 new completed homes (2015: 53)
7 refurbished/renovated completed homes (2015: nil)
31 new homes under construction (2015: 85)
3 refurbished/renovated under construction homes (2015: nil)

12. Investment properties

a. Summary of Carrying Amounts

a. Summary of Carrying Amounts
	2016	2015
	$’000	$’000
Completed properties	643,454	514,125
Properties under development	67,292	25,603
Total carrying amount	710,746	539,728

44 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

12. Investment properties (continued)

b. Individual Valuations and Carrying Amounts

b. Individual Valuations and Carrying Amounts
Property Purchase date Latest external valuation External valuation amount $’000	Carryingamount
	2016 $’000 2015 $’000
Ingenia Settlers: Cessnock, Cessnock, NSW(4) Jun-04 Oct-15 6,604 Forrest Lake, Forest Lake, QLD(4) Nov-05 Sep-15 16,395 Gladstone, South Gladstone, QLD(4) Nov-05 Oct-15 12,572 Rockhampton, Rockhampton, QLD(4) Nov-05 Oct-15 14,416 Ridge Estate, Gillieston Heights, NSW(4) Jul-12 Oct-15 13,078 Lakeside, Ravenswood, WA Apr-07 Oct-15 75,734 Meadow Springs, Mandurah, WA Apr-07 Oct-15 21,022 Ridgewood Rise, Ridgewood, WA Apr-07 Oct-15 108,580	6,793 – 16,103 – 11,333 – 14,087 – 14,887 – 77,224 75,866 20,063 19,103 108,436 109,114
268,401	268,926 204,083
Ingenia Garden Villages: Brooklyn, Brookfield, VIC Jun-04 Jun-15 4,100 Carey Park, Bunbury, WA Jun-04 Jun-15 4,300 Elphinwood, Launceston, TAS Jun-04 Jun-15 3,750 Horsham, Horsham, VIC Jun-04 Jun-15 3,900 Jefferis, Bundaberg North, QLD Jun-04 Jun-15 4,300 Oxley, Port Macquarie, NSW Jun-04 Jun-15 4,200 Townsend, St Albans Park, VIC Jun-04 Jun-15 4,400 Yakamia, Yakamia, WA Jun-04 Jun-15 4,750 Chatsbury, Goulburn, NSW Jun-04 Dec-15 3,600 Claremont, Claremont, TAS Jun-04 Dec-15 3,250 Coburns, Brookfield, VIC Jun-04 Dec-15 3,900 Devonport, Devonport, TAS Jun-04 Dec-15 1,700 Hertford, Sebastopol, VIC Jun-04 Dec-15 3,700 Seascape, Erskine, WA Jun-04 Dec-15 4,700 Seville Grove, Seville Grove, WA Jun-04 Dec-15 3,900 St Albans Park, St Albans Park, VIC Jun-04 Dec-15 4,950 Taloumbi, Coffs Harbour, NSW Jun-04 Dec-15 4,900 Wheelers, Dubbo, NSW Jun-04 Dec-15 4,900 Taree, Taree, NSW Dec-04 Jun-15 3,350 Grovedale, Grovedale, VIC Jun-05 Jun-15 4,700 Glenorchy, Glenorchy, TAS Jun-05 Dec-15 3,800 Marsden, Marsden, QLD Jun-05 Dec-15 8,500 Swan View, Swan View, WA Jan-06 Dec-15 7,150 Dubbo, Dubbo, NSW Dec-12 Dec-15 3,450 Ocean Grove, Mandurah, WA Feb-13 Dec-15 3,700 Peel River, Tamworth, NSW Mar-13 Jun-15 4,100 Sovereign, Ballarat, VIC Jun-13 Dec-15 3,150 Wagga, Wagga Wagga, NSW Jun-13 Dec-15 4,250 Bathurst, Bathurst, NSW Jan-14 Jun-15 3,850 Launceston, Launceston, TAS Jan-14 Jun-15 3,300 Warrnambool, Warrnambool, VIC Jan-14 Jun-15 2,500	4,220 4,100 4,430 4,300 3,970 3,750 3,960 3,900 4,420 4,300 4,360 4,200 4,310 4,400 4,880 4,750 3,680 3,760 3,360 3,420 3,940 3,490 1,709 1,785 3,970 3,910 4,920 4,330 3,960 3,400 5,120 4,620 5,160 4,500 5,130 4,680 3,300 3,350 5,000 4,700 4,110 3,780 8,970 8,640 7,430 6,480 3,640 2,940 3,680 3,290 4,590 4,100 3,320 3,130 4,350 4,000 4,340 3,850 3,460 3,300 2,880 2,500
129,000	134,569 125,655

Ingenia Communities Holdings Limited

12. Investment properties (continued)

12. Investment properties (continued)
Property completed Purchase date Latest external valuation External valuation amount $’000	Carryingamount
	2016 $’000 2015 $’000
Ingenia Lifestyle & Holidays: The Grange, Morisset, NSW Mar-13 Jun-16 10,312 Ettalong Beach, Ettalong Beach, NSW(1) Apr-13 Dec-15 5,788 Albury, Lavington, NSW Aug-13 Jun-16 2,464 Nepean River, Emu Plains, NSW Aug-13 Jun-16 11,000 Mudgee Valley, Mudgee, NSW Sep-13 Jun-16 2,358 Mudgee, Mudgee, NSW Oct-13 Jun-16 4,558 Kingscliff, Kingscliff, NSW Nov-13 Dec-14 10,500 Lake Macquarie (Lifestyle), Morisset, NSW Nov-13 Jun-16 5,263 Chain Valley Bay, Chain Valley Bay, NSW Dec-13 Dec-14 3,700 One Mile Beach, One Mile, NSW(2) Dec-13 Jun-16 12,492 Hunter Valley, Cessnock, NSW Feb-14 Jun-16 8,028 Cessnock, Cessnock, NSW Feb-14 Dec-14 1,000 Sun Country, Mulwala, NSW Apr-14 Jun-16 7,098 Stoney Creek, Marsden Park, NSW May-14 Jun-16 13,002 Rouse Hill, Rouse Hill, NSW(4) Jun-14 Jun-15 16,125 White Albatross, Nambucca Heads, NSW Dec-14 Jun-16 26,650 Noosa, Tewantin, QLD Feb-15 Jun-15 13,000 Chambers Pines, Chambers Flat, QLD Mar-15 Dec-15 15,040 Lake Macquarie (Holidays), Mannering Park, NSW Apr-15 Jun-15 6,800 Sydney Hills, Dural, NSW Apr-15 Jun-16 13,100 Bethania, Benthania, QLD Jul-15 Jun-16 1,537 Conjola Lakeside, Lake Conjola, NSW Sep-15 Jun-16 24,000 Soldiers Point, Port Stephens, NSW Oct-15 Jun-16 11,500 Lara, Lara, VIC Oct-15 Jun-16 1,610 South West Rocks, South West Rocks NSW(3)(6) Feb-16 – – Broulee, Broulee, NSW(3)(6) Mar-16 – –	10,312 11,072 5,853 5,583 2,464 2,275 11,000 13,317 2,358 3,662 4,558 5,934 12,682 11,734 5,263 4,212 – 247 12,492 12,769 8,028 7,589 1,000 1,000 7,098 6,514 13,002 10,940 16,465 16,125 26,650 25,500 14,996 13,000 15,457 14,114 7,500 6,800 13,100 12,000 1,537 – 24,000 – 11,500 – 1,610 – 4,713 – 6,321 –
226,925	239,959 184,387
Total completed properties 624,326	643,454 514,125

46 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

12. Investment properties (continued)

12. Investment properties (continued)
		Carrying	amount
	Purchase	2016	2015
Properties to be developed	date	$’000	$’000
Ingenia Lifestyle & Holidays:
The Grange, Morisset, NSW	Mar-13	2,516	1,291
Albury, Lavington, NSW	Aug-13	3,426	1,993
Mudgee Valley, Mudgee, NSW	Sep-13	2,334	775
Mudgee, Mudgee, NSW	Oct-13	2,270	430
Kingscliff, Kingscliff, NSW	Nov-13	502	444
Lake Macquarie (Lifestyle), Morisset, NSW	Nov-13	648	3,279
Chain Valley Bay, Chain Valley Bay, NSW	Dec-13	5,334	3,700
Hunter Valley, Cessnock, NSW	Feb-14	2,243	2,133
Cessnock, Cessnock, NSW	Feb-14	556	556
Sun Country, Mulwala, NSW	Apr-14	1,519	1,300
Stoney Creek, Marsden Park, NSW	May-14	5,765	7,064
Chambers Pines, Chambers Flat, QLD	Mar-15	8,322	2,638
Bethania, Benthania, QLD	Jul-15	11,889	–
Conjola Lakeside, Lake Conjola, NSW	Sep-15	1,416	–
Soldiers Point, Port Stephens, NSW	Oct-15	13,410	–
Lara, Lara, VIC	Feb-16	5,142	–
Properties to be developed		67,292	25,603
Total investment properties		710,746	539,728

(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) 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.

(3) Land component is leased from the Crown and is recognised as investment property with an associated finance lease.

(4) Previously classified as assets held for sale at 30 June 2015.

(5) Rouse Hill has been valued on a highest and best use basis as a medium density residential development.

(6) Held at purchase price plus any subsequent and supportable capital expenditure in accordance with accounting policy.

Investment property that has not been valued by an external valuer at reporting date is carried at the Group’s estimate of fair value in accordance with the accounting policy detailed at Note 1(p). Properties acquired during the year are carried at purchase price, excluding acquisition costs, plus any subsequent, supportable capital expenditure, which is reflective of the fair value.

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.

Ingenia Communities Holdings Limited

12. Investment properties (continued)

c. Movements in Carrying Amounts

c. Movements in Carrying Amounts
		2016	2015
	Note	$’000	$’000
Carrying amount at beginning of the year		539,728	498,863
Acquisitions		81,536	78,152
Expenditure capitalised		19,946	14,356
Disposals		–	(6,290)
Net transfer from/(to) inventory		442	(159)
Net gain on change in fair value		7,496	16,404
Transferred from/(to) assets held for sale	9	61,598	(61,598)
Carrying amount at end of the year		710,746	539,728

Fair value hierarchy disclosures for investment properties have been provided in Note 27(a).

d. Reconciliation of Fair Value

d. Reconciliation of Fair Value
	Garden		Lifestyle &
	Villages	Settlers	Holidays	Total
	$’000	$’000	$’000	$’000
Carrying amount at 1 July 2015	125,653	204,079	209,996	539,728
Acquisitions Expenditure capitalised Net transfer from inventory Net gain/(loss) on change in fair value(1) Transferred from assets held for sale	– 1,454 – 7,462 –	– 950 – 2,299 61,598	81,536 17,542 442 (2,265) –	81,536 19,946 442 7,496 61,598
Carrying amount at 30 June 2016	134,569	268,926	307,251	710,746

(1) Includes $5,459,939 of transaction costs relating to Ingenia Lifestyle and Holidays acquisitions written off during the year.

48 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

12. Investment properties (continued)

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

	Valuation technique Significant unobservable inputs Range Relationship of unobservable input to fair value
Garden Villages	Capitalisation method Stabilised occupancy Capitalisation rate 70% - 100% 9% - 12% As costs are fixed in nature, occupancy has a direct correlation to valuation (i.e. the higher the occupancy, the greater the value). Capitalisation has an inverse relationship to valuation.
Settlers	Discounted cash flow Current market value per unit Long-term property growth rate Average length of stay – future residents Average length of stay – current residents Discount rate $125,000 - $475,000 3.5% 11.4 years 15.0 - 17.6 years 13.5% - 17.0% Market value and growth in value have a direct correlation to valuation, while length of stay and discount rate have an inverse relationship to valuation. Average length of stay projection is based on life expectancy and other factors.
Lifestyle & Holidays	Capitalisation method (for existing rental streams) Short-term occupancy Residential occupancy Operating profit margin Capitalisation rate 15% - 30% for powered and camp sites; 45% - 70% for tourism and short term rental 100% 30% - 70% dependent upon short-term and residential accommodation mix 8.0% - 13.0% Higher the occupancy, the greater the value. Higher the profit margin, the greater the value. Capitalisation has an inverse relationship to valuation.
	Discounted cash flow (for future development) Discount rate 13% - 15% Discount rate has an inverse relationship to valuation.

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 and applying a capitalisation rate into perpetuity. The capitalisation rate is based on current market evidence. Future income projections take into account occupancy, rental income and operating expenses.

Ingenia Communities Holdings Limited

12. 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 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

	2016	2015
	$’000	$’000
a. Summary of carrying amounts
Plant and equipment	3,434	1,895
Less: accumulated depreciation	(1,491)	(1,175)
Total plant and equipment	1,943	720
b. Movements in carrying amount
Carrying amount at beginning of year	720	517
Assets written off	–	(118)
Additions	1,583	643
Depreciation expense	(360)	(322)
Carrying amount at end of year	1,943	720

14. Intangibles

2016	2015
$’000	$’000
a. Summary of carrying amounts Software & development 2,422	1,736
Less: accumulated amortisation (423)	(157)
Total Intangibles 1,999	1,579
b. Movements in carrying amount Carrying amount at beginning of year 1,579	473
Additions 686	1,263
Amortisation expense (266)	(157)
Carrying amount at end of year 1,999	1,579

50 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

15. Trade and other payables

15. Trade and other payables
	2016	2015
	$’000	$’000
Current
Trade payables and accruals	11,846	10,047
Deposits	2,841	1,184
Other unearned income	1,670	342
Deferred acquisition consideration	8,500	3,500
Total current	24,857	15,073
Non-current
Deferred acquisition consideration	6,770	14,770

16. Borrowings

16. Borrowings
	2016	2015
	$’000	$’000
Current liabilities
Finance leases	497	291
Non-current liabilities
Bank debt	99,100	63,900
Prepaid borrowing costs	(1,373)	(1,681)
Finance leases	5,866	4,272
Total non-current borrowings	103,593	66,491

a. Bank Debt

On 18 February 2016, the Group increased its Australian debt facility limit by $25.0 million. The additional facility matures 12 February 2020 and uses the existing facility covenants and pricing.

