Fastnet Securities 12 DAC

Transcription

1 Annual Report For the period from date of incorporation, 11 August 2016 to Registered number

2 Annual Report Contents Page Directors and other information 2 Directors' Report 3 Directors' Responsibility Statement 6 Independent Auditor's Report 7 Statement of Accounting Policies 9 Statement of Comprehensive Income 14 Statement of Financial Position 15 Statement of Changes in Equity 16 Statement of Cashflows 17 Notes to the Financial Statements 18 1

3 Directors and other information Directors Bianca Schwarze (Appointed 25 August 2016) Michael Carroll (Appointed 11 August 2016 and resigned 25 August 2016) Niall Vaughan (Appointed 11 August 2016) Secretary Deutsche International Corporate Services (Ireland) Ltd Pinnacle 2, Eastpoint Business Park, Dublin 3 Bankers permanent tsb St Stephens Green Dublin 2 US Bank Global Corporate Trust Services Fifth Floor 125 Broad Street London EC2N 1AR Trustee Deutsche Trustee Company Limited Winchester House 1 Great Winchester Street London EC2N 2DB United Kingdom Solicitors A & L Goodbody North Wall Quay I FSC Dublin 1 Independent auditor PricewaterhouseCoopers Chartered Accountants and Statutory Audit Firm One Spencer Dock North Wall Quay Dublin 1 Ireland Registered office 6th Floor, Pinnacle 2 Eastpoint Business Park Dublin 3 Registered number

4 Directors' report The Directors present their first annual report and audited financial statements for the period from incorporation on 11 August to 31 December Principal activities, business review and future developments Fastnet Securities 12 DAC (the "Company") was established in 2016 as a special purpose entity to effect the securitisation of a tranche of loans and receivables to customers ("mortgage advances") from a related party, permanent tsb plc. ("PTSB") (Formerly IL&P plc.). PTSB has not derecognised the mortgage assets included in this securitisation as it was deemed to have retained control of these assets. The Company has recognised equivalent mortgage assets due from PTSB to the extent of its continued involvement with these assets, and in particular, reflecting its right to receive certain cash flows from these mortgage assets. PTSB continues to administer the mortgage book and loan notes on behalf of the Company and further details of this relationship are set out in note 13. The Directors expect the current level of business activity to continue in the future Going Concern The Director's expect that the Company will continue to have sufficient cash inflows from its current cash resources and its interest in its mortgage book to meet its on-going obligations, in particular for its senior non-recourse debt providers over the period of assessment. The Company is dependent on PTSB to administer the mortgage book and loan notes on behalf of the Company. The Company is considered to be a subsidiary of PTSB owing to the specific terms set out in the governing documentation relating to this Company and its securitised assets. PTSB is wholly owned by and is dependent on Permanent TSB Group Holdings Public Limited Company ('PTSBGH') for continued financial support. PTSBGH strategic outlook has continued to improve both from the perspective of the macroeconomic environment and the Group's performance as set out in Note of the PTSBGH Annual Report. In evaluating the appropriateness of the going concern basis of preparation for its financial statements, the Directors of PTSBGH considered the principal risks and uncertainties as they might pertain to the going concern assumption, particularly the economic and political environment, the status of the Group's adherence to the terms of the Restructuring Plan, the Funding and Liquidity position and Profitability and Capital adequacy. In the PTSBGH 2016 Annual Report the Directors of PTSBGH have concluded that there are no material uncertainties which would cast significant doubt on the ability of PTSBGH to continue on a going concern basis for the foreseeable future. Based on the above, the Directors of the Company, having made due enquiries, continue to adopt the going concern basis in preparing these financial statements. If PTSB were unable to continue as a going concern, then, as administrator of the mortgage book and loan notes of this Company, P158, as Servicer, would be unable to continue realising assets and discharging liabilities on behalf of the Company in the normal course of business. The financial statements do not include any adjustments that would be required if PTSB, as administrator of this Company's mortgage book and loan notes, were unable to continue as a going concern. Results and Dividends for the financial period The statement of comprehensive income for the period ended is set out on page 14 and in the related notes. The Directors do not recommend the payment of a dividend for the financial period ending. Financial Risk Management Significant judgements/estimates used by management are outlined in note 12, and key performance indicators, which principally relate to mortgage portfolio arrears and the portfolio's associated liquidity and interest rate profile, are set out in note 11. Directors and secretary and their interests The Directors and secretary who held office at are listed on page 2 and, except where indicated, have served for the entire period. Michael Carroll resigned as a Director on 25 August 2016 and Bianca Schwarze was appointed on the same date. During the period, none of the Directors or the Company secretary had any interest in the share capital, debentures or loan stock of the Company or PTSB Group. Subsequent Events There have been no significant events affecting the Company since the date of the statement of financial position up until the date of signing this report that would require an adjustment to or disclosure in the financial statements. Political donations The Company has not made any political donations which require disclosure under the Electoral Act, 1997 (as amended by the Electoral (Amendment) Political Funding Act 2012).

