ALE Property : Half Yearly Report and Accounts Opens in a new Window

Appendix 4D

Half-year Report

Six Months Ended 31 December 2019

ALE PROPERTY GROUP

Australian Leisure and Entertainment Property Management Limited ABN 45 105 275 278

and Australian Leisure and Entertainment Property Trust ARSN 106 063 049

	Half yearly		Preliminary		Half-Year ended ('current period'):
	(tick)		final (tick)
					31 December 2019
					(previous corresponding period 31 December 2018)
Results for announcement to the market
							6 months to			6 months to
							31 December			31 December
							2019			2018		Variance
							A$'000			A$'000		%
	Rental revenue					30,689		29,676		3.4%
	Total income					39,697		30,125		31.8%
	Profit / (Loss) from ordinary activities after income
	tax, attributable to security holders		20,498		5,585		267.0%
	Profit before income tax, fair value adjustments,
	amortisation of prepaid costs and other non-cash		15,635		14,019
	items (Distributable profit)					11.5%
	Distribution payable for the half-year		20,458		20,458		-
	Available and under/(over) distributed at the half-
	year (paid from distributable profit, capital and		(4,823)	(6,439)		(25.1%)
	surplus cash)
Dividends (distributions)
							6 months to		6 months to
							31 December		31 December
							2019		2018
							Cents		Cents		Variance
												%
	December half-year interim distribution per		10.45		10.45		-
	security
	Franked amount per share			0.00		0.00		-
	Record date for distribution entitlement		31 December 2019
	Interim distribution will be paid					5 March 2020

Net tangible assets per security

	6 months to		6 months to
	31 December		31 December			Variance %
	2019		2018
Net tangible assets per security	$3.09	$3.09	-

Explanation of results

Brief explanation of results

• Rental revenue increased by 3.4% due to property rent (excluding Queensland land tax) increases of 10.0% in November 2018 on 36 properties and an average 1.73% CPI increase in November 2019 on properties during the half year. The remaining properties are subject to a continuing rent determination that will be assessed by independent valuers.
• Total income has increased by 31.8% as there was a fair value increment to properties of $8.82 million in the current period ($0.33 million decrement in December 2018).
• Profit after income tax for the period increased by $14.91 million due to:
• • Increment to property valuations of $8.82 million compared to a decrement of $0.33 million in the prior period as property yields were unchanged from June 2019 and were applied to higher rents on 40 properties;
  • Decrement to derivatives of $2.51 million in the current period compared to a decrement of $6.43 million in the prior period as the decrease in long term interest rates was not as significant in the current period;
  • Management costs decreased as costs associated with rent review submissions costs decreasing from $1.36 million to $0.22 million when compared to the prior period; and
  • Increased land tax for QLD properties as a result of an increase in the tax rate from 2.50% to 2.75%.
• The distribution of 10.45 cents per security remains unchanged from the previous comparable period.

Reconciliation of profit after tax to total available for distribution

	A$'000
Profit after income tax for half-year	$20,498
Plus / (Less)
Fair value adjustments to investment properties	(8,820)
Fair value adjustments to derivatives	2,509
Employee security based payments	125
Finance costs - non cash	1,326
Income tax expense / (benefit)	(3)
Total available for distribution	15,635
Distribution payable	20,458
Available and under/(over) distributed at the half-year	(4,823)

Audit Status

Independent auditor KPMG has completed a review of the accounts on which this report is based and provided an unqualified opinion.

A copy of the ALE Property Group 31 December 2019 Half-Year Financial Report with KPMG review opinion is attached.

ALE Property Group

Comprising Australian Leisure and Entertainment Property Trust and its

controlled entities

ABN 92 648 441 429

Half-Year Report 31 December 2019

ALE Property Group

Comprising Australian Leisure and Entertainment

Property Trust and its controlled entities

Report For the half-year ended 31 December 2019

ABN 92 648 441 429

Contents

FINANCIAL STATEMENTS

31 December 2019

ALE Property Group (ASX: LEP)

ALE Property Group is the owner of Australia's largest portfolio of freehold pub properties. Established in November 2003, ALE owns a portfolio of 86 pub properties across the five mainland states of Australia. All the properties are leased to Australian Leisure and Hospitality Group Pty Limited (ALH).

WWW.ALEGROUP.COM.AU

- 01 - - 07 - - 08 - - 09 - - 10 - - 11 - - 12 - - 13 - - 29 - - 30 - - 32 -

Directors' Report

Auditor's Independence Declaration

Financial Statements

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of Cash Flows

Notes to the Financial Statements

Directors' Declaration

Independent Auditor's Report to Stapled Securityholders Investor Information and Corporate Directory

DIRECTORS' REPORT

For the Half-Year Ended 31 December 2019

DIRECTORS' REPORT

The ALE Property Group ("ALE") comprises Australian Leisure and Entertainment Property Trust ("Trust") and its controlled entities including ALE Direct Property Trust ("Sub-Trust"), ALE Finance Company Pty Limited ("Finance Company") and Australian Leisure and Entertainment Property Management Limited ("Company") as the responsible entity of the Trust.

The registered office and principal place of business of ALE is level 10, 6 O'Connell Street, Sydney NSW 2000.

The directors of the Company present their report, together with the consolidated financial statements of ALE for the half-year ended 31 December 2019.

1. DIRECTORS

The following persons were directors of the Company during the half-year and up to the date of this report unless otherwise stated:

Name	Type	Appointed	Resigned
R W Mactier (Chairman)	Independent non-executive	28	November 2016
P J Downes	Independent non-executive	26	November 2013
N J Milne	Independent non-executive	6 February 2015
P G Say	Independent non-executive	24	September 2014
M P Triguboff	Non-executive	15	February 2018
B S Stanton	Non-executive	13	September 2019
A F O Wilkinson (Managing Director)	Executive	16 November 2004

2. PRINCIPAL ACTIVITIES

The principal activities of ALE consist of investment in property and property funds management. There has been no significant change in the nature of those activities during the half-year.

3. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL HALF-YEAR

Subsequent to 31 December 2019, long term interest rates have declined. This has resulted in an increase in the fair value of the net derivative liability position in the period since 31 December 2019. As at 3 February 2020 the value of that liability has increased by approximately $8.7 million to $45.9 million. The liability has not changed materially between 3 February 2020 and the date of this report.

In the opinion of the Directors of the Company, apart from the above, no transaction or event of a material and unusual nature has occurred between the end of the financial half-year and the date of this report that may significantly affect the operations of ALE, the results of those operations or the state of affairs of ALE in future financial years.

4. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

ALE will continue to maintain its focus on increasing the value to stapled securityholders.

In accordance with the leases of its investment properties, ALE had until November 2017 received annual increases in rental income in line with increases in the consumer price index. The first non CPI based market rent review commenced in November 2018 for 79 of ALE's properties. As at balance date 36 properties had received a full increase of 10% and 43 properties are to be assessed by independent determining valuers. It is anticipated that the rent determinations will be concluded during the current half year.

On 3 July 2019 Woolworths announced that it intended to combine ALH and Endeavour Drinks and then separate the combined entity from Woolworths (Endeavour Group). On 16 December 2019 Woolworths shareholders voted to proceed with the merger of ALH and Endeavour Drinks. ALE will continue to monitor developments closely.

Apart from the above matters, the directors are not aware of any other future development likely to significantly affect the operations and/or results of ALE.

Page 1: ALE Property Group

DIRECTORS' REPORT

For the Half-Year Ended 31 December 2019

5. DISTRIBUTIONS AND DIVIDENDS

Trust distributions paid out and payable to stapled securityholders, based on the number of stapled securities on issue at the respective record dates, for the half-year were as follows:

	December	December	December	December
	2019	2018	2019	2018
	cents	cents	$'000	$'000
	per security	per security
Interim Trust income distribution for the year ending 30	10.45	10.45	20,458	20,458
June 2020 to be paid on 5 March 2020
Interim Trust distribution	10.45	10.45	20,458	20,458

No provisions for or payments of Company dividends have been made during the half-year (2018: nil).

6. OPERATIONAL AND FINANCIAL REVIEW

Background

ALE Property Group is the owner of Australia's largest portfolio of freehold pub properties. Established in November 2003, ALE owns a portfolio of 86 pub properties across the five mainland states of Australia. All of the properties in the portfolio are leased to Australian Leisure and Hospitality Group Pty Limited (ALH) for an average remaining initial lease term of 8.8 years plus options for ALH to extend.

ALE's high quality freehold pubs have long term leases that include a number of unique features that add to the security of net income and opportunity for rental growth. Some of the significant features of the leases (for 83 of the 86 properties) are as follows:

• For most of the properties the leases commenced in November 2003 with an initial term of 25 years to 2028;
• The leases are triple net which require ALH to take responsibility for rates, insurance and essentially all structural repairs and maintenance, as well as land tax in all states except Queensland (three of the 86 properties are double net);
• Annual CPI rent increases are not subject to any cap and rents do not decline with negative CPI;
• Change of control protections - a change in more than 20% of the ownership of ALH requires ALE's consent based on its reasonable opinion that ALH will continue to have the financial capacity, business skills, other resources and authorisations to enable it to conduct the permitted operating uses profitably and perform all of its the lease obligations (an exception applies if the change of control arises by virtue of ALH becoming an ASX listed entity)
• Assignment protections - following ALE approved assignments, ALE continues to enjoy the benefit of an effective guarantee from ALH of any new tenant's obligations for the remaining lease term of around 8.8 years, as ALH is not released on assignment;
• All earnings from all improvements on the properties are included for rent review purposes, irrespective of who funded the improvements;
• The rent review for November 2018 is currently underway and is capped and collared within 10% of the 2017 rent; and
• There is a full open rent review (no cap and collar) in November 2028.