The total $200.0 million multi-lateral debt facility is with three Australian banks. The facility maturity dates are:

12 February 2018 ($100.0 million); and
12 February 2020 ($100.0 million)

As at 30 June 2016 the facility has been drawn to $99.1 million (30 June 2015: $63.9 million). The carrying value of investment property net of resident liabilities at reporting date for the Group’s Australian properties pledged as security is $470.3 million (30 June 2015: $363.7 million).

b. Bank Guarantees

The Group has the ability to utilise its bank facility to provide bank guarantees, which were $26.2 million at 30 June 2016 (2015: $28.8 million). Refer to Note 23 for further detail.

c. Finance Leases

The Group has entered into finance leases for the following lifestyle communities:

i. Gosford City Council for the land and facilities of Ettalong Holiday Village
ii. Crown leases for the land of One Mile Beach Holiday Park

iii. Crown lease for the land of Big 4 Broulee Beach Holiday Park

iv. Crown lease for the land of South West Rocks Holiday Park.

The leases are long-term in nature and range between 13.5 years to perpetuity.

Ingenia Communities Holdings Limited

16. Borrowings (continued)

i. Minimum lease payments – excluding perpetual lease

16. Borrowings (continued) i. Minimum lease payments – excluding perpetual lease
	2016	2015
	$’000	$’000
Minimum lease payments:
Within one year	510	299
Later than one year but not later than five years	2,119	1,273
Later than five years	4,565	3,431
Total minimum lease payments	7,194	5,003
Future finance charges	(1,966)	(1,579)
Present value of minimum lease payments	5,228	3,424
Present value of minimum lease payments:
Within one year	497	291
Later than one year but not later than five years	1,832	1,082
Later than five years	2,899	2,051
	5,228	3,424

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 applicable at the time of acquisition of 10.6% applied to the current lease payment. 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.

17. Retirement village resident loans

17. Retirement village resident loans
		2016	2015
	Note	$’000	$’000
a. Summary of Carrying Amounts
Gross resident loans		240,473	191,857
Accrued deferred management fee		(32,990)	(29,979)
Net resident loans		207,483	161,878
b. Movements in Carrying Amounts
Carrying amount at beginning of year		161,878	190,122
Net gain on change in fair value of resident loans		1,388	8,878
Accrued deferred management fee income		(4,222)	(6,788)
Deferred management fee cash collected		1,211	2,056
Proceeds from resident loans		11,056	19,815
Repayment of resident loans		(5,757)	(10,544)
Transfer from/(to) liabilities held for sale	9	42,041	(42,041)
Other		(112)	380
Carrying amount at end of year		207,483	161,878

Fair value hierarchy disclosures for retirement village resident loans have been provided in Note 27.

52 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

18. Deferred tax assets and liabilities

18. Deferred tax assets and liabilities
	2016	2015
	$’000	$’000
Deferred tax assets
Tax losses	20,827	17,496
Other	1,399	1,401
Deferred tax liabilities
DMF receivable	(8,883)	(7,982)
Investment properties	(3,944)	(4,567)
Net deferred tax asset	9,399	6,348
Deductible temporary differences and carried forward losses tax effected for which no
deferred tax asset has been recognised	7,500	7,500

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 securities

19. Issued securities
	2016	2015
	$’000	$’000
a. Carrying Values
At beginning of year	657,214	569,116
Issued during the year:
Dividend Reinvestment Plan (DRP) issues	3,344	2,884
Institutional & DRP placement	64,355	45,315
Rights issue	–	43,769
Institutional placement and rights issue costs	(2,243)	(3,870)
At end of year	722,670	657,214
The closing balance is attributable to the securityholders of:
Ingenia Communities Holding Limited	9,492	8,900
Ingenia Communities Fund	679,161	619,285
Ingenia Communities Management Trust	34,017	29,028
	722,670	657,214
	2016 Thousands	2015 Thousands
b. Number of Issued Securities
At beginning of year	147,118	112,708
Issued during the year:
Retention quantum rights	–	303
Performance quantum rights	640	–
Dividend reinvestment plan	2,968	1,112
Institutional placement	21,429	32,995
At end of year	172,155	147,118

Ingenia Communities Holdings Limited

19. Issued securities (continued)

c. Consolidation of Stapled Securities

At the Annual General Meeting on 17 November 2015, securityholders voted in favour of a consolidation of the Group’s stapled securities. The Group consolidated six stapled securities into one stapled security with effect from 19 November 2015. Where the consolidation resulted in a fraction of a security being held by a securityholder, that fraction was rounded up to the nearest whole security.

d. 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.

20. Reserves

20. Reserves
	2016	2015
	$’000	$’000
Share-based payment reserve
Balance at beginning of year	1,334	988
Transfer from reserves to retained earnings	(382)	(332)
Share-based payment transactions	858	678
Balance at end of year	1,810	1,334

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.

21. Accumulated losses

21. Accumulated losses
	2016	2015
	$’000	$’000
Balance at beginning of year	(315,028)	(330,962)
Net profit for the year	24,280	25,722
Transfer from reserves to retained earnings	383	332
Distributions	(12,513)	(10,120)
Balance at end of year	(302,878)	(315,028)
The closing balance is attributable to the securityholders of:
Ingenia Communities Holding Limited	(552)	(3,175)
Ingenia Communities Fund	(293,866)	(303,335)
Ingenia Communities Management Trust	(8,460)	(8,518)
	(302,878)	(315,028)

54 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

22. Commitments

a. Capital Commitments

There were commitments for capital expenditure on investment property and inventory contracted but not provided for at reporting date of $659,000 (2015: $7,048,000).

b. Operating Lease Commitments

The Group has two non-cancellable operating leases for its Sydney and Brisbane offices. Both leases have remaining lives of four years.

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

	2016	2015
	$’000	$’000
Within one year	598	362
Later than one year but not later than five years	1,929	744
	2,527	1,106

c. Finance Lease Commitments

Refer to Note 16 for future minimum lease payments (including their present value) payable at reporting date.

23. Contingent liabilities

There are no known contingent liabilities other than the bank guarantees totalling $26.2 million provided for under the $200.0 million bank facility. Bank guarantees primarily relate to deferred acquisition consideration ($15.0 million) and the Responsible Entity’s AFSL capital requirements ($10.0 million).

24. Share-based payment transactions

The Group’s current Rights Plan provides for the issuance of rights to eligible employees, which upon a determination by the Board that the performance conditions attached to the rights have been met, result in the issue of stapled securities in the Group for each right. The Rights Plan was approved at the 17 November 2015 Annual General Meeting (AGM) and contains the following:

a. Short-Term Incentive Plan (STIP)

STIP performance rights are awarded to eligible employees whose achievements, behaviour, and focus meet the Group’s business plan and individual Key Performance Indicators (KPIs) measured over the financial year. STIP rights are subject to a one year vesting deferral period from the issue date and allow for certain lapsing conditions within the deferral period, should certain conditions occur. Payment of STIP rights are 50% cash and a 50% deferred equity element linked to earnings growth sustainability.

The deferred expense for conditional STIP rights recognised for the period is $345,064 (2015: $86,356) and is based on an estimate of the Group’s and individual employee’s current period performance. The total value of STIP rights is subject to adjustment up until the final full-year audited result is known and KPIs reliably measured, being 1 October 2016.

b. Long-Term Incentive Plan (LTIP)

LTIP performance rights are granted to individuals to align their focus with the Group’s required Total Shareholder Return (TSR) and Return on Equity (ROE), as measured over three financial years. TSR is benchmarked against the ASX 300 Industrials Index, and contributes 70%, whilst ROE is benchmarked against internal targets, and contributes 30%. The ROE component is a new inclusion for the year ended 30 June 2016. Payment of LTIP rights is in equity, in order to increase alignment with securityholder’s interests.

LTIP rights replaced the Performance Quantum Rights (PQRs) for the year ended 30 June 2015. The last remaining PQRs are due to vest on 1 July 2016.

The number of LTIP rights that will vest depends on the TSR and ROE achieved, and is also conditional on the eligible employee being employed by the Group at the relevant vesting date. One right equates to one security in the Group.

Ingenia Communities Holdings Limited

24. Share-based payment transactions (continued)

Movements in rights during the year were:

	2016	2015
	Thousands	Thousands
PQRs
Outstanding at beginning of year	1,259	1,259
Converted to fully paid stapled securities	(640)	–
Outstanding at end of year(1)	619	1,259
Weighted average remaining life of outstanding rights (years)(1)	–	0.7
LTIPs
Outstanding at beginning of year	164	–
Granted during the year	287	164
Outstanding at end of year	451	164
Weighted average remaining life of outstanding rights (years)	1.8	–
STIPs
Outstanding at beginning of year	–	–
Granted during the year	77	–
Outstanding at end of year	77	–
Weighted average remaining life of outstanding rights (years)	0.3	–

(1) 619,333 PQRs vested on 1 July 2016 and 598,833 fully paid stapled securities were issued at that time. The remaining contractual life of these rights at 30 June 2016 was therefore 1 day.

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

		17 November
Grant Date		2015
Security price at grant date		$2.67
30 day Volume Weighted Average Price (VWAP) at start of performance period		$2.64
Expected remaining life at grant date		2.9
Risk-free interest rate at grant date		2.05%
Distribution yield		4.05% (FY16)
		4.49% (FY17)
		5.62% (FY18)
LTIP right fair value (TSR hurdle)		$1.58
LTIP right fair value (ROE hurdle)		$2.67
Weighted Average LTIP fair value		$1.91

The fair value of LTIPs and PQRs 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 total LTIP and PQR expense recognised for the financial year was $612,459 (2015: $590,928).

56 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

25. 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, 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 primarily monitors its capital position through the Loan to Value Ratio (LVR) which is a key covenant under the Group’s $200.0 million multilateral debt facility. LVR is calculated as the sum of bank debt, bank guarantees, finance leases, and interest rate swaps, less cash at bank, as a percentage of the value of properties pledged as security. The Group’s strategy is to maintain an LVR range of 30-35%. As at 30 June 2016, LVR is 24.9% compared to 22.6% at 30 June 2015.

In addition the Group also monitors Interest Cover Ratio and Net Debt: Adjusted EBITDA as defined under the multilateral debt facility. At 30 June 2016, the Total Interest Cover Ratio was 4.46; the Core Interest Cover Ratio was 3.73 and Net Debt: Adjusted EBITDA was 4.05.

26. 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 Investment, Derivatives, and Borrowing 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 the forecast is unlikely 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 Investment, Derivatives, and Borrowing 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 Investment, Derivatives, and Borrowing 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 Investment, Derivatives, and Borrowing 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 Investment, Derivatives, and Borrowing policy. The policy sets minimum and maximum levels of fixed rate exposure over a ten-year time horizon.

At 30 June 2016, after taking into account the effect of interest rate swaps, approximately 28% of the Group’s borrowings are at a fixed rate of interest (2015: 28%).

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.

Ingenia Communities Holdings Limited

26. 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:

2016 Floating interest rate	Fixed interest maturingin: Less than 1year 1 to 5 Years More than 5years Total
$’000 Financial assets Cash at bank 15,057 – – – 15,057 Financial liabilities Bank debt 99,100 – – – 99,100 Finance leases (excluding perpetual lease) – 497 1,832 2,899 5,228 Interest rate swaps: Group pays fixed rate (44,000) – 44,000 – –

	– – – 15,057

	– – – 99,100
	497 1,832 2,899 5,228

2015
$’000
Financial assets
Cash at bank	15,117	–	–	–	15,117
Financial liabilities
Bank debt	63,900	–	–	–	63,900
Finance leases (excluding perpetual lease)	–	291	1,082	2,051	3,424
Interest rate swaps; Group pays fixed rate	(18,000)	18,000	–	–	–

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 bps) 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).

	Effect on profit after tax higher/(lower)
	2016 $’000 2015 $’000
Increase in average interest rates of 100 bps:
Variable interest rate bank debt (AUD denominated)	(991) (639)
Interest rate swaps (AUD denominated)	1,238 –
Decrease in average interest rates of 100 bps:
Variable interest rate bank debt (AUD denominated)	991 639
Interest rate swaps (AUD denominated)	(735) –

58 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

26. Financial instruments (continued)

e. Foreign Exchange Risk

The Group’s exposure to foreign exchange risk is limited to foreign denominated cash balances and receivables following the divestment of its final overseas operations in December 2014. These amounts are unhedged as cash will be used to cover final costs to wind up the companies and receivables relate to escrows.

f. Net Foreign Currency Exposure

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

	Net foreign currency assets
	2016 $’000 2015 $’000
Net foreign currency exposure: United States dollars New Zealand dollars	3,479 3,491 289 473

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.

i. Effect of appreciation in Australian dollar of 10%:

i. Efect of appreciation in Australian dollar of 10%:
	Effect on profit after tax higher/(lower)
	2016 $’000 2015 $’000
Foreign exchange risk exposures denominated in: United States dollars New Zealand dollars	(316) (317) (26) (43)

ii. Effect of depreciation in Australian dollar of 10%:

	Effect on profit after tax higher/(lower)
	2016 $’000 2015 $’000
Foreign exchange risk exposures denominated in: United States dollars New Zealand dollars	387 388 32 53

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

Ingenia Communities Holdings Limited

26. Financial instruments (continued)

h. 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 Investment, Derivatives, and Borrowing 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.

i. 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 Investment, Derivatives, and Borrowing 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 Investment, Derivatives, and Borrowing 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 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.

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.

60 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

26. Financial instruments (continued)

26. Financial instruments (continued)
	Less than		More than
	1 year	1 to 5 Years	5 years	Total
2016	$’000	$’000	$’000	$’000
Trade and other payables	24,857	6,770	–	31,627
Retirement village residents loans	207,483	–	–	207,483
Borrowings	4,572	38,153	65,711	108,436
Provisions	1,382	227	–	1,609
Finance leases (excluding perpetual lease)	510	2,119	4,565	7,194
Finance lease (perpetual lease)(1)	121	483	–	604
	238,925	47,752	70,276	356,953
2015
Trade and other payables	15,073	14,770	–	29,843
Retirement village residents loans	161,878	–	–	161,878
Borrowings	2,731	68,344	–	71,075
Provisions	992	177	71	1,240
Finance leases (excluding perpetual lease)	299	1,273	3,431	5,003
Finance lease (perpetual lease)(1)	121	483	–	604
Liabilities held for sale	42,041	–	–	42,041
	223,135	85,047	3,502	311,684

(1) For purposes of the table above, the lease payments are included for five years for the perpetual lease. Refer to Note 16(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.

