Anglo Irish Asset Finance 2009 Accounts

8/9/2019 Anglo Irish Asset Finance 2009 Accounts

1/82

C o m p a n y N o . 3 0 9 1 0 8 2

ANNUAL REPORT AND FINANCIAL STATEMENTSANGLO IRISH ASSET FINANCE PLCPERIOD ENDED 31 DECEMBER 2009

LQCJAIYW*LD2 07/04/20 tO 132

COMPANIES HOUSE


2/82

ANGLO IRISH ASSET FINANCE PLCContents Pages

Corporate information 1Directors' report 2 - 5Statem ent of directors' responsibilities 6Management report 7 - 1 7Independent auditors' report 1 8 - 1 9Statement of Comprehensive Income 20Statem ent of Financial position 21Statemen t of chan ges in equity 22Statement of Cash f lows 23Notes to the financial statements 24 - 80


3/82

ANGLO IRISH ASSET FINANCE PLCDirectorsB Lm ehan (resigned 23 March 2010)D Quili igan (resigned 15 March 2010)F G ParkerJ BrydieT P WalshSecretaryF G ParkerAuditorsDeloitte LLPLondonBankersAnglo Insh Bank Corporation Limited10 Old JewryLondonEC 2R 8 D NBarclays Bank picLondon Corporate BankingPO Box 544Lombard StreetLondon, EC3V 1EXRegistered office10 Old JewryLondonEC2R 8DNRegistered number3091082


4/82

ANGLO IRISH ASSET FINANCE PLCDIRECTORS' REPORTThe directors present their report and the audited financial statements for Anglo Irish Asset Finance p!c {'the Company')for the penod ended 31 December 20091 PRINCIPAL ACTIVITIESThe Company continues to provide commercial finance to businesses and individuals supported by real estate andother assets2. PRINCIPAL RISKS AND UNCERTAINTIESThe pnncipal nsks and uncertainties facing the Company relate to the credit, l iquidity, market, operational andcom pliance nsks associated w ith its lending activities and capita! markets funding instruments Further details onthese nsks are set out in the Management Report, while manangement of these nsks is set out in Note 28 of theaudited financial statements3 PARENT COMPANY AND ULTIMATE PARENT COMPANYThe Company is a wholly owned subsidiary of CDB (U K ) Limited, a company incorporated in England, which in turnis a wholly owned subsidiary of Anglo Insh Bank Corporation Limited, incorporated in the Republic of Ireland, the ultimateparent undertaking4 CHANGE OF YEAR ENDIn order to align with the financial reporting penod of the ultimate parent undertaking, the Company has changed itsreporting pen od end from 30 September to 31 December Accordingly the financial statements include 15 months ofopera tions and cashflows to 31 Decem ber 2009, and are therefore n ot directly comparable to the amoun ts disclosedfor the pnor penod5 RESUL TS FOR THE PER IOD AND STATE OF AFFAIRS AS AT 31 DECEMBER 2009The results for the period and the statement of financial position at 31 December 2009 are set out on pages 20 and 21The loss after taxation for the penod amounte d to 1,178m (year ended 30 Septem ber 2008 loss 83m ) This lossreflects higher provisioning levels along with foreign exchange losses incurred on the Yen financing arrangement(Se e N ote 5) The se losse s were offset by gains on the repurchase of certain capital instruments issued by theCompa ny as detai led in Note 6Total equity amoun ted to 256m as at 31 December 2009 (30 September 2008 234m)On 18 Novem ber 2008 th e authonsed share capital of the Compa ny was increased to 3 3bn by the creation of3,000,000,000 ordinary shares of 1 each On the 18th November 2008 , 1 ,000,000,000 ordinary shares were issuedat par and subscnbed by CDB (U K ) Limited, the parent company, giving the Company additional equity of 1 billionThe Man agem ent Report con tains a full review of the performance of the Com pany which fulfils the requirementof the enhanced business review and is incorporated into this Directors' Report by reference

6 NATIONALISAT ION OF ULTIMATE PARENT COMPANYOn 15 January 2009, the Insh Government announced its intention to take Anglo Insh Bank Corporation pic ("theBank "), the ultimate parent und ertaking of the Company, into State ownership The Bank's shares were subsequentlysuspended from trading o n the Insh and London Stock Exchanges on 16 January 2009 The Anglo Insh BankCorporation Act 2009 which provided for the transfer of shares of the Bank to the Insh Minister for Finance, was signedinto Insh law on 21 January 2009 On the same date the Bank was re-registered a s a pnvate company and i ts namewa s change d from A nglo Insh Bank Corporation pic to Anglo Insh Bank Corporation Limited ("AIBC") The InshGovernment, following receipt of European Union approval, provided 3 bill ion of capital to AIBC on the 29 June 2009,827 7m on the 4 A ugust 2009, and a provided a further 172 3m of capital on the 25 September 2009 to AIBCOn 3 0 March 20 10 the Irish G overnment provided a further 8 3bn to AIBC in the form of a promissory note, fulfi ll ing acommitment given to the Board of AIBC by the Insh Minister for Finance on 22 December 2009 to provide additionalcapital support to AIBC, effective 31 December 2009 0


5/82

ANGLO IRISH ASSET FINANCE PLCDIRECTOR S REPORT continued7 DIVIDENDThe directors do not propose the paym ent of a dividend in respect of the penod (year ended 30 Septem ber 2008 Nil)8 GOING CONCERNThe Company's business activities have been severely impacted by the current financial and economic crisis resulting ina substantial loss for the peno d as detailed in the Managem ent Report The directors consider that the outlook rem ainsdifficult due to the current economic climate and the impact on our clients businesses which are pnmarily involved inthe property industry in the UKConsequently, this has a significant impact on the Company's future performance including the need for continued supportby AIBC due to the uncertainty over future trading results as detailed below Details of the nsk manag eme nt and thepolicies, governance and analysis of nsks in the Company are detailed in Note 28 to the financial statements, in particulardetails of the nsk management oversight by the AIBC Group of the Company, demonstrating how the Company and AIBC are reducing risk in the organisationThe assessment by the directors is underpinned by the fact that the ultimate parent company, AIBC, continues to supportthe Company This includes the provision of a Letter of Support from A IBC which confirms assistance in meeting theCompany's liabilities as and whe n they fall due at least until 31 July 2011 In add ition in the past year the Com panyhas benefited from a substantial injection of capital from CDB (U K ) Limited ("CD B") of 1 billion Subse quent to this inDecember 2009, AIBC agreed to irrevocably waive 200 million of intercompany lending to the Company, resulting in anadditional capital contribution of 200 million to the shareholders funds of the Com pany This demonstrates th econtinued substantial support the Com pany is receiving from its parent comp any, CDB , and its ultimate parent comp any, AIBC The Company does not maintain any liquid assets itself and places all surplus funds with and draws any required fundsfrom AIBC Consequently the Co mp any re lies totally on AIBC for the ongoing daily supply of liquidity and funds to enablethe Compan y to function which ha s operate d effectively throughout the p enod an d continues to do so to the date ofthis Directors' ReportThe Company is also subject to a range of nsks and uncertainties which are detailed in the Management ReportThe directors of the Company have also considered the financial statements of AIBC for the 15 month penod to 31December 2009 which have been prepared on a going concern basis and the assessment which the directors of AIBCreached in the preparation of its financial statementsThe assessmen t by the director's of AIB C is underpinned by the Irish Minister for Finance's (Minister) consistentstatements that the Insh Govern ment will ensure the continued viability of all systemic financial institutions,including AIBC, in a manner which is cons istent with EU state aid rules In making this assessment the directors of AIBCconsidered the potential impact of the following nsk factors and uncertainties which could affect the futureperformance and financial position of AIBC the Insh National Asset Mana gem ent Agency (NAMA) process on the group(see Note 29), l iquidity nsks, credit quality, regulatory cap ital, EU state aid considerations and political factorsimpacting both the AIBC Group and the industry The timing of the NAMA asset transfers and the discount applied to the valuation are an important co nsideration Liquidity nsk considerations take into account the AIBC Group's ability tocontinue to access wholesale and money market lines, the ability to continue to access essential central bank and otherspecial funding facilities, potential re-finance nsks and the impact of forecast cu stom er funding balances Creditquality will largely follow trends in the main economic environments in which the AIBC Group operates, which areuncertain In addition, decisions by regulatory authorities, the EU or the body politic could adversely impact on A lBC'sability to continue as a going concern


