Eirles Two Limited

Eirles Two Limited

Directors’ report andfinancial statements

For the year ended31 December2014

Registered number 327009

Eirles Two Limited

Contents Page

Directors and other information 1 -2

Directors’ report 37

Statement of Directors responsibilities 8

Independent auditor’s report 9— 10

Statement of financial position 11

Statement of comprehensive income 12

Statement of cash flows 13

Statement of changes in equity 14

Notes to the financial statements 15—71

Eirles Two Limited

Directors and other information

Directors Michael Whelan (Irish) (resignation: 27 February 2015)Niall O’Carroll (Irish)Liam Quirke (Irish)Margaret Kennedy (Irish) (appointment: 27 February 2015)

Registered office 6th Floor, Pinnacle 2Eastpoint Business ParkDublin 3Ireland

Trustee The Law Debenture Corporation p.l.c.Fifth Floor100 Wood StreetLondon EC2V 7EXUnited Kingdom

Deutsche Trustee Company LimitedWinchester House1 Great Winchester StreetLondon EC2N 208United Kingdom

Bank of New York MellonRiverside TwoSir John Rogersons QuayGrand Canal DockDublin 2Ireland

Administrator & Deutsche International Corporate Services (Ireland) LimitedCompany Secretary 61h Floor, Pinnacle 2

Eastpoint Business ParkDublin 3Ireland

Independent auditor KPMGChartered Accountants, Statutory Audit Firm1 Harbourmaster PlaceI FSCDublin 1Ireland

Arranger Deutsche Bank AG, London BranchPC Box 4416 BishopsgateLondon EC2P 2ATUnited Kingdom

Eirles Two Limited

Directors and other information

Bankers Deutsche Bank AG, London BranchPC Box 4416 BishopsgateLondon EC2P 2ATUnited Kingdom

Bank of New York MellonRiverside TwoSir John Rogersons QuayGrand canal DockDublin 2Ireland

Listing Agents Deutsche Bank Luxembourg 8k2 Boulevard Konrad AdenauerL-1115Luxembourg

Deutsche Bank AG, London BranchPD Box 4416 BishopsgateLondon EC2P 2ATUnited Kingdom

Solicitor Matheson70 Sir John Rogerson’s QuayDublinIreland

Swap Counterparty Deutsche Bank AG, London BranchPD Box 4416 BishopsgateLondon EC2P 2ATUnited Kingdom

BNP Paribas. London Branch10 Harewood AvenueLondon NW16MUnited Kingdom

7

Eirles Two Limited

Directors’ Report

The Directors present the annual report and audited financial statements of Eirles Two Limited (theCompany”) for the year ended 31 December 2014.

Principal activities, business review and future developmentsThe Eirles Two Limited program was set up in April 2000 to issue multiple series of debt securities,with the rating on each series independent of the other (if applicable). This means that Eirles TwoLimited (the company” or the ‘issuer’) can issue various series of debt securities ranging from AAAto non-rated. This gives the sponsor greater flexibility in what it can finance through this vehicle andit reduces the cost of issuing.

Eirles Two was set up as a segregated multi issuance Special Purpose Entity. Each Series isgoverned by a separate Supplemental Programme Memorandum (5PM). Each Series consists ofan investment in collateral from the proceeds of the issuance of debt securities.

The Programme offers investors the opportunity to invest in a portfolio of investments, the“investment securities and total return swaps”, and alter the interest rate risk and credit risk profile ofthe portfolio through the use of derivative instruments.

The Company has established a EUR 10,000.000,000 Multi-Issuance Programme (the“Programme”) to issue debt securities and/or other secured limited recourse indebtedness. Debtsecurities will be issued in Series (each a ‘Series”) and the terms and conditions of the debtsecurities of each Series will be set out in a Supplemental Programme Memorandum for such Series(each a “Supplemental Programme Memorandum”).

Each series of debt securities will be secured as set out in the terms and conditions of the Debtsecurities including a first fixed charge over certain collateral, primarily in the form of investmentsecurities, total return swaps or cash, as set out in the relevant Supplemental ProgrammeMemorandum (the “Collateral”) and a first fixed charge over funds held by the Agents under theAgency Agreement (each as defined in the terms and conditions of the Debt securities). EachSeries may also be secured by an assignment of the Company’s rights under a Swap Agreementand/or Option Agreement andlor Repurchase Agreement and/or Credit Support Document (each asdefined in the terms and conditions of the debt securities) and any additional security as may bedescribed in the relevant Supplemental Programme Memorandum (together the “MortgagedProperty”). For details of the assets held by the Company at the end of the year. refer to note 7 forthe investment securities and total return swaps.

The credit risk of the investment securities and total return swaps is borne by either the, Company’sswap counterparty (in cases where a default swap transaction has been entered into for thatparticular series) or the Company’s holders of debt securities. Refer to note 4 (b) (i) and 22 (a) forfurther details about how the Company manages credit risk.

For every new issuance of debt securities, Deutsche Bank AG London, as arranger, transfers to theCompany an amount of USD 200 as corporate benefit (income). This income is taxable under Irishlaw at a current rate of 25% and the net amount is retained as the profit for the year.

As arranger, Deutsche Bank AG, London Branch also agreed to reimburse the Company againstany costs, fees, expenses or out-goings incurred. Deutsche Bank AG, London Branch is also theswap coupterparty for all series.

The Company made a net gain on investment securities and total return swap of EUR 172m (2013:net loss EUR 0.36m) for the year and a net gain on derivative financial instruments of EUR llm(2013: net loss EUR 23m).

3

Eirles Two Limited

Directors’ Report (continued)

Principal activities, business review and future developments (continued)Due to the limited recourse nature of the debt securities issued and as the return on those issuedsecurities is directly linked to the performance of the investment securities, total return swaps andderivative financial instruments! the Company made a corresponding net loss of EUR 183m (2013:net gain EUR 24m) on the debt securities in issue for the year.

As at 31 December 2014, the fair value of the Company’s total debt securities issued was EUR1.091m (2Q13: EUR 1.218m). The company had no new series issued (2013: 3 new issues) duringthe year. Refer to Note 7 and 9 for further details.

No series have matured during the year whereas Series 325, 326, 327, 328, 329, 334 and 360 wereredeemed in full.

The following series are currently in issue as at year end date: Series 49, 91, 164, 176, 191, 192,194, 195, 200, 205, 215, 216, 229, 254, 255, 298, 299, 309, 312, 316, 319, 345, 347, 351, 352, 353,354, 355, 357, 361, 363, 364, 365, and 366.

Series 3, 4. 5. 6, 25, 26, 27, 28, 29, 30, 31, 37, 39, 41, 54. 57, 83, 86, 95, 111 (Class B), 124, 130,138, 154, 155. 169 (Class B), 170, 190, 204, 206, 249, 250. 253, 289. 302, 314 and 315 have neverbeen issued.

Results and dividends for the yearThe results for the year are set out on page 12. The Directors do not recommend the payment of adividend for the year under review.

Changes in Directors during the yearThere were no changes in Directors during the year.

Risks and uncertaintiesThe principal risks and uncertainties facing the Company relate to the debt securities issued,investment securities and total return swap and derivative instruments held by the Company. Theseare explained in Notes 4 and 22 of the financial statements along with the risk managementframework in place to deal with these risks.

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associatedwith the Company’s processes, personnel and infrastructure, and from external factors other thancredit, market and liquidity risks such as those arising from legal and regulatory requirements andgenerally accepted standards of corporate behaviour. Operational risks arise from all of theCompany’s operations.

Directors, secretary and their interestsThe Directors and secretary who held office on 31 December 2014 did not hold any shares in theCompany at that date, or during the year. There were no contracts of any significance in relation tothe business of the Company in which the Directors had any interest, as defined in the CompaniesAct 1990. at anytime during the year.

4

Eirles Two Limited


Subsequent eventsSince the end of the reporting period the Company has not issued any new series of debt securities.The following series have matured after year end:Series 49 18 March 2015Series 229 20 January 2015The following series have been disposed after year end:Series 316 13 January 2015 Partial Unwind USD 8.4MSeries 364 17 February 2015 Full Unwind USD lOOMOn 27 February 2015, Michael Whelan resigned as a Director of the Company. On the same date,Margaret Kennedy was appointed as Director of the Company.

Corporate Governance StatementThe Board of Directors (the Board”) is responsible for establishing and maintaining adequateinternal control and risk management systems for the Company in relation to the financial reportingprocess. Such systems are designed to manage rather than eliminate the risk of failure to achievethe Company’s financial reporting objectives and can only provide reasonable and not absoluteassurance against material misstatement or loss.The Board has established processes regarding internal control and risk management systems toensure its effective oversight of the financial reporting process. These include appointing DeutscheInternational Corporate Services (Ireland) (the Administrator’) to maintain the accounting records ofthe Company independently of Eirles Two Limited (the Servicer’) and the Trustee. TheAdministrator is contractually obliged to maintain proper books and records and to that end performsreconciliations of its records to those of the Servicer and the Trustee.The Administrator is also contractually obliged to prepare the annual report including financialstatements for review and approval by the Board. The Board evaluates and discusses significantaccounting and reporting issues as the need arises.From time to time, the Board also examines and evaluates the Administrator’s financial accountingand reporting routines and monitors and evaluates the external auditors’ performance, qualificationsand independence. The Administrator has operating responsibility for internal control in relation tothe financial reporting process and reports to the Board.The Board is responsible for assessing the risk of irregularities whether caused by fraud or error infinancial reporting and ensuring that the processes are in place for the timely identification of internaland external matters with a potential effect on financial reporting. The Board has also put in placeprocesses to identify changes in accounting rules and recommendations and to ensure that thesechanges are accurately reflected in the Company’s financial statements.The Administrator is contractually obliged to design and maintain control structures to manage therisks which the Board judges to be significant for internal control over financial reporting. Thesecontrol structures include segregation of responsibilities and specific control activities aimed atdetecting or preventing the risk of significant deficiencies in financial reporting for every significantaccount in the financial statements and the related notes in the Company’s annual report.The Board delegates the asset valuation function to DB AG, London Branch (the swapcounterpady/originator”) who operates a sophisticated system of controls to ensure appropriatevaluation of the assets except for Series 229 whose valuation is delegated to BNP Paribas. All thevalues for the financial instruments held by the Company have been provided by the swapcounterparty. In our opinion, DB AG, London Branch is the most appropriate and reliable source ofsuch fair values in its capacity as the swap counterparty. We are satisfied that the amounts asstated in the Company’s financial statements represent a reasonable approximation of those values.

)

Eirles Two Limited


Corporate Governance Statement (continued)The Company’s policies and the Board’s instructions with relevance for financial reporting areupdated and communicated via appropriate channels, such as e-mail, correspondence andmeetings to ensure that all financial reporting information requirements are met in a complete andaccurate manner. The Board has an annual process to ensure that appropriate measures are takento consider and address the shortcomings identified and measures recommended by theindependent auditors.

Given the contractual obligations on the Administrator, the Board has concluded that there iscurrently no need for the Company to have a separate internal audit function in order for the Boardto perform effective monitoring and oversight of the internal control and risk management systems ofthe Company in relation to the financial reporting process.

No person has a significant direct or indirect holding of securities in the Company. No person hasany special rights of control over the Company’s share capital.

There are no restrictions on voting rights.

Appointment and replacement of Directors and amendments to the Articles of AssociationWith regard to the appointment and replacement of Directors, the Company is governed by itsArticles of Association and Irish Statute comprising the Companies Acts, 1963 to 2013. The Articlesof Association themselves may be amended by special resolution of the shareholders.

Powers of DirectorsThe board is responsible for managing the business affairs of the Company with the Articles ofAssociation. The Directors may delegate certain functions to the administrator and other partiessubject to the supervision and direction by the Directors. The Directors have delegated the day today administration of the Company to the administrator as stated above.

Transfer of sharesThe instrument of transfer of any share shall be executed by or on behalf of the transferor and, incases where the share is not fully paid, by or on behalf of the transferee. The transferor shall bedeemed to remain the holder of the share until the name of the transferee is entered on the registerin respect thereof. If the Directors refuse to register a transfer, they shall, within two months afterthe date on which the transfer was lodged by the Cornpany, send to the transferee notice of therefusal.

Audit committeeThe sole business of the Company relates to the issuing of asset-backed debt securities. TheCompany invests in investment securities and total return swaps and writes credit default swaps inorder to secure return to its investors. It also enters into certain derivatives to hedge out interest rateand currency risk exposures arising between asset and liability mismatches.

Under Regulation 91(9)(d) of the European Communities (Statutory Audits) (Directive 2006/431EC)Regulations 2010 (the “Regulations”). which were published by the Irish Minister for Enterprise,Trade and Innovation on 25 May 2010, such a Company may avail itself of an exemption from therequirement to establish an audit committee.