	Less than		More than
	1 year	1 to 5 Years	5 years	Total
2016	$’000	$’000	$’000	$’000
Liabilities
Derivative liabilities – net settled	121	287	–	408
2015
Liabilities
Derivative liabilities – net settled	3	–	–	3

j. 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)
	2016 $’000 2015 $’000
Increase in market prices of investment properties of 10% Decrease in market prices of investment properties of 10%	(24,047) (19,290)
	24,047 19,290

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.

Ingenia Communities Holdings Limited

26. Financial instruments (continued)

k. 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:

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

There has been no movement from Level 3 to Level 2 during the year. Changes in the Group’s retirement village resident loans, which are Level 3 instruments are presented in Note 17.

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

27. 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
2016 Date of valuation Total $’000	Fair value measurement using
	Quoted prices in active markets (Level 1) $’000 Significant observable inputs (Level 2) $’000 Significant unobservable inputs (Level 3) $’000
Investment properties 30 June 2016 Refer Note 12 710,746	– – 710,746
2015
Investment properties 30 June 2015 Refer Note 12 539,728 Assets held for sale - investment property 30 June 2015 Refer Note 9 61,598	– – 539,728 – 61,598 –

62 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

27. Fair value measurement (continued)

b. Liabilities Measured at Fair Value

b. Liabilities Measured at Fair Value
2016 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 2016 Refer Note 17 207,483 Derivatives 30 June 2016 408	– – 207,483
	– 408 –
2015
Retirement village resident loans 30 June 2015 Refer Note 17 161,878 Derivatives 30 June 2015 3	– – 161,878 – 3 –

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

28. Auditor’s remuneration

28. Auditor’s remuneration
	2016	2015
	$	$
Amounts received or receivable by EY for:
Audit or review of the financial reports	440,461	469,524
Other audit related services	54,848	140,738
Non audit related services	35,570	–
	530,879	610,262

29. Related parties

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

	2016	2015
	$	$
Directors fees	559,667	542,000
Salaries and other short-term benefits	1,191,514	1,158,141
Short-term incentives	695,110	400,956
Superannuation benefits	57,924	58,518
Share-based payments	568,329	590,928
	3,072,544	2,750,543

The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to KMP. The aggregate rights outstanding of the Group held directly by KMP are as follows:

Issue date Right Type Expirydate	Number outstanding
	2016 2015
FY13 PQR FY16 FY14 PQR FY17 FY15 STIP FY17 FY15 LTIP FY18 FY16 LTIP FY19	– 640,333 619,333 619,333 76,548 – 163,829 163,829 173,870 –
	1,033,580 1,423,495

Ingenia Communities Holdings Limited

30. Company financial information

Summary financial information about the Company is:

	2016	2015
	$’000	$’000
Current assets	189	177
Total assets	3,530	5,315
Current liabilities	1,633	5,747
Total liabilities	2,670	4,014
Net assets	861	1,301
Securityholders’ equity Issued securities	9,492	8,900
Reserves	1,810	1,334
Accumulated losses	(10,441)	(8,933)
Total securityholders’ equity	861	1,301
Loss from continuing operations	(1,462)	(1,118)
Net loss attributable to securityholders	(1,462)	(1,118)
Total comprehensive income	(1,462)	(1,118)

The Company is a joint guarantor of the $200.0 million multi-lateral debt facility, which has been drawn to $99.1 million at 30 June 2016 (2015: $63.9 million).

31. 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):

Country of
residence

Ownershipinterest

2016
%
2015
%

Bridge Street Trust
Australia
Browns Plains Road Trust
Australia
Casuarina Road Trust
Australia
Edinburgh Drive Trust
Australia
Garden Villages Management Trust
Australia
INA CC Holdings Pty Ltd
Australia
INA CC Pty Ltd
Australia
INA Community Living Lynbrook Trust
Australia
INA CC Trust
Australia
INA Community Living Subsidiary Trust
Australia
INA Community Living Subsidiary Trust No. 2
Australia
INA Garden Villages Pty Ltd
Australia
INA Kiwi Communities Pty Ltd
Australia
INA Kiwi Communities Subsidiary Trust No. 1
Australia
INA Management Pty Ltd
Australia
INA Regency Co Pty Ltd
Australia
INA Settlers Co Pty Ltd
Australia
INA Sunny Communities Pty Ltd
Australia
INA Sunny Trust
Australia

100
100
100
100
100
100
100
100
100
100
–
100
–
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100

64 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

31. Subsidiaries (continued)

31. Subsidiaries (continued)
Country of residence	Ownershipinterest
	2016 % 2015 %
Ingenia Communities RE Limited Australia Jefferis Street Trust Australia Lovett Street Trust Australia ILF Regency Operations Trust Australia ILF Regency Subsidiary Trust Australia Settlers Operations Trust Australia Settlers Subsidiary Trust Australia SunnyCove Gladstone Unit Trust Australia SunnyCove Rockhampton Unit Trust Australia Ridge Estate Trust Australia Taylor Street (2) Trust Australia INA Subsidiary Trust No.1 Australia INA Subsidiary Trust No.3 Australia INA Operations Pty Ltd Australia INA Operations Trust No.1 Australia INA Operations Trust No.2 Australia INA Operations Trust No.3 Australia INA Operations Trust No.4 (formerly INA Subsidiary Trust No.2) Australia INA Operations Trust No.6 Australia INA Operations Trust No.7 Australia INA Operations Trust No.8 Australia INA Operations Trust No.9 Australia INA Operations No.2 Pty Limited Australia Settlers Property Trust Australia INA Operations No.3 Pty Limited Australia IGC NZ Student Holdings Ltd New Zealand INA NZ Subsidiary Unit Trust No 1 New Zealand CSH Lynbrook GP LLC USA CSH Lynbrook LP USA Lynbrook Freer Street Member LLC USA Lynbrook Management, LLC USA INA Community Living LLC (formerly ING Community Living LLC) USA INA Community Living II LLC (formerly ING Community Living II LLC) USA INA US Community Living Fund LLC (formerly ING US Community Living Fund LLC) USA	100 100 100 100 100 100 – 100 – 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 – 100 – 100 100 100 – 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

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

Ingenia Communities Holdings Limited

32. Notes to the cash flow statement

Reconciliation of profit to net cash flow from operating activities

	2016	2015
	$’000	$’000
Net profit for the year Adjustments for: Net foreign exchange (gain)/loss Release of FCTR on disposal of foreign operations Net loss on disposal of investment properties – continuing Net loss on disposal of investment properties – discontinued Net (gain)/loss on change in fair value of: Investment properties – continuing Derivatives Retirement village resident loans Income tax expense/(benefit): Continuing Discontinued Depreciation and amortisation Share-based payments expense Amortisation of borrowing costs Other non-cash items	24,280 (471) – 989 – (7,496) 414 1,388 (3,123) (4) 626 858 573 2	25,722 927 (2,374) 69 2,014 (16,404) (164) 8,878 (6,604) 214 479 678 536 –
Operating profit for the year before changes in working capital Changes in working capital: (Increase)/decrease in receivables Increase in inventory Increase in retirement village residents’ loans Increase/(decrease) in other payables and provisions	18,036 784 (4,457) 3,563 3,102	13,971 (2,599) (11,750) 12,446 (3,034)
Net cash provided by operating activities	21,028	9,034

Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

33. Subsequent events

a. Performance Quantum Rights (PQRs)

On 1 July 2016, 619,333 Performance Quantum Rights vested and 598,833 fully paid stapled securities were subsequently issued to certain KMP.

b. Security Purchase Plan

On 20 July 2016 the Group issued 3,022,723 new stapled securities pursuant to a security purchase plan announced on 14 June 2016. The Group received $8.5 million as consideration for the issued securities.

c. Acquisition of Ocean Lake

d. Amended Debt Facility

On 18 August 2016, the Group finalised an increase to its Australian multilateral debt facility limit of $24.0 million to $224.0 million. The revised facility has an expiry of $99.0 million on 12 February 2018 and $125.0 million on 12 February 2020 and with facility pricing unchanged for the two participating banks. The Loan to Value Ratio and Interest Cover Ratio covenants are unchanged, whilst the Net Debt to Adjusted EBITDA covenant has been removed.

e. Final FY16 Distribution

Ingenia Communities Holdings Limited

Directors’ Declaration

FOR THE YEAR ENDED 30 JUNE 2016

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

In the opinion of the directors:
(a) the financial statements and notes of Ingenia Communities Holdings Limited for the financial year ended 30 June 2016 are in accordance with the Corporations Act 2001 , including:
- (i) giving a true and fair view of its financial position as at 30 June 2016 and of its performance for the year ended on that date; and
- (ii) complying with Accounting Standards (including Australian Accounting Interpretations) and Corporations Regulations 2001 ; and
(b) there are reasonable grounds to believe that Ingenia Communities Holdings Limited will be able to pay its debts as and when they become due and payable.
The financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 1(b).
This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 .

On behalf of the Board

==> picture [103 x 39] intentionally omitted <==

Jim Hazel Chairman Sydney, 23 August 2016

68 Annual Report 2016

Independent Auditor’s Report

FOR THE YEAR ENDED 30 JUNE 2016

==> picture [496 x 678] intentionally omitted <==

Ingenia Communities Holdings Limited

Independent Auditor’s Report

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

==> picture [496 x 678] intentionally omitted <==

Annual Report 2016

Ingenia Communities Fund & Ingenia Communities Management Trust Annual Reports

FOR THE YEAR ENDED 30 JUNE 2016

Contents	Contents
Directors’ Report		71
Auditor’s Independence Declaration		74
Consolidated Statements of Comprehensive Income		75
Consolidated Balance Sheets		77
Consolidated Cash Flow Statements		78
Statements of Changes in Unitholders’ Interest		79
Notes to the Financial Statements		80
1.	Summary of signifcant accounting policies	80
2.	Accounting estimates and judgements	86
3.	Segment information	86
4.	Earnings per unit	91
5.	Income tax beneft	91
6.	Discontinued operations	92
7.	Assets and liabilities held for sale	92
8.	Trade and other receivables	92
9.	Inventories	93
10.	Investment properties	94
11.	Plant and equipment	95
12.	Intangibles	95
13.	Trade and other payables	95
14.	Borrowings	96
15.	Retirement village resident loans	97
16.	Deferred tax assets and liabilities	97
17.	Issued units	98
18.	Accumulated losses	98
19.	Commitments	99
20.	Contingencies	99
21.	Capital management	99
22.	Financial instruments	100
23.	Fair value measurement	105
24.	Auditor’s remuneration	107
25.	Related parties	107
26.	Parent fnancial information	109
27.	Subsidiaries	110
28.	Notes to the cash fow statements	112
29.	Subsequent events	113
Directors’ Declaration		114
Independent Auditor’s Report		115

Ingenia Communities Holdings Limited 71

Directors’ Report

FOR THE YEAR ENDED 30 JUNE 2016

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 (“ICRE” or “Responsible Entity”) is Ingenia Communities Holdings Limited (the “Company” or “ICH”). 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 Annual Report.

The directors’ report is a combined directors’ report that covers both Trusts for the full year ended 30 June 2016 (the “current period”).

Directors

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

Non-executive Directors (NEDs) Jim Hazel (Chairman)	Non-executive Directors (NEDs) Jim Hazel (Chairman)
Robert Morrison	(Appointed as Deputy Chairman
	on 2 December 2015)
Philip Clark AM
Amanda Heyworth
Norah Barlow ONZM
Executive director Simon Owen	(Chief Executive Ofcer & Managing
	Director) (“CEO” & “MD”)

Operating and financial review

a. ICF and ICMT Overview

ICF and ICMT are two of the entities that form part of the Ingenia Communities Group (the “Group”) which is a triple stapled structure traded on the ASX.

The Group is an active owner, manager and developer of a diversified portfolio of retirement and lifestyle communities across Australia. Its real estate assets at 30 June 2016 were valued at $496.8 million (net of finance leases and resident loans), being 26 lifestyle communities (Ingenia Lifestyle & Holidays), 31 rental villages (Ingenia Garden Villages), and eight deferred management fee communities (Ingenia Settlers). The Group is in the ASX 300 with a market capitalisation of approximately $500.0 million.

b. Strategy

The strategies of ICF and ICMT are aligned with the Group’s strategy of continuing to be focused on further accelerating development of lifestyle communities and identifying ways to enhance the operational performance of its asset base through both effective cost management and identification of additional revenue streams. Using a disciplined investment framework, the Group will continue to acquire further lifestyle communities as identified in the recent June 2016 equity raising as well as recycling capital from underperforming assets into accretive opportunities.

A key element to achieving growth is efficient operational and capital management. During the year, the Group increased its debt facility by $25.0 million to $200.0 million and subsequent to year-end has increased this facility by a further $24.0 million to $224.0 million. As at 30 June 2016, the facility is drawn to $125.3 million (including bank guarantees), which represents a loan to value ratio (“LVR”) of 24.9%. LVR is well below our target range of 30-35% at 30 June 2016 following the temporary application of proceeds from the recent June equity raising against debt prior to deployment into the four acquisition opportunities outlined to the market, which will move the LVR back into the target range.

c. FY16 Financial Results

Significant investment in lifestyle communities continued during FY16, with the focus on bedding down the sales and development platform to deliver development pipeline returns. Management has also remained focused on occupancy for rental communities as well as the room rate and occupancy growth within the lifestyle tourism communities.

In June 2016, the Group raised $60.0 million from an institutional placement, which will be used to fund four lifestyle community acquisitions, including a $33.0 million lifestyle community within the Sydney metro area with significant development upside. Over the year, the Group invested an additional $74.1 million (excluding transaction costs) into six lifestyle communities.

d. Key Metrics

Net Profit (continuing operations) for the year for ICF $25.9 million, down 19% from FY15.
Net Profit (continuing operations) for the year for ICMT of $0.06 million (2015: $4.1 m loss).
Full year distribution of 9.3 cents per security by ICF, nil from ICMT.

