Ingenia Communities Group Annual Report 2016

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FY2016 Annual Report · Ingenia Communities Group

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Investor

Update

2016

FINANCIAL SUMMARY

Statutory Profit

Underlying Profit

Underlying Profit EPS

$24.3m $20.2m 13.4c

Operating
Cashflow

Net Asset Value
per Security

Distribution
per Security

$21.0m $2.45 9.3c

PERFORMANCE HIGHLIGHTS

Underlying profit
up 20%, to $20.2m

Distribution up 15%,
to 9.3 cents per
security

Operating cashflows
strong at $21.0m –
up 133%

Garden Villages
portfolio occupancy
at 90.7%

Over 2,100
development sites
secured (83% in
metro and coastal
locations)

Sales momentum
building with
107 new home
settlements
(up over 100%)

Queensland

New South Wales

Victoria

5Tasmania

Western Australia9

66 quality
Australian
communities
and still
growing

Chairman’s Letter

JIM HAZEL

The achievements of financial year 2016
form a strong base for the coming year
as we seek to deliver long-term stable
securityholder returns.

Dear Securityholders
I am pleased to report on a
further year of progress in
delivering Ingenia’s strategy
as Ingenia rapidly expanded
in the fast growing lifestyle
communities segment of
the Australian seniors living
market and delivered growth
in investor returns.

The growth in returns achieved
in the 2016 financial year
demonstrated the results from
our strategy to increase our
investment in the lifestyle and
holidays portfolio and to grow
development returns from
this business. Having entered
this market with an initial
investment in 2013, we have
now established a portfolio of
27 communities with further
growth secured, including
Ingenia’s first Greenfield
development sites.

Over the last financial year,
underlying profit increased and
our revenue, of $107.1 million,
demonstrated 41% growth on
the prior year.

The full year distribution
for the 2016 financial year,
of 9.3 cents per security,
represented an increase of
15%, building on similar growth
in 2014 and 2015. We remain
committed to distribution
growth while maximising value
through prudent reinvestment
to deliver ongoing growth
in returns.

Much of this growth was due
to a significant increase in
the contribution from new
home sales in our lifestyle
communities and increased
revenue from rents as we
optimised performance and
saw the benefit of acquisitions
in key metropolitan and coastal
markets. Our enhanced scale
and established platform in this
market segment positions the
Group well for further growth
in sales, rental returns and
distributions.

The security price closed
the year at $2.87, above
the $2.67 security price at
the beginning of the 2016
financial year.

INA Security Price ($)

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Ingenia South West Rocks

While underperforming
the S&P/ASX Property 300
Accumulation Index over the
1 and 3 years to June 2016,
Ingenia’s returns over the past 1,
3 and 5 years have been strong,
with the Group significantly
outperforming the ASX All
Ordinaries Accumulation Index
over each period. We remain
focussed on continuing to
deliver results from the business,
supporting further price growth
as our earnings grow and our
business model benefits from
further scale.

We raised $60 million
through a capital raising in
June in order to acquire four
additional lifestyle and holiday
communities. The Security
Purchase Plan announced
in June raised a further
$8.5 million and allowed
existing securityholders to
participate in Ingenia’s growth.

With an increase in funding
capacity secured, progress
on the divestment of the non-
core Deferred Management
Fee (Settlers) portfolio and an
active Distribution Reinvestment
Plan, we will continue to pursue
opportunities which meet our
return requirements.

Driving performance and
organic growth within our
Garden Villages rental portfolio
and continuing to expand in the
lifestyle and holidays business
through acquisitions and
development remain the focus
of the Group’s strategy.

The achievements of financial
year 2016 form a strong base
for the coming year as we seek
to deliver long-term stable
securityholder returns.

I would like to thank Ingenia’s
dedicated directors and
management team for their hard
work over the past 12 months
and their ongoing commitment
to Ingenia’s performance and
strategic goals.

As your Chairman I would like
to thank all securityholders for
your continued support and
I look forward to meeting with
you and providing a further
update on the business at
our upcoming Annual General
Meeting to be held in Sydney
on 15 November 2016.

Jim Hazel
Chairman

CEO Update

SIMON OWEN

Over the year Ingenia’s business has continued
to evolve, enhancing the Group’s exposure
to lifestyle and holiday communities and
extending the pipeline for future growth.

Over the 2016 financial year we
made significant progress on
the Group’s key objectives –
further expanding our Australian
lifestyle business, continuing
to drive performance from the
existing asset base and securing
longer term growth through
the expansion of the Group’s
development pipeline.

We also launched several
new developments, exceeded
our sales target and saw the
benefits of our strategy with
substantial increases in revenue
and cashflows supporting
growth in distributions.

Financial Performance
While Statutory Profit of
$24.3 million was down 6% on
the 2015 result, due to a reduced
tax benefit in line with growing
profits, Underlying Profit
from continuing operations of
$20.2 million, was up 20% on
the prior comparative period.

Operating cashflow for the
year of $21.0 million was up
133% on the prior year driven
by rental and tourism earnings
growth and an increase in
home settlements.

Net Asset Value per security
(NAV) increased by 5%,
to $2.45.

Capital management
Over the year, six new lifestyle
communities were acquired
and a further six acquisitions
secured, supported by capital
recycling from divested
assets, the proceeds of a
successful placement and
Security Purchase Plan and
additional debt.

At 30 June 2016, Ingenia’s LVR
of 24.9% was below the Group’s
policy range of 30-35% and well
below the Group’s covenant of
50%. Following completion of
pending acquisitions, Ingenia’s
LVR is expected to be at the
lower end of the Group’s
policy range.

Consistent with our focus on
maintaining funding capacity,
Ingenia increased its debt
capacity to $224 million with
an increase of $24 million in its
debt facility. Ingenia’s current all
in cost of debt is now 4.0%.

Acquisitions
Over the last financial year
we have rapidly expanded,
securing growth in an emerging
asset class with strong long-
term industry fundamentals
underpinned by a growing
demand for quality affordable
housing from an ageing
population.

We continue to access off
market acquisitions in the
increasingly competitive lifestyle
communities market, investing
$70 million, adding over 900
income generating sites and
300 approved development
sites. This acquisition strategy
has seen Ingenia’s lifestyle and
holiday communities become
the key earnings driver across
the Group.

Recently announced
acquisitions are shown
in the table below.

Portfolio performance
Across the 31 Ingenia Garden
Villages, occupancy closed
the year at 90.7%, with rent
increases also achieved. The
portfolio’s return was stable
despite the sale of three non-
core villages in June 2015.

Across the Settlers Villages,
income fell as the development
and conversion program, which
has delivered significant value
since commencement, nears
completion.

The Ingenia lifestyle and
holidays portfolio continued
to expand with acquisitions
in Queensland and NSW
extending our presence in key
markets. This business provides
strong recurrent cash earnings,
attractive development returns,
and above all is affordable for a
growing number of seniors.

The portfolio continued to build
returns with rental revenue of
$33 million reflecting the benefit
of acquisitions and development
and strong growth in revenue
from tourism (up 10% on a like
for like basis).

Development
Significant progress was
made in development, with
13 communities now under
development, expansion of
the future potential pipeline
to over 2,000 sites and 107
home settlements. In addition
we secured our first Greenfield
developments, supplementing
our pipeline in key growth
corridors where existing
communities are not available
at appropriate returns.

Outlook
We remain focussed on the
growth of the Group’s lifestyle
and holidays portfolio and
continue to refine our strategy as
the market for affordable seniors
housing matures and evolves.

In addition to acquiring and
repositioning tourism and
mixed-use parks we secured
our first, high quality Greenfield
opportunities to extend our
pipeline in markets with
strong demand.

With additional assets secured
in metropolitan and coastal
markets and a forecast of more
than 150 home settlements
in the 2017 financial year, we
remain confident of continuing
growth from our lifestyle and
holidays business.

The potential to release
additional capital for investment
through the planned divestment
of the DMF portfolio will provide
future growth capital for
this portfolio.

In closing, I would like to thank
the Board for their support and
our management team and all
employees for their continuing
commitment and contribution
to the business.

The remainder of this Update
contains greater detail on
Ingenia’s business.

Simon Owen
Chief Executive Officer
and Managing Director

Purchase
price ($m)

Existing
sites

Develop-
ment sites

Summary

Avina Van Village,
Sydney (NSW)

Happy Wanderer,
Fraser Coast (QLD)

33.0

180

150

9.5

149

–

Confidential Park,
NSW Coast (NSW)

Greenfield Site,
Upper Coomera (QLD)

Latitude One,
Port Stephens (NSW)

7.5

7.0

–

180

229

Mixed-use park with substantial land
for development (subject to approvals)

Mixed-use park located in popular
retiree market

Mixed-use park dominated by annuals
with approved sites for development
(total 200 sites)

Site optioned – acquisition subject to
approval of proposed development

DA approved site for new
masterplanned community
(conditional contract)

Portfolio Location
Portfolio Location
(by value)*
(by value)*

Coastal

Metropolitan

Regional

52%

36%

12%

Includes Ocean Lake (acquired
August 2016).

Ingenia has
rapidly expanded
this business
focussed on
rental cashflows
complemented
by development
returns

Development

Development provides
the opportunity to
improve returns through
the sale of new homes,
expand cash yields
through additional
ground lease rents, and
improve the amenity of
existing communities
as new homes are
delivered.

Ingenia’s development pipeline
offers attractive returns while
growing permanent rental
income.

With a development and sales
platform in place to support
accelerated growth, new
projects were launched and
107 new home settlements were
achieved over the 2016 financial
year. Gross development profit
increased to $9.4 million (up
over 80%).

Ingenia acquired
its first lifestyle
community in March
2013, and has since
grown the portfolio
to 27 communities.

The Ingenia Lifestyle portfolio
provides exposure to a growing
demand from Australia’s ageing
population for affordable age-
appropriate housing.

Reflecting ongoing growth
in the portfolio, which is
located in predominantly
coastal and metropolitan
markets, rental revenue
increased to $33.0 million in
the 2016 financial year (up
from $19.8 million the prior
year). The Portfolio’s EBIT
contribution of $16.5 million,
was up by close to 100% on
prior year, driven by a growing
rental base and increasing
development profits.

The core of this portfolio
is permanent site revenue
generated from residents who
generally fund their rental
payments by government
pension and rental assistance.
Residents own their home, but
pay a land lease rent to locate
it on Ingenia’s land.

This represented significant
growth on the 52 new home
settlements achieved in the
prior year.

Recent acquisitions and
secured sites, which include
a DA approved Greenfield
site in Port Stephens (NSW),
and contracted or optioned
Greenfield sites in greater
Sydney and Upper Coomera
(QLD) have increased the
scale and quality of the
pipeline to over 2,100 potential
development sites. These
sites are located primarily
in metropolitan and coastal
markets where sales velocity
and price is expected to
be strong.

The launch of Ingenia’s first
Queensland and Melbourne
projects (Bethania, Chambers
Pines and Lara) and ongoing
demand at Stoney Creek
in Marsden Park (NSW) is
expected to support an increase
in new home settlements, with
over 150 settlements forecast
for the 2017 financial year.

Key data

Total properties

Total permanent sites

Total annual sites

Total tourism sites

Development sites2

Portfolio value

30 June 20161

30 June 2015

1,620

640

1,449

1,484

1,468

306

1,033

1,135

$299.7m

$204.2m

1 Excludes Ocean Lake (acquired post year end).
2 Includes new and recycled permanent and tourism sites. Excludes sites under

contract or option.

This stable cashflow is now
generated from over 1,600 sites.

In addition to strong rental
cashflows from permanent
homes this portfolio provides
exposure to complementary
tourism and development
returns.

The ongoing growth of this
portfolio through acquisition
and development is at the
core of Ingenia’s strategy.

Key data

30 June 2016

30 June 2015

Total active development projects

Sales projects ‘in market’

Deposited/contracted

New home settlements

Gross new home development profit

Average new home price ($’000)

FY16

107

$9.4m

$274

FY15

$5.2m

$275

Key data

Total properties

Total units

Occupancy

Portfolio value

Ingenia is the largest
owner-operator
of seniors’ rental
accommodation in
Australia. Stable
recurring cashflows
are underpinned
by government
payments (pension
and rent assistance)

The Ingenia Garden Villages
portfolio consists of 31 rental
communities with over 1,600
units across Australia.

The portfolio closed the year
with strong occupancy (90.7%)
and also increased rent. The
average weekly rent across
the portfolio of $321 was up
$10 (from $311 at June 2015).

30 June 2016

30 June 2015

1,628

90.7%

1,628

90.7%

$134.6m

$125.7m

These results, combined
with margin improvement,
contributed to relatively stable
revenue from the portfolio
despite the sale of three assets
in June 2015. Total revenue
of $27.5 million was down
only $0.7 million on the prior
year and EBIT was stable, at
$11.0 million.

‘Ingenia Care’, a free service that
acts as a ‘care concierge’, to
assist residents find a pathway
through the maze of accessing
care, was launched in October
2013 and has continued to grow
its reach. Over 400 residents
now access this service.

Ingenia Care extends Ingenia’s
commitment to resident health
and well being, enabling
residents to access primary
health services, social support,
transport and government
funded care packages, assisting
them to age in place.

Ingenia Settlers communities provide
traditional retirement living for self-
funded retirees

Ingenia’s focus is on maximising returns
while seeking to exit the portfolio at an
appropriate value.

Through referrals and regular
dialogue the program is
increasing the awareness of
health professionals to the
benefits of Garden Villages for
seniors in need of supported
accommodation. These
professionals are increasingly
referring residents to Ingenia’s
villages.

With Ingenia Care now
operating in a number of
Ingenia’s lifestyle communities,

a new extended care program
will be trialled in low occupancy
villages.

Further occupancy and rent
growth remain a focus in the
2017 financial year. Combined
with ongoing community
engagement, operational
efficiencies and the growing
benefit of Ingenia Care, the
portfolio is positioned to
continue to improve occupancy
and grow earnings.

Key data

Total properties

Total units

Occupancy

Portfolio value

The Ingenia Settlers portfolio
consists of eight Deferred
Management Fee (DMF)
communities with over 830
homes across WA, QLD
and NSW.

The overall returns from
the portfolio reduced in the
2016 financial year as the
development program moved
closer to completion.

Development income across the
portfolio was down 38% on the
prior year as stock levels have
reduced, and lower priced one
bedroom and studio apartments
largely remain.

30 June 2016

30 June 2015

838

97%

838

93%

$62.5m

$62.9m

With the conversion program
(which has seen the sale of
215 converted units for over
$38 million over the past five
and a half years) also nearing
completion and no new
capital committed to future
development, development
profits will continue to
moderate.

Ingenia is progressing the
divestment of these assets in
line with the Group’s strategy to
focus on Ingenia’s lifestyle and
holiday communities.

Portfolio Location
(by site numbers)*

Coastal

Metropolitan

Regional

74%

18%

Includes Ocean Lake (acquired
August 2016).

Tourism provides
complementary
strong cashflows
with significant
cross selling
potential and
preserves
longer term land
redevelopment
optionality

25%
OFF ALL
PARKS

Ingenia Holidays provide tourism
accommodation including
tourism villas, cabins, caravan
and camping sites which target
the affordable tourism market
and are attractive to grey
nomads and families alike.

