(formerly ING Real Estate Entertainment Fund) 30 June 2012 ... · the stapled, listed securities of...

IEF Real Estate Entertainment Group (formerly ING Real Estate Entertainment Fund)

30 June 2012 Annual Report

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Letter from the Chairman

Dear Securityholder,

Over the last 12 months the Group has transformed from a passive landlord to an integrated hotel operating

and property owning business. The Group is now actively managing these assets and is focusing on becoming a

leading provider of entertainment venues predominantly within New South Wales.

The transition involved a number of transactions including the change in Responsible Entity that occurred on 6

December 2011, the stapling of the shares of Bodiam Hotel Group Ltd to the units of the fund that occurred on

26 April 2012, a $15 million fully underwritten rights issue that was completed on 5 June 2012 and the

purchase of the business and leasehold interests of the Group’s largest tenant, Icon Hospitality Management

Ltd (Icon), that occurred on 15 June 2012.

In addition to commencing operations of the 7 Icon premises, the restructure has allowed the Group to

commence operations of an additional 2 properties that were previously leased.

The new operating structure allows the Group to benefit from a number of factors including:

• control of the group’s fundamental revenue streams

• aligned interests in leasehold and freehold positions

• operative economies of scale

• increased transparency

• stronger negotiation positions with non-performing tenants.

The completion of the restructure provides a strong platform for future growth. The Directors are focused on

utilising this platform to optimise the performance of the Group’s hotel assets while recycling inefficient

capital to take advantage of the opportunities presented to the Group.

One of the key initiatives of the Group is to refresh the hotels, many of which have had minimal capital

expenditure over the last three years. The board has approved a $4 million capital expenditure program which

is expected to be complete by the end of this calendar year.

The changes made to the business over the past 9 months are highlighted in the chart below. This highlights

the key features of the Australian operations as at June this year compared to last year. The New Zealand

assets have not been included for comparative purposes as they are all in the process of being sold to further

reduce group debt.

Jun-12 Jun-11

Number of properties owned and operated 9 0

Value of properties owned and operated $113.1 million $Nil

Number of properties leased (excluding New Zealand) 4 14

Value of properties leased (excluding New Zealand) $24.5 million $124.9 million

Total assets $238.9 million $235.6 million

Number of employees * 268 0

* Approximately 70% of employees are casual.

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Since the change in responsible entity, only 9 months ago, the key executives have very effectively taken

control and established a solid operational team that has reconfigured and positioned your group for

sustainable future value growth. On behalf of the Board and all securityholders I would like to thank them for

their efforts and ongoing commitment to the business.

I would also like to thank all security holders for their support and commitment provided over the past 12

months. We look forward to providing you with further updates as we continue to build the business.

Yours sincerely,

_______________

Bryan Mogridge

Chairman

Bodiam RE Ltd

30 September 2012

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Corporate Governance Statement

This Corporate Governance Statement relates to

the stapled, listed securities of IEF Real Estate

Entertainment Group (ASX:IEF). Each stapled

security is made up of one share in Bodiam Hotel

Group Limited (Bodiam), stapled to one unit in the

IEF Real Estate Entertainment Group (the “Fund”),

the Responsible Entity of which is Bodiam RE

Limited (Bodiam RE).

In view of the IEF corporate structure both

entities, Bodiam and Bodiam RE, collectively

referred to as the Bodiam Group, are required to

disclose their corporate governance framework

and practices against the ASX Corporate

Governance Priniciples and Recommendations.

This statement outlines the main corporate

governance practices currently in place for the

Bodiam Group. This statement also addresses the

ASX Corporate Governance Council Corporate

Governance Principles and Recommendations (ASX

Recommendations). The Board believes that the

Group accords with the majority of the principles

and recommendation of the ASX Corporate

Governance Council with the exception of two

recommendations that are outlined in the report.

A reference to the Bodiam Group should be read

as a reference to Bodiam and to Bodiam RE, and a

reference to 'Board' refers to the Board of each of

these entities unless otherwise stated.

ROLE OF THE BOARD

The Board of the Bodiam Group has the

responsibility to oversee the effective

management and operation of the Group. The

Board operates under a formal charter which can

be found on the Group’s website

(www.bodiamre.com.au). In addition to the

function prescribed by law, the Board has the

following functions and responsibilities:

• Delegation of powers and authorities

• Nomination, appointment, termination of, and

changes to the terms of employment or

appointment of directors

• Membership and role of board committees

• Board performance

• Director remuneration

• Appointment, remuneration and removal of

Managing Director and Company Secretary

• Managing Director delegation, including

Managing Director limits

• Approval of all decisions or expenditure

outside of the Managing Director limits

• Approval of corporate strategy and annual

budgets/business plans

• Balance sheet strategy, including acquiring,

selling or otherwise disposing of material IEF or

Bodiam Group assets and obtaining loans.

• Capital management, including issues, calls on,

forfeiture of shares, declaration of dividends

and share buybacks

• Acquiring or selling patent rights, rights in

registered trademarks, licences or other

intellectual property rights

• Significant mergers, acquisitions, restructures

and divestments or initiating major changes to

the Group’s business operations

• Approving or altering the annual business plan

and approval of Group policies

• Director and executive succession planning

• Appointments to subsidiary Group boards

• Evaluation of the Managing Director

• Remuneration of Managing Director and direct

reports to the Managing Director

• All donations made by the Group

Generally, the Managing Director is responsible for

all matters not specifically identified as the

responsibility of the Board. The Board Charter

outlines the authority that has been delegated to

the Managing Director, that of achieving the

Group’s corporate objectives and being

accountable to the Board for the overall

performance of the Group, within limits outlined in

the Board Charter.

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ROLE OF THE BOARD OF THE RESPONSIBLE

ENTITY

As the Responsible Entity, the Board of Bodiam RE

Limited has additional responsibilities for the

operation of the Fund. The Responsible Entity

must exercise its powers and perform its

obligations conferred on it under the Constitutions

and the Corporations Act 2001 in the best interests

of unitholders to ensure that the activities of the

Group are conducted in a proper and efficient

manner. The Responsible Entity must also ensure

compliance with the conditions of the Australian

Financial Services license and approve and monitor

compliance with Compliance Plan.

BOARD SIZE AND COMPOSITION

The Constitution of the Group provides that there

will be a minimum of three Directors and not more

than ten Directors.

Directors are appointed with the aim of ensuring

the Board has:

• an appropriate range of skills, experience and

expertise;

• a proper understanding of, and competence to

deal with, current and emerging issues in the

industry in which it engages;

• the ability to effectively review and challenge

the performance of Management and exercise

independent judgement; and

• a majority of independent directors.

Terms of Appointment

In the near future it is intended to formalise the

non-executive director appointments which,

among other things, will set out the key terms and

conditions of the appointment, the Board’s

expectations in relation to the performance of the

Director, procedures for dealing with a Director’s

potential conflict of interest, and the disclosure

obligations of the Director, together with the

details of the Director’s remuneration.

Director’s Interests

Directors are required to keep the Board advised

of any interest that may be in conflict with those

of the Bodiam Group, and restrictions are applied

to Directors’ rights to participate in discussion and

to vote, as circumstances dictate. In particular,

where a potential conflict of interest may exist,

Directors concerned may be required to leave the

Board meeting while the matter is considered in

their absence.

Independent Advice

The Board has a policy of enabling Directors to

seek independent professional advice for Group

related matters at the Group’s expense, subject to

the prior agreement of the Independent Directors

and that the estimated costs are reasonable.

Directors Independence

The Board has considered specific principles in

relation to directors' independence. The Board

considers an independent Director to be a non-

executive Director who is not a member of the

Group’s management and who is free from any

business or other relationship that could materially

interfere with, or could reasonably be perceived to

interfere with, the independent exercise of their

judgement. The Board will consider the materiality

of any given relationship on a case-by-case basis,

having regard to both quantitative and qualitative

principles.

At the date of this report, the Board comprises

three Non-Executive Directors and one Executive

Director. The Boards of BHG and Bodiam RE have

the same Directors. The current members of the

Board are Mr Bryan Mogridge (Chairman), Ms

Deborah Cartwright (Non-Executive Director), Mr

Julian Davidson (Non-Executive Director) and Mr

Russell Naylor (Executive Director).

Mr Bryan Mogridge, Ms Deborah Cartwright and

Mr Julian Davidson are considered by the Board to

be independent. The Group recognises that having

a majority of independent Non-Executive Directors

provides assurance that the Board is structured

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properly to fulfil its role in holding management

accountable for the Group’s performance.

The Board considers that the existing Board

structure is appropriate for the Group’s current

operations and stage of development.

Directors’ details are listed on pages 13 to 14,

including details of their other listed company

directorships and experience.

Chairman

The role of Chairman and Managing Director is not

occupied by the same individual. The Board has

agreed that it should continue to have a majority

of independent Non-Executive Directors, that the

positions of Chairman and Managing Director must

be separate, and that the Chairman should be an

independent Non-Executive Director.

Mr Bryan Mogridge was appointed Chairman of

the Group on 31 October 2011 and is considered

an independent Director in accordance with

recommendation 2.1 of the ASX

recommendations.

Board Diversity

In appointing members to the Board,

consideration was given to the skills, business

experience and educational backgrounds of

candidates. The advantage of having a mix of

relevant business, executive and professional

experience on the Board, the importance of

cultural and ethical values, and the benefits of

diversity, including gender diversity is also

recognised. These factors will also be considered

in any future appointments to the Board including

any identified skills ‘gaps’.

A separate Nomination Committee to oversee the

Director nomination process has not been formed

as it is believed that the current size of the Board

does not warrant this Committee. As a result, the

full Board determines who is invited to fill a casual

vacancy after extensive one-on-oneand collective

interviews with candidates and thorough due

diligence and reference checking.

The Group Board has one woman Non-Executive

Director out of four Directors; Ms Deborah

Cartwright was appointed to the Board for her

specific skills and experience including financial

and treasury experience.

The Group has established a formal diversity policy

having regard to the suggestions set out in the

new ASX Corporate Governance Principles and

Recommendations. The diversity policy covers

gender, age, ethnicity and cultural background.

Due to the current size and nature of IEF’s

operations, the Board has not established

measurable objectives for achieving gender

diversity. However the Group has always had a

policy of actively encouraging gender diversity at

all levels in the organisation and a culture that

supports workplace diversity. This is evidenced by:

Approximately 41% of employees within the whole

organisation are women.

Approximately 23% of employees in senior

positions within the whole organisation are

women.

Board Meetings

The Board has currently scheduled meetings on a

monthly basis, with additional meetings convened

as required. Agendas for each meeting are

prepared by the Company Secretary together with

the Managing Director and input from the

Chairman, and are distributed prior to the meeting

together with supporting papers.

Standing items include the Managing Director’s

report and the Financial Report, as well as reports

addressing matters of strategy, governance and

compliance. Senior Executives are directly

involved in Board discussions and Directors have a

number of further opportunities to contact a wider

group of employees, including visits to business

operations.

Board papers include minutes of Board

Committees and subsidiaries as well as papers on

material issues requiring consideration. Significant

matters are presented to the Board by Senior

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Executives and the Board may seek further

information on any issue, from any Executive.

Board and Director Performance

The Board has only been in its current form since

26 April 2012. The Board intends to review its

performance, the performance of its committees

and that of individual Directors at the appropriate

time, likely to be mid-end of the 2013 calendar

year.

BOARD COMMITTEES

The ultimate responsibility for the oversight of the

operations of the Group rests with the Board.

However, the Board may discharge any of its

responsibilities through Committees of the Board

in accordance with the Constitutions and the

Corporations Act 2001.

The Board has established the following

committees, and it is the intention of the Board to

review the composition and effectiveness of the

Committees on an annual basis:

• Audit Committee

• Risk and Compliance Committee

These Committees operate in accordance with

their Committee Charters approved by the Board.

Copies of these charters can be viewed on the

Group website (www.bodiamre.com.au).

AUDIT COMMITTEE

The Board has established an Audit Committee,

which assists the Board in fulfilling its governance

and disclosure responsibilities. The Audit

Committee has a written charter outlining the role

and responsibility of the committee.

The purpose of the Committee is to review the

integrity of the Group’s financial reporting

practices, the external and any internal audit

process, the framework established by

management to identify, assess and manage

financial risk, and any other matters referred to it

by the Board.

The Committee has the following responsibilities.

Financial Reporting

Evaluate and recommend for board approval

the Company’s financial statements

Regularly review the appropriateness of the

Company’s accounting policies and procedures

Obtain an independent judgment from the

external auditor about the acceptability and

appropriateness of accounting policies,

procedures and disclosures adopted by the

Company

Ensure management responds to any audit

management letters/recommendations by the

external auditor.

External Audit

The audit committee shall recommend whether

the external audit is adequate for securityholder

needs by advising the board on:

Procedures for the selection and appointment

of the external auditor and for the rotation of

external audit engagement partners

The appointment and dismissal of the external

auditor, including the terms of engagement

and fees

The performance of, and independence of the

external auditor, including the monitoring of

non-audit services in accordance with our

policy.

For the purpose of supporting the independence

of the external auditor, the external auditor shall

have a direct line of reporting to this committee.

Financial Risk Management & Control

The audit committee shall review and report to the

full board on:

Section 295A certificates from the Managing

Director

the Company’s financial risk profile

the Company’s compliance with its accounting

practices and standards

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The Audit Committee consists of two Non-

executive Directors both of whom are

independent directors, and is chaired by an

independent director who is not Chair of the

Board. The Chair satisfies the test of

independence.

The current members of the Audit Committee are

Ms Deborah Cartwright (Chair) and Mr Bryan

Mogridge.

