anglo irish asset finance plc 2008 accounts

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

    ANNUAL REPORT AND FINANCIAL STATEMENTSANGLO IRISH ASSET FINANCE PLCYEAR ENDED 30 SEPTEMBER 2008

    *L8AE88GD*LD2 25/03/2009

    COMPANIES HOUSE218

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    ANGLO IRISH ASSET FINANCE PLCContents

    Corporate informationDirectors' reportStatement of directors' responsibilitiesManagement reportAuditors' reportIncome statementBalance sheetStatement of changes in equityCash flow statementNotes to the financial statements

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    ANGLO IRISH ASSET FINANCE PLCDirectorsB LinehanD Quill iganF G ParkerJ Brydie (appointed 19 March 2008)T P Walsh (appointed 19 March 2008)D Murray (resigned 22 May 2008)SecretaryF G ParkerAuditorsErnst & Young LLP1 More London PlaceLondon, SE1 2AFBankersAnglo Irish Bank Corporation Limited10 Old JewryLondonEC2R 8DNBarclays Bank ptcLondon Corporate BankingPO Box 544Lombard StreetLondon, EC3V 1EX

    Registered office10 Old JewryLondonEC2R 8DNRegistered number3091082

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    ANGLO IRISH ASSET FINANCE PLCREPORT OF THE DIRECTORSThe directors present their report and the audited financial statements for Anglo Irish Asset Finance pic ('the Company")for the year ended 30 September 2008.1. PRINCIPAL ACTIVITIESThe Company continues to provide commercial finance to businesses and individuals supported by real estate andlease finance and hire purchase facilities.2. PRINCIPAL RISKS AND UNCERTAINTIESThe principal risks and uncertainties facing the Company relate to the credit, l iquidity, market, operational an dcompliance risks ass ociated with its lending activities and capital markets funding instruments. Further details on theserisks are set out in the M anageme nt Report, while manan gement of these risks is set out in Note 24 of the auditedfinancial statements.3. RESULTS FOR THE YEAR AND STATE OF AFFAIRS AS AT 30 SEPTEMBER 2008The results for the year and the balance sheet at 30 September 2008 are set out on pages 11 and 12.The loss after taxation for the year am ounted to 83m (2007: profit 17m ). This loss reflects higherprovisioning levels along with foreign exchange losses incurred on the Yen financing arrangement (Se e Note 5).Total equity amounted to 234m as at 30 September 2008 (2007: 317m).The M anageme nt Report co ntains a further review of the performance of the Com pany.4. DIVIDENDThe directors do not propose the payment of a dividend in respect of the year ended 30 September 20 08 (2007: Nil).5. FUTURE DEVELOPMENTSThe directors will continue to closely m onitor the performance of the Compan y, more details of which are set outin the Management Report.6. DIRECTORS AND SECRETARYBrian Linehan, Declan Quill igan and Gordon Parker continued to serve as directors throughout the year.James Brydie and Thom as W alsh were appointed directors on 19 March 2 008. All directors will continue inoffice in accordance w ith the articles of association. David Murray resigned as director on 2 2 May 2008 .Gordon Parker served as secretary throughout the year. The directors an d secretary had no interestsin the shares of the Company during the year.

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    ANGLO IRISH ASSET FINANCE PLCREPORT OF THE DIRECTORS (Continued)7. FINANCIAL INSTRUMENTSThe directors of the Company utilise various financial instruments in the normal co nduct of the Company's business,primarily in order to mitigate the interest rate risk arising from the Co mpany's operations. It is the Company's policy tohedge all Capital Market instruments wh ich are raised at a fixed rate of interest in order to match the income fromlending assets which is normally linked to 3 month LIBOR /EURIBOR. Further details on these risks and the Com pany'sexposure to financial instruments is given in Note 24 to the financial statements.8. DISCLOSURE OF INFORMATION TO THE A UDITORSSo far as each person wh o was a director at the date of approving this report is aware, there is no relevant auditinformation, b eing information needed by the auditor in connection with preparing its report, of which the a uditor isunaware. H aving made enquiries of fellow directors, each director has taken a ll steps that he is obliged to take as adirector in order to m ake himself aw are of any relevant audit information and to establish that the auditor is aware ofthat information.9. GOING CO NCERNAnglo Irish Bank C orporation Limited, the ultimate parent undertaking, has agreed to provide financial support to theCompany as would be required to allow the Com pany to meet its future obligations as they fall due for at least 16 monthsfrom the date of signing the balance sheet and for the foreseeable future.10. INDEPENDENT AUDITORA resolution for the reappointment of Ernst & Young LLP as auditors of the Company is to be proposed at theforthcoming Annual General Meeting.

    ON BEHALF OF THE BOARD.

    REGISTERED OFFICE:10 Old JewryLondonEC2R 8DN

    F. G. ParkerCompany SecretaryDate: 05 March 2009

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    ANGLO IRISH ASSET FINANCE PLCSTATEMENT OF DIRECTORS' RES PONSIBILITIES IN RESPECT OF THEDIRECTORS' REPORT AND FINANCIAL STATEMENTSThe directors are responsible for preparing the a nnual report and the financial stateme nts in accordance withapplicable United Kingdom law and International Financial Reporting Standards (IFRS) as adopted by the E uropeanUnion.

    Compa ny Law requires the directors to prepare financial statements for each financial year w hich give a true an d fairview of the state of affairs of the Company a nd of the profit and loss of the C ompany for that year. In preparing tho sefinancial statements, the directors are required to:- select suitable accounting policies and then apply them con sistently;- present information, including accounting policies, in a manner that provides relevant, reliable, comparable and

    understandable information;- provide additional disclosures whe n compliance w ith the specific requirements of IFRS is insufficient to enable users

    to understand the impact of particular transactions, other events and conditions on the entity's financial position andfinancial performance; and

    - state that the Company has complied with IFRS, subject to any material departures disclosed and explained in thefinancial statements.The directors are required to prepare the financial statements on the going concern basis, unless it is not appropriate. T hedirectors have received confirmation from the ultimate parent un dertaking, Anglo Irish Bank C orporation Limited, of itscontinued financial support to allow the Company to meet its future o bligations as they fall due for at least 16 m onths fromthe date of signing the balance sheet and for the foreseeable future and consequently the financial statemen ts continueto be prepared on the going concern basis.The directors are responsible for keeping proper accoun ting records which disclose with reasonable accuracy at any timethe financial position of the Company and which e nable them to ensure that the financial statements comp ly with theCom panies Act 1985. They have general responsibility for taking such steps as are reasonably open to them to safeguardthe assets of the Com pany a nd to prevent and d etect fraud and other irregularities.The directors confirm that, to the best of their knowledge, they have com plied with these requirements in preparing thefinancial statements, including preparation of these financial statements in accordance w ith IFRS as adopted bythe Eu ropean Union. Under applicable laws and regulations, the directors also have responsibility for preparing aDirectors Report, as set out on pages 2 to 3 that comp lies with that law and those regulations.DTR 4.1.5 of the Disclosure R ules and Transparency Rules of the Financial Services Authority requires the directors toinclude a man agement report in the financial statements which includes a fair review of the issuers' business as well as adescription of the principal risks and uncertainties faced by the Comp any.As required by DTR 4.1.12 of the Disclosure Rules and Transparency Rules of the Financial Services Authority thedirectors (as listed below) confirm tha t to the best of their know ledge:- the financial statements, prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial

    position and loss of the Company; and- the mana gement report includes a fair review of the development an d performance of the business and the position of

    the Com pany, together with a description of the principal risks and un certainties that the Company faces.Brian Linehan - DirectorDeclan Q uill igan - DirectorGordon Parker - Director and Company SecretaryJames Brydie - DirectorThomas Walsh - Director

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    ANGLO IRISH ASSET FINANCE PLCMANAGEMENT REPORT1. REVIEW OF BUSINESS PERFORMANCEThis review covers the year to September 2008 and includes commentary on key areas of performance of theCompany during that period.Key results for the year include:- Net loss after tax of 83m for the year, down from profits of 17m in 2007- Net interest income up 42% from 79m to 112m- Trading losses of 100m primarily incurred on a Japanese Ye n financing arrangement wh ich were more than

    eliminated through the structure of the arrangement across various UK group com panies of the ultimate p arent,Anglo Irish Bank Corporation Limited

    - Specific impairment charge of 58m, 1.29% of average loan book- Collective impairment charge of 67m, 1,49% of average loan book- Growth in net customer lending of 805m, an increase of 20%- Impaired loans represent 4.09% of closing loan book- Increase in loans and borrowings of 585m, an increase of 26%