Ingenia’s assets include a
number of iconic coastal
communities and have the
potential to provide significant
growth and generate
compelling returns.

While a number of tourism
sites will be converted to
permanent home sites
through development, tourism
accommodation provides a
number of benefits, including:

Key data

Total properties

Total self contained units

Average daily rate

— Diversifying and increasing

Occupancy

cashflows

Caravan and camping sites

— Providing potential residents
with their first exposure to
an Ingenia community

Average daily rate

Occupancy

30 June 2016

30 June 2015

495

$130

53%

954

$42

45%

376

$113

47%

657

$33

44%

— Access to Australia’s
growing grey nomad
caravanning market
— Preserving longer term

redevelopment optionality

— Significant cross selling
opportunities (through
resident discounts and the
ability to market permanent
homes to visitors).

Over the 2016 financial year
revenue grew by 10% (on a
like for like basis). In addition
to leveraging Ingenia’s own
database of over 100,000
members, partnerships with
online travel agents have
been extended, and bookings

through these agents are now
on average over $240,000 in
site revenue monthly.

Increasing returns are
anticipated as Ingenia’s
scale and brand recognition
continue to expand.

Thinking about a holiday?

Perhaps a weekend winery getaway or a family coastal
escape is in order? Remember, as a valued Investor
of Ingenia Communities you’re entitled to 25% off at
all of our Ingenia Holidays parks to make taking a break
just a little easier.

Simply mention your Family & Friends Discount
Voucher when booking over the phone and present the
voucher on arrival to receive your investor discount.*

With an ever expanding list of great
locations throughout NSW and south
east Queensland you’re bound to find
the perfect spot for your next holiday
at www.ingeniaholidays.com.au
*Terms and Conditions Apply. Phone
bookings only. Subject to availability,
cannot be used in peak periods or in
conjunction with any other offer.

View our parks online at
www.ingeniaholidays.com.au

Ingenia Communities Group
Level 9, 115 Pitt Street, Sydney, NSW 2000
T. 1300 132 946
E. investor@ingeniacommunities.com.au
W. www.ingeniacommunities.com.au

Note:

This Update provides a summary of performance
for the 2016 financial year. Further details can be
found in the Group’s Annual Report.

Annual

Report

2016

Ingenia Communities Holdings Limited
Annual Reports

FOR THE YEAR ENDED 30 JUNE 2016

Contents

Directors’ Report

Auditor’s Independence Declaration

Consolidated Statement of Comprehensive Income

Consolidated Balance Sheet

Consolidated Cash Flow Statement

Consolidated Statement of Changes in Equity

Notes to the Financial Statements

Summary of significant accounting policies

2. Accounting estimates and judgements

3. Segment information

4. Earnings per security

5. Revenue

6. Finance expense

Income tax benefit

8. Discontinued operations

9. Assets and liabilities held for sale

10. Trade and other receivables

11. Inventories

12. Investment properties

13. Plant and equipment

14. Intangibles

15. Trade and other payables

16. Borrowings

17. Retirement village resident loans

18. Deferred tax assets and liabilities

19. Issued securities

20. Reserves

21. Accumulated losses

22. Commitments

23. Contingent liabilities

24. Share-based payment transactions

25. Capital management

26. Financial instruments

27. Fair value measurement

28. Auditor’s remuneration

29. Related parties

30. Company financial information

31. Subsidiaries

32. Notes to the cash flow statement

33. Subsequent events

Directors’ Declaration

Independent Auditor’s Report

Securityholder Information

Investor Relations

Corporate Directory

www.ingeniacommunities.com.au

117

119

120

Annual Report 2016Directors’ 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
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
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

Ingenia Communities Holdings Limited
2

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.

Other Current Listed Company Directorships: Nil

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

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.

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:

Jim Hazel

Philip Clark AM

Amanda Heyworth

Robert Morrison

Norah Barlow ONZM

Simon Owen

Board

Audit & Risk Committee

Remuneration &
Nomination Committee

Investment
Committee

–

A: Meetings eligible to attend B: Meetings attended

Annual Report 20163

Interests of Directors

1.2
Securities in the Group held by directors or their associates as at 30 June 2016 were:

Issued stapled
securities

Rights

287,276

42,286

106,921

75,556

35,949

–

1,003,985

651,174

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.

Jim Hazel

Philip Clark AM

Amanda Heyworth

Robert Morrison

Norah Barlow ONZM

Simon Owen

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

Ingenia Communities Group Overview

a.
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.

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.

Ingenia Communities Holdings Limited4

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:

EBIT – continuing operations

Net interest expense

Tax benefit associated to Underlying Profit

Underlying Profit – continuing operations

Underlying Profit – discontinued operations

Underlying Profit

Net foreign exchange gain

Net loss on disposal of investment properties

Net gain/(loss) on change in fair value of:

Investment properties

Retirement village resident loans

Derivatives

Gain on revaluation of newly constructed retirement villages

Other

Discontinued operations (below Underlying Profit) net of income tax

Tax benefit associated with items below Underlying Profit

Statutory profit

2016
$’000

24,200

(6,625)

2,586

20,161

–

20,161

471

(989)

7,496

(1,388)

(414)

(1,525)

–

468

24,280

2015
$’000

18,050

(4,567)

3,319

16,802

705

17,507

111

(69)

16,404

(8,878)

164

(2,422)

503

(883)

3,285

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.

Annual Report 2016

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).

Performance

Ingenia Lifestyle & Holidays

New home settlements (#)

Gross new home development profit $m

Permanent rental income $m

Annuals rental income $m

Tourism rental income $m

Commercial rental income $m

EBIT contribution $m

2016

2015

Change

107

9.4

12.3

3.0

17.6

0.4

16.5

5.2

8.3

1.0

10.3

0.2

8.4

55.0

4.2

4.0

2.0

7.3

0.2

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.

Strategic Priorities

ii.
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

Performance

Ingenia Garden Villages

Occupancy %

Rental income $m

Catering income $m

EBIT $m

2016

2015

Change

90.7%

24.0

3.3

11.0

90.7%

24.4

3.5

11.0

–

(0.4)

(0.2)

–

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.

Ingenia Communities Holdings Limited6

Directors’ Report

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

Strategic Priorities

ii.
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.

Performance

Ingenia Settlers

Occupancy %

New settlements (#)

Development income $m

Accrued DMF income $m

EBIT $m

2016

97.0%

1.5

4.2

3.8

2015

Change

93.0%

4.0%

2.4

6.8

6.3

(14)

(0.9)

(2.6)

(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.

Strategic Priorities

ii.
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

Cash and cash equivalents

Inventories

Investment properties

Assets held for sale

Deferred tax asset

Other assets

Total assets

Borrowings

Retirement village resident loans

Liabilities held for sale

Other liabilities

Total liabilities

Net assets/equity

2016

15,057

17,665

2015

15,117

13,208

710,746

539,728

–

9,399

13,952

61,598

6,348

9,308

766,819

645,307

104,090

207,483

–

33,644

345,217

421,602

66,782

161,878

42,041

31,086

301,787

343,520

Change

(60)

4,457

171,018

(61,598)

3,051

4,644

121,512

37,308

45,605

(42,041)

2,558

43,430

78,082

Annual Report 20167

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.

Cash Flow

$’000

Operating cash flow

Investing cash flow

Financing cash flow

Net change in cash and cash equivalents

2016

2015

Change

21,028

9,034

11,994

(108,278)

(24,232)

(84,046)

87,126

(124)

15,564

366

71,562

(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.

Ingenia Communities Holdings Limited8

Directors’ Report

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

Significant Changes in the State of Affairs

4.
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.

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.

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.

Indemnification of Auditors

9.
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.

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.

Annual Report 20169

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

Norah Barlow ONZM
Chair – Remuneration and Nomination Committee

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.

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

The review of NED remuneration is deferred until
December 2016.

Ingenia Communities Holdings Limited10

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.

Annual Report 201611

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:

NEDs

Jim Hazel

Amanda Heyworth

Philip Clark AM

Robert Morrison

Position

Chairman of the Board

Member – Investment Committee

Chair – Audit and Risk Committee

Member – Remuneration and Nomination Committee

Member –Remuneration and Nomination Committee (Chair until
2 December 2015)

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)

Executive Director

Simon Owen

Other Executive KMP

Tania Betts

Nicole Fisher

Member – Audit and Risk Committee

Member – Investment Committee

CEO and MD

CFO

COO

14.4 Remuneration of Executive KMP

Remuneration Policy

a.
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.

Ingenia Communities Holdings Limited12

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)

Short-term incentive (STI)

Long-term incentive (LTI)

TFR is set with reference to the executive KMP’s role,
responsibilities and performance and remuneration levels for
similar positions in the market.

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.

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:

Total Underlying Profit ($000)

Statutory profit/(loss) ($000)

Basic EPS(1)

Net asset value per security(1)

Security price at 30th June

Distributions

FY16

FY15

20,161

24,280

17,507

25,722

FY14

11,568

11,518

FY13

5,867

(10,290)

FY12

7,434

33,627

16.1¢

18.8¢

10.8¢

(12.0)¢

45.6¢

$2.45

$2.87

$2.34

$2.58

$2.13

$3.03

$2.06

$2.07

9.3¢

8.1¢

6.9¢

6.0¢

$2.06

$1.17

–

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

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

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

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.

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.

Annual Report 2016

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:

KMP

CEO

CFO

COO

TFR

43.5%

55.6%

Maximum
STI

Maximum
LTI

Total
remuneration

34.8%

33.3%

21.7%

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

CEO

CFO

COO(2)

Total

TFR(1)

$650,004

$334,193

$265,241

$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.

Ingenia Communities Holdings Limited14

Directors’ Report

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

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.

KMP

CEO(1)

CFO

COO(2)

Total

Maximum STIP
(Cash)

Maximum STIP
Deferred (Rights)

Total Maximum
STIP Available

40% of TFR

$260,000

30% of TFR

$100,860

30% of TFR

$79,380

$440,240

40% of TFR

$260,000

30% of TFR

$100,860

30% of TFR

$79,380

$440,240

80% of TFR

$520,000

60% of TFR

$201,720

60% of TFR

$158,760

$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:

KMP

CEO

CFO

COO

Financial

Capital
Management

Operational

Systems

People

Reporting

Total

40%

30%

25%

15%

–

20%

–

40%

–

15%

10%

30%

10%

100%

Annual Report 201615

The key considerations in assessing performance against the KPIs are:

KPI

Financial

CEO, CFO, COO

Executive

Key Considerations in achievement

Capital management

CEO, CFO

Systems

CFO, COO

Operational

CEO, CFO, COO

People and reporting

CEO, CFO, COO

EBITDA and Underlying Profit per Security measures are used to
assess financial performance. Threshold levels are determined by
reference to growth on the prior year.

Non-core asset divestment, capital and debt available on
competitive pricing and flexible terms.

Successful implementation of various finance and operational
systems.

Achievement of operational and sales metrics that deliver on
business strategy, established for each executive KMP specific for
their area of responsibility.

Recruit and retain leading industry talent. High calibre leadership
team offering 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

CEO

CFO

COO

(1) 50% deferred for 12 months

Actual STI awarded(1)

Actual STI awarded as a % of maximum STI

$416,000

$140,195

$138,915

80.0%

69.5%

87.5%

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.

Ingenia Communities Holdings Limited16

Directors’ Report

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

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%
CAGR

10% plus an additional amount
progressively vesting on a straight line
basis between Threshold and Maximum

Maximum

Index + 6% CAGR

100%

CAGR: compound annual growth rate

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:

At or Below Threshold

Greater than 8.0%

Nil

ROE

% of Rights that vest

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.

Annual Report 201617

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

Where Group’s actual TSR over the 3 year
vesting period is:

Percentage of employee’s PQRs that may vest in
respect of the Scheme Year:

Below 26% – below threshold performance

26% (approximately 8%pa compound) – on threshold
performance

25%

At or above 26% (but below 33%) performance – between
threshold and target performance

25%-50%: in the same proportion as the Group’s actual
TSR bears to the threshold and target performance.

33% (approximately 10%pa compound) – on target
performance

50%

Above 33% (but below 40%) performance –between
target and stretch performance

50%-100%: in the same proportion as the Group’s actual
TSR bears to the target TSR and stretch performance

40% or above (approximately 12%pa compound) – stretch
performance

100%

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):

KMP

CEO

CFO

COO

Total

Scheme
year

LTI type

Number of
rights granted

Grant date

Fair value of
rights

Vesting
date

FY14

FY15

FY16

FY14

FY15

FY16

FY14

FY15

FY16

PQR

LTIP

PQR

LTIP

PQR

LTIP

Maximum to
expense in
future years

–

$74,839

$175,833

–

$14,139

1-Jul-16

1-Oct-17

1-Oct-18

1-Jul-16

1-Oct-17

410,000

19-Nov-13

$799,500

118,236

12-Nov-14

$179,481

122,938

17-Nov-15

$234,444

106,833

19-Nov-13

$208,325

23,257

25,674

1-Oct-14

1-Oct-15

$33,909

$48,960

30-Sep-18

$36,720

102,500

19-Nov-13

$199,875

22,336

25,258

957,032

1-Oct-14

1-Oct-15

$32,565

$48,167

$1,785,226

1-Jul-16

1-Oct-17

1-Oct-18

–

$13,579

$36,125

$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.

Ingenia Communities Holdings Limited
18

Directors’ Report

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

14.9 KMP Employment Contracts

CEO and MD

Contract duration

Fixed remuneration

Variable remuneration

Non-compete period

Non-solicitation period

Notice by Ingenia

Notice by executive

Treatment on termination

CFO

Contract duration

Fixed remuneration

Variable remuneration eligibility

Non-compete period

Non-solicitation period

Notice by Ingenia

Notice by executive

Treatment on termination

Commenced 4 June 2012, open-ended

Total fixed remuneration includes cash salary, superannuation and other non-
cash benefits.

Eligible for STI of up to 80% for any one year of the fixed 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 fixed 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 financial year in respect of that same financial
year.

12 months.

Payment in lieu of notice: Payment may be made in lieu of notice, which would
include pro rata fixed remuneration and statutory entitlements.

Treatment of Incentives: As outlined above.

Commenced 14 May 2012, open-ended.

Total fixed remuneration includes cash salary, superannuation and other non-
cash benefits.

Eligible for STI of up to 60% for any one year of fixed annual remuneration, of
which 50% is in the form of deferred equity.

Eligible for LTI of up to 20% for any one year of fixed annual remuneration.

12 months.

6 months.

Payment in lieu of notice: Payment may be made in lieu of notice, which
would include pro rata fixed remuneration and statutory entitlements.

Treatment of Incentives: As outlined above.

Annual Report 2016COO

Contract duration

Fixed remuneration

Variable remuneration eligibility

Non-compete period

Non-solicitation period

Notice by Ingenia

Notice by executive

Treatment on termination

Commenced 4 June 2012, open-ended.