At least one member of the Committee has

relevant accounting qualifications and experience

and all members have a good understanding of

financial reporting. Details of these directors’

qualifications and attendance at audit committee

meetings are set out in the directors’ report.

The external auditor will attend the Annual

General Meeting and be available to answer

securityholder questions about the conduct of the

audit and the preparation and content of the audit

report, accounting policies adopted by the Group

and the independence of the auditor in relation to

the conduct of the audit.

Risk and Compliance Committee

The Board has established a Risk and Compliance

Committee, which assists the Board in fulfilling its

governance and disclosure responsibilities. The

Risk and Compliance Committee has a written

charter outlining the role and responsibility of the

committee.

The Risk and Compliance Committee consists of

two Non-executive Directors both of whom are

independent directors and is chaired by an

independent director who is not Chair of the

Board. The Chair satisfies the test of

independence.

The current members of the Risk and Compliance

Committee are Ms Deborah Cartwright (Chair) and

Mr Bryan Mogridge.

RISK MANAGEMENT

The Board is responsible for ensuring that sound

risk management strategy and polices are in place.

The Group has established and documented an

enterprise risk management program for the

oversight and management of the Group’s

material business risks. This enterprise risk

management program is based on the

International Risk Standard AS/NZS ISO

31000:2009 and is complemented by our internal

control program based upon the principles set out

in the Australian Compliance Standard AS

3806:2006.

The Group has also established a Complaints

Handling Program, based upon the international

standard (AS ISO 10002-2006) that is designed to

better enable IEF to manage its risk on an

enterprise basis.

The Group has documented a common risk

language through which it considers internal risks,

such as human resources and those arising from

the IEF / Bodiam stapled security legal structure,

as well as external risks such as those raising from

dealings with key stakeholders. In assessing

material business risks, each identified risk is

individually assessed in terms of the likelihood of

the risk event occurring and the potential

consequences in the event that the risk event was

to occur. The Group’s on-line governance, risk and

compliance software system CompliSpace

Assurance allows material business risks to be

linked to mitigating controls so that the

performance of the Group’s enterprise risk and

compliance programs can be monitored

continuously.

The Group has established a compliance program

based upon the principles set out in the Australian

Compliance Standard AS3806:2006 which is

designed to ensure compliance with a range of

legal, regulatory and corporate governance

obligations including the disclosure requirements

set out in the ASX Listing Rules and the ASX

Corporate Governance Principles and

Recommendations. The Group monitors

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compliance with these obligations through the on-

line governance, risk and compliance software

system CompliSpace Assurance.

Compliance Plans

The Fund has a formal Compliance Plan in place

that has been adopted by the Board and lodged

with ASIC. The purpose of the Compliance Plan is

to set out key processes, systems and measures

the Responsible Entity will apply to ensure

compliance with:

the Corporations Act 2001 (the “Act”);

constitutions of the Fund and Trust;

industry practice standards relevant to the

particular scheme; and

internal policies and procedures.

The Compliance Plan is a ‘how to’ document and

has been prepared following a structure and

systematic process to consider the Responsible

Entity’s key obligations under the Act and the

Constitution, the risk of non-compliance and

measures required to meet the risks of non-

compliance.

The Compliance Plan describes the key obligations

that must be met by the Responsible Entity, and

how compliance with these measures will be

monitored. In addition, the Compliance Plan

details the risk of not complying with these

obligations, and how breaches are to be reported

and addressed.

EXTERNAL AUDITORS

Compliance Plan audit

Our external auditors conduct annual audits on the

Compliance Plan and report on:

• whether the procedures and controls as set out

in the Compliance Plan sufficiently address the

requirements of the Law (including the

framework, record keeping, valuations etc);

and

• whether the controls and procedures described

in the Compliance Plan have been in place and

operating effectively over the year.

Australian Financial Services Licence audit

The AFSL audit is conducted annually by the

external auditor. The auditor reports on whether

the internal control procedures of the AFSL holder

are adequate and that internal procedures

designed to ensure compliance with the conditions

or restrictions applicable to the licence are

adequate.

The Audit Committee also has the overall

responsibility for recommending the appointment

and removal of external auditors to the Board.

OTHER EXTERNAL REVIEW

ASIC

ASIC may undertake a review of the Responsible

Entity’s risk and compliance processes and systems

at any time.

AUSTRAC

AUSTRAC may undertake a review of the

Responsible Entity’s compliance with the Anti-

money Laundering laws at any time.

Executive Confirmations

In accordance with Bodiam Group’s legal

obligations, Russell Naylor (Managing Director) has

made the following certifications to the Board:

• the Group’s financial records have been

properly maintained in accordance with

Section 286 of the Corporations Act 2001;

• the Group’s financial statements, and notes

thereto, present a true and fair view, in all

material respects, of the stapled Consolidated

Group’s financial condition and operational

results and are prepared in accordance with

relevant Australian Accounting Standards,

Corporations Regulations 2001 and other

mandatory professional reporting

requirements;

• the statements made with respect to the

integrity of the Group financial reports are

founded on a sound system of risk

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management and internal compliance and

control systems which, in all material respects,

implement the policies adopted by the Board;

and

• the risk management and internal compliance

and control systems, to the extent they relate

to financial report, were operating efficiently

and effectively in all material respects

throughout the period.

Since 30 June 2012, nothing has come to the

attention of the Managing Director that would

indicate any material change to any of the

statements made above.

Executive Performance

It is intended that each member of the senior

executive team, including the Executive Director,

will sign a formal employment contract covering a

range of matters, including their duties, rights,

responsibilities and any entitlements on

termination. Each contract will set out the

remuneration of the executive, including his or her

entitlements to any rights under incentive plans.

The Group aims to have a clear process for

evaluating the performance of senior executives.

The Board directly oversees the annual

performance evaluation of the Group’s senior

executives, and the performance evaluation of the

Managing Director.

The evaluation for all executives will be based on

specific criteria, including the business

performance of the Group, whether strategic

objectives are being achieved and the

development of management and personnel.

Non-executive Directors receive director’s fees

outlined in their Letters of Appointment. No Non-

executive Director has any entitlement to

participate in any executive incentive plan.

Further information on directors' and executives'

remuneration, including principles used to

determine remuneration, is set out in Note 25 to

the financial statements.

CODE OF CONDUCT AND ETHICAL

BEHAVIOUR

The Board acknowledges the need for high

standards of corporate governance practice and

ethical conduct by all Directors and employees of

the Group.

The Group has established an organisational code

of conduct having regard to the Australian

Standard 8002-2003 and to the suggestions set out

in the ASX Corporate Governance Principles and

Recommendations – Recommendation 3.1. The

Code of Conduct sets out our key corporate values,

our commitment to compliance with laws and

regulations, behavioural standards that are

expected from our people and our commitment to

act with honestly and integrity in our business

dealings and in our dealings with the general

community. Individuals have a positive obligation

to report unethical behaviour and the Group has

established procedures for investigating such

reports.

Various measures have been established to ensure

a high standard of ethical business behaviour is

observed by all staff members, including policies

and procedures for:

managing conflicts of interests;

personal security trading;

whistleblower procedures

acceptance of gifts and entertainment as part

of the Gifts, Entertainment and Anti-Bribery

Policy; and handling confidential information.

In addition to their obligations under the

Corporations Act 2001 in relation to inside

information, all Directors, employees and

consultants have a duty of confidentiality to the

Group in relation to confidential information they

possess.

EMPLOYEE AND DIRECTOR TRADING IN IEF /

BODIAM STAPLED SECURITIES

The Group has established a securities trading

policy that complies with ASX Listing Rules 12.9 -

12.12 and has regard to ASX Guidance Note 27 –

“Trading Policies”. The Securities Trading Policy,

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establishes closed periods between the end of the

financial year and half-year and the release of our

financial results for these periods. All employees

are restricted from trading in IEF / Bodiam

securities during closed periods unless they have

obtained written authority to trade. Such authority

will only be provided in the event of severe

financial hardship or the fact that a person’s

circumstances are otherwise exceptional and that

the proposed sale or disposal of the relevant

securities is the only reasonable course of action

available. Directors, officers and certain other

employees, who may be privy to inside

information (“restricted persons”), have additional

restrictions placed upon them and must not trade

in the Group’s securities at any time during the

year without first obtaining written authority to do

so. All employees receive training with respect to

insider trading prohibitions and the requirements

of our securities trading policy.

The Group’s Securities Trading Policy may be

viewed on the Group website

(www.bodiamre.com.au).

SECURITYHOLDER COMMUNICATION

The Board has adopted a Securityholder

Communication Policy to ensure that

securityholders are kept well-informed of all major

developments and business events that are likely

to materially affect Group operations, financial

standing and the market price of its securities.

Information is communicated to securityholders

through:

• Annual and Half-Year Financial Reports lodged

with the ASX and made available to all

securityholders;

• Announcements of market-sensitive and other

information, including Annual and Half-Year

results announcements and analyst

presentations released to the ASX;

• the Chairman’s and Managing Director’s

addresses to, and the results of, the Annual

General Meeting; and

• copies of announcements, presentations, past

and current reports to securityholders made

available on the Group website


The Group produces two sets of financial

information each financial year: the Half-Year

Financial Report for the six months ended 31

December and the Annual Financial Report for the

year ended 30 June. Both are made available to

securityholders and other interested parties.

Securityholders have the right to attend the Group

Annual General Meeting, usually held in November

each year, and are provided with an explanatory

memorandum on the resolutions proposed

through the Notice of Meeting. A copy of the

Notice of Meeting is also posted on the Group

website and lodged with the ASX.

Securityholders are encouraged to vote on all

resolutions. Unless specifically stated otherwise in

the Notice of Meeting, all securityholders are

eligible to vote on all resolutions. Securityholders

who cannot attendthe Annual General Meeting

may lodge a proxy in accordance with the

Corporations Act 2001. Proxy forms may be lodged

by facsimile or electronically.

Transcripts of the Chairman’s and Managing

Director’s Reports to securityholders are also

released to the ASX upon the commencement of

the Annual General Meeting. These transcripts,

together with the results of the Annual General

Meeting are also posted on the Group website


Continuous Disclosure

The Group is committed to continuous disclosure

of material information as a means of promoting

transparency and investor confidence.

The Group has established a continuous disclosure

policy having regard to the suggestions set out in

the ASX Corporate Governance Principles and

Recommendations and in ASX Guidance Note 8 –

“Continuous Disclosure – Listing Rule 3.1”. The

continuous disclosure policy details legal

obligations with regard to continuous disclosure

and establishes materiality guidelines designed to

assist the board in its decision making process. The

Group has appointed a continuous disclosure

manager who is responsible for ensuring that the

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11

specific processes and procedures outlined in our

continuous disclosure policy are implemented

properly.

The disclosure policy details legal obligations with

respect to periodic disclosure such as half year and

full year reporting. All periodic disclosure

obligations are identified and allocated to

individuals who are responsible for completion of

these tasks. These tasks are then monitored

through the Group’s compliance program.

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Financial and Associated Reports

For the year ended 30 June 2012

Contents

12

Directors' report

13

Auditors Independence Declaration 19

Financial report

Income statement

20

Statement of comprehensive income 21

Balance Sheet

22

Cash flow statement 23

Statement of changes in equity 24

Note 1 Summary of significant accounting policies 25

Note 2 Accounting estimates and judgements 31

Note 3 Earnings per security 31

Note 4 Finance costs 32

Note 5 Income tax 32

Note 6 Discontinued operations 32

Note 7 Cash and cash equivalents 33

Note 8 Other assets 33

Note 9 Trade and other receivables 34

Note 10 Inventories 34

Note 11 Derivatives 35

Note 12 Investment properties 35

Note 13 Property, plant, equipment and intangibles 37

Note 14 Equity accounted investments 39

Note 15 Payables 39

Note 16 Provisions 40

Note 17 Borrowings 40

Note 18 Issued securities 41

Note 19 Reserves 42

Note 20 Commitments 42

Note 21 Capital management 42

Note 22 Financial risk management 43

Note 23 Auditor's remuneration 50

Note 24 Related parties 50

Note 25 Key management personnel 52

Note 26 Parent financial information 54

Note 27 Subsidiaries 54

Note 28 Segment information 54

Note 29 Notes to the cash flow statement 55

Note 30 Events subsequent to the reporting date 55

Note 31 Business combinations 56

Directors' declaration 57

Auditor's report

58

Top 20 security holders

60

Corporate information 61 For

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(i)

(ii)

Directors

Bryan Mogridge Chairman, appointed 31 October 2011

Russell Naylor Appointed 31 October 2011

Deborah Cartwright Appointed 31 October 2011

Julian Davidson Appointed 31 October 2011

Qualifications, experience and special responsibilities

Directors Qualifications Experience and special responsibilities

Bryan Mogridge BSC, ONZM, FNZID

Chairman

Appointed 31 October 2011

Deborah Cartwright B. Com, FCA

Director


Julian Davidson PMD Harvard

Director


On 26 April 2012 shares issued by Bodiam were stapled to units issued by the Fund.

The Group is a stapled entity. It includes:

A description of the nature of the Group's operations and its principal activities is included below.

Bodiam RE Limited (ABN 54 145 968 574), the Responsible Entity of the Fund, is a wholly owned subsidiary of Bodiam and is incorporated and

domiciled in Australia. Bodiam RE Limited was incorporated on 24 August 2010.

The following persons held office as directors of Bodiam RE Limited from 6 December 2011 (the date of appointment of Bodiam RE Limited as

Responsible Entity of the Fund) to the date of this report:

Member, New Zealand

Institute of Chartered

Accountants (NZICA)

Julian Davidson is a highly experienced Australasian senior

executive with extensive business leadership experience

within the liquor industry. Julian is currently the CEO of

Independent Liquor (New Zealand, USA and Canada) and

has over 20 years senior experience within the liquor

industry including Managing Director of Lion Breweries

Limited from 2002 to 2005. Julian is a director of a

number of companies within the Asahi group.