    Lending and asse t quality 2008 2007m_ mLoans and advance s to customers 4,793 3,988Net loan growth of 805m, wh ich primarily consisted of drawdowns on prior year commitments, brought total customerlending to 4,793m at year end, a 20% increase on prior year. In keeping with the Company's relationship ba sed lendingmodel, lending activity during the year was provided solely to the Compan y's longstanding an d experiencedcustomer base. Th e Company provides commercial finance to businesses and individuals supported by real estateand lease finance and hire purchase facilities.The Company is a traditional balance sheet lender, directly originating assets rather than participating in transactionalor bought in loans. The risk managem ent function of the ultimate parent compan y, Anglo Irish Bank Corpo rationLimited, review loans w ith the Company's lending teams at least twice yearly to monitor asset quality. The responsibilityfor loan performance rests with the relevant lending director and their team.The rapid worsening of the econom ic environment in the latter part of 2008 has led to increased specific impairments.In addition, the collective impairment provision has increased considerably recognising the significant eco nomicchallenges existing at the year end and is determined in line with the detailed policy set out on page 18. Cum ulativebalance sheet provisions as at 30 September 2008 total 145m which amounts to 2.94% of the closing loan book.The Company's loan book of 4,793m at 30 September 2008 is 57% secured on commercial property,35% secured on residential property and 8% other secured lending. O ver 80% of the loan balances at year end arerated as satisfactory or above. Of the balance, 4.09% is impaired.The economic outlook has become increasingly challenging and continues to deteriorate. No significantimprovement is anticipated over the next number of years.The following are the key highlights regarding asset quality at the year end date:

    2008 2007Income Statement: m mSpecific provision charge 58 42Collective provision charge 67 5Total lending impairment charge 124 47% of average loan balances 2.76% 1.16%

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    ANGLO IRISH ASSET FINANCE PLCMANAGEMENT REPORT (Continued)1. REVIEW OF BUSINESS PERFORMANCE (continued)Lending and asset quality (continued)

    2008 2007Balance Sheet: m mImpaired loans 202 115% of closing loan balances 4.09% 2.84%Specific provision 68 50Collective provision 77 10Total p rovisions 145 60Total provisions as a % of impaired loans 71.78% 52.17%Trading lossesIn May 2008 the Company entered into a Japanese Yen financing arrangement to enable the parent company,CDB (UK) Limited, and therefore the ultimate parent company, Anglo Irish Bank Corporation Limited, to avail of lowcost financing o n an after tax basis at Yen interest rates. The Company incurred foreign exchange losses of 101mon this transaction. T he losses to the Com pany on foreign excha nge in the period on this financing transa ction arereduced by 76m of translation gains across various UK group com panies of the ultimate parent, Anglo Irish BankCorporation Limited ("UK group"), and by a reduced taxation charge in the UK group resulting in an overall increasein profits after tax for the UK group of 5m.Loans and borrowings 2008 2007

    m_ mLoans and borrowings 2,826 2,241Loans and borrowings increased by 26%, in line with the increase in the loan book, to total 2,826m. All loansand borrowings are sourced from the ultimate parent undertaking or other group e ntities.Subordinated liabilities and other capital instrumentsThere we re no further issuances of subordinated liabilities or other capital instruments during the year. Full details ofthese are given in Note 20.2. PRINCIPAL RISKS AND UNCERTAINTIESThe Com pany is subject to a variety of risks and uncertainties in the normal course of its business activities.The Board of D irectors h ave u ltimate responsibility for the governance of all risk taking activity and have establisheda framework with its ultimate parent, Anglo Irish Bank Corporation Limited, to benefit from the various risk functions ofthe ultimate parent wh ich mo nitors all risks of the Company as part of the overall risk framework of Anglo Irish B ankLimited and its group comp anies ("AIBC Group"). Further details are given in Note 24 of the financial statements.The principal business risks faced by the Company are outlined below.Economic environmentThe Comp any's b usiness is primarily affected by economic conditions in the UK and to a lessor extent a num berof European countries, where the m ajority of earnings are generated. Each of these economies is currently inrecession. Higher unemployment, reduced consumer and business confidence and a contraction in housing marketshave all contributed to declining economic growth.

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    ANGLO IRISH ASSET FINANCE PLCMANAGEMENT REPORT (Continued)2. PRINCIPAL RISKS AND UNCERTAINTIES (continued)Economic environment (continued)The Comp any, with the assistance of its ultimate parent, assesses customers by reference to their financial strength,the nature of their underlying business an d the quality and certainty of their cash flows. A sustained deteriorationin economic conditions will impact borrowers' ability to service de bts. This, combined with a fall in value of u nderlyingcollateral, will adversely impact credit quality resulting in an increased level of defaults and higher impairment charges.To minimise the impact of this, the Company through the policies of its ultimate parent a nd the various risk functionsof the ultimate parent, has underwriting criteria an d controls in place which w ill l imit the extent of losses arisingin the event of default.As outlined in the Managem ent R eport, actively m anaging asset quality a nd controlling credit exposureare key priorities for the Com pany a nd its ultimate parent.Global financial markets and funding riskThe Com pany relies on its ultimate parent, to provide all funding requirements to enable the Company to operate.Anglo Irish Bank Corporation Limited has confirmed to the directors that it will continue to provide financial support to theCompany for the foreseeable future.Market riskMarket risk has increased globally due to recent volatility in interest and exchange rates. Changes in interest rates andspreads m ay affect the interest rate margin realised between lending and borrowing costs. This risk is largely mitigatedby the fact that almost all the Compa ny's lending assets and funding liabilities are priced off market related rates, with noasset pricing tied to official central bank rates. Th is ensures there is no structural interest rate pricing basis risk inherentin the Company's balance sheet.The Com pany incurs foreign exc hange risk on the Japanese Y en financing arrangement w hich is set off against gainsacross various UK group com panies wh ich are integral to the overall operation of this transaction, which is beneficial tothe results of the UK group and the ultimate parent group.Other risksOperational risk represents the risk that failed or inadequate processes, people or systems , or exposure to externalevents cou ld result in unexpected losses. T he risk is associated with human error, systems failure, a nd inade quatecontrols and procedures.The Comp any m ust at all times comply with all relevant laws and good practice g uidelines. Non compliance can give riseto reputational loss, legal or regulatory sanctions or material financial loss.3. IMPORTANT EVENTS SINCE THE YEAR END AND FUTURE DEVELOPMENTSNationalisation of ultimate parent companyOn 15 January 2009, the Irish Government announc ed its intention to take Anglo Irish Bank Corporation p ic ("theBank"), the ultimate parent undertaking of the Company, into State ownership. The B ank's shares were subseque ntlysuspend ed from trading on the Irish and London Stock Exchanges on 16 January 2009. The Anglo Irish BankCorporation Act 2009 which provided for the transfer of shares of the Bank to the Irish M inister for F inance, was s ignedinto Irish law on 21 January 2009. On the sam e date the Bank was re-registered as a private company and its namewas changed from Ang lo Irish Bank Corporation pic to Anglo Irish Bank Corporation Limited.

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    ANGLO IRISH ASSET FINANCE PLCMANAGEM ENT REPORT (Continued)3. IMPORTANT EVENTS SINCE THE YEAR END AND FUTURE DEVELOPMENTS (continued)Share capitalOn 18 November 2008 the authorised share capital of the Company was increased to 3,300m by thecreation of 3,000,000,000 ordinary shares of 1 each. On the 18th November 2008, 1,000,000,000 ordinary shareswere issued at par and subscribed by CDB(UK) Limited, the parent company.Japanese Yen financing arrangementDetails are given in Note 5 of the audited financial statements, of a financing arrangement, entered into inMay 20 08, whereby the C ompany exchanged a portion of its funding from a Sterling basis to a Yen basis. Thearrangement was structured such that the UK group and therefore the ultimate parent, Anglo Irish BankCorporation Limited would benefit from the differential between S terling and Yen interest rates and the potentialdownside from a foreign exch ange risk perspective was mitigated by an offset o n the UK group's taxation line. Thearrangement had a positive impact on the UK group's an d therefore the ultimate parent's profit for the year ended30 September 2008. Although the arrangement was unwound in early January 2009, the strengthening of Yenagainst S terling post year end has negatively impacted trading income from foreign exchange contracts by 6 11mfor the Company, which is reduced by related foreign exchange gains in other UK group companies of 455m,resulting in a net negative impact in profit before tax of the UK group a nd therefore the ultimate parent of 156m.The foreign exchange translation related to this arrangement may be offset by a reduction in the UK group'staxation charge in 2009 and future years.ImpairmentThe key econom ic indicators in the UK, the Company's principal operating market, have continued to showa marked deterioration since 30 September 2008. This economy is expected to contract further in 2009 andit will take some time before any improvements as a result of monetary actions are reflected. As a result,the Company anticipates that loan impairment charges will increase in 2009 and subsequent years.4.FUTURE DEVELOPMENTSThe directors will continue to closely monitor the performance of the Com pany.The d irectors intend that the Com pany will continue to provide lending to business secured upon assets in theUnited Kingdom and in Europe. The Company has future comitments to lend of 703m (2007: 1,703m)to be funded by further facilities from Anglo Irish B ank Corporation Limited - London branch. Ho wever this willbe closely ma naged in the current very u ncertain environment to ensure that only critical lending is ad vanced,in order to mitigate the Comp any's credit risk.5. FINANCIAL RISK MANAGEMENTThe directors of the Company util ise various financial instruments in the normal conduct of the Com pany'sbusiness, primarily in order to m itigate the interest rate risk arising from the Compan y's o perations. It is theComp any's policy to hedge all Capital Market instruments w hich are raised at a fixed rate of interest in order tomatch incom e from lending assets which is normally linked to 3 month LIBOR /EURIBOR. Risk m anagem entoversight for the Company is provided by the Risk M anagement function of Anglo Irish Bank C orporationLimited. Credit risk decisions are made on behalf of the Compan y by the Anglo Irish Bank CorporationLimited Credit Comm ittee function. Further details on these risks and the Company's exposure to financialinstruments is given in Note 24 of the financial statem ents.