5 Directors' report (continued) Statement of Relevant Audit Information In preparing and approving the 2016 Annual Report and in accordance with Section 330 (1) of the Companies Act, 2014 each of the current Directors of the Company confirm that: So far as the Directors are aware, there is no relevant audit information of which the statutory auditors are unaware; and The Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and they have established that the statutory auditors are aware of that information. Director's Compliance Statement The directors acknowledge that they are responsible for securing the company's compliance with its relevant obligations. The directors confirm that; 1) A compliance policy statement setting out the company's policies, that in our opinion are appropriate to the company, respecting compliance by the company with its relevant obligations has been drawn up. 2) Appropriate arrangements or structures that are designed to secure material compliance with the company's relevant obligations have been put in place. 3) A review of the arrangements and structures referred to at 2 above has been conducted during the financial period ended 31st December Audit Committee The directors of the Company has considered section 167 of the Companies Act 2014 and has decided not to establish an audit committee in this financial year as the board of directors currently discharges all the duties of an audit committee. The activities of the board of directors include, but are not limited to; Monitoring the financial reporting process; Monitoring the effectiveness of the Company's systems of internal control and risk management; Monitoring the statutory audit of the Company's statutory financial statements; and The review and monitoring of the independence of the statutory auditors and in particular the provision by the auditors of additional services to the Company. The directors of the Company review all internal and external reports and conclusions of such and the status of any findings are provided to the Company's Board. Accounting Records The measures taken by Directors to secure compliance with the Company's obligation to keep adequate accounting records are the use of appropriate systems and procedures and employment of competent persons. The accounting records are kept at the offices of permanent plc, at St. Stephen's Green, Dublin 2. Auditor PricewaterhouseCoopers, Chartered Accountants and Statutory Audit Firm, have expressed their willingness to continue in office in accordance with Section 383(2) of the Companies Act Corporate Governance Statement Introduction The Company is subject to and complies with Irish law comprising the Companies Act 2014 and the Listing rules of the Irish Stock Exchange. The Company does not apply additional requirements to those required by the above. Each of the service providers engaged by the Company is subject to their own corporate governance requirements. The Board of Directors ("the Board") is responsible for establishing and maintaining adequate internal control and risk management systems of the Company in relation to the financial reporting process. Such systems are designed to manage rather than eliminate the risk of failure to achieve the Company's financial reporting objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