6/82

ANGLO IRISH ASSET FINANCE PLCDIRECTOR S REPOR T continued8 GO ING CON CE RN continuedNotwithstanding the existence of such uncertainties, the directors of AIBC in making the determination have taken intoaccount th e following mitigating factors the capital injection of 4bn in 2009 into AIBC by the Minister, theMinister's letter of 22 December 2009 which restated his previous commitments in relation to ensunng that the Bank hassufficient capital to continue to meet its regulatory capital requirements, the subsequent receipt of a promissory noteto the value of 8 3bn in fulfi lment of the Minister's com mitment, the forecast receipt of senior NAMA bonds in 201 0which will be liquidity enhancing, the improving outlook for both the UK and US commercial property markets, and theintroduction of measures by the Irish Government to improve liquidity including the Irish Government guaranteeintroduced in September 2008 and the Credit Institutions Eligible Liabilities Guarantee Scheme ('the ELG Scheme')introduced in Decemb er 2009 As a result the directors of AIBC are satisfied that it is approp nate that the AIBCGroup's financial statements continue to be prepared on a going concern basisOn the basts of the above assessment by the directors of AIBC and the preparation of its group financial statements forthe 15 months ended 31 Decem ber 2009, which were publ ished on 31 March 2010, the directors of the Company havea reasonable expectation that the Company has adequate resources, or will be able to obtain adequate resourcesfrom AIBC in terms o f additional funding and /or equity, to continue in operational existence for the foreseeable futureThus, the directors continue to adopt the going concern basis of accounting in preparing the annual financial statements9 FUTURE DEVELOPMENTSThe d irectors will continue to c losely monitor the performance of the Com pany, more d etails of which are set outin the M anagem ent Rep ort In addition, AIBC is a participating institution in the Irish National Asset Managem ent Agen cy(NAM A), further details of wh ich are set out in Note 29 It is expected that the Compa ny will transfer loans with a grossvalue of 3,166m in the next 12 months to NAMA See Note 35 for further details10 DIRECTORS AND SECRETARYBnan Linehan and Declan Quill igan resigned as directors on 23 March 2010 and 15 March 2010 respectivelyGordon Parker, James Brydie and Thomas Walsh continued to serve as directors throughout the penodAll directors will continu e in office in accordance with the articles of association Gordon P arker served as secretarythrougho ut the penod The directors and secretary had no interests in the shares of the Comp any dunng the penod11 FINANCIAL INSTRUMENTSThe directors of the Company util ise vanous financial instruments in the normal conduct of the Company's business,pnm anly in order to mitigate the interest rate nsk ansing from the Com pany's operations It is the Company's policy tohedge all Capital Market instrumen ts which are raised at a fixed rate of interest in order to m atch the income fromlending a ssets which is norma lly linked to 3 month LIBOR /EURIBO R It is also the Com pany's policy to ensure thatforeign currency assets an d liabilities are matched to avoid foreign excha nge nsk on an after tax basis Further detailson these nsks and the Company's exposure to financial instruments is given in Note 28 to the financial statements

4


7/82

ANGLO IRISH ASSET FINANCE PLCDIRECTORS REPORT continued12 DISCLOSURE OF INFORMATION TO THE AUDITORSEach of the persons who is a director at the date of approval of the report confirms that

so far as the director is aware, there is no relevant audit information of which the Com pany's au ditors are una ware, and the director has taken all the steps that he ought to have taken as a director in order to make him self aware of any

relevant audit information and to establish that the compan y's auditors are aware of that informationThe confirmation is given and should b e interpreted in accordance with the provisions of S418 of the C ompanies Act 200613 DIRECTORS INDEMNITIESThe ultimate parent company has made qualifying third party indemnity provisions for the benefit of the Company'sdirectors which were made dunng the penod and remain in force at the date of this report14 PAYMENTS OF CREDITORSThe Company's policy is to settle terms of payment with suppliers when agreeing the terms of each transaction, ensurethat suppliers are made aware of the terms of payment and abide by the terms of payment

15 INDEPENDENT AUDITORErnst & Young L LP, resigned as auditors on 7 October 20 09 Deloitte LLP were appointed as auditors on 13 Oc tober2009A resolution for the reappointment of Deloitte LLP as auditors of the Company is to be proposed at theforthcoming A nnual General Meeting

ON BEHALF OF THE BOARD

REGISTERED OFFICE10 Old JewryLondonEC2R 8DN

F G ParkerCompany SecretaryDate 01 Apnl 2010

5


8/82

ANGLO IRISH ASSET FINANCE PLCSTATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THEDIRECTORS' REPORT AND FINANCIAL STATEMENTSThe directors are responsible for prepanng the annual report and the financial statements in accordance withapplicable United Kingdom law and International Financial Reporting Standards as adopted by the EuropeanUnion (IFRS)Company Law requires the directors to prepare financial statements for each financial penod which give a true and fairview of the state of affairs of the Compan y and of the profit and loss of the Com pany for that period In prepanng thosefinancial statements, International Accounting Standards requires that directors- select suitable accounting policies and then apply them con sistently,- present information, including accoun ting policies, in a manner that provides relevant, reliable, comparab le and

understandable information,- provide additiona l disclosures w hen com pliance with the specific requirements of IFRS is insufficient to enable users

to unde rstand the impact of particular transactions, other events an d conditions on the entity's financial p osition andfinancial performance, and

- state that the Com pany has com plied with IFRS, subject to any matenal departures disclosed and explaine d in thefinancial stateme nts

The directors are required to prepare the financial statements on the going concern basis, unless it is not appropnateFurther details are give n in section 8 of the Directors' R eportThe directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at anytime the financial position of the Company and which enable them to ensure that the financial statements comply withthe Com panies Act 20 06 They have gene ral responsibility for taking such steps as are reasonably open to them tosafeguard the assets of the Company and to prevent and detect fraud and other irregulantiesThe d irectors confirm that, to the best of their knowledge, they have com plied with these requiremen ts in prepanng thefinancial statem ents, including preparation of these financial statements in accordance w ith IFRS Under applicable lawsand regulations, the directors also have responsibility for preparing a Directors' Report, as set out on pages 2 to 5that complies with that law and those regulationsDTR 4 15 and 4 1 8 of the Disclosure Rules and Transparency Rules of the Financial Services Authonty requires thedirectors to include a management report in the financial statements which includes a fair review of the issuers' businessas well as a description of the principal risks and uncertainties faced by the CompanyAs required by DTR 4 1 12 of the Disclosure Rules and Transparency Rules of the Financial Services Authority thedirectors (as listed below) confirm that to the best of their knowledge- the financial stateme nts, prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financialposit ion and loss of the Company, an d- the M anage ment Report, which is incorporated into the Directors' Report, includes a fair review of the developmen t and

performance of the business and the position of the Company, together with a description of the principal nsks anduncertainties that the Company faces

F G PDirector

By Ord

T P WalshDirector Director

6


9/82

ANGLO IRISH ASSET FINANCE PLCMANAGEMENT REPORT1 REVIEW OF BUSINESS PERFOR MANCEThis review covers the penod from 1 Octobe r 2008 to 31 December 2009 and includes commentary on key areas ofperformance of the Company du nng that penod Pnor penod comparatives are for the year ended 30 Se ptember 2008The following includes Key Performance Indicators used by the mana gement of the Compan yKey results for the penod include- Net loss after tax of 1,17 8m for the penod, up from a loss of 83 m in 2008- Net interest income down 33% from 112m to 75m in 2009- Trading losses of 613 m primarily incurred on a Japane se Yen financing arrangement which were significantly

reduced by related profits in other UK group companies of AIBC- Gam of 324m on repurchase of certain subordinated liabilities and other capital instruments- Specific impairment charge of 987 m, 20 15% of average loan book- Collective impairment release of 7m in the current penod- 3,166m of gross loans and advances to customers reclassified a s assets held for sale at 31 December 2009- Impaired held for sale assets represent 80 16% o f closing assets classified as held for sale- Other loans and receivables of 325m in the penod on the acquisition of AIBC Group subordinated liabilities- Decline in net customer lend ing, pnor to transfer to held for sale of 1,047m , a decrease of 21 85 %- Impaired loans represent 28 06% of closing loan and advances to customers- Increase in other assets of 1,415m, due to loan advanced to parent company as part of ending of Japan ese Yen

financing arrangement- Increase in loans and borrow ings of 967m , an increase of 34 22% pnmanly due to loan received from the ultimate

parent as part of the ending of the Japanese Yen financing arrangement- Increase in authonse d share capital of 3b n by the creation of 3,000,000,000 ordinary shares of 1 each- Increase in issued share capital of 1bn sub scnbed by CDB (U K ) Ltd, the parent companyLending and asset quality 2009 2008

m_ mAssets classified as h eld for sale 2,302Loans and advances to custom ers 1,444 4,793

3,746 4,793Net loan decrease of 1,047m brought total customer lending to 3,746 at penod end, a 22% decrease on pnor yearIn keeping with the Company's relationship based lending model, lending activity dunng the penod was providedsolely to the Comp any's longstand ing and experienced customer base The Company provides com mercialfinance to businesses and individuals supported by real estate and lease finance and hire purchase facilitiesThe C ompany is a traditional balan ce sheet lender, directly originating assets rather than participating in transactionalor bought in loans The risk manag eme nt function of the ultimate parent company, Anglo Insh Bank CorporationLimited ("AIBC"), review loans with the Compa ny's lending team s at least twice yearly to monitor asset quality Theresponsibility for loan performance rests with the relevant lending director and their team Further details are provided inNote 28 Credit RiskLoans and advances of 3,166m along with provisions of 864m were reclassed as assets classified as held for saleon 31 December 2009 The ass ets classified as held for sale are those loans and advances designated for transfer tothe Insh National Asset Managem ent Agency (NAM A) This designation happened on 31 December 2009 Further detai l ;on the establishment o f NAMA are given in Note 29 NAMA has discretion as to which assets will be acquired a nd has ncconfirmed to the Comp any the total value of loans that it expects to purchase Therefore not all loans currently shown asassets classified as held for sale may ultimately transfer to NAMA