Total fixed remuneration includes cash salary, superannuation
and other non-cash benefits, currently based on a four day
working week.

Eligible for STI of up to 60% for any one year of fixed annual
remuneration, of which 50% is in the form of deferred equity.

Eligible for LTI of up to 20% for any one year of fixed annual
remuneration.

The Board may withdraw or vary the STI and LTI schemes at any
time by written notice to the executive, provided the scheme will
not be varied or withdrawn part way through a financial year in
respect of that same financial year.

12 months.

6 months.

Payment in lieu of notice: Payment may be made in lieu of notice,
which would include pro rata fixed remuneration and statutory
entitlements.

Treatment of Incentives: As outlined above.

Ingenia Communities Holdings Limited20

Directors’ Report

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

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

KMP

CEO

CFO

COO

Total

Period

FY16

FY15

FY16

FY15

FY16

FY15

FY16

FY15

Short-Term

Super-
Annuation
Benefits

STI(1)
Cash

STI(1)
Deferred
Rights

Total
Short-
Term

$19,308

$19,506

$19,308

$19,506

$19,308

$19,506

$57,924

$58,518

$208,000

$1,066,004

$136,500

$911,098

$70,098

$31,488

$69,458

$32,490

$70,098

$31,488

$69,458

$32,490

$474,388

$387,964

$404,156

$318,553

$347,555

$1,944,548

$200,478

$1,617,615

Salary

$630,696

$618,592

$314,885

$305,482

$245,933

$234,067

$1,191,514

$1,158,141

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

Performance Related

LTI

Total

Percent of Total

STI+LTI

LTI

$385,534

$387,803

$93,132

$101,555

$89,663

$101,570

$568,329

$590,928

$1,451,538

$1,298,901

$567,520

$489,519

$493,819

$420,123

$2,512,877

$2,208,543

55%

51%

41%

34%

46%

40%

50%

45%

27%

30%

16%

21%

18%

24%

23%

27%

Annual Report 201621

14.10 Remuneration Tables

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

KMP

CEO

CFO

COO

Total

Period

FY16

FY15

FY16

FY15

FY16

FY15

FY16

FY15

Short-Term

Super-

Annuation

Benefits

STI(1)

Cash

STI(1)

Deferred

Rights

Total

Short-

Term

$19,308

$19,506

$19,308

$19,506

$19,308

$19,506

$57,924

$58,518

$208,000

$1,066,004

$136,500

$911,098

$70,098

$31,488

$69,458

$32,490

$70,098

$31,488

$69,458

$32,490

$474,388

$387,964

$404,156

$318,553

$347,555

$1,944,548

$200,478

$1,617,615

Salary

$630,696

$618,592

$314,885

$305,482

$245,933

$234,067

$1,191,514

$1,158,141

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

Performance Related

LTI

Total

STI+LTI
Percent of Total

LTI
Percent of Total

$385,534

$387,803

$93,132

$101,555

$89,663

$101,570

$568,329

$590,928

$1,451,538

$1,298,901

$567,520

$489,519

$493,819

$420,123

$2,512,877

$2,208,543

55%

51%

41%

34%

46%

40%

50%

45%

27%

30%

16%

21%

18%

24%

23%

27%

Ingenia Communities Holdings Limited22

Directors’ Report

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

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:

NEDs

Jim Hazel

Amanda Heyworth

Philip Clark AM

Robert Morrison

Norah Barlow ONZM

Total

Directors’
fees

$172,917

$170,000

$98,250

$93,000

$94,750

$93,000

$97,500

$93,000

$96,250

$93,000

$559,667

$542,000

FY16

FY15

FY16

FY15

FY16

FY15

FY16

FY15

FY16

FY15

FY16

FY15

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.

Annual Report 201623

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

Directors

Jim Hazel

Philip Clark AM

Amanda Heyworth

Robert Morrison

Norah Barlow ONZM

Simon Owen

Total

Balance

1 July 2015(1) Acquisitions

Disposals

On vesting
of rights

Balance
30 June 2016

278,265

39,683

106,921

75,556

34,844

627,318

9,011

2,603

–

1,105

–

1,162,587

12,719

–

287,276

42,286

106,921

75,556

35,949

376,667

1,003,985

376,667

1,551,973

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

PQRs held by KMP were:

KMP

Directors

Simon Owen

Executives

Tania Betts

Nicole Fisher

Total

Balance
1 July 2015(1)

Granted

Vested

Balance
30 June 2016

786,667

238,666

234,333

1,259,666

–

(376,667)

410,000

(131,833)

106,833

(131,833)

102,500

(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
1 July 2015(1)

Granted

Vested

Balance
30 June 2016

118,236

122,938

23,257

22,336

25,674

25,258

163,829

173,870

–

241,174

48,931

47,594

337,699

Directors

Simon Owen

Executives

Tania Betts

Nicole Fisher

Total

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

Signed in accordance with a resolution of the directors

Jim Hazel
Chairman
Sydney, 23 August 2016

Ingenia Communities Holdings Limited24

Auditor’s Independence Declaration

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

Annual Report 2016Consolidated Statement of Comprehensive Income

FOR THE YEAR ENDED 30 JUNE 2016

Continuing Operations

Revenue

Rental income

Accrued deferred management fee income

Manufactured home sales

Catering income

Service station sales

Other property income

Interest income

Property expenses

Employee expenses

Administrative expenses

Operational, marketing and selling expenses

Cost of manufactured homes sold

Service station expenses

Finance expenses

Net foreign exchange gain/(loss)

Net loss on disposal of investment properties

Net gain/(loss) on change in fair value of:

Investment properties

Derivatives

Retirement village resident loans

Depreciation expense

Amortisation of intangible assets

Profit from continuing operations before income tax

Income tax benefit

Profit from continuing operations

Profit from discontinued operations(1)

Net profit for the year

Other comprehensive income, net of income tax

Items that may be reclassified subsequently to profit or loss:

Foreign currency translation differences during the year

Release of foreign currency translation reserve on disposal of foreign operations

Total comprehensive income for the year net of income tax

Note

2016
$’000

2015
$’000

5(a)

17(b)

5(b)

17(b)

13(b)

14(b)

7(a)

57,692

4,222

32,009

3,258

6,745

3,045

170

44,984

6,788

14,937

3,538

2,359

3,235

180

107,141

76,021

(21,242)

(18,024)

(26,153)

(21,230)

(5,129)

(3,555)

(21,729)

(5,862)

(6,795)

471

(989)

(4,880)

(3,931)

(9,256)

(1,910)

(4,747)

111

(69)

7,496

(414)

16,404

164

(1,388)

(8,878)

(360)

(266)

21,226

3,054

(322)

(157)

19,296

6,604

24,280

25,900

–

(178)

24,280

25,722

–

24,280

1,339

(2,374)

24,687

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

December 2014.

Ingenia Communities Holdings Limited

Consolidated Statement of Comprehensive Income

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

Profit/(loss) attributable to securityholders of:

Ingenia Communities Holdings Limited

Ingenia Communities Fund

Ingenia Communities Management Trust

Total comprehensive income attributable to securityholders of:

Ingenia Communities Holdings Limited

Ingenia Communities Fund

Ingenia Communities Management Trust

Distributions per security(1)(2)

Earnings per security(2):

Basic earnings from continuing operations

Per security

Per security attributable to parent

Basic earnings

Per security

Per security attributable to parent

Diluted earnings from continuing operations

Per security

Per security attributable to parent

Diluted earnings

Per security

Per security attributable to parent

2016
$’000

2015
$’000

2,243

21,981

24,280

2,243

21,981

(850)

31,039

(4,467)

25,722

(1,942)

31,265

(4,636)

24,280

24,687

2016
Cents

8.4

2015
Cents

7.8

16.1

1.5

16.1

1.5

16.0

1.5

16.0

1.5

18.9

(0.6)

18.8

(0.6)

18.9

(0.6)

18.8

(0.6)

Note

4(a)

4(b)

4(a)

4(b)

4(a)

4(b)

4(a)

4(b)

(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.

Annual Report 2016

Consolidated Balance Sheet

AS AT 30 JUNE 2016

Current assets

Cash and cash equivalents

Trade and other receivables

Inventories

Income tax receivable

Assets held for sale–investment properties

Total current assets

Non-current assets

Other receivables

Investment properties

Plant and equipment

Intangibles

Deferred tax asset

Total non-current assets

Total assets

Current liabilities

Trade and other payables

Borrowings

Retirement village resident loans

Employee liabilities

Interest rate swaps

Liabilities held for sale–retirement village resident loans

Total current liabilities

Non-current liabilities

Other payables

Borrowings

Employee liabilities

Interest rate swaps

Total non-current liabilities

Total liabilities

Net assets

Equity

Issued securities

Reserves

Accumulated losses

Total equity

Attributable to securityholders of:

Ingenia Communities Holdings Limited

Issued securities

Reserves

Accumulated losses

Ingenia Communities Fund

Ingenia Communities Management Trust

Net asset value per security(1)

Note

2016
$’000

2015
$’000

15,057

6,852

17,665

–

39,592

3,140

710,746

1,943

1,999

9,399

727,227

766,819

24,857

497

207,483

1,382

121

–

234,340

6,770

103,593

227

287

110,877

345,217

421,602

15,117

4,327

13,208

61,598

94,283

2,649

539,728

720

1,579

6,348

551,024

645,307

15,073

291

161,878

992

42,041

220,278

14,770

66,491

248

–

81,509

301,787

343,520

722,670

1,810

657,214

1,334

(302,878)

(315,028)

421,602

343,520

9,492

1,810

(552)

10,750

385,994

24,858

421,602

$2.45

8,900

1,334

(3,175)

7,059

315,951

20,510

343,520

$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.

Ingenia Communities Holdings Limited

Consolidated Cash Flow Statement

FOR THE YEAR ENDED 30 JUNE 2016

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

Cash flows from investing activities

Purchase and additions of plant and equipment

Purchase and additions of intangible assets

Payments for investment properties

Additions to investment properties

(Costs)/proceeds on sale of investment properties

(Costs)/proceeds from sale of equity accounted investments

Amounts received from villages

Cash flows from financing activities

Proceeds from issue of stapled securities

Payments for security issue costs

Payments for derivatives

Payments for finance leases

Distributions to securityholders

Proceeds from borrowings

Repayment of borrowings

Payments for debt issue costs

Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

Effects of exchange rate fluctuation on cash held

Cash and cash equivalents at the end of the year

Note

2016
$’000

2015
$’000

71,193

58,085

(56,039)

(51,225)

17(b)

11,056

19,815

(5,757)

(10,544)

35,054

15,736

(29,986)

(19,358)

6,708

(6,113)

124

2,359

(1,936)

198

(5,216)

(4,902)

21,028

806

9,034

(1,729)

(568)

(446)

(1,371)

(85,132)

(64,423)

(19,884)

(989)

–

(14,112)

56,161

(209)

168

(108,278)

(24,232)

67,699

(2,243)

–

(450)

91,968

(3,870)

(444)

(126)

(12,513)

(10,105)

103,742

65,205

(68,542)

(125,197)

(567)

87,126

(124)

15,117

15,057

(1,867)

15,564

366

14,551

200

15,117

Annual Report 2016Consolidated Statement of Changes in Equity

FOR THE YEAR ENDED 30 JUNE 2016

Attributable to Securityholders

Ingenia Communities Holdings Limited

Note

Issued
capital
$’000

Reserves
$’000

Retained
earnings
$’000

Total
$’000

ICF &
ICMT
$’000

Total

equity
$’000

7,377

988

(2,659)

5,706

234,471

240,177

(850)

26,572

25,722

–

(1,035)

(850)

25,537

24,687

–

678

–

858

–

1,523

–

592

–

1,523

86,575

88,098

678

–

678

–

(10,120)

–

(332)

332

8,900

1,334

(3,177)

7,057

336,463

343,520

8,900

1,334

(3,177)

2,243

7,057

2,243

336,464

343,521

22,037

24,280

–

2,243

22,037

24,280

592

64,864

65,456

858

–

858

–

(12,513)

–

(382)

382

9,492

1,810

(552)

10,750

410,852

421,602

Carrying amount at
1 July 2014

Net profit/(loss)

Other comprehensive
income

Total comprehensive
income for the year

Transactions with
securityholders in their
capacity as securityholders:

Issue of securities

Share-based payment
transactions

Payment of distributions
to securityholders

Transfer from reserves
to retained earnings

Carrying amount at
30 June 2015

Carrying amount at
1 July 2015

Net profit/(loss)

Other comprehensive
income

Total comprehensive
income for the year

Transactions with
securityholders in their
capacity as securityholders:

Issue of securities

Share-based payment
transactions

Payment of distributions
to securityholders

Transfer from reserves
to retained earnings

Carrying amount at
30 June 2016

Ingenia Communities Holdings Limited30

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016

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.

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.

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.

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.

Annual Report 201631

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

Functional and presentation currencies

i.
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.

Plant and Equipment

i.
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.

Financial Assets and Liabilities

j.
Current and non-current financial assets and liabilities
within the scope of AASB 139 Financial Instruments:
Recognition and Measurement are classified as fair value
through profit or loss; loans and receivables; held-to-
maturity investments or as available-for-sale. The Group
determines the classification of its financial assets and
liabilities at initial recognition with the classification
depending on the purpose for which the asset or liability
was acquired or issued. Financial assets and liabilities are
initially recognised at fair value plus directly attributable
transaction costs, unless their classification is at fair value
through profit or loss. They are subsequently measured
at fair value or amortised cost using the effective interest
method. Changes in fair value of available-for-sale financial
assets are recorded directly in equity. Changes in fair
values of any other financial assets and liabilities classified
as at fair value through profit or loss are recorded in the
income statement.

Ingenia Communities Holdings Limited32

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

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.

Impairment of Non-financial Assets

k.
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.

Cash and Cash Equivalents

l.
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.

Inventories

n.
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.

Investment Property

p.
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.

Intangible Assets

q.
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.

Annual Report 201633

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.

Payables

r.
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.

Ingenia Communities Holdings Limited34

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

Summary of significant accounting policies
(continued)

Issued Equity

v.
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.

Income Tax

Current income tax

i.
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.

Annual Report 201635

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.

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.

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.

Ingenia Communities Holdings Limited36

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

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.

Valuation of investment property

i.
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.

Annual Report 201637

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.

Calculation of deferred management fee (“DMF”)

vii.
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.

Critical Judgements in Applying the Entity’s
Accounting Policies

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

3. Segment information

a. Description of Segments
The Group invests 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.

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.

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.

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.