27 years experience as a Managing Director/CEO including

General Manager of Corban Wines, Managing Director of

Montana Wines, and Managing Director and CEO of

Corporate Investment Ltd. Bryan is Chairman of Rakon

Limited, BUPA Cares Services Ltd, Yealands Wine Group

Ltd and Pyne Gould Corporation. He is also a director of

Mainfreight Ltd. He is a fellow of the Institute of Directors

of New Zealand.

Deborah Cartwright has 30 years' experience as a

Chartered Accountant with Pitcher Partners Sydney,

where she is currently the head of Corporate Advisory and

Transaction Services. She is a Fellow of the Institute of

Chartered Accountants in Australia, a Fellow of the

Taxation Institute of Australia, a registered company

auditor, a registered tax agent and has extensive

experience working with the hospitality industry.

IEF REAL ESTATE ENTERTAINMENT GROUP

Directors' report

The registered office and principal place of business of Bodiam RE Limited is Level 1, 51-57 Pitt Street, Sydney NSW 2000.

the parent, IEF Real Estate Entertainment Group (formerly ING Real Estate Entertainment Fund) (ARSN 108 982 627) (the "Fund") which is

an Australian registered scheme, and its controlled entities; and

Bodiam Hotel Group Limited ("Bodiam") and its controlled entities.


The directors of Bodiam RE Limited ("Bodiam RE"), as Responsible Entity of IEF Real Estate Entertainment Group (the "Fund"), present their

report together with the consolidated financial statements of the "Group" and its controlled entities.

The financial report was authorised for issue by the directors of the Responsible Entity on 30 September 2012. The Group has the power to

amend and reissue the financial report.

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Directors (continued)

Qualifications, experience and special responsibilities (continued)

Directors Qualifications Experience and special responsibilities

Russell Naylor


Michael Coleman Chairman; appointed 1 July 2011

Hein Brand

Philip Clark AM

Michael Easson AM

Scott MacDonald Resigned 13 July 2011

Mark Lamb Resigned 13 July 2011

Company Secretary

Directors’ meetings

Director A B A B

Bryan Mogridge 5 5 1 1

Deborah Cartwright 5 5 1 1

Julian Davidson 5 5

Russell Naylor 5 5

A: Meetings eligible to attend B: Meetings attended

Interest held by Responsible Entities and associates

Bodiam RE did not hold securities in the Group for the year ended 30 June 2012.

Securities in the Group held by directors as at 30 September 2012 were:

Bryan Mogridge

Deborah Cartwright

Julian Davidson

Russell Naylor


The number of Directors’ meetings held (including meetings of committees of Directors) and the number of meetings attended by each of the

Directors during the period from Bodiam RE Limited's appointment as Responsible Entity were:

-

3,023,435

Board

1,078,240

The Company Secretary of Bodiam RE Limited from 31 October 2011 to 6 September 2012 was Russell Naylor. Leanne Ralph was appointed to

the position of Company Secretary on 6 September 2012. Mrs Ralph has over 21 years experience in chief financial officer and company

secretarial roles for various listed and unlisted entities. Mrs Ralph is a member of Chartered Secretaries Australia and Australian Institute of

Company Directors. Mrs Ralph is the principal of Boardworx Australia Pty Ltd, which supplies bespoke outsourced Company Secretarial services

to a number of listed and unlisted companies.

The following persons held office as directors of ING Management Limited, the Responsible Entity during the period 1 July 2011 to 6 December

2011:


Russell Naylor has an extensive background in banking

and finance and is the principal of Naylor Partners, a

boutique Sydney-based Corporate Advisory business.

Russell is an Executive Director and Investment

Committee Member of Torchlight, and is a Director of NZX

listed Pyne Gould Corporation.

Issued stapled securities

10,750,085

Audit Committee

Directors' report

Executive Director

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Principal activity

Significant changes in state of affairs

(a) ING Management Limited to retire as Responsible Entity.

(b) Bodiam RE Limited to be appointed as the new Responsible Entity.

(c) The Group's Constitution to be amended.

This change in Responsible Entity took effect on 6 December 2011.

On 10 February 2012 the name of the Fund was changed to IEF Real Estate Entertainment Group.

(a) Bodiam RE Limited

(b) Bodiam Management Services Pty Ltd

(c) Bodiam Operations Pty Ltd

(d) Bodiam Operations 2 Pty Ltd

(e) Bodiam HR Pty Ltd

Operating and financial review

The principal activity of the Group was owning hotel property. During the year management has successfully executed the OpCo/PropCo model

and the Group is now an integrated hotel property owning and operating business.

On 8 March 2012 Bodiam entered into a Stapling Deed with the Fund, which resulted in shares issued by Bodiam being stapled to the units

issued by the Fund on 26 April 2012. The following are the wholly owned subsidiaries of Bodiam:


In accordance with the Responsible Entity's strategic review completed on 30 December 2011, the Group has moved from a passive hotel

property owning business to an integrated hotel property owning and operating business.


On 27 May 2012 the lease of Lawson Park Hotel in Mudgee was surrendered by the lessee, following which the Group commenced operating

the Hotel.

At a unitholders meeting on 5 December 2011 the following changes in the state of affairs of the Group were approved:

On 6 March 2012 Bodiam Management Services Pty Ltd ('BMSPL'), a wholly owned subsidiary of Bodiam Hotel Group Limited, and the Fund

entered into a Property Management Agreement whereby BMSPL would receive a fee to manage the Group's property assets. Total fees

received/receivable by BMSPL prior to stapling were $62,622 (2011: $Nil).

Directors' report

In the opinion of the directors, there were no other significant changes in the state of affairs of the Group that occurred during the financial

year under review.

On 22 June 2012 the Group's $12.2 million Senior Debt Facility provided by National Australia Bank was refinanced by St George Bank.

On 16 April 2012 receivers were appointed to the Courthouse Hotel in Cairns, the freehold land and buildings of which were owned by the

Fund, and on 22 May 2012 the Courthouse Hotel lease was terminated by the Fund, following which the Group commenced operating the

Hotel.

On 15 June 2012 Bodiam Operations Pty Ltd and Bodiam Operations 2 Pty Ltd purchased, for approximately $11.4 million, the hotel operating

businesses of Icon Hospitality Management Pty Ltd (Receivers and Managers appointed), at the time the largest tenant of the Fund. This

purchase was financed by a rights issue as announced to the market on 7 May 2012 and completed on 31 May 2012.

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Operating and financial review (continued)

Operating income and EBITDA for the year has been calculated as follows:

June June

2012 2011

$'000 $'000

Profit/(Loss) from continuing operations for the year (9,395) (21,092)

Adjusted for:

Straight line lease revenue recognition (1,225) (571)

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

Investment properties (1,390) 24,031

Derivatives 8,450 (1,221)

Investment properties included in share of net profit of

Equity accounted investments 2,170 317

Write back of provision for aborted due diligence costs - (50)

Amortisation of costs of issuing convertible loan securities - 16

Capital transaction costs 2,251 2,733

Impairment loss on:

Trade receivables 539 1,358

Loans - 1,777

Reversal of impairment loss on loan (340) (2,409)

Loss from discontinued operations 3,777 4,617

Insurance claim proceeds recognised as other income - (3,377)

Operating income from continuing operations 4,837 6,129

Operating income from discontinued operations 361 2,259

Operating income 5,198 8,388

Further adjusted for:

Depreciation 609 -

Interest 11,347 15,963

EBITDA 17,154 24,351

Total assets increased by $3,353,000 or 1.42% to $238,944,000 over the current year primarily due to the rights issue completed on 7 May 2012

and offset by the change in fair value of derivatives.

Consolidated

EBITDA decreased by 29.6% to $17.2 million for the year ended 30 June 2012 from $24.4 million. The decrease is mainly due to lower rental

income resulting from sales of investment properties in the prior reporting period. During the year to 30 June 2012, one (2011: six) hotel/s

was/were sold which contributed to a decrease in book value of investment properties of $1.3 million (2011: $75.8 million).


Directors' report


Previously the Responsible Entity used Operating Income as a performance measure. As a result of the change in the structure during the year

to the OpCo/PropCo model, the current Responsible Entity now uses EBITDA as a more effective performace measure.

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Strategy and outlook

The key focus points for the year ahead are:

Operating activities

Capital management

Distributions

Insurance and indemnification of officers

Non-audit services

As the Group approaches its target leverage and gearing levels, the Board is focused on optimal capital outcomes for security

holders.

As a result of the receivership of Icon, many of the Group's venues have not had appropriate level of investment to support

sustainable trading levels over the past 3 years. This has resulted in low levels of staff morale and lower than optimal capital

expenditure and upkeep. The Board is committed to reinvesting in the people and the venues to create and maintain a leading

reputation in customer service, entertainment, food and beverage and local community participation.

During the period from 26 April 2012 (date of stapling) to 30 June 2012 Bodiam paid a premium of $16,126 to insure the directors and

secretaries of Bodiam and its controlled entities, including Bodiam RE.

The Group has not engaged the services of either the current auditors, HLB Mann Judd, or the previous auditors, on any assignments other than

audit services.


Directors' report


No distributions were made by the Fund during the year. The Directors do not propose to recommend any distribution at this time.

The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in

their capacity as officers of Bodiam RE, and any other payments arising from liabilities incurred by the officers in connection with such

proceedings. This does not include liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the

officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to Bodiam RE. It is not

possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.

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Significant events subsequent to the end of the year

Environmental regulation

Fees to the Responsible Entities

June June

2012 2011

$'000 $'000

Responsible entity fees - ING Property Management Pty Limited 563 1,818

Responsible entity fees - Bodiam RE Limited (prior to stapling) 542 -

Total 1,105 1,818

Rounding of amounts to the nearest thousand dollars

Auditor's independence declaration

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

Deborah Cartwright Bryan Mogridge

Director Chairman

Sydney Sydney

Dated in Sydney this 30th day of September 2012 Dated in Sydney this 30th day of September 2012

A copy of the Auditor's Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 19.

On 24 August 2012 the Group sold its 49.9% equity holding in Panthers Property Unit Trust ("PPUT") and Panthers Property Management Pty

Ltd ("PPM") for $24,000,000 (carrying value at 30 June 2012 of $21,221,058) with a deferred settlement date of 30 June 2014.

The Group is an entity of a kind referred to in Class Order 98/0100 (as amended) issued by the Australian Securities and Investments

Commission relating to the “rounding off” of amounts in the directors’ report and financial statements. Amounts in the directors’ report and

financial statements have been rounded to the nearest thousand dollars in accordance with that Class Order, or in certain cases to the nearest

dollar.

The Group has policies and procedures in place that are designed to ensure that, where operations are subject to any particular and significant

environmental regulation under a 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.

Interest will apply on the deferred sale amount of $24,000,000. The deferred payment is secured by first mortgages over PPUT properties and

fixed and floating charges over PPUT properties.

Of the principal repayment of approximately $8.9 million, approximately $6.1 million was used to repay the Group's borrowings. The remaining

$2.8 million will be used to support a capital expenditure program to refresh the Group's freehold going concern venues.

There have been no other matters or circumstances arising after the end of the reporting year that have significantly affected, or may

significantly affect, the Group's operations in future financial years, the results of those operations, or the Group's state of affairs in future

financial years.

Consolidated


Directors' report


The Group’s loan to Panthers Investment Corporation Pty Ltd (“PIC”) was due to expire on 1 August 2012. An agreement to extend the loan

until 30 June 2013 was executed on 24 August 2012. As part of the terms of extension, in addition to the existing fixed and floating charges, PIC

repaid approximately $8.9 million and first mortgage security was provided by PIC over all properties owned by PIC.

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19

AUDITOR’S INDEPENDENCE DECLARATION To the Directors of Bodiam RE Limited: As lead auditor for the audit of the IEF Real Estate Entertainment Group for the year ended 30 June 2012, I declare that, to the best of my knowledge and belief, there have been:

(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

(b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of IEF Real Estate Entertainment Group and its controlled and stapled entities during the year. D K Swindells Partner Sydney 30 September 2012

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June June

2012 2011

Note $'000 $'000

Revenue

Rental income 12,207 17,171

Interest income 6,323 6,287

Revenue from sale of hotel goods 1,486 -

Revenue from gaming activities 938 -

20,954 23,458

Other income

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

Investment properties 1,390 (24,031)

Derivatives (8,450) 1,221

Net gain/(loss) on foreign exchange transactions 24 -

Other 49 5,843

(6,987) (16,967)

Expenses

Property expenses (527) (692)

Finance costs 4 (11,347) (15,963)

Responsible Entity's fees 24(a) (1,105) (1,818)

Impairment loss on:

Trade receivables 44 (1,358)

Loans - (1,777)

Cost of sales - hotel operations (623) -

Hotel operation expenses (1,343) -

Depreciation (609) -

Legal fees - restructure (2,102) (1,780)

Consulting fees - restructure (149) (953)

Other (1,362) (506)

(19,123) (24,847)

Share of net profit/(loss) of equity accounted investments 14(d) (462) 1,881

Profit/(Loss) before income tax (5,618) (16,475)

Income tax expense 5 - -

Profit/(Loss) from continuing operations for the year (5,618) (16,475)

Profit/(Loss) from discontinued operations for the year 6(b) (3,777) (4,617)

Profit/(Loss) for the year (9,395) (21,092)

Profit/(Loss) is attributable to:

Stapled security holders as:

Equity holders of IEF Real Estate Entertainment Group (parent interest) (9,027) (21,092)

Equity holders of Bodiam Hotel Group (non-controlling interest) (368) -

(9,395) (21,092)

Profit/(Loss) per stapled security from continuing operations - basic and

diluted 3 (0.85) (3.00)

Profit/(loss) per stapled security from discontinuing operations - basic

and diluted 3 (0.57) (0.80)

Basic and diluted earnings per security (1.42) (3.80)

The above consolidated income statement should be read in conjunction with the accompanying notes

Consolidated income statement


IEF Real Estate Entertainment Group

Consolidated

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June June

2012 2011

Note $'000 $'000

Parent interest

Net loss for the year (9,027) (21,092)

Other comprehensive income:

Exchange differences on translation of foreign operations 19 (248) 326

Total comprehensive loss for the year - parent interest (9,275) (20,766)

Non-controlling interest

Net loss for the year (368) -

Other comprehensive income - -

Total comprehensive loss for the year - non-controlling interest (368) -

Stapled entity


Other comprehensive income:

Exchange differences on translation of foreign operations (248) 326

Total comprehensive loss for the year - stapled entity (9,643) (20,766)

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

Consolidated



Consolidated statement of comprehensive income

The components of other comprehensive income shown above are presented net of related income tax effects of $Nil.

