Annual Report - Campus Living Villages

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6 6 Campus Living Villages Annual Report 09/10 Campus Living Australia Trust NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 A$’000 CLAT b) Credit risk Credit risk arises from cash and cash equivalents, deposits with major banks and financial institutions, as well as credit exposure to students and universities, including outstanding receivables and committed transactions. Credit granted to customers is monitored regularly and past due receivables are followed up with customers. Student deposits are used as security and applied against outstanding amounts. Legal contracts provide the basis for collection of outstanding amounts relating to management and development contracts. Only banks and financial institutions with high credit ratings are used to deposit funds. Refer to “Trade and other receivables” note 10. c) Liquidity risk Cash flow forecasts are utilised to manage liquidity risk. Capital expenditure is funded through borrowings and cash calls from investors. Repayments of borrowings are funded through cash generated from operations, refinancing and cash calls from investors where required. The financing facilities available are included in note 6 (c).The forecasted payments of interest and principal for the financial liabilities of the remaining contractual liabilities are: DUE WITHIN ONE YEAR DUE WITHIN 2–5 YEARS DUE AFTER 5 YEARS TOTAL June 2010 Loans from financial institutions - Variable 14,957 106,547 256,176 377,680 - Swaps 4,914 17,762 14,792 37,468 Total loans from financial institutions 19,871 124,309 270,968 415,148 Lease liabilities - fixed 1,724 6,896 37,066 45,686 Loans from related parties - variable 9,263 43,295 187,208 239,766 Total undiscounted financial liabilities 30,858 174,500 495,242 700,600 June 2009 Loans from financial institutions - Variable 8,651 84,496 179,215 272,362 - Swaps 6,677 13,353 6,632 26,662 Total loans from financial institutions 15,328 97,849 185,847 299,024 Lease liabilities - fixed 1,724 6,896 37,066 45,686 Loans from related parties - variable 42,107 13,387 98,219 153,713 Total undiscounted financial liabilities 59,159 118,132 321,132 498,423 d) Cash flow interest rate risk Floating to fixed interest rate swaps are utilised to hedge against cash flow interest rate risks. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Generally the consolidated entity raises long term borrowings at floating rates and swaps them into fixed rates. Under the interest rate swap contracts, the consolidated entity agrees with financial institutions to exchange, at specified intervals (mainly quarterly), the difference between fixed contract rates and floating-rate interest amounts calculated by reference to agreed notional principal amounts. Interest payments are fixed through the use of interest rate swaps and fixed interest rate loans. The hedged portions of the loans in Australia are 90% (2009: 90%) and bear interest at a weighted average rate of 6.6% (2009: 7.1%). The variable portion of the interest payments is subject to change in floating interest rates and a 50 basis points increase results in $0.1m (2009: $0.1m) additional interest per annum. The carrying amount of borrowings is summarised below:
Campus Living Villages Annual Report 09/10 6 7 Campus Living Australia Trust NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 A$’000 June 2010 June 2009 Loans from financial institutions - Variable 27,708 20,810 - Swaps 234,023 177,759 Total loans from financial institutions 261,731 198,569 Lease liabilities - fixed 20,819 21,110 Loans from related parties - variable 141,523 126,092 Total undiscounted financial liabilities 424,073 345,771 CLAT The weighted average interest rates of the borrowings are summarised as: June 2010 June 2009 % % Loans from financial institutions 6.59 6.74 Lease liabilities - fixed 6.90 6.90 Loans from related parties - variable 7.10 3.87 e) Fair value measurement Derivative financial instruments The fair value of derivative financial instruments is recorded from external valuations and is measured using forward interest rates with the same maturity dates as the underlying instruments. Changes in fair value are recorded in profit or loss. In accordance with AASB 7 Financial Instruments: Disclosures, the interest rate swap instruments are considered a level 2 financial instrument in the fair value measurement hierarchy. 3. Revenue June 2010 June 2009 Accommodation rental revenue 54,312 36,070 Management fees 395 385 Development revenue - 514 Interest 507 422 Dividends received 218 240 Total revenue 55,432 37,631
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