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    IIIIH111 =!L ERNST &YOUNG Ernst & Young LLP1 More London PlaceLondon SE1 2AFTel: 020 7 951 2000Fax: 02 0 7951 1345www.ey.com/uk

    INDEPENDENT AU DITORS' REPORT TO THE MEMBERS OFANGLO IRISH ASSET FINANCE PLC

    We have audited the Financial Statements of Anglo Irish Asset Finance Pic for the year ended 30 September2008 which comprise the Income Statement, the Balance Sheet, and the statement of Changes in Equity,the Cash Flow Statement, and the related notes 1 to 32. These Financial Statements have been prepared onthe basis of the accoun ting policies set out therein.This report is made solely to the Company's members, as a body, in accordance with Section 235 of theCompanies Act 1985. Our audit work has been undertaken so that we might state to the Company'smem bers those matters w e are required to state to them in an auditor's report and for no other purpose. Tothe fullest extent perm itted by law, we do not accept or assum e responsibility to anyone other than theCompany and the Com pany's mem bers as a body, for our audit work, for this report, or for the opinions wehave formed.Respective responsibilities of Directors and AuditorsThe D irectors' R esponsibilities for preparing the F inancial Statements in accordance with applicable U nitedKingdom law and International Financial Reporting Standards (IFRSs) as adopted by the European Unionare set out in the Statement of Directors' Responsibilities.Our responsibility is to audit the financial statements in accordance with relevant legal and regulatoryrequirements and International Standards on Auditing {UK and Ireland).W e report to you our opinion as to whether the Financial Statements give a true and fair view and areproperly prepared in accordanc e with the Com panies Act 1985. We also report to you whether theinformation given in the Directors' R eport is consistent with the Financial Statements.In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if wehave not received all the information and explanations we require for our audit, or if information specified bylaw regarding Directors' remuneration and transactions with the Company is not disclosed.W e read the Directors' R eport and consider whether it is consistent with the audited financial statements.We consider the implications for our report if we become aware of any apparent misstatements or materialinconsistencies with the financial statements. Our responsibilities do not extend to any other information.Basis of audit opinionWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued bythe Auditing Practices Board. An aud it includes examination, on a test basis, of evidence relevant to theamounts and disclosures in the Financial Statements. It also includes an assessm ent of the significantestimates and judgem ents made by the directors in the preparation of the Financial Statements, and ofwhether the accounting policies are appropriate to the Company's circumstances, consistently applied andadequately disclosed.W e planned and performed our audit so as to obtain all the information and explanations which w econsidered necessary in order to provide us with sufficient evidence to give reasonable assu rance that theFinancial Statements are free from material misstatement, whether caused by fraud or other irregularity orerror. In forming our opinion w e also evaluated the overall adequacy of the presentation of information in theFinancial Statements.

    9The UK firm Ernst & Young LLP is a limited liabilitypartnership registered in England and Wales withregistered number OC300001 and is a member firm ofErnst & Young Global Limited. A list of members' namesis available for inspection at 1 More London Place,London SE1 2AF. the firm's principal place of businessand registered office.NVESTOR IN PEOPLE

    http://www.ey.com/ukhttp://www.ey.com/uk
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    I l l " " " '=H ERNST&YOUNG

    INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OFANGLO IRISH ASSET FINANCE PLC (Continued)

    Ernst & Young LLP1 More London PlaceLondon SE1 2AFTel: 020 795 1 2000Fax: 02 0 7951 1345www.eY.com/uk

    OpinionIn our opinion:- the Financial Statements give a true and fair view, in accordance with IFRSs as adopted by the E uropeanUnion, of the state of the Company's affairs as at 30 September 2008 and of its loss for the year then ended;- the Financial Statements have been properly prepared in accordance with the Companies Ac t 1985; and- the information given in the Directors' report is consistent with the Financial Statements.

    \ S y n / \ S V V - M 5

    Ernst & Young LLPRegistered Auditor1 More London PlaceLondon, SE1 2AF

    09 March 2009

    " w - 10INVESTOR IN PEOPLE

    The UK firm Ernst S Young LLP is a limited liabilitypartnership registered in Engand and Wales withregistered number 0C3Q00Q1 and is a member firm ofErnst 8 Young Global Limited. A list of members' namesisavailable far inspection at 1 More London Place,London SE1 2AF, the firm's principal place of businessand registered offce.

    http://www.ey.com/ukhttp://www.ey.com/uk
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    ANGLO IRISH ASSET F INANCE PLCIncome statementFor the year ended 30 S eptember 2008

    2008 2007Notes

    Interest and similar income 3 399,163,421 294,585 ,947Interest and similar expenses 4 (286,960,207) (215,752,014)Net interest income 112,203,214 78,833,933

    Fee and commission incomeFee and commission expenseTrading lossesOther (expense) I incomeNet Operating Income

    Administrative expensesDepreciation of properly, plant and equipmentTotal operating expenses

    2,954,899 1,136,163(6,348) (10,788)

    (99,907,934) (403,782)(96,959,383) 721,593

    15,243,831 79,555,526

    (7,963,413) (9,448,647)(12,700) (17,894)

    (7,976,113) (9,466,541)

    Operating profit before impairment lossesImpairment losses on loans and advances

    (Loss) / profit before taxationTaxation(Loss) / profit for the year

    7,267,718 70,088,98513 (124,073,168) (46,515,199)

    (116,805,450) 23,573,7868 33,948,738 (6,750,394)

    (82,856,712) 16,823,392

    The income statement includes net exchange losses of 1,438,694 (20 07: gains 101,435) arising from the co nversion ofnon-Sterling profits or losses at an average rate for the year as opposed to the year end rate.The notes on pages 15 - 6 2 form part of these financial statements.

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    A N G L O I R I SH A S S E T F I N A N C E P L CBalance sheet 30 September 30 SeptemberAs at 30 September 2008 2008 2007

    Notes AssetsDerivative financial instruments 10 31,212,066 17,026,608Loans and advances to banks 11 14,332,222 228,001,352Loans and advances to customers 12 4,792,977,845 3,987,717,652Property, plant and equipment 15 16,962 28,552Current taxation 20,523,689 2,046,622Deferred taxation 16 1,892,351 800,057Other assets 17 16,529,170 14,917,022Prepayments and accrued income 114,263 226,231Total assets 4,877,598,568 4,250,764,096

    LiabilitiesLoans and borrowingsDerivative financial instrumentsOther liabilitiesAccruals and deferred incomeDeferred taxationSubordinated liabilities and other capital instrumentsTotal liabilities

    18 2,826,401,80610 87,221,30619 9,941

    53,27916 4,515,86020 1,725,158,275

    4,643,360,467

    2,240,952,72157,296,657

    55,546337,541

    5,532,3261,629,494,4923,933,669,283

    Share capitalRetained profitsShareholders' fundsTotal equity and liabilities

    21234,238,101

    4,877,598,568317,094,813

    4,250,764,096

    The notes on pages 15 -6 2 form part of these financial statements.

    Director Director

    Date: 05 March 2009

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    A N G L O I R IS H A S S E T F I N A N C E P L CS t a t e m e n t o f c h a n g e s i n e q u i t yFor the year ended 30 September 2008

    ShareCapital

    RetainedProfits

    Total

    Balance at 1 October 2006 220,000,000 80,271,421 300,271,421

    Profit for the year 16,823,392 16,823,392

    Balance at 30 September 2007 220,000,000 97,094,813 317,094,813

    Loss for the yearBalance at 30 September 2008 220,000,000

    (82,856,712) (82,856,712)14,238,101 234,238,101

    The notes on pages 1 5 -6 2 form part of these f inancial statements.