Annual Report 2016

Directors’ Report

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

Operating and financial review (continued)

e. Continuing Operations

The key strategic priorities of the continuing operations are:

Continue building velocity in the delivery and sale of new lifestyle community homes, with a focus on East Coast metro and coastal locations;
Acquire additional lifestyle communities as well as invest in existing yield assets;
Grow occupancy and average room rates for lifestyle tourism communities;
Continue strategy of divesting the Ingenia Settlers portfolio and recycle this capital into development of lifestyle communities;
Continue to gradually grow occupancy rates within rental communities; and
Improve asset cash yields through operational efficiencies including revenue optimisation and disciplined cost management.

f. Capital Management

The Trusts adopt a prudent and considered approach to capital management. During the year, the Group strengthened its capital position by undertaking a $60.0 million capital raising and negotiating a $25.0 million increase to its multilateral debt facility. Subsequent to 30 June 2016, a further $24.0 million facility increase is in place and a further $8.5 million was raised from the Security Purchase Plan in July 2016.

g. Distributions

The following distributions were made by ICF during or in respect of the year:

On 23 February 2016, the directors declared an interim distribution of 4.2 cps (2015: 3.9 cps) amounting to $6,306,884 which was paid on 16 March 2016.
On 23 August 2016, the directors declared a final distribution of 5.1 cps (2015: 4.2 cps) amounting to $8,964,628, to be paid on 14 September 2016.

The full-year distribution is 41.8% 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.

h. Outlook

The Trusts are well positioned to continue growing their lifestyle communities business with a significant and accretive acquisition pipeline in place and significant debt capacity. Further accelerated growth in sales and settlements volumes is expected in FY17 as further projects are launched.

The Trusts will continue to regularly assess the performance of its existing assets and where appropriate recycle that capital into other opportunities delivering superior returns.

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 Annual Report. Refer to Note 10 for Investment properties acquired or disposed of during the year, Note 14 for details of Australian debt refinanced and Note 17 for issued units.

Events subsequent to reporting date

a. Performance Quantum Rights (PQRs)

On 1 July 2016, 619,333 PQRs vested and 598,833 fully paid stapled securities of the Group were subsequently issued to the Executive KMP.

b. Security Purchase Plan

On 20 July 2016, the Group issued 3,022,723 newly stapled securities pursuant to a security purchase plan announced on 14 June 2016. ICF received $8.5 million as consideration for the issued securities.

c. Acquisition of Ocean Lake

On 3 August 2016, ICMT settled Ocean Lake Caravan Park on the NSW South Coast. The acquisition price was $9.2 million (excluding transaction costs) and was funded from proceeds of the capital raising in June 2016.

d. Amended Debt Facility

On 18 August 2016, ICF finalised an increase to its Australian multilateral debt facility limit of $24.0 million to $224.0 million. The revised facility has an expiry of $99.0 million on 12 February 2018 and $125.0 million on 12 February 2020 with facility pricing unchanged for the two participating banks. The Loan to Value Ratio and Interest Cover Ratio covenants are unchanged, whilst the Net Debt to Adjusted EBITDA covenant has been removed.

e. Final FY16 Distribution

On 23 August 2016, the directors of ICF resolved to declare a final distribution of 5.1 cps (2015: 4.2 cps) amounting to $8,964,628 to be paid at 14 September 2016. The full-year distribution is 41.8% tax deferred and the dividend reinvestment plan will apply to the final distribution.

Likely developments

The Trusts will continue to pursue strategies aimed at improving cash earnings, profitability and market share within the rental property industry during the next financial year, with a continuing focus on the development and acquisition of land lease communities.

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 this Annual Report.

Ingenia Communities Holdings Limited

Environmental regulation

The Trusts have policies and procedures in place to ensure that, where operations are subject to any particular and significant environmental regulation under the law of Australia, those obligations are identified and appropriately addressed. The directors have determined that there has not been any material breach of those obligations during the financial year.

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.

Interests of directors of the Responsible Entity

Units in each Trust held by directors of the Responsible Entity or associates of the directors as at 30 June 2016 were:

	Number of
	units Rights
	Jim Hazel 287,276 – Philip Clark AM 42,286 – Amanda Heyworth 106,921 – Robert Morrison 75,556 – Norah Barlow ONZM 35,949 – Simon Owen 1,003,985 651,174

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 25 in the financial report.

Auditor’s independence declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 74.

Auditor extension

Rounding of amounts

The Trusts are of a kind referred to in Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to the “rounding off’’ of amounts in this report and in the financial report. Amounts in these reports have been rounded off in accordance with that Class Order to the nearest thousand dollars, unless otherwise stated.

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

==> picture [103 x 39] intentionally omitted <==

Jim Hazel Chairman Sydney, 23 August 2016

74 Annual Report 2016

Auditor’s Independence Declaration

FOR THE YEAR ENDED 30 JUNE 2016

==> picture [496 x 678] intentionally omitted <==

Ingenia Communities Holdings Limited

Consolidated Statements of Comprehensive Income

FOR THE YEAR ENDED 30 JUNE 2016

Note	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Continuing operations Revenue Rental income Accrued deferred management fee income 15 Manufactured home sales Catering income Other property income Service station sales Interest income	9,101 9,720 57,696 44,984 – – 4,222 6,788 – – 32,009 14,937 – – 3,258 3,538 – – 3,045 3,076 – – 6,745 2,359 17,105 14,564 14 7
Property expenses Employee expenses Administrative expenses Operational, marketing and selling expenses Cost of manufactured homes Service station expenses Finance expenses Net foreign exchange gain Net gain/(loss) on disposal of investment properties Net gain/(loss) on change in fair value of: Investment properties 10 Derivatives Retirement village resident loans 15 Responsible Entity’s fees and expenses 25 Depreciation expense 11 Amortisation of intangible assets 12	26,206 24,284 106,989 75,689 (222) (327) (30,080) (27,372) – – (22,385) (17,061) (170) (506) (2,821) (2,689) – (648) (3,358) (3,150) – – (21,729) (9,256) – – (5,862) (1,910) (5,367) (3,601) (17,941) (15,144) 422 107 45 – – (1,689) (638) 1,620 7,668 15,922 (172) 482 (414) 164 – – – – (1,388) (8,878) (2,244) (1,676) (2,693) (2,165) (24) (117) (72) (102) – – (346) (157)
Profit/(loss) from continuing operations before income tax Income tax benefit 5	25,855 31,913 (2,451) (10,093) – – 2,507 6,019
Profit/(loss) from continuing operations Profit/(loss) from discontinued operations 6	25,855 31,913 56 (4,074) (3,874) 2,587 – (3,854)
Net profit/(loss) for the period	21,981 34,500 56 (7,928)

76 Annual Report 2016

Consolidated Statements of Comprehensive Income

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Net profit/(loss) for the period Other comprehensive income, net of income tax Items that may be reclassified subsequently to profit or loss: Foreign currency translation differences arising during the period Release of foreign currency translation reserve on disposal of foreign operations	21,981 34,500 56 (7,928) – 1,846 – (169) – (1,620) – –
Total comprehensive income for the period, net of income tax	21,981 34,726 56 (8,097)
Profit/(loss) attributable to unitholders of: Ingenia Communities Fund Ingenia Communities Management Trust	21,981 34,500 – (3,461) – – 56 (4,467)
	21,981 34,500 56 (7,928)
Total comprehensive income attributable to unitholders of: Ingenia Communities Fund Ingenia Communities Management Trust	21,981 34,726 – (3,461) – – 56 (4,636)
	21,981 34,726 56 (8,097)

		2016	2015	2016	2015
	Note	Cents	Cents	Cents	Cents
Distributions per unit(1)		8.4	7.8	–	–
Earnings per unit(1):
Basic earnings from continuing operations	4	17.2	23.4	–	(3.0)
Basic earnings	4	14.6	25.2	–	(6.0)
Diluted earnings from continuing operations	4	17.1	15.0	–	(1.8)
Diluted earnings	4	14.5	16.2	–	(3.6)

(1) Current and previous corresponding period amounts have been restated to account for the 6:1 stapled security consolidation that was completed on 19 November 2015.

Ingenia Communities Holdings Limited

Consolidated Balance Sheets

AS AT 30 JUNE 2016

Note	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Current assets Cash and cash equivalents Trade and other receivables 8 Inventories 9 Income tax receivable Assets held for sale - investment properties 7	8,329 8,966 6,621 6,094 2,599 2,643 6,684 4,104 – – 17,665 13,208 – 16 19 16 – – – 61,598
Total current assets	10,928 11,625 30,989 85,020
Non-current assets Trade and other receivables 8 Receivable from related party 25 Investment properties 10 Plant and equipment 11 Intangibles 12 Investments Deferred tax asset 16	31,818 31,401 300 110 285,972 185,798 – – 162,795 153,434 547,951 386,294 103 122 1,018 459 2 2 1,962 1,577 – 3,874 – – – – 7,084 4,606
Total non-current assets	480,690 374,631 558,315 393,046
Total assets	491,618 386,256 589,304 478,066
Current liabilities Trade and other payables 13 Borrowings 14 Retirement village resident loans 15 Employee liabilities Interest rate swaps Liabilities held for sale 7	1,266 1,200 22,168 12,785 – – 2,962 2,817 – – 207,483 161,878 – – 1,164 830 121 3 – – – – – 42,041
Total current liabilities	1,387 1,203 233,777 220,351
Non-current liabilities Trade and other payables 13 Payable to related party 25 Borrowings 14 Employee liabilities Interest rate swaps	– – 6,770 14,770 – – 288,769 189,635 97,764 62,217 34,905 33,252 – – 227 248 287 – – –
Total non-current liabilities	98,051 62,217 330,671 237,905
Total liabilities	99,438 63,420 564,448 458,256
Net assets	392,180 322,836 24,856 19,810
Equity Issued units 17 Accumulated losses 18	679,161 619,285 34,017 29,028 (286,981) (296,449) (8,461) (8,518)
Unitholders’ interest Non-controlling interest	392,180 322,836 25,556 20,510 – – (700) (700)
Total equity	392,180 322,836 24,856 19,810
Attributable to unitholders of: Ingenia Communities Fund Ingenia Communities Management Trust	392,180 322,836 (700) (700) – – 25,556 20,510
	392,180 322,836 24,856 19,810

78 Annual Report 2016

Consolidated Cash Flow Statements

FOR THE YEAR ENDED 30 JUNE 2016

Note	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Cash flows from operating activities Rental and other property income Property and other expenses Proceeds from resident loans Repayment of resident loans Proceeds from sale of manufactured homes Purchase of manufactured homes Proceeds from sale of service station inventory Purchase of service station inventory Interest received Borrowing costs paid Income tax received/(paid)	– – 71,147 57,922 (898) (998) (48,049) (45,256) – – 11,056 19,815 – – (5,757) (10,543) – – 35,054 15,735 – – (29,986) (19,358) – – 6,708 (1,936) – – (6,113) 2,362 104 167 20 17 (4,109) (3,132) (1,107) (1,771) – 800 4 (5)
28	(4,903) (3,163) 32,977 16,982
Cash flows from investing activities Purchase and additions of plant and equipment Purchase and additions of intangible assets Additions to investment properties Proceeds/(costs) from sale of investment properties Payments for investment properties Amounts received from/(advanced to) villages Costs of equity accounted investments	(4) (2) (835) (415) – – (529) (1,364) (1,423) (1,292) (18,475) (12,820) (36) 6,650 (16) 49,511 – – (85,113) (64,423) – – 24 168 – (207) – (2)
	(1,463) 5,149 (104,944) (29,345)
Cash flows from financing activities Proceeds from the issue units Payment of unit issue costs Distributions to unitholders Finance lease payments Proceeds of/(repayments from) related party borrowings Proceeds from borrowings Repayment of borrowings Payments for debt issue costs Payments for derivatives	61,940 74,787 4,676 15,587 (2,064) (3,143) (150) (656) (12,513) (8,794) – (1,311) – – (450) (126) (76,304) 3,147 68,384 (237) 103,742 65,205 – – (68,542) (125,197) – – (559) (1,789) – – – – – (444)
	5,700 4,216 72,460 12,813
Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Effects of exchange rate fluctuation on cash held	(666) 6,202 493 450 8,966 2,658 6,094 5,550 29 106 34 94
Cash and cash equivalents at the end of the year	8,329 8,966 6,621 6,094

Ingenia Communities Holdings Limited

Statements of Changes in Unitholders’ Interest

FOR THE YEAR ENDED 30 JUNE 2016

Note	Ingenia Communities Fund
	Issued capital Reserves Retained earnings Total
	$’000 $’000 $’000 $’000
Carrying amount at 1 July 2014 Net profit/(loss) for the period Other comprehensive income	547,642 (226) (320,829) 226,587 – – 34,500 34,500 – 226 – 226
Total comprehensive income for the year	– 226 34,500 34,726
Transactions with unitholders in their capacity as unitholders: Issue of units 17 Distributions paid or payable 18	71,643 – – 71,643 – – (10,120) (10,120)
Carrying amount at 30 June 2015	619,285 – (296,449) 322,836
Carrying amount at 1 July 2015 Net profit/(loss) for the period Other comprehensive income	619,285 – (296,449) 322,836
	– – 21,981 21,981
	– – – –
Total comprehensive income for the year	– – 21,981 21,981
Transactions with unitholders in their capacity as unitholders: Issue of units 17 Distributions paid or payable 18
	59,876 – – 59,876
	– – (12,513) (12,513)
Carrying amount at 30 June 2016	679,161 – (286,981) 392,180

Note	Ingenia Communities Management Trust
	Issued capital Reserves Retained earnings Total Non- controlling interest Total equity
	$’000 $’000 $’000 $’000 $’000 $’000
Carrying amount at 1 July 2014 Net profit/(loss) for the period Other comprehensive income	14,097 169 (4,050) 10,216 2,761 12,978 – – (4,467) (4,467) (3,461) (7,928) – (169) – (169) – (169)
Total comprehensive income for the year	– (169) (4,467) (4,636) (3,461) (8,097)
Transactions with unitholders in their capacity as unitholders: Issue of units 17	14,929 – – 14,929 – 14,929
Carrying amount at 30 June 2015	29,026 – (8,517) 20,509 (700) 19,810
Carrying amount at 1 July 2015 Net profit/(loss) for the period	29,026 – (8,517) 20,509 (700) 19,809
	– – 56 56 – 56
Total comprehensive income for the year	– – 56 56 – 56
Transactions with unitholders in their capacity as unitholders: Issue of units 17
	4,991 – – 4,991 – 4,991
Carrying amount at 30 June 2016	34,017 – (8,461) 25,556 (700) 24,856

80 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016

1. Summary of significant accounting policies

a. The Trusts

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.