6

Eirles Two Limited


Audit committee (continued)Given the contractual obligations of the administrator and the limited recourse nature of thesecurities issued by the Company, the board of Directors has concluded that there is currently noneed for the Company to have a separate audit committee in order for the board to perform effectivemonitoring and oversight of the internal control and risk management systems of the Company inrelation to the financial reporting process. Accordingly, the Company has availed itself of theexemption under Regulation 91(19)(d) of the Regulations.

credit EventDuring the year, credit event arised in Series 91 with reference entity BWIC 2006 1A C2. The creditevent with respect to reference entity to which the notes are credit linked did not result in theoccurrence of any payment under the relevant credit default swap agreement or early redemption inwhole or in part in accordance with the terms of the notes due to sufficient headroom in place.

Accounting recordsThe Directors believe that they have complied with the requirements of Section 202 of theCompanies Act, 1990 with regard to the books of account by engaging a service provider whoemploys accounting personnel with the appropriate expertise and by providing adequate resourcesto the finance function. The books of account of the Company are maintained at 61h Floor, Pinnacle2. Eastpoint Business Park! Dublin 3.

Independent auditorIn accordance with Section 160(2) of the Companies Act, 1963, KPMG, Chartered Accountants,Statutory Audit Firm, have signified their willingness to continue in office.

On behalf of the board

AMargaret Kennedy Niall O’carrol)Director Director

Date:lCtt.4.

7

Eirles Two Limited

Statement of Directors’ responsibilities in respect of Directors’ report and thefinancial statements

The Directors are responsible for preparing the Directors Report and financial statements, inaccordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Underthat law, the Directors have elected to prepare the financial statements in accordance withInternational Financial Reporting Standards (IFRS&’) as adopted by the European Union. (‘EU”)and applicable law.

The financial statements are required by law to give a true and fair view of the state of affairs of theGroup and Company and of their profit or loss for that period. In preparing the financial statements,the Directors are required to:• select suitable accounting policies and then apply them consistently;• make judgments and estimates that are reasonable and prudent;• state whether they have been prepared in accordance with IFRS5 as adopted by the EU; 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 also required by the Transparency (Directive 20041109/EC) Regulations 2007 (the“Transparency Regulations”), to include a management report containing a fair review of thebusiness and a description of the principal risks and uncertainties facing the company.

The Directors are responsible for keeping proper books of account that disclose with reasonableaccuracy at any time the financial position of the Company and enable them to ensure that itsfinancial statements comply with the Companies Acts, 1963 to 2013. They have generalresponsibility for taking such steps as are reasonably open to them to safeguard the assets of theCompany and to prevent and detect fraud and other irregularities. The Directors are alsoresponsible for preparing a Directors’ Report that complies with the requirements of the CompaniesAct, 1963 to 2013.

Responsibility Statement, in accordance with the Transparency Regulations

Each of the Directors, whose names and functions are listed on page 1 of these FinancialStatements confirm that, to the best of each person’s knowledge and belief;

• the financial statements, prepared in accordance with lFRSs as adopted by the EU asapplied in accordance with the provisions of the Companies Acts 1963 to 2013, give a trueand fair view of the assets, liabilities and financial position of the Company at 31 December2014 and its result for the year then ended; and

• the Directors’ Report contained in the Annual Report includes a fair review of thedevelopment and performance of the business and the position of the company, togetherwith a description of the principal risks and uncertainties that it faces.

On behalf f the board

fV< a-t1- r 0L’tMargaret Kenne Niall O’CarrollDirector Director

Date:r.

8

KPMGAudit1 Harbou,rrster P!aceIFSCDubtn 1Ire!ad

Independent auditor’s report to the members of Lines Two Limited

We have audited the financial statements (‘‘financial statements”) of Eirles Two Limited for the yearended 31 December 2014 which comprise Statement of Financial Position, Statement ofComprehensive Income, Statement of Cash Flows, Statement of Changes in Equity and the relatednotes. The financial reporting framework that has been applied in their preparation is Irish law andInternational Financial Reporting Standards (WRSs) as adopted by the European Union.

This report is made solely to the Company’s members, as a body, in accordance with section 193 of theCompanies Act 1990. Our audit work has been undertaken so that we might state to the Company’smembers those matters we are required to state to them in an auditor’s report and for no other purpose.To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other thanthe Company and the Company’s members as a body, for our audit work, for this report, or for theopinions we have formed.

Respective responsibilities of directors and auditor

As explained more fully in the Directors’ Responsibilities Statement set out on page 8, the directors areresponsible forthe preparation of the financial statements giving a true and fair view. Our responsibilityis to audit and express an opinion on the financial statements in accordance with Irish law andInternational Standards on Auditing (UK and Ireland). Those standards require us to comply with theFinancial Reporting Council’s Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statementssufficient 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 areappropriate to the company circumstances and have been consistently applied and adequately disclosed;the reasonableness of significant accounting estimates made by the directors; and the overallpresentation of the financial statements. In addition, we read all the financial and non-financialinformation in the annual report to identify material inconsistencies with the audited financialstatements and to identify any information that is apparently materially incorrect based on, or materiallyinconsistent with, the knowledge acquired by us in the course of performing the audit. If we becomeaware of any apparent material misstatements or inconsistencies we consider the implications for ourreport.

Opinion on financial statements

In our opinion:

• the financial statements give a true and fair view, in accordance with WRSs as adopted by the EU,of the state of the Company’s affairs as at 31 December 2014 and of its result for the year thenended; and

• the financial statements have been properly prepared in accordance with the Companies Acts 1963to 2013.

9

KPMG. on Iris, p ar(narsh! and a member fern 0f jh KP.lG nerv.nnkrn,a,naI

Cze,a,n.,rKP.’2 Interanc’aIp a S., as 5rfy

Independent auditor’s report to the members of Eirles Two Limited (continued)

Matters on which we are required to report by the Companies Acts 1963 to 2013

We have obtained all the information and explanations which we consider necessary for the purposesof our audit.

The financial statements are in agreement with the books of account and, in our opinion, proper booksof account have been kept by the Company.

In our opinion the information given in the directors’ report is consistent with the financial statementsand the description in the Corporate Governance Statement of the main features of the internal controland risk management systems in relation to the process for preparing the financial statements isconsistent with the financial statements.

The net assets of the Company, as stated in the Statement of Financial Position are more than half ofthe amount of its called-up share capital and, in our opinion, on that basis there did not exist at 31December 2014 a financial situation which under Section 40(l) of the Companies (Amendment) Act,1983 would require the convening of an extraordinary general meeting of the Company.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:Under the Companies Acts 1963 to 2013 which require us to report to you if, in our opinion thedisclosures of directors’ remuneration and transactions specified by law are not made.

Ailbhe Kennyfor and on behalf ofKPMGChartered Accountants, Statutory Audit FirmI Harbourmaster PlaceJFSCDublin IIreland

Date: 29 April 2015

10

Eirles Two Limited

Statement of financial positionAs at 31 December 2014

Cash and cash equivalentsCash collateralDerivative assetsInvestment securities and total return swapsat fair value through profit or lossOther assets

Total assets

LiabilitiesDerivative liabilitiesDebt securities issued at fair value through profit or lossOther liabilities

Total liabilities

q U ityShare capitalRetained earnings

Total equity

Total liabilities and equity


AMargaret Kennedy

Date: C\ L

5 347 344277,043 235,628

81,850 80,21756

7 860,329 1,057,8082,775 4,4318

1.222,344 1 378,428

127,647 156,2471,091,000 1,217,517

3,506 4,473

1,222,153 1,378,237

191 191

191 191

1,222,344 1,378,428

Al, 0tCc’rtZ.

Niall o’carrollDirector

The notes on pages 15 to 71 form an integral part of these financial statements

Assets

2014 2013Note €‘OOO €‘OOO

6910

11

Eirles Two Limited

Statement of comprehensive incomeFor the year ended 31 December 2014

2014 2013Note €000 €000

Net gain / (loss) from investment securities and totalreturn swaps 13 172382 (362)Net gain / (loss) from derivative financial instruments 14 10,921 (23,236)Net finance (loss) / gain on debt securities issued 15 (183,303) 23,598

Operating income- -

Other income 16 79 106Otherexpenses 17 (79) (106)

Profit before taxation- -

Income tax expense 18 - -

Resultforthe year- -

Other comprehensive income- -

Total comprehensive income for the year- -

All items dealt with in arriving at the above profit for the year ended 31 December 2014 related tocontinuing operations.


CD(ora-LA..

Margaret Ke ne y Niall O’CarrollDirector Director

Date: 2Cs’Lk’


2

Eirles Two Limited

Statement of cash flowsFor the year ended 31 December 2014

Cash flows from operating activitiesProfit for the year

Adjustments forCoupon incomeCoupon expenseCredit default swap incomeNet unrealised (gain) / loss on investment securitiesand total return swaps

Net realised gain on investment securities and total return swapsNet unrealised loss! (gain) on debt securities issuedNet realised gain on debt securities issuedNet unrealised (gain) / loss on derivative financial instrumentsNet realised loss on derivative financial instruments

Movement in working capitalChange in other assetsChange in other liabilities 5Net cash from operating activities

Cash flows from investing activities

2013

(‘000

Acquisition of investment securities and total return swapsProceeds from maturity / disposal of investment securitiesand total return swaps

Net payments in respect of derivatives financial instruments

Coupon receipts

Net cash from investing activities

Cash flows from financing activitiesProceeds from issuance of debt securititesPayments on maturity / redemption of debt securitiesCoupon payments on debt securities issued

Net cash from financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at 1 January

Cash and cash equivalents at 31 December

(70,015) (173,384)

441747 349,441

18,991 (7,132)

29,980 32073

420,703 200,998

(420700)

3

344

347

93,262(266,397)

(27,863)

(200.998)

344

344


2014

(‘000

(25.877)18725(2,442)

(148.195)

1,690171.117

(6,539)(9,020)

541

(26,821)24,284(4,358)

30,081

(2.898)(35667)(12,215)21,762

5,832

220(220)

(5)

2,011(403,013)(19,698)

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Eirles Two Limited

Statement of Changes in EquityFor the year ended 31 December 2014

Share Retainedcapital earnings Total€000 €000 €000

Balance as at 31 December 2012- 191 191

Profit forthe year-2013- - -

Other comprehensive income- - -

Total comprehensive income for the year

Balance as at 31 December 2013 - 191 191

Profit for the year -2014- - -

Other comprehensive income- - -

Total comprehensive income for the year - - -

Balance as at 31 December 2014- 191 191


14

Eirles Two Limited

Notes to the Financial StatementsFor the year ended 31 December 2014

General information

Eirles Two Limited (the ‘Company”) was incorporated on 14 April 2000 in the Republic ofIreland with registered number 327009. The registered office of the Company is at 6th Floor,Pinnacle 2, Eastpoint Business Park, Dublin 3.

The Company is a special purpose vehicle that has been established to issue debt securitiesunder a EUR 10,000,000,000 Multi-issuance note programme.

The program offers investors the opportunity to invest in a portfolio of investments, the“investment securities,” and alter the interest rate risk and credit risk profile of the investmentportfolio through the use of derivative instruments.

The company has no direct employees. The financial statements were authorised for issue bythe Directors on 29 April, 2015.

2 Basis of preparation

(a) Statement of complianceThe financial statements have been prepared in accordance with International FinancialReporting Standards and its interpretations as adopted by the EU (“IFRS”) and inaccordance with the Companies Acts 1963 to 2013.

The accounting policies set out below have been applied in preparing the financialstatements for the year ended 31 December 2014, the comparative information, for 2013presented in these financial statements has been prepared on a consistent basis.

These financial statements have been prepared on a going concern basis.

(b) Changes in accounting policies

There were no changes in accounting policies which has a financial impact on theCompany’s financial statements during the year

15

Eirles Two Limited


2 Basis of preparation (continued)

(c) New standards, amendments or interpretations

(i) Effective for annual periods beginning on 1 January 2014

A number of new standards and interpretations are effective for annual periodsbeginning on or after 1 January 2014. Of these, the following were of relevance tothe company and were considered for adoption:

The amendments to lAS 32 Financial Instruments: Presentation (OffsettingFinancial Assets and Financial Liabilities) clarify the offsetting criteria in lAS 32 byrevising the guidance on when an entity currently has a legally enforceable right toset-off and when gross settlement is considered to be equivalent to net settlement.Based on the new requirements! the Company assessed that at this time norevisions to its previous approach to offsetting of financial assets and financialliabilities arises in the statement of financial position.