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June June

2012 2011

Note $'000 $'000

Current assets

Cash and cash equivalents 7 4,116 6,272

Trade and other receivables 9 65,250 68,119

Inventories 10 785 -

Investment properties 12 - 1,300

Assets of discontinued operations 6(d) 8,704 12,583

Other assets 8 1,054 -

79,909 88,274

Non-current assets

Investment properties 12 24,500 123,550

Property plant and equipment 13 107,050 -

Intangibles 13 6,000 -

Equity accounted investments 14 21,377 23,672

Derivatives 11 - 95

Deferred tax asset 108 -

159,035 147,317

Total assets 238,944 235,591

Current liabilities

Payables 15 5,046 8,250

Borrowings 17 8,704 13,883

Derivatives 11 4,682 1,902

18,432 24,035

Non-current liabilities

Payables 15 525 600

Provisions 16 157 -

Borrowings 17 106,234 106,334

Derivatives 11 9,803 4,227

116,719 111,161

Total liabilities 135,151 135,196

Net assets 103,793 100,395

Security holders' interest attributable to stapled security holders as:

Issued units 18 228,746 217,678

Reserves 19 (159) 89

Retained earnings/(Accumulated losses) (126,399) (117,372)

102,188 100,395

Issued shares 3,135 -

Retained earnings/(Accumulated losses) (1,530) -

1,605 -

Total security holders' interest 103,793 100,395

Net asset value per security $0.11 $0.17

Total unitholders' interest attributable to equity holders of IEF Real Estate

Entertainment Group (parent interest)

The above consolidated balance sheet should be read in conjunction with the accompanying notes.

Consolidated


As at 30 June 2012

Consolidated balance sheet

Total shareholders' interest attributable to equity holders of Bodiam Hotel Group

Limited (non-controlling interest)

Equity holders of Bodiam Hotel Group Limited (non-controlling interest)

Equity holders of IEF Real Estate Entertainment Group (parent interest)

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June June

2012 2011

Note $'000 $'000

Cash flows from operating activities

Rental and other property income 10,819 19,348

Proceeds from insurance claim 4,000 -

Receipts from customers (inclusive of GST) 2,035 -

Payments to suppliers and employees (inclusive of GST) (447) -

Property and other expenses (1,504) (1,156)

Distributions received from equity accounted investments 1,832 3,255

Interest received 6,233 5,967

Borrowing costs paid (10,840) (15,603)

Capital transaction costs (3,781) (2,733)

Interest paid (42) -

Responsible entity fees paid (4,031) -

Goods and services taxes paid/recovered from investing and financing activities (2,110) 705

Net cash inflow from operating activities 29 2,164 9,783

Cash flows from investing activities

Additions to investment properties (952) (3,738)

Proceeds from sale of investment properties 1,321 64,367

Purchase of plant, equipment and goodwill (12,129) -

Purchase of equity accounted investments - (60)

Loans to third parties 310 -

Loans repaid by lessees - 1,981

Net cash (outflow)/inflow from investing activities (11,450) 62,550

Cash flows from financing activities

Proceeds from issue of units 18 14,990 38,753

Proceeds from stapling - -

Unit issue costs (618) (3,031)

Repayment of borrowings (7,450) (98,361)

Payment on termination of derivative arrangement - (4,460)

Cash receipts/(payments) on intercompany loans - -

Net cash inflow/(outflow) from financing activities 6,922 (67,099)

Net (decrease)/increase in cash (2,364) 5,234

Cash at the beginning of the year 6,272 1,135

Cash acquired at the beginning of the year - BHG 208 -

Effects of exchange rate changes on cash - (97)

Cash at the end of the year 7 4,116 6,272


The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

Consolidated of statement cash flows


Consolidated

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Note Issued Reserves Retained Total

Capital earnings

$'000 $'000 $'000 $'000

Carrying amounts at 1 July 2010 182,425 (237) (96,280) 85,908

Net profit/ (loss) for the year - - (21,092) (21,092)

Other comprehensive income - 326 - 326

- 326 (21,092) (20,766)

Issue of units 18 35,253 - - 35,253

35,253 - - 35,253

Carrying amounts at 30 June 2011 217,678 89 (117,372) 100,395


Other comprehensive income - (248) - (248)

- (248) (9,027) (9,275)

Bodiam Hotel Group Limited:

Net profit/ (loss) for the year - - (368) (368)

- - (368) (368)

Total stapled entity


Other comprehensive income - (248) - (248)

- (248) (9,395) (9,643)

Placements and rights issues 18 14,253 - - 14,253

Issue costs - rights issue 18 (760) (760)

Return of capital 18 (2,425) - (2,425)

11,068 - - 11,068

- - (1,162) (1,162)

Placements and rights issues 18 3,175 - - 3,175

Issue costs - rights issue 18 (40) - - (40)

3,135 - (1,162) 1,973

Total stapled entity

Placements and rights issues 17,428 - - 17,428

Issue costs - rights issue (800) - - (800)

Return of capital (2,425) - - (2,425)

- - (1,162) (1,162)

14,203 - (1,162) 13,041

Carrying amounts at 30 June 2012 231,881 (159) (127,929) 103,793

228,746 (159) (126,399) 102,188

3,135 - (1,530) 1,605

231,881 (159) (127,929) 103,793

IEF Real Estate Entertainment Group:


Transactions with unitholders in their

capacity as equity holders:

Security holders of Bodiam Hotel Group

Limited

Security holders of Bodiam Hotel Group

Limited

Retained earnings /(Accumulated losses)

at date of stapling

Security holders of IEF Real Estate

Entertainment Group

Bodiam Hotel Group retained

earnings/(accumulated losses) at date of

stapling

Consolidated

Consolidated statement of changes in equity


Security holders of IEF Real Estate

Entertainment Group

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Total comprehensive profit/(loss) for the

year

Total comprehensive profit/(loss) for the

year

Transactions with unitholders in their

capacity as equity holders:

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1.

(a) Reporting Entity

The consolidated financial statements include:

(1) The Fund and its controlled entities.

(2) Bodiam and its controlled entities.

(b) Basis of preparation

The financial statements have been approved for release by the Board of Directors on 30 September 2012.

The financial report is presented in Australian dollars.

(c) Adoption of new and revised accounting standards

(d) Principles of consolidation

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

The financial report also complies with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards

Board.

Summary of significant accounting policies

This consolidated general purpose financial report has been prepared in accordance with Australian Accounting Standards and interpretations

issued by the Australian Accounting Standards Board and the Corporations Act 2001.

The IEF Real Estate Entertainment Group (formerly "ING Real Estate Entertainment Fund") (“the Fund” or “Parent”) was constituted on 20 April

2000. The new Responsible Entity for the Fund is Bodiam RE Limited ("Bodiam RE"), an Australian public company limited by shares that was

registered on 24 August 2010. The Responsible Entity has an Australian Financial Services License (Licence No. 386569).


In the current year the Group has adopted all the new and revised accounting standards and interpretations that are relevant to its operations

and effective for the current annual reporting period. There was no material effect on the financial statements of this adoption.

As a consequence of the stapling arrangement involving no acquisition consideration and no ownership interest being acquired by the

combining entities, no goodwill is recognised in relation to the stapling arrangement and the interest of the equity holders in Bodiam are

treated as non-controlling interests ("NCI").

The financial report is prepared on the historical cost basis, except for investment properties and derivative financial instruments, which are

measured at fair value through profit and loss and property, plant and equipment which are measured at fair value with changes in fair value

recognised in equity.

Notes to the financial statements


The consolidated financial statements of the Group have been prepared with the Fund identified as the Parent.

On 26 April 2012 the units issued by the Fund were stapled to shares issued by Bodiam Hotel Group Limited ("Bodiam"). The Stapling deed

ensures that, for as long as the two entities remain jointly quoted, the number of units in the Fund and the number of shares in Bodiam shall be

equal and that Unitholders and Shareholders shall be identical. The issued securities in these entities trade as one listed security on the

Australian Securities Exchange ("ASX"). The stapled securities cannot be traded or transferred independently and are quoted at a single price.

Subsidiaries are all those entities whose financial and operating policies the Group has the power to govern, so as to obtain benefits from their

activities.

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the parent (refer to note 1(i)).

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

Transactions and balances between consolidated entities are eliminated. Unrealised losses are also eliminated unless the transaction provides

evidence of the impairment of the asset transferred. Accounting policies of controlled entities have been changed where necessary to ensure

consistency with the policies adopted by the consolidated entity.

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1.

(d) Principles of consolidation (continued)

(e) Discontinued operations and assets held for sale

(f) Distributions

(g) Foreign currency translation

(i) Functional and presentation currencies

(ii) Translation of foreign currency transactions and balances

(iii) Translation of financial statements of foreign subsidiaries

(h) Operating leases - Investment properties

A liability for distribution 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 is declared.

Non-current assets or disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale

transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying

amount and fair value less costs to sell, except for assets such as investment property carried at fair value.

Leases where the lessor retains substantially all the risk and benefits of ownership are classified as operating leases. For operating leases for

which the Group is lessor, initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset

and recognised as an expense over the term of the lease on the same basis as the lease income.

The functional currency of certain subsidiaries is not the Australian dollar. At reporting date, the assets and liabilities of these entities are

translated into the presentation currency of the Group at the rate of exchange prevailing at balance date. Financial performance is translated at

the relevant exchange rates prevailing during the reporting period. The exchange differences arising on translation are taken directly to the

foreign currency translation reserve in equity.

Incentives may be provided to tenants to enter into an operating lease. These incentives may be in the form of cash, rent free periods, lessee or

lessor owned fit outs. The incentive is amortised over the term of the lease as a reduction in rental income. The unamortised carrying amount

of the incentive is reflected in the carrying value of the investment property.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair

value was determined.

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

income statement.



Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the

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

the balance sheet.

Summary of significant accounting policies (continued)

Associates are those entities over which the Group has significant influence, but not control or joint control. Jointly controlled entities and

associates, and investments in those entities, are referred to as “equity accounted investments”. Investments in associates are accounted for in

the consolidated financial statements using the equity method after initially being recognised at cost. The Group’s share of an associate's post-

acquisition profit or loss is recognised in the consolidated income statement and its share of any post-acquisition other comprehensive income

is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying value of the

investment. Distributions received or receivable are recognised as a reduction of the carrying value of the investment.


An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is

recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative

impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal

group) is recognised at the date of derecognition. Such non-current assets are not depreciated or amortised while they are classified as held for

sale.

The functional currency and presentation currency of the Fund is the Australian dollar.

Transactions in foreign currency are initially recorded in the functional currency at the exchange rates prevailing at the dates of the

transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the transactions at year end

exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

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(i) Business combinations

(j) Property Plant and equipment

(k) Cash and cash equivalents

(l) Trade and other receivables

(m) Derivative financial instruments

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.

For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents includes 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.

The Group uses derivative financial instruments such as interest rate swaps to hedge its risks associated with interest rate fluctuations. The

Group may also invest in derivatives related to listed property equities and indices and may issue derivatives related to its own units. 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. Changes in fair value are recognised in profit or loss.

The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets

are acquired.

Property, plant and equipment refer to the Group's freehold going concern ownership of hotels along with any plant and equipment used in

operating the hotels. The freehold properties, plant, equipment are shown at fair value, based on periodic, but at least triennial, valuations by

external independent valuers. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the

asset and the net amount is restated to the revalued amount of the asset.

Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business

combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis,

the consolidated entity recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's

proportionate share of the acquiree’s net identifiable assets.

The consideration transferred for the acquisition of a controlled entity comprises the fair values of the assets transferred, the liabilities incurred

and any equity interest issued by the Group. The consideration transferred also includes the fair value of any contingent consideration

arrangement and the fair value of any pre-existing equity interest in the controlled entity.





The excess of the consideration transferred, the amount of any non-controlled interest in the acquiree and the acquisition-date fair value of any

previous equity interest in the acquiree over the fair value of the consolidated entity’s share of the net identifiable assets acquired is recorded

as goodwill. If those amounts are less than the fair value of the net identifiable assets of the controlled entity acquired and the measurement of

all amounts has been reviewed, the difference is recognised directly in profit or loss as a discount on business combination. Where settlement

of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of

exchange. The discount rate used is the Group’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained

from an independent financier under comparable terms and conditions.

In the case of a stapling arrangement involving no acquisition consideration and no ownership interest being acquired, no goodwill is

recognised and the interest of the equity holders in the non-controlled entity are treated as non-controlling interests.

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(n) Intangibles

(o) Investment property

(p) Inventory

(q) Payables

(r) Borrowings


Intangible assets that are acquired by the Group are measured at cost less accumulated impairment losses. Intangible assets with an indefinite

useful life are systematically tested for impairment at each balance sheet date.

