SDOT2 Financial Report 30 June 2008 - Stockland
SDOT2 Financial Report 30 June 2008 - Stockland
SDOT2 Financial Report 30 June 2008 - Stockland
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Notes to<br />
the financial<br />
statements<br />
For the year ended <strong>30</strong> <strong>June</strong> 2007<br />
18 Distributions to unitholders (continued)<br />
Distributions to unitholders recognised in the previous financial period by the Trust are:<br />
Distribution per Unit Total Amount Date of Payment Tax deferred<br />
$’000<br />
2006<br />
31 December 2005 1.2540¢ 1,077 17 February 2006 100%<br />
31 March 2006 0.6350¢ 545 3 May 2006 100%<br />
<strong>30</strong> <strong>June</strong> 2006 0.6310¢ 542 28 August 2006 100%<br />
2,164<br />
19 Notes to the Cash Flow Statement<br />
18 //<br />
2007 2006<br />
Reconciliation of profit from operating activities to net cash flows from operating activities $’000 $’000<br />
Profit from operating activities 29,025 1,150<br />
Amortisation of borrowing costs 203 16<br />
Change in value of investment using the equity method (29,161) -<br />
Reclassification of borrowing costs 290 -<br />
Change in assets and liabilities:<br />
(Increase) in trade and other receivables (43) -<br />
(Increase) in other assets (2,019) (5)<br />
Increase in trade and other payables 1,842 <strong>30</strong>7<br />
Net cash flows from operating activities 137 1,468<br />
20 <strong>Financial</strong> instruments<br />
(a) <strong>Financial</strong> risk management<br />
The Trust’s activities expose it to a variety of financial risks; credit risk, liquidity risk, cash flow and interest rate risk. The Trust’s overall financial risk management program<br />
focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Trust’s financial performance. The Trust uses derivative financial<br />
instruments to hedge exposure to fluctuations in interest rates.<br />
<strong>Financial</strong> risk management is carried out by a central treasury department under policies approved by the Board of the Responsible Entity. The Board provides written<br />
principles of overall risk management, as well as written policies covering specific areas such as mitigating interest rate and credit risks, use of derivative financial<br />
instruments and investing excess liquidity.<br />
Credit risk<br />
Credit risk represents the loss that would be recognised if counterparties fail to perform as contracted. Derivative counterparties and cash transactions are limited to high<br />
credit quality financial institutions. The Responsible Entity has policies that limit the amount of credit risk exposure to any one financial institution.<br />
Liquidity risk<br />
Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents, the availability of funding through an adequate amount of committed credit<br />
facilities and the ability to close out market positions. The Trust aims at maintaining flexibility in funding by keeping committed credit lines available.<br />
Cash flow and fair value interest rate risk<br />
The Trust’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Trust to cash flow interest rate risk. Borrowings issued at<br />
fixed rates expose the Trust to fair value interest rate risk.<br />
The Responsible Entity, on behalf of the Trust, manages the Trust’s cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have<br />
the economic effect of converting borrowings from floating rates to fixed rates. Under the interest rate swaps, the Responsible Entity agrees with other parties to exchange,<br />
at specified intervals, generally quarterly, the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional<br />
principal amounts.<br />
<strong>Stockland</strong> Direct Office Trust No.2 <strong>June</strong> 2007