The financial report as at and for the year ended 30 June 2016 was authorised for issue by the directors on 23 August 2016.

b. Basis of Preparation

The financial report is a general purpose financial report which 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 Instrument 2015/838, 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 ICF and ICMT. The financial statements and accompanying notes of the Trusts have been presented within this 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 as permitted by Instrument 2016/191.

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 2016, ICMT recorded a net current asset deficiency of $202,788,000. This deficiency includes retirement village resident loans of $207,483,000 and payables to other entities within the Group of $288,768,560.

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. Accordingly, there are reasonable grounds to believe that ICMT will be able to pay its debts as and when they become due and payable; and the financial report of ICMT has been prepared on a going concern basis.

c. Adoption of New and Revised Accounting Standards

No new or revised standards and interpretations were issued by the Australian Accounting Standards Board that are relevant to the Group during the period.

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 de-consolidated 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 related 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.

Ingenia Communities Holdings Limited 81

1. Summary of significant accounting policies (continued)

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

f. 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.

g. 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.

iii. Translation of foreign currency transactions 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.

iv. Translation of financial statements of foreign subsidiaries

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

h Plant & Equipment

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 .

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; heldto-maturity investments; or as available-for-sale. The Trusts determine the classification of their financial assets and liabilities at initial recognition with the classification depending on the purpose for which the asset or liability was acquired or issued. Financial assets and liabilities are initially recognised at fair value, plus directly attributable transaction costs unless their classification is at fair value through profit or loss. They are subsequently measured at fair value or amortised cost using the effective interest method. Changes in fair value of available-for-sale financial assets are recorded directly in equity. Changes in fair values of financial assets and liabilities classified as at fair value through profit or loss are recorded in the income statement.

Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

1. Summary of significant accounting policies (continued)

k. Impairment of Non-Financial Assets

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

n. Inventories

The Trusts hold inventory in relation to the acquisition and development of manufactured homes and service station fuel and supplies both within its Lifestyle & Holidays segment.

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

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 interest rate swaps to hedge its risks associated with 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

Investment property includes property under construction, tourism cabins and associated amenities.

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. In determining the fair value of assets held for sale recent market offers have been taken into consideration.

It is the Trusts’ policy to have all investment properties externally valued at intervals of not more than two years. 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.

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

In determining fair values, the group considers relevant information including the capitalisation of rental streams using market assessed capitalisation rates, expected net cash flows discounted to their present value using market determined risk adjusted discount rates and other available market data such as recent comparable transactions. The assessment of fair value of investment properties does not take into account potential capital gains tax assessable.

q. Intangible Assets

An intangible asset arising from development expenditure related to software is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use, how the asset will generate future economic benefits, the availability of resources to complete the asset and the ability to measure reliably the expenditure during its development. Costs capitalised include external direct costs of materials and service, and direct payroll and payroll related costs of employees’ time spent on the project.

Ingenia Communities Holdings Limited 83

1. Summary of significant accounting policies (continued)

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.

The Group’s policy applied to capitalised development costs is as follows:

Software and associated development to capitalised development costs (assets in use)

Useful life: Finite Amortisation method using 7 years on a straight line basis; and
Impairment test: Amortisation method reviewed at each financial year end; closing carrying value reviewed annually for indicators of impairment.

Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred. Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is de-recognised.

r. 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.

s. 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 15 and 1(z) for information regarding the valuation of retirement village resident loans.

t. Borrowings

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.

u. 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.

v. Revenue

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

Revenue from the sale of manufactured homes within the Lifestyle & Holidays 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.

Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

1. Summary of significant accounting policies (continued)

w. 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 nonaccumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

iii. Long service leave

x. Income Tax

i. Current income tax

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

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

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

ii. Deferred income tax

y. Goods and Services Tax (“GST”)

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.

z. 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 22.

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.

Ingenia Communities Holdings Limited

1. Summary of significant accounting policies (continued)

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

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

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.

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 in Note 23.

aa. Pending Accounting Standards

The trusts have not early adopted the following standards, interpretations, or amendments that have been issued but are not yet effective:

AASB 9 Financial Instruments is applicable to reporting periods beginning on or after 1 January 2018. The Trusts have not early adopted this standard. This standard provides requirements for the classification, measurement and de-recognition of financial assets and financial liabilities.

Changes in the Trusts’ credit risk, which affect the value of liabilities designated at fair value through profit and loss, can be presented in other comprehensive income. The application of the Standard is not expected to have any material impact on the Trusts’ financial reporting in future periods.

AASB 15 Revenue from Contracts with Customers is applicable to reporting periods beginning on or after 1 January 2018. The Trusts have not early adopted this standard. The standard is based on the principle that revenue is recognised when control of a good or service is transferred to a customer. It contains a single model that applies to contracts with customers and two approaches to recognising revenue; at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognised. It applies to all contracts with customers except leases, financial instruments and insurance contracts. It requires reporting entities to provide users of financial statement with more informative and relevant disclosures. The Group is currently assessing the impact of this standard, however it does not expect it to have a material impact on future reporting.

AASB 16 Leases is applicable to reporting periods beginning on or after 1 January 2019. The Group has not early adopted this standard. This standard provides requirements for classification, measurement, and disclosure of all leases with a term of more than 12 months unless the underlying asset is of low value. A lease must now measure right-of-use assets similarly to other nonfinancial assets and lease liabilities similarly to other financial liabilities. Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes non-cancellable lease payments (including inflation-linked payments), and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease. The Group is currently the lessee of two non-cancellable operating leases which would be captured under this new standard. They relate to the Sydney and Brisbane offices with have future minimum lease payments totalling $2,527,000. The Group is also the lessee of four existing finance leases which relate to the land of certain investment properties. The application of the Standard is not expected to have any material impact on these finance leases.

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 Trusts’ financial reporting in future reporting periods.

bb. 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.

Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

1. Summary of significant accounting policies (continued)

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 Trusts classify 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.

i. Valuation of investment property

The Trusts have investment properties with a combined carrying amount of $710,746,000 (2015: $601,326,000) (refer Note 7 and 10), and combined retirement village residents’ loans of $207,483,000 (2015: $203,919,000) (refer Note 7 and 15) which together represent the estimated fair value of the Trusts interest in retirement villages.

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. The valuation assumption for properties to be developed reflect assumptions around sales prices for new homes, sales rates, new rental tariffs, estimates of capital expenditure, 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

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

3. Segment information

a. Description of Segments

The Trusts invest predominantly in rental properties located in Australia with three reportable segments:

Ingenia Garden Villages – rental communities;
Ingenia Settlers – deferred management fee communities; and
Ingenia Lifestyle & Holidays – lifestyle communities comprising permanent and tourism accommodation and the development and 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”.

Ingenia Communities Holdings Limited

3. Segment information (continued)

b. Ingenia Communities Fund - 2016

b. Ingenia Communities Fund - 2016
	Lifestyle & Holidays Settlers Garden Villages Corporate/ Unallocated Total
	$’000 $’000 $’000 $’000 $’000
i. Segment Revenue External segment revenue Interest income
	384 – 8,717 – 9,101
	– – – 17,105 17,105
Total revenue	384 – 8,717 17,105 26,206
ii. Segment Underlying Proft External segment revenue Interest income Property expenses Administration expenses Finance expense Depreciation and amortisation expense
	384 – 8,717 – 9,101
	– – – 17,105 17,105
	– – (3) (219) (222)
	– – – (170) (170)
	– – – (5,367) (5,367)
	– – – (24) (24)
Underlying Profit/(Loss) – continuing operations	384 – 8,714 11,325 20,423
Reconciliation of Underlying Profit to profit from continuing operations: Net foreign exchange gain Net gain/(loss) on change in fair value of: Investment properties Derivatives Responsible Entity fees
	– – – 422 422

	206 – 7,462 – 7,668
	– – – (414) (414)
	– – – (2,244) (2,244)
Profit from continuing operations per the consolidated statement of comprehensive income	590 – 16,176 9,089 25,855
iii. Segment Assets	7,751 63,690 91,362 328,815 491,618

Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

3. Segment information (continued)

c. Ingenia Communities Fund - 2015

c. Ingenia Communities Fund - 2015
	Lifestyle & Holidays Settlers Garden Villages Corporate/ Unallocated Total
	$’000 $’000 $’000 $’000 $’000
i. Segment Revenue External segment revenue Interest income	384 – 9,336 – 9,720 – – – 14,564 14,564
Total revenue	384 – 9,336 14,564 24,284
ii. Segment Underlying Proft External segment revenue Interest income Property expenses Administration expenses Operational, marketing and selling expenses Finance expense Depreciation and amortisation expense	384 – 9,336 – 9,720 – – – 14,564 14,564 – – (2) (325) (327) – – – (506) (506) – – – (648) (648) – – – (3,601) (3,601) – – – (117) (117)
Underlying Profit/(Loss) – continuing operations	384 – 9,334 9,367 19,085
Reconciliation of Underlying Profit to profit from continuing operations: Net foreign exchange gain Net gain/(loss) on disposal of investment property Net gain/(loss) on change in fair value of: Investment properties Derivatives Responsible Entity fees	– – – 107 107 – (2,013) 324 – (1,689) (7) (5) 15,934 – 15,922 – – – 164 164 – – – (1,676) (1,676)
Profit from continuing operations per the consolidated statement of comprehensive income	377 (2,018) 25,592 7,962 31,913
iii. Segment Assets	7,301 51,983 125,657 201,315 386,256

Ingenia Communities Holdings Limited

3. Segment information (continued)

d. Ingenia Communities Management Trust - 2016

d. Ingenia Communities Management Trust -	2016
	Lifestyle & Holidays Settlers Garden Villages Corporate/ Unallocated Total
	$’000 $’000 $’000 $’000 $’000
i. Segment revenue External segment revenue Interest Income Reclassification of gain on revaluation of newly constructed villages
	73,966 6,950 27,517 68 108,501
	– – – 14 14
	– (1,526) – – (1,526)
Total revenue	73,966 5,424 27,517 82 106,989
ii. Segment Underlying Proft External segment revenue Interest income Property expenses Employee expenses Administration expenses Operational, marketing and selling expenses Manufactured home cost of sales Service station expenses Finance expense Income tax benefit Depreciation and amortisation expense
	73,966 6,950 27,517 68 108,501
	– – – 14 14
	(11,801) (1,435) (16,844) – (30,080)
	(14,257) (1,053) (7,154) 79 (22,385)
	(1,911) (147) (875) 112 (2,821)
	(2,023) (437) (910) 12 (3,358)
	(21,729) – – – (21,729)
	(5,862) – – – (5,862)
	(1,602) (782) (2,016) (13,541) (17,941)
	– – – 2,623 2,623
	(374) (6) (38) – (418)
Underlying Profit/(Loss) – continuing operations	14,407 3,090 (320) (10,633) 6,544
Reconciliation of Underlying Profit to profit from continuing operations: Net foreign exchange gain Net gain/(loss) on disposal of investment property Net gain/(loss) on change in fair value of: Investment properties Retirement village resident loans Loss on revaluation of newly constructed villages Responsible Entity fees Income tax benefit associated with reconciliation items
	– – – 45 45
	– (638) – – (638)

	(2,489) 2,317 – – (172)
	– (1,388) – – (1,388)
	– (1,526) – – (1,526)
	– – – (2,693) (2,693)
	– – – (116) (116)
Profit from continuing operations per the consolidated statement of comprehensive income	11,918 1,855 (320) (13,397) 56
iii. Segment Assets	325,390 253,363 6,013 4,538 589,304

Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

3. Segment information (continued)

e. Ingenia Communities Management Trust - 2015

e. Ingenia Communities Management Trust -	2015
	Lifestyle & Holidays Settlers Garden Villages Corporate/ Unallocated Total
	$’000 $’000 $’000 $’000 $’000
i. Segment Revenue External segment revenue Interest income Reclassification of gain on revaluation of newly constructed villages	38,797 11,124 28,183 – 78,104 – – – 7 7 – (2,422) – – (2,422)
Total revenue	38,797 8,702 28,183 7 75,689
ii. Segment Underlying Proft External segment revenue Interest income Property expenses Employee expenses Administration expenses Operational, marketing and selling expenses Manufactured home cost of sales Service station expenses Finance expense Income tax expense Depreciation expense	38,797 11,124 28,183 – 78,104 – – – 7 7 (8,089) (1,562) (17,721) – (27,372) (6,657) (779) (9,599) (26) (17,061) (746) (57) (1,317) (569) (2,689) (1,559) (283) (1,306) (2) (3,150) (9,256) – – – (9,256) (1,910) – – – (1,910) – – – (15,144) (15,144) – – – 2,734 2,734 (34) – (226) – (260)
Underlying Profit/(Loss) – continuing operations	10,546 8,443 (1,986) (13,000) 4,003
Reconciliation of underlying profit to profit from continuing operations: Net gain/(loss) on disposal of investment property Net gain/(loss) on change in fair value of: Investment properties Retirement village resident loans Loss on revaluation of newly constructed villages Responsible Entity fees Income tax benefit associated with reconciliation items	(23) 1,648 (5) – 1,620 (2,812) 3,277 17 – 482 – (8,878) – – (8,878) – (2,422) – – (2,422) – – – (2,165) (2,165) – – – 3,286 3,286
Profit from continuing operations per the consolidated statement of comprehensive income	7,711 2,068 (1,974) (11,879) (4,074)
iii. Segment Assets Segment assets Assets held for sale	220,961 184,880 5,429 5,198 416,468 – – – – 61,598
Total assets	478,066

