Aveo : Annual Report

2019

ANNUAL REPORT

CONTENTS
Financial Overview...................................................................	1
Letter from Chairman ...........................................................	2
Letter from CEO ........................................................................	4
Property Portfolio .....................................................................	6
Board of Directors ....................................................................	8
Sustainability .............................................................................	10
Corporate Governance ......................................................	12
Financial Report ......................................................................	14
Securityholder Information .........................................	105
Six-year Financial Summary .....................................	107
Corporate Directory ..........................................................	108

The Aveo 2019 Annual Reporting suite

The reports available for securityholders are as follows:

1. 2019 Annual Report
2. 2019 Sustainability Report
3. 2019 Corporate Governance Statement

2019

2019

2019

ANNUAL	SUSTAINABILITY	CORPORATE
REPORT	REPORT	GOVERNANCE
		STATEMENT

FINANCIAL

RESULTS FOR

FY19

Underlying profit after tax is

$50.1m

driven by lower number of unit settlements

Successfully achieved development target of

419

new unit deliveries

NTA per stapled security of

$3.50

$213.4m

Statutory loss after tax

$44.4m

Funds from operations

8.7c

Earnings per stapled security on underlying profit after tax and non-controlling interest

• Aveo has been undertaking a strategic review over the past year.
• On 14 August 2019, Aveo announced that it had entered into a Scheme Implementation Deed with entities controlled by Brookfield.
• Under the Scheme Implementation Deed, entities controlled by Brookfield Property Group on behalf of its managed funds proposes to acquire 100% of the outstanding securities of Aveo by a trust scheme and company scheme of arrangement for consideration of $2.195 per security. The consideration is based on cash consideration and includes the final FY19 distribution of 4.5 cents per security, expected to be paid on 30 September 2019.
• Full overview of the terms of the Scheme will be provided in the Scheme Booklet, intended to be released in early October 2019.
• Scheme Meetings expected to be held in November 2019 and if approved, the Schemes would be implemented this calendar year.

Our values are how we achieve the vision and mission, our guiding principles;

Kindness, Care and Respect.

Aveo Group | Annual Report 2019

1

LETTER FROM THE CHAIRMAN

Our business is resilient and Aveo has continued to consolidate its position as the leading pure retirement group in Australia

Dear Securityholder,

On behalf of the Aveo Group Board, we are proud to present to you the financial results achieved by Aveo in FY19 and an update on the progress of the strategic review which we began last year.

The past financial year has not been without challenges for our business, particularly with extended weakness in the residential property market across Australia, resulting in an underlying profit after tax of $50.1 million. The soft market conditions also gave rise to a decrease in our retirement investment property valuation, and as a result of that non- cash adjustment, we recorded a statutory loss after tax for FY19.

However, our business is resilient and Aveo has continued to consolidate its position as the leading pure retirement group in Australia. Our written sales reflected strong interest in our retirement offerings, we continued to deliver major developments on time and on budget and innovate with integrating care into our offerings. Resident satisfaction is high and rising, thanks to many of the improvements we've made in recent years.

The strategic review of our business

In 2013, we commenced a process to transform from a diversified property group into a pure retirement group. We set a number of targets over five years to achieve that goal and as I reported to you last year, we achieved all of those targets.

However, as a Board and leadership team, we recognised the need to deliver more for our securityholders, and so on 15 August 2018, we announced that we had commenced a strategic review of our retirement portfolio and operations. The Strategic Review included the possibility of introducing capital partners (Australian or overseas) in relation to either a change of control transaction or partnership at the asset level.

To guide the strategic review, and to ensure the right governance framework, the Board of Directors established an Independent Board Committee (IBC) prior to the finalisation and issue of the Information Memorandum and the opening of the Phase 1 data room.

The IBC comprised independent directors Mr Walter McDonald (Chairman), Mr Jim Frayne, Mr Kelvin Lo and Ms Diana Saw.

The IBC was established to consider and respond to interested parties as part of the Strategic Review and to ensure securityholders' best interests were advanced.

The IBC and its advisors considered a wide range of alternatives and widely tested the market with a thorough and comprehensive competitive process. On 14 August 2019, we announced that Aveo Group had entered into a Scheme Implementation Deed with entities controlled by Brookfield Property Group, on behalf of its managed funds, who propose to acquire 100% of the outstanding securities of Aveo by way of a trust scheme and a company scheme of arrangement. You can read more about the schemes in this report and on Aveo's Investor Centre.

As we announced on 14 August 2019, both the IBC and Aveo Board unanimously concluded, based on the cash consideration offered, that in light of the short to medium term outlook for Aveo Group, the proposed transaction is in the best interests of our securityholders, in the absence of a superior proposal and subject to an Independent Expert concluding that the schemes are in the best interests of Aveo securityholders. Further details of the schemes and the recommendations of the IBC, the Aveo Board and the Independent Expert will be provided in the scheme booklet which we expect our securityholders will be receiving shortly.

Throughout the Strategic Review, Aveo's CEO, Geoff Grady, and his leadership team, have continued to lead the group with focus, determination and professionalism to ensure that Aveo continued business as usual. I extend my sincere thanks to all Aveo employees for the way in which they've remained focused on our residents' welfare and ensuring that the business continued to operate well in difficult market conditions.

Looking ahead

Aveo has emerged over the past five years to be Australia's leading and innovative provider of retirement communities. It is something the Board and all employees are very proud of. Today, we provide quality accommodation and vibrant communities for more than 14,000 Australians across the country. I would like to thank my Board colleagues for their hard work during the year and extend our appreciation and thanks to all Aveo employees for the devotion and commitment to ensuring the wellbeing of all our residents around Australia.

Yours sincerely

SENG HUANG LEE CHAIRMAN

2

LETTER FROM	LETTER FROM THE
THE CHAIRMAN	CHIEF EXECUTIVE OFFICER	PROPERTY PORTFOLIO	BOARD OF DIRECTORS	SUSTAINABILITY	CORPORATE GOVERNANCE	FINANCIAL REPORT 2019

Aveo Group | Annual Report 2019 3