7


10/82

ANGLO IRISH ASSET FINANCE PLCMANAGEMENT REPORT (Continued)1 REVIEW OF BUSINESS PERFORMANCE (continued)Lending and asset quality (continued)The worsening of the econom ic environment n 2009 has led to significantly increased specific impa irments However,there has been a reduction in the collective impairment provision due to the very detailed review and analysis of theloan portfolio The co llective provision is determined in line with the detailed policy set out in Acco unting Policy 1 8Cumulative balance sheet provisions on loans and advances to customers at 31 December 2009 , total 217m whichamou nts to 13 08% of the closing loan bookCumulative balance sheet provisions on assets classified as held for sale at 31 December 2009, total 864m w hichamounts to 27 3% of the closing loan bookThe economic outlook has been very challenging throughout the penod, although there have been signs of economicimprovem ent in the last three mo nths No significant im provement has been assumed by the directors over the nextnumber of yearsThe following are the key highlights regarding asset quality at the penod end date

2009 2008Income Statement m mSpecific provision charge 987 58Collective provision charge (7 ) 67Total lending impairment charge 980 125% of average loan balances 20 07% 2 78%Balance SheetImpaired loans and advances to customers% of closing loan balancesSpecific provisionCollective provisionTotal provisionsTotal provisions as a % of impaired loans

m m466 202

28 06% 4 09%146 6871 77

21 7 14546 57% 71 78%

Balance Sheet m mImpaired assets classified as held for sale 2,538 -% of closing loan balances 80 16% 0 00%Specific provision 86 4 -Total provisions 86 4 -Total provisions as a % of impaired assets classified as held for sale 34 04% 0 00%

8


11/82

ANGLO IRISH ASSET FINANCE PLCMANAGEMENT REPORT (Continued)1 REVIEW OF BUSINESS PERFORMANCE (continued)Japanese Yen financing arrangementTrading lossesJapanese Yen financing arrangementDetails are given in Note 5 of the audited financial statements of a financing arrangement, entered into inMay 2008, whereby the Compan y exchan ged a po rtion of its funding from a Sterling basis to a Yen basis Thearrangement was structured such that the CDB (U K ) Limited and its UK subsidianes ("UK Group") and therefore theultimate parent AIBC would benefit from the differential between S terling and Yen interest rates and the potential dow nsidefrom a foreign exchange n sk perspective was m itigated by an offset on the UK group's taxation line The arrangem ent hadhad a positive impact on the UK group's and therefore the ultimate parent's profit for the year ende d30 September 2008 The arrangement was ended in D ecember 2008 and January 2009, as the strengtheningof Yen against Sterling in the penod has ne gatively impa cted trading income from foreign exc hange contractsby 613m (2008 101m ) for the Company, which is reduced by related foreign excha nge gains in other UK groupcomp anies of 457 m (2008 77m ), resulting in a net negative impact in profit before tax of the UK group, andtherefore the ultimate parent of 156m (20 08 25 m) In the six months to March 2009 the arrangement resulted in apre-tax loss of 156m and after tax benefit of 14 9m However, beca use of the significant operating losses incurred bythe Company and the AIBC Group in the nine mo nths to 31 Decem ber 2009, 84m (200 8 Nil) of the taxation benefit hasnot been recognised, resulting in a pre-tax loss for the fifteen month penod to 31 Decem ber 2009 of 156m (200 8 24m)and an after tax cost of 69m (2008 gain 4 9m ) Th e potential benefit of these losses carried forward is a compon entof unrecognised deferred tax assets in Note 19

Loans and borrowings 2009 2008m_ m

Loans and borrowings 3,794 2,826

Loans and borrowings increased by 968m, due to intercompany lending as part of the ending of the JapaneseYen financing arrangement, to total 3,794m All loans and borrowings are sourced from e ither AIBC or othersubsidianes of CDB (U K ) LimitedOther assets 2009 2008

m_ mOther assets 1,431 17Other assets increased by 1,414m, due to intercomp any lending as part of the ending of the Japan ese Ye n financingarrangeme nt, to total 1,431m These loans are provided to other CDB group entities This ensures the elimination offoreign exchange nsk at a pre-taxation level in the Company

9


12/82

ANGLO IRISH ASSET FINANCE PLCMANAGE MENT REPOR T (Continued)1 REVIEW OF BUSINESS PERFOR MANCE (continued)Repurchase of certain subordinated liabilities and other capital instrumentsGain on repurchase of financial liabilities at amortised costThe Company recogn ised gains of 324m (2008 Nil) on the repurchase of 401 m (2008 Nil) nominal value ofundated loan capital recorded in subordinated liabilities and other capital instrumen ts (Note 23) as part of theoverall capital manag eme nt activities of the AIBC Group These instruments were bought back at 27% of parThe net gain of 324m results from cons ideration paid of 108m and the carrying value of the secuntiesrepurchased of 401 m Included in the gain is 31 m pnmanly in relation to the release of hedge accoun tingfair value adjustmen ts following termination of the related interest rate swaps

Subordinated liabilities and other capital instruments

On 30 July 2009, the Company completed the purchase of certain of its own capital instruments including thepurchase of 181 million of the 200 million 8 5325% Step-up Callable Perpetual Capital Secunties ('Secunties')at a purchase pnce of 27% of parOn 30 July 2009, the Company completed the purchase of certain of its own capital instruments including thepurchase of 221 million of the 250 million 7 625% Tier 1 Non Innovative Capital Secunties (TONICS') at apurchase pnce of 27% of par

The European Commission, as a condition of its approval of the Government's capitalisation of AIBC in mid 2009,required that no further coupon payments be made on any of the AIBC Group's Tier 1 Secunties following thepayment due on the Compa ny's TONICS on 23 July 2009 The Company continues to accrue the related interestcost in the Statement of Comprehensive Income for the Secunties and the TONICs due to the cumulativenature of the distnbutions from these instrumen tsIn December 2009 the Board resolved that the coupon on the Company's 200 million 8 5325% Step-up CallablePerpetual Capital Secun ties, which has the benefit of a subordinated guarantee from A IBC which would have be enpaid on 28 Dece mbe r 20 09, would not be paid The effect of this decision was to tngger the "Dividend and C apitalRestnction", the provision of which preclude the Com pany and/or the Guarantor (AIBC) from declanng, p aying ordistnbuting a dividen d or m aking a paym ent on any of its ordinary share capital, its preference share capital or itsTier 1 Securities, or make any payment on a Tier 1 Guarantee until such time as the deferred coupon is satisfiedIn addition, given the vanous conditions required for the payment of distnbutions on the Undated Loan Capital,including the requirement for the positive reserves of both the Company and the AIBC Group, andnotwithstanding the conditions prescnbed by the European Commission, it is not expected that distnbutionswill be paid on either the Company's or other AIBC Group's Tier 1 secunties for the foreseeable future

Subordinated liabilities and other capital instruments 1,5362009

m2008

m1,725

10


13/82

ANGLO IRISH ASSET FINANCE PLCMANAG EMENT REPORT (Continued)1 REVIEW OF BUSINESS PERFORM ANCE (continued )Other loans and receivablesOn 30 July 2009, the Company purchased the fol lowing other Tier 1 Secunties issued by fellow AIBCGroup entities- 403 million nominal of the 600 million Fixed rate / Vanable rate Guaranteed Non-voting Non-cumulative

Perpetual Preferred S ecurities issued by Ang lo Irish Capital UK LP The Company paid l 0 9 m- 526 m illion nominal of the 600 m illion Fixed rate / Floating rate Guaranteed N on-voting Non-cu mulative

Perpetual Preferred Securities issued by Anglo Irish Cap ital UK (2) LP The Company paid 142 m- 344 m illion nominal of the 350m Fixed rate / Floating rate Guaranteed Non-voting Non-cum ulative

Perpetual Preferred Securities issued by Anglo Irish Cap ital UK (3) LP The Company paid 9 3mThese are classified as loans and receivables as they are not traded in an active market and they have fixed anddetermined payment datesShare Capital and ReservesOn 18 November 2008 the authonsed share capital of the Company was increased to 3,300m by the creationof 3,000,000,000 ordinary shares of 1 each On the 18th November 2008, 1,000,000,000 ordinary shares wereissued at par and subscribed by CDB (U K ) Limited for a consideration of 1bn, thereby increasing ordinaryshare capital by 1,000m to 1,220mDuring the penod AIBC irrevocably w aived 200m of loans due by the Company to AIBC through a deed of waiverThis has resulted in a capital contribution reserve in the Company further increasing the shareholders funds of theCompany