Significant changes in the state of affairs

In the opinion of the directors, the following significant changes in the state of affairs of ALE occurred during the half-year:

• The aggregate value of 86 individual properties increased to $1,172.1 million; and
• Net Assets remained stable at $605.5 million and net covenant gearing (gross borrowings less cash as a percentage of total assets less cash, derivatives and deferred tax assets of ALE DPT) decreased to 41.1%.

Current half-year performance

ALE delivered a profit after tax of $20.5 million for the half-year ended 31 December 2019 compared to a profit of $5.6 million for the half-year ended 31 December 2018. The increase is primarily due to:

• Rental income increased by 3.41% due to the full period impact of the 10% increase for 36 properties in November 2018 and the part period impact of an average 1.73% CPI increase for 40 properties during the first half year;
• Fair value decrements to net derivatives decreased from $6.4 million in December 2018 to $2.5 million in the current period as the decrease in long term interest rates was not as significant in the current period;
• Fair value adjustments to investment properties increased from a decrement of $0.3 million in December 2018 to an increment of $8.8 million in the current period as directors decided to keep the properties adopted capitalisation rates unchanged from the June 2019 rates, with a portion of the properties receiving a CPI increase during the period;
• Management costs decreased as costs associated with the rent review submissions decreased significantly in the current period compared to December 2018; and
• Land tax increased as the land tax rate increased from 2.50% to 2.75% in relation to ALE's Queensland properties.

Page 2: ALE Property Group

DIRECTORS' REPORT

For the Half-Year Ended 31 December 2019

ALE has a policy of paying distributions which are subject to the minimum requirement to distribute taxable income of the trust under the Trust Deed. Distributable Profit is a non-IFRS measure that shows how free cash flow is calculated by ALE. Distributable Profit excludes items such as unrealised fair value adjustments arising from the effect of revaluing derivatives and investment properties, non-cash expenses and non-cash financing costs.

During the half-year ALE delivered a distributable profit of $15.6 million compared to $14.0 million in the previous half-year. The table below separates the cash components of ALE's profit that are available for distribution from the non-cash components. The directors believe this will assist stapled securityholders in understanding the results of operations and distributions of ALE. Distributable Profit was impacted by an increase in rent, an increase in land tax and a decrease in management costs.

		December	December
		2019	2018
		$'000	$'000
Profit after income tax for the half-year			5,585
	20,498
Plus /(Less): Adjustments for non-cash items
Fair value adjustments to investment properties		(8,820)	331
Fair value adjustments to derivatives		2,509	6,434
Employee share based payments		125	125
Finance costs - non-cash		1,326	1,539
Income tax expense/(benefit)		(3)	5
Total adjustments for non-cash items		(4,863)	8,434
Total available for distribution		15,635	14,019
Distribution paid or provided for		20,458	20,458
Over distributed for the half-year		(4,823)	(6,439)
Distribution funded as follows
Current half-year distributable profits		15,635	14,019
Capital and surplus cash		4,823	6,439
		20,458	20,458
	Percentage	December	December
	Increase /	2019	2018
	(Decrease)	Cents	Cents
Earnings and distribution per stapled security:
Basic earnings	267.37%	10.47	2.85
Earnings available for distribution	11.59%	7.99	7.16
Total distribution	0.00%	10.45	10.45
Current half-year distributable profits		7.99	7.16
Capital and surplus cash		2.46	3.29
		10.45	10.45

Page 3: ALE Property Group

DIRECTORS' REPORT

For the Half-Year Ended 31 December 2019

Financial position

ALE's net assets remained stable compared with June 2019 as increased property values were offset by reductions in cash. Total liabilities increased by 0.5% during the period.

Investment property values increased by $8.8 million to $1,172.1 million. The November 2018 rent review process is still currently in progress, 36 of the properties have been agreed at 10% increases in rent whilst the remaining 43 properties are subject to a rent determination process. As the rent review process has not been finalised, the Directors received advice from the independent statutory property valuers that:

• the 10% rent increase for 36 properties was adopted by the valuers at June 2019;
• the valuers expectations of rent for the other properties have not altered since they were valued at June 2019;
• the demand for investment properties leased to high grade tenants remains strong;
  • freehold pub properties remain in short supply with limited transactional evidence; and
• it was therefore not unreasonable for the Directors to adopt the same individual property adopted capitalisation rates that prevailed at June 2019.

Therefore the Directors have elected to keep adopted capitalisation rates unchanged as at 31 December 2019. As a proportion of properties received a CPI rent increase during the period, adopted property values increased by $8.8 million, from $1,163.2 million to $1,172.1 million.

When previously assessing statutory valuations at June 2019 the valuers applied both traditional capitalisation rate and discounted cash flow (DCF) based valuation methods. The average adopted property yields reflect a combination of these methods but continues to place significant emphasis upon the traditional capitalisation rate approach.

ALE believes that the DCF method provides a comprehensive view of the quality of the lease and tenant as well as the medium and longer term opportunities for reversion to market based levels of rent. In applying the DCF method the valuers made their own independent assessment of the tenant's current level of EBITDAR and also adopted industry standard market rental ratios. The valuers also used a range of assumptions they deemed appropriate for each of the individual properties. Based upon their assessments and assumptions the valuers' DCF valuations represented a weighted average yield of around 4.61% for the representative sample of 34 properties valued. This compares to the adopted yield of 5.05% for the 34 properties valued which was derived using a combination of the DCF and capitalisation rate methods.

During the half-year, gearing (gross borrowings less cash as a percentage of total assets less cash, derivatives and deferred tax assets of ALE DPT) decreased from 41.5% to 41.1%.

ALE's capital position remains sound. ALE's next debt maturity of $225 million is in August 2020. ALE is already well advanced in preparations for refinancing the amount due with a range of options available to it in order to refinance this debt prior to maturity.

ALE's debt capital structure continues to be characterised by the following positive features:

• investment grade credit rating of Baa2 (stable);
• debt maturity dates that are diversified over the next 3.9 years;
• 100% of forecast net debt hedged for the next 5.9 years;
• interest cover ratio well above covenant level at 2.6 times;
• all up cash interest rate of 4.26% p.a. fixed until the next maturity in August 2020; and
• lower covenant gearing of 41.1% (2018: 41.5%).

Business strategies and future prospects

ALE holds a positive outlook for the rent review prospects for the portfolio. In November 2018 the first major review commenced with the reviewed rent capped and collared within 10% of the November 2017 rent. There is also a full open rent review (no caps or collars) in November 2028.

Following the rent determinations ALE will seek to work constructively with ALH with a focus on maintaining and exploring the potential to further enhance the properties' existing strong profitability through development or better site utilisation.

ALE's Board will review the Group's distribution and capital management policy following the conclusion of the November 2018 rent determinations.

Page 4: ALE Property Group

DIRECTORS' REPORT

For the Half-Year Ended 31 December 2019

Material business risks

ALE is subject to a number of material business risks that may have an impact on the financial prospects of ALE. These risks and how ALE manages them include:

∙ Property valuation risk - the properties that ALE owns have values that are exposed to movements in the Australian commercial property markets, changes in rent and the general levels of long and short term interest rates. ALE is unable to control the market forces that impact ALE's property values however ALE constantly monitors the property market to assess general trends in property values. ALE undertakes on-going condition and compliance audits of our properties and has independent valuers perform valuations on one third of the property portfolio on an annual basis. Declines in ALE's property values will reduce NTA and could also reduce headroom to debt covenants. At 31 December 2019 the closest debt covenant would be triggered by a decline of around 33% in property values and a resultant average property yield of 7.83% based on current passing rents. ALE considers it currently has sufficient headroom in its debt covenants.

∙ Interest rate risk - ALE currently has $530 million of outstanding gross borrowings and consequently faces the risk of reduced profitability and distributions should interest rates on borrowings increase materially. To mitigate this risk ALE uses fixed rate borrowings and hedges variable rate borrowings for the medium and long term. Existing arrangements either fix or hedge ALE's forecasted net debt to November 2025 at weighted average base rates of between 3.11% and 3.46%.

∙ Refinancing risk - ALE currently has outstanding borrowings representing a covenant gearing level of 41.1%. ALE consequently faces refinancing risk as and when borrowings mature and require repayment. Failure, delays or increased credit margins in refinancing borrowings could subject ALE to a number of risks that could potentially impact future earnings. On 3 July 2019 Woolworths announced that it intended to combine ALH and Endeavour Drinks and then separate the combined entity from Woolworths. ALE will continue to monitor these developments closely as the rating of the new tenant may impact ALE's future credit margins. To mitigate these risks ALE proactively staggers debt maturities, continually monitors debt markets, actively seeks to maintain ALE's current credit rating of Baa2 and maintains relationships with diverse funding markets to ensure multiple funding options are available. ALE has a long track record of consistently approaching debt markets for refinancing well in advance of the scheduled debt maturity dates.

∙ Single tenant risk - all 86 of ALE's pub properties are leased to a single tenant. In the event of a default in rental payments by the tenant, ALE may be unable to pay interest on borrowings and distributions to securityholders. ALE manages this risk by monitoring the operating performance of each of the hotels and ALH on a regular basis. ALE also has the option of selling properties and/or issuing equity to meet its debt obligations.