Ingenia Communities Holdings Limited

4. Earnings per unit

4. Earnings per unit
	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 2015 2016 2015
Earnings per Unit Profit/(loss) from continuing operations ($’000) Profit/(loss) from discontinued operations ($000) Net profit/(loss) for the year ($000)	25,855 31,913 56 (4,074) (3,874) 2,587 – (3,854) 21,981 34,500 56 (7,928)
Weighted average number of units outstanding (thousands): Issued units Dilutive units (thousands): Performance quantum rights Long-term incentive rights Short-term incentive rights	150,408 136,944 150,408 136,944 620 470 620 470 269 – 269 – 56 – 56 –
Weighted average number of issued and dilutive potential units outstanding (thousands) 151,353 137,414 151,353 137,414
Basic earnings per unit from continuing operations (cents) 17.2 23.3 – (3.0) Basic earnings per unit from discontinued operations (cents) (2.6) 1.9 – (2.8) Basic earnings per unit (cents) 14.6 25.2 0.0 (5.8) Dilutive earnings per unit from continuing operations (cents) 17.1 23.2 – (3.0) Dilutive earnings per unit from discontinued operations (cents) (2.6) 1.9 – (2.8) Dilutive earnings per security (cents) 14.5 25.1 0.0 (5.8)

5. Income tax benefit

5. Income tax beneft
	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
a. Income tax beneft Current tax Increase in deferred tax asset	– – – – – – 2,507 6,019
Income tax benefit b. Reconciliation between tax expense and pre-tax net proft Profit/(loss) before income tax Less amounts not subject to Australian income tax	– – 2,507 6,019 21,981 34,500 (2,451) (10,093) (21,981) (34,500) – –
Income tax at the Australian tax rate of 30% (2015: 30%) Tax effect of amounts which are not (deductible)/taxable in calculating taxable income: Prior period income tax return true-ups Movement in carrying value and tax cost base of investment properties Movements in carrying value and tax cost base of DMF receivables Non deductible expenses	– – (2,451) (10,093) – – 735 3,028 – – 330 173 – – 1,399 1,385 – – (59) 1,683 – – 102 (250)
Income tax benefit	– – 2,507 6,019

92 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

5. Income tax benefit (continued)

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.

6. Discontinued operations

The Trusts completed the sale of the New Zealand Students business in December 2014. Accordingly there were no results of discontinued operations for 2016 other than a non cash write-down of investment totalling $3,874,000 within ICF. The 2015 prior year comparative results of the Trusts disposed of or classified as discontinued operations were: profit of $2,587,000 (ICF) and loss of $3,854,000 (ICMT), along with a net cash outflows of $1,657,000.

7. Assets and liabilities held for sale

As disclosed at 31 December 2015, the five Settlers assets held-for-sale at 30 June 2015 were deemed to no longer meet the required criteria to continue such classification. Accordingly, the assets were transferred back to investment property ($61,598,000), and the associated loans were transferred back to retirement village resident loans ($42,041,000).

8. Trade and other receivables

8. Trade and other receivables
	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Current Rental and other amounts due Finance lease receivable from stapled entity Other receivables	– – 5,882 3,772 2,599 2,643 – – – – 802 332
Total current trade and other receivables	2,599 2,643 6,684 4,104
Non-current Finance lease receivable from stapled entity Other receivables	28,978 28,862 – – 2,840 2,539 300 110
Total non-current trade and other receivables	31,818 31,401 300 110

Rental amounts due are typically paid in advance and other amounts due are receivable within 30 days.

Ingenia Communities Holdings Limited

8. 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 91 and 114 years. There are no purchase options. Minimum payments under the agreements and their present values are:

	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Minimum lease payments receivable: Not later than one year Later than one year and not later than five years Later than five years	2,599 2,643 – – 10,573 10,573 – – 237,447 240,091 – –
Unearned finance income	250,619 253,307 – – (219,042) (221,802) – –
Net present value of minimum lease payments	31,577 31,505 – –
Net present value of minimum lease payments receivable: Not later than one year Later than one year and not later than five years Later than five years	2,526 2,526 – – 8,295 8,222 – – 20,756 20,757 – –
	31,577 31,505 – –
Finance income recognised and included in interest income in the income statement	2,599 2,642 – –

Information about the related finance lease payable by ICMT is given in Note 25.

9. Inventories

9. Inventories
	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Carrying values: Manufactured homes: Completed Under Construction Service station fuel and supplies	– – 11,140 7,975 – – 6,331 4,900 – – 194 333
Total Inventories	– – 17,665 13,208

The manufactured homes balance includes:

60 new completed homes (2015: 53)
7 refurbished/renovated completed homes (2015: nil)
31 new homes under construction (2015: 85)
3 refurbished/renovated under construction homes (2015: nil)

94 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

10. Investment properties

a. Summary of carrying amounts

a. Summary of carrying amounts
	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Completed properties Properties under development	162,795 152,142 482,456 361,984 – 1,292 65,495 24,310
Total investment properties	162,795 153,434 547,951 386,294

b. Movements in carrying amounts

b. Movements in carrying amounts
	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Completed investment property Carrying amount at beginning of year Acquisitions Expenditure capitalised Disposals Net transfer from/(to) inventory Net gain/(loss) on change in fair value Transferred from/(to) assets held for sale	153,434 134,488 386,294 364,375 – – 81,536 78,152 1,451 2,149 18,495 12,207 – 875 – (7,165) 242 – 200 (159) 7,668 15,922 (172) 482 – – 61,598 (61,598)
Carrying amount at end of year	162,795 153,434 547,951 386,294

Capitalisation Method

Discounted Cash Flow Method

Ingenia Communities Holdings Limited

11. Plant and equipment

11. Plant and equipment
	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
a. Summary of carrying amounts Plant and equipment Less: accumulated depreciation	431 423 1,800 1,169 (326) (301) (782) (710)
Totalplant and equipment	105 122 1,018 459
b. Movements in carrying amount Carrying amount at beginning of year Assets written off Additions Depreciation expense	122 239 459 180 – – – (118) 5 – 631 499 (24) (117) (72) (102)
Carryingamount at end ofyear	103 122 1,018 459

12. Intangibles

12. Intangibles
	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
a. Summary of carrying amounts Software & development Less: accumulated amortisation	2 2 2,385 1,734 – – (423) (157)
Total intangibles	2 2 1,962 1,577
b. Movements in carrying amount Carrying amount at beginning of year Additions Amortisation expense	2 – 1,577 – – 2 731 1,734 – – (346) (157)
Carryingamount at end ofyear	2 2 1,962 1,577

13. Trade and other payables

13. Trade and other payables
	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Current liabilities Trade payables and accruals Deposits Other unearned income Deferred acquisition consideration	1,266 1,200 9,157 7,759 – – 2,841 1,184 – – 1,670 342 – – 8,500 3,500
Total current liabilities	1,266 1,200 22,168 12,785
Non-current liabilities Deferred acquisition consideration	– – 6,770 14,770

96 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

14. Borrowings

14. Borrowings
	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Current liabilities Finance leases	– – 2,962 2,817
Non-current liabilities Bank debt Prepaid borrowing costs Finance leases	99,100 63,900 – – (1,336) (1,683) – – – – 34,905 33,252
Total non-current borrowings	97,764 62,217 34,905 33,252

a. Bank Debt

On 18 February 2016, the Group increased its Australian debt facility limit by $25.0 million. The additional facility matures 12 February 2020 and uses the existing facility covenants and pricing.

The total $200.0 million multi-lateral debt facility is with three Australian banks. The facility maturity dates are:

12 February 2018 ($100.0 million); and
12 February 2020 ($100.0 million)

As at 30 June 2016 the facility has been drawn to $99.1 million (30 June 2015: $63.9 million). The carrying value of

investment property net of resident liabilities at reporting date for the Group’s Australian properties pledged as security is $470.3 million (30 June 2015: $363.7 million).

b. Bank Guarantees

The Group has the ability to utilise its bank facility to provide bank guarantees, which at 30 June 2016 were $26.2 million (2015: $28.8 million).

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 91 and 114 years. There are no purchase options.

i. Minimum lease payments – excluding perpetual lease

i. Minimum lease payments – excluding perpetual lease
	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Minimum lease payments: Within one year Later than one year but not later than five years Later than five years	– – 3,274 2,942 – – 13,175 11,846 – – 244,345 243,522
Total minimum lease payments Future finance charges	– – 260,794 258,310 – – (224,027) (223,380)
Present value of minimum lease payments	– – 36,767 34,930
Present value of minimum lease payments: Within one year Later than one year but not later than five years Later than five years	– – 2,979 2,817 – – 9,888 9,305 – – 23,900 22,808
	– – 36,767 34,930

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 applicable at the time of acquisition 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.

Ingenia Communities Holdings Limited

15. Retirement village resident loans

15. Retirement village resident loans
	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
a. Summary of carrying amounts Gross resident loans Accrued deferred management fee	– – 240,473 192,898 – – (32,990) (31,020)
Net resident loans	– – 207,483 161,878
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 Proceeds from resident loans Repayment of resident loans Transfer from/(to) liabilities held for sale Other	– – 161,878 190,122 – – 1,388 8,878 – – (4,222) (6,788) – – 1,211 2,056 – – 11,056 19,815 – – (5,757) (10,543) – – 42,041 (42,041) – – (112) 379
Carrying amount at end of year	– – 207,483 161,878

16. Deferred tax assets and liabilities

16. Deferred tax assets and liabilities
	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Deferred tax assets Tax losses Other	– – 18,799 15,938 – – 1,129 1,205
Deferred tax liabilities DMF receivable Investment properties	– – (8,871) (7,970) – – (3,973) (4,567)
Net deferred tax asset	– – 7,084 4,606
Deductible temporary differences and carried forward losses tax effected for which no deferred tax asset has been recognised – – 7,500 7,500

The Trusts offset 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.

98 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

17. Issued units

a. Carrying Amounts

a. Carrying Amounts
	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
At beginning of year Issued during the year: Distribution Reinvestment Plan (DRP) Institutional and DRP placement Rights issue Institutional placement and rights issue costs	619,285 547,642 29,026 14,097 2,802 2,374 501 464 59,138 36,835 4,648 7,693 – 35,578 – 7,430 (2,064) (3,144) (158) (658)
At end of year	679,161 619,285 34,017 29,026
The closing balance is attributable to the unitholders of: Ingenia Communities Fund Ingenia Communities Management Trust	679,161 619,285 – – – – 34,017 29,028
	679,161 619,285 34,017 29,028
b. Movements in Issued Units	2016 Thousands 2015 Thousands 2016 Thousands 2015 Thousands
At beginning of year Issued during the year: Retention quantum rights Performance quantum rights Dividend reinvestment plan Institutional placement and rights issue At end of year	147,118 112,708 147,118 112,708 – 303 – 303 640 – 640 – 2,968 1,112 2,968 1,112 21,429 32,995 21,429 32,995 172,155 147,118 172,155 147,118

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.

18. Accumulated losses

18. Accumulated losses
	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Balance at beginning of year Net profit/(loss) for the year Distributions	(296,449) (320,829) (15,402) (7,474) 21,981 34,500 56 (7,928) (12,513) (10,120) – –
Balance at end of year	(286,981) (296,449) (15,346) (15,402)
The closing balance is attributable to the unitholders of: Ingenia Communities Fund Ingenia Communities Management Trust	(286,981) (296,449) (6,885) (6,886) – – (8,461) (8,517)
	(286,981) (296,449) (15,346) (15,402)

Ingenia Communities Holdings Limited

19. Commitments

a. Capital Commitments

There were commitments for capital expenditure on investment property and inventory contracted but not provided for at reporting date of $659,000 (2015: $7,048,000).

b. Operating Lease Commitments

A subsidiary of ICMT has two non-cancellable operating leases for its Sydney and Brisbane offices. Both leases have remaining lives of four years.

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

	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Within one year Later than one year but not later than five years	– – 598 229 – – 1,929 744
	– – 2,527 973

c. Finance Lease Commitments

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 relating to investment property.

For commitments for inter-staple related party finance leases refer to Notes 8, 14 and 25.

20. Contingencies

21. 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 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 Group primarily monitors its capital position through the Loan to Value Ratio (LVR) which is a key covenant under the Group’s $200 million multilateral debt facility. LVR is calculated as the sum of bank debt, bank guarantees, finance leases, and interest rate swaps, less cash at bank, as a percentage of the value of properties pledged as security. The Group’s strategy is to maintain an LVR range of 30-35%. As at 30 June 2016, LVR is 24.9% compared to 22.6% at 30 June 2015.

100 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

22. 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 Investments, Derivatives, and Borrowing 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 the forecast is unlikely 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 Investments, Derivatives, and Borrowing 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 Investments, Derivatives, and Borrowing Policy in addressing the risks arising from the Trust’s financial instruments is reviewed on a regular basis.

While the Trusts aim to meet the Investments, Derivatives, and Borrowing 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 Investments, Derivatives, and Borrowing Policy. The policy sets minimum and maximum levels of fixed rate exposure over a ten-year time horizon.

At 30 June 2016, after taking into account the effect of interest rate swaps, approximately 28% of ICF’s borrowings are at a fixed rate of interest (2015: 28%).

Ingenia Communities Holdings Limited

101

22. Financial instruments (continued)

c. Interest Rate Risk Exposure

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

$’000 2016	Ingenia Communities Fund
	Fixed interest maturingin:
	Floating interest rate Less than 1year One to five Years More than 5years Total
Financial assets Cash at bank Financial liabilities Bank debt Interest rate swaps: (Fund pays fixed rate)
	8,329 – – – 8,329

	99,100 – – – 99,100
	(44,000) – 44,000 – –

2015
Financial assets
Cash at bank	8,966	–	–	–	8,966
Financial liabilities
Bank debt	63,900	–	–	–	63,900
Interest rate swaps: (Fund pays fixed rate)	(18,000)	18,000	–	–	–

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

$’000 2016	Ingenia Communities Management Trust
	Fixed interest maturingin:
	Floating interest rate Less than 1year One to five Years More than 5years Total
Financial assets Cash at bank Financial liabilities Finance leases (excluding perpetual lease)
	6,621 – – – 6,621

	– 497 1,832 2,899 5,228
2015
Financial assets Cash at bank Financial liabilities Finance leases (excluding perpetual lease)	6,094 – – – 6,094 – 2,817 9,305 22,808 34,930

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).