11


14/82

ANGLO IRISH ASSET FINANCE PLCMANAGE MENT REPORT (Continued)2 PRINCIPAL RISKS AND UNCE RTAINTIESThe Co mpany is subject to a vanety of nsks and uncertainties in the normal course of its business activities TheDisclosure Rules and Transparency Rules of the Financial Services Authonty require a descnption of thepnncipal nsks and uncertainties facing the CompanyThe Board of Directors of the Company has ultimate responsibility for the governance of all nsk takingactivity and as a wholly owned subsidiary of Anglo Irish Bank Corporation Limited (AIBC) relies significantly on theframework established by AIBC to manage risk throughout the AIBC Group Details of the nsk man agem ent po liciesand processes that the Company adopts are contained in Note 28 to the financial statementsThe pnncipal business risks and uncertainties below are those risks which the Directors currently believe to bematerial to the Comp any The precise nature of all the risks and uncertainties that the Company faces c anno t bepredicted and many of these risks are outside the Compan y's control The principal risk and uncertainties outlinedbelow should be read in conjunction with the Management Review of Business PerformanceGeneral economic conditionsThe Com pany's results are influenced by general econom ic and other business conditions The econom ic outlookremains challenging in the Compa ny's key markets the UK and mainland Europe These markets have experiencedhigher unemployment, reduced consumer and business confidence and a contraction tn housing markets, all of whichhave contnbuted to a decline in economic growthGlobal financial markets deteriorated dramatically after the bankruptcy fil ing of Lehman Brothers in September 2008Despite measures taken by governments and the European Central Bank to stabilise the financial markets, the volatil ityand disruption of the capital and credit markets con tinued through th e first half of the year Together with th esignificant declines in the property markets in Ireland, the United Kingdom and the United States these events havecontributed to significant write-downs of asset values by financial institutions and lending organisations, including theCompanyThese write-downs have caused many financial institutions and other lending organisations to seek additional capital,to merge with larger and stronger institutions, to be nationalised a nd, in some cases, to fail Reflecting conce rn ab outthe stability of the financial markets generally and the strength of counterparties, many lenders and institutionalinvestors have substantially reduced and, in some cases, stopped their funding to borrowers, including other financialinstitutionsThe results of the Com pany a nd of AIBC have bee n adversely affected by the deterioration in general e conom icconditions in the econ omies in which they operate, as w ell as by the decrease in the availability, and increased costs,of funding Wh ile recent econom ic forecasts are being revised upwards, any such growth is expected to be mode st andslow, which may affect the Company's and AIBC'S future earnings and financial conditionNAMAIn April 2009 the Insh Government announced the establishment of the National Asset Management Agency('NAMA ') for the purposes of acquiring certain assets from Irish banks including their subsidiaries, holding, man agingand realising those a ssets an d facilitating the restructuring of credit institutions of systemic importance to the Insheconom y On 9 February 2010, AIBC ap plied to be designa ted as a participating institution in NAMA This app licationwas acce pted by the Insh Minister for Finance on 12 February 201 0 Consequently this requires the Compan y to alsoparticipate in NAMA

12


15/82

ANGLO IRISH ASSET FINANCE PLCMANAGEMENT REPORT (Continued)2 PRINCIPAL RISKS AND UNCERTAINTIES (continued)The NAMA Act provides for the acqu isition by NAMA from participating institutions of eligible bank assets, wh ichmay include performing and non -performing loans made for the pu rpose, in whole or in part, of purchasing,exploiting or developing development land, loans associated with those loans and loans the secunty for whichis or includes development land or an interest in a company enga ged in the bu siness of purchasing or exploitingsuch landThe Com pany does not have full control over the nature, num ber, timing a nd valuation of the assets that are to betransferred A significant discount on the pnce that NAMA will pay for the portfolio of loans could impact theComp any's ability to meet its financial obligations w ithout further support from AIBCThe Company may be required to indemnify NAMA in respect of various matters, including NAMA's potentialliability ansing from any error, omission o r misstatemen t on the part of the Comp any of information pro vided toNAMA

Notwithstanding the unce rtainties outlined above, the transfer of a ssets to NAM A is a fundamental part of the AIBCGroup's restructunng process upon which the Company relies upon for financial support and will serve as thepnmary mechanism for de-leveraging the balance sheet, reduce nsk exposure and providing additional liquidityClearly, any potential delay in the NAM A process w ill impact on the timing of such benefitsRestructunng of AIBC GroupFinancial support provided by the Irish Government to the AIBC Group is subject to review by the EuropeanComm ission ('EC') under EU state aid rules The AIBC G roup has su bmitted a restructunng plan to the ECand the review of that plan by the EC is ongoing The EC will consider whe ther the plan demonstrates the AIBCGroup's long-term viability, that the AIBC G roup (and its capital holders) make an appropriate co ntribution tothe restructunng cos ts from their ow n resources and that me asures are taken to limit distortions of

compe tition ansing from the financial support provided by the Insh G overnm ent to the AIBC G roupNo decision in relation to the form of the restructunng has be en ann ounc ed b y the EC The EC may require theAIBC Group to limit its operations or restnct its comm ercial activities in such a way that could have a ma terialadverse effect on the results of its operations, financial cond ition and future prospects and consequently have amaterial adverse effect on the result of the C omp any's op erations, financial co ndition and future prospectsLiquidity n skLiquidity nsk is the risk that the C ompa ny d oes n ot have sufficient funds available at all times to meet itscontractual and contingent cash flow obligations This is a fundam ental nsk to the Company as the Com pany do esnot maintain any liquidity itself and is required by AIBC to repay any surplus funds to AIBC each day as part of thecentral AIBC Group Treasury man agem ent of liquidity Conse quen tly, all funding needs for the Company rely onthe continued ongoing support of AIBC which has been confirmed as available until at least 31 July 2011 Anychanges in the ability of AIBC to raise funding or ma intain liquidity could h ave a matenal adverse effect on theCompany's results, financial conditions and future prospects

13


16/82

ANGLO IRISH ASSET FINANCE PLCMANAGEMENT REPORT (Continued)2 PRINCIPAL RISKS AND UNCERTAINTIES (continued)Liquidity risk - AIBCThis nsk is inherent in all banking operations and ca n be affected by a range of institution-specific and market-wideevents The AIBC Group's liquidity may be adversely affected by a number of factors, including significantunforeseen changes in interest rates, ratings downgrades, higher than anticipated losses on investments anddisruptions in the financial markets generallyThe cnsis in the global financial system has resulted in a penod of significant turbulence and uncertainty, withunprece dented levels of ill iquidity, resulting in considerable problems at many financial institutions The terms onwhich funding is available has also become more onerous and expensiveWhile liquidity in wholesale markets improved in the second half of the year, the perception of counterparty andcountry risk has remained high This negative perception has led to reductions in, and increased costs of,wholes ale funding Accordingly, in com mo n with many o ther banks, the AIBC Grou p's access to traditionalsources of liquidity has been constrained In addition, negative sentiment towards the Insh market has createdadditional funding challenges for Insh institutions This has resulted in an overall reduction in liquidity and the AIBCGroup has increased its recourse to liquidity schemes provided by central banks as a resultIn response to major market instability and il l iquidity, governments and central banks around the world haveintervened in order to inject liquidity and capital into, a nd to stabilise, financial m arkets, and, in some ca ses, toprevent the failure of systemically important financial institutions These vanous initiatives to stabilise financialmarkets are subject to revocation or ch ange, which could have an adverse effect on the availability of funding tothe AIBC G roup AIBC is a participating institution in both the guarantee scheme pursuant to the Credit Institutions(Financial Sup port) Act 2008 and the Credit Institutions (Eligible Liabilities Guarantee) Schem e 2009 The financialposition of the AIBC Group could be impacted by the termination, amendment or cancellation of these schemes orthe remo val of the AIBC G roup from the sc hem es, pno r to their terminationFurthermore, the AIBC Group relies on customer deposits to meet a considerable portion of its fundingrequirements and those deposits are subject to fluctuation due to certain factors, such as a loss of confidence,reputational d ama ge or com petitive pressures w hich c ould result in a significant outflow of deposits within a shortperiod of time The ava ilability of comme rcial deposits is often dependent on credit ratings and any furtherdowng rade could limit the AIBC Group's liquidity and therefore increase liquidity riskWithin the banking industry the default of any institution could lead to defaults by other institutions Concernsabout or a default by, one institution cou ld lead to significant liquidity problems, losse s or defaults by o therinstitutions because the commercial soundness of many financial institutions may be closely related as a resultof their credit, trading, cleanng or other relationships This nsk is sometimes referred to as "systemic nsk" and mayadversely affect financial intermediaries, such as cleanng agencies, clearing houses, banks, securities firms andexchanges, with which the AIBC Group interacts on a daily basis, which could have an adverse effect on theAIBC Group's ability to raise funding and on the AIBC Group's results, financial condition and prospectsThis in turn is likely to have a significant adverse effect on the Compan y's results, financial conditionand prospe cts due to the continuous sup port the Comp any requires from AIBC