6 Directors' report (continued) Financial Reporting Process (continued) The Board has established processes regarding internal control and risk management systems to ensure its effective oversight of the financial reporting process. These include appointing the Administrator (permanent tsb plc), to maintain the accounting records of the Company. The Administrator is contractually obliged to assist the Company in maintaining adequate accounting records as required by the Mortgage Management Agreement. The Administrator is also contractually obliged to prepare for review and approval by the Board financial statements which are required to be presented on a true and fair basis. The Board evaluates and discusses significant accounting and reporting issues as the need arises. From time to time the Board also examines and evaluates the Administrator's financial accounting and reporting routines and monitors and evaluates the external auditors' performance, qualifications and independence. The Administrator has operating responsibility for internal control in relation to the financial reporting process and the Administrator's report to the Board. Risk Assessment The Board is responsible for assessing the risk of irregularities whether caused by fraud or error in financial reporting and ensuring the processes are in place for the timely identification of internal and external matters with a potential effect on financial reporting. The Board has also put in place processes to identify changes in accounting rules and recommendations and to ensure that these changes are accurately reflected in the Company's financial statements. Control Activities The Administrator is contractually obliged to design and maintain control structures to manage the risks which the Board judges to be significant for internal control over financial reporting. These control structures include appropriate division of responsibilities and specific control activities aimed at detecting or preventing the risk of significant deficiencies in financial reporting for every significant account in the financial statements and the related notes. Monitoring The Board has an annual process to ensure that appropriate measures are taken to consider and address the shortcomings identified and measures recommended by the independent auditors. Given the contractual obligations on the Administrator, the Board has concluded that there is currently no need for the Company to have a separate internal audit function in order for the board to perform effective monitoring and oversight of the internal control and risk management systems of the Company in relation to the financial reporting process. Capitol Structure No person has a significant direct or indirect holding of securities in the Company. No person has any special rights of control over the Company's share capital. There are no restrictions on voting rights. With regard to the appointment and replacement of Directors, the Company is governed by its Constitution, Irish Statute comprising the Companies Act 2014 and the Listing Rules of the Irish Stock Exchange. The Company's Constitution may be amended by special resolution of the shareholders. Powers of Directors The Board is responsible for managing the business affairs of the Company in accordance with the Company's Constitution. The Directors may delegate certain functions to the Administrator and other parties, subject to the supervision and direction by the Directors. The Directors have delegated the day to day administration of the Company to the Administrator. Audit Committee Under Regulation 115 of S.I. No. 312/ European Union (Statutory Audits) (Directive 2006/43/EC, as amended by Directive 2014/56/EU, and Regulation (EU) No 537/2014) Regulations 2016 (the "Regulations"), all public -interest entities (as such term is defined in the Regulations) are required to establish an audit committee, subject to certain exemptions. Section 167 of the Companies Act 2014 also requires the directors of a large company (as such term is defined in the Act) to establish an audit committee or to state the reasons for not establishing such a committee. Given the functions performed by the administrators and limited recourse nature of the securities issued by the company, the board has concluded that there is currently no need for the company to have a separate audit committee in order for the board to perform effective monitoring and oversight of the internal control and risk management systems of the company in relation the financial reporting process and the monitoring of the statutory audit and the independence of the statutory auditors. Accordingly the company has availed itself of the exemption from the requirements to establish an audit committee under Regulation 115(10)(c) of the Regulations. This report was approved by the Board and signed on its behalf by: Bianca Schwarze Niall Vaughan 12th September 2017 Director, Director

7 Directors' Responsibility Statement The Directors are responsible for preparing the Directors' report and the financial statements in accordance with Irish law. Irish law requires the Directors to prepare financial statements for each financial period. Under that law the Directors have prepared the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS). Under Irish law the Directors shall not approve the financial statements unless they are satisfied that they give a true and fair view of the Company's assets, liabilities and financial position as at the end of the financial period and of the profit or loss of the Company for the financial period. In preparing these financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether the financial statements have been prepared in accordance with IFRS and ensure that they contain the additional information required by the Companies Act 2014; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to: correctly record and explain the transactions of the Company; enable, at any time, the assets, liabilities, financial position and profit or loss of the Company to be determined with reasonable accuracy; and enable the Directors to ensure that the financial statements comply with the Companies Act 2014 and enable those financial statements to be audited. The Directors are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. On behalf of the board Bianca Schwarze Director Niall Vaughan Director 12th September 2017