Land, buildings, liquor and gaming licences subject to operating leases to third parties have the function of an investment and are regarded as

composite assets. In accordance with applicable accounting standards, the buildings, including fixtures and fittings, are not depreciated.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12

months after the balance sheet date.

It is the Group’s policy to have all investment properties externally valued at intervals of not more than three years and that those valuations be

reflected in the financial reports of the Group. 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 differs materially from their fair values.

In the absence of current prices in an active market, the Responsible Entity considers information from a variety of sources, including current

prices in an active market for properties of different nature, condition or location, adjusted to reflect those differences, recent prices of similar

properties in less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions that

occurred at those prices.

In determining fair values, expected net cash flows are discounted to their present value using a market determined risk adjusted discount rate.

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


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. The amounts are unsecured and are usually paid

within 60 days of recognition.



Finished goods, consisting of primarily food and beverage items for re-sale, are stated at the lower of cost and net realisable value. Cost

comprises purchase price and delivery costs associated. Costs are assigned to individual items of inventory on the basis of weighted average

costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in

the ordinary course of business less the estimated costs to make the sale.

Borrowings are initially recorded at the fair value less directly attributable transaction costs. 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.

Fair value represents the amount at which an asset could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing

seller in an arm’s length transaction at the date of valuation. It is based on current prices in an active market for similar property in the same

location and condition and subject to similar lease and other contracts, adjusted for any differences in the nature, location or condition of the

property, or in the contractual terms of the leases and other contracts relating to the property.

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.

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(s) Employee benefits

(i) Wages and salaries, annual leave

(ii) Other long-term employee benefit obligations

(t) Contributed equity

(u) Revenue

Revenue is recognised for the major business activities as follows:

(i) Rental Income

(ii) Interest income

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

(iii) Sale of goods - retail

(iv) Distributions

(v) Gaming revenue

Gaming revenue is recognised as the net funds received (cash invested less wins to players) before payment of government taxes.

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 in which 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.

Distributions are recognised as revenue when the right to receive payment is established.



Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade

allowances, rebates and amounts collected on behalf of third parties.

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity, the revenue can be reliably measured

and specific criteria have been met for each of the Group's activities as described below. The Group bases its estimates on historical results,

taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Revenue brought to account but

not received at balance date is recognised as a receivable.



Stapled securities, including units issued by the Fund and shares issued by Bodiam, are classified as equity. Incremental costs directly

attributable to the issue of new stapled securities are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly

attributable to the issue of new securities are shown in equity as a deduction, net of tax, from the proceeds.

The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which

the employees render the related service is recognised in the provision for employee benefits and measured at current values. From 1 July 2012

it is intended that this policy will be adjusted to recognise the liability as the present value of expected future payments to be made in respect

of services provided by employees up to the end of the reporting period 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 end of the reporting period on national government bonds with terms to maturity and currency that match, as

closely as possible, the estimated future cash outflows.

Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of the reporting

date are recognised in other payables in respect of employees' services up to the reporting date and are measured at the amounts expected to

be paid when the liabilities are settled.

Revenue from the sale of goods is recognised when a Group entity sells a product to the customer.

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(v) Income tax

(i) Current income tax

(ii) Deferred income tax

(w) Earnings per security

(x) Goods and services tax (“GST”)

(y) Pending Accounting Standards




The GST components of cash flows arising from investing and financing activities are classified as operating cash flows.

AASB 12 Disclosure of Interests in Other Entities is applicable to annual reporting periods beginning on or after 1 January 2013. The Group has

not early adopted this standard. It includes disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and

structures entities. New disclosures have been introduced about the judgements made by management to determine whether control exists,

and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non-controlling

interests.

The income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the applicable income tax

rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax

losses.

The subsidiaries that hold the Group's foreign properties may be subject to corporate income tax and withholding tax in the countries which

they operate. Under current Australian income tax legislation, unitholders may be entitled to receive a foreign tax credit for this withholding

tax.

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.

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.

The head entity, IEF and its subsidiaries account for their own current and deferred tax amounts as if each entity continues to be a stand alone

taxpayer in its own right, with the exception of Bodiam and its wholly owned subsidiaries. Bodiam and its wholly owned subsidiaries are a tax

group and account for their current and deferred tax amounts on a consolidated level.

Under 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 buildings and fixtures depreciation are distributed to unitholders in

the form of the tax deferred components of distributions.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the

deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally

enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Basic earnings per security is calculated as net profit or loss attributable to holders of stapled securities of the Group divided by the weighted

average number of issued stapled securities. Diluted earnings per security is calculated as net profit attributable to holders of stapled securities,

adjusted for preference distributions and interest associated with dilutive potential securities, divided by the weighted average number of

securities and dilutive potential securities outstanding during the year.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and

liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that

have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax

asset is realised or the deferred income tax liability is settled.


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(y) Pending Accounting Standards (continued)

2.

(a) Critical accounting estimates and assumptions

(b) Critical judgements in applying the entity’s accounting policies

3.

June June

2012 2011

'000 '000

Weighted average number of ordinary and dilutive stapled

securities outstanding (thousands) 660,425 548,528

$'000 $'000

Profit/(Loss) from continuing operations ($000's) (5,618) (16,475)

Profit/(loss) from discontinued operations ($000's) (3,777) (4,617)

Basic and diluted earnings/(loss) per security from continuing operations (0.85) (3.00)

Basic and diluted earnings/(loss) per security from discontinued operations (0.57) (0.80)

AASB 13 Fair Value Measurement is applicable to annual reporting periods beginning on or after 1 January 2013. The Group has not early

adopted this standard. It establishes a single source of guidance under Australian Accounting Standards (the "Standards") for determining the

fair value of assets and liabilities. It does not change when an entity is required to use fair value, but rather provides guidance on how to

determine fair value under the Standards when fair value is required or permitted by the Standards. Application of this guidance may result in

different fair values being determined for the relevant assets, particularly the Group’s investment properties; the precise impact is not known

at this time. AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value.

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.



Earnings per security

Consolidated

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 Fund’s financial report in future reporting periods.

Accounting estimates and judgements

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.


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.

The Group has investment properties and property, plant and equipment with carrying values of $33,204,000 (2011: $137,433,000) (see notes

6(d) and 12) and $107,050,000 (2011: $Nil) (see note 13) respectively, representing estimated fair value. The Group also has purchase goodwill

in relation to the hotel operating businesses carried at $6,000,000 (2011: $Nil) representing estimated fair value. In addition, the carrying

amount of the Group’s equity accounted investments of $21,377,000 (2011: $23,672,000) (see note 14) also reflects an interest in investment

properties carried at fair value. These carrying amounts reflect certain assumptions about expected future rental cash flows, rent-free periods,

operating revenues and costs and appropriate discount and capitalisation 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 properties.

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 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.


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4.

June June

2012 2011

$'000 $'000

Interest paid or payable 11,347 15,963

No finance costs were capitalised to qualifying assets during the year (2011: $Nil)

5.

(a)

Reconciliation of profit/(loss) from continuing operations before

income tax to income tax expense:

June June

2012 2011

$'000 $'000

Profit/(Loss) from continuing operations before income tax (5,618) (16,475)

Profit/(Loss) from discontinued operations before income tax (3,777) (4,617)

Profit/(Loss) before income tax (9,395) (21,092)

Tax at the Australian tax rate of 30% 2,818 (6,327)

Add/(Deduct):

Profit/(Loss) from Trust operations not taxable 2,305 6,327

Other deductible amounts 576 -

Non-deductible expenses (661) -

Deferred tax assets in relation to losses not recognised (422) -

Income tax expense - -

(b) Unused Tax losses

Unused tax losses for which no deferred tax asset has been recognised - Trust

These unused tax losses are available to offset future taxable income of IEF. 696 1,782

Unused tax losses for which no deferred tax asset has been recognised - Company 1,405 -

Potential tax benefit at 30% 422 -

These unused tax losses are available to offset future taxable income of Bodiam Hotel Group Limited.

6.

(a) Details of discontinued operations

(b) Financial performance

June June

2012 2011

$'000 $'000

Revenue 1,691 2,472

Net loss on change in fair value of investment properties (4,138) (2,331)

Impairment loss on:

Receivables (1,330) (1,778)

Loans - (2,980)

Profit/(loss) from discontinued operations for the year (3,777) (4,617)

Income tax

Income tax expense

Bodiam Hotel Group Limited and its wholly owned Australian resident entities have formed a tax consolidated group and are therefore

taxed as a single entity. The head entity within the tax consolidated group is Bodiam Hotel Group Limited.

Consolidated


Discontinued operations

Finance costs

Consolidated



The financial performance of components of the Group's discontinued operations at 30 June 2012 and 2011 were:

On 29 June 2010, the Group decided to sell its New Zealand portfolio consisting of eleven properties. On 16 July 2010, contracts were

exchanged for this sale. As at 30 June 2012, five of those properties have been settled. It is unlikely that the remaining properties will be sold

under the sale contract. However, the remaining six properties are expected to be sold within the next twelve months, with the proceeds

committed to repayment of debt. These assets are carried at fair value based on recent market conditions.

Consolidated

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6.

(c) Cash flows

June June

2012 2011

$'000 $'000

Net cash flows from operating activities:

Rental and other property income 366 851

Net cash flows from investing activities:

Proceeds on sale of discontinued operations - 9,652

Additions to investment properties (85) 1,981

Net cash flows from discontinued operations 281 12,484

(d) Assets and liabilities

The assets and liabilities of components of the Group's discontinued operations at each reporting date were:

June June

2012 2011

$'000 $'000

Assets

Investment properties 8,704 12,583

Total assets 8,704 12,583

Net assets of disposal group 8,704 12,583

7.

June June

2012 2011

$'000 $'000

Cash at bank and in hand 4,116 972

Short term deposits - 5,300

4,116 6,272

8.

June June

2012 2011

$'000 $'000

Deferred expense - straight lining rent adjustment 1,054 -

Cash and cash equivalents

Discontinued operations (continued)

Consolidated



Consolidated

Consolidated

The cash flows of components of the Group's discontinued operations at 30 June 2012 and 2011 were:

Other assets

Consolidated


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9.

June June

2012 2011

$'000 $'000

Current

Rental and other amounts due 340 553

Insurance claim receivable - 4,000

Loans to lessees(1,2)320 398

Icon settlement adjustment 490 -

Loans to third parties(1)790 -

Loan to Panthers Investment Corporation Pty Ltd ("PIC")(3)63,091 63,091

Accrued income, prepayments and deposits 219 77

65,250 68,119

(1) Loans to lessees and third parties are not secured and are repayable as follows:

Within one year 1,110 398

Later than one year but not later than five years - 12,924

1,110 13,322

Accumulated impairment - (12,924)

1,110 398

(2)

(3) The loan to PIC is repayable as follows:

June June

2012 2011

$'000 $'000

Within one year 63,091 63,091

Later than one year but not later than five years - -

63,091 63,091

(a) As at 30 June 2012 the key terms of the PIC loan were:

(i) It was due to expire on 1 August 2012 and this has been extended to 30 June 2013;

(ii)

(b) On 20 August 2012 the loan was restructured as follows:

(i) The loan was extended to 30 June 2013;

(ii) PIC repaid approximately $8,900,000;

(iii)

(iv)

(v)

10.

June June

2012 2011

$'000 $'000

Finished goods at cost 785 -

First mortgage security has been provided by PIC over all properties owned, adding to the fixed and floating charges held by the Group;

Consolidated

At 30 June 2012 the Group has an option to convert the outstanding balance into 49.9% of the issued shares in PIC at any time until the

maturity date.

The Group has reversed an impairment allowance of $320,000 (2011: ($12,924,000)) against loans to lessees.

Consolidated

PIC reimbursed the Group's costs and expenses of restructuring of approximately $630,000 related to legal fees, and paid an extension

fee of $435,000; and


Trade and other receivables



Consolidated

Accumulated impairment of approximately $2,409,000 at 30 June 2010 was reversed during the 2011 financial year and is included in

"other income" in the income statement.

Inventories

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11.

June June

2012 2011

$'000 $'000

Current liabilities

Interest rate swap contracts 4,682 1,902


Interest rate swap contracts 9,803 4,227

12.

(a) Summary of carrying amounts

June June

2012 2011

$'000 $'000

Current - completed properties - 1,300

Non-current - completed properties 24,500 123,550

24,500 124,850

Consolidated

Investment properties




Consolidated

Derivatives

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12.

(b) Individual valuations and carrying amounts - non-current

Property Date of Cost to date

purchase $'000 June June June June

Date Valuation 2012 2011 2012 2011

$'000 $'000 $'000 % %

Bowral Hotel,

Bowral NSW 25 Sep 06 6,738 28 Mar 11 5,400 5,400 5,400 10.4% 10.4%

Brisbane Hotel,

Perth WA 1 Oct 07 13,791 2 May 11 13,000 13,000 13,000 8.1% 8.1%

Central Hotel,

Bundaberg Qld 9 Nov 06 4,280 3 Dec 09 3,350 3,100 3,100 12.2% 12.2%

GPO Hotel,

Fortitude Valley Qld 19 Aug 04 2,761 10 Dec 09 3,000 3,000 2,900 10.2% 10.2%

Properties transferred in 2012 to

Property, plant and equipment:

Ambarvale Tavern,

Ambarvale NSW - - - 11,700 - 11.6%

Commodore Hotel

North Sydney NSW - - - 11,800 - 9.1%

Courthouse Hotel,

Cairns Qld - - - 5,200 - 11.5%

Dolphin Hotel,

Surry Hills NSW - - - 11,050 - 8.1%

El Toro Hotel,

Warwick Farm NSW - - - 13,950 - 9.2%

Five Dock Hotel,

Five Dock NSW - - - 17,600 - 7.9%

General Gordon Hotel,

Sydenham NSW - - - 10,050 - 12.4%

Lawson Park Hotel (1),

Mudgee NSW - - - 3,000 - 7.9%

Uncle Buck's Hotel & Retail Centre,

Mount Druitt NSW - - - 14,800 - 10.1%

- 24,750 24,500 123,550

(1)

(2) Capitalisation rates have been assessed having regard to geographic location, annual rent, expected reversions to market rent, turnover rent and tenant quality.