14


17/82

ANGLO IRISH ASSET FINANCE PLCMANAGE MENT REPORT (Continued)2 PRINCIPAL RISKS AND UNCERTAINTIES (continued)Credit riskCredit risk is the risk of suffering financial loss, should any of the Compa ny's custom ers or counterparties fail tofulfi l their contractual obligations to the Com pany The pnn cipal credit nsk that the Com pany faces an ses m ainlyfrom loans and advances to customersAdverse changes in the credit quality of the Company's borrowers, counterparties and their guarantors, or adversechange s ansing from the general deterioration in global econom ic conditions have reduced the recoverability oncertain of the Comp any's assets and have increased the q uantum of impaired loans and impairment chargesduring the periodThe Co mpany has exposures to a range of custom ers in different ge ographies, including exposures to investors inand developers of comm ercial and residential property Property pnces have shown significant declines throughoutthe last year and developers of commercial and residential property are facing particularly challenging marketconditions, including substantially lower prices a nd volum es In addition, the Com pany's exposure to credit risk isexacerbated when the collateral it holds cannot be realised o r is liquidated at prices that are not sufficient torecover the full amount of the loan that is due to the Co mpa ny, which is most likely to occur dun ng pe nods ofil l iquidity and depressed asset valuations, such as those currently being expenencedThe Company's asset quality deteriorated significantly in the 15 months to 31 December 2009 Property marketswere severely impacted by a lack of confidence and liquidity whic h has led to a significant red uction in propertyvalues across a ll of the Com pany's markets This toge ther with an extremely difficult operating environment in theCompany's markets, and the rapid erosion of the Company's clients' net worth has resulted in a substantialdeterioration in the asset quality of the Co mpa ny's loan bookThere is continuing uncertainty surrounding the depth of the slowdown in the global economy and the direction ofproperty markets W hile there are signs that the global eco nom ic downturn is bottoming out, any recovery isexpected to be slowOperational riskOperational nsk is the nsk of loss arising from inadeq uate co ntrols and procedures, unauthonse d a ctivities,outsourcing, hu man error, systems failure and b usine ss continuity Operational nsk is inherent in every businessorganisation and covers a wide spectrum of issu es The Company's management of its exposure to operationalrisk is governed by a policy prepared by the AIBC Group Risk Management and approved by the AIBC Group Riskand Com pliance Committee The Compa ny relies exclusively on the employees, processes, systems and activitiesof AIBC in order to manage its loan book and businessCapital riskCapital risk is the risk that the Compa ny has insufficient capital resources to remain solvent The C ompa ny's abilityto ma intain its capital level could be affected by a n umb er of factors, including the price NA MA will pay for theportfolio of loans to be transferred and the cred it quality of the G roup's loan portfolio following the NAM Atransfer If the Comp any n eeds to strengthen its capital position it will necessitate further ca pitalcontnbutions from A IBC which will be depen dent on the ca pital and liquidity position of AIBC

15


18/82

ANGLO IRISH ASSET FINANCE PLCMANAG EMENT REPORT (Continued)2 PRINCIPAL RISKS AND UNCERTAINTIES (continued)Market riskMarket nsk is the risk that the Compan y's earnings w ill be adversely affected by changes in the level or volatil ity ofmarket rates or pnces such as interest rates, credit spreads, commodity pnces, equity pnces and foreign exchangerates Changes in interest rates and spreads may affect the interest rate margin realised between lending an dborrowing costs Change s m interest rates are m itigated by the fact that almost all the Comp any's lending assetsand funding liabilities are priced off market related rates w ith no asset pricing tied to official central bank rates Thisensure s there is no structural interest rate pricing basis risk in the C omp any's balance sheetLitigation riskThe Company's business is subject to the risk of litigation by customers, employees, shareholders or other thirdparties through private actions, class actions, administrative proceedings, criminal proceedings or other litigationThe outcom e of any such litigation, proceedings or action s is difficult to assess or quantify The cost to defendfuture proceedings or actions m ay be significant There m ay also be adverse publicity associated with any suchlitigation, proceedings or actions that could impact the Company and result in a decrease in customer acceptanceof the Company's services, regardless of whether the allegations are valid or whether the Company is ultimatelyfound liable As a result, such litigation, proceedings o r actions may adversely affect the Com pany's b usiness,financial condition, results, operations or reputationOther risksThe Com pany must at all times comply with all relevant laws and good practice guidelines Non compliance ca ngive to reputational loss, legal or regulatory sanctions or material financial loss3 IMPORTANT EVENTS SINCE THE PERIOD ENDSee Note 35 for further details on important events since the financial reporting date4 FUTURE DEVELOPMENTSThe directors will continue to closely monitor the performance of the CompanyThe directors intend that the C ompa ny will continue to provide existing committed lending to existing clientssecured upon assets in the United Kingdom and in Europe The Com pany has future com itments to lend of 128m(2008 703m ), to be funded by further facilities from AIBC - London branch However this will be closely mana gedin the current very uncertain e nvironment to ensure that only cn tical lending is advanced, in order to m itigatethe Company's and AIBC Group's credit nsk

16


19/82

ANGLO IRISH ASSET FINANCE PLCMANAGE MENT REPORT (Continued)5 FINANCIAL RISK MANAGEMENTThe directors of the Company util ise vanous financial instruments in the normal conduct of the Company'sbusiness, pnman ly to mitigate the interest rate nsk ansing from the Co mpa ny's operations It is theCompa ny's policy to hedge all capital market instruments w hich are raised at a fixed rate of interest in order tomatch income from lending assets which is normally linked to 3 mon th LIBOR /EURIBO R Risk managem entoversight for the Company is provided by the Risk Management function of Anglo Insh Bank CorporationLimited Credit risk decisions are made on behalf of the Com pany by the Anglo Insh Bank CorporationLimited Credit Comm ittee function Further details on thes e nsks and the Comp any's exposure to financialinstruments are given in Note 28 of the financial stateme nts

17


20/82

INDEPENDENT AUDITORS' REPORT TO THE MEM BERS OFANGLO IRISH ASSET FINANCE PLCW e hav e audited the Financial Statements of Ang lo Insh Asset Finance P ic for the penod en ded 31 Decem ber 2009which comprise the Statement of Comprehensive income, Statement of Financial position, Statement of changesin Equity, the Statem ent of Cash flow and the related notes 1 to 37 The financial reporting frameworkthat has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRS)as adopted by the European UnionThis report is made solely to the company's members, as a body, in accordance with sections 495 and 496 of theCom panies Act 2006 Our audit work has been unde rtaken so that we might state to the comp any's mem bers thosematters w e are required to state to them in an auditors' report and for no other purpose To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other than the company and the company'smem bers as a body, for our audit work, for this report, or for the op inions we have formedRespective responsibilities of directors and independent auditorsAs e xplained more fully in the Directors' R esponsibilities Stateme nt, the directors are resp onsible for the preparationof the financial statements and for being satisfied that they give a true and fair view

Our responsibility is to audit the financial statements in accordance with applicable law and International Standards onAud iting (UK and Ireland) Those standards require us to comply with the Auditing Practices Board's (APB's) EthicalStandards for AuditorsScope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to givereasona ble assu rance that the financial statements are free from m atenal misstatement, whether caused by fraud orerror This includes an assessment of whether the accou nting policies are appropriate to the company's circumstancesand have been consistently applied and adequately disclosed, the reasonableness of significant accounting estimatesmade by the directors, and the overall presentation of the financial statementsOpinion on financial statementsIn our opinion the financial statements give a true and fair view of the state of the com pany's affairs as at 31 December 2009 and of its loss

for the penod then ended have been property prepared in accordance with IFRSs as adopted by the European Union, and have been prepared in accordance with the requirements of the Companies Act 2006Opinion on other matter prescribed by the Com panies Act 2006In our opinion the information given in the Directors' Repo rt for the financial period for which the financialstatements are prepared is consistent with the financial statements

18


21/82

INDEPENDENT AUDITORS' REPORT TO THE MEM BERS OFANGLO IRISH ASSET FINANCE PLC (Continued)Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to youif, in our opinion adequ ate accounting records have not been kept, or returns adequate for our audit have not been received from

branches not visited by us, or the financial statements are not in agreeme nt with the accounting records an d returns, or certain disclosures of directors' remuneration specified by law are not made , or we have not received all the information and explanations we require for our audit

Caroline Bntton (Senior Statutory Auditor)for and on be half of Deloitte LLP

Chartered Accountants and Statutory AuditorsLondon, United Kingdom

Date 01 April 2010

19


22/82

ANGLO IRISH ASSET FINANCE PLCStatement of Comprehensive incomeFor the period ended 31 December 2009

Interest and similar incomeInterest and similar expensesNet interest income

Notes34

15 Months31 Dec 2009

290,206,216(215,374,507)

12 Months30 Sep 2008

74,831,709399,163,421

(286,960,207)112,203,214

Fee and commission incomeFee and commission expenseTrading lossesGam on repurchase of financial l iabilities at amortised costOther operating incomeOther expenseNet non-interest (expense) / income

Administrative expensesDepreciation of property, plant and equipmentTotal operating expenses

Operating (loss) I profit before provisions for impairmentProvisions for impairment

Operating loss before taxationTaxationLoss for the period attributable to the equity holders of theCompany

10

3,675,200(66,869)

(613,040,875)323,602,801

70,200

2,954,899(6,348)

(99,907,934)

(285,759,543)(210,927,834)

(96,959,383)15,243,831

(6,692,803)(12,599)