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    A N G L O I R I SH A S S E T F IN A N C E P L CCash f low statementFor the year ended 30 September 2008

    2008 2007Notes

    Cash flows from operating activitiesProfit before tax (116,805,450) 23,573.786Financing costs of subordinated liabilities and other capital instruments 123,795,370 89,275,409Other non-cash items 23 84,213,187 44,574,772

    91,203,107 157,423,967Changes in operating assets and liabilitiesNet increase in loans and advances to customers (890,112,163) (1,496,653,090)Net decrease in loans and advances to banks 575,962,791 673,887,528Net increase in derivative financial instruments 10,192,713 36,375,874Net increase in other assets (1,612,148) (10,480,200)Net decrease in other liabilities (45,605) (142,323)Exchange m ovements 111,979,077Net cash flows from operating activities before taxation (102,432,228) (639,588,244)

    Tax recovered/(paid) 13,375,180 (9,758,734)Net cash flows from operating a ctivities (89,057,048) (649,346,978)Cash flows from investing ac tivitiesPurchases of property, plant and equipment (1,110) -Disposals of property, plant and equipmen t - 9,337Net cash flows from investing activities (1,110) 9,337Cash flows from financing activitiesProceeds of equity share issues - 120,000,000Proceeds from issues of subordinated liabilities and other capital instruments - 347,375,000Coupon s pa id on subordinated liabilities and other capital instruments (140,163,327) (92,839,989)Net cash flows from financing activities (140,163,327) 374,535,011Net decrease in cash and cash equivalents (229,221,485) (274,802,630)Opening cash and cash equivalents 23 228,001,352 482,194,643Effects of exchange rate changes o n cash and cash equivalents 6,066,061 20,609,339Closing cash and cash eq uivalents 23 4,845,928 228,001,352

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    ANGL O IRISH ASSET FINANCE PLCNotes to the financial statementsAccounting policies1.1 Authorisation of financial statements and compliance with IFRSThe financial statements of the Company for the year ended 30 September 2008 were authorised for issue by the board ofdirectors and the balance sheet was signed on the board's behalf by Gordon Parker and Thomas W alsh onon 05 March 2009. The Company is a public limited Company incorporated and domiciled in England and Wales.The financial statements have been presented in accordance with International Accounting Standards and InternationalFinancial Reporting Standards (collectively 'IFRS') as adopted by the European Union and applied in acc ordancewith the Companies Act 1985, and as applicable at 30 September 2008.1.2 Basis of preparationThe financial stateme nts have been prepared under the historical cost convention, as modified by the revaluation of certainassets and liabilities to the extent required or permitted under accounting standards as set out in the relevant accountingpolicies. They are presented in Sterling.The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptionsthat affect the reported amounts of certain assets, liabilities, revenues and expenses, and disclosures o f contingentassets an d liabilities. Since m anagement's judgem ent involves m aking estimates conce rning the likelihood of futureevents, the actua l results could differ from those estimates. Some e stimation techniques involve significant amo unts ofmanage ment judgem ent, often in areas which are inherently uncertain. The estimation techniques which are consideredto be most com plex are in the areas of impairment of financial assets and the fair value of financial a ssets andliabilities. Further detail is provided in Note 1.19 of these Accoun ting Policies.The financial statements are prepared on a going concern basis, as Anglo Irish Bank Corporation Limited, theparent undertaking, has agreed to provide financial support to the Company as would be required to allow theto m eet its future obligations as they fall due for at least 16 months from the date of signing the balance sheetforeseeable future.1.3 Ado ption of new accounting standardsFrom 1 October 2007 the Company adopted the following standards:

    - IFRS 7 - Financial Instruments: Disclosures;- Amend ment to IAS 1 - Capital Disclosures;- Reclassification of Financial Assets - Amendme nts to IAS 39 Financial Instruments: Recognition and Measureme nt

    and IFRS 7 Financial Instruments: DisclosuresRecent amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments:Disclosures p ermit the reclassification of certain financial instruments from held for trading and available-for-salefinancial assets. The Com pany has not made any such reclassifications.1.4 Interest income and expense recognitionInterest income and expense are recognised in the income statement for all interest-bearing financial instrumentsusing the effective interest rate m ethod.The effective interest rate me thod is a method of ca lculating the amortised cost of a financial asset or liability and ofallocating the interest income or interest expense o ver the relevant period. The effective interest rate is the rate that exactlydiscounts the expected future cash paym ents or receipts through the expected life of the financial instrument or, whenappropriate, a shorter period, to the net carrying amount of the financial asset or financial l iability.

    ultimateCompanyand for the

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued1.4 Interest income and ex pense recognition continuedThe calculation includes all fees, transaction costs and other premiums and d iscounts that are an integral part of theeffective interest rate on the transaction.Once an impairment loss has been recognised on an individual asset, interest income is recognised using the rate ofinterest at which the estimated future cash flows were discounted in measuring impairment.1.5 Fee and commission incomeFees and co mmissions which are not an integral part of the effective interest rate are generally recognised on an accrualsbasis over the period that the service has been provided.Loan comm itment fees for loans that are likely to be drawn down are deferred (together with related direct costs) an drecognised as an adjustment to the effective interest rate on the loan once drawn.Comm itment fees in relation to facilities where drawdo wn is not probable are recognised over the term of the comm itment.1.6 Financial assetsFinancial assets are classified into the following categories: financial a ssets at fair value through profit or loss; loans andreceivables; and available-for-sale financial assets. Managem ent determines the classification of its investmen ts at initialrecognition.Financial assets at fair value through profit or lossThis category has two sub -categories; financial assets held for trading, an d those des ignated at fair value throughprofit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling inthe short term or if so designated by m anagement. The se assets are carried at fair va lue.Derivatives are classified as he ld for trading unless they are designated as hedges. Interest on financial as setsat fair value through profit a nd loss held on own account is included in net interest income. Other gains andlosses arising from changes in fair value are included directly in the income statement within trading losses/profits.Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable paymen ts that are not quoted in anactive market. They arise when the Company provides money to a counterparty w ith no intention of trading the receivable.Loans and receivables are initially recognised at fair value, including direct and incremen tal costs, and are subsequentlycarried on an amortised cost ba sis. The best evidence of the fair value at initial recognition is the transaction price (i.e. thefair value of the consideration given or received).Available-for-sale financial assetsAvailable-for-sale financial assets are those intended to be held for an indefinite period of time, which may be sold inresponse to needs for liquidity or cha nges in interest rates, exchange rates, as set p rices or other factors.Available-for-sale financial assets are initially recognised at fair value, plus transaction costs, and are subsequentlycarried at fair value with gains and losses recognised as a separate com ponent of shareholders' equity.In the current year and previous year, w ith the exception of derivatives, a ll financial assets are classified as loans andreceivables.

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued1.7 Financial liabilitiesFinancial l iabilities are initially recognised at fair value, being their issue proceeds (fair value of consideration received)net of transaction costs incurred. Financial l iabilities are su bsequently measured at either amortised co st or fair valuethrough profit or loss. All l iabilities, other than those designated at fair value through profit or loss, are subsequentlycarried at amortised cost. Any difference between proceeds net of transaction costs and the redemption value isrecognised in the income statement using the effective interest rate method.A liability may be designated at fair value through profit or loss whe n:

    a) it eliminates or significantly reduces a measurement or recognition inconsistency, 'an accounting mismatch', thatwould o therwise arise from measuring assets and liabilities or recognising the gains and losses on them ona different basis; or

    b) a group of financial l iabilities is managed and its performance is evaluated on a fair valuebasis, in accordance with a documented risk management or investment strategy; or

    c) it contains one or more embedded derivatives, the significantly modify the cashflows arising from the instrumentand would otherwise need to be accounted for separately.

    The classification of an instrument as a financial l iability or an equity instrument is dependent on the substan ce of thecontractual arrangem ent. Instruments which carry a contractual obligation to deliver cash or another financial assetto another entity are classified as financial l iabilities. Interest on these instruments are recognised in the incomestatement as an exp ense. Other gains and losses arising from changes in fair value are included directly in theincome stateme nt within trading losses/profits.Preference shares and other subordinated capital instruments are classified as financial l iabilities if coupon paymentsare not discretionary. Distributions on these instruments are recognised in the income statement as interest expen seusing the effective interest rate method.

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued1.8 Impairment of financial assetsProvision is made for impairment of financial assets to reflect the losses inherent in those assets at the b alancesheet date.The Com pany assesses at each balance sheet date whether there is objective evidence that a financial asset or aportfolio of financial assets is impaired. A financial asset or portfolio of financial assets is impaired and impairmentlosses are incurred if, and only if, there is objective evidence o f impairment as a result of on e or more loss eventsthat occurred after the initial recognition of the asset ('a loss event') and that loss event (or events) has had animpact such that the estimated present value of future cash flows is less than the current carrying va lue of thefinancial asset, or portfolio of financial assets, and can be reliably m easured.Objective evidence that a financial asset, or a portfolio of financial assets, is impaired includes observable data thatcomes to the attention of the Company about the following loss events:

    i. significant financial difficulty of the issuer or obligor;ii. a breach of contract, such as a default or delinquency in interest or principal payments;iii. the granting to the borrower of a concession, for economic or legal reasons relating to the borrower's financial

    difficulty that the Company w ould not otherwise consider;iv. it becomes probable that the borrower will enter bankruptcy or other financial reorganisation;v. the disappearance of an active market for that financial asset because of financial difficulties; or

    vi. observable data indicating that there is a measurable decrease in the estimated future cash flows from aportfolio of financial assets since the initial recognition of those assets, a lthough the decrease cannot yetbe identified with the individual financial assets in the portfolio, including:- adverse changes in the payment status of borrowers in the portfolio, or- national or local economic conditions that correlate with defaults on the assets in the portfolio.