∙ Rental assessment risk - 43 of ALE's 86 pub properties are currently in the process of having their rent determined by independent determining valuers. The results of these determinations could see rent on the properties increasing or decreasing by up to 10%. There is also an uncapped rent review on the majority of properties in November 2028. The interpretation of the lease provisions in respect of rent reviews may have an impact on future rental income derived from the

∙ Regulatory risk - changes to liquor licence regulation or gaming licence regulation could significantly impact the trading performance of the operating businesses of ALH and therefore impact the EBITDAR of our tenant. EBITDAR is a key determining factor for rent reviews and therefore could impact on ALE's long term profitability. ALE is unable to control regulatory changes that may impact on our properties but monitors potential changes and liaises with ALH to understand the potential impact on hotel profitability.

7. AUDITOR'S INDEPENDENCE DECLARATION

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 7.

8. ENVIRONMENTAL REGULATION

While ALE is not subject to significant environmental regulation in respect of its property activities, the directors are satisfied that adequate systems are in place for the management of its environmental responsibilities and compliance with various licence requirements and regulations. Further, the directors are not aware of any material breaches of these requirements. At three properties, ongoing testing and monitoring is being undertaken and minor remediation work is required, however, in most cases ALE is indemnified by third parties against any remediation amounts likely to be required. ALE does not expect to incur any material environmental liabilities.

Page 5: ALE Property Group

DIRECTORS' REPORT

For the Half-Year Ended 31 December 2019

9. ROUNDING OF AMOUNTS

ALE is an entity of the kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to the "rounding off" of amounts in the Directors' Report. Amounts in the Directors' Report and Financial Report have been rounded off in accordance with the Instrument to the nearest thousand dollars, unless otherwise indicated.

This report is made in accordance with a resolution of the directors.

Robert Mactier	Andrew Wilkinson
Chairman	Managing Director
Sydney	Sydney
Dated this 5th day of February 2020

Page 6: ALE Property Group

Lead Auditor's Independence Declaration under Section 307C of the Corporations Act 2001

To the Directors of Australian Leisure and Entertainment Property Management Limited, the Responsible Entity for Australian Leisure and Entertainment Property Trust

I declare that, to the best of my knowledge and belief, in relation to the review for the half-year ended

31 December 2019 there have been:

1. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and
2. no contraventions of any applicable code of professional conduct in relation to the review.

KPMG	Eileen Hoggett

Partner

Sydney

5 February 2020

7

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

FINANCIAL STATEMENTS

Half-Year Report for the period ended 31 December 2019

Page 9 Statement of Comprehensive Income

Page 10 Statement of Financial Position

Page 11 Statement of Changes in Equity

Page 12 Statement of Cash Flows

Notes to the Financial Statements

Page 13	1	About this report
Page 15	2	Investment Property
Page 20	3	Capital structure and financing	3.1	Borrowings
			3.2	Financial Risk Management
			3.3	Equity
			3.4	Capital management
			3.5	Cash and cash equivalents
Page 26	4	Business performance	4.1	Finance costs
			4.2	Distributable income
			4.3	Earnings per security
Page 28	5	Other	5.1	Segment reporting
			5.2	Investments in controlled entities
			5.3	Events occurring after balance date

Page 29	Directors' Declaration
Page 30	Independent Auditor's Report to Stapled Securityholders
Page 32	Investor Information and Corporate Directory

Page 8: ALE Property Group

STATEMENT OF COMPREHENSIVE INCOME

Half-Year Report for the period ended 31 December 2019
		December	December
		2019	2018
	Note	$'000	$'000
Revenue
Rent from investment properties		30,689	29,676
Interest from cash deposits		188	449
Total revenue		30,877	30,125
Other income
Fair value increments to investment properties	2	8,820	-
Total other income		8,820	-
Total income		39,697	30,125
Expenses
Fair value decrements to derivatives		2,509	6,434
Fair value decrements to investment properties	2	-	331
Finance costs	4.1	12,373	12,684
Queensland land tax expense		1,659	1,473
Other expenses		2,661	3,613
Total expenses		19,202	24,535
Profit before income tax		20,495	5,590
Income tax expense/(benefit)		(3)	5
Profit after income tax expense		20,498	5,585
Other comprehensive income		-	-
Other comprehensive income for the period after income tax		-	-
Total comprehensive income for the period		20,498	5,585
Profit attributable to:
Members of ALE		20,498	5,585
Profit for the period		20,498	5,585
Total comprehensive income attributable to:
Members of ALE		20,498	5,585
Total comprehensive income for the period		20,498	5,585
		Cents	Cents
Diluted earnings per stapled security	4.3	10.46	2.85
Basic earnings per stapled security	4.3	10.47	2.85

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

Page 9: ALE Property Group

STATEMENT OF FINANCIAL POSITION

For the Half-Year Ended 31 December 2019
		December	June
		2019	2019
	Note	$'000	$'000
Current assets
Cash and cash equivalents	3.5	25,764	33,111
Derivatives	3.2	389	691
Receivables		179	176
Other		1,993	350
Total current assets		28,325	34,328
Non-current assets
Investment properties	2	1,172,050	1,163,230
Plant and equipment		32	39
Right of use assets		85	-
Deferred tax asset		303	296
Total non-current assets		1,172,470	1,163,565
Total assets		1,200,795	1,197,893
Current liabilities
Payables		8,044	8,634
Borrowings	3.1	224,988	-
Employee entitlements		264	294
Distribution payable		20,458	20,458
Total current liabilities		253,754	29,386
Non-current liabilities
Borrowings	3.1	303,964	527,523
Derivatives	3.2	37,622	35,415
Total non-current liabilities		341,586	562,938
Total liabilities		595,340	592,324
Net assets		605,455	605,569
Equity
Contributed equity	3.3	258,118	258,118
Reserve		725	782
Retained profits		346,612	346,669
Total equity		605,455	605,569
		$	$
Net assets per stapled security		$3.09	$3.09

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

Page 10: ALE Property Group

STATEMENT OF CHANGES IN EQUITY

Half-Year Report for the period ended 31 December 2019

		Share based
	Share Capital	payments	Retained
	reserve	Earnings	Total
	$'000	$'000	$'000	$'000
Half-year ended 31 December 2019
Total equity at the beginning of the half-year	258,118	782	346,669	605,569
Total comprehensive income for the period
Profit/(Loss) for the period	-	-	20,498	20,498
Other comprehensive income	-	-	-	-
Total comprehensive income for the period	-	-	20,498	20,498
Adjustment on initial application of AABS 16	-	-	(27)	(27)
Employee security based payments	-	125	-	125
Employee security based payments - securities
purchased	-	(182)	(70)	(252)
Distribution paid or payable	-	-	(20,458)	(20,458)
Total equity at the end of the half-year	258,118	725	346,612	605,455
Half-year ended 31 December 2018
Total equity at the beginning of the half-year	258,118	855	361,101	620,074
Total comprehensive income for the period
Profit/(Loss) for the period	-	-	5,585	5,585
Other comprehensive income	-	-	-	-
Total comprehensive income for the period	-	-	5,585	5,585
Employee security based payments	-	125	-	125
Employee security based payments - securities
purchased	-	(190)	(136)	(326)
Distribution paid or payable	-	-	(20,458)	(20,458)
Total equity at the end of the half-year	258,118	790	346,092	605,000

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

Page 11: ALE Property Group

STATEMENT OF CASH FLOWS

Half-Year Report for the period ended 31 December 2019
		December	December
		2019	2018
	Note	$'000	$'000
Cash flows from operating activities		33,794	32,677
Receipts from tenant and others
Payments to suppliers and employees		(9,794)	(9,553)
Interest received		195	545
Interest received - interest rate hedges (net)		335	230
Borrowing costs paid		(11,360)	(11,323)
Net cash inflow from operating activities		13,170	12,576
Cash flows from investing activities
Payments for plant and equipment		-	(4)
Payments for investment properties		-	(331)
Net cash inflow/(outflow) from investing activities		-	(335)
Cash flows from financing activities
Payment of lease liabilities		(59)	-
Distributions paid		(20,458)	(20,458)
Net cash inflow/(outflow) from financing activities		(20,517)	(20,458)
Net increase/(decrease) in cash and cash equivalents held		(7,347)	(8,217)
Cash and cash equivalents at the beginning of the half-year		33,111	46,014
Cash and cash equivalents at the end of the half-year	3.5	25,764	37,797
Reconciliation of profit after income tax to net
cash inflows from operating activities		December	December
		2019	2018
		$'000	$'000
Profit for the year		20,498	5,585
Plus/(less):		(8,820)	331
Fair value decrements/(increments) to investment property
Fair value decrements to derivatives		2,509	6,434
Finance costs amortisation		222	210
CIB Accumulated indexation		1,104	1,329
Share based payments expense		125	125
Share based payments securities purchased		(252)	(326)
Depreciation		58	14
Decrease/(increase) in -		(3)	95
Receivables
Deferred tax assets		(7)	(22)
Other assets		(1,643)	(1,384)
Increase/(decrease) in -		(591)	155
Payables
Employee entitlements		(30)	30
Net cash inflow from operating activities		13,170	12,576

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

Page 12: ALE Property Group

Notes to the financial statements

Half-Year Report for the period ended 31 December 2019

1.

About this report

Reporting Entity

ALE is domiciled in Australia. ALE, the stapled entity, was formed by stapling together the units in the Trust and the shares in the Company. For the purposes of financial reporting, the stapled entity reflects the consolidated entity. The parent entity and deemed acquirer in this arrangement is the Trust. The results reflect the performance of the Trust and its subsidiaries including the Company from 1 July 2019 to 31 December 2019.

The stapled securities of ALE are quoted on the Australian Securities Exchange under the code LEP and comprise one unit in the Trust and one share in the Company. The unit and the share are stapled together under the terms of their respective constitutions and cannot be traded separately. Each entity forming part of ALE is a separate legal entity in its own right under the Corporations Act 2001 and Australian Accounting Standards. The ALE Property Group is a for-profit entity.