(6,705,402)

(7,963,413)(12,700)

(7,976,113)

(217,633,236) 7,267,718(980,037,746) (124,073,168)

(1,197,670,982) (116,805,450)19,444,828 33,948,738

(1,178,226,154) (82,856,712)

The S tateme nt of Comprehensive incom e includes net exchange losses of 274,568 (2008 losses 1,438,694) arising fromthe conversion of non-sterling profits and losses at an average rate for the penod as opposed to the period end rate

The notes on pages 24 - 80 form part of these f inancial statements

20


23/82

ANGLO IRISH ASSET FINANCE PLCStatement of Financial position 31 December 30 SeptemberAs at 31 December 2009 2009 2008

Notes AssetsDenvative financial instruments 12 79,434,315 31,212,066Loans and advances to banks 13 - 14,332,222Assets classified as held for sale 14 2,301,732,292 -Other loans and receivables 15 324,655,751 -Loans and advances to customers 16 1,443,806,752 4,792,977,845Property, plant and equipment 18 4,363 16,962Current taxation 21,466,027 20,523,689Deferred taxation 19 - 1,892,351Other assets 20 1,431,239,300 16,529,170Prepayments and accrued income 16,426 114,263Total assets 5,602,355,226 4,877,598,568LiabilitiesLoans from banks 21 256,138 -Loans and borrowings 22 3,793,699,192 2,826,401,806Derivative financial instruments 12 10,289,764 87,221,306Other liabilities 5,624,506 9,941Accruals and deferred income 33,696 53,279Deferred taxation 19 - 4,515,860Subordinated liabilities and other capital instruments 23 1,536,439,983 1,725,158,275Total liabilities 5,346,343,279 4,643,360,467Share capital 24 1,220,000,000 220,000,000Other reserve 25 200,000,000 -Retained (losses) / profits (1,163,988,053) 14,238,101Shareholders' funds 256,011,94 7 234,238,101Total equity and liabilities 5,602,355,226 4,877,598,568

The notes on pa ges 24 - 80 form part of these financial statem ents

The f inancial statements were approved by the Board of Directors and authonsed for issue on 01 A pnl 2010They were signed on its behalf by

F G ParkerDirector

Date 01 Apnl 2010

Company number 3091082

21


24/82

A N G L O I R I S H A S S E T F I N A N C E P L CS ta te m en t o f h n e i n eFor the period ended 31 December 2009

NotesShare

Capital

Retained OtherProfits Reserves

Balance at 1 October 2007 220,000,000 97,094,813Loss for the year (82,856,712)

Balance at 30 September 2008 220,000,000 14,238,101Share capital issued 24 1,000,000,000

Loss for the p enod (1,178,226,154)

Chan ge in capital reserve 25 200,000,000Balance at 31 December 2009 1,220,000,000 (1,163,988 ,053) 200,000,000

The no tes on pag es 24 - 80 form part of these financial statem ents

Total

317,094,813

(82,856,712)

234,238,101

1,000,000,000(1,178,226,154)

200,000,000256,011,947

22


25/82

ANGLO IRISH ASSET FINANCE PLCStatement of C s oFor the period ended 31 D ecember 2009

Cash flows used in operating activitiesLoss before taxFinancing costs of subordinated liabilities and other capital instrumentsOther non-cash itemsChanges m operating assets and liabilitiesNet increase in other loans and receivablesNet increase in assets c lassified as held for saleNet decrease / (increase) in loans and advances to customersNet decrease in loans and borrowingsNetmcrease in denvative financial instrumentsNet increase in other assetsNet decrease in othe r liabilitiesExchange movementsNet cash flows used in operating activities before taxationTax recoveredNet cash flows used in operating activitiesCash flows used in investing activitiesPurchases of property, plant and equipmentNet cash flows used in investing activitiesCash flows from financing activitiesProceeds of ordinary share issuesRepurchase of subordinated liabilities and other capital instrumentsCoupons paid on subordinated liabilities and other capital instrumentsNet cash flows from financing activitiesNet decrease in cash and cash equivalentsOpening cash and cash equivalentsEffects of excha nge rate cha nges on cash and cash equivalentsClosing cash and cash equivalents

15 months 12 months31 Dec 2009 30 Sep 2008

Notes

(1,197,670,982) (116,805,450)98,010,516 123,795,370

818,518,853 84,213,187(281,141,613) 91,203,107(324,655,751) -

(3,238,236,588) -3,349,171,093 (890,112,163)

976,783,680 575,962,79140,682,584 10,192,713

(1,414,710,130) (1,612,148)(5,435) (45,605)

115,737,148 111,979,077(776.375,012) (102,432,228)

15,967,988 13,375,180(760,407,024) (89,057,048)

(1,110)(1.110)

1,000,000,000(108,283,764) -(136,371,817) (140,163,327)

755,344,419 (140,163,327)(5,062,605) (229,221,485)

4,845,928 228,001,352(39,461) 6,066,061

(256,138) 4,845,9282727

23


26/82

ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements

1 Accou nting policies1.1 Compliance with IFRSThe Company is a public limited company incorporated and domiciled in England and WalesThe financial statem ents have been presented in accordance with International Finan cial Reporting Standardsas adopted by the European Union ('IFRS') and applied in accordance with the Companies Act 2006, as applicable at31 December 20091.2 Basis of preparationThe financial statements have been prepared under the histoncal cost convention, as modified by the revaluation ofcertain assets and liabilities to the extent required or permitted under accounting standards as set out in the relevantacco unting po licies They are presented in sterling

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptionsthat affect the reported amounts of certain assets, liabilities, revenues and expenses, and disclosures of contingentasse ts and liabilities Since manag ement's judge me nt involves making estimates concerning the likelihood of futureeven ts, the actual results could differ from th ose estimates Some estimation techniqu es involve significant amounts ofma nag em ent judgem ent, often in areas which are inherently uncertain The estimation techniques which are consideredto be most complex are in the areas of impairment of financial assets and the fair value of financial assets andliabilities Further detail is provided in Note 1 20 of these Accou nting PoliciesThe Com pany's b usiness a ctivities, together with the factors likely to affect its future developm ent, performance andposition are set out in the Management report on pages 7 - 1 7 In addition, Note 28 to the financial statements includesthe Company's objectives, policies and processes for managing its capital, its financial risk management objectives,details of its financial instruments and he dging a ctivities, and its exposure to credit nsk and liquidity riskAs de scnbed in the Directors' Report on page 2 - 5 , the current economic environment remains diff icult and the Companyhas reported a subs tantial loss for the year The directors consider that the outlook presen ts significant challenges interms of borrowers ability to service debt as the majonty of the Company's lending is to borrowers in the commercialproperty sectorFurther d etails of the Principal nsks and uncertainties affecting the Comp any are set out in Note 28 of the FinancialStatem ents Section 8 of the Directors' Report sets out a detailed assessm ent of the Company an d its ability tooperate as a going concernBased on this assessment, the financial statements are prepared on a going concern basisIn order to align with the financial reporting penod of the parent undertaking, the Company has changed its reportingperiod en d from 30 S eptemb er to 31 December Accordingly the financial statements include 15 mon ths of operationsand cashflows to 31 Decemb er 2009, and are therefore not directly comparab le to the amo unts disclosed for the pnorpenod1 3 Adoption of new accounting standardsFrom 1 October 2008 the Company adopted the fol lowing standards

- Amendm ent to IAS 1 - Presentation of Financial StatementsThe Company has early adopted Amendments to IAS 1 which resulted in certain changes in the names and presentation othe f inancial statements


27/82

ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued1 4 Interest income and expense recognitionInterest income and expense are recognised in the Statement of Comprehensive income for all interest-beanngfinancial instruments u sing the effective interest rate m ethodThe effective interest rate m ethod is a method of calculating the amortised co st of a financial asse t or liability and ofallocating the interest incom e or interest expense o ver the relevant pen od The effective interest rate is the rate thatexactly discounts the expected future cash payments or receipts throughout the expected life of the financial instrumentor, when app ropnate, a shorter penod, to the net carrying am ount of the financial a sset or financial l iabilityThe calculation includes all fees, transaction costs and other premiums and discounts that are an integral part of theeffective interest rate on the transactionOnce an impairment loss has been recognised on an individual asset, interest income is recognised on the unimpairedportion of that asset using the rate of interest at which its estimated future ca sh flows w ere discoun ted in m easunngthe impairment1 5 Fee and commission IncomeFees and comm issions which are not an integral part of the effective interest rate are generally reco gnised on an accrualsbasis over the period that the service has been providedLoan commitment fees for loans that are likely to be drawn down are deferred {together with related direct costs) andrecognised as an adjustment to the effective interest rate on the loan once drawnCommitment fees in relation to facilities where drawdown is not probable are recognised over the term of the commitment1 6 Financia l assetsFinancial assets are classified into the following categ ones financial assets at fair value throu gh profit or loss, loans andreceivables, and available-for-sale financial assets Manag emen t determines the classification o f its investments at initialrecognitionFinancial assets at fair value through profit or lossThis category has two sub-categones, financial assets held for trading, and those designated at fair value throughprofit o r loss at inception A financial asset is classified in this category if acquired pnncipaliy for the purpose of selling inthe short term or if so designated by managem ent The se assets are earned at fair valueA financial asset may be designated at fair value through profit or loss in the following circumstancesa) it eliminates or significantly reduces a mea surem ent or recognises inconsistency that could otherwise anse on them

on different bases, orb) a group of financial assets, financial l iabilities or both is managed and its performance is evalua ted on a fair

value basis, in accordance with a documented nsk management or investment strategy, or

c) a financial instrument contains one or more embe dded d envatives that significantly mo dify the cash flows ansingfrom the instrument and would otherwise need to be accounted for separatelyDenva tives are classified as held for trading unless they are designated as hedges Interest on financial assetsat fair value through profit an d loss held on own accou nt is included in net interest income Othe r gains andlosses a nsing from cha nges in fair value are included directly in the statement of comprehe nsive income within tradinglosses/profits