Investment property that has not been valued by external valuers at reporting date is carried at the Responsible Entity’s estimate of fair value.

Latest external valuation Carrying amount Capitalisation rate (2)




Investment properties

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12.

(c) Movements in carrying amounts

June June

2012 2011

$'000 $'000

Current

Carrying amount at beginning of the year 1,300 -

Disposals (1,300) -

Transfer from non-current - 1,300

Carrying amount at end of the year - 1,300

Non-current

Carrying amount at beginning of the year 123,550 199,350

Additions to existing property 950 3,737

Disposals - (54,715)

Transfer to current - (1,300)

Amortisation of tenant incentives and leasing commissions (79) (62)

Net change in fair value 1,609 (23,460)

Transfer to property, plant and equipment for Hotels now operated (101,530) -

Carrying amount at end of the year 24,500 123,550

(d) Leasing arrangements

June June

2012 2011

$'000 $'000

Within one year 2,390 12,063

Later than one year but not later than five years 10,328 50,434

Later than five years 9,916 66,649

22,634 129,146

13.

(a) Summary of carrying amounts

June June

2012 2011

$'000 $'000

101,530 -

Plant and equipment 5,520 -

107,050 -

Goodwill 6,000 -

113,050 -

Transfer of property, plant and equipment from investment

properties (refer to note 12 for details)

The plant, equipment and goodwill were acquired during the year and are shown at cost, which was equal to their fair value at acquisition date,

as evidenced by an external valuation.

Property, plant, equipment and intangibles


Investment properties (continued)


Consolidated

Consolidated

Property, plant, equipment and intangibles represents the hotel operations owned by the Group. This

includes the leasehold assets purchased by the Group.


The investment properties are leased to tenants under long-term operating leases. Lease terms vary between tenants. Future minimum rentals

receivable under these leases are:

Consolidated

The businesses acquired operate from properties owned by the Fund, which were formerly classified as Investment properties.

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13.

(b) Individual valuations and carrying amounts

Property Date of Cost to date

purchase $'000 June June

Date Valuation 2012 2011 (2)

$'000 $'000 $'000

Ambarvale Tavern,

Ambarvale NSW 5 Sep 05 14,037 7 Mar 12 12,850 12,850 11,700

Commodore Hotel

North Sydney NSW 1 Jul 04 19,662 15 Apr 11 12,500 12,500 11,800

Courthouse Hotel,

Cairns Qld 11 Sep 06 11,579 2 Dec 09 6,100 5,200 5,200

Dolphin Hotel,

Surry Hills NSW 30 Nov 04 9,243 15 Apr 11 14,800 14,800 11,050

El Toro Hotel,

Warwick Farm NSW 25 May 05 17,719 15 Apr 11 15,100 15,100 13,950

Five Dock Hotel,

Five Dock NSW 1 Jul 04 11,802 15 Apr 11 23,800 23,800 17,600

General Gordon Hotel,

Sydenham NSW 18 Nov 05 13,270 7 Mar 12 9,500 9,500 10,050

Lawson Park Hotel,

Mudgee NSW 19 May 06 4,899 21 Apr 12 3,400 3,400 3,000

Uncle Buck's Hotel & Retail Centre,

Mount Druitt NSW 4 Jul 05 22,253 15 Apr 11 15,900 15,900 14,800

124,464 113,950 113,050 99,150

(1) The investment properties have been valued in 2012 taking into account the value of the plant and equipment purchased from Icon.

(2) Carrying amount at 30 June 2011 was included in Investment Properties (refer note 12.).

Carrying amount (1)




Property, plant, equipment and intangibles (continued)

Latest external valuation

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14.

(a) Details of investments

June June

Name 2012 2011

Panthers Property Unit Trust Property Investor 49.9% 49.9%

Panthers Property Management Pty Limited Property Investor 49.9% 49.9%

(b) Movements in Equity accounted investments

June June

2012 2011

$'000 $'000

Carrying amount at beginning of year 23,672 24,986

Share of profit/(loss) (462) 1,881

Distributions received/receivable (1,833) (3,195)

Carrying amount at the end of year 21,377 23,672

(c) Share of assets and liabilities

June June

2012 2011

$'000 $'000

Total assets 38,315 40,207

Total liabilities (16,938) (16,535)

Net assets 21,377 23,672

(d) Share of results

June June

2012 2011

$'000 $'000

Revenue 1,857 2,198

Loss on change in fair value of investment properties (317)

Profit/(Loss) before income tax (462) 1,881

Income tax expense - -

Profit/(Loss) for the year (462) 1,881

15.

June June

2012 2011

$'000 $'000

Trade payables 4,761 8,250

Unearned income 75 -

Employee liabilities 210 -

5,046 8,250


Unearned income 525 600

Unearned income relates to a lease premium paid by Brisbane Hotel in July 2008 and is being amortised over the remaining life of the lease on

a straight line basis.

Consolidated

Consolidated

Consolidated

Ownership interest



Equity accounted investments

Consolidated


Principal activity

Payables

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16.

June June

2012 2011

$'000 $'000

Long service leave 157 -

17.

June June

2012 2011

$'000 $'000

Current liabilities

Bank debt 8,704 13,883


Bank debt 106,234 106,334

(a) Bank debt

Facility 1

(i) ratio of net worth to total tangible assets of not less than 30%;

(ii)

(iii)

Facility 2

(i) minimum interest cover ratio of 2.0 times;

(ii) maximum LVR of 60% of the value of the secured investments; and

(iii) minimum EBITDA ratio of 80% of the EBITDA shown in the most recent registered valuations.

(b) Other external debt

Convertible loan securities were repaid on 31 August 2010. The Fund did not have any other external debt as at 30 June 2012.


The facility agreements impose certain covenants including maintenance of the following financial ratios:

Under the first facility agreement, a distribution may only be made if the loan to valuation ratio is less than or equal to 50% or the distribution

is made pursuant to a distribution reinvestment plan approved by the bank.


Provisions

Consolidated


Consolidated

Borrowings

Bank debt comprises Australian dollar denominated debt of $98,400,700 (2011: $104,501,000) and New Zealand dollar denominated debt of

$18,378,847 (2011: $18,128,000). Unamortised borrowing costs of $1,841,143 (2011: $2,412,000) reduce the amounts to the carrying amount

reported.

Debt is provided through two fully drawn facilities. These facilities are repayable as to $104,579,547 on 28 February 2014 and $12,200,000 on

22 June 2015. The Fund at its option may extend the repayment date for the first facility to 28 February 2015. The bank debt is secured by a

first mortgage over investment properties including those disclosed as a discontinued operation, property, plant and equipment, loan to PIC

and equity accounted investments with a total carrying amount at balance date of $230,722,000 (2011: $224,196,000).

During the year the Group maintained the required ratios.

The facility agreements impose certain covenants including maintenance of the following financial ratios:

minimum interest cover ratio of 1.5 times prior to 30 June 2014 and 1.75 times on and after 30

June 2014 (calculated retrospectively); and

maximum loan to value ratio (“LVR”) of 60% of the value of the secured investments, including the amounts

outstanding from PIC and PPUT at any time prior to 31 December 2013 or 55% at any time on or after 31 December

2013.

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18. Issued securities

(a) Carrying amounts

June June

2012 2011

$'000 $'000

At beginning of year 217,678 182,425

Issued during the year:

Placements and rights issues 14,253 38,753

Issue costs - rights issue (760) (3,500)

Return of capital (2,425) -

At end of year 228,746 217,678

Issued from date of stapling:

Stapling 2,425

Rights issue 750

Issue costs - rights issue (40)

At end of year 3,135

Total issued stapled securities 231,881 217,678

(b) Number of securities issued

June June

2012 2011

$'000 $'000

At beginning of year 606,333 175,749

Issued during the year:

Placements and rights issue - 430,584

Rights issues - stapled securities 365,619 -

At end of year 971,952 606,333

Issued from date of stapling:

606,333

Rights issue - stapled securities 365,619

At end of year 971,952

Total issued stapled securities 971,952 606,333

Attributable to stapled security holders of Bodiam stapled on 26 April 2012:

Attributable to stapled security holders of Bodiam stapled on 26 April 2012:

Issued shares resulting from stapling with IEF

Attributable to stapled security holders of IEF

Attributable to stapled security holders of IEF

Consolidated

Consolidated

At the date of stapling, Bodiam had 1 share on issue, at an amount of $1, which was cancelled on the date of stapling. This is not included in the

tables above.




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19. Reserves

June June

2012 2011

$'000 $'000

Foreign currency translation reserve (159) 89

Movements

Balance at beginning of year 89 (237)

Translation differences arising during the year (248) 326

Balance at end of year (159) 89

20. Commitments

21. Capital management

June June

2012 2011

$'000 $'000

Total consolidated liabilities 135,151 135,196

Plus share of liabilities of equity accounted investments 16,938 16,535

Total look-through liabilities 152,089 151,731

Total consolidated assets 238,944 235,591

Less equity accounted investments (21,377) (23,672)

Plus share of assets of equity accounted investments 38,315 40,207

Total look-through assets 255,882 252,126

Leverage ratio 59.4% 60.2%

Consolidated

In determining the optimal capital structure, the Group takes into account a number of factors, including the availability of debt relative to

equity, the cost of raising debt or equity, the maturity profile of debt, the volatility in future liquidity of debt and equity and exposure to

interest rates relative to the earning profile of the Group.

The Group’s capital position is primarily monitored through its ratio of total liabilities to total assets (“Leverage Ratio”), calculated on a look-

through basis, in which the Group’s interest in its joint ventures and associates are proportionately consolidated based on the Group’s

ownership interest. The Group’s medium term strategy is to maintain the Leverage Ratio in the range of 45% – 55%. At 30 June 2012, the

Leverage Ratio was 59.4%, compared to 60.2% at 30 June 2011, calculated as follows:

The capital structure at a point in time is the product of a number of factors, many of which are market driven and to various degrees outside

of the control of the Group, particularly the impact of revaluations on gearing levels, the availability of new equity and the liquidity in real

estate markets. While the Group periodically determines the optimal capital structure, the ability to achieve the optimal structure may be

impacted by market conditions and the actual position may often differ from the optimal position.

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

subsidiaries.

The Group aims to meet its strategic objectives to maximise security holder value by using the appropriate levels of debt and equity, while

taking account of the additional financial risks of higher debt levels.




No commitments for capital expenditure, finance and operating leases were contracted but not provided for at reporting date (2011: Nil).

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21. Capital management (continued)

June June

2012 2011

$'000 $'000

Total consolidated borrowings 114,938 122,628

Less cash & cash equivalents (4,116) (6,272)

Net consolidated debt 110,822 116,356

Net look-through debt 110,822 116,356

Total consolidated assets 238,944 235,591

Less cash and cash equivalents (4,116) (6,272)

Less equity accounted investments (21,377) (23,672)

Plus share of assets of equity accounted investments 38,315 40,207

Less elimination of receivables from and payables to equity accounted investments - -

Total look-through assets 251,766 245,854

Gearing ratio 44.0% 47.3%

22. Financial risk management

Introduction

June June

2012 2011

$'000 $'000

(i)

Cash and cash equivalents 4,116 6,272

Trade and other receivables 65,250 68,119

(ii)

Payables 5,571 8,850

Interest bearing liabilities 114,938 120,217

Derivatives 14,485 6,224

(a) Market risk

(i) Interest rate risk

The Group’s exposure to the risk of changes in market interest rates arises primarily from its use of borrowings. The main consequence of

adverse changes in market interest rates is higher interest costs, reducing the Group’s profit. In addition, the Group’s borrowing agreements

include minimum interest cover covenants. Higher interest costs resulting from adverse movements 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.

Financial assets:

The Group has the following financial instruments:

Financial liabilities:

Consolidated

Consolidated


The main risks arising from the Group’s financial instruments are market risk (interest rate risk and foreign exchange risk), credit risk and

liquidity risk. The Group manages its exposure to these risks primarily through its Treasury Policy. The policy sets out various targets aimed at

restricting the financial risk taken by the Group. Management reviews actual positions of the Group against these targets on a regular basis. If

the target is not achieved, or forecast not to be achieved, a plan of action is, where appropriate, put in place with the aim of meeting the target

within an agreed timeframe. Depending on the circumstances of the Group at a point in time, it may be that positions outside of the Treasury

Policy are accepted and no plan of action is put in place to meet the Treasury targets, because, for example, the risks associated with bringing

the Group into compliance outweigh the benefits. The adequacy of the Treasury Policy in addressing the risks arising from the Group’s financial

instruments is reviewed on a regular basis.



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22. Financial risk management (continued)

(a) Market risk (continued)

(i) Interest rate risk (continued)

At 30 June 2012, the Group holds interest rate swaps in excess of total borrowings.