IFRS 10 Consolidated Financial Statements establishes a new control-basedmodel for consolidation that replaces the existing requirements of both lAS 27 andSIC-12 Consolidation - Special Purpose Entities. Under the new standard aninvestor controls an investee when (i) it has exposure to variable returns from thatinvestee (H) it has the power over relevant activities of the investee that affectthose returns and (iii) there is a link between that power and those variable returns.The standard includes specific guidance on the question of whether an entity isacting as an agent or principal in its involvement with an investee. Theassessment of control is based on all facts and circumstances and is reassessed ifthere is an indication that there are changes in those facts and circumstances.

The Directors have assessed that IFRS 10 did not have an impact on theCompany as it is a stand-alone entity with no interests that could potentially qualifyas a subsidiary interest. Therefore, based on the new requirements, the Companyassessed that at this there was no implications for the financial statements. As theCompany has no subsidiaries, the IFRS 10 Amendment on Investment Entitiesdoes not apply.

IFRS 12 Disclosure of Interests in Other Entities sets out more comprehensivedisclosures relating to the nature, risks and financial effects of interests insubsidiaries, associates, joint arrangements and unconsolidated structuredentities. Interests are widely defined as contractual and non-contractualinvolvement that exposes an entity to variability of returns from the performance ofthe other entity or operation.

The Directors have assessed that IFRS 12 did not have any impact on theCompany as the Company does not hold any Interest in Other Entities.

16

EirIes Two Limited



(c) New standards, amendments or interpretations (continuation)

(ii) Effective for annual periods beginning after 1 January 2014

The Directors have set out below both the upcoming EU endorsed and Un-endorsed accounting standards, amendments or interpretations and have thensummarised the new requirements that may be relevant to the Company.

Description Etibctive date (periodL beginning)

Defined Bencjit PIanv Enipiotte Co,nrthzqions (Amendments to lAS I Februan 20 15’H9)

Annual Improvements to lFRSs 2010-2012 Cycle, and I Februan 2015”Annual_Improvements_to_IFRSs_201_1-2013_CeleAmendments to IFRS II: AccounLing for acquisitions olinterests in I January 2016Joint_OperationsIFRS 14: Regulatory Delërral Accounts I January 2016Amendments to IFRS 10 and lAS 28: Sale or contribution oI’assets 1 January 2016hetneen an in\ estor and its associate or joint ventureAmendments to IFRS 10. IFRS 12 and lAS 28: lnvt-sLment Entities: I Januan 2016Applying the Consolidation ExceptionAmendments to lAS I: Disclosure Initiative I January 2016Annual Improvements to IFRSs 2012-2014 Cycle I January 2016IFRS 9 Financial Instruments (2009. and subsequent amendments in I January 20182010 and 2013)

‘Mere new requirements are endorsed the EU effective date is disc!osed For un-encorsed standards andinterpretabors the IASBs effective date is noted. 1ere any of the upcoming requremens are applicable to theCompany. it wi’ apply them from their EU efftve date** EU endorsed

The Directors have considered the new standards, amendments andinterpretations as set out in the above table and have concluded that the followingmay be relevant to the Company. The company does not plan to adopt thesestandards early; instead it will apply them from their effective dates as determinedby their dates of EU endorsement. The Company is still reviewing the impact of theupcoming standards to determine their impact.

Annual improvement to IFASs 2010-2012 Cycle and Annual Improvement toIFRSs 2011-2013 Cycle:

As part of its annual improvements process, the IASB has published non-urgentbut necessary amendments to IFRS. Together, the two cycles cover a total ofnine standards, with consequential amendments to other standards. The topicscovered in these revisions which may impact the company are listed below.

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Eirles Two Limited



(c) New standards and interpretations (continued)

(i) Effective for annual periods beginning after 1 January 2014 (continued)

Annual Improvements to IFRSS 2010-2012 Cycle:

lAS 24 Related Party Disclosure: This improvement clarifies that an entityproviding key management personnel (KMP) services to the reporting entity or tothe parent of the reporting entity is a related party of the reporting entity. Thereporting entity is not required to disclose the compensation paid or payable bythe management entity to the management entity’s employees or directors.Instead the reporting entity discloses the amounts incurred for the provision of keymanagement personnel services that are provided by the separate managemententity.

Amendments to lAS 1: Disclosure Initiative: The amendments to lAS 1Presentation of Financial statements address some of the concerns expressedabout existing presentation and disclosure requirements and ensure that theentities are able to use judgement where applying lAS 1. The amendments relateto the following; materiality, order of the notes, subtotals, accounting policies anddisaggregation. The impact of these amendments are currently underconsideration by the Company.

IFRS 9 Financial Instruments (2014)

IFRS 9 Financial Instruments issued on 24 July 2014 is the IASB’s replacement oflAS 39’s Financial Instruments: Recognition and Measurement. The Standardincludes requirements for recognition and measurement. impairment,derecognition and general hedge accounting.

Recognition and measurement

Financial assets

1. Investments in debt instruments

The recognition and measurement of financial assets under IFRS 9 is built ona single classification and measurement approach for financial assets thatreflects the business model in which they are managed and their cashflowcharacteristics. There are three measurement methods available for financialassets (a) amortised cost1 (b) fair value through other comprehensive incomeand (c) fair value through profit or loss. The existing lAS 39 categories held-to-maturity, loans and receivables, and available-for-sale are removed.

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IFRS 9 Financial Instruments (2014) (continued)

Recognition and measurement (continued)

Financial assets (continued)

1. Investments in debt instruments (continued)

(a) Amortised cost

In order for a financial asset to be measured at amortised cost the followingtwo criteria are required;

(i) The asset is held to collect its contractual cash flows; and(U) The asset’s contractual cash flows represent ‘solely payments of

principal and interest’ (SPPI”)

The assessment as to whether cash flows meet this test is made in thecurrency in which the financial asset is denominated. Financial assetsincluded within this category are initially recognised at fair value andsubsequently measured at amoftised cost.

(b) Fair value through other comprehensive income (“FVOCI)

A financial asset is measured at FVDCI if both the following criteria are met

i. The objective of the business model is achieved both by collectingcontractual cash flows and selling financial assets; and

U. The asset’s contractual cash flows represent SPPI.

Financial assets included within the FVOCI category are initiallyrecognised and subsequently measured at fair value. Movements in thecarrying amount should be recognised through other comprehensiveincome (“OCI”), except for the recognition of impairment gains or losses,interest revenue and foreign exchange gains and losses which arerecognised in profit and loss.

(c) Fair value through profit or loss (“FVPL’)

FVPL is the residual category. Financial assets should be classified asFVPL if they do not mee the criteria of FVOCI or amortised cost with anychanges in fair value recorded through profit orloss.

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Recognition and measurement (continued)

Financial assets (continued)

2. Investments in equity instruments

Investments in equity instruments are always measured at fair value. Equityinstruments are those that meet the definition of “equity” from the perspectiveof the issuer as defined in lAS 32: Financial Instruments: Presentation. Equityinstruments that are held for trading are required to be classified at FVPL. Forall other equities, management has the ability to make an irrevocable electionon initial recognition, on an instrument-by-instrument basis, to presentchanges in fair value in DCI rather than profit or loss.

Financial liabilities

The recognition of financial liabilities under IFRS 9 carries forward the treatment oflAS 39, except that IFRS 9 introduces, with some limited exceptions, newrequirements for the accounting for and presentation of changes in the fair value ofan entity’s own debt when the entity has chosen to measure the debt at fair valueusing the fair value option. IFRS 9 requires that the changes in the fair value of anentity’s own credit risk should be recognised in CCI rather than through profit orloss. Amounts in CCI relating to own credit are not reclassified to profit or losseven when the liability is derecognised and the amounts are realised. However,the new standard does allow transfers within equity.

Impairment

IFRS 9 requires an entity to recognise expected credit losses on financial assetsmeasured at amortised cost and to update the amount of expected credit lossesrecognised at each reporting date to reflect changes in the credit risk of financialinstruments. This model is forward looking and it eliminates the threshold for therecognition of expected credit losses, so that it is no longer necessary for a triggerevent to have occurred before credit losses are recognised. Consequently moretimely information is provided about expected credit losses. Specifically, IFRS 9generally requires an entity to base its measurement of expected credit losses onreasonable and supportable information that is available without undue cost oreffort, and that includes historical, current and forecast information. In addition,the same impairment model is applied to all financial assets subject to impairmentaccounting.

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(I) Effective for annual periods beginning after 1 January 2014 (continued)


Hedge accountThg

IFRS 9 introduces a substantial revision to hedge accounting requirements whichwill allow entities better reflect their risk management activities in their financialstatements. The revision was issued in a response to concerns of preparers offinancial statements about the difficulty of appropriately reflecting riskmanagement activities in financial statements. The changes also addressconcerns raised by users of the financial statements about the difficulty ofunderstanding hedge accounting.

The version of IFRS 9 issued in 2014 supersedes all previous versions and ismandatorily effective for periods beginning on or after 1 January 2018 with earlyadoption permitted. For a limited period, previous versions of IFRS 9 may beadopted early if not already done so provided the relevant date of initialapplication is before 1 February 2015. In addition, the own credit changes can beearly applied in isolation without otherwise changing the accounting for financialinstruments. For EU Companies, endorsement by the EU is required, therebylimiting the ability to early adopt this standard.

Given the nature of the Company’s operations, this standard is not expected tohave a material impact on the Company’s financial statements as the Companyadopts fair value accounting in relation to all its significant financial instruments.

(d) Basis of measurement

The financial statements are prepared on the historical cost basis except for thefollowing:• Derivative financial instruments are measured at fair value;• Investment securities and total return swaps designated at fair value through profit

or loss are measured at fair value; and• Debt securities issued designated at fair value through profit or loss are measured at

fair value.

The methods used to measure fair values are discussed further in note 3(a).

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(e) Functional and presentation currency

The financial statements are presented in Euro! which is the Company’s functionalcurrency. Functional currency is the currency of the primary economic environment inwhich the entity operates. The issued share capital of the Company is denominated inEuro and the debt securities issued are also primarily denominated in Euro. Thedirectors of the Company believe that Euro most faithfully represents the economiceffects of the underlying transactions! events and conditions.

Except as otherwise indicated, all financial information presented in Euro has beenrounded to the nearest thousand.

(f) Use of estimates and judgements

The preparation of the financial statements in conformity with IFRSs requiresmanagement to make judgments, estimates and assumptions that may affect theapplication of accounting policies and the reported amounts of assets, liabilities, incomeand expenses. The estimates and associated assumptions are based on historicalexperience and various other factors that are believed to be reasonable under thecircumstances, the results of which form the basis of making the judgements aboutcarrying values of assets and liabilities that are not readily apparent from other sources.Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions toaccounting estimates are recognised in the period in which the estimates are revisedand in any future periods affected.

Information about significant areas of estimation, uncertainty and critical judgments inapplying accounting policies that have the most significant effect on the amountsrecognised in the financial statement are described in Notes 22 (e).

(g) Operating segments

The Company has applied IFRS 8 Operating Segments which puts emphasis on the“management approach” to reporting on operating segments.

The Company is engaged as one segment. It involves the repackaging of bonds andother debt instruments, on behalf of investors, which are bought from the market andsubsequently secuhtised to avail of potential market opportunities and risk-returnasymmetries.

Refer to Note 22(a) for further information on the assets.

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3 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presentedin these financial statements.

(a) Financial instruments

The financial instruments held by the company at fair value through profit or lossincludes the follo’Mng:• Investment securities and total return swaps (TRS);• Derivative financial instruments; and• Debt securities issued.

CategorisationA financial asset or financial liability at fair value through profit or loss is a financial assetor liability that is classified as held-for-trading or designated as at fair value through profitor loss. Other financial instruments are carried at amortised cost.

Derivative financial instruments are carried at fair value through profit or loss. TheCompany has designated the investment securities and total return swaps as well asdebt securities issued at fair value through profit or loss.

Designation at fair value through profit or loss upon initial recognitionThe Company has designated financial assets and liabilities at fair value through profit orloss when either:• The assets or liabilities are managed, evaluated and reported internally on a fair

value basis;• The designation eliminates or significantly reduces an accounting mismatch which

would otherwise arise; or• The asset or liability contains an embedded derivative that significantly modifies

the cash flows that would otherwise be required under the contract.

Investment securities and total return swapsInvestment securities consist of bonds held by the Company and these are designatedas at fair value through profit or loss. Total return swaps consist of credit linked collateralwhich enable the Company to gain exposure and benefit from a reference amount andare carried at fair value through profit or loss. These do not qualify as derivative financialinstruments under lAS 39 Financial Instruments: Recognition and Measurement as thesedo not have minimal initial net investment and therefore are classified as financial assetsat fair value through profit or loss. Investment securities include corporate bonds,government bonds, loans, mortgage bonds and receivable under total return swaps.