Ingenia Communities Holdings Limited38

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

Segment information (continued)

b. 2016

i. Segment revenue

External segment revenue

Interest income

Reclassification of gain on revaluation of newly
constructed villages

Total revenue

ii. Segment Underlying Profit

Lifestyle &
Holidays
$’000

Settlers
$’000

Garden
Villages
$’000

Corporate/
Unallocated
$’000

Total
$’000

73,965

6,949

27,516

–

73,965

–

(1,525)

5,424

–

27,516

(7,565)

(438)

(21,242)

(7,154)

(3,935)

(26,153)

170

–

236

170

108,496

170

(1,525)

107,141

108,496

170

(2,199)

(142)

–

(6,795)

2,586

(440)

(5,129)

(3,555)

(21,729)

(5,862)

(6,795)

2,586

(626)

External segment revenue

73,965

6,949

27,516

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

–

(11,801)

(14,010)

(1,911)

(2,023)

(21,729)

(5,862)

–

(1,438)

(1,054)

(147)

(480)

–

(872)

(910)

–

Depreciation and amortisation

(139)

(9)

(38)

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

Net loss on disposal of investment property

Net gain/(loss) on change in fair value of:

–

Investment properties

(2,283)

Retirement village resident loans

Derivatives

Gain on revaluation of newly constructed villages

Income tax expense associated with reconciliation
items

Profit/(loss) from continuing operations per
the consolidated statement of comprehensive
income

–

(989)

2,317

(1,388)

–

(1,525)

–

7,462

–

471

–

(414)

–

471

(989)

7,496

(1,388)

(414)

(1,525)

468

–

iii. Segment assets

332,851

273,841

140,587

19,540

766,819

14,207

2,236

18,439

(10,602)

24,280

Annual Report 2016

Total
$’000

78,263

180

(2,422)

76,021

78,263

180

Segment information (continued)

c. 2015

Lifestyle &
Holidays
$’000

Settlers
$’000

Garden
Villages
$’000

Corporate/
Unallocated
$’000

i. Segment revenue

External segment revenue

Interest income

Reclassification of gain on revaluation of newly
constructed villages

38,810

11,132

28,162

–

(2,422)

–

Total revenue

38,810

8,710

28,162

ii. Segment Underlying Profit

External segment revenue

38,810

11,132

28,162

159

180

–

339

159

180

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

Other

–

(7,918)

(8,514)

(979)

(1,794)

(9,256)

(1,910)

–

(113)

–

(1,694)

(1,786)

(191)

(608)

–

(46)

(503)

–

(8,042)

(370)

(18,024)

(7,450)

(3,480)

(21,230)

(959)

(591)

–

(101)

–

(2,751)

(938)

–

(4,747)

3,319

(219)

–

(4,880)

(3,931)

(9,256)

(1,910)

(4,747)

3,319

(479)

(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

Net gain/(loss) on disposal of investment property

Net gain/(loss) on change in fair value of:

–

(23)

–

(365)

–

319

Investment properties

(2,818)

3,269

15,953

Retirement village resident loans

Derivatives

Gain on revaluation of newly constructed villages

Other

Income tax benefit associated with reconciliation
items

Profit/(loss) from continuing operations per
the consolidated statement of comprehensive
income

iii. Segment assets

Segment Assets

Assets held for sale

Total Assets

111

–

164

–

111

(69)

16,404

(8,878)

164

(2,422)

503

3,285

–

(8,878)

–

(2,422)

503

–

5,485

(1,589)

27,291

(5,287)

25,900

228,329

205,357

129,604

20,419

583,709

–

61,598

228,329

205,357

129,604

20,419

645,307

Ingenia Communities Holdings Limited

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

4. Earnings per security

a. Per security

Profit attributable to securityholders ($’000)

Profit from continuing operations ($’000)

Profit/(loss) from discontinued operations ($000)

Weighted average number of securities outstanding (thousands):

Issued securities

Dilutive securities (thousands):

Performance quantum rights

Long-term incentive rights

Short-term incentive rights

Weighted average number of issued and dilutive potential securities
outstanding (thousands)

Basic earnings per security from continuing operations (cents)

Basic earnings per security from discontinued operations (cents)

Basic earnings per security (cents)

Diluted earnings per security from continuing operations (cents)

Diluted earnings per security from discontinued operations (cents)

Diluted earnings per security (cents)

b. Per security attributable to parent

2016

2015

24,280

25,722

25,900

–

(178)

150,408

136,944

620

269

–

151,353

137,022

16.1

–

16.1

16.0

–

16.0

18.9

(0.1)

18.8

18.9

(0.1)

18.8

Profit/(loss) attributable to securityholders ($’000)

2,243

(850)

Weighted average number of securities outstanding (thousands):

Issued securities

Dilutive securities (thousands):

Performance quantum rights

Long-term incentive rights

Short-term incentive rights

Weighted average number of issued and dilutive potential securities
outstanding (thousands)

Basic earnings per security (cents)

Diluted earnings per security (cents)

Basic earnings per security from continuing operations (cents)

Diluted earnings per security from continuing operations (cents)

150,408

136,944

620

269

–

151,353

137,022

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.

Annual Report 2016

5. Revenue

a. Rental income

Residential rental income – Garden Villages

Residential rental income – Settlers

Residential rental income – Lifestyle & Holidays

Annuals rental income – Lifestyle & Holidays

Tourism rental income – Lifestyle & Holidays

Commercial rental income – Lifestyle & Holidays

Total rental income

b. Other property income

Government incentives

Commissions and administrative fees

Anciliary lifestyle park income

Sundry income

Utility recoveries

Total other property income

6. Finance expense

Debt facility interest paid or payable

Deferred consideration interest on acquisitions

Finance lease interest paid or payable(1)

Total finance expense

2016
$’000

2015
$’000

23,961

24,367

462

12,311

2,970

17,565

423

707

8,329

1,020

10,323

238

57,692

44,984

142

809

644

374

1,076

3,045

2016
$’000

5,636

793

366

6,795

301

758

307

1,067

802

3,235

2015
$’000

3,950

533

264

4,747

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

Ingenia Communities Holdings Limited42

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

Income tax benefit

a. Income tax benefit

Current tax

Increase in deferred tax asset

Income tax benefit

b. Reconciliation between tax expense and pre-tax profit

Profit before income tax

Less amounts not subject to Australian income tax

Income tax benefit 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

Movements in carrying value and tax cost base of investment properties

Movements in carrying value and tax cost base of DMF receivables

Non deductible expenses

Income tax benefit

2016
$’000

2015
$’000

–

3,054

–

6,604

21,226

19,296

(25,855)

(31,901)

(4,629)

(12,605)

1,389

3,781

369

1,399

(59)

(44)

3,054

263

1,373

1,683

(496)

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.

Assets and liabilities held for sale

9.
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).

Annual Report 2016
10. Trade and other receivables

Current

Trade and other receivables

Prepayments

Deposits

Total current trade and other receivables

Non-current

Other receivables

2016
$’000

2015
$’000

2,218

3,946

688

6,852

960

2,452

915

4,327

3,140

2,649

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

11.

Inventories

Manufactured homes:

Completed

Under construction

Service station fuel and supplies

Total inventories

The manufactured homes balance includes:

7 refurbished/renovated completed homes (2015: nil)

– 60 new completed homes (2015: 53)
–
–
–

31 new homes under construction (2015: 85)

3 refurbished/renovated under construction homes (2015: nil)

12. Investment properties

a. Summary of Carrying Amounts

Completed properties

Properties under development

Total carrying amount

2016
$’000

2015
$’000

11,140

6,331

194

17,665

7,975

4,900

333

13,208

2016
$’000

643,454

67,292

2015
$’000

514,125

25,603

710,746

539,728

Ingenia Communities Holdings Limited
44

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

12. Investment properties (continued)

Individual Valuations and Carrying Amounts

Property

Ingenia Settlers:

Cessnock, Cessnock, NSW(4)

Forrest Lake, Forest Lake, QLD(4)

Gladstone, South Gladstone, QLD(4)

Rockhampton, Rockhampton, QLD(4)

Ridge Estate, Gillieston Heights, NSW(4)

Lakeside, Ravenswood, WA

Meadow Springs, Mandurah, WA

Ridgewood Rise, Ridgewood, WA

Ingenia Garden Villages:

Brooklyn, Brookfield, VIC

Carey Park, Bunbury, WA

Elphinwood, Launceston, TAS

Horsham, Horsham, VIC

Jefferis, Bundaberg North, QLD

Oxley, Port Macquarie, NSW

Townsend, St Albans Park, VIC

Yakamia, Yakamia, WA

Chatsbury, Goulburn, NSW

Claremont, Claremont, TAS

Coburns, Brookfield, VIC

Devonport, Devonport, TAS

Hertford, Sebastopol, VIC

Seascape, Erskine, WA

Seville Grove, Seville Grove, WA

St Albans Park, St Albans Park, VIC

Taloumbi, Coffs Harbour, NSW

Wheelers, Dubbo, NSW

Taree, Taree, NSW

Grovedale, Grovedale, VIC

Glenorchy, Glenorchy, TAS

Marsden, Marsden, QLD

Swan View, Swan View, WA

Dubbo, Dubbo, NSW

Ocean Grove, Mandurah, WA

Peel River, Tamworth, NSW

Sovereign, Ballarat, VIC

Wagga, Wagga Wagga, NSW

Bathurst, Bathurst, NSW

Launceston, Launceston, TAS

Warrnambool, Warrnambool, VIC

Purchase
date

Latest
external
valuation

External
valuation
amount
$’000

Carrying amount

2016
$’000

2015
$’000

Jun-04

Nov-05

Jul-12

Apr-07

Jun-04

Dec-04

Jun-05

Jan-06

Dec-12

Feb-13

Mar-13

Jun-13

Jan-14

Oct-15

Sep-15

Oct-15

Jun-15

Dec-15

Jun-15

Dec-15

Jun-15

Dec-15

Jun-15

6,604

16,395

12,572

14,416

13,078

75,734

21,022

108,580

6,793

16,103

11,333

14,087

14,887

77,224

20,063

108,436

–

75,866

19,103

109,114

268,401

268,926

204,083

4,100

4,300

3,750

3,900

4,300

4,200

4,400

4,750

3,600

3,250

3,900

1,700

3,700

4,700

3,900

4,950

4,900

3,350

4,700

3,800

8,500

7,150

3,450

3,700

4,100

3,150

4,250

3,850

3,300

2,500

4,220

4,430

3,970

3,960

4,420

4,360

4,310

4,880

3,680

3,360

3,940

1,709

3,970

4,920

3,960

5,120

5,160

5,130

3,300

5,000

4,110

8,970

7,430

3,640

3,680

4,590

3,320

4,350

4,340

3,460

2,880

4,100

4,300

3,750

3,900

4,300

4,200

4,400

4,750

3,760

3,420

3,490

1,785

3,910

4,330

3,400

4,620

4,500

4,680

3,350

4,700

3,780

8,640

6,480

2,940

3,290

4,100

3,130

4,000

3,850

3,300

2,500

129,000

134,569

125,655

Annual Report 201645

12. Investment properties (continued)

Property completed

Ingenia Lifestyle & Holidays:

The Grange, Morisset, NSW

Ettalong Beach, Ettalong Beach, NSW(1)

Albury, Lavington, NSW

Nepean River, Emu Plains, NSW

Mudgee Valley, Mudgee, NSW

Mudgee, Mudgee, NSW

Kingscliff, Kingscliff, NSW

Lake Macquarie (Lifestyle), Morisset, NSW

Chain Valley Bay, Chain Valley Bay, NSW

One Mile Beach, One Mile, NSW(2)

Hunter Valley, Cessnock, NSW

Cessnock, Cessnock, NSW

Sun Country, Mulwala, NSW

Stoney Creek, Marsden Park, NSW

Rouse Hill, Rouse Hill, NSW(4)

White Albatross, Nambucca Heads, NSW

Noosa, Tewantin, QLD

Chambers Pines, Chambers Flat, QLD

Lake Macquarie (Holidays), Mannering Park, NSW

Sydney Hills, Dural, NSW

Bethania, Benthania, QLD

Conjola Lakeside, Lake Conjola, NSW

Soldiers Point, Port Stephens, NSW

Lara, Lara, VIC

South West Rocks, South West Rocks NSW(3)(6)

Broulee, Broulee, NSW(3)(6)

Total completed properties

Purchase
date

Latest
external
valuation

External
valuation
amount
$’000

Carrying amount

2016
$’000

2015
$’000

Mar-13

Apr-13

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

Feb-14

Apr-14

May-14

Jun-14

Dec-14

Feb-15

Mar-15

Apr-15

Jul-15

Sep-15

Oct-15

Feb-16

Mar-16

Jun-16

Dec-15

Jun-16

Dec-14

Jun-16

Dec-14

Jun-16

Dec-14

Jun-16

Jun-15

Jun-16

Jun-15

Dec-15

Jun-15

Jun-16

–

10,312

5,788

2,464

11,000

2,358

4,558

10,500

5,263

3,700

12,492

8,028

1,000

7,098

13,002

16,125

26,650

13,000

15,040

6,800

13,100

1,537

10,312

5,853

2,464

11,000

2,358

4,558

12,682

5,263

–

12,492

8,028

1,000

7,098

13,002

16,465

26,650

14,996

15,457

7,500

13,100

1,537

24,000

11,500

1,610

–

11,500

1,610

4,713

6,321

11,072

5,583

2,275

13,317

3,662

5,934

11,734

4,212

247

12,769

7,589

1,000

6,514

10,940

16,125

25,500

13,000

14,114

6,800

12,000

–

226,925

239,959

184,387

624,326

643,454

514,125

Ingenia Communities Holdings Limited
46

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

12. Investment properties (continued)

Properties to be developed

Ingenia Lifestyle & Holidays:

The Grange, Morisset, NSW

Albury, Lavington, NSW

Mudgee Valley, Mudgee, NSW

Mudgee, Mudgee, NSW

Kingscliff, Kingscliff, NSW

Lake Macquarie (Lifestyle), Morisset, NSW

Chain Valley Bay, Chain Valley Bay, NSW

Hunter Valley, Cessnock, NSW

Cessnock, Cessnock, NSW

Sun Country, Mulwala, NSW

Stoney Creek, Marsden Park, NSW

Chambers Pines, Chambers Flat, QLD

Bethania, Benthania, QLD

Conjola Lakeside, Lake Conjola, NSW

Soldiers Point, Port Stephens, NSW

Lara, Lara, VIC

Properties to be developed

Total investment properties

Carrying amount

Purchase
date

2016
$’000

2015
$’000

Mar-13

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

Feb-14

Apr-14

May-14

Mar-15

Jul-15

Sep-15

Oct-15

Feb-16

2,516

3,426

2,334

2,270

502

648

5,334

2,243

556

1,519

5,765

8,322

11,889

1,416

13,410

5,142

1,291

1,993

775

430

444

3,279

3,700

2,133

556

1,300

7,064

2,638

–

67,292

25,603

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.

Annual Report 201612. Investment properties (continued)

c. Movements in Carrying Amounts

Carrying amount at beginning of the year

Acquisitions

Expenditure capitalised

Disposals

Net transfer from/(to) inventory

Net gain on change in fair value

Transferred from/(to) assets held for sale

Carrying amount at end of the year

Note

2016
$’000

2015
$’000

539,728

498,863

81,536

19,946

–

442

7,496

61,598

78,152

14,356

(6,290)

(159)

16,404

(61,598)

710,746

539,728

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

d. Reconciliation of Fair Value

Garden
Villages
$’000

Settlers
$’000

Lifestyle &
Holidays
$’000

Total
$’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.