The Company is the Responsible Entity of the Trust.

Statement of compliance

This general purpose financial report for the interim half-year reporting period ended 31 December 2019 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001.

This interim financial report does not include all of the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2019 and any public announcements made by ALE during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The consolidated financial statements were authorised for issue by the Board of Directors on 5th February 2020.

Going concern basis of accounting

The consolidated financial statements have been prepared on a going concern basis, which assumes the Group will be able to meet mandatory repayment terms of the AMTN tranche due for repayment in August 2020 as disclosed in note 3.1. Current liabilities exceed current assets by $225m.

ALE is already well advanced in preparations for refinancing the amount due with a range of options available to it in order to refinance this debt prior to maturity and is confident that the Group will be able to meet it's debts as and when they fall due.

Accounting estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Accounting estimates and judgements	Note
Investment property	2
Financial instruments	3.2

Rounding of amounts

ALE is an entity of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191 and in accordance with that Instrument, all financial information presented in Australian dollars has been rounded to the nearest thousand unless otherwise stated.

Significant accounting policies

Except as described below, the accounting policies applied in these interim financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 30 June 2019.

The changes in accounting policies are also expected to be reflected in the Group's consolidated financial statements as at and for the year ending 30 June 2020.

The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 July 2019.

AASB 16 Leases

AASB 16 establishes a comprehensive framework for accounting policies and disclosures applicable to leases, both for lessees and lessors. AASB 16 is effective for annual reporting periods beginning on or after 1 January 2019.

The Group applied AASB 16 using the retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly the comparative information for December 2018 is not restated. The details of the changes in accounting policies are disclosed below. Additionally the disclosure requirements in AASB 16 have not been applied to comparative information.

Page 13: ALE Property Group

Notes to the financial statements (continued)

Half-Year Report for the period ended 31 December 2019

1. About this report

Under AASB 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. As a lessee the Group has one lease, for office premises, that was previously classified as an operating lease under AASB 117. Under AASB 16 that lease has been recognised as a right-of- use asset and lease liability.

The Group leases its investment properties. The Group classified these leases as operating leases. The accounting policies applicable to the Group as lessor are not different from those under AASB 117. The Group is not required to make any adjustments on transition to AASB 16 for leases in which it acts as a lessor.

On transition to AASB 16, the Group's recognised right-of use asset and lease liabilities, recognising the difference in retained earnings. When measuring the lease liabilities for the lease that had been classified as an operating lease, lease liabilities were measured at the present value of remaining lease payments, discounted at the Group's incremental borrowing rate as at 1 July 2019. Right-of-use assets were measured at the carrying value as if AASB 16 had been applied since the commencement date discounted using the lessee's incremental borrowing rate at the date of initial application. The incremental borrowing rate applied was 2.10%.

The impact of the transition is summarised below:
Right of use assets		136
Lease liabilities		(162)
Retained earnings		27
Operating lease commitments at 30 June 2019
as disclosed under AASB 16 in the Groups'
financial statements		171
Discounted using the incremental borrowing
rate at 1 July 2019		168
Recognised exemption for leases of low-value
assets		(6)
Lease liability recognised at 1 July 2019		162

Measurement of fair values

A number of the Group's accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

The Group has an established control framework with respect to the measurement of fair values. Senior management regularly review significant inputs not based on observable market data and valuation adjustments. If third party information, such as bank valuations or independent valuations, is used to measure fair values then management assess the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of AASB, including the level in the fair value hierarchy in which such valuations should be classified.

Significant valuation issues are reported to the Audit, Compliance and Risk Management Committee (ACRMC).

When measuring the fair value of an asset or a liability, ALE uses market observable data as far as possible. Fair values are:

Level 1 : quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.

Level 2 : inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 : inputs for the asset or liability that are not based on observable market data.

Page 14: ALE Property Group

Notes to the financial statements (continued)

Half-Year Report for the period ended 31 December 2019

2.

Investment property

This section provides information relating to the investment properties of the Group. ALE has a strong focus on maintaining a quality investment grade portfolio of freehold pub properties.

	December	June
	2019	2019
	$'000	$'000
Investment properties	1,172,050	1,163,230
Reconciliation of fair value gains for half-year ending 31 December 2019
Fair value as at beginning of the half-year	1,163,230	1,136,260
Additions during half-year	-	331
Carrying amount before revaluations	1,163,230	1,136,591
Fair value as at end of the half-year	1,172,050	1,163,230
Fair value gain/(loss) for half-year	8,820	26,639

Recognition and measurement

Properties (including land and buildings) held for long term rental yields and capital appreciation and that are not occupied by ALE are classified as investment properties.

Investment property is initially brought to account at cost which includes the cost of acquisition, stamp duty and other costs directly related to the acquisition of the properties. The properties are subsequently revalued and carried at fair value. Fair value is based on active market prices, adjusted for any difference in the nature, location or condition of the specific asset or where this is not available, an appropriate valuation method which may include discounted cash flow projections and the capitalisation method. The fair value reflects, among other things, rental income from the current leases and assumptions about future rental income in light of current market conditions. It also reflects any cash outflows that could be expected in respect of the property.

Subsequent expenditure is capitalised to the properties' carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to ALE and the cost of the item can be reliably measured. Maintenance and capital works expenditure is the responsibility of the tenant under the triple net leases in place over 83 of the 86 properties. For the remaining three hotels capital works expenditure and structural maintenance is the responsibility of ALE. ALE undertakes periodic condition and compliance reviews by a qualified independent consultant to ensure properties are properly maintained.

Land and buildings that comprise investment property are not depreciated.

The carrying value of the investment property is reviewed at each reporting date and each property is independently revalued at least every three years. Changes in the fair values of investment properties are recorded in the Statement of Comprehensive Income.

Gains and losses on disposal of a property are determined by comparing the net proceeds on disposal with the carrying amount of the property at the date of disposal. Net proceeds on disposal are determined by subtracting disposal costs from the gross sale proceeds.

Measurement of fair value

The basis of valuation of investment properties is fair value, being the amounts for which the properties could be exchanged between willing parties in an arm's length transaction, based on current prices in an active market for similar properties in the same location and condition and subject to similar leases. As at 31 December 2019, the weighted average property yield was 5.09% (June 2019: 5.09%).

ALE has a process for determining the fair value of its investment properties at each reporting date. An independent valuer, having an appropriate professional qualification and recent experience in the location and category of property being valued, values individual properties every three years on a rotation basis or on a more regular basis if considered appropriate in accordance with the Board's approved valuation policy. These external independent valuations are taken into consideration by the Directors when determining the fair value of the investment properties. The weighted average lease term of the properties is around 9 years.

Page 15: ALE Property Group

Notes to the financial statements (continued)

Half-Year Report for the period ended 31 December 2019

2. Investment property

Measurement of fair value (continued)

30 June 2019

In accordance with ALE's policy of independently valuing at least one-third of its property portfolio annually, 34 properties were independently valued as at 30 June 2019. The independent valuations are identified as "A" in the investment property table under the column labelled "Valuation type and date". These valuations were completed by CBRE and Savills.

The remaining 52 properties were subject to Directors' valuations as at 30 June 2019, identified as "B". The Directors' valuations of the 52 properties were determined by taking each property's net rent as at 30 June 2019 and capitalising it at a rate equal to the prior year capitalisation rate for that property, adjusted by the average change in adopted capitalisation rate evident in the 34 independent valuations completed at 30 June 2019 on a like for like basis. The Directors received advice from CBRE and Savills, that it is reasonable to apply the same percentage movement in the weighted average capitalisation rates, on a like for like basis.

31 December 2019

As at 31 December 2019, the November 2018 rent review process is still in progress. There were 79 properties out of 86 that were subject to a rent review, of which 36 have been agreed to receive a 10% increase. The remaining 43 properties are subject to an independent determination process. The Directors have received advice from the independent property valuers that:

• the 10% rent increase for 36 properties was used by the valuers at June 2019;
• the valuers expectations of rent for the other properties have not altered since they were valued at June 2019;
• the demand for investment properties leased to high grade tenants remains strong;
• pub property values, pub rents and underlying capitalisation rates for comparable properties remain substantially unchanged;

• freehold pub properties remain in short supply with limited transactional evidence; and
• it was not unreasonable for the Directors to adopt the same individual adopted yields that prevailed at June 2019.

Accordingly the Directors have elected to keep the adopted property yields as assessed at June 2019.

Valuations reflect, where appropriate, the tenant in occupation, the credit worthiness of the tenant, the triple-net nature and remaining term of the leases (83 of 86 properties), land tax liabilities (Queensland only), insurance responsibilities between lessor and lessee and the remaining economic life of the property. It has been assumed that whenever rent reviews or lease renewals are pending with anticipated reversionary increases, all notices and, where appropriate, counter notices, have been served validly and within the appropriate time.

Valuation methodologies

Discounted cash flow

The discounted cash flow method calculates a property's value by using projections of reliable estimates of future cash flows, derived from the term of existing leases, and from external evidence such as current market rents for similar properties in the same area and condition, and using discount rates that reflect the current market assessments of the uncertainty in the amount and timing of cash flows specific to the property.

Capitalisation of income valuation

The capitalisation of income valuation method capitalises the current rent received, at a rate analysed from the most recent transactions of comparable property investments. The capitalisation rate used varies across properties. Valuations reflect, where appropriate, the quality of the tenant, lease term remaining, the relationship of current rent to the market rent, location and prevailing investment market conditions.

A table showing the range of property yields applied to individual properties for each state in which the property is held is included below.