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3 Significant accounting policies (continued)

(a) Financial instruments (continued)

Derivative financial instrumentsDerivative financial instruments held for risk management purposes include derivativeassets and liabilities that are used to economically hedge the derivatives at each seriesfrom interest rate or market fluctuations affecting the relevant collateral assets. Suchderivatives are not formally designated into a qualifying hedging relationship andtherefore all changes in their fair value are recognised in the statement ofcomprehensive income. The Company also write credit default swap derivatives thatcreate economic returns for the Company; such derivatives are carried at fair valuethrough profit or loss.

Debt securities issuedThe debt securities issued are initially measured at fair value and are designated asliabilities at fair value through profit or loss when they either eliminate or significantlyreduce an accounting mismatch or contain an embedded derivative that significantlymodifies the cash flows that would otherwise be required under the contract.

Financial assets and liabilities that are not at fair value through profit or lossFinancial assets that are not at fair value through profit or loss and are not quoted in anactive market include cash at bank, deposits with credit institutions and other assets andare categorised as loans and receivables for measurement purposes.

Financial liabilities that are not at fair value through profit or loss include accruedexpenses and other payables. These are categorised as financial liabilities measured atamortised cost, adjusted for initial direct costs in the case of instruments to be carriedsubsequently at amortised costs for measurement purposes.

Recognition and measurementThe Company initially recognises all financial assets and liabilities at fair value on the

trade date, which is the date on which the Company becomes a party to the contractual

provisions of the instruments. From trade date! any gains and losses arising from

changes in fair value of the financial assets or financial liabilities at fair value through

profit or loss are recorded in the statement of comprehensive income.

Financial assets and financial liabilities not categorised as at fair value through profit or

loss are subsequently measured at amortised cost.

DerecognitionThe 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 or expire.

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(a) Financial instruments (continued)

OffsettingFinancial assets and liabilities are offset and the net amount presented in the statementof financial position when, and only when, the Company has a legal right to offset theamounts and intends either to settle on a net basis or to realise the asset and settle theliability simultaneously. Income and expenses are presented on a net basis only whenpermitted by the accounting standards.

Fair value measurement principlesFair value is the price that would be received to sell an asset or paid to transfer a liabilityin an orderly transaction between market participants at the measurement date of theprincipal or which the Company has access at that time. The fair value of a liabilityreflects its non-performance risk. The determination of fair values of financial assets andfinancial liabilities are based on quoted bid market prices or dealer price quotations forfinancial instruments traded in active markets, where these are available and market isregarded as active if transaction for the asset or liability take place with sufficientfrequency and volume to provide pricing information on an ongoing basis. The Companymeasures instruments quoted in an active market at bid price. For all other financialinstruments fair value is determined by using valuation techniques. Valuation techniquesinclude net present value techniques, the discounted cash flow method, comparison tosimilar instruments for which market observable prices exist, and valuation models. TheCompany uses widely recognised valuation models for determining the fair value ofcommon and simpler financial instruments like call options, interest rate and currencyswaps.

For more complex instruments, the Company uses proprietary models, which usually aredeveloped from recognised valuation models. Some or all of the inputs into these modelsmay not be market observable, and are derived from market prices or rates or areestimated based on assumptions.

(b) Financial liability and equity

The financial instruments issued by the Company are treated as equity (i.e. forming part

of shareholder’s funds) only to the extent that they meet the following two conditions:

• they include no contractual obligations upon the Company to deliver cash or other

financial assets or to exchange financial assets or financial liabilities with another

party under conditions that are potentially unfavourable to the Company; and

• where the instrument will or may be settled in the Company’s own equity

instruments, it is either a non-derivative that includes no obligation to deliver a

variable number of the Company’s own equity instruments or is a derivative that

will be settled by the Company exchanging a fixed amount of cash or other

financial assets for a fixed number of its own equity instruments.

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(b) Financial liability and equity (continued)

To the extent that this definition is not met, the proceeds of issue are classified as afinancial liability.

Finance payments associated with financial liabilities are dealt with as part of theongoing remeasurement of debt securities to fair value. Any payments associated withfinancial instruments that are classified in equity are distributions from the net incomeattributable to equity holders and are recorded directly in equity.

(c) Operating segments

The Company has appUed IFRS 8 Operating Segments which puts emphasis on the“management approach” to reporting on operating segments.

The Company is engaged as one segment. It involves the repackaging of bonds andother debt instruments, on behalf of investors, which are bought from the market andsubsequently securitised to avail of potential market opportunities and risk-returnasymmetries.

Refer to Note 22(a) concentration risk for the geographical segmental information of theassets.

(d) Cash and cash collateral

Cash and cash collateral consist of cash held on deposit which can be terminated within

3 months provided all parties agree to the transaction. These are subject to insignificant

risk of changes in their fair value.

Cash collateral is held as security for issuance of certain debt securities.

Cash and cash collateral are carried at amortised cost in the statement of financial

position.

(e) Foreign currency transaction

Transactions in foreign currencies are translated to the functional currency of the

Company at exchange rates at the dates of the transactions. Monetary assets and

liabilities denominated in foreign currencies at the reporting date are retranslated to the

functional currency at the exchange rate at that date. Non monetary assets and liabilities

denominated in foreign currencies that are measured at fair value are retranslated to the

functional currency at the exchange rate at the date that the fair value was determined.

Foreign currency differences arising on retranslation are recognised through profit or

loss and are included under net gain from investment securities and total return swaps.

derivatives or debt securities issued, as appropriate.

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(f) Net gain I (loss) from investment securities and total return swaps

Net gain I (loss) from investment securities and total return swaps relates to investmentsin bonds and total return swaps, and includes realised income (including couponreceipts), and unrealised fair value changes including foreign exchange differences.

(g) Net gain I (loss) from derivative financial instruments

Net gain / (loss) from derivative financial instruments relates to the fair value movementson derivatives held by the Company and includes realised and unrealised fair valuechanges, settlements and foreign exchange differences.

(h) Net finance (loss) I gain on debt securities issued

Finance expense on debt securities issued relates to debt securities issued and includesfinancing costs (including coupon payments) realised and unrealised fair value changesand foreign exchange differences.

(i) Taxation

Income tax expense comprises current and deferred tax. Income tax expense isrecognised through profit or loss, in other comprehensive income or directly in equityconsistent with the accounting for the item to which it is related.

current tax is the expected tax payable on the taxable income for the year, using taxrates applicable to the Company’s activities enacted or substantively enacted at thereporting date, and adjustment to tax payable in respect of previous years.

Deferred tax is provided for temporary differences arising between the carrying amounts

of assets and liabilities for financial reporting purposes and the amounts used for

taxation purposes. Deferred tax is not recognised for temporary differences arising on

the initial recognition of assets or liabilities in a transaction that is not a business

combination and that affects neither accounting nor taxable profit. Deferred tax is

measured at the tax rates that are expected to be applied to the temporary differences

when they reverse, based on the laws that have been enacted or substantively enacted

by the reporting date.

A deferred tax asset is 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 assets are

reviewed at each reporting date and are reduced to the extent that it is no longer

probable that the related tax benefit will be realised.

(j) Other income and expenses

All other income and expenses are accounted for on an accruals basis.

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(k) Share capital and dividends

Share capital is issued in Euro and is classified as equity. Dividends are recognised as aliability in the period in which they are approved.

4 Financial risk management

(a) Introduction and overview

The Eirles Two Limited programme was set up in April 2000 to issue multiple series ofnotes, with the rating on each series independent of the other (if applicable). Thismeans that Eirles Two Limited (the ‘Company’ or the “issuer”) can issue various seriesof notes ranging from AAA to non-rated. This gives the sponsor greater flexibility in whatit can finance through this vehicle and it reduces issue costs.

Eirles Two Limited was set up as a segregated multi issuance Special Purpose Entity(SPE). The Programme offers investors the opportunity to invest in a portfolio ofinvestments and total retum swaps, the ‘investment securities and total return swap”,and alter the interest rate risk and credit risk profile of the portfolio through the use ofderivative instruments.

This ensures that if one series defaults, the holders of that series are unable to reachother assets of the issuer, which might otherwise have resulted in the issuer’sbankruptcy and the default of the other series of debt securities. The segregation criteriainclude the following:

• The Company is a bankruptcy remote SPE. organised in Ireland.• The Company issues separate series of debt obligations.• Assets relating to any particular series of debt securities are held separately and

apart from the assets relating to any other series.Any swap transaction entered into by the issuer for a series is separate from any

other swap transaction for any other series.• For each series of debt securities, only the trustees are entitled to exercise

remedies on behalf of the debt security holders.• Each series of issued debt securities is reviewed by a recognised rating agency

prior to issuance regardless of whether it is to be rated or not.

Each Series is governed by a separate Supplemental Programme Memorandum (SPM).

Each Series consists of an investment in collateral from the proceeds of the issuance of

debt securities.

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4 Financial risk management (continued)

(a) Introduction and overview (continued)

The Company has entered into Asset Swap Agreements with Deutsche Bank AG,London Branch. The net proceeds from the issue of the debt securities are paid to theSwap Counterparty to purchase the portfolio of investments securities plus any interestaccrued thereon on behalf of the Company. The credit quality details of the investmentsecurities and total return swap held by the Company are disclosed in note 4(b)(i).During the term of the Asset Swap, the Company pays to the Swap Counterpartyamounts equal to the interest received in respect of the collateral, and on the maturitydate of the collateral will deliver the portfolio or the proceeds of its redemption to theSwap Counterparty. The Company also entered into a number of Credit Default SwapAgreements with Deutsche Bank AG, London Branch. In exchange for the receipt ofpremium income for the relevant series, the Company has sold credit protection on anumber of reference entities.

The Swap Counterparty delivers the collateral to the account of the Company and paysthe Company amounts equal to the interest payable under the debt securities, and if theswap agreement has not terminated prior to the maturity date of the respective notes, asum equal to the redemption amount payable on the debt securities.

The debt securities issued are recorded at fair value which equates to the net proceedsreceived in Euro and are subsequently carried at fair value through profit or loss. Theultimate amount repaid to the holders of these debt securities will depend on theproceeds from the investment securities or total return swaps and any payment theSwap counterparty is obliged to make under the terms of the swap agreement

(b) Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the

Company’s risk management framework.

The risk profile of the Company is such that market, credit, liquidity and other risks relating

to the investment securities and total return swap as well as derivative financial

instruments are borne fully by the holders of debt securities issued.

The Company has exposure to the following risks from its use of financial instruments:

(i) Credit risk;(U) Liquidity risk; and(Ni) Market risk.

This note presents information about the Company’s exposure to each of the above risks,

the Company’s objectives, policies and processes for measuring and managing risk and

the Company’s management of capital. Further quantitative disclosures are included in

Note 22 to these financial statements.

The Company does not have any externally imposed capital requirements.

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(b) Risk management framework (continued)

(i) Credit risk

Credit risk is the risk of the financial loss to the Company if the counterparty to afinancial instrument fails to meet its contractual obligations, and arises principallyfrom the Company’s credit linked securities (investments and total return swaps)and also from the derivative contract that the Company has entered into.

The Company limits its exposure to credit risk by only investing in bonds and totalreturn swaps and only with counterparties that have a credit rating defined in thedocumentation of the relevant series.

The risk of default on these assets and on the underlying reference entities is borneby the swap counterparty and/or the holders of the debt securities as designated inthe priority of payments described in the 5PM of the relevant series.

The credit quality of the Company’s investment securities has been disclosed inNote 22 (a).

The credit risk relating to underlying reference entities as shown in Note 22(d) arisesprincipally from the investment assets and total return swaps which the Companyholds which are credit-hnked to a portfolio of underlying reference entities. Anydefault or “credit events” in the underlying portfolio of reference entities may triggera reduction in the nominal amounts of the debt instrument which the Company holdsdepending on the loss amounts, as well as, other terms and conditions on the debt.Because of the limited recourse nature of the debt securities issued by theCompany, any such losses would ultimately be borne by either the Company’sSwap Counterparty and/or the Company’s holders of debt securities for thatparticular series.

Secondly, the Company has also sold credit protection to Swap Counterparties inreturn for a premium. The corresponding debt securities on which the creditprotection has been sold are credit-linked to the credit quality of the underlyingportfolio of reference entities. Therefore any default or “credit events” in theunderlying portfolio of reference entities might require a specific amount of thecollateral i.e. certain investment securities held by the Company to be delivered tothe Swap Counterparty that has purchased the credit protection from the Company.However, due to the limited recourse nature of the debt securities issued by theCompany any such payments in respect of the credit default swap, i.e. theunderlying portfolio of reference entities would ultimately be borne by the holders ofdebt securities by way of corresponding reduction in the nominal amounts of those

debt securities issued depending on the terms and conditions attached to debtsecurities issued.