8 p Independent auditors' report to the members of Fastnet Securities 12 DAC Report on the financial statements In our opinion, Fastnet Securities 12 DAC's financial statements (the "financial statements"): give a true and fair view of the company's assets, liabilities and financial position as at and of its result and cash flows for the period then ended; have been properly prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union; and have been properly prepared in accordance with the requirements of the Companies Act The financial statements, included within the Annual Report, comprise:. the Statement of Financial Position as at ; the Statement of Comprehensive Income for the period then ended; the Statement of Cashflows for the period then ended; the Statement of Changes in Equity for the period then ended; the Statement of Accounting Policies; and the Notes to the Financial Statements, which include other explanatory information. The financial reporting framework that has been applied in the preparation of the financial statements is Irish law and IFRSs as adopted by the European Union. In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events. Matters on which we are required to report by the Companies Act 2014 We have obtained all the information and explanations which we consider necessary for the purposes of our audit. In our opinion the accounting records of the company were sufficient to permit the financial statements to be readily and properly audited. The financial statements are in agreement with the accounting records. In our opinion the information given in the Directors' Report is consistent with the financial statements. In our opinion, based on the work undertaken in the course of our audit of the financial statements, the description of the main features of the internal control and risk management systems in relation to the financial reporting process included in the Corporate Governance Statement, is consistent with the financial statements and has been prepared in accordance with section 1373(2)(c) of the Companies Act Based on our knowledge and understanding of the company and its environment, obtained in the course of our audit of the financial statements, we have not identified material misstatements in the description of the main features of the internal control and risk management systems in relation to the financial reporting process included in the Corporate Governance Statement. PricewaterhouseCoopers, One Spencer Dock, North Wall Quay, Dublin 1, Ireland, I.D.E. Box No. 137 T: +353 (0) , F: +353(0) , Chartered Accountants 7

9 PWC Independent auditors' report to the members offastnet Securities 12 DAC - continued Matter on which we are required to report by exception Under the Companies Act 2014 we are required to report to you if, in our opinion, the disclosures of directors' remuneration and transactions specified by sections 305 to 312 of that Act have not been made. We have no exceptions to report arising from this responsibility. Responsibilities for the financial statements and the audit As explained more fully in the Directors' Responsibilities Statement set out on page 6, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with Irish law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the company's members as a body in accordance with section 391 of the Companies Act 2014 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. We conducted our audit in accordance with International Standards on Auditing (UK and Ireland). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. We primarily focus our work in these areas by assessing the directors' judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements. We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Ivan McLoughlin -_ for and on behalf of PricewaterhouseCoopers Chartered Accountants and Statutory Audit Firm Dublin 12 September 2017

10 Statement of accounting policies Introduction Fastnet Securities 12 DAC (the Company) is a Company domiciled in Ireland. The Company's registered office address is 6' Floor, Pinnacle 2, Eastpoint Business Park, Dublin 3. The principal activity of the Company is the investment in mortgage advances secured by first charges over properties within the Republic of Ireland. The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Company's financial statements. Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU and in accordance with the provisions of the Companies Act The lfrss adopted by the EU and applied by the Company in the preparation of these financial statements are those that were effective for accounting periods commencing on or before 11 August Basis of preparation The Company's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) interpretations as adopted by the European Union and those parts of the Companies Act 2014 applicable to companies reporting under IFRS. The financial statements have been prepared under the going concern basis and under the historical cost convention, as modified by the revaluation of certain financial instruments. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the entity's financial statements are disclosed in note 12. Going concern The Director's expect that the Company will continue to have sufficient cash inflows from its current cash resources and its interest in its mortgage book to meet its on-going obligations, in particular for its senior non-recourse debt providers over the period of assessment. The Company is dependent on PTSB to administer the mortgage book and loan notes on behalf of the Company. The Company is considered to be a subsidiary of PTSB owing to the specific terms set Out in the governing documentation relating to this Company and its securitised assets. PTSB is wholly owned by and is dependent on Permanent TSB Group Holdings Public Limited Company ("PTSBGH") for continued financial support. PTSBGH strategic outlook has continued to improve both from the perspective of the macroeconomic environment and the Group's performance as set out in Note 1 of the 2016 PTSBGH Annual Report. In evaluating the appropriateness of the going concern basis of preparation for its financial statements, the Directors of PTSBGH considered the principal risks and uncertainties as they might pertain to the going concern assumption, particularly the economic and political environment, the status of the Group's adherence to the terms of the Restructuring Plan, the Funding and Liquidity position and Profitability and the Capital adequacy. In the PTSBGH 2016 Annual Report the Directors of PTSBGH have concluded that there are no material uncertainties which would cast significant doubt on the ability of PTSBGH to continue on a going concern basis for the foreseeable future. Based on the above, the Directors of the Company, having made due enquiries, continue to adopt the going concern basis in preparing these financial statements. If PTSB were unable to continue as a going concern, then, as administrator of the mortgage book and loan notes of this Company, PTSB, as Servicer, would be unable to continue realising assets and discharging liabilities on behalf of the Company in the normal course of business. The financial statements do not include any adjustments that would be required if PTSB, as administrator of this Company's mortgage book and loan notes, were unable to continue as a going concern. Significant estimates and judgements Significant estimates and judgements made by the group which have a significant impact on the financial statements include: - Valuations of mortgage advances as detailed in note Valuation of non-recourse funding as detailed in note 12. New and amended standards adopted by the Company There were no new standards adopted by the Company for the first time for the financial period.