Ingenia Communities Holdings Limited48

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

12. Investment properties (continued)

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

Valuation technique

Significant
unobservable inputs Range

Garden Villages

Capitalisation method

Stabilised occupancy

70% - 100%

Capitalisation rate

9% - 12%

Settlers

Discounted cash flow Current market value

$125,000 - $475,000

per unit

Long-term property
growth rate

3.5%

Average length of
stay – future residents

11.4 years

Average length of
stay – current residents

15.0 - 17.6 years

Discount rate

13.5% - 17.0%

Relationship of
unobservable input
to fair value

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.

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

15% - 30% for powered
and camp sites;
45% - 70% for
tourism and short
term rental

Higher the occupancy,
the greater the value.

Residential occupancy

100%

Operating profit margin

30% - 70% dependent
upon short-term
and residential
accommodation mix

Higher the profit margin,
the greater the value.

Capitalisation rate

8.0% - 13.0%

Discounted cash
flow (for future
development)

Discount rate

13% - 15%

Capitalisation has an
inverse relationship to
valuation.

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.

Annual Report 2016

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

a. Summary of carrying amounts

Plant and equipment

Less: accumulated depreciation

Total plant and equipment

b. Movements in carrying amount

Carrying amount at beginning of year

Assets written off

Additions

Depreciation expense

Carrying amount at end of year

14. Intangibles

a. Summary of carrying amounts

Software & development

Less: accumulated amortisation

Total Intangibles

b. Movements in carrying amount

Carrying amount at beginning of year

Additions

Amortisation expense

Carrying amount at end of year

2016
$’000

2015
$’000

3,434

(1,491)

1,943

720

–

1,583

(360)

1,943

1,895

(1,175)

720

517

(118)

643

(322)

720

2016
$’000

2015
$’000

2,422

(423)

1,999

1,579

686

(266)

1,999

1,736

(157)

1,579

473

1,263

(157)

1,579

Ingenia Communities Holdings Limited50

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

15. Trade and other payables

Current

Trade payables and accruals

Deposits

Other unearned income

Deferred acquisition consideration

Total current

Non-current

2016
$’000

2015
$’000

11,846

2,841

1,670

8,500

24,857

10,047

1,184

342

3,500

15,073

Deferred acquisition consideration

6,770

14,770

16. Borrowings

Current liabilities

Finance leases

Non-current liabilities

Bank debt

Prepaid borrowing costs

Finance leases

Total non-current borrowings

2016
$’000

2015
$’000

497

291

99,100

63,900

(1,373)

5,866

(1,681)

4,272

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.

Annual Report 201616. Borrowings (continued)

i. Minimum lease payments – excluding perpetual lease

Minimum lease payments:

Within one year

Later than one year but not later than five years

Later than five years

Total minimum lease payments

Future finance charges

Present value of minimum lease payments

Present value of minimum lease payments:

Within one year

Later than one year but not later than five years

Later than five years

2016
$’000

2015
$’000

510

2,119

4,565

7,194

(1,966)

5,228

497

1,832

2,899

5,228

299

1,273

3,431

5,003

(1,579)

3,424

291

1,082

2,051

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

a. Summary of Carrying Amounts

Gross resident loans

Accrued deferred management fee

Net resident loans

b. Movements in Carrying Amounts

Carrying amount at beginning of year

Net gain 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

Note

2016
$’000

2015
$’000

240,473

191,857

(32,990)

(29,979)

207,483

161,878

1,388

190,122

8,878

(4,222)

(6,788)

1,211

11,056

2,056

19,815

(5,757)

(10,544)

Transfer from/(to) liabilities held for sale

42,041

(42,041)

Other

Carrying amount at end of year

(112)

380

207,483

161,878

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

Ingenia Communities Holdings Limited52

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

18. Deferred tax assets and liabilities

Deferred tax assets

Tax losses

Other

Deferred tax liabilities

DMF receivable

Investment properties

Net deferred tax asset

2016
$’000

2015
$’000

20,827

1,399

(8,883)

(3,944)

9,399

17,496

1,401

(7,982)

(4,567)

6,348

Deductible temporary differences and carried forward losses tax effected for which no
deferred tax asset has been recognised

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

a. Carrying Values

At beginning of year

Issued during the year:

Dividend Reinvestment Plan (DRP) issues

Institutional & DRP placement

Rights issue

Institutional placement and rights issue costs

At end of year

The closing balance is attributable to the securityholders of:

Ingenia Communities Holding Limited

Ingenia Communities Fund

Ingenia Communities Management Trust

b. Number of Issued Securities

At beginning of year

Issued during the year:

Retention quantum rights

Performance quantum rights

Dividend reinvestment plan

Institutional placement

At end of year

2016
$’000

2015
$’000

657,214

569,116

3,344

64,355

–

2,884

45,315

43,769

(2,243)

(3,870)

722,670

657,214

9,492

679,161

34,017

722,670

8,900

619,285

29,028

657,214

2016
Thousands

2015
Thousands

147,118

112,708

–

640

2,968

21,429

172,155

303

–

1,112

32,995

147,118

Annual Report 2016

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

Share-based payment reserve

Balance at beginning of year

Transfer from reserves to retained earnings

Share-based payment transactions

Balance at end of year

2016
$’000

2015
$’000

1,334

(382)

858

1,810

988

(332)

678

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

Balance at beginning of year

Net profit for the year

Transfer from reserves to retained earnings

Distributions

Balance at end of year

The closing balance is attributable to the securityholders of:

Ingenia Communities Holding Limited

Ingenia Communities Fund

Ingenia Communities Management Trust

2016
$’000

2015
$’000

(315,028)

(330,962)

24,280

383

25,722

332

(12,513)

(10,120)

(302,878)

(315,028)

(552)

(3,175)

(293,866)

(303,335)

(8,460)

(8,518)

(302,878)

(315,028)

Ingenia Communities Holdings Limited

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:

Within one year

Later than one year but not later than five years

2016
$’000

598

1,929

2,527

2015
$’000

362

744

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.

Annual Report 201624. Share-based payment transactions (continued)
Movements in rights during the year were:

PQRs

Outstanding at beginning of year

Converted to fully paid stapled securities

Outstanding at end of year(1)

Weighted average remaining life of outstanding rights (years)(1)

LTIPs

Outstanding at beginning of year

Granted during the year

Outstanding at end of year

Weighted average remaining life of outstanding rights (years)

STIPs

Outstanding at beginning of year

Granted during the year

Outstanding at end of year

Weighted average remaining life of outstanding rights (years)

2016
Thousands

2015
Thousands

1,259

(640)

619

–

164

287

451

1.8

–

0.3

1,259

–

1,259

0.7

–

164

–

(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:

Grant Date

Security price at grant date

30 day Volume Weighted Average Price (VWAP) at start of performance period

Expected remaining life at grant date

Risk-free interest rate at grant date

Distribution yield

LTIP right fair value (TSR hurdle)

LTIP right fair value (ROE hurdle)

Weighted Average LTIP fair value

17 November
2015

$2.67

$2.64

2.9

2.05%

4.05% (FY16)

4.49% (FY17)

5.62% (FY18)

$1.58

$2.67

$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).

Ingenia Communities Holdings Limited56

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

Introduction

a.
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.

Interest Rate Risk

b.
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.

Annual Report 201657

26. Financial instruments (continued)

Interest Rate Risk Exposure

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

Fixed interest maturing in:

Floating
interest rate

Less than
1 year

1 to 5
Years

More than
5 years

Total

2016

$’000

Financial assets

Cash at bank

Financial liabilities

Bank debt

Finance leases (excluding perpetual lease)

Interest rate swaps: Group pays fixed rate

2015

$’000

Financial assets

Cash at bank

Financial liabilities

Bank debt

15,057

99,100

–

(44,000)

15,117

63,900

–

497

–

1,832

2,899

44,000

–

1,082

–

2,051

–

15,057

99,100

5,228

–

15,117

63,900

3,424

–

Finance leases (excluding perpetual lease)

–

291

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.

Interest Rate Sensitivity Analysis

d.
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).

Increase in average interest rates of 100 bps:

Variable interest rate bank debt (AUD denominated)

Interest rate swaps (AUD denominated)

Decrease in average interest rates of 100 bps:

Variable interest rate bank debt (AUD denominated)

Interest rate swaps (AUD denominated)

Effect on profit after tax
higher/(lower)

2016
$’000

2015
$’000

(991)

1,238

(639)

–

991

(735)

639

–

Ingenia Communities Holdings Limited58

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 exposure:

United States dollars

New Zealand dollars

Net foreign currency assets

2016
$’000

2015
$’000

3,479

289

3,491

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.

Effect of appreciation in Australian dollar of 10%:

Foreign exchange risk exposures denominated in:

United States dollars

New Zealand dollars

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

Foreign exchange risk exposures denominated in:

United States dollars

New Zealand dollars

Effect on profit after tax
higher/(lower)

2016
$’000

2015
$’000

(316)

(26)

(317)

(43)

Effect on profit after tax
higher/(lower)

2016
$’000

2015
$’000

387

388

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

Annual Report 201659

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.

Liquidity Risk

i.
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.

Ingenia Communities Holdings Limited60

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

26. Financial instruments (continued)

2016

Trade and other payables

Retirement village residents loans

Borrowings

Provisions

Finance leases (excluding perpetual lease)

Finance lease (perpetual lease)(1)

2015

Trade and other payables

Retirement village residents loans

Borrowings

Provisions

Finance leases (excluding perpetual lease)

Finance lease (perpetual lease)(1)

Liabilities held for sale

Less than
1 year
$’000

24,857

207,483

4,572

1,382

510

121

1 to 5 Years
$’000

More than
5 years
$’000

6,770

–

Total
$’000

31,627

207,483

38,153

65,711

108,436

227

2,119

483

–

4,565

–

1,609

7,194

604

238,925

47,752

70,276

356,953

15,073

161,878

14,770

–

2,731

68,344

992

299

121

42,041

177

1,273

483

–

3,431

–

29,843

161,878

71,075

1,240

5,003

604

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.

2016

Liabilities

Less than
1 year
$’000

1 to 5 Years
$’000

More than
5 years
$’000

Derivative liabilities – net settled

121

287

2015

Liabilities

Derivative liabilities – net settled

–

Total
$’000

408

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.

Increase in market prices of investment properties of 10%

Decrease in market prices of investment properties of 10%

Effect on profit after tax
higher/(lower)

2016
$’000

2015
$’000

(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.

Annual Report 2016

26. Financial instruments (continued)

k. Fair Value
The Group uses the following fair value measurement hierarchy:

Level 1:

Level 2:

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

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

Level 3:

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

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

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

Financial assets/
financial liabilities

Valuation technique(s) and
key inputs

Significant unobservable
inputs

Relationship of
unobservable inputs
to fair value

Retirement village
resident loans

Deferred management
fee accrued

Derivative interest rate
swaps

Loans measured as the ingoing
resident’s contribution plus
the resident’s share of capital
appreciation to reporting date,
less DMF accrued to reporting
date.

DMF measured using the initial
property price, estimated
length of stay, various contract
terms and projected property
price at time of re-leasing.

Net present value of future
cash flows discounted at
market rates adjusted for the
Group’s credit risk.

Long-term capital appreciation
rates for residential property
between 0-4%.

Estimated length of stay of
residents based on life tables.

The higher the appreciation,
the higher the value of resident
loans. The longer the length
of stay, the lower the value of
resident loans.

Estimated length of stay of
residents based on life tables.

The longer the length of stay,
the higher the DMF accrued,
capped at a predetermined
period of time.

N/A

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

2016

Investment properties

2015

Investment properties

Date of valuation

30 June 2016
Refer Note 12

Total
$’000

710,746

30 June 2015
Refer Note 12

539,728

Assets held for sale - investment property 30 June 2015

61,598

Refer Note 9

Fair value measurement using

Quoted
prices in
active
markets
(Level 1)
$’000

Significant
observable
inputs
(Level 2)
$’000

Significant
unobservable
inputs
(Level 3)
$’000

–

710,746

539,728

61,598

–

Ingenia Communities Holdings Limited62

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

27. Fair value measurement (continued)

b. Liabilities Measured at Fair Value

2016

Date of valuation

Retirement village resident loans

Derivatives

2015

Retirement village resident loans

Derivatives

30 June 2016
Refer Note 17

30 June 2016

30 June 2015
Refer Note 17

30 June 2015

Fair value measurement using

Quoted
prices in
active
markets
(Level 1)
$’000

Significant
observable
inputs
(Level 2)
$’000

Significant
unobservable
inputs
(Level 3)
$’000

–

207,483

408

–

161,878

–

Total
$’000

207,483

408

161,878

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

28. Auditor’s remuneration

Amounts received or receivable by EY for:

Audit or review of the financial reports

Other audit related services

Non audit related services

2016
$

2015
$

440,461

54,848

35,570

469,524

140,738

–

530,879

610,262

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

Directors fees

Salaries and other short-term benefits

Short-term incentives

Superannuation benefits

Share-based payments

2016
$

2015
$

559,667

542,000

1,191,514

1,158,141

695,110

400,956

57,924

58,518

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

Expiry date

FY13

FY14

FY15

FY16

PQR

STIP

LTIP

FY16

FY17

FY18

FY19

Number outstanding

2016

2015

–

640,333

619,333

76,548

163,829

173,870

619,333

–

163,829

–

1,033,580

1,423,495

Annual Report 201630. Company financial information
Summary financial information about the Company is:

Current assets

Total assets

Current liabilities

Total liabilities

Net assets

Securityholders’ equity

Issued securities

Reserves

Accumulated losses

Total securityholders’ equity

Loss from continuing operations

Net loss attributable to securityholders

Total comprehensive income

2016
$’000

189

3,530

1,633

2,670

861

9,492

1,810

2015
$’000

177

5,315

5,747

4,014

1,301

8,900

1,334

(10,441)

(8,933)

861

(1,462)

1,301

(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):

Bridge Street Trust

Browns Plains Road Trust

Casuarina Road Trust

Edinburgh Drive Trust

Garden Villages Management Trust

INA CC Holdings Pty Ltd

INA CC Pty Ltd

INA Community Living Lynbrook Trust

INA CC Trust

INA Community Living Subsidiary Trust

INA Community Living Subsidiary Trust No. 2

INA Garden Villages Pty Ltd

INA Kiwi Communities Pty Ltd

INA Kiwi Communities Subsidiary Trust No. 1

INA Management Pty Ltd

INA Regency Co Pty Ltd

INA Settlers Co Pty Ltd

INA Sunny Communities Pty Ltd

INA Sunny Trust

Ownership interest

Country of
residence

2016
%

2015
%

Australia

100

–

100

–

100

–

100

Ingenia Communities Holdings Limited

Ownership interest

Country of
residence

2016
%

2015
%

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

31. Subsidiaries (continued)

Ingenia Communities RE Limited

Jefferis Street Trust

Lovett Street Trust

ILF Regency Operations Trust

ILF Regency Subsidiary Trust

Settlers Operations Trust

Settlers Subsidiary Trust

SunnyCove Gladstone Unit Trust

SunnyCove Rockhampton Unit Trust

Ridge Estate Trust

Taylor Street (2) Trust

INA Subsidiary Trust No.1

INA Subsidiary Trust No.3

INA Operations Pty Ltd

INA Operations Trust No.1

INA Operations Trust No.2

INA Operations Trust No.3

INA Operations Trust No.4 (formerly INA Subsidiary Trust No.2)

INA Operations Trust No.6

INA Operations Trust No.7

INA Operations Trust No.8

INA Operations Trust No.9

INA Operations No.2 Pty Limited

Settlers Property Trust

INA Operations No.3 Pty Limited

IGC NZ Student Holdings Ltd

INA NZ Subsidiary Unit Trust No 1

CSH Lynbrook GP LLC

CSH Lynbrook LP

Lynbrook Freer Street Member LLC

Lynbrook Management, LLC

INA Community Living LLC (formerly ING Community Living LLC)

INA Community Living II LLC (formerly ING Community Living II LLC)

INA US Community Living Fund LLC (formerly ING US Community Living Fund
LLC)

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

Australia

New Zealand

USA

100

–

100

–

100

–

100

Annual Report 201632. Notes to the cash flow statement
Reconciliation of profit to net cash flow from operating activities

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

2016
$’000

2015
$’000

24,280

25,722

(471)

–

989

–

927

(2,374)

2,014

(7,496)

(16,404)

414

1,388

(164)

8,878

(3,123)

(6,604)

(4)

626

858

573

214

479

678

536

–

Operating profit for the year before changes in working capital

18,036

13,971

Changes in working capital:

(Increase)/decrease in receivables

Increase in inventory

Increase in retirement village residents’ loans

Increase/(decrease) in other payables and provisions

Net cash provided by operating activities

784

(4,457)

3,563

3,102

21,028

(2,599)

(11,750)

12,446

(3,034)

9,034

Ingenia Communities Holdings Limited

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
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 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
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.