	December	June	December	June
	2019	2019	2019	2019
	Average property yields	Average property yields	Average	Average
New South Wales	4.57% - 5.96%	4.57% - 5.96%	5.11%	5.11%
Queensland	3.22% - 6.31%	3.22% - 6.31%	5.02%	5.02%
South Australia	4.02% - 5.80%	4.02% - 5.80%	5.07%	5.07%
Victoria	2.75% - 6.00%	2.75% - 6.00%	5.06%	5.06%
Western Australia	5.80% - 6.93%	5.80% - 6.93%	6.28%	6.22%

Page 16: ALE Property Group

Notes to the financial statements (continued)

Half-Year Report for the period ended 31 December 2019

2. Investment property

The fair value measurement for investment property of $1,172.05 million has been categorised as a level 3 fair value based on inputs to the valuation technique used.

Valuation techniques and unobservable inputs

		Fair Value			Range of Individual
Fair Value	Class of	December			Property Unobservable
2019	Valuation	Inputs Used To Measure	inputs (June 2019
Hierarchy	Property	$000's	Technique	Fair Value	valuations)
Level 3	Pubs	1,172,050	Capitalisation	Gross rent p.a. ($'000's)	$84 - $1,782
			method	Land tax p.a. ($'000's)	$7 - $166
				Adopted yields	2.75% - 6.93%
			Discounted	Gross rent p.a. ($'000's)	$84 - $1,782
			cash flow	Land tax p.a. ($'000's)	$7 - $166
			method	Discount rates p.a.	6.25% - 9.36%
				Terminal capitalisation rates	5.50% - 7.75%
				Consumer price index p.a.	2.00% - 2.60%

As noted above the independent valuers had regard to discounted cash flow modelling and the traditional capitalisation rate methodology in determining a final adopted property yields although the capitalisation of income method remains the predominant method used in valuing the individual properties.

Ownership arrangements

All investment properties are freehold and 100% owned by ALE and comprise land, buildings and fixed improvements. The plant and equipment, liquor and gaming licences, leasehold improvements and certain development rights are held by the tenant.

Leasing arrangements

83 of the 86 properties in the portfolio are leased to ALH on a triple net basis for 25 years, mostly starting in November 2003, with four 10 year options for ALH to renew. The remaining three properties are leased on long term leases to ALH on a double net basis.

December	December
2019	2018
$'000	$'000

(i) Future minimum lease payments

The future minimum lease payments in relation to non-

cancellable leases are receivable as follows:
Within one year	63,259	63,283
Later than one year but not
later than five years	265,941	261,698
Later than five years	350,657	362,359
	679,857	687,340

(ii) Amount

Rental income30,689 29,676

The majority of ALE's leases expire in November 2028 and have four options of 10 years to extend. As the exercise of the options are unknown at this point the future minimum lease payments exclude the options. The comparative numbers have been calculated on the same basis.

Put and call options

For most of the investment properties, at the end of the initial lease term of 25 years (2028 for most of the portfolio), and at the end of each of four subsequent ten year terms if the lease is not renewed, there is a call option for ALE (or its nominee) and a put option for the tenant to require the landlord (or its nominee) to buy plant, equipment, goodwill, inventory, all then current consents, licences, permits, certificates, authorities or other approvals, together with any liquor licence, held by the tenant in relation to the premises. The gaming licence is to be included or excluded at the tenant's option. These assets are to be purchased at current value, at that time, as determined by the valuation methodology set out in the leases. ALE must pay the purchase price on expiry of the lease. Any leasehold improvements funded and completed by the tenant will be purchased by ALE from the tenant at each property for an amount of $1.

Valuation type and date

The following tables detail the cost and fair value of each of

the Group's investment properties. The valuation type and
date is as follows:
A	Independent valuations conducted during
	June 2019 with a valuation date of 30 June
	2019.
B	Directors' valuations conducted during June
	2019 with a valuation date of 30 June 2019.
C	Directors' valuations conducted during

December 2019 with a valuation date of 31 December 2019.

Properties were purchased in November 2003, unless otherwise indicated.

Page 17: ALE Property Group

Notes to the financial statements (continued)

Half-Year Report for the period ended 31 December 2019

2. Investment property

					Fair Value
	Cost		Fair value	Fair value	gains/
		(losses) for
	including	Valuation	at December	at June	December
	additions	2019	2019	2019
Property	$'000	type	$'000	$'000	$'000
New South Wales		C, A	14,120	13,900	220
Blacktown Inn, Blacktown	5,472
Brown Jug Hotel, Fairfield Heights	5,660	C, B	14,180	13,960	220
Colyton Hotel, Colyton	8,208	C, B	21,080	20,750	330
Crows Nest Hotel, Crows Nest	8,772	C, A	23,160	22,800	360
Melton Hotel, Auburn	3,114	C, B	7,990	7,870	120
Narrabeen Sands Hotel, Narrabeen (Mar 09)	8,945	C, B	16,130	16,130	-
New Brighton Hotel, Manly	8,867	C, B	11,540	11,540	-
Pioneer Tavern, Penrith	5,849	C, B	15,290	15,050	240
Pritchard's Hotel, Mount Pritchard (Oct 07)	21,130	C, B	30,800	29,900	900
Smithfield Tavern, Smithfield	4,151	C, A	10,560	10,400	160
Total New South Wales properties	80,168		164,850	162,300	2,550
Queensland
Albany Creek Tavern, Albany Creek	8,396	C, A	19,070	18,700	370
Alderley Arms Hotel, Alderley	3,303	C, B	7,540	7,540	-
Anglers Arms Hotel, Southport	4,434	C, B	11,420	11,210	210
Balaclava Hotel, Cairns	3,304	C, B	13,810	13,540	270
Breakfast Creek Hotel, Breakfast Creek	11,024	C, A	23,950	23,500	450
Burleigh Heads Hotel, Burleigh Heads (Nov 08)	6,685	C, A	15,940	15,700	240
Camp Hill Hotel, Camp Hill	2,265	C, A	6,650	6,500	150
Chardons Corner Hotel, Annerly	1,416	C, B	3,470	3,500	(30)
Dalrymple Hotel, Townsville	3,208	C, A	14,480	14,200	280
Edge Hill Tavern, Manoora	2,359	C, B	6,210	6,230	(20)
Edinburgh Castle Hotel, Kedron	3,114	C, A	7,400	7,400	-
Four Mile Creek, Strathpine (Jun 04)	3,672	C, B	8,910	8,940	(30)
Hamilton Hotel, Hamilton	6,604	C, B	16,190	15,990	200
Holland Park Hotel, Holland Park	3,774	C, A	15,510	15,200	310
Kedron Park Hotel, Kedron Park	2,265	C, A	4,800	4,800	-
Kirwan Tavern, Townsville	4,434	C, B	13,170	12,920	250
Lawnton Tavern, Lawnton	4,434	C, B	9,220	9,250	(30)
Miami Tavern, Miami	5,548	C, B	14,220	14,620	(400)
Mount Gravatt Hotel, Mount Gravatt	3,208	C, B	7,110	7,110	-
Mount Pleasant Tavern, Mackay	1,794	C, B	11,510	11,290	220
Noosa Reef Hotel, Noosa Heads (Jun 04)	6,874	C, B	11,490	11,490	-
Nudgee Beach Hotel, Nudgee	3,020	C, B	6,860	6,900	(40)
Palm Beach Hotel, Palm Beach	6,886	C, B	14,050	14,510	(460)
Pelican Waters, Caloundra (Jun 04)	4,237	C, A	7,600	7,600	-
Prince of Wales Hotel, Nundah	3,397	C, A	9,590	9,400	190
Racehorse Hotel, Booval	1,794	C, B	7,400	7,240	160
Redland Bay Hotel, Redland Bay	5,189	C, A	9,730	10,000	(270)
Royal Exchange Hotel, Toowong	5,755	C, B	10,110	10,110	-
Springwood Hotel, Springwood	9,150	C, B	20,590	20,260	330
Stones Corner Hotel, Stones Corner	5,377	C, A	10,740	10,800	(60)
Vale Hotel, Townsville	5,661	C, A	15,300	15,300	-
Wilsonton Hotel, Toowoomba	4,529	C, A	13,560	13,300	260
Total Queensland properties	147,110		367,600	365,050	2,550

Page 18: ALE Property Group

Notes to the financial statements (continued)