Total

30 June 2012

$'000 $'000 $'000 $'000 $'000

Principal amounts $’000

Financial assets

Cash at bank 4,116 - - - 4,116

Loan to lessees - 320 - - 320

Loan to PIC - 63,091 - - 63,091

Financial liabilities

Bank debt denominated in AUD 96,560 - - - 96,560

Bank debt denominated in NZD 18,379 - - - 18,379

Interest rate swaps:

(143,700) - 143,700 - -

% % % % %

Weighted average interest rates

Financial assets

Cash at bank 3.22 - - - -

Loan to lessees - 8.00 - - -

Loan to PIC - 9.57 - - -


Bank debt denominated in AUD 6.70 - - - -

Bank debt denominated in NZD 4.71 - - - -


6.42 6.42 - -

Floating interest

rate

Consolidated

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

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

risk.

The Group manages the risk of changes in market interest rates by aiming to maintain a mix of fixed and floating rate borrowings. Fixed rate

debt is achieved either through fixed rate debt funding or through derivative financial instruments permitted under the Treasury Policy. The

policy sets minimum and maximum levels of fixed rate exposure over a ten-year time horizon.

– denominated in AUD; Group pays fixed rate

More than 5

years



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.

Fixed interest rate maturing in:

1 to 5 years

Less than 1 year

– denominated in AUD; Fund pays fixed rate


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(i) Interest rate risk (continued)

Total

30 June 2011

$'000 $'000 $'000 $'000 $'000

Principal amounts $’000

Financial assets

Cash at bank 972 - - - 972

Short term deposits 5,300 - - - 5,300

Loan to lessees - 398 - - 398

Loan to PIC - 63,091 - - 63,091


Bank debt denominated in AUD 102,089 - - - 102,089

Bank debt denominated in NZD 18,128 - - - 18,128


(168,700) 55,000 113,700 - -

% % % % %

Weighted average interest rates

Financial assets

Cash at bank 4.30 - - - -

Short term deposits 4.70 - - - -

Loan to PIC - 9.30 - - -


Bank debt denominated in AUD 7.20 - - - -

Bank debt denominated in NZD 4.70 - - - -


7.20 6.20 6.50 - -

Interest rate sensitivity analysis

Increase/(decrease) in average interest rates of 1%

2012 2011

$’000 $’000

Variable interest rate instruments denominated in:

Australian dollars 533 399

New Zealand dollars (187) (155)

Floating interest

rate

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.

Consolidated


The effect on net interest expense for one year would have been an increase/(decrease) of:


Effect on profit after tax

Less than 1 year

Higher/(lower)

1 to 5 years


Consolidated

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

risk.



Fixed interest maturing in:

More than 5

years

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(ii) Foreign exchange risk

June June

2012 2011

$'000 $'000

New Zealand Assets and Liabilities:

Assets of discontinued operations 8,704 12,583

Bank debt (18,379) (18,128)

(b) Credit risk

(i) Tenants

(ii) Loans receivable


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

movements may increase or reduce the Australian dollar equivalent of the carrying value of the Group’s offshore properties, and may result in

higher or lower Australian dollar equivalent proceeds when an offshore property is sold. In addition, foreign exchange rate movements may

change the Australian dollar equivalent of the earnings from the offshore properties while they are owned by the Group.

At reporting date, the Group held $136,872 (30 June 2011: $438,000) of receivables that are past due but not impaired. There are reasonable

grounds to believe that these amounts are recoverable. The Group holds bank guarantees covering these receivables of $394,617 (30 June

2011: $271,000). Of these past due receivables, $100,713 was up to 30 days overdue, $7,228 was between 30 and 60 days overdue and $28,931

was more than 90 days overdue.

The Group has loans receivable which are now secured by registered mortgages over real estate and other assets.

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 aggregate exposure the

Group may have to the prospective tenant if the counterparty is already a tenant in the Group’s portfolio; the strength of the prospective

tenant’s business; the level of its commitment to locating in the Group’s property; and any form of security, for example a rental bond, to be

provided.

The Group is also exposed to foreign exchange risk from its borrowings in New Zealand dollars. Foreign exchange movements change the

Australian dollar equivalent of the borrowings, and the related interest expense.

The Responsible Entity believes that the Group’s receivables that are neither past due nor impaired do not give rise to any significant 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 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 vacant space.

The major credit risk for the Group is defaults 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. In addition, a default of one of

the Group’s major tenants may trigger the right for one or more of the lenders to the Group to review or call in its loan.

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.

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.



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(c) Liquidity risk

$’000 $’000 $’000 $’000

Trade and other payables 5,046 525 - 5,571

Borrowings 8,704 106,234 - 114,938

13,750 106,759 - 120,509

$’000 $’000 $’000 $’000

Trade and other payables 8,250 300 300 8,850

Borrowings 21,687 126,669 - 148,356

29,937 126,969 300 157,206


Total1 to 5 years

Less than 1 year

Less than 1 year

More than 5

years

1 to 5 years


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 including interest at market rates. Foreign currencies have been

converted at rates of exchange ruling at reporting date.

Consolidated 2011

Total

The Group may also be exposed to contingent liquidity risk under its term loan facilities, where term loan facilities include covenants which if

breached give the lender the right to call in the loan, thereby accelerating a cash flow which otherwise was scheduled for the loan maturity. The

Group monitors adherence to loan covenants on a regular basis, and the Treasury Policy sets targets based on the ability to withstand adverse

market movements and remain within loan covenant limits.


The main objective of liquidity risk management is to reduce the risk that the Group does not have the resources available to meet its financial

obligations and working capital and committed capital expenditure requirements. The Group’s Treasury Policy sets a target for the level of cash

and available undrawn debt facilities to cover future committed expenditure in the next year, loan maturities within the next year and an

allowance for unforeseen events such as tenant default.

Consolidated 2012

More than 5

years

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(c ) Liquidity risk (continued)

$’000 $’000 $’000 $’000

Liabilities

Derivative liabilities – net settled 4,682 9,803 - 14,485

The contractual maturities of the Group’s derivative financial liabilities at 30 June 2011, on the same basis, were:

$’000 $’000 $’000 $’000

Liabilities

Derivative liabilities – net settled 1,902 1,308 2,919 6,129

(d) Fair value

The Group uses the following fair value measurement hierarchy:

Level 1: Fair value is calculated using quoted prices in active markets;

Level 2:

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

Consolidated 2011

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



More than 5

years

The fair value of derivatives was calculated either as the net present value of future payment obligations discounted at market rates adjusted

for the Group’s credit risk or by using option pricing models. These valuation techniques use both observable and unobservable market inputs.

Total

The fair value of an interest rate swap agreement is based on valuation techniques using market data that is not observable. The valuation

input that is not observable is an adjustment for the credit risk of the Group.

The tables below present the Group’s financial instruments that were measured and recognised at fair value at reporting date.

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 including interest at market rates. Foreign currencies have been

converted at rates of exchange ruling at reporting date.

More than 5

years

1 to 5 years

Less than 1 year


1 to 5 years

Consolidated 2012

Total

Less than 1 year

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.

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(d) Fair value (continued)

Level 1 Level 2 Level 3 Total

$’000 $’000 $’000 $’000


Derivatives - 14,485 - 14,485

Level 1 Level 2 Level 3 Total

$’000 $’000 $’000 $’000

Financial assets

Derivatives 95 95


Derivatives - 3,209 2,920 6,129

The following table presents the changes in the Group’s level 3 instruments for the financial year.

Assets Liabilities

$’000 $’000

Derivatives

Opening balance 95 (2,920)

Gains & losses recognised in profit or loss (95) 2,920

Closing balance - -

(95) 2,920

The following table presents the changes in the Group’s level 3 instruments for the previous financial year.

Assets Liabilities

$’000 $’000

Derivatives

Opening balance 395 (1,841)

Gains & losses recognised in profit or loss (300) (1,079)

Closing balance 95 (2,920)

(300) (1,079)

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

Consolidated 2011



Consolidated 2011

The following tables present the Group’s financial instruments that were measured and recognised at fair value at 30 June 2011.


Consolidated 2012

Gains & losses for the year included in profit or loss that relate to assets held at the end of the year

Gains & losses for the year included in profit or loss that relate to assets held at the end of the year

Consolidated 2012

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23. Auditor’s remuneration

June June

2012 2011

$ $

Ernst & Young

126,620 245,057

Other services – assurance related - 87,914

Total 126,620 332,971

HLB Mann Judd

125,454 -

Other services – assurance related 1,818 -

Total 127,272 -

24. Related parties

(a) Responsible Entity

Fees of the Responsible Entities and related parties:

June June

2012 2011

$'000 $'000

Responsible entity fees - ING Property Management Pty Limited 563 1,818

Responsible entity fees - Bodiam RE Limited (prior to stapling) 542 -

Total 1,105 1,818

Amounts received or receivable by HLB Mann Judd and Ernst & Young for:


Bodiam RE Limited is a wholly owned subsidiary of Bodiam, which was a 100% owned subsidiary of Torchlight (GP) 1 Ltd as general partner of

Torchlight Fund No. 1 LP. Torchlight (GP) 1 Ltd's ultimate parent is Pyne Gould Corporation Ltd which is listed on the New Zealand Stock

Exchange. On 26 April 2012 after Bodiam issued a share for every unit in the Fund, Torchlight (GP) 1 Ltd as general partner of Torchlight Fund

No.1 LP cancelled its share in Bodiam.

Audit or review of financial reports of the Fund and any other entity in the consolidated entity

Consolidated

The appointment of Bodiam RE Limited as Responsible Entity of the Fund was approved by unitholders at a Unitholders Meeting held on 5

December 2011 and Bodiam RE Limited became the new Responsible Entity of IEF Real Estate Entertainment Group on 6 December 2011,

replacing ING Management Limited.

Audit or review of financial reports of the Fund and any other entity in the consolidated entity



Consolidated

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24. Related parties (continued)

(a) Responsible Entity (continued)

- 0.6% of the total assets of IEF Real Estate Entertainment Group.

-

IML was entitled to an acquisition fee of 0.5% of the total price paid by the Group for any new properties.

(b) Holdings of the Responsible Entity and its related parties

2012 2011

ING Real Estate Co-Investment Pty Ltd - 1,127,805

ING Real Estate International Investments III BV - 25,032,196

- 26,160,001

(c) Other transactions with the Responsible Entity and its related parties

2012 2011

$ $

Amounts receivable at reporting date 63,090,819 63,090,819

Interest income 5,971,860 5,769,575

The fees noted in the Income Statement relate to the period prior to stapling.

The Group has a loan to PIC, an associated entity; further details of this loan are given at notes 8 and 19. Amounts recognised were:


ING Management Limited waived all other fees due and receivable from the Fund upon its retirement as Responsible Entity of the Fund.


ING Property Management Pty Limited was entitled to receive a property management fee of 1.5% of gross rent received. However, it waived

this fee for the years ended 30 June 2005, 2006, 2007, 2008, 2009, 2010 and 2011.

As at 30 June 2011, the Fund had accrued and recognised an amount of $3,636,462 payable to IML which was paid in the current year.

Holdings of the new and former Responsible Entities and their related parties (including managed investment schemes for which a related party

is the Responsible Entity), and distributions received or receivable for the year, were:

ING Management Limited ("IML"), the former Responsible Entity, was entitled to a management fee of 0.6% per annum of total assets of the

Fund. However, IML waived this fee for the years ended 30 June 2005 and 2006, and partially waived fees for the years ended 30 June 2007,

2008 and 2009.

Bodiam Management Services Pty Ltd., a subsidiary of Bodiam, is entitled to receive a property management fee of 1.5% of gross rent received.

Number of units held

No distributions were received from the Fund by the new and former Responsible Entities and their related parties in either reporting year,

As the Responsible Entity of IEF Real Estate Entertainment Group, Bodiam RE Limited is entitled to the following fees:


Consolidated

acquisition fees calculated of 0.5% of the total price paid by IEF Real Estate Entertainment Group for any new properties.

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25. Key management personnel

(a) Information on key management personnel

Bryan Mogridge Chairman, appointed 31 October 2011

Russell Naylor Appointed 31 October 2011

Deborah Cartwright Appointed 31 October 2011

Julian Davidson Appointed 31 October 2011

Michael Coleman Chairman; appointed 1 July 2011

Hein Brand

Philip Clark AM

Michael Easson AM

Scott MacDonald Resigned 13 July 2011

Mark Lamb Resigned 13 July 2011

There were no other key management personnel.

(b) Remuneration of key management personnel

Remuneration structure

Remuneration policy

The performance of the Group depends upon its ability to attract and retain quality people. The Group is committed to developing a

remuneration philosophy of paying sufficient competitive 'base' rewards to attract and retain high calibre management personnel and

providing the opportunity to receive superior remuneration tied to the creation of value for securityholders.

The Group does not have a dedicated remuneration committee but rather the full board is responsible for ensuring the level of director and key

management personnel remuneration is sufficient and reasonable. For further information the Board Charter is available on the Group’s public

website - www.bodiamre.com.au.


Non-executive Director's remuneration is solely in the form of fees and has been set by security holders at a maximum aggregate amount of

$1,000,000, to be allocated amongst the Directors as they see fit. It has been set to balance the need to attract and retain Directors of the

highest calibre at a cost that is acceptable to security holders.

For the period to 30 June 2012, key management personnel remuneration consisted of simple base fees. There were no performance bonuses

paid or accrued during the period.


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 following persons held office as directors of Bodiam RE Limited from 6 December 2011 to the date of this report:


The following persons held office as directors of ING Management Limited, the Responsible Entity during the period 1 July 2011 to 6 December

2011, the date ING Management Limited ceased to act as the Responsible Entity of the Group.

