Annual Report 10/11 - Campus Living Villages

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2011
A$’000
Campus Living Villages Annual Report 10/11
Campus Living Finance Trust
2. Financial risk management
CLFT’s activities expose it to a variety of financial risks, which include credit risk, cash flow interest rate risk and liquidity
risk. The overall risk management program focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the financial performance.
a) Currency Risk
Subsidiaries of the Fund operate in Australia and the UK and operate and source external financing in their local currency.
Management of the Fund monitors the exchange rate fluctuations between the Australian Dollar and the local currencies
of the foreign subsidiaries on a regular basis. Management have not utilised any derivative financial instruments to date to
hedge the foreign currency risk of earnings from subsidiaries in accordance with an agreement with the unit holders of the
Fund. If the exchange rate fluctuated by 10% the loss after tax would vary by $54k and the net assets would vary by $2.2m.
Management will institute the appropriate action and utilise the necessary derivative financial instruments should there
be a change in agreement with the unit holders.
Loans are made between entities within the Fund for purposes of providing funding for capital expenditure or the net
investment in subsidiaries. The currency of the loan is generally denominated in the currency of the lender and the loans
are valued at balance sheet spot rate at each reporting date.
b) Credit risk
Credit risk arises from cash and cash equivalents, deposits with major banks and financial institutions and loans to related
parties and entities within the CLV Fund. Only banks and financial institutions with high credit ratings are used to deposit
funds. Credit granted to related parties is monitored regularly and the loan agreements contain unsecured recourse
against the borrower for default of the loans.
c) Cash flow interest rate risk
The borrowings of CLFT (refer note 11) are variable and the entity does not utilise interest rate swaps to mitigate
fluctuations in interest rates.
The ANZ facility was repaid and the bank guarantees and letters of credit were cash backed in July 2010. A summary of the
undrawn facility at 30 June 2011 is:
June 2011 June 2010
Total facilty - 23,400
Funds drawn - (12,608)
Letters of credit provided and indemnity guarentee - (10,792)
Undrawn facility - -
d) Liquidity risk
Funds drawn from the ANZ facility were lent to entities within the group at the variable rate plus an appropriate margin to
cover interest and finance charges incurred. The related party borrowings bear interest at a variable rate (refer note 11).
The forecasted payments of interest and principal of all external borrowings are:
June 2011 June 2010
Payments within one year - 12,680
Payments within one to five years - -
Total payments - 12,680
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