    The Company first assesses wh ether ob jective evidence of impairment exists individually for financial assets that areindividually significant, and individually or collectively for financial assets that are not individually significant. If theCompany determines that no objective evidence of impairment exists for an individually assessed financial assetwhether significant or not, it includes that asset in a group of financial assets with similar credit risk characteristicsand includes these performing assets under the co llective 'incurred but not reported' ('IBNR') assessments.An IBNR impairment provision represents an interim step pending the identification of impairment losses on a nindividual asset in a group of financial assets. As soon as information is available that specifically identifies losseson individually impaired assets in a group, those assets are removed from the group, A ssets that are individuallyassessed for impairment an d for which an impairment loss is, or continues to be, recognised are not included underthe collective assessment of impairment.

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial s tatemen ts continued1.8 Impairm ent o f financial assets continuedFor loans and receivables, the am ount of impairment loss is measured as the difference between the asset's carryingamount a nd the present value of estimated future cash flows discounted at the asset's original effective interest rate.If a loan has a variable interest rate, the discount rate for mea suring any impairment loss is the current effectiveinterest rate determined under the contract. The am ount of the loss is recognised using an allowance accoun t and theamoun t of the loss is included in the income statement.The c alculation of the present va lue of the estimated future cash flows of a col ateral sed financial asset reflects thecash flows that may result from foreclosure, less costs for obtaining and selling the collateral, whether or not foreclosureis probable.Wh en a borrower fails to m ake a contractually due paymen t of interest or principal but the Company believes thatimpairment is not ap propriate on the b asis of the level of the security / collateral available and / or the stage of collectionsof amou nts owed to the Co mpan y, a loan is classified as past due but not impaired. In this instance the entire exposureis reported as past due but not impaired, rather than just the amount in arrears.Renegotiated loans are those loans and receivables outstanding at the reporting date whose terms h ave beenrenegotiated during the financial year, resulting in an upgrade from impaired to performing status. This is based onsubsequent good performance and/or an improvement in the profile of the borrower.If, in a subsequen t period, the amou nt of the impairment loss decreases and the decrease can be related o bjectivelyto an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed byadjusting the allowance acco unt. The amount of the reversal is recognised in the income statement, to the extent thatthe carrying value of the asset do es not exceed its amortised cost at the reversal date.Whe n a loan is uncollectible, it is written off against the related allowance for loan impairment. Such loans are writtenoff after all the necessary procedures have been completed and the amount of the loss has been determined.Subsequent recoveries of amounts previously written off decrease the am ount of the allowance for loan impairment inthe income statement.

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued1.9 Derivative financial instruments and hedge accountingDerivativesDerivative instruments, including sw aps, futures, forward foreign exchange contracts, forward rate agreements and options,are used for hedging and trading purposes.

    Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and aresubsequently remeasured at fair value. Fair values are obtained from quoted market prices in active markets includingrecent market transactions, and valuation techniques including discounted cash flow m odels and options pricing m odels, asappropriate. A ll derivatives are carried as assets when fair value is positive an d as liabilities whe n fair value is negative.Derivatives are classified as held for trading unless they are designated as hed ges.The best evidence of the fair va lue of a derivative at initial recognition is the transaction price (i.e. the fair value of theconsideration given or received) unless the fair value of that instrument is evidenced by comparison with other ob servablecurrent m arket transactions in the same instrument (i.e. without modification or repackaging) or based on a valuationtechnique w hose variables include only data from observable markets.Hedge accountingThe method of recognising the resulting fair value g ain or loss depends o n whether the d erivative is designa ted as ahedging instrument and, the nature of the item being hedged. Wh en transactions m eet the criteria specified in IAS 39 theCompany applies fair value hedge accounting.The Company documents, at the inception of the transaction, the relationship between hedging instruments and hedgeditems, as well as its risk ma nagement objective and strategy for undertaking various hed ge transactions. The Companyalso docum ents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that areused in hedging transactions are highly effective in offsetting chang es in fair va lues of h edged items.Fair value hedge accountingChange s in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the incomestatement, together w ith any changes in the fair value of the hedged asset or liability that are attributable to thehedged risk.If the hedg e no longer m eets the criteria for hedge accounting, the fair value h edge adjustment cumulativelymade to the carrying am ount of the hedged item is, for items carried at amortised cos t, amortised to the income statementover the period to maturity of the previously designated h edge relationship using the effective rate m ethod.Derivatives that do not qualify for hedge accountingCertain derivative instruments entered into as economic hedges m ay not qualify for hed ge accounting. These derivativesare classified as held for trading. Changes in the fair value of any derivative that does not qualify for hed ge accountingare recognised immediately in the income statement.

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued1.10 Collateral and NettingCollateralThe Co mpany receives collateral in the form of cash in respect of credit instruments, such as derivatives, in orderto reduce credit risk. Collateral received in the form of cash is recogn ised on ba lance sheet with a corresponding liability.Any interest payable or receivable arising is recorded as interest expense or interest income respectively.NettingFinancial assets and liabilities are offset and the net amount reported in the balance sheet if, and only if, there isa currently enforceable legal right to offset the recognised am ounts and there is an intention to settle on a netbasis, or to realise the asset and settle the liability simultaneously.1.11 Property, plant and equipmentProperty, plant and equipme nt are stated at cost less accumulated depreciation and provisions for impairment, if any.Additions and subsequen t expenditure are capitalised only to the extent that they enhan ce the future econo mic b enefitsexpected to be d erived from the asset. Property, plant and equipment are depreciated on a straight-line basis over theirestimated useful e conom ic lives as follows:Fixtures and fittings 12.5% to 25% per annumMotor vehicles 20% per annumThe useful l ives and residual values of property, plant and equipment are reviewed and adjusted, if appropriate, at eachbalance sheet date.Assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstancesindicate that the carrying amoun t may not be recoverable. A n asset's carrying amount is written dow n imm ediately to itsrecoverable am ount if the asset's carrying am ount is greater than its estimated recoverable amoun t. The recoverableamount of an asset is the higher of its fair value less costs to sell and its value in use. Gains and losses on d isposal ofproperty, plant and equipm ent are included in the income statement in the period of derecognition.1.12 Foreign currency translationFunctional and presentational currencyThe financial statem ents are presented in Sterling, which is the Company's functional and p resentational currency.Transactions and balancesTransactions in foreign cu rrencies are initially recorded at the functional currency rate ruling at the date of thetransaction. M onetary a ssets and liabilities denominated in foreign currencies are retranslated at the functionalcurrency rate of excha nge ruling at the balance sheet date. All differences are recognised in the incomestatement. Foreign exchange gains and losses resulting from the settlement of such transactions and from theretranslation at period end excha nge rates of monetary assets and liabilities denominated in foreign currencies arerecognised in the income statement. Non-monetary items that are measured in terms of historical cost in a foreigncurrency are translated using the exchange rates as at the dates of the initial transactions. Non-m onetary itemsmeasured at fair value in the foreign currency are translated using the exchange rates at the date when the fair valuewas determined.

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued1.13 ProvisionsProvisions are recognised for present legal or constructive obligations arising as conse quences of past eventswhere it is probable that a transfer of econom ic benefits will be necessary to settle the obligation, and it can bereliably estimated.

    Whe n the effect is material, provisions are determined by discounting e xpected future ca sh flows at a pre-tax ratethat reflects current market assessm ents o f the time value of money and, where a ppropriate, the risks specific to theliability.Payments are deducted from the present value of the provision and interest at a relevant discount rate is chargedannually to interest expense. C hanges in the present value of the liability as a result of movements in interest rates areincluded in other financial income, T he present value of provisions are included in other liabilities.Legal claims an d other contingenciesProvisions are made for legal claims w here the Com pany has a present legal or constructive obligation as a result of pastevents a nd it is more likely than not that an outflow of resources will be required to settle the obligation and the amountcan be reasonably estimated.Contingent liabilities are possible o bligations whose existence will be confirmed only by uncertain future events givingrise to present obligations where the transfer of econom ic benefit is uncertain or ca nnot be reliably m easured. Contingentliabilities are not recognised but are d isclosed in the notes to the financial statements unless they are remote.1.14 Taxation (current and deferred)Current tax is the expe cted tax payable (shown as a liability) or the expected tax receivable (shown as an asset) on thetaxable income for the year adjusted for cha nges to previous years and is calculated based on the applicable taxlaw in the United Kingdom. Deferred tax is provided u sing the balance sheet liability method on temporary differencesarising between the tax ba ses of asse ts and liabilities for taxation purposes a nd their carrying am ounts in thefinancial statements. Current ^nd deferred taxe s are determined using tax rates based on legislation enacted orsubstantively enacted at the balance sheet date and expected to apply whe n the related tax asset is realised or therelated tax liability is settled.Deferred tax assets are recogn ised where it is probable that future taxa ble profits will be available a gainst wh ichtemporary differences will be util ised.Current an d deferred taxes are recognised in the income statement in the period in which the profits or losses ariseexcept to the extent that they relate to items recognised directly in equity, in which case taxes are also recog nised inequity.Deferred and current tax assets and liabilities are only offset w here there is both the legal right and intention to settle ona net basis, or to realise the asset and settle the liability simultaneously.