25


28/82

ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued1 6 Financial assets (continued)Loans and receivablesLoans and receivables are non-denvative financial assets with fixed or determinable payments that are not quoted in anactive market They arise whe n the Company provides m oney to a counterparty with no intention of trading the receivableLoans and receivables are initially recognised at fair value, including direct and incremental costs, and are subsequentlycarried on an a mortised cost basis The best evidence of the fair value at initial recognition is the transaction pnce (i ethe fair value of the consideration given or received)Available-for-sale financial assetsAvailable-for-sale financial assets are those intended to be held for an indefinite p enod of time, which may be sold inresponse to nee ds for liquidity or changes in interest rates, exchange rates, asset pn ces or other factorsAvailable-for-sale financial a ssets are initially recognised at fair value, plus transaction costs, and are subseq uentlyearned at fair value with gains and losses recognised as a separate component of shareholders' equityFinancial as sets are initially recognised at fair value plus directly attnbutab le transac tion co sts, with the exception o ffinancial asse ts earned at fair value through profit or loss who se transaction costs are taken directly to the Stateme nt ofCom prehensive Income Financial assets are derecognised when the nghts to receive cash flows from the financialassets have e xpired or where the Company has transferred substantially all the nsks an d rewards of ownershipAvailable-for-sale financial assets and financial assets at fair value through profit or loss are subsequently earned atfair value Loa ns and receivables and held-to-maturity investments are subs equen tly earned at amortised cost usingthe effective interest rate m ethodThe fair values of financial assets quoted in active markets are base d on current bid pnces For unquoted financialassets or wh ere the market for a financial asset is not active, the Co mpan y esta blishes fair value by using valuationtechnique s The se include the use of prices obtained from inde pende nt third party pricing service providers, recentarm's length transac tions, reference to other similar instrumen ts, discounted cash flow analysis, option pneingmodels and other valuation techniques commonly used by market participants

In the current peno d an d previous year, with the exception of derivatives, all financial assets are classified as loa nsand receivables1 7 Financial liabilitiesFinancial l iabilities are initially recognised at fair value, being their issue proce eds (fair value of consideration received)net of transaction costs incurred Financial l iabilities are subsequen tly me asured a t either amortised cost or fair valuethrough profit or los s All l iabilities, other than those designated at fair value throu gh profit or loss, are sub sequentlyearned at amo rtised cost Any difference between proceeds net of transaction costs and the redemption value isrecognised in the Stateme nt of Comprehensive Income using the effective interest rate methodA liability may be des ignated at fair value through profit or loss wh en

a) it eliminates or significantly reduces a measurement or recognition inconsistency, 'an accounting mismatch', thatwould othe rwise a nse from measu nng assets and liabilities or recognising the gams and losses on them ona different b asis, or

b) a group of financial l iabilities is managed and its performance is evaluate d on a fair value basis, in accordanc ewith a documented nsk management or investment strategy, or

c) it contains one or more emb edded denvatives, that significantly modify the cash flows ansmg from the instrumentand would otherwise need to be accounted for separately

26


29/82

ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued1 7 Financial liabilities continuedThe classification of an instrument as a financial l iability or an equity instrument is dependent upon the substance ofthe contractual arrangem ent Instruments which carry a contractual obligation to deliver cash or another financial assetto another entity are classified as financial liabilities Interest on these instruments are recognised in the Statem ent ofCom prehensive incom e as an expense Other gains and losses ansing from ch anges in fatr value are included directlyin the Statement of Comprehensive Income within trading losses/profitsPreference shares and other subordinated capital instruments are classified as financial l iabilities if coupon paymentsare not discretionary Distnbutions on these instruments are recognised in the Statement of Com prehen sive income asinterest expense using the effective interest rate metho d Distnbutions on the undated loan capital continue to berecognised as an interest expense even if they are not paid due to the impact of other similar instruments issued by AngloIrish Bank Corporation Limited or its subsidiary entities where their conditions impact on the undated loan capital issuedby the Compan y Th e terms of the undated loan capital requires that the distnbutions are cumulative in the event of nonpayment in any pen odWhere undated loan capital issued by the Company is acquired by the Company, the amount of undated loan capital isreduced by the amou nt of such instrument acquired by the Com pany Similarly, the interest expense is reduced by theamount of interest income due on the undated loan capital acquired by the Company1 8 Impairment of financial assetsProvision is made for impairme nt of financial assets to reflect the losses inherent in those as sets at the balancesheet dateThe Company assesses at each financial reporting date whether there is objective evidence that a financial asset or aportfolio of financial as sets is impaired A financial asset or portfolio of financial assets is impaired and impairmen tlosses are incurred if, and only if, there is objective evidence of impairment as a result of one or more loss eventsthat occurred after the initial recognition of the asset ('a loss event') a nd that loss event (or events) has ha d animpact such that the estimated present value of future cash flows is less than the current carrying value of thefinancial asset, or portfolio of financial assets, and can be reliably measuredObjective evidence that a financial asset, or a portfolio of financial assets, is impaired includes observable data thatcomes to the attention of the Company about the following loss events

i significant financial difficulty of the issuer or obligor,n a breach of contrac t, such as a default or delinquency in interest or pnncipal paym ents,in the granting to the borrower of a concession , for econo mic or legal reasons relating to the borrower's financial

difficulty that the C omp any would not otherwise con sider,iv it becom es proba ble that the borrower will enter bankruptcy or other financial reorganisation,v the disapp earan ce of an active market for that financial asset because of financial difficulties, orvi observab le data indicating that there is a meas urable decrease in the estimated future cash flows from a

portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yetbe identified with the individual financial assets in the po rtfolio, including- adverse changes in the payment status of borrowers in the portfolio, or- national o r local econ omic conditions that correlate w ith defaults on the assets in the portfolio

The Company first assesses whether objective evidence of impairment exists individually for financial assets that areindividually significant, and individually or collectively for financial asse ts that are not individually significantAn additional incurred but not reported ("IBNR") collective provision is required to cover losses inherent in the loanbook where there is objective evidence to suggest that it contains impaired loans but the individual impaired loanscanno t yet be identified Further detail on the estimation techniq ues used to calculate IBNR is provided in Note 1 20of the Accounting P ol icies


30/82

ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued1 8 Im pairment of financial assets continuedAn IBNR impairment provision represents an intenm step pending the identification of impairment losses on anindividual a sset in a group of financial assets As soon a s information is available that specifically identifies losseson individu ally impaired assets in a group, those assets are removed from the group Assets that are individuallyassessed for impairment and for which an impairment loss is, or continues to be, recognised are not included underthe collective assessment of impairmentFor loan s and rece ivables, the amount of impairment loss is measured as the difference between the a sset's carryingamo unt a nd the present v alue of estimated future cash flows discounted at the asset's onginal effective interest rateIf a loan has a van able interest rate, the discount rate for measun ng any im pairment loss is the current effectiveinterest rate determined under the contract The amou nt of the loss is recognised using an allowance account and theamount of the loss is included in the Statement of Comprehensive incomeThe calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects thecash flows that m ay result from foreclosure, less cos ts for obtaining and selling the collateral, whe ther or not foreclosureis probableWhen a borrower fails to make a contractually due payment of interest or pnncipal but the Company believes thatimpairme nt is not appropnate on the basis of the level of the secunty / collateral available and / or the stage of collectionof amou nts o wed to the Com pany, a loan is classified as p ast due but not impaired In this instance the entire exposureis reported as past due but not impaired, rather than just the amount in arrearsRenegotiated loans are those loans and receivables outstanding at the reporting date whose terms have beenrenego tiated d unng the financial pen od, resulting in an upgrade from impaired to performing status This is based onsubsequen t g ood performance and / or an improvement in the profi le of the borrowerIf, in a subseq uent period, the amount of the impairmen t loss de creases and the decrease can be related ob jectivelyto an event occumng after the impairment was recognised, the previously recognised impairment loss is reversed byadjusting the allowan ce accoun t The amount of the reversal is recognised m the Statement of Com prehensive incomeas a red uction to the heading "Provision for impairmen t", to the extent that the carrying value of the asse t does notexceed its amortised cost at the reversal dateW he n a loan is deeme d to be uncollectible, it is wntte n off against the related allowance for loan impa irment Suc hloans are wntten off after all the necessary procedures have been completed and the amount of the loss has beendetermined Subsequent recovenes of amounts previously w ntten off decrease the amount of the al lowance for loanimpairment in the Statement of Com prehensive income