11 Statement of accounting policies (continued) New standards and interpretations not yet adopted A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 11 August 2016, and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Company, except the following set Out below: IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in July 2014 and is effective for financial periods beginning on or after 1 January It replaces the parts of las 39 that relate to the classification and measurement of financial instruments. IFRS 9 replaces las 39 in its entirety. This final version of IFRS 9 includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit loss model that replaces the incurred loss impairment model used today. IFRS 9 has three classification categories for debt instruments: amortised cost, fair value through other comprehensive income and fair value through profit or loss. Classification under IFRS 9 for debt instruments is driven by the entity's business model for managing the financial assets and whether the contractual cash flow represents solely payments of principal and interest. An entity's business model is how an entity manages its financial assets in order to generate cash flows and create value for the entity. The Company is yet to assess IFRS 9's full impact and intends to adopt IFRS 9 when it becomes mandatorily applicable. IFRS 15, 'Revenue from Contracts with Customers, establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer. The standard permits either a full retrospective or a modified retrospective approach for the adoption. IFRS 15 is effective for financial periods beginning on or after 1 January Amendments to AS 7, 'Statement of Cash Flows - Changes in liabilities arising from financing activities' (effective for financial periods beginning on or after 1 January 2017) - subject to EU endorsement. The amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. Amendments to las 12, 'Income Taxes' (effective for financial periods beginning on or after 1 January 2017) - subject to EU endorsement. The amendments clarify the accounting treatment in relation to recognition of deferred tax assets for unrealised losses. There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company. The Company has not adopted any other new standards or interpretations that are not mandatory. Other than as indicated above, the Directors anticipate that the adoption of those standards or interpretations will have no material impact on the financial statements of the Company in the period of initial application. Functional and presentation currency The financial statements are presented in Euro, which is the Company's functional currency. Functional currency is the currency of the primary economic environment in which the entity operates. Foreign currency transactions are translated to Euro at the exchange rate prevailing at the date of transaction. Monetary assets and liabilities denominated in foreign currency are translated at the exchange rates prevailing at the balance sheet date. Exchange movements on these are recognised in the statement of comprehensive income. Segmental reporting A segment is a distinguishable component of a Company that is engaged either in providing products or services (business segment) or in providing products or services within a particular economic environment (geographical segment) which is subject to risks and rewards that are different from those of other segments. The Company's principal business is holding rights to a securitised mortgage portfolio, the funds from which are utilised principally to repay non-recourse finance raised. All of the associated net results and assets are located in the Republic of Ireland and are derived from this single portfolio, which largely comprises residential mortgages with individual customers. The Company accordingly considers that it operates in both a single business and geographical segment and that there are no separate reportable segments for which additional segmental disclosures are required. 10