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    ANGLO IRISH ASSET FINANCE PLCNotes to th e financial statements continued1.15 LeasesCompany as lessorLeasing and instalment credit agreements with customers are classified as finance leases if the lease agreem entstransfer substantially all the risks and rewards of ownership, with or without ultimate legal title. Assets that are heldsubject to finance lease, or instalment credit agreements are recorded as receivables based on the present va lueof the lease p aymen ts, discounted at the rate of interest implicit in the lease, less any provisions for ba d anddoubtful rentals. The difference between the total payments receivable under the lease and the present value ofthe receivable is recognised as unearned finance income, which is allocated to accounting periods under thepre-tax net investment m ethod to reflect a constant periodic rate of return. Impairment reviews on finance leases arecarried out as per impairment reviews of loans and receivables (Note 1.8 and 1 .19 of Accounting policies).Assets leased to customers are classified as operating leases if the tease agreements do not transfer substantially allthe risks and rewards of ownership. The leased assets are included within property, plant and equipment on theCompany's balance sheet and depreciation is provided on the depreciable amount of these assets on a systematic basisover their e stimated useful l ives. Rental income, including the effect of lease incentives, is recognised on a straightline basis over the non cancellable term of the lease.Company as lesseeOperating lease rentals payable and related lease incentives receivable are recognised as an expense in the incomestatement on a straight-line b asis over the lease term unless another systema tic basis is more appropriate.1.16 Segmental reportingBusiness seg ments are distinguishable com ponents of the Company that provide products or services that are subject torisks and rewards that are different to those of other business segm ents. Geographical segments provide products orservices within a particular econo mic environment that is subject to risks and rewards that are different tothose of components operating in other economic environments.1.17 Cash and cash equivalentsFor the purposes of the cash flow statement, cash comprises cash on hand and demand deposits. Cash equivalentscomprise highly liquid investments that are convertible into cash with an insignificant risk of changes in value andwith original m aturities of less than three months.1.18 Financial guaranteesA financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holderfor a loss it incurs be cause the g uaranteed party fails to meet a contractual obligation or to make payment when due inaccordance with the original or modified terms of a debt instrument.Financial guarantees are given to banks, financial institutions and other bodies on beh alf of customers to secure loans,and other lending facilities and to other parties in connection w ith the performance of customers under obligationsrelated to contracts, advance payments made by other parties, tenders, retentions and the payment of import duties andtaxes.Financial guarantees are initially recognised in the financial statements at fair value on the date that the guaranteewas g iven. Subsequen t to initial recognition, the Compan y's liabilities under such guarantees are measu red at the higherof the initial measurement, less amortisation calculated to recognise in the income statement the fee income earned overthe period, an d the best estimate of the expenditure required to settle any financial obligation arising as a result ofthe guarantees at the balance sheet date.

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statem ents continued1.19 Significant accounting estimates and judgementsThe reported results of the Company are sensitive to the accounting policies, assumptions and estimates that underlie th epreparation of its financial stateme nts. IFRS require the directors, in preparing the company's financial statements, toselect suitable accounting policies, apply them consistently and m ake judgem ents an d estimates that are reasonable andprudent.The judgements and estimates involved in the Company's accounting policies that are considered by the directors to bethe most important to the portrayal of the Compan y's financial condition and that have a significant risk of cau sing amaterial adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.The use of estimates, assum ptions or models that differ from those ad opted by the Com pany could affect its reportedresults.Loan impainventThe estimation of potential loan losses is inherently uncertain and depends upon m any factors. On an ongoing basispotential issues are identified promptly as a result of individual loans being regularly m onitored. At least every six monthsthe Company through the auspices of the Group Risk function of Anglo Irish B ank Corporation Limited, the ultimate parentof the Company, reviews its loan portfolios to assess whether there is objective e vidence of impairment. If there isobjective evidence that a loan is impaired, a provision is recognised equ ating to the am ount by which the book value ofthe loan exceeds the present value of its expected future cas h flows. P rovisions are calculated on an individual basiswith reference to expected future cash flows including those arising from the realisation of collateral. Thedetermination of these provisions often requires the exercise of considerable judgem ent by management involving matterssuch as future economic conditions and the resulting trading performance of the customer and the value of co llateral,for which there m ay not be a readily accessible market. As a result these provisions can be subject to significantvariation as time progresses and the circumstances become clearer. The methodology and assumptions used forestimating both the amount an d timing of future cash flows are reviewed regularly to reduce any differences betweenloss estimates and actual loss experience.An additional incurred but not reported ('IBNR') collective provision is required to cover losses inherent in the loan bookwhere there is objective evidence to sug gest that it contains impaired loans but the individual impaired loans cannotyet be identified. This p rovision takes acco unt of observable data indicating that there is a m easurable decrease in theestimated future cash flows from a group of loans with similar credit risk characteristics, although the decrease cannotyet be identified within the individual loans in the group.This provision is calculated by ap plying incurred loss factors to groups of loans sharing com mon risk characteristics.Loss factors are determ ined by historical loan loss experience as adjusted for current observable m arket data.Adjustments reflect the impact of current conditions that did not affect the yea rs o n which the historical loss experienceis based and remove the effects of conditions in the historical period that do not exist currently.The future credit quality of loan portfolios a gainst which an IBNR collective p rovision is applied is subject touncertainties that could cause actual credit losses to differ materially from reported loan impairment provisions. Theseuncertainties include factors such as local and international econ omic co nditions, borrower specific factors, industrytrends, interest rates, unemployment levels and other external factors.

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued1.19 Accounting estimates and judgemen ts continuedFair value of financial instrumentsFair value is the amount for which an asset could be exchange d, or a liability settled, between knowledgeable and will ingparties in an arm's length transaction. Fair values are determined by reference to observable market prices where theseare available and are reliable. W here representative market prices are not available or are unreliable, fair va lues aredetermined by using valuation techniques which refer to observable market data. These include prices obtained fromindependent third party pricing sen/ice providers, comparisons with similar financial instruments for which m arketobservable prices exist, discounted cash flow analyses and other valuation techniques commonly used by marketparticipants.Fair value of financial instruments (continued)Where non-observable market data is used in valuations, any resulting difference between transaction price andvaluation is deferred. The deferred day one profit or loss is either am ortised over the life of the transaction, deferreduntil the instrument's fair value can be determined using market observable inputs, or realised through settlement,

    depending on the nature of the instrument and a vailability of m arket observable inputs. The accuracy of fair valuecalculations could be affected by unexpected m arket movements when compared to actual outcomes.Expected life of lendingIAS 39 requires interest and arrangement fees which form an integral part of the return ea rned from len ding to bemeasured using the effective interest rate method. The effective interest rate is the rate that exactly discoun ts estimatedfuture cash receipts and paym ents through the expected life of the loan or, when appropriate, a shorter period to thenet carrying amount of the loan.Manage ment uses judgem ent to estimate the expected life of each loan and hence the expected cash flows relatingto it. The accuracy of the effective interest rate would therefore be affected by unexpected m arket movements resultingin altered customer b ehaviour and differences in the models used when com pared to actual outcomes.

    TaxationThe taxation ch arge accounts for amo unts due to fiscal authorities in the United Kingdom, and includes e stimatesbased on a judgemen t of future profits and the application of law and practice in certain case s in order to d eterminethe quantification of any liabilities arising. In arriving at such estima tes, mana gement assesses the relative m eritsand risks of tax treatments a ssumed, taking into account statutory, judicial and regulatory guidance and , whereappropriate, external a dvice. Whe re the final tax outcome is different from the amounts that are currently recorded,such differences will impact upon the current and deferred tax amounts in the period in which such determinationis made.

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued1.20 Prospective accounting changesThe C ompany has not applied the following new standards, amendm ents to standards and interpretations (IFRICs)that have been adopted by the International Accounting Standards B oard which would be applicable to the Com panywith an effective date after the date of these financial statements :IFRS 8 - Operating Segments;Amendment to IAS 1 - Presentation of Financial Statements;Amendment to IAS 23 - Borrowing Costs;Amendm ent to IAS 32 - Financial Instruments: Presentation;Amendment to IAS 39 - Financial Instruments: Recognition and Measurement - Eligible Hedged Items;IFR1C Interpretation 18 - Transfer of Assets from CustomersThese w ill be adopted in future years an d are not expected to have a m aterial impact on the Company's results orfinancial statements.