Annual Report 2016Directors’ 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

Jim Hazel
Chairman
Sydney, 23 August 2016

Ingenia Communities Holdings Limited

Independent Auditor’s Report

FOR THE YEAR ENDED 30 JUNE 2016

Annual Report 2016Independent Auditor’s Report

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

Ingenia Communities Holdings Limited70

Ingenia Communities Fund & Ingenia Communities
Management Trust Annual Reports

FOR THE YEAR ENDED 30 JUNE 2016

Contents

Directors’ Report

Auditor’s Independence Declaration

Consolidated Statements of Comprehensive Income

Consolidated Balance Sheets

Consolidated Cash Flow Statements

Statements of Changes in Unitholders’ Interest

Notes to the Financial Statements

1. Summary of significant accounting policies

2. Accounting estimates and judgements

3. Segment information

4. Earnings per unit

5. Income tax benefit

6. Discontinued operations

7. Assets and liabilities held for sale

8. Trade and other receivables

9. Inventories

10. Investment properties

11. Plant and equipment

12. Intangibles

13. Trade and other payables

14. Borrowings

15. Retirement village resident loans

16. Deferred tax assets and liabilities

17. Issued units

18. Accumulated losses

19. Commitments

20. Contingencies

21. Capital management

22. Financial instruments

23. Fair value measurement

24. Auditor’s remuneration

25. Related parties

26. Parent financial information

27. Subsidiaries

28. Notes to the cash flow statements

29. Subsequent events

Directors’ Declaration

Independent Auditor’s Report

100

105

107

109

110

112

113

114

115

Annual Report 2016Directors’ 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)
(Chairman)
Jim Hazel

Robert Morrison

(Appointed as Deputy Chairman
on 2 December 2015)

Philip Clark AM

Amanda Heyworth

Norah Barlow ONZM

Executive director
Simon Owen

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

Operating and financial review

ICF and ICMT Overview

a.
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.

Ingenia Communities Holdings Limited72

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.

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.

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.

Annual Report 201673

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:

Jim Hazel

Philip Clark AM

Amanda Heyworth

Robert Morrison

Norah Barlow ONZM

Simon Owen

Number of
units

Rights

287,276

42,286

106,921

75,556

35,949

–

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
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.

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.

Jim Hazel
Chairman
Sydney, 23 August 2016

Ingenia Communities Holdings Limited74

Auditor’s Independence Declaration

FOR THE YEAR ENDED 30 JUNE 2016

Annual Report 2016Consolidated Statements of Comprehensive Income

FOR THE YEAR ENDED 30 JUNE 2016

Ingenia Communities Fund

Ingenia Communities
Management Trust

Note

2016
$’000

2015
$’000

2016
$’000

2015
$’000

Continuing operations

Revenue

Rental income

Accrued deferred management fee income

Manufactured home sales

Catering income

Other property income

Service station sales

Interest income

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

Derivatives

Retirement village resident loans

Responsible Entity’s fees and expenses

Depreciation expense

Amortisation of intangible assets

Profit/(loss) from continuing operations before
income tax

Income tax benefit

Profit/(loss) from continuing operations

Profit/(loss) from discontinued operations

Net profit/(loss) for the period

9,101

9,720

–

17,105

26,206

14,564

24,284

57,696

4,222

32,009

3,258

3,045

6,745

44,984

6,788

14,937

3,538

3,076

2,359

106,989

75,689

(327)

(30,080)

(27,372)

–

(22,385)

(222)

–

(170)

–

(506)

(648)

–

(5,367)

(3,601)

422

–

7,668

(414)

–

107

(1,689)

15,922

164

–

(2,244)

(1,676)

(24)

–

(117)

–

(2,821)

(3,358)

(21,729)

(5,862)

(17,941)

(638)

(172)

–

(1,388)

(2,693)

(72)

(346)

(17,061)

(2,689)

(3,150)

(9,256)

(1,910)

(15,144)

–

1,620

482

–

(8,878)

(2,165)

(102)

(157)

25,855

31,913

(2,451)

(10,093)

–

2,507

6,019

25,855

(3,874)

21,981

31,913

2,587

34,500

–

(4,074)

(3,854)

(7,928)

Ingenia Communities Holdings Limited

Consolidated Statements of Comprehensive Income

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

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

Total comprehensive income for the period,
net of income tax

Profit/(loss) attributable to unitholders of:

Ingenia Communities Fund

Ingenia Communities Management Trust

Total comprehensive income attributable to
unitholders of:

Ingenia Communities Fund

Ingenia Communities Management Trust

Distributions per unit(1)

Earnings per unit(1):

Basic earnings from continuing operations

Basic earnings

Diluted earnings from continuing operations

Diluted earnings

Note

Ingenia Communities Fund

2016
$’000

21,981

2015
$’000

34,500

Ingenia Communities
Management Trust

2016
$’000

2015
$’000

(7,928)

–

1,846

(1,620)

21,981

34,726

21,981

34,500

–

21,981

34,500

21,981

34,726

–

21,981

34,726

2016
Cents

8.4

17.2

14.6

17.1

14.5

2015
Cents

7.8

23.4

25.2

15.0

16.2

–

2016
Cents

–

(169)

–

(8,097)

(3,461)

(4,467)

(7,928)

(3,461)

(4,636)

(8,097)

2015
Cents

–

(3.0)

(6.0)

(1.8)

(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.

Annual Report 2016

Consolidated Balance Sheets

AS AT 30 JUNE 2016

Ingenia Communities Fund

Ingenia Communities
Management Trust

Note

2016
$’000

2015
$’000

2016
$’000

2015
$’000

Current assets

Cash and cash equivalents

Trade and other receivables

Inventories

Income tax receivable

Assets held for sale - investment properties

Total current assets

Non-current assets

Trade and other receivables

Receivable from related party

Investment properties

Plant and equipment

Intangibles

Investments

Deferred tax asset

Total non-current assets

Total assets

Current liabilities

Trade and other payables

Borrowings

Retirement village resident loans

Employee liabilities

Interest rate swaps

Liabilities held for sale

Total current liabilities

Non-current liabilities

Trade and other payables

Payable to related party

Borrowings

Employee liabilities

Interest rate swaps

Total non-current liabilities

Total liabilities

Net assets

Equity

Issued units

Accumulated losses

Unitholders’ interest

Non-controlling interest

Total equity

Attributable to unitholders of:

Ingenia Communities Fund

Ingenia Communities Management Trust

8,329

2,599

–

8,966

2,643

–

6,621

6,684

17,665

–

10,928

11,625

30,989

6,094

4,104

13,208

61,598

85,020

110

–

31,818

285,972

162,795

103

–

31,401

185,798

153,434

122

3,874

–

300

–

547,951

386,294

1,018

1,962

–

7,084

459

1,577

–

4,606

480,690

374,631

558,315

393,046

491,618

386,256

589,304

478,066

1,266

1,200

–

121

–

22,168

2,962

207,483

1,164

–

1,387

1,203

233,777

–

97,764

62,217

6,770

288,769

34,905

227

–

62,217

63,420

330,671

564,448

–

287

98,051

99,438

392,180

322,836

24,856

679,161

619,285

(286,981)

(296,449)

392,180

322,836

–

392,180

322,836

34,017

(8,461)

25,556

(700)

24,856

392,180

322,836

(700)

–

392,180

322,836

25,556

24,856

12,785

2,817

161,878

830

–

42,041

220,351

14,770

189,635

33,252

248

–

237,905

458,256

19,810

29,028

(8,518)

20,510

(700)

19,810

(700)

20,510

19,810

Ingenia Communities Holdings Limited78

Consolidated Cash Flow Statements

FOR THE YEAR ENDED 30 JUNE 2016

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)

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

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

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

Cash and cash equivalents at the end of the year

Ingenia Communities Fund

Ingenia Communities
Management Trust

Note

2016
$’000

2015
$’000

2016
$’000

2015
$’000

–

(898)

–

71,147

57,922

(998)

(48,049)

(45,256)

–

104

(4,109)

–

167

(3,132)

800

11,056

19,815

(5,757)

(10,543)

35,054

15,735

(29,986)

(19,358)

6,708

(6,113)

(1,107)

(1,936)

2,362

(1,771)

(5)

(4,903)

(3,163)

32,977

16,982

(4)

–

(1,423)

(36)

–

(2)

–

(1,292)

6,650

–

(207)

(835)

(529)

(415)

(1,364)

(18,475)

(12,820)

(16)

49,511

(85,113)

(64,423)

–

168

(2)

(1,463)

5,149

(104,944)

(29,345)

61,940

(2,064)

(12,513)

–

(76,304)

74,787

(3,143)

(8,794)

–

3,147

103,742

65,205

(68,542)

(125,197)

(559)

(1,789)

–

4,676

(150)

–

(450)

68,384

–

5,700

4,216

72,460

(666)

8,966

8,329

6,202

2,658

106

8,966

493

6,094

6,621

15,587

(656)

(1,311)

(126)

(237)

–

(444)

12,813

450

5,550

6,094

Annual Report 2016Statements of Changes in Unitholders’ Interest

FOR THE YEAR ENDED 30 JUNE 2016

Carrying amount at 1 July 2014

Net profit/(loss) for the period

Other comprehensive income

Total comprehensive income for the year

Transactions with unitholders in their capacity as
unitholders:

Issue of units

Distributions paid or payable

Carrying amount at 30 June 2015

Carrying amount at 1 July 2015

Net profit/(loss) for the period

Other comprehensive income

Total comprehensive income for the year

Transactions with unitholders in their capacity as
unitholders:

Issue of units

Distributions paid or payable

Carrying amount at 30 June 2016

Carrying amount at 1 July 2014

Net profit/(loss) for the period

Other comprehensive income

Total comprehensive income for the
year

Transactions with unitholders in their
capacity as unitholders:

Issue of units

Carrying amount at 30 June 2015

Carrying amount at 1 July 2015

Net profit/(loss) for the period

Total comprehensive income for
the year

Transactions with unitholders in their
capacity as unitholders:

Issue of units

Carrying amount at 30 June 2016

Note

Issued
capital

$’000

14,097

–

14,929

29,026

–

4,991

34,017

Ingenia Communities Fund

Issued
capital

$’000

Reserves

$’000

Retained
earnings

$’000

Total

$’000

Note

547,642

(226)

(320,829)

226,587

–

226

34,500

–

226

34,500

34,726

71,643

–

619,285

–

59,876

–

679,161

–

71,643

(10,120)

(296,449)

322,836

(296,449)

322,836

21,981

–

21,981

–

59,876

(12,513)

(286,981)

392,180

Ingenia Communities Management Trust

Reserves

Retained
earnings

$’000

Non-
controlling
interest

$’000

Total

$’000

Total
equity

$’000

169

–

(169)

(4,050)

10,216

2,761

12,978

(4,467)

(3,461)

(7,928)

–

(169)

–

(169)

(4,467)

(4,636)

(3,461)

(8,097)

–

14,929

–

14,929

(8,517)

20,509

(700)

19,810

(8,517)

20,509

(700)

19,809

–

4,991

–

4,991

(8,461)

25,556

(700)

24,856

Ingenia Communities Holdings Limited80

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016

1. Summary of significant accounting policies

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

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

The stapling structure will cease to operate on the first to
occur of:

–

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

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

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.

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.

Annual Report 201681

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.

Plant & Equipment

h
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.

Leases

i.
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.

Financial Assets and Liabilities

j.
Current and non-current financial assets and liabilities
within the scope of AASB 139 Financial Instruments:
Recognition and Measurement are classified as at fair
value through profit or loss; loans and receivables; held-
to-maturity investments; or as available-for-sale. The
Trusts determine the classification of their financial assets
and liabilities at initial recognition with the classification
depending on the purpose for which the asset or liability
was acquired or issued. Financial assets and liabilities are
initially recognised at fair value, plus directly attributable
transaction costs unless their classification is at fair value
through profit or loss. They are subsequently measured
at fair value or amortised cost using the effective interest
method. Changes in fair value of available-for-sale financial
assets are recorded directly in equity. Changes in fair
values of financial assets and liabilities classified as at fair
value through profit or loss are recorded in the income
statement.

Ingenia Communities Holdings Limited82

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

Summary of significant accounting policies
(continued)

Impairment of Non-Financial Assets

k.
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.

Cash and Cash Equivalents

l.
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.

Inventories

n.
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.

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

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

o. Derivative Financial Instruments
The Trusts use derivative financial instruments such
as 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.

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.

Intangible Assets

q.
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.

Annual Report 20161.

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.

Payables

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

Borrowings are classified as current liabilities unless
the Trusts do not have an unconditional right to
defer settlement to more than twelve months after
reporting date.

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

Issued Units

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

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

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

Revenue from the sale of manufactured homes within
the 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.

Ingenia Communities Holdings Limited84

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

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 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.

Income Tax

Current income tax

i.
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.

y. 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.

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.

Annual Report 201685

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 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 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.

Ingenia Communities Holdings Limited86

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

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.

Valuation of investment property

i.
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.

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”.