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(b) Risk management framework (continued)

(i) Credit risk (continued)

Refer to Note 6 “Derivative financial instruments” for further details.

The linking of the Company’s issued debt securities to the underlying portfolio ofreference entities is achieved by entering into credit default swap agreements withSwap Counterparties. The credit default swap is a leveraged arrangement.

The aggregate reference portfolio notional amounts are usually substantially higherthan the notional amounts of the credit default swaps and the nominal amounts ofthe debt securities issued. This leverage increases the risk of loss to the Companyand, therefore, to the holders of debt securities.

Refer to the table in Note 22(e) “Fair Values” for further details.

(ii) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulties in meetingobligations arising from its financial liabilities that are settled by delivering cash oranother financial asset, or that such obligation will have to be settled in a mannerdisadvantage to the Company.

The Company’s obligation to the holders of debt securities of a particular series islimited to the net proceeds upon realisation of the collateral of that series, i.e.investment securities, total return swaps and derivatives. Should the net proceedsbe insufficient to make all payments due in respect of a particular series of Notes,the other assets of the Company are not contractually required to be made availableto meet payment and the deficit is instead borne by the holders of debt securitiesand/or the Swap Counterparties according to established priority of payment.

The timing and amount of proceeds from realising the collateral of each series issubject to market conditions.

There were no liquidity issues experienced by the Company or the SwapCounterparties in respect to meeting its obligations to holders of debt securitiesissued or to swap counterparties. The Company or the Swap Counterparties did notdefault on any of its contractual commitments during the year.

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(a) Risk management framework (continued)

(iii) Market risk

Market risk is the risk that changes in market prices, such as foreign exchangerates, interest rates and other price risk will affect the company’s income or thevalue of its holdings of financial instruments and receivables under total returnswaps.

The objective of the market risk management is to manage and control market riskexposures within acceptable parameters while optimising the return on risk.

Foreign exchange risk and interest rate risk are economically hedged with the use ofcurrency swap agreements and the asset swap agreements, respectively. Crosscurrency swap is incorporated in the asset swap.

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5 Cash and cash equivalents and cash collateral 2014 2013

€000 €000

Cash and cash equivalents 347 344

Cash at bank balances are held with Deutsche Bank AG, London Branch.

2014 2013

€000 €000

Cash collateral 277043 235,628

Cash held on deposit consist of cash held as collateral for series 91, 176, 194, 215, 216, 309, 355,

363 and 364 (2013: Series 176, 194, 215, 216. 309, 355, 360,363 and 364). Sixty two percent

(62%) is held by Deutsche Bank AG, London Branch and the remaining thirty eight percent (38%)

is held by The Bank of New York Mellon in accordance with the terms of the Supplemental

Programmme Memorandum. These deposits are not on demand, are resthcted and can only be

used for their respective series.

Refer to Note 22(a) for credit ratings for cash at bank and cash collateral.

3)

Eirles Two Limited


6 Derivative financial instruments

Less Greater 2014 Less Greater 2013than than Total than one than Total

one year one year year one year

(‘000 (‘000 (‘000 (‘000 (‘000 (‘000

Derivative assets

Asset swaps 6,882 74,968 81,850 - 74,141 74,141

CreditdefaultSWaps - - -

- 6,076 6,076

6,882 74,968 81,850 - 80,217 80,217

Derivative liabilities

Asset swaps - 98,367 98.367 - 114,087 114,087

Creditdefaultswaps

- 29,280 29,280 - 42,160 42,160

- 127,647 127,647 - 156,247 156,247

The Company entered into asset swap agreements for most series of debt securities issued

eliminate the mismatch between the amount payable in respect of those issued debt securities and

the return from the investment securities held by the Company as collateral.

The Company has also entered into credit default swaps for series 91, 176, 194, 215, 216, 229,

312, 316, 319 and 334 in 2014 (2013: series 91, 176, 194, 215, 216, 229, 227, 280, 312, 316,

319 and 334) in order to provide an asset risk profile which is suited to the needs of the investors

(the holders of the debt securities).

In cases where no swaps are in place for a series, the credit risk is borne by the holders of debt

securities issued by the Company. During the year, no swap agreements were entered into for the

follo’Mng series: 191, 192, 200, 205, 298 and 299.

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Eirles Two Limited


8 Other assets 2014 2013€000 €‘OOD

coupon income receivable from investment securities

and total return swaps 2566 4227

Other receivables 209 204

2)775 4,431

All other assets are current.

Refer to Note 22 (a) for Credit Risk disclosure.

9 Debt securities issued at fair value through profit or loss 2014 2013€000 €000

Designated at fair value through profit or loss 1,091,000 1,217,517

Maturity analysis of the debt securities issued at fair value 2014 2013

through profit or loss €000 €000

Within one year 8,361 -

One to five years 298,817 258,147

Greater than five years 783,822 959,370

1,091,000 1,217,517

The Company’s obligations under the debt securities issued and related derivative financial

instruments are secured by collateral held as noted in Note 7. The investors’ recourse per series is

limited to the assets of that particular series,

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Eirles Two Limited


7 Investment securities and total return swaps at fair valuethrough profitor loss 2014 2013

€000 €000

Designated at fair value through profit or lossBonds 679,214 604,134

Total return swap 181,115 453674

860,329 1,057,808

Maturity analysis of investment securities and total return swaps

at fair value through profit or loss

Within one year 2,112 17,393

One to five years 335,060 296,916

Greater than five years 523,157 743,499

860,329 1,057,808

The carrying value of all of the above assets of the Company represents their maximum exposure

to credit risk. The credit risk is eventually transferred to the Swap Counterparty or the holders of

debt securities through the credit default swap. The Company is then exposed to credit risk in

respect of the CDS Swap Counterpafty. The investment securities and total return swaps are held

as collateral for debt securities issued by the Company.

The Company has issued certain passthrough series of notes which do not meet the recognition

criteria under lAS 39 - Financial Instruments: Recognition and Measurement since inception. As at

31 December 2014, the passthrough series in issue were 191, 192, 200, 205, 298 and 299. All the

series as mentioned as at 31 December 2014 were not recognised in the financial statements for

the year ended 31 December 2013.

Total return swapsUnder these arrangements the proceeds from the issuance of debt securities are held on deposit

with the Swap Counterparty under the swap agreement. The deposit is synthetically linked to the

credit performance of a portfolio of reference entities through a credit default swap. The Swap

Counterparty provides a return that replicates the return due to the holders of the debt securities

and also reimburses certain the expenses related to the series.

In the event that any of these reference entities default, a notice is served to the Company. The

receivable under total return swap is reduced by an amount equal to the amount in the default as

determined by the calculation agent with reference to the defaulted reference entity and the

Company’s obligation under the debt securities is also reduced by the same amount as per the

terms of the SPM.

Refer to Note 22(a) for credit risk disclosure relating to the investment securities and total return

swaps.

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Eirles Two Limited


9 Debt securities issued at fair value through profit or loss (continued)

In the event that accumulated losses prove not to be recoverable during the life of the debtsecurities issued, then the obligation to the holders of the debt securities issued by the Company‘Mll be reduced to the extent of the accumulated losses. No series have matured during the year(2013: Series 241! 337, 341, and 348) wfiereas series 325, 326, 327, 328, 329, 334 and 360 wereredeemed in full (2013: Series 196, 277, 280, and 362).

Debt securities for 164, 176, 191, 192, 194, 195, 205, 215, 216, 254, 255, 298, 299, 309, 312,316, 319, 345, 347, 351, 352, 353, 354, 355, 357, 361, 363, 364, 365 and 366 are listed on theIrish Stock Exchange. Debt securities for 49, 91, 200 and 229 are not listed in any exchanges.

The fair value amount of financial liabilities designated at fair value through profit or loss was EUR7Dm (2013: EUR 284m) less than the contractual amount at maturity as at 31 December 2014.

10 Other liabilities 2014 2013

€000 €000

Coupon payable on debt securities issued 3,143 4,115

Accrued e’penses 52 49

Other payables 311 309

3,506 4,473

All other liabilities are current.

11 Share capital 2014 2013

€000 €000

Author/seth

100,000,000 ordinary shares of€1 each 100,000 100,000

Issued and fully paid

3 ordinary shares of €1 each

37

Eirles Two Limited


12 Accounting categorisation and fair values of financial assets and liabilities

2014 2013Carrying Fair Carrying Fair

value value value value

€000 €000 €000 €000

Financial assets at amortised costcash and cash equivalents 347 347 344 344

cash collateral 277043 277043 235,628 235628

Other assets 2,775 2,775 4,431 4,431

Total financial assets at amortised

cost 250165 280,165 240,403 240,403

Financial assets designated at fairvalue through profit or lossInvestment securities 679,214 679,214 604,134 604,134

Financial assets at fair value through

profit or lossDerivative assets 81,850 81,850 80217 80,217

Total return swaps 181115 181,115 453,674 453,674

Total assets 1,222,344 1,222,344 1,378,428 1,378,428

Financial liabilities at amortised cost

Other liabilities 3,506 3,506 4,473 4,473

Financial liabilities designated at fair

value through profit or loss

Debt securities issued 1,091,000 1,091,000 1,217,517 1,217,517

Financial liabilities at fair value

through profit or loss

Derivative liabilities 127.647 127,647 156,247 156,247

Total liabilities 1,222,153 1,222,153 1,378,237 1,378,237

The financial instruments not accounted for at fair value through profit or loss are short-term

financial assets and liabilities whose carrying amounts approximate fair value.

38

Eirles Two Limited


13 Net gain! (loss) from investment securities and total return 2014 2013swaps €‘OOO €‘OOO

Net gain / (loss) from investment securities and total return swaps atfair value through profit or loss(including coupon receipts):- Bonds and loans 172661 (9,631)- Total return swaps (279) 9,269

172,382 (362)

Analysed as follows:coupon income including accrued income 25,877 26,821Net unrealised gain! (loss) on investment securitiesand total return swaps 116,309 (18,474)

Net realised (loss) / gain on disposal / maturities of investmentsecurities and total return swaps (1,795) 4,430

Net unrealised foreign exchange gain / (loss) on cash collateral 31,886 (11,607)

Net realised foreign exchange gain! (loss) on cash collateral 105 (1,532)

172,382 (362)

14 Net gain / (loss) from derivative financial instruments 2014 2013€‘OOO €000

Net gain / (loss) from derivative financial instruments

carried at fair value (including coupon receipts)

- Asset swap (1,959) (192)

- Credit default swap 12,880 (23,044)

10,921 (23,236)

Analysed as follows:Credit default swap income 2,442 4,358

Net unrealised gain? (loss) on derivative financial instruments 9,020 (21,762)

Net realised loss on settlement of derivative financial instruments (541) (5,832)

10,921 (23,236)

39

EirIes Two Limited


15 Net finance (loss) I gain on debt securities issued

2014 2013(‘000 (‘000

Net finance (loss) / gain on debt decuritiesat fair value through profit and loss (183,303) 23598

Analysed as follows:Coupon payments including accruals (18,725) (24,284)

Net unrealised (loss) I gain on debt securities issued (171.117) 35,667

Net realised gain on maturities / redemption of debtsecurities issued 6539 12,215

(183.303) 23,598

16 Other income 2014 2013(‘000 (‘000

Arranger income 79 106

As per the Expense Agreement, Deutsche Bank AG, London Branch as the arranger bears all the

expenses of the company. Arranger income is equal to the total expenses incurred by the

Company during the year.

17 Other expenses 2014 2013(‘000 (‘000

Administration fee (22) (38)

Audit fee (44) (55)

Directors’ fee (13) (13)

(79) (106)

The company is administered by Deutsche International Corporate Services (Ireland) Limited and

has no employees.

Audit fees relates to the statutory audit of the financial statements.

40

Eirles Two Limited


17 Other expenses (continued)

Other operating expenses are after charging the following:

Auditors remuneration (excluding VAT) 2014 2013€000 €000

Audit of company financial statements 31 (38)

Other assurance services -

Tax advisory services (8) (5)

Other non-audit services - -

25 (43)

18 Income tax expense 2014 2013€000 €000

Current tax expense -

Factors affecting tax charge for the period

Corporation tax has been calculated based on the profit for the year and the resulting taxation

charge is as follows:

Profit before tax -

Current tax at standard rate of 25% - -

Current tax charge -

The company will continue to be actively taxed at 25% in accordance with Section 110 of the

Taxes Consolidation Act, 1997.