Half-Year Report for the period ended 31 December 2019

2. Investment property

					Fair Value
	Cost		Fair value	Fair value	gains/
		(losses) for
	including	Valuation	at December	at June	December
	additions	2019	2019	2019
Property	$'000	type	$'000	$'000	$'000
South Australia
Aberfoyle Hub Tavern, Aberfoyle Park	3,303	C, B	7,250	7,250	-
Eureka Tavern, Salisbury	3,303	C, A	6,300	6,300	-
Exeter Hotel, Exeter	1,888	C, A	5,000	5,000	-
Finsbury Hotel, Woodville North	1,605	C, A	4,700	4,700	-
Gepps Cross Hotel, Blair Athol	2,507	C, B	8,350	8,200	150
Hendon Hotel, Royal Park	1,605	C, B	4,200	4,200	-
Stockade Tavern, Salisbury	4,435	C, B	6,250	6,250	-
Total South Australian properties	18,646		42,050	41,900	150
Victoria
Ashley Hotel, Braybrook	3,963	C, A	10,780	10,600	180
Bayswater Hotel, Bayswater	9,905	C, B	22,400	22,400	-
Berwick Inn, Berwick (Feb 06)	15,888	C, A	20,800	20,800	-
Blackburn Hotel, Blackburn	9,433	C, B	19,870	19,870	-
Blue Bell Hotel, Wendouree	1,982	C, A	5,590	5,500	90
Boundary Hotel, East Bentleigh (Jun 08)	17,943	C, B	27,130	27,130	-
Burvale Hotel, Nunawading	9,717	C, A	25,000	25,000	-
Club Hotel - FTG, Ferntree Gully	5,095	C, B	12,410	12,410	-
Cramers Hotel, Preston	8,301	C, B	19,360	19,360	-
Deer Park Hotel, Deer Park	6,981	C, B	18,820	18,510	310
Doncaster Inn, Doncaster	12,169	C, B	26,040	26,040	-
Ferntree Gully Hotel/Motel, Ferntree Gully	4,718	C, B	9,160	9,160	-
Gateway Hotel, Corio	3,114	C, B	8,850	8,700	150
Keysborough Hotel, Keysborough	9,622	C, B	24,810	24,400	410
Mac's Melton Hotel, Melton	6,886	C, A	16,270	16,000	270
Meadow Inn Hotel/Motel, Fawkner	7,689	C, B	18,400	18,400	-
Mitcham Hotel, Mitcham	8,584	C, A	17,800	17,800	-
Morwell Hotel, Morwell	1,511	C, B	2,620	2,620	-
Olinda Creek Hotel, Lilydale	3,963	C, B	9,060	9,060	-
Pier Hotel, Frankston	8,019	C, A	16,700	16,700	-
Plough Hotel, Mill Park	8,490	C, A	19,570	19,250	320
Prince Mark Hotel, Doveton	9,810	C, B	22,390	22,390	-
Royal Exchange, Traralgon	2,171	C, A	6,710	6,600	110
Sandbelt Club Hotel, Moorabbin	10,849	C, A	25,500	25,500	-
Sandown Park Hotel/Motel, Noble Park	6,321	C, B	14,750	14,510	240
Sandringham Hotel, Sandringham	4,529	C, A	13,500	13,500	-
Somerville Hotel, Somerville	2,733	C, B	7,790	7,660	130
Stamford Inn, Rowville	12,733	C, A	29,790	29,300	490
Sylvania Hotel, Campbellfield	5,377	C, A	13,220	13,000	220
The Vale Hotel, Mulgrave	5,566	C, B	15,860	15,600	260
Tudor Inn, Cheltenham	5,519	C, B	13,020	13,020	-
Village Green Hotel, Mulgrave	12,546	C, A	28,000	28,000	-
Young & Jackson, Melbourne	6,132	C, B	23,790	23,400	390
Total Victorian properties	248,259		565,760	562,190	3,570
Western Australia
Queens Tavern, Highgate	4,812	C, B	10,090	10,090	-
Sail & Anchor Hotel, Fremantle	3,114	C, B	4,700	4,700	-
The Brass Monkey Hotel, Northbridge (Nov 07)	7,815	C, B	9,550	9,550	-
Balmoral Hotel, East Victoria Park (Jul 07)	6,645	C, B	7,450	7,450	-
Total Western Australian properties	22,386		31,790	31,790	-
Total investment properties	516,569		1,172,050	1,163,230	8,820

Page 19: ALE Property Group

Notes to the financial statements (continued)

Half-Year Report for the period ended 31 December 2019

3.

Capital structure and financing

This section provides information on the Group's capital structure and its exposure to financial risk, how they affect the Group's financial position, and how the risks are managed.

3.1	Borrowings	3.4	Capital management
3.2 Financial risk management	3.5	Cash and cash equivalents
3.3	Equity

3.1 Borrowings

December	June
2019	2019
$'000	$'000

Current borrowings

Australian Medium Term

Notes (AMTN)	224,885	-
Lease liability	103	-
	224,988	-
Non-current borrowings
Capital Indexed Bond (CIB)	154,481	153,331
Australian Medium Term	149,483	374,192
Notes (AMTN)
	303,964	527,523

Recognition and measurement

Interest bearing liabilities are initially recognised at cost, being the fair value of the consideration received, net of issue and other transaction costs associated with the borrowings.

After initial recognition, interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method. Under this method, fees, costs, discounts and premiums directly related to the financial liability are spread over the expected life of the borrowings on an effective interest rate basis.

Assets pledged as security

The carrying amounts of assets pledged as security as at the balance date for CIB borrowings and certain interest rate derivatives are:

	December	June
	2019	2019
CIB	$'000	$'000
Gross value of debt	111,900	111,900
Accumulated indexation	43,037	41,934
Unamortised borrowing costs	(456)	(503)
Net balance	154,481	153,331

$125 million of CIB was issued in May 2006 of which $111.9 million face value remains outstanding. A fixed rate of interest of 3.40% p.a. (including credit margin) applies to the CIB and is payable quarterly, with the outstanding balance of the CIB accumulating quarterly in line with the national consumer price index. The total amount of the accumulating indexation is not payable until maturity of the CIB in November 2023.

	December	June
	2019	2019
	$'000	$'000
Current assets
Cash - CIB borrowings	8,390	8,390
reserves
Non-current assets
Total investment properties	1,172,050	1,163,230
Less: Properties not subject to
mortgages:
Pritchard's Hotel, NSW	(30,800)	(29,900)
Miami Hotel, QLD1	(1,470)	(1,480)
Properties subject to	1,139,780	1,131,850
mortgages
Total assets	1,148,170	1,140,240

1. Adjoining property purchased in April 2018

	December	June
	2019	2019
AMTN	$'000	$'000
Gross value of debt	375,000	375,000
Unamortised borrowing costs	(632)	(808)
Net balance	374,368	374,192
Current Liability	224,885	-
Non Current Liability	149,483	374,192
Net balance	374,368	374,192

The AMTN are fixed rate securities with interest payable semi annually.

In the unlikely event of a default by the properties' tenant, Australian Leisure and Hospitality Group Pty Limited (ALH), and if the assets pledged as security are insufficient to fully repay CIB borrowings, the CIB holders are also entitled in certain circumstances to recover certain unpaid amounts from the business assets of ALH.

Borrowing facility

In December 2019, ALE established a $20 million committed bank facility with a termination date of 23 December 2020. At balance date the bank facility is undrawn.

Page 20: ALE Property Group

Notes to the financial statements (continued)

Half-Year Report for the period ended 31 December 2019

3. Capital structure and financing

Terms and Repayment Schedule

	Nominal		31 December 2019	30 June 2019
	Maturity
	Interest		Carrying		Carrying
	Rate	Date1	Face Value	Amount	Face Value	Amount
			$'000	$'000	$'000	$'000
AMTN	5.00%	Aug-2020	225,000	225,000	225,000	225,000
AMTN	4.00%	Aug-2022	150,000	150,000	150,000	150,000
CIB	3.40%2	Nov-2023	111,900	154,937	111,900	153,834
			486,900	529,937	486,900	528,834
Unamortised borrowing costs				(1,088)		(1,311)
Lease liabilities				103		-
Total borrowings				528,952		527,523

1. Maturity date refers to the first scheduled maturity date for each tranche of borrowing.
2. Interest is payable on the indexed balance of the CIB at a fixed rate.

Reconciliation of movements in liabilities to cash flows arising from financing activities

		CIB	AMTN	Total
	Lease liability	Borrowings	Borrowings	Borrowings
Balance as at 1 July 2019	-	153,331	374,192	527,523
Changes from financing cash flows
Payment of lease liabilities	(59)	-	-	(59)
Total changes from financing cash flows	(59)	-	-	(59)
Other changes
Adjustment on initial application of AASB 16	162	-	-	162
Amortisation of capitalised borrowing costs	-	46	176	222
Accumulated indexation	-	1,104	-	1,104
Total other changes	162	1,150	176	1,488
Balance as at 31 December 2019	103	154,481	374,368	528,952

3.2 Financial Risk Management	Valuation techniques used to derive Level 2 fair
The Group's financial risk management objectives and policies	values
are consistent with those disclosed in the consolidated	The fair value of derivatives is determined by using
financial statements as at and for the year ended 30 June	counterparty mark-to-market valuation notices, cross checked
2019.	internally by using a generally accepted pricing model based
Fair Value	on discounted cash flow analysis using quoted market inputs
(interest rates) adjusted for specific features of the
The basis for determining fair values is disclosed in Note 1.	instruments and applying a debit or credit value adjustment
based on ALE's or the derivative counterparty's credit
The fair value of derivative financial instruments (level 2) is	worthiness.
Credit value adjustments are applied to mark-to-market
disclosed in the Statement of Financial Position.
	assets based on the counterparty's credit risk using the credit
AMTN and CIB Borrowings are classed as Level 2.	default swap curves as a benchmark for credit risk.
The carrying amount of all financial assets and liabilities	Debit value adjustments are applied to mark-to-market
approximates their fair value with the exception of	liabilities based on the ALE's credit risk using the credit rating
borrowings which is shown below:	of ALE issued by a rating agency for the recent AMTN issue.
	31 December 2019	30 June 2019
	Carrying		Carrying
	Amount	Fair Value	Amount	Fair Value
	$'000	$'000	$'000	$'000
CIB	154,481	172,368	153,331	168,488
AMTN	374,368	384,261	374,192	385,035
	528,849	556,629	527,523	553,523

Page 21: ALE Property Group

Notes to the financial statements (continued)

Half-Year Report for the period ended 31 December 2019

3. Capital structure and financing

Interest rate hedges

ALE uses derivative financial instruments, being interest rate hedges, to manage its exposure to interest rate risk on borrowings. As at balance date, ALE has hedged all non CIB net borrowings past the maturity date of the AMTN through nominal interest rate hedges.