102 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

22. Financial instruments (continued)

22. Financial instruments (continued)
	Effect onprofit after tax
	Ingenia Communities Fund Ingenia Communities Management Trust
	Higher/(lower) Higher/(lower)
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
i. Increase in average interest rates of 1% Variable interest rate instruments	(991) (639) – –
Interest rate swaps	1,238 – – –
ii. Decrease in average interest rates of 1% Variable interest rate instruments	991 639 – –
Interest rate swaps	(735) – – –

e. Foreign Exchange Risk

The Trusts’ exposure to foreign exchange risk is limited to foreign denominated cash balances and receivables following the divestment of its final overseas operations in December 2014. These amounts are unhedged as cash will be used to cover final costs to wind up the companies and receivables relate to escrows.

f. Net Foreign Currency Exposure

	Net foreign currencyasset/(liability)
	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Net foreign currency exposure: United States dollars New Zealand dollars	3,479 3,491 – – 289 473 – –
Total net foreign currency assets	3,768 3,964 – –

g. Foreign Exchange Sensitivity Analysis

balance sheet date.
	Effect onprofit after tax
	Ingenia Communities Fund Ingenia Communities Management Trust
	Higher/(lower) Higher/(lower)
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
i. Efect of appreciation in Australian dollar of 10%: Foreign exchange risk exposures denominated in: United States dollars New Zealand dollars	(316) (317) – – (26) (43) – –
ii. Efect of depreciation in Australian dollar of 10%:
Foreign exchange risk exposures denominated in: United States dollars New Zealand dollars	387 388 – – 32 53 – –

Ingenia Communities Holdings Limited

103

22. Financial instruments (continued)

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 Trusts’ receivables that are neither past due nor impaired do not give rise to any significant credit risk.

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 investment, derivatives, and borrowing 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 investment, derivatives, and borrowing 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.

The contractual maturities of the Trusts’ 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.

Credit risk also arises from deposits placed with financial institutions and derivatives contracts that may have a positive value to the Trusts. The Trusts’ Investment, Derivatives, and Borrowing 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.

104 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

22. 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 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 $’000 1 to 5 Years $’000 More than 5 years $’000 Total $’000
2016 Trade and other payables Borrowings
	1,266 – – 1,266
	4,572 38,153 65,711 108,436
	5,838 38,153 65,711 109,702
2015 Trade and other payables Borrowings	1,200 – – 1,200 2,731 68,344 – 71,075
	3,931 68,344 – 72,275
	Ingenia Communities Management Trust
	Less than 1 year $’000 1 to 5 Years $’000 More than 5 years $’000 Total(1) $’000
2016 Trade and other payables Retirement village resident loans Finance leases (excluding perpetual lease) Finance lease (perpetual lease)(2) Provisions
	22,168 6,770 – 28,938
	207,483 – – 207,483
	3,274 13,175 244,345 260,794
	121 483 – 604
	1,382 227 – 1,609
	234,428 20,655 244,345 499,428
2015 Trade and other payables Retirement village resident loans Borrowings (excluding perpetual lease) Finance lease (perpetual lease)(2) Provisions Liabilities held for sale	12,785 14,770 – 27,555 161,878 – – 161,878 2,942 11,846 243,522 258,310 121 483 – 604 830 177 71 1,078 42,041 – – 42,041
	220,597 27,276 243,593 491,466

(1) Excludes related party loans.

(2) For purposes of the table above, the lease payments are included for five years for the perpetual lease. Refer to Note 25.

Ingenia Communities Holdings Limited

105

22. 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 at market rates.

	Ingenia Communities Fund Less than 1 year $’000 1 to 5 Years $’000 More than 5 years $’000 Total $’000
2016 Liabilities Derivative liabilities – net settled	121 287 – 408
2015 Liabilities Derivative liabilities – net settled	3 – – 3

ICMT did not have any derivative financial liabilities at either 30 June 2016 or 30 June 2015.

i. 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 onprofit after tax
	Ingenia Communities Fund Ingenia Communities Management Trust
	Higher/(lower) Higher/(lower)
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Increase in market prices of investment properties of 10% Decrease in market prices of investment properties of 10%	– – (24,047) (19,290) – – 24,047 19,290

These effects are largely offset by corresponding changes in the fair value of the Trusts’ investment properties. The effect on unit holders’ interest would have been the same as the effect on profit.

23. Fair value measurement

a. Ingenia Communities Fund

The following table provides the fair value measurement hierarchy of Ingenia Communities Fund assets and liabilities:

Ingenia Communities Fund Date of valuation i. Assets Measured at Fair Value 2016	Fair value measurement using: Total $’000 Quoted prices in active markets (Level 1) $’000 Significant observable inputs (Level 2) $’000 Significant unobservable inputs (Level 3) $’000
Investment properties 30 June 2016 Refer to Note 10 162,795 – – 162,795
2015
Investment properties 30 June 2015 Refer to Note 10 153,434 – – 153,434
ii. Liabilities Measured at Fair Value 2016
Derivatives 408 – 408 –
2015
Derivatives 3 – 3 –

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

Annual Report 2016

106

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

23. 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:

Ingenia Communities Management Trust Date of valuation i. Assets Measured at Fair Value 30 June 2016	Fair value measurement using:
	Total $’000 Quoted prices in active markets (Level 1) $’000 Significant observable inputs (Level 2) $’000 Significant unobservable inputs (Level 3) $’000
Investment properties 30 June 2016 Refer to Note 10 547,951 – – 547,951
30 June 2015
Investment properties 30 June 2015 Refer to Note 10 386,294 – – 386,294
Assets held for sale - investment property 30 June 2015 Refer to Note 7 61,598 – 61,598 –
ii. Liabilities Measured at Fair Value 30 June 2016
Retirement village resident loans 30 June 2016 Refer to Note 15 207,483 – – 207,483
30 June 2015
Retirement village resident loans 30 June 2015 Refer to Note 15 161,878 – – 161,878
Liabilities held for sale - resident loans 30 June 2015 Refer to Note 7 42,041 – 42,041 –

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

Ingenia Communities Holdings Limited 107

24. Auditor’s remuneration

24. Auditor’s remuneration
	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $ 2015 $ 2016 $ 2015 $
Amounts received or receivable by EY for: Audit or review of financial reports Other audit related services Non-audit related services	207,091 202,455 229,751 202,455 6,489 39,514 6,489 84,514 14,228 – 14,228 –
	227,808 241,969 250,468 286,969

25. 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
	2016 $ 2015 $ 2016 $ 2015 $
Ingenia Communities RE Limited: Asset management fees	2,244,053 1,676,496 2,693,243 2,164,618

The Responsible Entity is entitled to a fee of 0.5% of total assets. In addition, it is entitled to recover certain expenses.

The gross amount accrued and recognised but unpaid at reporting date was:

	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $ 2015 $ 2016 $ 2015 $
Current trade payables	4,960,724 2,716,671 8,025,433 5,332,190

The above ICF balances are netted against the receivable from related party balance on the face of the balance sheet. The above ICMT balances are included in the payable to related party balance on the face of the balance sheet, which is shown net of related party receivables.

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 2016 and 30 June 2015.

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 91 and 114 years. There are no purchase options. Rental villages have been classified as operating leases and DMF villages have been classified as finance leases.

Intercompany loans are subject to a loan deed, amended on and effective from 1 July 2015, encompassing ICH, ICF and ICMT and their respective subsidiaries. The revised deed stipulates that interest is calculated on the intercompany balances between ICH, ICF and ICMT for the preceding month. Interest is charged at a margin of 3.5% on the monthly Australian Bank Bill Swap Reference Rate. 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.

108 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

25. Related parties (continued)

There are a number of other transactions and balances that occur between the Trusts, which are detailed below:

Ingenia Communities Fund
Ingenia Communities
Management Trust

2016
$
2015
$
2016
$
2015
$

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
Finance lease commitments
Operating lease fees received or accrued/(paid or payable)
for the year between ICF and ICMT
Interest on intercompany loans received or accrued/
(paid or payable) between stapled entities
Intercompany loan balances between stapled entities

2,643,268
2,698,453
(2,643,268)
(2,698,453)
31,503,706
31,505,116
(31,503,706)
(31,505,116)
250,619,000
253,307,008
(250,619,000)(253,307,008)
9,101,040
9,719,788
(9,101,040)
(9,719,788)
14,359,442
11,693,024
(13,924,014)
(11,323,052)
285,971,979
185,799,420
(288,768,560)(189,634,511)

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) Robert Morrison (Appointed as Deputy Chairman on 2 December 2015) Philip Clark AM Amanda Heyworth Norah Barlow ONZM Simon Owen (Managing Director and CEO)

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

Nicole Fisher Chief Operating Officer Tania Betts Chief Financial Officer

Key management personnel do not receive any remuneration directly from the Trusts. They receive remuneration from ICH in their capacity as Directors or employees of ICH. Consequently, the Trusts do not pay any compensation as defined in Accounting Standard AASB 124 Related Parties to its key management personnel.

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

	2016	2015
	$	$
	Directors fees 559,667	542,000
	Salaries and other short-term benefits 1,191,514	1,158,141
	Short-term incentives 695,110	400,956
	Superannuation benefits 57,924	58,518
	Share-based payments 568,329	590,928
	3,072,544	2,750,543

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

Ingenia Communities Holdings Limited

109

25. Related parties (continued)

The aggregate Rights of the Group held directly, by KMP, are as follows:

Issue date Right Type Expiry date	Number outstanding
	2016 2015
FY13 PQR FY16 FY14 PQR FY17 FY15 STIP FY17 FY15 LTIP FY18 FY16 LTIP FY19	– 640,333 619,333 619,333 76,548 – 163,829 163,829 173,870 –
	1,033,580 1,423,495

26. Parent financial information

Summary financial information about the parent of each Trust is:

	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Current assets Total assets Current liabilities Total liabilities	8,392 8,966 1,816 1,816 440,710 335,348 4,652 4,652 1,646 1,171 7,606 237 99,409 63,389 7,780 1,982
Net assets/(liabilities) Unitholders’ equity: Issued units Accumulated losses	341,301 271,959 (3,128) 2,671 679,161 619,288 34,013 29,024 (337,860) (347,329) (37,141) (26,353)
Total unitholders’ equity	341,301 271,959 (3,128) 2,671
Profit/(loss) from continuing operations Profit/(loss) from discontinued operations	25,855 27,700 (10,788) (9,653) (3,873) – – –
Net profit/(loss) attributable to unitholders of each Trust Total comprehensive income/(loss)	21,982 27,700 (10,788) (9,653) 21,982 27,700 (10,788) (9,653)

110 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

27. 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):

Country of
residence

Ownershipinterest

2016
%
2015
%

Subsidiaries of Ingenia Communities Fund
Bridge Street Trust
Australia
Browns Plains Road Trust
Australia
Casuarina Road Trust
Australia
Edinburgh Drive Trust
Australia
INA CC Trust
Australia
INA Community Living Subsidiary Trust No. 2
Australia
INA Community Living Subsidiary Trust
Australia
INA Kiwi Communities Subsidiary Trust No. 1
Australia
INA Sunny Trust
Australia
Jefferis Street Trust
Australia
Lovett Street Trust
Australia
ILF Regency Subsidiary Trust
Australia
Settlers Subsidiary Trust
Australia
SunnyCove Gladstone Unit Trust
Australia
SunnyCove Rockhampton Unit Trust
Australia
Taylor Street (2) Trust
Australia
INA Subsidiary Trust No. 1
Australia
Noyea Pty Ltd
Australia
Settlers Company Pty Limited
Australia
Settlers Property Trust
Australia
INA Community Living LLC (formerly ING Community Living LLC)
USA
INA US Community Living Fund LLC (formerly ING US Community Living
Fund LLC)
USA

100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
–
100
100
–
100
–
100
100
100
100

Ingenia Communities Holdings Limited

111

27. Subsidiaries (continued)

27. Subsidiaries (continued)
Country of residence	Ownershipinterest
	2016 % 2015 %
Subsidiaries of Ingenia Communities Management Trust Garden Villages Management Trust Australia INA Community Living Lynbrook Trust Australia ILF Regency Operations Trust Australia Settlers Operations Trust Australia INA Operations Trust No. 1 Australia INA Operations Trust No. 2 Australia INA Operations Trust No. 3 Australia INA Operations Trust No. 4 (formerly INA Subsidiary Trust No. 2) Australia INA Operations Trust No. 6 Australia INA Operations Trust No. 7 Australia INA Operations Trust No. 8 Australia INA Operations Trust No. 9 Australia Noyea Operations Pty Ltd Australia Ridge Estate Trust Australia INA Subsidiary Trust No. 3 Australia INA NZ Subsidiary Unit Trust No. 1 New Zealand CSH Lynbrook GP LLC USA CSH Lynbrook LP USA INA Community Living II (formerly ING Community Living II) USA Lynbrook Freer Street Member LLC USA Lynbrook Management, LLC USA	100 100 100 100 – 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 – 100 – – 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

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

112 Annual Report 2016

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

28. Notes to the cash flow statements

Reconciliation of profit to net cash flows from operations

	Ingenia Communities Fund Ingenia Communities Management Trust
	2016 $’000 2015 $’000 2016 $’000 2015 $’000
Net profit/(loss) for the year Adjustments for: Net foreign exchange (gain)/loss Release of foreign currency translation reserve on disposal of foreign operations Net (gain)/loss on disposal of investment properties Net (gain)/loss on change in fair value of: Investment properties - continuing Derivatives Retirement village resident loans Income tax expense/(benefit) Depreciation and amortisation expense Amortisation of borrowing costs Share based payments expense	21,981 34,500 56 (7,928) (422) (1,291) (45) 2,222 – (1,620) – 337 3,874 1,689 (638) 377 (7,668) (15,922) 172 (482) 414 (164) – – – – 1,388 8,878 – 212 (2,507) (6,017) 24 117 418 260 574 322 2 – – – 300 –
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 Increase/(decrease) in other payables and provisions related to investing activities	18,777 17,843 (854) (2,353) (320) 5,133 1,024 (2,677) – – (4,457) (11,749) – – 3,563 12,326 35,628 (26,139) 4,679 21,435 (58,988) – 29,022 –
Net cash provided by operating activities	(4,903) (3,163) 32,977 16,982

Ingenia Communities Holdings Limited

113

29. Subsequent events

a. Performance Quantum Rights (PQRs)

On 1 July 2016, 619,333 PQRs vested and 598,833 fully paid stapled securities of the Group were subsequently issued to the Executive KMP.

b. Security Purchase Plan

c. Acquisition of Ocean Lake

d. Amended Debt Facility

e. Final FY16 Distribution

114 Annual Report 2016

Directors’ Declaration

FOR THE YEAR ENDED 30 JUNE 2016

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

In the opinion of the directors:
(a) the financial statements and notes of Ingenia Communities Fund and of Ingenia Communities Management Trust are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of each Trust’s financial position as at 30 June 2016 and of their performance for the year ended on that date; and
(ii) complying with Accounting Standards and Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that Ingenia Communities Fund and Ingenia Communities Management Trust will be able to pay their debts as and when they become due and payable.
The notes to the financial statements include an explicit and unreserved statement of compliance with international financial reporting standards at Note 1(b).
This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2016.