12 Statement of accounting policies (continued) Interest income and expense Interest income and expense for all financial instruments are recognised in the statement of comprehensive income using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument or, where appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Company estimates cash flows considering all contractual terms of the financial instrument but not future credit losses. The calculation includes all amounts paid or received by the Company that are an integral part of the effective interest rate of a financial instrument, including transaction costs and all other premiums or discounts. Interest income and expense on financial assets and liabilities at fair value through the profit and loss is included in net income on financial instruments designated at fair value and includes all gains and losses from changes in the fair value of financial assets and liabilities designated at fair value through profit or loss. Taxation Taxation comprises both current and deferred tax. Taxation is recognised in the statement of comprehensive income except where it relates to an item which is recognised directly in equity. Corporation tax payable is provided on taxable profits at current tax rates. Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using the tax rates enacted or substantively enacted at the reporting date, together with any adjustment to tax payable or receivable in respect of previous years. Deferred tax is provided using the liability method on all temporary differences except those arising on goodwill not deductible for tax purposes, or where the temporary difference arose on the initial recognition of an asset or liability in a transaction that affects neither accounting profit nor taxable profit. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax liabilities and assets are offset only where there is both the legal right and the intention to settle on a net basis or to realise the asset and settle the liability simultaneously. Financial instruments The financial instruments held by the Company include the following: Financial assets Mortgage advances Financial liabilities Fair value option Non-recourse funding The Company has chosen to designate its interest in the mortgage assets and its non-recourse funding at fair value through profit and loss in line with las 39.9 on initial recognition because the instruments are managed as a ring fenced secured financing transaction and are evaluated on a fair value basis. a) Mortgage advances Mortgage advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and that the Company has no intention of trading. Income is recognised on an effective interest basis as interest income in the statement of comprehensive income. Substantially all of the Company's mortgage advances were originated in a securitisation transaction from a related undertaking, PTSB. However, PTSB does not derecognise those assets from the transaction as it is deemed to have retained control of the underlying assets. Accordingly, the Company has recognised equivalent mortgage advances due from PTSB to the extent of its continued involvement with these assets, and in particular, reflecting its right to receive certain cash flows from those underlying mortgage assets securitised. The Company has not made any separate provision for impairments against the mortgage advances as they are designated as at fair value through profit and loss. Fair value encompasses changes in credit/prepayment and other material risks associated with the assets. The Company has used a discounted cash flow valuation model to arrive at a fair value for the mortgage advances. The model used at has discounted the estimated future cash flows at current market rates incorporating the impact of credit spreads and margins. Model inputs are calibrated against historical data and published forecasts and, where possible, against current or recent observed transactions or implied pricing for similar mortgagebacked securities. This calibration process is inherently subjective as different input sources may imply different levels of expected losses and discount rate. 11

13 Statement of accounting policies (continued) (b) Non-recourse funding Non-recourse funding includes both the loans note and the subordinated loan advanced from PTSB. These financial liabilities are designated at fair value through profit and loss. Recognition The Company initially recognises all financial assets and liabilities on the date at which the Company becomes a party to the contractual provisions of the instruments and measured at fair value, which is normally the consideration received net of directly attributable transaction costs incurred. Any gains and losses arising from changes in fair value of the financial assets or financial liabilities designated as at fair value through profit or loss are recorded in the statement of comprehensive income. The subsequent measurement of financial liabilities, other than those measured at fair value through profit or loss and financial guarantees, are measured at amortised cost, using the effective interest rate method to amortise the difference between proceeds net of directly attributable transaction costs and the redemption amount over the expected life of the debt. Derecognition The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability. The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, expired or substantially modified. Offsetting Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains and losses arising from a group of similar transactions. Net income/(expense) from financial instruments designated at fair value Gains and losses from changes in the fair value of mortgage advances and changes in the fair value of non-recourse funding are included in "net income/(expense) from financial instruments designated at fair value" in the statement of comprehensive income. Fair value measurement principles Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability which is accessible to the Company. The determination of fair values of financial assets and financial liabilities is based on quoted market prices or dealer price quotations for financial instruments traded in active markets, where these are available. For all other financial instruments fair value is determined by using valuation techniques. Valuation techniques include net present value techniques, the discounted cash flow method, comparison to similar instruments for which market observable prices exist, and valuation models. Some or all of the inputs into these models may not be market observable, and are derived from market prices or rates or are estimated based on assumptions. The value produced by a model or other valuation technique is adjusted to allow for a number of factors as appropriate, because valuation techniques cannot appropriately reflect all factors market participants take into account when entering into a transaction. 12