28


31/82

ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued1 9 Derivative financial instruments and hedge accountingDerivativesDenva tive instruments, including swaps, futures, forward foreign exch ange contracts, forward rate agreemen ts and options,are used for hedging and trading purposes

Denva tives are initially recognised at fair value on the date on which a denvative contrac t is entered into and aresubsequ ently re-measured at fair value Fair values are obtained from quoted market prices in active markets includingrecent market transactions, and valuation techniques including discounted cash flow models and options pncmg models,as appropnate Fair values are adjusted for counterparty credit nsk All denvatives are earned as assets when fairvalue is positive and as liabilities when fair value is negative unless there is a legal ability and intention to settle netDenvatives are classified as held for trading unless they are designated as hedgesThe best evidence of the fair value of a denva tive at initial recognition is the transaction price (i e the fair value of theconsideration given or received) unless the fair value of that instrument is evidenced by companson with other observablecurrent market transactions in the same instrument {i e without modification or repacka ging) or base d on a valuationtechnique who se vanables include only data from observable m arketsHedge accountingThe method of recognising the resulting fair value gain or loss depends on whether the denvative is designated as ahedging instrument, and if so, the nature of the item being hedged W hen trans actions meet the cntena spe cified in IAS 39,Financial Instruments Recognition and Measurem ent, the Compa ny applies fair value hedge acco untingThe Company documents, at the inception of each hedging transaction, the relationship between hedging instruments andhedg ed items, as well as its nsk mana gem ent objective and strategy for undertaking va nous h edge transactions TheCompany also documents its assessment, both at hedge inception and on an ongoing basis, of whether the denvatives thatare used in hedging transactions are highly effective in offsetting chang es in fair values or cash flows of hed ged itemsFair value hedge accountingChanges in the fair value of denvatives that are designated and qualify as fair value hedges are recorded in the incomestatemen t, together with any change s in the fair value of the hedged asse t or liability that are attnbutable to thehedged nskIf the hedge no longer meets the cntena for hedge accounting, the fair value hedge adjustment cumulativelymade to the carrying amount of the hedged item is, for items earned at amortised cost, amortised to the Statement ofComprehensive income over the penod to matunty of the previously designated hedge relationship using the effectiverate methodDerivatives that do not qualify for hedge accountingCertain derivative instrumen ts entered into as economic hedges m ay not qualify for hedge accoun ting Thes e derivativesare classified a s held for trading Change s in the fair value of any denvative that doe s not qualify for hedge acco untingare recognised immediately in the Statement of Com prehensive incomeEmbedded DerivativesCertain financial instruments contain both denvative and non denvative compo nent In such cases, the denvativecomponent is termed an embe dded de nvative When the economic charactensties and nsk of embedded denvatives are notclosely related to those of the host con tract and the h ost contract is not earned at fair value through profit o r loss,the embe dded denvatives is treated as a separate denvative Em bedded de nvatives separates from the host contract aremeasured at fair value with changes in fair value recognised in net trading income

29


32/82

ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued1.10 Collateral and NettingCollateralThe Com pany receives collateral in the form of cash in respect of credit instruments, such as denvatives, in orderto reduce credit nsk Collateral received in the form of cash is recognised on b alance s heet in the category "Loans andAdv ance s to Bank" with a corresponding liability Any interest payable or receivable ansing is recorded as interestexpense or interest income respectivelyNettingThe Company enters into master netting agreements with counterparties wherever possible, and when appropriate, obtaincollateral Master netting agreem ents provide that, if an event of default occurs, a ll outstanding transactions with thecounterparty will fall due and all amounts outstanding will be settled on a net basis Financial assets and liabilitiesare offset an d the net am oun t reported in the Statement of Financial position if, and only if, there is a currentlyenforceable legal nght to offset the recognised am ounts and there is an intention to se ttle on a net basis, or to realisethe asset and settle the liability simultaneously

111 Property, plant and equipmentProperty, plant and equipment is held for use in the business and is stated at cost less accumulated depreciation andprovisions for impairm ent, if any Additions and subsequ ent expenditure are capitalised only to the extent that theyenha nce the future econ omic benefits expected to be denved from the asset Property, plant and equipment aredepreciated on a straight-line basis over their estimated useful economic lives as followsFixtures and f i tt ings 12 5% to 25% per annumMotor vehicles 20% per annumThe useful l ives and residual values of property, plant and equipment are reviewed and adjusted, if appropriate, at eachfinancial reporting dateAssets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstancesindicate that the carrying am ount may no t be recoverable An asset's carrying am ount is written down immediately to itsrecoverable amo unt if the asset's carrying amoun t is greater than its estimated recoverable am ount The recoverableamo unt of an asset is the higher of its fair value less costs to sell and its value in use Gains a nd losses on disposal ofproperty, plant and equipment are included in the Statement of Comprehensive income in the penod of derecognition1 1 2 Asset classified as held for saleAn asset is classified as held for sale if it is pnmanly acquired for the purpose o f selling it in the near term andwhere a sale is highly probable and is expected to occur within one year Asse ts classified a s held for sale are statedat the lower of their carrying amount an d fair value less costs to sell Gains and losses arising from changes in fair valueare recognised in the Statement of Comprehensive incomeLoans wh ich are due to be transferred from the Com pany to the National Asset M anagement Agency ("NAMA") areclassified as he ld for sale These assets meet the definition of a disposal group under IFRS 5 as their carrying am ountexpe cted to be recovered pnncipally through a sale transaction and the sale is highly probable within one year Theseloans continue to be earned at amortised cost less provision for impairment See Note 14113 Foreign currency translationFunctional an d presentational currencyThe financial statements are presented in Sterling, which is the Company's functional and presentational currencyTransactions and balancesTransa ctions in foreign currencies are initially recorded at the functional currency rate ruling at the date of thetransaction Monetary as sets an d liabilities denominated in foreign currencies are retranslated at the functional

30


33/82

ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued1 13 Foreign currency translation continuedcurrency rate of excha nge ruling at the balance sheet date All differences are recog nised in the Stateme nt ofCom prehensive income Foreign exchange gains and losses resulting from the settlement of such transaction s andfrom the retranslation at period end exchange rates of monetary assets and liabilities deno minated in foreigncurrencies are recognised in the Statement of Comprehensive income Non-monetary i tems that are measured in termsof histoncal cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactionsNon-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the datewhen the fair value w as determined1 14 ProvisionsProvisions are recogn ised for present legal or constructive o bligations arising from past events where it isprobable that a transfer of economic benefits will be necessary to settle the obligation, and it can be reliablyestimatedWh en the effect is matenal, provisions are determined by discounting expected future cash f lows at a pre-tax ratethat reflects current market assessments of the time value of money and, where appropnate, the nsks specific to theliabilityPaymen ts are dedu cted from the present value of the provision and interest at a relevant discount rate is cha rgedannually to interest e xpense Change s in the present value of the liability as a result of movem ents in interest rates areincluded in other financial income The present value of provisions are included in other liabilitiesLegal claims an d other contingenciesProvisions are made for legal claims where the Company has a present legal or constructive obligation as a result ofpast events and it is more likely than not that an outflow of resources will be required to settle the obligation and theamount can be reasonably estimatedContingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events givingnse to present obligations where the transfer of economic benefit is uncertain or cannot be reliably measuredContingent liabilities are not recognised but are disclosed in the notes to the financial statements unless they are remote115 Taxation (current and deferred)Current tax is the expected tax payable (shown as a liability) or the expected tax receivable (shown as an asset) on thetaxable income for the penod adjusted for changes to previous years and is calculated based on the applicable taxlaw in the United K ingdom Deferred tax is provided using the balance sheet liability method on temporary differencesarising between the tax bases of assets and liabilities for taxation purposes and their carrying amounts in thefinancial statements Current and deferred taxes are determ ined using tax rates based on legislation enacted orsubstantively enacted at the financial reporting date and expected to apply when the related tax asset is realised or therelated tax liability is settledDeferred tax as sets are recog nised wh ere it is probable that future taxable profits will be available against whichtemporary differences will be utilisedCurrent and deferred taxes are recognised in the Statement of Compreh ensive income in the penod in which the profitsor losses anse except to the extent that they relate to items recognised directly in equity, in which case taxes arealso recognised in equityDeferred and current tax as sets an d liabilities are only offset w here there is both the legal nght and intention to settle ona net basis, or to realise the asset an d settle the liability s imultaneo usly

31


34/82

ANGLO IRISH ASSET FINANCE PLCNotes to th e financial statements continued116 LeasesCompany as lessorLeasing and instalment credit agreements with customers are classified as finance leases if the lease agreementstransfer s ubstantially all the nsks and rewards of ownership, with or without ultimate legal title Assets tha t are heldsubject to finance lease, or instalment credit agreements are recorded as receivables b

Anglo Irish Asset Finance 2009 Accounts

Documents

Transcript of Anglo Irish Asset Finance 2009 Accounts