	December	June
	2019	2019
	$'000	$'000
Current assets	389	691
Non current assets	-	-
Total assets	389	691
Current liabilities	-	-
Non current liabilities	(37,622)	(35,415)
Total liabilities	(37,622)	(35,415)
Net assets/(liabilities)	(37,233)	(34,724)
Fair value adjustments to derivatives
	December	December
	2019	2018
	$'000	$'000
Fair value increments/
(decrements) to interest rate	(2,509)	(6,434)
derivatives

ALE documents, at the inception of any hedging transaction, the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. ALE also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.

To date, ALE has not designated any of its derivatives as cash flow hedges and accordingly ALE has valued them all at fair value with movements recorded in the Statement of Comprehensive Income.

The gain or loss from marking to market the interest rate hedges (derivatives) at fair value is taken directly to the Statement of Comprehensive Income.

At 31 December 2019, the notional principal amounts and periods of expiry of the interest rate derivative contracts are as follows:

	Nominal Interest Rate
	Hedges
	December	June
	2019		2019
	$'000		$'000
Less than 1 year	(30,000)		(30,000)
1 - 2 years	-		-
2 - 3 years	-		-
3 - 4 years	-		-
4 - 5 years	-		-
Greater than 5 years	506,000		506,000
	476,000		476,000

Recognition and measurement

Interest rate hedges are initially recognised at fair value and are subsequently remeasured to their fair value at each reporting date. Any gains or losses arising from the change in fair value of the interest rate hedges are recognised in the Statement of Comprehensive Income.

Page 22: ALE Property Group

Notes to the financial statements (continued)

Half-Year Report for the period ended 31 December 2019

3. Capital structure and financing

ALE has a series of forward start hedges in place and a $30 million counter hedge that terminates in May 2020. The forward start hedge commences on the date of the maturity of the August 2020 AMTN borrowings. The forward start hedges terminate in November 2025.

The hedge contracts require settlement of net interest receivable or payable on a quarterly basis. The settlement dates coincide with the dates on which interest is payable on the underlying borrowings. The contracts are settled on a net basis.

The average term of the interest rate hedges and fixed rate securities in relation to the total borrowings of ALE is 5.9 years at 31 December 2019.

The following chart shows the hedge balances over the life of the hedges.

Financial covenants

ALE is required to comply with certain financial covenants in respect of its borrowing and hedging facilities. The major financial covenants are summarised as follows:

Interest Cover Ratio covenants (ICR)

Borrowing	ICR covenant	Consequence
CIB	ALH EBITDAR to be greater than 7.5 times CIB	Stapled security distributions lockup
	Interest expense
AMTN	ALE DPT EBITDA to be greater than or equal to	Note holders may call for notes to be
	1.5 times ALE DPT interest expense	redeemed
Hedging	As per AMTN above	As per AMTN above

Definitions

Interest amounts include all derivative rate swap payments and receipts.

EBITDAR - Earnings before Interest, Tax, Depreciation, Amortisation and Rent for ALE owned properties.

Rating covenant

Borrowing	Covenant	Consequence
AMTN	AMTN issue rating to be maintained at	Published rating of Ba1/BB+ or lower results
	investment grade. (i.e. at least Baa3/BBB-)	in a step up margin of 1.25% to be added to
		the interest rate payable

Page 23: ALE Property Group

Notes to the financial statements (continued)

Half-Year Report for the period ended 31 December 2019

3. Capital structure and financing

Loan to Value Ratio covenants (LVR)

Borrowing	LVR Covenant	Consequence
CIB	The issuance of new CIB is not permitted if the	Note holders may call for notes to be
	indexed value of the resultant CIB exceeds	redeemed
	25% of the value of properties held as security
CIB	Outstanding value of CIB not to exceed 66.6%	Note holders may call for notes to be
	of the value of properties held as security	redeemed
AMTN	The new issuance of Net Priority Debt is not	Note holders may call for notes to be
	permitted to exceed 20% of Net Total Assets	redeemed
AMTN	Net Finance Debt not to exceed 60% of Net	Stapled Security distribution lockup
	Total Assets
AMTN	Net Finance Debt not to exceed 65% of Net	Note holders may call for notes to be
	Total Assets	redeemed
Hedging	As per AMTN above	As per AMTN above
Definitions
All covenants exclude the mark to market value of derivatives.
Net Total Assets	Total Assets less Cash less Derivative Assets less Deferred Tax Assets.
Net Priority Debt	ALE Finance Company Pty Limited (ALEFC) borrowings less Cash held against the ALEFC
	borrowings, divided by Total Assets less Cash less Derivative Assets less Deferred Tax Assets.
Net Finance Debt	Total Borrowings less Cash, divided by Total Assets less Cash less Derivative Assets less
	Deferred Tax Assets.

ALE currently considers that significant headroom exists with respect of all the above covenants. At all times during the periods ended 31 December 2019 and 30 June 2019, ALE and its subsidiaries were in compliance with all the above covenants.

3.3 Equity

	December	June
	2019	2019
	$'000	$'000
Balance at the beginning of	258,118	258,118
the period	-	-
No movements
Closing balance	258,118	258,118
Movements in the number	Number of	Number of
of fully paid stapled	Stapled	Stapled
securities during the year	Securities	Securities
Stapled securities on issue:
Opening balance	195,769,080	195,769,080
No movements	-	-
Closing balance	195,769,080	195,769,080

Measurement and recognition

Ordinary units and ordinary shares are classified as contributed equity.

Incremental costs directly attributable to the issue of new units, shares or options are shown in Contributed Equity as a deduction, net of tax, from the proceeds.

Stapled securities

Each stapled security comprises one share in the Company and one unit in the Trust. They cannot be traded or dealt with separately. Stapled securities entitle the holder to participate in dividends/distributions and the proceeds on any winding-up of ALE in proportion to the number of, and amounts paid on, the securities held. On a show of hands every holder of stapled securities present at a meeting in person or by proxy, is entitled to one vote. On a poll, each ordinary shareholder is entitled to one vote for each fully paid share and each unit holder is entitled to one vote for each fully paid unit.

No income voting units (NIVUS)

The Trust issued 9,080,010 of no income voting units (NIVUS) to the Company, fully paid at $1.00 each in November 2003. The NIVUS are not stapled to shares in the Company, have an issue and withdrawal price of $1.00, carry no rights to income from the Trust and entitle the holder to no more than $1.00 per NIVUS upon the winding-up of the Trust. The Company has a voting power of 4.43% in the Trust as a result of the issue of NIVUS. The NIVUS are disclosed in the Company and the Trust financial reports but are not disclosed in the ALE Property Group financial report as they are eliminated on consolidation.

Page 24: ALE Property Group

Notes to the financial statements (continued)

Half-Year Report for the period ended 31 December 2019

3. Capital structure and financing

3.4 Capital management	3.5 Cash and cash equivalents
Capital management

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain the future development of the business. The Board of Directors monitors the return on capital and the level of gearing.

The Board seeks to maintain a balance between the higher returns that may be achieved with higher levels of borrowings and the advantages and security afforded by a sound capital position. ALE seeks to ensure that capital is efficiently used at all times. Additionally, the available total returns on potential new acquisitions are tested against the anticipated weighted cost of capital at the time of the acquisition.

	December	June
	2019	2019
	$'000	$'000
Cash at bank and in hand		14,648
2,801
Deposits at call	14,573	10,073
Cash reserve	8,390	8,390
	25,764	33,111

Recognition and measurement

For the purposes of the cash flow statement, cash and cash equivalents includes cash at bank, deposits at call and short term money market securities which are readily convertible to cash.

Gearing ratios are monitored in the context of any increase or decrease from time to time based on existing property value movements, acquisitions completed, the levels of debt financing used and a range of prudent financial metrics, both at the time and on a projected basis going forward.

The total gearing ratios (total liabilities as a percentage of total assets) at 31 December 2019 and 30 June 2019 were 49.6% and 49.4% respectively.

The covenent gearing ratios (gross borrowings less cash as a percentage of total assets less cash, derivatives and deferred tax assets of ALE DPT) at 30 December 2019 and 30 June 2019 were 41.1% and 41.5% respectively.

Cash obligations

An amount of $8.39 million is required to be held as a cash reserve as part of the terms of the CIB issue in order to provide liquidity for CIB obligations to their scheduled maturity date of 20 November 2023.

An amount of $2 million is required to be held in a term deposit by the Company to meet minimum net tangible asset requirements of the AFSL licence.

Page 25: ALE Property Group

Notes to the financial statements (continued)

Half-Year Report for the period ended 31 December 2019

4.

Business performance

This section provides the information that is most relevant to understanding the financial performance of the Group during the financial year and, where relevant, the accounting policies applied and the critical judgements and estimates made.

4.1 Finance costs				4.3 Earnings per security
4.2 Distributable income
4.1 Finance costs				4.2 Distributable income
	December	December		Reconciliation of profit after tax to amounts available for
	2019	2018		distribution:
	$'000	$'000			December	December
					2019	2018
Finance costs - cash		2,596			$'000	$'000
Capital Indexed Bonds (CIB)	2,625		Profit after income tax	20,498	5,585
Australian Medium Term	8,665	8,665		Plus /(less)
Notes (AMTN)
Interest rate derivative	(354)	(231)		Fair value adjustments to	(8,820)	331
payments/(receipts)		investment properties
Other finance expenses	111	115		Fair value adjustments to	2,509	6,434
	11,047	11,145		derivatives
Finance costs - non-cash				Employee share based	125	125
1,104	1,329		payments expense
Accumulating indexation - CIB		Finance costs - non cash	1,326	1,539
Amortisation - CIB	46	43		Income tax expense/(benefit)	(3)	5
Amortisation - AMTN	176	167		Adjustments for non-cash	(4,863)	8,434
	1,326	1,539		items
Finance costs (cash and
non-cash)	12,373	12,684		Total available for distribution	15,635	14,019
Recognition and measurement			Distribution paid or provided	20,458	20,458
		for
Interest expense is recognised on an accruals basis.		Over distributed	(4,823)	(6,439)

Borrowing costs are recognised using the effective interest rate method.