14 Statement of accounting policies (continued) Fair value hierarchy The Company carries certain financial assets at fair value. In estimating the fair value of these assets, the Company seeks to use quoted market prices (level 1). Where quoted market prices are not available, the Company uses internally developed valuation models and valuations from external experts. Inputs to these models are taken from observable market data where possible (level 2) but where this is not possible, a degree of judgement is used (level 3). Such judgement considerations typically include items such as interest rate yield curves, equity prices, option volatilities and currency rates. Fair value estimates are made at a specific point in time, based on market conditions and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgement e.g. interest rates, volatility, credit spreads, probability of defaults, estimates cash flows etc. and therefore, cannot be determined with precision. Financial assets and liabilities that are not at fair value through profit or loss Financial assets that are not at fair value through profit or loss and are not quoted in an active market include cash and cash equivalents and trade and other receivables. Financial liabilities that are not at fair value through profit or loss include accruals and other payables. Cash and cash equivalents Cash and cash equivalents are held for the purpose of meeting short-term cash commitments rather than investing or other purposes. Cash and cash equivalents consist of cash and balances with banks that are freely available, bank overdrafts and short term borrowings and non-equity investments with a maturity of three months or less from the date of acquisition. Restricted cash comprises cash held which is required by the Company's governing documentation to be utilised primarily to repay its non-recourse borrowings. These amounts are not included within the Company's own (unrestricted) cash balances in the statement of cash flows. Share capital Ordinary shares Ordinary shares are classified as equity. Incremental costs are directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects. Dividends Dividends on ordinary shares are recognised as a liability in the period in which they are declared and approved. 13

15 Statement of Comprehensive Income For the period from date of incorporation 11 August 2016 to Period ended Notes Net income/(expense) from financial instruments designated at fair value 8(a) 208,994 Interest income 8(b) - Net interest income 208,994 Other operating expenses 7 (208,994) Operating profit on ordinary activities before taxation 9 Income tax expense 10 Other comprehensive income Total comprehensive income for the financial period - Attributable to; Owners of the Company The statement of accounting policies and notes to the financial statements form part of these financial statements. 14

16 Statement of Financial Position As at Assets Notes 31 December 2016 Cash and cash equivalents 1 31,722,731 Mortgage advances designated at fair value 2 521,425,011 Trade and other receivables 3 - Total assets Liabilities Non-recourse funding designated at fair value 4 549,496,172 Accruals and other payables 5 3,650,570 Total liabilities Equity Share capital Total equity 553,146,742 Total liabilities and equity 553,147,742 The statement of accounting policies and notes to the financial statements form part of these financial statements. Approved by the board of Directors on the 12"1 September 2017 and signed on their behalf by: /2L Bianca Schwarze Director Niall Vaughan Director 15

17 Statement of changes in equity For the period from date of incorporation 11 August 2016 to Share Capital Retained Earnings Total Equity Issue of ordinary shares during the period 1,000-1,000 Balance as at 31 December 1,000-1,000 16

18 Statement of cash flows For the period from date of incorporation 11 August 2016 to Cash flows from operating activities Note Profit before taxation for the financial period - Adjusted for: Fair value movement on mortgage advances 2 27,048,606 Fair value movement on non-recourse funding 4 (27,048,606) Non-cash items (net) - (Increase) / decrease in operating assets: Trade receivables 3 - Increase/(decrease) in operating liabilities: Accruals and other payables 5 3,650,570 Net cashflows from operating activities before tax 3,650,570 Net cashflows from operating activities 3,650,570 Cash flows from investing activities (increase)/decrease in purchase of Mortgage Advances 2 (561,961,122) (increase)/decrease in Mortgage advances 2 13,487,505 Cashflows from financing activities Increase/(decrease) in issue of non-recourse funding 4 576,265,000 (Increase)/decrease in restricted cash 1 (14,055,000) Increase/(decrease) in non-recourse funding 4 279,778 Increase / (decrease) in cash and cash equivalents 17,666,731 Analysis of changes in cash and cash equivalents Cash and cash equivalents as at date of incorporation i000 Net cash flow 17,666,731 Cash and cash equivalents as at 31 December 1 17,667,731 17