Annual Report 201687

Total

$’000

9,101

17,105

26,206

9,101

17,105

(222)

(170)

3. Segment information (continued)

Ingenia Communities Fund - 2016

i. Segment Revenue

External segment revenue

Interest income

Total revenue

ii. Segment Underlying Profit

External segment revenue

Interest income

Property expenses

Administration expenses

Finance expense

Depreciation and amortisation expense

Underlying Profit/(Loss) – continuing operations

384

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

Profit from continuing operations per the
consolidated statement of comprehensive
income

iii. Segment Assets

–

206

–

590

7,751

Lifestyle &
Holidays

$’000

Settlers

$’000

Garden
Villages

Corporate/
Unallocated

$’000

384

–

384

–

17,105

–

17,105

(219)

(170)

8,717

–

8,717

–

(3)

–

(5,367)

(24)

8,714

11,325

20,423

–

422

7,462

–

(414)

7,668

(414)

(2,244)

16,176

9,089

25,855

63,690

91,362

328,815

491,618

Ingenia Communities Holdings Limited
88

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

3. Segment information (continued)

Ingenia Communities Fund - 2015

i. Segment Revenue

External segment revenue

Interest income

Total revenue

ii. Segment Underlying Profit

External segment revenue

Interest income

Property expenses

Administration expenses

Operational, marketing and selling expenses

Finance expense

Depreciation and amortisation expense

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

Profit from continuing operations per the
consolidated statement of comprehensive
income

iii. Segment Assets

Lifestyle &
Holidays

$’000

Settlers

$’000

Garden
Villages

Corporate/
Unallocated

$’000

384

–

384

–

(7)

–

(2,013)

9,336

–

9,336

–

(2)

–

324

(5)

15,934

–

Total

$’000

9,720

14,564

24,284

9,720

14,564

(327)

(506)

(648)

–

14,564

–

14,564

(325)

(506)

(648)

(3,601)

(117)

107

–

164

107

(1,689)

15,922

164

(1,676)

377

7,301

(2,018)

25,592

7,962

31,913

51,983

125,657

201,315

386,256

Underlying Profit/(Loss) – continuing operations

384

9,334

9,367

19,085

Annual Report 2016
89

3. Segment information (continued)

Ingenia Communities Management Trust - 2016

Lifestyle &
Holidays

$’000

Settlers

$’000

Garden
Villages

Corporate/
Unallocated

$’000

Total

$’000

i. Segment revenue

External segment revenue

Interest Income

Reclassification of gain on revaluation of newly
constructed villages

Total revenue

ii. Segment Underlying Profit

73,966

6,950

27,517

–

73,966

–

(1,526)

5,424

–

27,517

External segment revenue

73,966

6,950

27,517

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

–

(11,801)

(1,435)

(16,844)

(14,257)

(1,053)

(7,154)

(1,911)

(2,023)

(21,729)

(5,862)

(1,602)

–

(374)

(147)

(437)

–

(875)

(910)

–

(782)

(2,016)

(13,541)

–

(6)

–

(38)

2,623

–

112

–

108,501

(1,526)

106,989

108,501

(30,080)

(22,385)

(2,821)

(3,358)

(21,729)

(5,862)

(17,941)

2,623

(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

(2,489)

Retirement village resident loans

Loss on revaluation of newly constructed villages

Responsible Entity fees

Income tax benefit associated with reconciliation
items

Profit from continuing operations per the
consolidated statement of comprehensive
income

–

(638)

2,317

(1,388)

(1,526)

–

(638)

(172)

(1,388)

(1,526)

(2,693)

(116)

–

iii. Segment Assets

325,390

253,363

6,013

4,538

589,304

11,918

1,855

(320)

(13,397)

Ingenia Communities Holdings Limited

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

3. Segment information (continued)

Ingenia Communities Management Trust - 2015

Lifestyle &
Holidays

$’000

Settlers

$’000

Garden
Villages

Corporate/
Unallocated

$’000

Total

$’000

78,104

(2,422)

75,689

78,104

(27,372)

(17,061)

(2,689)

(3,150)

(9,256)

(1,910)

–

(26)

(569)

(2)

–

(15,144)

2,734

–

2,734

(260)

i. Segment Revenue

External segment revenue

Interest income

Reclassification of gain on revaluation of newly
constructed villages

38,797

11,124

28,183

–

(2,422)

–

Total revenue

38,797

8,702

28,183

ii. Segment Underlying Profit

External segment revenue

38,797

11,124

28,183

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

–

(8,089)

(6,657)

(746)

(1,559)

(9,256)

(1,910)

–

(34)

–

(1,562)

(779)

(57)

(283)

–

(17,721)

(9,599)

(1,317)

(1,306)

–

(226)

Reconciliation of underlying profit to profit from
continuing operations:

Net gain/(loss) on disposal of investment property

(23)

1,648

(5)

Net gain/(loss) on change in fair value of:

Investment properties

(2,812)

3,277

Underlying Profit/(Loss) – continuing operations

10,546

8,443

(1,986)

(13,000)

4,003

Retirement village resident loans

Loss on revaluation of newly constructed villages

Responsible Entity fees

Income tax benefit associated with
reconciliation items

Profit from continuing operations per the
consolidated statement of comprehensive
income

iii. Segment Assets

Segment assets

Assets held for sale

Total assets

–

(2,165)

1,620

482

(8,878)

(2,422)

(2,165)

3,286

–

(8,878)

(2,422)

–

7,711

2,068

(1,974)

(11,879)

(4,074)

220,961

184,880

5,429

5,198

416,468

–

61,598

478,066

Annual Report 2016

4. Earnings per unit

Earnings per Unit

Profit/(loss) from continuing operations ($’000)

Profit/(loss) from discontinued operations ($000)

Net profit/(loss) for the year ($000)

Weighted average number of units outstanding (thousands):

Issued units

Dilutive units (thousands):

Performance quantum rights

Long-term incentive rights

Short-term incentive rights

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016

2015

2016

2015

25,855

(3,874)

21,981

31,913

2,587

34,500

–

(4,074)

(3,854)

(7,928)

150,408

136,944

150,408

136,944

620

269

470

–

620

269

470

–

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)

Basic earnings per unit from discontinued operations (cents)

Basic earnings per unit (cents)

Dilutive earnings per unit from continuing operations (cents)

Dilutive earnings per unit from discontinued operations (cents)

Dilutive earnings per security (cents)

17.2

(2.6)

14.6

17.1

(2.6)

14.5

23.3

1.9

25.2

23.2

1.9

25.1

–

0.0

–

0.0

(3.0)

(2.8)

(5.8)

(3.0)

(2.8)

(5.8)

Income tax benefit

a. Income tax benefit

Current tax

Increase in deferred tax asset

Income tax benefit

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016
$’000

2015
$’000

2016
$’000

2015
$’000

–

2,507

–

6,019

b. Reconciliation between tax expense and pre-tax

net profit

Profit/(loss) before income tax

21,981

34,500

(2,451)

(10,093)

Less amounts not subject to Australian income tax

(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

Income tax benefit

–

(2,451)

(10,093)

735

3,028

330

173

1,399

1,385

(59)

102

2,507

1,683

(250)

6,019

Ingenia Communities Holdings Limited

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

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

Current

Rental and other amounts due

Finance lease receivable from stapled entity

Other receivables

Total current trade and other receivables

Non-current

Finance lease receivable from stapled entity

Other receivables

Total non-current trade and other receivables

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016
$’000

2015
$’000

2016
$’000

2015
$’000

–

5,882

–

2,599

–

2,599

2,643

–

2,643

28,978

28,862

2,840

31,818

2,539

31,401

–

802

6,684

–

300

3,772

–

332

4,104

–

110

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

Annual Report 201693

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

Unearned finance income

Net present value of minimum lease payments

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

2,599

10,573

2,643

10,573

237,447

240,091

250,619

253,307

(219,042)

(221,802)

31,577

31,505

2,526

8,295

20,756

31,577

2,526

8,222

20,757

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.

Inventories

–

Carrying values:

Manufactured homes:

Completed

Under Construction

Service station fuel and supplies

Total Inventories

The manufactured homes balance includes:

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016
$’000

2015
$’000

2016
$’000

2015
$’000

–

11,140

6,331

194

17,665

7,975

4,900

333

13,208

7 refurbished/renovated completed homes (2015: nil)

– 60 new completed homes (2015: 53)
–
–
–

31 new homes under construction (2015: 85)

3 refurbished/renovated under construction homes (2015: nil)

Ingenia Communities Holdings Limited
94

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

10. Investment properties

a. Summary of carrying amounts

Completed properties

Properties under development

Total investment properties

b. Movements in carrying amounts

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016
$’000

2015
$’000

2016
$’000

2015
$’000

162,795

152,142

482,456

361,984

–

1,292

65,495

24,310

162,795

153,434

547,951

386,294

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016
$’000

2015
$’000

2016
$’000

2015
$’000

Completed investment property

Carrying amount at beginning of year

153,434

134,488

386,294

364,375

Acquisitions

Expenditure capitalised

Disposals

Net transfer from/(to) inventory

–

1,451

–

242

–

2,149

875

–

Net gain/(loss) on change in fair value

7,668

15,922

81,536

18,495

–

200

(172)

78,152

12,207

(7,165)

(159)

482

Transferred from/(to) assets held for sale

–

61,598

(61,598)

Carrying amount at end of year

162,795

153,434

547,951

386,294

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.

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.

Annual Report 201695

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016
$’000

2015
$’000

2016
$’000

2015
$’000

431

(326)

105

122

–

(24)

103

423

(301)

122

239

–

(117)

122

1,800

(782)

1,018

459

–

631

(72)

1,018

1,169

(710)

459

180

(118)

499

(102)

459

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016
$’000

2015
$’000

2016
$’000

2015
$’000

–

2,385

(423)

1,962

1,577

731

(346)

1,962

1,734

(157)

1,577

–

1,734

(157)

1,577

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016
$’000

2015
$’000

2016
$’000

2015
$’000

1,266

1,200

–

1,266

1,200

9,157

2,841

1,670

8,500

22,168

7,759

1,184

342

3,500

12,785

11. Plant and equipment

a. Summary of carrying amounts
Plant and equipment

Less: accumulated depreciation

Total plant and equipment

b. Movements in carrying amount

Carrying amount at beginning of year

Assets written off

Additions

Depreciation expense

Carrying amount at end of year

12. Intangibles

a. Summary of carrying amounts
Software & development

Less: accumulated amortisation

Total intangibles

b. Movements in carrying amount

Carrying amount at beginning of year

Additions

Amortisation expense

Carrying amount at end of year

13. Trade and other payables

Current liabilities

Trade payables and accruals

Deposits

Other unearned income

Deferred acquisition consideration

Total current liabilities

Non-current liabilities

Deferred acquisition consideration

–

6,770

14,770

Ingenia Communities Holdings Limited96

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

14. Borrowings

Current liabilities

Finance leases

Non-current liabilities

Bank debt

Prepaid borrowing costs

Finance leases

Total non-current borrowings

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016
$’000

2015
$’000

2016
$’000

2015
$’000

–

2,962

2,817

99,100

(1,336)

–

97,764

63,900

(1,683)

–

62,217

–

34,905

–

33,252

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)

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

Minimum lease payments:

Within one year

Later than one year but not later than five years

Later than five years

Total minimum lease payments

Future finance charges

Present value of minimum lease payments

Present value of minimum lease payments:

Within one year

Later than one year but not later than five years

Later than five years

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016
$’000

2015
$’000

2016
$’000

2015
$’000

–

3,274

13,175

244,345

260,794

2,942

11,846

243,522

258,310

(224,027)

(223,380)

36,767

34,930

2,979

9,888

23,900

36,767

2,817

9,305

22,808

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.

Annual Report 2016

15. Retirement village resident loans

a. Summary of carrying amounts

Gross resident loans

Accrued deferred management fee

Net resident loans

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

Carrying amount at end of year

16. Deferred tax assets and liabilities

Deferred tax assets

Tax losses

Other

Deferred tax liabilities

DMF receivable

Investment properties

Net deferred tax asset

Deductible temporary differences and carried forward losses
tax effected for which no deferred tax asset has been recognised

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016
$’000

2015
$’000

2016
$’000

2015
$’000

–

240,473

192,898

(32,990)

(31,020)

207,483

161,878

1,388

190,122

8,878

(4,222)

(6,788)

1,211

11,056

2,056

19,815

(5,757)

(10,543)

42,041

(42,041)

(112)

379

207,483

161,878

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016
$’000

2015
$’000

2016
$’000

2015
$’000

–

18,799

1,129

15,938

1,205

(8,871)

(3,973)

7,084

(7,970)

(4,567)

4,606

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.

Ingenia Communities Holdings Limited98

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

17. Issued units

a. Carrying Amounts

At beginning of year

Issued during the year:

Distribution Reinvestment Plan (DRP)

Institutional and DRP placement

Rights issue

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016
$’000

2015
$’000

2016
$’000

2015
$’000

619,285

547,642

29,026

14,097

2,802

59,138

–

2,374

36,835

35,578

501

4,648

–

(158)

464

7,693

7,430

(658)

Institutional placement and rights issue costs

(2,064)

(3,144)

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

b. Movements in Issued Units

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

679,161

619,285

–

679,161

619,285

–

34,017

–

29,028

2016
Thousands

2015
Thousands

2016
Thousands

2015
Thousands

147,118

112,708

147,118

112,708

–

640

2,968

21,429

172,155

303

–

1,112

32,995

147,118

–

640

2,968

21,429

172,155

303

–

1,112

32,995

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

Balance at beginning of year

Net profit/(loss) for the year

Distributions

Balance at end of year

The closing balance is attributable to the unitholders of:

Ingenia Communities Fund

Ingenia Communities Management Trust

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016
$’000

2015
$’000

2016
$’000

(296,449)

(320,829)

(15,402)

21,981

34,500

(12,513)

(10,120)

–

2015
$’000

(7,474)

(7,928)

–

(286,981)

(296,449)

(15,346)

(15,402)

(286,981)

(296,449)

–

(6,885)

(8,461)

(6,886)

(8,517)

(286,981)

(296,449)

(15,346)

(15,402)

Annual Report 2016

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:

Within one year

Later than one year but not later than five years

Ingenia Communities Fund

2016
$’000

2015
$’000

–

Ingenia Communities
Management Trust

2016
$’000

598

1,929

2,527

2015
$’000

229

744

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
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).

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

In assessing this risk, the Group takes into account the relative security of income flows, the predictability of expenses, debt
profile, the degree of hedging and the overall level of debt as measured by gearing.

The 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.

Ingenia Communities Holdings Limited100

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

22. Financial instruments

Introduction

a.
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.

Interest Rate Risk

b.
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%).

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.

Annual Report 2016101

Total

8,329

99,100

–

8,966

63,900

–

22. Financial instruments (continued)

Interest Rate Risk Exposure

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

$’000

2016

Financial assets

Cash at bank

Financial liabilities

Bank debt

Interest rate swaps: (Fund pays fixed rate)

2015

Financial assets

Cash at bank

Financial liabilities

Bank debt

Floating
interest
rate

8,329

99,100

(44,000)

8,966

63,900

Ingenia Communities Fund

Fixed interest maturing in:

Less than
1 year

One to five
Years

More than
5 years

–

44,000

–

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

Financial assets

Cash at bank

Financial liabilities

Ingenia Communities Management Trust

Fixed interest maturing in:

Floating
interest
rate

Less than
1 year

One to five
Years

More than
5 years

Total

6,621

–

6,621

Finance leases (excluding perpetual lease)

–

497

1,832

2,899

5,228

2015

Financial assets

Cash at bank

Financial liabilities

6,094

–

6,094

Finance leases (excluding perpetual lease)

–

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.