Deterred tax

Any temporary difference arising on the assets will be offset by a corresponding difference in the

liabilities. Therefore the Company does not have any exposure to deferred tax.

41

EirIes Two Limited


19 Ownership of the Company

The issued shares are held on trust by Matsack Trust Limited! Matsack Nominees Limited andMatheson Services Limited (the “Share Trustees!!)! each of whom own one share under theterms of a declaration of trust dated 19 June 2000. under which the relevant Share Trusteeholds an issued share of the company on trust for charity. The Share Trustees have appointeda Board of Directors to run the day-to-day activities of the Company.

The Board of Directors have considered the issue as to who is the controlling party of thecompany. It has determined that the control of the day-to-day activities of the company restswith the Board. The Board is composed of three Directors! one of whom is an employee ofDeutsche International Corporate Services (Ireland) Limited, being the entity that acts as theadministrator of the Company. The remaining two Directors are considered to be independentof the Deutsche Bank Group.

Deutsche Bank AG. under International Financial Reporting Standards (IFRS), hasconsolidated Series 91! 176, 195, 215, 216, 299, 351! 352 and 353 as at 31 December 2014(2013: Series 91! 176, 195, 215, 216, 280, 334, 347, 351, 352, 353! 354, and 360).

20 charges

The debt securities issued by the company are secured by way of mortgage over thecollateral purchased in respect of each of the Note! and by the assignment of a fixed first

charge of the Company’s rights! title and interest under the respective swap agreement for

each series.

21 Transactions with related parties

During the year the Company incurred a fee of EUR 19,271 (2013: EUR 17,957) relating to

administration and other services provided by Deutsche International Corporate Services

(Ireland) Limited. Michael Weihan, as a director of the Company, had an interest in this fee in

his capacity as director of Deutsche International Corporate Services (Ireland) Limited.

Under a Series Proposal Agreement entered into for each series by the Company and

Deutsche Bank AG, London Branch as Arranger for each Series, will pay the Company a

Series Fee of US$ 200 per Series on commencement of the series and agree to reimburse the

Company against any costs, fees, expenses or out-goings incurred, refer to note 16 for details.

Deutsche Bank AG, London Branch is also the Swap counterparty for all Series containing

credit default and asset swap agreements.

Legal fees of EUR 6.349 (2013: EUR 8,194) were paid to Matheson. Liam Quirke as a Director

of the Company had an interest in this fee in his capacity as partner of Matheson.

42

Eirles Two Limited


22 Financial instruments

(a) Credit risk

The carrying amount of financial assets represents the maximum credit exposure. The

maximum exposure to the credit risk at the reporting date was:

2014 2013€‘OOO €‘ODO

Cash and cash equivalents 347 344

Cash collateral 277,043 235,628

Derivative assets 81,850 80217

Investment securities and total return swaps 860,329 1,057,808

Other assets 2,775 4,431

1222344 1,378,428

The credit risk is the risk of financial loss to the Company if the counterparty fails to meet its

contractual obligation and arises principally from investment securities. The Company limits its

exposure to credit risk by issuing notes that are linked to its investments securities. If a credit

event were to occur with respect to any of the investment securities and the value of the

security is not sufficient to settle the Company’s liabilities, any such losses would ultimately be

borne by the Company’s Swap Counterparty and/or the Company’s holders of debt securities

issued.

At the reporting date the credit quality of the Company’s financial assets was as follows:

Cash and cash equivalents and and cash collateral:

The Company’s cash and cash collateral are held mainly with the Deutsche Bank AG, London

Branch which is rated A by Standard and Poor’s (SW) in 2014 (2013: A). The Company’s

cash and cash collateral are also held with the Bank of New York Mellon which is rated A+ as

at 31 December 2014 (2013: A-1+) based on rating agency S&P.

43

Eirles Two Limited


22 Financial instruments (continued)

(a) Credit risk (continued)

Derivative financial instruments:The Company has entered into asset swap transactions with the Swap Counterparties toeliminate the mismatch between the amount payable in respect of the debt securities and thereturn from the investments securities and total return swaps held as collateral.

The Company also entered into a number of Credit Default Swap Agreements with DeutscheBank AG. London Branch. In exchange for the receipt of premium income for the relevantseries, the Company has sold credit protection on a number of reference entities.

The table below shows a breakdown by derivatives financial instruments for each class of debtsecurities issued:

Class of debt securities issued Derivatives 2014 2013types

Asset backed securities installment Asset swap 0.00% 0.02%notes

Short Bond Forward 0.11% 0.33%

Credit linked debt securities Asset swap 10.39% 10.18%Collateralised DebtObligation 15.89% 15.63%Credit default swap 8.41% 7.57%

Cash Collateral 42.70% 42.87%

Deposit -0.35% -0.10%

Zero Coupon notes Asset swap 7.75% 7.57%

Collateralised Debt 17.05% 14.86%ObligationCross currency swap -1.95% 1.07%

100.00% 100.00%

44

Eirles Two Limited




Derivative financial instruments are always settled net and therefore the above reflects the netportion of the derivative financial instruments at the year end.

The Company is exposed to the credit risk of the Derivative Counterparty with respect topayments due under the derivatives. This risk is borne by the note holders who are subject tothe risk of defaults by the Swap Counterparty as well as to the risk of defaults of theinvestment secirities’ reference obligations under the TRS. The Company’s exposure and thecredit rating of its counterparty are continually monitored. Deutsche Bank AG, London Branchis the primary derivative counterparty. Deutsche Bank AG, London Branch is currently longterm rated by S&P as A (2013: A). The Directors are satisfied with the Company’s currentexposure.

Investment securities and total return swaps:At the reporting date, the credit quality and the assets concentration of the Company’sinvestment securities and total return swaps was as shown in the table below based oncarrying amount in statement of financial position.

None of the investments held were past due or defaulted.

Significant movement in ratings from last year are due to issuance of new series, partial/fullunwind, and maturities during the year.

45

Eirles Two Limited



Class of notes Collateral type Country of Rating Rating Rating 2014 2013issuance Agency 2014 2013 %

Asset backed securitiesinstallment notes corporate bonds Germany NR NR NR 0.00% 12.09%

Great Britain S&P A A 36.51% 16.17%

S&P A- A- 24.28% 10.78%

Korea 582 - A+ 0.00% 21.78%

ttherIands 582 NR AR- 0.00% 21 .87%

Spain 582 BBB BBS- 36.21% 15.79%

Total ReturnSwap TRS NR NR NR 3.00% 1.52%

100.00% 100.00%

Credit linked debtsecurities Corporate bonds Canada S&P A- A- 15.22% 10.36%

Italy NR NR NR 8.85% 5.58%

Korea S&P BBB- NR 1.74% 1.22%

582 NR NR 1.29% 0.91%

Luxembourg 582 NR NR 28.09% 19.42%

Singapore 582 BBS AM 10.99% 3.23%

italy Moodys Baa2u Baa2u 5.61% 3,53%Government bond

582 NR NR 9.32% 5.37%


100.00% 100.00%

Inflation linked debtsecurities Corporate bonds United States S&P A- A- 100.00% 100.00%

Zero Coupon notes Corporate bonds United States S&P NR M+ 15.11% 15.B4%

Italy S&P NR NR 42.70% 36.60%Government bond


100,00% 100.00%

46

Eirles Two Limited




Other assets:The other assets mainly include income receivable from bonds held by the company as at the

year end. The credit rating and concentration of the investments securities and TRS at the

year end are disclosed under investment securities and TRS above.

(b) Liquidity risk

The following are the contractual maturities of financial assets and liabilities including

undiscounted interest payments and excluding the impact of netting agreements:

2014Gross

Carrying contractual Less than Two to five More than

amounts cash flows one year years five years

€000 €000 €000 €000 €000

cash and cash equivalent 347 347 347 - -

Cash collateral 277,043 277043 - - 277,043

Investment securities 860,329 1,262,137 23,701 377317 861,119

and total return swaps

Derivative assets 81,850 198,821 5,819 45,588 147,414

Other assets 2,775 2,775 2,775 - -

Derivative liabilities (127,647) (309,875) (9,260) (71,243) (229,372)

Debt securities issued (1.091,000) (1.427,551) (19.876) (351,662) (1,056.013)

Other liabilities {3,506) (3506) (3.506) - -

191 191 -- 191

47

Eirles Two Limited



(b) Liquidity risk (continued)

2013Gross

carrying contractual Less than Two to five More than

amounts cash flows one year years five years

€000 €000 €‘OOO €‘OOO €000

Cash and cash equivalent 344 344 344 -

cash collateral 235628 235,623 - 1,750 233,873

Investment securitiesand total return swaps 1,057,308 1,548936 33,393 338,212 1,177,331

Derivative assets 80,217 78,079 - 11,316 66,763

Other assets 4,431 4,431 4,431 - -

Derivative liabilities (156,247) 152,272 (9,483) 22,070 139,685

Debt securities issued (1.217,517) (2.015,026) (24,212) (373,348) (1,617,466)

Other liabilities (4.473) (4,473) (4.473) - -

191 191 - - 191

Derivative liabilities represent asset swaps and credit default swaps.

Refer to note 6, 7 and 9 for maturity profile of derivatives, investments securities and debt

securities issued.

The asset swaps have been entered into to hedge the liquidity exposure on a series by series

basis. The above table reflects derivative liability cash flows as being the cash flows required to

ensure that the contractual undiscounted cash flows arising on the Company’s assets match

the undiscounted cash flows arising on the Company’s liabilities.

48

Eirles Two Limited



(c) Market risk

Market risk embodies the potential for both loss and gains and includes currency risk, interest

rate risk and other price risk.

(i) Currency risk

The Company is exposed to movements in exchange rates between its functional currency -

Euro and foreign currency denominated financial instruments. At the reporting date, the

Company’s had the following exposure to foreign currency risk:

2014UsD JPY GBP

€‘OOO €•000 €‘ooOMonetary assets

Cash and cash equivalents 2 - 7

Cash collateral 274,085 - -

Derivative assets 7025 - -

Investment securities and total

return swaps 468.342 - -

Other assets - - -

749,454 - 7

Monetary liabilities

Derivative liabilities 59,872 63,915 -

Debt securities issued 547,086 136,283 -

Other liabilities 1,242 949 -

608,200 201,147 -

Netexposure 141,254 (201,147) 7

49

EirIes Two Limited



(c) Market risk (continued)

(i) Currency risk (continued)

2013USD JPY GBP

Monetary assets - - -

Cash and cash equivalents 344 -7

Cash collateral 235,628 --

Derivative assets 6.357 --

Investment securities and total 497,107 --

Other assets 2,831 --

742267 - 7

Monetary liabilities

Derivative liabilities 96,349 44,023 -

Debt securities issued 464,273 119,748 -

Other liabilities 1031 942 -

561 .653 164,713 -

Netexposure 180,614 (164,713) 7

The Company has traded in GaP, JPY, and USD.

The following significant exchange rates applied during the year:

Average rate Closing rate

2014 2013 2014 2013

USD 1.329 1.328 1.215 1.377

JPY 140.386 129.760 145.034 144.512

GBP 0.806 0.649 0.779 0.833

Sensitivity analysis

The impact of any change in the exchange rates on the investment securities and TRS

relating to any series issued is offset by entering into asset and currency swap agreements

for most series. Any difference is borne by the Swap Counterparty and thus the exchange

rate changes have no net impact on the equity or the profit or lass of the Company.

50

Eirles Two Limited




(ii) Interest rate ask

At the reporting date, the interest rate risk profile of the Company’s non derivative interest

bearing financial instruments was;

Investments Securities and total return swaps

Class of debt securities issued currency 2014 2013€000 €000

Fixed rated instruments:Asset backed securities installment notes USD 68,203 124,173

Credit linked debt securities EUR 92,112 71,689

Credit linked debt securities USD 166,299 162,131

Inflation linked debt securities USD 13,852 11,331

360,466 369,324

Floating rated instruments:

Asset backed securities installment notes FUR 5 31,486

Asset backed securities installment notes USD - 17,393

Credit linked debt securities EUR - 42,251


Zero Coupon notes USD 21,005 60,540

199,993 304,560

Variable rate instruments:

Asset backed securities installment notes EUR 2,112 2,194

Credit linked debt securities FUR 179,717 358,172

Zero Coupon notes FUR 116,041 54,909

299,870 415,275

51

Eirles Two Limited


22 Financial instruments (continued;


(U) Interest rate risk (continued)

Debt securities issued

Class of debt securities issued Currency 2014 2013€000 €000

Fixed rated instruments:Asset backed securities installment notes EUR 2,112 2,194

Asset backed securities installment notes USD - 49.833

Credit linked debt securities JPY 129,299 112,608

131,411 164,635

Floating rated instruments:

Asset backed securities installment notes EUR 2,962 31,486

Asset backed securities installment notes USD 291 337



Credit linked debt securities JPY 6,985 7,141

374,155 592,236

Variable rate instruments:

Asset backed securities installment notes USD 67,134 59,502



Inflation linked debt securities EUR 9,995 8,879

273,698 242,785

Refer to Note 7 and 9 for maturity profile for investment securities and TRS and debt

securities respectively. The Company manages its interest rate risk by entering into swap

agreements.

