INGENIA COMMUNITIES GROUP — Management Reports 2008

Sep 10, 2008

1 June 2008

ING Management Limited ABN 15 006 065 032 Level 6, 345 George Street Sydney NSW 2000

11 September 2008

Dear Unitholder,

ING Real Estate Community Living Group Annual Results and 2009 Update

I am writing to you to provide an important update on your Fund, including information on the forecast distributions for the forthcoming 2009 financial year. Further information will be included in the Fund’s Annual Report which will be mailed out by the end of the month to those investors who have previously elected to receive it. For those investors who have not elected to receive the Annual Report, a copy will be available on the ING Real Estate website at www.ingrealestate.com.au

Market conditions have been very challenging over the last twelve months. The global credit crisis has reduced the availability of financing and resulted in significant impediments to transacting real estate. US residential market values have fallen, while in Australia, higher interest rates have dampened the residential market. These factors, combined with portfolio specific issues, have impacted ILF’s performance in 2008 and the outlook for 2009.

Distributable income for the 2008 year was 10.7 cents per unit, unchanged from last year, while distributions per unit increased 2.8% to 11.0 cents per unit. It is disappointing the Fund did not achieve its earnings growth target. The major reason for not achieving the target was a decrease in the contribution from the US Student portfolio. The negative impacts included cutbacks in State Budget spending which affected enrolment growth, reduced occupancy and rising costs impacting operating margins. On the positive side the Fund’s US Seniors portfolio held up well in the face of the US residential downturn, with average occupancy for the year at 93.6%, higher than the two previous years and above the level achieved by many of its peers. The Australian retirement village development pipeline also made a strong contribution to the portfolio with over 100 homes being built and sold during the year. The strongest contributor was Settlers Ridgewood Rise in the northern suburbs of Perth with 51 homes built and sold in 2008.

The outlook for ILF’s earnings in 2009 remains challenging. In particular, the expiry/termination of the master leases over the 35 Australian Seniors rental villages will result in income dropping to reflect the underlying occupancy. Under external management, the occupancies of this portfolio fell from 78% to 66% over the last 12 months. From 30 September 2008, management of the properties will be brought in-house and a team of experienced professionals has been hired to restore the occupancy at these villages. Other factors impacting 2009 earnings include depressed residential markets which are likely to result in a slower pace of development activity in Australia and lower occupancy in the US. As a result, earnings for the 2009 year are forecast to be 9.4 cents per unit, a 12% decrease on 2008 earnings.

In light of current conditions, distributions for the 2009 year will be reduced to 6.0 cents per unit, or 1.5 cents per quarter starting with the 30 September 2008 quarter. The reduction in distribution level is necessary to allow the Fund to continue with its operating activities without seeking external finance and to provide a contingency should profit from development activities slow further.

The key objectives for 2009 are to increase occupancy of the Australian rental portfolio, improve operating margins of the US Students portfolio and maintain the performance of both the US Seniors portfolio and the Australian retirement village development activities. While market conditions make the disposal of properties difficult, the Fund will look to achieve selective sales in order to reduce the Fund’s gearing.

2009 will be a year of consolidation for ILF. The Board and Management thank you for your support and ask for your patience while we work to achieve the key objectives.

Yours sincerely

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IAN MUIR Chief Executive Officer ING Real Estate Community Living Group