19 Notes to the Financial Statements 1. Cash and cash equivalents Cash at bank Restricted cash 17,667,731 14,055,000 31,722,731 Cash at bank is held for the purpose of meeting short-term cash commitments rather than investing or other purposes. Cash and cash equivalents are short term by nature and are considered current as Opposed to non-current assets. Restricted cash comprises cash held which is required by the Company's governing documentation to be utilised primarily to repay its non-recourse borrowings. 2. Mortgage advances designated at fair value The Company purchased 561,961,122 of an interest in certain mortgage assets from PTSB. These assets consist of a portfolio of Irish residential mortgages, wholly secured on properties in the Republic of Ireland. In order to fund the purchase of the interest in mortgage assets, the Company issued a series of floating rate notes. Under the terms of this arrangement, the rights of the providers of the finance for this transaction are limited to the interest in the mortgage assets purchased and any related income generated by the portfolio and are without recourse to PTSB. PTSB is not obliged to support any losses, which may arise in respect of the underlying mortgage assets. During the term of this transaction, any amounts realised from the mortgage portfolio in excess of that due to the providers of the funding under the mortgage backed loan notes and subordinated loan, less any related administrative costs, will be payable to PTSB in the form of deferred consideration. The Company has not made any separate provision for impairments against the mortgage advances as they are designated as at fair value through profit and loss. Fair value encompasses changes in credit/prepayment and other material risks associated with the assets. The Company has used discounted cash flow valuation model to arrive at a fair value for mortgage advances. The model used at has discounted the estimated future cash flows at current market rates incorporating the impact of credit spreads and margins. Model inputs are calibrated against historical data and published forecasts and, where possible, against current or recent observed transactions or implied pricing for similar mortgagebacked securities. This calibration process is inherently subjective as different input sources may imply different levels of expected losses and discount rates. As at 42.1m of mortgage advances were classified as current and 479.3m as non-current based on a forecasted capital payment analysis of the mortgage advances. Issued during the period 561,961,122 Net repayments in the financial period (13,487,505) Fair value movement (27,048,606) As at 31 December 521,425, Trade and other receivables Accrued interest receivable on bank accounts As at 31 December - All trade and other receivables are current as they are due within 1 financial year. 18

20 Notes to the Financial Statements 4. Non-recourse funding Bond issue Subordinated loan issue Net repayments/interest accrued Fair value movement As at 31 December 562,200,000 14,065, ,778 (27,048,606) 549,496,172 In 2016, the Company issued 562,200,000 in mortgage backed loan notes in order to fund the purchase of an interest in a mortgage portfolio. The loan notes are secured over a portfolio of mortgage loans secured by first charges over residential properties in the Republic of Ireland. The interest in mortgages advances was purchased from PTSB. The mortgage portfolio is administered by PTSB. Given the non-recourse nature of the mortgage backed loan notes, repayment of capital is dependent on cashflows generated by the mortgage advances. On this basis, 42.1m of non-recourse funding was classified as current and 507.4m as non-current as at. Interest on the notes is payable, quarterly in arrears, at the following rates: Class of Note Balance outstanding as of Up to October After October 2021 Class A 448,000 3m Euribor % 3m Euribor % Class B 30,900 3m Euribor % 3m Euribor % Class C 21,100 3m Euribor % 3m Euribor % Class Z 62,200 Fixed 0.05% Fixed 0.05% Total 562,200 The above notes are listed on the Irish Stock Exchange ('ISE") and have a contractual maturity date of October The A notes will rank in priority to the Z notes in point of payment of interest and principal. The A, B and C notes ("the senior notes") rank pari passu in point of payment of interest and security (but the A notes will rank in priority to the B notes in the point of payment of principal prior to enforcement and the B notes will rank in priority to the C notes in point of payment of principal prior to enforcement). The balances above are the nominal balances outstanding on the loan notes as the end of the financial period. Optional redemption The Company may, at its option, redeem all (but not some) of the notes at their principal amounts outstanding: a) in the event of certain tax changes affecting the notes or the mortgages comprising the mortgage pool at any time; b) on the interest payment date falling in October 2021 ('Optional Call Date') or any interest payment date falling thereafter; c( on any interest payment date on which the aggregate principal amount outstanding of the notes is less than 10% of the total aggregate principal amount outstanding of the notes as at the issue date. Fitch, DBRS, and Moody's rating of the loan notes as at are as follows: Loan notes Fitch DBRS Moody AAA AA AAA Aaa AA Aa1 A(high) Al The Z notes are unrated. 19