52

EirIes Two Limited




(ii) Interest rate risk (continued)


A 100 basis point increase or decrease represents management’s assessment of areasonable, potential change in interest rates.

A 100 basis point increase in interest rates (assuming all other variables are held

constant) ‘ouId have resulted in an increase of coupon expenditure payable on the debt

securities issued of EUR 7734,650 for the year (2013: EUR 10,520,365). Under the same

conditions, the coupon income receivable from investment securities would have increased

by EUR 2,257,398 for the same period (2013: EUR 3,855,566). A similar 100 basis point

decrease in interest rates would have resulted in an equal, but opposite effect on coupon

expenditure and coupon income, respectively.

The Company does not bear any interest rate risk as the interest rate risk associated with

the floating and variable rate financial assets and liabilities is neutralised by entering into

swap agreements w1iereby the Swap Counterparty pays the Company amounts equal to

the interest payable to the holders of the debt securities issued in return for the interest

earned by the Company on its investment securities and TRS. Therefore any change in

the interest rates would not affect the equity or the Statement of Comprehensive Income of

the Company.

The Company does not bear any interest rate risk for the Company’s fixed rate financial

assets and liabilities at fair value through profit or loss, any changes in interest rates would

affect the fair value of the fixed rate financial assets and liabilities which in turn would

impact on the Statement of Comprehensive Income and the equity of the Company.

However, the Company has neutralised this risk by entering into swap agreements

wtiereby all fair value changes are borne by the Swap Counterparty.

53

EirIes Two Limited




(UI) Other price risk

Other price risk is the risk that value of the instruments will fluctuate as a result of changes

in market prices (other than those arising from interest rate risk or currency risk), whether

caused by factors specific to an individual investment, its issuer or all factors affecting all

instruments traded in the market.

Other price risk may include risks such as equity price risk, commodity price risk,

repayment risk (i.e. the risk that one party to a financial asset will incur a financial loss

because the other party repays earlier or later than expected)! and residual value risk.

In relation to the company’s portfolio of investment securities and TRS, this is not subject

to equity price risk, commodity price risk and residual value risk. In relation to prepayment

risk! the Directors do not consider this to be significant risk from the prespective of the

Company itself! as any fluctuation in the value of loans held by the Company is borne by

the holders of debt securities.

The following is the breakdown of the company’s investment securities and total return

swaps at the reporting date is:

Listed! 2014 2013

Class of debt securities issued Unlisted C000 €000

Asset backed securities installment notes Listed 68,204 110,216

Asset backed securities installment notes Unlisted 2,117 33,680

Credit linked debt securities Listed 516,771 386.710

credit linked debt securities Unlisted 120,339 400,423

Inflation linked debt securities Listed 13,852 11,331

Zero Coupon notes Listed 80,383 60,540

Zero coupon notes Unlisted 58,663 54,908

860,329 1,057,808

54

EirIes Two Limited




(iii) Other price risk (continued)


The market price of the investments securitities will generally fluctuate with, among other

things, the liquidity and volatility of the financial markets, general economic conditions,political events, developments or trends in a particular industry and the financial conditions

of the securities issuer.

Credit Linked / Inflation Linked / Fixed Rated / Floating rated debt securities

If the market value of the collateral increases the Swap Counterparty is entitled to the

resultant gains, and if the market value of the collateral decreases the Swap Counterpartyand the noteholders bears the losses. This split is dependant on who has priority ofpayment in these circumstances as disclosed in the agreements.

Any changes in the quoted prices or unquoted prices of the investment securities held by

the company would not have any effect on the equity or profit or loss of the Company as

any fair value fluctuations are ultimately borne by either the Swap Counterparties and/or

the holders of the debt securities issued by the Company.

If the market prices of the investment securities held by the Company had increased or

decreased by 10% with all other variables held constant, this would have increased or

reduced the carrying value of the debt securities issued by EUR 8Gm (2013: EUR 105.8m).

(d) Specific instruments

(i) Receivable under total return swap and asset backed investment securities

As part of certain series programmes the Company has entered into a number of credit

default swap and asset swap agreements with Deutsche Bank AG, London Branch.

In exchange for the receipt of premium income for the relevant series, the Company

has sold credit protection on a number of reference entities, the Reference

Obligations”.

55

Eirles Two Limited



(d) Specific instruments (continued)

(i) Receivable under total return swap and asset backed investment securities(continued)

In the event of an issuance of a credit event notice with respect to the ReferencePortfolio, the Company will pay an amount as defined in the Credit Default SwapAgreements from the assets of that series to which the Credit Default SwapAgreement relates. The aggregate liability of the Company under the Credit DefaultSwap Agreements for individual series shall not exceed the aggregate of the eligibleinvestment securities and TRS for those Series. No payment calls under the creditdefault swaps were made during the year.

In various series, as detailed below, the Company has issued Fixed or Floating RateSecured debt securities, linked to a pool of reference entities. If defaults in CreditDefault Swap reference obligations arise! the nominal is proportionally reduced bythe relevant defaults,

CreditHead-room In Event

Payment

Nominal of Notes Description of requiredTranche held existence as occur-

Series CCV (CCV) reference under creditby Note-holder 431 Dec encesto

000 oblIgations Default swap2014 31 Dcc

agreement2014

49 EUR Z000 AR YES Forum 2 portfd/o NO NO

195 EuR 177,100 N/A N/A FrceTecan NO NO

215 USD 30,000 Class C YES HEL Portfoio NO NO

215 uso 25.000 Class C YES I-tEL PcI1iE3 ND ND

254 EUR 50,000 N/A YES Men NO NO

229 2,636 class A & B N/A craft Portfolio NO NO

Set of named361 EUR 98,510 N/A YES NO NO

refe,ence enUties

The ultimate amount repaid to the holders of debt securities will depend on the

proceeds from the investments securities and total return swaps held as collateral

less any protection payments under the credit default swaps.

56

Eirles Two Limited




(ii) Credit-Unked investment securities

In certain series, the underlying investment securities and TRS (held as collateral)may itself be credit-linked to a selection of reference entities. In the event of theissuance of a credit event notice with respect to one of the reference entities thenominal of the collateral may be reduced proportionally, with a correspondingreduction in the note nominal of the relevant series.

No payment calls were made on the credit linked investment securities during theyear, or since the year end.

(Hi) credit Default Swaps

As part of certain series programmes the Company has entered into a number ofcredit Default Swap Agreements with Deutsche Bank AG, London Branch. Inexchange for the receipt of premium income for the relevant series, the companyhas sold credit protection on a number of reference entities, the ReferenceObligations.

In the event of an issuance of a credit event notice with respect to the ReferencePortfolio, the company will pay an amount as defined in the credit Default SwapAgreements from the assets of that series to which the credit Default SwapAgreement relates. The aggregate liability of the company under the CreditDefault Swap Agreements for individual series shall not exceed the aggregate ofthe Eligible investment securities and TRS for those Series. No payment calls

under the Credit Default Swaps were made during the year.

In various series, as detailed below, the Company has issued Fixed and Floating

Rate Secured debt securities, linked to a pool of reference entities. As a

consequence of defaults in reference obligations, the nominal is proportionally

reduced by the relevant debt securities issued. However, this will only occur when

subordinate tranches within the corresponding portfolio have been fully reduced.

57

Eirles Two Limited




The Reference Obligations for each series under Credit Default Swaps were as follows:

creditPayment

Head-room in EventNominal of Notes Description of required

- Tranche held existence as occur•Series CCY (CCY) reference under Credit

by Note-holder at 31 Dec - ences to000

2014obligations

31Default swap

2014agreement

91 USO 24003 Class A- YES Tsar7 Portfolio YES NO

176 USD 5000 Class B- NO Portfolio of US NO NORMBS and HEL

194 USD 38500 Menanine YES CMOS Ptfclio NO NO

215 uSD 33000 Class C YES HEL Portfc;io NO NO

216 USD 25.000 Class C YES HEL Palfo:io NO NO

229 USD 2636 class A & S NO Craft Portfolio NO NO

312 EUR 91000 N/A NO Setofnamed NO NOreference entities

316 USD 70150 N/A YES Setcfnamed NO NOreference entities

319 USD 155,350 A YES Setofnamed NO NOreference entil!es

334 EUR - REDEEMED YES Setofnamed NO NOreference entities

A Credit event occurred on 22 December 2014 relating to Series 91. No reductions in

nominal of the debt security of Series 91 during the year. The series and its associated

CDS in Series 334 was fully redeemed during the financial year.

The credit events with respect to reference entities to which the notes are credit linked did

not result in the occurrence of any payment under the relevant credit default swap

agreement or early redemption in whole or in part in accordance with the terms of the

notes due to sufficient headroom in place.

58

Eirles Two Limited




(iv) Profile of the series of debt securities issued by the Company

2014

Types! Nwit.r Debt Coebied Delviiee De,jvtee DTho

9oe sOw,, ucoflnin Cab aet, Iithibt., ann flit.,

Sal

% flit % nOl (101 IlK (112 % 1W 1W.

Pass-througestrndures 6 0.33% - 0.02% 6! 0.33% - 833% - 033% - 580% 61 8.37% 4

Inflation linkeddebt 5e040693 1 091% 9996 096% 0 ‘61% 03,652 0 00% - 295% 3,163 544% 15! 7 24% 254

4tb0!c0s 05 5307% 675769 2962% Il’S! 7496 637110 770’S 93000 96191, 64.494 6177% 1110 78W. 2.195

4gi nno:

to Irtl9305: on33:%i45. ThITh 45 578% °I% 93 238. X47 2582% 74 I% 416

Zeo Couponnotes 3 2191% 233037 3253% 90232 96.16% 13546 2296% lUG? 659% 6,921 0.11% 3 083% 29

ToOl 34 09396% 1.050005 19350% 277,393 1030% 690,329 19350% 81.150 1000% 127.647 1930% 2775 1960% 3.596

The following are the broad categories as at 31 December 2013:

2213

C41Wd Dema 0Th,

bvadkno ai,ns seasiesh, C tecfl ia1s inn

(100 % €000 €000 % (100 % (800 % (000

Pao-ftounhII 0.96% . 004% 92 096% - 085% 392% 196 I 74% 78

lTn1000Tlirlei

Aso.teo 1073% 5573233% 507% l33’.°. - Iwo 2€229%’24 7?o 345

0*31 b6Id

9 92. .43 fl, 5558% 96730 OtiS’ 2844 75Th 3496

(iTsOlInondodes) 6 14.18% 17Z€03 3072% 74,961 1361% 043,966 089% 282 9616% 47,131 2807% 1258 13.17% 589

Zero Cosçoonokes 3 0549% 133.610 3054% 7(413 10.51% 1l%446 2350% 18092 02.65% 96079 005% 2 0.51% 28

V 1196% 12j751799696% 29672 961% 1967371 l.961%57719696’, 150]47 9637% ‘2i 110 (473

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(e) Fair values

The Company’s investment securities and total return swaps, derivative financialinstruments and debt securities issued are carried at fair value on the statement offinancial position. Usually the fair value of the financial instruments can be reliablydetermined within a reasonable range of estimates. The carrying amounts of all theCompany’s financial assets and financial liabilities carried at amortised cost at thereporting date approximated their fair values. Their fair values together with carryingamounts shown in the statement of financial position are disclosed in Note 12.

These disclosures supplement the commentary on financial risk management (see Note4).

Determining fair valuesThe determination of fair value for financial assets and liabilities for which there is noobservable market price requires the use of valuation techniques as described inaccounting policy Note 3(a) under the sub heading “Fair value measurement principles”.For financial instruments that trade infrequently and have little price transparency, fairvalue is less objective, and requires varying degrees of judgement depending onliquidity, concentration, uncertainty of market factors, pricing assumptions and other risksaffecting the specific instrument.

The Company’s accounting policy on fair value measurements is discussed under Note3(a) under the sub heading “Fair value measurement principles”. Critical accountingjudgements made in applying the company’s accounting policies in relation to valuationof financial instruments are as follows:

Valuation of financial instrumentsThe Company measures fair values using the following hierarchy of methods:• Level 1 — Quoted market price (unadjusted) in an active market for an identical

instrument.• Level 2 — Valuation techniques based on observable inputs, either directly (i.e. as

prices) or indirectly (i.e. derived by prices). This category includes instrumentsvalued using: quoted market prices in active markets for similar instruments; quotedprices for similar instruments in markets that are considered less than active; orother valuation techniques where all significant inputs are directly or indirectlyobservable from market data.