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25. Key management personnel (continued)

Remuneration structure (continued)

Remuneration

$

22,569

44,236

13,542

13,542

93,889

Acquisitions Disposals Ending

2012 balance

Paul Scully 112,499 - (112,499) -

Bryan Mogridge 1,000,000 2,023,435 - 3,023,435

Deborah Cartwright 80,000 998,240 - 1,078,240

Russell Naylor 6,706,229 4,043,856 - 10,750,085

7,898,728 7,065,531 (112,499) 14,851,760

2011

Paul Scully 112,499 - - 112,499

Daniel Hargraves 393,050 - (393,050) -

505,549 - (393,050) 112,499

Russell Naylor and Naylor Partners (Managing Director)

Bryan Mogridge (Chairman)

In addition to the above persons, key management personnel as defined in the Accounting Standards includes the Responsible Entity. Details of

the remuneration of the Responsible Entity are given at note 24(b) above. Details of its holdings in the Fund are given at note 24(c) above.

Beginning

balance

The number of securities held directly, indirectly or beneficially in the Group by each key management person, including their related parties,

were:

Julian Davidson (Non-Executive Director)

The remuneration paid to directors and key management by the Group during the financial year is presented below:




Deborah Cartwright (Non-Executive Director)

No distributions were received from the Group by each key management person in either reporting year, nor were any distributions receivable

at either reporting date.

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26. Parent financial information

Summary financial information about the Parent is:

2012 2011

$’000 $’000

Current assets 95,419 77,793

Non-current assets 111,417 122,230

Total assets 206,836 200,023

Current liabilities 7,928 21,529

Non-current liabilities 94,806 77,456

Total liabilities 102,734 98,985

Unitholders equity:

Issued units 229,769 217,678

Accumulated losses (125,667) (116,640)

Total unitholders’ equity 104,102 101,038

Net loss attributable to unitholders of the Group (6,302) (20,766)

Total comprehensive income (6,302) (20,766)

27. Subsidiaries

Names of subsidiaries

Country of incorporation 2012 2011

Name or establishment % %


Bourbon Unit Trust Australia Australia 100 100

IEF Subsidiary Trust Australia 100 100

IEF NZ Subsidiary Trust Australia 100 100

IEF NZ Trust New Zealand 100 100

Bodiam Hotel Group Limited

Bodiam RE Limited Australia 100 -

Bodiam Management Services Pty Ltd Australia 100 -

Bodiam Operations Pty Ltd Australia 100 -

Bodiam Operations 2 Pty Ltd Australia 100 -

Bodiam HR Pty Ltd Australia 100 -

Minkx Pty Ltd Australia 100 100

IEF NZ Company Ltd Australia 100 100

IEF NZ Pty Ltd Australia 100 100

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

28. Segment information

Description of segments

The New Zealand segment is now classified as a discontinued operation.

Ownership interest


IEF Real Estate Entertainment Fund

The Group invests in and operates hospitality and entertainment property located in Australia and New Zealand. The Group has identified its

operating segments as being each of these regions, based on internal reporting to the Managing Director. The Fund is organised around

functions, but distinguishes these regions in its internal reporting.



The consolidated financial statements incorporate the assets, liabilities and results of the subsidiaries of the stapled entities in accordance with

the accounting policy described in note 1(e):

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29 Notes to the cash flow statement

a) Reconciliation of net loss to net cash flows from operations

June June

2012 2011

$'000 $'000


Adjustments for:

Straight line lease revenue recognition (1,225) (571)

Straight line lease revenue recognition – discontinued operations - (213)

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

Investment properties (1,390) 24,031

2,170 317

Investment properties – discontinued operations 4,138 2,331

Derivatives 8,450 (1,221)

Amortisation of borrowing costs 754 714

Amortisation of tenant incentives (126) 62

Impairment loss on:

Trade receivables 539 1,358

Trade receivables – discontinued operations 1,330 1,778

Loans - 1,777

Loans – discontinued operations - 2,980

Reversal of impairment loss on loans (340) (2,409)

Realised gain on disposal of plant and equipment (21) -

Depreciation expense 609 -

Operating cash flow for the year before changes in working capital 5,493 9,842

Changes in working capital:

Decrease/(increase) in receivables 2,716 (4,118)

(Decrease)/increase in other payables (5,099) 4,059

Decrease/(increase) in inventory (785)

Increase in prepayments (161) -

Net cash provided by operating activities 2,164 9,783

30. Events subsequent to the reporting date

Investment in Associate

2012

$'000

21,377

(354)

24,000

2,977

On 24 August 2012 the Group disposed of its investment in the associated entities identified in Note 14., for consideration of $24,000,000,

which is to be paid to the Fund on or before 30 June 2014. The Fund earns interest at the same rate applying to the PIC loan which is 9.854% as

of 24 August 2012. This rate steps up by 3% on 13 July every year.


The financial effects of this transaction has not been brought to account on 30 June 2012. Details of the transactions are as follows:

Investment properties included in share of net profit of equity accounted investments


Balance of investment in associates at 30 June 2012


Distribution received after 30 June 2012

Consolidated

Consideration received

Profit on sale before income tax

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31. Business combinations

(a) Stapling

2012

$'000

Assets 1,566

Liabilities 3,328

Bodiam and its controlled entities contributed revenue and profit/(loss) as follows:

2012

$'000

Revenue 2,467

Expenses 2,835

Profit/(Loss) (368)

(b) Hotel businesses

(i) Icon

Details of the acquisition are as follows:

Fair value

$'000

Cash 519

Inventories 704

Plant and equipment 5,400

Goodwill 6,000

Employee liabilities (367)

Deferred lease asset in relation to employee liabilities 108

Other assets and liabilities (1,019)

Acquisition date fair value of the total consideration transferred 11,343

Representing:

Cash paid to vendor 11,834

Less amount due back from vendor due to adjustments (491)

11,343

(ii) Courthouse Hotel and Lawson Park Hotel

Fair value

$'000

Cash 57

Inventories 98

Plant and equipment 2

Other assets and liabilities 32

Acquisition date fair value of the total consideration transferred 189

Representing:Cash paid to vendor 189

The acquired hotel businesses contributed revenue and profit/(loss) as follows:

2012

$'000

Revenue 2,456

Expenses (3,051)

Profit/(Loss) (595)

On 15 June 2012 the Group acquired the hotel businesses of Icon. This acquisition was in line with the strategic review completed on 30

December 2011 by the Responsible Entity to move to a combined OpCo/Prop Co model.




On 26 April 2012 units issued by the Fund were stapled to shares issued by Bodiam. In compliance with Accounting Standard AASB 3: Business

Combinations, the Fund was identified as the acquirer and Bodiam as the acquiree.

There was no cost or cash outflow to the Fund in relation to the stapling. The assets and liabilities of Bodiam at the date of stapling were as

follows:

On 22 May 2012 and 27 May 2012 the Group also acquired the hotel businesses from lessees of the land and buildings, owned by the Group, of

Courthouse Hotel and Lawson Park Hotel respectively.

Combined details of the acquisition are as follows:

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1. In the opinion of the directors:

(a)

(i)

(ii)

(b)

2.

3.

Signed in accordance with a resolution of the Board of Directors.

____________________ ____________________

Deborah Cartwright Bryan Mogridge

Director Chairman

Sydney Sydney

Dated in Sydney this 30th day of September 2012 Dated in Sydney this 30th day of September 2012

the consolidated financial statements and notes, set out on pages 20 to 56 are in accordance with the Corporations Act 2001, including:

giving a true and fair view of the financial position of the Group as at 30 June 2012 and of its performance for the year ended on that

date; and

complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations

Regulations 2001;

There are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable.

Directors' declaration


The notes to the financial statements include a statement of compliance with International Financial Reporting Standards at note 1(b).


This declaration has been made after receiving the declarations required to be made by the Managing Director, as chief executive officer

and chief financial officer, to the directors in accordance with section 295A of the Corporations Act 2001 .

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INDEPENDENT AUDITOR’S REPORT

To the unitholders of IEF Real Estate Entertainment Group:

Report on the Financial Report

We have audited the accompanying financial report of IEF Real Estate Entertainment Group (“the Fund”), which comprises the consolidated balance sheet as at 30 June 2012, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of Bodiam RE Limited, the Responsible Entity of the Fund, for the consolidated entity. The consolidated entity comprises the Fund and the entities it controlled, and the entities stapled to the Fund, at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report

The directors of Bodiam RE Limited are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error.

In Note 1(b), the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that the consolidated financial report complies with International Financial

Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Fund’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

Our audit did not involve an analysis of the prudence of business decisions made by directors or management.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. F

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INDEPENDENT AUDITOR’S REPORT (continued)

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of Bodiam RE Limited on 30 September 2012, would be in the same terms if provided to the directors as at the time of this auditor’s report.

Auditor’s Opinion

In our opinion:

(a) the financial report of IEF Real Estate Entertainment Group is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2012 and of its performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;

and

(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(b).

HLB MANN JUDD Chartered Accountants Sydney D K Swindells 30 September 2012 Partner

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Top 20 Security Holders

Rank Name of Security Holder Number of securities held % of issued

at 18 Sep 2012 capital

1 CUSTODIAL SERVICES LIMITED <BENEFICIARIES HOLDING A/C> 234,587,738 24.14%

2 AURORA FUNDS MANAGEMENT LTD BORG FUND> 194,293,063 19.99%

3 UBS NOMINEES PTY LTD 110,439,814 11.36%

4 NATIONAL NOMINEES LIMITED 83,051,728 8.54%

5 J P MORGAN NOMINEES AUSTRALIA LIMITED 54,581,355 5.62%

6 CITICORP NOMINEES PTY LIMITED 49,358,456 5.08%

7 CITICORP NOMINEES PTY LIMITED <COLONIAL FIRST STATE INV A/C> 33,629,210 3.46%

8 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 20,005,241 2.06%

9 JAGEN PTY LTD 17,315,000 1.78%

10 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 3 14,015,836 1.44%

11 ROLYAN PTY LTD <JASARASH INVESTMENT A/C> 9,894,885 1.02%

12 GREENWICH STREET PTY LTD REDLICH FAMILY 4,500,000 0.46%

13 ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD <CUSTODIAN A/C> 4,101,399 0.42%

14 INSTANZ EMPLOYEE INVESTMENTS PTY LIMITED 4,000,000 0.41%

15 JAWTON PTY LTD THE NICOLAS BROWN FAMILY 3,660,000 0.38%

16 BRISPOT NOMINEES PTY LTD <HOUSE HEAD NOMINEE NO 1 A/C> 3,534,125 0.36%

17 MONEX BOOM SECURITIES (HK) LTD <CLIENTS ACCOUNT> 3,400,000 0.35%

18 AUSTRALIAN EXPORTS & INDUSTRIALISATION SUPER PTY LTD <BUCK FAMILY SUPER FUND A/C> 3,085,000 0.32%

19 JULIBER PTY LTD THE GP JUSL LIMITED PARTNERSHIP 2,440,000 0.25%

19 JULIBER PTY LTD JULIBER 2,440,000 0.25%

20 JAWTON PTY LTD <NICHOLAS BROWN FAMILY A/C> 2,234,978 0.23%

TOTAL 854,567,828 87.92%

Balance of Register 117,384,060 12.08%

Grand TOTAL 971,951,888 100.00%

RANGE OF SECURITY HOLDERS

Range Securities % No of Holders %

100,001 and Over 935,899,700 96.29% 245 12.91%

50,001 to 100,000 12,711,051 1.31% 173 9.11%

10,001 to 50,000 19,823,178 2.04% 806 42.47%

5,001 to 10,000 2,573,146 0.26% 314 16.54%

1,001 to 5,000 916,316 0.09% 261 13.75%

1 to 1,000 28,497 0.00% 99 5.22%

Total 971,951,888 100.00% 1,898 100.00%

Unmarketable Parcels 2,162,959 0.22% 535 28.19%

SUBSTANTIAL HOLDERS

Name of Security Holder % Date of last notice

Torchlight (GP) 1 Ltd as GP of Torchlight Fund No.1 LP 23.48% 8 September 2012

Borg Fund 19.99% 27 August 2010

Allen Gray 16.53% 19 July 2010

Merricks Capital 14.64% 6 September 2012

Renaissance Property 7.98% 31 August 2010

Total 81.62%

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Corporate Information

Enquiries relating to IEF Real Estate Entertainment

Group can be directed to Russell Naylor on +61 2

9225 6072.

www.bodiamre.com.au

You can visit the IEF Real Estate Entertainment

Group website to find information in relation to

the Group’s governance and policies.

COMPLAINTS

Any security holder wishing to register a compliant

should direct it to the Managing Director or

Chairman on +61 2 9225 6072. IEF Real Estate

Entertainment Group is a member of the

independent dispute resolution scheme, the

Financial Ombudsman Service (FOS). If a security

holder feels that a complaint remains unresolved

or wishes it to be investigated further, FOS can be

contacted as below:

By telephone: 1300 780 808

In writing: Financial Ombudsman Service,

GPO Box 3, Melbourne VIC 3007

By email: [email protected]

Website: www.fos.org.au

GENERAL INFORMATION


ARSN 108 982 627

RESPONSIBLE ENTITY:

Bodiam RE Ltd ACN 145 968 574,

AFSL Number: 386569

REGISTERED OFFICE:

c/o MainstreamBPO, Level 1, 51-57 Pitt St,

Sydney, NSW 2000

Email: [email protected]

Website: www.bobdiamre.com.au

UNIT REGISTRY:

Link Market Services Limited

Level 12, 680 George St,

Sydney, NSW 2000

Ph: 1300 653 497

or from outside Australia: +61 2 8280 7057

AUDITOR:

HLB Mann Judd

Level 19, 207 Kent St,

Sydney, NSW 2000

DISCLAIMER

This report was prepared by Bodiam RE Ltd the

Responsible Entity of IEF Real Estate

Entertainment Group. Information contained in

this report is current as at 30 June 2012. This

report is provided for information purposes only

and has been prepared without taking account of

any particular reader’s financial situation,

objective 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.

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(formerly ING Real Estate Entertainment Fund) 30 June 2012 ... · the stapled, listed securities of...

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