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continuedSegmental reportingGeographical segments 2008

    UK

    MainlandEurope

    Rest of

    World

    Total

    Revenue from external customers 327,025,356 74,110,399 982,565 402,118,320(Loss)/profit before tax (a) (b) (c) (122,456,342) 5,710,991 (60,099) (116,805,450)External assets 3,626,141,887 1,227,296,309 7,631,202 4,861,069,398External liabilities (c) 868,750,711 948,207,950 - 1,816,958,661Additional information:Impairment losses on loans andadvances (including IBNR)

    117,774,660 6,298,5082007

    - 124,073,168

    UK

    MainlandEurope

    Rest ofWorld

    Total

    Revenue from external customers 245,223,470 48,857,079 1,641,561 295,722,110Profit / (loss) before tax (a) (b) 27,194,615 (4,307,272) 686,443 23,573,786External assets 3,326,767,100 889,580,979 19,498,995 4,235,847,074

    External liabilities 831,985,622 860,730,940 - 1,692,716,562Additional information:Impairment losses on loans andadvances (including IBNR)

    43,780,201 2,734,998 - 46,515,199

    Revenu e includes interest and similar income, fee and comm ission income, dealing profits and other operating income.The g eographical segments are based primarily on the currency of the related assets.(a) All subordinated liabilities and other capital instruments are included under the relevant currency of issue. Thus Eurobased subordinated liabilities and capital instruments are analysed against mainland Europe, whereas Sterling basedsubordinated liabilities and capital instruments are analysed against the United K ingdom.(b) Income generated from shareholders funds is allocated against the United K ingdom.(c) All items related to the Japanese Yen financing arrangement have been allocated against the United Kingdom.(SeeNote 5).The Company's primary segment is its sole business segment, namely the provision of commercial finance to businessesand individuals.

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued

    3 Interest and similar income

    Interest on loans and advances to banksInterest on loans and advances to customersFinance leasing and hire purchase incomeOther interest income

    4 Interest and similar expenses

    Interest on subordinated liabilities and other capital instrumentsInterest on dep osits from banksInterest on intercompany balances

    5 Trading losses

    Hedge ineffectivenessForeign exchange contractsForeign exchan ge revaluation on foreign currency liabilities

    2008 2007

    9,380,658 16.097.052388,324,607 273,996,895

    1,458,156 4,460,001- 31.999399,163,421 294,585.947

    2008 2007

    123,795,370 89,275,4097,563 -

    163,157,274 126,476,605286,960,207 215,752,014

    2008 2007

    893,371 (403,782)(24,399,377) -(76,401.928) -(99,907,934) (403,782)

    Foreign exchan ge contracts a nd revaluation on foreign currency liabilities represent the impact of a J apaneseYen financing arrangement, e ntered into in May 2008 to enable the parent com pany and therefore the ultimateparent company to avail of low cost financing on an after tax basis at Yen interest rates. Th e losses to theCompany on foreign exchange o n this financing transaction are reduced by other foreign exchange ga ins in theperiod in various UK group com panies of the ultimate parent, Ang lo Irish Bank Corporation Limited, ("UK group")of 76,401,928 and the net remaining loss to the UK group of 24,399,377 is more than eliminated by reduced taxcharges, ge nerating an overall after tax profit for UK group of 4,909,509 from the Japa nese Yen financingarrangement.

    6 Administrative expenses 2008 2007

    Staff costs:Wages and salaries 4,953,318 5,343,841Pension costs 578,873 449,664Social welfare costs 583,297 591.182Other staff costs 23.413 21,944

    6,138,901 6.406.631Other administrative costs 1,824.512 3,042,016

    7,963,413 9.448.647

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued

    6 Adm inistrative Expenses continuedKey managem ent personnel that are directors of the Company are remunerated b y the ultimate parent compa ny, AngloIrish Bank Corporation Limited. These directors are full time employees of Anglo Irish Bank Corporation L imited andreceive no additional remuneration for their services to the Company. T he staff costs reflected above are allocated to theCompan y based on the Com pany's share of Anglo Irish Bank Corporation Limited's total loan base in the UnitedKingdom. The Company does not directly employ any staff.

    7 Auditor's remuneration (including VAT) 2008 2007 Audit and assurance servicesStatutory audit 69,325 45,825

    8 Taxation 2008 2007_ _

    Corporation tax-cu rren t year (32,916,543) 7,250,492- prior years 1,064,296 44,760

    (31,852,247) 7,295,252Deferred tax-cur ren t year (1,149,755) (514,249)- prior years (946.736) (30,609)(33,948,738) 6,750,394Effective tax rate 29% 29%The deferred tax credit arising from the origination and reversal of temporary differences was as follows:Leased assets (1,149,755) (514,249)

    The reconciliation of total tax on profits o n ordinary activities at the standard Corporation tax rate to the C ompan y'sactual total tax charge is analysed as follows:(Loss) / profit before taxation (116,805,450) 23,573,786(Loss) / profit on ordinary activities before taxation at 29% (2007: 30%) (33,873,581) 7,072,136Effects of:Non deductible expenses (946) 2,661Effect of reduction in tax rate 39,228 (338,198)Losses carried back (241,378)Other 10,379 (356)Prior year adjustments - Current Tax 1,064,296 44,76 0Prior year adjustments - Deferred Tax (946,736) (30,609)Total taxation (33,948,738) 6,750,394

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued

    9 IAS 19 pension disclosuresThe total pension c osts allocated to the Company for the year were 57 8,873 (2007: 449,664), which relate to theCompan y's share of defined contribution pension costs for notionally allocated employees as described in Note 6.

    10 Derivative financial instrumentsDerivative financial instruments derive their value from the price of underlying variables such as interest rates, foreignexchange rates, credit spreads or equity and other indices. Derivatives enable users to efficiently reduce or altermarket risks. In the normal course of business, the Company is party to various types of financial instruments used toreduce its own exposure to fluctuations in interest rates.With the e xception of designated hedging derivatives, as defined by IAS 39, derivatives are treated as held for trading.The held for trading classification includes economic hedges w hich do not meet the strict qualifying criteria forhedge accounting.The notional am ount of a derivative contract does not necessarily represent the Com pany's real exposure to creditrisk, which is limited to the current replacement cost o f contracts with a positive fair value to the Company shouldthe counterparty default. To reduce credit risk the Company uses a variety of credit enhancement technique ssuch as master ne tting agreements and collateral support agreem ents, where cash security is providedagainst the exposure. Derivatives are carried at fair value and show n in the balance she et as separatetotals of assets and liabilities. Fair values are obtained from quoted m arket prices in active markets and usingvaluation technique s including discounted cash flows. Derivative assets and liabilities on different transactionsare only netted if a legal right of offset exists and the cash flows are intended to be settled on a net basis.Details of the objectives, policies and strategies arising from the Com pany's use o f financial instruments, includingderivative financial instruments, are presented in Note 24 on risk management and control.The following table overleaf presents the notional and fair value am ounts of derivative financial instruments, analysedby product and purpose.

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continuedDerivative financial instruments continued

    2008Contractnotional Fair valuesamo unt Assets Liabilities

    Derivatives held for tradingCross currency swaps 400,000,000 - 24,399,377Derivatives held for hedging: designated fair value hedgesInterest rate swaps 1,748,360,000 31,212,066 62,821,929Total derivative financial instruments 2,148,360,000 31,212,066 87,221,306

    2007Contractnotional Fair valuesamount Assets Liabilities

    Derivatives held for tradingCross currency swapsDerivatives held for hedging: designated fair value hedgesInterest rate swaps 1,636,160,000 17.026,608 57,296,657Total derivative financial instruments 1,636,160,000 17,026,608 57,296,657

    The a bove cross currency swaps have been entered into as part of a Japanese Yen financing arrangement (see Note 5).The above interest rate swaps have been entered into in order to convert the interest rate payable on the variousSubordinated Liabilities and other C apital Instruments to 3 month LIBOR / EURIBOR as applicable. This enables th ematching of interest earned o n assets with these liabilites an d thus eliminates interest rate risk. Further d etails are givenin Note 20.Hedging activities:The Company uses derivatives for hedging purposes to mitigate the interest rate risk exposure arising from itsissuance of its subordinated liabilities. For accounting purposes the Com pany uses derivatives which qualify as fair valuehedges.Fair value hedges:The Company uses interest rate swaps to hedge the interest rate risk resulting from potential changes in the fair valueof certain liabilities. Hedged liabilities include subordinated liabilities issued.For the year ended 30 September 2008 the Company recognised a net gain of 15,030,320 (2007: loss of 40,932,880)in dealing profits in respect of fair value movements on hed ging instruments de signated as fair value hedge s.The corresponding net loss attributable to the hedged risk on the hedged items, also recognised in tradinglosses was 14,136,948 (2007: gain 40,529,099).