Amounts represent net cash finance costs after derivative payments and receipts.

Finance cost details

Other borrowing costs such as rating agency fees and liquidity fees.

Establishment costs of the various borrowings are amortised over the period of the borrowing on an effective rate basis.

Distribution funded as follows
Current year distributable	15,635	14,019
profits
Capital and surplus cash	4,823	6,439
	20,458	20,458

Page 26: ALE Property Group

Notes to the financial statements (continued)

Half-Year Report for the period ended 31 December 2019

4. Business performance

4.3 Earnings per security

Basic earnings per stapled security

The calculation of basic earnings per stapled security is based on the profit attributable to ordinary securityholders and the weighted-average number of ordinary stapled securities outstanding.

	December	December
	2019	2018
Profit attributable to members
of the Group ($000's)	20,498	5,585
Weighted average number of
stapled securities	195,769,080	195,769,080
Basic earnings per security
(cents)	10.47	2.85

Distributable profit per security

ALE has a policy of paying distributions which are subject to the minimum requirement to distribute taxable income of the trust under the Trust Deed. Distributable Profit is a non-IFRS measure that shows how free cash flow is calculated by ALE. Distributable Profit excludes items such as unrealised fair value (increments)/decrements arising from the effect of revaluing derivatives and investment property, non-cash expenses and non-cash financing costs.

The calculation of distributable profit per stapled security is based on the distributable profit attributable to ordinary securityholders and the number of ordinary stapled securities outstanding.

Diluted earnings per stapled security

The calculation of diluted earnings per stapled security is based on the profit attributable to ordinary securityholders and the weighted-average number of ordinary stapled securities outstanding after adjustments for the effects of all dilutive potential ordinary stapled securities.

	December	December
	2019	2018
Profit attributable to members
of the Group ($000's)	20,498	5,585
Weighted average number of
stapled securities	195,911,039	195,932,008
Diluted earnings per security	10.46	2.85
(cents)

	December	December
	2019	2018
Distributable profit
attributable to members of
the Group ($000's)	15,635	14,019
Number of stapled securities	195,769,080	195,769,080
Distributable profit per	7.99	7.16
security (cents)
Distributed profit per security
	December	December
	2019	2018
Distributable income per	7.99	7.16
stapled security
Distribution paid per stapled	10.45	10.45
security
Under/(over) distributed for	(2.46)
the half year	(3.29)

Page 27: ALE Property Group

Notes to the financial statements (continued)

Half-Year Report for the period ended 31 December 2019

5.

Other

This section provides details on other required disclosures relating to the Group to comply with the accounting standards and other pronouncements.

5.1	Segment information	5.3 Events occurring after reporting date
5.2	Investments in controlled entities

5.1 Segment information

Business segment

The Trust determines and presents its operating segment based on the internal information that is provided to the Managing Director, who is the Trust's chief operating decision maker.

The Trust operates wholly within Australia and derives rental income from investments in pub properties and as such this is considered to be the only segment in which the Trust is engaged.

All of ALE Property Group's pub properties are leased to ALH, and accordingly 100% of the pub rental income is received from ALH (2018: 100%). Non pub rental income comprises less than 1% of total revenue.

5.2 Investments in controlled entities

The Trust owns 100% of the issued units of the Sub Trust. The Sub Trust owns 100% of the issued shares of the Finance Company. The Trust owns none of the issued shares of the Company, but is deemed to be its "acquirer" under AASB.

In addition, the Trust owns 100% of the issued units of ALE Direct Property Trust No.3, which in turns owns 100% of the issued shares of ALE Finance Company No.3 Pty Limited.

Both of these Trust subsidiaries are dormant.

5.3 Events occurring after reporting date

Subsequent to 31 December 2019, long term interest rates have declined. This has resulted in an increase in the fair value of the net derivative liability position in the period since 31 December 2019. As at 3 February 2020 the value of that liability has increased by approximately $8.7 million to $45.9 million. The liability has not changed materially between 3 February 2020 and the date of this report.

Apart from the above, there has not arisen in the interval between the end of the financial year and the date of this report, any transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.

Page 28: ALE Property Group

Directors Declaration

Half-Year Report for the period ended 31 December 2019

In the directors' opinion:

1. the financial statements and notes set out on pages 9 to 28 are in accordance with the Corporations Act 2001 including:
2. 1. giving a true and fair view of the Company's financial position as at 31 December 2019 and of its performance for the six month period ended on that date: and
   2. complying with Australian Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and
3. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the directors.

Robert Mactier	Andrew Wilkinson
Chairman	Managing Director
Sydney	Sydney
Dated this 5th day of February 2020

Page 29: ALE Property Group

Independent Auditor's Review Report

To the stapled security holders of ALE Property Group

Report on the Half-year Financial Report

Conclusion

We have reviewed the accompanying Half-yearFinancial Report of ALE Property Group ("the Stapled Group").

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the Half-year Financial Report of ALE Property Group is not in accordance with the Corporations Act 2001, including:

• giving a true and fair view of the Stapled Group's financial position as at [date] and of its performance for the Half-year ended on that date; and
• complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

The Half-year Financial Report comprises:

• Consolidated statement of financial position as at 31 December 2019
• Consolidated statement of comprehensive income, Consolidated statement of changes in equity and Consolidated statement of cash flows for the Half- year ended on that date
• Notes 1 to 5 comprising a summary of significant accounting policies and other explanatory information
• The Directors' Declaration.

The Stapled Group comprises Australian Leisure and Entertainment Property Trust ("the Trust") and the entities it controlled at the Half year's end or from time to time during the Half-year.

Responsibilities of the Directors for the Half-year Financial Report

The Directors of Australian Leisure and Entertainment Property Management Limited, the Responsible Entity of the Trust, are responsible for:

• the preparation of the Half-year 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 Half-year Financial Report that is free from material misstatement, whether due to fraud or error.

30

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

Auditor's responsibility for the review of the Half-year Financial Report

Our responsibility is to express a conclusion on the Half-year Financial Report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the Half-year Financial Report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Stapled Group's financial position as at 31 December 2019 and its performance for the half-year ended on that date; and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As auditor of ALE Property Group, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a Half-year Financial Report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001.

KPMG	Eileen Hoggett
	Partner
	Sydney
	5 February 2020

31

INVESTOR INFORMATION AND CORPORATE DIRECTORY

Half-Year Report for the period ended 31 December 2019

INVESTOR INFORMATION	CORPORATE DIRECTORY
Stock Exchange Listing	Securityholder Enquiries

The ALE Property Group (ALE) is listed on the Australian Securities Exchange (ASX). Its stapled securities are listed under ASX code: LEP.

Please contact the registry if you have any questions about your holding or payments.

Distribution Reinvestment Plan

ALE has a distribution reinvestment plan. Details of the plan are available on the ALE website.

Distributions

Stapled security distributions are paid twice yearly, normally in March and September.

Electronic Payment of Distributions

Securityholders may nominate a bank, building society or credit union account for payment of distributions by direct credit. Payments are electronically credited on the payment dates and confirmed by mailed advice.

Securityholders wishing to take advantage of payment by direct credit should contact the registry for more details and to obtain an application form.

Annual Tax Statement

Accompanying the final stapled security distribution payment, normally in September each year, will be an annual tax statement which details the tax components of the year's distribution.

Publications

The Annual Review and Annual Report are the main sources of information for stapled securityholders. In August each year the Annual Review, Annual Report and Full Year Financial Report, and in February each year, the Half-Year Financial Report are released to the ASX and posted on the ALE website. The Annual Review is mailed to stapled securityholders unless we are requested not to do so. The Full Year and Half-Year Financial Reports are only mailed on request. Periodically ALE may also send releases to the ASX covering matters of relevance to investors. These releases are also posted on the ALE website and may be distributed by email to stapled securityholders by registering on ALE's website. The election by stapled securityholders to receive communications electronically is encouraged by ALE.

Website

The ALE website, www.alegroup.com.au, is a useful source of information for stapled securityholders. It includes details of ALE's property portfolio, current activities and future prospects. ASX announcements are also included on the site on a regular basis. The ALE Property website, www.aleproperties.com.au, provides further detailed information on ALE's property portfolio.

Registered Office

Level 10, 6 O'Connell Street

Sydney NSW 2000

Telephone [phone]

Company Secretary

Mr Michael Clarke

Level 10, 6 O'Connell Street

Sydney NSW 2000

Telephone [phone]

Auditors

KPMG

Level 38, Tower Three

International Towers Sydney

300 Barangaroo Avenue

Sydney NSW 2000

Lawyers

Allens Linklaters

Level 28, Deutsche Bank Place

Sydney NSW 2000

Custodian (of Australian Leisure and Entertainment Property Trust)

The Trust Company Limited

Level 13, 123 Pitt Street

Sydney NSW 2000

Trustee (ALE Direct Property Trust)

The Trust Company (Australia) Limited

Level 13, 123 Pitt Street

Sydney NSW 2000

Registry

Computershare Investor Services Pty Ltd

Reply Paid GPO Box 7115

Sydney NSW 2000

Level 3, 60 Carrington Street

Sydney NSW 2000

Telephone [phone]

Facsimile [phone]

www.computershare.com.au

32