On behalf of the Board

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Jim Hazel Chairman Sydney, 23 August 2016

Ingenia Communities Holdings Limited 115

Independent Auditor’s Report

FOR THE YEAR ENDED 30 JUNE 2016

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116 Annual Report 2016

Independent Auditor’s Report

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

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Ingenia Communities Holdings Limited

117

Securityholder Information

FOR THE YEAR ENDED 30 JUNE 2016

Additional information required under ASX Listing Rule 4.10 and not shown elsewhere in this Annual Report is as follows. This information is current as at 13 September 2016.

The information set out below applies equally to units in the trusts and shares in the company under the terms of the joint quotation on the Australian Securities Exchange.

Twenty Largest Securityholders

Twenty Largest Securityholders
	Number of	Percentage
	securities	of issued
Securityholder	held	capital
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	45,698,404	26.00
J P MORGAN NOMINEES AUSTRALIA LIMITED	30,523,153	17.36
CITICORP NOMINEES PTY LIMITED	19,470,151	11.08
NATIONAL NOMINEES LIMITED	16,497,821	9.39
BNP PARIBAS NOMS PTY LTD	10,725,365	6.10
ONE MANAGED INVT FUNDS LTD	6,966,501	3.96
BNP PARIBAS NOMINEES PTY LTD	4,476,242	2.55
AMP LIFE LIMITED	2,020,237	1.15
CITICORP NOMINEES PTY LIMITED	1,640,056	0.93
BOND STREET CUSTODIANS LIMITED	1,419,342	0.81
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED	1,416,573	0.81
CS FOURTH NOMINEES PTY LIMITED	1,324,933	0.75
PERSHING AUSTRALIA NOMINEES PTY LTD	1,124,172	0.64
CUSTODIAL SERVICES LIMITED	1,038,434	0.59
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED	1,028,910	0.59
FORSYTH BARR CUSTODIANS LTD	643,224	0.37
GWYNVILL TRADING PTY LTD	557,937	0.32
BODIAM PROPERTIES PTY LTD	520,500	0.30
MRS MONIKA BATKIN	516,667	0.29
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2	373,540	0.21
Total	147,982,162	84.19
Total Quoted Securities	175,777,011	100.00
Distribution of Securityholders

Distribution of Securityholders
	Number of	Number of	Percentage
Size of holding(1)	securityholders	securities	of securities
100,001 and Over	51	153,632,160	87.40
10,001 to 100,000	545	12,738,971	7.25
5,001 to 10,000	597	4,366,618	2.48
1,001 to 5,000	1,764	4,499,404	2.56
1 to 1,000	1,212	539,858	0.31
Total	4,169	175,777,011	100.00

(1) There are 308 securityholders with unmarketable parcels totalling 12,628 shares.

118 Annual Report 2016

Securityholder Information

FOR THE YEAR ENDED 30 JUNE 2016

Distribution of Long Term Incentive Plan (LTIP) Rights Holders

Distribution of Long Term Incentive Plan (LTIP) Rights Holders
	Number of
	LTIP Right	Number of	Percentage
Size of holding	Holders	securities	of securities
100,001 and Over	1	241,174	53.44
10,001 to 100,000	7	210,140	46.56
5,001 to 10,000	–	–	–
1,001 to 5,000	–	–	–
1 to 1,000	–	–	–
Total	8	451,314	100.00
LTIP Rights are unquoted and issued under the Ingenia Rights Plan.

Distribution of Short Term Incentive Plan (STIP) Rights Holders

	Number of
	STIP Right	Number of	Percentage
Size of holding	Holders	securities	of securities
100,001 and Over	–	–	–
10,001 to 100,000	3	76,548	100.00
5,001 to 10,000	–	–	–
1,001 to 5,000	–	–	–
1 to 1,000	–	–	–
Total	3	76,548	100.00

STIP Rights are unquoted and issued under the Ingenia Rights Plan.

Unquoted Securities
	Number of	Number of
Type of security	holders	securities
LTIP Rights	8	451,314
STIP Rights	3	76,548
Substantial Securityholders
	Number of	Percentage of
Securityholder	securities	issued capital
Cohen & Steers and all bodies controlled by Cohen & Steers, Inc	20,480,041	11.90
The Vanguard Group Inc	10,821,125	7.21
AMP Limited and its related bodies corporate	8,863,146	5.04

Restricted Securities

There are no restricted securities on issue as at 13 September 2016.

Voting

In accordance with the Constitution each member present at a meeting whether in person, or by proxy, or by power of attorney, or in a duly authorised representative in the case of a corporate member, shall have one vote on a show of hands, and one vote for each fully paid stapled security, on a poll.

Holders of LTIP and STIP Rights have no voting rights.

On-Market Buyback

There is no current on-market buy-back in relation to the Group’s securities.

Ingenia Communities Holdings Limited

119

Investor Relations

FOR THE YEAR ENDED 30 JUNE 2016

Enquiries relating to Ingenia Communities Group (ASX code: INA) can be directed to the Link Market Services Investor Information line on 1300 554 474 (or from outside Australia +61 1300 554 474). This service is available from 8:30am to 5:30pm (Sydney time) on all business days.

Link Market Services can assist with:

Change of address details
Requests to receive communications online
Provision of tax file numbers
Changes to payment instructions
General enquiries about your securityholding.

www.ingeniacommunities.com.au

Ingenia’s corporate website provides investors with extensive information about the Group. You can visit the website to find: information on Ingenia and its property portfolios; the latest financial information; reports; announcements; and corporate governance information. Securityholders can access their investment details, including holding balance and payment history, from the site.

Distribution Payments

Distribution payments are made twice a year, for the six months ending 30 June and the six months ending 31 December. Distributions are declared and paid in Australian dollars.

The table below details distribution payments for the 2015/2016 financial year. A history of distribution payments made since 2005 is available from the Group’s website www.ingeniacommunities.com.au.

2005 is available from the Group’s website www.ingeniacommunities.com.au.
Period Ended	Date Paid	Total Amount
June 2016	14 September 2016	$0.051
December 2015	16 March 2016	$0.042

Information on the tax components of distributions can be found on Ingenia’s website or the Annual Tax Statement.

Ingenia Communities Group operates a Distribution Reinvestment Plan through which securityholders can elect to reinvest all or part of their distributions in additional Ingenia securities. The rules of the Plan and how to apply can be found on the website or obtained from the Registry, Link Market Services.

Annual Taxation Statement

Annual Taxation Statements, which summarise payments made during the year and include information required to complete an Australian tax return, are dispatched each September. Details of past distributions and relevant tax information are available on Ingenia’s website.

Annual General Meeting

The Annual General Meeting will be held on 15 November 2016 in Sydney.

2015/2016 Securityholder Calendar

14 September 2016	Final FY16 distribution paid
14 September 2016	Annual Tax Statement dispatched
15 November 2016	Annual General Meeting
February 2017	1H17 Result announced
March 2017	Interim FY17 distribution paid

Privacy Policy

Ingenia Communities Group is committed to ensuring the confidentiality and security of your personal information. The Group’s Privacy Policy, detailing our handling of personal information, is available online at www.ingeniacommunities.com.au.

Complaints

Any securityholder wishing to register a complaint should direct it to Investor Relations in the first instance, at the Responsible Entity’s address listed in this Report.

Ingenia Communities RE Limited is a member of an independent dispute resolution scheme, the Financial Ombudsman Service (FOS). If a securityholder feels that a complaint remains unresolved or wishes it to be investigated further, FOS can be contacted as detailed below:

By telephone: 1300 780 808

In writing: Financial Ombudsman Service Limited GPO Box 3, Melbourne VIC 3001 Website: www.fos.org.au

Corporate Governance Statement

The Corporate Governance Statement was approved by the Board of Directors on 3 August 2016 and can be found at http://www.ingeniacommunities.com.au/about-us/corporate-governance/

Annual Report 2016

120

Corporate Directory

FOR THE YEAR ENDED 30 JUNE 2016

Ingenia Communities Group

Ingenia Communities Holdings Limited ACN 154 444 925

Ingenia Communities Management Trust ARSN 122 928 410

Ingenia Communities Fund ARSN 107 459 576

Responsible Entity

Ingenia Communities RE Limited ACN 154 464 990 (AFSL 415862)

Registered Office

Level 9, 115 Pitt Street Sydney NSW 2000 Telephone: 1300 132 946 Facsimile: +61 2 8263 0500 Email: [email protected] Website: www.ingeniacommunities.com.au

Directors of Ingenia Communities Group (as at 19 September 2016)

J Hazel (Chairman) R Morrison (Deputy Chairman) A Heyworth N Barlow ONZM P Clark AM S Owen

Secretary

L Ralph T Betts

Security Registry

Link Market Services Limited

Level 12, 680 George Street Sydney NSW 2000 Locked Bag A14 Sydney South NSW 1235

Telephone: 1300 554 474 (local call cost) or from outside Australia: +61 1300 554 474 Facsimile: +61 2 9287 0303

Email: [email protected]

Auditors

EY

200 George Street Sydney NSW 2000

Stock Exchange Quotation

Ingenia Communities Group is listed on the Australian Securities Exchange under ASX listing code: INA.

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Disclaimer

This report was prepared by Ingenia Communities Holdings Limited (ACN 154 444 925) and Ingenia Communities RE Limited (ACN 154 464 990) as responsible entity for Ingenia Communities Fund (ARSN 107 459 576) and Ingenia Communities Management Trust (ARSN 122 928 410) (together Ingenia Communities Group, INA or the Group). Information contained in this report is current as at 30 June 2016. This report is provided for information purposes only and has been prepared without taking account of any particular reader’s financial situation, objectives or needs. Nothing contained in this report constitutes investment, legal, tax or other advice. Accordingly, readers should, before acting on any information in this report, consider its appropriateness, having regard to their objectives, financial situation and needs, and seek the assistance of their financial or other licensed professional adviser before making any investment decision. This report does not constitute an offer, invitation, solicitation or recommendation with respect to the subscription for, purchase or sale of any security, nor does it form the basis of any contract or commitment.

Ingenia Communities Group Level 9, 115 Pitt Street, Sydney, NSW 2000 T. 1300 132 946 E. [email protected] W. www.ingeniacommunities.com.au

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AI assistant

INGENIA COMMUNITIES GROUP — Annual Report 2016

65125_rns_2016-09-29_8941bafe-32b0-46d7-a6a8-20cf89f99345.pdf

Annual Report 2016

Ingenia Communities Holdings Limited Annual Reports

Contents

Directors’ Report

1. Directors

Non-executive Directors (“NEDs”)

Qualifications, Experience and Special Responsibilities

Jim Hazel – Non-executive Chairman

Philip Clark AM – Non-executive Director

Amanda Heyworth – Non-executive Director

Directors’ Report

Robert Morrison – Deputy Chairman

Norah Barlow ONZM – Non-executive Director

Simon Owen – CEO and MD

1.1 Meetings

1.2 Interests of Directors

2. Company Secretaries

Leanne Ralph

Tania Betts

3. Operating and Financial Review

a. Ingenia Communities Group Overview

b. Strategy

Directors’ Report

c. FY16 Financial Results

d. Key Metrics

e. Group Results Summary

f. Segment Performance and Priorities

Ingenia Lifestyle and Holidays

i. Performance

ii. Strategic Priorities

Ingenia Garden Villages

i. Performance

Directors’ Report

ii. Strategic Priorities

Ingenia Settlers

i. Performance

ii. Strategic Priorities

g. Capital Management

h. Financial Position

i. Cash Flow

j. Distributions

k. FY17 Outlook

Directors’ Report

4. Significant Changes in the State of Affairs

5. Events Subsequent to Reporting Date

a. Performance Quantum Rights (PQRs)

b. Security Purchase Plan

c. Acquisition of Ocean Lake

d. Amended Debt Facility

e. Final FY16 Distribution

7. Environmental Regulation

8. Group Indemnities

9. Indemnification of Auditors

10. Auditor’s Independence Declaration

11. Auditor Extension

6. Likely Developments

12. Rounding of Amounts

13. Message from the Remuneration and Nomination Committee

13.1 Introduction

13.2 Ingenia’s Performance

13.3 Ingenia’s Corporate Strategy

13.4 Conclusion

Directors’ Report

14. Remuneration Report (Audited)

14.1 Introduction

14.2 Remuneration Governance

a. Remuneration and Nomination Committee (RNC)

b. External Remuneration Advisers

14.3 Details of KMP

14.4 Remuneration of Executive KMP

a. Remuneration Policy

Directors’ Report

b. Link between Remuneration and Performance

c. Mix of Remuneration Components

14.5 Total Fixed Remuneration of Executive KMP

14.6 Rights Plan

Directors’ Report

INGENIA COMMUNITIES GROUP Annual Report 2016