Interest Rate Sensitivity Analysis

d.
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).

Ingenia Communities Holdings Limited102

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

22. Financial instruments (continued)

i. Increase in average interest rates of 1%

Variable interest rate instruments

Interest rate swaps

ii. Decrease in average interest rates of 1%

Variable interest rate instruments

Interest rate swaps

Effect on profit after tax

Ingenia Communities Fund

Ingenia Communities
Management Trust

Higher/(lower)

2016
$’000

2015
$’000

2016
$’000

2015
$’000

(991)

1,238

(639)

–

991

(735)

639

–

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 currency exposure:

United States dollars

New Zealand dollars

Total net foreign currency assets

Net foreign currency asset/(liability)

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016
$’000

2015
$’000

2016
$’000

2015
$’000

3,479

289

3,768

3,491

473

3,964

–

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

Foreign exchange risk exposures denominated in:

United States dollars

New Zealand dollars

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

Foreign exchange risk exposures denominated in:

United States dollars

New Zealand dollars

Effect on profit after tax

Ingenia Communities Fund

Ingenia Communities
Management Trust

Higher/(lower)

2016
$’000

2015
$’000

2016
$’000

2015
$’000

(316)

(26)

(317)

(43)

387

388

–

Annual Report 2016103

Liquidity Risk

i.
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.

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.

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.

Ingenia Communities Holdings Limited104

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.

2016

Trade and other payables

Borrowings

2015

Trade and other payables

Borrowings

2016

Trade and other payables

Retirement village resident loans

Finance leases (excluding perpetual lease)

Finance lease (perpetual lease)(2)

Provisions

2015

Trade and other payables

Retirement village resident loans

Borrowings (excluding perpetual lease)

Finance lease (perpetual lease)(2)

Provisions

Liabilities held for sale

Ingenia Communities Fund

Less than
1 year

1 to 5
Years

More than
5 years

Total

$’000

1,266

4,572

5,838

1,200

2,731

3,931

–

38,153

–

68,344

–

1,266

65,711

108,436

65,711

109,702

–

1,200

71,075

72,275

Ingenia Communities Management Trust

Less than
1 year

1 to 5
Years

More than
5 years

Total(1)

$’000

22,168

6,770

207,483

–

28,938

207,483

3,274

121

1,382

13,175

244,345

260,794

483

227

–

604

1,609

234,428

20,655

244,345

499,428

12,785

161,878

2,942

121

830

42,041

14,770

–

27,555

161,878

11,846

243,522

258,310

483

177

–

604

1,078

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.

Annual Report 2016

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

2015
Liabilities

Derivative liabilities – net settled

–

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

–

408

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 on profit after tax

Ingenia Communities Fund

Ingenia Communities
Management Trust

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

Ingenia Communities Fund

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

Ingenia Communities Fund

Fair value measurement using:

i. Assets Measured at Fair Value

2016

Investment properties

2015

Investment properties

ii. Liabilities Measured at Fair Value

2016

Derivatives

2015

Derivatives

Date of
valuation

Total
$’000

30 June 2016
Refer to
Note 10

162,795

30 June 2015
Refer to
Note 10

153,434

408

Quoted
prices in
active
markets
(Level 1)
$’000

Significant
observable
inputs
(Level 2)
$’000

Significant
unobservable
inputs
(Level 3)
$’000

–

408

162,795

153,434

–

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

Ingenia Communities Holdings Limited

106

Notes to the Financial Statements

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

23. Fair value measurement (continued)

Ingenia Communities Management Trust

b.
The following table provides the fair value measurement hierarchy of Ingenia Communities Management Trust assets and
liabilities:

Ingenia Communities Management Trust

Fair value measurement using:

i. Assets Measured at Fair Value

30 June 2016

Investment properties

30 June 2015

Investment properties

Assets held for sale - investment property

ii. Liabilities Measured at Fair Value

30 June 2016

Retirement village resident loans

30 June 2015

Retirement village resident loans

Liabilities held for sale - resident loans

Date of
valuation

Total
$’000

30 June 2016
Refer to
Note 10

547,951

30 June 2015
Refer to
Note 10

30 June 2015
Refer to
Note 7

386,294

61,598

30 June 2016
Refer to
Note 15

207,483

30 June 2015
Refer to
Note 15

30 June 2015
Refer to
Note 7

161,878

42,041

Quoted
prices in
active
markets
(Level 1)
$’000

Significant
observable
inputs
(Level 2)
$’000

Significant
unobservable
inputs
(Level 3)
$’000

–

547,951

–

386,294

61,598

–

207,483

–

161,878

42,041

–

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

Annual Report 2016

107

24. Auditor’s remuneration

Amounts received or receivable by EY for:

Audit or review of financial reports

207,091

202,455

229,751

202,455

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016
$

2015
$

2016
$

2015
$

Other audit related services

Non-audit related services

25. Related parties

6,489

14,228

39,514

–

6,489

14,228

84,514

–

227,808

241,969

250,468

286,969

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 RE Limited:

Asset management fees

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016
$

2015
$

2016
$

2015
$

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:

Current trade payables

Ingenia Communities Fund

Ingenia Communities
Management Trust

2016
$

2015
$

2016
$

2015
$

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.

Ingenia Communities Holdings Limited108

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

2,643,268

2,698,453

(2,643,268)

(2,698,453)

31,503,706

31,505,116

(31,503,706)

(31,505,116)

Finance lease commitments

250,619,000 253,307,008 (250,619,000) (253,307,008)

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

9,101,040

9,719,788

(9,101,040)

(9,719,788)

14,359,442

11,693,024

(13,924,014)

(11,323,052)

Intercompany loan balances between stapled entities

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:

Directors fees

Salaries and other short-term benefits

Short-term incentives

Superannuation benefits

Share-based payments

2016
$

2015
$

559,667

542,000

1,191,514

1,158,141

695,110

400,956

57,924

58,518

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.

Annual Report 2016109

Number outstanding

2016

2015

–

640,333

619,333

76,548

163,829

173,870

619,333

–

163,829

–

1,033,580

1,423,495

Ingenia Communities
Management Trust

25. Related parties (continued)
The aggregate Rights of the Group held directly, by KMP, are as follows:

Issue date

Right Type

Expiry date

FY13

FY14

FY15

FY16

PQR

STIP

LTIP

FY16

FY17

FY18

FY19

26. Parent financial information
Summary financial information about the parent of each Trust is:

Current assets

Total assets

Current liabilities

Total liabilities

Net assets/(liabilities)

Unitholders’ equity:

Issued units

Accumulated losses

Total unitholders’ equity

Ingenia Communities Fund

2016
$’000

2015
$’000

8,392

8,966

440,710

335,348

1,646

1,171

99,409

63,389

2016
$’000

1,816

4,652

7,606

7,780

341,301

271,959

(3,128)

2015
$’000

1,816

4,652

237

1,982

2,671

679,161

619,288

34,013

29,024

(337,860)

(347,329)

341,301

271,959

(37,141)

(3,128)

(26,353)

2,671

Profit/(loss) from continuing operations

25,855

27,700

(10,788)

(9,653)

Profit/(loss) from discontinued operations

Net profit/(loss) attributable to unitholders of each Trust

Total comprehensive income/(loss)

(3,873)

21,982

–

27,700

(10,788)

(9,653)

Ingenia Communities Holdings Limited
110

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

Ownership interest

2016
%

2015
%

Subsidiaries of Ingenia Communities Fund

Bridge Street Trust

Browns Plains Road Trust

Casuarina Road Trust

Edinburgh Drive Trust

INA CC Trust

INA Community Living Subsidiary Trust No. 2

INA Community Living Subsidiary Trust

INA Kiwi Communities Subsidiary Trust No. 1

INA Sunny Trust

Jefferis Street Trust

Lovett Street Trust

ILF Regency Subsidiary Trust

Settlers Subsidiary Trust

SunnyCove Gladstone Unit Trust

SunnyCove Rockhampton Unit Trust

Taylor Street (2) Trust

INA Subsidiary Trust No. 1

Noyea Pty Ltd

Settlers Company Pty Limited

Settlers Property Trust

INA Community Living LLC (formerly ING Community Living LLC)

INA US Community Living Fund LLC (formerly ING US Community Living
Fund LLC)

Australia

USA

100

–

100

–

100

–

100

–

100

Annual Report 2016111

Country of
residence

Ownership interest

2016
%

2015
%

27. Subsidiaries (continued)

Subsidiaries of Ingenia Communities Management Trust

Garden Villages Management Trust

INA Community Living Lynbrook Trust

ILF Regency Operations Trust

Settlers Operations Trust

INA Operations Trust No. 1

INA Operations Trust No. 2

INA Operations Trust No. 3

INA Operations Trust No. 4 (formerly INA Subsidiary Trust No. 2)

INA Operations Trust No. 6

INA Operations Trust No. 7

INA Operations Trust No. 8

INA Operations Trust No. 9

Noyea Operations Pty Ltd

Ridge Estate Trust

INA Subsidiary Trust No. 3

Australia

INA NZ Subsidiary Unit Trust No. 1

New Zealand

CSH Lynbrook GP LLC

CSH Lynbrook LP

INA Community Living II (formerly ING Community Living II)

Lynbrook Freer Street Member LLC

Lynbrook Management, LLC

USA

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

100

–

100

–

100

–

100

Ingenia Communities Holdings Limited112

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

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

Ingenia Communities Fund

2016
$’000

2015
$’000

21,981

34,500

Ingenia Communities
Management Trust

2016
$’000

2015
$’000

(7,928)

(422)

(1,291)

(45)

2,222

–

3,874

(1,620)

1,689

(7,668)

(15,922)

414

–

574

–

(164)

–

212

117

322

–

(638)

172

–

1,388

(2,507)

418

300

337

377

(482)

–

8,878

(6,017)

260

–

Operating profit/(loss) for the year before changes in working
capital

18,777

17,843

(854)

(2,353)

Changes in working capital:

(Increase)/decrease in receivables

(Increase)/decrease in other assets

Increase in retirement village resident loans

(320)

5,133

–

Increase/(decrease) in other payables and provisions

35,628

(26,139)

1,024

(4,457)

3,563

4,679

Increase/(decrease) in other payables and provisions related to
investing activities

Net cash provided by operating activities

(58,988)

(4,903)

–

(3,163)

29,022

32,977

(2,677)

(11,749)

12,326

21,435

–

16,982

Annual Report 2016113

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
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.

Ingenia Communities Holdings Limited114

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:

1. 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.

2. The notes to the financial statements include an explicit and unreserved statement of compliance with international

financial reporting standards at Note 1(b).

3. 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

Jim Hazel
Chairman
Sydney, 23 August 2016

Annual Report 2016

Independent Auditor’s Report

FOR THE YEAR ENDED 30 JUNE 2016

115

Ingenia Communities Holdings Limited116

Independent Auditor’s Report

FOR THE YEAR ENDED 30 JUNE 2016 | CONTINUED

Annual Report 2016Securityholder Information

FOR THE YEAR ENDED 30 JUNE 2016

117

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

Securityholder

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

J P MORGAN NOMINEES AUSTRALIA LIMITED

CITICORP NOMINEES PTY LIMITED

NATIONAL NOMINEES LIMITED

BNP PARIBAS NOMS PTY LTD

ONE MANAGED INVT FUNDS LTD

BNP PARIBAS NOMINEES PTY LTD

AMP LIFE LIMITED

CITICORP NOMINEES PTY LIMITED

BOND STREET CUSTODIANS LIMITED

RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED

CS FOURTH NOMINEES PTY LIMITED

PERSHING AUSTRALIA NOMINEES PTY LTD

CUSTODIAL SERVICES LIMITED

RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED

FORSYTH BARR CUSTODIANS LTD

GWYNVILL TRADING PTY LTD

BODIAM PROPERTIES PTY LTD

MRS MONIKA BATKIN

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2

Total

Total Quoted Securities

Distribution of Securityholders

Size of holding(1)

100,001 and Over

10,001 to 100,000

5,001 to 10,000

1,001 to 5,000

1 to 1,000

Total

Number of
securities
held

Percentage
of issued
capital

45,698,404

26.00

30,523,153

19,470,151

16,497,821

10,725,365

6,966,501

4,476,242

2,020,237

1,640,056

1,419,342

1,416,573

1,324,933

1,124,172

1,038,434

1,028,910

643,224

557,937

520,500

516,667

373,540

17.36

11.08

9.39

6.10

3.96

2.55

1.15

0.93

0.81

0.75

0.64

0.59

0.37

0.32

0.30

0.29

0.21

147,982,162

84.19

175,777,011

100.00

Number of
securityholders

Number of
securities

Percentage
of securities

153,632,160

87.40

545

597

1,764

1,212

12,738,971

4,366,618

4,499,404

539,858

7.25

2.48

2.56

0.31

4,169

175,777,011

100.00

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

Ingenia Communities Holdings Limited118

Securityholder Information

FOR THE YEAR ENDED 30 JUNE 2016

Distribution of Long Term Incentive Plan (LTIP) Rights Holders

Size of holding

100,001 and Over

10,001 to 100,000

5,001 to 10,000

1,001 to 5,000

1 to 1,000

Total

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

Distribution of Short Term Incentive Plan (STIP) Rights Holders

Size of holding

100,001 and Over

10,001 to 100,000

5,001 to 10,000

1,001 to 5,000

1 to 1,000

Total

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

Unquoted Securities

Type of security

LTIP Rights

STIP Rights

Substantial Securityholders

Securityholder

Cohen & Steers and all bodies controlled by Cohen & Steers, Inc

The Vanguard Group Inc

AMP Limited and its related bodies corporate

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

Number of
LTIP Right
Holders

Number of
securities

Percentage
of securities

–

241,174

210,140

–

53.44

46.56

–

451,314

100.00

Number of
STIP Right
Holders

–

Number of
securities

Percentage
of securities

–

76,548

100.00

–

76,548

100.00

Number of
holders

Number of
securities

451,314

76,548

Number of
securities

Percentage of
issued capital

20,480,041

10,821,125

8,863,146

11.90

7.21

5.04

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.

Annual Report 2016

Investor Relations

FOR THE YEAR ENDED 30 JUNE 2016

119

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.

Period Ended

June 2016

December 2015

Date Paid

Total Amount

14 September 2016

16 March 2016

$0.051

$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
14 September 2016
15 November 2016
February 2017
March 2017

Final FY16 distribution paid
Annual Tax Statement dispatched
Annual General Meeting
1H17 Result announced
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/

Ingenia Communities Holdings Limited120

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:
Facsimile:

1300 132 946
+61 2 8263 0500

Email: investor@ingeniacommunities.com.au
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
+61 2 9287 0303
Facsimile:

Email: registrars@linkmarketservices.com.au

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.

Annual Report 2016Disclaimer
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. investor@ingeniacommunities.com.au
W. www.ingeniacommunities.com.au