• Level 3 — Valuation techniques using significant unobservable inputs. This category

includes all instruments where the valuation technique includes inputs not based on

observable data and the unobservable inputs could have a significant effect on theinstrument’s valuation. This category includes instruments that are valued based on

quoted prices for similar instruments where significant unobservable adjustments or

assumptions are required to reflect differences between the instruments.

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(e) Fair values

Valuation Techniques

The following is an explanation of the valuation techniques used in establishing the fairvalue of the different types of financial instruments of the Company.

Investment securities: Where there are no recent transactions then fair value may bedetermined from the last market price adjusted for all changes in risks and informationsince that date. Where a close proxy instrument is quoted in an active market then fairvalue is determined by adjusting the proxy value for differences in the risk profile of theinstruments. Where close proxies are not available then fair value is estimated using morecomplex modelling techniques. These techniques include discounted cash flow modelsusing current market rates for credit, interest, Uquidity and other risks. For equity securitiesmodelling techniques may also include those based on earnings multiples.

Derivative Financial Instruments: Market standard transactions in liquid trading markets,such as interest rate swaps, foreign exchange forward and option contracts in G7currencies, and equity swap and option contracts on listed securities or indices are valuedusing market standard models and quoted parameter inputs. Parameter inputs areobtained from pricing services, consensus pricing services and recently occurring

transactions in active markets wherever possible. More complex instruments are modelled

using more sophisticated modelling techniques specific for the instrument and are

calibrated to available market prices. Where the model output value does not calibrate to

a relevant market reference then valuation adjustments are made to the model output

value to adjust for any difference. In less active markets, data is obtained from less

frequent market transactions, broker quotes and through extrapolation and interpolation

techniques. Where observable prices or inputs are not available, management judgment

is required to determine fair values by assessing other relevant sources of information

such as historical data, fundamental analysis of the economics of the transaction and

proxy information from similar transactions.

Debt securities issued at fair value through profit and loss: The fair value of debt securities

issued at fair value through profit and loss is dependent upon the fair value of investment

securities and derivative financial instrument. Any changes in the valuation have direct

impact to the fair value of debt securities issued.

For more complex Level 3 instruments, more sophisticated modelling techniques are

required which usually are developed from recognised valuation models. Some or all of

the significant inputs into these models may not be observable in the market, and are

derived from market prices or rates or are estimated based on assumptions or more

complex parameters. Examples of instruments involving significant unobservable inputs

include correlations, prepayments speeds, default rates and loss severity, certain over the

counter derivatives and certain securities for which there is no active market.

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(e) Fair values (continued)

Valuation Techniques (continued)

Where no observable information is available to support the valuation models then theyare based on other relevant sources of information such as prices for similar transactiona,historic data, economic fundamentals, and research information, with appropriateadjustment to reflect the terms of the actual instrument being valued and current marketconditions. Valuation models that employ significant unobservable inputs require a higherdegree of management judgement and estimation in the determination of fair value. Whendetermining the appropriate valuation model to be used, management selects whichvaluation technique makes the least adjustment to the inputs used, analyse the range ofvalues indicated by the techniques used and whether they overlap and check the reasonsfor the differences in value under different techniques. Depending on the circumstances,one valuation model might be more appropriate than another. Management decides thevaluation model to be used based on the provisions indicated in the swap agreements.Some factors that are considered includes information that is reasonably available, themarket conditions, the type of investment, expected future cash flows on the financialinstrument being valued, determination of probability of counterparty default and discountrates. Level 3 valuations are reviewed quarterly and disclosed yearly in the financialstatements.

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(e) Pair values (continued)

At the reporting date, the carrying amounts of investment securities and total return swaps,

derivative financial instruments and debt securities issued by the Company where fair values

were determined directly, in full or in part, by reference to published price quotations and

determined using valuation techniques are as follows:

Total Level 1 Level 2 Level 3

€000 €000 €‘OOO €‘OOO

81 850 - 74,968 6,882

(127647) - (91,861) (35.786)

(1.091.000) - (622,141) (468859)

(276,468) 210,867 (170,692) (316,643)

2013

Total Level I Level 2 Level 3

CODa (‘ODD €000 €000

1,057,808 156,191 447,938 453,679

80.217 - 74,141 6,076

(156,247) - (98,110) (58,137)

(1,217,517) - (513,573) (703,944)

(235,739) 156,191 (89,604) (302.326)

Total return swaps consists of underlying asset backed financial instruments, credit debt

obligations and cash collateral were classified as level 3. The instruments are valued using a

valuation technique that involves significant unobservable inputs and no active market

available.

Derivative financial instruments classified as Level 3 involves credit default swap,

collateralised debt obligations, and other over the counter derivative instruments where the fair

value measurements were based on unobservable inputs and no active market data available

for similar instruments.

2014

860,329 210,867 466,342 181,120Investment securities and total return

swapsDerivative financial assets

Derivative financial liabilities


Investment securities and total return

swapsDerivative financial assets

Derivative financial liabilities


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Debt securities issued are traded in the institutional market and the prices for these at yearend have been obtained from market sources. Notwithstanding that a quoted market priceexists for these, the Directors have concluded that the debt securities are not activelytraded due to the limited liquidity that exists in the market.

As a result, the levelling of debt securities is dependent on the levelling of the investmentsecurities, total return swaps, cash and cash collateral and derivative financial instruments.Debt securities are classified in the lowest level observed of the assets and derivatives on aseries by series basis. As no derivatives are classified as Level 1, debt securities havebeen classified as either Level 2 or Level 3.

The table below discloses the transfer between level 1 and level 2:

Transfers from Level I and Level 22014

Levell Level2

€‘OOO €000

Transfers between Level I and Level 2Investment securities and total return swaps - -

Derivative financial assets - -

Derivative financial liablities - -

Debt securities issued - -

Closing balance - -

No transfers between Level 1 and Level 2 has occurred during the year.

2013Levell Level2

(‘000 (‘000

Transfers between Level 1 and Level 2Investment securities and total return swaps (620,776) 620,776

Derivative financial assets - -

Derivative financial liablities - -

Debt securities issued - -

Closing balance (620,776) 620,776

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The below table shows the roll-forward movements for investments securities and total returnswaps classified under valuation techniques unobservable parameter (Level 3):

2014 2013€000 €‘ooo

Opening balance 453,679 408,552Acquisition - -

Maturities (17397) -

Disposal (264.454)Transfers in 17,393 54.909Transfers outFair value movements (8,101) (9,782)

Closing balance 181,120 453,679

During the year, Series 91 was transferred from Level 2 into Level 3 due to lack ofobservable inputs and unavailability of market data for similar instrument. This was fullyredeemed during the year. Series 195 was partially redeemed.

Transfers into Level 3 are recorded at fair value at the beginning of the year. Forinstruments transferred into Level 3, the Company recognised gains and losses and cashflows on the instruments as they had been transferred at the beginning of the year.

Fair value movements are recognised under net (loss) / gain from investment securities and

total return swaps in the statement of comprehensive income.

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The below table shows the roll-forward movements for derivative financial assets classifiedunder valuation techniques unobservable parameter (Level 3):

2014 2013€‘ooo cooo

Opening balance 6,076 12869Sum of settlements

- (6,524)Transfers in - -

Transfers out -

Fair value movements 806 (269)

Closing balance 6,882 6,076

Fair value movements are recognised under net (loss) I gain from derivative financialinstruments in the statement of comprehensive income.

The below table shows the roll-forward movements for derivative financial liabilities classifiedunder valuation techniques unobservable parameter (Level 3):

2014 2013€000 €‘OOO

Opening balance (58,137) (145,371)Sum of settlements 13,190 2,388Transfers in - -

Transfers out - 18,065Fairvalue movements 9,161 66,781

Closing balance (35,786) (58,13fl

During the year, Series 334 was fully disposed and the corresponding derivative financial

liability was settled with the swap counterparty.

Fair value movements are recognised under net (loss) I gain from derivative financial

instruments in the statement of comprehensive income.

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The below table shows the roll-forward movements for debt securities issued classified undervaluation techniques unobservable parameter (Level 3):

2014 2013€‘OOO €000

Opening balance (703944) (938293)Maturities 33395 49531Redemption 231460 66927Transfers in (32290) (60503)Transfers out 49833 205,009Fair value movements (47313) (26615)

closing balance (468859) (703944)

Any changes in the prices of the financial assets under Level 3, held by the Company wouldnot have any effect on the statement of changes in equity or statement of comprehensiveincome of the Company as any fair value fluctuations are ultimately borne by the holders ofdebt securities.

Any change in the classification of the investment securities and TRS, derivatives assetsand derivatives liabilities will have a direct impact on the classification of the debt securities.Therefore, if any of the associated financial assets or derivative financial instruments isvalued using unobservable parameters, this will result in the classification to Level 3 ofrelated debt securities issued for that series.

Fair value movements are recognised under net finance gain / (loss) on debt securitiesissued in the statement of comprehensive income.

Sensitivity AnalysisWhere the value of financial instruments is dependent on unobservable valuation models,

appropriate models and inputs are chosen so that they are consistent with prevailing

market evidences. A 10% change in the price of the financial assets under Level 3 held by

the Company would increase or decrease the fair value as at 31 December 2014 by EUR

57M (2013: EUR 70.4M).

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Any change in the classification of the investment securities and TRS, derivatives assets andderivatives liabilities will have a direct impact on the classfication of the debt securities. If anyof these are classified as using unobservable parameters (Level 3) it will automatically meanthe debt securities value is reliant on unobservable paramenters as well.

The total amount of realised and unrealised gain / loss estimated using a valuation techniquebased on significant unobservable data (Level 3) that was recognised in statement ofcomprehensive income for the year is as follows:

2014 2013€000 €‘OOO

Investment securitites and total return swaps (8.101) (9782)Derivative financial instruments 9967 66512Debt securities issued (47.313) (26.615)

(45.447) 30115

The total amount of change in fair value estimated using valuation techniques based onsignificant unobservable data (Level 3) for assets and liabilities held at the end of the reportingperiod:

2014 2013€000 €000

Investment securitites and total return swaps (2,852) 17,766

Derivative financial instruments 9970 65,062

Debt securities issued (51,644) (52,960)

(44.526) 29.868

Although the Directors believe that their estimates of fair value are appropriate, the use of

different methodologies or assumptions could lead to different measurement of fair value as

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. Details in relation to the

unobservable inputs used have been noted above and therefore their associated fair value

cannot be determined with precision.

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For recognised fair values measured using significant unobservable inputs, changing one ormore assumptions used to reasonably possible alternative assumptions would not have anyeffect on the profit or loss or on equity as any change in fair value will be borne by theholders of debts securities issued due to the limited recourse nature of debt securitiesissued by the Company.

(f) Financial instruments not measured at fair value

The financial instruments not measured at fair value through profit or loss are financial assetsand financial liabilities whose carrying amounts approximate fair value.

The following table sets out the fair values of financial instruments not measured at fair valueand analyses it by the level in the fair value hierarchy into which each fair value measurementis categorised.

2014Level I Level 2 Level 3(‘000 (‘000 (‘000

Financial assetsCash and cash equivalents 347 - -

Cash collateral 277043 -

Other assets - 2,775 -

Financial liabilitiesOther liabilities - (3.506) -

277.390 (731) -

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(f) Financial instruments not measured at fair value (continued)2013

Level I Level 2 Level 3€‘OOO €000 €000

Financial assetsCash and cash equivalents 344 - -

Cash collateral 235628 -

Other assets - 4431 -

Financial liabilitiesOther liabilities - (4,473) -

235,972 (42) -

Cash and cash collateral

Cash and cash collateral classified as Level 1 includes deposit held with banks which can beterminated within 3 months provided all parties agrees to the transaction.

Other assets and Other liabilities

These balances are mainly comprised of contractual amounts due to/by the Company in

relation to the investments securities and debt securities issued respectively.

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23 Subsequent events

Since the end of the reporting period the Company has not issued any new series of debtsecurities,The following series have matured after year end:

Series 49 18 March 2015Series 229 20 January 2015

The following series have been disposed after year end:Series 316 13 January 2015 Partial Unwind USD 8.4MSeries 364 17 February 2015 Full Unwind USD lOOM

On 27 February 2015, Michael Whelan resigned as a Director of the Company. On the samedate, Margaret Kennedy was appointed as Director of the Company.

24 Approval of the financial statements

The financial statements were approved and authorised for issue by the Board of Directors on

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