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued

    11 Loans and advances to banks

    Placements with banks

    2008

    14,332,222

    2007

    228,001,352

    The externa l ratings profile of loans and advances to banks is as follows:

    A A A / A AABBB+ / BBB / BBB-Total

    20084,845,826

    2007217,369,859

    9,486,396 1 0,631,49314,332,222 228,001,352

    12 Loans and advances to customers

    Loans and advances to customersAmounts receivable under finance leasesAmounts receivable under hire purchase contracts

    Provisions for impairment (Note 13)

    2008

    4,914,691,44110,427,36212,909,608

    2007

    3,997,315,39412,941,07037,659,784

    4,938,028,411 4,047,916,248(145,050,566) (60,198,596)

    4,792,977,845 3,987,717,652Loans pledged as collateralLoans and ad vances to customers include loans of 41,914,722 (2007: nil) which have been transferred toAnglo Irish Covered Bonds L LP, a limited liability partnership in which the Company is a partner. The transferredloans secure bonds issued by the UK Branch of Anglo Irish Bank Corporation Limited under its 5bn covered bondprogramme. T he loans remain on the Com pany's balance sheet as the Company retains substantially all of the risksand rewards relating to them.Risk concentrations

    United KingdomMainland EuropeLoans secured on real estate

    2008

    3,543,945,5371,199,489,3124,743,434,849

    % o ftotal loans

    2007

    74% 3,073,592,89125% 793,822,80099% 3,867,415,691

    % o ftotal loans

    77%20 %97%"

    Other secured 49,542,996Total loans and advances to customers 4,792,977,845

    1% 120,301,961100% 3,987,717,652

    3%100%

    The analysis shows risk concentrations based o n the geographic location of the secured real estate.

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued

    12 Loans and advances to customers continuedAsset qualityThe Com pany m onitors lending a sset quality on an ongoing basis using the rating categoriesoutlined below. These ratings provide a common and consistent framework for aggregating and comparing exposuresacross all lending portfolios. The categories are as follows:High qualityHigh quality ratings apply to exposures of strong financial standing that ha ve an excellent repayment experience.These exposures are considered very low risk.Good qualityGood quality ratings apply to exposures that are performing as expected and are of soun d financial standing.These exposures are con sidered low to moderate risk.Satisfactory qualityThis rating applies to exposures that continue to perform as expected satisfactorily, but are subject to closer monitoring.Lower quality but not past due nor impairedThis rating applies to exposures that require increased m anagement attention to prevent any deterioration in assetquality. No evidence of specific impairment exists.Past due but not impairedThese are loans and rece ivables where the contractual interest or principal payments are past due but where thereis no objective evidence of impairment due to the level of collateral and/or personal recourse available to theCompany.Impaired loansLoans are classified as impaired and impairment losses are incurred if, and only if, there is objective evidence ofimpairment as a result of one or more loss events that occurred after the initial recognition of the loan. The loan isimpaired if that loss event (or events) has an impact such that the estimated present value of future cashflow isless than the current carrying va lue and can be reliably measured.

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued

    12 Loans and advances to customers continuedCredit grading of lending assets

    High qualityGood qualitySatisfactory qualityLower quality but notpast due nor impairedTotal nei ther impai rednor past duePast due but notimpairedImpaired loansTotal loans

    Commercial

    94,764,0481,818,428,604

    416,704,484290,365,426

    2,620,262,562143,857,82728,252,373

    2,792,372,762

    BusinessBanking

    30,778,273

    2008Residential

    1,160.997,357125,065,818179,011,908

    Other

    325,521,08625,132,00019,698,964

    Total

    94,764,0483,335,725,320

    566,902,302489,076,298

    30,778,273 1,465,075,083 370,352,050 4,486,467,968103,375,682

    -_ 168,827,82530,778,273 1,737,278,590

    2,653,5994,593,137

    249,887,108201,673,335

    377,598,786 4,938,028,411

    2007

    High q ualityGood qualitySatisfactory qualityLower quality but notpast due nor impairedTotal neither impairednor past duePast due but notimpairedImpaired loansTotal loans

    Commercial

    57,687,5772,127,463,437

    4,607,33811,289,532

    2,201,047,88442,557,97717,472,431

    2,261,078,292

    BusinessBanking

    43,795,462

    Residential

    1,188,129,98620,982,32819.120.280

    43,795,462 1,228,232,59420,327.39270,276,624

    Other

    385,274,008

    Total

    11,451,82327,480,053

    57,687,5773.744,662,893

    25,589,66630,409,812

    385,274,008 3,858,349,94874,337,192

    115,229,10843,795,462 1,318,836,610 424,205,884 4,047,916,248

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued

    13 Provisions for impairment

    At beginning of yearCharge a gainst profits specificCharge against profits - collectiveUnwind of discountWrite-offsRecoveries of previous write-offsExchange rate movementsAt end of year

    2008 2007

    60,198,596 15,596,08257,573,168 41,630,25966,500,000 4,884,940124,073,168 46,515,199(4,795,676) (1,872,543)

    (34,946,158) (82,872)41,447 19,811

    479,189 22,919145.050,566 60,198,596

    Specific 67,875,278 50,002,496Collective 77,175,288 10,196,100Total provision 145,050.566 60,198,596Impaired loans 201,673,335 115,229,108The u nwind of discount represents interest income earned on the performing element of impaired loans and advan ces.

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    ANGLO IRISH ASSET FINANCE PL CNotes to the financial statements continued

    13 Provisions for impairment continued

    2008Commercial Business Residential Other Total

    Banking At beginning of year 7,661,569 113,547 23,924,854 28,498,626 60,198,596

    Charge against profits - specific 12,767,083 - 43,379,850 1,426,235 57,573,168- collective 38,426,909 - 26,801,347 1,271,744 66,500,000

    Write-offs (1,690,986) - (9,403,669) (23,851,503) (34,946,158)Recoveries of previous write-offs 32,159 - 9,288 - 41,447Unwind of discount (797,127) - (3,992,392) (6,157) (4,795,676)Exchange movements 277,290 - 192,767 9,132 479,189At end of year 56,676,897 113,547 80,912,045 7,348,077 145,050,566Specific 12,155,803 50,680,846 5,038,628 67,875,278Collective 44,521,094 113,547 30,231,199 2,309,449 77,175,288Total provision 56,676,897 113,547 80,912,045 7,348,077 145,050,566

    2007Commercial Business Residential Other Total

    Banking

    At beginning of year 3,910,343 58,891 8,616,347 3,010,501 15,596,082Charge against profits - specific 951,283 - 14,853,507 25,825,469 41,630,259

    - collective 2,786,868 54,400 1,550,884 492,788 4,884,940

    Write-offs - - (82,872) - (82,872)Recoveries of previous write-offs - - 19,811 - 19,811Unwind of discount - - (1,040,099) (832,444) (1,872,543)Exchange movements 13,075 25 6 7,276 2,312 22,919At end of year 7,661,569 113,547 23,924,854 28,498,626 60,198,596Specific 1,844,674 20,687,769 27,470,053 50,002,496Collective 5,816,895 113,547 3,237,085 1,028,573 10,196,100Total Provision 7,661,569 113,547 23,924,854 28,498,626 60,198,596

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued

    14 LeasingLoans and adva nces to customers include finance lease receivables (including hire purchase agreem ents), analysed byremaining maturity as follows:

    2008Gross investment in finance leases:Three months or lessOne year or less but over three monthsFive years or less but over one yearUnearned future income on finance leasesNet investment in finance leasesPresent value of minimum lease payments receivable:Three months or lessOne year or less but over three monthsFive years or less but over one yearPresent value of minimum payments receivableProvision for uncollectable minimum lease payments receivable*

    5,614,9687,696,97710,625,50823,937,453

    (600,483)

    * Included in provisions for impairment on loans and a dvances to customers (Note 13).There are no unguaranteed residual values accruing to the benefit of the Company (2007: Nil).

    15 Property, plant & equipment

    Cost or valuat ionAt 1 October 2006AdditionsDisposalsAt 1 October 2007AdditionsDisposalsAt 30 September 2008Accumula ted deprec ia t ionAt 1 October 2006Charge for the yearDisposalsAt 1 October 2007Charge for the yearDisposalsAt 30 September 2008Net book valueAt 30 September 2008At 30 September 2007

    2007

    10,304,78316,039,89626,454,26652,798,945(2,198,091)

    23,336,970 50,600,854

    5,572,579 10,663,0617,358,913 15,404,215

    10,405,478 24,533,57823,336,970 50,600,854

    1,004,665 495,915

    Equipmentand motor

    vehicles

    182,317(100,146)

    82,1711,110

    (15,715)67,566

    122,99917,894(87,274)53,61912,700

    (15,715)50,604

    16,96228,552

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    ANGLO IRISH ASSET FINANCE PLCNotes to the financial statements continued

    15 Property, plant & eq uipmen t continuedAs at 30 September 2008, the Company had annual commitments under non-cancellable operating leases as follows:

    Operating leases which expire:W